Tamilnadu Advocates Welfare Fund, CHENNAI V. DDIT (OSD), CHENNAI

ITA 2620/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7740 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 09-09-2016
• Court: TRIBUNAL
• Assessee Lawyers: R VENKATESH
• Keywords: Opportunity of being heard; Maximum Marginal Rate; Capital receipt; Condonation of delay
• Section: 142(1); 12A; 12AA; 148; 12; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , ' # BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NOS.2616, 2617, 2618, 2619 & 2620/MDS/2016 / ASSESSMENT YEAR : 2005-06, 2006-07, 2007-08, 2008-09 & 2009-10 TAMIL NADU ADVOCATE WELFARE FUND, BAR COUNCIL BUILDINGS, HIGH COURT CAMPUS, CHENNAI - 600 104. VS. DEPUTY DIRECTOR OF INCOME TAX, OSD (EXEMPTIONS) - II, 121, MAHTMA GANDHI ROAD, CHENNAI - 34. ( / APPELLANT) ( /RESPONDENT) % & / APPELLANT BY : SHRI R. VENKATESH, CA )*% & / RESPONDENT BY : NONE & /DATE OF HEARING : 01.12.2016 & /DATE OF PRONOUNCEMENT : 29.12.2016 /O R D E R PER BENCH: THE ASSESSEE HAS FILED THE APPEALS AGAINST THE COMM ON ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 17, CHENNAI IN ITA NO. 80,81,393 & 394/10-11 AND 622,648 &649/11-12&95/13-14, DATED 30 .03.2016 FOR THE ASSESSMENT YEARS 2005-06, 2006-07, 2007-08, 2008-09 & 2009-10. SINCE, THE ISSUE :-2-: I.T.A. NOS. 2616, 2617, 2618, 2619 & 2620/MDS/2016 IS THESE APPEALS ARE COMMON IN NATURE, THE APPEALS ARE CLUBBED AND HEARD TOGETHER AND DISPOSED OFF BY THE COMMON ORDER. FOR THE SAKE OF CONVENIENCE, WE FIRST TAKE UP THE ASSESSEE APPEAL ITA NO. 2616/MDS/2016 FOR TH E ASSESSMENT YEAR 2005-06 AND TAKE UP THE FACTS NARRATED BY THE APPEAL. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 2.1 THE LD. CIT(A) FAILED TO APPRECIATE THAT ALL TH E AFFAIRS OF THE APPELLANT INSTITUTION IS GOVERNED BY THE STATE STATUE TAMIL NADU ADVOCATES WELFARE FUND ACT, 1987 (ACT NO. 49 OF 1987) AND THE INCOME AND UTILIZATION FOR MEETING THE OBJECTS OF THE FUND ARE ALSO GOVERNED AND MANDATED AS PER THE SAID STATUTE AND THAT THEY BEING EXEMPT U/S. 1 1 HAVING BEEN REGISTERED U/S. 12AA W.E.F. 25.02.2011. 2.2 WHILE APPRECIATING THE EFFECT OF THE INSERTED P ROVISIONS OF SECTION 12A BY THE FINANCE ACT 2014 IN RESPECT OF ASSESSMENT YEA R 2010-11 THE LD. CIT(A) ERRED IN NOT FOLLOWING THE EXEMPTION U/S. 1 1 TO APPELLANT IN RESPECT OF ASSESSMENT YEARS PRECEDING ASSESSMENT YEAR 2010 -11. 2.3 THE ASSESSMENT WAS CONFIRMED BY THE LD. CIT(A) AS HE REJECTED THE GROUNDS DUE TO NON AVAILABILITY REGISTRATION U/S. 12AA OF THE IT ACT FOR THE IMPUGNED YEAR. 2.4 THE LD. CIT(A) FAILED TO APPRECIATE THAT APPELL ANT HAD EARLIER MADE A PETITION U/S. 119(2)(B) BEFORE CBDT FOR ALLOWING T HE APPLICATION FOR THE BENEFIT OF REGISTRATION U/S. 12AA FROM THE DATE OF THE INCEPTION AS THE DESIGNATED AUTHORITY HAD AND COULD GRANT THE REGIS TRATION U/S. 12AA ONLY FROM 25.02.2011, THE DATE OF FILING OF THE APPLICA TION FOR REGISTRATION. :-3-: I.T.A. NOS. 2616, 2617, 2618, 2619 & 2620/MDS/2016 2.5 THE LD. CIT(A) FAILED TO APPRECIATE THAT APPELL ANT HAD EARLIER MADE A PETITION U/S. 119(2)(B) BEFORE CBDT FOR ALLOWING T HE APPLICATION FOR THE BENEFIT OF REGISTRATION U/S. 12AA FROM THE DATE OF ITS INCEPTION AS THE DESIGNATED AUTHORITY HAD AND COULD GRANT THE REGIS TRATION U/S. 12AA ONLY FROM 25.02.2011, THE DATE OF FILING OF THE APPLICA TION FOR REGISTRATION. 2.6 IN VIEW OF THE ORDER DATED 19.07.2016 OF THE CB DT CONDONING THE DELAY IN FILING THE APPLICATION FOR REGISTRATION U/S. 12 AA FOR THE ASSESSMENT YEARS 2005-06 ONWARDS TILL 24.02.2011 THE APPELLANT GET THE OPPORTUNITY TO ESTABLISH THE CLAIM FOR EXEMPTION U/S. 11 AND THIS ASPECT HAS A SUBSTANTIVE BEARING ON THE TAXABILITY OF THE INCOM E FOR THE IMPUGNED YEAR. 2.7 THE LD. CIT(A) ERRED IN CONCLUDING THAT THERE I S NO NEXUS BETWEEN THE REVENUE GENERATED AND THE EXPENDITURE IN PURSUING THE OBJECTS OF THE APPELLANT MANDATED BY LAW AND FURTHER ERRED IN BRI NGING THE SAID INCOME BEING THE GROSS RECEIPTS LESS MARGINAL EXPENSES TO TAX AT MAXIMUM MARGINAL RATE FAILING TO NOT THAT THE EXPENDITURE TOWARDS OBJECT ARE INTEGRAL TO THE MANNER OF GENERATING THE RECEIPTS 2.8 THE LD. CIT(A) ERRED IN NOT ALLOWING FOR IMPUGN ED YEAR WHILE ACCEPTING THE FACT THAT THE ONETIME LIFE SUBSCRIPTION IS CAP ITAL IN NATURE AND AN EARMARKED RECEIPT WHILE WRONGLY CONCLUDING THAT 'S ECTION 11 HAS BECOME INOPERATIVE' AND THE CAPITAL RECEIPTS GET INCLUDED AS INCOME OF THE TRUST AS PER SEC 13(8). :-4-: I.T.A. NOS. 2616, 2617, 2618, 2619 & 2620/MDS/2016 3. THE BRIEF FACTS OF THE CASE THAT THE ASSESSEE IS A WELFARE FUND FORMED UNDER TAMIL NADU ADVOCATE WELFARE FUND U/S. 6(2) OF THE ADVOCATES ACT 1961 AND CONSTITUTED BY THE STATE LEGISLATURE U/S. 4 OF THE TAMIL NADU ADVOCATES WELFARE FUND TRUSTEE COMMITTEE AND ADMINISTERED BY THE BAR COUNCIL. THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS FOUND THAT TH E ASSESSEE'S FUND HAS CLAIMED INCOME AS EXEMPT AND HAS NOT FILED RETURN OF INCOME AND ISSUED NOTICE U/S. 148 OF THE ACT. IN COMPLIANCE TO THE NOTICE, THE LETTER W AS FILED BY THE ASSESSEE EXPLAINING THAT THE FUNDS WERE PART OF THE BAR COUNCIL, TAMILN ADU WERE EXEMPTED U/S. 11 AND 10(23A) OF THE ACT. FURTHER, QUESTIONNAIRE WAS ISS UED ALONG WITH NOTICE 142(1) OF THE ACT. THE ASSESSEE FILED THE RETURN OF INCOME WI TH NIL INCOME. THE LD AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND THE CASE WA S DISCUSSED. THE CONTENTION OF THE ASSESSEE THAT THIS WELFARE FUND IS PART OF BAR COUNCIL OF TAMILNADU ADMINISTERED BY STATE LEGISLATIVE IN ACCORDANCE WITH PROVISIONS OF ADVOCATE ACT, 1961 AND CLAIMING EXEMPTION OF INCOME OF THE FUND ON INTERES T ON FIXED DEPOSIT, LIFE TIME SUBSCRIPTIONS AND CORPUS FUND. THE LD. AO ELABORAT ELY DISCUSSED ON THE PROVISIONS OF SECTION 10(23A) OF THE ACT ON CLAIM OF EXEMPTION OF INCOME AND FINALLY CONCLUDED THAT THE ASSESSEE HAS NOT COMPLIED THE CONDITIONS R EQUIRED FOR CLAIM OF EXEMPTION AND WAS NOT REGISTERED U/S. 12AA OF THE ACT FOR THE SAID ASSESSMENT YEAR AND ASSESSED THE ASSESSEE'S WELFARE FUND AS ASSOCIATION OF PERSONS AND PASSED ORDERS U/S. 143 R.W.S. 147 OF THE ACT DATED 26.12.2011 WIT H ASSESSED INCOME OF RS. 1,88,01,470/- AND RAISED THE DEMAND. 4. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN AP PEAL WITH THE CIT(A). THE LD. AR ARGUED THE GROUNDS AND REITERATED THE SU BMISSIONS OF ASSESSMENT :-5-: I.T.A. NOS. 2616, 2617, 2618, 2619 & 2620/MDS/2016 PROCEEDINGS AND EMPHASIZED THAT THE ASSESSEE FUND I S PART AND PARCEL OF BAR COUNCIL OF TAMILNADU. THE LD. CIT(A) FOUND THAT THE ASSESS EE HAS MADE AN APPLICATION FOR REGISTRATION U/S. 12AA OF THE ACT AND WAS GRANTED O N 25.02.2011 FOR THE ASSESSMENT YEAR 2011-12 ONWARDS AND ALSO APPLICATION WAS FILED WITH THE CBDT UNDER THE PROVISIONS OF SECTION 119(2)(B) FOR GRANTING REGIST RATION U/S. 12AA FROM THE DATE OF INCEPTION OF THE WELFARE FUND. FURTHER, THE LD. CI T(A) CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER ON THE APPLICABILITY OF PROVI SIONS AND SUBMISSIONS ON LAW AND FACTS AND DISMISSED THE APPEAL. AGGRIEVED BY THE O RDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE TRIBUNAL. 5. BEFORE US, THE LD. AR OF THE ASSESSEE ARGUED TH E GROUNDS AND SUBMITTED THAT THE INCOME OF THE WELFARE FUNDS WAS SUBJECTED TO TAX AND CONFIRMED BY THE CIT(A) AS REGISTRATION U/S. 12AA OF THE ACT NOT AVA ILABLE TO ASSESSEE FOR THE SAID ASSESSMENT YEAR. WHEREAS, THE ASSESSEE WAS REGISTE RED U/S. 12AA OF THE ACT ON 25.12.2011 VIDE LETTER DATED 29.08.2011 BUT FOR THE ASSESSMENT YEARS 2005-06 TO 2009-10. THE LD. CIT(A) CONFIRMED THE TAXABILITY O F INCOME BASED ON NEWLY INSERTED PROVISIONS OF SECTIONS 12A(2) OF THE ACT BY FINANCI AL ACT, 2014. THE LD. AR SUBSTANTIATED THAT THE ASSESSEE HAS MADE AN PETITIO N U/S. 119(2)(B) OF THE ACT FOR CONDONATION OF DELAY FOR ASSESSMENT YEAR 2005-06 TO 2010-11 IN FILING APPLICATION OF REGISTRATION U/S. 12AA OF THE ACT AND DEMONSTRATED THE ORDER U/S. 119(2)(B) OF INCOME TAX ACT ISSUED BY CBDT ON 19.07.2016. THE C BDT EXAMINED THE MATTER AND CONDONED THE DELAY IN FILING THE APPLICATION FO R REGISTRATION U/S. 12AA OF THE ACT FOR THE ASSESSMENT YEAR 2005-06 TO 2010-11 AND SUBJ ECT TO AUTHORITY GRANTING :-6-: I.T.A. NOS. 2616, 2617, 2618, 2619 & 2620/MDS/2016 REGISTRATION U/S. 12AA OF THE ACT AND TO SATISFY TH E FULFILMENT OF CONDITIONS PRESCRIBED UNDER THE ACT WHICH ARE NECESSARY FOR GR ANTING OF REGISTRATION. 6. FURTHER, THE LD. AR SUBMITTED THAT THE ORDER U/ S. 119(2)(B) OF THE ACT HAS BEARING ON THE ASSESSMENT OF THE ASSESSEE IN DE CIDING THE TAXABILITY OF THE INCOME AND SHALL BE THE BASIS REVOLVES ON GRANTING OF REGISTRATION U/S. 12AA OF THE ACT AND PRAYED FOR SETTING ASIDE ASSESSMENT TO THE AO AND TO COMPLY THE CONDITIONS OF REGISTRATION AS PER CBDT ORDER DATED 19.07.2016. CONTRA, THE LD. DR ACCEPTED THE CBDT ORDER U/S. 119(2B) OF THE ACT FILED BY THE ASSESSEE AND HAS NO SERIOUS OBJECTIONS. 7. WE HAVE CONSIDERED THE FACTS, MATERIAL ON RECORD AND THE ORDER U/S. 119(2B). WE ARE OF THE OPINION, THAT THERE IS STRE NGTH IN THE ARGUMENTS OF THE ASSESSEE AND IN THE INTEREST OF JUSTICE, WE SET AS IDE THE ORDER OF THE CIT(A) AND REMIT THE DISPUTED ISSUE TO THE FILE OF THE ASSESSI NG OFFICER FOR GRANTING REGISTRATION U/S. 12AA AS PER THE ORDER U/S. 119(2)(B) OF THE AC T ON FULFILMENT OF THE CONDITIONS NECESSARY FOR THE GRANT OF REGISTRATION. THE LD. A O SHALL PROVIDE ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE P ASSING THE ORDER AND ACCORDINGLY, THE GROUNDS OF THE ASSESSEE ARE ALLOWED FOR STATIST ICAL PURPOSE. 8. LIKEWISE, I.E., AS FOR ASSESSMENT YEAR 2005-06, ITA NO. 2617/MDS/2016 FOR THE ASSESSMENT YEAR 2006-07, ITA NO. 2618/MDS/2 016 FOR THE ASSESSMENT YEAR 2007-08, ITA NO. 2619/MDS/2016 FOR THE ASSESSMENT Y EAR 2008-09 AND ITA NO. :-7-: I.T.A. NOS. 2616, 2617, 2618, 2619 & 2620/MDS/2016 2620/MDS/2016 FOR THE ASSESSMENT YEAR 2010-11 ARE A LSO SIMILARLY SET ASIDE TO THE FILE OF THE ASSESSING OFFICER AND ASSESSEE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSE. 9. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE A LLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THURSDAY, THE 29TH DAY OF DECEM BER, 2016 AT CHENNAI. SD/ - ( ) (SANJAY ARORA) ! / ACCOUNTANT MEMBER SD/ - ( . ) (G. PAVAN KUMAR) $ ! /JUDICIAL MEMBER /CHENNAI, / /DATED: 29TH DECEMBER, 2016 JPV & )'12 32 /COPY TO: 1. APPELLANT 2. )*% /RESPONDENT 3. 4 ( )/CIT(A) 4. 4 /CIT 5. 2 )'' /DR 6. 8 /GF