Kantilal Manilal Charitable Trust, Ahmedabad V. The DIT(Exemp), Ahmedabad

ITA 211/AHD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67630 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-08-2013
• Assessment Year: misc
• Appeal Filed On: 22-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Charitable institution
• Section: 80G

Judgement Text

ITA NO 211/AHD/20 13 . A.Y. N.A. 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 211/AHD/2013 (ASSESSMENT YEAR: N.A. KANTILAL MANILAL CHARITABLE TRUST BRIJ HOUSE, OPP. OLD GUJARAT HIGH COURT, AHMEDABAD 380014 (APPELLANT) VS. THE DIRECTOR OF INCOME TAX (EXEMPTION), AHMEDABAD (RESPONDENT) PAN: AAATK 1266 G APPELLANT BY : SHRI S.N. SOPARKAR. A.R. RESPONDENT BY : SHRI SUBHASH BAINS. CIT D.R. ( )/ ORDER DATE OF HEARING : 22-08-20 13 DATE OF PRONOUNCEMENT : 13 -09-2013 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF DIT(E), AHMEDABAD ORDER DATED 13.12.2012. 2. THE FACTS AS CULLED OUT FROM THE ORDER OF LOWER AUT HORITIES ARE AS UNDER: 3. THE ASSESSEE TRUST MADE AN APPLICATION FOR RENEWAL OF EXEMPTION U/S 80G(5) ON 29.5.2009. DIT(E) VIDE ORDER DATED 21.1.2 010 PASSED U/S ITA NO 211/AHD/20 13 . A.Y. N.A. 2 80G(5) REJECTED THE APPLICATION FOR THE REASON THAT THE ASSESSEE HAD GIVEN ADVANCES TO 3 TRUSTS NAMELY K.M.HOSPITAL TRUST, PAT HIK FOUNDATION AND P.K.CHARITABLE TRUST, THE AGGREGATE BALANCE OUTSTAN DING AS ON 31.3.2008 WAS RS 51,59,865/- AND THEREFORE HE WAS OF THE VIEW THAT THE ADVANCING OF ADVANCES WITHOUT THE PERMISSION OF THE CHARITY C OMMISSIONER WAS NOT AS PER CONDITIONS (II) AND (V) OF S. 80G(5) AND THE REBY WAS AGAINST THE OBJECT OF THE TRUST. AGGRIEVED BY THE ORDER OF DIT( E), ASSESSEE CARRIED THE MATTER BEFORE TRIBUNAL. TRIBUNAL VIDE ORDER DAT ED 20.4.2012 RESTORED THE MATTER BACK TO THE FILE OF DIT(E) FOR FRESH ADJ UDICATION. PURSUANT TO THE ORDER OF ITAT IN ITA NO. 664/AHD/2010 ORDER DAT ED 20.04.2012, DIT(E)AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE, PASSED ORDER GIVING EFFECT TO ITAT'S ORDER ON 13.12.2012 WHEREIN HE ONCE AGAIN REJECTED THE APPLICATION U/S 80G(5) INTERALIA FOR T HE REASON THAT THE ADVANCES WERE MADE OUT OF THE CORPUS FUND OF THE AS SESSEE. DIT(E) WAS FURTHER OF THE VIEW THAT THE CORPUS IS A PERMANENT FUND AND IT CANNOT BE USED FOR RUNNING THE TRUST OBJECTS AND THE CORPUS I S REQUIRED TO BE INVESTED AS PER THE MODES SPECIFIED IN SECTION 11(5 ) AND ONLY THE INCOME GENERATED THEREFROM COULD BE USED FOR RUNNING THE T RUST OBJECTS. HE FURTHER NOTED THAT THE PERMISSION OF CHARITY COMMIS SIONER WAS ALSO NOT OBTAINED. AGGRIEVED BY THE ORDER OF DIT(E), THE ASS ESSEE IS NOW IN APPEAL BEFORE US. 4. BEFORE US, THE LD. A.R. SUBMITTED THAT THE ADVANCE HAVE BEEN MADE TO TRUSTS HAVING SIMILAR OBJECTS AS THAT OF THE ASSESS EE AND AS THE ADVANCES WERE MADE OUT OF THE CORPUS OF THE TRUST, THE PERMI SSION FROM CHARITY COMMISSIONER WAS NOT REQUIRED. HE FURTHER SUBMITTED THAT THE TRUSTS TO WHOM THE ADVANCE HAVE BEEN GRANTED HAVE ALSO BEEN G RANTED APPROVAL U/S ITA NO 211/AHD/20 13 . A.Y. N.A. 3 80G OF THE ACT. HE PLACED ON RECORD THE COPIES OF T HE APPROVAL GRANTED TO THE RECIPIENT TRUSTS. HE FURTHER SUBMITTED THAT AS PER THE TRUST DEED THE TRUSTEES HAVE THE POWER TO UTILIZE AND SPEND THE AM OUNT OUT OF THE CORPUS OF THE TRUST AND FOR WHICH HE ALSO PLACED RELIANCE ON THE DECISION IN THE CASE OF ACME EDUCATIONAL SOCIETY 326 ITR 146. HE FU RTHER PLACED RELIANCE ON THE DECISIONS IN THE CASE OF CIT VS MAH ARANA OF MEWAR CHARITABLE FOUNDATION (1987) 164 ITR 439. HE FURTHE R SUBMITTED THAT THE ASSESSEE HAS COMPLIED WITH THE REQUIREMENTS OF 80G AND THEREFORE THE ASSESSEE'S APPLICATION FOR RENEWAL FOR EXEMPTION SH OULD BE CONSIDERED FAVOURABLY. ON THE QUERY FROM THE BENCH, THE LD. AR . SUBMITTED THAT THE ADVANCE WAS GRANTED PRIOR TO 1999, THERE IS NO AGRE EMENT BETWEEN THE ASSESSEE AND THE TRUST TO WHOM THE ADVANCE HAS BEEN GRANTED AND FURTHER NO INTEREST HAS BEEN CHARGED BY THE ASSESSEE. THE L D. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF DIT(E). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT ASSESSEE IS A TRUST W HICH IN THE PAST WAS GRANTED APPROVAL U/S 80G(5) WHICH WAS VALID FROM 1. 4.2006 TO 31.3.2009. THE ASSESSEE TRUST MADE AN APPLICATION FOR RENEWAL OF REGISTRATION U/S 80G(5) WHICH WAS REJECTED BY DIT(A) FOR THE REASON THAT ASSESSEE HAD GRANTED ADVANCES TO 3 TRUSTS OUT OF CORPUS OF THE T RUST. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAS GRANTED MONEY TO 3 TRUSTS HA VING SIMILAR OBJECTS AS THAT OF THE ASSESSEE. THE AMOUNT HAS BEEN CLASSIFIE D AS 'ADVANCE' BY THE ASSESSEE IN THE ACCOUNTS. IT IS ALSO A FACT THAT AS SESSEE HAS NOT CHARGED ANY INTEREST ON THE AFORESAID ADVANCE. IT IS ALSO A FACT THAT THE TOTAL CAPITAL OF THE ASSESSEE AS PER THE BALANCE SHEET AS ON 31ST MARCH 2009, IS RS 53.68 LACS (COMPRISING OF CORPUS FUND OF RS 37.88 L ACS, UNSECURED LOAN OF ITA NO 211/AHD/20 13 . A.Y. N.A. 4 RS 2.95 LACS AND BALANCE OF INCOME AND EXPENDITURE ACCOUNT OF RS 12.83 LACS). AGAINST THE AFORESAID FUNDS, ASSESSSEE HAS A DVANCED RS 51.50 LACS TO THE 3 TRUSTS (NAMELY PATHIK FOUNDATION, P.K.CHAR ITABLE TRUST AND K.M.CHARITABLE TRUST) WHICH AMOUNTS TO ALMOST 93% O F THE FUNDS WHICH THEREFORE MEANS THAT THE ASSESSEE HAS APART FROM C ORPUS FUNDS AND OWN FUNDS, HAD ALSO LENT OUT THE AMOUNTS BORROWED BY IT . FROM THE DETAILS PLACED ON RECORD IT IS FURTHER SEEN THAT PATHIK FOU NDATION WAS GRANTED ADVANCE IN FINANCIAL YEAR ENDED 31.3.2002 AND THE A MOUNT HAS NEVER BEEN RETURNED BY PATHIK FOUNDATION TILL YEAR ENDING 31ST MARCH 2008 BUT ON THE CONTRARY THE AMOUNT ADVANCED HAS INCREASED FROM YEAR TO YEAR. THE AMOUNT OUTSTANDING AS ON 31ST MARCH 2002 WAS RS 7,0 00/- AND THE AMOUNT OUTSTANDING AS ON 31ST MARCH 2008 WAS RS 45, 000. SIMILARLY, IN THE CASE OF P.K.CHARITABLE TRUST, THE AMOUNT WAS AD VANCED PRIOR TO 31ST MARCH 1999 BUT THE EXACT DATE OF ADVANCING THE AMOU NT IS NOT AVAILABLE FROM THE RECORDS PLACED BEFORE US. THE AMOUNT OUTST ANDING AS ON 31ST MARCH 2000 WAS RS 50,000/- AND THE AMOUNT OUTSTANDI NG AS ON 31ST MARCH 2008 WAS RS 5,80,000/-. IN CASE OF AMOUNT ADV ANCED TO K.M.HOSPITAL TRUST ALSO, THE AMOUNT WAS ADVANCED PR IOR TO 31ST MARCH 1999 BUT THE EXACT DATE IS NOT AVAILABLE FROM THE R ECORDS BEFORE US. THE AMOUNT OUTSTANDING AS ON 31ST MARCH 2000 WAS RS 27. 32 LACS AND THE AMOUNT OUTSTANDING AS ON 31ST MARCH 2008 WAS RS 45. 35 LACS. THE DETAILS FURTHER REVEALS THAT THE AMOUNT ADVANCED HAS NEVER BEEN RETURNED BACK FULLY BUT ON THE CONTRARY THE AMOUNT ADVANCED HAS I NCREASED OVER A PERIOD OF YEARS. FROM THE COPY OF THE RESOLUTIONS A UTHORISING THE ADVANCING OF AMOUNTS, IT IS SEEN THAT IN THE RESOLU TION THERE ARE NO DETAILS AS TO WHEN THE RESOLUTION WAS PASSED BY THE ASSESSE E. FURTHER, ALL THE THREE RESOLUTIONS ARE IDENTICALLY WORDED AUTHORISIN G THE TRUST TO 'PROVIDE ITA NO 211/AHD/20 13 . A.Y. N.A. 5 GRANTS AND/OR LOANS (UNSECURED)' AND THE BORROWER W ILL 'REFUND THE LOAN ON DEMAND'. BEFORE US, THERE IS NOTHING ON RECORD TO SHOW THAT ASSESSEE HAS AT ANY TIME DEMANDED REFUND OF THE AMOUNTS. BEF ORE US, FURTHER NOTHING HAS BEEN BROUGHT ON RECORD TO DEMONSTRATE T HAT THE 3 TRUSTS TO WHOM THE AMOUNT HAS BEEN ADVANCED ARE IN A POSITION TO RETURN THE AMOUNT WHENEVER DEMANDED BY THE ASSESSEE NOR HAS AN YTHING BEEN BROUGHT ON RECORD TO DEMONSTRATE AS TO HOW THE AMOU NT ADVANCED HAS BEEN UTILISED BY THE RECIPIENT TRUSTS. IT IS ALSO A N ADMITTED FACT THAT THE ASSESSEE HAS NOT OBTAINED PERMISSION FROM CHARITY C OMMISSIONER FOR GRANTING OF ADVANCE, TO ANY OF THE 3 TRUSTS. 6. THE MEANING OF 'CORPUS' HAS BEEN DEFINED BY H'BLE K ARNATAKA HIGH COURT IN THE CASE OF DIT VS RAMAKRISHNA SEVA ASHRAM (2012) 205 TAXMAN 26 (KAR) AS 'THE CAPITAL OF AN ASSESSEE; A CAPITAL OF AN ESTATE ; CAPITAL OF A TRUST; A CAPITAL OF AN INSTITUTION. TH EREFORE, IF VOLUNTARY CONTRIBUTION IS MADE WITH A SPECIFIC DIRECTION, THE N IT SHALL BE TREATED AS CAPITAL OF THE TRUST FOR CARRYING ON ITS CHARITABLE OR RELIGIOUS ACTIVITIES.' SEEN IN THE LIGHT OF THE AFORESAID DEFINITION, IT M EANS THAT THE CORPUS FUND IS A PERMANENT FUND WHICH HAS BEEN GIVEN WITH A SPE CIFIC DIRECTION AND THEREFORE IT CANNOT BE USED IN ANY MANNER CONTRARY TO THE DIRECTIONS OF THE DONOR. IN THE PRESENT CASE BEFORE US, AS SEEN ABOVE , THE ENTIRE CORPUS DONATION OF THE ASSESSEE TRUST HAS BEEN USED FOR AD VANCING AMOUNTS TO OTHER TRUSTS. FURTHER, THE AMOUNTS ADVANCED HAVE NE VER BEEN RETURNED THOUGH A LONG PERIOD OF MORE THAN 15 YEARS HAVE ELA PSED FROM THE FIRST DATE OF IT BEING GRANTED AND HAS ALSO NOT BEEN RETU RNED TILL DATE AND THEREFORE IT CAN BE SAID TO HAVE GONE OUT OF THE TR UST. IN THESE FACTS OF THE CASE, WE HOLD THAT THE AMOUNT ADVANCED BY THE ASSES SEE TRUST TO THE 3 ITA NO 211/AHD/20 13 . A.Y. N.A. 6 OTHER TRUSTS AS LOAN, WAS IN FACT A DIVERSION OF CO RPUS FUND OF THE ASSESSEE TO THE OTHER TRUSTS AND WAS NOT IN THE NATURE OF LO ANS OR ADVANCE. THE DIVERSION OF CORPUS FUND IS A CLEAR VIOLATION OF TH E SPECIFIC DIRECTION OF THE DONORS AND ALSO THE APPLICABLE LAWS OF THE LAND . WE FURTHER FIND THAT THE CASE LAWS RELIED UPON BY THE LD. AR. ARE DISTIN GUISHABLE ON FACTS AND CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDE R OF DIT(E) AND THUS THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13 - 09 - 2013. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT ,AHMEDABAD