ITO, BHILWARA V. Vardhman Sthanakvasi Jain Shravak Sangh, BHILWARA

ITA 185/JODH/2014

• Counselvise Citation: 18523314 RSA 2014
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-08-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 24-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: U C JAIN
• Keywords: Business income; Depreciation; Revenue expenditure; Capital expenditure
• Section: 12A; 12AA; 12; 28

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 185 /JODH/2014 (A.Y. 20 1 0 - 11 ) ITO, WARD - 3, BHILWARA. VS. VARDHMAN STHANAKVASI JAIN SHRAVAK SANGH, SHANTI BHAWAN, BHOPALGANJ, BHILWARA. (APPELLANT) PAN NO. AAATV 1140 N (RESPONDENT) ASSESSEE BY : SHRI U.C. JAIN DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 01 / 0 8 /201 4 . DATE OF PRONOUNCEMENT : 09 /0 9 /201 4 . O R D E R PER N.K. SAINI, A.M TH IS IS AN APPEAL BY THE D EPARTMENT AGAINST THE ORDER DATED 2 7 /0 1 /201 4 OF L D . CIT(A), AJMER . THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: THE LD. CIT(A) , AJMER IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE HAS ERRED IN: - 1. ALLOWING TO DETERMINED THE INCOME AS PER SECTION 2(45) OF THE I.T. ACT, ALTHOUGH THE ASSESSEE FILED RETURN IN THE STATUS OF AOP TRUST (08 - CODE.) 2 2. ALLOWING TO DETERMINED THE INCOME AS PER SECTION 2(45) OF THE I.T. ACT, THOUGH THE ASSESSEE TRUST WAS NOT REGISTERED U/S. 12AA OF THE I.T. ACT, 1961. 3. THE APPELLANT CRAVES TO ADD, ALTER, DELETE OR MODIFY THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2 VIDE GROUND NO. 1 , THE GRIEVANCE OF THE DEPARTMENT RELATES TO THE DETERMINATION OF INCOME U/S. 2(45) OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) . 3. FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 15/1 2/2010 DECLARING NIL INCOME WHICH WAS PROCESSED U/S. 143(1) OF THE ACT ON 14/06/2011. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY . THE ASSESSING OFFICER FRAMED THE ASSESSMENT AT AN INCOME OF RS. 34,02,564/ - BY OBSERVING THAT THE EXEMPTION U/S. 11(1)(A) OF THE ACT FOR A SUM OF RS. 34 , 02,564/ - WAS NOT AVAILABLE TO THE ASSESSEE SINCE THE ASSESSEE TRUST WAS NOT REGISTERED U/S. 12 A OF THE ACT . 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: - 'FACT OF THE CASE: 1. THE DUE DATE OF FILLING OF RETURN OF INCOME WAS JULY, 2010 AS MENTIONED IN THE COMPUTATION OF INCOME ATTACHED WITH THE RETURN OF INCOME, WHEREAS RETURN OF INCOME WAS SUBMITTED ON 15/12/2010 ON TOTAL INCOME OF NIL . 2. IN THE COMPUTATION OF INCOME A SUM OF RS. 34,02,564/ - WAS SHOWN AS 3 INCOME AND AGAINST THIS AMOUNT A SUM OF RS. 44,06,156/ - WAS SHOWN AS AMOUNT DEEMED TO APPLIED DURING THE PREVIOUS YEAR. THE REFORE EXEMPTION WAS TAKEN U/S 11 ( 1 )(A) TO THE EXTENT OF RS.34,02,564/ - . 3. THAT THIS APPLICATION OF RS.44,06,156/ - CALCULATED AS UNDER: I) REVENUE EXPENDITURE AS PER INCOME & EXPENDITURE ACCOUNT OF SHANTI BHAWAN RS. 26,05,748/ - II) REVENUE EXPENDITURE AS PER INCOME & EXPENDITURE A/C OF SHANTI JAIN ATHITI GRAH RS. 1,37,777/ - RS.27,43,525/ - III) REPAYMENT OF BANK LOAN AS PER BALANCE SHEET OF SHANTI BHAWAN. R S. 86,247/ - IV) ADDITION TO FIXED ASSETS AS PER BALANCE SHEET OF SHANTI BHAWAN RS.4,15,474/ - AND IN SHANTI JAIN ATHITHI GRAH RS. 11 ,60,910/ - RS. 15,76,384/ - RS.1 6 , 62 , 631/ - RS.44 , 06 , 156/ - APPLICATION OF AMOUNT CAN BE FOR REVENUE OR CAPITAL PURPOSE. IN THIS CASE REVENUE EXPENDITURE IS FOR RS.27,43,525/ - AND CAPITAL EXPENDITURE IS RS.L6,62,631/ - . 4. THE RETURN OF INCOME WAS SUBMITTED UNDER THIS IMPRESSION THAT REGISTRATION U/S 12A MIGHT HAD BEEN TAKEN BECAUSE THE TRUST WAS VERY OLD. HOWEVER DURING THE COURSE OF ASSESSMENT IT WAS GATHERED THAT SUCH REGISTRATION IS NOT WITH THE TRUST. 5. AFTER OBSERVING THIS FACT THE ASSESSING OFFICER MADE THE AS SESSMENT ON TOTAL INCOME OF RS. 34,02,564/ - . OUR SUBMISSION: 1. THE TOTAL RECEIPT OF RS.34,02,564/ - WAS AS UNDER: I) FROM SHANTI JAIN ATHITHI GRAH RS. 2,946/ - II) FROM SHANTI BHAWAN RS.23,46,996/ - RS.23,49,942/ - III) VOLUNTARY CON TRIBUTION FOR LIFT RS. 2,50,000/ - - FOR CONSTRUCTION OF BUILDING RS. 8,02,622/ - RS.10,52, 622/ - RS. 34 , 02 , 564/ - 4 THE ASSESSING OFFICER HAS ASSESSED INCOME OF RS. 34,02,564/ - WITH THE FOLLOWING REMARK IN THE ASSESSMENT ORDER: 2. THE AO HAS NOT MENTIONED UNDER WHAT HEADS OF INCOME HE HAS ASSESSED THE INCOME. HE HAS TO ASSESS THE INCOME UNDER THE HEADS OF INCOME PRESCRIBED UNDER SECTION 14 OF IT ACT. 3. THE AO HAS FURTHER ERRED IN TREATING TOTAL RECEIPT AS INCOME. UNDER EACH HEAD OF INCOME THE PROVISIONS OF DEDUCTION OF EXPENSES UNDER EACH HEAD IS GIVEN IN THE INCOME TAX ACT. IN OTHER WORDS THE INCOME SHALL BE DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF THE IT ACT. - 165 ITR(SC) 681 - 247ITR 785 (SC) YOU R HONOUR WILL APPRECIATE THAT WITH THE RETURN OF INCOME IN THE INCOME AND EXPENDITURE ACCOUNT REVENUE INCOME AND EXPENDITURE WERE DISCLOSED OF SHANTI BHAWAN AND SHANTI ATHITHI GRAH WAS SUBMITTED AND DURING THE COURSE OF ASSESSMENT COMPLETE DETAILS OF EXPEN DITURE EITHER OF REVENUE OR CAPITAL WAS VERIFIEDFROM THE BOOKS OF ACCOUNT. SIR, THE SECTION 11(1) (A) ALSO SAY FOR INCOME NOT FOR THE RECEIPT 53 ITR 176 (SC). 4. THE AO HAS MENTIONED THAT THE EXPENDITURE HAS NOT BEEN MADE IN FULL FOR THE OBJECT OF THE TRU ST. IN THIS RESPECT WE SUBMIT THAT APPLIED APPEARING IN THE PROVISION OF SECTION 11 ( 1 )(A) AND NOT THE WORDS SUCH PURPOSE . HENCE THE ASSESSMENT BASED ON SUCH PURPOSE CANNOT BE SAID AS LEGAL ORDER. LIKEWISE LETTING OUT OF THE PROPERTY WAS AN ACTIVITY FOR FULFILLING OBJECT OF TRUST. IN VIEW OF ABOVE ALL THE ORDER PASSED BY THE AO IS BAD - IN - LAW HENCE DESERVE TO BE ANNULLED. ALTERNATIVELY: SUBJECT TO ABOVE OUR SUBMISSION ON QUANTUM IS AS UNDER: A) FOR EARNING INCOME UNDER ANY HEAD OF INCOME, THE EXPENDITURE IN RELATION TO THAT INCOME IS DEDUCTIBLE AS PER INCOME TAX ACT. AND SPECIALLY ALLOWABLE DEDUCTION UNDER RESPECTIVE HAD OF INCOME IS MENTIONED IN THE INCOME TAX ACT. YOUR HONOUR WILL APPRECIATE T HAT THE AO HAS TAKEN ONLY THE RECEIPTS BUT NO DEDUCTION/PAYMENT OF EXPENSES WAS ALLOWED SPECIALLY WHEN ALL THE RELEVANT DETAIL OF EXPENSES WAS AVAILABLE OR SUBMITTED WHEN ASKED BY HIM. NO SPECIFIC INSTANCE OF ANY BILL OR VOUCHER NOT AVAILABLE WITH THE ASSE SSEE WAS OBSERVED. 5 THE ACCOUNTS ARE DULY AUDITED BY THE CHARTERED ACCOUNTANT AND EXCESS OF EXPENDITURE OVER INCOME WAS DULY CERTIFIED. THE AO ONLY MADE THE ASSESSMENT OF INCOME CONSIDERING ALL RECEIPT AS INCOME. FOR COMPUTING INCOME, INCOME IS TO BE ARRIVE D AT IN COMMERCIAL MANNER, B) WHEN THE INCOME - TAX OFFICER HAS DENIED REGARDING 12A REGISTRATION, THEN THE INCOME SHOULD BE ASSESSED IN ACCORDANCE WITH PROVISIONS OF THE IT ACT I.E. AS PER SECTION 28 TO 44DB AND ALSO THE INCOME IS TO BE TAKEN AS PER DEFINITIO N OF INCOME SPECIFIED IN SECTION 2(24) OF IT ACT. AND AS PER THE DEFINITION - THE VOLUNTARY CONTRIBUTION RECEIVED BY A TRUST WILL BE TREATED AS INCOME . IN THIS CASE THE AO HAS NOT TREATED THE ASSESSEE AS TRUST, THEREFORE THE VOLUNTARY CONTRIBUTION OF RS.10,52,622/ - CANNOT BE TREATED AS INCOME. THUS FROM TOTAL RECEIPT OF RS.34,02,564/ - A SUM OF RS.10,52,622/ - IS DEDUCTIBLE SUBJECT TO FURTHER DEDUCTION/ALLOW ABLE REVENUE EXPENDITURE OF RS. 27,43,525/ - C) WHILE COMPUTING THE INCOME THE LEGAL DEDUCTION WHETHE R THE ASSESSEE HAS CLAIMED OR NOT IS TO BE ALLOWED, THEREFORE THE DEPRECIATION ON FIXED ASSETS IS REQUIRED TO BE FURTHER ALLOWED. IN VIEW OF ABOVE ALL KINDLY DELETE ALL THE ADDITION AND ACCEPT THE APPEAL AND OBLIGE. THE ASSESSEE FURTHER SUBMITTED AS UNDER: IF THE INCOME IS TREATED AS FROM COMMERCIAL ACTIVITIES THEN AS PER SECTION 2(24) THE INCOME INCLUDES PROFIT AND GAIN AND PROFIT AND GAIN OF BUSINESS IS DEFINED UNDER SECTION 28 OF IT ACT AND UNDER SECTION 29 HOW TO COMPUTE INCOME FROM PROFIT AND G AIN OF BUSINESS IS GIVEN I. E. THE INCOME REFERRED TO IN SECTION 28 SHALL BE COMPLETED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION 30 TO 43D OF IT ACT. THE AO HAS NOT DONE SO RATHER TAXED THE COMPLETE EXPENDITURE INCURRED BY THE ASSESSEE AS YOU WILL APPRECIATE THAT WHOLE EXPENDITURE COULD NOT BE DISALLOWED OR TREATED AS TAXABLE INCOME AS SUCH. THUS THE ORDER IS LEGALLY NULL AND VOID AND DESERVE TO BE SET ASIDE. THE HONBLE ITAT VIDE ORDER DATED 18.11.2013 (COPY ENCLOSED) ALLOWED REGISTRATION AFTE R OBSERVING - I) A PERUSAL OF THE OBJECT OF THE TRUST CLEARLY REVEAL THAT THEY ARE ALL CHARITABLE IN NATURE. II) IN SO FAR AS GIVING PREMISES OF THE TRUST ON RENT, DOES NOT AMOUNT TO BUSINESS INCOME . THUS IT IS CLEAR THAT THROUGH THE REGISTRATION U/S 12A WAS NOT TAKEN BY THE ASSESSEE BUT EXPENDITURE WAS MADE FOR T HE OBJECT OF THE TRUST. FURTHER MORE THE REFERENCE OF THE INCOME FOR THIS ASSESSMENT YEAR I.E. 2010 - 11 HAS ALSO BEEN GIVEN. 6 ONLY ON THE BASIS THAT EXEMPTION U/S 12A/11A HAD BEEN RIGHTLY DENIED, AO WOUL D NOT BE PERMITTED TO DISALLOW EXPENDITURE INCURRED BY ASSESSEE. SAI RAM EDUCATION TRUSTS V/S ASSTT. CIT (HP). AS COMPLETE DETAILS AND BOOKS OF ACCOUNTS ALONGWITH VOUCHERS WERE PRODUCED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDING AND ACCOUNTS ARE AUDITED BY THE CHARTERED ACCOUNTANTS AND AS PER AUDITED ACCOUNTS THERE IS EXCESS OF EXPENDITURE OVER INCOME BUT AS THE RETURN WAS SUBMITTED LATE HENCE THE INCOME BE TREATED AS NIL WITH DUE PERMISSION WE SUBMIT THAT FROM THE TOTAL RECEIPTS OF RS. 34, 02,564/ - THE FOLLOWING REVENUE EXPENSES AND CONTRIBUTION NOT PART OF INCOME AS PER SECTION 2(24) DESERVE TO BE ALLOWED - TOTAL RECEIPTS RS. 34,02,564/ - LESS: VOLUNTARY CONTRIBUTION FOR LIFT RS. 2,59,000/ - FOR BUILDING RS. 8, 02 , 622/ - RS. 10 , 52 , 622/ - RS. 23,49,942/ - ALLOWABLE REVENUE EXPENDITURE SHANTI BHAWAN RS. 26,05,748/ - SHANTI JAIN ATHITHIGRAH RS. 1 , 37 , 777/ - RS. 27 , 43 , 525/ - ALLOWABLE DEPRECIATION RS. 3,93,583/ - APPROX RS. 5 , 00 , 000/ - RS. 8 , 93 , 583/ - AS THE RETURN WAS SUBMITTED LATE, HENCE ONLY DEPRECIATION IS ALLOWABLE TO CARRY FORWARD AND INCOME BE TREATED AS NIL . 5. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT THE ASSESSEE WAS NOT REGISTERED U/S. 12A OF THE ACT, THEREFORE, IT WAS NOT ENTITLED FOR EXEMPTION U/S. 11 OF THE ACT . AS REGARDS TO THE CLAIM OF THE ASSESSEE THAT ITS INCOME WAS NOT TAXABLE U/S. 2(24) OF THE ACT, THE LD. CIT(A) WAS OF THE VIEW THAT THE DEFINITION U/S. 2(24) OF THE ACT IS INCLUSIVE DEFINITION AND IF VOLUNTARY CONTRIBUTION RECEIVED BY THE ASSESSEE ARE NOT FOR THE CHARITABLE OR RELIGIOUS PURPOSE AS HELD BY THE ASSESSING OFFICER, EVEN IN THAT CASE IT CANNOT BE SAID THAT THE 7 ASSESSEE HAD NOT DERIVED PROFITS & GAINS AS MENTIONED IN SECTION 2(24) (I) OF THE ACT . HE WAS OF THE VIEW THAT IN SUCH TYPE OF CASES, THE TOTAL INCOME WAS LIABLE TO BE DETERMINED AS PER SECTION 2(45) OF THE ACT BY FOLLOWING THE REGULAR PROVISIONS OF I.T. ACT FOR COMPUTING THE INCOME OF THE ASSESSEE. NOW THE DEPARTMENT IS IN APPEAL. 6 . L EARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND FURTHER SUBMITTED THAT SINCE THE ASSESSEE TRUST WAS NOT REGISTERED U/S. 12AA OF THE ACT, THE EXEMPTION CLAIMED U/S. 11 WAS RIGHTLY DENIED BY THE ASSESSING OFFICER AND THE LD. CIT(A) ALTHOUGH UPHELD THE ACTION OF THE ASSESSING OFFICER IN DENYING EXEMPTION U/S. 11 OF THE ACT, BUT HE WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO DETERMINE THE INCOME AS PER THE PROVISIONS OF SECTION 2(45) OF THE ACT. 7 . IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE OBJECTS OF THE ASSESSEE TRUST ARE AS UNDER: - 8 1. TO DO ACTIVITIES FOR DEVELOPMENT AND PROMOTION OF NATURAL, PHYSICAL, EDUCATIONAL ASPECTS OF GENERAL PUBLIC. 2. TO AID TO INSTITUTIONS INVOLVING IN PROMOTION AND PLAN FOR DOING PUBLIC UTILITIES. 3. TO ENCOURAGE AND FINANCIAL AID FOR AMALGAMATION OF PROPERTIES HIRED BY DIFFERENT SOCIETIES DOING SAME CHARITABLE AND RELIGIOUS WORKS/ACTIVITIES FOR GENERAL PUBLIC. 4. TO PROMOTE, ENCOURAGE, DEVELOPMENT AND FINANCIAL AIDS TO MEDICAL INSTITUTIONS/HOSPITAL, MEDICAL CAMPS, SCHOOLS AND LIBRARIES DOING GENERAL PUBLIC ACTIVITIES ETC. 9 . THE ASSESSEE HAD SHOWN THE INCOME OF RS. 34,02,564/ - AGAINST WHICH A SUM OF RS. 44,06,156/ - WAS CLAIMED AS AN AMOUNT APPLIED DURING THE YEAR UNDER CONSIDERATION . THE SAID AMOUNT INCLUDED REVENUE EXPENDITURE OF RS. 27,43,525/ - AND CAPITAL EXPENDITURE OF RS. 16,62,631/ - ON ACCOUNT OF CONSTRUCTION OF SHANTI JAIN ATHITHI GR AH . THE ASSESSEE CLAIMED THE EXEMPTION ON THE TOTAL RECEIPTS AMOUNTING TO RS. 34,02,564/ - U/S. 11(I)(A) OF THE ACT . THE SAID EXEMPTION WAS NOT ALLOWED SINCE THE ASSESSEE WAS NOT REGISTERED U/S. 12A OF THE ACT. IN OUR OPINION, FOR CLAIMING EXEMPTION U/S. 11 OF THE ACT, REGISTRATION U/S. 12A OF THE ACT MUST BE THERE BECAUSE SECTION 12 DEFINES THE VARIOUS INCOMES OF THE TRUST FOR WHICH EXEMPTION CAN BE CLAIMED U/S. 11 OF THE ACT AND IT HAS BEEN SPECIFICALLY PRESCRIBED IN THE PROVISIONS OF SECTION 11 & 12 OF THE ACT THAT UNLESS THE TRUST IS REGISTERED U/S. 12AA OF THE ACT , THOSE PROVISIONS IN RELATION TO THE INCOME SHALL NOT APPLY. IN THE PRESENT CASE, THE EXEMPTION U/S. 11 OF THE ACT WAS 9 NOT AVAILABLE TO THE ASSESSEE, HOWEVER, THE INCOME OF THE ASSESSEE WAS TO BE DETERMINED U/S. 2(45) OF THE ACT WHICH STATES AS UNDER: - TOTAL INCOME MEANS, THE TOTAL AMOUNT OF INCOME REFERRED TO IN SECTION 5 COMPUTED IN THE MANNER LAID DOWN IN THIS ACT. IN OUR OPINION, THE LD. CIT(A) RIGHTLY DIRECTED THE ASSESSING OFFICER TO COMPUTE THE INCOME AS PER ACT. WE DO NOT SEE ANY INFIRMITY IN THIS ORDER OF THE LD. CIT(A). 10 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED . ( ORDER PRONOUNCED IN THE COURT ON 09 TH SEPTEMBER , 201 4) . S D/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 09 TH SEPTEMBER , 201 4 . VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY , ITAT, JODHPUR .