DCIT, Bangalore V. M/s All India Granite Association, Bangalore

ITA 1086/BANG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9380 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 27-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DK JHA
• Keywords: Charitable institution; Benefit of exemption
• Section: 142(1); 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- A, BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1086 /BANG/2 016 (ASST. YEAR 2010-11) THE DY. COMMISSIONER OF INCOME-TAX (E), CIRCLE-1, BENGALURU. . APPELLANT VS. M/S ALL INDIA GRANITE ASSOCIATION, NO.429/7, 12 TH CROSS, SADASHIVNAGAR, BENGALURU-560 080. . RESPONDENT APPELLANT BY : SHRI DK JHA, ADDL. CIT RESPONDENT BY : SMT. SHEETAL, ADVOCATE DATE OF HEARING : 25-08-2016 DATE OF PRONOUNCEMENT : -09-2016 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER:` THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS), BENGALURU 1 4 DATED 22/3/2016 AND IT PERTAINS TO THE ASSESSMENT YEAR 2010-11. ITA NO.1086/B/16 2 2. THE RETURN OF INCOME WAS FILED BY THE ASSESSEE O N 27.09.2010 VIDE ACKNOWLEDGEMENT NO.1702001271 WITH ADIT(E), CI RCLE- 17(2), BANGALORE. THE RETURN WAS PROCESSED ON 13.04 .2011 AND IT RESULTED IN A REFUND OF RS.4,66,200/-. THE CASE WAS PICKED UP FOR SCRUTINY AND A STATUTORY NOTICE U/S 143(2) OF THE I NCOME TAX ACT, 1961 DATED 13.09.2011 WAS ISSUED TO THE ASSESSEE AN D WAS DULY SERVED. SUBSEQUENTLY, A NOTICE U/S 142(1) OF THE I. T. ACT DATED 22.06.2012 WAS ISSUED TO THE ASSESSEE. 3. THE ASSESSEE WAS ASKED TO CLARIFY THE CHARITABLE ACTIVITIES IN VIEW OF THE AMENDMENT TO SEC 2(L5)RWS 13(8) OF THE INCOME TAX ACT, 1961 AND OTHER DETAILS WERE ALSO CALLED FOR AY 2010-11. 4. THE ASSESSEE HAS BEEN GRANTED 12AA REGISTRATION VIDE ORDER IN NO. TRUST/728/10ANOI.ALIA.62 DATED 20.02.1987. T HE MAIN OBJECTS OF THE ASSOCIATION ARE:- (I) TO PROMOTE GRANITE AND OTHER NATURAL STONES AN D ALLIED INDUSTRIES. ITA NO.1086/B/16 3 (II) TO PROMOTE AUXILIARY INDUSTRIES FOR NATURAL STONES I.E., MINING, QUARRYING, PROCESSING, MACHINERIES, T OOLS, EQUIPMENT, CONSUMABLES ETC. (III) TO PROMOTE AND EXCHANGE TECHNOLOGICAL DEVELOPMENTS IN THE FIELD OF NATURAL STONE INDUSTRI ES OF INDIA I.E., TECHNOLOGICAL UPGRADATION. (IV) TO PROMOTE DYNAMIC HEALTHY AND CO-OPERATIV E APPROACH TO NATURAL STONE INDUSTRY/TRADE IN INDIA A ND ABROAD. 5. THE LEARNED AO OBSERVED THAT THE ASSESSEE WAS AS KED TO EXPLAIN THE ACTIVITIES AND ASSESSEE HAS GIVEN THE C LARIFICATIONS. IT IS SEEN THAT THE ASSESSEE IS MAINLY ENGAGED IN PROMOTI ON OF GRANITE AND OTHER NATURAL STONES AND AUXILIARY INDUSTRIES FOR NATURAL STONES I.E., M INING, QUARRYING, PROCESSING, MACHINERIES, TOOLS, EQUIPMENT, CONSUMAB LES ETC. THE ASSESSEE HAS TAKEN AN AMOUNT OF RS. 33,19,036/- STR AIGHT TO THE RECEIPTS SIDE AND HAS NOT OFFERED AS INCOME. FURTHE R IT IS NOTICED THAT THIS AMOUNT HAS BEEN RECEIVED FROM THE MEMBERS AS LIFE ITA NO.1086/B/16 4 MEMBERSHIP AND HAS BEEN TREATED AS CORPUS. 6. THE LD. AO FURTHER HELD THAT ASSESSEE HAS NOT FI LED ANY CONFIRMATION TO SHOW THAT THE AMOUNT HAS BEEN RECEI VED AS CORPUS. HOWEVER, IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS CLAIMED EXEMPTION U/S 11(1)( D) OF THE INCOME TAX ACT. WHIC H CANNOT BE ALLOWED TO THE ASSESSEE FOR THE REASON THAT SPECIFI C CONFIRMATION FROM THE DONOR STATING THAT THE AMOUNT TOWARDS THE CORPUS HAS TO BE FILED. AND THIS AMOUNT IS TREATED AS INCOME FOR THE A.Y. 2010-11. 7. DURING THE COURSE OF APPEAL BEFORE CIT(A) HEARIN G THE ASSESSEE PRODUCED THE COPY OF THE LEDGER A/C OF THE ASSOCIATION BANK A/C DETAILS ETC. WHEREIN THE RECEIPTS WERE IDE NTIFIABLE TO THE PERSON WHO HAS BECOME LIFE MEMBER IN THE LEDGER ACC OUNT AND ALSO THE ASSESSEE CONTENDED AS UNDER:- THE ASSESSEE HAS FURNISHED THE DETAILS OF THE NAMES AND ADDRESS OF THE CORPUS DONORS WHO HAD BECOME THE LIF E MEMBERS OF THE SOCIETY. THE LIST IS PLACED ON RECO RD IN ANNEXURE-A FOR YOUR KIND PERUSAL. IN FACT THE MEMORANDUM OF ASSOCIATION AND RULES AND ITA NO.1086/B/16 5 REGULATIONS OF THE ASSESSEE, UNDER CLAUSE 6 WHICH DEALS WITH AIMS AND OBJECTIVES, IN SUB-CLAUSE Q CLEARLY STATES THAT ONE OF THE OBJECTIVE IS TO MAI NTAIN A CORPUS FUND OF ALL LIFE MEMBERSHIP FEES. IN OTHER WORDS ONE OF THE OBJECTIVES OF THE ASSESSEE IS TO T REAT THE LIFE MEMBERSHIP FEES AS THE CORPUS FUND OF THE ASSESSEE. THIS HAS BEEN SPECIFICALLY STATED, MADE PART OF THE RULES AND REGULATIONS OF THE ASSESSEES SOCIE TY. ACCORDINGLY ALL THE LIFE MEMBERSHIP FEES, WHICH FOR MS PART OF THE CAPITAL FUND OF THE ASSESSEE AND ACCORD INGLY IT IS EXCLUDED FROM THE GROSS INCOME OF THE ASSESSE E. IT HAS TO BE APPRECIATED THAT THE LIST COMPRISES OF TH E NAMES OF THE MEMBERS, THE TYPE OF THE MEMBERSHIP AN D THE MEMBERSHIP NUMBER ALLOTTED TO THEM AND THEIR FU LL POSTAL ADDRESS. HENCE BY NO STRETCH IMAGINATION, T HESE FEES CAN BE EQUATED WITH ANONYMOUS DONATIONS. BEFORE ANSWERING TO THE OBSERVATION THAT NO CONFIRMATION TO SHOW THAT THE AMOUNT HAS RECEIVED A S CORPUS IT IS HEREBY EXPLAINED THE REAL INTENTION O F SEC.11(1)(D) OF THE ACT FOR EXEMPTING CORPUS DONATI ONS FROM THE INCOME OF THE CHARITABLE INSTITUTION. SECTION 11(1)(D) GRANTS EXEMPTION TO DONATIONS MAD E WITH A SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS IT IS HEREBY EXPLAINED THE REAL INTENTION O F SEC.11(1)(D) GRANTS EXEMPTION TO DONATIONS MADE WIT H ITA NO.1086/B/16 6 A SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF T HE CORPUS, BUT THE BENEFIT OF THIS SECTION IS AVAILABL E ONLY TO TRUSTS ENJOYING THE BENEFIT OF EXEMPTION U/S.11. KINDLY NOTE THAT THE ASSESSEE IS REGISTERED U/S.12A OF THE ACT, ENJOYING THE BENEFIT OF EXEMPTION U/S.11. IN THE CASE OF HAKMUDDIN MULLA HASSUBHAI SINGAPOREWALA CHARITABLE TRUST VS.ITO(1985)23TTJ(BOM)43, THE BOMBAY BENCH OF THE TRIBUNAL HELD THAT IN THE CASE OF A TRUST WHOSE DEE D CONTAINS A STIPULATION THAT THE DONATIONS RECEIVED SHALL FORM A PART OF THE CORPUS OF THE TRUST, IT SHALL NO T BE NECESSARY FOR THE TRUST TO OBTAIN SEPARATE DIRECTIO N LETTER FROM THE DONOR. IN DIRECTOR OF INCOME TAX (EXEMPTIONS) & ANR VS. SR I RAMAKRISHNA SEVA ASHRAMA (2013) 258 CTR 0201, IN PARA 17, THE HIGH COURT OF KARNATAKA (THE JURISDICTIONAL HIGH COURT HELD THAT THE ARGUMENT THAT THE PERSONS WHO MADE THESE CONTRIBUTIONS DOES NOT SPECIFICALLY DIRECT, THAT THEY SHALL FORM PART OF T HE CORPUS OF THE TRUST IS CONCERNED, WAS REJECTED. IN VIEW OF THE LANGUAGE EMPLOYED IN CLAUSE (B) OF THE SUB- SECTION (A) OF SECTION 11, THE REQUIREMENT IS THAT THE VOLUNTARY CONTRIBUTIONS HAVE TO BE MADE WITH A SPEC IFIC DIRECTION. THE LAW DOES NOT REQUIRE THAT THE SAID ITA NO.1086/B/16 7 DIRECTION SHOULD BE IN WRITING. IN THE ABSENCE OF T HE DIRECTION IN WRITING, THE ONLY WAY THAT ONE CAN FIN D OUT WHETHER THERE WAS A SPECIFIC DIRECTION AND TO FIND OUT HOW THE MONEY SO PAID IT IS UTILIZE. IN VIEW OF THE AFORESAID FACTUAL AND LEGAL POSITION , WE SUBMIT THAT THE CORPUS DONATION OF RS.33,19,036/- CANNOT BE TREATED AS INCOME OF THE ASSESSEE LIABLE TAX AND WE REQUEST YOU TO SET ASIDE THIS DISALLOWANCE. 8. THE CIT(A) STATED THAT HE HAD GONE THROUGH THE ARGUMENTS, LEDGER, STATEMENT OF BANK A/C COPIES FILED BY THE ASSESSEE WHERE THE LEDGER EXTRACT AND BANK ACCOUNT CLEARLY REFLECTS TH E CHEQUE DETAILS, NAME OF THE PERSON WHO HAS PAID AND WHO HAS BECOME LIFE MEMBER AND ALL THE RECEIPTS ARE CLEARLY ACCOUNTED TO THE C ORPUS AS PER THE BY-LAWS OF THE ASSOCIATION, CONFIRMATION PER SAY, A GAIN, FROM THESE MEMBERS DOES NOT HAVE MUCH RELEVANCE. THEREFORE, T HE CIT(A) AGREED WITH THE VIEW OF THE ASSESSEE AND THE ASSEES SEES APPEAL ALLOWED. 9. AGGRIEVED THE DEPARTMENT HAS FILED THE FOLLOWING GROUNDS OF APPEAL:- ITA NO.1086/B/16 8 (I). WHETHER THE CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE PROVISIONS OF SEC.11(1)(D) IS CLE AR ABOUT THE NATURE OF RECEIPT BEING VOLUNTARY CONTRIBUTION AND NOT ANYTHING ELSE IN WHATEVER NAME CALLED. (II). WHETHER THE CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE VOLUNTARY CONTRIBUTION MADE SHOUL D BE WITH A SPECIFIC DIRECTION TO TREAT THE CONTRIBUT ED AMOUNT AS A PART OF THE CORPUS, FOR THE SAME TO BE QUALIFIED FOR EXEMPTION U/S.11(1)(D). III). WHETHER THE CIT(A)HAS FAILED TO APPRECIATE TH E FACT THE ASSESSEE HAS NO POWER/DISCRETION TO TREAT AND CLASSIFY THE LIFE MEMBERSHIP FEE AS CORPUS. IV). WHETHER, IN THE GIVEN FACTS AND CIRCUMSTANCES, THE CIT(A) IS CORRECT IN ALLOWING TH E APPEAL FILED BY THE ASSESSEE BASED ON THE LEDGER EXTRACTS AND BANK ACCOUNT DETAILS ON WHICH NAMES OF THE PERSONS WHO HAVE PAID AND BECOME LIFE MEMBERS, ARE APPEARING WITHOUT GOING INTO THE PROVISIONS OF SEC.11(1)(D). ITA NO.1086/B/16 9 10. WE HEARD BOTH PARTIES. IN THE CASE OF HAKUMDD IN MULLA HASSUBHAI SINGAPOREWALA CHARITABLE TRUST VS. ITO(1985) 23 TTJ(BOM) 43, THE BOMBAY BENCH OF THE TRIBUNAL HELD THAT IN THE CASE OF A TRUST WHOSE DEED CONTAINS A STIPULATION T HAT THE DONATIONS RECEIVED SHALL FROM A PART OF THE CORPUS OF THE TRU ST, IT SHALL NOT BE NECESSARY FOR THE TRUST TO OBTAIN SEPARATE DIRECTIO N LETTER FROM THE DONOR. 11. RESPECTFULLY FOLLOWING THE RATIO OF THE BOMBAY TRIBUNAL WE DISMISS THE DEPARTMENTAL APPEAL. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21ST SEPTEMBER, 2016 . SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER BANGALORE DATED : 21/09/2016 VMS ITA NO.1086/B/16 10 COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. RE GISTRAR, ITAT, BANGALORE.