The Dy. Commissioner of Income Tax, CIRCLE-1, (EXAMPTION), Chandigarh V. M/s Amritsar Improvement Trust, Amritsar.

ITA 391/ASR/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8678 (ITAT-AMRITSAR)
• Duration Of Justice: 5 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 14-06-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revenue expenditure; Capital expenditure; Set aside

Judgement Text

DCIT, Circle-I (Exemption), v.Amritsar Improvement Trust, Amritsar Asstt. Year 2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 391/ASR/2017 Assessment Year: 2009-10 Dy. Commissioner of Income- tax, Circle-I (Exemption) Vs. M/sAmritsar Improvement Trust, Amritsar. [PAN:AAJFA4492K] (Appellant) (Respondent) Appellant by : Sh. |Satish Bansal, CA Respondent by: Sh. Rohit Sharma, CIT DR Date of Hearing: 13.07.2022 Date of Pronouncement: 10.08.2022 ORDER Per Anikesh Banerjee, JM: The instant appeal is directed against the order of Ld. Commissioner of Income Tax (Appeal)-2, Amritsar {in brevity CIT(A)} bearing appeal no. 381/2012-13 date of order 19.01.2017, order passed u/s. 250(6) of the Income Tax Act, 1961 (in brevity of the Act) for the Assessment year 2009-10. The impugned order was generated from the order of ld. Assistant Commissioner of Income-tax, Circle-V, Amritsar (in brevity A.O), order passed u/s.143(3) of the Act, date of order 28.12.2011. DCIT, Circle-I (Exemption), v.Amritsar Improvement Trust, Amritsar Asstt. Year 2009-10 2. The Revenue has raised following grounds: 1. That on facts and circumstances in the case, the ld. CIT(A) has erred in deleting the addition made at Rs.10,95,60,459/- on account of work bill expenses being capital expenses. 2. That on the facts and circumstances of the case, the ld. CIT(A) has erred in deleting the addition made at Rs.3,96,08,139/- on account of interest paid on loan taken in connection with schemes to be launched/launched by the assesse and hence being capital nature. 3. That on the facts and circumstances of the case, the ld. CIT(A) has erred in deleting the addition made at Rs.63,53,539/- on account of enhanced compensation being capital expenses. 4. That on facts and circumstances of the case, the ld. CIT(A) has erred in deciding the above issues in favour of the assessee, even when the trust has already been dissolved. 5. That the appellant craves to leave, add or amend the grounds of appeal on or before the appeal heard and disposed of. 3. Tersely we advert the fact of the case. That the assesse is an Improvement Trust was constituted under the provisions of Punjab Government Improvement Act, 1922 with the object of bring improvement in the town by providing Road, Street, Park, pavement, sewerage, Housing facilities etc., for the benefit of DCIT, Circle-I (Exemption), v.Amritsar Improvement Trust, Amritsar Asstt. Year 2009-10 general public at large and the assessee had incurred various expenses under the head “Work Bill” for the development of city of Amritsar. The said assesse- trust was dissolved by the order of Government of Punjab w.e.f. 12.04.2007 vide notification no. 4/20/2007-4LG2/2574 and it was again revived as on 29.06.2009 vide notification no. 4/72/2008-4LG2/1086. As per ld. AO, the trust was dissolved and all the assets and liabilities of the trust were vested in the Punjab Govt. The said trust was dissolved but it was functioning as independent body. During the assessment ld. AO had determined the status of the assessee as AOP. Assessee filed the return with loss of Rs.16,04,36.804/- as calculated in the Income and Expenditure account. During the assessment the amount of Rs.10,95,60,459/- was added back on account of work bills relating to various schemes of the trust. The ld. AO had taken this expenditure in Capital nature which was related to pre-launched expenditure of the schemes of the assessee. As a result these expenses were added back with the total income of the assesse. Further amount of Rs.3.96.08.139/- was added back on account expenses of interest debited. The ld. AO determine the expenditure as Capital in nature related to interest on loan related new schemes to be launched by the trust. Hence the interest was disallowed. Further compensation amount Rs.60,53,339/- was disallowed, which was paid to persons to whom, the land was acquired. The ld. AO directed the assesseeto club the amount with the land lying in the closing stock with the trust. The same amount was disallowed and DCIT, Circle-I (Exemption), v.Amritsar Improvement Trust, Amritsar Asstt. Year 2009-10 added back to the income of the assesse. Aggrieved assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) dismissed the additions made by the ld. AO in assessment and allowed the grounds of the assesse. Being aggrieved the Revenue, filed an appeal before us. 4. The ld. CIT DR vehemently argued and relied on assessment order in para 2 page 1 which is extracted hereunder: “As per the Income & Expenditure account, the assesseehas shown loss of Rs.16,04,36,804/-. During the year the assesse counsel submitted that trust was dissolved by the Government of Punjab w.e.f. 12.04.2007 vide notification no. 4/20/2007-4LG2/2574 and it was again revived as on 29.06.2009 vide notification no. 4/72/2008-4LG2/1086. The assesse counsel has also furnished the copy of notification, which is placed on record. The Trust was functioning under Sh. Sunil Bhatia, Regional Dy. Director, Local Government, Amritsar during the year under consideration. During the year trust has functioned but no major development/schemes have beenlaunched. The assesse submitted that due to dissolution of the trust all the assets & liabilities of the trust were vested in Punjab Govt. The assesse has not denied the fact that though the trust was dissolved but was functioning as an independent body. Their income & expenditure have also been kept separately and were duly audited. During the year the major source of receipts are enhancement charges of Rs.1,71,34,103/-. Non-construction Fee at Rs.1,86,26,598/- and rent of Rs.80,85,477/- which shows that the assesse was normally functioning during the year. Thus, the trust during the year worked as AOP and is accordingly assessed.” DCIT, Circle-I (Exemption), v.Amritsar Improvement Trust, Amritsar Asstt. Year 2009-10 4.1 The ld. CIT DR in the argument pointed out that the Appellate Authority did not consider the issue related to status of the trust. During the financial year, the assessee was not a trust but an AOP. He further relied on the order of Hon’ble Punjab & Haryana High Court in the case of M/s. Amritsar Improvement Trust v. CIT-II, Amritsar ITA No. 100 of 2014 (O & M) dated of decision 06.08.2014. He further mentioned the para no. 8 & 11 which is extracted as below: 8. After hearing learned counsel for the parties, in our opinion, the matter requires to be remitted to the Tribunal to adjudicate the issue regarding the nature of activities of the appellant trust whether they are in the nature of charitable within the meaning of Section 2(15) of the Act in respect of assessment years in question or not, keeping in view the arguments raised by the learned counsel for the appellant-assessee and to pass fresh orders relating to assessment proceedings thereafter in accordance with law. 11. Accordingly, the impugned orders passed by the Tribunal in all the appeals are set aside and the matter is remanded to the Tribunal to decide the same a fresh in the light of the submissions made by the learned counsel for the appellant after affording an opportunity of hearing to the parties in accordance with law. Needless to say, anything observed hereinbefore shall not be taken to the expression of opinion on the demerits of the controversy. Sincere efforts shall be made to decide the matter expeditiously. As a result, all the appeals stand disposed of. DCIT, Circle-I (Exemption), v.Amritsar Improvement Trust, Amritsar Asstt. Year 2009-10 5. The ld. Counsel vehemently argued and mentioned that the addition was made by the ld. AO by taking the Revenue expenditure as a capital expenditure. He submitted that in notification dated 29.06.2009 of Govt. of Punjab, Deptt. of Local Govt. II Branch as per notification, the revival of trust is under process related to the assessee. So, the trust is in process of gaining its own status as trust. 6. We heard the rival submission and relied on the documents available in the record. As per the order of CIT(A) the additions are deleted related to assessment. But the crux point related to status of the trust was not discussed in the order of the CIT(A). Respectfully observing the order of |Apex Court the status of the assessee as trust was not vested during the financial year. The issue was not adjudicated by the CIT(A), during the appeal proceedings. The CIT DR specifically argued and made his objection in particular issue. The ld. Counsel did not bring any contrary view in this issue. Considering the above-mentioned discussion, here, we are setting aside the appeal before the ld.CIT(A) for adjudicating the issue denovo. Needless to say, the assessee should get reasonable opportunity for represent its case before the Appellate Authority. DCIT, Circle-I (Exemption), v.Amritsar Improvement Trust, Amritsar Asstt. Year 2009-10 7. In the result, the appeal of the Revenue bearing ITA no.391/ASR/2017 is allowed for statistical purposes. Order pronounced in the open court on10 .08.2022 Sd/- Sd/- (Dr. M. L. Meena) (Anikesh Banerjee) Accountant Member Judicial Member *GP/Sr. PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(A), (4) The CIT concerned (5) The Sr. DR, I.T.A.T (6) The Guard File True Copy By Order