TaxTMI 
TaxTMI 
2015 (11) TMI 1068
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....appellant prays that to the extent of above grounds the order of the Commissioner of Income tax (Appeals)-7, Mumbai be set aside and that of the Assessing Officer be restored." 3. Briefly stated the facts of the case are that the assessee is an Institute of Chemical Technology (ICT) Mumbai, was established as a Department of Chemical Technology on 1st October, 1993 by the University of Mumbai. Subsequently, the assessee was declared as an autonomous Institute and a deemed University by the Central Government in the year 2008. The CIT(A) has exempted the income generated by the assessee for rendering the consultancy services through its professors to various organizations under the provisions of law. The reasons given by the CIT(A) are mentioned in para 6, 7 and 8 of the impugned order, which are reproduced as under:- "6. I have considered the above submissions of the appellant, the assessment order passed by the A.O., the documents furnished by the appellant as well as the decisions cited in this regard. There is no dispute regarding the fact that the appellant has been declared as a deemed university by the Government of India as per notification dated 12 September, 20....
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....rtaking so held". Firstly, the appellant, as is evident from the facts of the case discussed above, is not carrying out any business itself and the activity of providing consultancy services is being carried out by its professors. And even if such activity is deemed to have been carried out by the appellant, it is only ancillary / incidental to the objects of the appellant, as has been discussed above. Thus, in my opinion, the appellant trust also benefits from the provisions of section 11(4A), because the business if any being carried out by the appellant is incidental / ancillary to the objects of the appellant trust. So far as maintenance of separate books of account is concerned, the appellant has maintained separate ledger of consultancy fee receipts. Since there is no question of expenses, assets or liabilities in this regard, any further requirement of maintaining any separate account would not be there." 4. Whereas, the Revenue in support of the case relied upon the order passed by the Assessing Officer, more particularly observing in para 4.3 and 4.4, which read as under:- "4.3 The assessee's contention is perused along with the details submitted during the yea....
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....scussion held, the contention of the assessee is not acceptable and the net consultancy fees of Rs. 53,18,171/- is taxed as business income u/s 11(4A) of the Income Tax At, 1961. Penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 are initiated separately for filing of inaccurate particulars." 6. Revenue is in appeal. 5. We have heard the parties and perused the relevant material on record. Before going to the merits of the case, it will be relevant to state the provisions of law as applicable in the case. Section 2(13) defines business which is under:- "2(13) : "business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture." 5.1 Section 2(15) provides as under: "2(15) : charitable purpose includes relief of the poor, education [yoga] medical relief, [preservation of environment (including water sheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other object of general public utility; Provided that the advancement of any other object of general public utility shall not be a charit....
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....and gains. 5.5 In the present case, the assessee was established as a Department of Chemical Technology on 1st October, 1993 by the University of Mumbai and since in the year 2008 it was declared as an Autonomous Institute and deemed University by the Central Government. The main aims and object of the Institute are to provide instructions, study, teaching, training and research in various branches of Science and Technology. Though it is the case of the assessee that by virtue of the University Circular bearing No.508 of 1985 dated 7th September, 1985, the revised terms and conditions under which teachers / professors are permitted to undertake the consultation work. At this stage, it is relevant to reproduce the relevant paragraphs of the said Notification :- "2. Normally at any time only two consultations may be permitted concurrently. Any request for an additional consultation may be examined on the merit of the case. 2A. The consultancy work should not interfere with the normal teaching / research work of the department / University and other duties which may be assigned to staff by University authorities. 3. Consultation work may be either for a s....
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....e year as (i) honoraria for consultation work, (ii) honoraria for expert advice or opinion, industrial training during vacation etc., and (iii) the sitting fees received by him for attending meetings of Boards of Directors of companies in the Public or Private Sector taken together does not exceed Rs. 50,000/-." 5.6 It is contended by the assessee during the course of argument that UGC while issuing separate guidelines of incentives for resource mobilization during 11th plan from 2007 to 2012, has observed that - "To encourage university to provide consultancy ON PAYMENT BASIS not only to the industries but to the government, and other bodies and society at large on vital issues of national importance". The assessee, during the course of argument, had also handed over one of the sample letter issued by the Hindustan Petroleum Corporation Limited, which reads as under:- "The Director Institute of Chemical Technology, N.Parekh Marg, Matunga (East) Mumbai 400 019, India Sub : Process consultancy by Professor (Dr.) V.V.Mahajani Dear Sir, We at Bharat Petroleum would like to have expert advisory services of Professor (Dr.....
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....ment of the object of the trust, and therefore, exempted from tax. 5.8 We find that invariably, the consultancy services provided for the specific project or a specific purpose which has direct co-relation with the education imparted by the assessee-University should come within the realm of services imparted for the attainment of the object of the trust. But in the present case, a sample letter from Bharat Petroleum Corporation Ltd. placed on record clearly shows that the expert advice services were sought from Dr. V.V.Mahajani for the corporate R & D Centre, Greater Noida. The letter dated 29th October, 2010 has been reproduced hereinabove was addressed to the Director, Institute of Chemical Technology (the assessee). Therefore, it is not right on the part of the assessee to allege that it is not rendering any services, rather, its Professors are rendering the services. The juristic person like the assessee can only execute its work either through its trustees or employees. Since the employees of the assessee trust (juristic person) are rendering consultancy / advice services for a fee and the part of the fee is also coming to the chest of the assessee, therefore, in our opini....
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.... in any way relatable to the aims and object for which the assessee was established, therefore, we hold that the assessee is not entitled for any exemption under the provisions of the Act. This Tribunal is not oblivious to the fact that if the Professors of the assessee / gives consultancy / advice work on regular basis, that will have the colour of the advice given by the assessee. Further the said consultancy work will also impair the regular studies of the students. 5.10 The judgment relied upon by the assessee in the case of Ashish Super Marcato (supra) is a case which provided the difference between section 11(4) and 11(4A). In the present case, the assessee's case does not fall in section 11(4). Because for the purpose of attracting section 11(4), the income is earned from the property held under the trust. In assessee's case, there is no property held by the assessee and the income generated is not from the property held by the assessee, therefore, it does not fall under section 11(4). On the contrary the case of the assessee will fall under proviso to section 11(4A) and since there is no co-relation between the activity of consultancy with the aims and objects of the tru....
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.... Section 11 was extended because Sub-section (4A) of Section 11 had further undergone change with effect from April 1, 1992. However, in respect of the assessment year of 1984-85, which is relevant to the case in hand, the benefit could not be extended. 13. In the present case, there are categorical findings recorded by the Tribunal that although one of the objects of the assessee RCC was to impart computer training but that was not its sole purpose. It has further been found that the major source of income as reflected in the statement of profit and loss account was from consultancy work. The assessee RCC was not considered to be existing solely for educational purposes simply because its services were used by colleges, universities, Government Departments or other public sector organisations. That alone would not bring its case within the parameters of Section 111(4A)(b) of the Act. The Tribunal has placed reliance on a report submitted by the assessee RCC itself, which provided that the assessee RCC was not only to become self-sufficient but it was also to become profitable. When the aforementioned findings are viewed in the light of bare perusal of Sections 2(15), 10(2....