M/s Haryana State Counselling Society, Panchkula V. DCIT, Chandigarh

CO 10/CHANDI/2015

• Counselvise Citation: [2016] 119 COUNSELVISE.COM (IT) 3189 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-03-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 20-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income
• Section: 12AA; 28; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.277/CHD/2012 (ASSESSMENT YEAR : 2008-09) THE INCOME TAX OFFICER, VS. HARYANA STATE COUNSELING SOCIETY, WARD-3, BAY NO.7-12, SECTOR 4, PANCHKULA. PANCHKULA. PAN: AAABH0196G AND C.O.NO.16/CHD/2012 IN ITA NO.277/CHD/2012 (ASSESSMENT YEAR : 2008-09) HARYANA STATE COUNSELING SOCIETY, VS. THE INCOME TAX OFFICER, BAY NO.7-12, SECTOR 4, WARD-3, PANCHKULA. PANCHKULA. PAN: AAABH0196G ITA NO.170/CHD/2013 (ASSESSMENT YEAR : 2009-10) THE INCOME TAX OFFICER, VS. HARYANA STATE COUNSELING SOCIETY, WARD-3, BAY NO.7-12, SECTOR 4, PANCHKULA. PANCHKULA. PAN: AAABH0196G AND C.O.NO.11/CHD/2013 IN ITA NO.170/CHD/2012 (ASSESSMENT YEAR : 2009-10) HARYANA STATE COUNSELING SOCIETY, VS. THE INCOME TAX OFFICER, BAY NO.7-12, SECTOR 4, WARD-3, PANCHKULA. PANCHKULA. PAN: AAABH0196G 2 ITA NO.533/CHD/2014 (ASSESSMENT YEAR : 2010-11) THE INCOME TAX OFFICER, VS. HARYANA STATE COUNSELING SOCIETY, WARD-3, BAY NO.7-12, SECTOR 4, PANCHKULA. PANCHKULA. PAN: AAABH0196G ITA NO.203/CHD/2015 (ASSESSMENT YEAR : 2011-12) THE D.C.I.T., VS. HARYANA STATE COUNSELING SOCIETY, CIRCLE-2 (EXEMPTION), BAY NO.7, SECTOR 4, PANCHKULA. PANCHKULA. PAN: AAABH0196G AND C.O.NO.10/CHD/2015 IN ITA NO.203/CHD/2015 (ASSESSMENT YEAR : 2011-12) HARYANA STATE COUNSELING SOCIETY, VS. THE D.C.I.T., BAY NO.7, SECTOR 4, CIRCLE-2 (EXEMPTION), PANCHKULA. PANCHKULA. PAN: AAABH0196G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TEJ MOHAN SINGH DEPARTMENT BY : SHRI SUSHIL KUMAR, DR DATE OF HEARING : 05.05.2016 DATE OF PRONOUNCEMENT : 09.05.2016 O R D E R PER RANO JAIN, A.M . : THESE FOUR APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LEARNED 3 COMMISSIONER OF INCOME TAX (APPEALS), PANCHKULA DAT ED 19.12.2011,, 12.12.2012, 14.3.2014 AND 19.11.2014, RELATING TO ASSESSMENT YEARS 2008-09, 2009-10, 2010 -11 AND 2011-12 RESPECTIVELY. THE ASSESSEE HAS FILED C ROSS OBJECTIONS AGAINST THE APPEALS IN ITA NO.277/CHD/20 12, ITA NO.170/CHD/2013 AND ITA NO.203/CHD/2015. 2. SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL IN ALL THE APPEALS, THE SAME WERE HEARD TOGETHER AN D ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR T HE SAKE OF CONVENIENCE. THE DECISION GIVEN IN ITA NO.277/CHD/2012 FOR ASSESSMENT YEAR 2008-09 SHALL APPLY MUTATIS MUTANDIS TO ALL THE APPEALS FILED BY THE REVENUE. ITA NO.277/CHD/2012 : 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THERE WERE CERTAIN EXPENSES INCURRED BY THE ASSESSE E OUT OF WHICH IT HAS NOT DEDUCTED TDS. THE ASSESSING OF FICER DISALLOWED THE AMOUNT OF RS.3,34,92,686/- ON ACCOUN T OF CERTAIN EXPENSES INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT. 4. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE MADE DETAILED SUBMISSIONS WITH REGARD TO ITS CONTEN TION THAT OUT OF ALL THESE PAYMENTS, SINCE THE AMOUNTS I NVOLVED WERE NOT EXIGIBLE TO INCOME TAX ACT, THERE WAS NO N EED TO DEDUCT TDS, THEREFORE DISALLOWANCE UNDER SECTION 40 (A)(IA) 4 OF THE ACT CANNOT BE MADE. THE LEARNED CIT (APPEAL S) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, ALLOWED THE APPEAL OF THE ASSESSEE STATING THAT THE DISALLO WANCE UNDER SECTION 40(A) (IA) OF THE ACT IS NOT WARRANTE D IN VIEW OF THE GRANT OF EXEMPTION UNDER SECTION 10(23C)(IV) TO THE ASSESSEE BY THE COMMISSIONER OF INCOME TAX, PANCHKU LA. FOR THE YEAR UNDER CONSIDERATION. FURTHER, THE LEA RNED CIT (APPEALS) STATED THAT THE PENALTY PROCEEDINGS M AY BE INITIATED BY THE COMMISSIONER OF INCOME TAX (TDS) F OR DEFAULT IN DEDUCTION OF TDS. 5. AGGRIEVED BY THIS, THE DEPARTMENT HAS COME UP IN APPEAL BEFORE US, RAISING THE FOLLOWING GROUNDS OF APPEAL : 1. THE LD. CIT(A) HAS ERRED IN DELEING OF ADDITION MA DE UNDER SECTION 40(A)(IA) OF THE ACT WHEN THE ASSESSE E HAS ADMITTED IT FAILED TO DEDUCT THE TDS AS REQUIRED UNDER SECTION 194 OF THE INCOME TAX ACT, 1961. 2. THE APPLICANT CRAVES FOR LEAVE TO ADD OR AMEND T HE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 3. IT IS PRAYED THAT THE ORDER OF LD.CIT(A) BE SET A SIDE AND THAT OF THE A.O. MAY BE RESTORED. 6. THE LEARNED D.R. WHILE ARGUING BEFORE US STARTE D WITH THE FACT THAT IT IS UNDISPUTED THAT THE IMPUGN ED PAYMENTS MADE TO THIRD PERSON ARE LIABLE TO TDS UND ER VARIOUS SECTIONS IN CHAPTER-XVII OF THE ACT. IT WA S STATED THAT THE ARRANGEMENT OF VARIOUS CHAPTERS AND SECTIO NS UNDER SUCH CHAPTERS IN THE ACT CARRIES A LOT OF 5 SIGNIFICANCE AND HAS OFTEN BEEN MADE THE BASIS OF INTERPRETING THE INTENT AND PURPOSE OF ANY SECTION BY VARIOUS COURTS INCLUDING THE HON'BLE SUPREME COURT OF INDIA. IN THIS BACKGROUND, AFTER QUOTING THE PROVI SIONS OF SECTION 40(A)(IA) AND SECTION 28 OF THE ACT, IT WAS STATED THAT AS PER THE SCHEME OF TAXATION, AS PROVIDED IN THE ACT, FIRST A PERSON IS TO BE LIABLE TO BE TAXED UNDER TH E ACT BEFORE HE CLAIMS FOR EXEMPTION OF SUCH INCOME UNDER SECTIONS 10 OR 11 OF THE ACT. IF THE CLAIM IS CORR ECT, HE GOES TO ENJOY THE BENEFITS OF SUCH SECTIONS OR ELSE THE INCOME IS TAXABLE UNDER DIFFERENT HEADS OF THE INCO ME AS PER THE PROVISIONS UNDER CHAPTER-IV OF THE ACT. IN THIS WAY, HE TRIED TO DEMONSTRATE THAT THE ACT MAKES IT VERY CLEAR THAT ALL PERSONS WHO ARE ENTITLED TO EXEMPTIO N OF INCOME UNDER SECTIONS 10 OR 11 OF THE ACT ARE FIRST LIABLE TO TAX UNDER THE ACT IN OTHER WORDS, PERSONS ENTITL ED TO EXEMPTION OF INCOME UNDER SECTIONS 10 OR 11 OF THE ACT ARE CHARGEABLE TO TAX UNDER DIFFERENT HEADS OF INCO ME INCLUDING THE HEAD PROFITS AND GAINS OF BUSINESS O R PROFESSION. FOR THIS PROPOSITION, RELIANCE WAS PL ACED ON A DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE C ASE OF GREEN EMIRATE SHIPPING & TRAVELS (2006) 100 ITD 203 (MUM). IN THIS VIEW, IT WAS PRAYED THAT THE PROVIS IONS OF SECTION 40(A)(IA) OF THE ACT MAY BE HELD TO BE APPL ICABLE TO THE PERSONS ENJOYING THE EXEMPTION OF INCOME AS PER THE PROVISIONS OF SECTIONS 10 OR 11 OF THE ACT. RELIAN CE WAS PLACED ON THE ORDER OF THE AMRITSAR BENCH OF THE TR IBUNAL 6 IN THE CASE OF MUNICIPAL COMMITTEE VS. ITO, 46 TAXMANN.263, A COPY OF THE ORDER WAS PLACED ON RECO RD. 7. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE LEARNED CIT (APPEALS) AND STATED T HAT SINCE THE INCOME OF THE ASSESSEE IS NOT TAXABLE UND ER THE HEAD INCOME FROM BUSINESS OR PROFESSION, THE PROV ISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT APPLICABLE ON IT. RELIANCE WAS PLACED ON THE ORDER OF THE MUMBAI BENC H IN THE CASE OF MAHATMA GANDHI SEVA MANDIR VS. DEPUTY DIRECTOR OF INCOME-TAX (E), MUMBAI IN ITA NO.4135/MUM/2011, DATED 11.5.2012 AND ANOTHER ORDER OF THE AMRITSAR BENCH IN THE CASE OF BABA FARID VIDHYAPEETH SOCIETY, BHATINDA VS. ACIT IN ITA NO.180/ASR/2010 DATED 30.1.2011. IN VIEW OF THIS, IT WAS PRAYED THAT THE ORDER OF THE LEARNED CIT (APPEALS) BE CONFIRMED. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE UNDISPUTED FACTS OF THE CASE ARE THAT IN THE ASSESSMENT YEAR 2008-09, THE ASSESSEE WAS REGISTERE D UNDER SECTION 10(23C)(IV) OF THE ACT AND CLAIMED EXEMPTION UNDER THE SAID ACT. SIMILARLY, IN ASSESS MENT YEARS 2009-10, 2010-11, SINCE THE ASSESSEE WAS REGI STERED UNDER SECTION 12AA OF THE ACT, THE INCOME WAS CLAIM ED TO BE EXEMPT UNDER SECTION 11 OF THE ACT. IT IS ALSO A FACT ON RECORD THAT ON THE IMPUGNED PAYMENTS, THE ASSESSEE HAVE 7 NOT DEDUCTED TAX, AS REQUIRED UNDER THE PROVISIONS OF THE ACT. SINCE THE INCOME OF THE ASSESSEE IS EXEMPT IN VIEW OF THESE SECTIONS, THE INCOME OF THE ASSESSEE IS NOT T AXABLE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION , APPEARING IN CHAPTER-IV OF THE INCOME TAX ACT. SEC TION 40(A)(IA) OF THE ACT IS A PART OF CHAPTER-IV FOR TH E PURPOSES OF COMPUTING THE INCOME UNDER THE HEAD BUSINESS INCOME. WE ARE IN AGREEMENT WITH THE SUBMISSIONS OF THE ASSESSEE AND ALSO THE FINDINGS O F THE LEARNED CIT (APPEALS) THAT THE PROVISIONS OF SECTIO N 40(A)(IA) OF THE ACT CAN BE INVOKED ONLY FOR THE PU RPOSES OF COMPUTING THE INCOME UNDER THE HEAD BUSINESS INCOM E. SINCE THE INCOME IS NOT COMPUTED UNDER THIS HEAD, T HE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CANNOT B E INVOKED. THIS PROPOSITION HAS BEEN LAID DOWN BY VA RIOUS BENCHES OF THE TRIBUNAL AS WELL AS THE HIGH COURTS. WE ARE NOT IN AGREEMENT WITH THE ARGUMENTS OF THE LEAR NED D.R. THAT FIRST AN ASSESSEE IS TO BE LIABLE TO BE T AXED UNDER THE ACT BEFORE HE CLAIMS FOR ANY EXEMPTION UN DER SECTIONS 10 OR 11 OF THE ACT. SINCE AS PER THE SCH EME OF THE ACT, BEFORE ATTACHING THE LIABILITY TO TAX ON ANY R ECEIPT OF INCOME, THE HEAD OF INCOME UNDER WHICH IT HAD TO BE TAXED, HAS TO BE CARVED OUT. SINCE THE ASSESSEE IS A TRUS T WHO IS CLAIMING EXEMPTION UNDER SECTIONS 10 OR 11 OF THE A CT. THIS FACT ITSELF GOES TO SHOW THAT THE ASSESSEE IS NOT C ARRYING ON ANY BUSINESS OR PROFESSION. THEREFORE, ITS INCOME IS NOT TO BE COMPUTED UNDER THIS HEAD. IF THE INCOME IS NOT COM PUTED UNDER THIS ACT, THE PROPOSITION LAID DOWN BY VARIOUS HIGH COURTS 8 AND BENCH OF THE TRIBUNAL IS THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT BEING A PART OF CHAPTER-IV OF THE ACT, CANNOT BE INVOKED IN SUCH CIRCUMSTANCES. 9. BEFORE PARTING, IN DEALING WITH THE ARGUMENT RAISED BY THE LEARNED D.R. WITH REGARD TO THE EXEMP TION UNDER SECTIONS 10 OR 11 OF THE ACT, TO BE PROVIDED ONLY ONCE THE INCOME IS COMPUTED UNDER A SPECIFIC HEAD, WE FIND THE ANSWER IN THE JUDGMENT OF THE HON'BLE PUNJ AB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MARKET COMMITTEE, PIPLI, 330 ITR 16 (P&H), WHEREBY AT THE END OF PARA 6, THE HON'BLE HIGH COURT OBSERVED AS UNDER : IN FACT WHEREVER THE STATUTE CONTEMPLATED THE INCO ME BEING COMPUTED IN THE MANNER SET OUT IN THE PROVISIONS OF THE ACT, APPROPRIATE WORDS ARE USED. FOR INSTANCE, IN S. 80E, WH ICH WAS CONSIDERED BY THE SUPREME COURT IN CAMBAY ELECTR IC SUPPLY INDUSTRIAL CO. LTD. VS. CIT 1978 ITR (SC) 50 : (1978) 113 ITR 84 (SC), AFTER THE EXPRESSION TOTAL INCOME TH E FOLLOWING WORDS ARE ADDED IN BRACKETS : AS COMPUTED I N ACCORDANCE WITH THE OTHER PROVISIONS OF THIS ACT. THI S EMPHASISES THAT WHEREVER PARLIAMENT CONSIDERED THAT THE COMPUTATION SHOULD BE IN ACCORDANCE WITH THE PROVISI ONS OF THE ACT, IT INTRODUCED THE CONCEPT BY USING APPROPR IATE LANGUAGE. IN THE ABSENCE OF ANY SUCH LANGUAGE IN S. 1 1(1), WE CONSIDER THAT THE COMPUTATION AS ENVISAGED BY THE OT HER PROVISIONS OF THE ACT CANNOT BE IMPORTED INTO S. 11(1). THE TRIBUNAL HAS IN A WAY MIXED UP THE NOTION OF TOT AL INCOME IN UNDERSTANDING THE EXPRESSION INCOME FROM PROPER TY HELD UNDER TRUST. SEC. 14 OCCURS IN THE CHAPTER COMPUTATIO N OF TOTAL INCOME. IT PROVIDES THAT ALL INCOME FOR THE PURPO SES OF CHARGE OF INCOME-TAX AND COMPUTATION OF TOTAL INCOME BE CLASSIFIED UNDER CERTAIN HEADS. THEREFORE, THE COMPU TATION UNDER THE DIFFERENT CATEGORIES OR HEADS ARISES ONLY FOR THE 9 PURPOSES OF ASCERTAINING THE TOTAL INCOME FOR THE PUR POSES OF CHARGE. THOSE PROVISIONS CANNOT BE INTRODUCED TO FIN D OUT WHAT THE INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST TO BE EXCLUDED FROM THE TOTAL INCOME IS, FOR THE PURPOSE OF THE EXEMPTIONS UNDER CHAPTER III. 10. IN VIEW OF THE ABOVE, THE APPEAL OF THE DEPARTMENT IS DISMISSED. ITA NO. 170/CHD/2013 : ITA NO. 533/CHD/2013 4: & ITA NO. 203/CHD/2015 : 11. IT IS RELEVANT TO OBSERVE HERE THAT THE FACTS AND CIRCUMSTANCES IN THESE APPEALS FILED BY THE REVENUE ARE SIMILAR TO THE FACTS IN ITA NO.277/CHD/2012 AND THE FINDINGS GIVEN IN ITA NO.277/CHD/2012 SHALL APPLY T O THIS THESE CASES ALSO WITH EQUAL FORCE. C.O.NO.16/CHD/2012 IN ITA NO. 277/CHD/2012 : & C.O.NO.11/CHD/2013 IN ITA NO. 170/CHD/2013 : & C.O.NO.10/CHD/2015 IN ITA NO. 203/CHD/2015 : 12. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SEEKS THE PERMISSION OF TH E BENCH TO WITHDRAW CROSS OBJECTIONS, REFERRED TO ABO VE. 10 13. THE LEARNED D.R. DID NOT HAVE OBJECTION AGAINST THE SAME. 14. IN VIEW OF THE ABOVE, THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED AS WITHDRAWN. 15. IN THE RESULT, ALL THE FOUR APPEALS OF THE REV ENUE ARE DISMISSED AND ALL THE THREE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED AS WITHDRAWN. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF MAY, 2016. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 9 TH MAY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH