TaxTMI 
TaxTMI 
2015 (2) TMI 684
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....cable trust and in holding that the alienation of the property would amount to the Appellant being extinct. He further erred in holding that the development of land was beyond the objects of the Appellant. 1:4 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, it is entitled to the exemption under section. 11 of the Income-tax Act, 1961 and the action of the Commissioner of Income-tax(Appeals) in directing the Assessing Officer to recompute the Appellants total income without considering the provisions of section 11 of the Income-tax Act, 1961 is misconceived, erroneous, incorrect and illegal. 1:5 The Appellant submits that the Assessing Officer be directed to grant the Appellant the exemption under section. 11 of the Income-tax Act, 1961 and to re-compute its income accordingly. 2:0 Re.: Enhancement of income by the Commissioner of Income-tax (Appeals): 2:1 The Commissioner of Income-tax (Appeals) has erred in enhancing the Appellant's total income for the year under consideration without complying with the mandatory provisions of section 251 (2) of the Income-tax Act, 1961. 2:2 The Commissioner ....
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....me-tax (Appeals) in consequence of denying the benefit of section 11 has erred in disallowing a sum of Rs. 2,26,836/- being the depreciation for the year under consideration. 4:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject it is entitled to depreciation on the assets held by it and the stand taken by the Assessing Officer in this regard in misconceived, incorrect, erroneous and illegal and the Commissioner of Incometax (Appeals) ought to have held as such. 4:3 The Appellant submits that the Assessing Officer be directed to delete the disallowance so made by him and to re-compute its total income accordingly. 5:0 Re.: Non setting off of the brought forward deficit:- 5:1 The Commissioner of Income-tax (Appeals) in consequence of denying the benefit of section 11 erred in not permitting setoff of the unabsorbed brought forward deficit of the earlier years while determining the income of the Appellant for the year under consideration. 5:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the unabsorbed deficit of the earlier years ou....
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....f Charitable Organization with DIT(E), Mumbai under section 12A in 1975 and as per F5 by the Charity Commissioner, Mumbai. 4. From the inception, till date, the objects of the Trust have remained the same. 5. In the assessment proceedings, the AO noticed that the assessee has shown liability of Rs. 32,50,00,000/- in the Balance Sheet and put a note, "Mandali had received Rs. 32,50,00,000/-( Rupees thirty two crores fifty lacs if) from M/s Lokhandwala Construction Industry Ltd. in consideration of development agreement dated. 13th December, 1984 entered into by the Mandali with M/s Lokhandwala Construction Industries Ltd. As per the terms of the agreement total consideration is Rs. 11,00,00,000/- (Rupees eleven Crore only) or Rs. 50/- per sq feet or available FSI whichever is higher. Till date Mandali and the Developers have not been able to arrive at the quantum of available FSI, agreeable to both the parties. As a consequence the total amount payable by the Developers could not be ascertained so far. Hence, the amount of Rs. 32.50 crore received is shown as advance, pending negotiations." 6. This note has been appearing over the years, because a dispute arose between the ....
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....ng in an extraneous activity, which became responsible to exclude the trust from its charitable objects. 10. Against this order of the CIT(A), the assessee is before the ITAT. 11. Before us, the AR submitted (a) that denial of exemption under section 11 of the Income Tax Act, 1961 by the CIT(A) was wrong, as it was not the subject matter of appeal before him (b) If at all the CIT(A) wanted to touch upon the issue which is not under appeal before him, it would amount to enlarging the scope of the appeal, which is not permitted (c) The CIT(A) has the power to enhancement, but to delve into that, he had first to comply with the provisions of section 251(2) and then proceed with the enhancement proceedings, and (d) that the revenue authorities were wrong to invoke the provisions of section 41(1) of the Act. 12. The AR submitted that denial of exemption under section 11 by the CIT(A), which had been allowed by the AO, is a case of enhancement, the Act has provided certain guidelines, as provided under section 251(2), wherein the Act says "The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has h....
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....ue authorities. The AR submitted that if at all transaction with LICL was to be considered outside the objects of the trust, it would deemed to have happened in 1984, when the agreement for development with LICL was signed and not in 2009-10. But since 1984 to 2009-10 it has consistently been accepted, than there was no violation of objects. It squarely means that there was no scope of denial of benefit under section 11, and on the other hand, advance, which has neither been treated as an expense or loss in any earlier year, the provisions of section 41(1) cannot get triggered. 17. The AR also submitted that the advance so received by the assessee was never treated as an allowance or a deduction, which could trigger either the provision of section 41(1) or on a worst case scenario trigger the denial of section 11, as there was no change in the facts of the transaction with LICL, which was always there. 18. The AR placed reliance on the decision of ITO vs M/s Veeyenes Shipping Services (P) Ltd, ITA No. 6468/Mum/2010, wherein, it was held, "It is settled proposition of law that until and unless it is apparent that the liability is ceased to exist or the assessee takes a decisio....
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....The consideration paid was for such import. In the circumstances, section 28 (iv) was not attracted. Lastly, AMC agreed to forego the principal amount of loan as a part of takeover arrangement with KJC to which the assessee was not a party. The waiver of the principal amount was unexpected In the circumstances, such waiver would not constitute business income. [Para 7] Bombay Gowrakshak Mandali So far as applicability of section 41(1) is concerned, one of the requirements is that the assessee should have obtained a deduction in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee. In the instant case, the assessee had not obtained such allowance or deduction in respect of expenditure or trading liability in the earlier years. It was not disputed that the assessee had paid interest at 6 per cent over a period of 10 years to KJC. In respect of that interest, the assessee never got deduction under section 36(1)(iii) or section 37. Further, Toolings constituted capital asset and not stock-in-trade. Therefore, section 41(1) was not applicable. Secondly, assuming for the sake of argument that the assessee had got deduction on allowance....
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....Hon'ble Supreme Court was whether the assessing officer examined the issue of taxability, when the issue was not before him. But in the instant case, the issue of addition under section 41(1) was examined by the AO along with the allowance of benefit of exemption under section 11. 26. We have heard the arguments and have pursued the orders of the revenue authorities, evidences and case laws cited before us. 27. The fact that the assessee had entered into a development agreement in 1984 with LICL and received advance therefrom is not disputed. 28. The fact that till preceding year, the advance so received in 1984, was treated as advance and accepted by the revenue authorities is also not disputed. 29. The fact that from 1984 till date there has been no change in the status of the transaction, which is standing still, and neck deep in litigation, is also not disputed. Bombay Gowrakshak Mandali 30. The fact that the revenue authorities had been accepting the status from 1984, till date, and allowing exemption under section 11 is also not disputed. 31. The issue before us has become two fold, i.e. firstly, invocation of section 41(1) by the AO and sustaining thereof b....
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....under section 11. 38. In so far as addition on account of section 41(1) is concerned, we set aside the order of CIT(A) and direct the AO to delete the addition made under section 41(1). 39. Grounds no. 1, 2 & 3 are therefore allowed. 40. Ground no. 4 pertains to disallowance of Rs. 2,26,836/-, being depreciation for the year. 41. At the time of hearing, the AR submitted that the issue is covered by the decisions of Hon'ble Bombay High Court in the case of DIT (Ex) vs Framjee Cawasjee Institute, reported in 109 CTR 463 (Bom), wherein it has been held, "Depreciation o depreciable assets had to be taken into account in computing income of trust although the amount spent on acquiring such assets had been treated Bombay Gowrakshak Mandali as application of income of trust in the year in which assets were acquired; answer being self-evident, reference declined". and in the case of CIT vs Institute of Banking Personnel Selection reported in 264 ITR 110 (Bom), wherein it has been held, "in view of the decision in CIT v. Munisuvrat Jain 1994 Tax LR 1084, it was held that the Tribunal was right in law in directing the Assessing Officer to allow depreciation on the assets the cost....