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TMI Blog2015 (2) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the DR deserves to be rejected, because, the statute itself has given the safe guard under section 251(2), as mentioned earlier. In such a case, accepting or sustaining the order of the CIT(A) in denying the exemption under section 11, would amount to injustice to the assessee. - addition on account of section 41(1) is concerned, we set aside the order of CIT(A) and direct the AO to delete the addition made under section 41(1) - Decided in favour of assessee. Disallowance of depreciation - Held that:- Depreciation cannot be denied. Respectfully, therefore, following the decisions of Hon’ble Bombay High Court in the case of DIT (Ex) vs Framjee Cawasjee Institute [1992 (7) TMI 331 - BOMBAY HIGH COURT] wherein held that Depreciation on depreciable assets had to be taken into account in computing income of trust although the amount spent on acquiring such assets had been treated as application of income of trust in the year in which assets were acquired, we set aside the order of the CIT(A) and direct the AO to allow the rightful claim of depreciation. - Decided in favour of assessee. - ITA No. : 5508/Mum/2014 - - - Dated:- 6-2-2015 - Shri N.K. Billaiya, and Shri Vivek Var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd circumstances of its case and the law prevailing on the subject the enhancement made by the Commissioner of Income- tax (Appeals) under section. 251 of the Income-tax Act, 1961 is misconceived incorrect and illegal. 2:4 The Appellant submits that the enhancement made by the Commissioner of Income-tax (Appeals) be struck down as ab-initio void. Without prejudice to the above: 3:0 Re.: Addition of ₹ 32,50,00,000/- being the advance received from Lokhandwala Construction Industries Ltd. {ICIL] against sale of property by applying the provisions of section 41(1) of the Income-tax Act,1961: 3:1 The Commissioner of Income-tax (Appeals) has erred in confirming the action of the Assessing Officer in making an addition of ₹ 32,50,00,000/- being the advance received against sale of property received from LCIL by applying the provisions of section 41 (1) of the Income-tax Act, 1961. 3:2 The Commissioner of Income-tax (Appeals) has erred in rejecting the claim of the Appellant that section 41(1) of the Income-tax Act, 1961 does not apply, without any discussion whatsoever. He failed to appreciate that the applicability of section 41(1) of the Income-tax Act, 1961 wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as such. 5:3 The Appellant submits that the Assessing Officer be directed to re-compute its surplus for the year after setting off the brought forward deficit. 6:0 Re.: Not allowing and quantifying the deficit of earlier years to be carried forward for set-off in subsequent years:- 6: 1 The Commissioner of Income-tax (Appeals) has erred in not allowing the set off of the brought forward unabsorbed deficit and in not quantifying the unabsorbed deficit of the earlier years to be carried forward for set off in the subsequent assessment years. 6:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject it is entitled to carry forward the unabsorbed deficit of the earlier years to the subsequent years and the stand taken by the Assessing Officer in this regard is incorrect and erroneous and the Commissioner of Income-tax (Appeals) ought to have held as such. 6:3 The Appellant submits that the Assessing Officer be directed to quantify and allow the deficit of the earlier years which is to be carried forward to subsequent assessment years for setting off against surplus of those years. 7:0 Re.: General 7:1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. However, the AO called for an explanation, as to Bombay Gowrakshak Mandali why held it should not be treated as a case of cessation of liability and why the same should not be added as the income of the assessee under section 41(1) of the Income Tax Act, 1961. The assessee explained that the sum, shown as advance was still a liability, because of the dispute arose pertaining to transferable FSI. This stalled the entire development project, hence the amount was being shown as payable to LCIL. As a consequence, the assessee and LCIL entered into long drawn correspondence which resulted into a legal dispute. This dispute ultimately was culminated, with termination of agreement and revoked the POA given to LCIL. According to the AO, the assessee failed to provide copies of correspondence with LCIL. The AO, therefore, added back the sum of ₹ 32.50 crores, received as advance as income of the assessee as per the provisions of section 41(1). 7. The AO, on the one side added the sum of ₹ 32.50 crores as income of the assessee, but on the other hand accepted the status of the trust as charitable trust, allowed the claim of exemption under section 11 of the Act. 8. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicated upon, the CIT(A) should have show Bombay Gowrakshak Mandali caused the assessee as per the provisions of section 251(2), which was mandatory and without which, the CIT(A) could not have proceeded on a non-issue. The AR submitted that even the order sheet showing the proceeding before the CIT(A), did not refer or mention anything with regard to enhancement, which (as per the order sheet copy) read as, A.R. Sh. Chhapgar with I.T. Singh C.A. for discussion on the issue of objective of the Trust and the activity and assignment of trust property. Heard concluded Sd/- sd/- 27.07.2014 24.7.14 Letter/submission is considered. Order dictated. Sd/- 13. The AR placed reliance on the decision of Hon ble Delhi High Court in the case of CIT vs Sardarilal And Co., reported in 251/864 (Del-FB), wherein it was held, The court observed that there was no doubt that this view was also possible, but having regard to the provisions of sections 34 and 33B, which made provision for assessment of escaped income from new sources, the interpretation suggested on behalf of the revenue would be against the view which had held the field for nearly 37 years . (Emphasis, here italicised in print ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved by some material that the liability actually ceased to exist. 5. In the case in hand, the Assessing Officer has not brought out a case by investigation or any material to establish that the liability is no longer in existence. The only ground of invoking the provisions of sec. 41(1) is no filing of confirmation of creditors and no change in the opening and closing stock of the creditors account. The assessee has submitted that some litigation is going on between the assessee and the creditors; therefore, the assessee has not made the payment to creditors. In these facts and circumstances of the case, we do not find any reason to interfere with the order of the CIT(A) on this issue . In this case also the AO proceeded to invoke the provisions of section 41(1) because the assessee was unable to produce confirmations. In the instant case, the revenue authorities invoked the provisions because the assessee could not file details. It is a fact that there were deep differences continuing over the years, between the parties to the agreement, because of that reason, the assessee could not file details. In such case, the AR submitted that the assessee could not file as many details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, pleaded that the addition so made be deleted. 22. On the other hand, the DR submitted that the CIT(A) having coterminous powers can do what the AO failed/forgot to do. The DR placed reliance on the decision of Hon ble Supreme Court in the case of CIT vs Nirbheram Deluram, reported in 91 Taxman 181 and also the decision of Addl CIT vs Gurjargravures Pvt. Ltd. reported in 111 ITR 1 (SC), wherein, the Hon ble Supreme Court held, If, as held in this case, an item of income noticed by the Income-tax Officer but not examined by him from the point of view of its taxability or non-taxability cannot be said to have been considered by him, it is not possible to hold that the Income-tax Officer examining a portion of the profits from the point of view of its taxability only, should be deemed to have also considered the question of its non-taxability. As we have pointed out earlier, the statement of case drawn up by the Tribunal does not mention that there was any material on record to sustain the claim for exemption which was made for the first time before the Appellate Assistant Commissioner. We are not here called upon to consider a case where the assessee failed to make a cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t nowhere from the orders of the revenue authorities do we find that in the year under consideration something new happened, which converted the advance into a remission and the liability became un payable, to be treated as income. 33. In such a situation, the invocation of provisions of section 41(1) in our opinion is not called for and therefore, deserves to be deleted on the facts as well as after considering the ratios laid down by the decisions as referred to above. 34. In so far as denial/revocation of exemption under section 11 is concerned, we find that the AO allowed the same, but the CIT(A) took up the issue suo moto, without showing cause the assessee about his intention of encroaching on the non issue and contemplating enhancement. 35. The CIT(A) held that proviso to section 2(15) became applicable, because the transaction entered into by the assessee was outside the scope and object of the trust as it became profit motive. Holding so, the CIT(A) did not give any reason, that how in the current year, the objects were alienated. If at all some juggle was done with the objects, it was done in 1984 and not in the year under consideration. Bombay Gowrakshak Mandali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n law in directing the Assessing Officer to allow depreciation on assets received on transfer, when the assessee had not incurred the cost of acquiring the assets. Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied, then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the 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 in which adjustment has been made having regard to the benevolent provisions contained in section 11 and such adjustment will have to be excluded from the income of the trust under section 11(1)(a). Accordingly, on the facts and in the circumstances of the instant case, the Tribunal was justified in law in allowing carrying forward of the deficit of earlier year and set it off against the surplus of subsequent year . 42. The AR, therefore, pleaded that depreciation must be allowed. 43. The DR placed reliance on the decision of revenue authorities. 44. We have heard the arguments and have gon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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