MAHAVIR EDUCATION TRUST, MUMBAI V. ADDL DIT (E) RG II, MUMBAI

ITA 6075/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83482 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 17-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Assessee Lawyers: J K SHAH
• Keywords: Depreciation; Charitable institution; Bonafide belief; Question of law; Bonafide mistake; Capital expenditure
• Section: 12A; 12; 10

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI .., ! , ' , # BEFORE SHRI I.P.BANSAL, JM AND SHRI RAJENDRA, AM ITA NO.6075/MUM/2013 (A.Y.2009-10) MAHAVIR EDUCATION TRUST, C/O. SHAH & ANCHOR KUTCHHI ENGG. COLLEGE, WAMAN TUKARAM PATIL MARG, NEAR DUKE CO., CHEMBUR, MUMBAI 400 088 PAN: AAATM 5568P ADDL. D.I.T (E), RANGE II,PIRAMAL CHAMBER, MUMBAI. ( $% / // / APPELLANT) ' ' ' ' / VS. ( ()$%/ RESPONDENT) $% * + * + * + * + /APPELLANT BY : SHRI J.K.SHAH ()$% * + * + * + * + /RESPONDENT BY :SHRI VIVEK BATRA ' * ,-' / / / / DATE OF HEARING : 12.8.2014 ./0 * ,-' / DATE OF PRONOUNCEMENT : 12.08.2014 1 1 1 1 / / / / O R D E R PER I.P.BANSAL (JM) : THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-I, MUMBAI DATED 30/08/2013 FOR ASSESSMENT YEAR 2009-10. GROUNDS OF APPEAL READ AS UNDER: 1. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER ERRED IN MAKING ADDITION OF RS.30,67,680/- AS INCOM E OF THE TRUST ,WHICH IS CONTRARY TO THE FACTS AND EVIDENCE ON RECORD THE SAME SHOULD BE DELETED. (B) THE LEARNED ASSESSING OFFICER AND THE CIT(A) FA ILED TO APPRECIATE THAT THE AMOUNT OF DEVELOPMENT OF FUND RECEIVED IS NOT AN INCOME OF TH E TRUST. (C) THE APPELLANT PRAYS THAT THE CONTRIBUTION TO TH E DEVELOPMENT FUND BEING CORPUS DONATION AND BEING EXEMPT ULS.11(1) AND SECTION 12 OF THE ACT THE ADDITION OF RS.30,67,680/- BE DELETED. 2. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER AND THE CIT(A) ERRED IN HOLDING THAT, THERE IS A BR EACH OF SECTION 11(5) READ WITH SECTION 11(2) AND THEREFORE, PROVISIONS OF SECTION 13(1 )(D ) OF THE ACT IS APPLICABLE AND THEREFORE , FORFEITURE OF EXEMPTION OF THE SECTION 11 OF THE ACT. ITA NO.6075/MUM/2013 (A.Y.2009-10) 2 (B) THE APPELLANT PRAYS THAT, THE APPELLANT HAS NOT BREACHED THE PROVISIONS AND CONDITIONS REQUIRED FOR CLAIMING EXEMPTION U/S. 11 OF THE ACT. (C)THE APPELLANT PRAYS THAT, THE EXEMPTION WITHDRAW N BEING BAD IN LAW IT SHOULD BE ALLOWED. 3. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER AND THE CIT(A) ERRED IN REJECTING THE CLAIM OF RS.2 ,26,21,694/- ON ACCOUNT OF DEPRECIATION WHICH SHOULD BE ALLOWED IN FULL. (B) THE APPELLANT PRAYS THAT, THE CLAIM OF DEPRECAT ION IS NOT DOUBLE DEDUCTION. (C) THE CLAIM OF DEPRECIATION IS ON THE ASSETS WHI CH HAS TO BE FULLY ALLOWED AS THE APPLICATION OF INCOME. (D) THE APPELLANT PRAYS THAT, THE LEARNED ASSESSING OFFICER ERRED IN REJECTING THE CLAIM MADE ON ACCOUNT OF DEPRECIATION WHICH SHOULD BE ALL OWED IN FULL. 4. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER AND THE CIT(A) ERRED IN NOT ALLOWING THE EXCESS AMO UNT OF EXPENDITURE BEING DEFICIT OF RS. 71,62,825/- AS APPLICATION OF INCOME U/S. 11(1) (A) AGAINST THE INCOME OF THE CURRENT ASSESSMENT YEAR AND ERRED IN HOLDING THAT, IT AMOUN TS TO DOUBLE DEDUCTION. (B) THE APPELLANT PRAYS THAT, THE DEFICIT OF RS.71, 62,825/- BE ALLOWED IN COMPUTING THE INCOME OF THE TRUST REGARD TO THE PROVISIONS CONTAI NED IN SECTION 11 OF THE ACT. 5. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER ERRED IN HOLDING THAT THE INVESTMENT IN FIXED DEPOS IT WITH TATA MOTORS LTD., AND CANERA REBECO ARE NOT PERMISSIBLE U/S.11(5)(2)(B). THE APP ELLANT PRAYS THAT THE SAID INVESTMENT IN FIXED DEPOSIT COVERED BY SECTION 13(1 ) R.W.S. 11(5), IT BE ALLOWED. (B) THE LEARNED ASSESSING OFFICER ERRED IN OBSERVIN G THAT, IT CONTINUE FROM MANY YEARS. (C )THE APPELLANT PRAYS THAT, THE INVESTMENT BEING BONAFIDE THE EXEMPTION GRANTED U/S. 11 SHOULD NOT BE DENIED. 2. THE ASSESSEE IS A CHARITABLE TRUST REGISTERED UN DER SECTION 12A OF THE INCOME TAX ACT, 1961(THE ACT) VIDE REGISTRATION NO.TR/1908 5 DATED 28/1/1984. THE ACTIVITY OF THE TRUST IS IMPARTING EDUCATION AND TO PROVIDE SCHOLARSHIP FOR EDUCATION TO THE NEEDY PERSONS OF THE SOCIETY. 3. IT MAY ALSO BE MENTIONED HERE THAT IT WAS POINTE D OUT BY LD. AR THAT IN GROUND NO.1 THE FIGURE HAS BEEN WRONGLY MENTIONED A S RS.30,67,680/-. THE SAME WAS TO BE READ AS RS.3,00,67,680/-. 4. APROPOS GROUND NO.1, FROM THE PERUSAL OF THE BAL ANCE SHEET IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD DIRECTLY CREDITED A SU M OF RS.3,00,67,680/- (DEVELOPMENT FUND) WITHOUT ACCOUNTING IT IN THE P&L ACCOUNT AND THE AO FOR THE ITA NO.6075/MUM/2013 (A.Y.2009-10) 3 REASONS DISCUSSED IN THE ASSESSMENT ORDER ADDED THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE. 4.1 DURING THE COURSE OF HEARING BEFORE US LD. AR D ID NOT AGITATE THE ADDITION MADE ON ACCOUNT OF DEVELOPMENT FUND. HOWEVER, IT I S HIS CASE THAT ENTIRE AMOUNT OF RS.3,00,67,680/- DOES NOT BELONG TO THE YEAR UND ER CONSIDERATION AS IT IS AN AGGREGATE SUM RELATING TO A.YS 2007-08, 2008-09 AN D 2009-10. IT WAS SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION THE ADDITI ON TO THE SAID ACCOUNT IS ONLY A SUM OF RS.46,15,180/-. LD. AR HAS INVITED OUR ATTE NTION TOWARDS DETAILS SUBMITTED AT PAGE 1 OF THE PAPER BOOK, WHICH FOR THE SAKE OF CONVENIENCE IS REPRODUCED BELOW: STATEMENT OF DEVELOPMENT FUND IN INSTITUTIONS AS ON 31.03.2007 A.Y. 2007-08: INSTITUTIONS O/P.BAL. ADDITION CL. BL. REMARK SHAH & ANCHOR KUTCHHI ENGG. COLLEGE 0 7825500 7825500 SHAH & ANCHOR KUTCHHI POLYTECHNIC 0 5271000 5271000 13096500 13056500 THE AMOUNT OF RS.1,30,96,500/- HAS BEEN ADDED AND TAXED IN ASSESSMENT AS PER ORDER DATED 30/11/2009 AS ON 31.03.2008 A.Y. 2008-09 SHAH & ANCHOR KUTCHHI ENGG. COLLEGE 7825500 5720000 13545500 SHAH & ANCHOR KUTCHHI POLYTECHNIC 5271000 6636000 11907000 13096500 12356000 25452500 THE AMOUNT OF RS.1,43,56,000/- (INCLUDES RS.1,23,56,000/-) HAVE BEEN ADDED AND TAXED IN ASSESSMENT AS PER ORDER DATED 13/12/2010 AS ON 31.3.2009 A.Y. 2009-10 SHAH & ANCHOR KUTCHHI ENGG. COLLEGE 13545500 3806260 17351760 SHAH & ANCHOR KUTCHHI POLYTECHNIC 11907000 808920 12715920 25452500 4615180 30067680 ADDED ENTIRE AMOUNT OUTSTANDING TO THE CREDIT IN B/SHEET RS.3,00,67,680/- INSTEAD OF RECEIVED DURING THE YEAR I.E. RS.46,15,180/- TO SUPPORT THE ABOVE CONTENTION LD. AR ALSO INVITED OUR ATTENTION TOWARD ASSESSMENT ORDERS WHICH ARE ALSO ENCLOSED IN THE P APER BOOK AS UNDER: ASSESSMENT YEAR PAGE NOS. A.Y. 2007-08 2 TO 14 A.Y. 2008-09 15 TO 28 4.2 LD. AR WAS ABLE TO DEMONSTRATE THAT WHILE COMP UTING THE INCOME FOR A.Y 2007-08 AND 2008-09 A SUM OF RS.1,30,96,500/- AND R S.1,43,56,000/- WAS ADDED ITA NO.6075/MUM/2013 (A.Y.2009-10) 4 TO THE COMPUTATION OF INCOME IN THE RESPECTIVE YEAR S. THUS, IT IS CLEAR FROM THE DETAILS AND DOCUMENTS SUBMITTED IN THIS REGARD THA T OUT OF TOTAL SUM OF RS.3,00,67,680/- THE OPENING BALANCE AMOUNTING TO R S.2,54,52,500/- HAS ALREADY BEEN ADDED TO THE INCOME OF THE ASSESSEE IN ASSESSM ENT YEARS 2007-08 AND 2008- 09. THEREFORE, AFTER HEARING BOTH THE PARTIES WE D IRECT THE AO TO RESTRICT THE ADDITION TO A SUM OF RS.46,15,180/- SUBJECT TO VERIFICATION OF THE FIGURES MENTIONED IN THE CHART REPRODUCED ABOVE. THIS GROUND OF THE ASSESSE E IS PARTLY ALLOWED. 5. APROPOS GROUND NO.2 & 5, IT WAS SUBMITTED BY LD. AR THAT BOTH THESE GROUNDS RAISE A COMMON ISSUE. THEREFORE, HE AD DRESSED THESE GROUNDS IN A CONSOLIDATED MANNER. DURING THE COURSE OF ASSESSME NT PROCEEDINGS THE AO NOTICED THAT ASSESSEE HAD INVESTED A SUM OF RS.75.00 LACS I N THE FUNDS, WHICH ACCORDING TO AO WERE NOT PERMISSIBLE UNDER SECTION 11(5)(2)(B) O F THE ACT. THE DETAIL IS AS UNDER: FIXED DEPOSIT WITH CANARA REBECO 25,00,000 FIXED DEPOSIT WITH TATA MOTORS LTD. 50,00,0 00 THEREFORE, AO REFERRING TO THE PROVISIONS OF SECTIO N 13(1)(D) OBSERVED THAT AS THERE WAS VIOLATION OF SECTION 11(5)(2)(B), THEREFORE, TH E ASSESSEE IS NOT ELIGIBLE FOR CLAIMING DEDUCTION UNDER SECTION 11 OF THE ACT. HE REQUIRED THE ASSESSEE TO EXPLAIN THE SAME. IN ABSENCE OF EXPLANATION TO BE FURNISHED BY THE ASSESSEE THE AO DENIED EXEMPTION TO THE ASSESSEE UNDER SECTION 11 OF THE A CT AND ASSESSED THE ENTIRE INCOME AS ASSESSABLE TO TAX. 5.1 THE ISSUE WAS CONTESTED IN THE APPEAL FILED BE FORE LD. CIT(A). IT WAS SUBMITTED THAT THE INVESTMENT IN THE CANARA RABECO IS NOT A FIXED DEPOSIT BUT IS UNITS OF MUTUAL FUNDS REFERRED TO IN CLAUSE (23D) OF SECTION 10 AND THE SAID INVESTMENT IS PERMISSIBLE UNDER RULE 17C OF THE INC OME TAX RULES,1962. WITH REGARD TO FIXED DEPOSITS WITH TATA MOTORS IT WAS SU BMITTED THAT DUE TO INADVERTENCE AND LACK OF AWARENESS OF THE LAW ON THE SUBJECT ON THE PART OF THE TRUST MANAGEMENT, IT WAS ON ACCOUNT OF BONA-FIDE ERROR. REFERENCE WAS MADE TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (E) VS. AGRIM CHARAN FOUNDATION, 253 ITR 593, WHEREIN THE C HARITABLE TRUST HAD MADE DEPOSITS WITH S.M FINANCE LTD. AND UNITECH LTD. WHI CH WERE NOT PUBLIC SECTOR UNDERTAKINGS. THE AO OBSERVED THAT SUCH INVESTMENT WAS IN VIOLATION OF THE ITA NO.6075/MUM/2013 (A.Y.2009-10) 5 PROVISIONS CONTAINED IN SECTION 11(5) AND HE DENIE D THE EXEMPTION TO THE ASSESSEE. THE TRIBUNAL ALLOWED THE RELIEF TO THE ASSESSEE KEE PING IN VIEW THE FACT THAT SINCE INCORPORATION, THE ASSESSEE WAS CARRYING CHARITABLE WORK AND THE DONATIONS WERE OBTAINED BY ACCOUNT PAYEE CHEQUES AND CORPUS FUNDS WERE INVESTED AS FIXED DEPOSITS WITH PUBLIC SECTOR UNDERTAKINGS; IN THE APPLICATION FORMS IT WAS MENTIONED THAT THESE CONCERNS ARE AUTHORIZED TO ACC EPT DEPOSITS FROM CHARITABLE TRUSTS AND DEPOSITS WERE MADE; THE FACT THAT ASSE SSEE UPON BECOMING AWARE OF THE VIOLATION IMMEDIATELY WITHDRAWN THE AMOUNT FROM THO SE TWO CONCERNS. IT WAS HELD BY THEIR LORDSHIPS THAT TRIBUNAL DID NOT COMMIT ANY ERROR IN HOLDING THAT ASSESSEE IS ENTITLED TO EXEMPTION UNDER SECTION 11 OF THE ACT. RELIANCE WAS ALSO PLACED ON SEVERAL OTHER DECISIONS TO CONTEND THAT INADVERTENT VIOLATION OF SECTION 11(5) R.W.S. 13(1)(D)WILL NOT LEAD TO REJECTION OF EXEMPTION UND ER SECTION 11 OF THE ACT. HOWEVER, LD. CIT(A) UPHELD THE ORDER OF AO. ACCORDING TO LD . CIT(A) THE ASSESSEE HAD FAILED TO FULFILL THE CONDITIONS LAID DOWN FOR GRANT OF EXEM PTION UNDER SECTION 11 AS SPECIFIED IN SECTION 13(1)(D) AND, THEREFORE, INCOME WAS TO BE COMPUTED ACCORDING TO NORMAL ACCOUNTANCY PROVISIONS AND AS INCOME FROM OTHER SOU RCES. IT IS IN THIS MANNER LD. CIT(A) HAS DECIDED THE ISSUE AGAINST THE ASSESSEE. 5.2 AFTER NARRATING THE FACTS IT WAS SUBMITTED BY LD. AR THAT THROUGH INADVERTENT MISTAKE THE ASSESSEE PLACED FIXED DEPOSIT WITH TATA MOTORS LTD. WHICH IS NOT A PERMISSIBLE ENTITY WITH WHOM THE FIXED DEPOSIT COU LD BE PLACED BY CHARITABLE TRUST. HE SUBMITTED THAT SUCH INADVERTENT OMISSION ON THE PART OF THE ASSESSEE WAS GUIDED BY A MISTAKEN BONAFIDE BELIEF THAT FIXED DE POSIT PLACED WITH TATA MOTORS LTD. WILL NOT BE IN VIOLATION OF SECTION 13(1)(D) R.W.S. 11(5) OF THE ACT. HE INVITED OUT ATTENTION TOWARDS COPY OF APPLICATION FORM FOR OBTA INING FIXED DEPOSITS FROM TATA MOTORS LTD.( PAGE 29 OF THE PAPER BOOK) IN WHICH RE GISTERED TRUSTS ARE ONE OF THE AUTHORIZED ENTITY WHO COULD APPLY FOR FIXED DEPOSIT S. HE SUBMITTED THAT ON SUCH BONA-FIDE REASONABLE BELIEF THE ASSESSEE HAD SUBMIT TED THE APPLICATION. HE ALSO INVITED OUR ATTENTION TO THE COPIES OF FDRS WHICH A RE PLACED AT PAGES 31 AND 32 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT IT IS ON LY UPON CONCLUSION OF THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION THE AS SESSEE CAME TO KNOW THAT SUCH INVESTMENT COULD NOT BE MADE BY THE ASSESSEE AND IM MEDIATELY UPON NOTING SO, THE FIXED DEPOSITS WITH TATA MOTORS LTD. WERE WITHDR AWN. TO SUBSTANTIATE SUCH CONTENTION HE INVITED OUR ATTENTION TOWARDS PAGES 3 3 AND 34 OF THE PAPER BOOK, ITA NO.6075/MUM/2013 (A.Y.2009-10) 6 WHEREIN THE FDRS WERE SUBMITTED FOR WITHDRAWAL ON 24/0/2012. THUS, IT WAS PLEADED BY LD. AR THAT ASSESSEE HAD NEVER INTENDEDL Y MADE SUCH INVESTMENT IN VIOLATION OF SECTION 11(5) AND THE ACT OF THE ASSES SEE IN MAKING THE FDR WAS BONAFIDE. RELYING UPON THESE FACTS LD. AR REFERRED TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (E XEMPTION) VS. AGRIM CHARAN FOUNDATION (SUPRA) , WHERE UNDER SIMILAR CIRCUMSTAN CES THE TRIBUNAL WAS HELD TO BE RIGHT IN ACCEPTING THE CLAIM OF THE ASSESSEE. 5.3 SO FAR AS IT RELATES TO MUTUAL FUND INVESTMENT IN CANARA ROBECO IT WAS SUBMITTED BY LD. AR THAT THE SAID INVESTMENT OF THE ASSESSEE IS PERMISSIBLE INVESTMENT AS PER RULE 17C(I) WHICH PROVIDE FORMS O R MODE OF INVESTMENT OR DEPOSIT BY A CHARITABLE OR RELIGIOUS TRUST OR INSTITUTION A ND INVESTMENT IN UNITS ISSUED UNDER ANY SCHEME OF MUTUAL FUND REFERRED TO IN CLAUSE (23 D) OF SECTION 10 OF THE ACT IS INCLUDED. HE SUBMITTED THAT SUCH INVESTMENT BY THE ASSESSEE IS NOT IN VIOLATION OF SECTION 11(5) R.W.S. 13(1)(D) OF THE ACT. 5.4 THUS, IT WAS SUBMITTED BY LD. AR THAT LD. CIT(A ) HAS ERRED IN NOT ACCEPTING THE CLAIM OF THE ASSESSEE U/S. 11 OF THE ACT. 6. ON THE OTHER HAND, LD. DR SUBMITTED THAT THE DEP OSIT OF THE ASSESSEE WITH TATA MOTORS LTD. WAS IN CLEAR VIOLATION OF SECTION 11(5) R.W.S. 13(1)(D). SUCH INVESTMENT BY THE ASSESSEE WAS NOT PERMITTED, THERE FORE, LD. CIT(A) HAS RIGHTLY HELD THAT ASSESSEE IS NOT ENTITLED TO GET EXEMPTION UNDE R SECTION 11 OF THE ACT. HE SUBMITTED THAT THE ACCOUNT STATEMENT OF CANARA BANK FOR CANARA ROBECO MUTUAL FUND UNITS WERE NOT SUBMITTED TO AO. THEREFORE, HE SUBMITTED THAT THESE GROUNDS OF THE ASSESSEE SHOULD BE DISMISSED. 7. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY CONSIDERED. FIXED DEPOSITS WERE PLACED BY THE ASSE SSEE WITH TATA MOTORS LTD. ON 2/2/2009. ADMITTEDLY, TATA MOTORS LTD. IS NOT AN I NSTITUTION WITH WHICH THE FIXED DEPOSIT COULD BE ELIGIBLE FOR INVESTMENT BY A CHA RITABLE TRUST. HOWEVER, THERE IS POSSIBILITY OF BONAFIDE BELIEF FORMED BY THE ASSES SEE IN VIEW OF THE FACT THAT REGISTERED TRUST COULD BE ONE OF THE ENTITIES FO R SUBMITTING APPLICATION FOR FIXED DEPOSIT SCHEME. THE COPY OF APPLICATION SUBMITTED BY THE ASSESSEE TO TATA MOTORS ITA NO.6075/MUM/2013 (A.Y.2009-10) 7 LTD. IS PLACED IN THE PAPER BOOK WHERE THE APPLICAT ION HAS BEEN SUBMITTED IN THE CAPACITY OF A REGISTERED TRUST. IT IS ALSO A MATT ER OF FACT THAT THE IMPUGNED ASSESSMENT HAS BEEN FRAMED ON 30/12/2011 AND ALMOST IMMEDIATELY AFTER COMPLETION OF ASSESSMENT THE ASSESSEE HAS SUBMITTED APPLICATION FOR REDEMPTION OF THE FDR I.E. ON 24/2/2012. ALL THESE FACTS INDICAT E THAT IT COULD BE A BONAFIDE MISTAKE OF THE ASSESSEE AND UPON BECOMING AWARE THA T SUCH INVESTMENT IS NOT PERMISSIBLE THE ASSESSEE SUBMITTED PAPERS OF REDEMP TION OF THE FDR. RELIANCE HAS BEEN PLACED BY LD. AR ON THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. AGRIM CHARAN FOUNDATION (SUPRA). THE RATIO OF THE SAID DECISION IS THAT IF UNDER BONAFIDE BELIEF /MISTAKE A CHARITABLE TRUST MAKES A DEPOSIT WITH AN ENTITY WITH WHOM DEPOSITS WILL BE IN VIOLATION OF SECTION 11(5) R.W.S. 13(1)(D) OF THE ACT AND THE TRUST UPON BECOMING AWARE OF SUCH VIOLATION WITHDR AWS THE DEPOSIT THAN FOR SUCH VIOLATION EXEMPTION U/S.11 CANNOT BE DENIED TO THE TRUST. THIS DECISION OF HONBLE DELHI HIGH COURT IN OUR HUMBLE, IS SQUARELY APPLICA BLE TO THE FACTS OF THE PRESENT CASE AS THE FACTS OF THE PRESENT CASE ARE ALSO VER Y PECULIAR UPON WHICH THE SAID DECISION CAN BE APPLIED. IT MAY ALSO BE MENTIONED HERE THAT THE SAID DECISION OF DELHI HIGH COURT HAS ALSO BEEN FOLLOWED IN THE FOLL OWING CASES: 1. ITAT DECISION DATED 18/10/2013 IN MA NO.139 TO 143/PN/2013 IN THE CASE OF ABHIJIT KADAM MEMORIAL FOUNDATION. 2. DECISION OF HONBLE KARNATAKA HIGH COURT IN ITA NO.105/2004 DATED 21/7/2008 WHEREIN THE QUESTION REFERRED BEFORE THEIR LOR DSHIPS WAS UNDER: WHETHER THE ORDER OF ASSESSMENT DENYING EXEMPTION WITHOUT CONSIDERING THE EXPLANATION OFFERED BY THE ASSESSEE IN REGARD TO TH E MISREPRESENTATION OF THE INVESTEE COMPANY THEREBY MAKING THE ASSESSEE TO INV EST UNDER WRONG NOTION, IS BAD IN LAW CONTRARY TO THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) VS. AGRIM CHARAN FOUNDATION REPORTED IN 253 ITR 593? THE QUESTION WAS DECIDED BY THEIR LORDSHIPS AS UNDE R: 6. HAVING HEARD THE COUNSEL FOR THE PARTIES, WE NO TICE THE FOLLOWING UNDISPUTED FACTS IN THIS APPEAL: 7. THE ASSESSEE IS CREATED ONLY FOR THE PURPOSE OF CHARITY AND DOING YEOMAN SERVICES TO THE SOCIETY. IT IS ALSO NOT DISPUTED BY THE REVE NUE THAT EXEMPTION UNDER SECTION 11 OF THE ACT WAS GRANTED FOR EARLIER ASSESSMENT PERIOD A ND FOR SUBSEQUENT ASSESSMENT PERIOD EXCEPT FOR ASSESSMENT YEAR 1995-96. THE SAME HAS BEEN REJECTED ONLY ON THE GROUND THAT INVESTMENT MADE UNDER THREE FINANCIAL I NSTITUTIONS ARE CONTRARY TO .SECTION 11(5) OF THE ACT. THE EXPLANATION OFFERED BY THE A SSESSEE THAT IT HAD INVESTED ON ITA NO.6075/MUM/2013 (A.Y.2009-10) 8 ACCOUNT OF THE INADVERTENCE AND ON THE MIS-REPRESEN TATION OF THOSE FINANCIAL INSTITUTIONS HAS BEEN REJECTED BY THE ASSESSING O FFICER AND THE SAME HAS BEEN AFFIRMED BY THE COMMISSIONER OF INCOME TAX BEFORE T HE TRIBUNAL. THOUGH THE JUDGMENT OF THE DELHI HIGH COURT WAS RELIED UPON, THE TRIBUN AL WITHOUT CONSIDERING THE SAME HAS AFFIRMED THE ORDER PASSED THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE ASSESSING OFFICER. IN THIS BACKGROUND WE HAVE TO CO NSIDER WHETHER THE CASE OF THE APPELLANT FALLS WITHIN THE FOUR CORNERS OF THE FACT S INVOLVED IN AGRIM CHARAN FOUNDATIONS CASE. IN AGRIM CHARAN FOUNDATIONS CAS E ALSO CERTAIN DEPOSITS WERE MADE IN TWO COMPANIES ON THE GROUND THAT THEY WERE PERMITTED TO RECEIVE DEPOSITS AND THOSE TWO COMPANIES HAD FLOATED THE GOVERNMENT RULE S. IN THIS CASE ALSO IT IS THE SPECIFIC CASE OF THE ASSESSEE THAT DUE TO INADVERTE NCE IN THAT PARTICULAR ASSESSMENT YEAR INVESTMENTS ARE MADE IN THREE FINANCIAL INSTIT UTIONS AND THEY WERE NOT ONLY AWARE OF THE INCOME TAX LAWS AND THAT THEY WERE MIS -REPRESENTED BY THOSE THREE INVESTEE COMPANIES. THIS EXPLANATION IS OFFERED IN THE YEAR 1998. 8. THE DELHI HIGH COURT ON 14.8.2007 HAS RULED TH AT IF THE ASSESSEE IS MIS-LEAD BY THE MIS-REPRESENTATION BY THOSE TWO COMPANIES, THE ASSESEEE IS ENTITLED TO CLAIM EXEMPTION UNDER SECTION 11( L)(D) OF THE INCOME TAX ACT. IN THIS CASE THERE WAS NO MATERIAL BEFORE THE ASSESSING OFFICER TO REJECT THE EXPLANATION OFFERED THE ASSESSEE. THE ASSESSEE WAS MIS-REPRESENTED BY THE INVESTEE CO MPANY, IN THE ABSENCE OF CONTRA MATERIAL WHEN THE ASSESSEE IS DOING CHARITABLE WORK , THE CONDUCT OF THE ASSESSEE SHOWS THAT IT HAD NO INTENTION TO FLOUT THE PROVISI ONS OF SECTION 11(5) OF THE ACT. THE EXPLANATION OFFERED BY THE ASSESSEE DISCLOSE THAT D UE TO INADVERTENCE AND ON THE MIS- REPRESENTATION OF THE INVESTEE COMPANY, SUCH INVEST MENT IS MADE. THEREFORE, WE ARE OF THE OPINION THAT THE FACTS AND CIRCUMSTANCES IN AGR IM CHARAN FOUNDATIONS CASE AND IN THE PRESENT CASE ARE ONE AND THE SAME. IN VIEW OF THE LAW LAID DOWN BY THE DELHI HIGH COURT, WE HAVE TO SET ASIDE ALL THE ORDERS AND ANSWER THE QUESTION OF LAW IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE DISCUSSION WE HOLD THAT THE A CT OF THE ASSESSEE IN MAKING FIXED DEPOSIT WITH TATA MOTORS LTD. WAS AN UNINTENDED AC T ARISING OUT OF BONAFIDE MISTAKE/BELIEF AND FOR THIS REASON ASSESSEE CANNOT BE HELD TO BE DISENTITLED FOR EXEMPTION UNDER SECTION 11 OF THE ACT. 7.1 APROPOS INVESTMENT OF THE ASSESSEE OF RS.25.00 LACS IN CANARA ROBECO MUTUAL FUND THE ASSESSEE HAS FILED ACCOUNTS STATEMENT. A CCORDING TO RULE 17C(I) FORMS OR MODES OF INVESTMENT OR DEPOSIT UNDER CLAUSE (X II) OF SUB-SECTION(5) OF SECTION 11 SHALL INTER ALIA INCLUDE INVESTMENT IN THE UNITS I SSUED UNDER ANY SCHEME OF MUTUAL FUND REFERRED TO IN CLAUSE (23D) OF SECTION 10 OF T HE ACT. ACCORDING TO THE KEY INFORMATION MEMORANDUM SUBMITTED BEFORE US CANARA ROBECO MUTUAL FUND HAS DESCRIBED REGARDING THE APPLICATION OF TAX PROVISIO NS AS FOLLOWS: THE ENTIRE INCOME OF THE MUTUAL FUND IS EXEMPT FRO M INCOME TAX IN ACCORDANCE WITH THE PROVISIONS OF SEC.10(23D) OF THE INCOME TAX ACT , 1961. THE INCOME RECEIVED BY THE FUND IS NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE. ITA NO.6075/MUM/2013 (A.Y.2009-10) 9 ACCORDING TO THE SAID KEY INFORMATION MEMORANDUM A CHARITABLE TRUST/WAKFS OR A SOCIETY ESTABLISHED UNDER THE RELEVANT LAWS AND AUT HORIZED TO INVEST IN MUTUAL FUND SCHEMES IS ONE OF THE ENTITY WHO COULD APPLY FOR TH E SAME. KEEPING IN VIEW THESE PROVISIONS, THE SAID INVESTMENT BY THE ASSESSEE SHA LL NOT IN VIOLATION OF SECTION 11(5), THEREFORE, THERE IS NO VIOLATION ON ACCOUNT OF THAT DEPOSIT. 7.2 THEREFORE, GROUND NO.2 & 5 ARE ALLOWED IN THE M ANNER AFORESAID. 8. APROPOS GROUND NO.3, BENEFIT OF DEPRECIATION HAS BEEN DISALLOWED ONLY ON THE GROUND THAT IT WILL PROVIDE DOUBLE BENEFIT TO THE ASSESSEE AS INVESTMENT IN THE ASSETS ON WHICH DEPRECIATION IS BEING CLAIMED WAS A LREADY ALLOWED AS APPLICATION OF INCOME. LD. CIT(A) HAS NOT CONSIDERED THIS ISSUE BY WAY OF A SPEAKING ORDER AND HAS DISMISSED THIS CLAIM ON THE GROUND THAT SINCE A SSESSEE HAS BEEN HELD TO BE NOT ENTITLED FOR GRANT OF EXEMPTION UNDER SECTION 11 TH EN INCOME OF THE ASSESSEE HAS TO BE COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT. HOWEVER, AO HAS DISALLOWED THE DEPRECIATION ON THE BASIS OF THE FACT THAT IT WILL TANTAMOUNT TO DOUBLE DEDUCTION. 8.1 AFTER HEARING BOTH THE PARTIES, WE FOUND THAT T HIS ISSUE IS NO MORE RES-INTEGRA AND IS COVERED IN FAVOUR OF THE ASSESSEE AS PER DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMP TION) VS. GKR CHARITIES (2013) 32 TAXMAN.COM 208 (BOM). THIS DECISION HAS BEEN RELIE D UPON BY LD.AR ALONGWITH DECISION OF MUMBAI TRIBUNAL DATED 27/2/2014 IN THE CASE OF DDIT(E) VS. ADITYA BIRLA FOUNDATION IN ITA NO.5922/MUM/2012 IN RESPECT OF A.Y 2009-10, COPY OF THE ORDER WAS PLACED ON OUR RECORD. THE RELEVANT OBSER VATION OF TRIBUNAL ARE AS UNDER: 2. THE ASSESSEE IS A TRUST CREATED AND REGISTERED WITH CHARITY COMMISSIONER AS WELL AS UNDER SECTION 12A OF THE INCOME TAX ACT, 19 61 (THE ACT). THE ACTIVITIES OF THE TRUST ARE TO PROVIDE FINANCIAL ASSISTANCE TO VARIOU S CHARITABLE INSTITUTIONS FOR MEDICAL RELIEF, SPORTS AND CULTURAL ACTIVITIES. WHILE COMP UTING THE INCOME THE AO DISALLOWED DEPRECIATION UNDER SECTION 11(1) OF THE ACT ON THE GROUND THAT CAPITAL EXPENDITURE ON THESE ASSETS HAD BEEN CLAIMED AS APPLICATION OF INC OME, THEREFORE, ALLOWING DEPRECIATION WOULD AMOUNT TO CLAIM OF DOUBLE DEDUCT ION. BEFORE LD. CIT(A) IT WAS PLEADED THAT SUCH DISALLOWANCE BY THE AO IS CONTRAR Y TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL, 264 ITR 110 (BOM). FINDING FORCE IN SUCH CLAIM OF THE ASSESSEE LD. CIT(A) HAS DELETED THE ADDITION OF RS.3,75,52,814/- ON ACCOUNT OF DEPRECIATION. THE DEPARTMENT IS AGGRIEVED, HENCE, HAS FILED GROUND NO.1 TO 3 TO AGITATE SUCH DECISION OF LD. CIT(A). 3. AS IT CAN BE SEEN FROM THE GROUNDS RAISED BY T HE REVENUE, THE DELETION IS MAINLY AGITATED ON THE BASIS OF DECISION OF HONBL E SUPREME COURT IN THE CASE OF ESCORTS LTD. VS. UNION OF INDIA, 199 ITR 43(SC). D URING THE COURSE OF HEARING LD. AR DREW OUR ATTENTION TOWARDS LATEST DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE ITA NO.6075/MUM/2013 (A.Y.2009-10) 10 OF DIRECTOR OF INCOME TAX (EXEMPTION), MUMBAI VS. G KR CHARITIES, (2013) 32 TAXMANN.COM 208 (BOMBAY). COPY OF THIS DECISION IS PLACED AT PAGES 4 TO 5 OF THE PAPER BOOK. OUR ATTENTION WAS DRAWN TO THE FOLLOWI NG QUESTION ADDRESSED BY THE REVENUE TO BE ADJUDICATED BY THE HONBLE HIGH COUR T: (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE TRIBUNAL WAS CORRECT IN LAW IN IGNORING THE STAND O F THE REVENUE THAT ALLOWANCE OF DEPRECIATION ON THE ASSETS, THE COST OF WHICH HA S ALREADY BEEN ALLOWED AS A DEDUCTION ON ACCOUNT OF APPLICATION OF INCOME, WOUL D AMOUNT TO DOUBLE DEDUCTION WHICH IS LEGALLY NOT PERMISSIBLE IN VIEW OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF ESCORTS LTD. V. UNION OF INDIA 199 ITR 443 ? THE AFOREMENTIONED QUESTION WAS ADJUDICATED WITH TH E FOLLOWING OBSERVATION: 3. SO FAR QUESTIONS (B) & (C) ARE CONCERNED, COUNSE L FOR THE PARTIES AGREE THAT THE ISSUE ARISING HEREIN ARE COVERED BY THE DECISION OF THIS COURT IN THE MATTER OF CIT V. INSTITUTE OF BANKING PERSONNEL SELECTION (JBP$ [ 20031 264 ITR 110 / 131 TAXMAN 386 IN FAVOUR OF THE ASSESSEE AND AGAINST TH E REVENUE. IN THESE CIRCUMSTANCES, WE DO NOT SEE ANY REASON TO ENTERTAI N QUESTIONS (B) & (C). 4. IN THIS VIEW OF THE SITUATION, AS THE ISSUE IS DIRECTLY COVERED BY THE AFOREMENTIONED OBSERVATIONS OF JURISDICTIONAL HIGH COURT, WE DECLINE TO INTERFERE IN THE RELIEF GRANTED BY LD. CIT(A) AND GROUND NO.1 TO 3 RAISED BY THE REVENUE ARE DISMISSED. 8.2 IN THIS VIEW OF THE SITUATION, AFTER HEARING BO TH THE PARTIES, WE ALLOW GROUND NO.3 FILED BY THE ASSESSEE AND AO IS DIRECTED TO GR ANT BENEFIT OF DEPRECIATION TO THE ASSESSEE. 9. APROPOS GROUND NO.4, IT WAS SUBMITTED BY LD. AR THAT IF ASSESSEE IS HELD ENTITLED TO GET DEPRECIATION THEN THE SAID GROUND W ILL BECOME INFRUCTUOUS. HENCE, GROUND NO.4, HAVING BECOME INFRUCTUOUS DOES NOT R EQUIRE ADJUDICATION. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH AUG., 2014. 1 * ./0 2'3 12.08.2014 / * 9 SD/- SD/- (RAJENDRA) (I.P.BANSAL) ' ' ' ' / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 2' DATED : 12TH AUG. 2014. VM. ITA NO.6075/MUM/2013 (A.Y.2009-10) 11 1 * (,: ; :0, 1 * (,: ; :0, 1 * (,: ; :0, 1 * (,: ; :0,/ COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. ()$% / THE RESPONDENT. 3. <() / THE CIT, MUMBAI. 4. < / CIT(A)-13, MUMBAI 5. :?9 (,' , , / DR, ITAT, MUMBAI 6. 9@ A / GUARD FILE. 1' 1' 1' 1' / BY ORDER, ):, (, //TRUE COPY// B BB B/ // /C C C C (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI