Till Baba Religious & Charitable Society, Faridkot V. The Income Tax Officer,(Exemption), Amritsar.

ITA 94/ASR/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3299 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 20-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-06-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 13-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K KATARIA
• Keywords: Charitable institution
• Section: 143(3); 12A; 12AA; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. NO. 94/ASR/2017 AS SESSMENT YEAR: 2013-14 TILLA BABA FARID RELIGIOUS & CHARITABLE SOCIETY, HARINDER NAGAR, FARIDKOT [PAN: AABTT 7895H] VS. ITO (EXEMPTION) WARD-AMRITSAR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. S. K. KATARIA (ADV.) RESPONDENT BY: SH. RAHUL DHAWAN (D.R.) DATE OF HEARING: 07.06.2018 DATE OF PRONOUNCEMENT: 19.06.2018 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), BATHINDA ('CI T(A)', FOR SHORT) DATED 16.12.2016, PARTLY ALLOWING THE ASSESSEES APPEAL C ONTESTING HIS ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREI NAFTER) DATED 28.01.2016 FOR ASSESSMENT YEAR (AY) 2013-14. 2. THE ONLY ISSUE IN THE INSTANT APPEAL, RAIS ING THREE GROUNDS, IS THE CORRECT ASSESSMENT OF THE ASSESSEES TOTAL INCOME UNDER THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE ASSESSEE IS A SOCIETY, SINCE (W.E.F. 13 .04.2015) REGISTERED U/S. 12AA OF THE ACT. IT FILED ITS RETURN OF INCOME FOR THE YEA R ON 29.03.2014 DECLARING NIL INCOME, CLAIMING EXEMPTION U/S. 10(23C)(IIIAD) AND SEC.11(1)(A) ON ITS ENTIRE ITA NO. 94/ASR/2017 (AY 2013-14) TILLA BABA FARID RELIGIOUS & CHARITAB LE SOCIETY V. ITO 2 SURPLUS. THE ASSESSE-SOCIETY IS RUNNING AN EDUCATIO NAL INSTITUTION IN THE NAME OF BABA FARID KINDERGARTEN SCHOOL AND ALSO MAINTAINING TILLA BABA FARID SHRINES, MAINTAINING SEPARATE BOOKS OF ACCOUNT FOR EACH OF I TS TWO UNITS. QUA THE SCHOOL, IT CLAIMED EXEMPTION U/S. 10(23)(IIIAD) ON THE SURPLUS OF RS.78.02 LACS (ON GROSS RECEIPT OF RS.91.89 LACS). THE GURDWARA ACCOUNTS DI SCLOSED A SURPLUS OF RS.23.22 LACS (ON A GROSS RECEIPT OF RS.44.71 LACS), ON WHIC H, IN THE VIEW OF THE ASSESSING OFFICER (AO), EXEMPTION U/S. 11(1)(A) COULD NOT BE ALLOWED IN THE ABSENCE OF REGISTRATION U/S. 12AA, WHICH WOULD BE APPLICABLE O NLY FROM AY 2016-17 ONWARDS, AND NOT RELATE BACK TO THE CURRENT YEAR, I .E., F.Y. 2012-13. THAT APART, THE NOTICE FOR ACCUMULATION OF INCOME U/S. 11(2) WAS FU RNISHED BY THE ASSESSEE ONLY ON 01.12.2015, I.E., BEYOND THE TIME STIPULATED FOR TH E PURPOSE, WITH THERE BEING NOTHING ON RECORD TO SHOW THAT THE DELAY HAD BEEN C ONDONED BY THE LD. CIT ON AN APPLICATION MADE BY THE ASSESSEE TO HIM. FURTHER, A S AGAINST A SURPLUS INCOME OF RS.37.12 LACS, I.E., OVER APPLICATION, ON THE BASIS OF ITS CONSOLIDATED ACCOUNTS, THE ASSESSEE HAD INVESTED RS.50 LACS IN BANK FDR. THERE WAS, THUS, AN EXCESS INVESTMENT (APPLICATION) OF RS. 12.88 LACS, WHICH W AS INFERRED BY HIM AS FROM UNDISCLOSED SOURCES AND, ACCORDINGLY, BROUGHT TO TA X U/S. 69A. THE ASSESSEES INCOME WAS ACCORDINGLY ASSESSED AT RS. 36.10 LACS. IN APPEAL, THE LD. CIT(A) DIRECTED EXEMPTION U/S. 11(1) ON THE SURPLUS OF RS. 23.22 LACS IN-AS-MUCH AS THE ASSESSEE OUGHT TO BE ALLOWED THE BENEFIT OF REGISTR ATION U/S. 12AA AS ITS ASSESSMENT WAS PENDING BEFORE THE AO AT THE RELEVANT TIME (13/ 4/2015), WITH THERE BEING NO CHANGE IN THE OBJECTS AND ACTIVITIES OF THE ASSESSE E-SOCIETY, I.E., IN VIEW OF SEC.12A(2). AS REGARDS THE OTHER ADDITION OF RS.12. 88 LACS, 15% OF THE GROSS RECEIPT (OF RS.159.82 LACS), WORKED TO RS.23.97 LAC S. ACCORDINGLY, IT IS ONLY THE ACCUMULATION IN EXCESS OF 15%, I.E., RS.13.15 LACS (RS.37.12 LACS - RS.23.97 LACS), THAT WOULD NOT BE ELIGIBLE FOR EXEMPTION U/S. 11(1) R/W S.11(2). HE, ACCORDINGLY, ITA NO. 94/ASR/2017 (AY 2013-14) TILLA BABA FARID RELIGIOUS & CHARITAB LE SOCIETY V. ITO 3 DIRECTED FOR ADDITION OF RS.13.15 LACS INSTEAD OF R S.12.88 LACS. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. AT THIS STAGE, IT MAY BE RELEVANT TO STATE THAT THE ASSESSEES CASE FOR A.Y.2012-13 STANDS SINCE DECIDED BY THE TRIBUNAL (I N ITA NO. 621/ASR/2015, DATED 20.04.2018). THE ASSESSEE HAVING BEEN DENIED EXEMPTION U/S. 11(1) IN THE ABSENCE OF REGISTRATION U/S 12AA, THE TRIBUNAL HELD THAT THE WORDS FOR WHICH THE ASSESSMENT PROCEEDINGS ARE PENDING BEFORE THE ASSES SING OFFICER IN FIRST PROVISO TO SEC.12A(2) ARE TO BE READ TO INCLUDE PENDENCY OF ASSESSMENT PROCEEDING BEFORE ANY APPELLATE AUTHORITY AS WELL. AS SUCH, THE BENEF IT OF REGISTRATION U/S. 12AA WOULD BE AVAILABLE TO THE ASSESSEE FOR THAT YEAR, P ROVIDED THERE IS NO CHANGE IN THE OBJECTS AND ACTIVITIES OF THE TRUST. FURTHER, ADVER TING TO SEC.11(7), READING AS UNDER, IT WAS POINTED OUT THAT THE ASSESSEE COULD NOT CLAI M BENEFIT UNDER BOTH THE PROVISIONS, I.E., SEC.11 AS WELL UNDER SEC.10(23C)( IIIAD): 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. THE ASSESSEE CLAIMS ITS CASE TO BE COVERED BY THE DECISION BY THE TRIBUNAL FOR A.Y. 2012-13. 4. THE FIRST THING, THEREFORE, THAT NEEDS TO BE CLARIFIED IS THAT THE ASSESSEE CANNOT IN LAW (I.E., SEC. 11(7)) CLAIM EXEMPTION BOTH U/S. 11 AS WELL AS U/S. 10(23C)(IIIAD), EVEN AS NOTED BY THE TRIBUNAL FOR A.Y.2012-13, RELI ED UPON THE ASSESSEE BEFORE ME. REFERRING TO THE FOLLOWING COMPUTATION, IT WAS FURT HER CONTENDED THAT CONSIDERING ITA NO. 94/ASR/2017 (AY 2013-14) TILLA BABA FARID RELIGIOUS & CHARITAB LE SOCIETY V. ITO 4 THE CONSOLIDATED ACCOUNTS (FOR BOTH THE UNITS), NO DENIAL OF EXEMPTION U/S. 11(1) ARISES AS THE AMOUNT ACCUMULATED IN EXCESS OF 15% ( OF THE GROSS RECEIPT), FOR WHICH NOTICE U/S. 11(2) IN FORM-10 WAS SUBMITTED DURING T HE ASSESSMENT PROCEEDING, IS ONLY RS.13.15 LACS, WHILE THE NOTICE OF ACCUMULATIO N STANDS GIVEN FOR RS.50 LACS: (AMOUNT IN RS. ) GROSS RECEIPT 1,59,82,675 (GURDWARA AND SCHOOL) LESS DEDUCTION U/S. 11(2) 15% 23,97,401 BALANCE INCOME 1,35,85,274 FUNDS APPLIED 5858361 FUNDS IN FIXED ASSETS 6412357 TOTAL 1,22,70,718 EXCESS OF INCOME OVER APPLICATION 13,14,553 DEDUCTION U/S. 11(2)/11(5) FDR BANK (FORM 10) 50,00,000 BALANCE TAXABLE INCOME NIL IN OTHER WORDS, THE ASSESSEE CLAIMS BENEFIT OF ACCU MULATION U/S. 11(2), DENIED BY THE LD. CIT(A), AND WHICH IT CLAIMS AT RS.13.15 LAC S. THERE IS NO QUESTION OF ANY PART OF RS.50 LACS, SHRI S K. KATARIA, THE LD. COUN SEL FOR THE ASSESSEE, WOULD ADD, BEING UNDISCLOSED; THE INVESTMENT BEING DULY REFLEC TED IN ACCOUNTS, SO THAT THE EXCESS (RS.12.88 LACS) IS OUT OF THE FUNDS ALREADY AVAILABLE WITH THE ASSESSEE FROM PAST SURPLUS. ON A QUERY BY THE BENCH, HE WOULD CON FIRM THAT THE INVESTMENT BY WAY OF REGULAR BANK ACCOUNT AS WELL AS IN BANK FDR BOTH WITH SUTLEJ GRAMIN BANK, TO BE WITH A SCHEDULED BANK, I.E., AS SPECIFI ED U/S. 11(5) OF THE ACT. 5. THE FACTS OF THE CASE ARE NOT IN DISPUTE. THE LD . CIT(A) HAS, FINDING THE OBJECTS AND ACTIVITIES OF THE ASSESSEE TO BE THE SA ME (DURING THE RELEVANT YEAR) VIS- A-VIS THE DATE OF GRANT OF REGISTRATION U/S. 12AA, EXTENDED THE BENEFIT OF SEC.11 FOR ITA NO. 94/ASR/2017 (AY 2013-14) TILLA BABA FARID RELIGIOUS & CHARITAB LE SOCIETY V. ITO 5 THE CURRENT YEAR, AND WHICH IS TO BE WITH REFERENCE TO THE ENTIRE RECEIPT (INCOME) OF THE ASSESSEE. THE ORDER U/S. 12AA(B)(I) DATED 13.04 .2015 (COPY ON RECORD) GRANTING REGISTRATION DOES NOT SPELL OUT IF IT IS FOR RELIGI OUS OR CHARITABLE PURPOSES. IF, THEREFORE, AS CONTENDED, THE APPLICATION FOR REGIST RATION WAS FOR BOTH, THE SAME (REGISTRATION) WOULD HAVE TO BE CONSTRUED ACCORDING LY. THE EXEMPTION U/S. 11(1) WOULD ACCORDINGLY BE SUBJECT TO THE APPLICATION FOR RELIGIOUS OR CHARITABLE PURPOSES FOR WHICH THE REGISTRATION IS, OR CAN BE SAID TO HA VE BEEN, GRANTED, WHICH (APPLICATION) THE AO SHALL VERIFY WHILE GIVING APPE AL EFFECT TO THIS ORDER. THE SECOND ASPECT OF THE MATTER IS THE EXTENT OF A CCUMULATION, QUA WHICH BOTH THE ASSESSEE AND THE REVENUE HAVE, IN MY VIEW, FALTERED. THE ASSESSEE HAS TO APPLY A MINIMUM OF EIGHTY FIVE PER CENT. (85%) OF I TS INCOME (AND NOT GROSS RECEIPT) FOR THE CURRENT YEAR, FOR CHARITABLE OR RE LIGIOUS PURPOSES, TO BE ENTITLED FOR EXEMPTION U/S. 11(1)(A) ON ITS ENTIRE INCOME. WHERE BELOW 85%, THE SHORTFALL COULD BE ACCUMULATED, WHICH IT DOES AT RS.50 LACS BY WAY OF BANK FDR. THE TOTAL SURPLUS (INCOME) IS AT RS.101.24 LACS, 85% OF WHICH WORKS T O RS.86.05 LACS. AS AGAINST THIS, THE TOTAL APPLICATION OF INCOME (FOR BOTH REL IGIOUS AND CHARITABLE PURPOSES) FOR THE YEAR IS AT RS.122.71 LACS (REFER PARA 9 OF THE ASSESSMENT ORDER). THAT IS, THE ASSESSEE HAS APPLIED ITS ENTIRE SURPLUS OF RS.101.2 4 LACS AND, IN ADDITION, RS.21.47 LACS OUT OF ITS PAST (ACCUMULATED) SURPLUS OR, AS T HE CASE MAY BE, CORPUS, AS INDEED IS THE SOURCE OF THE BANK FDR OF RS.50 LACS PURCHAS ED DURING THE YEAR. THIS MAY WELL REPRESENT THE 15% (OF INCOME) UP TO WHICH THE INCOME FOR A YEAR COULD BE RETAINED WITHOUT APPLYING IT DURING THE YEAR, I.E., AS EARNED IN THE PAST. FURTHER, THE FDR BEING DULY REFLECTED IN THE ASSESSEES AUDITED ACCOUNTS, THERE IS NO QUESTION OF ANY PART OF IT BEING UNEXPLAINED. THE AO SHALL, ACC ORDINGLY, SUBJECT TO THE VERIFICATION OF THE SATISFACTION OF THE CONDITIONS OF SECTIONS 11 TO 13, ALLOW EXEMPTION ON THE ENTIRE SURPLUS OF RS.101.24 LACS. ITA NO. 94/ASR/2017 (AY 2013-14) TILLA BABA FARID RELIGIOUS & CHARITAB LE SOCIETY V. ITO 6 6. I DECIDE ACCORDINGLY. 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED ON THE AFORESAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 19 .06.2018 SD/- (SANJAY ARORA) ACCOUNTANT MEMBER DATE: 19.06.2018 /PK/PS COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: TILLA BABA FARID RELIGIOUS & CHARITABLE SOCIETY, HARINDER NAGAR, FARIDKOT (2) THE RESPONDENT: ITO (EXEMPTION) WARD- AMRIT SAR (3) THE CIT(APPEALS), BATHINDA (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T TRUE COPY BY ORDER