The ACIT, Circle-1, JAMNAGAR V. Oshwal Education Trust, JAMNAGAR

ITA 1068/RJT/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7326 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 29-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JM SAHAY
• Assessee Lawyers: J C RANPURA
• Keywords: Charitable institution
• Section: 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA (JM) AND SHRI A. L. GEHL OT AM). ITA NO. 1068/RJT/2010 (ASSESSMENT YEAR 2007-08) THE A.C.I.T., VS. OSHWAL EDUCATION TRUST, CIRCLE-1, JAMNAGAR. HARIA SCHOOL BUILDING, JAMNAG AR. PAN:AAATO0229R.. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI J. M. SAHAY, D. R. ASSESSEE BY : SHRI J. C. RANPURA, C.A. DATE OF HEARING : 02-12-2011. DATE OF PRONOUNCEMENT : 15-12-2011. O R D E R. PER A. L. GEHLOT (A.M.) : THIS APPEAL BY ASSESSEE IS FILED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), JAMN AGAR DATED 28-05-2010 FOR ASSESSMENT YEAR 2007-08. 2. THE GROUNDS RAISED BY REVENUE IN ITS APPEAL ARE REPRODUCED AS UNDER:- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO TREAT THE DONATION AMOUNTING TO RS.60,25,000/- OUT OF DONATIO N OF RS.98,32,354/- ENLISTED IN THE ASSESSMENT ORDER AS CORPUS DONATION AND THEREBY HOLDING THE SAME AS ELIGIBLE FOR EXEMPTION U/S.11(1)(D) OF THEE ACT. (2) THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING TH E PROVISIONS OF SECTION 11(1)(D) OF THE ACCT PROPERLY AND IN NOT AP PRECIATING THE FACT THAT ANY DIRECTIONS GIVEN BY A DONOR AFTER A CONSID ERABLE LAPSE OF TIME SHOULD NOT BE TREATED AS VALID DIRECTION FOR T REATING THE SAME AS. CORPUS DONATION. (3) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO ALLOW THE CLAIM OF THE ASSESSEE TRUST FOR CARRY FORWARD AND S ET OFF OF EARLIR YEARS DEFICIT AMOUNTING TO RS.25,97,1,053/- AGAINST THE CURRENT YEAR INCOME. ITA 1068-RJT-2010 A.Y. 2007-08 2 (4) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE EXCESS OF EXPENDITURE IN EARLIER YEARS CAN BE ADJUS TED AGAINST INCOME OF SUBSEQUENT YEAR AND ADJUSTMENT SHOULD BE TREATED AS APPLICATION OF INCOME IN SUCH SUBSEQUENT YEAR FOR C HARITABLE PURPOSE. (5) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO ALLOW THE CLAIM OF THE ASSESSEE TRUST FOR ACCUMULATION OF RS. .75,00,000/-. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HO LDING THAT ANY NOTICE OF ACCUMULATION FILED DURING THE COURSE OF A SSESSMENT PROCEEDINGS WAS VALID NOTICE AND THAT IT IS NOT REQ UIRED TO BE FILED BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME A S REQUIRED UNDER RULE 17 OF THE INCOME-TAX RULES, 1962. (6) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THEE ASSES SING OFFICER. (7) IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD . CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. (8) THAT THE REVENUE CRAVES LEAVE TO ADD, AMEND, AL TER OR WITHDRAW ANY GROUNDS OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE-TRUST IS FORMED WITH THE OBJECT OF PROVIDING EDUCATION. DURING THE ASSESSME NT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED DONATION TOWA RDS CORPUS FUND RS.98,32,354/- DETAILED AS UNDER:- SR. NO. NAME & ADDRESS AND PAN OF DONEE AMOUNT 1. SHRI KHIM HADDHA CHANDARIS, C/O. BHAVANI CHAMBERS, NEAR GURUDWARA ROAD, JAMNAGAR. 100000 2. M/S. ADAR INDUSTRIES. 3000 3. MR. R. MUGAM PILLEY 5000 4. LIONS CLUB INTERNATIONAL 4000 5. SHRI RANGMATI EDUCATION AND MPA TRUST 500 0 6.. SMT. ZAVIBEN SHANTILAL JUTHALAL VIRJI GOSRANI 15000 7. RELIANCE INDUSTRIES LIMITED, MOTI KHAVDI, JAMNAG AR 2500000 8. ESSAR OIL LIMITED, 204, SWETA APARTMENT, 2 ND FLOOR, OPP:JOGGERS PARK, JAMNAGAR. 1800000 ITA 1068-RJT-2010 A.Y. 2007-08 3 9. BEST PAPER MILLS PVT. LTD., PLOT NO.57, GH/A, PHASE -I, GIDS, VAPI. 500000 10. INSTITUTE GROWTH FUND CONTRIBUTION BY SUBSIDI ARIES 3148110 11. OSWAL ASSOCIATION OF THE U.K. OSWAL CENTRE, COOPERS LAND ROAD, NORTHWAY, HERTFORDSHIRE, EN64DG, UK. 127244 12. MRS. JADAVBEN HARILAL KOTHARI, P.B. NO.80701, MOMBA SA, KENYA. 200000 13. SHI NAVINBHAI J. SHAH, 52 HARDWICK ROAD, LONDON N-1 3, 4-54, U.K. 200000 14. ZAVERCHAND MULCHAND SHAH, P.B.NO.82970, MOYNE DRIVE , MOMBASA, KENYA. 1225000 TOTAL CORPUS DONATION RS. 9832354 4. THE AO. TREATED THE SAID AMOUNT OF RS.98,32,354/ - AS INCOME OF THE ASSESSEE TRUST IN TERMS OF SECTION 12 OF THE ACT ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PROVE BY EVIDENCE THAT THE DONATION W AS WITH THE SPECIFIC DIRECTION OF THE DONOR TO TREAT THAT DONATION TO CORPUS FUND . 5. THE AO HAS ALSO NOTICED THAT THE ASSESSEE DID NO T FURNISH FORM NO.10 BEFORE THE DUE DATE OF FILING OF RETURN U/S.139(1) OF THE ACT. THE ASSESSEE WAS REQUIRED TO FILE DECLARATION U/S.11(2) BEFORE 30-10 -2007 WHEREAS, THE ASSESSEE FILED IT ON 21-12-2009. THE AO WAS OF THE VIEW THA T THE DECLARATION/NOTICE U/S.11(2) OF THE ACT IS NOT IN ACCORDANCE WITH LAW. 6. IT HAS ALSO BEEN NOTICE BY THE AO THAT THE ASSE SSEE HAS CLAIMED SET OFF OF THE EARLIER YEAR S DEFICIT AGAINST THE CURRENT YEA RS INCOME. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, TH AO REJECTED THE ASSE SSEES CLAIM OBSERVING THAT WHILE COMPUTING INCOME U/S.11(2), THERE IS NO PROVI SION TO ALLOW SET OFF OF THE EARLIER YEARS DEFICIT. THE AO ACCORDINGLY, REJECTE D THE ASSESSEES CLAIM FOR ALLOWING SET OFF OF THE EARLIER YEARS DEFICIT AGAI NST THE CURRENT INCOME. 7. THE CIT(A) AFTER CONSIDERING ASSESSEES SUBMISSI ON AND REMAND REPORT OF THE AO HELD THAT THE ASSESSEE HAS FURNISHED SUFFIC IENT EVIDENCE IN THE FORM OF CONFIRMATION LETTERS ETC. IN CASE OF DONATION RECEI VED FROM RELIANCE INDUSTRIES ITA 1068-RJT-2010 A.Y. 2007-08 4 LTD. RS,25,00,000/-, RS.18,00,000/- FROM ESSAR OIL LTD. AND RS.5,00,000/- FROM BEST PAPER MILLS LTD. THE CIT(A) FOUND THAT THESE ARE THE DONATIONS WITH A SPECIFIC DIRECTION THAT THE SAID DONATIONS SHALL FO RM PART OF THE CORPUS OF THE TRUST. THE CIT(A) DIRECTED AO TO GRANT EXEMPTION TO THE AS SESSEE ON THESE AMOUNTS OF RS.25,00,000/-, RS.18,00,000/- AND RS.5,00,000/- U/ S.11(1)(D) OF THE ACT. 8. IN RESPECT OF DONATION FROM THE PARTIES T SR.NO. 1 TO 6 TOTAL AMOUNTING TO RS.1,32,000/-, THE CIT(A) CONFIRMED THE ORDER OF TH E AO ON THE GROUND THAT THERE IS NO EVIDENCE SUPPORTING CONTENTION OF THE ASSESSE E THAT THEY ARE CORPUS CONATIONS. THE CIT(A) OBSERVED THAT MERELY SUBMITTI NG THE AFFIDAVIT OF THE MANAGING TRUSTEE WHO IS RECIPIENT OF THE DONATIONS DOES NOT SERVE ANY PURPOSES. THE CIT(A) HELD THAT THE TOTAL DONATION OF RS.1,32,000/- FROM SIX PARTIES HAS BEEN DETAILED AT SR.NO.1 TO 6 OF THE AB OVE TABLE CANNOT BE SAID AS CORPUS DONATION. 9. THE CIT(A) WHILE EXAMINING THE DEVELOPMENT FUND, CONTRIBUTION BY SUBSIDIARIES OF RS.31,48,110/- OBSERVED THAT THE AM OUNT RECEIVED IS A REGULAR FEE AND THERE IS NO PROVISO WHATSOEVER NATURE THAT THIS AMOUNT SHOULD BE CONSIDERED AS CORPUS DONATION. THE CIT(A) HELD THAT THE DEVELO PMENT FUND OF RS.31,48,110/- CANNOT BE CONSIDERED AS VOLUNTARY CONTRIBUTION WITH A SPECIFIC DIRECTION SO THAT IT CAN FORM THE CORPUS OF THE TRUST. 10. AS REGARDS THE CONTENTION AT SR. NO.11 TO 14 TO TAL AMOUNTING TO RS.17,52,244/-, THE CIT(A) EXAMINED THE CONTENTION OF THE ASSESSEE WITH RESPECT TO PROVISION OF FOREIGN CONTRIBUTION REGULATION ACT ,1976 AND FOUND THAT THE TRUST IS REQUIRED TO GET ITSELF REGISTERED WITH MINISTRY OF HOME AFFAIRS AND AFTER IT GETS REGISTRATION, IT CAN RECEIVED FOREIGN DONATION AND IT HAS TO MAINTAIN AND GET ITS ACCOUNTS AUDITED SEPARATELY. DONATION CAN BE TAKEN FOR ANY GENERAL PURPOSES OR FOR SPECIFIC PURPOSES. THE CIT(A) REJECTED THE ASS ESSEES CONTENTION THAT ONCE FOREIGN CONTRIBUTION IS RECEIVED, IT SHALL BE TREAT ED AS CORPUS DONATION EVEN IF THERE IS NO DIRECTION FROM THE DONOR. THE CIT(A) F OUND THAT THE DONATION OF ITA 1068-RJT-2010 A.Y. 2007-08 5 RS.12,25,000/- RECEIVED FROM ONE ZAVERCHAND MULCHAN D SHAH, A PERSON OF INDIAN ORIGIN RESIDING ABROAD, WHO HAS DONATED THE FUND FOR BUILDING AN INSTITUTION TO BE KNOWN AFTER HIS NAME. THE CIT(A) AFTER CONSI DERING THE VARIOUS EVIDENCES AND DETAILS AND AFTER CONSIDERING SURROUNDING CIRCU MSTANCE, HE WAS OF THE VIEW THAT THE DONATION OF RS.12,25,000/- RECEIVED FOR A CAPITAL PURPOSES AND IT SHOULD BE REGARDED AS CORPUS DONATION. THE CIT(A) ACCEPTE D ASSESSEES CONTENTION IN RESPECT OF THIS DONATION OF RS.12,25,000/- AND REJ ECTED THE ASSESSEES CLAIM FOR RS.5,27,244/- OBSERVING THAT IT IS NOT VOLUNTARY CO NTRIBUTION WITH SPECIFIC DIRECTION. THE CIT(A) DIRECTED AO TO TREAT THE AMOUNT OF RS.60 ,25,000/- AS VOLUNTARY CONTRIBUTION WITH SPECIFIC DIRECTION THAT IT WILL F ORM PART OF THE CORPUS OF THE TRUST AND THEREFORE, ELIGIBLE FOR EXEMPTION U/S.11(1)(D) OF THE ACT. HOWEVER, IN RESPECT OF BALANCE AMOUNT OF RS.38,07,354/-, THE CIT(A) CON FIRMED THE ORDER OF THE AO. 11. AS REGARDS SET OFF OF EARLIER YEARS EXPENDITUR E OVER THEE CURRENT YEARS INCOME RS.2,59,71,053/-,THE CIT(A) FOLLOWED THE JUD GMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PL OT SHEWTAMBER MURTIPUJAK JAIN MANDAL 211 ITR 293 WHEREIN, IT HAS BEEN HELD THAT T HE EXCESS EXPENDITURE IN EARLIER YEAR CAN BE ADJUSTED AGAINST THE INCOME OF SUBSEQUENT YEAR AND ADJUSTMENT SHOULD BEE TREATED AS APPLICATION OF INC OME IN SUCH SUBSEQUENT YEAR FOR CHARITABLE PURPOSE. THE CIT(A) ALSO RELIED UPO N A JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANK ING PERSONNEL SELECTION 264 ITR 110 (BOM). 12. AS REGARDS ACCUMULATION OF RS.75,00,000/-, IT W AS REJECTED BY THE AO ON THE GROUND THAT THE FORM NO.10 WAS NOT FURNISHED IN TIME. THE CIT(A) FOLLOWED THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT V S. V. NAGPUR HOTEL OWNERS ASSOCIATION 247 ITR 201 AND HELD THAT IF FORM NO.10 FILED BEFORE COMPLETION OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SHOULD BE GRAN TED BENEFIT OF ACCUMULATION OF INCOME. ITA 1068-RJT-2010 A.Y. 2007-08 6 13. WE HAVE HEAD THE LEARNED REPRESENTATIVES OF THE PARTIES, RECORD PERUSED. AS REGARDS GROUND NO.1 AND 2 WHICH IS IN RESPECT OF DONATION OF RS.60,25,000/- TO BE TREATED AS CORPUS DONATION AND ELIGIBLE FO EX EMPTION U/S.11(1)(D) OF THE ACT, WE FIND THAT THE CIT(A) HAS ELABORATELY DISCUSSED E ACH AND EVERY ITEMS AND WHEREVER HE FOUND SUFFICIENT EVIDENCE, THE CLAIM OF THE ASSESSEE WAS ALLOWED AND WHEN HE DID NOT FIND SUFFICIENT EVIDENCE, THE C LAIM OF THEE ASSESSEE HAS BEEN REJECTED. THE CIT(A) WHILE ALLOWING THE CLAIM OF THE ASSESSEE FOUND THAT THERE IS AN EVIDENCE TO SHOW THAT THE DONATION WERE WITH A SPECIFIC DIRECTION TO FORM THE PART OF THE CORPUS OF THE TRUST. THE CIT( A) FOUND THAT THE DONATIONS WERE GIVEN BY THE RELIANCE INDUSTRIES LTD. RS.25,00,000/ -, RS.18,00,000/- FROM ESSAR OIL LTD. AND RS.5,00,000/- FROM BEST PAPER MILLS PV T. LTD. AND THE ASSESSEE HAS SUBMITTED CONFIRMATION LETTERS AND OTHERS. THE CIT (A) HAS DECIDED THE ISSUE AFTER PROVIDING OPPORTUNITY OF HEARING TO THE AO AN D AFTER CONSIDERING REMAND REPORT FURNISHED BY THE AO. THE OBJECTION IN THE R EMAND REPORT OF THE AO WAS THAT THE ASSESSEE HAS FAILED TO POINT OUT SUFFICIEN T CAUSE TO PRODUCE THE EVIDENCES BEFORE THE AO. THEREFORE, THE EVIDENCES F ILED BEFORE THE CIT(A) MAY NOT BE ADMITTED. WE FIND THAT THE AO INSTEAD OF CH ALLENGING THE JURISDICTION OF THE CIT(A) HE SHOULD HAVE REPLY ON MERIT AFTER EXAMININ G THE DETAILS FILED BY THE ASSESSEE. THE CIT(A) HIMSELF HAS EXAMINED THE EVID ENCE BY EXERCISING HIS POWER WHICH IS CO-TERMINATE WITH THE AO. UNDER THE CIRCUMSTANCES, OBJECTIONS OF THE AO BEFORE THE CIT(A) HAVE NO MERIT. THE OTHER OBJECTION RAISED BY THE DEPARTMENT WHICH IS IN GROUND NO.2 IS THAT THE DIRE CTION GIVEN BY DONOR AFTER CONSIDERABLE LAPSE OF TIME SHOULD NOT BE TREATED AS VALID DIRECTION. WE DO NOT FIND ANY SUBSTANCE OF THE DEPARTMENT BECAUSE BEFORE THE COMPLETION OF THE ASSESSMENT, THE EVIDENCES FILED BEFORE THE AO ARE R EQUIRED TO BE CONSIDERED FOR MAKING THE ASSESSMENT. THIS CANNOT BE IGNORED ON T ECHNICAL BASIS. IN THE LIGHT OF ABOVE DISCUSSION, THE GROUND NO.1 AND 2 OF THE R EVENUE ARE DISMISSED. 14. IN RESPECT OF GROUND NO.3 AND 4, WE FIND THAT T HEE CIT(A) HAS FOLLOWED THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. PLOT SHEWTAMBER MURTIPUJAK JAIN MANDAL (SUPRA). IN THE LIGHT OF TH E FACT, WE DO NOT FIND ANY ITA 1068-RJT-2010 A.Y. 2007-08 7 INFIRMITY IN THE ORDER OF THE CIT(A) IN DIRECTING T HE AO THAT EXCESS EXPENDITURE IN EARLIER YEAR BE ALLOWED ADJUSTMENT AGAINST THE INCO ME OF THIS YEAR. 15. AS REGARDS GROUND NO.5, WE DO NOT FIND ANY INFI RMITY IN THE ORDER OF THE CIT(A). THAT THE CIT(A) HAS FOLLOWED THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS. V. NAGPUR HOTEL OWNERS ASSOCIATION (SUP RA). WE FIND THAT THE CIT(A) HAS RIGHTLY FOLLOWED THE ABOVE JUDGMENT OF APEX COU RT AND HAS RIGHTLY DIRECTED AO TO ALLOW ACCUMULATION OF AMOUNT OF INCOME OF RS. 75,00,000/- AS FORM NO.10 HAS BEEN FILED BY THE ASSESSEE BEFORE COMPLETION OF THE ASSESSMENT. 16. THE GROUND NOS.6, 7 AND 8 ARE GENERAL IN NATURE AND REQUIRE NO FINDING. 17. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15-12-2011. SD/- SD/- ( T. K. SHARMA ), ( A. L. GEHLOT ), JUDICIAL MEMBER. ACCOUNTANT MEMBER. RAJKOT. DATED: 15 -12-2011. NVA/ COPY TO:- 1.THE A.C.I.T. CRCLE-1, JAMNAGAR. 2.OSHWAL EDUCATION TRUST, JAMNAGAR. 3.THE C.I.T.(A)-II, RAJKOT. 4.THE C.I.T., RAJKOT. 5.THE D.R., ITAT, RAJKOT. TRUE COPY. BY ORDER, ASSTT. REGISTRAR, ITAT,RAJKOT.