Delhi State AIDS Control Society, New Delhi v. ITO, New Delhi

ITA 2906/DEL/2010 | 2006-2007
Pronouncement Date: 05-07-2013 | Result: Dismissed

Appeal Details

RSA Number 290620114 RSA 2010
Bench Delhi
Appeal Number ITA 2906/DEL/2010
Duration Of Justice 3 year(s) 25 day(s)
Appellant Delhi State AIDS Control Society, New Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 05-07-2013
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 05-07-2013
Date Of Final Hearing 15-05-2013
Next Hearing Date 15-05-2013
Assessment Year 2006-2007
Appeal Filed On 10-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SMT. DIVA SINGH JUDICIAL MEMBER AND SHRI T.S. KAPOOR ACCOUNTANT MEMBER I.T.A. NO.2906/DEL/2010 ASSESSMENT YEAR : 2006-07 DELHI STATE AIDS CONTROL ITO SOCIETY GOVT. OF NCT OF TRUST WARD-III DELHI DHARAMSHALA BLOCK NEW DELHI. DR. BSA HOSPITAL SECTOR-6 ROHINI. V. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAATD AAATD AAATD AAATD- -- -2304 2304 2304 2304- -- -A AA A APPELLANT BY : SHRI N.K. SHARMA C.A. RESPONDENT BY : MS. ARCHANA S. AWASTHI SR. DR. ORDER PER TS KAPOOR AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD CIT(A) DATED 15.4.2010. THE ASSESSEE HAS TAKEN SEVERAL GR OUNDS OF APPEALS BUT THE CRUX OF THE GROUNDS OF APPEAL IS THAT ASSESSEE IS AGGRIEVED WITH THE DECISION OF LD CIT(A) IN WHICH HE HAD CONFIRMED AN ADDITION OF ` .1 16 68 688/- ON ACCOUNT OF NON APPLICATION OF INC OME FOR CHARITABLE PURPOSES TO THE EXTENT OF 85% OF INCOME D ERIVED DURING THE YEAR. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A REGISTERED SOCIETY U/S 12A OF THE INCOME TAX ACT 1961 AND IT IS A GOVT. ORGANIZATION UNDER THE GOVT. OF DELHI. THE SOCIETY H AS CARRIED OUT NATIONAL PROGRAMMES FOR WELFARE OF THE MASSES IN RESPECT OF ITA NO2906/DEL/2010 2 AWARENESS OF HIV / AIDS. THE ASSESSEE HAS FILED RETURN OF INCOME DECLARING NIL INCOME ON 7.8.2006. THE CASE OF THE ASSE SSEE WAS SELECTED FOR SCRUTINY AND DURING ASSESSMENT PROCEEDINGS TH E ASSESSING OFFICER OBSERVED THAT ASSESSEE HAD RECEIVED GRANTS FROM V ARIOUS SOURCES. THE ASSESSING OFFICER FURTHER OBSERVED THAT OUT O F TOTAL GRANTS A PART OF GRANT WAS DIRECTLY TAKEN TO BALANCE SHEET INSTEAD OF INCOME & EXPENDITURE ACCOUNT. THEREFORE HE HELD THAT GRANTS DIRECTLY CREDITED IN THE BALANCE SHEET WERE NOT USED FOR CHARITABLE PURPOSE S AND HENCE THE TOTAL USE FOR CHARITABLE PURPOSES WAS LESS THAN 85% OF TO TAL INCOME. THE ASSESSEE IN ITS REPLY HAD SUBMITTED THAT WHEN ANY DO NATION OR GRANT IS RECEIVED FOR ANY CHARITABLE PURPOSE THEN ONL Y THE EXPENDITURE PART OF GRANT IS TAKEN TO INCOME & EXPENDITURE A/C A ND REST OF THE BALANCE IS TAKEN IN THE BALANCE SHEET. THE ASSESSING OFFI CER THEN HELD THAT ACCOUNTING PROCEDURE FOLLOWED BY THE ASSESSEE WAS N OT CORRECT. THEREFORE HE HELD THAT CONTRIBUTION/GRANT CANNOT B E TREATED AS CORPUS IN THE YEAR OF RECEIPT AND THEREAFTER AS INCOME IN T HE YEAR IN WHICH THESE ARE SPENT AND IN VIEW OF THE ABOVE HE MADE AN ADDITION OF ` .1 16 68 688/- BEING DIFFERENCE BETWEEN AMOUNT REQU IRED TO BE SPENT FOR CHARITABLE PURPOSES AND AMOUNT ACTUALLY SPENT. 3. DISSATISFIED WITH THE ORDER THE ASSESSEE FILED APPEAL BEFORE LD CIT(A) AND SUBMITTED AS UNDER:- I) THAT FOR THE PURPOSE OF COMPUTING EXEMPTION U/S 11(1 )(A) OF IT ACT THE ASSESSEE HAS TO COMPUTE THE GRANT GIVEN BY THE ASSESSEE TOWARDS THE PURPOSES OF THE ORGANIZATION AND IN COMPUTING OF GRANT APPLIED BY THE ASSESSEE THE ACCOUN TING ENTRIES WERE NOT TO BE GIVEN IMPORTANCE AND THE SOLE CONSIDERATION WAS TO SEE AS TO WHETHER OR NOT THE GRANT WAS APPLIED TOWARDS THE PURPOSES OF THE ORGANIZATION. IT WAS FURTHER SUBMITTED THAT ACCOUNTING PROCEDURE FOLLOWE D BY THE ASSESSEE SHOULD NOT BE THE FACTOR IN DECIDING WHETHER O R NOT ITA NO2906/DEL/2010 3 THE EXEMPTION U/S 11(1)(A) OF THE ACT SHOULD BE GRANT ED OR NOT. RELIANCE IN THIS RESPECT WAS PLACED ON THE FOLLO WING CASE LAWS:- 1. COMMISSIONER OF INCOME TAX TAMIL NADU I. V. KANNIKA PARAMESWARI DEVASTHANAM AND CHARITIES. 133 ITR 779 HOLDING THAT ANY EXPENDITURE WHETHER CAPITAL OR REV ENUE IN NATURE WOULD BE TREATED AS APPLICATION IF IT SERVES TH E PURPOSES OR OBJECTS OF THE ORGANIZATION. 2. SATYA VIJAY PATEL HINDU DHARAMSHALA TRUST. V. COMMISSIONER OF INCOME TAX GUJARAT I. 3. CIT V. ST. GEORGE FORANA CHURCH 170 ITR 62. 4. IT WAS FURTHER SUBMITTED THAT ASSESSEE WAS A GOVT. ORGA NIZATION AND HAS TO FOLLOW THE ACCOUNTING SYSTEM AS PRESCRIBED B Y THE GOVT. AND AS PER THE PRESCRIBED PROCEDURE THE GRANT IN AID GIVEN FOR CHARITABLE PURPOSES BY ASSESSEE TO THE PERIPHERAL UNITS W HO ITSELF WERE REGISTERED CHARITABLE INSTITUTIONS WAS TO BE SHOWN AS AD VANCE TO BE TAKEN TO BALANCE SHEET AND THE SUCH ADVANCES WERE TO B E ADJUSTED AS EXPENSES UPON RECEIPT OF UTILIZATION CERTIFICATES FROM SUCH PERIPHERAL UNITS. DURING THE PREVIOUS YEAR THE ASSESSEE HAD PAID AD VANCES OF ` .2 54 26 550/- TO THE PERIPHERAL UNIT FOR WHICH UTI LIZATION CERTIFICATES WERE NOT RECEIVED TILL 31.3.2006. IT WAS FURTHER SUB MITTED THAT ADVANCES PAID TO THE PERIPHERAL UNITS CONSTITUTE VALI D APPLICATION OF INCOME FROM CONTRIBUTION IN THE LIGHT OF DIRECTION OF SECTION 12(1) OF THE IT ACT 1961 READ WITH SECTION 11(1)(A) OF INCOME TA X ACT 1961. RELIANCE IN THIS RESPECT WAS ALSO PLACED ON THE CBDT I NSTRUCTION NO.1132 DATED 5.1.1978. ITA NO2906/DEL/2010 4 5. THE LD CIT(A) AFTER GOING THROUGH THE SUBMISSIONS OF ASSESSEE DID NOT AGREE WITH THE CONTENTIONS OF LD AR AND UPHE LD THE ADDITION MADE BY THE ASSESSING OFFICER. 6. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 7. AT THE OUTSET THE LD AR SUBMITTED THAT WHEN ASSESSEE GIVES GRANT TO OTHER CHARITABLE SOCIETY IT MAKES A DEBIT EN TRY AND REFLECTS IT AS ADVANCE IN THE BALANCE SHEET AND WHEN THE UTILIZAT ION CERTIFICATE IN RESPECT OF SUCH GRANT IS RECEIVED FROM THE RECEIVING O RGANIZATION THEN EXPENSES ARE BOOKED AND ADVANCES SHOWN IS REVERSED AND THE EQUIVALENT AMOUNT OF SUCH REVERSAL IS TAKEN TO INCOME SIDE AS WELL AS EXPENDITURE SIDE. IT WAS FURTHER SUBMITTED ASSESSING OFFIC ER MADE THE ADDITIONS ON ACCOUNT OF ADVANCES ON THE BASIS THAT THE SE WERE NOT EXPENSES. IN THIS RESPECT OUR ATTENTION WAS INVITED TO I NSTRUCTION NO.1132 DATED 5.1.1978 ISSUED BY CBDT STATING THAT THE PAYMENT OF SUM BY ONE CHARITABLE TRUST TO ANOTHER FOR UTILIZATIO N BY THE DONEE TRUST TOWARDS ITS CHARITABLE OBJECT WAS PROPER APPLICATION O F INCOME FOR CHARITABLE PURPOSES IN THE HANDS OF DONEE TRUST AND DON OR TRUST WILL NOT LOOSE EXEMPTION U/S 11 OF THE IT ACT MERELY BECAUSE TH E DONEE TRUST DID NOT SPEND THE DONATION DURING THE YEAR OF RECEI PT ITSELF. HE FURTHER ARGUED THAT LD CIT(A) HAD ALSO HELD THAT THESE ARE LO ANS BUT THESE ARE NOT LOANS AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PAPER BOOK PAGE 76 WHEREIN A COPY OF SANCTION LETTER ISSUED BY T HE ASSESSEE IN FAVOUR OF ANCHAL CHARITABLE TRUST WAS PLACED. IT WAS FURTHER SUBMITTED THAT ADVANCES ARE SHOWN ONLY TO ENSURE PROPER CONTROL ON THE GRANTS TO CHARITABLE ORGANIZATIONS SO AS TO ENSURE THAT THESE GRAN TS ARE SPENT FOR THE PURPOSES FOR WHICH THESE WERE GIVEN. THE LD AR FUR THER RELIED UPON NUMBER OF CASE LAWS INCLUDING THOSE RELIED BEFORE LD C IT(A). ITA NO2906/DEL/2010 5 8. THE LD DR ON THE OTHER HAND SUBMITTED THAT IF AS SESSEE DEMANDED UTILIZATION CERTIFICATE FROM THE DONEE THE N THE PAYMENTS CANNOT BE SAID TO BE DONATION AND THEREFORE THE ASSESSIN G OFFICER AND LD CIT(A) HAS RIGHTLY MADE AND UPHELD THE DISALLOWANC E. 9. IN HIS REJOINDER THE LD AR SUBMITTED THAT UTILIZA TION CERTIFICATE IN RESPECT OF SUCH ADVANCES WERE RECEIVED LATER ON AND FU RTHER SUBMITTED THAT IF THE CONTENTION OF LD DR IS ACCEPTED THEN DON ATION RECEIVED BY THE ASSESSEE CANNOT BE SAID TO BE AN INCOME OF ASSESSEE BUT IT IS A LIABILITY. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT ASSESSEE RECEIVED A TOTAL AMOUNT OF ` .13 72 .27 537/- GRANT IN AID FOR SPENDING ON CHARITABLE PURPOSES. AFTER REDUCING 1 5% WHICH CAN BE CARRIED FORWARD THE 85% OF AMOUNT COMES OUT AT ` .11 66 43 407/-. OUT OF WHICH ` .10 49 74 719/- HAD ALREADY BEEN SPENT DURING THE YE AR AND THEREFORE THERE WAS A DISPUTE FOR A SUM OF ` .1 16 68 688/- FOR WHICH THE ASSESSING OFFICER IS OF THE VIEW THAT IT HAS NOT CREDITED TO INCOME & EXPENDITURE A/C AND THUS HAS NOT BEEN UTILIZED DURI NG THE YEAR. THERE IS NO DISPUTE ABOUT THE FACT THAT ASSESSEE HAD GIVEN AMO UNTS FOR CHARITABLE PURPOSES TO OTHER CHARITABLE SOCIETIES. THE ONLY DISPUTE IS WITH RESPECT TO TREATMENT OF SUCH DONATION WHICH SHOUL D HAVE BEEN DEBITED TO INCOME & EXPENDITURE A/C INSTEAD OF SHOWIN G IT AS ADVANCES. AS PER INSTRUCTION NO.1132 OF CBDT DATED 5.1 .1978 IT IS CLEAR THAT WHEN A SUM HAS BEEN DISBURSED TO ANOTHER E NTITY CARRYING OUT SIMILAR OBJECT AND REGISTERED U/S 12A THEN IT IS TH E APPLICATION OF INCOME FOR PURPOSES OF SECTION 11 & 12 OF THE ACT. THE ACCOUNTING PRACTICE OF THE APPELLANT IS CREDITING VARIOUS GRANTS TO THE INCOME & EXPENDITURE A/C ONLY TO THE EXTENT FOR WHICH UTILIZ ATION CERTIFICATES ARE ITA NO2906/DEL/2010 6 RECEIVED WHICH IS A REGULAR CONSISTENT PRACTICE AND WH ICH IS BEING IMPLEMENTED BY THE ASSESSEE ON THE DIRECTIONS OF GOVT. O F INDIA AND WHICH IS FOR THE PURPOSE OF HAVING CONTROL OVER THE P ROPER UTILIZATION OF GRANT GIVEN TO OTHER CHARITABLE ORGANIZATIONS. THE A CCOUNTING PRACTICE FOLLOWED BY THE ASSESSEE CANNOT COME IN THE WAY OF ENT ITLEMENT OF EXEMPTION TO THE ASSESSEE AS THE SUMS WERE ACTUALLY DISTRI BUTED TO THE CHARITABLE ORGANIZATIONS AS IS APPARENT FROM PAPER BOO K PAGES 76 TO 87 WHEREIN SPECIMEN COPIES OF SANCTIONS OF GRANT IN AID TO VARIOUS SOCIETIES ARE PLACED. THE RECIPIENTS OF GRANTS ARE ALSO REGISTERED SOCIETIES AS IS APPARENT FROM PAPER BOOK PAGES 52 TO 75. AGAINST TAXABLE INCOME DETERMINED BY ASSESSING OFFICER AT ` .1 1 6 68 688/- THE ASSESSEE HAD ADVANCES OF ` .2 54 42 26550/-AS ON 31/03/2006 TO VARIOUS CHARITABLE INSTITUTIONS FROM WHICH UTILIZATION CERTIFICATES WERE NOT RECEIVED BY 31.3.2006 THEREFORE IN VIEW OF CB DT INSTRUCTION NO. 1132 THESE PAYMENTS SHOWN BY ASSESSEE AS ADVANCES ARE IN F ACT A PROPER UTILIZATION OF FUNDS OF THE ASSESSEE FOR CHARITA BLE PURPOSES. IN VIEW OF THE ABOVE WE HOLD THAT ASSESSEE HAD UTILIZED T HE FUNDS FOR CHARITABLE PURPOSES AND THEREFORE THE APPEAL FILED B Y THE ASSESSEE IS ALLOWED. 11. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS AL LOWED. 12. ORDER PRONOUNCED IN THE OPEN COURT ON 5TH DAY O F JULY 2013. SD/- SD/- (DIVA SINGH) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 5.7.2013. HMS ITA NO2906/DEL/2010 7 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)- NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. TRUE COPY. (ITAT NEW DELHI). DATE OF HEARING 15.5.2013 DATE OF DICTATION 27.6.2013 DATE OF TYPING 27.6.2013 DATE OF ORDER SIGNED BY 05.07.2013 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET & SENT TO THE BENCH CONCERNED.