TaxTMI 
TaxTMI 
2015 (5) TMI 862
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.... 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 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 an....
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....s 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 material available to teachers at....
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....se 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. 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....
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....gued 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 ....
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....T(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 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 i....
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....he asstt. year 2006-07, 2007-08, 2008-09 & 2009-10 are reproduced as under:- 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 Books Cost Profit Profit % 2006-07 7,95,37,47....
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.... 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 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 educat....
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....view 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 ....
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....y 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 o....