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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SHRI MAHAVIR PRASAD & SHRI AMARJIT SINGH
PER MAHAVIR PRASAD, JUDICIAL MEMBER:
This appeal along with CO No.184/Ahd/2015 has been preferred by the assessee against order of the ld.CIT(A) –VI, Ahmedabad and following ground have been taken:
Whether on the facts and in the circumstances of the case the ld.CIT(A) is justified in allowing the assessee’s appeal negating the finding of the AO denying the benefits of section 11(1)(a) of the I.T. Act in view of proviso 1&2 inserted to section (15) of the I.T.Act and deleting additions made of Rs.Rs.92,01,510/-
ITA No.2496 /Ahd/2015 with CO 2 2. On the facts and circumstance the case, the ld.CIT(A) ought to have upheld the order of the Assessing Officer.
Facts of the case are that the assessee filed its return of income on 30.9.2011 declaring total income at Rs.NIL. Case was selected for scrutiny assessment under section 143(3) of the Act was framed on 27.3.2014 declaring income at Rs.92,01,510/- after denying claim under section 11 of the Act. Assessee objected to the denial of exemption under section 11 of the Act on account that it was carrying on business of high quality semen on commercial basis and with a profit motive The AO had discussed the issue in para 4 to 12 of the assessment order. During the course of assessment proceedings, the AO noted that the assessee was not involved in charitable activities as its activities/services were rendered for the advancement of general public utility, for which it was receiving sale consideration. Therefore, The AO held that as per the revised provisions of Charitable purpose, the assessee was no longer charitable trust and accordingly, the assessee was not eligible for exemption u/s.11 rws 12A of the Act. The ld.AO also held that the assessee was carrying on business with profit motive and its activities were no longer charitable as it had a surplus of Rs.92,01,510/- during the relevant year. The AO denied exemption u/s.11 to the assessee and treated the surplus of Rs.92,01,510/- as business income of the assessee. Against such order, the assessee preferred first statutory appeal before the ld.CIT(A) who partly allowed the appeal of the assessee. Now assessee is before us.
While deciding the appeal, the ld.CIT(A) held that since facts of the present case were exactly similar to the assessee’s case decided by the CIT(A) in para 5.14 . The ld.AR relied on the order of the co-ordinate Bench of the Tribunal in assessee’s own case, and on similar grounds, the ITAT held that
ITA No.2496 /Ahd/2015 with CO 3 we have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that the facts of the assessee trust are similar to the facts of Sabarmati Ashram Gaushala Trust, and in its order Hon’ble High Court’s decisions have been discussed and the same is as under:
"We are wholly in agreement with the view of the Tribunal. The objects of the Trust clearly establish that the same was for general public utility and where for charitable purposes. The main objectives of the trust are-to breed the cattle and endeavour to improve the quality of the cows and oxen in view of the need of good oxen as India is prominent agricultural country, to produce and sale the cow milk; to hold and cultivate agricultural lands; to keep grazing lands for cattle keeping and breeding, to rehabilitate and assist Rabaris and Bharwads; to make necessary arrangements for getting informatics and scientific knowledge and to do scientific, research with regard to keeping and breeding of the cattle, agriculture, use of milk and its various preparations, etc.; to establish other allied institutions like leather work and to recognize and help them in order to make the cow keeping economically viable; to publish study materials, books, periodicals, monthlies etc., in order to publicize the objects of the trust as also to open schools and hostels for imparting education in cow keeping and agriculture having regard to the trust objects. All these were the objects of the general public utility and would squarely fall under section 2 (IS) of the Act. Profit making was neither the aim nor object of the Trust. It was not the principal activity. Merely because while carrying out the activities for the purpose of achieving the objects of the Trust, certain incidental surpluses were generated, would not render the activity to the nature of trade, commerce or business. As clarified by the CBDT in its Circular No. 11/2008 dated 19th December 2008 the proviso aims to attract those activities which are truly in the regarded as business even when profit motive cannot be established/proved. In such cases, there should be evidence and material to show that the activity has continued on sound and recognized business principles, and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that the activity undertaken is in fact in the nature of business. The test as prescribed in Raipur Manufacturing Company [1967] 19 STC 1 (SC) and Soi Publication fund [20Q2] 258 ITR 70 (SC); {2002} 126 STC 288 (SC} can be applied. The six indicia
ITA No.2496 /Ahd/2015 with CO 4 stipulated in Lord fisher [1981] STC 238 are also relevant. Each case, therefore, has to be examined on its own facts.
In view of the aforesaid enunciation, the real issue and question is tht whether the petitioner-Institute pursues the activity of business, trade or commerce. To our mind, the respondent while dealing with the said question has not applied their mind to the legal principles enunciated above and have taken a rather narrow and myopic view by holding that the petitioner-Institute is holding coaching classes and that this amounts to business."
In the result, we do not find that the Tribunal has committed any error and the Tax Appeal is therefore dismissed.”
Respectfully following the Hon’ble High Court’s order and ITAT’s order in assessee’s own case, department allowed the claim and similar exemption was given by the department. In view of the above, we dismiss the appeal of the Revenue.
So far as CO is concerned, in CO the assessee has taken following grounds:
The Assessing officer while holding the appellant's income as business income erred in not granting set off of brought forward unabsorbed depreciation on the ground that it was deficit of earlier years which cannot be treated as business loss. It is submitted it be so held now. 3.1 The Assessing officer erred in holding that in earlier years, appellant would have got deduction of the capital expenditure as application of funds and set off of unabsorbed depreciation now would result in double deduction. The appellant submits that in the earlier years it has not claimed deduction of capital expenditure but had claimed only depreciation accordingly there is no double deduction. It is submitted it be so held now. 3.2 The Assessing officer erred in not appreciating the settled legal position that the unabsorbed depreciation can be set off against any income. It is submitted it be so held now. 4. The Assessing officer has erred in computing tax on the total income determined by him at flat rate of 30% in place of correct slab rate as applicable to an Association of Persons (AOP). It is submitted it be so held now.
ITA No.2496 /Ahd/2015 with CO 5
The Assessing officer has erred in charging interest under section 234B of the Act & has erred in withdrawing interest under section 244A.”
We have gone through relevant material. In connected appeal, ITA No.2496/Ahd/2015 we have given relief to the assessee and dismissed the appeal of the department. The ld.AR cited an order of this co-ordinate Bench in assesse’s own case in ITA NO.2016/Ahd/201 and CO No.260/Ahd/2014, Asstt.Year 2010-11. It was held by the co-ordinate Bench that coming to the cross objection of the assessee, we find that the deficit shown in the earlier years is eligible to be given set off for surplus, if any for the year under consideration. Therefore, the AO is directed to allow the set off of brought forward deficit while giving appeal effect to our order. In view of the ITAT’s order, we allow ground nos.1, 2 and 3 in CO. So far as ground no.4 is concerned, the same has become infructous and as far as charging of interest under section 234B of the Act and withdrawing interest under section 244A, it needs not to be adjudicated because the same is consequential.
In the result, the appeal of the Revenue is dismissed and CO of the assessee is partly allowed.
Order pronounced in the Court on 9th November, 2017 at Ahmedabad.
Sd/- Sd/- (AMARJIT SINGH) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 09/11/2017