ITO 17 (2)(3), MUMBAI V. M/S MAHAKALP AROGYA PRATISTHAN, MUMBAI

ITA 7099/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8664 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 18-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MAHENDRA GOHEL
• Keywords: Charitable institution; Maximum Marginal Rate; Question of law; Tax effect; Set aside
• Section: 143(3); 12A; 13; 12; 10; 11

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI AMARJIT SINGH (JM) I.T.A. NO. 7099/MUM/2019 (ASSESSMENT YEAR 2013-14) ITO - 17(2)(3) ROOM NO113, KAUTILYA BHAVAN, BANDRA KURLA COMPLEX MUMBAI-400 051 PAN : AAATM2595C VS. M/S. MAHAKALP AROGYA PRATISTHAN BAJAJ BHAWAN, 2 ND FLOOR JAMANALAL BAJAJ MARG 226, NARIMAN POINT MUMBAI-400 021 ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI MAHENDRA GOHEL DEPARTMENT BY MS. USHA GAIKWAD DATE OF HEARING 25 .05 .2021 DATE OF PRONOUNCEMENT 20 .07 .2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-6 DATED 23.08.2019 AND PERTAINS TO ASSESSMENT YEAR 20 13-14. 2. THE GROUNDS OF APPEAL READ AS UNDER : 1. 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A}-6, MUMBAI, WAS JUSTIFIED IN GRANTING EXEMPTION U/S. 10 (34) TO THE TUNE OF RS. 3,43,55,850/-, WHEN THIS INCOME FORMS A PART OF THE INCOME FROM PROPERT Y HELD UNDER TRUST AND THEREFORE CAN ONLY BE CLAIMED TO BE EXEMPT U/S. 11, IF APPLIED FOR CHARIT Y AND NOT U/S. 10 OF THE INCOME TAX ACT,1961?' 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) WAS RIGHT IN REPLYING ON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT ITAT IN THE C ASE OF DIT(E) VS. JASUBHAI FOUNDATION 374 ITR 315 (BOM) WHICH IS DISTINGUISHABLE TO THE F ACTS OF THE ASSESSEE'S CASE AS IN THE ABOVE CASE, EXEMPTION U/S. 11 IS DENIED TO THE ASSESSEE D UE TO THE VIOLATION OF SECTION 13(1 )(D) OF THE INCOME TAX ACT, 1961, EVEN THROUGH THE INCOME TAX D EPARTMENT HAS NOT FILED SLP BEFORE HON'BLE SUPREME COURT DUE TO LOW TAX EFFECT.' 3. 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD. C IT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED' 4. 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY'. ITA NO.7099/MUM/2019 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PUBLIC COMPANY INCORPORATED U/S 25 OF COMPANIES ACT 1956 AND IS ENGAGED IN THE FIEL D OF ADVANCEMENT OF RURAL POOR BY WAY PROVIDING MEDICAL AID. THE TRUST WAS CREATED IN THE YEAR 1991. IT IS REGISTERED UNDER SECTION 12A (A) OF THE ACT. THE TRUST HAD / R ECEIVED CERTAIN SHARES OF LISTED COMPANIES AS DONATION TOWARDS ITS CORPUS. THE TRUST CONTINUED HOLDING THESE SHARES AND ACCRUAL THERETO TILL DATE WHICH AMOUNTED TO VIO LATION OF SECTION 11(5) READ WITH SECTION 13(1)(D) OF THE ACT. AS A RESULT, THE TRUST DID NOT CLAIM BENEFIT OF SECTION 11 & 12 OF THE ACT. ACCORDINGLY, THE TRUST HAD FILED T HE RETURN OF INCOME FOR THE ABOVE YEAR DECLARING A TOTAL INCOME AT RS. NIL CLAIMING D EDUCTION FOR DONATIONS GIVEN TO ELIGIBLE INSTITUTIONS AND TRUSTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAD SHOWN INVESTMENT IN QUOTED/UNQUOTED SHARES AS UNDER:- NAME OF THE COMPANY TYPE & F.V NO. OF SHARES AS AT 31/03/2013 BAJAJ HOLDINGS AND INVESTMENT LTD. EQUITY RS. 10 EACH 2,94,900 2,43,21,600 BAJAJ AUTO LTD. EQUITY RS. 10 EACH 5,89,800 95,13,405 BAJAJ FINSERV LTD. EQUITY RS. 5 EACH 3,24,390 2,83,80,575 NRC LTD. EQUITY RS. 10 EACH 13,950 13,26,535 TOTAL 6,35,42,115 THE AO CONTENTED THAT THE ASSESSEE HAD INVESTED IN PROHIBITED MODE OF INVESTMENT AND VIOLATED THE PROVISIONS OF SECTION 13(1)(D) R.W .S 11(5) OF THE INCOME TAX ACT AND SECTION 13(2)(H) OF THE INCOME TAX ACT, 1961. FURTH ER IT WAS SEEN BY THE AO THAT ASSESSEE WAS IN RECEIPT OF DIVIDEND OF RS.3,43,55,8 50/- AND SAME HAD BEEN CLAIMED AS EXEMPT U/S. 10(34) OF THE L.T.ACT. THE AO FURTHE R DISCUSSED THE ISSUE ON CHARGING THE INCOME OF THE ASSESSEE'S TRUST AS PER PROVISION S OF SECTION 164(2) OF THE ACT. SINCE ITA NO.7099/MUM/2019 3 NO EXEMPTION U/S. 11 WAS ALLOWED TO THE ASSESSE ON DIVIDEND ON SHARES OF RS.3,43,55,850/- AND INCOME WAS TAXED AT MAXIMUM MA RGIN RATE AS PER PROVISIONS OF SECTION 164(2) R.W.S. 2(29C). THE AO FURTHER DISCUS SED TAXABILITY AS A TRUST OBSERVING THAT THE STATUS OF THE TRUST IS NOT CHANGED WHEN TH E CONDITIONS U/S. 13 OF THE ACT ARE VIOLATED BY THE ASSESSE. THE VIOLATION U/S.13 OF TH E ACT HAD ONLY CHANGED THE ELIGIBILITY FOR EXEMPTION OF INCOME DERIVED FROM TH E PROPERTY HELD BY THE TRUST U/S.11 OF THE ACT AND NOT U/S.10(34) OF THE ACT. ACCORDING LY, THE AO COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT DETERMIN ING THE TOTAL INCOME AT RS.3,43,55,850/- BEING DIVIDEND INCOME EARNED ON TH E SHARES HELD BY THE TRUST, LEVYING TAX ON THIS DIVIDEND INCOME AT MAXIMUM MARG INAL RATE OF TAX. 4. UPON ASSESSEES APPEAL LD.CIT(A) DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER:- 8. I HAVE CONSIDERED THE FACTS OF THE CASE, DISCUSSION OF THE AO IN THE ASSESSMENT ORDER, ORAL CONTENTION AND WRITTEN SUBMISSIONS OF T HE APPELLANT AND MATERIAL AVAILABLE ON RECORD. THE AO HAS NOT ALLOWED EXEMPTION U/S. 10 (34) OF THE ACT IN RESPECT OF DIVIDEND INCOME BY HOLDING THAT, THE SAME IS NOT AV AILABLE WHILE COMPUTING INCOME U/S. 11 OF THE ACT. THE APPELLANT HAS RELIED IN THI S REGARD ON THE JUDGEMENT OF HON. ITAT MUMBAI AND HON. BOMBAY HIGH COURT AS ABOVE. DU RING THE COURSE OF APPELLATE PROCEEDINGS, IT WAS SUBMITTED BY THE APPE LLANT THAT THE DIVIDEND INCOME CAN BE CLAIMED EXEMPT U/S. 10 OF THE ACT IRRESPECTIVE O F THE FACT THAT THE ASSESSEE IS A CHARITABLE TRUST. THE APPELLANT, IN THIS REGARD HAS RELIED ON THE JUDGEMENT OF HON. ITAT, MUMBAI DT. 26.03.2014 IN THE CASE OF JAMSETJI TATA TRUST VS. JOIT (E) RANGE - II 148 ITO 3SSWHEREIN THE HON. ITAT WHILE DEALING WITH THE SAM E ISSUE HAVE OBSERVED AS UNDER:- 'IN OUR VIEW THE EXEMPTION U/S 11 IS AVAILABLE ON T HE INCOME OF THE PUBLIC CHARITABLE/ RELIGIOUS TRUST OR INSTITUTION WHICH IS OTHERWISE T AXABLE IN THE HANDS OF OTHER PERSONS. THUS THE INCOME WHICH IS EXEMPT U/S 10 CANNOT BE BR OUGHT TO TAX BY VIRTUE OF SECTIONS 11 AND 13 OF THE ACT BECAUSE NO SUCH PRE CONDITION IS PROVIDED EITHER U/S 10 OR 11 TO 13 OF INCOME-TAX ACT. THEREFORE, SECTION 11 TO 13 W OULD NOT OPERATE AS OVERRIDING AFFECT TO THE SECTION 10 OF THE ACT. THE LANGUAGE O F THESE PROVISIONS DOES NOT SUGGEST THAT EITHER SECTION 10 OF THE ACT. THE LANGUAGE OF THESE PROVISIONS DOES NOT SUGGEST THAT EITHER SECTION 10 IS SUBJECTED TO THE PROVISIO NS OF SECTIONS 11 TO 13 OR SECTIONS 11 TO 13 HAS ANY OVERRIDING AFFECT OVER SECTION 10. TH EREFORE, THE BENEFIT OF SECTION 10 CANNOT BE DENIED BY INVOKING THE PROVISIONS OF SECT IONS 11 TO 13 OF THE ACT. ONCE THE ITA NO.7099/MUM/2019 4 CONDITIONS OF SECTION 10 ARE SATISFIED THEN NO OTHE R CONDITION CAN BE FASTENED FOR DENYING THE CLAIM UNDER SECTION 10 OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION AND FOLLOWING THE V ARIOUS DECISIONS (SUPRA) WE HOLD THAT THE DIVIDEND INCOME ON SHARES AND MUTUAL FUNDS AND LONG TERM CAPITAL GAIN ON SALE OF SHARES AN EXEMPT U/S 10(34) 10(35) AND 10(3 8) RESPECTIVELY AND CANNOT BE BROUGHT TO TAX BY APPLYING SECTIONS 11 AND 13 OF TH E ACT.' 8.1 FURTHER IN SUPPORT OF ITS CONTENTION, THE APP ELLANT HAS ALSO RELIED ON THE JUDGEMENT OF HON. BOMBAY HIGH COURT DATED 01.04.201 5 IN THE CASE OF DIT (E) VS. JASUBHAI FOUNDATION 374 ITR 215 WHEREIN THE HON'BLE JURISDICTIONAL HIGH COURT WHILE DECIDING THE SAME ISSUE HAS OBSERVED AS UNDER . 'UPON A PERUSAL OF THE ORDER OF THE ASSESSING OFFIC ER AND THAT OF THE COMMISSIONER UPHOLDING IT, WE ARE OF THE VIEW THAT THE TRIBUNAL WAS CORRECT IN SETTING ASIDE THESE CONCURRENT ORDERS. THE LANGU AGE OF THE TWO SECTIONS IS PLAIN AND CLEAR. THE PROVISIONS, NAMELY, SECTIONS 1 0 AND 11 FALL UNDER A CHAPTER WHICH IS TITLED 'INCOMES WHICH DO NOT FORM PART OF TOTAL EXPENDITURE' (CHAPTER III). SECTION 10 DEALS WITH I NCOMES NOT INCLUDED IN TOTAL INCOME WHEREAS SECTION 11 DEALS WITH INCOME F ROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES. WE HAVE NOT FOUND ANYTHING IN THE LANGUAGE OF THE TWO PROVISIONS NOR WAS MR. MALHOTRA ABLE TO POINT OUT AS TO HOW WHEN CERTAIN INCOME IS NOT TO BE INCLUDED IN COMPUTING T OTAL INCOME OF A PREVIOUS YEAR OF ANY PERSON, THEN, THAT WHICH IS EXCLUDED FR OM SECTION 10 COULD BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR O F THE PERSON/ASSESSEE. THAT MAY BE A PERSON WHO RECEIVES OR DERIVES INCOME FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES. THUS, THE INCOME WHICH IS NOT TO BE INCLUDED IN COMPUTATION OF THE TOTAL INCO ME IS A MATTER DEALT WITH BY SECTION 10 AND BY SECTION 11 THE CASE OF AN ASSESSE E WHO HAS RECEIVED INCOME DERIVED FROM PROPERTY HELD UNDER TRUST ONLY FOR CHA RITABLE OR RELIGIOUS PURPOSES TO THE EXTENT TO WHICH SUCH INCOME IS APPL IED TO SUCH PROPERTY IN INDIA AND THAT ANY SUCH INCOME IS ACCUMULATED OR SE T APART FOR APPLICATION FOR SUCH PURPOSES IN INDIA TO THE EXTENT OF WHICH THE I NCOME SO ACCUMULATED OR SET APART IN COMPUTING 15% OF THE INCOME OF SUCH PROPER TY, IS DEALT WITH. THEREFORE, IT IS A PARTICULAR ASSESSEE AND WHO IS I N RECEIPT OF SUCH INCOME AS IS FALLING UNDER CLAUSE (A) OF SUB-SECTION (1) OF S ECTION 11 WHO WOULD BE CLAIMING THE EXEMPTION OR BENEFIT. THAT IS A INCOME DERIVED BY A PERSON FROM PROPERTY. IT IS THAT WHICH IS DEALT WITH AND IF THE PROPERLY IS HELD IN TRUST FOR THE SPECIFIED PURPOSE, THE INCOME DERIVED THERE FRO M IS EXEMPT AND TO THE EXTENT INDICATED IN SECTION 11(1)(A) OF THE INCOME TAX ACT, 1961. THERE IS NOTHING IN THE LANGUAGE OF SECTIONS 10 OR 11 WHICH SAYS THAT WHAT IS PROVIDED BY SECTION 10 OR DEALT WITH IS NOT TO BE TAKEN INTO CONSIDERATION OR OMITTED FROM THE PURVIEW OF SECTION 11. IF WE ACCEPT THE AR GUMENT OF MR. MALHOTRA AND THE REVENUE, THE SAME WOULD AMOUNT TO READING I NTO THE PROVISIONS SOMETHING WHICH IS EXPRESSLY NOT THERE. IN SUCH CIR CUMSTANCES, THE TRIBUNAL WAS RIGHT IN ITS CONCLUSION THAT THE INCOME WHICH I N THIS CASE THE ASSESSEE ITA NO.7099/MUM/2019 5 TRUST HAS NOT INCLUDED BY VIRTUE OF SECTION LA, THE N, THAT CANNOT BE CONSIDERED UNDER SECTION 11. IN THE CIRCUMSTANCES AND WHEN THE INCOME FROM PROPE RTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSE IS NOT A MATTER COVERED OR DEA LT WITH BY SECTION 10 THAT THE TRIBUNAL'S VIEW CANNOT BE TERMED AS PERVERSE OR CLEAR LANGUAGE OF THESE PROVISIONS ENABLES US TO UPHOLD THE ORDER OF THE TR IBUNAL. IT IS, ACCORDINGLY, UPHELD. THE REVENUE'S APPEAL DOES NOT RAISE ANY SUB STANTIAL QUESTION OF LAW.' THE AO HAS ALSO SOUGHT TO ARGUE THAT IN THE CASE OF JASUBHAI FOUNDATION (SUPRA), THE ASSESSEE THEREIN WAS GRANTED BENEFITS OF SECTION 11 WHEREAS IN THE CCISE OF THE APPELLANT, THE BENEFITS OF SECTION 11 HAVE NOT BEEN GRANTED AND HENCE THE SAME IS NOT APPLICABLE. IN MY OPINION, THE FACT THAT BENEFITS O F SECTION 11 HAVE NOT BEEN GRANTED TO THE APPELLANT FURTHER STRENGTHENS ITS CLAIM FOR EXEMPTION OF DIVIDEND INCOME. IT IS NOTED THAT THE EXEMPTION UNDER SECTION 10(34) OF TH E ACT IS IN RESPECT OF THE DIVIDEND INCOME REFERRED TO IN SECTION 115-O OF THE ACT. NO OTHER CONDITIONS HAVE BEEN PRESCRIBED. SUCH EXEMPTION IS QUA THE DIVIDEND INCO ME AND NOT QUA THE STATUS OF THE ASSESSEE. THE HON'BLE BOMBAY HIGH COURT HAS ELABORA TELY DEALT WITH THE EXEMPTION UNDER SECTION 10 AS WELL AS THE PROVISIONS OF SECTI ON 11 AND HAS HELD THAT THERE IS NOTHING IN THE LANGUAGE OF SECTION 11 THAT PREVENTS ASSESSE FROM CLAIMING EXEMPTION UNDER SECTION 10 OF THE ACT OR VICE VERSA. 8.2 IN VIEW OF THE FOREGOING AND RESPECTFULLY FOL LOWING THE AFORESAID BINDING JUDGMENTS OF THE HON'BLE BOMBAY HIGH COURT AND THE JURISDICTIONAL ITAT, MUMBAI, THE ACTION OF THE AO IN DENYING THE EXEMPTION UNDER SECTION 10(34) OF THE ACT IN RESPECT OF THE DIVIDEND INCOME EARNED BY THE APPELL ANT IS NOT FOUND TO BE SUSTAINABLE. CONSEQUENTLY, THE LEVY OF TAX ON SUCH DIVIDEND INCO ME AT MAXIMUM MARGINAL RATE OF TAX IS ALSO UNJUSTIFIED. ACCORDINGLY, THE GROUND OF APPEAL IS ALLOWED: 9. IN THE RESULT, THE APPEAL IS ALLOWED. 5. AGAINST THE ABOVE ORDER REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS DULY COVERED I N FAVOUR OF THE ASSESSEE BY THE JURISDICTIONAL HIGH COURT DECISION AS REFERRED IN C IT(A) ORDER. 7 . PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE RELI ED UPON THE AOS ORDER ITA NO.7099/MUM/2019 6 8. UPON CAREFUL CONSIDERATION, WE FIND OURSELF AGRE EMENT WITH THE SUBMISSION OF LD. COUNSEL OF THE ASSESSEE AND THE VIEW TAKEN B Y THE LD.CIT(A) THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DEC ISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF JASUBHAI FOUNDATION (SUPR A). ITAT DECISION IN THE CASE OF JAMSETJI TATA TRUST AND ASSOCIATE TRUST OF THE A SSESSEE TRUST, SHEKHAR BAJAJ CHARITABLE TRUST ALSO SUPPORTS THIS VIEW. DEPARTMEN TS PLEA IN GROUNDS OF APPEAL THAT HONBLE JURISDICTIONAL HIGH COURT IN DECISION IN JA SUBHAI FOUNDATION(SUPRA) HAS NOT BEEN APPEALED BEFORE HONBLE SUPREME COURT DUE TO LOW TAX EFFECT IS NOT A REASON FOR US TO TAKE A CONTRARY VIEW. HENCE, WE UP HOLD THE ORDER OF LD.CIT(A). 9. IN THE RESULT, REVENUE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 20.07.2021 SD/- SD/- ( AMARJIT SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI; DATED : 20/07/2021 SR.PS. THIRUMALESH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) ITAT, MUMBAI