Srujan Trust, Kandhamala v. ITO, Paradeep

ITA 116/CTK/2011 | 2006-2007
Pronouncement Date: 14-03-2011

Appeal Details

RSA Number 11622114 RSA 2011
Assessee PAN AAFTS1385P
Bench Cuttack
Appeal Number ITA 116/CTK/2011
Duration Of Justice 15 day(s)
Appellant Srujan Trust, Kandhamala
Respondent ITO, Paradeep
Appeal Type Income Tax Appeal
Pronouncement Date 14-03-2011
Appeal Filed By Assessee
Bench Allotted SMC
Assessment Year 2006-2007
Appeal Filed On 28-02-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (SMC) CUTTACK BENCH CUTTACK ( ) BEFORE . . HONBLE SHRI K.K.GUPTA ACCOUNTANT MEMBER. / ITA NOS.116 AND 117/CTK/2011 / ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 SRUJAN TRUST AT;P.O. G.UDAYAGIRI KANDHAMAL PAN AAFTS 1385 P - - - VERSUS - INCOME - TAX OFFICER PHULBANI WARD PHULBANI. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPEL LANT : / SHRI J.M.PATTNAIK AR / FOR THE RESPONDENT: / SHRI J.KHANRA DR / ORDER (SMC) . . SHRI K.K.GUPTA ACCOUNTANT MEMBER . THESE TWO APPEALS FOR THE AYS 2006 - 07 AND 2007 - 08 BY THE ASSESSEE AGIT ATE THE CONFIRMATION OF THE EXPENSES DISALLOWED ON AN ESTIMATION INSPITE OF THE FACT THAT THE DEPARTMENT GRANTED REGISTRATION UNDER THE PROVISIONS OF SECTION 12AA ON THE VERY APPLICATION WHICH INCLUDED THESE TWO AYS LEADING TO FINDING THAT THE RECEIPTS OF THE ASSESS EE ARE BEING UTILISED FOR THE MAIN OBJECT OF THE TRUST BEING CHARITABLE. 2. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED THAT THE ASSESSEE HAD APPLIED FOR REGISTRATION UNDER THE PROVISIONS OF SECTION 12AA WHICH WAS GRA NTED W.E.F. 1.4.2008.THELEARNED CIT HAD VERIFIED THE MAIN OBJECTS OF THE TRUST FULFILL THE CRITERIA FOR OBTAINING INCOME TO BE CONSIDERED EXEMPT U/S.11 TO 13. HOWEVER FOR THESE TWO AYS WHICH FINANCIAL STATEMENTS WERE FILED ALONG WITH THE APPLICATION WERE PICKED UP FOR SCRUTINY BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 147/148 WHICH HAVE NO BEARING INSOFAR AS THE ORDERS OF ASSESSMENT CLEARLY INDICATE THAT THE WHOLE OF THE RECEIPTS HAVE BEEN SHOWN AS TAXABLE INCOME BUT ITA NOS.116 AND 117/CTK/2011 2 DISALLOWING PART EXPEND ITURE WHICH REQUIRE D CONSIDERATION IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. HE ARGUED THAT THE LEARNED CIT AGREE D TO THE PROPOSITION THAT THE OBJECTS OF THE TRUST ARE FULFILLED ENTITLING IT TO BE GIVEN EXEMPTION AS REGISTERED U/S.12AA WHICH THE LEARNED CIT(A) COMBINED PROVISION OF LAW IN GRANTING ALLOWABILITY OF THE EXPENDITURE TO THE EXTENT OF 80% THEREOF LEAVING 20% TAXABLE IN THE HANDS OF THE ASSESSEE WHICH LAW ALSO PROVIDES ALLOWABLE TO BE CARRIED FORWARD FOR THE PURPOSE OF CARRYING OUT THE MAIN OBJ ECT OF THE TRUST IN A SUBSEQUENT YEAR. 3. HE ARGUED THAT THERE WAS NO OCCASION TO INSIST THAT A PARTICULAR AMOUNT OF INCOME HAS TO BE GENERATED FROM THE EXEMPTED RECEIPTS OF THE ASSESSEE AND FURTHER MORE REQUIRING THE ASSESSEE TO PAY TAX ON ATLEAST 20% THE REOF COMPLICATED THE ISSUE INSOFAR AS IT WAS NOBODYS CASE THAT THE TRUST WAS RUNNING A BUSINESS ENTITY. THE ASSESSING OFFICER CHOSE TO DISALLOW THE EXPENSES U/S.147/148 ONLY INDICATES THAT THE VALIDITY OF INITIATING PROCEEDINGS UNDER SECTION 147/148 WAS N OT ON SOUND FOOTINGS. THE LEARNED CIT(A) FURTHER AGREED TO THE PURPOSE OF 80% OF THE INCOME OR RECEIPTS ARE BONAFIDELY SPENT BY THE TRUST FOR CARRYING OUT ITS OBJECT THEREFORE ONLY INDICATE THE UNJUSTIFICATION OF MISINTERPRETING THE LAW GOVERNING THE TAXAT ION OF ASSESSEES REGISTERED U/S.12AA. DISALLOWANCE OF EXPENDITURE HAS BEEN HELD AS NO CRITERIA FOR INITIATING PROCEEDINGS U/S.147 BY MANY JUDICIAL PRONOUNCEMENTS WHICH COMPILATION IS BEING FURNISHED. THE LEARNED CIT(A) AND LEARNED CIT TO BEGIN WITH HAVIN G SATISFIED HIMSELF THAT THE OBJECTS OF THE ASSESSEE TRUST ARE CHARITABLE THEREFORE LEFT NO ROOM FOR THE ASSESSING OFFICER OR THE LEARNED CIT(A) TO DISALLOW PART OF THE EXPENDITURE THAT TOO ON ESTIMATION WITHOUT BRINGING EVEN AN IOTA OF DISALLOWABLE EX PENDITU RE ON RECORD. THE LEARNED CIT THEREFORE C OULD HAVE IMMEDIATELY WITHDRAWN REGISTRATION WHEN HE CHOSE TO GRANT REGISTRATION ON THE BASIS OF THESE YEAR S F INANCIAL STATEMENTS INDICATING ITA NOS.116 AND 117/CTK/2011 3 EXPENDITURE INCURRED FOR THE PURPOSE OF CARRYING OUT THE CHARITA BLE OBJECT OF THE ASSESSEE TRUST. HE PRAYED THAT THE PART DISALLOWANCE OF EXPENSES MAY KINDLY BE DIRECTED FOR DELETION. 4. THE LEARNED DR SUBMITTED THAT THE ASSESSING OFFICER WAS WITHIN HIS RIGHT TO HOLD THAT INCOME HAD ESCAPED ASSESSMENT WHEN THE EXPENSES DISALLOWED BY HIM REMAINED UNSUBSTANTIATED BY THE ASSESSEE BEFORE HIM. HOWEVER THE LEARNED CIT(A) ON THE BASIS OF SUBMISSIONS MADE BY THE ASSESSEE APPELLANT BEFORE HIM HAS GIVEN RELIEF BY ALLOWING 80% OF THE RECEIPTS AS EXPENSES INCURRED WHICH HE FULLY SUPPORTED FOR HIS PART SUBMISSIONS. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON MY CAREFUL CONSIDERATION OF FACTS AND CIRCUMSTANCE IT TRANSPIRES THAT THE REFUSAL OF GRANTING REGISTRATION FROM A DATE PRIOR TO WHI CH THE BASIS FOR CONSIDERING CHARITABLE ACTIVITIES CARRIED OUT BY THE ASSESSEE COULD NOT BE HELD THAT NON - CHARITABLE OR ULTRAVIRES THE OBJECT OF THE TRUST WOULD LEAD TO DISALLOWANCE OF EXPENSES AS IS CONSIDERED IN THE CASE OF A BUSINESS ENTITY. THE LAW PROVIDES EXPENSES TO BE ALLOWED WHICH HAVE BEEN WHOLLY AND EXCLUSIVELY INCURRED FOR THE BUSINESS OF THE ASSESSEE THEREFORE CANNOT TAKE THE SHAPE OF INCOME HAVING ESCAPED ASSESSMENT EVEN AFTER AN ASSESSEE BEING A CHARITABLE INSTITUTION HAS BEEN GRANTED R EGISTRATION ON THE BASIS OF SAME FACTS AND FIGURES BUT FROM A LATER DATE. THE LEARNED CIT(A) DEFINITELY COMPLICATE D THE ISSUE BY DELETING THE DISALLOWANCE OF EXPENSES TO BE RETAINED AT 20% OF RECEIPTS WITHOUT ANY BASIS WHICH IN MY VIEW OTHERWIS E STANDS AL LOWABLE AS PROVIDED UNDER THE PROVISIONS OF SECTIONS 11 TO 13 OF THE I.T.ACT. THE ISSUE THEREFORE IS WHETHER ESTIMATION OF DISALLOWANCE OF EXPENSES COULD BE RESORTED TO WHEN THE VERY INCOME OR RECEIPTS HAVE BEEN ITA NOS.116 AND 117/CTK/2011 4 CERTIFIED AS EXEMPT BY THE LEARNED CIT ON THE BASIS OF FACTS WHICH WERE BROUGHT TO HIS KNOWLEDGE AND WHO GRANTED REGISTRATION FROM A LATER DATE I.E. 1.4.2008. 6. I AM OF THE CONSIDERED VIEW THAT THE DISALLOWANCE OF EXPENSES MERELY ON ESTIMATION COULD NOT BE RESORTED TO BE UNDER THE PROVISIONS OF SECTION 147/148 WHEN THE INFORMATION WAS AVAILABLE TO THE DEPARTMENT THAT THE EXPENDITURE HAS BEEN CARRIED OUT FROM THE RECEIPTS THAT WERE EXEMPT TO BE TAXED UNDER THE PROVISIONS OF SECTIONS 11 TO 13 . THIS WAS FURTHER COMPLICATED BY THE LEARNED CIT(A) BY G RANTING RELIEF OF 80% THEREOF WHICH IN ITSELF COMPLIES TO THE FACT THAT THE ASSESSEE WAS CARRY ING ON CHARITABLE ACTIVITIES COULD HAVE EXCESS OF INCOME OVER EXPENDITURE TO BE UTILISED SUBSEQUENTLY IN ACCORDANCE WITH LAW. IN THE RESULT THEREOF I FIND THAT THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS APPROPRIATE AND LE GALLY JUSTIFIED AND THEREFORE DIRECT THE DELETION OF THE PART OF SUSTENANCE OF THE DISALLOWANCE OF THE EXPENSES AS MADE BY THE LEARNED CIT(A) FOR BOTH THE AYS . 7. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 14 TH MARCH 2011 S D/ - ( . . ) (K.K.GUPTA) ACCOUNTANT MEMBER. ( ) DATE: 14 TH MARCH 2011 ( ) (H.K.PADHEE) SENIOR.PRIVATE SECRETARY. ITA NOS.116 AND 117/CTK/2011 5 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : SRUJAN TRUST AT;P.O. G.UDAYAGIRI KANDHAMAL 2 / THE RESPO NDENT: INCOME - TAX OFFICER PHULBANI WARD PHULBANI. 3 . / THE CIT 4 . ( )/ THE CIT(A) 5 . / DR CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY / BY ORDER [ ] SENIOR PRIVATE SECRETARY