The ITO, Ward-6(1), Surat V. Deep Development Effort For Rural Economy & People, Surat

ITA 1558/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2128 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 02-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Keywords: Business income; Depreciation; Business expenditure; Charitable institution; TDS
• Section: 143(3)

Judgement Text

ITO, EXE. WARD, SURAT VS. DEEP DEVELOPMENT EFFORT FOR RURAL ECONOMY & PEOPLE /I.T.A. NO.1558/AHD/2015/SRT/A.Y.:2009-10 PAGE 1 OF 14 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./I.T.A NO.1558/AHD/2015/SRT /ASSESSMENT YEAR : 2009-10 THE INCOME TAX OFFICER, EXEMPTION WARD, SURAT. VS. DEEP DEVELOPMENT EFFORT FOR RURAL ECONOMY & PEOPLE, C/O. GIPCL, NANI NAROLI, MANGROL, SURAT 394 110. [PAN: AAATD 2015 L] APPELLANT /RESPONDENT /ASSESSEE BY SHRI HIREN R. VEPARI CA /REVENUE BY SHRI O.P.SINGH CIT DR / DATE OF HEARING: 30 .0 7 .2018 /PRONOUNCEMENT ON 31 .0 8 . 2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-3, SURAT(IN SHORT THE CIT (A)) DATED 12.03.2015 PERTAINING TO ASSESSMENT YEAR 2009-10, WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-6(1), SURAT (IN SHORT THE AO) DATED 30.02.2011 UNDER SECTION 143(3) OF INCOME TAX ACT, 1961 (IN SHORT THE ACT). ITO, EXE. WARD, SURAT VS. DEEP DEVELOPMENT EFFORT FOR RURAL ECONOMY & PEOPLE /I.T.A. NO.1558/AHD/2015/SRT/A.Y.:2009-10 PAGE 2 OF 14 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CHARITABLE TRUST REGISTERED UNDER BOMBAY PUBLIC TRUST ACT 1950 AND HAS BEEN GRANTED REGISTRATION U/S.12A(A) DATED 31.03.1997. THE AO NOTICED THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.81,83,324/- AS A PROJECT DEVELOPMENT INCOME FROM GUJARAT INDUSTRIAL POWER COMPANY LIMITED, VADODARA (GIPCL) WHICH HAS DEDUCTED TAX BY CONSIDERING THE ASSESSEE AS CONTRACTOR. ACCORDING TO AO, WHILE THE TRUST WAS EXPECTED TO ACCEPT VOLUNTARY CONTRIBUTION, IT HAS EXCLUDED CONTRACTS. HE FURTHER STATED THAT THE INCOME TAX ACT HAS RESTRICTED THE TRUST TO DO THE BUSINESS ACTIVITY. THEREFORE, THE AO WAS OF THE VIEW THAT THE TRUST IS DOING BUSINESS ACTIVITY AND RENDERING SERVICES TO GIPCL. THEREFORE, AS PER PROVISION OF SECTION 2(15) IF THE ACTIVITY OF THE CHARITABLE TRUST INVOLVES THE CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE OR ANY ACTIVITY OF RENDERING ANY SERVICES IN RELATION TO TRADE ETC. FOR ANY FEES OR CONSIDERATION, THEN THE PROVISO TO SECTION 2(15) WOULD BE APPLICABLE. THEREFORE, THE AO DISALLOWED THE EXEMPTION OFRS.5,04,09,256/- AND ASSESSED THE EXCESS OVER EXPENDITURE OF INCOME OF RS.45,02,092/- IN THE INCOME AND EXPENDITURE ACCOUNT AS BUSINESS LOSS. THE AO FURTHER HELD THAT RECEIPT OF THE APPELLANT TRUST INCLUDED CONTRACT RECEIPT OF RS.81,83,323/- FROM GIPCL AGAINST THE BILL RAISED FOR RS.90,79,958/- IN THE BOOKS OF ACCOUNTS OF GIPLC ON WHICH TDS HAS ITO, EXE. WARD, SURAT VS. DEEP DEVELOPMENT EFFORT FOR RURAL ECONOMY & PEOPLE /I.T.A. NO.1558/AHD/2015/SRT/A.Y.:2009-10 PAGE 3 OF 14 ALSO BEEN DEDUCTED. THEREFORE, THE ACTIVITY OF THE ASSESSEE ARE IN THE NATURE OF CONTRACT BUSINESS AND THEREFORE DOES FALL WITHIN THE DEFINITION OF U/S.2(15) R.W. FIRST PROVISO. THE AO FURTHER HELD THAT SINCE THE RECEIPTS FROM THIS ACTIVITY EXCEED RS. 10 LAKHS, THE SECOND PROVISO TO SECTION 2(15) DOES NOT HELP THE CASE OF THE APPELLANT AND AS A RESULT, THE ASSESSEE LOOSES EXEMPTION U/S.11 OF THE ACT. 3. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE LD.CIT(A). THE LD.CIT(A) AFTER DISCUSSING THE DETAILS HAS CALLED FOR A REMAND REPORT FROM THE AO WHICH WAS SENT TO THE APPELLANT FOR COUNTER COMMENTS. IN THE REMAND REPORT, THE AO HAS WORKED OUT THE ACTIVITY WISE PROFIT OF THE APPELLANT IN RESPECT OF RECEIPTS OF RS.81,83,324/- AND WORKED OUT PROFIT AT RS.16,54,768/- OF THIS PROJECT AND SUBMITTED THAT THIS AMOUNT SHOULD BE ASSESSED AS BUSINESS INCOME OF THE ASSESSEE. IN THE COUNTER COMMENTS OF THE REMAND REPORT, THE ASSESSEE SUBMITTED THAT THE SUBMISSIONS MADE EARLIER AND THE ACTIVITIES OF THE ASSESSEE ARE GREEN BELT MAINTENANCE AND CONVERSION OF FLY ASH INTO BRICKS FALL UNDER THE PRESERVATION OF ENVIRONMENT AND THE ACTIVITIES INVOLVED EMPLOYING POOR PEOPLE AND THEREFORE CONSTITUTES RELIEF OF POVERTY AS WELL. THE ASSESSEE HAS ALSO PLACED RELIANCE IN THE CASE OF KRUPNIDHI ITO, EXE. WARD, SURAT VS. DEEP DEVELOPMENT EFFORT FOR RURAL ECONOMY & PEOPLE /I.T.A. NO.1558/AHD/2015/SRT/A.Y.:2009-10 PAGE 4 OF 14 EDUCTION TRUST 139 ITD 228 (BANGALORE), SHRI GIAN GANGA VOCATIONAL & EDUCATIONAL SOCIETY 85 DTR 66 (DELHI) AND PIMS MEDICAL AND EDUCATION CHARITABLE SOCIETY 150 TTJ 891 (CHANDIGARH) AND CONTENDED THAT THE TRUST WORKS FOR SOCIO ECONOMIC UPLIFTMENT OF PEOPLE AND THAT HAS TO BE TREATED AS CHARITABLE PURPOSE AND RELIEF OF POVERTY. IT WAS FURTHER SUBMITTED THAT THE TRUST IS ALSO INCURRED THE EXPENDITURE OF EDUCATION, MEDICAL FACILITIES AND PRESERVATION OF ENVIRONMENT, THEREFORE, THE EXEMPTION 11 OF THE ACT CANNOT BE DENIED. THE CIT(A) OBSERVED THAT THIS TRUST WAS CREATED AND THE FOUNDED TRUSTEE WAS GIPCL WITH INITIAL PURPOSE CONTRIBUTED BY GIPCL HAD ACQUIRED THE LAND IN THE AREA, FOR SETTING UP A LIGNITE BASED POWER WITH THE MINING PROJECT IN VILLAGE MANGROL AND THE LAND WAS ACQUIRED IN RESPECT OF THE SAME. THE TRUST WAS CREATED FOR THE WELFARE OF THE PEOPLE AFFECTED BY ABOVE PROJECT OF GIPCL. THE CIT(A) SPELL OUT THE OBJECT OF THE TRUST AS PER TRUST DEED WHICH ARE REPRODUCED AT PAGE NO.9 AND 10 OF THE APPELLATE ORDER. THE CIT(A) FURTHER OBSERVED THAT IT IS AN UNDISPUTED FACT THAT THE TRUST WAS CREATED AS A SPECIAL PURPOSE VEHICLE FOR SOCIO ECONOMIC UPLIFTMENT OF PROJECT AFFECTED VILLAGES. THE RECEIPTS OF THE TRUST CONSISTED OF DONATIONS FROM GIPCL AND OTHERS, APART FROM GRANTS FROM GOVERNMENT AGENCIES INTEREST ON BANK DEPOSITS AGRICULTURAL INCOME, MISCELLANEOUS INCOME AND PROJECT DEVELOPMENT INCOME ITO, EXE. WARD, SURAT VS. DEEP DEVELOPMENT EFFORT FOR RURAL ECONOMY & PEOPLE /I.T.A. NO.1558/AHD/2015/SRT/A.Y.:2009-10 PAGE 5 OF 14 BEING CONTRACT RECEIPTS OF RS.81,83,323/-. THESE RECEIPTS PERTAINS TO 14 ACTIVITIES MENTIONED AT PAGE 7 OF THE REMAND REPORT OF THE AO. THE AO FURTHER WORKED OUT INCOME OF THE TRUST AT RS.16,84,768/- WHICH THE AO HAS RECOMMENDED THAT THIS MAY BE ASSESSED AS BUSINESS INCOME AS AGAINST BUSINESS LOSS OF RS.45,82,092/- ASSESSED IN ASSESSMENT ORDER. THEREFORE, THE AO HAS REQUESTED FOR ENHANCEMENT. AFTER CONSIDERING THE ACTIVITIES OF THE TRUST AND REMAND REPORT, THE CIT(A) OPINED THAT THE TRUST IS ENGAGED IN A LARGE NUMBER OF WELFARE ACTIVITIES FALLING UNDER THE CATEGORY OF RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND PRESERVATION OF ENVIRONMENT. THE FACT THAT IT WAS THE CORPORATE SOCIAL RESPONSIBILITY OF GIPCL TO DO SUCH ACTIVITY IN RESPECT OF PROJECT AFFECTED PEOPLE / VILLAGE DOES NOT CHANGE THE BASIC CHARACTER OF THESE ACTIVITIES. THE APPELLANT TRUST HAS RECEIVED DONATION NOT ONLY FROM THE GIPCL, BUT ALSO FROM GOVERNMENT GRANTS AND DONATIONS FROM OTHERS FOR CARRYING OUT THESE ACTIVITIES. THEREFORE, IT WAS HELD THAT ACTIVITIES OF THE APPELLANT TRUST FALL WITHIN THE DEFINITION OF CHARITABLE PURPOSE U/S.2(15) OF THE ACT. WITH REGARD TO RECEIPTS OF RS.81,83,323/- WHICH CONSTITUTES ABOUT 21% OF THE TOTAL RECEIPTS OF THE APPELLANT AND 73.5 % RECEIPTS ARE BY WAY OF DONATION AND GOVERNMENT GRANTS WHICH HAVE BEEN USED FOR VARIOUS OBJECTS OF THE TRUST. IF IT IS ACCEPTED THAT RECEIPTS OF ITO, EXE. WARD, SURAT VS. DEEP DEVELOPMENT EFFORT FOR RURAL ECONOMY & PEOPLE /I.T.A. NO.1558/AHD/2015/SRT/A.Y.:2009-10 PAGE 6 OF 14 RS.81,83,323/- ARE CONTRACT RECEIPTS OF THE APPELLANT AND ARE HAVING A PROFIT ELEMENT, EVEN THEN THE ACTIVITIES ARE INCIDENTAL TO ATTAINMENT OF THE OBJECTS OF THE TRUST AND THEREFORE COVERED U/S.11(4A) OF THE ACT. THE CIT(A) FURTHER REFERRED THE DECISION OF APEX COURT IN THE CASE OF THANTHI TRUST 247 ITR 785 (SC) IN WHICH IT WAS HELD THAT THE BUSINESS WHOSE INCOME IS UTILISED BY THE TRUST FOR THE PURPOSE OF ACHIEVING THE OBJECTS OF THE TRUST IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECT OF THE TRUST AND THEREFORE, THE TRUST IS ENTITLED TO EXEMPTION U/S.11 OF THE ACT. SECTION 11 (4A) HAS A REQUIREMENT OF MANTAINANCE OF SEPARATE BOOKS OF ACCOUNTS FOR BUSINESS. THOUGH THE APPELLANT MAINTENANCE THAT IT IS NOT A BUSINESS ACTIVITY EVEN THEN THE APPELLANT HAS MAINTAINED SEPARATE ACCOUNTS FOR RECEIPTS AND EXPENSES FOR EACH OF THE 14 ITEMS OF ACTIVITIES MENTIONED IN THE PARA 7 OF THE REMAND REPORT AND THAT IS WHY THE AO COULD WORKED OUT PROFIT FOR EACH ACTIVITY COVERED BY THE CONTRACT RECEIPTS OF RS.81,83,324/-. THEREFORE, THE CIT(A) HELD THAT THOUGH THE CONTRACT RECEIPTS CONSTITUTE ONLY 21% OF THE TOTAL RECEIPTS, THE ACTIVITY AMOUNTS TO BUSINESS ACTIVITY COVERED U/S.11 (4A). THE BUSINESS PROFIT \DERIVED THEREFROM HAS BEEN APPLIED FOR ATTAINMENT OF OBJECTS OF THE TRUST WHICH ARE THE CHARITABLE IN NATURE. SINCE THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS OF THE TRUST, THE TRUST DOES NOT LOOSE ITO, EXE. WARD, SURAT VS. DEEP DEVELOPMENT EFFORT FOR RURAL ECONOMY & PEOPLE /I.T.A. NO.1558/AHD/2015/SRT/A.Y.:2009-10 PAGE 7 OF 14 EXEMPTION U/S.11 OF THE ACT. THE CIT(A) FURTHER OBSERVED THAT THE TRUST HAS SHOWN INCOME OF RS.3,92,74,676/- WHICH INTER-ALIA INCLUDED INTEREST INCOME, DONATIONS, AGRICULTURAL INCOME AND CONTRACT RECEIPTS FROM WHICH DEPRECIATION OF RS.3,93,857/- AND AGRICULTURAL INCOME RS.8,47,488/- HAS BEEN REDUCED TO ARRIVE AT A FIGURE OF RS.3,80,33,331/- MENTIONED IN THE RETURN. THE EXPENDITURE OF THE TRUST INCLUDES EXPENDITURE OF RS.69,539/- IN THE NATURE OF EXPENSES INCURRED FOR RUNNING THE TRUST. APART FROM THIS THE EXPENDITURE OF RS.4,31,65,229/- HAS BEEN SPENT FOR THE OBJECT OF EDUCATION AND PROJECT DEVELOPMENT. THE CIT(A) FURTHER OBSERVED THAT EXPENSES OF RS.64,98,556/- WHICH HAVE BEEN CONSIDERED BY THE AO AS BUSINESS EXPENDITURE AGAINST THE CONTRACT RECEIPTS THEN THE TOTAL EXPENSES LEFT WITH ARE AT RS.3,66,66,673/- (RS.4,31,65,229 RS.64,98,556). THIS AMOUNT IS NOT AN EXPENDITURE INCURRED FOR EARNING THE INCOME OF THE TRUST NOR THIS AMOUNT CONSISTS OF EXPENSES INCURRED FOR RUNNING THE TRUST BUT ACTUALLY THIS AMOUNT IS APPLICATION OF INCOME DERIVED FROM THE PROPERTY HELD IN THE TRUST FOR ATTAINMENT OF THE OBJECT OF THE TRUST. THEREFORE, THE CIT(A) WAS OF THE VIEW THAT THE CLAIM OF EXEMPTION OF RS.5,04,09,256/- NOT IN ACCORDANCE WITH LAW AS THE APPELLANT HAS REDUCED THE AGRICULTURAL INCOME FROM THE INCOME DERIVED FROM THE PROPERTY UNDER TRUST BUT HAD ADDED THE SAME FOR CLAIMING ITO, EXE. WARD, SURAT VS. DEEP DEVELOPMENT EFFORT FOR RURAL ECONOMY & PEOPLE /I.T.A. NO.1558/AHD/2015/SRT/A.Y.:2009-10 PAGE 8 OF 14 EXEMPTION U/S.11 OF THE ACT. THEREFORE, THE EXEMPTION CLAIMED BY THE APPELLANT WILL BE REDUCED BY RS.8,47,488/- FOR THIS REASON ALONE WHILE THE INCOME WILL INCREASE BY THE SAME AMOUNT IN PARA 26 OF HIS ORDER THE CIT(A) HAS WORKED OUT AFTER CONSIDERING THE TOTAL RECEIPTS OF RS.3,92,74,676/- AND REDUCING THEREFROM CONTRACT RECEIPTS, BUSINESS PROFIT AND DEPRECIATION ARRIVED AT INCOME OF RS.3,27,1,7045/- AGAINST WHICH THE CIT(A) NOTED THAT THE APPLICATION OF INCOME IS MADE AT RS.3,73,58,212/- WHICH EXCEEDS THE INCOME DERIVED FROM PROPERTY HELD IN TRUST OFRS.3,27,17,042/- BY RS.46,41,117/- THIS IS EXCESS APPLICATION OF INCOME. THIS FIGURE IS DIFFERENT FROM THE FIGURE OF RS.45,82,095/- IN THE INCOME AND EXPENDITURE ACCOUNT DUE TO DEPRECIATION ALLOWED OF RS.59,079/-. THESE EXCESS APPLICATION FOR INCOME IS NOT A ASSESSED LOSS OF APPELLANT TRUST. THEREFORE, THE ASSESSED INCOME WILL BE NIL. THIS IS THE EXCESS APPLICATION OF INCOME OF THE TRUST WHICH NEEDS TO FIRST ADJUSTED AGAINST THE ACCUMULATION OF INCOME OF EARLIER YEARS, IF ANY. IF THERE IS ANY SURPLUS LEFT AFTER THAT THE SAME MAY BE TREATED AS APPLICATION OF INCOME IN THE YEAR IN WHICH THE APPLICATION FALLS SHORT OF THE INCOME DERIVED FROM THE PROPERTY HELD IN TRUST. THEREFORE, THIS DEPOSIT OF RS.46,41,170/- IS NOT AN ASSESSED LOSS UNDER THE HEADS OF INCOME PROVIDED IN THE INCOME TAX ACT. IN THIS DECISION, IT HAS BEEN HELD THAT ACCUMULATION U/S.11(1)(A) IS NOT ITO, EXE. WARD, SURAT VS. DEEP DEVELOPMENT EFFORT FOR RURAL ECONOMY & PEOPLE /I.T.A. NO.1558/AHD/2015/SRT/A.Y.:2009-10 PAGE 9 OF 14 ALLOWED IF THERE IS NO INCOME LEFT AFTER THE APPLICATION OF INCOME. IT HAS BEEN HELD BY THE CIT(A) THAT THE DEPRECIATION ALLOWED ONLY IN RESPECT OF BUSINESS ASSETS AND OTHER ASSETS FROM WHICH INCOME IN THE NATURE OF RENT ETC., IS DERIVED. MOREOVER, THE ORDER HAS FURTHER HELD THAT EXCESS OF APPLICATION OVER INCOME IS NOT THE ASSESSED LOSS FROM THE INCOME TAX ACT, BUT IT IS DEFICIT WHICH WILL BE ADJUSTED AGAINST THE ACCUMULATION OF INCOME OF EARLIER YEARS AND THE BALANCE MAY BE TREATED AS APPLICATION OF INCOME IN THE YEAR IN WHICH THE APPLICATION OF INCOME FALLS SHORT OF THE INCOME. THIS DECISION WAS GIVEN BY THE CIT(A) AFTER FOLLOWING HIS DECISION IN THE CASE OF DAWAT PROPERTIES TRUST IN APPEAL NO.CAS- 3/TRFD/II/72/2014-15 DATED 12.12.2014 OF HIS PARA 8 TO 13.8 HAS BEEN REPRODUCED AT PAGE 19 TO 33 OF THE APPELLATE ORDER AND AFTER FOLLOWING THE SAME THE CIT(A) HELD THAT THE APPEAL IS PARTLY ALLOWED IN THE SENSE THAT THE EXEMPTION U/S.11 OF THE ACT IS GRANTED TO THE EXTENT OF INCOME DERIVED FROM THE PROPERTY HELD IN TRUST. THE ASSESSED INCOME IS NIL AND THE DEFICIT OF RS.46,41,170/- IS TO BE ADJUSTED AGAINST THE PAST ACCUMULATION OF INCOME AND THE BALANCE WOULD BE TREATED AS APPLICATION OF INCOME IN THE YEAR IN WHICH THE APPLICATION OF THE INCOME FALLS SHORT OF THE INCOME DERIVED. ITO, EXE. WARD, SURAT VS. DEEP DEVELOPMENT EFFORT FOR RURAL ECONOMY & PEOPLE /I.T.A. NO.1558/AHD/2015/SRT/A.Y.:2009-10 PAGE 10 OF 14 4. BEING AGGRIEVED, THE REVENUE HAS FILED THIS BEFORE THIS TRIBUNAL. THE LD.CIT-DR REFERRED THE PARA 22 AND 23 OF THE APPELLATE ORDER AND SUBMITTED THAT RECEIPTS OF RS.81,83,323/- CONSTITUTES ABOUT 21% OF THE TOTAL RECEIPTS AND HAVING PROFIT ELEMENT. THEREFORE, IT WAS CONTENDED THAT RECEIPTS FROM PROJECTIONS ARE NOT INCIDENTAL TO THE ATTAINMENT OF THE OBJECT OF THE TRUST AND THE PROVISO TO SECTION 2(15) HAS BEEN AMENDED FOR W.E.F. 01.04.2009 ACCORDING TO WHICH IT SHOULD BE FOR INCIDENTAL TO THE BUSINESS, HENCE THE TRUST IS NOT ENTITLED FOR EXEMPTION U/S.11 OF THE ACT. THE AO HAS WORKED OUT THE PROFIT FROM THE PROJECT RECEIPTS FROM GIPCL AT RS.16,84,768/-. THEREFORE, THE SAME ARE NOT FOR THE PURPOSE OF CHARITABLE ACTIVITIES, HENCE, ARE ASSESSABLE AS BUSINESS PROFIT. THE CIT-DR, THEREFORE SUPPORTED THE ORDER OF THE AO. 5. ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE SUBMITTED THAT THE TRUST IS ESTABLISHED WITH THE OBJECT TO UNDERTAKE INFRASTRUCTURE AND COMMUNITY DEVELOPMENT PROGRAMMES FOR SOCIO ECONOMIC UPLIFTMENT OF PROJECT AFFECTED VILLAGES WHICH WILL PARTLY INCLUDED TO IMPROVE THE SOCIO ECONOMIC CONDITIONS OF THE PEOPLE RESIDING IN THE SAID AREAS BY PROVIDING THEM TO BASIC AMENITIES. SUCH AS SUPPLY OF WATER, CONSTRUCTION OF ROADS, ESTABLISHMENT OF EDUCATIONAL ITO, EXE. WARD, SURAT VS. DEEP DEVELOPMENT EFFORT FOR RURAL ECONOMY & PEOPLE /I.T.A. NO.1558/AHD/2015/SRT/A.Y.:2009-10 PAGE 11 OF 14 INSTITUTIONS, HEALTH INPUTS ETC., THE PROVISO ADDED TO SECTION 2(15) FROM A.Y.2009-10 PROVIDES THAT THIS PROVISO IS APPLICABLE TO THE PURPOSE OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. IT IS FURTHER MENTIONED THAT IT SHALL NOT BE CHARITABLE PURPOSE TO INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE ETC. FOR ANY ACTIVITY OF RENDERING ANY SERVICES IN RELATION TO ANY TRADE ETC., FOR A CESS FOR FEE FOR ANY OTHER CONSIDERATION WITH THE ABSOLUTE CLARITY OF ANY LANGUAGE THE PROVISO IS ONLY APPLICABLE TO THE CHARITABLE PURPOSE OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. IF IT INVOLVES CARRYING OUT ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR ANY ACTIVITY OF RENDERING ANY SERVICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATION. THE LD.AR ALSO RELIED IN THE CASE OF IMPROVEMENT TRUST OF AMRITSAR BENCH 61 TAXMANN.COM 162 (AMRITSAR) IN SUPPORT OF HIS CONTENTION AND OTHER CASE LAWS AS FILED IN THE PAPER BOOK. IN VIEW OF THESE FACTS, THE LD.AR SUPPORTED THE ORDER OF THE CIT(A) AND REQUESTED THAT THE DEPARTMENTAL APPEAL MAY BE DISMISSED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDERED THE FACTS AND PERUSED THE RECORDS. WE FIND THAT THE TRUST IS ESTABLISHED WITH THE OBJECT TO UNDERTAKE INFRASTRUCTURE AND COMMUNITY ITO, EXE. WARD, SURAT VS. DEEP DEVELOPMENT EFFORT FOR RURAL ECONOMY & PEOPLE /I.T.A. NO.1558/AHD/2015/SRT/A.Y.:2009-10 PAGE 12 OF 14 DEVELOPMENT PROGRAMMES FOR SOCIO ECONOMIC UPLIFTMENT OF THE PROJECT AFFECTED VILLAGES AND TRUST IS DULY REGISTERED U/S.12A(A) BY CIT, SURAT VIDE ORDER DATED 31.03.1977. THE TRUST WAS CREATED BY GIPLC AS PART OF ITS CORPORATE SOCIAL RESPONSIBILITY AND TO TAKE MEASURES TO AMELIORATE THE CONDITIONS OF THE VILLAGERS IN AND AROUND MANGROL WHERE IT HAD SET UP A LIGNITE BASED POWER STATION AND MINING PROJECT. IT IS AN UNDISPUTED FACT THAT MANGROL IS A TRIBAL THALUKA OF SURAT DISTRICT AND LARGELY CONSIST OF POOR PEOPLE. GIPCL IS PROMOTED BY THE STATE GOVERNMENT WITH 68% OF ITS SHARE ARE HELD BY THE GOVERNMENT AND OTHER STATE GOVERNMENT COMPANIES. IT HAS COMMITTED TO SHARE HOLDER THE RESPONSIBILITY ALONG WITH THE STATE FOR THE NOBLE CAUSE OF SOCIO ECONOMIC UPLIFTMENT OF POOR PEOPLE IN THE DESIGNATED AREAS OF OPERATION. THE AO NOTED THAT THE ASSESSEE HAS RECEIVE A SUM OF RS.81,83,323/- AS PROJECT DEVELOPMENT INCOME FROM GIPLC ON WHICH TDS HAS ALSO BEEN DEDUCTED. THEREFORE, THE AO WAS OF THE VIEW THAT TRUST HAS BEEN RENDERING SERVICES TO GIPLC, HENCE THE TRUST IS CARRYING OUT THE ACTIVITIES WHICH ARE NOT CHARITABLE PURPOSE AS LAID DOWN BY SECTION 2(15) OF THE ACT. HOWEVER, THE ASSESSEE TRUST HAS CONTENDED THAT THE TRUST IS WORKING TO IMPROVE THE SOCIAL ECONOMIC CONDITIONS OF THE PEOPLE RESIDING IN THE AREA CLOSE TO THE LIGNITE POWER PLANT BY PROVIDING BASIC AMENITIES SUCH AS WATER, ROADS, EDUCATIONAL INSTITUTIONS, ITO, EXE. WARD, SURAT VS. DEEP DEVELOPMENT EFFORT FOR RURAL ECONOMY & PEOPLE /I.T.A. NO.1558/AHD/2015/SRT/A.Y.:2009-10 PAGE 13 OF 14 MEDICAL SERVICES ETC., AND HAS ALSO TO BUILT UP CAPACITY IN DIVERSE FIELDS TO CREATE AWARENESS ABOUT THE ECOLOGICAL RESTORATION AND TO ASSIST IN REHABILITATION AND TO DO ANY OTHER ACTIVITY FOR SOCIAL AND ECONOMIC DEVELOPMENT OF THE RURAL COMMUNITY RESIDING IN THE VILLAGES AFFECTED BY THE LIGNITE BASED POWER PLANTS. AFTER GOING THROUGH THE DETAILS ANALYZING VARIOUS ISSUES RAISED BY THE AO, THE CIT(A) OBSERVED IN PARA 22 AND 24 OF HIS ORDER THAT RECEIPTS OF RS.81,83,323/- CONSTITUTE ABOUT 21% OF TOTAL RECEIPTS OF THE APPELLANT WHEREAS RECEIPTS OF 73.5% ARE BY WAY OF DONATION AND GOVERNMENT GRANTS WHICH HAVE USED FOR VARIOUS OBJECTS OF THE TRUST. THEREFORE, IT WAS HELD THAT THOUGH THE CONTRACT RECEIPTS OF THE ASSESSEE ARE HAVING A PROFIT ELEMENT EVEN THEN THE ACTIVITIES ARE INCIDENTAL TO ATTAINMENT OF THE OBJECTS OF THE TRUST AND THEREFORE COVERED U/S.11(4A) OF THE ACT. ACCORDINGLY, THE BUSINESS PROFIT DERIVED THEREFROM AS APPLIED FOR CONTENTION OF THE OBJECTS OF THE TRUST WHICH ARE OF CHARITABLE IN NATURE. WE ALSO NOTICE THAT THE CIT(A) AFTER WORKING OUT VARIOUS EXPENDITURES, ALLOWING DEDUCTION OF EXPENSES AND DEPRECIATION HAS WORKED OUT INCOME DERIVED FROM THE PROPERTY HELD IN TRUST AT RS.3.27 CRORES AS AGAINST WHICH APPLICATION FOR THE OBJECTS OF THE TRUST WAS AT RS.3.73 CRORES WHICH EXCEEDS THE INCOME DERIVED FROM THE PROPERTY HELD IN TRUST OF RS.3.27 CRORES I.E. BY 46 LAKHS I.E. [RS.3.73 RS.3.27 CRORES] ITO, EXE. WARD, SURAT VS. DEEP DEVELOPMENT EFFORT FOR RURAL ECONOMY & PEOPLE /I.T.A. NO.1558/AHD/2015/SRT/A.Y.:2009-10 PAGE 14 OF 14 WHICH IS EXCESS APPLICATION OF INCOME WHICH IS AN ASSESSED LOSS OF THE TRUST, WHICH ACCORDINGLY, ASSESSED INCOME OF THE TRUST WAS AS NIL AND THE APPEAL WAS PARTLY ALLOWED. CONSIDERING THE ABOVE FACTS AND DETAILED FINDINGS OF THE LD.CIT(A) WE FIND NO REASON TO INTERFERE WITH THE SAME, ACCORDINGLY SAME IS UPHELD, CONSEQUENTLY GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 8. THE ORDER PRONOUNCED IN THE OPEN COURT ON 31-08-2018. SD/- SD/- ( . . /C.M. GARG) ( . . / O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / SURAT, DATED : 31 ST AUGUST , 2018/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT