ACIT, Cuttack V. Bhagat Educational Trust, Jagatsinghpur

ITA 487/CTK/2012

• Counselvise Citation: 48722114 RSA 2012
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-10-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 08-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Depreciation; Charitable institution; Condonation of delay; Capital expenditure
• Section: 12A; 147; 148; 11

Judgement Text

1 I .T.A NO. 487/CTK/2012 C.O.NO.01/CTK/2013 ASSESSMENT YEAR:2008 - 09 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI P.K.BANSAL(ACCOUNTANT MEMBER) AND SHRI D.T.GARASIA (JUDICIAL MEMBER) I.T.A NO. 487/CTK/2012 ASSESSMENT YEAR: 2008 - 09 ACIT, /CIRCLE - 1(2), CUTTACK VS BHAGABAT EDUCATIONAL TRUST, AT/PO: MANGARAJPUR, VIA: KUJANG, DIST: JAGATSINGHPUR PA NO.AABTB 4227 H APPELLANT RESPONDENT C.O.NO.01/CTK/2013 (ARISING OUT OF I.T.A NO. 487/CTK/2012) ASSESSMENT YEAR: 2008 - 09 BHAGABAT EDUCATIONAL TRUST, AT/PO: MANGARAJPUR, VIA: KUJANG, DIST: JAGATSINGHPUR PA NO.AABTB 4227 H VS ACIT, /CIRCLE - 1(2), CUTTACK CROSS OBJECTOR RESPONDENT REVENUE BY: SHRI S.C.MOHANTY, DR CROSS OBJECTOR BY : NONE DATE OF HEARING: 03/10/2013 DATE OF PRONOUNCEMENT: 4 /10/2013 O R D E R PER D.T.GARASIA, JM THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST ORDER DATED 2.7.2012 OF LD CIT(A) - CUTTACK FOR ASSESSMENT YEAR 2008 - 09, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3)/147 OF THE I.T.ACT, 1961. 2 I .T.A NO. 487/CTK/2012 C.O.NO.01/CTK/2013 ASSESSMENT YEAR:2008 - 09 2. THE REVENUE HAS TAKEN FOLLOWING GROUNDS IN ITS APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD CIT(A) IS NOT JUSTIFIED IN DIRECTING THE AO TO TAX THE NET INCOME INSTEAD OF GROSS RECEIPT OF RS.18,74,400/ - . AS THE ASSESSEE SOCIETY WAS NOT REGISTERED U/S.12A OF THE I.T.ACT, 1961, THE PROVISIONS OF SECTION 11 OF THE ACT ARE NOT APPLICABLE FOR WHICH THE AO HAS DETERMINED THE STATUS AS AOP AND ALSO TAXED THE GROSS RECEIPTS OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES AND DUE TO FAILURE ON ITS PART TO PRODUCE THE DETAILS OF BOOKS OF ACCOUNT/BILLS AND VOUCHERS TO SUBSTANTIATE THE GENUINENESS OF EXPENDITURE CLAIMED. 2. WHETHER THE LD CIT(A) IS JUSTIFIED TO HOLD THAT VARIOUS EXPENSES CLAIMED IN RECEIPT AND EXPENDITURE ACCOUNTS HAVE TO BE EXCLUDED FROM GROSS RECEIPT UNDER SITUATION WHERE THE EXPENSES CLAIMED CANNOT BE CONSIDERED AS WHOLLY AND EXCLUSIVELY LAID OUT FOR EARNING THE GROSS RECEIPT WHICH ARE MOSTLY VOLUNTARY CONTRIBUTIONS AND GRANT AS SUCH THE EXPENSES CAN ONLY BE TREATED AS APPLICATION OF INC OME NOT EXPENSES INCURRED TO EARN SUCH INCOME. 3. BRIEFLY STATED THE RELEVANT FACTS ARE LIKE THIS. THE ASSESSEE TRUST FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION ON 26.12.2008 DECLARING A LOSS OF RS.1,428/ - AND SAME WAS PROCESSED UNDER SECTION 143(1) ON 31.3.2010. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PERUSAL OF INCOME AND EXPENDITURE ACCOUNT ANNEXED TO RETURN OF INCOME, THE ASSESSING OFFICER NOTICED THAT THE TRUST HAD RECEIVED AN AMOUNT OF RS.18,74,400/ - AS DONATION (VOLUNTARY CONTRIBUTION) DURING THE PREVIOUS YEAR 2007 - 08. THEREFORE, THE AO TREATED THIS VOLUNTARY CONTRIBUTION AS INCOME IN THE HANDS OF THE TRUST IN ACCORDANCE WITH THE SUB - CLAUSE(IIA) OF CLAUSE (24) OF SECTION 2 READ WITH EXPLANATION TO TH E SAME OF THE INCOME TAX ACT, 1961. HOWEVER, ALTHOUGH THE TRUST WAS NOT REGISTERED UNDER SECTION 12A OF THE INCOME TAX ACT,, NEVERTHELESS IT CLAIMED DEDUCTION FOR EXPENDITURE MADE FOR CHARITABLE ACTIVITIES IN ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2008 - 09. CONSEQUENTLY, NOTICE UNDER SECTION 148 3 I .T.A NO. 487/CTK/2012 C.O.NO.01/CTK/2013 ASSESSMENT YEAR:2008 - 09 OF THE INCOME TAX ACT WAS ISSUED TO THE CHAIRMAN OF THE TRUST ON 29.5.2009 ON THE GROUND INCOME HAS BEEN ESCAPED WITHIN THE MEANING OF SECTION 147 OF THE ACT AND ASSESSEE WAS ASKED TO FILE THE RETURN OF INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAS CLAIMED THAT ENTIRE DONATION RECEIVED BY THE ASSESSEE TRUST UNDER THE MANDATE OF DONATION FOR ASSETS, HENCE SAME COULD NOT BE CONSIDERED AS INCOME. IT WAS STATED THAT SOME OF THE INCOME WAS UTILI ZED FOR INCURRING EXPENSES AND SOME OF THE MONEY WERE UTILIZED FOR PURCHASE OF ASSETS. THEREFORE, ASSESSEE SUBMITTED THAT ASSESSEE IS NOT ENTITLED FOR REGISTRATION UNDER SECTION 12A OF THE ACT BUT ASSESSEE IS ENTITLED FOR CLAIMING EXPENSES. THEREFORE, T OTAL DONATION RECEIVED BY THE ASSESSEE CANNOT BE CONSIDERED AS INCOME OF THE TRUST. THE ASSESSING OFFICER DID NOT CONSIDER THE ABOVE CONTENTIONS OF THE ASSESSEE AS TENABLE IN THE EYE OF LAW AND ASSESSED THE ENTIRE DONATION RECEIVED OF THE TRUST AS INCOME OF THE ASSESSEE TRUST. BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER TO THE FIRST APPELLATE AUTHORITY, WHO HAS ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: INCOME DERIVED FOR TRUST PROPERTY MUST BE DETERMINED AS COMMERCIAL PRINCIPLES AND IN DO ING SO, ALL OUTGOINGS INCLUDING OUTGOINGS BY WAY OF INCOME TAX PAID BY THE ASSESSEE TRUST MUST BE DEDUCTED AND IT IS ONLY FROM THE SURPLUS INCOME IN THE HANDS OF THE TRUSTEES THAT THE QUESTION OF APPLICATION OR ACCUMULATION OR SETTING APART OF INCOME CAN A RISE. IT HAS BEEN HELD SO IN CIT VS. GANGA CHARITY TRUST FUND (1986) 162 ITR 612(GUJ) (IN RESPECT OF A.Y. 1971 - 72) AND 1972 - 73) AND FOLLOWED IN (1993) 115 CTR (GUJ) 325 (IN RESPECT OF A.Y. 1973 - 74 AND 1974 - 75), CIT VS. TRUSTEES OF H.E.H. THE NIZAMS SUPPL EMENTAL RELIGIOUS ENDOWMENT TRUST (1981) 127 ITR 378 (AP), FOLLOWED IN CIT VS. JANAKI AMMAL AYYA NADAR TRUST (1985) 153 ITR 159(MAD) ; CIT V. RAO BAHADUR CALAVALA CUNNAN CHGETTY CHARITIES(1982) 135 ITR 485 (MAD) & CIT VS. ETHIRAJ (ESTATES OF VL)(1982) 136 ITR 12(MAD). COMPUTATION OF INCOME FROM PROPERTY FOR CHARITABLE PURPOSES IS GIVEN BELOW: (I) HOUSE PROPERTY INCOME (NORMAL WORKING) X 4 I .T.A NO. 487/CTK/2012 C.O.NO.01/CTK/2013 ASSESSMENT YEAR:2008 - 09 (II) BUSINESS INCOME)NORMAL WORKING) X (III) CAPITAL GAIN X (IV) INCOME FROM OTHER SOURCES X GROSS RECEIPTS OF THE TRUST/INSTITUTIONS(INCLUDING DONATIONS CREDITED TO OTHER FUNDS OTHER THAN CORPUS AND SPECIFIC - FUND DONATIONS WHERE INCOME IS TO BE UTILIZED) ___________ X LESS : ESTABLISHMENT EXPENSES (INCLUDING DEPRECIATION) E NET INCOME X1 LESS - DEDUCT ION U/S.11 (I) ACCUMULATION @ 15% (ON THE GROSS INCOME) (II) APPLICATION OF INCOME FOR CHARITABLE OBJECTS Y (III) APPLICATION OF INCOME FOR CREATION OF NEW CAPITAL ASSETS Y (IV) DEEMED APPLICATION OF INCOME Y (REQUIRED AND/OR SPEND IN NEXT YEAR AS THE CASE MAY BE BY PE RMITTED OPTION) Y (V) ACCUMULATION OF INCOME FOR SPECIFIED PURPOSE (PERMITTED FOR 5 YEARS BY FILING OF FORM 10) Y1 --------------- TOTAL INCOME (X1 - Y1) A SIMILAR ISSUE AROSE IN NORMAL AGRICULTU RAL SOCIETY VS. ITO(1999) 71 ITD 152 (HYD B BENCH). THE ASSESSE WAS A REGISTERED SOCIETY FORMED FOR UNDERTAKING CHARITABLE ACTIVITIES AMONG AGRICULTURISTS. THE ASSESSEE HAD NOT APPLIED FOR REGISTRATION U/S.12A IN TIME. THE APPLICATION WAS FILED BELATEDLY. THE COMMISSIONER REJECTED THE APPLICATIO N ON THE GROUND OF DELAY. AS THE ASSESSEE HAS NOT BEEN GRANTED REGISTRATION, THE AO FOUND THAT THE ASSESSEE WAS NOT ENTITLED FOR THE RELIEFS SPECIFIED U/S.11 & 13 OF THE ACT. THEREFORE, THE AO COMPLETED THE ASSESSMENT IN THE STATUS OF AOP. IT WAS HELD B Y THE HONBLE TRIBUNAL THAT EVEN WHEN ASSESSEE HAS BEEN ASSESSED AS AOP AND DEPRIVED OF SECTION 11 BENEFITS, THE AO COULD ASSESS ONLY NET INCOME OF THE ASSESSEE AND NOT GROSS RECEIPTS. HAVING REGARD TO THE ABOVE, AO IS DIRECTED TO BRING TO TAX THE NET INCOME IN PLACE OF ENTIRE DONATION OF RS.18,74,400/ - . 4. NONE APPEARED ON BEHALF OF ASSESSEE. HENCE, WE PROCEED TO DECIDE THE APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE ON MERITS AFTER HEARING LD D.R. AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 5 I .T.A NO. 487/CTK/2012 C.O.NO.01/CTK/2013 ASSESSMENT YEAR:2008 - 09 5. LD D.R. SUBMITTED BEFORE US THAT ASSESSEE TRUST IS NOT GRANTED REGISTRATION UNDER SECTION 12A OF THE ACT AND WHEN ASSESSEE TRUST IS NOT REGISTERED, THE ENTIRE DONATION RECEIVED BY THE ASSESSEE TRUST IS THE INCOME OF THE ASSESSEE A ND, THEREFORE, ASSESSEE TRUST IS ENTITLED FOR ANY DEDUCTION IN RESPECT OF EXPENDITURE AND ALSO ASSESSEE CANNOT INCUR ANY CAPITAL EXPENDITURE. HE SUBMITTED THAT ENTIRE DONATION RECEIVED BY THE ASSESSEE HAS TO BE ASSESSED AS INCOME OF THE TRUST. 6 . WE HAV E HEARD OF LD D.R. AND PERUSED THE ORDERS OF AUTHORITIES BELOW. THE ONLY ISSUE INVOLVED IN THIS CASE WHETHER GROSS DONATION OF RS.18,74,400/ - HAS TO BE ADDED OR NET INCOME HAS TO BE ADDED. WE NOTED THAT LD CIT(A) HAS CLEARLY HELD ON THE BASIS OF DECISIO N IN THE CASE OF NORMAL AGRICULTURAL SOCIETY VS. ITO (SUPRA) THAT IT IS ONLY NET INCOME, WHICH CAN BE ADDED EVEN IF THE ASSESSEE TRUST IS NOT ENTITLED FOR RELIEF SPECIFIED UNDER SECTION 11 & 13 OF THE ACT. IN OUR OPINION, THE FINDINGS GIVEN BY LD CIT(A) ARE DULY SUPPORTED BY THE DECISION OF COORDINATE BENCH IN THE CASE OF NIRMAL AGRICULTURAL SOCIETY VS. ITO (SUPRA). THEREFORE, FOLLOWING THE SAID DECISION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT(A) TO INTERFERE. WE, THEREFORE, UPHOLD THE IM PUGNED ORDER. 7. THE ASSESSEE HAS FILED CROSS OBJECTION, WHICH IS DELAYED BY 60 DAYS. ASSESSEE HAS FILED APPLICATION PRAYING FOR CONDONATION OF DELAY ALONGWITH AN AFFIDAVIT. IN THE 6 I .T.A NO. 487/CTK/2012 C.O.NO.01/CTK/2013 ASSESSMENT YEAR:2008 - 09 APPLICATION FOR CONDONATION OF DELAY, IT IS SUBMITTED THAT MR MADAN MOHA N SWAIN, CHAIRMAN OF THE TRUST, WHO LOOKS AFTER THE LEGAL AND INCOME TAX MATTERS OF THE TRUST WAS SERIOUSLY ILL AND MEDICALLY UNFIT. THEREFORE, HE COULD NOT FILE THIS CROSS OBJECTION AND, THEREFORE, THERE WAS DELAY OF 60 DAYS. IN VIEW OF THIS, PRAYER WA S MADE TO CONDONE THE DELAY. 8. IT IS PERTINENT TO MENTION HERE THAT ASSESSEE DID NOT PRESENT AT THE TIME OF HEARING OF THIS CROSS OBJECTION AND APPEAL FILED BY THE REVENUE. WE ALSO FIND THAT CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF THE OR DER OF LD CIT(A). WE HAVE ALREADY DISMISSED THE APPEAL OF THE REVENUE AND, THEREFORE, THERE IS NO NECESSITY TO CONDONE THE DELAY. THEREFORE, CROSS OBJECTION FILED BY ASSESSEE IS DISMISSED. 9. IN THE RESULT, APPEAL FILED BY REVENUE AND CROSS OBJECTION FI LED BY ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 4 TH OCTOBER, 2013 SD/ - (P.K.BANSAL) (ACCOUNTANT MEMBER) SD/ - (D.T.GARASIA) (JUDICIAL MEMBER) CUTTACK: DATED 4 /10/2013 PARIDA 7 I .T.A NO. 487/CTK/2012 C.O.NO.01/CTK/2013 ASSESSMENT YEAR:2008 - 09 COPY TO: 1. THE APPELLANT - REVENUE: ACIT, /CIRCLE - 1(2),CUTTACK 2. THE CROSS OBJECTOR/RESPONDENT: BHAGABAT EDUCATIONAL TRUST, AT/PO: MANGARAJPUR, VIA: KUJANG, DIST: JAGATSINGHPUR 3. COMMISSIONER OF INCOME TAX (APPEAL), CUTTACK 4. COMMISSIONER OF INCOME TAX, CUTTACK 5. DEPARTMENTAL REPRESENTATIVE, ITAT, CUTTACK //TRUE COPY// BY ORDER ASST.REGISTRAR, ITAT, CUTTACK