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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI PRAMOD KUMAR&
The instant appeal filed by the assessee is directed against the order dated 03.11.2017 passed by the Commissioner of Income Tax (Appeals) – 9, Ahmedabad arising out of the order dated 21.11.2016 passed by the ITO (Exemption), Ward - 1, Ahmedabad under section143(3) of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Year 2014-15 whereby and whereunder the disallowance of Rs.70,00,000/- transferred to Specific Fund has been confirmed by not considering the same as an application of income on account of non-filing of Form No.10 for accumulation of funds u/s 11(2) of the Act.
Indian Red Cross Soceity vs. ITO(Exemption) Assessment Year 2014-15 - 2 - 2. The assessee trust engaged in various activities, registered u/s 12AA of the Act by and under an order dated 22.05.2008, filed its return of income for A.Y. 2014-15 on 30.03.2016 declaring total income at Rs. Nil which was processed u/s 143(1) of the Act. Subsequently, under scrutiny notice u/s 143(2) of the Act was issued on 01.08.2016. During the course of scrutiny proceeding, it was found that the assessee has transferred an amount of Rs.70,00,000/- to specific funds i.e. Equipment Depletion Fund and General Maintenance Fund. Since these amount were not spent during the year but treated as expenditure by transferring the same to the specific funds explanation was called for whereupon the assessee by and under a letter dated 15.11.2016 stated that the income is actually applied for the charitable purpose of the trust. The word “applied” as mentioned in the provision u/s 11 of the Act does not necessarily implied “spent” even if an amount is irretrievably earmarked and allocated for the charitable purpose. However, such plea of the assessee was not found acceptable and since the assessee has not opted to express provision in terms of section 11(2) of the Act intimating the Assessing Officer that such fund could not be spent during the year and set apart for a period of 5 years for a specific purpose but treated unspent amount as application of income by simply transferring the amount to specific fund, the amount of Rs.70,00,000/- were disallowed and added to the total income of the assessee. In appeal, the appellant sought permission from the appellate authorities to file Form No.10 for accumulation u/s 11(2) of the Act. However, according to the Learned CIT(A) exempt entities can file Form No.10 since assessment proceeding are not completed. It was further held that no permission is required for filing such form, which is required is due process of filing of Form No.10 which includes identification or purpose for which fund are to be accumulated supported by necessary resolution of the governing body of the society. Since the same was Indian Red Cross Soceity vs. ITO(Exemption) Assessment Year 2014-15 - 3 - not filed,the Learned CIT(A) upheld the order passed by the Learned AO. Hence, the instant appeal before us.
At the time of hearing of the instant appeal, the Learned Senior Counsel appearing for the assessee submitted before us that in terms of Section 11(2) Form No.10 under Rule 17 can be filed before the completion of the assessment proceeding meaning thereby during thependency of an appeal arising out of the assessment order even before the Court of law. In that view of the matter, the Learned CIT(A) ought to have allowed the assessee to file Form No.10 which is relevant factors for the purpose of determining the controversy.The Revenue has denied the legitimate relief to assessee who was benefited litigating. The exemption in respect of accumulation u/s 11(2) is thus required to be allowed by the Tribunal. The Learned DR relied upon the order without any basis as also argued by the Learned Senior Counsel appearing for the assessee.
Heard the respective parties, perused the relevant materials available on record. It appears from the records that the appellant has transferred Rs.35,00,000/- towards General Maintenance Fund (for Training & Research Centre Building) and Rs.35,00,000/- towards Equipment Depletion Fund (for Purchase of Thalassemia Testing Machines & Artificial Limb Manufacturing Equipments).
It further appears from the records that the assessee asked for permission before the first appellate authority to file the Form No.10 for accumulation under section 11(2) of the Act and it was clarified that the amount was spent in subsequent year and thus for the ends of justice addition
Indian Red Cross Soceity vs. ITO(Exemption) Assessment Year 2014-15 - 4 - was requested to be deleted. Thus the fact of accumulation of fund is not in dispute. The only question before us is this that whether the application in Form No.10 under Rule 17 of the Income Tax Rules, 1962 could be filed even after the assessment is completed. The Learned Senior Counsel appearing for the assessee relied upon a judgment passed by the Hon’ble Jurisdictional High Court in the matter of CIT-vs-Mayur Foundation reported in [2005] 274 ITR 562 (Gujarat) wherein the position in respect of filing of Form No.10 under Rule 17 has been clarified. The view of the Hon’ble Court is this that the Assessing Authority is empowered and is duty bound to pass an order giving effect to the order of the Tribunal for the purpose of assessing the tax liability of the assessee for the assessment year which are under consideration before the Tribunal. Under this circumstances, it cannot be contended by the department that the assessment proceedings has come to an end when the assessment order is framed. If the ratio of the judgment is applied in the instant case then the assessment proceeding cannot be said to be completed since the same before us is still pending. Therefore,until the order of the Tribunal is given effect to by the Assessing Authority by computing the correct tax liability of assessee ascertaining whether the assessee is required to pay tax or becomes entitled to a refund, the assessment proceeding is not completed. Merely because Form No.10 has not been submitted by the assessee we cannot shut our eyes on the approach taken by the authorities below in denying legitimate claim of the assessee since the assessment proceeding still pending in the instant case as already determined by us in view of the ratio laid down by the Hon’ble Jurisdictional High Court in the case of CIT-vs-Mayur Foundation (supra). We, therefore, find it fit and proper to allow the assessee to submit the Form No.10 to the Assessing Officer clarifying the entire position of the specific fund to the tune of Rs.70,00,000/-. The Learned AO is Indian Red Cross Soceity vs. ITO(Exemption) Assessment Year 2014-15 - 5 - further directed to pass orders in accordance with law taking into consideration as if such Form No.10 is submitted by the assessee at the very onset of the assessment proceeding and to pass orders in accordance with law. Needless to mention that the addition made by the authorities below is hereby deleted.
In the result,assessee’sappeal is allowed. This Order pronounced in Open Court on 06/08/2019