DDIT, CHENNAI V. The Arya Vysya Maternity Home & Child Welfare Centre, CHENNAI

ITA 2606/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90414 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 07-05-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 15-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Keywords: Charitable institution
• Section: 12AA; 10; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , ! ' , # $% & [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ] ./ I.T.A.NO.2606/MDS/2014 / ASSESSMENT YEAR : 2010-11 THE DY. DIRECTOR OF INCOME- TAX (EXEMPTIONS)-II CHENNAI VS. THE ARYA VYSYA MATERNITY HOME & CHILD WELFARE CENTRE NO.158, GOVINDAPPA NAICK STREET CHENNAI 600 001 [PAN AAATT 0628 F] ( '( / APPELLANT) ( )*'( /RESPONDENT) / APPELLANT BY : DR. B.NISCHAL, JCIT /RESPONDENT BY : SHRI PHILIP GEORGE, ADVOCATE / DATE OF HEARING : 07-05-2015 / DATE OF PRONOUNCEMENT : 29-05-2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VII, CHEN NAI, DATED 16.6.2014 AND PERTAINS TO ASSESSMENT YEAR 2010-11 . ITA NO.2606/14 :- 2 -: 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS EXEMPTIO N U/S 10(23C) OF THE ACT. 3. DR. B. NISHAL, LD. DEPARTMENTAL REPRESENTATIVE SUBM ITTED THAT THE ASSESSEE-SOCIETY WAS REGISTERED U/S 12AA OF T HE ACT AS CHARITABLE INSTITUTION. ACCORDING TO THE LD. DR, THE ASSESSE E RECEIVED RENTAL INCOME OF ` 4,16,532/- FROM HOUSE PROPERTY SITUATED AT GOVIN DAPPA NAICKEN STREET, CHENNAI. THE ASSESSEE HAS ALSO REC EIVED FROM ANOTHER HOUSE PROPERTY ` 8,95,886/- IN SAME STREET, AT CHENNAI. THE ASSESSEE CLAIMED STANDARD DEDUCTION IN RESPECT OF I NCOME RECEIVED FROM THE HOUSE PROPERTIES. HOWEVER, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT DEDUC TION U/S 24(A) OF THE ACT IS INCONSISTENT TO THE PRINCIPLES OF REVEN UE RECOGNITION INVOLVING CHARITABLE ORGANIZATIONS. ACCORDING TO T HE LD. DR, IN CASE OF CHARITABLE ORGANIZATION, THE INCOME AND EXPENDITURE HAS TO BE REAL ONE CORRESPONDING TO INFLOW AND OUTFLOW. THEREFORE, TH E ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS OF THE DECISION OF THIS TRIBUNAL IN THE ASS ESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 IN I.T.A.NO.1843/MDS/2011 D ATED 20.7.2012. ACCORDING TO THE LD. DR, THE INCOME FROM HOUSE PROP ERTY CANNOT BE ALLOWED AS EXEMPT U/S 10(23C)(IIIAE) OF THE ACT. ITA NO.2606/14 :- 3 -: 4. ON THE CONTRARY, SHRI PHILIP GEORGE, LD. COUNSEL FO R THE ASSESSEE SUBMITTED THAT AN IDENTICAL ISSUE CAME UP BEFORE THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09. THIS TRIBUNAL, AFTER CONSIDERING THE PROVISIONS OF SECTION 10(23C)(IIIAE) OF THE ACT, FOUND THAT THE ASSESSEE IS ELIGIBLE FO R EXEMPTION U/S 10(23C) OF THE ACT. THIS TRIBUNAL HAS ALSO FOUND T HAT SIMPLY BECAUSE THE ASSESSEE WAS RECEIVING RENTAL INCOME AND ACCUM ULATING SUCH INCOME FOR SPENDING THE SAME FOR ATTAINMENT OF ITS OBJECTS BY ITSELF DOES NOT PROVE THAT THE ASSESSEE WAS ACTING WITH A PROFIT MOTIVE. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE ISSUE IS COVERED BY THE ORDER OF THIS TRIBUNAL IN FAVOUR OF THE ASSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMI TTEDLY, THE ASSESSEE-SOCIETY IS RUNNING A HOSPITAL AND REGISTER ED U/S 12AA OF THE ACT. FROM THE ORDERS OF THE LOWER AUTHORITIES IT A PPEARS THAT THE ASSESSEE HAS TWO HOUSE PROPERTIES AT GOVINDAPPA NAI CKEN STREET, CHENNAI AND RECEIVING RENTAL INCOME. AFTER CLAIMIN G STANDARD DEDUCTION OF 30% ALLOWED U/S 24(A) OF THE ACT, THE ASSESSEE SCALING DOWN THE RENTAL INCOME TO ` 8,12,049/-. THE ASSESSING OFFICER FOUND THAT THE CLAIM OF STANDARD DEDUCTION U/S 24(A) OF THE ACT IS INCONSISTENT TO THE PRINCIPLES OF REVENUE RECOGNITI ON INVOLVING CHARITABLE ORGANIZATIONS. AFTER REFERRING TO THE O RDER OF THIS TRIBUNAL IN ITA NO.2606/14 :- 4 -: THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-0 9, THE ASSESSING OFFICER FOUND THAT THIS TRIBUNAL GRANTED RELIEF TO THE ASSESSEE AFTER ADJUDICATING ON THE ASPECT AS TO WHETHER THE SOCIET Y WAS ENGAGED IN PROFIT MOTIVE OR NOT. THE CHARACTERISTICS OF THE INCOME DERIVED BY THE SOCIETY WERE NEVER PUT FORTH BEFORE THIS TRIBUNAL. ACCORDINGLY, THE ASSESSING OFFICER FOUND THAT THE RELIEF WAS GRANTED TO THE ASSESSEE ON TOTALLY DIFFERENT SET OF FACTS. AFTER REFERRING TO SECTION 10(23C)(IIIAE) OF THE ACT, THE ASSESSING OFFICER FOUND THAT IN ORDER TO CLAIM EXEMPTION U/S 10(23C)(IIIAE), THE INCOME SHOULD BE DERIVED FR OM MEDICAL FACILITY AND IF INCOME IS DERIVED FROM OTHER SOURCES, IT WOU LD NOT BE ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAE)OF THE ACT. WE HAVE C AREFULLY GONE THROUGH THE PROVISIONS OF 10(23C)(IIIAE) OF THE ACT . FOR THE PURPOSE OF CONVENIENCE, WE REPRODUCE BELOW SECTION 10(23C)(III AE) OF THE ACT: 10(23)C : ANY INCOME RECEIVED BY ANY PERSON ON BEHAL F OF - (IIIAE) ANY HOSPITAL OR OTHER INSTITUTION FOR THE RECEPTION AND TREATMENT OF PERSONS SUFFERING FROM ILLNESS OR MENTAL DEFECTIVENESS OR FOR THE RECEPTION AND TREATMENT OF PERSONS DURING CONVALESCENCE OR OF PERSONS REQUIRIN G MEDICAL ATTENTION OR REHABILITATION, EXISTING SOLEL Y FOR PHILANTHROPIC PURPOSES AND NOT FOR PURPOSES OF PROF IT, IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH HOSPITAL OR INSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL REC EIPTS AS MAY BE PRESCRIBED; A BARE READING OF THE ABOVE PROVISION CLEARLY SHOWS THAT IF THE AGGREGATE ANNUAL RECEIPTS OF HOSPITAL OR INSTITUTIO N FOR TREATMENT DO ITA NO.2606/14 :- 5 -: NOT EXCEED ` 1 CRORE IS ENTITLED FOR EXEMPTION U/S 10(23C)(III AE) OF THE ACT. THE ASSESSING OFFICER FINDS THAT THE INCOME S HALL BE DERIVED FROM THE MEDICAL FACILITY PROVIDED BY THE ASSESSEE. TH E ACT DOES NOT SAY THAT THE INCOME SHALL BE DERIVED FROM THE HOSPITAL OR OTHER INSTITUTION. THE LANGUAGE EMPLOYED BY THE PARLIAMENT CLEARLY SAY S THAT ANY INCOME AND AGGREGATE ANNUAL RECEIPTS. THEREFORE , IT MEANS THAT THE AGGREGATE ANNUAL RECEIPTS OF THE INSTITUTION/HOSPIT AL FROM ALL SOURCES INCLUDING THE RUNNING OF THE HOSPITAL RECEIVED BY T HE ASSESSEE FOR PROVIDING TREATMENT SHOULD BE COVERED BY SECTION 10 (23C)(IIIAE) OF THE ACT. WHEN THE HOSPITAL HAS HOUSE PROPERTY WHICH WA S HELD UNDER THE TRUST, THE INCOME EARNED BY THE ASSESSEE FROM SUCH HOUSE PROPERTY SHALL ALSO FORM PART OF THE AGGREGATE ANNUAL RECEIP TS OF THE INSTITUTION PROVIDED THE SAME IS UTILIZED FOR PROVIDING TREATME NT. IT IS WELL SETTLED PRINCIPLES OF LAW THAT THE TAXATION LAW HAS TO BE I NTERPRETED WITHOUT ADDING ANY WORD TO THE LANGUAGE EMPLOYED BY THE PAR LIAMENT. WHEN THE PARLIAMENT DOES NOT SAY THAT THE INCOME SHALL B E DERIVED FROM HOSPITAL FOR MEDICAL RELIEF, IT MAY NOT BE PROPER F OR THE ASSESSING OFFICER TO SAY THAT INCOME SHALL BE DERIVED FROM TH E HOSPITAL. WHEN THE ASSESSEE HAS INCOME FROM OTHER SOURCES INCLUDI NG THE INCOME FROM HOUSE PROPERTY AND THE AGGREGATE ANNUAL RECEIPTS EX CEEDS ` 1 CRORE, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 10(23C) (IIIAE). HOWEVER, IF THE ITA NO.2606/14 :- 6 -: ANNUAL RECEIPTS DO NOT EXCEED ` 1 CRORE, THE ASSESSEE IS DEFINITELY ENTITLED FOR EXEMPTION U/S 10(23C)(IIIAE) OF THE A CT. 6. THE NEXT OBJECTION OF THE ASSESSING OFFICER IS REGA RDING STANDARD DEDUCTION ALLOWED U/S 24(A) OF THE ACT WH ILE COMPUTING INCOME FROM HOUSE PROPERTY. THE PARLIAMENT, IN ITS WISDOM, ALLOWED 30% DEDUCTION FOR MAINTENANCE OF THE HOUSE PROPERT Y U/S 24(A) OF THE ACT. THIS DEDUCTION COULD BE CLAIMED BY ALL IN STITUTIONS INCLUDING CHARITABLE INSTITUTION WHEN THE INCOME IS NOT EXEMP T U/S 11 OR 10(23C) OF THE ACT. WHEN THE ASSESSEE CLAIMED EXE MPTION U/S 11 OR 10(23C), THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE STANDARD DEDUCTION PROVIDED IN SECTION 24(A) IS NOT AVAILABL E TO THE ASSESSEE. THIS IS FOR THE SIMPLE REASON THAT THE PARLIAMENT P ROVIDED FOR STANDARD DEDUCTION OF 30% FOR MAINTENANCE OF HOUSE PROPERTY. WHEN THE ASSESSEE IS A CHARITABLE TRUST/SOCIETY, ITS INCOME IS EXEMPTED U/S 11 OR 10(23C) ON APPLICATION. IN OTHER WORDS, THE INCO ME RECEIVED BY THE ASSESSEE SHALL NOT FORM PART OF THE TOTAL INCOME PR OVIDED THE SAME IS APPLIED FOR CARRYING OUT THE OBJECTS OF THE TRUST. HENCE, ANY PART OF THE INCOME RECEIVED BY THE ASSESSEE FROM HOUSE PRO PERTY IS APPLIED FOR MAINTENANCE OF THE VERY SAME HOUSE PROPERTY, TH E SAME IS ALLOWED AS APPLICATION U/S 11 AND 10(23C) OF THE ACT. THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT SECTIONS 10 AND 11 OF THE A CT OVERRIDE SECTION ITA NO.2606/14 :- 7 -: 22 TO 27 OF THE ACT. THEREFORE, THE GROSS RENT REC EIVED FROM HOUSE PROPERTY SHALL BE TAKEN AS INCOME OF THE TRUST/SOCI ETY. THE COMPUTATION OF INCOME FROM HOUSE PROPERTY U/S 24 O F THE ACT FAILS WHEN THE ASSESSEE CLAIMS EXEMPTION U/S 10 OR 11 O F THE ACT. IN CASE, THE INCOME IS NOT EXEMPTED U/S 10 OR 11, THE INCOME FROM HOUSE PROPERTY HAS TO BE COMPUTED U/S 24 OF THE AC T. IN VIEW OF THE ABOVE, THE ASSESSEE IS NOT ENTITLED FOR STANDARD D EDUCTION OF 30% AS PROVIDED IN SECTION 24(A) OF THE ACT. IF THE STAND ARD DEDUCTION IS ALLOWED, IT WOULD AMOUNT TO DOUBLE DEDUCTION. THER EFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASS ESSEE IS ENTITLED TO CLAIM THE ACTUAL EXPENDITURE ON MAINTENANCE OF THE HOUSE PROPERTY AS APPLICATION OF INCOME, HOWEVER, NOT ENTITLED FOR ST ANDARD DEDUCTION U/S 24(A) OF THE ACT. WE HAVE ALSO CAREFULLY GONE THROUGH THE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE. IN F ACT, THERE IS NO MUCH OF DISCUSSION IN THE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09. THIS TRIBUNAL HAS TAK EN NOTE OF THE FACT THAT THE ASSESSEE IS RECEIVING RENTAL INCOME FROM HOUSE PROPERTY AND FOUND THAT THERE IS NO PROFIT MOTIVE. AS OBSERVED BY THE TRIBUNAL FOR ASSESSMENT YEAR 2008-09, IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS DIVERTED ITS FUNDS TO THE PER SONAL BENEFITS OF ANY MEMBERS OF THE SOCIETY. ITA NO.2606/14 :- 8 -: 7. IN VIEW OF THE ABOVE DISCUSSION, THIS TRIBUNAL IS O F THE CONSIDERED OPINION THAT THE GROSS INCOME FROM HOUS E PROPERTY HAS TO BE TAKEN WITHOUT ALLOWING ANY DEDUCTION U/S 24(A) O F THE ACT. ACCORDINGLY, THE ORDER OF THE LOWER AUTHORITY IS SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO TAKE THE GROSS REN TAL INCOME FROM HOUSE PROPERTY WITHOUT ANY DEDUCTION U/S 24(A) OF THE ACT. HOWEVER, IT IS MADE CLEAR THAT THE ACTUAL EXPENDITURE INCURR ED BY THE ASSESSEE FOR MAINTENANCE OF THE BUILDING SHALL BE ALLOWED AS APPLICATION OF INCOME EITHER U/S 11 OR 10(23C) OF THE ACT. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 29 TH OF MAY, 2015, AT CHENNAI. SD/- SD/- ( ! ' ) (CHANDRA POOJARI) # / ACCOUNTANT MEMBER ( . . . ! ) (N.R.S. GANESAN) / JUDICIAL MEMBER '# / CHENNAI $% / DATED: 29 TH MAY, 2015 RD %&'' ()'*) / COPY TO: ' 1 . / APPELLANT 4. ' + / CIT 2. / RESPONDENT 5. ),-' . / DR 3. ' +'/! / CIT(A) 6. -0'1 / GF