ITO (E)-II(1), MUMBAI V. KAMALAGAURI M. BHATT PUBLIC CHARITABLE TRUST, MUMBAI

ITA 1767/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55321 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-07-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 05-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K B MENON
• Keywords: Charitable institution; Deemed to accrue or arise in india
• Section: 12A; 10B; 11; 139

Judgement Text

1 ITA 1767 /M/2010 KAMALAGAURI M. BHATT PUBLIC CHARITABLE TRUST. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A BEFORE SHRI N.V. VASUDEVAN, J.M. AND SHRI R.K. PAND A, A.M. ITA NO. 1767/MUM/2010 ASSESSMENT YEAR 2002-03 I.T.O. (E)-II(1), R. NO. 509, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI 12. VS. KAMALAGAURI M. BHATT PUBLIC CHARITABLE TRUST, C/O S.M. BHATT, E-2, NEW LIGHT CHS, GR. FLOOR, S.V. ROAD, OPP. SACRED CHURCH, KHAR (W), MUMBAI.400052. PAN AAATK1616J APPELLANT RESPONDENT APPELLANT BY SHRI N.K.B. MENON RESPONDENT BY SHRI HARESH SHAH DATE OF HEARING 18.7.2011 DATE OF PRONOUNCEMENT 21.9.2011 ORDER PER R.K. PANDA A.M. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DT. 30.10.2009 OF CIT(A)- 1, MUMBAI RELATING TO A.Y. 2002-03. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A), MUMBAI HAS ERRED IN ALLOWING TH E BENEFIT OF ACCUMULATION ON DEEMED INCOME WITHOUT APPRECIATING THAT THE ACCUMULATION IS PERMISSIBLE ONLY ON THE REAL INCOME AND NOT ON THE NOTIONAL DEEMED INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A), MUMBAI HAS FAILED TO APPRECIATE THAT ALLOWING THE 2 ITA 1767 /M/2010 KAMALAGAURI M. BHATT PUBLIC CHARITABLE TRUST. ACCUMULATION U/S 11(2) AFTER FAILURE OF THE ASSESSE E TO COMPLY WITH THE PROVISIONS OF SEC. 11(1) READ WITH EXPLANATION 2, AMOUNTED TO EXTENDING THE PERIOD OF APPLICATION OF INCOME BEYON D THAT ENVISAGE BY THE I.T. ACT, 1961. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A), MUMBAI HAS ERRED IN DIRECTING T HE ASSESSING OFFICER TO ALLOW BENEFIT OF ACCUMULATION TO THE ASS ESSEE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE OPTED FOR A CCUMULATION U/S 11(1) READ WITH EXPLANATION 2 IN RESPECT OF THE DEE MED INCOME BY FILLING FORM NO. 10 WHICH IS VIOLATION OF THE BASIC PRINCIPLES OF CONCEPT OF INCOME ENUMERATED UNDER THE I.T. ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A), MUMBAI HAS ERRED IN IGNORING TH E FACT THAT THE ASSESSING OFFICER HAS ONLY REPRODUCED EXTRACTS OF L ETTER DATED 24.10.2002 FILED ON 20.10.2002 AND NOT TREATED THE SAME AS DUE COMPLIANCE FOR THE PURPOSE OF STATUTORY PROVISIONS OF SEC. 11(1) OF THE I.T. ACT AS HELD BY THE LEARNED CIT(A). 5. THE APPELLANT PRAYS THAT THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS)-1 MUMBAI BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FI LED RETURN OF INCOME ON 7.3.2003 ALONG WITH AUDITED INCOME AND EXPENDITURE ACCOUNT AND BALANCE SHEET IN FORM 10B DISCLOSING TOTAL INCOME AT ` NIL THE TRUST IS REGISTERED U/S 12A OF THE I.T. ACT. THE OBJECTS OF THE TRUST ARE TO GIVE MEDICAL RELIEF TO THE POOR AND OTHER CHARITABLE ACTIVITIES. ON BEING QUESTION ED BY THE A.O. DURING THE RE- ASSESSMENT PROCEEDINGS THE ASSESSEE REPLIED AS UNDE R:- THE TOTAL INCOME DURING THIS ASSESSMENT YEAR IS ` 2520543/- WHICH INCLUDES A DEEMED INCOME OF ` 936030/-IN RESPECT OF WHICH AN OPTION U/S 11(1) EXPLANATION 2 DURING ASST. YEAR 20 01-02 WAS EXERCISED. HENCE THE SAME WAS TO BE SPENT WITHIN 1 2 MONTHS OF THE END OF THE ASST. YEAR 2001-02. SINCE THE SAID INCOME COULD NOT BE THE OBJECT OF TH E TRUST DURING THE NEXT PREVIOUS YEAR I.E. ASST. YEAR 2002- 03, THE SAME WAS INCLUDED IN THE INCOME FOR AY 2002-03 AND FORMED PA RT OF INCOME OF AY 2002-03. AN OPTION WAS ALSO EXERCISED FOR AY 2002-03 U/S 11 (1) EXPLANATION 2 AND HENCE WHICH IS IN ACCORDANCE WITH LAW. 3 ITA 1767 /M/2010 KAMALAGAURI M. BHATT PUBLIC CHARITABLE TRUST. SINCE THE DEEMED INCOME BECOMES A PART OF THE TOTA L INCOME AND EACH ASST. YEAR IS A SEPARATE ASST. YEAR, ALL T HE RELEVANT PROVISIONS APPLICABLE U/S 11 APPLY TO AY 2002-03 AL SO. ACCORDINGLY AN APPLICATION EXERCISING OPTION U/S 11(1) EXPLANAT ION 2 WAS FILED ON 20.10.2002 WHICH WAS IN TIME AND IS IN ACCORDANCE W ITH LAW. 3.1 HOWEVER, THE A.O. WAS NOT SATISFIED WITH THE EXPLAN ATION GIVEN BY THE ASSESSEE. ACCORDING TO HIM, AS PER EXPLANATION 2 O F SECTION 11(1) OF THE I.T. ACT WHERE THE INCOME APPLIED TO CHARITABLE OR RELIGIOUS PURPOSES IN INDIA FALL SHORT OF SEVENTY FIVE PERCENT OF THE INCOME DERIVED DURIN G THE YEAR FROM PROPERTY HELD UNDER TRUST, OR AS THE CASE MAY BE, HELD UNDER TRUS T IN PART,.. AT THE OPTION OF THE PERSON IN RECEIPT OF THE INCOME (SUCH OPTION TO BE EXERCISED IN WRITING BEFORE THE EXPIRY OF THE TIME ALLOWED UNDER SUB-SEC TION (1) OF SECTION 139 FOR FURNISHING THE RETURN OF INCOME) BE DEEMED TO BE IN COME APPLIED TO SUCH PURPOSE DURING THE PREVIOUS YEAR IN WHICH THE INCOM E WAS DERIVED AND THE INCOME SO DEEMED TO HAVE BEEN APPLIED SHALL NOT BE TAKEN INTO ACCOUNT IN CALCULATING THE AMOUNT OF INCOME APPLIED TO SUCH PU RPOSES. HE ACCORDINGLY BROUGHT TO TAX THE AMOUNT OF ` 936030/- AS NOT BEING APPLIED ON THE OBJECTS. 3.2 IN APPEAL, THE LD. CIT(A) FOLLOWING THE ORDER O F THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2003-04 DIRECTED THE A.O. TO EXAM INE THE CORRECTNESS OF THE CLAIM. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) , THE REVENUE IS IN APPEAL BEFORE US. 4. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). ADMITTEDLY, BASED ON THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2003-04 IN ITA NO. 5647/M/05 ORDE R DATED 19.12.2008, THE LD. CIT(A) DIRECTED THE A.O. TO EXAMINE THE CORRECT NESS OF THE CLAIM OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER OF THE LD. CIT(A) AT PARA 6.4 ONWARDS READS AS UNDER:- TAKING NOTE OF APPELLANTS LETTER WHICH WAS FILED W ELL IN TIME BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME I.E. ON 31.10.2002. THE 4 ITA 1767 /M/2010 KAMALAGAURI M. BHATT PUBLIC CHARITABLE TRUST. APPELLANT TRUST HAS EXERCISED ITS OPTION WELL IN TI ME THROUGH MAKING THIS SUBMISSION TO THE A.O. TAKING INTO ACCOUNT, T HE LETTER OF THE APPELLANT TRUST FILED BEFORE THE A.O., I AM CONVINC ED THAT IN VIEW OF THIS LETTER FILED, THE A.O.S ACTION OF TAXING THE DEEMED INCOME OF ` 9,36,030/- AS INCOME NOT APPLIED ON OBJECT TO THE T RUST, IS NOT JUSTIFIED. IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE A.O. IS DELETED. ACCORDINGLY THE APPELLANT TRUST GETS RELI EF OF ` 9,36,030/-. HENCE THIS GROUND OF APPEAL IS ALLOWED TO THE APPEL LANT. BESIDES THIS, I WOULD ALSO LIKE TO POINT OUT THAT THIS RELIEF IS GRANTED TO THE APPELLANT SUBJECT TO VERIFICATION OF CORRECTNESS OF EXERCISE OF APPELLANTS TRUST LETTER OF OPTION U/S 11(1) EXPLANATION OF I.T. ACT, 1961WHICH IS DATED 24.10.2002 STATED TO B E FILED BY THE A.O. AS ON 20.10.2002 AS FINDS MENTION IN PARA 4 OF ASSE SSMENT ORDER. ON THIS GROUND OF APPEAL, I WOULD ALSO LIKE TO POI NT OUT THE OBSERVATION MADE BY HONBLE ITAT IN ITS ORDER PERTA INING TO A.Y. 2003-04 IN ITA NO. 5647/MUM/05 IN THE APPELLANTS O WN CASE WHEREIN THE TRIBUNAL PASSED OBSERVATION IN PARA 12 AS UNDER:- 12. THE ABOVE DECISIONS CLARIFY THE POINT THAT IT I S ONLY THE REAL INCOME OF THE ASSESSEE AND NOT THE DEEMED INCOME W HICH CAN BE SET APART OR ACCUMULATED FOR CHARITABLE OR RELIG IOUS PURPOSES OF THE TRUST. THE ASSESSEE CANNOT ACCUMULATE 15% O F THE INCOME INCLUDING THE DEEMED INCOME U/S 11(3) OF THE I.T. ACT. BUT SUB-SEC. [3A) PROVIDES THAT IF THE ACCUMULATED INCOME IS NOT APPLIED FOR THE PURPOSES FOR WHICH IT WAS ACCUMULAT ED OR SET APART DUE TO CIRCUMSTANCES BEYOND ITS CONTROL, THE ASSESSEE MAY APPLY FOR ACCUMULATION OF THE SAME FOR A FURTHE R PERIOD AND THE ASSESSING OFFICER MAY ALLOW THE SAME AND THEREU PON THE PROVISIONS OF SECTION 3 SHALL APPLY. THUS, SUB-SEC [3A] GIVER POWER TO THE ASSESSING OFFICER TO EXTEND THE TIME F OR APPLICATION OF THE ACCUMULATED OR SET APART FUNDS PROVIDED THEY ARE INVESTED OR DEPOSITED IN ACCORDANCE WITH THE PROVIS IONS OF CLAUSE (B) OF SUB-SEC. [2]. THE APPLICABILITY OF T HIS PROVISION OF LAW HAS NOT BEEN EXAMINED BY EITHER THE ASSESSING O FFICER OR THE CIT(A). IN VIEW OF THE SAME, WE DEEM IT FIT AN D PROPER TO REMAND THE ISSUE TO THE FILE OF THE ASSESSING OFFIC ER TO EXAMINE IF THE APPLICATION OF THE ASSESSEE WOULD FALL WITHI N THE PURVIEW OF SUB-SEC [3A] OF SEC. 11 OF THE ACT AND ALLOW THE APPLICATION OF SUCH FUNDS IF IT IS FOUND TO BE IN ACCORDANCE WITH THE SAID PROVISION AND IF THE ASSESSEE IS FOUND TO BE NOT SA TISFYING THE PROVISIONS OF SUB-SECTION [3A], THEN THE INCOME OF THE ASSESSEE MAY BE COMPUTED IN THE LIGHT OF OUR OBSERVATIONS IN PARA 11 & 12 ABOVE AND IN ACCORDANCE WITH THE LAW. THOUGH, THIS OBSERVATIONS OF HONBLE ITAT PERTAININ G TO A.Y. 2003-04, BUT I FEEL IT IS RELEVANT FOR THIS CURRENT YEAR ALSO. HENCE, I CONSIDERED PROPER AND APPROPRIATE TO DIRECT THE A.O . TO EXAMINE THIS 5 ITA 1767 /M/2010 KAMALAGAURI M. BHATT PUBLIC CHARITABLE TRUST. ASPECT ALSO FOR THE CURRENT YEAR WHILE GIVING APPEA L EFFECT TO THIS ORDER. 4.1 SINCE THE LD. CIT(A) HAS DIRECTED THE A.O. TO E XAMINE THE CORRECTNESS OF THE CLAIM IN THE LIGHT OF THE DIRECTION OF THE TRIB UNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING A.Y. AND SINCE LD. D.R. C OULD NOT CONTROVERT THE FINDINGS OF THE LD. CIT(A), THEREFORE, IN ABSENCE O F ANY DISTINGUISHING FEATURE BROUGHT TO OUR NOTICE AGAINST THE ORDER OF THE LD. CIT(A), THE SAME IS UPHELD. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY D ISMISSED. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED ON 21.09.2011. SD/- SD/- (N.V. VASUDEVAN) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 21.09.2011 RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) I, MUMBAI 4. THE DIRECTOR OF I.T. (EXEMPTION) MUMBAI 5. THE DR BENCH, C 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 6 ITA 1767 /M/2010 KAMALAGAURI M. BHATT PUBLIC CHARITABLE TRUST. DATE INITIALS 1 DRAFT DICTATED ON 18.7.2011, 26.9.11 SR. PS 2 DRAFT PLACED BEFORE THE AUTHOR 19.7.11, 16.9.2011 SR. PS 3 DRAFT PLACED BEFORE THE SECOND MEMBER 4 APPROVED DRAFT COMES TO THE SR. PS SR. PS 5 KEPT FOR PRONOUNCEMENT ON SR. PS 6 FILE SENT TO THE BENCH CLERK SR. PS 7 DATE ON WHICH FILE GOES TO THE HEAD CLERK 8 DATE ON WHICH FILE GOES TO THE AR 9 DATE OF DISPATCH OF ORDER