Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (10) TMI 973 - AT - Income TaxDeduction u/s. 11 12 - as alleged assesssee s activities were not carried out in accordance with the object as per definition of charitable purpose for which registration was granted - assesssee s activities were not carried out in accordance with the object as per definition of charitable purpose for which registration was granted - HELD THAT - the activities carried out by the assessee is for advancement of any other object of general public utility without any intention of the profit motive after considering the provision of the Gujarat Maritime Board Act, 1981 and fact of the case, it cannot be said that the activities carried out by the assessee are in the nature of trade commerce or business. It is observed that predominant object of the assessee is to administer control on miner ports in the State of Gujarat and there is no profit motive as demonstrated by the provision of section 73, 74 and 75 of the Gujarat Maritime Board Act, 1981. The Gujarat Maritime Board is under legal obligation to apply the income which arises directly and substantially from the business held under trust for the development of minor ports in the state of Gujarat. Further after following the decision of Hon ble Gujarat High Court in the case of AUDA 2017 (5) TMI 1468 - GUJARAT HIGH COURT and GIDC, 2017 (7) TMI 811 - GUJARAT HIGH COURT the fees collected by the assessee is incidental to the object and purpose of attainment of the main object for development of mining ports as enumerated in the provision of the Gujarat Maritime Board Act, 1981, therefore, we consider that activity of the assessee is for advancement of any other object of general public utility and not hit by the proviso to section 2(15) of the act, therefore, the assessee is entitled for exemption u/s. 11 - Decided in favour of assessee Understatement of income - assessing officer on the basis of audit report of the controller and auditor general of India stated that assessee has understated its income - CIT(A) has deleted the addition stating that the assessing officer has added the cumulative figure on the basis of audit paras pertaining to different years without any clarification - HELD THAT - CIT(A) has rightly held that the impugned receipt was of commutative nature and not received during the year under consideration and the assessee was also entitled for exemption u/s. 10(20) of the Act upto 31-03-2002 - departmental representative could not contradict the finding of ld. CIT(A) therefore we do not find any substance in the appeal of the assessee of the revenue and the same is dismissed. Depreciation assets as allowed as application of income - HELD THAT - CIT(A) has referred the decision of Hon ble Supreme Court in the case of CIT vs. Gwalior Rayon Silk Manufacturing Co. Ltd. 1 992 (4) TMI 3 - SUPREME COURT stating that the definition of building would include Road. Therefore, we consider that Ld. CIT(A) has rightly held that capital expenditure incurred thereon is admissible to depreciation on written down value - income of the trust is required to be computed u/s. 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the trust. Therefore, we do not find any merit in the appeal of the revenue and the same is dismissed. Not including profit in sale of assets in computing income - HELD THAT - We do not find any substance in the ground of appeal of Revenue as ld. CIT(A) after considering the material on record has directed the assessing officer to delete the impugned addition after verification of the material fact that said profit on sale of assets has already been included in the computation of business income of the assessee. Therefore, this appeal of the Revenue is also rejected. Allowing deduction as contribution towards Pension Fund - HELD THAT - CIT(A) has correctly allowed the appeal of the assessee after taking into consideration the fact that Gujarat Maritime Board employees Pension Trust fund was duly approved by CIT, Gandhinagar w.e.f. 28th March, 2003 and taken into consideration that contribution has been paid in compliance of the terms of appointment on respective erstwhile state government employees and in earlier years also the same contribution was allowed constantly by the department. Addition u/r 8D - HELD THAT - CIT(A) has allowed the appeal of the assessee after taking into consideration the fact that Gujarat Maritime Board employees Pension Trust fund was duly approved by CIT, Gandhinagar w.e.f. 28th March, 2003 and taken into consideration that contribution has been paid in compliance of the terms of appointment on respective erstwhile state government employees and in earlier years also the same contribution was allowed constantly by the department.
Issues Involved:
1. Whether the activities carried out by the assessee were charitable or in the nature of business. 2. Entitlement to exemption under sections 11 and 12 of the Income Tax Act. 3. Depreciation claims on assets. 4. Inclusion of profit on sale of assets in total income. 5. Deduction of contributions to the Pension Fund. 6. Disallowance under Rule 8D(iii) for dividend income. 7. Addition of interest on income tax refund. Detailed Analysis: 1. Nature of Activities: Charitable vs. Business The primary issue was whether the activities of the assessee, Gujarat Maritime Board, were charitable or business in nature. The assessee argued that it was constituted under the Gujarat Maritime Board Act, 1981, with no profit motive, and was registered under section 12AA of the Income Tax Act. The Pr. CIT, Gandhinagar had canceled the registration, citing the commercial nature of activities. However, the tribunal noted that the predominant object was the development of minor ports in Gujarat, with no profit motive, as demonstrated by sections 73, 74, and 75 of the Gujarat Maritime Board Act, 1981. The tribunal followed judicial precedents, including the Supreme Court's decision in CIT vs. Gujarat Maritime Board, and concluded that the activities were for the advancement of general public utility and not business. 2. Exemption under Sections 11 and 12 Given the charitable nature of the activities, the tribunal allowed the assessee's claim for exemption under sections 11 and 12 of the Act. The tribunal referenced previous decisions, including those of the Co-ordinate Bench and the Gujarat High Court, which supported the assessee's entitlement to such exemptions. 3. Depreciation Claims The tribunal addressed the issue of whether depreciation could be claimed on assets whose cost had already been treated as an application of income. The tribunal upheld the CIT(A)'s decision, which allowed depreciation, referencing the Supreme Court's ruling in CIT vs. Rajasthan and Gujarat Charitable Foundation, Pune, which stated that income of the trust should be computed on commercial principles, including depreciation. 4. Profit on Sale of Assets The tribunal examined whether the profit on the sale of assets should be included in the total income. The CIT(A) had directed the AO to verify if the profit was already included in the business income. The tribunal found no merit in the revenue's appeal, as the CIT(A) had correctly directed the AO to verify and delete the addition if the profit was already accounted for. 5. Pension Fund Contributions The tribunal reviewed the disallowance of contributions to the Pension Fund. The CIT(A) had allowed the appeal, noting that the Pension Trust Fund was approved by the CIT and contributions were made in compliance with employment terms. The tribunal upheld this decision, finding no error in the CIT(A)'s judgment. 6. Disallowance under Rule 8D(iii) The tribunal addressed the disallowance under Rule 8D(iii) for dividend income. Since the assessee was granted exemption under sections 11 and 12, the tribunal deleted the disallowance made by the AO under Rule 8D(iii). 7. Interest on Income Tax Refund The tribunal directed the AO to verify the financial year in which the interest on the income tax refund was credited to the assessee's account. The issue was restored to the AO for fresh verification and decision. Conclusion: The tribunal allowed the appeals filed by the assessee and dismissed the appeals filed by the revenue. The tribunal pronounced the order in the open court on 30-07-2019.
|