ADIT (E) II (1), MUMBAI V. JASLOK HOSPITAL AND RESEARCH CENTRE, MUMBAI

ITA 6620/MUM/2012

• Counselvise Citation: 662019914 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2005-2006
• Appeal Filed On: 31-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDRA KUMAR
• Assessee Lawyers: NITESH JOSH
• Keywords: Charitable institution; Bad and doubtful debts; Validity of assessment
• Section: 148; 11; 143(3); 80G; 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI . .. . . . . . , ,, , !'# !'# !'# !'# $ $ $ $ %$$ $& %$$ $& %$$ $& %$$ $&, ,, , ' !'# ' !'# ' !'# ' !'# !( !( !( !( BEFORE SHRI P.M. JAGTAP, AM AND SHRI VIVEK VARMA , JM !./ I.T.A. NO. 6620/MUM/2012 ( '* & $+& '* & $+& '* & $+& '* & $+& / / / / ASSESSMENT YEAR:2005-06) ADIT(E)-II (1), 507, 5 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI-400012 * * * * / VS. JASLOK HOSPITAL AND RESEARCH CENTER, 15, DR.G.DESHMUKH MARG, MUMBAI-400026 #, ! ./ PAN : AAAA0028Q ( #$ / // / REVENUE ) .. ( '* &- / ASSESSEE ) #$ . / ! / REVENUE BY : SHRI SURENDRA KUMAR '* &- . / ! / ASSESSEE BY SHRI NITESH JOSH ! *$ . / // / DATE OF HEARING : 02/01/2014 01+ . / DATE OF PRONOUNCEMENT : 10/01/2014 '2 / O R D E R PER P.M. JAGTAP, A.M . .. , !'# : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-1, MUMBAI, DATED 09/08/2012 WHEREBY HE D ELETED THE ADDITION OF RS.78,32,793/- MADE BY THE AO TO THE TO TAL INCOME OF THE ASSESSEE ON ACCOUNT OF DISALLOWANCE OF PROVISION F OR DOUBTFUL DEBTS. 2. THE ASSESSEE IN THE PRESENT CASE IS A CHARITABLE TRUST RUNNING HOSPITAL AND RESEARCH CENTER IN THE CITY OF MUMBAI. IT IS FORMED SOLELY FOR THE PURPOSE OF ESTABLISHING, RUNNING AND MANAGI NG HOSPITAL FOR MEDICAL RELIEF AND MEDICAL RESEARCH CENTRE. IT IS REGISTERED WITH THE DIRECTOR OF INCOME-TAX (EXEMPTION) MUMBAI, U/S 12A OF THE ACT AS WELL AS U/S 80G OF THE ACT. DURING THE YEAR UNDER CONSIDERATION, IT HAD SUFFERED DEFICIT OF RS.19,08,72,208/- AND ACCOR DINGLY INCOME OF 2 ITA NO.6620/MUM/2012 JASLOK HOSPITAL AND RESEARCH CENTER NIL WAS DECLARED BY IT IN THE RETURN OF INCOME. IN THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) VIDE AN ORDER DATED 13.12.2007, THE ASSESSEES CLAIMED FOR BENEFIT U/S 11 OF THE ACT WA S DENIED BY THE AO AND ITS INCOME WAS ASSESSED UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION AT RS.50,44,110/-. ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 11 OF T HE ACT FOLLOWING THE ORDER OF THE TRIBUNAL AND ACCORDINGLY THE RETURNED INCOME FILED BY THE ASSESSEE AT NIL WAS ACCEPTED. THEREAFTER, A NOTICE U/S 148 WAS ISSUED BY THE AO ON 23.03.2011 REOPENING THE ASSESSMENT FO R THE YEAR UNDER CONSIDERATION ON THE GROUND THAT THE CLAIM OF THE A SSESSEE FOR PROVISION FOR DOUBTFUL DEBTS AMOUNTING TO RS. 78,32 ,793/- WAS WRONGLY ALLOWED IN THE ORIGINAL ASSESSMENT AND INCO ME TO THAT EXTENT THUS HAD ESCAPED ASSESSMENT. THE ASSESSEE CHALLENG ED THE VALIDITY OF THE REOPENING ON VARIOUS GROUNDS WHICH DID NOT FIND FAVOUR WITH THE ASSESSING OFFICER. IT WAS ALSO CONTENDED ON BEHALF OF THE ASSESSEE THAT EVEN IF THE DISALLOWANCE ON ACCOUNT OF PROVISI ON FOR DOUBTFUL DEBTS IS MADE, IT WOULD STILL RESULT IN DEFICIT AND THERE WOULD THUS BE NO CASE OF ANY INCOME ESCAPING ASSESSMENT. THIS CO NTENTION OF THE ASSESSEE WAS ALSO NOT FOUND ACCEPTABLE BY THE AO AN D HE COMPLETED THE ASSESSMENT U/S143(3) R.W.S 147 VIDE AN ORDER DA TED 28.11.2012 MAKING THE ADDITION OF RS.78,32,793/- TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF DISALLOWANCE OF PROVISION FO R DOUBTFUL DEBTS. 3. AGAINST THE ORDER PASSED BY THE AO U/S 143(3) R. W.S. 147 OF THE ACT, APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE TH E LD. CIT(A) CHALLENGING THE VALIDITY OF THE SAID ASSESSMENT AS WELL AS DISPUTING THE ADDITION MADE THEREIN ON ACCOUNT OF DISALLOWANC E OF PROVISION FOR DOUBTFUL DEBTS. AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AS WELL AS MATERIAL AVAILABLE ON RECOR D, THE LD. CIT(A) UPHELD THE VALIDITY OF ASSESSMENT MADE BY THE AO U/ S143(3) R.W.S. 147 OVERRULING THE OBJECTION RAISED BY THE ASSESSEE ON THIS ISSUE. HE, HOWEVER, HELD THAT THE ADDITION MADE BY THE AO ON A CCOUNT OF 3 ITA NO.6620/MUM/2012 JASLOK HOSPITAL AND RESEARCH CENTER DISALLOWANCE OF PROVISION FOR DOUBTFUL DEBTS WAS NO T SUSTAINABLE RELYING ON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME-TAX (EXEMPTION) V/S NATIONAL ASSOCIATION OF SOFTWARE AND SERVICES COMPANIES 345 ITR 362. HE ALSO HELD THAT EVEN IF THE PROVISION FOR DOUBTFUL DEBTS WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE, THE SAME WOULD BRING DOWN THE DEFICIT FRO M RS.19,08,72,208/- TO RS. 18,45,44,475/- RESULTING I NTO NO TAXABLE INCOME IN THE HANDS OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL BEFOR E THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED TH AT THE SOLITARY ISSUE INVOLVED IN THIS APPEAL OF THE REVENUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE DELHI H IGH COURT IN THE CASE OF NATIONAL ASSOCIATION OF SOFTWARE AND SERVIC ES COMPANIES (SUPRA), WHEREIN IT WAS HELD THAT WHILE COMPUTING T HE INCOME AVAILABLE TO THE TRUST FOR APPLICATION TO CHARITABL E PURPOSES IN INDIA IN ACCORDANCE WITH SECTION 11(1)(A), PROVISION FOR DOU BTFUL DEBTS MUST BE DEDUCTED. A SIMILAR VIEW HAS BEEN TAKEN BY THE COO RDINATE BENCH OF THIS TRIBUNAL AT AGRA IN THE CASE OF CIT VS M/S. SA MTA LOK SANSTHAN VIDE ORDER DATED 08/06/2012 PASSED IN ITA NO.271/AG RA/2011 WHEREIN IT WAS HELD THAT WHILE COMPUTING THE SURPLU S AND APPLICATION OF ITS INCOME FOR THE PURPOSE OF GRANTING EXEMPTION U/S. 11 OF THE IT ACT, UNRECOVERABLE FEES SHALL HAVE TO BE GIVEN TREA TMENT IN INCOME AND EXPENDITURE ACCOUNT. RESPECTFULLY FOLLOWING THESE JUDICIAL PRONOUNCEMENTS, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF PROVISION FOR DOUBTFUL DEBTS. WE ALSO FIND OURSELV ES IN AGREEMENT WITH THE LD. CIT(A) THAT THE ADDITION ON ACCOUNT OF DISA LLOWANCE OF PROVISION FOR BAD DEBTS, EVEN IF IT IS MADE, WOULD GO TO REDU CE THE DEFICIT OF THE ASSESSEE RESULTING INTO NO TAXABLE INCOME WHICH COU LD BE SAID TO HAVE ESCAPED ASSESSMENT. 4 ITA NO.6620/MUM/2012 JASLOK HOSPITAL AND RESEARCH CENTER 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/01/2 014. '2 . 01+ 3'*4 10 / 01/2014 1 . SD/- SD/- ( VIVEK VARMA ) (P.M. JAGTA P ) ' !'# / JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; 3'* DATED 10 /01/2014 F{X~{T? P.S./ '*.!. '2 . 5'6% 7%+ '2 . 5'6% 7%+ '2 . 5'6% 7%+ '2 . 5'6% 7%+/ COPY OF THE ORDER FORWARDED TO : 1. ,8 / THE APPELLANT 2. 59,8 / THE RESPONDENT. 3. : ( ) / THE CIT (A) - , MUMBAI 4. : /CIT MUMBAI 5. %$= 5''* , , / DR, ITAT, MUMBAI BENCH 6. >& ? / GUARD FILE. '2* ! '2* ! '2* ! '2* ! / BY ORDER, !9% 5' //TRUE COPY// @ @@ @/ // /!A !A !A !A ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI,