Asstt. Commissioner of Income tax, Jalandhar V. M/s. Jalandhar Improvement Trust, Jalandhar

ITA 155/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5837 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 18-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RUPESH GUPTA CAS; SSH ASHWANI GUPTA
• Keywords: TDS
• Section: 40(a)(ia); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.L. KARWA, VICE PRESIDENT AND SH. MEHAR SINGH, ACCOUNTANT MEMBER I.T.A. NO.155(ASR)/2010 ASSESSMENT YEAR: 2005-06 PAN : THE ASSTT. COMMR. OF INCOME-TAX, VS. M/S. JALANDHAR IMPROVEMENT TRUST, RANGE-III, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) DEPARTMENT BY:SH. TARSEM LAL, DR ASSESSEE BY:S/SH. ASHWANI GUPTA & RUPESH GUPTA, CAS ORDER PER MEHAR SINGH, AM, THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTE D AGAINST THE ORDER OF THE CIT(A), JALANDHAR, DATED 29.12.2009, PASSED UNDER SECTION 250(6) OF THE INCOME-TAX ACT, 1961 ( HEREINAFTER REFERRED TO IN SHORT THE ACT), FOR THE ASSESSMENT YEAR 2005-06. 2. THE ONLY EFFECTIVE GROUND RAISED BY REVENUE IS AS UNDER: 1. THAT THE LD. CIT(A) HAS ERRED IN DELETING THE A DDITION OF RS.2,75,544/-, PAYMENT TOWARDS WORKS CONTRACT, RS.1 6,72,161/- FOR ADVERTISEMENT EXPENSES AND RS.1,40,90,000/-, PA YMENT TO HPCL FOR WORK CONTRACT FOR LYING GAS PIPELINE, WHI CH WAS MADE BY THE A.O. BY INVOKING THE PROVISIONS OF SECT ION 40(A)(IA) OF THE INCOME-TAX ACT, 1961. 1(A) WHILE DELETING THE ABOVE ADDITIONS LD. CIT(A) HAS NOT APPRECIATED THE FACT THAT SECTION 40(A)(IA) IS VERY CLEAR ON NON 2 DEDUCTABILITY OF PAYMENTS WHERE TDS IS NOT DEDUCTE D OR IS SHORT DEDUCTED. 3 IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, BOTH THE LD. COUNSEL FOR THE ASSESSEE AND THE LD. DR CONCEDED BEFORE T HE BENCH THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE DECISION OF THE ITAT, AMRITSAR BENCH, DATED 31ST JANUARY, 2011, IN THE CASE OF BABA FARI D VIDYAK SOCIETY, BHATINDA VS. THE ASSTT. C.I.T. CIRC LE-1, BHATINDA, PASSED IN ITA NO.180(ASR)/2010 FOR THE ASSESSMENT YEAR 2006-0 7. 5. HAVING HEARD BOTH THE PARTIES, WE FIND THAT SIMI LAR ISSUE CAME UP FOR CONSIDERATION, BEFORE THIS BENCH, IN THE CASE OF B ABA FARID VIDYAK SOCIETY, BHATINDA VS. THE ASSTT. C.I.T. CIRCLE-1, BHATINDA, IN ITA NO.180(ASR)/2010 FOR THE ASSESSMENT YEAR 2006-07 AND THE TRIBUNAL V IDE ITS ORDER DATED 31 ST JANUARY, 2011, ALLOWED THE APPEAL OF THE ASSESSEE. THE RELEVANT FINDING PART OF THE IMPUGNED ITAT ORDER IS REPRODUCED HEREUNDER : 5. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE THR OUGH THE MATERIAL AVAILABLE ON RECORD. IN THE CASE OF ITO V S. SANGAT SAHIB BHAI PHERU SIKH EDUCATIONAL SOCIETY, FARIDKOT, THE AMRITSAR BENCH OF THE ITAT HAS HELD AS UNDER:- IN THIS CASE, THE FACTS OF THE CASE AS RECORDED AB OVE HAS CLEARLY PROVED THAT THE ASSESSEE IS AN EDUCATIONAL SOCIETY RUNNING EDUCATIONAL INSTITUTION FOR NON PROFIT PURPOSES. T HIS FACT IS ADMITTED BY THE AO IN THE ASSESSMENT ORDER ITSELF A ND THE EXEMPTION FROM THE TAX UNDER SECTION 10(22) OF THE INCOME TAX ACT HAS BEEN ALLOWED IN FAVOUR OF THE ASSESSEE IN T HE ASSESSMENT ORDER. COPY OF THE AUDITED BALANCE SHEE T IS FILED IN THE PAPER BOOK WHICH SHOWS THAT THE ASSESSEE HAS PR EPARED THE INCOME AND EXPENDITURE ACCOUNT OF THE EDUCATIONAL S OCIETY AND 3 AS SUCH THE ASSESSEE WAS NOT CARRYING ON ANY BUSINE SS OR PROFESSION AND IS ALSO NOT CARRYING ON ANY BUSINESS AS IS REFERRED TO IN SECTION 49AB(C) OF THE INCOME TAX AC T. THE ASSESSEE HAS NO SALES, TURNOVER OR GROSS RECEIPTS F ROM THE BUSINESS OR PROFESSION AS SPECIFIED UNDER SECTION 44AB, THEREFORE, THE PROVISIONS OF SECTION 44AB ARE NOT A TTRACTED IN THIS CASE. THE INCOME OF THE ASSESSEE IS EXEMPT AS ADMITTED BY THE AO, THEREFORE, THE DECISION OF THE ITAT, MUMBAI A BENCH IN THE CASE OF INDIAN MAGNUM FUND (SUPRA) IS CLEARLY APPLICABLE TO THE PRESENT APPEALS. 5.1 IN THE CASE OF ASSTT. C.I.T. VS. INDIA MAGNUM F UND REPORTED IN (2002) 74 TTJ (MUM) 620, THE MUMBAI A BENCH OF TH E TRIBUNAL HAS HELD AS UNDER:- IT IS WELL-SETTLED THAT THERE HAS TO BE LEGAL BASI S FOR ANY LEVY OF TAXES IN INDIA. AS PER ART.265 OF THE CONSTITUTION OF INDIA, NO TAX SHALL BE LEVIED OR COLLECTED EXCEPT BY AUTHORIT Y OF LAW. THE LEGAL BASIS FOR LEVY OF INCOME TAX IS GIVEN IN S. 4 . IT PROVIDES FOR CHARGE OF INCOME TAX IN RESPECT OF THE TOTAL INCOM E OF THE PREVIOUS YEAR OF EVERY PERSON. IT IS, THEREFORE, CLEAR THAT CHARGE OF INCOME TAX UNDER THE IT ACT, 1961, IS IN RESPECT OF THE TOTAL INCOME. IT IS CLEAR THAT THE TOTAL INCOME IS ONLY THAT AMOUNT OF INCOME WHICH IS COMPUTED UNDER THE PROVIS IONS OF THE ACT. CHAPTER IV OF IT ACT PROVIDES FOR COMPU TATION OF TOTAL INCOME. SEC. 44AB IS ONLY ONE OF THE SECTIO NS ENACTED UNDER CHAPTER IV-D, DEALING WITH COMPUTATION OF PRO FITS AND GAINS OF BUSINESS OR PROFESSION. IN OTHER WORDS, S . 44AB BECOMES OPERATIVE WHEN THERE IS COMPUTATION OF PROF ITS AND GAINS OF BUSINESS OR PROFESSION AS A PART OF TOTAL INCOME. IF THERE IS NO COMPUTATION OF TOTAL INCOME OR, FOR THA T MATTER, NO COMPUTATION OF PROFITS AND GAINS OF BUSINESS AS A P ART OF COMPUTATION OF TOTAL INCOME, THE PROVISIONS OF S.44 AB WOULD SIMPLY NOT TAKE OFF. THE INCOME OF THE ASSESSEE IS ADMITTEDLY WHOLLY EXEMPT UNDER S. 10(23D). SECTION 10 (23D) I S PART OF CHAPTER III OF THE ACT. THE HEADING OF CHAPTER III IS INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME. THEREFORE , PROVISIONS OF S. 44AB CANNOT AND DO NOT HAVE ANY APPLICATION IN RELATION TO INCOMES WHICH ARE ENUMERATED UNDER CHAPTER III A ND ARE EXPRESSLY EXCLUDED FROM TOTAL INCOME. TO REITERATE , S. 44AB IS OPERATIONAL ONLY WHEN PROFITS AND GAINS OF BUSINESS OR 4 PROFESSION ARE TO BE COMPUTED FOR THE PURPOSE OF CO MPUTATION OF TOTAL INCOME TO MEET THE REQUIREMENTS OF THE PRO VISIONS OF S. 4. THAT BEING SO, ANY INCOME WHICH IS DESIGNATED AS INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME HAVE NOTHIN G TO DO AND CANNOT BE SUBJECTED TO THE PROVISIONS OF S. 44AB. IN VIEW OF THE DISCUSSION IN THE FOREGOING PARAGRAPHS, THE ASS ESSEE WAS NOT LIABLE TO OBTAIN ANY AUDIT REPORT WITHIN THE MEANIN G OF S.44AB. FOR THIS REASON, THE IMPUGNED ORDER OF THE CIT(A) C ANCELING PENALTY UNDER S. 271B CANNOT BE INTERFERED WITH. 5.2.RESPECTFULLY FOLLOWING THESE TRIBUNAL DECISIONS , THIS GROUND OF APPEAL FILED BY THE ASSESSEE IS ALLOWED. 6.1. THUS, RESPECTFULLY FOLLOWING THE AFORESAID OR DER OF THE TRIBUNAL, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7. THE DEPARTMENT HAS ALSO TAKEN ONE ADDITIONAL GR OUND, WHICH READS AS UNDER: THE LD. CIT(A) HAS ERRED BY NOT INVOKING THE PROVI SIONS OF SECTION 11(4) OF THE INCOME-TAX ACT, 1961 WHEN IT HAD CLEAR LY BEEN BROUGHT ON RECORD BY THE A.O. THAT BUSINESS UNDERTAKING WAS THE PROPERTY OF THE ASSESSEE TRUST. 8. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 11(4) OF THE ACT AND FOUND THAT THE ADDITIONAL GROUND RAISED BY THE REVENUE HAS NOT BEEN CONCEIVED HAVING REGARD TO THE LEGISLATIVE INTENT AS ENSHRINED IN THE SAID SECTION. THE CONCLUSIVE FINDING GIVEN BY THE LD. CI T(A), IN HIS ORDER, IS REPRODUCED HEREUNDER: THE ONLY EXCEPTION IS REGARDING THE COMPUTATION OF THE INCOME OF A BUSINESS UNDER SECTION 11(4), BUT, AS NOTED ABOVE, THERE IS NO FINDING THAT THE ASSESSEE IS HOLDING ANY PROPERTY WHICH IS A BUSINESS UNDERTAKING. HENCE, THE PROVISIONS OF SECTION 11(4) ARE HELD TO BE NOT APPLICABLE IN THIS CASE. 5 8. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE ORDER PASSED BY THE LD. CIT(A), IS PERFECTLY WITHIN THE PARAMETERS OF THE R ELEVANT SECTION, ON THE ISSUE, IN QUESTION. HENCE, THIS ADDITIONAL GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 9TH JUNE, 2011. SD/- SD/- (H.L. KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 9TH JUNE, 2011 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE: M/S. JALANDHAR IMPROVEMENT TRUST, JAL ANDHAR. 2. THE ACIT, R-III, JALANDHAR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.