OMFED Trust, Bhubaneswar V. ITO, Bhubaneswar

ITA 186/CTK/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3863 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-04-2017
• Assessment Year: 2002-2003
• Appeal Filed On: 20-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: B K MOHAPATRA
• Keywords: Charitable institution; Principle of natural justice; Competent authority
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO. 186/CTK/2015 ASSESSMENT YEAR : 2002 - 03 OMFED TRUST, PLOT NO.D - 2, SAHID NAGAR, BHUBANESWAR. VS. ITO, WARD 2(2), BHUBANESWAR. PAN/GIR NO. AADTS 7895 N (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI B.K.MOHAPATRA, AR REVENUE BY : SHRI D.K.PRADHAN , DR DATE OF HEARING : 12 /04 / 2017 DATE OF PRONOUNCEMENT : 12 /04 / 2017 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 1, BHUBANESWAR , DATED 29.1.2015 , FOR THE ASSESSMENT YEAR 2002 - 03 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER DATED 29.01.2015 PASSED BY THE LEARNED CIT(APPEALS) IN DISMISSING THE APPEAL IS AGAINST PRINCIPLES OF NATURAL JUSTICE, UNJUSTIFIED, ERRONEOUS, ARBITRARY, CONTRARY TO FACTS AND BAD IN LAW. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) IN HOLDING THAT: A. THE APPELLANT HAS NOT PRODUCED NECESSARY DETAILS AND EVIDENCES; B. NO ARGUMENTS HAVE BEEN MADE AGAINST THE FACTUAL FINDINGS OF THE AO; 2 ITA NO. 186/CTK/2015 ASSESSMENT YEAR :2002 - 03 C. THE CONCLUSION OF THE AO THAT THE EXPENSES MADE THROUGH COMMERCIAL ORGANIZATIONS HAVE NOT BEEN PROVED TO HAVE B EEN MADE FOR CHARITABLE PURPOSES HAS NOT BEEN CONTRADICTED; AND D. THE AO'S FINDINGS THAT THE EXPENSES INCURRED ARE NOT IN FURTHERANCE OF CHARITABLE ACTIVITIES AND OBJECTIVE OF THE TRUST HAVE NOT BEEN CONTRADICTED . IS ARBITRARY, UNJUSTIFIED, ERRONEOUS, AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) HAS ERRED BOTH ON FACTS AND IN LAW IN DISMISSING THE GROUNDS BY IGNORING/ NOT CONSIDERING THE DOCUMENTS FILED IN THE PAPER BOOK BEF ORE HIM. 4. THAT THE PAYMENTS MADE BY THE APPELLANT: A. TO CUTTACK MILK UNION FOR CYCLONE SHELTER HOMES FOR OF RS.21,61,933/ - ; AND B. RS.13,99,804/ - TOWARDS CATTLE FEED SUBSIDY TO FARMER'S ARE FOR CHARITABLE PURPOSE' AND HENCE THE DENIAL OF CLAIM OF EXEMPTION U/S.11 OF THE ACT IS ON MIS - APPRECIATION OF FACTS, ARBITRARY, ERRONEOUS, AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORD ER OF THE LEARNED CIT(APPEALS) IN DISMISSING THE GROUND IN RESPECT OF DENIAL OF EXEMPTION U/S.11 OF THE ACT BY HOLDING THAT AO IS CORRECT IN DENYING THE CLAIM OF EXEMPTION U/S.11 OF THE ACT IS CONTRARY TO FACTS, UNJUSTIFIED, ARBITRARY, ERRONEOUS, AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS. 6. THAT WITHOUT PREJUDICE TO GROUNDS (1) TO (5) ABOVE, THE LEARNED CIT(APPEALS) HAS FAILED TO APPRECIATE AND ADJUDICATE THAT, THE LEARNED CIT HAVING GRANTED REGISTRATION OF THE TRUST UNDER THE ACT, THE LEARNED AO BY MISQUOTING THE CONTENTS OF THE TRUST DEED AND IN HOLDING THAT THE SURPLUS FUND OF THE ASSESSEE TRUST CAN BE DIVERTED TO OMFED (WHICH IS A COMMERCIAL ORGANIZATION) AFTER THE DISSOLUTION OF THE TRUST AND HENCE THE BENEFIT OF SEC 11 IS NOT ALLOWED TO THE ASSE SSEE TRUST IS CONTRARY TO FACTS, IS ARBITRARY, ERRONEOUS, AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS. 7 . THAT THE LEARNED AO IN TREATING THE ENTIRE INTEREST ON FIXED DEPOSITS OF RS.41,45,633/ - AS INCOME FROM OTHER SOURCES AND UPHOLDING OF THE SAME BY T HE LEARNED CIT(APPEALS IS CONTRARY TO FACTS, ARBITRARY, UNJUSTIFIED, ERRONEOUS, BAD IN LAW AND LEGALLY UNTENABLE. 3 . IN THE INSTANT CASE, THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CHARITABLE TRUST WHICH HAS DULY BEEN REGISTERED U/S.12A OF THE ACT BY THE COMPETENT AUTHORITY. THE ASSESSEE TRUST CLAIMED TO HAVE INCURRED EXPENDITURE OF RS.21, 61,933/ - FOR REPAIRING OF SHELTER HOMES AND 3 ITA NO. 186/CTK/2015 ASSESSMENT YEAR :2002 - 03 CLAIMED RS.13,99,804/ - WAS FOR THE CATTLE FEED SUBSIDY. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS MADE PAYMENT OF RS.21,66,933/ - TO CUTTACK MILK UNION IN RESPECT OF EXPENDITURE CLAIMED UNDER THE HEAD CYCLONE SHELTER HOMES REPAIRS AND MAINTENANCE AND MADE PAYMENT OF RS.13,99,804/ - TO OMFED IN RESPECT OF EXPENDITURE CLAIM ED UNDER THE HEAD CATTLE FEED SUBSIDY. THE ASSESSEE PRODUCED COPIES OF BILLS AND VOUCHERS OF CUTTACK MILK UNION AND EXPLAINED TO THE ASSESSING OF FICER THAT THE ASSESSEE AVAILED REPAIRING SERVICE OF SHELTER HOMES FROM CUTTACK MILK UNION AND, THEREFORE, MADE PAYMENT TO THAT ORGANI ZATION. 4. SIMILARLY, THE ASSESSEE PRODUCED BILLS OF OMFED BEFORE THE ASSESSING OFFICER AND EXPLAINED TH AT IN PURSUANCE OF THE DIRECTION OF THE ASSESSEE , THE SAID OMFED SUPPLIED CATTLE FEE DS TO THE OWNERS OF CATTLE AT SUBSIDISED RATE AND, THEREFORE, THE SUBSIDY AMOUNT WAS REIMBURSED TO OMFED. HOWEVER, THE ASSESSING OFFICER OBSERVED THAT THE SAID TWO ORGANISATIONS NAMELY, CUTTACK MILK UNION AND OMFED WERE COMMERCIAL ORGANISATIONS AND THE PAYMENT TO THEM BY THE ASSESSEE CANNOT BE TREAT ED AS APPLICATION FOR CHARITABLE PURPOSES. THE ASSESSING OFFICER, THEREFORE, DISALLOWED THE ABOVE AMOUNT AS NOT APPLICATION FOR CHARITABLE PURPOSES. 5. THE ASSESSING OFFICER ALSO OBSERVED THAT CLAUSE 25 OF THE TRUST DEED PROVIDES THAT ON DISSOLUTION OF THE TRUST, THE FUNDS OF THE TRUST WILL REVERT BACK TO THE SETTLER AND, THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S.11 OF THE ACT. FINDING THAT NO FUNDS WERE UTILIZED FOR FURTHERANCE OF THE 4 ITA NO. 186/CTK/2015 ASSESSMENT YEAR :2002 - 03 OBJECTS OF THE TRUST, THE ASSESSING OFFICER ADDED TH E ENTIRE INTEREST INCOME OF RS.41,45,630/ - AS THE TOTAL INCOME OF THE ASSESSEE TRUST AND, ACCORDINGLY, LEVIED TAX THEREON. 6. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 7. BEFORE ME, LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE S UBMITTED THAT THE LOWER AUTHORITIES HAVE NOT BEEN ABLE TO APPRECIATE THE NATURE AND PURPOSE OF THE EXPENDITURE INCURRED BY TH E ASSESSEE UNDER THE HEAD CYCLONE SHELTER HOMES REPAIRS AND MAINTENANCE AND CATTLE FEEDS SUBSIDY AND CONSEQUENTLY ERRED IN HOL DING THAT NO FUND WAS EXPENDED BY THE ASSESSEE IN FURTHERANCE OF THE CHARITABLE OBJECTS OF THE TRUST DURING THE YEAR UNDER CONSIDERATION. HE SUBMITTED THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE BILLS FOR THE SAME. 8. ON THE OTHER HAND, LD DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 9. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD . I FIND THAT THE ASSESSEE TRUST HAS NOT PAID RS.21,61,933/ - TO CUTTACK MILK UNION AS DONATION. THE PAYMENT TO CUTTACK MILK UNION WAS MADE AS CONSIDERATION FOR SERVICES RENDERED BY THEM AT THE DIRECTION OF THE ASSESSEE TRUST. IT IS NOT IN DISPUTE THAT THE BILLS RAISED BY CUTTACK MILK UNION SHOW THAT THEY HAVE REPAIRED THE 5 ITA NO. 186/CTK/2015 ASSESSMENT YEAR :2002 - 03 CYCLONE SHELTER HOMES AT THE DIRECTION OF THE ASSESSEE AND, THEREFORE, RECEIVED CONSIDERATION FOR SERVICES RENDERED BY THEM OR WORK DONE BY THEM. THE ASSESSEE INCURRED EXPENDITURE IN QUESTION NOT FOR THE BENEFI T OF CUTTACK MILK UNION BUT THE EXPENDITURE WAS INCURRED FOR THE BENEFIT OF THE INHABITANT OF THE CYCLONE SHELTER HOMES. THEREFORE, IN MY CONSIDERED OPINION, THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN TREATING THE AFORESAID PAYMENT AS NOT APPLICATION FO R CHARITABLE PURPOSES BY THE ASSESSEE. FURTHER, IT IS OBSERVED THAT THE PAYMENTS TO OMFED WAS ALSO NOT FOR THE PURPOSE OF BENEFIT TO OMFED. OMFED SOLD CATTLE FEEDS AT A CONCESSIONAL RATE TO THE PERSONS ENGAGED IN RARING OF CATTLE. THE AMOUNT OF CONCESSIO N OR SUBSIDY WHICH WAS ACTUALLY PROVIDED TO THOSE PERSONS BY OMFED ON BEHALF OF TH E ASSESSEE WERE SPENT BY THE ASSESSEE AND THE ASSESSEE PAID THE SAID AMOUNT TO OMFED. THUS, THE PAYMENT MADE TO OMFED WAS FOR THE BENEFIT WHICH WAS ACTUALLY RECEIVED BY THE PERSONS WHO WERE ENGAGED IN RARING CATTLE AND THE SAME WAS FOR THE CHARITABLE PURPOSES. IN VIEW OF MY ABOVE FINDINGS, I FIND THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN HOLDING THAT NO AMOUNT WAS SPENT BY THE ASSESSEE TRUST DURING THE YEAR UNDER CONS IDERATION IN FURTHERANCE OF ITS CHARITABLE OBJECTS. AS THE LD A.R. OF THE ASSESSEE HAS SUBMITTED BEFORE ME THAT THE ISSUE SHOULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF BILLS AND VOU C HERS. I , THEREFORE, SET ASIDE THE ORDE RS OF LOWER AUTHORITIES AND REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR LIMITED PURPOSES OF VERIFICATION OF BILLS AND VOUCHERS TO ASCERTAIN THAT AMOUNT OF RS.21,66,933/ - PAID BY THE ASSESSEE TO CUTTACK MILK UNION AND 6 ITA NO. 186/CTK/2015 ASSESSMENT YEAR :2002 - 03 RS.13,99,804/ - PAI D TO OMFED IS NOT DONATION TO THEM BUT FOR REPAIRS AND MAINTENANCE OF CYCLONE SHELTER HOME FOR INHABITANTS OF CYCLONE SHELTER HOMES AND SUBSIDY FOR CATTLE FEED SUPPLIERS TO PERSONS RARING CATTLE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED IN THE OPEN COURT ON 12 /04 /2017 IN THE PRESENCE O F PARTIES. ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 12 /04 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : OMFED TRUST, PLOT NO.D - 2, SAHID NAGAR, BHUBANESWAR 2. THE RESPONDENT. ITO, WARD 2(2), BHUBANESWAR. 3. THE CIT(A) - 1, BHUBANESWAR 4. CIT (EXEMPTION), HYDERABAD 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//