POONA PANJARPOLE TRUST,PUNE vs. INCOME TAX OFFICER (EXEMPTION), WARD-1(2), PUNE

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ITA 163/PUN/2023Status: DisposedITAT Pune06 October 2023AY 2017-184 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that investment of net consideration in fixed deposits for 6 months or above is regarded as utilization for acquiring another capital asset, following Board circulars and High Court judgments. Therefore, the interest component of the compensation was to be treated as application of income.

What were the facts?

The assessee, a public trust running a Goshala, received interest on delayed compensation. The Assessing Officer taxed this interest, treating it as revenue receipt. The NFAC upheld this decision, stating TDS was deducted and the income was not applied for charitable purposes.

What were the issues?

Whether interest received on delayed compensation can be treated as application of income for charitable purposes, and if investment in fixed deposits out of sale proceeds qualifies as such application.

Which sections of the Income-tax Act were involved?

Section 11,Section 11(1A),Section 143(3),Section 194A

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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE

Before: SHRI INTURI RAMA RAO & SHRI S. S. VISWANETHRA RAVI

For Appellant: Shri Suhas Bora
For Respondent: Shri M. G. Jasnani
Hearing: 06.09.2023Pronounced: 06.10.2023

ORDER

PER INTURI RAMA RAO, AM:

1.

This is an appeal filed by the assessee directed against the order of the National Faceless Appeal Centre, Delhi [‘NFAC’] dated 16.12.2022 for the assessment year 2017-18.

2.

Briefly, the facts of the case are that the assessee is public trust registered under the Bombay Public Trust Act, 1950. It is formed for the purpose of rendering the charitable activities by running a Goshala. The assessee trust is also registered u/s 12A of the Income Tax Act, 1961 (‘the Act’) and granted approval u/s 80G of the Act. The Return of Income for the assessment year 2017-18 was filed on 23.01.2018 disclosing taxable income of Rs.Nil after claiming exemption u/s 11 of the Act. Against the said return of income, the assessment was completed by the Income Tax Officer, Exemption Ward-1(2), Pune (‘the Assessing Officer’) vide order dated 26.12.2019 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.2,97,86,660/-. While doing so, the Assessing Officer treated a sum of Rs.3,05,55,560/- being the amount of interest receivable from the Pharande Promoters and Builders towards interest on account of the delay in payment of compensation. It was contended that the said interest was not received by the assessee and, therefore, the question of offering to tax, as income had not arisen and it is a capital receipt forming part of the sale consideration, cannot be brought to tax. However, the Assessing Officer had brought to tax the said amount. 3. Being aggrieved, an appeal was filed before the NFAC, who vide impugned order held that since the amount was received as interest and TDS had been deducted u/s 194A of the Act, the interest income partakes the character of revenue receipt and, therefore, formed part of the income of the assessee trust since the income was not applied for charitable purposes and no application was filed for carry forward. Therefore, the same should be taxed as income.

4.

Being aggrieved by the above decision of the NFAC, the appellant is in appeal before us in the present appeal.

5.

Ground of appeal

nos.1, 2 and 3 were not pressed at the time of hearing of appeal, hence the same are dismissed as not pressed.

6. By the ground of appeal no.4, it is contended that the entire amount received for investment in the fixed deposits amount of application of income and, therefore, the question of application does not arise.

7. On the other hand ld. Sr. DR opposed the submissions of the assessee.

8. We heard the rival submissions and perused the material on record. The only issue involved in the present appeal is whether investment of fixed deposit with bank out of the sale proceeds of asset, could be regarded as the application of income or not. This issue was clarified by the Board vide Instruction No.883 dated 24.09.1975:- “The Board had occasion to examine whether investment of the net consideration in fixed deposit with a bank would be regarded as utilization of the amount of the net consideration for acquiring another capital asset within the meaning of section11(1A) of the Income Tax Act, 1961. The Board has been advised that investment of the net consideration in fixed deposit with a bank for a period of 6 months or above would be regarded as utilization of the net consideration for acquisition of another capital asset within the meaning of section 11(1A).”

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