ITO(EXEMPTION) WARD-1, CHENNAI vs. HINDUSTAN CHAMBER OF COMMERCE, CHENNAI

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ITA 2087/CHNY/2019Status: DisposedITAT Chennai13 February 2020AY 2015-164 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that investing sale proceeds of an asset in a fixed deposit with a bank for 6 months or more is considered an application of income for acquiring another capital asset, as per CBDT Circular No. 883 and various High Court decisions.

What were the facts?

The assessee, a company registered under Section 25 of the Companies Act, had its Section 12AA registration cancelled, but this cancellation was later quashed by the Tribunal. During the assessment, the assessee did not have the 12AA registration, leading the AO to tax excess income and capital gains.

What were the issues?

Whether investment of sale proceeds in a bank fixed deposit constitutes application of income for acquiring another capital asset, and if the AO should have examined the proviso to Section 2(15).

Which sections of the Income-tax Act were involved?

Section 12AA,Section 11(1A)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI

Before: SHRI INTURI RAMA RAO & SHRI DUVVURU RL REDDY

For Respondent: Shri B. Gowthaman, CA
Hearing: 06.02.2020Pronounced: 13.02.2020

सुनवाई क� तार�ख/Date of hearing : 06.02.2020 घोषणा क� तार�ख /Date of Pronouncement : 13.02.2020 आदेश /O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER:

These appeals filed by the Revenue are directed against the common order of the Commissioner of Income Tax (Appeals)- 9,Chennai, (in short ‘CIT(A)’) dated 20.03.2019 for the Assessment Years 2013-14 & 2015-16.

2 & 2087/Chny/2019 2. The brief facts of the case are the respondent assessee namely M/s. Hindustan Chamber of Commerce is a company registered U/s.25 of the Companies Act. It was enjoying the registration U/s.12AA of the Income Tax Act, 1961 (in short ‘the Act’). Subsequently, it was cancelled by the DIT(Exemption), Chennai and this cancellation of registration was quashed by this Tribunal vide order dated 23.07.2017 in ITA No.670/Mds/2017. At the time of completion of assessment proceedings, the assessee was not enjoying registration U/s.12AA of the Act. Consequently, the AO brought to tax the excess of income over expenditure and the Long Term Capital Gains on sale of the property and accordingly completed the assessment vide order dated 21.03.2016 for the assessment year 2013-14 and vide order dated 21.12.2017 for the assessment year 2015-16. Being aggrieved, by the above assessment orders, appeals was preferred before the CIT(A), who vide impugned order taking into consideration the order passed by the Tribunal restoring the registration U/s.12AA of the Act and allowed the appeals of the assessee by holding that once the assessee makes fixed deposit out of the sale proceeds of the asset, it amounts to application of income of charitable trust.

3 & 2087/Chny/2019 3. Being aggrieved, the Revenue is in appeal before us challenging the correctness of the decision of the CIT(A). It is submitted that the AO had no occasion to examine the applicability of proviso to Section 2(15) of the Act and the CIT(A) ought not have granted the relief.

4.

On the other hand, the Ld.AR submitted that placing a fixed deposit against the sale proceeds of asset amounts to acquisition of another capital asset which is nothing but an application of income. He placed reliance on the CBDT Circular Instruction No.883 dated 24.09.1975 and also decision of the Hon’ble Gujarat High Court in the case of CIT vs. Ambalal Sarabhai Trust No.3, 173 ITR 683.

5.

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 in 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(1A0 of the Income Tax Act, 1961. The Board has been advised that investment of the net consideration in fixed deposit with a bank

4 & 2087/Chny/2019 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).”

This board circular was followed by the Hon’ble Kolkata High Court in the case of CIT v. Hindustan Welfare Trusts, 70 taxman 93 and CIT v. East India Charitable Trust, 73 taxman 880 and the Hon’ble Gujarat High Court in the case of CIT vs. Ambalal Sarabhai Trust No.3, 173 ITR 683. Since the decision of the Ld.CIT(A) is in consonance with the settled position of law, we do not find any reason to interfere with the order of the Ld.CIT(A). Accordingly the appeals filed by the Revenue stand dismissed.

6.

In the result, the appeals filed by the Revenue are dismissed.

Order pronounced in the court on 13th February, 2020 at Chennai.

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