Indian Red Cross Scoiety,-Gujarat state, Ahmedabad V. The ITO,(exemptions), Ward-1, Ahmedabad

ITA 168/AHD/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6115 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 16-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Charitable institution
• Section: 12AA; 143(1); 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT& MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO.168/AHD/2018 (ASSESSMENT YEAR :2014-15) INDIAN RED CROSS SOCIETY, GUJARAT STATE 1, RED CROSS BHAVAN, NR. KHADI BOARD, ASHARM ROAD, AHMEDABAD 380 016. VS. THE INCOME TAX OFFICER (EXEMPTION), WARD-1, AHMEDABAD 380 009 [ PAN NO. AAAAI 6036 R ] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI S. N. SOPARKAR & PARIN SHAH, A.R. RESPONDENTBY: SHRI MUDIT NAGPAL, SR. D.R. DATE OF HEARING 12.06.2019 DATE OF PRONOUNCEMENT 06.08.2019 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL FILED BY THE ASSESSEE IS DIRECT ED AGAINST THE ORDER DATED 03.11.2017 PASSED BY THE COMMISSIONER OF INCO ME TAX (APPEALS) 9, AHMEDABAD ARISING OUT OF THE ORDER DATED 21.11.2016 PASSED BY THE ITO (EXEMPTION), WARD - 1, AHMEDABAD UNDER SECTION143(3 ) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TO THE ACT) FO R ASSESSMENT YEAR 2014-15 WHEREBY AND WHEREUNDER THE DISALLOWANCE OF RS.70,00 ,000/- TRANSFERRED TO SPECIFIC FUND HAS BEEN CONFIRMED BY NOT CONSIDERING THE SAME AS AN APPLICATION OF INCOME ON ACCOUNT OF NON-FILING OF F ORM NO.10 FOR ACCUMULATION OF FUNDS U/S 11(2) OF THE ACT. ITA NO.168/AHD/2018 INDIAN RED CROSS SOCEITY VS. ITO(EXEMPTION) ASSESSMENT YEAR 2014-15 - 2 - 2. THE ASSESSEE TRUST ENGAGED IN VARIOUS ACTIVITIES , REGISTERED U/S 12AA OF THE ACT BY AND UNDER AN ORDER DATED 22.05.2008, FIL ED ITS RETURN OF INCOME FOR A.Y. 2014-15 ON 30.03.2016 DECLARING TOTAL INCOME A T RS. NIL WHICH WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, UNDE R SCRUTINY NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 01.08.2016. DURING THE COU RSE OF SCRUTINY PROCEEDING, IT WAS FOUND THAT THE ASSESSEE HAS TRANSFERRED AN A MOUNT OF RS.70,00,000/- TO SPECIFIC FUNDS I.E. EQUIPMENT DEPLETION FUND AND GE NERAL MAINTENANCE FUND. SINCE THESE AMOUNT WERE NOT SPENT DURING THE YEAR B UT TREATED AS EXPENDITURE BY TRANSFERRING THE SAME TO THE SPECIFIC FUNDS EXPL ANATION WAS CALLED FOR WHEREUPON THE ASSESSEE BY AND UNDER A LETTER DATED 15.11.2016 STATED THAT THE INCOME IS ACTUALLY APPLIED FOR THE CHARITABLE PURPO SE OF THE TRUST. THE WORD APPLIED AS MENTIONED IN THE PROVISION U/S 11 OF T HE ACT DOES NOT NECESSARILY IMPLIED SPENT EVEN IF AN AMOUNT IS IRRETRIEVABLY EARMARKED AND ALLOCATED FOR THE CHARITABLE PURPOSE. HOWEVER, SUCH PLEA OF THE A SSESSEE WAS NOT FOUND ACCEPTABLE AND SINCE THE ASSESSEE HAS NOT OPTED TO EXPRESS PROVISION IN TERMS OF SECTION 11(2) OF THE ACT INTIMATING THE ASSESSING O FFICER THAT SUCH FUND COULD NOT BE SPENT DURING THE YEAR AND SET APART FOR A PE RIOD OF 5 YEARS FOR A SPECIFIC PURPOSE BUT TREATED UNSPENT AMOUNT AS APPLICATION O F INCOME BY SIMPLY TRANSFERRING THE AMOUNT TO SPECIFIC FUND, THE AMOUN T OF RS.70,00,000/- WERE DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. IN APPEAL, THE APPELLANT SOUGHT PERMISSION FROM THE APPELLATE AUTH ORITIES TO FILE FORM NO.10 FOR ACCUMULATION U/S 11(2) OF THE ACT. HOWEVER, ACC ORDING TO THE LEARNED CIT(A) EXEMPT ENTITIES CAN FILE FORM NO.10 SINCE AS SESSMENT PROCEEDING ARE NOT COMPLETED. IT WAS FURTHER HELD THAT NO PERMISSI ON IS REQUIRED FOR FILING SUCH FORM, WHICH IS REQUIRED IS DUE PROCESS OF FILING OF FORM NO.10 WHICH INCLUDES IDENTIFICATION OR PURPOSE FOR WHICH FUND ARE TO BE ACCUMULATED SUPPORTED BY NECESSARY RESOLUTION OF THE GOVERNING BODY OF THE S OCIETY. SINCE THE SAME WAS ITA NO.168/AHD/2018 INDIAN RED CROSS SOCEITY VS. ITO(EXEMPTION) ASSESSMENT YEAR 2014-15 - 3 - NOT FILED,THE LEARNED CIT(A) UPHELD THE ORDER PASSE D BY THE LEARNED AO. HENCE, THE INSTANT APPEAL BEFORE US. 3. AT THE TIME OF HEARING OF THE INSTANT APPEAL, TH E LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT IN TERMS OF SECTION 11(2) FORM NO.10 UNDER RULE 17 CAN BE FILED BEFORE THE CO MPLETION OF THE ASSESSMENT PROCEEDING MEANING THEREBY DURING THEPEN DENCY OF AN APPEAL ARISING OUT OF THE ASSESSMENT ORDER EVEN BEFORE THE COURT OF LAW. IN THAT VIEW OF THE MATTER, THE LEARNED CIT(A) OUGHT TO HAVE ALL OWED THE ASSESSEE TO FILE FORM NO.10 WHICH IS RELEVANT FACTORS FOR THE PURPOS E OF DETERMINING THE CONTROVERSY.THE REVENUE HAS DENIED THE LEGITIMATE R ELIEF TO ASSESSEE WHO WAS BENEFITED LITIGATING. THE EXEMPTION IN RESPECT OF A CCUMULATION U/S 11(2) IS THUS REQUIRED TO BE ALLOWED BY THE TRIBUNAL. THE LEARNED DR RELIED UPON THE ORDER WITHOUT ANY BASIS AS ALSO ARGUED BY THE LEARNED SEN IOR COUNSEL APPEARING FOR THE ASSESSEE. 4. HEARD THE RESPECTIVE PARTIES, PERUSED THE RELEVA NT MATERIALS AVAILABLE ON RECORD. IT APPEARS FROM THE RECORDS THAT THE APPELL ANT HAS TRANSFERRED RS.35,00,000/- TOWARDS GENERAL MAINTENANCE FUND (FO R TRAINING & RESEARCH CENTRE BUILDING) AND RS.35,00,000/- TOWARDS EQUIPME NT DEPLETION FUND (FOR PURCHASE OF THALASSEMIA TESTING MACHINES & ARTIFICI AL LIMB MANUFACTURING EQUIPMENTS). IT FURTHER APPEARS FROM THE RECORDS THAT THE ASSES SEE ASKED FOR PERMISSION BEFORE THE FIRST APPELLATE AUTHORITY TO FILE THE FORM NO.10 FOR ACCUMULATION UNDER SECTION 11(2) OF THE ACT AND IT WAS CLARIFIED THAT THE AMOUNT WAS SPENT IN SUBSEQUENT YEAR AND THUS FOR TH E ENDS OF JUSTICE ADDITION ITA NO.168/AHD/2018 INDIAN RED CROSS SOCEITY VS. ITO(EXEMPTION) ASSESSMENT YEAR 2014-15 - 4 - WAS REQUESTED TO BE DELETED. THUS THE FACT OF ACCUM ULATION OF FUND IS NOT IN DISPUTE. THE ONLY QUESTION BEFORE US IS THIS THAT W HETHER THE APPLICATION IN FORM NO.10 UNDER RULE 17 OF THE INCOME TAX RULES, 1 962 COULD BE FILED EVEN AFTER THE ASSESSMENT IS COMPLETED. THE LEARNED SENI OR COUNSEL APPEARING FOR THE ASSESSEE RELIED UPON A JUDGMENT PASSED BY THE H ONBLE JURISDICTIONAL HIGH COURT IN THE MATTER OF CIT-VS-MAYUR FOUNDATION REPO RTED IN [2005] 274 ITR 562 (GUJARAT) WHEREIN THE POSITION IN RESPECT OF FI LING OF FORM NO.10 UNDER RULE 17 HAS BEEN CLARIFIED. THE VIEW OF THE HONBLE COURT IS THIS THAT THE ASSESSING AUTHORITY IS EMPOWERED AND IS DUTY BOUND TO PASS AN ORDER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL FOR THE PURPOSE OF ASSESSING THE TAX LIABILITY OF THE ASSESSEE FOR THE ASSESSMENT YEAR WHICH ARE U NDER CONSIDERATION BEFORE THE TRIBUNAL. UNDER THIS CIRCUMSTANCES, IT CANNOT B E CONTENDED BY THE DEPARTMENT THAT THE ASSESSMENT PROCEEDINGS HAS COME TO AN END WHEN THE ASSESSMENT ORDER IS FRAMED. IF THE RATIO OF THE JUD GMENT IS APPLIED IN THE INSTANT CASE THEN THE ASSESSMENT PROCEEDING CANNOT BE SAID TO BE COMPLETED SINCE THE SAME BEFORE US IS STILL PENDING. THEREFORE,UNTIL TH E ORDER OF THE TRIBUNAL IS GIVEN EFFECT TO BY THE ASSESSING AUTHORITY BY COMPU TING THE CORRECT TAX LIABILITY OF ASSESSEE ASCERTAINING WHETHER THE ASSE SSEE IS REQUIRED TO PAY TAX OR BECOMES ENTITLED TO A REFUND, THE ASSESSMENT PROCEE DING IS NOT COMPLETED. MERELY BECAUSE FORM NO.10 HAS NOT BEEN SUBMITTED BY THE ASSESSEE WE CANNOT SHUT OUR EYES ON THE APPROACH TAKEN BY THE AUTHORIT IES BELOW IN DENYING LEGITIMATE CLAIM OF THE ASSESSEE SINCE THE ASSESSME NT PROCEEDING STILL PENDING IN THE INSTANT CASE AS ALREADY DETERMINED BY US IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF CIT-VS-MAYUR FOUNDATION (SUPRA). WE, THEREFORE, FIND IT FIT AND PROPER TO ALLOW THE ASSESSEE TO SUBMIT THE FORM NO.10 TO THE ASSESSING OFFICER C LARIFYING THE ENTIRE POSITION OF THE SPECIFIC FUND TO THE TUNE OF RS.70, 00,000/-. THE LEARNED AO IS ITA NO.168/AHD/2018 INDIAN RED CROSS SOCEITY VS. ITO(EXEMPTION) ASSESSMENT YEAR 2014-15 - 5 - FURTHER DIRECTED TO PASS ORDERS IN ACCORDANCE WITH LAW TAKING INTO CONSIDERATION AS IF SUCH FORM NO.10 IS SUBMITTED BY THE ASSESSEE AT THE VERY ONSET OF THE ASSESSMENT PROCEEDING AND TO PASS ORDERS IN ACCORDA NCE WITH LAW. NEEDLESS TO MENTION THAT THE ADDITION MADE BY THE AUTHORITIES B ELOW IS HEREBY DELETED. 5. IN THE RESULT,ASSESSEESAPPEAL IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 06/08/2019 SD/- SD/- ( PRAMOD KUMAR) (MS. MADHU MITA ROY) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED 06/08/2019 PRITIYADAV, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-9 AHMEDABAD. 5. , , / DR, ITAT, AHMEDABAD 6. !'#$ / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , ! / ITAT, AHMEDABAD 1. DATE OF DICTATION 17.07.2019 (DICTATION PAGES 6) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22.07.2019 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S23.07.2019 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER