TATWAJNANA VIDYAPEETH,MUMBAI vs. ITO (W) WD 2(4), MUMBAI

The above titled appeals one by the assessee and the other by the Revenue have been preferred against the order dated 07.10.2016 of the Commissioner of Income Tax (Revenue’s appeal) 2. The main sole issue raised by the Revenue in various grounds of appeal is against the order of Ld. CIT(A) allowing the claim of the assessee of exempt income under section 10(34) and 10(1) of the Act by ignoring the fact that the assessee can not claim the exemption under section 10 because this section does not deal with the income derived from property held under Trust and once income is exempt under section 10 it will not be required to be clarified under section 11 of the Act as per CBDT circular.

The brief facts of the case are that during the year the assessee has derived income by way of dividend Rs.66,06,853/- and agricultural income Rs.1,82,866/- which were claimed as exempt under section 10(34) and 10(1) of the Act respectively. However, the AO did not agree with the contentions of the assessee that the said incomes are exempt under section 10 and accordingly added the same to the income of the assessee by holding that the exemption under section 10 is not available where the income is derived from property held under Trust and the income has to be dealt with as per provision of section 11 of the Act.

The Ld. CIT(A) allowed the appeal of the assessee after considering the contentions and submissions of the assessee during the appellate proceeding and after relying on the decision of ITAT in the case of Jamsetji Tata Trust vs. JDIT (E)

The Ld. A.R. prayed before the Bench that the issue involved in the appeal of the Revenue is covered in favour of the assessee by the decision of the Jurisdictional High Court in the case of DIT(E) vs. Jasubhai Foundation (supra) wherein it has been held that the income which is exempt under the provision of section 10 can not be subject to the provision of section 11 and thus upheld the decision of the ITAT. The Ld. A.R. also relied on the decision of Jamsetji Tata Trust vs. JDIT (supra) wherein a similar question was decided in favour of the assessee by holding that a dividend income on share, mutual fund and long term capital gain on sale of shares is exempt under section 10(36), 10(34), 10(38) respectively and can not be brought to a tax by application of section 11 and 13 of the Act.

The Ld. D.R., on the other hand, relied on the grounds of appeal and the order of the AO.

We have heard the rival submissions of both the parties and perused the material on record including the decisions cited by the Ld. A.R. The undisputed facts are that the assessee received income of Rs.66,06,853/- by way of dividend and Rs.1,82,866/- by way of agricultural income which were claimed exempt under section 10(34) and 10(1) of the Act respectively. The AO denied the said exemption under section 10 as claimed by the assessee and invoked the 4 & ITA No.119/M/2017 M/s. Tatwajnana Vidyapeeth Nirmal Niketan provision of section 11 to the said income by holding that where the income is derived from a property held under Trust that has to be dealt with in accordance with the provisions of section 11 and provisions of section 10 has no application. The Ld. CIT(A) allowed the appeal of the assessee after following the jurisdictional High Court in the case of DIT(E) vs. Jasubhai Foundation (supra) and Jamsetji Tata Trust vs. JDIT (supra). From the perusal of the above decisions, it is apparent that the case of the assessee is squarely covered in its favour by the ratio laid down by the Hon’ble Bombay High Court and co-ordinate Bench of the Tribunal holding that where the Trust derives income from dividend or any other exempt income which is claimed exempt under section 10 of the Act, the same could not be brought to tax by invoking the provision of section 11 of the Act. Keeping in view the facts if the assessee in the light of the decisions as discussed hereinabove , we dismiss the appeal of the Revenue by upholding the order of Ld. CIT(A).

The ground raised by the assessee is as under: “On the facts and under the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals), erred in upholding the action of the Assessing Officer of denying the benefit of section 11 of the I.T Act, in respect of Advance paid of Rs.1,15,00,000/- given by the appellant for construction of building which is towards the object of the Trust.”

The only issue raised by the assessee is against the confirmation of disallowance of Rs.1,15,00,000/- by Ld. CIT(A) as made by the AO by denying the benefit of section 11 of the Act in respect of advance given by the assessee for the construction of the building of the Trust.

The facts in brief are that the assessee is a Trust which carries on the activity of imparting education. The assessee acquired land at Nashik, Aurangabad and Ahmedabad for the construction of building to be used for or in connection with the purposes of achieving the objects of the assessee. The assessee has accumulated under section 11(2) of the Act the following amounts to be spent till 31.03.2012: A.Y. Rs. 2007-08 2,01,21,212/- 2008-09 18,28,211/- Total 2,19,49,423/-

In the appellate proceedings the Ld. CIT(A) upheld the assessment order by holding that AO rightly made the addition by relying on the judgment in case of CIT vs. Shree P. Subramaniam Religious Trust (2009) 179 TAXMAN 144.

The Ld. A.R. vehemently submitted before us that the AO has completely ignored the fact that there was an opening balance of advance given in earlier year for construction purposes and similar type of payment was made during the year. The ld counsel further argued that said advance was finally capitalized and transferred to the asset account on the completion of the project. The assessee submitted that during the year Rs.1,15,00,000/- was paid as advance on various dates namely Rs.75 lakhs on 10.02.2012 and Rs.20 lakhs on 29.03.2012 for Aurangabad and Rs.20 lakh on 23.02.2012 for Nashik. The Ld. A.R. also placed before the Bench a certificate from the architect and completion certificate from the municipal corporation of Aurangabad during the year. Thus the Ld. A.R. submitted that the AO has confused the facts of the case by wrongly considering the payment made for Aurangabad unit as payment made for Nashik unit. The Ld. A.R. prayed before the Bench that the matter should be referred back to the file of the AO to verify the opening balance along with the current advance of Rs.95 lakhs spent on Aurangabad project which was completed immediately in the next year and the balance of Rs.20 lakhs paid for Nashik unit was also used for the purpose of construction. Finally,

The Ld. D.R., on the other hand, strongly objected to the arguments of the Ld. A.R. by submitting that all these documents as placed before the Tribunal were afterthought and were never placed before the authorities below. The ld DR contended that assessee has created all these evidences in order to justify his claim. The Ld. D.R. prayed before the Bench that the order of Ld. CIT(A) should be affirmed by dismissing the appeal of the assessee.

We have heard the rival submissions of both the parties and perused the material on record. We find that the assessee has placed before the Bench some additional evidences which were not placed before the authorities below and in such ab event/scenario the matter has to go back to the file of the AO so that the issue could be decided after due examination and appreciation of these evidences which have been filed before the Tribunal for the first time. Needless to state that advance given for the construction of building has to be allowed as application of income of the trust. Accordingly, we restore the matter back to the file of the AO with the direction to decide the same as per the facts and law after affording a reasonable opportunity of being heard to the assessee.