DCIT, C-1 (Exemptions), Chandigarh V. Amritsar International Foundation (Trust), Amritsar

ITA 1313/CHANDI/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5280 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 01-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Keywords: Charitable institution; Question of law
• Section: 80G; 12A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH A, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.1313/CHD/2017 (ASSESSMENT YEAR: 2014-15) THE DCIT VS. AMRITSAR INTERNATIONAL FOUNDATION CIRCLE-1 (EXEMPTIONS) AMRITSAR JALANDHAR G.T. ROAD CHANDIGARH NEAR MANWALA P.O. MEHARBAN AMRITSAR PAN NO. AABTA0422D (APPELLANT) (RESPONDENT) ASSESSEEBY : SHRI SUDHIR SEHGAL REVENUE BY : SMT. CHANDRAKANTA DATE OF HEARING : 08.01.2018 DATE OF PRONOUNCEMENT : 31/01/2018 ORDER PER ANNAPURNA GUPTA, A.M. : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 2, AMRITSAR DATED 18/05/2017 AND PERTAINS TO ASSESSMENT YEAR 20 14-15 2. THE ISSUE IN THE PRESENT APPEAL PERTAINS TO EXEM PTION CLAIMED BY THE ASSESSEE U/S 10(23C)(VI) OF THE ACT ON ACCOUNT OF QUALIFYING AS AN INSTITUTE ESTABLISHED ONLY FOR THE PURPOSE OF EDUCATION. 3. BRIEFLY STATED THE ASSESSEE WAS REGISTERED AS A CHARITABLE TRUST UNDER SECTION 12A OF THE INCOME TAX ACT,1961 AND HAD ALSO BEEN GRANTED APPROVAL AS AN INSTITUTE ESTABLISHED W HOLLY FOR THE PURPOSE OF EDUCATION BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 10(23C)(IV) OF THE ACT. DURING THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE HAD CLAIMED EXEMPTION OF ITS INCO ME UNDER SECTION 10(23C)(VI) OF THE ACT. THE AO DENIED THE S AME SINCE HE 2 FOUND THAT THE ASSESSEE HAD ADVANCED AN INTEREST FR EE LOAN AMOUNTING TO RS. 30,00,000/- TO ONE M/S BABA AMARNA TH EDUCATIONAL SOCIETY WHICH ATTRACTED THE PROVISIONS OF SECTION 13(1)/(D) OF THE ACT ,DISENTITLING THE ASSESSEE TO CLAIM EXEMPTION OF ITS INCOME .THE AO FOUND THE SAID LOAN TO BEING MADE TO A PERSON SPECIFIED U/S 13(3) OF THE ACT THU S ATTRACTING THE PROVISIONS OF SECTION 13(1) ACT. THE AO ALSO F OUND THAT THE LOAN ADVANCED VIOLATED THE PROVISIONS OF SECTION 11(5) OF THE ACT, AS PER WHICH THE ASSESSEE WAS REQUIRED TO DEP OSIT ITS FUNDS IN SPECIFIED MODES ONLY , THUS ATTRACTING THE PROVI SIONS OF SECTION 13(1)(D) OF THE ACT. THE A.O. FURTHER HELD THAT TH E MAIN OBJECT OF THE ASSESSEE WAS NOT PROVIDING EDUCATION BUT INDULG ING IN THE ACTIVITY OF GIVING LOANS AND ADVANCES AND THEREFORE ALSO HELD THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM EXEMPTI ON OF ITS INCOME U/S 10(23C)(VI) OF THE ACT 4. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT( APPEAL) WHO ALLOWED THE ASSESSEES APPEAL BRUSHING A SIDE ALL THE FINDINGS OF THE AO . AGGRIEVED BY THE SAME THE REVE NUE HAS COME UP IN APPEAL BEFORE US RAISING THE FOLLOWING G ROUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN ALLOWING EXEMPTION UNDER SECTION 10(23C)(VI) OF THE IT. ACT, 1961 WITHOUT APPRECIATING THAT THERE WAS A CLEAR VIOLATION OF SU B CLAUSE(A) OF UN-NUMBERED PROVISO 3 TO SECTION 10(23C) WHICH STRICTLY PROVIDE S THAT APPLICATION OF INCOME SHALL BE WHOLLY AND EXCLUSIVELY TO THE OBJECTS FOR WHICH IT IS ESTABLISHED. THE ASSESSEE WAS PRECLUDED FROM APPLYING ITS INCOME OTH ER THAN ON ITS OBJECTS WHICH WAS SOLELY FOR EDUCATION PURPOSES. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN NOT TAKING INTO ACCOUNT THAT THE ADVANCEMENT OF LOAN IS NOT AN APPLICATION OF INCOME FOR THE PURPOSE OF SECTION 10 (23C)(VI). 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN NOT CONSIDERING SUB CLAUSE (B) OF UN-NUMBERE D PROVISO 3 TO SECTION 10(23C) WHICH PROHIBITS INVESTMENT OF FUNDS OTHER THAN IN A NY MODE OR FORMS SPECIFIED IN SECTION 11(5). 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN ALLOWING BENEFIT UNDER SECTION 10(23C)(VI) O F THE IT. ACT, 1961 WITHOUT APPRECIATING THAT THERE WAS A CLEAR VIOLATION OF SE CTION 13 OF THE INCOME TAX ACT. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW AS THE FINDINGS RECORDED ARE PERVERSE AND CONTR ARY TO THE EVIDENCE/MATERIAL AVAILABLE ON RECORD AND DULY CONSIDERED BY THE AO. 3 5. DURING THE COURSE OF HEARING BEFORE US LD. COUNS EL FOR THE ASSESSEE AT THE OUTSET DREW OUR ATTENTION TO THE OR DER PASSED BY THE I.T.A.T. CHANDIGARH BENCH IN THE CASE OF THE AS SESSEE FOR THE PRECEDING ASSESSMENT YEAR I.E. 2013-14 AND POINTED OUT THEREFROM THAT THE ORDER OF THE CIT(A) ,ALLOWING TH E ASSESSEES CLAIM OF EXEMPTION U/S 10(23C)(VI) OF THE ACT ,WHIC H WAS DENIED BY THE AO FOR IDENTICAL REASONS WAS UPHELD BY THE I .T.A.T. LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE CATEGORICAL FINDING OF THE ITAT IN THE SAID ORDER AT PARA 16-22 OF THE ORDER, UPHOLDING THE FINDINGS OF THE LD. CIT (APPEAL) THAT THE ASSESSEE HAD NEITHER VIOLATED THE PROVISION OF SECTION 13(1( )C) R.W.S 13(3) OF THE ACT NOR THE PROVISIONS OF SECTION 13(1)D R.W .S11( 5 )OF THE ACT AND ALSO THAT IT WAS NOT INDULGING IN THE ACTI VITY OF PROVIDING LOANS/ADVANCES, ON ACCOUNT OF THE FACT THAT LOAN O F RS. 30,00,000/- WAS GIVEN BY THE ASSESSEE TO M/S BABA A MARANTH EDUCATIONAL SOCIETY. THE RELEVANT FINDINGS OF THE I .T.A.T. ARE AS UNDER: 16. 'WE HAVE HEARD BOTH THE PARTIES ,GONE THROUG H THE ORDERS OF THE AUTHORITY BELOW AND ALSO THE DOCUMENTS REFERRED TO BEFORE US. WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(APPEALS). CLEARLY THE ONLY REASON FOR FINDING THE ASSESSEE INELIGIBLE FOR EXEMPTION U/S 10(23C)(VI) IS ON ACCO UNT OF THE INTEREST FREE LOAN GIVEN BY IT TO M/S BABA AMARNATH CHARITABLE TRUST . THE FACT THAT THE IMPUGNED LOAN/ADVANCE PERTAINED TO A.Y 2011-12 AND NOT TO THE YEAR IN APPEAL BEFORE US HAS REMAINED UNCONTROVERTED, SO IN ANY CASE, THERE CANNOT BE SAID TO BE ANY VIOLATION IN THE IM PUGNED YEAR BY THE ASSESSEE EITHER OF THE PROVISIONS OF SECTION 13(L)(C) READ WITH SECTION 13(3) OR EVEN SECTION 13(1 )(D) RWS 1 1(5) OF THE ACT AT ALL. 17. FURTHER, WE FIND THAT THE ASSESSEE HAD DEMO NSTRATED BY WAY OF A DETAILED CHART LISTING ALL RELATIONSHIPS COVERED U/S 13(3), THAT M/S BABA AMARNATH EDUCATIONAL SOCIETY IS NOT A SPECIFIED PERSON AS PE R THE PROVISIONS OF SECTION 13(3) OF THE ACT AND THE REVENUE HAS NOT CONTROVERTED THE SAME. LD. DR HAS MERELY REITERATED THE GENERAL AND CASUAL REMARKS OF THE AS SESSING OFFICER OF ESTABLISHING NEXUS BETWEEN THE ASSESSEE AND M/S BABA AMARNATH ED UCATIONAL SOCIETY BY WAY OF HAVING ONE COMMON MEMBER ONLY OR ON ACCOUNT OF INDULGING IN TRANSACTION OF GIVING LOAN TO ONE ANOTHER. TH E LD. DR HAS NOT POINTED OUT AS TO HOW THE ABOVE SITUATIONS ARE COVERED U/S 13(3) TO ESTABLISH M/S BABA AMARNATH EDUCATIONAL SOCIETY AS A SPECIFIED PERSON, WHICH IS AN EXHAUSTIVE LIST, LISTING ONLY THE FOLLOWING AS 'SPECIFIED PERSONS'; A) AUTHOR OF THE TRUST OR FOUNDER OF THE INSTITUTION B) PERSONS WHO HAVE MADE SUBSTANTIAL CONTRIBUTION TO T HE TRUST OR INSTITUTION I.E EXCEEDING RS.50,000/- C) WHERE THE AUTHOR, FOUNDER OR PERSON IS A HUF, MEMBER OF THE HUF D) TRUSTEE OF THE TRUST OR MANAGER OF THE INSTITUTION E) ANY RELATIVE OF THE AFORESAID PERSONS F) ANY CONCERN IN WHICH AFORESAID PERSONS HAVE SUBSTAN TIAL INTEREST. 4 18. CLEARLY HAVING A COMMON MEMBER OR INDULGING IN A NU MBER OF TRANSACTIONS OF LOAN AND ADVANCES IS NOT ENVISAGED AS ESTABLISHI NG A SPECIFIED PERSON U/S 13(3) OF THE ACT. HAVING SAID SO, NO QUESTION ARISE S OF THE ASSESSEE INDULGING IN TRANSACTIONS PROHIBITED BY SECTION 13(L)(C) OF THE ACT, WHICH LISTS TRANSACTIONS WITH PERSONS SPECIFIED U/S 13(3) OF THE ACT. THEREFORE, WE CONCUR WITH THE LD.CIT(APPEALS) THAT THE PROVISIONS OF SECTION 13(L )(C) READ WITH SECTION 13(3) ARE NOT APPLICABLE IN THE PRESENT CASE. 19. WE ALSO FIND THAT THE ASSESSEE HAD STATED ON RECORD THAT M/S BABA AMARNATH EDUCATIONAL SOCIETY WAS ALSO A CHARITABLE SOCIETY REGISTERED U/S 12A OF THE ACT, FOR THE PURPOSE OF IMPARTING EDUCATION AND LOAN WAS ADVANCED TO IT TO ASSIST IN CARRYING OUT ITS OBJECTIVES WHICH WAS IDE NTICAL TO THAT FOR WHICH THE ASSESSEE SOCIETY WAS ALSO SET UP. THESE FACT HAVE NOT BEEN CONTROVERTED BY THE REVENU E. THE SAID LOAN/ADVANCE THEREFORE QUALIFIED AS APPLICATION OF INCOME BY THE ASSESSEE AND WAS NOT AN INVESTMENT OR DEPOSIT COVERED U/S 11(5) OF THE ACT. THE ASSESSEE, WE HOLD THEREFORE CANNOT BE SAID TO HAVE VIOLATED THE PRO VISIONS OF SECTION 13(L)(D) R.W.S 11(5) OF THE ACT. THE RELIANCE PLACED BY LD.COUNSE L FOR THE ASSESSEE ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) VS ACME EDUCATIONAL SOCIETY 326 ITR 14 6 IS APT, WHEREIN AFTER DISCUSSING THE ISSUE AT LENGTH IT WAS HELD THAT INT EREST FREE LOAN GIVEN BY ONE CHARITABLE SOCIETY TO ANOTHER CHARITABLE SOCIETY HAVING SIMILAR OBJECTS WAS NEITHER A DEPOSIT OR INVESTMENT IN VIOLATION OF SECTION 13(L)(D) R.W.S. 11(5) OF THE ACT. THE RELEVANT FINDINGS OF THE HON'BLE HIGH COUR T AT PARA 15 OF ITS ORDER ARE AS UNDER: '15. KEEPING IN VIEW THE AFORESAID EXPOSITION OF LAW, WE ARE OF THE OPINION THAT INTEREST-FREE LOAN OF RS. 90,50,000 GIVEN BY T HE ASSESSEE-SOCIETY TO NA.V BHARTI EDUCATIONAL SOCIETY DOCS NOT VIOLATE S. 13(LJ(D) R/W S. 11(5) OF ACT, 1961 AS THE SAID LOAN WAS NEITHER AN 'INVESTME NT' NOR A 'DEPOSIT'. THIS IS MORE SO AS BOTH THE SOCIETIES HAD SIMILAR OBJECT S AND WERE REGISTERED UNDER S. 12A OF ACT, 1961 AND HAD APPROVALS UNDER S , 80G OF THE ACT, 1961. THE FACT THAT THE LOAN WAS INTEREST-FREE AND HAD BEEN SUBSEQUENTLY RETURNED IS ALSO SIGNIFICANT. IN VIEW OF THE ORDER PASSED BY THE CIT(A) IN THE CASE OF NAV BHARATI EDUCATIONAL SOCIETY, MS. BANSAL 'S ALLEGATION WITH REGARD TO 'ENTRY SCAM' ALSO DOES NOT SURVIVE. CONSE QUENTLY, THERE IS NO SUBSTANTIAL QUESTION OF LAW INVOLVED IN THE PRESENT APPEAL AND ACCORDINGLY, APPEAL IS DISMISSED BUT WITH NO ORDER AS TO COSTS.' 20. THE SAID PROPOSITION HAS BEEN REITERATED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS INDIAN NATIONAL THEATRE TRUST (2008) 305 ITR 149. LD.COUNSEL FOR THE ASSESSEE HAS ALSO DRAWN OUR ATTENTION TO A NUMBER O F OTHER DECISIONS WHEREIN IT HAS BEEN HELD THAT GIVING LOANS TO OTHER CHARITABLE INSTITUTIONS REGISTERED U/S 12A HAVING SIMILAR OBJECTS ARE NOT IN VIOLATION OF THE PROVISIONS OF SECTION 13(L)( D ) READ WITH SECTION 11(5) OF THE ACT. LD. DR HAS NOT DISTI NGUISHED THE CASE LAWS RELIED UPON BY THE ASSESSEE. ON THE CONTRARY, THE RELIANCE PLACED BY THE LD.DR ON THE DECISION OF THE HON.BLE MADRAS HIGH COURT IN THE CA SE OF CIT VS V.G.P. FOUNDATION, WE FIND IS BASED ON DIFFERENT SET OF FA CTS, SINCE IN THAT CASE THE ADVANCE WAS GIVEN TO SISTER CONCERN WITH NO FINDING THAT IT WAS ALSO A CHARITABLE SOCIETY REGISTERED WITH THE SAME OBJECTS AS THE DON OR, WHILE IN THE PRESENT CASE THE LOAN HAS BEEN GIVEN BY ONE SOCIETY TO ANOTHER HAVING SIMILAR OBJECTS AND BOTH SOCIETIES ARE REGISTERED U/S 12A. THEREFORE, W E AGREE WITH THE LD.CIT(APPEALS) THAT THE IMPUGNED ADVANCE DID NOT VIOLATE THE PROVISIONS OF SECTION 13(L)(D) R.W.S. 11(5) OF THE ACT ALSO. 21. IN VIEW OF THE ABOVE, WE CONCUR WITH THE LD.CIT (APPEALS) THAT THE ASSESSEE BY GIVING ADVANCE OF RS.30 LACS TO M/S BABA AMARNATH E DUCATIONAL SOCIETY HAD NOT VIOLATED THE PROVISIONS OF SECTION 13(L)(C) READ WI TH SECTION 13(3) OR SECTION 13(L)(D) 5 R.W.S. 11(5) OF THE ACT AND, THEREFORE, THERE WAS N O REASON TO DENY EXEMPTION CLAIMED BY THE ASSESSEE U/S 10(23C)(VI) OF THE ACT. 22. WE ARE ALSO IN AGREEMENT WITH THE LD.COUNSEL OF THE ASSESSEE THAT NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO PROVE THAT THE MAIN OBJECT OF THE ASSESS EE ACTUALLY WAS GIVING LOANS AND NOT PROVIDING EDUCATION. EXCE PT FOR THE FACT OF GIVING LOAN OR RS.30 LACS TO BABA AMARNATH EDUCATIONAL TRUST NO OTHER LOAN GIVEN BY THE ASSESSEE HAS BEEN SHOWN TO US. THE SAID LOAN HAS ALREADY BEEN HELD BY US AS APPLIC ATION OF ITS INCOME FOR THE PURPOSE OF ADVANCING ITS OBJECT OF PROVIDING EDUCATION, ABOVE. THEREFORE, THERE IS NO MERIT IN THE CONTENTION OF THE LD.DR THAT THE ASSESSEE IS INDULG ING IN THE ACTIVITY OF GIVING LOANS AND ADVANCES. EVEN THE IDE NTICAL ALLEGATION OF THE LD.DR VIS-A-VIS THE ENTIRE GROUP WE FIND REMAINS UNPROVED SINCE THE TABLE RELIED UPO N BY THE LD.DR IN SUPPORT OF ITS CONTENTION REFLECTS ONLY THE LOAN GIVEN BY THE ASSESSEE AND TWO OTHER TRUSTS OF THE G ROUP TO M/S BABA AMARNATH TRUST. THE SAME HAS ALREADY BEEN EXPL AINED BY THE LD. COUNSEL FOR THE ASSESSEE AS HAVING BEEN GIV EN TO LEND FINANCIAL SUPPORT TO THE SAID TRUST IN THE INITIAL YEARS OF ITS SETTING UP, WHICH FACT HAS NOT BEEN CONTROVERTED B Y THE REVENUE. EVEN OTHERWISE IT FAILS TO BRING TO LIGH T HOW THE ENTIRE GROUP WAS INVOLVED IN CREATING CAPITAL ONLY. EVEN THE REFERENCE TO THE TRANSACTION BETWEEN SHIVA EDUCATIO NAL TRUST AND SACHDEVA BUILDING CONTRACTORS PVT. LTD. HAS NO RELEVANCE TO THE ISSUE, SINCE AS RIGHTLY POINTED OUT BY THE LD.COUNSEL FOR THE ASSESSEE NO DISALLOWANCE/ADD ITION HAS BEEN MADE ON ACCOUNT OF THE SAME. THE CONTENTI ON OF THE LD.DR, WE HOLD, THEREFORE, HAS NO LEGS TO STAND ON AND IS THUS DISMISSED. 6. LD. DR FAIRLY ADMITTED THAT THE ISSUE WAS COVERE D BY THE AFORESAID ORDER OF THE I.T.A.T. 7. IN VIEW OF THE ABOVE WE FIND NO REASON TO INTERF ERE IN THE ORDER OF THE LD, CIT (APPEAL) ALLOWING THE ASSESSEE S CLAIM OF EXEMPTION UNDER SECTION 10(23C)(VI) OF THE ACT. THE ITAT HAS IN THE PRECEDING YEAR CATEGORICALLY HELD THE IMPUGNED ADVANCE MADE BY THE ASSESSEE OF RS.30 LACS TO M/S BABA AMAR NATH EDUCATIONAL SOCIETY TO BE NOT IN VIOLATION OF THE P ROVISIONS OF SECTION 13(1)/(D) OF THE ACT AND HAS ALSO CATEGORI CALLY HELD THAT THE ASSESSEE CANNOT BE SAID TO BE INDULGING IN THE ACTIVITY OF GIVING LOANS AND ADVANCES. SINCE ,ADMITTEDLY THE AS SESSEE HAS BEEN DENIED EXEMPTION IN THE IMPUGNED YEAR ON ACCOU NT OF THE SAME ADVANCE MADE, BY HOLDING IT TO BE IN VIOLATION OF SECTION 13(1)/(D) OF THE ACT AND BY HOLDING FOR THE SAME R EASON THAT THE ASSESSEE IS INDULGING IN THE ACTIVITY OF MAKING LOA NS AND 6 ADVANCES , THE ISSUE STANDS DECIDED IN FAVOUR OF TH E ASSESSEE FOLLOWING THE ORDER OF THE ITAT IN THE CASE OF THE ASSESSEE FOR THE PRECEDING YEAR. 8. IN VIEW OF THE ABOVE WE UPHOLD THE ORDER OF THE CIT(A) ALLOWING THE ASSESSEES CLAIM OF DEDUCTION U/S 10(23 C)(VI) OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE REVENUE AR E THEREFORE DISMISSED. 9. IN EFFECT THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31/01/ 2018 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR