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Facts
The revenue appealed against the CIT(A)'s orders for AY 2017-18 and 2018-19, where the CIT(A) reversed the AO's disallowances of application of income. The AO had disallowed certain amounts due to ceased liability or advertisement expenses. The assessee, a registered trust, reported Nil income in both years.
Held
The Tribunal held that there was no tax effect in the appeals for both years, as the assessed income was Nil. Therefore, the appeals were not maintainable. However, the revenue was granted liberty to move for recalling the order if any exception clause of CBDT circulars was later discovered.
Key Issues
Whether the appeals are maintainable when there is no tax effect, and if so, whether the CIT(A)'s reversal of AO's disallowances was correct.
Sections Cited
11, 12A/AB, 80G(5), 254(1)
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PER PAWAN SINGH, JUDICIAL MEMBER;
These two appeals by revenue are directed against the separate orders of National Faceless Appeal Centre (NFAC) / CIT(A) both dated 22.08.2024 for the A.Y. 2017-18 & 2019-20. In both the appeal the revenue has raised certain common grounds of appeal, certain facts in both the years are common except variation of figures of disallowances of application of income, thus, with the consent of parties, both the appeal were clubbed, heard together and are decided by common order to avoid conflicting decisions. The Assessing Officer (AO) while passing assessment order disallowed application of income under section 11 of the Income tax Act to the extent of Rs. 187,84,314/- in AY 2017-18 and of Rs. 4,28,16,935/- in AY 2018-19. On appeal before ld CIT(A)
& 5718/Mum/2024 Dr. Balabhai Nanawati Hospital (AY 2017-18 & 2018-19) disallowances in both the years were reversed. The revenue in its appeal has challenged the correctness of orders passed by ld CIT(A) in reversing the action of AO.
Rival submissions of both the parties have been heard and record perused. At the outset of hearing the ld authorised representative (ld. AR) of the assessee submits that in the assessment for AY 2017-18 was completed on 21.12.2019, and for AY 2018-19 completed on 13.05.2021. The assessee while filing return of income for AY 2018-19 has shown Nill income and no loss has been claimed to be carried forward. During the year the assessee has shown revenue of Rs. 316.69 Crore, and the assessee spent Rs. 343.87 Crore for charitable object. The AO while passing assessment order, the amount spent toward object was determined at Rs. 339.59 Crore and restricted the revenue of Rs. 316.69 Crore.
Similar submissions were made by ld AR for the assessee for AY 2017-18, wherein the assessee has shown revenue of Rs. 255.18 Crore and spent funds for its object of Rs. 301.72 Crore. The assessee while filing return of income has shown Nill income. The AO while passing assessment order determined the amount spent for charitable purpose at Rs. 299.85 Crore and restricted to revenue Rs. 255.18 Crore and determined Nill income. Resultantly, assessed income determined in both the years is Nill, thus, there is no tax effect in the present appeal, within the meaning of para-5.1 of the CBDT Circular No. 05/2024. And the appeals of the revenue are liable to be dismissed due no tax effect.
& 5718/Mum/2024 Dr. Balabhai Nanawati Hospital (AY 2017-18 & 2018-19) 4. On the other hand, the learned senior departmental representative (Sr. DR) for submits that if the appeals of the revenue are being dismissed, he may be given liberty to move appropriate miscellaneous application (MA) for recalling the order, if at later stage it is discovered that the case of revenue is covered by any exception clause of Circular of Central Board of Direct Taxes (CBDT).
We have considered the rival submission of both the parties and perused the orders of lower authorities. The assessee is trust registered with Chrity Commissioner and having registration under section 12A/AB of Income Tax Act (Act). The assessee is also having approval under section 80G(5) of the Act. In AY 2017-18, the AO while passing the assessment order held that liability to the extent of Rs. 1.87 Crore has ceased to exit; thus, equivalent amount was reduced from the application of income. Similarly, while passing assessment order in AY 2018-19, the AO held disallowed an amount of Rs. 4.28 Crore incurred on advertisement expenses and similar amount was reduced from application of income. On appeal before ld CIT(A) the action of AO in both the years were reversed. Hence, both the appeals are filed by AO/ Revenue. On perusal of grounds of appeal in AY 2017-18, we find that the grounds of appeal raised by revenue/ AO are nor in accordance with the disallowance made by AO.
In fact, the AO while passing the assessment order treated the liability of assessee ceased to exit to the extent of Rs. 1.87 Crore. On considering the facts of both years and submissions of the parties we find that there is no tax effect involve in both the appeals, thus, the appeal of the revenue is not maintainable, & 5718/Mum/2024 Dr. Balabhai Nanawati Hospital (AY 2017-18 & 2018-19) hence, both the appeals are dismissed as not maintainable for the want of tax effect, however, the revenue is given liberty to move appropriate application for recalling the order, if at later stage it is discovered that the appeal is covered by any exception clause of Circulars of CBDT.
In the result, both the appeals of revenue are dismissed.
Order pronounced in the open Court on 06 May, 2025.