2018 (4) TMI 1066 - AT - Income Tax

Reopening of assessment under Section 147 - Set off excess application brought forward - Held that - Identical question was considered in TANMAC India v. DCIT 2017 (1) TMI 122 - MADRAS HIGH COURT as held when the entire material was available before the Assessing Officer, in the absence of any new material, the Assessing Officer cannot reopen the assessment under Section 147 of the Act. Section 147 of the Act is not to extend the period of limitation provided for completing the assessment. Unless and until a new material was found on record by the Assessing Officer, the completed assessment cannot be reopened on the basis of very same material available on record. - Decided in favour of assessee Depreciation of certain assets the cost of which was allowed as application of income under Section 11 of the Act - Held that - Apex Court in the case of CIT v. Rajasthan And Gujarati Charitable Foundation Poona 2017 (12) TMI 1067 - SUPREME COURT found that the assessee is eligible for depreciation even though the cost of the asset was allowed as application of income under Section 11 of the Act. This Tribunal is unable to uphold the orders of the authorities below. Assessing Officer is directed to allow depreciation. Assessee is eligible for carry forward the excess application of income against the shortfall in the succeeding year. See case of Matriseva Trust (1999 (3) TMI 34 - MADRAS High Court) Eligible for exemption under Section 11 - Held that - Charitable activity cannot be carried on without money. In other words, to carry out the object of the trust, the assessee needs money and income. Therefore, it is for the assessee to generate income from the property held under trust. When the assessee exploited the land by putting up a construction and letting out the same with an intention to generate income for the purpose of carrying on the object of the trust, this Tribunal is of the considered opinion that the construction of such building and letting out the same cannot be considered to be a commercial activity. Therefore, the CIT(Appeals) has rightly found that the assessee is eligible for exemption under Section 11 of the Act Validity of reopening of assessment - Held that - AO found that the assessee applied the income out of donation. But the information regarding donation was not available before the Assessing Officer. Moreover, consequent to the order of the High Court, the Principal Commissioner revised the order of the Assessing Officer. In those circumstances, this Tribunal is of the considered opinion that the Assessing Officer has rightly reopened the assessment. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority for reopening the assessment under Section 147 Amount accumulated under Section 11(2) added back under Section 11(3) - Held that - When the assessee accumulated income for specific purpose, and disclosing the same in Form 10B but such accumulated income was not used for the purpose for which the same was accumulated, this Tribunal is of the considered opinion that the assessee is not eligible for exemption in respect of such accumulated income Assessee made donation in respect of the trust which was granted approval under Section 80G from and out of current profit. When the assessee has advanced money to the trust which has similar object and approved under Section 80G of the Act, from and out of current profit, this Tribunal is of the considered opinion that the assessee is eligible for exemption under Section 11 of the Act. Assessee is eligible for depreciation even on the asset on which the cost was allowed as application of income under Section 11

Summary

Issues Involved:
1. Reopening of assessment under Section 147 of the Income-tax Act, 1961.
2. Addition of accumulated income.
3. Depreciation of assets whose cost was allowed as application of income under Section 11.
4. Carry forward of excess application of income to subsequent years.
5. Activity of the assessee and its classification as a charitable institution.
6. Construction and letting out of a building known as "Sigappi Aachi building."
7. Exemption under Section 80G of the Act.

Detailed Analysis:

1. Reopening of Assessment under Section 147:
The primary issue in the assessee's appeal for the assessment year 2006-07 was the reopening of the assessment under Section 147 of the Income-tax Act, 1961. The assessee argued that the original assessment was completed under Section 143(3) after examining all materials, and no new material was available to justify reopening. The Tribunal referred to the Madras High Court's decision in TANMAC India v. DCIT, which held that in the absence of new material, reopening is not justified. Consequently, the Tribunal found the reopening of the assessment for the year 2006-07 unjustified and set aside the orders of the lower authorities, allowing the assessee's appeal.

2. Addition of Accumulated Income:
For the assessment year 2009-10, the issue was the addition of accumulated income of ?1,23,41,310/-. The Tribunal noted that the matter was previously remitted for re-examination and is pending before the Assessing Officer. Therefore, the Tribunal found the issue premature and upheld the CIT(Appeals)'s decision, dismissing the assessee's appeal.

3. Depreciation of Assets:
Regarding the assessment year 2010-11, the assessee's appeal concerned the depreciation of certain assets whose cost was allowed as application of income under Section 11. The Tribunal referred to the Supreme Court's decision in CIT v. Rajasthan And Gujarati Charitable Foundation Poona, which allowed depreciation on such assets. Accordingly, the Tribunal set aside the orders of the lower authorities and directed the Assessing Officer to allow depreciation, allowing the assessee's appeal.

4. Carry Forward of Excess Application of Income:
The Revenue's appeal for the assessment year 2010-11 involved the carry forward of excess application of ?6,94,54,741/- to subsequent years. The Tribunal upheld the CIT(Appeals)'s decision, which followed the Madras High Court's judgment in CIT v. Matriseva Trust, allowing the set-off of excess application against shortfall in succeeding years. The Revenue's appeal was dismissed.

5. Activity of the Assessee and Charitable Classification:
The Revenue's appeal for the assessment year 2010-11 also questioned the activity of the assessee, arguing that running Kalyana Mandapams is a commercial activity. The Tribunal found that the income from such activities was applied for charitable purposes, referring to the Madras High Court's decision in DIT v. Willington Charitable Trust. The Tribunal upheld the CIT(Appeals)'s decision, confirming the assessee's status as a charitable institution and dismissing the Revenue's appeal.

6. Construction and Letting Out of "Sigappi Aachi Building":
The Revenue challenged the construction and letting out of the "Sigappi Aachi building," arguing it constituted a business activity. The Tribunal held that generating rental income from the building, which was applied for charitable activities, did not amount to a business activity. The Tribunal upheld the CIT(Appeals)'s decision, confirming the assessee's eligibility for exemption under Section 11, and dismissed the Revenue's appeal.

7. Exemption under Section 80G:
For the assessment years 2012-13 and 2013-14, the Revenue questioned the exemption claimed by the assessee under Section 80G. The Tribunal found that the assessee made donations to a trust approved under Section 80G from current profits, qualifying for exemption under Section 11. The Tribunal upheld the CIT(Appeals)'s decision and dismissed the Revenue's appeals.

Conclusion:
The Tribunal allowed the assessee's appeals for the assessment years 2006-07, 2010-11 (original assessment), 2012-13, and 2013-14, while dismissing the Revenue's appeals for all contested years. The Tribunal upheld the CIT(Appeals)'s decisions on issues of reopening assessments, accumulated income, depreciation, excess application carry forward, charitable activities, and exemptions under Section 80G.