DEVIDAYAL EDUCATIONAL TRUST,NEW DELHI V. CIT (EXEMPTION), NEW DELHI

ITA 1014/DEL/2024

AI Insights

The case involves Devidayal Educational Trust appealing against the decision of the Commissioner of Income Tax (Exemption), which denied their application for registration under section 12AB of the Income Tax Act. The CIT(E) had rejected the application on grounds that the Trust had not conducted any charitable activities in the specified financial years and had improperly handled the proceeds from the sale of a capital asset. The Tribunal, however, found evidence of charitable activities and clarified the legal interpretation of section 11(1A), leading to the decision to grant the Trust permanent registration.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470210 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Other Referred Cases: ACIT vs Bharatiya Yug Vasishta Sangha
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY KUMAR BHARATI
• Assessee Lawyers: RANO JAIN
• Keywords: Business income; Capital asset; Retrospective amendment; Charitable institution
• Section: 10; 72; 11(1A)

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No. 1014/Del/2024 Devidayal Educational Trust, H-3/102, Sector-11, Rohini, Delhi-110085 Vs. CIT(E), New Delhi (Appellant) (Respondent) PAN:AABTD1832G Assessee by : Ms. Rano Jain, Adv Ms. Mansi Jain, CA Revenue by: Shri Sanjay Kumar Bharati, CIT DR Date of Hearing 16/01/2025 Date of pronouncement 29/01/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.1014/Del/2024, arises out of the order of the Commissioner of Income Tax (Exemption), New Delhi [hereinafter referred to as „ld. CIT(E)‟, in short] dated 28.02.2024. 2. This appeal is preferred by the assessee challenging the action of the learned CIT(E) in rejecting the application for grant of registration under section 12AB of the Act. 3. We have heard the rival submissions and perused the materials available on record. The assessee is a public charitable trust having charitable objects including that of imparting education. The application for provisional registration was filed by the assessee and provisional registration was granted to it which is enclosed in pages 1 and 2 of the paper book. The assessee filed an application for fresh registration under section 12AB of the Act which was ITA No. 1014/Del/2024 Devidayal Educational Trust Page | 2 denied by the Learned CIT(E) vide order dated 28-02-2024 on the ground that assessee trust had not carried out any charitable activity in the financial years 2020-21 to 2022-23. Further, the Learned CIT(E) observed that assessee had purchased a land on 30-04-2009 which was sold during the financial year 2022-23 for an amount of Rs 2,17,33,125/- and since no other asset has been purchased by the assessee trust from the sale proceeds of the capital asset held under the trust, it resulted in violation of provisions of section 11(1A) of the Act. Consequentially, the Learned CIT(E) observed that the assessee is not entitled for registration under section 12AB of the Act. Aggrieved, the assessee is in appeal before us. 4. Admittedly, the assessee wanted to build a school and impart education to poor children, for which purpose, this charitable trust was created, among other charitable objects. The assessee trust purchased a land on 30-4-2009 for pursuing its charitable objects. Since necessary permission could not be obtained to start the activity of education, the land lying with the assessee useless was decided to be sold and accordingly the assessee sold the same on 14-02-2023 for a sum of Rs 2,17,33,125/-. The sale proceeds received thereon were utilized by the assessee for giving donations to other trusts having similar charitable objects and activities. 5. We find that the learned CIT(E) had observed that assessee had not carried out any charitable activities from financial years 2020-21 to 2022-23. But on perusal of the Balance Sheet and Income & Expenditure Account for the years ended 31-03-2021, 31-03-2022 and 31-03-2023 which are enclosed in pages 63 to 70 of the paper book, we find that assessee had indeed made the following contributions towards pursuing its charitable activities:- Financial year 2020-21 -Rs 2,500/- amount spent towards scholarship and books distribution-Rs 250. Financial year 2021-22 - amount spent towards scholarship Rs 3,000 and distribution of books Rs 255. ITA No. 1014/Del/2024 Devidayal Educational Trust Page | 3 Financial year 2022-23 - donation paid to other trusts Rs 1,90,00,000/-. 6. We find that the provisions of section 11-13 nowhere indicates any minimum amount of charitable activity to be spent by the assessee trust. Neither minimum limit nor maximum limit has been mentioned in the said provisions. It is a fact that assessee had indeed carried out its charitable activities during the Financial years 2020-21 to 2022-23. The assessee has utilized major portion of the sale proceeds received on sale of land by giving donations to the following trusts in Financial Year 2022-23 :- Devi Dayal Educational Trust Detail of Donation paid during F.Y 2022-23 Sr. No. Name PAN Address Amount 1 Kanta Devi Charitable & Education Society AAAAK0109K 343JARUN ENCLAVE,Saraswati Vihar, Delhi,INDIA-110034 40000001 2 Lingyas Society AAAAL3893P 16A, Central Drive, DLF, Chattarpur Farms, New Delhi-110074 60000001 3 Gadde Charitable Education Society AAATG5843K C-72, Shivalik, New Delhi- 110017 5000000 4 Videta Education & Welfare Trust AABTV3113E S-7, Dhruv Appartment, Sector-13, Rohini, Delhi- 110085 2500000 5 Maa Sataswati Education Society AABAM6187A Kalanaur Khurd, Rohtak, Haryana-124113 1500000 Total 19000000 7. The assessee had also enclosed the receipts issued by the aforesaid charitable trusts to the assessee, which are enclosed in pages 128 to 132 of the paper book. On perusal of the said donation receipts, we find that contributions made in the sums of Rs 15,00,000/- and Rs 25,00,000/- to Kanta Devi Charitable and Educational Society towards corpus fund, cannot be treated as application of income. However, this is an issue which would be subject matter of assessment proceedings and cannot stand as a hindrance to the Learned CIT(E) while granting registration under section 12AB of the Act to the assessee trust. As per the provisions of the Act, both corpus as well ITA No. 1014/Del/2024 Devidayal Educational Trust Page | 4 as regular revenue donations are indeed charitable activities carried out by the assessee. Whether the same is eligible to be treated as application of income for charitable purposes is a subject matter of assessment proceedings. The main allegation of the Learned CIT(E) for denial of registration to the assessee trust is that assessee had violated the provisions of section 11(1A) of the Act by not reinvesting the sale consideration in purchase of another property. In fact, exactly on the very same issue, the Coordinated Bench of Ranchi Tribunal in the case of ACIT vs Bharatiya Yug Vasishta Sangha in ITA No. 211/Ran/2014 dated 9-9-2016 had an occasion to address the same issue wherein it was observed as under:- “10. We have given a careful consideration to the rival submissions. A charitable trust can spend away the proceeds of the capital gain on sale of the capital assets in the following modes – A. It can apply proceeds to charitable purposes as was allowed prior to insertion of Section 11(1A) of the Act and as is allowed even after insertion of Section 11(1A) of the Act. B. It can accumulate proceeds within the limits generally and beyond the limits by following laid-down procedure that is filing Form No. 10 under Section 11(2) of the Act. C. It can make donation to other charitable trusts. D. It can invest proceeds of sale of capital assets in acquiring new capital assets and the capital gain shall be deemed to have been applied to charitable or religious purposes because of insertion of Section 11(1A) of the Act, which has been specifically inserted to allow this exemption by Finance No. 2 Act 1971 with retrospective effect from 1-4-1962. 11. Prior to this insertion of Section 11(1A) of the Act, acquisition of new capital asset on sale of old asset would not be deemed application to charitable or religious purpose and as such charitable trusts were liable to be taxed if they were unable to apply whole of sale proceeds to charitable or religious purpose. However, by this insertion of Section 11(1A) of the Act, option of charitable trust to apply sale proceeds for application to charitable or religious purpose including donation to another charitable trust has not been taken away, but rather one more avenue has been opened that is investment in new capital asset to be treated as deemed application to charitable or religious purpose. The CBDT in Circular No. 72 dated 6th January, 1972 has explained the legislative intent behind insertion of ITA No. 1014/Del/2024 Devidayal Educational Trust Page | 5 Section 11(1A) of the Act as a measuring for granting tax relief and removing certain anomalies and practical difficulties. Thus Section 11(1A) of the Act does not place any restriction, but it is enlarging the area of utilization. The Assessee Trust has acquired land being capital asset for charitable purpose, but due to abnormal increase in value due to establishment of Heart and Eye Hospital by Group Trust, it sold the capital assets and applied the proceeds by way of donation to Group Trust which is running Ear and Eye Hospital. The Trust is not allowed to do any business by its rules and regulations and the Trust has not carried out any business and as such surplus on sale of land is not business income but is capital gain.” 8. Hence it could be safely concluded that the assessee trust had not violated the provisions of section 11(1A) of the Act. Further the assessee trust had also carried out charitable activities during the financial years 2020- 21 to 2022-23. Hence both the observations of the Learned CIT(E) had been met by the assessee trust thereby making the assessee eligible for permanent registration under section 12AB of the Act. Hence the Learned CIT(E) is hereby directed to grant permanent registration to the assessee trust. Accordingly, the grounds raised by the assessee are allowed. 9. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 29/01/2025. -Sd/- -Sd/- (YOGESH KUMAR U.S.) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 29/01/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "