Om Shri Laxminarayan Balmukund S.K.Pant Walawalkar Kapad Dukan Trust, Kolhapur V. ITO, Wd 1(2), Kolhapur, Kolhapur

ITA 217/PUN/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49837 (ITAT-PUNE)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-04-2011
• Assessment Year: 1997-1998
• Appeal Filed On: 27-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H C LEUVA
• Assessee Lawyers: S U PATHAK
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 217/PN/2008 (ASSTT. YEAR : 1997-98) OM SHRI LAXMINARAYAN BALMUKUND S.K. PANT ... APPELLANT WALAWALKAR KAPAD DUKAN TRUST, LAXMI ROAD, KOLHAPUR PAN : NOT AVAILABLE V. INCOME TAX OFFICER, WARD 1(2) , RESPONDENT KOLHAPUR APPELLANT BY : SHRI S.U. PATHAK RESPONDENT BY : SHRI H.C. LEUVA ORDER PER I.C. SUDHIR, JM THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS : 1. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING T HE ADDITION OF RS. 70,32,305/- MADE BY THE AO ON ACCOUNT OF INTERE ST GRANTED ON REFUND OF INCOME-TAX ARISING FROM THE DECISION OF T HE INCOME-TAX APPELLATE TRIBUNAL FOR ASSESSMENT YEARS 1979-80 TO 1989-90, AS INCOME ACCRUED TO THE APPELLANT DURING THE PREVIOUS YEAR 01-04- 1996 TO 31-03-1997. 2. WITHOUT PREJUDICE TO GROUND NO. 1 AS ABOVE, THE LD. CIT(A) ERRED IN HOLDING THAT EXEMPTION CLAIMED U/S. 11 IN RESPECT OF THE INTEREST OF RS. 70,32,305/- ON INCOME-TAX REFUND CA N NOT BE ALLOWED. 3. IT IS PRAYED THAT THE ALLEGED INCOME OF RS. 70,3 2,305/- ADDED BY THE AO AND CONFIRMED BY THE CIT(A) BE DELETED AN D WITHOUT PREJUDICE, EXEMPTION U/S. 11 IN RESPECT THEREOF BE DIRECTED TO BE ALLOWED. 2. BESIDES ABOVE, THE ASSESSEE HAS ALSO RAISED FOLL OWING ADDITIONAL GROUNDS WITHOUT PREJUDICE TO THE ABOVE GROUNDS : ITA . NO 217/PN/2008 OM SHRI LAXMINARAYAN BALMUKUND S.K . PANT WALAWALKAR KAPAD DUKAN TRUST.. A.Y 1997-98 PAGE OF 7 2 1] ASSUMING WITHOUT ADMITTING THAT THE ADDITION MAD E OF RS.70,32,305/- IS SUSTAINABLE IN THE HANDS OF THE APPELLANT FOR A.Y. 1997-98, THE APPELLANT HAVING ALREADY MADE FRESH DE POSITS IN THIS YEAR IN THE PERMITTED SECURITIES, THE SAME SHOULD B E CONSIDERED FOR RELIEF U/S 11(2) R.W.S 11(5). 2] THE APPELLANT REQUESTS FOR ADMISSION OF THE NOTI CE U/S 11(2) FOR ACCUMULATION OF THE FUNDS AND AS A CONSEQUENCE FOR ALLOWANCE OF RELIEF OF EXEMPTION U/S 11 ON THE ENTIRE INCOME INCLUDING THE ABOVE ADDITION OF RS.70,32,305/-. 3. THE LD. A.R. REQUESTED FOR PERMITTING THE ADJUDI CATION OF THE ABOVE ADDITIONAL GROUNDS WITH THIS SUBMISSION THAT THE IS SUES RAISED THEREIN ARE LEGAL IN NATURE, ADJUDICATION OF WHICH DOES NOT RE QUIRE CONSIDERATION OF FRESH MATERIAL OUTSIDE THE RECORD. HE SUBMITTED FU RTHER THAT THE ISSUES RAISED THEREIN ALSO GO TO THE ROOT OF THE MATTER. 4. THE LD. D.R., ON THE OTHERHAND, OBJECTED THE ABO VE STATED REQUEST OF THE LD. A.R. WITH THIS CONTENTION THAT NO SUCH GROUND WAS EVER RAISED BEFORE THE AUTHORITIES BELOW, HENCE IT CANNOT BE EN TERTAINED AT THIS BELATED STAGE. HE SUBMITTED FURTHER THAT ADJUDICAT ION OF THESE ADDITIONAL GROUNDS ALSO REQUIRE CONSIDERATION OF FRESH MATERIA L. 5. CONSIDERING THE ABOVE SUBMISSIONS, WE FOUND THAT THE ISSUE RAISED IN THESE ADDITIONAL GROUNDS ARE LEGAL IN NATURE, AD JUDICATION OF WHICH, DO NOT REQUIRE CONSIDERATION OF FRESH MATERIAL OUTSIDE RECORD. WE, THUS, ALLOWED THE ADDITIONAL GROUNDS FOR ADJUDICATION OF THE BENCH. PARTIES WERE DIRECTED TO ADVANCE THEIR ARGUMENTS THEREUPON. SINCE THESE ADDITIONAL GROUNDS HAVE BEEN RAISED AS ALTERNATIVE GROUNDS WITHOUT PREJUDICE TO THE MAIN GROUNDS OF THE APPEAL, WE DE CIDED TO DEAL WITH THE SAME AFTER ADJUDICATING THE MAIN GROUNDS. ITA . NO 217/PN/2008 OM SHRI LAXMINARAYAN BALMUKUND S.K . PANT WALAWALKAR KAPAD DUKAN TRUST.. A.Y 1997-98 PAGE OF 7 3 GROUND NOS. 1, 2 & 3 6. THE RELEVANT FACTS ARE THAT RS.70,32,305/- REPRE SENTING INTEREST RECEIVED ON INCOME-TAX REFUND WAS INITIALLY ADDED TO THE INCOME OF THE ASSESSEE IN THE ASSESSMENT MADE U/S. 143(3) ON 11.3 .1999. THE LD CIT(A), KOLHAPUR VIDE ITS ORDER DATED 28.6.1999 HAD ALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF EXEMPTION U/S. 11(2) IN RESPECT OF INTEREST RECEIVED ON INCOME-TAX REFUND. THE REVENUE PREFER RED APPEAL AGAINST THE SAID FIRST APPELLATE ORDER BEFORE THE TRIBUNAL RAISING ONE OF THE GROUNDS ON THIS ISSUE AS TO WHETHER THE INTEREST ON INCOME-TAX REFUND IS TO BE ASSESSED AS INCOME, AND IF SO, WHETHER IT IS ALSO TO BE EXEMPTED U/S. 11(4). THE ISSUE WAS RESTORED BACK TO THE FIL E OF THE A.O BY THE TRIBUNAL FOR HIS FRESH ADJUDICATION. THE TRIBUNAL DIRECTED THE A.O TO EXAMINE AS TO WHETHER THE REFUND MIGHT BE WITHDRAW N IN VIEW OF THE REJECTION OF THE ASSESSEES CLAIM FOR EXEMPTION U/S . 11(4) IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F ACIT V/S. THANTHI TRUST (2001) 247 ITR 785 (SC). THE ASSESSEE EXPLAI NED BEFORE THE A.O THAT THE REFUND WAS RECEIVED IN VIEW OF THE ORDER O F THE TRIBUNAL FOR THE A.Y. 1997-98 WHEREBY THE TRIBUNAL HAD ALLOWED THE C LAIM OF EXEMPTION. HOWEVER, THE MATTER WAS TAKEN TO THE HONBLE BOMBAY HIGH COURT BY THE REVENUE WHERE THE REFERENCE WAS STILL PENDING. IT WAS ARGUED THAT IN CASE THE MATTER WAS DECIDED AGAINST THE TRUST, THE TRUST WOULD HAVE TO REFUND THE AMOUNT OF INTEREST TO THE REVENUE. IN C ASE THE APPEAL IS ALLOWED AND REFUND IS NOT REQUIRED TO BE ADJUSTED, THE ASSESSEE WOULD IN ANY WAY BE ENTITLED FOR DEDUCTION U/S. 11. THE A. O REJECTED THE CONTENTION OF THE ASSESSEE SIMPLY ON THE BASIS THA T THE MATTER IS PENDING BEFORE THE HONBLE BOMBAY HIGH COURT AND HAS NOT RE ACHED FINALITY. ITA . NO 217/PN/2008 OM SHRI LAXMINARAYAN BALMUKUND S.K . PANT WALAWALKAR KAPAD DUKAN TRUST.. A.Y 1997-98 PAGE OF 7 4 7. BEFORE THE LD CIT(A), AFTER DISCUSSING THE CASE OF THE ASSESSEE AS WELL AS ACTION OF THE A.O, HELD THAT THE AMOUNT OF RS.70,32,305/- IS INCOME IN THE HANDS OF THE ASSESSEE IN THE YEAR IN WHICH IT HAS BEEN RECEIVED I.E. A.Y. 1997-98. AS TO WHETHER THIS INC OME HAS ACCRUED IN THE YEAR, THE LD CIT(A) HELD THAT IT IS DETERMINED BY T HE DEPARTMENT AND IS RECEIVABLE OR RECEIVED, DEPENDING ON THE METHOD OF ACCOUNTING ADOPTED BY THE PARTICULAR PERSON. HE OBSERVED THAT IN THE C ASE OF THE ASSESSEE, THE AMOUNT HAS BEEN ACCOUNTED ON RECEIPT BASIS. O N THE CONTENTION OF THE ASSESSEE THAT THE INCOME DOES NOT ACCRUE AS IT CAN BE WITHDRAWN AT A LATER STAGE DEPENDING ON THE DECISION OF HONBLE BO MBAY HIGH COURT IN THE PENDING MATTER, THE LD CIT(A) HELD THAT THERE I S NO ACTUAL WITHDRAWAL OF INTEREST AND IT CAN BE WITHDRAWN AT A LATER STAG E DEPENDING UPON CERTAIN CONTINGENCY, HENCE IT IS NOT ACCEPTABLE. 8. THE FURTHER ISSUE RAISED BEFORE LD CIT(A) WAS AS TO WHETHER THE INTEREST RECEIVED FROM THE INCOME TAX DEPARTMENT ON REFUND OF INCOME TAX IS EXEMPT U/S. 11 OF THE ACT. THE LD CIT(A) IN THIS REGARD OBSERVED THAT THE FIRST APPELLATE AUTHORITY ON EARLIER OCCAS ION VIDE ITS ORDER DATED 28.6.1999 HAD FOLLOWED THE DECISION OF TRIBUNAL IN THE CASE OF ASSESSEE FOR EARLIER YEARS HOLDING THAT INCOME FROM INTEREST ON I.T. REFUND WAS EXEMPT U/S. 11 OF THE ACT. THE TRIBUNAL, HOWEVER, HAD OVERRULED THE DECISION OF LD CIT(A) HOLDING THAT THE EARLIER DEC ISION OF THE TRIBUNAL IN THE ASSESSEES CASE WAS BASED ON THE DECISION OF HO NBLE MADRAS HIGH COURT IN THE CASE OF THANTHI TRUST V/S. ACIT (1995) , 213 ITR 626 (MAD.) WHICH HAS BEEN REVERSED BY THE HONBLE SUPREME COU RT IN THE CASE OF ACIT V/S. THANTHI TRUST (2001) 247 ITR 785 (SC). T HE LD CIT(A), ACCORDINGLY, DECIDED THE ISSUE AFRESH IN VIEW OF TH E DECISION OF HONBLE SUPREME COURT AND IN VIEW OF THE DECISION OF HONBL E DELHI HIGH COURT IN ITA . NO 217/PN/2008 OM SHRI LAXMINARAYAN BALMUKUND S.K . PANT WALAWALKAR KAPAD DUKAN TRUST.. A.Y 1997-98 PAGE OF 7 5 THE CASE OF CIT V/S.HAMDARD DAWAKHANA (WAKF) (2001) , 249 ITR 601 (DEL.). RESPECTFULLY FOLLOWING THESE DECISIONS, TH E LD CIT(A) CAME TO THE CONCLUSION THAT THE REFUND OF INCOME TAX CAN BY NO ANY STRETCH OF IMAGINATION BE HELD AS INCOME DERIVED FROM THE PROP ERTY UNDER THE TRUST, HENCE EXEMPTION CLAIMED U/S. 11 IN RESPECT OF INTER EST ON TAX REFUND CANNOT BE ALLOWED. 9. BEFORE US, THE LD A.R. HAS REITERATED THE CONTE NTIONS MADE BEFORE THE AUTHORITIES BELOW ON THE ISSUE. HE ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS : I) CIT V/S. HUNDUSTAN HOUSING & LAND DEVELOPMENT TRUST (1986), 161 ITR 524. II) CIT V/S. GHANSHYAM (HUF) (2009), 224 CTR (SC) 522. III) CIT V/S. R.D. RAMNATH & CO. (2007) 164 TAXMAN 317 ( DEL.) IV) DIRECTOR OF INCOME TAX (EXEMPTION) V/S. GOEL CH ARITABLE TRUST (1995), 215 ITR 672 (DEL.). 10. THE LD. D.R., ON THE OTHER HAND, TRIED TO JUSTI FY THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED FURTHER THAT THE D ECISIONS FOLLOWED BY THE LD CIT(A) WHILE DECIDING THIS ISSUE ARE DIRECTL Y ON THE ISSUE, HENCE IT IS FULLY COVERED BY THOSE CITED DECISIONS. 11. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT THE DECISION OF FIRST APPELLATE AUTHORITY THAT THE REFUND OF INCOME TAX, CAN BY NO STRETCH OF IMAGINATION, BE HELD AS INCOME DERIVED FROM PROPERT Y UNDER THE TRUST, HENCE EXEMPTION CLAIMED U/S. 11 IN RESPECT OF INTER EST RECEIVED ON TAX REFUND CANNOT BE ALLOWED IN THE CASE OF THE ASSESSE E, IS FULLY COVERED BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF CIT V/S. HAMDARD DAWAKHANA (WAKF) ( SUPRA). THE HONBLE DELHI HIGH COURT IN THAT CASE ITA . NO 217/PN/2008 OM SHRI LAXMINARAYAN BALMUKUND S.K . PANT WALAWALKAR KAPAD DUKAN TRUST.. A.Y 1997-98 PAGE OF 7 6 HAS BEEN PLEASED TO HOLD THAT UNLESS THE INCOME IS DERIVED FROM PROPERTY HELD UNDER THE TRUST FOR RELIGIOUS AND CHARITABLE P URPOSES, PROVISIONS OF SECTION 11(2) HAVE NO APPLICATION TO A PARTICULAR RECEIPT. REFUND OF INCOME TAX CANNOT BE HELD TO BE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST. THEREFORE, PROVISIONS OF SECTION 11(2) HA D NO APPLICATION TO THE FACTS OF THE CASE, HELD THE HONBLE HIGH COURT. LI KEWISE, INTEREST GRANTED ON REFUND OF INCOME TAX ALSO CANNOT BE HELD TO BE I NCOME DERIVED FROM PROPERTY HELD UNDER TRUST. THE ASSESSEE, IS, THERE FORE, NOT ENTITLED TO CLAIM EXEMPTION U/S. 11 ON THE SAID INCOME IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT ON THE ISSUE. WE, THUS, D O NOT FIND INFIRMITY IN THE FIRST APPELLATE ORDER ON THE ISSUE. THE SAME IS UPHELD . GROUND NOS. 1 TO 3 ARE ACCORDINGLY REJECTED. ADDITIONAL GROUNDS 12. THE CONTENTION OF THE LD. A.R. IN SUPPORT OF TH ESE ADDITIONAL GROUNDS REMAINED THAT EVEN IF FOR THE SAKE OF ARGUM ENT IT IS ASSUMED FOR TIME BEING THAT THE ADDITION MADE OF RS. 70,32,305 /- IS HELD SUSTAINABLE IN THE HANDS OF THE ASSESSEE FOR A.Y. 1997-98, THE ASSESSEE HAVING ALREADY MADE FRESH DEPOSIT IN THIS YEAR IN THE PER MITTED SECURITIES, THE SAME SHOULD BE CONSIDERED FOR RELIEF U/S. 11(2) REA D WITH SECTION 11(5) OF THE ACT. HE ACCORDINGLY REQUESTED THAT NOTICE U/S. 11(2) FOR ACCUMULATION OF THE FUNDS MAY BE DIRECTED TO BE ADMITTED AND AS A CONSEQUENCE FOR ALLOWANCE OF RELIEF OF EXEMPTION U/S. 11 ON THE EN TIRE INCOME INCLUDING THE ADDITION OF RS.70,32,305/- BE GRANTED. 13. THE LD. D.R., ON THE OTHERHAND, SUBMITTED THAT NO SUCH ISSUES WERE RAISED BEFORE THE AUTHORITIES BELOW AS NOW THE ASS ESSEE IS RAISING BEFORE THE TRIBUNAL. CONSIDERING THE ABOVE SUBMISSIONS, W E IN THE INTEREST OF ITA . NO 217/PN/2008 OM SHRI LAXMINARAYAN BALMUKUND S.K . PANT WALAWALKAR KAPAD DUKAN TRUST.. A.Y 1997-98 PAGE OF 7 7 JUSTICE, SET ASIDE THE ABOVE STATED ADDITIONAL GROU ND NOS. 1 & 2 BEFORE THE A.O FOR HIS CONSIDERATION ON THE BASIS OF MATER IAL ALREADY AVAILABLE ON RECORD. THESE ADDITIONAL GROUND NOS. 1 & 2 ARE, AC CORDINGLY, ALLOWED FOR STATISTICAL PURPOSES. 14. CONSEQUENTLY, APPEAL IS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22 ND JUNE 2011. SD/- SD/- ( D. KARUNAKARA RAO ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 22ND JUNE, 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT, KOLHAPUR 4. THE CIT(A)-, KOLHAPUR 5. THE D.R. B BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE