TaxTMI 
TaxTMI 
2018 (6) TMI 1452
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....ssessment u/s. 143(3) of the Act at 'NIL' after granting benefit of exemption u/s. 11 of the Act. Subsequently, the assessee Trust got a show cause notice u/s. 263 of the Act dated 15.07.2016 from the Ld. CIT(E) holding the assessment order to be erroneous and prejudicial to the interest of the Revenue on two grounds viz. (a) according to Ld. CIT, the AO had taken the expenses of Rs. 40,88,944/- which, inter alia, included income tax of Rs. 40,61,061/- paid during the FY 2011-12 and it was allowed as application of income. The Ld. CIT, however, observed that the said tax payment was refunded to the assessee in FY 2014-15 but not shown as income in the corresponding year and hence, the AO had wrongly allowed the payment of Rs. 40,61,061/- in the relevant FY 2011-12, (b) as per receipts and payments account, the assessee had received Rs. 92,50,000/- from M/s. Tirupati Associates but in the Balance Sheet the said receipt was shown as advance against property less returned to the Tirupati Associates. According to the Ld. CIT(E), no such return to Tirupati Associates was reflected in the payment side of the receipt and payment account and the said receipt was also not taken into the gro....
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.... on 22.09.2014, the AO had admitted of receiving revised computation of income in which the assessee had claimed income tax payment to be application of income for charitable purposes. The Ld. CIT(E) noted that although the AO did not consider such tax payment to be application of income for charitable purposes, nonetheless the AO considered such tax payment to be administrative expenses and allowed this set off against income derived from the property held under the trust and thereby arrived at the income assessable u/s. 11 of the Act. In the Ld. CIT's opinion the assessee's claim for deducting income tax payment could not have been considered by the AO since such claim was not made either in the return of income or in the revised return but only by way of revised computation. The ld. CIT(E) therefore, held that as per the judgment of the Hon'ble Supreme Court in the case of Goetz India Ltd. 284 ITR 323 the AO was not permitted to admit and allow the claim not made by the assessee in the return or revised return of income. Since such claim was allowed by the AO, the Ld. CIT (E) considered the assessment order to be erroneous and prejudicial to the interest of the revenue and the L....
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....essment framed by AO was erroneous and prejudicial to the interest of the revenue. In our considered opinion, merely because in the original return filed for AY 2015-16, the assessee had omitted to declare the tax refund as its income, cannot be a sole ground to conclude that the assessment order passed for AY 2012-13 i.e. the year in which the tax actually paid could be held to be erroneous and prejudicial to the interest of the revenue. Thus the assumption of jurisdiction by ld CIT(E) is on this incorrect understanding of law itself is erroneous and so makes the order untenable. 7. Be that as it may, however for completeness we would like to see the merit of the Ld. CIT(E)'s direction to AO to disallow the income tax as expenditure which according to us is also not in consonance with the applicable legal provisions and judicial precedents available on the issue. It may be true that in the return furnished by the assessee it did not claim deduction for the tax payment in arriving at the total income computed as per sec. 11 of the Act. However, as admitted in the impugned order, in the course of assessment proceedings the assessee had furnished a revised computation of income wher....
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....ar year, irrespective of the fact that they relate to the assessment of the previous years, are yet outgoings and constitute expenditure. Such payments cannot be excluded from exemption and are thus to be excluded from the income of the trust. Point No. 2 is answered accordingly." 9. We also rely on the judgment of the Hon'ble Gujarat High Court in the case of CIT Vs. Ganga Charity Trust Fund (1986) 162 ITR 612 wherein the Hon'ble High Court allowing the payment of income tax as and by way of expenditure from the total income held as follows: "We are, therefore, of the view that the Tribunal was right in coming to the conclusion that the income derived from trust property must be determined on commercial principles and in doing so all outgoings, including outgoing by way of income-tax paid by the assessee-trust must be deducted and it is only from the surplus income in the hands of the trustees that the question of application or accumulation or setting apart of income can arise. In this view that we take, we do not feel called upon to examine the second contention based on the decisions referred to above, whether the expenditure incurred by the, trust for the payment of income....