Activity of the assessee are primarily motivated with the objective of promoting handloom sector in India and said activity are not for gain or profit of an individual. The executive committee of the Society also consist of all government officials with no motive of profit sharing or personal interest. The member subscription is received by the assessee in proportion of the supply by the agency and the rate decided. The said subscription fee received cannot be equated with the cess or fee against services rendered. The AO is not justified in holding that provision to section 2(15) will be attracted in the case of the assessee and therefore qualifies for exemption under section 11.
IN THE ITAT, DELHI BENCH
H.S. SIDHU, J.M. & N.K. BILLAIYA, A.M.
ITO v. Association of Corporation & Apex Societies of Handlooms
ITA No. 2087/Del/2017
6 March, 2020 A.Y. 2012-13
Assessee by: K.V.S.R. Krishnan, C.A.
Revenue by: Rakhi Vimal, Sr. D.R.
ORDER
H.S. Sidhu, J.M.
Revenue has filed the present appeal against the impugned Order, dated 30-1-2017 passed by the learned Commissioner (Appeals)-40, New Delhi relating to assessment year 2012-13 on the following grounds :–
- On the facts and in the circumstances of the case and in law, learned Commissioner (Appeals) has erred in law in ignoring that though the objects of the assessee seems to be charitable in nature, but the activities carried out by the assessee which resulted in the profits/surplus are commercial in nature.
- The appellant craves leave to add, to alter or amend any ground of appeal raised before at the time of hearing.
- The brief facts of the case are that assessee filed its return of income declaring nil income on 29-9-2012 for assessment year 2012-13. The assessee is registered under the Societies Registration Act, 1860. The assessee is also registered under section 12A of the Income Tax Act, 1961 (In short “Act”) since 28-6-1984. The assessee-society has been constituted by the Development Commissioner (Handloom), Ministry of Textiles, Government of India. The main objective of the assessee society is to promote the handloom sector. It works as the implementing agency for the Development Commissioner (Handloom), Government of India for organizing exhibitions in different parts of the country for display and sale of handloom fabrics/cloth manufactured by handloom weavers and handloom society. During the course of assessment proceedings the assessee was asked to show cause how its activities are charitable and why the same should not be treated as business of providing facilities to member societies for a fee and why the same should not be covered by the proviso to section 2(15) of the Act. The assessee, in response, stated that it is a non-profit organization managed and controlled by the Government of India and that its objectives are to coordinate and diffuse useful knowledge to the member units towards marketing of handloom products. It was also stated that the main objective is to promote the handloom sector by providing marketing platform to the handloom primary societies, apex societies as well as handloom corporation and that it procures orders from various department of Government of India for supply of handloom items and distributes the orders to various members of the society for supply. It was also stated that the society is registered under the Societies Registration Act, 1860 and is also registered under section 12A of the Act and qualifies for exemption under section 11 and 12 of the Act. The assessing officer held that the activities of the assessee do not fall in the category of relief of poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest. The assessing officer also held that the assessee’s case cannot be considered the under the concept of mutuality since the essence of mutuality lies in the return of what one has contributed to a common fund and unless there is a complete identity between the contributors and participators in a common fund, the principle of mutuality would not be attracted. The assessing officer discussed the amendment to the proviso to section 2(15) of the Act and CBDT Circular, dated 19-12-2008 and completed the assessment by invoking the proviso to section 2(15) by assessing total income of Rs. 2,23,63,070 under section 143(3) of the Act vide Order, dated 11-3-2015. Against the assessment Order, dated 11-3-2015, assessee appealed before the learned Commissioner (Appeals), who vide his impugned Order, dated 30-1-2017has partly allowed the appeal of the assessee by holding that assessing officer is directed to allow the benefit of section 11 with consequential benefits Aggrieved with the impugned Order, dated 30-1-2017, the Revenue is in appeal before the Tribunal.
- At the time of hearing, learned DR relied upon order passed by the assessing officer and the reiterated the contention raised in the grounds of appeal of the Revenue and requested that appeal of the Revenue may be allowed.
- On the contrary, learned Counsel for the assessee relied upon the order of the learned Commissioner (Appeals) and stated that learned Commissioner (Appeals) has passed a well reasoned order on the basis of the facts and circumstances of the case and in accordance with provisions of law. Therefore, he requested that the appeal filed by the Revenue may be dismissed. He further submitted that on identical facts, the ITAT, Coordinate Bench, Delhi in Revenue’s ITA No. 4788/Del/2016(Assessment Year 2010- 11) vide Order, dated 27-3-2019 in assessee’s own case has upheld the order of the learned Commissioner (Appeals) for the assessment year 2010-11 and dismissed the appeal filed by the Revenue, before the Tribunal.
- We have heard both the parties especially the orders of the authorities especially the impugned order of the learned Commissioner (Appeals) as well as the ITAT, Coordinate Bench, Delhi decision passed in Revenue’s ITA No. 4788/Del/2016(Assessment Year 2010-11) vide Order, dated 27-3-2019 in assessee’s own case. We find that learned Commissioner (Appeals) has observed as under :–
“4.1 The appellant has raised, as many as 8 grounds of appeal for assessment year 2011-12 and 9 grounds of appeal for assessment year 2012-13. Ground nos. 1 to 5 in assessment year 2011-12 and ground nos. 1 to 6 in assessment year 2012-13 challenge the denial of exemption under section 11. Since these grounds are interlinked, these are being adjudicated together.
4.1.1 I have considered the assessment order, the submissions of the appellant as well as the Order of learned Commissioner (Appeals) for assessment year 2010-11 in the appellant’s own case. A copy of the assessment order for assessment year 2010-11, which was also filed by the appellant, has also been perused. The learned Commissioner (Appeals)-36 in her Order, dated 10-6-2016 has held as under :–
“8. I have considered the assessment order and the submissions of the assessee. The only ground of appeal is whether the assessee is engaged in the activities of trade, commerce or business or so as to be hit by the proviso to section 2(15) of the Act. The first contention of the assessee is that in all earlier years the objects of the assessee remaining same and held to be charitable, the benefit of section 11 should be allowed based on principle of consistency. In this case, this contention is not acceptable as the amendment to the section 2(15) of the Income Tax Act was applicable only from assessment year 2009-10 and therefore what happens previously cannot be seen with the same eyes.
With this argument, no amendment can ever be applicable.
Ground No. 4 is therefore dismissed.
- Whether the benefit of section 11 is to be given is to be decided by the objects and the activities from year to year.
In this case the assessee is an organization constituted by the Ministry of Textiles and clearly is not for profit as it can be seen that the Executive Committee is wholly constituted by the Government officers mainly consisting of the MOs of Textiles related department in different states and headed by the DC Handloom, Ministry of Textiles. It is promoting the handloom sector by procuring the orders from all Government departments which have the demand and giving it to the member society. Thus it is a nodal and implementing agency of the Government and not a society for the purpose of making any profit or doing business.
Further, it organizes exhibitions to provide a platform to weavers across the country. The assessing officer has apparently not considered the nature of the activities and the objectives of the society and merely disallowed the benefit of section 11 by stating that the activities do not fall under the first five limbs of section 2(15) & that principle of mutuality does not apply.
The case of ITPO (2015) 371 ITR 333 (Del) : 2015 TaxPub(DT) 0623 (Del-HC) of Delhi High Court applies to this case also, where it was adjudicated that where institution is not driven by motive to earn profit but to do charity through the advancement of objectives of general public utility, it will be regarded as established for charitable purposes. Further in the case of ICAI (2013) 358 ITR 91 (Del) : 2013 TaxPub(DT) 2666 (Del-HC), it was observed by the High Court that even though fees are charged for such activities (coaching in that case) activities cannot be stated to be rendering of services in relation to any trade, commerce or business, as such activities are undertaken in furtherance of its main objects which is not trade, commerce or business. Thus, the purpose and the dominant objective for which an institution carries on its activities is material to decide if the same is business or not for which existence of profit motive is a vital indicator. In the present case the motive is to provide a platform for handloom weavers of the country for marketing and displaying their products through exhibitions.
The activities are not for the any private gain at profit as can be seen by the executive committee which consists of all Govt. offices having no profit sharing or personal interest.
The receipts are used for activities of the society and the activities are monitored by the Ministry of Textiles, Government of India. In my opinion therefore, the assessee cannot be said to be involved in carrying on any business, trade or commerce even through it has objects of general public utility. The benefit of section 11 may therefore be provided to the assessee alongwith consequential benefits.”
4.1.2 The facts of the case for assessment year 2011-12 and 2012-13 are same as those for assessment year 2010-11. A comparison of the assessment order for the assessment year 2010-11 with those for assessment years 2011-12 and 2012-13 shows that no new facts have been brought on record by the assessing officer for the assessment years under consideration in these appeals. Since the facts of the case are same as in assessment year 2010-11, respectfully following the order of the learned Commissioner (Appeals)-36 for assessment year 2010-11, it is held that the assessee cannot be said to be involved in carrying on any business, trade or commerce and the assessing officer is directed to allow the benefit of section 11 with consequential benefits. Ground nos. 1 to 5 for assessment year 2011-12 and ground no. 1 to 6 for assessment year 2012-13 are allowed.”
5.1 We further find that Coordinate Bench of ITAT, Delhi in Revenue’s ITA No. 4788/Del/2016 (Assessment Year 2010-11) vide Order, dated 27-3-2019 in assessee’s own case has observed as under :–
“5.3 Evidently, the activity of the assessee are of advancement of any other object of the general public utility, which falls under the definition of the charitable purposes defined under section 2(15) of the Act. But the contention of the assessing officer is that said object of general public utility shall not be charitable because the assessee is engaged in the activity in the nature of trade, commerce or business or rendering any service in relation to any trade, commerce and business for cess or fee. We find that activity of the assessee are primarily motivated with the objective of promoting handloom sector in India and said activity are not for gain or profit of an individual. The executive committee of the Society also consist of all government officials with no motive of profit sharing or personal interest. The member subscription is received by the assessee in proportion of the supply by the agency and the rate decided. The said subscription fee received cannot be equated with the cess or fee against services rendered. We are of the view that the assessing officer has not appreciated the activities and objective of the society properly and therefore he is not justified in holding that provision to section 2(15) will be attracted in the case of the assessee. In our opinion, the finding of the learned Commissioner (Appeals) on the issue in dispute is well reasoned, and we do not find any error in the same.
Accordingly, we uphold the same. The ground of the appeal of the Revenue is accordingly dismissed.”
5.2 After hearing both the parties and perusing the orders passed by the revenue authorities, especially the impugned Order, dated 30-1-2017 of the learned Commissioner (Appeals) and the finding of the Tribunal, as reproduced above, we are of the considered view that the facts of the case of assessment year 2012-13 are same as those for assessment year 2010-11. A comparison of the assessment order for the assessment year 2010-11 with those for assessment year 2012-13 shows that no new facts have been brought on record by the assessing officer for the assessment years under consideration in this appeal. Since the facts of the case are same as in assessment year 2010-11, respectfully following the order of the learned Commissioner (Appeals)-36 for assessment year 2010-11, it is held that the assessee cannot be said to be involved in carrying on any business, trade or commerce and the assessing officer is directed to allow the benefit of section 11 with consequential benefits and the Tribunal vide its Order, dated 27-3-2019, as reproduced above, has also upheld the order of the learned Commissioner (Appeals) by holding that assessing officer has not appreciated the activities and objective of the society properly and therefore he is not justified in holding that provision of section 2(15) will be attracted in the case of the assessee. In view of above, we do not find any infirmity in the order of the learned Commissioner (Appeals), hence, uphold the same by respectfully following the Tribunal’s Order, dated 27-3-2019 and reject the grounds raised by the Revenue.
- In the result, the appeal of the Revenue is dismissed.