TMI Blog2018 (6) TMI 1452X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of Ld. CIT(E) on 27.12.2017 and after complying with the direction of Ld. CIT(E) and after disallowing ₹ 40,60,061/- (income tax paid) still the total income is “NIL”. So we note that there is no prejudice whatsoever caused to Revenue, so even if for argument sake the Ld. CIT(E)’s contention and direction is accepted as correct, then also the twin conditions which is a condition precedent is not satisfied at all. Thus in any case, the AO’s original order dated 14.11.2014 cannot be held to be erroneous and prejudicial to the Revenue. - decided in favour of assessee. - I.T.A. No. 938/Kol/2017 - - - Dated:- 27-6-2018 - Shri A. T. Varkey, JM And Dr. A. L. Saini, AM For The Appellant : Shri Miraj D. Shah, AR For The Respondent : Shri G. Mallikarjuna, CIT, DR ORDER Per Shri A.T.Varkey, JM This appeal preferred by the assessee is against the order of the Ld. CIT(E), Kolkata dated 14.03.2017 for assessment year 2012-13 passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as the Act ). 2. In the several grounds raised in the appeal the assessee has objected to the action of the Ld. CIT(E), Kolkata in invoking the revisional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined that the tax of ₹ 40,60,061/- was paid by the assessee in respect of demand raised on the assessee for earlier years and as noted by the Ld. CIT(E) in the show cause notice, the refund was received in FY 2014-15 relevant to AY 2015-16. According to the assessee trust, its assessment for AY 2012-13 could not be considered erroneous within the meaning of sec. 263 of the Act, if in the year of refund, the same was not reflected in the tax return for AY 2015-16. According to the assessee, in deciding the question as to whether the assessment for AY 2012-13 was erroneous, the Ld. CIT(E) could not take into account the transaction which pertained to subsequent assessment years and since such refund was not received by the assessee in the AY 2012-13, the assessment order framed by AO for AY 2012-13 could not be considered by him to be erroneous. Further, the assessee had also brought to the knowledge of the Ld. CIT(E) that in its revised return for AY 2015-16, the assessee trust had included the said tax refund as its income and, therefore, even the reason set out in the show cause notice was no longer existing to justify the proceedings u/s. 263 of the Act. After having cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction were different from the reasons for which the assessment order was finally held to be erroneous and prejudicial to the interest of the Revenue. In the show cause notice, the assessment was considered to be erroneous only because the tax paid during FY 2011-12 was found to be refunded to the assessee by the Department in FY 2014- 15 and such refund was not reflected in the income tax return filed for AY 2015-16 as income of the assessee. In this regard, we find merit in the contention of the Ld. AR that for failure of the assessee to disclose income tax refund as its income in AY 2015-16 could not be a valid reason for considering the assessment order for AY 2012-13 to be erroneous and prejudicial to the interest of the Revenue. The remedy for such failure/omission if any, on the part of assessee can be taken care by suitable action for AY 2015-16 and not a reason for finding fault with the assessment framed in AY 2012-13. The Ld. CIT(E) never disputed the fact that during FY 2011-12, a sum of ₹ 40,60,061/- was paid by the assessee as income tax and to that extent, the sum available with the assessee for application of charitable purposes was diverted and not avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is entitled to consider the said payment to be permissible deduction either by way of application of income or by way of expenditure. Since in the impugned order, the Ld. CIT(E) has given a specific direction to disallow the income tax remitted by the assessee, let us look at the validity of such a direction to AO. 8. In this regard, we find that the issue as to whether the taxes paid to the Department can be considered as application of income or allowable as expenditure has been considered by various judicial precedents. The Hon ble Andhra Pradesh High Court in the case of CIT Vs. Trustee of H.E.H. Nizams Supplemental Religious Endowment Trust (1981) 127 ITR 378 wherein the facts of the case were that the assessee had paid wealth tax and income tax during the relevant year but pertaining to the past assessment years. It was assessee s contention that such tax payment constituted expenditure and, therefore, liable to be deducted in arriving at taxable income of the charitable trust. On appeal, the Hon ble High Court accepted the contention of the assessee trust and allowed the appeal of the assessee by observing as under: It is true that the payments in a particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the provisions of the Act. The question is whether the word income used in Section 11 (l)(a) of the Act must be assigned the same meaning as the words total income as defined in Section 2(45) of the Act. The CBDT itself has opined in the circular cited above that it would be incorrect to assign to the word income used in Section 11 (l)(a) the same meaning as has been statutorily assigned to the expression total income under Section 2(45) of the Act. Having regard to the authorities noticed above and keeping in view the fact that the long-settled position, which has also been accepted by the CBDT, should notbe upset, particularly where the statute which we are dealing with is an all India statute, we express our agreement with the judicial trend and hold that the payment of taxes under the VDIS is to be deducted before arriving at the commercial income of the assessee-trust that is available for application to charitable purposes. We are thus in agreement with the view taken by the Tribunal on this point. 11. We, therefore, find that the issue involved in the present case is no longer res integra and the consensus view among various Hon ble High Courts are that the ..... 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