Viswamanava Samikyata Samsat, Guntur V. The Assistant Commissioner of Income Tax ( Exemptions), Exemptions Circle, Vijayawada

CO 18/VIZ/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0864 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-10-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-09-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 09-03-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 142(1); 12A; 143(1); 143(2)

Judgement Text

आयकरअपीलȣयअͬधकरण, ͪवशाखापटणमपीठ, ͪवशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM Įीदुåवूǽआरएलरेɬडी, ÛयाǓयकसदèयएवंĮीएसबालाकृçणन, लेखासदèयकेसम¢ BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./ I.T.A. No. 151/Viz/2020 (Ǔनधा[रणवष[/ Assessment Year :2015-16) The Assistant Commissioner of Income Tax (Exemptions), Vijayawada. Vs. M/s. Viswamanava Samikyata Samsat, Guntur. PAN: AAATV 1597 P (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) CO No.18/Viz/2021 (In आयकरअपीलसं./ I.T.A. No.151/Viz/2020) (Ǔनधा[रणवष[/ Assessment Year :2015-16) M/s. Viswamanava Samikyata Samsat, Guntur. PAN: AAATV 1597 P Vs. The Assistant Commissioner of Income Tax (Exemptions), Vijayawada. (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) अपीलाथȸकȧओरसे/ Assessee by : Sri GVN Hari, Advocate Ĥ×याथȸकȧओरसे/ Revenue by : Sri MN Murthy Naik, CIT-DR सुनवाईकȧतारȣख/ Date of Hearing : 08/09/2022 घोषणाकȧतारȣख/Date of Pronouncement : 13/10/2022 O R D E R 2 PERBENCH : This appeal filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-2, Guntur [Ld. CIT(A)] in ITA No.10124/GNT/CIT(A)-2/2018-19, dated 26/02/2020 arising out of the order passed U/s. 143(3) of the Income Tax Act, 1961 [the Act] for the AY 2015-16. 2. Brief facts of the case are that the assessee is a charitable institution registered U/s. 12A of the Act and under Foreign Contribution Regulation Act (FCRA) filed its return of income for the AY 2015-16 admitting a total income of Rs. NIL. The return was summarily processed U/s. 143(1) of the Act. Subsequently, the case was selected for complete scrutiny under CASS to verify “Large Corpus donations received by the Trust” and statutory notices U/s. 143(2) and 142(1) of the Act were issued and served on the assessee. In response to the notices, the assessee’s Authorized Representative appeared and produced the details called for by the Ld. AO. Considering the submissions made by the Ld. AR, the Ld. AO noticed that the assessee has claimed an exemption of Rs. 3,96,45,981/- towards corpus donation U/s. 11(1)(d) of the Act. The Ld. AO issued a show cause notice on 3 19/9/2017 requesting the assessee to substantiate the claim of corpus donations. In response to the assessee’s end, the assessee submitted that during the Financial Year 2014-15 the assessee received Foreign Corpus Donations of $ 6,50,000 translated to Rs. 3,96,45,981/- from Sri Viswayogi Viswamjee Foundation for Universal Integration & Peace (SVVFUIP) situated in USA. The Ld. AR further submitted before the Ld. AO the letter received from SVVFUIP stating that the donation is towards corpus fund. The Ld. AO after receiving the letter issued a show cause notice on 13/4/2018 stating that there is no specific direction in the letter submitted by the assessee. In response, the assessee filed a reply on 25/4/2018 pointing out that “balance amount shall be treated as build corpus fund for the running of VMSS activities in the long run”. The Ld. AO not satisfied with the reply given by the Ld. AR, treated the donation as general donation and assessed the same to tax. Further, the Ld. AO on verification of the income and expenditure statement noticed that the assessee has claimed Rs. 1,44,31,936/- towards loss on assets written off and disallowed the same citing the Amendment made to section 11(6) of the Act w.e.f 1/4/2015. The Ld. AO completed the assessment by making the above additions and raised a tax demand of Rs. 73,51,516/-. Aggrieved by the 4 order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) considering the submissions made by the assessee and by admitting the additional ground raised by the assessee, allowed the appeal. Aggrieved by the order of the Ld. CIT (A) the Revenue is in appeal before the Tribunal. 3. The Revenue has raised the following grounds of appeal before the Tribunal: “(i) The Ld. CIT(A) erred in bo th law and facts of the case. (ii) The Ld. CIT(A) erred in treating the amount of Rs. 3,96,45,981/- as corpus fund in the absence of specific direc tions fro m the Donor as per the provisions of sec tion 11(1)(d) of the Act. (iii) The Ld.CIT(A) erred in allowing the claim of carry forward of unabsorbed excess of expenditure over inco me of Rs. 3,60,21,441/- and unabsorbed depreciation of Rs. 4,51,52,791/- without considering the fact that the assessee had no t made such a claim in the return of inco me as well as during the assessment proceedings. (iv) The Ld. CIT(A) ignored the fact that the 154 application regarding the carry forward of unabsorbed depreciation was rejected by the AO as it was a debatable issue. The Ld. CIT(A) erred in no t considering the fact that the issue is subjec t matter of separate appeal against order U/s. 154. (v) Any other ground(s) that may be urged at the time of hearing of the appeal.” 5 4. The Ld. Departmental Representative submitted that the assessee has not produced letter from the donor clearly stating the intention of the donor towards corpus fund. The Ld. DR submitted mentioning from the activities listed in their letter, one activity is pertaining to Build Corpus Fund for the running of the VMSS activities in the long term and hence it cannot be construed as a specific direction. The Ld. DR also accepted that there is no doubt in the activities carried on by the Trust. Per contra, the Ld. AR submitted a letter dated 3 rd June, 2019 placed at page 80 of the paper book stating that the above donation was made as corpus donation in order to Build Corpus Fund for running of the VMSS activities in the long run. SVVFUIP has stated that it is a specific direction to treat the donation as Corpus Fund Donation. Similarly, the Ld. AR also further submitted that section 11(6) was introduced by the Finance Act, 2014 w.e.f 1/4/2015 and it is a settled law that it has to be applied prospectively. The Ld. AR also further submitted that the assessee filed an additional ground before the Ld. CIT(A) with respect to unabsorbed depreciation and unabsorbed expenditure over income which was admitted by the Ld. CIT(A). The Ld. AR therefore pleaded that the order of the Ld. CIT(A) be upheld. 6 5. We have heard both the parties and perused the material available on record and the orders of the Ld. Revenue Authorities. Admittedly the Revenue is in agreement with the activities carried on by the Trust. The only issue here is whether the donation received by the assessee amounting to Rs. 3,96,45,981/- [USD 6,50,000] from SVVFUIP, USA is general donation or a corpus donation with a specific direction. We see from the letter submitted by the Ld. AR in page 80 of the paper book that there is a clear direction from the donor to treat the amount donated as a specific direction towards corpus donation in order to build the corpus fund for the running of VMSS activities in the long run. It is clear from the letter that the intention of the donor is to set up a corpus fund in long run. We give below the findings of the Ld. CIT(A) which reads as under: “The appellant submitted that the substance needs to be looked into and would f orm the basis f or conclusion about the nature of DONATIONS. The appellant placed reliance on in the case of State of Andhra Pradesh vs. Kone Elevators India Ltd (2005) 181 ELT 156 (Supreme Court), Sundaram Finance Ltd vs. State of Kerala AIR 1966 SC 1178 the Supreme Court, Bharat Sanchar Nigam Ltd vs. Union of India reported in 2006-TMI-309 (Supreme Court) wherein it was held “where the Apex Court held that the substance of the contract is determinative and not its f orm. Thus, the essence of the contract is crucial and to be seen, keeping in mind the intention of the parties.” As the intention of the donor is to build the corpus f und f or the running of the VMSS activities in the long term, they cannot be treated as general donations since specif ic 7 direction has been given. I direct the AO to treat the donation of $6,50,000 as corpus fund. Ground No.3 is adjudicated.” 6. We agree with the findings of the Ld. CIT(A) and hence no interference is required on this ground. Accordingly, this ground raised by the Revenue is dismissed. 7. The ground No.(iii) raised by the Revenue regarding allowing the claim of carry forward of unabsorbed excess of expenditure over income and unabsorbed depreciation, we find that the assessee has filed a petition u/s. 154 of the Act before the Ld. AO. However, the Ld. AO has rejected the claim of the assessee since the assessee has not made any claim in the return of income. Therefore, the assessee filed an additional ground along with the evidences before the Ld. CIT(A). The Ld. CIT(A) as per the provisions of section 250(5) of the Act admitted the additional ground raised by the assessee. The Ld. CIT(A) placing reliance on the decision of the Bombay High Court in the case of DIT (Exemption) vs. FramjeeCawasjee Institute (1993) 109 CTR 463 (Bom.) wherein it was held that “the Tribunal, however, took the view that when the ITO stated that full expenditure had been allowed in the year of acquisition of assets, what he really meant was that the amounts spent on acquiring those assets had been 8 treated as application of income of the trust in the year in which the income was spent in acquiring those assets. This did not mean that in computing the income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account. This view of the Tribunal has been confirmed by the Bombay High Court in the above judgment. Hence, Question No.2 is answered in the affirmative ie., in favour of the assessee and against the Department”. This view was confirmed by the Hon’ble Supreme Court in the case of CIT vs. Rajasthan and Gujarathi Charitable Foundation Poona 402 ITR 441 SC. The Hon’ble Supreme Court in the referred case held that “also follows that once assessee is allowed depreciation he shall be entitled to carry forward the depreciation as well”. 8. The facts of the present case are similar to the facts of the above referred case. Respectfully following the judicial discipline, the Ld. CIT(A) directed the AO to allow claim of unabsorbed depreciation of earlier years of Rs. 4,51,52,791/-. 9. We find no infirmity in the order of the Ld. CIT(A) and hence no interference is required on this ground. Thus, this ground raised by the Revenue is dismissed. 9 10. Similarly, the allowance of excess of expenditure over income in earlier years as carry forward loss the Ld. CIT (A) relying on the decision of the Rajasthan High Court in the case of CIT vs. Maharana of Mewar Charitable Foundation 164 ITR 439(Raj) Gujarat High Court in the case of CIT vs. Sri Plot Swetamber Murthy Pujak Jain Mandal 211 ITR 293 (Guj.), Bombay High Court decision in the case of CIT vs. Institute of Banking Personal Selection has concluded that the assessee is eligible for claiming excess expenditure over income of earlier assessment years. We therefore are of the view that there is no error in the order of Ld CIT(A), and hence judicially following the above legal precedents, we find no infirmity in the order of the Ld. CIT(A) and no interference is required. Accordingly this ground raised by the Revenue is dismissed. 11. Grounds No.(i) and (v) raised by the Revenue are general in nature and therefore they need no adjudication. 12. In the result, appeal filed by the Revenue is dismissed. 10 CO No.18/Viz/2021 (In आयकरअपीलसं./ I.T.A. No.151/Viz/2020) (Ǔनधा[रणवष[/ Assessment Year :2015-16) 13. This cross objection is filed by the assessee. The grounds raised by the assessee are in support of the decision taken by the Ld. CIT(A). While adjudicating the Revenue’s appeal, we upheld the decision of the Ld. CIT(A) and accordingly dismissed the grounds raised by the grounds raised by the Revenue. Thus, the adjudication of the Cross Objection becomes infructuous. 14. In the result, Cross Objection filed by the assessee is dismissed as infructuous. 15. Conclusively, Appeal filed by the Revenue is dimissed and the Cross Objection filed by the assessee is dismissed as infructuous. Pronounced in the open Court on the 13 th October , 2022. Sd/- Sd/- (दुåवूǽआर.एलरेɬडी) (एसबालाकृçणन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) ÛयाǓयकसदèय/JUDICIAL MEMBER लेखासदèय/ACCOUNTANT MEMBER Dated : 13.10.2022 OKK - SPS 11 आदेशकȧĤǓतͧलͪपअĒेͪषत/Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/ The Assessee–M/s. Viswamanava Samikyata Samsat, D.No.3-29-39/1, Viswamandiram, 3 rd Lane, Krishna Nagar, Guntur, Andhra Pradesh – 522006. 2. राजèव/The Revenue –Assistant Commissioner of Income Tax, Exemptions Circle, 4 th Floor, Stalin Corporate Building, 2 nd Lane, Industrial estate, Auto Nagar, Vijayawada-7. 3. (i) The Principal Commissioner of Income Tax, (ii) Chief Commissioner of Income Tax, Exemptions, New Delhi. (iii)j Commissioner of Income Tax, Exemptions, Hyderabad. 4. आयकरआयुÈत (अपील)/ The Commissioner of Income Tax (Appeals)-2, Guntur. 5. ͪवभागीयĤǓतǓनͬध, आयकरअपीलȣयअͬधकरण, ͪवशाखापटणम/ DR,ITAT, Visakhapatnam 6. गाड[फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam