TaxTMI 
TaxTMI 
2018 (8) TMI 54
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....n No.10002 of 2013 order dated 1.2.2016 wherein, the writ petition filed by the assessee in Misc Case No.15710 of 2015 was allowed to be withdrawn by the assessee and a liberty was granted to the assessee to file the appeal before the Tribunal. 4. It was submitted by ld A.R. of the assessee that after the said order of Hon'ble Orissa High Court, the assessee filed appeals to the Tribunal on 22.3.2016, which are within the time limit prescribed and, therefore, the delay be condoned and appeals be added for hearing. 5. Ld D.R. had no objection to the above submission of ld A.R. of the assessee. 6. In view of above facts, we condone the delay and admit the appeals for hearing. 7. The sole issue involved in the appeals filed by the assessee is that the CIT(A) erred in confirming the order of the Assessing Officer disallowing exemption u/ss 11 & 12 of the Act to the assessee on profit out of training and consultancy of Rs. 74,68,700/- for the assessment year 2005-06, Rs. 37,29,240/- for the assessment year 2006-07, 42,19,010/- for the assessment year 2007-08 and Rs. 73,82,290/- for the assessment year 2009-2010, respectively. 8. In the revenue's appeal, the sole issue inv....
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....parate accounts are not maintained u/s.11(4A) for the activities of CENDERET pertaining to profit yielding training and consultancy activities. 7.1. Now coming to the nature of activity in CENDERET pertaining to training and consultancy, I have to respectfully follow the observation of the Hon'ble High Court where, considering the magnitude of activity and nature of services rendered and considering the non-involvement of students in such services, the Hon'ble Court has agreed with the view of CCIT, Odisha that this is a profit yielding activity. Therefore, in order to be qualified for the benefit u/s.11 it had to maintain separate accounts for such training and consultancy, which the appellant has failed to do. 7.2 There is no problem on the issue that the profit arising from the profit yielding activity is ploughed back and is ultimately used for attainment of charitable objective of the society. This has been the explainable/non-controverted position in all the four cases under appeal. However, unless and until separate accounts are maintained as stipulated u/s.11(4A) of the I.T. Act, benefit u/s.11 cannot be given for the profits. Therefore, in my view, th....
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.....34 crore, that the gross turnover from "Training and Consultancy" was Rs. 3.47 crores which is also around 12% of the total revenue. In such circumstances, the AO had not provided any substantial reason as to why 3% of surplus could be treated as a dominant profit motive particularly in the light of the Hon'ble Supreme Court Decisions in T.M.A.Pai Foundation v. State of Karnaataka (2002) 8 SCC 481 and in the case P.A. Inamdar v. State of Maharashtra AIR 2005 SC 3226 (2005] SCC 537 where even 6 to 15% surplus was held to be permissible. The Training and Consultancy Activity was incidental to the primary activity and even the profit motive was not required to be seen in advancement of ancillary objects as held by the Hon'ble Apex Court in the case of CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 that only the predominant object for which the organization was created is alone to be considered for the purpose for determining whether the nature of activities fall within the scope and ambit of 'charity . In the case of Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1978] 121 ITR 1 [1972] 2 Taxman 501, the Hon'ble Apex Court has held ....
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....er in the concerned assessment year the object is to make profit as opposed to educating persons." In the case Visvesvaraya Technological University vs. Assistant commissioner of Income tax, [2016] 68 taxmann.com 287 (SC) the Hon'ble Apex court confirmed and reiterated the same principles. The second proviso to section 2(15) of the Act clarifies that first proviso to sec.2(15) shall not apply if the aggregate value of the receipts from the activities referred to therein is [twenty-five lakh rupees] or less in the previous year. The Hon'ble Delhi High Court in the case of GSI India v. Director General of Income-tax (Exemption) & Anr. [2014] 360 ITR 138 held that the proviso does not seek to disqualify charitable organization covered by the last limb, when a token fee is collected from the -beneficiaries in the course of activity which is not a business but clearly charity for which they are established and they undertake." Again, the Hon'ble Delhi High Court in the case of India Trade Promotion Organization v. Director General of Income-tax (Exemptions) & Ors. [2015] 371ITR 333, held that if the literal interpretation is given to the proviso to....
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....purposes. In such circumstances of the case, the admissibility of exemption u/s.11 is required to be verified with reference to quantum of profits from project works and its application for charitable purposes in view of the decision of the Hon'ble Apex the case of T.M.A.Pal Foundation v. State of Karnataka (2002) 8 SCC 481 and in the case of P.A.Inamdar v. State of Maharashtra AIR 2005 SC 3226 (2005) SCC 537 etc. The appellant has generated a surplus of Rs. 77.99 lakhs, which is not even 3% of the total revenue of Rs. 28.34 crores. This indicates at if the appellant is not working dominantly with profit motive. There is no evidence brought to the record of dominant profit motive or non- application of the profit from the alleged source for non-charitable purposes. Moreover, the CBDT has issued Circular No.21/2016 on 27.05.2016 regarding clarification on cancellation of registration u/s,12AA of the IT. Act, 1961 wherein the Board has clarified that the field authorities should not cancel registration of a charitable institution granted U/S.12AA of the Act just because proviso to section 2(15) comes into play and that process for cancellation of registration to be initiated stri....
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.... derived from the said activities was charged to tax in the hands of the assessee by the Assessing Officer and exemption u/ss 11 & 12 of the Act was denied to the assessee society in respect of that part of the income. 17. The CIT(A) in earlier assessment years i.e. assessment years 2005- 06, 2006-07, 2007-08 and 2009-2010 has confirmed the action of the Assessing Officer whereas in subsequent assessment years i.e. 2010-11 and 2011-2012 has decided the issue in favour of the assessee. 18. Ld D.R. supported the orders which are in favour of the revenue. 19. Ld A.R. submitted that the activity of rendering training and consultancy services cannot be held as business activity in the case of the assessee. Further, this activity is incidental to the main object of assessee society, which was education and, therefore, provisions of section 11(4A) are not applicable. 20. We find that the assessee is running Management Institute and imparts education on management of business to the students. Because of the above activity, the Faculty of the Institute acquires expertise knowledge of the subject. The Corporates with the intent to educate their officers and staff send them to the....
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....ciety. The training and consultancy fee was charged in the course of attainment of the main object as an incidental activity. The income realized from the training and consultancy fee by the assessee society was not significant keeping in view the total revenue of the assessee society. Thus, we do not find any material to show that the training and consultancy activity was undertaken by the assessee society as an independent business activity. We are inclined to agree with the contention of the assessee that the same was incidental to the attainment of the objects of the assessee society, which are charitable in nature. Thus, in our considered view, provisions of section 11(4A) are not attracted in the instant case. 27. Moreover, we find that in an assessment made in the subsequent assessment years u/s.143(3) of the Act in the case of the assessee, the income derived from similar activity in the similar facts in assessment years 2012-13, 2013-14, 2014-15 & 2015-16 has been allowed as exemption u/ss 11 & 12 of the Act by the Income Tax Officer himself. Thus, there is no reason to take a different view in the years under appeal. We, therefore, allow the appeals of the assessee for....