JCIT (OSD), (E), C-2, Chandigarh V. M/s Sanjiv Bansal Charitable Trust , Karnal

ITA 147/CHANDI/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 3643 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-07-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 08-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH CIT DR
• Assessee Lawyers: S K GOEL
• Keywords: Charitable institution; Opportunity of being heard; Non passing of speaking order; Revenue expenditure; Capital expenditure
• Section: 12A; 12AA; 143(1); 205; 201; 2; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BEN CH B, CHANDIGARH .., ! '# #$ %, & '( BEFORE: SHRI. N.K.SAINI, VP & SHRI , SANJAY GARG, JM ITA NO. 147/CHD/2019 ASSESSMENT YEAR : 2015-16 JCIT (OSD), (E), C - 2 SECTOR 17 CHANDIGARH M/S SANJIV BANSAL CHARITABLE TRUST RAILWAY ROAD, SANJIV HOSPITAL KARNAL- HARYANA PAN NO: AAATS5445H APPELLANT RESPONDENT !' ASSESSEE BY : SHRI. S.K. GOEL, ADVOCATE #!' REVENUE BY : SHRI. MANJIT SINGH, CIT DR $ %! & DATE OF HEARING : 11/07/2019 '()*! & DATE OF PRONOUNCEMENT : 27/08/2019 ')/ ORDER PER N.K. SAINI, VICE PRESIDENT THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DT. 27/11/2018 OF LD. CIT(A), KARNAL. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: 1. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE ID. CIT HAS ERRED IN LAW IN DELETING THE ADDITION AMOUNTING TO RS. 32,89,114/- DESPITE THE FACT THAT THE ASSESSEE IS EARNING RENTAL INCOME IN TERMS OF 8% SHARE IN GR OSS RECEIPTS FROM LETTING OUT THE TRUST'S BUILDING TO A PRIVATE HOSPITAL RUNNING ON C OMMERCIAL LINES. 2. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE ID. CIT HAS ERRED IN LAW IN DELETING THE ADDITION AMOUNTING TO RS. 28,50,000/- DESPITE THE FACT THAT THE ASSESSEE HAS EXPENDED THE AMOUNT OF RS. 28,50,000/- ON CONST RUCTION AND PURCHASE OF THREE BRONZE STATUES OF ITS FOUNDERS WHICH IS NEITHER A C HARITABLE ACTIVITY NOR IN ACCORDANCE TO THE OBJECTS OF THE TRUST. 3. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE ID. CIT HAS ERRED IN LAW IN DELETING THE ADDITION AMOUNTING TO RS. 15,83,670/- EVEN WHEN THESE RECEIPTS WHICH HAVE BEEN SHOWN AS 'OTHER RECEIPTS' BY THE ASSESSEE ARE COMMERCIAL IN NATURE. 4. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, T HE ID. CIT HAS ERRED IN LAW IN DELETING THE ADDITION AMOUNTING TO RS. 15,00,000/- EVEN WHEN THE ASSESSEE HAS SHOWN THE UNCLAIMED LIABILITY IN THE NAME OF AN IND IVIDUAL 'LATE SH. D.P. GUPTA' AND THE CLAIMANT DIED IN THE YEAR 2001 AND SUFFICIENTLY LONG TIME HAS PASSED SINCE THEN. 5. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE ID. CIT HAS ERRED IN LAW IN HOLDING THAT THE EXPENDITURE MADE BY THE ASSESSEE A RE APPLICATION OF INCOME U/S 11 OF THE IT. ACT EVEN WHEN THE ASSESSEE HAS INCURRED EXPENDITURE ON HOSPITAL BUILDING WHICH IS BEING USED COMMERCIALLY AND ON PURCHASE OF BRONZE STATUES WHICH IS NOT AN ACTIVITY AS PER THE OBJECTS OF THE TRUST AND NOT EV EN CHARITABLE. 6. THAT THE APPELLANT CRAVES TO LEAVE, ADD OR AMEND AN Y GROUNDS OF APPEAL ON OR BEFORE THE APPEAL IS HEARD OR DISPOSED OF. 3. VIDE GROUND NO. 1, THE GRIEVANCE OF THE DEPARTME NT RELATES TO THE DELETION OF ADDITION OF RS. 32,89,114/- MADE BY THE A.O. ON ACCOUNT OF RENTAL INCOME. 2 4. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THA T THE ASSESSEE FILED THE RETURN OF INCOME ON 29/09/2015 DECLARING NIL INCOME WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (HEREINA FTER REFERRED TO AS ACT), LATER ON THE CASE WAS SELECTED FOR SCRUTINY. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE WAS REGISTERED WITH THE REGISTRAR OF SOCIE TY UNDER SOCIETIES REGISTRATION ACT 1860 ON 02/02/1979 AND ALSO REGISTERED UNDER S ECTION 12AA OF THE ACT VIDE ORDER DT. 23/03/1979 ISSUED BY THE LD. CIT,ROHTAK A ND THAT THE ASSESSEE WAS RUNNING A HOSPITAL UNDER NAME AND STYLE SANJIV BAN SAL CYGNUS HOSPITAL AT KARNAL. HE FURTHER OBSERVED THAT THE ASSESSEE ENTER ED INTO A MEDICAL SERVICE AGREEMENT ON 03/06/2013 WITH CYGNUS MEDICATE PVT. L TD..THE GIST OF AGREEMENT IS AS UNDER: I) CYGNUS ON BEHALF OF TRUST SHALL COLLECT ALL THE RECEIPTS/ CHARGES FOR THE SERVICES TO BE RENDERED IN THE HOSPITAL AND TRANSFE R A SUM EQUIVALENT TO 8% OF THE MONTHLY GROSS HOSPITAL RECEIPTS (HEREINAFTER REFERR ED TO AS MONTHLY SUM FOR OPERATIVE ACCOUNT TO TRUST ACCOUNT, EXCLUSIVE OF THE CREDITS, WHICH SHALL BECOME GROSS REVENUE AS AND WHEN THE SAME STANDS REALIZED. II) CYGNUS SHALL MEET OUT ALL OF THE RUNNING AND MA INTENANCE EXPENSES/ STAFF SALARIES AND SHARE OF TRUST ETC. FROM THAT ACCOUNT AND SHORTFALL, IF ANY, SHALL BE MET BY THE CYGNUS ONLY FROM ITS OWN RESOURCES. III) CYGNUS SHALL ENSURE THAT AFTER MEETING ALL THE OPERATIONAL EXPENSES, THE TRUST MUST GET THE MONTHLY SUM OF 8% OF GROSS REVENUES/COLLECT IONS ON MONTHLY BASIS (INCLUDING BUT NOT LIMITED TO THROUGH SALE OF MEDICINES AND LA B CHARGES ETC.) UNDER THE SAID ARRANGEMENTS AS NET RECEIPTS OVER EXPENDITURE AND C YGNUS SHALL BE ENTITLED TO GET THE REMAINING REVENUES, AS CALCULATED, AS ITS MEDIC AL SERVICE FEE WHICH SHALL BE SUBJECT TO TAX DEDUCTION AT SOURCE, IF APPLICABLE. THE ABOVE SAID MONTHLY SUM IS HOWEVER BEING EXEMPTED FOR FIRST SIX MONTH AND CYGN US SHALL BE LIABLE TO TRANSFER THE MONTHLY SUM FROM OPERATIVE ACCOUNT TO TRUST ACC OUNT AFTER SIX MONTHS OF THE EFFECTIVE DATE. IV) THAT THE MONTHLY SUM AGREED SHALL BE TRANSFERRE D BY ACCOUNT PAYEE CHEQUE IN FAVOUR OF SANJEEV BANSAL CHARITABLE TRUST. AS PER THE AFORESAID AGREEMENT THE CYGNUS MEDIATE P VT. LTD. HAD TO ENSURE THAT AFTER MEETING ALL THE OPERATION EXPENSES THE A SSESSEE TRUST MUST GET THE MONTHLY SUM OF 8% OF GROSS REVENUE/COLLECTION ON MO NTHLY BASIS AND IN CASE ASSESSEE FINDS ANY SHORTFALL TO MEET OUT ALL THE OP ERATIONAL EXPENSES, THAT SHORT FALL SHALL BE MET BY CYGNUS ONLY FROM ITS OWN RESOU RCES. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOLL OWING FINANCIAL STATEMENT / CALCULATION OF INCOME WERE SUBMITTED BY THE ASSESSEE : 3 S.NO. PARTICULARS AMOUNT(RS.) 1. REVENUE RECEIPTS FROM CYNGUS MEDICARE PVT. LTD. RS 46,98,733/- 2. OTHER RECEIPTS RS. 15,83,670/- 3. DIVIDEND INCOME RS. 3,94,123 (EXEMPT) - GROSS RECEIPT RS. 62,82,403/- 4. 85% OF GROSS RECEIPT RS. 53,40,043/- 5. EXPENSES REVENUE EXPENDITURE RS. 6,67,413/- CAPITAL EXPENDITURE RS. 63,87,070/- TOTAL EXPENDITURE RS. 70,54,483/- BALANCE SURPLUS / SHORTFALL RS. 17,14,440/- THE A.O. OBSERVED THAT DURING THE YEAR UNDER CONSID ERATION THE ASSESSEE RECEIVED A SUM OF RS. 46,98,733/- AS 8% OF TOTAL RE CEIPT. ACCORDING TO THE A.O., THE AFORESAID RECEIPTS WERE IN NO WAY THE OBJECTS O F THE ASSESSEE TRUST AND THAT THE EARNING OF RENT ON THE CONSTRUCTED BUILDINGS CO ULD NOT HAVE BEEN CLAIMED AS CHARITABLE ACTIVITY. HE WAS OF THE VIEW THAT THE ASSESSEE TRUST CONSTRUCTED THE BUILDING AND RENTED OUT IT TO A REPUTED CHAIN OF HO SPITALS, A COMPANY WORKING IN NORTH INDIA AND EARNING PROFIT. HE THEREFORE TREATE D THE AFORESAID RECEIPT AS INCOME FROM HOUSE PROPERTY AND AFTER ALLOWING 30% S TANDARD DEDUCTION UNDER SECTION 24A OF THE ACT, WORKED OUT THE TAXABLE INCO ME FROM HOUSE PROPERTY AT RS. 32,89,114/-. 7. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: THE APPELLANT IS A CHARITABLE TRUST AND IS RUNNING A HOSPITAL TO PROVIDE MEDICAL RELIEF TO THE WEAKER SECTION OF THE SOCIETY AND PUBLIC AT LARGE. THE HOSPITAL WAS INAUGURATED BY PRESIDENT OF INDIA ON 7TH JULY, 1983 . IN FURTHERANCE TO ITS OBJECT AND TO CATER TO THE REQUIREMENTS OF MODERN DAY REQUIREM ENTS OF MEDICAL TREATMENT OF THE PEOPLE, TO HAVE COMPLETE UP GRADATION OF THE HO SPITAL, THE TRUST APPROACHED CYGNUS MEDICARE PVT. LTD. FOR PROVIDING THEIR E XPERTISE AND SHARING OF SPECIALIZED KNOWLEDGE IN THIS REGARD AND ACCORDINGLY ENTERED IN TO AN AGREEMENT WITH M/S CYGNUS MEDICARE PRIVATE LIMITED (CMPL) VIDE MEDICAL SERVICE AGREEMENT ON 3RD DAY OF JUNE, 2013. THE SOLE PURPOSE OF MEDICAL SERV ICE AGREEMENT WAS SHARING OF SPECIALIZED KNOWLEDGE AND PROVISIONS FOR TREATMENT OF CRITICAL AILMENTS FOR THE SOCIETY. IN TERM OF AFORESAID AGREEMENT, CYGNUS WAS TO ENSUR E THAT 8% OF THE GROSS REVENUE COLLECTIONS WAS TO BE MADE AVAILABLE TO THE TRUST O N MONTHLY BASIS AND ALL EXPENSES WERE TO BE INCURRED BY CYGNUS MEDICARE PVT. LTD. (C MPL) FROM OPERATING BANK A/C. IN CASE FOUND ANY SHORTFALL TO MEET OUT ALL THE OPE RATIONAL EXPENSES THAT SHORTFALL SHALL BE MET BY CYGNUS MEDICARE PVT. LTD. (CMPL) ONLY FRO M ITS OWN RESOURCES. THE GROSS RECEIPTS OF THE TRUST DURING THE YEAR AMOUNTING TO RS.6,08,40,093/- AND THE TRUST HAD APPLIED RS.61,01,4,602/- FOR REVENUE AND CAPITAL EX PENDITURE OF THE TRUST, A FACT WHICH IS CLEAR FROM THE AUDITED ACCOUNTS. THUS IT I S CRYSTAL CLEAR THAT TRUST HAD SPENT EXCESS MONEY OVER THE RECEIPTS WHICH SHOWN THAT TRU ST HAD NO MOTIVE IN EARNING OF ANY PROFIT FROM RUNNING THE TRUST AND THE SOLE AIM WAS BENEFIT OF SOCIETY AT LARGE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O . REQUISITIONED FOR SEGREGATING STAND ALONE REVENUE RECEIPTS & EXPENDITURES STATEME NT WHICH WERE SUBMITTED AND THE SAME CLEARLY REFLECTS THAT AS AGAINST TOTAL STA ND ALONE RECEIPTS/INCOME OF THE TRUST HAS APPLIED MORE THAN 85% ON THE OBJECTS OF T RUST FOR CHARITABLE PURPOSES. FURTHER THE BODY OF THE ASSESSMENT ORDER REVEALS TH AT ASSESSMENT HAS BEEN FRAMED ON THE BASIS OF STAND ALONE FINANCIAL STATEMENTS/CA LCULATION OF INCOME WHICH IS REPRODUCED HEREUNDER FOR READY REFERENCE :- PARTICULARS AMOUNT (RS) REVENUE RECEIPTS FROM CYGNUS MEDICARE PVT. LTD. 46,98,733/- 4 OTHER RECEIPTS(OPD RECEIPTS, RENTAL INCOME AND INTEREST INCOME ETC.) 15,83,670/- TOTAL RECEIPTS 62,82,403/- 85% OF THE ABOVE TOTAL RECEIPT 53,40,043/- APPLICATION OF INCOME REVENUE EXPENSES 6,67,413/- CAPITAL EXPENSES 63,87,070/- TOTAL APPLICATION OF INCOME 70,54,483/- HENCE THE ABOVE TABLE CLEARLY REFLECTS THAT THE TRU ST HAS APPLIED MORE THAN 85% OF TOTAL RECEIPT FOR CHARITABLE PURPOSES. FURTHER THE FACTUAL SUBMISSIONS MADE BEFORE AO VIDE LETTER DTD. 19/12/2017 ARE REPR ODUCED HEREUNDER FOR YOUR READY PERUSAL :- ' RECEIPT FROM CYGNUS MEDICARE PVT. LTD AMOUNTING R S. 46,98,733/- : KINDLY NOTE THAT, AS SUBMITTED VIDE REPLY LETTER DATED 20/ 11/2017 AND 12/12/2017, THAT IN FURTHERANCE TO ITS CHARITABLE ACTIVITIES AS WELL AS ITS OBJECT TO PROVIDE THE MEDICAL FACILITIES TO THE POOR AND DEPRIVED CLASS OF PEOPLE , SANJEEV BANSAL CHARITABLE TRUST (SBCT), RAILWAY ROAD, KARNAL-132001, TOOK AN INITIA TIVE BY SETTING UP A HOSPITAL IN KARNAL IN THE YEAR 1983 WHICH WERE INAUGURATED BY T HEN HON'BLE PRESIDENT OF INDIA ON 7TH JULY, 1983. SINCE THEN SBCT THROUGH THIS HOSPIT AL, IN DUE COMPLIANCE OF THE PROVISIONS OF SECTION 11(4) OF THE INCOME TAX ACT, 1961, IS PROVIDING MEDICAL FACILITIES TO THE SOCIETY INCLUDING THE WEAKER SECTION. IN FURTHERANCE TO THE SAID OBJECTIVE AND ACTIVITY D ULY CONSIDERING THE REQUIREMENT OF A HOSPITAL FOR CURING OF THE CRITICA L AILMENTS IN THE CITY, IN THE YEAR 2013-14, SBCT TO HAVE COMPLETE UPGRADATION OF THE H OSPITAL, APPROACHED CYGNUS MEDICARE FOR PROVIDING THEIR EXPERTISE AND SHARING OF SPECIALIZED KNOWLEDGE IN THIS REGARD AND ACCORDING ENTERED INTO AN AGREEMENT WITH M/S CYGNUS MEDICARE PRIVATE LIMITED (CYGNUS) VIDE MEDICAL SERVICE AGREEMENT ON 3RD DAY OF JUNE, 2013 COPY OF WHICH HAS ALREADY BEEN SUBMITTED WITH YOUR GOOD SEL F OF OUR EARLIER REPLY LETTER DATED 20/11/2017. KINDLY NOTE THAT TO ENSURE ITS REVENUE FLOW, BESIDE S DONATIONS ETC., REQUIRED FOR ITS ONGOING CHARITABLE ACTIVITIES, IN TERM OF THE S AID MEDICAL SERVICE AGREEMENT ENTIRE OPERATIONAL COST OF THE HOSPITAL INCLUDING BUT NOT LIMITED TO THE ASSURED SUM @8% OF THE GROSS COLLECTION OF THE HOSPITAL TO SBCT. PLEASE NOTE THAT AS REQUIRED DURING THE COURSE OF A SSESSMENT PROCEEDINGS THE SEPARATE STAND ALONE INCOME & EXPENDITURE ACCOUNT O F THE TRUST HAVE ALSO BEEN SUBMITTED BEFORE YOUR GOOD SELF OF OUR REPLY LETTER DATED 12/12/2017 AND ARE BEING RESUBMITTED IN MORE CLARIFICATORY MANNER, WHICH REF LECTS THAT AS AGAINST TOTAL STAND ALONE RECEIPTS/INCOME OF THE TRUST HAS APPLIED IN E XCESS OF 85% FOR CHARITABLE PURPOSES. BESIDE THE ABOVE, IT IS REQUESTED TO KINDLY LOOK IN TO THE CONSOLIDATED INCOME & EXPENDITURE ACCOUNT WHICH DULY REFLECTS THAT THE TRUST HAS APPLIED MORE THAT 85% OF TOTAL RECEIPT FOR CHAR ITABLE PURPOSES. THE AFORESAID FACTS WAS ALSO DULY DISCLOSED BEFORE YOUR PREDECESSOR DURING THE COURSE OF ASSESSMENT PR OCEEDINGS FOR THE ASSESSMENT YEAR 2014-15, VIDE REPLY LETTER DATED 22/08/2016, A ND WAS ASSESSED ACCORDINGLY VIDE ORDER DATED 23/08/2016. SO THE CONTENTION THAT THE REVENUE CONTRIBUTION RECEIVED FROM CYGNUS AS INCOME FROM COMMERCIAL ACTIVITY OR O F RENTAL NATURE IS NOT CORRECT AND IS HEREBY STRONGLY REFUTED WITH A SUBMISSION TH AT AFORESAID STATED RECEIPT HAS EITHER BEEN APPLIED FOR REVENUE EXPENDITURE OR CAPI TAL EXPENDITURE ON THE OBJECT OF THE TRUST FOR CHARITABLE PURPOSES.' IN ADDITION TO ABOVE FACTS STATED IT IS WORTH CONSI DERATION BY YOUR GOODSEIF THAT THE TRUST'S CASE FOR PRECEDING YEAR I.E A.Y. 2 014-15 WAS ASSESSED VIDE ORDER DATED 23/08/2016 AND NO SUCH DISALLOWANCE WERE MADE BY AO WHEREAS THE FACTS & CIRCUMSTANCES OF THE CASE WAS IDENTICAL AND DOMINAN T PURPOSE OF TRUST WAS CHARITABLE WITHIN THE MEANING OF SECTION 2(15) OF I NCOME TAX ACT. SO THE CONTENTION THAT THE REVENUE CONTRIBUTION RECEIVED FROM CYGNUS MEDICARE PVT. LTD (CMPL) AS INCOME FROM HOUSE PROPERTY IS NOT CORRECT AS THESE RECEIPT HAS EITHER BEEN APPLIED FOR REVENUE EXPENDITURE OR CAPITAL EXPENDITURE ON T HE OBJECT OF THE TRUST FOR CHARITABLE PURPOSES. 5 EVEN NO DEFECTS HAD BEEN POINTED OUT BY LEARNED AO IN BOOKS OF ACCOUNT OF ASSESSEE TRUST AND IT HAD BEEN GRANTED EXEMPTION IN EARLIER YEARS. THE LEARNED A.O. WHILE FRAMING ASSESSMENT HAS HELD THAT 8% OF RECEIPTS AT RS.46,98,733/- WAS RENTAL INCOME FROM HOSPITAL BUIL DING NOT INCIDENTAL TO CHARITABLE ACTIVITIES AND ILLEGALLY PROCEEDED TO MAKE ADDITION OF RS.32,89,114/- AS INCOME FROM PROPERTY WHICH IS ALTOGETHER AGAINST FACTS, ARBITRA RY AND UNCALLED FOR. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: I. MOOL CHAND KHAIRATI RAM TRUST VS. DIRECTOR OF INCOM E-TAX (EXEMPTIONS)[2015] 59 TAXMANN.COM 398 II. COMMISSIONER OF INCOME-TAX VS. FEDERATION OF INDIAN CHAMBERS OF COMMERCE & INDUSTRIES [1981] 6 TAXMAN 7(SC) 7.1 THE LD. CIT(A) ALSO ASKED THE REMAND REPORT FRO M THE A.O., ON THE AFORESAID SUBMISSIONS OF THE ASSESSEE. IN RESPONSE THE A.O. FURNISHED THE REMAND REPORT AS UNDER: THE ASSESSEE IN ITS SUBMISSION HAS SUBMITTED THAT T O CATER TO THE MODERN DAY REQUIREMENTS OF MEDICAL TREATMENT OF PEOPLE THE TRU ST APPROACHED CYGNUS MEDICARE PVT. LTD. AND ENTERED INTO AN AGREEMENT WI TH IT ON 3 RD JUNE 2013. THE ASSESSEE ADMITTEDLY HAS SUBMITTED THAT CYGNUS MEDIC ARE WAS TO ENSURE 8% OF THE GROSS REVENUE COLLECTIONS TO BE MADE AVAILABLE TO T HE TRUST ON MONTHLY BASIS AND ALL EXPENSES WERE TO BE INCURRED BY CYGNUS MEDICARE PVT . LIMITED! FURTHER, ANY SHORTFALL TO MEET OUT THE OPERATIONAL EXPENSES SHALL BE MET B Y CYGNUS MEDICARE PVT. LTD. ONLY FROM ITS OWN RESOURCES. FROM THE AGREEMENT BETWEEN THE ASSESSEE AND CYGUS MEDICARE PVT. LTD., IT IS EVIDENT THAT THE ASSESSEE PROVIDED ITS PROPERTY TO CYGNUS MEDICARE PVT. LTD. FOR COMMERCIAL USE AND RECEIVED 8% OF ITS GROSS RECEIPTS MONTHLY IN RETURN. THIS INCOME IS IN NO WAY INCIDENTAL TO C HARITABLE ACTIVITIES AND HAS BEEN ADDED TO THE INCOME OF THE ASSESSEE AFTER STANDARD DEDUCTION OF 30%. THE ASSESSEE HAS RELIED UPON THE CASE LAW IN CASE O F 'MOOL CHAND KHAIRATI RAM TRUST V. D1T (EXEMPTIONS) [2015] 59 TAXMANN.COM 398 (DELHI HC). THIS CASE LAW CANNOT BE APPLIED TO THIS CASE IN LIGHT OF THE FACT THAT THE ASSESSEE MOOL CHAND KHAIRATI RAM TRUST WAS RUNNING A HOSPITAL IN ACCORDANCE TO THE O BJECTS SPECIFIED IN ITS TRUST DEED WHILE IN THE PRESENT CASE, THE BUILDING HAS BEEN GI VEN TO A COMPANY DEALING IN HEALTHCARE FOR COMMERCIAL USE UNDER AN AGREEMENT WH ERE THE ASSESSEE IS GETTING FIXED MONTHLY PERCENTAGE I.E. 8% OF GROSS RECEIPTS. GIVING THE HOSPITAL BUILDING TO AN ESTABLISHED HEALTHCARE CHAIN IS NEITHER A CHARITABL E ACTIVITY NOR IS SPECIFIED IN THE OBJECTS OF THE ASSESSEE. IN THE OTHER CASE LAW RELIED UPON BY THE ASSESSEE I N CASE OF 'CIT V. FEDERATION OF INDIAN CHAMBERS OF COMMERCE & INDUSTRIES [1981] 6 T AXMAN 7 (SC), THE HON'BLE SUPREME COURT HELD THAT THE HOLDING OF INDIAN TRADE FAIR AND SPONSORING OF CONFERENCE OF THE AFRO-ASIAN ORGANIZATION WERE FOR THE ADVANCEMENT OF THE OBJECTS AND PURPOSES OF THE TRUST VIZ. PROMOTION, PROTECTIO N AND DEVELOPMENT OF TRADE, COMMERCE AND INDUSTRY IN INDIA. PERUSAL OF THE SAID CASE LAW CLEARLY ESTABLISHES THAT THE ACTIVITIES OF THE ASSESSEE I.E. FICCI WERE IN A CCORDANCE TO ITS STATED OBJECTS WHICH IS NOT THE CASE IN RESPECT OF THE PRESENT ASSESSEE. HERE, THE ASSESSEE HAS LET OUT ITS PROPERTY TO A HEALTHCARE CHAIN FOR COMMERCIAL PURPO SES AND HAS BEEN EARNING THE RENTAL INCOME WHICH IS NOT AT ALL IN ACCORDANCE WIT H ITS OBJECTS. IN VIEW OF THIS, ADDITION OF RS. 32,89,114/- HAS RIGHTLY BEEN MADE. 7.2. ON THE REMAND REPORT FROM THE A.O. THE ASSESSE E FURNISHED THE COUNTER COMMENTS STATING THERE IN AS UNDER: 'FROM THE AGREEMENT BETWEEN THE ASSESSEE AND CYGNUS MEDICARE PVT. LTD., IT IS EVIDENT THAT THE ASSESSEE PROVIDED ITS PROPERTY TO CYGNUS MEDICARE PVT. LTD. FOR COMMERCIAL USE AND RECEIVED 8% OF ITS GROSS RECEIPT S MONTHLY IN RETURN. THIS INCOME IS IN NO WAY INCIDENTAL TO CHARITABLE ACTIVITIES AND H AS BEEN ADDED TO THE INCOME OF THE ASSESSEE AFTER STANDARD DEDUCTION OF 30%. GIVING THE HOSPITAL BUILDING TO AN ESTABLISHED HEAL THCARE CHAIN IS NEITHER A CHARITABLE ACTIVITY NOR IS SPECIFIED IN THE OBJECTS OF THE ASS ESSEE. 6 HERE, THE ASSESSEE HAS LET OUT ITS PROPERTY TO A HE ALTHCARE CHAIN FOR COMMERCIAL PURPOSES AND HAS BEEN EARNING THE RENTAL INCOME WHI CH IS NOT AT ALL IN ACCORDANCE WITH ITS OBJECTS. IN VIEW OF THIS, ADDITION OF RS.3 2,89,114/- HAS RIGHTLY BEEN MADE.' APPELLANT'S SUBMISSION IN RESPECT OF INCOME FROM PR OPERTY HELD UNDER TRUST AMOUNTING RS. 32.89,114/- THE APPELLANT IS A CHARITABLE TRUST AND IS RUNNING A HOSPITAL TO PROVIDE MEDICAL RELIEF TO THE WEAKER SECTION OF THE SOCIETY AND PUBLIC AT LARGE. THE HOSPITAL WAS INAUGURATED BY PRESIDENT OF INDIA ON 7TH JULY, 1983. IN FURTHERANC E TO ITS OBJECT AND TO CATER THE REQUIREMENTS OF MODERN DAY REQUIREMENTS OF MEDICAL TREATMENT OF THE PEOPLE, TO HAVE COMPLETE UP GRADATION OF THE HOSPITAL, THE TRU ST APPROACHED CYGNUS MEDICARE PVT. LTD. FOR PROVIDING THEIR EXPERTISE AND SHA RING OF SPECIALIZED KNOWLEDGE IN THIS REGARD AND ACCORDINGLY ENTERED INTO AN AGREEMENT WI TH M/S CYGNUS MEDICARE PRIVATE LIMITED (CMPL) VIDE MEDICAL SERVICE AGREEME NT ON 3 RD DAY OF JUNE, 2013. THE SOLE PURPOSE OF MEDICAL SERVICE AGREEMENT WAS SHARI NG OF SPECIALIZED KNOWLEDGE AND PROVISIONS FOR TREATMENT OF CRITICAL AILMENTS F OR THE SOCIETY. IN TERM OF AFORESAID AGREEMENT, CYGNUS WAS TO ENSURE THAT 8% OF THE GROS S REVENUE COLLECTIONS WAS TO BE MADE AVAILABLE TO THE TRUST ON MONTHLY BASIS AND AL L EXPENSES WERE TO BE INCURRED BY CYGNUS MEDICARE PVT. LTD. (CMPL) FROM OPERATING BAN K A/C. IN CASE FOUND ANY SHORTFALL TO MEET OUT ALL THE OPERATIONAL EXPENSES, THAT SHORTFALL SHALL BE MET BY CYGNUS MEDICARE PVT. LTD. (CMPL) ONLY FROM ITS OWN RESOURCES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. REQUISITIONED FOR S EGREGATING STAND ALONE REVENUE RECEIPTS & EXPENDITURES STATEMENT WHICH WERE SUBMIT TED AND THE SAME CLEARLY REFLECTS THAT AS AGAINST TOTAL STAND ALONE RECEIPTS /INCOME OF THE TRUST HAS APPLIED MORE THAN 85% ON THE OBJECTS OF TRUST FOR CHARITABL E PURPOSES. FURTHER THE BODY OF THE ASSESSMENT ORDER REVEALS THAT ASSESSMENT HAS BEEN F RAMED ON THE BASIS OF STAND ALONE FINANCIAL STATEMENTS/CALCULATION OF INCOME WH ICH IS REPRODUCED HEREUNDER FOR READY REFERENCE :- PARTICULARS AMOUNT(RS.) REVENUE RECEIPTS FROM CYGNUS MEDICARE PVT. LTD. RS. 46,98,733/- OTHER RECEIPTS(OPD RECEIPTS, RENTAL INCOME AND INTEREST INCOME ETC.) RS. 15,83,670/- TOTAL RECEIPTS RS. 62,82,403/- 85% OF THE ABOVE TOTAL RECEIPT 53,40,043/- APPLICATION OF INCOME REVENUE EXPENSES 6,67,413/- CAPITAL EXPENSES 63,87,070/- TOTAL APPLICATION OF INCOME 70,54,483/- HENCE THE ABOVE TABLE CLEARLY REFLECTS THAT THE TRU ST HAS APPLIED MORE THAN 85% OF TOTAL RECEIPT FOR CHARITABLE PURPOSES. IN ADDITION TO ABOVE STATED FACTS IT IS WORTH CONSI DERATION BY YOUR GOODSELF THAT THE TRUST'S CASE FOR PRECEDING YEAR I.E ASSTT. YEAR 201 4-15 WAS ASSESSED VIDE ORDER DATED 23/08/2016 AND NO SUCH DISALLOWANCE WERE MADE BY AO WHEREAS THE FACTS & CIRCUMSTANCES OF THE CASE WAS IDENTICAL AND DOMINAN T PURPOSE OF TRUST WAS CHARITABLE WITHIN THE MEANING OF SECTION 2(15) OF I NCOME TAX ACT. SO THE CONTENTION THAT THE REVENUE CONTRIBUTION RECEIVED FROM CYGNUS MEDICARE PVT LTD (CMPL) AS INCOME FROM HOUSE PROPERTY IS NOT CORRECT AS THESE RECEIPT HAS EITHER BEEN APPLIED FOR REVENUE EXPENDITURE OR CAPITAL EXPENDITURE ON T HE OBJECT OF THE TRUST FOR CHARITABLE PURPOSES. EVEN NO DEFECTS HAD BEEN POINT ED OUT BY LEARNED AO IN BOOKS OF ACCOUNT OF ASSESSEE TRUST AND IT HAD BEEN GRANTE D EXEMPTION IN EARLIER YEARS. THE RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON' BLE APEX COURT IN THE CASE OF MOOL CHAND KHAIRATI RAM TRUST VS. DIRECTOR OF IN COME TAX (EXEMPTIONS) [2015] 59 TAXMANN.COM 398. 7.3 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE AND REMAND REPORT OF THE A.O. DELETED THE ADDITION BY O BSERVING AS UNDER: A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE ASSESSING OFFICER (A.O.) HAS STATED THAT FROM THE AGREEMENT BETWEEN THE ASSESSEE AND CY GNUS MEDICARE LTD., IT IS 7 EVIDENT THAT THE ASSESSEE PROVIDED ITS PROPERTY TO THE LATTER FOR COMMERCIAL USE AND HAS BEEN EARNING RENTAL INCOME WHICH IS NOT IN ACCO RDANCE WITH ITS OBJECTS. THE A.O. PROCEEDED TO MAKE THE ADDITION TO THE INCOME OF THE TRUST AS RENTAL INCOME AFTER THE STATED DEDUCTION OF 30%. THE COUNSEL OF THE APPELLANT HAS REFERRED TO REPLIE S FILED BEFORE THE A.O. WHICH HAD BEEN IGNORED AT THE TIME OF ASSESSMENT. THE APPELLA NT HAS SHOWN CONSOLIDATED INCOME AND EXPENDITURE ACCOUNT IN ADDITION TO THE S TAND ALONE INCOME AND EXPENDITURE ACCOUNT AFTER DUTY EXCLUDING THE OPERAT ION OF CYGNUS MEDICARE PVT. LTD. WHICH DULY REFLECTS THAT THE APPELLANT HAS APP LIED ITS INCOME OF MORE THAN 85% OF RECEIPTS IN BOTH CASES. THE APPELLANT HAS STATED TH AT THESE RECEIPTS HAS EITHER BEEN UTILISED FOR REVENUE OR CAPITAL EXPENDITURE BEING T HE OBJECT OF THE TRUST FOR RUNNING OF THE HOSPITAL. RELEVANT CASE LAWS PERTAINING TO THIS ISSUE HAVE BEEN FILED AND I AM IN AGREEMENT WITH THE APPELLANT THAT AS THE TRUST WHIC H IS REGISTERED U/S 12A OF THE IT ACT WOULD BE ENTITLED TO EXEMPTION U/S 11 OF THE ACT, I F THE INCOME IS APPLIED TO THE OBJECTS OF THE TRUST FOR CHARITABLE PURPOSES FOR WH ICH PROPERTIES ARE HELD UNDER THE TRUST. HENCE, I DELETE THE ADDITION ON THIS ACCOUNT . 8. NOW THE DEPARTMENT IS IN APPEAL. 9. THE LD. CIT DR STRONGLY SUPPORTED THE ORDER OF T HE A.O. IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) PASSED A NON SPEAKING ORDER AND DID NOT APPRECIATE THE FACTS IN RIGHT PERSPECTIVE. 10. IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR TH E ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND F URTHER SUBMITTED THAT THE ASSESSEE WAS ESTABLISHED IN 1979 AND NO SUCH DISALL OWANCE HAD BEEN MADE IN PAST AND THAT EVEN IN THE PRECEDING ASSESSMENT YEAR I.E; A.Y. 2014-15, THE A.O. HIMSELF ACCEPTED THE SIMILAR INCOME AS GENUINE VIDE ORDER DT. 23/08/2016 COPY OF THE SAID ORDER WAS FURNISHED WHICH IS PLACED AT PAGE NO. 61 & 62 OF THE ASSESSEES COMPILATION. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN SIMILAR CIRCUMSTAN CES NO SUCH ADDITION WAS MADE IN THE PRECEDING YEAR HAS NOT BEEN REBUTTED. I T IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAD APPLIED ITS INCOME OF MORE THAN 85 % OF ITS RECEIPT. THE ASSESSEE UTILIZED THE RECEIPT FOR ITS OBJECTS AND R UNNING A HOSPITAL, THE BUILDING OF WHICH WAS GIVEN TO M/S CYGNUS MEDICATE PVT. LTD. WH O WAS ALSO RUNNING THE HOSPITALS WHICH IS THE OBJECTS OF THE ASSESSEE, SO IT CANNOT BE SAID THAT THE INCOME EARNED WAS NOT UTILIZED BY THE ASSESSEE TO F ULFILL ITS OBJECTS AND IN FURTHERANCE TO ACHIEVE ITS OBJECTS. WE THEREFORE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS GIVEN BY THE LD. CIT(A) AND AS SUCH DO NOT SEE ANY MERIT IN THIS GROUND OF DEPARTMENTAL APPEAL. 12. VIDE GROUND NO. 2 THE GRIEVANCE OF THE DEPARTME NT RELATES TO THE DELETION OF ADDITION OF RS. 28,50,000/- UTILIZED BY THE ASSESSEE ON CONSTRUCTION AND PURCHASE OF THREE BRONZE STATUES OF ITS FOUNDER S. 8 13. THE FACT RELATED TO THIS ISSUE IN BRIEF ARE THA T THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HA D INCURRED CAPITAL EXPENDITURE OF RS. 28,50,000/- ON AMPHITHEATRE UND ER CONSTRUCTION I.E; THREE BRONZE STATUES. HE ASKED THE ASSESSEE TO EXPLAIN AS TO HOW THIS CAPITAL EXPENDITURE WAS IN THE NATURE OF CHARITABLE ACTIVIT Y. THE A.O. OBSERVED THAT NO SPECIFIC REPLY WAS FURNISHED BY THE ASSESSEE HE THE REFORE DISALLOWED THE EXPENDITURE TO THE TUNE OF RS. 28,50,000/- AND TREA TED THE SAME AS INCURRED FOR NON CHARITABLE ACTIVITY. 14. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT(A) AND SUBMITTED AS UNDER: ' THAT THE LEARNED AO ISSUED SHOW CAUSE NOTICE ON 1 3.12.2017 AND ASKED THE APPELLANT TO EXPLAIN WHY THE EXPENDITURES IN RESPEC T OF AMPHITHEATRE UNDER CONSTRUCTION AMOUNTING RS 28,50,000/- MAY NOT BE TR EATED AS INCOME FROM COMMERCIAL ACTIVITIES AND THE COMPLIANCE WAS MADE V IDE REPLY LETTER DATED 19.12.2017 THAT AN AMPHITHEATRE TO BE CONSTRUCTED I N COMMEMORATION OF MEMORY OF OUR 3 FOUNDERS NAMELY LT. S/SH P. D. GUPTA, LT. S/O SH D. P. GUPTA AND LT. S/SH R. K. BANSAL WITH WHOSE BLESSINGS THE TRUST HAS BEEN RUNN ING CHARITABLE ACTIVITIES SINCE 1983. DURING THE YEAR UNDER CONSIDERATION, THE TRUS T HAS PURCHASED 3 BRONZE STATUE OF 3 FOUNDERS TO THE SUM OF RS 28.50 LACS AND THE SAME IS CAPITALIZED UNDER HEAD 'AMPHITHEATER UNDER CONSTRUCTION' IN SCHEDULE OF FI XED ASSET. UNDOUBTEDLY, THE ACTIVITIES OF THE TRUST IN RESPECT OF CONSTRUCTION OF AMPHITHEATRE WERE FOR THE ADVANCEMENT OF THE DOMINANT OBJECT TO PROMOTE THE S OCIAL INTEREST AND TO INSPIRE THE GENERAL PUBLIC AT LARGE WITHOUT ANY MOTIVE OF P ROFIT. THESE CAPITAL EXPENDITURES ARE DULY COVERED IN OBJECT CLAUSES UNDER PARA 5 (F) AND 5(J) OF THE TRUST DEED. SO LONG AS THE EXPENDITURE IS INCURRED FOR CAPITAL PURPOSES OUT OF INCOME EARNED BY THE TRUST ON THE OBJECTS OF THE TRUST, CAN BE SAID TO BE AN A PPLICATION OF INCOME FOR CHARITABLE PURPOSES. THAT THE LEARNED AO WHILE FRAMING ASSESSMENT HAS FA ILED TO CONSIDER THE SUBMISSIONS AND EVIDENCE FILED BEFORE HIM AND ARBITRARILY PROCE EDED TO DISALLOWANCE THESE EXPENDITURES OF RS 28,50,000/- TREATING THE SAME AS INCURRED FOR NON CHARITABLE ACTIVITIES WHICH IS ALTOGETHER, ILLEGAL, VOID AND UNCALLED FOR . RELIANCE WAS PLACED ON THE DECISION OF THE ITAT CHA NDIGARH BENCH IN THE CASE OF YODHA SAMARAK SAMITI VS. COMMISSIONER OF INCOME- TAX, PANCHKULA REPORTED AT [2012] 24 TAXMANN.COM 126 (ITAT CHD.). 14.1 THE LD. CIT(A) ASKED THE REMAND REPORT FROM TH E A.O. WHO SUBMITTED AS UNDER: THE ASSESSEE PURCHASED 3 BRONZE STATUES OF ITS 3 FO UNDERS AND SHOWN IT UNDER THE HEAD 'AMPHITHEATRE UNDER CONSTRUCTION'. THE ASSESSE E SUBMITTED THAT THE ACTIVITIES OF THE TRUST IN RESPECT OF CONSTRUCTION OF AMPHITHEATR E WERE FOR THE ADVANCEMENT OF ITS DOMINANT OBJECTS TO PROMOTE THE SOCIAL INTEREST AND TO INSPIRE THE GENERAL PUBLIC AT LARGE WITHOUT ANY MOTIVE OF PROFIT. BEFORE PROCEEDI NG FURTHER, IT IS NECESSARY TO HIGHLIGHT THE AIMS AND OBJECTS OF THE ASSESSEE WHIC H ARE REPRODUCED AS UNDER: A) TO CONTRIBUTE/PROVIDE MEDICAL RELIEF BY AIDING, OPE NING, MAINTAINING ALLOPATHIC AYURVEDIC, UNANI, HOMEOPATHIC, HOSPITALS, DISPENSAR IES AND INSTITUTIONS. B) TO PROMOTE AND AID EDUCATION IN GENERAL INCLUDING T HAT RELATING TO INDUSTRIAL, ENGINEERING AND TECHNICAL STUDIES AND RESEARCHES AN D ALSO IN ARTS INCLUDING FINE ARTS AND AWARD AID AND PAY SCHOLARSHIPS TO DESERVING STU DENTS WHETHER REFUNDABLE OR NONREFUNDABLE AND TO PROMOTE & AID SPORTS. C) TO ESTABLISH, MAINTAIN AND AID CHARITABLE INSTITUTI ONS SUCH AS DHARAMSHALAS, HOSPITALS, DISPENSARIES, CLINICS, SARAIS, GOSHALAS, MATERNITY HOMES, CHILD WELFARE CENTRES, HOUSES FOR POOR ORPHANAGES, INSTITUTIONS F OR THE BLIND, HOUSES FOR OLD AND 9 INFIRM PEOPLE. WIDOWS HOUSES, TRAINING CENTRES, RES CUE HOMES AND OTHER SIMILAR INSTITUTIONS. D) TO PROMOTE AND AID THE INTEREST OF BACKWARD CLASSES AND POOR IN GENERAL. E) TO AID PEOPLE AT PLACES WHICH ARE FLOOD EFFECTED AN D OTHER PLACES WHICH ARE AFFECTED BY NATURAL CALAMITIES. F) TO PROMOTE AND AID SOCIAL AND NATIONAL INTEREST S G) TO RECEIVE DONATIONS FROM PUBLIC CHARITABLE AND COMMERCIAL INSTITUTIONS FOR PROMOTIONS OF THE OBJECTS OF THE SOCIETY/TRUST, H) IN GENERAL TO HELP ALL CHARITABLE CAUSES AND INS TITUTIONS AND ALSO HELP ALL DESERVING PEOPLE IN DISTRESS REGARDLESS AND WITHOUT DISTINCTION OF CASTE, COLOUR AND CREED. I) TO PROMOTE AND AID PUBLIC LIBRARIES AND READING ROOMS. J) TO PROMOTE AND AID ANY ACTIVITY FOR THE GENERAL PUBLIC WITHOUT THE ACTIVITY OF PROFIT. OUT OF ALL THE OBJECTS STATED IN THE TRUST DEED, TH E ASSESSEE HAS REFERRED TO OBJECTS STATED AT SERIAL NO. (F) AND (J) IN PARA 5 OF ITS T RUST DEED WHICH ARE REPRODUCED AS UNDER: 5(F): TO PROMOTE AND AID SOCIAL AND NATIONAL INTERE ST. 5(J): TO PROMOTE AND AID ANY ACTIVITY FOR THE BENEF IT OF GENERAL PUBLIC WITHOUT THE ACTIVITY OF PROFIT. THE SUBMISSION AND CLAIMS OF THE ASSESSEE IN RESPEC T OF THE EXPENDITURE OF RS. 28.5 LACS CANNOT BE ACCEPTED. THE PURCHASE AND INSTALLAT ION OF THREE STATUES OF ITS FOUNDERS/FAMILY MEMBERS IS NEITHER IN ACCORDANCE WI TH THE OBJECTS OF THE ASSESSEE NOR CAN IT BE CALLED AN ACTIVITY FOR BENEFIT OF GEN ERAL PUBLIC AT LARGE. THE REFERENCE GIVEN BY THE ASSESSEE TO THE OBJECT STATED AT PARA 5(F) AND 5(J) IN ITS TRUST DEED ARE NOT RELEVANT TO THE ACTIVITY OF PURCHASE AND INSTALLATI ON OF THREE STATUES AS THIS ACTIVITY NEITHER PROMOTES/AID SOCIAL AND NATIONAL INTEREST N OR PROMOTES/AID ANY ACTIVITY FOR THE BENEFIT OF GENERAL PUBLIC WITHOUT THE ACTIVITY FOR PROFIT. MOREOVER, THE ACTIVITY OF PURCHASE AND INSTALLATION OF THREE BRONZE STATUES I S NOWHERE IN ACCORDANCE TO ANY OF THE OBJECT OF THE TRUST MENTIONED IN ITS TRUST DEED WHICH ARE ALSO STATED ABOVE FOR READY REFERENCE. THE ASSESSEE HAS RELIED UPON THE CASE LAW IN CASE O F 'YODHA SAMARAK SAMITI V. CIT, PANCHKULA [2012] 24 TAXMANN.COM 125 (1TAT CHD.). TH IS CASE LAW IS NOT APPLICABLE IN CASE OF THE PRESENT ASSESSEE IN LIGHT OF THE FACT T HAT PRIMARY PURPOSE OF THE ASSESSEE 'YODHA SAMARAK SAMITI' WAS SETTING UP OF SUITABLE M EMORIALS TO PERPETUATE THE MEMORY OF NATIONAL WAR HEROES. IN THE PRESENT CASE, THE SAID CASE LAW CANNOT BE APPLIED AS CONSTRUCTION OR PURCHASE OF STATUES IS N EITHER ITS PRIMARY/DOMINANT OBJECT NOR A CHARITABLE ACTIVITY. IN VIEW OF THIS, THE ADD ITION OF RS. 28,50,000/- HAS RIGHTLY BEEN MADE. 14.2 ON THE AFORESAID REMAND REPORT OF THE A.O., TH E ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED COUNTER COMMENTS AS UNDER: THAT AN AMPHITHEATRE TO BE CONSTRUCTED IN COMMEMORA TION OF MEMORY OF OUR 3 FOUNDERS NAMELY LT. S/SH. P. D. GUPTA, LT. S/SH D. P. GUPTA AND LT. S/SH. R. K. BANSAL WITH WHOSE BLESSINGS THE TRUST HAS BEEN RUNNING CHA RITABLE ACTIVITIES SINCE 1983. DURING THE YEAR UNDER CONSIDERATION, THE TRUST HAS PURCHASED 3 BRONZE STATUE OF 3 FOUNDERS TO THE SUM OF RS 28.50 LACS AND THE SAME I S CAPITALIZED UNDER HEAD 'AMPHITHEATER UNDER CONSTRUCTION' IN SCHEDULE OF FIXED ASSET. UNDOUBTEDLY, THE ACTIVITIES OF THE TRUST IN RESPECT OF CONSTRUCTION OF AMPHITHEATRE WERE FOR THE OBJECTS OF THE TRUST TO PROMOTE THE SOCIAL INTEREST AND TO INSPIRE THE GENERAL PUBLIC AT LARGE WITHOUT ANY MOTIVE OF PROFIT. THESE CAPITAL EXPENDI TURES ARE DULY COVERED WITHIN THE OBJECT CLAUSES CONTAINED IN THE TRUST DEED OF THE T RUST. SO LONG AS THE EXPENDITURE IS INCURRED FOR CAPITAL PURPOSES OUT OF INCOME EARNED BY THE TRUST ON THE OBJECTS OF THE TRUST, CAN BE SAID TO BE AN APPLICATION OF INCOME F OR CHARITABLE PURPOSES. THAT THE CASE LAW OF ITAT CHD. IN YODHA SAMARAK SAM ITI V. COMMISSIONER OF INCOME- TAX, PANCHKULA [2012] 24 TAXMANN.COM 126 DULY SUPPO RT THE MATTER UNDER CONSIDERATION AS ITAT, CHD. HELD THAT OBJECTS OF SE TTING UP MEMORIALS TO PERPETUATE MEMORY OF NATIONAL WAR HEROES ARE CHARITABLE IN NAT URE. 10 14.3 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE AND THE REMAND REPORT OF THE A.O. DELETED THE ADDITION BY O BSERVING THAT THE ASSESSEE HAD PURCHASED THREE BRONZE STATUE OF ITS FOUNDER FO R CONSTRUCTION OF AMPHITHEATRE, THEREFORE THE CAPITAL EXPENDITURE INC URRED IN MEMORY OF THE FOUNDER, FOR CONSTRUCTION OF AMPHITHEATRE WAS TO BE CONSIDERED AS APPLICATION OF INCOME. 15. NOW THE DEPARTMENT IS IN APPEAL. 16. THE LD. SR. DR STRONGLY SUPPORTED THE ORDER OF THE A.O. AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER. 17. IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR TH E ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND F URTHER SUBMITTED THAT THE ACTIVITIES OF THE TRUST IN RESPECT OF CONSTRUCTION OF AMPHITHEATRE WERE FOR ACHIEVING THE ASSESSEES OBJECTS TO PROMOTE THE SOC IAL INTEREST AND TO INSPIRE THE GENERAL PUBLIC AT LARGE WITHOUT ANY MOTIVE OF PROFI T, THEREFORE THE IMPUGNED DISALLOWANCE MADE BY THE A.O. WAS RIGHTLY DELETED B Y THE LD. CIT(A). 18. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE P ARTIES WE ARE OF THE VIEW THAT THE ASSESSEE INCURRED THE CAPITAL EXPENDITURE FOR CONSTRUCTION OF AMPHITHEATRE AND THE IDOLS OF THE FOUNDERS OF THE T RUST WERE INSTALLED TO PROMOTE SOCIAL INTEREST AND TO INSPIRE THE GENERAL PUBLIC AT LARGE FOR CHARITABLE ACTIVITIES. IN OUR OPINION THE CONSTRUCTION OF AMPH ITHEATRE WAS AN ACTIVITY IN ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY THE SAME BEING CHARITABLE IN NATURE AND THE IDOLS WERE THE PART OF THE AMPHITHEATRE, WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). 19. VIDE GROUND NO. 3 THE GRIEVANCE OF THE DEPARTME NT RELATES TO THE DELETION OF ADDITION OF RS. 15,83,670/- MADE BY THE A.O. BY TREATING THE RECEIPTS AS COMMERCIAL IN NATURE. 20. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE TH AT THE A.O. MADE THE IMPUGNED ADDITION BY TREATING THE RECEIPTS SHOWN BY THE ASSESSEE UNDER THE HEAD OTHER RECEIPTS AS COMMERCIAL AND NOT FOR FUL FILLING THE OBJECTS OF THE ASSESSEE. 21. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: 'THAT THE LEARNED AO ISSUED SHOW CAUSE NOTICE ON 13 .12.2017 AND ASKED THE APPELLANT TO EXPLAIN WHY OTHER RECEIPTS MAY NOT BE TREATED AS INCOME FROM COMMERCIAL ACTIVITIES AND THE COMPLIANCE WAS MADE V IDE REPLY LATTER DATED 19.12.2017 THAT OTHER RECEIPTS COMPRISED OF RENTAL INCOME, OPD INCOME, INTEREST INCOME ETC. HAS EITHER BEEN UTILIZED FOR REVENUE EX PENDITURE OR CAPITAL EXPENDITURE 11 ON THE OBJECT OF THE TRUST FOR CHARITABLE PURPOSES AND NONE OF THE EXPENDITURE HAS MADE FOR THE BENEFIT OF SETTLERS OR OTHER SPECIFIED PERSONS THAT THE APPELLANT FILED DETAILS OF OTHER RECEIPTS ALONG WITH LEDGERS THEREOF VIDE REPLY DT. 19.12.2017 AND THE LD. AO WITHOUT GOING INTO TH E DETAILS WITH A PREDETERMINED BIAS PROCEEDED TO MAKE DISALLOWANCE OF RS. 15,83,67 0/- WITHOUT GIVING ANY REFERENCE /EXPLANATION WHILE FRAMING ASSESSMENT ORDER WHICH I S ALTOGETHER ARBITRARY, ILLEGAL, VOID AND UNCALLED FOR. 21.1 THE LD. CIT(A) ASKED THE REMAND REPORT FROM TH E A.O. WHO SUBMITTED AS UNDER: THE OTHER RECEIPTS OF THE ASSESSEE SELF-ADMITTEDLY INCLUDE RENTAL INCOME, OPD INCOME FROM HOSPITAL, INTEREST INCOME FROM BANK ETC. THE A SSESSEE HAS SUBMITTED THAT THESE RECEIPTS HAD BEEN UTILIZED FOR REVENUE OR CAPITAL E XPENDITURE ON THE OBJECTS OF THE TRUST FOR CHARITABLE PURPOSES. THIS STAND OF THE AS SESSEE IS NOT ACCEPTABLE IN VIEW OF THE ACTIVITY OF ASSESSEE WHEREIN IT HAS PROVIDED TH E TRUST'S PROPERTY FOR COMMERCIAL USE AND EARNING THE RENT ON THE SAME. APART FROM TH E 8% SHARE IN THE GROSS RECEIPTS OF THE HOSPITAL, THE ASSESSEE HAS SHOWN OPD INCOME TO THE TUNE OF RS. 9,93,675/- FROM HOSPITAL EVEN WHEN IT IS NOT RUNNING THE HOSPITAL. ALSO, IT HAS SHOWN RENTAL INCOME FROM THE PROPERTY TO THE TUNE OF RS. 5,49,000/- WHI CH IS CLEARLY ADDITIONAL INCOME TO THE RECEIPTS FROM CYGNUS MEDICARE PVT. LTD. AND DOE S NOT AMOUNT TO BE INCIDENTAL TO THE CHARITABLE ACTIVITIES. IN VIEW OF THIS, THE ADD ITION OF RS. 15,83,670/- UNDER HEAD 'OTHER RECEIPTS' HAS RIGHTLY BEEN MADE. 21.2 ON THE AFORESAID REMAND REPORT OF THE A.O. THE ASSESSEE FURNISHED THE COUNTER COMMENTS AS UNDER: THAT OTHER RECEIPTS COMPRISED OF RENTAL INCOME, OPD INCOME, INTEREST INCOME ETC. HAS EITHER BEEN UTILIZED FOR REVENUE EXPENDITURE OR CAPITAL EXPENDITURE ON THE OBJECT OF THE TRUST FOR CHARITABLE PURPOSES AND NONE OF TH E EXPENDITURE HAS MADE FOR THE BENEFIT OF SETTLERS OR / OTHER SPECIFIED PERSONS . THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E APPELLANT FILED DETAILS OF OTHER RECEIPTS ALONG WITH LEDGERS ACCOUNT THEREO F VIDE REPLY DT. 19.12.2017 AND THE ID. AO WITHOUT GOING INTO THE DETAILS WITH A PREDET ERMINED BIAS PROCEEDED TO MAKE DISALLOWANCE OF RS.15,83,670/-WHICH IS ALTOGETHER A RBITRARY, ILLEGAL, VOID AND UNCALLED FOR.' 21.3 LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE AND THE REMAND REPORT OF THE A.O. DELETED THE ADDITION BY O BSERVING THAT THE ASSESSEE UTILIZED THE OTHER RECEIPTS I.E; RENTAL INCOME, OPD INCOME AND THE INTEREST INCOME FOR THE OBJECTS OF THE ASSESSEE TRUST. HE TH EREFORE DELETED THE IMPUGNED ADDITION. 22. NOW THE DEPARTMENT IS IN APPEAL. 23. THE LD. SR. DR SUPPORTED THE ORDER OF THE A.O A ND THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 24. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE IT IS NOTICED THAT THE A.O. DID NOT BRING ANY MATERIAL ON RECORD TO SUBSTANTIAT E THAT THE RECEIPT SHOWN BY THE ASSESSEE UNDER THE HEAD OTHER RECEIPTS WERE NOT UTILIZED TO ACHIEVE THE OBJECTS OF THE ASSESSEE TRUST FOR CHARITABLE PURPOS E. HE EVEN DID NOT MENTION IN THE ASSESSMENT ORDER HOW AND IN WHAT MANNER THE OTH ER RECEIPT WERE NOT 12 UTILIZED BY THE ASSESSEE TO ACHIEVE OBJECTS OF THE ASSESSEE TRUST, THEREFORE THE ARBITRARY ADDITION MADE BY THE A.O. WAS RIGHTLY DEL ETED BY THE LD. CIT(A). 25. VIDE GROUND NO. 4 THE GRIEVANCE OF THE DEPARTME NT RELATES TO ADDITION OF RS. 15,00,000/- MADE BY THE A.O. ON ACCOUNT OF UNCL AIMED LIABILITY. 26. FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT T HE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT AN AMOUNT OF RS 15,00,000/- WAS SHOWN AS A LIABILITY UNDER THE HEAD LOAN FUND IN THE NAME OF SH. D.P. GUPTA WHO EXPIRED ON 09/02/2001, HE THEREFORE TREATED THE SAM E AS INCOME FROM OTHER SOURCE AND ADDED IT TO THE TAXABLE INCOME OF THE AS SESSEE. 27. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: 'THAT THE CHARITABLE TRUST HAD RAISED LOAN FUND OF RS.15,00,000/-FROM LATE SH. D. P. GUPTA. AFTER THE DEATH OF SH. D. P. GUPTA, THE LEGA L HEIRS HAD SOME FAMILY DISPUTE AND AS SUCH THE LOAN COULD NOT BE REPAID BACK BUT T HE LIABILITY HAD NEVER BEEN DENIED BY THE TRUST. THE ID. AO HAS ILLEGALLY TREAT ED THE SAME AS UNCLAIMED LIABILITY AND MADE AN ADDITION OF RS.15,00,000/- WHICH IS VOI D AND UNCALLED FOR HERE IT IS BROUGHT INTO YOUR KIND NOTICE THAT NEITH ER SHOW CAUSE NOTICE ISSUED NOR OPPORTUNITY OF BEING HEARD GIVEN BY THE ID. AO DURI NG THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. IN TERM OF PROVISION OF SEC. 41(1), IT IS HEREBY RE SPECTFULLY SUBMITTED THAT THE EXPRESSION 'REMISSION OR CESSATION OF LIABILITY' INCLUDE THE R EMISSION OR CESSATION OF ANY TRADING LIABILITY BY ANY UNILATERAL ACT OF THE ASSESSEE BY WAY OF WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS. SO IN TERMS OF THE PROVISIONS OF SEC. 41( 1) ANY AMOUNT OF LIABILITY IS SUBJECT TO TAX PROVIDED IT HAS BEEN WRITTEN OFF IN THE BOOKS OF AC COUNTS. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: I. HOTLINE ELECTRONICS LTD. (2012) 205 TAXMAN 245 (DEL HI HC) II. CIT VS. BHOGILAL RAMJIBHAI ATARA (GUJRAT HC) [2014] 43 TAXMANN.COM 55(GUJRAT) 27.1 THE A.O. ALSO FURNISHED THE REMAND REPORT ON T HE AFORESAID SUBMISSIONS OF THE ASSESSEE WHICH READ AS UNDER: THE ASSESSEE HAS SHOWN UNCLAIMED LIABILITY IN THE BALANCE SHEET FOR RELEVANT YEAR UNDER 'LOAN FUND IN THE NAME OF SH. D.P. GUPTA AMOU NTING TO RS. 15,00,000/-. DURING ASSESSMENT PROCEEDINGS, IT CAME TO LIGHT THAT SH. D .P. GUPTA DIED ON 09.02.2001 AND THIS AMOUNT OF RS. 15 LACS HAS NOT BEEN CLAIMED BY ANYONE TILL DATE. THIS AMOUNT HAS BEEN TREATED AS 'INCOME FROM OTHER SOURCES' AS THE LIABILITY REMAINS UNCLAIMED TILL DATE. THE ASSESSEE HAS RELIED UPON THE CASE LAW IN CASE O F CIT VS. HOTLINE ELECTRONICS LTD. [2012] 205 TAXMAN 245 (DELHI HC) AND CIT-II VS. BHO GILAL RAMJIBHAI ATARA (GUJARAT HC)[2014] 43 TAXMANN.COM 55 (GUJRAT). THE CASE LAWS ARE NOT APPLICABLE IN THIS CASE AS IN THE PRESENT CASE THE LIABILITY IS SHOWN IN TH E NAME OF SHRI. D.P. GUPTA WHO DIED IN THE YEAR 2001 AND THE LIABILITY IS UNCLAIMED TILL D ATE. THE CIRCUMSTANCES OF THE CASES REFERRED TO BY THE ASSESSEE ARE NOT SIMILAR TO THE PRESENT CASE AND CANNOT BE APPLIED TO THE SAME. IN VIEW OF THIS, THE ADDITION OF RS. 1 5,00,000/- HAS RIGHTLY BEEN MADE. 27.2 LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE AND THE REMAND REPORT OF THE A.O. DELETED THE ADDITION BY O BSERVING THAT IN THE ABSENCE OF EVIDENCE OF CESSATION OF LIABILITY, UNPA ID LIABILITIES COULD NOT BE 13 ADDED TO THE ASSESSEES INCOME MERELY BECAUSE THE S AME REMAINED UNPAID FOR A SUFFICIENTLY LONG TIME. 28. NOW THE DEPARTMENT IS IN APPEAL. 29. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE IT IS NOTICED THAT THE A.O. DID NOT BRING ANY MATERIAL ON RECORD TO SUBSTANTIAT E THAT THE LIABILITY SHOWN BY THE ASSESSEE ON ACCOUNT OF LOAN RECEIVED FROM SHRI D.P. GUPTA WAS NOT IN EXISTENCE OR THERE WAS ANY EVIDENCE FOR REMISSION/C ESSATION OF LIABILITY. THEREFORE, THE ADDITION MADE BY THE A.O. WAS NOT JU STIFIED AND THE LD. CIT(A) RIGHTLY DELETED THE SAME. 30. GROUND NO. 5 IS CORRELATED WITH THE MAIN GROUND S NO. 1 TO 4 RAISED BY THE DEPARTMENT THEREFORE NO SEPARATE ADJUDICATION IS RE QUIRED ON THE SAME. 31. GROUND NO. 6 IS GENERAL IN NATURE SO DO NOT REQ UIRE ANY COMMENT ON OUR PART. 32. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 27/08/2019 ) SD/- SD/- #$ % .., (SANJAY GARG ) ( N.K. SAINI) & '(/ JUDICIAL MEMBER ! / VICE PRESIDENT AG DATE: 27/08/2019 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE