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2021 (2) TMI 1253 - AT - Income TaxExemption u/s 11 - Denial of registration u/s. 12A being engaged in the activities in the nature of trade, commerce or business, inasmuch as one of the dominant activities of the Assessee-Authority is acquisition and sale of immovable property, the receipt of which are in excess of ₹ 25,00,000/-, being the ceiling stipulated in second proviso of section 2(15) - HELD THAT - Now the issue is no longer res integra, as it has already been held that there is no good reasons for holding that Statutory bodies could not be treated as charitable within the meaning of section 2(15) of the Act, as its object is to provide shelter to the homeless people . So there being no material/evidence on record supporting the case of the Revenue to reach the conclusion that the assessee was conducting its affairs on commercial lines with the profit earning motive and as such the proviso to section 2(15) of the Act is not attracted in this case and the assessee was entitled to exemption provided u/s. 11 of the Act. Moreover, no cogent reason or distinguishable facts have been brought on record by the Revenue if the year under consideration is different from earlier years, i.e., A.Yrs. 2009-10 to 2011-12 2018 (6) TMI 685 - ITAT DELHI which have already been decided in favour of the assessee. So, in these circumstances, the Revenue authorities are required to follow the principle of consistency , as has been laid down by Hon ble Supreme Court in the case of Radhasoami Satsang vs. CIT 1991 (11) TMI 2 - SUPREME COURT Consequently, grounds Nos. 1 to 4 are decided in favour of the assessee. Addition being the residual amount of opg. Bal. of infrastructure fund related to earlier years - as submitted amount of infrastructure fund is belonging to state and which was only on capital a/c credited to B/s etc and not belonging to assessee of which assessee is only a custodian - HELD THAT - As infrastructure fund, development and reserve fund IDRF as per Notification dated 15.01.1998 belongs to State and the assessee-authority is a mere custodian, the same cannot be taxed in its hand. Even otherwise, the same has been utilized for general utility. So, in view of the matter, grounds Nos. 5 to 10 are also decided in favour of the assessee. Benefit of excess utilization of earlier years - HELD THAT - Since the issue in controversy has already been decided by coordinate Bench of Tribunal in favour of the assessee in A.Y.2009-10 to 2011-12 on the basis of principle laid down in the case of CIT vs. Shri Plot Swetamber Murti Pujak Jain Mandal 1993 (11) TMI 17 - GUJARAT HIGH COURT that income derived from the trust property has also got computed on commercial principles and if commercial principles are applied, then the adjustment of the expenses incurred by the trust for charitable and religious 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 , and as such, the assessee is entitled for benefit of excess utilization of earlier years. Moreover, such benefit has already been granted to the assessee in earlier years at the level of ld. CIT(A) which has been accepted by the Revenue. So, rule of consistency is also applicable to this issue. Consequently, we decide ground No. 11 in favour of the assessee.
Issues Involved:
1. Legality of the CIT(A)'s order. 2. Invocation of proviso to section 2(15) of the Income Tax Act. 3. Applicability of section 11(4A) of the Income Tax Act. 4. Maintenance of separate accounts for activities. 5. Addition of ?14.158 crore related to the infrastructure fund. 6. Ownership and taxability of the infrastructure fund. 7. Principle of consistency in tax treatment. 8. Adherence to jurisdictional high court rulings. 9. Basis for estimated and other additions. 10. Utilization of income for charitable purposes. 11. Allowance of benefit for excess utilization of earlier years. Detailed Analysis: Issue 1: Legality of the CIT(A)'s Order The appellant argued that the CIT(A)'s order was "bad in law and against the facts and circumstances of the case." The Tribunal found that the CIT(A) had erred in its judgment, particularly in upholding the estimated addition by wrongly invoking the proviso to section 2(15) of the Act. Issue 2: Invocation of Proviso to Section 2(15) The Tribunal examined whether the CIT(A) erred in invoking the proviso to section 2(15) of the Income Tax Act, which pertains to the definition of "charitable purpose." The Tribunal noted that this issue had been previously decided in favor of the assessee in earlier assessment years (2009-10 to 2011-12) and cited the Allahabad High Court's decision in the assessee's favor. The Tribunal reiterated that the assessee's activities did not fall under trade, commerce, or business as per section 2(15), thereby making the assessee eligible for exemption under section 11. Issue 3: Applicability of Section 11(4A) The Tribunal discussed whether the provisions of section 11(4A) were applicable, which deals with the income from business held under a trust. The Tribunal found that the CIT(A) had erred in holding that the income over expenditure was chargeable to tax under section 11(4A) once the proviso to section 2(15) was invoked, as both provisions are mutually exclusive. Issue 4: Maintenance of Separate Accounts The appellant contended that they had maintained sufficient separate accounts for their activities, and even the Assessing Officer had calculated separate surpluses based on these accounts. The Tribunal agreed with the appellant, stating that the rejection of exemption under sections 11-12 was illegal, especially after invoking section 11(4A). Issue 5: Addition of ?14.158 Crore The Tribunal examined the addition of ?14.158 crore, which was the residual amount of the operating balance of the infrastructure fund related to earlier years. The Tribunal found that the CIT(A) had erred in upholding this addition, as the expenditure against the current year's receipts was more, and the authorities failed to consider this. Issue 6: Ownership and Taxability of the Infrastructure Fund The appellant argued that the infrastructure fund belonged to the state and was only credited to the balance sheet as a capital account, with the assessee acting merely as a custodian. The Tribunal agreed, citing the Allahabad High Court's decision that the infrastructure fund could not be treated as belonging to the assessee and was not taxable. Issue 7: Principle of Consistency The Tribunal emphasized the principle of consistency, noting that since the inception, neither the activities were considered as business nor the fund as income of the assessee. This principle was upheld by the Supreme Court in Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC). Issue 8: Adherence to Jurisdictional High Court Rulings The Tribunal noted that the CIT(A) had defeated the order of the jurisdictional high court in the assessee's own case, which was against Article 141 of the Constitution. The Tribunal reiterated that the earlier high court rulings should have been followed. Issue 9: Basis for Estimated and Other Additions The Tribunal found that the lower authority had erred in upholding estimated and other additions without any material basis, accepting accounts arbitrarily and without application of mind. Issue 10: Utilization of Income for Charitable Purposes The Tribunal noted that all the additions were covered within the utilized limit of 85% of its income for charitable purposes, even before considering the excess utilization of earlier years. Issue 11: Allowance of Benefit for Excess Utilization of Earlier Years The Tribunal found that the CIT(A) had erred in not adjudicating the additional ground about the allowance of the benefit of excess utilization of earlier years, which had been allowed in earlier years by the CIT(A) and accepted by the revenue. The Tribunal upheld the assessee's entitlement to this benefit, following the principle laid down by the Bombay High Court in CIT vs. Institute of Banking Personnel Selection (2003) 264 ITR 110 (Bombay). Conclusion: The Tribunal allowed the appeal filed by the assessee, setting aside the CIT(A)'s order and granting the exemptions and benefits claimed by the assessee. The Tribunal's decision was pronounced in the open court on February 4, 2021.
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