Asst., DIT(Exemption)-II, Hyderabad V. Andhra Pradesh Film Chamber of Commerce, Hyderabad

ITA 649/HYD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74546 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 02-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K HARITA
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Charitable institution
• Section: 12A; 147; 148; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.649/HYD/2012 ASSESSMENT YEAR 2007-2008 ASST. DIRECTOR OF INCOME TAX (EXEMPTION)-II, HYDERABAD VS. ANDHRA PRADESH FILM CHAMBER OF COMMERCE, HYDERABAD PAN AAATA4856E (APPELLANT) (RESPONDENT) FOR REVENUE : MS. K. HARITA FOR ASSESSEE : MR. V. SIVAKUMAR DATE OF HEARING : 23.01. 2014 DATE OF PRONOUNCEMENT : 05.02. 2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY REVENUE IS AGAINST THE ORDER OF CIT(A), GUNTUR DATED 14.03.2011. THE REVENUE IS AGG RIEVED ON THE DELETION OF AMOUNT OF RS.12,72,180/- TREATED AS INCOME OF THE TRUST AND THE COMPUTATION OF INCOME MADE BY THE ASSESSEE IN THE RETURN OF INCOME FILED. THE GROUNDS RAISED B Y THE REVENUE ARE AS UNDER : 1. THE ORDER OF THE LEARNED CIT(A) IS NOT ACCEPTABLE AS IT IS ERRONEOUS BOTH IN LAW AND FACTS. 2. THE LEARNED CIT(A) ERRED IN LAW IN NOT APPRECIATING THAT FOLLOWING WAIVER OF LOAN OF RS.12,72,180/-, IT AMOUNTS TO RECEIPT OF THAT AMOUNT BY THE ASSESSEE DURING THE PREVIOUS YEAR AND THE SAME BEING RETAINED FOR BUSINESS PURPOSE OF THE ASSESSEE, THE SAME IS ASSESSABLE AS INCOME FOR THE ASSESSMENT YEAR 2007-08 IN THIS CASE FOLLOWING RATIO OF DECISION OF BOMBAY HIGH COURT IN SOLID CONTAINERS 2 ITA.NO.649/HYD/2012 ANDHRA PRADESH FILM CHAMBER OF COMMERCE, HYDERABAD LTD. VS. DCIT & ANOTHER (2009) 308 ITR 417 AND ALSO IN VIEW OF THE DECISION IN LOGITRONICS PVT. LT D. VS. CIT (2011) 333 ITR 386 (DEL.) 3. THE OBSERVATION OF THE LEARNED CIT(A) THAT PRIMA FACIE, THE DEFICIT RETURNED BY THE APPELLANT IS VAL ID, IS NOT CORRECT IN AS MUCH AS THE STATEMENT SHOWING UTILISATION OF FUNDS FOR THE YEAR ENDED 31.03.2007 COMPUTING EXCESS OF EXPENDITURE OVER INCOME AT RS.50,61,138/- BY THE ASSESSEE, AS FURNISHED WITH THE RETURN OF INCOME IS ERRONEOUS. 4. ANY OTHER GROUND THAT MAY BE URGED LATER. 2. WE HAVE HEARD THE LEARNED D.R. AND LEARNED A.R. IN DETAIL AND PERUSED THE PAPER BOOK PLACED ON RECO RD. 3. BRIEFLY STATED, ASSESSEE IS A REGISTERED SOCIET Y REGISTERED UNDER SECTION 12A OF THE ACT. IT FILED R ETURN OF INCOME ON 29.10.2007 REPORTING EXCESS EXPENDITURE O VER INCOME OF RS.50,61,138/-. THE RETURN WAS NOT ORIGIN ALLY SELECTED BUT LATER ON REOPENED UNDER SECTION 147 BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT. THE A.O. COMPL ETED THE ASSESSMENT INTER ALIA MAKING VARIOUS DISALLOWANCES. WHILE DOING SO, HE HAS MADE AN ADDITION OF RS.12,72,180/- REPRESENTING WAIVER OF PRINCIPLE OF LOAN, TREATING IT AS INCOME FROM PROPERTY HELD ON THE TRUST. MOREOVER, THE EXCE SS OF EXPENDITURE OVER INCOME WAS IGNORED AND BENEFIT OF SECTION 11 WAS ALSO NOT GRANTED ON THE REASON THAT WHEN THE AS SESSEE HAS INCURRED EXPENDITURE OVER INCOME, TRUST IS NOT ENTI TLED FOR EXEMPTION UNDER SECTION 11(1A) OF THE ACT. ASSESSEE IS AGGRIEVED ON THE ORDER AND PREFERRED AN APPEAL BEFO RE THE LEARNED CIT(A), WHO GAVE RELIEF ON THE ABOVE TWO IS SUES TO THE ASSESSEE AND ACCORDINGLY, REVENUE IS AGGRIEVED. 4. GROUND NO. 2 IS ON THE ISSUE OF DELETION OF THE ADDITION MADE BY THE A.O. FACTS LEADING TO THE ABOV E ISSUE ARE 3 ITA.NO.649/HYD/2012 ANDHRA PRADESH FILM CHAMBER OF COMMERCE, HYDERABAD THAT THE ASSESSEE GOT WAIVER OF PRINCIPLE OF LOAN F ROM A.P. STATE FILM DEVELOPMENT CORPORATION LTD, A LOAN OBTAINED I N EARLIER YEARS. A.O. CONSIDERING THAT ASSESSEE IS A COMPANY THEREFORE, MUST INEVITABLY FOLLOW MERCANTILE SYSTEM OF ACCOUNT ING HELD THAT WAIVER OF PRINCIPAL AMOUNT OF RS.12,72,180/- S HOULD BE TREATED AS INCOME FROM PROPERTY HELD UNDER THE TRUS T. 5. BEFORE THE CIT(A), IT WAS CONTENDED THAT NEITHE R THE AMOUNT HAS BEEN CLAIMED AS EXPENDITURE NOR AS APPLICATION FOR CHARITABLE PURPOSE IN ANY OF THE YE ARS SO, THE WAIVER OF THE PRINCIPAL AMOUNT MAY NOT COME UNDER T HE PROVISIONS OF INCOME OF THE TRUST. IT SUPPORTED ITS CONTENTION BY REFERRING TO VARIOUS BALANCE SHEETS IN THE EARLIER YEARS AND COMPUTATION OF INCOMES. THE LEARNED CIT(A) HAVING C ONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE AND PERUSING T HE ORDER OF THE A.O. AND OTHER MATERIALS AVAILABLE HELD THAT THE SAID AMOUNT WAS NOT CLAIMED AS EXPENDITURE OR APPLICATI ON FOR CHARITABLE PURPOSE. PRESUMPTION BY THE A.O. WAS FA R FROM TRUTH. HE GAVE A FINDING THAT THE WAIVED AMOUNT HAS NOT BEEN CLAIMED AS DEDUCTION, SO SUCH ADDITION MADE BY THE A.O. IS NOT SUSTAINABLE. 6. LEARNED D.R. VEHEMENTLY ARGUED THAT THAT WAIVER OF THE PRINCIPAL AMOUNT HAS TO BE TREATED AS INCOME AND RELIED ON THE DECISIONS OF HONBLE BOMBAY HIGH COURT IN TH E CASE OF SOLID CONTAINERS LTD. VS. CIT 308 ITR 417 AND ALSO DECISION OF LOG ELECTRONICS PVT. LTD. VS. CIT 333 ITR 386 WHERE AS, LEARNED A.R. RELIED ON THE PAPER BOOK TO EXPLAIN THE FACTS AND SUBMITTED THAT THE CASE LAW RELIED UPON BY THE REVE NUE DOES NOT APPLY. 4 ITA.NO.649/HYD/2012 ANDHRA PRADESH FILM CHAMBER OF COMMERCE, HYDERABAD 7. AS CAN BE SEEN FROM THE RECORDS AND ISSUE CONTESTED BEFORE US, THERE IS NO DISPUTE WITH REFER ENCE TO THE FACT THAT ASSESSEE IS TREATED AS TRUST AND HAS BEEN REGISTERED UNDER SECTION 12A AND ALSO NATURE OF ACTIVITY IS CH ARITABLE ACTIVITY. THEREFORE, THE COMPUTATION OF INCOME HAS TO FOLLOW THE PROVISIONS OF SECTIONS 11 AND 12 AND NOT CHAPTER IV -D PERTAINING TO PROFITS AND GAINS OF BUSINESS OR PRO FESSION. EVEN THOUGH ASSESSEE MAY BE A DEEMED COMPANY UNDER THE COMPANY LAW, AS FAR AS PROVISIONS OF INCOME TAX ARE CONCERNED, ASSESSEE HAS TO BE TREATED AS TRUST AND THEREFORE, TREATING ANY RECEIPT AS INCOME HAS TO BE GOVERNED B Y THE PROVISIONS OF THE ACT. NO SUCH EXERCISE WAS UNDERTA KEN BY THE A.O. THE CASE LAW RELIED UPON BY THE REVENUE PERTAI N TO COMPUTATION OF INCOME UNDER HEAD BUSINESS WHICH D OES NOT APPLY TO THE ASSESSEE AT ALL. THEREFORE, WE ARE OF THE OPINION THAT THE WAIVER OF THE LOAN CANNOT BE TREATED AS IN COME AS THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION EARLIER ON T HE LOAN AMOUNT, WHICH IS ON CAPITAL ACCOUNT. THEREFORE, ORD ER OF THE CIT(A) IS UPHELD AND GROUND IS REJECTED. 8. THE NEXT ISSUE RAISED BY THE REVENUE IS WITH REFERENCE TO COMPUTATION OF INCOME SHOWN BY THE ASS ESSEE IN THE RETURN OF INCOME. THE ASSESSEE WHILE FILING THE RETURN OF INCOME HAS SHOWN AN AMOUNT OF RS.50,61,138/- AS EXC ESS OF EXPENDITURE OVER INCOME. THE A.O. IGNORED THE SAID COMPUTATION AND ALSO NOTED THAT SINCE ASSESSEE HAD EXCESS EXPENDITURE OVER INCOME, THE PRINCIPLES LAID DOWN B Y HONBLE RAJASTHAN HIGH COURT IN THE CASE OF EASWAR PRASAD T RUST VS. CIT 266 ITR 281 (WRONGLY SHOWN PAGE NO. AS 289 IN A .OS ORDER) WILL APPLY AND ASSESSEE IS NOT ENTITLE FOR E XEMPTION UNDER SECTION 11. THEREFORE, THE COMPUTATION BY AO STARTED AT 5 ITA.NO.649/HYD/2012 ANDHRA PRADESH FILM CHAMBER OF COMMERCE, HYDERABAD NIL INCOME AND ALL THE AMOUNTS ADDED WERE TREATED A S INCOME, WITHOUT CONSIDERING FOR ANY EXEMPTION EVEN THOUGH T RUST IS REGISTERED UNDER SECTION12A. 9. BEFORE THE CIT(A), ASSESSEE CONTESTED THE SAME TO SUBMIT THAT DECISION IN THE CASE OF RAJASTHAN HIGH COURT RELIED UPON BY THE AO HAS NO APPLICATION TO THE FACTS OF T HE CASE. IN THAT CASE, THE SAID TRUST HAS INCURRED EXPENDITURE OVER INCOME FROM ACCUMULATED FUNDS OF EARLIER YEARS AND THEREFO RE, ON THOSE FACTS, THE SAID TRUST WAS NOT ALLOWED TO CLAI M EXEMPTION UNDER SECTION 11(1A) OF THE ACT. THE ASSESSEE SUBMI TTED BEFORE THE CIT(A) THAT TOTAL EXPENDITURE AT RS.2.11 CRORES ON VARIOUS HEADS WAS OUT OF THE ASSESSEES OWN RECEIPTS RECEI VED DURING THE YEAR AND A.O. WAS NOT JUSTIFIED IN HOLDING THAT EXCESS OF EXPENDITURE HAS TO BE IGNORED. LEARNED CIT(A) ALLOW ED THE CONTENTION OF THE ASSESSEE BY STATING AS UNDER : 9.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO GONE THROUGH THE ASSESSMENT ORDER AND SEEN ALL OTHER MATERIAL PLACED BEFORE ME. THE A.O. HAS APPLIED THE RATIO OF RAJASTHAN HIGH COURT IN THE CASE OF SHRI AKHEY RAM ISHWARI PRASAD TRUST VS. CIT, REPORTED IN (2004) 266 ITR 281 (RAJASTHAN). BUT, AS SEEN FROM THE RECORDS THE FACT S ARE DISTINGUISHABLE IN THE SENSE THAT IN THAT CASE EARLIER YEARS INCOMES WERE SET OFF FOR CURRENT YEAR S EXPENSES WHEREAS IN THE FACTS OF THE PRESENT CASE CURRENT YEARS INCOME ALONE WAS UTILISED FOR SET OF F OF EXPENSES UNDER THE YEAR UNDER REPORT. THUS, THE RAT IO OF THAT DECISION IS NOT APPLICABLE IN THE CASE OF T HE APPELLANT FOR THE IMPUGNED ASSESSMENT YEAR UNDER CONSIDERATION AND AS SUCH THE DECISION OF THE A.O. IS REVERSED I.E., THE INCOME, IF ANY IS ENTITLED FOR EXEMPTION UNDER THE PROVISIONS OF SECTION 11(1)(A). SINCE, IT IS HELD THAT THE APPELLANT IS ENTITLED FO R EXEMPTION UNDER SECTION 11(1)(A), PRIMA FACIE THE DEFICIT RETURNED BY THE APPELLANT IS VALID, WHICH M AY BE MODIFIED SUBJECT TO THE DECISIONS OF THE UNDERSIGNED ON VARIOUS ADDITIONS MADE BY THE A.O. I F 6 ITA.NO.649/HYD/2012 ANDHRA PRADESH FILM CHAMBER OF COMMERCE, HYDERABAD THE MODIFIED POSITION IS ALSO DEFICIT, IN THAT CASE , THE APPELLANT IS NOT ENTITLED FOR CARRY FORWARD OF SUCH DEFICIT AS THERE IS NO SUCH SCHEME IN ANY OF THE SECTIONS LIKE SECTION 10, SECTION 11, SECTION 12, SECTION 13 ETC., THE SECTIONS APPLICABLE TO THE ACT IVITIES OF THE APPELLANT. THUS, THIS GROUND OF APPEAL IS TREATED AS DISMISSED. 10. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE DO NOT SEE ANY REASON TO UPHOLD REVENUES CONTENTIONS. EV EN THOUGH THE REPRESENTATION MADE BY THE ASSESSEE IN THE COMP UTATION IS ERRONEOUS, IT IS THE DUTY OF THE A.O. TO CORRECTLY COMPUTE THE DEDUCTIONS ALLOWANCE ETC., UNDER THE INCOME TAX ACT . INSTEAD THE A.O. IGNORED THE ENTIRE COMPUTATION AND WRONGLY APPLIED THE PRINCIPLES IN THE CASE OF EASWARI PRASAD TRUST, TO DENY THE ASSESSEES RIGHTFUL CLAIMS. LEARNED CIT(A) HAS CLEA RLY SET OUT THE PRINCIPLES AND ALSO DIRECTED THE A.O. TO COMPUT E PROPERLY. IN VIEW OF THIS, WE DO NOT SEE ANY MERIT IN THE REV ENUE CONTENTION. GROUND IS NOT SUSTAINABLE. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.02.2014. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATE 05 TH FEBRUARY, 2014 VBP/- COPY TO : 1. ASST. DIRECTOR OF INCOME TAX (EXEMPTIONS)-II, RO OM NO.307A, 3 RD FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 2. ANDHRA PRADESH FILM CHAMBER OF COMMERCE, FILM NAGAR , JUBILEE HILLS, HYDERABAD 3. CIT(A), GUNTUR 4. DIRECTOR OF INCOME TAX-(EXEMPTIONS), HYDERABAD 5. D.R. ITAT, A BENCH, HYDERABAD.