M/S DIVYA JAN KALYAN TRUST V. ASSTT. COMMISSIONER OF INCOME TAX

IAPL/3/2017

AI Insights

The case involves M/S Divya Jan Kalyan Trust appealing against the order of the Assistant Commissioner of Income Tax, which denied them exemption under Section 11 of the Income Tax Act for the Assessment Year 2011-12. The denial was based on the use of a bus owned by the trust, which was used by an organization run by the family of the trustee, violating Section 13(1)(c) read with Section 13(3) of the Act. The ITAT and CIT upheld the AO's decision, leading to the trust's appeal in the High Court. The court dismissed the appeal, referencing a Supreme Court decision that discourages entertaining appeals for minor amounts unless significant legal questions are involved.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 754002 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 03-10-2018
• Assessment Year: misc
• Other Referred Cases: Alexander George vs. Commissioner of Income-Tax (2015) 373 ITR 49 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: GAURAV MAHAJAN; S S C I T ADVOCATE
• Assessee Lawyers: ABHINAV MEHROTRA
• Keywords: Assessment Year 2011-12; Charitable Trust; Exemption denial; Income tax appeal; Violation of Section 13
• Section: 11; 12AA; 13; 13(1)(c); 13(3); 260-A

Judgement Text

"Court No. - 35 Case :- INCOME TAX APPEAL No. - 3 of 2017 Appellant :- M/S Divya Jan Kalyan Trust Respondent :- Asstt. Commissioner Of Income Tax Counsel for Appellant :- Abhinav Mehrotra Counsel for Respondent :- C.S.C.,Gaurav Mahajan,S.S.C. I.T. Hon'ble Bharati Sapru,J. Hon'ble Salil Kumar Rai,J. Heard Sri Abhinav Mehrotra, learned Counsel for the appellant and Sri Gaurav Mahajan, learned Counsel for the respondent-department. This is an assessee's appeal under Section 260-A of the Income Tax Act, 1961 against the order dated 31.08.2016 for the Assessment Year 2011-12. The substantial questions of law sought to be answered are hereunder:- \"1. Whether on a true and correct interpretation of law, benefit of exemption u/s 11 of the Income Tax Act, to an entity, duly registered u/s 12AA of the Act, is deniable, by Assessing Officer citing an alleged violation of the provisions of Section 13 of the Act ? 2. Whether on a true and correct interpretation of law it is open for an Assessing Authority to exercise the Powers contained u/s 12AA (3) of the Income Tax Act which power exclusively vests in the domain of Commissioner of Income Tax (Exemption) ? 3. Whether on a true and correct interpretation of law the determination of status of the appellant, as on AOP in contradiction to a charitable entity, as arrived at, by the Assessing Officer and as confirmed by the ITAT, is in accordance with law ?\" On an examination of facts it appears that the assessee had claimed exemptions in respect of use of a bus and the AO records as hereunder:- \"Further, during the scrutiny assessment, it has been noticed in the balance sheet that assessee trust owns a bus and claimed declaration of Rs.3,124/- on it. In the reply dated 11.02.2014, the assessee itself accepted that the said bus is purchased by it but the bus is used by M/s. Kailash Vidya Lok Inter College, Meharban Singh Ka Purwa, Kanpur. It is pertinent to mention here that mention here that M/s. Kailash Vidya Lok Inter College, Meharban Singh Ka Purwa, Kanpur is not run under the trust M/s Divya Jan Kalyan Trust. M/s. Kailash Vidya Lok Inter College, Meharban Singh Ka Purwa, Kanpur is run by the family of the trustee which is also violation of Section 13 (1) (c) read with Section 13 (3) of the I.T. Act, 1961.\" The CIT while dealing with the matter also held as under:- \"The other grounds of appeal relates to disallowances on account of tanning expensed, petrol expenses, environment expenses and maintenance expenses. The AO has recorded his observation for violation of Section 13 (1) (c) read with Section 13 (3) on account of bus being used by the organization run by the family members of the trustees. Thereby, the addition of depreciation of Rs.3,124/- has also been made. On overall consideration of the facts and circumstances of the case, the observation for violation of the Section 13 (1) (c) read with Section 13 (3) is found correct. Thereby, the exemption claimed u/s 11 has rightly been denied and rejected by the AO. Accordingly, the income has been assessed rightly in the status of AOP. During the appeal proceedings also, the details and evidences regarding the disallowances made out of such expenditures have not been explained fully for the purpose of the trust. Thereby, the additions made by the AO are hereby confirmed.\" From a reading of the assessment order, the CIT's order and Tribunal's order it appears that the AO while exercising its power under Section 13 (1) (c) of the Act has deleted the amount for which there was a clear violation and a finding that the bus had not been used by the trust but rather had been used by the trustee for his own family business. The Tribunal has upheld the order of AO and the CIT and has deleted the exemption in respect of the amount sought towards the bus expenses. No other amount has been added or deleted. The Hon'ble Apex Court in a recent judgement in the case of Alexander George vs. Commissioner of Income-Tax reported in (2015) 373 ITR 49 (SC) has also held that where the amount is very small normally an appeal should not be entertained. No question of law arises in this appeal. The appeal has no merit, it is dismissed. No costs. Order Date :- 3.10.2018 S.P. "