ITO, Sirsa V. Market Committee, Dabwali

ITA 564/CHANDI/2011

• Counselvise Citation: 56421514 RSA 2011
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 23-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY SHARMA
• Assessee Lawyers: R R THAKUR
• Keywords: Charitable institution
• Section: 28; 11; 143(3); 264

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NOS. 562/CHD/2011 ASSESSMENT YEAR: 2008-09 THE ITO, VS. THE MARKET COMMITTEE, WARD-I, ELLANABAD SIRSA PAN NO. AAALM0430E & ITA NOS. 564/CHD/2011 ASSESSMENT YEAR: 2007-08 THE ITO, VS. THE MARKET COMMITTEE, WARD-I, DABWALI SIRSA PAN NO. AAALM0154H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY SHARMA RESPONDENT BY : SHRI R.R.THAKUR DATE OF HEARING : 08.09.2011 DATE OF PRONOUNCEMENT : 19.09.2011 ORDER PER BENCH BOTH THE APPEALS BY THE REVENUE ARE RELATING TO THE DIFFERENT MARKET COMMITTEES AGAINST THE SEPARATE ORDERS OF CIT(A), R OHTAK DATED 7.3.2011 & 29.3.2011 RELATING TO ASSESSMENT YEARS 2008-09 AN D 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT, 1961. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN I TA NO. 562/CHD/2011 ARE AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD . CIT(A) HAS ERRED IN ALLOWING BENEFIT OF ACCUMULATIO N OF INCOME AMOUNTING TO RS. 3,90,49,430/- WITHOUT 2 APPRECIATING THE FACT THAT THE PURPOSE MENTIONED IN FORM NO.10 WAS VAGUE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 5,60,0 00/- MADE ON ACCOUNT OF RECOVERY OF INSTALLMENT OF PLOTS SOLD IN EARLIER YEARS WITHOUT APPRECIATING THE FACT THAT SUCH RECEIPTS ARE TO BE TAKEN INTO ACCOUNT FOR VERI FYING THAT THE INCOME TO THE TUNE OF 85% IS SPENT BY THE TRUST DURING THE YEAR. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF A PPEAL IN ITA NO. 564/CHD/2011:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF EXCESS APPLICATION OF INCOME OF RS. 1,11,82,365 (ASSESSMEN T YEAR 2007-08) AND RS. 7,60,43,369/-(ASSESSMENT YEAR 2008-09) FOR THE EARLIER YEARS AS APPLICATION OF IN COME AGAINST THE CURRENT YEARS INCOME. 4. BOTH THE APPEALS OF THE REVENUE THOUGH RELATING TO THE DIFFERENT MARKET COMMITTEES WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 5. SHRI AJAY SHARMA APPEARED FOR THE REVENUE AND SH RI R.R. THAKUR APPEARED FOR THE ASSESSEE AND PUT FORWARD THEIR CON TENTIONS. ITA NO. 562/CHD/2011 6. THE ISSUE IN GROUND NO.1 RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN ALLOWING THE BENEFIT OF ACCUMULATION OF INCOME. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN THE COMP UTATION OF TOTAL INCOME ATTACHED WITH THE RETURN OF INCOME HAD APPENDED A N OTE AS UNDER:- 1. NOTICE IN FORM NO.10 GIVEN TO ITO THAT RS. 39049930/- WILL BE ACCUMULATED AND SET A PART FURTH ER UTILIZATION IN THE NEXT FIVE YEARS. 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD FILED A COPY OF FORM NO. 10 CLAIMING A SUM OF RS. 3.90 CR ORES I.E. INCOME OF THE 3 TRUST WOULD BE ACCUMULATED FOR DEVELOPMENT WORK ETC . THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE ASSESSEE HAS FAILED TO SPECIFY THE WORKS FOR WHICH THE SAID ACCUMULATED FUNDS ARE PROP OSED TO BE UTILIZED THE ASSESSEE IS NOT ENTITLED FOR THE BENEFIT OF ACC UMULATION AS PROVIDED U/S 11(2) OF THE INCOME TAX ACT, 1961. 8. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT SIM ILAR ISSUE AS ARISING IN THE PRESENT APPEALS HAS BEEN ADJUDICATED UPON BY THE TRIBUNAL IN THE CASE OF ANOTHER MARKET COMMITTEE I.E. ITO V MARKET COMMITTEE, ELLANABAD. THE LD. DR FOR THE REVENUE PLACED RELIA NCE ON THE ORDER OF ASSESSING OFFICER. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS THE ISSUE RAISED IN THE PRESENT CASE AROSE BEFORE THE T RIBUNAL AND THE TRIBUNAL VIDE ORDER DATED 25.5.2010, IN ITA NO. 429/CHD/2010 RELATING TO ASSESSMENT YEAR 2007-08 IN THE CASE OF ITO, WARD-1, SIRSA V MARKET COMMITTEE, ELLANABAD WITH LEAD ORDER IN ITO V MARKE T COMMITTEE, RANIA IN ITA NO. 427/CHD/2010, HELD AS UNDER:- 13. WE FIND THAT THE BASIS FOR DISALLOWING THE CLA IM U/S 11(2) OF THE ACT WAS NON FURNISHING THE COPY OF TH E RESOLUTION PASSED BY THE TRUST ALONGWITH THE FORM N O.10, IN WHICH THE INTENTION OF THE MONEY ACCUMULATED AND SE T APART IS CLARIFIED. THE ASSESSEE FILED THE COPY OF THE SA ID RESOLUTION BEFORE THE CIT(A) AND HE IN TURN ALLOWED THE CLAIM OF THE ASSESSEE. IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, WE ARE IN CONFORMITY WITH THE ORDER OF THE CIT(A) IN ALLOW ING THE CLAIM OF THE ASSESSEE ONCE THE COPY OF RESOLUTION P ASSED BY THE TRUSTEE HAD BEEN FURNISHED BEFORE THE CIT(A). T HE LEARNED DR FOR THE REVENUE FAILED TO BRING ON RECOR D ANY EVIDENCE TO THE CONTRARY. ACCORDINGLY, UPHOLDING TH E ORDER OF THE CIT(A), WE DISMISS THE GROUND NO.(III) RAISED B Y THE REVENUE. 10. WE FIND THAT BEFORE THE CIT(A), THE ASSESSEE HA D FURNISHED EVIDENCE OF THE INVESTMENTS OF THE ACCUMULATED FUNDS IN THE MANNER PROVIDED U/S 4 11(5) OF THE ACT AND THE COPIES OF THE BANK STATEME NTS / ACCOUNTS WERE CLAIMED TO BE PRODUCED EVEN BEFORE THE ASSESSING OF FICER. THE CIT(A) IN TURN FOLLOWING THE ORDER OF THE TRIBUNAL (SUPRA), A LLOWED THE CLAIM OF THE ASSESSEE. WE ARE IN AGREEMENT WITH THE ORDER OF T HE CIT(A) AS THE ISSUE BEFORE US IS IDENTICAL TO THE ISSUE RAISED BEFORE T HE TRIBUNAL (SUPRA) AND THE REVENUE HAS FAILED TO BRING ON RECORD ANY EVIDE NCE TO THE CONTRARY. ACCORDINGLY, UPHOLDING THE ORDER OF CIT(A), WE DISM ISS THE GROUND NO.1 RAISED BY THE REVENUE. 11. THE SECOND ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST THE DELETION OF ADDITION OF RS. 5,60,000/-. THE ASSESSING OFFIC ER HAVE NOTED THAT THE APPELLANT HAVE SHOWN RECOVERY OF AUCTION FOR EARLI ER YEARS AT RS. 2,36,40,674/- WHEREAS IN THE COMPUTATION OF INCOME IT HAS BEEN TAKEN AS RS. 2,30,80,674/-. THE ASSESSING OFFICER THUS MADE AN ADDITION OF RS. 5,60,000/- BEFORE THE CIT(A), THE CONTENTION OF TH E ASSESSEE WAS THAT THOUGH A RECOVERY ON ACCOUNT OF AUCTION OF EARLIER YEARS WAS TAKEN AT RS. 2,36,40,674/-, IN THE COMPUTATION OF INCOME, IT WAS TAKEN AS RS. 2,30,80,674/- AS NOTICE U/S 11 (1) HAS BEEN GIVEN B EFORE THE DUE DATE OF RETURN. HOWEVER, FOR THE REMAINING RECOVERY OF RS. 5.60 LACS, NOTICE HAS NOT BEEN GIVEN AS IT HAS BEEN DULY SHOWN DURING THE YEARS 2005-06 & 2006-07. THE CIT(A) AFTER CONSIDERING THE SUBMISSI ONS HELD AS UNDER:- I HAVE CONSIDERED THE ISSUE AND THE SUBMISSIONS MA DE BY THE AR. SINCE THE AMOUNT OF RS. 5.60 LACS HAS B EEN ALREADY SHOWN IN THE YEARS 2005-06 & 2006-07, THE ACTION OF THE ASSESSING OFFICER IN BRINING IT IN TH E YEAR UNDER CONSIDERATION IS NOT CORRECT AND THEREFORE, T HE GROUND ON APPEAL IS ALLOWED. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ISSUE WAS IN CONNECTION WITH THE RECOVERY OF RS. 5, 60,000/- FOR WHICH THE ASSESSEE CLAIMS TO HAVE GIVEN THE NOTICE DURING ASS ESSMENT YEAR 2005-06 5 AND 2006-07. HOWEVER, THE ASSESSEE HAS NOT FURNISHE D THE COMPLETE DETAILS IN RESPECT THEREOF BEFORE US AND AS SUCH MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR NECESSARY VERIFICATION. T HE ASSESSING OFFICER SHALL AFTER DUE VERIFICATION ALLOW THE CLAIM OF THE ASSESSEE IN CASE THE SAID AMOUNTS OF RS. 5,60,000/- HAD ALREADY BEEN SHOWN IN ASSESSMENT YEARS 2005-06 AND 2006-07. A REASONABLE OPPORTUNITY OF H EARING SHALL BE AFFORDED TO THE ASSESSEE. THE GROUND NO.2 RAISED B Y THE ASSESSEE IS THUS ALLOWED FOR STATISTICAL PURPOSES. THUS, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ITA NO. 564/CHD/2011 13. WE FIND THAT THE TRIBUNAL IN ITA NO. 407/CHD/20 10 VIDE ORDER DATED 26.5.2010 HAD RESTORED THE ISSUE IN QUESTION TO THE FILE OF THE CIT(A) TO DECIDE THE SAME ON THE MERITS OF THE CLA IM OF THE ASSESSEE. 14. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN R ESPECT OF THE CLAIM OF THE EXCESS APPLICATION OF INCOME OF RS. 14,58,110/- RELATING TO THE EARLIER YEARS AS APPLICATION OF INCOME AGAINST THE CURRENT YEAR INCOME. THE ASSESSEE HAD CLAIMED EXCESS APPLICATION OF INCOME O F RS. 1,11,82,365/- FOR THE ASSESSMENT YEAR 2002-03 AS APPLICATION OF I NCOME AGAINST THE CURRENT YEARS INCOME AND HE ALSO CLAIMED EXCESS AP PLICATION OF LAST YEAR TO BE CARRIED FORWARD TO NEXT YEAR AS UNDER:- 2005-06 RS. 3,45,735/- 2004-05 RS. 2,13,24,486/- 2003-04 RS. 1,74,54,967/- 2002-03 RS. 1,57,68,034/- 15. THE CLAIM OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT THE ISSUE IS COVERED BY THE VARIOUS CASE LAWS OF DIFFERENT HIGH COURTS. THE CIT(A) AFTER CONSIDERING THE MATTER HAS ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING AS UNDER:- 6 I HAVE CONSIDERED THE ISSUE AND THE SUBMISSIONS MA DE BY THE AR. IT IS SEEN THAT THE CASE LAWS RELIED UPON BY T HE AR ARE SQUARELY APPLICABLE TO THE FACTS OF THE APPELLANTS. FURTHER, I HAVE DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT B Y MY ORDER, AS MENTIONED ABOVE BY THE AR. IN VIEW OF THE ABOVE, THE ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING THE CARRY FORWARD OF EXCESS APPLICATION TO BE SET OFF AGAINST THE INCOME OF THE SUBSEQUENTLY YEAR IS HELD AS NOT CORRECT AND THEREFORE, THE GROUND OF APPEAL IS DISMISSED. 16. WE FIND THAT THE PRESENT ISSUE RAISED BY THE AS SESSEE IS COVERED BY THE RATIO LAID DOWN BY HON'BLE BOMBAY HIGH COURT IN CIT V INSTITUTE OF BANKING PERSONNEL SELECTION [(2003) 264 ITR 110(BOM )]. THE HON'BLE COURT HELD AS UNDER:- NOW COMING TO QUESTION NO. 3, THE POINT WHICH ARIS ES FOR CONSIDERATION IS WHETHER EXCESS OF EXPENDITURE IN THE EARLIER YEARS CAN BE ADJUSTED AGAINST THE INCOME OF THE SUB SEQUENT YEAR AND WHETHER SUCH ADJUSTMENT SHOULD BE TREATED AS APPLICATION OF INCOME IN THE SUBSEQUENT YEAR FOR CH ARITABLE PURPOSES ? IT WAS ARGUED ON BEHALF OF THE DEPARTMEN T THAT EXPENDITURE INCURRED IN THE EARLIER YEARS CANNOT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND THAT UTILI SATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF EARLIER YEARS WOULD NOT AMOUNT TO APPLICATION OF INCOME FOR CHARI TABLE OR RELIGIOUS PURPOSES. IN THE PRESENT CASE, THE ASSESS ING OFFICER DID NOT ALLOW CARRY FORWARD OF THE EXCESS OF EXPEND ITURE TO BE SET OFF AGAINST THE SURPLUS OF THE SUBSEQUENT YE ARS ON THE GROUND THAT IN THE CASE OF A CHARITABLE TRUST, THEI R INCOME WAS ASSESSABLE UNDER SELF-CONTAINED CODE MENTIONED IN SECTION 11 TO SECTION 13 OF THE INCOME-TAX ACT AND THAT THE INCOME OF THE CHARITABLE TRUST WAS NOT ASSESSABLE U NDER THE HEAD 'PROFITS AND GAINS OF BUSINESS' UNDER SECTION 28 IN WHICH THE PROVISION FOR CARRY FORWARD OF LOSSES WAS RELEVANT. THAT, IN THE CASE OF A CHARITABLE TRUST, THERE WAS NO PROVISION FOR CARRY FORWARD OF THE EXCESS OF EXPENDITURE OF E ARLIER YEARS TO BE ADJUSTED AGAINST INCOME OF THE SUBSEQUE NT YEARS. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT OF THE DE PARTMENT. INCOME DERIVED FROM THE TRUST PROPERTY HAS ALSO GOT TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUS T IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICA TION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PU RPOSES IN THE SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAS BEEN MA DE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINE D IN SECTION 11 OF THE ACT AND THAT SUCH ADJUSTMENT WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST UNDER SECTION 11(1)(A) OF THE ACT. OUR VIEW IS ALSO SUPPORTED BY THE JUDGM ENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT V. SHRI PLOT 7 SWETAMBER MURTI PUJAK JAIN MANDAL [1995] 211 ITR 29 3. ACCORDINGLY, WE ANSWER QUESTION NO. 3 IN THE AFFIRM ATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEP ARTMENT. 17. SIMILAR ISSUE AROSE BEFORE THE HON'BLE DELHI HI GH COURT IN DIRECTOR OF INCOME TAX (EXEMPTION) V RAGHUVANSHI CHARITABLE TRUST & ORS [(2011) 3 SCT 40)] AND ALSO HON'BLE RAJASTHAN HIGH COURT IN CIT V MAHARANA MEWAR CHARITABLE FOUNDATION [(1987)164 ITR 439 (RAJ )], HON'BLE MADRAS HIGH COURT IN CIT V MATRISEVA TRUST (2000) 242 ITR 20(MAD)] AND HON'BLE CALCUTTA HIGH COURT IN CIT V RAMCHANDRA POD DAR CHARITABLE TRUST (164 ITR 666 (CAL.)]. IN VIEW OF THE ABOVE S AID PRINCIPLE BEING LAID DOWN BY VARIOUS COURTS, WE UPHOLD THE ORDER OF CIT( A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE CARRY FORWARD OF EXC ESS APPLICATION OF INCOME FOR EARLIER YEARS AS APPLICATION AGAINST THE CURRENT YEAR INCOME. THE GROUND OF APPEAL RAISED BY THE REVENUE IS THUS DISMISSED. THUS, APPEAL OF THE REVENUE IS DISMISSED. 18. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 562/CHD/2011 IS PARTLY ALLOWED AND IN ITA NO. 564/CHD/2011 IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF SEPTEMBER, 2011. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 19 TH SEPTEMBER, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH 8