Gujarat Industrial Security Force Society, Ahmedabad V. The Dy.CIT.,(OSD),Circle-9, Ahmedabad

ITA 2923/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6826 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 27-10-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAVANSI
• Keywords: Charitable institution; Principle of natural justice
• Section: 43B; 37(1); 12AA; 11

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI MUKUL KR. SHRAWAT, JM AND D.C.AGRAWAL , AM GUJARAT INDUSTRIAL SECURITY FORCE SOCIETY, O/1, NEW MENTAL HOSPITAL, MEGHANINAGAR, AHMEDABAD. VS. THE DY. CIT (OSD), CIRCLE- 9, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI TUSHAR P. HEMANI, AR RESPONDENT BY:- SHRI G. S. SOURYAVANSI, DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS:- (1) THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACT S IN CONFIRMING THE ACTION OF LD. AO IN TREATING SERVICE TAX AMOUNT OF RS.47,04,102/- AS PENAL IN NATURE AND ACCORDINGL Y ERRED IN DISALLOWING THE SAME. (2) THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACT S IN CONFIRMING THE ACTION OF LD. AO IN DISALLOWING AMOU NT OF RS.8,734/- IN RESPECT OF ESIC PAYMENTS AND INTEREST THEREON. (3) THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACT S IN CONFIRMING THE ACTION OF LD. AO IN DISALLOWING EMPL OYEES CONTRIBUTION OF RS.46,89,574/- U/S 36(1)(VA) OF THE ACT HOLDING THAT THE SAME WERE NOT DEPOSITED WITHIN DUE DATE, W ITHOUT APPRECIATING THE FACTS THAT EMPLOYEES CONTRIBUTION WERE DULY DEPOSITED TO THE GOVERNMENT TREASURY ACCOUNT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. ITA NO.2923/AHD/2009 ASST. YEAR 2006-07 ITA NO.2923/AHD/2009 ASST. YEAR 2006-07 2 (4) THE LD. CIT(A) AND LD. AO HAS GROSSLY ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACTS THAT THE APPELLANT IS REGISTERED TRUST U/S 12AA OF THE ACT AND THEREFORE ANY EXPENDITURE I NCURRED FOR ATTAINING THE OBJECTS OF THE TRUST ARE ALLOWED U/S 11 OF THE ACT IRRESPECTIVE OF ANY OTHER PROVISIONS OF THE ACT. (5) THE LD. CIT(A) AND LD. AO OUGHT TO HAVE APPRECIATED THE FACT THAT THE INCOME OF THE APPELLANT TRUST IS TAXABLE U NDER THE HEAD INCOME FROM OTHER SOURCES AND NOT PROFIT AND GAI N OF BUSINESS OR PROFESSION AND ACCORDINGLY THE LD. CIT(A) HAS E RRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN INVOKING PROVISIONS OF SECTION 36,37 AND 43B OF THE ACT IN T HE CASE OF THE APPELLANT TRUST. (6) BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN PASSING THE ORDERS WITHOUT PROPERLY APPRECIATING TH E FACT AND THAT HE FURTHER ERRED IN GROSSLY IGNORING VARIOUS S UBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPEL LANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BE FORE PASSING THE IMPUGNED ORDER. THIS ACTION OF BOTH THE AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. (7) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE LD. AO IN LEVYING INTEREST U/S 234B/C/D OF THE ACT. (8) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 2. THE ASSESSEE IS A TRUST REGISTERED UNDER SECTION 12AA OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT ASSESSEE HAS PAID A SUM OF RS.47,04,102/- AS SERVICE TAX. TH E AO CONSIDERED IT AS PENAL IN NATURE. IT WAS EXPLAINED TO HIM THAT SERVI CE TAX DEPARTMENT HAS ISSUED SHOW CAUSE NOTICE FOR A SUM OF RS.49,78,896/ - OUT OF WHICH THE ASSESSEE HAS PAID ONLY A SUM OF RS.41,24,667/- DURI NG THE YEAR. THIS SUM IS NOT PENAL IN NATURE AND SHOULD NOT BE DISALLOWED . THE AO, HOWEVER, ITA NO.2923/AHD/2009 ASST. YEAR 2006-07 3 DID NOT AGREE AND MADE THE ADDITION AS ACCORDING TO HIM RS.47,04,102/- (OR RS.41,24,667/-) IS HELD AS NOT APPLIED TO CHARI TABLE PURPOSES AND ACCORDINGLY WILL NOT GET EXEMPTION U/S 11. HE ALSO HELD THAT SERVICE TAX IS PENAL IN NATURE AND CANNOT BE TREATED AS ANY APPLIC ATION OF FUNDS. 3. WHEN THE MATTER CAM UP BEFORE LD. CIT(A), HE DID NOT OFFER ANY REASON WHILE CONFIRMING THE ORDER OF THE AO. 4. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT SERVICE TAX DEPARTMENT HAS ISSUED A NOTICE WHICH IS PLACED AT P AGES 11 TO 15 OF THE PAPER BOOK. IT CLEARLY MENTIONS THAT ASSESSEE HAS T O MAKE PAYMENT OF RS.49,78,896/- TOWARDS SERVICE TAX. THE QUESTION OF PENALTY WAS LEFT OPEN BY THE COMMISSIONER, (SERVICE TAX). THE ANNEXURE TO THE SHOW CAUSE NOTICE ISSUED BY THE COMMISSIONER, (SERVICE TAX) AL SO SHOWED SERVICE TAX PAYABLE AT RS.61,67,626/- OUT OF WHICH ASSESSEE HAS PAID SERVICE TAX OF RS.11,88,730/- AND THUS THERE WAS A SHORT PAYMEN T OF RS.49,78,896/- WHICH ASSESSEE WAS REQUIRED TO PAY. THE ASSESSEE HA S IN FACT MADE THE PAYMENT OF SAID SUM. HE REFERRED TO THE COPY OF CHA LLANS PLACED AT PAGES 16 TO 23 OF ITS PAPER BOOK. HE ALSO INVITED OUR ATT ENTION TO THE EFFECT THAT THE CHILLAN DID NOT REFER TO ANY PENALTY IN RESPECT OF SERVICE TAX. IN PARTICULAR LD. AR REFERRED TO FOLLOWING PARA FROM T HE SHOW CAUSE NOTICE EMPHASIZING THE POINTS THAT THE AMOUNT OF RS.49,78, 896/- DID NOT COMPRISE OF ANY PENALTY:- (1) SERVICE TAX AMOUNTING TO RS.49,78,896/- (RUPEE S FORTY NINE LAKHS SEVENTY EIGHT THOUSAND EIGHT HUNDRED NINETY S IX ONLY) AS SHOWN IN TO THIS NOTICE SHOULD NOT BE DEMANDED A ND RECOVERED UNDER THE PROVISIONS OF SECTION 73(1)(A) OF THE FINANCE ACT, 1994 AND PART OF THE AMOUNT ALREADY DE POSITED BY THEM SHOULD NOT BE ADJUSTED TOWARDS THE SAID DEM AND. ITA NO.2923/AHD/2009 ASST. YEAR 2006-07 4 (2) THE INTEREST AT THE PRESCRIBED RATE SHOULD NOT BE CHARGED FROM THEM UNDER THE PROVISIONS OF SECTION 75 IBID O N THE AMOUNT OF SERVICE TAX PAID AS WELL AS REQUIRE TO BE PAID. (3) PENALTY SHOULD NOT BE IMPOSED AS THEY FAILED TO PA Y THE SERVICE TAX CORRECTLY AS WELL AS TIMELY AS PRESCRIB ED UNDER THE PROVISION SECTION 76 OF FINANCE ACT, 1994. (4) PENALTY SHOULD NOT BE IMPOSED UNDER SECTION 77 IBI D FOR CONTRAVENTION OF PROVISIONS AS THEY FAILED TO FURNI SH PRESCRIBED RETURN IN DUE TIME. (5) PENALTY SHOULD NOT BE IMPOSED UNDER THE PROVISION OF SECTION 78 IBID FOR SUPPRESSING AND NOT DISCLOSING THE VALUE OF TAXABLE SERVICE PROVIDED BY THEM BEFORE THE SERV ICE TAX DEPARTMENT WITH INTENT TO EVADE THE PAYMENT OF SERV ICE TAX. 5. ACCORDING TO HIM IF THIS SUM DOES NOT CONSIST OF ANY PENALTY IT CANNOT BE DISALLOWED U/S 37. HE ALSO SUBMITTED THAT LD. AO AND LD. CIT(A) WERE NOT CORRECT IN HOLDING THAT PAYMENT OF SERVICE TAX IS NOT APPLICATION OF INCOME OF THE ASSESSEE. SINCE SERVIC E TAX IS PAID TOWARDS SERVICES RENDERED BY THE ASSESSEE TRUST THEN IT IS AN ADDITIONAL COST OF SERVICES RENDERED BY THE TRUST FOR THE OBJECTIVE OF THE TRUST. THERE CANNOT BE A DIFFERENT OBJECTIVE OF SERVICE TAX EXCEPT THE PURPOSE FOR WHICH SERVICE TAX WAS PAID AND SUCH PURPOSE IS ONLY CHARI TABLE WHICH HAS NOT BEEN DOUBTED BY THE AO. 6. LD. DR ON THE OTHER HAND RELIED ON THE ORDERS OF AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS NO REASO N FOR MAKING ANY ADDITION. FIRSTLY, AS POINTED OUT BY THE LD. AR BY REFERRING TO VARIOUS DOCUMENTS IN THE PAPER BOOK THAT PAYMENT IS EXCLUSI VELY FOR SERVICE TAX AND THERE IS NO PENAL ELEMENT INVOLVED IN IT. IN FA CT THE SHOW CAUSE NOTICE ISSUED BY THE COMMISSIONER, (SERVICE TAX) ON 21.10. 2005, SHOWS THAT SUM ITA NO.2923/AHD/2009 ASST. YEAR 2006-07 5 OF RS.49,78,896/- IS EXCLUSIVELY FOR SERVICE TAX AN D ISSUE OF PENALTY WOULD BE CONSIDERED SEPARATELY. ACCORDINGLY THIS SUM CANN OT BE DISALLOWED U/S 37(1) AND EXPLANATION THERETO. 8. SIMILARLY, THIS SUM CANNOT BE TREATED AS NOT APP LIED FOR CHARITABLE PURPOSES. SERVICE TAX IS NOT A DEMAND IN ISOLATION OR INDEPENDENT OF ITSELF BUT IT IS IN RELATION TO SERVICES RENDERED BY THE A SSESSEE. THE AO HAS NO WHERE MENTIONED THAT ASSESSEE HAS RENDERED SOME NON -CHARITABLE SERVICES OR SERVICES WHICH DID NOT CONFORM TO THE OBJECTIVES OF THE TRUST OR ASSESSEE HAS APPLIED ITS INCOME TO NON-CHARITABLE O BJECTIVE. SUCH APPLICATION OF FUNDS TO CHARITABLE WORK HAS NOT BEE N DOUBTED BY THE AUTHORITIES BELOW. SERVICE TAX IS JUST AN ADDITIONA L COST OF SERVICE RENDERED AND NOTHING MORE. THE PURPOSE FOR WHICH SE RVICE TAX IS PAID CANNOT BE DIFFERENT THAN THE PURPOSE ON WHICH EXPEN DITURE IS INCURRED I.E., RENDERING SERVICES FOR CHARITABLE WORK. IT IS INCOR RECT TO HOLD THAT PURPOSE FOR RUNNING SERVICES WOULD BE CHARITABLE WHEREAS PU RPOSE FOR PAYING SERVICE TAX ON SUCH SERVICES WOULD BE NON-CHARITABL E. 9. WE ACCORDINGLY ALLOW THE CLAIM OF THE ASSESSEE. 10. GROUND NOS. 2 & 3 RELATE TO PAYMENT IN RESPECT OF ESIC AND EMPLOYEES CONTRIBUTION TO PF. 11. WE HAVE HEARD THE PARTIES. IT IS NOW SETTLED PO SITION OF LAW IF THE PAYMENTS OF ESIC AND PF ARE MADE BEFORE DUE DATE OF FILING OF RETURN THE SAME SHOULD BE ALLOWED AS DEDUCTION. FOLLOWING TWO JUDGMENTS ARE REFERRED TO :- ITA NO.2923/AHD/2009 ASST. YEAR 2006-07 6 ITA NO.1908/A/2009 ASST. YEAR 2005-06 SHREEOMSINGH B. RAWAT, PROP. STAR SECURITY SERVICES, 905-6, GIDC ESTATE, MAKARPURA, BARODA VS. ITO, WARD 2(5) BARODA. PRONOUNCED ON 18.09.2009 ITA NO.2162/A/2007 ASST. YEAR 2000-01 M/S CONSULTECH, OPP. SAHIL JETALPUR ROAD, B/H, AGARWAL GUEST HOUSE, BARODA-390 005. VS. ACIT, CIR.2, BARODA. PRONOUNCED ON 9.7.2010 FROM THE ORDERS OF AUTHORITIES BELOW IT IS NOT POSS IBLE TO ASCERTAIN AS TO WHEN THE PAYMENTS WERE MADE BY THE ASSESSEE. LET TH E AO VERIFY AS TO WHEN THE PAYMENTS WERE MADE AND IF THEY ARE MADE BE FORE DUE DATE OF FILING OF RETURN THEN THE SAME SHOULD BE ALLOWED. W ITH THIS DIRECTION THIS GROUND OF ASSESSEE IS ALLOWED BUT FOR STATISTICAL P URPOSES. 12. GROUND NOS. 4 TO 8 ARE NOT PRESSED AND HENCE TH EY ARE REJECTED. 13. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS PA RTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 21/4/11. SD/- SD/- (MUKUL KR. SHRAWAT) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 21/4/11. MAHATA/- ITA NO.2923/AHD/2009 ASST. YEAR 2006-07 7 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 7/4/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 15/4/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..