Income Tax Appellate Tribunal - Delhi
Software Technology Parks Of India, New ... vs Ito (E), New Delhi on 16 May, 2018
1 ITA Nos. 2169 & ors/Del/2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'G' NEW DELHI
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
AND
SH. PRASHANT MAHARISHI, ACCOUNTANT MEMBER
ITA No. 843/DEL/2010 ( A.Y 2006-07)
ITA No. 2169/DEL/2011 ( A.Y 2007-08)
Software Technology Parks of India Vs ITO(E)
6, CGO Complex, Trust Ward-II
Electronics Niketan, Lodhi Road Aayakar Bhawan, District
New Delhi Centre, Laxmi Nagar
AAATS2468J New Delhi
(APPELLANT) (RESPONDENT)
ITA No. 2431/DEL/2011 ( A.Y 2007-08)
ITA No. 1470/DEL/2013 ( A.Y 2008-09)
ITO(Exemptions) Vs Software Technology Parks of
Trust Ward-II, Room No. 414, India
Aayakar Bhawan, Laxmi Nagar 6, CGO Complex,
District Centre, Electronics Niketan, Lodhi
New Delhi Road, New Delhi AAATS2468J
(APPELLANT) (RESPONDENT)
Appellant by Sh. Akhilesh Gupta, CA, Ms.
Priya Juneja, CA & Sh.
Satish Kr. Singh, CA
Respondent by Sh. S. S. Rana, CIT DR
Date of Hearing 07.03.2018
Date of Pronouncement 16.05.2018
ORDER
PER BENCH These appeals are filed by the assessee as well as Revenue against the orders dated 28/02/2011 & 30/12/2009 passed by CIT(A)-XXI, New Delhi.
2 ITA Nos. 2169 & ors/Del/20112. The grounds of appeal are as under:-
ITA No. 843/DEL/2010 ( A.Y 2006-07) Assessee's appeal1. The CIT(A) has erred in denying the contention of the appellant that advances made for charitable purposes of rs.26,87,656/- cannot be construed as application of income.
2. The CIT(A) has erred in denying the deemed application u/s11(1) explanation 2 of the Income Tax account on account of unrealized income of Rs.4,01,16,473/-. IN this regard all the necessary documents/intimation was field with the revised return u/s 139(5) of the Income Tax Act, 1961."ITA No. 2169/DEL/2011 (A.Y 2007-08) Assessee's appeal
1. The CIT(A) has erred in denying the contention of the appellant that advance made for charitable purpose of Rs.3,63,83,604/- cannot be construed as application of income u/s 11 of the Income Tax Act, 1961.
2. The CIT(A) has erred in denying the deemed application u/s 11(1) Explanation 2 of the Income Tax Act on account of unrealized income of Rs.11`,33,55,285/-. In this regard all the necessary documents/intimation was filed with the belated return u/s 139(4) of the Income Tax Act, 1961."ITA No. 2431/DEL/2011 ( A.Y 2007-08) Revenue's appeal
"1. In the facts and circumstances of the case, the Ld. CIT(A) has erred in granting benefits of Section 11 & 12 of the Act even when the assessee is involved in purely commercial activities."ITA No. 1470/DEL/2011 ( A.Y 2008-09) Revenue's appeal
"1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in allowing the eligibility for exemption u/s 11 & 12 of the Income Tax Act, 1961 ignoring the fact the assessee is engaged in business activities and no charitable activity is being done which is the basic requirement for available the exemption u/s 11 of the Act. The assessee is also get hit by provision of section 13(2)(g) r.w.s. of the Income Tax Act, 1961.3 ITA Nos. 2169 & ors/Del/2011
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO amounting to Rs.1,00,00,59,234/- which is a consequential effect to (1) above.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in directing the AO to verify the amount claimed of Rs.5,01,613, the same was claimed u/s 11(1)(a) of the Act and AO rightly disallowed the same, since the benefit of Section 11 & 12 has been denied by the AO.
4. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in allowing depreciation of Rs.10,65,85,905/- ignoring the fact that there is apprehension that granting depreciation could lead to a situation where amount of depreciation would exceed the purchase value of the assets."
3. For the sake of convenience we are taking up the facts of the assessee's case for A.Y. 2006-07. The assessee is registered under Section 12A(a) of the Income Tax Act, 1961 w.e.f. 01.04.1994 and also got registration for exemption from CBDT u/s 10(23)(c)(iv) upto A.Y.1998-99, while its application for the subsequent assessment years were pending for approval with the Income Tax Department. The assessee filed its return of income regularly in the past with the Department and it had been assessed at NIL income by treating its objective covered u/s 2(15) during assessment proceedings u/s 143(1) as well as u/s 143(3) by the predecessor assessing authorities. However, for the A.Ys. 2003-04, 2004-05 and 2005-06, the assessee's claims for benefit of exemption u/s 11 was rejected vide Assessment Order u/s 143(3) of the Act, but was found to be in order, and upheld by the then CIT(A). Subsequently, assessment for the current A.Y. 2006-07 was finalized considering the objectives and activities not of a charitable nature and disallowing benefit of Section 11 of the Act.
4. Being aggrieved assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
4 ITA Nos. 2169 & ors/Del/20115. The Ld. AR submitted that the order of A.O is contrary to provisions of law, facts, circumstances, natural justice and all other principles of law and as such liable to be quashed. The Ld. AR submitted that the action of AO in denying the benefits of section 11 & 12 of IT Act is perverse and contrary to the facts and provisions of law hence liable to be undone. The Ld. AR submitted that the society paid the advance during the year under consideration to various suppliers/contractors and claimed the same as application of income for charitable purpose. The Assessing Officer rejected the benefits of section 11 & 12 of IT Act which is arbitrary, contrary to the principles of natural justice and also misconceived on facts and law as such ought to be deleted. The Ld. AR submitted that the Assessing Officer as well as the CIT(A) were erred in denying the contention of the assessee that advances made for charitable purposes amounting to Rs.26,87,656/- cannot be construed as application of income. Further, the Ld. AR submitted that the CIT(A) erred in denying the deemed application u/s 11 (1) Explanation 2 of the Income Tax Act on account of unrealized income of Rs. 4,01,16,473/- despite filing the necessary documents/intimation with the revised return u/s 139(5) of the Income Tax Act, 1961.
6. The Ld. DR relied upon the Order u/s 12A and 80G of the Act. The Ld. DR also relied upon the case of PIT Vs Charanjiv Charitable Trust 2014 43 taxmann.com 300 (Delhi)/2014 223 Taxman 71 (Delhi)/2014 267 CTR 305 (Delhi) where Hon'ble Delhi High Court held that in case of a charitable trust, is found that provisions of section 13(1 )(c)(ii) read with section 13(3) are not following, trust would lose its exemption in entirety, with result that assessment of its income will be made according to provisions of Act. The Ld. DR further relied upon the decision in case of ACIT Vs Space Age Research & Technology Foundation, Charitable Trust 2014l 43 taxmann.com 300 (Delhi)/ 20141 223 Taxman 71 (Delhi)/[2014] 267 CTR 305 (Delhi)]. The Ld. DR further submitted that interest paid by the assessee @18% of Rs. 2050491/-
5 ITA Nos. 2169 & ors/Del/2011to persons specified under section 13(3) of the Act results into violation of the provisions of section 13(3) of the Income Tax Act and provisions of section 13(1)(c) read with section 13(2) are triggered. The ITAT Delhi held that even if there is one instance of application or use of the income or property of the trust directly or indirectly for the benefit of any prohibited persons, the trust will lose exemption in respect of its entire income and resultantly the assessment of its income will be made according to the provisions of the Act. The Ld. DR relied upon the decision of CIT Vs Vijeta Educational Society (2011-TIQL-591-HC-ALL-IT) where Hon'ble Allahabad High Court held that in view of clause (c) 13(1) rendering the entire income of Trust or charitable institution on liable to tax even if only part of income is directed to be applied for the benefit of the specified persons. The Ld. DR also relied upon the decision of CIT Vs Audh Educational Society 2011 15 taxmann.com 235 Allahabad)/2011l 203 Taxman 166 (Allahabad) Budha Vikas Samiti Vs CIT 2011 11 taxmann.com 234 (Patna)/[2011] 199 Taxman 395 (Patna)/2011 242 CTR 324 (Patna) Dy. PIT v. India Cements Educational Society (157 ITD 1008 / 46 ITR 80)
7. We have heard both the parties and perused the records. Ground No. 1 of the appeal filed by the Assessee for A.Y. 2006-07, it can be seen that the advances was made for charitable purpose only. The Assessing Officer as well as the CIT(A) has not given any reason for rejecting advances as applincation of income. The word 'may' is used by the CIT(A) which means the CIT(A) has not arrived at the conclusion based on the facts and law. The assessee society paid advance of Rs. 26,87,656/- during the year under consideration to various suppliers/contractors and claimed the same as application of income for charitable purpose only. The evidence put up before the Assessing Officer confirms the same. Thus, these advances was used by the assessee for charitable purpose only. Therefore, the Assessing Officer and CIT(A) was not correct in denying the claim of application of income on the advances made to the various suppliers/contractors. Therefore, Ground No. 1 of the assessee's appeal is allowed.
6 ITA Nos. 2169 & ors/Del/20118. As relates to Ground No. 2, the claim of assessee amounting to Rs. 4,01,16,473/- in respect of deemed application u/s 11(1) explanation 2 of the Income Tax Act, 1961 fulfills all the conditions prescribed therein. The CIT(A) held that the original return was filed and the same was not accompanied by intimation in writing to the Assessing Officer regarding exercise of the option under Explanation 2 to Section 11(1). The intimation was attached to the revised return filed under Section 139(5), and therefore, the benefit of filing of intimation was denied by the CIT(A). But as per the provision of the Section 139(5) of the Act, there is no bar for filing intimation with the revised return. The intimation can be filed at any time before the assessment proceedings are completed. Therefore, the Assessing Officer as well as the CIT(A) was not correct in rejecting this claim of the assessee. Therefore, Ground No. 2 of the assessee's appeal is allowed.
9. In result, appeal being ITA No. 843/DEL/2010 filed by the assessee is allowed.
10. Now we come to the ITA No. 2169/DEL/2011 for A.Y. 2007-08, the facts are identical and the issues contesting are also identical with the A.Y. 2006-07 wherein we have already decided in favour of the assessee. Therefore, appeal filed by the assessee is allowed.
11. In result, appeal being ITA No. 2169/DEL/2011 filed by the Assessee is allowed.
12. As regards, ITA No. 2431/DEL/2011 for A.Y. 2007-08, filed by the Revenue, the issue contested is that the CIT(A) erred in granting benefit of Section 11 and 12 of the Act even when the assessee is involved in purely commercial activities. From the records we can see that the objects of the assessee was never disputed by the Revenue authorities at any stage. There was no change in the object and the functions of the assessee. The activities which are carried by the assessee was as per the objects and functions. Therefore, Revenue failed to establish that there is any commercial activity. Thus, the CIT(A) rightly granted benefit of Section 11 and 12 of the Act to the assessee.
13. In result, appeal being ITA No. 2431/DEL/2011 filed by the Revenue is 7 ITA Nos. 2169 & ors/Del/2011 dismissed.
14. Now we take up appeal being ITA No. 1470/DEL/2013 for A.Y. 2008-09 filed by the Revenue.
15. The Assessing Officer determined the income at Rs. 100,40,47,200/- as against Nil income declared by the assessee. The assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
16. The Revenue is before us. The Ld. DR relied upon the Assessment Order.
17. The Ld. AR submitted that the CIT(A) has rightly allowed the issues contested by the Revenue herein after following the earlier Assessment Year orders passed by the CIT(A).
18. We have heard both the parties and perused the records. The CIT(A) held as under:
" 3. Ground No. 1 is general in nature.
4. 'Ground No. 2 is against the benefit of exemption u/s. 11 and 12 of the IT Act. In this regard it is found that similar issue was also involved in assessment year 2007-08 which has been decided by me vide order dated 28-2-2011, wherein, vide para 4.7 of the appellate order, I have held that provision of Section 2(15) of the Act can be attracted w.e.f. assessment year 2009-10 which has been offered for taxation by the assessee from assessment year 2009-10 and details have been submitted in this regard that activity has been found to be in the nature of trade, commerce or business and it has been offered for taxation accordingly for assessment year 2009-10. So, amendment effected from A.Y. 2009-10 cannot be proponed for A.Y. 2008-09. Similar issue has been decided by my predecessor while deciding the appeal for assessment year 2003-04, 2004-05, 2005-06 and 2006-07 and by me for assessment year 2007-08. So, respectfully following the earlie4r year's judgments, it is decided that assessee 8 ITA Nos. 2169 & ors/Del/2011 is eligible for exemption u/s. 11 & 12 of the IT Act. Ground No. 2 of appeal is allowed.
5. Ground No. 3 is consequential as ground No. 2 has already been allowed, appellant gets relief. Ground No. 3 is also allowed.
6. Ground No. 4 pertains to not allowing deduction with regard to provisions for advances written back amounting to Rs.5,01,613/-. In this regard vide letter dated 12.9.2011 Id. AR of the appellant has submitted that provision for advances written back is with respect to the provisions made in earlier assessment years and not claimed as expenditure while computing the taxable income. The above said provisions have been written back in the current assessment year and the addition of the same amounts to double taxation. The AO has not given any finding in this regard. So, in my considered opinion, it amounts to double taxation. However, AO is directed to verify the claim and allow after proper verification. This ground No. 4 is partly allowed.
7. Ground No. 5 pertains to action of AO by which he has considered amortization expenses of Rs. 1,50,000/- relating to license fee. In this regard it has been alleged that no specific observation has been given in the assessment order. During the course of appellate proceedings it has been contended that these type of claims have been made in earlier years also beginning from A.Y. 2004-05, but, AO has taken action in A.Y. 2008- 09 only. Furthermore, he has added back without giving any specific finding in this regard. AO is directed to verify the claim and allow it after verification. Ground No. 5 of the appeal is partly allowed.
8. Ground No. 6 pertains to not allowing depreciation because capital expendi5tyure has been allowed as application of income in the earlier years. In this regard reliance is placed on the judgrnent of Hon'ble Delhi High Court in the case of Vishwa Jagriti Mission, reported at 20112-TIOL-271-HC-DEL-IT, 9 ITA Nos. 2169 & ors/Del/2011 wherein, in the relevant paragraph No. 13 the Hon'ble High Court has held as under:-
"P. 13:- The judgment of the Supreme Court in Escorts Limited vs. Union of India supra) has been rightly held to be inapplicable to the present case. There are two reasons as to why the judgment cannot be applied to the present case. Firstly, the Supreme Court was not concerned with the case of a charitable trust/institution involving the question as to whether its income should be computed on commercial principles in order to determine the amount of income available for application to charitable purposes. It was a case where the assessee was carrying on business and the statutory computation provisions of Chapter IV-D of the Act were applicable. In the present case, we are not concerned with the applicability of these provisions. We are concerned only with the concept of commercial income as understood from the accounting point of view. Even under normal commercial accounting principles, there is authority for the proposition that depreciation is a necessary charge in computing the net income. Secondly, the Supreme Court was concerned with the case where the assessee had claimed deduction of the cost of the asset under Section 35(1) of the Act, which allowed deduction for capital expenditure incurred on scientific research. The question was whether after claiming deduction in respect of the cost of the asset under Section 35(1), can the assessee again claim deduction on account of depreciation in respect of the same asset. The Supreme Court ruled that, under general principles of taxation, double deduction in regard to the same business outgoing is not intended unless clearly expressed. The present case is not one of the type, as rightly distinguished by the CIT (Appeals).'' 8.1 As facts and circumstances of the appellant are identical, following the judgment of the Hon'ble Delhi High Court , it is held that depreciation should be allowed to the appellant. Ground No. 6 of appeal is allowed."10 ITA Nos. 2169 & ors/Del/2011
There is no need to interfere with the findings of the CIT(A) as the CIT(A) after going through various records given a finding. In fact, the Hon'ble Apex Court in case of CIT vs. Rajasthan & Gujrati Charitable Foundation Poona (2018) 89 taxmann.com 127 (SC) held that charitable institution registered under Section 12A, even though incurred expenditure for acquisition of capital assets has to be treated as application of income for charitable purposes under Section 11(1)(a) and depreciation has to be allowed on assets so purchased. Therefore, the appeal filed by the Revenue does not survive.
19. In result, appeal being ITA No. 1470/DEL/2013 filed by the Revenue is dismissed.
Order pronounced in the Open Court on 16th May, 2018.
Sd/- Sd/-
(PRASHANT MAHARISHI) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 16/05/2018
R.N*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
11 ITA Nos. 2169 & ors/Del/2011
Date
1. Draft dictated on 08/03/2018 PS
2. Draft placed before author 12/03/2018 PS
3. Draft proposed & placed before .2018 JM/AM
the second member
4. Draft discussed/approved by JM/AM
Second Member.
5. Approved Draft comes to the PS/PS
Sr.PS/PS 16.05.2018
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk 16.05.2018 PS
8. Date on which file goes to the AR
9. Date on which file goes to the
Head Clerk.
10. Date of dispatch of Order.