M/s Novodaya grama Vikas Charitable Trust , Mangalore V. Assistant Commissioner of Income TAx Circle-1, Mangalore

ITA 1880/BANG/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4615 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 19-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V SRINIVASAN
• Keywords: Capital asset; Depreciation; Charitable institution; Opportunity of being heard; Revenue expenditure
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, B ENGALURU BEFORE S HRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA , ACCOUNTANT MEMBER I TA NO. 1 880 / BANG/2 0 1 7 (ASSESSMENT YEAR: 201 2 - 1 3 ) M/S.NAVODAYA GRAMA VIKAS CHARITABLE TRUST, 14 - 7 - 1005, SC DCC BANK LTD., HEAD OFFICE BUILDING, KODIALBAIL, MANGALORE - 575 003. PAN: A AATN 7594 E VS. APPELLANT ASST. COMMISSIONER OF INCOME - TAX, (EXEMPTIONS) CIRCLE 1, MANGALORE. RESPONDENT APPELLANT BY : SHRI V.SRINIVASAN, ADVOCATE. RESPONDENT BY : MS. NEERA MALHOTRA, CIT(DR) DATE OF HEARING: 13/06/2018 DATE OF PRONOUNCEMENT: 15 /06/2018 O R D E R PER SUNIL KUMAR YADAV THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX [ CIT ] , BENGALURU, DATED 30/0 3 /2017, INTER ALIA ON THE FOLLOWING GROUNDS: 1. THE ORDER PASSED BY THE LEARNED C.I.T.[E] U/S 263 OF THE ACT, IN SO FAR AS IT IS AGAINST THE APPELLANT, IS OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTAN CES OF THE CASE. 2. THE LEARNED C.I.T[E]. FAILED TO APPRECIATE THAT THERE WAS NO ERROR MUCH LESS AN ERROR PREJUDICIAL TO THE INTEREST OF THE REVENUE IN THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER WARRANTING REVISION U/S.263 OF THE ACT AND CONSEQUENTLY, THE ORDER PASSED BY THE C.I.T. IS OPPOSED TO LAW AND FACTS OF THE APPELLANT'S CASE AND REQUIRES TO BE CANCELLED. 3. THE LEARNED CIT [E] OUGHT TO HAVE APPRECIATED THAT THE ISSUE POINTED OUT BY HIM IN THE NOTICE ISSUED U/S. 263 OF THE ACT WAS ONLY IN THE NATU RE OF MAKING FISHING AND ROVING ENQUIRIES AND AS SUCH THE SAME CANNOT BE REGARDED AS ECRU' PREJUDICIAL TO THE INTEREST ON REVENUE TO TAKE ACTION U/S. 263 OF THE ACT. ITA NO . 1 880 /BANG/20 1 7 PAGE 2 OF 5 4. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT[E] IS NOT JUSTIFIED IN HOLDING THAT THE A PPELLANT IS NOT ENTITLED TO CLAIM DEPRECIATION ON FIXED ASSETS UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CAS E. 5. THE LEARNED CIT[E] IS NOT JUSTIFIED IN HOLDING THAT THE GRANTS RECEIVED FROM THE GOVERNMENT CANNOT BE REGARDED AS INCOME OF TH E APPELLANT AND THAT THE SURPLUS OF THE GRANTS RECEIVED OVER EXPENDITURE INCURRED BY THE APPELLANT ON ANIMATOR PAYMENTS HAS TO BE TREATED AS SURPLUS UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 6. THE LEARNED CIT[E] IS NOT JUSTIFIED IN H OLDING THAT THE AMOUNT RECEIVED ON SALE OF VEHICLE HAS TO BE TREATED AS INCOME UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 7. THE LEARNED CIT[E] IS NOT JUSTIFIED IN HOLDING THAT THE A.O. HAS TO RECOMPUTE THE INCOME IN RESPECT OF THE SHG LOANS ADVANCED AND RECOVERIES WITHOUT POINTING OUT ANY ERROR IN THE COMPUTATION OF APPLICATION BY THE LEARNED A.O. ON THIS SCORE IN THE ORIGINAL ASSESSMENT ORDER UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 8. FOR THE ABOVE AND OTHER GR OUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE FEES AS PART OF THE COSTS. 2. DURING THE COURSE OF HEARING, LEARNED COUNSEL FOR ASSESSEE HAS INVITED OUR ATTENTION TO THE SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE AND THE OBJECTIONS FILED ON BEHALF OF THE ASSESSEE. THE LEARNED COUNSEL FOR ASSESSEE HAS CONTENDED THAT THE ORDER OF THE ASSESSING OFFICER WAS REVISED ON THE POINT OF CLAIM OF DEPRECIATION, GRANTS BY GOVERNMENT TAKEN AS INCOME, ALLOWANCE OF ANIMATORS EXPENSES, NON - CONSIDERATION OF SALE OF VEHICLE AS RECEIPTS/INCOME AND TAKING LOAN AND RECOVERY AS INCOME AND APPLICATION. 3. DURING THE COURSE OF HEARING, LEARNED COUNSEL FOR ASSESSEE CANDIDLY ADMITTED THAT ON ALL THE ISSUES THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER AND MORE - SO, NO QUERY WAS RAISED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT U/S 143(3) OF THE INCOME - TAX ACT,1961 [HEREINAFTER CALLED THE ACT ]. WITH REGARD TO CLAIM OF DEPRECIATION, LEARNED COUNSEL FOR ASSESSEE HAS SUBMITTED THAT IT IS A SETTLED POSITION OF ITA NO . 1 880 /BANG/20 1 7 PAGE 3 OF 5 LAW THAT BEFORE AMENDMENT DEPRECIATION IS ALLOWED AS REVENUE EXPENDITUR E. LEARNED COUNSEL FOR ASSESSEE PLACED HEAVY RELIANCE UPON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF DIT VS. AL - AMEEN CHARITABLE F UND TRUST (383 ITR 515) AND SUBMITTED THAT THE JUDGMENT WAS PASSED ON 22/02/2016 AND THE CIT PASSED HIS RE VISIONARY ORDER ON 30 /03/2017. THEREFORE, AT THE RELEVANT POINT OF TIME, WHEN THE ORDER WAS PASSED, LEGAL POSITION IN THIS REGARD IS VERY CLEAR. THE LEARNED COUNSEL FOR ASSESSEE FURTHER POINTED OUT THAT THE CIT HAS TAKEN COGNIZANCE OF THE JUDGMENT BUT HA S NOT FOLLOWED THE SAME UNDER THE GARB THAT AN APPEAL WAS FILE D IN APEX COURT. THEREFORE, THE ORDER OF THE CIT IS NOT SUSTAINABLE IN THE EYES OF LAW. 3.1 WITH REGARD TO GRANTS BY GOVERNMENT, TAKEN AS INCOME, LEARNED COUNSEL FOR ASSESSEE CONTENDED THAT THE ASSESSING OFFICER HAS TAKEN COGNIZANCE OF THESE FACTS WHILE COMPUTING SURPLUS OF THE ASSESSEE. THEREFORE, THE CIT IS NOT JUSTIFIED IN SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER AND DIRECTING TO RECOMPUTE SURPLUS OF THE ASSESSEE. 3.2 WITH REGARD TO ALLOWANCE OF ANIMATORS EXPENSES, SIMILAR ARGUMENT WAS RAISED AS RAISED IN RESPECT OF GRANTS BY GOVERNMENT TAKEN AS INCOME. 3.3 WITH REGARD TO NON - CONSIDERATION ON SALE OF VEHICLES AS RECEIPT OF INCOME, LEARNED COUNSEL FOR ASSESSEE CONTENDED THAT SALE PROCE EDS OF THE VEHICLES WERE TAKEN TO RECEIPT & EXPENDITURE ACCOUNT. THEREFORE, NO INTERFERENCE IN THE ORDER OF THE AO IS CALLED FOR. 3.4 WITH REGARD TO TAKING LOAN AND RECOVERY AS APPLICATION OF INCOME, LEARNED COUNSEL FOR ASSESSEE CONTENDED THAT THE AO HAS E XAMINED THESE FACTS WHILE COMPUTING THE INCOME OF THE ASSESSEE. THEREFORE, NO INTERFERENCE IS CALLED FOR. 4. LEARNED DR, ON THE OTHER HAND, CONTENDED THAT ON THE POINT OF ISSUE OF SHOW CAUSE NOTICE, AS PER JUDGMENT OF THE HON BLE APEX COURT IN THE CAS E OF CIT VS. AMITABH BACHCHAN REPORTED IN 69 TAXMANN.COM 170)(SC) , THE CIT IS NOT REQUIRED TO ISSUE SHOW CAUSE NOTICE. THEREFORE, ITA NO . 1 880 /BANG/20 1 7 PAGE 4 OF 5 NO COGNIZANCE OF ANY DEFECT IN THE SHOW - CAUSE NOTICE CAN BE TAKEN. WITH REGARD TO OTHER ISSUES, LEARNED DR CONTENDED THAT TH E AO HAS NOT EXAMINED ALL THE POINTS WHICH HAVE BEEN RAISED BY THE CIT IN THE SHOW CAUSE NOTICE. THEREFORE, THE CIT HAS DIRECTED THE AO TO RECOMPUTE INCOME AFTER MAKING NECESSARY VERIFICATION O N ALL THE ISSUES. 5. HAVING CAREFULL Y EXAMINED THE ORDER OF TH E CIT IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND THAT ON THE POINT OF DEPRECIATION, THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION AS REVENUE EXPENDITURE IN THE LIGHT OF THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF AL - AMEEN CHARITABLE F UND TRUST (SUPRA). THOUGH THE CIT HAS TAKEN COGNIZANCE OF THE JUDGMENT BUT HAS NOT FOLLOWED THE SAME ON THE GROUND THAT SLP WAS FILED BEFORE THE APEX COURT. SO LONG AS THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IS NOT REVERSED OR ITS OPERATION IS STAYED B Y THE APEX COURT, IT HOLDS THE FIELD AND ALL THE SUBORDINATE AUTHORITIES ARE SUPPOSED TO FOLLOW THE SAME. SINCE THE LEGAL POSITION AT THE RELEVANT POINT OF TIME IS VERY CLEAR THAT DEPRECIATION ON CAPITAL ASSET IS TO BE ALLOWED TO THE ASSESSEE, WE FIND NO MERIT IN THE ORDER OF THE CIT IN THIS REGARD. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT ON THIS ISSUE. SO FAR AS REMAINING ISSUES ARE CONCERNED, WE FIND THAT THE AO HAS NOT EXAMINED ALL THESE ISSUES EITHER IN THE ASSESSMENT ORDER OR BY RAISING ANY Q UERY FROM THE ASSESSEE. THE CIT HAS NOTED THAT ON ACCOUNT OF NON - ADJUDICATION OF ALL THE ISSUES IN PROPER PERSPECTIVE, THE ORDER OF THE AO HAS BECOME ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WE HAVE CAREFULLY EXAMINED THE ORDER OF THE C IT AND WE FIND THAT IN THE ABSENCE OF PROPER ADJUDICATION OF THE ISSUES BY THE AO, THE CIT S ORDER SETTING ASIDE THE AO S ORDER CANNOT BE CALLED TO BE IMPROPER. WE, HOWEVER, DO NOT AGREE WITH THE SPECIFIC DIRECTI ONS GIVEN BY THE CIT TO THE AO TO FRAME AS SESSMENT IN A PARTICULAR MANNER. WE MODIFY THE DIRECTIONS AND DIRECT THE AO TO RE - ADJUDICATE THE ISSUES RAISED BY THE CIT IN HIS ORDER IN ACCORDANCE WITH LAW, AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, THE ORDER OF THE CIT WITH REGARD TO CLAIM OF DEPRECIATION IS SET ASIDE AND ON THE POINT OF GRANTS BY GOVERNMENT TAKEN AS INCOME, NON - CONSIDERATION ON SALE OF VEHICLES AS ITA NO . 1 880 /BANG/20 1 7 PAGE 5 OF 5 RECEIPT OF INCOME AND TAKING LOAN AND RECOVERY AS APPLICATION OF INCOME ARE CONFIRMED WITH SLIGHT MODIFICA TION. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE , 2018 S D/ - SD/ - (A.K.GARODIA ) ( SUNIL KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : BEN GALURU. D A T E D : 15 / 0 6 /201 8 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME - TAX APPELLATE TRIBUNAL BANGALORE