Institute of Professional Studies & Research, Cuttack V. ITO(Exemptions), Cuttack

ITA 403/CTK/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7582 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 23-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: SASWAT ACHARYA
• Keywords: Maximum Marginal Rate; Benefit of exemption
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N. S SAINI, ACCOUNTANT MEMBER ITA NO.403 /CTK/2015 ASSESSMENT YEAR : 2011 - 12 THE INSTITUTE OF PROFESSIONAL STUDIES & RESEARCH, IPSAR HOUSE, SECTOR - 6, MARKAT NAGAR, CDA, CUTTACK - 14. VS. ACIT, CIRCLE - 2(1), CUTTACK AT PRESENT ITO (EXEMPTION), CUTTACK PAN/GIR NO. AABFI 1911 Q (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI SASWAT ACHARYA, AR REVENUE BY : SHRI D.K.PRADHAN , DR DATE OF HEARING : 2 4 /10 / 2016 DATE OF PRONOUNCEMENT : 26 /10 / 2016 O R D E R THIS I S AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - CUTTACK, DATED 21.7.2015 , FOR THE ASSESSMENT YEAR 2011 - 12 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: A) FOR THAT THE ORDER PASSED BY THE LD CIT(A) IS ERRONEOUS, ARBITRARY AND IS ILLEGAL, AND THUS, DESERVES TO BE QUASHED IN LIMINE. 2 ITA NO.403/CTK/2015 ASSESSMENT YEAR :2011 - 12 B. FOR THAT THE LD CIT(A) AS WELL AS THE AO HAVE ERRED IN TREATING THE APPELLANT AS AN AOP AND DENYING THE BENEFIT OF EXEMPTION U/S.11 OF T HE ACT. C. FOR THAT THE LD CIT(A) AS WELL AS THE AO HAVE ERRED IN RESORTING TO DISALLOWANCE OF THE ENTIRE EXCESS OF INCOME OVER EXPENDITURE TO THE TUNE OF RS.40,27,468/ - BY DENYING EXEMPTION U/S.11 OF THE ACT, INSTEAD OF THE ALLEGED ILLEGAL EXPENDITURE OF RS.41,072/ - . 3. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE LD CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING EXEMPTION U/S.11 AND 12 OF THE ACT TO THE ASSESSEE ON THE ENTIRE EXCESS OF INCOME OVER EXPENDITURE OF RS. 40,27,468/ - AND TREATING THE ASSESSEE AS AN AOP ON THE GROUND THAT THE ASSESSEE TRUST HAD INCURRED EXPENDITURE ON AIR TRAVEL OF THE DAUGHTER OF THE DIRECTOR OF THE ASSESSEE TRUST AMOUNTING TO RS.41,072/ - THEREBY VIOLATING THE PROVISIONS OF SECTION 13(1)(C) (II) OF THE ACT. 4. BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHILE EXAMINING THE LEDGER ACCOUNT OF TRAVEL DOT POINT ALONGWITH SUPPORTING BILLS AND VOUCHERS, THE ASSESSING OFFICER FOUND THAT IN SOME OF THE TRIPS, TH E DIRECTOR OF THE INSTITUTE HAS TRAVELLED ALONGWITH HIS FAMILY MEMBERS TO DELHI, WHO ARE NOT RELATED TO THE ACTIVITIES OF THE TRUST. ACCORDING TO THE ASSESSING OFFICER, THE ACTION OF THE DIRECTOR ATTRACTS PROVISION S OF SECTION 13(1(C) (II) OF THE INCOME TA X ACT, 1961, WHICH STATES THAT ; 3 ITA NO.403/CTK/2015 ASSESSMENT YEAR :2011 - 12 IF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR THE INSTITUTION (WHENEVER CREATED OR ESTABLISHED) IS DURING THE PREVIOUS YEAR USED OR APPLIED, DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SUB - SECTION (3) THE ASSESSING OFFICER NOTED THAT TABLE SHOWS THE DETAILS OF TRIPS UPON WHICH SECTION 13(2)(G) WILL BE ATTRACTED: SL.NO. NAME DATE OF TRAVEL MODE OF TRAVEL AMOUNT SPENT(RS.) 1. MS R.MISHRA 30.8.2010 FLIGHT 5,782/ - 2. MRS N.MISHRA 30.8.2010 FLIGHT 5,582/ - 3. MR J.K.MISHRA & ROMA MISHRA 5.10.2010 FLIGHT 10,392/ - 4. MR J.K.MISHRA & ROMA MISHRA 9.10.2010 FLIGHT 11,952/ - 5. MR T.MISHRA 5.10.2010 & 9.10.2010 FLIGHT 12,442/ - 6. MR T.MISHRA 1.12.2010 FLIGHT 5,933/ - 7. MR T.MISHRA 7.12.2010 FLIGHT 5,923/ - 8. MR J.K.MISHRA +1 24.7.2010 FLIGHT 11,952/ - 9. MR J.K.MISHRA +1 23.7.2010 FLIGHT 17,178/ - TOTAL: 87,136/ - 8. THEREFORE, HE HELD THAT SINCE SECTION 13 IS APPLICABLE IN THE CASE OF THE ASSESSEE AS STATED IN SECTION 13( 1) NO THING CONTAINED IN SECTION 11 OR 12 SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF THE PREVIOUS YEAR OF 4 ITA NO.403/CTK/2015 ASSESSMENT YEAR :2011 - 12 THE PERSON IN RECEIPT THEREOF , THE ASSESSEE LOSES THE IMMUNITY UNDER SECTION 11 AND 12 AND WILL BE CONSIDERED AS AN ASSOCIATION OF PERSONS FOR THE PURPOSE OF COMPUTATION OF INCOME TAX AND, ACCORDINGLY, ADDED THE ENTIRE EXCESS OF INCOME OVER EXPENDITURE OF AN AMOUNT OF RS.40,27,468/ - AS INCOME OF THE ASSESSEE. 9. ON APPEAL, LD CIT(A) CONFIRMED THE ACTION OF THE ASSESSI NG OFFICER. 10. AT THE TIME OF HEARING, LD A.R. RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTIONS) VS SHETH MAFATLAL GAGALBHAI FOUNDATION TRUST (2001) 249 ITR 533 (BOM) AND SUBMITTED THAT IT HAS BEEN HELD THAT FORFEITURE OF EXEMPTION FOR BREACH OF SECTION 13(1)(D), RESULTING IN LEVY OF MAXIMUM MARGINAL RATE OF TAX CATEGORICALLY REFERS TO THAT PART OF THE INCOME WHICH HAS FORFEITED EXEMPTION. IT DOES NOT REFER TO THE ENTIRE INCOME BEING SUBJECTED TO MA XIMUM MARGINAL RATE OF TAX. 11. HE FURTHER RELIED ON THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. SIKSHA O AUSANDHAN PASSED IN ITA NO.116/CTK/2014 ORDER DATED 20.10.2014 AND SUBMITTED THAT THE TRIBUNAL HELD THAT IF SOME BENEFIT S HA VE BEEN GIVEN TO A PERSON OF PROHIBITORY CATEGORY, SAME CANNOT BE BASIS FOR DENYING EXEMPTION. IN SUCH CASES, TAX HAS TO BE LEVIED AT THE MAXIMUM MARGINAL RATE ON SUCH INCOME WHICH HAS BEEN APPLIED TO THE BENEFIT OF THE PROHIBITED PERSONS. HENCE, IT WAS T HE SUBMISSION OF LD A.R. OF 5 ITA NO.403/CTK/2015 ASSESSMENT YEAR :2011 - 12 THE ASSESSEE THAT MAXIMUM MARGINAL RATE OF TAX SHOULD BE APPLIED TO THE SUM OF RS.41,072/ - BEING THE AMOUNT OF E XPENDITURE INCURRED FOR AIR TRAVEL OF THE DAUGHTER OF THE DIRECTOR OF TRUST. 12. ON THE OTHER HAND, LD D.R. SUPPORTE D THE ORDERS OF LOWER AUTHORITIES. 13. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE TRUST INCURRED A SU M OF RS.41,072/ - ON THE AIR TRAVEL OF THE DAUGHTER OF THE DIRECTOR OF THE TRUST. THEREFORE, THE ASSESS ING OFFICER DISALLOWED EXEMPTION U/S.11 & 12 OF THE ACT AND BROUGHT THE ENTIRE EXCESS INCOME OVER EXPENDITURE OF RS.40,27,468/ - TO TAX AS AN AOP. ON APPEAL, THE LD CIT(A) CONFIRMED TH E ACTION OF THE ASSESSING OFFICER. 14. I FIND THAT THIS BENCH OF THE TRIBUNAL FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SHETH MAFATLAL GAGALBHAI FOUNDATION TRUST (SUPRA) HELD THAT IF SOME BENEFITS HAVE BEEN GIVEN TO A PERSON O F PROHIBITORY CATEGORY, SAME CANNOT BE BASIS FOR DENYING EXEMPTION. IN SUCH CASES, TAX HAS TO BE LEVIED AT THE MAXIMUM MARGINAL RATE ON SUCH INCOME WHICH HAS BEEN APPLIED TO THE BENEFIT OF THE PROHIBITED PERSONS. LD D.R. COULD NOT CITE ANY CONTRARY DECISIO N WHICH WAS IN FAVOUR OF THE REVENUE. HE ALSO COULD NOT POINT OUT ANY DISTINGUISHING FEATURES SO AS TO NOT TO FOLLOW THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF SIKSHA O AUSANDHAN(SUPRA). THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THIS 6 ITA NO.403/CTK/2015 ASSESSMENT YEAR :2011 - 12 TRIBUNAL IN THE CASE OF SIKSHA O AUSANDHAN(SUPRA), I HOLD THAT MAXIMUM MARGINAL RATE OF TAX HAS TO BE LEVIED ON RS.41,072/ - BEING THE EXPENDITURE INCURRED ON AIR TRAVEL OF THE DAUGHTER OF THE DIRECTOR OF THE TRUST. THUS, TH E GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. 15. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 2 6 /10 /2016 . ( N. S SAINI ) A CCOUNTANT MEMBER CUTTACK; DATED 2 6 /10 /2016 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, ASST.REGISTRAR, ITAT, CUTTACK 1. THE APPELLANT : THE INSTITUTE OF PROFESSIONAL STUDIES & RESEARCH, IPSAR HOUSE, SECTOR - 6, MARKAT NAGAR, CDA, CUTTACK - 14. 2. THE RESPONDENT. ACIT, CIRCLE - 2(1), CUTTACK/ AT PRESENT ITO (EXEMPTION), CUTTACK 3. THE CIT(A) , CUTTACK 4. CIT , CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//