ITO(EXEMPTION), WARD-1(2), KOLKATA, KOLKTA vs. DEV SANGHA SEVA PRATISTHAN, KOLKATA

PDF · subscribers
ITA 1254/KOL/2017Status: DisposedITAT Kolkata13 June 2018AY 2013-143 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 administrative and establishment expenses are incidental to the charitable purpose and thus allowable. It also held that depreciation is allowable for the assessment year in question, as the amendment disallowing it was not retrospective.

What were the facts?

The Revenue appealed against the CIT(A)'s order deleting the disallowance of administrative and establishment expenses and depreciation made by the Assessing Officer. The assessee is a charitable trust.

What were the issues?

Whether administrative and establishment expenses are allowable as application of income for charitable purposes. Whether depreciation is allowable for the assessment year 2013-14.

Which sections of the Income-tax Act were involved?

Section 11(1)(a),Section 12AA,Section 11(6)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA

Before: Shri S.S.Godara & Dr. A.L. Saini

O R D E R

PER S.S.Godara, Judicial Member:

1.

- This Revenue’s appeal for assessment year 2013-14 arises against Commissioner of Income Tax (Appeals)-25. Kolkata’s order dated 17.03.2017 in case No. CIT(A)-25 Kolkata/FY 2016-17/ Dev Sangha Seva Pratishan, AY 2013-14_143(3)_B-1B/432, in proceedings u/s 143(3) of the Income Tax Act, 1961; in short, ‘the Act’.

2.

The Revenue’s former substantive ground pleads that the CIT(A) has erred in law as well as on facts in reversing the Assessing Officer’s action deleting assessee’s administrative and establishment expenses disallowance of ₹56,08,823/- as application of its case for charitable purpose u/s 11A of the Act with the following detailed discussions:- “5. Accumulation / setting-apart u/s. 11(1)(a): Issue of ‘administrative and establishment expenses’. [Ground of appeal No.1] ₹56,08,823/- ITO (Ex), Ward-1(2), Kol. Vs. Dev Sangha Seva Pratisthan Page 2 5.1 It will be better appreciated if at the outset the relevant extract from the statute is presented. The concerned section 11(1)(a), relevant extract, is hereunder: Income from property held for charitable or religious purposes. 11. (1) Subject to the provisions of…. The following income shall not be included in the total income of the prevus year of the person in receipt of the income- (a) Income derived from property held on the trust wholly for charitable or religious purposes, to the extent to which such income is applied such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property. 5.2 Now, the impugned issue is concerning the 2nd part of the clause (a) – that is, the accumulation/setting apart. The accumulation/setting apart could come into consideration only when it is the case that 100% of the income has not been applied. So, if it were the case that 100% of the income has been applied, the impugned issue of ‘administrative and establishment expenses’ would not have arisen. And it should be so for the property is held ‘wholly’ for the charitable purposes – which is the purport of clause (a). So as regards the 1st part of the clause (a) – the issue will not arise. However, as regards the 2nd part of the clause (a), if by taking a restricted view that administrative and establishment expenses are not be considered as application of income this tantamount to taking contradictory views. That, as regards the 1st part [the income having been applied] that administrative and establishment expenses are incidental application of income, but when it comes to the 2nd part of accumulation/setting apart that such expenses are not incidental application of income. so a different interpretation is being taken for the 1st part [application of income], and a different interpretation is taken for the 2nd part [accumulation/setting apart]. Interpretation has to be wholistic and consistent for the entire clause (a). 5.3 Per se, administrative and establishment expenses are the very necessary incidental expenses required for the trust to exist in the first place itself. Else, how could it exists to carry out the objectives and activities for which it has been granted registration u/s. 12AA.”

4. It emerges that CIT(A) has thereafter followed hon'ble jurisdictional high court’s judgment in CIT vs. Birla Janhit Trust (1994) 208 ITR 372 (Cal) holding similar expenses to be allowable as application of income. He has also quoted hon'ble Madhya Pradesh high court’s decision in Deo Radha Madhava Lalji Genda Trust Vs. Property Tax Officer (1980) 125 ITR 531 (MP) that but for such administrative and establishment expenditure claimed, even existence of a charitable society itself may be jeopardized. The Revenue fails to indicate any distinction on facts or law therein particularly to the former case law of hon'ble jurisdictional high court (supra) holding very kind of expenses as

More judgments on Section 11(1)(a)

All 553 judgments and leading authorities on Section 11(1)(a) →

Recent GST High Court judgments

Search GST case law →