Dy. DIT (E), New Delhi V. Help Age India, New Delhi

ITA 585/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8202 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 04-06-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 17-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDEEP GOYAL
• Assessee Lawyers: VINOD BINDAL MS SWEETY KOTHARI
• Keywords: Capital asset; Charitable institution
• Section: 143(3); 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `G : NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO.585/DEL./2009 (ASSESSMENT YEAR : 2005-06) DCIT(E), TRUST CIRCLE-II, VS. HELP AGE INDIA, NEW DELHI. C-14, QUTAB INSTITUTIONAL AREA, NEW DELHI. (PAN/GIR NO.AAATH0021N) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VINOD BINDAL/MS. SWEETY KOTHARI, CA, REVENUE BY : SHRI JAGDEEP GOYAL, SR.DR ORDER PER K.G. BANSAL, AM THIS APPEAL OF THE REVENUE EMANATES FROM THE ORDER OF THE CIT(A)- XXI, NEW DELHI, PASSED ON 4.11.2008 IN APPEAL NO.15 2/07-08, AND IT PERTAINS TO ASSESSMENT YEAR 2005-06. THE CORRESPON DING ORDER OF ASSESSMENT WAS FRAMED BY THE ADDITIONAL DIRECTOR OF INCOME-TAX (EXEMPTIONS),RANGE-I, DELHI (HEREINAFTER CALLED AS AO) ON 26.11.2007 UNDE R THE PROVISIONS OF SECTION 143(3) OF THE I.T. ACT, 1961. THE REVENUE HAS TAKEN UP TWO SUBSTANTIVE GROUNDS IN THE APPEAL. GROUND NOS.1 & 2 ARE TO THE EFFECT THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE HAS NOT VIOLATED THE PROVISIONS C ONTAINED IN SECTION 13(1)(D)(III) AND, THUS, ALLOWING EXEMPTION UNDER S ECTIONS 11 & 12 OF THE ACT. IT IS MENTIONED THAT WHEN THE PROVISIONS ARE CLEAR AND NOT AMENABLE TO TWO VIEWS THERE IS NO NEED TO RELY ON ANY RULE OF C ONSTRUCTION FOR INTERPRETING THE SECTION. GROUND NO.3 IS TO THE EFFECT THAT THE LD.CIT(A) ERRED IN DELETING ITA NO.585/DEL./2009 (AY : 2005-06) 2 THE DISALLOWANCE OF RS.27,58,384, MADE BY THE AO ON ACCOUNT OF UTILIZATION OF THE GRANT FOR ACQUIRING CAPITAL ASSET. 2. THE FACTS OF THE CASE ARE THAT HE ASSESSEE FILED THE RETURN OF INCOME ON 29.10.2005, DECLARING TOTAL INCOME OF RS.49,96,090. THIS INCOME WAS CLAIMED TO BE EXEMPT U/S 11(1)(A). IN THE COURSE O F ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO FROM THE NOTES ON ACCOUNTS THAT THE ASSESSEE WAS HOLDING SHARES AND BONDS OF 25 SPECIES, SOME OF WHI CH WERE IN THE DEMAT- FORM. THESE HOLDINGS WERE NOT IN CONFORMITY WITH T HE PROVISIONS CONTAINING UNDER SECTION 11(5) OF THE ACT. THEREFORE, THE AO H ELD THAT THE ASSESSEE INFRINGED THE PROVISIONS CONTAINED IN SECTION 13(1) (D)(III), AS SUBSTITUTED BY FINANCE ACT, 2007, RETROSPECTIVELY W.E.F. 1.4.1999. ACCORDINGLY, THE ASSESSEE WAS NOT ALLOWED EXEMPTION U/S 11(1)(A) IN RESPECT OF APPLICATION OF THE INCOME. AGGRIEVED BY THIS ORDER, THE ASSESSEE M OVED AN APPEAL BEFORE THE CIT(A)-XXI, NEW DELHI. AFTER HEARING THE SUBM ISSIONS OF THE ASSESSEE AND CONSIDERING THE ASSESSMENT ORDER, IT WAS NOTED BY HIM THAT THE UNDISPUTED FACT WAS THAT THE ASSESSEE NEVER INVESTE D ANY PART OF ITS FUND TO ACQUIRE THE AFORESAID SHARES AND BONDS, WHICH WERE RECEIVED BY IT IN KIND. IT WAS ALSO AN ADMITTED FACT THAT THESE ASSETS WERE NO T RECORDED IN THE BOOKS OF ACCOUNT AS DONATIONS RECEIVED BY IT. THERE WAS MER ELY A DISCLOSURE IN THE NOTES ON ACCOUNTS TO THE EFFECT THAT THESE SHARES A ND BONDS WERE RECEIVED BY IT. IT WAS NOT POSSIBLE TO LIQUIDATE THESE SHARES AND BONDS AS MOST OF THEM WERE IN ODD LOTS AND IN SMALL QUANTITIES. THE ASSE SSEE WAS ALSO NOT PHYSICALLY IN POSSESSION OF ALL THE SCRIPTS SO AS T O ENABLE IT TO SELL THEM AND IN ANY CASE THE SALE VALUE WAS NEGLIGIBLE. THUS, T HE ASSESSEE WAS IN A HELPLESS SITUATION WHERE IT COULD NOT SELL THE SHAR ES AND BONDS WITH A VIEW TO INVEST THE SALE PROCEEDS IN THE PRESCRIBED SECURIT IES AS PER THE PROVISIONS ITA NO.585/DEL./2009 (AY : 2005-06) 3 CONTAINING SECTION 11(5). IN THESE CIRCUMSTANCES, IT WAS HELD THAT ON SIMPLE READING OF LAW, ONE MAY COME TO A CONCLUSION THAT T HE PROVISION CONTAINED IN SECTION 13(1)(D)(III) ARE APPLICABLE, BUT, IT IS IM PORTANT TO APPRECIATE THE INTENTION OF THE LEGISLATURE IN MAKING THE RETROSPE CTIVE AMENDMENT. IT IS NOT POSSIBLE FOR THE LEGISLATURE TO TAKE ALL CIRCUMSTAN CES INTO ACCOUNT. THE CASE OF THE ASSESSEE WAS SUCH THAT ALTHOUGH IT HAD NO IN TENTION TO INVEST ITS FUNDS IN THE AFORESAID SECURITIES, THOSE CAME IN ITS POSS ESSION ON ACCOUNT OF SMALL SMALL DONATIONS. THE ASSESSEE WAS ALSO NOT IN A PO SITION TO DISPOSE OF THESE SHARES AND BONDS. IN THESE CIRCUMSTANCES, IF THE C ONTENTION OF THE AO IS ACCEPTED, THEN, HOLDING THE AFORESAID SECURITIES OF THE SMALL VALUE OF RS.2.05 LAKH, WILL BRING THE ENTIRE CHARITABLE ACTIVITIES O F THE ASSESSEE TO THE EXTENT OF ABOUT RS.30.00 CRORE TO A NAUGHT. THUS, IT WAS HEL D THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THERE WAS NO INFRING EMENT OF THE PROVISION CONTAINED IN SECTION 13(1)(D)(III) OF THE ACT. ACC ORDINGLY, EXEMPTION WAS ALLOWED UNDER SECTION 11 & 12. THE ASSESSEE WAS AL SO ALLOWED THE EXEMPTION UN RESPECT OF UTILIZATION OF RS.27,58,384 FOR ACQUISITION OF CAPITAL ASSET. 3. BEFORE US, THE LD.DR REFERRED TO THE ORDERS OF T HE AO AND THE CIT(A), WHICH HAVE ALREADY BEEN SUMMARIZED BY US. HE DREW OUR ATTENTION TOWARDS THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F FEDERATION OF ANDHRA PRADESH CHAMBERS OF COMMERCE AND INDUSTRIES & OTHER S VS. STATE OF ANDHRA PRADESH & OTHERS (2001) 247 ITR 36. HONBLE COURT MENTIONED THAT THE LEVY UNDER CONSIDERATION WAS ON LAND WHICH IS U SED FOR INDUSTRIAL PURPOSES. THE WORDS IS USED DO NOT MEAN MEANT T O BE USED OR SET APART FOR BEING USED. IT WAS FURTHER MENTIONED THAT THE COURTS IN INTERPRETING A TAXING STATUTE WILL NOT BE JUSTIFIED IN ADDING WORD S THERETO SO AS TO MAKE OUT ITA NO.585/DEL./2009 (AY : 2005-06) 4 SOME PRESUMED OBJECT OF THE LEGISLATURE. IF THE LE GISLATURE HAS FAILED TO CLARIFY ITS MEANING BY THE USE OF THE APPROPRIATE L ANGUAGE, BENEFIT MUST GO TO THE TAX-PAYER. IT IS SETTLED LAW THAT IN CASE OF D OUBT, THAT INTERPRETATION OF A TAXING STATUTE WHICH IS BENEFICIAL TO THE TAX-PAYER MUST BE ADOPTED. THE CASE OF THE LD.DR WAS THAT THE WORD HELD IN SECTION 13 (1)(D)(III) IS UNAMBIGUOUS AND, THEREFORE, WHILE INTERPRETING IT, NO WORD CAN BE SUPPLIED WHICH DOES NOT EXIST IN THE STATUTE. FURTHER, HE R ELIED ON THE DECISION OF THE APEX COURT IN THE CASE OF COMMISSIONER OF AGRICULTU RE INCOME-TAX VS. PLANTATION CORPORATION OF KERALA LTD.(2001) 247 ITR 155 IN WHICH IT WAS, INTER ALIA, HELD THAT AS LONG AS THERE IS NO AMBIGU ITY IN THE STATUTORY LANGUAGE, THE COURT CANNOT RESORT TO INTERPRETATIVE PROCESS F OR FINDING OUT LEGISLATIVE INTENT. THUS, THE CASE OF THE LD.DR WAS THAT IN VI EW OF THE CLARITY OF THE STATUTORY PROVISION, THERE IS NO NEED OF TAKING ANY AID OF STATUTORY INTERPRETATION FOR FINDING OUT WHETHER THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 11(1)(A). 4. IN REPLY, THE LD.COUNSEL FOR THE ASSESSEE POINTE D OUT THAT THE SHARES AND BONDS WERE NOT PURCHASED OUT OF THE FUNDS OF TH E ASSESSEE, BUT THOSE WERE RECEIVED IN KIND. THE ASSESSEE HAD NOT TAKEN THESE SECURITIES AS DONATIONS RECEIVED AND IT WAS FOR THIS REASON THAT THEY WERE NOT ENTERED IN THE BALANCE SHEET OF THE ASSESSEE. THE SHARES AND SECURITIES WERE IN SMALL LOTS AND, THEREFORE, THEY WERE NOT TRADABLE. THE A SSESSEE HAS BEEN DOING CHARITY ON A VERY LARGE SCALE AND IT IS A WELL RECO GNIZED CHARITABLE ORGANIZATION. IF THE SECURITIES WERE DISPOSABLE, T HE FIRST RESPONSE OF THE ASSESSEE WOULD HAVE BEEN TO DISPOSE OF THE SAME AND USE THE SALE PROCEEDS FOR CHARITABLE PURPOSES. HE RELIED ON THE ORDER OF THE CIT(A), IN WHICH IT WAS, INTER ALIA, MENTIONED THAT THE SECURITIES WERE NOT TAKEN TO THE BALANCE ITA NO.585/DEL./2009 (AY : 2005-06) 5 SHEET, THEY WERE IN SMALL LOTS AND, THEREFORE, THEY COULD NOT BE DISPOSED OF. HE DREW OUR ATTENTION TO THE PROVISION CONTAINED IN SUB CLAUSES (I) AND (II) OF THE CLAUSE (D) OF SUB-SECTION (1) OF SECTION 13, WH ICH USE THE WORDS ANY FUNDS OF THE TRUST OR INSTITUTION ARE INVESTED. I T WAS SUBMITTED THAT SUB CLAUSE (III) WAS AMENDED BY FINANCE ACT, 2007 RETRO SPECTIVELY W.E.F. 1.4.1999, WHICH USES THE WORD HELD. HIS CASE WAS THAT BY APPLYING PRINCIPLE OF AJUSDEM GENERIS, FOR HARMONIOUS INTERP RETATION OF THE THREE SUB CLAUSES, WHICH SHOULD GET THE SAME COLOUR, IT WILL BE CLEAR THAT SUB CLAUSE (III) SHOULD ALSO BECOME APPLICABLE ONLY WHEN THE F UNDS OF THE TRUST ARE INVESTED IN SECURITIES OTHER THAN THE SECURITIES ME NTIONED IN SECTION 11(5) OF THE ACT. IN THIS CONNECTION, OUR ATTENTION WAS ALS O DRAWN TOWARDS NOTES OF CLAUSES TO FINANCE BILL, 1983, WHICH MENTIONS THAT SUB-CLAUSE (C) SEEKS TO INSERT A NEW SUB SECTION (5) WHICH PROVIDES FOR FOR MS AND MODES OF INVESTING OR DEPOSITING, BEING BROADLY THE SAME AS THOSE SPECIFIED IN CLAUSE (A) OF SUB SECTION (5) OF SECTION 13 OF THE INCOME- TAX ACT. THE LIST OF SPECIFIED FORMS AND MODES AS CONTAINED IN THE EXIST ING PROVISIONS HAS BEEN TO INCLUDE DEPOSITS WITH CERTAIN APPROVED FINANCIAL CORPORATIONS AND DEPOSITS WITH OR INVESTMENT IN BONDS ISSUED BY APPROVED PUBL IC COMPANIES ENGAGED IN PROVIDING LONG TERM FINANCE FOR CONSTRUCTION OR PURCHASE OF HOUSES IN INDIA FOR RESIDENTIAL PURPOSES. HIS ARGUMENT ON TH E BASIS OF THIS NOTE WAS THAT THIS PROVISION DEALT WITH MODES OF INVESTING O R DEPOSITING MONIES ACCUMULATED OR SET APART BY A TRUST. THEREFORE, IT IS ONLY THE FUNDS OF THE ASSESSEE WHICH BECOME SUBJECT MATER OF INVESTMENT U /S 11(5) AND CONSEQUENTLY IN CONTRAVENTION OF THIS PROVISION, TH E EXEMPTION MAY NOT BE GRANTED U/S 11 & 12 ONLY WHEN THE FUNDS OF THE TRUS T ARE INVESTED IN UNAPPROVED SECURITIES. RELIANCE WAS ALSO PLACED ON A NUMBER OF CASES TO THE EFFECT THAT TECHNICALITIES SHOULD NOT COME IN THE W AY OF GRANTING SUBSTANTIVE ITA NO.585/DEL./2009 (AY : 2005-06) 6 JUSTICE AND THAT THE INTENTION OF THE LEGISLATURE S HOULD BE FOUND OUT TO SEEK CORRECT MEANING OF THE PROVISION. 5. IN THE REJOINDER, THE LD.DR SUBMITTED THAT NON-E NTERING OF THE SECURITIES IN THE BOOKS OF ACCOUNT IS IMMATERIAL AS THE WORD USED IS HELD. FURTHER, SOME OF THE SHARES COULD BE SOLD, WHICH HA S NOT BEEN DONE. IT WAS ALSO SUBMITTED THAT IF THE SUB-CLAUSE WAS TO BE INV OKED ONLY IN CASE OF INVESTMENT OF THE FUNDS OF THE TRUST, THE SUB-CLAUS E (III) IT WILL BECOME REDUNDANT AS THE CASE WOULD STAND COVERED UNDER SUB -CLAUSE (I) OR (II). 6. WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIV AL SUBMISSIONS. WE FIND THAT THE ASSESSEE RECEIVED CERTAIN SHARES AND BONDS OF SMALL VALUES, WHICH STATEDLY CAME INTO ITS POSSESSION ON ACCOUNT OF DEATH OF THE INMATES. SINCE THERE WAS NO MANIFEST TRANSFER OF THE SHARES AND BONDS TO THE ASSESSEE, THE SAME WERE NOT TAKEN INTO ACCOUNT IN THE BOOKS O F ACCOUNT. THE SHARES WERE OF SMALL VALUE AND SOME WERE IN ODD LOTS WHICH COULD NOT BE DISPOSED OF IMMEDIATELY AND, THEREFORE, THEY CONTINUED TO RE MAIN IN POSSESSION OF THE ASSESSEE. SOME OF THE SECURITIES WERE GOT TRANSFER RED IN THE NAME OF THE ASSESSEE. THAT, HOWEVER, DOES NOT MEAN THAT THE AS SESSEE MANIFESTLY BECAME OWNER OF THE SHARES. THE SHARES AND BONDS BELONGED TO THE DECEASED INTIMATES WHICH NORMALLY WOULD HAVE GONE TO THEIR L EGAL HEIRS WHO WERE NOT TRACEABLE. THIS WAS THE REASON FOR NON-ENTERING TH E SHARES ETC. IN THE BOOKS. THE BONDS AND SHARES WERE ALSO NOT SALEABLE IMMEDIA TELY. IN THESE CIRCUMSTANCES, THE ASSESSEE COULD NOT BE TAKEN TO B E THE DE JURE OWNER OF THE SHARES. ALTHOUGH, THE WORD USED IS HELD, WE ARE OF THE VIEW THAT THESE WORDS IMPLY OWNERSHIP OF THE ASSESSEE TO THE EXCLUS ION OF ALL OTHERS, WHICH IS NOT THE CASE HERE. IN THESE CIRCUMSTANCES, WE A RE OF THE VIEW THAT TOTAL ITA NO.585/DEL./2009 (AY : 2005-06) 7 DENIAL OF EXEMPTION U/S 11(1)(A) ON THE GROUND THAT THE SHARES WERE HELD BY THE ASSESSEE WILL BE AGAINST EVEN THE LANGUAGE OF T HE PROVISION. THE LD.CIT(A) HAS REACHED MORE OR LESS ON THE SAME CONC LUSION BY MENTIONING THAT INFRINGEMENT, IF ANY, WAS TECHNICAL, WHICH SHO ULD BE IGNORED BY APPLYING THE RULE OF PURPOSIVE CONSTRUCTION. WE TE ND TO AGREE WITH HIM ON THE FACTS OF THE CASE. IN SUCH CIRCUMSTANCES, WHA T CAN BE DONE IS THAT INCOME DERIVED FROM THE SHARES, IF TAKEN INTO ACCOU NT IN THE BOOKS, MAY BE BROUGHT TO TAX. HOWEVER, WE AGREE WITH THE LD.CIT( A) THAT THERE CANNOT BE A COMPLETE DENIAL OF THE EXEMPTION U/S 11(1)(A). T HUS, GROUND NOS.1 & 2 ARE DISMISSED. 7. GROUND NO.3 IS CONSEQUENTIAL IN NATURE IN THE SE NSE THAT ONCE EXEMPTION IS ALLOWED U/S 11(1)(A), THE AMOUNT UTILI ZED BY ACQUIRING CAPITAL ASSET HAS TO BE EXCLUDED FROM THE TOTAL INCOME OF T HE ASSESSEE. 8. IN THE RESULT, THE APPEAL IS DISMISSED. 9. ORDER PRONOUNCED IN OPEN COURT ON 19 TH JUNE, 2009. (RAJPAL YADAV) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: JUNE 19, 2009. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-XXI, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT ITA NO.585/DEL./2009 (AY : 2005-06) 8