Sindhu Sewa Samaj, Ahmedabad V. ITO (Exemption), Ward-2, Ahmedabad

ITA 1576/AHD/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9618 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-04-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 22-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 63; 11; 143(3); 201; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH ( THROUGH VIRTUAL COURT) BEFORE: SHR I AMARJIT SINGH , ACCOUNTANT MEMBER AND MS. MADHUMITA ROY , JUDICIAL MEMBER SINDHU SEWA SAMAJ SINDHU BHAVAN, PLOT NO. 173, 100 FEET ROAD, S.G. HIGHWAY, T H A LTEJ, AHMEDABAD - 380059 PAN: AACTS2591L (APPELLANT) VS THE IT O (EXEMPTION) , WARD - 2 , ROOM NO. 203, 2 ND FLOOR, EXEMPTIONS, NAT URE VIEW BUILDING, ASHRAM ROAD, AHMEDABAD - 380014 (RESPONDENT) REVENUE BY : S H RI DILIP KUMAR , SR. D . R. ASSESSEE BY: SHRI S.K. SADHWANI , A.R. DATE OF HEARING : 01 - 0 6 - 2 020 DATE OF PRONOUNCEMENT : 22 - 06 - 2 020 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2015 - 16 , ARI SES FROM ORDER OF THE CIT(A) - 9, AHMEDABAD DATED 30 - 05 - 2 018 , IN PROCEEDINGS UNDER SECTION 1 4 3(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE AS SESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE LD. CIT(A) IS UNJUSTIFIED, ERRED IN LAW AND FACT BY CONFIRMING THE DISALLOWANCE OF DEDUCTION CLAIMED U/S 24(A) OF RS. 54,000/ - BY AO FROM THE RENT INCOME ON THE ERRONEOUS I T A NO . 1 576 / A HD/20 18 A SS ESSMENT YEAR 2015 - 16 I.T.A NO. 1576 /AHD/20 18 A.Y. 2015 - 16 PAGE NO SINDHU SEWA SAMAJ VS. IT O (EXEMPTION) 2 GROUND THAT INCOME FROM PROPE RTY HELD UNDER TRUST HAS TO BE ARRIVED IN NORMAL COMMERCIAL MANNER WITHOUT CONSIDERING THE PROVISIONS OF SECTION 14. 2. LD. CIT(A) HAS ERRED IN LAW & UNJUSTIFIED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS. 22,44,353/ - ON ASSETS OF TRUST, MADE BY AO PRESUMING THAT EXPENDITURE ON ASSET CREATION/ACQUISITION HAS BEEN ALLOWED AS APPLICATION OF INCOME, WITHOUT GIVING ANY FINDING ABOUT SUCH ALLOWANCE IN ANY OF THE PAST YEARS. THE TRUST HAS NEVER CLAIMED ACQUISITION/ CREATION OF ASSETS AS APPLICATION OF I NCOME IN PAST YRS. 3.1 THE LD. CIT(A) HAS ERRED IN LAW & UNJUSTIFIED IN CONFIRMING ABOVE ADDITIONS BY PASSING NON - SPEAKING ORDER. 3.2 THE LD. CIT [A] IS UNJUSTIFIED IN NOT DEALING WITH THE GROUND NO 3 RAISED IN APPEAL BEFORE HIM THAT ADDITION WAS MADE BY A O WITHOUT ISSUE OF SHOW CAUSE NOTICE. 3. THE FACT IN BRIEF IS THAT ASSESSEE TRUST HAD FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 27 TH SEP, 2015 DECLARING TOTAL INCOME AT RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143( 2) WAS ISSUED ON 29TH JULY, 2016. THE ASSESSMENT U/S. 143(3) OF THE ACT WAS FINALIZED ON 23 RD AUGUST, 2017. THE REMAINING FACT S OF THE CASE ARE DISCUSSED WHILE ADJUDICATING THE TWO GROUNDS OF APPEAL FILED BY THE ASSESSEE AS UNDER: - GROUND NO. 1 (DISALLO WANC E OF DEDUCTION CLAIMED U/S. 24(A ) OF RS. 54,000/ - ) 4. AT THE TIME OF ASSES SMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED STANDARD DEDUCTION AT 30% OF THE RENT INCOME AMOUNTING TO RS. 54,000/ - . THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF STANDARD DEDUCTION STATING THAT THE INCOME FROM THE HOUSE PROPERTY HELD UNDER THE TRUST HAVE TO BE ARRIVED IN THE NORMAL COMMERCIAL MANNER WITHOUT REFERENCE TO PROVISION OF SECTION 14 OF THE I.T. ACT. THE ASSESSING OFFICER HAS ALSO PLACED R ELIANCE ON THE DECISION OF HON BLE MADRAS HIGH COURT IN THE CASE OF RAO BAHAHUR CALAVALA CUNNAN CHETTY CHAR I TIES ( 135 ITR 485) (MADRAS). I.T.A NO. 1576 /AHD/20 18 A.Y. 2015 - 16 PAGE NO SINDHU SEWA SAMAJ VS. IT O (EXEMPTION) 3 5. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A) . T HE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSES SEE. 6. WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISSUE. WE HAVE PERUSED THE MATERIAL ON RECOR D. THE INCOME OF THE TRUST IS DETERMINED UNDER CHAPTER 3 AS PER SECTION 11 OF THE ACT. WE HAVE GONE THROUGH THE PROVISIONS OF SECTION 11 OF THE ACT AND IT IS OBSERVED THAT DEFINITION OF TOTAL INCOME U/S. 2(45) IS INCLUSIVE IN NATURE AND IT INCLUDES VARIOUS KINDS OF INCOME WHEREAS SEC. 11(1) REFER TO INCOME AND NOT TOTAL INCOME. SEC. 11(1)(A) DEALS WITH THE INCOME FROM PROPERTY HELD UNDER THE TRUST. THEREFO RE, IN CASE OF TRUST THE TERM INCOME CANNOT BE ASSIGNED THE MEANING OF THE TERM TOTAL INCOME. THE REFERENCE IN CLAUSE (A) IS INVARIABLY TO INCOME AND NOT TO TOTAL INCOME. SECTION 14 PROVIDES THE HEADS OF INCOME FOR THE PURPOSE OF DETERMINING TOTAL INCOME TO BE CHARGED FOR INCOME TAX AS PER THE ACT. THE INCOME OF THE CHARITABLE TRUST MAY BE FROM ALL THE HEAD OF INCOME EXCEPT SAL ARY INCOME AND THE SAME IS NOT DETERMINED AS PER SECTION 2(45) OF THE ACT. IN THE DIT(EXEMPTION) VS. GIRDHARILAL SHEWNARAIN TANTI A TRUST (1993) 199 ITR 215 (CAL), IT WAS OBSERVED THAT APPL ICATION OF SEC. 14 TO CHARITABLE ORGANIZATION WAS NOT POSSIBLE. THE INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES CANNOT THEREFORE BE EQUATED WITH THE INCOME WHICH IS COMPUTED UN DER THE GENERAL PROVISION OF THE ACT. THE CHARGEABILITY OF INCOME TO TAX ARISE ONLY WHEN THE TRUST IS NOT ABLE TO APPLY 85% OF ITS INCOME FOR CHARITABLE PURPOSE OR LOSES EXCEPTION ON COMPLIANCE OF THE PROVISIONS. CIT ESTATE OF V.L. ETHIRAJ (1982) 136 ITR 12 (MAD) I.T.A NO. 1576 /AHD/20 18 A.Y. 2015 - 16 PAGE NO SINDHU SEWA SAMAJ VS. IT O (EXEMPTION) 4 IT WAS HELD THAT INCOME FROM PROPERTIES WOULD HAVE TO BE ARRIVED AT IN THE NORMAL COMMERCIAL MANNER WITHOUT REFERENCE TO PROVISION OF SECTION 14 OF THE ACT. CBDT CIRCULAR NO. 5 - P (LXX - 6) DT. 19 - 06 - 1968 WHICH WAS REFERRED IN THE CASE OF DIT (EXEMPT ION) VS. GIRDHARILAL SHEWNARAIN TANTIA TRUST (1993) 99 ITR 215 (CAL.) AT PARA 2 IT IS STATED THAT SECTION 11(1) PROVIDES THAT SUBJECT TO THE PROVISIONS OF SECTION 60 TO 63 THE FOLLOWING INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR. THE REFERENCE IN SUB - SECTION (1)(A) IS INVARIABLY TO INCOME AND NOT TOTAL INCOME. AT PARA 4 OF THE SAID CIRCULARS IT IS STATED THAT WHERE THE TRUST DERIVES INCOME FROM HOUSE PROPERTY, INTEREST ON SECURITIES, CAPITAL G AINS, OR OTHER SOURCES, THE WOR D I NCOME SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE I.E. BOOK INCOME AFTER ADDING BACK ANY APPROPRIATIONS OR APPLICATIONS THEREOF TOWARDS THE PURPOSE OF THE TRUST OR OTHERWISE AND ALSO AFTER ADDING BACK ANY DEBITS MADE FOR CAPITAL EXPENDITURE FOR THE PURPOS ES OF THE TRUST OR OTHERWISE. THIS CLAUSE (4) OF THE ABOVE CIRCULAR MAKES IT CLEAR THAT THE WORD INCOME IN SECTION 11(1) MUST BE UNDERSTOOD IN A COMMERCIAL SENSE. IN HINDUSTAN WELFARE TRUST VS. DIT (EXEMPTION)(1993) 201 ITR 564 THE CALCUTTA HIGH COURT REI TERATED THAT THERE WAS NO SCOPE FOR APPLYING PROVISION OF SECTION 14 IN COMPUTING INCOME FROM PROPERTY. IT WAS HELD THAT THE INCOME FROM THE PROPERTY HELD UNDER THE TRUST HAS TO BE ARRIVED AT IN THE NORMAL COMMERCIAL MANNER THAT THERE IS NO SCOPE FOR COMP UTING THE INCOME FROM PROPERTY BY COMPLYING WITH THE PROVISIONS OF SECTION 14 OF THE ACT. WE HAVE ALSO GONE THROUGH THE DECISION OF HON BLE GUJARAT HIGH COU RT IN THE CASE OF CIT VS. SETH M ANILAL RANCHHOD DAS VISHRAM BHAVAN TRUST, 198 IT R 598 (GUJ.) WHEREI N THE HON BLE HIGH COURT HAS REFERRED THE CASE OF I.T.A NO. 1576 /AHD/20 18 A.Y. 2015 - 16 PAGE NO SINDHU SEWA SAMAJ VS. IT O (EXEMPTION) 5 CIT VS. RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES ( 135 ITR 485) WHEREIN THE MADRAS HIGH COURT HELD THAT THE INCOME FROM THE PROPERTIES HELD UNDER TRUST WOULD HAVE TO BE ARRIVED AT THE NORMAL COMMERCIAL MANNER WITHOUT CLASSIFICATION UNDER THE VARIOUS HEADS SET OUT IN SECTION 14. IT IS HELD THAT THE EXPRESSION INCOME HAS TO BE UNDERSTOOD IN THE POPULAR OR GENERAL SENSE AND NOT IN THE SENSE IN WHICH THE INCOME IS ARRIVED AT FOR THE PURPOSE OF ASSESSMENT TO TAX BY APPLICATION OF SOME ARTIFICIAL PROVISIONS EITHER GIVING OR DEN YING DEDUCTION. IN THE LIGHT OF THE ABOVE FACTS AND JUDICIAL FINDINGS ON THIS ISSUE, WE CONSIDER THAT DEDUCTION U/S. 24(A) IS NOT AVAILABLE WHERE THE ASSESSEE IS CHARITABLE TR UST AND ITS INCOME IS EXEMPT U/S. 11 OF THE ACT. THEREFORE, ANY PART OF THE INCOME RECEIVED BY THE ASSESSEE FROM HOUSE PROPERTY IS APPLIED FOR MAINTENANCE OF THE SAME HOUSE PROPERTY THE SAME IS ALLOWED AS APPLICATION U/S. 11 AND ACTUAL EXPENDITURE OF MAINT ENANCE SHALL BE ALLOWED AS DEDUCTION U/S. 11 OF THE ACT. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LOWER AUTHORITY STATING THAT THE INCOME FROM THE HOUSE PROPERTY HELD UNDER CHARITABLE TRUST HAS TO BE ARRIVED IN THE NORMAL COMMERCIA L MANNER WITHOUT REFERENCE TO PROVISION OF SECTION 14 OF THE ACT. GROUND NO. 2 (DISALLOWANCE OF DEPRECIATION OF RS. 22 , 44 , 353/ - ON ASSETS OF TRUST) 7. DURING THE COURSE OF ASSESSMENT THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE TRUST HAS DEBITED TOTAL DEPRECIATION OF RS. 22 , 44 , 353/ - STATING THAT THE SAID CLAIM HAS ALREADY BEEN ALLOWED AS CAPITAL EXPENDITURE AS APPLICATION OF THE FUND IN THE CASE OF THE ASSESSEE TRUST. I.T.A NO. 1576 /AHD/20 18 A.Y. 2015 - 16 PAGE NO SINDHU SEWA SAMAJ VS. IT O (EXEMPTION) 6 8. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT (A) HAS DISMISSED THE APPEAL OF THE ASSESSEE AFTER REFERRING SECTION 11(6) WHICH HAS BEEN AMENDED W.E.F. 1 ST APRIL, 2015. 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IN THE CASE OF THE ASSESSEE IN THE PRECEDING ASSESSMENT YEAR 2014 - 15 THE CLAIM OF THE ASSESSEE ON THE SIMILAR GROUND HAS BEEN ALLOWED BY THE LD. CIT(A) AFTER PLACING RELIANCE ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SETH MANI LAL RANCHHODDAS VISHRAM BHAVAN TRUST 198 ITR 598 (GUJ). C ONSIDERING THE SIMILAR FACTS AND ISSUE INVOLVED IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND FOLLOWING THE JUDGMENT OF HON BLE HIGH COURT SUPRA , WE DO NOT FIND ANY MERIT IN THE DECISION OF LD. CIT(A) AS THE AMENDMENT REFERRED BY LD. CIT (A) IN SECTION 11(6) IS APPLICABLE W.E.F. 01 - 04 - 2005, THEREFORE, THE APPEAL OF THE ASSESSEE ON THIS ISSUE IS ALLOWED. 10. GROUND NO. 3.1 & 3.2 ARE GENERAL GROUNDS OF APPEAL WHICH WERE NOT CONTESTED AT THE TIME OF APPELLATE PROCEEDINGS WITH ANY RELE VANT MATERIAL, THEREFORE, THE SAME STANDS DISMISSED. 11 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 22 - 0 6 - 20 20 SD/ - SD/ - ( MADHUMITA ROY ) ( AMARJIT SINGH ) JUDI CIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 22 /0 6 /2020 I.T.A NO. 1576 /AHD/20 18 A.Y. 2015 - 16 PAGE NO SINDHU SEWA SAMAJ VS. IT O (EXEMPTION) 7 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,