M/s Provincial Congregation of Sisters of St. Charles, Bangalore V. DDIT, Bangalore

ITA 974/BANG/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95359 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 17-06-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RUKMANI ATTRI
• Keywords: Gift; Depreciation; Charitable institution; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.974/ BANG/2015 (ASST. YEAR 2011-12 ) M/S PROVINCIAL CONGREGATION OF SISTERS OF ST. CHARLES, #44/1, VILLA BORROMEO, HENNUR ROAD, BANGALORE-560 084. . APPELLANT VS. THE DY. DIRECTOR OF INCOME-TAX (EXEMPTION), CIRCLE 17(2), BANGALORE. . RESPONDENT APPELLANT BY : SHRI SURESH MUTHUKRISHNA, C.A RESPONDENT BY : SMT. RUKMANI ATTRI, JCIT DATE OF HEARING : 10-11-2015 DATE OF PRONOUNCEMENT : 13-11 -2015 O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THE APPEAL IS FILED BY THE ASSESSEE DIRECTED AGAINS T THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS) 14, LTU, BAN GALORE DATED 12/3/2015 FOR THE ASSESSMENT YEAR 2011-12. ITA NO.974/B/15 2 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APP EAL : (1) THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUIT Y, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUM STANCES OF THE CASE. (2) THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDIN G, IN PRINCIPLE, THE ACTION OF THE LEARNED AO IN COMPUTI NG THE ACCUMULATION OF INCOME U/S 11(1)(A) OF THE ACT, AT 15% OF THE NET INCOME FROM PROPERTY HELD UNDER TRUST AFTER DEDUCTING REVENUE EXPENDITURE INCURRED BY THE APPEL LANT AS AGAINST A SUM OF RS.51,52,825/- CLAIMED BY THE APPELLANT ON THE BASIS OF THE GROSS INCOME FROM PRO PERTY HELD UNDER TRUST UNDER THE FACTS AND IN THE CIRCUMS TANCES OF THE APPELLANTS CASE. (3) FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT H UMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUN D OF THE INSTITUTION FEES AS PART OF THE COSTS. ITA NO.974/B/15 3 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E SOCIETY VIDE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-012 O N 9/3/2012 DECLARED NIL INCOME. AGAINST THE SAID RETURN OF IN COME, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VI DE ORDER DATED 20/12/2013 BY THE LEARNED DY. DIRECTOR OF INCOME-TA X (EXEMPTION), CIRCLE - 17(2) DECLARING NIL INCOME. WHILE DOING SO, THE LEARNED AO MADE THE COMPUTATION OF TOTAL INCOME AS UNDER : I. COMPUTATION OF NET SURPLUS OF THE TRUST AMOUNT (RS.) A. GROSS RECEIPTS FROM ACTIVITIES 2,68,18,291 B. INCOME FROM SCHOOL & HOSPITAL 75,33,873 REVENUE EXPENDITURE AS CLAIMED 48,13,575 27, 20,299 II. NET SURPLUS 2,95,38,590 LESS: REVENUE EXPENDITURE (EXCL. DEPRECIATION & SCHOOL EXPENSES) 1,82,33,039 LESS: EXPENDITURE ATTRIBUTABLE TO UTILIZATION OF INCOME ACCUMULATED U/S 11(2) FOR THE AY 2010-11 38,51,441 III. NET SURPLUS AVAILABLE FOR APPLICATION 51,52,825 IV. APPLICATION FOR OBJECTS OF TRUST A. CAPITAL EXPENDITURE 100,04,167 B. CORPUS DONATIONS C. REPAYMENT OF LOAN V. BALANCE NIL VI. ACCUMULATION U/S11(1)(A) TO THE EXTENT OF 15% OF NET SURPLUS (PARA IV) LIMITED BY ACTUAL BALANCE AS PER AMOUNT AVAILABLE IN THE HANDS OF THE TRUST (PARA VI) 44,30,789 VII. AMOUNT ACCUMULATED U/S 11(2) (FORM NO.10 FILED) 7,22,037 ITA NO.974/B/15 4 VIII. BALANCE TAXABLE INCOME NIL IX. TAX THEREON NIL TAX DEDUCTED SOURCE NIL X. BALANCE PAYABLE REFUNDABLE 4. FROM THE ABOVE COMPUTATION, IT IS CLEAR THAT VI DE COLUMN NO.6, THE LEARNED AO OBSERVED THAT ONLY 15% OF NET SURPLUS IS ALLOWED TO BE ACCUMULATION UNDER THE PROVISION OF S EC. 11(1)(A) OF THE INCOME-TAX ACT. 5. THE ASSESSEE SOCIETY BEING AGGRIEVED BY THIS OBS ERVATION FILED AN APPEAL BEFORE THE LEARNED CIT(A), WHO VIDE IMPUG NED ORDER DISMISSED THE APPEAL BY GIVING THE FOLLOWING FINDIN G: 3.7 I FIND FROM THE AOS TREATMENT THAT THE DIFFERENT KINDS OF RECEIPTS AVAILABLE TO THE APPELL ANT THROUGH DONATIONS AND GIFTS, SALE OF SCRAP MATERIAL , GRANTS RECEIVED FROM KHPT ETC., APART FROM INCOME FROM THE HOSPITAL AND THE EDUCATIONAL INSTITUTIONS RUN BY TH E APPELLANT, HAS NOT BEEN APPRECIATED AND THE PRINCIP LE OF 15% ACCUMULATION ON NET EDUCATIONAL INCOME HAS BEEN APPLIED WITHOUT PROPER MIND APPLICATION. TO THE EX TENT THE APPELLANT RECEIVES DONATIONS, THE ACCUMULATION FROM SUCH RECEIPTS ARE TO BE TREATED IN TERMS OF THE HONBLE SUPREME COURTS DECISION IN CASE OF PROGRAMME FOR COMMUNITY ITA NO.974/B/15 5 ORGANIZATION (SUPRA). THE RECEIPTS FROM THE HOSPIT AL AND THE EDUCATIONAL INSTITUTIONS, EVEN IF FIXED AT NON COMMERCIAL RATES (SUBJECT TO VERIFICATION AND RECOR DING CLEARLY BY THE AO) COULD BE EARNED ONLY THROUGH THE INCURRING OF OPERATIONAL EXPENSES RELATING TO SALAR Y, MEDICINE PURCHASE, ACADEMIC MATERIAL, MAINTENANCE E TC. FOR THESE ACTIVITIES. THEREFORE, THE APPLICATION O F INCOME AND ACCUMULATION ARE BOTH TO BE RECKONED FROM THE N ET INCOME AVAILABLE FOR THESE PURPOSES. THE AO IS, TH EREFORE, DIRECTED TO SEPARATE THE RECEIPTS FROM DONATION, AN D THE CONSIDERATION CHARGING ACTIVITIES AND TREAT THE ACCUMULATION IN THE FORMER IN TERMS OF GROSS RECEIP T AND IN THE LATTER IN TERMS OF NET RECEIPTS. IN VIEW OF TH IS DISCUSSION, THE GROUNDS RAISED ARE PARTLY ACCEPTED. 6. HENCE, THE ASSESSEE SOCIETY IS BEFORE US WITH TH E PRESENT APPEAL. 7. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON T HE ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M /S THE CAPUCHIN FRIAR SERVICES SOCIETY TO WHICH ONE OF US I.E HONB LE JM IS AUTHOR OF THE ORDER, WHEREIN FOLLOWING THE EARLIER DECISION OF THE COORDINATE BENCH IN THE CASE OF JYOTHY CHARITABLE TRUST IN IT A NO.662/BANG/2015 HELD THAT FOR THE PURPOSE OF RECOG NIZING 15% ITA NO.974/B/15 6 INCOME TO BE ACCUMULATED ONLY GROSS RECEIPT OF INCO ME TO BE CONSIDERED. 8. ON THE OTHER HAND, THE LEARNED SR. DR PLACED REL IANCE ON THE ORDERS OF THE LOWER AUTHORITIES. 9. WE HAVE HEARD RIVAL SUBMISSION AND PERUSED THE M ATERIAL ON RECORD. A PERUSAL OF THE COMPUTATION OF TOTAL INCO ME DONE BY THE AO VIDE PARA 8 OF THE ASST. ORDER SHOWS THAT THERE WAS NET SURPLUS OF RS.51,52,825/- BEFORE THE INCOME BEING APPLIED FOR CHARITABLE PURPOSE. AFTER APPLYING THE SAID INCOME TO THE CAP ITAL EXPENDITURE OF RS.100,04,167 LAKHS THERE REMAINS NO INCOME. THERE FORE, THE QUESTION OF ACCUMULATED INCOME FOR THE FUTURE YEAR S DOES NOT ARISE. THE ISSUE IN APPEAL IS PURELY ACADEMIC IN NATURE DO ES NOT REQUIRE ANY ADJUDICATION. HENCE, THE APPEAL FILED BY THE ASSESS EE SOCIETY IS DISMISSED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ITA NO.974/B/15 7 ORDER PRONOUNCED IN THE OPEN COURT ON 13TH NOV, 2015 . SD/- SD/- (ASHA VIJAYARAGHAVAN) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT M EMBER BANGALORE DATED : 13/11/2015 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REG ISTRAR, ITAT, BANGALORE.