ITO (E), New Delhi V. M/s. Maratha India, New Delhi

ITA 2257/DEL/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2905 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 05-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 11-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P DAM KANUNJNA
• Keywords: Benefit of exemption
• Section: 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: E NEW DELHI BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDI CIAL MEMBER ITA NO: 2257/DEL/2012 ASSTT. YEAR 2008-09 ITO (E) VS. MARANATHA INDIA TRUST WARD-IV, 220, VINOBA PURI, NEW DELHI. 1 ST FLOOR, LAJPAT NAGAR-II, NEW DELHI 110 024. PAN: AABTM3060F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.K. BINDAL, CA MS. SWEETY KOTHARI, CA RESPONDENT BY : SHRI P.DAM KANUNJNA, SR.DR DATE OF HEARING : 05.10.2015 DATE OF PRONOUNCEMENT : 2016 O R D E R PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE DEPART MENT AGAINST THE ORDER DATED 30.11.2011 PASSED BY THE LD. CIT (A)-XVI, NEW DELHI . THE GROUNDS OF APPEAL RAISED BY THE DEPARTMENT ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING TELEPHONE EXPENSES WHI CH WAS DISALLOWED BY THE AO AS BEING NOT RELATED TO THE ASSESSEE TRUS T AND THEREBY AN INFRINGEMENT OF SECTION 13(1) (C) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE EXEMPTION U/S 11 A ND 12 OF THE ACT, ITA NO. 2257/DEL/2012 ITO VS. M/S. MARATHA INDIA 2 'V* ' WHICH WAS DENIED BY THE AO BEING AN INFRINGEMENT OF SECTION 13(1)(C) OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THE DISALL OWANCE OF TELEPHONE EXPENSES AND DENIAL OF EXEMPTION U/S 11 AND 12 OF T HE ACT WERE MADE BY THE AO AFTER GIVING AMPLE OPPORTUNITY TO THE ASS ESSEE TRUST TO PRESENT ITS CASE. 2. THE BRIEF FACTS OF THE CASE, AS BORNE OUT FROM THE RECORDS, ARE THAT THE ASSESSEE IS A TRUST AND HAS BEEN GRANTED REGISTRATI ON U/S 12A OF THE INCOME TAX ACT, 1961 VIDE ORDER DATED 1.4.2003 W.E.F. 1.11.2002. FO R THE ASSESSMENT YEAR 2008-09, THE RETURN OF INCOME DECLARING INCOME OF RS. NIL WA S FILED ON 30.9.2008. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT ON 30.3.2010. L ATER THE CASE WAS SELECTED FOR SCRUTINY UNDER COMPULSORY CATEGORY AS PROVIDED IN A CTION PLAN FOR FINANCIAL YEAR 2009-10. DURING THE ASSESSMENT PROCEEDINGS U/S 143( 3) OF THE INCOME TAX ACT,1961 THE AO OBSERVED THAT PART OF EXPENDITURE INCURRED I N RESPECT TO TELEPHONE EXPENSES WAS IN THE NAME OF THE FOLLOWING PERSONS :- 1. MARANTHA INDIA PVT. LTD. (RS. 16,083/-) 2. DALIA CLARK RELATIVE OF TRUSTEE (RS. 2,989/-) 3. NORTHERN UNION OF SEVENTH DAY ADVENTIST NO RELATI ON INDICATED (RS. 18,139/-) 4. DOUGLAS CLARK FOUNDER & TRUSTEE (RS. 7,735/-) 5. BHAGMAL NAGRATH NO RELATION INDICATED (RS. 5,699/ -) 6. M. KUMAR AGGARWAL TRUSTEE (RS. 2,268/-) 3. THE AO WAS OF THE OPINION THAT THERE WAS A VIOLATION OF PROVISIONS OF SECTION 13(1)(C) OF THE INCOME TAX ACT, 1961 AND ACCORDINGL Y THE EXEMPTION U/S 11 & 12 OF THE ACT WAS DENIED AND THE TOTAL INCOME OF THE TRUS T WAS CALCULATED AT RS. 5,47,33,430/- IN THE STATUS OF AOP. ITA NO. 2257/DEL/2012 ITO VS. M/S. MARATHA INDIA 3 'V* ' 4. AGGRIEVED, THE ASSESSEE WENT INTO APPEAL WHER EIN THE LD. CIT (A) GAVE A CATEGORICAL FINDING THAT THE AO HAD NOT BROUGHT ANY THING ADVERSE ON RECORD REGARDING THE UTILISATION OF TELEPHONE FOR PURPOSES OTHER THAN CHARITABLE. LD. CIT (A) WAS OF THE VIEW THAT REGISTRATION OF TELEPHONE BILL S IN THE NAME OF ANOTHER PARTY COULD NOT BE A REASON FOR DISALLOWANCE OF SUCH EXPE NSES IF THE TELEPHONES WERE USED FOR THE ACTIVITIES OF THE ASSESSEE TRUST. ACCORDING LY PAYMENTS MADE FOR TELEPHONE BILLS IN THE NAMES OF OTHER PERSON WERE DELETED BY THE LD. CIT (A). THE ASSESSEE HAD ALSO CONTESTED THE CALCULATION OF SURPLUS BY THE AO AND HAD SUBMITTED THAT THE TAXABLE INCOME WAS NIL AS THERE WAS GROSS LOSS DUE TO EXCESS OF EXPENDITURE OVER INCOME AMOUNTING TO RS. 1,62,34,561/- AS THE GROSS RECEIPTS FOR THE YEAR WERE RS. 10,37,67,107/- AND THE TOTAL EXPENDITURE INCURRED W AS RS. 10,44,36,602/- WHICH WAS ENTIRELY EXPENDED TOWARDS THE ATTAINMENT OF THE CHARITABLE OBJECTS. THE ASSESSEE HAD OBJECTED BEFORE THE LD CIT (A) THAT TH E AO HAD INCLUDED THE CLOSING VALUE OF WORK AND PROGRESS IN ITS RECEIPTS AND THE OPENING VALUE IN ITS EXPENDITURE. THIS GROUND OF THE ASSESSEE WAS ALSO ALLOWED BY THE LD. CIT (A). AS FAR AS THE APPLICABILITY OF SECTION 13(1)(C) WAS CONCERNED, TH E LD. CIT(A) WAS OF THE OPINION THAT THE PAYMENTS MADE TO PERSONS COVERED U/S 13(3) CAN BE COVERED U/S 13(1)(C) ONLY WHEN THE AMOUNT PAID WAS EXCESSIVE , UNREASONA BLE AND NOT COMMENSURATE WITH THE ACTIVITIES/ SERVICES RENDERED BY THESE PER SONS. THE LD. CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE AMOUNTS PAID / REIMBUR SED TOWARDS TELEPHONE BILLS OF THE PERSONS IN QUESTION WERE QUITE REASONABLE AND HENCE SECTION 13(1)(C) DID NOT COME INTO PLAY. ACCORDINGLY THE EXEMPTION U/S 11 AND 12 OF THE ACT WAS ALLOWED TO THE ASSESSEE. ITA NO. 2257/DEL/2012 ITO VS. M/S. MARATHA INDIA 4 'V* ' 5. IN THE PRESENT APPEAL BEFORE US, THE DEPAR TMENT HAS RELIED ON THE ORDER OF THE AO WHEREAS THE LD. AR HAS SUPPORTED THE ORDER O F THE LD. CIT (A). 6. IT IS GATHERED FROM RECORDS AND SUBMISSIONS THAT THE ASSESSEE IS A TRUST FORMED TO CARRY OUT CHARITABLE AND BENEVOLENT WORK FOR THE NEEDY, DESTITUTE PEOPLE REGARDLESS OF NATIONALITY, RACE, CREED, COMMUNITY, CASTE, LANGUAGE OR SOCIAL STATUS. ITS OBJECTS INCLUDE PROMOTION, TAKING OVER, ESTABLI SHING, RUNNING, MANAGING, MAINTAINING OR DEVELOPING INSTITUTIONS FOR SPREADIN G LITERAL / VOCATIONAL/ACADEMIC/ MORAL EDUCATION THROUGH SCHOOLS, COLLEGES, UNIVERSI TIES AND INSTITUTIONS SOLELY FOR PHILANTHROPIC PURPOSES. THE TRUST HOLDS REGISTRATIO N U/S 12A OF THE INCOME TAX ACT, 1961. AS FAR AS THE FIRST GROUND OF APPEAL REGARDIN G THE ALLOWANCE OF TELEPHONE EXPENSES BY THE LD. CIT (A) IS CONCERNED, IT IS SEE N FROM THE RECORDS THAT THE AMOUNT OF RS. 7,735/- HAS BEEN PAID TOWARDS BILL FO R TELEPHONE IN THE NAME OF MR. DOUGLAS CLARK. MR. CLARK IS A FOUNDER AND MANAGING TRUSTEE OF THE TRUST AND A CERTIFICATE FROM MR. CLARK REGARDING THE USE OF TEL EPHONE FOR THE PURPOSES OF THE TRUST IS ALSO ON RECORD. LD. CIT (A) HAS GIVEN A CA TEGORICAL FINDING ON THIS ISSUE. SIMILARLY, PAYMENT OF TELEPHONE BILLS AMOUNTING TO RS. 2,989/- IN THE NAME OF MS. DALIA CLARK HAS ALSO BEEN ALLOWED BY THE LD. CIT (A ) ON A SPECIFIC FINDING THAT SHE HAS BEEN ASSISTING HER HUSBAND MR. DOUGLAS CLARK IN CHARITY MATTERS AS A VOLUNTEER AND ALSO THAT THE CERTIFICATE FROM HER STATING THAT THE PHONE WAS USED BY HER FOR THE PURPOSE OF CHARITABLE ACTIVITIES OF THE TRUST WAS O N RECORD. SIMILARLY TELEPHONE BILLS AMOUNTING TO RS. 18,139/- IN THE NAME OF NORTHERN U NION OF SEVENTH DAY ADVENTIST HAVE BEEN ALLOWED BY THE LD. CIT (A) ON THE GROUND THAT MR. DOUGLAS CLARK HAD RETAINED THIS NUMBER WHICH WAS BEING USED BY THE NO RTHERN UNION OF SEVENTH DAY ADVENTIST EARLIER. A CONFIRMATION FROM NORTHERN UNI ON OF SEVENTH DAY ADVENTIST WAS ITA NO. 2257/DEL/2012 ITO VS. M/S. MARATHA INDIA 5 'V* ' ALSO ON RECORD. AGAIN, TELEPHONE EXPENSES AMOUNTING TO R. 5699/- IN THE NAME OF SHRI BHAGMAL NAGRATH WERE ALLOWED BY THE LD. CIT (A ) ON THE GROUND THAT SHRI BHAGMAL NAGRATH WAS THE LAND LORD OF THE PREMISES H IRED BY THE ASSESEE TRUST FOR RUNNING ITS CHARITABLE ACTIVITIES. THE PHONE WAS AL SO INSTALLED IN THE SAID PREMISES AND THE ASSESSEE TRUST WAS USING THE SAID PREMISES AND THE TELEPHONE EXPENSES WERE PAID BY THE TRUST AND DULY RECORDED IN ITS BOO KS OF ACCOUNTS. AS REGARDS THE PHONE REGISTERED IN THE NAME OF SHRI M KUMAR AGGARW AL, THE LD. CIT (A) HAS GIVEN A CATEGORICAL FINDING THAT HE WAS A TRUSTEE OF THE AS SESSEE TRUST DURING THE PERIOD UNDER CONSIDERATION. HE WAS LOOKING AFTER THE FINAN CE AND ACCOUNTS OF THE TRUST AND OTHER DAY TO DAY MATTERS AND WAS NOT TAKING ANY REM UNERATION FOR HIS SERVICES AND HE HAD USED HIS CELL PHONE FOR THE PURPOSES OF THE TRUST. A CONFIRMATION FROM SHRI M. KUMAR AGGARWAL WAS ALSO ON RECORD. AS REGARDS THE A LLOWANCE OF RS. 16083/- OF TELEPHONE BILLS IN THE NAME OF M/S. MARANTHA INDIA (P) LTD., THE LD. CIT (A) HAS GIVEN A FINDING THAT THESE BILLS WERE ACTUALLY PERT AINING TO THE ASSESSEE TRUST BUT DUE TO WRONGLY MENTIONING OF THE NAME BY THE SERVICE PR OVIDER, THE AMOUNT WAS DISALLOWED. A CERTIFICATE FROM THE MANAGING DIRECTO R OF THE ASSESSEE TRUST CERTIFYING THESE FACTS WAS ALSO ON RECORD. LD. DR COULD NOT CO NTROVERT THESE FINDINGS OF THE LD. CIT (A) BY BRINGING ANY OTHER EVIDENCE ON RECORD. L D. CIT (A) HAS ALSO GIVEN A CATEGORICAL FINDING THAT THE ADDITIONAL DOCUMENTS I N THE FORM OF CONFIRMATIONS FROM THESE SIX PERSONS REGARDING THE UTILISATION OF TELE PHONES WERE DULY FORWARDED TO THE AO FOR VERIFICATION. HOWEVER, THE AO AFTER VERIFICA TION OF THE DOCUMENTS AND EVIDENCES DID NOT BRING ANYTHING ADVERSE ON RECORD. LD. CIT(A) HAS ALSO GIVEN A FINDING THAT THE AMOUNTS PAID / REIMBURSED TOWARDS THE TELEPHONE BILLS OF THESE PERSONS WERE QUITE REASONABLE AS COMPARED TO THE SE RVICES RENDERED BY THEM AND ITA NO. 2257/DEL/2012 ITO VS. M/S. MARATHA INDIA 6 'V* ' WERE NOT AT ALL EXCESSIVE OR UNREASONABLE SO AS TO ATTRACT THE PROVISIONS OF SECTION 13(1)(C). IN THESE CIRCUMSTANCES WE FIND NO REASON TO INTERFERE THE ORDERS OF THE LD. CIT (A) ON THIS ISSUE AND THE GROUND IS ACCORDINGLY REJECTED. 6. AS FAR AS THE ISSUE OF DENIAL OF EXEMPTION U/S 11 AND 12 OF THE INCOME TAX ACT, 1961 IS CONCERNED, IT IS OUR CONSIDERED OPINIO N THAT THE EXEMPTION U/S 11 AND 12 CAN BE WITHDRAWN ONLY WHEN THERE IS AN INFRINGEM ENT U/S 13(1)(C) READ WITH SECTION 13(3) OF THE INCOME TAX ACT, 1961. THE AO H AS NO WHERE DISPUTED THE UTILISATION OF FUNDS FOR CHARITABLE ACTIVITIES. UND ER THE PROVISIONS OF SECTION 13(1)(C), ONLY WHEN THE INCOME OR PROPERTY OF THE TRUST IS US ED FOR APPLYING DIRECTLY OR INDIRECTLY, FOR THE BENEFIT OF ANY PERSON, LIKE AUT HOR OF THE TRUST OR THE PERSON WHO HAD MADE SUBSTANTIAL CONTRIBUTION OR ANY TRUSTEE AN D MANAGER OR ANY RELATIVE OF SUCH AFORESAID PERSONS , THE EXEMPTION CAN BE DENIE D WHERE THE PAYMENT IS FOUND TO BE EXCESSIVE OR UNREASONABLE. AS HAS BEEN DULY F OUND BY THE LD. CIT (A), THE PAYMENT MADE TO THE SIX PERSONS TOWARDS THEIR TELEP HONE EXPENSES WERE FOR THE SERVICES RENDERED BY THESE PERSONS AND WERE COMMENS URATE WITH THE NATURE OF SERVICES RENDERED. THERE IS NO PROHIBITION IN THE I NCOME TAX ACT TO REMUNERATE THE INTERESTED PERSON AND THE ONLY CONDITION IS THAT SU CH REMUNERATION SHOULD BE COMMENSURATE WITH THE SERVICES RENDERED. HENCE IT C ANNOT BE SAID THAT PROVISIONS OF SECTION 13(1) (C) ARE ATTRACTED IN THE ASSESSEES C ASE SO AS TO DENY BENEFIT OF EXEMPTION U/S 11 AND 12 OF THE ACT. ACCORDINGLY WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A) ON THIS ISSUE ALSO AND HENCE THIS GROUND IS ALSO DISMISSED. ITA NO. 2257/DEL/2012 ITO VS. M/S. MARATHA INDIA 7 'V* ' 7. IN THE RESULT APPEAL OF THE DEPARTMENT IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01. 01.2016. SD/- SD/- (INTURI RAMA RAO) (SUD HANSHU SRIVASTAVA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 1 ST JANUARY, 2016 VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR