Income Tax Appellate Tribunal - Delhi
Ddit (E), New Delhi vs Flt. Lt. Rajan Dhall Charitable Trust, ... on 21 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI 'B' BENCH,
NEW DELHI
BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND
SHRI K.N. CHARY, JUDICIAL MEMBER.
ITA No. 3073/DEL/2012 [A.Y. 2008-09]
ITA No. 5873/DEL/2013 [ A.Y. 2009-10]
The ADIT[E] Vs. Flt. Lt Ranjan Dhall Charitable Trust
Inv. Circle - II Block B, Pocket - I, Aruna Asal Ali Marg,
New Delhi Vasant Kunj, New Delhi
PAN : AAATF 0185 H
ITA No. 3495/DEL/2012
[Assessment Year: 2008-09]
Flt. Lt Ranjan Dhall Charitable Trust Vs. The DDIT[E]
Block B, Pocket - I Inv Circle-II
Aruna Asal Ali Marg, New Delhi
Vasant Kunj, New Delhi
CO No. 125/DEL/2017
A/o ITA No. 5873 /DEL/2013
[Assessment Year: 2009-10]
Flt. Lt Ranjan Dhall Charitable Trust Vs. The DDIT[E]
Block B, Pocket - I Inv Circle-II
Aruna Asal Ali Marg, New Delhi
Vasant Kunj, New Delhi
PAN : AAACF 488 5D
[Appellant] [Respondent]
Date of Hearing : 03.08.2017
Date of Pronouncement : 21 .08.2017
Assessee by : Shri R.M. Mehta, Adv
Revenue by : Ms. Renu Amitabh, CIT-DR
-2-
ORDER
PER B.P. JAIN, ACCOUNTANT MEMBER:
The above appeals filed by the Revenue and appeal filed by the assessee and cross objection filed by the assessee pertain to A.Ys. 2008-09 and A.Y. 2009-10. Since the appeals pertain to same assessee and were heard together involving identical issues, these are being disposed of by this consolidated order for the sake of convenience and brevity.
ITA Nos. 3073 & 3495 /DEL/2012
2. These two appeals filed by the Revenue arise from the order of the ld. CIT(A) XXII, New Delhi vide order dated 6.03.2012 and out of order of ld. CIT(A), XX1, New Delhi vide order dated 26.08.2013 for assessment years 2008-09 and 2009-10 respectively.
3. The Revenue has raised the following grounds of appeal in assessment year 2008-09:
"1. On the facts and in the circumstances of the case as well as in law the ld. CIT(A) has erred in allowing exemption u/s 11 of the Act to the assessee trust whereas the activities of the assessee trust are not charitable within section 2(15) of the Act.-3-
2. On the facts and in the circumstances of the case as well as in law the ld. CIT(A) has erred in deleting the addition made on the ground of disallowance of 25% expenditure and restricting it to 10% of the total expenditure."
4. The Revenue has raised the following grounds of appeal in assessment year 2009-10:
"1. On the facts and in the circumstances of the case as well as in law the ld. CIT(A) has erred in allowing exemption u/s 11 of the Act to the assessee trust whereas the activities of the assessee trust are not charitable within section 2(15) of the Act.
2. "On the facts and in the circumstances of the case as well as in law the ld. CIT(A) has erred in deleting the addition made on the ground of disallowance of financial expenses of Rs. 3,26,88,639/-.
3. On the facts and in the circumstances of the case as well as in law the ld. CIT(A) has erred in deleting the addition made of Rs. 8,91,171/- on account of depreciation and amortization."
5. The assessee has raised the following grounds of appeal in assessment year 2008-09:
"1. That the learned CIT(A) erred both on facts and in law in sustaining disallowance to the extent of 10% as against 25% by the Assessing Officer out of the total expenditure of -4- Rs.81,50,92,376/- incurred bonafidely by the appellant towards lease rent, management fees and other expenses for running the hospital.
2. Without prejudice to the aforesaid ground, the CIT(A) after allowing the main ground of appeal of the appellant pertaining to the grant of exemption u/s 11 of the I.T. Act, 1961 was not required to go into the alternative ground raised aforesaid. This would unnecessarily create precedence for subsequent assessment years although no such disallowance was made in past assessments."
6. The assessee has also raised the following additional ground of appeal in assessment year 2008-09:
"That the deficit arising as a result of the application of the funds towards charitable purposes being in excess of the income earned is required to be carried forward to the subsequent years to be adjusted in case of shortfall in the application."
7. The assessee has filed an application for condonation of delay.
8. We have considered the rival submissions. In the present case, we find that the Hon'ble Apex Court in the case of Vedabai alias Vaijayanatabai vs Shantaram Baburao Patil And Ors reported at 253 ITR 798 held as under:
-5-
"A distinction must be made between a case where the delay is inordinate and a case where the delay is of a few days. Whereas in the former case the consideration of prejudice to the other side will be a relevant factor so the case calls for a more cautious approach but in the latter case no such consideration may arise and such a case deserves a liberal approach."
9. We, therefore, considering the genuine and valid reasons stated by the ld. counsel for the assessee and the ratio laid down by the Hon'ble Supreme Court and by taking a liberal approach of few days delay, condone the delay.
10. The ld. counsel for the assessee, Shri R.M. Mehta, vehemently argued that the said ground raises a question of law which goes to the root of the matter and does not entail any verification of facts or brining on record any fresh material or additional evidence. He relied upon the decisions of various courts of law in this regard.
11. On the other hand, the ld. DR opposed the admission of additional ground.
-6-
12. We have considered the rival arguments made by both the sides, perused the orders of the A.O and the ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions relied upon by both the sides. We find that said ground raises a question of law which goes to the root of the matter and does not entail any verification of facts or bringing on record any fresh material or additional evidence. Reliance was placed on the following judgements in support of the admission of the additional ground:
1. National Thermal Power Corporation Ltd. vs CIT (1998) 229 ITR 383(SC).
2. Orissa Cement Ltd. vs CIT (2001) 2o0 ITR 806 (Delhi)
3. Avery Cycle Industries Ltd. (2007) 292 ITR 493 (P&H)
4. Hukumchand Mills Ltd. vs CIT (1967) 663 ITR 232 (SC)
5. CIT vs Nelliaappan (1967) 66 ITR 727 (SC) In view of the above judicial pronouncements, we admit the additional ground of appeal.
13. At the outset, we decide the additional ground in view of the arguments made by the parties. The ld. counsel for the assessee relied upon the decision of the Mumbai Bench of the Tribunal dated -7- 30.07.2015 in the case of ACIT[E] Vs. Dawat E. Hadiyah reported in [2015] 43 ITR [Trib] 476 wherein it has been held as under:
"I have considered the argument put forward by both the parties. The issue of excess application of income of earlier to be carried forward is decided in favour of the assessee in the decision of the higher judicial form as referred to and relied on by the ld. CIT(A). Therefore, respectfully following the decision relied upon by the ld. CIT(A) and applicable under the facts and circumstances of the case, these grounds of the Revenue are dismissed."
14. After considering the facts and circumstances of the case and in view of the decision relied upon by the ld. counsel for the assessee. We allow the additional ground of appeal raised by the assessee.
15. The Revenue has also raised additional ground of appeal for assessment year 2008-09 which reads as under:
"On the facts and in the circumstances of the case as well as in law the ld. CIT(A) has erred in deleting the addition of Rs. 23,50,00,000/- made by the Assessing Officer on account of unsecured loans."-8-
16. We have considered the rival arguments and perused the written submissions filed by the Revenue. We find that the Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. vs CIT (1998) 229 ITR 383 (SC) considering its earlier judgement in the case of Jute Corporation of India Ltd. vs CIT 187 ITR 688 observed as follows:
"This Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also."
17. From a reading of the aforesaid judgement, the legal prepositions that emerge are as under :
1. Additional grounds involving questions of law can be raised at any stage of the proceedings provided relevant facts are already on record.
2. That the appellate authority (the ITAT in the present case) must be satisfied that the additional ground raised was -9- bonafide and that the same could not have been raised earlier for good reasons.
3. Under Rule 11 of the Appellate Tribunal Rules 1963 the ITAT has to record reasons for admitting the additional ground.
18. Before examining the explanation of the revenue in the light of the aforestated legal position certain dates are relevant as under:
1. The appeal by the revenue was filed on 18.06.2012.
2. The additional ground was filed vide communication dated 28.09.2012.
3. The order of the CIT(A) u/s 154 on the basis of which the revenue is stated to have acted is dated 18.07.2012.
4. Assessment for Assessment year 2009-10 was completed on 23.12.2011.
19. A reference to the order of the ld. CIT(A) dated 06.03.2012 shows that the figure of Rs.23,50,00,000/- (Rs.23.50 CR) is mentioned at 7 places spanning 11 pages whereas the figure of Rs. 23,50,000/- (Rs.23.50 Lakhs) admittedly a typographical error, is mentioned at only one place. Is it to be understood that the recommending and the approving authority for the revenue's appeal looked only at the last page of the order of the CIT(A) and did not examine the earlier pages where the figure of Rs.23.50 crores was clearly highlighted at 7 places including in the grounds of appeal. Further the order of assessment -10- indicated the figure of Rs.23.50 crores at three places including the computation of income. Another important fact to be noted is that prior to the order dated 06.03.2012 passed by the CIT(A) the assessment for the subsequent assessment year i.e 2009-10 had been completed on 23.12.2011 wherein the AO took note of the loan taken by the assessee in Assessment year 2008-09 to the tune of Rs.23.50 cr. From the aforesaid undisputed facts two things emerge, namely:
1. Either there was a non application of mind on the part of the tax authorities whereby they missed the figure of Rs.23.50 cr and became aware (as stated in their letter dated 28.09.2012) only after the order on rectification was passed by the JCIT(A) on 18.07.2012 or
2. There was a conscious decision at the initial stage of the filing of the appeal to accept the order of the ld. CIT(A) in respect of the relief given on the unsecured loan addition and the filing of the additional ground subsequently was a change of mind to agitate an issue which was already given up.-11-
20. Under both the aforesaid situations the case of the revenue for the admission of the additional ground is farfetched, an afterthought, without merit and clearly, outside the parameters laid down by the courts. In fact if a party is negligent (as is the case here) in not raising a ground of appeal initially then the same cannot be urged as an additional ground subsequently at its whims and fancies to cover up the said negligence. Appeals cannot be filed piece meal and a party cannot get the benefit of its own negligence.
21. Coming to the second situation a conscious decision to accept the relief given by the ld. CIT(A) (sum of Rs.23.50 cr in the present case) cannot be reagitated by raising an additional ground. Also the addition of Rs.23.50 crores on account of an unsecured loan and its subsequent deletion by the CITA(A) does not involve a question of law being a pure question of fact. In other words, an additional ground cannot be raised on a factual matter. In that view of the matter, the additional ground raised by the Revenue is rejected.
22. Now we take up the main grounds of appeal of the Revenue as under.
-12-
23. As regards Ground No. 1 raised by the Revenue, the brief facts are that the AO in the course of the assessment proceedings for the AY 2008-09 took the view that the activities of the appellant were not in accordance with the provisions of Section 2(15) of the Act and exemption u/s 11 was to be denied. The main grounds for arriving at the aforesaid conclusion were:
(1) Consequent to the agreement dated 12/5/2005 between the assessee, Vaitalik and Oscar Biotech P. Ltd. (OBPL) whereby Vaitalik opted out of the agreement between itself and the assessee dated 7.8.1998 and OPBL stepped into the shoes of Vaitalik for setting up and running a super speciality hospital the control and management of the said hospital had gone into the hands of OBPL rather than being under the control and management of the assessee trust.
(2) As a result of the facts and circumstances outlined in (1) above, the activities of the trust had become commercial in nature rather than remaining charitable for the common people of Delhi.
3. That the change in the members of the Executive committee with reference to three dates vix 23.9.71. 7.6.98 and -13-
12..2005 confirmed the change in the character of the assessee trust.
4. That Vaitalik as per its agreement with the assessee was required to invest Rs.7.6 crores in the project but the balance sheets for the asst years 2003-04, 2004-05 and 2005-06 did not reflect the said condition to have been fulfilled.
5. That certain clauses in the agreement (see top of page 4 of the assessment order) revealed that the assessee was running business activities rather than charitable activities.
24. The ld. CIT(A) accepted the arguments of the assessee and allowed the claim whose observation is reproduced as under for the sake of convenience:
"I have perused the facts stated in the assessment order as well as the facts assessee in his submission. In this regard, Section 2(15) defines "2(15) of the Act defining meaning of the term "charitable purpose", as was applicable for the AY 2008-09, is reproduced as under:
"Charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility.-14-
Further a proviso to section 2(15) was inserted in the statute w.e.f. 1/4/09, i.e., applicable from the AY 2009- 10 onwards, as under:
"Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce of business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity."
There is no violation of section 2(15). Further the Assessing Officer in his order nowhere challenge the application/utilization of fund raised by the appellant. Hence the AO suo-moto cannot deny the assessee, the benefit of Section 11 & 12. Moreover the exemption of Section 11 has not been withdrawn in the case of the assessee and I am in agreement with the assessee's submission. Hence the assessee is to enjoy the benefit of Section 11 & 12 and the addition made in this regard is hereby deleted."
25. We have considered the rival arguments, perused the orders of the A.O and the ld. CIT(A) and the paper book filed on behalf of the assessee. As argued by the ld. counsel for the assessee, the status of -15- assessment on identical facts for difference years of the assessee itself is as under:
1. Assessment year 2007-08 Treated as charitable u/s 11 of the Act in an assessment u/s 143(3) [copy of order at page 10 of paper book]
2. Assessment year 2008-09 Treated as exempt u/s 11 of the Act by the ld. CIT(A) [in appeal to the ITAT by Revenue]
3. Assessment year 2009-10 Treated as exempt u/s 11 of the Act by the ld. CIT(A) [in appeal to the ITAT by Revenue]
4. Assessment year 2010-11 Treated as exempt u/s 11 of the Act by the ld. CIT(A) [in appeal to the ITAT by Revenue]
5. Assessment year 2008-09 Treated as exempt u/s 11 of the Act by the order u/s 143(3) of the Act
26. Having taken a view in assessment years 2007-08, 2013-14 & 2014- 15 treating the assessee as exempt u/s 11 of the Act, the AO could not have taken a view to the contrary in other years there being no change in facts or the legal position. Reliance was placed on the following judgements:
a). CIT vs Escorts Ltd. 338 ITR 435 (Delhi)
b) Director of Income Tax (Exemption vs Apparel Export Promotion Council (No. 1) 244 ITR 734, 736 (Delhi)
c) CIT vs ARJ Security Printers (2003) 264 ITR 276, 278 (Delhi) -16-
27. By the decisions of the ITAT in the case of R B Seth Jessa Ram & Bros Charitable Hospital Trust (JESSARAM for short) for various assessment years namely 2004-05 (copy at page 18 of Paper Book dated 16.04.2013) and 2005-06 to 2007-08 vide copy of order dated 19.07.2013Jn ITA 2260, 2261/D/2010 and 2125/D/2011 (copy on record) wherein the ITAT has followed its decision for Assessment Year 2008-09 (para 2.6 of the order). Copy of the order for assessment year 2008-09 is placed at pages 143 to 147 of PB II.
That an "operation and maintenance agreement" between the parties was under consideration in both the cases ie. between Jessaram and Fortis and between Rajan Dhall (for short) the present assessee and Fortis with an identical effect namely:
1. Provision of medical facilities to the public.
2. The overall control and management of the trust continued to remain with the trustees.
3. There was no misuse or siphoning of funds for non charitable purposes which is not even alleged in the case of Rajan Dhall.
4. All funds were expended for the objects of the trust which were well within the meaning of "charitable purpose" as defined in Section 2(15) of the Act.-17-
5. No material had been brought on record by the AO to suggest that provisions of Section 11 to 13 of the Act had been violated. (Copy of the agreement between Rajan Dhall and Fortis is placed at pages 118 to 128 of PB II). It was argued that the revenue took the matter to the Hon'ble High Court u/s 260 A of the Act for the assessment years 2005-06 and 2006-07 where the same was rejected not only on the ground of delay in refiling but also on merits, (copy of the order in ITA 1021 and 1022/2015 dated 04.01.2016 is placed on record. Thus, Ground No. 1 of the Revenue is dismissed.
28. As regards Ground No. 2 of the Revenue, the assessee is also in appeal vide Ground No. 1 in assessment year 2008-09 which is also decided alongwith this ground raised by the Revenue arising out of same addition.
29. Brief facts pertaining to these grounds are that the Assessing Officer proceeded to disallow the expenditure in various forms on estimate basis @ 25% to Rs. 20,37,73,094/- which, in fact, was limited to 10% at Rs. 8,15,09,237/- by the ld. CIT(A).
30. We have considered the rival arguments made by both the sides, perused the orders of the A.O and the ld. CIT(A) and the paper book filed on behalf of the assessee. It was submitted, at the outset, by the -18- ld. counsel for the assessee that the entire issue in respect of the items of expenditure referred to by the AO had been examined in the assessment order for AY 2007-08 and no disallowance was made. The AO in fact accepts in the assessment order that copies of agreements in respect of the lease rent, management fee as also the other items of expenditure have been filed. The main thrust of the argument of the AO is that since OBPL had been engaged to set up the hospital and run it, there was no requirement to incur these items of expenditure.
It was contended that the aforesaid conclusion of the AO is factually and legally incorrect in as much as the items of expenditure in question are necessary to run the hospital and these have to be met out of the receipts of the hospital and not by OBPL out of their funds. According to the agreement between the assessee and OBPL already referred to earlier the latter has been contracted to set up the hospital and run it for which it is entitled to 70% of the surplus remaining after meeting the entire expenditure. The liability of OBPL does not extend to meeting the aforesaid items of expenditure, which are necessary for running the hospital. In view of the aforesaid submissions of the ld. counsel for the assessee, we find no infirmity in the order of the ld. CIT(A). We hold that the disallowance made by the AO is not called for either on facts or in law. Accordingly, we -19- direct the deletion of addition made by the Assessing Officer which is on estimate basis and on surmises and conjectures. Accordingly, ground raised by the Revenue is dismissed whereas the ground raised by the assessee is allowed.
31. As regards Ground No. 2 of the assessee, we find that the ld. CIT(A) was not required to go into the alternative ground since he had already allowed the exemption u/s 11 of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] and, therefore, in view of the findings on the alternative ground so given by the ld. CIT(A), the addition is directed to be deleted.
32. In the result, the appeal of the Revenue in ITA No. 3073/DEL/2012 is dismissed and that of the assessee in ITA No. 3495/DEL/2012 is allowed.
ITA No. 5873/DEL/2013 [A.Y. 2009-10] & CO No. 125/DEL/2017 [2009-10]
33. The facts of Ground Nos. 1 and 2 of the Revenue involved in the appeals of the Revenue for the assessment year 2008-09 in ITA No. -20- 3073/DEL/2012 are identical to the facts involved in ITA No. 5873/DEL/2013 for the assessment year 2009-10. Therefore, our findings given in the former part of this order shall also apply mutatis mutandis for the assessment year 2009-10. Accordingly, Ground Nos. 1 and 2 of the Revenue are dismissed.
34. Apropos Ground no. 3 of the Revenue, we find that the ld. CIT(A) has not decided this issue separately and, therefore, the ground raised by the Revenue is out rightly rejected and, accordingly, Ground No. 3 of the Revenue is dismissed.
35. As regards the sole ground of appeal raised by the assessee in the cross objection, the facts are identical to the ground raised in assessment year 2008-09. In that view of the matter, our finding on this ground hereinabove for assessment year 2008-09 shall apply mutatis mutandis to this ground. Accordingly, sole ground of the assessee is allowed.
36. In the result, the appeal of the Revenue is dismissed whereas the cross objection of the assessee is allowed.
-21-
37. To sum up, in the result, Revenue appeal in ITA No. 3073/DEL/2012 & ITA No. 3495 /DEL/2012 are dismissed. Appeal of the assessee in ITA No. 5873/DEL/2013 and cross objection stand allowed.
The order is pronounced in the open court on 21 .08.2017.
Sd/- Sd/-
[K.N. CHARY] [B.P. JAIN]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 21st AUGUST, 2017
VL/
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar,
ITAT, New Delhi