M/s. Nitco Logistics Pvt. Limited, Jammu V. The Joint Commissioner of Income-tax, Jammu

ITA 344/ASR/2014

• Counselvise Citation: 34420914 RSA 2014
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 27-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Charitable institution; Rule of consistency
• Section: 143(3); 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.344(ASR)/2014 ASSESSMENT YEAR:2010-11 PAN :AAACN6345A M/S. NITCO LOGISTICS PVT. LIMITED VS. JOINT COMMIS SIONER OF INCOME TAX, TALAB TILLO, JAMMU. RANGE-2, JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.P.N.ARORA, ADVOCATE RESPONDENT BY:SMT. RATINDER KAUR, DR DATE OF HEARING:13/01/2015 DATE OF PRONOUNCEMENT:16/01/2015 ORDER PER B.P. JAIN, AM: THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), JAMMU DATED 31.03.2014 RELATING TO ASSESSMENT YEAR 2010-11. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS OF TH E CASE IN CONFIRMING THE ADDITIONS TO THE RETURNED INCOME. 2. THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND FACT S OF THE CASE IN CONFIRMING ADDITION OF RS.13,35,707/- ON ACCOUNT OF DHARMARTH RECEIPTS. ITA NO.344(ASR)/2014 2 2.2. THAT DHARMARTH COLLECTED AT THE TIME OF BOOKIN G & DELIVERY IS ACCOUNTED FOR STRAIGHT AWAY BY CREDITING TO DHARMA RTH ACCOUNT AND ENTIRE AMOUNT IS PAID TO CHARITY BY ACC OUNT PAYEE CHEQUES BY DEBITING TO DHARMARTH ACCOUNT. 2.3. THAT IT IS ETHICALLY WRONG TO TREAT THE AMOUN T COLLECTED AS DHARMARTH AS AN INCOME. 2.4. THAT AS PER CBDT CIRCULAR NO.77-F NO.AUDIT 9/7 3-79/DIT DATED 21.03.1979 & DECISION OF HONBLE SUPREME COUR T IN THE CASE OF CIT VS. BIJLI COTTON MILLS (P) LTD. 116 ITR 60, IT HAS BEEN CLARIFIED THAT DHARMARDHA AMOUNTS COULD NOT BE REGARDED AS PART OF THE PRICE. 2.5 THAT CHARITABLE TRUSTS TO WHOM PAYMENT WAS MADE ARE REGISTERED U/S 80G OF THE INCOME TAX ACT AND COPIES OF REGISTRATION CERTIFICATES WERE FILED BOTH BEFORE TH E AO AND THE LD. CIT(A). 2.6. THAT PROVISO EXISTED IN THE MEMORANDUM AND ART ICLES OF ASSOCIATION OF THE COMPANY REGARDING MAKING CHARITY . 2.7. THAT SINCE DHARMARTH IS NOT A TRADING RECEIPT, IT IS PRAYED THAT ADDITION OF RS.13,35,707/- BE DELETED. 3. THE ASSESSEE CRAVES LEAVE TO ADD OR AMEND THE GR OUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COLLECTED AN AMOUNT OF RS.13,35,707/- ON ACCOUNT OF DHARMARTH RECEIPTS FRO M ITS CUSTOMERS WHICH IN FACT, WERE NOT DECLARED IN THE PROFIT & LOSS AC COUNT. IT WAS OBSERVED BY THE AO THAT THESE RECEIPTS ARE COLLECTED IN LIEU O F SERVICES RENDERED DURING NORMAL COURSE OF BUSINESS OF TRANSPORTATION OF GOOD S. THE EXPLANATION OF THE ITA NO.344(ASR)/2014 3 ASSESSEE WAS NOT FOUND SATISFACTORY AND ACCORDINGL Y THE AO ON SIMILAR ADDITION MADE IN IMMEDIATE PRECEDING YEAR IN ASSESS EES OWN CASE I.E. ASSESSMENT YEAR 2009-10 MADE AN ADDITION OF RS.13,3 5,707/- TO THE INCOME OF THE ASSESSEE IN THE IMPUGNED YEAR. 3. THE LD. CIT(A), CONFIRMED THE ACTION OF THE A.O. THE LD. CIT(A), WHILE CONFIRMING THE ACTION OF THE AO OBSERVED THAT THE OBJECTIVE OF THE COMPANY ARE COMMERCIAL IN NATURE AND THERE IS NO RE ASON TO COLLECT DHARMARTH. ANY COLLECTION OF DHARMADA OR DHARMARTH IS PART OF THE RECEIPT AND SUBSEQUENT PAYMENT TO ANY CHARITABLE INSTITUTIO N IS THE APPLICATION OF INCOME. THE SAID DECISION BY THE LD. CIT(A) HAS BEE N TAKEN ON THE BASIS OF HIS DECISION IN ASSESSEES OWN CASE IN THE PRECEDIN G ASSESSMENT YEAR I.E. 2009-10. 4. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N.ARORA, ADVOCATE, AT THE OUTSET POINTED OUT AT PAGE 3 OF AOS ORDER IN PARA 2 AND IN LD. CIT(A)S ORDER IN PARA 4.2 THAT THE FACTS IN THE PRESENT CAS E ARE SIMILAR TO THE FACTS IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 WHICH MATTER HAS TRAVELLED TO THE ITAT, AMRITSAR BENCH AND THE TRI BUNAL IN ITS ORDER IN ITA NO.437(ASR)/2012 VIDE ORDER DATED 05.09.2014 HAS DE LETED THE ADDITION SO MADE. THE SAID ORDER OF THE TRIBUNAL IS PLACED ON R ECORD PB 12 TO 23. ACCORDINGLY, THE LD. AR PRAYED TO ALLOW THE APPEAL OF THE ASSESSEE BY ITA NO.344(ASR)/2014 4 FOLLOWING THE EARLIER ORDER OF ITAT, AMRITSAR FOR THE ASSESSMENT YEAR 2009- 10 BEING SIMILAR ON FACTS. 5. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE UNDISPUTED FACTS IN THE IMPUGNED ORDER ARE THAT THE ASSESSEE HAS COLLECTED DHARMARTH IN GRS AND GATE PASSES AS PA RT OF CHARITY . DHARMARTH IS COLLECTED EVERY MONTH AND IS BEING PASSED TO A C HARITABLE TRUST. THE RECEIPT IS NEITHER SHOWN AS INCOME NOR AS EXPENDITURE. THE PAYMENT TO THE CHARITABLE TRUST IS NOT CLAIMED AS AN EXPENDITURE. THIS ACCOUNTING PRACTICE IS BEING FOLLOWED CONSISTENTLY SINCE ASSESSMENT YEAR 2 001-02 TO ASSESSMENT YEAR 2009-10 AND ALSO IN THE IMPUGNED YEAR. ALL THE ASSESSMENTS SINCE 2001- 02 TO ASSESSMENT YEAR 2009-10 HAVE BEEN MADE UNDER SECTION 143(3) OF THE ACT EXCEPT FOR THE ASSESSMENT YEAR 2002-03. THE DEP ARTMENT HAS NEVER DISPUTED SUCH RECEIPTS AS INCOME OF THE ASSESSEE. ONCE THE RECEIPTS HAVING BEEN COLLECTED FOR PAYMENT OF CHARITY, SUCH RECEIPT S CANNOT BE TREATED AS INCOME. PRINCIPLE OF CONSISTENCY HAS TO BE FOLLOWED ONCE NO CHANGE IN FACTS HAS BEEN BROUGHT ON RECORD BY ANY OF THE AUTHORITIE S BELOW IN THE IMPUGNED YEAR AS COMPARED TO EARLIER YEARS AS MENTIONED HERE INABOVE. ALSO DHARMARTH RECEIPTS ARE NOT TAXABLE, HAS BEEN HELD BY THE HON BLE SUPREME COURT, IN THE ITA NO.344(ASR)/2014 5 CASE OF CIT VS. BIJLI COTTON MILLS (P) LTD. (1979) 116 ITR 60 (SC). THE ISSUE IN THE PRESENT CASE IS SQUARELY COVERED BY O UR OWN DECISION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 AND THE ADDITION SO MADE HAS BEEN DIRECTED TO BE DELETED VIDE ORDER DAT ED 05.09.2014 IN ITA NO.437(ASR)/2012. FOR THE SAKE OF CONVENIENCE, THE FACTS OF THE CASE AND OUR DECISION THEREIN IN THE ASSESSMENT YEAR 2009-10 IS REPRODUCED HEREINBELOW: 3.APROPOS GROUND NO. 1, THE ASSESSING OFFICER MADE AN ADDITION OF RS. 15,99,471/- ON ACCOUNT OF DHARMA RTH RECEIPTS COLLECTED ALONG WITH FREIGHT RECEIPT, NOT REFLECTED BY THE ASSESSEE IN ITS PROFIT AND LOSS AC COUNT. 4. THE ASSESSING OFFICER OBSERVED THAT THE RECEIPT S WERE DIRECTLY RELATED TO THE BUSINESS OF THE ASSESS EE COMPANY; THAT THE RECEIPTS WERE RECEIVED NOT BY A T RUST CREATED FOR THE PURPOSES OF CHARITY IN NATURE, BUT BY A COMPANY DOING BUSINESS AND TRADING; AND THAT NO EVIDENCE HAD BEEN FILED BY THE ASSESSEE THAT THE RE CEIPTS HAD BEEN ACTUALLY SPENT ON CHARITY. 5. THE LEARNED CIT(A), WHILE UPHOLDING THE ADDITION, OBSERVED THAT THE ASSESSEE HAD REMAINED U NABLE TO ESTABLISH THAT THE OBJECT OF THE COMPANY, AS PER ITS MEMORANDUM AND ARTICLES OF ASSOCIATION, WAS ALSO TO CARRY OUT CHARITY; THAT ITS OBJECTIVE WAS COMMERCIAL AND THERE WAS NO REASON TO COLLECT DHARMARTH FROM ITS CLIENTS ; AND THAT, THEREFORE, THE ASSESSING OFFICER HAD RIGHTLY TREATED THIS RECEIPT AS A TRADE RECEIPT. 6. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSE E HAS CONTENDED THAT SIMILAR RECEIPTS WERE ALLOWED IN E ARLIER YEARS, WHICH ARE AS FOLLOWS: S. NO. ASSTT. YEAR AMOUNT RECD . REMARKS 1. 2001-02 1834047/- ALLOWED IN ASSESSMENT U/S 14 3(3) 2. 2002-03 1846517/- ALLOWED IN ASSESSMENT U/S 14 3(1) 3. 2003-04 1730473/- ALLOWED IN ASSESSMENT U/S 143 (3) ITA NO.344(ASR)/2014 6 4. 2004-05 1727683/- ALLOWED IN ASSESSMENT U/S 143 (3) 5. 2005-06 1745350/- ALLOWED IN ASSESSMENT U/S 143 (3) 6. 2006-07 1746854/- ALLOWED IN ASSESSMENT U/S 143 (3) 7. 2007-08 1662338/- ALLOWED IN ASSESSMENT U/S 143 (3) 8. 2008-09 1708967/- ALLOWED IN ASSESSMENT U/S 14 3( 3) 7. IT HAS BEEN FURTHER CONTENDED THAT A SUMMARIZE D COPY OF THE ACCOUNTS OF THE DHARMARTH RECEIPT WAS FILED. A COPY THEREOF IS AT APB -8. IT HAS NEXT BEEN SUBMITTED THAT AS PER CBDT CIRCULAR NO. 77- F (COPY AT APB - 9), DATED 21 ST MARCH, 1979, DHARMARTH RECEIPTS ARE NOT TAXABLE; THAT THIS CIRCULAR IS BINDING ON THE D EPARTMENT AND HAS ILLEGALLY NOT BEEN ABIDED BY; AND THAT WHILE WRONGL Y HOLDING THAT THE OBJECTS OF THE ASSESSEE COMPANY WERE NOT CHARITABLE , THE LEARNED CIT(A) HAS FAILED TO TAKE INTO CONSIDERATION CLAUSE NO. 30 OF THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE ASSES SEE COMPANY [COPY AT APB 34, RELEVANT PORTION AT APB 34(D)]. 8. THE LEARNED DR HAS PLACED STRONG RELIANCE ON T HE IMPUGNED ORDER, CONTENDING THAT THE OBJECTIVE OF TH E ASSESSEE COMPANY IS COMMERCIAL AND THERE WAS NO REASON TO CO LLECT DHARMARTH FROM ITS CLIENTS; AND THAT THE ASSESSEE HAS NOT BEE N ABLE TO ESTABLISH THAT THE OBJECTIVE OF THE ASSESSEE COMPANY WAS TO C ARRY OUT CHARITY. 9. IT IS NOT DISPUTED THAT DHARMARTH RECEIPTS ARE NOT TAXABLE. THIS IS AS PER THE CBDT CIRCULAR (SUPRA), AS ALSO THE FOLLOWING DECISIONS: I. CIT VS. BIJLI COTTON MILLS (P) LTD., (1979) 116 IT R 60 (SC) II. CIT VS. GHERU LAL BAL CHAND, (1978) 111 ITR 134 (P& H) III. ADDL. CIT VS. CHANNOO LAL DAMODAR DASS, (1978) 113 ITR 759 (ALL.) IV. ADDL. CIT VS. DALSUKHRAI JAIDAYAL, (1979) 117 ITR 4 66 (ALL.) V. NATHU RAM SHIV NARAIN VS. CIT, (1982) 134 ITR 625 ( P&H) VI. CIT VS. E.H. KATHAWALA & CO., (1982) 135 ITR 384 (B OM.) VII. CHUNNILAL ONKARLAL (HUF) VS. CIT, (1982) 135 ITR 58 0 (MP) VIII. CIT VS. RATILAL POPATLAL SHAH, (1984) 43 CTR 4 (BOM .) 10. THE ONLY DISPUTE BEFORE US IS AS TO WHETHER TH E RECEIPTS WERE, IN FACT, DHARMARTH RECEIPTS. THE ASSESSEES STAND IN T HIS REGARD IS THAT IT WAS COLLECTING DHARMARTH IN GRS AND GATE PASSES, AS PART OF CHARITY; ITA NO.344(ASR)/2014 7 THAT THIS DHARMARTH COLLECTED EVERY MONTH WAS BEING PASSED ON TO A CHARITABLE TRUST; AND THAT THE RECEIPT WAS NEITHER SHOWN AS INCOME, NOR AS EXPENDITURE. THIS STAND OF THE ASSESSEE IS E NTIRELY IN LINE WITH ITS STAND FOR THE EARLIER YEARS, RIGHT FROM A.Y. 20 01-02 TO A.Y. 2008- 09. FOR ALL THESE YEARS, IN SCRUTINY ASSESSMENTS FR AMED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT), BUT FOR A.Y. 2002-03, FOR WHICH YEAR, SUCH ASSESSMENT WAS FRAMED UNDER SECTION 143(1) OF THE ACT, THE DEPARTMENT HAS NEVER DISPUTE D SUCH COLLECTION IN GRS AND GATE PASSES AND THE FACT THAT IT WAS BEI NG PASSED ON TO A CHARITABLE TRUST. THE OBJECTION OF THE AUTHORITIES BELOW IN THIS REGARD, RAISED ONLY FOR THE FIRST TIME, DURING THE YEAR 200 9-10, IS THAT THE RECEIPT IS NOT BY A CHARITABLE TRUST, BUT BY THE AS SESSEE COMPANY, WHICH IS DOING BUSINESS AND TRADING. THIS, ACCORDIN G TO US, IS NOT AT ALL ACCEPTABLE. ONCE THE RECEIPTS ARE ROUTED AS SUC H TO A CHARITABLE TRUST BY THE ASSESSEE COMPANY AND THE NATURE OF THA T TRUST HAS NOT BEEN QUESTIONED, WE HOLD THAT THE RECEIPTS ARE DHAR MARTH RECEIPTS AND NOTHING ELSE. THE CONSISTENT ACCEPTANCE OF SUCH RECEIPTS BY THE DEPARTMENT ITSELF, FOR AS MANY AS EIGHT EARLIER ASS ESSMENT YEARS, MANDATES THE ACCEPTANCE OF SUCH RECEIPTS OF THE ASS ESSEE DURING THE YEAR UNDER CONSIDERATION ALSO AS DHARMARTH RECEIPTS , WHEN NO CHANGE IN FACTS HAS BEEN POINTED OUT BY THE AUTHORI TIES TO HAVE COME ABOUT DURING THE YEAR UNDER CONSIDERATION. 11. THAT DHARMARTH RECEIPTS ARE NOT TAXABLE, HAS BEEN LAID DOWN AS LAW BY THE HONBLE SUPREME COURT, WAY BACK IN THE Y EAR 1979, IN THE CASE OF CIT VS. BIJLI COTTON MILLS (P) LTD. , (1 979) 116 ITR 60 (SC). CLAUSE NO. 30 OF THE MEMORANDUM AND ARTICLES OF ASS OCIATION OF THE ASSESSEE COMPANY READS AS FOLLOWS: 30. TO DONATE OR SUBSCRIBE MONEY FOR ANY NATIONAL, CHARITABLE, BENEVOLENT OR PUBLIC PURCHASE OR TO INSTITUTIONS AN D FUNDS FOR PUBLIC BENEFIT OR WHICH HAVE ANY MORAL AND OTHER CLAIM ON COMPANY OR ITS MEMBERS, EMPLOYEES OR CUSTOMERS AND TO PROMOTE SUCH INSTITUTIONS AND FUNDS AND TO GIVE CHARITIES AND DONATIONS. 12. THIS CLAUSE OF MEMORANDUM AND ARTICLES OF ASSOC IATION OF THE ASSESSEE COMPANY CLEARLY SHOWS THAT ONE OF T HE OBJECTIVES OF THE ASSESSEE COMPANY IS CHARITY. THE LEARNED CIT(A) HAS REMAINED OBLIVIOUS OF THIS SPECIFIC CLAUSE IN THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE ASSESSEE COMPANY, WHILE HOLDING THAT THE APPELLANT COULD NOT ESTABLISH BEFORE ME THAT THE OBJECTIVES O F THE COMPANY AS ITA NO.344(ASR)/2014 8 PER MEMORANDUM AND ARTICLES OF ASSOCIATION WAS ALSO TO CARRY OUT CHARITY. 13. THEREFORE, FINDING MERIT IN THIS GRIEVANCE RAI SED BY THE ASSESSEE, THE SAME IS HEREBY ACCEPTED. THE IMPUGNED ORDER IN THIS REGARD IS CANCELLED AND THE ADDITION MADE IS DELETED. 7. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CA SE AND OUR FINDINGS HEREINABOVE AND OUR DECISION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10, REPRODUCED HEREINABOVE, DHARMARTH RECEIPTS ARE NOT TAXABLE. ACCORDINGLY, WE CANCEL THE IMPUGNED ORDER AND DIREC T THE AO TO DELETE THE ADDITION SO MADE. THUS, ALL THE GROUNDS OF THE ASSE SSEE ARE ALLOWED. 8 IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.344(ASR)/2014 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16TH JANUARY, 2015. SD/- SD/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16TH JANUARY, 2015 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S.NITCO LOGISTICS (PVT.) LTD. JAMMU 2. THE JCIT, R-1, JAMMU 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL,