Income Tax Appellate Tribunal - Delhi
Delhi Bureau Of Text Books, New Delhi vs Department Of Income Tax on 23 April, 2015
ITA NOS. 2362-2363/Del/2010,
3796/Del/2011 & 56/Del/2013
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "B", NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI B.C. MEENA, ACCOUNTANT MEMBER
I.T.A. Nos. 2362&2363/DEL/2010 &
3796/DEL/2011 & 56/Del/2013
A.Yrs. : 2006-07,
2007-08, 2008-09 & 2009-10
Income Tax Officer(E), Delhi Bureau of Text
Trust Ward-III, Aayakar Bhavan, VS. Books,
Laxmi Nagar, 25/2, Institutional Area,
Distt. Centre, Pankha Road,
Delhi - 110 092 D-Block, New Delhi
(PAN: AAATD4122G)
(APPELLANT) (RESPONDENT)
Department by : Smt. Poonam Khaira Sidhu,
CIT(DR) and Smt. Parwinder
Kaur, Sr. DR
Assessee by : Sh. Gaurav Jain, Ms. Bavita
Kumari, Adv.
Date of Hearing : 13-03-2015
Date of Order : 23-04-2015
ORDER
PER H.S. SIDHU: JM These are 4 Appeals filed by the Revenue against the separate impugned orders passed by the Ld. CIT(A) for the assessment years 2006-07, 2007-08, 2008-09 & 2009-10. Since the issues involved in these 4 appeals are identical and we have heard 4 appeals together, therefore, we are disposing off these appeals by passing one common order for the sake of convenience, by dealing with ITA 1 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 No. 2362/Del/2010 (A.Y. 2006-07). The grounds raised in ITA No. 2362/Del/2010 are reproduced as under:-
"1. On the facts & in the circumstances of the case, the Ld.CIT(A) has erred in holding that once exemption has been granted by way of registration by DIT (E) U/S 12A the Assessing Officer cannot override this exemption while passing the order of assessment ignoring the fact that Registration U/S 12A of the Act is granted by DIT (E) on certain terms and conditions which have to be met by the assessees.
Registration U/S 12A does not automatically guarantee exemption from income tax U/S 11 of the Act. One of the conditions governing the grant of Registration U/S 12A is that the entity should prove before the Assessing Officer that it is involved in activities which are charitable in nature. The Registration granted U/S 12A casts an onus upon the Assessee to prove, during assessment proceedings, that provisions of Section 2(15) and Section 11 are satisfied by it and also that there is no contravention of provisions of Section 13 of the Act. Once it is discovered that activities being undertaken are not charitable in nature, then, the 2 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 conditions prescribed in the Registration Certificate are violated and, hence, the Assessing Officer is entitled to hold the view that exemption' U/S 11 is deniable because the Assessee was not doing any charitable activities. The Assessee is bound to prove that it's activity is charitable in nature as per provisions of Section 2(15) of the Act and also is not commercial in nature. Therefore, Ld.CIT (A) has erred in allowing the benefit of Section 11 to the Assessee.
2. On the facts & in the circumstances of the case, the Ld.CIT (A) has erred in granting relief to the Assessee by ignoring the fact that the activities of the Assessee do not fall under the definition of 'Education' as per provisions of Section 2(15) of the Act in view of decision of Hon'ble Supreme court in the case of Sole Trustee Loka Shikshana Trust vs. CIT (1975) 101 ITR 234.
3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."3
ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013
2. The brief facts relating to the issues in dispute are that the assessee is in the status of Resident filed its Return of Income on 31/10/2006 declaring Nil income. The return of the assessee was processed u/s 143(1) on 24/03/2007. The AO took up the case of the assessee for scrutiny and issued notice u/s. 143(2) of the I.T. Act on 09/10/2007. Thereafter, the same was followed by questionnaire and notice u/s 143(2)/142( 1) of the I.T. Act. In response to the said notices, Authorised Representative of the assessee appeared from time to time and filed the details.
2.1 The assessee Society is registered under the Society's Registration Act, 1860. lt is also registered u/s 12A(a) of IT Act The Society was notified u/s 10(23C)(vi) upto assessment year 2002-03. The assessee society is engaged in publication of text of books form class 1 to VII Govt. Schools, MCD Schools, NDMC Schools and Delhi cantonment Schools. The book are claimed to be Published and sold at subsidized rates with nominal profit to school students to wholesale dealers. Besides, the Assessee Society also claims to have distributed free books/ reading material and school bags to needy students. The Assessee Society is run and managed by officials of Education Department of Govt. of Delhi.
2.2 Keeping in view of the facts and circumstances as explained above as well as the on the basis of documentary evidence filed by 4 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 the assessee society, the AO was of the prima facie view that activities of the assessee are in the nature of business by way of sale and purchase of books. During the year under consideration the assessee has shown sale of books of Rs. 79537473/- against cost of Rs.55793090/- , thus there is profit of Rs.23744383/-. From these figures it is also apparent that the books are being sold at a huge profit margin of about 40%. The AO was of the view that the assessee is engaged in activities for earning profit. He asked the assessee vide his letter dated 01/12/2008 as to why this activity of publication and sale/purchase of books should not be treated as business activity and secondly, whether the assessee is maintaining separate books of accounts as required under the provisions of section 11(4A).
2.3 In response to the letter dt. 1.12.2008, the assessee filed its reply dated 8.12.2008 and stated that the main object of the society is to provide aid and to promote the advancement of education particularly elementary and secondary education and for this purpose the assessee has undertaken to produce, print, publish and distribute high quality text books and other instructional material such as teacher hand books, work books etc. Assessee further submitted that the objective of the assessee to make available at subsidized cost or even at the free of cost text books to children of economically weaker families and similarly to make teaching 5 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 material available to teachers at subsidized cost or even free of cost so as to promote better teaching in Delhi Schools with the prior approval of Delhi Administration. No reply was furnished with regard to the issue whether the assessee is maintaining separate books of accounts.
2.4 After considering the submissions filed by the assessee alongwith the documentary evidence, the AO is of the view that activities of the assessee are by way of publication and sale of books was by which the assessee is earning huge profit margin by more than 40% is incidental business activities. By no stretch of imagination can this activity of publishing, printing and sale of books oat a huge profit margin be called charitable activity. As per the provisions of section 11(4A) of the Income Tax Act, 1961 the assessee is required to maintain separate books of account for the activity of selling of books, but no separate books are maintained by the assessee for its activities. The assessee has thus violated the provisions of section 11(4A) of the I.T. Act for the activities of the sale / purchase of books. The Assessing Officer held that the income of the assessee from the activity of the assessee is taxable as business income under Chapter 4 of the I.T. Act. 2.5 The Assessing Officer further held that during the year assessee has shown accumulation of Rs. 15670997/-. As per Form 6 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 No. 10 filed alongwith the return of income the accumulation has been done for the purpose of Education Fund Rs. 98,00,000/-; Gratuity Fund Rs. 1,98,000/- and General Reserve Fund Rs. 1,94,27,360/-, but the assessee has not explained in Form No. 10 as to what purpose the funds would be used and has accumulated the aforesaid funds without specifying any purpose in Form No. 10 filed alongwith return of income for the assessment year in dispute. The AO has also held that the assessee was engaged mainly in printing and sale of schools text books could not be treated as an educational institution within the meaning of Section 10(22) of the I.T. Act. He supported his view by citing the decision of Hon'ble Gauhati High Court as well as the Hon'ble Supreme Court of India in the case of CIT vs. Assam State Book Production and Publication Corporation Limited (2007) 288 ITR 352 (Guj) and CIT vs. Assam State Book Production & Publication Corporation Ltd. (2008) 169 Taxman 19 (Gau.) and the decision of the Hon'ble Supreme Court of India in the case of Oxford University Press vs. CIT (2001) 247 ITR 658 (SC). The AO lastly has also held that the claim regarding the free distribution of books amounting to Rs. 1443605/- is also not an act of charity but in the nature of business promotion expenses by way of free sample given to various people. But there is nothing to prove as to whom these free books have been distributed. AO is also of the view that as per the provisions of section 11(2) of the I.T. 7 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 Act, the accumulation in excess of 15% can be made only for the objects of the trust for which assessee had not specified any purpose, therefore, accumulation is not wholly for the purpose of trust. He supported his view by the decisions of the Hon'ble Delhi High Court in the case of CIT vs. Hotel & Restaurant Association (2003) 261 ITR 190 and DIT vs. Daulat Ram Education Society (2005) 278 ITR 260. Keeping in view of the aforesaid discussions, the AO has finally held that the assessee has no charitable activity under Chapter 4 of the Income Tax Act, 1961 by completing the assessment u/s. 143(3) of the I.T. Act on 31.12.2008.
3. Aggrieved by the assessment order dated 31.2.2008, the assessee filed the Appeal before the Ld. CIT(A) who vide impugned order 22.2.2010 partly allowed the appeal filed by the assessee for statistical purposes and mainly held that once exemption has been granted by way of exemption given by the DIT(E) u/s. 12A of the I.T. Act, the AO cannot override this exemption while passing the order of the assessment order ignoring the fact that the Registration u/s. 12A of the Act is accumulated by certain terms and conditions which have to be met by the assessee. Secondly, he has held that the exemption u/s. 11 and 12 denied to the assessee deserve to be restored and the finding of the AO that the assessee is carrying on business merits deletion. He also do not find any merit in the findings of the AO that as accumulation has not been done for the 8 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 objects of the trust, and that the benefit of section 11(2) are not allowable to the assessee.
4. Now the Revenue is aggrieved by the impugned order dated 22.2.2010 and filed the present Appeals before the Tribunal.
5. Mrs. Poonam Khaira Sidhu, CIT(DR) and Mrs. Parwinder Kaur, Sr. DR appeared for the Department and stated that the impugned order passed by the Ld. CIT(A) is contrary to the law and facts of the case, therefore, deserved to be cancelled.
5.1 Ld. CIT(DR) stated that the assessee is engaged in the sale and purchase of books as a business activity, but the Ld. CIT(DR) has wrongly reversed the finding of the AO on the basis of presumption and assumption and without any logic and evidence, contrary to the findings of the AO. She further stated that the activities of the assessee are not educational and AO has rightly denied the benefit of exemption u/s. 11 and 12 of the Act. She further stated that the Ld. CIT(A) has wrongly held that generation of income of a society is no test in itself for determining the charitable nature of activities, and that the earning of surplus in working out the charitable purposes is not excluded from the provisions of section 2(15) of the Act. To support her arguments she draw our attention towards para 4 and 5 of the impugned order. She further stated that Ld. CIT(A) has also wrongly held that it is not mandatory 9 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 and non maintenance of separate books of accounts and it shall not be fatal to the claim of the assessee for exemption u/s. 11 of the I.T. Act. Further, to support this contention, she also draw our attention towards para 4, 5 and 5.1 of the impugned order. Ld. CIT(DR) argued that activity of publishing and selling of books is systematic and organized and is run for a profit. It is not different from any other publisher. She also draw our attention towards the assessment order and finding of the AO regarding the sale of books in the assessment year in dispute amounting to Rs. 79537473/- against the cost of Rs. 55793090/-, thus there is profit of Rs. 23744383/- amounting thereby that the books are being sold at a huge profit margin of about 40% and therefore, the assessee is engaged in the activities for earning profit. She has also draw our attention towards the profit and loss account for the asstt. years in dispute and stated that assessee is earning 40% of profit from its business. Therefore, the assessee is not entitled for exemption u/s. 11 and 12 of the I.T. Act and the AO has rightly assessed the income of the assessee as its business income.
5.2 As regards the violation of provisions of section 11(4A) of the I.T. Act, Ld. CIT(DR) has stated that as per record the assessee has not replied to the query of the AO regarding the maintenance of separate books of accounts for its activities. Therefore, the assessee has violated the provisions of section 11(4A) of the Act and 10 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 has is not entitled or exemption u/s. 11 of the I.T. Act. In view of the Indian Machine Tools Mfrs. Association vs. ADIT 70 ITD 304; 71 TTJ
944. 5.3 She further stated that assessee has also accumulated without specifying any purposes and creation of provisions. During the year under consideration assessee showed an accumulation of Rs. 15670997 as per Form 10 filed along with return, which shows that accumulation is without specifying any purpose and is excess of 15% according to section 11(2) of the I.T. Act. She also stated that printing and publication of books falls under general public utility limb of definition u/s. 2(15) of the I.T. Act, not education. Because the assessee is engaged in the publication of text books from Class I to VIII of the Govt. schools, MCD schools, NDMC schools and Delhi Cantonment Schools. The books are claimed to be published and sold at subsidized rates and nominal profit to schools students and wholesale dealers and thus is for business purposes. To support her contention, she stated that the decision of the Hon'ble Supreme Court of India in the case of Sole Trustee , Loka Shikshana Trust vs. CIT 101 ITR 234; Bihar Institute of Mining and Mines Surveying vs. CIT and Assam State Book Production and Publication Corporation; OUP vs. CIT (2001) 245 ITR 658 (SC). She stated that keeping in view of the aforesaid decisions there should be "imparting education or some other educational activity". Activity not pertaining to 11 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 systematic instruction, schooling or training has been held to fall under the purview of the general public utility limb of section 2(15) of the I.T. Act, 1961. If such assessee is engaged in any activity in the nature of trade commerce or business it would not be entitled to claim that its object is charitable purpose, as held by the Hon'ble Supreme Court of India in the case of Indian Chamber of Commerce vs. CIT [1976] 101 ITR 796. In support of her contention she has also cited the decision of the ITAT, Amritsar Bench in the case of Punjab Institute of Medical Sciences, Garha Road, Jalandhar City vs. DCIT in ITA No. 504(Asr)/2009, for the assessment year 2006-07 and ITA No. 515(Asr)/2009, Assessment year 2006-07; Jalandhar Development Authority vs. CIT, Amritsar 124 TTJ 598 and Jammu Development Authority vs. CIT in ITA No. 30(ASR) of 2011 dated June, 14, 2012.
5.4 Lastly, Ld. CIT(DR) also distinguished the case law cited by the Ld. CIT(A) in the impugned order by drawing our attention towards written statement filed by her during the course of hearing and requested that keeping in view of her arguments, the Appeal of the Revenue may be allowed by cancelling the impugned order and restoring the order of the AO.
6. On the other hand, Shri Gaurav Jain, alongwith Miss Babita Kumari, Advocates/ Authorised Representatives of the assessee 12 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 relied upon the order passed by the Ld. First Appellate Authority and stated that Ld. First Appellate Authority has passed a well reasoned order on the basis of the previous record of the assessee as well as the documentary evidence, produced by the assessee. Therefore, the appeals filed by the Revenue may be dismissed. Ld. Counsel of the assessee also filed the Paper Book in each Appeal alongwith the Paper Book of case laws to support the order of Ld. First Appellate Authority. Ld. Counsel of the assessee also draw our attention towards the written submission filed before the Ld. First Appellate Authority as well as the documents attached with the Paper Books and stated that the ITAT, Delhi 'E' Bench has already decided the issue in dispute in favor of the assessee for the asstt. year 1975-76 and 1976-77 on 30.9.1980 in assessee's own case, therefore, the appeal filed by the Revenue may be dismissed and the order of the Ld. First Appellate Authority may be upheld. He also tried to distinguish the case laws cited by the Ld. CIT(DR) in her written submission filed during the course of hearing of the present appeals and stated that the activities of the assessee-society is charitable in nature and the objects of the assessee-society fall under the purview of the education limb of section 2(15) of the I.T. Act. He also stated that the assessee is engaged in the publication of text books from Class I to VIII of the government schools, MCD schools, NDMC schools and Delhi Cantonments Schools. The books 13 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 are published and sold on subsidized rates and nominal profits to the schools students and whole dealers. Therefore, the objects of the assessee-society falls under the purview of the education limb of section 2(15) of the I.T. Act. He also draw our attention towards the balance sheet of all the four assessment years and stated that the major part of the income has been spent by the assessee for the purpose of charitable, hence, the Ld. First Appellate Authority has rightly cancelled the order of the AO and restored the exemption u/s. 11 and 12 of the I.T. Act in the case of the assessee. 6.1 Lastly, he stated that there is no violation of provisions of section 11(4A) of the Income Tax Act, 1961, because it is not mandatory to maintain the separate books of accounts for the activities of the assessee society and there is no bar to accumulate more than 15% of the funds without specifying its purposes. He requested that keeping in view of his arguments alongwith documentary evidence filed by him and the Paper Books, the appeals filed by the Revneue may be dismissed.
7. We have heard both the parties and perused the records, especially the orders passed by the revenue authorities and the Paper Book filed by the assessee, especially the balance sheet of the assessee society for the asstt. year 2006-07, 2007-08, 2008-09 & 2009-10. We are of the view it is very much relevant for the 14 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 adjudication and the decision of the issue in dispute to reproduce the balance sheet for the asstt. years in dispute. For the sake of convenience the Income and Expenditure Statement of the assessee society for the asstt. year 2006-07, 2007-08, 2008-09 & 2009-10 are reproduced as under:-
Income & Expenditure for the Year ended 31.03.2006 of Delhi Bureau of Text Books Expenditure Sed. Current year Previous year Income Sed. Current year Cost of Book sold V 55793090 155190740 Sale of Books 79537473 Establishment Charges VI 6795897 14942573 Interest on 15734421 Deposits General Admin. Exp. Interest on Staff 218160 Advances Repair and Maint. Of 678336 77940 Misc. Receipts VII 8901 Car Repair and Maint. Of 33840 300089 Balance Written Building Back Printing & Stationary 113728 Earnest Money profit a/c Electricity/Water 269126 Charges Postage 3264 Entertainment 36087 Fuel for Generator Set 17391 Auditors Remuneration 53885 Rates and Taxes 140180 Telephone Expenses 167754 Office Maintenance 29738 Review/ Maintenance 14930 Storage and Packaging 40730 Bank Charges Staff Welfare 204329 TA/DA/Conveyance 29694 Transportation 31525 Charges Advertisement 727313 Depreciation Charges 650588 Misc. Expenses 24845 Insurance 208455 Paper Testing 19175 Excess of Income over Expenditure Transferred to General Reserve Fund 19427360 Education Funds 9800000 Gratuity Fund 188000 95499257 170511342 95499255 In Terms of our Report of Even date Attached For Gupta Ravi & Co.
(Chartered Accounts)
Sd/- Sd/- Sd/- Sd/- Sd/-
(K.P. Sharma) (O.P. Arora) (S.N. Misra) (Vijay Kumar) (R.K. Gupta)
A.O. Secretary Managing Director Chairman F.C.A.
Place: New Delhi
Date : 16.10.2006
15
ITA NOS. 2362-2363/Del/2010,
3796/Del/2011 & 56/Del/2013
Income & Expenditure for the Year ended 31.03.2007 of Delhi Bureau of Text Books Expenditure Sed. Current year Previous year Income Sed. Current year Cost of Book sold V 61301456 79537472.8 Sale of Books 82852577.6 Establishment VI 7408942 15734421 Interest on 17622034 Charges Deposits General Admin. Exp. 218460 Interest on 11961 Staff Advances Repair and Maint. 641927 8901 Misc. Receipts VII 3965 Of Car Repair and Maint. 128217 Earned Money 52794 Of Building Forfeited A/c Printing & 105541 Stationary Electricity/Water 293482 Charges Postage 16612 Entertainment 53856 Fuel for Generator 28948 Set Professional Charges 25444 Rates and Taxes 138535 Telephone Expenses 167911 Office Maintenance 29241 Review/ 19907 Maintenance Storage and 29350 Packaging Bank Charges 2609 Staff Welfare 154947 TA/DA/Conveyance 202657 Transportation 158729 Charges Advertisement 386096 Depreciation 454775 Charges Misc. Expenses 45447 Insurance 215605 Paper Testing 41986 Interest paid on loan 83552 Excess of Income over Expenditure Transferred to General Reserve 14227560 Fund Education Funds 14000000 Gratuity Fund 180000 100543332 95499255 100543332 In Terms of our Report of Even date Attached For Gupta Ravi & Co.
(Chartered Accounts)
Sd/- Sd/- Sd/- Sd/- Sd/-
(K.P. Sharma) (M.K. Agrawal) (S.S. Ghorkrokta) (Vijay Kumar) (R.K. Gupta)
A.O. Secretary Managing Director Chairman F.C.A.
Place: New Delhi
Date : 22.10.2007
16
ITA NOS. 2362-2363/Del/2010,
3796/Del/2011 & 56/Del/2013
Income & Expenditure for the Year ended 31.03.2008 of Delhi Bureau of Text Books Expenditure Sed. Current year Previous year Income Sed. Current year 2007-08 2006-07 2007-08 Cost of Book sold V 96896166 82852577.6 Sale of Books 129857215 Establishment VI 8412069 17622034 Interest on 22131852 Charges Deposits General Admin. Exp. 11961 Interest on 14198 Staff Advances Repair and Maint. 129686 3965 Misc. Receipts VII 9645 Of Car Repair and Maint. 75391 52794 Earnest o Of Building Money Printing & 141387 forfeited a/c Stationary Electricity/Water 251678 Charges Postage 8750 Entertainment 57393 Petro & Fuel for 411254 Generator Set Professional Charges 65338 Rates and Taxes 138787 Telephone Expenses 194333 Office Maintenance 136995 Review/ 0 Maintenance Storage and 53500 Packaging Bank Charges 5095 Staff Welfare 430360 TA/DA/Conveyance 43907 Transportation 194257 Charges Advertisement 730401 Depreciation 615631 Charges Misc. Expenses 5609 Insurance 209455 Paper Testing 179769 Interest paid on Loan Incidental Charges 44325 Excess of Income over Expenditure Transferred to General Reserve 19427360 Fund Education Funds 40000000 Gratuity Fund 2581374 152012910 100543332 152012910 In Terms of our Report of Even date Attached For Karpana Gupta & Associates.
(Chartered Accounts)
Sd/- Sd/- Sd/- Sd/- Sd/-
(K.P. Sharma) (M.K. Agrawal) (Garima Gupta) (Chandra Bhushan Kumar) (Kalpana Gupta)
A.O. Secretary Managing Director Chairman F.C.A.
Place: New Delhi
Date : 25.09.2008
17
ITA NOS. 2362-2363/Del/2010,
3796/Del/2011 & 56/Del/2013
Income & Expenditure for the Year ended 31.03.2009 of Delhi Bureau of Text Books Expenditure Sed. Current Previous Income Sed. Current year year year 2007-08 2007-08 2006-07 Cost of Book sold V 105,151,795 129,857,215 Sale of Books 130,372,3..... Establishment Charges VI 11,400,201 22,131,852 Interest on 12,263,9.....
Deposits General Admin. Exp. 14,198 Interest on Staff Advances Repair and Maint. Of Car 68,099 9,645 Misc. Receipts VII 689,5.....
Repair and Maint. Of Building 23,503
Printing & Stationary 119,080
Electricity/Water Charges 296,673
Postage 9,437
Entertainment 59,938
Petro & Fuel for Generator Set 310,200
Audit fees 25,000
Professions Charges 138,100
Rates and Taxes 339,181
Telephone Expenses 132,660
Office Maintenance 122,147
Storage and Packaging 52,460
Bank Charges 5,022
Staff Welfare 163,969
TA/DA/Conveyance/Transportation 264,339
Advertisement 846,236
Depreciation Charges 638,202
Misc. Expenses 1,570
Insurance 176,390
Paper Testing 27,101
Incidental Charges 67,213
Excess of Income over Expenditure
Transferred to
Education Funds 20,000,000
General Reserve Fund 2,887,322
Gratuity Fund 2581374
143325838 152012910 143325838
In Terms of our Report of Even date Attached For Karpana Gupta & Associates.
(Chartered Accounts)
Sd/- Sd/- Sd/- Sd/- Sd/-
(K.P. Sharma) (M.K. Agrawal) (G.L. Meena) (Chandra Bhushan Kumar) (Kalpana Gupta)
A.O. Secretary Managing Director Chairman F.C.A.
Place: New Delhi
Date : 29.09.2009
18
ITA NOS. 2362-2363/Del/2010,
3796/Del/2011 & 56/Del/2013
7.1 After perusing the aforesaid Income and Expenditure
Statement for the assessment years in dispute as well as the order passed by the Revenue Authorities, we are of the view that the AO in his order dated 13.12.2008 for asstt. year 2006-07 has rightly held that the activities of the assessee are prima facie in nature of business activities by way of sale and purchase of books, because during the year under consideration, the assessee has shown sale of books of Rs.7,95,37,473/- against the cost of Rs.5,57,93,090/-, thus there is profit of Rs.2,37,44,383/-. From these figures it is apparent that books also have sold on huge profit margin of about 40%, which shows the assessee is engaged in the activities of earning profit. We also find that the assessee has earned a huge profit from the activities of sale and purchase of books from 21.76% to 43.90% for the assessment years in dispute.
For the sake of convenience the details thereof is as under:-
Selling the books to both Delhi Schools and Retailers at a substantial profit A.Y. Sale of Cost Profit Profit % Books 2006-07 7,95,37,473 5,57,93,090 2,37,44,383 42.5 2007-08 8,28,52,577 6,13,01,456 2,15,51,121 35.16 2008-09 12,98,57,215 9,68,96,166 4,25,81,374 43.95 2009-10 13,03,72,304 10,51,51,795 2,28,87,322 21.76 7.2 Keeping in view of the aforesaid Income and Expenditure Statement as well as showing Profit Margin Table, we are of the 19 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 considered view that the activities of the assessee society are in the nature of business, not in the nature of charitable purposes. Ld. CIT(A) wrongly reversed the finding of the AO by saying that assessee society has been given Registration u/s. 12 of the I.T. Act by Ld. DIT(E). Ld. CIT(A) has further held that the assessee is carrying on these activities, as per its aims and objects and the AO has not brought on record any finding that activities of the assessee society are beyond the aims and objects. 7.3 After perusing the impugned order, we find that Ld. First Appellate Authority has held that AO is precluded from examining the eligibility of trust or institution for exemption u/s. 11 of the I.T. Act. We are of the considered view that this finding given by the Ld. CIT(A) in the impugned order is totally against the law and facts of these cases, which deserve to be cancelled. We hold that even if the registration is granted to the assessee trust u/s. 12AA of the I.T. Act as has been granted in the present appeals, then it will not be precluded the AO to examine in details of every objects of the society and to give his findings in the assessment orders as to whether the assessee has complied with the requirement of section 11 of the I.T. Act or not as and when the assessee is seeking exemption under section 11 of the I.T. Act. The registration granted u/s. 12AA of the Act to the assessee should not be obstacle in any way of the AO at the time when the assessment proceedings are to 20 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 be taken and to decide as to whether the assessee is entitled for benefit of section 11 or 12 of the I.T. Act as the case may be. In view of this finding, we cancelled the impugned order. Our view is supported by the decision of the ITAT, Amritsar Bench in the case of Punjab Institute of Medical Sciences, Garha Road, Jalandhar City vs. DCIT in ITA No. 504(Asr)/2009 for the assessment year 2006-07 and ITA No. 515(Asr)/2009, Assessment year 2006-07; Jalandhar Development Authority vs. CIT, Amritsar 124 TTJ 598 and Jammu Development Authority vs. CIT in ITA No. 30(ASR) of 2011 dated June, 14, 2012 which has been upheld by Hon'ble J&K High Court in ITA No. 164 of 2012 vide orders dated 7.11.2013 and the said Judgment of the Hon'ble J&K High Court has also been upheld by the Hon'ble Supreme Court of India vide its order dated 21.7.2014 by dismissing the Special Leave to Appeal (C) No. 4990/2014 filed by the Jammu Development Authority.
7.4 Secondly, Ld. CIT(A) has not appreciated that printing and publication of books falls under general public utility limb of definition u/s. 2(15) of the I.T. Act, 1961, but not an education.
Because the assessee society is engaged in the publishing of text books from Class I to VIII of the Govt. schools, MCD schools, NDMC schools and Delhi Cantonment Schools. The books are claimed to be published and sold on subsidized rates and nominal profit to schools students and whole sale dealers. According to the assessee the 21 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 object of the society fall under the purview of the education limb of section 2(15) of the I.T. Act, 1961. After going through the aims and objects of the society, alongwith the relevant provisions of section 2(15) of the I.T. Act, we are of the considered view that meaning of word education and the context in which it is used under the Income Tax Act, 1961 has been explained by the Hon'ble Supreme Court of India in the case of Sole Trustee, LokaShikshana Trust vs. CIT [1975] 101 ITR 234(SC). The relevant finding of the Hon'ble Supreme Court is reproduced as under:-
"The scene in which the word "education" has been used in section 2(15) in the systematic instruction, schooling or training given the young is preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word "education" has not been used in that wide and extended sense, according to which acquisition of further knowledge constitutes education. According to this wide and extended sense travelling is education, because as a result of travelling you acquire fresh knowledge. Likewise, if you read newspapers and magazine, see pictures, visit art galleries, museums and zoos, you thereby add to your knowledge. Again, when you grow up 22 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 and have dealings with other people, some of whom are not straight, you learn have dealings with other people, some of whom are not straight, you learn by experience and thus add to your knowledge of the ways of the world. If you are not careful, your wallet is liable to be stolen or you are liable to be cheated by some unscrupulous person. The thief who removes your wallet and the swindler who cheats you teach you a lesson and in the process make you wiser though poorer. If you visit a night club, you get acquainted with and add to your knowledge about some of the not much revealed realities and mysteries of life. All this in a way is education in the great school of life. But that is not the sense in which the word "education" is used in clause (15) of Section 2. What education cannotes in that clause is he process of training and developing the knowledge, skill mind and character of students by normal schooling."
7.5 Similar view has also been taken by the Hon'ble Supreme Court of India in the case of Oxford University Press vs. Commissioner of Income Tax [2001] 247 ITR 658 (SC) in which the Hon'ble Supreme Court of India has held that there should be 23 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 "imparting education or some other educational activity. Activity not pertaining to systematic instruction, schooling or training has been held to fall under the purview of the general public utility limb of section 2(15) of the I.T. Act, 1961." In view of the facts and circumstances of the present case, we are of the view that the assessee is engaged in the activities in the nature of trade, or commerce or business. It should not be entitled to claim that its objects is charitable purposes, in view of the aforesaid decision of the Hon'ble Supreme Court of India.
7.6 We have also perused the order of the ITAT, Delhi Bench 'E' passed in the case of assessee in ITA No. 1239/Del/1979 and 4440/Del/1979 for the asstt. years 1975-76 and 1976-77 title vs. ITO, Trust Circle, Delhi vs. Delhi Bureau of Text Books vide order dated 30.9.1980. We are of the view that in the order dated 30.9.1980 the Bench has not considered Income and Expenditure Statement filed by the assessee for the asstt. yearfs 1975-76 and 1976-77 and other relevant evidence, therefore, the facts of the present case are not identical to the facts of that case and are distinguishable.
7.7 Keeping in view of the aforesaid discussions, we are of the considered view that the activities of the society of publishing of books would fall under the general public utility limb and where this 24 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 is systematically run for profit, section 11 exemption cannot be allowed to it.
7.8 Thirdly, it is admitted fact that the assessee has not maintained separate books of accounts for its activities of sale and purchase of books for the assessment year in dispute and thus has violated the provisions of section 11(4A) of the I.T. Act. Ld. CIT(A) has not appreciated these facts and has wrongly allowed the exemption u/s. 11 & 12 of the Act which is contrary to the provisions of law, in view of the decision of the ITAT, Mumbai Bench in the case of Indian Machine Tools Mfrs. Association vs. ADIT 70 ITD 304. 7.9 Fourthly, it is also admitted fact that assesssee has made accumulation in excess which is contrary to the provisions of section 11(2) of the I.T. Act. The accumulation made by the assessee is also without specifying any purpose and is not wholly for the charitable purpose and according to the aims and objects of the Trust, which is also in excess of 15% and contrary to the provisions of Section 11(2) of the I.T. Act. Our view is supported by the decision of Hon'ble Supreme Court of India in the case Nachimuthu Industrial Association vs. CIT 235 ITR 190 (SC).
7.10 We have gone through the Paper Book filed by the assessee in which he has cited various decisions rendered by the Hon'ble High 25 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 Courts. At the time of hearing, Ld. Counsel of the assessee draw our attention towards few judgments.
i) Council for the Indian School Certificate Examination vs. Director General of Income Tax [2012] 206 Taxman 466/20 taxmann.com 505 (Delhi)
ii) M/s GSI India vs. Director General of Income Tax (Exemption) and Anr. In Writ Petition (Civil No. 7797/2009 dated 26.9.2013) - Delhi High Court.
iii) The Institute of Chartered Accountants of India & Anr. Vs. Director General of Income Tax (Exemptions) & Ors. (2013) 260 CTR (Del) 1 -
Delhi High Court.
iv) Pinegrove International Charitable Trust vs. UOI & Ors. [2010] 327 ITR 73 (P&H).
7.11 After going through the decisions cited by the Ld. Counsel of the assessee, we are of the view that not on the denial of the exemption u/s. 11 and 12 of the I.T. Act by the AO, the judgments cited by the Ld. Counsel for the assessee are for granting the registration u/s. 12AA or section 10(23) or section 80G of the I.T. 26 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 Act, therefore, decision cited by him are not helpful to the assessee. Ld. Counsel has not cited any judgment of any Hon'ble Court regarding precluding the AO for examining the details filed by the assessee while completing the assessment, if the assessee is seeking exemption u/s. 11 & 12 of the I.T. Act. Secondly, assessee has also not established the maintaining of separate books of accounts for the business of the assessee is not mandatory u/s. 11(2) of the I.T. Act. He also not established that the assessee has mentioned the purpose for its accumulation more than 15% as required under section 11(2) of the I.T. Act. Ld. Counsel of the assessee has also not filed any evidence that the assesee has filed Income & Expenditure Statements for the asstt. years 1975-76 and 1976-77 before the Tribunal in ITA No. 1239/Del/1979 and ITA no. 4448/Del/1979 for asstt. years 1975-76 and 1976-77 vide order dated 3.9.1980.The Tribunal in its order at Page 18 has held that "......though the assessee is not running any educational institution as such....."
7.12 Keeping in view of the facts and circumstances, as explained above, we are of the considered view that impugned order passed by the Ld. CIT(A) is contrary to the law and facts and on the file by holding that once registration has been granted u/s. 12A of the I.T. Act, AO cannot override exemption while passing the assessment order. We have discussed in detail in the forgoing paragraphs on 27 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 assessee-trust u/s 12AA of the Act as has been granted in the present appeal, then it will not be precluded to the AO to examine in details the every object of the society and to give finding in the assessment order as to whether the assessee has complied with the requirement of section 11 of the Act or not as to when the assessee is seeking exemption u/s. 11 of the I.T. Act. The registration granted u/s. 12AA of the Act to the assessee should not be obstacle in the way of AO, at the time when the assessment proceedings are to be taken and to decide as to whether the assessee is entitled for the benefit of section 11 and 12 of the I.T. Act as the case may be. After examining the Income and Expenditure Statement of the assessee for the asstt. year in dispute as reproduced above, we are of the view that the assessee has not incurred any expenditure for charitable purpose, as per their aims and objects. Therefore, the activities of the assessee is not charitable in nature and is commercial in nature. In view of the aims and objects of the assessee-society and the activities done by the assessee, we are of the view that the printing and stationery of the books fall under the general public utility limb of definition u/s. 2(15) of the I.T. Act, 1961 and not an education, because the activities of the society is not pertaining to systematic instructions school or training. After going through the orders passed by the Revenue Authorities as well as the documentary evidence filed by the assessee in the shape of Paper 28 ITA NOS. 2362-2363/Del/2010, 3796/Del/2011 & 56/Del/2013 Book, we are of the considered view that assessee has not proved that activities done by the assessee for the asstt. years in dispute is charitable in nature, as per the provisions of section 2(15) of the I.T. Act. We find that the Ld. First Appellate Authority has passed the impugned order and granted the exemption u/s. 11 and 12 of the I.T., Act to the assessee, which is contrary to the law and facts on the file, therefore, the order is not sustainable in the eyes of law, hence, we cancel the impugned orders by allowing all the appeals filed by the Revenue.
8. In the result, all the 04 Appeals filed by the Revenue stands allowed.
Order pronounced in the Open Court on 23/4/2015.
Sd/- Sd/-
[B.C. MEENA] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 23/4/2015
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT
TRUE COPY By Order,
Assistant Registrar,
ITAT, Delhi Benches
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