Deputy Commissioner of Income-tax, V. M/s. Jaya Hind Inverstments Pvt. Ltd., Pune

ITA 2419/PUN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8037 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-08-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 14-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: N K BOKIL
• Keywords: Earning of tax free income
• Section: 143(3); 80G; 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E BEFORE SHRI R.S. SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY, JM / ITA NO.2419/PUN/2016 / ASSESSMENT YEAR : 2010-11 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-9, PUNE. ....... / APPELLANT / V/S. M/S. JAYA HIND INVESTMENTS PVT. LTD. MUMBAI- PUNE ROAD, AKURDI, PUNE-411 035 PAN : AAACJ4269R / RESPONDENT ASSESSEE BY : SHRI N.K. BOKIL REVENUE BY : SHRI SUDHENDU DAS / DATE OF HEARING : 03.01.2019 / DATE OF PRONOUNCEMENT : 04.01.2019 / ORDER PER PARTHA SARATHI CHAUDHURY, JM : THIS APPEAL PREFERRED BY THE REVENUE EMANATES FROM THE ORDER OF LD. CIT(APPEALS)-9, PUNE FOR THE ASSESSMENT YEAR 2010-11 D ATED 20.07.2016 AS PER FOLLOWING GROUNDS OF APPEAL ON RECORD: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLOW ANCE U/S.14A PROPORTIONATE TO EXEMPT INCOME AS RULE 8D HAS NO SU CH PROVISION FOR PROPORTIONATE DISALLOWANCE. 2 ITA NO. 2419/PUN/2016 A.Y.2010-11 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) IS JUSTIFIED IN ALLOWING THE DONATION MA DE U/S.80G WHEN THE APPROVAL U/S.80G GRANTED TO ASHWINI RURAL CANCER RE SEARCH AND RELIEF SOCIETY WAS VALID UPTO 30.03.2009? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) FAILED TO APPRECIATE THAT THE APPLICATION FO R CONTINUANCE OF RECOGNITION U/S.80G WAS MADE AFTER THE EXPIRY OF AP PROVAL U/S.80G GRANTED TILL 31.03.2009 AND CONTINUANCE WAS NOT OBT AINED BY THE ASSESSEE EVEN AFTER MAKING TWO APPLICATIONS DATED 1 1.05.2009 ( RECEIVED ON 20.05.2009 AND ON 30.06.2010.) 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. 2. BRIEF FACTS OF THIS CASE ARE THAT THE ASSESSEE-COMPAN Y IS ENGAGED IN THE BUSINESS OF DEALING IN SHARES AND SECURITIES AND INVESTME NT IN VARIOUS BANKS AND COMPANIES BY WAY OF DEPOSIT. THE ASSESSEE FILED RETURN OF INCOME FOR THE AY 2010-11 ON 29.09.2010 DECLARING TOTAL LOSS OF (-) RS.13,74 ,17,594/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. THE ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE AC T) WAS COMPLETED ON 08.03.2013 DETERMINING TOTAL LOSS OF (-) RS.15,38,99,760/- BY MA KING THE FOLLOWING ADDITIONS/DISALLOWANCES : I) DISALLOWANCE U/S.14A OF THE ACT RS.97,49,662/- II) DISALLOWANCE U/S.80G OF THE ACT RS.67,32,505/- 3. AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE LD.CIT(APPEALS) CHALLENGING THE ABOVE ADDIT IONS /DISALLOWANCES. 4. THAT WITH REGARD TO THE DISALLOWANCE OF RS.97,49,662/- U /S.14A OF THE ACT , THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE COMPANY HAD RECEIVED DIVIDEND INCOME OF RS.17,38,8 7,939/- WHICH WAS CLAIMED AS EXEMPT INCOME U/S.10(34) OF THE ACT. THE A SSESSING OFFICER 3 ITA NO. 2419/PUN/2016 A.Y.2010-11 WORKED OUT THE DISALLOWANCE OF EXPENDITURE IN RESPECT OF E XEMPT INCOME TO RS.97,49,662/- WHICH WAS PERCENT OF AVERAGE VALUE OF INVE STMENT OF RS.194,99,32,489/- BY APPLYING RULE 8D(2)(II) AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSING OFFICER PASSED AN ORDER U /S.154 OF THE ACT RESTRICTING THE DISALLOWANCE U/S.14A TO THE EXTENT OF RS.5 2,26,096/- AS THE TOTAL EXPENDITURE DEBITED TO P & L ACCOUNT WAS RS.59,38,1 48/- AND THE ASSESSEE HAD ALREADY DISALLOWED THE AMOUNT OF RS.7,12,052/-. 5. THE LD.CIT(APPEALS) OBSERVED THAT DURING THE YEAR UND ER CONSIDERATION, THE ASSESSEE COMPANY HAD SHOWN TOTAL INCOME OF RS.32,36 ,66,738/- OUT OF WHICH THE INCOME OF RS.17,38,69,784/- WAS CLAIMED AS EXEMPT INCOME. THE LD. CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO RESTRICT TH E DISALLOWANCE TO THE AMOUNT ALREADY DISALLOWED BY THE ASSESSEE PLUS PROPO RTIONATE OF THE BALANCE AMOUNT OF RS.52,26,096/- IN PROPORTION OF THE EXEMP T INCOME TO THE TOTAL INCOME. THE GRIEVANCE OF THE REVENUE IS THAT DISALLOWA NCE U/S.14A R.W. RULE 8D DOES NOT HAVE ANY PROVISION FOR PROPORTIONATE DISALLOWANCE. 6. WE HAVE PERUSED THE CASE RECORD AND HEARD RIVAL CO NTENTIONS. IT IS THE DECISION OF THE ASSESSING OFFICER THAT CLAUSE (II) OF SUB-RULE 2 OF RULE 8D IS NOT APPLICABLE IN THIS CASE AND THE ASSESSEE HAS ALREADY MADE DISALLOWANCE OF RS.5,80,742/- UNDER CLAUSE (I) I.E. EXPENDITURE DIRECTLY RELATED TO THE EXEMPT INCOME. ACCORDING TO THE ASSESSING OFFICER, ASSESSEES CASE WAS COVERED UNDER RULE 8D(2)(III). RULE 8D(2)(III) READS AS UNDER: AN AMOUNT EQUAL TO ONE HALF PERCENT OF THE AVERAGE OF THE VALUE OF INVESTMENT , INCOME FROM WHICH DOES NOT OR SHALL NO T FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. 4 ITA NO. 2419/PUN/2016 A.Y.2010-11 ACCORDING TO THIS RULE, THE EXPENDITURE IN RELATION TO EXE MPT INCOME WORKS OUT TO RS.97,49,662/- WHICH IS PERCENT OF AVER AGE VALUE OF INVESTMENT OF RS.194,99,32,489/-. THEREFORE, AN AMOUNT OF RS.9 7,49,662/- IS DISALLOWED AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE U/S.14A OF THE ACT. WHEREAS, THE LD. CIT(APPEALS) WAS OF THE VIEW TH AT THE TOTAL EXPENDITURE DEBITED TO PROFIT AND LOSS ACCOUNT IS INCURRE D BY THE ASSESSEE IN RELATION TO EXEMPT INCOME AND ALSO TAXABLE INCOME AS WELL . THEREFORE, IT IS MORE APPROPRIATE TO RESTRICT THE DISALLOWANCE U/S.14A OF THE ACT P ROPORTIONATE TO THE EXEMPT INCOME. THUS, DISALLOWANCE ON THIS ACCOUNT W OULD BE THE EXPENDITURE ALREADY DISALLOWED BY THE ASSESSEE IN THE RET URN OF INCOME TO THE TUNE OF RS.7,12,052/- WHICH IS DIRECTLY RELATABLE TO THE EXE MPT INCOME AND THE DISALLOWANCE OUT OF THE BALANCE EXPENDITURE OF RS.52,26,0 96/- IN PROPORTION OF THE EXEMPT INCOME TO THE TOTAL INCOME. THE ASSESSING OFFICER WAS DIRECTED TO WORK OUT THE DISALLOWANCE ACCORDINGLY. 7. THIS ISSUE NEEDS FURTHER VERIFICATION AND THEREFORE, WE SET ASIDE THE ORDER OF LD.CIT(APPEALS) AND RESTORE THIS ISSUE BACK TO HIS FILE TO ADJUDICATE THIS ISSUE AFRESH AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, GROUND NO.1 RAISED IN APPEAL BY REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 8. THE SECOND AND THIRD GROUNDS IN THE PRESENT APPEAL IS DIRECTED AGAINST THE ACTION OF THE LD. CIT(APPEALS) IN ALLOWING ASSESSEES CLA IM U/S.80G OF THE ACT IN RESPECT OF DONATION OF RS.1,50,00,000/- GIVEN TO ASHW INI RURAL CANCER RESEARCH AND RELIEF SOCIETY. THE LD. CIT(APPEALS) GRANTED R ELIEF TO THE ASSESSEE ON THE BASIS OF REASONS AS CONTENDED IN PARA 6.3 OF HIS ORDER AFTER APPRECIATING THE FACTS OF THE CASE, WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND ASSESSMENT ORDER. THE LD. CIT(APPEALS) WHILE GRANTING R ELIEF TO THE 5 ITA NO. 2419/PUN/2016 A.Y.2010-11 ASSESSEE FOLLOWED THE RATIO LAID DOWN BY THE HON'BLE HIGH C OURT OF ALLAHABAD IN THE CASE OF SOCIETY FOR PROMOTION OF EDUCATION WHICH WA S APPROVED BY THE HON'BLE APEX COURT IN ITS DECISION REPORTED IN 382 ITR 6 (SC). AS PER THE SAID DECISION IF AN APPLICATION FOR EXEMPTION IN THE CASE OF A CHAR ITABLE TRUST IS NOT ENTERTAINED WITHIN A PERIOD OF 6 MONTHS, THE TRUST IS DEEMED TO H AVE BEEN GRANTED APPROVAL OR REGISTRATION. 9. DURING THE COURSE OF HEARING BEFORE THE TRIBUNAL ON 19 .12.2018, THE BENCH ASKED THE AR FOR THE ASSESSEE TO SUBMIT A BRIEF N OTE IN REGARD TO THE STATUS OF THE APPLICATION U/S.80G IN CASE OF ASHWANI RURAL CANCER RESEARCH & RELIEF SOCIETY. 10. ASHWINI RURAL CANCER RESEARCH & RELIEF SOCIETY HAD RE CEIVED ITS EARLIER RECOGNITIONS U/S.80G FROM TIME TO TIME AND THE LAST RECOGN ITION GRANTED WAS FOR THE PERIOD 01.04.2006 TO 31.03.2009. THE SAID TRUST HAD APPLIED FOR RENEWAL AS PER ITS APPLICATION FILED ON 20.05.2009 AND THE SA ME WAS ALSO DULY ACKNOWLEDGED ON 17.06.2009 AND FURTHER RESPONDED TO BY THE TRUST ON 01.07.2009 WHICH IS PLACED IN THE PAPER BOOK FILED BEFORE US AT PAGE 32 TO 38. SINCE THERE WAS NO RESPONSE RECEIVED BY THE TRUST FOR RENEWAL OF ITS RECOGNITION U/S. 80G, THE TRUST FILED A REMINDER IN THE MATTER BEFORE THE CIT- IV , PUNE ON 30-6-2010. WHILE NO FORMAL RESPONSE WAS RECEIVED IN WRITING BY THE TRUST , IT WAS GIVEN TO UNDERSTAND INFORMALLY THAT AS PER RULE 11AA(6) , THE TIME LIMIT FOR APPROVAL HAD EXPIRED , AFTER THE PERIOD OF 6 MONTHS OF THE APPLICATION SUBM I TTED IN MAY , 2009. MOREOVER, AS PER THE NEW PROVISIONS OF SECTION 80G(5) AS APPLICABLE W.E.F. 1-10-2009, ANY TRUST WHICH HAD BEEN GRANTED APPROVAL EARLIER WAS NOT REQUIRED TO APP L Y FOR RENEWAL AND SUCH APPROVAL WOULD BE DEEMED TO CONTINUE, UNTIL IT WAS SPECIFICA LLY WITHDRAWN. 6 ITA NO. 2419/PUN/2016 A.Y.2010-11 THEREUPON, NO FURTHER EFFORTS WERE MADE FOR PURSUING THE RENEWAL APPLICATION BY THE SAID TRUST. 11. IN THE PAPER BOOK FILED BEFORE US ON PAGE 41 TO 43 WHEREIN A COPY OF THE I.T. ASSESSMENT ORDER DATED 3-3-2014 PASSED U/S . 143(3) IN THE CASE OF THE TRUST FOR A.Y. 2011-12 AS FURNISHED BY THE TRUST HAS BEEN DULY COMPILED. PARA 3 OF THE SAID ASSESSMENT ORDER CLEARLY NOTES THE FACT THAT THE SAID TRUST ENJOYED VALID APPROVALS BOTH FOR PURPOSES OF SEC. 12A AN D SEC. 80G AND BASED THEREON, THE RETURNED INCOME AS DECLARED BY THE TRUST AT RS. NIL WAS TREATED AS EXEMPT. 12. WE HAVE PERUSED THE CASE RECORD AND ANALYZED TH E FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. WE FIND THAT IN THE ASSESSMENT OR DER DATED 03.03.2014 PASSED U/S.143(3) OF THE ACT IN THE CASE OF THE TRUST I.E. ASHWANI RURAL CANCER RESEARCH & RELIEF SOCIETY, IT IS CLEARLY STATED THAT THE TRUST IS REGISTERED U/S.12A OF THE ACT AND ALSO HAVE OBTAINED ITS EXEMPTION U/S.80G OF THE ACT. IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCE S, RELIEF GRANTED TO THE ASSESSEE BY THE LD. CIT(APPEALS) IS SUSTAINED. ACCORDI NGLY, GROUNDS OF APPEAL NO. 2 AND 3 RAISED BY REVENUE ARE DISMISSED . 13. IN COMBINED RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 4 TH DAY OF JANUARY, 2019. SD/- SD/- R.S. SYAL PARTHA SARAT HI CHAUDHURY VICE-PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 4 TH JANUARY, 2019. SB 7 ITA NO. 2419/PUN/2016 A.Y.2010-11 !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-9, PUNE. 4. THE PR. CIT-5, PUNE. 5. '#$ %%&' , ( &' , )*+ , / DR, ITAT, B BENCH, PUNE. 6. $,- ./ / GUARD FILE. // TRUE COPY // (0 / BY ORDER, %1 &+ / PRIVATE SECRETARY ( &' , / ITAT, PUNE. 8 ITA NO. 2419/PUN/2016 A.Y.2010-11 DATE 1 DRAFT DICTATED ON 03 .01.2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 04 .01 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER