2018 (8) TMI 54 - AT - Income Tax

Deduction u/s.11 on profits earned out of training and consultancy - According to the Assessing Officer, the assessee ought to have maintained separate books of account in respect of its activity of providing training and consultancy services in view of section 11(4A) - Held that - In the facts of the instant case, education is the main object of the assessee society. 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. Also 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 Penalty u/s. 271(1)(c) - Held that - Hon ble Supreme Court in the case of K.C.Builders and Another vs ACIT (2004 (1) TMI 7 - SUPREME COURT) has held that Where the additions made in the assessment order on the basis of which penalty for concealment is levied, are deleted, there remains no basis at all for levying penalty for concealment and, therefore, in such a case no penalty can survive and the penalty is liable to be cancelled. Ordinarily, penalty cannot stand if the assessment itself is set aside. In the instant case, the quantum appeal has been decided in favour of the assessee. Hence, we confirm the order of the CIT(A) in deleting the levy of penalty - decided in favour of assessee

Issues Involved:
1. Delay in filing appeals by the assessee.
2. Disallowance of exemption under sections 11 & 12 of the Income Tax Act for income from training and consultancy.
3. Requirement of maintaining separate books of account under section 11(4A).
4. Penalty under section 271(1)(c) for furnishing inaccurate particulars of income.

Detailed Analysis:

1. Delay in Filing Appeals by the Assessee:
The assessee's appeals were barred by a limitation of 1050 days. The delay was condoned because the appeals were filed within the time limit prescribed by the Hon'ble Orissa High Court's order dated 1.2.2016, allowing the assessee to withdraw the writ petition and file an appeal before the Tribunal. The department had no objection to this submission, and the appeals were admitted for hearing.

2. Disallowance of Exemption under Sections 11 & 12:
The primary issue was whether the CIT(A) erred in confirming the Assessing Officer's decision to disallow exemptions under sections 11 & 12 on income from training and consultancy. The Assessing Officer treated the income from these activities as business income, as the assessee did not maintain separate books of account as required under section 11(4A). The CIT(A) upheld this view, noting that the training and consultancy activities were profit-yielding and separate accounts were not maintained.

3. Requirement of Maintaining Separate Books of Account under Section 11(4A):
The Tribunal found that the training and consultancy activities were incidental to the main objective of the assessee, which was education. The income from these activities was not significant compared to the total revenue, and there was no evidence of an independent intention to carry on a business. The Tribunal referred to several judicial precedents, including the Hon'ble Delhi High Court and the Supreme Court, which supported the view that incidental activities generating surplus do not constitute a business. Therefore, the provisions of section 11(4A) were not applicable, and the exemption under sections 11 & 12 should not be denied.

4. Penalty under Section 271(1)(c):
The revenue appealed against the CIT(A)'s order deleting the penalty of ?24,10,169/- under section 271(1)(c). The penalty was initially levied for furnishing inaccurate particulars of income. However, the CIT(A) deleted the penalty because the quantum appeal was decided in favor of the assessee. The Tribunal upheld this decision, citing the Hon'ble Supreme Court's ruling in K.C. Builders and Another vs ACIT, which states that if the assessment order's additions are deleted, the basis for levying penalty no longer exists.

Conclusion:
The Tribunal allowed the appeals filed by the assessee for the assessment years 2005-06, 2006-07, 2007-08, and 2009-2010, granting exemption under sections 11 & 12 for income from training and consultancy. The appeals filed by the revenue for the assessment years 2010-11 and 2011-12 were dismissed. Additionally, the Tribunal confirmed the deletion of the penalty under section 271(1)(c) for the assessment year 2011-12, dismissing the revenue's appeal.

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