Citrus Estate Badal, Muktsar V. Assistant Commissioner of Income Tax, Bathinda

ITA 154/ASR/2014

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4012 (ITAT-AMRITSAR)
• Duration Of Justice: 4 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-09-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 11-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN K KUMAR
• Keywords: Charitable institution
• Section: 143(3); 12A; 12AA; 147; 145; 56; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I. T. A. NO. 154/(ASR)/2014 ASSES SMENT YEAR: 2009-10 CITRUS ESTATE, VPO BADAL, DISTT.- SH. MUKTSAR SAHIB [PAN: AABTC 0229Q] VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE II, BATHINDA (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ASHWANI KALIA (C .A.) RESPONDENT BY: SH. PAWAN K. KUMAR, CIT- DR DATE OF HEARING: 11.09.2018 DATE OF PRONOUNCEMENT: 09.10.2018 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), BATHINDA (CI T(A) FOR SHORT) DATED 27.12.2013, DISMISSING THE ASSESSEES APPEAL CONTES TING ITS ASSESSMENT UNDER SECTION 143(3) R/W S. 147 OF THE INCOME TAX ACT, 19 61 ('THE ACT' HEREINAFTER) DATED 25.08.2011 FOR ASSESSMENT YEAR (AY) 2009-10. 2. THE SOLE ISSUE ARISING IN THE INSTANT APPEAL IS THE TAXABILITY IN LAW OF A SUM OF RS.19,50,441/-, BEING INTEREST ACCRUED ON ITS BANK FDRS TO THE ASSESSEE-SOCIETY, MADE ON INVESTMENT OF ITS CORPUS FUNDS (RS.16.24 L ACS) AND REVENUE GRANT (RS.3.27 LACS). ITA NO. 154/ASR/2014 (AY 2009-10) CITRUS ESTATE V. ASSTT. CIT 2 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE, A GOVE RNMENT SOCIETY, IS FORMED FOR THE DEVELOPMENT OF HORTICULTURAL ACTIVITIES IN THE STATE OF PUNJAB. BOTH ITS CORPUS AND WORKING CAPITAL FUNDS ARE FUNDED BY THE STATE G OVERNMENT, AND STAND PLACED BY WAY OF TERM DEPOSIT/S WITH THE BANK/S, INTEREST ON WHICH IS TO FUND ITS DAY TO DAY ACTIVITIES (EXPENSES). IT, REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 ON 25.07.2007, WAS REGISTERED AS A CHARITABLE INSTI TUTION U/S. 12A OF THE ACT ON 30.08.2010. THE ASSESSEE NOT RETURNING THE INTEREST (ON ITS FDRS), OR ON THE SAVING BANK ACCOUNT FOR THAT MATTER, THE SAME WAS BROUGHT TO TAX BY THE REVENUE, EVEN AS THE ASSESSEE BEING NOT REGISTERED (AS A CHARITABLE INSTITUTION) UNDER THE ACT DURING THE RELEVANT YEAR WAS NOT ACCORDED EXEMPTION U/S. 1 1 OF THE ACT ON ITS INCOME. 4. THE ASSESSEES CASE BEFORE US, AS BEFORE THE REV ENUE AUTHORITIES, IS THAT IT FOLLOWS CASH METHOD OF ACCOUNTING, PERMISSIBLE U/S. 145 OF THE ACT. THERE WAS, ACCORDINGLY, NO OCCASION FOR INTEREST ACCRUED BEING REGARDED AS ITS INCOME FOR THE RELEVANT YEAR, AND WHICH HAS BEEN SOLELY ON THE BAS IS THAT THE INTEREST HAD ACCRUED TO THE ASSESSEE, ON WHICH THERE IS NO QUARREL. TOWA RD THIS, THE LD. COUNSEL, SH. KALIA, WOULD TAKE US TO THE STATEMENT OF INTEREST A CCRUED ON A FDR (FOR RS.200 LACS) MADE DURING THE YEAR (10/5/2008), WHICH STOOD MATURED ON 10.5.2009, I.E., SUBSEQUENT TO THE END OF THE RELEVANT PREVIOUS YEAR ON 31.03.2009. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. OUR FIRST OBSERVATION IN THE MATTER IS THAT THE AS SESSEE STANDS SINCE GRANTED (I.E., SUBSEQUENT TO THE ASSESSMENT) REGISTRATION U /S. 12A, I.E., ON 30.08.2010 (STATED AS 07.02.2011 IN THE ASSESSEES RETURN OF INCOME, AT PB PGS. 11-23). AS SUCH, WHERE THERE IS, AS CONTENDED, AND TOWARD WHICH WE F IND NO ADVERSE FINDING, NO CHANGE IN THE OBJECTS AND ACTIVITIES OF THE ASSESSE E-SOCIETY, I.E., AS OBTAINING AT THE TIME OF THE GRANT OF REGISTRATION (AUGUST, 2010/FEB RUARY, 2011) AND THE RELEVANT ITA NO. 154/ASR/2014 (AY 2009-10) CITRUS ESTATE V. ASSTT. CIT 3 YEAR (BEING FY. 2008-09), THE BENEFIT OF REGISTRATI ON AND, CONSEQUENTLY, SECTION 11, CANNOT BE DENIED TO THE AO FOR WANT OF REGISTRATION . THIS IS THE CONSISTENT VIEW OF THE TRIBUNAL, FOR WHICH REFERENCE MAY BE MADE, BY W AY OF AN EXAMPLE, TO ITS ORDER IN DR. SHYAM LAL THAPAR FOUNDATION V. ITO (IN ITA 592/ASR/2015 & 586/ASR/2016, DATED 27/3/2108) WHEREIN, AFTER DISCU SSING THE RELEVANT PROVISION (SECTION 12A(2)) IN DETAIL, IT CONCLUDED AS UNDER: WE, IN VIEW OF THE FOREGOING, WHILE HOLDING THAT A PPELLATE PROCEEDINGS CANNOT BE REGARDED AS ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFI CER, OR AS AN ASSESSMENT PENDING BEFORE HIM, EQUATING THUS THE APPELLATE AND THE ASSESSMENT PROCEEDINGS, WHICH ARE SEPARATE AND DISTINCT, FIND NO REASON NOT TO ACCEPT THE ASSESSEE S PRAYER. THIS IS AS AN ASSESSEE REGISTERED U/S. 12AA OF THE ACT IS TO BE, IN VIEW OF S. 12A(2) , DEEMED TO BE SO REGISTERED FOR ANY OTHER YEAR FOR WHICH THE PROCEEDINGS ARE PENDING AT ANY ( APPELLATE) STAGE, PROVIDED OF COURSE THAT THERE IS NO CHANGE IN THE OBJECTS AND ACTIVITIES OF THE ENTITY DURING THE INTERVENING PERIOD. THE APPLICABILITY OF SECTION 11, I.E., PER SE , WOULD MATERIALLY ALTER THE MANNER IN WHICH THE SUBJECT ISSUE WOULD STAND TO BE CONSIDERE D. THE REASON IS SIMPLE. THE SYSTEM OF ACCOUNTING, CASH OR MERCANTILE, AS REGULA RLY EMPLOYED, ON THE BASIS OF WHICH THE INCOME CHARGEABLE U/S. 28 OR U/S. 56 IS T O BE RECKONED, IS RENDERED IRRELEVANT. THE INCOME OF A CHARITABLE INSTITUTION, IN CONTRAST TO A BUSINESS OR OTHER TAXABLE ENTITIES, FALLS UNDER CHAPTER III OF THE AC T. IT IS NOT REQUIRED TO BE ASSESSED BY CLASSIFYING IT UNDER DIFFERENT HEADS OF INCOME, WHICH ARE FOR THE PURPOSE OF COMPUTING THE TAXABLE INCOME. IT IS TO BE DETERMINE D ON THE BASIS OF THE ACCOUNTING INCOME, I.E., FOLLOWING THE WELL ACCEPTED PRINCIPLE S OF COMMERCIAL ACCOUNTING. WHERE, THEREFORE, THERE IS NO OR LITTLE UNCERTAINTY AS TO THE ULTIMATE REALIZATION OF INCOME, THE SAME IS TO BE RECOGNIZED. THE INCOME UN DER REFERENCE IS BY WAY OF INTEREST ON TERM DEPOSITS WITH A PUBLIC SECTOR (NAT IONALIZED) BANK. NOT ONLY THEREFORE THERE IS NO UNCERTAINTY AS TO ITS REALIZA TION, THE SAME STANDS IN FACT ACTUALLY REALIZED ON THE MATURITY OF THE FDR ON 26. 05.2009, I.E., PRIOR TO THE DATE OF THE FILING THE RETURN OF INCOME U/S. 139(1), EVEN T HOUGH THE MATURITY PROCEEDS STAND RE-DEPOSITED IN ANOTHER FDR WITH THE BANK, WHICH TH OUGH IS ANOTHER MATTER. ITA NO. 154/ASR/2014 (AY 2009-10) CITRUS ESTATE V. ASSTT. CIT 4 CONTINUING FURTHER, THE SAID INCOME, HOWEVER, CAN BE ACCUMULATED OR SET APART, AS INDEED IT IS, FOR BEING APPLIED FOR ITS O BJECTS AND PURPOSES, BY THE ASSESSEE. WE ARE CONSCIOUS THAT THE ASSESSEE HAS NOT, AS REQU IRED TO U/S. 11(2), SPECIFIED PER A NOTICE IN WRITING, TO THE AO THE PURPOSE/S FOR WHIC H INCOME IS BEING ACCUMULATED OR SET APART BY IT. THE SAID NOTICE, AS EXPLAINED B Y THE HONBLE COURTS (REFER: CIT V. NAGPUR HOTEL OWNERS ASSOCIATION [2001] 247 ITR 201 (SC)), COULD BE GIVEN EVEN DURING THE STAGE OF THE ASSESSMENT PROCEEDINGS. THE ASSESSEE, HOWEVER, COULD NOT HAVE ANTICIPATED AN AMENDMENT IN LAW (WHICH CAME AB OUT BY WAY OF A PROVISO TO SECTION 12A(2), INSERTED BY FINANCE (NO. 2) ACT, 20 14 W.E.F. 01.10.2014), ACCORDING THE BENEFIT OF REGISTRATION RETROSPECTIVE LY. AS SUCH, IT IS ONLY APPROPRIATE THAT IT, BEING SINCE ENTITLED TO CLAIM EXEMPTION U/ S. 11 FOR THE RELEVANT YEAR, IS ALSO ALLOWED AN OPPORTUNITY TO OBSERVE THE REQUIRED PROC EDURE IN ITS RESPECT. THIS, IN FACT, IS THE ASSESSEES ALTERNATE CLAIM, RAISED BY THE LD. COUNSEL SH. KALIA DURING HEARING, ALSO FINDING MENTION IN HIS WRITTEN SUBMIS SIONS. THE MATTER, ACCORDINGLY, IS RESTORED BACK TO THE F ILE OF THE AO TO ALLOW THE ASSESSEE DUE OPPORTUNITY TO CLAIM, FOLLOWING APPLIC ABLE PROCEDURE IN ITS RESPECT, EXEMPTION U/S. 11 ON ITS ENTIRE INCOME, INCLUDING I NTEREST ARISING TO IT ON THE SAVING BANK (RS.3.47 LACS), OMITTED TO BE RETURNED BY THE ASSESEE AND, THEREFORE, ASSESSED BY THE AO, AS WELL AS THE INTEREST ACCRUED ON FDRS. THE AO SHALL ADJUDICATE AFRESH, IN ACCORDANCE WITH LAW, ALLOWING THE ASSESS EES DUE OPPORTUNITY TO PRESENT ITS CASE BEFORE HIM. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 09, 2 018 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA NO. 154/ASR/2014 (AY 2009-10) CITRUS ESTATE V. ASSTT. CIT 5 DATE: 09.10.2018 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: CITRUS ESTATE, VPO BADAL, DI STT.- SH. MUKTSAR SAHIB (2) THE RESPONDENT: ASSTT. COMMISSIONER OF INCO ME TAX, CIRCLE II, BATHINDA (3) THE CIT(APPEALS), BATHINDA (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T TRUE COPY BY ORDER