SWASTHYA BIKASH SAMITI,BERHAMPUR vs. ITO(EXEMPTION), BERHAMPUR

PDF · subscribers
ITA 416/CTK/2016Status: DisposedITAT Cuttack22 June 2017AY 2007-088 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that since registration under Section 12AA was subsequently granted and the assessment proceedings were pending, the assessee was entitled to the benefits of Sections 11 and 12 of the Act. The matter was restored to the Assessing Officer for re-computation of income.

What were the facts?

The assessee, Swathsya Bikash Samithy, a society managing a medical college hospital, did not file income tax returns. The Assessing Officer treated it as an Association of Persons (AOP) and taxed its surplus income because it lacked registration under Section 12AA of the Income Tax Act. The CIT(A) upheld this decision.

What were the issues?

Whether the assessee is eligible for exemption under Sections 11 and 12 of the Income Tax Act for assessment years prior to the grant of registration under Section 12AA, when assessment proceedings were pending.

Which sections of the Income-tax Act were involved?

Section 12AA,Section 11,Section 12,Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK

Before: S/SHRI N.S SAINI & PAVAN KUMAR GADALE

For Appellant: Shri B.Panda/B.R.Panda, AR
For Respondent: Shri D.K.Pradhan, DR
Hearing: 28/06

Heard together (5 matters)

ITA No.416/CTK/2016
ITA No.05/CTK/2016
ITA No.06/CTK/2016
ITA No.07/CTK/2016
ITA No.08/CTK/2016

Read from the judgment's own cause title. This page is filed under one of them.

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA No.416/CTK/2016: Assessment Year :2007-08 ITA No.05/CTK/2016: Assessment Year :2008-09 ITA No.06/CTK/2016: Assessment Year :2009-10 ITA No.07/CTK/2016: Assessment Year :2010-11 ITA No.08/CTK/2016: Assessment Year :2011-12

Swathsya Bikash Samithy Vs. DCIT, Berhampur Circle, MKCG Medical College Berhampur Hospital, Berhampur PAN/GIR No. AAAAM 6698 P (Appellant) .. ( Respondent)

Assessee by : Shri B.Panda/B.R.Panda, AR Revenue by : Shri D.K.Pradhan, DR

Date of Hearing : 28/06/ 2017 Date of Pronouncement : /06/ 2017

O R D E R Per N.S.Saini, AM These are appeals filed by the assessee against the order of CIT(A)-

3, Bhubaneswar. ITA Nos.05 to 08/CTK/2016 are directed against a

common order dated 30th October, 2016 for the assessment years 2008-

09 to 2011-12 and ITA No. 462/CTK/ is directed against the order dated

4.8.2016 for the assessment year 2007-08.

2 ITA No. 416/CT K/ 2016: Assessmen t Ye ar :2 00 7-08 ITA No. 05/ CTK/2016: Assessme nt Ye ar : 200 8 -09 ITA No. 06/ CTK/2016: Assessme nt Ye ar : 200 9 -10 ITA No. 07/ CTK/2016: Assessme nt Ye ar : 201 0 -11 ITA No. 08/ CTK/2016: Assessme nt Ye ar : 201 1 -12

2.

In all these appeals, the assessee has raised the following common

grounds of appeal except change in figures:

“ A. For that the orders of the Forums below are illegal, absurd, Unjust, arbitrary and capricious in the facts and circumstances of the case. The return filed declaring the 'NIL" income should have been accepted and therefore the income determined illegally and excessively at Rs.41,84,660/- raising the tax demand of Rs.18,95,900/- is to be deleted entirely.

B. For that the learned CIT(A) had totally misconstrued the facts as well as the provisions of law holding wrongly that the departmental circulars had applied to the facts of the case stating therein that the appellant was required to file the return u/s 139(1) of the I.T.Act as such the submission of the Appellant should have been accepted since the Appellant institution is fully and substantially financed by the Government for the purpose of treatment and rehabilitation of the patients, thus the amount received towards users fee since is not within the scope of income under the I.T. Act, filing of return of income is not required u/s. 139(1) hence no income accrued from the user fee for the purpose of assessment, therefore the passing of the order is contradicting.

C. For that the Forums below without appreciation and consideration of the facts and law had illegally held that the user's fee received for the purpose of treatment and to provide pathological and other tests, etc. in order to improve and cure the patients within a reasonable time at lower subscriptions should not have been assessed as income and the Appellant Society is a philanthropic body absolutely grown for the welfare of the patients and committed to see their comforts should not have been taxed on the users fee collected and accumulated only for the purpose of the patients benefit.

D. For that the Forums below have made certain illegalities and proceeded erratically stating that the fixed deposits are maintained and advanced to Government Funds are quite misnomer because of the surplus amount kept for the safety in the bank which should not have been otherwise to be considered except the purpose for which the users fee collected.

E. For that the Forums below had illegally proceeded beyond the facts and circumstances of the case and the determination of income made arbitrarily without giving reduction of Rs.39,57,076/- found to be excess income over the expenditure and therefore the user fees do not come under the scope, purview and concept of income under the I.T. Act, 1961.

F. For that the Forums below had failed to provide adequate opportunity to justify, examine and carry out the process of law and the concepts there of to confront and find out whether the fee collected for the purpose of

3 ITA No. 416/CT K/ 2016: Assessmen t Ye ar :2 00 7-08 ITA No. 05/ CTK/2016: Assessme nt Ye ar : 200 8 -09 ITA No. 06/ CTK/2016: Assessme nt Ye ar : 200 9 -10 ITA No. 07/ CTK/2016: Assessme nt Ye ar : 201 0 -11 ITA No. 08/ CTK/2016: Assessme nt Ye ar : 201 1 -12

treatment of patients had owned by the Appellant Society as its income, therefore, orders are to be quashed. G. For that the learned CIT(A) should not have ignored the submissions and the grounds raised by the Appellant stating therein that the taxability of the Government Revenue held by the State as well as the Union Government is prohibited under Article 289 of the Constitution and in as much as user of charges collected by the Appellant basing on the Rules framed by the Medical College and Hospitals run by the Government of Odisha should not have been taxed under the I.T. Act since is violative of the Constitutional provisions and no assessment as such to be made.

H. For that it was not considered by the learned CIT(A) that the Appellant per se has no capacity or activity to earn any income but it is only the user charges of the Medical College Hospital that are kept in the custody of the Appellant and the Appellant is authorised by the by-laws, framed by the Government of Odisha, to incur expenses on certain specific heads which are totally on behalf of the Government and the said funds deposited can under no circumstances be treated as the income of the Appellant.

I. For that the learned Assessing Officer as well as the CIT(A) should not have distinguished the Appellant as a separate entity different from the other Medical Colleges where the user fee is collected, since the very creation is to function as part of the Hospital and improve the health services provided to the public, there should not have any assessment.”

3.

Ld A.R. of the assessee submitted that the assessee is a society

registered under the Registration of Societies Act VIII of 1969 vide

registration No.5205 of 1997-98 dt.2.1.1998 in the name & style “Society

of the Maharaja Krushna Chandra Gajapati Medical College & Hospital”

at/Po; Medical Campus, Berhampur and later again on 18.8.2005 as

“Swasthya Bikash Samittee M.K.C.G. Medical College Hospital” under the

Society Registration (Orissa Amendment Act, 1969) vide No.7391. The

aims and objective for creation of society are (i) repair, maintenance and

upkeep of all assets of the hospital; (ii) promotion of patient care and

treatment activities, hospital services, training of personnel engaged in

health services and create awareness among the public about public health,

4 ITA No. 416/CT K/ 2016: Assessmen t Ye ar :2 00 7-08 ITA No. 05/ CTK/2016: Assessme nt Ye ar : 200 8 -09 ITA No. 06/ CTK/2016: Assessme nt Ye ar : 200 9 -10 ITA No. 07/ CTK/2016: Assessme nt Ye ar : 201 0 -11 ITA No. 08/ CTK/2016: Assessme nt Ye ar : 201 1 -12

family welfare and medical education issues and matters connected

thereof. During the years under appeal, the assessee did not file return of

income. Notice u/s.148 of the Act was issued and in response to the same,

the assessee filed return of income showing Nil income. The Assessing

Officer held that registration under section 12A of the I.T.Act, 1961 for

exemption of income from tax was not granted during the year under

reference and, therefore, he treated the assessee as an Association of

persons (AOP) and brought to tax the excess of income over expenditure

of Rs.32,26,642, for the assessment year 2007-08, Rs.39,57,076/- for the

assessment year 2008-09, Rs.3,40,150/-for the assessment year 2009-10,

Rs.341,84,660/- for the assessment year 2010-11 and Rs.88,50,108/- for

the assessment year 2011-12.

4.

On appeal, the CIT(A) confirmed the action of the Assessing Officer.

5.

He submitted that application for registration u/s.12AA of the Act was

filed before the Commissioner of Income Tax (Exemption), Hyderabad on

19.11.2013, which was rejected vide order dated 2.1.2014. On an appeal

filed by the assessee there-against, the Cuttack Bench of the Tribunal

restored the matter back to the file of the CIT(Exemption), Hyderabad for

redeciding the issue of grant of registration u/s.12AA of the Act to the

assessee. The CIT(Exemption), Hyderabad vide order dated 30.6.2016

granted the registration u/s.12AA of the Act to the assessee w.e.f.

19.11.2013. Thus, the very basis for treating the assessee as an AOP for

want of registration u/s.12AA of the Act did not exist after granting of

5 ITA No. 416/CT K/ 2016: Assessmen t Ye ar :2 00 7-08 ITA No. 05/ CTK/2016: Assessme nt Ye ar : 200 8 -09 ITA No. 06/ CTK/2016: Assessme nt Ye ar : 200 9 -10 ITA No. 07/ CTK/2016: Assessme nt Ye ar : 201 0 -11 ITA No. 08/ CTK/2016: Assessme nt Ye ar : 201 1 -12

registration by the CIT(Exemption) Hyderabad to the assessee u/s.12AA of

the Act. He submitted as per the first proviso to Section 12A Sub-section

(2) where registration has been granted to the trust or institution under

section 12AA, then, the provisions of sections 11 and 12 shall apply in

respect of any income derived from property held under trust of any

assessment year preceding the aforesaid assessment year, for which

assessment proceedings are pending before the Assessing Officer as on the

date of such registration and the objects and activities of such trust or

institution remain the same for such preceding assessment year. He

submitted that for assessment year 2007-08, order was passed by the

CIT(A) on 4.8.2016. As the powers of the CIT(A) are co-terminus with that

of the powers of the Assessing Officer as held by Hon’ble Supreme Court in

the case of CIT vs. Kanpur Coal Syndicate, 53 ITR 224 (SC), therefore, the

assessment proceedings were pending as on the date of grant of

registration u/s.12AA of the Act on 30.6.2016. Therefore, in view of the

said proviso, the assessee was entitled to the benefit of provisions of

sections 11 and 12 of the Act in respect of any income derived from

property held under trust as the objects and activities of the trust were the

same in assessment year 2007-08. Therefore, it was his submission that

the matter should be restored back to the Assessing Officer for recomputing

the income of the assessee after allowing the benefit of deduction u/s.11

and 12 of the Act.

6 ITA No. 416/CT K/ 2016: Assessmen t Ye ar :2 00 7-08 ITA No. 05/ CTK/2016: Assessme nt Ye ar : 200 8 -09 ITA No. 06/ CTK/2016: Assessme nt Ye ar : 200 9 -10 ITA No. 07/ CTK/2016: Assessme nt Ye ar : 201 0 -11 ITA No. 08/ CTK/2016: Assessme nt Ye ar : 201 1 -12

6.

With regard to other assessment years viz Assessment years 2008-

09, 2009-10, 2010-11 and 2011-12, he submitted that the registration

u/s.12AA of the Act was granted to the assessee by the ld CIT(Exemption)

Hyderabad vide order dated 30.6.2016 w.e.f. 19.11.2013 and as the

objectives and activities of the society were the same as in the year of grant

of registration u/s.12AA of the Act, therefore, it will be unjust and unfair to

the assessee to not to allow the benefit of provisions of section 11 & 12 of

the Act for the said years also. He submitted that it is trite law that

continuation of the appeal proceedings before the Tribunal is continuation

of the assessment proceedings. In this view of the matter also, the

assessee is entitled for benefit of deduction u/s.11 and 12 of the Act for the

said assessment years.

7.

On the other hand, ld D.R. relied on orders of lower authorities.

8.

After hearing both the parties at length and considering the materials

available on record, it is observed that the Assessing Officer treated the

assessee as an AOP for want of registration u/s.12AA of the Act. It is also

not in dispute that the registration u/s.12AA of the Act has been granted to

the assessee w.e.f. 19.11.2013 by the ld CIT(Exemption), Hyderabad vide

order dated 30.6.2016. Therefore, the appellate proceedings before the

CIT(A) for the assessment year 2007-08 who passed the order on 4.8.2016,

were pending before him. As the Hon’ble Supreme Court in the case of

Kanpur Coal Syndicate (supra) has held that the powers of the CIT(A) are

7 ITA No. 416/CT K/ 2016: Assessmen t Ye ar :2 00 7-08 ITA No. 05/ CTK/2016: Assessme nt Ye ar : 200 8 -09 ITA No. 06/ CTK/2016: Assessme nt Ye ar : 200 9 -10 ITA No. 07/ CTK/2016: Assessme nt Ye ar : 201 0 -11 ITA No. 08/ CTK/2016: Assessme nt Ye ar : 201 1 -12

co-terminus with that of the Assessing Officer, we, therefore, following the

same, hold that the assessment proceedings were pending as on the date

of grant of registration u/s.12AA of the Act and, therefore, in view of the

first proviso to section 12A(2) of the Act, the objectives and activities of

the society remain the same which is not in disputed, the assessee is

entitled to the benefit of deduction u/s.11 and 12 of the Act. Accordingly,

we set aside the orders of lower authorities and restore the matter back to

the file of the Assessing Officer for re-computing the income after allowing

benefit of section 11 and 12 of the Act to the assessee as per law. Thus,

this part of the ground is allowed.

9.

With regards to other assessment years under appeal, it is observed

that the CIT(A) has confirmed the order of the Assessing Officer treating

the assessee as an AOP and bringing to tax the excess of income over

expenditure on the ground that registration u/s.12AA of the Act was not

granted to the assessee. It is also not in dispute that the objectives and

activities of the assessee society in the impugned assessment years remain

the same as in the year of granting of registration u/s.12AA of the Act to

the assessee. Therefore, we are of the considered view that it would be

wholly unjustified to not to grant the benefit of provisions of section 11 and

12 of the Act for the impugned assessment years also when the objectives

and activities of the society are the same which fact is not in dispute.

Hence, we set aside the orders of lower authorities and restore the matter

8 ITA No. 416/CT K/ 2016: Assessmen t Ye ar :2 00 7-08 ITA No. 05/ CTK/2016: Assessme nt Ye ar : 200 8 -09 ITA No. 06/ CTK/2016: Assessme nt Ye ar : 200 9 -10 ITA No. 07/ CTK/2016: Assessme nt Ye ar : 201 0 -11 ITA No. 08/ CTK/2016: Assessme nt Ye ar : 201 1 -12

back to the file of the Assessing Officer to re-compute the income as per

law after allowing the benefit of provisions of section 11 and 12 of the Act

to the assessee. Needless to mention that the Assessing Officer shall allow

reasonable and proper opportunity of hearing to the assessee for

adjudicating the issue afresh as per law. Hence, the grounds of appeal of

the assessee are allowed.

10.

In the result, the appeals filed by the assessee are allowed. Order pronounced in the open court on 30 /06/2017 in the presence of parties. Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 30 /06/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Swathsya Bikash Samithyi MKCG Medical College Hospital, Berhampur 2. The Respondent. DCIT, Berhampur Circle, Berhampur-3, Bhubaneswar 3. The CIT(A) €, Hyderabad. 4. Pr.CIT, 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// BY ORDER,

SR.PRIVATE SECRETARY ITAT, Cuttack

More judgments on Section 12AA

All 4,243 judgments and leading authorities on Section 12AA →

Recent GST High Court judgments

Search GST case law →