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Income Tax Appellate Tribunal, ‘B’ SMC BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN
आदेश /O R D E R
Both the appeals of the assessee are directed against the
respective orders of the Commissioner of Income Tax (Appeals)-17,
Chennai, dated 16.01.2018 and pertain to assessment years 2006-
07 and 2007-08. Since common issue arises for consideration in
both the appeals, I heard both the appeals together and disposing
the same by this common order.
2 I.T.A. Nos.1180 & 1181/Chny/18
Sh. R. Vijayaraghavan, the Ld.counsel for the assessee,
submitted that the common issue arises for consideration in both
these appeals is with regard to inclusion of dividend income from
mutual funds which was claimed as exemption under Section 10(35)
of the Income-tax Act, 1961 (in short 'the Act'). Referring to Section
11(5) of the Act, more particularly clause (xii) of sub-section (5) of
Section 11, the Ld.counsel submitted that the CBDT in Rule 17C of
Income-tax Rules, 1962 specified that investment in the mutual
funds is also one of the mode of investment for the trust. Referring
to clause (vii) of sub-section (5) of Section 11, the Ld.counsel
submitted that with effect from 01.04.2015, the income referred in
Section 10 shall not be excluded while computing income of the
trust. The years under consideration are 2006-07 and 2007-08.
Therefore, according to the Ld. counsel, clause (vii) of sub-section
(5) of Section 11 may not be applicable for both the assessment
years under consideration. Referring to the order of this Tribunal in
the assessee's own case for assessment years 2008-09 and 2009-
10 in I.T.A. No.1776 & 1777/Mds/2015 dated 20.11.2015, the
Ld.counsel submitted that on identical circumstances, this Tribunal
by placing its reliance on the judgment of Bombay High Court in
DIT(E) v. M/s Jasubhai Foundation in Income Tax Appeal No.1310
3 I.T.A. Nos.1180 & 1181/Chny/18
of 2013 dated 01.04.2015, remitted back the matter to the file of the
Assessing Officer. On a query from the Bench, the Ld.counsel
clarified that the Assessing Officer has not passed any order
consequent to the order of this Tribunal dated 20.11.2015 for the
assessment years 2008-09 and 2009-10. The Ld.counsel has
submitted that the issue arises for consideration in both the years
under consideration can also be remitted back to the file of the
Assessing Officer with similar direction.
I heard Shri Sanath Kumar Raha, the Ld. Departmental
Representative also. Admittedly, this Tribunal for the assessment
years 2008-09 and 2009-10 in the assessee's own case, after
placing reliance on the judgment of Bombay High Court in Jasubhai
Foundation (supra), remitted back the matter to the file of the
Assessing Officer for reconsideration. Since identical situation arise
for the years under consideration also, orders of both the authorities
below are set aside and the issue of inclusion of dividend income
from mutual funds in the total income is remitted back to the file of
the Assessing Officer. The Assessing Officer shall re-examine the
matter and thereafter decide the issue afresh in accordance with
law, after giving a reasonable opportunity to the assessee.
4 I.T.A. Nos.1180 & 1181/Chny/18
For the assessment year 2006-07, the assessee has raised one more issue with regard to standard deduction under Section 24
of the Act in respect of income from house property. The Ld.counsel for the assessee very fairly submitted that he is not pressing this issue. The Ld.counsel has also made an endorsement
to that effect on the appeal folder. Hence, this ground of the appeal is dismissed as not pressed.
I have also gone through the provisions of Section 11 of the
Act. In respect of the trust, which is registered under Section 12AA of the Act, the income derived from property held under trust do not form part of total income provided the same is applied for the object
of the trust. Therefore, the entire rental income would form part of total income. In view of the above, this Tribunal do not find any merit in the contention of the Ld. representative for the assessee.
Accordingly, order of the CIT(Appeals) deserves to be confirmed on merit also.
The assessee has also raised one more ground for the
assessment year 2006-07 with regard to administrative expenses, taxes and insurance to the extent of ₹3,82,134/-.
5 I.T.A. Nos.1180 & 1181/Chny/18
After hearing the Ld.counsel for the assessee and the Ld. D.R., this Tribunal finds that the break up of details with regard to
administrative expenses, taxes and insurance are not available on record. It is not known what is the nature of payment, whether the insurance premium was paid for insuring the property held under
trust or any other property. Therefore, this Tribunal is of the considered opinion that the matter needs to be re-examined. Accordingly, orders of both the authorities below are set aside and the issue with regard to administrative expenses, taxes and
insurance premium is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter and bring on record the nature of administrative expenses, taxes and
insurance and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.
For the assessment year 2007-08, the assessee has taken one more ground with regard to profit on sale of investment.
The assessee claims that on sale of mutual fund units, it earned profit of ₹11,75,555/-. Since the issue of dividend income from mutual fund is remitted back to the file of the Assessing Officer, this Tribunal is of the considered opinion that the issue of
6 I.T.A. Nos.1180 & 1181/Chny/18
profit on sale of mutual fund units also needs to be reconsidered. Accordingly, orders of both the authorities below are set aside and
the issue of profit on sale of mutual fund units is also remitted back to the file of the Assessing Officer for reconsideration as remitted back for the assessment years 2008-09 and 2009-10. The
Assessing Officer shall re-examine the matter in the light of the material that may be available on record and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.
The assessee has raised one more ground for the assessment year 2007-08 with regard to provision for doubtful advances to the extent of ₹9,03,192/-.
I heard the Ld.counsel for the assessee and the Ld. D.R. The Assessing Officer disallowed the claim of the assessee on the
ground that there was no actual payment involved during the year under consideration. It is only a provision and non-funded liability. The details of the advances are not available on record. Unless the
nature of advances is brought on record, it cannot be said that it would amount to application of income. Moreover, the Assessing Officer observed that there was no actual outflow of funds. In view
7 I.T.A. Nos.1180 & 1181/Chny/18
of the above, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of both the authorities below are set aside and the issue of provision for doubtful advances is remitted back to the file of the Assessing Officer. The Assessing Officer shall re- examine the matter in the light of the material available on record and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.
In the result, both the appeals filed by the assessee are partly allowed for statistical purposes.
Order pronounced in the court on 9th July, 2019 at Chennai.
sd/- (एन.आर.एस. गणेशन) (N.R.S. Ganesan) �या�यक सद�य/Judicial Member
चे�नई/Chennai, �दनांक/Dated, the 9th July, 2019
Kri.
8 I.T.A. Nos.1180 & 1181/Chny/18
आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A)-17, Chennai 4. CIT(Exemptions), Chennai 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.