ACIT, CHENNAI V. Shri G.Ramaswamy, CHENNAI

ITA 1120/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64533 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-11-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 21-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: S SRIDHAR
• Keywords: Business income; Charitable institution; Cost of acquisition
• Section: 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NOS. 1120, 1121 & 1122/MDS/2012 ASSESSMENT YEARS; 2000-01, 2001-02 & 2005-06 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE IX, CHENNAI - 600 006. (APPELLANT) V. SHRI G. RAMASWAMY, PROP. SUGUNA INDUSTRIES, 160, LINGHI CHETTY STREET, CHENNAI - 600 001. PAN : AADPR2883D (RESPONDENT) APPELLANT BY : SHRI ANIRUDH RAI, CIT-DR RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE DATE OF HEARING : 01.11.2012 DATE OF PRONOUNCEMENT : 08.11.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE REVENUE, DIRECTED A GAINST ORDERS DATED 9.2.2012 OF COMMISSIONER OF INCOME TAX (APPEA LS)-IX, CHENNAI, FOR IMPUGNED ASSESSMENT YEARS. 2. FACTS APROPOS ARE THAT ASSESSEE, ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING MOTORS AND PUMPS, WAS COL LECTING 1% OF THE INVOICE PRICE FOR CHARITY WHILE SELLING HIS PRODUCT S TO ITS DISTRIBUTORS AND 2 I.T.A. NOS. 1120 TO 1122/MDS/12 DEALERS. COLLECTION OF CHARITY AT THE RATE OF 1% O F INVOICE PRICE WAS SEPARATELY SHOWN IN THE BILLS ISSUED TO THE DISTRIB UTORS AND DEALERS. THE SAID AMOUNT WAS NOT ADMITTED AS PART OF THE SALES B Y THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT. AS PER THE ASSESSEE, SU CH CHARITY COLLECTIONS WERE MADE ON BEHALF OF ONE SUGUNA CHARITABLE TRUST, COIMBATORE, FOR WHICH SEPARATE ACCOUNT WAS MAINTAINED. IT WAS PLEA DED THAT ASSESSEE WAS UNDER OBLIGATION TO SPEND SUCH MONEY ONLY FOR T HE CHARITY FOR WHICH SUCH MONEY WAS GIVEN BY THE DISTRIBUTORS AND DEALER S. RELYING ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V . BIJLI COTTON MILLS (P) LTD. (116 ITR 60), ASSESSEE ARGUED THAT THE AMOUNT COULD NOT BE CONSIDERED AS PART OF HIS INCOME AT ALL. AS PER TH E ASSESSEE, THERE WAS AN OVERRIDING TITLE FOR CHARITY, NAMELY, SUGUNA CHA RITABLE TRUST, ON SUCH AMOUNTS. ASSESSING OFFICER NOTED THAT FOR ASSESSME NT YEAR 2003-04, CLAIM OF THE ASSESSEE THAT SUCH AMOUNTS COULD NOT B E CONSIDERED AS TRADING RECEIPTS, WAS NOT ACCEPTED AND ADDITIONS WE RE MADE. ACCORDING TO HIM, PURCHASERS OF THE GOODS HAD NEVER ANY INTEN TION TO PAY AMOUNTS TOWARDS CHARITY, BUT ON THE OTHER HAND, MONEY PAID TO ASSESSEE WERE PART OF SALE CONSIDERATION. HENCE, HE HELD THAT TH E AMOUNT SHOWN BY THE ASSESSEE AS COLLECTED FOR CHARITY COULD NOT BE EXCL UDED AND ADDITIONS WERE MADE FOR ALL THE YEARS. 3. ASSESSEE MOVED IN APPEAL BEFORE THE CIT(APPEALS) . ONCE AGAIN, RELYING ON THE DECISION OF HONBLE APEX COURT IN TH E CASE OF BIJLI COTTON 3 I.T.A. NOS. 1120 TO 1122/MDS/12 MILLS (P) LTD. (SUPRA), ASSESSEE SUBMITTED THAT M/S SUGUNA CHARITABLE TRUST WAS A SEPARATE ENTITY AND ALL THE COLLECTIONS MADE ON THEIR BEHALF, WERE HANDED OVER TO THE SAID TRUST. SUCH COLLECTIO NS WERE NEVER PART OF THE BUSINESS INCOME OR ANY INCOME OF THE ASSESSEE. THAT THE AMOUNTS WERE HANDED OVER TO SUGUNA CHARITABLE TRUST, WAS NE VER DISPUTED BY THE ASSESSING OFFICER. CIT(APPEALS) WAS APPRECIATI VE OF THIS CONTENTION. ACCORDING TO HIM, THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF HONBLE APEX COURT IN THE CASE OF BIJLI COTTON MILL S (P) LTD. (SUPRA). HE, THEREFORE, DELETED THE ADDITIONS MADE FOR ALL THE Y EARS. 4. NOW BEFORE US, LEARNED D.R. STRONGLY ASSAILING T HE ORDERS OF CIT(APPEALS), SUBMITTED THAT SIMILAR ADDITION MADE BY THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2003-04, WHICH WAS QUAS HED BY THE CIT(APPEALS) ON ASSESSEES APPEAL, WAS REINSTATED B Y THE TRIBUNAL IN FURTHER APPEAL FILED BY THE REVENUE. ACCORDING TO HIM, THIS TRIBUNAL IN I.T.A. NO. 179/MDS/2007, VIDE ITS ORDER DATED 3 RD APRIL, 2008, HAD HELD THAT THE CASE OF THE ASSESSEE WAS DISTINGUISHABLE F ROM THE FACTS AVAILABLE IN THE CASE OF BIJLI COTTON MILLS (P) LTD . (SUPRA). ACCORDING TO HIM, IN ASSESSEES CASE, THE DISTRIBUTORS AND DEALE RS, WHO HAD PURCHASED THE PUMPS FROM THE ASSESSEE, PAID THE AMO UNTS ONLY AS PART OF THE PURCHASE CONSIDERATION AND THEY HAD NO INTEN TION TO PAY ANY AMOUNT AS CHARITY TO THE ASSESSEE. SUCH PERSONS HA D ALSO ACCOUNTED THESE AMOUNTS AS PART OF THEIR PURCHASE COST. THER EFORE, THE CLAIM OF 4 I.T.A. NOS. 1120 TO 1122/MDS/12 THE ASSESSEE THAT IT WAS NOT A TRADING RECEIPT, COU LD NOT BE ACCEPTED. ACCORDING TO HIM, IN THE CASE OF BIJLI COTTON MILLS (P) LTD. (SUPRA), HONBLE APEX COURT HAD GIVEN A FINDING THAT THE CUSTOMERS O R BROKERS, WHO HAD PURCHASED THE ITEMS, HAD MADE THE PAYMENTS BY EARMA RKING THEM FOR DHARMADA. HERE, ON THE OTHER HAND, THIS WAS NOT ANY DHARMADA GIVEN BY THE DISTRIBUTORS OR DEALERS. IT WAS ONLY AN APP LICATION OF INCOME RECEIVED AS PART OF ITS TRADING RECEIPT. THEREFORE, ACCORDING TO HIM, THE TRIBUNAL ORDER FOR ASSESSMENT YEAR 2003-04, MENTION ED SUPRA, HAD TO BE FOLLOWED. 5. PER CONTRA, LEARNED A.R. SUBMITTED THAT THE ORDE R OF THE TRIBUNAL IN I.T.A. NO. 179/MDS/2007 STOOD RECALLED IN A MISCELL ANEOUS PETITION FILED BY THE ASSESSEE. ACCORDING TO HIM, THE SAID ORDER WAS PASSED BY THE TRIBUNAL REJECTING THE ADJOURNMENT PETITION FILED B Y THE AUTHORIZED REPRESENTATIVE. FOR THIS REASON, THE SAID ORDER ST OOD RECALLED BY THIS TRIBUNAL. THEREFORE, ACCORDING TO HIM, NO RELIANCE COULD BE PLACED ON SUCH ORDER. ON MERITS, LEARNED A.R. SUBMITTED THAT WHOLE OF THE MONEY RECEIVED ON BEHALF OF SUGUNA CHARITABLE TRUST WAS H ANDED OVER TO THE SAID TRUST WHICH WAS HAVING REGISTRATION UNDER SECT ION 12AA OF INCOME- TAX ACT, 1961 (IN SHORT 'THE ACT'). THERE IS NOTHI NG ON RECORD TO SHOW THAT THE DISTRIBUTORS OR DEALERS, WHO HAD PURCHASED PUMP S FROM THE ASSESSEE, HAD PAID THE MONEY AS PART OF PURCHASE PR ICE AND NOT WITH ANY INTENTION OF MAKING CONTRIBUTION OF CHARITY TO SUGUNA CHARITABLE 5 I.T.A. NOS. 1120 TO 1122/MDS/12 TRUST. ACCORDING TO HIM, THESE WERE ALL PRESUMPTIO NS AND SURMISES BY THE REVENUE. ON THE OTHER HAND, ACCORDING TO HIM, DECISION OF HONBLE APEX COURT IN THE CASE OF BIJLI COTTON MILLS (P) LT D. (SUPRA) WAS CLEARLY APPLICABLE. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. RELIANCE HAS BEEN STRONGLY PLACED BY THE REVENUE ON THE DECISION OF THE TRIBUNAL IN I.T.A. NO. 179/MDS/2007 FOR ASSESSM ENT YEAR 2003-04. LEARNED A.R. HAS MADE A STATEMENT AT BAR THAT THE S AID ORDER OF THE TRIBUNAL HAS BEEN RECALLED AND RE-FIXED FOR HEARING AFRESH. THIS POSITION HAS NOT BEEN DISPUTED BY THE REVENUE. THIS BEING T HE CASE, WE ARE OF THE OPINION THAT NO RELIANCE CAN BE PLACED ON SUCH ORDER WHILE DECIDING THE PRESENT APPEALS. 7. COMING TO MERITS OF THE CASE, IT IS NOT DISPUTED THAT ASSESSEE HAS SEPARATELY SHOWN IN THE INVOICES RAISED BY IT ON IT S CUSTOMERS, WHO WERE DEALERS AND DISTRIBUTORS, THAT 1% WAS FOR CHARITY. SO, TO TAKE A PRESUMPTION THAT THE CUSTOMERS, WHO HAD PURCHASED P UMPS FROM THE ASSESSEE, WOULD NOT HAVE HAD THE INTENTION OF GIVIN G SUCH AMOUNT FOR CHARITY, IN OUR OPINION, IS NOT APPROPRIATE UNLESS EVIDENCE WAS BROUGHT IN SUPPORT. ARGUMENT OF THE REVENUE THAT THE AMOUNTS PAID BY THEM TO THE EXTENT OF 1%, SPECIFICALLY EARMARKED FOR CHARITY IN THE INVOICES RAISED ON THEM WAS PAID BY THEM ONLY AS A PART OF PURCHASE CO NSIDERATION AND NOT 6 I.T.A. NOS. 1120 TO 1122/MDS/12 AS CHARITY, CANNOT BE ACCEPTED UNLESS IT WAS SUPPOR TED BY CREDIBLE EVIDENCE. SINCE ASSESSEE HAD RAISED INVOICES SEPAR ATELY SHOWING 1% AMOUNT FOR CHARITY, NAMELY, SUGUNA CHARITABLE TRUST , THE PRESUMPTION GOES THAT THE PAYMENTS MADE BY THE CONCERNED DISTRI BUTORS AND DEALERS WERE ALSO ONLY FOR THIS PURPOSE. NO RECORD HAS BEE N PRODUCED BY THE REVENUE TO SHOW THAT THE INTENTION OF THE DISTRIBUT ORS OR DEALERS WAS DIFFERENT. IT IS ALSO NOT DISPUTED THAT THE WHOLE OF THE AMOUNTS WHICH WERE COLLECTED BY THE ASSESSEE, WAS HANDED OVER TO M/S SUGUNA CHARITABLE TRUST. SUBMISSION OF THE LEARNED A.R. T HAT M/S SUGUNA CHARITABLE TRUST WAS HAVING REGISTRATION UNDER SECT ION 12AA OF THE ACT, HAS NOT BEEN DISPUTED. THIS BEING THE FACT, WE AR E OF THE OPINION THAT THERE WAS AN OVERRIDING TITLE ON SUCH AMOUNT WITH S UGUNA CHARITABLE TRUST AND SUCH COLLECTION MADE FOR SUGUNA CHARITABL E TRUST WAS NEVER A PART OF THE INCOME OF THE ASSESSEE. WE ARE OF THE OPINION THAT THE ATTEMPT MADE BY THE LEARNED D.R. TO DISTINGUISH THE CASE WITH THAT OF HONBLE APEX COURT IN BIJLI COTTON MILLS (P) LTD.S CASE (SUPRA) IS NOT IN LINE WITH THE SPIRIT OF THE DECISION. THERE THE PA YMENTS MADE WERE FOR DHARMADA AND HONBLE APEX COURT HELD THAT WHEN SU CH AMOUNTS RIGHT FROM THE INCEPTION WERE RECEIVED AND HELD UNDER AN OBLIGATION TO SPEND THEM FOR CHARITABLE PURPOSE, THE RESULT WOULD BE TH AT THESE WOULD NOT BE TRADING RECEIPTS. WE ALSO FIND THAT HONBLE JURISD ICTIONAL HIGH COURT IN A LATER CASE OF VELLORE RADHA JAYALAKSHMI FUNDS (P.) LTD. V. CIT (147 ITR 7 I.T.A. NOS. 1120 TO 1122/MDS/12 480) HAD HELD THAT EVEN COLLECTIONS MADE BY A CHIT COMPANY TOWARDS CHARITY AT THE TIME OF AUCTION OF CHIT WOULD NOT CO NSTITUTE TRADING RECEIPT AND COULD NOT BE ASSESSED FOR TAX AS BUSINESS INCOM E. WHEN VIEWED FROM THIS EXPOSITION OF LAW MADE BY HONBLE APEX CO URT AND JURISDICTIONAL HIGH COURT, WE ARE OF THE OPINION TH AT THE ADDITIONS COULD NOT HAVE BEEN MADE FOR THE AMOUNTS EARMARKED BY THE ASSESSEE IN ITS INVOICES FOR CHARITY. SUCH ADDITIONS WERE RIGHTLY DELETED BY THE CIT(APPEALS). WE DO NOT FIND ANY REASON TO INTERFE RE WITH THE ORDERS OF CIT(APPEALS). 8. IN THE RESULT, APPEALS FILED BY THE REVENUE ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE EIGHTH OF NOVEMBER, 2012, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 8 TH NOVEMBER, 2012. KRI. COPY TO: APPELLANT/RESPONDENT/CIT(A)-IX, CHENNAI-3 4/ CIT-VIII, CHENNAI-34/D.R./GUARD FILE