THE BOMBAY PRESIDENCY GOLF CLUB LTD, MUMBAI V. ITO (E) 1(1), MUMBAI

ITA 7244/MUM/2010

• Counselvise Citation: 724419914 RSA 2010
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 20-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 22-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: ARVIND V SONDE
• Keywords: Charitable institution; Revised return; Capital expenditure
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, B, MUMBAI BEFORE S/SHRI B.R.MITTAL (JM) AND SHRI R.K.PANDA(AM ) ITA NO.7244/MUM/2010 (ASSESSMENT YEAR: 2007-08) M/S THE BOMBAY PRESIDENCY GOLF CLUB LTD, DR.CHOITARAM GIDWANI ROAD, CHEMBUR, MUMBAI-400074, PAN: AAATT5024B V/S INCOME TAX OFFICER, (E)-1(1), ROOM NO.217, 6 TH FLOOR, PIRAMAL CHAMBERS, LOWER PAREL, MUMBAI-400012. APPELLANT RESPONDENT DATE OF HEARING : 20.10.2011 DATE OF PRONOUNCEMENT : 02.11.2011 APPELLANT BY : SHRI ARVIN D V.SONDE RESPONDENT BY : SHRI P.C.MAU RYA O R D E R PER R.K.PANDA (AM) THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 30.8.2010 PASSED BY THE LD.CIT(A)- I, MUMBAI RELATING TO THE ASSESSMENT YEAR 2007-08. 2. GROUND NO.1 BY THE ASSESSEE READS AS UNDER : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN SUSTAINING THE ORDER OF THE AO IN HOLDING THAT INTE REST ON DEPOSITS IN BANK DOES NOT FALL WITHIN THE CONCEPT O F MUTUALITY; 3. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ABOVE GROUND IS AGAINST THE ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT ITA NO.7244/MUM/2010 (ASSESSMENT YEAR: 2007-08) 2 IN THE CASE OF CIT V/S COMMON EFFLUENT TREATMENT P LANT, (THANE-BELAPUR) ASSOCIATION REPORTED IN (2010) 328 ITR 362 (BOM), WHEREIN IT HAS BEEN HELD THAT INTEREST ON SURPLUS FUND INVESTED IN FIXED DEPOSITS IN BANKS IS NOT INC OME FROM RECEIPT FROM MEMBERS OF THE ASSESSEE BUT WAS FROM THIRD PARTY AND THEREFORE THE PRINCIPLE OF MUTUALITY DOE S NOT APPLY. IN VIEW OF THE ABOVE SUBMISSIONS OF THE LEARNED COU NSEL FOR THE ASSESSEE, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 4. GROUND NO.2 BY THE ASSESSEE READS AS UNDER : 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN SUSTAINING THE ORDER OF THE AO IN NOT ALLOWING DEFI CIT OF PREVIOUS YEARS TO BE SET-OFF AGAINST THE INCOME OF THE CURRENT YEAR; 5. FACTS OF THE CASE IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LEARNED AR OF THE ASSE SSEE IN ITS LETTER DATED 23.12.2009, RELYING ON A COUPLE OF DECISIONS, SUBMITTED THAT THE SURPLUS IN THE YEAR SHOULD BE AL LOWED TO BE SET-OFF AGAINST THE DEFICIT OF THE EARLIER YEAR S. HOWEVER, THE AO NOTED THAT THE ASSESSEE HAS NOT CLAIMED AN Y SET-OFF OF DEFICIT OF EARLIER YEARS AGAINST THE CURRENT YEA RS INCOME IN THE RETURN OF INCOME. ACCORDING TO THE AO, THE ASS ESSEE WOULD HAVE BEEN ENTITLED TO SET-OFF OF DEFICIT ON LY IF IT HAD FILED THE REVISED RETURN WITHIN THE DUE PERIOD WHIC H THE ITA NO.7244/MUM/2010 (ASSESSMENT YEAR: 2007-08) 3 ASSESSEE HAS FAILED TO DO. THEREFORE, THE ASSESSEE IS NOT PERMITTED TO CLAIM THE SET-OFF OF DEFICIT AGAINST THE INCOME OF THE CURRENT YEAR. FOR THIS PROPOSITION HE RELIED O N THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. V/S CIT (2006) 284 ITR 323 (SC) A ND THE DECISION OF THE TRIBUNAL IN THE CASE OF MAFATLAL I NDUSTRIES LTD. V/S WEALTH TAX OFFICER, 95 ITD 66(MUM). 6. IN APPEAL, THE LD. CIT(A) UPHELD THE ACTION OF T HE AO. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 7. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE, WHILE FILING THE RETURN OF INCOME WAS UND ER THE IMPRESSION THAT ITS INCOME IS EXEMPT. IN ALL THE PAST YEARS, THE ASSESSEE WAS HAVING NEGATIVE INCOME AND ALL THE RETURNS WERE FILED IN TIME. REFERRING TO THE LETTER ADDRE SSED TO THE AO ON 23.12.2009, THE LEARNED COUNSEL FOR THE ASSES SEE DREW THE ATTENTION OF THE BENCH TO THE SAID WHEREI N THE AO WAS REQUESTED TO PERMIT THE ASSESSEE TO SET-OFF THE EXCESS OF EXPENDITURE OF THE EARLIER ASSESSMENT YEARS AS A D EDUCTION AGAINST THE INCOME OF THE CURRENT YEAR. THE LD. CO UNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE NEVER KNEW THAT THE AO IS NOT GOING TO ACCEPT ITS RETURN OF INCO ME. THE QUESTION OF SET-OFF WAS REQUIRED BECAUSE OF THE ITA NO.7244/MUM/2010 (ASSESSMENT YEAR: 2007-08) 4 DISALLOWANCE MADE BY THE AO. HE SUBMITTED THAT FO R THE FIRST TIME, THE ASSESSEE FILED THE DETAILS OF LOSS BEFORE THE LD. CIT(A). HOWEVER, THE DETAILS OF LOSS CLAIMED BY TH E ASSESSEE IN ITS RETURN OF INCOME FOR PRECEDING ASSE SSMENT YEARS, WHICH WERE FILED IN TIME, ARE IN THE RECORDS OF THE DEPARTMENT. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S MANMOHAN DAS REPORTED IN (1966) 59 ITR 699(SC), HE SUBMITTED THA T WHETHER THE LOSS IN ANY YEAR WERE CARRIED FORWARD TO THE FOLLOWING YEAR AND SET-OFF AGAINST THE PROFITS AND GAINS OF THE SUBSEQUENT YEAR HAS TO BE DETERMINED BY THE INCOME TAX OFFICER WHO DEALS WITH THE ASSESSMENT OF THE SUBS EQUENT YEAR. A DECISION RECORDED BY THE ITO WHO COMPUTES THE LOSS IN THE PREVIOUS YEAR THAT THE LOSS CANNOT BE SET-OF F AGAINST THE INCOME OF THE SUBSEQUENT YEAR IS NOT BINDING ON THE ASSESSEE. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S INSTITUTE OF BANKING (2003) 264 ITR 110 (BOM), HE SUBMITTED THAT EXCESS EXPENDITURE IN PRIOR YEAR CAN BE SET-OFF AGAINST THE INCOME OF THE CURRENT YEAR. HE ALSO RELIED ON THE DECISI ON OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL REPORTED IN (1995 ) 211 ITR 293 (GUJ) AND SUBMITTED THAT THE MATTER MAY BE SET ITA NO.7244/MUM/2010 (ASSESSMENT YEAR: 2007-08) 5 ASIDE TO THE FILE OF THE AO WITH A DIRECTION TO D ECIDED THE ISSUE AS PER LAW. 8. ON THE OTHER HAND, THE LD. DR, SUBMITTED THAT SI NCE THE ASSESSEE HAS NOT CLAIMED THE SET-OFF OF THE CARRIED FORWARD LOSSES AGAINST THE INCOME OF THE CURRENT YEAR IN TH E RETURN OF INCOME FILED, THEREFORE, THE LD. CIT(A) WAS JUSTIFI ED IN UPHOLDING THE ACTION OF THE AO. 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE LD. CIT(A) AND PERUSED THE PAPER BOOK FILED BY THE ASSESSEE. WE HAVE CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE IT IS NOT ICED THAT THE ASSESSEE WAS INCURRING LOSS IN THE PRECEDING AS SESSMENT YEARS. ACCORDING TO THE LD. COUNSEL FOR THE ASSESS EE, ALL THE RETURNS WERE FILED IN TIME AS PRESCRIBED U/S 139(1) OF THE INCOME TAX ACT, 1961. ALTHOUGH THE ASSESSEE HAS NOT CLAIMED THE SET-OFF OF THE CARRIED FORWARD LOSS FRO M THE INCOME OF THE CURRENT YEAR, IT IS A FACT THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS REQ UESTED THE AO TO SET-OFF THE BROUGHT FORWARD LOSSES FROM THE CURRENT YEARS INCOME. THE PAST RECORDS OF THE ASSESSEE AR E VERY MUCH AVAILABLE WITH THE DEPARTMENT. THE CO-ORDINATE BENCHES OF THE TRIBUNAL ARE TAKING THE VIEW FOLLOWI NG THE ITA NO.7244/MUM/2010 (ASSESSMENT YEAR: 2007-08) 6 DECISION OF THE TRIBUNAL IN THE CASE OF CHICAGO P NEUMATICS INDIA LTD. V/S DCIT REPORTED IN 15 SOT 252 (MUM) T HAT EVEN THOUGH THE ASSESSEE HAS NOT CLAIMED BROUGHT FORWARD LOSSES IN THE ORIGINAL RETURN FILED, THE ASSESSEE IS ENTIT LED TO CLAIM THE SAME DURING THE COURSE OF ASSESSMENT PROCEEDI NGS BY MAKING A NEW CLAIM WITHOUT RECOURSE TO REVISED RETU RN. THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F GOETZE INDIA LTD. (SUPRA) HAS BEEN DISTINGUISHED IN THE AB OVE DECISION. IN THIS VIEW OF THE MATTER, WE RESTORE TH IS ISSUE TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH AND I N ACCORDANCE WITH LAW AFTER VERIFYING THE PAST RECORD OF THE ASSESSEE. THIS GROUND TAKEN BY THE ASSESSEE IS ACC ORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 10. GROUND NO.3 BY THE ASSESSEE READS AS UNDER : 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN N OT CONSIDERING THE CAPITA EXPENDITURE RS.1,25,52,276/ - AS APPLICATION OF INCOME IN ACCORDANCE WITH THE PROVIS ION OF SECTION 11 OF THE INCOME TAX ACT, 1961.; 11. THE LD.COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT THE CORRECT FIGURE IS RS.88,94,038/- . HE SUBMITTED THAT THIS GROUND IS NOT COMING OUT OF EIT HER THE ORDER OF THE AO OR THE LD. CIT(A). HOWEVER, THE FA CTS ARE ALREADY ON RECORD. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN CIT V/S INSTITUTE OF BANKING ( SUPRA), ITA NO.7244/MUM/2010 (ASSESSMENT YEAR: 2007-08) 7 WHEREIN IT HAS BEEN HELD THAT CAPITAL EXPENDITURE ON ACQUISITION OF ASSETS HAS TO BE ALLOWED AS DEDUCTI ON WHILE COMPUTING THE INCOME OF A TRUST, HE SUBMITTED THAT THE MATTER MAY BE SET ASIDE TO THE FILE OF THE AO FOR FRESH A DJUDICATION. 12. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT THIS IS A FRESH GROUND AND THE ISSUE WAS NEITHER BEFORE THE AO NOR BEFORE THE LD. CIT(A). HOWEVER, IF THIS GROUND IS ADMITTED THEN DIRECTIONS MAY BE GIVEN TO REDUCE THE CAPITAL EXPENDITURE FROM THE AMOUNT RECEIVED FROM THE MEMBE RS WHICH IS EXEMPT. 13. AFTER HEARING BOTH THE SIDES, THE GROUND RAISED BY THE ASSESSEE IS ADMITTED. FROM THE AUDITED ACCOUNTS, I T IS SEEN THAT THE ASSESSEE HAS ADDED AN AMOUNT OF RS.88,94, 038/- TO THE GROSS BLOCK, WHICH IS AS PER SCHEDULE OF FIXED ASSETS PLACED AT PAGE 17 OF THE PAPER BOOK. WE, THEREFORE , RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE DECISION OF THE HO NBLE BONBAY HIGH COURT IN THE CASE OF CIT V/S INSTITUT E OF BANKING (SUPRA) AND THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF S. RM. M. CT. M. TIRUPPANI TR UST V/S CIT (1998) 230 ITR 636 (SC). THUS, GROUND RAISED B Y THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 14. GROUND NO.4 BY THE ASSESSEE READS AS UNDER : ITA NO.7244/MUM/2010 (ASSESSMENT YEAR: 2007-08) 8 4. THE EARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN NO T ALLOWING ACCUMULATION OF INCOME AS PROVIDED &. 11(2 ) OF THE ACT. THE LEARNED CIT(A) FAILED TO APPRECIATE TH E DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MAYUR FOUNDATION 274 ITR 564, WHEREIN THE HIGH COURT CONFIRMED THE ORDER OF THE ITAT THAT THE ASSESSMENT PROCEEDINGS ARE COMPLETED WHEN AN APPEAL AGAINST ORDER OF THE ASSESSMENT IS DECIDED BY THE TRIBUNAL AND AS SUCH, BELATED FILING OF FORM NO. 10 EVEN AFTER COMPLETION OF ASSESSMENT IS VAILD. 15. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO D ID NOT ALLOW THE ACCUMULATION OF PROFIT U/S 11 OF THE INCOME TAX ACT, 1961, SINCE THE ASSESSEE DID NOT FILE FORM NO.10 W ITHIN THE TIME AS PRESCRIBED U/S 11(2) OF THE ACT. IN APPEAL , THE LD. CIT(A) UPHELD THE ACTION OF THE AO. 16. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO COMPLETED THE ASSESSMENT ON 29.12.2009 AND THE ASSESSEE FILED THE FORM NO.10 ON 10.3.2010 I.E. BE FORE THE DATE OF APPEAL ORDER PASSED BY THE LD. CIT(A) WHICH IS DATED 30.8.2010. REFERRING TO THE DECISION OF THE GUJ ARAT HIGH COURT IN THE CASE OF CIT V/S MAYUR FOUNDATION 274 ITR 564, HE SUBMITTED THAT IN THE SAID CASE, THE ASSESSEE WA S A CHARITABLE TRUST REGISTERED UNDER THE PROVISIONS OF BOMBAY PUBLIC TRUST, 1950. DURING THE ACCOUNTING YEAR RELE VANT TO THE ASSESSMENT YEAR 1980-81, THE ASSESSEE RECEIVED VOLUNTARY CONTRIBUTION AMOUNTING TO RS.2,04,468/-. THE ITA NO.7244/MUM/2010 (ASSESSMENT YEAR: 2007-08) 9 DONATIONS WERE TREATED AS INCOME WITHIN THE MEANING OF SECTION 2(24) (IIA) OF THE ACT BY THE AO. IT WAS CONTENDED THAT THE DONATION OF RS.1,74,432/- AND RS.9,036/- INCLUDED IN THE TOTAL INCOME OF DONATION WERE TOWARDS CORPUS OF THE TRUST FOR WHICH THE ASSESSEE SUBMITTED THE CONFIRMA TION LETTERS FROM THE DONORS. THE AO DID NOT ACCEPT THE SUBMISSIONS AND AFTER GRANTING PERMISSION OF ACCUMU LATION OF 25% HELD THAT THE BALANCE AMOUNT OF RS.1,53,351/- IS LIABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE. THE CIT( A) CONFIRMED THE ORDER. THE ASSESSEE PREFERRED AN APP EAL BEFORE THE TRIBUNAL AND DURING THE PENDENCY OF THE APPEAL MOVED AN APPLICATION BEFORE THE COMMISSIONER OF IN COME TAX ON 5.10.1989 ACCOMPANIED BY FORM NO.10 AND COPY OF RESOLUTION PASSED BY THE TRUSTEES ON 27.8.1988 TO THE EFFECT THAT THE DONATION MAY BE TREATED AS GENERAL DONATI ON AND THE ASSESSEE BE PERMITTED TO ACCUMULATE THE TRUSTS INCOME U/S 11(2) OF THE ACT BY CONDONING THE DELAY IN FI LING THE FORM NO.10. THE COMMISSIONER REJECTED THE APPLICAT ION OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE ORDER O F THE CIT BY A WRIT PETITION. THE HONBLE HIGH COURT DIRE CTED THE CIT TO RECONSIDER THE MATTER. THE CIT AGAIN REJECT ED THE PETITION OF THE ASSESSEE. THE ASSESSEE FILED AN AD DITIONAL GROUND OF APPEAL BEFORE THE TRIBUNAL TO THE EFFECT THAT THE INCOME OF THE TRUST WAS NOT TAXABLE IN VIEW OF THE RESOLUTION ITA NO.7244/MUM/2010 (ASSESSMENT YEAR: 2007-08) 10 FOR THE ACCUMULATION AND THE NOTICE THEREOF TO THE INCOME TAX OFFICER U/S 11(2). THE TRIBUNAL HELD THAT THE A SSESSEE TRUST HAD COMPLIED WITH THE REQUIREMENT STIPULATED BY THE PROVISIONS OF SECTION 11(2) OF THE ACT. ON REFERE NCE TO THE HONBLE GUJARAT HIGH COURT, IT HAS BEEN HELD THAT T HE TRIBUNAL WAS CORRECT IN HOLDING THAT THE ASSESSEE W AS ENTITLED TO BENEFITS ALLOWABLE U/S 11(2) OF THE AC T. HE SUBMITTED THAT THE CASE OF THE ASSESSEE IS IN MUCH STRONGER POSITION, SINCE THE RESOLUTION HAS BEEN PASSED BY T HE ASSESSEE COMPANY ON 10.3.2010. THEREFORE, IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT, THE CLA IM OF THE ASSESSEE FOR ACCUMULATION OF INCOME AS PROVIDED U/S 11(2) OF THE ACT SHOULD BE ALLOWED. 17. THE LD. DR ON THE OTHER HAND, SUPPORTED THE ORD ER OF THE AO AND THE LD. CIT(A). 18. AFTER HEARING BOTH THE SIDES, WE FIND THAT ALT HOUGH THE ASSESSEE HAS NOT FILED THE FORM NO.10 WHILE FILING THE RETURN OF INCOME OR BEFORE COMPLETION OF THE ASSESSMENT, H OWEVER, THE SAME HAS BEEN FILED BEFORE THE ORDER PASSED BY THE LD. CIT(A). THE RESOLUTION OF THE COMPANY WAS ALSO FILE D ON THAT DATE. THEREFORE, IN VIEW OF THE DECISION OF THE HON BLE GUJARAT HIGH COURT IN THE CASE OF MAYUR FOUNDATION (SUPRA), WE HOLD THAT THE ASSESSEE HAS FULFILLED THE CONDI TIONS LAID ITA NO.7244/MUM/2010 (ASSESSMENT YEAR: 2007-08) 11 DOWN IN PROVISION OF SECTION 11(2) OF THE ACT. ACC ORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND NOVEMBER, 2011. SD/- SD/- (B.R.MITTAL) (R. K.PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI, DATED : 02 ND NOVEMBER, 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI