Al. Ameen Education Society, Bangalore V. DIT (Exemptions), Bangalore

ITA 220/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0586 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-09-2009
• Assessment Year: misc
• Appeal Filed On: 16-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWATI S PATIL
• Assessee Lawyers: GANESH RAO
• Keywords: Capital asset; Depreciation; Charitable institution; Capital Gains
• Section: 80G; 10; 154; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.220/BANG/2009 ASSESSMENT YEAR : N.A. AL AMEEN EDUCATION SOCIETY, AL-AMEEN CAMPUS, HOSUR ROAD, BANGALORE 560 027. : APPELLANT VS. THE DIRECTOR OF INCOME TAX (EXEMPTION), BANGALORE. : RESPONDENT APPELLANT BY : SHRI GANESH RAO RESPONDENT BY : SMT. SWATI S. PATIL O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE SOCIETY AL- AMEEN EDU CATIONAL SOCIETY - IS DIRECTED AGAINST THE ORDER OF THE DIT (E), IN REJECTING ITS APPLICATION FOR RENEWAL OF RECOGNITION U/S 80G OF T HE ACT. 2. THE ASSESSEE SOCIETY IN ITS GROUNDS OF APPEAL HA D INITIALLY RAISED SIX GROUNDS. THE CRUX OF THE ISSUE WAS THE REJECTION OF ITS APPLICATION FOR RENEWAL OF RECOGNITION U/S 80G OF THE ACT BY THE LD .DIT(E). HOWEVER, DURING THE COURSE OF HEARING, THE LD. A R CAME UP W ITH REVISED GROUNDS OF ITA NO.220/B/09 PAGE 2 OF 7 APPEAL WHICH CONSIST OF EIGHT GROUNDS. ON A PERUSA L OF THE SAME, WE FIND THAT GROUND NOS: 1 AND 8 ARE GENERAL AND NOT SPECIF IC WHICH, IN OUR CONSIDERED VIEW, DO NOT SURVIVE FOR ADJUDICATION. 2.1 IN GROUND NO.2 , THE ASSESSEE SOCIETY H AD CHALLENGED THE VERY ORDER OF THE DIT(E) WHICH, ACCORDING TO THE ASSESSE E, WAS BARRED BY LIMITATION WITHIN THE MEANING OF RULE 11AA(6) OF I. T.RULES. HOWEVER, DURING THE COURSE OF HEARING, THE LD. A R SUBMITTED THAT T HIS GROUND WAS NOT PRESSED. AN ENDORSEMENT TO THAT EFFECT HAS ALSO BE EN RECORDED BY THE LD. A.R ON THE ORDER SHEET. ACCORDINGLY, THIS GROUND W AS DISMISSED AS NOT PRESSED. 2.2. IN THE REMAINING GROUNDS, THE ESSENCE AND S UBSTANCE OF THE ISSUES ARE TWO-FOLD, VIZ., (I) THE LD.DIT(E) ERRED IN REJECTING ITS APPLICATION F OR RENEWAL OF RECOGNITION U/S 80G OF THE ACT; & (II) NO PROPER OPPORTUNITY OF HEARING INDICATING THE DEF ICIENCIES WAS AFFORDED BEFORE PASSING THE 80G REJECTION ORDER. 3. THE ASSESSEE SOCIETY WHICH MANAGES A NUMBER OF EDUCATIONAL INSTITUTIONS, HAD FURNISHED AN APPLICATION FOR RENE WAL OF RECOGNITION U/S 80G OF THE ACT ON 11/7/2008. 3.1 AFTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE-SOCIETY AND ALSO THE VERIFICATION OF THE ASSESSING OFFICER AS P ER THE CONDITIONS LAID DOWN U/S 80G (5) OF THE ACT, THE LD DIT (E) HAD FORMED A N OPINION THAT THE ASSESSEE TRUST HAS CONSIDERABLE RECEIPTS LIABLE FOR INCLUSION IN ITS TOTAL INCOME WITHOUT EXEMPTION U/S 11 AND, THUS, THE ASSE SSEE TRUST IS INELIGIBLE IN TERMS OF S.80G (5) (I) OF THE ACT FOR ITS CLAIM. THE REASONS SET OUT, FOR ARRIVING AT SUCH AN OPINION BY THE DIT (E), ARE SUM MARIZED AS UNDER: ITA NO.220/B/09 PAGE 3 OF 7 (I) FOR THE AY 2006-07, THE ASSESSEE SOCIETY HAD SOLD L AND AND UTILIZED A PART OF THE CAPITAL GAIN FOR INVESTMENT IN A CAPITAL ASSET. SINCE THE AMOUNT SO INVESTED WAS LESS THAN THE NET CONSIDERATION RECEIVED, THE BALANCE OF CAPITAL GAIN WAS SUBJECTED TO TAX IN THE HANDS OF THE ASSESSEE SOCIETY; (II) THE ASSESSEE SOCIETY HAD ALSO CLAIMED DOUBLE DEDUCT ION ON ACCOUNT OF DEPRECIATION WHEREAS THE ENTIRE CAPITAL GAIN HAD ALREADY BEEN EXEMPTED SINCE IT HAD BEEN SPENT ON TH E ACQUISITION OF FIXED ASSETS ON WHICH THE DOUBLE DEDUCTION IN TH E FORM OF DEPRECIATION BEING CLAIMED WAS TAXABLE [RELIED ON T HE RULING OF HONBLE SC IN THE CASE OF CIT V. ESCORTS (199 ITR 4 3) AND THE HONBLE TRIBUNALS DECISION IN ITA NOS:642 & 643/B/ 2008]; (III) THE ASSESSMENT FOR THE AY 08-09 WAS PENDING SCRUTIN Y, BUT, THE ASSESSEE HAD WITHDRAWN ITS DEPRECIATION CLAIM, OTHE RWISE ITS CASE ELIGIBLE FOR COMPULSORY SCRUTINY; (IV) FOR THE AY 07-08, THE INCOME OF THE ASSESSEE TRUST WAS BELOW RS.10 CRORES. THOUGH, IT DOESNT FALLS UNDER THE C ATEGORY OF COMPULSORY SCRUTINY, IT REQUIRES EXAMINATION AS IT HAD CLAIMED LARGE DEPRECIATION; (V) WITH REGARD TO ELIGIBILITY U/S 80G(5)(IV), THE AUDI T REPORT, REPRODUCED HEREUNDER, WAS BASED: - I HAVE CONDUCTED MY AUDIT IN ACCORDANCE WITH AUDIT ING STANDS GENERALLY ACCEPTED IN INDIA. THOSE STANDARDS REQUIRE THAT I PLAN AND PERFORM THE AUDIT TO OBTAIN REASONA BLE ASSURANCE ABOUT WHETHER THE FINANCIAL STATEMENTS AR E FREE OF MATERIAL MIS-STATEMENT. AN AUDIT INCLUDES EXAMINING, ON A TEST BASIS, EVIDENCE SUPPORTING THE AMOUNTS AND DISCLOSU RES IN THE FINANCIAL STATEMENTS. AN AUDIT ALSO INCLUDES ASSES SING THE ACCOUNTING PRINCIPLES USED AND SIGNIFICANT ESTIMATE S MADE BY MANAGEMENT, AS WELL AS EVALUATING THE OVERALL FINAN CIAL STATEMENT PRESENTATION. I BELIEVE THAT MY AUDIT PR OVIDES A REASONABLE BASIS FOR MY OPINION. 4. AGGRIEVED, THE ASSESSEE TRUST HAS COME UP WIT H THE PRESENT APPEAL. THE SUBMISSION OF THE LD. A R, FOR THE SAK E OF CLARITY, IS SUMMARIZED AS UNDER: ITA NO.220/B/09 PAGE 4 OF 7 THE LD.DIT(E) ERRED : (I) IN NOT PROPERLY INTERPRETING S.80G (5)(I) OF THE AC T WHILE DENYING RECOGNITION. S.80G(5)(I) SPEAKS OF FUTURE INCLUSIO N OR EXCLUSION OF CERTAIN INCOME, IN THE TOTAL INCOME OF THE TRUST A ND DOES NOT AFFECT IN GRANTING OF 80G RENEWAL; (II) IN RELYING ON THE FINDINGS OF THE AO IN THE ASSESSE E TRUSTS ASSESSMENT ORDER FOR THE AY 06-07 WHEREIN THE TRUST HAD BEEN SUBJECTED TO CAPITAL GAINS TAX, AND IN FACT LEVY OF CAPITAL GAINS TAX WAS NOT CORRECT AND AN APPLICATION U/S 154 HAD BEEN FILED BEFORE THE AO TO MODIFY THE ASSESSMENT ORDER FOR 06-07 AND IF THE ASSESSMENT IS RECTIFIED AS REQUESTED FOR, THERE WIL L BE NO CAPITAL GAINS LIABILITY AT ALL; (III) IN RELYING ON S.80G (5) (IV) AND NOTHING TURNS ON T HIS SECTION AND IT FIXES THE RESPONSIBILITY ON THE AUDITOR FOR AUDI TING THE TRUSTS ACCOUNTS; (IV) TO APPRECIATE THAT THE GRANTING OF 80G RECOGNITION WAS GOVERNED BY THE PROVISIONS CONTAINED IN RULE 11AA OF I.T.RUL ES AND THE DIT(E) HAD NOT RECORDED ANY FINDINGS WITH REGARD TO INFRINGEMENT OF RULE 11AA IN THE IMPUGNED ORDER; (V) IN NOT GIVING PROPER OPPORTUNITY OF HEARING INDICAT ING THE DEFICIENCIES BEFORE PASSING THE IMPUGNED ORDER; & (VI) RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: (A) PARIVAR SEVA SANSTHA V. DIT (E) 255 ITR 132 (DEL) (B) ORPAT CHARITABLE TRUST V. CIT 256 ITR 690 (GUJ); (C) N.N.DESAI CHARITABLE TRUST V. CIT 246 ITR 452 (GU J) (D) CIT V. ACADEMY GENERAL EDUCATION, MANIPAL 150 ITR 135 (KAR) (E) BRAHMIN EDUCATIONAL SOCIETY V. ACIT & ANR - 140 CT R 262 (KER) 4.1. TO BUTTRESS HIS ARGUMENT, THE LD. A R HAD FU RNISHED A PAPER BOOK CONTAINING 1 16 PAGES WHICH CONSISTS OF, INTER AL IA, COPIES OF REVISED GROUNDS OF APPEAL, MEMORANDUM AND RULES OF THE TRUS T ETC. ITA NO.220/B/09 PAGE 5 OF 7 4.2. ON THE OTHER HAND, THE LD. D R WAS OF THE V IEW THAT THE DIT(E) HAD REJECTED THE ASSESSEE-TRUSTS REQUEST FOR RENEWAL O F RECOGNITION IN CONFORMITY WITH THE PROVISIONS OF ACT WHICH REQUIRE S TO BE SUSTAINED. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBM ISSIONS, PERUSED THE RELEVANT RECORDS AND ALSO PAPER BOOK FURNISHED BY T HE LD. A R. 5.1. LET US NOW PERUSE THE CASE LAWS ON WHICH THE ASSESSEE TRUST HAS PLACED STRONG RELIANCE: (I) THE HONBLE DELHI HIGH COURT IN THE CASE OF PAR IVAR SEVA SANSTHA V. DIT REFERRED SUPRA HAS RULED THAT THE RELEVANT PROVISIONS OF THE ACT AND THE RULES THAT THESE NOWH ERE STIPULATE THAT THE CONTINUATION OF THE BENEFIT SHALL BE GRANT ED ONLY UPON PAYMENT OF THE OUTSTANDING DEMAND . (II) IN THE CASE OF N.N.DESAI CHARITABLE TRUST CIT ED SUPRA , THE HONBLE HIGH COURT OF GUJARAT IN ITS WISDOM HAD DEL IBERATED AN IDENTICAL ISSUE IN AN EXHAUSTIVE MANNER AND RULED T HAT (PAGE 460) THAT IS DEMONSTRATIVE OF THE SCOPE OF EN QUIRY BY THE COMMISSIONER WHILE ENQUIRING THE EXISTENCE OF CONDI TION UNDER SECTION 80G(5)(I). THAT EXTENDS TO ELIGIBILITY TO EXEMPTION UNDER VARIOUS PROVISIONS OF THE INCOME-TAX ACT REFERRED T O IN THAT SUB- SECTION, BUT NOT TO ACTUAL ASSESSMENT WHICH DEPENDS ON FULFILLMENT OF FURTHER CONDITIONS BY THE ELIGIBLE INSTITUTIONS, TRUSTS OR FUNDS. IN NONE OF THESE CASES INQUIRY OF THE COMMISSIONER UND ER SECTION 80G(5)(VI) EXTENDS TO THE ACTUAL COMPUTATION OF INC OME UNDER THE ASSESSMENT THAT IS LIKELY TO BE FRAMED WE SEE NO REASON THAT SUCH EXERCISE CAN BE TAKEN IN RESPECT OF A TRUST WHICH IS CLAIMING EXEMPTION NOT UNDER SECTION 10 BUT UNDER SECTIONS 1 1 AND 12 OF THE ACT, ONCE THE COMMISSIONER FINDS THAT THE PERSO N WHO IS CLAIMING APPROVAL IS THE ASSESSEE WHO CLAIMED HIS I NCOME NOT LIABLE TO BE INCLUDED IN THE TAXABLE INCOME UNDER S ECTION 11 OR 12. THE ENQUIRY RELATES TO WHETHER IT IS REGISTERED UND ER SECTION 12A, WHETHER IT IS A TRUST WHOLLY FOR CHARITABLE PURPOSE S OR RELIGIOUS PURPOSES, AND WHETHER INCOME RECEIVED BY IT IS LIAB LE TO BE CONSIDERED UNDER SECTION 11, BUT IT DOES NOT GO BEY OND THAT TO EXAMINE AS AN ASSESSING OFFICER WHETHER THE INCOME RECEIVED BY IT AT THE CLOSE OF ANY PARTICULAR YEAR OR YEARS WAS OR WAS NOT ACTUALLY INCLUDED IN THE TAXABLE INCOME IN THE PAST. THIS ITA NO.220/B/09 PAGE 6 OF 7 CONSIDERATION MUST BE WHETHER THE INCOME RECEIVABLE BY IT WILL OR WILL NOT BE LIABLE TO BE CONSIDERED FOR EXCLUSION U NDER SECTION 11. SUCH ENQUIRY OBVIOUSLY CANNOT INCLUDE AN ENQUIRY WH ETHER AT THE CLOSE OF THE PREVIOUS YEAR THE DONEE WILL ACTUALLY BE ABLE TO SUSTAIN SUCH CLAIM BECAUSE OF NON-FULFILMENT OF SOM E CONDITIONS BY HIM AS TO THE APPLICABILITY OR ACCUMULATION OF I NCOME, AS IT IS NOT POSSIBLE TO PREDICATE THAT IN PRAESENTI WHEN DO NATION IS MADE. AS WE HAVE NOTICED ABOVE, THAT QUESTION WOUL D DEPEND UPON THE FACTS EXISTING AT THE CLOSE OF THE ASSESSM ENT YEAR AND AT THE TIME OF CONSIDERING THE APPLICATION IT CANNOT B E EXAMINED IN THE LIGHT OF WHAT IS GOING TO HAPPEN IN PENDING ASS ESSMENTS IN RESPECT OF WHICH APPROVAL CERTIFICATE WAS ALREADY E XISTING AND THE ASSESSMENT OF WHICH WOULD NOT AFFECT THE DONATIONS MADE TO THE TRUST DURING THAT YEAR. VIEWED FROM ANY ANGLE, WE ARE OF VIEW THAT THE ORDER OF THE COMMISSIONER REFUSING APPROVAL IS FOUNDED ON WHOLLY IRRELEVANT CONSIDERATIONS BY TRENCHING UPON THE FIELD OF THE A SSESSING OFFICER BY PRONOUNCING ON THE TAXABILITY OR NON-TAXABILITY OF ANY INCOME IN RESPECT OF THE ASSESSMENTS FOR THE PAST YEAR WHICH ARE YET TO BE COMPLETED AND DOES NOT RELATE TO A PERIOD FOR WHICH APPROVAL, IF ACCORDED, IS TO OPERATE. (III) THE OTHER CASE LAWS REFERRED SUPRA, THE RATIOS OF T HE FINDINGS OF THE HONBLE COURTS ARE ALSO APPLICABLE TO THE FACTS OF THE CASE ON HAND. 5.2. IN AN OVERALL CONSIDERATION OF THE JUDICIAL PRECEDENTS, WE ARE OF THE UNANIMOUS VIEW THAT THE LD. DIT(E) WAS NOT JUSTIFIE D IN REJECTING THE ASSESSEE TRUSTS APPLICATION FOR RENEWAL OF RECOGNI TION U/S 80G OF THE ACT. IT IS ORDERED ACCORDINGLY. 6. SINCE THE ASSESSEE-TRUSTS REQUEST FOR RENE WAL OF RECOGNITION U/S 80G OF THE ACT IS CONCEDED, ITS OTHER GROUSE THAT NO PROPER OPPORTUNITY WAS AFFORDED WHILE DISPOSING OF ITS APPLICATION U/S 80G HAS BECOME REDUNDANT AND, ACCORDINGLY, IGNORED. ITA NO.220/B/09 PAGE 7 OF 7 7. IN THE RESULT, THE ASSESSEE-TRUSTS APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF OCTOBER, 2009. SD/- SD/- (GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 16 TH OCTOBER, 2009. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.