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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI ABY T. VARKEY, JM & SHRI AMARJIT SINGH, AM
स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AAAAM2049J (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee by: Shri. Ravi Savana Revenue by: Smt. Mahita Nair (Sr. Ar. CIT) सुनवाई की तारीख / Date of Hearing: 18/10/2022 घोषणा की तारीख /Date of Pronouncement: 14/12/2022 आदेश / O R D E R PER : ABY T. VARKEY, JM:
This is an appeal preferred by the assessee against order of the Ld.CIT(A)-6 Mumbai dated 05.03.2018 for A.Y. 2012-13.
At the outset it has been brought to our notice that assessee has filed additional grounds which is included in the consolidated grounds of appeal filed on 22 Jan 2021, which reads as under:-
1. “In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the disallowance of deduction of Rs. 54,39,119/- 1 M/S. Maratha Mandir claimed by the Appellant towards standard deduction u/s 24(a) of the Act.
2. In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the addition on account of unutilized accumulated surplus u/s 11(3) r.w.s. 11(2) of the Act, and directing the Ld. AO to verify the quantum of the amount for the purpose of the addition. 3. In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the addition on account of unutilized accumulated surplus u/s 11(3) r.w.s. 11(2) of the Act to the total income of the Appellant, whereas the same should have been added to its ‘income’. 4. In the facts and circumstances of the case and in law, the unutilized accumulated surplus of AY 2006-07 would not be taxable in AY 2012-13. 5. Without prejudice to our above grounds, the Ld. AO erred in treating the amounts accumulated u/s 11(2) of the Act as unutilized for the purposes specified in Form No. 10, without appreciating the fact that the Appellant had indeed spent a much higher amount on those specified purposes. 6. Without prejudice to our above grounds, the Ld. AO erred in treating the amounts accumulated u/s 11(2) of the Act as income u/s 11(3)(c) of the Act, without appreciating the fact that one of the specified purposes mentioned in Form No. 10 for accumulation of surplus was rendered unviable due to impossibility of performance. 7. The appellant craves leave to all/alter any of the grounds of appeal on or before date of final hearing”.
3. At the outset the Ld.AR of the assessee does not press Ground no. (1) (3) & (4) therefore, the same are not adjudicated and stands dismissed.
4. Coming to grounds no.2, 5 & 6 which pertains to single issue that is assessee has challenged the action of the Ld.CIT(A) confirming the action 2 M/S. Maratha Mandir of the AO who has made addition on account of unutilized accumulated surplus u/s 11(3) r.w.s. with section 11(2) of the Income Tax Act, 1961 (herein after “the Act”). The Ld. AR of the assessee also brought to our notice that assessee has filed an application for admission of additional evidences which is found placed at page no-1 to 33 which according to assessee is relevant to decide the ‘Lis’ in this case which are as under:-
ADDITIONAL EVIDENCES Exhibit Description Page No. No A. Copy of ledgers from the books of accounts of the Appellant, detailing 1-8 the expenditure towards M.M. Babasaheb Gawade Diagnostic Centre, Vile Parle, Mumbai B. 9-13 Sample invoices evidencing expenditure on the diagnostic centre C. True copy of Orders of the Department of Revenue & Forests, State 14-33 Government of Maharashtra, wherein the land granted to the Appellant in Alibag has been confiscated and reverted to the Government
According, to the Ld.AR of the assessee, the aforesaid additional evidences the assessee could not file before the AO at the time of assessment or before the Ld.CIT(A) and pleaded for admitting the same in the interest of justice. For adjudicating as to whether we should admit the additional evidences supra, we note after hearing both the parties that assessee is a charitable institution which is registered u/s 12A of the Act. As per the assessee its charitable activities includes owning & managing charitable M/S. Maratha Mandir hospitals, schools, colleges etc in India viz Vidyavardhini, Babasaheb Gawde Institute of Technology, Babasaheb Gawde Institute of Management Studies, Babasaheb Gawde Hospital, Maharashtra Dnyanpeeth etc. According to the assessee its income are from fees, Donations, grants, lease, rent, interest and dividend. According to assessee, its income are applied to its charitable objects of education and medical relief.
6. During the relevant year (AY 2012-13), the assessee had filed its return of income declaring total income at ‘Nil’, claiming exemption u/s 11 of the Act. However, the AO assessed the total income at Rs. 3.06 Cr on three (3) counts (i) Disallowance of deduction of Rs. 54,39,119/- claimed by assessee u/s 24(a) of the Act. (ii) Treating the amount of Rs. 1.35 Cr accumulated u/s 11(2) of the Act during AY 2006-07 as income u/s 11(3)(c) of the Act for AY 2012-13, on the ground that the same has been not-utilized (assessee contest the accumulated amount to be Rs. 80,00,811) (iii) Treating amount of Rs. 1,71,62,414/- accumulated u/s 11(1)(a) of the Act as income of the assessee on the ground that assessee has failed to apply 85% of its receipt towards charitable objects.
7. Aggrieved by the aforesaid action of AO, the assessee preferred an appeal before the Ld.CIT(A) who confirmed the action of AO regarding deduction claimed u/s 24(a) of the Act because assessee submitted that the deduction u/s 24 of the Act has no consequence on the computation of M/S. Maratha Mandir income of the assessee for the relevant year. And the Ld.CIT(A) deleted the addition of Rs. 1,71,62,414/- made by AO which assessee claimed to have been accumulated u/s 11(1)(a) of the Act (The Revenue has not preferred any appeal against this deletion ordered by Ld.CIT(A) before this Tribunal). And the Ld.CIT(A) confirmed the action of AO making addition Rs. 1.35 Cr which assessee has shown to have accumulated for AY 2006-07 u/s 11(2) of the Act. According to assessee, it has desired to accumulate Rs. 1.35 Cr u/s 11(2) of the Act and filed Form 10 for AY 2006-07 accordingly reflecting the same. However, the AO in the scrutiny assessment order for AY 2006- 07 u/s 143(3) of the Act dated 05.12.2008 allowed only Rs. 80,00,811/- to be accumulated u/s 11(2) of the Act because surplus (amount) was only to that extent for accumulation. And so, the assessee pleaded before the Ld.CIT(A) that AO failed to appreciate the fact that even though in Form 10 assessee had shown its desire to accumulate Rs.1.35 Cr in AY 2006-07 u/s 11(2) of the Act, but the AO allowed only to the extent of Rs. 80,00,811/- and so, the AO erred in adopting Rs. 1.35 Cr while making addition u/s 11(3)(c) of the Act. The Ld.CIT(A) at Para 7.4 of impugned order directed the AO to verify this question of fact i.e. actual amount set-aside & accumulated as per the provision of section 11(2) of the Act by observing as under:-
I have carefully considered the facts of the case, discussion of the AO in the assessment order, oral contentions and written submission of the M/S. Maratha Mandir appellant and material available on record. The appellant in its issues raised vide Grounds No.2 & 4 has contended that the amount required to be accumulated and spent u/s 11(2) for AY 2006-07 was only Rs.80,00,811/- and that the unspent accumulated income should be added to the income of the appellant wherefrom the deductions as per other provisions and provisions of section 11 of the Act should be allowed. The assessee, in support of its contention has also relied upon the judgement of Hon'ble Calcutta High Court in the case of CIT vs Natwarlal Choudhury Charity Trust (supra). In regard to the contentions of the assessee that the amount accumulated and to be spent was only at Rs.80,00,811/- and not Rs. 1,35,00,000/-, the AO is directed to verify the actual amount set-aside and accumulated as per the provisions of section 11(2) of the Act by the assessee for AY 2006-07. It is that actual amount which has been accumulated and set-aside as per the provisions of section 11(2) of the Act for AY 2006-07 and which has not been spent for the purposes of the trust within the period allowed for 5 years that can be considered for addition within the meaning of section 11(3) of the Act. However, if the actual amount set-aside u/s.11(2) of the Act is found to be Rs. 1,35,00,000/-, then it would be this amount which would be assessable u/s 11(3) of the Act. If the actual amount so set-aside is found to be only at Rs 80,00,811/- , then, it is this amount which would become liable to be assessed u/s.11(3) of the Act. Subject to such verification and necessary action, Ground No.2 of appeal is disposed off and for statistical purposes, it is treated as partly allowed
Still not satisfied with the aforesaid action of Ld.CIT(A), the assessee is before us agitation only one issue that is against the direction of Ld.CIT(A) to verify the quantum of addition u/s 11(3)(c) read with section 11(2) of the Act. The relief claimed is two (2) fold. First of all after hearing both the parties we do not find any infirmity in the direction given by the Ld.CIT(A) to AO as reproduced (supra) to verify the actual accumulate amount u/s 11(2) i.e. whether it is Rs. 80,00,811/- or it is Rs. 1.35 Cr. We confirm this action of Ld.CIT(A) it with a modification which will be discussed (infra).
M/S. Maratha Mandir Secondly assessee pleads that the amount accumulated u/s 11(2) of the Act for AY 2006-07 (which fact AO has to verify i.e. whether it is Rs. 80,00,811/- or Rs. 1.35 Cr) has been fully utilized. According to assessee, the confusion on this issue arose because the C.A. of the assessee didn’t give the correct advice during the assessment proceedings or during the first appellate proceeding before the Ld.CIT(A). So, the limited prayer of the assessee is that the additional evidences filed before us (supra page 1-33) be admitted and since, the assessee has utilized the accumulated amount for AY 2006-07 u/s 11(2) of the Act, the addition u/s 11(3) of the Act was not warranted. For buttressing this point, the assessee brought to our notice that assessee had utilized the accumulated amount to the tune Rs. 80,00,811/- for the following object which are reproduced as under:-
“developing a diagnostic health care centre in Mumbai; a. b. developing a Naval School in Alibag; c. developing a Junior College in Ratnagiri. 5. Factually, the Appellant had incurred the following expenses towards construction of Diagnostic centre in the name and style of M.M. Babasaheb Gawde Diagnostic Centre in Vile Parle, Mumbai: Financial Year Amount 2008-09 40,19,465 2009-10 85,66,474 M/S. Maratha Mandir Total 1,25,85,939
The said diagnostic centre provides screening and testing facilities at a nominal charge to persons from marginalised sections of the society. A few of the services provided by the centre include medical check-up & services by modern equipment and machinery, ICCU, NICU, well equipped operation theatres & maternity department. Ledger account of from the Appellant's books of accounts for FY 2008-09 and FY 2009-10 (corresponding to AY 2009-10 and 2010- 11), which record the amounts spent by the Appellant towards expenditure incurred on the said diagnostic centre is enclosed herewith as Exhibit A. Sample invoices evidencing incurring of the expenditure is enclosed herewith as Exhibit B.
Further, the Appellant had received a land on 30 years lease from the Government of Maharashtra to setup a Naval School in Alibaug. There were certain conditions attached to it for granting of the land, on both the parties, which included, inter alia: a. That the Government would provide road, water and electrical connectivity to the land; b. The Appellant would set approach the Urban Development Department for approval of change of use of land c. The Appellant would also get approval for starting a Naval School on the land. 8. However, later on, the Government failed to provide road, water and electrical connectivity to the land for setting up the school. The Appellant was advised to acquire land through private negotiations, however, this entailed significant cost for the Appellant. Considering lack of resources to setup a Naval School on the land, the Appellant approached the State Government to provide permission to build a school on the said piece of land. This permission was not granted by the State Government, and the land granted to the Appellant was confiscated by the State Government. Once the land was confiscated by the State Government, it was impossible for the Appellant to expend any sums towards the specified objects. 9. True copy of Orders of the Department of Revenue & Forests, State Government of Maharashtra, wherein the land granted to the Appellant 8 M/S. Maratha Mandir has been confiscated and reverted to the Government is enclosed herewith as Exhibit C.
The Appellant submits that during the course of assessment and in the proceedings before the first appellate authority, the Appellant was solely contesting the legal ground that the sum of Rs 80,00,811/- should be treated as income derived from property held under trust, and not as a separate source of income. While arguing this point, the Appellant had inadvertently lost sight of the fact that the sums accumulated has actually been utilised by it for the said objects. The appellant had briefed M/s Lakshmikumaran and Sridharan Attorneys, Advocates, to represent them before the Tribunal in the present appeal filed by it against the impugned order of the Ld. AO and the appellate order of the Ld. CIT(A). When the advocates of the Appellant reviewed the submissions filed before the lower authorities, and sought additional information from the Appellant, it transpired that the Appellant had actually spent the money for the purposes specified in Form 10.
11. The Appellant is not well versed with the provisions of the Act and is completely dependent on the advice of its Chartered Accountants. The Chartered Accountant of the Appellant never advised the Appellant that the utilization of the accumulation should also be separately disclosed in the form, in the year when such sums were utilized.
The Appellant further submits that these documents are essential to decide the question that would go to the root of the matter. The Appellant also submits acceptance of these evidences would not prejudice the interest/ rights of the Respondent. However, non- acceptance of the additional evidences would cause irreparable hardship to the Appellant as there would be no other forum before whom the evidences can then be filed by the Appellant. The Appellant submits that specific non reference of these evidences before the lower authorities was not intentional or deliberate.
Having heard both the parties regarding admission of additional evidences, we find that the assessee could not file the same for the reasonable cause as discussed (supra) mainly the failure of the C.A. in M/S. Maratha Mandir advising the assessee on this issue. For the mistake of legal professional, the assessee cannot be penalized. Any way what is being allowed is admission of additional evidences for ascertaining the claim of assessee that it has utilized the accumulated amount u/s 11(2) of the Act of AY 2006-07. In the interest of justice and fair play, we are inclined to admit the additional evidences because it appears to be relevant evidences but needs to be examined/verified by the AO as to whether the assessee has utilized the accumulated fund u/s 11(2)of the Act (in the assessment year 2006-07) and after first verifying to the correct amount accumulated (Rs. 80,00,811/- or Rs.1.35Cr); and thereafter the claim of assessee that it has utilized the same need to be verified/examined. Therefore, we set aside the impugned order of the Ld. CIT(A) and restore this issue back to the file of AO with the direction to examine the additional evidences (which have been admitted supra) and to examine de-novo as to whether the assessee has utilized the amount accumulated to the tune of Rs. 80,00,811/ Rs. 1.35 of (AY 2006- 07) u/s 11(2) of the Act and to pass order in accordance to law after hearing the assessee.
10. Before parting we also make it clear that we have not stated anything about the action of Ld.CIT(A) in respect of deletion of Rs.1,71,62,414/- which is not before us because Revenue did not point out as to whether any appeal has been filed by them against the impugned action of Ld.CIT(A). So, M/S. Maratha Mandir our aforesaid action is confined only to the issue of accumulated amount u/s 11(2) of the Act for AY 2006-07 and as observed/directed (supra).
In the result appeal of the assessee is partly allowed for the statistical purpose. Order pronounced in the open court on this 14/12/2022.