SETH WALCHAND HIRACHAND MEMORIAL TRUST, MUMBAI V. ITO (E) II(1), MUMBAI

ITA 7635/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93197 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 30-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C W ANGOLKAR D R
• Assessee Lawyers: H P MAHAJANI; PRASAD BAPAT
• Keywords: Charitable institution; Diversion of income; Additional evidence; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 12AA

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI A.D. JAIN, JM AND SHRI N.K. BILLAIYA, A M .. , . . , ./ I.T.A. NO. 7635 /MUM/2013 ( / ASSESSMENT YEAR : 2007-08 SETH WALCHAND HIRACHAND MEMORIAL TRUST, HINCON HOUSE, 11 TH FLOOR, 247 PARK, LBS MARG, VIKHROLI (WEST), MUMBAI 400 083. / VS. INCOME TAX OFFICER (EXEMP.) II(1), 5 TH FLOOR, PIRAMAL CHAMBERS, PAREL, LALBAUG, MUMBAI 400 012 ./ PAN : AAATW0014E ( ! / APPELLANT ) .. ( '# ! / RESPONDENT ) ./ I.T.A. NO. 788 /MUM/2014 ( / ASSESSMENT YEAR : 2007-08 INCOME TAX OFFICER (EXEMP.) II(1), R. NO. 509, 5 TH FLOOR, PIRAMAL CHAMBERS, PAREL, LALBAUG, MUMBAI 400 012 / VS. SETH WALCHAND HIRACHAND MEMORIAL TRUST, HINCON HOUSE, 11 TH FLOOR, 247 PARK, LBS MARG, VIKHROLI (WEST), MUMBAI 400 083. ./ PAN : AAATW0014E ( ! / APPELLANT ) .. ( '# ! / RESPONDENT ) A PPELLANT BY SHRI H.P. MAHAJANI & SHRI PRASAD BAPAT R E SPONDENT BY : SHRI C.W. ANGOLKAR (D.R.) $ % & ' ( ) / DATE OF HEARING : 15-07-2015 *+,- ' ( ) / DATE OF PRONOUNCEMENT : 15-07-2015 [ ITA 7635/M/13 & ITA 788/M/14 2 . / O R D E R PER A.D. JAIN, J.M . : .. , ITA NO. 7635/MUM/2013 IS THE ASSESSEES APPEAL FOR A.Y. 2007-08, TAKING THE FOLLOWING GROUNDS OF APPEAL:- 1. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT ADJUDICATING THE GROUND ON THE VALIDITY OF REASSESSMENT PROCEEDINGS, SINCE THE / ASSESSING OFFICER HAD ERRE D IN INITIATING THE SAME, BASED ON A CHANGE OF OPINION, WITH NO NEW FACTS, WH ERE THE SAID ISSUE WAS ACCEPTED AND ALLOWED IN THE ORIGINAL ASSESSMENT. THE REASSESSMENT PROCEEDINGS INITIATED BY THE LEARN ED ASSESSING OFFICER, BE QUASHED. WITHOUT PREJUDICE TO THE ABOVE, PRAYER FOR RELIEF O N FOLLOWING GROUNDS; 2. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT(A) ERRED IN NOT ADJUDICATING THE ASSESSING OFFI CER'S ACTION OF NOT ALLOWING EXEMPTION UNDER SECTION 10(33) OF THE ACT, ON DIVID END AMOUNTING TO RS. 8,92,108/- RECEIVED ON INVESTMENTS IN UNITS AND MUT UAL FUNDS. THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER BE DELETED. 3. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT(A) ERRED IN THE ASSESSING OFFICER'S ACTION OF N OT ALLOWING THE ACCUMULATION OF 15% OF INCOME AS ALLOWED UNDER SECTION 11(1)(A) OF THE ACT. THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER BE DELETED. 4. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT(A) ERRED IN NOT ADJUDICATING THE ASSESSING OFFI CER'S ACTION OF NOT ALLOWING THE BROUGHT FORWARD EXCESS APPLICATION AMOUNTING TO RS. 68,01,449/-. 2. THE DEPARTMENT IN ITS APPEAL IN ITA NO. 7688/MU M/2014, WHICH IS A CROSS APPEAL TO THE ASSESSEES APPEAL FOR A.Y. 2007 -08, HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THE ASSESSEE ENTITLED FOR E XEMPTION OF ITS INCOME TO THE ITA 7635/M/13 & ITA 788/M/14 3 EXTENT OF DONATIONS MADE TO OTHER CHARITABLE TRUSTS OUT OF ITS ACCUMULATED INCOME. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO TAKE NOTE OF THE SECTION 11 (3)(D) , WHEREBY IT IS STATED THAT ANY INCOME CREDITED OR PAID T~ TRUST OR INSTITUTION REG ISTERED U/S 12AA OR TO ANY FUND OR INSTITUTION OR TRUST OR ANY UNIVERSITY OR O THER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION REFERR ED TO IN SUB-CLAUSE (IV) OR SUB-CLAUSE (V) OR SUB-CLAUSE (VI) OR SUB-CLAUSE (VI A) OF CLAUSE (23C) OF SECTION 10; SHALL BE DEEMED TO BE THE INCOME OF SUCH PERSON OF THE PREVIOUS YEAR IN WHICH IT IS SO APPLIED OR CEASES TO BE SO ACCUMULAT ED OR SET APART OR CEASES TO REMAIN SO INVESTED OR DEPOSITED OR [CREDITED OR PAI D OR], AS THE CASE MAY BE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING THE ADDITIONAL EVIDENCE W ITHOUT GIVING THE ASSESSING OFFICER AN OPPORTUNITY TO EXAMINE AND REBUT THE SAM E, THEREBY VIOLATING THE PROVISIONS OF THE IT RULES. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT THE ASSESSEE VIDE I TS LETTER DATED 19.11.20 HAS SLATED THAT' THE TRUST HAD GIVEN DONATION OF RS.1 C RORE FROM THE ITS CORPUS. 3. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE HAS STATED AT THE BAR THAT GROUND NO. 1 IS NOT PRESSED. DISMISSED AS NOT PRESS ED. 4. APROPOS GROUND NOS. 2 TO 4, DURING THE YEAR, THE ASSESSEE HAD RECEIVED DIVIDEND INCOME OF RS. 8,92,108/- FROM MUTUAL FUNDS UNITS. THIS WAS DEPICTED IN THE ASSESSEES INCOME AND EXPENDITURE A CCOUNT FILED ALONG WITH THE RETURN OF INCOME. IT WAS ALSO DISCLOSED BY WAY OF A NOTE IN THE STATEMENT OF TOTAL INCOME. THIS RECEIPT WAS EXEMPT U/S 10(33) OF THE INCOME TAX ACT, 1961. IT WAS NOT SHOWN IN THE RETURN OF TOTAL INCO ME. SINCE THE PRESENTATION IN THE RETURN OF INCOME DID NOT SHOW THE INCLUSION AND THE EXEMPTION, THE A.O. DISALLOWED THE DIVIDEND INCOME. ON CHALLENGE, THIS ISSUE WAS NOT DECIDED BY THE LD. CIT(A). THIS WAS SO, SINCE THE LD. CIT(A ) DECIDED GROUND NO. 2 RAISED BEFORE HIM BY THE ASSESSEE, IN FAVOUR OF THE ASSESS EE. GROUND NO. 2 RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A) ALLEGED THAT THE A.O. HAD ERRED IN NOT ALLOWING THE APPLICATION TOWARDS CHARITABLE PURPOSE S AMOUNTING TO RS. ITA 7635/M/13 & ITA 788/M/14 4 1,52,06,995/-, BEING DONATION TO OTHER TRUST TOWARD S SIMILAR OBJECTS. THIS ACTION OF THE LD. CIT(A) HAS BEEN CHALLENGED BY THE DEPARTMENT BEFORE US. 5. NOW, SO FAR AS REGARDING THE ISSUE OF DONATION A MOUNTING TO RS. 1,52,06,995/- MADE BY THE ASSESSEE TO OTHER TRUST H AVING SIMILAR OBJECTS, THE ASSESSEE MADE DONATIONS TO THE OTHER TRUST, HAVING SIMILAR OBJECTS, TO THE EXTENT OF RS. 2,04,57,500/-. THE A.O. OBSERVED THAT CORPUS DONATIONS WERE NOT AVAILABLE FOR SPENDING ON THE OBJECTS OF THE TR UST, AND, HENCE, THE DONATION OUT OF THE ACCUMULATED INCOME OF THE ASSES SEE TO ANOTHER TRUST, WAS NOT ENTITLED TO BE CONSIDERED AS APPLICATION OF INC OME. THE A.O. OBSERVED THAT THE INCOME AVAILABLE TO THE ASSESSEE TRUST DURING T HE YEAR WAS OF RS. 52,70,707/- ONLY AND THAT THE DONATIONS GIVEN WERE MUCH BEYOND SUCH AVAILABLE INCOME, AND THAT THEY HAD NECESSARILY BEE N GIVEN FROM THE ACCUMULATED INCOME OF THE TRUST AND ALSO FROM ITS C ORPUS FUNDS, AND NOT OUT OF ITS CURRENT INCOME. 6. NOW, AS RIGHTLY HELD BY THE LD. CIT(A), DONATION TO OTHER CHARITY IS APPLICATION OF INCOME WITHIN THE MEANING OF SECTI ON 11 OF THE ACT. THIS LEGAL POSITION STANDS SETTLED, INTER ALIA, IN THE FOLLOWI NG CASES:- 1. CIT VS. SARLADEVI SARABHAI TRUST (NO.2)(1988) 172 I TR 698 (GUJ). 2. CIT VS. THANTHI TRUST (1999) 239 ITR 502 (SC) 3. CIT VS. NIRMALA BAKUBHAI FOUNDATION(1997) 226 ITR 3 94 (GUJ) 4. KRISHI UTPADAN MANDI SAMITI (2012) 211 RAXMAN 32 (S C) 7. FURTHER, THE DONATION MADE BY THE ASSESSEE DURIN G THE YEAR WAS UNDISPUTEDLY INCLUSIVE OF INCOME OF THE YEAR, WHICH OBVIOUSLY IS APPLICATION OF INCOME OF THE TRUST. NO CASE OF DIVERSION OF INCOME , OR OF INFRINGEMENT OF THE PROVISIONS OF SECTION 13 OF THE ACT STOOD MADE OUT. 8. IT WAS ON THE BASIS OF THE ABOVE, THAT THE LD. C IT(A) ALLOWED GROUND NO. 2 RAISED BEFORE HIM BY THE ASSESSEE AND THE DONATIO N OF RS. 1,52,06,995/-, ITA 7635/M/13 & ITA 788/M/14 5 MADE BY THE ASSESSEE TRUST TO AN OTHER TRUST HAVING SIMILAR CHARITABLE PURPOSES, WAS CORRECTLY HELD TO BE APPLICATION OF I NCOME. THE GRIEVANCE OF THE DEPARTMENT IN THIS REGARD IS, THEREFORE, REJECTED. 9. THERE IS NO MERIT IN THE GRIEVANCE OF THE DEPART MENT THAT THE LD. CIT(A) ERRED IN ACCEPTING ADDITIONAL EVIDENCE AT THE BACK OF THE A.O. IT HAS NOT BEEN SHOWN AS TO WHAT ADDITIONAL EVIDENCE WAS ADMITTED B Y THE LD. CIT(A). THIS GRIEVANCE IS, ACCORDINGLY ALSO REJECTED. 10. THE ACTION OF THE LD. CIT(A) IN HOLDING THE INC OME OF THE ASSESSEE TO BE ENTITLED FOR EXEMPTION HAS BEEN UPHELD BY US, AS AB OVE. THEREFORE, THE GRIEVANCE OF THE ASSESSEE BY WAY OF GROUND NOS. 2 T O 4 IS RENDERED INFRUCTUOUS. GROUND NOS. 2 TO 4 ARE, ACCORDINGLY, REJECTED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED AS INFRUCTUOUS, WHEREAS THE APPEAL OF THE DEPARTMENT IS DISMISSED, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JULY, 2015 . ' *+,- $ /0 1 2.15-07-2015 + ' 9& SD/- SD/- (N.K. BILLAIYA) (A.D. JAIN ) ACCOUNTANT MEMBER /J UDICIAL MEMBER / $ & MUMBAI ; 1 DATED 22 -07-2015 [ %.../ R.K. R.K. R.K. R.K. , SR. PS ITA 7635/M/13 & ITA 788/M/14 6 ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. $ E( () / THE CIT(A)- 1, MUMBAI 4. $ E( / DIRECTOR OF INCOME TAX (EXEM), MUMBAI 5. H%I 9 '(JK , ) JK- , / $ & / DR, ITAT, MUMBAI E BENCH 6. 9 L M & / GUARD FILE. ! ( / BY ORDER, # H( '( //TRUE COPY// )/(* + ( DY./ASSTT. REGISTRAR) , / $ & / ITAT, MUMBAI