DDIT, New Delhi V. Jamnalal Bajaj Foundation, New Delhi

ITA 1978/DEL/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6881 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 07-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND SONDE
• Assessee Lawyers: S S RANA
• Keywords: Charitable institution; Deemed to accrue or arise in india
• Section: 143(3); 12

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI , ACCOUNTANT MEMBER I TA NO . 1978/DEL/2013 (ASSESSMENT YEAR: 2009 - 10 ) DDIT, TRUST CIRCLE - IV, NEW DELHI VS. JAMNALAL BAJAJ FOUNDATION, C/O. BAJAJ AUTO LTD., B - 60 - 61, NARINA INDUSTRIAL AREA, PHASE - II, NEW DELHI PAN:AAATJ0402B (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SS RANA, CIT DR REVENUE BY: SH. ARVIND SONDE, ADV DATE OF HEARING 07/11/ 2016 DATE OF PRONOUNCEMENT 30 / 01 /201 7 O R D E R PER PRASHANT MAHARISHI , A . M . 1. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A) - XXI, NEW DELHI DATED 04.01.2013 FOR THE ASSESSMENT YEAR 2009 - 10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL - 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN IGNORING THE FACT THAT AS PER THE PROVISIONS OF SECTION 199 OF THE ACT, TDS IS A TAX PAID BY THE RECIPIENT OF INCOME ON WHICH TAX HAS BEEN DEDUCTED AT SOURCE, THEREFOR E, ALLOWANCE OF TDS AS APPLICATION OF INCOME WILL TANTAMOUNT TO ALLOWANCE OF TAX AS APPLICATION OF INCOME, WHICH IS NOT A ALLOWABLE AS APPLICATION OF INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN IGNORI NG THE FACT THAT PROVISIONS OF SECTION 11(1) OF THE ACT CLEARLY STIPULATES THAT ACCUMULATION TO THE EXTENT OF 15% OF INCOME DERIVED FROM PROPERTY HELD BY TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES CAN BE SET APART FOR SUCH PURPOSES FOR WHICH TRUST HAS BEEN CREATED AND DOES NOT TALK ABOUT THE DEEMED INCOME U/S 11(3) (C)/ 11(3)(D) OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN IGNORING THAT DEEMED INCOME U/S 11(3)(C)/ 11(3)(D) OF THE ACT WAS OUT OF ACC UMULATION OF INCOME U/S 11(2) OF THE ACT OF THEIR EARLIER YEARS AND WHEREON DEDUCTION U/S 11(1)(A) WAS APPLICABLE 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN IGNORING THAT DEEMED INCOME U/S 11(3)(C)/ PAGE 2 OF 4 11(3)(D ) OF THE ACT WAS OUT OF ACCUMULATION OF INCOME U/S 22(2) OF THE ACT OF THE EARLIER YEARS AND WHEREON DEDUCTION U/S 11(1) WAS APPLICABLE IN THE YEAR IN THE YEAR IN WHICH SUCH ACCUMULATION HAVE BEEN TREATED AS DEEMED INCOME U/S 11(3)(C)/ 11(2)(D) FOR VIOLATI ON WITHIN THE MEANING OF SECTION U/S 11(3)(C)/ 11(3)(D) WILL RESULT IN DOUBLE DEDUCTION. 3. BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS A TRUST CARRYING ON ACTIVITIES OF EDUCATION, MEDICAL RELIEF AND RELIEF TO THE POVERTY. IT FILED ITS RETURN OF INCOME ON 30.09.2009. THE ASSESSMENT U/S 143(3) WAS FRAMED ON 19.12.2011 WHEREIN THE TAXABLE SURPLUS OF THE ASSESSEE WAS DETERMINED AT RS. 190218228/ - . IN THE ASSESSMENT PROCEEDINGS THE LD ASSESSING OFFICER HELD THAT A SUM OF RS. 20 CRORES IS A DEEMED INCOME U/S 11(3)(C) OF THE INCOME TAX ACT. THE FACTUAL DETAILS OF THE ABOVE ADDITION IS THAT THE ASSESSEE HAS ACCUMULATED THE SURPLUS AMOUNTING TO RS. 25.16 C RORES FOR AY 2006 - 07 TO 2008 - 09 AND OUT OF THAT A SUM OF RS. 20 CRORES WAS GIVEN AS A DONATION AS IT WAS UTLISED. FURTHER, TDS DEDUCTION OF RS. 1476121/ - WAS ALSO NOT ALLOWED BY THE ASSESSING OFFICER. THE ASSESSEE BEFORE THE LD CIT(A), WHO ALLOWED THE APPE AL OF THE ASSESSEE, CHALLENGED BOTH THESE ISSUES . AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US. 4. THE FIRST GROUND OF THE REVENUE WAS WITH RESPECT TO GRANTING OF TDS CREDIT AS APPLICATION OF INCOME. 5. THE LD DR SUBMITTED THAT THE TAX DEDUCTION AT SOURCE C ANNOT BE AN APPLICATION OF INCOME. 6. THE LD AR SUBMITTED THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010 - 11, WHEREIN, THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS. IN ASSESSEES OWN CASE FOR AY 2010 - 11 IN ITA NO. 118/DEL/2015 DATED 20.07.2015, THE IDENTICAL ISSUE HAS BEEN DECIDED RELYING UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF DIT VS. NATIONAL ASSOCIATION OF SOFTWARE AND SERVICES CO. 345 ITR 262. THE LD DR COULD NOT POINT OUT THAT THIS ISSUE IS NOT COVERED BY THE ORDER OF THE JURISDICTIONAL HIGH COURT. IN VIEW OF THIS WE ALSO HOLD THAT THE TAX DEDUCTION AT SOURCE IS AN PAGE 3 OF 4 APPLICATION OF INCOME WHILE COMPUTING THE INCOME OF THE ASSESSEE U /S 11 AND 12 OF THE INCOME TAX ACT. IN THE RESULT GROUND NO. 1 OF THE APPEAL OF THE REVENUE IS DISMISSED. 8. GROUND NO. 2 AND 3 OF THE APPEAL ARE AGAINST THE ORDER OF THE LD CIT(A) WITH RESPECT TO ALLOWING OF 15% OF THE ACCUMULATION U/S 11(3) OF THE ACT. 9. THE LD DR RELIED UPON THE ORDER OF THE LD ASSESSING OFFICER WHEREAS THE LD AR RELIED UPON THE ORDER OF THE LD CIT(A) AND FURTHER STATED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN 189 ITR 656 . 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. THE ISSUE INVOLVED IN THESE GROUND ARE THAT THE CONTENTION OF THE REVENUE IS THAT IN THE CASE OF THE ASSESSEE ACCUMULATED INCOME WAS NOT UTLISED IN SPECIFY PERIOD FOR SPECIFIED PURPOSES AND THEREFORE DEEMED INCOME ARISE U/S 11(3)(C) AND D OF THE ACT AND HENCE, HE COULD NOT BE ELIGIBLE FOR DEDUCTION @15% U/S 11(1)(A) OF THE ACT. THE CONTENTION OF THE ASSESSEE IS THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN VIEW OF THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN CASE OF CIT VS. NATWARLAL CHOUDHURY 189 ITR 656. THE ASSESSEE - TRUST ACCUMULATED RS. 46,184 DURING THE ACCOUNTING YEARS RELEVANT TO THE ASSESSMENT YEARS 1973 - 74 TO 1976 - 77. DURING THE PREVIOUS YEAR RELEVANT TO THE PRESENT ASSESSMENT YEAR, ACCUMULATED INCOME CEASED TO BE INVESTED IN FIXED DEPOSIT WITH THE INDIAN BANK AND IT WAS, THEREFORE, DEEMED TO BE THE INCOME OF THE TRUST IN THE PREVIOUS YEAR IN WHICH IT CEASED TO REMAIN INVESTED OR DEPOSITED IN TERMS OF CLAUSE (B) OF SU B - SECTION (3) OF SECTION 11 OF THE INCOME - TAX ACT, 1961. THE INCOME - TAX OFFICER WAS OF THE OPINION THAT THE ASSESSEE WAS NOT ENTITLED TO ACCUMULATE 25% OF THIS DEEMED INCOME BECAUSE PERMITTING IT TO DO SO WOULD AMOUNT TO A DOUBLE BENEFIT TO THE ASSESSEE. H E, THEREFORE, ASSESSED THE ENTIRE DEEMED INCOME. THE TRIBUNAL IN AGREEING WITH THE DECISION OF THE APPELLATE ASSISTANT COMMISSIONER OBSERVED: THE LEGAL FICTION CONTAINED IN SECTION 11(3) OF THE INCOME - TAX ACT, 1961, SHOULD BE ALLOWED TO PLAY TO THE FULLE ST EXTENT AND THERE IS NO WARRANT TO TAKE A RESTRICTED VIEW FOR DENYING THE EXEMPTION WHICH IS SPECIFICALLY ALLOWED BY THE STATUTE. IN FACT, AS PER THE LAW AS STOOD FROM APRIL 1, 1976, CHARITABLE TRUSTS ARE PERMITTED TO ACCUMULATE UP TO 25% OF THEIR INCOME WITHOUT COMPLYING WITH ANY FORMALITIES OR PAGE 4 OF 4 CONDITION AND SUCH ACCUMULATION IS NOT INCLUDED IN THE TOTAL INCOME. THEREFORE, WE UPHOLD THE ORDER OF THE APPELLATE ASSISTANT COMMISSIONER AS IT IS QUITE JUSTIFIED IN LAW AND THE ASSESSEE WOULD BE ENTITLED TO ACC UMULATE 25% OF THE TOTAL INCOME OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1978 - 79 INCLUSIVE OF THE DEEMED INCOME UNDER SECTION 11 (3) OF THE INCOME - TAX ACT, 1961. MR. MOITRA, APPEARING ON BEHALF OF THE REVENUE, HAS FAILED TO SHOW ANY INFIRMITY IN THE ORDER OF THE TRIBUNAL. IN FACT, HE HAS PRAYED MERELY FOR REMAND OF THE CASE AS WAS DONE BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT V. HYDERABAD SECUNDERABAD FOODGRAINS ASSOCIATION LTD. [1989] 175 ITR 574 . THE FACTS IN THAT CASE WERE QUITE DIFFERENT AND IT WAS FELT BY THE ANDHRA PRADESH HIGH COURT THAT IT WAS NECESSARY TO REMAND THE CASE. BUT, IN THE INSTANT CASE, NO ARGUMENT AT ALL HAS BEEN ADVANCED TO SHOW ANY INFIRMITY IN THE ORDER OF THE TRIBUN AL. SINCE MR. MOITRA HAS FAILED TO SHOW US ANY INFIRMITY IN THE ORDER PASSED BY THE TRIBUNAL, THE QUESTION IS ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. 11. AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND IT IS ELIGIBLE FOR ACC UMULATION OF 15% OF ITS INCOME INCLUDING THE INCOME WHICH WAS ACCUMULATED IN EARLIER YEARS BUT COULD NOT BE UTLISED IN SPECIFIED TIME ALSO. IN THE RESULT GROUND NO. 2 AND 3 OF THE APPEAL OF THE REVENUE ARE DISMISSED. 12. IN THE RESULT THE APPEAL OF THE REVENU E IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 0 / 01/2017 . - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 0 / 01/2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI