Income Tax Appellate Tribunal - Amritsar
Diocese Of Chandigarh,Cni,Mission ... vs Income Tax Officer (Exemptions), ... on 19 March, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
Before Sh. N. S. Saini, Accountant Member
And
Sh. N. K. Choudhry, Judicial Member
ITA No. 737/Asr./2017 : Asstt. Year : 2012-13
Diocese of Chandigarh, Vs Income Tax Officer(Exemption),
CNI, Mission Compound, Brown Jalandhar
Road, Ludhiana
(APPELLANT) (RESPONDENT)
PAN No. AAATD0653Q
Assessee by : Shri. Padam Bhal, CA
Revenue by : Smt. Ratinder Kaur, DR
Date of Hearing :19.02.2019 Date of Pronouncement : 19.03.2019
ORDER
Per N. S. Saini, Accountant Member:
Thi s i s an appeal filed by the assessee agai nst the orde r of CIT(A)-4, Ludhi ana dated 22.09.2017.
2. The assessee has rai sed foll owi ng grounds of appeal :
"The learned CIT (APPEALS) orde r is not justified so far as additions re sulting in taxable income of the assessee amounting to Rs. 18 23453/- by non- deletion of following additions m ade by Assessin g Officer in order u/s 143(3) in gross receipts of the assessee and even afterwards n et rectifying the orde r pa ssed u/s 154 r.w.s. 250( 6) as per details below:
1. The amount of G roup Gratuity Fund balance as on 31.03.2012 Rs.2039842/- and interest accrued on this Group G ratuity Fund Rs.176503/- for the financial year has wrongly been treated as part of gross re ceipts of the t rust by the Assessing 2 ITA No. 737/Asr./2017 Diocese of Chandigarh Officer, whereas this amount is not part of gross receipts of the trust as:
a) a sum of Rs.1975050/- which was total deposit under Group Gratuity Scheme by the trust from the year 2000 (since inception of the scheme) till 31.03.2011 was b/f and incorpora ted in books by passing contra entry by de biting " Group Gratuity Fund" balance under Cash an d Bank Balance on Asset Si de and crediting " Grou p Gratuity Fund"
a/c under Designated Funds on Lia bility Side.
b) further deposit in this fund account were also entered by passing contra entry resulting in total balance in Funds A/c (both Assets and Liability Side) to Rs.2039842/-. Furthe r a sum of Rs.176503/- received a s interest on this fun d deposits wa s wrongly credited by assessee a s income, however was reduced from Gross Receipts while working % utilization of G ross Receipts by the trust for the financial year 2011-
12.
c) these debit and credit entries were only incorporate d in books by the trust to keep track on the balance lying in group gratuity funds scheme and amount deposited pertained to the period from the year 2000 to 2012 and this i s only contra entry and does n ot form pa rt of receipts of the trust . On Asset si de the balance shows balance of Funds deposite d in Designate d A/c and on lia bility side the same amount i s shown as it pe rtains to liability a gainst deposits on behalf of different employees of the trust. "
3. The bri ef facts of the case are that the assessee fil ed return of i ncome on 06.03 .2013 showi ng Ni l i ncome after cl ai mi ng exempti on u/s 11 & 12 of the Act. The Assessi ng Offi cer observed that the assessee has shown desi gnated fund of Rs.29,11 ,196/- recei ved duri ng the year as recei pt out of whi ch a sum of Rs.20,39,842/- i s on account of grou p gratui ty 3 ITA No. 737/Asr./2017 Diocese of Chandigarh fund and Rs.1 ,76,503/- on account of i nterest recei ved on LIC group gratui ty fund have been deducted wi thout any l egality. Thus, i t i s not i n accordance wi th the provi si ons of Secti on 11 of the Act. The amount recei ved in desi gnated fund i s to be shown as recei pt for the year w i thout any deducti on of the group gratui ty scheme fund and interest recei ved on LIC grou p gratui ty fund as per provi si ons of Secti on 11 of the Act . Therefore, he hel d that the assessee shoul d have utili zed Rs.83,37,167/- bei ng 85% of the total recei pts of Rs.98,08,432/- duri ng the year but had actuall y utili zed Rs.65,13,714/- whi ch is 66.40% of the total recei pts. Therefore, he assessed Rs.18,23 ,453/- bei ng the di fference amount as i ncome of the assessee.
4. On appeal , the CIT(A) confi rmed the order of the AO by observi ng as under:
"5.2 I have considered the observations of the Assessing Officer as made by him in the assessment orde r while making impugned a ddition. I have also considere d written submissions filed by the assessee trust/society through its learned AR vide letter dated 09.08.2016 on t he issue unde r reference. On ca reful consideration of the rival contentions, it has been n oticed that the submissions made by the learned AR of the assessee during appellate procee dings are almost similar to the submissions which were made by him during assessment proceedings. It has also been noticed that the funds received by the assessee on account of Group Gratuity Scheme Fund have directly been taken to balance sheet under the head 'designated funds' and have not been route d through income and expenditure account which i n my opinion is a glaring mistake on the part of the assessee. Simila rly, other receipt s routed through designated funds account have also not been route d through income and expenditure account. Moreover, 4 ITA No. 737/Asr./2017 Diocese of Chandigarh the learned AR of the assessee ha s himself admitted that the receipt throu gh designat ed funds account should have been treated as income of the assessee trust. As and when the designated funds are utilized, the assessee t rust is free to claim it as a n expenditure which has also been done by the learned AR while filing revised computation durin g assessment proceedings. In the present case, afte r receiving the funds which have directly been taken to designated funds a ccount, t he assessee ha s deposited pa rt of it in its bank account. It means that the control over the funds is still with the assessee. Nothing has been brou ght on re cord t o suggest that the assessee trust has no control ove r the funds deposited in its ban k a ccount which ha s also been made pa rt of the balance sheet. More over, the Assessing Officer i s fare enough to allow the utilization of expenses claimed through designated fund account. Under su ch circumstances, I am of the opinion that the Assessing Officer has made no mista ke in bringing to tax th e underutilized amount of funds received during the year. The plea of the assessee t hat the amount is lying in the bank account and it should be allowe d deduction under section 11(5) of the Act cannot be accepted as the assessee trust do not fulfill the necessary conditions for claiming such deduction.
5.3 In view of the above stated facts and in the circumstances of the case , I am of the opinion that the Assessing Officer is fully justified in bringing t o tax the underutilized amount of R s. 18,23,453/- for claiming exemption under section 11/12 of the Act. The addition of Rs. 18,23,453 /- made by th e Assessing Officer in this case on account of under utilization of income is, therefore, upheld. In th e result, ground No.1 of appeal take n by the assessee is dismissed."
5. Before us, the AR of the assessee submi tted as under:
"ii) In this rega rd copies of balances in grou p gratuity fund balance with L.I.C . Grou p Gratuity Funds as on 31 .03.2011 as well a s 31.03.2012 duly confirmed are enclosed herewith wherein it is clear 5 ITA No. 737/Asr./2017 Diocese of Chandigarh that Rs.1975050/- was lying in the funds account a s on 31.03.2011 and neither this a mount appeare d in the funds account under "Desi gnated Fund" in Balance Sheet as on 31.03 .2011 on liability side no r the Gratuity Fund Deposit A/c appea red in the books during that year under "Cash & Ban k Balances" on asset side (as per copies of Bal ance Sheet already submitted). This amount actually pertains to deposits in this fund a/c from the yea r 2000 to 2011 as this fund account was opened in the year 2000 (as per copy of ma ster policy of L IC enclosed herewith).
iii) Hence our submission that the amount shown in funds account under the head "Group Gratuity Fund" i.e. Rs.2039842/- should not be taken as receipt of funds during the year as this entry ha s occurred only due to the reason that the assessee has decided t o incorporate th e Gratuity Fund Deposit account in the books by de biting the Deposit Account under Cash & Bank Balances an d Crediting the same under the hea d Funds received, which earlier wa s not being depi cted in books a s funds in this account belong to Employees of th e institution and not to the institution and withdrawals f rom this fund can onl y be made by the employees (after retirement or earlier termination of services). This is only contra entry for tota l amount till the passing of entry in the books b/f in books by the assessee.
iv) in this rega rd, copy of LIC Group G ratuity Fund Agreement issued at the time of st arting of the fund is also enclosed herewith which cl early reflects that the fund was opened by the institution in 2000 and till 2011 (i.e. 31.03.2011) only funds deposite d were being shown as expenditure in the books bu t in the year 2011-12, total funds lying in the fund have been b/f in the books by Debiting "LIC grou p Gratuity" A/c shown under Cash & Bank Balance s in debit side of Balance Sheet as on 31.03.2012 and crediting "Grou p Gratuity Scheme Funds" under the column "received during the year" under Designated Funds a/c on credit side of the Balance Sheet. This 6 ITA No. 737/Asr./2017 Diocese of Chandigarh entry was passed by the institution Just to kee p track of funds deposited in this scheme."
6. The DR supported the orders of the l ower authori ti es.
7. We have heard the ri val submi ssi ons and perused the orde rs of the l ower authori ti es and materi al s avail abl e on record. In the i nstant case, i t i s not i n di spute that the assessee trust i s a cha ri tabl e trust regi stered u/s 12AA of the Act. The onl y di spute rai sed before us i s that the AO a dde d Rs.20,39,842/- as recei pt on account of group gratui ty fund to the i ncome of the assessee f or t he year under consi derati on whi ch accordi ng to the a ssesse e ought not to have been i ncl uded i n the income of the year under consi derati on.
8. The AO obse rved from the bal ance sheet of the assessee that Rs.20,39,842/- was shown credi ted under the head group gratui ty fund whereas no such amount was appeari ng i n the bal ance sheet of the immedi ately precedi ng year. Theref ore , the AO treated thi s amount as re cei pt of the assessee of the year. The assessee expl ained before us that i t was mai ntai ning a group gratui ty poli cy wi th the LIC si nce the year 2000. The i nvestment made i n the sai d poli cy was kept outsi de the bal ance sheet. For tra cki ng the bal ance l yi ng i n the grou p gratui ty fund scheme, the same was capi tali zed i n the bal ance sheet of the year under consi dera ti on by passi ng contra entry. The group gratui ty fund was credi ted by a sum of Rs.19,75,050/- whi ch was total deposi t under group gratui ty scheme by the trust from the year 2000 (si nce incepti on of the scheme) till 31.03.2011 was brou ght forward and i ncorporate d i n books by passi ng contra entry by debi ting group gratui ty 7 ITA No. 737/Asr./2017 Diocese of Chandigarh fund bal ance under cash and bank bal ance on asset si de and credi ting group gratui ty fund account under desi gnated funds on li abili ty si de.
9. However, we fi nd that no evi dence coul d be produce d before us or before l ower authori ti es by the assessee t o show that Rs.19,75,050/- was the value of i nvestment i n group gratui ty scheme wi th LIC as on 3 1.03.2011. Si mul taneousl y, i t i s observed that the assessee filed a copy of group gratui ty pol i cy i ssued by the LIC i n the year 2000 whi ch i s pl ace at page nos. 40 to 46 of the paper book. It i s al so observed that i n the earlier year when investment was made i n the group gratui ty scheme wi th LIC how the same was accounted for by the assessee. The assessee al so coul d not expl ai n the di fference between the cl osi ng bal ance of Rs.20,39,842/- shown on the credi t si de of the bal ance sheet and Rs.19,75,050/- whi ch was credi ted by way of contra entry. Thus, the di fference of Rs.64,792/- whi ch has been i ncreased duri ng the year al so need i nqui ry by the AO. In ou r consi dere d vi ew si mpl y because val ue of group gratui ty poli cy as on 31.03.2011 is capi tali zed thi s year by credi ti ng to group gratui ty fund account, the sai d amount cannot be treated a s recei pt or i ncome of the assessee of the year.
10. In these ci rcumstances, in our consi dered opi ni on, i t shall be in the i nterest of justi ce to restore thi s i ssue back to the file of the AO for adjudi cati ng afresh after proper ve ri fi cati on i n li ght of the di scussi on made herei nabove. The assessee i s al so di rected to coope rate wi th the department and furni sh the necessary evi dence before the AO as and when call ed for by 8 ITA No. 737/Asr./2017 Diocese of Chandigarh the AO. We order accordi ngl y. Thi s ground of appeal of the assessee i s partl y all owed as above.
11. In the resul t, the appeal of the assessee i s partl y all owed for stati sti cal purposes.
(Orde r Pronounced i n the Open Court on 19/03/2019) Sd/- Sd/-
(N. K. Choudhry) (N. S. Saini)
Judicial Member Accountant Member
Dated: 19/03/2019
*Subodh*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR