ADIT, Hyderabad V. A.P.Olympic Association, Hyderabad

ITA 1208/HYD/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7183 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 10-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Keywords: Depreciation; Charitable institution
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B ', HYDERABAD BEFORE SHRI H.S. SIDHU, JUDICIAL MEMEBR AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.1208/HYD/2010 : ASSESSMENT YEAR 2003-04 ITA NO.1213/HYD/2010 : ASSESSMENT YE AR 2007-08 ASSTT. DIRECTOR OF INCOME- TAX(EXEMPTION) I, HYDERABAD V/S. A.P. OLYMPIC ASSOCIATION, HYDERABAD ( PAN - NOT AVAILABLE ON RECORD) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.V.PRASAD REDDY RESPONDENT BY : S HRI P.V.S.S. PRASAD DATE OF HEARING 7.12.2011 DATE OF PRONOUNCEMENT 9.12.2011 O R D E R PER BENCH: THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGA INST SIMILAR BUT SEPARATE ORDERS OF THE CIT(A) IV, HYDERABAD DAT ED 15.7.2010 FOR THE ASSESSMENT YEAR 2003-04 AND DATED 30.6.2010 FOR THE ASSESSMENT YEAR 2007-08. SINCE COMMON ISSUES ARE INVOLVED, THESE A PPEALS ARE BEING DISPOSED OFF WITH THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. EFFECTIVE GROUNDS OF THE REVENUE, COMMON IN BO TH THESE APPEALS, AS TAKEN FROM ITA NO.1208/HYD/2010, READ A S FOLLOWS- 1. THE ORDER OF THE CIT(A) IS NOT ACCEPTABLE AS IT IS ERRONEOUS BOTH IN LAW AND ON FACTS. ITA NO.1208 & 1213/HYD /2010 A.P. OLYMPIC ASSOCIATION, HYDERABAD 2 2. THE CIT(A) FAILED TO APPRECIATE THAT THE DEPREC IATION BEING A NOTIONAL COULD NOT BE SAID TO HAVE BEEN INCURRED OR APPLIED FOR CHARITABLE PURPOSES. 3. THE LEARNED CIT(A) OUGHT TO HAVE CONFIRMED THE A SSESSMENT ORDER AS THE RENTAL INCOME HAS TO BE CHARGED TO UND ER THE HEAD INCOME FROM HOUSE PROPERTY.; 4. THE LEARNED CIT(A) OUGHT TO HAVE DISALLOWED THE DEDUCTIONS WHICH ARE NOT ADMISSIBLE U/S. 12A OF THE IT ACT. 5. . 3. FACTS OF THE CASE IN BRIEF, AS TAKEN FROM THE A PPEAL FOR ASSESSMENT YEAR 2003-04, ARE THAT THE ASSESSEE SOCI ETY, REGISTERED WITH THE REGISTRAR OF SOCIETIES FOR THE PROMOTION OF SPORTS AND GAMES IN THE STATE OF ANDHRA PRADESH AND AFFILIATED TO THE INDIAN OLYMPIC ASSOCIATION AND SPORTS AUTHORITY, FILED ITS RETURN OF INCOME FOR THE ASSES SMENT YEARS UNDER CONSIDERATION, DECLARING LOSS OF RS.1,71,036, BESID ES CLAIMING EXEMPTION UNDER S.11 OF THE ACT. THE ASSESSING OFFICER, NOT ICED THAT THE ASSESSEE HAD DECLARED GROSS RECEIPTS OF RS.24,17,875, WHICH COM PRISED OF RENTAL INCOME FROM INCOME-TAX DEPARTMENT, GUEST ROOM AND CONFEREN CE HALL TOTALING TO RS.19,15,385, NATIONAL GAMES GRANTS OF RS.3,51,472 AND INCOMES UNDER OTHER MISC. HEADS ETC. IT HAD ALSO CLAIMED EXPENDI TURE UNDER VARIOUS HEADS AND ARRIVED AT THE LOSS OF RS.1,71,035. HE WAS OF THE VIEW THAT THE ASSESSEE WAS NOT CORRECT IN TREATING THE RENTAL INC OME OF RS.19,15,385 AS INCOME OF THE ASSOCIATION, AS IN VIEW OF S.22 OF TH E ACT, THE RENTAL INCOME IS TO BE CHARGED TO TAX UNDER THE AHEAD INCOME FROM H OUSE PROPERTY. HE ACCORDINGLY, TREATED THE SAID INCOME AS INCOME FROM HOUSE PROPERTY, AND ARRIVED AT SUCH INCOME OF RS.13,40,770 AFTER ALLOWI NG DEDUCTION OF 30% UNDER S.24(1). THE ASSESSING OFFICER ALSO NOTED TH AT THE ASSESSEE HAD RECEIVED RS.5,02,490 FROM OTHER SOURCES, SUCH AS AF FILIATION REGISTRATION FEE, CONTRIBUTION FOR SPORTS, GRANT OF OLYMPIC DAY RUN AND INTEREST ON FDR ETC,. OUT OF THE SAME RS.14,32,097 HAD BEEN CLAIMED TOWAR DS MAINTENANCE OF ITA NO.1208 & 1213/HYD /2010 A.P. OLYMPIC ASSOCIATION, HYDERABAD 3 OFFICE BUILDING, GUST ROOM AND DEPRECIATION. ASSES SING OFFICER WAS OF THE VIEW THAT SINCE RENTAL INCOME HAD BEEN ASSESSED AS INCOME FROM HOUSE PROPERTY, EXPENDITURE ON MAINTENANCE OF OFFICE BUIL DING AND GUEST ROOM OF RS.1,66,577 AND DEPRECIATION OF RS.12,65,521 COULD NOT BE ALLOWED. ACCORDINGLY, THE ASSESSING OFFICER RESTRICTED THE C LAIM OF THE ASSESSEE FOR EXPENDITURE OF RS.25,88,910 TO RS.11,56,813, AND AC CORDINGLY COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF RS.6,86,450, A S AGAINST RETURNED AS LOSS OF RS.1,71,036, VIDE ORDER OF ASSESSMENT DATE D 16.11.2007 PASSED UNDER S.143(3) READ WITH S.147 OF THE ACT. 4. AGGRIEVED BY THE ADDITIONS/DISALLOWANCES MADE B Y THE ASSESSING OFFICER, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A ), WHO ALLOWED THE APPEAL OF THE ASSESSEE BY THE IMPUGNED ORDER DATED 15.7.20 10. 5. AGGRIEVED BY THE ORDER OF TEHE CIT(A), REVENUE IS IN APPEAL BEFORE US WITH THE ABOVE GROUNDS OF APPEAL 6. FACTS OF THE CASE FOR THE ASSESSMENT YEAR 2007- 08 ALSO, EXCEPT FOR THE AMOUNTS INVOLVED, ARE IDENTICAL, AND AS SUC H NEED NO REPETITION. 7. AT THE TIME OF HEARING, LEARNED DEPARTMENTAL R EPRESENTATIVE RELIED ON THE ORDERS PASSED BY THE ASSESSING OFFIC ER, AND SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN ACCEPTING THE CLAIMS OF THE ASSESSEE AND GRANTING RELIEFS. 8. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE O THER HAND, REITERATING THE CONTENTIONS URGED BEFORE THE LOWER AUTHORITIES, SUBMITTED THAT THE ASSESSEE HAS BEEN GRANTED REGISTRATION UND ER S.12A OF THE ACT, AND THEREFORE, ITS ENTIRE INCOME IS EXEMPT FROM TAX UND ER S.11 OF THE ACT. HE ITA NO.1208 & 1213/HYD /2010 A.P. OLYMPIC ASSOCIATION, HYDERABAD 4 SUBMITTED THAT FOR THE ASSESSMENT YEAR 2003-04, THO UGH THE ASSESSEE HAS NOT BEEN ORIGINALLY GRANTED EXEMPTION UNDER S.12A, IN PURSUANCE OF THE ORDER OF THE TRIBUNAL FOR THAT YEAR, REGISTRATION W AS ULTIMATELY GRANTED, AND SUCH REGISTRATION RELATES BACK TO THE DATE OF ESTAB LISHMENT OF THE ASSESSEE- SOCIETY. THE ASSESSEE ALSO SUBMITTED THAT THE INCO ME FROM PROPERTY HAS TO BE COMPUTED IN THE NORMAL COMMERCIAL MANNER AND THE RE IS NO SCOPE FOR COMPUTING THE SAME BY COMPLYING WITH PROVISIONS OF S.14. HE ALSO SUBMITTED THAT THE INCOME OF THE TRUST HAS TO BE DE TERMINED AS PER THE ACCOUNTS MAINTAINED BY THE ASSESSEE AND NOT UNDER T HE PROVISIONS OF THE INCOME-TAX ACT, 1961. HE FURTHER SUBMITTED THAT TH E AMOUNT OF DEPRECIATION DEBITED TO THE ACCOUNT OF CHARITABLE I NSTITUTION IS TO BE DEDUCTED, WHILE DETERMINING THE INCOME AVAILABLE FO R APPLICATION TO CHARITABLE PURPOSES. LEARNED COUNSEL FOR THE ASSES SEE ALSO RELIED ON CIRCULAR NO.5P(LXX)-6) OF 1968 DATED 19.6.1968, WHE REIN IT HAS BEEN CLARIFIED THAT WHERE A SOCIETY UNDER S.12A OF THE A CT DERIVES INCOME FROM HOUSE PROPERTY, INTEREST ON SECURITIES, CAPITAL GAI NS AND OTHER SOURCES, THE WORD INCOME SHOULD BE UNDERSTOOD IN THE COMMERCIA L SENSE, THAT IS BOOK INCOME, AND ACCORDING TO THE ACCOUNTS OF THE TRUST AND NOT THE TOTAL INCOME. RELIANCE IS ALSO PLACED ON VARIOUS DECISIONS, ALREA DY NOTED BY THE CIT(A), IN THE IMPUGNED ORDERS. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL ON RECORD. ADMITTEDLY, ASSESSEE SOCIETY H AS BEEN REGISTERED UNDER S.12A OF THE ACT, AND SUCH REGISTRATION, THOUGH DON E IN PURSUANCE OF THE ORDER OF THE TRIBUNAL DATED 22.2.2008 FOR THE ASSES SMENT YEAR 2003-04, IT RELATES BACK TO THE DATE OF ESTABLISHMENT OF THE AS SESSEE-TRUST. THAT BEING SO, THE INCOME OF THE ASSESSEE IS EXEMPT UNDER S.11 OF THE ACT. AS REGARDS THE METHOD TO BE ADOPTED FOR COMPUTING THE INCOME OF A CHARITABLE TRUST, THE CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE BY PLACING ITA NO.1208 & 1213/HYD /2010 A.P. OLYMPIC ASSOCIATION, HYDERABAD 5 RELIANCE ON THE BOARDS CIRCULAR NO.5(LXX-6) DATED 19.6.1968 AND THE DECISIONS OF THE HONBLE KOLKATA HIGH COURT IN CIT V/S. BIRLA JANAHIT TRUST; OF THE HONBLE ANDHRA PRADESH HIGH COURT IN CIT V/S . HEH THE NIZAMS SUPPLEMENTAL RELIGIOUS ENDOWMENT TRUST (127 ITR 378 ); OF THE HONBLE MARAS HIGH COURT IN CIT/ RAO BAHADUR CALAVALLA CUNN AN CHETTI CHARITIES(135 ITR 485). CIT V/S. ESTATE OF V. ETHI RAJ (136 ITR 12), AND CONCLUDED THAT THERE IS NO MERIT IN THE VIEW TAKEN BY THE ASSESSING OFFICER THAT THE INCOME OF THE ASSESSEE FROM RENTS RECEIVED FROM IT DEPARTMENT, GUEST ROOM AND CONFERENCE HALL, ETC. SHOULD HAVE BE EN CONSIDERED UNDER THE HEAD HOUSE PROPERTY INCOME, AND HELD THAT THE SAME SHOULD BE COMPUTED IN THE NORMAL COMMERCIAL MANNER, WITHOUT TAKING RECOUR SE TO THE PROVISIONS OF S.22 OF THE ACT. HE ALSO ACCEPTED THE CLAIM OF THE ASSESSEE FOR ALLOWANCE OF DEPRECIATION RELYING ON THE DECISIONS OF THE HONBLE BOMBAY HIGH COURT IN CIT V/S. MUNISURVRAT JAIN (1994) TAX LR 1084(BOM) AND CIT V/S. INSTITUTE OF BANKING PERSONNEL SELECTION (131 TAXMAN 366). WE FIND THAT THE CIT(A) HAS PASSED WELL REASONED AND ELAB ORATE SPEAKING ORDERS AND WE FIND NO INFIRMITY IN THE SAME. WE ACCORDI NGLY, UPHOLD THE ORDERS OF THE CIT(A), AND REJECT THE GROUNDS OF THE REVENUE I N THESE APPEALS. 10. IN THE RESULT, REVENUES APPEALS ARE DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 9.12.2011 SD/- SD/- (CHANDRA POOJARI) ( H.S.SIDHU ) ACCOUNTANT MEMBER JUDICIAL MEMBER. DT/- 9TH DECEMBER, 2011 COPY FORWARDED TO: 1. M/S. A.P. OLYMPIC ASSOCIATION, HYD ERABAD 2. ASSTT. DIRECTOR OF INCOME - TAX(EXEMPTION) I, HYDERABAD ITA NO.1208 & 1213/HYD /2010 A.P. OLYMPIC ASSOCIATION, HYDERABAD 6 3. COMMISSIONER OF INCOME - TAX(APPEALS) I V HYDERABAD 4. COMMISSIONER OF INCOME TAX I I I, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S.