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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI C.N. PRASAD, JM & SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R
Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year [AY] 2012-13 contest the order of the Ld. Commissioner of Income-Tax (Appeals)-1 [CIT(A)], Mumbai, Appeal No.CIT(A)-I/IT/E-1(55)/2015-16 dated 20/10/2016 by raising following grounds of appeal:-
1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the assessed income of the appellant at Rs. 4,16,77,269/- as against the income declared in the return of income as Nil.
Apne Aap Women Worldwide (India) Trust Assessment Year-2012-13 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the rule of consistency is not applicable in the case of the appellant even though the factual position remains the same as it was in the previous assessment years.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the application of the provisions of Sec. 13(1)(c)/13(2)(c) r.w.s. 13(3) of the Act on account of following; a) To hold that the salary amount paid to Ms. Ruchira Gupta, the Managing Trustee of Rs. 36,00,000/- is unreasonable without appreciating that; i) She has worked with the United Nations in various capacities in 12 countries for over 10 years ii) She has been awarded for her achievements iii) She is working 24X7 all 365 days for trust's fund raising activity and for performing duties to advance the objects of the trust iv) The salary paid was at the same level or lower compared to her salary in preceding three years b) in considering the application of income for a new car purchased as a benefit accrued to the persons covered u/s 13(3) of the Act merely because the registration is done in the name of the trustee overlooking the fact that the car was entirely used for the purposes of the trust and it was purchased in her name to comply with the requirements of law in this regard; and In confirming an adverse view in the assessment year under consideration even though the car was purchased in AY 2010-11 which was not appreciated by the Ld. CIT(A). c) In considering the rent expense paid to the persons covered u/s 13(3) as violation of provisions of Sec 13(1)(c) even though: - the rate at which the premises are taken on rent is less than the market value; - the documents were submitted to prove the reasonableness of rent paid wherein the name of the building for comparison was the same where the appellant trust had taken property on rent; - the payment of rent at the same rate since 2005 has been accepted by the department as reasonable in past Assessment Years.
On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in confirming the disallowance of the following amounts written off which were treated as application of funds allowable u/s 11 of the Act. a) Rs. 1,71,313/- shown as receivable from donors earlier considered as income as the same was not received up till relevant assessment year b) Rs. 43,02,556/- being Fixed Assets written off without considering the fact that no deduction has been claimed towards cost of acquisition or depreciation on the assets 5. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming grants received of Rs. 76,41,943/- as income even though.
Apne Aap Women Worldwide (India) Trust Assessment Year-2012-13 - said grants were received for specific purpose as defined u/s 11(1)(d) of the Act and was to be considered as income in the year in which it was applied for the specific project; - 85% of the total receipt was applied for achieving the objectives of the trust.
On the facts and in the circumstances of the case and in law, without prejudice to the ground raised for invoking the provisions of Section 13, the Ld. CIT(A) has erred in confirming the rejection of the entire claim of exemption of the assessee u/s II merely because there is a violation of provisions of Sec. 13 of the Act for application of part of the income specified in said section. The assessment for impugned AY was framed by Ld. Income Tax Officer (Exemption)-1(1), Mumbai [AO] u/s 143(3) of the Income Tax Act, 1961 on 28/03/2015 wherein the income of the assessee has been assessed at Rs.416.77 Lacs as against ‘Nil’ returned income filed by the assessee on 27/09/2012 along with Income & Expenditure Account, Balance Sheet and Audit Report in Form No. 10B. The assessee is assessed as Association of Person [Trust] and registered u/s 12A as well as registered with Charity Commissioner, Mumbai. In the present appeal, the assessee is primarily aggrieved by denial of exemption u/s 11 for alleged violation of certain provisions of Section 13. 2.1 The root of the issue before us lies in the fact that during assessment proceedings, it was noted that the assessee paid a salary of Rs.36 Lacs to one of the Trustee namely Ruchira Gupta, which in the opinion of Ld. AO, violated the provisions of Section 13(1)(c) & 13(2)(c) of the Income Tax Act, 1961. The assessee, vide submissions dated 03/03/2015 & 20/03/2015 explained the nature of services being rendered by the aforesaid Trustee and justified the quantum of salary being paid to her. The Ld. AO after perusal of statutory provisions and past trend of salary payments concluded Apne Aap Women Worldwide (India) Trust Assessment Year-2012-13 that the payment was excessive for which no reasonable justification could be adduced by the assessee. Another factor which led to denial of exemption was the fact that the assessee purchased a motor car in the name of the aforesaid Trustee, the expenses of which were being borne by the assessee Trustee. The Ld. AO opined that the ownership should be in the name of the assessee Trustee and since the title as well as control of ownership was with the Trustee, it amounted to violation of Section 13(1)(c). Further, the assessee paid certain rent @ Rs.60,000/- per month to specified persons for the rented premises at New Delhi during impugned AY, the justification of the quantum of which, in the opinion of Ld. AO, could not be substantiated by the assessee. Finally, considering all these factors, the assessee was denied exemption u/s 11 for alleged violation of various provisions of Section 13. 2.2 The assessee claimed balances written-off for Rs.1,71,313/- & Fixed Assets Written-off for Rs.43,02,556/- as an application of Trust income. It was submitted that balances written-off represented contractual donations receivable from certain donors but remaining unrecoverable despite lapse of several years and the same were already offered to revenue in earlier years. Regarding fixed assets written-off, it was submitted that the same represented old assets found to be unusable upon physical inspection carried out by the management. However, not convinced, Ld. AO did not consider both these items as application of income.
Apne Aap Women Worldwide (India) Trust Assessment Year-2012-13 2.3 The perusal of Income & Expenditure Account revealed that the assessee reflected grants of Rs.335.67 Lacs as against Rs.411.99 Lacs reflected in the Receipts & Payments Account. Rejecting the assessee’s explanation in this regard, the figures of grants were taken as Rs.411.99 Lacs. 2.4 Finally, the assessee was denied exemption u/s 11. The figures of grants were taken as Rs.411.99 Lacs against which the related / mandatory expenses were allowed. The income so computed in the aforesaid manner worked out to Rs.416.77 Lacs, which was assessed in the hands of the assessee.
3. Aggrieved, the assessee contested the same without any success before Ld. CIT(A) vide impugned order dated 20/10/2016 wherein the matter was concluded in the following manner: - 5.2 I have considered the facts and circumstances of the case, gone through the assessment order of the A.O and the submissions of the appellant and also discussed the case with the AR of the appellant. The contentions and submissions of the appellant are being discussed and decided here in under: i. The appellant stared that in preceding years’ department has accepted its return and hence AO should have been consistent and allowed exemption u/s. 11 in this year also. In this regard it is mentioned that, in the case of M.M. Ipoh & Ors Vs CIT(SC) 67 ITR 106 Hon’ble Apex court has observed that res judicata is not applicable as each assessment year is a separate proceeding. Similar observations were made by Hon’ble Supreme Court in the case of New Jehangir Vakil Mills Co Ltd Vs CIT(SC) 49 ITR 137, and Bharat Sanchar Nigam Ltd & Anr.Vs Union of India & Ors (SC) 282 ITR 273. Further in the case of CIT Vs Seshasayee Industries Ltd (Madras) 242 ITR 691, It was held by the Hon’ble Madras High Court that the fact that if claim was questioned in earlier years does not entitle the assessee to contend that the law would not be applied during the course of assessment year. Further it is noted that there is a legal issue involved regarding non-availability of exemption u/s. 11 on account of violation of provisions u/s. 13(1)(c) / 13(2)(c) r.w.s 13(3). It has been held by Hon’ble Courts that where legal issue arises, the principle of resjudicata does not apply. In the Apne Aap Women Worldwide (India) Trust Assessment Year-2012-13 case of Oswal Agro Mills [313 ITR 24], the Hon’ble Supreme Court has held that where question of law is involved, the rule of consistency will not prevail. Similar observations were made by Hon’ble apex court in 313 ITR 363; 307 ITR 338; 300 ITR. Further, in the case of British Paints [188 ITR 44], the Hon’ble Supreme Court has held that there cannot be estoppel against the law. Similar view was held that there cannot be estoppel against the law. Similar view was held in the cases of Luchi Ram Puranmal [177 CTR 640 (MP)]; Foss Electric 263 ITR 125] and Distributors of Baroda [118 ITR 243]. The Hon’ble Delhi High Court in CWT vs. Meattles (p) Ltd. 156 ITR 569 has held that the revenue authorities cannot be stopped from taking a view of statutory provisions in the later year. Contention of the appellant is therefore not acceptable ii. Regarding violation of provisions of section 13, the appellant submitted that the payment made to Ms. Ruchira Gupta was not commensurate with the service rendered by her since she has worked in several organizations (no details of such organizations were filed). It was stated that she has been paid salary even in previous years of approximately same amount which has been accepted by the department. In this regard it is mentioned that as per details submitted by the appellant, the salary in A.Y. 2005-06 was only Rs.2,40,0000/- which has risen to Rs.36,00,000/- in the year under consideration and in A.Y. 2014-15 it has gone up to Rs.60.56 lakhs which is approximately 30 times. It is stated that here salary would have been US$ 101563 had she accepted UN assignment. However, on perusal of the document filed it is noted that she has been offered a net annual salary of US$67909 only which converts to Rs.40,74,540 approximately as on date. She is being paid salary more than this amount in India and that too by a "charitable" organization. As held by Hon'ble Allahabad High Court in the case of Chamber of Commerce Vs. CIT (1936) 4 ITR 397 element of 'altruism' must be present which stands violated in the present case by such a huge amount of salary paid to one of the trustees. iii. Further as mentioned by the AO there is no comparable increase in salary of any other trustee or any other member of the organization. Also, the appellant has not filed copy or any resolution of the governing body either during the course of assessment or appellate proceedings in which this much increase in the salary of one of the trustees was considered as reasonable. Nothing has been brought on record to justify the substantial increase in her salary with reference to any extra ordinary services rendered by her. Hence I agree with the Assessing Officer that the provisions of section 13(1)(c) and 13(2)(c) apply in case of the appellant; iv. Appellant stated that due to complicated procedure for registration of car in name of the trust, car was purchased in the name of the trustee Ms. Ruchira Gupta. In this regard it is mentioned that the car can be registered even in the name of the trust without any complication as claimed by the appellant. Thus the title of the asset being in the name of the trustee who is also using It and controlling it, I agree with the AO that there was a violation of provisions of Apne Aap Women Worldwide (India) Trust Assessment Year-2012-13 section 13(1)(c) as held by Hon. ITAT, Hyderabad in case of Society for Poor and Oppressed 125 LTD 190. v. The appellant contended that rent paid to Mr. Vidyasagar Gupta father of Ms. Ruchira Gupta is quite reasonable. in this regard it is mentioned that the appellant has filed copy of print out from the website of Magicbricks to state that the market rate is Rs. 45/- per sq. whereas the appellant has paid only Rs. 20/- per sq. ft. However, on perusal of this document it is noted that the address and locality for which these rates in Delhi are given is not mentioned therein and hence same is not reliable. Contention of the appellant is therefore not acceptable. vi. Appellant submitted that at the best Assessing Officer could have disallowed the amounts hit by the provisions of section 13 and should not have disallowed the entire exemption u/s.
In this regard it is mentioned that section 13 clearly provides that wherever there is a violation as mentioned in section 13, the provisions of section 11 would not apply. This view of mine is supported by the judgement of Hon’ble Madras High Court in the case of CIT Vs. Ramaswamy Iyer (1977) 110 ITR. Accordingly, this contention or the appellant is not acceptable. vii. Appellant submitted that the addition of Rs. 76,41,943/- being difference between amounts of grants received and recognized during the year has wrongly been made since these funds were recognized when the particular project is executed. In this regard it is mentioned that this practice is against the basic principle of accountancy. Appellant further submitted that 85% of donations received have been expended for the objects of the trust and hence are allowable u/s. 11(2). In this regard it is mentioned that since the AO has not allowed exemption u/s. 11 this argument of the appellant has no force. viii. With reference to the balance and fixed assets written off it was stated that these amounts were not recovered and hence were written off. In this regard it is mentioned that as rightly stated by the AO these expenses are on capital account. Also such finances written off and fixed assets written off do not amount of application of Income. Contention of the appellant is therefore not acceptable. ix, in view of the facts and legal position as discussed above, I have no reason to deviate from the findings of the AO in the assessment order. Accordingly, Grounds of appeal
No. 1 to 6 are dismissed. Aggrieved, the assessee is in further appeal before us.
4. The Ld. Authorized Representative for Assessee [AR], drawing our attention to the documents placed in the paper-book contested the stand of lower authorities which has been controverted by Ld. Departmental Representative, Shri Rajesh Kumar Yadav.
Apne Aap Women Worldwide (India) Trust Assessment Year-2012-13 5.1 We have carefully heard the rival contentions and perused relevant material on record including judicial pronouncements as cited before us. The prime contention of the assessee revolves around the rule of consistency. It has been submitted that the assessee has been granted exemption u/s 11 since AY 2005-06 and the activities & manner of functioning including expenditure incurred by the assessee Trust are on similar pattern and the same has been accepted by the revenue over several years in scrutiny assessments u/s 143(3). The Ld. DR has controverted the same by submitting that the principle of res-judicata do not apply to Income Tax proceedings and each year is independent unit of assessment and therefore, the rule of consistency could not absolve the assessee to justify his claim in the impugned AY. Nevertheless, we find that the fact that the assessee has been granted exemption u/s 11 in earlier years and claimed expenditure on similar pattern remains un-rebutted. Nothing on record suggest that there was any change in the activities being carried out by the assessee. The copies of scrutiny Assessment orders for AYs 2010-11 & 2011-12 as placed on record vouch for the fact that the assessee has been granted deduction u/s 11 by Ld. AO and its claim has not been doubted by the revenue. The Hon’ble Bombay High Court, in a recent decision of PCIT Vs. Quest Investment Advisors Private Limited [ITA No. 280 of 2016 dated 28/06/2018], after considering judicial pronouncements of higher authorities, held as under:- 7. We note that the impugned order of the Tribunal records the fact that the Revenue Authorities have consistently over the years i.e. for the 10 years years prior to Apne Aap Women Worldwide (India) Trust Assessment Year-2012-13 Assessment Years 2007-08 and 2008-09 and for 4 subsequent years, accepted the principle that all expenses which has been incurred are attributable entirely to earning professional income. Therefore, the Revenue allowed the expenses to determine professional income without any amount being allocated to earn capital gain. In the subject assessment year, the Assessing Officer has deviated from these principles without setting out any reasons to deviate from an accepted principle. Moreover, the impugned order of the Tribunal also records that the Revenue was not able to point out any distinguishing features in the present facts, which would warrant a different view in the subject assessment year from that taken in the earlier and subsequent assessment years. So far as the decision of Radhasoami Satsang (supra) is concerned, it is true that there are observations therein that restrict its applicability only to that decision and the Court has made it clear that the decision should not be taken as an authority for general applicability.
However, subsequently the Apex Court in Bharat Sanchar Nigam Ltd. Vs. Union of India 282 ITR 273 has after referring to the decision of Radhasoami Satsang (supra) has observed as under : “20. The decisions cited have uniformly held that res judicata does not apply in matters pertaining to tax for different assessment years because res judicata applies to debar courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision of where the earlier decision is per incuriam. However, these are fetters only on a coordinate Bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a Bench of superior strength or in some cases to a Bench of superior jurisdiction.” (emphasis supplied) 9. The principle accepted by the Revenue for 10 earlier years and 4 subsequent years to the Assessment Years 2007-08 and 2008-09 was that the entire expenditure is to be allowed against business income and no expenditure is to be allocated to capital gains. Once this principle was accepted and consistently applied and followed, the Revenue was bound by it. Unless of course it wanted to change the practice without any change in law or change in facts therein, the basis for the change in practice should have been mentioned either in the assessment order or at least pointed out to the Tribunal when it passed the impugned order. None of this has happened. In fact, all have proceeded on the basis that there is no change in the principle which has been consistently applied for the earlier assessment years and also for the subsequent assessment years. Therefore, Apne Aap Women Worldwide (India) Trust Assessment Year-2012-13 the view of the Tribunal in allowing the respondent's appeal on the principle of consistency cannot in the present facts be faulted with, as it is in accord with the Apex Court decision in Bharat Sanchar Nigam Ltd. (supra).
Accordingly, the question as proposed do not gives rise to any substantial question of law. Thus, not entertained. We have no reason to deviate from the conclusion that there being no change in material facts or circumstances, the revenue is debarred from taking flickering stands on the same issue taken in assessee’s own case in earlier years. In the present case in hand, the revenue is unable to point out any change in facts or circumstances which warrant taking a different view in the impugned AY. Therefore, we find force in arguments as made by Ld. AR, in this regard. 5.2 So far as the salary payment to Trustee namely Ruchira Gupta [Payee] is concerned, we find that the she was the founder Trustee of the Trust and was being remunerated by the assessee Trust for her services regularly since AY 2005-06 onwards. The details of salary being paid to her over several years could be tabulated in the following manner:- Assessment Year Salary Paid 2005-06 Rs.2.40 Lacs 2006-07 Rs.15.80 Lacs 2007-08 Rs.15.36 Lacs 2008-09 Rs.15.36 Lacs 2009-10 Rs.15.36 Lacs 2010-11 Rs.42.75 Lacs 2011-12 Rs.36 Lacs The perusal of the table reveal that the assessee is regular in making salary payments to the Trustee right from AY 2005-06 onwards, which has not been doubted by the revenue until impugned AY. It is also undisputed fact Apne Aap Women Worldwide (India) Trust Assessment Year-2012-13 that the aforesaid Trustee was exclusively working for the Trust which is evident from copy of her Income Tax Return for the impugned AY as placed on record wherein we find that her major source of income is Salary income from the Assessee Trust. Needless to add that the aforesaid salary has duly been reflected by her in Tax Return and due taxes have been paid thereupon. A brief profile of Ruchira Gupta as placed on record reveal that she is stated to have worked with United Nations in various capacities in 12 countries for over ten years. She was on the board of coalition against trafficking in women and the advisory councils of Polaris Project, Vital Voices, Ricky Martin Foundation, Asia Society, Nomi Network, the coalition against trafficking in women and cents for relief. The primary objective of the all these forums matches with some of the objectives of the Assessee Trust, which as per Trust Deed dated 17/06/2002 could be listed as follows:- (XIV) Combat the sex trafficking of women and children (XV) improving the well being an situation of women and children victims of sex trafficking Further. She is stated to be a part of steering committee for planning commission of the Government of India for the Eleventh & Twelfth Five year plans, once for women and once for Social Welfare, She was also on the working group of the Ministry of women and children and served on advisory boards of many forums. All these facts reveal that the aforesaid Trustee had rich experience of over 25 years which was in line with the objectives of the Assessee Trust. As against the above credentials, the Apne Aap Women Worldwide (India) Trust Assessment Year-2012-13 revenue has failed to place on record any comparative chart or any other corroborative evidence to establish that the aforesaid payment was excessive or unreasonable, in any manner. This being the case, the payment of salary as aforesaid, in our opinion, could not be a ground to deny the deduction to the assessee. 5.3 The second premise on which the deduction has been denied is that fact that Motor Car funded out of assessee Trust has been registered in assessee’s name and the same is alleged to be under the control of the Trustee. However, we find that the said car was purchased in the year 2010-11 and this is the third year since purchase of the car. The revenue, except for mere allegations, is unable to point out, in any manner, as to how the said car was under personal use of the Trustee particularly when she had no other source of income. This being the case, the same, in our opinion, could also not be a ground for denial of deduction to the assessee. 5.4 The last factor which led to denial of deduction is rental payments of Rs.60,000/- per month stated to be paid by the assessee to use office premises of 325 Square Yards [2925 Square Feets] & situated at D-56, Anand Niketan, New Delhi-21. The said payment translates into rent of approx. Rs.20/- per Square Feet per month against which the assessee has placed on record comparative rental rates of the area as prevailing therein at the relevant point of time & the same are stated to be in the range of 45- 107 per Square Feet. However, we find that the aforesaid payments are being made by the assessee pursuant to sub-lease agreement dated Apne Aap Women Worldwide (India) Trust Assessment Year-2012-13 01/04/2010 and the payment is in accordance with the terms of the agreement. The assessee has made the said payment in earlier AYs also, which has been accepted by the revenue. Keeping in view all these factors, we concur with the stand of Ld. AR that the same could not be a ground to deny the deduction of the assessee. 5.5 The above facts, discussion and observations lead us to an inevitable conclusion that the denial of deduction u/s 11 for alleged violations of Section 13 was not justified and therefore, we reverse the stand of Ld. first appellate authority, in this regard. The grounds raised in this regard, stands allowed. Consequently, ground numbers-1 to 4 stands allowed whereas ground number-6 becomes infructuous. 6.1 In ground number-4, the assessee is aggrieved by certain amounts written-off in the books of accounts but not treated as application of Trust Income by the revenue. The assessee has written-off an amount of Rs.1,71,313/- as donations receivable from the donors but remaining unrecoverable and therefore, written-off in the books of accounts. The assessee has submitted that the said donations were already been offered as Trust receipts in earlier years and therefore the non-recovery should be treated as application of income. Similarly, the assessee has written-off an amount of Rs.43.02 Lacs on account of fixed assets which have been found to be non-usable upon physical inspection by management. The Ld. AR has submitted that neither the acquisition thereof nor the depreciation against the same has even been considered as application of funds.
Apne Aap Women Worldwide (India) Trust Assessment Year-2012-13 6.2 Keeping in view the submissions made by Ld. AR, the claim of the assessee is, prima facie, allowable subject to the verification of the stated assertions made by Ld. AR. Therefore, the write-off of donations as well as fixed assets shall be treated as application of funds subject to verification of the facts as narrated by Ld. AR before us. The Ld. AO is directed to allow the claim after due verification. This ground stands allowed for statistical purposes.
The last issue is related with difference of Rs.76.41 Lacs in grants amount as reflected by the assessee in Receipts & Payments Account and Income & Expenditure Account. The Ld. AR, while contesting the same, submitted that even after considering the higher grants of Rs.411.99 Lacs as reflected in the Receipts & Payments Account, the assessee has expanded more than 85% of the aggregate grants for the object of the Trust in terms of Section 11(2) which entitles him to claim complete deduction . A perusal of the financial statements for impugned AY as placed on record reveal that the assessee has expanded an amount of Rs.387.71 Lacs as including write-off of fixed assets & donations aggregating to Rs.44.73 Lacs. Since we have already allowed assessee’s claim with respect to amounts written-off as stated in para 6.2, we find that the application of funds translates into application rate of more than 85% of total grants of Rs.411.99 Lacs. Therefore, the assessee has fulfilled the conditions of Section 11(2) and eligible to claim the full deduction. This ground stands allowed.
Apne Aap Women Worldwide (India) Trust Assessment Year-2012-13 8. The assessee’s appeal stands allowed in terms of our above order. Order pronounced in the open court on 03rd October, 2018.