B.D.E. Society, Bijapur V. ACIT, Bijapur

ITA 811/BANG/2010

• Counselvise Citation: 81121114 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 18-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE JT
• Assessee Lawyers: ASHOK A KULKARNI
• Keywords: Depreciation; Charitable institution; Maximum Marginal Rate; Capital expenditure
• Section: 12A; 12AA; 10B; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.811/BANG/2010 ASSESSMENT YEAR : 2005-06 B.D.E. SOCIETY, C/O. P.D.J. P.U. COLLEGE, BAGALKOT ROAD, BIJAPUR 586 101. PAN : AAATB 9056B VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I, BIJAPUR. APPELLANT RESPONDENT APPELLANT BY : SHRI ASHOK A. KULKARNI, ADVOCATE RESPONDENT BY : SMT. SUSAN THOMAS JOSE, JT.CIT(DR) DATE OF HEARING : 17.01.2012 DATE OF PRONOUNCEMENT : 17.01.2012 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 18.03.2010 OF THE CIT(APPEALS), BELGAUM. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L : (1) THE HONBLE COMMISSIONER OF INCOMETAX, (APPEA LS) IS WRONG IN DISMISSING THE APPEAL OF THE APPELLANT, WI THOUT CONSIDERING THE FACTUAL POSITION OF THE APPELLANT. ITA NO.811/BANG/10 PAGE 2 OF 7 (2) THE HON'BLE CIT(A) OUGHT TO HAVE TAKEN INTO CONSIDERATION THE FACT THAT DUE TO PROLONGED ILL-HE ALTH THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT WAS IN A POSITION TO APPEAR BEFORE HIM. (3) THE HONBLE CIT(A) OUGHT TO HAVE NOTED THE FAC T THAT THE APPELLANT IS A PUBLIC TRUST RUNNING EDUCATIONAL INS TITUTIONS AND ITS WHOLE FUNDS ARE BEING SPENT ON EDUCATIONAL ACTIVITIES. (4) ALTERNATIVELY, THE APPELLANT SUBMITS THAT IT BE ASSESSED AS PUBLIC TRUST AND BE DEEMED TO HAVE BEEN GRANTED REGISTRATION U/S 12A. (5) THE APPELLANT BEGS LEAVE TO ADD, ALTER OR AMEN D ANY OF THE FOREGOING GROUNDS OF APPEAL THAT MAY BE URGED AT HE ARING STAGE. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE IS A TRUST REGISTERED UNDER THE SOCIETIES REGISTRATION ACT AND CARRYING ON CHARITABLE ACTIVITIES BY RUNNING PRIMARY SCHOOLS, HIGHER SECON DARY SCHOOLS AND JUNIOR COLLEGES ETC. THE ASSESSEE FILED RETURN OF INCOME DECLARING NIL INCOME IN THE STATUS OF AOP ALONG WITH AUDIT REPORT IN FORM 1 0B. THE SAID RETURN WAS PROCESSED U/S. 143(1) OF THE INCOME-TAX ACT, 1961 [ HEREINAFTER REFERRED TO AS THE ACT IN SHORT] ON 24.07.2006 BY ACCEPTING THE INCOME RETURNED BY THE ASSESSEE. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER NOTICED FROM THE COMPUTATION SHEET ENCLOSED ALONG WITH THE RETURN OF INCOME THAT THE ASSESSEE HAD SHOWN GROSS RECEIPT S OF RS.1,58,51,314 AND ARRIVED AT RS.1,18,88,485 AS INCOME TO BE APPLI ED FOR CHARITABLE PURPOSES AFTER CLAIMING EXEMPTION U/.S 11 OF RS.39, 62,827. THE AO ALSO NOTICED THAT THE ASSESSEE HAD SHOWN RS.1,44,27,529 AS FUNDS APPLIED FOR THE CHARITABLE PURPOSES WHICH INCLUDED DEPRECIATION OF RS.7,84,385. THE ITA NO.811/BANG/10 PAGE 3 OF 7 AO ASKED THE ASSESSEE TO PRODUCE THE CERTIFICATE IS SUED BY THE COMMISSIONER OF INCOME-TAX (CIT) GRANTING REGISTRAT ION U/S. 12AA OF THE ACT FOR ITS CLAIM OF EXEMPTION U/S. 11 OF THE ACT. THE ASSESSEE SUBMITTED THAT IT WAS NOT YET GRANTED WITH REGISTRATION U/S. 12AA OF THE ACT. THE AO TREATED THE SURPLUS OF RS.14,23,785 SHOWN IN THE IN COME & EXPENDITURE ACCOUNT AS INCOME OF THE TRUST AND ASSESSED THE SAM E TO TAX IN THE STATUS OF AOP BY APPLYING THE MAXIMUM MARGINAL RATE. 4. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A PPEALS) AND THE WRITTEN SUBMISSIONS FILED BEFORE HIM AS MENTIONED I N PARA 5 OF THE IMPUGNED ORDER READ AS UNDER: '3. AS ADMITTED BY THE ACIT, THE APPELLANT-SOCIETY IS A CHARITABLE PUBLIC TRUST RUNNING EDUCATIONAL INSTITU TIONS IN BIJAPUR. THE AMOUNT OF RS.14,23,780/- ASSESSED BY T HE ACIT IS THE SURPLUS AS DETERMINED IN THE INCOME AND EXPENDITURE ACCOUNT OF THE SOCIETY FOR THE PREVIOUS YEAR. AS AG AINST THE TOTAL INCOME RECEIVED AMOUNTING TO RS.158,51,314/- THE IN COME APPLIED IS RS.144,27,529/- AS DISCUSSED BY THE ACIT IN THE ASSESSMENT ORDER. IN ADDITION TO THIS, THE INCOME A PPLIED INCLUDES RS.34,59,085/- INCURRED BY THE SOCIETY TOWARDS THE BUILDING CONSTRUCTION, AS PER THE AUDIT REPORT IN FORM NO. 1 0B ATTACHED TO THE RETURN OF INCOME. THE LEARNED ACIT OUGHT TO HAV E CONSIDERED THE SAME. THE ZEROX COPY OF THE SAID FOR M NO. 10B IS ATTACHED HERETO. 4. IT IS RESPECTFULLY SUBMITTED THAT THE APPELLANT -SOCIETY MAY NOT BE DEEMED TO BE AOP HAVING NO REGISTRATION U/S 12AA. THE SOCIETY HAS APPLIED FOR REGISTRATION IN FORM 10A DU RING JANUARY, 2007. IT MAY ALSO BE NOTED THAT THE SOCIETY WAS GRA NTED EXEMPTION U/S 15B OF THE IT ACT, 1922 PREVIOUSLY. T HE APPELLANT- SOCIETY IS ATTACHING HEREWITH THE ZEROX COPY OF THE SAID LETTER DATED 15-05-1959 ISSUED BY THE COMMISSIONER OF INCO ME-TAX, BANGALORE. 5. THE APPELLANT-SOCIETY IS RELYING ON THE JUDGEME NT OF THE SUPREME COURT IN THE CASE OF ACIT VS. SAURSHTRA KUT CH STOCK EXCHANGE LTD. REPORTED IN 305 ITR 227 (SC) WHEREIN THE FACTS ABOUT GRANTING REGISTRATION U/S 12A ARE IDENTICAL T O THOSE OF THE ITA NO.811/BANG/10 PAGE 4 OF 7 APPELLANT-SOCIETY. THE ACTION OF THE HON'BLE ITAT I N GRANTING REGISTRATION BY RECALLING ITS EARLIER ORDER DISMISS ING THE APPELLANT'S APPEAL, RELYING ON THE JUDGEMENTS OF HON'BLE GUJARA T HIGH COURT IN HIRALAL BHAGWATI VS. CIT 246 ITR 188 AND SUHIRD GIEGY LTD VS. COMMISSIONER OF SURTAX 237 ITR 834 HAS BEEN UPH ELD BY THE HON'BLE HIGH COURT. 5. THE APPELLANT-SOCIETY PRAYS THAT IT SHOULD BE A SSESSED AS TRUST DEEMED TO HAVE BEEN REGISTRATION U/S 12AA AND THAT ITS APPEAL BE ALLOWED. 5. APART FROM THE ABOVE WRITTEN SUBMISSIONS, IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD INCURRED EXPENSES OF RS.34,59 ,085 IN THE CONSTRUCTION OF P.D.J. PRE-UNIVERSITY COLLEGE BUILD ING AND THE AO SHOULD HAVE CONSIDERED THE SAME. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE SOCIETY SHOULD NOT BE TAKEN TO BE AOP HAVING NO REG ISTRATION U/S. 12AA OF THE ACT, SINCE THE ASSESSEE HAD APPLIED FOR REGISTR ATION IN FORM 10A DURING JANUARY, 2007 AND WAS EARLIER GRANTED EXEMPTION U/S . 15B OF THE INCOME- TAX ACT, 1922 ON 15.5.1959. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: (1) ACIT V. SAURASHTRA KUTCH STOCK EXCHANGE LTD. 3 05 ITR 227 (S.C.) (2) HIRALAL BHAGWATI VS. CIT 246 ITR 188 (GUJ) (3) SUHRID GIEGY LTD. VS. COMMISSIONER OF SURTAX 2 37 ITR 834 (GUJ) IT WAS ACCORDINGLY SUBMITTED THAT THE ASSESSEE SHOU LD HAVE BEEN ASSESSED AS A TRUST DEEMED TO HAVE BEEN GRANTED REGISTRATION U/S. 12AA. ITA NO.811/BANG/10 PAGE 5 OF 7 6. THE LD. CIT(APPEALS) AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE OBSERVED THAT SINCE THE ASSESSEE SOCIETY H AD NOT BEEN GRANTED REGISTRATION U/S. 12AA BY THE CIT, BELGAUM, THE EXP ENDITURE OF RS.34,59,085 COULD NOT BE CONSIDERED AS APPLICATION OF INCOME. HE FURTHER OBSERVED THAT AS PER SECTION 12 OF THE ACT, ANY VOL UNTARY CONTRIBUTION RECEIVED BY THE TRUST SHALL BE DEEMED TO HAVE BEEN DERIVED FOR CHARITABLE PURPOSES UNLESS THEY ARE GIVEN SPECIFICALLY WITH A DIRECTION THAT THEY SHALL FORM PART OF CORPUS OF THE TRUST, BUT IN THE ABSENC E OF REGISTRATION U/S. 12AA, THE EXPENDITURE INCURRED FOR CONSTRUCTION OF COLLEG E BUILDING WAS TO BE TREATED AS CAPITAL EXPENDITURE AND SHOULD NOT BE AD JUSTED AGAINST THE SURPLUS SHOWN IN THE INCOME AND EXPENDITURE ACCOUNT . THE LD. CIT(A) FURTHER OBSERVED THAT AS PER THE PROVISIONS OF SECT ION 12A(A) OF THE ACT, THE TRUSTS CREATED EARLIER MANDATORILY REQUIRED TO APPL Y FOR FRESH REGISTRATION BY 01.07.1993 AND THEREAFTER BEFORE THE EXPIRY OF ONE YEAR FROM THE DATE OF CREATION OF TRUST AND IN THE ASSESSEES CASE THE AP PLICATION FOR REGISTRATION U/S. 12AA OF THE ACT WAS FILED BEFORE THE LD. CIT I N JANUARY, 2007 WHICH WAS CLAIMED TO BE PENDING AND SINCE THE ASSESSEE HA D NOT GOT REGISTRATION U/S. 12AA OF THE ACT, THE INCOME WAS NOT ELIGIBLE F OR EXEMPTION U/S. 11 OF THE ACT. HE ACCORDINGLY CONFIRMED THE ACTION OF TH E ASSESSING OFFICER. NOW THE ASSESSEE IS IN APPEAL. 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHEN ASSESSMENT WAS FRAMED BY THE AO ON 22.11.07, THE APPLICATION O F THE ASSESSEE FILED BEFORE THE LD. CIT, BELGAUM FOR GRANTING REGISTRATI ON WAS PENDING AND SAME WAS THE POSITION WHEN THE APPEAL WAS DECIDED BY THE LD. CIT(A), BELGAUM, ITA NO.811/BANG/10 PAGE 6 OF 7 THEREFORE THE ASSESSEE SHOULD HAVE BEEN ALLOWED THE EXEMPTION U/S. 11 OF THE ACT. 8. IN HER RIVAL SUBMISSIONS, THE LD. DR SUPPORTED T HE ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT SINCE THE ASSESSEE WAS NOT GRANTED REGISTRATION U/S. 12AA OF THE ACT, SO IT WA S NOT ELIGIBLE FOR EXEMPTION U/S. 11 OF THE ACT AND THE LD. CIT(A) WAS FULLY JUSTIFIED IN CONFIRMING THE ACTION OF THE AO IN NOT GRANTING EXE MPTION U/S. 11 OF THE ACT. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSEE APPLIED FOR R EGISTRATION U/S. 12AA OF THE ACT, BUT THE SAID APPLICATION WAS NOT DISPOSED OF W HEN THE ASSESSMENT WAS FRAMED BY THE AO, THAT IS WHY EXEMPTION U/S. 11 WAS NOT GRANTED. HAD THE REGISTRATION U/S. 12AA BEEN GRANTED TO THE ASSESSEE , THE EXEMPTION U/S. 11 OF THE ACT WAS AVAILABLE. AS ON TODAY ALSO, IT IS NOT CLEAR AS TO WHETHER THE ASSESSEE IS ENJOYING REGISTRATION U/S. 12AA OF THE ACT OR THE APPLICATION WHICH WAS FILED IN JANUARY, 2007, BEFORE THE LD. C IT, BELGAUM FOR GRANTING THE SAID REGISTRATION HAS BEEN DISPOSED OF. SO WE DEEM IT APPROPRIATE TO RESTORE THIS ISSUE BACK TO THE FILE OF THE ASSESSIN G OFFICER AND DIRECT HIM TO DECIDE THE ISSUE AFTER CONSIDERING THE OUTCOME OF T HE APPLICATION MOVED BY THE ASSESSEE BEFORE THE LD. CIT, BELGAUM FOR GRANTI NG REGISTRATION U/S. 12AA OF THE ACT. 10. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATI STICAL PURPOSES. ITA NO.811/BANG/10 PAGE 7 OF 7 PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF JANUARY, 2012. SD/- SD/- ( SMT. P. MADHAVI DEVI ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 17 TH JANUARY, 2012. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.