TMI Blog2022 (3) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... g substantial interest in Tata Sons Ltd. Accordingly, the investment by the assessee trust in shares of Tata Sons Ltd. is not affected by the vice of section 13(2)(h) of the Act. In the present case, the only basis for invoking the provisions of section 13(2)(h) of the Act by the AO was that Shri Ratan N. Tata, being the Chairman of Tata Sons Ltd., could have influenced the decision of Tata Sons Ltd. as well as of the assessee trust at the time of investment, is nothing but conjectures/surmises which is not even supported by the statutory requirements of section 13(2)(h) read with Explanation 3 to section 13 of the Act. As in a recent decision in the case of Sir Dorabji Tata Trust v. DCIT (Exemption) [ 2020 (12) TMI 1121 - ITAT MUMBAI ] held that observation made in the said decision of Jamsetji Tata Trust [ 2014 (5) TMI 890 - ITAT MUMBAI ] is a sweeping observation based on conviction rather than material available on record, as it observes that As far as the violation of clause(h) of section 13(2) is concerned we find that the author of the assessee trust and its relative definitely have a substantial interest in the Tata Sons Ltd., therefore, the investment in the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while estimating its income - it is pertinent to note that section 234C refers to the term returned income in comparison to section 234B which refers to the term assessed tax for imposing interest. In the present case, it is not in dispute that returned income in case of assessee trust was NIL. As only in the case of default / shortfall in payment of advance tax as compared to tax due on returned income, interest is chargeable under sections 234C of the Act. Thus, we hold that no interest is chargeable under section 234C of the Act in the present case. The AO is directed to delete the interest levied under section 234C of the Act. Accordingly, ground no. 7 raised in assessee s appeal is allowed. Levy of interest under section 234B / 234D - HELD THAT:- While ground no. 9 in assessee s appeal pertains to addition of interest received under section 244A of the Act. During the course of hearing, learned counsel submitted that all these grounds are consequential in nature. Thus, the AO is directed to compute the interest under sections 234B and 234D, if leviable, in accordance with law. Further, the AO may grant the interest under section 244A of the Act in accordance with law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haritable institution in earlier assessment year would be allowed to be set off against income of subsequent years by invoking section 11 of the Act - we, inter-alia, upheld the order passed by the CIT(A) allowing the carry forward of deficit. Accordingly, ground no. (iv) raised in Revenue s appeal is dismissed. - ITA No. 1301/Mum./2018 ITA no.1316/Mum./2018 ITA No. 1302/Mum./2018 ITA No. 1314/Mum./2018 ITA No. 2115/Mum./2018 ITA No. 2161/Mum./2018 ITA No. 2116/Mum./2018 ITA No. 2162/Mum./2018 - - - Dated:- 10-3-2022 - SHRI G. S. PANNU , PRESIDENT AND SHRI SANDEEP SINGH KARHAIL , JUDICIAL MEMBER Assessee by : Shri Sukhsagar Syal , Advocate Revenue by : Shri Rajesh Damor , CIT DR ORDER PER BENCH The aforesaid cross appeals have been filed by either parties challenging the orders passed by the Commissioner of Income Tax (Appeals) 6, Mumbai, (hereinafter referred to as the CIT(A) ) under section 250 of the Income Tax Act, 1961 ( the Act ) for the assessment years 2011-12, 2012-13, 2013-14 and 2014-15. 2. Since all the cross appeals pertain to the same assessee and issues involved are, inter-alia, common, therefore, these appeals were heard together as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed as deduction while computing the total income. 5. On the facts and under the circumstances of the case and in law, the learned Assessing Officer has erred in disallowing carry forward of deficit for adjustment in subsequent years. The Appellant prays that the benefit of carry forward of the deficit to subsequent years be allowed. 6. On the facts and under the circumstances of the case and in law, the learned Assessing Officer has erred in levying interest under section 234B of the Act on the additions not envisaged by the Appellant. The Appellant prays that the learned Assessing Officer be directed to delete the interest levied under section 234B of the Act. 7. On the facts and under the circumstances of the case and in law, the learned Assessing Officer has erred in levying interest under section 234C of the Act on the assessed income as against the returned income The Appellant prays that the learned Assessing Officer be directed to delete the interest levied under section 234C of the Act 8. On the facts and under the circumstances of the case and in law, the learned Assessing Officer has erred in levying interest under section 234D of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gain was invested in Tata Sons Ltd. i.e., during the assessment years 2008 09, 2009 10 and 2010 11, Shri Ratan N. Tata was a Chairman of Tata Sons Ltd. and thus also as a founder trustee of the assessee has invested funds in a concern where he was a Chairman. Accordingly, the AO held that by investing in shares of Tata Sons Ltd., the assessee has violated provisions of section 13(2)(h) of the Act. 5.3 In appeal, the CIT(A) vide order dated 18.12.2017 upheld the conclusion of the AO in respect of violation of provisions of section 13(2)(h) of the Act for denial of exemption under section 11 to the assessee. 5.4 During the course of hearing, the learned counsel submitted that Shri Ratan N. Tata, founder trustee of the assessee, was not having substantial interest in Tata Sons Ltd., as per the provisions of Explanation 3 to section 13 of the Act and thus assessee did not violate the provisions of section 13(2)(h) of the Act. In support of his submissions, the learned counsel also placed reliance on judicial precedences of the Co ordinate Bench of the Tribunal. 5.5 On the other hand, Shri Rajesh Damor, learned Departmental Representative (hereinafter referred to as learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han twenty per cent of the profits of such concern. Therefore, in view of above, it is only when shares of the concern carrying not less than 20% of voting power are owned by authors / founders of the trust, such person shall be deemed to have a substantial interest in the concern. 5.7 It is evident from the facts of the present case, as also noted by the Assessing Officer, that Shri Ratan N. Tata, founder trustee of the assessee, was holding 3,368 ordinary shares of Tata Sons Ltd. constituting only 0.83% of the aggregate paid up ordinary share capital of Tata Sons Ltd., which was much less than the threshold requirement of provision of Explanation 3 to section 13 of the Act. Therefore, Shri Ratan N. Tata cannot be held to be having substantial interest in Tata Sons Ltd. Accordingly, the investment by the assessee trust in shares of Tata Sons Ltd. is not affected by the vice of section 13(2)(h) of the Act. In the present case, the only basis for invoking the provisions of section 13(2)(h) of the Act by the AO was that Shri Ratan N. Tata, being the Chairman of Tata Sons Ltd., could have influenced the decision of Tata Sons Ltd. as well as of the assessee trust at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held the issue to be mere academic in nature and not requiring specific adjudication. 6.4 During the course of hearing, learned counsel, submitted that this issue is no longer res integra and has been decided in favour of the taxpayer by Hon ble Jurisdictional High Court in the case of DIT(Exemption) v. Sheth Mafatlal Gagalbhai Foundation Trust: 249 ITR 533. 6.5 On the other hand, learned D.R. vehemently relied upon the order passed by the AO. 6.6 We have considered the rival submissions and perused the material available on record. In the present case, the assessee had made investment in redeemable preferential shares of Tata Sons Ltd. which the AO, inter-alia, held to be in violation of provision of section 13(1)(d) of the Act. The income that could be derived from such an investment would be dividend income or the capital gains on sale of such investment. However, due to violation of provisions of section 13, income derived from property held under trust is not exempted under section 11 of the Act. The issue which arises in the present case is whether the entire income of the trust shall become ineligible for exemption under section 11 of the Act or it is restricted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on failure to pay the advance tax by the assessee or on shortfall in payment of advance tax as compared to tax due on returned income. Further, under the provisions of section 208 or section 209 of the Act, advance tax is to be computed on the estimated current income of the assessee and in case such income is not taxable, there is no liability imposed on the assessee to pay any advance tax. In the present case, as the assessee trust at the relevant time of deposit of advance tax had NIL taxable income, there was no liability to deposit any advance tax. Consequently, no default can be attributed to the assessee for non-deposit of advance tax while estimating its income. Further, it is pertinent to note that section 234C refers to the term returned income in comparison to section 234B which refers to the term assessed tax for imposing interest. In the present case, it is not in dispute that returned income in case of assessee trust was NIL. As only in the case of default / shortfall in payment of advance tax as compared to tax due on returned income, interest is chargeable under sections 234C of the Act. Thus, we hold that no interest is chargeable under section 234C of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing exemption u/s.10(34) of the Income tax Act to the tune of ₹ 115,47,80,338/- on the dividend received on shares without appreciating the fact that the income derived by the assessee trust is from the properties held under the trust and claimed exemption u/s. 11 of the I T Act. Section 11 starts with the words income derived from property held under Trust which means that section which exclusively deals with income derived from property held under trust is section 11 and not any other section. The assessee trust cannot claim alternative exemption under section 10(34) because section 10(34) does not deal with income derived from property held under trust. (iv) On the facts and circumstances of the case and in law, the Ld CIT(A) erred in allowing depreciation without appreciating the fact that the assessee has claimed the deduction twice. The assessee trust claimed depreciation and also capital expenditure viz addition to fixed assets in the computation of income which amounted to double deduction. (v)The appellant prays that the order of the A.O. should be restored and order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from section 10 could be included in the total income of the previous year of the person/assessee. That may be a person who receives or derives income from property held under trust wholly for charitable or religious purposes. 11.5 It is pertinent to note that vide Finance (No.2) Act, 2014, sub-section (7) was inserted in section 11 of the Act whereby it has been provided that benefits of exemption provided in section 10 shall not be available to any Trust/Institution registered and claiming the benefit of section 11 of the Act. This amendment was brought w.e.f. 1st April, 2015 and therefore, is only applicable to assessment year 2015-16 and onwards. Thus, respectfully following the aforesaid decision of Hon ble Jurisdictional High Court, order passed by the CIT(A), inter-alia, granting benefit of exemption under section 10(34) of the Act in respect of dividend income received by assessee is upheld. Accordingly, ground nos. (i) to (iii) raised in Revenue s appeal are dismissed. 12. The next issue to be decided in Revenue s appeal is with regard to the claim of depreciation by the assessee trust. 12.1 The brief facts of the case pertaining to this issue as emanating from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. In the result, appeal by the Revenue being ITA no. 1316/Mum/2018 is dismissed in terms of our aforesaid findings. ITA no.1302/Mum./2018 Assessee s Appeal 2012 13 15. The issues arising in this appeal for our consideration pertains to (i) denial of exemption under section 11 due to violation of section 13(1)(d) of the Act; (ii) denial of exemption under section 11 due to violation of section 13(2)(h) of the Act; (iii) levy of interest under section 234B of the Act; and (iv) levy of interest under section 234C of the Act. 16. As all these issues are similar to assessee s appeal for assessment year 2011-12, our findings/conclusion in assessee s appeal being ITA No. 1301/Mum/2018 for assessment year 2011-12 shall apply mutatis mutandis to this appeal. 17. In the result, appeal by the assessee being ITA No. 1302/Mum/2018 is partly allowed. ITA no.1314/Mum./2018 Revenue s Appeal 2012 13 18. The issue arising in ground nos. (i) to (iii) in Revenue s appeal pertaining to claim of exemption under section 10(34) of the Act is similar to Revenue s appeal for assessment year 2011-12. Thus, our findings/conclusion in Revenue s appeal being ITA No. 1316/Mum/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal for assessment year 2011-12, our findings/conclusion in assessee s appeal being ITA No. 1301/Mum/2018 for assessment year 2011-12 shall apply mutatis mutandis to this ground. Accordingly, ground no.1 raised in assessee s appeal, insofar as it pertains to violation of section 13(2)(h) of the Act, is allowed. While ground pertaining to violation of section 13(1)(d) of the Act is dismissed as not pressed. 23. The next issue to be decided in assessee s appeal is with regard to levy of interest under section 234A of the Act. 23.1 The brief facts of the case pertaining to the issue as emanating from record are: The AO vide order dated 31.03.2016 passed under section 143(3) levied interest amounting to ₹ 87,11,646 under section 234A of the Act. In appeal, the CIT(A) vide order dated 15.01.2018 directed the AO to compute the interest, in accordance with law, after giving effect to its order. 23.2 Being aggrieved, assessee is in appeal before us. The interest under section 243A of the Act is levied for default / delay in furnishing the return of income. In the present case, it is not in dispute that assessee filed the return of income for the relevant assessment year. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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