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TAXAP/558/2009 1/ 11 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 558 of 2009
=========================================================
COMMISSIONER
OF INCOME TAX-I - Appellant(s)
Versus
SARVODAY
KELVANI SAMAJ - Opponent(s)
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Appearance :
MRS
MAUNA M BHATT for
Appellant(s) : 1,
None for Opponent(s) :
1,
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CORAM
:
HONOURABLE
MR.JUSTICE D.A.MEHTA
and
HONOURABLE
MS.JUSTICE H.N.DEVANI
Date
: 22/06/2010
ORAL
ORDER
(Per
: HONOURABLE MR.JUSTICE D.A.MEHTA)
1.
Appellant Revenue has preferred this Appeal under section 260A of
the Income Tax Act, 1961 (the Act) proposing following three
questions as substantial questions of law :
[A] Whether on the facts
and in law, the Appellate Tribunal is right in deleting the addition
of Rs.53,00,000/- made by the Assessing Officer and confirmed by the
CIT(A), on account of Development Fund created, instead of utilizing
it for the objects of the trust, ignoring the fact that the assessee
failed to fulfill the specific requirements of law of spending 85% of
receipts for claiming exemption u/s.11 of the Act?
[B] Whether the Appellate
Tribunal has erred in law and on facts in not appreciating that the
amount of Rs.53 lacs out of total receipts/income of the year was
transferred by book entry alone from the Income and Expenditure
account of one of units to the Balance Sheet of the main trust as
Development Fund without utilizing it for the purpose of the trust,
nor as specified in the assessment order having filed form No. 10 as
required u/s. 11(2) for accumulating the amount in question and
therefore was not entitled to exemption u/s. 11 of the IT Act, 1961
?
[C] Whether the Appellate
Tribunal is right in law and on facts in its interpretation that the
amount of Rs. 53,00,000/- is ‘neither claimed nor allowed as
deduction from income by way of application of funds, it cannot be
treated as receipt of fresh donation during the year or income of the
trust’ & it is ‘nothing more than a transfer entry in books of
one unit of the assessee to the main trust account’ and therefore the
same cannot be treated as income of the assessee trust, whereas the
said amount was actually collected by Atmiya Institute run by the
assessee trust and which has been declared as applied for the
purpose of trust development expense in the Income & Expenditure
A/c. for year ended 31/03/2003 but actually the said amount of
Rs.53,00,000/- was not utilized but used to merely create Development
fund in the Balance Sheet of the assessee and therefore the trust was
not entitled for exemption u/s. 11 as the fund was not utilized for
the purpose of the trust nor filed form No.10 as required u/s.11(2)
for accumulating the amount & thus whether the order of the
Appellate Tribunal is perverse ?
2. The
Assessment Year in question is 2003-2004, the relevant previous year
being Financial Year 2002-2003. In the assessment framed under
section 143(3) of the Act on 31.3.2006 the Assessing Officer made
addition of Rs.53 lacs, which was a development fund created by the
assessee, for the reasons recorded in paragraph No.5 of the
Assessment Order. The addition was confirmed by Commissioner
(Appeals), and the assessee carried the matter before Income Tax
Appellate Tribunal who vide impugned order dated 30.06.2008 has
deleted the addition.
3. It
was submitted on behalf of the Appellant that the Tribunal has failed
to consider and correctly appreciate the facts recorded by the
Assessing Officer. That Rs.53 lacs shown to be the development fund
created by the assessee had to be considered as part and parcel of
Rs. 6,59,55,320/-. It was therefore submitted that the order made by
the Tribunal was bad in law and gives rise to the question(s) as
proposed.
4. In
the first instance, it is a mistake on the part of the Appellant to
state that Rs.53 lacs forms part of the amount of Rs.6,59,55,320/-,
because as recorded in paragraph No. 5.1 of the Assessment Order,
that is the amount which has been shown to be application of
income/fund by the assessee. It is also not possible to state that
the amount of Rs. 53 lacs is part of the total receipts of
Rs.6,67,99,070/- for the reasons recorded by the Tribunal in its
impugned order.
5. As
can be seen from the order of the Tribunal in paragraph No.8 the
Tribunal has recorded the submission made on behalf of the assessee
that the sum of Rs. 53 lacs shown in the balance sheet as a fund was
not a fresh inflow of funds this year but it was merely a transfer
entry from income and expenditure account of one of the units of the
trust, namely Atmiya Institute of Technology and Science by
way of transfer of other income of the said institute to the
development fund. The Tribunal has thereafter recorded the following
findings :
We
have heard both the parties, perused the orders of the authorities
below and also gone through the material placed before us. We find
that the audited accounts of the trust and its constituent units
which were available to both the lower authorities, and in particular
the accounts of the Atmiya institute, we find that the total of the
debit side of the I & E account shows Rs.2,58,26,738/- including
trust development amount of Rs.53,00,000/-. As against this, the
amount claimed as deduction from income by way of application to
objects of the trust/the unit as per the statement of income attached
with the return of income shows that the amount claimed is only Rs.
2,05,26,738/- for Atmiya institute. Thus, it becomes apparent that
the impugned amount of Rs.53,00,000/- was reduced first from the
total expenses of Rs.2,58,26,738/- and only the net amount of
Rs.2,05,26,738/- has been claimed as application of income. It is not
in dispute that the said statements, schedules and audited accounts
forming part of the return of income are otherwise accepted by the
A.O. Hence, we find force in the submission of the A.R. that when the
impugned amount of Rs.53,00,000/- is neither claimed nor allowed as a
deduction from income by way of application of funds, it cannot be
treated as receipt of fresh donation during the year or income of the
trust. We also find from accounting statements that the impugned
amount is nothing more than a transfer entry in books of one unit of
the appellant to the main trust accounts. As a result, we hold that
the same cannot be treated as income of the appellant trust and the
question of following the procedure of accumulation of income does
not arise. As far as Sec. 11(5) is concerned it is nowhere pointed
out by either the A.O. or the C.I.T. (Appeals) that the appellant
trust failed to invest it funds as required by law. On the contrary,
the A.R. showed from the accounts that all funds of the trust were
duly invested with banks. It is further seen that the return of
income shows both brought forward and carried forward deficit and
hence even if the amounts treated as income by the A.O. are added
thereto, the net result continues to be deficit which is more than
the addition made by the A.O. Therefore, we find merits in the
contention of the learned AR and we set aside the order of the
CIT(A) and direct the Assessing Officer to delete the addition made
by him on this issue .
6. It
is apparent that the Tribunal has merely appreciated the evidence on
record. While doing so, the Tribunal has taken cognizance of the fact
that the statements, schedules and the audited accounts forming
part of the return of income are otherwise accepted by the Assessing
Officer. That the amount of Rs. 53 lacs has neither been claimed nor
allowed as deduction from income by way of application of funds, it
is not a receipt of fresh donation during the year nor income of the
trust. The Tribunal has also accepted
that the amount in question is nothing else but a transfer entry from
one unit to the other in the books of account.
6.1. The
Tribunal has also referred to provisions of section 11(5) of the Act,
to hold that neither the Assessing Officer nor Commissioner (Appeals)
have pointed out as to how the assessee trust has failed to invest
funds as required by law. To the contrary, the Tribunal has taken
note of the fact that all the funds of the trust have been duly
invested with the banks.
6.2. Lastly,
the Tribunal has even accepted the alternative submission of the
assessee that considering the brought forward and carried forward
deficit even if the amount in question is added as income the net
result continues to be a deficit and hence there is no tax liability.
7. Taking
into account the aforesaid findings recorded by the Tribunal, it is
not possible to state that
the said findings are in any manner one which a reasonable person
could not have arrived at. No evidence has been placed before the
High Court to show which relevant piece of evidence has been ignored
or irrelevant evidence has been considered by the Tribunal. The
submission on behalf of the appellant that what has been stated by
the Assessing Officer has not been correctly appreciated by the
Tribunal cannot make the order of the Tribunal perverse, even if what
is submitted is accepted as correct. On facts even the said statement
is not correct as noticed hereinbefore. Even otherwise, in law an
order of the Appellate Forum can at best be termed to be an
erroneous order but cannot be termed to be perverse when compared
with the order made by an inferior forum, as otherwise the same would
render the right of Appeal statutorily granted redundant. The order
of the Assessing Officer has no independent existence and stands
merged with the order of Commissioner (Appeals) and primarily the
Tribunal is only required to consider whether the order made by
Commissioner (Appeals) is correct or not.
8. In the
circumstances, on none of the grounds pleaded or urged at the time of
hearing can it be stated that the impugned order of the Tribunal
suffers from any legal infirmity so as to warrant interference. None
of the questions as proposed, or otherwise can be stated to arise out
of the impugned order of the Tribunal on the ground of perversity.
9. The
Appeal is accordingly dismissed in absence of any substantial
question of law.
Sd/-
Sd/-
(D.A.
Mehta, J.) (H.N. Devani, J.)
M.M.BHATT
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