ADIT (E), New Delhi V. PHD Chambers of Commerce and Industry, New Delhi

ITA 5685/DEL/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7112 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 19-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 15-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: SWEETY KOTHARI CAS
• Keywords: Capital asset; Business income; Depreciation; Rule of consistency
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER & SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA NO.5685/DEL/2010 ASSESSMENT YEAR: 2007-08 ADIT(E), VS. PHD CHAMBERS OF COMMERCE AND INDUSTRY , INV. CIR. II, PHD HOUSE, OPP. ASIAN GAMES VILLAG E, ROOM NO. 306, NEW DELHI. 3 RD FLOOR, AAACP1438L AAYAKAR BHAWAN, LAXMI NAGAR, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : MS. Y. KAKKAR, SR. DR RESPONDENT BY : V.K. BINDAL & MS. SWEETY KOTHARI, CAS. DATE OF HEARING: 19.12.2011 DATE OF PRONOUNCEMENT: 19.12.2011 ORDER PER K.G. BANSAL, A.M. THE ONLY GROUND TAKEN BY THE REVENUE IN THIS APPEA L IS THAT THE LD. CIT(A) ERRED IN ACCEPTING THE ASSESSEE S CLAIM OF EXEMPTION U/S 11 OF THE ACT AS THE ASSESSEE IS NOT CARRYING ON ANY CHARITABLE ACTIVITY AS ENVISAGED U/S 2(15) OF T HE I.T. ACT, 1961 (THE ACT). ITA NO. 5685/D/10 2 2. THE LD. SR. DR SUBMITS THAT THE FACTS OF THE CAS E ARE IDENTICAL WITH THE FACTS OF THE CASE FOR THE A.Y. 2 006-07 IN THE CASE OF ASSESSEE. FOR THAT YEAR, THE TRIBUNAL HAD PASSED ITS ORDER ON 31.03.2011 IN ITA NO. 1233/DEL/2010, A COP Y OF WHICH HAS BEEN PLACED BEFORE US. THEREFORE, IT IS ARGUED THAT THE FINDING RECORDED IN PARAGRAPH 5.2 OF THAT ORDER MAY BE MADE APPLICABLE TO THIS YEAR ALSO. 2.1 IN REPLY, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE FACTS ARE DISTINGUISHABLE. THE AO HAS RECORDED A FINDING THAT CASH BOOK, BANK BOOK, LEDGER, BILLS/VOUCHERS E TC. HAVE BEEN PRODUCED IN THE COURSE OF ASSESSMENT PROCEEDIN GS, WHICH HAVE BEEN EXAMINED ON A TEST CHECK BASIS. TH E ASSESSEE HAS FILED THE DETAILS REQUISITIONED FROM I T AND SUCH DETAILS HAVE BEEN LOOKED INTO. IT IS HIS CASE THAT IN THE PROCEEDINGS OF A.Y. 2006-07, THE DETAILS AND THE BO OKS COULD NOT BE PRODUCED. THEREFORE, IT IS ARGUED THAT SOME OTHER FINDINGS OF THAT YEAR WILL NOT BE APPLICABLE TO THE FACTS OF THIS YEAR. IN PARTICULAR, THE AO HAS NOT MENTIONED ANYW HERE IN THE ASSESSMENT ORDER THAT SEPARATE BOOKS OF ACCOUNT HAV E NOT BEEN MAINTAINED FOR THE BUSINESS OR BUSINESSES CARR IED ON BY ITA NO. 5685/D/10 3 THE ASSESSEE, IF ANY. THEREFORE, THERE IS NO QUEST ION OF GOING INTO THE PROVISION CONTAINED IN SEC. 11(4A). 3. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE GROUND IN A.Y. 200 6-07 WAS TO THE EFFECT THAT SINCE THE ASSESSEE IS NOT CA RRYING ON ANY CHARITABLE ACTIVITY, IT IS NOT ENTITLED TO DEDU CTION U/S 11 OF THE ACT, THEREFORE, THE LD. CIT(A) ERRED IN GRANTIN G IT THE DEDUCTION. IT IS SEEN THAT THE GROUND TAKEN IN THI S YEAR IS THE SAME. FURTHER, IT HAS BEEN MENTIONED IN THE ASSESS MENT ORDER THAT THE FACTS OF THIS YEAR ARE IDENTICAL WIT H THE FACTS OF THE LAST YEAR, FOR WHICH HIS PREDECESSOR HAS PASSED THE ORDER. IN VIEW THEREOF, IT IS FURTHER MENTIONED THAT THERE HAS BEEN NO CHANGE IN THE ACTIVITIES OF THE ASSESSEE AND HAVING BEEN TAKEN INTO CONSIDERATION THE DETAILS FURNISHED, A S HOW CAUSE NOTICE WAS ISSUED AS TO WHY THE ORDER FOR A.Y. 2006 -07 SHOULD NOT BE FOLLOWED. THIS SHOWS THAT THE FACTS OF THE CASE FOR THIS YEAR AND EARLIER YEAR ARE IDENTICAL. ACCORDINGLY, WE ARE OF THE VIEW THAT THE ORDER FOR A.Y. 2006-07, PASSED BY THE TRIBUNAL ON 31.03.2011, OUGHT TO BE FOLLOWED IN THE INTEREST OF CONSISTENCY AS WELL AS THE ORDER BEING A PRECEDENT OF BINDING NATURE. ACCORDINGLY, THE ORDER IS FOLLOWED. PARAG RAPH 5.2 OF THAT ORDER IS REPRODUCED OVERLEAF FOR READY REFEREN CE: - ITA NO. 5685/D/10 4 5.2 THE PROVISION CONTAINED IN SECTION 11(4A) IS CLEAR TO THE EFFECT THAT VARIOUS DEDUCTIONS U/S 11 SHALL NOT BE ADMISSIBLE IN RELATION TO ANY INCOME, BEING PROFITS AND GAINS OF BUSINESS PROFIT. THEREAFTER, A CONCESSION IS ALSO GIVEN THAT IF (I) THE BUSINESS IS INCIDENTAL TO ATTAINMENT OF OBJECTIVES OF THE INSTITUTION, AND (II) SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED IN RESPECT OF SUCH BUSINESS, THE ASSESSEE WILL BECOME ENTITLED TO OTHER DEDUCTIONS U/S 11. HOWEVER, THE OTHER DEDUCTIONS WILL BECOME INADMISSIBLE IN RESPECT OF BUSINESS INCOME IF THE AFORESAID TWO CONDITIONS ARE CUMULATIVELY SATISFIED. THIS IS A STATUTORY PROVISION AND RULE OF CONSISTENCY CANNOT OVERRIDE THE PROVISION. THEREFORE, IT CANNOT BE HELD THAT LOOKING TO THE PAST ASSESSMENTS, THIS PROVISION OUGHT TO BE IGNORED. IN OTHER WORDS, THIS PROVISION WILL HAVE TO BE APPLIED. THE ADMITTED POSITION OF FACT IS THAT THE ASSESSEE HAS BEEN CARRYING ON BUSINESS ACTIVITIES. HOWEVER, IT IS NOT CLEAR WHETHER SEPARATE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED FOR SUCH BUSINESS OR BUSINESSES. THE FINDING OF THE ASSESSING OFFICER IS THAT THE ASSESSEE IS CARRYING ON BUSINESS ACTIVITY BY RENDERING PROFESSIONAL SERVICES TO MEMBERS AND NON-MEMBERS AND IT IS NOT CARRYING ON ANY CHARITABLE ACTIVITY. THE LATTER FINDING OF ITA NO. 5685/D/10 5 THE AO CANNOT BE UPHELD IN VIEW OF THE FACT THAT THE ASSESSEES OBJECTS ARE CHARITABLE IN NATURE AND IT HAS BEEN REGISTERED U/S 12A. THEREFORE, THE ONLY THING WHICH CAN BE DONE ON THE FACTS OF THE CASE IS TO ASCERTAIN THE BUSINESS INCOME, WHETHER SUCH INCOME IS INCIDENTAL TO THE OBJECTS, WHETHER BOOKS ARE MAINTAINED FOR THE BUSINESS AND QUANTUM THEREOF. IF THE CONDITIONS PRESCRIBED IN SECTION 11(4A) STANDS SATISFIED, THE ASSESSEE WILL BE ENTITLED TO OTHER DEDUCTIONS U/S 11, OTHERWISE NOT. AS MENTIONED EARLIER, THESE FACTS COULD NOT BE ASCERTAINED BY THE AO DUE TO PAUCITY OF TIME. THEREFORE, THE MATTER IS RESTORED TO THE FILE OF THE AO TO ASCERTAIN FACTS IN THIS MATTER, HEAR THE ASSESSEE AND PASS A FRESH ORDER AS PER LAW. THUS, THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6. IN SO FAR AS THE DEDUCTION OF DEPRECIATION IS CONCERNED, THE CASE OF THE LD. COUNSEL IS THAT THE ASSESSEE HAS NEVER WRITTEN OFF CAPITAL ASSETS FROM ITS ACCOUNTS BY TREATING THEM AS APPLICATION OF INCOME. THEREFORE, IT IS ARGUED THAT THE ASSESSEE IS ENTITLED TO THE DEDUCTION OF DEPRECIATION. WE FIND THAT THIS ISSUE HAS NOT BEEN DISCUSSED BY THE AO IN THE ASSESSMENT ORDER. THEREFORE, WE THINK IT FIT TO RESTORE THE MATTER TO HIS FILE F OR CONSIDERING THIS SUBMISSION OF THE ASSESSEE ITA NO. 5685/D/10 6 ALSO AND THEREAFTER DECIDE IT DE NOVO AFTER HEARING THE ASSESSEE. THUS, THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 31. INCIDENTALLY, IT MAY ALSO BE MENTIONED THAT THE ASSESSEE HAD PREFERRED AN APPLICATION U/S 254 BEFORE THE TRI BUNAL, WHICH WAS DISMISSED ON 14.10.2011 IN MA NO. 133/DEL ./2011, IN WHICH IT WAS SPECIFICALLY MENTIONED THAT THE QUE STION WHETHER THE ASSESSEE HAS EARNED PROFITS AND GAINS F ROM BUSINESS HAS TO BE DECIDED NOT WITH REFERENCE TO TH E PROVISION CONTAINED IN SEC. 2(15), BUT WITH REFERENCE TO THE PROVISION CONTAINED IN SEC. 2(13) OF THE ACT. 4. IN THE RESULT, THE APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. SD/- SD/- (R.P. TOLANI) (K.G. BANS AL) JUDICIAL MEMBER ACCOUNTANT MEMB ER DATED: 19.12.11 *KAVITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR ITA NO. 5685/D/10 7 ITA NO. 5685/D/10 8