Gnyan Dham Vapi Charitable Trust, Vapi V. The Dy.CIT, Circle-2, Exemption, Ahmedabad

ITA 206/AHD/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5493 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-10-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 30-03-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Revised return; Revenue expenditure
• Section: 11; 250

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘B’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R.SENTHIL KUMAR, JUDICIAL MEMBER ITA No.206/AHD/2023 Assessment Year : 2016-17 Gnyan Dham Vapi Charitable Trust 11, GIDC Estate Vapi, Dist : Valsad. PAN : AAATG 7795 C Vs. The DCIT, Cir.2 (Exemption) Ahmedabad. अपीलाथ / (Appellant) यथ /(Respondent) Assessee by : Shri S.N. Soparkar, Sr.Advocate Revenue by : Shri Sudhendu Das, CIT-DR स ु नवाई क तार ख/Date of Hearing : 11/10/2023 घोषणा क तार ख /Date of Pronouncement: 08/11/2023 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER This appeal has been filed by the assessee against order passed by the ld.Commissioner of Income Tax(Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “Ld.CIT(A)”] under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) dated 02.02.2023 pertaining to the Asst.Year 2016- 16. 2. The grounds raised by the assessee in the appeal read as under: i) On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) ['CIT(A)'] erred in passing the appellate order under section 250 without giving an opportunity of being heard to the appellant thereby violating the principles of natural justice. ITA No.206/Ahd/2023 2 ii) On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the Assessing Officer in not considering 15% of the gross receipts amounting to Rs.1,27,01,109, as deemed application of income under section 11(1)(a) of the Act. iii) On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of the Assessing Officer and applying the provisions of section 244A(1)(a)(ii) in spite of the fact that the return of income was filed within the time allowed under section 139(1) of the Act.” 3. As evident from the grounds of appeal raised, the assessee is aggrieved by the action of the ld.CIT(A) in confirming order of the AO in restricting the claim of the assessee towards accumulation of fund under section 11(1)(a) of the Act from Rs.1,27,01,709/- to Rs.77,36,520/- . The AO was of the view that after deducting Revenue and Capital expenditure aggregating to Rs.7,69,41,539/- from the receipt of 8,46,78,059/-, only an amount of Rs.77,36,520/- remained to be set apart under section 11(1)(a) of the Act, and therefore, the assessee could only claim Rs.77,36,520/-as accumulation of income for charitable purposes. Therefore, he restricted the claim of income set apart/accumulated from Rs.1,27,01,709/- to Rs.77,36,520/- under section 11(1)(a) of the Act. 4. Short factsas emanating from the record is that the assessee is a charitable trust engaged in educational activities. The assessee filed NIL return of income, which was reiterated in the revised return filed. In the scrutiny assessment, it was noticed by the AO that the assessee had shown gross receipt of Rs.8,95,80,259/- including corpus donation of Rs.9,02,200/- and total application of income towards the object of the Trust of Rs.7,69,41,539/- (Rs.6,92,76,747/- Revenue expenditure, and Rs.76,64,792/- capital expenditure. Therefore, only Rs.77,36,520/- remained to be set apart under section 11(1)(a) of the Act. But the assessee trust ITA No.206/Ahd/2023 3 claimed set apart of 15% of receipts amounting to Rs.1,27,01,709/- i.e. 15% of Rs.8,46,78,059/- and claimed deficit of Rs.49,55,189/-. According to the AO, the assessee could claim accumulation under section 11(1)(a) of the Act only to the extent of unutilized income, that too, not in excess of 15% of such unutilized income. Accordingly, the AO restricted the accumulation/set apart from Rs.1,27,01,709/- as claimed by the assessee to Rs.77,36,520/-. This decision of the AO was challenged by the assessee before the ld.CIT(A). However, the ld.CIT(A) after relying on certain decisions of the higher appellate authority, including the decision of the Hon’ble Apex Court in the case of ACIT Vs. ALN Rao Charitable Trust, accepted the AO’s method of computation and upheld his order by holding that the AO was right in reducing the quantum of deficit allowed to be carried forward as accumulation as per section 11(1)(a) of the Act. The assessee, is therefore, in further appeal before us. 5. Before us, the ld.counsel for the assessee submitted that the assessee is entitled to whole of 15% on the gross receipt as accumulation/ set apart for charitable purposes ,as per the provisions of section 11(1)(a) of the Act, and not the amount of income left after application of revenue and capital expenditure. The ld.counsel also relied on the decision of the Tribunal in the assessee’s own case for Asst.Year 2015-16 in ITA No.2208/Ahd/2018 order dated 19.8.2020 where, it is contended, the Tribunal allowed identical claim of the assessee. He also filed a copy of the Tribunal’s order and placed on record. 6. On the other hand, the ld.DR supported orders of the Revenue authorities. ITA No.206/Ahd/2023 4 7. We have heard both the parties, and gone through orders of the Revenue authorities and the case law cited at bar. The issue before us is, whether the charitable institution is entitled to claim accumulation/ set apart of its income for charitable purposes @ 15% of the receipts of the trust irrespective and without regard to the actualapplication by the trust for charitable purposes not leaving such amount for application. In other words whether the exemption to income of charitable trusts on the amount accumulated for said purposes upto 15% of the same is to be treated as deemed application of income for charitable purposes to be allowed first in order of priority before allowing actual application of income for such purposes. This issue has already been adjudicated by the Tribunal in favour of the assessee in assessee’s own case for preceding assessment year 2016-17, relying on decisions of the Co-ordinate Bench in the case of Maharshi Karve Stree Shikshan Samastha Karvenagar Vs. ITO, 174 ITD 591 (Pune), which in turn referred to decisions of Hon’ble Apex Court in the case of CIT Vs. Programme for Community Orgnisation, 284 ITR 1 (SC) and CIT Vs. ALN Rao Charitable Trust, 216 ITR 697 (SC). The ITAT held that the trust is entitled to claim excessive carry forward of deficit which resulted after making an allowance of 15% of gross receipts under section 11(1)(a) of the Act and thereafter claim the application of income to the extent of expenses incurred on the objects of trust. The relevant para of the Tribunal reads as under: “8.3 Ostensibly, the assessee has not availed the entitlement of accumulation of 15% of income in the instant case. Needless to say, the statutory postulations towards accumulation of 15% of income for indefinite period is an entitlement or a right of absolute nature vested upon the assessee but, however, cannot be regarded as an obligation envisaged in law. The law applicable to accumulation of income cannot be extended to ITA No.206/Ahd/2023 5 application thereof. Where an assessee trust has made excess application of its income, the option or entitlement vested upon an assessee to accumulate 15% for indefinite period in our view cannot operate as an obligation enforceable against it in the absence of accumulation. The method of computation of deficit to be truncated artificially 15% based on an entitlement (opposed to an obligation) as suggested by first appellate authority is totally devoid of any logic. This would tantamount to application of concession conferred on assessee in a reverse manner and thus put the assessee in a worser position in the event of accelerated application of receipts for salutary purposes. The action directed by CIT(A) has the effect of deprivation of concession granted and is repugnant to the intended outcome. The Pune Bench of Tribunal in Maharshi Karve StreeShikshanSamsthaKarvenagar vs. ITO 174 ITD 591 (Pune) has also essentially held that relaxations conferred under s. ll(l)(a)/(b) r.w. Section 11(2) of the Act to the extent of 15% of income would not nullify the entitlement of such absolute nature by way of reduction in quantum of deficit. We thus have no hesitations to quash the observations of the first appellate authority towards exclusion of 15% of income for the purposes of determination of quantum of deficit to be carried forward for set off in ensuing years in accordance with law. . The issue raised before us is squarely covered by the order of the ITAT as above and we therefore have no hesitation in allowing the assesses appeal. The assessee , we hold, is entitled to claim exemption on account of accumulation of 15% of its income as per section 11 (1)(a) of the Act and thereafter to the extent applied for charitable purposes. The deficit of income over application is to be accordingly arrived at. The grounds of appeal of the assessee are accordingly allowed in above terms. 8. In the result, appeal of the assessee is allowed as above. Order pronounced in the Court on 8 th November, 2023 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad,dated 08/11/2023