Sandesh Charitable Trust, Ahmedabad V. The ACIT, CPC, Bangalore

ITA 2959/AHD/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0872 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 29-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ART I AH
• Keywords: Charitable institution; Deemed to accrue or arise in india; Set aside
• Section: 154; 11; 143(1); 274

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 2959/AHD/2017 ( ASSESSMENT YEAR : 2015-16) SANDESH CHARITABLE TRUST SANDESH BHAVAN, LAD SOCEITY, BODAKDEV, AHMEDABAD / VS. ASST. COMMISSIONER OF INCOME TAX CPC, BANGALORE ./ ./ PAN/GIR NO. : AAATS6991C ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : ARTI SHAH, A.R. / RESPONDENT BY : SHRI VIDHYUT TRIVEDI, CIT.D.R. DATE OF HEARING 18/12/2019 !'# / DATE OF PRONOUNCEMENT 20/12/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-9, AHMEDABAD, (CIT(A) IN SHORT), DATED 06.10.2017 ARISING IN THE ORDER UNDER S.143(1) OF THE INCOME T AX ACT, 1961 (THE ACT) DATED 21.10.2016 PASSED BY THE ACIT (CPC) CONC ERNING AY 2015-16. ITA NO. 2959/AHD/17 [SANDESH CHARITABLE TRUST VS. ACIT] A.Y. 2015-16 - 2 - 2. THE GROUND OF APPEAL RAISED BY ASSESSEE READS AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-9. AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY HOLDING THAT DEDUCTION U/S. 11L(1)(A) OF THE I.T. ACT, 1961 AT 15% IS NOT ALLOWABLE ON RS.50,83,082/- WHICH HAS BEEN INCLUDED IN THE RETURNED INCOME OF THE APPELLANT U/S.11(3)(C) OF TH E I.T. ACT, 1961. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS)-9, AHMEDABAD HAS GROSSLY ERRED IN LAW AND ON FACTS OF THE CASE BY NOT DECIDING THE GROUND OF APPEAL TAKEN BY THE APPE LLANT AGAINST ACTION OF THE ASSESSING OFFICER OF DETERMINING TOTA L INCOME OF THE APPELLANT AL RS. 50,83.082/- WITHOUT CONSIDERING TH E CLAIMS FOR DEDUCTIONS MADE IN THE RETURN OF INCOME FILED BY TH E APPELLANT WHICH DEDUCTIONS ARE LEGITIMATELY ALLOWABLE. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS)-9; AHMEDABAD HAS GROSSLY ERRED IN LAW AND ON FACTS OF THE CASE BY DISMISSING THE LAST GROUND OF APPEAL AFTER HOLDING IT AS RESIDUARY IN NATURE AND ALSO AS NOT AVAILED BY THE APPELLANT. 4. WITHOUT PREJUDICE TO ABOVE GROUNDS, THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS)-9. AHMEDABAD HAS ALSO ERRED IN LAW AND ON FACTS OF THE CASE BY NOT CONSIDERING THAT THE DI SALLOWANCES MADE IN THE INTIMATION U/S.143(1) CANNOT BE CONSIDE RED AS ADJUSTMENTS COVERED UNDER SECTION 143(1)(A) OF THE I..T. ACT, 1961. 5. THE APPELLANT HAS INADVERTENTLY OFFERED RS. 50.83,082/- AS DEEMED INCOME U/S.11(3)(C) THOUGH IN FACT THE SAME IS TO BE CONSIDERED AS UTILIZATION OF ACCUMULATIONS MADE IN EARLIER YEARS AND CONSEQUENTLY ACCUMULATION CLAIMED OF RS.28.21.5 04/- U/S.11(2) IN THE RETURN OF INCOME BE ALLOWED TO BE MODIFIED. 3. BRIEFLY STATED, THE ASSESSEE TRUST FILED ITS R ETURN OF INCOME FOR AY 2015-16, WHICH WAS PROCESSED UNDER S.143(1) OF T HE ACT, WHEREIN DEDUCTION CLAIMED BY THE ASSESSEE AS PER SL. NO. 12 (V) OF THE INTIMATION AT RS.13,94,926/- WAS COMPUTED AND REPLA CED BY RS.6,32,465/- BY THE TAX DEPARTMENT. 4. THE ASSESSEE IS AGGRIEVED BY THE REDUCTION IN TH E QUANTUM OF DEDUCTION CLAIMED WHILE PROCESSING THE RETURN UNDER S.143(1) OF THE ACT. THE CIT(A) IN THE FIRST APPEAL ON THE AFORESA ID ISSUE REJECTED THE OBJECTION OF THE ASSESSEE AND DISMISSED THE APPEAL. ITA NO. 2959/AHD/17 [SANDESH CHARITABLE TRUST VS. ACIT] A.Y. 2015-16 - 3 - 5. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 6. THE LEARNED AR FOR THE ASSESSEE POINTED OUT, AT THE OUTSET, THAT THE GROSS TOTAL INCOME COMPUTED BY THE ASSESSEE STA NDS AT RS.42,16,431/- FOR THE AY 2015-16. APART FROM THE AFORESAID AMOUNT, THE ASSESSEE HAS ALSO BROUGHT FORWARD INCOME REMAIN ING UNUTILIZED IN RELATION TO EARLIER YEARS UNDER S.11(3) OF THE ACT AMOUNTING TO RS.50,83,082/-. IT WAS CLAIMED BY THE LEARNED AR F OR THE ASSESSEE THAT INCOME DERIVED FROM TRUST PROPERTY WHICH WAS NOT AP PLIED FOR CHARITABLE PURPOSES BUT WAS ACCUMULATED OR SET APAR T FOR APPLICATION FOR SUCH PURPOSES IN INDIA IN THE EARLIER YEAR, EXE MPTION COULD BE CLAIMED FOR THE INCOME SO ACCUMULATED OR SET APART IN THE ORIGINAL ASSESSMENT YEAR. THE AO, HOWEVER, HAS BEEN GIVEN P OWER TO TREAT THE INCOME SO ACCUMULATED OR SET APART AS INCOME OF THE PREVIOUS YEAR IN WHICH IT CEASES TO BE SO ACCUMULATED OR CEASES TO R EMAIN SO INVESTED OR DEPOSITED OR AS THE CASE MAY BE, SUCH ACCUMULATI ON MAY BE TREATED AS THE INCOME OF THE PREVIOUS YEAR IMMEDIATELY FOLL OWING THE EXPIRY OF THE SPECIFIED PERIOD. THE LEARNED AR THUS CLAIM ED THAT THE UNUTILIZED ACCUMULATION OF THE PRECEDING ASSESSMENT YEARS WAS TREATED AS CHARGEABLE INCOME OWING TO PROVISIONS OF SECTION 11(3) OF THE ACT TO THE EXTENT OF RS.50,83,082/- IN ADDITION TO CHAR GEABLE INCOME OF RS.42,16,431/- ACCRUED IN RELATION TO CURRENT YEAR. THE ASSESSEE CLAIMED DEDUCTION @ 15% OF THE AGGREGATE AMOUNT OF RS.92,99,563/- AND CLAIMED DEDUCTION QUANTIFIED AT RS.13,44,926/- AS PER SL. NO. 12(V) OF THE INTIMATION UNDER S.143(1) OF THE ACT. THE DEPARTMENT HOWEVER HAS PROCESSED THE RETURN AND GRANTED DEDUCT ION OF 15% UNDER S.11(1)(A) OF THE ACT ONLY ON THE INCOME ACCRUED DU RING THE CURRENT YEAR I.E. RS.42,16,431/- AND DENIED SUCH DEDUCTION OF 15% OF ACCUMULATION I.E. RS.50,83,082/- CONCERNING EARLIER YEARS WHICH ARE DEEMED TO BE INCOME OF CURRENT YEAR BY VIRTUE OF SE CTION 11(3) OF THE ACT. THE DEDUCTION WAS THUS REDUCED TO RS.6,32,465 /- AS AGAINST CLAIM ITA NO. 2959/AHD/17 [SANDESH CHARITABLE TRUST VS. ACIT] A.Y. 2015-16 - 4 - OF RS.13,94,926/- (BY EXCLUDING THE DEDUCTION ON AC CUMULATION) WHILE PROCESSING THE RETURN UNDER S.143(1) OF THE ACT. T HE LEARNED AR SUBMITTED THAT SUCH COURSE IS NOT PERMISSIBLE IN SU CH A DEBATABLE ISSUE WHILE MAKING EX PARTE PROCESS UNDER S.143(1) OF THE ACT. THE LEARNED AR SUBMITTED THAT THE IDENTICAL ISSUE CAME UP FOR A DJUDICATION BEFORE THE TRIBUNAL IN CITY MANAGER ASSOCIATION VS. ACIT ITA NO. 2337/AHD/2017 ORDER DATED 21.08.2019 WHERE SUCH ADJUSTMENT UNDER S.143(1) OF THE ACT WAS NOT APPROVED BEING DEBATABL E ISSUE. 7. THE LEARNED DR FOR THE REVENUE RELIED UPON THE A CTION OF THE AO AND THE CIT(A). 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. WE STRAIGHTWAY NOTICE THAT IDENTICAL ISSUE HAS BEEN AD JUDICATED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN CITY MANAGER ASSOCIATION (SUPRA). THE RELEVANT PORTION OF THE ORDER IS REPRODUCED H EREUNDER FOR READY REFERENCE: 5. BEFORE US, THE ASSESSEE RAISED TWO FOLD SUBMISS IONS. FIRSTLY, ON THE STRENGTH OF HONBLE KOLKATTA HIGH COURT IN THE CASE OF CIT VS. NATWARLAL CHOWDHURY CHARITY TRUST, 52 TAXMANN 330 ( KOL) IT IS ENTITLED FOR DEDUCTION AT 15% OF THE ALLEGED DEEMED INCOME O FFERED FOR TAXATION IN THIS ASSESSMENT YEAR. IN THE SECOND CONTENTION S, SHE CONTENDED THAT BOTH THE ISSUES ARE DEBATABLE THAT CANNOT BE ADJUDI CATED UNDER SECTION 143(1) OF THE ACT. 6. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORD ER OF THE REVENUE AUTHORITIES. HE PLACED ON RECORD COPY OF I TATS ORDER IN THE CASE OF THE TRUSTEES, THE B.N. GAMADIA PARSI HUNNAR SHALA, 77 TTJ 274 (MUM-TRIB.) WE WOULD LIKE TO REPRODUCE BRIEF ORDER OF THE HONBLE KOLKATTA HIGH COURT IN THE CASE OF CIT VS. NATWARLA L CHOWDHURY CHARITY TRUST (SUPRA), WHICH READS AS UNDER: 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS CORRECT IN LAW IN HOLDING THAT THE ASS ESSEE'S RIGHT TO ACCUMULATE 25% OF THE TOTAL INCOME OF THE PREVIO US YEAR EXTENDED TO THE DEEMED INCOME UNDER SECTION 11(3) O F THE INCOME-TAX ACT, 1961, ADDED THEREIN IN THE CIRCUMST ANCES MENTIONED ABOVE ?' 2. THE FACTS FOUND BY THE TRIBUNAL AS STATED IN THE STATEMENT OF CASE ARE AS FOLLOWS : ITA NO. 2959/AHD/17 [SANDESH CHARITABLE TRUST VS. ACIT] A.Y. 2015-16 - 5 - THE ASSESSEE-TRUST ACCUMULATED RS.46,184 DURING THE ACCOUNTING YEARS RELEVANT TO THE ASSESSMENT YEARS 1973-74 TO 1 976-77. DURING THE PREVIOUS YEAR RELEVANT TO THE PRESENT AS SESSMENT YEAR, ACCUMULATED INCOME CEASED TO BE INVESTED IN F IXED DEPOSIT WITH THE INDIAN BANK AND IT WAS, THEREFORE, DEEMED TO BE THE INCOME OF THE TRUST IN THE PREVIOUS YEAR IN WHICH I T CEASED TO REMAIN INVESTED OR DEPOSITED IN TERMS OF CLAUSE (B) OF SUB- SECTION (3) OF SECTION 11 OF THE INCOME-TAX ACT, 19 61. THE INCOME-TAX OFFICER WAS OF THE OPINION THAT THE ASSE SSEE WAS NOT ENTITLED TO ACCUMULATE 25% OF THIS DEEMED INCOME BE CAUSE PERMITTING IT TO DO SO WOULD AMOUNT TO A DOUBLE BEN EFIT TO THE ASSESSEE. HE, THEREFORE, ASSESSED THE ENTIRE DEEMED INCOME. 3. THE TRIBUNAL IN AGREEING WITH THE DECISION OF TH E APPELLATE ASSISTANT COMMISSIONER OBSERVED: THE LEGAL FICTION CONTAINED IN SECTION 11(3) OF THE INCOME-TAX ACT, 1961, SHOULD BE ALLOWED TO PLAY TO THE FULLEST EXTENT AND THERE IS NO WARRANT TO TAKE A RESTRICTED VIEW FOR D ENYING THE EXEMPTION WHICH IS SPECIFICALLY ALLOWED BY THE STAT UTE. IN FACT, AS PER THE LAW AS STOOD FROM APRIL 1, 1976, CHARITABLE TRUSTS ARE PERMITTED TO ACCUMULATE UP TO 25% OF THEIR INCOME W ITHOUT COMPLYING WITH ANY FORMALITIES OR CONDITION AND SUC H ACCUMULATION IS NOT INCLUDED IN THE TOTAL INCOME. T HEREFORE, WE UPHOLD THE ORDER OF THE APPELLATE ASSISTANT COMMISS IONER AS IT IS QUITE JUSTIFIED IN LAW AND THE ASSESSEE WOULD BE EN TITLED TO ACCUMULATE 25% OF THE TOTAL INCOME OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1978-79 INCLUSIVE OF THE DEE MED INCOME UNDER SECTION 11 (3) OF THE INCOME-TAX ACT, 1961. 4. MR. MOITRA, APPEARING ON BEHALF OF THE REVENUE, HAS FAILED TO SHOW ANY INFIRMITY IN THE ORDER OF THE TR IBUNAL. IN FACT, HE HAS PRAYED MERELY FOR REMAND OF THE CASE AS WAS DONE BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT V. HYD ERABAD SECUNDERABAD FOODGRAINS ASSOCIATION LTD. [1989] 175 ITR 574. THE FACTS IN THAT CASE WERE QUITE DIFFERENT AND IT WAS FELT BY THE ANDHRA PRADESH HIGH COURT THAT IT WAS NECESSARY TO REMAND THE CASE. BUT, IN THE INSTANT CASE, NO ARGUMENT AT ALL HAS BE EN ADVANCED TO SHOW ANY INFIRMITY IN THE ORDER OF THE TRIBUNAL.' SINCE MR. MOITRA HAS FAILED TO SHOW US ANY INFIRMIT Y IN THE ORDER PASSED BY THE TRIBUNAL, THE QUESTION IS ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. 7. IN THE LIGHT OF THE ABOVE, LET US CONSIDER THE S COPE OF SECTION 154 FOR MAKING PRIMA FACIE ADJUSTMENT WHILE PROCESSING RETURN UNDER SECTION 143(1)(A) OF THE ACT I.E. PROCESS OF DEALIN G WITH THE RETURN IS AN EX PARTE PROCESS. IT IS PERTINENT TO OBSERVE THAT WHENEVER ANY DEBATABLE ISSUE IS INVOLVED AN EXPLANATION OF THE A SSESSEE IS REQUIRED, THEN ON SUCH ISSUE, NO PRIMA FACIE ADJUSTMENT IN AN EX PARTE PROCEEDINGS CAN BE MADE. READING OF JUDGMENT OF HO NBLE KOLKATTA HIGH COURT (SUPRA), AND IF FACTS ARE LOOKED INTO, T HEN IT WOULD REVEAL THAT BOTH THE ISSUES WERE DEBATABLE ONE, WHERE MORE THAN ONE OPINION ITA NO. 2959/AHD/17 [SANDESH CHARITABLE TRUST VS. ACIT] A.Y. 2015-16 - 6 - WAS POSSIBLE. ADJUSTMENT UNDER SECTION 143(1)(A) I S NOT PERMISSIBLE ON BOTH THESE ASPECTS. THEREFORE, WE ALLOW APPEAL OF THE ASSESSEE, AND DELETE BOTH THE DISALLOWANCES. THE CO-ORDINATE BENCH HAS REVERSED THE ACTION OF R EVENUE FOR MAKING SUCH ADJUSTMENTS IN A DEBATABLE ISSUE INVOLV ED. IN CONSONANCE WITH THE DECISION OF THE CO-ORDINATE BEN CH, WE SET ASIDE THE ACTION OF THE LOWER AUTHORITIES AND DIRECT THE AO TO RESTORE THE DEDUCTION AS CLAIMED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. SD/- SD/- (MADHUMITA ROY) (PRADIP KUMAR K EDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 20/12/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 20/12/2019