ACIT, Cuttack V. Abinava Orissa, Cuttack

ITA 489/CTK/2012

• Counselvise Citation: 48922114 RSA 2012
• Duration Of Justice: 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 08-10-2012
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: S RAY
• Keywords: Capital asset; Business income; Depreciation; Charitable institution
• Section: 11; 12A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , H ONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO S . 489 AND 490/CTK/2012 / ASSESSMENT YEAR S 2006 - 07AND 2007 - 08 ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), CUTTACK. - - - VERSUS - ABHINAVA ORISSA, BIDANASHI, CUTTACK . PAN: AAAAA 7768 A ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI S.C.MOHANTY, DR / FOR THE RESPONDENT: / SHRI S.RAY, AR / DATE OF HEARING: 26.11.2012 / DATE OF PRONOUNCEMENT: 30.11.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THESE APPEALS BY THE REVENUE ARE ON THE ORDERS OF THE LEARNED CIT(A) DIRECTING THE ASSESSING OFFICER TO BRING TO TAX THE EXCESS OF INCOME OVER E XPENDITURE WHEN THE ASSESSING OFFICER CHOSE TO TAX THE RECEIPTS IN THE HANDS OF THE ASSESSEE FOR THE RESPECTIVE AYS HOLDING THAT THE ASSESSEE HAD FAILED TO OBTAIN REGISTRATION U/S.12A OF THE I.T.ACT,1961 FOR THE IMPUGNED ASSESSMENT YEARS. 2. THE BRIEF FACT S ARE THAT THE ASSESSEE, AN AOP WAS CREATED AND REGISTERED UNDER REGISTRATION OF SOCIETIES ACT,1860 ON 16.9.1999. IT APPLIED FOR REGISTRATION/S.12A OF THEI.T.ACT,1961 ON 30.5.2007 WHICH FATE OF THE APPLICATION WAS NOT KNOWN TO THE ASSESSEE, FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006 - 07 HAVING INCURRED EXCESS OF EXPENDITURE OVER INCOME IN FORM ITS - 3A WHEN THE ASSESSING OFFICER TOTALED THE SUMMATIONS ON THE CREDIT OF RECEIPTS AND PAYMENT ACCOUNTS AND IN VIEW OF HOLDING IT IN VIOLATION OF SECTION 11 D ISALLOWED THE EXCESS CLAIMED WHICH WAS APPEALED I.T.A.NOS. 489 AND 490/CTK/2012 2 AGAINST BEFORE THE APPELLATE AUTHORITY. FOR THE ASSESSMENT YEAR 2007 - 08, THE ASSESSING OFFICER CONSIDERED THE RETURN FILED BY THE ASSESSEE IN FORM ITR - 7 SHOWING EXCESS OF INCOME OVER EXPENDITURE AMOUNTING TO RS.1,49,411 BEING AMOUNT AVAILABLE TO THE ASSESSEE U/S.11(1)(A). HOLDING A CONSISTENT VIEW AS IN THE EARLIER YEAR, THE ASSESSING OFFICER HELD THAT THE EXEMPTION U/S11 WAS NOT AVAILABLE TO THE ASSESSEE IN VIEW OF REGISTRATION 12A NOT GRANTED HE BROUGHT TO T AX INCOME OF RS.20,01,270 BEING THE RECEIPTS IN ACCORDANCE WITH THE RECEIPTS AND PAYMENT ACCOUNTS. 3. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY, WHO BY WAY OF SEPARATE ORDERS CONSIDERED THE ISSUE BEFORE HIM AS FOLLOWS (PARAGRAPH 6 OF THE APPELLATE ORDER FOR THE AY 2007 - 08) : 6. I HAVE CAREFULLY CONSIDERED THE MATTER. INCOME DERIVED FOR TRUST PROPERTY MUST B DETERMINED ON COMMERCIAL PRINCIPLES AND IN DOING SO, ALL OUTGOINGS INCLUDING OUTGOINGS BY WAY OF INCOME TAX PAID BY THE AS SESSEE 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 ARISE. IT HAS BEEN HELD SO IN CI T V. GANGA CHARITY TRUST FUND (1986) 162 ITR 6 12 (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 V. TRUTEES OF H.E.H. THE NIZAMS SUPPLEMENTAL RELIGIOUS ENDOWMENT TRUST (1981) 127 ITR 378 (AP), FOLLOWED IN CIT V. JANA KI AMMAL AYYA NADAR TRUST (1985) 153 ITR 159 (MAD.); CIT V. RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES (1982) 135 ITR 485 (MAD.) & CIT V. ETHIRAJ (ESTATE OF VL) (1982) 136 ITR 12 (MAD.). COMPUTATION OF INCOME FROM PROPERTY HELD FOR CHARITABLE PURPOSES I S GIVEN BELOW. (I)HOUSE PROPERTY INCOME - (NORMAL WORKING) X (II)BUSINESS INCOME (NORMAL WORKING) X (III)CAPITAL GAIN X (IV) INCOME FROM OTHER SOURCES GROSS RECEIPTS OF THE TRUST/INSTITUTIONS(INCLUDING DONATIONS CREDITED TO OTHER FUNDS OTHER THAN CORPUS AND SPECIFIC FUNDDONATIONS WHERE INCOME IS TO BE UTILIZED). X ------------ TOTAL X (I) LESS: ESTABLISHMENT EXPENSES (INCLUDING DEPRECIATION) E ------------ NET INCOME X1 LESS DEDUCTION U/S.11. I.T.A.NOS. 489 AND 490/CTK/2012 3 (I) ACCUMULATION @15% (ON THE GROSS INCOME) Y (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 SPENT IN NEXT YEAR AS THE CASE MAY BE BY PERMITTED OPTION) (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 NIRMAL AGRICULTURAL SOCIETY V. ITO (1999) 71 L TD 152 (HYDERABAD B BENCH). THE ASSESSEE 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 REJE CTED THE APPLICATION 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 BY THE HONBLE TRIBUNAL THAT EVEN WHEN THE 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. AGAINST THIS ORDER OF THE LEARNED CIT(A), THE REVE NUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. THE LEARNED DR SUBMITTED HIS ARGUMENTS FOR THE RESPECTIVE AYS THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) IS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO TAX THE NET INCOME OF RS .6,69, 050 INSTEAD OF G ROSS RECEIPT OF RS. 20,01,270 . 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 A.O. 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. HE SUBMITTED THAT THE LEARNED CIT(A) IS NOT 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 CAN NOT BE CONSIDERED AS WHOLLY AND I.T.A.NOS. 489 AND 490/CTK/2012 4 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 INCOME NOT EXPENSES INCURRED TO EARN SUCH INCOME. THE LEARNED DR EMPHASIZED THAT HAVING CONSIDERED THE PROVISIONS OF THE I.T.ACT IN RESPECT TO RE GISTRATION U/S.12A AND EXEMPTION U/S.11, THE LEARNED CIT(A) COULD NOT HAVE ADJUDICATED THE ISSUE ON A FINDING OTHERWISE NOT BROUGHT ON RECORD BY THE ASSESSING OFFICER INSOFAR AS THE LEARNED CIT(A) HAS NOT CONCLUDED THAT THE EXPENSES SO CLAIMED COULD BE AL LOWED UNDER THEPROVISIONS OF SECTON 57( III ) WHEN THE PURPOSE OF THE ASSESSEE COULD NOT BE CHANGE TO THAT OF EARNING OF INCOME FROM OTHER SOURCES. HE PRAYED THAT THE ISSUE BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION AFRESH IN THE LIG HT OF FACTS BROUGHT ON RECORD JUST BECAUSE THE ASSESSEE HAS CHOSEN TO REMAIN INACTIVE INSOFAR AS THE REGISTRATION U/SD.12A HAS NOT BEEN PERUSED BY IT. IN ABSENCE OF CLAIM OF SUCH NATURE, THE ASSESSEE CANNOT BE SAID TO BE CONTEMPLATING THE POSITIVE RESPONS E HAS BEEN WRONGLY STATED TO HAVE BEEN CONSIDERED BY THE LEARNED CIT(A). 5. THE LEARNED COUNSEL OF THE ASSESSEE SUPPORTED THE ORDERS OF THE LEARNED CIT(A) INSOFAR AS THE LEARNED DR COULD HAVE RAKED A NEW ISSUE BEFORE THE TRIBUNAL WHEN THE GROUNDS RAISED BY THE REVENUE ARE SPECIFIC INSOFAR AS THE SECOND GROUND RATHER LEANS IN FAVOUR OF THE ASSESSEE TO THE EXTENT THAT THE LEARNED CIT(A) HAS CONSIDERED THE FACTS IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT. IT WAS NOT THE CASE OF THE ASSESSEE TO TAKE A DVANTAGE OF THE SITUATION WHEN THE RETURNS FILED BY IT WERE ON THE BASIS OF CARRYING OUT ITS OBJECT IN ACCORDANCE WITH THE SOCIETY REGISTERED FOR THE PURPOSE OF CARRYING OUT CHARITABLE ACTIVITIES. IT WAS NOT THE CASE OF THE ASSESSING OFFICER ALSO TO CONSID ER THE UTILITY OF THE RECEIPTS IN ACCORDANCE WITH THE PURPOSE OF SECTION 11 WHEN THE NET INCOME HAS BEEN DIRECTED TO BE I.T.A.NOS. 489 AND 490/CTK/2012 5 TAX ED BY THE LEARNED CIT(A) AFTER VERIFYING THE FACTS WHICH LEAD TO THE FINDING THAT IT WAS NOT A CASE OF TRYING TO BALANCE THE INCOME S O GENERATED NOT TO BE TAXED WHEN THE CLAIM OF THE ASSESSEE WAS TO CLAIM EXEMPTION U/S.11. THERE IS NO INFIRMITY IN LAW TO THE EXTENT THAT ASSUMING AND NOT ACCEPTING THE OBJECTS CARRIED OUT BY THE ASSESSEE HAVE TO BE CONSIDERED IN ACCORDANCE WITH THE PROVIS IONS OF SECTION 2(15) WAS BEFORE THE LEARNED CIT(A) WHEN HE CHOSE TO DIRECT THE ASSESSING OFFICER TO TAX THE EXCESS OVER INCOME ONLY. THEREFORE, THE SITUATION AS OF NOW CANNOT BE ON RESTORATION AS SUGGESTED BY THE LEARNED DR TO HOLD OTHERWISE. 6. WE HAVE H EARD THE RIVAL SUBMISSIONS AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LEARNED CIT(A) HAS APPLIED HIS MIND O N THE ASSESSEE NOT HAVING BEEN GRANTED REGISTRATION U/S.12A WAS TO BE SUBJECTED TO TAX AS A NON - CHARITABLE UNIT WHEN THE ASSESSEE HAS BEEN REGISTERED AS AOP IN ACCORDANCE WITH THE PROVISIONS OF I.T.ACT. THE ASSESSING OFFICER HAS MERELY DISALLOWED THE CLAIM OF TOTAL EXPENSES IN VIEW OF THE ASSESSEE NOT ELIGIBLE FOR EXEMPTION U/S.11 BY BRINGING TO TAX THE TOTAL RECEIPTS I N THE HANDS OF THE ASSESSEE. REFRAINING OURSELVES ON ADJUDICATING THE IS SUE IN THE LIGHT OF THE ASSESSMENT WHETHER COULD HAVE BEEN MADE OTHERWISE WHEN ON THE ASSESSEES FAILURE TO GET REGISTRATION U/S.12A LEAD TO A FINDING WHETHER CAN BE ADJUDICATED AS FOU ND BY THE LEARNED CIT(A), WE ARE OF THE CONSIDERED VIEW THAT THE LEARNED CIT(A) HAS PROCEEDED TO CONSIDER THE ASSESSEES SUBMISSIONS IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT WHEN HE DIRECTED THE ASSESSING OFFICER TO TAX THE EXCESS OF INCOME OVER EX PENDITURE FOR THE IMPUGNED AYS. THE LEARNED COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS NOT FILED ANY CROSS OBJECTION NO R HAS FILED ANY APPEAL AGAINST THE DIRECTION OF THE LEARNED CIT(A) SETTLES THE ISSUE THAT THE ASSESSMENTS SO PASSED BY T HE ASSESSING OFFICER ARE ACCEPTABLE TO IT I.T.A.NOS. 489 AND 490/CTK/2012 6 INSOFAR AS CLAIMING OF EXPENSES WAS NOT TO HIGH LIGHT EXEMPTION U/S.11 WHEN THE LEARNED CIT(A) HELD THAT THE RECEIPTS WHETHER OR NOT EXEMPT U/S.12A WERE TO BE UTILISED FOR THE PURPOSE IT HAD BEEN RECEIVED HAD BEE N DONE BY THE ASSESSEE SOCIETY IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT CLAIMING DEDUCTION UNDER SECTIONS 30 TO 38. IN OTHER WORDS, THE LEARNED CIT(A) HAS CONSIDERED THAT INSPITE OF THE ASSESSING OFFICER HAVING CONSIDERED THE DISALLOWANCE OF EXPENS ES IN VIOLATION TO THE PROVISIONS OF SECTIONS 11 AND 13, THE ASSESSEE COULD ONLY BE TAXED ON THE EXCESS OF INCOME OVER EXPENDITURE WITHOUT ANY CONDITION OR STIPULATION OF HAVING GRANTED REGISTRATION U/SD.12A. THE LEARNED DRS APPREHENSION THEREFORE AS OF N OW IS OF NO AVAIL INSOFAR AS IT IS NOT THE CASE OF THE AO TO WANT RESTORATION OF THE ASSESSMENT TO BE MADE AFRESH N THE LIGHT OF COMPUTING EXCESS OF INCOME OVER EXPENDITURE FOR HOLDING A VIEW OTHER THAN A VIEW WHICH HAS BEEN DELIBERATED UPON BY THE LEARNED CIT(A) ON THE BASIS OF FINDING OF FACTS AS NOTED BY HIM. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF THE LEARNED CIT(A), WHICH WE CONFIRM BY DISMISSING THE APPEAL OF THE REVENUE. 7. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. S D/ - S D/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 30.11.2012 ( ), (H.K.PADHEE), SENIOR.PRIVATE SE CRETARY. I.T.A.NOS. 489 AND 490/CTK/2012 7 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), CUTTACK. 2 / THE RESPONDENT: ABHINAVA ORISSA, BIDANASHI, CUTTA CK. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 27.11.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PL ACED BEFORE THE DICTATING MEMBER 29.11.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.11.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GO ES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..