Shree Nirman Foundation Charitable Trust, Ahmedabad V. The Dirctor of Income tax(Exemption), Ahmedabad

ITA 1190/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76852 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 21-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P VAISHNAV
• Keywords: Charitable institution; Principle of natural justice; Diversion of income; Additional evidence; Competent authority; Cancellation of registration; Capital expenditure
• Section: 12AA; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTA NT MEMBER THE DIRECTOR OF INCOME TAX, (EXEMPTION), AHMEDABAD (APPELLANT) VS SHREE NIRMAN FOUNDATION CHARITABLE TRUST, OPP. SABARI APPARTMENTS, VASTRAPURA, AHMEDABAD PAN: AABTN 0243 R (RESPONDENT) SHREE NIRMAN FOUNDATION CHARITABLE TRUST, C/O H.B. KAPADIA NEW HIGH SCHOOL, C.G. ROAD, ELLISBRIDGE, AHMEDABAD (APPELLANT) VS THE DIRECTOR OF INCOME TAX, (EXEMPTION), AHMEDABAD (RESPONDENT) REVENUE BY: SRI O.P. VAISHNAV, CIT-D.R. ASSESSEE BY: SRI A.L. THAKKAR WITH SR I RAJIV SAHAI, A.R. DATE OF HEARING : 21-04-2014 DATE OF PRONOUNCEMENT : 20-06-201 4 ITA NO.1320/AHD/2011 ASSESSMENT YEAR 2008-2009 ITA NOS.1190/AHD/2011 & 2591/AHD/2012 ASSESSMENT YEAR 2009-2010 I.T.A NOS.1190 &1320/AHD/2011 & 2591/AHD2012 A.Y. 2 009-10 & 2008-09 PAGE NIRMAN FOUNDATION CHARITABLE TRUST VS. DCIT 2 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THE APPEAL IN ITA NO. 1320/AHD/2011 FILED BY REVEN UE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-XXI DATED 28/02/20 11 AND THE APPEALS IN ITA NOS. 1190/AHD/2011 & 2591/AHD/2012 FILED BY ASS ESSEE ARE DIRECTED AGAINST THE ORDER OF LD. DIT(EXEMPTION) DATED 16/03 /2011 & CIT(A)-XXI DATED 11-10-2012 RESPECTIVELY. 2. ALL THESE APPEALS BELONG TO SAME ASSESSEE AND AR E INTERRELATED THEREFORE THESE WERE HEARD TOGETHER AND ARE BEING D ISPOSED OFF BY THIS CONSOLIDATED ORDER. FIRST WE WILL TAKE UP REVENUES APPEAL IN ITA NO132 0/AHD/2011 A.Y. 2008-09 3. REVENUE HAS TAKEN FOLLOWING EFFECTIVE GROUND:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO GRANT THE DEDUCTION U/S. 11 OF RS. 10,19,39,409/- OF THE I.T. ACT. 4. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE-TRUST RUNS A SCHOOL FOR WHICH IT HAD TAKEN LOAN OF RS. 9 CRORE FOR ACQUIRIN G A PLOT OF LAND FROM AUDA WHICH COSTED RS. 6,88,24,676/-. THE CONTRACT FOR CONSTRUCTION OF THE SCHOOL BUILDING WAS GIVEN TO NICHE REALTY PVT. LTD. THE ASSESSEE TRUST IS HAVING ONLY TWO TRUSTEES WHICH ARE AS UNDER:- (I) SHRI ASHISH J. DESAI, MANAGING TRUSTEE IS A PED IATRIC DOCTOR BY PROFESSION WHO ADVENTURED INTO THE FIELD OF EDUCATI ON. I.T.A NOS.1190 &1320/AHD/2011 & 2591/AHD2012 A.Y. 2 009-10 & 2008-09 PAGE NIRMAN FOUNDATION CHARITABLE TRUST VS. DCIT 3 (II) SHRI NARENDRA KORINGA, A RETIRED TEACHER OF GO VT. SCHOOL WHO IS BASED AT RAJKOT. 5. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT ASSESSEE-TRUST HAS MADE PAYMENT OF RS. 3,28,51,483/- TO M/S. NICHE REALTY PVT. LTD. IN NICHE REALTY PVT. LTD, THERE ARE TWO DIRECTORS, NAM ELY SRI ASHISH J. DESAI AND SRI ASHISH BHAVSAR. SRI DESAI WHO WAS THE MANA GING TRUSTEE OF THE ASSESSEE WAS ALSO ONE OF THE DIRECTORS OF M/S NICHE REALTY TO WHOM THE CONSTRUCTION OF THE SCHOOL BUILDING WAS GIVEN. AO FURTHER OBSERVED THAT AS PER PROVISIONS OF SECTION 13(2)(G) OF THE IT ACT IF ANY INCOME OR PROPERTY OF THE TRUST IS DIVERTED DURING THE PREVIOUS YEAR IN F AVOUR OF ANY PERSON REFERRED TO IN SUB-SECTION 3 OR SECTION 13 THEN THE ASSSESSE IS NOT ELIGIBLE FOR DEDUCTION U/S. 11 OF THE ACT. AS PER THE PROVI SIONS OF THE ACT ASSESSEE WAS REQUIRED TO FILL FORM 10B WITH THE AUDIT REPORT U/S.12AB OF THE ACT AND DISCLOSE WHETHER THERE WAS ANY APPLICATION OR USE O F INCOME OR PROPERTY FOR THE BENEFITS OF PERSONS REFERRED TO IN SECTION 13(3) OF THE ACT. HOWEVER IT WAS FOUND IN FORM NO. 10B FILED ALONG WITH RETUR N OF INCOME, SECTION (II) WHERE APPLICATION OR USE OF INCOME OR PROPERTY FOR THE BENEFIT FOR THE PERSONS REFERRED TO U/S. 13(3) WAS SHOWN AS NIL. T HE ASSESSEE WAS THEREFORE SHOW CAUSED AS TO WHY THE CLAIM OF DEDUCT ION U/S. 11 OF THE ACT SHOULD NOT BE DISALLOWED IN VIEW OF THE VIOLATION O F PROVISIONS OF SECTION 13(2)(G) OF THE I.T. ACT. THE ASSESSEE REPLIED AS UNDER:- ASSESSEE TRUST HAS PAID RS. 3 , 13 , 50,00/- TO NICHE REALITY PVT, LTD FOR CONSTRUCTION OF SCHOOL BUILDING, THE SAID PAYMENTS DO NOT FAIL WITHIN THE AMBIT OF SECTION 13(2)(G) READ WITH SEC. 13(3) OF T HE I, T. ACT- BECAUSE OF THE FOLLOWING REASONS:- (1) IT IS TO BE NOTED THAT DR. ASHISH DESAI , THE TRUSTEE OF THE TRUST DOES NOT HAVE SUBSTANTIAL INTEREST IN NICHE REALITY PVT. LTD . AND HENCE, PROVISIONS OF SECTION 13(2)(G) READ WITH SECTION 13(3) ARE NOT APPLICABLE IN THE CASE. I.T.A NOS.1190 &1320/AHD/2011 & 2591/AHD2012 A.Y. 2 009-10 & 2008-09 PAGE NIRMAN FOUNDATION CHARITABLE TRUST VS. DCIT 4 (2) THE PAYMENT OF RS.3 , 13,50 , 000/- IS NOT IN THE NATURE OF 'ANY INCOME OR PROPERTY OF THE TRUST OR INSTITUTION IS DIVERTED DU RING THE PREVIOUS YEAR IN FAVOUR OF ANY PERSON REFERRED TO IN SUB-SECTION (3) '. (3) THE PAYMENT IS MAINLY OF THE NATURE OF REIMBURS EMENT OF EXPENSES WHICH M/S. NICHE REALITY HAD INCURRED IN ADVANCE FO R AND ON BEHALF OF THE ASSESSEE TRUST. THIS WAS ON ACCOUNT OF BUILDING MAT ERIALS PURCHASED BY M/S. NICHE REALITY AND THE REIMBURSEMENT IS OF EXAC TLY THE SAME AMOUNT AS THE BILL AMOUNT WITHOUT ANY AMOUNT/ELEMENT OF PR OFIT. (4) THE PAYMENT OF RS. 1,90,86 , 700/- MADE FOR LABOUR WORK CARRIED OUT BY M/S NICHE REALITY IS A PAYMENT AGAINST THE SERVICES RENDERED. THE SAID SERVICES GIVEN BY M/S. NICHE REALITY WERE THE CONST RUCTION OF THE TRUST BUILDING. (5) THE CONSTRUCTION WORK CARRIED OUT IS AT THE RAT E OF RS.95.50/- PER SQ. FEET. THIS RATE IS A VERY REASONABLE ONE. AT THAT P OINT OF TIME THE CONSTRUCTION LABOUR WORK CHARGED BY OUT SIDE LABOUR CONTRACTORS VARIED FROM RS. 150/- TO RS.250/- PER SQ, FEET WHERE AS TH E NICHE REALITY AHS DONE THE WORK AT A NOMINAL RATE OF RS.95.50/- PER SQ . FEET ONLY. (6) THE ASSESSEE HAS BEEN THE BENEFICIARY AND THERE IS NO QUESTION OF ANY INCOME OF THE TRUST OR THE PROPERTY OF THE ASSESSEE TRUST BEING DIVERTED TO ANY OTHER ENTITY. (7) MERE PAYMENT TOWARDS EXPENSES INCURRED ON OUR B EHALF AND BILL VALUE EQUIVALENT PAYMENT/REIMBURSEMENT BY THE ASSESSEE TR UST DOES NOT CONSTITUTE DIVERSION OF INCOME OR PROPERTY TO NICHE REALITY. (8) AGAIN YOU WILL OBSERVE THAT THE SAID FIRM HAS ALSO GIVEN INTEREST FREE DEPOSIT FOR 10 YEARS WHERE BY OUR TRUST HAS GAINED A LARGE BENEFIT. 5.1 THE ASSESSEE WAS FURTHER ASKED TO FURNISH COPY OF THE RESOLUTION PASSED BY THE BOARD FOR AWARDING THE CONTRACT FOR C ONSTRUCTION OF SCHOOL BUILDING. THE SAME WAS FURNISHED WHICH READS AS UN DER:- 'RESOLVED THAT LABOUR CONTRACT FOR THE CONSTRUCTION OF THE SCHOOL BUILDING BE AWARDED M/S. NICHE REALTY PVT. LTD. ON SUCH TERM S AND CONDITIONS WHICH MAY BE DECIDED BY THE TRUSTEES AND DIRECTORS OF THE COMPANY WITHIN THE FRAMEWORK OF SOME OF THE MAIN CONDITIONS LISTED HEREUNDER- THE RATE FOR THE LABOUR CONTRACT SHOULD BE VERIFIED FROM THE MARKET RATES AND A REASONABLE RATE ON COST PLUS BASIS NOT EXCEED ING RS. 100/-PER SFT SHOULD BE FIXED:- THE RATES & SUPPLIERS FOR THE CONSTRUCTION MATERIAL SHALL BE FINALIZED BY THE TRUST. THOUGHT EH PURCHASES OF THE CONSTRUCT ION MATERIAL SHALL BE FINALIZED BY THE TRUST. THOUGH THE PURCHASES OF THE CONSTRUCTION MATERIAL I.T.A NOS.1190 &1320/AHD/2011 & 2591/AHD2012 A.Y. 2 009-10 & 2008-09 PAGE NIRMAN FOUNDATION CHARITABLE TRUST VS. DCIT 5 COULD BE DONE BY THE CONTACTOR ALSO FOR WHICH THE C ONTRACT SHALL BE REIMBURSED THE COST BY THE TRUST FROM TIME TO TIME. THE CONTRACTOR SHOULD GIVE AN INTEREST FREE DEPOSIT TO THE TRUST FOR AN AMOUNT OF RS.355//- LACS TO BE REFUNDED BY THE T RUST WITHIN A PERIOD OF TEN YEARS AFTER THE COMPLETION OF THE BUILDING CONS TRUCTION WORK. IT SHALL BE THE RESPONSIBILITY OF THE CONTRACTOR TO APPOINT THE STRUCTURAL CONSULTANT, THE ARCHITECT AND THE SIGHT ENGINEERS ON SUCH TERMS AND CONDITIONS AS MAY BE DECIDED BY THE TRUSTEES. IT SHALL BE THE RESPONSIBILITY OF THE CONTRACTOR TO GET THE PLANS FOR THE SCHOOL BUILDING MADE FROM THE ARCHITECT AS PER THE REQUIREMENT OF THE TRUST AND GET THE SAME APPROVED FROM THE COMPETENT AUTHORITY AT THE COST OF THE TRUST THE CONTRACTOR SHALL DEVELOP THE BUILDING AS PER TH E PLANS AND SPECIFICATIONS OF THE TRUST. IT SHALL BE THE RESPONSIBILITY OF THE CONTRACTOR TO APPOINT THE SUB CONTACTORS FOR DIFFERENT PART OF THE BUILDING CONST RUCTION AT THEIR COST IT SHALL BE THE RESPONSIBILITY OF THE CONTRACTOR TO COMPLETE THE BUILDING AS PER THE APPROVED PLANS AND GET THE NECE SSARY BUILDING USE PERMISSION FROM THE COMPETENT AUTHORITY. THE CONTRACTOR SHOULD INDEMNIFY THE TRUST AGAINST A LL LOSSES & DAMAGES THAT MAY BE INCURRED OR SUFFERED BY THE TRU ST ON ACCOUNT OF ANY BREACH OF THESE TERMS AND CONDITIONS OR ANY RULES OR REGULATIONS OF THE LAW OF THE LAND OR DUE TO ACCIDENT OR MISHAP DURING THE CONSTRUCTION. THE CONTRACTOR SHOULD BE BOUND TO COMPLETE THE BUIL DING BEFORE JUNE 2008 TO ENABLE THE TRUST TO START THE FIRST AC ADEMIC SESSION WITH EFFECT FROM JUNE 2008 .' 6. AFTER TAKING INTO CONSIDERATION THE SUBMISSION O F THE ASSESSEE, CLAIM OF DEDUCTION U/S. 11 OF THE ACT OF RS. 10,19,39,409 /- WAS DISALLOWED BY AO AND ADDED TO THE INCOME OF THE ASSESSEE BY OBSERVIN G AS UNDER:- 2.5 ON CRITICAL EXAMINATION OF THE RESOLUTION P ASSED BY THE TRUST, IT IS SEEN THAT THE RATE AT WHICH CONTRACT HAS BEEN AWARD ED IS NOT SPECIFIED. IT IS VERY AMBIGUOUS. IT IS MENTIONED IN THE RESOLUTIO N THAT THE CONTRACT IS GIVEN AT THE MARKET RATE AND A REASONABLE RATE ON C OST PLUS BASIS NOT EXCEEDING RS.100/-PER SQ. FT. BUT IT IS NOT SPECIFI ED AS TO WHAT WAS THE MARKET RATE OR REASONABLE RATE. THE RATE FOR THE CO NSTRUCTION MATERIALS ARE ALSO NOT SPECIFIED. THE RESOLUTION CLEARLY STATES T HAT THE CONTRACT IS AWARDED TO M/S. NICHE REALITY P, LTD. ON SUCH TERMS AND CONDITIONS WHICH MAY BE DECIDED BY THE TRUSTEES AND DIRECTORS OF THE COMPANY. THE TRUST IS HAVING ONLY TWO TRUSTEES AND COMPANY TOO IS HAVI NG ONLY TWO DIRECTORS WHICH ARE AS UNDER- TRUST NICHE REALTY P. LTD ASHISH J. DESAI ASHISH J. DESAI NARENDRA KORINGA AS HISH BHAVSAR I.T.A NOS.1190 &1320/AHD/2011 & 2591/AHD2012 A.Y. 2 009-10 & 2008-09 PAGE NIRMAN FOUNDATION CHARITABLE TRUST VS. DCIT 6 SHRI ASHISH J DESAI THE MANAGING TRUSTEE OF THE TRU ST IS ALSO THE DIRECTOR OF THE COMPANY. THERE IS ONLY ONE TRUSTEE OTHER THAN S HRI ASHISH J DESAI IN THE ASSESSEE TRUST AND ONLY ONE DIRECTOR OTHER THAN SHRI ASHISH J DESAI IN THE COMPANY. BY AWARDING THE CONTRACT TO NICHE REAL ITY PVT. LTD THE MANAGING TRUSTEE OF THE TRUST HAS BENEFITED AT THE COST OF THE TRUST. IT IS VERY DEAR THAT THERE IS DIVERSION OF INCOME FROM TH E TRUST TO THE NICHE REALITY PVT. LTD. IN WHICH SHRI ASHISH J DESAI IS I NTERESTED. THIS FACT WAS NOT DISCLOSED IN FORM 10B FILED ALONGWITH THE AUDIT REPORT IN THE RETURN OF INCOME. IN VIEV OF THE CLEAR VIOLATION OF THE PROVI SIONS OF SECTION 13(2)(G) R.W.S. 13(3) OF THE ACT THE ASSESSES IS NOT ELIGIBL E TO CLAIM DEDUCTION U/S 11 OF THE L T. ACT. 3. THE TRUST HAS OBTAINED A TERM LOAN AND CASH CRE DIT FACILITY OF RS. 9,00,00,000/- FROM INDIAN OVERSEAS BANK. THIS LOAN IS UTILIZED FOR PURCHASE OF LAND AND CONSTRUCTION OF SCHOOL BUILDIN G, WHICH SHOWS THAT IT IS NOT A CHARITABLE ACTIVITY BUT A PURELY BUSINESS ENT ERPRISE. SHRI ASHISH J DESAI, THE MANAGING TRUSTEE OF THE ASSESSEE TRUST H AS NOT TAKEN ANY SALARY DURING THE YEAR UNDER CONSIDERATION, BUT HE HAS RECEIVED 12,96,080/- AS REMUNERATION FROM THE ASSESSEE TRUST DURING THE SUBSEQUENT ASSESSMENT YEAR. I.E. 2010-11. SHRI NARE NDRA KORINGA ALSO DID NOT RECEIVE ANYTHING DURING THE YEAR BUT HAS RE CEIVED A SALARY OF 3,00,000/- DURING THE ASSESSMENT YEAR 2010-2011. TH IS ESTABLISHES THAT BOTH THE TRUSTEES ARE ENGAGED IN THE BUSINESS OF ED UCATION AND ARE GETTING PROFIT BY WAY OF REMUNERATION FROM THE BUSINESS OF EDUCATION. 4. THE DECISION OF THE HON'BLE UTTARAKHAND HIGH CO URT FOR THE CASE OF NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERING EDUC ATION SOCIETY V/S. CIT (315 ITR 428) IS SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE. IN THIS CASE THE HIGH COURT OBSERVED THAT 'MERELY IMPARTING EDUCATION FOR THE PRIMARY PURPOSE OF EARNING PROFITS COULD NOT BE SAI D TO BE A CHARITABLE ACTIVITY. IN THE EXPRESSION 'CHARITABLE PURPOSE', ' CHARITY' IS THE SOUL OF THE EXPRESSION. MERE TRADE OR COMMERCE IN THE NAME OF E DUCATION CANNOT BE SAID TO BE A CHARITABLE PURPOSE.' 5. THE ASSESSEE IS INVOLVED IN THE BUSINESS OF EDU CATION AND THERE IS NO CHARITABLE ACTIVITY INVOLVED. THE ASSESSEE HAS S TARTED THIS BUSINESS OF EDUCATION WITH A MOTIVE TO EARN PROFITS AND EARN A LIVING OUT OF IT. THE MAIN BENEFICIARIES OF THE TRUST ARE MANAGING TRUSTEE SHR I ASHISH DESAI AND SHRI NARENDRA KORINGA. AS MENTIONED ABOVE THE ASSESSEE I S NOT ELIGIBLE FOR DEDUCTION U/S. 11 OF THE ACT. THE ASSESSEE HAS VIOL ATED THE PROVISION OF SECTION 13(2)(G) OF THE ACT BY GIVING THE CONSTRUCT ION OF THE SCHOOL BUILDING IN FAVOUR OF M/S. NICHE REALITY PVT. LTD. IN WHICH THE MANAGING TRUSTEE SHRI ASHISH DESAI IS THE DIRECTOR. THE ASSESSEE HAS FURTHER COMPOUNDED THIS VIOLATION BY NOT DISCLOSING THE TRUE FACTS IN FORM 10 B FILED WITH THE RETURN OF THE INCOME. THUS THE CLAIM OF DEDUCTION U /S. 11 OF THE ACT OF RS, 10,19,39,409/- IS DISALLOWED AND ADDED TO THE INCOM E OF THE ASSESSEE AND I.T.A NOS.1190 &1320/AHD/2011 & 2591/AHD2012 A.Y. 2 009-10 & 2008-09 PAGE NIRMAN FOUNDATION CHARITABLE TRUST VS. DCIT 7 THE EXCESS OF INCOME OVER EXPENDITURE OF RS. 1,02,8 5,413/- AS SHOWN IN THE INCOME AND EXPENDITURE ACCOUNT; IS BROUGHT TO TAX. IN VIEW OF THE ABOVE FACTS THE TOTAL INCOME IS COMP UTED AS UNDER:- TOTAL INCOME AS PER RETURN:- RS. (-)9,16,53,996/ - ADD:- DISALLOWANCE OF DEDUCTION U/S. 11 OF THE ACT AS DISCUSSED ABOVE RS. 10,19,39,409/- ASSESSED INCOME RS. 1,02,85,413/- 7. IN APPEAL LD. CIT(A) AFTER TAKING INTO CONSIDERA TION THE SUBMISSION OF THE ASSSESSEE WHICH HAS BEEN REPRODUCED BY HIM IN H IS ORDER DIRECTED THE AO TO DELETE THE ADDITION BY OBSERVING AS UNDER:- 9. AFTER TAKING INTO CONSIDERATION REASONS FOR DIS ALLOWANCE GIVEN IN ASSESSMENT ORDER BY LEARNED AO AND AFTER GOING THRO UGH SUBMISSIONS GIVEN BY LEARNED AR, IT CAN BE CONCLUDED THAT THE D ISALLOWANCE OF CLAIM U/S 11 FOR RS. 10,19,39,409/- OF ASSESSEE TRUST IS NOT IN CONSONANCE WITH PROVISIONS OF LAW SINCE THE LEARNED AO CONCLUDED THAT ASSESSEE TRUST IS ENGAGED IN BUSINESS ACCLIVITY AND NOT CHARITABLE AC TIVITY AND SAID CONCLUSION IS WITHOUT BRINGING ANY MATERIAL ON RECO RD AND REASONS GIVEN BY LEARNED AO IN SAID CONNECTION ARE VAGUE IN NATUR E AND NOT INCONSONANCE WITH PROVISIONS OF LAW AS NONE OF THE SECTION UNDER INCOME TAX ACT PROHIBITS ASSESSEE TRUST TO PURCHASE LAND, CONSTRUCT SCHOOL BUILDING AND TO TAKE LOAN FOR PURCHASE OF LAND AND CONSTRUCTION OF BUILD ING. THE ASSESSEE TRUST HAS DONE SAID ACTIVITIES FOR ATT AINMENT OF OBJECTIVE OF TRUST AS FOR ATTAINMENT OF SAID OBJECTIVE OF EDUCAT ION SCHOOL BUILDING IS NECESSARY AND FOR CONSTRUCTION OF SCHOOL BUILDING P LOT OF LAND IS NECESSARY. TAKING LOAN FROM BANK IS ALSO NOT PROHIBITED IN LAW . IT SHOULD ALSO BE NOTED THAT WHEN SAID CAPITAL EXPENDITURE IS RNADE OUT OF BORROWING FROM BANK AND SAID EXPENDITURE CAN NOT BE SAID TO BE OUT OF, REVENUE RECEIPTS OF THE ASSESSES TRUST. 9 . 1 THE ACTIVITY CARRIED ON BY THE ASSESSEE IS RUNNIN G SCHOOL WHICH IS WITHIN THE DEFINITION OF CHARITABLE PURPOSE AS PRES CRIBED IN SECTION 2(15) OF I.T. ACT. 1961 AND AS THE SHARE HOLDING OF MR. ASHI SH J DESAI THE MANAGING TRUSTEE OF THE ASSESSEE TRUST IS LESS THAN 20% AS PRESCRIBED IN SECTION 13(3) OF I T ACT,L961, THE OBSERVATION OF L EARNED AO THAT ASSESSEE TRUST HAS VIOLATED THE PROVISIONS OF SECTION 13(2)(G) R W S 13(3) IS NOT CORRECT. THE ASSESSEE TRUST HAS PROVIDED FOR SAID P URPOSE THE PHOTO COPY OF ANNUAL RETURN FILED WITH ROC AND SAID COPY WAS A LSO PROVIDED DURING ASSESSMENT PROCEEDINGS TO LEARNED AO BUT HE HAS NOT TAKEN THE SAID FACT INTO CONSIDERATION WHILE PASSING ORDER. I.T.A NOS.1190 &1320/AHD/2011 & 2591/AHD2012 A.Y. 2 009-10 & 2008-09 PAGE NIRMAN FOUNDATION CHARITABLE TRUST VS. DCIT 8 9.2 IT IS ALSO TO BE NOTED INERT THE OBSERVATION OF PAYMENT OF SALARY TO TRUSTEES IN SUBSEQUENT ASSESSMENT YEAR CAN NOT BE B ASE FOR DISALLOWANCE OF CLAIM U/S 11 AS DURING THE YEAR UNDER ASSESSMENT THE SALARY HAS NOT BEEN PAID AND EVERY YEAR IS SEPARATE YEAR AS PER DE CISIONS GIVEN BY VARIOUS COURTS. THE LEARNED AR'S CONTENTION FOR PUR CHASE OF LAND FROM AUDA, A LOCAL AUTHORITY THROUGH AUCTION AND PURCHAS E OF FURNITURE FROM NON RELATED PARTIES IS ALSO NOT TAKEN INTO CONSIDER ATION WHILE PASSING THE ASSESSMENT ORDER BY LEARNED AO IS ALSO VERIFIED AND CONSIDERED WHILE PASSING THIS ORDER. 10. IN VIEW OF THE ABOVE OBSERVATIONS AND TAKIN G INTO CONSIDERATION THE SUBMISSIONS MADE BY AR OF ASSESSEE TRUST, THE A DDITION MADE BY LEARNED AO BY WAY OF DISALLOWANCE OF CLAIM OF DEDUC TION U/S. 11 FOR RS. 10,19,39,409/- IS DELETED. 8. AGGRIEVED BY THIS ORDER OF LD. CIT(A) NOW THE RE VENUE IS IN APPEAL BEFORE US. 9. AT THE TIME OF HEARING LD. DR VEHEMENTLY ARGUED THAT LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE BY PLACING RELIANCE ON THE ADDITIONAL EVIDENCE IN THE FORM OF PHOTOCOPY OF ANNUAL REPORT FILED WIT H ROC ACCORDING TO WHICH ASHISH J. DESAI HELD ONLY 4% OF THE EQUITY SH ARES AND HENCE IT WAS ARGUED THAT IT CANNOT BE SAID THAT HE WAS HOLDING S UBSTANTIAL INTEREST IN M/S. NICHE REALTY PVT. LTD TO WHOM CONTRACT FOR CON STRUCTION OF SCHOOL BUILDING WAS GIVEN BY THE ASSESSEE-TRUST. THIS ADD ITIONAL EVIDENCE WAS ADMITTED AND RELIED UPON BY THE LD. CIT(A) WITHOUT CONFRONTING THE SAME TO THE AO, THEREFORE IN THE INTEREST OF NATURAL JUSTIC E AND FAIR PLAY THE MATTER MAY KINDLY BE RESTORED BACK TO THE FILE OF AO FOR F RESH ADJUDICATION IN THE LIGHT OF ADDITIONAL EVIDENCE ADMITTED BY LD. CIT(A) . LEARNED COUNSEL OF THE ASSESSEE ON THE OTHER HAND VEHEMENTLY OPPOSED THIS CONTENTION OF LD. DR AND SUBMITTED THAT THE COPY OF ANNUAL REPORT FILED WITH ROC WAS BEFORE AO ALSO THOUGH THIS FACT HAS NOT BEEN MENTIONED BY THE AO IN HIS ASSESSMENT ORDER. HE THEREFORE VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT(A) AND PRAYED THAT THE ORDER PASSED BY LD. CIT(A) MAY KIND LY BE UPHELD. I.T.A NOS.1190 &1320/AHD/2011 & 2591/AHD2012 A.Y. 2 009-10 & 2008-09 PAGE NIRMAN FOUNDATION CHARITABLE TRUST VS. DCIT 9 10. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT EXEMPTION U/S. 11 OF THE ACT WAS DISALLOWED BY AO I NTERALIA ON THE GROUND THAT ASSESSEE-TRUST GAVE CONTRACT FOR CONSTRUCTING THE SCHOOL BUILDING TO NICHE REALTY PVT. LTD IN WHICH ONE OF THE TRUSTEES WAS HAVING SUBSTANTIAL INTEREST. LD. CIT(A) PLACING RELIANCE ON THE PHOTO COPY OF ANNUAL REPORT FILED WITH ROC HELD THAT MR. DESAI ONLY HOLDING 4% OF EQUITY SHARES OF M/S. NICHE REALTY PVT. LTD AND THEREFORE IT CANNOT BE SA ID THAT HE WAS HOLDING SUBSTANTIAL INTEREST IN THAT COMPANY. DURING THE A PPELLATE PROCEEDINGS BEFORE US NEITHER THIS DOCUMENT NOR ANY EVIDENCE TO THE EFFECT THAT THIS WAS BEFORE THE AO WAS FOUND IN THE PAPER BOOK OF TH E ASSESSEE. THOUGH LATER ON PHOTOCOPY OF ANURAL REPORT WITH ROC WAS SU BMITTED BUT NO EVIDENCE IN RESPECT OF THIS DOCUMENT BEING FILED BE FORE AO WAS FILED. WE FURTHER FIND THAT IN ITS SUBMISSION BEFORE AO IT WA S CLAIMED BY ASSESSEE- TRUST THAT SRI ASHISH J. DESAI WAS NOT HAVING SUBST ANTIAL INTEREST IN M/S. NICHE REALTY PVT. LTD BUT EVEN IN THESE SUBMISSIONS OF THE ASSESSEE WHICH HAVE BEEN REPRODUCED BY AO IN HIS ORDER THERE IS AN Y MENTION ABOUT THE COPY OF ANNUAL REPORT WITH ROC BEING FILED, THOUGH IN THE SUBMISSION BEFORE LD. CIT(A), IT WAS MENTIONED BY ASSSESSEE-TR UST THAT COPY OF ANNUAL REPORT WITH ROC WAS BEING FILED. IN VIEW OF THESE UNDISPUTED FACTS OF THIS CASE, WE ARE INCLINED TO AGREE WITH THE CONTENTION OF LD. DR THAT LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE BY ADMITTIN G AND RELYING ON THE ADDITIONAL EVIDENCE WHICH WAS NOT BEFORE AO, THEREF ORE IN THE INTEREST OF NATURAL JUSTICE AND FAIR PLAY WE ARE OF THE CONSIDE RED OPINION THAT MATTER BE RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICAT ION AS PER LAW. WE HOLD ACCORDINGLY. 11. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. I.T.A NOS.1190 &1320/AHD/2011 & 2591/AHD2012 A.Y. 2 009-10 & 2008-09 PAGE NIRMAN FOUNDATION CHARITABLE TRUST VS. DCIT 10 ITA NO. 1190/AHD2011 A.Y. 2009-10 12. THIS IS THE ASSESSEES APPEAL AGAINST THE ORDER OF LD. DIT(EXEMPTION) CANCELLING THE REGISTRATION GRANTED U/S. 12AA OF THE I.T. ACT. THE REGISTRATION OF THE ASSESSEE GRANTED U/S . 12AA OF THE ACT WAS CANCELLED BY DIT(EXEMPTION) ON THE BASIS OF AOS OR DER FOR ASSESSMENT YEAR 2008-09 WHEREIN AO BY OBSERVING THAT CONTRACT FOR CONSTRUCTION OF SCHOOL BUILDING HAS BEEN GIVEN BY THE ASSESSEE-TRUS T TO NICHE REALTY PVT. LTD IN WHICH SRI ASHISH DESAI ONE OF THE TRUSTEES W AS A DIRECTOR WHICH CLEARLY CONTRAVENES THE PROVISIONS OF SECTION 13(1) , 13(2) READ WITH SECTION 13(3) OF THE IT ACT, HELD THAT ASSESSEE-TRUST WAS N OT ELIGIBLE FOR EXEMPTION U/S. 11 OF THE ACT. SINCE THIS ISSUE HAS BEEN REST ORED BACK BY US TO THE AO FOR FRESH ADJUDICATION IN ITA NO. 1320/AHD/2011 A.Y .2008-09 WE ARE OF THE CONSIDERED OPINION THAT THIS MATTER SHOULD ALSO GO BACK TO THE FILE OF DIT(EXEMPTION) FOR FRESH ADJUDICATION AFTER THE MAT TER IS DECIDED BY AO IN RESPECT OF ASSESSMENT YEAR 2008-09. WE HOLD ACCORD INGLY. 13. IN THE RESULT, ASSEESSEES APPEAL IS ALLOWED FO R STATISTICAL PURPOSE. ITA NO. 2591/AHD/2012 A.Y. 2009-10 14. THIS IS THE ASSESSEES APPEAL AGAINST THE ORDER OF LD. CIT(A) CONFIRMING THE ACTION OF JOINT DIT(EXEMPTION) DISAL LOWING EXEMPTION IN RESPECT OF CORPUS DONATION AMOUNTING TO RS. 90,59,7 50/-. THE JOINT DIT(EXEMPTION) HAS DISALLOWED THE DEDUCTION IN RESP ECT OF CORPUS DONATION ON THE GROUND OF CANCELLATION OF REGISTRAT ION OF TRUST U/S. 12AA OF THE I.T. ACT. SINCE IN ITA NO. 1190/AHD2011 THE MA TTER REGARDING CANCELLATION OF REGISTRATION U/S. 12AA HAS BEEN RES TORED BACK TO THE FILE OF LD. DIT(EXEMPTION) THIS MATTER IS ALSO REQUIRED TO BE SENT BACK TO THE FILE OF I.T.A NOS.1190 &1320/AHD/2011 & 2591/AHD2012 A.Y. 2 009-10 & 2008-09 PAGE NIRMAN FOUNDATION CHARITABLE TRUST VS. DCIT 11 JOINT DIT(EXEMPTION) FOR FRESH ADJUDICATION AFTER D ISPOSAL OF REGISTRATION PROCEEDINGS U/S. 12AA BY LD. DIT(EXEMPTION) 15. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 16. IN THE COMBINED RESULT, REVENUES APPEAL AS WEL L AS ASSESSEES APPEALS ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (N.S. SAINI) ( D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 20/06/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,