Ideal Education and Welfare Society, Ghaziabad V. ACIT, Ghaziabad

ITA 1376/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52816 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 05-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 17-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Assessee Lawyers: RANO JAIN CAS
• Keywords: Charitable institution; Question of law
• Section: 12AA; 68; 12; 11

Judgement Text

ITA NO. 1376/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1376/DEL/2011 A.Y. : 2006-07 IDEAL EDUCATION AND WELFARE SOCIETY, B-49, RAMPRASTHA, GHAZIABAD (PAN/GIR NO. : AAAT14155) VS. ACIT, RANGE - I, GHAZIABAD (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. VED JAIN, AND MS. RANO JAIN, CAS DEPARTMENT BY : SH. A.K. MONGA, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 24.1.2 011 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE GROUNDS READ AS UNDER:- (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS) IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING TH E ITA NO. 1376/DEL/2011 2 ADDITION OF ` 74,05,400/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DONATION RECEIVED. (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ORDER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORING THE CONTENTION OF THE APPELLANT THAT NO ADDITIONS UNDER SECTION 68 OF THE ACT CAN BE MADE AN ACCOUNT OF DONATIONS RECEIVED AS DONATION PER-SE IS INCOME ACCORDING TO THE DEFINITION OF INCOME UNDER SECTION 2(24)(IIA). (IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH ON FACTS AND IN LAW IN NOT APPRECIAT ING THE PROVISION OF SECTION 11 OF THE ACT WHEREBY EXEMPTION IS TO BE PROVIDED TO THE EXTENT WHICH INCOME OF THE TRUST IS APPLIED TO CHARITABLE OR REL IGIOUS PURPOSES IN INDIA. (V) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH ON FACTS IN LAW IN CONFIRMING THE AC TION OF ASSESSING OFFICER IN NOT GIVING BENEFITS OF PRO VISION OF SECTION 11 READ WITH SECTION 12 OF THE ACT DESP ITE THE ASSESSEE FULFILLING ALL THE CONDITIONS AND BEIN G ELIGIBLE FOR THE SAME. (VI) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING TH E ITA NO. 1376/DEL/2011 3 SAME DESPITE THE FACT THAT THE SOCIETY IS DULY REGISTERED UNDER SECTION 12AA OF THE ACT. (VII) THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR AL TER ANY OF THE GROUNDS OF APPEAL. 3. IN THIS CASE THE ASSESSMENT WAS FRAMED U/S 143(3 ) OF THE IT ACT AND ASSESSING OFFICER HAD TREATED THE DONATION AMOU NTING TO ` 74,05,400/- AS UNEXPLAINED DEPOSITS. THIS WAS AS IN THE OPINION OF THE ASSESSING OFFICER THAT ASSESSEE HAS NOT BEEN ABLE TO PRODUCE THE CREDIBLE EVIDENCE REGARDING THE GENUINENESS AND CRE DITWORTHINESS OF THE DONATIONS. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOM E TAX (APPEALS) CONFIRMED THE ASSESSING OFFICERS ACTION. 5. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 6. LD. COUNSEL OF THE ASSESSEE HAS MADE AN ALTERNATE SUBMISSION THAT EVEN IF THE DONATION IS TREATED AS INCOME OF TH E ASSESSEE, ASSESSEE CANNOT BE DENIED BENEFIT FOR EXEMPTION U/S 11 OF THE IT ACT AS MORE THAN 85% OF THE INCOME HAS BEEN UTILIZED FO R CHARITABLE PURPOSES. IN THIS CONNECTION, HE REFERRED THE D ECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIRECTOR O F INCOME TAX (EXEMPTION) VS. KESHAV SOCIAL AND CHARITABLE FOUNDAT ION 278 ITR 152 (DEL). IN THIS CASE IT WAS HELD AS UNDER:- TO OBTAIN THE BENEFIT OF THE EXEMPTION UNDER S. 11 , THE ASSESSEE IS REQUIRED TO SHOW THAT THE DONATIONS WER E VOLUNTARY. IN THE PRESENT CASE, THE ASSESSEE HAD N OT ONLY DISCLOSED ITS DONATIONS, BUT HAD ALSO SUBMITTED A LI ST OF DONORS. THE FACT THAT THE COMPLETE LIST OF DONORS WAS NOT ITA NO. 1376/DEL/2011 4 FILED OR THAT THE DONORS WERE NOT PRODUCED, DOES N OT NECESSARILY LEAD TO THE INFERENCE THAT THE ASSESSEE WAS TRYING TO INTRODUCE UNACCOUNTED MONEY BY WAY OF DON ATION RECEIPTS. THIS IS MORE PARTICULARLY SO IN THE FACTS OF THE CASE WHERE ADMITTEDLY MORE THAN 75 PER CENT OF THE DONATIO NS WERE APPLIED FOR CHARITABLE PURPOSES. SECTION 68 HAS NO APPLICATION TO THE FACTS OF THE CASE BECAUSE THE AS SESSEE HAD IN FACT DISCLOSED THE DONATIONS OF ` 18,24,200/ - AS ITS INCOME AND IT CANNOT BE DISPUTED THAT ALL RECEIPTS, OTHER THAN CORPUS DONATIONS, WOULD BE INCOME IN THE HANDS OF THE ASSESSEE. THERE WAS, THEREFORE, FULL DISCLOSURE I NCOME BY THE ASSESSEE AND ALSO APPLICATION OF THE DONATIONS FOR CHARITABLE PURPOSES. IT IS NOT IN DISPUTE THAT TH E OBJECTS AND ACTIVITIES OF THE ASSESSEE WERE CHARITABLE IN N ATURE, SINCE IT WAS DULY REGISTERED UNDER THE PROVISIONS OF S. 12A. FOR THESE REASONS, THERE IS NO MERIT IN THE APPEAL. NO SUBSTANTIAL QUESTION OF LAW ARISES. 6.1 OTHER SUBMISSIONS OF THE ASSESSEE IN THIS REGA RD ARE AS UNDER:- IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO ABOVE, THE ACTION OF THE ASSESSING OFFICER IN ASSESSING ` 74, 05,400/- AS INCOME IN ISOLATION IS OTHERWISE UNTENABLE IN THE EYE OF LAW AS THE APPELLANT TRUST BEING ELIGIBLE UNDER SECTION 11 OF THE ACT, AS HELD BY ASSESSING OFFICER HIMSELF BY ALLOWI NG EXEMPTION, THE ASSESSING OFFICER HAS TO CONSIDER TH E TOTAL INCOME OF THE APPELLANT TRUST AND THEN WORKOUT THE APPLICATION SO AS TO COMPUTE THE CORRECT TAXABLE INC OME, IF ANY. IN THIS REGARD THE DETAILED COMPUTATION AT PAP ER BOOK ITA NO. 1376/DEL/2011 5 PAGE 106 CLEARLY SHOWS THAT THE APPLICATION OF INCO ME WAS MORE THAN THE INCOME AS BEING ALLEGED BY THE ASSESSI NG OFFICER. THE APPELLANT TRUST HAS RECEIVED ` 84,30, 900/- TOWARDS CORPUS OUT OF WHICH THE ASSESSING OFFICER HAS ACCEPTED ` 13,46,500/- AS DONATION RECEIVED TOWARDS CORPUS. THE BALANCE AMOUNT OF ` 70,84,400/- HAS B EEN CONSIDERED AS INCOME OF THE APPELLANT TRUST BY INVOK ING PROVISIONS OF SECTION 68 OF THE ACT BY THE ASSESSIN G OFFICER. THUS, THIS AMOUNT WILL INCREASE THE TOTAL INCOME OF THE TRUST. SIMILARLY THE SUM OF ` 3,21,000/- BEING DONATION REC EIVED (PAPER BOOK PAGE 86) WILL BE CONSIDERED AS INCOME. THUS TOTAL INCOME AS COMPUTED BY THE ASSESSEE WILL GET INCREASED BY THIS AMOUNT OF ` 74,05,400/-. THE APPE LLANT TRUST HAS APPLIED A SUM OF ` 3,33,43,680/- DURING THE YEAR ON THE FOLLOWING ITEMS AS PER DETAILS ON PAPER BOO K PAGERS 7 AND 13:- I) BUS PURCHASE : ` 26,900,000/- II) CONSTRUCTION OF BUILDING : ` 3,05,85,980/- III) FIXED ASSETS PURCHASED AT : ` 67,700/- EASTERN VALLEY SCHOOL TOTAL TOTAL TOTAL TOTAL : ` 3,33,43,680/ : ` 3,33,43,680/ : ` 3,33,43,680/ : ` 3,33,43,680/- -- - THUS APPLICATION DURING THE YEAR IS FAR MORE THAN THE INCOME COMPUTED EVEN AS PER THE ALLEGATION OF THE ASSESSING OFFICER (COMPUTED ON PAPER BOOK PAGE 106 ). ACCORDINGLY, THE ASSESSING OFFICER WAS NOT JUSTIFI ED IN IGNORING THE PROVISIONS OF SECTION 11(1)(A) AND AS SESSING ITA NO. 1376/DEL/2011 6 THE INCOME AT ` 74,05,400/- IN ISOLATION. THIS IS SUE IS ALSO COVERED BY THE FOLLOWING JUDGEMENTS:- I) KESHAV SOCIAL AND CHARTITABLE FOUNDATION 278 ITR 152 (DELHI) II) BHARAT KALYAN PRATISTAN 257 ITR 609. III) DIRECTOR OF INCOME TAX (EXEMPTION) VS. MOTI BAGH MUTUAL AID EDUCATION 200 ITR 190. IV) ACIT VS. GEENTAJALI EDUCATION SOCIETY 1 DTR 60. V) CALOREX FOUNDATION VS. ADIT (EXEMPTION) ITA NO. 1494/DEL/2003 (DEL) DECIDED ON 20 TH JUNE, 2005. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT THE PROPOSITION MADE BY THE LD. COUNSEL OF THE ASSESSEE IS COGENT ENOUGH, THE SAME IS DULY SUPPORT ED THE HONBLE JURISDICTIONAL HIGH COURT DECISION CITED ABOVE. H ENCE, IN OUR CONSIDERED OPINION, INTEREST OF JUSTICE WILL BE SE RVED, IF THE MATTER REMITTED TO THE FILE OF THE ASSESSING OFFICER TO C ONSIDER THE ISSUE AS TO WHETHER AFTER TAKING INTO ACCOUNT THE DONATIONS AS THE INCOME OF THE ASSESSEE 85% HAS BEEN UTILIZED FOR CHARITABLE PURP OSES OR NOT. IF MORE THAN 85% HAS BEEN UTILIZED FOR CHARITABLE PURPO SES, ASSESSEE SHALL BE ENTITLED TO BENEFIT U/S. 11 OF THE IT ACT. IN THAT CASE THE ADDITION OF THE DONATIONS AS UNEXPLAINED DEPOSITS WILL BE LIABLE TO BE ITA NO. 1376/DEL/2011 7 SET ASIDE. ACCORDINGLY, ISSUE STANDS REMITTED TO TH E FILES OF THE ASSESSING OFFICER. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14/10/2011. SD/- SD/- [ [[ [C.L. SETHI C.L. SETHI C.L. SETHI C.L. SETHI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 14/10/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES