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From: Kapil Goel <advocatekapilgoel@gmail.com>
To: ghaziabad_ca@yahoogroups.com
Sent: Saturday, 21 September 2013 7:57 AM
Subject: [Gzb_CA Group -CA. VINAY MITTAL] ITAT orders on section 12AA & Section 2(15) charitable purpose ass & rev fav general public utility : private club (not public object); investor protection fund (public object); III) P&H high court Concealment penalty orders section 271(1)(c) only where intent to evade taxes is there & not where divergent judicial opinion is there; & concept of Headless income apply when Source unknown (section 115BBE)
From: Kapil Goel <advocatekapilgoel@gmail.com>
To: ghaziabad_ca@yahoogroups.com
Sent: Saturday, 21 September 2013 7:57 AM
Subject: [Gzb_CA Group -CA. VINAY MITTAL] ITAT orders on section 12AA & Section 2(15) charitable purpose ass & rev fav general public utility : private club (not public object); investor protection fund (public object); III) P&H high court Concealment penalty orders section 271(1)(c) only where intent to evade taxes is there & not where divergent judicial opinion is there; & concept of Headless income apply when Source unknown (section 115BBE)
Included in this update:
I) ITAT orders on section 12AA & Section 2(15) charitable purpose ass & rev fav general public utility : private club (not public object); investor protection fund (public object)
II) P&H high court Test laid down for when income falls under chapter (head of taxation) when source of income is Known and when source is unknown it is unexplained income (under section 68)
III) P&H high court Concealment penalty orders section 271(1)(c)
IN THE INCOME TAX APPELLATE TRIBUNAL "I" BENCH, MUMBAI I.T.A. No. 7436/Mum/2011 Inter-connected Stock Exchange Investors Protection Fund (ISE IPF) C/. Inter-connected Stock Exchange of India Ltd. 20.09.2013 Opening the arguments for and on behalf of the assessee, it was submitted by its
counsel, Shri A. H. Dalal, that the assessee-appellant is a Trust formed and settled on 29th day of June, 2009 by Inter-connected Stock Exchange India Ltd. (ISEL), a company formed by the coming together of the 23 (the trust deed mentions the said number at 36 though/ PB pgs. 04 - 15) regional Stock Exchanges of India to provide a common platform for trading in shares and securities. The assessee-trust was formed in pursuance of the Securities and Exchange Board of India (SEBI) guidelines/regulations for investor
protection, with the sole aim of creating a Fund which could provide compensation to the investors in case of loss on account of default by any member of a participating, recognized Stock Exchange. The same is a public charitable cause, falling within the scope of the term 'charitable purpose' as defined u/s. 2(15), vide the last limb thereof, i.e., the advancement of any other object of general public utility…
The first aspect that needs to be clarified in the instant case is that it is a case of
refusal to grant registration u/s.12AA(1), and not of withdrawal of registration already granted, i.e., u/s.12AA(3) of the Act. Coming, next, to the objections, i.e., the reason/s that inform the order of the ld. DIT (Exemption) toward the assessee's objects being not charitable, we shall consider the
same in seriatim, as under:
(a) that the appellant fund is for the benefit of the specific persons who invest in a
particular market, and not for the general public. As explained by the apex court in the case of Ahmedabad Rana Caste Association (supra), an object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose it is not necessary that the object leads to the benefit the
whole mankind or all persons in a particular country or even state, and it would be sufficient if the intention is to benefit a section of the community, sufficiently defined and identifiable by some common quality of a public or impersonal nature. What is to be seen is the intention to benefit a section of the public as distinguished from a specified individual or group. As such, we find no merit in the said objection by the ld. DIT (E).
(b) that the contribution which the participating member stock exchange is required to make to the appellant-fund is toward defined services, so that the same, as well as the interest earned thereon, would be liable to being taxed, and which is sought to be evaded by seeking registration as the charitable institution.
So however, to the extent it is by way of performance linked, or even a uniform
charge on the companies listed on the stock exchange/s, as, say, a percentage of their revenue, in our view, the same could be an arrangement to indemnify their members by charging them a particular amount, even though termed as a 'contribution'. The said Members may well seek insurance in respect of the losses liable to be sustained in the course of and in pursuance to their trade, with the insurance company creating such a fund, and for which it may charge an insurance premia. On the other hand, if the contributions is not linked to any service, made voluntarily by the recognized stock exchange, with it retaining no lien or right on the said contribution, no charge as to the same being hit by the proviso to s. 2(15) would hold and, consequently, the Revenue's objection would not be valid In our considered view, therefore, the applicant fund is a public charitable fund, set up to advance an object of general public utility, and has been wrongly denied registration as one by the Revenue. We, accordingly, vacating the findings of the competent authority vide the impugned order, direct it to grant registration applied for. We decide accordingly.
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH "C" CHENNAI I.T.A. No.2124/Mds/2012 YONO CLUB TRUST Date of Pronouncement : 26 Aug 2013 Undisputedly, the objects of the assessee are claimed to promote
to help and develop the game of badminton shuttle cock without
profit motive. On a specific query being raised by the bench to
the assessee as to whether the promotion of the event in
question was for the general public or its members only, the
response is that it does not cater the general public but confines
only to its members. In our view, offering of the so called
service to a particular section as in the instant case to members of the assessee organization only does not in any way lead to a
charitable activity for the purpose of sec.2(15) of the Act. We
reiterate that a charitable activity can not be confined to a
particular section but for the society at large. In view of these
facts and circumstances, instead of restoring the issue back to the file of CIT, we reject the assessee's contentions by holding
that it is not engaged in any charitable activity.
4. In the result, the appeal is dismissed.
Income Tax Appeal No.189 of 2012
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH Date of Decision:10th September, 2013
Dulari Digital Photo Services Private Limited. ..Appellant
Versus
Commissioner of Income Tax, Ludhiana (Punjab) ..Respondent A perusal of findings recorded by the Assessing Officer
reveals that the matter was considered in a great degree of detail
and as referred to in preceding paragraph (which we have
reproduced). The expression "income from other sources" would
come into play only where income is relatable to a known source.
Where the income is not relatable to any known or any bona fide
source, it would necessarily be brought to tax or considered as
income of the assessee, under Section 68 of the Act. Section 68 of
the Act clearly provides that where a sum is credited in the books of
assessee and the assessee is unable to offer any explanation about
the nature and source thereof, or the explanation offered is not
satisfactory, the sum so credited may be charged to income tax as
the income of the assessee of that previous year. What is brought to
tax under Chapter IV of the Act is an income from a known source,
i.e., a particular source from which the income flows but the source
of a particular revenue receipt cannot be pegged down to any
particular source, provisions of Section 14 of the Act, particularly
"income from other sources", would not apply and such income
would necessarily fall under Section 68 of the Act, being
unexplained cash receipts that do not fall within the definition of
"income from other sources".
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH ITA No.122 of 2012 (O&M)
Date of decision:08.8.2013 Commissioner of Income Tax I, Ludhiana
Appellant Versus M/s Tudor Knitting Works Pvt. Limited
Respondent
It had been noticed by the Tribunal that there was no false claim made
by the assessee though the same was found to be incorrect. There was
no mens rea on the part of the assessee to claim the deduction and
therefore, the case did not fall under Section 271(1) (c) of the Act as
there are divergent judicial opinions on the claim made by the
assessee.
In view of the above, the substantial questions of law are
answered against the revenue and in favour of the assessee.
(Whether on the facts and circumstances of the case,
Hon'ble Income Tax Appellate Tribunal is justified in deleting the penalty levied under Section 271(1) (c ) of the IT Act, 1961 by AO on account of excess claim of deduction under Section 80IB on surrendered income ignoring the fact that the assessee had knowingly claimed deduction under Section 80IB inspite of a categorical knowledge that such a claim was patently wrong and against the law and also that it was ab initio
void claim?
Whether on the facts and circumstances of the case, Hon'ble Income Tax Appellate Tribunal is justified in deleting the penalty levied under Section 271(1) (c) of the IT Act, 1961 by applying the decision of Hon'ble
Supreme Court in the case of M/s Reliance Petro Products (P) Limited 322 ITR 158 as the facts and legal position of this case are different and the assessee knowingly made a false claim of deduction
under Section 80IB?")
Income Tax Appeal No.183 of 2013 1
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
Income Tax Appeal No.183 of 2013
Date of Decision:06.09.2013 Bal Kishan Dhawan HUF, Prop. M/s B.K.D.Enterprises,Amritsar The revenue impugns order dated 8.3.2013 passed by the
Income Tax Appellate Tribunal, Amritsar Bench, Amritsar and order dated
25.5.2012 passed by the Commissioner of Income Tax (Appeals), deleting
the penalty imposed by the Assessing Officer.
Counsel for the appellant submits that as the assessment
order was upheld by the Income Tax Appellate Tribunal, the order imposing
penalty, under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter
referred to as the "Act"), has been wrongly set aside by the Commissioner
of Income Tax (Appeals) and the Income Tax Appellate Tribunal, by relying
upon a judgment of the Hon'ble Supreme Court in Commissioner of Income
Tax (Appeals) versus Reliance Petro Products Private Limited 322 ITR 158 (Supreme Court). The judgment is not applicable as it is distinguishable on
facts. The controversy, in the present case, is fully covered against the assessee by a judgment of the Delhi High Court in Commissioner of
Income Tax versus Zoom Communication Private Limited, 2010 (327) ITR
510 (Delhi). The Income Tax Appellate Tribunal as well as the
Commissioner of Income Tax (Appeals) have fallen into error while holding
that mere disallowance of deduction claimed, would not necessarily invite
penalty. We have heard counsel for the appellant, perused the
impugned orders and find no reason to entertain the appeal, much less on
the questions of law raised by the appellant. Counsel for the revenue's contention that as claim for
deduction was not bona fide, penalty was rightly imposed. The controversy,
herein, is covered against the assessee by a judgment of the Delhi High
Court in Zoom Communication Private Limited's case (supra) and not by
judgment of the Hon'ble Supreme Court in Reliance Petro Products' case
(supra) as the latter judgment is distinguishable on facts. We are not
inclined to accept the submissions made by counsel for the revenue While considering the scope and ambit of penalty levied
under Section 271(1)(c) of the Act, the Hon'ble Supreme Court has held in
Reliance Petro Products' case (supra) that mere raising of a claim, even if
not sustainable in law, is not by itself, sufficient to hold that it denotes
furnishing of inaccurate particulars with an intent as would invite a penalty.
The Hon'ble Delhi High Court has held in Zoom Communication Private
Limited's case (supra), that if an assessee is unable to explain as to in
what circumstances and on account of whose mistake, deductions were
claimed, it would amount to raising a mala fide claim that would invite
penalty. We cannot, but agree with the observations by the Delhi High
Court, but, as the situation, on facts, in the present case, is entirely different, find no reason to depart from the ratio laid down by the Hon'ble
Supreme court in Reliance Petro Products' case (supra). The deductions
were claimed in a bona fide exercise of the right of an assessee to claim
deduction. The fact that this claim was rejected, does not raise inference of a mala fide attempt to evade tax. A penalty is imposed only if the claim is mala fide or raised with intent to evade tax.
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