DCIT, C-1, (E), Chandigarh V. Om Prakash Bansal Charitable Trust, Jammu

ITA 1422/CHANDI/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3447 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 27-09-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Charitable institution
• Section: 12AA; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH . . , , BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO. 1422/CHD/2017 / ASSESSMENT YEAR : 2014-15 DCIT, CIRCLE-1(EXEMPTIONS), CHANDIGARH VS. ! OM PRAKASH BANSAL CHARITABLE TRUST, C/O G.D. GOENKA PUBLIC SCHOOL, AKHNOOR ROAD, JAMMU ' # ./ PAN NO: AAATO1533A '$/ APPELLANT &' '$ / RESPONDENT ()*+ /ASSESSEE BY : SH. P.N. ARORA, ADVOCATE *+ / REVENUE BY : SH. AMIT SHUKLA, SR.DR , -*) .# /DATE OF HEARING : 18.09.2019 /0 *) .# / DATE OF PRONOUNCEMENT : 21.10.2019 / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 30.05.2017 OF THE COMMISSIONER OF INCO ME TAX (APPEALS )- J&K, JAMMU [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE REVENUE IN THIS APPEAL HAS TAKEN FOLLOWING G ROUNDS OF APPEAL:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN NOT CONSIDERING THE EVIDENCE/MATERIAL AVAILABLE ON RECORD AND FACTS OF THE CASE. ITA NO. 1422-CHD-2017- OM PRAKASH BANSAL CHARITABLE TRUST, JAMMU 2 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN NOT CONSIDERING THE FACT THAT THE AGREEMENT WITH THE ASSESSEE WAS A METHOD FOR DIVERT ING THE RECEIPTS TO M/S. G.D. GOENKA PVT. LTD BY PAYING 10% OF RECEIPT IN THE NAME OF ROYALTY. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN NOT CONSIDERING THE FACT THAT CONDITIONS OF AGREEMENT BETWEEN THE ASSESSEE AND M/ S. G.D. GOENKA PVT. LTD CLEARLY SHOW THAT THE AGREEMEN T IS BUSINESS IN NATURE AND IS A PROFIT SHARING AGREEMEN T SHOWING THE PROFIT MOTIVE OF THE PARTIES WITH THE A SSESSEE DIVERTING ALL ITS POWERS AND OBLIGATIONS TO A LIMIT ED COMPANY. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN HOLDING THAT THE PROVISI ONS OF SECTION 11(4)(A) DO NOT APPLY TO THE ASSESSEE. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN NOT APPRECIATING THE FAC T THAT THE ASSESSEE HAS VIOLATED THE BASIC PRINCIPLES OF E XEMPTION AND IS NOT DOING ANY CHARITY AS PER SECTION 2(15) O F THE ACT BY CARRYING OUT ACTIVITIES ON A COMMERCIAL BASIS. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 11,23,122/- ON ACCOUNT OF UNREASONABLE RENT PAID TO A SPECIFIED PERSON WITHOUT GIVING ANY FINDING ON THE ISSUE EVEN AS THE ASSESSING OFFICER HAD CLEARLY ESTABLISH ED THE VIOLATION OF PROVISIONS OF SECTION 13(L)(C) OF THE ACT. 7. THAT THE APPELLANT CRAVES TO LEAVE, ADD OR AMEND TH E GROUNDS OF APPEAL ON OR BEFORE THE APPEAL HEARD AND DJSPOSED OFF. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E SOCIETY IS REGISTERED U/S 12AA OF THE INCOME TAX ACT, 1961 WIT H THE CIT, J&K, VIDE ORDER NO. IT/J&K/JMU/ITO (TECH)/06-07/3112, DA TED 29/08/2006. THE ASSESSEE SOCIETY WAS IMPARTING AND PROVIDING ED UCATIONAL DIRECTION ITA NO. 1422-CHD-2017- OM PRAKASH BANSAL CHARITABLE TRUST, JAMMU 3 AND EXPERT GUIDANCE TO ESTABLISH, MANAGE AND DEVELO P PROGRESSIVE SCHOOLS TO MEET THE NEEDS AND DEMAND. DURING THE AS SESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSE SSEE WAS NOT FULFILLING CONDITIONS AS PROVIDED UNDER SECTION 11 R.W.S. 2(15) OF THE INCOME TAX ACT. IT WAS NOTED BY THE AO THAT THE ASS ESSEE TRUST WAS IMPARTING EDUCATION ON COMMERCIAL PRINCIPLES AND EA RNING HUGE PROFITS, GENERATING LARGE SCALE SURPLUS AND NOT BEING PLOUGH ED BACK INTO THE STATED OBJECTS OF THE TRUST, DIVERTING THE RECEIPTS OF THE TRUST TO A PRIVATE LTD. COMPANY IN THE NAME OF BUSINESS SERVI CES PROVIDED BY THE COMPANY TO THE TRUSTS, PAYING HUGE AMOUNTS TO M/S. G.D. GOENKA PVT. LTD. UNDER THE HEAD ROYALTY' BY MAKING A PROFIT SH ARING AGREEMENT, PAYING LEASE RENT TO SMT. SUMAN BANSAL, WHO WAS COV ERED UNDER SPECIFIC PERSON U/S 13(3) OF THE ACT. THE AO, THEREFORE, ISS UED SHOW CAUSE NOTICE TO THE ASSESSEE SOCIETY DATED 9.12.2006 ASKING THE ASSESSEE TO EXPLAIN AS TO WHY THE CLAIM OF EXEMPTION U/S 11 SHOULD NOT BE DISALLOWED AND SURPLUS BE TAXED AS AOP AS THE ASSESSEE IS NOT FOLL OWING THE OBJECTS OF THE TRUST FOR WHICH IT WAS ESTABLISHED. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE FILED ITS WRITTEN REPLY ON 22/12/2016 STATING THEREIN THAT CBDT VIDE ITS CIRCULAR NO. 14/2015 DATED 17 TH AUGUST 2015 HAS CLARIFIED THAT THE GENERATION OF SURPLUS OUT OF GROSS RECEIPTS WOULD NOT NECESSARILY BE BREACH OF THE THRESHOLD CONDITION THAT THE EDUCATIONAL INSTITUTIO NS SHOULD EXIST SLOWLY FOR EDUCATIONAL PURPOSE AND FOR THE PURPOSE OF THE PROFIT AND SOME ITA NO. 1422-CHD-2017- OM PRAKASH BANSAL CHARITABLE TRUST, JAMMU 4 GENERATION OF SURPLUS CANNOT BE THE BASIS FOR REJEC TION OF THE EXEMPTION ON THE GROUND THAT IT AMOUNTS TO AN ACTIVITY OF THE NATURE OF PROFIT MAKING SUBJECT TO THE CONDITION THAT SUCH AMOUNT WA S APPLIED WHOLLY AND EXCLUSIVELY TO THE OBJECT FOR WHICH IT WAS ESTA BLISHED. FURTHER THE ALLEGATION, THAT THE ASSESSEE WAS RECOVERING CERTAI N AMOUNTS FROM THE STUDENTS AS ADMISSION FEE ETC. WAS WHOLLY BASELESS AND THERE WAS NO JUSTIFICATION FOR TREATING THE SAID AMOUNT AS PROFI T MAKING ACTIVITY UNLESS THE AMOUNT WAS IN THE NATURE OF CAPITATION FEE DIRE CTLY OR INDIRECTLY. THE ASSESSEE ALSO PLACED RELIANCE ON A NUMBER OF JUDGM ENTS, WHEREIN, IT HAS BEEN HELD THAT THE GENERATION OF SURPLUS BY THE ASS ESSEE IS NO GROUND TO DENY EXEMPTION UNDER SECTION 80-G OF THE INCOME TAX ACT. THE REPLY GIVEN BY THE ASSESSEE WAS DULY CONSIDERED BY THE AO BUT HE DID NOT ACCEPT ITS CONTENTION AND HELD THAT THE PERUSAL OF THE NATURE OF RECEIPTS AND PERCENTAGE OF PROFIT CLEARLY REVEALED THAT THE ASSESSEE WAS INVOLVED IN COMMERCIAL ACTIVITY. HE, T HEREFORE, DENIED THE DEDUCTION TO THE ASSESSEE, CLAIMED U/S 11 OF THE I NCOME TAX ACT, 1961. 4. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). HO WEVER, THE LD. CIT(A) RELYING UPON THE VARIOUS CASE LAWS WHEREIN I T HAS BEEN HELD THAT MERE GENERATION OF SUM SURPLUSES WAS NOT A GROUND T O DENY THE ITA NO. 1422-CHD-2017- OM PRAKASH BANSAL CHARITABLE TRUST, JAMMU 5 EXEMPTION, ALLOWED THE APPEAL OF THE ASSESSEE. THE REVENUE, THUS, HAS COME IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE GON E THROUGH THE FILE. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUT SET, HAS SUBMITTED THAT THE FINDINGS OF THE ASSESSING OFFICER THAT THE ASS ESSEE WAS INVOLVED IN LARGE SCALE COMMERCIAL ACTIVITY WAS WRONG. THAT THE ASSESSING OFFICER HAS TAKEN INTO CONSIDERATION SOME OF THE FIGURES ME NTIONED OF NEXT YEAR NOT BELONGING TO THE FINANCIAL YEAR UNDER CONSIDERA TION TO ARRIVE AT SUCH AN ERRONEOUS CONCLUSION. THE LD. DR, ON THE OTHER HAND, HAS INVITED OUR ATT ENTION TO THE IMPUGNED ORDER OF THE CIT(A) TO SUBMIT THAT EVEN TH E LD. CIT(A) HAS NOT CONSIDERED THE RELEVANT FIGURES OF INCOME OF TH E ASSESSEE, RATHER, THE LD. CIT(A) HAS STRAIGHTWAY RELIED UPON CERTAIN CASE LAWS AND ALLOWED THE APPEAL OF THE ASSESSEE WITHOUT DISCUSSING AS T O HOW THOSE CASE LAWS WERE APPLICABLE TO THE FACTS OF THE CASE OF THE ASS ESSEE ESPECIALLY TO THE QUANTUM OF INCOME EARNED BY THE ASSESSEE OR THE GEN ERATION OF HUGE SURPLUS. BOTH THE LD. REPRESENTATIVES OF THE PARTIES, THEREF ORE, SUBMITTED THAT SINCE THE MATTER HAS NOT BEEN PROPERLY EXAMINE D EITHER BY THE ASSESSING OFFICER OR BY THE CIT(A), HENCE, THE SAM E BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR PROPER APPRECIATI ON OF THE FACTS AND THE DECISION IN ACCORDANCE WITH LAW. ITA NO. 1422-CHD-2017- OM PRAKASH BANSAL CHARITABLE TRUST, JAMMU 6 6. IN VIEW OF THE ABOVE SUBMISSIONS OF THE LD. REPR ESENTATIVES OF THE PARTIES, THE ORDER OF THE LOWER AUTHORITIES ARE SE T ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR DECISION AFRESH IN THE ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT THE ASS ESSING OFFICER WILL PROVIDE PROPER OPPORTUNITY TO THE ASSESSEE TO PRES ENT ITS CASE. THE ASSESSEE IS ALSO DIRECTED TO PROMPTLY APPEAR BEFORE THE ASSESSING OFFICER, AS AND WHEN CALLED FOR, AND WILL NOT CONTR IBUTE IN DELAYING THE PROCEEDINGS. THE APPEAL OF THE ASSESSEE STANDS ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21.10.2019. SD/- SD/- ( . . / N.K. SAINI) ( ! / SANJAY GARG) '#$ / VICE PRESIDENT %& / JUDICIAL MEMBER DATED : 21.10. 2019 .. 2*&)3454) / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. &' '$ / THE RESPONDENT 3. , 6) / CIT 4. , 6) ( )/ THE CIT(A) 5. 47 &)8 , . 8 , 9:;< / DR, ITAT, CHANDIGARH 6. ;= - / GUARD FILE 2 , / BY ORDER, > / ASSISTANT REGISTRAR