KWA TRUST, Mumbai V. ITO (EXEMPTIONS)-1(4), Mumbai

ITA 777/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8605 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 12-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V MOHAN
• Keywords: Charitable institution; Cost of acquisition
• Section: 12A; 201; 13; 11

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI . , !',#$% BEFORE SHRI RAMESH C. SHARMA, ACCOUNTANT MEMBER & SHRI VIKAS AWASTHY, JUDICIAL MEMBER . 777 / /201 9 ($+. . 2013-14 ) ITA NO.777/MUM/2019 (A.Y.2013-14) KWA TRUST, 52, 5 TH FLOOR, MAKER TOWER F CUFFE PARADE, COLABA, MUMBAI 400 005 PAN:AAATK 0114F ...... '- / APPELLANT + VS. INCOME TAX OFFICER (EXEMPTIONS)-1(4), ROOM NO.507, 5 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400 012. ..... .$// RESPONDENT '-0/ APPELLANT BY : SHRI V. MOHAN .$/0/ RESPONDENT BY : SHRI AMIT PRATAP SINGH +1$/ '/ DATE OF HEARING : 10/02/2020 1$/ '/ DATE OF PRONOUNCEMENT : 16/07/2020 / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-3 MUMBAI (IN S HORT THE CIT (A)) DATED 15/10/2018 FOR THE ASSESSMENT YEAR 2013-14. 2 ITA NO.777/MUM/2019(A.Y.2013-14) 2. THE ASSESSEE IN APPEAL HAS ASSAILED THE FINDING OF CIT (A) BY RAISING FOLLOWING GROUNDS:- EACH OF THE FOLLOWING GROUNDS IS INDEPENDENT OF AN D WITHOUT PREJUDICE TO ONE ANOTHER. 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD. CIT (APPEALS) ERRED IN ENHANCING THE TAXABLE INCOME BY RS.13,30,716/- 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD. CIT (APPEALS) ERRED IN NOT ALLOWING INDEXATION ON THE SALE OF LONG TERM INVEST MENTS; 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD. CIT (APPEALS) ERRED IN CONFIRMING THAT THE DEFICIT OF THE EARLIER YEARS CA NNOT BE SET OFF AGAINST THE CURRENT YEAR'S INCOME; 4} APPELLANT CRAVES LEAVE TO AMEND OR ALTER THE EXI STING GROUNDS OR ADD FURTHER GROUNDS OF APPEAL AT THE TIME OF HEARING. 3. SHRI V. MOHAN, APPEARING ON BEHALF OF THE ASSES SEE SUBMITTED THAT THE ASSESSEE IS A CHARITABLE TRUST REGISTERED UNDER SEC TION 12A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 27/09/2013 DECLARING TO TAL INCOME AS NIL. DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR U NDER APPEAL, THE ASSESSEE HAD SOLD MUTUAL FUNDS FOR A TOTAL CONSIDERATION OF RS.1,33,30,716/-. AFTER REDUCING THE INDEXED COST OF ACQUISITION OF THE MUT UAL FUNDS, THE ASSESSEE SUFFERED LONG TERM CAPITAL LOSS OF RS.4,84,222/-. IN SCRUTINY ASSESSMENT, THE ASSESSING OFFICER DISALLOWED THE BENEFIT OF SECTION 11 TO THE ASSESSEE AS THE ASSESSEE HAD MADE INVESTMENTS IN VIOLATION OF THE P ROVISIONS OF SECTION 11(5) OF THE ACT, AS WELL AS, DENIED THE BENEFIT OF INDEX ATION. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY ADMITTED THA T BY MAKING INVESTMENT IN MUTUAL FUNDS, THE ASSESSEE HAS VIOLATED THE PROVISI ONS OF SECTION 11 OF THE ACT. HOWEVER, BENEFIT OF INDEXATION CANNOT BE DENIED TO THE ASSESSEE AS THE 3 ITA NO.777/MUM/2019(A.Y.2013-14) ASSESSMENT IS MADE IN THE CASE OF ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR UNDER REGULAR PROVISIONS. THE LD. AUTHORIZED REPRE SENTATIVE FOR THE ASSESSEE CONTESTED THAT WHILE COMPUTING LONG TERM CAPITAL GA IN/LOSS THE ASSESSEE SHOULD BE TREATED AS INDIVIDUAL AND NOT AS TRUST. IN SUPP ORT OF HIS CONTENTION THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PLACED R ELIANCE ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR O F INCOME TAX (EXEMPTIONS) VS. SHARDABEN BHAGUBHAI MAFATLAL PUBLIC CHARITABLE TRUST REPORTED AS 247 ITR 1. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSE SSEE SUBMITTED THAT SINCE THE BENEFIT OF SECTION 13 HAS BEEN WITHDRAWN, THE ASSES SEE SHOULD BE GRANTED BENEFIT OF INDEXATION. THE ASSESSEE CANNOT BE DEPR IVED OF BOTH THE BENEFITS. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER CONTENDED THAT THE CIT(A) HAS ERRED IN DENYING THE BENEFIT OF SET-OFF OF DEFICIT OF THE EARLIER YEARS AGAINST INCOME OF CURRENT YEAR. SINCE THE ASSESSME NT HAS BEEN MADE IN THE CASE OF ASSESSEE UNDER NORMAL PROVISIONS, THE BENEF IT OF CARRY FORWARD AND SET- OFF OF EARLIER DEFICIT SHOULD BE ALLOWED TO THE ASS ESSEE. 4. ON THE OTHER HAND, SHRI AMIT PRATAP SINGH, REPRE SENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER. THE LD. DEP ARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE TRUST IS REGISTERED UNDER SECTION 12A OF THE ACT. THE ASSESSEE MADE INVESTMENT IN MU TUAL FUNDS IN VIOLATION OF THE PROVISIONS OF SECTION 11(5) OF THE ACT. THUS, THE ASSESSEE IS NOT ELIGIBLE FOR THE BENEFIT OF SECTION 13 OF THE ACT. SINCE THE AS SESSEE HAD SOLD MUTUAL FUNDS WITH A MOTIVE TO EARN COMMERCIAL INCOME, THE PROFIT ON SALE OF MUTUAL FUNDS IS COMPUTED AS REAL INCOME IN COMMERCIAL SENSE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY RIVAL SIDE S AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. IT IS AN ADMITTED FACT THAT THE ASSESSEE IN THE 4 ITA NO.777/MUM/2019(A.Y.2013-14) IMPUGNED ASSESSMENT YEAR HAS SOLD MUTUAL FUNDS AND HAD NOT APPLIED FUNDS OF THE TRUST IN ACCORDANCE WITH THE PROVISIONS OF SECT ION 11 OF THE ACT. THE AUTHORITIES BELOW HAVE RIGHTLY DENIED THE BENEFIT O F SECTION 13 OF THE ACT TO THE ASSESSEE. 6. THE ASSESSING OFFICER AFTER WITHDRAWING THE BENE FIT OF SECTION 13 OF THE ACT COMPLETED THE ASSESSMENT UNDER NORMAL PROVISION S. THE ASSESSEE WHILE COMPUTING CAPITAL GAIN/LOSS ON SALE OF MUTUAL FUNDS CLAIMED THE BENEFIT OF INDEXATION ON THE COST OF ACQUISITION. THE LONG TE RM CAPITAL GAIN/LOSS COMPUTED BY THE ASSESSEE ON SALE OF MUTUAL FUNDS IS AS UNDER:- LONG TERM CAPITAL GAIN (WITHOUT STT) SALE PROCEEDS RS.1,33,30,716/- LESS: INDEXED COST OF ACQUISITION RS.1,38,14,938/- LONG TERM CAPITAL LOSS RS. (4,84,222)/- THE ASSESSING OFFICER AND THE CIT (A) REJECTED ASSE SSEES COMPUTATION OF CAPITAL LOSS ON SALE OF MUTUAL FUNDS ON THE PREMISE THAT THE ASSESSEE BEING CHARITABLE TRUST IS NOT ELIGIBLE FOR INDEXATION ON COST OF ACQUISITION. THE DENIAL OF INDEXATION HAS CAUSED DOUBLE WHAMMY TO THE ASSES SEE. THE ASSESSEE LOSES THE BENEFIT OF SECTION 13 AND IS ASSESSED UNDER NOR MAL PROVISIONS OF THE ACT. AT THE SAME TIME UNDER NORMAL PROVISIONS, THE ASSESSEE IS DENIED THE BENEFIT OF INDEXATION. 7. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF DIRECTOR OF INCOME TAX (EXEMPTIONS) VS. SHARDABEN BHAGUBHAI MAFATLAL P UBLIC CHARITABLE TRUST (SUPRA) IN A SOMEWHAT SIMILAR CASE, WHERE THE TRUST HAD MADE INVESTMENTS IN VIOLATION OF THE PROVISIONS OF SECTION 11(5) AND WA S DENIED THE BENEFIT OF 5 ITA NO.777/MUM/2019(A.Y.2013-14) SECTION 13; THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80L WAS ALSO DENIED BY THE REVENUE. THE HONBLE HIGH COURT FOLLO WING THE JUDGEMENT RENDERED IN THE CASE OF CIT V. MARSONS BENEFICIARY TRUST REPORTED AS 188 ITR 224 (BOM.) UPHELD THE DECISION OF TRIBUNAL IN DIREC TING THE REVENUE TO MAKE ASSESSMENT BY TREATING THE ASSESSE AS AN INDIVIDUAL . THE RELEVANT EXTRACT OF THE JUDGEMENT READS AS UNDER: 12. .. IN THE CASE OF SODRA DEVI (SUPRA), T HE SUPREME COURT WAS CONSIDERING THE SCOPE OF SECTION 16(3) OF THE INDIA N INCOME-TAX ACT, 1922. IN THE SAID JUDGMENT, THE SUPREME COURT HAS HELD THAT THE WORD 'ASSESSEE' WAS WIDE ENOUGH TO COVER NOT ONLY AN INDIVIDUAL BUT ALSO AN HUF, COMPA NY, LOCAL AUTHORITY, FIRM AND AN AOP OR THE PARTNERS OF THE FIRM OR THE MEMBERS OF T HE AOP. THAT, THE WORD 'INDIVIDUAL' HAS NOT BEEN DEFINED IN THE ACT. THAT THE WORD 'INDIVIDUAL' DID NOT MEAN ONLY A HUMAN BEING BUT IT INCLUDED A GROUP OF PERSO NS FORMING A UNIT. IN THE CASE OF MARSONS BENEFICIARY TRUST (SUPRA), THE DIVISION BENCH OF THIS COURT HAS HELD THAT ALL KINDS OF INCOME OF A TRUST HAVE TO BE ASSESSED UNDE R SECTION 161(1). THAT, THE TRUSTEES ARE AUTHORISED TO CARRY ON BUSINESS UNDER A DEED OF TRUST. THEY DO NOT DERIVE THEIR AUTHORITY FROM THE BENEFICIARIES. THEY DERIVE THEIR AUTHORITY FROM THE SETTLOR UNDER THE DEED OF TRUST. THE BENEFICIARIES ARE MERE LY RECIPIENTS OF THE INCOME EARNED BY THE TRUST. THEY HAVE NOT COME TOGETHER FOR A COM MON PURPOSE TO EARN INCOME. THEREFORE, THEY CANNOT BE CONSIDERED AS AOP OR A BO I. IN THE SAID JUDGMENT, THE DIVISION BENCH OF THIS COURT REJECTED THE CONTENTIO N OF THE DEPARTMENT THAT THE BENEFICIARIES CONSTITUTED AN AOP. THE TRUSTEES DID NOT CARRY ON BUSINESS ON BEHALF OF THE BENEFICIARIES JUST AS THE RECEIVERS. THE BENEFI CIARIES ARE MERELY RECIPIENTS OF THE INCOME EARNED BY THE TRUST. ACCORDINGLY, IT WAS HELD THAT THE TRUSTEES WERE NOT ASSESSABLE AS AN AOP. IN VIEW OF THE ABOVE JUDGMENT S, THE TRIBUNAL WAS RIGHT IN COMING TO THE CONCLUSION THAT THE ASSESSEE-TRUST OU GHT TO HAVE BEEN ASSESSED IN THE STATUS OF AN INDIVIDUAL. AFTER TAKING INTO CONSIDERATION FACTS OF THE CASE A ND ABOVE DECISION BY THE HONBLE BOMBAY HIGH COURT, WE HOLD THAT WHILE COMPL ETING ASSESSMENT UNDER NORMAL PROVISIONS OF THE ACT, THE ASSESSE SHOULD BE TREATED AS INDIVIDUAL. SINCE, BENEFIT OF SECTION 13 HAS BEEN WITHDRAWN FROM THE A SSESSEE, THE BENEFIT OF INDEXATION WHILE COMPUTING CAPITAL GAIN/LOSS SHOULD BE ALLOWED. THE ASSESSEE SUCCEEDS ON GROUND NO.2 OF THE APPEAL. 6 ITA NO.777/MUM/2019(A.Y.2013-14) 8. AS WE HAVE ALLOWED ALTERNATIVE CLAIM OF THE ASSE SSEE, GROUND NO.1 OF THE APPEAL IS DISMISSED. 9. AS FAR AS BENEFIT OF CARRY FORWARD OF EARLIER YE AR DEFICIT AND SET OFF AGAINST CURRENT YEAR INCOME IS CONCERNED, WE HOLD T HAT SINCE ASSESSMENT IS MADE UNDER REGULAR PROVISIONS, THE ASSESSEE IS ALLO WED TO CARRY FORWARD DEFICIT OF EARLIER YEARS AND SET OFF AGAINST CURRENT YEAR I NCOME, IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THE GROUND NO.3 OF THE APPEA L IS ALLOWED, ACCORDINGLY. 10. THE GROUND NO.4 OF THE APPEAL IS GENERAL IN NAT URE, HENCE, NEEDS NO ADJUDICATION. 11. IN THE RESULT, APPEAL BY THE ASSESSEE IS PARTLY ALLOWED . 12. THIS APPEAL WAS HEARD ON 10/02/2020. AS PER RUL E 34(5) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963, (ITAT RULES, 1963), THE ORDER WAS REQUIRED TO BE ORDINARILY PRONOUNCED WITHIN A PER IOD OF 90 DAYS FROM THE DATE OF CONCLUSION OF THE HEARING OF APPEAL. THE IN STANT APPEAL WAS HEARD PRIOR TO THE LOCKDOWN DECLARED BY THE HONBLE PRIME MINIS TER ON 24-03-2020 IN VIEW OF COVID-19 PANDEMIC. THE LOCKDOWN WAS FORCED DUE T O EXTRA ORDINARY CIRCUMSTANCES CAUSED BY WORLD WIDE SPREAD OF COVID- 19. THEREAFTER, THE LOCKDOWN WAS EXTENDED FROM TIME TO TIME. THEREFORE , THE PRONOUNCEMENT OF ORDER BEYOND THE PERIOD OF 90 DAYS FROM THE DATE OF HEARING IS NOT UNDER ORDINARY CIRCUMSTANCES. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. JSW LTD., ITA NO.6264/MUM/2018 FOR A.Y 201 3-14 DECIDED ON 14/05/2020, UNDER IDENTICAL CIRCUMSTANCES, AFTER CO NSIDERING THE PROVISIONS OF RULE 34(5) OF THE ITAT RULES, 1963, JUDGEMENTS REND ERED BY HONBLE APEX COURT AND THE HONBLE BOMBAY HIGH COURT ON THE ISSU E OF TIME LIMIT FOR 7 ITA NO.777/MUM/2019(A.Y.2013-14) PRONOUNCEMENT OF ORDERS BY THE TRIBUNAL AND THE CIR CUMSTANCES LEADING TO LOCKDOWN HELD:- 10. IN THE LIGHT OF THE ABOVE DISCUSSIONS, WE ARE OF THE CONSIDERED VIEW THAT RATHER THAN TAKING A PEDANTIC VIEW OF THE RULE REQUIRING P RONOUNCEMENT OF ORDERS WITHIN 90 DAYS, DISREGARDING THE IMPORTANT FACT THAT THE ENTI RE COUNTRY WAS IN LOCKDOWN, WE SHOULD COMPUTE THE PERIOD OF 90 DAYS BY EXCLUDING A T LEAST THE PERIOD DURING WHICH THE LOCKDOWN WAS IN FORCE. WE MUST FACTOR GROUND RE ALITIES IN MIND WHILE INTERPRETING THE TIME LIMIT FOR THE PRONOUNCEMENT OF THE ORDER. LAW IS NOT BROODING OMNIPOTENCE IN THE SKY. IT IS A PRAGMATIC TOOL OF THE SOCIAL OR DER. THE TENETS OF LAW BEING ENACTED ON THE BASIS OF PRAGMATISM, AND THAT IS HOW THE LAW IS REQUIRED TO INTERPRETED. THE INTERPRETATION SO ASSIGNED BY US IS NOT ONLY INCONS ONANCE WITH THE LETTER AND SPIRIT OF RULE 34(5) BUT IS ALSO A PRAGMATIC APPROACH AT A TI ME WHEN A DISASTER, NOTIFIED UNDER THE DISASTER MANAGEMENT ACT 2005, IS CAUSING UNPREC EDENTED DISRUPTION IN THE FUNCTIONING OF OUR JUSTICE DELIVERY SYSTEM. UNDOUBT EDLY, IN THE CASE OF OTTERS CLUB VS DIT [(2017) 392 ITR 244 (BOM)], HONBLE BOMBAY HIGH COURT DID NOT APPROVE AN ORDER BEING PASSED BY THE TRIBUNAL BEYOND A PERIOD OF 90 DAYS, BUT THEN IN THE PRESENT SITUATION HONBLE BOMBAY HIGH COURT ITSELF HAS, VID E JUDGMENT DATED 15TH APRIL 2020, HELD THAT DIRECTED WHILE CALCULATING THE TIME FOR DISPOSAL OF MATTERS MADE TIME- BOUND BY THIS COURT, THE PERIOD FOR WHICH THE ORDER DATED 26TH MARCH 2020 CONTINUES TO OPERATE SHALL BE ADDED AND TIME SHALL STAND EXTENDED ACCORDINGLY . THE EXTRAORDINARY STEPS TAKEN SUO MOTU BY HONBLE J URISDICTIONAL HIGH COURT AND HONBLE SUPREME COURT ALSO INDICATE THAT THIS PERIO D OF LOCKDOWN CANNOT BE TREATED AS AN ORDINARY PERIOD DURING WHICH THE NORMAL TIME LIMITS ARE TO REMAIN IN FORCE. IN OUR CONSIDERED VIEW, EVEN WITHOUT THE WORDS ORDINA RILY, IN THE LIGHT OF THE ABOVE ANALYSIS OF THE LEGAL POSITION, THE PERIOD DURING W HICH ITA NO. 6103 AND LOCKOUT WAS IN FORCE IS TO EXCLUDED FOR THE PURPOSE OF TIME LIM ITS SET OUT IN RULE 34(5) OF THE APPELLATE TRIBUNAL RULES, 1963. VIEWED THUS, THE EX CEPTION, TO 90-DAY TIME-LIMIT FOR PRONOUNCEMENT OF ORDERS, INHERENT IN RULE 34(5)(C), WITH RESPECT TO THE PRONOUNCEMENT OF ORDERS WITHIN NINETY DAYS, CLEARLY COMES INTO PLAY IN THE PRESENT CASE. OF COURSE, THERE IS NO, AND THERE CANNOT BE A NY, BAR ON THE DISCRETION OF THE BENCHES TO REFIX THE MATTERS FOR CLARIFICATIONS BEC AUSE OF CONSIDERABLE TIME LAG BETWEEN THE POINT OF TIME WHEN THE HEARING IS CONCL UDED AND THE POINT OF TIME WHEN THE ORDER THEREON IS BEING FINALIZED, BUT THEN, IN OUR CONSIDERED VIEW, NO SUCH EXERCISE WAS REQUIRED TO BE CARRIED OUT ON THE FACTS OF THIS CASE. THUS, IN LIGHT OF ABOVE FACTS AND THE DECISION OF C OORDINATE BENCH, THE PRESENT ORDER IS PRONOUNCED BEYOND THE PERIOD OF 90 DAYS. 8 ITA NO.777/MUM/2019(A.Y.2013-14) 13. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. O RDER PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) R ULES, 1962, BY PLACING THE DETAILS ON THE NOTICE BOARD. ORDER PRONOUNCED ON THURSDAY THE 16 TH DAY OF JULY, 2020. SD./- SD./- (R. C. SHARMA) (VIKAS AWASTHY) / ACCOUNTANT MEMBER #$ / JUDICIAL MEMBER / MUMBAI, 5+/ DATED 16/07/2020 VM , SR. PS(O/S) COPY OF THE ORDER FORWARDED TO : 1. '- / THE APPELLANT , 2. .$/ / THE RESPONDENT. 3. 6/ ( )/ THE CIT(A)- 4. 6/ CIT 5. ! 78 .$/$+ , . . . , / DR, ITAT, MUMBAI 6. 89 :; / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI