Shri Plot Swetamber Murtipujak Jain Tapgachchha Sangh, Rajkot V. The ITO, Ward-1, Rajkot

ITA 3/RJT/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 7280 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 05-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Deemed to accrue or arise in india; Question of law; Set aside
• Section: 11; 12A; 143(1)

Judgement Text

आयकरअपील यअ धकरण, राजकोट यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकरअपीलसं./ITA Nos. 02&03/Rjt/2020 नधा रणवष /Asstt. Years:2014-15 & 2015-16 Shri Plot Swetamber Murtipujak Jain Tapgachchha Sangh, Sanghavi & Company, 112, Aditya Centre, Phulchhab Chowk, Rajkot-360001 PAN: AABTS4462M Vs. ITO(Exemption) Ward-1, Rajkot (Applicant) (Respondent) Assessee by : Shri Gaurang Sanghvi, A.R. Revenueeby : Shri B. D. Gupta, Sr. DR स ु नवाईक तार ख/Date of Hearing : 06/07/2022 घोषणाक तार ख/Date of Pronouncement: 14/09/2022 आदेश/O R D E R PER BENCH: Both the captioned appeals have been filed at the instance of the assessee against the order of the Ld. Commissioner of Income Tax-(Appeals)-3 (in short the Ld. CIT(A)), Rajkot dated 26/11/2019arising in the matter of assessment order passed under section 143(1)of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 2014-15 & 2015-16. ITA No. 02/Rjt/2020 is taken as the lead case. 2. The assessee has raised the following grounds of appeal: “1. That the learned CIT(A)-3 Rajkot has grievously erred in confirming the assessment of the returned income of Rs. NIL at a taxable income of Rs. 1700000 whilst processing u/s 143(1) of the Act. 2. That the learned CIT(A)(3) has grievously erred in confirming that the adjustment so done by the CPC is within the jurisdiction vested u/s 14391) of the Act. ITA Nos.02&03/Rjt/2020 A.Ys. 2014-15 & 2015-16 2 3. That the appellant craves for leave to add, amend and or modify the grounds of appeal.” 3. The only issue raised by the assessee is that the Ld. CIT(A) erred in confirming the order of the AO by sustaining the addition of Rs. 17,00,000/- representing the deemed income under Section 11(3) of the Act. 4. The facts in brief are that the assessee in the present case is a public charitable trust and duly registered under Section 12A of the Act. The assessee in the year under consideration filed its return of income at NIL after claiming exemption under Section 11 of the Act. One of the exemption claimed by the assessee in the return of income was representing the deemed income under Section 11(3) of the Act amounting to Rs. 17,00,000/- only which was denied in the intimation generated under section 143(1) of the Act. Accordingly, the demand was raised in the intimation generated under Section 143(1) of the Act amounting to Rs. 3,50,200/- only. 5. Aggrieved assessee preferred an appeal before the Ld. CIT(A) who has confirmed the order of the AO by observing as under: “4.0 I have carefully considered the intimation u/s 143(1) of the submissions of the appellant and the rival contentions. The grievance of the assessee is that the AO, CPC, Bangalore while processing the return u/s. 143(1) of the act has restricted the claim u/s 11 to the amounts applied for the objects of the trust, basic exemption u/s 11(1) at 15% and accumulation u/s 11(2) to the extent of the gross income of Rs. 51,43,175/- as against the total of Rs.68,43,175/- and consequently he has assessed the returned deficit of NIL at Rs.17,00,000 thus treating the deemed income u/s 11(3) as the returned income. 4.1 The appellant has filed a detailed written submission as reproduced above. The feet of the matter is that after careful perusal of the intimation sheet u/s. 143(1)(a) it is evident that actually no adjustment has been made by the AO CPC. What has been done in computation of the Income is calculation strictly as per the prescribed set format as per the existing provisions of law. In view of this no interference in the intimation is called for. Without prejudice to the foregoing, I find that only issue whether the deemed income u/s 11(3) would fee eligible for 15% In this regard the assessee has placed reliance on the decision of Calcutta high Court stating that there is no decision of any other High Court on this issue and therefore the decision of Kolkata High Court in favor of the assessee should be followed. However, I find that the issue has been examined In Circular No, 29; R. No. 20/22/CS-IT(AI), dated 23.08.1360 and Circular 5P (LXX-6) of 1968 dated 19.06.1968. In the former Circular it is categorically mentioned that when the amounts are taxed u/s 11(3) the benefit which would have been available to trust in respect of 25% of its income or Rs. 10,000/- u/s. 11(1)(a) would also be lost. In the later circular issue has been re-examined and legal position has been clarified stating that only the Income disclosed in the account will be eligible for exemption u/s 11(1) and will be eligible for ITA Nos.02&03/Rjt/2020 A.Ys. 2014-15 & 2015-16 3 permitting accumulation of 25%. It Is categorically explained that deemed income charged u/s. 11(3)is in excess of income shown in its account. Thus, from both these circulars it can be seen that the exemption u/s 11(1) is not available for the deemed income u/s 11(3). In the judgment of Hon Kolkata High Court there is no reference to these circulars which directly address the issue at hand and therefore in my considered opinion the decision of Hon. Calcutta High Court is distinguishable on the facts. Therefore the contentions of the assessee are rejected on merits too and action of the AO calls for no interference. In view of above discussion the grounds of appeal are dismissed.” 6. Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 7. The Ld. A.R. before us filed a Paper Book running from Pages 01 to 67 and contended that the adjustment made by the CPC does not fall under the purview of the provisions of Section 143(1) of the Act. As such there is no arithmetical error or inaccurate claim in the return of income. Therefore, such adjustment cannot be made in the intimation generated under Section 143(1) of the Act. It was also contended by the Ld. A.R. that the issue involved in the present case is a debatable issue and therefore, the same cannot be made subject to the adjustment under the provision of Section 143(1) of the Act. 8. On the other hand, the Ld. D.R. vehemently supported the order of the authorities below. 9. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, the two issues arise for our adjudication as detailed below: i. Whether the adjustment made by the AO in the intimation issued under Section 143(1) of the Act is sustainable in the given facts and circumstances. ii. Whether the assessee is eligible to accumulate its deemed income specified under section 11(3) of the Act in the manner provided under Section under 11(1)/ 11(2) of the Act. ITA Nos.02&03/Rjt/2020 A.Ys. 2014-15 & 2015-16 4 9.1 With regard to question No. 1, we note that under the provisions of Section 143(1) of the Act, the total income or loss shall be computed after making the following adjustments:- 1. Any arithmetic error in the return 2. Any incorrect claim apparent from any information in the return shall mean a claim on the basis of an entry, in the return of an item:- o which is inconsistent with another entry of the same or some other item in the income tax return. o in respect of which, information required to be furnished to substantiate such entry, has not been furnished under this Act. o in respect of which a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction. 10. In the present case, the assessee has accumulated a sum of Rs.17 lakhs, representing the deemed income under Section 11(3) of the Act, in pursuance to the provisions of Section 11(2) of the Act. The first question arises whether the assessee can again accumulate the deemed income under the provisions of Section 11(3) of the Act in the manner as provided under Section 11(2) of the Act. Assuming the answer stands in negative, the next question arises whether such adjustment/denial of accumulation of the deemed income, can be made in the intimation generated under Section 143(1) of the Act. Undoubtedly, the scope of adjustments under the provisions of Section 143(1) of the Act is limited to the extent of the items as described above. 11. The Hon’ble Calcutta High Court in the case of CIT vs. Natwarlal Chowdhury Trust, reported in 189 ITR 656 has held that the assessee is entitled to accumulate 15% of the total income which is inclusive of the deemed income specified under Section 11 (3) of the Act. Thus, from the above judgment, it is transpired that the assessee can claim the benefit of accumulation even on the deemed income specified under the provisions of Section 11(3) of the Act. ITA Nos.02&03/Rjt/2020 A.Ys. 2014-15 & 2015-16 5 However, the Ld. CIT-A in his order has not pointed out any distinguishing features in the case on hand viz-a-viz in the judgment of Hon’ble Calcutta High Court as discussed above. However, it is pertinent to note that the assessee has already claimed the benefit of exemption under Section 11(2) of the Act with respect to the deemed income specified under Section 11(3) of the Act and if the same is allowed to accumulate again, then the assessee will be claiming the benefit twice. 12. It is also pertinent to note that the Ld. CIT-A denied to follow the judgment of Hon’ble Calcutta High Court as discussed above on the reasoning that there were CBDT circulars denying the benefit of the deemed income specified under Section 11(3) of the Act but these circulars were not considered by the Hon’ble Calcutta High. However, the law laid down by the Hon’ble Calcutta High Court as of now is applicable on us even it was passed by the non-jurisdictional High Court. For the reason that, the Ld. DR and the AR has not brought any judgment on the issue on hand of the jurisdictional High Court. Thus, over understanding ratio laid down by the Hon’ble Calcutta High Court is applicable on us in view of the decision of Pune Tribunal in the case of CIT vs. Aurangabad Holiday Resorts Pvt. Ltd., reported in 118 ITD 1 wherein it was held as under: “7. It is also important to bear in mind that the question requiring adjudication by Their Lordship was whether or not decision of one of the High Courts was binding on the other High Courts. This will be clear from following observations made by Their Lordships in the beginning of the judgment : "On a careful consideration of the submissions of the learned counsel for the assessee, we find that before taking up the issue involved in the question of law referred to us in this case for consideration, it is necessary to first decide.... whether this Court, while interpreting an all India statute like Income-tax Act, is bound to follow the decisions of any other High Court and to decide accordingly, even if its own view is contrary thereto, because of the practice followed in this Court. Because, if we are to accept this submission, it will be an exercise in futility to examine the real controversy before us...." 13. Be that as it may be, a conjoint reading of the above stated discussion reveals that claim made by the assessee to accumulate the specified deemed income under Section 11(3) of the Act cannot be classified as incorrect claim being an issue of debatable nature. Thus, such adjustment cannot be made in the ITA Nos.02&03/Rjt/2020 A.Ys. 2014-15 & 2015-16 6 intimation generated under Section 143(1) of the Act with respect to the issues under consideration being an issue of contentious nature. For this purpose, we also referred the instruction issued by the CBDT bearing No. 1814/1989 dated 04- 04-1989. The relevant extract of the instruction reads as under: “In context of the legal position as outlined above, it follows that it will not be permissible for the Assessing officer to disallow a claim for deduction allowance or relief in cases where the claim is made on the basis of the decision of any High Court, Appellate Tribunal or other appellate authority even though a contrary view in the matter may have been expressed by another High Court or another bench of the Tribunal or any other appellate authority. The fact that the claim is based on the decision which has not been accepted by the board will also not make any differences to this position.” 14. The Bombay High Court in the case of Bajaj Auto Finance Ltd. vs. CIT reported in ITR No. 25 of 2000 has also held as under: Once, reliance is placed upon a decision of a Court and / or Tribunal to make a claim, then even if the Assessing Officer has a different view and does not accept the view, yet the claim itself becomes debatable. This is so laid down in Instruction No.1814 dated 4 th April, 1989 issued by the CBDT in respect of the scope of prima facie disallowance under Section 143(1)(a) of the Act. In fact, paragraph no.9 thereof provides that where a claim for deduction has been made on the basis of a decision of a High Court / Tribunal, then, even if there is contrary view expressed by another High Court and / or Tribunal or an appellate Authority, the issue itself becomes debatable. In such cases, no adjustment under Section 143(1)(a) of the Act is permissible. 15. The Hon’ble Gujarat High Court in the case of CIT vs. Rughuvir Synthetics Ltd. in Tax Appeal No. 333 of 2004 has also held as under: 12. In view of the above submissions, in our considered view the order passed by the CIT (Appeals), the Income Tax Appellate Tribunal and also the order of the Gujarat High Court impugned herein cannot sustain and are set aside as they have wrongly held that the issue was debatable and could not be considered in the proceedings under section 143 (1) of the Act. 16. From the above judgments, there remains no ambiguity to the fact that the issues which are of debatable nature cannot be made subject to adjustment in the intimation specified under Section 143(1) of the Act. Accordingly, we set aside the finding of the Ld. CIT-A and direct the AO to allow the claim of the assessee on the reasoning as discussed above. ITA Nos.02&03/Rjt/2020 A.Ys. 2014-15 & 2015-16 7 17. As the assessee has succeeded on the first question framed above, we do not find any reason to adjudicate the question No. 2 discussed above. As such, the issue raised in question No. 2 remains open and we are not inclined to give any finding thereon. Hence, the ground of appeal of the assessee is allowed. ITA No. 03/Rjt/2020(A.Y. 2015-16):- 18. At the outset, we note that the issues raised by the assessee in its grounds of appeal for the A.Y. 2015-16 are identical to the issues raised by the assessee in ITA No. 02/Rjt/2020 for the A.Y. 2014-15. Therefore, the findings given in 02/Rjt/2020 shall also be applicable for the year under consideration i.e. A.Y. 2014-15. The ground of appeal of the assessee for the A.Y. 2014-15 has been decided by us vide Paragraph No. 9 to 16 of this order in favour of the assessee. The Ld. A.R. and the D.R. also agreed that whatever will be the findings for the A.Y. 2014-15 shall also be applied for the year under consideration i.e. 2015-16. Hence, the grounds of appeal filed the assessee is hereby allowed. 19. In the combined result, both the appeals filed by the assessee are allowed. Order pronounced in the Court on 14/09/2022 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 14/09/2022 Tanmay, Sr. PS TRUE COPY आदेशक त ल प े षत/Copy of the Order forwarded to : आदेशान ु सार /BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपील यअ!धकरण, अहमदाबाद / ITAT, Ahmedabad 1. अपीलाथ / The Appellant 2. !यथ / The Respondent. 3. संबं धतआयकरआय ु #त/ Concerned CIT 4. आयकरआय ु #त(अपील) / The CIT(A) 5. $वभागीय 'त'न ध, आयकरअपील यअ धकरण/ DR, ITAT, 6. गाड)फाईल / Guard file.