THE DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) CIRCLE-1, MANGALORE vs. M/S FR.MULLERS CHARITABLE INSTITUTIONS, MANGALORE

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ITA 783/BANG/2017Status: DisposedITAT Bangalore02 February 2018AY 2012-134 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 since the facts and activities were the same as in previous and subsequent assessment years where the surplus was treated as charitable income, the Revenue was bound to take a consistent stand. Therefore, the order of the CIT(A) was upheld.

What were the facts?

The assessee, a charitable trust running hospitals and educational institutions, also operated a homeopathy medicine manufacturing unit. The Assessing Officer taxed the surplus from this unit as business income, but the CIT(A) deleted the addition.

What were the issues?

Whether the surplus generated from the manufacturing of homeopathy medicine by a charitable trust is to be treated as business income or application of charitable income. Whether the Revenue is bound to maintain a consistent stand across assessment years when facts remain unchanged.

Which sections of the Income-tax Act were involved?

Section 12AA,Section 11,Section 12

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, BENGALURU BENCH B, BENGALURU

Before: SHRI. JASON P. BOAZ

For Respondent: Smt. Padmameenakshi, JCIT

PER LALIET KUMAR, JUDICIAL MEMBER :

1.

This appeal is filed by the Revenue against the order of the CIT (A), dt.20.01.2017, for the assessment year 2012-13, on the following effective ground :

2. The Ld. CIT (A) erred in allowing the manufacturing activity as charitable and allowing the exemptions.

ITA.783/Bang/2017 Page - 2

2.

The assessee is a charitable trust registered u/s.12AA of the Income- tax Act, 1961, running hospitals and educational institutions. For the assessment year 2012-13, assessee filed its return of income on 01.10.2012 declaring nil income after claiming application of income. During the course of assessment proceedings the AO noticed that along with hospitals and colleges the assessee-trust was also operating a manufacturing unit under the name of Fr. Muller Homeopathic Division which manufactures generic homeopathy medicine. For the AY 2012-13 the said unit generated surplus to the extent of Rs.41,03,140/-. During the assessment proceedings the assessee relied upon the circular No.11/2008 to buttress its argument that the income generated is to be considered as application of income and not as business activity for the advancement of general public utility. However, the AO was not convinced and therefore has brought to tax the surplus income of Rs.41,03,140/-. Being aggrieved, the assessee filed appeal before the CIT (A).

3.

The CIT (A) considered the written submissions of the assessee and also the assessment order and deleted the additions made by the AO. Feeling aggrieved the Revenue is in appeal before this Tribunal.

4.

It was the case of the assessee before us that in the assessee’s own case for AYs.2009-10, 2010-11 and 2011-12, the CIT (A) had allowed the appeals of the assessee by holding that the disallowance of surplus income from Homeopathy division taxed by the AO as business income was not correct and it is to be taken as Charitable income and eligible for exemption. The order of the CIT (A) was accepted and no appeals were preferred before the ITAT. In Para 5.3 of the CIT (A)’s impugned order CIT (A) mentioned that for the AYs.2013-14 and 2014-15 AO has ITA.783/Bang/2017 Page - 3 considered the similar aspect and has treated the surplus as application of income and has not treated as business activity.

5.

We have heard the rival contentions and perused the record. It is an undisputed statement of fact before us that same activities of the assessee for AYs 2009-10 to 2011-12, 2013-14 and 2014-15 were considered to be charitable activities and the surplus income generated was considered as income of trust i.e charitable in nature. In our view the law is settled , once there is no change in facts and activities of the assessee, then the Revenue is bound to take a consistent, and coherent stand. There should not be any deviation in the stated position of the Revenue on the same set of facts . Law abhor unpredictability in the decision making of the Revenue and therefore the Revenue is bound to take consistent stand year after year and should not deviate from the stand taken in the earlier / subsequent year unless there is a change in facts . We may rely on Hon’ble Supreme Court in the case of Radhasomi Satsang 193 ITR321 held that.

“We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings, in the absence of any material change justifying the Revenue to take a different view of the matter and, if there was no change, it was in support of the assessee-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals ITA.783/Bang/2017 Page - 4 should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12 of the Income-tax Act of 1961.”

As there is no change in facts brought to our notice, therefore revenue appeal fails . we uphold the order of Ld CIT(A).

6.

In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 2nd day of February, 2018.

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