M/S.indian Officers Association v. The Deputy Commissioner Of Income Tax(Exemptions)-1,Nungambakkam, Chennai – 600 034

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 18.08.2021 CORAM : The Honourable Mr.Justice T.S.SIVAGNANAMandThe Honourable Mr.Justice SATHI KUMAR SUKUMARA KURUP M/s.Indian Officers Association,No.69, Thiru-vi-ka High Road,Royapettah, Chennai – 600 014.PAN: ...Appellant/Respondent Vs The Deputy Commissioner of Income Tax(Exemptions)-1,Nungambakkam, Chennai – 600 034. ...Respondent/ Appellant APPEAL under Section 260A of the Income Tax Act, 1961 againstthe order dated 06.11.2015 made in ITA.No.108/Mds/2015 on thefile of the Income Tax Appellate Tribunal, 'C' Bench, Chennaifor the assessment year 2011-2012 Against the order of The Commissioner of Income TaxAppeals VII, Chennai –34. dated 14/10/2014 in ITA-174/14-15against the order of The Deputy Director of Income Tax(Exemptions)-1,ChennaiinPAN/GIR.No.AAATT7858Fdated31/03/2014 assessment year 2011-2012. For Appellant: M/s.Pushya Sitaraman Senior Counsel for M/s.Sree Vidya For Respondent : Mr.J.Narayansasamy Senior Standing Counsel JUDGMENT (Delivered by T.S.Sivagnanam,J) This tax case appeal filed by the assessee under Section260A of the Income Tax Act, 1961 ['the Act' for brevity] isdirected against the order dated 06.11.2015 passed by theIncome Tax Appellate Tribunal [hereinafter referred to as “theTribunal”], 'C' Bench in I.T.A.No.108/Mds/2015 for theassessment year 2011-12. 2.This appeal was admitted on 08.03.2016 on the followingsubstantial questions of law: “(i) Whether on the facts and in thecircumstances of the case, the Appellate Tribunalwas right in holding that the appellant society isnot entitled to exemption under Section 11 in thelight of the amendment made to Section 2(15) witheffect from 01.04.2009? (ii) Whether on the facts and circumstances ofthe case, the Tribunal was right in denying theexemption under Section 11, when the Revenue hadopted to withdraw the appeal filed by them for theearlier year (AY 2010-11) on the same set of facts?And (iii) Whether on the facts and in thecircumstances of the case, the Appellate Tribunalwas right in upholding denial of exemption on theground that conducting lectures, workshops,seminars and earning rental income from multi-storeyed building and running of hostel arecommercial in nature contrary to the decision ofthe Supreme Court in the case of ACIT vs. ThanthiTrust [247 ITR 785]?” 3.We have heard M/s.Pushya Sitaraman, learned seniorcounsel for M/s.J.Sree Vidya, learned counsel for theappellant/assessee and Mr. J.Narayanasamy, learned seniorstanding counsel appearing for the respondent/revenue. 4.The assessee is an association which is in existence formore than 100 years established by the Gazetted Officers ofState and Central Governments and Judges of High Court andDistrict Courts. The object of starting the association was torender social service and it was a non-profit organization andwas registered as Public Charitable Trust under Section 12AA ofthe Act by order dated 29.08.2001 with retrospective effect.For the assessment year under consideration, the assessee filedreturn of income dated 30.09.2011 declaring Nil income claimingexemption under Section 11 of the Act. The Assessing Officer 4.The assessee is an association which is in existence formore than 100 years established by the Gazetted Officers ofState and Central Governments and Judges of High Court andDistrict Courts. The object of starting the association was torender social service and it was a non-profit organization andwas registered as Public Charitable Trust under Section 12AA ofthe Act by order dated 29.08.2001 with retrospective effect.For the assessment year under consideration, the assessee filedreturn of income dated 30.09.2011 declaring Nil income claimingexemption under Section 11 of the Act. The Assessing Officer took up the case for scrutiny and called upon the assessee toexplain the activities of the Trust pertaining to letting out ofcommercial property and rental income received from tenants andas to how they can be termed as Charitable activities eligiblefor claim ;of exemption and as to how it is not hit by theamended proviso to Section 2(15) of the Act. The assesseefurnished all the details with regard to the charitableactivities conducted by them, various medical camps, free legalaid camps, etc. and sought to explain that they are eligiblefor exemption under Section 11 of the Act as their activitiesfall under the limb of medical relief and they are not hit bythe amended proviso to Section 2(15) of the Act. 5.The Assessing Officer did not agree with the assessee andwhile completing the assessment under Section 143(3) of the Act,by order dated 31.03.2014 held that the activities of theassessee are not charitable in nature and its objects fall underthe category of 'advancement of object of general publicutility' and they are not eligible for exemption under Section11 of the Act. Further, the Assessing Officer held that thereceipts of the assessee by way of rental income from students,tenants are in the nature of trade, commerce and business andthus are commercial receipts in nature and are not eligible forthe benefit of exemption under Section 11 and treated theassessee as an Association of Persons [AoP] and brought thereceipts to tax. Certain other issues were also such as theclaim of the benefit of principle of mutuality was also decidedagainst the assessee. Aggrieved by such order, the assesseepreferred appeal before the Commissioner of Income Tax(Appeals)-VII, Chennai [hereinafter referred to as CIT(A)]. Thesaid appeal was allowed by order dated 14.10.2014. Aggrieved bythe same, the revenue preferred appeal before the Tribunal whichhas been allowed by the impugned order. Challenging thecorrectness of the same, the assessee is before us by way ofthis appeal raising the above referred substantial questions oflaw. 6.Though elaborate submissions have been made by thelearned senior counsel appearing on behalf of theappellant/assessee and the learned senior standing counselappearing for the respondent/revenue, we are of the view that onaccount of the fact that the assessee had succeeded before theCommissioner of Income Tax (Appeals) in I.T.A.No.286/13-14 forassessment year 2010-11 and the said order having become final,applying the Rule of Consistency the revenue cannot take adifferent stand for the assessment year under consideration, AY2011-12. Further, we note that the returns filed by theassessee claiming exemption under Section11 of the Act wasaccepted by the revenue for the assessment years 2012-13, 2013-14, 2014-15 and only for the assessment year 2016-17, the issuewas once again waked up and the matter is now pending before the Commissioner of Income Tax (Appeals). 7.It is the submission of the learned senior standingcounsel appearing for the respondent/revenue that eachassessment year is a distinct unit and the Assessing Officer isentitled to consider the return of income filed for theconcerned year independently and take a decision in the matter. Commissioner of Income Tax (Appeals). 7.It is the submission of the learned senior standingcounsel appearing for the respondent/revenue that eachassessment year is a distinct unit and the Assessing Officer isentitled to consider the return of income filed for theconcerned year independently and take a decision in the matter. 8.There can be no quarrel to the legal proposition aspointed out by the learned senior standing counsel for therespondent. Nevertheless there are decisions wherein it hasbeen held that though the cardinal principle is that eachassessment year is a distinct and separate unit, nevertheless ifthe facts and the nature of activities done by the assessee andthe nature of claim made by the assessee are identical for theearlier assessment years. Unless there are strong andcompelling reasons to take a different view, the revenue shouldbe bound by the decisions in the earlier as well as thesubsequent assessment years so far as the said assessee isconcerned. This in other words terms as the Rule of Consistency. 9.In this regard, we are guided by the decision of the HighCourt of Bombay in the case of Dipti Textiles Industries vs.Commissioner of Income Tax [(2010) 323 ITR 0638]. In the saidcase, the expenditure which was incurred by the assessee for thesubsequent assessment years were similar to that of theexpenditure incurred in respect of the assessment year which wasunder consideration and the question was whether the revenuehaving accepted the orders passed by the subsequent years cantake a different stand for the year under consideration. TheCourt held that if the revenue had accepted the order of theTribunal in the case of the assessee itself for the subsequentassessment years in the identical facts and circumstances of thecase, in that event, it is not open for the revenue to take acontrary stand. 10.The Hon'ble Division Bench of this Court in Commissionerof Income Tax vs. Hitech Arai Ltd. [(2014) 368 ITR 0577 (Mad)],held that there is no justifiable reasons to differ with thefinding rendered by the Tribunal, more so, taking note of thefact that the revenue had for the assessment years 1986-1987 to1994-1995, for a period of nine years, accepted the fact thatthe payment made towards royalty is revenue expenditure and hadnot raised dispute thereon. It is further held that a suddenvolte-face by the Department on the issue appears to be onaccount of a new interpretation by the subsequent AssessingOfficer. It was held that while interpreting the very sameagreement, the revenue cannot be inconsistent. Unless there isa change in law or on the basis of new and acceptable materialwhich went unnoticed, the opinion should not differ from time totime based on the perception of individual Officers. Further,it was held that Citizens expect consistency not only in judicial orders but also in the orders passed by the quasi-judicial authorities. judicial orders but also in the orders passed by the quasi-judicial authorities. 11.The legal principle which can be culled out from theabove decisions is that the Rule of Consistency needs to beadopted by the revenue even though each assessment year may be adistinct and a separate unit unless and until there aredistinguishing features to take a different view, the revenue isbound to be consistent, more so, when they are interpreting thenature of transactions done by the assessee Trust which wereidentical in respect of the earlier assessment years as well asthe assessment years post the assessment year underconsideration. In the instant case, for the assessment year2010-2011, the Assessing Officer took a similar view as that ofthe view taken by the Assessing Officer for the assessment yearunder consideration AY 2011-2012. Against such decision, theassessee filed appeal before the CIT(A)-VII, Chennai. The CIT(A) after elaborately considering the factual matrix allowed theappeal filed by the assessee. In the said decision, the CIT(A)has examined the very same rental receipts received by theappellant/assessee and granted relief to the appellant/assessee.Aggrieved by the same, the revenue preferred an appeal beforethe Tribunal in I.T.A.No.1600/Mds/2014 and the appeal waswithdrawn by the revenue and accordingly, the appeal wasdismissed as withdrawn by order dated 22.07.2014. It issubmitted by the learned senior standing counsel for therespondent that the appeal was not pursued by the revenue onaccount of low tax effect. This appears to be factuallyincorrect as could be seen from the order passed by the Tribunaldated 22.07.2014 which reads as follows: “The appeal has been filed by the Revenueagainst the order of Commissioner of Income Tax(Appeals)-VII, Chennai dated 19.02.2014 relevant tothe Assessment Year (AY) 2010-11. 2.The Revenue has filed application forwithdrawal of appeal stating following reasons: “Ref:(i) Appeal filed vide F.No.DDIT(E)-1/2[nd]Appeal/AAATT7858F/2014-15 dated 06.06.2014 filedon 10.06.2014. In connection with above, it is hereby requestedthat the departmental appeal filed videreference (1) cited above may please bewithdrawn as the communication received in thisoffice vide the judicial Memo dated 01.07.2014intimated 'No appeal to the Appellate Tribunalis necessary against the order of theCommissioner of Income Tax (appeals)”. 3.For the reasons stated in the application, the Revenue is permitted to withdraw the appeal.The appeal of the Revenue is dismissed aswithdrawn.” 12.As could be seen from the above order that the Tribunalhas recorded the application filed by the revenue seeking leaveto withdraw the appeal and nowhere in the said application ithas been mentioned that the appeal has not been pursued on theground of low tax effect. Rather the application states that noappeal to the Appellate Tribunal is necessary against the orderof the CIT(A) dated 19.02.2014. If such was the factualposition, the Assessing Officer on the date when he completedthe assessment on 31.03.2014 the order passed by the CITA() inthe assessee's own case for the earlier assessment year dated19.02.2014 was available and on record. Therefore, theAssessing Officer was bound by the said order because the saidorder has not been reversed or modified on the date when theassessment order for the current assessment year 2011-2012 waspassed i.e. on 31.03.2014. Therefore, the Assessing Officerignored the cardinal principle of judicial discipline in notadhering to the orders passed by the Appellate Authority. Thus,for all the above reasons we find that the Tribunal ought not tohave reversed the order passed by the CIT(A). 13.In the result, the tax case appeal is allowed, the orderpassed by the Tribunal is set aside and the order passed by theCIT(A) dated 14.10.2014 is restored. Since we have allowed theappeal by holding that the order passed by the CIT(A) dated19.02.2014 for the assessment year 2010-2011 had attainedfinality and binds the Department, the substantial questions oflaw are left open. No costs. Consequently, connectedmiscellaneous petition is closed. Sd/- Assistant Registrar(CS IV) //True Copy// Sub Assistant Registrar cse To 1. The Income Tax Appellate Tribunal, 'C' Bench, Chennai. 'C' Bench, Chennai. 2. The Deputy Commissioner of Income Tax (Exemptions)-1,Nungambakkam, Chennai – 600 034. (Exemptions)-1,Nungambakkam, Chennai – 600 034. 3. The Commissioner of Income Tax Appeals VII, Chennai – 600 034. 4. The Deputy Director of Income Tax(Exemptions)-1, Chennai +1cc to Mr.J.Narayansasamy, Advocate, S.R.No.41568+1cc to M/s.Sree Vidya, Advocate, S.R.No.41573 TCA.No.205 of 2016 PVS(CO)CT(21/09/2021)