DCIT (E), New Delhi V. M/s Mool Chand Khairati Ram Trust, New Delhi

ITA 4458/DEL/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5722 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 08-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST IMPUGNED DATED PASSED
• Keywords: Business income; Benefit of exemption
• Section: 143(3); 12A; 12AA; 12; 11

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.:- 4458/DEL/2015 ASSESSMENT YEAR: 2011-12 O R D E R PER AMIT SHUKLA, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST IMPUGNED ORDER DATED 27.4.2015, PASSED BY LD. CIT ( APPEALS)-40 (EXEMPTION), NEW DELHI FOR THE QUANTUM OF ASSESSMENT PA SSED U/S 143 (3) FOR THE ASSTT. YEAR 2011-12. IN THE GROUNDS OF APPEAL REVENUE HAS RAISED FOLLOWING GROUNDS:- DCIT CIRCLE 1 (1), NEW DELHI. VS. MOOL CHAND KHAIRATI RAM TRUST LAJPAT NAGAR-III NEW DELHI 110 024 PAN AAATM0394H (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AMIT JAIN, SR. DR RESPONDENT BY : SHRI LALIT MOHAN, CA, SHRI PIYUSH KUMAR KAMAL, ADV. DATE OF HEARING 19/06/2018 DATE OF PRONOUNCEMENT 25/06/2018 2 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF C ARRY FORWARD OF LOSSES DISREGARDING THE FACTS THAT THE SET OFF AND CARRY FORWARD OF LOSSES ARE DEALT WITH BY THE PROVISIONS OF SECTION 70,71,72,73 AND 74 OF THE INCOME-TAX ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAD ERRED IN ALLOWING THE CLAIM OF C ARRY FORWARD OF LOSSES DISREGARDING THE FACTS THAT THE PROVISIONS O F THE ACT ARE NOT APPLICABLE IN THE CASES WHO ARE CLAIMING EXEMPTION U/S 11 &12 OF THE INCOME TAX ACT, 1961. 2. THE FACTS IN BRIEF ARE THAT ASSESSEE IS CHARITAB LE TRUST REGISTERED U/S 12A (A) VIDE ORDER DATED 4.12.74. THE MAIN OBJE CT OF THE TRUST WAS TO PROMOTE AYURVEDIC SYSTEM OF MEDICINE TREATMENT AND RUN NING OF AYURVEDIC HOSPITAL. AO NOTED THAT THE ASSESSEE WAS ENJOY ING THE BENEFIT OF EXEMPTION U/S 11(1) UP TO A.Y. 2002-03 AND ALSO EXEMPTION U/S 10(23C)(VIA) FROM A.Y. 2003-04 TO A.Y. 2005-06. THE ASSESSEES APPLICATION FOR RENEWAL OF THE EXEMPTION WAS STILL PEN DING WITH DGIT (EXEMPTION), DELHI. IN THE SCRUTINY PROCEEDINGS U/S 14 3(3) FOR THE A.Y. 2006-07, THE ASSESSEE WAS DENIED THE EXEMPTION ON THE GROUND THAT THE ACTIVITIES OF THE ASSESSEE WERE NOT CARRIED OUT AS PER THE OBJECTS OF THE TRUST AS THE ASSESSEE WAS ALSO DOING THE ALLOPATHIC TREATMENT. IN THE FIRST APPEAL AGAINST THE SAID ASSESSMENT ORDER, LD. CIT (A) HAS ALLOWED THE EXEMPTION U/S 11 VIDE ORDER DATED 15.10.2 010. HOWEVER, IN THE APPEAL PREFERRED BY THE DEPARTMENT BEFORE THE TR IBUNAL, THE 3 ORDER OF THE LD. CIT (A) WAS SET-ASIDE AND THE MATTER RESTORED BACK TO THE FILE OF AO. IN THE MEANTIME DGIT (EXEMPTION) HAD CA NCELLED THE REGISTRATION OF THE ASSESSEE U/S 12AA VIDE ORDER DATE D 30.6.2009. HOWEVER, THE SAID ORDER OF DGIT (EXEMPTION) HAS BEEN SET ASIDE BY THE TRIBUNAL AND REGISTRATION U/S 12AA HAS BEEN RESTORED. THIS ORDER OF THE TRIBUNAL HAS ALSO BEEN UPHELD BY THE HONBLE DELH I HIGH COURT VIDE ORDER DATED 4.4.2011. AO AFTER REFERRING TO THE PAST HISTORY OF THE VARIOUS ASSESSMENTS, AGAIN HELD THAT ACTIVITIES CARRIED OUT BY THE ASSESSEE TRUST IS NOT IN ACCORDANCE WITH THE AIMS AND OBJECTS OF THE TRUST, BECAUSE ASSESSEE IS ALSO RUNNING ALLOPATHIC H OSPITAL WHICH IS A PRIMARY SOURCE OF ACTIVITIES OF THE ASSESSEE. ACCORDI NGLY, HE DENIED THE BENEFIT OF EXEMPTION U/S 11 AND COMPUTED THE INCOME OF THE ASSESSEE AS NORMAL BUSINESS INCOME. 3. BEFORE THE LD. CIT (A) ONE OF THE ALTERNATIVE S UBMISSIONS OF THE ASSESSEE WAS THAT, IF CLAIM OF EXEMPTION OF THE INCOM E OF THE AYURVEDIC DIVISION IS DISALLOWED, THEN ASSESSEE SHOULD BE GIVE N BENEFIT OF ADJUSTMENT OF LOSSES AS PER THE LAW. LD. CIT (A) HAD A CCEPTED SUCH PLEA AFTER OBSERVING AND HOLDING AS UNDER:- 4.13 AFTER CONSIDERING ALL THE FACTS AND CIRCUMS TANCES OF THE CASE I AM OF THE VIEW THAT SINCE THE HONBLE TRIBUN AL HAS RESTORED THE ORDER OF THE AO FOR THE A.Y. 2006-07 DENYING TH E EXEMPTION U/S 11(1) TO THE ASSESSEE AND NO EXEMPTION U/S 10(2 3C)(VIA) IS AVAILABLE AS ON DATE THE ASSESSEE CANNOT BE ALLOWED THE 4 EXEMPTION FOR THE TIME BEING IN FULL BUT THE ASSESS EE IS ELIGIBLE FOR EXEMPTION OF THE INCOME OF THE TRUST DIVISION AND T HE AYURVEDIC DIVISION AS PER THE DECISION OF THE HONBLE TRIBUNA L OF THE A.Y. 2006-07 AS REFERRED ABOVE AND AS FOLLOWED BY THE AO IN THE ASSESSMENT U/S 143(3) FOR THE A.Y. 2012-13 AND IT I S ONLY THE INCOME OF THE ALLOPATHIC DIVISION WHERE EXEMPTION U /S 11(1) WHICH IS TO BE DENIED TO THE ASSESSEE AND AT THE SAME TIM E THE ASSESSEE SHOULD BE ALLOWED THE CONSEQUENTIAL BENEFIT OF ADJU STMENT OF LOSS AS PER LAW AND THE AO IS DIRECTED ACCORDINGLY. 4. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT (A) HAS ERRED IN ALLOWING THE CLAIM OF CARRY FO RWARD OF LOSSES DESPITE THE FACT THAT AO HIMSELF HAS DENIED THE EXEMPTION U/S 11 AND 12 TO THE ASSESSEE AND HAS COMPUTED THE INCOME AS NOR MAL BUSINESS INCOME. ONCE THE INCOME HAS BEEN COMPUTED BY THE AO AS PER THE NORMAL BUSINESS INCOME, THEN CONSEQUENTLY BENEFIT OF A DJUSTMENT OF LOSSES HAS TO BE ALLOWED AS PER LAW. THE AFORESAID O BSERVATION AND DIRECTION OF THE LD. CIT (A) IS COMPLETELY IN ACCORDAN CE WITH FACTS AND LAW OF THE CASE, BECAUSE IF EXEMPTION U/S 11(1) IS D ENIED TO THE ASSESSEE ON THE INCOME OF ALLOPATHIC DIVISION AND IS COMPUTED AS BUSINESS INCOME THEN ADJUSTMENT OF LOSSES IN THE COMPU TATION OF SUCH BUSINESS INCOME IS CONSEQUENTIAL EFFECT WHICH HAS TO B E GIVEN. ACCORDINGLY, THE ORDER THE LD. CIT(A) IS CONFIRMED AN D GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 5 4. IN THE RESULT THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JUNE, 2018. SD/- SD/- (G.D. AGRAWAL) (A MIT SHUKLA) PRESIDENT JUD ICIAL MEMBER DATED: 25/06/2018 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI