M/s Balaji Technical Education Society, Panchkula V. ITO, Panchkula

CO 41/CHANDI/2014

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2345 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 16-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K GOYAL
• Assessee Lawyers: S K MITTAL
• Keywords: Charitable institution; Opportunity of being heard; Earning of tax free income; Additional evidence; Wrong claim; Corroborative evidences
• Section: 143(3); 12A; 12AA; 6; 28; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT & MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 759/CHD/2014 ASSESSMENT YEAR: 2010-11 THE ITO, VS. M/S BALAJI TECHNICAL EDUCATION WARD-3, SOCIETY, PANCHKULA PANCHKULA PAN NO. AABTB3050G & C. O. NO. 41/CHD/2014 (IN ITA NO. 759/CHD/2014) ASSESSMENT YEAR: 2010-11 M/S BALAJI TECHNICAL EDUCATION VS. THE ITO, WARD-3, SOCIETY, PANCHKULA PANCHKULA PAN NO. AABTB3050G (APPELLANT) (RESPONDENT) APPELLANT BY : SH. S.K.MITTAL RESPONDENT BY : SH. S.K. GOYAL DATE OF HEARING : 28.03.2016 DATE OF PRONOUNCEMENT : 11.05.2016 . ORDER PER H.L.KARWA, VP THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A), PANCHKULA DAT ED 9.6.2014 RELATING TO ASSESSMENT YEAR 2010-11. GROUND NO.1 OF THE APPEAL READS AS UNDER:- 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS ERRED IN LAW IN RESTRICTING THE DISALLOWANCE OUT OF SALARY EXPENSES WITHOUT ANY EVIDENCE AND BY ADMITTING THE ADDITIONAL EVIDENCE, THOROUGHLY DISREGARDING THE FINDINGS GIVEN BY THE A .O . 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THE ASS ESSEE IS A SOCIETY, RUNNING EDUCATIONAL INSTITUTION IN THE NAME AND STYLE OF P ANCHKULA COLLEGE OF ENGINEERING. THE ASSESSING OFFICER FRAMED THE ASSE SSMENT U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') AT AN INC OME OF RS. 65,14,780/- AFTER MAKING CERTAIN ADDITIONS / DISALLOWANCES. THE FIRS T ISSUE IN THIS APPEAL IS REGARDING DISALLOWANCE OF RS. 35,35,126/- ON ACCOUN T OF SALARY EXPENSES. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD DEBIT ED SALARY EXPENSES OF RS. 70,70,252/-. THE ASSESSING OFFICER REQUIRED THE ASS ESSEE TO FURNISH EMPLOYEE WISE DETAILS OF SALARY PAID AND TDS DEDUCTED, WITH COMPLETE PAN NUMBERS AND ADDRESSES OF THE EMPLOYEES AND SUPPORTING EVIDENCE. IN RESPONSE TO THE AFORESAID QUERY, THE ASSESSEE SUBMITTED A LIST OF E MPLOYEES TO WHOM SALARY WAS CLAIMED TO BE PAID. FROM THIS DETAIL, THE ASSESSIN G OFFICER NOTICED THAT THE LIST DID NOT CONTAIN THE ADDRESSES, NOR THE PAN NUMBERS OF THE EMPLOYEES AND ALSO THE DESIGNATIONS. THE ASSESSEE DID NOT DEDUCT THE T AX AT SOURCE ON THESE PAYMENTS AND ALL THE PAYMENTS WERE MADE IN CASH. AF TER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THIS CASE, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT PART OF THESE PAYMENTS WERE UNDOUBTEDLY BOGUS AND, THEREFORE, HE DISALLOWED 50% OF THE SALARY DEBITED BY THE ASSESSEE I.E. RS. 35,35,126/- AND ADDED BACK THE SAME TO THE TOTAL IN COME OF THE ASSESSEE. 3. ON APPEAL, THE CIT(A) RESTRICTED THE DISALLOWANC E TO RS. 5 LAKHS AS AGAINST RS. 35,35,126/- DISALLOWED BY THE ASSESSING OFFICER. THE RELEVANT OBSERVATIONS OF THE CIT(A) ARE AS UNDER:- 3 6. I HAVE GONE THROUGH THE FACTS OF THE CASE, WRI TTEN SUBMISSION FILED BY THE APPELLANT, REMAND REPORT OF THE AO AND REJOINDER FILED BY THE APPELLANT. IT IS NOTED T HAT THE ASSESSEE IS A REGISTERED SOCIETY RUNNING AN EDUCATI ONAL INSTITUTE AND HAS CLAIMED ITS INCOME AS EXEMPT INCO ME UNDER THE PROVISIONS OF SECTION 11 OF THE ACT. THE ASSESSEE HAS SUBMITTED AUDITED ACCOUNT AS PER SECTION 44AB A ND SHOWN GROSS RECEIPTS OF RS. 1,57,94,400/-. IT HAS C LAIMED EXPENDITURE ON ACCOUNT OF SALARY TO STAFF OF RS.70, 70,252/-. AS PER INCOME AND EXPENDITURE ACCOUNT, THE ASSESSEE HAD SHOWN A SUM OF RS.22,15,359/- AS EXCESS OF INCOME O VER EXPENDITURE. THE AO DISALLOWED 50% OF SALARY EXPENS ES I.E. RS.35,35,126/- AS BOGUS PAYMENT DUE TO NON SUBMISSI ON OF COMPLETE ADDRESS, PAN DETAILS OF EMPLOYEES AND NON DEDUCTION OF TDS ON THE PAYMENTS MADE TO EMPLOYEES. THE AO ALSO FOUND THE BASIS FOR DISALLOWANCE THAT ALL P AYMENTS WERE MADE IN CASH AND DETAILS OF SALARY EXPENSES WE RE SUBMITTED ONLY FOR FEW MONTHS. 6.1 ON THE OTHER HAND THE APPELLANT SUBMITTED MONTH WISE SALARY DETAILS SHOWING EMPLOYEES WISE NAME, AM OUNT AND RECEIPT TAKEN ON STAMP ON SALARY SHEETS. THE AP PELLANT HAS ALSO SUBMITTED THAT COLLEGE IS SITUATED 32 KM A WAY FROM PANCHKULA WHERE IT HAS ITS BANK ACCOUNT. THE FEES R ECEIVED FROM STUDENTS ARE IN CASH, BANK OF ASSESSEE IS AT F AR OFF PLACE AND TO AVOID CHANCES OF PILFERAGE OF CASH OR ANY MIS- HAPPENING ON THE ROUTE FOR DEPOSIT AND WITHDRAWAL O F MONEY FROM THE BANK, THE SALARY WAS PAID IN CASH. THE APPELLANT ALSO SUBMITTED THAT THERE IS NO BAR IN IN COME TAX ACT FOR PAYMENT OF SALARY IN CASH. 6.2 SINCE, DOCUMENTS OF SALARY EXPENSES WERE F ILED AS ADDITIONAL EVIDENCE DURING APPELLATE PROCEEDING S, THEREFORE, THE ASSESSEE'S WRITTEN SUBMISSIO NS ALONGWITH EVIDENCES WERE FORWARDED TO THE AO FOR COMMENTS. THE AO SIMPLY REITERATED THE FINDINGS N OTED IN THE ASSESSMENT ORDER AND GAVE HIS OPINION THAT THOU GH THE ASSESSEE HAS RIGHT TO FILE THE ADDITIONAL EVIDENCE BEFORE THE 4 CIT(A) UNDER RULE 46A BUT THE CIT(A) IS REQUESTED N OT TO ACCEPT THE ADDITIONAL EVIDENCES SUBMITTED BY THE AS SESSEE DURING THE APPELLATE PROCEEDINGS. THE AO HAS NOT CI TED ANY REASON THAT WHY THE ADDITIONAL EVIDENCES WHICH WERE DETAILS OF SALARY EXPENSES FOR ALL MONTHS SHOULD NO T BE ACCEPTED. ON THE SUBMISSION OF ADDITIONAL EVIDENCE, THE APPELLANT HAS SUBMITTED THAT DETAILS OF SALARY EXPE NSES OF FEW MONTHS WERE SUBMITTED BY THE COUNSEL OF THE ASS ESSEE AS IT WAS ASKED DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE WAS IN POSSESSION OF ALL THE DETAILS OF TH E EXPENSES AS THE ACCOUNTS WERE DULY AUDITED BY THE AUDITOR AN D DETAILS OF FEW MONTHS WERE SUPPLIED TO SHOW THE NUM BER OF EMPLOYEES AND THE NATURE OF EXPENDITURE. THE ASSESS EE HAS ALSO RELIED ON FEW JUDICIAL PRONOUNCEMENTS THAT INA CTION OF THE PART OF THE COUNSEL OF THE ASSESSEE SHOULD NEED NOT LEAD TO DRAW ADVERSE INFERENCE AGAINST THE ASSESSEE. THE EVIDENCE SUBMITTED BY THE ASSESSEE DURING APPELLATE PROCEEDINGS WAS VITAL AND DIRECTLY RELATED TO THE G ROUND WHICH LED TO A DISALLOWANCE. FURTHER, THE AO HAS NO T CITED ANY REASON FOR REFUSAL TO ADMIT THE ADDITIONAL EVID ENCE. CONSIDERING THE FACTS AND HAVING RELEVANCE TO THE DISALLOWANCE, THE ADDITIONAL EVIDENCES SUBMITTED DU RING APPELLATE PROCEEDING WERE ADMITTED AND CONSIDERED F OR DECISION. HERE, RELIANCE IS ALSO PLACED ON THE DECI SION IN THE CASE OF SMT. MAHINDER KAUR VS. CENTRAL GOVT (19 76) 104 ITR 120 (AIL), CIT VS. SUBHASH CHANDER AGGARWAL [1988] 172 ITR 166 (ALL.). 6.3 ON PERUSAL OF SALARY DETAILS, IT IS NOTED THAT THE SALARY EXPENSES HAS BEEN CLAIMED ON MONTHLY BASIS F OR ABOUT 60 TO 66 PERSONS WHO HAVE GIVEN SERVICES AS LECTURERS, CLERK, LAB TECHNICIANS, SWEEPER, GATE KE EPER, PEON, ATTENDANT ETC. THE TOTAL MONTHLY SALARY' EXPE NSE VARIES FROM ABOUT RS,5.1 LACS TO RS.6.1 LACS. THE I NDIVIDUAL MONTHLY PAYMENTS VARIES BETWEEN RS.2,500/- TO RS. 1 5,000/- WITH ONE/TWO EXCEPTIONS OF HIGHER SALARY. THE PAYME NTS HAVE BEEN SHOWN TO BE GIVEN AFTER TAKING THEIR SIGN ATURES 5 ON STAMPS ON THE SALARY SHEETS. SINCE, THE COLLEGE IS A RUNNING COLLEGE AND HAS SHOWN GROSS RECEIPTS OF ABO UT RS.1.58 CRORES DURING THE YEAR, IT CANNOT BE SAID T HAT COLLEGE WILL RUN WITHOUT ANY PROPER SUPPORT OF STAF F PERFORMING VARIOUS KINDS OF DUTIES. THE AO HAS SIMP LY MADE DISALLOWANCE OF 50% OF SALARY EXPENSE ON ESTIM ATION WITHOUT BRINGING ANY DEFECT OR ANY CONDUCT OF INQUI RY FOR FINDING THAT THE PAYMENTS WERE BOGUS PAYMENTS. THE ONLY BASIS DRAWN BY AO FOR DISALLOWANCE OF EXPENSES WAS NON SUBMISSION OF COMPLETE DOCUMENTARY EVIDENCES. FURTH ER, NO COMMENTS HAVE BEEN OFFERED ON EVIDENCES SUBMITTED D URING APPELLATE STAGE EXCEPT THAT THE SAME SHOULD NOT BE ACCEPTED WITHOUT CITING ANY REASON. CONSIDERING THESE FACTS, I CONCLUDE THAT ASSESSEE HAS SHOWN GROSS RECEIPTS, IT HAS ALSO SHOWN SURPLUS OF INCOME OVER EXPENDITURE, THE INCOM E IS EXEMPT INCOME AS THE SOCIETY HAS BEEN GRANTED REGIS TRATION U/S 12AA OF THE ACT AND THE BASIS FOR DISALLOWANCE AT 50% OF SALARY EXPENSES HAS NOT BEEN SPELT OUT. SO, THE DISALLOWANCE AT 50% OF EXPENSES SEEMS TO BE MUCH HI GHER. AT THE SAME TIME, SINCE ALL THE PAYMENTS ARE MADE I N CASH, COMPLETE DETAILS SUCH AS PAN, ADDRESS AND IDS WAS N OT PROVIDED BY THE APPELLANT AND ALL EXPENSES CANNOT B E VERIFIABLE, THEREFORE, ON AN ESTIMATED BASIS THE DISALLOWANCE OUT IF SALARY EXPENSES IS LIMITED TO R S.5 LACS. THUS, THE ASSESSEE GETS RELIEF OF RS.30,35,126/-. T HIS GROUND OF APPEAL IS PARTLY ALLOWED. 4. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E SIDE AT LENGTH AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS APPARENT FORM THE RECORD THAT THE ASSESSEE SOCIETY WAS GRANTED REGISTRATION U/S 12AA OF THE ACT BY CIT,, PANCHKULA VIDE HIS ORDER DATED 15.7.2008 AS THE ENG INEERING COLLEGE IN THE NAME OF PANCHKULA ENGINEERING COLLEGE, VILLAGE MO ULI, PANCHKULA. THE ASSESSEE IS A CHARITABLE SOCIETY COVERED UNDER THE DEFINITION OF CHARITABLE PURPOSES AS PER SECTION 2(15) OF THE ACT ALSO. THE ENTIRE INCOME OF THE ASSESSEE 6 IS EXEMPT U/S 11 OF THE ACT. THE ACCOUNTS OF THE A SSESSEE ARE AUDITED U/S 44AB OF THE ACT . IN THIS CASE, IT IS AN ADMITTED FACT THAT THE SUBSTANTIAL AMOUNT OF SALARY WAS PAID IN CASH. IN THIS REGARD, THE ASSESS EE CONTENDED THAT CASH PAYMENTS WERE MADE BECAUSE THE BANK OF THE ASSESSEE WHERE THE ACCOUNT WAS MAINTAINED WAS SITUATED AT THE DISTANCE OF ABOUT 32 KMS FROM THE COLLEGE PREMISES I.E BANK WAS AT PANCHKULA AND COLLEGE WAS AT VILALGE MOULI. HOWEVER, THE ASSESSEE HAS MAINTAINED THE RECORDS OF SALARY PAID BY IT I.E. MONTH WISE / PERSON WISE, SALARY SHEET AND DESIGNATION. ADMITTED LY, THE ASSESSEE IS RUNNING AN ENGINEERING COLLEGE AND, THEREFORE, IT HAS TO KE EP QUALIFIED STAFF FOR TEACHING THE STUDENTS WITHOUT WHICH A COLLEGE CANNOT RUN. TH E MAIN CONTENTION OF THE ASSESSEE IS THAT THE WHOLE AMOUNT INCURRED ON ACCOU NT OF SALARY IS ONLY FOR THE PURPOSE OF RUNNING OF COLLEGE AND NO PART OF IT HAD BEEN SPENT FOR ANY OTHER PURPOSES. IN THIS CASE, THE CIT(A) HAS OBSERVED TH AT THE SALARY EXPENSES HAS BEEN CLAIMED ON MONTHLY BASIS FOR ABOUT 60 TO 66 PE RSONS WHO HAD GIVEN SERVICES AS LECTURERS, CLERKS, LAB TECHNICIANS, SWE EPER, GATE KEEPERS, PEONS, ATTENDANTS ETC. ACCORDING TO LD. COUNSEL FOR THE AS SESSEE, THE TOTAL MONTHLY SALARY EXPENSE VARIES FROM RS. 5.1 LAKH TO RS. 6.1 LAKHS. HE HAS ALSO STATED IN CLEAR TERMS THAT THE PAYMENTS ON ACCOUNT OF SALARY WERE BEING GIVEN AFTER TAKING THE SIGNATURES OF THE EMPLOYEES ON STAMPS ON THE SA LARY SHEETS. THE LD. CIT(A) HAS ALSO OBSERVED THAT THE COLLEGE IS A RUNNING COL LEGE AND THE GROSS RECEIPTS FOR THE YEAR UNDER CONSIDERATION WERE ABOUT RS. 1.58 CR ORES. HE THEREFORE, CATEGORICALLY STATED THAT IT CANNOT BE SAID THAT CO LLEGE WILL RUN WITHOUT ANY PROPER SUPPORTING STAFF PERFORMING VARIOUS KINDS OF DUTIES. WE MAY OBSERVE HERE THAT DURING THE APPELLATE PROCEEDINGS BEFORE T HE CIT(A), THE ASSESSEE SUBMITTED DOCUMENTS OF SALARY EXPENSES AS ADDITIONA L EVIDENCE. THE CIT(A) HAS FORWARDED THE ASSESSEES WRITTEN SUBMISSIONS AND TH E DOCUMENTS OF SALARY EXPENSES TO THE ASSESSING OFFICER FOR COMMENTS. THE ASSESSING OFFICER SUBMITTED A REMAND REPORT STATING THAT THE ASSESSEE HAD RIGHT TO FILE THE ADDITIONAL EVIDENCE BEFORE THE CIT(A) UNDER RULE 46 A OF BUT HE HAS REQUESTED 7 THE LD. CIT(A) NOT TO ADMIT THE ADDITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS. IN THIS REGARD, THE LD. CIT(A) HAS OBSERVED THAT ASSESSING OFFICER HAS NOT STATED ANY REASONS AS TO WHY ADDITIONAL EVIDENCE WHICH WERE DETAILS OF SALARY EXPENSES FOR ALL MONT HS SHOULD NOT BE ADMITTED. IN OUR OPINION, THERE IS NO MERIT IN THE SUBMISSIONS O F LD. DR THAT CIT(A) HAS WRONGLY ADMITTED THE ADDITIONAL EVIDENCE DISREGARD ING THE FINDINGS GIVEN BY THE ASSESSING OFFICER. IN OUR OPINION, THE CIT(A) WAS FULLY JUSTIFIED IN ADMITTING THE ADDITIONAL EVIDENCE. WE MAY ALSO OBSERVE HERE T HAT ASSESSING OFFICER HAS DISALLOWED 50% OF THE SALARY EXPENSES ON ADHOC BAS IS WITHOUT POINTING OUT ANY PARTICULAR INSTANCE TO SHOW THAT THE PART OF PAYMEN T WAS BOGUS. THUS, WE FULLY AGREE WITH THIS OBSERVATION OF THE CIT(A) THAT THER E WAS NO BASIS FOR MAKING DISALLOWANCE OF 50% OF SALARY EXPENSES. AS REGARDS THE DISALLOWANCE OUT OF SALARY EXPENSES AT RS. 5 LAKHS SUSTAINED BY THE CIT (A), WE ARE OF THE VIEW, THAT DISALLOWANCE OF RS. 5 LAKHS IS QUITE REASONABLE AND JUSTIFIED KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. ACCORD INGLY, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE. CONSEQU ENTLY WE REJECT GROUND NO.1 OF THE APPEAL. 5. GROUND NO.2 OF THE APPEAL READS AS UNDER;- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION MA DE ON ACCOUNT OF DISALLOWANCE OF EXPENSES U/S 40(A)(IA) W ITHOUT ANY EVIDENCE IGNORING THE FINDINGS OF THE A.O. 6. THE FACTS RELATING TO THIS ISSUE ARE THAT THE AS SESSEE CLAIMED AN AMOUNT OF RS. 5,84,071/- ON ACCOUNT OF ADVERTISEMENT EXPANSE S. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE AMOU NT IN QUESTION SHOULD NOT BE DISALLOWED U/S 40(A)(IA) OF THE ACT. AFTER CONSIDER ING THE ASSESSEES REPLY, THE ASSESSING OFFICER OBSERVED THAT TO ENJOY PRIVILEGE OF REGISTRATION U/S 12AA OF 8 THE ACT, THE TRUST IS UNDER OBLIGATION TO COMPLETE VARIOUS STIPULATIONS PROVIDED IN THE RELEVANT PROVISIONS OF THE ACT. ACCORDING T O ASSESSING OFFICER, THE ASSESSEE FAILED TO COMPLY WITH THE PROVISIONS BY NO T DEDUCTING TDS. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED THE C LAIM MADE BY THE ASSESSEE ON ACCOUNT OF ADVERTISEMENT EXPENSES AT RS. 5,84,071/- US/ 40(A)(IA) OF THE ACT. 7. ON APPEAL, THE CIT(A) DELETED THE DISALLOWANCE F OR THE REASONS STATED IN PARA 10 OF THE IMPUGNED ORDER. ACCORDING TO LD. CI T(A), DISALLOWANCE U/S 40(A) (IA) IS NOT APPLICABLE TO THE COMPUTATION OF INCOME OF TRUST FOR CHARITABLE PURPOSES AS PER THE PROVISIONS OF SECTION 11 OF THE ACT. HE ACCORDINGLY DELETED THE DISALLOWANCE OF RS. 5,84,071/- MADE U/S 40(A) ( IA) OF THE ACT. 8. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF MAHATMA GANDHI SEVA MAN DIR V DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS), MUMBAI (2012) 52 SOT 26 (MUMBAI)(URO) WHEREIN THE TRIBUNAL HELD AS UNDER;- IT IS AN ADMITTED FACT THAT THE ASSESSEE IS A CHAR ITABLE TRUST, WHICH IS DULY REGISTERED UNDER SECTION 12A A ND ACCORDINGLY ITS INCOME AND EXPENDITURE IS COMPUTED IN TERMS OF SECTION 11. THE ISSUE IS WHETHER THE DISAL LOWANCE UNDER SECTION 40(A)(IA) CAN BE MADE FOR THE NON-DED UCTION OF TDS UNDER SECTION 194. UNDER THE INCOME TAX ACT, COMPUTATION OF TOTAL INCOME IS MADE UNDER THE VARIO US HEADS OF INCOME, VIZ : (I) SALARY (II) INCOME FROM HOUSE PROPERTY (III) PROFITS AND GAINS FROM BUSINESS OR PROFESSION 9 (IV) CAPITAL GAINS (V) INCOME FROM OTHER SOURCES. IT IS NECESSARY TO EXAMINE SECTION 11 AND SECTION 4 0 TO DECIDE THIS CONTROVERSY. SECTION 11 TO 13 IS A PART OF CHAPTER 3 UNDER THE HEADING 'INCOME WHICH DOES NOT FORM THE PART OF THE TOTAL INCOME'. SECTION 11 (1) PROVI DES THAT 'SUBJECT TO THE PROVISIONS OF SECTION 60 TO 63, THE FOLLOWING INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOM E'. THEREAFTER IT IS PROVIDED AS TO HOW THE INCOME AND TO WHAT EXTENT IT CAN BE APPLIED FOR CHARITABLE PURPOSES. T HE MANNER IN WHICH THE INCOME CAN BE APPLIED HAS BEEN LAID DOWN IN SECTION 11(1) TO SECTION 11(5). SECTION 13 PROVIDES EXCEPTION TO SECTION 11 WHEREIN SUCH AN INCOME CAN BE EXCLUDED FROM THE EXEMPT INCOME OF THE TRUST. THUS, SECTION 11 TO 13 PROVIDES FOR APPLICATION OF INCOME BY A TR UST FOR CHARITABLE PURPOSES AND TO THAT EXTENT, SUBJECT TO CERTAIN CONDITIONS, INCOME OF THE TRUST IS TREATED TO BE EX EMPTED FROM TAXATION. THE INSTANT CASE IS CONCERNED WITH SECTION 40, WHIC H IS PART OF COMPUTATION OF PROFIT AND GAINS FROM BUSINESS OR PROFESSION. THE PROFITS AND GAINS FROM BUSINESS OR PROFESSION ARE COMPUTED UNDER SECTION 28 AND SECTIO N 29 STATES THAT 'THE INCOME REFERRED TO IN SECTION 28 S HALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINE D IN SECTION 30 TO 43D'. THUS, SECTION 30 TO 43 PROVIDES VARIOUS KINDS OF DEDUCTIONS WHICH ARE TO BE MADE WHILE COMP UTING THE PROFIT OF THE ASSESSEE FROM BUSINESS OR PROFESS ION. SECTION 40 PROVIDES AN EXCEPTION TO SUCH DEDUCTIONS WHICH HAVE BEEN PROVIDED IN SECTION 30 TO 38 AND STARTS W ITH A NON OBSTANTE CLAUSE. THUS, SECTION 40 IS APPLICABLE ONLY WHEN DEDUCTIONS UNDER SECTIONS 30 TO 38 ARE BEING M ADE IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PRO FITS AND GAINS OF BUSINESS OR PROFESSION' UNDER SECTION 28. THE EXCEPTION IN SECTION 40 IS CARVED OUT, ONLY FOR THE PURPOSE 10 OF SECTION 28 AND NOT FOR COMPUTING THE EXEMPTION O F INCOME OF A CHARITABLE TRUST UNDER SECTION 11. THE DISALLOWANCE MADE UNDER SECTION 40(A) WILL ONLY GO TO ENHANCE THE BUSINESS PROFIT OF AN ASSESSEE WHOSE IN COME IS ASSESSABLE UNDER SECTION 28 AND NOT OTHERWISE. HENC E, PROVISIONS OF SECTION 40(A) ARE NOT APPLICABLE IN C ASE OF CHARITABLE TRUST OR INSTITUTION WHERE INCOME AND EXPENDITURE IS COMPUTED IN TERMS OF SECTION 11. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE ORDER S PASSED BY THE ASSESSING OFFICER AS WELL AS BY THE CIT(A) A ND DELETE THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) ON AC COUNT OF NON-DEDUCTION OF TDS HAS TO BE DELETED. RESPECTFULLY FOLLOWING THE JUDGEMENT OF THE ITAT MU MBAI BENCH REFERRED TO ABOVE, WE DONT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) ON THIS ISSUE AND ACCORDINGLY WE UPHOLD THE SAME. 9. GROUND NO.2 OF THE APPEAL STANDS REJECTED. 10. GROUND NOS. 3 OF THE APPEAL READS AS UNDER:- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A} HAS ERRED IN LAW BY THE A.O. ON THE ACCOUNT OF UNVOUCHED EXPENSES AND EXPENSES OF PERSONAL NATURE, DISREGARDING THE FINDING GIVEN BY THE A.O. 11. THE ASSESSING OFFICER NOTICED THAT ASSESSEE CLA IMED EXPENSES TOTALING TO RS. 9,01,124/- UNDER VARIOUS HEADS OF ACCOUNT IN IN COME AND EXPENDITURE ACCOUNT. THE DETAILS ARE AS UNDER;- S.NO. HEAD OF ACCOUNT AMOUNTS (RS.) 1 BUSINESS PROMOTION 20,000/- 2 D.G. SET EXPENSES 3,22,889/- 11 3 MISC. EXPENSES 14,475/- 4 REPAID AND MAINTENANCE 92,845/- 5 OFFICE EXPENSES 5,700/- 6 PRINTING AND STATIONERY 1,03,058/- 7 VEHICLE RUNNING AND MAINTENANCE 3,42,157/- TOTAL RS. 9,01,124 12. THE ASSESSING OFFICER DISALLOWED 1/5 TH OF THESE EXPENSES I.E. RS. 1,80,224/- ON ACCOUNT OF UNVOUCHED EXPENSES AND EXP ENSES OF PERSONAL NATURE. ON APPEAL, THE CIT(A) ALLOWED THE EXPENSES CLAIMED ON ACCOUNT OF BUSINESS PROMOTION, MISC. EXPENSES, REPAIR AND MAINTENANCE, OFFICE EXPENSES, D.G. SET, PRINTING AND STATIONARY EXPENSES. THE LD. CIT(A) O BSERVED THAT THESE EXPENSES WERE CLAIMED TO RUN THE EDUCATIONAL INSTITUTION. AC CORDING TO HIM, THESE EXPENSES ARE REASONABLE AND AT THE SAME TIME, THE L D. CIT(A) HAS ALSO OBSERVED THAT THE ASSESSING OFFICER HAS NOT FOUND ANY EVIDEN CE REGARDING BOGUS CLAIM OF ANY EXPANSES, THEREFORE, HE HELD THAT THESE EXPENSE S CANNOT BE DISALLOWED. HOWEVER, THE LD. CIT(A) HELD THAT 1/10 TH OUT OF VEHICLE RUNNING AND MAINTENANCE EXPENSES SHOULD BE TREATED AS PERSONAL IN NATURE. HE THEREFORE, RESTRICTED THE DISALLOWANCE OUT OF THESE EXPENSES T O RS. 34,215/-, AND ALLOWED A RELIEF OF RS. 1,46,009/- TO THE ASSESSEE. 13. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH T HE PARTIES, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE. THE LD. CIT(A) HAS CORRECTLY OBSERVED THAT THE EXPENSES INCURRED O N ACCOUNT OF BUSINESS PROMOTION, MISC. EXPENSES, REPAIR AND MAINTENANCE O FFICE EXPENSES, D.G. SET AND PRINTING AND STATIONERY EXPENSES ARE REQUIRED F OR SMOOTH RUNNING OF THE EDUCATIONAL INSTITUTION. BY ANY STRETCH OF IMAGINAT ION, THESE EXPENSES CANNOT BE 12 HELD UNREASONABLE OR EXCESSIVE. WE ALSO AGREE WITH THE CIT(A) THAT 1/10 TH OF VEHICLE RUNNING AND MAINTENANCE EXPENSES IS TO BE T REATED AS PERSONAL IN NATURE BECAUSE THE ELEMENT OF PERSONAL USE OF VEHICLE CANN OT BE RULED OUT IN THIS CASE. THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE AS SESSEE HAD MAINTAINED THE LOG BOOK OF THE VEHICLE. THUS, CONSIDERING THE ENTIRE F ACTS AND CIRCUMSTANCES OF THE CASE, WE UPHOLD THE ORDER OF CIT(A) AND REJECT GROU ND NO3 OF THE APPEAL. 14. GROUND NO.4 OF THE APPEAL READS AS UNDER;- 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS ERRED IN LAW IN IGNORING THE FACT THAT T HE AO HAS RECOMMENDED FOR WITHDRAWAL OF REGISTRATION U/S 12AA AS THE APPLICATION OF INCOME OF THE ASSESSEE TRUST COMES T O MERE 62.32%, WHICH IS MUCH BELOW THE LIMIT OF 85% AND TH E TRUST FAILED TO COMPLY WITH THE REQUISITE PROVISIONS OF I NCOME TAX ACT, 1961. 15. WHILE DECIDING THE ABOVE ISSUE, THE CIT(A) HAS HELD AS UNDER:- 11.2 AFTER CONSIDERING THE SUBMISSIONS OF THE APPE LLANT AND THE FACTS OF THE CASE, I AM OF THE VIEW THAT RE-COM PUTATION OF APPLICATION OF MONEY HAS BEEN DONE ON THE GROUNDS O F VARIOUS DISALLOWANCE IN THE ASSESSMENT ORDER. THE RELIEF ON ACCOUNT OF DISALLOWANCE HAS BEEN GIVEN IN PRECEDING PARAS D URING THE APPELLATE STAGE. SINCE THE RE-COMPUTATION IS CONSEQ UENTIAL IN NATURE, THEREFORE, IT DOES NOT REQUIRE SEPARATE DEC ISION ON ASSESSING OFFICERS S ACTION FOR RECOMMENDATION OF WITHDRAWAL OF REGISTRATION U/S 12AA OF THE ACT. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS. SHRI S.K. GOYAL LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE LD. CIT(A) HAS DELETE D VARIOUS ADDITIONS MADE BY THE ASSESSING OFFICER AND AFTER RE-COMPUTATION CON DITION OF APPLICATION OF 85% OF INCOME STANDS SATISFIED AND, THEREFORE, THERE RE MAINS NO GROUND FOR 13 WITHDRAWAL OF THE REGISTRATION GRANTED U/S 12AA OF THE ACT. ACCORDING TO LD. COUNSEL FOR THE ASSESSEE, THIS GROUND HAS BEEN RAIS ED BY THE REVENUE CONSIDERING THE ADDITIONS MADE BY THE ASSESSING OFF ICER. IN OUR OPINION, THE ORDER OF THE CIT(A) IS CORRECT AND THE GROUND RAISE D BY THE REVENUE THAT THE TRUST HAS APPLIED 62.32 % OF ITS INCOME FOR THE PUR POSES OF WHICH TRUST HAD BEEN CREATED HAS NO FORCE AND, HENCE, WE REJECT GROUND N O.4 OF THE APPEAL. CROSS OBJECTION NO. 41/CHD/2014 17. THE CROSS OBJECTION FILED BY THE ASSESSEE MEREL Y SUPPORTS THE ORDER OF THE CIT(A). THE ASSESSEE HAS NOT SOUGHT ANY EFFECTIVE RELIEF IN THE CROSS OBJECTIONS. ACCORDINGLY, THE CROSS OBJECTIONS ARE D ISMISSED, 18. IN THE RESULT, THE APPEAL OF THE REVENUE AND CR OSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.05.2016 SD/- SD/- (RANO JAIN) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 11 TH MAY, 2016 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR