The ADIT(Exemptions), Ahmedabad V. Karmakshetra Educational Faoundation, Ahmedabad

ITA 1203/AHD/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1866 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-11-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 11-05-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Assessee Lawyers: P M MEHTA; S N SOPARKAR
• Keywords: Charitable institution; Competent authority
• Section: 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND M.V. NAYAR, ACCOUNTANT MEMBER) ITA NO.1203/AHD/2006 [ASSTT.YEAR : 2002-2003] THE ADIT (EXEMPTION) AHMEDABAD. VS. MANAGING TRUSTEE KARMAKSHETRA EDUCATIONAL FOUNDATION 705, KAIVANNA, NR.PANCHVATI ELLISBRIDGE, AHMEDABAD. ITA NO.1329/AHD/2006 [ASSTT.YEAR : 2002-2003] MANAGING TRUSTEE KARMAKSHETRA EDUCATIONAL FOUNDATION 705, KAIVANNA, NR.PANCHVATI ELLISBRIDGE, AHMEDABAD. VS. THE ADIT (EXEMPTION) AHMEDABAD. REVENUE BY : SHRI GOVIND SINGHAL ASSESSEE BY : SHRI S.N.SOPARKAR, AND SHRI P.M.MEHTA O R D E R PER R.V.EASWAR, VICE-PRESIDENT : THESE ARE CROSS APPEALS RELATING TO THE ASSESSMENT YEAR 2002-2003 IN THE CASE OF KAR MAKSHETRA EDUCATIONAL FOUNDATION, AHMEDABAD (KEF) WHICH HAS BEEN RECOGN ISED AS A CHARITABLE TRUST UNDER SECTION 12A OF THE INCOME TAX ACT BY OR DER DATED 31-3-1975 BY THE COMMISSIONER OF INCOME TAX, GUJARAT-II. THE OB JECT OF THE ASSESSEE-TRUST, ESTABLISHED BY THE LATE DR.VIKRAM A. SARABHAI ON 20 -8-1945 IS THE PROPAGATION OF ARTS, CULTURE AND RESEARCH, DANCE AND MUSIC AND IN FURTHERANCE OF THIS OBJECT THE ASSESSEE RUNS A DANCE SCHOOL BY NAME DARPAN AC ADEMY, AMONGST VARIOUS OTHER INSTITUTIONS. 2. IN RESPECT OF THE ASSESSMENT YEAR 2002-2003 THE ASSESSEE FILED A RETURN OF INCOME DECLARING A DEFICIT OF RS.15,97,127/-, WH ICH WAS ACCEPTED UNDER PAGE - 2 ADIT (EXEMPTION) VS. KARMAKSHETRA EDUCATIONAL FOUNDATION -2- SECTION 143(1)(A) OF THE ACT BUT LATER ON SELECTED FOR SCRUTINY BY ISSUE OF NOTICES UNDER SECTION 143(2). PARA-4 OF THE ASSESSMENT ORD ER SHOWS THAT ONE OF THE REASONS FOR SELECTING THE RETURN FOR SCRUTINY WAS T O INVESTIGATE THE IMPACT OF CERTAIN NEWSPAPER REPORTS RELATING TO STUDENT PARTI CIPANTS WHO ALLEGEDLY WENT MISSING WHILE ON TOUR IN FOREIGN COUNTRIES. WHEN THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF STUDENTS WHO WENT ABROAD AS PARTICIPANTS, SOME DETAILS WERE FURNISHED BY LETTER DATED 17-3-2005. FROM THE SE DETAILS IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THREE STUDENTS OF THE DANCE SCHOOL WHO WERE PART OF THE TOUR TO FOREIGN COUNTRIES (FRANCE/USA) DID N OT RETURN AND WENT MISSING. IT WAS ALSO POINTED OUT THAT BEFORE TAKING THE STUD ENTS ON TOUR INDEMNITY BONDS WERE TAKEN FROM THEM FOR RS.7.5 LAKHS EACH BUT WHEN THEY WERE SOUGHT TO BE ENFORCED, ALL THE CHEQUES BOUNCED AND LEGAL NOTICES WERE ISSUED TO THEM UNDER THE NEGOTIABLE INSTRUMENTS ACT, WHEREUPON THE PAREN TS OF STUDENT BY NAME CHOLAVIYA JOICE NITYANAND GAVE ANOTHER CHEQUE WHICH WAS ENCASED BY THE ASSESSEE. THE ASSESSEE ALSO STATED THAT THE AMOUNT WAS SHOWN AS LIABILITY IN ITS ACCOUNTS. THE AO ON THE ABOVE FACTS TOOK THE VIEW THAT THE REPLY OF THE ASSESSEE WAS UNSATISFACTORY AS THE ASSESSEE WAS NOT ABLE TO PRODUCE ANY AGREEMENTS OR OTHER DOCUMENTS ENTERED INTO WITH THE PARTICIPANTS IN THE TOUR. HE THEREFORE RECORDED THE STATEMENT OF NITYANAND, T HE FATHER OF MS.JOICE. WE MAY REFER TO THE STATEMENT IN SOME DETAIL A LITTLE LATER BUT FOR THE PRESENT IT IS SUFFICIENT TO NOTE THAT THE AO FELT THAT THE STATEM ENT REVEALED A MUTUAL UNDERSTANDING BETWEEN DARPAN ACADEMY AND THE STUDEN TS TO THE EFFECT THAT THEY WOULD BE TAKEN TO THE FOREIGN COUNTRIES AS MEM BERS OF THE DANCE TROUPE BUT NOT FOR THE PURPOSE OF DANCE PERFORMANCES BUT T O PERMIT THEM TO STAY BACK AND NOT RETURN TO INDIA. HE SOUGHT TO FORTIFY HIS INFERENCE BY THE FOLLOWING POINTS: A) THE STUDENTS WHO ABSCONDED DURING THE USA TOUR WERE NOT PROPERLY QUALIFIED AS PERFORMERS FOR A FOREIGN PERFORMANCE I N FOLK DANCE. B) THEY HAD NOT HAD ANY TRAINING REGARDING THE FOREIGN PERFORMANCE BEFORE THEIR DEPARTURE. PAGE - 3 ADIT (EXEMPTION) VS. KARMAKSHETRA EDUCATIONAL FOUNDATION -3- C) THEY HAD NO MUSICAL OR DANCE BACKGROUND OTHER THAN SMALL OR AMATEURISH EXPOSURE WHICH WAS NOT SUFFICIENT FOR PE RFORMING OUTSIDE THE COUNTRY AS PART OF PRESTIGIOUS INSTITUTIONS, SU CH AS DARPAN ACADEMY. IN THIS VIEW OF THE MATTER, THE AO WAS OF THE VIEW THAT A SUM OF RS.7.50 LAKHS CHARGED BY THE ASSESSEE AS INDEMNITY BOND WAS NOTHI NG BUT CHARGES FOR SHIPPING THE STUDENTS TO USA WITHOUT A PROPER VISA AND NOT FOR DANCE PERFORMANCES. ACCORDINGLY, HE PROPOSED TO DENY THE EXEMPTION UNDER SECTION 11 ON THE GROUND THAT THE AFORESAID ACTIVITY WAS CO NTRARY TO THE OBJECTS OF THE ASSESSEE. 3. THE ASSESSEE WOULD APPEAR TO HAVE TAKEN STRONG O BJECTION TO THE AFORESAID PROPOSAL OF THE AO. IN PARTICULAR IT DEN IED ANY COMPLICITY IN THE ALLEGED ATTEMPT OF THE STUDENTS TO SETTLE IN FOREIG N COUNTRIES WITHOUT PROPER PAPERS. THE AO HOWEVER DENIED THE EXEMPTION, OVERRU LING THE ASSESSEES OBJECTION. HE THEREFORE HELD THAT THE INCOME OF TH E ASSESSEE WAS NOT EXEMPT UNDER SECTION 11 AND BROUGHT TO TAX ALL THE VOLUNTA RY DONATIONS, AMOUNTING TO RS.23,97,190/- UNDER THE HEAD INCOME FROM OTHER SO URCES. THE DEFICIT DECLARED IN THE RETURN WAS ALSO IGNORED. 4. ON APPEAL, THE CIT(A) HELD THAT THE CHARGE OF TH E AO THAT THE ASSESSEE ABETTED THE ILLEGAL IMMIGRATION OF SOME STUDENTS HA S NOT BEEN CONCLUSIVELY ESTABLISHED AND FURTHER THERE IS NO FINDING THAT TH E ASSESSEE UTILISED THE CONTRIBUTIONS RECEIVED FROM VARIOUS DEPARTMENTS OF THE CENTRAL AND STATE GOVERNMENTS FOR PURPOSES OTHER THAN CHARITABLE PURP OSES AS DEFINED IN SECTION 2(15) OF THE ACT. HE FURTHER HELD THAT EVEN ASSUMI NG THAT THE TRUST HAS APPLIED ITS INCOME TO AID ITS STUDENTS TO ILLEGALLY MIGRATE TO THE FOREIGN COUNTRIES, THE RESULT WOULD ONLY BE THAT THE EXPENSES INCURRED ON SUCH AN ACTIVITY CAN BE TREATED AS INCOME. HE FURTHER FOUND THAT THE EXPEN SES SUCH AS COST OF TICKETS, VISA CHARGES, INSURANCE CHARGES ETC. WERE MET BY TH E DANCE TROUPE MEMBERS AND THEREFORE IT CANNOT BE SAID THAT THE INCOME OF THE TRUST WAS APPLIED FOR NON- PAGE - 4 ADIT (EXEMPTION) VS. KARMAKSHETRA EDUCATIONAL FOUNDATION -4- CHARITABLE PURPOSES. THE NET SURPLUS FROM THE CONC ERNED FOREIGN TOUR WAS FOUND CREDITED TO THE INCOME AND EXPENDITURE ACCOUN T AND APPLIED FOR THE OBJECTS OF THE TRUSTS. ACCORDINGLY, THE CIT(A) HE LD THAT NO AMOUNT IS TO BE TAXED ON THIS SPECIFIC COUNT. AS REGARDS THE VOLUN TARY DONATION OF RS.23,97,190/-, THE CIT(A) HELD THAT THEY WERE RECE IVED AS DONATIONS OR GRANTS FOR SPECIFIC PURPOSES AND THERE WAS NO MATERIAL TO SHOW THAT THEY WERE APPLIED FOR OTHER PURPOSES. HE ACCORDINGLY HELD THAT THE DONATIONS WERE ELIGIBLE FOR EXEMPTION UNDER SECTION 11 REVERSING THE ORDER OF T HE AO. 5. HOWEVER, SO FAR AS THE AMOUNT OF RS.7.50 LAKHS R ECEIVED FROM MS.JOICE IS CONCERNED, THE CIT(A) VIEWED THE SAME AS PENALTY STIPULATED IN THE INDEMNITY BOND AND WAS NOT REFUNDABLE UNDER ANY CIR CUMSTANCES. HE THEREFORE HELD THE SAME TO BE THE ASSESSEES INCOME CHARGEABLE TO TAX. 6. THE ASSESSEE IS IN APPEAL IN ITA NO.1329/AHD/200 6 CHALLENGING THE FINDING OF THE CIT(A) THAT THE AMOUNT OF RS.7.50 LA KHS PAID BY MS.JOICE UNDER THE INDEMNITY BOND AND FORFEITED BY THE ASSESSEE IS INCOME LIABLE TO TAX. THE DEPARTMENT IS IN APPEAL IN ITA NO.1203/AHD/2006 TO CONTEND THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF RS.23,97,300/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF THE ASSESSEES CLAIM FOR EXEMPTION OF DONATION. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS. IN HIRALAL BHAGWATI V CIT (2000) 246 ITR 188, THE HONBLE GUJARAT HIGH COURT HELD THAT .ONCE REGISTRATION UNDER SECTION 12A(A) OF THE ACT IS GRA NTED, THE GRANT OF BENEFIT CANNOT BE DENIED. THE INCOME-TAX OFFICER WA S NOT JUSTIFIED IN REFUSING THE BENEFITS WHICH WOULD OTHERWISE ACCRUE UNDER THE REGISTRATION. IF THERE WAS NO REGISTRATION, AS CONT EMPLATED UNDER SECTION 12A(A) READ WITH RULE 17A, THE REVENUE WOULD HAVE B EEN JUSTIFIED IN MAKING A SUBMISSION THAT THE BENEFIT CANNOT BE GRAN TED, BUT WHERE THE PAGE - 5 ADIT (EXEMPTION) VS. KARMAKSHETRA EDUCATIONAL FOUNDATION -5- APPLICATION FOR REGISTRATION IS SUBMITTED AND THE R EGISTRATION HAS BEEN GRANTED, THE BENEFIT CANNOT BE DENIED ON THE GROUND THAT THE SCHEME IS NOT FOR THE BENEFIT OF THE PUBLIC AT LARGE. THIS DECISION HAS BEEN REFERRED TO WITH APPROVAL BY THE SUPREME COURT IN ACIT V SUR AT CITY GYMKHANA (2008) 300 ITR 214. IN THE CASE BEFORE US, THE CIT, GUJARA T-II HAS GRANTED REGISTRATION U/S.12A(A) AS FAR BACK AS 31-3-1975 AND THERE IS NO ORDER CANCELLING THE SAME PASSED BY A COMPETENT AUTHORITY. THE CHARITABLE NAT URE OF THE OBJECTS OF THE ASSESSEE-TRUST CANNOT THEREFORE BE QUESTIONED. THE ASSESSING OFFICER HAS ATTEMPTED TO SHOW THAT THERE WAS A JOINT ATTEMPT BY MS. JOICE NITHYANAND AND THE TRUST TO GET HER INTO USA WITHOUT ANY VALID PAP ERS OR WITHOUT FOLLOWING THE PROCEDURE PRESCRIBED BY THE IMMIGRATION RULES OF TH AT COUNTRY. THE FIRST REASON GIVEN FOR THIS IS THAT THE SAID STUDENT DID NOT POS SESS THE REQUISITE TRAINING AND EXPERIENCE IN DANCING IN ORDER TO BE ABLE TO BE PAR T OF A PERFORMING GROUP IN FRANCE/USA. THIS IS HOWEVER A SUBJECTIVE OPINION. E VEN OTHERWISE, NITHYANAND, THE FATHER OF THE STUDENT, IN HIS STATE MENT HAS AVERRED, IN ANSWER TO QUESTION NO.2 THAT MS. JOICE HAD PARTICIPATED IN DA NCING ACTIVITY DURING THE COLLEGE TIME AND ATTENDED PRIVATE COACHING CLASSES NEAR GURUKUL AREA, THAT SHE HAS NOT PERFORMED IN ANY DANCE EVENT IN INDIA, BUT THAT SHE JOINED DARPAN ACADEMY IN MARCH-APRIL 2001 FOR A PERIOD OF ABOUT 4 MONTHS UPTO JULY/AUGUST AND THAT A SUM OF RS.20,000 WAS PAID AS FEES FOR TH E TRAINING. SHE THEREFORE APPEARS TO HAVE BEEN SELECTED BY THE ACADEMY ON MER IT FOR THE FOREIGN TOUR. IT IS DIFFICULT ON THE MATERIAL BROUGHT ON RECORD TO QUES TION THE JUDGMENT OF THE ACADEMY IN SELECTING MS. JOICE FOR THE PERFORMANCE TOUR ABROAD. SECONDLY, THE ASSESSING OFFICER HAS REMARKED ABOUT THE NONCHALAN T ATTITUDE OF SHRI NITHYANAND, FATHER OF THE STUDENT AS REVEALING A T ACIT UNDERSTANDING WITH THE ACADEMY THAT MS. JOICE WOULD BE TAKEN AS MEMBER OF THE PERFORMERS ABROAD AND ALLOWED TO STAY BACK WITHOUT PROPER PAPERS. NO DOUBT HE HAS REFERRED TO SOME REPORTS ON HUMAN TRAFFICKING, BUT THE PAPERS F ILED AT PAGES 17-19 OF THE PAPER BOOK OF THE ASSESSEE SHOWS THAT THE CHARGES A GAINST THE ACADEMY AND THE PAGE - 6 ADIT (EXEMPTION) VS. KARMAKSHETRA EDUCATIONAL FOUNDATION -6- PERSONS IN CHARGE OF ITS AFFAIRS ON THIS COUNT WERE DROPPED AND THE POLICE HAD FILED A C SUMMARY STATEMENT TO THAT EFFECT. NITHY ANANDS ALLEGED NONCHALANT ATTITUDE MAY BE DUE TO THE FACT THAT WHEN THE STATE MENT WAS RECORDED FROM HIM ON 28-3-2003, HIS DAUGHTER WHO HAD GONE MISSING FRO M THE PERFORMERS GROUP HAD SURFACED IN USA AND HAD GOT MARRIED. AT THAT PO INT OF TIME IT MAY NOT BE PROPER TO READ TOO MUCH INTO HIS STATEMENT AND INFE R THAT HIS ATTITUDE WAS NONCHALANT, AS IF HE WAS NOT WORRIED ABOUT HIS DAUG HTER. WE WOULD VENTURE TO THINK THAT HAD HIS MENTAL STATE AT THE TIME WHEN HE CAME TO KNOW THAT HIS DAUGHTER HAD GONE MISSING SHOWED AN INDIFFERENT ATT ITUDE, THEN PERHAPS THE DEPARTMENTAL AUTHORITIES WOULD HAVE BEEN JUSTIFIED IN THEIR INFERENCE. MS. JOICE WENT MISSING IN OCTOBER, 2001 AND THE STATEMENT OF HER FATHER WAS BEING RECORDED IN MARCH, 2003 BY WHICH TIME SHE HAD SURFA CED IN USA, GOT MARRIED AND PROBABLY WELL-SETTLED. THE ASSESSING OFFICER HA D ALSO REFERRED TO THE FACT THAT INDEMNITY BOND WAS TAKEN FROM NITHYANAND IN TH E SUM OF RS.7.5 LAKHS AND THIS WAS AN INDICATION THAT EVEN AT THAT TIME IT WA S UNDERSTOOD BY THE PARTIES THAT MS. JOICE WOULD NOT RETURN. WE ASKED THE LEARN ED COUNSEL FOR THE ASSESSEE AS TO WHETHER SUCH BONDS WERE TAKEN FROM ALL THE ST UDENTS WHO WERE TAKEN ABROAD. HE TOOK A DAYS TIME TO VERIFY THE SAME AND MAKE A STATEMENT AND SUBMITTED THAT SINCE THE BONDS WERE IDENTICALLY WOR DED AND ONLY THE BLANKS WERE REQUIRED TO BE FILLED IN (SUCH AS CHEQUE NO. E TC.) THERE IS GOOD REASON TO THINK THAT ALL THE STUDENTS WHO WERE TAKEN ABROAD W ERE REQUIRED TO SIGN THEM. HE ALSO FILED 9 BONDS FROM DIFFERENT STUDENTS, SOME OF WHICH WERE SIGNED AND SOME WERE NOT. HE ALSO STATED THAT THESE WERE THE C OPIES OF THE BONDS WHICH WERE AVAILABLE WITH THE ACADEMY NOW, ASSERTING THAT THE BONDS WERE TAKEN FROM ALL THE STUDENTS AS A PRECAUTIONARY MEASURE. W E HAVE NO REASON TO DOUBT THE STATEMENT MADE AT THE BAR BY THE LEARNED COUNSE L FOR THE ASSESSEE. ONE WOULD EXPECT ANY INSTITUTION SUCH AS THE ACADEMY TO FOLLOW A UNIFORM PRACTICE WITHOUT ANY DISCRIMINATION, AND THEREFORE IT SEEMS ACCEPTABLE THAT INDEMNITY BONDS WERE TAKEN FROM ALL THE STUDENTS BEFORE DEPAR TURE. THEREFORE NO COMPLICITY BETWEEN THE STUDENTS AND THE TRUST CAN B E INFERRED, THAT EVEN BEFORE PAGE - 7 ADIT (EXEMPTION) VS. KARMAKSHETRA EDUCATIONAL FOUNDATION -7- THE DEPARTURE OF THE TROUPE IT WAS UNDERSTOOD THAT SOME OF THE STUDENTS WOULD NOT RETURN. 8. THE ASSESSING OFFICER HAS ALSO REFERRED TO THE F ACT THAT THE ASSESSEE DID NOT PRODUCE ANY AGREEMENTS OR DOCUMENTS. A PERUSAL OF THE ANSWER OF NITHYANAND TO QUESTION NO.4 SHOWS THAT THE STUDENTS OR THEIR PARENTS WERE NOT REQUIRED TO SIGN ANY CONTRACT WITH DARPAN ACADEMY O R ANY OTHER INSTITUTION. WHEN NO CONTRACT OR AGREEMENT WAS ENTERED INTO THER E IS NO QUESTION OF ANY FAILURE TO FILE THE SAME WITH THE ASSESSING OFFICER . 9. THE ASSESSING OFFICER HAS ALSO NOT DISPUTED THE FACT THAT ALL THE STUDENTS WHO WENT ABROAD AS PART OF THE PERFORMING TROUPE OF THE ACADEMY WERE STUDENTS OF THE ACADEMY AND OBSERVATIONS TO THIS EF FECT CAN BE FOUND AT PAGES 7-8 OF THE ASSESSMENT ORDER. FURTHERMORE, AS THE LE ARNED COUNSEL FOR THE ASSESSEE POINTED OUT, IF THE DEPARTMENTAL AUTHORITI ES WERE TO JUSTIFY THEIR ALLEGATION THAT THERE WAS COMPLICITY BETWEEN THE TR UST AND NITHYANAND THEN IT WAS INCUMBENT UPON THEM TO HAVE EXAMINED THE MANAGI NG TRUSTEE ALSO. THAT WAS NOT DONE. IT IS NOT UNDERSTOOD HOW THEY HAVE CO ME TO THE CONCLUSION ONLY ON THE BASIS OF THE STATEMENT OF NITHYANAND. THIS I S NOT TO SAY THAT HIS STATEMENT SHOWS COMPLICITY. WHAT IS MEANT TO CONVEY IS THAT A CONCLUSION THAT TWO PERSONS ARE GUILTY OF COMPLICITY IN AN OFFENCE CANN OT BE REACHED BY MERELY EXAMINING ONE OF THEM. IN ANY CASE, EVEN ASSUMING F OR THE SAKE OF ARGUMENT THAT THERE WAS A VIOLATION OF THE IMMIGRATION RULES TO THE KNOWLEDGE OF THE TRUSTEE AND THERE WAS COMPLICITY IN THE SAME, A MIS DEED OF A TRUSTEE CANNOT DISENTITLE THE TRUST TO THE EXEMPTION AND DOES NOT AFFECT THE CHARITABLE NATURE OF ITS OBJECTS AS HELD BY THE RAJASTHAN HIGH COURT IN DCIT V COSMOPOLITAN EDUCATION TRUST (2000) 244 ITR 494. AT BEST OR WORS T, ACTION COULD BE TAKEN AGAINST THE TRUSTEE OR OTHER PERSON WHO HAS COMMITT ED THE DEED. IN THE PRESENT CASE, IT MAY BE CLARIFIED THAT THE ACTION WAS DROPP ED BY THE POLICE AUTHORITIES. PAGE - 8 ADIT (EXEMPTION) VS. KARMAKSHETRA EDUCATIONAL FOUNDATION -8- 10. THE MERE TAKING OF AN INDEMNITY BOND CANNOT VIT IATE THE CHARITABLE NATURE OF THE OBJECTS OF THE TRUST, AS WAS CONTENDE D ON BEHALF OF THE REVENUE. A DISTINCTION HAS TO BE MADE BETWEEN THE OBJECTS OF T HE TRUST PER SE, AND THE MEANS TO ACHIEVE THOSE OBJECTS. IT IS NOT ONE OF TH E OBJECTS OF THE TRUST TO COLLECT MONIES FROM THE STUDENTS BY ASKING THEM TO EXECUTE INDEMNITY BONDS. IN ORDER TO PROPAGATE INDIAN DANCES ABROAD, THE DARPAN ACADE MY UNDERTOOK THE FOREIGN TOUR WITH PERFORMING STUDENTS. THE OBJECT OF THE TR UST WAS SOUGHT TO BE ACHIEVED THROUGH THE PERFORMANCE TOUR. THE REQUIREM ENT THAT THE STUDENTS SHOULD EXECUTE INDEMNITY BONDS IS PURELY AN ADMINIS TRATIVE MATTER, OR A PRECAUTION, IN ORDER TO ENSURE DISCIPLINE AND PROPE R BEHAVIOUR OF THE STUDENTS. IT MUST BE REMEMBERED THAT THE STUDENTS WERE GRANTED V ISA WITHOUT ANY DOCUMENTS AND ONLY ON THE REPUTATION OF THE ACADEMY AND IT WAS THE RESPONSIBILITY OF THE ACADEMY TO ENSURE THAT ALL OF THEM RETURNED TO INDIA. IT WAS TO ENSURE THIS THAT THE INDEMNITY BOND WAS TAKE N. THAT HAS NOTHING TO DO WITH THE OBJECT OF THE TRUST. IT DOES NOT VITIATE O R AFFECT THE CHARITABLE NATURE OF THE OBJECTS. 11. THE LEARNED SR. DR REFERRED TO THE JUDGMENT OF THE SUPREME COURT IN INDIAN CHAMBER OF COMMERCE V CIT (1975) 101 ITR 796 AND THE JUDGMENT OF THE KERALA HIGH COURT IN COCHIN CHAMBER OF COMMERCE (1977) 110 ITR 243 IN WHICH THE FORMER WAS FOLLOWED. IN THESE CASES IT WAS HELD THAT THE ONUS OF PROVING THAT THE RECEIPTS WERE EXEMPT FROM TAX WAS ON THE ASSESSEE. IN THE PRESENT CASE, AS WE HAVE POINTED OUT, THERE IS NOTH ING TO SHOW THAT THE TRUST INDULGED IN ANY UNLAWFUL ACTIVITY OR ABETTED IN ILL EGAL IMMIGRATION OF ITS STUDENTS TO USA OR ANY OTHER FOREIGN COUNTRY. THE I NDEMNITY AMOUNT RECEIVED BY THE TRUST CANNOT THEREFORE BE SAID TO LOSE EXEMP TION, PROVIDED THE OTHER CONDITIONS OF SECS.11 & 12, VIZ., REGARDING THE APP LICATION OF THE TRUST FUNDS FOR CHARITABLE PURPOSES IN INDIA ARE SATISFIED. THE CIT (A) HAS FOUND THAT OUT OF THE CONTRIBUTIONS OF RS.23.20 LAKHS FROM PARTICIPANTS T HE ASSESSEE HAS SPENT RS.20,00,627 BY WAY OF COST OF TICKETS, VISA CHARGE S, INSURANCE ETC. THE PAGE - 9 ADIT (EXEMPTION) VS. KARMAKSHETRA EDUCATIONAL FOUNDATION -9- EXPENDITURE HAS THUS BEEN FOUND TO HAVE BEEN MET OU T OF THE SPECIFIC CONTRIBUTIONS MADE BY THE STUDENTS. THE NET SURPLUS FROM THE FOREIGN TOUR HAS BEEN FOUND BY HIM TO BE CREDITED TO THE INCOME AND EXPENDITURE ACCOUNT AND APPLIED FOR THE OBJECTS OF THE TRUST. THE OBJECTION OF THE DEPARTMENT CANNOT THEREFORE SURVIVE. 12. HAVING HELD THAT THE RECEIPTS BY WAY OF CONTRIB UTIONS TO THE TRUST FOR MEETING THE EXPENDITURE ON THE FOREIGN TOUR CANNOT BE ASSESSED AS INCOME, THE CIT(A) WAS NOT JUSTIFIED IN SINGLING OUT THE INDEMN ITY BOND AMOUNT OF RS.7.50 LAKHS RECEIVED FROM MS. JOICE. IT IS INCIDENTAL TO THE CARRYING ON OF THE ACTIVITIES OF THE TRUST. WE HAVE ALREADY FOUND THAT IT WAS NOT RECEIVED AS CONSIDERATION FOR ANY UNLAWFUL PURPOSE. THE CIT(A) WAS THEREFORE NOT RIGHT IN DIRECTING THE ASSESSING OFFICER TO TAX THE SAME. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. NO COSTS. ORDER PRONOUNCED IN THE OPEN COURT 9 TH DECEMBER, 2009. SD/- SD/- (M.V. NAYAR) ACCOUNTANT MEMBER (R.V.EASWAR) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 09-12-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD