NANDLAL TOLANI CHARITABLE TRUST, MUMBAI V. ACIT CEN CIR 17 & 18, MUMBAI

ITA 1110/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0441 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-03-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 07-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V K AGARWAL
• Assessee Lawyers: NEELKANTH K
• Keywords: Charitable institution; Retrospective amendment; Reassessment proceedings; Capital expenditure
• Section: 12AA; 10B; 37; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI P K BANSAL, VP & SHRI PAWAN SINGH, JM ITA NO. 200/MUM/2011 ASSESSMENT YEAR : 2005-06 ASST. CIT CENTRAL CIRCLE 17 & 28 MUMBAI VS. NANDLAL TOLANI CHARITABLE TRUST 10-A, BAKHTAWAR, NARIMAN POINT, MUMBAI 400 021 PAN : AAATN0043Q (APPELLANT) (RESPONDENT) ITA NO. 1110/MUM/2011 ASSESSMENT YEAR : 2005-06 NANDLAL TOLANI CHARITABLE TRUST MUMBAI 400 021 PAN : AAATN0043Q VS. ASST. CIT CENTRAL CIRCLE 17 & 28 MUMBAI (APPELLANT) (RESPONDENT) FOR THE REVENUE : SHRI V K AGARWAL FOR THE ASSESSEE : SHRI RAJIV KHANDELWAL & SHRI NEELKANTH KHANDELWAL DATE OF HEARING : 30 .0 5 .2017 DATE OF PRONOUNCEMENT : 31 .0 5 .2017 O R D E R PER BENCH: THE CROSS APPEALS HAVE BEEN FILED AGAINST THE ORD ER OF THE CIT(A) DATED 29.10.2010 FOR A.Y. 2005-06. ITA NO.200 & 1110/MUM/2011 NANDLAL TOLANI CHARITABLE TRUST 2 2. ITA NO. 200/MUM/2011 THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROU ND OF APPEAL: A. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT ASSESSEE TRUST HAS AP PLIED INCOME TO THE EXTENT OF RS. 1,02,00,000/- FOR CHARITABLE PURP OSES BY GIVING THESE AMOUNTS AS CORPUS DONATIONS TO ANOTHER TRUST, WHEN THERE IS NO OBLIGATION ON DONEE TRUST TO APPLY THE AMOUNT FO R CHARITABLE PURPOSES. B. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT BY GIVING CORPUS DONAT IONS OF RS. 1,02,00,0007-, ASSESSEE TRUST HAS APPLIED THIS AMOU NT FOR CHARITABLE PURPOSES IGNORING THE FACT THAT SUCH AMOUNT WILL NE VER BE APPLIED FOR CHARITABLE PURPOSES, AS DONATION GIVEN ARE CORP US DONATIONS AND HENCE NO SATISFACTION AS MENTIONED IN INSTRUCTION N O. 1582 DATED 19/10/1884 EXIST. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO T REATING THE CORPUS DONATION AMOUNTING TO ` .1,02,00,000/- GIVEN BY THE ASSESSEE TO TOLANI EDUC ATION SOCIETY AS APPLICATION OF INCOME TOWARDS OBJECTS OF THE TRUST. THE FACTS RELATING TO THIS GROUND ARE DURING THE ASSESSMENT P ROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS GIVEN DONATION TO TOLANI EDUCATION SOCIETY AMOUNTING TO ` 1,02,00,000/-, WHICH HAS BEEN CLAIMED BY THE ASSESSEE AS APPLICATION OF INCOME TOWARDS THE OBJEC TS OF THE TRUST. THE ASSESSING OFFICER WAS OF THE VIEW THAT TOLANI EDUCA TION SOCIETY AND THE ASSESSEE ARE COVERED WITHIN THE MEANING OF PROVISIO NS OF SECTION 13(3) OF THE ACT EVEN THOUGH THE TAX AUDIT REPORT IN FORM 10B C ATEGORICALLY MENTIONED THAT NO PAYMENTS WERE MADE TO THE PERSONS COVERED U /S. 13(3) OF THE I T ITA NO.200 & 1110/MUM/2011 NANDLAL TOLANI CHARITABLE TRUST 3 ACT. HOWEVER, THE ASSESSING OFFICER CAME TO THE CO NCLUSION THAT THIS DONATION WAS COVERED U/S. 13(3) OF THE I T ACT IN V IEW OF THE FACT THAT THE TRUSTEES OF THE ASSESSEE TRUST DR. NANDLAL B TOLANI IS THE CHAIRMAN/MEMBER OF THE TOLANI EDUCATION SOCIETY. THE ASSESSING OFFICE R REFERRED TO THE SECOND PROVISO TO SECTION 11(2), OF THE ACT, WHICH READS A S UNDER: PROVIDED FURTHER THAT IN RESPECT OF ANY INCOME ACC UMULATED OR SET APART ON OR AFTER THE 1 ST DAY OF APRIL, 2001, THE PROVISIONS OF THIS SUB-SECTION SHALL HAVE EFFECT AS IF FOR THE WORDS TEN YEARS AT BOTH THE PLACES WHERE THEY OCCUR, THE WORDS FIVE YEARS HAD BEEN SUBSTITUTED. EXPLANATION ANY AMOUNT CREDITED OR PAID, OUT OF I NCOME REFERRED TO IN CLAUSE (A) OR CLAUSE (B) OF SUB-SECTION (1), READ WITH THE EXPLANATION TO THAT SUB-SECTION, WHICH IS NOT APPLI ED, BUT IS ACCUMULATED OR SET APART, TO ANY TRUST OR INSTITUTI ON REGISTERED UNDER SECTION 12AA OR TO ANY FUND OR INSTITUTION OR TRUST OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION REFERRED TO IN SUB-CLAUSE (IV) OR SUB-CLAUSE (V) OR SUB-CLAUSE (VI) OR SUB-CLAUSE (VIA) OF CLAUSE (23C) OF SECTION 10, SHALL NOT BE TREATED AS APPLICATION OF INCOME FOR C HARITABLE OR RELIGIOUS PURPOSES, EITHER DURING THE PERIOD OF ACC UMULATION OR THEREAFTER. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID DONATION IS NOT ALLOWABLE U/S. 11(1)(A) AS APPLICATION OF INCOME TOWARDS THE OBJECT OF THE ASSESSEE TRUST. ACCORDINGLY, HE DINED THE CLAIM OF THE ASSE SSEE. 3. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT( A) ALLOWED THE SAID DONATION AS APPLICATION OF INCOME FOR CHARITABLE PU RPOSES U/S. 11(1)(A) BY OBSERVING AS UNDER: ITA NO.200 & 1110/MUM/2011 NANDLAL TOLANI CHARITABLE TRUST 4 5.16 I HAVE GONE THROUGH THE FACTS OF THE CASE, TH E ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT. THE APPELLANT HA;; MA DE DONATION OF RS. 1,02,00,000/- TO M/S. TOLANI EDUCAT ION SOCIETY. THE A.O. HAS CONSIDERED THESE TWO TRUSTS AS PERSONS COV ERED U/S 13(3) OF THE ACT AND IN VIEW OF THIS, THE A.O. HAS CONCLUDED THAT RS.1,02,00,000/- WAS NOT APPLIED FOR THE PURPOSES M ENTIONED IN SECTION LL(L)(A) OF THE ACT. IN THIS REGARD, THE AP PELLANT HAS FURNISHED THE DETAILED SUBMISSIONS. FROM THIS, IT IS CLEAR TH AT TOLANI EDUCATION SOCIETY WILL NOT COME UNDER THE PURVIEW OF SECTION 13(3)(A), (B), (C), (CC) AND (D) OF THE ACT. SO, ONLY CLAUSE TO BE EXAMINED IS SECTION 13(3)(E) OF THE I.T. ACT-HOWEVER, EXPLANATI ON 3 TO SECTION 13 OF THE ACT MAKES IT VERY CLEAR THAT SECTION 13(3 )(E) IS NOT APPLICABLE IN THIS CASE. 5.25 IN VIEW OF THIS, I HOLD THAT DONATIONS MADE TO TOLANI EDUCATION SOCIETY IS NOT HIT BY SECTION 13 OF THE I.T. ACT. I DIRECT THE A.O. TO TREAT THE DONATION OF RS.1,02,00,000/- AS APPLICATI ON OF INCOME FOR CHARITABLE PURPOSES U/S 11(1)(A) 4. THE LEARNED AR DREW OUR ATTENTION TOWARDS THE OR DER OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS.6970 & 199/MUM/2011 & ITA NO. 1111/MUM/2011 FOR ASSESSMENT YEAR 2004-05 AND CONTE NDED THAT THE ISSUE INVOLVED IS DULY COVERED IN FAVOUR OF THE ASSESSEE. HE ALSO ON THE QUERY FROM THE BENCH SUBMITTED THAT THE SAID DONATION HAS BEEN GIVEN BY THE ASSESSEE OUT OF CURRENT INCOME. 5. THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE ASSESSING OFFICER. 6. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULL Y CONSIDERED THE MATERIAL AVAILABLE ON RECORD. WE NOTED THAT SIMILA R ISSUE IN RESPECT OF DONATION BEING PAID BY THE ASSESSEE TRUST TO TOLANI EDUCATION TRUST WAS ITA NO.200 & 1110/MUM/2011 NANDLAL TOLANI CHARITABLE TRUST 5 DECIDED BY THIS TRIBUNAL IN FAVOUR OF THE ASSESSEE, VIDE ORDER DATED 30.09.2013 IN ITA NOS.6970 & 199/MUM/2011 & ITA NO. 1111/MUM/2011 FOR ASSESSMENT YEAR 2004-05, WHEREIN IT HAS BEEN HELD A S UNDER: 3.3 WE MAY NEXT CONSIDER THE ADD-BACK OF THE DONATI ONS FOR RS. 24 LACS AND RS. 36 LACS, FORMING PART OF THE TOTAL SUM OF RS. 60 LACS PAID BY THE ASSESSE TO TEF, A CHARITABLE INSTITUTIO N UNDER THE SAME MANAGEMENT, DURING THE RELEVANT YEAR, BY THE REVENU E IN THE ASSESSMENT AND REASSESSMENT PROCEEDINGS RESPECTIVEL Y. THE BASIS OF THE REVENUES DISALLOWANCE QUA THESE S UMS, PAYMENT DETAILS OF WHICH STAND LISTED AT PARA 2 / PAGE 4 OF THIS ORDER, ARE AS: (A)THE SAME ARE TOWARD CORPUS DONATIONS TO THE DONE -FUND, I.E., PER THE RECEIPTS ISSUED THEIR RESPECT. AS SUCH, IT IS O NLY THE INCOME THERE-FROM, AND NOT THE SAID FUNDS, WHICH ARE LIABL E TO BE SPENT FOR THE OBJECTS OF THERECIPIENT, SO THAT THE SAME WOULD NOT QUALIFY AS TOWARD APPLICATION OF INCOME U/S. 11(1)(A); (B) NO EXPLANATION TOWARD THE SAME AS BEING FOR SCH OLARSHIP AND REIMBURSEMENT OF CAPITAL EXPENDITURE, AS CLAIMED DU RING THE REASSESSMENT PROCEEDINGS, STOOD FURNISHED IN THE AS SESSMENT PROCEEDINGS, SO THAT THE SAME IS ONLY AN AFTER-THOU GHT. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE MATT ER. FIRSTLY, THERE IS NO CASE OF ANY ROUND TRIPPING INASMUCH AS, ADMIT TEDLY VIDE ORDER U/S. 154 DATED 12/3/2007 ASSESSING THE INCOME AT RS. 8,94,470/-, NO DONATION HAS BEEN RECEIVED FROM TEF, SO THAT THERE ARE NO CROSS DONATIONS. ALSO, THERE IS NO QUESTION OF CONSIDERING THE RENT OF RS. 60 LACS RECEIVED FROM TEF AS A DONATION , AND NEITHER IS IT THE REVENUES CASE OF THE RENT ARRANGEMENT BEING NOT GENUINE. TWO, THE EXPLANATION TO S. 11(2), EVEN AS CLARIFIED BY THE NOTES TO CLAUSES INTRODUCING THE RELEVANT BILL, IS ONLY IN R ESPECT OF SUMS ACCUMULATED OR SET APART FOR APPLICATION, AND NOT S UMS APPLIED FOR CHARITABLE PURPOSES DURING THE RELEVANT YEAR, INCLU DING BY WAY OF DONATION TO ANY OTHER CHARITABLE TRUST WITH SIMILAR OBJECTS; THE RELEVANT PART OF THE SAID NOTE READING AS UNDER: ...... THUS, THE PAYMENT TO THE OTHER TRUST OR INSTITUTION OUT OF INCOME FROM PROPERTY HELD UNDER TRUST IN THE YEAR OF RECEI PT WILL CONTINUE TO ITA NO.200 & 1110/MUM/2011 NANDLAL TOLANI CHARITABLE TRUST 6 BE TREATED AS AN APPLICATION OF INCOME. HOWEVER, AN Y SUCH PAYMENT OUT OF THE ACCUMULATED INCOME SHALL NOT BE TREATED AS AN APPLICATION OF INCOME, AND SHALL BE TAXED ACCORDING LY. IN FACT, CONSEQUENTIAL AMENDMENTS STAND ALSO MADE T O THE ACT BY WAY OF INSERTION OF CLAUSE (D) TO S. 11(3) AND PROV ISO TO S. 11(3A), ALL TO THE SAME EFFECT AND PURPORT. THE SAID PROVIS ION/S WOULD HAVE NO APPLICATION IN THE INSTANT CASE AS, WITHOUT DOUB T, EACH OF THE THREE SUMS COMPRISING THE TOTAL AMOUNT OF RS. 60 LA CS PAID BY THE ASSESSE TO TEF STAND PAID DURING THE RELEVANT YEAR. WE MAY NOW DISCUSS EACH OF THE THREE SUMS SEPARATELY. THE SUM OF RS. 24 LACS IS ADMITTEDLY A CORPUS DONAT ION (ALSO REFER LEDGER ACCOUNTS IN THE BOOKS OF THE DONOR AND THE D ONEE PAGES 24, 26 / PB 2). THE LAW IN THE MATTER IS BY NOW WEL L SETTLED, SO THAT DONATION BY ONE CHARITABLE TRUST TO ANOTHER WOULD E NTITLE THE DONOR FUND TO CLAIM EXEMPTION QUA APPLICATION OF INCOME U /S. 11(1). AS POINTED OUT BY THE HONBLE COURT IN SARLADEVI SARAB HAI TRUST (NO. 2) (SUPRA), IT WOULD MAKE NO DIFFERENCE IF THE DONATIO N IS TOWARD THE CORPUS OF THE DONEE-FUND, SO THAT IT IS ONLY THE IN COME THEREFROM, AND NOT THE DONATION SUM ITSELF, THAT IS LIABLE TO BE SPENT FOR OR UTILIZED FOR THE CHARITABLE PURPOSES OF THE RECIPIE NT. THE WORD APPLICATION HAS A WIDER CONNOTATION THAN THE WORD SPENT, SO THAT AN APPLICATION OF INCOME OF THE DONOR TRUST COULD N OT BE DENIED. AGAIN, THE CORPUS FUND MAY NOT NECESSARILY BE INVESTED IN SPECIFIED SECURITIES BUT COULD ALSO BE TOWARD CAPITAL EXPENDI TURE, WHICH AGAIN QUALIFIES AS AN APPLICATION OF INCOME. THE OBJECTIO N, THUS, RAISED BY THE REVENUE IS NOT MAINTAINABLE. COMING TO THE DONATIONS FOR RS. 36 LACS; THE SAME H AVE BEEN EXPLAINED AS: - RS. 20.80 LACS TOWARD SCHOLARSHIP TO STUDENTS MARIN E ENGG. OF TEF - RS. 15.20 LACS AS REIMBURSEMENT OF CAPITAL EXPENDIT URE OUR FIRST OBSERVATION IS THAT THE REVENUE HAVING AC CEPTED THE DONATION OF RS. 24 LACS, COMPRISED IN THE SUM OF RS . 30 LACS PAID VIDE CHEQUE NO. 30771 DTD. 21/11/2003 (SUPRA), AS A CORPUS DONATION, IT CANNOT RETRACT TO DENY THE SAME TREATM ENT TO THE BALANCE RS. 6 LACS OF THE SAID CHEQUE, OR THE AMOUN TS SIMILARLY DONATED VIDE THE OTHER TWO CHEQUES SUPRA. IN FACT, THE SUMS STAND OSTENSIBLY DEBITED AND REFLECTED IN THE ASSESSEES ACCOUNTS, INCLUDING THE INCOME & EXPENDITURE ACCOUNT, FORMING PART OF ITS ITA NO.200 & 1110/MUM/2011 NANDLAL TOLANI CHARITABLE TRUST 7 RETURN OF INCOME (PGS. 37 43/ PB 1), SO THAT THER E IS NO QUESTION OF NOT RECOGNIZING THE SAME AS SUCH. COMING TO THE SPECIFICS, THE AMOUNT OF RS. 20.80 LA CS IS PAID TO TEF FOR THE SCHOLARSHIP TO STUDENTS OF TOLANI MARITIME INSTITUTE, BEING RUN BY IT, I.E., THE PAYEE-TRUST. THE SAME IS CLEAR LY AN APPLICATION OF INCOME TO THAT EXTENT AND, IN FACT, STANDS REFLECTE D IN THE INCOME & EXPENDITURE ACCOUNT ITSELF (PGS. 23, 25/PB 2 & PG. 39/PB 1). NO DOUBT, AS IT APPEARS, THE DONATION IS NOT TO SET UP ANY SCHOLARSHIP FUND, BUT FOR SCHOLARSHIP TO BE GRANTED TO THE IND IVIDUAL STUDENTS, FORMING PART OF THE REGULAR EXPENDITURE OF THE DONE -TRUST AND, AS SUCH, NOT A CORPUS DONATION, AS STATED IN THE RELEV ANT RECEIPT. HOWEVER, THIS WOULD NOT MATERIALLY IMPACT; RATHER, ONLY ENHANCES THE ASSESSEES CASE INASMUCH AS ONE OF THE REVENUE S OBJECTIONS WAS OF THE SAME BEING TOWARD THE CORPUS OF THE DONE E. THE SAME WOULD, THEREFORE, WITHOUT DOUBT, QUALIFY FOR EXEMPT ION U/S. 11(1)(A). AS REGARDS THE AMOUNT OF RS. 15.20 LACS, THE SAME I S AGAIN BY WAY OF CORPUS DONATION TOWARD FUNDING THE CAPITAL EXPEN DITURE OF TEF ON CONSTRUCTION OF EXECUTIVE RESIDENCY AND HOSTEL B UILDING. THERE IS NO QUESTION OF TEF HAVING SPENT THE MONEY ON ASSESS EES BEHALF, SINCE REIMBURSED BY THE ASSESSEE, WHICH WOULD BE SO WHERE THE BUILDINGS UNDER REFERENCE EITHER BELONG TO THE ASSE SSEE OR ARE BEING CONSTRUCTED BY IT. AS SUCH, AS FAR AS THE ASS ESSE-TRUST IS CONCERNED, IT IS DONATION TO ANOTHER TRUST AND, THU S, ONLY AN APPLICATION OF INCOME (REFER PGS. 22, 23 & 27/PB2). SO, HOWEVER, WE ARE UNABLE TO FIND ANY REFLECTION OF THE SAME IN THE ASSESSEES ANNUAL ACCOUNTS (PGS. 37 43/PB 1), INCLUDING THE INCOME AND EXPENDITURE ACCOUNT (PG. 39), SHOWING THE SOURCES A ND APPLICATION OF, INCLUDING THE EXPENDITURE INCURRED ON ADMINISTR ATION OR OTHERWISE FOR GENERATING, THE REVENUE. THE ASSESSEE S CLAIM, THEREFORE, THOUGH ACCEPTABLE IN PRINCIPLE, WOULD BE REQUIRED TO BE SHOWN WITH REFERENCE TO ITS ACCOUNTS. THE AO SHALL VERIFY THE INCURRING OF THE SAID PAYMENT WITH REFERENCE TO THE ASSESSEES ACCOUNTS, AND SUBJECT TO HIS RETURNING A POSITIVE F INDING IN ITS RESPECT, WE CONFIRM THE TREATMENT OF THE SAID SUM A S TOWARD APPLICATION OF INCOME. WE DECIDE ACCORDINGLY. ITA NO.200 & 1110/MUM/2011 NANDLAL TOLANI CHARITABLE TRUST 8 NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE. RE SPECTFULLY FOLLOWING THE SAID DECISION, OF THE TRIBUNAL, WE DISMISS THE GROU ND TAKEN BY THE REVENUE. 7. ITA NO.1110/MUM/2011 IN THIS APPEAL, THE ASSESSEE HAS TAKEN AS MANY AS FIVE GROUNDS OF APPEAL, BUT THE ONLY ISSUE PERTAINS TO THE DISALLOW ANCE OF CLAIM OF STANDARD DEDUCTION ON RENTAL INCOME @30% U/S. 24(A) OF THE I T ACT. 8. WE HAVE HEARD THE RIVAL PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. ON A PERUSAL OF THE TRIBUNAL ORDER DATED 30.09.2013 IN ITA NOS.6970 & 199/MUM/2011 & ITA NO. 1111/MUM/2011 FOR ASSESSMENT YEAR 2004-05, WE FIND THAT ON IDENTICAL ISSUE HAS B EEN DECIDED AGAINST THE ASSESSEE BY OBSERVING AS UNDER: 3.2 THE FIRST ISSUE ARISING IN THE INSTANT APPEALS IS THE VALIDITY IN LAW OF THE ASSESSEES CLAIM TOWARD REPAIRS AND MAIN TENANCE U/S. 24 OF THE ACT IN COMPUTING THE INCOME FROM HOUSE PROP ERTY LET OUT BY THE ASSESSE, AND TOWARD WHICH IT HAS (SU BSEQUENTLY) RAISED A SINGLE, PRECISE GROUND. THE CLAIM IS, BY ALL COUNTS, WITHOUT MERIT. THIS IS FOR THE SIMPLE REASON THAT THE IN COME OF A CHARITABLE TRUST OR INSTITUTION, SUBJECT TO I TS APPLICATION FOR CHARITABLE PURPOSES, FOR WHICH IT HAS BEEN IN FACT FORMED (PER ITS CONSTITUTING CHARTER) IS EXEMPT FROM TAX UNDER CHAP TER III (SS.10 TO 13B) OFTHE ACT. THE SAID INCOME DOES NOT FORM PART OF THE TOTAL INCOME OF THE ENTITY TO WHICH IT ARISES OR ACCRUES OR IS RECEIVED BY. IT IS ONLY THE INCOME FORMING PART OF THE TOTAL INC OME U/S.2(45) OF THE ACT, WHICH IS TO BE CLASSIFIED UNDER THE VARIOU S HEADS OF THE INCOME U/S.14 AND, ACCORDINGLY, SUBJECT TO THE COMP UTATION PROVISIONS OF CHAPTER IV (SS. 14 TO 59)OF THE ACT. THE EXPENDITURE INCURRED IN EARNING THE SAME IS, LIKEWISE, AND ONLY UNDERSTANDABLY, NOT TO BE TAKEN INTO ACCOUNT IN COMPUTING THE TOTAL INCOME UNDER ITA NO.200 & 1110/MUM/2011 NANDLAL TOLANI CHARITABLE TRUST 9 THE ACT, WHICH REPRESENTS TRITE LAW, AND TOWARD WHI CH A SEPARATE SECTION (SEC. 14A) HAS SINCE BEEN INSERTED BY FINANCE ACT, 2001 WITH RETROSPECTIVE EFFECT FROM 01.04.1962. THIS ASPECT STANDS ABUNDANTLY CLARIFIED BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. HARPRASAD & CO. (P.) LTD. [1975] 99 IT R 118 (SC), EXPLAINING THAT AN INCOME TO COME WITHIN ITS PURVI EW MUST SATISFY THE DEFINITION OF TOTAL INCOME U/S. 2(15) (OF THE I NCOME-TAX ACT, 1922, WHICH IS PARA MATERIAL WITH SECTION 2(45) OF THE ACT), PRESCRIBING TWO CONDITIONS. FIRSTLY, IT MUST COMPRI SE THE TOTAL AMOUNT OF INCOME, PROFITS AND GAINS REFERRED TO IN SECTION4(1) AND, TWO, MUST BE COMPUTED IN THE MANNER LAID DOWN UNDE R THE ACT. THE CAPITAL GAIN BEING NOT CHARGEABLE U/S.12B OF T HE 1922 ACT DURING THE RELEVANT PERIOD, THE SAME WOULD NO T ENTER THE COMPUTATION MECHANISM OF THE TOTAL INCOME. THIS IS AS THE CAPITAL GAIN OR LOSS (WHICH IS ONLY NEGATIVE INCOME) DID NO T FORM PART OF THE TOTAL INCOME OF THE ASSESSEE WHICH COULD BE BROUGHT TO CHARGE, SO THAT IT WAS NOT REQUIRED TO BE COMPUTED. REFERENCE IN THIS CONTEXT MAY ALSO BE MADE TO THE FOLLOWING OBSERVATION BY TH E TRIBUNAL IN THE CASE OF PRAVIN SHAH TRUST VS. DY. CIT(IN ITA NO . 4782/MUM/2010 DATED 05.07.2013): 3.3 . THAT IS, AN INCOME EXEMPT U/C. III OF THE ACT, NOT FORMING PART OF THE TOTAL INCOME, WOULD NOT ENTER THE COMPU TATION PROCESS TO DETERMINE THE QUANTUM OF INCOME UNDER THE RELEVA NT HEAD OF INCOME, EACH OF WHICH HAS ITS OWN COMPUTATION PROVI SIONS. TO THE SAME EFFECT AND PURPORT ARE ITS OBSERVATIONS IN THE CASE OF LKP SECURITIES LTD.(IN ITA NOS. 638 & 1093/MUM/2012 DATED 17.05.2013): `14 . THE INCOME (AND LOSS, WHICH IS ONLY NEGATIVE INCOME) FALLING UNDER CHAPTER III OF THE ACT AND, THUS, EXEMPT FROM THE LEVY OF THE TAX, WOULD NOT FOR M PART OF THE COMPUTATION OF THE INCOME UNDER CHAPTER IV OF THE A CT. THAT IN FACT IS A FUNDAMENTAL PREMISE; THE BASIS OF SEC. 14 A OF THE ACT. THE REVENUES CASE IN THIS REGARD IS UNEXCEPTIONA L, AND WE CONFIRM THE SAME. ITA NO.200 & 1110/MUM/2011 NANDLAL TOLANI CHARITABLE TRUST 10 IN BOTH THE DECISIONS, THE TRIBUNAL RELIED ON THE D ECISION IN THE CASE OF HARPRASAD & CO. (P.) LTD. (SUPRA). THE RELI ANCE BY THE LD. CIT(A) ON THE CIRCULAR ISSUED BY THE BOARD ( NO.5P(LXX6) DATED 19.06.1968), EXPLAINING THE POSITION IN THE MATTER, IS ALSO APPOSITE. IT STANDS EXPLAINED THAT ONLY THE INCOME AS REFLECT ED IN THE ACCOUNTS OF THE TRUST/INSTITUTION THAT IS TO BE APP LIED OR DEEMED TO HAVE BEEN APPLIED FOR CHARITABLE PURPOSES, AND WHIC H, THEREFORE, HAS TO BE COMPUTED IN THE COMMERCIAL SENSE. THE SAI D CIRCULAR HAS BEEN FOUND BY THE HONBLE COURTS OF LAW AS R EPRESENTING THE CORRECT INTERPRETATION OF THE RELEVANT PROVISIO NS AND THE REQUIREMENT OF THE LAW, AS IN THE CASE OF CIT VS. PROGRAMME FOR COMMUNITY ORGANISATION [1997] 228 IT R 620 (KER), SINCE APPROVED BY THE APEX COURT (REPORTED AT [2001 ] 248 ITR 1 (SC)), TO WHICH (LATTER) DECISION REFERENCE STANDS ALSO MADE BY THE LD. CIT(A). THIS ASPECT OF THE MATTER, I.E.,THE MAN NER OF COMPUTATION OF INCOME OF A CHARITABLE OR RELIGIOUS TRUST/INSTITUTION WHICH HAS TO BE APPLIED FOR THE SAID PURPOSES, HAS BEEN A SUBJECT MATTER OF A NUMBER OF DECISIONS, AS BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (IBPS) [2003] 264 ITR 110 (BOM ). THIS IS EVEN OTHERWISE PATENT INASMUCH AS A TRUST COULD ONLY APP LY THE INCOME AS AVAILABLE WITH IT, I.E., AS ARRIVED AT F OLLOWING THE ACCEPTED PRINCIPLES OF COMMERCIAL ACCOUNTING. THE COMPUTATI ON PROVISIONS OF THE ACT DO NOT COME INTO PLAY, SO THAT THE SAID COM PUTATION OF THE INCOME WOULD BE DE HORSTHE SAME. THIS WOULD OF COU RSE BE SUBJECT TO THE SPECIFIC PROVISIONS OF THE ACT, SO THAT WHER E SPECIFICALLY PROVIDED FOR, THE INCOME WOULD BE COMPUTED IN THE MANNER SO PROVIDED; FOR EXAMPLE SS. 11(4) AND 11(4A) SPECIFICALLY PROVIDE FOR THE COMPUTATION OF INCOME OF A BUSINESS UNDERTAKING FORMING PART OF THE PROPERTY HELD UNDER TRUST BY A CHARITABLE TRUST/INSTITUTION IN ACCORDANCE WIT H THE PROVISIONS OF THE ACT, EVEN AS POINTED OUT BY THE HONBLE COURT IN RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES (SUPRA). THE SPECIAL BENCH OF THE TRIBUNAL IN SCIENTIFIC ATLANTA INDIA TECHN OLOGY (P.) LTD. VS. ACIT [2010] 2 ITR 66 (TRIB) (CHENNAI) (SB) HELD THA T THE PROFITS OF A UNIT ELIGIBLE FOR DEDUCTION U/S.10A OF THE ACT, I .E., TO THE EXTENT ITA NO.200 & 1110/MUM/2011 NANDLAL TOLANI CHARITABLE TRUST 11 NOT COVERED BY THE DEDUCTION THERE-UNDER, WOU LD STAND TO BE TAXED DIRECTLY AND NOT ENTER THE COMPUTATION MECHAN ISM INASMUCH AS THE SAME DO NOT FORM PART OF THE GROSS TOTAL INC OME, AS SECTION 10A FALLS UNDER CHAPTER III OF THE ACT, SO THAT THE PROVISIONS OF CHAPTER VI-A AND, CONSEQUENTLY, S. 80AB WOULD NOT B E APPLICABLE THERETO. BEFORE PARTING WITH THE MATTER, WE MAY ALSO ADD THAT THE ASSESSEE HAS BEEN ALLOWED ALL THE EXPENDITURE ON REPAIRS AND MAINTENANCE AS DEBITED IN ITS ACCOUNTS, I.E., ON AC TUAL BASIS (RS. 11.97 LACS/PB 1 PG. 39), EVEN AS DIRECTED BY THE L D. CIT(A), AND WHICH FACT WAS ALSO CLARIFIED BY US DURING HEARING. ACCORDINGLY, THE ASSESSEES GROUND/S FOR THE CLAIM OF THE STANDARD D EDUCTION U/S.24 FAIL. WE DECIDE ACCORDINGLY. FINALLY, THE RELIANCE BY THE ASSESSEE ON THE DECISI ON IN THE CASE OF IAC, MUMBAI VS. SAURASHTRA TRUST [2007] 106 ITD 1 (MUM) (SB) IS, UNDER THE CIRCUMSTANCES, MISPLACED. THE SAID DECISI ON IS, FIRSTLY, SANSANY REFERENCE TO ANY PRECEDENTS; NAY, EVEN WIT HOUT A DISCUSSION OF THE LAW IN THE MATTER. THIS ASPECT WO ULD IN FACT BECOME CLEAR IN VIEW OF THE QUESTIONS REFERRED TO A ND ANSWERED BY THE TRIBUNAL. AS A READING OF ITS ORDER WOULD SHOW (REFER PARA 1), THE SAME ARE NOT DIRECTLY CONNECTED WITH THE ISSUE BEFORE US. THE SAID DECISION, THUS, WOULD BE OF NO ASSISTANCE TO THE ASSESSEE, WITH WE HAVING EVEN OTHERWISE DECIDED THE MATTER FO LLOWING THE BINDING PRECEDENTSIN THE MATTER, SO THAT THE DECISI ON IN THE CASE OF BANK OF BARODA V. H.C. SHRIVASTAVA[2002] 256 ITR 38 5 (BOM), ADVOCATING JUDICIAL DISCIPLINE WITH REFERENCE T O THE DECISION BY THE APEX COURT IN CCE V. DUNLOP INDIA LTD. AIR 1985 SC 330, ONLY SUPPORTS THE SAME. THE DECISION IN THE CASE OF AL AMEEN EDUCATIONAL SOCIETY V. DIT (EXEMPTION) ( IN ITA NO. 575/BANG./2011 DATED 28/9/2012, ALSO AT [2012] 26 T AXMANN.COM 250 (BANG.)) IS AGAIN ONLY IN RESPECT OF THE SPECIF IC PROVISION OF SEC. 11(1A) OF THE ACT, I.E., QUA CAPITAL GA IN, AND, THUS, NOT APPLICABLE. WE HAVE ALREADY CLARIFIED THAT OU R DECISION IS BASED ON AND REPRESENTS THE GENERAL POSITION OF LAW, SO THAT IT WOULD BE SUBJECT TO THE SPECIFIC PROVISIONS OF THE ACT, GIVING ITA NO.200 & 1110/MUM/2011 NANDLAL TOLANI CHARITABLE TRUST 12 EXAMPLE OF SS. 11(4) AND 11(4A). IT MAY BE RELEVANT TO STATE THAT THE DECISION BY THE APEX COURT IN HARPRASAD & CO. ( P.) LTD. (SUPRA), REFERRED TO EARLIER, IS ALSO IN RESPECT OF CAPITAL GAINS. 9. NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE B Y THE LEARNED AR. IN VIEW OF THIS FACT, WE CONFIRM THE ORDER OF THE CIT( A) DISALLOWING THE CLAIM OF THE ASSESSEE U/S. 24(A) OF THE ACT. THUS, THE GROU ND TAKEN BY THE ASSESS FAILS. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE AS WELL AS THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DAY OF MAY, 2017. SD/- SD/- (PAWAN SINGH) (P K BANSAL) JUDICIAL MEMBER VICE-PRESIDENT MUMBAI; DATED: 31 ST MAY, 2017 SA COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, B BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI