M/s G.S.L.Trust, Visakhapatnam V. The ITO, Ward-4, Rajahmundry,

ITA 159/VIZ/2012

• Counselvise Citation: 15925314 RSA 2012
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-12-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 11-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B BABU RAO
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 143(3); 147; 11

Judgement Text

ITA NOS.128, 159,166&167/VIZAG/2012 G.S.L. TRUST, RAJAHMUNDRY IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 128 /VIZAG/ 20 1 2 ASSESSMENT YEAR : 2005 - 06 ITO WARD - 4 RAJAHMUNDRY VS. G.S.L. TRUST RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO.AAATG 3008N ITA NO.159/VIZAG/2012 ASSESSMENT YEAR : 2006 - 07 G.S.L. TRUST RAJAHMUNDRY VS. ITO WARD - 4 RAJAHMUNDRY (APPELLANT) (RESPONDENT) ITA NO.166&167/VIZAG/2012 ASSESSMENT Y EAR : 2004 - 05 & 2006 - 07 ITO WARD - 4 RAJAHMUNDRY VS. G.S.L. TRUST RAJAHMUNDRY (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C. SUBRAHMANYAM, CA REVENUE BY : SHRI B. BABU RAO, JCIT DATE OF HEARING : 10.12.2013 DATE OF PRONOUNCEMENT : 13 .12.2013 ORDER PER B. RAMAKOTAIAH,:- THESE APPEALS ARE BY ASSESSEE AND REVENUE FOR ASSE SSMENT YEARS 2004-05, 2005-06 & 2006-07. SINCE COMMON ISSUES AR E INVOLVED IN THESE APPEALS, THEY ARE CONSIDERED TOGETHER AND DECIDED B Y THIS COMMON ORDER. ITA NOS.166/VIZAG/2012 & 167/VIZAG/2012: 2. THE REVENUE APPEALS FOR ASSESSMENT YEARS 2004-05 & 2006-07. IN THE APPEALS, THE REVENUE IS CONTESTING THE ORDER OF THE CIT ALLOWING THE CLAIM OF DEPRECIATION TO ASSESSEE TRUST. AT THE OUTSET, IT WAS SUBMITTED THAT THIS ISSUE WAS COVERED BY THE ORDERS OF THE ITAT VIZAG BENCH I N ASSESSEES OWN CASE IN ITA NOS.128, 159,166&167/VIZAG/2012 G.S.L. TRUST, RAJAHMUNDRY 2 THE ASSESSMENT YEARS 2005-06 & 2007-08 IN ITA NO.37 2 AND 220 & OTHERS DATED 11.8.2011 VIDE PARA-10 AS UNDER: 10. THE REVENUE IS ALSO AGGRIEVED WITH THE DECISIO N OF LEARNED CIT(A) IN ALLOWING DEPRECIATION TO THE ASSESSEE. AS STATED EARLIER, TH E ASSESSEE SHOULD HAVE CLAIMED DEPRECIATION IN THE INCOME AND EXPENDITURE ACCOUNT. I N THAT CASE, THE REVENUE SHOULD NOT BE AGGRIEVED WITH THE DECISION OF LEARNED C IT(A) ON THIS ISSUE. WE HAVE ALREADY STATED THAT THE DEPRECIATION COULD NOT BE ACCOUNTED FOR IN THE 'RECEIPTS AND PAYMENTS ACCOUNT'. HENCE THE LD CIT(A ) WAS REQUIRED TO DEDUCT THE DEPRECIATION WHILE COMPUTING THE INCOME OF THE ASSESS EE ON THE BASIS OF 'RECEIPTS AND PAYMENTS ACCOUNT'. EVEN OTHERWISE, THE FOLLOWIN G CASE LAW SUPPORT THE VIEW OF THE LEARNED CIT(A) THAT THE DEPRECIATION CAN BE ALL OWED WHILE COMPUTING THE INCOME OF A CHARITABLE TRUST. CIT VS. SOCIETY OF SISTERS OF ST. ANNE 146 ITR 28(K AR) CIT VS. RAIPUR PALLOTTINE SOCIETY 180 ITR 579(MP) CIT VS. SHETH MANILAL RANCHCHODDAS VISHRAM BHAVAN T RUST 198 ITR 598)(GUJ) CIT VS. BHORUKA PUBLIC WELFARE TRUST 240 ITR 513(CA L) . ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE DE CISION OF LD CIT(A) IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION OF DEPRECIAT ION WHILE COMPUTING THE INCOME OF THE ASESSEE. 11.1 THE FIRST ISSUE IS WHETHER THE CAPITAL EXPENDI TURE INCURRED ON ACQUISITION OF ASSETS CAN BE TREATED AS APPLICATION OF INCOME FOR THE PURPOSES OF SEC.LL OF THE ACT. THE LEARNED A.R SUBMITTED THAT THE AMOUNT SPENT ON ACQUISITION OF ASSETS FOR FURTHERANCE OF OBJECTS OF THE TRUST IS ALWAYS TAKEN AS APPLICATION OF INCOME. IN THIS REGARD, THE ASSESSEE RELIED ON THE DECISION OF HON' BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUS T & ORS. VS. UNION OF INDIA (2010)(327 ITR 73)(P & H). IT IS PERTINENT TO NOTE THAT THE EXEMPTION U/S 11 IS GRANTED TO THE INCOME DERIVED FROM PROPERTY HELD UN DER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA AND, WHERE ANY SUCH INCOME IS ACCUMULATED OR SET APART FOR APPLICATION FOR SUCH PURPOSES IN INDIA TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF FIFTEEN PERCENT OF THE INCOME FROM SUCH PROPERTY. THUS, THE EXEMPTION IS GRANTED TO THE AMOUNT 'APPLIED' FOR CH ARITABLE/RELIGIOUS PURPOSES. THE WORD 'APPLIED' IS WIDER IMPORT THAN THE WORD 'EXPENDITURE'. IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST AND ORS, (SUPRA), IT WAS HELD THAT THE CAPITAL EXPENDITURE INCURRED BY THE TRUST HAS TO BE DEDUCTE D FROM THE GROSS INCOME OF THE EDUCATIONAL INSTITUTION IN DETERMINING WHETHER 85% OF THE INCOME HAS BEEN APPLIED FOR ITS OBJECTS. THE HON'BLE SUPREME COURT HAS HELD IN THE CASE OF M.CT.M.TIRUPPANI TRUST VS. CIT (230 ITR 636) THAT ALL CAPITAL EXPEND ITURE LAID OUT IN FURTHERANCE OF THE OBJECTS AND PURPOSES OF THE TRUST WILL BE TREATED A S APPLICATION OF THE INCOME. HENCE THE CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE IN FURTHERANCE OF OBJECTS OF THE TRUST SHOULD BE TREATED AS APPLICATION OF INCOM E. ACCORDINGLY WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS POINT. ITA NOS.128, 159,166&167/VIZAG/2012 G.S.L. TRUST, RAJAHMUNDRY 3 3. SINCE THE ORDER OF THE CIT(A) IS COMPLYING WITH THE ORDER OF THE ITAT IN ASSESSEES OWN CASE, WE DO NOT SEE ANY MERIT IN THE REVENUE GROUNDS. ACCORDINGLY, THE SAME ARE REJECTED AND BOTH THE APP EALS ARE REJECTED. ITA NO.159/VIZAG/2012: 4. THIS IS ASSESSEES APPEAL FOR AY 2006-07, WHEREI N ASSESSEE IS AGITATED ABOUT THE OBSERVATION MADE BY THE CIT(A) THAT THERE IS VIOLATION OF SECTION 13(2)(G). AT THE OUTSET, IT WAS SUBMITTED THAT SIM ILAR ISSUE HAS COME UP BEFORE ITAT FOR ASSESSMENT YEAR 2005-06 AND 2007-08 AND THE COORDINATE BENCH HELD THAT THERE IS NO VIOLATION OF SECTION 13 (2)(G). HOWEVER, IT WAS ADMITTED THAT THE MATTER WAS REMANDED TO THE AO TO VERIFY THAT THE CAR RENTALS PAID ARE ON PAR WITH MARKET RATES AND ACCOR DINGLY AO EXAMINED THIS ISSUE AND HELD IN FAVOUR OF THE ASSESSEE FOR ASSESS MENT YEARS 2005-06 & 2007-08 VIDE THE ORDERS PASSED U/S 143(3) R.W.S. 25 3 OF THE ACT. THE ORDERS ARE PLACED ON RECORD. 5. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT THE ISSUE REQUIRES EXAMINATION BY THE AO. EVEN THOUGH LD. CIT(A) MADE AN OBSERVATION AND ASSESSEE IS CONTESTING THE ISSUE, A S CONSIDERED BY THE COORDINATE BENCH, THE ISSUE IS TO BE RE-EXAMINED BY THE AO. ACCORDINGLY, THE ORDER OF THE CIT(A) WAS SET ASIDE ON THIS ISSUE AND RESTORED TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE ADEQUACY OF THE IMPUGNED PAYMENTS HAVING REGARD TO THE UTILIZATION OF VEHICL ES VIS--VIS THE MARKET RATES OF IDENTICAL FACILITIES AND THEN DECIDE THE M ATTER IN ACCORDANCE WITH LAW, AS DIRECTED IN THE ABOVE REFERRED ORDER DATED 11.8.2011. ACCORDINGLY, THE ASSESSEES GROUNDS ON THIS ISSUE ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 6. ANOTHER GROUND RAISED BY THE ASSESSEE WITH REFER ENCE TO INITIATION OF PROCEEDINGS U/S 147 OF THE ACT HAS NOT BEEN PRESSED AND ACCORDINGLY THE SAME IS TREATED AS WITHDRAWN. 6.2. IN THE RESULT, THE APPEAL IS ALLOWED FOR ST ATISTICAL PURPOSES. ITA NOS.128, 159,166&167/VIZAG/2012 G.S.L. TRUST, RAJAHMUNDRY 4 ITA 128/VIZAG/2012: 7. THIS IS A REVENUE APPEAL AGAINST THE DELETION OF PENALTY U/S 271(1)(C) OF THE ACT. AO INITIATED PENALTY CONSEQUENT TO THE ORDERS U/S 143(3) DATED 1.11.2005. ULTIMATELY, ON APPEAL THE MATTER WAS DI SPOSED OF BY ITAT. IN THE CONSEQUENTIAL ORDERS PASSED BY THE AO, WE WERE INFORMED THAT ENTIRE INCOME WAS ALLOWED TO BE EXEMPT UNDER THE PROVISION S OF SECTION 11. COPY OF THE ORDER WAS PLACED ON PAPER BOOK. CONSEQUENTL Y, SINCE THE VERY BASIS FOR LEVY OF PENALTY IS NO LONGER EXISTING, THERE IS NO MERIT IN REVENUE APPEAL CONTESTING THE DELETION OF PENALTY BY CIT(A) ON MER ITS. THE GROUNDS RAISED BY THE REVENUE ARE INFRUCTUOUS AND ACCORDINGLY THE SAME ARE DISMISSED. 8. IN THE RESULT, ALL THE REVENUE APPEALS IN ITA NO S.166, 167, 128 ARE DISMISSED AND ASSESSEES APPEAL IN 159 IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 13 TH DEC13 SD/ - SD/ - ( SAKTIJIT DEY ) ( B. RAMAKOTAIAH ) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS VISAKHAPATNAM, DATED 13 TH DECEMBER, 2013 COPY TO 1 ITO WARD - 4, RAJAHMUNDRY 2 GSL TRUST, D.NO.23 - 12 - 4, SRIRAM NAGAR, RAJAHMUNDRY. 3 THE CI T, RAJAHMUNDRY 4 THE CIT (A) , RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM