ITO, Pune V. Society of Saint Ursula., Pune

ITA 2445/PUN/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5897 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 11-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Capital asset; Depreciation; Charitable institution
• Section: 6; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 2445/PN/2012 (ASSTT.YEAR : 2009-10) ITO-WARD-10(1), PUNE .. APPELLANT VS. SOCIETY OF SAINT URSULA, AKURDI POST OFFICE, AKURDI, PUNE 411044 PAN NO. AAAAS 4291C .. RESPONDENT ASSESSEE BY : SHRI C.H. NANIWADEKAR REVENUE BY : SHRI P.L. PATHADE DATE OF HEARING : 13-01-2014 DATE OF PRONOUNCEMENT : 28-01-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 10-09-2012 OF THE CIT(A)-V, PUNE RELATING TO A.Y. 2009-10. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A TRUST KNOWN AS SOCIETY OF SAINT URSULA FORMED IN 1963 AS A PUBLIC CHARITABLE TRUST AND THE OBJECTS OF THE TRUST ARE CLAIMED TO BE EDUCATIO NAL AND MEDICAL. THE TRUST IS ALSO REGISTERED AS A PUBLIC CHARITABLE TRU ST UNDER THE BOMBAY PUBLIC TRUST ACT. (BPT), 1950. THE CHARITY COMMISS IONER HAS GRANTED REGISTRATION UNDER BPT ACT VIDE REGISTRATION NO.F26 6, POONA ON 27-05- 1963. THE TRUST IS ALSO REGISTERED UNDER THE SOCIE TY REGISTRATION ACT. THE MANAGEMENT AND ADMINISTRATION OF THE TRUST ARE RUN BY SISTERS WHO ARE MEMBERS OF THE SOCIETY. THEY WORK AS TEACHERS IN THE SCHOOL AND ALSO LOOK AFTER ADMINISTRATIVE AND OTHER WORK. IT IS CL AIMED THAT NO 2 REMUNERATION OR SALARY IS PAID FOR THE SERVICES REN DERED TO THE TRUST. FROM THE ORDER OF CIT(A) IT IS SEEN THAT THE TRUST IS RUNNING THE FOLLOWING SCHOOLS : (1) SAINT URSULA SCHOOL, NIGDI (2) KAMALNAYAN BAJAJ SCHOOL, CHINCHWAD (3) STELLA MARIS SCHOOL, VADGAON SHERI (4) SAINT URSULA SCHOOL, VARAWADE, DIST : SINGHUDURG A (5) ST. THERESA SCHOOL, HIDKAL DAM 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE TRUST HAS SPENT RS.23,239/- ON MEDICAL EXPENSES FOR THE MEMBERS OF THE TRUST. ON BEING QUESTIONED BY THE ASSESSING OFFICER, IT WAS SUBMITTED THAT THE CONCERNED SISTER S HAD DEVOTED THEIR LIFE TIME IN THE SERVICES OF TRUST WITHOUT CHARGING ANY SALARY AND THEREFORE IT WAS BUT NATURAL FOR THE TRUST TO TAKE CARE OF THE M EDICAL NEEDS OF THE SISTERS. IT WAS ALSO SUBMITTED THAT THE SISTERS AR E TRUSTEES FOR THE NAME SAKE ONLY AS THEY MANAGE THE ADMINISTRATION AND OTH ER AFFAIRS OF THE TRUST AND THEY HAVE NO PERSONAL AMBITION. EVEN THEY DO N OT HAVE ANY BANK A/C. HOWEVER, THE SUBMISSIONS WERE NOT ACCEPTED BY THE ASSESSING OFFICER AND HE CAME TO THE CONCLUSION THAT THERE WA S VIOLATION OF PROVISIONS OF SEC.13(1)(C) OF THE I.T. ACT ON THIS ACCOUNT BY HOLDING AS UNDER : IN THE ABOVE CITED CASE, NUNS WERE PAID SALARIES AND THEREAFTER THEY MADE OVER TO THE SOCIETY. EXPENSES WERE NOT OUT OF DONATION GIVEN TO THE TRUST B Y THE DONORS OTHER THAN THE MONIES MADE OVER TO THE SOCIETY BY THE NUNS. IN THE PRESENT CASE, THE ASSESSEE TRUST HAS DIVERTED FUNDS OUT OF FOREIGN DONATIONS, EVEN THOUGH SUCH FUNDS ARE MEANT NEITHER FOR CORPUS N OR EARMARKED. NUNS WERE ONLY MEMBERS OF THE TRUST AND NOT THE TRUSTEE S OF THE TRUST WHEREAS IN THE PRESENT CASE, SISTER SUSANE AND SR. REKHA ARE TRUSTEES OF THE TRUST. 3 THEREFORE, THE FACTS OF THE CASE ARE TOTALLY DIFFEREN T FROM THAT OF THE ASSESSEES CASE. 2.2 THE ASSESSING OFFICER SIMILARLY NOTED THAT THE TRUST HAS CLAIMED DEPRECIATION OF RS.15,86,257/- AND RS.35,20,532/- R ESPECTIVELY ON MOVABLE AND IMMOVABLE ASSETS IN INCOME AND EXPENDIT URE ACCOUNT AS WELL AS COMPUTATION OF TOTAL INCOME. IN SUPPORT OF THIS CLAIM THE TRUST HAS PLACED RELIANCE ON DIT(EXEMPTION) VS. FRAMJEE C AWSJEE INSTITUTE REPORTED IN 109 CTR 463 AND CIT VS. SOCIETY OF SIST ERS OF ST. ANNES REPORTED IN 146 ITR 28 (KAR.). 3. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT TH E ABOVE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THE T RUST HAS CLAIMED EXPENDITURE ON ACQUISITION OF SUCH CAPITAL ASSETS A S APPLICATION OF INCOME, THEREFORE, IT IS CLAIMING DOUBLE DEDUCTION. RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ES CORTS LTD. AND OTHERS VS. UOI REPORTED IN 193 ITR 43 (SC) HE REJEC TED SUCH CLAIM OF THE ASSESSEE. HE NOTED THAT THE ASSESSEE HAS NOT A PPLIED 85% OF ITS TOTAL INCOME AND NO DECLARATION IN REQUISITE FORM NO.10 H AS BEEN FILED IN SUPPORT OF THIS AMOUNT. THEREFORE, AN AMOUNT OF RS .51,06,789/- CEASES TO REMAIN INVESTED OR DEPOSITED UNDER THE MODES AS REQUIRED U/S.11(5) OF THE I.T. ACT. HE, THEREFORE, TREATED RS.51,06,789/ - AS INCOME OF THE TRUST IN VIEW OF THE PROVISIONS OF SECTION 11(3)(B) OF TH E I.T. ACT. THE ASSESSING OFFICER THUS DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.2,85,50,685/-. 4. IN APPEAL THE LD.CIT(A) HELD THAT THERE WAS NO V IOLATION OF THE PROVISIONS OF SECTION 13(1)(C) OF THE I.T. ACT ON A CCOUNT OF MEDICAL 4 EXPENSES OF RS.23,239/- INCURRED FOR SISTERS SUSANE AND REKHA. WHILE DOING SO, HE OBSERVED THAT THE SISTERS HAD SERVED T HE TRUST WITHOUT CHARGING ANY SALARY. THE VERY FACT THAT THE CONCER NED SISTERS HAVE SERVED THE TRUST WITHOUT CHARGING ANY SALARY PROVES THAT T HEY WERE NOT HAVING ANY MONETARY INTEREST IN THE TRUST. SINCE THEY HAD DEVOTED THEIR ENTIRE LIFE IN THE SERVICES OF THE TRUST IT WAS BUT NATURAL AND EVEN THE RESPONSIBILITY OF THE TRUST TO TAKE CARE OF THEIR MEDICAL NEEDS. HE OBSERVED THAT THE AMOUNT OF RS.23,239/- IS TOO INSIGNIFICANT TO BE CO NSIDERED AS A BENEFIT TO THE TRUSTEES ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN COMING TO TH E CONCLUSION THAT THERE WAS VIOLATION OF THE PROVISIONS OF SECTION 13(1)(C) OF THE I.T. ACT. 5. SO FAR AS THE DENIAL OF DEPRECIATION OF RS.51,06 ,789/- HE DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEPRECI ATION IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF DIT (EXEMPTION VS. FRAMJEE CAWSJEE INSTITUTE REPORTED IN 109 CTR 463 (BOM). 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) ERRED IN ALLOWING DEDUCTION U/S. 11 EVEN WHEN THERE WAS VIOL ATION OF PROVISIONS OF SEC. 13(1)(C), WHICH STATES THAT IF ANY PART OF INCOME I S USED OR APPLIED FOR THE BENEFIT OF ANY PERSON SPECIFIED U/S. 13(3), PROVISION OF SE C 11 WOULD NOT APPLY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) ERRED IN ALLOWING THE CLAIM OF DEPRECIATION OF RS. 51,06,789 /- WHEN THE ASSETS ON WHICH DEPRECATION WAS CLAIMED WERE ACQUIRED OUT OF APPLIC ATION OF INCOME AND ALLOWING OF DEPRECIATION WOULD AMOUNT TO DOUBLE DED UCTION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE AMOUNT OF DEPREC IATION OF RS. 51,06,789/- IS EVEN OTHERWISE NOT ALLOWABLE TO THE ASSESSEE, AS IT HAS FAILED TO APPLY 85% OF ITS TOTAL INCOME INCLUDING THE AMOUNT OF DEPRECIATION A VAILABLE TO THAT EXTENT FOR THE 5 SPECIFIED PURPOSE AND, THEREFORE, THE AMOUNT IS REQ UIRED TO BE TREATED AS INCOME AS PER THE PROVISIONS OF SEC. 11 (3) OF THE ACT. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET FILE D A COPY OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2008-0 9 VIDE ITA NO.1540/PN/2012 ORDER DATED 31-12-2013 AND SUBMITTE D THAT BOTH THE GROUNDS HAVE BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. HE ACCORDINGLY SUBMITTED THAT THIS BEING A COVERED MAT TER THE GROUNDS RAISED BY THE REVENUE SHOULD BE DISMISSED. THE LD. DEPARTM ENTAL REPRESENTATIVE ON THE OTHER HAND WHILE SUPPORTING T HE ORDER OF THE ASSESSING OFFICER FAIRLY CONCEDED THAT THE ISSUES H AVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL. 8. WE FIND THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2008-09 (SUPRA) WHILE DECIDING THE ISSUE OF ALLOWABILITY OF DEDUCTION EVEN WHEN THERE WAS VIOLATION OF PROVISIONS OF SECTION 13(1)( C) HAS OBSERVED AS UNDER (PARA 11 OF THE ORDER) : 11. IN SO FAR AS THE PLEA OF THE ASSESSING OFFICER THAT ON ACCOUNT OF EXPENDITURE OF RS.20,000/- INCURRED ON MEDICAL EXPE NSES OF SISTER SUSANE (TRUSTEE) THERE IS A VIOLATION OF SECTION 13(1)( C) OF THE ACT IS CONCERNED, WE FIND THAT THE APPROACH OF THE ASSESSING O FFICER IS CLEARLY MISDIRECTED. AS NOTED EARLIER AND WHICH HAS ALSO BEEN APPRECIATED BY THE CIT(A), THE CONCERNED SISTER HAS BEEN SERVING THE T RUST WITHOUT CHARGING ANY SALARY AND SHE HAS DEVOTED ENTIRE LIFE IN THE TRUST AND THEREFORE IT WOULD BE NATURAL AND EVEN IMPERATIVE FOR THE ASSESSEE TRUST TO TAKE CARE OF H ER MEDICAL NEEDS. ASSESSEE POINTED OUT BEFORE THE CIT(A) THAT SISTER SUSANE WAS WHOLLY DEPENDENT ON THE TRUST WITH NO PERSONAL BANK ACCOUNT OR WEALTH AND THEREFORE IT WAS IN THE FITNESS OF THINGS THAT HER MEDICAL NEEDS WERE TO BE TAKEN CARE BY THE TRUST. THE SAID EXPENDITURE UNDER THE CIRCUMSTANCES OF THE CASE, IN OUR VIEW, DOES NOT AMOUNT TO VIOLATION OF S ECTION 13(1)(C) OF THE ACT. NOTABLY, EVEN IF WE STRICTLY APPLY SECTION 13(1 )(C) OF THE ACT, IT WOULD BE EVIDENT THAT THE AMOUNT HAS BEEN SPENT ON A PERSON WHO IS RENDERING SERVICES TO THE TRUST AND THE IMPUGNED AMOUNT OF RS.20,000/- SPEND IN THE WHOLE YEAR CANNOT BE CONSIDERED AS UNREASONABLE OR EXCESSIVE. THEREFORE, CONSIDERING THE ENTIRETY OF THE CIRCUMSTANCES, WE FIND NO ERROR ON THE PART OF THE CIT(A) IN HOLDING THAT THERE IS NO VIOLATION OF PROVISIONS OF SECTION 13(1 )(C) OF THE ACT ON ACCOUNT OF INCURRENCE OF MEDICAL EXPENSES OF RS.20,000/- FOR S ISTER SUSANE. 6 8.1 SO FAR AS THE ISSUE RELATING TO DENIAL OF DEPRE CIATION IS CONCERNED, WE FIND THE TRIBUNAL AT PARA 13 OF THE ORDER HAS OB SERVED AS UNDER : 13. THE ONLY OTHER ISSUE REMAINING BY WAY OF G ROUNDS OF APPEAL NOS. 3 AND 4 RELATE TO THE DENIAL OF ASSESSEE'S CLAIM OF D EPRECIATION OF RS.42,38,718/- ON THE ASSETS. THE CIT(A) HAS DELETE D THE DISALLOWANCE FOLLOWING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH C OURT IN THE CASE OF DIT (EXEMPTION) VS. FRAMJEE CAWSJEE INSTITUTE, 109 CTR 4 63 (BOM). NOTHING TO THE CONTRARY HAS BEEN ARGUED BY THE REVENUE BEFORE US AND THEREFORE, FOLLOWING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH C OURT, WE FIND THAT THE CIT(A) MADE NO MISTAKE IN ALLOWING THE CLAIM OF DEP RECIATION OF RS.42,38,718/-. THUS, GROUNDS OF APPEAL NOS. 3 AND 4 ARE ALSO DISMISSED. 8.2 SINCE BOTH THE ISSUES HAVE BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE BY DISMISSING THE APPEAL FILED BY T HE REVENUE AND NOTHING CONTRARY WAS BROUGHT TO OUR NOTICE, THEREFO RE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF T HE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING A SSESSMENT YEAR THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON 28-01-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE, DATED : 28 TH JANUARY 2014 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-V, PUNE 4. THE CIT-V, PUNE 5. D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE