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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-3’, NEW DELHI
Before: SHRI H.S. SIDHU
Date of Hearing : 11-07-2016 Date of Order : 02-08-2016
ORDER PER H.S. SIDHU, J.M.
The appeal has been filed by the Department and the Cross Objection filed by the Assessee against the order of the Ld. CIT(A), Meerut dated 26.11.2014 relating to assessment year 2010-11.
The Revenue has raised the following grounds in its appeal:
1 The Ld. CIT(A) has erred on facts and in law by deleting the addition of Rs. 20,49,000/- out of Rs. 33,75,400/- made by the AO on account of capital gain. Therefore, the addition made by the AO amounting to Rs. 20,49,000/- be restored and the relief given by the ld. CIT(A) be cancelled in this issue. 2 The order of the CIT(A) be cancelled and the order of the AO be restored. 3 Appellant craves leave to modify/ amend or add anyone or more grounds of appeal
3. I have heard both the parties and perused the material on record. From the above, I find that the tax effect in the Revenue’s Appeal is less than Rs.10,00,000/-, therefore, the Department’s Appeal is not maintainable, in view of the Circular No. 21/2015 dated 10th December, 2015 issued vide F.No. 279/Misc. 142/2007- ITJ (Pt.) by the CBDT. For the sake of convenience, the relevant para nos. 3 & 10 of the aforesaid CBDT’s Circular are reproduced as under:-
“3. Henceforth, appeals/ SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder:
Monetary Limit S No Appeals in Income-tax matters (in Rs) 1 Before Appellate Tribunal 10,00,000/- 2 Before High Court 20,00,000/-
3 Before Supreme Court 25,00,000/- It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case.
This instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in High Courts/ Tribunals. Pending appeals below the specified tax limits in para 3 above may be withdrawn/ not pressed. Appeals before the Supreme Court will be governed by the instructions on this subject, operative at the time when such appeal was filed.”
It is not in dispute that the Board’s instruction or directions issued to the income-tax authorities are binding on those authorities, therefore, the Department should have withdrawn/ not pressed the present Appeal, in view of the aforesaid instructions since the tax effect in the instant Appeal is less than the amount of Rs. 10 lacs, prescribed in the above said CBDT’s Instructions. Keeping in view the CBDT Instruction No. 21/2015 dated 10th 5.
December, 2015, I am of the view that the Revenue should have withdrawn/ not pressed the instant appeal before the Tribunal. I 3 am also of the view that the said Instructions are applicable for the pending appeals and appeals to be filed henceforth in Tribunal.
Accordingly, the Revenue’s Appeal is dismissed.
ASSESSEE’S CROSS OBJECTION NO. 283/DEL/2015
The assessee has raised the following grounds in its Cross Objection:-
“1.1 On the facts and circumstances of the case and in law, the learned Assessing officer has erred in assessing the sum of Rs. 33,75,400 being 'profit from sale of land, as income from Capital Gain in the hands of the assessee when the amount of capital gain had been invested in accordance of the provisions of Section 11(IA) of the Act.
1.2. The learned assessing officer has not allowed the deduction under section 11(IA) of the Act and failed to appreciate the fact that although profit of sale of land being shown on the credit side of statement of profit and loss account is 'Income under the head Capital Gain’ still it qualifies for the investment linked deduction in accordance of the provisions of Section 11(1A) of the Act. Therefore the Income chargeable to tax in the hands of assessee having compiled with the provisions of Section 11(1A) is Nil.
1.3. On the facts and circumstances of the case and in law, the learned CIT(A) has allowed the assessee relief of Rs. 20,49,000/- only without appreciating the facts of the case and in line with the requirements of the Act under section 11(1A) of the Act but the learned CIT(A) has erred in holding that the deduction under section 11(1A) is restricted to Rs. 20,49,000.00 only instead of allowing full relief to the assessee as the complete amount has been invested in accordance with section 11(1A) of the Act. The learned CIT(A) failed to appreciate that the intent of the section 11(1A) is on the investment and not on the source of the investment. When the assessee being a charitable society being audited under the provisions of the Act, has invested the sum as per section 11(1A) of the Act, it is eligible for deduction under section 11(1A) of the Act. Therefore, respondent prays to delete the balance addition of Rs. 13,26,400/- sustained by learned CIT(A) as the same is unjustified in law.
The Respondent craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid cross objections at any time before or at the time of hearing of the matter.”
The brief facts of the case are that the assessee-society registered with the Registrar of Society, Uttar Pradesh and renewal was granted on 8.6.2010. The Society has been granted Registration u/s. 12AA of the I.T. Act, 1961 by the then ld. CIT, Merrut vide order dated 24.11.1984. In this case assessment was completed u/s. 143(3) of the Income Tax Act, 1961 on 7.3.2013 in which addition of Rs. 33,75,400/- was made under the head capital gains.
Aggrieved by the aforesaid addition, assessee appealed before the Ld. CIT(A), Meerut vide his impugned order dated 26.11.2014 has partly allowed the appeal of the assessee.
Against the order of the ld. CIT(A), Assessee has filed the Cross Objection before the Tribunal.
10. During the hearing, Ld. Counsel of the Assessee stated that the Assessing officer has erred in assessing the sum of Rs. 33,75,400 being 'profit from sale of land, as income from Capital Gain in the hands of the assessee when the amount of capital gain had been invested in accordance of the provisions of Section 11(IA) of the Act. He further stated that the Assessing Officer has not allowed the deduction under section 11(IA) of the Act and failed to appreciate the fact that although profit of sale of land being shown on the credit side of statement of profit and loss account is 'Income under the head Capital Gain’ still it qualifies for the investment linked deduction in accordance of the provisions of Section 11(1A) of the Act. Therefore the Income chargeable to tax in the hands of assessee having compiled with the provisions of Section 11(1A) is 6 Nil. Lastly, Ld. Counsel of the assessee further stated that Ld. CIT(A) has allowed the assessee relief of Rs. 20,49,000/- only without appreciating the facts of the case and in line with the requirements of the Act under section 11(1A) of the Act but the learned CIT(A) has erred in holding that the deduction under section 11(1A) is restricted to Rs. 20,49,000.00 only instead of allowing full relief to the assessee as the complete amount has been invested in accordance with section 11(1A) of the Act. Therefore, the learned CIT(A) failed to appreciate that the intent of the section 11(1A) is on the investment and not on the source of the investment. When the assessee being a charitable society being audited under the provisions of the Act, has invested the sum as per section 11(1A) of the Act, it is eligible for deduction under section 11(1A) of the Act.
In view of the above, he requested to delete the balance addition of Rs. 13,26,400 sustained by learned CIT(A).
On the other hand, ld. DR has strongly opposed the Cross Objection and stated that since the Revenue’s appeal has been dismissed, as aforesaid, the assessee’s Cross Objection is not maintainable as it did not survive and should be dismissed as infructuous.
I have heard both the parties and perused the records available with us, especially the order of the Ld. First Appellate Authority. After perusing the impugned order of the Ld. CIT(A), I find that Ld. CIT(A) has elaborately discussed the issues in dispute vide his impugned order dated 26.11.2014 vide para no. 5.1 at page no. 5 and held as under:-
“I find that the sole reason of making the addition by AO is that the assessee had shown such profit in its accounts. This premise of AO is ill founded. Maintaining accounts for arriving at profit or loss in real terms and claiming exemption under Income Tax Act are two separate things. The provisions of Section 11(1A) are clearly applicable in facts and circumstances as neither the assessee has been held to be non-charitable entity nor the new assets have been held to be purchased for purposes other than charitable nor it has been held that the new assets are not qualified for such deduction. Denial of the deduction u/s. 11(1A) on the ground cited by the AO is not reasonable.
From the facts of the case it transpires that the assessee society has sold two properties on 31.3.2010 but claiming to have received advance against these sales, the assessee has claimed to have made investments in new capital asset in form of FDs and New Building at Shalimar Garden-II, Village Pasonda to be used for running school and has claimed deduction u/s. 11(1A) out of capital gains arising on sale of assts.
In my considered opinion in the facts and circumstances, the case of assessee is covered squarely by the decision of Mumbai ITAT supra as regards investments out of advance of sale receipts being eligible for deduction uls 11(1A). However, the quantum of allowable deduction requires some more deliberation.
It is seen that the when the advance was given for new capital asset and FDs were purchased, the assessee had not received commensurate advance out of sale consideration. When assessee paid advance of Rs. 21 Lacs for purchase of new asset, it had received only Rs. 6 lacs towards sale consideration.
Similarly, when FDs were purchased for Rs. 30 Lac, it had received another sum of only Rs. 20 Lacs advance out of sale consideration. Thus only Rs. 26 Lacs could be said to have been invested out of advance received out of sale consideration. As per provisions of Section 11 (lA) (a), the capital gain deemed to applied for charitable purposes would be the sum invested (Rs. 26 lacs in this case). The cost of asset sold (which is Rs. 551000/- in this case). Therefore, the allowable deduction is only Rs.20,49,000/-. Therefore, addition of Rs. 20,49,000/- is deleted and addition of Rs. 13,26,400/- is sustained as per provisions of Section 11(1A) (a). The Ground no 1 of appeal is partly allowed.”
12.1 After perusing the aforesaid findings of the Ld. CIT(A), I am of the view that the provisions of Section 11(1A) are clearly applicable in facts and circumstances as neither the assessee has been held to be non- charitable entity nor the new assets have been held to be purchased for purposes other than charitable nor it has been held that the new assets are not qualified for such deduction. It reveals that the assessee society has sold two properties on 31.3.2010 but claiming to have received advance against these sales, the assessee has claimed to have made investments in new capital asset in form of FDs and New Building at Shalimar Garden-II, Village Pasonda to be used for running school and 9 has claimed deduction u/s. 11(1A) out of capital gains arising on sale of assets. In my view in the facts and circumstances, the case of assessee is covered squarely by the decision of Mumbai ITAT decisions in the case of Shri Ramnagar Trust vs. Third ITO 13 ITD 426 (Mum) and ITAT as regards investments out of advance of sale receipts being eligible for deduction uls 11(1A). I also find that Ld. CIT(A) has rightly held that when the advance was given for new capital asset and FDs were purchased, the assessee had not received commensurate advance out of sale consideration. It is noted that when assessee paid advance of Rs. 21 Lacs for purchase of new asset, it had received only Rs. 6 lacs towards sale consideration. Similarly, when FDs were purchased for Rs. 30 Lac, it had received another sum of only Rs. 20 Lacs advance out of sale consideration. Thus only Rs. 26 Lacs could be said to have been invested out of advance received out of sale consideration. As per provisions of Section 11(1A)(a), the capital gain deemed to applied for charitable purposes would be the sum invested (Rs. 26 lacs in this case). The cost of asset sold (which is Rs. 551000/- in this case). Hence, the allowable deduction is only Rs.20,49,000/- which the Ld. CIT(A) has rightly deleted and addition of Rs. 13,26,400/- was rightly sustained as per provisions of Section 11(1A)(a). In view of the above, I am of the view that the Ld. CIT(A) order is a well reasoned which does not need any interference on my part, hence, the finding of the Ld. CIT(A) is upheld on the issues raised in the Cross Objection filed by the Assessee. Accordingly, the Cross Objection stands dismissed.
In the result, Appeal filed by the Revenue as well as Cross Objection filed by the Assessee Stand dismissed.
Order pronounced in the Open Court on 02/08/2016.