Madre De Deus Church Vettucaud Church, Thiruvananthapuram V. The Assistant Commissioner of Income Tax, Circle-1(2), Trivandrum, Thiruvananthapuram

ITA 568/COCH/2022

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 0858 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 02-05-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order
• Section: 37; 263; 11; 143(3); 142(1); 12A; 12AA; 143(2)

Judgement Text

ITA No.568/Coch/2022 Madre De Deus Church, Thiruvananthapuram IN THE INCOME TAX APPELLATE TRIBUNAL BENCH: COCHIN BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA No.568/Coch/2022 Assessment Year: 2017-18 Madre De Deus Church Vettucaud Church Vettucaud Thiruvananthapuram 695 008 PAN NO : AAETM4324K Vs. ACIT Circle – 1(2) Trivandrum APPELLANT RESPONDENT Appellant by : Shri R. Krishnan, A.R. Respondent by : Smt. J.M. Jammuna Devi, Sr. DR Date of Hearing : 03.08.2022 Date of Pronouncement : 03.08.2022 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal by assessee is directed against order of the PCIT passed u/s 263 of the Act dated 7.2.2022. The assessee has raised following grounds of appeal:- 1) “The learned Principal Commissioner of Income Tax erred in setting aside the assessment u/s 263 of the Income Tax Act. 2) The learned Principal Commissioner of Income Tax ought to have noted that in order to fall within the ambit of section 263 of the Income Tax Act, an order must be both erroneous as well as prejudicial to the interests of the revenue. The main condition has not been satisfied in this case. ITA No.568/Coch/2022 Madre De Deus Church, Thiruvananthapuram Page 2 of 5 3) The learned Principal Commissioner of Income tax erred in entering into a finding that the expenses of Rs. 99,00,000/- incurred by the appellant towards grant for house construction ought to have been disallowed u/s 37 of the Income Tax Act as the appellant was not having registration u/s 12A of the Income Tax Act. 4) The learned Principal Commissioner of Income Tax ought to have appreciated that the connection of the appellant itself having been made for the purpose of aid for construction of houses for the poor needy fishermen, the sum of Rs. 99,00,000/- spent for that purpose is certainly a revenue expenditure and has been rightly allowed in the assessment, so much so there is no error in the order passed by the Assessing Officer. 5) The decisions quoted by the learned Principal Commissioner of Income Tax are out of context and not applicable to the facts of the appellant's case. 6) The learned Principal Commissioner of Income Tax went wrong in giving a narrow interpretation of the provisions of the Income Tax Act in that the expenses incurred by the appellant are not allowable against the income earned merely because the appellant is not registered wilder 12A of the Income Tax Act.” 2. Facts of the case are that the assessment in this case for assessment year 2017-18 u/s 143(3) of the Income-tax Act,1961 ['the Act' for short] vide order dated 9.12.2019 arising a total loss of Rs.2,51,539/-. On verification of the records, Ld. PCIT noticed that assessee has claimed an expenditure of Rs.99 lakhs towards grant for house construction in the income and expenditure account. According to the Ld. PCIT, this expenditure cannot be allowed u/s 37 of the Act. Accordingly, he proposed to revise the assessment order invoking provisions of section 263 of the Act. Accordingly, he set aside the assessment order and directed the AO to verify the facts of the case in respect of the above discrepancies found and remitted the matter de-novo to decide afresh after giving an opportunity of hearing to the assessee. Against this assessee is in appeal before us. ITA No.568/Coch/2022 Madre De Deus Church, Thiruvananthapuram Page 3 of 5 3. The Ld. A.R. submitted that the AO in this case issued pre- assessment notice u/s 142(1) & 143(2) of the Act and enquired about the following issues:- 1. Explanation with supporting documents for grant for house construction. 2. Agreement of AOP relevant to A.Y.17-18. 3. Explanation with supporting documents & ledger for the following expenses —BCC related expense, church expense, education related expense, KCYM expense, shrine maintenance, social service, Thirunal expense, bank interest expense. 4. Explanation regarding mission Sunday collection —income & expense with ledger. 5. Explanation for donation of Rs.1,20,000. 6. Cash deposit details during 08/11/15 to 31/12/15. 4. The assessee furnished all the details called for by the AO and after duly satisfied with the reply given by the assessee, AO completed assessment u/s 143(3) of the Act determining the income after making addition of Rs.1,21,25,699/- to the returned income of the assessee. According to the Ld. A.R., there is no error committed by AO so far as prejudicial to the interest of revenue. 5. On the other hand, Ld. D.R. relied on the order of Ld. PCIT passed u/s 263 of the Act. 6. We have heard the rival submissions and perused the materials available on record. In this case, assessee claimed an expenditure of Rs.99 lakhs towards grant given for house construction out of its donation received by assessee and the assessee offered net income for taxation. Now the contention of Ld. ITA No.568/Coch/2022 Madre De Deus Church, Thiruvananthapuram Page 4 of 5 D.R. is that grant for house construction incurred by the assessee cannot be allowed u/s 37 of the Act. There is no dispute that the assessee not registered u/s 12AA of the Act and it has not claimed any exemption u/s 11 of the Act. However, the claim of assessee is that only net income of the assessee is to be taxed and the gross receipt received by the assessee cannot be taxed and it should be netted out of the expenditure incurred by the assessee towards grant for house construction. In our opinion, the arguments of the assessee holds good in view of the judgement of Jaipur bench of Tribunal in the case of Kund Kund Kahan Digamber Jain in ITA Nos.165 to 168/JP/2019 dated 29.5.2019, wherein held as under:- 8. We have heard the rival contentions and perused the material available on record. We find that where the exemption claimed under section 11 and 12 has been denied by the Assessing officer, what can be brought to tax is the net income in the hands of the assessee trust and not the gross receipts. In all these years, we find that while denying the exemption under section 11 and 12 for want of registration under section 12AA, the Assessing officer has brought gross receipts to tax which is against the basic tenets of law where only the real income which is determined after deducting expenses from gross receipts can be brought to tax. We therefore agree with the alternate contention so advanced by the Id AR and without going into merit of the other contention which is left open, the matter is set-aside to the file of the Assessing officer to examine the claim of the expenditure so claimed by the assessee trust against the gross receipts for each of the relevant years and where the Assessing officer determines the net receipts as not exceeding the maximum amount not chargeable to tax, allow the necessary relief to the assessee trust. In the result, all the appeals filed by assessee trust are allowed for statistical purposes.” 7. In view of the above order of the Tribunal, we are of the opinion that all the expenditure incurred by the assessee out of the donations ITA No.568/Coch/2022 Madre De Deus Church, Thiruvananthapuram Page 5 of 5 received by the assessee to be deducted and net income of the assessee to be taxed and being so, we are vacating the finding of the Ld. PCIT and restore the assessment order as passed by AO. 7. In the result, the assessee’s appeal is allowed. Order pronounced in the open court on 3 rd Aug, 2022 Sd/- (George George K. ) Judicial Member Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 3 rd Aug, 2022. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.