D.D..I.T(E) - I,kolkata, Kolkata V. St John's Diocesan Girls Higher Secondary School, Kolkata

ITA 1079/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1645 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 06-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT KUMAR KUREEL SENIOR
• Assessee Lawyers: S M SURAN
• Keywords: Charitable institution
• Section: 12A; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1079 / KOL / 2013 ASSESSMENT YEAR :2009-10 DCIT(E)-1, 5 TH FLOOR, 10B, MIDDLETON ROW, KOLKATA-71 V/S . ST. JOHNS DIOCESAN GIRLS HIGHER SECONDARY SCHOOL, AE-467, SALT LAKE CITY, KOLKATA-64 [ PAN NO.AADTS 3910 L ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI RAJAT KUMAR KUREEL, SENIOR DR /BY RESPONDENT SHRI S.,M. SURAN, ADVOCATE /DATE OF HEARING 26-04-2017 /DATE OF PRONOUNCEMENT 02-06-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-JALPAIGURI DAT ED 07.03.2013. ASSESSMENT WAS FRAMED BY DCIT(EX) KOLKATA U/S 143(3 )/11 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 14.11.2011 FOR ASSESSMENT YEAR 2009-10. SHRI RAJAT KUMAR KUREEL, LD. DEPARTMENTAL REPRESENT ATIVE REPRESENTED ON BEHALF OF REVENUE AND SHRI S.M. SURANA, LD. ADVOCAT E APPEARED ON BEHALF OF ASSESSEE. ITA NO.1079/KOL/2013 A.Y. 2009-10 DDIT(E)-I KOL. VS. SST. JOHNS DIOCESAN G IRLS HIGHER SECONDARY SCHOOL PAGE 2 2. ONLY ISSUE RAISED BY REVENUE IN THIS APPEAL IS T HAT LD. CIT(A) ERRED IN ADMITTING THE REVISED FORM10/FORM10B AND ALLOWING A CCUMULATION U/S. 11(2) OF THE ACT. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A CHAR ITABLE ORGANIZATION AND RUNNING EDUCATIONAL ACTIVITIES. THE ASSESSEE-TRUST IS DULY REGISTERED U/S 12A VIDE NO.DIT(E)/7-76 DATED 09.12.1999. THE ASSESSEE HAS RECEIVED FOLLOWING FEES DURING THE YEAR UNDER CONSIDERATION FROM ITS S TUDENTS AS DETAILED UNDER:- SL.NO PARTICULARS AMOUNT (RS) OF FEES 1 DEVELOPMENT FEES 84,49,380/- 2 BUILDING FEES 17,72,900/- 3 CONSTRUCTION OF EDUCATION FUND 16,61,950/- TOTAL 1,17,84,230/- THE AFORESAID FEES RECEIVED BY ASSESSEE WERE CAPITA LIZED IN ITS BOOKS OF ACCOUNT. ACCORDINGLY, ASSESSEE HAS NOT SHOWN THE AB OVE RECEIPTS IN ITS INCOME AND EXPENDITURE ACCOUNT. THE ASSESSEE CLAIME D TO UTILIZE THE ABOVE FEES FOR UP-GRADATION AND DEVELOPMENT OF EDUCATIONA L FACILITIES. THUS THE ASSESSEE CLAIMED BEFORE THE AO THAT THE AFORESAID F EES REPRESENT CORPUS CONTRIBUTION AND THUS NOT TAXABLE. HOWEVER, THE AO OBSERVED THAT THE AFORESAID FEES ARE BEING RECEIVED BY THE ASSESSEE O N REGULAR BASIS AND ITS ACCRUAL IS CERTAIN ON YEAR TO YEAR BASIS. THE AO FU RTHER OBSERVED THAT THE AFORESAID FEES IN THE AYS 2008-09 AND 2010-11 WERE SHOWN AS ON REVENUE ACCOUNT BY THE ASSESSEE. ACCORDINGLY, AO TREATED TH E AFORESAID SUM OF 1,17,84,230/- AS REVENUE IN NATURE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) CONCEDED THE FACT THAT I MPUGNED FEES RECEIVED BY IT IS REVENUE IN NATURE AND FURTHER REQUESTED TO AL LOW TO ACCUMULATE THE AFORESAID FEES U/S. 11(2) OF THE ACT. THE ASSESSEE IN SUPPORT OF ITS CLAIMED FILED REVISED FORM-10 WITH RESOLUTION PASSED BY THE BOARD OF GOVERNORS FOR THE ACCUMULATION OF THE AFORESAID AMOUNT. ACCORDINGLY T HE LD. CIT(A) AFTER ITA NO.1079/KOL/2013 A.Y. 2009-10 DDIT(E)-I KOL. VS. SST. JOHNS DIOCESAN G IRLS HIGHER SECONDARY SCHOOL PAGE 3 CONSIDERING THE SUBMISSION OF ASSESSEE HAS ALLOWED ITS APPEAL BY OBSERVING AS UNDER:- 6.1 IT IS SEEN THAT THE AO DID NOT ISSUE THE SHOW-C AUSE NOTICE TO ASSESSEE BEFORE PROCEEDING TO TAX THE CORPUS RECEIPTS OF RS. 1,17,84,230 AS UNDISCLOSED INCOME. IT IS FURTHER SEEN THAT IN THE IMMEDIATELY EARLIER AND LATE5R AYS, THE ASSESSEE HIMSELF HAD TREATED THESE RECEIPTS AS INCO ME AND CLAIMED AS ACCUMULATION U/S. 11(2) WHICH HAS BEEN ALLOWED BY T HE AO. THE ASSESSEE COULD HAVE CLAIMED THIS RECEIPT AS INCOME FOR THIS YEAR ALSO AND CLAIMED ACCUMULATION U/S. 11(2). IT APPEARS THAT THE ASSESS EE TREATED THIS RECEIPT AS CORPUS RECEIPT BECAUSE OF WRONG ADVICE OF AUDITORS. BECAUSE OF WRONG ADVICE OF AUDITORS, THE ASSESSEE CANNOT BE PENALIZED. IT I S THE DUTY OF REVENUE AUTHORITY TO CORRECT THE MISTAKE WHICH HAS OCCURRED DUE TO WRONG ADVICE OF AUDITORS AND ALLOW CORRECT EXEMPTION AS PER LAW. TH E AO IS DIRECTED TO COMPUTE THE INCOME AFTER ADMITTING THE REVISED FORM NUMBER 1, REVISED AUDIT REPORT IN FORM 10B AND THE COPY OF RESOLUTION PASSE D BY THE BOARD OF GOVERNORS WITH REGARD TO ACCUMULATION OF RS.1,43,61 ,134 U/S. 11(2), FILED BEFORE THE UNDERSIGNED DURING THE COURSE OF APPELLA TE PROCEEDINGS. BEFORE RE- COMPUTING THE INCOME, THE AO IS DIRECTED TO VERIFY THAT THE AMOUNT ACCUMULATED AS PER REVISED FORM 10 HAS BEEN INVESTE D IN THE MODES PRESCRIBED U/S. 11(5) . THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S ON THE FOLLOWING GROUND:- 1. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A)/JALPAIGURI ERRED IN HOLDING THAT THE ASSESSE E TREATED THE REVENUE RECEIPT OF RS.11784280 AS CORPUS RECEIPT BECAUSE OF WRONG ADVICE OF AUDITORS FOR WHICH THE ASSESSEE CANNOT BE PENALIZED AND ALLOWING ACCUMULATION U/S. 11(2) OF THE IT ACT WITHOUT APPRE CIATING THE FACT THAT THE ASSESSEE WAS GIVEN TWO CLEAR OPPORTUNITIES TO EXPLA IN AND/OR TO REVISE THE FORM 10/FORM 10B BEFORE COMPLETION OF ASSESSMENT. 5. BEFORE US BOTH THE PARTIES RELIED ON THE ORDER O F AUTHORITIES BELOW AS FAVOURABLE TO THEM. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTI ES AND PERUSED THE MATERIALS AVAILABLE AS WELL AS ORDER OF AUTHORITIES BELOW. THE ASSESSEE HAS TREATED THE FEES RECEIVED FROM STUDENTS IN THE NAME OF DEVELOPMENT, BUILDING FEES AND CONTRIBUTION TO EDUCATION FUND IN THE YEAR UNDER CONSIDERATION AS CORPUS FUND. THEREFORE THE ASSESSEE WAS OF THE VIEW THAT THE SAME ARE NOT TAXABLE. HOWEVER THE AO TREATED THE SAME AS THE REV ENUE RECEIPTS IN THE ASSESSMENT PROCEEDINGS AND FRAMED THE ASSESSMENT AC CORDINGLY. HOWEVER ITA NO.1079/KOL/2013 A.Y. 2009-10 DDIT(E)-I KOL. VS. SST. JOHNS DIOCESAN G IRLS HIGHER SECONDARY SCHOOL PAGE 4 THE ASSESSEE BEFORE THE LEARNED CIT(A) CONCEDED THE FACT THAT THE AFORESAID SUM OF FEES IS REVENUE RECEIPTS AND THEREFORE LIABL E TO BE APPLIED IN THE YEAR OF RECEIPT TO THE EXTENT OF 85% AS PER THE PROVISIO NS OF SECTION 11(1)(A) OF THE ACT. BUT THE ASSESSEE BEFORE THE LEARNED CIT(A) CLA IMED THE BENEFIT UNDER SECTION 11(2) OF THE ACT. THUS THE ASSESSEE FILED R EQUISITE DOCUMENTS FOR CLAIMING THE BENEFIT UNDER SECTION 11(2) OF THE ACT BEFORE THE LEARNED CIT(A). ACCORDINGLY THE LEARNED CIT-A DIRECTED THE AO TO AL LOW THE RELIEF TO THE ASSESSEE AFTER VERIFYING THE AMOUNT COLLECTED AS PE R REVISED FORM 10 AND WHETHER THE SUM HAS BEEN INVESTED IN THE MODES AS P RESCRIBED UNDER SECTION 11(5) OF THE ACT. HERE WE FIND IMPORTANT TO REPRODU CE THE PROVISIONS OF SECTION 11(2) OF THE ACT WHICH READS AS UNDER:- INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIO US PURPOSES . 11(1) . [(2) [WHERE [EIGHTY-FIVE] PER CENT OF THE INCOME RE FERRED TO IN CLAUSE (A) OR CLAUSE (B) OF SUB-SECTION (1) READ WITH THE EXPLANATION TO THAT SUB-SECTION IS NOT APPLIED, OR IS NOT DEEMED TO HAVE BEEN APPLIED, TO CHARITABLE OR RELIGIOUS PURPOSES IN INDIA DURING THE PREVIOUS YEAR BUT IS A ACCUMULATED OR SET APART, EITHER IN WHOLE OR IN PART, FOR APPLICATION TO SUCH PURPOSES IN INDIA, SUCH INCOME SO ACCUMULATED OR SET APART SHALL NOT BE INC LUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF TH E INCOME, PROVIDED THE FOLLOWING CONDITIONS ARE COMPLIED WITH, NAMELY:- ] A PLAIN LOOK AT THE ABOVE STATUTORY PROVISION MAKES IT CLEAR THAT WHERE 85% OF THE INCOME IS NOT APPLIED FOR CHARITABLE PURPOSES, THE ASSESSEE IS ENTITLED TO ACCUMULATE OR SET APART SUCH INCOME FOR FUTURE APPL ICATION. THE INCOMES SO ACCUMULATED WILL NOT BE INCLUDED IN THE TOTAL INCOM E OF THE ASSESSEE IF THE FOLLOWING CONDITIONS ARE APPLIED : I) THE ASSESSEE HAS TO GIVEN A NOTICE TO THE ASSESS ING OFFICER IN FORM NO. 10, ALONG WITH A CERTIFIED COPY OF RESOLUT ION PASSED BY THE GOVERNING BODY. THIS RESOLUTION SHOULD SPECIFY THE PURPOSE AND THE PERIOD FOR WHICH THE INCOME IS SO ACCUMULAT ED. THE PERIOD OF ACCUMULATION CANNOT EXCEED FIVE YEARS UND ER ANY CIRCUMSTANCES. EARLIER THIS PERIOD USED TO BE TEN Y EARS BUT HAS BEEN REDUCED TO FIVE YEARS WITH EFFECT FROM 01.04.2 002. ITA NO.1079/KOL/2013 A.Y. 2009-10 DDIT(E)-I KOL. VS. SST. JOHNS DIOCESAN G IRLS HIGHER SECONDARY SCHOOL PAGE 5 II) THE ASSESSEE HAS TO ENCLOSE COPIES OF ANNUAL A CCOUNTS ALONG WITH THE DETAILS OF INVESTMENTS OF THE MONEY SO ACC UMULATED BEFORE THE EXPIRY OF SIX MONTHS FROM THE END OF EAC H RELEVANT PREVIOUS YEAR. III) THE AMOUNT SO ACCUMULATED SHOULD BE INVESTED IN ANY ONE OR MORE FORMS SPECIFIED IN SECTION 11(5) WITHIN SIX MO NTHS FROM THE END OF THE EACH OF THE PREVIOUS YEAR. IT IS IMPORTANT TO NOTE THAT ACCUMULATION UNDER THE PROVISIONS OF SECTION 11(2), IS SPECIFICALLY MADE ONLY UNDER THOSE CIRCUMSTANCES WHERE 85% OF THE INCOME OF THE TRUST COULD NOT BE APPLIED. SECTION 11(2), O NLY BECOMES OPERATIVE BEYOND THE 15% OF THE ACCUMULATION OF INCOME WHICH IS OTHERWISE ALLOWED UNDER SECTION 11(1) OF THE ACT. ON PERUSAL OF THE ABOVE, WE FIND THAT THE ASSESSEE HAS MADE ALL THE REQUISITES COMPLIANCE BEFORE THE LD. CIT(A) WHICH THE ASSESSEE WAS SUPPOSED TO MAKE WELL IN ADVANCE AS DISCUSSED ABOVE. THUS, WE OBSERV E THAT THERE WAS DELAY ON THE PART OF THE ASSESSEE IN THE COMPLIANCES AS M ANDATED UNDER THE PROVISIONS OF SECTION 11(2) READ WITH RULES 17 OF I NCOME TAX RULES. HOWEVER WE FIND THAT HONBLE GUJARAT HIGH COURT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF ASSESSEE IN THE CASE OF CIT VS. MAYUR FOUNDATION REPORTED IN 274 ITR 562. THE RELEVANT EXTRACT IS REPRODUCED AS UNDE R:- WHEN THE MATTER IS PENDING BEFORE THE TRIBUNAL BY WAY OF AN APPEAL, THE ASSESSMENT PROCEEDING IS PENDING. THE ASSESSING AUT HORITY IS EMPOWERED AND IS DUTY-BOUND, TO PASS ORDER GIVING EFFECT TO T HE ORDER OF THE TRIBUNAL FOR THE PURPOSES OF ASSESSING THE TAX LIABILITY OF AN A SSESSEE FOR THE ASSESSMENT YEAR WHICH WAS UNDER CONSIDERATION BEFORE THE TRIBU NAL. IN THESE CIRCUMSTANCES, IT CANNOT BE CONTENDED ON BEHALF OF THE REVENUE THAT THE ASSESSMENT PROCEEDINGS COME TO AN END WHEN THE ASSE SSMENT ORDER IS FRAMED. THE CONTENTION ON BEHALF OF THE REVENUE TO EQUATE THE ASSESSMENT ORDER WITH ASSESSMENT PROCEEDING IS BASED ON A FALL ACIOUS PREMISE. THE PROCEEDINGS BEFORE THE TRIBUNAL ARE MEANT TO CORREC TLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. IF THIS BE SO, IT FOLLOWS THAT THE ASSESSMENT PROCEEDING CANNOT BE SAID TO BE COMPLETE AND IS PENDING TILL THE APPE AL IS HEARD AND DISPOSED OF BY THE TRIBUNAL AND THE ORDER OF THE TRIBUNAL IS GI VEN EFFECT TO BY THE ASSESSING AUTHORITY BY COMPUTING THE CORRECT TAX LI ABILITY OF AN ASSESSEE. IN ITA NO.1079/KOL/2013 A.Y. 2009-10 DDIT(E)-I KOL. VS. SST. JOHNS DIOCESAN G IRLS HIGHER SECONDARY SCHOOL PAGE 6 OTHER WORDS, WHETHER AN ASSESSEE IS REQUIRED TO PAY TAX OR BECOMES ENTITLED TO A REFUND, WOULD BE ASCERTAINED BY THE ASSESSING AUTHORITY AFTER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL. IN THESE CIRCUMSTANCE S, THE TRIBUNAL WAS WELL WITHIN ITS JURISDICTION TO ENTERTAIN THE NEW GROUND BY WHICH THE ASSESSEE CLAIMED THE BENEFIT UNDER S. 11(2) AND ADJUDICATE T HE TAX LIABILITY OF THE ASSESSEE. THE TRIBUNAL HAS CATEGORICALLY FOUND THAT THE ADDITIONAL GROUND INVOLVES THE QUESTION RELATING TO INTERPRETATION OF S. 11(2) AND THE FACTS ON THE BASIS OF WHICH SUCH A DECISION IS TO BE GIVEN REGAR DING INTERPRETATION OF S. 11(2) ARE NOT AT ALL IN DISPUTE. IN THE CIRCUMSTANC ES, THERE IS NO INFIRMITY IN THE ORDER OF THE TRIBUNAL, HOLDING THAT THE ASSESSEE IS ENTITLED TO BENEFITS ALLOWABLE UNDER S. 11(2). RESPECTFULLY FOLLOWING THE JUDGMENT OF HON'BLE GUJA RAT HIGH COURT IN THE CASE OF MAYUR FOUNDATION (SUPRA) AND IN THE LIGHT OF ABOVE REASON ING, WE HOLD THAT THE ORDER OF THE LD. CIT(A) IS CORRECT AND IN ACCOR DANCE WITH LAW AND NO INTERFERENCE IS CALLED FOR. THIS GROUND OF REVENUE S APPEAL IS DISMISSED. 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 02/ 06/2017 SD/- SD/- ( !') ( !') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S $!% &- 02 / 06 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DDIT(E), 5 TH FLOOR, 10B, MIDDLETON ROW, KOLKATA-71 2. /RESPONDENT-ST. JOHNS DIOCESAN GIRLS HIGHER SECON DARY SCHOOL, AE-467, SALT LAKE CITY, KO LKATA-64 3. %.%/0 1 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 1 /0 ,