Annadhanam Scheme Fund HR & CE Department, CHENNAI V. ADIT, CHENNAI

ITA 1003/CHNY/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7489 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 05-05-2015
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS JT
• Keywords: Charitable institution; Deemed to accrue or arise in india
• Section: 143(3); 12AA; 6; 56; 11

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI , ! ' # $' # % . &' , ( ! )* BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I T.A. NO. 1003/MDS/2015 / ASSESSMENT YEAR :2011-12 ANNADHANAM SCHEME FUND, HR&CE DEPARTMENT, NO.119, UTTAMAR GANDHI SALE, NUNGAMBAKKAM, CHENNAI - 600 034. [PAN: AAATA 9168R] VS. ASST. DIRECTOR OF INCOME TAX (EXEMPTIONS)-IV, NUNGAMBAKKAM, CHENNAI 600 034. ( +, /APPELLANT ) ( -.+, / RESPONDENT ) / APPELLANT BY : SHRI R.VENKATARAMAN, SR. ADVOCATE SHRI B.SIVARAMAN, ADVOCATE / RESPONDENT BY : SHRI SHIVA SRINIVAS, JT. CIT / DATE OF HEARING : 05.01.2017 /DATE OF PRONOUNCEMENT : 17.03.2017 / / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-17 DATED 30.01 .2015 (CIT(A)) FOR SHORT) PASSED UNDER SECTION 143(3) OF THE INCOME TA X ACT, 1961 [ACT IN SHORT], FOR THE ASSESSMENT YEAR (AY) 2011-12. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1003 1003 1003 1003/M /M/M /MDS DSDS DS/ // /201 201201 2015 55 5 2 2. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS WITH REGARD TO THE TAXING AN AMOUNT OF RS. 3,26,56,820/- ON THE REASO N THAT THE ASSESSEE HAS NOT UTILIZED THE ACCUMULATED FUND WITHIN PRESCRIBED TIME OF FIVE YEARS AND THE SAME WAS TREATED AS DEEMED INCOME OF ASSESSEE AS PE R SEC. 11(3)(C) OF THE I.T ACT. THE FACTS OF THE ISSUE ARE THAT THE ASSES SEE IS A PUBLIC CHARITABLE TRUST CONSTITUTED BY A TRUST DEED DATED 23.03.2002. IT WAS GRANTED REGISTRATION U/S. 12AA OF THE ACT VIDE PROCEEDINGS OF THE DIT(E), CHENNAI IN DIT(E) NO.2(654)/04-05 DATED 14.02.2005. THE ASS ESSEE FILED ITS RETURN FOR THE AY 2011-12 ON 30.09.2011 ADMITTING ' NIL' INCOME. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT ON 15.11 .2012. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE ACT WAS ISSUED BY ASSESSING OFFICER ACCORDINGLY. DETAILS CALLED F OR WERE FILED. AFTER SCRUTINIZING THE DETAILS FILED AND DISCUSSING THE C ASE WITH THE AUTHORIZED REPRESENTATIVE, THE ASSESSMENT WAS COMPL ETED U/S 143(3) OF THE ACT ON 26.02.2014 DETERMINING THE TOTAL INCO ME AT RS.3,26,56,820/-. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE ACCUMULATED RS.2,75,81,397/- PERT AINING TO AY 2005-06 AND THE SAME WAS NOT UTILIZED TILL THE AY 2 010-11. IN RESPONSE, THE ASSESSEE STATED THAT THE AMOUNT ACCUM ULATED DURING THE EARLIER YEARS WERE NOT DISTRIBUTED TO VARIOUS T EMPLES FOR THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1003 1003 1003 1003/M /M/M /MDS DSDS DS/ // /201 201201 2015 55 5 3 REASON THAT APPROVAL U/S 12AA OF THE ACT FOR THE AN NADHANAM SCHEME OF SUCH TEMPLES WERE REJECTED AND ON APPEAL, REGISTRATION WAS GRANTED LATER. BECAUSE OF THIS, THE FUNDS WERE NOT DISBURSED IN TIME THOUGH THE LIABILITY WAS ALREADY ASCERTAINED A ND IT WAS ONLY A PROCEDURAL DELAY, IT WAS CONTENDED. NOT CONVINCED W ITH THE REPLY, THE AO WAS OF THE VIEW THAT THE ACCUMULATED SUM HAS TO BE SPENT WITHIN A PERIOD OF FIVE YEARS FROM THE ASSESSMENT YEAR IN WHICH THE ACCUMULATION WAS MADE AND IF IT WAS NOT UTILIZED, T HE SAME WILL BE DEEMED TO BE INCOME OF THE ASSESSEE AS PER SEC.11(3 )( C) OF THE ACT. THE AO ALSO RELIED ON THE CBDT CIRCULAR NO.29 DATED 23.08.1969 FOR THE ABOVE PROPOSITION AND HELD THAT THE PERMISSIBLE ACCUMULATION OF 15%/25% IS ALSO NOT ALLOWABLE TO THE ASSESSEE. THUS THE AO BROUGHT TO TAX RS.3,26,56,820/- [RS.2,75,81,397 SET APART I N THE AY 2005-06+ RS.50,75,423 BEING PERMISSIBLE ACCUMULATION OF 15%/ 25%]. 4. AGAINST THIS THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). THE LD. CIT(A) OBSERVED THAT A S PER THE PROVISIONS OF SEC.11(2) OF THE ACT, THE INCOME CAN BE ACCUMULATED FOR A PERIOD OF FIVE YEAR S IF THE AMOUNT IS ACCUMULATED/SET APART ON OR AFTER 01.04.2001. IN TH IS CASE, THE AMOUNT WAS SET APART DURING THE AY 2005-06 AND HENCE CAN B E KEPT SET APART UPTO AY 2010-11. SINCE THE AMOUNT CONTINUED TO BE K EPT UNSPENT DURING AY 2011-12, THE AO BROUGHT IT TO TAX FOR THE AY 2011-12. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1003 1003 1003 1003/M /M/M /MDS DSDS DS/ // /201 201201 2015 55 5 4 HENCE THERE IS NO PROCEDURAL FLAW IN THE ACTION OF THE ASSESSING OFFICER IN BRINGING TO TAX THE SUM OF RS.2,75,81,397/- U/S 11(3)(C) OF THE ACT. 4.1 FUTHER, THE LD. CIT(A) OBSERVED THAT INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31.03.2011 REVEALS THAT THE ASSE SSEE WAS IN RECEIPT OF INTEREST ON FD AND INTEREST ON SB A/C . THE ONLY EXPENDITURE WAS CONTRIBUTION TO TEMPLES. THE SURPLU S STATEMENT FOR THE .AYS 2003-04 TO 2013-14 REVEALS THAT THE ASSESSEE I S HAVING SURPLUS IN EXCESS OF 15% EVERY YEAR EXCEPT AY 2007-08. SINC E THE ASSESSEE IS HAVING SURPLUS, OPTION U/S 11(2) OF THE ACT IS E XERCISED IN EVERY ASSESSMENT YEAR. THE FUNDS ARE INVESTED AS PER THE PROVISIONS OF SEC. 11(5) OF THE ACT. SINCE THE ASSESSEE IS IN RECEIPT OF INTEREST INCOME AND THE UNUTILIZED INTEREST INCOME IS INVESTED IN B ANK DEPOSITS EVERY YEAR AS PER SEC.1 1 (5) OF THE ACT. IT IS FOR THE ASSESSEE TO UTILIZE T HE SET APART AMOUNT WITHIN FIVE YEARS AND IT IS THE RESPON SIBILITY OF THE ASSESSEE TO PLAN IN SUCH A WAY THAT THE SET APART F UNDS ARE UTILIZED WITHIN THE STIPULATED TIME. OTHERWISE THE ACCUMULAT ED INCOME WILL BE SUBJECT TO TAX IN THE IMMEDIATE SUCCEEDING AY AFTER THE YEAR. THE LD. CIT(A) OBSERVED THAT THE RATIO OF JUDGEMENT IN TH E CASE OF KVIDFC [315 ITR 301(KAR)] AND IN THE CASE OF CIT VS UPBHOK TA SAHKARI SANGH LIMITED 288 ITR 106 (ALL) ARE NOT APPLICABLE. ACCOR DING TO HIM, THE ASSESSEE ' S RELIANCE ON THESE CASES ARE MISPLACED AS THE NATU RE OF RECEIPT IN THESE CASES WHETHER SUBJECT TO TAX OR NO T WAS THE QUESTION I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1003 1003 1003 1003/M /M/M /MDS DSDS DS/ // /201 201201 2015 55 5 5 TO BE DECIDED, WHEREAS IN THIS CASE, THE ACCUMULATI ON OF INCOME IS THE SUBJECT MATTER. HE ALSO OBSERVED THAT THE ASSESSEE' S RELIANCE ON THE DECISION OF MADRAS HIGH COURT IN THE CASE OF MR A.R . EDUCAT I ONAL SOCIETY VS CIT (2002) 253 ITR 589 IS ALSO NOT RELEV ANT TO THE FACTS AND CIRCUMSTANCES OF THIS CASE. ACCORDING TO HIM CLAUSE 2(C) OF CIRCULAR NO . 29 DATED 23 . 08.1969 C LEARLY STATES THAT THE ENTIRE ACCUMULATION WILL BE SUBJECT TO TAX U/S 11(3) OF THE ACT, IF THE PROV ISIONS OF SECTION 11(2) OF THE ACT HAVE BEEN VIOLATED. IN THIS CASE, THERE IS CLEAR VIOLATION OF SEC.11(2) OF THE ACT BY THE ASSESSEE BY NOT UTILIZI NG THE AMOUNT SET APART WITHIN THE STIPULATED PERIOD I.E . WITHIN AY 2010-11 OF THE ACT. ACCORDING TO HIM THERE IS NO ERROR IN THE ORDER OF THE ASSESSING OFFICER IN TAXING THE SUM OF RS.2,75,81 , 397/ - U/S 11(3)(C) OF THE ACT . THUS, HE DECLINED TO INTERFERE WITH THE ORDER OF THE AO ON THIS COUNT . REGARDING TAXING THE SUM OF RS.50,75,423/- I.E . 15% OF GROSS TOTAL INCOME PERTAINING TO AY 2005-06, THE AO RELIED ON C LAUSE 3 OF CIRCULAR NO . 29 DATED 23.08 . 1969. THE ASSESSEE RELIED ON THE DECISION OF SUPREME COURT IN THE CASE OF ADD!. CIT AND ANOTHER VS ALN RAO CHARITABLE TRUST (195) 216 ITR 697. IN THE DECISION, THE HON ' BLE SUPREME COURT OBSERVED AS UNDER: 'THAT EXEMPTION IS UNFETTERED AND NOT SUBJECT TO AN Y CONDITIONS. IN OTHER WORD , IT IS AN ABSOLUTE EXEMPTION . IF SUB-SECTION(2) IS SO READ AS SUGGESTED BY LEARNED COUNSEL FOR THE REVENUE , WHAT IS AN ABSOLUTE AND UNFETTERED EXEMPTION OF ACCUMULATED INCOME OR G UARANTEED BY SECTION 11(1 ) (A) WOULD BECOME A RESTRICTED EXEMPTION AS LAID DOWN I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1003 1003 1003 1003/M /M/M /MDS DSDS DS/ // /201 201201 2015 55 5 6 BY SEC . 11 (2). SECTION 11 (2) DOES NOT OPERATE TO WHITTLE DOWN OR TO CUT ACROSS THE EXEMPTION PROVISIONS CONTAINED IN SECTIO N 11 (1 ) (A) SO FAR AS SUCH ACCUMULATED INCOME OF THE PREVIOUS YEAR IS CONCERNED . ' BY APPLYING THE ABOVE DECISION, THE ADDITION MADE B Y THE AO IS NOT TENABLE. THEREFORE, HE DIRECTED THE AO TO DELE TE THE ADDITION OF RS.50,75,423/- MADE IN THE ASSESSMENT ORDER. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS BEEN SPENDING ACCUMULATED MONEY FROM THE ASSESSMENT YEAR 2005-06 TILL THIS ASSESSMENT YEAR AND THE ACCUMULATED FUND OUTSTANDING AT THE EN D OF ASSESSMENT YEAR 2011-12 AT RS. 3,57,04,582/- WHICH IS NOT THE UNSPE NT ACCUMULATED FUND FROM THE ASSESSMENT YEAR 2005-06. ON THE OTHER HAN D, THE ACCUMULATED FUND RELATING TO THE ASSESSMENT YEAR 2005-06 WAS AL SO SPENT IN THE ASSESSMENT YEAR 2006-07, 2007-08, 2008-09, 2009-10 & 2010-11 AND IT WAS NOT PENDING TO SPEND IN THIS ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDING TO THE AR THERES IS NO VIOLATION OF PRO VISIONS OF S. 11(2) OF THE ACT. 5.1 ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. IN OUR OPINION AS SEEN FROM THE ANNEXURE TO THE GROUND S OF APPEAL, THE OUTSTANDING ACCUMULATED FUND AVAILABLE IN THE ASSES SMENT YEAR 2011-12 IS I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1003 1003 1003 1003/M /M/M /MDS DSDS DS/ // /201 201201 2015 55 5 7 AT RS. 3,57,04,582/-. ACCORDING TO THE ASSESSEE, IT IS THE CUMULATIVE FUND WHICH WAS NOT CARRIED FORWARD FROM ASSESSMENT YEAR 2005-06 AND THE ACCUMULATED FUND OF ASSESSMENT YEAR 2005-06 WAS AL READY SPENT AND THERE CANNOT BE ANY VIOLATION U/S. 11(2) OF THE I.T ACT S O AS TO TAX THE ACCUMULATED FUND IN THE ASSESSMENT YEAR UNDER CONSIDERATION. I T IS NOTICED THAT THE ASSESSEE HAS TAKEN A DIFFERENT PLEA THAT THE AMOU NT ACCUMULATED DURING THE EARLIER YEARS WERE NOT DISTRIBUTED TO VARIOUS T EMPLES FOR THE REASON THAT APPROVAL U/S 12AANOF THE ACT FOR THE ANNADHANAM SC HEME OF SUCH TEMPLES WERE REJECTED AND ON APPEAL, REGISTRATION WAS GRANT ED LATER. HOWEVER, BEFORE THE LD. CIT(A) TAKEN A DIFFERENT CONTENTION STATING THAT THE ASSESSEE CONSTITUTED AS A CENTRAL FUND AND ACT AS A FACILITA TOR TO DISBURSE THE FUNDS FROM THE SERVICE CENTRE TO THE DEFICIENCY CENTRE AND UNTIL SUCH DISBURSEMENT ACT AS A CUSTODIAN OF THE FUNDS DUE TO THE DEFICIENT CENTRES. HENCE, SUCH FUNDS ARE NOT EXIGIBLE TO THE TAX IN TH E HANDS OF THE CUSTODIAN. HOWEVER, THE ASSESSEE HAS NOT PRESENTED THE DETAILS OF UTILIZATION OF ACCUMULATED FUNDS RELATED TO THE ASSESSMENT YEAR 20 05-06 AND SUBSEQUENT ASSESSMENT YEARS. HENCE, IN THE INTEREST OF JUSTIC E, WE ARE INCLINED TO SET ASIDE THE ORDER OF THE LOWER AUTHORITIES AND REMIT THE ISSUE IN DISPUTE TO THE FILE OF AO FOR FRESH CONSIDERATION. IT IS NEEDLESS TO SAY THAT AN OPPORTUNITY OF HEARING TO BE GIVEN TO THE ASSESSEE TO PRESENT ASS ESSEES CASE. WITH THIS OBSERVATION, THE ISSUE RAISED BY THE ASSESSEE IN IT S APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1003 1003 1003 1003/M /M/M /MDS DSDS DS/ // /201 201201 2015 55 5 8 7. IN THE RESULT, THE ASSESSEE APPEAL IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 17 TH MARCH, 2017 AT CHENNAI. SD/- SD/- (DUVVURU RL REDDY) JUDICIAL MEMBER (CHANDRA POOJARI) ACCOUNTANT MEMBER CHENNAI, DATED, THE 17.03.2017 EDN !' #$ %$ /COPY TO: 1. /APPELLANT, 2. / RESPONDENT, 3. & ( )/CIT(A), 4. & /CIT, 5. $'( ) /DR & 6. (* + /GF.