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2016 (1) TMI 1082 - ITAT JAIPUR

2016 (1) TMI 1082 - ITAT JAIPUR - TMI - Registration granted U/s 12AA withdrawn - assessee is not entitled exemption U/s 11,12 and 13 - change of accounting policy - Held that:- The assessee has been granted registration by the order of the Coordinate Bench wherein the coordinate Bench has held that the assessee’s activities are charitable and are not covered U/s 2(15) of the Act. Therefore, the Assessing Officer is directed to give benefit of Section 11 and 12 of the Act to the assessee. The in .....

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ed by the assessee is squarely applicable. A change in the method of accounting should not be rejected for reasons that it would result in bringing into accounts in one year the losses of several years as held in the case of CIT Vs. Eastern Bengal Jute Trading Co. Ltd. (1978 (1) TMI 72 - CALCUTTA High Court ) Accordingly change of the accounting policy is allowed.

The assessee has claimed depreciation on fixed assets which is also allowable as held by the various courts in case of Tru .....

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ated 28/02/2013 passed by the ld CIT(A)-II, Jaipur for A.Y. 2009-10. The effective grounds of both the appeal are as under:- Grounds of assessee s appeal:- 1. The ld. CIT(A)-II has erred at law as well as in facts to apply the provisions of Section 145(3) and assessee in the manner as provided in section 1 44 of the I.T. Act, 1961. 2. The ld CIT(A)-II has erred in law and exceeded in jurisdiction in disallowing the exemptions U/s 11 of the Act by holding that the activities of the appellant Boar .....

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iture related to such change. 4. the ld CIT(A)-II has erred at law as well as in facts in disallowing ₹ 1,07,02,423/- on account of expenses on shooting range. 5. The ld CIT(A)-II has erred at law as well as in facts in disallowing ₹ 5,00,00,000/- being expenditure as contribution for Deendayal Medical Hospital at Jaipur assuming them as donation to charitable institutions, further doubly disallowing the same. 6. The ld CIT(A)-II has erred at law as well as in facts in disallowing &# .....

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eciation without appreciating the fact that the assessee has already take deduction of cost of assets purchased in earlier years as application of income in earlier year and claiming of depreciation on such assets would tantamount to double benefit. 2. The ld Assessing Officer has observed that the assessee is maintaining and developing of area and civic amenities including allotment of lands. The assessee filed its return on 29/09/2009 claiming loss of ₹ 1,86,64,18,300/-. The case was scr .....

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granted U/s 12AA of the Act, therefore, from A.Y. 2009-10, there was no registration U/s 12AA of the Act and the assessee is not entitled exemption U/s 11,12 and 13 of the Act. Therefore, the ld Assessing Officer calculated the assessee s income as per the normal provisions of the Act. The auditor of the assessee company had made 15 qualification on method of accounting adopted by the assessee one of the qualification is as under:- The authority has maintained the accounts on cash basis and has .....

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te No. 1 of schedule X and the effect on the income and expenditure and balance sheet of the qualification mentioned herein after could not be reported since not ascertained by the management as reported in the respective notes. The ld Assessing Officer observed that the assessee had not followed existed accounting principle. He has not satisfied about correctness or completeness of the account of the assessee and in view of Section 145(3), the assessment was made in manner provided U/s 144 of t .....

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during the year under consideration. He applied the last year method of accounting, the deposit shown in the income and expenditure account was required to be reduced by ₹ 2,69,69,91,775/- to make it comparable with the last year method. It does not include 5% of administrative expenditure, which was the practice till last year, which was worked out at ₹ 1,41,85.013/-. He further found that ₹ 27,08,29,603/- had incurred on development work on shooting range. The expenses are re .....

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e income, accordingly, it has been disallowed. The assessee also made payment exceeding ₹ 20,000/- cash amounting to ₹ 1,26,000/- which has also been disallowed U/s 40(a)(3) of the Act. The assessee had claimed depreciation amounting to ₹ 1,98,41,604/-. Since the expenditure in respect of addition to fixed assets is already allowed in earlier years as application of income, assessee is not entitled for double deduction on those additions to fixed assets in the shape of deprecat .....

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d paid an amount of ₹ 5 crores each to Amber Development Authority and Deen Dayal Charitable Trust. No doubt these expenses would be admissible as application of income but in regular computation of income, these expenditures are not allowable. The ld Assessing Officer finally assessed the total income of the assessee at ₹ 126,36,80,980/- in place of deficit at ₹ 186,64,18,300/-. 3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before th .....

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le. This was withdrawn by the ld CIT in view of the amendment made in Section 2(15) wherein charitable purpose by way of advancement of any other object of general public utility had been added in this Section, advancement of any other object of general public utility shall not be charitable purpose in certain circumstances that is if it involves the carrying on any activities in the nature of trade, commerce or business, or any activity or rendering any service in relation to any trade, commerc .....

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he assessee itself. The ld CIT(A) held that the JDA is selling property on auction, which is an activity duly commercial in nature. The assessee argued that the assessee is a charitable organization as per JDA Act. The assessee had followed existed principle of accounting, any change made in accounting system has been qualified by the auditor by providing the note in assessment year 2008-09, the develo0pment receipts and entire development expenditure was put and then the result was taken to the .....

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.Y. 2009-10. All the development activities in the Jaipur region is carried out by the assessee itself or through local authority or private operators but on control from initial production given to completion of project always under the watch of the assessee. The norms of the JDA has to be followed by them. They further argued that the Hon ble ITAT has granted registration U/s 12AA, therefore, even due to change of accounting policy as such there is no surplus if calculated will be adjusted aga .....

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accounting followed in A.Y. 2008-09. The ld CIT(A) has computed the income after considering the deficit shown by the assessee from page 46 to 63 and held that disallowance of ₹ 141,85,013/- taken out in the second part of ground No. 2, in this appeal, has been enhanced to ₹ 21,13,94,421/- as this is the correct amount, which should have been reduced from the expenditure side of the income and expenditure statement as per accounting note 9 of A.Y. 2008-09. According to which, 5% of d .....

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assessee has reiterated the arguments made before the ld CIT(A) and argued that the Hon ble ITAT has granted registration U/s 12AA of the Act w.e.f. 14/3/2007. The Assessing Officer has to allow the benefit given in Section 11 and 12 of the Act to the assessee Trust. There is no doubt that the assessee s activities are charitable and are not covered U/s 2(15) of the Act. The Hon ble Bench has considered this issue also at the time of allowing the registration in favour of the assessee. He furthe .....

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n the balance sheet. However, the assessee is not getting any benefit from the development activity as it is not an income generated apparatus for the assessee. Therefore, whole amount on development has been debited in the P&L account. Whatever development activity carried out by the appellant is making available to the public such as road, sewerage, developing of societies, water facilities, gardens and no revenue has been charged from the public on using these facilities. Therefore, there .....

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He relied on the decision of Hon ble Gujarat High Court at Ahmedabad (Tax Appeal No. 902 of 2013) in the case of CIT Vs Mapin Publishing Pvt. Ltd. 5. At the outset, the ld CIT DR vehemently supported the order of the ld CIT(A) and argued that the assessee s registration has been withdrawn by the CIT. However, the Hon ble ITAT has allowed registration U/s 12AA of the Act, therefore, she fairly accepted the arguments made by the ld counsel for the assessee. Accordingly benefit of Section 11 and 12 .....

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