DCIT, Chatrapatti V. M/s. Indian Institute of Engineering Technology, CHENNAI

ITA 2245/CHNY/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5089 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-01-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 27-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Keywords: Depreciation; Charitable institution
• Section: 2; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , ! , ! BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NOS. 2092 & 2093/CHNY/2016 / ASSESSMENT YEARS : 2011-12 & 2012-13 M/S. INDIAN INSTITUTE OF ENGG TECHNOLOGY, NO. 363, ARCOT ROAD, KODAMBAKKAM, CHENNAI 600 024. [PAN: AAATT 2768C] VS. THE DEPUTY DIRECTOR OF INCOME TAX, (EXEMPTIONS) III, CHENNAI 600 034. ( / APPELLANT) ( / RESPONDENT) /. I.T.A. NOS. 2244 & 2245/CHNY/2016 / ASSESSMENT YEARS : 2011-12 & 2012-13 THE DEPUTY DIRECTOR OF INCOME TAX, (EXEMPTIONS), CHENNAI CIRCLE, AAYAKAR BHAVAN, ANNEXE BUILDING, III FLOOR, 121 M.G. ROAD, NUNGAMBAKKAM, CHENNAI 600 034. VS. M/S. INDIAN INSTITUTE OF ENGG TECHNOLOGY, NO. 363, ARCOT ROAD, KODAMBAKKAM, CHENNAI 600 024. [PAN: AAATT 2768C] ( / APPELLANT) ( / RESPONDENT) ASSESSEE BY : SHRI. SAROJ KUMAR PARIDA, ADVOCATE REVENUE BY : SHRI. GURU BHASHYAM, ADDL. CIT . /DATE OF HEARING : 18.05.2018 . /DATE OF PRONOUNCEMENT : 22.06.2018 :-2-: ITA NOS.2092, 2093, 2244 & 2245/CHNY/2016 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEE AS WELL AS THE REVENUE FILED THESE APPEALS AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APP EALS)- 17 ,CHENNAI, IN ITA NOS. 134& 153/15-16 /CIT(A)- 17 DATED 30.03.2016 FOR THE AYS 2011-12 & 2012-13, RESPECTIVELY. 2. M/S. THE INDIAN INSTITUTE OF ENGINEERING AND T ECHNOLOGY , THE ASSESSEE , RUNS TWO COLLEGES, NAMELY, MEENAKSHI SUNDARARAJAN E NGINEERING COLLEGE, WHICH IS AFFILIATED TO ANNA UNIVERSITY AND MEENA KSHI SUNDARARAJAN SCHOOL OF MANAGEMENT, WHICH IS AFFILIATED TO MADRAS UNIVERSIT Y. 3. WHILE MAKING THE ASSESSMENTS FOR AYS 2011- 12 & 2012-13, THE AO DENIED THE CLAIM OF EXEMPTIONS U/S 10(23) ( C ) (VI) , REFUSED TO ALLOW THE ASSESSEES DEPRECIATION CLAIM ON THE CAPITAL EXPEN DITURE HOLDING THAT WHEN THE ENTIRE COSTS OF ASSETS HAVE ALREADY BEEN CLA IMED AS APPLICATION OF INCOME TOWARDS OBJECTS OF THE TRUST, THE CLAIM OF D EPRECIATION ON THE COST OF THE VERY SAME ASSETS RESULTS IN DOUBLE DEDUCTION, ASSESSED THE ACCUMULATED INCOME IN AY 2006-07 AS IT WAS NOT- APPLIE D IN AY 2011-12, DENIED THE BENEFITS OF EXEMPTION U/S 11 INVOKING THE PROVI SIONS OF SECTIONS 13(1) (C) FOR AY 2011-11 & UNDER SECTIONS 13(1) (C) & 13 (1) (D) FOR AY 2012-13 ETC. :-3-: ITA NOS.2092, 2093, 2244 & 2245/CHNY/2016 4. AGGRIEVED, THE ASSESSEE FILED APPEALS BEFORE THE LD. CIT(A) PLEADING, INTER ALIA, THAT THAT THE AO REFUSED EXEMPTION WITH OUT MAKING ANY DISCUSSION ON DENIAL OF EXEMPTION U/S 10(23) (C) FOR AY 2011- 12 ETC. THE LD. CIT (A) AFTER CONSIDERING ALL THE PLEAS OF THE ASSESSEE , THE ASSESSMENT ORDERS ETC , RELYING ON THIS TRIBUNAL ORDER IN THE ASSESSEES CASE IN EARLIER YEAR ALLOWED THE APPEALS ON THE ISSUE OF THE DISALLOWANCE OF HONORARIUM PAYMENTS MADE TO SPECIFIED PERSON , VIZ MS. MEENAKSHI SUNDARARAJA N, U/S 13(3) FOR BOTH THE AYS AND CONFIRMED THE DENIAL OF EXEMPTION S ON CERTAIN OTHER ISSUES FOR BOTH THE AYS. AGGRIEVED , ON THE ISSUES OF DE NIAL OF EXEMPTIONS, THE ASSESSEE FILED APPEALS FOR BOTH THE AYS. AGGRIEVE D , ON THE DELETIONS MADE U/S13(3), THE REVENUE FILED APPEALS FOR BOTH THE A YS . THEY ARE DEALT AS UNDER : 5. ON THE DENIAL OF EXEMPTION U/S 10(23C)(VI): THE RELEVANT PORTION OF THE ORDER OF THE AO IS EXTRACTED AS UNDER : DENIAL OF EXEMPTION U/S 10(23C)(VI): AT THE OUTSET IT MAY BE MENTIONED THAT THOUGH THE A SSESSEE SOCIETY FILED THE APPLICATION FOR GRANT OF EXEMPTION U/S 10(23C)(VI) FOR THE ASSESSMENT YEAR 2012-13 AND SUBSEQUENTLY FOR ASSESSMENT YEAR 2013-1 4 BEFORE THE PRESCRIBED AUTHORITY BEING CHIEF COMMISSIONER OF INCOME TAX-II I, CHENNAI THE SAME HAD BEEN DENIED TO THE ASSESSEE ORGANIZATION. IN THE OR DER C.NO.CCIT- III /10(23C)(VI)1201 3-1414 DATED 29.09.2014 FOR A.Y.20 13-14, THE LEARNED CCIT- III IN PAGE 5 HAD HELD THAT THE ASSESSEES HAVING A SUBSTANTIAL PERCENTAGE OF SURPLUS RANGING FROM AROUND 30% TO 42% WHICH WOULD PRIMA FADE POINT TO THE ASSESSEE RUNNING A PROFITABLE VENTURE. :-4-: ITA NOS.2092, 2093, 2244 & 2245/CHNY/2016 YEAR ENDED TOTAL RECEIPTS (RS.) SURPLUS (RS.) SURPLUS WRT RECEIPTS 31.03.2011 8,21,17,598 2,87,39,451 35% 31.03.2012 11,75,96,825 4,88,55,229 41.5% 31.03.2013 11,68,84,064 3,37,58,156 28.88% THE CCIT FURTHER CITED KARNATAKA HIGH COURTS DECIS ION IN THE CASE OF VISWESVARAYYA TECHNOLOGICAL UNIVERSITY V. ACIT (2 014) 42 TAXMANN.COM 237 HAS LAID DOWN THAT INSTITUTIONS GENERATING SURPLUS OF OVER 15-20% CANNOT BE SAID TO EXIST NOT FOR PROFIT PURPOSE. THIS WAS IN THE CASE OF A GOVERNMENT INSTITUTION. IN THE CASE PRESENTED HERE, WHEN THE S URPLUS IS AS HIGH ABOUT 42% OBVIOUSLY THE RATIO OF THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF VISWESVARAYYA TECHNOLOGICAL UNIVERSITY (SUPRA) SHA LL BE APPLICABLE. 5.1 THE RELEVANT PORTION OF THE ORDER OF THE LD.C IT(A) IS EXTRACTED AS UNDER : I AM NOT IN AGREEMENT WITH THE AFORESAID CONTENTIO NS OF THE A.R PRAYING FOR ALLOWING EXEMPTION U/S 1O(23C)(VI) FOR THE SIMPLE R EASON THAT FOR THE INSTANT YEARS IN APPEAL, THE CCIT HAS NOT GRANTED APPROVAL TO THE APPELLENTS APPLICATION FOR EXEMPTION U/S 10(23C)(VI) AND JUST AS NO DEEMED REGISTRATION CAN BE GRANTED U/S 12AA(2) AS HELD IN ANJUMAN-EKHY RKHAH-E-AAM 200 TAXMANN 27 THERE IS NO PROVISION FOR DEEMED REGISTR ATION U/S 10(23C) EITHER, IN THE ABSENCE OF EXPRESS APPROVAL BY THE CCIT AS IT I S IN THIS CASE, WHICH WOULD MEAN THAT THE APPELLANT DID NOT ENJOY THE EXEMPTION U/S 10(23C)(VI) DUE TO LACK OF REGISTRATION GRANTED TO IT BY THE CCIT FOR BOTH THE ASST. YEARS 2011-12 & 2012-13 AND THEREFORE, THE A.OS ACTION IN DENYING EXEMPTION FOR THE AFORESAID REASON IS HELD TO BE VALID AND THEREFORE CONFIRMED. THIS GROUND IS THEREFORE DISMISSED FOR BOTH THE ASST. YEARS IN APPEAL, E. 20 11-12 & 2012-13. 6. BEFORE US, THE LD. A R SUBMITTED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE.THE COMMISSIONER OF INCOM E TAX (APPEALS) OUGHT :-5-: ITA NOS.2092, 2093, 2244 & 2245/CHNY/2016 TO HAVE APPRECIATED THAT HONBLE APEX COURT IN THE CASE OF M/S. QUEENS EDUCATIONAL SOCIETY VS CIT IN CIVIL APPEAL NO.5167 OF 2008DATED 16.03.2015 HAS CATEGORICALLY STATED THAT REALIZATION OF SURPLU S IN THE COURSE OF OPERATION OF EDUCATIONAL INSTITUTION CANNOT MEAN THAT THEY AR E NOT FOR THE PURPOSE OF PROFIT, PARTICULARLY WHEN THE ENTIRE INCOME HAS BEE N UTILIZED FOR THE PURPOSES OF EDUCATION. THE COMMISSIONER OF INCOME TAX (APPE ALS) OUGHT TO HAVE APPRECIATED THAT THERE HAS BEEN NO FINDING THAT THE SURPLUS HAS NOT BEEN UTILIZED FOR THE PURPOSE OF EDUCATION, HE ERRED IN CONFIRMING THE DENIAL OF EXEMPTION U/S.10(23C)(VI) AND HENCE HIS ORDERS MAY BE QUASHED AND EXEMPTION U/S.10(23C)(VI) MAY BE RESTORED. PER CONT RA, THE LD. DR SUBMITTED THAT THE ASSESSEE SOUGHT GRANT OF EXEMPTIONS U/S 1 0(23C)(VI) BEFORE THE PRESCRIBED AUTHORITY BEING CHIEF COMMISSIONER OF IN COME TAX-ILL, CHENNAI WHICH HAD BEEN DENIED , INTER ALIA, FOR THE REASON THAT THE ASSESSEE IS HAVING A SUBSTANTIAL PERCENTAGE OF SURPLUS RANGING FROM AROUND 30% TO 42% WHICH WOULD PRIMA FACIE POINTS TO THE FACT THAT TH E ASSESSEE IS RUNNING A PROFITABLE VENTURE. THEREAFTER, THE AO DENIED EXEMP TIONS RELYING ON THE SAME ORDER AND ITS RATIO. THE ASSESSEE CHALLENGED THE SA ME BEFORE THE LD. CIT (A) WHO CONFIRMED THE DISALLOWANCES. THE ASSESSEE HAS NOT PLACED ANY MATERIAL TO SHOW THAT THE ORDER PASSED BY THE PRESCRIBED AU THORITY IE., THE CHIEF COMMISSIONER OF INCOME TAX-III, CHENNAI IS NO MORE A GOOD ORDER, THE ORDERS OF THE LOWER AUTHORITIES ARE CONTRARY TO THE FACTS AND LAW ON WHICH THEY RELIED AND PASSED THOSE ORDERS. THEREFORE, THEIR ORDERS MA Y BE SUSTAINED. :-6-: ITA NOS.2092, 2093, 2244 & 2245/CHNY/2016 7. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROU GH RELEVANT MATERIAL. IT IS CLEAR THAT THE ASSESSEE HAS SOUGHT GRANT OF EXEMPTIONS U/S 10(23C)(VI) BEFORE THE PRESCRIBED AUTHORITY , VIZ THE CHIEF COM MISSIONER OF INCOME TAX- III, CHENNAI , WHICH HAD BEEN DENIED , INTER ALIA, FOR THE REASON THAT THE ASSESSEE IS HAVING A SUBSTANTIAL PERCENTAGE OF SURPLUS RANGING FROM AROUND 30% TO 42% WHICH PRIMA FACIE POINTS TO THE FACT THAT THE ASSESSEE IS RUNNING A PROFITABLE VENTURE. THEREAFTER, THE A O DENIED EXEMPTIONS RELYING ON THE SAME ORDER AND ITS RATIO. THE ASSESSEE CHALL ENGED THE SAME BEFORE THE LD. CIT(A) WHO CONFIRMED DENIAL OF EXEMPTIONS U /S 10(23C) (VI) , INTER ALIA, FOR THE REASON THAT THE ASSESSEE DOES NOT ENJOY EXE MPTION FOR U/S 10(23C) (VI) FOR LACK OF REGISTRATION . THE ASSESSEE HAS NOT PLACED ANY MATERIAL TO SAY THAT THE ORDER PASSED BY THE PRESCRIBED AUTHOR ITY IE THE CHIEF COMMISSIONER OF INCOME TAX-III, CHENNAI IS NO MORE A GOOD ORDER AND THE ORDERS OF THE LOWER AUTHORITIES ARE CONTRARY TO T HE FACTS AND LAW ON WHICH THEY RELIED ON THEIR ORDERS. THEREFORE, THE CORRESP ONDING GROUNDS OF THE ASSESSEE ARE DISMISSED FOR BOTH THE AYS. THE HONBL E SC IN THE CASES OF ADITANAR EDUCATIONAL INSTITUTION VS ADDITIONAL COM MISSIONER OF INCOME-TAX AND OTHERS IN224 ITR 310 (SC) HELDINTER ALIA, THAT THE AVAILABILITY OF THE EXEMPTION SHOULD BE EVALUATED EACH YEAR TO FIND OUT WHETHER THE INSTITUTION EXISTED DURING THE RELEVANT YEAR SOLELY FOR EDUCATI ONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT. A FIVE MEMBER BENCH OF THE HON BLE SC IN THE CASE OF ISLAMIC ACADEMY OF EDUCATION AND ANOTHER VS. STATE OF KARNATAKA AND OTHERS :-7-: ITA NOS.2092, 2093, 2244 & 2245/CHNY/2016 DECIDED ON 14 AUGUST, 2003 IN THE CONTEXT OF THE DE TERMINATION OF THE REASONABLE FEES TO BE CHARGED BY PRIVATE EDUCATIONA L BODIES HELD , INTER ALIA , THAT A SURPLUS OF 6 TO 15 % COULD BE HELD AS REASON ABLE OR PERMISSIBLE LIMIT. THE JURISDICTIONAL HIGH COURT IN THE CASE OF MADR AS HOTELS ASSOCIATION VS COMMISSIONER OF INCOME-TAX, MADRAS IN 111 ITR 241, HELD , INTER ALIA, THATTHE BEST EVIDENCE TO FIND OUT WHETHER THE PURPO SE OF THE ACTIVITY IS TO EARN INCOME OR PROFIT, IS THE VERY ACCOUNTS OF THE ASSOCIATION IE THE PERSON. IN THE LIGHT OF THESE RATIOS AND IN THE ABSENCE O F ANY MATERIAL TO THE CONTRARY FROM THE ASSESSEE , ON THE ABOVE FACTS IE WHEN TH E ASSESSEE MAKES HUGE PROFITS YEAR AFTER YEAR, THE FINDINGS RECORDED BY THE LOWER AUTHORITIES THAT THE ASSESSEE IS RUNNING A PROFITABLE VENTURE ,DURIN G THE IMPUGNED YEARS, IS JUSTIFIED AND HENCE THE CORRESPONDING GROUNDS OF THE ASSESSEE ARE DISMISSED FOR BOTH THE AYS. 8. ONTHE AMOUNT PARKED WITH SISTER CONCERN : 8.1 FROM THE ACCOUNT COPY FURNISHED BY THE ASSESS EE , THE AO FOUND THAT THE ASSESSEE HAD RECEIVED RS. 3,82,84,422/-, BETWEE N 24.02.2003 & 30.3.2004 FROM GANAPATHY EDUCATIONAL TRUST. AGAINST SUCH RECEIPTS , THE ASSESSEE PAID RS. 4,53,10,202/- BETWEEN 19.9.2003 T O 13.02.2007. THUS, IT HAS PAID RS. 70,25,780/-, IN EXCESS OF THE ADVANCE RECEIPT, WHICH WAS NOT RECEIVED UNTIL 26.03.2012. THE AO AFTER CONSIDERING THE ASSESSEES SUBMISSIONS ETC HELD THAT THOUGH THE TRANSACTION PE RTAINED TO EARLIER PERIOD, :-8-: ITA NOS.2092, 2093, 2244 & 2245/CHNY/2016 THE EXCESS ADVANCE WAS HELD BY THE SISTER CONCERN A LL ALONG WITHOUT ADEQUATE CONSIDERATION. FURTHER, IT WAS ALSO NOT IN THE NATU RE OF AN INVESTMENT AS PER THE PRESCRIBED MODES SPECIFIED IN SECTION 11(5) AND HENCE THERE IS A CLEAR VIOLATION U/S. 11(1)(C)/11(1)(D) RW.S.11(5). THERE FORE, THE PROVISIONS OF SECTION 11 BECOME IN-OPERATIVE AND THE SURPLUS GAIN ED BY THE TRUST FOR THE YEAR THEREFORE NEEDED TO BE BROUGHT TO TAXATION AND ACCORDINGLY ASSESSED THE ASSESSEES INCOME. 8.2 BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED T HAT THE APPELLANT HAD PAID AN EXCESS AMOUNT OF RS.70,25,780/-, WHICH WAS RECOVERABLE FROM MEENAKSHI COLLEGE FOR WOMEN AS IT WAS GIVEN TO THE OTHER CHARITABLE INSTITUTION FOR EDUCATIONAL PURPOSE TO ENABLE THEM TO CONSTRUCT BUILDING AS PART OF THE COLLEGE AND THEREFORE, CANNOT BE CONSID ERED AS AN INVESTMENT AND THEREFORE, THE PROVISIONS OF SECTION 11, 12 & 13 WE RE NOT VIOLATED. FURTHER, MEENAKSHI COLLEGE FOR WOMEN CANNOT BE CONSIDERED AS RELATED PERSON FOR THE PURPOSE OF SECTION 11(1)(C) AND 11(1)(D) RWS 13(3). THE LOAN GIVEN TO ANOTHER CHARITABLE TRUSTHAVINGSIMILAR OBJECTS FOR C ARRYING OUT OBJECTS OF SUCH TRUST COULD NOT BE CONSIDERED TO HAVE VIOLATED THE PROVISIONS OF SECTION 11(1)(C) AND 11(1)(D) R.W.S 11(5), AS CONTENDED BY THE A.O. THE RELEVANT PORTION OF THE ORDER OF THE LD. CIT (A) IS EXTRACTE D AS UNDER : 10.2. I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT ON THIS ISSUE ALONG WITH THE CASE LAWS RELIED ON BOTH BY THE A.O AND BY A.R AND I FIND NO SUBSTANCE IN THE SUBMISSIONS MADE BY THE A.R. IT IS QUITE CLEAR THAT / THE AMOUNT RECEIVED AS ADVANCE WAS REPAID BACK BY A HIG HER AMOUNT :-9-: ITA NOS.2092, 2093, 2244 & 2245/CHNY/2016 OFRS.4,53,10,202/-, INDICATING THAT THE DIFFERENTIA L EXCESS AMOUNT OF RS.70,25,780/- WAS LOANED TO THE SISTER TRUST, GANA PATHY EDUCATIONAL TRUST WITHOUT ADEQUATE SECURITY OR ADEQUATE INTEREST OR B OTH AND THEREFORE, IT HAD CLEARLY VIOLATED THE PROVISIONS OF SECTION 13(1)(C) R.W.S.11(5) AND [13(2)(A)] AND THEREFORE, THE ACTION OF THE A.O IN MAKING THE ADDITION OF THE DIFFERENCE BETWEEN THE AMOUNT RECEIVED AND PAID BACK TO THE SI STER CONCERN IS UPHELD AND THE ADDITION CONFIRMED. THIS GROUND IS, THEREFORE, DISMISSED. 8.3 BEFORE US, THE LD. AR SUBMITTED THAT THE SAME S UBMISSIONS MADE BEFORE THE LD. CIT(A) AND RELIED ON CERTAIN CASE L AWS. PER CONTRA, THE LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 9. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH RELEVANT MATERIAL. THE IMPUGNED TRANSACTIONS HAVE HAPPENED LONG BEFORE . THE ASSESSEE HAS RECEIVED THE EXCESS AMOUNT AFTER A LONG GAP. THOUGH , THE RATIONALE IS QUESTIONED AT ASSESSMENT STAGE ITSELF, IT HAS NOT L AID ANY CONTEMPORANEOUS MATERIALIN SUPPORT OF ITS CONTENTIONS, VIZ MINUTES BOOK, THE FACTS AND CIRCUMSTANCES ON WHICH THE ALLEGED TRANSACTIONS HA PPENED, WHO AND WHEN TOOK THE ALLEGED DECISIONS ETC , BEFORE THE LOWER AUTHORITIES AND HENCE THEY HAVE REJECTED ASSESSEES CLAIM OF EXEMPTION. BEF ORE US ALSO, THE ASSESSEE HAS NOT LAID ANY MATERIAL TO ASSAIL THE FINDINGS RE CORDED BY THEM. THEREFORE, THE CORRESPONDING GROUNDS OF THE ASSESSEE ARE DIS MISSED FOR THIS AY. 10. WE HAVE CONSIDERED ALL OTHER CLAIMS OF THE ASSE SSEE. THE A O HAS DENIED THE CLAIM OF EXEMPTION IN AY 2012-13 , OB SERVING AS UNDER : 7.2 THE TAXATION OF INCOME IS NOT CONFINED TO THE INCOME DERIVED FROM THE UNITS WHICH OPERATE LIKE A BUSINESS ENTITY. SECT ION 13(8) PROHIBITS APPLICABILITY :-10-: ITA NOS.2092, 2093, 2244 & 2245/CHNY/2016 OF SECTION 11 & 12 IN RESPECT OF ANY INCOME OF THE TRUST AND IS NOT RESTRICTED TO THE BUSINESS ACTIVITY OF THE TRUST. THEREFORE, THE SURPLUS DERIVED BY THE TRUST IS ENTIRELY BROUGHT TO TAXATION. IN VIEW OF THE FINDINGS RECORDED , SUPRA, THAT THE ASSESSEE IS CARRYING ITS ACTIVITIES AS A PROFITABLE VENTURE , THE A O HEL D THAT THE ASSESSEE IS NOT UNDERTAKING ANY CHARITABLE ACTIVITY WITHIN THE SC OPE OF SECTION 2(15) OF THE ACT . THEREFORE, HE DENIED THE ASSESSEES EXEMP TION CLAIM U/S 11, SUPRA. IT APPEARS THAT THIS FINDING IS NOT CHALL ENGED BY THE ASSESSEE BEFORE THE LD. CIT (A). WHEN THE ASSESSEES AC TIVITIES OR THE PURPOSES ARE CONSIDERED AS EXISTING FOR PURPOSES OF PROFIT , I TS CLAIM U/S 11 THAT IT IS EXISTING FOR CHARITABLE PURPOSES WITHIN THE S COPE OF SECTION 2 (15) OF THE ACT ALSO FAILS BOTH THE AYS . THUS, WHEN THE A SSESSEE IS NOT ENTITLED FOR THE BENEFIT U/S 11, ALL ITS OTHER CLAIMS U/S 11 AR E NOT ALLOWABLE AND HENCE THEY BECOME ACADEMIC AND HENCE NOT DEALT WITH . I.T.A. NOS. 2244 & 2245/CHNY/2016 ASSESSMENT YEARS : 2011-12 & 2012-13 NOW, LET US EXAMINE THE REVENUES APPEALS : 11. THE REVENUE FILED THESE APPEALS WITH A DELAY OF 3 DAYS AND SOUGHT CONDONATION OF DELAY. WE HEARD THE RIVAL PARTIES AN D ON DUE CONSIDERATION OF THE PETITION, CONDONE THE DELAY. 12. THE COMMON GROUNDS OF THE REVENUE IS EXTRACTED AS UNDER : 1. THE ORDER OF THE LEARNED CIT (A) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. :-11-: ITA NOS.2092, 2093, 2244 & 2245/CHNY/2016 2.1 THE ID. CIT (A) ERRED IN HOLDING THAT THERE IS NO VIOLATION U/S. 13 (1) (C) OF THE L.T.ACT. 2.2 THE ID. CIT (A) FAILED TO APPRECIATE THAT AS PE R CLAUSE 40 OF THE MEMORANDUM OF ASSOCIATION ONLY THE OUTSTANDING AMOU NT PAYABLE TO THE FOUNDER TRUSTEE COULD HAVE BEEN PAID TO HIS WIFE MS . MEENAKSHI SUNDARARAJAN. 2.3 THE ID. CIT (A) FAILED TO NOTE THAT THE PAYMENT MADE IS NOT IN CONSONANCE WITH ANY OF THE MANDATORY TERM OF THE TRUST. 2.4 THE ID. CIT (A) FAILED TO APPRECIATE THAT THE A MOUNT OF RS.1 ,1190OI- PAID TO MS. MEENAKSHI SUNDARARAJAN IS IN VIOLATION OF SE CTION 13 (1)(C). 2.5 THE ID. CIT (A) OUGHT TO HAVE APPRECIATED THAT THE AMOUNT WAS PAID BY WAY OF HONORARIUM WITHOUT ANY SERVICES HAVING BEEN RENDERED. 2.6 THE ID. CIT (A) OUGHT TO HAVE APPRECIATED THAT THE DEPARTMENT HAS NOT ACCEPTED THE RELIED ON DECISION OF THE HONBLE ITAT IN ITA NO.318/MDS/2014 DATED 27.5.2014. 13. WHILE MAKING THE ASSESSMENTS, THE AO FOUND THAT PAYMENT OF RS.1,08,600 & RS1,11,900/- WAS MADE TO MS. MEENAKSH I SUNDARARAJAN, THE WIFE OF THE FOUNDER OF THE TRUST, IN A YS 2011-12 & 2012-13, RESPECTIVELY , AND AFTER CONSIDERING ASSESSEES SUBMISSIONS ETC DISALL OWED THEM U/SS 13(1)(C), 13(2) AND 13(3). AGGRIEVED , THE ASSESSEE FILED APPEALS BEFORE THE LD. CIT(A) , WHO RELYING ON THIS TRIBUNAL DECISION, ON THE IDENTICAL ISSUE IN THE ASSESSEES CASE IN ITA NO.318/MDS/2014 DATED 27.5.1 4 FOR THE ASST. YEAR 2010-11, ALLOWED THE APPEALS. AGGRIEVED THE REVENUE FILED THE ABOVE APPEALS. 14. THE LD DR PRESENTED ON THE LINES OF THE GROUNDS OF APPEAL AND THE ORDERS OF THE AO . PER CONTRA, THE LD AR RELIED ON THE ORDERS OF THIS TRIBUNAL AND THE LD. CIT(A). :-12-: ITA NOS.2092, 2093, 2244 & 2245/CHNY/2016 15. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH RELEVANT MATERIAL. THE RELEVANT PORTION OF THIS TRIBUNAL ORDER, SUPR A, IS EXTRACTED AS UNDER: 7. FIRST, LET US CONSIDER, WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SEC.11 OR NOT, IN VIEW OF PAYMENT OF RS.,13,400/- M ADE TO MS. MEENAKSHI SUNCLARARAJAN. 8. IT IS THE CASE OF THE ASSESSEE THAT THE LOWER AU THORITIES HAVE ERRED IN HOLDING THAT SEC.13(1)(C),13(2)AND 13(3) ARE ATTRACTED IN R ESPECT OF HONORARIUM, EX- GRATIA AND MEDICAL EXPENSES OF RS.1,13,400/- PAID T O MS.MEENAKSHI SUNDARARAJAN, WHO IS THE WIFE OF THE FOUNDER OF THE TRUST. IT IS THE CASE OF THE ASSESSEE THAT THE LOWER AUTHORITIES HAVE OVERLOOKED THE FIRST PROVISO TO SEC. 13(1)(C)(II), WHICH PROVIDES THAT THE PROVISIONS OF SUB-CLAUSE(II) SHALL NOT APPLY, TO A TRUST OR INSTITUTION CREATED OR ESTABLISHED BE FORE THE COMMENCEMENT OF THIS ACT, TO ANY USE OR APPLICATION, WHETHER DIRECTLY OR INDIRECTLY, OF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR INSTITUTION FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SUB- SEC. (3), IF SUCH USE OR APPILC ATION IS BY WAY OF COMPLIANCE WITH A MANDATORY TERM OF THE TRUST OR A MANDATORY R ULE GOVERNING THE INSTITUTION. 9. IN THE PRESENT CASE, THE ASSESSEE TRUST HAS BEEN CREATED ON 1.2.1961. THIS IS BEFORE THE COMMENCEMENT OF THE INCOME-TAX ACT, 1961 . AS PER CLAUSES 36 TO 41 OF THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE TRUST, MS.MEENAKSHI SUNDARARAJAN IS ENTITLED FOR HONORARIUM IN RENDERIN G SERVICES TO THE BENEFITS OF THE ASSESSEE SOCIETY. THEREFORE, AS RIGHTLY ARGUED BY THE LEARNED COUNSEL, THE PAYMENT MADE TO MS.MEENAKSHI SUNDARARAJAN IS COVERE D BY THE SAID EXEMPTION. THEREFORE, WE HOLD THAT THE LOWER AUTHOR ITIES HAVE GROSSLY ERRED IN HOLDING THAT THEASSESSE IS NOT ENTITLED FOR EXEMPT ION UNDER SEC. 11 OF THE ACT. 15.1 THE FACTS BEING ALMOST IDENTICAL AND RECURRIN G FOR THESE ASSESSMENT YEARS TOO, FOLLOWING THE RATIO OF THE ABOVE RULING, PAYMENT OF HONORARIUM EX- GRATIA AND MEDICAL EXPENSES TO THE WIFE OF THE FOUN DER OF THE TRUST, SMT. MEENAKSHI SUNDARARAJAN IS HELD TO BE ALLOWABLE . H OWEVER, A QUESTION ARISES AS TO WHETHER THIS EXPENDITURE IS ALLOWABLE WHEN TH E EXEMPTION IS DENIED U/S :-13-: ITA NOS.2092, 2093, 2244 & 2245/CHNY/2016 11. WE HAVE CONSIDERED. ON DENIAL OF EXEMPTION, THE INCOME HAS TO BE ASSESSED U/S 14 OF THE ACT AND WHEN THE PURPOSE FO R WHICH THE ASSESSEE IS EXISTING IS HELD AS FOR PURPOSES OF PROFIT, THE IMP UGNED CLAIM IS ALLOWABLE U/S 37. ON THIS GROUND ALSO, THE REVENUES GROUNDS FAIL AND HENCE ITS APPEALS ARE DISMISSED. 16. IN THE RESULT, THE ASSESSEES APPEALS IN ITA NO S2092& 2093/CHNY/2016 ARE DISMISSED . THE REVENUES APPEALS IN I.T.A. NOS . 2244 & 2245/CHNY/2016 ARE ALSO DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 22 ND DAY OF JUNE, 2018 AT CHENNAI. SD/- ( . ' ) (DUVVURU RL REDDY) $% /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) % /ACCOUNTANT MEMBER /CHENNAI, 3 /DATED: 22 ND JUNE, 2018 JPV .56787 /COPY TO: 1. :/ APPELLANT 2. 5<: /RESPONDENT 3. = ) (/CIT(A) 4. = /CIT 5. 75 /DR 6. @ /GF