DEPUTY COMMISSIONER OF INCOME TAX v. J&K SMALL SCALE IND. DEV. CORP. LTD
[Citation -2008-LL-0208-8]

Citation 2008-LL-0208-8
Appellant Name DEPUTY COMMISSIONER OF INCOME TAX
Respondent Name J&K SMALL SCALE IND. DEV. CORP. LTD.
Court ITAT
Relevant Act Income-tax
Date of Order 08/02/2008
Assessment Year 1980-81 TO 1986-87 & 1990-91
Judgment View Judgment
Keyword Tags principles of natural justice • opportunity of being heard • memorandum of association • declaration of dividend • general public utility • charitable institution • industrial development • delhi stock exchange • charitable objects • specific provision • division of profit • additional ground • state government • interim dividend • issue of notice • share capital • deemed profit • trust deed
Bot Summary: In the set aside proceedings, the AO enquired from the assessee regarding the declaration of dividend and distribution of profit as per the clauses contained in the Articles of Association of the assessee. The income of the assessee was thus held taxable and not exempt under s. 11 of the Act, as claimed by the assessee. These contentions are to the effect that the learned CIT(A) has erred in observing that the decision in Delhi Stock Exchange Association Ltd. was distinguishable and thus not applicable to the case of the assessee; that in observing so, the learned CIT(A) has erred in stating that in Delhi Stock Exchange Association Ltd., the clauses prohibiting declaration of dividends were inserted w.e.f. 1973 and not retrospectively, whereas in the assessee s case, such clauses had been inserted retrospectively. 106 to 114 of the Articles of the Association of the assessee were existing; that thus, before 17th April, 2006, the assessee in obligation prohibiting it from declaring and distributing the income derived by it by way of dividends amongst its shareholders; that such prohibition came to be imposed only on 17th April, 2006; that thus, in view of Delhi Stock Exchange Association Ltd., s. 13(1)(c)(ii) of the Act would be attracted in the case of the assessee only with effect from the asst. The learned Departmental Representative has further contended that the learned CIT(A) has erred in holding that Sakthi Charities worked in favour of rather than against the assessee to the effect that in that case, the amendment was supposed to be made by the Court, whereas in the case of the assessee, since the assessee was incorporated under Companies Act, its Memorandum of Association and Articles of Association were required to be registered before the RoC and that the assessee had not attained its objects, but had only altered its rules to fulfil its objects. The learned CIT(A) has sought to uphold the alleged retrospectivity of the amendment of the Articles of Association of the assessee, holding that in keeping with Kamla Town Trust, it was not open for the AO to refuse to consider the rectified Articles of Association and to insist that the assessee should stick to the original Articles of Association. The observation of the learned CIT(A) that Delhi Stock Exchange Association Ltd. does not apply to the case of the present assessee, since in that case, the clauses prohibiting declaration of dividends were inserted w.e.f. 1973 and not retrospectively; whereas in the case of the assessee, such amendment was retrospective, is not correct.


These are eight Department s appeals for asst. yrs. 1980-81 to 1986- 8 7 and 1990-91. facts being common in all these appeals, they are being disposed of by this composite order. Department has raised following ground of appeal No. 1 in all these cases: "The learned CIT(A) has erred in allowing assessee exemption under s. 11 of IT Act, 1961." following additional grounds of appeal have also been taken: "(1) That on facts and circumstances of case and in law learned CIT(A) has erred in passing appellate order dt. 14th March, 2007 without giving opportunity of being heard to AO, which is mandatory as per provisions of ss. 250(1) and 250(2) of IT Act, 1961, thus violating principles of natural justice and therefore order of CIT(A) deserves to be declared as null and void. (2) That learned CIT(A) has erred on facts (and in law by not appreciating the) case of Delhi Stock Exchange Association Ltd. vs. CIT (1997) 139 CTR (SC) 455: (1997) 225 ITR 235 (SC) in right perspective in accordance with law and thereby has erroneously held that ratio of said judgment is not applicable to case of assessee with regard to prospective operation of amendment to Articles of Association of assessee. (3) That learned CIT(A) has erred on facts and circumstances of case and in law by not appreciating ratio of judgment of Hon ble Supreme Court in case of CIT vs. Kamla Town Trust (1996) 130 CTR (SC) 112: (1996) 217 ITR 699 (SC) in right perspective in accordance with law and thereby has erroneously held that ratio of said judgment is not applicable to case of assessee with regard to prospective operation of amendment to Articles of Association of assessee." learned Departmental Representative has stated at Bar that he does not seek to press additional ground of appeal No. 1. additional ground of appeal No. 1 in all these appeals is thus rejected as not pressed. additional grounds of appeal Nos. 2 and 3 are, in fact, elaboration of original ground of appeal No. 1. first issue raised by Department in all these appeals is that learned CIT(A) has erred in allowing assessee exemption under s. 11 of IT Act. facts are that assessment order dt. 15th March, 2002 assessed Rs. 8,56,650 as income of assessee, in status of company. learned CIT(A) allowed status of trust to assessee. Vide order dt. 3rd Feb., 2006, this Bench of Tribunal, in ITA Nos. 255 to 262/Asr/2003, for asst. yrs. 1980-81 to 1986-87 and 1990-91 in assessee s case, in appeals filed by Department, set aside orders of CIT(A) and restored assessments to file of AO for decision afresh. AO was directed to confine himself to issue relating to exemption under s. 11 of Act and was further directed not to again make additions on issues which had already become final. Tribunal also directed AO to see as to whether assessee fulfilled conditions of s. 11 of Act. In set aside proceedings, AO enquired from assessee regarding declaration of dividend and distribution of profit as per clauses contained in Articles of Association of assessee. AO observed that these clauses were in clear violation of requirement of s. 11 that property be held for charitable or religious purposes which enure for benefit of public and no part of income should enure or be applied directly or indirectly for benefit of settlor or other specified persons and that property should be held wholly and not in part only, for charitable purposes. AO asked assessee to clarify position in this regard. relevant portion of questionnaire dt. 27th June, 2006 issued by AO to assessee, reads as follows: "(b) Clauses 106 to 114 of Articles of Association in your case enumerate procedure for declaring dividend. They are: (i) Declaration of dividend (cl. 106). (ii) Dividend out of profit only (cl. 107). (iii) When to be deemed profit (cl. 108). (iv) Interim dividend (cl. 109). (v) Payment of dividend in proportion of amount paid (cl. 110). (vi) Deduction of amount payable to company from dividend (cl. 111). (vii) Mode of payment of dividend (cl. 112). (viii) Notice of dividend (cl. 113) and (ix) Receipt in case of joint holders (cl. 114). It is thus clear that there is specific provision for division of profit provided in your Articles of Association of company. Hon ble Supreme Court in important judgment in case of CIT vs. Indian Sugar Mills Association 1974 CTR (SC) 278: (1974) 97 ITR 486 (SC) on this point has observed that where relevant rules and regulations of association or institution permit distribution of profit of association or institution amongst its members, element of private gain is introduced which is inconsistent with object of general public utility . While perusing cls. 106 to 114 of your Article of Association in light of Hon ble Supreme Court decision, discussed supra, it is totally clear that there is clear motive of private gain in formation of SICOP and as such you are not engaged in advancement of any other object of general public utility. When institution is not created for charitable purpose, it cannot claim exemption under s. 11 of IT Act, 1961. In case Delhi Stock Exchange Association Ltd. vs. CIT (1997) 139 CTR (SC) 455: (1997) 225 ITR 235 (SC) it has clearly been held that so long as there is provision of distribution of profit by way of dividend trust is not entitled to exemption under s. 11." assessee, vide letter dt. 11th July, 2006, replied that contention of AO had already been examined by CIT, Amritsar in light of judgment of Tribunal, Hyderabad Bench, in case of ITO vs. A.P. Industrial Infrastructure Corporation Ltd. (1990) 34 ITD 381 (Hyd); that Articles of Association or bye-laws of institution did not govern objects of institute as set out in Memorandum of Association; that arts. 106 to 114 were only enabling clauses which did not affect objects of institute; that institute was wholly owned by Government and on this account also, provision and non-provision of dividend clause did not have any effect; that no dividend had been declared since claim of exemption i.e. from asst. yr. 1980-81 onwards; that copy of order of Tribunal as well as copy of written submissions made before CIT, Amritsar, were being enclosed; that Revenue was not in appeal before High Court against order of Tribunal in case of A.P. Industrial Infrastructure Corporation Ltd. (supra); that Tribunal in this case had held that merely because Articles of Association of company made provision for declaration of dividend, such provision did not detract from predominant objective of State Government in forming corporation, financed (and) fully subscribed by State, for rapid and orderly industrial development of State; that assessee was charitable institution within meaning of s. 2(15) and, therefore, was entitled to exemption of its income under s. 11; that case law pointed out by AO i.e., Delhi Stock Exchange Association Ltd. vs. CIT (1997) 139 CTR (SC) 455: (1997) 225 ITR 235 (SC) could not be said to be applicable to assessee trust because shareholders of company (H.E. Governor, Principal Secretary to Government Industries and Commerce Department, Commission Secretary to Government Finance Department), in extraordinary general meeting, had already deleted all clauses relating to declaration of dividend retrospectively from its Articles of Association by recording reason that it was inherent inadvertent technical shortcoming and accordingly, amendments were being made in Articles of Association; that copy of minutes along with amended copy of Memorandum and Articles of Association were being enclosed; that moreover, there could be said to be private gain when private persons were involved as shareholders of company, whereas when Government was involved as shareholder, no element of private gain could be said to be present; that judgment in case of CIT vs. Indian Sugar Mills Association 1974 CTR (SC) 278: (1974) 97 ITR 486 (SC) was also not applicable because in case of assessee trust, it was Government of Jammu & Kashmir which was holding entire share capital; and that Tribunal Hyderabad Bench, in case of A.P. Industrial Infrastructure Corporation Ltd. (supra) had not followed this judgment. assessee, in fact, contended that it had deleted from its Articles of Association, clauses relating to declaration of dividend, retrospectively. AO, however, rejected this contention of assessee, holding that such contention was totally misleading and illegal; that trustees of trust have no power to amend Articles of Association of trust; that rather, even founder of trust has no power to alter terms of trust deed; that it is only Court which can alter terms of trust under s. 92 of CPC; that so, act of trustees in deleting clauses relating to declaration of dividend and distribution of profit, was void and illegal. AO relied on decision of Hon ble Madras High Court in case of Sakthi Charities vs. CIT (1984) 41 CTR (Mad) 192: (1984) 149 ITR 624 (Mad). It was held by AO that further, even if deletion of such clauses from Articles of Association of assessee trust were to be taken as accepted, such rectification could not be made retrospectively. AO also relied on decision of Hon ble Supreme Court in case of CIT vs. Kamla Town Trust (1996) 130 CTR (SC) 112: (1996) 217 ITR 699 (SC). AO observed that clauses in Articles of Association of assessee trust provided for declaration of dividend and distribution of profits in favour of shareholders of trust and this being case, trust was not entitled to exemption under s. 11 of IT Act. For this, AO relied on decision of Hon ble Supreme Court in case of Delhi Stock Exchange Association Ltd. vs. CIT (supra). assessee had contended before AO that no dividend had been declared from asst. yr. 1980-81. AO observed that this contention was also not acceptable in view of Delhi Stock Exchange Association Ltd. vs. CIT (supra). Apropos assessee s reliance on decision of Hyderabad Bench of Tribunal in case of A.P. Industrial Infrastructure Corporation Ltd. (supra) for proposition that enabling clause for declaration of dividend would make no difference, as no dividend has ever been declared by assessee, AO observed that this decision was not good law in view of Delhi Stock Exchange Association Ltd. (supra). AO thus held that assessee had provided for direct or indirect application of its income for benefit of settlor and other specified persons by providing for distribution of profit and declaration of dividend in Articles of by providing for distribution of profit and declaration of dividend in Articles of Association; and that thus, there was clear violation of s. 13(1)(c), (2) and (3) of IT Act, besides violation of conditions contained in s. 11 of Act. income of assessee was thus held taxable and not exempt under s. 11 of Act, as claimed by assessee. Before learned CIT(A), assessee contended that Sakthi Charities (supra) and Delhi Stock Exchange Association Ltd. (supra) did not apply to case of assessee; that Kamla Town Trust (supra) had been misread by AO; that in Sakthi Charities (supra), amendment was supposed to be made by Court, whereas in case of assessee, since it was incorporated under Companies Act, 1956, its Memorandum of Association and Articles of Association were required to be registered before RoC, which was authority designated under Company Law, for such matters; that assessee trust had not altered or rectified its Memorandum of Association, and had, in effect not altered/rectified its objects; that rather, it had altered its Articles o f Association, thereby altering or rectifying its rules to fulfil its objects; that in Kamla Town Trust (supra), trust deed had not been amended by Court retrospectively; that however, assessee trust had deleted from its Articles of Association enabling clauses regarding declaration of dividends, retrospectively; that as per Kamla Town Trust (supra), when such rectified trust deed is pressed into service before IT authorities in assessment proceedings, AO would have to interpret such rectified instrument for finding out its legal effect for framing assessment; and that since as per amended Articles of Association, no dividend and/or bonus was to be paid to any member/partner of trust, Delhi Stock Exchange Association Ltd. (supra) no longer remains applicable. By virtue of impugned consolidated order 14th March, 2007, learned CIT(A) cancelled order passed by AO. It was observed, inter alia, t h t Sakthi Charities (supra) was not applicable; that in that case, amendment deleting clauses relating to declaration of dividend of profits, was made by Court, whereas in case of assessee trust, this was required to be done by RoC, since assessee was registered with said authority; that objects of assessee trust were laid down in its Memorandum of Association, whereas its rules were contained in its Articles of Association; that assessee had not amended its Memorandum of Association, but had amended its Articles of Association; that thus, assessee had not amended its objects, but its rules fulfilled objects; that Kamla Town Trust (supra) was also not applicable; that in that case, trust deed was amended by Court in 1955 and it was not amended retrospectively; that therefore, trust had itself agreed that 1955 rectification of trust deed substituted new trust for old one and that therefore, trust would not trace that such rectification had any retrospective effect; that accordingly, it had been held in Kamla Town Trust (supra); that said rectification was not retrospective; that on other hand, facts of case were altogether different; that in this case, shareholders of institution had deleted, vide extraordinary meeting held on 17th April, 2006, enabling clauses regarding declaration of dividend from Articles of Association retrospectively; that this deletion/amendment had been made since there had been inherent inadvertent technical shortcoming in Articles of Association; that in Kamla Town Trust (supra), it had been held that on such rectified trust deed is pressed into service before IT authorities, ITO will have to interpret such rectified instruction for finding out its legal effect, taking instruction as it is in its actual amended form; that in present case, notice under s. 143(3) of IT Act for all assessment years under consideration, was issued after Articles of Association to assessee were amended; that AO had erred in not considering instruction as it existed in its actual amended form, when it was pressed into service by assessee; that Delhi Stock Exchange Association Ltd. (supra) was not applicable to case of assessee; and that in that case, clause prohibiting declaration of dividend had been inserted w.e.f. 1973 and not retrospectively whereas in case of assessee, such amendment was retrospective. Aggrieved, Department is in appeal before us. Before us, Department has filed detailed written submissions, which had been duly supported by oral arguments made by learned Departmental Representative. These contentions are to effect that learned CIT(A) has erred in observing that decision in Delhi Stock Exchange Association Ltd. (supra) was distinguishable and thus not applicable to case of assessee; that in observing so, learned CIT(A) has erred in stating that in Delhi Stock Exchange Association Ltd. (supra), clauses prohibiting declaration of dividends were inserted w.e.f. 1973 and not retrospectively, whereas in assessee s case, such clauses had been inserted retrospectively. learned Departmental Representative has submitted that ratio of Delhi Stock Exchange Association Ltd. (supra) has not been correctly appreciated by learned CIT(A); that date of amendment of Articles of Association is relevant date and not purported retrospectively of amendment; that prior to 17th April, 2006, date on which amendment was brought about, cls. 106 to 114 of Articles of Association of assessee were existing; that thus, before 17th April, 2006, assessee in obligation prohibiting it from declaring and distributing income derived by it by way of dividends amongst its shareholders; that such prohibition came to be imposed only on 17th April, 2006; that thus, in view of Delhi Stock Exchange Association Ltd. (supra), s. 13(1)(c)(ii) of Act would be attracted in case of assessee only with effect from asst. yr. 2007-08 and that for all earlier years, assessee would not be eligible for exemption under s. 11 of Act; that learned CIT(A) has not considered that cls. 106 to 114 of Articles of Association could not be amended retrospectively, as it was not possible to go back in time and to bring about amendment as on date of incorporation of company or any date thereof, till date on which it was actually attained; that learned CIT(A) further failed to notice that in Delhi Stock Exchange Association Ltd. (supra), for relevant asst. yrs. 1966-67 to 1969-70 Hon ble Supreme Court specifically held that exemption of s. 11 of Act would not be available for these assessment years since relevant Article of Association was amended only in December, 1973. learned Departmental Representative has next contended that learned CIT(A) has erred in not correctly appreciating ratio of Supreme Court decision in case of CIT vs. Kamla Town Trust (supra) and held that s i d decision is not applicable to present case and that if interpreted correctly, which rather supports case of assessee that AO will have to take instruction as it exists in its actually amended form when these pressed into service for framing assessment, even for assessment year prior to year in which Articles of Association have been amended; that such interpretation of Kamla Town Trust (supra) was erroneous; that Hon ble Supreme Court had rather held that by virtue of rectification of 1955, new clause was substituted for old one and that such rectification was operative only prospectively with effect from date on which it was brought about; that case of assessee was not different; that there was no reason why rectification/amendment in Articles of Association of present assessee to be taken retrospectively; that Hon ble Supreme Court had held that it was in way of casual mistake had occurred in original trust deed, that amendment therein was permissible; that in that case, assessee trust did acquire status of trust wholly for charitable and religious purpose only after amendment to trust deed in May, 1988 and that whether such rectified trust deed was pressed into service before IT authorities in assessment proceedings, concerning relevant assessment year, ITO would have to intrepret such rectified instruction of finding out its correct legal effect; that this would not be applicable for assessment year previous to year relevant to year in which amendment was made. It was further contended that learned CIT(A) has erroneously misplaced emphasis on date of issue of notice under s. 143(2) of Act to assessee; that even if for sake of argument, such date is taken to be factor relevant to decide applicability of amended Articles of Association of assessee to years under consideration, correct date of issuance of notification under s. 143(2) would be date of issuance of original notice under s. 143(2); and that cases were originally taken up for scrutiny under s. 143(3) of Act, within time permissible under s. 143(2) of Act. learned Departmental Representative has further contended that learned CIT(A) has erred in holding that Sakthi Charities (supra) worked in favour of rather than against assessee to effect that in that case, amendment was supposed to be made by Court, whereas in case of assessee, since assessee was incorporated under Companies Act, its Memorandum of Association and Articles of Association were required to be registered before RoC and that assessee had not attained its objects, but had only altered its rules to fulfil its objects. It has been urged that issue of amendment of Articles of Association of trust has been put at rest by Hon ble Supreme Court in case of Sri Agasthyar Trust vs. CIT (1999) 152 CTR (SC) 393: (1999) 236 ITR 23 (SC), holding, inter alia, that when charity had been founded and trusts have been declared, founder had no power to revoke or vary or add to trusts; that if valid and complete dedication had taken place, there would be no power left in founder to revoke. learned Departmental Representative has thus contended that order of learned CIT(A) in this regard is liable to be set aside and that of AO is entitled to be revived. assessee, on its part, has also filed written submissions. learned counsel for assessee has made oral arguments as well. It has been submitted, supporting impugned order, that since assessee did not amend its objects, Sakthi Charities (supra) is not applicable; that since trust was incorporated under Companies Act, jurisdiction for any alteration in Articles of Association lies solely with RoC and not by any Court; that assessee is eligible to make alteration in its Articles of Association by virtue of s. 31 of Companies Act; that amendment in Articles of Association of assessee trust has to be considered with retrospective effect, since such amendment has been made specifically retrospectively applicable; that in Jagdamba Charity Trust vs. CIT (1980) 18 CTR (Del) 317: (1981) 128 ITR 377 (Del), in similar circumstances, retrospectivity of amendment was upheld; that objectionable clause of Articles of Association was not deleted by virtue of amendment in question was never implemented and no dividend was ever declared; that, therefore, years under consideration were in accordance with amended Articles of Association; that amendments being fully retrospective, AO could not hold that in years under consideration, assessee trust was down by terms of old Articles of Association. learned counsel for assessee has thus requested that appeals of Department in this regard be dismissed. We have heard parties and have perused material on record with regard to this issue. learned CIT(A) has, first of all, held that Shakthi Charities (supra) is not applicable to present case. In this regards, it has been held that in that case, amendment was supposed to be made by been held that in that case, amendment was supposed to be made by Court, whereas in present case, assessee being incorporated under Companies Act, amendment was required to be registered with RoC. This distinction tried to be made by learned CIT(A) is not relevant for our present purposes. Whatsoever considered herein is eligiblity or otherwise of assessee to exemption under s. 11 of IT Act. AO s case has been that since in cls. 106 to 114 of Articles of Association of assessee, there was specific provision for profit and declaration of dividend amongst shareholders of company, it was not entitled to exemption under s. 11 of Act. ratio of Shakthi Charities (supra) is very clear in this regard, when it holds that once trust had been founded with certain objects, these original objects cannot be deleted even by founder of trust, though it is possible to add some other charitable objects to original objects. case of assessee has been that by way of amendment to its Articles of Association, it has not brought about any deletion in its original objects and so, Shakthi Charities (supra) is not applicable. However what we are concerned with here is entitlement of assessee to exemption under s. 11. Since original Articles of Association did not contain any clause prohibiting distribution of dividend amongst shareholders of assessee, it was not entitled to exemption under s. 11 of Act. Rather, there was express provision, by virtue of cls. 106 to 114 of Articles of Association, for distribution of dividend amongst shareholders of assessee. It was by way of amendment of Articles of Association that such clauses were deleted. This was done so as to make assessee eligible for exemption under s. 11. This read with decision in Sakthi Charities (supra) make it amply clear that learned CIT(A) s order in holding in favour of assessee (is not sustainable). Then, learned CIT(A) has sought to uphold alleged retrospectivity of amendment of Articles of Association of assessee, holding that in keeping with Kamla Town Trust (supra), it was not open for AO to refuse to consider rectified Articles of Association and to insist that assessee should stick to original Articles of Association. In this regard, first of all, in Kamla Town Trust (supra), it has been, inter alia, held that AO will have to take instrument as it exists in its actually amended form when it is pressed into service for framing assessment concerning relevant assessment year if said rectified instrument holds field. It nowhere holds that amendment which cannot be carried out retrospectively is also to be taken into consideration by AO. In present case, assessee has remained unable to make out case with regard to retrospectivity of amendment in question. Therefore, learned CIT(A) has clearly misread Kamla Town Trust (supra). Apropos agreement of learned CIT(A) with assessee s contention that notice under s. 143(2) of Act for years under consideration was issued after Articles of Association were amended, this evidently is wrong observation. First of all, direction of Tribunal was for AO to confine himself to issue relating to exemption under s. 11 of Act and not to make addition on issues which had attained finality in set aside assessments. This difference shows that notices under s. 143(2) which need to be considered are original notices, as issued for all years under consideration and not those issued while dealing with case. observation of learned CIT(A) that Delhi Stock Exchange Association Ltd. (supra) does not apply to case of present assessee, since in that case, clauses prohibiting declaration of dividends were inserted w.e.f. 1973 and not retrospectively; whereas in case of assessee, such amendment was retrospective, is not correct. Firstly, as observed hereinabove, amendment in question does not stand proved to have been made retrospectively. Moreover, as also admitted by learned counsel for assessee before us, had amendment in question not been carried out, Delhi Stock Exchange Association Ltd. (supra) would have been squarely applicable. assessee has also contended that it is eligible to make alteration in its Articles of Association by virtue of s. 31 of Companies Act. There is no denial to this. However, activities (sic) sought to be drawn by assessee to amendment in its Articles of Association is nowhere provided in s. 31 of Companies Act. It is only that by virtue of s. 31(2), any amendment to Articles of Association is to be treated as valid, as if it was originally contained in Articles. Sec. 17, (or) for that matter, any other provision of Companies Act does not provide that requirement of s. 11 can be overruled to claim exemption under said latter section, by amending Articles of Association and making such amendment applicable retrospectively from very inception of Articles of Association. In view of above, finding force in grievance raised by Department, in this regard, same is accepted. ITA Nos. 249 to 254/Asr/2007 contain following ground No. 2 also: "That learned CIT(A) has erred in deleting additions which were confirmed by predecessor CIT(A) vide order dt. 13th Nov., 2003 and against which, belated appeals filed by assessee before Tribunal on 30th Nov., 2006 were pending adjudication. Thus, CIT(A) did not have jurisdiction to order deleting of such additions." In this regard, learned CIT(A) observed as follows: "The appellant trust is correct in stating that CIT(A), Bhatinda has allowed appeals of appellant trust for all these six years and deleted additions/disallowances by stating that most of issues are already covered by his order or by order of Tribunal and for later year entire additions/disallowances had been deleted covering each ground one by one. appellate trust is also correct in stating that CIT(A), Bhatinda further held that he finds no utility of similar exercise in most/all points of later assessment years for which combined appellate order is framed. learned AO while giving effect to order of CIT(A), Bhatinda was not correct in giving full effect since he has not deleted from income of appellant trust additions/disallowances otherwise deleted by CIT(A), Bhatinda. then CIT(A), Amritsar in his appellate order passed against order of AO giving effect to order of CIT(A), Bhatinda has also held that when whole of income of appellant trust is exempt under s. 11 purposes of object of appellant is served and there is no need for specific disallowances to be mentioned in order giving effect to order of CIT(A). This aspect has been ignored by AO while passing assessment orders which are in appeals before me. I am in agreement with contention of appellant trust that if to mind of then AO there was any ambiguity in order of CIT(A), Bhatinda then right course before him was to agitate matter before Hon ble Tribunal whereas appeal before Hon ble Tribunal was only on issue relating to exemption under s. 11 of IT Act, 1961. I observe that AO has not followed directions of Hon ble Tribunal. Hon ble Bench has held that further while deciding appeals learned CIT(A) has deleted certain additions on merits and Revenue has not filed appeals on points of deletion of additions. Therefore, order of CIT(A) in respect of additions deleted on merits have become final. AO is directed to confine himself only to issue relating to exemption of income under s. 11 of Act and shall not make again additions on issues which have already become final while completing these set aside assesments . Since from perusal of orders of CIT(A), Bhatinda, additions/disallowances for these assessment years which were before him in appeals have been deleted and also confirmed to be deleted by Hon ble Tribunal, Amritsar Bench, Amritsar, as such it was required from AO to compute that income of appellant trust which was after deleting all these additions/disallowances. In view of these facts ground No. 1 of appellate trust pertaining to asst. yrs. 1982-83 to 1986-87 and 1990-91 is allowed and AO is directed to recompute that income of appellate trust which is after deletion of all those additions/disallowances which were in appeal before CIT(A), Bhatinda. Hence, all these appeals are allowed." learned Departmental Representative has contended that learned CIT(A) has exceeded his jurisdiction by reversing findings of his predecessor CIT(A) on same issue for same years; that this could have been done only by next appellate authority, i.e., Tribunal; that CIT(A) has erred in holding that AO while giving effect to order of CIT(A), Bhatinda, was not correct in deleting income of asssessee trust, additions/disallowances otherwise deleted by CIT(A), Bhatinda; that AO s orders giving effect to CIT(A) s orders, were confirmed by learned CIT(A), Amritsar, vide order dt. 13th Nov., 2003; that appeal before Tribunal was only on issue regarding exemption under s. 11 of Act and AO s orders giving effect to order of CIT(A), Bhatinda, were confirmed by learned CIT(A), Amritsar, vide order dt. 13th Nov., 2003, there was no occasion for Department to file appeal against order of learned CIT(A); and that this matter was agitated by assessee before Tribunal. learned counsel for assessee, on other hand, has placed heavy reliance on CIT(A) s order in this regard. Here, we find Tribunal had, inter alia, held that while deciding appeals, CIT(A) had deleted certain additions on merit and Department had not filed appeals on points of deletion of additions and that, therefore, order of CIT(A) with regard to additions deleted on merits, had become final. Obviously, aforesaid directions of Tribunal were with regard to CIT(A) s orders which were appealed against before Tribunal and not with regard to any subsequent order. Therefore, no further relief in this regard could have been granted to assessee. learned CIT(A), evidently, has erred in going beyond directions issued by Tribunal. grievance of Department in this regard is, therefore, justified and is entitled to be accepted. Ordered accordingly. In result, all eight appeals filed by Department are allowed. *** DEPUTY COMMISSIONER OF INCOME TAX v. J&K SMALL SCALE IND. DEV. CORP. LTD.
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