ASST. COMMISSIONER OF INCOME TAX, (EXEMPTIONS)-1, HYDERABAD vs. INDO ARAB LEAGUE, HYDERABAD

Facts of the case, in brief, are that the assessee is a society registered u/s 12A of the Act vide order dated 25.11.1991 of the learned CIT, AP-II, Hyderabad. It filed its return of income electronically for A.Y. 2014-15 on 15.03.2015 admitting total income of Rs.27,73,91,953/- after claiming exemption u/s 11 of the Act. Thereafter, the assessee filed a revised manual return of income on 30.06.2015. The case was selected for limited scrutiny under CASS to verify the large receipts and large value of sale consideration of property. Accordingly statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. During the course of scrutiny proceedings, the Assessing Officer asked the assessee to submit information regarding trust deed, copy of accounts, additions to fixed assets and sale of property relating to the capital gains etc. In response to the above notices, the assessee submitted the requisite information as called for.

The Assessing Officer observed that the assessee society filed its original return of income on 15.03.2015 which was revised on 28.3.2015 admitting income from (a) rent (b) Bank interest on savings bank account and fixed deposits and (c) sale of property. He observed that the assessee during the course of assessement proceedings filed its revised computation of income wherein it was stated that it had received Rs.32,43,18,286/-(after indexation allowed) as capital gains from sale proceeds of land. It was submitted that Mrs. Basheeunissa Begam w/o Mr. Mohd. Fasiuddin had donated land admeasuring 9056.80 sq. meters equivalent to 10,827 sq. yards in Plot No.63 and 66 bearing Survey No.120 & 121 at Shaikpet (viii) Golconda (Taluq), Hyderabad District i.e. is located at Road No.10 Banjara Hills, Hyderabad vide acknowledgement cum declaration of Past Oral Gift (HIBA) executed at Hyderabad in March, 1985 to the assessee society.

From the above, the Assessing Officer was of the opinion that the donor of the said property, Mrs. Basheerunissa Begum had donated. the land to the assessee to enable it to construct and establish a cultural centre. However, the assessee society had breached the conditions/directions laid down by the donor (donated for specific purpose) and sold large chunk of land to various parties for construction of commercial complex. In view of the above, the Assessing Officer was of the opinion that the assessee had alienated its immovable properties for which it had no mandate. The Assessing Officer further noted from the copies of the return of income for A.Y 2005-06 to 2014-15 that the assessee society has not expended any amount on its aims and objects and none of the expenditure claimed by it relate to any charitable activity for the cause of education, medical aid or relief to the poor. Even the charitable purpose of an object of general public utility is missing. He noted that the assessee during the financial year 2013-14 has expended a meagre amount of Rs.18,160/- only on maintenance of Library. Further, the main object of the assessee is to promote cordial relation; fraternal ties, fruitful co-operation and mutual co-existence in social, educational, cultural, political, economic and technological spheres between India and the Arab World. However, as per section 11(1)(c) of the Act, for a trust/institution created on or after 01.04.1952, the proviso provides that the Board by general or special order shall allow exemption for income applied to charitable or religious purposes outside India.

The Assessing Officer further noted that the objects of the society remained on paper but the actual activities of the assessee are contrary to the said objects which are neither genuine nor within the scope of the objects. In view of the above irregularities noticed, the Assessing Officer issued a show-cause notice to the assessee asking it to explain its case with supporting documents, bills & vouchers etc.,

From the details furnished by the assessee, the Assessing Officer noted that the capital gain of Rs.32,43,18,286/- is adopted from the original return and revised return filed by the assessee as per which the assessee also paid tax on capital gains. He noted that in earlier submissions, the assessee filed two different statements revising application of income computations. He noted that the figures varies in each and every submission made by the assessee society. He, therefore, was of the opinion that the financial statements are discrepant and cannot be relied upon. Therefore, while denying exemption u/s 11 of the I.T. Act, he held that the other provisions such as accumulation of income and indexation of capital gains are not required to be considered and the capital gains are to be calculated purely on the basis of its declaration and tax paid thereon in the original return of income.

He further noted that in respect of accumulation of income @ 15%, the assessee society has shown Rs.4,89,51,521/- in its original and revised return. However, in the revised computation the same was shown at Rs.3,05,03,946/-. This was further revised at Rs.5,69,94,458/- which was revised in response to the show cause notice dated 27.12.2016. The Assessing Officer therefore, concluded that the assessee has not maintained proper books of account. Similarly on verification of the return of income filed for A.Ys 2012-13 & 2013-14, the Assessing Officer noted that the assessee declared the income under the head house property of Rs.5,04,000/- and Rs.5,35,000/- as against expenditure of Rs.8,08,341/- and Rs.8,08,140/- respectively claiming loss for the above A.Ys. However, the assessee is not maintaining any books of account properly such as ledger, cash book and other relevant documents. He, therefore, was of the opinion that the assessee is not having income to spend for the objects of the Society. Whatever income is available is for meeting the administrative expenses only. Further, the administrative expenses are also not supported by proper bills and vouchers as most of the bills are self-made and not genuine.

He further noted that there is violation of provisions of section of section 13(1)(c) of the I.T. Act. He observed that the assessee has received loan from Sri Syed Vicaruddin, Chairman of the Society during the year under consideration for an amount of Rs.9.00 lakhs and also made repayment on various dates amounting to Rs.27,42,000/-. After analysing the various details furnished by the assessee, the discrepancies noticed and violation of various provisions of the I.T. Act, the Assessing Officer rejected the claim of exemption u/s 11 of the I.T. Act and determined the total income of the assessee at Rs.32,63,43,470/.

Before the learned CIT (A) the assessee filed elaborate written submission and furnished additional evidences. The learned CIT(A) forwarded these evidences and submissions made by the assessee to the Assessing Officer and called for a remand report from the Assessing Officer. After considering the remand report of the Assessing Officer and rejoinder of the assessee to such remand report, the learned CIT (A) held that the assessee is eligible for exemption/s 11, there is no violation of provisions of section 13(1)(c) of the I.T. Act, etc., by observing as under : “6.5 To sum up, it is held that a) The assessee is eligible for exemption u/s 11 in view of the categorical finding by Assessing Officer that there is no violation of section 13(1)(c), the assessee’s expenditure was made towards attainment of objectives of the society. Because the amendments made to the trust deed are not applicable to the assessment year under consideration, the same will not affect the eligibility of the assessee for the year under consideration. Therefore, Assessing Officer is directed to allow exemption u/s 11 and determine the income of the assessee as per the provisions of section 11. b) As the assessee is held to be eligible for exemption u/s 11, the capital gains on sale of land have to be computed in accordance with the specific provisions of Section 11(1A). c) Amount of Rs.4,50,45,000/- is allowable as deemed application under Clause (2) of explanation to Section 11(1). d) Rs.6,77,82,362/- being taxes paid, is allowable as application of income. e) Rs.7,96,83,950/- is in principle allowable as application of income subject to factual verification by Assessing Officer. f) Rs.2,50,00,000/- invested in fixed deposit is allowable as application u/s 11(2) subject to factual verification by Assessing Officer. Assessing Officer in the remand report submitted that though there is no violation of section 13(1)(c) with regard to the transactions between the assessee society and its Chairman Syed Vicaruddin; provisions of section 269SS and 269T are attracted as some of the transactions of advancing and repaying of loans were carried out in cash. In this regard, it is held that necessary proposal may be put to the Addl.CIT (Exemption) for relevant action at his end.”

Aggrieved with such order of the learned CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds :

The Revenue has also raised the following additional grounds:

The learned DR strongly objected to the order of the learned CIT (A) in granting relief to the assessee. He submitted that the assessee is a registered charitable society in which there was a transfer of asset as a donation during the A.Y 2006-07 admeasuring 10500 sq. yards. The assessee has sold the property in bits and pieces to various organizations. Since the assessee society was not doing any charitable activities at any point of time in the entire tenure of the organization nor built any cultural centre in furtherance of the charitable activities and has violated the provisions of section 13(1)(c), the Assessing Officer has rightly denied the exemption claimed by the assessee u/s 11 and assessed the capital gains on such sale of capital assets without applying for any charitable cause. He submitted that the learned CIT (A) without appreciating the fact that there is no charitable activity done nor did the capital asset applied for any charitable cause has allowed the claim of exemption u/s 11 of the I.T. Act. Further, the learned CIT (A) proceeded to the sale of above said land into bits and pieces and held the same as application of funds resorting to the calculation u/s 11(1A) and held section 50C as unapplicable to the assessee. He submitted that the conclusion of the learned CIT (A) that the assessee is a charitable organization is not correct since it is a sham and without any basis and the learned CIT (A) has abruptly and without any reason concluded in favour of the assessee which is a conclusion without any fact or basis.

The learned DR drew the attention of the Bench to the following written submission:

Referring to the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Bhopal vs M/S. Shelly Products and Another order dated 8th May, 2003, the learned DR submitted that once the assessee has filed the return of income declaring LTCG and paid the taxes, he cannot claim the refund treating the same as exempt by filing the revised computation before the Assessing Officer.

The learned DR further submitted that there is no change in the audited financial statement furnished to the Members of the Trust and the learned CIT (A) accepted the unaudited/unsubstantiated audit of accounts and revised report in form 10B.

Referring to the grounds of appeal raised by the Revenue he submitted that when the assessee was pursuing religious objects by way of construction of Masjid and allowing its functioning on the land of the trust as admitted by itself in the affidavit before Hon'ble High Court, the learned CIT (A) should not have allowed exemption to the assessee u/s 11 of the I.T. Act. He accordingly submitted that the order of the learned CIT (A) being contrary to the law and facts should be set aside and that the order of the Assessing Officer be restored.

The learned Counsel for the assessee, on the other hand, strongly supported the order of the learned CIT (A) granting relief to the assessee. He submitted that the Hon'ble Supreme Court in its order dated 9.11.2013 has set aside the direction of the Hon'ble High Court with regard to the alienation of or construction on the property for non-cultural or non-religious purposes.

Referring to the decision of the Hon'ble Supreme Court, copy of which is placed in the Paper Book, he submitted that the Hon'ble Supreme Court has allowed the trust to alienate its properties in any manner. So far as the allegation of the Revenue that the assessee did not spend any amount on charitable activity or an object of general public utility except for a meagre amount of Rs.18,160/- was spent during 2013-14 on Library is concerned, he submitted that due to lack of funds, the assessee was unable to spent substantial amount towards its charitable activities. This is one of the reasons for which the assessee had to alienate its property and this very submission was taken as a ground before the Hon'ble Supreme Court which permitted the assessee to alienate the property. He submitted that no expenditure has been incurred outside India and the earlier expenditure was incurred inside India to promote its main object of cordial relationship etc. between India and the Arab World. So far as the argument of the Revenue that the expenditure was claimed through revised computation of income is concerned, he submitted that claiming an expenditure through revised computation of income is not fatal to the claim of the assessee.

So far as the argument of the learned DR that why the entire capital gain of Rs.32,43,18,286/- shall not be taxed is concerned, he submitted that the entire capital gain cannot be taxed as the entire amount has been used as application of money and also creation of fixed deposit in accordance with the provisions of section 11(1A) of the I.T. Act. As regards the argument of the learned DR that the capital expenditure of Rs.7,61,39,287/- should be disallowed as the same is not incurred towards objectives of the Trust is concerned, he submitted that the above capital expenditure cannot be disallowed as the application of income in the capital field in a charitable trust is permissible. He submitted that the entire receipts arising out of the sale proceeds was spent in the capital field and to state that it is not incurred towards objectives of the Trust does not arise.

So far as the argument of the learned DR that there is violation of provisions of sec13(1)(c) is concerned, the learned Counsel for the assessee referring to the order of the learned CIT (A) at para 5.4 submitted that there is absolutely no violation of provisions of section 13(1)(c). Further, the Assessing Officer in the remand report has also admitted that there is no violation of provisions of section 13(1)(c). He submitted that taking and giving of loans by the assessee was accepted by the Assessing Officer. He submitted that the books of account have been audited and to state that the books of account were not reliable is totally contrary to the facts and evidence on record. He submitted that the presence or absence of entries in the books of account are not relevant for what has to be seen is the provisions of law and if the claim falls within the parameters of the provisions, the expenditure has to be allowed notwithstanding the expenditure was not claimed through the return which again is not a correct statement of fact. The learned Counsel for the assessee submitted that there is absolutely no failure in respect of accumulation of unspent income which has been clearly demonstrated and the learned CIT (A) at Para 6.3.1 of his order has clearly discussed the issue of application of income.

Referring to the decision of the Hon'ble Supreme Court in the case of Kedarnath Jute Mfg. Co vs. CIT reported in 82 ITR 363 (S.C) he submitted that the Hon'ble Supreme Court in the said decision has held that the entries in the books of account are not the criteria to allow or disallow the claim. What has to be seen is the provisions of law governing the subject and accordingly the claims have to be allowed.

He submitted that the learned CIT (A) while holding that the claims though may not be made in the return of income have to be considered and the learned CIT (A) has referred a catena of decisions while allowing the claim.

Referring to the grounds of appeal raised by the Revenue, the learned Counsel for the assessee submitted that the only objection of the Assessing Officer is that all the claims are in order except that these have not been made through by filing a revised return. He reiterated his arguments that mere non-claim of certain items in the return of income is not fatal to claim of an allowance at the appellate stage, if they comply with the provisions of the law governing the charitable trust.

So far as the argument of the learned DR that the assessee cannot claim refund having computed the taxes on the returned income is concerned, the learned Counsel for the assessee submitted that the decision relied on by the learned DR in the case of CIT vs. Shelly Products and Another reported in 261 ITR 367 is not applicable to the facts of the present case. In that case relied on by the learned DR, the entire assessment was annulled whereas in the instant case it is not so. He submitted that Article 265 of the Constitution of India clearly states that the income is to be assessed correctly. He submitted that the income relating to charitable Trust provides the procedure about the taxability of income which should be computed in accordance with the principles and the provisions governing the charitable trust.

The learned Counsel for the assessee further submitted that the payment of income tax is an application of income and it has to be deducted. He submitted that the question of non-application of income in the facts of the present case would not arise as in each and every aspect, the Revenue has considered the issue while making a claim and the learned CIT (A) at Para 6.4.1 of his order has restored the issue back to the file of the Assessing Officer to examine the claim and the grounds raised by the assessee on this issue is not disputed in the findings of the learned CIT (A). He submitted that the revised return could not be filed as the return of income originally filed was belated return of income u/s 139(4) which could not have been revised.

So far as the argument of the learned DR that part of sale transactions are not recorded in the books and it was a conscious act on the part of the assessee society to treat the sale of land as non-exempt and therefore, the capital gains tax was paid is concerned, he submitted that the submission of the learned DR on this issue is not correct. He submitted that the Revenue has failed to note that under the provisions of the Act governing the charitable trusts, it is only the real income that has to be taxed. He submitted that the revised computation of income is in consonance with the provisions of the Act and is not unauthorized as it is in accordance with the statute.

So far as the ground regarding the expenditure of Rs.7,96,83,950/- claimed by the assessee to be incurred by M/s. Namra Constructions is concerned, he submitted that the learned CIT (A) at Para 6.4 has held that the issue needs to be examined in accordance with the provisions of the Act and has restored the matter to the file of the Assessing Officer for examination. He submitted that the fact of alienating the land is not to deviate the provisions or objects of the assessee society but to see that the Trust is supplemented with funds as prior to the sale of immovable property the assessee did not have any liquidity. The learned Counsel for the assessee submitted that the income can never be an expenditure in personal capacity as the provisions of section 11 & 12 treats the payment of Income-Tax also as an application of income. The learned Counsel for the assessee submitted that the decision of the Hon'ble Supreme Court in the case of Bharat Commerce and Industries Ltd v. CIT (1998) 230 ITR 733 relied on by the learned DR is not applicable as the Hon'ble Supreme Court was considering whether the payment of income tax is a deductible expenditure in the course of carrying on the business. He submitted that the Hon'ble jurisdictional High Court has held that the payment of income tax is an application of income as far as the provisions relating to charitable trusts are concerned.

So far as the ground raised by the Revenue that the requirement of spending 85% of the receipts towards charitable purpose is not fulfilled is concerned, the learned Counsel for the assessee drew the attention of the Bench to the computation of income and sources and application of income and submitted that it clearly demonstrates that the assessee has fully spent 85% of its receipts, therefore, this ground is totally contrary to the facts and evidence on record. He submitted that the various decisions relied on by the learned DR are not applicable to the facts of the present case and are distinguishable. He submitted that the learned CIT (A) in the instant case has passed a detailed order. The revenue has nowhere disputed about the claims made in the revised computation or satisfaction of the conditions laid down in section 11 to 13 but has only stated that in certain aspects the claims are made by revised computation and not by way of revised return of income. He submitted that it is not necessary to file the revised return to make the claims in accordance with the statute since in a number of decisions it has been held that the assessee can make a new claim through revised computation during the assessement proceedings. He accordingly submitted that the grounds raised by the revenue should be dismissed.

The learned Counsel for the assessee also relied upon the following decisions: i) Hon'ble Supreme Court in the case of Visvesvaraya Technological University vs. ACIT in Civil Appeal Nos.4361-4366 of 2016 dated 22nd April, 2016. ii) Hon'ble Supreme Court in the case of NTPC Ltd vs. CIT (229 ITR 383). iii) Hon'ble Madras High Court in the case of M/s. Sharp Tools vs. PCIT (421 ITR 91). iv) Hon'ble Kerala High Court in the case of Raghavan Nair vs. ACIT (402 ITR 400) v) Hon'ble Gujarat High Court in the case of S.R. Koshti vs. CIT (276 ITR 165). vi) Hon'ble Delhi High Court in the case of CIT vs. Bharat General Reinsurance Co. Ltd (81 ITR 303). vii) ITAT Cuttack in the case of Mangalam Timbers Products Ltd vs. Income Tax Officer (47 ITR (Trib) 758 ) viii) ITAT Hyderabad in the case of Dy.Cit vs. A. Audinarayana Reddy (27 ITR (Trib.) 580) ix) ITAT Hyderabad in the case of M/s. Mali Flores Ltd vs. DCIT (ITA No.892/Hyd/2011) x) ITAT Chandigarh in the case of Infrastructure Development Fund vs. DCIT in & 645/Chd/2018 and ITA No.528/Chd/2017) xi) ITAT Delhi in the case of ADIT (Exemption) vs. Manav Bharati Child Institute & Child Psychology (20 SOT 517 (Del.) xii) ITAT Agra in the case of JCIT vs. Sewa Education Trust (27 ITR (Trib.) 292. xiii) ITAT Chennai in the case of V. Ramakrishna Charitable Trust vs. DCIT (Exemption) (155 ITD 727). xiv) Hon'ble Bombay High Court in the case of Sesa Goa Ltd vs. JCIT (ITA Nos. 17 & 18 of 2013) dated 28th Feb.2020 xv) ITAT Pune in the case of Shivram Rakhmaj Bankar vs. DCIT in ITA No.1676/PUN/2017 dated 31.08.2020. xvi) ITAT Mumbai in the case of Dy.CIT vs. M/s. Godrej Properties Ltd in ITA No.6486/Mum/2018 dated 11.11.2020.

We have heard the rival arguments made by both the sides and perused the material available on record. We have also considered the various decisions cited before us. We find the assessee in the instant case is a society registered u/s 12A of the Act vide order dated 25.11.1991 issued by the CIT, A.P Hyderabad. The assessee filed its return of income declaring total income of Rs.27,73,91,953/- after claiming exemption u/s 11 of the I.T. Act. We find the Assessing Officer in the order passed u/s 143(3) dated 30.12.2016 determined the total income at Rs.32,63,43,470/- wherein he made addition of Rs.32,43,18,286/- as income from LTCG after indexation. The Assessing Officer in the assessment order has denied the claim of exemption u/s 11 of the Act on the ground that: a) The assessee made certain amendments in its rules and regulations by duly registering before the Registrar of Societies but without obtaining prior approval of the sanctioning authority; b) The assessee filed its original return of income on 28.3.2015 which was revised on 30.06.2015 admitting income from rent, bank interest on Savings Bank Account, Fixed Deposits and sale of property. However, the assessee during the course of assessement proceedings filed revised computation of income wherein the amount of Rs.32,43,18,286 received on sale of land after indexation was treated as long term capital gain and paid taxes thereon. However, the assessee was keeping on changing the figures and therefore, the books of account are not reliable. c) The assessee had incurred meagre expenditure for charitable purposes and the charitable purpose of an object of general public utility is missing; d) The assessee has not spent any money for the purpose of the main object for which it was created; e) The assessee has not maintained proper books of account and has not accumulated 15% of the income which is mandatory in nature. f) The assessee violated section 13(1)(c) of the I.T. Act.

We find the assessee before the learned CIT(A) filed elaborate submissions based on which the learned CIT (A) called for a remand report from the Assessing Officer. The Assessing Officer submitted his remand report which reads as under:

We find the learned CIT (A) on the basis of remand report of the Assessing Officer and rejoinder of the assessee to such remand report held that the assessee is eligible for exemption u/s 11, there is no violation of provisions of section 13(1)(c) of the Act and the amount of tax paid as well as the investment in fixed deposits are allowable application u/s 11(2) of the I.T. Act. The detailed reasonings given by the learned CIT (A) while allowing the claim of exemption are as under:

We do not find any infirmity in the order of the learned CIT (A) on this issue. We find the learned CIT (E) vide order dated 6.7.2020 on the basis of application by the assessee dated 12.11.2018 has approved the various amendments made by the assessee Trust as below:

We find the learned PCIT vide order dated 2.10.2021 has given approval u/s 80G to the assessee Trust the details of which are as under:

We find the activities of the Trust are in accordance with the objects which have been accepted over a period of time and a perusal of I.T. Returns filed by the assessee shows that the assessee is still recognized as a charitable trust u/s 11 of the I.T. Act. The contention of the learned DR that the activities of the assessee are not in accordance with the gift given by the original doner is without any basis. Further, as observed by the Hon'ble Supreme Court in its order dated 9.1.2013, the assessee was allotted a land by the Govt. of A.P vide allotment order dated 13.02.2006. After the allotment of the land by the State Govt. the earlier gift deed ceases to operate and is substituted by the allotment letter. We find the Govt. of A.P has issued the following notification.

The argument of the learned Counsel for the assessee that the Hon'ble Supreme Court has allowed the Trust to alienate its properties in any manner could not be controvered by the learned DR. We find merit in the argument of the learned Counsel for the assessee that since the assessee trust had insufficient funds to carry on its activities it had to sell a part of the property. Since the assessee trust had not filed its original return of income in time and it was a belated return, the assessee had to file the revised computation during the course of assessement proceedings.

So far as the argument of the learned DR that the assessee permitted commercial activities in the land in violation of the obejct is concerned, we find the order of the Hon'ble High Court has already been reversed by the Hon'ble Supreme Court. Further, in our opinion, there is no embargo on a charitable trust to let out its properties for commercial purposes as long as it fulfills its main objects.

So far as the argument of the learned DR that the assessee has spent meagre amount for charitable activities or on an object of general public utility is concerned, we find merit in the argument of the learned Counsel for the assessee that since the assessee trust was not having liquidity of funds and that was one of the reason for which the assessee had to aleniate its property and this was a ground also taken before the Hon'ble Supreme Court which permitted the assessee society to aleniate its property. We further find that no expenditure has been incurred outside India and the entire expenditure has been incurred in India. We further find merit in the argument of the learned Counsel for the assessee that claim of an expenditure through revised computation of income is not fatal to the claim of expenditure u/s 11 by the assessee.

So far as the argument of the Revenue that why the entire capital gain of Rs.32,43,18,286/- as admitted by the assessee in its return of income be not taxed is concerned, we find it is the submission of the assessee before the Assessing Officer through a revised computation that the entire amounts have been utilised as application of money and also purchase of fixed assets in accordance with section 11 of the I.T. Act. It has been held in varoius decisions that the entries in the books of account is not the criteria to alow or disallow the claim. What is to be seen is the provisions governing the claim and accordingly the claims have to be allowed.

We find the Hon'ble Supreme Court in the case of Kedarnath Jute Mills vs. CIT reported in 82 ITR 363 has held as under: “The main contention of the learned Solicitor General is that the assessee failed to debit the liability in its books of accounts and, therefore, it was debarred from claiming the same as deduction either under section 10 (1) or under s. 10 (2) (xv) of the Act. We are wholly unable to appreciate the suggestion that if an assessee under some misapprehension or mistake fails to make an entry in the- books of account and although under the law, a deduction must be allowed by the Income Tax Officer, the assesses will lose the right of claiming or will be debarred from being allowed that deduction. Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter. The assessee who was maintaining accounts on the mercantile system was fully justified in claiming deduction of the sum of Rs. 1,49,776/being the amount of sales tax which it was liable under the law to pay during the relevant accounting year. it may be added that the liability remained in tact even after the assessee had taken appeals to higher authorities or Courts which failed. The appeal is consequently allowed and the judgment of the High Court is set aside. The question which was referred is answered in favour of the assessee and against the Revenue. The assessee will be entitled to costs in this Court and in the High Court. Appeal allowed.”

We find the Hon'ble Bombay High Court in the case of Pruthi Brokers & Shareholders (P) Ltd vs. CIT has held that the assessee is entitled to raise claims not made in the return of income before the appellate authorities. In that case the assessee filed a return of income in which it omitted to make a claim for payment of SEBI fees. The claim was made by a letter during the assessment proceedings. The AO rejected the claim on the ground that he had no authority to allow any deduction which had not been claimed in the ROI. The assessee raised the claim before the CIT (A) who allowed and this was confirmed by the Tribunal. The department filed an appeal before the Hon'ble High Court claiming that as per Goetze India 284 ITR 323 (SC), the assessee was not entitled to make an additional claim for deduction other than by filing a revised return. The Hon'ble Supreme Court dismissed the appeal filed by the Revenue. It was held that it is well settled that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. That they may choose not to exercise their jurisdiction in a given case is another matter. The exercise of discretion is entirely different from the existence of jurisdiction. Goetze India was confined to a case where the claim was made only before the AO and not before the appellate authorities. The Court did not lay down that a claim not made before the AO cannot be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. On facts, there was nothing to show that the claim entertained by the CIT (A)/ ITAT was improper.

So far as the argument of the learned DR that the assessee has violated the provisions of section 13(1)(c) of the Act is concerned, we find the learned CIT (A) has already given a finding that the Assessing Officer in his remand report has stated that there is no violation. The various other objections raised by the Revenue has already been well addressed by the learned CIT (A) in his detailed order which has already been reproduced in the preceding paragraphs. Since the learned CIT (A) has elaborately discussed each and every issue threadbare and has given his finding holding that the assessee is eligible to claim exemption u/s 11 of the I.T. Act, therefore, we concur with the findings of the learned CIT (A) on this issue. Accordingly the order of the learned CIT (A) is upheld and the grounds raised by the Revenue are dismissed.

In the result, appeal filed by the Revenue is dismissed.