The ITO, (Exemption), RAJKOT-GUJARAT V. Udhyog Bharati, RAJKOT-GUJARAT

ITA 473/RJT/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6679 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 09-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: D M RINDANI AR
• Keywords: Tax effect
• Section: 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [ CONDUCTED THROUGH E-COURT AT AHMEDABAD ] BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.473/RJT/2015 ( / ASSESSMENT YEAR : 2011-12) INCOME-TAX OFFICER (EXEMPTION) WARD-1 RAJKOT / VS. UDHYOG BHARATI CHORDI GATE GONDAL ./ ./ PAN/GIR NO. AAATU 0391 A ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI LALIT P. JAIN, SR.DR ! / RESPONDENT BY : SHRI D.M. RINDANI, AR ' #$% ! & / DATE OF HEARING 20/02/2017 '( ! & / DATE OF PRONOUNCEMENT 14/03/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM : THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-1, RAJKOT [CIT(A) IN SHORT] DATED 16/07/2015 FOR THE ASSESSMENT YEAR (AY) 2011-12. ITA NO.473/RJT/ 2015 ITO VS. UDHYOG BHARATI ASST.YEAR 2011-12 - 2 - 2. THE ASSESSING OFFICER (AO) HAS CHALLENGED THE WI SDOM OF THE CIT(A) IN DELETING THE ADDITION MADE OF RS.39,22,56 0/- MADE BY AO ON ACCOUNT OF DENIAL OF BENEFITS OF EXEMPTION UNDER S. 10(23B) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT' ). 3. BRIEFLY STATED, THE ASSESSEE-TRUST IS ENGAGED I N THE BUSINESS OF MANUFACTURING AND MARKETING OF KHADI AND ALLIED PRO DUCTS. THE ASSESSEE-TRUST FILED ITS RETURN OF INCOME DECLARING ITS INCOME AT RS.NIL. THE ASSESSMENT WAS COMPLETED UNDER S.143(3) OF THE ACT BY THE AO. THE AO OBSERVED THAT INTEREST EARNED RS.39,22,559/- ON INVESTMENTS OF SURPLUS FUNDS LYING IN BANK FIXED DEPOSITS AND SARD AR SAROVAR NARMADA NIGAM LTD. (SSNNL) BONDS ETC. IS NOT ENTITLED TO B ENEFIT UNDER S.10(23B) OF THE ACT. THE AO TREATED THE INTEREST INCOME AS INCOME FROM OTHER SOURCES AND HELD THAT THE INTEREST INCO ME CANNOT EQUATED WITH INCOME EARNED FROM ACTIVITIES OF DEVELOPMENT OF KHA DI OR VILLAGE INDUSTRIES. THE AO ACCORDINGLY HELD THAT EXEMPTION CLAIMED UNDER S.10 (23B) OF THE ACT IS NOT ADMISSIBLE IN LAW IN SO FAR AS INTEREST CONCERNED. 4. THE CIT(A) IN FIRST APPEAL DELETED THE DISALLOWA NCE SO MADE RELYING UPON THE DECISION OF THE COORDINATE BENCH O F ITAT RAJKOT BENCH ON THE IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR E ARLIER YEARS. ITA NO.473/RJT/ 2015 ITO VS. UDHYOG BHARATI ASST.YEAR 2011-12 - 3 - 5. IT IS THE CASE ON BEHEST OF THE AO THAT THE DEC ISION OF THE CIT(A) IS NOT CORRECT. IT WAS SUBMITTED BY THE LD.DR THA T THAT THE DECISION OF THE ITAT IN EARLIER YEARS HAS NOT BEEN AGREED AND A PPEAL UNDER S.260A OF THE ACT HAS BEEN PREFERRED BY THE DEPARTMENT VIDE T AX APPEAL NO.1744 OF 2010 FOR AY 2004-05 DATED 20/10/2011 WHICH IS PE NDING FOR ADJUDICATION. 6. THE LD.AR, ON THE OTHER HAND, REFERRED TO DECISI ONS OF THE COORDINATE BENCH OF THE ITAT FOR VARIOUS ASSESSMENT YEARS IN ASSESSEES OWN CASE. THE LD.AR ALSO REFERRED TO THE DECISIONS RENDERED BY THE HONBLE GUJARAT HIGH COURT DISMISSING THE APPEAL OF THE DEPARTMENT FOR SOME YEARS IN ASSESSEES OWN CASE ALBEIT ON ACCOUNT OF LAW TAX EFFECT WITHOUT ADDRESSING THE ISSUE ON MERITS. 7. WE HAVE PERUSED THE ORDERS OF THE AO AS W ELL AS THAT OF CIT(A) AND ALSO THE DECISIONS OF THE ITAT CITED THE SHORT QUESTION THAT ARISEN FOR CONSIDERATION IN THE INSTANT CASE IS WHETHER IN TEREST INCOME ON SURPLUS FUNDS DEPLOYED IN FIXED DEPOSITS AND OTHER INVESTME NTS ETC. PARTAKES THE CHARACTER OF INCOME ATTRIBUTABLE TO BUSINESS OF PRO DUCTION, SALE OR MARKETING OF KHADI AND ALLIED PRODUCTS IN TERMS OF SECTION 10(23B) OF THE ACT.. WE NOTE THE RELEVANT FINDINGS OF THE COORDIN ATE BENCH OF ITAT IN ASSESSEES OWN CASE IN ITA NO.100/RJT/2008 FOR AY 2 004-05 ORDER DATED 19/03/2010 ON THE ISSUE WHICH READS AS UNDER:- ITA NO.473/RJT/ 2015 ITO VS. UDHYOG BHARATI ASST.YEAR 2011-12 - 4 - 8. WE HAVE DULY CONSIDERED THE CONTENTIONS OF THE A.O. AND OF THE CIT(A)-1, RAJKOT AND ALSO THE ARGUMENT OF THE L EARNED DR AND THE A.R. OF THE ASSESSEE AND THE PAPER BOOK FILED B Y THE ASSESSEE. WE OBSERVE THE FOLLOWING FACTS: THAT THE ASSESSEE IS SOLELY ENGAGED IN THE BUSINESS OF THE MANUFACTURING AND MARKETING OF KHADI AND ALLIED PRO DUCTS IS NOT IN DISPUTE; THAT THE ASSESSEE APPLIES/ACCUMULATES ITS INCOME FO R APPLICATION SOLELY FOR THE SAID PURPOSE IS ALSO NOT IN DISPUTE; THAT THE ASSESSEE IS ALSO APPROVED BY THE KHADI AND VILLAGE INDUSTRIES COMMISSION FOR THE SAID PURPOSE IS ALSO NOT IN DISPUTE. AS HAS BEEN SO OBSERVED BY THE CIT(A)-1, RAJKOT, AN D WHICH OBSERVATIONS HAS NOT BEEN CONTROVERTED BY THE LEARN ED DR, ALL THE FUNDS OF THE ASSESSEE CONSTITUTE A COMMON POOL AND THE SOURCE AND THE DESTINATION OF THE SAID FUNDS IS THE SOLE BUSIN ESS OF THE ASSESSEE WHICH IS MANUFACTURING AND MARKETING OF KHADI AND A LLIED PRODUCTS. THESE FACTS ARE NOT UNDER DISPUTE NOR WE RE ANY ARGUMENT PUT FORWARD BY THE D.R. TO CONTROVERT THE SAEM. THE HON.GUJARAT HIGH COURT IN THE CASE OF CIT V/S BAROD A PEOPLES CO-OPERATIVE BANK LTD (280 ITR 282) WHILST DEALING WITH, AMONGST OTHER ISSUES, THE ISSUE OF APPLICABILITY OF THE PROVISIONS OF SEC-80P TO THE INTEREST INCOME EARNED BY THE BANKS FROM INVESTMENTS IN VARIOUS SECURITIES HAS HELD THAT THE SAID INTEREST INCOME FROM INVESTMENTS STOOD COVERED BY THE DEDUCT ION U/S.80P (2)(A)(1) SINCE THE INVESTMENTS OF FUNDS WAS CONDUC IVE TO THE PROMOTION OR THE ADVANCEMENT OF BUSINESS OF BANKING . THE HON.BOMBAY HIGH COURT IN COMMISSIONER OF INCOME TAX V/S LOK HOLDINGS 308 ITR 356) HAS HELD THAT INTEREST INCOME RECEIVED BY THE ASSESSEE FROM THE DEPOSIT OF SURPLUS MONEY IN T HE COURSE OF ITS BUSINESS WAS LIABLE TO BE TAXED AS ITS BUSINESS INC OME. AS FAR AS ITA NO.473/RJT/ 2015 ITO VS. UDHYOG BHARATI ASST.YEAR 2011-12 - 5 - THE ASSESSEE IS CONCERNED SINCE IT IS A PUBLIC CHAR ITABLE TRUST, IT IS ALSO EXPECTED TO COMPLY TO PROVISIONS OF SEC-35 OF THE BOMBAY PUBLIC TRUST ACT WHICH SPECIFICALLY REQUIRES THE TR USTEES TO INVEST SURPLUS FUNDS IN PRESCRIBED SECURITIES. WE ARE ALS O OF THE OPINION THAT SEC-10(23B) HAVING BEEN BROUGHT INTO THE STATU TE TO ENCOURAGE THE KHADI AND RELATED ACTIVITIES OF THE CONCERNED I NSTITUTION AS SUCH (AS EXPLAINED BY THE BOARD IN ITS CIRCULAR CIT ED SUPRA) COUPLED WITH THE FACT THAT THE PHRASE ATTRIBUTABLE TO HAVING BEEN USED IN THE AID SECTION, A WIDER INTERPRETATION IS CALLED FOR ESPECIALLY WHEN THE FUNDAMENTAL FACT THAT THE ASSES SEE IF APPLYING THE SAID INCOME SOLELY FOR THE PURPOSE SPECIFIED IN SEC-10(23B) IS NOT UNDER DISPUTE. WE ALSO NOTE THAT THE PROVISION S UNDER WHICH RELIEF IS CLAIMED BY THE ASSESSEE IS PART OF EXEMPT ION PROVISIONS WHOSE PURPOSE IS ALSO TO ENCOURAGE PRESCRIBED ACTIV ITIES OF SUCH INSTITUTIONS AND THEREFORE AS PER SETTLED JUDICIAL PRINCIPAL IN THIS REGARD SUCH PROVISIONS ARE ALWAYS TO BE GIVEN A BEN EFICIAL INTERPRETATION WITH A VIEW TO ADVANCE THE LEGISLATI VE INTENT. FROM THE FACTS AND FINANCIAL FIGURES ON RECORD WE ALSO N OTE THAT THE INCOME OF INTEREST IS ATTRIBUTABLE TO AND ARISES FR OM WORKING FUNDS IN AN INTEGRATED MANNER AND FOR THIS REASON ALSO WE FIND THAT INTEREST CANNOT BE SEPARATED FROM THE OVERALL INCOM E AND ACTIVITIES OF THE TRUST. FOR THE REASONS ABOVE WE THEREFORE H OLD THAT THE INTEREST INCOME EARNED BY THE ASSESSEE IS ENTITLED TO THE EXEMPTION U/S.10(23B) OF THE ACT. THIS GROUND OF APPEAL OF T HE DEPARTMENT IS THEREFORE DISMISSED. 8. AS NOTED, THE ISSUE HAS ALREADY BEEN ADDRES SED IN ASSESSEES OWN CASE IN EARLIER YEARS. FOR THE PARITY OF REASONIN G CONSISTENT WITH THE DECISION OF THE SAME RANK, THE ISSUES RAISED BY THE DEPARTMENT ARE DECIDED AGAINST IT IN TERMS OF THE EARLIER ORDERS OF THIS TRIBUNAL. AN AMENDMENT MAY BE CARRIED OUT, IF NECESSARY, LATER I N TERMS OF SUB- ITA NO.473/RJT/ 2015 ITO VS. UDHYOG BHARATI ASST.YEAR 2011-12 - 6 - SECTION-5 OF SECTION 158A(1) OF THE ACT. THUS, THE APPEAL FILED BY THE REVENUE IS DISMISSED WITH AFORESAID OBSERVATIONS. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 14/03/2 017 AT AHMEDABAD. SD/- SD/- ( RAJPAL YADAV) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD ; DATED 14/03/2017 ..#, $.,#../ T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. - & ' .& / CONCERNED CIT 4. ' .& ( ) / THE CIT(A)-1, RAJKOT 5. 2$34 ,&,# , , /DR,ITAT, RAJKOT 6. 4?@ A% / GUARD FILE. / BY ORDER, 2& ,& //TRUE COPY// / ( DY./ASSTT.REGISTRAR) %&, / ITAT, RAJKOT 1. DATE OF DICTATION .. 1.3.17(DICTATION-PAD 8- PA GES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER .. 2.3.17 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 14.3.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 14.3.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER