M/s Xavier Labour Relations Institute , Jamshedpur V. DCIT EXEMPTION CIRCLE , Ranchi

ITA 128/RAN/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0611 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 27-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: INDERJI T SINGH
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 143(3); 234B; 12AA

Judgement Text

1 ITA NO. 128 /RAN/20 1 7 IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI N.S.SAINI , ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE , JUDICIAL MEMBER ITA NO. 128 / RAN/20 1 7 ASSESSMENT YEAR : 20 1 4 - 2015 M/S XAVIER LABOUR RELATIONS INSTITUTE, CH AREA(EAST), JAMSHE DPUR, JHARKHAND V S DCIT, EXEMPTION CIRCLE, JAMSHEDPUR PAN NO. : AA A TI 01475 M (APPELLANT ) .. RESPONDENT ASSESSEE BY : SHRI PRAJNARAJ MOHANTY , ADVOCATE REVENUE BY : SHRI INDERJIT SINGH , CIT DR DATE OF HEARING : 2 9 . 11 .201 8 DATE OF PRONOUNCEMENT : 30 . 11 .201 8 O R D E R PER PAVAN KUMAR GADALE, JM : THE ASSESSEE HA S FILED THE APPEAL AGAINST THE ORDER OF CIT(A), JAMSHEDPUR , DATED 25.04.2017 FOR THE ASSESSMENT YEAR 201 4 - 201 5 . 2. THE REVISED GROUNDS O F APPEAL OF ASSESSEE ARE AS UNDER : - 01. THE APPELLANT HAS SUFFERED DEFICIT OF RS. 34.26 CRORE AS THE AO HAS ERRONEOUSLY CONCLUDED THAT CAPITAL EXPENDITURE IS NOT ADMISSIBLE AS APPLICATION FOR CHARITABLE PURPOSES WHICH IS IN DISREGARD OF THE PROVISION U /S. 1 L(L)(A) OF THE I.T. ACT, 1961. THE AO HAS NOT DISPUTED THE GENUINENESS AND RELEVANCE OF THE CAPITAL APPLICATION OF RS. 89,08,79,411.38 FOR EDUCATIONAL PURPOSES. THEREFORE, THE DISALLOWANCE OF CAPITAL EXPENDITURE IS LEGALLY NOT SUSTAINABLE. 02. TH AT THE ORDER OF THE AO IS LEGALLY UNSUSTAINABLE AS IT DEFIES THE PRINCIPLES OF LAW LAID DOWN BY SUPREME COURT FOR EXEMPT EDUCATIONAL INSTITUTIONS. 03. THAT THE ORDER OF THE AO IS LEGALLY AND FACTUALLY UNSUSTAINABLE, BECAUSE THE AO FAILED TO UNDERSTAND T HAT SURPLUS INCOME IS NOT 2 ITA NO. 128 /RAN/20 1 7 AN ISSUE TO BE DETERMINED UNDER AN ASSESSMENT UNDER 143(3) IF INCOME IS APPLIED UNDER SECTION 11(1) ACCORDINGLY. 04. THAT THE ORDER OF THE AO IS LEGALLY UNSUSTAINABLE AS THE AO CANNOT WITHDRAW THE EXEMPT STATUS OF THE ASSESSEE B ASED ON WHICH THE 12AA REGISTRATION WAS GRANTED IN LIGHT OF THE SUPREME COURT RULING IN CIT V. SURAT CITY GYMKHANA [2008] 300 ITR 214/ 170 TAXMAN 612 (SC). 05. THAT THE LD. CIT HAS ERRED IN APPLYING THE RULING OF SUPREME COURT IN P. A. INAMDAR AND NATION AL INSTITUTE OF AERONAUTICS BY UTRAKHAND HIGH COURT. 06. FOR THAT THE LEARNED ASSESSING OFFICER CHARGED INTEREST U/S 234B AMOUNTING TO RS. 5,07,85,680/ - ON THE ASSESSED INCOME, WHICH IS AGAINST THE RULING OF JURISDICTIONAL HIGH COURT OF JHARKHAND IN THE CASE OF AJAY PRAKASH IN TAX APPEAL NO.38 OF 2010 REPORTED IN 2013(L)TM1140 AND IS MOST ARBITRARY AND LIABLE TO BE DELETED IN TO - TO. 07. FOR THAT THE LEARNED LOWER AUTHORITIES ARE NOT JUSTIFIED TO DISALLOW RS. 52,51,306 UNDER THE HEAD PROGRAM EXPENSES ON ESTIMATE THOUGH EACH ITEM OF EXPENSES ARE FULLY VOUCHED & VERIFIABLE AND FOR THE PURPOSE OF EDUCATION. THE DISALLOWANCE OF RS. 52,51,306 IS HIGHLY UNJUSTIFIED, MOST ARBITRARY WITHOUT ANY BASIS AND LIABLE TO BE DELETED IN TO - TO. 08. THAT THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AMEND, MODIFY, SUBSTITUTE, DELETE AND/OR RESCIND ALL OR ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE FINAL HEARING, IF NECESSITY SO ARISES. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN EDUCATIONAL SOCIETY REGISTER ED UNDER SOCIETIES REGISTRATION ACT, 861 AND IS BASED AT JAMSHEDPUR AND IS ENGAGED IN EDUCATIONAL ACTIVITIES AND THE ASSESSEE SOCIETY FILED RETURN OF INCOME ON 23.09.2014 FOR THE ASSESSMENT YEAR 201 4 - 201 5 DECLARING TOTAL INCOME AT NIL. UPON SELECTION OF TH E CASE FOR SCRUTINY UNDER CASS , NOTICES U/S.143(2)/142(1) OF THE ACT WERE ISSUED. THEREAFTER THE AO COMPLETED THE ASSESSMENT MAKING ADDITION ON ACCOUNT OF ESTIMATED BASIS AS UNEXPLAINED EXPENSES AND ASSESSED 3 ITA NO. 128 /RAN/20 1 7 THE TOTA L INCOME OF THE ASSESSEE RS. 45,33,35,070 / - AND PASSED ORDER U/S.143(3) OF THE ACT, DATED 29.12.2016 . 4 . AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). IN THE APPELLATE PROCEEDINGS, THE AR OF THE ASSESSEE APPEARED AND ARGUED THE GROUNDS AND REITERATED THE SUBMISSION S MADE BEFORE THE AO. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE FINDINGS OF AO, PARTY ALLOWED THE APPEAL OF THE ASSESSEE . 5 . AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. 6 . LD. AR IN THE COURSE OF HEARING PROCEEDINGS FILED HE DOCUMENTS WITH RESPECT TO EARLIER ASSESSMENT YEARS ALONG WITH FORM NO.10B, AUDIT REPORT FOR THE ASSESSMENT YEAR 2010 - 2011 TO 2013 - 2014, WHEREAS THE CURRENT ASSESSMENT YEAR IS 2014 - 2015. THE CONTENTION OF LD. AR THE A SSESSEE HAS BEEN REGULARLY FILING THE INCOME TAX RETURN AND COMPLIED WITH THE DIRECTION OF INCOME TAX DEPARTMENT. WHEREAS IN THE ASSESSMENT YEAR UNDER CONSIDERATION THE AO HAS OBSERVED THAT THE ASSESSEE IS NOT CARRYING OUT ANY CHARITABLE ACTIVITIES AND ALS O INFORMATION OF CAPITAL EXPENDITURE INCURRED DURING THE YEAR WAS NOT PROPERLY EXPLAINED BY THE ASSESSEE. LD. AR FILED COMPUTATION OF INCOME TO SUBSTANTIATE THAT THE ASSESSEE HAS BEEN COMPLYING THE DIRECTION OF INCOME TAX DEPARTMENT AND 15% OF THE AMOUNT IS UTILISED IN SUBSEQUENT YEARS AND THERE IS NO VIOLATION OF PROVISIONS AND THE ASSESSEE HAS SUBSTANTIATED HIS FINANCIAL STATEMENTS WITH EVIDENCE OF 4 ITA NO. 128 /RAN/20 1 7 BOOKS OF ACCOUNTS AND PRODUCED ALSO EXPLANATION FILED BEFORE THE AO IN RESPONSE TO NOTICE U/S.142(1)/143(2) OF THE ACT AND FURTHER IN THE COURSE OF APPELLATE PROCEEDINGS WRITTEN SUBMISSIONS WAS FILED. LD. AR FURTHER SUBMITTED THAT THE CAPITAL EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE AND EVERY YEAR SUCH CAPITAL EXPENDITURE WAS INCURRED AND CONSIDERED IN THE WORK - IN - PROGRESS AND THE FINANCIAL STATEMENTS. LD. AR FURTHER EMPHASIZED THAT IN THE EARLIER YEARS SUCH CAPITAL EXPENDITURE WAS INCURRED AND ALSO FILED AUDITED STATEMENTS OF ACCOUNTS TO SUBSTANTIATE THAT THE CAPITAL EXPENDITURE HAS BEEN DEDUCTED AND CLAIM ED AS PER THE PROVISIONS AND PRAYED FOR ALLOWING THE APPEAL OF THE ASSESSEE. 7 . CONTRA, LD. D R SUBMITTED THAT THE AO HAS MADE A FINDING THAT NO BOOKS OF ACCOUNTS HAVE BEEN PRODUCED AND IN INTEREST AND EXPENDITURE ACCOUNT AND THE BALANCE SHEETS COULD NOT SU BSTANTIATE BEFORE THE AO WITH PROPER BILLS AND VOUCHERS, THEREFORE, PRAYED FOR DISMISSAL OF APPEAL. 8 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON THE ISSUE OF CLAIM OF CAPITAL EXPENDITURE OF RS. 89, 08,79,411.38 THE AO HAS MAD E DISALLOWANCE AND ASSESSED THE TOTAL INCOME AT RS. 45,33,35,070/ - . THE CONTENTION OF LD. AR AS ENVISAGED IS THAT THE TOTAL INCOME AS WORKED OUT TO RS. 109,70,15,843/ - AND OUT OF THAT THE ASSESSEE HAS COMPLIED FOR CHARITABLE PURPOSES MORE THAN 8 5 %. THEREFORE , EVEN THE CAPITAL EXPENDITURE IS CONSIDERED TOTAL CLAIM EXCEEDS AMOUNT TO BE APPLIED FOR CHARITABLE PURPOSES. LD. AR ALSO FILED WRITTEN SUBMISSIONS AND THE 5 ITA NO. 128 /RAN/20 1 7 STATEMENT OF INCOME AS FILED AT PAGE 7 OF THE PAPER BOOK WHICH READS AS UNDER : - XAVIER LABOUR RELA TIONS INSTITUTE JAMSHEDPUR ASSESSMENT YEAR, 2014 - 2015 PREVIOUS YEAR ENDED 31.03.2014 STATEMENT OF INCOME AMOUNT (RS) AMOUNT (RS.) INCOME AS PER INCOME & EXPENDITURE ACCOUNT 1,069,231,156.74 RECEIPTS NOT ROUTED THROUGH I & E A/C (B/S ITEMS ) INTEREST ON FUNDS 13,715, 860.18 OTHERS 14,068,825,95 27,784,686.13 TOTAL INCOME 1,097,015,842.87 STATEMENT OF UTILISATION EXPENSES AS PER THE INCOME & EXPENDITURE A/C 621,147,392.30 ADD: FIXED ASSETS AND WIP DURING THE YEAR 890,879,411.38 EXPENSES ROUTED THROUGH BALANCE SHEET (NOT THROUGH I & E A/C) UTI LISATION OF FUNDS 7,831,497.83 CONTINGENCY 76,005.00 LEAVE ENCASHMENT 1,228,686.00 GRATUITY 7,045.810.00 16,181,998.83 LESS: DEPRECIATION 53,477,575.15 LESS: EXPENSES NOT ALLOWABLE - PROVISION FOR GRATUITY 23,308,333.00 - PROVISION FOR LEAVE ENCASHMENT 11,759,003.00 35,067,336.00 TO UTILISATI ON 1,439,663, 891.36 9. ON THE QUERY FROM THE BENCH WITH RESPECT TO WHAT IS THE TOTAL ADDITION ON ACCOUNT OF CAPITAL EXPENDITURE, LD. AR REFERRED TO THE SCHEDULE - 6, THE TOTAL ADDITION MADE TO THE GROSS BLOCK OF ASSETS IS RS.83,46,32,679.58 AND THE REMAINING INCREASE IN THE CAPITAL EXPENDITURE FROM EARLIER YEARS REFERRED IN THE BALANCE SHEET. THE CONTENTION OF LD. AR THAT THE DIFFERENCE IN THE WORK IN PROGRESS IS WORKED OUT TO RS. 5 , 68 , 46 , 731 / - SO TOTAL EXPENDITURE INCURR ED BY THE ASSESSEE IS RS.89,08,79,411.38. NOW, THE QUESTION ARISES THAT THE AO IS OF THE OPINION THAT THE ASSESSEE COULD NOT 6 ITA NO. 128 /RAN/20 1 7 ABLE TO SUBSTANTIATE WITH ANY EVIDENCE BUT THE ASSESSEE PRODUCED AUDIT ED BALANCE SHEET, BOOKS OF ACCOUNTS AND THE AUDITORS CERTIFI ED BOOKS OF ACCOUNT. EVERY YEAR THE CAPITA L WORK IN - PROGRESS IS TAKEN INTO CONSIDERATION AND, THEREFORE, THE EXPENDITURE CANNOT BE DOUBTED. THE AO IN THE ASSESSMENT ORDER ASSESSEE COULD NOT SUBSTANTIATE BUT THE GENUINENESS OF THE TRANSACTION HAS NOT BE DOU BTED BY THE AO. WE FOUND THAT THERE IS STRENGTH IN THE ARGUMENTS OF THE LD. AR AND THE LD. AR ALSO SUBSTANTIATED THAT HOW THE COMPUTATION OF INCOME HAS BEEN MADE AND ALSO PRODUCED THE FORM NO.10B ISSUED BY THE AUDITOR ALONG WITH STATEMENTS OF INCOME AT PAG E 7 OF THE PAPER BOOK, WHICH WE HAVE REPRODUCED ABOVE. LD. AR EXPLAINED THAT THE ASSESSEE HAS INCURRED THE AMOUNT TOWARDS FIXED ASSETS DURING THE YEAR AGGREGATING TO RS.89.08 CRORES AND THE TOTAL UTILISATION OF FUNDS HAS BEEN WORKED OUT TO RS.143,966,389/ - . THE CONTENTION OF LD. AR IS THAT THE ASSESSEE IS REGULARLY DISCLOSED THE CAPITAL EXPENDITURE IN THE FINANCIAL STATEMENTS AND ALSO IN THE COMPUTATION OF INCOME AS REQUIRED UNDER THE INCOME TAX ACT. FURTHER THE CAPITAL EXPENDITURE WAS ROUTED THROUGH THE CA PITAL FUND IN THE BALANCE SHEET WHICH HAS BEEN CONSIDERED AT SCHEDULE - 1. THE LD. DR ALSO EXPLAINED HOW THE ADJUSTMENT WAS ROUTED IN THE BOOKS OF ACCOUNTS. WE FOUND THAT THE ASSESSEE BEING AN EDUCATIONAL INSTITUTION HAS BEEN MAINTAINING PROPER BOOKS OF ACCO UNTS AND ALSO THE BOOKS OF ACCOUNTS ARE AUDITED AND AS REQUIRED ONLY FOR THIS ASSESSMENT YEAR THE AO HAS NOT ALLOWED THE CLAIM OF THE ASSESSEE WHEREAS THE ASSESSEE HAS PRODUCED THE COPY OF INCOME TAX 7 ITA NO. 128 /RAN/20 1 7 RETURNS AND AUDITED ACCOUNTS FOR EARLIER ASSESSMENT YEAR AND SUBSEQUENT ASSESSMENT YEAR I.E. 2010 - 2011 TO 2013 - 2014 WHERE FIRST TIME EXPENDITURE WAS ALLOWED. THEREFORE, CONSIDERING OVERALL FACTUAL ASPECTS AND THE FINANCIAL STATEMENTS AND THE MAINTENANCE OF VARIOUS RECORDS BY THE ASSESSEE AND THE CLAIM OF THE A SSESSEE DULY SUBSTANTIATED. THEREFORE, IN THE INTEREST OF SUBSTANTIAL JUSTICE, WE DIRECT THE AO TO DELETE THE DISALLOWANCE MADE ON ACCOUNT OF CAPITAL EXPENDITURE. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED 10 . SINCE WE HAVE ALLOWED THE ABOVE GROUNDS OF APPEAL, THEREFORE, THE SECOND GROUND OF APPEAL HAS BECOME INFRUCTUOUS AND ACCORDINGLY, THE SAME IS DISMISSED. 11 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PART L Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 / 11 /201 8 SD / - SD/ - (N.S.SAINI) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER RANCHI , DATED 30 / 11 /2018 PRAKASH KUMAR MISHRA , SR. PS COPY OF THE ORDER FORWARDED TO : //TRUE COPY// BY ORDER, SR.PS,ITAT, RANCHI 1. THE APPELLANT M/S XAVIER LABOUR RELATIONS INSTITUTE, CH AREA(EAST), JAMSHEDPUR, JHARKHAND 2. THE RESPONDENT DCIT, EXEMPTIO N CIRCLE, JAMSHEDPUR 3. THE CIT(A) CONCERNED 4. CIT , CONCERNED 5. DR, ITAT, RANCHI 6. GUARD FILE.