ITO(E), Ghaziabad V. St. Josheph's Capuchin Service Society, Ghaziabad

ITA 717/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7518 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 3
• Next Hearing Date: 11-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 05-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SREENIVASA RAO
• Keywords: Capital asset; Charitable institution; Tax effect
• Section: 143(3); 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-3, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 717/DEL/2015 ASSESSMENT YEAR: 2010-11 INCOME TAX OFFICER (EXEMPTION) VS. ST. JOSEPHS ROOM NO. 208, 2 ND FLOOR, CGO-1, CAPUCHIN SERVICE HAPUR ROAD, SOCIETY, GHAZIABAD SECTOR-3, RAJINDER NAGAR, SAHIBABAD, GHAZIABAD UP (PAN: AAETS1341J) (APPELLANT) (RESPONDENT) AND C.O. NO. 283/DEL/2015 ASSESSMENT YEAR: 2010-11 ST. JOSEPHS CAPUCHIN VS. ITO(E) SERVICE SOCIETY, GHAZIABAD SECTOR-3, RAJINDER NAGAR SAHIBABAD, GHAZIABAD UP (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. A SREENIVASA RAO, SR. D R ASSESSEE BY : SH. KAPIL GOEL, ADVOCATE DATE OF HEARING : 11-07-2016 DATE OF ORDER : 02-08-2016 ORDER PER H.S. SIDHU, J.M. THE APPEAL HAS BEEN FILED BY THE DEPARTMENT AND THE CR OSS OBJECTION FILED BY THE ASSESSEE AGAINST THE ORDER O F THE LD. CIT(A), MEERUT DATED 26.11.2014 RELATING TO ASSESSMENT YEAR 201 0-11. ITA NO.717/DEL/2015 & CO NO. 283/DEL/2015 2 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN I TS APPEAL: 1 THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW BY DELETING THE ADDITION OF RS. 20,49,000/- OUT OF RS. 33,75,400/- MADE BY THE AO ON ACCOUNT OF CAPITAL GAIN. THEREFORE, THE ADDITION MADE BY THE AO AMOUNTING TO RS. 20,49,000/- BE RESTORED AND THE RELIEF GIVEN BY THE LD. CIT(A) BE CANCELLED IN THIS ISSUE. 2 THE ORDER OF THE CIT(A) BE CANCELLED AND THE ORDER O F THE AO BE RESTORED. 3 APPELLANT CRAVES LEAVE TO MODIFY/ AMEND OR ADD ANYONE OR MORE GROUNDS OF APPEAL. 3. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATER IAL ON RECORD. FROM THE ABOVE, I FIND THAT THE TAX EFFECT IN TH E REVENUES APPEAL IS LESS THAN RS.10,00,000/-, THEREFORE, THE D EPARTMENTS APPEAL IS NOT MAINTAINABLE, IN VIEW OF THE CIRCULA R NO. 21/2015 DATED 10 TH DECEMBER, 2015 ISSUED VIDE F.NO. 279/MISC. 142/200 7- ITJ (PT.) BY THE CBDT. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PARA NOS. 3 & 10 OF THE AFORESAID CBDTS CIRCULAR AR E REPRODUCED AS UNDER:- 3. HENCEFORTH, APPEALS/ SLPS SHALL NOT BE FILED IN CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY L IMITS GIVEN HEREUNDER: S NO APPEALS IN INCOME -TAX MATTERS MONETARY LIMIT (IN RS) ITA NO.717/DEL/2015 & CO NO. 283/DEL/2015 3 1 BEFORE APPELLATE TRIBUNAL 10,00,000/ - 2 BEFORE HIGH COURT 20,00,000/ - 3 BEFORE SUPREME COURT 25,00,000/ - IT IS CLARIFIED THAT AN APPEAL SHOULD NOT BE FILED MERELY BECAUSE THE TAX EFFECT IN A CASE EXCEEDS THE MONETA RY LIMITS PRESCRIBED ABOVE. FILING OF APPEAL IN SUCH CASES IS TO BE DECIDED ON MERITS OF THE CASE. 10. THIS INSTRUCTION WILL APPLY RETROSPECTIVELY TO PENDING APPEALS AND APPEALS TO BE FILED HENCEFORTH IN HIGH C OURTS/ TRIBUNALS. PENDING APPEALS BELOW THE SPECIFIED TAX LIMITS IN PARA 3 ABOVE MAY BE WITHDRAWN/ NOT PRESSED. APPEALS BEFORE THE SUPREME COURT WILL BE GOVERNED BY THE INSTRUCTIONS ON THIS SUBJECT, OPERATIVE AT THE TIME WHEN SUCH APPEAL WAS FILED. 4. IT IS NOT IN DISPUTE THAT THE BOARDS INSTRUCTION OR DIRECTIONS ISSUED TO THE INCOME-TAX AUTHORITIES ARE BINDING ON THO SE AUTHORITIES, THEREFORE, THE DEPARTMENT SHOULD HAVE WITHD RAWN/ NOT PRESSED THE PRESENT APPEAL, IN VIEW OF THE AFORESAI D INSTRUCTIONS SINCE THE TAX EFFECT IN THE INSTANT APPEAL IS LESS THA N THE AMOUNT OF RS. 10 LACS, PRESCRIBED IN THE ABOVE SAID CBDTS I NSTRUCTIONS. 5. KEEPING IN VIEW THE CBDT INSTRUCTION NO. 21/2015 DATED 10 TH DECEMBER, 2015, I AM OF THE VIEW THAT THE REVENUE S HOULD HAVE WITHDRAWN/ NOT PRESSED THE INSTANT APPEAL BEFORE THE TRI BUNAL. I ITA NO.717/DEL/2015 & CO NO. 283/DEL/2015 4 AM ALSO OF THE VIEW THAT THE SAID INSTRUCTIONS ARE APP LICABLE FOR THE PENDING APPEALS AND APPEALS TO BE FILED HENCEFORTH I N TRIBUNAL. ACCORDINGLY, THE REVENUES APPEAL IS DISMISSED. ASSESSEES CROSS OBJECTION NO. 283/DEL/2015 6. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS CROSS OBJECTION:- 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER HAS ERRED IN ASSESSING THE SUM OF RS. 33,75,400 BEING 'PROFIT FROM SALE OF LAND, AS INCOME FROM CAPITAL GAIN IN THE HANDS OF THE ASSESSEE WHEN THE AMOUNT OF CAPITAL GAIN HAD BEEN INVESTED IN ACCORDANCE OF THE PROVISIONS OF SECTION 11(IA) OF THE ACT. 1.2. THE LEARNED ASSESSING OFFICER HAS NOT ALLOWED THE DEDUCTION UNDER SECTION 11(IA) OF THE ACT AND FAILED TO APPRECIATE THE FACT THAT ALTHOUGH PROFIT OF SALE OF LAND BEING SHOWN ON THE CREDIT SIDE OF STATEMENT OF PROFIT AND LOSS ACCOUNT IS 'INCOME UNDER THE HEAD CAPITAL GAIN STILL IT QUALIFIES FOR THE INVESTMENT LINKED DEDUCTION IN ACCORDANCE OF THE PROVISIONS OF SECTION 11(1A) OF THE ACT. THEREFORE THE INCOME CHARGEABLE TO TAX IN THE HANDS OF ASSESSEE HAVING COMPILED WITH THE PROVISIONS OF SECTION 11(1A) IS NIL. 1.3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT(A) HAS ALLOWED THE ASSESSEE ITA NO.717/DEL/2015 & CO NO. 283/DEL/2015 5 RELIEF OF RS. 20,49,000/- ONLY WITHOUT APPRECIATING THE FACTS OF THE CASE AND IN LINE WITH THE REQUIREMENTS OF THE ACT UNDER SECTION 11(1A) OF THE ACT BUT THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE DEDUCTION UNDER SECTION 11(1A) IS RESTRICTED TO RS. 20,49,000.00 ONLY INSTEAD OF ALLOWING FULL RELI EF TO THE ASSESSEE AS THE COMPLETE AMOUNT HAS BEEN INVESTED IN ACCORDANCE WITH SECTION 11(1A) OF THE ACT. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE INTENT OF THE SECTION 11(1A) IS ON THE INVESTMENT AND NOT ON THE SOURCE OF THE INVESTMENT. WHEN THE ASSESSEE BEING A CHARITABLE SOCIETY BEING AUDITED UNDER THE PROVISIONS OF THE ACT, HAS INVESTED THE SUM AS PER SECTION 11(1A) OF THE ACT, IT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 11(1A) OF THE ACT. THEREFORE, RESPONDENT PRAYS TO DELETE THE BALANCE ADDITION OF RS. 13,26,400/- SUSTAINED BY LEARNED CIT(A) AS THE SAME IS UNJUSTIFIED IN LAW. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID CROSS OBJECTIONS AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE MATTER. 7. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE -SOCIETY REGISTERED WITH THE REGISTRAR OF SOCIETY, UTTAR PRADESH AND RENEWAL WAS GRANTED ON 8.6.2010. THE SOCIETY HAS BEEN GRAN TED REGISTRATION U/S. 12AA OF THE I.T. ACT, 1961 BY THE T HEN LD. CIT, ITA NO.717/DEL/2015 & CO NO. 283/DEL/2015 6 MERRUT VIDE ORDER DATED 24.11.1984. IN THIS CASE ASS ESSMENT WAS COMPLETED U/S. 143(3) OF THE INCOME TAX ACT, 1961 ON 7 .3.2013 IN WHICH ADDITION OF RS. 33,75,400/- WAS MADE UNDER TH E HEAD CAPITAL GAINS. 8. AGGRIEVED BY THE AFORESAID ADDITION, ASSESSEE APPE ALED BEFORE THE LD. CIT(A), MEERUT VIDE HIS IMPUGNED ORDER DATED 26.11.2014 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 9. AGAINST THE ORDER OF THE LD. CIT(A), ASSESSEE H AS FILED THE CROSS OBJECTION BEFORE THE TRIBUNAL. 10. DURING THE HEARING, LD. COUNSEL OF THE ASSESS EE STATED THAT THE ASSESSING OFFICER HAS ERRED IN ASSESSING THE SUM OF RS. 33,75,400 BEING 'PROFIT FROM SALE OF LAND, AS INCOME FROM CAP ITAL GAIN IN THE HANDS OF THE ASSESSEE WHEN THE AMOUNT OF CAPITAL GAIN HAD BEEN INVESTED IN ACCORDANCE OF THE PROVISIONS OF SECTION 1 1(IA) OF THE ACT. HE FURTHER STATED THAT THE ASSESSING OFFICER HAS NOT ALLOWED THE DEDUCTION UNDER SECTION 11(IA) OF THE ACT AND FAILED TO APPRECIATE THE FACT THAT ALTHOUGH PROFIT OF SALE OF LAND BEING SHO WN ON THE CREDIT SIDE OF STATEMENT OF PROFIT AND LOSS ACCOUNT IS 'INCOME UNDER THE HEAD CAPITAL GAIN STILL IT QUALIFIES FOR THE INVES TMENT LINKED DEDUCTION IN ACCORDANCE OF THE PROVISIONS OF SECTION 11(1A) OF THE ACT. THEREFORE THE INCOME CHARGEABLE TO TAX IN THE HAN DS OF ASSESSEE HAVING COMPILED WITH THE PROVISIONS OF SECTI ON 11(1A) IS ITA NO.717/DEL/2015 & CO NO. 283/DEL/2015 7 NIL. LASTLY, LD. COUNSEL OF THE ASSESSEE FURTHER STA TED THAT LD. CIT(A) HAS ALLOWED THE ASSESSEE RELIEF OF RS. 20,49, 000/- ONLY WITHOUT APPRECIATING THE FACTS OF THE CASE AND IN LIN E WITH THE REQUIREMENTS OF THE ACT UNDER SECTION 11(1A) OF THE AC T BUT THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE DEDUCTIO N UNDER SECTION 11(1A) IS RESTRICTED TO RS. 20,49,000.00 ONLY INSTEAD OF ALLOWING FULL RELIEF TO THE ASSESSEE AS THE COMPLETE AMOUNT HAS BEE N INVESTED IN ACCORDANCE WITH SECTION 11(1A) OF THE ACT. THEREFORE , THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE INTENT OF THE SECTIO N 11(1A) IS ON THE INVESTMENT AND NOT ON THE SOURCE OF THE INVESTMEN T. WHEN THE ASSESSEE BEING A CHARITABLE SOCIETY BEING AUDITED UNDER THE PROVISIONS OF THE ACT, HAS INVESTED THE SUM AS PER SEC TION 11(1A) OF THE ACT, IT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 1 1(1A) OF THE ACT. IN VIEW OF THE ABOVE, HE REQUESTED TO DELETE THE BAL ANCE ADDITION OF RS. 13,26,400 SUSTAINED BY LEARNED CIT(A). 11. ON THE OTHER HAND, LD. DR HAS STRONGLY OPPOSED THE CROSS OBJECTION AND STATED THAT SINCE THE REVENUES APPEAL HAS BEEN DISMISSED, AS AFORESAID, THE ASSESSEES CROSS OBJECTION IS NOT M AINTAINABLE AS IT DID NOT SURVIVE AND SHOULD BE DISMISSED AS INFRUCTUOUS. 12. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS AVAILABLE WITH US, ESPECIALLY THE ORDER OF THE LD. FIRST APPE LLATE AUTHORITY. AFTER PERUSING THE IMPUGNED ORDER OF THE LD. CIT(A), I FI ND THAT LD. CIT(A) HAS ITA NO.717/DEL/2015 & CO NO. 283/DEL/2015 8 ELABORATELY DISCUSSED THE ISSUES IN DISPUTE VIDE H IS IMPUGNED ORDER DATED 26.11.2014 VIDE PARA NO. 5.1 AT PAGE NO. 5 AND HELD AS UNDER:- I FIND THAT THE SOLE REASON OF MAKING THE ADDITION BY AO IS THAT THE ASSESSEE HAD SHOWN SUCH PROFIT IN ITS ACCO UNTS. THIS PREMISE OF AO IS ILL FOUNDED. MAINTAINING ACCOUNTS FOR ARRIVING AT PROFIT OR LOSS IN REAL TERMS AND CLAIMING EXEMPT ION UNDER INCOME TAX ACT ARE TWO SEPARATE THINGS. THE PROVISI ONS OF SECTION 11(1A) ARE CLEARLY APPLICABLE IN FACTS AND CIRCUMSTANCES AS NEITHER THE ASSESSEE HAS BEEN HELD TO BE NON-CHARITABLE ENTITY NOR THE NEW ASSETS HAVE BEEN HELD TO BE PURCHASED FOR PURPOSES OTHER THAN CHARITABLE NOR IT HAS BEEN HELD THAT THE NEW ASSETS ARE NOT QUALIFIED FOR SUCH DEDUCTION. DENIAL OF THE DEDUCTION U/S. 11(1A) ON THE GROUND C ITED BY THE AO IS NOT REASONABLE. FROM THE FACTS OF THE CASE IT TRANSPIRES THAT THE A SSESSEE SOCIETY HAS SOLD TWO PROPERTIES ON 31.3.2010 BUT CL AIMING TO HAVE RECEIVED ADVANCE AGAINST THESE SALES, THE ASSE SSEE HAS CLAIMED TO HAVE MADE INVESTMENTS IN NEW CAPITAL AS SET IN FORM OF FDS AND NEW BUILDING AT SHALIMAR GARDEN-II , VILLAGE PASONDA TO BE USED FOR RUNNING SCHOOL AND HAS CLAIM ED DEDUCTION U/S. 11(1A) OUT OF CAPITAL GAINS ARISING ON SALE OF ASSTS. IN MY CONSIDERED OPINION IN THE FACTS AND CIRCUMSTA NCES, THE CASE OF ASSESSEE IS COVERED SQUARELY BY THE DECISIO N OF MUMBAI ITAT SUPRA AS REGARDS INVESTMENTS OUT OF ADV ANCE OF SALE RECEIPTS BEING ELIGIBLE FOR DEDUCTION ULS 11(1 A). HOWEVER, THE QUANTUM OF ALLOWABLE DEDUCTION REQUIRES SOME MO RE DELIBERATION. ITA NO.717/DEL/2015 & CO NO. 283/DEL/2015 9 IT IS SEEN THAT THE WHEN THE ADVANCE WAS GIVEN FOR NEW CAPITAL ASSET AND FDS WERE PURCHASED, THE ASSESSEE HAD NOT RECEIVED COMMENSURATE ADVANCE OUT OF SALE CONSIDERA TION. WHEN ASSESSEE PAID ADVANCE OF RS. 21 LACS FOR PURCH ASE OF NEW ASSET, IT HAD RECEIVED ONLY RS. 6 LACS TOWARDS SALE CONSIDERATION. SIMILARLY, WHEN FDS WERE PURCHASED FOR RS. 30 LAC, IT HAD RECEIVED ANOTHER SUM OF ONLY RS. 20 LACS ADVANCE OU T OF SALE CONSIDERATION. THUS ONLY RS. 26 LACS COULD BE SAID TO HAVE BEEN INVESTED OUT OF ADVANCE RECEIVED OUT OF SALE CONSIDERATION. AS PER PROVISIONS OF SECTION 11 (LA) (A), THE CAPITAL GAIN DEEMED TO APPLIED FOR CHARITABLE PURPO SES WOULD BE THE SUM INVESTED (RS. 26 LACS IN THIS CASE). THE COST OF ASSET SOLD (WHICH IS RS. 551000/- IN THIS CASE). TH EREFORE, THE ALLOWABLE DEDUCTION IS ONLY RS.20,49,000/-. THEREFO RE, ADDITION OF RS. 20,49,000/- IS DELETED AND ADDITION OF RS. 13,26,400/- IS SUSTAINED AS PER PROVISIONS OF SECTI ON 11(1A) (A). THE GROUND NO 1 OF APPEAL IS PARTLY ALLOWED. 12.1 AFTER PERUSING THE AFORESAID FINDINGS OF THE L D. CIT(A), I AM OF THE VIEW THAT THE PROVISIONS OF SECTION 11(1A) ARE CLEA RLY APPLICABLE IN FACTS AND CIRCUMSTANCES AS NEITHER THE ASSESSEE HAS BEEN HELD TO BE NON- CHARITABLE ENTITY NOR THE NEW ASSETS HAVE BEEN HELD TO BE PURCHASED FOR PURPOSES OTHER THAN CHARITABLE NOR IT HAS BEEN HELD THAT THE NEW ASSETS ARE NOT QUALIFIED FOR SUCH DEDUCTION. IT REVEALS TH AT THE ASSESSEE SOCIETY HAS SOLD TWO PROPERTIES ON 31.3.2010 BUT CLAIMING T O HAVE RECEIVED ADVANCE AGAINST THESE SALES, THE ASSESSEE HAS CLAIM ED TO HAVE MADE INVESTMENTS IN NEW CAPITAL ASSET IN FORM OF FDS AND NEW BUILDING AT SHALIMAR GARDEN-II, VILLAGE PASONDA TO BE USED FOR RUNNING SCHOOL AND ITA NO.717/DEL/2015 & CO NO. 283/DEL/2015 10 HAS CLAIMED DEDUCTION U/S. 11(1A) OUT OF CAPITAL GA INS ARISING ON SALE OF ASSETS. IN MY VIEW IN THE FACTS AND CIRCUMSTANCES, THE CASE OF ASSESSEE IS COVERED SQUARELY BY THE DECISION OF MUMBAI ITAT DECISIONS IN THE CASE OF SHRI RAMNAGAR TRUST VS. THIRD ITO 13 ITD 426 (MU M) AND ITAT AS REGARDS INVESTMENTS OUT OF ADVANCE OF SALE RECEIPTS BEING ELIGIBLE FOR DEDUCTION ULS 11(1A). I ALSO FIND THAT LD. CIT(A) H AS RIGHTLY HELD THAT WHEN THE ADVANCE WAS GIVEN FOR NEW CAPITAL ASSET AN D FDS WERE PURCHASED, THE ASSESSEE HAD NOT RECEIVED COMMENSURA TE ADVANCE OUT OF SALE CONSIDERATION. IT IS NOTED THAT WHEN ASSESSEE PAID ADVANCE OF RS. 21 LACS FOR PURCHASE OF NEW ASSET, IT HAD RECEIVED ONL Y RS. 6 LACS TOWARDS SALE CONSIDERATION. SIMILARLY, WHEN FDS WERE PURCHA SED FOR RS. 30 LAC, IT HAD RECEIVED ANOTHER SUM OF ONLY RS. 20 LACS ADVANC E OUT OF SALE CONSIDERATION. THUS ONLY RS. 26 LACS COULD BE SAID TO HAVE BEEN INVESTED OUT OF ADVANCE RECEIVED OUT OF SALE CONSIDERATION. AS PER PROVISIONS OF SECTION 11(1A)(A), THE CAPITAL GAIN DEEMED TO APPLI ED FOR CHARITABLE PURPOSES WOULD BE THE SUM INVESTED (RS. 26 LACS IN THIS CASE). THE COST OF ASSET SOLD (WHICH IS RS. 551000/- IN THIS CASE). HE NCE, THE ALLOWABLE DEDUCTION IS ONLY RS.20,49,000/- WHICH THE LD. CIT( A) HAS RIGHTLY DELETED AND ADDITION OF RS. 13,26,400/- WAS RIGHTLY SUSTAIN ED AS PER PROVISIONS OF SECTION 11(1A)(A). IN VIEW OF THE ABOVE, I AM OF TH E VIEW THAT THE LD. CIT(A) ORDER IS A WELL REASONED WHICH DOES NOT NEE D ANY INTERFERENCE ON MY PART, HENCE, THE FINDING OF THE LD. CIT(A) IS UP HELD ON THE ISSUES RAISED IN THE CROSS OBJECTION FILED BY THE ASSESSEE . ACCORDINGLY, THE CROSS OBJECTION STANDS DISMISSED. ITA NO.717/DEL/2015 & CO NO. 283/DEL/2015 11 13. IN THE RESULT, APPEAL FILED BY THE REVENUE AS WEL L AS CROSS OBJECTION FILED BY THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/08/2016. SD/- (H.S. SIDHU) JUDICIAL MEMBER DATED: 02/08/2016 *SR BHATNAGAR* COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR