Quality Circle Forum of India,, Secunderabad v. DDIT (Exemptions)-III, Hyderabad

ITA 1340/HYD/2014 | 2010-2011
Pronouncement Date: 28-10-2016 | Result: Partly Allowed

Appeal Details

RSA Number 134022514 RSA 2014
Assessee PAN AAAAQ0008P
Bench Hyderabad
Appeal Number ITA 1340/HYD/2014
Duration Of Justice 2 year(s) 3 month(s) 4 day(s)
Appellant Quality Circle Forum of India,, Secunderabad
Respondent DDIT (Exemptions)-III, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 28-10-2016
Date Of Final Hearing 01-08-2016
Next Hearing Date 01-08-2016
Assessment Year 2010-2011
Appeal Filed On 24-07-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SMT P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN ACCOUNTANT MEMBER ITA NO. 1340/HYD/2014 ASSESSMENT YEAR: 2010-11 QUALITY CIRCLE FORUM OF INDIA HYDERABAD. PAN AAAAQ0008 P VS. DY. DIRECTOR OF INCOME-TAX EXEMPTIONS III HYDERABAD. (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI K.E. SUNIL BABU REVENUE BY : SHRI A.V. SADASIVA & SHRI M.V. ANIL KUMAR DATE OF HEARING 01-08-2016 DATE OF PRONOUNCEMENT 28-09-2016 O R D E R PER S. RIFAUR RAHMAN A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) - IV HYD ERABAD DATED 20/06/2014 FOR AY 2010-11. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED ITS RETURN OF INCOME ON 30/09/2010 CLAIMING EXEMPTION U /S 11 OF THE INCOME-TAX ACT 1961 (IN SHORT THE ACT). THE ASSE SSING OFFICER REJECTED THE CLAIM OF EXEMPTION U/S 11 ON THE BASIS OF PROVISO TO SECTION 2(15). THEREAFTER THE ASSESSING OFFICER AS SESSED THE TOTAL INCOME AT RS. 1 28 25 761/-. 2.1 IN THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE WAS PROVIDING SERVI CES TO ITS CLIENTS 2 ITA NO. 1340/H/14 QUALITY CIRCLE FORUM OF INDIA HYD. (MAINLY CORPORATE/BUSINESS HOUSES). BEFORE THE ASSE SSING OFFICER THE ASSESSEE SUBMITTED AS FOLLOWS: 'OUR MAIN OBJECTIVES ARE FOR PROVIDING EDUCATION A ND TRAINING TO THE BOTTOM LINE EMPLOYEES ON QUALITY AND IMPROVEME NT METHODS AND INTEGRATE THEM WITH THE MAIN STREAM OF THE ORG ANISATION. WE ASSIST IN SMALL AND MEDIUM SCALE INDUSTRIES CL USTERING THEM THROUGH THEIR ASSOCIATION' 2.2 THE ASSESSEE SUPPLIED THE RELEVANT COURSE MATE RIAL DURING THE COURSES. IF ANY ORGANIZATION (WHO WERE CLIENTS OF T HE ASSESSEE) NEEDED EXTRA PUBLICATION FOR THEIR STAFF/ EMPLOYEES IT WAS SUPPLIED AT A NOMINAL COST. THIS SHOWED THAT THE ASSESSEE WAS P ROVIDING TRAINING AND ITS PUBLICATIONS TO ITS MEMBERS ONLY. THE ASSES SEE HAD ORGANIZED A NATIONAL CONVENTION ON QUALITY CONTROL (NCQC) WHE RE ALL THE CHAPTERS LOCATED IN DIFFERENT PARTS OF THE COUNTRY HAD TAKEN PART. FOR NCQC 2009 THE ASSESSEE HAD RECEIVED THE FOLLOWING A MOUNTS: I. ADVERTISEMENT AND SPONSORING FEE RS.20 79 50 0 II. REGISTRATION FEE RS. 1 44 29 760 III. PARTICIPATION FEE RS .1 45 02 760 IV. PARTICIPATION FEE R S.17 70 000 V. SOUVENIR DONATION RS .2 48 000 2.3. THE MAIN ACTIVITIES OF THE ASSESSEE WERE PROVI DING TRAINING CONSULTANCY PROFESSIONAL SERVICES TO ITS CLIENTS I N LIEU OF FEES. THE ASSESSEE HAD CHARGED FEES TO ITS CLIENTS REFERRED TO AS INSTITUTIONAL MEMBERS OVER AND ABOVE THE MEMBERSHIP FEE. IT WAS CLEAR THAT THE ACTIVITIES WERE NOT FOR BENEFIT OF GENERAL PUBLIC A ND WAS LIMITED TO THE MEMBERS ONLY ON PAYMENT OF FEE FOR THE SPECIFIC SER VICES RENDERED E.G. PARTICIPATION FEES REGISTRATION FEES ADVERTI SEMENT AND SPONSORING FEE TRAINING PROGRAMME FEE SALE OF BOO KS MEMBERSHIP FEE ETC. THE EXPENSES WERE ATTRIBUTABLE MAINLY TO ADMINISTRATION AND SALARY AND HONORARIUM. NO CHARITY WAS INVOLVED IN T HE EXPENSES. 3 ITA NO. 1340/H/14 QUALITY CIRCLE FORUM OF INDIA HYD. 2.4 THE ASSESSING OFFICER THEREFORE CONCLUDED TH AT THE ACTIVITIES OF THE ASSESSEE WERE IN THE NATURE OF BUSINESS AND COMMERCE AND NO CHARITY WAS INVOLVED IN ITS ACTIVITIES. THE ASSESSI NG OFFICER ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE ON 07.12.2012 FI XING THE HEARING ON 17.01.2013. AS REQUESTED THE HEARING WAS ADJOUR NED TO 25.01.2013. THERE WAS NO COMPLIANCE FROM THE AR ON THIS DATE. THE ASSESSING OFFICER THEREFORE PRESUMED THAT THE ASSES SEE HAD NO EXPLANATION TO OFFER AND BROUGHT THE ENTIRE EXCESS OF INCOME TO TAX BY DENYING EXEMPTION U/S 11. 2.5 THE ASSESSING OFFICER HAD ALSO DIRECTED THE AS SESSEE TO PRODUCE THE BOOKS OF ACCOUNT AND SINCE THE ASSESSEE FAILED TO DO SO THE ASSESSING OFFICER INFERRED THAT THE ASSESSEE HA D NOT MAINTAINED PROPER BOOKS OF ACCOUNT AND DISALLOWED 20% OF THE R EVENUE EXPENDITURE OF RS.2 70 01 223 AMOUNTING TO RS.54 0 0 245/-. 2.6 THE ASSESSING OFFICER FURTHER NOTED THAT THE A SSESSEE HAD CLAIMED RS.14 55 963 AS DEPRECIATION. THE ASSESSING OFFICER HELD THAT DEPRECIATION WAS NOT ALLOWABLE IN VIEW OF THE DECISION IN THE CASE OF ESCORTS LTD VS. UNION OF INDIA (SC). HOWEVER SIN CE THE EXEMPTION U/S 11 HAD BEEN DENIED TO THE ASSESSEE THE ASSESSI NG OFFICER ALLOWED DEPRECIATION ON THE ASSETS ACQUIRED DURING THE CURRENT YEAR AND CONSEQUENTLY DISALLOWED RS.13 35 805/- . 3. AGGRIEVED WITH THE ORDER OF AO THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(A). 4. IN THE COURSE OF THE APPELLATE PROCEEDINGS THE AR SUBMITTED THAT THE ASSESSEE WERE TO PROVIDE EDUCATION AND TR AINING PRIMARILY TO THE BOTTOM LINE EMPLOYEES ON QUALITY AND IMPROVEMEN T METHODS AND INTEGRATE THEM WITH THE MAINSTREAM OF THE ORGANIZAT ION THAT FOR THIS PURPOSE THE ASSESSEE CONDUCTED TRAINING PROGRAMMES AND SEMINARS AND WHENEVER ANY MEMBER OR PARTICIPANT NEEDED EXTRA PUBLICATION FOR THEIR STAFF/EMPLOYEES THE ASSESSEE PROVIDED THE SA ME AT A NOMINAL 4 ITA NO. 1340/H/14 QUALITY CIRCLE FORUM OF INDIA HYD. PRICE. THE AR SUBMITTED THAT THE OBJECTIVES OF THE ASSESSEE WERE IN THE NATURE OF EDUCATION AND TRAINING THAT THE WORD EDUCATION HAD NOT BEEN DEFINED IN THE ACT THAT THE PROCESS OF LEARNI NG OR TRAINING WAS ALSO EDUCATION AND THAT EDUCATION WAS NOT MERELY SY STEMATIC TEACHING FOLLOWED BY A CERTIFICATE THE AR SUBMITTED THAT ED UCATION HAD A BROADER MEANING U/S 2(15) THAN U/S 10(23C)(IIIAB) (IIIAD) AND (VI) AND THEREFORE THE ACTIVITIES OF THE ASSESSEE WERE TO B E CONSIDERED TO BE 'EDUCATION'. 4.1 THE AR SUBMITTED THAT EVEN IF THE ASSESSEE'S A CTIVITY WAS TO BE CONSIDERED AS NOT FALLING WITHIN THE DEFINITION OF EDUCATION IT FELL UNDER THE RESIDUARY CATEGORY GENERAL PUBLIC UTILIT Y. THE ASSESSEE AIMED TO DEVELOP THE BOTTOM LINE PEOPLE MANY OF WHO M HAD NO MEANS TO PURSUE THEIR EDUCATION AND TO HONE THEIR SKILLS AND THE MOST SIGNIFICANT GAIN FROM SUCH TRAINING WAS NOT MONITOR Y BUT SELF CONFIDENCE AND SELF SATISFACTION THAT THE WORKERS D ERIVE. 4.2 THE AR ALSO SUBMITTED THAT IT WAS A WELL SETTL ED LAW THAT EVEN WHEN MERELY A SECTION OF SOCIETY OR PUBLIC WAS BENE FITED EXEMPTION U/S 11 CANNOT BE DENIED. THE AR RELIED ON THE DECIS ION IN THE CASE OF ICAI VS. DGIT [2013] 358 ITR 91 (DEL). 4.3 THE AR SUBMITTED THAT EXEMPTION U/S 11 COULD NO T BE DENIED MERELY DUE TO EXISTENCE OF PROFIT SO LONG AS THE PR OCEEDS WERE APPLIED FOR ITS OBJECTS. THE AR RELIED ON VARIOUS D ECISIONS IN SUPPORT OF ASSESSEES CASE WHICH WERE EXTRACTED BY THE CIT (A) IN HIS ORDER AT PAGES 7 AND 8. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E THE CIT(A) AS REGARDS EXEMPTION U/S 11 OF THE ACT OBSERVED TH AT THERE IS NO ELEMENT OF CHARITY IN THE ACTIVITIES OF ASSESSEE. EACH AND EVERY ACTIVITY OF THE ASSESSEE IS CHARGED FOR. SUCH CHARG ING OF FEES IS NOT OCCASIONAL BUT SYSTEMATIC AND MANDATORY. THE FEES A RE ALSO NOT FIXED AT A NOMINAL LEVEL BUT IN MANNER TO GENERATE REGULA R ADEQUATE SURPLUS. HE THEREFORE HELD THAT THE ASSESSEE IS E NGAGED IN AN 5 ITA NO. 1340/H/14 QUALITY CIRCLE FORUM OF INDIA HYD. ACTIVITY IN THE NATURE OF TRADE OR BUSINESS. AS A R ESULT THE ASSESSEE IS ADVERSELY AFFECTED BY THE PROVISO TO SEC.2(15) AND IS NOT ELIGIBLE FOR THE EXEMPTION U/S 11. 5.1 AS REGARDS THE DISALLOWANCE OF 20% OF THE EXPEN DITURE CLAIMED THE CIT(A) OBSERVED THAT THE ASSESSEE HAS SUBMITTED THAT IT HAD NOT MAINTAINED REGULAR BOOKS OF ACCOUNTS DULY SUPPORTED BY BILLS AND VOUCHERS WHICH HAD BEEN PRODUCED DURING THE ASSESSM ENT PROCEEDINGS AND THAT THE SAME WAS EVIDENCED BY AUD IT REPORT ATTACHED TO THE RETURN OF INCOME. HE FURTHER OBSERV ED THAT THERE IS NO DISPUTE THAT THE BOOKS OF THE ASSESSEE HAD BEEN AUD ITED AND THE AUDITED REPORT HAD BEEN ENCLOSED TO THE RETURN. HOW EVER THAT DOES NOT DEBAR THE ASSESSING OFFICER FROM EXAMINING THE BOOKS OF ACCOUNT AND SATISFYING HIMSELF THAT THE CLAIMS MADE IN THE AUDITED BOOKS ARE IN ORDER. FOR THIS PURPOSE THE ASSESSEE WAS OBLIGE D TO PRODUCE THE BOOKS OF ACCOUNT AND OTHER SUPPORTING EVIDENCE LIKE BILLS AND VOUCHERS BEFORE THE ASSESSING OFFICER WHEN CALLED U PON TO DO SO. THERE IS NO EVIDENCE THAT THE ASSESSEE DID SO. THE CIT(A) HELD THAT UNDER THE CIRCUMSTANCES THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING 20% OF THE EXPENSES. 5.3 AS REGARDS THE DISALLOWANCE OF DEPRECIATION T HE CIT(A) OBSERVED THAT THERE IS NO DISPUTE THAT THE COST OF THE ASSETS HAD BEEN ALLOWED AS AN APPLICATION OF INCOME IN THE PRE CEDING YEARS. FOLLOWING THE DECISIONS OF COORDINATE BENCH OF THIS TRIBUNAL UPHELD THE ACTION OF THE AO. 6. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX HYDERABAD IS AGAINST THE LAW WEIGHT OF EVIDENCE A ND PROBABILITIES OF CASE. 2. YOUR ASSESSEE SUBMITS THAT THE CIT(A) OUGHT TO H AVE APPRECIATED THE FACT THAT YOUR ASSESSEE IS CARRYING ON EDUCATION AND TRAINING ACTIVITIES BASED ON THE VARIOUS CASE LAWS CITED 6 ITA NO. 1340/H/14 QUALITY CIRCLE FORUM OF INDIA HYD. BEFORE CIT(A) WITHIN THE MEANING OF EDUCATION UNDE R SECTION 2(15) OF THE INCOME TAX ACT 1961. 3. CIT (A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSEE WAS ALLOWED EXEMPTION DURING PAST 30 YEARS AND THER E IS NO CHANGE IN OBJECTIVES AND ACTIVITIES OF THE ASSESSEE . 4. CIT (A) ERRED IN CONCLUDING THAT THERE IS NO ELE MENT OF CHARITY IN THE ACTIVITIES OF YOUR ASSESSEE WHEREAS YOUR AS SESSEE SINCE INCEPTION IN 1982 WAS GRANTED EXEMPTION UNDER SECT ION 11 ON THE BASIS THAT ITS OBJECTIVES AS WELL AS ITS ACTIVI TIES ARE CHARITABLE WITHIN THE MEANING OF SECTION 2(15) OF THE INCOME T AX ACT 1961. 5. THE CIT(A) AS WELL AS THE ASSESSING OFFICER ERRE D IN LAW AND FACTS OF THE CASE THAT YOUR ASSESSEE WAS IN FACT CA RRYING ON EDUCATION AND TRAINING TO WHICH PROVISO TO SECTION 2(15) ARE NOT APPLICABLE AND NOT HAVE DENIED EXEMPTION U/S 11 OF THE INCOME TAX ACT 1961. 6. CIT (A) AS WELL AS THE ASSESSING OFFICER ERRED I N LAW AND ON FACTS OF THE CASE IN DISALLOWING 20% OF THE EXPENDI TURE CLAIMED WHERE THE ASSESSEE HAD MAINTAINED REGULAR BOOKS OF ACCOUNTS AND VOUCHERS WHICH HAVE BEEN PRODUCED. 7. CIT (A) ERRED IN LAW AND ON FACTS OF THE CASE IN DISALLOWING DEPRECIATION CLAIMED BY YOUR ASSESSEE. 8. THE ASSESSEE CRAVES LEAVE TO ADD TO AMEND OR MO DIFY THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIM E OF HEARING OF THE APPEAL IF IT IS CONSIDERED NECESSARY. 7. BEFORE US THE LD. AR SUBMITTED THAT THE ASSESSE E IS A REGISTERED CHARITABLE SOCIETY AND ESTABLISHED WITH THE MAIN OBJECTIVE OF EDUCATING PEOPLE REGARDING CONCEPT OF QUALITY IN EXECUTING DAY TO DAY ACTIVITIES OF EMPLOYMENT AND EMPOWERMENT OF THE FORCE THOUGH IMPROVEMENT OF QUALITY OF PEOPLE PRODUCT AND SERVI CES. THE ASSESSEE WAS INVOLVED IN EDUCATING PEOPLE IN THE MATTERS OF QUALITY MAINTENANCE AND IMPROVEMENT. IT IS ESTABLISHED IN 1 982 AND WAS GRANTED REGISTRATION U/S 12A OF THE INCOME-TAX ACT 1961 VIDE NO. H.QRS. III/5(46)86/87 DTD. 18/05/87. IT WAS ALLOWE D EXEMPTION U/S 11 OF THE ACT SINCE INCEPTION. ALL THESE YEARS THERE IS NO CHANGE IN OBJECTS NOR ACTIVITIES OF THE ASSESSEE. FROM INCEPT ION IT WAS FUNCTIONING AS NON-PROFIT ORGANIZATION. 7 ITA NO. 1340/H/14 QUALITY CIRCLE FORUM OF INDIA HYD. 7.1 HE ALSO INVITED OUR ATTENTION TO THE CATEGORICA L FINDINGS OF THE CIT(A) AT PARA 6.4 IN HIS ORDER WHICH ARE AS BELOW : 6.4 THERE IS NO DOUBT THAT THE APPELLANT IS ENGAGED IN UPGRADING THE SKILL OF THE WORKERS TO WHOM IT IMPA RTS TRAINING. IT IS ALSO DOING IT IN A SYSTEMATIC AND STRUCTURED MAN NER. HOWEVER IT IS NECESSARY TO EXAMINE THE NATURE OF THESE SKIL LS AND THE MANNER IN WHICH IT IS DONE IN ORDER TO ARRIVE AT A CONCLUSION WHETHER SUCH TRAINING FALLS WITHIN THE DEFINITION O F EDUCATION AS PER THE DECISION OF THE SUPREME COURT. 7.2 HE FURTHER SUBMITTED THAT THE ACTIVITIES OF THE ASSESSEE WILL FALL IN THE CATEGORY OF EDUCATION AND SECTION 2(15) OF T HE ACT WILL NOT APPLY TO THE ASSESSEE. 7.3 THE AR RELIED ON THE FOLLOWING CASE LAWS: 1. DIT (EXEMPTION) VS. AHMEDABAD MANAGEMENT ASSOCI ATION 366 ITR 85 (GUJ.) 2. ICAI ACCOUNTING RESEARCH FOUNDATION VS. DIT(E) 183 TAXMAN 462 (DELHI). 3. INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA VS. DIT(E) DELHI 347 ITR 99 (DELHI) 4. SOCIETY OF INDIAN AUTOMOBILE MANUFACTURERS VS. ITO (E) [2016] 71 TAXMANN.COM 138 (DELHI TRIB.) 5. CIT VS. ST. PETERS EDUCATION SOCIETY [2016] 7 0 TAXMANN.COM 171 (SC). 8. LD. DR ON THE OTHER HAND RELIED ON THE ORDER O F CIT(A) AND ALSO RELIED ON THE SPECIFIC SUBMISSIONS OF CIT(A) A S BELOW: 6.4 THERE IS NO DOUBT THAT THE APPELLANT IS ENGAGED IN UPGRADING THE SKILL OF THE WORKERS TO WHOM IT IMPA RTS TRAINING. IT IS ALSO DOING IT IN A SYSTEMATIC AND STRUCTURED MAN NER. HOWEVER IT IS NECESSARY TO EXAMINE THE NATURE OF THESE SKIL LS AND THE MANNER IN WHICH IT IS DONE IN ORDER TO ARRIVE AT A CONCLUSION WHETHER SUCH TRAINING FALLS WITHIN THE DEFINITION O F EDUCATION AS PER THE DECISION OF THE SUPREME COURT. 6.9 WHAT EMERGES FROM THESE CASE STUDIES IS THAT TH E TEAMS OF WORKERS ARE ENCOURAGED TO IDENTIFY SOME PROBLEMS AFFECTING THE BUSINESS OF THEIR EMPLOYER THE TEAMS THEN STUD IED AND ANALYSED THE PROBLEM TO ARRIVE AT A WORKABLE SOLUTI ON. THE ROLE OF THE APPELLANT IS TO GUIDE THE WORKERS IN THE PROCES S OF ANALYSIS 8 ITA NO. 1340/H/14 QUALITY CIRCLE FORUM OF INDIA HYD. FOR FINDING THE SOLUTION TO THE PROBLEMS. IN EFFECT THE EMPLOYER INSTEAD OF HIRING PROFESSIONAL CONSULTANTS FOR IMPR OVING ITS PRODUCTIVITY RELIES ON ITS OWN WORKERS TO DO SO. I N THE PROCESS THE APPELLANT ACTS AS A MENTOR FOR THE WORKERS IN M AKING THEM LEARN TO THINK ABOUT AND TO ANALYSE THE PROBLEMS FR OM THEIR WORK ENVIRONMENT. 6.12 THE DECISION OF THE SUPREME COURT ENVISAGES A STRICT DEFINITION OF 'EDUCATION' INVOLVING A SET OF SCHOL ASTIC INSTRUCTIONS IN A FORMAL METHOD OF SCHOOLING THAT IS GLARINGLY L ACKING IN THE APPELLANT'S CASE. THE APPELLANT'S ACTIVITIES ALSO D O NOT RESULT IN THE IMPARTING OF ANY STRUCTURED AND FORMALLY RECOGN IZED BODY OF KNOWLEDGE TO THE PARTICIPANTS. I THEREFORE HOLD T HAT THE ACTIVITIES OF THE APPELLANT DO NOT FALL IN THE REALM OF 'EDUCA TION'. 9 CONSIDERED THE SUBMISSIONS OF BOTH THE COUNSELS A ND MATERIAL FACTS ON RECORD AS WELL AS THE ORDERS OF REVENUE AU THORITIES. THERE IS NO DISPUTE ON THE FACT THAT THE TRUST IS FUNCTIONIN G SINCE 1982 AND 12A REGISTRATION IS GRANTED AS WELL AS ENJOYING EXEMPTI ON U/S 11. THERE IS NO CHANGE IN TRUST NOR METHOD OF ACCOUNTING SINCE I NCEPTION. AFTER AMENDMENT TO SECTION 2(15) OF THE ACT THE DEPARTME NT IS RELOOKING AT THE OBJECTS AND FUNCTIONING OF THE TRUST. AFTER ANA LYZING THE SUBMISSIONS THE QUESTION RAISED BEFORE US IS THAT WHETHER THE TRUST NO DOUBT CHARITABLE FALLS IN THE SECOND LIMB OF DE FINITION OF CHARITABLE PURPOSE CONTAINED IN SECTION 2(15) OF THE ACT I.E . EDUCATION OR FOURTH LIMB I.E. ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY. 9.1 TO ADJUDICATE THE ISSUE IN DISPUTE WE ANALYSE THE JUDICIAL PRONOUNCEMENTS WHICH ARE AS BELOW: 9.2 IT WAS HELD IN BUREAU OF INDIAN STANDARDS VS. D GIT (EXEMPTION) [2013] 212 TAXMANN 210 (DEL.) ACTIVITIES OF BUREAU OF INDIAN STANDARDS IN PRESCRIBING OF STANDARDS OF GOODS/ARTI CLES AND ENFORCING THOSE STANDARDS THROUGH ACCREDITATION AND CONTINUIN G SUPERVISION THROUGH INSPECTION ETC. CANNOT BE CONSIDERED AS TR ADE BUSINESS OR COMMERCIAL ACTIVITY MERELY BECAUSE TESTING PROCEDUR ES INVOLVES CHARGING OF FEES. IN THE PRESENT CASE ALSO MERELY C HARGING FEES DOES NOT TAKE AWAY THE CHARITABLE NATURE OF THE TRUST. 9 ITA NO. 1340/H/14 QUALITY CIRCLE FORUM OF INDIA HYD. 9.3 ON THE ISSUE OF EDUCATION ACTIVITIES AS HELD I N DIT(*E) VS. AMHEDABAD MANAGEMENT ASSOCIATION [2014] 47 TAXMANN. COM 162 (GUJ.) FROM CIRCULAR NO. 11/2008 DTD. 19/12/2008 IT APPEARS THAT THE NEWLY INSERTED PROVISO TO SECTION 2(15) OF THE ACT WILL APPLY TO ENTITIES WHOSE PURPOSE IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND HENCE SUCH ENTITIES WILL NOT BE ELIGIBL E FOR EXEMPTION U/S 11 OR 10(23)(C) OF THE ACT IF THEY CARRY ON COMMERCIAL ACTIVITIES AND IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES IS TEN LAKH RUPEES OR MORE IN THE RELEVANT PY. THE PROVISO WILL NOT APPLY IN RESPECT OF THE FIRST THREE LIMBS OF SECTION 2(15) I.E. RELIEF TO THE POOR EDUCATION OR MEDICAL RELIEF. THUS WHERE THE PURPOSE OF A TRU ST OR INSTITUTION IS RELIEF TO THE POOR EDUCATION OR MEDICAL RELIEF IT WILL CONSTITUTE CHARITABLE PURPOSE EVEN IF IT INCIDENTALLY INVOLV ES THE CARRYING ON OF THE COMMERCIAL ACTIVITIES. IN THE PRESENT CASE THE AO AND CIT(A) HAVE HELD THAT THERE EXISTS INCOME OVER EXPENDITURE AND THE ASSESSEE IS CHARGING CERTAIN FEES FOR ACTIVITIES CARRIED ON BY IT WHICH AMOUNTS TO CARRYING ON OF COMMERCIAL ACTIVITIES HENCE DEN IED THE EXEMPTION U/S 11. WE ARE OF THE VIEW THAT MERE CHARGING OF FE ES FOR CARRYING ACTIVITIES WILL NOT LOOSE THE CHARACTER OF CHARITY AND IN THIS CASE THE DEPARTMENT HAS ALREADY GRANTED REGISTRATION TREATIN G THE ACTIVITIES AS CHARITABLE BUT HAS NOT DECLARED UNDER WHICH ACTIVIT Y WHETHER UNDER EDUCATION OR GENERAL PUBLIC UTILITY. FROM THE ASSES SMENT ORDER THE ASSESSEE HAS CHARGED FEE TO VARIOUS ACTIVITIES LIKE SEMINARS PARTICIPATION FEES OF PARTICIPANTS SHOWS THAT ASSES SEE HAD ENGAGED IN SOME SORT OF LECTURES/TRAINING RELATING TO THE OBJ ECTS OF THE TRUST I.E. EDUCATION AND TRAINING TO THE BOTTOM LINE EMPLOYEES IN QUALITY AND IMPROVEMENT METHODS. IT WAS NOT CONTROVERTED BY THE DEPARTMENT. IT WAS ONLY OBJECTED TO CHARGING OF FEES. IN OUR CONSI DERED VIEW THE ASSESSEE HAS CARRIED ON THE ACTIVITIES OF IMPARTING TRAINING TO THE BOTTOM LINE EMPLOYEES AND THERE IS NO ELEMENT OF PR OFIT IN THE SAID ACTIVITY AS THE SURPLUS GENERATED OUT OF THE ACTIVI TIES IS AGAIN APPLIED FOR THE CHARITABLE ACTIVITY ONLY. MOREOVER THE ASS ESSEE QUOTED VARIOUS CASE LAWS IN SUPPORT OF ITS CLAIM THAT THEY ARE IN THE FIELD OF 10 ITA NO. 1340/H/14 QUALITY CIRCLE FORUM OF INDIA HYD. EDUCATION. WHEN ANALYSED CLOSELY ALL THE INSTITUTI ONS I.E. AHMADABAD MANAGEMENT ASSOCATION ICAI PETERS EDUCATION SOCI ETY ARE EDUCATING PEOPLE MORE ON STRUCTURED MANNER AND ACKN OWLEDGING BY ISSUING PROPER CERTIFICATES. IN THE PRESENT CASE W E ARE NOT SURE IF SUCH ACTIVITIES ARE BEING CARRIED ON BY THE ASSESSE E. WE ARE NOT INCLINED TO ADJUDICATE WHETHER THEY FALL INTO EDUC ATION ACTIVITIES IN THE ABSENCE OF RELEVANT MATERIAL BEFORE US. HOWEVER AS SESSEE IS IMPARTING TRAINING TO THE BOTTOM LIKE EMPLOYEES WH ICH MAY BE SIMILAR TO EDUCATION. HENCE IN OUR VIEW THE ASSESSEE IS I NVOLVED IN CARRYING ON OF CHARITABLE ACTIVITIES AND NOT IN ANY COMMERCI AL ACTIVITIES AS HELD BY THE AO. THUS AO CANNOT DENY THE BENEFIT U/S 11 OF THE ACT. ACCORDINGLY THE GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD ARE ALLOWED. 10. WITH REGARD TO GROUND NO. 6 DISALLOWANCE OF 20 % OF EXPENDITURE DUE TO THE OBSERVATION OF THE AO THAT A SSESSEE HAD NOT MAINTAINED PROPER BOOKS OF ACCOUNT. FROM THE RECORD S THE BOOKS OF THE ASSESSEE WAS AUDITED GIVES THE IMPRESSION THAT THERE EXISTS BOOKS OF ACCOUNT AND WE ARE IN AGREEMENT WITH CIT(A ) THAT BECAUSE OF BOOKS OF ACCOUNT ARE AUDITED THE AO HAS ALSO A RIGHT TO REVIEW THE BOOKS OF ACCOUNT. THERE IS NO DISPUTE THAT THE BOOK S OF ACCOUNT WAS AUDITED SINCE THE ASSESSEE HAS SUBMITTED AUDITED F INANCIAL STATEMENT. SINCE THE BOOKS ARE AUDITED THERE EXIST S BOOKS OF ACCOUNT. CONSIDERING THE ABOVE WE FIND IT APPROPRI ATE TO REMIT THIS ISSUE BACK TO THE FILE OF THE AO TO VERIFY THE BOOK S. WE DIRECT ASSESSEE TO SUBMIT THE BOOKS BEFORE THE AO SO THAT AO CAN VERIFY THE GENUINENESS OF THE TRANSACTIONS AND VOUCHERS. WE DI RECT THE AO TO VERIFY THE BOOKS AS PER LAW AND COMPLETE THE ASSESS MENT AFTER GIVING PROPER OPPORTUNITY TO ASSESSEE IN THIS REGARD INSTE AD OF RESORTING TO DISALLOW ON ADHOC BASIS. ACCORDINGLY GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 11 ITA NO. 1340/H/14 QUALITY CIRCLE FORUM OF INDIA HYD. 11. WITH REGARD TO DEPRECIATION AO HAS NOT DISALLO WED ANY DEPRECIATION IN THE ASSESSMENT THEREFORE WE DO NO T FIND THIS GROUND AS APPROPRIATE FOR ADJUDICATION. ACCORDINGLY THE S AME IS REJECTED. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER 2016 SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAH MAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD DATED: 28 TH SEPTEMBER 2016 KV COPY TO:- 1) QUALITY CIRCLE FORUM OF INDIA C/O M. ANANDAM & CO CAS. 7A SURYA TOWERS SP ROAD SECUNDERABAD 500 0 03. 2) ADIT - III HYDERABAD. 3) CIT(A) IV HYD 4) DIT(E) HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE I.T.A.T. HYDE RABAD. S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./ P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER