TMI Blog2019 (7) TMI 1865X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-7-2019 - SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER For the Appellant : Shri Sushil Kumar Madhuk CIT, (D.R.) For the Respondent : Shri D. D. Chopra, Advocate ORDER PER T.S. KAPOOR: This is an appeal filed by the Revenue against the order of learned CIT(A)-4, Lucknow dated 07/08/2018 pertaining to assessment year 20152016. 2. In this appeal the Revenue has raised as many as 8 grounds of appeal out of which ground Nos. 7 8 are general in nature and do not require any specific adjudication therefore, these grounds are dismissed. 3. Ground Nos. 1,2,3,5 6 are on the same issue. Vide these grounds the Revenue has challenged the action of CIT(A), vide which he has allowed the appeal of the assessee, on the ground that the activities of the assessee fall within preservation of environment (including watersheds, forest and wildlife) . 4. Learned D. R., at the outset, submitted that assessee, upto assessment year 2008-09, had been claiming exemption u/s 11 under the head objects of general public utility whereas from assessment year 200910 the assessee had claimed the exemption under the head pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the respective years under consideration as the expenses crystallized during the years under consideration and therefore, learned CIT(A) has rightly deleted the addition. It was further submitted that Hon'ble Tribunal, vide order dated 29/03/2019, in a bunch of appeals in the case of the assessee itself, has dismissed the appeals of Revenue under similar facts and circumstances. 6. We have heard the rival parties and have gone through the material placed on record. We find that vide its order dated 29/03/2019 in I.T.A. Nos.357 to 360/Lkw/2017 for assessment year 2009-10 to 11-12 13-14, I.T.A. No.282/Lkw/2017 for assessment year 2012-13 and I.T.A. No.556/Lkw/2018 for assessment year 2014-15, this Bench of the Tribunal, has dismissed the appeals of the Revenue under similar facts and circumstances. During those years the assessee had claimed exemption under the specific head preservation of environment (including watersheds, forest and wildlife) as this specific head has been included in the definition of section 2(15) w.e.f. 01/04/2009. The activities of the assessee remained same and the activities being carried out by the assessee has already been held charita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished an application under Section 12AA of the Act with the Office of the Commissioner of Income-Tax, Lucknow on 11-07-1988 for seeking registration under Section 12A of the Act. The registration to the appellant was denied vide order dated 18.03.1997 primarily on the findings by the Commissioner of Income-Tax, Lucknow that the Appellant has requested for grant of registration after a gap of 14 years and the application was not in prescribed form 10-A as specified in the rules. (ii) The appellant preferred appeal against the order of the CIT, Lucknow dated 18.03.1997 regarding refusal of registration before the Hon'ble Allahabad High Court wherein the Hon'ble court vide order dated 26-11-2002 in Civil Misc Writ Petition No 173 (MB) of 1998 has quashed the order of the CIT, Lucknow dated 18.03.1997 with the observation that necessary opportunity of being heard was not afforded to the appellant and the CIT, Lucknow was directed to decide the application for grant of registration afresh on merits. (iii) The CIT, Lucknow vide its order 13-06-2007 in compliance to the terms of the directions of the Hon'ble Allahabad High Court in Civil Misc Writ Petition No 173 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appeal preferred by the Department both at Hon'ble Jurisdictional Allahabad High Court in case no ITA No 70 of 2009 bearing date 12-05-2010 and Hon'ble Supreme Court in SLP No CC 2590/2011 bearing date 12-05-2011. (vi) Accordingly as on date, the registration as duly granted by the Hon'ble ITAT Lucknow In ITA No 512/LUC/2007 and as duly attained finality pursuant to dismissal of the appeal preferred by the Department both by at Hon'ble Jurisdictional Allahabad High Court in case no ITA No 70 of 2009 bearing date 12-05-2010 and Hon'ble Supreme Court in SLP No CC 2590/2011 bearing date 12-05-2011 stands valid. The CIT, Lucknow vide order dated 17-122012 read with order dated 18.04.2011 has duly granted the registration under Section 12A of the Act holding appellant eligible for claiming exemption under Section 11 of the Act. The said registration is retrospective with effect from 25-11-1974, being the date when appellant was incorporated. 4.1 The reasoning of the Assessing Officer that activity of the assessee do not qualify under head preservation of environment (including watersheds, forest and wildlife) has also been decided by the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in form of an SLP preferred by the Appellant against order of the Hon'ble Allahabad High court dated 26.11.2002. Since the appeal for deciding the grant of registration under Section 12A of the Act was pending before the Tribunal, the Hon'ble Supreme Court has further held that Tribunal is required to consider appeal without getting influenced by the decision of the Hon'ble High Court. The relevant clause of the Judgment is reproduced below: 14. In view of the dismissal of these appeals, the appeals filed by the revenue also stand dismissed. However, in order to protect the interest of the assessee as well as the revenue, we direct the Tribunal, before whom the appeals are pending against the order passed by the Commissioner rejecting the application filed under section 12A of the Act, to take up the matter on priority basis and decide the same as expeditiously as possible without being influenced by any of the findings recorded by the High Court in the impugned order. (d) In this context the Hon'ble Tribunal at Lucknow vide its order dated 16.01.2003 while granting exemption to the Appellant under Section 12A has categorically gave its findings as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n filed u/s 12A be taken up on priority and be decided expeditiously without being influenced by any of the findings recorded by the Hon'ble High Court in the impugned order. In view of these facts and judgments, the grounds of appeal No. 5 and 6 are allowed. The said findings of learned CIT(A) are crystal clear and do not require any interference. Therefore, Ground No. 1 2 of the Revenue s appeal are dismissed. 7. Now coming to ground No. 3 5 of the appeal by which the Revenue has agitated that the assessee was granted 12A registration for preservation, supervision and development of forest and not for the exploitation of forest produce. We find that learned CIT(A) has dealt this issue in para 5.1 of his order and has held as under: 5.1 After examining the assessment order and the written submissions of the appellant the grounds of appeal are discussed and decided as under:- Grounds of appeal No. 1 a) The Ground 1 relates to findings of the AO that the activities of the appellant partly classify as charitable and partly as commercial and do not fall within the Expression Charitable Purpose . b) In light of the findings of the AO, it b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e construed to be against its objects as well as conducted on commercial lines d) I also find much force in the arguments placed before me in holding out that the activities as undertaken by the appellant pertaining to removal and disposal of trees and exploitation of forest resources has been held to be in the nature of preservation of environment by the Hon'ble ITAT Lucknow in appellants own case vide findings contained under para no 24 to para 29 of its order in I.T.A No 512 /LUC/2007 decided on 16-01.2009 in the course of granting registration under 12A of the Act. The extracts of the said para's are reproduced below : 24. Hearing the rival submissions, we are of the view that the appeal of the assessee is to be allowed. From the arguments advanced and also from the objects of the assessee, it is clear that Corporation was constituted by the Legislative mandate of the state of by U.P.Forest Corporation Act 1974 and the State has entrusted forest resources to U.P. Forest Corporation as per Section 14(a) with reference to the objects enshrined in the preamble for better preservation, supervision and development of forests and better exploitation of forest p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the state and for matters with it and not for any commercial activity true and simple if at all. Clause 17 deals with Finance, Accounts and audit of the Corporation reads as under makes it clear that the funds could only be utilised by the Corporation in the discharging of its function and not for any other purposes: 17.(1). The Corporation shall have its own fund which shall be a local fund and to which shall be credited all money received by or on behalf of the Corporation. (2). The fund shall be applied towards meeting expense incurred by the Corporation in the discharge of its functions under this Act and for no other purposes. (3). The Money of the Fund shall be kept in the State Bank of India or in the Uttar Pradesh Cooperative Bank or nay Scheduled Bank. 26. The above makes it clear that one of the objections of the C.I.T. that discretion is given to utilise funds for commercial purpose cannot be held as entirely correct. The accounts are to be audited by the Govt. agent and the reports are to be each year tabled before each house of legislature 27. It is also clear that the Corporation was asked by the State Govt. to check illegal felli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking over progressively the felling and transport operation of tress from private contractors. The labour engaged by the bigger contractors, the so called Maldars , in the hills has been held in bondage for years and grossly exploited in a variety of ways. They had a stronghold on them and in the initial phases of the Corporation's working in the hills, it was difficult to loosen these bonds of Slavery. It is to the credit of some of the dedicated social workers of the areas and the staff of the Corporation that the fetters are breaking down and freed labour are coming over to the Corporation in ever increasing numbers. The Corporation has ensured minimum wages, wholesome rations, medical facilities, recreation and adult literacy classes to the labour engaged by it. Stress is being laid on the Formation of labour cooperatives and encouraging them in everyway possible. Local youth is being recruited and trained in modern logging methods, use of improved hand tools, mechanical hand saws, so that gradually a revolution could be ushered in the methods of felling, extraction and transport, as has been practiced by their fathers and forefathers for well over a century. (Extracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble ITAT has allowed the exemption to the appellant for AY 2002-03 after recording its findings under para 5 of the ruling. The same is reproduced below: After hearing the ld. AR and the Id DR and respectfully following the above order of the Tribunal, we hold that assessee is a charitable institute entitled to registration u/s 12A as well as exemption in accordance with Section 11 and 13. Therefore, this issue is decided in favour of the assessee g) It was also brought to my knowledge that the subject order of the ITAT on this finding has not been challenged before the Hon'ble Allahabad High Court and the same therefore has been accepted by the department and attains finality to this extent. h) It would be right to hold that the activities undertaken by the appellant are in the nature of preservation of environment. The above stated order of the Hon'ble ITAT dated 16.01.2009 as outlined in para 5.1(d) as duly upheld by the Higher Judicial authorities is binding on the authorities below as held by the Hon'ble Jurisdictional Allahabad High Court in the Case of N. N. Agarwal v. CIT [1991] 189 ITR 769 wherein it has been held that Indeed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvancement of any other general public utility whereas presently under the expression preservation of environment , it is a settled jurisprudence that the Specific clause would always prevail over the General clauses. It is to be seen that by way of amendment to Section 2(15) the legislature incorporated two major changes, at the one hand it included Preservation of Environment (including watershed s, forests and wildlife) as one of the charitable activity and on the other hand denied benefit of exemption to those who are doing commercial activities in the nature of trade, business of commerce buy virtue of falling under the expression advancement of any other general public utility general . Post amendment of section 2(150 and the inclusion of the specific clause Preservation of Environment (including watershed s, forests and wildlife) as a charitable activity makes the appellant govern by the specific clause of Preservation of Environment (including watershed s forests and wildlife) and not advancement of any other general public utility. i) The above finding also hold good in light of the findings of the Hon'ble Supreme Court Judgment in the case of J. K. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other direction. This rule is particularly applicable where the legislature has enacted comprehensive scheme and has deliberately targeted specific problems with specific solutions. A subject specific provision relating to a specific, defined and descriptable subject is regarded as an exception to and would prevail over a general provision relating to a board subject. n) Further, even if for the sake of argument it is held that appellant is under the expression general public utility as held by the Assessing Officer, then in such a scenario the Hon'ble Punjab Haryana High Court in the case of The Tribune [I.T. Act 62-2015] has interpreted the concept of general public utility post amendment in section 2(15) of the Act in the year 2009. In the instant case the Tribune was held to be conducting a charitable activity by way of printing newspaper and the same was held to be an activity in the nature of general public utility by the Privy Council. However post amendment, Assessing Officer questioned the claim of exemption on the pretext that the Tribune is doing a commercial activity by way of selling newspaper. In the instant case the Hon'ble court of Punjab Haryana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blic utility , it would have worded the amendment entirely differently. The proviso would have expressly been made applicable to the advancement as well as to the object of general public utility. That the legislature did not do so is an indication that it accepted the interpretation of the Supreme Court of section 2(15) as it originally stood and retained the effect of the section in that regard in the 2009 amendment. The ration of the judgment in Surat Art silk s case ((supra)), in this regard, therefore, remains the same. o) During the course of appellate proceedings, the Learned A. R. also brought to my knowledge that the department has accepted the claim of the appellant under Section 11 of the Act by way for granting exemption to it by the Assessing Officer concerned. The details of the same are tabulated below: Asstt Year Date of Order Section under which passed Order 199091 29.12. 2009 Section 254 read with Section 143(3) Hon'ble I.T.A.T., vide its order dated 16.01.2009 in I.T. Act No. 512/LUC/2007, has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he I.T.A.T. s directions, exemption claimed by the assesse u/s 11 is allowed and the returned income is accepted 199-2000 29.12. 2009 Section 254 read with Section 143(3) Hon'ble I.T.A.T., vide its order dated 16.01.2009 in ITA No 512/LUC/2007, has granted registration to the assesse u/s 12A of the Income Tax Act, 1961. The assesse vide its written reply dated 29.12.2009 has claimed that in view of the said decision of the Hon'ble I.T.A.T., its entire income is exempt u/s 11 of the IncomeTax Act, 1961, After a careful considerations of the material on record and in compliance with the I.T.A.T. s directions, exemption claimed by the assesse u/s 11 is allowed and the returned income is accepted 4.3 The above findings of learned CIT(A) are quite exhaustive which are correct also and we do not find any infirmity in the same. In view of the above, ground No. 1,2,3,7 8 in assessment year 2009-10 are dismissed and similarly ground No. 1 to 3 and 5 to 7 in rest of the appeals are dismissed. 5. Now coming to ground No. 4 regarding prior period expenses, we find that this issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was placed on the following judgments of Hon'ble High courts including Hon'ble jurisdictional High Court i)The Hon'ble Gujarat High Court in the case of Saurashtra Cement Chemical Industries Ltd. v. CIT (213 ITR 523) held that merely because an expense related to a transaction of an earlier year does not become a liability payable in the earlier year unless it can be said that the liability was determined and crystallized in the year in question. ii) The Hon'ble Rajasthan High Court in the case of Addl. CIT v. Farasol Ltd.(163 ITR 364) held that the assessee entered into a contract with Oil and Natural Gas Commission in February, 1964. The operation started in December 1964. The assessee claimed deduction of expenses for the period 10-9-1964 to 3112-1965 after the communication of approval in the assessment year 1966-67. The Hon'ble High Court held that the expenditure incurred in earlier years can be allowed as a deduction in the assessment year 1966-67 as it crystallized only when approval was received. iv)The Hon'ble High Court of Gujrat in the case of Commissioner of Income-tax State Forest Development (163 TAXMAN 547) wherein the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier FY. The said amount crystallised in F.Y. 2001-02. Thus, the action of the AO in holding and disallowing these expenses as prior period expenses cannot be upheld. (g)Further, it was also contended that the appellant is a Corporation which is an AOP(Trust) and the tax rates for the appellant remain constant for this assessment year and earlier/subsequent AY's. Accordingly, the appellant's claim of these items in a subsequent assessment year due to crystallization can by no means represent a device to evade or minimize corresponding tax liability. Reliance in this regard is placed on the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Vishnu Industrial Gases ITR No. 229/1988) wherein the Hon'ble Delhi High Court followed the ruling of the Hon'ble Mumbai High Court in the case of Nagri Mills Co. Ltd. [1958] 33 ITR 681. Relevant Extracts of the judgment in the case of Nagri Mills Co. Ltd (supra) are reproduced below: We have often wondered why the Income tax authorities, in a matter such as this where the deduction is obviously a permissible deduction under the income tax Act, raise disputes as to the year in which the deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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