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TMI Blog2012 (7) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... - in favour of assessee. - IT Appeal NO. 146 (BANG.) OF 2012 - - - Dated:- 29-6-2012 - N. BARATHVAJA SANKAR, N.V. VASUDEVAN, JJ. ORDER N.V. Vasudevan, Judicial Member This is an appeal by the Assessee against the order dated 19.12.2011 of Director of Income-Tax (Exemption), Bangalore, ("DIT") passed u/s.263 of the Act relating to AY 2009-10. 2. The Assessee is a charitable institution registered u/s.12A of the Income Tax Act, 1961 ("the Act"). For AY 2009-10, the Assessee filed a return of income declaring Nil income. By an order dated 18.3.2011 passed u/s.143(3) of the Act, the AO accepted the income so returned by the Assessee. 3. The DIT in exercise of his powers u/s.263 of the Act perused the assessment records of the Assessee for AY 2009-10 and was of the view that the order of the AO dt.18.3.2011 passed u/s.143(3) of the Act was erroneous and prejudicial to the interests of the Revenue. The DIT noticed that the Assessee trust was engaged in construction business and real estate activities and its total turnover was to the tune of Rs.194.24 crores and had earned a profit of Rs.57.38 crores. The Assessee trust had claimed exemption u/s.80-IB(10) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make proper enquiries to verify the details filed and give a specific finding as to whether the Assessee was eligible for deduction u/s.80-IB(10) of the Act and whether the Assessee has applied its income for charitable or religious purposes as per the provisions of Sec.11 of the Act. He therefore held that the order of the AO was erroneous and prejudicial to the interests of the revenue. 6. With regard to the alternative contention of the Assessee regarding set off the earlier year's deficit against the current years income, the DIT held that there was no carry forward of deficit claimed or allowed by the AO in the earlier years. The DIT also held that the provisions of Sec.70, 71 and 72 of the Act are not applicable to the income computed u/s.11 of the Act. 7. With regard to the contention of the Assessee that once the character of income does not fall within the ambit of Sec.11 of the Act the said income has to be computed in accordance with the provisions of the Act and if so computed, the Assessee is entitled to claim deduction u/s.80-IB(10) of the Act, the DIT held that income as far as it relates to income derived from property held under trust wholly for charitable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Calcutta High Court in the case of DIT( E) v. Giridharilal Shewnarain Tantia Trust 199 ITR 215 (Cal). The facts of the aforesaid case were the assessee was a trust. The Assessing Officer rejected the assessee's claim for deduction under section 80T of the Income-tax Act, 1961. Section 80T provided that where the gross total income of an assessee not being a company includes any income chargeable under the head "Capital gains" relating to capital assets other than short-term capital assets, a straight deduction to the extent of the prescribed percentage of such gains from the total income itself shall be allowed. The first Rs. 5,000 of the long-term capital gains is not liable to any tax and has to be excluded from the amount of long-term capital gains and, on the balance, the relief is allowable at the prescribed percentage. The Tribunal allowed the claim of the Assessee for deduction u/s.80T of the Act. The question before the Hon'ble High Court was as to "Whether, on the facts and in the circumstances of the case and in the light of the proper interpretation of section 11 of the Income-tax Act, 1961, the Tribunal was justified in holding that the capital gain amounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aforesaid provisions. In a case where an assessee-trust has income from different sources and has applied such income and a part of such income comes within the ambit of taxation, it will not be possible to earmark any part of such income to a particular head. Therefore, the question of allowing any statutory deductions as contemplated by the different provisions of the Act dealing with different heads of income in computing the income accumulated will not arise when the trust loses the benefit of accumulation. Hence, a charitable trust is not entitled to deduction under section 80T in respect of its long-term capital gains. 9. The DIT therefore concluded that the order of the AO was erroneous and prejudicial to the interests of the revenue and the AO was accordingly set aside. The AO was directed to pass a fresh assessment order with a direction not to allow deduction u/s.80-IB(10) of the Act but consider all other aspects and re-do assessment in accordance with law after affording opportunity of being heard to the Assessee. 10. Aggrieved by the order of the DIT, the Assessee has preferred the present appeal before the Tribunal. The grounds of appeal raised by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .263 of the Act can be invoked. It was argued that the AO after due enquiry has taken a possible view in allowing deduction u/s.80-IB(10) of the Act and the DIT cannot revise the AO's order because he has taken a different view with regard to allowability of deduction u/s.80-IB(10) of the Act. In this regard, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. ( supra ). 12. It was submitted that if for any reason any income of a charitable trust is not entitled to exemption u/s.11 of the Act, then the said income has to be assessed in accordance with the provisions of the Act. In this regard it was argued that Sec.4 is the charging section under the Act and the charge thereunder is on the total income of an Assessee. Sec.2(45) of the Act defines total income to mean the total income computed in the manner laid down under the Act. Therefore income of the Assessee has to be computed in the manner laid down in the Act and if so computed the Assessee should be allowed deduction u/s.80-IB(10) of the Act. In this regard, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Harprasad Co. Ltd. v. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome for purposes which are not charitable, it should not get the benefit of exemption under any other provision of the Act. In all other respects, the reasoning given by the DIT in the impugned order were reiterated. 16. The learned counsel for the Assessee brought to our notice the fact that after the passing of the impugned order of the DIT, the Finance Act, 2012 has inserted sub-section (8) to Sec.13 of the Act with retrospective effect from 1.4.2000. The said provision reads as follows: "(8) Nothing contained in Section 11 or Section 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof, if the provisions of the first proviso to clause (15) of Section 2 become applicable in the case of such person in the said previous year." 17. Sec.2(15) defines Charitable purpose and it reads as follows: "(15) "charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility : Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich claims exemption u/s.11 of the Act. The case of the DIT is based on the decision of the Hon'ble Calcutta High Court in the case of Giridharilal Shewnarain Tantia Trust ( supra ) in which it has been held to claim exemption u/s.11 of the Act, income, whatever be the head under which it is to be considered under the Act, has to be applied for charitable purposes. Therefore the head of income or exemption allowed while computing total income under the normal provisions of the Act, would not apply. The income which is in dispute is a sum of Rs. 57,39,68,569/- which is the profit derived from developing a housing project by the Assessee which was claimed as deduction while computing total income in view of provisions of Sec.80-IB(10) of the Act. 20 . There can be no serious dispute that the AO had accepted the claim of the Assessee to deduction u/s.80-IB(10) of the Act. The Assessee had filed details before the AO in the course of assessment proceedings u/s.143(3) of the Act. The AO in the order of assessment u/s.143(3) of the Act has not discussed anything regarding the claim of the Assessee for deduction u/s.80-IB(10) of the Act, but has allowed the claim of the Assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous year of the person in receipt thereof, if the provisions of the first proviso to clause (15) of Section 2 become applicable in the case of such person in the said previous year." 23. The above provisions are applicable for AY 2009-10. The Assessee's claim for deduction u/s.80-IB(10) of the Act for AY 2009-10, in so far as it relates to the profit derived from developing housing project, cannot be regarded as income of a charitable trust or institution within the meaning of Sec.11(1)(a) of the Act, because carrying on of the housing project was not a charitable purpose even in AY 2009-10 in view of the first proviso to Section 2(15) of the Act. The income from developing housing project by virtue of the provisions of Sec.13(8) of the Act would become part of the total income under the Act. In the light of the aforesaid retrospective amendment to the law, application of the income for charitable purpose becomes irrelevant. In other words, the income derived from business cannot be considered as income derived from property held for charitable purpose. In other words, it would no longer be income within the meaning of Section 11(1)(a) of the Act. The said income will ..... X X X X Extracts X X X X X X X X Extracts X X X X
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