Purni Devi Shyamsayka Charity Trust, Kolkata V. DIT (Exemption), Kolkata, Kolkata

ITA 2078/KOL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7948 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 08-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M HUSSAIN
• Assessee Lawyers: V N PUROHIT
• Keywords: Charitable institution; Opportunity of being heard
• Section: 80G; 12A; 12AA; 11; 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : KOLKATA [ BEFORE SHRI B.R.MITTAL, J.M. & SHRI B.C. MEENA, A.M. ] I.T.A.NO. 2078 (KOL) OF 2009 PURNI DEVI SHYAMSAYKA CHARITY TRUST -VS- DIRECTO R OF INCOME-TAX (E), KOLKATA. (PAN-AAATP7875L) KOLKATA. ( APPELLANT ) ( RESPONDEN T ) APPELLANT BY : SRI V.N.PUROHIT RESPONDENT BY : SRI M. HUSSAIN O R D E R PER SRI B.C.MEENA, A.M. : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 06.11.2009 OF DIRECTOR OF INCOME-TA X (EXEMPTION), PASSED U/S. 80G(5)(VI) OF THE INCOME-TAX ACT, 1961. THE GR OUNDS RAISED IN THIS APPEAL BY THE ASSESSEE READ AS UNDER :- 1. THAT THE DIRECTOR OF INCOME TAX (EXEMPTION), KOLKATA HA S ERRED IN LAW AND OR ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN REFUSING THE RENEWAL OF EXEMPTION (OF DONATION) CERTIFICATE U/S. 80G(5)(VI) OF T HE I.T.ACT, 1961. 2. THAT ON THE FACTS AS WELL AS IN LAW, WHEN IT IS NOT DISPUT ED THAT TRUST IS NOT FOR CHARITABLE PURPOSE AS DEFINED UNDER SECTION 2(15 ) OF THE I.T.ACT, 1961 AND REGISTRATION U/S. 12AA CONTINUOUS, IN NO T ACCEPTING ASSESSEES APPLICATION IN FORM-10G FOR GRANTING RENEWAL OF EXEMPTION CERTIFICATE U/S. 80G(5)(VI) OF THE ACT. 2. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE A SSESSEE-TRUST WAS CREATED BY A TRUST DEED DATED 14/2/2001 AND IT WAS GRANTED REGISTRATION U/S. 12A ON 7/6/200, WHICH IS STILL CONTINUING. EXEMPTION CERTIFICATE ON THE BASIS OF SUCH REGISTRATION WAS ALSO ISSUED ON 7/6/2001 AN D RENEWAL OF THE SAME WAS GRANTED FROM TIME TO TIME UPTO ASSESSMENT YEAR 2008-09. THE ASSESSEE-TRUST APPLIED FOR RENEWAL OF EXEMPTION CER TIFICATE FOR ASSESSMENT YEAR 2009-10 ONWARDS, WHICH WAS REJECTED ON THE GRO UND THAT AUDITED INCOME & EXPENDITURE ACCOUNT WAS NOT FILED ALONG WI TH THE APPLICATION. THE MATTER CAME BEFORE THE TRIBUNAL AND THE TRIBUNA L VIDE ITS ORDER DATED 11/6/2009 IN ITA NO. 279 (KOL)/2009 REMANDED THE MA TTER BACK TO THE FILE 2 OF THE DIT(EXEMPTION) WITH A DIRECTION TO ALLOW ADE QUATE OPPORTUNITY TO THE ASSESSEE TO PRODUCE NECESSARY DETAILS AND THEN TO R EADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW. IN THE SET ASIDE PROCEEDING, THE DIT(EXEMPTION) REFUSED TO GRANT RENEWAL OF EXEMPTION CERTIFICATE U /S. 80G(5)(VI) OF THE ACT ON THE GROUND THAT REQUIREMENT OF LAW FOR UTILIZATI ON OF FUNDS FOR CHARITY IS NOT MET AND APPLICANT HAS NOT EXERCISED THE OPTION U/S. 11(2) OF THE ACT. 3. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE L D. A/R SUBMITTED AS UNDER :- 1. SECTION 11(1)(A) CLEARLY PROVIDES THAT ONLY S O MUCH OF INCOME WHICH IS APPLIED TO CHARITABLE PURPOSE OF INDIA WIL L NOT BE INCLUDED IN TOTAL INCOME. IF 85% IS NOT SPENT OR SURPLUS LEFT IS MOR E THAN 15%, IT WILL BE TAXED. 2. IT IS NOT DISPUTED OR ALLEGED THAT TRUST WAS NOT ESTABLISHED FOR CHARITABLE PURPOSE. THIS BE SO FIRST CONDITION OF SECTION 80G(5) IS FULFILLED. ALL OTHER CONDITIONS OF SECTION 80G(5) FROM (I)(B) & (C) TO (VI) ARE ALSO FULFILLED. AS STATED ABOVE, UNDER SECTION 11 ONLY SO MUCH OF INCOME WILL BE COVERED AS IS APPLIED TO CHARITABLE PURPOSE AND IF IT FALLS SHORT OF 85% AND ASSESSEE HAS NOT EXERCISED OPTION U/S. 11(2), EXCES S WILL BE TAXED. RENEWAL CANNOT BE REFUSED. 3. WITHOUT PREJUDICE TO ABOVE KIND REFERENCE IS DRAWN TO PAGE-6, 8, 10 AND 12 BEING COMPUTATION OF INCOME WHICH HAVE BE EN ACCEPTED BY A.O. AT LEAST UPTO ASST. YEAR 2007-08 INASMUCH AS THAT N O DEMAND HAS BEEN RAISED. POSITION IS SUMMARIZED BELOW : ASST. YEAR GROSS INCOME 85% OF GROSS INCOME AMOUNT SPENT ON CHARITIES PAGE NO. OF PAPER BOOK. 2006-07 663235 563750 826860 6 2007-08 10247 8710 22216 8 2008-09 320288 272245 658999 10 2009-10 560745 476633 317210 12 THUS ONLY IN ASST. YEAR 2009-10, 85% WAS NOT SPENT AND EXPLANATION (2)(B) TO SECTION 11(1) PROVIDES THAT SUCH LESS SPENDING CAN BE SO SPEND IN 3 IMMEDIATELY FOLLOWING YEAR. BEFORE FILING OF RETURN, ASSESSEE VID E LETTER DT. 21- 09-2009 HAS INFORMED A.O. THAT BALANCE WILL BE SPENT IN NEXT YEAR. IN VIEW OF ABOVE IT IS HUMBLY SUBMITTED THAT REJECTION OF RENEWAL OF 80G(5) CERTIFICATE IS BAD IN LAW AND ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE. RELIANCE IS PLACED ON FOLLOWING DECISIONS : SONEPAT HINDU EDUCATIONAL & CHARITABLE SOCIETY VS . CIT [278 ITR 262 (P&H)] N.N.DESAI CHARITABLE TRUST VS. CIT [246 ITR 452 ( GUJ)] ORPAT CHARITABLE TRUST VS. CIT [256 ITR 690 (GUJ )]. 4. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT THE ASSESSEE HAS FAILED TO COMPLY WITH THE CON DITIONS AS PRESCRIBED IN RULE 11AA OF I.T. RULES, 1962, AS PER WHICH THE ASS ESSEE HAS TO SATISFY THE CONDITIONS AS LAID DOWN IN CLAUSES (I) TO (V) OF SU B-SECTION (5) OF SEC. 80G. THE ASSESSEE HAS FAILED TO FULFILL THE CONDITIONS A S PROVIDED IN THE AFORESAID CLAUSES. THEREFORE, THE D.I.T. (EXEMPTION) HAS RIG HTLY DENIED EXEMPTION CERTIFICATE U/S. 80G(5)(VI) OF THE ACT. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE DIT(EXEMPTION) REJECTE D THE APPLICATION OF THE ASSESSEE FOR RENEWAL OF REGISTRATION CERTIFICATE U/ S. 80G(5)(VI) WITH THE FOLLOWING OBSERVATION :- ON PERUSAL OF THE APPLICATION IT WAS OBSERVED FROM THE ACC OUNT FOR ASSTT. YEARS 07-08, 08-09 & 09-10 THAT THE APPLICANT HA S BEEN SPENT LESS THAN 85% ON CHARITABLE ACTIVITIES. SUBSEQUENTLY, IN OR DER TO GIVE THE APPLICANT ANOTHER OPPORTUNITY THIS OFFICE HAD ISSUED LE TTER DATED 22.10.2009 FIXING HEARING ON 05.11.2009. IN COMPLIANCE SRI V.M.PUROHIT, FCA, A/R OF THE APPLICANT APPEARED AND SUBMITTE D SOME DOCUMENTS WHICH SHOWS LESS THAN 85% OF EXPENDITURE FOR C HARITABLE PURPOSE. THUS THE REQUIREMENT UNDER LAW FOR UTILIZATION OF FUNDS FOR CHARITY IS NOT MET. MOREOVER APPLICANT HAS NOT EXERCISED THE OPTION U/S. 11(2). IN VIEW OF THE ABOVE DISCUSSION, APPLICATION FOR RENEWAL OF EXEMPTION U/S. 80G(5)(VI) OF THE INCOME TAX ACT, 1961 IS HEREBY REJECTED. FROM THE ABOVE OBSERVATION OF DIT(EXEMPTION), IT IS EVIDENT THAT HE HAS DENIED RENEWAL OF EXEMPTION CERTIFICATE U/S. 80G(5) (VI) ON TWO COUNTS, VIZ., (I) THAT AS PER ACCOUNTS FOR ASSESSMENT YEARS 2007- 08 TO 2009-10, THE 4 APPLICANT HAS SPENT LESS THAN 85% ON CHARITABLE ACT IVITIES; AND (II) THAT THE APPLICANT HAS NOT EXERCISED OPTION U/S. 11(2) OF TH E ACT. IN THE PAPER BOOK AT PAGES 6, 8, 10 & 12, THE ASSESSEE HAS FILED COMP UTATION OF INCOME FOR ASSESSMENT YEARS 2006-07 TO 2009-10 SHOWING GROSS I NCOME, 85% OF GROSS INCOME AND AMOUNT SPENT ON CHARITIES. THE TABLE OF SUCH COMPUTATION HAS ALREADY BEEN GIVEN ABOVE AND THE LD. DEPARTMENTAL R EPRESENTATIVE DID NOT OBJECT TO SUCH COMPUTATION BEFORE US. ON PERUSAL OF THE SAME WE FIND THAT DURING ASSESSMENT YEARS 2006-07 TO 2008-09, AMOUNT SPENT ON CHARITIES EXCEEDED 85% OF GROSS INCOME. ONLY IN ASSESSMENT Y EAR 2009-10, IT WAS LESS THAN 85% OF GROSS INCOME. 5.1. SECTION 11(1) AND EXPLANATION THEREUNDER, IN PARTICULAR EXPLANATION (2)(B), READ AS UNDER :- 11.(1) SUBJECT TO THE PROVISIONS OF SECTIONS 60 TO 63, THE FOLLOWING INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PR EVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME ( A ) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WH OLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INC OME IS APPLIED TO SUCH PURPOSES IN INDIA; AND, WHERE ANY SUCH INCOME IS AC CUMULATED OR SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE E XTENT TO WHICH THE INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF [FI FTEEN] PER CENT OF THE INCOME FROM SUCH PROPERTY; ( B ) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST IN PART ONLY FOR SUCH PURPOSES, THE TRUST HAVING BEEN CREATED BEFORE THE COMMENCEMENT OF THIS ACT, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA; AND, WHERE ANY SUCH INCOME IS FINALLY SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOM E SO SET APART IS NOT IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FROM SUCH PROPERTY; EXPLANATION. FOR THE PURPOSES OF CLAUSES ( A ) AND ( B ), ( 1 ) IN COMPUTING THE [FIFTEEN] PER CENT OF THE INCOME WHICH MAY BE ACCUMULATED OR SET APART, ANY SUCH VOLUNTARY CONTRIBUTIONS AS A RE REFERRED TO IN SECTION 12 SHALL BE DEEMED TO BE PART OF THE INCOME; ( 2 ) IF, IN THE PREVIOUS YEAR, THE INCOME APPLIED TO C HARITABLE OR RELIGIOUS PURPOSES IN INDIA FALLS SHORT OF EIGHTY-FIVE PER CE NT OF THE INCOME DERIVED DURING THAT YEAR FROM PROPERTY HELD UNDER TRUST, OR , AS THE CASE MAY BE, HELD UNDER TRUST IN PART, BY ANY AMOUNT ( I ) FOR THE REASON THAT THE WHOLE OR ANY PART OF THE INCOME HAS NOT BEEN RECEIVED DURING THAT YEAR, OR ( II ) FOR ANY OTHER REASON, THEN ( A ) IN THE CASE REFERRED TO IN SUB-CLAUSE ( I ), SO MUCH OF THE INCOME APPLIED TO SUCH PURPOSES IN INDIA DURING THE PREVIOUS YEAR IN WHICH THE INCOME IS 5 RECEIVED OR DURING THE PREVIOUS YEAR IMMEDIATELY FO LLOWING AS DOES NOT EXCEED THE SAID AMOUNT, AND ( B ) IN THE CASE REFERRED TO IN SUB-CLAUSE ( II ), SO MUCH OF THE INCOME APPLIED TO SUCH PURPOSES IN INDIA DURING THE PREVIOUS YEAR IMMEDIATELY FOLLOWING THE PREVIOUS YEAR IN WHICH THE INCOME WAS DERIVED A S DOES NOT EXCEED THE SAID AMOUNT , MAY, AT THE OPTION OF THE PERSON IN RECEIPT OF TH E INCOME (SUCH OPTION TO BE EXERCISED IN WRITING BEFORE THE EXPIRY OF THE TIME ALLOWED UNDER SUB-SECTION (1) OF SECTION 139 FOR FURNISHING THE RETURN OF INC OME) BE DEEMED TO BE INCOME APPLIED TO SUCH PURPOSES DURING THE PREVIOUS YEAR IN WHICH THE INCOME WAS DERIVED; AND THE INCOME SO DEEMED TO HAV E BEEN APPLIED SHALL NOT BE TAKEN INTO ACCOUNT IN CALCULATING THE AMOUNT OF INCOME APPLIED TO SUCH PURPOSES, IN THE CASE REFERRED TO IN SUB-CLAUS E ( I ), DURING THE PREVIOUS YEAR IN WHICH THE INCOME IS RECEIVED OR DURING THE PREVIOUS YEAR IMMEDIATELY FOLLOWING, AS THE CASE MAY BE, AND, IN THE CASE REFERRED TO IN SUB-CLAUSE ( II ), DURING THE PREVIOUS YEAR IMMEDIATELY FOLLOWING T HE PREVIOUS YEAR IN WHICH THE INCOME WAS DERIVED . [EMPHASIS SUPPLIED] THEREFORE, EXPLANATION (2)(B) TO SEC. 11(1) PROVIDE S THAT IF THE AMOUNT SPENT FOR CHARITABLE/RELIGIOUS PURPOSES FALLS SHORT OF 85% OF THE INCOME OF THE TRUST DERIVED DURING THE YEAR, THEN THE SAID AM OUNT MAY, AT THE OPTION OF THE TRUST IN WRITING BEFORE EXPIRY OF TIME OF FI LING OF RETURN U/S. 139(1) BE DEEMED TO BE INCOME APPLIED TO SUCH PURPOSES DURING THE PREVIOUS YEAR IN WHICH THE INCOME WAS DERIVED AND THE INCOME SO DEEM ED TO HAVE BEEN APPLIED SHALL NOT BE TAKEN INTO ACCOUNT IN CALCULAT ING THE INCOME APPLIED TO SUCH PURPOSES. IN THIS CASE, AS STATED BY THE A SSESSEES LD. A/R, THE ASSESSEE-TRUST BEFORE FILING OF ITS RETURN U/S. 139 (1) HAD GIVEN SUCH OPTION BY WAY OF A LETTER ADDRESSED TO THE CONCERNED A.O. DATED 21/9/2009 TO THE EFFECT THAT BALANCE, I.E. SHORT OF 85%, WILL BE SPE NT IN THE IMMEDIATELY NEXT YEAR. IN THE ORDER OF THE DIT(EXEMPTION), THERE IS NO SUCH MENTION OF THIS INTIMATION TO THE A.O. THEREFORE, THE FINDING OF TH E DIT(EXEMPTION) THAT THE APPLICANT HAS NOT EXERCISED THE OPTION U/S. 11(2), IN OUR CONSIDERED OPINION, DOES NOT APPEAR TO BE CORRECT. MOREOVER, A S STATED ABOVE, SINCE ITS CREATION VIDE A TRUST DEED DATED 14/2/2001, REGISTR ATION U/S. 12A WAS GRANTED AND CONTINUANCE OF REGISTRATION HAS ALSO BE EN GRANTED TILL ASSESSMENT YEAR 2008-09. AS A MATTER OF FACT, REGIS TRATION OF AN INSTITUTION U/S. 12A BY ITSELF IS A SUFFICIENT PROOF OF THE FAC T THAT THE TRUST OR THE INSTITUTION CONCERNED IS CREATED OR ESTABLISHED FOR CHARITABLE OR RELIGIOUS 6 PURPOSES AND IT ENJOYS APPROVAL U/S. 80G OF THE ACT . IN THE CASE OF SONEPAT HINDU EDUCATIONAL & CHARITABLE SOCIETY VS. CIT (SUPRA), IT HAS BEEN HELD THAT WHILE DEALING WITH THE APPLICATION U /S. 80G(5), THE SCOPE OF ENQUIRY BY THE CIT EXTENDS TO ELIGIBILITY OF THE AP PLICANT TO EXEMPTION UNDER VARIOUS PROVISIONS REFERRED TO IN THAT SUB-SE CTION BUT NOT TO ACTUAL COMPUTATION OF INCOME UNDER THE ACT. REGISTRATION OF AN INSTITUTION U/S. 12A BY ITSELF IS A SUFFICIENT PROOF THAT THE INSTIT UTION IS CREATED OR ESTABLISHED FOR CHARITABLE OR RELIGIOUS PURPOSES. 5.2. AS STATED ABOVE, THE DIT(EXEMPTION) IN HIS OR DER HAS RECORDED HIS FINDING THAT AS PER ACCOUNTS FOR ASSESSMENT YEARS 2 007-08 TO 2009-10, THE ASSESSEE-APPLICANT HAS SPENT LESS THAN 85% ON CHARI TABLE ACTIVITIES. AT THE SAME TIME, AS PER ASSESSEE, DETAILS OF WHICH ARE GI VEN IN TABLE ABOVE, EXCEPT FOR A.Y. 2009-10, MORE THAN 85% OF GROSS INC OME HAS BEEN SPENT ON CHARITIES. IN THIS VIEW OF THE MATTER, IN OUR OPIN ION, IT WOULD MEET THE ENDS OF JUSTICE IF THE ORDER OF THE DIT(EXEMPTION) IS SE T ASIDE AND THE MATTER IS RESTORED BACK TO HIS FILE FOR THE LIMITED ISSUE TO VERIFY WHETHER THE GROSS INCOME OF THE TRUST AND AMOUNT SPENT ON CHARITIES Y EAR-WISE AS GIVEN IN THE TABLE ABOVE IS ALREADY ON RECORD OF THE DEPARTM ENT AND WHETHER THE ASSESSEE BY ITS LETTER DATED 21/9/2009 HAS INFORMED THE A.O. THAT BALANCE WILL BE SPENT IN NEXT YEAR. WE ORDER ACCORDINGLY. NEEDLESS TO MENTION THAT THE DIT(EXEMPTION) WILL ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE READJUDICATING THE MATTER IN TERMS OF OUR OBSERVATION ABOVE AND IN ACCORDANCE WITH LAW. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE COURT ON 31.03.2010. SD/- SD/- [B.R. MITTAL] [B.C. ME ENA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 -03-2010 7 COPY FORWARDED TO : 1. PURNI DEVI SHYAMSAYKA CHARITY TRUST, C/O. V.N.PUROH IT & CO., 32-B, GANESH CH. AVENUE, 2 ND FLOOR, KOLKATA-700 013. 2. D.I.T. (EXEMPTION), KOLKATA. 3. THE DEPARTMENTAL REPRESENTATIVE, ITAT, KOL KATA. TRUE COPY, BY OR DER [DKP] DY. REGISTRAR.