The Society of Catechist Sisters of St. Ann, Hyd, Secunderabad V. ADIT (Exemption)-III, Hyd., Hyderabad

ITA 1014/HYD/2015

• Counselvise Citation: 101422514 RSA 2015
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 06-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G SURYA PRASAD
• Keywords: Charitable institution; Question of law; Assessment record
• Section: 143(3); 12AA; 263; 11

Judgement Text

ITA 1014 OF 2015 SMC SOCIETY OF CATECHIST SISTER OF ST.ANN HYDERABAD PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B SMC BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO1014/HYD/2015 (ASSESSMENT YEAR: 2008-09) THE SOCIETY OF CATECHIST SISTERS OF ST. ANN HYDERABAD PAN: AABTT 2179 A VS. ASST T. DIRECTOR OF INCOME TAX (EXEMPTIONS)- II HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.C. DEVDAS FOR REVENUE : SHRI G. SURYA PRASAD, DR DATE OF HEARING : 18 .09 .2015 DATE OF PRONOUNCEMENT : 23 .09. 2015 O R D E R THIS IS ASSESSEES APPEAL FOR A.Y 2008-09. IN THIS APPEAL ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT (A) I N UPHOLDING THE ORDER OF THE AO IN REJECTING THE FORM NO.10 AND CON SEQUENTIALLY BRINING TO TAX THE DISALLOWED AMOUNT OF RS.5,16,930 . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE TR UST FILED ITS RETURN OF INCOME FOR A.Y 2008-09 ON 22.1.2009 DECLA RING NIL INCOME AFTER CLAIMING EXEMPTION U/S 11 OF THE I.T. ACT. ALONG WITH THE RETURN OF INCOME ASSESSEE ALSO FILED FORM NO.10 SEEKING PERMISSION TO ACCUMULATE INCOME FOR APPLICATION IN SUBSEQUENT YEARS. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, AO OBSERVED THAT FORM NO.10 DOES NOT MENTION THE SP ECIFIC PURPOSE FOR WHICH THE AMOUNT IS BEING ACCUMULATED. HE, THEREFORE HELD FORM NO.10 TO BE DEFECTIVE. AN OPPOR TUNITY OF ITA 1014 OF 2015 SMC SOCIETY OF CATECHIST SISTER OF ST.ANN HYDERABAD PAGE 2 OF 7 RECTIFYING THE DEFECTS IN FORM NO.10 WAS GIVEN TO T HE ASSESSEE AND IN RESPONSE TO THE SAID NOTICE, ASSESSEE FILED AN EXPLANATION THROUGH ITS LETTER DATED 22.12.2010 STATING THAT TH E AMOUNT WAS ACCUMULATED OR SET APART FOR ESTABLISHMENT OF SCHOOLS/HOSPITALS/ ACCOMMODATION FOR WORKERS . AO, HOWEVER, OBSERVED THAT THE ASSESSEE SOCIETY HAS BEEN ESTABLISHED AND MANAGED B Y A MINORITY COMMUNITY FOR THE BENEFIT OF ROMAN CATHOL IC CHRIST AND ALL PERSONS. AND SINCE THE ASSESSEE HAS NOT FILED ANY EXTRACT OF THE MINUTES/BOOK OR RESOLUTION PASSED BY THE TRUSTEES OF THE SOCIETY IN SUPPORT OF THE PURPOSE MENTIONED I.E. ESTABLISHMENT OF SCHOOLS/HOSPITALS ETC., THE EXPLA NATION DATED 22.12.2010 WAS TREATED AS INVALID. HE ACCORDINGLY B ROUGHT THE EXCESS OF INCOME EXPENDITURE OF RS.10,46,695 AS PER THE INCOME AND EXPENDITURE STATEMENT TO TAX. AGGRIEVED, ASSESS EE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO CONFIRMED THE ORDE R OF THE AO AS FAR AS THE DISALLOWANCE OF THE ACCUMULATION OF I NCOME IS CONCERNED. AGGRIEVED, ASSESSEE IS IN SECOND APPEAL BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI K.C. DEVDAS, WHILE REITERATING THE SUBMISSIONS MADE BY THE AUTHO RITIES BELOW SUBMITTED THAT, THOUGH NO RESOLUTION PASSED BY THE BOARD ACCOMPANIED FORM NO.10 OR THE RETURN OF INCOME, IT WAS STATED THAT THE ACCUMULATION OF EXCESS OF INCOME OVER EXPE NDITURE AS SATED IN FORM NO.10 WAS TO ENABLE THE ASSOCIATION/I NSTITUTION/ MEMBERS OF THE TRUST TO ACCUMULATE SUFFICIENT FUNDS FOR CARRYING OUT THE OBJECTS OF THE TRUST. HE SUBMITTED THAT DUR ING THE COURSE OF THE ASSESSMENT PROCEEDINGS, ASSESSEE HAS FURNISH ED THE SPECIFIC PURPOSE FOR WHICH THE FUNDS HAVE BEEN SET ASIDE AND IN SUCH CIRCUMSTANCES, THE ACCUMULATION CANNOT BE DENI ED. HE ITA 1014 OF 2015 SMC SOCIETY OF CATECHIST SISTER OF ST.ANN HYDERABAD PAGE 3 OF 7 SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISIO N OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SAMAJ SEVA NIDHI VS. ASSTT. COMMISSIONER OF INCOME TAX (INV.) (2015)(376 ITR 507 (T & AP) WHEREIN IT WAS HELD THAT WHERE THE REQUIRED I NFORMATION WAS NOT FURNISHED THROUGH FORM NO.10 ALONG WITH THE RETURN OF INCOME AND SUBSEQUENTLY, THE ASSESSEE SUBMITTED ANO THER LETTER TO THE AO INTIMATING SPECIFIC PURPOSE FOR WHICH THE AMOUNT WAS SOUGHT TO BE UTILISED, THE INFORMATION FURNISHED BE FORE THE COMPLETION OF THE ASSESSMENT REQUIRES THAT NO DISAL LOWANCE OF ACCUMULATION IS CALLED FOR. HE HAS FILED A COPY OF THE SAID ORDER BEFORE US. HE FURTHER SUBMITTED THAT THE AMOUNT WHI CH HAS BEEN ACCUMULATED OR SET APART FOR CONSTRUCTION OF SCHOOL S/HOSPITALS ETC., HAS BEEN UTILISED FOR THE VERY SAME PURPOSE I N THE SUBSEQUENT YEARS AND THEREFORE, THE DISALLOWANCE IS NOT CALLED FOR. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, I FIND THAT THE ASSESSEE IS A CHARITABLE TR UST AND HAS BEEN REGISTERED U/S 12AA OF THE ACT. DURING THE REL EVANT FINANCIAL YEAR, ASSESSEE HAS EXCESS OF INCOME OVER EXPENDITURE AND HAS SOUGHT TO SET APART THE SAID EXCESS FOR THE PURPOSES OF OBJECTS OF THE TRUST. THOUGH IN FORM NO.10, ASSESSE E HAS NOT MENTIONED SPECIFIC PURPOSE FOR WHICH THE ACCUMULATI ON IS BEING DONE, WE FIND THAT DURING THE COURSE OF THE ASSESSM ENT PROCEEDINGS, ASSESSEE HAS STATED THE SPECIFIC PURPO SE FOR WHICH THE ACCUMULATION IS BEING DONE. THE REASON FOR AOS REFUSAL TO ACCEPT THE SUBSEQUENT LETTER OF THE ASSESSEE GIVING SPECIFIC PURPOSE OF ACCUMULATION IS THAT THE ASSESSEE HAS NO T FILED THE ITA 1014 OF 2015 SMC SOCIETY OF CATECHIST SISTER OF ST.ANN HYDERABAD PAGE 4 OF 7 RESOLUTION OF THE SOCIETY FOR THE SPECIFIC PURPOSE MENTIONED IN THE LETTER. AS FAR AS THE DECISION OF THE JURISDICTIONA L HIGH COURT IS CONCERNED, WE FIND THAT THE HON'BLE HIGH COURT HAS HELD THAT AS LONG AS THE ASSESSEE IS ABLE TO FURNISH THE REQUIRE D INFORMATION BEFORE THE COMPLETION OF THE ASSESSMENT, IT IS DUE COMPLIANCE OF THE LAW AND THE ASSESSEE IS ELIGIBLE TO ACCUMULATE SUCH INCOME. FOR COMING TO THIS CONCLUSION THE HON'BLE HIGH COUR T HAS CONSIDERED THE JUDGMENT OF THE HON'BLE HIGH COURT O F CALCUTTA IN THE CASE OF DIT VS. SINGHANIA CHARITABLE TRUST REPO RTED IN 199 ITR 819 (CAL.) AND ALSO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HOTEL RESTAURANT ASSOC IATION (261 ITR 190 (DEL.) AND CIT VS. NAGPUR HOTEL OWNERS ASSO CIATION (247 ITR 201 (S.C) FOR COMING TO THIS DECISION. THE RELE VANT PORTION OF THE DECISION IS REPRODUCED HEREUNDER FOR READY REFE RENCE: 5. SECTION 11(2) OF THE ACTREADS AS FOLLOWS: WHERE EIGHTY-FIVE PER CENT. OF THE INCOME REFERRED TO IN CLAUSE (A) OR CLAUSE (B) OF SUB-SECTION (1) READ WITH THE EXPLANATION TO THAT SUBSECTION IS NOT APPLIED, OR IS NOT DEEMED TO HAVE BEEN APPLIED, TO CHARITABLE O R RELIGIOUS PURPOSES IN INDIA DURING THE PREVIOUS YEA R BUT IS ACCUMULATED OR SET APART, EITHER IN WHOLE OR IN PART, FOR APPLICATION TO SUCH PURPOSES IN INDIA, SU CH INCOME SO ACCUMULATED OR SET APART SHALL NOT BE INCLUDED IN THE TOTAL INCOME' OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME, PROVIDED THE FOLLOWING CONDITIONS ARE COMPLIED WITH, NAMELY :- (A) SUCH, PERSON SPECIFIES,' BY NOTICE IN WRITING G IVEN TO THE ASSESSING OFFICER IN THE PRESCRIBED MANNER,' THE PURPOSE FOR WHICH THE INCOME IS BEING ACCUMULATED OR SET APART .AND THE PERIOD FOR WHICH THE INCOME IS TO BE ACCUMULATED 'OR SET APART, WHIC H SHALL IN NO CASE EXCEED TEN YEARS ; ITA 1014 OF 2015 SMC SOCIETY OF CATECHIST SISTER OF ST.ANN HYDERABAD PAGE 5 OF 7 (B) THE MONEY SO ACCUMULATED OR SET APART IS INVEST ED OR DEPOSITED IN THE FOID1S OR MODES SPECIFIED IN SU B- SECTION (5) .. 6. A PERUSAL OF THE ABOVE PROVISION MAKES IT CLEAR THAT THE ASSESSEE SHOULD SUPPLY THE INFORMATION IN FORM NO.10 AND INDICATE THE PURPOSES FOR WHICH THE ACCUMULATED FUNDS WERE MEANT TO BE UTILISED. 7. THE SAID PROVISION CAME UP FOR CONSIDERATION IN TRUSTEES OF SINGLIANIA CHARITABLE TRUST (SUPRA). TH E HIGH COURT OF CALCUTTA WAS CONSIDERING THE FOLLOWIN G QUESTIONS OF LAW WHEN THEY WERE REFERRED TO IT UNDE R SECTION 256(1) OF THE ACT FOR THE ASSESSMENT YEAR 1984-85 (PAGE 820 OF 199 ITR): 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL IS JUSTIFIED IN LAW IN HOLDING THAT TH ERE IS NOTHING ILLEGAL ON THE PARR OF THE ASSESSEE IN GIVING NOTIC E TO THE INCOME-TAX OFFICER IN FORM NO. 10 LISTING ALL ITS O BJECTS FOR THE PURPOSE OF ACCUMULATION OF INCOME AS PROVIDED IN SE CTION 11(2) OF THE INCOME-TAX ACT, 1961, WHICH REQUIRES SPECIFI CATION OF THE PURPOSES ? ', 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE TRIBUNAL IS JUSTIFIED IN CANCELLING THE ORDER O F THE COMMISSIONER OF INCOME-TAX UNDER SECTION 263 OF THE INCOME- TAX ACT, 1961, HOLDING THAT THE ASSESSMENT OF THE I NCOME-TAX OFFICER ALLOWING ACCUMULATION OF THE INCOME UNDER S ECTION 11(2) OF THE INCOME-TAX ACT, FOR ALL THE OBJECTS FO R WHICH THE TRUST WAS CREATED AND NOT FOR ANY SPECIFIC OBJECTS, WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE R EVENUE ?' 8. IN THE SAID CASE, THE INCOME-TAX OFFICER ALLOWED THE EXEMPTION UNDER SECTION 11 OF THE ACT B Y RELYING ON THE NOTICE GIVEN BY THE ASSESSEE UNDER SECTION 11(2) OF THE ACT. THE COMMISSIONER OF INCOM E- TAX, BY INVOKING THE POWERS VESTED IN HIM UNDER SECTION 263 OF THE ACT CALLED FOR AND EXAMINED THE ASSESSMENT RECORDS OF THE ASSESSEE. AFTER NOTICE TO THE ASSESSEE AND RESPONSE, HE SET ASIDE THE ORDER O F ASSESSMENT AND ORDERED FOR DE NOVO ENQUIRY. THE ASSESSEE PREFERRED AN APPEAL TO THE TRIBUNAL. THE TRIBUNAL HELD THAT SINCE A PLURALITY OF CHARITABLE ITA 1014 OF 2015 SMC SOCIETY OF CATECHIST SISTER OF ST.ANN HYDERABAD PAGE 6 OF 7 PURPOSES IS NOT RULED OUT UNDER THE SCHEME OF THE ACT, NO OBJECTION COULD POSSIBLY BE TAKEN TO THE ASSESSEE'S LISTING OUT ALL THE OBJECTS OF THE TRUST IN FORM NO. 10. THE MATTER WAS TAKEN BY THE REVENUE TO THE HIGH COURT. IT WAS CONTENDED THAT ONE PURPOS E IS INTERLINKED WITH THE OTHER AND, THEREFORE, THE MENTION OF ALL THE PURPOSES DOES NOT MAKE ANY DIFFERENCE AND SATISFIES THE REQUIREMENT OF SUB- SECTION (2) OF SECTION 11. THE SAID CONTENTION OF T HE ASSESSEE WAS NOT ACCEPTED HOLDING THAT THE SAID CONTENTION WOULD RENDER THE REQUIREMENT OF SPECIFICATION OF THE PURPOSE FOR ACCUMULATION IN TH AT SUB-SECTION REDUNDANT. IT WAS HELD THAT THE PURPOSE S TO BE SPECIFIED CANNOT, UNDER ANY CIRCUMSTANCES, TREAD BEYOND THE OBJECTS CLAUSE OF THE TRUST AND TH E LEGISLATURE COULD NOT HAVE THOUGHT OF THE NEED OF SPECIFICATION OF THE PURPOSE IF IT DID NOT HAVE IN MIND THE PARTICULARITY OF THE PURPOSE OR PURPOSES FALLIN G WITHIN THE AMBIT OF THE OBJECTS CLAUSE OF THE TRUST DEED. ACCORDINGLY, IT ANSWERED QUESTION NO.2 IN THE NEGATIVE AND DECLINED TO ANSWER QUESTION NO.1. IT REMANDED THE MATTER TO THE TRIBUNAL TO ALLOW THE ASSESSEE TO ADDUCE FRESH EVIDENCE WHETHER IN THE FORM OF ANY RESOLUTION OR OTHERWISE SHOWING THAT TH E SPECIFIC PURPOSE FOR WHICH THE TRUST REQUIRES THE ACCUMULATION OF THE INCOME EXISTS AND OBSERVED THAT THE SAID EVIDENCE SHOULD BE CONSIDERED BY THE TRIBUNAL. 9. THE SAID SECTION WAS CONSIDERED BY THE HIGH COURT OF DELHI IN CIT V. HOTEL AND RESTAURANT ASSOCIATION [2003] 261 ITR 190 (DELHI) AND IT WAS HELD AS FOLLOWS (PAGE 192) : ' IT IS TRUE THAT SPECIFICATION OF CERTAIN PURPOSE OR PURPOSES IS NEEDED FOR ACCUMULATIONS OF THE TRUST'S INCOME UNDE R SECTION 11(2) OF THE ACT. AT THE SAME TIME THE PURPOSE OR P URPOSES TO BE SPECIFIED CANNOT BE BEYOND THE OBJECTS OF THE TR UST. PLURALITY OF THE PURPOSES FOR ACCUMULATION IS NOT PRECLUDED B UT IT DEPENDS ON THE PRECISE PURPOSE FOR WHICH THE ACCUMU LATION IS INTENDED. IN THE PRESENT CASE, BOTH THE APPELLATE A UTHORITIES BELOW HAVE RECORDED A CONCURRENT FINDING THAT ; THE INCOME WAS SOUGHT TO BE ACCUMULATED BY THE ASSESSEE TO ACHIEVE , THE OBJECT FOR WHICH THE ASSESSEE WAS INCORPORATED. IT IS NOT THE CASE OF THE ITA 1014 OF 2015 SMC SOCIETY OF CATECHIST SISTER OF ST.ANN HYDERABAD PAGE 7 OF 7 REVENUE THAT ANY OF THE OBJECTS OF THE ASSESSEE-COM PANY WERE NOT FOR CHARITABLE PURPOSE. THE AFOREMENTIONED FIND ING BY THE TRIBUNAL IS ESSENTIALLY A FINDING OF FACT GIVING RI SE TO NO QUESTION OF LAW. 5. SINCE THE FACTS AND CIRCUMSTANCES BEFORE ME ARE ALSO SIMILAR AND PARTICULARLY TAKING INTO CONSIDERATION THE ASSESSEES CONTENTION THAT THE FUNDS SET APART HAVE BEEN UTILI SED FOR THE PURPOSE MENTIONED BY THE ASSESSEE IN ITS LETTTER FI LED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS, I AM OF THE O PINION THAT THE ASSESSEE IS ELIGIBLE FOR ACCUMULATING THE EXCES S OF INCOME OVER THE EXPENDITURE FOR THE RELEVANT A.Y. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED ACCO RDINGLY. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2015. S D/ - (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 23 RD SEPTEMBER, 2015. VNODAN/SPS COPY TO: 1. SEKHAR & CO. 133/4 R.P. ROAD, SECUNDERABAD 500003 2. ASSTT. DIRECTOR OF INCOME TAX (E)-III, HYDERABAD 3. CIT(A)-9 HYDERABAD 4. PR. CIT (EXEMPTIONS) HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER