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Income Tax Appellate Tribunal, J Bench, Mumbai
O R D E R
Per Ravish Sood, JM
The present appeal is directed against the order of the CIT(A)-1, Mumbai, dated 23.06.2016, which in turn arises from the order passed by the A.O under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 02.12.2010 for A.Y. 2008-09.
The assessee while assailing the order of the CIT(A) has raised before us the following grounds of appeal: - “1. On the facts and under the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in confirming the action of AO of considering the tax claim of Rs.19,87,100/- as new claim on the ground that there was no claim made by appellant in the Return of income.
2. On the facts and under the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred confirming the action of AO of not considering the tax expenses of Rs. 19,87,100/- incurred on the object of the trust. The AO ought to have allowed the same as it is allowable as per law.
M/s. Bhav Vardhan Trust 3. On the facts and under the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in directing the AO to dispose rectification request instead of granting specifically the claim of Rs. 51 lacs u/s 11(1), when the same was already made in the revised option letter filed with AO during the assessment proceedings & filed before CIT(A).
4. On the facts and under the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in considering the TDS as income which is incorrect and bad in law.”
Briefly stated, the assessee, which is a charitable trust, had filed its return of income along with the Audit Report in Form No. 10B, Income & Expenditure Account, Balance Sheet and Annexures on 13.09.2008, declaring income of Rs. 1,02,354/- after claiming exemption under Section 11(1) of the Act. The case of the assessee was thereafter selected for scrutiny assessment under Section 143(ii) of the Act.
During the course of assessment proceedings it was observed by the AO that the assessee had debited an amount of Rs. 29 lac to its Income & Expenditure Account with the narration “Loss on Redemption of Mutual Fund Units”, which was claimed as deduction in the computation of income. On being called upon to substantiate the veracity of the aforesaid claim, the assessee filed a revised computation of income on the basis of which the aforesaid claim of loss of Rs. 29 lac was withdrawn by it. However, simultaneously in the revised computation of income the assessee had sought that the TDS deducted from the receipts amounting to Rs. 19,87,110/- be considered as application of income of the trust under Sec. 11(1) of the Act. The AO, after deliberating on the aforesaid claim of assessee, was, however, not persuaded to subscribe to the same on two counts, viz. (i) that the audited accounts of the assessee trust did not reveal the claim on account of TDS; and (ii) that it was beyond his jurisdiction to entertain any claim of deduction or exemption during the course of assessment proceedings, which had not been taken by the assessee in its return of income. In the backdrop of the aforesaid observation the A.O declined to consider the claim of the assessee for treating the amount of TDS as its application of income while computing
M/s. Bhav Vardhan Trust its claim for exemption under Section 11(1) of the Act. On the basis of the aforesaid deliberations the A.O assessed the income of the assessee trust at Rs. 30,02,350/-.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, the CIT(A) being in agreement with the view taken by the A.O that as the assessee had failed to raise the claim that the amount of TDS be considered as an application of income for the purpose of computing the amount of exemption under Section 11(1) of the Act, thus, declined to accept the aforesaid contention of the assessee. The CIT(A), in order to fortify his opinion, relied upon the judgement of the Hon'ble Supreme Court in the case of Goetze (I) Ltd. Vs. CIT (2006) 284 ITR 323 (SC).
The assessee trust being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The learned Authorised representative (for short „A.R‟) for the assessee at the very outset of the hearing of the appeal fairly conceded that the claim for considering the amount of TDS of Rs. 19,87,110/- as application of income under Section 11(1) of the Act was not raised by the assessee in its return of income, but was raised for the very first time in the course of assessment proceedings. It was submitted by the learned A.R. that though as per the settled position of law the A.O was not vested with the jurisdiction to entertain any claim of deduction or exemption which had not been raised by the assessee in its return of income, but no such restriction was placed on the appellate authorities, to the extent the assessee seeks an adjudication of a legal issue based on the facts available on record. The learned A.R. buttressed his aforesaid contention by relying on the judgement of the Hon'ble Bombay High Court in the case of CIT vs. Pruthvi Brokers and Shareholders P. Ltd. (2012) 349 ITR 336 (Bom) and the order of the ITAT, Mumbai “C” Bench in the case of DCIT vs. CMS Securitas Ltd. (2016) 47 ITR (Trib) 378 (Mum). The learned A.R. further taking us to the merits of the issue involved in the present appeal submitted that the same was squarely covered by the order passed by the Tribunal in assessee‟s own
M/s. Bhav Vardhan Trust case for A.Y. 2012-13, viz., Bhav Vardhan Trust, Mumbai vs. Income Tax Officer (Exemptions)-1, Mumbai in dated 11.04.2018 (copy placed on record). It was submitted by the learned A.R. that the Tribunal, after deliberating at length on the issue under consideration, i.e. as to whether the amount of TDS in the hands of the assessee trust would be eligible for being considered as an application of income for the purpose of computing exemption under Section 11, had found favour with the claim of the assessee. It was further averred by the learned A.R. that the Tribunal be pleased to direct the AO to dispose off the rectification application which was pending before him in respect of the quantification of exemption of Rs. 51 lac claimed under Section 11(1) of the Act.
Per contra, the learned D.R. relied on the orders of the lower authorities.
We have heard the learned Representatives for both the parties, perused the orders of the lower authorities and the material available on record. We shall first advert to the maintainability of the claim of the assessee that the amount of TDS of Rs. 19,67,110/- be considered as an application of income for the purpose of working out the exemption under Section 11(1) of the Act, despite the fact that no such claim was raised in the return of income and was raised for the first time only during the course of the assessment proceedings. We find that it remains as a matter of an admitted fact that the aforesaid claim was raised by the assessee only in the course of assessment proceedings by way of filing a revised computation of income, vide its letter dated 28.10.2010. Though, we are in agreement with the observations of the lower authorities that in the backdrop of the judgement of the Hon'ble Supreme Court in the case of Goetze (I) Ltd. Vs. CIT (2006) 284 ITR 323 (SC) as the AO is not vested with the power or discretion to entertain any claim of deduction or exemption during the course of assessment proceedings which has not been made by the assessee in its return of income, however, are of the considered view that the powers of the appellate authorities are neither fettered or bridled
M/s. Bhav Vardhan Trust in a similar manner. We are persuaded to subscribe to the claim of the learned A.R. that an assessee during the course of the appellate proceedings is entitled to raise additional ground not merely in terms of legal submissions, but also additional claims to wit claims not made in the return of income filed by it. We, though, are not oblivious of the fact the appellate authorities have the discretion whether or not to permit such additional claims to be raised before them, but it cannot be said that they have no jurisdiction to consider the same. We find that our aforesaid view is fortified by the judgement of the Hon'ble Bombay High Court in the case of CIT vs. Pruthvi Brokers and Shareholders P. Ltd. (2012) 349 ITR 336 (Bom). We, thus, in terms of the aforesaid observations are unable to subscribe to the order of the CIT(A) who, despite specific ground of appeal, vis. Ground No. 1, raised by the assessee in respect of the issue under consideration had, however, without assigning any reason refrained from adjudicating the same and merely endorsed the observations of the AO in the said context.
9. We shall now advert to the merits of the issue involved in the present appeal. We find that the issue involved in the present case lies in a narrow compass. The assessee has sought our indulgence in the present appeal for adjudicating its entitlement towards claim of TDS of Rs. 19,87,110/- as application of income under Section 11(1) of the Act. We find that the issue involved in the present appeal is squarely covered by the order passed by the Tribunal in assessee‟s own case, viz. Bhav Vardhan Trust, Mumbai vs. Income Tax Officer (Exemptions)-1, Mumbai in for A.Y. 2012-13, dated 11.04.2018. We find that the Tribunal, while adjudicating the issue and accepting the claim of the assessee, had observed as under: - “7. We have perused the aforesaid judgment of the Hon'ble High Court of Calcutta and find that the High Court had observed that though the income that has not been applied for charitable purpose or accumulated beyond the prescribed limit for charitable purpose will not enjoy the immunity from taxation, but however, the exclusion from the immunity that has been granted by s. 11 must be confined to the real income' of the trust. We though are not oblivious of the fact that M/s. Bhav Vardhan Trust Sec. 198 provides that the amounts deducted by way of income-tax shall be deemed to be "income received", but then, as observed by the Hon'ble High Court, the amount of income which is taken away by deduction of tax at source, can neither be spent nor accumulated for charitable purpose, as "application" or "accumulation" can only be of real income which has actually been received by an assessee, therefore, such portion of income that has been taken away by way of income-tax deducted at source, would not be available to the assessee for application or accumulation. We are of the considered view that as observed by the Hon'ble High Court, Sec. 11 cannot be interpreted to mean that the amount which has been deducted at source by way of income-tax shall be included in the "total income" of the trust and brought to tax. We find that the High Court had rather observed that though Sec. 198 provides that the sums deducted by way of income-tax shall be deemed to be income received, but, the deeming provisions of s. 198 should not be construed in a way to frustrate the object of s.
11. We thus respectfully following the view taken by the High Court, are of the considered view that in the case of the assessee before us, the immunity from taxation that has been granted to the income of the said charitable trust cannot be denied on the ground that the deemed income under sec. 198, i.e tax deducted at source under 194A of Rs. 13,28,823/- had not been actually spent for the purpose of charity during the year. The Id. A.R had averred that the tax deducted at source of Rs. 13,28,823/- for the year under consideration, viz. A.Y 2012-13, which was received by the assessee as a refund on 20.03.2014, i.e in the period relevant to A.Y 2014-15, was shown by the assessee as its income in the said year of receipt, viz. A.Y 2014-15 while working out its entitlement of exemption under Sec. 11 for the said year. We thus set aside the matter to the file of the A.O for the limited purpose of verifying the veracity of the aforesaid claim so raised before us by the Id. A.R. That in case the claim of the Id. A.R that the tax deducted at source of Rs. 13,28,823/- was shown by the assessee as its income in A.Y 2014-15 is found to be in order, then the said amount shall not be treated as the income of the assessee under Sec. 11 for the year under consideration i.e A.Y 2012-13.”
We have deliberated at length on the aforesaid order of the Tribunal and being persuaded to be in agreement with the view taken therein, hence follow the same. In the backdrop of our aforesaid observations we allow the amount of TDS of Rs. 19,87,110/- as application of income of the assessee trust while working out its exemption under Section 11(1) of the Act. The Grounds of appeal No. 1 & 2 are allowed in terms of our aforesaid observations.
M/s. Bhav Vardhan Trust 11. In respect of the contention of the learned A.R. that a direction be issued to the A.O to dispose off the application filed by the assessee under Section 154 of the Act, we are of the considered view that as the said issue does not arise from the impugned order, hence no such direction as sought by the assessee can be given. The Ground of appeal No. 3 is dismissed.