A.D. Rathod Foundation Trust, RAJKOT-GUJARAT V. The Commissioner of Income Tax, Rajkot-1, RAJKOT-GUJARAT

ITA 14/RJT/2013

• Counselvise Citation: 1424914 RSA 2013
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-08-2013
• Assessment Year: misc
• Appeal Filed On: 16-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR M L MEENA DR I
• Assessee Lawyers: KALPESH DOSHI CA I
• Keywords: Charitable institution; Onus to prove
• Section: 80G

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. 3 . . T R N . . N N BEFORE SHRI T. K. SHARMA JM AND SHRI D. K. SRIVASTAVA AM IT A NO. 14/RJT/2013 R R / ASSESSMENT YEAR - A.D. RATHOD FOUNDATION TRUST, C/O. KALPESH S. DOSHI & CO. CHARTERED ACCOUNTANTS, 411, COSMO COMPLEX, MAHILA COLLEGE CIRCLE, RAJKOT - 1. PAN : A A CTA8604J ( A / APPELLANT) COMMISSIONE R OF INCOME - TAX - I, RAJKOT. A / RESPONDENT REI / ASSESSEE BY SHRI KALPESH DOSHI , CA I / REVENUE BY DR. M. L. MEENA , DR I / DATE OF HEARING 2 3 - 08 - 2013 I / DATE OF PRONOUNCEMENT 13 - 0 9 - 2 013 / ORDER 3 . . T , R N / T. K. SHARMA, J. M. : TH IS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 21 - 11 - 2012 OF LD. CIT, RAJKOT - 1 U/S.80G(5)(VI) REJECTING THE APPLICATION OF THE ASSESSEE FOR APPROVAL O F RECOGNITION U/S.80G(5) (VI) OF I.T. ACT, 1961. 2. T HE FACTS , IN BRIEF, ARE THAT THE ASSESSEE FILED AN APPLICATION FOR REGISTRATION U/S.80G OF I.T. ACT IN FORM NO.10G ON 15 - 05 - 2012 WITH CIT, RAJKOT - I. THE TRUST IS REGISTERED U/S.12A(A) OF THE I.T. ACT VIDE NO.CIT/TECH/12A/GR - 22/ 22/2010 - 11/4034. A COPY OF FORM NO.10G WAS ALSO FILED WITH THE INCOME TAX OFFICER, WARD - 1, BHUJ AS THE JURISDICTION OVER THE ASSESSEE TRUST RESTS WITH HIM. THE LD. CIT, RAJKOT - I REJECTED THIS APPLICATION FOR THE DETAILED REASON GIVEN IN HIS ORDER U/S.80G(5 )(VI) OF THE I.T. ACT WHICH READS AS UNDER: - 2. AS PER THE TRUST DEED OF THE TRUST, THE OBJECTS OF THE TRUST ARE TO PROVIDE EDUCATION AND RUN OTHER ACTIVITIES TO ASSIST POOR AND NEEDY PEOP L E. AS PER EXPLANATION - 3 BELOW SECTION 80G(5), CHARITABLE PURPOSE DOES NOT INCLUDE ANY PURPOSE THE WHOLE OR SUBSTANTIALLY THE WHO LE OF WHICH IS A RELIGIOUS NATURE. ON VERIFICATION OF THE INCOME AND EXPENDITURE ACCOUNT FOR THE F.Y. 2011 - 12, IT IS FOUND THAT THE FINANCIAL YEAR ENDING ON 31/03/2012, ITS TOTAL INCOME WAS R S.9,54,701/ - , OUT OF THAT IT INCURRED RS.3,81,246/ - FOR RELIGIOUS PURPOSE. SUCH RELIGIOUS EXPENSES WERE ALMOST 50% OF THE TOTAL INCOME OF THE TRUST FOR THE RELEVANT PERIOD. ACCORDINGLY THIS OFFICE HAS ITA 14 - 201 3 2 ISSUED A SHOW CAUSE NOTICE CALLING FOR THE EXPLANATION ON THE MATTER VIDE THIS OFFICE NOTICE BEING NO.CIT.R/TECH/80G(5)/3/2012 - 13 DATED29.10.2012 BY 07.11.2012 TO THE TRUST TO SHOW CAUSE AS TO WHY THE APPLICATION FOR APPROVAL OF RECOGNITION U/S.80G(5) OF THE ACT SHOULD NOT BE REJECTED AS THE TRUST FAILED TO CO MPLY WITH THE STATUTORY REQUIREMENTS. 3. IN RESPONSE, THE ASSESSEE VIDE ITS LETTER DATED 07.11.2012 SUBMITTED THAT IN ITS INCOME AND EXPENDITURE ACCOUNT AN AMOUNT OF RS.3,81,246/ - SHOWN AS RELIGIOUS EXPENDITURE INCLUDES EXPENSES OF RS.2,97,500 / - INCURRED FOR NON RELIGIOUS PURPOSES. HOWEVER NOTHING IS EXPLAINED IN RESPECT OF REMAINING AMOUNT OF RS.83,746/ - , WHICH IS MORE THAN 8% OF THE TOTAL INCOME OF THE RELEVANT PERIOD. IT WAS, AFTER QUOTING THE EXPLANATION - 3 APPENDED BELOW SEC.80G(5) OF THE ACT, FURTHER SUBMITTED THAT VERY INSIGNIFICANT AMOUNT HAS BEEN SPENT FOR RELIGIOUS PURPOSES. 4. THE SUBMISSION OF THE ASSESSEE AS WELL AS THE PROVISIONS OF THE RELEVANT SECTIONS OF THE ACT IS PERUSED. THE ASSESSEE SUBMITTED THAT RS.2,97,500/ - WERE SPENT FOR NON RELI GIOUS PURPOSE. HOWEVER IN ABSENCE OF SPECIFIC INFORMATION, THE REMAINING AMOUNT OF RS.83,746/ - ARE FOUND TO BE INCURRED FOR THE RELIGIOUS PURPOSE, SPECIALLY WHEN THE AUDITOR OF THE TRUST HAS CATEGORIZED THE SAME AS RELIGIOUS EXPENSES. THE ONUS TO PROVE WHE THER THE PAYMENTS MADE BY THE TRUST WERE TOWARDS ITS OBJECTS ONLY LIES UPON THE TRUST, FOR WHICH IT FAILED. THUS IT IS CLEAR THAT DURING THE F.Y. 2011 - 12 THE TRUST INCURRED EXPENSES AT LEAST OF RS.83,746/ - FOR RELIGIOUS PURPOSE ONLY. DURING THE SAME PERIOD ITS TOTAL INCOME WAS RS.9,54,701/ - . ACCORDINGLY ITS RELIGIOUS EXPENSES FOR THE PERIOD WAS 8.77% OF THE TOTAL INCOME OF THE RELEVANT PERIOD, MORE THAN THE THRESHOLD LIMIT OF 5% PROVIDED BY THE LEGISLATURE IN SEC.80B (5B) OF THE ACT. 5. IN VIEW OF THE ABO VE, THE TRUST HAS FAILED TO COMPLY WITH THE REQUIREMENTS FOR APPROVAL U/S.80G(5) AS LAID DOWN UNDER SECTION 80G(5) & RULE 11AA OF THE I T ACT, RULES 1962. THE APPLICATION MADE BY THE ASSESSEE SEEKING APPROVAL U/S.80G(5) IS THEREFORE HEREBY REJECTED. AG GRIEVED WITH THE ORDER OF LD. CIT, RAJKOT - I, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS: - 1 . THAT, THE LEARNED CIT - I HAS ERRED ON FACTS AND IN LAW IN REJECTING THE APPLICATION FOR APPROVAL OF RECOGNITION U/S.80G(5)(VI) OF THE I. T . ACT. 2 . THAT, THE LEARNED CIT - I HAS ERRED ON FACTS AND IN LAW IN CONSIDERING THE EXPENSES INCURRED RS.83,746/ - IS FOR RELIGIOUS PURPOSE. 3 . THAT, THE FINDINGS OF THE LEARNED CIT - I ARE NOT JUSTIFIED IN LAW AS WELL AS FACTS OF THE CASE AND REQUIRED TO BE DELET ED. 3. AT THE TIME OF HEARING BEFORE US ON BEHALF OF ASSESSEE, SHRI KALPESH DOSHI, CA APPEARED AND DREW OUR ATTENTION TO PARA - 4 OF ORDER OF LD. CIT, RAJKOT REJECTING THE ASSESSEES APPLICATION FOR APPROVAL OF RECOGNITION U/S.80G (5)(VI) OF THE I. T. ACT, 1961 POINTED OUT THAT THE SPECIFIC INFORMATION COULD NOT BE FURNISHED DUE TO PAUCITY OF THE TIME. THE COUNSEL OF THE ASSESSEE PRODUCED A CERTIFICATE ITA 14 - 201 3 3 FROM P. J. VORA & CO., CHARTERED ACCOUNTANTS DATED 10 - 08 - 2013 WHICH READS AS UNDER: - IT IS CERTIFIED THAT A. D. RATHOD FOUNDATION TRUST, 6136, SWAMI VIVEKANAND NAGAR, BHUTDAVADI, MANDVI - KUTCH HAS SHOWN VARIOUS EXPENDITURE UNDER THE HEAD OF RELIGIOUS EXPENSES OF RS.3,81,246/ - FOR THE FINANCIAL YEAR 2011 - 12. ON THE BASIS OF VERIFICATION OF THESE EXPENDITURES, I T IS FURTHER CERTIFIED THAT IT INCLUDES EXPENDITURE RELATING TO EDUCATION AS WELL AS RELIGIOUS OBJECT OF THE TRUST. THE DETAILS OF EXPENSES ARE ENCLOSED IN ANNEXURE ATTACHED HEREWITH. THE ABOVE CERTIFICATE HAS BEEN ISSUED ON THE BASIS OF DETAILS AND BOOK S OF ACCOUNTS PRODUCED BEFORE US. THIS CERTIFICATE HAS BEEN ISSUED ON THE REQUEST OF THE TRUST. 4. THE COUNSEL OF THE ASSESSEE SUBMITTED THAT LD. CIT - I, RAJKOT REJECTED THE APPLICATION U/S.80G(5)(VI) ON THE GROUND THAT HOWEVER NOTHING IS EXPLAINED IN R ESPECT OF REMAINING AMOUNT OF RS.83,746/ - , WHICH IS MORE THAN 8% OF THE TOTAL INCOME OF THE RELEVANT PERIOD. THIS FINDING OF LEARNED CIT IS INCORRECT. IN FACT THE EXPENSE FOR RELIGIOUS PURPOSE IS MUCH LESS THAN 5% LIMIT. TO SUM - UP, HE POINTED OUT THAT TO TAL INCOME OF RS.9,54,701/ - ONLY 3.43% OF THE EXPENSES HAVE BEEN INCURRED FOR RELIGIOUS PURPOSE. THEREFORE, AS PER SECTION 80G (5B), ASSESSEE IS ENTITLED TO GRANT OF REGISTRATION U/S.80G(5) OF THE I.T. ACT, 1961. AS AGAINST THIS, LD. DR POINTED OUT THAT S INCE THE CERTIFICATE NOW FILED WAS NOT FILED BEFORE THE LD. CIT THEREFORE, MATTER BE REMANDED TO THE FILE OF LD. CIT FOR VERI F ICATION. 5. RIVAL SUBMISSIONS WERE CONSIDERED. ADMITTEDLY, CERTIFICATE OF P. J. VORA & CO., CHARTERED ACCOUNTANTS NOW FILED BEFOR E US, WAS N EVER FILED BEFORE THE LD. CIT - I, RAJKOT. SECTION 80G(5B) PROVIDES NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE (II) OF SUB - SECTION (5) AND EXPLANATION 3, AN INSTITUTION OR FUND WHICH INCURS EXPENDITURE, DURING ANY PREVIOUS YEAR, WHICH IS OF A R ELIGIOUS NATURE FOR AN AMOUNT NOT EXCEEDING FIVE PER CENT OF ITS TOTAL INCOME IN THAT PREVIOUS YEAR SHALL BE DEEMED TO BE AN INSTITUTION OR FUND TO WHICH THE PROVISIONS OF THIS SECTION APPLY. FURTHER EXPLANATION 3 OF SECTION 80G (5) STATES THAT CHARITAB LE TRUST DOES NOT INCLUDE ANY PURPOSE THE WHOLE OR SUBSTANTIALLY THE WHOLE OF WHICH IS OF RELIGIOUS NATURE. KEEPING IN VIEW THESE CONSPICUOUS FACTS, WE SET ASIDE THE ORDER OF LD. CIT - I, RAJKOT AND DIRECT THE ASSESSEE TO FURNISH THE CHARTERED ACCOUNTANTS CERTIFICATE TO HIM WHO WILL EXAMINE THE SAME AND RE - CONSIDER THE REQUEST OF THE ITA 14 - 201 3 4 ASSESSEE FOR APPROVAL OF RECOGNITION U/S.8 0G(5)(VI) OF THE I.T. ACT, 1961 AFRESH IN ACCORDANCE WITH LAW. 6. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED. 7. THIS O RDER IS PRONOUNCED IN OP EN COURT ON THE DATE MENTIONED HEREINABOVE. SD/ - SD/ - ( . . . D. K. SRIVASTAVA ) ( . . R / T. K. SHARMA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER U / ORDER DATE 13 - 0 9 - 2013. /RAJKOT NVA/ - RJO O / COPY OF ORDER FORWARDED TO: - 1 . A /APPELLANT - A.D. RATHOD FOUNDATION TRUST, C/O. KALPESH S. DOSHI & CO. CHARTERED ACCOUNTANTS, 411, COSMO COMPLEX, MAHILA COLLEGE CIRCLE, RAJKOT - 1. 2 . A / RESPONDENT - THE COMMISSIONER OF INCOME TAX I, RAJKOT . 3 . / CONCERNED JT. CIT . GR, GANDHIDHAM. 4 . FORW RDED - / CIT , RAJKOT - I, RAJKOT. 5 . , , / DR, ITAT, RAJKOT 6 . R / GUARD FILE. / BY ORDER TRUE COPY. PRIVATE SECRETARY, ITAT, RAJKOT