The Commissioner of Income Tax-III, vs. Smt. Babita Gupta

1. These two appeals by the Revenue raise similar questions of law for different assessment years (AYs) involving the same Assessee and are accordingly disposed of by this common order.

ITA 48 of 2011 is directed against an order dated 20th May, 2011 passed by the Income Tax Appellate Tribunal, Cuttack Bench, Cuttack (ITAT) in ITA No.99/CTK of 2011 and ITA No.114/CTK of 2011 for the AY 2007-08 and ITA 89 of 2017 is directed against an order dated 9th August, 2017 of the ITAT in ITA No.395/CTK of 2012 for the AY 2008-09.

In both these appeals, common questions have been urged for consideration by this Court by the Revenue. The first question relates to the registration granted to the Assessee under Section 12A of the Income Tax Act, 1961 (Act). The question urged is whether such registration allows the Assessee automatic exemption from income tax on all types of income?

It is pointed out by Mr. R. V. Easwar, learned Senior Counsel appearing for the Assessee-Respondent, that the said question in fact does not arise from the impugned orders of the ITAT at all since for neither of the AYs did the Assessee actually claim automatic exemption on the basis of the registration granted in its favour under Section 12A of the Act. 5. Indeed, the Court finds that the Assessee filed returns for each of the AYs in question and provided the justification for claiming exemption on a case-to-case basis. In other words, there was no claim for automatic exemption from income tax on the basis of the registration under Section 12A of the Act. Consequently, the Court declines to frame such a question for consideration.

The next issue raised is whether there ought to have been a valid resolution of the Assessee Trust in terms of Rule 17 of the Income Tax Rules, 1962 (Rules) read with Section 11 (2) of the Act? This Court finds that in terms of Rule 17, the Assessee is required to submit a statement in Form No.10 to the Assessing Officer (AO), which contains the statement that “it has been decided by a resolution passed by the trustees/governing body….” that “out of the income of the trust/institution/association for the previous year……per cent of the income of the trust/institution/association

Mr. Radheshayam Chimanka, learned Senior Standing Counsel for the Revenue submits that inasmuch as a copy of the resolution of the Assessee Trust was not furnished, the above statement regarding amount being accumulated for charitable activities cannot be acted upon.

A perusal of Form No.10 reveals that the requirement of the resolution, referred to in the statement therein, having to be enclosed with the said Form, has not been indicated. In other words, there is nothing in either Section 11(2) of the Act or Rule 17(2) of the Rules that mandates the furnishing of such resolution by the Assessee in order for the statement in Form No.10 to be acted upon by the AO. Consequently, the Revenue cannot insist on a copy of the resolution being furnished. The Court therefore concurs with the view expressed by the ITAT in the impugned order and declines to frame the question in this regard.

The third issue sought to be urged is whether the declaration filed by the Assessee regarding correctness of its accounts for the purposes of claiming exemption under Section 11 of the Act ought not to have been accepted in view of the accounting irregularities pointed out by the CAG?

As pointed out by Mr. Easwar, the report of the CAG indicates that the Assessee offered excess income for assessment for the AYs in question and therefore no prejudice can be said to be caused to the Revenue on this score. It is not as if the Assessee has gained an

It is then sought to be contended that the amendment to Section 2 (15) of the Act by the Finance Act, 2008 should be considered to be retrospective.

The Court is unable to agree. The very text of the Finance Act, 2008 and in particular Section 3 thereof which inserts the amended Section 2(15) clearly states that “the following clause shall be substituted with effect from the 1st day of April, 2009.” Clearly, therefore, the amendment is prospective. Consequently, the Court declines to frame this question either.

On the issue whether the Assessee ought to have resorted to the cash system of accounting and not the accrual basis, it has been pointed out on behalf of the Assessee that it is bound by the guidance note of the Ministry of Shipping and Transport, Government of India and the requirement under the Companies Act as regards maintaining its accounts on accrual basis. Consequently, this Court finds no reason to take a view different from what the ITAT has taken in the matter.

It is next sought to be urged that the Assessee had withdrawn the ground urged by it before the Commissioner of Income Tax (Appeals) [CIT(A)] regarding taxability of interest on two Funds. A perusal of the order of the CIT(A) shows that in fact the Assessee had maintained its contention against the additions made by the AO in this regard and the CIT(A) upheld the additions. Therefore, the question appears to be misconceived and the Court accordingly declines to frame the question.

In ITA No.89 of 2017, an additional question is sought to be raised whether absolutely similar activities carried on by the Assessee from 1963 considered as charitable till AY 2008-09 can cease to be charitable from AY 2009-10 onwards?

As pointed out by the Assessee, the change occurred as a result of the prospective amendment to Section 2(15) of the Act, the validity of which obviously cannot be questioned by the Revenue. Consequently, this question also does not arise for consideration.

For all of the aforementioned reasons, the Court declines to frame any of the questions urged by the Revenue in these two appeals. They are accordingly dismissed.