SHRI DIGAMBER JAIN BEES PANTHI , AJMERI AMNAY PANCHAYAT BADA DHADA V. INCOME TAX OFFICER, EXEMPTION, AJMER

ITA 473/JPR/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0549 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 09-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SINGH JCIT DHK
• Assessee Lawyers: SANJIV JAIN
• Keywords: Business income; Charitable institution; Competent authority
• Section: 12A; 12AA; 56; 12; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 473/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2014-15 SHRI DIGAMBER JAIN BEES PANTHI AJMERI AMNAY PANCHAYAT BADA DHADA, MAHAVEER CIRCLE, DAULAT BAGH, AJMER (RAJ)-305001 CUKE VS. INCOME TAX OFFICER, (EXEMPTIONS), AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAJAS 9907 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SANJIV JAIN (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI JAI SINGH (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 12/09/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 13/09/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 09/01/2018 OF LD. CIT(A), AJMER FOR THE A.Y. 2014- 15. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON F ACTS OF THE CASE BY CONFIRMING APPLICATION OF MAXIMUM MARGIN RATE AND N OT ALLOWING BASIC EXEMPTION LIMIT. 2. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FA CTS OF THE CASE BY CONFIRMING DISALLOWANCE OF A SUM OF RS. 2,50,000/- U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, DELETE OR MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIM E OF HEARING. ITA 473/JP/2018_ SHRI DIGAMBER JAIN BEES PANTHI AJMERI AMNAY PANCHAYAT BADA DHADA VS ITO (E) 2 2. AT THE TIME OF HEARING, THE LD AR OF THE ASSESSE E HAS STATED AT BAR THAT THE ASSESSEE DOES NOT PRESS GROUND NO. 1 OF TH E APPEAL AND THE SAME MAY BE DISMISSED AS NOT PRESSED. THE LD DR HAS RAISE D NO OBJECTION IF GROUND NO. 1 OF THE APPEAL IS DISMISSED AS NOT PRES SED. ACCORDINGLY, GROUND NO. 1 OF THE APPEAL IS DISMISSED BEING NOT P RESSED. 3. GROUND NO. 2 OF THE APPEAL IS REGARDING DISALLOWA NCE OF RS. 2.50 LACS U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT) IN RESPECT OF THE PAYMENT MADE BY THE ASSESSEE TO THE CONTRACT OR FOR CONSTRUCTION OF BUILDING. THE ASSESSING OFFICER NOTED THAT IN THE IN COME AND EXPENDITURE ACCOUNT FOR THE YEAR UNDER CONSIDERATION, THE ASSES SEE SOCIETY HAS SHOWN PAYMENT OF RS. 2.50 LACS TO THE CONTRACTOR M/S CHOU DHARY SAND STONE OUT OF THE TOTAL CONSTRUCTION EXPENSES OF RS. 9,33,802/ - ON WHICH NO TDS WAS DEDUCTED. ACCORDINGLY, THE ASSESSING OFFICER INVOKE D THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND DISALLOWED THE SAI D AMOUNT OF RS. 2.50 LACS. 4. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSI NG OFFICER BEFORE THE LD. CIT(A) AND CONTENDED THAT THE ASSESSEE SOCIE TY BEING A RELIGIOUS INSTITUTION DOES NOT CARRY OUT ANY TRADE OF MANUFAC TURING ACTIVITY. THE INCOME OF THE ASSESSEE WAS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND THEREFORE, NO DISALLOWANCE U/S 40(A)(IA ) OF THE ACT IS CALLED ITA 473/JP/2018_ SHRI DIGAMBER JAIN BEES PANTHI AJMERI AMNAY PANCHAYAT BADA DHADA VS ITO (E) 3 FOR. THE LD. CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER. 5. BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITT ED THAT THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT IN RESPEC T OF THE EXPENDITURE INCURRED FOR THE PURPOSE OF COMPUTING THE INCOME UN DER THE HEAD PROFIT & GAIN FROM BUSINESS OR PROFESSION IS PROVIDED AND T HEREFORE, WHEN THE ASSESSEE IS NOT DOING ANY ACTIVITY OF BUSINESS OR T RADING THEN THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT ATTRACTED FOR THE PURPOSE OF DISALLOWANCE EVEN IF THE ASSESSEE HAS NOT DEDUCTE D THE TAX AT SOURCE FROM THE PAYMENTS MADE TO THE CONTRACTOR. THE LD AR HAS FURTHER SUBMITTED THAT THE ASSESSEE SOCIETY IS A RELIGIOUS INSTITUTION AND ENGAGED ONLY IN THE RELIGIOUS ACTIVITY AS MANAGING TEMPLES. THE SOURCE OF INCOME OF THE SOCIETY IS DONATION, RENT AND INTEREST. THESE IN COMES ARE USED TO CARRY OUT DAY TO DAY ACTIVITY OF TEMPLES MAINTAINED BY TH E ASSESSEE SOCIETY AND MAINTENANCE OF PROPERTY OF THE INSTITUTION. THESE AC TIVITIES OF THE SOCIETY CANNOT BE HELD AS ANY BUSINESS ARRANGEMENT OR TRADE ACTIVITIES. FURTHER THERE WAS NO PROFIT MOTIVE BEHIND THE ACTIVITY OF TH E ASSESSEE SOCIETY AND THE ASSESSEE HAS DECLARED THE INCOME IN THE RETURN OF INCOME UNDER THE INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER HAS COMPUTED THE INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES A S PER THE NOTICE ITA 473/JP/2018_ SHRI DIGAMBER JAIN BEES PANTHI AJMERI AMNAY PANCHAYAT BADA DHADA VS ITO (E) 4 ISSUED U/S 156 OF THE ACT. HENCE, THE LD AR HAS SUB MITTED THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF KOLKATA BENCHES OF THE TRIBUNAL DATED 24/05/2018 IN THE CASE OF PEDIATRIC INFECTIOUS DISEASES ACADEMY VS ITO IN ITA NO. 2355/KOL/2017. 6. ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT ONCE THE REGISTRATION U/S 12A OF THE ACT HAS BEEN REJECTED B Y THE COMPETENT AUTHORITY THEN THE ASSESSEE CANNOT CLAIM THAT THESE ACTIVITIES ARE RELIGIOUS AND CHARITABLE IN NATURE. THE INCOME OF THE ASSESSEE SOCIETY HAS TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND THEREFORE, TH E PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE SO FAR AS THE ASSESSEE HAS FAILED TO DEDUCT TDS IN RESPECT OF THE PAYMENT MADE TO THE CONTRACTOR. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ASS ESSEE IS A SOCIETY AND ENGAGED IN THE ACTIVITY OF MAINTAINING THE TEMPLE. THE APPLICATION OF THE ASSESSEE U/S 12AA OF THE ACT WAS REJECTED AND THEREF ORE, THE INCOME OF THE ASSESSEE WAS TO BE COMPUTED WITHOUT THE BENEFIT O F SECTIONS 11 AND 12 OF THE ACT. THE ASSESSING OFFICER HAS MADE A DIS ALLOWANCE OF RS. 2.50 LACS BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA ) OF THE ACT FOR WANT OF ITA 473/JP/2018_ SHRI DIGAMBER JAIN BEES PANTHI AJMERI AMNAY PANCHAYAT BADA DHADA VS ITO (E) 5 DEDUCTION OF TAX AT SOURCE. THOUGH, THE PAYMENT IN Q UESTION TO THE CONTRACTOR WAS REQUIRED DEDUCTION OF TAX AT SOURCE A S PER THE PROVISIONS OF CHAPTER XVII OF THE ACT, HOWEVER, THE ASSESSEE HAS N OT INCURRED THE SAID EXPENDITURE FOR ITS BUSINESS ACTIVITY BUT THE ACTIV ITY OF THE ASSESSEE ARE ONLY RELIGIOUS IN NATURE. FURTHER THE ASSESSING OFF ICER HAS ALSO ACCEPTED THE INCOME OF THE ASSESSEE UNDER THE INCOME FROM O THER SOURCES AS PER THE COMPUTATION OF INCOME. THE LD AR OF THE ASSESSEE HAS FILED A COPY OF THE COMPUTATION OF THE INCOME MADE BY THE ASSESSING OFFICER WHEREIN THE INCOME OF RS. 4,42,080/- HAS BEEN COMPUTED UNDER TH E HEAD INCOME FROM OTHER SOURCES. THE KOLKATA BENCHES OF THE TRIBU NAL IN THE CASE OF PEDIATRIC INFECTIOUS DISEASES ACADEMY VS ITO (SUPRA ) WHILE DEALING AN IDENTICAL ISSUE HAS HELD IN PARA 4 AND 5 AS UNDER: 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT TH E ASSESSEE IN THE PRESENT CASE IS AN ASSOCIATION OF PAEDIATRIC DOCTORS WITH T HE PRINCIPAL OBJECT OF GENERAL PUBLIC ADVANCEMENT. IT IS DULY REGISTERED U NDER THE WEST BENGAL SOCIETY REGISTRATION ACT, 1961 AS WELL AS UNDER SEC TION 12A OF THE INCOME TAX ACT, 1961. DURING THE YEAR UNDER CONSIDERATION, IT HAD PUBLISHED JOURNAL FROM THE FUNDS RECEIVED FROM SPONSORSHIP FE ES AND THE JOURNALS SO PUBLISHED WERE ISSUED TO THE MEMBERS FREE OF COST. THE SURPLUS FROM THE ACTIVITY OF PUBLISHING JOURNAL WAS OFFERED TO TAX B Y THE ASSESSEE UNDER THE HEAD 'INCOME FROM OTHER SOURCES AND WHEN THE DISAL LOWANCE WAS SOUGHT TO BE MADE BY THE A.O. U/S 40(A)(IA) FOR NON-DEDUCT ION OF TAX AT SOURCE FROM THE PAYMENT OF PRINTING CHARGES, IT WAS CLAIME D BY THE ASSESSEE THAT ITA 473/JP/2018_ SHRI DIGAMBER JAIN BEES PANTHI AJMERI AMNAY PANCHAYAT BADA DHADA VS ITO (E) 6 THE SAID PROVISION COULD BE INVOKED ONLY WHY COMPUT ING INCOME UNDER THE HEAD 'PROFITS AND GAINS FROM BUSINESS OR PROFESSION '. THE A.O. HOWEVER TREATED THE SURPLUS OF THE ASSESSEE FROM THE ACTIVI TY OF PUBLICATION OF JOURNAL AS ITS BUSINESS INCOME BY RELYING ON THE PR OVISO TO SECTION 2(15) AND MADE A DISALLOWANCE ON ACCOUNT OF PRINTING CHAR GES U/S 40(A)(IA). AS RIGHTLY CONTENDED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A) AS WELL AS BEFORE THE TRIBUNAL, THE ACTIVITY OF PUBLICATION OF JOURNAL HAVING BEEN FINANCED FROM THE SPONSORSHIP FEES AND THE SAID JOU RNALS HAVING BEEN ISSUED TO THE MEMBERS FREE OF COST, THE SAME CANNOT BE TREATED AS IN THE NATURE TRADE, COMMERCE OR BUSINESS AS ENVISAGED IN THE PROVISO TO SECTION 2(15) AND THE INCOME OF THE ASSESSEE FROM THE SAID ACTIVITY CANNOT BE TREATED AS ITS BUSINESS INCOME. I, THEREFORE, FIND MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE A.O. WAS NOT JUSTIFIED IN RE- CLASSIFYING THE INCOME OF THE ASSESSEE FROM THE ACT IVITY OF PUBLICATION OF JOURNALS AS BUSINESS INCOME AND IN MAKING A DISALLO WANCE U/S 40(A)(IA) 5. IN MY OPINION, THE LD. CIT(A) IS ALSO NOT JUSTIF IED IN HOLDING THAT THE FACT OF THE ASSESSEE BEING THE CHARITABLE ORGANISATION IS O F NO RELEVANCE FOR THE APPLICABILITY OF SECTION 40(A)(IA). AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE, THIS VIEW TAKEN BY THE LD. CIT(A) IS CONTRARY TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BOM BAY STOCK EXCHANGE VS. DDIT 365 ITR 181 WHEREIN IT WAS HELD THAT WHERE THE INCOME OF THE ASSESSEE WAS EXEMPT UNDER SECTION 11 AND THE ASSESS EE WAS NOT CARRIED ON THE BUSINESS, SECTION 40(A)(IA) HAD NO APPLICATI ON. MOREOVER, THE INSERTION OF EXPLANATION 3 TO SECTION 11 BY THE FIN ANCE ACT, 2018 MAKING INTER ALIA THE PROVISIONS OF SECTION 40(A) (IA) APP LICABLE IN CASE OF CHARITABLE OR RELIGIOUS TRUST OR INSTITUTION WITH E FFECT FROM 1 ST APRIL, 2019 FURTHER SHOWS THAT SECTION 40(A)(IA) HITHERTO WAS N OT APPLICABLE IN COMPUTING INCOME OF ENTITIES REGISTRATION U/S 12A O F THE ACT. I, THEREFORE, HOLD THAT THE DISALLOWANCE MADE BY THE A.O. UNDER S ECTION 40(A)(IA) AND ITA 473/JP/2018_ SHRI DIGAMBER JAIN BEES PANTHI AJMERI AMNAY PANCHAYAT BADA DHADA VS ITO (E) 7 CONFIRMED BY THE LD. CIT(A) IS NOT SUSTAINABLE AND DELETING THE SAME, I ALLOW THIS APPEAL OF THE ASSESSEE. WHEN THE INCOME OF THE ASSESSEE HAS BEEN ASSESSED U NDER THE HEAD INCOME FROM OTHER SOURCES AND THERE IS NO PROVISI ON U/S 56 TO 58 OF THE ACT TO MAKE A DISALLOWANCE U/S 40(A)(IA) OF THE ACT PRIOR TO THE AMENDMENT VIDE FINANCE ACT 2017 W.E.F. 1/04/2018 WHER EBY SUB-SECTION (1A) OF SECTION 58 HAS BEEN AMENDED FOR THE PURPOSE OF MAKING A PROVISION FOR DISALLOWANCE U/S 40(A)(IA) OF THE ACT. THEREFORE, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WHEN THE AMENDMENT IS APPLICABLE FROM 01/4/2018, NO DISALLOWANCE CAN BE MA DE U/S 40(A)(IA) OF THE ACT AGAINST THE INCOME OF THE ASSESSEE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES, HENCE, WE DIRECT TO DEL ETE THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/09/2018. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 13 TH SEPTEMBER, 2018 *RANJAN ITA 473/JP/2018_ SHRI DIGAMBER JAIN BEES PANTHI AJMERI AMNAY PANCHAYAT BADA DHADA VS ITO (E) 8 VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI DIGAMBER JAIN BEES PANTHI AJMERI AMNAY PANCHAYAT BADA DHADA, AJMER. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO (EXEMPTIONS), AJMER. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 473/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR