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2018 (6) TMI 1452 - AT - Income TaxRevision u/s. 263 - directing the AO to re-compute the taxable income of the assessee - income tax paid by a charitable trust - deduction in arriving at income available for application of charitable purposes - Held that - Issue in the present case is no longer res integra and the consensus view among various Hon ble High Courts are that the income tax paid by a charitable trust must be allowed as deduction in arriving at income available for application of charitable purposes. The finding and the direction given by the Ld. CIT(E) in the impugned order requiring the AO to disallow the income tax paid of ₹ 40,60,061/- as expenditure is clearly contrary to the consistent view taken by the Hon ble High Court at Delhi, Gujarat and Andhra Pradesh and, therefore, the direction of the Ld. CIT(E) is not inconformity with the view of the Hon ble High courts, therefore, the direction of Ld. CIT(E) is clearly unwarranted and legally not tenable, so the direction of ld. CIT(E) is invalid. As brought to our notice that AO has given effect to the impugned order of Ld. CIT(E) on 27.12.2017 and after complying with the direction of Ld. CIT(E) and after disallowing ₹ 40,60,061/- (income tax paid) still the total income is NIL . So we note that there is no prejudice whatsoever caused to Revenue, so even if for argument sake the Ld. CIT(E) s contention and direction is accepted as correct, then also the twin conditions which is a condition precedent is not satisfied at all. Thus in any case, the AO s original order dated 14.11.2014 cannot be held to be erroneous and prejudicial to the Revenue. - decided in favour of assessee.
Issues Involved:
1. Validity of invoking revisional jurisdiction under Section 263 of the Income-tax Act, 1961. 2. Treatment of income tax paid as application of income for charitable purposes. 3. Whether the assessment order for AY 2012-13 was erroneous and prejudicial to the interest of the Revenue. Issue-wise Detailed Analysis: 1. Validity of invoking revisional jurisdiction under Section 263 of the Income-tax Act, 1961: The assessee, a Public Religious Charitable Trust registered under Section 12A of the Act, challenged the order of the CIT(E) invoking revisional jurisdiction under Section 263. The CIT(E) issued a show cause notice alleging that the assessment order was erroneous and prejudicial to the interest of the Revenue because the AO allowed the payment of ?40,61,061/- as application of income, which was later refunded but not shown as income in the subsequent year. The CIT(E) also raised concerns about a receipt of ?92,50,000/- from M/s. Tirupati Associates. However, after considering the assessee's submissions, the CIT(E) was satisfied with the explanation regarding the receipt from Tirupati Associates and dropped that issue but proceeded with the issue of tax payment. 2. Treatment of income tax paid as application of income for charitable purposes: The CIT(E) argued that the AO should not have allowed the tax payment as application of income since the claim was not made in the original or revised return but only through a revised computation. The CIT(E) relied on the Supreme Court judgment in Goetz India Ltd. to support this position. The assessee contended that the tax payment diverted funds from charitable purposes and should be considered as application of income. The assessee also pointed out that the tax refund was included in the income for AY 2015-16, making the CIT(E)'s reason for invoking Section 263 invalid. 3. Whether the assessment order for AY 2012-13 was erroneous and prejudicial to the interest of the Revenue: The Tribunal found merit in the assessee's contention that the failure to disclose the tax refund in AY 2015-16 could not justify the assessment order for AY 2012-13 being considered erroneous. The Tribunal emphasized that each assessment year is a separate unit of taxation, and events in subsequent years should not impact the assessment of the relevant year. The Tribunal also noted that judicial precedents, including decisions from the Andhra Pradesh, Gujarat, and Delhi High Courts, supported the view that income tax payments by a charitable trust should be allowed as a deduction in arriving at the income available for charitable purposes. The Tribunal concluded that the CIT(E)'s direction to disallow the income tax payment was contrary to these judicial precedents and legally untenable. Additionally, the Tribunal observed that even after disallowing the income tax payment, the total income remained 'NIL,' indicating no prejudice to the Revenue. Therefore, the Tribunal held that the assumption of revisional jurisdiction by the CIT(E) was bad in law and quashed the revisional order. Conclusion: The appeal of the assessee was allowed, and the revisional order passed by the CIT(E) was quashed. The Tribunal emphasized the consistency of judicial precedents in allowing income tax payments as deductions for charitable trusts and found no error or prejudice to the Revenue in the original assessment order.
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