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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI CHANDRA POOJARI
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
These two are assessee’s appeals directed against different orders of Ld. CIT(A)-14, Bengaluru dated 29.3.2018 and 20.8.2020 for the assessment years 2014-15 & 2012-13. There was a delay of 156 days in filing the appeal in 2012-13.
The grounds of appeal of the assessee in are as under: 1. “The impugned order of the Commissioner of Income Tax (Appeals)- 14, Bangalore [for short 'the CIT(A)'], passed under section 250 of the Income Tax Act, 1961 is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case.
& ITA 103/Bang/2021 Sri Sathya Sai Central Trust, Bangalore Page 2 of 10 2. The learned CIT(A) is not justified in confirming the action of the assessing officer in treating the expenditure incurred in the current year as incurred only out of the income of the current year for the purposes of adjustment of the unspent accumulations on the facts and circumstances of the case.
3. The learned CIT(A) is not justified in directing the assessing officer to consider the accumulation u/s 11(1)(a) of the Act at 15% of gross receipts only in respect of donations and though in law the appellant is entitled to consider 15% of the entire gross receipts of the year on the facts and circumstances of the case.
4. The learned CIT(A) erred in not allowing depreciation of Rs.17,88,62,628/- from the amount of application of income for charitable objects of the appellant trust on the facts and circumstances of the case.
The learned assessing officer failed to appreciate that depreciation is allowable on the assets, even though the cost of the assets has been fully allowed as application of income under section 11 or section 10(23C) of the Act and is covered by the decision of the jurisdictional High Court on the facts and circumstances of the case.
6. The appellant craves for leave of this Hon’ble Tribunal, to add, alter, delete, amend or substitute any or all of the above grounds of appeal as may be necessary at the time of hearing.
7. For these and other grounds that may be urged at the time of hearing of appeal, the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity.”
2.1 The grounds of appeal of the assessee in are as under:
1. “The impugned order of the Commissioner of Income Tax (Appeals)- 14, Bangalore [for short ‘the CIT(A)’], passed under section 250 of the Income Tax Act, 1961 is opposed to law, weight of evidence, probabilities, facts and circumstances of the appellant’s case.
Page 3 of 10 2. The learned CIT(A) erred in confirming the action of the assessing officer in treating the expenditure incurred in the current year as incurred only out of the income of the current year for the purposes of adjustment of the unspent accumulations on the facts and circumstances of the case.
3. The learned CIT(A) is not justified in confirming the action of the assessing officer in denying the application from accumulated income by holding that the assessee accumulated income u/s 11 of the Act by filing Form 10 in earlier years by specifying the purpose of accumulation on the facts and circumstances of the case.
4. The learned CIT(A) is not justified in holding that the interest u/s 234B of the Act levied in the assessment order is only consequential in nature and does not need any separate adjudication contrary to the actual fact when no demand has resulted on account of any of the disallowances or additions in the assessment on the facts and circumstances of the case.
5. The learned CIT(A) lost sight of the fact that the exact amount of excess advance tax paid by the appellant of Rs. 31,38,638/- has been adjusted as interest u/s 234B of the Act when the entire advance tax was paid even before the first instalment due for the assessment year and thus no interest was payable u/s 234B of the Act on the facts and circumstances of the case.
6. The appellant craves for leave of this Hon'ble Tribunal, to add, alter, delete, amend or substitute any or all of the above grounds of appeal
as may be necessary at the time of hearing.
7. For these and other grounds that may be urged at the time of hearing of appeal, the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity.”
The first common ground of appeal in these two years is with regard to ground No.2 in and Ground Nos.2 & 3 in .
After hearing both the parties, we are of the opinion that similar issue came for consideration before this Tribunal in Page 4 of 10 assessee’s own case for assessment year 2011-12 in ITA No.1129/Bang/2017. The Tribunal vide its order dated 20.12.2021 held as under:-
“7. The next issue relates to incorrect determination of income accumulated u/s 11(2)/third proviso to sec.10(23C)(iv) of the Act.. The.A.0',s case is stated by him as under:- "8.1 In the computation of total income, the assessee has claimed application of accumulated income of earlier years even before claiming set off of current year expenditure/application of income. In view of this while computing the total income of the assessee, the expenditure incurred both on revenue account and capital account. pertaining to current financial year will be adjusted against. current year income and balance, if any, will be considered for adjustment against earlier years accumulation." According to AO, the assessee has failed to prove direct nexus between current year's expenditure and the accumulated income. Referring to the provisions of sec. 11(2), the AO also observed that the assessee has to show that the accumulated income was used for the objects for which it was accumulated and till the time it was spent, the accumulated income has been kept in specified modes and forms of investments mentioned in scc.11(5) of the Act. Accordingly, the AO recomputed the amount accumulated u/s 11(2)/third proviso to sec.10(23C)(iv) of the Act. The Ld CIT(A) also confirmed the same.
7.1We heard the parties on this issue and perused the record. There should not be any dispute that it is the responsibility of the assessee to segregate the sources of expenditure incurred during the year, i.e., to split the expenditure incurred out of current year's income and that incurred out of accumulated income in accordance with the objects for which it was accumulated. Another question that arises apd in fact, raised by the AO is to identify the sources of accumulated income with the investments made u/s 11(5)/proviso to see.10(23C)(iv).
7.2. With regard to the investments, the Ld A.R submitted that so long as the aggregate amount of investments is more than the aggregate amount of income accumulated over the years and remaining un-utilised, the requirements of sec. 11(5) should be deemed to have been complied with, i.e., it is the contention of the I,d A.R that there need not be strict one to one nexus between the money spent for objects for which it was accumulated and the investment. In this regard, he placed reliance on the decision rendered by Cochin bench of Tribunal in the case of Dharmodayam Co. Vs. ITO (2015)(154 ITD 574), where in it was held as under:- "13. It is also pertinent to note that the provisions of sec. 1 1(2)(a) talks about "income", whereas the provisions of sec. 1 1(2)(b) talks about the "money" so accumulated. The "money" available with the Page 5 of 10 assessee may be pertaining to the current year's income or earlier year's income. Further, if the view taken by the tax authorities that the deposit should have been made out of current year's income is accepted as correct for a moment, then the assessee trust shall be forced to foreclose the existing deposit and thereafter make a new deposit, thus losing considerable amount towards loss of interest/penalty. The same would be very much technical in nature. Hence, in our considered view, the earmarking of existing bank fixed deposits, which is free from any lien, towards the income accumulated u/s 11(2) of the Act during the year under consideration would be sufficient compliance with the provisions of sec. 11(2)(b) of the Act, since the accumulated income is represented by the corresponding deposit/investment."
We notice that the assessee has cited the decision rendered by the Cochin bench of Tribunal (cited above), before Ld CIT(A). However, the Ld CIT(A) has refused to follow the same by giving some other interpretation. Since the above said decision has been rendered by the co-ordinate bench, we prefer to follow the same.
7.3 In view of the foregoing discussions, we are of the view that this issue requires fresh examination at the end of AO in the light of principles discussed above. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO.”
In view of the above order of the Tribunal, we are inclined to remit the above issue in dispute to the file of A.O. for fresh consideration as in earlier year.
5. With regard to ground No.3 in after hearing both the parties, we are of the opinion that similar issue came for consideration by the Tribunal in assessee’s own case in assessment year 2011-12 in ITA Number cited above, wherein it was by the Tribunal as follows:-
6. The next issue relates to allowing deduction of accumulation of income to the extent of 15% prescribed u/s 11(1)(a)/ under third proviso to10(23)(vi) of the Act on net income, as against the claim of the assessee to allow the same on 6.1 The AO noticed that the assessee has claimed deduction towards accumulation @ 15% of income to the tune of Rs.18,63,47,469/-. The AO noticed that the assessee has worked out above said accumulation by applying 15% on the Page 6 of 10 amount of "gross receipts". The AO took the view that the word "income" for the purpose of sec.11 8s 12 of the Act should be understood in commercial sense. Hence expenses incurred in earning income should be deducted from the gross receipts and accordingly, the net income should be arrived. Accordingly he expressed the view that the accumulation of 15% should be allowed on "net income" and not on "gross receipts". The AO also gave an example, i.e., in the case of a hospital, the "net income" arrived at, after deducting nil expenses relating to doctors fee, staff salaries, cost of medicines etc from the fees collected, should alone be considered for allowing accumulation to the extent of 15%, i.e., the accumulation of 15% cannot be allowed on gross fee receipts. The AO also referred to various case laws to buttress his view. Accordingly, he allowed deduction 'towards accumulation @ 15% to the extent. of Rs.15,28,71,783/-.
6.2 The Ld CIT(A) gave partial relief to the assessee with the following observations:- "12.9 I find from the AO's order that he has computed the accumulation at 15% of net surplus i.e., Rs.101,91.,45,221. This does not seem to be in order since, going by the logic of AO's arguments and the discussions in the paras supra, the net surplus should result -from the consideration charging services of the appellant. In the FY 2010-11, the hospital and medical units constituted such services for which some consideration was charged. As far as the income from donation is concerned, the 15% accumulation is to be calculated on the gross amount as held in the case of CIT vs. Programme for Community Organisation 248 ITR l(SC). The AO is directed to recomputed accordingly. This ground, therefore, partly succeeds."
6.3 Before us, the Ld A.R placed heavy reliance on the decision rendered by the co-ordinate bench in the case of Jyothy Charitable Trust vs. DCIT (ITA No.662/Bang/2015 dated 14-08-2015) and contended that the deduction for accumulation @ 15% is to be allowed on gross receipts only. On the contrary, the Ld supported the order passed by Ld CIT(A) on this issue.
6.4 We notice that the assessee had also placed reliance on the decision rendered by the co-ordinate bench in the case of Jyothy Charitable Trust (supra) before Ld CIT(A). However, the Ld CIT(A) has distinguished the same according to his understanding. However, we prefer to follow the decision rendered by the coordinate bench in the case of Jyothy Charitable Trust (supra), as no contrary decision of any High Court/Supreme Court was cited by the revenue before us. We notice that the co-ordinate bench has followed the decision rendered by the Special bench of Mumbai in the case of Bai Sonabai Hirji Agiary Trust vs. ITO (93 ITD 0070) in order to hold that the accumulation @ 25% (later reduced to 15%) should be allowed on gross income.
Page 7 of 10 6.5 We also examined the Income and Expenditure account of the assessee. The gross receipts declared therein are as under:-
Donations 536,467,252 Government Grant in Aid 48,675 Interest 638,188,687 Income from Properties 66,083,408 Other Income 1,599,784 Income relating to earlier years (157,384) Net profit on sale of fixed assets 61,614,803 Above said receipts do not contain any of the receipts relating to hospital or college. Only expenditure relating to maintenance of properties could be related to the income from properties, but the question whether the maintenance of properties can be considered as an expenditure incurred for earning rental income is a debatable one. Accordingly, following the decision rendered by the co-ordinate bench in the case of Jyothy Charitable Trust (supra), we hold that the accumulation of income @ 15% should be computed on the gross income only. Accordingly, we "set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow accumulation on gross income.”
In view of the above order on this issue, we decide this issue in favour of the assessee.
With regard to ground Nos.4 & 5 in after hearing both the parties, we are of the opinion that similar issue came for consideration in assessee’s own case for assessment year 2011-12 in ITA number cited above, wherein it was held as under:-
8. “The last issue relates to the disallowance of depreciation claimed by the assessee. The assessee had claimed depreciation of Rs.14,30,80,730/- as application of income. The AO disallowed the same. The Ld. CIT(A) also upheld the disallowance. 8.1 The question as to whether depreciation can be allowed as application of income in respect of assets whose cost has already been allowed as Page 8 of 10 application has since been answered in favour of the assessee for the periods prior to 1.4.2015 by Hon’ble Supreme Court in the case of CIT Vs. Rajasthan & Gujarati Charitable Foundation Poona (2018) (89 taxmann.com 127) (SC). Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to allow the depreciation claimed by the assessee as application of income.”
In view of the above order or the Tribunal, we decide this issue in favour of the assessee. We take consistent view and allow the ground taken by the assessee.
Next ground in 2012-13 is with regard to chargeability of interest u/s 234B of the Act in ground Nos.4 & 5, which reads as under:- “4. The learned CIT(A) is not justified in holding that the interest u/s 234B of the Act levied in the assessment order is only consequential in nature and does not need any separate adjudication contrary to the actual fact when no demand has resulted on account of any of the disallowances or additions in the assessment on the facts and circumstances of the case.
5. The learned CIT(A) lost sight of the fact that the exact amount of excess advance tax paid by the appellant of Rs.31,38,638/- has been adjusted as interest u/s 234B of the Act when the entire advance tax was paid even before the first instalment due for the assessment year and thus no interest was payable u/s 234B of the Act on the facts and circumstances of the case.”
The assessee-trust declared anonymous donation in cash and kind amounting to Rs.14,63,19,382/- and Rs.35,58,80,838/- respectively totalling to Rs.50,22,00,220/- during the assessment year. On this amount of anonymous donation, tax under section 115BBC of the Act was computed as follows:
Particulars Amount (Rs.) Total anonymous donation 50,22,00,220/- Less: Exemption: 5% of total 4,09,18,228/- voluntary contribution of Taxable anonymous donation 46,12,81,992/-
Page 9 of 10 Tax under section 115BBC @ 14,25,36,135/- 30.9%
The assessee paid the above tax on the anonymous donation by way of advance tax on 28.06.2011 and 20.07.2011 in amounts of Rs.9,75,34,938/- and Rs.4,81,39,835/- in all amounting to Rs.14,56,74,773/-. The advance tax paid as above is in excess of the actual tax liability in a sum of Rs. 31,38,638/-. The assessee made a claim of refund the excess tax so paid and TDS amount of Rs.26,350/- in the return of income filed. Thus, the total refund claim as per return of income is Rs.31,64,988/-. However, the learned assessing officer levied interest under section 234B of the Act of Rs.31,38,638/- which incidentally is the exact amount of tax paid in excess of the tax liability. The assessee paid the advance tax well before the due date for payment of first installment of advance tax on 15.09.2011. Hence, there could not have been any levy of interest under section 234B of the Act. Further the quantum, period and rate are not discernible from the assessment order. In view of the above submissions, it was prayed before the learned CIT(A) that the levy of interest of Rs.31,38,638/- being not in accordance with law and is liable to be deleted. The learned CIT(A), on the other hand, misconstrued the ground of appeal and submissions made by the assessee and held that the ground of appeal is only consequential and thereby did not adjudicate the ground of appeal. It may be seen that even though there are disallowances and / or additions in the assessment order, none of them have given rise to any demand. Thus, the interest purportedly levied in the assessment order does not arise out of any of the disallowances and / or additions and thus not related to any other grounds of appeal. On the other hand, it is a stand-alone ground based on separate set of facts and hence & ITA 103/Bang/2021 Sri Sathya Sai Central Trust, Bangalore Page 10 of 10 ought to have been recognised so and adjudicated on its own merits. It is submitted that the levy of interest if so properly adjudicated would have been held to be fit to be deleted on the facts and circumstances of the case. Therefore, assessee requested the Hon’ble Tribunal to delete the levy of interest u/s 234B of the Act in a sum of Rs.31,38,638/- on the facts and circumstances of the case.
12. After hearing both the parties, we are of the opinion that the levy of interest u/s 234B of the Act is to be recomputed by the A.O. after hearing the assessee. Accordingly, the issue is remitted back to the file of the A.O. for his consideration.
In the result, the appeals filed by the assessee in is allowed and in is allowed for statistical purposes. Order pronounced in the open court on 17th Jan, 2022.