Maruti Rural Development Association, ... vs Department Of Income Tax
- CitationITA.No.1928/Ahd/2011
Ratio decidendi
The rule this decision rests on
Where the Assessing Officer, in a year after the trust's exemption under section 11 has been allowed in the two subsequent assessment years without challenge by Revenue, denies that exemption for the year under appeal and estimates income, the tribunal applies the principle of consistency: the question of exemption under section 11 having attained finality in the assessee's favour in the later years, it deserves to be granted in the year under consideration as well, so that no estimation of income at a percentage of receipts arises. Where an Assessing Officer denies exemption under section 11 on the ground that the trust has conferred undue benefits on its trustees, but records no finding to that effect, the denial cannot be sustained, and the estimation of income founded upon it is liable to be set aside. An order of the Assessing Officer that applies the amended provisions of section 2(15), enacted for a later assessment year, to a year to which those amendments do not apply, is not a proper appreciation of the assessee's case and cannot support the denial of exemption for the year under consideration.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
अपीलाथ क ओर से /By Appellant : Shri Roopchand, Sr.D.R. ू यथ क ओर से/By Respondent : Shri Tushar P. Hemani, A.R. सुनवाई क तार!ख/Date of Hearing : 30.01.2015 घोषणा क तार!ख/Date of Pronouncement : 19.02.2015 I.T.A. No. 1928/Ahd/11 A.Y. 08-09 [ADIT (E xem p.) vs. Shri Maruti Rural De vl. Association) Page 2
ORDER
PER SHAILENDRA KUMAR YADAV, J.M:
This appeal has been filed by Revenue against the order of the Commissioner of Income Tax (Appeals)-XXI, Ahmadabad, dated 19.05.2011 for A.Y. 2008-09 on the following grounds:
"The ld. CIT(A) has erred in law and on facts in allowing the appeal of the assessee:
(i) The ld. CIT(A) has erred in facts in allowing assessee's appeal by deleting the addition made of 8% of gros receipt of Rs.1,62,92,417/- by the A.O. on the basis of contract income, bogus purchase bills and ingenuine public contribution.
(ii) The ld. CIT(A) has erred in facts in directing to treat the activities as charitable and granting the exemption under the provisions of section 11,12, and 13 of the I.T. Act, 1961, not considering the provisions u/s.11(4A), 13 regarding cancellation of registration if benefit was taken by the trustee."
2. Assessee is a charitable trust engaged in the activity of construction of check dams under the scheme of Government of Gujarat for the utility of general public at large. Assessing Officer treated the said activity as business activity and denied exemption u/s. 11 in view of Section 11(4A). Consequently, Assessing Officer estimated assessee's income at Rs.13,03,393/- being 8% of total receipts of Rs.1,62,92,447/-. Stand of assessee has been that in assessment year 2009-10, exemption u/s. 11 was denied by Assessing Officer which came to be allowed by CIT(A) against which no appeal has been I.T.A. No. 1928/Ahd/11 A.Y. 08-09 [ADIT (E xem p.) vs. Shri Maruti Rural De vl. Association) Page 3
preferred by revenue. Furhter exemption claimed u/s.11 in A.Y. 2010-11 has been allowed by Assessing Officer which has also not disputed by Revenue. Thus, in subsequent two assessment years, issue as to exemption u/s.11 has been decided in assessee's favour and same has attained finality. In this background, learned Authorized Representative submitted that following principles of consistency, exemption u/s.11 deserves to be granted in the year under consideration as well. Consequently, question of estimating assessee's income @10% does not arise.
2.1 We find that Assessing Officer has not properly appreciated the facts of assessee's case. It is undisputed that assessee is engaged in the activity of construction of check dams i.e. construction of small dams in various catchment areas to preserve water and facilitate its usage at a later date, as per scheme of Government of Gujarat. As per said scheme, only public charitable trusts are entitled to undertake the work of construction of check dams. As per scheme of Government of Gujarat, only those check dams which are refused by regular contractors are to be allotted to such trusts. Moreover, only 80% of estimated or actual cost, whichever is lower, is to be paid to the trust. Rest of funding is to be raised by trust by donation or labour from public. Trust has not received any donation but through public labour, raised remaining 20%. Assessing Officer has considered the amended Section 2(15) which was applicable for A.Y. 2009-10 and not for the year I.T.A. No. 1928/Ahd/11 A.Y. 08-09 [ADIT (E xem p.) vs. Shri Maruti Rural De vl. Association) Page 4
under consideration. There is also reference of Section 13 regarding cancellation of registration if benefit was taken by trustee. It was not found proper by CIT(A) since exemption u/s.11 has been denied on count that assessee trust has passed on undue benefits to its trustees. There is no finding of Assessing Officer in this regard. In this background, it was found that Assessing Officer has wrongly concluded that assessee is not eligible for Section 11 and estimated assessee's income @ 8%. CIT(A) has rightly allowed exemption u/s.11 and deleted impugned addition. Accordingly, order of CIT(A) is upheld.
3. In the result, the appeal filed by Revenue is dismissed.
Pronounced in the open Court on this the19th day of February, 2015.
Sd/- Sd/- (N. S. SAINI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER True Copy S.K.SINHA
आदे श क ूितिल'प अमे'षत / Copy of Order Forwarded to:-
1. राजःव / Revenue
2. आवेदक / Assessee
3. संबंिधत आयकर आयु0 / Concerned CIT
4. आयकर आयु0- अपील / CIT (A)
5. 'वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड9 फाइल / Guard file.
By order/आदे श से,
उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।
This page reproduces a public judgment and a summary of it. It is research material, not legal advice, and it is no substitute for advice from an advocate on your own facts.
Research this judgment with Miss Lucy
Ask what it holds, what has followed it, and what it means for your matter — in plain English, with the citations.
Try Miss Lucy free