ADIT(Exemptions)-II, Hyderabad V. Kalinga Cultural Trust, Hyderabad

ITA 1067/HYD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77931 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 10-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Assessee Lawyers: C S SUBRAMANYAM
• Keywords: Charitable institution
• Section: 143(3); 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NOS. 894 & 895/HYD/2013 AND 1067/HYD/2012 ASSESSMENT YEARS: 2006-07, 2007-08 AND 2008-09 ASST. DIRECTOR OF INCOME-TAX(EXEMPTIONS)-II, APPELLANT HYDERABAD. VS. KALINGA CULTURAL TRUST, RESPONDEN T HYDERABAD 500 034 REVENUE BY : SHRI B. YADAGIRI ASSESSEE BY : SHRI C.S. SUBRAMANYAM DATE OF HEARING : 02/04/2014 DATE OF PRONOUNCEMENT : 06/06/2014 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THESE APPEALS FILED BY THE REVENUE ARE DIRECTED AG AINST SEPARATE ORDERS OF CIT(A) FOR THE ASSESSMENT YEARS 2006-07 TO 2008- 09. AS IDENTICAL ISSUES ARE INVOLVED IN THESE APPEA LS, THEY WERE CLUBBED AND HEARD TOGETHER AND, THEREFORE, A COMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENCE. 2. TO DISPOSE OF THESE APPEALS, FACTS IN AY 2008-09 ARE TAKEN INTO CONSIDERATION. THE ASSESSEE IS A REGISTERED AS A SO CIETY UNDER THE AP (TELANGANA AREA) PUBLIC SOCIETIES ACT 1350 FASLI. T HE ASSESSEE SOCIETY HAS BEEN GRANTED REGISTRATION U/S 12A OF TH E IT ACT, 1961 ON 23 RD NOVEMBER, 1995 BY THE CIT, AP-II, HYDERABAD. FOR T HE AY 2008- 09, IT FILED RETURN OF INCOME DECLARING INCOME OF R S. 7,03,198/- 2 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST REPRESENTING SHORTFALL IN APPLICATION OF INCOME DER IVED FROM PROPERTY HELD IN TRUST AS PER SECTION 11 OF THE ACT. THE AO PASSED ORDER U/S 143(3) OF THE ACT ON 23/11/2010 HOLDING THAT THE AS SESSEE WAS NOT ENTITLED TO THE BENEFIT U/S 11 OF THE ACT. THE AO HELD AS FOLLOWS: TAKING INTO ACCOUNT ALL THE ABOVE DEFECTS, I AM OF THE CONSIDERED VIEW THAT THE SOCIETY IS NOT ENTITLED TO ANY BENEFI T UNDER SECTION 11 AS THE FUNDS OF THE TRUST/INSTITUTION HAS NOT BE EN APPLIED FOR ITS OBJECTIVE. MOREOVER, THIS BEING A RESIDUARY TRUST H AVING CARRIED ON BUSINESS AS DISCUSSED ABOVE, IT LOSES ITS CHARIT ABLE CHARACTER. 2.1 LEARNED AR OF THE ASSESSEE CONTENDED BEFORE THE AO THAT THE ASSESSEE TRUST WAS GRANTED REGISTRATION U/S 12A OF THE ACT AFTER DUE CONSIDERATION OF ITS OBJECTS AND, THEREFORE, THE SA ME CANNOT BE DISTURBED. IT WAS ARGUED THAT THE ACTIVITIES ARE GE NUINE AND, HENCE, TRUST WOULD ENJOY THE EXEMPTION OF ITS INCOME. AR A LSO ARGUED BEFORE THE AO THAT PROPAGATION OF JAGANNADH DHARMA IS AN E SSENTIAL PART OF ODISHA CULTURE AND THE SAME BEING ONE OF THE OBJECT S OF THE TRUST, CONSTRUCTION OF TEMPLE BY APPLICATION OF FUNDS OF T HE TRUST IS FOR FULFILLMENT OF AUTHORIZED OBJECT. THE AO FELT THAT PROPAGATION OF SUCH PHILOSOPHY DOES NOT JUSTIFY CONSTRUCTION OF TEMPLE OR WORSHIP OF DEITY. HE WAS OF THE OPINION THAT WHERE THE DOMINANT PURPO SE WAS CHARITABLE APPLICATION OF SOME FUNDS FOR ANCILLARY PURPOSE, SU CH AS RELIGIOUS PURPOSE WOULD NOT JUSTIFY DEDUCTION OF EXEMPTION U/ S 11. HE FURTHER NOTED THAT CONSTRUCTION OF TEMPLE IS A RELIGIOUS AC TIVITY AND, THEREFORE, TRUST HAVING PURSUED RELIGIOUS ACTIVITY ALL ALONG C OULD NOT BE SAID THAT IT CAN APPLY TRUST FUNDS PROPERLY AND ACCORDINGLY TRUS T IS NOT ENTITLED FOR EXEMPTION U/S 11 OF THE ACT. 2.2 FURTHER, THE AO NOTICED THAT THE ASSESSEE HAD N OT DEDUCTED TAX AT SOURCE FROM CONTRACT PAYMENTS OF RS. 14,39,990/- THEREBY VIOLATING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. HE WAS OF THE OPINION THAT SINCE THE ASSESSEE WAS NOT ENTITLE TO THE BENE FIT OF SECTION 11, 3 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST SUCH AMOUNT IS TO BE ADDED TO THE ASSESSEES INCOME ON ACCOUNT OF VIOLATION OF SECTION 40(A)(IA). THE AO, THEREFORE, DETERMINED THE INCOME OF THE ASSESSEE AT RS. 1,15,51,946/-. 3. ON APPEAL, BEFORE THE CIT(A), IT WAS SUBMITTED T HAT THE OBJECT OF THE SOCIETY HAS TO PROVIDE FACILITY AND OPPORTUNIT IES FOR CULTURAL MEETINGS, EVENTS AND ACTIVITIES OF PEOPLE FROM ORIS SA. IT WAS SUBMITTED THAT SOCIETY IS ENGAGED IN PROMOTING JAGANNADH DHAR MA AS PART OF THE OBJECTS OF THE SOCIETY AND, ACCORDINGLY, CONSTRUCTI ON OF TEMPLE FOR LORD JAGANNADHA WAS TO BE TREATED AS PART OF ODISSEY CUL TURE AND TEMPLE CONSTRUCTION AND MAINTENANCE ACTIVITY WAS ALSO A PA RT OF JAGANNADH DHARMA. THE AR FURTHER SUBMITTED THAT EVEN IF ANY PURPOSES OF THE TRUST IS HELD TO CONSTITUTE A RELIGIOUS PURPOSE THA T BY ITSELF WOULD NOT DISENTITLE THE TRUST FROM SEEKING EXEMPTION U/S 11 OF THE ACT. THE AR RELIED ON THE DECISION OF THE HONBLE COCHIN BENCH OF THE ITAT IN THE CASE OF SOCIETY OF PRESENTATION SISTERS VS. ITO, 12 1 ITD 422 (TM) . THE AR ALSO RELIED ON THE FOLLOWING DECISIONS FOR T HE PROPOSITION THAT SO LONG AS THE DOMINANT OBJECT IS OF A GENERAL PUBLIC UTILITY AND THERE IS NO PROFIT MOTIVE, IT CANNOT BE SAID THAT TRUST/INSTITU TION IS NOT ESTABLISHED FOR CHARITABLE PURPOSES, EVEN IF SOME PROFIT IN THE ACTIVITY CARRIED ON BY THE TRUST OCCURS: I) CIT VS. THANTHI TRUST, 115 TAXMAN 126 (SC) II) CIT VS. AGRICULTURAL PRODUCE AND MARKET COMMITT EE, 291 ITR 419 (BOM.) III) CIT VS. FEDERATION OF INDIAN CHAMBER OF COMMER CE AND INDUSTRY, 130 ITR 186 (SC) THE LEARNED AR ALSO RELIED ON THE DECISION IN THE C ASE OF NIRMAL AGRICULTURAL SOCIETY VS. IT), 71 ITD 152 (HYD.) TO CONTEND THAT THE INTENTION OF THE DONORS AND THE DONE AT THE INITIAL STAGE SHOULD BE TAKEN INTO CONSIDERATION. A DECISION IN THE CASE OF STHAN AKVASI VARDHMAN VANIK JAIN SANGH, 260 ITR 366 (GUJ.) WAS ALSO CITED FOR EXPLAINING THAT 4 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST VOLUNTARY CONTRIBUTION MADE WITH A SPECIFIC DIRECTI ON IS EXEMPT U/S 12 OF THE ACT. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) NOTICED THAT THE REGISTRATION GRANTED TO THE ASSESS EE SOCIETY ON 30/12/1995 U/S 12A OF THE ACT WAS IN FORCE DURING T HE RELEVANT YEAR. THE CIT(A) ALSO NOTICED THAT WHILE THE OBJECTS OF T HE ASSESSEE WERE NOT AMENDED DURING THE RELEVANT YEAR, EVEN IF THE SAME WERE AMENDED LATER TO ADD SOME NEW OBJECTS IT CANNOT BE SAID THA T THE ORIGINAL OBJECTIVES WERE DISCARDED ALTOGETHER SO AS TO SAY T HAT THE ASSESSEES ELIGIBILITY FOR BEING REGISTERED U/S 12A WAS REQUIR ED TO BE REVISITED. IN THIS REGARD, THE CIT(A) RELIED ON THE DECISION OF M UMBAI BENCH OF ITAT IN THE CASE OF MEHTA JIVRAJ MAKANDAS & PAREKH GOVIN DAJI KALYANJI MODH VANIK VIDYARTHI PUBLIC TRUST VS. DIT(E), 131 I TD 462 (MUM.) THE CIT(A) ALSO RELIED ON THE DECISION OF THE APEX COUR T IN THE CASE OF ACIT VS. SURAT CITY GYMKHANA, 300 ITR 214(SC) AND N OTED THAT THE ORIGINAL OBJECTS CONTINUE TO EXIST AND THE AMENDED OBJECTS ALSO REMAINED CHARITABLE AND, THEREFORE, THE TRUST CONTI NUED TO BE ELIGIBLE TO REGISTRATION U/S 12A OF THE ACT. 4.1 FURTHER, THE CIT(A) HELD THAT AS REGARDS PURPOS ES LIKE RELIEF TO POOR, EDUCATION OR MEDICAL AID THERE CANNOT BE TWO VIEWS THAT THESE PURPOSES ARE NOT CHARITABLE. FURTHER, HE HELD THAT EVEN IF THE OBJECT PROPAGATION OF JAGANNADH DHARMA DID NOT FIND A PL ACE IN THE ORIGINAL MOU DATED 29/12/1994, IT IS CLEAR THAT THE AIMS AND OBJECTIVES CONTAINED THEREIN ARE RELIEF TO THE CULTURE AND ETH OS OF ORISSA. THE CIT(A) FURTHER HELD THAT EVEN IF THE NEW OBJECTIVES ARE ADDED TO THE OLD CHARITABLE OBJECTS THE CHARITABLE CHARACTER OF THE ASSESSEE TRUST WAS NOT LOST. ACCORDINGLY, APPLYING THE DECISION OF THE ITAT, MUMBAI IN THE CASE OF MEHTA JIVRAJ MAKAANDAS & PAREKH GOVINDAJI K ALYANJI MODH 5 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST VANIK VIDYARTHI PUBLIC TRUST VS. DIT(E) (SUPRA), TH E CIT(A) HELD THAT THE ASSESSEE COULD NOT HAVE BEEN DENIED EXEMPTION U /S 11 ON THIS COUNT. HE FURTHER OBSERVED THAT THE CENTRAL THEME O F THE OBJECTIVES OF THE ORIYA CULTURE ITSELF AND THAT JAGANNADH DHARMA AND ORIYA CULTURE ARE ALMOST SYNONYMOUS. THE CIT(A) FURTHER OBSERVED THAT CONSTRUCTION OF JAGANNADH TEMPLE BY THE ASSESSEE TRUST WAS IN TE RMS OF THE OBJECTION AND UNDISPUTEDLY NOT ONLY THE SAID TEMPLE SYMBOLIZED ORIYA CULTURE BUT ALSO SERVES AS PLATFORM FOR FOSTERING A ND PROMOTING THE CULTURAL AND SOCIAL ASPECTS. IT WAS FURTHER EMPHAS IZED BY THE CIT(A) THAT ADVANCEMENT OF RELIGION CAN ALSO BE A CHARITAB LE PURPOSE AND FOR THIS PROPOSITION, HE RELIED ON THE DECISION OF CIT VS. BARKATE SAIFIYAH SOCIETY, 2132 ITR 492 (GUJ.) AND THE DECISION IN TH E CASE OF CIT VS. SOCIAL SERVICE CENTRE, 250 ITR 39 (AP) WHEREIN IT H AS BEEN CATEGORICALLY OPINED THAT IN OUR COUNTRY MOST OF TH E RELIGIOUS AND CHARITABLE ACTIVITIES GO TOGETHER. RELYING ON THE DECISION OF CALICUT ISLAMIC CULTURAL SOCIETY VS. ACIT IN ITA NOS. 729 & 641/COCH/2006, DATED 31/07/2008 AND THE CASE OF SOCIETY OF PRESENT ATION SISTERS VS. ITO, THE CIT(A) HELD THAT PROPAGATION OF JAGANNADH DHARMA CANNOT BE SAID TO BE A NON-CHARITABLE PURPOSE. APPLYING THE D ECISION OF THE MUMBAI BENCH OF TRIBUNAL IN THE CASE OF MEHTA JIVRA J MAKANDAS & PAREKH GOVINDAJI KALYANJI MODH VANIK VIDYARTHI PUBL IC TRUST (SUPRA), THE CIT(A) HELD THAT THE ASSESSEE COULD NOT HAVE BE EN DENIED EXEMPTION U/S 11 ON THIS COUNT. 4.2 THE CIT(A) ALSO HELD THAT AS REGARDS CONSTRUCTI ON OF JAGANNATH TEMPLE, IT IS CLEAR THAT THE CONSTRUCTION WAS MADE ONLY IN TERMS OF THE AIMS AND OBJECTIVES OF THE ASSESSEE TRUST. AS REGAR DS THE DECISIONS IN THE CASE OF ARSHA VIGNAN TRUST VS. D.P. SHARMA, DIT (E) 295 ITR 437(AP), THE CIT(A) STATED THAT IT IS CLEAR THAT IN THE LIGHT OF THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F SOCIAL SERVICE 6 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST CENTRE (SUPRA) THIS TOO FALLS WITHIN THE AMBIT OF C HARITABLE ACTIVITIES. IN FACT, THE CIT(A) OBSERVED, IN THE SAID DECISION CON STRUCTION OF A CHURCH HAS BEEN HELD AS EXPENDITURE TOWARDS CHARITABLE PUR POSES. APPLYING THE SAID DECISION, THE CIT(A) HELD THAT CONSTRUCTIO N OF JAGANNATH TEMPLE BY THE ASSESSEE ALSO AMOUNTED TO EXPENDITURE TOWARDS CHARITABLE PURPOSES OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUND OF APPEAL IN AY 2008-09: 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS BOT H ON FACTS AND IN LAW. 2. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT PROPAGATION OF JAGANNATH DHARMA WAS NOT PART OF THE OBJECTIVES OF THE TRUST FOR THE RELEVANT ASSESSMENT YEAR. 3. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT ALTHOUGH THE PREDOMINANT OBJECTIVE OF THE ASSESSEE IS PROMOTION OF ODISSI CULTURE, THE PREDOMINANT ACTIVITY BEING P URSUED BY THE ASSESSEE WAS CONSTRUCTION OF A TEMPLE, WHICH IS OF RELIGIOUS NATURE. 4. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT CONSTRUCTION OF JAGANNATH TEMPLE WAS NOT A PART OF THE OBJECTIVES OF THE ASSESSEE TRUST AND THERE IS NO NE XUS BETWEEN THE ASSESSEES OBJECTIVES AND THE ACTIVITY OF CONST RUCTION OF JAGANNATH TEMPLE, WHICH IS OF RELIGIOUS NATURE. 5. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE CASE OF CIT VS. BARKAT SAFIYAH SOCIETY [1995] 213 I TR 492 (GUJ.) IS CLEARLY DISTINGUISHABLE FROM THE PRESENT CASE, B ECAUSE IN THE CITED CASE ONE OF THE OBJECTIVES WAS TO CARRY OUT R ELIGIOUS ACTIVITIES WHILE IN THE CASE OF THE SUBJECT ASSESSE E, IT IS A CHARITABLE TRUST, CARRYING OUT RELIGIOUS ACTIVITIES AND THUS, IT IS NOT ENTITLED FOR EXEMPTION U/S 11 OF THE IT ACT, 1961. 6. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE CASE OF CIT VS. SOCIAL SERVICE CENTER [2001] 250 IT R 39 AP HIGH COURT IS CLEARLY DISTINGUISHABLE FROM THE PRESENT C ASE, IN THE CITED CASE, THE HONBLE JURISDICTIONAL HIGH COURT F OLLOWED THE PRINCIPLE OF DOMINANT AND ANCILLARY PURPOSES AS LAI D DOWN BY THE APEX COURT. IN THE CASE OF THE ASSESSEE, THE ONLY D OMINANT ACTIVITY WAS CONSTRUCTION OF THE TEMPLE, LEAVING AS IDE THE ORIGINAL OBJECTIVES OF THE ASSESSEE AND UNDER THAT CIRCUMSTA NCE, IT IS NOT ENTITLED FOR EXEMPTION U/S 11 OF THE IT ACT. 7 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST 7. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE RATIONALE OF THE DECISION OF HONBLE SUPREME COURT IN UPPER GANG ES GARMENTS LTD. VS. CIT (227 ITR 678) AND OF HONBLE ANDHRA PRADESH HIGH COURT IN ARSHA VIJNANA TRUST VS. D.P. SHARMA IRS, DIT(E) & OTHERS [2007 295 ITR 437) ARE FULLY APPLIC ABLE TO THE FACTS OF THE ASSESSEE TRUST IN THIS CASE. 8. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THA T THE FUNCTION HALL IN THE CASE OF THE ASSESSEE TRUST, DURING THE PREVIOUS YEAR, WAS MOSTLY GIVEN ON HIRE TO OTHERS, THEREBY USED FO R COMMERCIAL PURPOSE, WHICH WAS NOT THE OBJECTIVE OF THE TRUST. 9. THE LEARNED CIT(A) ERRED IN ACCEPTING THE CLAIM OF THE ASSESSEE REGARDING RECEIPT OF RS. 89,43,651/- TOWAR DS CORPUS DONATION, WHEN THERE IS NO INDICATION ABOUT SUCH NA TURE IN THE ACCOUNT BOOKS OF THE RUST AND IN THE FACE OF VARIOU S OTHER FACTUAL FINDINGS GIVEN BY THE AO IN PARA 5.7 OF THE ASSESSM ENT ORDER. 10. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN NOT CON SIDERING THE ORIGINAL AUDIT REPORT FILED IN FORM NO. 10B, AS PER WHICH NO AMOUNT WAS APPLIED FOR OBJECTIVES OF THE TRUST. HE FURTHER ERRED IN CONSIDERING THE REVISED AUDIT REPORT, FILED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS WHICH WAS NOT CORRECT. 11. THE LEARNED CIT(A) ERRED IN DELETING THE DISALL OWANCE OF RS. 1,47,485/- TOWARDS RELIGIOUS EXPENSES, WHEN THE ASS ESSEE TRUST WAS NOT ENTITLED TO BENEFIT OF SECTION 11 OF THE AC T. 12. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH E FACT THAT AS THE ASSESSEE WAS NOT ENTITLED FOR EXEMPTION, THE AS SESSEES INCOME SHOULD BE COMPUTED ON THE BASIS OF COMMERCIA L PRINCIPLE AND ACCORDINGLY, PROVISIONS OF SECTION 40(A)(IA) AR E APPLICABLE IN THE CASE OF THE ASSESSEE TO PAYMENT OF A SUM OF RS. 14,39,990/- WHICH WAS OF CONTRACTUAL NATURE. 13. THE LEARNED CIT(A) ERRED IN DELETING THE DISALL OWANCE OF RS. 9,16,704/- MADE BY THE AO OUT OF THE ADMINISTRATIVE AND OTHER EXPENSES. THE AO FOUND THAT AS THE MAIN ACTIVITY OF THE ASSESSEE WAS CONSTRUCTION OF THE TEMPLE, 50% OF THE SAID ADMINISTRATIVE EXPENSES AMOUNTING TO RS. 9,16,704/- WAS ATTRIBUTABLE TO SUCH CONSTRUCTION ACTIVITY WHICH CA NNOT BE ALLOWED DEDUCTION. 5.1 IN AY 2006-07 , GROUND NO. 2 TO 5 ARE PERTAINING TO DENIAL OF EXEMPTION U/S 11 OF THE ACT. GROUND NO. 6 IS PERTAI NING TO DELETION OF ADDITION U/S 40(A)(IA) OF THE ACT. GROUND NOS. 1 & 7 ARE GENERAL IN NATURE. 8 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST 5.2 IN AY 2007-08 , GROUND NO. 2 TO 5 ARE PERTAINING TO DENIAL OF EXEMPTION U/S 11 OF THE ACT. GROUND NO. 6 IS PERTAI NING TO DELETION OF ADDITION U/S 40(A)(IA) OF THE ACT. GROUND NO. 7 IS PERTAINING TO DELETION OF ADDITION MADE BY THE AO TOWARDS POOJA EXPENSES. GROUND NOS. 1 & 8 ARE GENERAL IN NATURE. 6. THE LEARNED DR RELIED ON THE ORDER OF THE AO WHI LE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE REVENUE AUTHORIT IES. IN THIS CASE THE AO COMPLETED THE ASSESSMENT DENYING EXEMPTION U/S 1 1 BY MAKING SEVERAL ADDITIONS/DISALLOWANCES. ON APPEAL, THE CIT (A) ALLOWED THE EXEMPTION U/S 11 OF THE ACT. WE FIND NO INFIRMITY I N THE ORDER OF THE CIT(A) RELYING ON THE DECISION OF COCHIN BENCH (TM) IN THE CASE OF SOCIETY OF PRESENTATION SISTERS VS. ITO, [2009] 121 ITD 422 (COCHIN) (TM) WHEREIN IT HAS BEEN HELD AS FOLLOWS: SO FOR AS THE PROVISION OF S. 11(1)(A) IS CONCERNE D, NO DISTINCTION IS MADE BETWEEN CHARITABLE AND RELIGIOUS PURPOSES. A CHARITABLE INSTITUTION CAN HAVE RELIGIOUS PURPOSES; WHEREAS A RELIGIOUS INSTITUTION MAY BE PARTLY CHARITABLE. EVEN OTHERWIS E RELIEF AND HELP TO THE POOR, MEDICAL HELP TO THE NEEDY, LOOKIN G AFTER OF DEITY AND TEMPLES (MOSQUE, CHURCH INCLUDED) ARE NO DOUBT RELIGIOUS PURPOSES BUT THESE ARE ALSO CONSIDERED AS CHARITABL E IN INDIA. THEREFORE, THE VIEW TAKEN THAT EXEMPTION UNDER S. 1 1(1)(A) CANNOT BE ALLOWED TO A CHARITABLE TRUST AS IT IS AL SO CARRYING ON SOME PURPOSES WHICH ARE TERMED AS RELIGIOUS IS TO TALLY UNWARRANTED.PT. RAM CHANDRA SHUKLA VS. MAHADEOJI M AHABIRIJI & HAZRAT ALL KANPUR & ORS. AIR 1970 SC 450 APPLIED; CIT VS. SOCIAL SERVICE CENTRE (2001) 169 CTR (AP) 130 : (2001) 250 ITR 39 (AP), ADDL. CIT VS. A.A. BIBIJIWALA TRUST (1975) 100 ITR 516 (GUJ) AND CIT VS. BARKATE SAIFIYAH SOCIETY (1995) 2 13 ITR 492 (GUJ) RELIED ON; CALICUT ISLAMIC CULTURAL SOCIETY (ITA NOS. 9 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST 729/COCH/2006 AND 641/COCH/ 2006, DT. 31ST JULY, 20 08) IMPLIEDLY APPROVED. (PARA 19) ALTHOUGH THERE IS NO DISTINCTION BETWEEN RELIGIOUS OR CHARITABLE INSTITUTION AS FAR AS S. 11(1)(A) IS CONCERNED, SUC H DISTINCTION IS RECOGNISED UNDER S. 13 WHICH IS AN EXCEPTION TO SS. 11 AND 12. CASES WHICH ARE COVERED UNDER CLS. (A), (B), (C) AN D (D) OF S. 13 WOULD NOT BE ENTITLED TO EXEMPTION UNDER S. 11 OR 1 2. CLAUSE (A) OF ABOVE SECTION RELATES TO INCOME FROM PROPERTY UN DER A TRUST FOR PRIVATE RELIGIOUS PURPOSES WHICH DOES NOT ENURE FOR THE BENEFIT OF THE PUBLIC. CLAUSE (B) DEALS WITH CASES OF CHARITAB LE INSTITUTION CREATED OR ESTABLISHED AFTER THE COMMENCEMENT OF TH E ACT. IT IS REQUIRED TO BE SEEN WHETHER SUCH CHARITABLE TRUST O R INSTITUTION IS ESTABLISHED FOR THE BENEFIT OF A PARTICULAR RELIGIO US COMMUNITY OR CASTE. IF IT IS SO ESTABLISHED, THEN PROVISIONS OF S. 11 WILL NOT BE ATTRACTED. BUT FOR APPLICATION OF ABOVE CLAUSE, IT IS TO BE SHOWN THAT INCOME OF THE TRUST ENURES AND USED OR APPLIED DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF THE PERSONS REFERRED TO IN SUB-S. (3). CLAUSES (C) AND (D) ARE APPLICABLE TO BOTH TYPE OF TRUSTS I.E. TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES, UNLIKE IN CLS . (A) AND (B) WHICH WERE APPLICABLE TO PRIVATE RELIGIOUS TRUST OR TO CHARITABLE TRUST. THE LEGISLATURE HAS SPECIFICALLY USED IN CL. (C) THE WORDS 'TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES'. CLAUS ES (C) AND (D) WOULD BE APPLICABLE TO TRUST WHICH IS EITHER FOR CH ARITABLE PURPOSES OR FOR RELIGIOUS PURPOSES OR PARTLY CHARIT ABLE AND PARTLY RELIGIOUS. IN OTHER WORDS, IF SUCH TRUST IS ESTABLI SHED ONLY FOR THE BENEFIT OF A PARTICULAR RELIGIOUS COMMUNITY OR CAST E, THEN THE PROVISION OF S. 11 WOULD NOT BE APPLICABLE. BUT THE POSITION WOULD BE DIFFERENT AND IN CASE OF A TRUST OR INSTITUTION FOR RELIGIOUS PURPOSES, WHEREIN CERTAIN ACTIVITIES TERMED AS CHAR ITABLE ACTIVITIES ARE ALSO CARRIED FOR THE BENEFIT OF A RE LIGIOUS COMMUNITY OR CASTE, CL. (B) WOULD HAVE NO APPLICATION IN SUCH A CASE. IN THESE CASES, THE REVENUE AUTHORITIES DID NOT MAKE O UT ANY CASE UNDER S. 13(1)(B) OR ANY OTHER CLAUSE OF THE SECTIO N. THERE IS NO FINDING THAT TRUSTS IN QUESTION ARE CHARITABLE INST ITUTIONS CREATED OR ESTABLISHED FOR THE BENEFIT OF ANY PARTICULAR RE LIGIOUS COMMUNITY OR CASTE. PROVISION OF CL. (B) OF S. 13(1 ) IS APPLICABLE ONLY TO A CHARITABLE INSTITUTION AND NOT TO ANY INS TITUTION WHICH IS CREATED BOTH FOR CHARITABLE AND RELIGIOUS PURPOSES. THERE IS NO ELABORATION AS TO HOW ANY PARTICULAR RELIGIOUS COMM UNITY OR CASTE IS TO BE BENEFITED FROM THE TRUST IN QUESTION. NO V IOLATION OF PROVISION OF S. 13 HAS BEEN STATED OR ESTABLISHED. THE FINDING OR BASIS FOR DENIAL OF EXEMPTION UNDER S. 11(1)(A) IS THAT TRUSTS ARE 10 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST PARTLY RELIGIOUS AND PARTLY CHARITABLE, WHEREAS EXE MPTION IS PERMISSIBLE TO WHOLLY CHARITABLE OR WHOLLY RELIGIOU S TRUSTS. SUCH BASIS IS NOT LEGALLY TENABLE. (PARAS 20 & 21) ACCORDING TO THE AO, ERECTION OF CHAPELS AND CONVEN TS WERE RELIGIOUS IN NATURE. ACCORDINGLY PURPOSE OF THE TRU ST WAS HELD TO BE PARTLY RELIGIOUS AND PARTLY CHARITABLE AND EXEMP TION DENIED TO THE ASSESSEE. IT IS DIFFICULT TO APPRECIATE OR AGRE E WITH AFORESAID CONCLUSION. ERECTION OF CHAPELS AND CONVENTS CANNOT BE TREATED PURELY RELIGIOUS IN NATURE AND NOT CHARITABLE. NO R ELEVANT FACTS HAVE BEEN BROUGHT ON RECORD TO MAKE OUT A CASE JUST IFYING DENIAL OF EXEMPTION UNDER S. 11(1)(A). THERE IS NO FINDING THAT CHAPELS AND CONVENTS ARE TO SERVE A PARTICULAR COMMUNITY AN D THE PURPOSE WOULD BE HIT BY PROVISIONS OF S. 13(1)(B). BESIDES AS ALREADY RECORDED A RELIGIOUS PURPOSE CAN BE A CHARI TABLE PURPOSE AND VICE VERSA IN INDIA. THEREFORE, EXEMPTION COULD NOT BE DENIED TO A TRUST WHICH IS PARTLY CHARITABLE AND PA RTLY RELIGIOUS. MAINTENANCE OF MOSQUE AND CHURCH MUST BE TREATED AS CHARITABLE PURPOSE. EVEN IF THEY ARE TREATED AS RELIGIOUS, THE RE IS NO JUSTIFICATION FOR DENYING EXEMPTION TO THE ASSESSEE IN THE LIGHT OF ABOVE DISCUSSION. IT IS NOBODYS CASE THAT PURPOSES ARE PARTLY CHARITABLE AND PARTLY NON-CHARITABLE AND, THEREFORE , EXEMPTION UNDER S. 11(1)(A) IS NOT AVAILABLE AS TRUSTS WERE C REATED AFTER 1ST APRIL, 1962. NO ADVERSE INFERENCE CAN BE DRAWN FROM WHAT IS STATED BY THE ASSESSEE IN LETTER DT. 27TH MARCH, 20 06 WHEREIN ASSESSEE CLAIMED THAT ITS TRUST IS WHOLLY CHARITABL E. FACTS AND CIRCUMSTANCES OF THE CASE ARE REQUIRED TO BE CONSID ERED IN THE LIGHT OF STATUTORY PROVISIONS TO DECIDE THE CASE. O N CONSIDERATION OF THE RELEVANT FACTS, THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER S. 11(1)(A). GHULAM MOHIDIN TRUST VS. CIT (2001) 168 CTR (J&K) 367 : (2001) 248 ITR 587 (J&K), STATE OF KERALA VS. M.P. SHANTI VERMA JAIN (1998) 149 CTR (SC) 279 : (1998) 231 ITR 787 (SC) AND EAST INDIA INDUSTRIES (MADRAS) (P) LTD . VS. CIT (1967) 65 ITR 611 (SC) DISTINGUISHED. (PARAS 22, 24, & 26.3) CONCLUSION : NO DISTINCTION IS MADE BETWEEN CHARITABLE AND RELIG IOUS PURPOSES IN S. 11(1)(A) AND, THEREFORE, A TRUST WHICH IS PAR TLY RELIGIOUS AND PARTLY CHARITABLE, IS ENTITLED TO EXEMPTION UNDER S . 11(1)(A); EVEN OTHERWISE, MAINTENANCE OF MOSQUE AND CHURCH IS TO B E TREATED AS 11 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST CHARITABLE PURPOSE AND NOT PURELY RELIGIOUS PURPOSE AND, THEREFORE, EXEMPTION UNDER S. 11(1)(A) COULD NOT BE DENIED TO THE ASSESSEE TRUSTS WHICH EXIST FOR VARIOUS CHARITABLE PURPOSES BESIDES MAINTENANCE OF CHAPELS AND MOSQUES, ON THE GROUND THAT THEY ARE PARTLY CHARITABLE AND PARTLY RELIGIOU S TRUSTS, ONCE NO CASE IS MADE OUT FOR APPLICATION OF PROVISIONS OF S . 13. IN VIEW OF THE ABOVE DECISION, WE ARE OF THE OPINIO N THAT AO WAS NOT CORRECT IN DENYING EXEMPTION U/S 11 IN ASSESSEES C ASE AND REGISTRATION GRANTED TO ASSESSEE U/S 12A IS INTACT. THE LEARNED CIT(A) HAS RIGHTLY APPRECIATED THE FACTS AND HELD THAT THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 11. WE UPHOLD THE ORDER OF THE CIT (A) ON THIS ISSUE AND GROUNDS RAISED BY THE REVENUE ON THIS ISSUE IN AY 2008-09 (GROUND NOS. 2 TO 7), IN 2006-07 AND 2007-08 (GROUN D NOS. 2 TO 5 ARE DISMISSED. 8. GROUND NO. 8 IN AY 2008-09 IS DIRECTED THAT THE CIT(A) ERRED IN NOT APPRECIATING THAT DURING THE YEAR THE FUNCTION HALL WAS USED FOR COMMERCIAL PURPOSES, WHICH WAS NOT THE ASSESSEES O BJECTIVE. 9. THE AO HELD THAT THE ASSESSEE WAS ADVANCING ARGU MENTS KEEPING IN VIEW THE AMENDED PROVISIONS OF SECTION 2 (15) WHICH WOULD DISENTITLE THE ASSESSEE IF IT CARRIES ON ANY TRADE, COMMERCE OR BUSINESS. THE CIT(A) HELD THAT EVEN IF ANY INCOME W AS GENERATED OUT OF SUCH ACTIVITIES, EARNING OF SUCH INCOME WAS ONLY AN ANCILLARY ACTIVITY. HE OBSERVED THAT AS HELD IN SEVERAL JUDICIAL PRONOU NCEMENTS, GENERATION OF SUCH ADDITIONAL INCOME COULD NOT ITSE LF PROVE THAT THE MOTIVE OF THE ASSESSEE WAS TO EARN PROFITS. IN THIS REGARD HE CITED THE DECISIONS IN THE CASES OF CIT VS. THANTI TRUST, 115 TAXMANN 126 SC AND DIT VS. BHARAT DIAMOND BOURSE 259 ITR 280 SC. H E ALSO OBSERVED THAT IT IS NOT THE CASE OF THAT THE INCOME GENERATED FROM HIRING THE FUNCTION HALL WAS USED FOR ANY NON-CHARI TABLE PURPOSE OR FOR 12 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST ANY OBJECTS OTHER THAN THE ASSESSEES OBJECTS. HE A LSO HELD THAT SINCE THE HALL WAS BEING RENTED IN THE REGULAR COURSE OF ACTIVITIES OF THE ASSESSEE TO AUGMENT INCOME FOR THE FURTHERANCE OF I TS OBJECTS, IT COULD NOT HAVE BEEN CONSIDERED AS A SEPARATE BUSINESS AS WOULD REQUIRE MAINTENANCE OF SEPARATE BOOKS OF ACCOUNT IN TERMS O F SEC. 11(4A) OF THE ACT. HE COUNTERED THE ALLEGATION OF THE A.O AND HELD THAT EXEMPTION CANNOT BE DENIED TO THE ASSESSEE ON THIS COUNT. 10. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 11. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE REC ORD AND GONE THROUGH THE ORDERS OF THE REVENUE AUTHORITIES. ACCO RDING TO THE LEARNED AR THE HALL WAS CONSTRUCTED AS A SUITABLE VENUE FOR CARRYING OUT AND SUSTAINING THE ACTIVITIES OF THE ASSESSEE KEEPING IN VIEW ITS PRESENT AND FUTURE NEEDS. SPARE CAPACITY UTILIZATION OUGHT NOT TO HAVE BEEN VIEWED BY THE A.O AS CARRYING OUT COMMERCIAL ACTIVI TY. THE SUBMISSION OF THE LEARNED AR IS THAT THE CIT(A) HAS TAKEN A RA TIONAL VIEW AND THE SAME MAY BE UPHELD. 11.1 IN THE CASE OF CIT VS. NARAYANA GURUVIAH CHETT Y'S ESTATE & CHARITIES 326 ITR 662 MAD), THE HONBLE MADRAS HIGH COURT HELD AS FOLLOWS: SECTION 11 OF INCOME-TAX ACT, 1961 - CHARITABLE OR RELIGIOUS TRUST - INCOME FROM PROPERTY HELD UNDER ASSESSEE-TRUST RUNN ING KALYAN MANDAPAM ON RENTAL BASIS WAS ENTITLED TO EXEMPTION UNDER SECTION 11 AS MANDAPAM WAS BEING USED FOR CHARITABLE PURPOSES [ASSESSMENT YEARS 1996-97 TO 1999-2000] CLT V. SRI NARAYANA GURUVIAH CHETTY'S ESTATE & CHARITIES [ 2008J 220 CTR (MAD.) 310. THE ASSESSING OFFICER DENIED EXEMPTION TO THE ASSESSEE-TRUST UNDER SECTION 11 ON THE GROUND THAT THE ASSESSEE WAS RUNNING A KALYANA MANDAPAM WHICH WAS NOT N ACTIVITY EITHER AS PER THE OBJECTS OF THE TRUST OR INCIDENTAL THERETO. THE KAL YANA MANDAPAM WAS RENTED OUT N 13 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST SUBSTANTIAL RENT WHICH SUSTAINED THE COMMERCIAL NAT URE OF THE ACTIVITY. THE TRIBUNAL AFTER CONSIDERING THE VARIOU S CLAUSES CONTAINED IN THE WILL AND ALSO FOLLOWING THE EARLIE R ORDER IN RESPECT OF THE VERY SAME ASSESSEE DATED 27-12-2004, IN IT APPEAL NO. 103 (MAD.) OF 1998 ALLOWED THE ASSESSEE' S CLAIM. HELD THAT AS THE ORDER OF THE TRIBUNAL WAS BASED ON CONSIDERATION OF THE RELEVANT CLAUSE IN THE WILL AND ALSO THE INT ERPRETATION OF SUCH CLAUSES BY THE JURISDICTIONAL HIGH COURT IN CL T V. SAMVUKTHA GOWDA SARASWATHA SABHA [20001 245 ITR 242 (MAD.) AND THE SUPREME COURT IN ASSTT. CLT V. THANT HI TRUST [200112471TR 785, THE TRIBUNAL'S VIEW WAS TO BE UPHELD. 11.2 IN CIT VS. AGRICULTURAL PRODUCE AND MARKET CO MMITTEE (2007) 291 ITR 419 (BOM),IT WAS HELD THAT SO LONG AS THE DOMINANT OBJECT IS OF GENERAL PUBLIC UTILITY AND THERE IS NO PROFIT MOTIVE, IT CANNOT BE SAID THAT THE TRUST/INSTITUTION IS NOT ESTABLISH ED FOR CHARITABLE PURPOSE, EVEN IF THERE IS SOME PROFIT IN THE ACTIVI TY CARRIED ON BY THE TRUST/INSTITUTION. 11.3 IN VIEW OF THE ABOVE DISCUSSION, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND DISMISS THE GROUND RAISED BY THE REVENUE IN THIS REGARD. 12. AS REGARDS GROUND NO. 9 IN AY 2008-09 REGARDING DELETION OF AMOUNT OF CORPUS DONATIONS OF RS. 89,43,651/-, IT I S OBSERVED THAT T HE ASSESSEE RECEIVED CORPUS DONATIONS OF RS.89,43,651/ - DURING THE YEAR. THE A.O DID NOT ACCEPT THE CLAIM OF THE ASSES SEE THAT THESE ARE EXEMPT AS CORPUS DONATIONS U/S.12. THE A.O ADD ED AN AMOUNT OF RS.80,39,569/- DESCRIBED AS 'TEMPLE CONSTRUCTION AND BUILDING FUND' AND ANOTHER AMOUNT OF RS.3,05,000/- DESCRIBED AS 'BUILDING CONSTRUCTION' 13. IN APPEAL, THE CIT(A) DELETED THE ADDITION ACCE PTING THE ASSESSEE'S SUBMISSION THAT DONATIONS WERE RECEIVED WITH A SPECIFIC 14 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST MENTION THAT THOSE WERE MEANT FOR THE CONSTRUCTION OF A MONUMENT/EDIFICE WHICH VERY WELL INCLUDED THE CONST RUCTION OF A TEMPLE. HE FOUND AS A FACT THAT THE ASSESSEE HAS AL SO MAINTAINED A SEPARATE BANK ACCOUNT STYLED AS 'KALINGA CULTURAL T RUST CORPUS FUND' WHICH ESTABLISHED THE INTENTION OF RECEIVING SUCH DONATIONS AS CORPUS DONATIONS. HE ALSO HELD THAT THE A.O HAS NOT ESTABLISHED THAT THE CONFIRMATION LETTERS WERE NOT GENUINE. 14. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. BEFORE US, THE ASSESSEE SUBMITS THAT SINCE THE ABOV E AMOUNTS ARE CAPITAL IN NATURE, THE SAME CANNOT BE TREATED AS IN COME, ESPECIALLY WHEN THE ASSESSEE-SOCIETY IS ASSESSED UNDER NORMAL PROVISIONS OF THE ACT. ALTERNATIVELY, IF THE ABOVE ARE CONSIDERED TO BE INCOMES OF THE APPELLANT, THE CORRESPONDING PAYMENTS OF RS.80, 39,569 TOWARDS TEMPLE AND RS.3,05,000/- TOWARDS BUILDING, AS CONFI RMED BY THE LEARNED ASSESSING OFFICER OUGHT TO BE ALLOWED AS EX PENDITURES FROM THE ABOVE RECEIPTS. 15.1 THE RAJASTHAN HIGH COURT IN SUKHDEO CHARITY E STATE VS. ITO 192 ITR 615 RAJ, ON WHICH RELIANCE PLACED BY TH E ASSESSEE, HELD THAT, VOLUNTARY CONTRIBUTIONS RECEIVED FOR 'SP ECIFIC PURPOSE' ARE NOT ASSESSABLE AS INCOME. THE ABOVE PROPOSITION HAS BEEN ACCEPTED BY THE HYDERABAD BENCH OF THE TRIBUNAL IN SOCIETY FOR INTEGRATED DEVELOPMENT IN URBAN & RURAL AREAS VS. DC IT 90 ITD 493 HYD. IT HAS BEEN SO HELD BY THE HYDERABAD BENCH OF THE HON'BLE TRIBUNAL IN THE CASE OF NIRMAL AGRICULTURAL SOCIETY VS. ITO 71 ITD 152 HYD. IT IS SUBMITTED THAT IN THIS CASE IT HAS A LSO BEEN HELD THAT EVEN WHEN THE ASSESSEE HAD BEEN ASSESSED AS AOP AND DEPRIVED OF SECTION 11 BENEFITS, THE AO COULD ASSESS ONLY NE T INCOME OF THE ASSESSEE AND NOT GROSS RECEIPTS. 15 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST 15.2 IN VIEW OF THE ABOVE DISCUSSION, WE UPHOLD TH E ACTION OF THE CIT(A) ON THIS ISSUE AND DISMISS THE GROUND RAI SED BY THE REVENUE. 16. AS REGARDS GR.NO.10 IN AY 2008-09 REGARDING THE ACTION CIT(A) ERRED IN NOT CONSIDERING THE ORIGINAL AUDIT REPORT, THE A.O FOUND THAT THE ASSESSEE INITIALLY FILED AN AUDIT RE PORT IN WHICH THE AMOUNT APPLIED FOR THE OBJECTS OF THE TRUST WAS SHO WN AT RS.NIL. SUBSEQUENTLY THE ASSESSEE FILED A REVISED AUDIT REP ORT IN WHICH THE AMOUNT WAS SHOWN AT RS.L,04,18,108/-. THE A.O OBSER VED THAT THE SECOND REPORT CANNOT BE HELD AS CORRECT IN THE FACE OF THE FIRST REPORT. HE STATED THAT THIS WAS A CASE OF MISREPRES ENTATION OF FACTS. 17. IN APPEAL THE CIT(A) HELD THAT THE REVISED REP ORT HAS NOT BEEN SHOWN TO BE INCORRECT. HE HELD THAT THE MERE F ACT THAT THERE EXISTED AN EARLIER REPORT CANNOT LEAD TO THE CONCLU SION THAT THE REVISED REPORT IS NOT RELIABLE. 18. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. THE GRIEVANCE OF THE ASSESSEE BEFORE US IS THAT THE GRO UND OF APPEAL TAKEN BY THE DEPARTMENT IS ILL CONCEIVED. THE EARLI ER REPORT SHOWED THAT AMOUNT SPENT ON THE OBJECTS OF THE TRUST AS NI L. ON FACTS, IT IS OBVIOUS THAT SUCH A MENTION WAS MADE BY MISTAKE. TH E CIT(A) HAS RIGHTLY HELD THAT THE A.O HAS NEITHER SHOWN THAT TH E REVISED REPORT FILED WAS INCORRECT OR THAT THE ASSESSEE NOT APPLIE D ITS INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES. HENCE, WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. 20. AS REGARDS THE GR.NO.11 IN AY 2008-09 AND GROUND NO . 7 IN AY 2007-08 PERTAINING TO DELETION OF DISALLOWANCE OF POOJA 16 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST EXPENSES, THE A.O MADE DISALLOWANCE OF RS.99,144/- BEING 'VINAYAKA CHATURDHI AND DURGASHTAMI EXPENSES AND A FURTHER DISALLOWANCE OF RS.48,341/- BEING POOJA EXPENSES. T HE TOTAL DISALLOWANCE COMES TO RS.L,47,485/-. THIS DISALLOWA NCE WAS MADE ON THE COUNT THAT THE EXPENDITURE IS OF RELIGIOUS N ATURE AND BECAUSE THE COMPUTATION OF INCOME IN THE ASSESSMENT WAS MAD E UNDER NORMAL PROVISIONS AFTER DENYING EXEMPTION U/S.L1. T HE LEARNED CIT(A) DELETED THE DISALLOWANCE BECAUSE HE RESTORED THE EXEMPTION UNDER SEC.L1. AGGRIEVED, THE REVENUE IS IN APPEAL B EFORE US. 21. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE ARE OF THE VIEW THAT THIS DISALLOWANCE WILL NOT SURVIVE ONCE THE ASSESSEES CLAIM FOR EXEMPTION U/S 11 IS ALLOWE D. EVEN OTHERWISE, THERE IS NO CASE FOR THE DISALLOWANCE BE CAUSE ONCE THE INCOME FROM THE POOJA ACTIVITY IS INCLUDED, THE CONNECTED EXPENDITURE IS TO BE ALLOWED. HENCE, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE GROUND RAISED BY THE REVENUE IN ALL THE APPEALS UNDER CONSIDERATION. 22. AS REGARDS GR.NO.12 IN AY 2008-09 AND GROUND NO. 6 IN AY 2006-07 AND 2007-08 REGARDING DELETION OF DISALLOWA NCE U/S.40(A)(IA) , IT IS SEEN THAT T HE A.O DISALLOWED RS.14,39,990/- U/S.40{A)(IA). THE DETAILS OF DISALLOWANCE U/S 40{A )(IA) WERE NOT PROVIDED BY THE A.O. HENCE, THE APPELLANT IS UNABLE TO REBUT THE CLAIM OF A.O AND ALSO NOT IN A POSITION TO PROVIDE A DETAILED SECTION- WISE BREAK UP TO ESTABLISH THAT THE LIABILITY UNDER CHAPTER XVII-B WAS COMPLIED WITH. 23. ON APPEAL, THE LEARNED CIT(A)DELETED THE DISALL OWANCE BECAUSE HE ALLOWED THE ASSESSEE'S CLAIM FOR EXEMPTION. 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. 17 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST AS HELD IN EARLIER GROUND, THIS DISALLOWANCE WILL N OT SURVIVE ONCE THE ASSESSEE'S CLAIM FOR EXEMPTION U/S.11 IS ALLOWED. EVEN OTHERWISE, THE DISALLOWANCE WAS MADE WITHOUT AFFORDING AN OPPO RTUNITY TO THE ASSESSEE TO REBUT THE ASSUMPTION OF THE A.O THAT TH E ITEMS OF EXPENDITURE COMPRISED IN THE IMPUGNED AMOUNT ARE LI ABLE FOR DISALLOWANCE U/S.40(A)(IA). THE A.O OUGHT TO HAVE AFFORDED OPPORTUNITY TO THE ASSESSEE BEFORE MAKING THE DISALLOWANCE. ACCORDINGLY, WE CONFIRM THE ACTION OF THE CIT(A) ON THIS COUNT IN ALL THREE APPEALS UNDER CONSIDERATION . 25. AS REGARDS GR.NO.13 IN AY 2008-09 REGARDING DELETIO N OF DISALLOWANCE OUT OF ADM. EXPENSES: RS.9,16,704/- , T HE ASSESSING OFFICER MADE AN ADHOC DISALLOWANCE OF RS.9,16,704 ( BEING 50% OF ADMINISTRATIVE AND OTHER EXPENDITURE OF RS.18,33,40 8) ON THE GROUND THAT THE MAIN ACTIVITY OF THE ASSESSEE WAS CONSTRUC TION OF TEMPLE AND SINCE THE EXPENDITURE CANNOT BE BIFURCATED, 50% WAS BEING DISALLOWED. THIS DISALLOWANCE IS MADE BECAUSE OF DENIAL OF EXEMPTION UNDER SEC.11 AND CONSEQUENT COMPUTATION O F INCOME UNDER NORMAL PROVISIONS. 26. ON APPEAL, THE LEARNED CIT(A) DELETED THE DISAL LOWANCE BECAUSE HE ALLOWED THE ASSESSEE'S CLAIM FOR EXEMPTI ON. 27. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. THIS DISALLOWANCE WILL NOT SURVIVE ONCE THE ASSESSEE'S C LAIM FOR EXEMPTION U/S.L1 IS ALLOWED. EVEN OTHER WISE, THER E IS NO CASE FOR SEPARATE DISALLOWANCE BECAUSE EXPENDITURE DEBITED B Y THE ASSESSEE IS NORMAL ADMINISTRATIVE EXPENDITURE AND T HERE IS NO FINDING THAT SUCH EXPENDITURE WAS NOT INCURRED OR T HAT THE SAME WAS NOT VOUCHED ETC. ACCORDINGLY, WE UPHOLD THE ACTION OF THE CIT(A) ON 18 ITA NOS. 1067/HYD/2012, 894 & 895/H/13 KALINGA CULTURAL TRUST THIS ISSUE AND DISMISS THE GROUND OF APPEAL OF THE REVENUE. 28. IN THE RESULT, APPEALS FILED BY THE REVENUE IN ITA NO. 1067/H/12 AND 894 & 895/H/13 ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 06/06/2014. SD/- SD/- (B. RAMAKOTAIAH) (ASHA VIJAYAR AGHAVAN) ACCOUNTANT MEMBER JUDI CIAL MEMBER HYDERABAD, DATED: 06/06/2014. KV COPY TO:- 1) ADIT (E) II, HYDREABAD. 2) KALINGA CULTURAL TRUST, PLOT NO. 1269, ROAD NO. 12, BANJARA HILLS, HYDERABAD 34. 3) THE CIT(A)-IV, HYDERABAD 4) THE DIT(E), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. S.NO DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER