Asst. Director Of Income Tax(Exemption)-I, Hyderabad V. Nice Foundation, Hyderabad

ITA 1431/HYD/2013

• Counselvise Citation: 143122514 RSA 2013
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 31-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Assessee Lawyers: A V RAGHURAM
• Keywords: Charitable institution; Capital expenditure
• Section: 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND S HRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1430 AND 1431/HYD/13 ASSESSMENT YEARS 2005-06 AND 2006-07. ASST. DIT (E)-I, -V- NICE FOUNDATION, HYDERABAD. MASABTANK, H YDERABAD. PAN:AAATN 9395H (APPELLANT) (RESPONDENT) APPELLANT BY SHRI B. YADAGIRI RESPONDENT BY SHRI A.V. RAGHU RAM DATE OF HEARING 01-01-2014. DATE OF PRONOUNCEMENT 10-O1-2014 ORDER PER SAKTIJIT DEY, J.M: THESE TWO APPEALS ARE FILED BY THE DEPARTMENT AGA INST COMMON ORDER DATED 16-8-2013 OF CIT (A)-IV, HYDERABAD PERT AINING TO THE ASSESSMENT YEARS 2005-06 AND 2006-07. SINCE COMMON AND IDENTICAL ISSUES ARE INVOLVED IN THESE TWO APPEALS, THESE ARE HEARD, CLUBBED TOGETHER AND DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. BOTH THESE DEPARTMENTAL APPEALS HAVE BEEN FILED ON THE FOLLOWING COMMON GROUNDS:- 1. THE ORDER OF THE LD. CIT (A) IS ERRONEOUS BOTH ON F ACTS AND IN LAW. 2 ITA NOS.1430 AND 1431 OF 2013 NICE FOUNDATION, HYDERABAD. 2. THE LD. CIT (A) ERRED IN HOLDING THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 12A FOLLOWING THE DECISION OF INCOME- TAX APPELLATE TRIBUNAL IN THE APPELLANTS OWN CASE FOR THE ASST. YEAR 2007-08. IT IS PERTINENT TO MENTION HERE THAT THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL IN ITA NO.2039/HYD/2011, FOR THE SAID ASST. YEAR 2007-08, WHEREIN THE TRIBUNAL HAS HELD THAT NON CONSIDERATION OF APP LICATION U/S 12A WITHIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE I.T.A.T ORDER HAS BEEN RECEIVED, WOULD BE A DEEMED GRANT OF REGISTRATION. THE DEPARTMENT HAS N OT ACCEPTED THE DECISION OF I.T.A.T AND FILED A FURTHE R APPEAL BEFORE THE HONBLE HIGH COURT OF ANDHRA PRADESH WHI CH IS PENDING. 3. THE LD. CIT (A) OUGHT TO HAVE APPRECIATED THE FA CT THAT THE TIME LIMIT OF SIX MONTHS FIXED BY SECTION 12AA(2) I S APPLICABLE FOR FRESH APPLICATION BY A TRUST/INSTITU TION SEEKING REGISTRATION U/S 12A AND NO TIME LIMIT IS PRESCRIBE D IN SECTION 153 OF THE ACT WHEN ANY SUCH MATTER IS SET ASIDE BY THE HONBLE I.T.A.T TO THE FILE OF DIT(E)/CIT (A). 4. THE LD. CIT (A) OUGHT TO HAVE UPHELD THE ORDER O F THE ASSESSING OFFICER SINCE THE APPELLANT HAS NOT BEEN GRANTED REGISTRATION U/S 12A, THE QUESTION OF TIED UP GRANT S DOES NOT ARISE AND HENCE THE EXPENDITURE HAS BEEN TREATED AS CAPITAL EXPENDITURE. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. SINCE FACTS INVOLVED IN BOTH THESE APPEALS ARE ID ENTICAL, FOR THE SAKE OF BREVITY, WE DEAL WITH THE FACTS AS MENTIONED IN ITA NO.1430/HYD/2013 PERTAINING TO THE ASSESSMENT YEAR 2005-06. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A TRUST REGISTERED U/S 12A OF THE ACT WITH EFFECT FROM 1-4-2007. FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE FILED ITS RETURN OF INCOME ON 26-10-20 07 DECLARING NIL 3 ITA NOS.1430 AND 1431 OF 2013 NICE FOUNDATION, HYDERABAD. INCOME AFTER CLAIMING EXEMPTION U/S 11 OF THE ACT. DURING SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAD RECEIVED DONATIONS OF RS.15 LAKH FROM NANDI FO UNDATION DURING THE YEAR. IN RESPONSE TO THE QUERY MADE BY THE ASSESSI NG OFFICER THOUGH THE ASSESSEE FURNISHED PROOF FOR DONATION IN THE SHAPE OF BANK STATEMENT AND BOOKS OF ACCOUNTS, THE ASSESSING OFFICER TREATED TH E DONATION RECEIVED AS INCOME OF THE ASSESSEE ON THE GROUND THAT THERE WAS NO REGISTRATION U/S 12A OF THE ACT FOR THE IMPUGNED ASSESSMENT YEAR. T HE ASSESSING OFFICER FURTHER DENIED THE CLAIM OF EXPENDITURE BY TREATING IT AS CAPITAL EXPENDITURE ON THE GROUND THAT ACTIVITY OF THE ASSE SSEE WAS NOT COMMENCED. BEING AGGRIEVED OF THE ASSESSMENT, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A). 4. IN APPEAL, BY FOLLOWING THE ORDER PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD BENCH IN CASE OF THE SAME ASSESSEE FOR ASSESSMENT YEAR 2007-08 IN ITA NO.2039/HYD/11 AND I TA NO.268/HYD/2012 DATED 8-8-2012, THE CIT (A) ALLO WED THE APPEALS OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE IS ENTITL ED TO CLAIM EXEMPTION U/S 11 OF THE ACT FOR THE IMPUGNED ASSESSMENT YEAR S ALSO. BEING AGGRIEVED OF THE AFORESAID ORDER OF THE CIT (A), TH E DEPARTMENT IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL ON RECORD. THOUGH THE LEARNED DR AT THE OUTSET CONTENDED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE INCOME-TAX APPELLATE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2007-08 VI DE ORDER PASSED IN ITA NO.2039/HYD/2011 AND ITA NO.268/HYD/2012 DATED 8-8-2012 BUT AT THE SAME TIME, HE CONTENDED THAT THE CIT (A) SHOULD NOT HAVE FOLLOWED THE ORDER OF THE TRIBUNAL AND GRANTED RELIEF TO THE ASSESSEE SINCE THE TIME LIMIT OF SIX MONTHS FIXED BY SECTION 12AA(2) IS APP LICABLE FOR FRESH APPLICATION SEEKING REGISTRATION U/S 12A AND NOT T O PENDING APPLICATIONS. THE LEARNED DR CONTENDED THAT THE DEPARTMENT HAS AL SO FILED AN APPEAL 4 ITA NOS.1430 AND 1431 OF 2013 NICE FOUNDATION, HYDERABAD. BEFORE THE HONBLE AP HIGH COURT AGAINST THE ORDER PASSED BY THE INCOME- TAX APPELLATE TRIBUNAL. 6. THE LEARNED AR, ON THE OTHER HAND, STRONGLY SUPP ORTING THE ORDER OF THE CIT (A) SUBMITTED THAT WHEN THE DIT (E) HAD PAS SED THE ORDER, THE PROVISIONS OF SEC.12AA WERE NOT AMENDED AND THE OL D PROVISION WAS STILL PREVAILING, CONSIDERING WHICH THE TRIBUNAL HAD PASS ED THE ORDER DATED 8- 8-2012 IN THE SUBSEQUENT ASSESSMENT YEAR 2007-08. HE FURTHER CONTENDED THAT EVEN THOUGH THE DEPARTMENT MIGHT HAV E FILED AN APPEAL BEFORE THE HONBLE HIGH COURT CHALLENGING THE ORDE R OF THE TRIBUNAL BUT THAT ITSELF WOULD NOT MAKE THE ORDER OF THE TRIBUN AL INOPERATIVE. 7. HAVING CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDER PASSED BY THE CO-ORDINATE BENCH OF THIS TRIBU NAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 (SUPRA), WE FI ND THAT THE CO- ORDINATE BENCH WHILE CONSIDERING IDENTICAL FACTS OF TAXING THE DONATION RECEIVED FROM NANDI FOUNDATION DUE TO ABSENCE OF R EGISTRATION U/S 12A OF THE ACT HELD AS UNDER:- 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDE RS OF THE AUTHORITIES BELOW. 7. GROUND NO.1 IS GENERAL IN NATURE. 8. GROUND NO. 4 REGARDING REGISTRATION U/S 12A, IS DISPOSED OF AS UNDER:- 9. IN THE CASE OF SOCIETY FOR THE PROMOTION OF EDUC ATION ADVENTURE SPORT & CONSERVATION OF ENVIRONMENT VS. C IT & ORS., [2008] 5 DTR (ALL.) 329, THE HONBLE ALLAHABA D HIGH COURT HELD AS UNDER:- CHARITABLE TRUST-REGISTRATION U/S 12A EFFECT OF N ON-PASSING OF ORDER WITHIN THE TIME-LIMIT- TAKING THE VIEW THA T NON- CONSIDERATION OF THE REGISTRATION APPLICATION WITH IN THE TIME FIXED BY S. 12AA(2) WOULD RESULT IN DEEMED REGISTRA TION, MAY AT THE WORST CAUSE LOSS OF SOME REVENUE OR INCOME-T AX 5 ITA NOS.1430 AND 1431 OF 2013 NICE FOUNDATION, HYDERABAD. PAYABLE BY THE INDIVIDUAL ASSESSEE ON THE OTHER H AND, IF A CONTRARY VIEW IS TAKEN, IT WOULD LEAVE THE ASSESSEE TOTALLY AT THE MERCY OF THE IT AUTHORITIES INASMUCH AS THE ASS ESSEE HAS NOT BEEN PROVIDED ANY REMEDY UNDER THE ACT AGAINST NON- DECISION MOREOVER, THE FORMER VIEW FURTHERS THE O BJECT AND PURPOSE OF THE STATUTORY PROVISION THUS, THE BETT ER INTERPRETATION WOULD BE TO HOLD THAT THE EFFECT OF NON- CONSIDERATION OF THE APPLICATION FOR REGISTRATION U /S 12A WITHIN THE TIME FIXED BY S. 12AA(2) WOULD BE A DEEM ED GRANT OF REGISTRATION. 10. IN THE CASE OF SARDARILAL OBERAI MEMORIAL CHART IABLE TRUST VS. ITO, 3 SOT 229 (DELHI), IT HAS BEEN HELD THAT THE CIT(A) HAVING PASSED NO ORDER OF REFUSAL WITHIN THE TIME PERIOD OF SIX MONTHS PRESCRIBED IN SECTION 12AA(2) OF THE ACT, APPLICATION U/S 12A FOR REGISTRATION OF TRUST SHALL BE DEEMED TO HAVE BEEN ALLOWED. 11. IN THE CASE OF REV FATHER TRUST OSCAR COLASCO MEMORIAL MEDICAL ASSOCIATION VS. CIT, [2009] 31 SOT 1 (MUMBA I), THE HONBLE MUMBAI HIGH COURT HELD THAT AS THE CIT IN T HE PRESENT CASE HAS FAILED TO INITIATE THE ENQUIRY IN TIME TO COMPLETE THE PROCESS OF GRANT OF REGISTRATION WITHIN THE STIPULA TED PERIOD OF SIX MONTHS AND AS THE ORDER HAS NOT BEEN PASSED WITHIN THE TIME-LIMIT PRESCRIBED, THE APPLICATION IS DEEMED TO HAVE BEEN GRANTED. THE ORDER OF THE CIT REFUSING THE REGISTRA TION IS A NULLITY AND IS QUASHED. THE REGISTRATION IS DEEMED TO HAVE BEEN GRANTED TO THE ASSESSEE. CIT VS. SOHAN LAL CHH AJAN MAL [2009] 222 CTR (P&H) 190: [2008] 307 ITR 53 (P&H), BHAGWAD SWARUP SHRI SHRI DEVRAHA BABA MEMORIAL SHRI HARI PARMARTH DHAM TRUST VS. CIT [2007] 111 TTJ (DEL)( ( SB) 424: [2007] 17 SOT 281 (DEL)(SB) AND DHARMA SANSTHAPAK S ANGH (NIYAS) VS. CIT [2008] 118 TTJ (DEL) 823 FOLLOWED. 6 ITA NOS.1430 AND 1431 OF 2013 NICE FOUNDATION, HYDERABAD. 12. IN VIEW OF THE RATIO LAID DOWN IN THE ABOVE DEC ISIONS, THE EFFECT OF NON-CONSIDERATION OF THE APPLICATION FOR REGISTRATION U/S 12A WITHIN THE TIME FIXED BY SECTION 12AA(2) WO ULD BE A DEEMED GRANT OF REGISTRATION. THUS, GROUND NO. 4 RA ISED BY THE ASSESSEE IS ALLOWED 13. AS REGARDS GROUNDS NOS. 2 & 3 REGARDING RECEIPT OF GRANTS, IT IS OBSERVED THAT THE GRANTS RECEIVED BY THE ASSESSEE ARE FROM NANDI FOUNDATION AND ARE IN THE N ATURE OF TIED-UP GRANTS TO BE USED TOWARDS CONSTRUCTION OF NICE INSTITUTE PROJECT. ALL THE RECORDS RELATING TO THIS HAVE BEEN PRODUCED BY THE ASSESSEE BEFORE THE LOWER AUTHORITI ES. THE HYDERABAD ITAT HAS HELD IN THE CASE OF NIRMAL AGRICULTURAL SOCIETY (71 ITD 152) AND SOCIETY FOR INTEGRATED DEV ELOPMENT IN URBAN & RURAL AREAS (90 ITD 493) THAT TIED-UP GRANTS, EVEN IF REGISTRATION U/S 12A IS NOT AVAILABLE, CANNOT BE TAXED AS INCOME. FOLLOWING THE ABOVE DECISIONS OF THE ITAT H YDERABAD, IN THE PRESENT CASE, WE POINT OUT THAT REGISTRATION U/S 12A IS DEEMED, THEREFORE, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUND NOS. 2 & 3 ARE ALLOWE D. 8. AS CAN BE SEEN FROM THE AFORESAID ORDER OF THE C O-ORDINATE BENCH, THE INCOME-TAX APPELLATE TRIBUNAL HAS NOT ONLY HELD THAT NON CONSIDERATION OF APPLICATION FOR REGISTRATION U/S 1 2A WITHIN THE TIME FIXED U/S 12AA(2) WOULD AMOUNT TO GRANT OF DEEMED REGISTR ATION U/S 12A OF THE ACT BUT IN PARA-13 OF THE ORDER, THE CO-ORDINATE BE NCH FOLLOWING ANOTHER DECISION OF THE SAME BENCH IN THE CASE OF NIRMAL AG RICULTURAL SOCIETY (71 ITD 493) HELD THAT TIED-UP GRANTS, EVEN IF REGISTRA TION U/S 12A IS NOT AVAILABLE, CANNOT BE TAXED AS INCOME. IT IS TO BE NOTED THAT THE CIT (A) ON CONSIDERING THE IDENTICAL FACTS AND CIRCUMSTANCE S HAS FOLLOWED THE AFORESAID DECISION OF THE CO-ORDINATE BENCH WHICH I S BINDING ON HER. FURTHERMORE, MERE FILING OF AN APPEAL BEFORE THE H ONBLE HIGH COURT 7 ITA NOS.1430 AND 1431 OF 2013 NICE FOUNDATION, HYDERABAD. AGAINST THE ORDER OF THE TRIBUNAL WOULD NOT MAKE TH E ORDER IN-OPERATIVE. IN THE CIRCUMSTANCES, THE CIT (A) HAVING FOLLOWED T HE ORDER PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER WHICH IS ACCORDINGLY UPHELD. ITA NO.1431/HYD/13- A.YR. 2006-07: - ISSUE BEING COMMON AND FACTS ALSO BEING IDENTICAL, FOLLOWING OUR DECISION IN ITA NO.1430/HYD/13 PERTAINING TO ASSESSMENT YEAR 2005-06 (SUPRA), WE D O NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A) FOR THIS ASSE SSMENT YEAR ALSO WHICH IS ACCORDINGLY UPHELD. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE DEP ARTMENT STAND DISMISSED. ORDER PRONOUNCED IN THE COURT ON 10-01-2014. SD/ - (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 10 TH JANUARY, 2014. JMR* COPY TO:- 1) ASST. DIRECTOR OF INCOME (E)-I, 3 RD FLOOR, AAYAKAR BHAVAN, HYDERABAD. 2) NICE FOUNDATION, 10-2-247 & 248, OPP. TO EMPLOYMENT EXCHANGE, SHANTINAGAR, MASABTANK, HYDERABAD. 3) DIT (E)-I, HYDERABAD. 4) CIT (A)-IV, HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. 8 ITA NOS.1430 AND 1431 OF 2013 NICE FOUNDATION, HYDERABAD. 9 ITA NOS.1430 AND 1431 OF 2013 NICE FOUNDATION, HYDERABAD.