The Income Tax Officer, Amritsar. V. M/s Tilla Babal Farid Religious and Charitable Society, Faridkot

ITA 91/ASR/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7978 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 19-03-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 10-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K KATARIA
• Assessee Lawyers: RAJEEV GUBGOTRA
• Keywords: Depreciation; Capital expenditure
• Section: 143(3); 12A; 12AA; 32; 12; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. NO. 621/(ASR)/2015 AS SESSMENT YEAR: 2012-13 TILLA BABA FARID RELIGIOUS & CHARITABLE SOCIETY, HARINDER NAGAR, FARIDKOT [PAN: AABTT 7895H] VS. I. T. O. (EXEMPTIONS), WARD, AMRITSAR (APPELLANT) (RESPONDENT) I.T.A. NO. 91/(ASR)/2017 AS SESSMENT YEAR: 2012-13 I. T. O. (EXEMPTIONS), WARD, AMRITSAR VS. TILLA BABA FARID RELIGIOUS & CHARITABLE SOCIETY, HARINDER NAGAR, FARIDKOT [PAN: AABTT 7895H] (APPELLANT) (RESPONDENT) APPELLANT BY : SH. S. K. KATARIA (ADV.) RESPONDENT BY: SH. RAJEEV GUBGOTRA (D.R.) DATE OF HEARING: 19.03.2018 DATE OF PRONOUNCEMENT: 20.04.2018 ORDER PER SANJAY ARORA, AM: THIS IS A SET OF TWO APPEALS BY THE ASSESSEE IN REL ATION TO ASSESSMENT YEAR (AY) 2012-13 (UNDER THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) VIDE ORDER U/S. 143(3) DATED 13.03.2015), I.E., IN QUANTUM AND PENALTY PROCEEDINGS, EACH OF WHICH WE SHALL TAKE UP SEPARATELY. THE PENALTY U/S. 271(1)(C) ARISING OUT OF THE ITA NOS. 621&91/ASR/2015&2017 TILLA BABA FARID RELIGIOUS & CHARITABLE SOCIETY (AY 2012-13) 2 IMPUGNED ASSESSMENT, THE SAME IS ALSO BEING ADJUDIC ATED PER A COMMON, CONSOLIDATED ORDER. QUANTUM PROCEEDINGS: 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 ON 14.01.2005. IT IS RUNNING TWO UNITS, I.E., BABA FARID KINDERGARTEN SCHOOL, AND ALSO MANAGES TILLA BABA FARID SHRINES, MAINTAINING SEPARATE BOOKS OF ACCOUNT FOR EACH OF T HEM. THE SURPLUS FOR THE SCHOOL FOR THE RELEVANT YEAR, DISCLOSED AT RS.77.02 LACS, WAS CLAIMED AND ALLOWED EXEMPT U/S. 10(23C)(IIIAD); THE GROSS RECEIPT - AT RS.86.0 1 LACS, BEING LESS THAN RS.100 LACS. THE GURDWARA RECEIPT WAS CLAIMED EXEMPT U/S. 11. HO WEVER, AS THE ASSESSEE WAS NOT REGISTERED U/S. 12AA AT THE RELEVANT TIME, THE SAME WAS DENIED, BRINGING THE INCOME OF RS.64,38,618/- TO TAX, ALSO INITIATING PE NALTY PROCEEDINGS U/S. 271(1)(C). IN APPEAL, IT WAS CLAIMED THAT IN-AS-MUCH AS REGIST RATION U/S. 12AA HAS SINCE BEEN GRANTED, I.E., ON 13.04.2015, THE BENEFIT OF SECTIO N 11 COULD NOT BE DENIED. ALTERNATIVELY, IT WAS CLAIMED THAT THE AO HAS BY MI STAKE ADOPTED THE FIGURE OF GROSS RECEIPT FOR RECKONING TAX LIABILITY, I.E., WI THOUT EXCLUDING THE RELATED EXPENDITURE, BEING AT RS.25,54,685. ALSO, DEPRECIAT ION ON THE RELEVANT ASSETS WAS EXIGIBLE EVEN IF THE ASSESSEE HAD OMITTED TO CHARGE THE SAME IN ITS ACCOUNTS. THE LD. CIT(A) HELD THAT THE MANDATE OF SECTION 12A(2), EXT ENDING THE BENEFIT OF SECTIONS 11 AND 12 WHERE REGISTRATION U/S. 12AA STANDS GRANT ED SUBSEQUENTLY, IS ONLY FOR THE YEAR FOR WHICH ASSESSMENT IS PENDING BEFORE THE ASS ESSING OFFICER (AO) AT THE RELEVANT TIME, I.E., AS ON THE DATE OF GRANT OF REG ISTRATION. THE SAME DOES NOT EXTEND TO THE YEARS FOR WHICH THE ASSESSMENT STANDS ALREAD Y COMPLETED. THE LANGUAGE OF SECTION 12A(2) IS EXPLICIT, UNAMBIGUOUS AND CLEAR. FURTHER, ONLY THE EXCESS OF INCOME OVER EXPENDITURE, AS PER THE INCOME AND EXPE NDITURE ACCOUNT, COULD BE SUBJECT TO TAX. THE CLAIM FOR DEPRECIATION WAS DENI ED BY HIM IN-AS-MUCH AS THE ITA NOS. 621&91/ASR/2015&2017 TILLA BABA FARID RELIGIOUS & CHARITABLE SOCIETY (AY 2012-13) 3 RELEVANT PROPERTIES DID NOT CONSTITUTE A BUSINESS U NDERTAKING, FOR SECTION 32 TO HAVE AN APPLICATION. AGGRIEVED, THE ASSESSEE IS IN SECON D APPEAL. THE APPEAL RAISES THE FOLLOWING GROUNDS: 1. THAT AS PER PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF LD. CIT(A) IS DEFECTIVE BOTH IN LAW AND FACTS AND IS LIABLE TO BE SET ASIDE. 2. THAT AS PER PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT BENEFIT OF SECTION 11 & 12 OF THE INCO ME TAX ACT, 1961, CANNOT BE ALLOWED IN APPELLATE PROCEEDINGS, AS THE ASSESSMENT PROCEEDINGS STANDS CONCLUDED AS SOON AS THE ASSESSMENT ORDER IS PASSED BY AO, WHERE AS THE PROCEEDING PENDING BEFORE LD. CIT(A) ARE A CONTINUATION OF THE ASSESSMENT PRO CEEDINGS ; IS NOT CONCLUDED. [RELIANCE IS PLACED ON NATIONAL THERMAL POWER CORPO RATION LTD. V. CIT (1998) 229 383 (SC)] 3. THAT LD. CIT(A) HAS ERRED IN NOT ALLOWING DEPREC IATION ON ASSETS, AS THE INCOME SHOULD HAVE BEEN COMPUTED IN NORMAL COMMERCIAL MANNER IN V IEW OF CIRCULAR NO. 5-P (LXX-6) OF 1968 DATED 19.06.1968. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE FIRST ISSUE ARISING BEFORE US IS IF THE ASSESS EE IS ENTITLED TO A CLAIM OF DEPRECIATION ALLOWANCE ON THE ASSETS OF ITS UNIT M ANAGING SHRINES (HOLY PLACES). WITHOUT DOUBT, THE SAME IS ADMISSIBLE. THE SAME WOU LD NOT BE U/S. 32(1), AS RIGHTLY POINTED OUT BY THE LD. CIT(A), IN-AS-MUCH A S THE ASSETS DO NOT REPRESENT OR CONSTITUTE A BUSINESS UNDERTAKING. HOWEVER, AN ANNU ALIZED CAPITAL CHARGE, BASED ON A REASONABLE ESTIMATE OF THE LIFE OF THE RELEVANT A SSETS, WOULD DEFINITELY STAND TO BE ALLOWED, EVEN AS EXPLAINED BY THE BOARD PER ITS CIR CULAR NO. 5-P (LXX-6) DATED 19.06.1968. THIS, IN FACT, REPRESENTS TRITE LAW AND IS ALSO THE PREMISE FOR A CLAIM OF DEPRECIATION (REFER: CIT V. MARKET COMMITTEE, PIPLI [2011] 330 ITR 16 (P&H); CIT V. SOCIETY OF SISTERS OF ST. ANNE [1984] 146 ITR 28 (KAR); CIT V. P.K. BADIANI [1970] 76 ITR 369 (BOM)). THE NON-BOOKING OF DEPREC IATION IN ACCOUNTS, THOUGH ESSENTIAL INASMUCH AS IT CANNOT BE UNACCOUNTED, WOU LD NOT IN OUR VIEW BE FATAL. THE FIRST APPELLATE AUTHORITY OUGHT TO HAVE ISSUED SPECIFIC DIRECTIONS IN THIS REGARD ITA NOS. 621&91/ASR/2015&2017 TILLA BABA FARID RELIGIOUS & CHARITABLE SOCIETY (AY 2012-13) 4 AS THE ASSESSEES ACCOUNTS, WHICH ARE SUBJECT TO AU DIT, OUGHT TO BEAR THE SAID CHARGE. THE SAME WOULD ALSO ESCHEW A DOUBLE CLAIM IN ITS RE SPECT, WHICH IS A DISTINCT POSSIBILITY WHERE THE ASSET VALUE/S IS NOT CORRESPO NDINGLY REDUCED (BY THE AMOUNT OF DEPRECIATION). FURTHER, THE ASSESSEE IS EQUALLY ENTITLED TO CLAIM CAPITAL EXPENDITURE, INCLUDING ON ACQUISITION OF CAPITAL AS SETS, AS A PART OF APPLICATION OF INCOME. WE STATE THIS IN-AS-MUCH AS EXEMPTION UNDER SECTION 11 IS ONLY ON THE BASIS OF APPLICATION OF INCOME, AND NOT OTHERWISE, AND ON WHICH ASPECT WE OBSERVE NO FINDING BY THE AO. WITH REGARD TO THE LEGAL ISSUE, WE, AGAIN, FIND TH E ASSESSEES CLAIM ACCEPTABLE. NO DOUBT REGISTRATION IS A CONDITION PR ECEDENT FOR SECTIONS 11 AND 12 TO APPLY (REFER SECTION 12A(1); UP FOREST CORPORATION & ORS. V. CIT [2008] 297 ITR 1 (SC)). HOWEVER, EVEN WHERE GRANTED SUBSEQUENT TO THE ASSESSMENT, AS IN THE PRESENT CASE, AN ASSESSEE CANNOT, GIVEN THE SCHEME OF THE ACT, BE DENIED THE BENEFIT OF SECTIONS 11 AND 12. REFERENCE IN THIS CONTEXT MA Y BE MADE TO THE DECISION BY THE AMRITSAR BENCH OF THE TRIBUNAL IN DR. SHYAM LAL THAPAR FOUNDATION V. ITO (IN ITA NOS. 644/(ASR)/2013 AND 592/(ASR)/2015, DATED 2 7/3/2018), DISCUSSING THE MATTER IN DETAIL. WE REPRODUCE THE CONCLUDING PART OF THE SAID ORDER FOR READY REFERENCE: WE, IN VIEW OF THE FOREGOING, WHILE HOLDING THAT A PPELLATE PROCEEDINGS CANNOT BE REGARDED AS ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFI CER, OR AS AN ASSESSMENT PENDING BEFORE HIM, EQUATING THUS THE APPELLATE AND THE ASSESSMENT PROCEEDINGS, WHICH ARE SEPARATE AND DISTINCT, FIND NO REASON NOT TO ACCEPT THE ASSESSEE S PRAYER. THIS IS AS AN ASSESSEE REGISTERED U/S. 12AA OF THE ACT IS TO BE, IN VIEW OF S. 12A(2) , DEEMED TO BE SO REGISTERED FOR ANY OTHER YEAR FOR WHICH THE PROCEEDINGS ARE PENDING AT ANY ( APPELLATE) STAGE, PROVIDED OF COURSE THAT THERE IS NO CHANGE IN THE OBJECTS AND ACTIVITIES OF THE ENTITY DURING THE INTERVENING PERIOD. THIS IS OF COURSE SUBJECT TO THERE BEING, AS CONTEN DED, NO CHANGE IN THE ASSESSEES OBJECTS AND ACTIVITIES DURING THE INTERVENING PERIO D, WHICH THE AO SHALL VERIFY WHILE GIVING APPEAL-EFFECT TO THIS ORDER. ITA NOS. 621&91/ASR/2015&2017 TILLA BABA FARID RELIGIOUS & CHARITABLE SOCIETY (AY 2012-13) 5 AT THE SAME TIME, HOWEVER, AS THE ASSESSEE IS DEE MED AS REGISTERED U/S. 12AA FOR THE RELEVANT YEAR, I.E., THE PREVIOUS YEAR RELEVANT TO AY 2012-13, SUB- SECTION (7) OF SECTION 11, READING AS UNDER, SHALL GET ATTRACTED: INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIO US PURPOSES. 11. (1) (6) (7) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTE D REGISTRATION UNDER CLAUSE ( B ) OF SUB- SECTION (1) OF SECTION 12AA OR HAS OBTAINED REGISTR ATION AT ANY TIME UNDER SECTION 12A [AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO.2) AC T, 1996 (33 OF 1996)] AND THE SAID REGISTRATION IS IN FORCE FOR ANY PREVIOUS YEAR, THE N, NOTHING CONTAINED IN SECTION 10 [OTHER THAN CLAUSE ( 1 ) AND CLAUSE ( 23C ) THEREOF] SHALL OPERATE TO EXCLUDE ANY INCOME DER IVED FROM THE PROPERTY HELD UNDER TRUST FROM THE TOTAL INCOME OF THE PERSON IN RECEIPT THEREOF FOR THAT PREVIOUS YEAR. ACCORDINGLY, IT BECOMES IMPERMISSIBLE IN LAW FOR TH E ASSESSEE TO CLAIM THE BENEFIT OF SECTION 11 ON A PART OF THE PROPERTY HELD UNDER TRUST (I.E., THE UNIT CONTROLLING AND MANAGING SHRINES) AND U/S. 10 (23C(IIIAD) ON THE OTHER (I.E, WHICH MANAG ES THE KINDERGARTEN SCHOOL). WE HAVE ALREADY HELD THAT THE ASSESSEE IS ENTITLED FOR BOTH, I.E., THE NORMAL ACCOUNTING DEPRECIATION AS WELL AS FOR THE APPLICATION QUA THE CAPITAL EXPENDITURE INCURRED. THE LATTER IS IN VIEW OF THE AMENDMENT BY WAY OF INSERTION OF SUB-SECTION (6) TO SEC. 11 (BY FINANCE (NO. 2) ACT, 2014, W.E.F. 01.04.2015) BEING PROSPECTIVE. THE MATTER, ACCORDINGLY, SHALL TRAVEL TO THE FILE O F THE AO TO COMPUTE THE ASSESSEES INCOME (FOR BOTH THE UNITS) IN ACCORDANC E WITH LAW. THE AO, WHOSE POWERS IN THE MATTER OF ASSESSMENT ARE PLENARY, SHA LL, AFTER HEARING THE ASSESSEE, ISSUE DIRECTIONS WITH REGARD TO BOOKING OF DEPRECIA TION DEEMED PROPER UNDER THE CIRCUMSTANCES, WHICH THE ASSESSEE IS ENTITLED TO CL AIM, AND WHICH MAY EXTEND TO PROPERTIES OF BOTH THE UNITS. WE MAY CLARIFY THAT T HE DEPRECIATION IS TO BE CONSISTENTLY PROVIDED IN ACCOUNTS BASED ON OBJECTIV E DATA. NEEDLESS TO ADD, THE AO ITA NOS. 621&91/ASR/2015&2017 TILLA BABA FARID RELIGIOUS & CHARITABLE SOCIETY (AY 2012-13) 6 SHALL CAUSE THE COMPUTATION OF THE APPLICATION OF I NCOME - FOR THE RELEVANT OBJECTS; THE ASSESSEE PURSUING BOTH RELIGIOUS AND CHARITABLE OBJECTS, PER THE REQUISITE FORMS. WE DECIDE ACCORDINGLY. PENALTY PROCEEDINGS: 4. PENALTY STANDS LEVIED U/S. 271(1)(C) ON THE ADDI TION OF RS.38,83,933/- SUSTAINED BY THE LD. CIT(A), I.E., THE EXCESS OF GU RDWARA RECEIPT OVER THE RELATED EXPENDITURE. WE HAVE NOT ONLY HELD OF THE ASSESSEE AS BEING ENTITLED FOR THE CLAIM OF DEPRECIATION - WHICH THOUGH WOULD HAVE TO SUITAB LY QUANTIFIED AND ALSO BOOKED, BUT ALSO FOR SET OFF OF CAPITAL EXPENDITURE AS APPL ICATION OF INCOME, BOTH IN TERMS OF SETTLED LAW, WHICH SHALL REDUCE THE TAXABLE INCOME. IN FACT, EVEN EXCLUDING SECTION 11, THE CLAIM WOULD STAND, AS IT IS ONLY INCOME THE REAFTER THAT COULD BE SUBJECT TO APPLICATION FOR CHARITABLE OR RELIGIOUS PURPOSES. I N FACT, MERITS APART, THE ASSESSMENT ITSELF STANDS SET ASIDE. NO CASE FOR THE LEVY OF PENALTY IS UNDER THE CIRCUMSTANCES MADE OUT. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES, AND THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 20, 201 8 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 20.04.2018. /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: TILLA BABA FARID RELIGIOUS & CHARITABLE SOCIETY, FARIDKOT (2) THE RESPONDENT: ITO WARD- AMRITSAR (3) THE CIT(A), BATHINDA (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. TRUE COPY BY ORDE R