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Facts
The assessee, a trust engaged in executing common effluent treatment plants, received government grants and promoter contributions. Despite filing returns using ITR-6, they claimed exemption under section 11 of the Income Tax Act. The revenue challenged the grant of relief by the CIT(A), arguing that the doctrine of res judicata does not apply to direct taxes and that assets were bought out of government grants.
Held
The tribunal held that while the principle of res judicata may not strictly apply to direct taxes, the revenue cannot take inconsistent positions in different years if the material facts remain the same. Since the assessee was granted exemption under section 11 in the preceding assessment year (AY-2014-15) under similar circumstances, and the revenue accepted that decision, it should be extended to the current assessment year (AY-2015-16).
Key Issues
Whether the assessee is eligible for exemption under section 11 of the Income Tax Act when filing returns in ITR-6, and whether the principle of consistency should be applied despite the non-applicability of res judicata in direct taxes.
Sections Cited
11, 12AA, 250, 143(3), 263
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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & SHRI AMITABH SHUKLA
आदेश / O R D E R PER AMITABH SHUKLA, A.M : This appeal is filed by the revenue against the order bearing DIN & Order No.ITBA/NFAC/S/250/2024-25/1064629485(1) dated 03.05.2024 of the Learned Commissioner of Income Tax [herein after “CIT(A), National Faceless Appeal Center[NFAC], Delhi, for the assessment years 2015-16. Through the aforesaid appeal the assesse has challenged order u/s 250 dated 03.05.2024 passed by NFAC, Delhi.
2.0 The primary issue challenged by the revenue through this appeal is the grant of relief by the CIT(A) of treating the assesse as eligible for exemption u/s 11 of the ITA in spite of the fact that the return was filed using ITR-6. It has been contested that the doctrine of res judicata do not apply to direct taxes. The revenue has further agitated the issue of grant of depreciation on the premise that assets were bought out of government grants.
3.0 Brief factual matrix of the case is that the assesse trust had filed its return of income using ITR-6. The assesse is engaged in the activity of execution of “common effluent treatment plants” for leather industries situated in the state of Tamil Nadu. The assesse receives grants from GOI and contributions from promotors for the execution of said contract. During the course of scrutiny proceedings the assesse had requested the assessing officer of the exemption charge for transfer of its assessment proceedings to territorial assessing officer. Subsequently, the assesse resubmitted that assessment proceedings may be continued. The assessing officer vide para-4 of his order deemed the same as no objection of the assesse being assessed as a registered entity u/s 12AA of the act. The assessing officer however noted that the assesse had claimed depreciation of Rs.9.96 Crs. app. and had also received grants from Government of India aggregating to Rs.45, 43, 90,460/- in turn utilized for acquisition of assets. During the course of assessment proceedings, the assesse had filed revised computation claiming an amount of Rs.2,26,42,024/- as application of income as capital expenses. It was urged that if the company is going to be treated for a company registered under section 12AA, even though return was filed in ITR-6, exemption u/s 11 to be allowed. The Ld. AO proceeded to make additions to the returned loss of Rs.28,82,07,812/- to profit of Rs.2,84,44,173/-. While doing so, the LD. AO had taken loss as profit and loss account of Rs.7,49,63,770/-. The Ld. AO had made additions of depreciation of 9.96 Crs app. and project fund of Rs.28.56 lakhs as well as an ROC fees of Rs.9 lakhs. The Ld. CIT(A) held that because in the immediately preceding assessment years i.e AY-2014-15 same facts were present and the Ld. AO had allowed to assesse exemption u/s 11 of the Act therefore in line with principle of consistency and rest judicata exemption u/s 11 is available. He held that filing of return under ITR-6 would be immaterial. Grounds of appeal raised before the First Appellate Authority qua merits of addition being alternative grounds were rejected as being infructuous.
4.0 The Ld. DR vehemently argued in favour of the order of the assessing officer supporting the line of arguments narrated in the assessment order. The Ld. AR argued in favour of the decision taken by the Ld. CIT(A). In support of its contentions it provided a copy of remand report dated 23.04.2024 and assessment order u/s 143(3) dated 28.12.2016 for AY-2014-15. Material available on records indicate that the assesse has been granted exemption u/s 11 for immediately preceding AY-2014-15 as is evident from order u/s 143(3) dated 28.12.2016. Perusal of para-3 thereof also alludes that same situation qua filing of ITR-6 and treatment of assesse as a rested entity u/s 12AA existed in the said year as well. The perusal of order further shows that the assesse has been allowed exemption u/s 11. The argument of Ld. CIT(A) recording principle of consistency and applicability of res judicata have been found to be correct. It is trite law that principle of res judicata do not apply to direct tax however the revenue cannot take different positions in different years if there is no change in the material facts. The assessment orders for AY’s 2014-15 & 2015-16 show that the same fact of filing of ROI in ITR 6 was existing therein. The Ld.AO in AY-2014-15 chose to grant the assesse deduction u/s 11. This decision has become final and rather accepted by the revenue as nothing has been brought on records to suggest that the same was agitated through available revisionary remedies like action u/s 263 etc. It is trite law that notwithstanding principle of res judicata not applicable to direct taxes, an AO is not permitted to take different stand on the same issue and same set of facts over different years. The Ld. DR has not been able to point out any difference in the facts of the case as they existed in comparison to AY-2014-15. Accordingly, we are of the view that the Ld. CIT(A) has taken a correct decision in granting exemption u/s 11 and no interference is required to be made to his order at this stage. Accordingly, the order of Ld. CIT(A) is sustained. We also concur with the finding of the Ld. CIT(A) that the other issues raised qua merits of addition w.r.t depreciation become academic and infructuous. In the result, all the grounds of appeal raised by the revenue are dismissed.
Order pronounced on 23rd , October-2024 at Chennai.