The ACIT, Trivandrum V. M/s. Manohar Hill Charitable Trust, Kottayam

ITA 368/COCH/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3934 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2017
• Appeal Filed By: Department
• Bench Allotted: SMC
• Next Hearing Date: 18-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 29-08-2016
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: R SRINIVASAN
• Keywords: Depreciation; Charitable institution; Wrong claim; Unabsorbed depreciation; Capital expenditure
• Section: 143(3); 12A; 12AA; 28; 10; 11; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER I.T.A. NO S . 366 - 368 /COCH/20 16 AS SESSMENT YEAR S : 2006 - 07 TO 2008 - 09 THE ASSISTANT COMMISSIONER OF INCOME-TAX, EXEMPTION CIRCLE, TRIVANDRUM. VS. M/S. MANOHAR HILL CHARITABLE TRUST, KANGAZHA, KOTTAYAM. [PAN:AAATM 3850E] (REVENUE - APPELLANT) (ASSESSEE - RESPONDENT) REVENUE BY SHRI A. DHANARAJ, SR. DR ASSESSEE BY SHRI R. SR I NIVASAN, CA DATE OF HEARING 18 / 0 4 / 201 7 DATE OF PRONOUNCEMENT 19 TH / 0 4 /201 7 O R D E R PER GEORGE GEORGE K.,JUDICIAL MEMBER: THESE APPEALS, AT THE INSTANCE OF THE DEPARTMENT , ARISE OUT OF THE TWO ORDERS OF THE CIT(A), KOTTAYAM BOTH DATED 10/06/2014. THE RELEVANT ASSESSMENT YEARS ARE 2006-07 TO 2008-09. 2. SINCE COMMON ISSUES ARE RAISED IN THESE APPEALS , THE Y WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDE R. I.T.A. NOS.366-368/COCH/2016 2 3. IDENTICAL GROUNDS ARE RAISED IN THESE APPEALS. THE GROUNDS READ AS FOLLOWS: 1. THE ORDER OF THE LD. CIT(A) KOTTAYAM IN I.T.A. NO. K-62/CIT(A)/KTM/2013- 14 DATED 10.06.2016 IS OPPOSED TO LAW, FACTS AND EV IDENCES OF THE CASE. 2. THE LD. CIT(A) KOTTAYAM ERRED IN ALLOWING THE AS SESSEE TO SET OFF THE UNABSORBED DEPRECIATION BROUGHT FORWARD FROM EARLIE R YEARS, AS THE ASSESSEE WAS ENJOYING EXEMPTION U/S. 12AA UNTIL AY 2005-06 F OR WHICH THEY HAVE CLAIMED EXEMPTION FOR CAPITAL EXPENDITURE. 3. THE DECISION OF THE LD. CIT(A) IS NOT ACCEPTABL E AS THE ASSESSING OFFICER HAS RIGHTLY POINTED OUT IN THE ASSESSMENT ORDER THAT TH E RETURN HAS BEEN FILED BY THE ASSESSEE CLAIMING THE STATUS AS A CHARITABLE TR UST AND IN THE PARTICULAR FORM PRESCRIBED AND THEREFORE, IS ALSO OF THE VIEW THAT SUCH LOSS CANNOT BE CARRIED FORWARD OR SET OFF. 4. THE DECISION OF THE LD. CIT(A) IS NOT ACCEPTABLE IN THE VIEW TAKEN BY THE HONBLE SUPREME COURT IN ESCORTS UNION CASE AND OF T HE HONBLE HIGH COURT OF KERALA IN LIZZIE MEDICAL INSTITUTIONS. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF TH E ASSESSING OFFICER MAY BE RESTORED. 4. I SHALL FIRST TAKE UP FOR ADJUDICATION THE REV ENUES APPEAL IN I.T.A. NO. 366/COCH/2016 PERTAINING TO THE ASSESSMENT YEAR 200 6-07. THE BRIEF FACTS IN RELATION TO THE CASE ARE AS FOLLOWS: THE TRIBUNAL IN I.T.A. NO.583/COCH/2009 IN A SSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07, HAD SET ASIDE THE ISSUE OF CARRY FORWARD OF LOSSES TO THE ASSESSING OFFICER. THE RELEVANT FINDING OF THE TRIBUNAL READS AS FOLLOWS: 8. THE NEXT GROUND OF APPEAL IS WITH REGARD TO CA RRY FORWARD OF LOSSES. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE TAXPA YER ON THE GROUND THAT THE TAXPAYER HAS NOT COMPUTED THE INCOME U/S 28 TO 44DA OF THE ACT. THE I.T.A. NOS.366-368/COCH/2016 3 COMMISSIONER OF INCOME-TAX(A) FURTHER FOUND THAT TH E TAXPAYER CLAIMED EXEMPTION IN RESPECT OF INCOME OF THE EARLIER YEAR. THEREFORE, THE SAME CANNOT BE ADJUSTED AGAINST THE TAXABLE INCOME. THE FACT RE MAINS IS THAT NO REGISTRATION WAS GRANTED U/S 12AA OF THE ACT. THE TAXPAYERS RET URN WAS NOT TAKEN UP FOR SCRUTINY. NO ASSESSMENT ORDER WAS PASSED U/S 143(3) OF THE ACT AT ANY POINT OF TIME EXCEPT THE IMPUGNED ASSESSMENT. BASED ON SOME INVALID CERTIFICATES WERE ISSUED BY AN INCOME-TAX OFFICER, WHO HAD NO JURISDI CTION TO ISSUE SUCH CERTIFICATES, THE TAXPAYER CLAIMS THAT IT IS A CHAR ITABLE INSTITUTION. BUT BASED ON THOSE INVALID CERTIFICATES IT CANNOT BE SAID THAT T HE TAXPAYER HAS BEEN RECOGNISED U/S 12AA AND EXEMPTION U/S 11 HAS BEEN GRANTED DURI NG THE EARLIER YEARS. THE DEPARTMENT HAS COMMITTED AN ERROR IN NOT TAKING UP THE MATTER FOR SCRUTINY. THE TAXPAYER CLAIMED EXEMPTION U/S 11 WITHOUT GETTING R EGISTRATION U/S 12AA OF THE ACT. THE NEGLIGENCE OF THE DEPARTMENT IN NOT TAKING UP THE RETURN FOR SCRUTINY CANNOT BE CONSIDERED AS IF THE TAXPAYER WAS HAVING EXEMPTED INCOME. WHEN THE TAXPAYER ITSELF WAS NOT REGISTERED AS A CHARITABLE INSTITUTION UNDER SECTION 12AA OF THE ACT, THERE CANNOT BE ANY QUESTION OF HAVING ANY EXEMPTED INCOME. THEREFORE, THE OBSERVATION OF THE LOWER AUTHORITIES THAT THE TAXPAYER WAS HAVING EXEMPTED INCOME FOR EARLIER YEARS IS CONTRARY TO TH E MATERIAL AVAILABLE ON RECORD. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE MATTER NEEDS TO BE RE-EXAMINED IN THE LIGHT OF THE MATTER AVAILABLE ON RECORD. IT IS MADE CLEAR THAT IF THE DEPARTMENT CLAIMS THAT FOR EARLIER YEARS THE IN COME WAS TREATED AS EXEMPT U/S 11 OF THE ACT, UNDER WHAT CIRCUMSTANCES SUCH EX EMPTION WAS GRANTED IN THE ABSENCE OF REGISTRATION U/S 12AA OF THE ACT SHALL B E BROUGHT ON RECORD BY THE ASSESSING AUTHORITY. IN VIEW OF THE ABOVE, THE ORDE RS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE IS REMITTED BACK TO THE FIL E OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL BRING ON RECORD THE MATERIA L FACTS AND THEN DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER GIVING RE ASONABLE OPPORTUNITY OF HEARING TO THE TAXPAYER. 5. PURSUANT TO THE ITATS ORDER, THE ASSESSING OFF ICER VIDE HIS ORDER DATED 05/12/2013 GAVE EFFECT TO THE TRIBUNALS ORDER. TH E ASSESSING OFFICER DENIED THE BENEFIT OF CARRY FORWARD OF LOSSES. THE RELEVANT O BSERVATION OF THE ASSESSING OFFICER IS REPRODUCED BELOW: 8. THE ASSESSEE HAD FILED ITS RETURN CLAIMING THE STATUS OF A TRUST ENJOYING EXEMPTION U/S. 11, EVEN THOUGH THERE WAS NO VALID 1 2A REGISTRATION. IN THE ABSENCE OF ANY DOCUMENTS TO SUPPORT THE CLAIM OF B EING A TRUST ENJOYING EXEMPTION U/S. 11, THE ASSESSMENT WAS COMPLETED ASS ESSING M/S. MANOHAR HILL CHARITABLE TRUST IN THE STATUS OF AN AOP . ACCORD ING TO THE ASSESSEE, IT IS ELIGIBLE FOR SETTING OFF OF BROUGHT FORWARD LOSSES AND UNABS ORBED DEPRECIATION OF EARLIER YEARS AGAINST THE TAXABLE INCOME OF THE CURRENT YEA R. GIVEN THE FACT THAT THE I.T.A. NOS.366-368/COCH/2016 4 ASSESSEE WAS FILING ITS RETURN IN THE STATUS OF A TRUST ENJOYING EXEMPTION U/S. 11, THE CARRY FORWARD LOSSES PRESENTLY CLAIMED CAN ONLY BE CONSIDERED AS EXCESS APPLICATION OF INCOME DURING THE RELEVANT YEARS. NO W, WHEN THE INCOME OF THE ASSESSEE IS ASSESSED UNDER THE STATUS OF AOP, THE EXCESS APPLICATION OF INCOME OF THE ASSESSEE IS ASSESSED UNDER THE STATUS OF AO P, THE EXCESS APPLICATION OF INCOME WILL HAVE NO BEARING IN DETERMINING ITS TOTA L INCOME. 9. FURTHER, AS PER SECTION 80 OF THE ACT, NO LOSS WHICH HAS NOT BEEN DETERMINED IN PURSUANCE OF A RETURN FILED IN ACCORDANCE WITH T HE PROVISIONS OF SUB SECTION (3) OF SECTION 139 SHALL BE CARRIED FORWARD. SUB SECTI ON (3) OF SECTION 139 MAKES IT AMPLY CLEAR THAT IF THE LOSS IS TO BE CARRIED FORWA RD, THE RETURN OF LOSS HAS TO BE IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIB ED MANNER. 10. ON PERUSAL OF ASSESSEES RETURN FOR AY 2005-06 IT IS SEEN THAT THE SAME IS IN FORM NO.3A, WHICH IS MEANT FOR ASSESSES CLAIMING EX EMPTION U/S. 10 OR 11. THE ASSESSEE HAS NO VALID CLAIM FOR 12A AND THE CLAIM I N THIS REGARD WAS REJECTED BY THE AO. HONBLE ITAT IN ITS ORDER DATED 07.12.2012 HAS CLEARLY HELD THAT THE ASSESSEE IS INELIGIBLE FOR EXEMPTION U/S. 11 OF THE ACT. THEREFORE, THE ASSESSEE OUGHT TO HAVE FILED ITS RETURN OF INCOME FOR AY 200 5-06 AND PRECEDING YEARS IN THE FORM THAT WAS PRESCRIBED FOR AN AOP. INSTEAD, THE ASSESSEE MADE A BOGUS CLAIM OF BEING EXEMPT U/S. 11 AND FURNISHED ITS RET URN IN FORM NO.3A PRESCRIBED FOR AN ASSESSEE CLAIMING EXEMPTION. THUS, IT FOLLO WS THAT THE RETURN OF LOSS WAS NOT IN THE PRESCRIBED FORM AND VERIFIED IN THE PRE SCRIBED MANNER MAKING THE ASSESSEE INELIGIBLE TO CARRY FORWARD LOSS, IF AT AL L THERE IS ANY LOSS TO BE CARRIED FORWARD. 6. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER , THE ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A ) DIRECTED THE ASSESSING OFFICER TO SET OFF THE UNABSORBED DEPRECIATION. THE RELEVAN T FINDING OF THE CIT(A) FOR THE ASSESSMENT YEAR 2006-07 READS AS FOLLOWS: 17. IN MY VIEW SEC. 80 HAS NO APPLICATION, SO FAR AS UNABSORBED DEPRECIATION IS CONCERNED. THE APPELLANT HAS NOT SUBSTANTIATED THE CLAIM OF CARRY FORWARD LOSS BY FILING DETAILS OF EARLIER YEARS RETURN TO COME T O THE CONCLUSION THAT THESE RETURNS HAVE BEEN FILED WITHIN THE TIME ALLOWED U/S . 139. ACCORDING TO THE ASSESSING OFFICER THE RETURN HAS BEEN FILED CLAIMIN G THE STATUS AS A CHARITABLE TRUST AND IN THE PARTICULAR FORM PRESCRIBED AND THE REFORE IS ALSO OF THE VIEW THAT SUCH LOSS CANNOT BE CARRIED FORWARD OR SET OFF. 18. HAVING CONCLUDED THAT THE STATUS OF THE APPELL ANT AS AOP, AS FINALLY HELD BY THE INCOME TAX APPELLATE TRIBUNAL I AM OF THE VIEW THAT THE ASSESSING OFFICER IS I.T.A. NOS.366-368/COCH/2016 5 NOT CORRECT IN HOLDING THAT THE RETURN HAS BEEN FIL ED IN A PARTICULAR FORM. SEC. 292B COMES IN TO OPERATION IN APPELLANTS CASE AND AS PER SEC.292B:- NO RETURN OF INCOME, ASSESSMENT, NOTICE, SUMMONS O R OTHER PROCEEDINGS FURNISHED OR MADE OR ISSUED OR TAKEN OR PURPORTED T O HAVE BEEN FURNISHED OR MADE OR ISSUED OR TAKEN IN PURSUANCE OF ANY OF THE PROVISIONS OF THIS ACT SHALL BE INVALID OR SHALL BE DEEMED TO BE INVALID MERELY BY REASON OF ANY MISTAKE, DEFECT OR OMISSION IN SUCH RETURN OF INCOME, ASSESS MENT, NOTICE, SUMMONS OR OTHER PROCEEDINGS IF SUCH RETURN OF INCOME, ASSESSM ENT, NOTICE, SUMMONS OR OTHER PROCEEDINGS IS A SUBSTANCE AND EFFECT IN CONF ORMITY WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THIS ACT. 19. IN THE APPELLANTS CASE AS STATED EARLIER THE A PPELLANT IS ENTITLED TO CARRY FORWARD AND SET OFF UNABSORBED DEPRECIATION AS THE STATUS HAS BEEN DETERMINED AS AOP AND UNABSORBED DEPRECIATION WILL PARTAKE IN THE NATURE OF CURRENT DEPRECIATION. I THEREFORE DIRECT THE ASSESSING OFF ICER TO SET OFF THE UNABSORBED DEPRECIATION CLAIMED. 7. AGGRIEVED BY THE DIRECTION OF CIT(A), THE RE VENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. DR RELIED ON THE GROUNDS RAISED BEFORE THE TRIBUNAL. THE LD. AR ON THE OTHER HAND REITERATED THE SUBMISSIONS MAD E BEFORE THE IT AUTHORITIES AND RELIED ON THE CONCLUSIONS/FINDINGS OF THE CIT(A ). 8. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE CIT(A) IN THE IMPUGNED ORDER HAD ALLOWED SET OFF OF UNABSORBED DEPRECIATION AMOUNTING TO RS.2,59,06,591/-. THE UNABSORBED DEPR ECIATION WAS FOR THE PERIOD BEGINNING OF AY 1992-93 TO AY 2005-06. FOR THE AY 1992-93 TO AY 2005-06, HOW THE INCOME HAS BEEN CALCULATED, IS NOT AVAILABL E ON RECORD. ADMITTEDLY, THE ASSESSEE FOR THE CURRENT ASSESSMENT YEARS AS WELL A S PAST AYS WERE FILING RETURNS OF INCOME IN THE STATUS OF CHARITABLE SOCIETY. I T IS NOT CLEAR FROM THE RECORD, THAT THE CLAIM OF DEPRECIATION IS ON THE ASSETS WHE RE THE COST HAS BEEN ALLOWED AS APPLICATION OF INCOME. IF THE COST OF ASSETS IS ALLOWED AS AN APPLICATION OF I.T.A. NOS.366-368/COCH/2016 6 INCOME, THEN DEPRECIATION ON THE SAME ASSETS CANNOT BE ALLOWED/CARRIED FORWARD GOING BY THE DICTUM LAID DOWN BY THE HONBLE JURISD ICTIONAL HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS VS. CIT REPORTED IN 348 ITR 344. NECESSARILY, THE MATTER NEEDS TO BE EXAMINED BY THE ASSESSING OF FICER. THEREFORE, THE OBSERVATION OF THE CIT(A) DIRECTING THE ASSESSING O FFICER TO GRANT SET OFF THE UNABSORBED DEPRECIATION IS SET ASIDE. THE ASSESSING OFFICER SHALL EXAMINE THE CALCULATION OF INCOME MADE BY THE ASSESSEE FOR THE RELEVANT YEARS IN WHICH UNABSORBED DEPRECIATION HAS BEEN CALCULATED. THE DE PRECIATION OF PAST AYS SHALL NOT BE ALLOWED TO BE CARRIED FORWARD IF THE COST OF ASSETS IS CLAI MED AND ALLOWED AS AN APPLICATION OF INCOME. WITH THESE DIRECTIONS , I DISPOSE OF THIS APPEAL FILED BY THE REVENUE. THEREFORE, I.T.A. NO. 366/COCH/2016 IS ALLOWED FOR STATISTICAL PURPOSES. 9. REGARDING THE REVENUES APPEALS IN I.T.A. NOS . 367 & 368/COCH/2016, MY FINDING FOR THE ASSESSMENT YEAR 2006-07 CONCERNING I.T.A. NO. 366/COCH/2016 WILL HOLD GOOD FOR THE AY 2007-08 AND AY 2008-09 AS WELL. ACCORDINGLY, THE APPEALS FILED BY THE REVENUE FOR THESE TWO ASSESSME NT YEARS ARE ALSO SET ASIDE TO THE ASSESSING OFFICER. THE ASSESSING OFFICER SH ALL FOLLOW THE DICTUM LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF LISSIE MEDICAL INSTITUTIONS (SUPRA) AND SHALL TAKE A DECISION IN ACCORDANCE WIT H LAW. IT IS ORDERED ACCORDINGLY. HENCE, THE APPEALS FILED BY THE REVEN UE IN I.T.A. NOS. 367 & 368/COCH/2016 ARE ALSO ALLOWED FOR STATISTICAL PURP OSES. I.T.A. NOS.366-368/COCH/2016 7 10. IN THE RESULT, THE APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 19 TH -04-2017. SD/- (GEORGE GEORGE K.) JUDICIAL MEMBER PLACE: KOCHI DATED: 19 TH APRIL, 2017 GJ COPY TO: 1. M/S. MANOHAR HILL CHARITABLE TRUST, KANGAZHA, KO TTAYAM. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, EXEMPTI ON CIRCLE,TRIVANDRUM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), KOTTAYA M. 4. THE PRINCIPAL COMMISSIONER OF INCOME-TAX, KOTTAY AM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN