THE ITO, WARD-2, Eluru V. Siddhartha Educational Society, Eluru

CO 17/VIZ/2013

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0458 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-03-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 25-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Keywords: Cancellation of registration
• Section: 40A(3); 12A; 12AA; 147; 11

Judgement Text

ITA NOS.440 441 AND COS 17 AND 18 SIDDHARTHA EDUCAT IONAL SOCIETY ELURU PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER, & SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS.440 & 441/VIZAG/2012 ASSESSMENT YEARS: 2007-08 & 2009-10 ITO WARD-2 ELURU M/S SIDDHARTHA EDUCATIONAL SOCIETY, SHANTINAGAR, ELURU (APPELLANT) VS. (RESPONDENT) PAN NO: AABTS 1259 E C.O. NOS. 17 & 18/VIZ/2013 (ARISING OUT OF ITA NOS. 440 & 441/VIZAG/2012) ASSESSMENT YEARS: 2007-08 & 2009-10 M/S SIDDHARTHA EDUCATIONAL SOCIETY, SHANTINAGAR, ELURU VS. ITO WARD-2 ELURU (CROSS OBJECTOR) PAN NO: AABTS 1259 E (RESPONDENT) ASSESSEE BY: SHRI G.V.N. HARI, CA DEPARTMENT BY: SHRI R.K. SINGH, DR DATE OF HEARING: 26/02/2015 DATE OF PRONOUNCEMENT: 03/03/2015 ORDER PER SAKTIJIT DEY. APPEALS BY THE DEPARTMENT AND CROSS OBJECTIONS BY THE ASSESSEE ARE AGAINST THE COMMON ORDER DATED 27.09.201 2 PASSED BY THE LEARNED CIT (A) GUNTUR FOR THE ASSESSME NT YEARS 2007-08 AND 2009-10. 2. THOUGH, THE DEPARTMENT HAS RAISED A NUMBER OF GROUNDS, BUT THE BASIC GRIEVANCE OF THE DEPARTMENT IS WI TH ITA NOS.440 441 AND COS 17 AND 18 SIDDHARTHA EDUCAT IONAL SOCIETY ELURU PAGE 2 OF 7 REGARD TO THE DECISION OF LEARNED CIT (A) IN ALLOWING ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT. SINCE TH E FACTS ARE IDENTICAL IN BOTH THE APPEALS OF THE DEPARTMENT, FOR THE SAKE OF BREVITY, WE WILL REFER TO THE FACTS AS INVOLVE D IN ASSESSMENT YEAR 2007-08. 3. BRIEFLY THE FACTS ARE ASSESSEE; A SOCIETY REGISTERE D UNDER THE ANDHRA PRADESH SOCIETIES REGISTRATION ACT IS RUNNIN G EDUCATIONAL INSTITUTIONS. FOR THE ASSESSMENT YEAR 2007-0 8 IT FILED ITS RETURN OF INCOME ON 31.10.2007 DECLARING NI L INCOME AFTER CLAIMING EXEMPTION UNDER SECTION 11 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT REGISTRATION GRANTED TO ASSESSEE UNDER SECTION 12A OF THE ACT WAS CANCELLED BY THE CIT RAJAHMUNDRY VIDE ORDER DATE D 26.11.2007. SINCE ASSESSEES REGISTRATION UNDER SECTIO N 12A WAS CANCELLED, ASSESSING OFFICER WAS OF THE VIEW THA T NO EXEMPTION UNDER SECTION 11 COULD BE GRANTED TO THE ASSES SEE. ACCORDINGLY, ASSESSMENT WAS COMPLETED UNDER SECTION 1 43(3) VIDE ORDER DATED 23.12.2009 BY DENYING THE CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT. IN THE PROCESS THE TOTAL INCO ME WAS DETERMINED AT RS.42,46,016. AGGRIEVED BY THE ASS ESSMENT ORDER, ASSESSEE PREFERRED APPEALS BEFORE THE CIT (A) . DURING THE PENDANCY OF THE SAID APPEAL, ASSESSING OFFICER INITIA TED ACTION UNDER SECTION 147 OF THE ACT BY ISSUING NOTICE UNDER SE CTION 148. DURING THE RE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE ALLEGING V IOLATION UNDER CHAPTER-III. IN RESPONSE TO THE SAID SHOW CAUSE NOTICE, ASSESSEE IN ITS REPLY DATED 26.12.2011 STATED BEFORE TH E ASSESSING OFFICER THAT IN THE ORIGINAL ASSESSMENT COMPL ETED UNDER SECTION 143(3), ASSESSEES CLAIM OF EXEMPTION U NDER SECTION 11 WAS REJECTED SINCE AT THAT POINT OF TIME ASSES SEES ITA NOS.440 441 AND COS 17 AND 18 SIDDHARTHA EDUCAT IONAL SOCIETY ELURU PAGE 3 OF 7 REGISTRATION UNDER SECTION 12A HAD BEEN CANCELLED AND THE DISPUTE WAS PENDING BEFORE THE ITAT. HOWEVER, SUBSEQU ENT THERE TO THE ITAT VISAKHAPATNAM BENCH, VIDE ORDER DATED 9.5.2011 HAD NOT ONLY STRUCK DOWN THE CANCELLATION OF REGISTRATION UNDER SECTION 12AA(3) AND RESTORED THE REGI STRATION UNDER SECTION 12AA RETROSPECTIVELY, BUT THE TRIBUNAL AL SO WHILE DECIDING THE ASSESSEES CLAIM OF EXEMPTION IN THE APP EALS FOR ASSESSMENT YEAR 2004-05 AND 2005-06 HELD THAT THE ASSE SSEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT A S THE ACTIVITIES OF THE ASSESSEE IS CHARITABLE IN NATURE AND I T HAS NOT VIOLATED ANY OF THE CONDITIONS OF SECTIONS 11 TO 13 OF THE ACT. ASSESSING OFFICER HOWEVER, DID NOT ACCEPT THE CONTENTION S OF THE ASSESSEE AND PROCEEDED TO COMPLETE THE ASSESSMENT BY NOT ONLY DENYING EXEMPTION TO THE ASSESSEE UNDER SECTION 1 1 OF THE ACT, BUT ALSO MADE VARIOUS ADDITIONS/DISALLOWANCES UN DER SECTION 40A(2), 40A(3) AND 40(A)(IA) BY COMPUTING THE INCOME OF THE ASSESSEE UNDER COMMERCIAL PRINCIPLES. BEING AGGR IEVED BY THE ASSESSMENT ORDER, ASSESSEE PREFERRED APPEAL BEFOR E THE FIRST APPELLATE AUTHORITY. 4. THE LEARNED CIT (A) AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE AND KEEPING IN VIEW THE FACT THAT THE ITAT VISAKHAPATNAM BENCH HAS RESTORED THE REGISTRATION GRANTE D UNDER SECTION 12A OF THE ACT TO THE ASSESSEE RETROSPECTIV ELY AND HAS ALSO ALLOWED EXEMPTION UNDER SECTION 11 FOR ASSESSMENT YEARS 2004-05 AND 2005-06 TO THE ASSESSEE H ELD AS UNDER: 7.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT, GONE THROUGH THE ORDER OF THE ASSESSING OFFICER. IT IS SEEN FROM THE RECORDS THAT AS PER TH E RETURN, THE APPELLANT HAD SURPLUS OF INCOME OVER ITA NOS.440 441 AND COS 17 AND 18 SIDDHARTHA EDUCAT IONAL SOCIETY ELURU PAGE 4 OF 7 EXPENDITURE AT RS.61,07,484 WHICH WAS CLAIMED EXEMPT UNDER SECTION 12A. SINCE 12A WAS CANCELLED BY THE ADMINISTRATIVE CIT; IN THE FIRST PLACE, THE ASSESSING OFFICER HAS DENIED THE EXEMPTION. IN THE SECOND PLACE, THE ASSESSING OFFICER HAS OBSERVED THAT (I) THE TRUST HAS PAID EXCESS RENT TO TRUSTEES ; (II) ADVANCE GIVEN TO FOUNDER MEMBERS FOR CONSTRUCTION OF SCHOOL BUILDING; AND (III) CONTRIBUTED TO CHITS. IN THE TRANSACTIONS MENTIONED BETWEEN THE SOCIETY AND THE TRUSTEES, THE OBSERVATION OF THE ASSESSING OFFICER WAS THAT SUCH TRANSACTIONS VIOLATED THE PROVISIONS OF SEC 13(2) WITH THE PERSONS MENTIONED IN SECTION 13( 3) OF THE ACT. IN THE FIRST PLACE, AS THE ITAT HAS RES TORED THE EXEMPTION GRANTED EARLIER UNDER SECTION 12A, IN PRINCIPLE, THE EXCESS OF INCOME OVER EXPENDITURE IS EXEMPT SUBJECT TO CERTAIN CONDITIONS LIKE PARAMETER S PRESCRIBED IN SECTIONS 11(2) AND GIVING NOTICE IN F ORM NO.10 BESIDES FURNISHING AUDIT REPORT IN FORM NO.10B ETC. IN THE SECOND PLACE, ON PERUSAL OF RECORDS THERE WAS NO EXCESS RENT PAID, BUT IN FACT SUCH RENT FOR THE BUILDING AT SATRAMPADU WAS LESS THAN THE MARKET PRICE IN THE RANGE OF RS.16.00 PER S. FT WHEREAS THE RENT CHARGED WAS AT RS.3.33 PER S.FT . REGARDING ADVANCE TO TRUSTEES WAS CONCERNED, NO DOUBT THE SAME WAS UTILIZED FOR THE PURPOSE OF CONSTRUCTION OF SCHOOL BUILDING AND IN ADDITION THE TRUSTEES HAVE PAID INTEREST TO SOCIETY @ 21% ON THE ADVANCES RECEIVED. REGARDING CHIT CONTRIBUTIONS WER E CONCERNED, IF WE SEE THE PATTERN OF AUCTIONING SUCH CHITS, IT PROVIDED CHEAP FINANCING AND FELICITATED SMOOTH RUNNING OF THE ACTIVITIES OF THE SOCIETY AND AS SUCH, NO ADVANTAGE WAS PASSED ON. THUS ON A PROPER READING OF THE INVESTMENTS MADE BY THE SOCIETY, NO ADVANTAGE WAS PASSED ON TO ANY OTHER PERSON INCLUDING THE PERSONS MENTIONED IN SECTION 13(3) OF THE ACT. IN THE CIRCUMSTANCES, DENYING EXEMPTION UNDER SECTION 12A IS NOT WARRANTED AND THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 5. AS FAR AS VARIOUS DISALLOWANCES MADE BY THE ASSES SING OFFICER UNDER SECTION 40A(2), 40A(3) AND 40(A)(IA) A RE CONCERNED, THE LEARNED CIT (A) DELETED ALL THESE ADDI TIONS BY CONSIDERING THE ISSUES ON MERITS. SIMILAR RELIEF WAS ALSO GRANTED FOR ASSESSMENT YEAR 2009-10 BY LEARNED CIT (A ). ITA NOS.440 441 AND COS 17 AND 18 SIDDHARTHA EDUCAT IONAL SOCIETY ELURU PAGE 5 OF 7 6. BEING AGGRIEVED THE DEPARTMENT IS IN APPEAL BEFORE US. 7. GROUND NOS. 1 AND 14 BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. 8. GROUND NOS. 2 TO 4 ARE ON THE ISSUE OF ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT. AT THE OUTSET, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF THE IT AT VISAKHAPATNAM BENCH IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06, WHEREIN THE IT AT WHILE CONSIDERING ADDITIONS/DISALLOWANCES MADE ON ID ENTICAL GROUNDS AS IN THE IMPUGNED ASSESSMENT YEARS GRANTED R ELIEF TO THE ASSESSEE. 9. LEARNED DEPARTMENTAL REPRESENTATIVE WITHOUT CONTROVERTING THE AFORESAID FACTUAL POSITION, AS STATED BY LEARNED AUTHORISED REPRESENTATIVE, TRIED TO JUSTIFY THE VIEW TAKEN BY THE ASSESSING OFFICER. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIALS ON RECORD. IT IS A FACT ON RECOR D THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME FOR BOTH THE AF ORESAID ASSESSMENT YEARS CLAIMING EXEMPTION UNDER SECTION 11 O F THE ACT. HOWEVER, THE EXEMPTION CLAIMED WAS DISALLOWED ON THE GROUNDS THAT ASSESSEES REGISTRATION UNDER SECTION 12A H AD BEEN CANCELLED BY THE CIT IN EXERCISE OF POWER UNDER SECTION 12AA(3) OF THE ACT. HOWEVER, AS ADMITTED BY BOTH THE PARTIES, THE TRIBUNAL WHILE CONSIDERING ASSESSEES APPEAL AGA INST THE CANCELLATION OF REGISTRATION HAS RESTORED THE REGISTRATION ITA NOS.440 441 AND COS 17 AND 18 SIDDHARTHA EDUCAT IONAL SOCIETY ELURU PAGE 6 OF 7 GRANTED UNDER SECTION 12A OF THE ACT WITH RETROSPECTIVE E FFECT. IT IS ALSO EVIDENT FROM RECORD, AS IS THE CASE IN THE IMPUGNED ASSESSMENT YEAR, FOR ASSESSMENT YEARS 2004-05 AND 200 5-06 ALSO, THE ASSESSING OFFICER HAD DISALLOWED CLAIM OF EXEMPTION UNDER SECTION 11 BY ALLEGING VIOLATION OF SECTIONS 11 AND 13 MORE OR LESS ON SIMILAR GROUNDS. HOWEVER, ITAT VISAKHAPATNAM BENCH WHILE CONSIDERING ASSESSEES AP PEAL IN ASSESSMENT YEARS 2004-05 AND 2005-06 HAS UPHELD ASSE SSEES CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT BY HOLDI NG THAT THERE IS NO VIOLATION OF ANY PROVISIONS OF SECTION 11 OR 13 OF THE ACT. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT CONTROVERTED THIS FACTUAL POSITION. IN THE AFORESAID FAC TS AND CIRCUMSTANCES AS THE ISSUE IS SQUARELY COVERED BY THE DECISIONS OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEARS AND THE LEARNED CIT (A) H AVING FOLLOWED THE SAME WHILE ALLOWING ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 11, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE CIT(A). ACCORDINGLY THE SAME IS UPHELD AND THE GR OUNDS RAISED ARE DISMISSED. 11. GROUND NOS. 5 TO 13 ARE ON VARIOUS DISALLOWANCES MADE BY ASSESSING OFFICER APPLYING THE PROVISIONS OF SEC TION 40A(2), 40A(3) AND 40(A)(IA). CONSIDERING THE FACT THAT ASSESSE ES CLAIM OF EXEMPTION UNDER SECTION 11 HAS BEEN UPHELD, THESE G ROUNDS HAVE BECOME INFRUCTUOUS AS ASSESSEES INCOME CANNOT BE COMPUTED UNDER COMMERCIAL PRINCIPLES ONCE PROVISIONS OF SECTION 11 IS APPLICABLE TO THE ASSESSEE. 12. IN THE RESULT GROUND NOS. 5 TO 13 ARE DISMISSED. ITA NOS.440 441 AND COS 17 AND 18 SIDDHARTHA EDUCAT IONAL SOCIETY ELURU PAGE 7 OF 7 13. AS THE FACTS AND ISSUES INVOLVED IN ASSESSMENT YEA R 2009-10 ARE IDENTICAL, FOLLOWING OUR DECISION IN ASS ESSMENT YEAR 2007-08, WE ALSO DISMISS THE APPEAL OF THE DEPAR TMENT. 14. IN THE RESULT BOTH THE APPEALS OF THE DEPARTMENT ARE DISMISSED. C.O. NOS. 17 & 18/VIZ/2013 15. AS WE HAVE UPHELD THE ORDERS OF THE LEARNED CIT (A) ALLOWING EXEMPTION TO THE ASSESSEE UNDER SECTION 11, THE CROSS OBJECTIONS HAVE BECOME INFRUCTUOUS, AS THE ISSUE RAIS ED THEREIN IS OF MERE ACADEMIC INTEREST, HENCE THEY ARE DI SMISSED. 16. IN THE RESULT, BOTH THE CROSS OBJECTIONS OF THE ASSE SSEE ARE DISMISSED. 17. IN THE RESULT, BOTH THE APPEALS AND CROSS OBJE CTIONS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 3.3. 2015 SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:3 RD MARCH,2015 PVV/SPS CAMP: VISAKHAPATNAM, COPY TO 1 INCOME TAX OFFICER, WARD-2, KKS TOWERS, R.R. PET, ELURU 534002 2 M/S. SIDDHARTHA EDUCATIONAL SOCIETY, SHANTINAGAR, ELURU 3 THE CIT (A) GUNTUR 4 THE CIT RAJAHMUNDRY 5 DEPARTMENTAL REPRESENTATIVE ITAT VISAKHAPATNAM 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM