ASSISTANT COMMISSIONER OF INCOME TAX EXEMPTION CIRCLE PATNA, PATNA vs. CHANAKYA NATIONAL LAW UNIVERSITY, NAYAY NAGAR

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ITA 342/PAT/2024Status: DisposedITAT Patna21 November 2024AY 2016-174 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the issue of Accounting Standard-12 was not properly addressed by the lower authorities. Therefore, the matter was remanded to the Assessing Officer to verify the nature of the receipt and its accounting treatment.

What were the facts?

The revenue appealed against the CIT(A)'s deletion of an addition of Rs. 3,58,00,000/-. The addition was made because Form 10 was filed late, and the amount was treated as a receipt not offered for tax. The CIT(A) considered the amount an internal adjustment.

What were the issues?

Whether the amount of Rs. 3,58,00,000/- was a genuine receipt to be offered for tax, and the implications of late filing of Form 10 on the benefit of carrying forward surplus income.

Which sections of the Income-tax Act were involved?

Section 11(2),Section 13(9),Section 250,Section 119(2)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “PATNA BENCH, PATNA

Before: Shri Duvvuru RL Reddy, Vice- & Shri Sanjay Awasthi

Assessment Year: 2016-17 ACIT(Exemption), Patna..........................................................……….……Appellant vs. Chanakya National Law University, Nayay Nagar.............……...…..…..Respondent Mithapur, Patna, Bihar – 800001. [PAN: AAAJC0528M] Appearances by: Shri Ashwani Kumar, Sr. DR, appeared on behalf of the appellant. Shri A. K. Rastogi, AR, appeared on behalf of the Respondent. Date of concluding the hearing : November 18, 2024 Date of pronouncing the order : November 21, 2024 ORDER

Per Sanjay Awasthi, Accountant Member:

1.

The present appeal has been filed by the revenue against the order dated 07.02.2024 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 1.1 In this case, there were primarily two issues which were before the Assessing Officer, namely, the issue of delayed filing of Form 10 which was required u/s 11(2) r.w.s. 13(9) of the Act and secondly, the issue of an amount of Rs.3,58,00,000/- which was added as technically being a receipt which had not been offered for tax by the assessee. Needless to say, the amount of Rs.3,58,00,000/- was added and the benefit of carry forward of surplus income was denied since the Form 10 was not filed in time.

2.

This matter was carried in appeal before the ld. CIT(A) and there the issue of Rs.3,58,00,000/- was allowed as relief on the ground that the impugned amount was apparently debited internally and shown as Assessment Year: 2016-17 Chanakya National Law University advance to Govt. account, while at the same time, it was credited to the Income and Expenditure Statement under the head ‘grant-in-aid’ for establishment expenses. The ld. CIT(A) has recorded that in reality, no funds were received by the institution from any third party and this transaction was merely an inter head adjustment. Accordingly, he deleted the said addition on account of which the department is in appeal before the ITAT through a single ground of appeal as under:

The ld. CIT(A) erred in excluding the sum of Rs.3,58,00,000/- from income of the relevant assessment year on the ground that it was on account of internal transfer without appreciating mandate of AS-12 followed by the assessee.

3. Before us, the ld. DR has averred that since the accounts are maintained on mercantile system and any receivable amount was required to be shown as a receipt by the assessee. It has been further averred that this was actually not done. The ld. DR also pointed out a relevant portion of the Assessing Officer’s order in which it has been recorded that the impugned amount has been shown as a receipt and has been included in computing excess of income over expenditure. It has been pointed out that though the impugned amount has been included as a receipt but the same has not been shown as an item of receipt in the return of income.

4. Per contra, the ld. AR has emphasised the point that no amount was received during the year and to meet expenses, this amount was transferred from one head to another in order to ensure smooth running of the institution.

5.

We have carefully considered the rival submissions and also gone through the documents before us. It is seen that in the department’s ground of appeal

it is specifically mentioned that the mandate provided in Accounting Standard

12. (‘AS-12’) has not been kept in mind while ensuring an appropriate treatment of the impugned amount in the 2 Assessment Year: 2016-17 Chanakya National Law University accounts. This Accounting Standard deals with treatment of Govt. grants in the books of account. At this stage, it is noticed that the AS-12, in question, as an individual issue was neither before the Assessing Officer nor was it before the ld. CIT(A). However, it needs to be mentioned that for recognition of an amount as a receipt under this Accounting Standard two conditions are required to be present viz. (a) if the Govt. grant is expected to be realised or its collection is reasonably certain, (b) conditions pertaining to the said Govt. grant have been complied with. As has been mentioned earlier, this issue of the specific Accounting Standard was not dealt with either by Assessing Officer or ld. CIT(A), hence, we deem it fit to remand the matter back to the file of the Assessing Officer for verifying whether the said amount was actually receivable, whether the assessee has been accounting for such grants on receipt or mercantile basis in the past and finally whether there are any terms and conditions pertaining to the said arrangement between the assessee and the Govt. regarding the receipt of such amounts. The Assessing Officer would do well to analyse these issues and thereafter come to a conclusion as to whether the impugned amount would be treated as income for the year under consideration or alternatively treated as income in the year of actual receipt. We direct accordingly. 5.1 Before parting with this issue, it deserves to be mentioned that the ld. DR had pointed out that the issue of the Form 10 not being filed within the time prescribed in the Act/Rules would fatally affect the assessee’s chance of any accumulation as envisaged u/s 11(2) r.w.s. 13(9) of the Act. Though this has not been specifically raised in the grounds of appeal but it is noticed that in the last but one paragraph (Para 8) of the impugned order, the ld. CIT(A) has mentioned as under:

I have carefully considered the above grounds and appellant's arguments relating to the condonation of delay in furnishing the Form No.10 as required under section 11(2) r/w section 13(9) and the consequential eligibility to carry forward the amount accumulated or set apart for 3 Assessment Year: 2016-17 Chanakya National Law University charitable purposes in India. Having regard to powers of Central Board of Direct Taxes under section, 119(2)(b) and delegated powers in the of condonation of delay vested with Jurisdictional Commissioners of Income Tax as per the CBDT Circulars mentioned above, I refrain from proceeding to deal with the condonation pleaded in the appeal by the appellant and direct the appellant to file an application before the concerned Jurisdictional Commissioner of Income Tax seeking condonation in its case. Accordingly, the appellant's grounds are dismissed and the denial of benefit of section 11(2) by the Assessing Officer is hereby confirmed.

5.2 We support this action in as much as that the CBDT has its powers u/s 119(2)(b) of the Act to condone the delay and in case, the said action is done then the assessee would get consequential benefits u/s 11(2) r.w.s. 13(9) of the Act.

6.

In the result, this appeal is allowed for statistical purposes. Kolkata, the 21st November, 2024.

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