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TMI Blog2018 (8) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - ITA Nos. 98 ,99 ,100 & 101 /CTK/ 2016, ITA Nos. 266 ,267 & 320 /CTK/2017 - - - D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained. 9. As the facts and issue involved in assessee s appeals and revenue s appeals are interconnected, they ae being disposed of together by this consolidated order as under: 10. The brief facts of the case are that the Assessing Officer observed that the income derived from training and consultancy by the assessee was not incidental to the objects of the institution for which registration under the Income tax Act was given and the assessee has not maintained separate books of account as envisaged in section 11(4A) of the Act. Therefore, he treated the sum of ₹ 74,68,700/- for the assessment year 2005-06, ₹ 37,29,240/- for the assessment year 2006-07, 42,19,010/- for the assessment year 2007-08 and ₹ 73,82,290/- for the assessment year 2009-2010, respectively as income from business and taxed the same at maximum marginal rate denying exemption u/ss 11 12 of the Act. 11. The assessee filed appeals against the orders of the Assessing Officer. The CIT(A) confirmed the orders of the Assessing Officer by observing as under: 7. I have carefully applied my mind to all the documents made available to me and have considered the arguments placed be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) has allowed deduction u/s.11 of the Act to the assessee on profits earned out of training and consultancy. While doing so, he has also taken into consideration the order of Hon ble Orissa High Court in the case of the assessee itself in Writ Petition No.2467 of 2011 dated 24.11.2011, wherein, the Hon ble High Court held that it was not entitled to approval u/s 10(23C)(vi) of the Act as it was not any institution is in existence solely for educational purposes. The CIT(A) has held as under: Submission of the Ld. A.R. and grounds of appeal are carefully considered with reference to material available on record. The Ld. AR contended that the treatment of income from 'Training and Consultancy Services' provided by the appellant is not a violation of Section 2(15) read with Section 11(4A) 13(8), that the AO in his order has misquoted the order of the Hon'ble Odisha High Court dated 24.11.2011 in the appellant's own case in W.P.(C) No. 2467 of 2011, that the AO had taxed the income under section 11(4A) which is legally incorrect, that the AO had misunderstood not only the relevant provisions but also he has failed to understand that a tax demand under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Director of Income-tax (E)~l,[2015] 63 taxmann.com 297 (Hyderabad-Trib.) where assessee society was established by RBI to provide Banking Technology services and to carry out research which was charitable in nature; it was held that merely because it had generated surplus during course of carrying on ancillary objects, it could not be denied exemption under section 11. The same order was confirmed by the High Court of Judicature at Hyderabad in the case Institute for Development and Research In Banking Technology (IDRBT), Hyderabad v. Assistant Director of Income- tax (E)-l, Hyderabad, ITTA No. 168 dated 04.11.2015. It may be noted that the ratio of this case is about carrying out incidental objectives on commercial principles and generating surplus which basically is the contention of the AO. The Ld. AR also placed the principles laid by Supreme Court for Solely Educational Institutions in Queen's Educational Society v. Commissioner of Income-tax [2015] 55 taxmann.com 255 (SC), [2015] 8 SCC 47 wherein it has been held that the law common to educational institutions under section 10(23C)(iiiad) and (vi) may be summed up as follows : (i)`Where an educational institut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11] 202 Taxman 1/13 taxmann.com 175 (Delhi) where it was held that a broad interpretation of the term business was not intended under section 2(15). A definite profit motive was required to be established; existence of surplus itself was not enough to treat an organization as commercial entity. The Ld. AR reiterated the dominant purpose theory through the decision of Hon'ble SC in the case of CST v. Sai Publication Fund [2002] 258 ITR 70 wherein it has been laid out that if the main activity is not business, then any transaction incidental or ancillary would not normally amount to business unless an independent intention to carry on business in the incidental or ancillary activity is established. In such cases, the onus of proof of an independent intention to carry on business connected with or incidental or ancillary sales will rest on the Department. The Hon'ble Delhi High Court in the case of ICAI Accounting Research Foundation Anr. v. Director General of Income-tax (Exemptions) Ors. (2010) 321 ITR 73 has held that charging of amount from the Government bodies for undertaking these research projects would not make the activity commercial . Again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d consequently infructuous. The other grounds are, therefore, adjudicated upon and are treated as allowed for statistical purposes. 13. He further argued that in the subsequent assessment years i.e. 2012-13, 2013-14, 2014-15 2015-16 in an order passed u/s.143(3) of the I.T.Act, 1961, the Assessing Officer himself has allowed exemption u/s.11 of the Act to the assessee on income earned from training and consultancy charges, copies of which have been placed at paper book at pages 61 to 66. Therefore, it was his submission that in view of the above facts of the case, the orders of the CIT(A) for the assessment years 2005-06, 2006-07, 2007-08 2009-2010 should be set aside and the appeals of the assessee should be allowed allowing exemption of income earned out of training and consultancy charges under sections 11 12 of the Act. 14. On the other hand, ld D.R. relied on the orders of lower authorities for the assessment years 2005-06, 2006-07, 2007-08 2009-10 and orders of the Assessing Officer for the assessment years 2010-11 2011- 12. 15. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. In the instant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section(3) or sub- section 3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business. 22. A perusal of the above provisions shows that for an activity to get hit by the above provisions must satisfy two conditions, namely; it must constitute business and secondly that business must not be incidental to the attainment of objects of the institution. In our considered view, both these conditions are not satisfied in the instant case. 23. We find that Hon ble Delhi High Court in the case of Institute of Chartered Accountants of India v. DGIT (Exemptions) [2012] 347 ITR 99/[2011] 202 Taxman 1/13 taxmann.com 175 (Delhi) has held that a broad interpretation of the term business was not intended under section 2(15). A definite profit motive was required to be established; existence of surplus itself was not enough to treat an organization as commercial entity. 24. The Hon'ble Supreme Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e evaded on account of furnishing inaccurate particulars of income by the assessee. 29. The Assessing Officer levied penalty u/s.271(1)(c) of ₹ 24,10,169/-. 30. On appeal, the CIT(A) deleted the penalty on the ground that the quantum appeal has been decided in favour of the assessee. 31. We find that the Hon ble Supreme Court in the case of K.C.Builders and Another vs ACIT, 265 ITR 562 (SC) 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 of ₹ 24,10,169/- u/s.271(1)(c) of the Act and dismiss the ground of appeal of the revenue. 32. In the result, appeals filed by the assessee are allowed and the appeal filed by the revenue are dismissed. Order pronounced on 27 /07/2018. - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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