DDIT, CHENNAI V. M/s. T.Thomaz Educational Trust, CHENNAI

ITA 1781/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64542 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 28-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JUNIOR
• Assessee Lawyers: G BASKAR
• Keywords: Depreciation; Maximum Marginal Rate
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO.1781/MDS/2012 ASSESSMENT YEAR: 2004-05 THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS) III, AYAKAR BHAVAN, ANNEXE BUILDING, NUNGAMBAKKAM, CHENNAI 600 034. VS. M/S. T. THOMAS EDUCATIONAL TRUST, NO. 16, ST. MARYS ROAD, SEMBIUM, CHENNAI 600 011. [PAN:AAATT3517D] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.E.B. RENGARAJAN, JUNIOR STANDING COUNSEL RESPONDENT BY : SHRI G. BASKAR, ADVOCATE DATE OF HEARING : 20.11.2012 DATE OF PRONOUNCEMENT : 20.11.2012 ORDER PER S.S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL IS DIRECTED AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME TAX (APPEALS) XII, CHENNAI D ATED 25.06.2012 IN ITA NO. 396/2011-12 FOR THE ASSESSMENT YEAR 2004-05 IN PROCEEDINGS UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT 1961 [IN SHORT THE ACT]. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A TRUST REGISTERED ON 16.12.1981 UNDER SECTION 12A(A) OF THE ACT. IT IS RUNNING SIX EDUCATIONAL INSTITUTIONS. ON 28.10.2004, IT HAD FILED ITS RETU RN FOR THE IMPUGNED I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 17 77 78 88 81 11 1/M/ /M/ /M/ /M/12 1212 12 2 ASSESSMENT YEAR DECLARING INCOME OF ` .6,14,96,082/- AND CLAIMED EXEMPTION UNDER SECTION 11 OF THE ACT. THEREAFTER , THE ASSESSING OFFICER COMPLETED SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT DISALLOWING DEPRECIATION AND RAISED DEMAND OF ` . NIL. SUBSEQUENTLY, THE ASSESSEES ASSESSMENT FINALIZED WAS REOPENED VIDE NOTICE DATED 30.03.2011 ISSUED UNDER SECTION 148 OF THE ACT. IN RESPONSE, THE AS SESSEE REITERATED THE RETURN ALREADY FILED AND ACCEPTED BY THE ASSESSING OFFICER IN SCRUTINY ASSESSMENT. 3. IN SCRUTINY PROCEEDINGS IN CONSEQUENCE TO REOPE NING, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD MADE INVESTME NT OF ` .92,375/- IN M/S. GUARDIAN CHIT FUND REFLECTED IN ITS INCOME AND EXPE NDITURE ACCOUNT WHICH HAD INCREASED TO ` .1,27,430/-. PER ASSESSING OFFICER, IT WAS NOT A MO DE OF INVESTMENT APPROVED UNDER SECTION 11(5) VIOLATING T HE PROVISIONS ENSHRINED UNDER SECTION 13(1)(D) OF THE ACT. THEREFORE, HE CHOSE TO BRING TO TAX THE EXCESS OF INCOME OVER EXPENDITURE OF THE ASSESSEE T RUST IN THE STATUS OF AOP AT MAXIMUM MARGINAL RATE VIDE ASSESSMENT ORDER DATED 27.12.2011. SIMILARLY, THE ASSESSING OFFICER AFTER HOLDING THA T THE ASSESSEE WAS NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 11 DURING THE IMPUGNED ASSESSMENT YEAR DID NOT CONSIDER THE ASSESSEES CLAIM OF EXPEN DITURE. THEREFORE, ASSESSEES INCOME WAS ALSO BROUGHT TO TAX BY TREATI NG IT AS IN THE BRACKET OF AOP AND DEPRECIATION WAS RESTRICTED AS ` .35,71,746/- BY ALLOWING IT ONLY FOR I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 17 77 78 88 81 11 1/M/ /M/ /M/ /M/12 1212 12 3 THE ASSETS PURCHASED DURING THE RELEVANT YEAR. ALON G WITH THIS, THE ASSESSING OFFICER ALSO HELD THAT SINCE THE ASSESSEE HAD COLLECTED BUILDING FUND OF ` .14,80,450/-, THE SAME BEING IN THE SHAPE OF CORPUS DONATIONS WAS ALSO NOT EXEMPTED UNDER SECTION 11(1)(D). THEREFORE , THE SAID AMOUNT WAS ALSO TREATED AS INCOME AND BROUGHT TO TAX. ACCORDIN GLY, THE ASSESSING OFFICER COMPUTED ASSESSEES TAXABLE INCOME AS ` .31,66,902/-. 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), WHEREIN ITS CONTENTION STANDS CONCURRED MAINLY ON THE GROUN D THAT QUA ASSESSMENT YEAR 2005-06, THE COORDINATE BENCH OF CHENNAI ITAT HAD HELD THAT SINCE THE ASSESSEES INVESTMENT HAD COME FROM THE YEARS P RECEDING 1988 AND THE PAYMENTS DURING THE FINANCIAL YEAR 2003-04 ARE AS P ER THE DIRECTIONS OF THE HONBLE JURISDICTIONAL HIGH COURT, THE SAME CANNOT BE TAKEN AS VIOLATION UNDER SECTION 13(1)(D) R.W.S. 11(5) OF THE ACT. A CCORDINGLY, THE ASSESSEES APPEAL STANDS ACCEPTED BY THE CIT(A). THEREFORE, THE REVENUE IS IN APPEAL. 5. ON BEHALF OF THE REVENUE, THE DR HAS REITERATED THE PLEADING RAISED IN THE GROUNDS OF APPEAL AND STATED THAT THE CIT(A) HAS WRONGLY ACCEPTED THE ASSESSEES CONTENTION QUA THE BENEFIT OF SECTIO N 11 OF THE ACT. HENCE, HE PRAYED THAT THE ASSESSING OFFICERS ORDER BE UPH ELD BY UPSETTING THAT OF CIT(A). I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 17 77 78 88 81 11 1/M/ /M/ /M/ /M/12 1212 12 4 6. OPPOSING THE REVENUES ARGUMENT, THE AR REPRESE NTING THE ASSESSEE HAS SUBMITTED THAT QUA ASSESSMENT YEAR 2005-06, THE COORDINATE BENCH OF CHENNAI ITAT IN I.T.A. NO. 175/MDS/2009 VIDE ORDER DATED 23.03.2012 HAS UPHELD THE CONTENTIONS OF THE ASSESSEE AND SINCE TH ERE ARE NO DISTINGUISHING FEATURES QUA THE IMPUGNED ASSESSMENT YEAR AS WELL, THE ORDER OF THE CIT(A) DESERVES TO BE UPHELD. IN REBUTTAL, THE DR HAS NOT BEEN ABLE TO SERIOUSLY CONTROVERT THE SUBMISSIONS MADE BY THE AR. 7. WE HAVE HEARD BOTH PARTIES AT LENGTH AND GONE T HROUGH THE RELEVANT FINDINGS AS WELL AS THE ORDER OF THE COORDINATE BEN CH (SUPRA). THE ONLY CASE OF THE PARTIES IS THAT PER ASSESSEE, THE INVESTMENT S IN QUESTION DO NOT CONTRAVENE THE PROVISIONS OF THE ACT, MAINLY SECT ION 13(1)(D) R.W.S. 11(5) WHICH IN TURN HAS BEEN DISPUTED BY THE REVENUE. WE NOTICE THAT IN THE IDENTICAL FACTS AND CIRCUMSTANCES PERTAINING TO THE ASSESSEES CASE FOR THE ASSESSMENT YEAR 2005-06, THE COORDINATE BENCH HAD H ELD AS UNDER: 5. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. BOOKS OF THE ASSESSEE, NO DOUBT, SHOW A SUM OF ` .92,375/- AS DUE FROM M/S GUARDIAN CHIT FUNDS AND SUCH AMOUNT APPEARS IN ITS BOOKS FROM 1.4.1990 ONWARDS CONTINUOUSLY. RELEVANT PAPERS PLACED AT PA PER-BOOK PAGES 35- 43 ALSO SHOW THAT THERE WERE NO TRANSACTIONS WITH G UARDIAN CHIT FUNDS FROM 1.4.1990 TILL 31.3.2002. THE TRANSACTIONS THE REAFTER WERE PAYMENTS EFFECTED BY THE ASSESSEE ON 13.6.2003, 24.6.2004 AN D 6.7.2004 OF ` .35,055/-, ` . 20,161/- AND ` . 1,172/- ALL THROUGH DEMAND DRAFTS. AS PER THE ASSESSEE, THE BALANCE OF ` . 92,375/- SHOWN IN ITS BOOKS AS DUE FROM M/S GUARDIAN CHIT FUNDS, WAS INCORRECT. THE AMOUNT S WERE ACTUALLY DUE FROM THE ASSESSEE TO SAID M/S GUARDIAN CHIT FUNDS. IN SUPPORT THEREOF, I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 17 77 78 88 81 11 1/M/ /M/ /M/ /M/12 1212 12 5 ASSESSEE IS RELYING ON ORDER OF JURISDICTIONAL HIGH COURT IN COMP. APPLICATION NO.578 OF 1997 AND COMP. PETITION NO.8 OF 1990 DATED 3 RD OCTOBER, 2002. A COPY OF THE SAID ORDER OF HONBLE JURISDICTIONAL HIGH COURT ARE PLACED AT PAPER-BOOK PAGES 27 AND 28. TH E SAID ORDER CONTAINS THE FOLLOWING DIRECTION:- 1. THAT THE RESPONDENT HEREIN DO PAY TO THE APPLIC ANT HEREIN THE SUM OF ` . 36,053/- (RUPEES THIRTY-SIX THOUSAND FIFTY THREE ONLY) WITH SUBSEQUENT INTEREST AT 12% PER ANNUM ON ` . 20,000/- FROM 30.11.93 TILL THE DATE OF REALIZATION; 2. THAT THE RESPONDENT BE AND IS HEREBY DIRECTED TO PAY THE COST OF THIS APPLICATION ` . 2/-. WE ARE OF THE OPINION THAT WHEN THE HONBLE JURISDI CTIONAL HIGH COURT HAS ORDERED PAYMENTS TO BE EFFECTED BY THE ASSESSEE TO M/S GUARDIAN CHIT FUNDS, IT CLEARLY SHOW THAT THE AMOUNTS WERE DUE FR OM THE ASSESSEE TO THE SAID CHIT FUNDS AND NOT VICE VERSA. ASSESSEES BOO KS MIGHT HAVE SHOWN A SUM OF ` . 92,375/- AS DUE FROM M/S GUARDIAN CHIT FUNDS. IT IS NOT IN DISPUTE THAT ALL PAYMENTS BY THE ASSESSEE TO M/S GU ARDIAN CHIT FUNDS, PRIOR TO THE PAYMENTS EFFECTED BY IT ON THE DIRECTI ONS OF HONBLE JURISDICTIONAL HIGH COURT, WERE MADE DURING THE PER IOD WHEN IT WAS ENJOYING EXEMPTION UNDER SECTION 10(22) OF THE ACT. IN THE CONTEXT OF SECTION 10(22) OF THE ACT, THERE WAS NO NECESSITY T HAT INVESTMENTS OF SURPLUS HAD TO BE MADE IN ANY OF THE MODES PRESCRIB ED UNDER SECTION 11(5) OF THE ACT. HENCE, ASSESSEES INVESTMENT IN M/S GUARDIAN CHIT FUNDS, DURING THE PERIOD WHEN IT WAS ENJOYING EXEMP TION UNDER SECTION 10(22) OF THE ACT, WAS NOT IN VIOLATION OF THE REQU IREMENT OF THAT SECTION. AS FOR THE QUESTION OF CONVERTING THE DUES AS PER T HE BOOKS OF THE ASSESSEE, TO ONE OF THE MODES PRESCRIBED UNDER SECTION 11(5) OF THE ACT, ONCE ASSESSEE STARTED CLAIMING EXEMPTION UNDER SECTIONS 11 AND 12 OF THE ACT, WE ARE OF THE OPINION THAT THIS REQUIREMENT COULD N EVER HAVE BEEN FASTENED ON THE ASSESSEE. THIS IS FOR THE SIMPLE REASON THA T WHATEVER THE BOOKS OF ACCOUNTS HAD MENTIONED, THERE WAS NO AMOUNT DUE FRO M M/S GUARDIAN CHIT FUNDS TO THE ASSESSEE, BUT, ON THE OTHER HAND, THE AMOUNTS WERE DUE FROM THE ASSESSEE TO THE SAID CHIT FUNDS. ASSESSEE HAD EFFECTED THE PAYMENTS OF ` . 35,055/- AS PER THE DIRECTION OF HONBLE JURISDIC TIONAL HIGH COURT AND FURTHER PAYMENT OF INTEREST AND THE PAYME NTS, AGAIN AS PER THE DIRECTIONS OF OFFICIAL LIQUIDATOR OF THE HONBLE HI GH COURT. THESE PAYMENTS WERE CONSIDERED DONE IN VIOLATION OF SECTI ON 11(5) OF THE ACT BY THE ASSESSING OFFICER, ERRONEOUSLY. PAYMENTS EFFEC TED UNDER COMPULSION OF LAW CANNOT BE CONSIDERED AS INVESTMENT. SUCH PA YMENTS WERE MADE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 17 77 78 88 81 11 1/M/ /M/ /M/ /M/12 1212 12 6 ONLY TO SATISFY THE REQUIREMENT OF THE DECREE OF HO NBLE HIGH COURT AND NO DECREE WILL EVER BE PASSED COMPELLING A PERSON T O MAKE AN INVESTMENT BUT, DECREES ARE GENERALLY PASSED FOR ENSURING PAYM ENT OF LIABILITIES. IN SUCH A SITUATION, WE ARE OF THE OPINION THAT AUTHOR ITIES BELOW FELL IN ERROR IN CONSIDERING THE PAYMENTS EFFECTED, IN OBEDIENCE OF THE DIRECTION OF OFFICIAL LIQUIDATOR TO BE INVESTMENT MADE BY THE AS SESSEE. THE QUESTION OF APPLICATION OF SECTION 11(5) OF THE ACT WOULD AR ISE ONLY IF THERE WERE ANY INVESTMENTS BY THE ASSESSEE. AS ALREADY NOTED BY US, EARLIER PAYMENTS MADE BY THE ASSESSEE WHEN IT WAS ENJOYING EXEMPTION UNDER SECTION 10(22) OF THE ACT COULD NOT HAVE RESULTED IN ANY DU ES TO THE ASSESSEE FROM THE SAID M/S GUARDIAN CHIT FUNDS BUT IT WAS THE OTH ER WAY ROUND, NO MATTER WHAT THE BOOKS MENTIONED. OTHERWISE, THE SA ID CHIT FUNDS WOULD NOT HAVE SOUGHT AN ORDER FROM HONBLE JURISDICTIONA L HIGH COURT FOR GETTING PAYMENTS FROM THE ASSESSEE. IN THE CONTEXT OF THE EXEMPTION UNDER SECTION 10(22) OF THE ACT, ENJOYED BY THE ASSESSEE IN EARLIER YEARS, THE PAYMENT MADE TO M/S GUARDIAN CHIT FUNDS WAS NOT REL EVANT SINCE THE SAID SECTION DID NOT PROVIDE ANY COMPULSIVE METHOD OF INVESTMENTS, AS STIPULATED UNDER SECTION 11(5) OF THE ACT. WE ARE OF THE OPINION THAT LD. CIT(APPEALS) AS WELL AS A.O. FELL IN ERROR IN CONSI DERING ASSESSEE TO HAVE VIOLATED THE MODE OF INVESTMENT MENTIONED IN SECTIO N 11(5) OF THE ACT AND HOLDING THAT RIGOURS OF SECTION 13(1)(D) OF THE ACT WERE ATTRACTED. THERE WAS NO SUCH VIOLATION. ASSESSEE WAS ELIGIBLE FOR E XEMPTION UNDER SECTIONS 11 AND 12 OF THE ACT. ORDERED ACCORDINGLY. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. TAKING CUE FROM THE ABOVE OPINION OF THE COORDINATE BENCH AND MORE SO IN VIEW OF THE FACT THAT THERE ARE NO DISTINGUISHING F EATURES FORTHCOMING IN THE TWO ASSESSMENT YEARS IN QUESTION, WE ALSO EXPRESS O UR RESPECTFUL AGREEMENT AND HOLD THAT THE CIT(A) HAS RIGHTLY ACCE PTED THE CONTENTIONS OF THE ASSESSEE BY RECORDING A FINDING THAT IT HAS NOT VIOLATED THE PROVISIONS OF THE ACT SO AS TO LOOSE ITS CLAIM OF EXEMPTION. ME RE ASSERTION MADE BY THE REVENUE IN ITS GROUNDS THAT THE ORDER OF THE COORDI NATE BENCH (SUPRA) IS YET TO ATTAIN FINALITY, CANNOT BE FORM THE SOLE BASIS F OR NOT PLACING RELIANCE ON THE SAME. HENCE, WE FIND NO REASON TO INTERFERE WITH TH E WELL REASONED FINDINGS I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 17 77 78 88 81 11 1/M/ /M/ /M/ /M/12 1212 12 7 OF THE CIT(A). 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON TUESDAY, THE 20 TH OF NOVEMBER, 2012 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 20.11.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.