M/s CURRIMBHOY EBRAHIM KHOJA ORPHANAGE, MUMBAI V. ITO (E)-1(2), MUMBAI

ITA 2854/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 9393 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 06-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI LD
• Assessee Lawyers: FIROZE ANDHYARUJINALD SR
• Keywords: Charitable institution; Set aside
• Section: 143(3); 13; 11

Judgement Text

ITA NO.2854/MUM/2019 CURRIMBHOY EBRAHIM KHOJA ORPHANAGE ASSESSMENT YEAR: 2012-13 1 - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , , BEFORE HONBLE SHRI AMARJIT SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.2854/MUM/2019 ( / ASSESSMENT YEAR: 2012-13) CURRIMBHOY EBRAHIM KHOJA ORPHANAGE 206, REWA CHAMBERS NEW MARINE LINES MUMBAI 400 020 / VS. CIT(A) - 3 R.NO.354, M.K.ROAD AAYKAR BHAWAN MUMBAI 400 020 '# ./ ./PAN/GIR NO. AAATC-0212-E ( ! #% /APPELLANT ) : ( &'#% / RESPONDENT ) ASSESSEE BY : SHRI FIROZE ANDHYARUJINA-LD. SR. COUNSEL REVENUE BY : SHRI SANJAY J.SETHI LD. DR / DATE OF HEARING : 22/12/2020 / DATE OF PRONOUNCEMENT : 04/01/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR (AY) 2012-13 CONTESTS THE ORDER OF LEARNED COMMISSIONER OF INCOM E TAX (APPEALS)-3, MUMBAI [CIT(A)], APPEAL NO.CIT(A)-3/IT-10823/18-18 DATED 18/03/2019 ON FOLLOWING GROUNDS: - A. ACCUMULATION TO BE ALLOWED AND WRONGLY TAKEN AT RS.28,47,860 AS INCOME OF THE CURRENT YEAR 1. THE CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE U NSPENT AMOUNT OF LAST YEARS ACCUMULATION OF RS.28,47,860 WHICH WAS BROUGHT TO T AX IN THE CURRENT YEAR THAT IS ASSESSMENT YEAR 2012-13. ITA NO.2854/MUM/2019 CURRIMBHOY EBRAHIM KHOJA ORPHANAGE ASSESSMENT YEAR: 2012-13 2 2. THE CIT(A) CAME TO THE WRONG CONCLUSION AND FAIL ED TO APPRECIATE THAT THE ACCUMULATION HAD TO BE UTILIZED WITHIN A SPAN OF 5 YEARS AND THAT THE APPELLANT HAD CORRECTLY UTILIZED THE SAME WITHIN THE STATUTORY PE RIOD AS PER THE LAW OF ACCUMULATION U/S 11 READ WITH FORM NO.10. B. DIVIDEND EXEMPT 1. ON THE FACTS AND CIRCUMSTANCES AND IN LAW THE CI T(A) GROSSLY ERRED IN REJECTING THE CLAIM OF THE APPELLANT THAT DIVIDEND INCOME OF RS.1 ,72,169 IS EXEMPT FROM TAX. 2. THE ISSUE OF EXEMPTION OF DIVIDEND INCOME IS SQU ARELY COVERED BY VARIOUS DECISIONS OF THE COURT AND IS COVERED U/S 11(5) AND IS PERMIS SIBLE AS PER LAW. 2. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS PLA CED IN THE PAPER- BOOK. OUR ADJUDICATION TO THE SUBJECT MATTER OF APP EAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 3.1 THE ASSESSEE, BEING AOP TRUST REGD. U/S 12A, WA S ASSESSED U/S 143(3) ON 27/03/2015 WHEREIN THE INCOME WAS DETERMI NED AT RS.28.47 LACS AS AGAINST RETURNED INCOME OF RS.1.14 LACS. TH E FIRST ISSUE IS RELATED WITH THE FACT THAT THE ASSESSEE EARNED DIVI DEND INCOME OF RS.1.72 LACS AND CLAIMED THE SAME TO BE EXEMPT U/S 10(34). THE LD. AO DENIED THE SAME IN VIEW OF THE FACT THAT DIVIDEN D WAS EARNED ON PROPERTY HELD UNDER TRUST AND IT WAS AVAILABLE FOR APPLICATION OF INCOME. IT WOULD NOT BE OPTIONAL FOR THE ASSESSEE TRUST TO AVA IL EXEMPTION. 3.2 THE SECOND ISSUE STEM FROM THE FACT THAT THE AS SESSEE OFFERED AN AMOUNT OF RS.68 LACS AS LAST YEARS ACCUMULATION FO R WHICH OPTION UNDER CLAUSE (II) OF EXPLANATION TO SECTION 11(1) WAS EXE RCISED BY THE ASSESSEE TRUST FOR SPENDING IT DURING AY 2012-13. THE TRUST ALSO OFFERED RS.82.16 LACS WHICH WAS SET APART AS PER FORM NO.10 OUT OF E ARLIER YEARS ACCUMULATION TO BE SPENT IN CURRENT YEAR. ACCORDING LY, THE TRUST HAD TO SPEND IN ALL RS.150.16 LACS OUT OF LAST YEARS ACCU MULATION. HOWEVER, THE ASSESSEE TRUST ONLY SPENT RS.103.43 LACS AS WEL L INCURRED ADMINISTRATIVE EXPENSE OF RS.18.25 LACS AND FAILED TO SPEND BALANCE ITA NO.2854/MUM/2019 CURRIMBHOY EBRAHIM KHOJA ORPHANAGE ASSESSMENT YEAR: 2012-13 3 AMOUNT OF RS.28.47 LACS. ACCORDINGLY, THIS AMOUNT W AS BROUGHT TO TAX AND AN ASSESSMENT WAS FRAMED DETERMINING TOTAL INCO ME AT RS.28.47 LACS. THE STAND OF LD. AO, UPON CONFIRMATION BY LD. CIT(A ), IS UNDER CHALLENGE BEFORE US. 4. SO FAR AS THE ISSUE OF DIVIDEND IS CONCERNED, WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN ASSESSEES FAVOR BY THE DECI SION OF THIS TRIBUNAL IN JAMSHEDJI TATA TRUST V/S JT.DIT (E) (44 TAXMANN.COM 447) WHEREIN COORDINATE BENCH DRAWING ANALOGY FROM THE DECISION OF HONBLE DELHI HIGH COURT IN CIT V/S DIVINE LIGHT MISSION (278 ITR 659) HELD THAT DIVIDEND INCOME BEING EXEMPT U/S 10(34) COULD NOT B E BROUGHT TO TAX BY APPLYING THE PROVISIONS OF SEC. 11 TO 13 OF THE ACT . WE ALSO NOTE THAT AMENDMENT TO SEC.11 BY WAY OF INSERTION OF CLAUSE ( 7) BY FINANCE ACT, 2014 TO NULLIFY THE EFFECT OF THIS DECISION IS APPL ICABLE ONLY WITH EFFECT FROM 01/04/2015 AND DO NOT APPLY TO THIS YEAR. THER EFORE, RESPECTFULLY FOLLOWING THE SAME, WE WOULD HOLD THAT DIVIDEND INC OME BEING EXEMPT U/S 10(34) COULD NOT BE BROUGHT TO TAX BY APPLYING THE PROVISIONS OF SEC.11 TO 13 OF THE ACT. THE AMENDED PROVISION REST RICTING THIS EXEMPTION IS APPLICABLE ONLY FROM AY 2015-16. THE A SSESSEE SUCCEEDS ON THIS ISSUE. 5. SO FAR AS THE SECOND ISSUE IS CONCERNED, WE FIND THAT THE PROVISIONS OF SEC. 11(1)(A) ENABLES THE ASSESSEE TRUST TO ACCU MULATE OR SET APART TRUST INCOME TO THE EXTENT OF 15% FOR UTILIZATION F OR CHARITABLE PURPOSES IN SUBSEQUENT YEARS. IN SUCH A CASE, THE PROVISION OF SEC. 11(2) MANDATES THE ASSESSEE TO FURNISH A STATEMENT IN THE PRESCRIB ED MANNER I.E. FORM NO. 10 TO THE ASSESSING OFFICER STATING THE PURPOSE S AND PERIOD FOR WHICH SUCH INCOME WAS BEING ACCUMULATED OR SET APART. THI S PERIOD IN NO CASE ITA NO.2854/MUM/2019 CURRIMBHOY EBRAHIM KHOJA ORPHANAGE ASSESSMENT YEAR: 2012-13 4 WOULD EXCEED 5 YEARS. AS PER CLAUSE (C) OF SUB-SECT ION (3) TO SEC.11, THE AMOUNT WHICH IS NOT UTILIZED IN THE PRESCRIBED MANN ER IN THE GIVEN PERIOD WOULD BE DEEMED TO BE THE INCOME OF THE ASSESSEE AF TER THE EXPIRY OF AFORESAID PERIOD. THE CLAUSE (2) OF EXPLANATION (RENUMBERED AS EXPLAN ATION-1 BY FINANCE ACT, 2017) TO SEC. 11(1) FURTHER ENABLES THE ASSESS EE TO CARRY FORWARD THE INCOME TO NEXT YEAR IN CERTAIN SITUATIONS IN CA SE APPLICATION FALL SHORT OF 85% OF TRUST INCOME EARNED DURING THE YEAR. 6. APPLYING THE LEGAL PROVISIONS TO THE FACT OF THE CASE, WE FIND THAT THE ASSESSEE HAD FILED FORM NO.10 FOR AY 2010-11 WHEREI N AN AMOUNT OF RS.410.84 LACS HAS BEEN SET-APART FOR SUBSEQUENT UT ILIZATION UP-TO PREVIOUS YEAR 2014-15. THE SAME IS ALSO EVIDENT FRO M ASSESSMENT ORDER U/S 143(3) DATED 27/12/2012. THE AMOUNT OF RS.410. 84 LACS HAS BEEN SPREAD BY ASSESSEE EQUALLY OVER 5 YEARS IN THE COMP UTATION OF INCOME. HOWEVER, IF THE SAID AMOUNT OF RS.82.16 LACS IS EXC LUDED FROM LD. AOS COMPUTATIONS, THE ASSESSEE WAS REQUIRED TO SPEND AN AMOUNT OF RS.160.48 LACS (RS.91.48 LACS PLUS RS.68 LACS) DURI NG THE YEAR. OUT OF THE SAME, THE ASSESSEE HAS ALREADY APPLIED THE AMOU NT OF RS.103.43 LACS DURING THE YEAR TOWARDS THE OBJECTS OF THE TRU ST AND THE BALANCE AMOUNT HAS BEEN SET ASIDE U/S 11(1)(A) AS WELL AS U NDER CLAUSE (2) OF EXPLANATION (RENUMBERED AS EXPLANATION-1 BY FINANCE ACT, 2017) TO SEC. 11(1) TO BE SPENT IN IMMEDIATELY NEXT YEAR I.E . 2013-14. HENCE, THERE IS NO UNDERUTILIZATION AS ALLEGED BY LD.AO. THE CONCLUSION STEM FROM ERRONEOUS ASSUMPTION THAT THE AMOUNT OF RS.82.16 LACS WAS TO BE SPENT IN THIS YEAR AS AGAIN ST THE CORRECT FACT THAT THE AMOUNT WAS SET APART FOR UTILIZATION IN NE XT 5 YEARS. THEREFORE, LD. AO IS DIRECTED TO REWORK THE ASSESSEES COMPUTA TION IN THE LIGHT OF ITA NO.2854/MUM/2019 CURRIMBHOY EBRAHIM KHOJA ORPHANAGE ASSESSMENT YEAR: 2012-13 5 OUR ABOVE OBSERVATIONS AND RE-DETERMINE THE AMOUNTS TO BE SET APART U/S 11(1)(A) AS WELL AS UNDER CLAUSE (2) OF EXPLANA TION (RENUMBERED AS EXPLANATION-1 BY FINANCE ACT, 2017) TO SEC. 11(1). THIS GROUND STANDS ALLOWED FOR STATISTICAL PURPOSES. 7. THE APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED ON 04 TH JANUARY, 2021. SD/- SD/- (AMARJIT SINGH) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 04/01/2021 S R.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. ! #% / THE APPELLANT 2. &'#% / THE RESPONDENT 3. - ( ! ) / THE CIT(A) 4. - / CIT CONCERNED 5. ./ &0 , ! 0 , / DR, ITAT, MUMBAI 6. /123 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.