THE COMMISSIONER OF INCOME TAX V. M/S MEDICAL RELIEF SOCIETY OF SOUTH KANARA

ITA/865/2008

AI Insights

The case involves an appeal by the Commissioner of Income Tax and the Deputy Commissioner of Income Tax against the Medical Relief Society of South Kanara concerning the exemption of income under Section 10(23C)(vi) of the Income Tax Act, 1961. The primary contention was whether the appellate authorities were correct in allowing the carry forward and set-off of capital expenditure claims, which the appellants argued was in violation of Section 37(1) of the Act. The Assessing Officer initially denied the exemption, but the Appellate Commissioner and the Income Tax Appellate Tribunal reversed this decision, leading to the present appeal. The High Court of Karnataka decided to remand the matter back to the Assessing Officer for a fresh assessment, considering the subsequent developments and the certificate of exemption that was not available at the time of the original assessment.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 733401 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 15-12-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: S PARTHASARATHI
• Assessee Lawyers: JEEVAN NEERALGI
• Keywords: Appellate Tribunal; Assessment Order; Capital expenditure; Exemption; Income Tax
• Section: 11; 37(1); 143; 10(23C)(vi); 153(A); 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 15TH DAY OF DECEMBER, 2014 PRESENT THE HON’BLE MR. JUSTICE N.K. PATIL AND THE HON’BLE MRS. JUSTICE RATHNAKALA ITA NO. 865/2008 BETWEEN: 1. THE COMMISSIONER OF INCOME TAX C.R. BUILDING, ATTAVAR, MANGALORE. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 1 UDUPI. ...APPELLANTS (BY SHRI. JEEVAN. J. NEERALGI, ADVOCATE) AND: M/S. MEDICAL RELIEF SOCIETY OF SOUTH KANARA MADHAVANAGAR, MANIPAL, SOUTH KANARA DISTRICT. ... RESPONDENT (BY SHRI. S. PARTHASARATHI, ADVOCATE) THIS ITA IS FILED U/S. 260-A OF I.T.ACT, 1961 AGAINST THE ORDER DATED 25-04-2008 PASSED IN ITA NO.1240/BANG/2007 FOR THE ASSESSMENT YEAR 1999-2000, TO (I) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN (II) ALLOW 2 THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA NO.1240/BANG/2007 DATED 25-04-2008 IN THE INTEREST OF JUSTICE. THIS APPEAL COMING ON FOR HEARING THIS DAY, N.K. PATIL J., DELIVERED THE FOLLOWING:- JUDGMENT In this appeal, the appellants are questioning the correctness of the order dated 25th April 2008, bearing ITA No.1240/BANG/2007, passed by the Income Tax Appellate Tribunal, Bangalore, and confirm the order passed by the Assessing Officer. The following substantial questions of law are raised in this appeal. “1] whether the appellate authorities were right in law in allowing carry forward and set-off of capital expenditure claim ignoring the provision of Section 37(1) of the Act, which specifically prohibits allowing of capital expenditure in computing the income? 2] Whether the Appellate authorities were right in allowing carry forward and set off capital expenditure when the act does not provide for such treatment and was inadmissible per se and void ab initio in law?” 3 2. The facts in brief are that, the Assessing Officer has passed the assessment order holding that the respondent- Institution is not entitled to exemption in violation of Section 10(23C)(via) of the Act. Not being satisfied with the order passed by the Assessing Officer, respondent filed an appeal before the Appellate Commissioner. The Appellate Commissioner in turn after considering the material on record set aside the order passed by the Assessing Officer, holding that the exemption obtained by the respondent is in accordance with the provisions of the Act. Not being satisfied with the order passed by the Appellate Commissioner, the appellants herein have filed the appeal before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal in turn, after hearing the parties, dismissed the appeals, confirming the order passed by the Appellate Commissioner. Not being satisfied with the order passed by the Appellate Commissioner and its confirmation by the Income Tax Appellate Tribunal, Bangalore, the appellants herein felt necessitated to present this appeal seeking appropriate relief as stated supra. 4 3. We have heard the learned counsel appearing for the appellants and the learned counsel appearing for the respondent. 4. Learned counsel appearing for appellants and learned counsel appearing for respondent submitted that, the Revenue has challenged the benefit of carry forward of set-off of capital expenditure incurred while computing the net income of the relevant years for the purpose of Section 11 of the IT Act. The Respondent-Institution has been granted the Certificate under Section 10(23C)(vi) of the Act by the Chief Commissioner for the relevant years. However, when the Assessing Officer passed the assessment orders for the relevant years, the Certificate was not available to the Assessing Officer. As on the date of passing the Assessment Orders, the Certificate granted by the Chief Commissioner of Income-Tax, Panaji, was not before the Assessing Officer. Hence, the said Certificate was not taken cognizance by the Assessing Officer while passing the Assessment Orders. Consequently, the said authority had made the disallowance as aforesaid. However, subsequently the Respondent-Institution obtained the Certificate and consequently 5 the entire income of the Institution is exempted from taxation. Therefore, they submitted that the matter may be remanded back to the Assessing Officer with a direction to consider the legal consequences of the Certificate granted under Section 10(23C)(iv), taking into consideration subsequent developments and pass fresh orders. 5. The submission made by the learned counsel appearing for both the parties, as stated supra, is placed on record. 6. In the light of the submission of learned counsel appearing for both the parties, without expressing any opinion on the merits or demerits of appellants’ case, it would suffice for this Court if the impugned order are set aside and the matter is remanded back to the Assessing Officer for fresh consideration, in accordance with law. 7. Having regard to the facts and circumstances of the case, as stated supra, the appeal filed by appellants is allowed; The impugned order dated 25th April 2008, passed by the Income Tax Appellate Tribunal, Bangalore Bench ‘A’, vide Annexure A, order dated 6 31st August 2007, passed by the Commissioner of Income-Tax (Appeals)-VI, Bangalore vide Annexure D and the order dated 30th January 2006 passed under Section 143 r/w. Section 153-A of I.T. Act by the Assistant Commissioner of Income Tax, Central Circle 2(3), Bangalore, are all hereby set aside; The matter stands remitted back to the Assessing Officer for reconsideration afresh, and to pass appropriate orders, in accordance with law, after hearing both the parties, as expeditiously as possible, at any rate, not later than six months from the date of receipt of a copy of this judgment; However, it is needless to clarify that the two substantial questions of law raised in the memorandum of appeal are left open and it is the duty of the Assessing Officer to consider the same after affording opportunity of hearing to both the parties afresh and to pass appropriate orders in accordance with law. 7 All the contentions urged by both the parties are left open. SD/- JUDGE SD/- JUDGE BMV* "