M/s Armed Force Flag Day Fund Kendriya Sainik Board, New Delhi V. ADIT (E), New Delhi

ITA 2176/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74293 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 12-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H G SEMA
• Assessee Lawyers: M K MADAN
• Keywords: Charitable institution
• Section: 143(3); 144; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI SHAMIM YAHYA ITA NO. 2176/DEL/2013 ASSTT. YR: 2009-10 ARMED FORCES FLAG DAY FUND VS. ADDL. DIRECTOR OF I NCOME-TAX (E), KENDRIYA SAINIK BOARD, INVESTIGATION CIRCLE-I, N . DELHI. WEST BLOCK-IV, R.K. PURAM, NEW DELHI. PAN: AACTA 0965 G ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI M.K. MADAN CA RESPONDENT BY : SHRI H.G. SEMA SR. DR O R D E R PER R.P. TOLANI, J.M: : THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF CI T(A)-XXI, NEW DELHI DATED 31-1-2013 RELATING TO A.Y. 2009-10. FOL LOWING GROUNDS ARE RAISED: 1. THAT THE ORDER PASSED BY LD. CIT(A)-XXI, NEW DE LHI IS BAD IN LAW AND ON FACTS. 2. THAT THE APPELLANT IS NOT LIABLE TO INCOME-TAX, NOT BEING A PERSON WITHIN THE MEANING OF SECTION 2(31) OF THE INCOME TAX ACT, 1961. 3. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 1.96 CRORES BY IGNORING THE FACT THAT THE AP PROVAL U/S 10(23C)(IV) WAS GRANTED VIDE LETTER DATED 26-03-200 7 AND CONDITION OF APPLICATION OF FUNDS WITHIN 5 YEARS SH OULD APPLY W.E.F. 26-03-2007 AND NOT RETROSPECTIVELY FROM ASSE SSMENT YEAR 2003-04. 2 4. THAT THE LD. CIT(A) HAS ERRED IN IGNORING THAT T HE APPELLANT HAS SPENT A SUM OF RS. 2.00 CRORES FOR CO NSTRUCTION OF GAURAV SENANI BHAVAN IN ASSESSMENT YEAR 2008-09. 5. THAT THE LD. CIT(A) HAS WRONGLY IGNORED THAT APP ELLANT IS APPLYING THE INCOME ON YEAR TO YEAR BASIS AND U NSPENT FUNDS OF AY 2003-04 ARE APPLIED IN ASSESSMENT YEAR 2004-0 5. 6. THAT APPELLANT CRAVES LEAVE TO ALTER, VARY, ADD AND MODIFY AND GROUNDS OF APPEAL. 2. AT THE OUT SET, LD COUNSEL FOR THE ASSESSEE MADE A PRAYER FOR ADMISSION OF ADDITIONAL GROUND, RELYING ON HONBLE SUPREME CO URT JUDGMENT IN THE CASE OF NTPC 229 ITR 283. THE ADDITIONAL GROUND PRO POSED TO BE ADMITTED IS AS UNDER: GROUND NO. 3D (I) THAT THE ASSESSMENT FRAMED U/S 143(3) BY THE LD . ACIT MAKING AN ADDITION OF RS. 7,44,05,591/- AND CONFIRM ED BY LD. CIT(A) OF RS. 1.96 CRORES IS AGAINST THE PRO VISION OF SUB CLAUSE (II) TO THE PROVISO OF SUB SECTION (3 ) OF SECTION 143 OF THE INCOME TAX ACT, 1961. (II) THAT THE APPELLANTS INCOME IS EXEMPT UNDER SU B CLAUSE (IV) OF CLAUSE (23C) OF SECTION 10 OF THE INCOME-TA X ACT, 1961. (III) THAT THE RELEVANT NOTIFICATION NO. 78/2007 DA TED 26-03- 2007 IS ANNEXED VIDE PAGE 111 OF THE PAPER BOOK FIL ED. 2.1. AFTER HEARING BOTH THE PARTIES WE ARE OF THE V IEW THAT THE ISSUE IN QUESTION IS LEGAL IN NATURE AND GOES TO THE ROOT OF ADJUDICATION AS THE RELEVANCY OF SUB-CLAUSE (II) TO THE PROVISO OF SUB- SECTION (3) OF SEC. 143 IS APPLICABLE TO THE ASSESSEES CASE. ACCORDINGLY, WE ADMIT THE ABOVE PROPOSITION OF ADDITIONAL GROUND. 3 3. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE A SSESSEE I.E. ARMED FORCES FLAG DAY FUND IS CONSTITUTED BY THE GOVERNME NT OF INDIA BY AN APPROPRIATE NOTIFICATION IN THE OFFICIAL GAZETTE. E ARLIER RETURNS OF INCOME WERE NOT FILED AS THE ASSESSEE WAS UNDER A BONA FIDE BEL IEF THAT BEING A NOTIFIED FUND OF DEFENCE MINISTRY, GOVT. OF INDIA ITS INCOM E WAS EXEMPT. 3.1. CLAUSE (IV) TO SEC. 10(23C) WAS AMENDED BY TH E FINANCE ACT, 2007 W.E.F. 1-6-2007 TO COVER SUCH INSTITUTION WHICH MA Y BE NOTIFIED BY THE CENTRAL GOVERNMENT IN THE OFFICIAL GAZETTE. AMENDE D CLAUSE (IV) READS AS UNDER: (IV). ANY OTHER FUND OR INSTITUTION ESTABLISHED FO R CHARITABLE PURPOSES, WHICH MAY BE APPROVED BY THE PRESCRIBED A UTHORITY, HAVING REGARD TO THE OBJECTS OF THE FUND OR INSTITU TION AND ITS IMPORTANCE THROUGHOUT INDIA OR THROUGHOUT ANY STATE OR STATES. 3.2. THE ASSESSEE WAS ACCORDINGLY APPROVED AND NOTI FIED IN THE OFFICIAL GAZETTE AND . ASSESSING OFFICER PROCEEDED TO TAX TH E ASSESSEE. DURING THE COURSE OF ASSESSMENT IT WAS FOUND THAT THE SURPLUS OF INCOME PRIOR TO ISSUE OF NOTIFICATION WAS UN-UTILIZED, THE AGGREGATE THER EOF IS HELD BY ASSESSING OFFICER AS TAXABLE INCOME. LD. COUNSEL EXPLAINED TH AT FUNDS COULD NOT BE UTILIZED IN PRIOR YEARS AS SEC. 10(23C) WAS NOT APP LICABLE EARLIER AND THE SPENDING OF FUNDS IS NOT IN THE CONTROL OF THE ASS ESSEE, WHICH IS BEING REGULATED BY THE MINISTRY OF DEFENCE. IN ANY CASE D URING THE ENTIRE INCOME- TAX PROCEEDINGS, THE LOWER AUTHORITIES FAILED TO TA KE COGNIZANCE OF THIS SPECIFIC AMENDMENT IN SEC. 143(3) I.E. THE PROVISO WHICH WAS INSERTED BY THE FINANCE ACT 2003 W.E.F. 1-4-2003, WHICH READS AS UN DER:. 4 [ PROVIDED THAT IN THE CASE OF A (A) [RESEARCH ASSOCIATION] REFERRED TO IN CLAUSE ( 21) OF SECTION 10; (B) NEWS AGENCY REFERRED TO IN CLAUSE (22B) OF SE CTION 10; (C) ASSOCIATION OR INSTITUTION REFERRED TO IN CLAU SE (23A) OF SECTION 10; (D) INSTITUTION REFERRED TO IN CLAUSE (23B) OF SEC TION 10; (E) FUND OR INSTITUTION REFERRED TO IN SUB-CLAUSE (IV) OR TRUST OR INSTITUTION REFERRED TO IN SUB-CLAUSE (V) OR ANY UN IVERSITY OR OTHER EDUCATIONAL INSTITUTION REFERRED TO IN SUB-CL AUSE (VI) OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION REFERRED TO IN SUB- CLAUSE (VIA) OF CLAUSE (23C) OF SECTION 10, WHICH IS REQUIRED TO FURNISH THE RETURN OF INCOME U NDER SUB- SECTION (4C) OF SECTION 139, NO ORDER MAKING AN ASS ESSMENT OF THE TOTAL INCOME OR LOSS OF SUCH [RESEARCH ASSOCIAT ION], NEWS AGENCY, ASSOCIATION OR INSTITUTION OR FUND OR TRUST OR UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION, SHALL BE MADE BY THE ASSESSING OFFICER, WITHOUT GIVING EFFECT TO THE PROVISIONS OF SECTION 10, UNLESS (I) THE ASSESSING OFFICER HAS INTIMATED THE CENTR AL GOVERNMENT OR THE PRESCRIBED AUTHORITY THE CONTRAVE NTION OF THE PROVISIONS OF CLAUSE (21) OR CLAUSE (22B) OR CL AUSE (23A) OR CLAUSE (23B) OR SUB-CLAUSE (IV) OR SUB-CLAUSE (V) O R SUB-CLAUSE (VI) OR SUB-CLAUSE (VIA) OF CLAUSE (23C) OF SECTION 10, AS THE CASE MAY BE, BY SUCH [RESEARCH ASSOCIATION], NEWS AGENCY, ASSOCIATION OR INSTITUTION OR FUND OR TRUST OR UNIV ERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER ME DICAL INSTITUTION, WHERE IN HIS VIEW SUCH CONTRAVENTION H AS TAKEN PLACE; AND (II) THE APPROVAL GRANTED TO SUCH [RESEARCH ASSOC IATION] OR OTHER ASSOCIATION [OR FUND OR TRUST] OR INSTITUTIO N OR UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR HOSPITAL OR OTH ER MEDICAL INSTITUTION HAS BEEN WITHDRAWN OR NOTIFICATION ISSU ED IN RESPECT OF SUCH NEWS AGENCY OR FUND OR TRUST OR INSTITUTION HAS BEEN RESCINDED :] 5 [ PROVIDED FURTHER THAT WHERE THE ASSESSING OFFICER IS SATISFIED THAT THE ACTIVITIES OF THE UNIVERSITY, COLLEGE OR O THER INSTITUTION REFERRED TO IN CLAUSE (II) AND CLAUSE (III) OF SUB- SECTION (1) OF SECTION 35 ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH ALL OR ANY OF THE CONDITIONS SUBJECT TO WHICH SUCH UNIVERS ITY, COLLEGE OR OTHER INSTITUTION WAS APPROVED, HE MAY, AFTER GI VING A REASONABLE OPPORTUNITY OF SHOWING CAUSE AGAINST THE PROPOSED WITHDRAWAL TO THE CONCERNED UNIVERSITY, COLLEGE OR OTHER INSTITUTION, RECOMMEND TO THE CENTRAL GOVERNMENT TO WITHDRAW THE APPROVAL AND THAT GOVERNMENT MAY BY ORDER, WITH DRAW THE APPROVAL AND FORWARD A COPY OF THE ORDER TO THE CON CERNED UNIVERSITY, COLLEGE OR OTHER INSTITUTION AND THE AS SESSING OFFICER:] [ PROVIDED ALSO THAT NOTWITHSTANDING ANYTHING CONTAINED IN THE FIRST AND THE SECOND PROVISOS, NO EFFECT SHALL BE G IVEN BY THE ASSESSING OFFICER TO THE PROVISIONS OF CLAUSE (23C) OF SECTION 10 IN THE CASE OF A TRUST OR INSTITUTION FOR A PREV IOUS YEAR, IF THE PROVISIONS OF THE FIRST PROVISO TO CLAUSE (15) OF S ECTION 2 BECOME APPLICABLE IN THE CASE OF SUCH PERSON IN SUCH PREVI OUS YEAR, WHETHER OR NOT THE APPROVAL GRANTED TO SUCH TRUST O R INSTITUTION OR NOTIFICATION ISSUED IN RESPECT OF SUCH TRUST OR INSTITUTION HAS BEEN WITHDRAWN OR RESCINDED.] [(4) WHERE A REGULAR ASSESSMENT UNDER SUB-SECTION (3) OF THIS SECTION OR SECTION 144 IS MADE, (A) ANY TAX OR INTEREST PAID BY THE ASSESSEE UNDER SUB-SECTION (1) SHALL BE DEEMED TO HAVE BEEN PAID TOWARDS SUCH REGULAR ASSESSMENT ; (B) IF NO REFUND IS DUE ON REGULAR ASSESSMENT OR T HE AMOUNT REFUNDED UNDER SUB-SECTION (1) EXCEEDS THE AMOUNT R EFUNDABLE ON REGULAR ASSESSMENT, THE WHOLE OR THE EXCESS AMOU NT SO REFUNDED SHALL BE DEEMED TO BE TAX PAYABLE BY THE A SSESSEE AND THE PROVISIONS OF THIS ACT SHALL APPLY ACCORDINGLY. 3.3. THUS BEFORE DISALLOWING ANY INCOME FROM 10(2 3C) COVER, THE ASSESSING OFFICER WAS UNDER OBLIGATION TO INTIMATE TO THE CENTRAL GOVERNMENT ABOUT THE ALLEGED CONTRAVENTION. THUS, ASSESSING OF FICER HAS FAILED TO GIVE 6 EFFECT TO A MANDATORY OBLIGATION IN THIS BEHALF, TH EREFORE, THE ASSESSMENT MAY BE SET ASIDE TO COMPLY WITH THIS MANDATORY REQUIREM ENT. . 4. LD. DR IS HEARD WHO SUPPORTED THE ORDERS OF LOWE R AUTHORITIES. 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SINCE WE HAVE ADMITTED THE ADDITIONAL GROUN D, THERE IS NO DOUBT THAT THE SAID PROVISO IS TO BE READ ALONG WITH SEC. 10(2 3C). THE PROPOSAL FOR DENIAL OF BENEFIT OF SEC. 10(23C) CAN BE MADE AFTE R PRIOR APPROVAL BY THE CENTRAL GOVERNMENT. IN VIEW THEREOF, WE ARE INCLINE D TO SET ASIDE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER TO DECIDE THE SAME AFRESH IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE ADEQUATE OPPORTU NITY OF BEING HEARD. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 05-03-2014. SD/- SD/- ( SHAMIM YAHYA) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 05-03-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR