M/s. C R Nagappa And Sons, Bangalore V. Deputy Commissioner Of Income Tax (CPC), Bangalore

ITA 701/BANG/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7321 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-07-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 13-11-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANDEEP CHALAPATHY
• Keywords: Charitable institution; Revised return
• Section: 154; 11; 12A; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.701/BANG/2020 ASSESSMENT YEAR : 2015-16 M/S CR NAGAPPA AND SONS, #16, KASTURBA ROAD, BENGALURU. PAN AABAS 1764 R VS. THE DY. COMMISSIONER OF INCOME-TAX (CPC), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI SANDEEP CHALAPATHY, C.A REVENUE BY : SHRI KANNAN NARAYANAN, JCIT (DR) DATE OF HEARING : 19-07-2021 DATE OF PRONOUNCEMENT : 17-08-2021 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGA INST ORDER DATED 16/09/2020 BY THE LD.CIT(A)-14, BENGALURU FOR ASSES SMENT YEAR ON FOLLOWING GROUNDS OF APPEAL: PAGE 2 OF 9 ITA NO.110/BANG/2020 PAGE 3 OF 9 ITA NO.110/BANG/2020 BRIEF FACTS OF THE CASE ARE AS UNDER: 2. ASSESSEE IS A CHARITABLE TRUST, REGISTERED UNDER SECTION 12A OF THE ACT. IT FILED ITS RETURN OF INCOME ON 27/09/ 2015 DECLARING TOTAL INCOME AT NIL, AFTER CLAIMING DEDUCTION UND ER SECTION 11(1)(A) OF THE ACT ON THE SURPLUS. IT HAD DECLARED ITS INCOME UNDER THE INCOME FROM HOUSE PROPERTY AND OTHER SOUR CES. THE LD.AO NOTED THAT, THE ASSESSEE CLAIMED DEDUCTION OF 30% UNDER SECTION 24(B) OF THE ACT UNDER, INCOME FROM HOUSE PROPERTY. IN THE INTIMATION UNDER SECTION 143(1) OF THE ACT, THE SAID DEDUCTION WAS REJECTED. 2.1 THE ASSESSEE FILED AN APPLICATION UNDER SECTION 154 ELECTRONICALLY FOR RECTIFICATION. IN THE RECTIFICAT ION APPLICATION ASSESSEE WITHDREW THE DEDUCTION CLAIMED UNDER SECTI ON 24(B) OF THE ACT, BUT CLAIMED EXEMPTION UNDER SECTION 11(1)( A) OF THE ACT, AMOUNTING TO 72,66,63/- BEING 15% OF THE GROSS RECEIPTS PAGE 4 OF 9 ITA NO.110/BANG/2020 TOWARDS APPLICATION OF INCOME. THE RECTIFICATION AP PLICATION FILED BY ASSESSEE WAS REJECTED ON THE GROUND THAT THERE I S NO PRIMA FACIE ERROR IN THE INTIMATION UNDER SECTION 143 (1). 3 AGGRIEVED BY THE ORDER OF THE LD.AO, ASSESSEE PRE FERRED APPEAL BEFORE THE LD.CIT(A). 3.1 THE LD.CIT(A) DISALLOWED THE EXEMPTION CLAIMED UNDER SECTION 11(1)(A) ON THE GROSS RECEIPTS FOR THE REAS ON THAT THE CLAIM MADE IN THE RECTIFICATION RETURN WAS FRESH WHICH CA NNOT BE ENTERTAINED. THE LD.CIT(A) ALSO UPHELD DISALLOWANCE OF DEDUCTION CLAIMED UNDER INCOME FROM HOUSE PROPERTY BEING 30% OF THE ANNUAL LET OUT VALUE. 4 AGGRIEVED BY THE ORDER OF THE LD.CIT(A) ASSESSEE IS AN APPEAL BEFORE US NOW. 5. GROUND NO.1 IS SUBMITTED TO BE GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ADJUDICATION. GROUND NO.3-7 6. IT HAS BEEN SUBMITTED THAT IN GROUNDS 3 TO 7 THE ISSUE THAT NEEDS TO BE CONSIDERED IS REGARDING WHETHER FOR THE PURPOSE OF SECTION 11(1)(A) OF THE ACT THE AMOUNT FOR GRANT OF EXEMPTION WOULD BE THE NET OF EXPENDITURE OR THE GROSS INCOME IN THE HANDS OF ASSESSEE. 6.1 THE LD.AR SUBMITTED THAT ASSESSEE IN ITS ORIGIN AL RETURN OF INCOME COMPUTED THE EXEMPTION UNDER SECTION 11(1)( A) BEING 15% OF THE TOTAL INCOME. SUCH TOTAL INCOME WAS COMP UTED WHICH INCLUDED THE CLAIM OF DEDUCTION UNDER SECTION 24(A) BEING 30% OF THE RENTAL INCOME. SUBSEQUENTLY, IN THE REVISED RET URN FILED, PAGE 5 OF 9 ITA NO.110/BANG/2020 ASSESSEE WITHDREW THE CLAIM OF STANDARD DEDUCTION U NDER THE INCOME FROM HOUSE PROPERTY INSTEAD THE DEDUCTION U NDER SECTION 11(1)(A) OF THE ACT WAS COMPUTED ON THE GROSS RECEI PTS. 6.2 THE LD.AR THUS SUBMITTED THAT, ASSESSEE IN THE REVISED RETURN CLAIMED DEDUCTION OF 72,66,663/- UNDER SECTION 11(1)(A) OF THE ACT, IN THE APPLICATION FILED UNDER SECTION 154 OF THE ACT, AS AGAINST THE CLAIM OF 34,42,396/- MADE IN THE RETURN OF INCOME. HE SUBMITTED THAT, THE AUTHORITIES BELOW REJECTED A SSESSEES RECTIFICATION APPLICATION ON THE GROUND THAT ASSESS EE HAD MADE FRESH CLAIMS WHICH CANNOT BE ALLOWED UNDER SECTION 154 OF THE ACT. 6.3 THE LD.AR SUBMITTED THAT, POSITION UNDER LAW IS VERY CLEAR THAT DEDUCTION UNDER SECTION 11(1)(A) OF THE ACT, I S TO BE ALLOWED ON GROSS RECEIPTS. IN SUPPORT HE PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN CASE OF CIT VS. PROGRAMME FOR COMMUNITY ORGANISATION REPORTED IN (2001) 248 ITR 1. 6.4 THE LD.AR SUBMITTED THAT, NOT FOLLOWING THE DEC ISION OF HON'BLE SUPREME COURT , AMOUNTS TO MISTAKE A PRINT ON RECORD AND HENCE IT IS RECTIFIABLE UNDER SECTION 154 OF THE AC T. 6.5 ON THE CONTRARY, THE LD.DR RELIED ON THE ORDERS PASSED BY AUTHORITIES BELOW. 7. WE HAVE PERUSED THE VISION THAT WAS WHERE BOTH S IDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 7.1 SECTION 11 (1)(A) READS AS UNDER: '11. (1) (A) INCOME DERIVED FROM PROPERTY HELD UNDE R TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA ; AND, WHERE A NY SUCH INCOME PAGE 6 OF 9 ITA NO.110/BANG/2020 IS ACCUMULATED OR SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOME SO ACCUMUL ATED OR SET APART IS NOT IN EXCESS OF FIFTEEN PER CENT, OF THE INCOME FROM SUCH PROPERTY.' 7.2 THE SECTION RELATES TO THE INCOME DERIVED BY THE TRUST FROM PROPERTY. THE TRUST IS REQUIRED TO BE WHOLLY FOR CH ARITABLE OR RELIGIOUS PURPOSES, AND THE INCOME IS EXPECTED TO H AVE RELATION TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA. 7.3 THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. PROGRAMME FOR COMMUNITY ORGANISATION (SUPRA), WHILE DEALING WITH IDENTICAL ISSUE, HELD THAT, A CHARITABLE OR RE LIGIOUS TRUST IS ENTITLED TO ACCUMULATE 25% OF ITS GROSS INCOME DERI VED FROM PROPERTY HELD UNDER TRUST. 7.4 AT THIS JUNCTURE WE REFER TO THE DECISION OF ITAT MUMBAI SPECIAL BENCH IN THE CASE OF BAI SONABAI HIRJI AGIARY TRUST REPORTED IN 272 ITR (AT) 67 WHEREIN, IN IDENTICAL ISSUE, THE TRIBUNAL OBSERVED AS UNDER:- FROM THE ABOVE, IT WOULD APPEAR THAT THE DISPUTE I S LIMITED TO CORRECT AMOUNT OF INCOME FROM HOUSE PROPERTY, WHETHER IT SHOULD BE GROSS RENT OF RS.2,63,675 OR THE NET INCOME AFTER DEDUCTING OUTGOINGS AND DEP RECIATION. SHRI V.H. PATIL FURTHER SUBMITTED THAT THE KERALA HIGH COURT (SEE [1997] 228 ITR 620), IN THE SAME CASE, HAS REF ERRED TO THE BOARDS CIRCULAR DATED JUNE 19, 1968, ON THE SAME SUBJECT A ND OBSERVED THAT INCOME FOR THE PURPOSES OF SECTION 11(1), SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE. IT WAS HELD BY THE KERALA HIGH CO URT THAT 25 PER CENT OF GROSS AMOUNT OF RS. 2,57,376 SHOULD BE ACCUMULATED, AND THIS FINDING HAS BEEN CONFIRMED BY THE HONBLE SUPREME COURT. SHRI V . H. PATIL ALSO CONTENDED THAT ALL OUT-GOINGS INCLUDING EXPENDITURE INCURRED BY A PUBLIC CHARITABLE TRUST MUST BE CONSIDERED TO BE IN THE NATURE OF APPLICATI ON OF INCOME FOR THE OBJECTS AND PURPOSES OF THE TRUST. IT IS, THEREFORE, CONTEN DED THAT 25 PER CENT OF THE GROSS INCOME AS REFLECTED IN THE ACCOUNT OF THE ASS ESSEE-TRUST SHOULD BE ALLOWED TO BE ACCUMULATED UNDER SECTION 11(1). HAVING REGARD TO THE CLEAR PRONOUNCEMENT OF THEIR LORDSHIPS OF THE SUPREME COURT IT IS DIFFICULT TO ACCEPT THAT OUTGOINGS WHIC H ARE IN THE NATURE OF PAGE 7 OF 9 ITA NO.110/BANG/2020 APPLICATION OF INCOME ARE TO BE EXCLUDED. THE INCOM E AVAILABLE TO THE ASSESSEE BEFORE IT WAS APPLIED IS DIRECTED TO BE TAKEN AND T HE SAME IN THE PRESENT CASE IS RS. 3,42,174. TWENTY-FIVE PER CENT OF THE ABOVE INCOME IS TO BE ALLOWED AS A DEDUCTION. SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE HONBLE MADHYA PRADESH HIGH COURT IN PARSI ZORASTRIAN ANJUMAN TRUST MHOW V . CIT [1987] 163 ITR 832. NO REASON WHATSOEVER HAS BEEN GIVEN BY THE REV ENUE AUTHORITIES FOR DEDUCTING RS. 2,17,126 IN THIS CASE FOR PURPOSES OF SECTION 11(1)(A). THE DECISION CITED ON BEHALF OF THE REVENUE DID NOT TAK E INTO ACCOUNT THE DECISION OF THE SUPREME COURT REFERRED TO ABOVE. THE CIRCULA R OF THE CENTRAL BOARD OF DIRECT TAXES HAS ALSO BEEN CONSIDERED BY THE HONBL E KERALA HIGH COURT IN ITS DECISION REFERRED TO ABOVE. ACCORDINGLY, THE QUESTI ON REFERRED TO US IS ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE AS SESSEE. 7.5 BASED ON THE ABOVE VIEW, WE ARE OF THE OPINION THAT, IN THE PRESENT FACTS OF THE CASE ASSESSEE IS ENTITLED TO A CCUMULATE 15% OF THE GROSS TOTAL INCOME. AT THIS JUNCTURE WE ALSO KNOW THAT THIS CLAIM WAS NOT VERIFIED BY THE LD.AO. UNDER SUCH CIR CUMSTANCES WE DEEM IT FIT AND PROPER TO REMAND THIS ISSUE BACK TO THE LD.AO TO VERIFY THE ACCUMULATION OF GROSS INCOME AND TO C ONSIDER THE CLAIM OF ASSESSEE IN ACCORDANCE WITH THE RATIOS LAI D DOWN BY HONBLE SUPREME COURT IN THE CASE OF CIT VS. PROGRAMME FOR COMMUNITY ORGANISATION (SUPRA), AND THE DECISION BY ITAT MUMBAI SPECIAL BENCH (SUPRA) . ACCORDINGLY THESE GROUNDS RAISED BY ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH AUGUST, 2021 SD/- SD/- (CHANDRA POOJARI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 17 TH AUG, 2021. /VMS/ PAGE 8 OF 9 ITA NO.110/BANG/2020 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 9 OF 9 ITA NO.110/BANG/2020 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -8-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -8-2021 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -8-2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -8-2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -8-2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -8-2021 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -8-2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS