The Automotive Research Association of India, Pune V. CIT-IV, Pune

ITA 1099/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56625 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 03-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TEJENDRA SINGH
• Assessee Lawyers: SHANTANU PARANJA PE
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO 1099/PN/10 (ASSTT. YEAR: 2005-06) THE AUTOMATIVE RESEARCH ASSOCIATION OF INDIA, .. APPEL LANT S.NO 102, VETAL HILL, KOTHRUD, PUNE-411-038 PAN AAATT1989P VS. COMMISSIONER OF INCOME-TAX-IV, .. RESPOND ENT PUNE APPELLANT BY: SHRI SHANTANU PARANJA PE RESPONDENT BY: SHRI TEJENDRA SINGH DATE OF HEARING : 30.11.2011 DATE OF PRONOUNCEMENT : 23.12.2011 ORDER PER G.S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX-IV, PUNE DATED 10.3.2010 P ASSED UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) REVISING THE ASSESSMENT ORDER DATED 19.12.2007 OF THE ASSESSING OFFICER PASSED UN DER SECTION 143(3) OF THE ACT, PERTAINING TO THE ASSESSMENT YEAR 2005-06. 2. IN THIS APPEAL, THE FIRST AND THE FOREMOST PLEA SE T-UP BY THE ASSESSEE IS THAT THE ORDER OF THE COMMISSIONER OF INCOME-TAX IS INCO NSISTENT WITH THE REQUIREMENTS OF SECTION 263 OF THE ACT AND, THEREFORE , THE IMPUGNED ORDER IS BAD IN LAW. 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE IS A R ESEARCH INSTITUTION UNDER THE ADMINISTRATIVE CONTROL OF MINISTRY OF HEAVY INDUSTRIES & PUBLIC 2 ENTERPRISES, GOVERNMENT OF INDIA AND IT IS DULY APPROV ED UNDER SECTION 35(1)(II) OF THE ACT AS A SCIENTIFIC AND INDUSTRIAL RESEARCH ORGANIZ ATION BY THE MINISTRY OF SCIENCE & TECHNOLOGY, GOVERNMENT OF INDIA, VIDE COMMUNI CATION NO 11/91/88- TU-V DATED 10.5.2005. THE APPELLANT GENERATES ITS IN COME FROM GRANTS RECEIVED FROM THE GOVERNMENT OF INDIA FOR VARIOUS RESEARCH AND DEVELOPMENT PROJECTS AND FOR CREATION OF TESTING FACILITIES ALONG WITH ACTING AS THE APPROVED TESTING AND CERTIFICATION AUTHORITY. FOR THE RELEVANT ASSESSMENT YEAR OF 2005-06, THE ASSESSEE FILED A RETURN OF INCOME DECLARING TOTAL INCOME A T RS NIL WHICH WAS ASSESSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 17.12.2007 AT RS NIL, INTER ALIA, ALLOWING EXE MPTION UNDER SECTION 10(21) READ WITH SECTION 35(1)(II) OF THE ACT. IT EMERGES FROM RECORD THAT DURING THE YEAR UNDER CONSIDERATION THE INCOME EARNED BY THE ASSESSEE INCL UDED MISCELLANEOUS INCOME OF RS 32.76 LAKHS WHICH WAS ALSO FOUND ELIGIBLE F OR EXEMPTION UNDER SECTION 10(21) READ WITH SECTION 35(1)(II) OF THE ACT BY THE ASSESSING OFFICER. SUBSEQUENTLY, THE COMMISSIONER OF INCOME-TAX ISSUED NOTICE UNDER SECTION 263 OF THE ACT ON 16.2.2010, A COPY OF WHICH HAS BEEN PLACE D AT PAGES 73-74 OF THE PAPER BOOK. IN THE SAID SHOW CAUSE NOTICE, THE CHARGE MAD E OUT BY THE COMMISSIONER OF INCOME-TAX IS THAT GRANT OF EXEMPTION U NDER SECTION 10(21) READ WITH SECTION 35(1)(II) BY THE ASSESSING OFFICER WITH RESPECT TO THE SUM OF RS 32,76,688/- REPRESENTING MISCELLANEOUS INCOME WAS PREJUD ICIAL TO THE INTERESTS OF THE REVENUE. THE ASSESSEE IN RESPONSE RESISTED THE SHOW CAUSE NOTICE ISSUED BY THE COMMISSIONER OF INCOME-TAX. HOWEVER, THE COMMISSI ONER OF INCOME-TAX, AFTER CONSIDERING THE OBJECTIONS OF THE ASSESSEE, HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER DATED 17.12.2007 FOR THE ASSESSMENT YEAR 2005-06 WAS PREJUDICIAL TO THE INTERESTS OF REVENUE TO THE EXTENT OF EXCESS EXEMPTION ALLOWED IN RESPECT OF THE MISCELLANEOUS INCOME EARNED OF RS 32,76, 688/- AND ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO REVISE THE SAID ASSESSMENT O RDER BY REDUCING THE EXEMPTION TO THE EXTENT OF RS 32,76,688/-. THE R ELEVANT FINDING OF THE COMMISSIONER IS AS UNDER: 3 I HAVE GONE THROUGH THE WRITTEN SUBMISSION MACE BY SHRI RANADE AND ALSO THE CASE LAWS WHERE THE DECISION OF THE JURISDICTIONAL HIGH COURT HAS TO BE CONSIDERED WHICH IS ALLOWING EXEMPTION TO THE EDUCATIONAL INSTITUTIONS AND PARTICULARLY ON THE INTEREST EARNED AND NOT OTHER KINDS OF INCOME. THUS, THE DECISION I S NOT IN RESPECT OF SCIENTIFIC RESEARCH ORGANIZATION AND ALSO NOT IN RESPECT OF MISCELLANEO US INCOME EARNED BY THE ASSESSEE. THUS, HE NATURE OF INSTITUTION AS WELL AS NATURE OF INCOME ARE TOTALLY DIFFERENT FROM THE NATURE OF INCOME EARNED AND NATURE OF INSTITUTION, THEREFORE, THE JURISDICTIONAL HIGH COURT DECISION IS NOT APPLICABLE IN CASE OF THE ASSESSEE. IN RESPECT OF THE DECISION OF HONBLE HIGH COURT OF ORISSA, THE FACTS ARE DIFFERENT. THER EFORE, THE EXEMPTION ALLOWED BY THE HIGH COURT SPECIALLY IN RESPECT OF DIFFERENT ORGANI ZATION LIKE RESEARCH ORGANIZATION THE DECISION IN RESPECT OF EDUCATIONAL INSTITUTION WILL NOT APPLY. THUS, THE ORDER PASSED BY THE TRO & AO, RANGE-7, PUNE DT 17.12.2007 FOR AY 2005-0 6 WAS PREJUDICIAL IN THE INTEREST OF REVENUE TO THE EXTENT OF ALLOWING EXEMPTION MORE IN RESPECT OF THE MISCELLANEOUS INCOME EARNED OF RS 32,76,688/-. THEREFORE, THE ORD ER IS REVISED AS PER THE PROVISIONS OF SECTION 263 AFTER GIVING A DUE OPPORTUNITY TO THE A SSESSEE. AO IS HEREBY DIRECTED TO REVISE THE SAID ASSESSMENT ORDER BY REDUCING THE EX EMPTION TO THE EXTENT OF RS 32,76,688/- (13,78,14,117 32,76,688) AND PASS A F RESH ASSESSMENT ORDER AND ISSUE THE REVISED DEMAND NOTICE/CHALLAN ACCORDINGLY. BEING AGGRIEVED WITH THE ORDER OF THE COMMISSIONER, T HE ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, THE CASE MADE OUT BY THE LEARNED COUNSE L FOR THE ASSESSEE IS THAT SECTION 263 OF THE ACT PRESCRIBES THAT BEFORE INVOKI NG OF REVISIONARY POWERS, THE ORDER IN QUESTION SHOULD BE ESTABLISHED TO BE ERRO NEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF REVENUE. IT IS POINTED OUT THAT I N THIS CASE SUCH TWIN CONDITIONS HAS NOT BEEN SATISFIED, INASMUCH AS THERE IS NO ERROR O N THE PART OF THE ASSESSING OFFICER IN ALLOWING EXEMPTION UNDER SECTION 10(21) RE AD WITH SECTION 35(1)(II) OF THE ACT IN RESPECT TO THE INCOME BY WAY OF MISCELLANEOU S INCOME. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE, APPEARING FOR THE REVENUE, HAS DEFENDED THE ORDER OF THE COMMI SSIONER OF INCOME-TAX BY PLACING RELIANCE THEREOF. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. A B ARE READING OF SECTION 263 OF THE ACT MAKES IT ABUNDANTLY CLEAR THAT IN ORDER TO INVOKE THE REVISIONARY JURISDICTION, THE COMMISSIONER OF INCOME-TAX MUST SATISFY THE TWIN CONDITIONS, NAMELY, THAT THE ORDER SOUGHT TO BE REVISED IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF REVENUE. THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT 243 ITR 83 ( SC) HAS CLEARLY OPINED THAT THE 4 COMMISSIONER OF INCOME-TAX HAS TO BE SATISFIED OF THE TWIN CONDITIONS IN A CUMULATIVE MANNER AND AN ABSENCE OF SATISFACTION ON EITH ER OF THE TWO CONDITIONS WOULD BE FATAL TO THE ASSUMPTION OF JURISDICTION UNDER SECTION 263 OF THE ACT. 7. IN THE BACKGROUND OF THE ABOVE PROPOSITION, WE HAVE CAREFULLY PERUSED THE SHOW CAUSE NOTICE ISSUED BY THE COMMISSIONER OF INCOME-TAX DATED 16.2.2010 AS WELL AS THE FINDINGS IN THE IMPUGNED ORDER, WHICH WE HAVE ALREADY EXTRACTED ABOVE AND IT EMERGES THAT THERE IS NO CASE MADE OUT TH AT THE ORDER OF THE ASSESSING OFFICER DATED 19.12.2007 WAS ERRONEOUS IN THE EY ES OF LAW, IN SO FAR AS IT RELATED TO ALLOWING OF EXEMPTION OF MISCELLANEO US INCOME OF RS 32,76,688/-. IN FACT, THE OPERATIVE PORTION OF THE COMMISSIONER OF INCOME-TAX ONLY BRINGS OUT HIS PERCEIVED PREJUDICE ON ACCOUNT OF THE EXEMPTION HA VING BEEN ALLOWED IN THE ASSESSMENT ORDER BY THE ASSESSING OFFICER, BUT IT DOES NOT E STABLISH ANY ERROR OF LAW OR FACT IN THE ORDER QUA THE IMPUGNED EXEMPTION. 8. MOREOVER, EVEN ON MERITS OF THE CONTROVERSY, WE FI ND NO REASONING ADVANCED BY THE COMMISSIONER OF INCOME-TAX AS TO WHY THE MISCELLANEOUS INCOME IN QUESTION DOES NOT FALL FOR EXEMPTION UNDER SE CTION 10(21) READ WITH SECTION 35(1)(II) OF THE ACT. MOREOVER, A PERUSAL OF TH E ASSESSMENT ORDER REVEALS THAT THE NATURE OF THE INCOME IN QUESTION HAS BEEN EX AMINED BY THE ASSESSING OFFICER AND ON THAT BASIS HE HAS FACTUALLY ARRIVED AT AN INFERENCE THAT SUCH ITEMS OF INCOME HAVE PROXIMATE NEXUS WITH RESEARCH AND DEVELO PMENT ACTIVITY OF THE ASSESSEE AND, HENCE THE SAME HAVE BEEN FOUND TO BE ELIGIB LE FOR EXEMPTION UNDER SECTION 10(21) READ WITH SECTION 35(1)(II) OF THE ACT. THE FOLLOWING EXTRACT FROM THE ASSESSMENT ORDER IS RELEVANT. THE SUBMISSIONS OF THE ASSESSEE HAVE BEEN CONSIDER ED. IT TRANSPIRES THAT THE ASSESSEE IS AN APPROVED R & D INSTITUTE AS APPROVED BY THE D EPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH, A GOVERNMENT OF INDIA ENTITY AND FURTHER BY CBDT. THE INCOME OF THE ASSESSEE ARISES FROM R & D PRIMARILY. ON CLOSE SCRU TINY, IT APPEARS, THE INCOME CONTAINED IN THE OTHER INCOME SCHEDULE CONSISTS OF ITEMS WHICH HAVE PROXIMATE NEXUS WITH THE RESEARCH AND DEVELOPMENT ACTIVITY OF THE A SSESSEE. AS SUCH, THE ASSESSEES ENTIRE INCOME IS ELIGIBLE FOR EXEMPTION U/S 10(21) OF THE IT ACT, 1961. (UNDERLINED FOR EMPHASIS BY US) 5 AGAINST SUCH FACTUAL ASSERTION OF THE ASSESSING OFFICER, THE RE IS NOT EVEN AN IOTA OF COMMENT BY THE COMMISSIONER OF INCOME-TAX AS TO WHY T HE MISCELLANEOUS INCOME IS NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 10( 21) READ WITH SECTION 35(1)(II) OF THE ACT AND, THEREFORE, WE FIND NO JUSTI FIABLE REASONS TO UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME-TAX. 9. IN THE END, ON THE BASIS OF THE ABOVE DISCUSSION, WE F IND THAT THE COMMISSIONER OF INCOME-TAX WAS NOT JUSTIFIED IN LAW OR O N FACTS FOR ASSUMING JURISDICTION UNDER SECTION 263 OF THE ACT TO REVISE TH E ASSESSMENT ORDER DATED 17.12.2007. RESULTANTLY, THE IMPUGNED ORDER OF THE C OMMISSIONER OF INCOME-TAX IS SET ASIDE AND THAT OF THE ASSESSING OFFICER DATED 17.12 .2007 IS HEREBY RESTORED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . DECISION PRONOUNCED IN THE OPEN COURT ON THE 23 RD DAY OF DECEMBER, 2011. SD/- SD/- (I C SUDHIR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE, DATED: 23 RD DECEMBER, 2011 B COPY TO:- 1) APPELLANT 2) RESPONDENT 3) THE CIT-IV, PUNE 4) DR, B BENCH, ITAT, PUNE. 5) GUARD FILE TRUE COPY BY ORDER SR. PS, I.T.A.T., PUNE 6