ITA Nos. 248 and 1572/Del/2013, (Assessment Year: 2008-2009;2009-2010). Case: DDIT Vs PHD Chamber of Commerce & Industry. Delhi DRAT ITAT Cases
| Case Number | ITA Nos. 248 and 1572/Del/2013, (Assessment Year: 2008-2009;2009-2010) |
| Counsel | For Appellant: Vikram Sahay, Sr. DR and For Respondentst: C.S. Aggarwal, Sr. Adv. |
| Judges | B.C. Meena, Member (A) and C.M. Garg, Member (J) |
| Issue | Companies Act, 1956 - Section 25; Constitution of India - Article 14; Income Tax Act, 1961 - Sections 10, 10(23C)(iv), 11, 11(1), 11(4A), 12, 12A, 2(15), 254(2), 28, 28(iii) |
| Judgement Date | May 11, 2015 |
| Court | Delhi DRAT ITAT Cases |
Order:
C.M. Garg, Member (J), (ITAT Delhi 'F' Bench)
1. These appeals have been filed against the order of Commissioner of Income Tax (Appeals)-XXI, New Delhi dated 15.11.2012 in Appeal No. 128/2010-11 for A.Y. 2008-09 and another order dated 31.01.2013 in Appeal No. 257/2011-12 for A.Y. 2009-10 respectively.
2. Grounds raised by the Revenue in ITA No. 248/Del/2013:
"1. "On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in upholding that the activities of the assessee are Charitable in nature.
2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in upholding that the activities of the assessee is eligible for exemption u/s. 11 of the Income Tax Act, 1961.
3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in direction to allow depreciation on Rs. 73,68,590/-.
4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in direction to allow deduction of Rs. 9,05,460/- on account of provision for leave encashment.
5. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in direction to allow deduction of Rs. 65,00,000/- on account of provision of gratuity."
3. Grounds raised by the Revenue in ITA No. 1572/Del/2013 read as under:
"1. "On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in upholding that the activities of the assessee are charitable in nature;
2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in upholding that the assessee is eligible for exemption u/s. 11 of the Income Tax Act, 1961;
3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in upholding that the assessee is eligible for exemption on earned surplus of Rs. 2,41,40,492/- on the basis of principle of mutuality;
4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in directing the AO to allow depreciation of Rs. 76,62,753/-;
5. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in directing the AO to allow deduction of Rs. 73,36,350/- on account of provision for gratuity."
4. We have heard arguments of both the sides and carefully perused the relevant material placed on record. Briefly stated the facts giving rise to these appeals are that the assessee was established in 1909 and it was incorporated as a company on 26.04.1951 as Punjab Chamber of Commerce and thereafter on 13.08.1981 afresh certificate of incorporation was issued in the name of PHD Chamber of Commerce and Industry under Companies Act, 1956. The assessee is also registered u/s. 12A of the Income Tax Act, 1961 vide certificate dated 23/05/1994 from the A.Y. 1996-97 upto A.Y. 2005-06 and it was granted exemption u/s. 11 of the Act. For the year assessment year under consideration, the AO noted that the assessee has not restricted its activities only to the members and the assessee is doing business activity either specific service to its members which is taxable u/s. 28(iii) of the Act or the business or professional services to the non members which is taxable u/s. 28 of the Act. Thereafter the AO held that since the assessee is not carrying out any charitable activity. Therefore, exemption u/s. 11 of the Act is denied and the receipts collected from the members and non members are taxed u/s. 28(iii) of the Act.
5. Being aggrieved by the above assessment order, the assessee preferred an appeal before the CIT(A) which was allowed by passing the impugned order granting part relief for the assessee. Now the aggrieved revenue before this Tribunal with the grounds as reproduced hereinabove.
6. The ld. Departmental Representative (DR) contended that while the assessee is not working according to the aims and objectives of the memorandum of the Association and is providing services to the non members performing professional services to all then it should be inferred that the assessee is doing business activity. The ld. DR also contended that the assessee has not restricted its activities only to the members. Therefore, either specific service to its members or the business or professional services to the non members both are taxable u/s. 28 of the Act. The ld. DR vehemently contended that in view of aforesaid facts the assessee is not carrying out any charitable activities. Therefore, the AO was correct in denying exemption u/s. 11 of the Act and rightly taxed all the receipts collected from the members and non members.
7. The ld. DR supporting the order of the AO for A.Y. 2009-10 submitted that after the amendment to section 2(15) of the Act w.e.f. A.Y. 2009-10 the assessee's claim of exemption the sixth limb of the charitable activity mentioned in section 2(15) of the Act is not tenable. The ld. DR also drawn our attention towards paragraph No. 14 of the assessment order for A.Y. 2009-10 and submitted that the assessee's claim of exemption on the mutuality was rightly rejected as the assessee was under the purview of newly inserted proviso to sec. 2(15) of the Act. The ld. DR, justifying the action of the AO further submitted that after proviso inserted to sec. 2(15) of the Act w.e.f. 2009-10 in a case of General Public Utilities the entities will no longer be enjoying charitable status if they involve carrying on any activity in the nature of trade, or business or any activity of rendering any service in relation to any trade, or business for a cess or fee or any other consideration irrespective of the nature of use or application, or retention, of the income from such activity. The ld. DR lastly submitted that the AO rightly denied exemption u/s. 11 & 12 of the Act to the assessee society and rightly taxed the same.
8. Replying to the above, the ld. Sr. Counsel of the respondent assessee at the very outset, submitted that while framing the assessment for A.Y. 2006-07 and 2007-08, the AO for the first time held that the assessee was carrying on business of rendering services not only to its members but also to the non members and, therefore, the provisions of sec. 11(4A) of the Act (w.e.f. 01.04.12) were attracted and hence exemption u/s. 11(1) of the Act could not be given to the assessee. The ld. SR. Counsel further pointed out that in these assessment years the AO also observed that since the exemption could be held allowable only if the business was incidental to the carrying out of the purchase of the trusts and separate books of accounts were maintained for the business. The ld. Sr. Counsel further pointed out that the AO finally held that as the assessee was also providing services to the non members and had not maintained separate books of accounts therefore, the exemption u/s. 11 of the Act could not be granted to the assessee because the activities of the assessee society were not charitable in nature as by providing services to non members it was carrying on activity for consideration and with profit motive.
9. The ld. Sr. Counsel further pointed out that the findings of the AO denying the exemption was upheld by the ITAT in ITA No. 1233/D/2010 dated 31.03.2011 for A.Y. 2006-07 and ITA No. 5685/D/2010 dated 19.12.2011 for A.Y. 2007-08. The ld. Sr. Counsel strenuously pointed out that the Hon'ble High Court allowed the appeals of the assessee which were filed against the orders of the Tribunal (supra), by its judgment reported in 357 ITR 296 (Del.). The ld. Sr. Counsel further drawn our attention towards...
To continue reading
Request your trial