The DCIT, Gandhinagar, Gandhinagar V. Gujarat Council of Science City, Ahmedabad

ITA 834/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5956 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 18-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital expenditure
• Section: 12; 11

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M DY. CIT, GANDHINAGAR CIRCLE, BLOCK NO.14, 4 TH FLOOR, UDYOG BHAVAN, SECTOR-11, GANDHINAGAR. V/S . GUJARAT COUNCIL OF SCIENCE CITY, NR. SOLA- SANTEJ ROAD, SOLA, NR. SCIENCE CITY, NR. HIGH COURT, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI ANIL KUMAR, CIT, DR RESPONDENT BY:- SHRI SANJAY R. SHAH, AR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THESE ARE TWO APPEALS FILED BY THE REVENUE AGAINST THE ORDERS OF LD. CIT(A) FOR ASST. YEARS 2006-07 AND 2007-08. AS COMM ON ISSUES ARE INVOLVED IN THESE APPEALS, THE SAME ARE TAKEN UP TO GETHER FOR THE SAKE OF CONVENIENCE. ASST. YEAR 2006-07 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT L D. CIT(A) HAS GIVEN DIRECTIONS TO CARRY FORWARD THE UNABSORBED EXPENDIT URE OVER INCOME TO SUBSEQUENT YEARS FOR THE ADJUSTMENT AGAINST RECEIPT /INCOME OF SUBSEQUENT YEARS FOR TREATING AS APPLICATION IN SUCH SUBSEQUEN T YEARS. ITA NOS.834 & 835/AHD/2010 ASST. YEARS : 2006-07 & 2007-08 2 3. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A SOC IETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT FOR ADVANCEMENT AND PROMOTION OF SCIENCE AND TECHNOLOGY AND DISSEMINATION OF INFORMATION REL ATING TO SCIENCE AND TECHNOLOGY BY DEVELOPING SCIENCE CITY PROJECT. FOR ASST. YEAR 2006-07 GRANT IN AID AMOUNTING TO RS.34.96 CRORES WERE TREA TED AS REVENUE RECEIPTS AND THUS INCLUDED IN THE INCOME FOR THE PURPOSE OF CALCULATING 85% OF SUCH INCOME AS APPLICATION. THE MATTER WENT TO TRIB UNAL WHICH VIDE ITS ORDER IN ITA NO.1508/AHD/2009 DECIDED ON 17.7.2009 HELD THAT GRANTS- IN-AID WERE FOR THE PURPOSES OF CORPUS OF THE TRUST . FOR THE SAKE OF CONVENIENCE WE REPRODUCE THE OBSERVATIONS OF THE TR IBUNAL AS UNDER :- 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MAT ERIAL AVAILABLE ON RECORD. IN OUR CONSIDERED VIEW THE ISSUE IS SQUAREL Y COVERED BY THE DECISION OF THE TRIBUNAL AS REFERRED TO ABOVE. FOR THE SAKE OF CONVENIENCE WE REPRODUCE THE RELEVANT PARA FROM THE ORDER OF TH E TRIBUNAL PASSED IN ITA NO.2841/AHD/2QQ7 AND OTHERS AS UNDER: '4. WE HAVE HEARD THE RIVAL SUBMISSIONS, CARE FULLY CONSIDERED THE SAME AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT AT P AGE-126 OF THE PAPER BOOK, THE ASSESSEE HAS FILED A COPY OF GOVERNMENT OF GUJARAT, SCIENCE & TECHNOLOGY DEPARTMENT, GR NO.SCI/11/2007/I36/IT, DATED 31 ST JANUARY, 2007, BY WHICH IS HAS BEEN CONFIRMED THAT THE GRANT HAS BEEN PROVIDED BY THE DEPARTMENT OF SCIENCE AND TECHNOLOGY FOR CAPITAL EXPENDITURE, DEVELOPMENT OF SCIENCE CITY PROJECT AND CONTRIBUTION TOWARDS CORPUS OF FUNDS OF THE SOCIETY . THE HON. GUJARAT HIGH COURT IN CASE OF CIT VS. STHANAKVASI VARDHMAN VANIK JAIN SAN GH (2003) 260 ITR 366 WHILE INTERPRETING THE PROVISIONS OF SECTION 12 AS WERE I N EXISTENCE AT THE TIME, TOOK THE VIEW THAT THE VOLUNTARY CONTRIBUTIONS WHICH ARE MADE WIT H A SPECIFIC DIRECTION THAT IT SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTION , WOULD NOT BE DEEMED TO BE THE INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST W HOLLY AND CHARITABLE OR RELIGIONS PURPOSES. SUBSEQUENTLY, NO DOUBT, SIMILAR EXEM PTION HAS BEEN PROVIDED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1989 WITH EFFECT F ROM 1-4-I989 BY INSERTING SUB- CLAUSE (D) IN SECTION 11(1). IN VIEW OF THIS FACT, WE ARE OF THE VIEW THAT THE GRANT IN AID RECEIVED BY THE ASSESSEE TO FORM PART OF THE CO RPUS CANNOT BE HELD TO BE THE INCOME OF THE ASSESSEE AND ASSESSEE WILL BE ENTITLED FOR THE EXEMPTION U/S.11(L)(D) OF THE ACT. WE ACCORDINGLY, SET ASI DE THE ORDER OF THE CIT(A) ON THIS ISSUE ALLOWING THE GROUNDS OF APPEAL OF THE ASSESSE E BEARING GROUND NOS. 1 TO 3 IN AY 2005-06 AND DISMISS THE APPEAL OF THE REVENUE IN A Y 2004-05. 3 IT IS HELD THAT THE GRANT-IN-AID RECEIVED BY THE AS SESSEE WILL FORM PART OF THE CORPUS AND WOULD NOT BE HELD AS INCOME OF THE A SSESSEE. AS PER THE ABOVE DECISION, WE UPHOLD THE ORDER OF DIE CIT(A) A ND DISMISS THE APPEAL OF THE REVENUE. THEREAFTER THE MATTER WAS RESTORED BACK TO THE FILE OF LD. CIT(A) WITH RESPECT TO THE DISPOSAL OF GROUND NO.5 RAISED BY TH E ASSESSEE IN APPEAL BEFORE LD. CIT(A) WHICH WAS DECIDED ON 17.07.2009. GROUND NO.5 BEFORE LD. CIT(A) READS AS UNDER :- 5. WITHOUT PREJUDICE TO FOREGOINGS, IF AS PER GROU ND NO.1 TO 3, IT IS HELD THAT THE AMOUNT RECEIVED AS GRANT FOR A SUM OF RS.34,96,48,719/- IS TOWARDS CORPUS OF THE TRUST AN D HENCE NOT LIABLE TO BE INCLUDED IN TOTAL INCOME, THE DEFICIT AS COMPUTED BY THE APPELLANT IN ITS RETURN OF INCOME FOR ASST. YEAR 20 06-07 AT RS.22,95,71,087/- BE DIRECTED TO BE CARRIED FORWARD . THE LD. CIT(A) FOLLOWING THE DECISION OF HON. GUJAR AT HIGH COURT IN CIT VS. PLOT SWETAMBER MURTI PUJAK JAIN MAN 211 ITR 293 HELD THAT THE DEFICIT HAS TO BE CARRIED FORWARD FOR BEING ADJUSTE D AGAINST INCOME OF SUBSEQUENT YEARS BY TREATING IT AS APPLICATION. THE RELEVANT PORTION OF ORDER OF LD. CIT(A) IS AS UNDER :- 5. THE MATTER HAS BEEN CONSIDERED. THE DECISION OF THE JURISDICTIONAL HIGH COURT AS CITED ABOVE IN THE CASE OF SHRI PLOT SWETAMBER MURTI PUJAK JAIN MAN (SUPRA), HAS LAID DOWN AS FOLLOWS :- IN VIEW OF THE TWO DECISIONS OF THIS COURT ABOVE R EFERRED TO, IT IS THE WELL- SETTLED POSITION THAT INCOME DERIVED FROM THE TRUST PROPERTY HAS TO BE DETERMINED ON COMMERCIAL PRINCIPLES AND IF COMMERCI AL PRINCIPLES FOR DETERMINING THE INCOME ARE APPLIED, IT IS BUT NATUR AL THAT THE ADJUSTMENT OF THE EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND R ELIGIOUS PURPOSES IN THE EARLIER YEAR AGAINST INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH SUCH ADJUSTMENT HAS BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CON TAINED IN SECTION 11 OF 4 THE ACT AND WILL HAVE TO BE EXCLUDED FROM THE INCOM E OF THE TRUST UNDER SECTION 11(1)(A) OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE OPI NION THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSEE IS ENTI TLED TO CARRY FORWARD EXPENSES FOR SET OFF IN THE SUBSEQUENT YEAR. THE QU ESTION REFERRED TO US IS, THEREFORE, ANSWERED IN THE AFFIRMATIVE, I.E. IN FAV OUR OF THE ASSESSEE AND AGAINST THE REVENUE. 6. IN VIEW OF THE ABOVE, THEREFORE, IN PRINCIPLE, T HE ASSESSEE IS ENTITLED TO CARRY FORWARD ANY DEFICIT OF THE YEAR TO BE SET OFF AGAINST THE INCOME OF THE SUCCEEDING YEAR. HOWEVER, AS STATED EARLIER, TH E AO DID NOT COMPUTE THE CARRY FORWARD BECAUSE OF THE TREATMENT GIVEN TO GRANTS. THEREFORE, THE AO IS DIRECTED TO COMPUTE THE APPLICATION OF INCOME AS WELL AS THE ACCRUAL OF INCOME, AS PER THE DIRECTIONS OF THE ITA T AND THE EXCESS OF EXPENDITURE OVER INCOME BE ALLOWED TO BE CARRIED FO RWARD IN THE SUBSEQUENT YEAR. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD. DR SUBMITTED THAT THERE IS NO PROVISION IN THE INCOME-TAX ACT TO ALLOW CARRY FORWARD THE UNABSORBED APPLICATI ON WHERE INCOME IS COMPUTED UNDER SECTIONS 11 & 13. THEREFORE, THE LD. CIT(A) OUGHT TO HAVE ONLY CONSIDERED THE PROVISIONS OF SECTIONS 11 & 13 AND SHOULD NOT HAVE ALLOWED CARRY FORWARD OF UNABSORBED APPLICATIO N TO SUBSEQUENT YEARS. 5. ON THE OTHER HAND, LD. AR SUBMITTED THAT THE ISS UE IS COVERED BY THE DECISION OF JURISDICTIONAL HIGH COURT AND, THEREFOR E, NO DIFFERENT VIEW SHOULD BE TAKEN. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF LD. CIT(A). SINCE THE LD. CIT(A) HAS FOLLO WED THE DECISION OF 5 JURISDICTIONAL HIGH COURT, NO FAULT CAN BE FOUND WI TH HIS ORDER. THUS THE APPEAL FILED BY THE REVENUE IS DISMISSED. ASST. YEAR 2007-08 7. IN THIS YEAR FOLLOWING GROUND IS RAISED BY THE R EVENUE :- (1) THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE AD DITION MADE ON ACCOUNT OF A GRANT OF RS.31,03,25,670/- REC EIVED TREATED AS INCOME AND ALLOWED TO CARRY FORWARD THE DEFICIT OF INCOME OVER THE EXPENDITURE. 8. THE ISSUE INVOLVED IS CARRY FORWARD OF UNABSORBE D APPLICATION TO SUBSEQUENT YEARS FOR BEING TREATED AS APPLICATION I N SUCH SUBSEQUENT YEARS TO BE ADJUSTED AGAINST RECEIPTS/INCOME OF THAT SUBS EQUENT YEAR. 9. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. THE ISSUE IS COVERED BY THE DECISION OF JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHRI PLOT SWETAMBER MURTI PU JAK JAIN MAN (SUPRA). SINCE WE HAVE ALREADY DECIDED THE ISSUE IN FAVOUR O F THE ASSESSEE IN ASST. YEAR 2006-07, WE ACCORDINGLY FOLLOW THE SAME AND DE CIDE THE ISSUE IN FAVOUR OF THE ASSESSEE THIS YEAR ALSO. 10. SO FAR GRANT IN AID RECEIVED FROM THE GOVERNMEN T IS CONCERNED IT IS ALREADY TREATED AS CONTRIBUTION TO CORPUS IN ASST. YEAR 2006-07 AND, THEREFORE, THE SAME HAS TO BE EXCLUDED FROM THE COM PUTATION OF INCOME UNDER SECTION 11. THIS ISSUE IS ALSO DECIDED IN FAV OUR OF THE ASSESSEE FOLLOWING OUR DECISION IN ASST. YEAR 2006-07 AS REF ERRED TO ABOVE. THUS THE APPEAL OF REVENUE IS DISMISSED. 6 11. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 11/6/2010 SD/- SD/- (BHAVNESH SAINI) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 11/6/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD