SANTOKBA DURLABJI TRUST FUND, Jaipur V. CIT-EXEMPTION, Jaipur

ITA 148/JPR/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5404 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 19-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEENA CIT DHK
• Assessee Lawyers: G G MUNDRAC A
• Keywords: Charitable institution; Prejudicial to interest; Benefit of exemption
• Section: 143(3); 260A; 263; 12; 10; 11

Judgement Text

+VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO.148/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 M/S SANTOKBA DURLABJI TRUST FUND, 139, JOHARI BAZAR, JAIPUR CUKE VS. COMMISSIONER OF INCOME TAX (EXEMPTIONS), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AADFS 7665 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI G.G. MUNDRA(C.A.) JKTLO DH VKSJ LS@ REVENUE BY :S HRI M.S. MEENA (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19.04.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 19/04/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT (EXEMPTIONS), JAIPUR DATED 08.02.2016 WHEREIN THE A SSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: (1) THE LD. CIT(EXEMPTION) IS WRONG AND HAS ERRED IN L AW IN INVOKING THE PROVISIONS OF SECTION 263 OF IT ACT, 1961 IN CASE OF ASSESSEE TRUST IS AS MUCH AS THE ASSESSMENT ORDER PASSED BY LD. AO IS NE ITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. THE IMPUGN ED ORDER PASSED BY LD. CIT(A)(EXEMPTION) IS WITHOUT JURISDICTION. (2) THE LD. CIT(EXEMPTION) IS WRONG AND HAS ERRED I N LAW IN NOT CONSIDERING THE CONTENTION OF ASSESSEE TRUST THAT EVEN BY HOLDI NG THE SHARES OF TISCO BY ASSESSEE TRUST IN CONTRAVENTION OF SECTION 13(1) (D) WAS NOT TANTAMOUNT TO DENIAL OF EXEMPTION U/S 11 & 12 OF TH E TOTAL INCOME OF ASSESSEE TRUST BUT ONLY THAT PART OF INCOME DERIVED FROM HOLDING OF THOSE SHARES IS NOT ENTITLED TO EXEMPTION U/S 11 & 12 OF THE IT ACT, 1961 AND ITA NO. 148/JP/16 M/S SANTOKBA DURLABJI TRUST FUND JAIPUR VS. CIT(EX EMPTIONS), JAIPUR 2 THAT PART OF INCOME DERIVED FROM HOLDING OF SHARES WILL THEREAFTER BE SUBJECT TO OTHER PROVISIONS OF IT ACT, 1961 SUCH AS SECTION 10 OF IT ACT, 1961 AND DIVIDEND INCOME FROM SHARES AND GAIN DERIV ED FROM SALE OF SHARES WILL BE EXEMPT RESPECTIVELY U/S 10(34) & 10( 38) OF IT ACT, 1961. (3) THAT THE LD. CIT(EXEMPTION) FAILED TO APPRECIAT E THAT IN ACCORDANCE WITH LAW THE INCOME OF ASSESSEE TRUST WILL WORK OUT TO N IL AS ASSESSED BY LD. AO AT NIL IN ASSESSMENT ORDER. THUS ASSESSMENT ORD ER PASSED BY LD AO CAN NEITHER BE CALLED ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE AND PROVISIONS OF SECTION 263 OF IT ACT, 1961 ARE I NAPPLICABLE. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE APPEL LANT TRUST HAS FILED ITS RETURN OF INCOME FOR AY 2011-11 DECLARING TOTAL INC OME OF RS. NIL ON 29.09.2011 WITH ITO, WARD 1(1), JAIPUR WHICH WAS SE LECTED FOR SCRUTINY AND THE ASSESSMENT ORDER U/S 143(3) WAS PASSED BY THE ACIT CIRCLE-1, JAIPUR DATED 10.05.2013 AND THE INCOME WAS ASSESSED AT RS. NIL. SUBSEQUENTLY, A SHOWCAUSE NOTICE U/S 263 WAS ISSUED BY THE CIT-I, JAIPUR VIDE LETTER NO.162 DATED 9/16.05.2014 WHICH READS AS UNDER: IN THE BALANCE SHEET AS ON 31.03.2011, THE ASSESSE E HAS SHOWN RS.51,13,393/- AS INVESTMENT IN SHARES OF TISCO LTD . WHICH IS NOT A PUBLIC SECTOR COMPANY. IN VIEW OF THE PROVISION OF SECTION 13(1) (D)(III) OF THE ACT, IT APPEARS THAT THE ASESESSEE HAS VIOLATED THE PROVISIONS OF S ECTION 13(1)(D) OF IT ACT, 1961.IT HELD DURING THE YEAR UNDER CONSIDERATION, N ON PUBLIC SECTOR COMPANYS SHARES AND HAS NOT DISPOSED OF OR CONVERTED THEM INTO GOVT. COMPANY SHARES UPTO 30 TH NOV.1983 OR 1 ST MARCH1993, AS PER PROVISIONS OF SECTION 13(1)(D). DUE TO VIOLATION, ASSESSEE TRUST IS NOT ENTITLED TO EX EMPTION U/S 11. ON SIMILAR ISSUE, ADDITION HAS BEEN MADE IN A.Y.2004-05, 2008- 09 & 2009-10. IN THE YEAR UNDER CONSIDERATION, THIS ISSUE WAS NOT EXAMINED AN D THE EXEMPTION U/S 11 WAS WRONGLY ALLOWED BY AO. IN VIEW OF THE ABOVE FACTS, THE CIT-1, JAIPUR IS OF THE OPINION THAT THE ASSESSMENT ORDER PASSED IN YOUR CASE U/S 143(3) FO R THE A.Y. 2011-12 ON 10.05.2013 IS ERRONEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY, THE CIT-1, JAIPUR PROPOSES TO REVISE T HE AFORESAID ASSESSMENT ORDER FOR A.Y. 2011-12 IN RESPECT OF ABOVE MENTIONED POI NT IN EXERCISE OF THE POWER VESTED U/S 263 OF THE ACT. 2.2 SUBSEQUENTLY, THE IMPUNGED ORDER PASSED U/S 263 OF THE ACT WAS PASSED BY THE LD. CIT (EXEMPTIONS), JAIPUR WHEREIN HE HAS HELD AS UNDER: ITA NO. 148/JP/16 M/S SANTOKBA DURLABJI TRUST FUND JAIPUR VS. CIT(EX EMPTIONS), JAIPUR 3 FROM THE AFOREMENTIONED PROVISIONS OF LAW, IT IS I MPERATIVE TO MENTION THAT THE ONLY REQUIREMENT FOR ATTRACTING THE PROVISIONS OF SECTION 13(1)(D)(III) IS SHAREHOLDING AND NOTHING MORE THAN THAT. IT IS ALS O WORTHWHILE TO DISCUSS THAT SIMILAR ISSUE WAS RAISED IN THE ASSESSEES CASE IN A.Y. 2004-05 WHEREIN THE AO HAS HELD THAT THE PROVISIONS OF SECTION 13(1)(D)(II I) ARE APPLICABLE AND BASED ON THESE FINDINGS THE ASSESSEES EXEMPTION U/S 11 WAS REJECTED. THE APPEAL FILED BY THE ASSESSEE WAS DISMISSED BY THE CIT(A) AND AGA INST THE ORDER OF THE LD. CIT(A), THE ASSESSEE FILED AN APPEAL BEFORE THE ITA T. THE HONBLE ITAT IN THE ASSESSEES CASE IN A.Y.2004-05 AND 2009-10 IN ITA N O. 241 & 242/JP/2014 VIDE ORDER DATED 13.03.2015 HAS ACCEPTED THE ASSESSEES CONTENTION AND HELD THAT THE PROVISIONS OF SECTION 13(1)(D)(III) ARE NOT APP LICABLE FOR THE REASONS DISCUSSED THEREIN. IN THIS REGARD IT IS ALSO WORTH WHILE TO MENTION THAT THE ORDER OF HONBLE ITAT IN A.Y. 2008-09 IN ITA NO.169 DATED 05.11.2014 AND IN A.Y. 2004-05 AND 2009-10 IN ITA NO.241 & 242/JP/2014 VID E ORDER DATED 13.03.2015 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT. FURTHER APPEAL U/S 260A HAS BEEN FILED BEFORE THE HONBLE RAJASTHAN HIGH CO URT, AS SUCH THE ASSESSEES CONTENTION THAT THE ISSUE HAS GOT FINALITY IN ITS F AVOUR IS NOT CORRECT. FURTHERMORE THE ORDER OF LD. CIT(A) FOR A.Y. 2004-0 5 IN ITA NO.599/2011-12 DATED 31.10.2014 IS DETAILED ONE WHEREIN THE ISSUE HAS BEEN DEALT WITH AFTER CONSIDERING THE AOS ORDER FOR A.Y. 2011-12 WHERE T HE ASSESSEE HAS BEEN ALLOWED BENEFIT OF EXEMPTION U/S 11 AND ALSO THE OT HER RELEVANT ASPECTS AS HAS BEEN FURNISHED BY THE ASSESSEE AND THEREAFTER THE L D. CIT(A) HAS UPHELD THE AOS ORDER ON THE BASIS OF HONBLE DELHI HIGH COUR TS DECISION IN THE CASE OF SHRI RADHA KRISHAN CHARITABLE TRUST IN ITA NO. 303 OF 2008. AS SUCH I AM SATISFIED THAT BY VIRTUE OF HOLDING OF SHARES OF TI SCO LTD. FOR PART OF THE YEAR PROVISIONS OF SECTION 213(1)(D)(III) OF THE ACT AS SUCH THE ASSESSEE IS NOT ELIGIBLE FOR CLAIMING EXEMPTION U/S 11 OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION AND LEGAL POSITION IT IS HELD THAT THE ASSESSEES CASE IS SQUARELY COVERED WITHIN THE PROVISIONS OF S ECTION 13(1)(D)(III) OF THE ACT AS SUCH THE ASSESSEE IS NOT ELIGIBLE FOR CLAIMING E XEMPTION U/S 11 AND 12 OF THE ACT. THUS, HOLDING OF TISCO SHARES BY THE ASSESSEE AND NOT DISALLOWING THE EXEMPTION BY THE AO IN ASSESSMENT ORDER IS ERRONEOU S IN SO FAR AS IT IS PREJUDICIAL TO INTEREST OF REVENUE. ACCORDINGLY, THE AO IS DIRECTED TO EXAMINE THE ISSUE OF HOLDING OF SHARES OF TISCO LTD. IN TH E LIGHT OF ABOVE DISCUSSION AND ALSO TO CONSIDER THE FINAL OUTCOME OF APPEAL ORDER AVAILABLE IN THE CASE OF ASSESSEE AT THE TIME OF FINALIZATION OR REASSESSME NT PROCEEDINGS. AS SUCH THE ORDER PASSED BY THE AO IS SET-ASIDE WITHIN THE MEAN ING OF SECTION 263 OF THE ACT TO AO TO DO DE-NOVO ASSESSMENT ON THE ISSUES D ISCUSSED AFTER PROVIDING ITA NO. 148/JP/16 M/S SANTOKBA DURLABJI TRUST FUND JAIPUR VS. CIT(EX EMPTIONS), JAIPUR 4 PROPER OPPORTUNITY TO THE ASSESSEE AND MAKING PROPE R INQUIRY AND ARRIVE AT A FACTUALLY AND LEGALLY CORRECT FINDING ON THESE ISSU ES. 2.3 LD AR SUBMITTED THAT THE HONBLE ITAT IN THE AS SESSEES CASE IN A.Y.2004-05 AND 2009-10 IN ITA NO. 241 & 242/JP/201 4 VIDE ORDER DATED 13.03.2015 HAS ACCEPTED THE ASSESSEES CONTENTION A ND HELD THAT THE PROVISIONS OF SECTION 13(1)(D)(III) ARE NOT APPLICA BLE. FURTHER. LD AR SUBMITTED THAT THE CIT(EXEMPTION) SIMILARLY CANCELLED ASSESSM ENT ORDERS PASSED BY THE AO FOR A.Y. 2005-06 & A.Y. 2010-11 IN CASE OF ASSES SEE BY INVOKING PROVISION OF SECTION 263 OF IT ACT . THE ASSESSEE TRUST FILED A PPEAL BEFORE THE HONBLE ITAT AGAINST SAID ORDERS AND HONBLE ITAT VIDE ITS ORDER DATED 24.07.2015 (ITA NO. 449/JP/15 AND 450/JP/15) HAS CANCELLED THE ORDER OF CIT(EXEMPTION) PASSED U/S 263. THUS THE ISSUE IS DIRECTLY COVERED IN FAV OUR OF ASSESSEE FROM SAID ORDERS OF ITAT, JAIPUR BENCH, JAIPUR PASSED IN CASE OF ASSESSEE. 2.4 THE FINDING OF THE COORDINATE BENCH IN THE CONT EXT OF SECTION 263 PROCEEDINGS VIDE ITS ORDER DATED 24.07.2015 IS AS U NDER: WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E MATERIAL ON RECORD. THE ASSESSEE IS A CHARITABLE TRUST RUNNING A HOSPITAL. THE TECHNICAL ISSUE ABOUT HOLDING OF TISCO SHARES AND DIVIDEND EARNED THEREO N HAS BEEN DECIDED BY A DETAILED ORDER BY THIS VERY BENCH. THUS AOS VIEW OF ALLOWING EXEMPTION U/S 11 TO ASSESSEE ON MERITS IS SUPPORTED BY ITAT ORDERS. WE FIND MERIT ON THE RELIANCE OF HONBLE SUPREME COURT JUDGEMENT IN THE CASE OF MALABAR INDUSTRIES (SUPRA ) SQUARELY HOLDING THAT IF THE VI EW ADOPTED BY AO IS THE POSSIBLE VIEW AND TENABLE IN LAW, THE ORDER CANNO T BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. MORE S O IN THE INSTANT CASE WHERE THE LD. CIT (EXEMPTIONS) PERFUNCTORILY HELD THAT AS THERE IS A POSSIBILITY OF APPEALING AGAINST THE ORDER OF ITAT, THEREFORE, TH E ORDER OF AO BECOMES ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E, IN OUR CONSIDERED OPINION, IT REFLECT NON-APPLICATION OF MIND TOWARDS THE MEAN ING AND SPIRIT OF PROVISIONS OF SECTION 263. WE FIND MERIT IN THE ARGUMENT OF L D. COUNSEL THAT THE POWERS ENSHRINED BY SECTION 263 CANNOT BE UTILIZED TO UNSE TTLE WHAT IS SETTLED BY THE HIGHER AUTHORITIES DISCIPLINE AND TO START ROWING A ND FISHING ENQUIRY AGAIN AND AGAIN. IN VIEW OF THE FOREGOING PARAS, WE QUASH THE ORDER OF THE LD. CIT(EXEMPTIONS) U/S 263 AS UNTENABLE AND UNJUSTIFIED. IN VIEW THE REOF, ASSESSEES APPEALS ARE ALLOWED. ITA NO. 148/JP/16 M/S SANTOKBA DURLABJI TRUST FUND JAIPUR VS. CIT(EX EMPTIONS), JAIPUR 5 2.5 IN LIGHT OF COORDINATE BENCH DECISION WHERE THE MATTER HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT IN QUANTUM PROCE EDINGS AND FOLLOWING THE SAME, THE PROCEEDINGS UNDER SECTION 263 OF THE ACT HAVE BEEN QUASHED IN PAST YEARS, WE ARE IN COMPLETE AGREEMENT WITH THE DECISI ON OF THE COORDINATE BENCH THAT THE POWERS ENSHRINED BY SECTION 263 CANN OT BE UTILIZED TO UNSETTLE WHAT IS SETTLED BY THE HIGHER AUTHORITIES DISCIPLIN E. MERELY ON ACCOUNT OF THE FACT THAT THE REVENUE HAS NOT ACCEPTED THE VIEW OF THE ITAT AND HAS APPEALED BEFORE THE HONBLE RAJASTHAN HIGH COURT, CANNOT FOR M THE FOUNDATION FOR INVOKING POWERS UNDER SECTION 263 OF THE ACT. WE A CCORDINGLY QUASH THE ORDER OF THE LD. CIT(EXEMPTIONS) U/S 263 AS UNTENABLE AND UNJUSTIFIED. IN THE RESULT THE APPEAL FILED BY THE APPELLANT IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 /0 4/2016. SD/- SD/- ( R.P. TOLANI ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 19/ 04 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S SANTOKBA DURLABJI TRUST FUN D, JAIPUR 2. THE RESPONDENT- THE CIT(EXEMPTIONS), JAIPUR 3. THE CIT(A) 4. THE CIT-III, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 148/JP/16) VKNS'KKUQLKJ@ BY ORDER, LGK;D` IATHDKJ@ ASSISTANT. REGISTRAR