9911796707
TMI Blog2020 (11) TMI 1027X X X X Extracts X X X X X X X X Extracts X X X X ..... l was not justified in holding that the payment of Income Tax of Rs. 2,16,50,650/- paid on deemed income u/s 11(3) for A.Y. 2013-14 should not be allowed as a deduction or application of the income of the current year (ASSESSMENT YEAR 2014-15) & is hence also wrong in upholding the following: a) Tax demand of Rs. 84,72,830/- b) Interest payable u/s 234A, 234B & 234C." 2. In this case, the return of income declaring total income of Rs. 4,51,53,000/- was filed by the assessees trust on 07.10.2014. Thereafter, the case was selected for scrutiny through CASS. A notice u/s 143(2) of the Income Tax Act 1961(hereinafter referred as the Act) was issued on 01.09.2015 through speed post fixing the case for hearing on 10.09.2015. Subsequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reiterated the submission as made in the written synopsis. Ld. counsel for the assessee placed reliance on the judgment of the Hon'ble Gujarat High Court in the case of CIT vs. Ganga Charity Trust Fund (162 ITR 612). To buttress his contention, Ld. counsel for the assessee vehemently argued that the income tax paid would be application of income as per the explanation 11(1)(a) of section 11 of the Act. 5. On the contrary Ld. Departmental Representative (DR) opposed the submissions and supported the orders of the authorities below. Ld. DR submitted that there is no ambiguity under the provisions of law, payments of income tax would not tantamount to the application of income. He submitted that the law is clear that the income shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms certain items, which is otherwise exempt, as deemed income. The purpose of section 11(3) which prohibitive in nature, by withdrawing exemption in respect of certain items of income in case default in committed is to make the compliance of exemption regime effective. When a default is committed leading to deeming of income u/s 11(3), the consequent payment of tax cannot be treated as deduction or application u/s 11(1). This will amount to first holding the person liable for committing particular default by levy of income tax and at the same time granting him benefit of deduction of the same income tax by treating the same as application u/s 11(1). This could never have been the intention of the legislature. To make things more clear, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e incurred by way of payment of tax out of current years income has to be considered as application of income made for trust's purposes. The income tax in the present case was not paid on the income of the current year so as to be allowed as deduction u/s 11(1) but the same was paid in respect of the income of A.Y. 2013-14 which as deemed as income u/s 11(3) because of certain violation mentioned in that provision. Income Tax payment on an earlier. 11. In view of the reasons discussed above, it is held that the AO was right in law in disallowing payment of income tax of Rs. 2,16,50,650/- paid on deemed income u/s 11(3) for A.Y. 2013-14 as application of income or deduction of the income of the current year. The disallowance is there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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