DDIT, CHENNAI V. Sivananda Saraswati Sevashram, CHENNAI

ITA 1599/CHNY/2014

• Counselvise Citation: 159921714 RSA 2014
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 13-10-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 09-06-2014
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: P RAJASEKARAN
• Keywords: Depreciation; Charitable institution; Revised return; Revenue expenditure; Capital expenditure
• Section: 32; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! ' . #$ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO. 1599/MDS/2014 / ASSESSMENT YEAR : 2010-11 THE DEPUTY COMMISSIONER OF INCOME-TAX(EXEMPTIONS)-IV, 121, MG ROAD, NUNGAMBAKKAM, CHENNAI 600 006. APPELLANT) V. M/S. SIVANANDA SARASWATI SEVASHRAM, NO.20, KAMBAR STREET, EAST TAMBARAM, CHENNAI 600 059. PAN AAATS0160K RESPONDENT) / APPELLANT BY : SHRI A.B.KOLI, JCIT / RESPONDENT BY : SHRI P. RAJASEKARAN, CA ! / DATE OF HEARING : 13.10.2015 '# ! / DATE OF PRONOUNCEMENT: 11.12.2015 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 21 .2.2014. - - ITA 1599/14 2 2. THE FIRST GRIEVANCE OF THE REVENUE IN THIS APPEA L IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN LA W IN HOLDING THAT THE UNUTILIZED ACCUMULATED AMOUNT OF ` 1.17 CRORES PERTAINING TO ASSESSMENT YEAR 1999-2000 NEED NOT BE TAXED IN ASSESSMENT YEAR 2010-11. 3. THE FACTS RELATING TO ISSUE OF DISALLOWANCE OF UNUTILIZED AMOUNT TAXED U/S.11(2) OF THE ACT ARE THAT THE AS SESSEE FILED A STATEMENT SHOWING ACCUMULATION AND UTILIZATION OF F UNDS FROM ASSESSMENT YEAR 1999-2000 TO ASSESSMENT YEAR 2010-1 1. THE ASSESSING OFFICER ARRIVED AT THE TAXABLE AMOUNT OF ` 1,17,69,950/- WHICH IS AS UNDER:- GROSS RECEIPTS FOR AY 1999-2000 ` 2,13,81,416 LESS : 25% THEREON ` 53,45,354 --------------------- ` 1,60,36,062 LESS : REVENUE EXPENDITURE ` 68,04,607 -------------------- ` 92,31,455 LESS : CAPITAL EXPENDITURE ` 28,06,859 -------------------- UNUTILIZED SURPLUS ` 64,24,596 LESS : 25% SET APART ` 53,45,354 TOTAL ` 1,17,69,950 =========== - - ITA 1599/14 3 THE ASSESSING OFFICER ADDED UNUTILIZED PORTION OF S URPLUS AND SET APART AMOUNT OF 25% OF GROSS RECEIPTS TO ARRIVE AT ` 1,17,69,950/-. SINCE THE ABOVE SUM IS NOT UTILIZED WITHIN A PERIOD OF TEN YEARS FROM THE YEAR OF ACCUMULATION, THE AO BROUGHT THE SAME TO TAX. ACCORDING TO THE AO, UNSP ENT AMOUNT INCLUDING 25% OF PERMISSIBLE ACCUMULATION IS TO BE TAXED IN VIEW OF THE PROVISIONS OF SEC.11(3)(C) AS PER THE DIRECT ION OF THE CBDT CONTAINED IN CIRCULAR NO.29 DATED 23.8.1969. ACCOR DINGLY, THE ASSESSING OFFICER BROUGHT TO TAX THE SHORT FALL IN APPLICATION OF ` 1,17,69,950/- IN THE ASSESSMENT YEAR UNDER CONSIDER ATION. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). 4. ON APPEAL, THE CIT(APPEALS) OBSERVED THAT THERE WAS UTILIZATION OF AMOUNT PERTAINING TO THE AY 2000-01 IN THE YEAR 2005-06 AND UTILIZATION OF AMOUNT PERTAINING TO THE AY 2001-02 IN THE AYS 2005-06, 2006-07. ACCORDING TO THE CIT( APPEALS), THERE WAS UTILIZATION OF AMOUNT PERTAINING TO THE A Y 1999-2000 IN THE ASSESSMENT YEARS 2005-06 AND 2006-07 AND THERE WOULD NOT BE ANY SUM PERTAINING TO AY 1999-2000 REMAINED UNUTILIZED, - - ITA 1599/14 4 IF THE SUM PERTAINING TO THE AY 1999-2000 SHALL BE TAKEN IN AYS 2005-06 AND 2006-07. ACCORDING TO HIM, THE MISTAKE IN CALCULATION BROUGHT TO NOTICE OF THE AO, WAS NOT AC CEPTED. ACCORDINGLY, HE OBSERVED THAT SURPLUS PERTAINS TO A Y 1999-2000 SHOULD BE TREATED AS UTILIZED DURING AYS 2005-06 AN D 2006-07 AND HE DELETED THE ADDITION. WHILE ALLOWING THE CL AIM OF THE ASSESSEE, HE CONSIDERED REVISED WORKING FOR THE PUR POSE OF ACCUMULATION OF FUND. AGAINST THIS, THE REVENUE I S IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. WE HAVE GONE THROUGH THE DETAILS MENTI ONED IN THE STATEMENT OF ACCUMULATION AND UTILISATION OF FUNDS FOR THE AYS 2009-10 AND 2010-11, WHICH IS ENCLOSED AS ANNEXURE A & B AND FORM PART OF THIS ORDER. 6. WE HAVE GONE THROUGH THE DETAILS MENTIONED IN TH E STATEMENT OF ACCUMULATION AND UTILISATION OF FUNDS FOR THE AYS 1999-2000 TO 2010-11, WHICH IS ENCLOSED AS ANNEXURE D AND FORM PART OF THIS ORDER. AS SEEN FROM ANNEXURE D , FOR THE A.Y. 1999-2000, THE ASSESSEE HAD GROSS RECEIPT OF ` 2,13,81,416/- - - ITA 1599/14 5 OUT OF WHICH THE ASSESSEE NEED TO APPLY AN AMOUNT O F `1,60,36,062/-, BEING 75% OF THE RECEIPTS. HOWEVER , IN THAT YEAR, THE ASSESSEE APPLIED ONLY AN AMOUNT OF ` 68,04,607/-- [` 11,17,487 + ` 30,08,284 + ` 26,78,8 36] TOWARDS REVENUE EXPENDITURE AND AN AMOUNT OF ` 28,06,859/- [` 27,06,000 + `1,00,859] AS CAPITAL EXPENDITURE, RESULTING IN A SHORTFALL OF APPLICATIO N TO THE EXTENT OF ` 64,24,596/-. THE ABOVE CALCULATION IS REPRODUCED HEREUNDER FROM THE STATEMENT OF UTILIZAT ION OF INCOME ATTACHED AS ANNEXURE C TO THE ASSESSM ENT ORDER, WHICH IS ALSO ENCLOSED HEREWITH AS FORM PART OF THIS ORDER: A.Y. 1999-2000 GROSS RECEIPTS FOR AY 1999-2000 ` 2,13,81,416 LESS : 25% OF INCOME ` 53,45,354* --------------------- ` 1,60,36,062 LESS : REVENUE EXPENDITURE ` 68,04,607 -------------------- ` 92,31,455 LESS : CAPITAL EXPENDITURE ` 28,06,859 -------------------- ` 64,24,596 ============ NET SHORTFALL IS ` 1,17,69,950 [ ` 6424596 + ` 5325354*] - - ITA 1599/14 6 6.1 IT IS FACTUALLY SEEN THAT THE ACCUMULATION OF F UNDS FOR THE A.Y. 1999-2000 WAS NEVER UTILIZED TILL THE A.Y. 201 0-11. AS PER THE LAW ENFORCEABLE, THE ASSESSEE HAD THE LIBERTY T O UTILIZE THE SAID ACCUMULATION UPTO A PERIOD OF 10 YEARS OR IN T HE YEAR IMMEDIATELY FOLLOWING SUCH PERIOD. IT IS FOR THE A SSESSEE TO DECIDE IN WHICH A.Y. AND HOW MUCH ACCUMULATED AMOUN T IS TO BE SPENT. 6.2 A PERUSAL OF THE EARLIER YEARS RECORDS SHOWS TH AT THE ASSESSEE HAD UTILIZED THE ACCUMULATED AMOUNT [PERTA INING TO A.Y. 2000-01 AND 2001-02 IN ASSESSMENT YEARS 2005-0 6 & 2006-07, WHICH IS ENCLOSED AS ANNEXURE E &F RES PECTIVELY AND FORM PART OF THIS ORDER. ON VERIFICATION OF RE TURNS OF INCOME FOR EARLIER YEARS AND THE ANNEXURE DETAILING STATEM ENT OF ACCUMULATION AND UTILIZATION OF FUNDS (ANNEXURE D ) IT IS SEEN THAT THE UNUTILIZED AMOUNT OF A.Y. 1999-2000 WAS NE VER SPENT AT ALL. 6.3 WHEN THE ASSESSING OFFICER EXPRESSED HER DESIRE TO TAX THE UNSPENT BALANCE OF A.Y. 1999-2000 IN A.Y. 2010- 11 AS PER SEC.11(3)(C) OF THE ACT, THE ASSESSEE FILED A REVIS ED COMPUTATION - - ITA 1599/14 7 OF INCOME FROM AY 1999-00 TO 2010-11, REVISING THE ENTIRE APPLICATION OF INCOME AND ACCUMULATION OF INCOME. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THIS. AS STAT ED EARLIER THE UNSPENT AMOUNT INCLUDING THE 25% OF PERMISSIBLE ACC UMULATION IS TO BE TAXED IN CASE OF FAILURE TO SPEND WITHIN T HE STIPULATED TIME U/S.11(3)(C) OF THE ACT. THE SAME VIEW HAS BE EN REITERATED IN CBDTS CIRCULAR NO.29 DATED 23.08.1969. 6.4 THE UNUTILIZED ACCUMULATED INCOME FOR THE AY 19 99-2000 WAS NOT AT ALL SPENT WITHIN THE STIPULATED PERIOD T ILL THE AY 2010- 11, AS REQUIRED U/S.11(3)(C) OF THE ACT. THIS FACT WAS BROUGHT TO THE NOTICE OF THE ASSESSEE DURING THE ASSESSMENT PR OCEEDINGS FOR THE AY 2010-11. SUBSEQUENT TO THE ABOVE, THE A SSESSEE FILED A REVISED STATEMENT, ADJUSTING THE ACCUMULATE D INCOME OF THE AYS 1999-2000 IN A.YS. 2005-06 & 2006-07. BUT IT IS ON RECORD THAT THE ASSESSEE HAD UTILIZED THE ACCUMULAT ED AMOUNT OF A.YS. 2000-01 & 2001-02 IN A.YS. 2005-06 & 2006-07. THIS IS EVIDENT FROM THE STATEMENT OF INCOME FILED FOR THOS E YEARS (ENCLOSED AS ANNEXURE E & F). NOW, DURING TH E ASSESSMENT PROCEEDINGS FOR A.Y. 2010-11, THE ASSESSEE CANNOT T URN AROUND AND FILE A REVISED STATEMENT OF APPLICATION REVIS ING ITS EARLIER - - ITA 1599/14 8 CLAIM MADE IN A.YS. 2005-06 & 2006-07. THIS WOULD AMOUNT TO REVISING THE RETURN OF INCOME FOR A.YS. 2005-06 & 2006-07 IN 2013 DURING THE ASSESSMENT PROCEEDINGS FOR A.Y. 201 0-11. AS PER THE PROVISIONS OF THE ACT, REVISED RETURNS FO R A.YS. 2005-06 & 2006-07 COULD HAVE BEEN FILED LATEST BY 31.03.200 6 & 31.03.2007 RESPECTIVELY. HENCE, FILING OF REVISED STATED OF APPLICATION SHOWING APPLICATION OF ACCUMULATED INC OME OF A.Y. 1999-2000 IN A.Y. 2005-06 & A.Y. 2006-07 IS NOT IN ORDER. 6.5 IT IS TRITE LAW THAT EACH ASSESSMENT YEAR IS AN INDEPENDENT LEGAL PROCEEDING AND THE ASSESSEE HAS TO CLAIM THE RELEVANT EXEMPTION FOR EACH YEAR SEPARATELY BY FILING RETURN S OF INCOME AND MAKING THE NECESSARY CLAIMS ALONG WITH THE RETU RN OF INCOME WITHIN THE SPECIFIED TIME LIMIT FOR EACH ASSESSMENT YEAR. THE CLAIM OF ACCUMULATION OF INCOME OR EXERCISING OPTIO N IS INDEPENDENT FOR EACH ASSESSMENT YEAR. THE ASSESSEE CANNOT CLAIM THE APPLICATION OUT OF EARLIER YEAR BY FILING A DIFFERENT STATEMENT OF INCOME DURING THE SCRUTINY ASSESSMENT PROCEEDINGS FOR THE SUBSEQUENT ASSESSMENT YEAR. 6.6 IN VIEW THEREOF, THE CIT(APPEALS) OBSERVATION T HAT HAD THE SUM PERTAINING TO A.Y. 1999-2000 TAKEN IN A.Y. 2005-06 OR - - ITA 1599/14 9 2006-07, THERE WOULD NOT BE ANY SUM PERTAINING TO A .Y. 1999- 2000 REMAIN UNUTILIZED, IS NOT BASED ON LEGAL PRIN CIPLE AND IT IS NOT A CASE OF BONAFIDE CALCULATION MISTAKE, AS WAS MADE OUT BY THE CIT(APPEALS). IF SUCH UNILATERAL REVISIONS IN SUBSEQUENT YEARS ARE ALLOWED, THEN THE PROVISIONS OF SEC.11(3) (C) OF THE ACT AND THE WHOLE SCHEME OF OPTION GRANTED U/S.11 TO TH E ASSESSEE TO ACCUMULATE UNSPENT AMOUNT OF ONE YEAR FOR UTILIZ ATION IN SUBSEQUENT YEARS, WOULD BE REDUNDANT. ACCORDINGLY, THE RELIEF GRANTED BY THE CIT(APPEALS) HAS NO LEGS TO STAND AN D SHOULD BE SET ASIDE AND THE ASSESSING OFFICERS ORDER BE REST ORED. 6.7 FURTHER, IT IS SEEN FROM THE RETURNS OF INCOME FILED BY THE ASSESSEEE FOR THE A.YS. 2005-06 & 2006-07 MARKED AS E & F, (WHICH IS ENCLOSED) THAT THE ASSESSEEE CARRIED FORW ARD THE ACCUMULATION AS UNUTILIZED FUNDS FOR THE AY 1999-00 , WHICH WAS NOT AT ALL SPENT. HOWEVER, BEFORE THE CIT(APPEALS) , IT WAS TAKEN A PLEA THAT IT WAS SPENT IN AY 2005-06 AND 2006-07 AS PER THE REVISED COMPUTATION FILED BEFORE THE AO. FURTHER, IT WAS TAKEN A PLEA THAT IT WAS AN INADVERTENT MISTAKE AND SUBMITT ED THAT IN VIEW OF CHANGE OF CIRCUMSTANCES OF THE CASE, IT WAS INVESTED IN LAND ALLOTTED BY CMDA VIDE ITS LETTER DATED 19.3.20 09. WHEN THE - - ITA 1599/14 10 DEPARTMENT VIDE A LETTER DATED 10.1.2013 RAISED A QUESTION ON APPLICATION OF INCOME, THE LETTER DATED 6.2.2013 F ROM CMDA WAS FILED BY THE ASSESSEE TO PROVE THAT THE ASSESSEE IS INTENDING TO PURCHASE THE LAND. HOWEVER, IF THE ASSESSEEE IS B ONA FIDE, THE ASSESSEE SHOULD HAVE PRODUCED THE ORDER ISSUED FROM THE CMDA ON 19.3.2009 AND THE REASON FOR DELAY IN FILIN G THE SAID LETTER FOR SUCH A LONG PERIOD TILL THE ASSESSING O FFICER MAKING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2010-11 IS NOT ACCEPTABLE. THERE EXISTS NO REASON FOR SUCH DELAY . WE ARE NOT IN A POSITION TO ACCEPT THE SUBMISSION OF THE ASSESSEEE. ACCORDI NGLY, WE ARE INCLINED TO REVERSE THE ORDER OF THE CIT(APPEALS) A ND RESTORE THAT OF THE AO. 7. NEXT GROUND IS WITH REGARD TO ALLOWING OF DEPREC IATION WHEN THE COSTS OF ACQUISITION OF ASSETS WERE TREATE D AS APPLICATION OF INCOME FOR THE PURPOSE OF CLAIMING E XEMPTION U/S.11 OF THE ACT. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF SECTION 32 OF THE AC T WHICH PROVIDES FOR DEPRECIATION. DEPRECIATION HAS TO BE A LLOWED ON THE - - ITA 1599/14 11 COST OF THE ASSET. IN THIS CASE, THE COST OF THE AS SET WAS ALLOWED U/S 11 OF THE ACT AS APPLICATION INCOME SINCE THE A SSESSEE IS A CHARITABLE INSTITUTION ENTITLED FOR EXEMPTION U/S 1 1. THEREFORE, THE COST OF THE ASSET BECOMES NIL. WHEN THE COST OF THE ASSET BECOMES NIL, THERE IS NO QUESTION OF ALLOWING ANY D EPRECIATION. IF THE DEPRECIATION IS ALLOWED THEN IT WOULD AMOUNT TO DOUBLE DEDUCTION. THE INCOME OF THE CHARITABLE INSTITUTION HAS TO BE COMPUTED ON COMMERCIAL PRINCIPLE IN CASE THE ASSESS EE IS NOT CLAIMING EXEMPTION U/S 11 OF THE ACT. THE ASSESSEE CAN ALSO CLAIM DEPRECIATION IN CASE THE EXEMPTION U/S 11 WAS DENIED BY THE ASSESSING OFFICER. WHATEVER MAY BE THE REASONS, SINCE THE COST OF THE ASSET IS NIL AS THE COST WAS ALREADY AL LOWED AS APPLICATION OF INCOME, THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT THE ASSESSEE IS NOT ENTITLED FOR DEPRECIATION. SECTION 32 OF THE ACT FALLS IN CHAPTER IV UNDER COMPUTATION OF BU SINESS INCOME, HOWEVER, SECTION 11 FALLS IN CHAPTER III WH ICH PROVIDES FOR INCOMES WHICH DO NOT FORM PART OF THE TOTAL INC OME. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED PINIO N THAT PROVISIONS OF SECTION 11 OF THE ACT WILL OVERRIDE S ECTION 32. IN OTHER WORDS, IF THE ASSESSEE CLAIMS EXEMPTION U/S 1 1 UNDER - - ITA 1599/14 12 CHAPTER III OF THE ACT, IT CANNOT CLAIM DEPRECIATIO N U/S 32 OF THE ACT. THEREFORE, WE ARE UNABLE TO UPHOLD THE ORDER O F THE CIT(A). ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET ASIDE A ND THAT OF THE ASSESSING OFFICER IS RESTORED. ACCORDINGLY, WE ARE INCLINED TO ALLOW THIS GROUND OF APPEAL OF THE REVENUE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED. ORDER PRONOUNCED ON FRIDAY, THE 11 TH OF DEC., 2015 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 11 TH DEC., 2015. MPO* 9D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H- /CIT(A) 4. H /CIT 5. FIJ K /DR 6. J(L /GF. - - ITA 1599/14 13 - - ITA 1599/14 14 - - ITA 1599/14 15 - - ITA 1599/14 16 - - ITA 1599/14 17 - - ITA 1599/14 18