DDIT(E) - I,kolkata, Kolkata V. The Indian Institute of Welding, Kolkata

ITA 734/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5061 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 08-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 05-04-2013
• Court: TRIBUNAL
• Department Lawyers: SALLONG YADEN CIR
• Keywords: Depreciation; Charitable institution; Benefit of exemption; Capital expenditure
• Section: 12A; 10B; 11

Judgement Text

1 ITA NO.734/KOL/2013-THE INDIAN INSTITUTE OF WELDING -A.Y.2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A KOL KATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI M.B ALAGANESH, AM ] ITA NO.734/KOL/2013 ASSESSMENT YEAR : 2009-10 D.D.I.T. (E)-I, -VERSUS- THE INDIAN INSTITUTE OF WELDING KOLKATA KOLKATA (PAN:AAATT5926E) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SALLONG YADEN, ADDL. CIR, SR .DR FOR THE RESPONDENT: NONE DATE OF HEARING : 08.03.2016. DATE OF PRONOUNCEMENT : 6.4.2016. ORDER PER N.V.VASUDEVAN, JM: THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 05.02.2013 OF CIT(A)-JALPAIGURI RELATING TO A.Y.2009-10. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FOLLOWS :- 1. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A)-JAJPAIGURI ERRED IN DIRECTING THE A.O. TO GRANT THE BENEFIT OF EXEMPTION U /S 11 OF THE INCOME TAX ACT, 1961 TO THE ASSESSEE. 2. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT (A)-JALPAIGURI ERRED IN HOLDING THAT THE ASSESSEE CORRECTED THE DEFECTIV E FORM-L0B, DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHEREAS NEITHER SUCH CORRECT ION WAS EVER MADE NOR REVISED FORM NO. 10B WAS SUBMITTED BY THE ASSESSEE. 3. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT (A)- JALPAIGURI ERRED IN OVERLOOKING THE FACT THAT THE ASSESSEE HAD NOT C OMPLIED WITH STATUTORY REQUIREMENT TO FILE FORM 10 AS REQUIRED BY SEC.11 (2) OF THE I TAC T. 4. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT (A)-JALPAIGURI ERRED IN HOLDING THAT THE A.O. HAD FORMED AN OPINION ABOU T THE TRANSACTION OF INVESTMENT IN BUILDING AND EDUCATION FUND WHEREAS THE STATEMENT O F COMPUTATION OF INCOME CONTAINING THE ABOVE WAS ACTUALLY SUBMITTED BY THE ASSESSEE IN COURSE OF ASSESSMENT PROCEEDINGS. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR ALTER, AMEND, RESCIND OR MODIFY THE GROUNDS HERE IN ABOVE BEFORE OR AT THE HEARING OF T HIS APPEAL. 2 ITA NO.734/KOL/2013-THE INDIAN INSTITUTE OF WELDING -A.Y.2009-10 3. THE ASSESSEE IS A SOCIETY REGISTERED UNDER SECTI ON 25 OF THE INDIA COMPANIES ACT, 1956. THE ASSESSEE WAS GRANTED REGISTRATION BY CIT(A) U/S 12A OF THE INCOME TAX ACT, 1961 (ACT). THE OBJECT OF THE ASSESSE IS P ROMOTION AND ADVANCEMENT OF SCIENCE AND PRACTICE OF WELDING, EDUCATION OF THE P ROFESSIONALS IN THE FIELD OF WELDING WITH THE ULTIMATE OBJECT OF PROMOTING EFFICIENCY AN D GROWTH OF WELDING INDUSTRY THEREBY BENEFITING ALL THE INDUSTRIES IN THE COUNTR Y. FOR A.Y.2009-10 THE ASSESSEE FILED RETURN OF INCOME ON 18.02.2010 DECLARING TOTAL INCO ME AT RS. NIL. 4. AS PER ANNUAL ACCOUNTS, ASSESSEE HAD A SURPL US OF RS. 13122399/-. IN THE RETURN OF INCOME FILED FOR AY 09-10, THE ASSESSEE CLAIMED THAT THE SAME WAS EXEMPT U/S.11 OF THE ACT. ACCORDING TO THE AO, THE RETURN WAS NOT ACCOMPANIED BY ANY COMPUTATION OF TOTAL INCOME OR FORM L0B SHOWING ANY DEEMED APPL ICATION OF INCOME. THE AO CALLED UPON THE ASSESSEE TO EXPLAIN AS TO HOW THE S AID AMOUNT OF RS. 13122399/- WAS EXEMPT AND NOT CHARGEABLE TO TAX. IN THE COURSE OF HEARING ON 12.12.2011 BEFORE THE AO, A COPY OF COMPUTATION OF TOTAL INCOME CLAIMING DEEMED APPLICATION U/S. 11(2) OF RS. 13122400/- WAS FILED. THE SAME SHOWED INVESTME NTS U/S. 11(5) OF THE ACT IN THE FOLLOWING MANNER :- 1. INVESTMENT IN FIXED DEPOSITS RS.7437631/- 2. TRANSFER TO BUILDING FUND RS.4000000/- 3. TRANSFER TO EDUCATION FUND RS. 2000000/- RS. 13437631/- 5. THE AO ON A PERUSAL OF THE AFORESAID DETAILS WA S OF THE VIEW THAT I) THE ASSESSEE HAS NOT GIVEN ANY PRIOR INTIMATION TO THE A.O. REGA RDING SETTING APART OF THE FUND. NO FORM NO. 10 WAS FILED WITH THE RETURN AND NOT EVEN DURING THE COURSE OF ASSESSMENT. IN FORM NO. 10B THERE WAS NO MENTION REGARDING PERM ISSION TO ACCUMULATE. II) THAT A SUM OF RS. 40.00 LAKH AND RS. 20.00 LAKH RESPECTIVE LY HAVE BEEN TRANSFERRED TO BUILDING AND EDUCATION FUND BY SIMPLE BOOK ENTRIES WHICH IS NOT A MANNER OR MODE OF INVESTMENT AS CONTEMPLATED U/S. 11(5) OF THE ACT . FURTHER THE AO ALSO OBSERVED THAT INVESTMENTS IN FIXED DEPOSITS ARE NOT VERIFIAB LE AS NO EVIDENCE WAS PRODUCED EXCEPT PHOTOCOPY OF A FIXED DEPOSIT CERTIFICATE SHO WING INVESTMENT ON 10.03.2009. 3 ITA NO.734/KOL/2013-THE INDIAN INSTITUTE OF WELDING -A.Y.2009-10 ACCORDING TO THE AO THEREFORE IT CANNOT BE SAID THA T INVESTMENT IS MADE AS PER PROVISIONS U/S. 11(5) OF THE ACT OUT OF THE FUND SO SET APART IN THE YEAR. ACCORDINGLY, ASSESSEE'S CLAIM OF BENEFIT U/S. 11(2) OF THE ACT W AS DENIED. 6. THEREAFTER THE AO DETERMINED THE TOTAL INCOME OF THE ASSESSEE AS FOLLOWS :- INCOME FROM OTHER SOURCES AS PER INCOME EXPENDITURE ACCOUNT RS.23859935 LESS DEPRECIATION BEING A CHARGE ON INCOME BUT NOT APPLICATION OF INCOME RS. 269 261 INCOME AVAILABLE FOR APPLICATION RS.23590674 APPLICATION OF INCOME I)EXPENDITURE AS PER I/E EXCLUDING DEPRECIATION RS. 10737536 LESS : DEPRECIATION ALREADY ALLOWED RS. 26926 1 RS.10468275 II)CAPITAL EXPENDITURE RS. 101670 RS.105699 45 TOTAL INCOME CHARGEABLE TO TAX ROUNDED OFF RS. 9482130 7. AGGRIEVED BY THE ORDER OF AO ASSESSEE PREFERRED APPEAL BEFORE CIT(A). BEFORE CIT(A) THE ASSESSEE SUBMITTED THE BANK STATEMENT SH OWING THE OUTFLOW OF FDRS INVESTMENT MADE DURING THE PREVIOUS YEAR. OF THE FU ND FLOW STATEMENT OF A.YR. 2009- 10 AND 2010-11 ASSESSEE ALSO EXPLAINED THAT THE TRA NSFER TO BUILDING FUND AND TRANSFER TO EDUCATION FUND OF RS.RS.40 LKAHS AND RS.20 LAKHS RESPECTIVELY WERE MERE PROPOSALS TO MUMBAI BRANCH BUT THE SAME WERE NOT ACCEPTED. UL TIMATELY THE MONEY WAS KEPT IN THE BANK ACCOUNT OF MUMBAI BRANCH AND ULTIMATELY DE POSITED IN FIXED DEPOSIT. IT WAS THEREFORE SUBMITTED THAT THERE WAS NO VIOLATION OF SECTION 11(5) OF THE ACT. THE DETAILS OF THE FDRS WERE GIVEN BEFORE CIT(A) AND THE SAME I S EXTRACTED IN PARA 4.2. OF THE CIT(A)S ORDER. 8. ON CONSIDERATION OF THE SUBMISSION MADE BY THE ASSESSEE CIT(A) CAME TO THE FOLLOWING CONCLUSION :- 5. CONCLUSION- IT IS SEEN THAT THE FORM NUMBER L0B WAS FILED WITH THE RETURN OF INCOME BUT WAS DEFECTIVE. THE ASSESSEE DURING THE COURSE O F ASSESSMENT PROCEEDINGS CORRECTED THE SAME. THEREFORE, THIS CANNOT BE A REASON FOR DE NYING THE EXEMPTION U/S 11. THE AO HAS FORMED AN OPINION ABOUT THE TRANSACTIONS OF INV ESTMENT IN BUILDING AND EDUCATION FUND BY BOOK ENTRIES ON THE BASIS OF INTERNAL PROPO SALS OF A BRANCH TO HEAD OFFICE. THIS PROPOSAL WAS NOT ACCEPTED BY HEAD OFFICE AND ALL TH E FUNDS REMAINED DEPOSITED IN 4 ITA NO.734/KOL/2013-THE INDIAN INSTITUTE OF WELDING -A.Y.2009-10 BANK, WHICH WERE SUBSEQUENTLY CONVERTED IN FDS. THE CONDITIONS LAID DOWN IN SECTION 11(5)(III) HAVE BEEN FULLY COMPLIED WITH. THE AO HA S MENTIONED THAT INVESTMENTS IN EXISTING FDS ARE NOT VERIFIABLE AS THE ASSESSEE HAD NOT FILED ANY DETAIL EXCEPT THE PHOTOCOPIES OF FDS. DENYING EXEMPTION U/S 11 ON THI S POINT IS ALSO WITHOUT BASIS. THERE IS NOTHING MORE THAN THE PHOTOCOPIES OF THE FDS THA T AN ASSESSEE CAN FILE FOR VERIFICATION. THE PHOTOCOPIES OF FDS CONTAIN ALL DE TAILS OR AN AO TO CARRY OUT VERIFICATION. THE A.O IS DIRECTED TO GIVE THE BENEF IT OF EXEMPTION U/S 11. THE APPEAL IS ALLOWED. 9. AGGRIEVED BY THE ORDER OF CIT(A) ASSESSEE HAS P REFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 10. THIS CASE WAS FIXED FOR HEARING ON 20.09.2015. THE ASSESSEE WAS DULY SERVED NOTICE OF HEARING. THE ASSESSEE MADE A REQUEST FOR AN ADJOURNMENT AND THE CASE WAS ADJOURNED TO 15.12.2015. ON THAT DATE NONE APPEARED ON BEHALF OF THE ASSESSEE. THE CASE WAS AGAIN FIXED ON 13.01.2016 . ON THAT DATE T HE ACCOUNTANT OF THE ASSESSEE APPEARED AND REQUESTED FOR TIME. THE APPEAL WAS ACC ORDINGLY ADJOURNED TO 08.03.2016. WHEN THE CASE WAS CALLED FOR HEARING ON 08.03.2016 NONE APPEARED ON BEHALF OF THE ASSESSEE. IN THE CIRCUMSTANCES WE PRO CEEDED TO DECIDE THE APPEAL AFTER HEARING THE SUBMISSIONS OF THE LEARNED DR. 11. THE LEARNED DR PLACED RELIANCE ON THE ORDER OF AO AND REITERATED THE STAND OF THE REVENUE AS REFLECTED IN THE GROUNDS OF APPEAL B EFORE THE TRIBUNAL. 12. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED DR. IT IS SEEN FROM THE ORDER OF AO THAT THE BENEFIT OF ACCUMULATION AS PER 11(2) OF THE ACT WAS DENIED BY HIM FOR THE REASON THAT FORM NO.10B FILED WITH THE RETURN OF THE INCOME WAS NOT PROPERLY FILLED UP. FURTHER CASE OF THE AO WAS TH AT FORM NO.10B CONTAINED CERTAIN DEFECTS. CIT(A) HAS HOWEVER FOUND THAT THE DEFECTS WITH FORM NO.10B HAD BEEN DULY RECTIFIED IN THE COURSE OF ASSESSMENT PROCEEDINGS. THIS HAS BEEN STOUTLY DENIED BY THE REVENUE IN GROUND NO.2 RAISED BEFORE THE TRIBUNAL. WE, THEREFORE, ARE OF THE VIEW THAT IT WOULD BE FIT AND PROPER TO SET ASIDE THE ORDER O F CIT(A) ON THIS ISSUE RAISED IN THE GROUNDS OF APPEAL AND RESTORE THE SAME FOR FRESH CO NSIDERATION BY THE AO. WE ARE OF THE VIEW THAT DEFECT IN FORM NO.10B ARE CURABLE DEF ECT AND THE BENEFIT OF EXEMPTION 5 ITA NO.734/KOL/2013-THE INDIAN INSTITUTE OF WELDING -A.Y.2009-10 U/S 11 OF THE ACT CANNOT BE DENIED ON THIS GROUND. WE THEREFORE MAKE IT CLEAR THAT IF THE AO SHOULD POINT OUT THE DEFECTS, IF ANY, IN FOR M NO.10B AND ALLOW OPPORTUNITY TO THE ASSESSEE TO RECTIFY THE SAME. THE ASSESSEE IS A LSO DIRECTED TO GIVE ALL THE DETAILS OF FDS TO THE AO. THE AO AFTER EXAMINING ALL THESE DO CUMENTS IS DIRECTED TO SATISFY THE QUESTION AS TO WHETHER THE ASSESSEE SHOULD BE ALLOW ED THE BENEFIT OF THE PROVISION OF SECTION 11(2) OF THE ACT. WE ARE SUPPORTED IN THE A BOVE CONCLUSIONS BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V S MAYUR FOUNDATION 274 ITR 562 (GUJARAT) WHEREIN IT WAS HELD AS FOLLOWS :- THE ASSESSEE WAS CHARITABLE TRUST, REGISTERED UNDE R THE PROVISIONS OF THE BOMBAY PUBLIC TRUSTS ACT, 1950. DURING THE RELEVANT PREVIO US YEAR, THE ASSESSEE TRUST RECEIVED VOLUNTARY CONTRIBUTIONS AMOUNTING TO RS. 2,04,468. THE SAID DONATIONS WERE TREATED AS INCOME WITHIN THE MEANING OF SECTION 2(24)(IIA) BY THE ASSESSING OFFICER. THE ASSESSEE CONTENDED THAT THE DONATIONS OF RS. 1,74,432 AND RS . 9,036 INCLUDED IN THE AFORESAID TOTAL AMOUNT OF DONATIONS WERE TOWARDS THE CORPUS O F THE TRUST AND IN SUPPORT OF THE SAID CONTENTIONS, CONFIRMATION LETTERS FROM TWO DON ORS WERE SUBMITTED. THE ASSESSING OFFICER DID NOT ACCEPT THE SUBMISSION AND AFTER GRA NTING PERMISSIBLE ACCUMULATION OF 25 PER CENT, HELD THE BALANCE AMOUNT OF RS. 1,53,351 A S LIABLE TO TAX IN THE HANDS OF THE ASSESSEE. THE COMMISSIONER (APPEALS) CONFIRMED THE ASSESSMENT ORDER. THE ASSESSEE PREFERRED SECOND APPEAL BEFORE THE TRIBUNAL, AND DU RING THE PENDENCY OF APPEAL, MOVED AN APPLICATION BEFORE THE COMMISSIONER ACCOMPANIED BY FORM NO. 10; AND A COPY OF THE RESOLUTION PASSED BY THE TRUSTEES TO THE EFFECT THAT THE DONATIONS MIGHT BE TREATED AS GENERAL DONATIONS AND THE ASSESSEE BE PERMITTED TO ACCUMULATE THE TRUST INCOME UNDER SECTION 11(2) BY CONDONING THE DELAY IN FILING FORM NO. 10. THE COMMISSIONER REJECTED THE ASSESSEE'S APPLICATION. THE ASSESSEE THEREUPON FILED ADDITIONAL GROUND OF APPEAL BEFORE THE TRIBUNAL STATING THAT THE TRUST WAS NOT TAXABLE IN VIEW OF THE RESOLUTION OF ACCUMULATION AND THE NOTICE THEREOF TO THE ITO UNDE R SECTION 11(2). THE TRIBUNAL ADMITTED THE ADDITIONAL GROUND AND FOUND THAT, THE TRUST HAD SET APART THE AMOUNT OF DONATION FOR THE PURPOSE OF PURCHASING LAND AND CON STRUCTING AN ORPHANAGE THEREUPON; THAT THE FUNDS RECEIVED BY WAY OF DONATIONS HAD BEE N KEPT APART IN FIXED DEPOSIT RECEIPTS OF NATIONALISED BANK; AND THAT THE TRUSTEES OR THE SETTLERS HAD NOT BENEFITED BY THE FAILURE OR DELAY ON THE PART OF THE TRUST TO GIVE NOTICE OF SUCH ACCUMULATION AND ACCORDINGLY, HELD THAT THE ASSESSEE-TRUST HAD COMPLIED WITH ALL THE REQUIREMENTS STIPULATED BY THE PROVISIONS OF SECTION 11(2) AND WAS, THEREFORE, ENT ITLED TO BENEFIT ALLOWABLE UNDER SAID PROVISIONS. ON A REFERENCE AGAINST THE ORDER OF THE TRIBUNAL, T HE HONBLE GUJARAT HIGH COURT HELD, WHEN THE MATTER WAS PENDING BEFORE THE TRIBUNAL BY WAY OF AN APPEAL IT COULD BE SAID THAT THE ASSESSMENT PROCEEDING WAS PENDING. THE ASS ESSING AUTHORITY IS EMPOWERED AND IS DUTY BOUND, TO PASS AN ORDER GIVING EFFECT TO TH E ORDER OF THE TRIBUNAL FOR THE PURPOSES OF ASSESSING THE TAX LIABILITY OF THE ASSE SSEE FOR THE ASSESSMENT YEAR WHICH WAS UNDER CONSIDERATION BEFORE THE TRIBUNAL. IN THESE C IRCUMSTANCES, IT COULD NOT BE CONTENDED BY THE REVENUE THAT THE ASSESSMENT PROCEE DINGS CAME TO AN END WHEN THE ASSESSMENT ORDER WAS FRAMED. THE HONBLE COURT FURT HER HELD THAT THE PROCEEDINGS 6 ITA NO.734/KOL/2013-THE INDIAN INSTITUTE OF WELDING -A.Y.2009-10 BEFORE THE TRIBUNAL ARE MEANT TO CORRECTLY ASSESS T HE TAX LIABILITY OF AN ASSESSEE. IF THIS BE SO, IT FOLLOWS THAT THE ASSESSMENT PROCEEDINGS C ANNOT BE SAID TO BE COMPLETE AND IS PENDING TILL THE APPEAL IS HEARD AND DISPOSED OF BY THE TRIBUNAL AND THE ORDER OF THE TRIBUNAL IS GIVEN EFFECT TO BY THE ASSESSING AUTHOR ITY BY COMPUTING THE CORRECT TAX LIABILITY OF AN ASSESSEE. IN OTHER WORDS, WHETHER A N ASSESSEE IS REQUIRED TO PAY TAX OR BECOMES ENTITLED TO A REFUND, WOULD BE ASCERTAINED BY THE ASSESSING AUTHORITY AFTER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL. CONSEQU ENTLY, THE HONBLE COURT HELD THAT THE TRIBUNAL WAS WELL WITHIN ITS JURISDICTION TO ENTERT AIN THE NEW GROUND BY WHICH THE ASSESSEE CLAIMED THE BENEFIT UNDER SECTION 11(2) AN D ADJUDICATE THE TAX LIABILITY OF THE ASSESSEE AND IN SUCH CIRCUMSTANCES, THERE WAS NO IN FIRMITY IN THE ORDER OF THE TRIBUNAL, HOLDING THAT THE ASSESSEE WAS ENTITLED TO BENEFITS ALLOWABLE UNDER SECTION 11(2). 13. FOR THE REASONS GIVEN ABOVE WE ALLOW THE APPEAL OF THE REVENUE FOR STATISTICAL PURPOSES. 14. IN THE RESULT THE APPEAL OF THE REVENUE IS TREA TED AS ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE COURT ON 6.4.2016. SD/- SD/- [M.BALAGANESH ] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 6.4.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.THE INDIAN INSTITUTE OF WELDING, FLAT NO.4B, NORT H, 3A, DR.U.N.BRAHMACHARI STREET, KOLKATA-700017. 2. D.D.I.T. (E)-I, KOLKATA. 3. CIT(A), JALPAIGURI 4. CIT- JALPAIGURI 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, ASST. REGISTRAR, ITAT, KOLKATA BENCHES 7 ITA NO.734/KOL/2013-THE INDIAN INSTITUTE OF WELDING -A.Y.2009-10