M/S. N.T.THOMAS MEMORIAL EDUCATIONAL AND DEVELOPMENT SOCIETY, Indore V. THE ACIT 1(2), Indore

ITA 139/IND/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5676 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 03-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M D JAVED
• Assessee Lawyers: S S DESHPANDE
• Keywords: Unexplained cash credit; Depreciation; Charitable institution; Earning of tax free income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., .., % BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER 1. N.T. THOMAS MEMORIAL EDUCATIONAL AND DEVELOPMENT SOCIETY, INDORE. 2. ACIT- 1(2) V. 1. ACIT- 1(2) 2. N.T. THOMAS MEMORIAL EDUCATIONAL AND DEVELOPMENT SOCIETY, INDORE. & / APPELLANT ()& / RESPONDENT . . ./ PAN:AAAN-5198F & * / APPELLANT BY SHRI S.S. DESHPANDE, C.A. ()& * / RESPONDENT BY SHRI MD. JAVED, D.R. * / DATE OF HEARING 27.03.2017 / * / DATE OF PRONOUNCEMENT 29.03.2017 / O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AS W ELL AS REVENUE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A )-1, INDORE, DATED 9.10.2014 FOR THE ASSESSMENT YEAR 2011-12 WHI CH IN TURN 1. . . ./ I.T.A. NO. 139/IND/2015 2. I.T.A. NO. 150/IND/2015 / ASSESSMENT YEAR:2011-12 N.T. THOMAS MEMORIAL EDUCATIONAL & SOCIETY I.T.A. N O.139 & 150 /IND/2015/A.Y.: 11-12 PAGE 2 OF 11 HAS BEEN ARISEN OUT OF THE ORDER U/S 14(3) DATED 7. 2.2014 PASSED BY THE ACIT-1(2) (HEREINAFTER REFERRED TO AS THE AO ). THE GROUNDS OF APPEAL AS TAKEN BY THE ASSESSEE IN I.T.A. NO. 13 9/IND/2015. 1. THE LD. CIT(A) HAS ERRED IN NOT ALLOWING THE BENEFI T OF CARRY FORWARD OF LOSS. 2. THE LD. CIT(A) HAS ERRED IN NOT ACCEPTING THE CLAIM OF THE ASSESSEE U/S 11 SINCE THE APPLICATION REGISTRATION WAS MADE AND ALL THE NECESSARY COMPLIANCES WERE ALSO MA DE. ON THIS ACCOUNT IT SHOULD BE PRESUMED THAT THE INST ITUTION BE DEEMED TO BE TREATED AS A REGISTERED INSTITUTIO N U/S 12A/12AA AND THE LOSS BE CARRY FORWARD. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL I N ITA NO. 150/IND/2015 AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-1, ERRED IN DELETING THE ADDITION OF RS. 40, 00,000/- MADE U/S 68 OF THE I.T. ACT, 1961 BEING UNEXPLAINED CREDIT ESPECIALLY WHEN AT THE TIME OF COMPLETING THE ASSES SMENT THE ASSESSEE FAILED TO EXPLAIN THE NATURE AND SOURCE UP -TO THE SATISFACTION OF THE ASSESSING OFFICER? 2.ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETH ER THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 3, 98,892/- MADE BY THE AO ON ACCOUNT OF EXCESS DEPRECIATION HO LDING THAT THE ASSESSEE IS ENTITLED FOR ALLOWING DEPRECIATION ON THE HIGHER RATE 30% AS AGAINST 15% ALLOWABLE AS PER RULE 5 OF INCOME-TAX RULES. NOW WE WILL TAKE UP I.T.A.NO. 139/IND/2015. N.T. THOMAS MEMORIAL EDUCATIONAL & SOCIETY I.T.A. N O.139 & 150 /IND/2015/A.Y.: 11-12 PAGE 3 OF 11 3. GROUND NO. 1 RELATES TO NOT ALLOWING THE BENEFIT OF CARRY FORWARD OF LOSSES. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE HAS FURNISHED ITS RETURN OF INCOME ON 27.09.2011 DECLAR ING THE TOTAL LOSS OF RS. 1,17,97,731/- WHICH WAS ASSESSED U/S 14 3(3) AT TOTAL LOSS OF RS. 54,25,934/-. THE ASSESSEE IS AN REGISTE RED EDUCATIONAL TRUST. THE CIT(A) OBSERVED THAT THE ENTIRE INCOME I S HELD TO BE EXEMPT , THERE IS NO PROVISION FOR ANY CARRY FORWAR D OF LOSS, BECAUSE IF INCOME OF ANY KIND IN SUCH CASES IS HELD AS EXEMPT IN THESE CASES, NO PURPOSE COULD BE SERVED BY CARRY FO RWARD OF LOSSES FROM ONE YEAR TO ANOTHER YEAR, BECAUSE THEY COULD NOT BE SET OFF AGAINST ANY INCOME AS, ENTIRE INCOME HAS BE EN MADE EXEMPT UNDER THIS SECTION, WITHOUT ANY LIMITATION O R RESTRICTION . THEREFORE, CARRY FORWARD OF LOSSES, WHICH ARE NOT P ROVIDED UNDER THE PROVISION OF SECTION 10(23C)(VI) OF THE I.T. AC T, FOR THE REASONS MENTIONED ABOVE, WOULD BE AN EXERCISE IN FUTILITY. THE CASE LAW REFERRED TO BY APPELLANT IN CASES OF GUJRATI SAMAJ 204 TAXMAN 151 [MP] AND JUDGMENT OF BOMBAY HIGH COURT REPORTED IN 264 ITR 110 [BOMB.], ARE WITH REFERENCE TO SECTION 11 O F THE ACT AND ARE NOT APPLICABLE TO THE PROVISION OF SECTION 10(2 3C)(VI) OF I.T. ACT. ACCORDINGLY, THE ACTION OF THE AO WAS UPHELD. N.T. THOMAS MEMORIAL EDUCATIONAL & SOCIETY I.T.A. N O.139 & 150 /IND/2015/A.Y.: 11-12 PAGE 4 OF 11 5. BEING AGGRIEVED, THE ASSESSEE HAS FILED AN APPEAL B EFORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LOWER AUTHORITIES HAS DISALLOWED THE CARRY FORWARD OF LOS S BY HOLDING THAT THE ASSESSEES INCOME IS EXEMPT U/S 10(23C)(VI ) AND THERE IS NO PROVISION IN THE ACT FOR ANY CARRY FORWARD OF LO SS FROM ONE YEAR TO ANOTHER YEAR BECAUSE THEY COULD NOT BE SET OFF A GAINST ANY INCOME AT THE INCOME IN SUCCEEDING YEAR IS ALSO EXE MPT. THE LD. CIT(A) AS ALSO DISTINGUISHED THE CASE LAWS RELIED B Y THE ASSESSEE IN THE CASE OF GUJRATI SAMAJ OF HON'BLE MP HIGH COU RT 204 TAXMAN 151 BY OBSERVING THAT THESE CASES WERE DECID ED WITH REFERENCE TO SECTION 11 OF THE ACT, HENCE NOT APPLI CABLE TO THE PROVISION OF SECTION 10(23C)(VI) OF THE ACT. HOWEVE R, THE PROVISIONS OF SECTION 11 ARE ALSO APPLICABLE TO CHA RITABLE TRUST, WHERE THE INCOME OF THE ASSESSEE IS HELD TO BE EXEM PT. SIMILARLY THE PROVISIONS OF SECTION 10(23C)(VI) IS ALSO AKIN TO THE SECTION 11 OF THE I.T. ACT. THEREFORE, THE RATIO OF DECISION O F HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF GUJRATI SA MAJ (SUPRA) IS DULY APPLICABLE TO THE PRESENT CASE OF THE ASSESSEE . 6. ON THE OTHER HAND THE LD. DR RELIED ON THE ORDERS O F THE LOWER AUTHORITIES. N.T. THOMAS MEMORIAL EDUCATIONAL & SOCIETY I.T.A. N O.139 & 150 /IND/2015/A.Y.: 11-12 PAGE 5 OF 11 7. WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. GUJ RATI SAMAJ [2012] 349 ITR 559 (MP) WHEREIN PARA 8 OF THE SAID DECISION THE HON'BLE HIGH COURT HAS OBSERVED AS UNDER: COMING TO THE NEXT QUESTION AS TO WHETHER THE ORDER OF THE TRIBUNAL HOLDING THAT THE ASSESSEE IS ENTITLED FOR CARRY FORWARD AND SET OFF EXCESS OF EXPENDITURE INC URRED DURING THE YEAR OVER ITS INCOME. WE FIND THAT IN VI EW OF SECTION 11(1)(A) OF THE ACT, IT CANNOT BE SAID THAT THE EXPENDITURE INCURRED IN THE EARLIER YEAR CANNOT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND UTILIZ ATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF THE E ARLIER YEAR WOULD NOT AMOUNT TO SUCH INCOME BEING APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. HAVING REGARD TO SECTION 11(1)(A) OF THE ACT, IN OUR VIEW, WHEN THE INCOME OF THE TRUST IS USED OR PUT TO USE TO MEET THE CHAR ITABLE OR RELIGIOUS PURPOSES, IT IS APPLIED FOR CHARITABLE PURPOSE AND THE SAID APPLICATION OF THE INCOME FOR CHARITAB LE OR RELIGIOUS PURPOSES TAKES PLACE IN THE YEAR IN WHICH THE INCOME FOR CHARITABLE AND RELIGIOUS PURPOSES HAVE B EEN INCURRED IN THE EARLIER YEAR AND THE SAID EXPENSES ARE ADJUSTED AGAINST THE INCOME OF A SUBSEQUENT YEAR, T HE INCOME OF THAT YEAR CAN BE SAID TO HAVE BEEN APPLI ED FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE YEAR I N WHICH EXPENSES INCURRED FOR CHARITABLE AND RELIGIOU S PURPOSES HAD BEEN ADJUSTED. THERE ARE NO WORDS OF LIMITATION IN SECTION 11(1)(A) OF THE ACT EXPLAININ G THAT THE INCOME SHOULD HAVE BEEN APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES ONLY IN THE YEAR IN WHICH THE IN COME HAD ARISEN [SEE CIT V. MAHARANA OF MEWAR CHARITABLE FOUNDATION, [1987] 164 ITR 439 (RAJ.)]. IN OUR CONSIDERED VIEW, THE TRIBUNAL HAS RIGHTLY APPLIED T HE RATIO OF THE JUDGMENT AND ORDER PASSED BY THE DIVIS ION BENCH OF THE RAJASTHAN HIGH COURT IN CIT V. MAHARAN A N.T. THOMAS MEMORIAL EDUCATIONAL & SOCIETY I.T.A. N O.139 & 150 /IND/2015/A.Y.: 11-12 PAGE 6 OF 11 OF MEWAR CHARITABLE FOUNDATION, [1987] 164 ITR 439 (RAJ.) AND COMMITTED NO ERROR IN HOLDING THIS ISSUE IN FAVOUR OF THE ASSESSEE. 8. WE ARE OF THE VIEW THAT EXCESS EXPENDITURE INCURRED FOR CHARITABLE PURPOSES IN THE YEAR IS LIABLE TO BE ADJ USTED AGAINST THE INCOME OF THE SUCCEEDING YEAR WHICH COMPUTING T AXABLE INCOME OF THE SUCCEEDING YEAR. SINCE, THE PROVISIO N OF SECTION 10(23C)(VI) AND SECTION 11 ARE APPEARING ON THE CHA PTER 3 UNDER THE HEAD EXEMPT INCOME SIMILARLY THE PROVISION OF SECTION 10(23C)(VI) FALLS UNDER THAT CHAPTER 3 AND BOTH SEC TION ALLOW EXEMPTION OF INCOME, AND DEALS WITH CHARITABLE TRUS TS, HENCE, PROVISION HAS THE SIMILARITY. FURTHER, THE HON'BLE HIGH COURT IN ABOVE CASE HAS HELD THAT THE EXPENDITURE OF THE EAR LIER YEAR CAN BE SET OFF AGAINST THE INCOME OF SUBSEQUENT YEAR. T HEREFORE, RESPECTFULLY FOLLOWING DECISION OF THE HON'BLE JURI SDICTIONAL HIGH COURT IN THE CASE OF GUJRATI SAMAJ (SUPRA), THE CLA IM OF EXCESS EXPENDITURE OF THE ASSESSEE IS DIRECTED TO BE ALLO WED IN SUBSEQUENT YEAR SUBJECT TO ACTUAL EXPENDITURE/DEFIC IT AGAINST THE RECEIPTS OF SUCCEEDING YEAR, IF REMAINED AVAILABLE AFTER DETERMINING THE FINAL ASSESSED INCOME AND GIVING AP PEAL EFFECT. THIS GROUNDS OF APPEAL, IS ACCORDINGLY ALLOWED. N.T. THOMAS MEMORIAL EDUCATIONAL & SOCIETY I.T.A. N O.139 & 150 /IND/2015/A.Y.: 11-12 PAGE 7 OF 11 9. GROUND NO. 2 RELATES TO NOT ACCEPTING THE CLAIM OF ASSESSEE U/S 11 OF THE ACT. 10. THE LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED TH IS GROUND, THEREFORE, THE SAME IS TREATED AS DISMISSED AS NOT PRESSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. I.T.A. NO. 150/IND/2015 REVENUES APPEAL.: 12. GROUND NO. 1 RELATES TO DELETION OF ADDITION OF RS. 40,00,000/- MADE U/S 68 OF THE ACT. 13. BRIEFLY STATED THE FACTS ARE THAT, THE AO MADE AN A DDITION OF RS. 40,00,000/- ON THE GROUND THAT THE ASSESSEE HAS SHOWN M/S NITIN & COMPANY AS ITS SUNDRY CREDITOR FOR RS. 40,0 0,000/-, BUT M/S NITIN & COMPANY HAS DENIED OF ANY SUCH CREDIT B ALANCE. HOWEVER, DURING THE COURSE OF APPELLATE PROCEEDINGS IT WAS EXPLAINED THAT M/S NITIN & COMPANY HAS CARRIED OUT THE CONSTRUCTION OF SCHOOL AS A CONTRACTOR FOR RS. 84,0 0,000/- FOR THE ASSESSEE. A PART OF THIS BILL IS PAID IN THE YEAR U NDER CONSIDERATION AS ADVANCE ON WHICH TDS WAS ALSO DE DUCTED IN THE YEAR 2011. FOR THAT REASON ALONE A PART OF THIS AMOUNT OF RS. 40,00,000/- WAS SHOWN BY THE ASSESSEE AS OUTSTANDIN G CREDIT BALANCE IN THE NAME OF NITIN & COMPANY IN ASSESSMEN T YEAR N.T. THOMAS MEMORIAL EDUCATIONAL & SOCIETY I.T.A. N O.139 & 150 /IND/2015/A.Y.: 11-12 PAGE 8 OF 11 2011 ITSELF. THE CIT(A) AFTER EXAMINING THE FACTS, DELETED THE ADDITION OF RS. 40,00,000/- MADE U/S 68 OF THE ACT. 14. THE LD. DR RELIED ON THE ORDER OF THE AO. 15. THE LD. COUNSEL SUBMITTED THAT M/S NITIN & COMPANY HAS CARRIED OUT THE CONSTRUCTION WORK FOR THE ASSESSEE FOR THE TOTAL AMOUNT OF RS. 84,00,000/-. THE BILL RECEIVED ON 4.4 .2011. IT WAS SUBMITTED THAT A JOURNAL ENTRY BY DEBITING TO THE B UILDING ACCOUNT AND CREDITING THE CONTRACTORS ACCOUNT WAS PASSED. THE BILL HAS BEEN RECEIVED ON 4.4.2011 WHICH CLEARLY SH OWS THAT THE BUILDING WAS COMPLETED UP TO 31.03.2011 TO THE TUNE OF RS. 85,00,000/-. THE ASSESSEE HAS MADE THE PAYMENT FOR THIS BILL BY DD ISSUED DIRECTLY BY THE BANK FROM THE LOAN ACCOUN T ON 11.04.2011 AND THE T.D.S. PAYMENT IS MADE ON 15.4.2 011. THEREFORE, THE CREDIT TO THE CONTRACTOR WAS CORRECT LY GIVEN AS PER HIS BILL AND THERE IS NO QUESTION OF MAKING ANY ADD ITION AS A CASH CREDIT. EVEN OTHERWISE, THIS WAS MERELY A JOURNAL E NTRY AND THERE IS NO QUESTION OF MAKING SUCH ADDITION. 16. WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAD PAID A SUM OF RS. 44,00,000/- AS ADVAN CE FOR THE CONTRACT WORK DONE FOR RS.84,00,000/- AND HAS PROVI DED AN N.T. THOMAS MEMORIAL EDUCATIONAL & SOCIETY I.T.A. N O.139 & 150 /IND/2015/A.Y.: 11-12 PAGE 9 OF 11 AMOUNT OF RS. 40,00,000/- BY DEBITING THE BUILDING ACCOUNT AND CREDITING THE CONTRACTORS ACCOUNT. THE BILL OF RS. 84,00,000/- WAS RECEIVED ON 4.4.2011. WE FIND THAT THIS IS A JO URNAL ENTRY OF PAYMENT OF RS. 40,00,000/- WHICH WAS MADE THROUGH B ANKING CHANNEL. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ACCORDINGLY, THIS GROUNDS OF APPEAL OF THE REVENUE IS REJECTED. 17. GROUND NO. 2 OF REVENUE RELATES TO DELETION OF RS. 3,98,892/- MADE ON ACCOUNT OF EXCESS DEPRECIATION H OLDING THAT THE ASSESSEE IS ENTITLED FOR ALLOWING THE DEPR ECIATION OF HIGHER RATE OF 30% AS AGAINST 15% ALLOWABLE. 18. FACTS FROM THE ASSESSMENT ORDER AND APPELLATE ORDER REVEALS THAT THE AO FOUND THAT THE ASSESSEE HAS CLAIMED DEP RECIATION OF RS. 7,97,786/- BEING @ 30% ON BUSES OWNED AND USED BY THE ASSESSEE AS CONVENIENCE TO AND FROM THE STUDENTS OF THE INSTITUTION, WHEREAS HIGHER RATE OF DEPRECIATION IS ALLOWED TO BUSES WHICH ARE USED FOR TRANSPORT BUSINESS, HENCE, DEPRECIATION SO CLAIM WAS RESTRICTED TO 15% RATE AS APPLICABLE F OR MACHINERY. THIS RESULTED IN DISALLOWANCE OF RS. 3,98,892/-. 19. BEING, NOT SATISFIED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) DELETED THE DISALLOWANCE SO MADE BY N.T. THOMAS MEMORIAL EDUCATIONAL & SOCIETY I.T.A. N O.139 & 150 /IND/2015/A.Y.: 11-12 PAGE 10 OF 11 HOLDING THE BUSES WERE USED AS PROFESSION LINE FOR SAFETY AND SECURITY OF CHILDREN, ON WHICH HIGHER RATE OF DEPRE CIATION IS ELIGIBLE. 20. BEING AGGRIEVED THE REVENUE FILED THIS APPEAL BEFO RE THE TRIBUNAL. THE LD. SENIOR DR RELIED ON THE ORDER OF THE AO, AND SUBMITTED THAT BUSES ARE USED AS CONVEYANCE OF STUD ENTS OF INSTITUTION, HENCE, THE AO WAS CORRECT IN MAKING SU CH DISALLOWANCE. 21. PER CONTRA, THE LD. AR SUPPORTED THE ORDER OF THE L D. CIT(A) AND SUBMITTED THAT BUSES WERE USED IN A PROFESSION, HENCE, LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE. 22. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE T HROUGH THE ORDERS OF THE LOWER AUTHORITIES, AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE IS O WNER OF THE BUSES. THESE BUSES ARE BEING USED FOR TRANSPORT OF THE STUDENTS OF INSTITUTION TO AND FRO RESIDENCE OF CHILDREN TO THE CLASSROOM ONLY WHICH CANNOT BE SAID AS BEING USED FOR BUSINES S TRANSPORT BUSINESS OR RUNNING THEM ON HIGHER. WE FIND THAT HI GHER DEPRECIATION WILL ALSO BE ADMISSIBLE ON MOTOR LORRI ES USED IN THE ASSESSEES BUSINESS OF TRANSPORTATION OF GOODS ON H IRE. THE HIGHER RATE OF DEPRECIATION HOWEVER WILL NOT APPLY IF THE MOTOR BUSES, N.T. THOMAS MEMORIAL EDUCATIONAL & SOCIETY I.T.A. N O.139 & 150 /IND/2015/A.Y.: 11-12 PAGE 11 OF 11 MOTOR LORRIES ETC. ARE USED IN SOME OTHER NON-HIRIN G BUSINESS OF THE ASSESSEE. THEREFORE, THE ASSESSEE IS NOT ENTITL ED TO CLAIM OF HIGHER RATE OF DEPRECIATION. ACCORDINGLY, THIS GROU NDS OF APPEAL IS ALLOWED IN FAVOUR OF REVENUE AND ORDER OF LD. CIT( A) ON THIS ISSUE IS SET ASIDE. 23. IN THE RESULT THE APPEAL OF THE REVENUE IS PARTLY A LLOWED. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE AS WELL AS REVENUE IS PARTLY ALLOWED. 25. THE ORDER PRONOUNCED IN THE OPEN COURT ON 29 .03. 2017. SD/- SD/- DATED: 29 TH MARCH,2017. SB* ( .. ) /(C.M. GARG) (..) /(O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER