2014 (7) TMI 1339 - AT - Income Tax

Tribunal affirms CIT(A) decision on various tax aspects, favoring assessee over Revenue

Asstt. DIT (E) TC-II, New Delhi Versus India Islamic Cultural Centre

The Tribunal upheld the ld. CIT(A)'s decision in all aspects contested by the Revenue, including the treatment of the Inspector Report, characterization ... Exemption u/s 11 denied - AO felt that the assessee was engaged in the business of running cafeteria and coffee shop with profit motive - HELD THAT:- The assessee is registered as a charitable institution u/s 12A with the Commissioner of Income tax. It is not in dispute that the aims and objects of the society are objects of general public utility inasmuch as they attempt to promote better understanding amongst various sections of the society. Establishing communal harmony and better understanding between various sections of the society are purely in the nature of objects of general public utility. The assessee had generated profit from cafeteria and coffee shop but the fact of the matter is that these facilities were created for the members of the assessee-society. The profit so generated from cafeteria and coffee shop was utilized for achieving the aims and objects of the society. The society had no overall profit in the year under appeal. Profits so generated from cafeteria and coffee shop were ultimately used for achieving aims and objects of the institution. Therefore, such profits generated from a few activities of the institution cannot be used to convert a purely charitable institution into non-charitable institution. The view that we are taking in the matter is supported by the order passed by a Coordinate Bench of this tribunal referred to by the ld. AR for the assessee at the time of hearing. Appeal filed by the Revenue is dismissed. Issues:1. Treatment of Inspector Report2. Characterization of gross sale consideration3. Classification of the assessee's activities4. Application of 'The proova Sanskriti Kendra' decision5. Double deduction on depreciation of capital assets6. Treatment of membership fees corpus income7. Admissibility of appeal groundsAnalysis:1. Treatment of Inspector Report:The Revenue contested the treatment of the Inspector Report by the ld. CIT(A), arguing that it was baseless due to the absence of managing committee members' statements and verification from the service provider. The Inspector had procured bills/invoices independently. However, the Tribunal upheld the ld. CIT(A)'s decision, emphasizing the independent basis of bill procurement by the Inspector.2. Characterization of gross sale consideration:The Revenue challenged the categorization of gross sale consideration from the service provider as rent instead of a commercial/business receipt. The Tribunal affirmed the ld. CIT(A)'s decision, maintaining that the revenue sharing basis was correctly treated as rent.3. Classification of the assessee's activities:The dispute arose regarding the classification of the assessee under 'Education' by the ld. CIT(A) while the activities and accounts indicated 'General Public Utility.' The Tribunal ruled in favor of the assessee, recognizing the charitable nature of the institution's objectives promoting communal harmony and understanding as activities of general public utility.4. Application of 'The proova Sanskriti Kendra' decision:The Revenue objected to the application of 'The proova Sanskriti Kendra' decision by the ld. CIT(A) based on distinctions made by the AO. The Tribunal supported the ld. CIT(A)'s decision, aligning with the differentiation of facts made during assessment.5. Double deduction on depreciation of capital assets:The issue of allowing double deduction on depreciation of capital assets, which were already claimed as application of income, was raised. The Tribunal dismissed the Revenue's claim, citing the 'Doctrine of Estoppel' and upholding the ld. CIT(A)'s decision to allow the depreciation claim.6. Treatment of membership fees corpus income:The ld. CIT(A) treated membership fees as corpus income rather than revenue receipt, contrary to the assessment order. The Tribunal concurred with the ld. CIT(A)'s classification, supporting the treatment of membership fees as corpus income.7. Admissibility of appeal grounds:The Revenue sought to add, alter, or amend the grounds of appeal during the hearing. The Tribunal dismissed the appeal filed by the Revenue, affirming the decision of the ld. CIT(A) in favor of the assessee.This comprehensive analysis highlights the key issues addressed in the judgment, providing a detailed overview of the Tribunal's decisions on each matter raised by the Revenue in the appeal.