Sahayeeka, Bhubaneswar V. DCIT (CPC), Bangalore

ITA 322/CTK/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4030 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 20-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P K MISHRA
• Keywords: Charitable institution; Revenue expenditure
• Section: 12A

Judgement Text

P A G E 1 | 7 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER ITA NO. 322 /CTK/201 8 ASSESSMENT YEAR : 2014 - 2015 SAHAYEEKA, PLOT NO.270(P), BAPUJI NAGAR, BHUBANESWAR. VS. DCIT (CPC), BANGALORE. /ITO WARD 1(2), BHUBANESWAR. PAN/GIR NO. AAEAS 1170 N (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : P.K.MISHRA, AR REVENUE BY : SHRI SUBHENDU DUTTA, DR DATE OF HEARING : 0 4 / 02 / 201 9 DATE OF PRONOUNCEMENT : 06 / 0 2 / 201 9 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 1, BHUBANESWAR D ATED 30.5.2018 FOR THE ASSESSMENT YEAR 20 14 - 15. 2. THE SOLE ISSUE AGITATED IN THIS APPEAL IS THAT THE BOTH THE ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS) - 1, BHUBANESWAR HAVE COMMITTED GROSS ERROR OF LAW IN DETERMINING THE INCOME AND IN NOT GIVING THE CREDIT OF THE APPLICATION OF FUNDS FOR CHARITABLE PURPO SES. THUS, THE IMPUGNED DETERMINATION OF INCOME IS ILLEGAL, ARBITRARY AND NOT SUSTAINABLE IN THE EYE OF LAW ITA NO.322/CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 2 | 7 AND THE CONSEQUENTIAL DEMAND RAISED THEREIN IS LIABLE TO BE DELETED. 3. I HAVE CONSIDERED THE ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIALS PLACED ON THE RECORD OF THE TRIBUNAL. LD AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) ARE NOT JUSTIFIED IN NOT ALLOWING THE INCOME GENERATING EXPENDITURE S WHILE DETERMINING THE INCOME OF THE APPELLANT SOCIETY. LD A.R. VEHEMENTLY POINTED OUT THAT THE AUTHORITIES BELOW SHOULD NOT HAVE TREATED THE ENTIRE RECEIPTS AS INCOME OF THE ASSESSEE AS THE REVENUE EXPENDITURE INCURRED BY THE SOCIETY SHOULD BE ALLOWED T O THE APPELLANT BEFORE ASCERTAINING THE TAXABLE INCOME OF THE ASSESSEE IN ABSENCE OF REGISTRATION U/S.12A OF THE I.T.ACT, 1961 (IN SHORT ACT). LD A.R. OF THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF HYDERABAD BENCHES OF THE TRIBUNAL IN THE CASE OF NIRMAL AGRICULTURAL SOCIETY VS ITO, (1999) 71 ITD 0152 (HYD) TO SUBMIT THAT EVEN IN ABSENCE OF REGISTRATION U/S.12A OF THE ACT, THE ASSESSING OFFICER COULD ASSESS ONLY NET INCOME OF THE ASSESSEE AND NOT THE ENTIRE GROSS RECEIPTS. HE FURTHER SUBMITTED THAT FOR ASCERTAINING THE NET INCOME/SURPLUS, THE ASSESSING OFFICER HAS TO ALLOW EXPENDITURE INCURRED BY THE ASSESSEE OUT OF GROSS RECEIPTS. THEREFORE, THE ASSESSING OFFICER MAY KINDLY BE DIRECTED TO ALLOW THE ENTIRE ITA NO.322/CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 3 | 7 AMOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE DURING THE RELEVANT FINANCIAL PERIOD. 4. REPLY TO ABOVE, LD D.R. SUBMITTED THAT SINCE THE ASSESSEE HAS NOT BEEN REGISTERED U/S 12A OF THE ACT, THE AMOUNT OF INCOME APPLIED FOR CHARITABLE PURPOSES DURING THE RELEVANT PREVIOUS YEAR CANNOT BE CONSIDE RED TO BE EXEMPT U/S.11 OF THE ACT. LD D.R. VEHEMENTLY POINTED OUT THAT THE ENTIRE INCOME OF RS.20 LAKHS IS LIABLE TO BE TAXED AND THE ASSESSING OFFICER HAS EXACTLY DONE SAME AND DETERMINED THE TAXABLE TOTAL INCOME OF THE SAME AMOUNT. LD D.R. SUBMITTED T HAT THE APPLICATION OF FUNDS FOR CHARITABLE PURPOSES CANNOT BE TAKEN INTO CONSIDERATION WHILE PROCESSING THE RETURN U/S.143(1) OF THE ACT AND AS THE ASSESSEE ITSELF HAS MENTIONED IN THE RETURN OF INCOME THAT IT HAS NOT BEEN REGISTERED U/S.12AA OF THE ACT. LD D.R. LASTLY SUBMITTED THAT THE CLAIM OF THE ASSESSEE PERTAINING TO INCURRING OF EXPENDITURE AND IT ALLOWABILITY OUT OF TOTAL GROSS RECEIPTS IS NOT BASED ON SOUND LEGAL FOOTING, THEREFORE, SAME WAS RIGHTLY REJECTED BY THE AUTHORITIES BELOW. 5. IN THE RE JOINDER TO ABOVE , LD A.R. SUBMITTED THAT THE ASSESSING OFFICER SHOULD HAVE ALLOWED EXPENDITURES, WHICH WERE REQUIRED TO BE INCURRED TO EARN THE INCOME/RECEIPTS BECAUSE ONCE THE ASSESSEE DOES NOT HAVE REGISTRATION U/S.12A OF THE ACT, ITA NO.322/CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 4 | 7 EXEMPTION U/S.11 IS ALS O NOT AVAILABLE AND THE TAXABLE INCOME OF THE ASSESSEE IS REQUIRED TO BE DETERMINED ON THE PRINCIPLE OF COMMERCIAL ACCOUNTING WHICH PROVIDES THAT THE EXPENDITURE ACTUALLY INCURRED BY THE ASSESSEE FOR ITS OBJECTS/BUSINESS ARE ALLOWABLE AMOUNT OUT OF TOTAL R ECEIPTS RECEIVED BY THE ASSESSEE DURING THE FINANCIAL PERIOD. LD A.R. VEHEMENTLY POINTED OUT THAT ALLOWABILITY OF APPLICATION OF FUNDS/INCURRING OF EXPENDITURE FOR CHARITABLE PURPOSES CANNOT BE TAKEN INTO CONSIDERATION WHILE PROCESSING RETURN OF INCOME U/S.143(1) OF THE ACT BUT THIS CLAIM OF THE ASSESSEE COULD HAVE BEEN ALLOWED BY THE CIT(A) AFTER CON SIDERING THE SUBMISSION OF THE ASSESSEE AND FOLLOWING THE PROPOSITION LAID DOWN BY THE ITAT HYDERABAD BENCHES IN THE CASE OF NIRMAL AGRICULTURAL SOCIETY (SUPRA). LD A.R. ALSO SUBMITTED THAT THE JURISDICTIONAL ASSESSING OFFICER IN THIS CASE IS INCOME TAX O FFICER, WARD 1(2), BHUBANESWAR. 6. ON A CAREFUL CONSIDERATION OF THE SUBMISSIONS OF THE RIVAL PARTIES, FIRST OF ALL, I MAY POINT OUT THAT FOR THE RELEVANT FINANCIAL PERIOD, THE APPELLANT WAS NOT HAVING REGISTRATION U/S.12A OF THE ACT, WHICH IS REQUIRED F OR THE PURPOSE OF GRANTING EXEMPTION U/S.11 OF THE ACT. IN ABSENCE OF REGISTRATION U/S.12A OF THE ACT, THE ASSESSEE DESERVES TO BE ASSESSED AS AN ASSOCIATION OF PERSON (AOP)AND THE ASSESSING OFFICER COULD ASSESS AND TAX THE ONLY NET ITA NO.322/CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 5 | 7 INCOME OF THE ASSESSE E AND NOT THE ENTIRE GROSS RECEIPTS. THE PURPOSE AND ACTIVITY OF THE ASSESSEE SOCIETY BEING CHARITABLE HAS NOT BEEN DISPUTED BY THE AUTHORITIES BELOW AND THUS, THE EXPENDITURE INCURRED BY THE ASSESSEE AND SHOWN IN THE INCOME AND EXPENDITURE ACCOUNT ARE PR ESUMED TO BE INCURRED TOWARDS SUCH CHARITABLE ACTIVITIES AND WHATEVER AMOUNT HAS BEEN SPENT ON THOSE PROGRAMMES/PROJECTS , THEY WERE SPENT IN THE USUAL COURSE OF CARRYING ON ITS ACCLAIMED OBJECTS AND HENCE, THOSE EXPENSES ARE REVENUE EXPENSES WHICH SHOUL D HAVE BEEN ALLOWED TO THE ASSESSEE OUT OF TOTAL AMOUNT OF GROSS RECEIPTS DURING THE RELEVANT FINANCIAL PERIOD. 7. FROM THE ORDERS OF THE AUTHORITIES BELOW I.E. INTIMATION OF THE ASSESSING OFFICER U/S.143(1) OF THE ACT AND THE IMPUGNED ORDER PASSED BY THE CIT(A), I OBSERVE THAT IN PARA 3 OF THE FIRST APPELLATE ORDER, THE CIT(A) HAS NOTED THAT DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAS CLAIMED RS.22,29,460/ - ON REVENUE ACCOUNT AND IN THE SAME PARA, SUBSEQUENTLY, THE CIT(A) UPHELD THE ACTION OF THE A SSESSING OFFICER TAXING THE ENTIRE AMOUNT OF RECEIPTS WITHOUT ALLOWING CLAIM OF EXPENDITURE. 8. IN THE LIGHT OF THE ABOVE FACTUAL POSITION AND KEEPING IN VIEW THE PRINCIPLES LAID DOWN BY THE HYDERABAD BENCHES OF THE TRIBUNAL ITA NO.322/CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 6 | 7 IN THE CASE OF NIRMAL AGRICUL TURAL SOCIETY (SUPRA), I HAVE NO HESITATION TO HOLD THAT EVEN IN ABSENCE OF REGISTRATION U/S.12A OF THE ACT, THE ASSESSING OFFICER COULD ASSESS ONLY NET INCOME OF THE ASSESSEE AND NOT THE ENTIRE RECEIPTS BECAUSE IN ABSENCE OF REGISTRATION U/S.12A OF THE A CT, THE ASSESSEE SHOULD BE ASSESSED IN THE CAPACITY OF AOP ON THE COMMERCIAL PRINCIPLES, WHEREIN, THE TOTAL GROSS RECEIPTS/INCOME CANNOT BE TREATED AS INCOME OF THE ASSESSEE WITHOUT ALLOWING REVENUE EXPENDITURE INCURRED BY THE ASSESSEE DURING THE RELEVANT SAME PERIOD AND THUS, I AM INCLINED TO HOLD THAT THE AUTHORITIES BELOW WERE NOT RIGHT IN DISALLOWING THE CLAIM OF EXPENDITURE OF THE ASSESSEE. HOWEVER, I MAY POINT OUT THAT THE ASSESSING OFFICER HAS FRAMED ASSESSMENT U/S.143(1) OF THE ACT WITHOUT VERIFYIN G THE QUANTUM OF EXPENDITURE CLAIMED BY THE ASSESSEE AND THE CIT(A) HAS NOT VERIFIED THE SAME DURING THE RELEVANT APPELLATE PROCEEDINGS. THEREFORE, I DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF EXPENDITURE OF THE ASSESSEE PERTAINING TO THE RELEVAN T FINANCIAL PERIOD AFTER DUE VERIFICATION OF PURPOSE AND QUANTUM OF EXPENDITURE. HENCE, THE CASE IS RESTORED TO THE FILE OF THE JURISDICTIONAL ASSESSING OFFICER I.E. INCOME TAX OFFICER, WARD 192), BHUBANESWAR FOR THE LIMITED PURPOSE FOR VERIFICATION AND EXAMINATION AS DIRECTED ABOVE. ITA NO.322/CTK/2018 ASSESSMENT YEAR : 2014 - 2015 P A G E 7 | 7 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED ON 06 / 0 2 /201 9 . SD/ - ( CHANDRA MOHAN GARG ) JUDICIALMEMBER CUTTACK; DATED 06 / 0 2 /20 9 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR. PVT. SECRETARY, ITAT, CUTTACK 1. THE APPELLANT : SAHAYEEKA, PLOT NO.270(P), BAPUJI NAGAR, BHUBANESWAR 2. THE RESPONDENT. DCIT (CPC), BANGALORE /ITO WARD 1(2), BHUBANESWAR 3. THE CIT(A) - 1, BHUBANESWAR 4. PR.CIT - 1, BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//