Income Tax Appellate Tribunal - Mumbai
Mumbai Cricket Association, Mumbai vs Cit (E), Mumbai on 23 June, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "B", MUMBAI
Before Shri G S Pannu, Accountant Member
& Shri Pawan Singh, Judicial Member
ITA No.3816/Mum/2016
Assessment Year : 2011-12
Mumbai Cricket Association, CIT (Exemption),
Wankhede Stadium North Stand, Mumbai
A & C Block, Vs.
Mumbai 400 010
PAN AAAAM0223A
(Appellant) Respondent)
Appellant By : Shri Arvind Sonde
Respondent By : Shri N P Singh
Date of Hearing :11.04.2017 Date of Pronouncement : 23.06.2017
ORDER
Per G S Pannu, Accountant Member
This appeal by the assessee is directed against the order of the CIT(Exemption), Mumbai (in short 'the Commissioner'), dated 28.03.2016, u/s. 263 of the Income Tax Act, 1961 (in short 'the Act') for A.Y. 2011-12, whereby the assessment order passed by the Assessing Officer, dated 29.03.2014 (wrongly mentioned as 11.03.2013 by the CIT(E)), u/s. 143(3) has been held to be erroneous in so far as it is prejudicial to the interests of the Revenue on account of excess deduction of expenses amounting to ` 2,23,92,358/-.
2. In this context, the relevant facts can be summarized as follows. The assessee is a registered trust and engaged in the promotion of cricket. For the year under consideration, it filed return of income declaring income at 'nil' after claiming 2 ITA No.3816/Mum/2016 M/s. Mumbai Cricket Association exemption u/s. 11 & 12 of the Act. The Assessing Officer made assessment u/s. 143(3) of the Act determining the total income at ` 7,05,47,380/- after denying exemptions u/s. 11 & 12 of the Act. The Commissioner examined the record of proceedings and show caused the assessee as to why the assessment order dated 29.03.2014 (supra), be not treated as erroneous and prejudicial to the interests of the Revenue. The Commissioner noted that while computing the total income the Assessing Officer worked out the income under the head "Income from house property" at ` (-)11,19,070/- after allowing the deduction for municipal taxes paid, etc. The Commissioner further noted that while computing income under the head "Income from other sources", the Assessing Officer had allowed deductions u/s. 57 of the Act, which, inter-alia, included a sum of `.2,23,92,358/- representing, expenditure on property other than property taxes. In the show cause notice, the Commissioner further observed that the said expenditure was in the nature of ground, electrical, general expenses and that, such details were disclosed in schedule 15 of the Annual Accounts of the assessee. On this basis, the Commissioner inferred that the expenses of `.2,23,92,358/- were relatable to the 'Income from house property' and, therefore, such expenses could not have been further allowed as deduction u/s. 57 of the Act while computing the income under the head 'Income from other sources'. As per the Commissioner, the said action of the Assessing Officer had resulted in excess deduction of `.2,23,92,358/-, which made the assessment order erroneous in so far as it was prejudicial to the interests of the Revenue within the meaning of section 263 of the Act.
3ITA No.3816/Mum/2016
M/s. Mumbai Cricket Association
3. The assessee trust resisted the action of the Commissioner and filed detailed written submissions, which have been, inter alia, reproduced by the Commissioner in his order. A perusal of the written submissions reveal that the assessee assailed the assertions of the Commissioner both in law and on facts. One of the pertinent points raised by the assessee was that the Commissioner was wrong in assuming that the expenses of `.2,23,92,358/- related to the property which had generated rental income. Rather, it was explained by the assessee that the expenditure does not relate to the property from which rental income is being derived, but the same was in relation to other properties viz. Wankhede Stadium, cricket ground, etc. incomes from which had been brought to tax by the Assessing Officer under the head "Income from business". The assessee also explained that though said expenditure was allowable while determining the 'Income from business', whereas the same has been allowed by the Assessing Officer while computing income under the head 'Income from other sources', that in any case, this error would not impact the determination of total income and, therefore, the assessment order could not be considered to be prejudicial to the interests of the Revenue within the meaning of section 263 of the Act. However, the Commissioner was not satisfied with the explanation furnished by the assessee though it is noticeable that none of the factual assertions made by the assessee have been controverted by him. The Commissioner has considered the assessment order dated 29.03.2014 (supra), as erroneous in so far as prejudicial to the interests of the Revenue and directed the Assessing Officer to examine the claim of the assessee with respect to the 4 ITA No.3816/Mum/2016 M/s. Mumbai Cricket Association expenditure of `.2,23,92,358/- afresh after making necessary inquiries. Against such a decision of the Commissioner, the assessee is in further appeal before us.
4. Before us, the learned representative for the assessee vehemently pointed out that the Commissioner erred on facts and in law in assuming the jurisdiction u/s. 263 of the Act, in as much as the expenditure of ` 2,23,92,358/-, was relating to properties other than those assessed under the head 'Income from House Property' and though it was allowed by the Assessing Officer u/s. 57 (which was otherwise allowable u/s. 37(1)) and, therefore, it would have had no impact on determination of the total income. At the time of hearing, the learned representative for the assessee referred to appropriate pages of the Paper Book, wherein are placed the relevant extracts from the Annual Accounts of the assessee and also correspondences with and the queries by the Assessing Officer during the assessment proceedings to point out that the assessment order could not be said to have been passed without due application of mind. It has also been sought to be demonstrated that the assessment order could not be labelled as based on incorrect assumption of facts or incorrect application of law. In sum and substance, the plea of the assessee is that the Commissioner has exceeded his jurisdiction by invoking section 263 of the Act in the present case.
5. On the other hand, the learned CIT-DR appearing for the Revenue contended that the Commissioner was justified in concluding that the Assessing Officer had allowed the claim of the assessee without making enquiries and, such error stood manifested by the fact that excess deduction of expenditure stood allowed. 5 ITA No.3816/Mum/2016
M/s. Mumbai Cricket Association
6. We have carefully considered the rival submissions. Section 263 of the Act empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard, pass such order thereon as the circumstances of the case may justify, including an order enhancing or modifying the assessment, or cancelling and directing a fresh assessment. In the present case, the Commissioner has invoked his revisionary power contained in section 263 of the Act with respect to an assessment order dated 29.03.2014 (supra), passed by the Assessing Officer qua the deduction of expenses of ` 2,23,92,358/-; and, further directed the Assessing Officer to pass an assessment order afresh after making necessary enquiries and verification of the aforesaid aspect. The phraseology of section 263(1) of the Act itself shows that the power of the Commissioner is contingent on fulfilment of two conditions prescribed therein, namely, that the order is erroneous and that it is prejudicial to the interests of the Revenue. The Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. [243 ITR 83] held that the two conditions have to be cumulatively satisfied. In this context, the Commissioner notes in para 6 of his order that the two conditions have been satisfied in as much as the Assessing Officer allowed the claim of deduction of expenses u/s. 57 of the Act whereas these expenses were related to 'Income from house property' and deduction of 30% was already allowed u/s. 24(a) of the Act. Factually speaking, the assessee has joined issues with the Commissioner on this aspect by pointing out that the expenses in question do not relate to the property whose income has been 6 ITA No.3816/Mum/2016 M/s. Mumbai Cricket Association assessed under the head "Income from house property". In order to appreciate the said plea of the assessee, we may briefly touch upon the relevant facts. Notably, in the assessment order, the Assessing Officer has determined the total income at ` 7,05,47,380/- under three heads of income, viz. 'Income from house property' at ` (-)11,19,070/-, 'Income from business & profession' at ` 13,47,50,419/- and 'Income from other sources' at ` (-)6,30,83,974/- thereby determining the total taxable income at ` 7,05,47,380/-. The income under the head 'Income from house property' reflects the rental income derived by the assessee of ` 2,82,35,927/- which is corresponding to schedule 12 of the Annual Accounts of the assessee, which is placed at page 27 of the Paper Book. Notably, in schedule 15 of the Annual Accounts, copy of which is placed at page 29 of the Paper Book, total expenditure on various counts viz. ground, electrical, general, property tax, rates and taxes, ground rent to State Government, property insurance, stadium redevelopment expenses, water and sewerage charges have been enumerated at ` 7,95,34,044/- under the head 'Expenditure in respect of Property'. The amount of property taxes of ` 5,71,41,686/- has been considered while computing the income under the head 'Income from house property' and the balance of ` 2,23,92,358/- has been considered while computing income under the head 'Income from other sources'. Pertinently, the Assessing Officer has allowed deduction on account of property taxes to the extent of ` 3,20,58,995/-out of the total expenditure of ` 5,71,41,686/- on payment basis. The second component of income was determined under the head 'Income from business and profession', wherein the Assessing Officer has assessed income from sports activities. The third component 7 ITA No.3816/Mum/2016 M/s. Mumbai Cricket Association of income was determined under the head 'Income from other sources', which comprised of interest income, income from AC Boxes, composite charges from caterers, etc. Against such income, deduction of expenses has been allowed u/s. 57 of the Act of ` 10,29,25,946/- which, inter alia, included the expenditure on property other than the property taxes of ` 2,23,92,358/-. Now, as per the assessee, such amount of ` 2,23,92,358/- reflecting expenditures under various heads except property taxes, which we have enumerated earlier, relate to the income from sports activities, which has been assessed under the head 'Income from business'. At the time of hearing, the learned representative pointed out that the said expenses are in relation to the cricket ground and Wankhede Stadium, income wherefrom is contained in schedule 11 of Annual Accounts which are reflected at page 26 of the Paper Book, and the same has indeed been assessed by the AO under the head 'Income from business'; it was pointed out that such an infirmity in the assessment did not affect the total income and, therefore, the assessee made no grievance on this aspect. It has also been stated, that even in the earlier assessment years 2009-10 and 2010-11 in the assessments finalized u/s. 143(3) of the Act such expenses were allowed u/s. 57 of the Act. Be that as it may, in our considered opinion, the aforesaid does not really turn much for our purpose in as much as the point to be addressed by us is whether the expense of `2,23,92,358/- related to the properties whose income has been assessee under the head 'Income from house property' or not. At the time of hearing, the learned representative for the assessee has also referred to the schedule of fixed assets, which brings out the various properties, inter-alia, including the stadium building, 8 ITA No.3816/Mum/2016 M/s. Mumbai Cricket Association Wankhede stadium, cricket ground and other properties including the properties from which the income earned has been assessed under the head 'Income from house property'. Considering the factual matrix which has been brought out and which was very much available before the Commissioner, it does not justify the assertion of the Commissioner that the expenditure of ` 2,23,92,358/- related to the income assessed by the Assessing Officer under the head 'Income from house property'. In our considered opinion, the Commissioner has been influenced by the heading of schedule 15 of the Annual Accounts viz. "Expenditure in respect of Property". In any case, once the assessee had brought to his notice the wrong factual notion entertained by him at the time of issuing the show cause notice, it was imperative for the Commissioner to have considered the same in an appropriate manner. Though the Commissioner in para 4.1 of his order has specifically noted this submission of the assessee but there is no negation of the same. Therefore, the very foundation of the Commissioner to embark on the exercise of invoking section 263 becomes susceptible to error. Admittedly, the Commissioner has proceeded to show cause the assessee on the ground that the expenses of `2,23,92,358/- relate to 'Income of house property' and, ostensibly, such ground is not compliant with the fact-situation.
7. There is another aspect of the matter, which needs some elaboration. In the show cause notice issued to the assessee, which has been reproduced by the Commissioner in para 2 of his order, the charge posed against the assessee was that the expenditure of ` 2,23,92,358/- related to income from house property and thus, should not have been allowed as a deduction u/s 57 of the Act and, thus, it 9 ITA No.3816/Mum/2016 M/s. Mumbai Cricket Association was a case of excess deduction of expenses. Pertinently, after going through the submissions furnished by the assessee, the Commissioner has changed the course while concluding that the assessment order was erroneous. In his order, Commissioner concludes that the assessment order is erroneous and prejudicial for the reason that the Assessing Officer had not gone into the whole aspect of the case and not analysed the things properly and, moreover, not brought on record all the relevant facts and documents to arrive at a proper conclusion on the issue of allowability of the expenditure of `.2,23,92,358/-. The Commissioner further notes that the assessment order was passed without making enquiries and verification, which should have been made before allowing deduction of ` 2,23,92,358/-. At the time of hearing, the learned representative assailed such conclusion of the Commissioner by referring to the content of the assessment proceedings. Our attention was invited to an annexure to notice u/s. 142(1) of the Act, copy of which is placed at page 3 of the Paper Book, which contains queries raised by the Assessing Officer, which, inter alia, include calling for details along with supporting evidences in respect of expenditure incurred on the property. Reference was also invited to the reply furnished by the assessee, copies of which have also been placed on record. A tabulation has also been filed showing that similar claim was allowed in assessment years 2009-10 and 2010-11 also, in assessments made u/s. 143(3) of the Act. In our considered opinion, whether or not an inquiry or verification of an aspect has been carried out is matter of factual appreciation and in the present case, it is quite evident that the Assessing Officer has called for the relevant material. In fact, the manner in which the Assessing Officer has drawn up 10 ITA No.3816/Mum/2016 M/s. Mumbai Cricket Association the total income in para 6 of the assessment order also reflects that he has considered the matter appropriately. If one looks at the computation of income made under the head 'Income from other sources', it is clear that while determining the deduction u/s. 57 of the Act , the Assessing Officer takes up the figure of ` 7,95,34,044/-, which was the expenses depicted in schedule 15 under the head 'Expenditure in respect of property' and has reduced therefrom a sum of ` 5,71,41,686/- being property tax, as the same was considered by him separately while computing income under the head 'Income from house property'. In our considered opinion, the queries raised by the Assessing Officer and the manner in which he has computed the income finally in para 6 of the order clearly points out that he was conscious of the fact that the expenditure in question was not related to the income being assessed under the head 'Income from house property', an aspect which is supported by the fact-situation. Therefore, the charge made by the Commissioner in the order that the assessment order has been made without making enquiries and verification is factually untenable.
8. Before parting, we may also refer to a specific plea raised by the learned CIT- DR that the assessment order reflected non-application of mind as the details of `.2,23,92,358/- were not verified by the Assessing Officer. In our view, the aforesaid argument of the learned CIT-DR is devoid of any factual support since we have already observed that during the assessment proceedings the relevant details were called for by the Assessing Officer and the appreciation of the same by him is duly reflected in the manner in which he computed the respective incomes under 11 ITA No.3816/Mum/2016 M/s. Mumbai Cricket Association the head 'Income from house property' as well as under the head 'Income from other sources'.
9. In conclusion, therefore, we are inclined to hold that the very basis on which the Commissioner has proceeded to initiate proceedings u/s. 263 of the Act on the notion that the expenses of ` 2,23,92,358/- relate to the income assessed under the head 'Income from house property' is factually unfounded and, therefore, the impugned order dated 28.03.2016 is untenable. We hold so.
10. As a consequence, we set aside the order of the Commissioner and restore the assessment order dated 29.03.2014, in so far as it relates to deduction of expenses of ` 2,23,92,358/-
17. In the result, the appeal is allowed.
Order pronounced in the open court on this day of 23rd June, 2017.
Sd/- Sd/-
(Pawan Singh) (G S Pannu)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated : 23rd June, 2017.
SA
Copy of the Order forwarded to :
1. The Appellant.
2. The Respondent.
3. The CIT(A), Mumbai.
4. The CIT , Mumbai.
5. The DR, 'B' Bench, ITAT, Mumbai BY ORDER
//True Copy// (Assistant Registrar)
Income Tax Appellate Tribunal, Mumbai