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Income Tax Appellate Tribunal, BENCH ‘A’ KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM ]
ORDER PER N.V.VASUDEVAN, JM:
This is an appeal by the Revenue against the order dated 05.02.2013 of CIT(A)-Jalpaiguri relating to A.Y.2009-10.
The grounds of appeal raised by the Revenue read as follows :-
“1. That on the facts and the circumstances of the case, The Ld. CIT (A)-JaJpaiguri erred in directing the A.O. to grant the benefit of exemption u /s 11 of the Income Tax Act, 1961 to the assessee.
2. That on the facts and the circumstances of the case, The Ld. CIT (A)-Jalpaiguri erred in holding that the assessee corrected the defective Form-l0B, during the course of assessment proceedings whereas neither such correction was ever made nor revised Form no. 10B was submitted by the assessee.
3. That on the facts and the circumstances of the case, The Ld. CIT (A)- Jalpaiguri erred in overlooking the fact that the assessee had not complied with statutory requirement to file Form 10 as required by Sec.11 (2) of the I TAct.
4. That on the facts and the circumstances of the case, The Ld. CIT (A)-Jalpaiguri erred in holding that the A.O. had formed an opinion about the transaction of investment in building and education fund whereas the statement of computation of income containing the above was actually submitted by the assessee in course of assessment proceedings.
5. That the appellant craves leave to add to and/or alter, amend, rescind or modify the grounds here in above before or at the hearing of this appeal.”
Indian Institute of Welding-A.Y.2009-10
The Assessee is a Society registered under section 25 of the India Companies Act, 1956. The Assessee was granted registration by CIT(A) u/s 12A of the Income Tax Act, 1961 (Act). The object of the assesse is promotion and advancement of science and practice of welding, education of the professionals in the field of welding with the ultimate object of promoting efficiency and growth of welding industry thereby benefiting all the industries in the country. For A.Y.2009-10 the assessee filed return of income on 18.02.2010 declaring total income at Rs. Nil.
As per annual accounts, assessee had a surplus of Rs. 13122399/-. In the return of income filed for AY 09-10, the Assessee claimed that the same was exempt u/s.11 of the Act. According to the AO, the return was not accompanied by any computation of total income or Form l0B showing any deemed application of income. The AO called upon the Assessee to explain as to how the said amount of Rs. 13122399/- was exempt and not chargeable to tax. In the course of hearing on 12.12.2011 before the AO, a copy of computation of total income claiming deemed application u/s. 11(2) of Rs. 13122400/- was filed. The same showed investments u/s. 11(5) of the Act in the following manner :-
Investment in fixed deposits Rs.7437631/- 2. Transfer to building fund Rs.4000000/- 3. Transfer to education fund Rs. 2000000/- Rs. 13437631/-
The AO on a perusal of the aforesaid details was of the view that i) The assessee has not given any prior intimation to the A.O. regarding setting apart of the fund. No Form No. 10 was filed with the return and not even during the course of assessment. In Form No. 10B there was no mention regarding permission to accumulate. ii) That a sum of Rs. 40.00 lakh and Rs. 20.00 lakh respectively have been transferred to Building and Education fund by simple book entries which is not a manner or mode of investment as contemplated u/s. 11(5) of the Act. Further the AO also observed that investments in fixed deposits are not verifiable as no evidence was produced except photocopy of a Fixed Deposit Certificate showing investment on 10.03.2009. Indian Institute of Welding-A.Y.2009-10 According to the AO therefore it cannot be said that investment is made as per provisions u/s. 11(5) of the Act out of the fund so set apart in the year. Accordingly, assessee's claim of benefit u/s. 11(2) of the Act was denied.
Thereafter the AO determined the total income of the assessee as follows :-
Income from Other Sources As per income expenditure account Rs.23859935 Less Depreciation being a charge on income But not application of income Rs. 269261 Income available for application Rs.23590674 Application of Income i)Expenditure as per I/E excluding depreciation Rs.10737536 Less : Depreciation already allowed Rs. 269261 Rs.10468275 ii)Capital expenditure Rs. 101670 Rs.10569945 Total Income chargeable to tax rounded off Rs. 9482130
Aggrieved by the order of AO assessee preferred appeal before CIT(A). Before CIT(A) the assessee submitted the bank statement showing the outflow of FDRs investment made during the previous year. Of the fund flow statement of A.Yr. 2009- 10 and 2010-11 assessee also explained that the transfer to building fund and transfer to education fund of Rs.Rs.40 lkahs and Rs.20 lakhs respectively were mere proposals to Mumbai branch but the same were not accepted. Ultimately the money was kept in the bank account of Mumbai Branch and ultimately deposited in Fixed deposit. It was therefore submitted that there was no violation of section 11(5) of the Act. The details of the FDRs were given before CIT(A) and the same is extracted in para 4.2. of the CIT(A)’s order.
On consideration of the submission made by the assessee CIT(A) came to the following conclusion :-
“5. Conclusion- It is seen that the Form number l0B was filed with the return of income but was defective. The assessee during the course of assessment proceedings corrected the same. Therefore, this cannot be a reason for denying the exemption u/s 11. The AO has formed an opinion about the transactions of investment in building and education fund by book entries on the basis of internal proposals of a branch to Head Office. This proposal was not accepted by Head Office and all the funds remained deposited in Indian Institute of Welding-A.Y.2009-10
Bank, which were subsequently converted in FDs. The conditions laid down in Section 11(5)(iii) have been fully complied with. The AO has mentioned that investments in existing FDs are not verifiable as the assessee had not filed any detail except the photocopies of FDs. Denying exemption u/s 11 on this point is also without basis. There is nothing more than the photocopies of the FDs that an assessee can file for verification. The photocopies of FDs contain all details or an AO to carry out verification. The A.O is directed to give the benefit of exemption u/s 11. The appeal is allowed. “
Aggrieved by the order of CIT(A) assessee has preferred the present appeal before the Tribunal.
10. This case was fixed for hearing on 20.09.2015. the assessee was duly served notice of hearing. The assessee made a request for an adjournment and the case was adjourned to 15.12.2015. On that date none appeared on behalf of the assessee. The case was again fixed on 13.01.2016 . On that date the accountant of the assessee appeared and requested for time. The appeal was accordingly adjourned to 08.03.2016. When the case was called for hearing on 08.03.2016 none appeared on behalf of the assessee. In the circumstances we proceeded to decide the appeal after hearing the submissions of the learned DR.
The learned DR placed reliance on the order of AO and reiterated the stand of the revenue as reflected in the grounds of appeal before the Tribunal.
We have considered the submissions of the learned DR. It is seen from the order of AO that the benefit of accumulation as per 11(2) of the Act was denied by him for the reason that Form No.10B filed with the return of the income was not properly filled up. Further case of the AO was that Form No.10B contained certain defects. CIT(A) has however found that the defects with Form No.10B had been duly rectified in the course of assessment proceedings. This has been stoutly denied by the revenue in ground no.2 raised before the Tribunal. We, therefore, are of the view that it would be fit and proper to set aside the order of CIT(A) on this issue raised in the grounds of appeal and restore the same for fresh consideration by the AO. We are of the view that defect in Form No.10B are curable defect and the benefit of exemption Indian Institute of Welding-A.Y.2009-10 u/s 11 of the Act cannot be denied on this ground. We therefore make it clear that if the AO should point out the defects, if any, in Form No.10B and allow opportunity to the Assessee to rectify the same. The assessee is also directed to give all the details of FDs to the AO. The AO after examining all these documents is directed to satisfy the question as to whether the assessee should be allowed the benefit of the provision of section 11(2) of the Act. We are supported in the above conclusions by the decision of the Hon’ble Gujarat High Court in the case of CIT vs Mayur Foundation 274 ITR 562 (Gujarat) wherein it was held as follows :-
“The assessee was charitable trust, registered under the provisions of the Bombay Public Trusts Act, 1950. During the relevant previous year, the assessee trust received voluntary contributions amounting to Rs. 2,04,468. The said donations were treated as income within the meaning of section 2(24)(iia) by the Assessing Officer. The assessee contended that the donations of Rs. 1,74,432 and Rs. 9,036 included in the aforesaid total amount of donations were towards the corpus of the trust and in support of the said contentions, confirmation letters from two donors were submitted. The Assessing Officer did not accept the submission and after granting permissible accumulation of 25 per cent, held the balance amount of Rs. 1,53,351 as liable to tax in the hands of the assessee. The Commissioner (Appeals) confirmed the assessment order. The assessee preferred second appeal before the Tribunal, and during the pendency of appeal, moved an application before the Commissioner accompanied by Form No. 10; and a copy of the resolution passed by the trustees to the effect that the donations might be treated as general donations and the assessee be permitted to accumulate the trust income under section 11(2) by condoning the delay in filing Form No.
The Commissioner rejected the assessee's application. The assessee thereupon filed additional ground of appeal before the Tribunal stating that the trust was not taxable in view of the resolution of accumulation and the notice thereof to the ITO under section 11(2). The Tribunal admitted the additional ground and found that, the trust had set apart the amount of donation for the purpose of purchasing land and constructing an orphanage thereupon; that the funds received by way of donations had been kept apart in fixed deposit receipts of nationalised bank; and that the trustees or the settlers had not benefited by the failure or delay on the part of the trust to give notice of such accumulation and accordingly, held that the assessee-trust had complied with all the requirements stipulated by the provisions of section 11(2) and was, therefore, entitled to benefit allowable under said provisions. On a reference against the order of the Tribunal, the Hon’ble Gujarat High Court held, when the matter was pending before the Tribunal by way of an appeal it could be said that the assessment proceeding was pending. The assessing authority is empowered and is duty bound, to pass an order giving effect to the order of the Tribunal for the purposes of assessing the tax liability of the assessee for the assessment year which was under consideration before the Tribunal. In these circumstances, it could not be contended by the revenue that the assessment proceedings came to an end when the assessment order was framed. The Hon’ble Court further held that the proceedings Indian Institute of Welding-A.Y.2009-10
before the Tribunal are meant to correctly assess the tax liability of an assessee. If this be so, it follows that the assessment proceedings cannot be said to be complete and is pending till the appeal is heard and disposed of by the tribunal and the order of the Tribunal is given effect to by the assessing authority by computing the correct tax liability of an assessee. In other words, whether an assessee is required to pay tax or becomes entitled to a refund, would be ascertained by the assessing authority after giving effect to the order of the Tribunal. Consequently, the Hon’ble Court held that the Tribunal was well within its jurisdiction to entertain the new ground by which the assessee claimed the benefit under section 11(2) and adjudicate the tax liability of the assessee and in such circumstances, there was no infirmity in the order of the Tribunal, holding that the assessee was entitled to benefits allowable under section 11(2). “
For the reasons given above we allow the appeal of the revenue for statistical purposes.
In the result the appeal of the revenue is treated as allowed for statistical purposes.