Parmatma Sharan Shikshan Sansthan, JODHPUR V. ITO, Ward-1, UDAIPUR

ITA 254/JODH/2018

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 2166 (ITAT-JODHPUR)
• Duration Of Justice: 5 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 31-01-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 22-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REVENUE OR; NIDHI NAIR
• Assessee Lawyers: MOHIT SONI
• Keywords: Difference of opinion; Change of opinion; Reassessment proceedings; Depreciation; Capital expenditure; Principle of natural justice; TDS; Earning of tax free income; Charitable institution; Cancellation of registration; Benefit of exemption; Maximum Marginal Rate
• Section: 147; 143(3); 142(1); 143(2); 143(1); 11; 12AA; 12A; 13; 234B; 37; 12; 40(a)(ia); 10B; 80G; 260A; 13(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR(DB). BEFORE: DR. S. SEETHALAKSHMI, JJUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. No.254/Jodh/2018 Assessment Year: 2011-12 Parmatma Sharan Shikshan Sansthan Rajputon Ka Bass, Village Unchiyarda, Jodhpur. [PAN: AAAAP 4583 C] (Appellant) Vs. The Income Tax Officer Ward-1(1), Udaipur. (Respondent) Appellant by Sh. Mohit Soni, Adv. Respondent by Ms. Nidhi Nair, Sr. DR Date of Hearing 01.02.2024 Date of Pronouncement 04.03.2024 ORDER Per: DR. S. Seethalakshmi, JM: This appeal filed by assessee is arising out of the order of the Learned Commissioner of Income Tax (Appeals-2, Jodhpur dated 22.02.2018 [here in after “ld.CIT(A)”] for assessment year 2011-12, which in turn arise from the order dated 27.03.2014 passed under section 143(3) of the Income Tax Act (here in after “Act”) by the ITO, Ward-1(1), Udaipur. I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 2 2. In this appeal, the assessee has raised following grounds: - “ 1.That on the facts and in the circumstances of the case, the assessment order passed by the Id. AO is bad in law, bad in facts and perverse. The Id. CIT (Appeals) did not justify in sustaining the assessment order. The appellant appeals for its annulment 2. Without prejudice to the aforesaid ground of appeal, on the facts and in- the circumstances of the case, the Id. AO and Id. CIT (Appeals) did not justify in rejecting the appellant's objection regarding invalid exercise of jurisdiction over the appellant's case by the ITO, Ward 1(1), Udaipur. The impugned assessment order has been passed by the Id. ITO, Ward 1(1), Udaipur without having jurisdiction over the appellant's case and, therefore, the impugned assessment order is invalid and the appellant appeals for its annulment. 3. Without prejudice to the aforesaid grounds of appeal, on the facts and in the circumstances of the case, transfer of the appellant's case from the jurisdictional assessing officer, i.e., the ACIT-Circle-1, Jodhpur to the ITO, Ward 1(1), Udaipur was not made in accordance with the relevant provisions of the IT Act, 1961 and, therefore, the impugned assessment order is invalid and the appellant appeals for its annulment. 4. Without prejudice to the aforesaid grounds of appeal, on the facts and in the circumstances of the case, the Id. CIT (Appeals) did not justify in holding that the first notice u/s 143(2) is issued well with in time. Therefore, the impugned assessment order is invalid and the appellant appeals for its annulment. 5. Without prejudice to the aforesaid grounds of appeal, on the facts and in the circumstances of the case, Id. AO's allegations that the activities of the appellant society were in the nature of business and that the appellant violated the provisions of sec. 11(2) read with secs. 11(5), 13(2) and 13(3) of the I.T. Act, 1961, were contrary to the facts of the case. On the basis of those allegations, the Id. AO deprived the appellant of the benefits of sec. 11 of the IT Act, 1961. The Id. CIT (Appeals) did not justify in sustaining the Id. AO's such allegations and conclusion. The appellant society appeals for allowing it the benefits of sec. 11 of the IT Act, 1961. 6. Without prejudice to the aforesaid grounds of appeal, on the facts and inthe circumstances of the case, the Id. AO did not justify in makingdisallowances of expenses of Rs. 1,45,93,211 and thereby in convertingthe returned loss(deficiency) of Rs. 72,46,852 into income of Rs.73,46,360 and the Id. CIT (Appeals) did not justify in sustaining the sameto the extent of Rs. 1,30,61,211. The appellant society appeals for deleting the disallowances in question. I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 3 7. Without prejudice to the aforesaid grounds of appeal, on the facts and in the circumstances of the case, the CIT (Appeals) did not justify in sustaining the Id. AO's conclusion that the appellant's activities were not charitable in nature. This sustenance was contrary to the order of the Hon'ble ITAT, Jodhpur Bench, Jodhpur, bearing ITA nos. 24 and 25/Jodh/2015 dated 19.05.2017 in appellant's own case. The appellant society appeals for holding that its activities were charitable in nature. 8. Without prejudice to the aforesaid grounds of appeal, on the facts and inthe circumstances of the case, the Id. CIT(Appeals) and the AssessingOfficer both failed in appreciating that appellant was a trust which wasregistered u/s 12AA of IT Act, 1961 by the worthy CIT, Udaipur on 13.09.2006. The appellant appeals that the assessment should have been made as per the provisions of secs. 11 & 12 read with section 13 of IT Act, 1961. 9. Without prejudice to the aforesaid grounds of appeal, on the facts and in the circumstances of the case, the Id. AO erred in making disallowance of Rs. 52,62,531/- u/s 40(a)(ia) on contractual payments and the Id CIT(Appeals) erred in sustaining the same. The disallowance so sustained is not only arbitrary but also contrary to the provisions of IT Act, 1961. The appellant appeals for deletion of the same. 10. Without prejudice to the aforesaid grounds of appeal, on the facts and in the circumstances of the case, the Id. AO erred in making disallowance of Rs. 21,04,800/- u/s 40(a)(ia) on salary payments and the id CIT(Appeals) erred in sustaining the same. The disallowance so sustained is not only arbitrary but also contrary to the provisions of IT Act, 1961. The appellant appeals for deletion of the same 11. Without prejudice to the aforesaid grounds of appeal, on the facts and in the circumstances of the case, the Id. AO erred in making disallowance of Rs. 9,100/- paid as donation and the Id. CIT(Appeals) erred in sustaining the same. The disallowance so sustained is not only arbitrary but also contrary to the provisions of IT Act, 1961. The appellant appeals for deletion of the same. 12. Without prejudice to the aforesaid grounds of appeal, on the facts and in the circumstances of the case, the Id. AO erred in making disallowance of expenses of Rs. 17,80,000/- for university affiliation fee and Rs. 23,480/- for building Insurance and the Id. CIT(Appeals) erred in sustaining the same. The disallowance so sustained is not only arbitrary but also contrary to the provisions of IT Act, 1961. The appellant appeals for deletion of the same. 13. That the appellant appeals for allowing consequential relief from the interest charged u/ss. 234A and 234B of the IT Act, 1961. I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 4 14. That the appellant craves opportunity for furnishing any other ground/s of appeal and for amending, altering, varying and / or withdrawing any of the grounds of appeal on or before the date of appeal hearing.” 3. Ground Nos. 2 to 4:- At the time hearing, the learned counsel for assessee stated at bar that the assessee do not intend to press ground nos. 2 to 4 and the same may be dismissed as not pressed. The ld. DR has no objections to that request of the assessee and therefore, based on that arguments ground Nos. 2 to 4 of the assessee’s appeal are dismissed as not pressed. 4. For the effective ground raised in this appeal it is necessary to recap the brief facts of the case. The assessee is an educational trust and is a society registered under Rajasthan Society Act, 1958. The activities of the trust are charitable in nature within the meaning of section 2(15) of the Act. The assessee trust is working in the field of education since 2004. The assessee society filed its return of income on 28.09.2012 declaring net deficit of Rs. (-) 72,46,852/- after claim of depreciation on the assets of the trust. The assessee return of income was supported with the audit report in form 10B and Form no. 3CD and audited financial accounts. The case of the assessee selected under CASS and accordingly notice u/s. 143(2) and a questionnaire was issued by letter as per provision of section 142(1) of the Act. In compliance the assessee filed the replies and ultimately the ld. AO completed the assessment u/s 143(3) of the I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 5 Act on 27.03.2014, determining assessee’s total income at Rs. 73,46,359/- by making various additions/disallowance for an amount of Rs. 1,45,93,211/-. 5. Aggrieved from the order of the assessing officer, assessee preferred an appeal before the ld. CIT(A). The appeal of the assessee was dismissed by the ld. CIT(A), 2, Jodhpur and the relevant observations of the ld. CIT(A) a propos to the various grounds of the assessee is reiterated herein below for having the brevity:- “ Ground 6 to 10 6.2. I have considered the facts of the case and submissions of the appellant and I find that the in the light of aforesaid discrepancies, the AO held that the assessee violated the provisions of sec. 11(2) r.w.s. 11(5) 13(2) r.w.s. 13(3) and activities of the society were found to be in the nature of business. Accordingly, the AO denied the exemption u/s. 11 and 12 of the Act. The appellant contended that the AO had gone beyond his power and he challenged and questioned the granting of registration u/s. 12AA. It was also claimed that the appellant trust had not violated the provisions of sec. 11(5). 11(3) and 13(2)/13(3) of the Act. It was also submitted that from nowhere it is proved that the appellant trust was engaged in business activities. 6.2.1. As regards the appellant's contention that AO had gone beyond his power by challenging and questioning the grant of registration u/s. 12AA by higher authority, it is observed that the same is devoid of any merits in the light of judicial decisions discussed below:- 6.2.2. The Hon'ble High Court of Gujarat in the case of Gujarat State Board of School Textbooks vs. ACIT [2016] 76 taxmann.com 312 (Gujarat) held that where assessee, an educational Board, was registered under section 12AA and in relevant assessment year it claimed exemption under section 11(1)(a) and Assessing Officer accepted return without scrutiny assessment and later on he reopened said assessment on ground that mere registration under section 12AA would not give automatic exemption under section 11, reassessment proceedings were valid. The head note is reproduced as under:- I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 6 "Section 11, read with sections 12AA, 147 and 148, of the Income-tax Act, 1961- Charitable or religious trust Exemption of income from property held under (Application of income) - Assessment year 2007-08-Assessee, an educational Board formed by State Government, was registered under section 12AA - In relevant assessment year 2007-08, it claimed exemption at rate of 15 per cent under section 11(1)(a) Assessing Officer accepted return under section 143(1) without scrutiny assessment Later on he reopened said assessment on ground that mere registration of a Board under section 12AA would not automatically give status of trust and, therefore, exemption which was meant for trust under section 11(1)(a) was not available to assessee and further activities of assessee were business activities and, therefore, not amenable for exemption Whether since retum of assessee was accepted under section 143(1), there was no question of change of opinion by Assessing Officer and, therefore, concept of change of opinion could not be applied Held, yes Whether while dealing with claim of exemption, Assessing Officer had to look at considerations which were stipulated under sections 11 and 12 and this aspect could be gone into only during assessment or reassessment Held, yes Whether, therefore, reassessmentproceedings were valid - Held, yes [Paras 11, 12 and 18] [In favour of revenue]” 6.2.3. The Hon'ble Supreme Court dismissed the SLP in the case of CIT vs. Sree Anjaneya Medical [2016] 74 taxmann.com 243 (SC) by upholding the High Court's decisions that while granting registration to a trust, authorities is empowered to examine only genuineness of trust and its activities and that only during assessment eligibility in terms of sections 10, 11 and 12 is to be verified as to whether or not what was professed in Deed of trust. 6.2.4. Thus, from the above decisions, it is clear that mere grant of registration u/s. 12A does not render the assessee eligible for benefit of sec. 11 and 12 without satisfying the terms and condition as laid down in relevant sections. Therefore the Assessing Officer was well within his jurisdictional domain to look at considerations stipulated u/s 11 & 12 of the Act. 6.3. As regards the appellant's contention that it had not violated the provisions of sec. 11(5), 11(3) and 13(2)/13(3) of the Act, the issues raised by the AO and explanation and my remarks thereon are mentioned /discussed in the tabular form as under:- AO’s Remarks Appellant’s explanation By remarks In this case the assessee is charing fee/cess for almost all the services provided by him like tuition fee, hostel fee, mess fee, bus fee, late, college bag income, Rs. 38,81,300/- was not assessee is charging on account of payment unexplained of scholarship but was actually related to left services. student Fact remained unexplained regarding charging of fee for all services I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 7 admission form fee etc. payment Despite claiming that it had paid scholarship of Rs. 38,81,300/- failed to furnish details viz. name of students, amount and purpose of scholarship, mode of payment etc/ No details of student to whom scholarship granted were furnished. The assessee also failed to provide ‘student wise details of scholarship payment of Rs. 38,81,300/- to its auditors. No details was submitted in respect of students who had left. The assessee failed to give explain purpose and circumstances for advancing money amount to Rs. 7,34,000/- to three persons Money advanced to these three persons were as per normal course of trust work and was not in violation of the provisions of sec. 11(5) of the Act The appellant failed explain the exact reason for advancing money Non-deposition of Rs. 2 crores in corpus fund it was proposed to transfer Rs. 2 crores in the corpus fund during FY 2010-11, but it could not be transferred eventually it was transferred in FY 2012- 13 in response to settlement process between the old management and new management in the court Fact remained unproved transfer Rs. 2 crores was transferred to corpus the FY 2010-11 Innova car was used for personal purpose EMI was paid by society and car was used for society’s work No log book or other details were filed to establish that care was exclusively used for society work There were excess payments of salary made to secretary and chairman. Payment was not excessive and were as per their qualification and devotion and caliber Fact remained unproved that other person having similar qualification received lesser salary. No justifiable explanation submitted regarding huge cash in hand of Rs. 1,00,94,680/-. There was no violation of sec. 13(2) and 13(3) in respect of huge cash in hand as the AO failed to establish It is admitted fact that huge cash of Rs. 1,00,94,689/- was held by the person specified u/s 13(3) of the I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 8 how and in what manner the promoters/founders benefited directly or indirectly by this huge cash balance ling in the society. Act. From the above discussion, it is clear that the appellant's activities are not of charitable nature as laid down u/s. 12(1) of the Act. On the contrary, there are sufficient facts and evidence that establish that it had carried out activity, which were in nature of business laden with profit motive. 6.4. The appellant by furnishing the decision of Hon'ble ITAT dated 19-05-2017 passed in its own case in ITA No. 24 & 25/Jodh/2015, submitted that since the ITAT overruled the decision of CIT denying the grant of registration u/s. 12A, and directed to renew the registration, therefore, all the benefits u/s. 11 & 12 and 13 are available with it. However, I find no force in this claim of the appellant in the light of judgment of Hon'ble HIGH COURT OF ALLAHABAD in the case of CIT vs. A.R Trust [2017] 86 taxmann.com 6 (Allahabad) ratio of which held that tribunal has no jurisdiction in law to direct for registration of trust without there being satisfaction recorded by registering authority as contemplated by section 12AA. The head note is reproduced as under:- "Section 12AA of the Income-tax Act, 1961 Charitable or religious trust- Registration of (Conditions precedent) Assessee-trust applied for registration under section 12AA which was refused by Commissioner simply for reason that assessee was not carrying out any charitable activities Tribunal, however allowed appeal of assessee and directed for registration of trust under section 12AA Whether as per section 12AA registering authority after satisfying himself about objects of trust and genuineness of its activities shall pass an order in writing for registering/refusing to register trust Held, yes Whether satisfaction of registering authority is mandatory before any trust is registered under section 12AA-Held, yes Whether Tribunal could have ordered for setting aside order of registering authority refusing registration but could not have directed for registration straightaway in as much as there was no satisfaction recorded by registering authority- Held, yes [Paras 14 to 16] [In favour of revenue]" In the light of the above discussion and judicial precedents cited supra, it is held that the AO was justified in holding that the appellant society was engaged in activity which is in the nature of business. Accordingly, it is further held that the AO righty denied the benefits of sec. 11, 12 & 13 of the appellant trust. The ground nos. 6 to 10 are dismissed. xxx xxxxx I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 9 Ground No. 11 7.3. I have considered the facts of the case and appellant's submissions and I find that the AO made the disallowance u/s, 40(a)(i) of Rs. 73,67,331/- (Rs. 52,62,531/- Rs./ 21,04,800/-) observing that the assessee was required to deduct TDS in respect of various payments as discussed above. The appellant submitted that charitable trust is exempt u/s. 11 and therefore, no disallowance u/s. 40(a)(ia) can be made. Since it is held that the appellant's activities are not of charitable in nature and the AO rightly denied the exemption u/s. 11 & 12 of the Act, therefore, there is no relevance of appellant's claim that no disallowance u/s. 40(a)(ia) can be made in its case being a charitable trust. The appellant failed to explain any justification for non deduction of TDS on various payments (payment against construction, salary, rent and advertisement). The appellant has not disputed that these payments are covered by TDS provisions. Alternatively, the appellant submitted that even if addition is found correct then it should be restricted to the payment outstanding as on 31.03.2011 in the light of decision of Hon'ble Special Bench of ITAT (Visakhapatnam) in case of Merilyn Shipping & Transports. However, I find no force in this contention of the appellant. I find that after the special bench decision in the case of Merilyn Shipping & Transports (supra), the Calcutta and Gujarat High Courts have given reasoned rulings distinguishing the decision of the Special Bench. In their decisions in the case of CIT vs. Crescent Export Syndicate (85 CCH 056 Kol HC) and CIT vs. Md. Jakir Hossain Mandal (Cal) and CIT vs. Sikandarkhan N. Tunvar (87 DTR (Guj) 137), in which it has been held that disallowance u/s 40(a)(ia) of the I. T. Act, 1961 can be made even for the amount which have been paid during the year. On the other hand, the Hon'ble Allahabad High Court in the case of Vector Shipping Services (P) Ltd without dealing with the decisions of Calcutta and Gujarat High Court has held that the disallowance of expenditure on which tax has not been deducted, the amount should be payable and not which has already been paid by the end of the year. Keeping in view the above discussion and analysis of various judicial decisions, this contention of the appellant is rejected. Considering the factual and legal position as discussed above, I hold that the AO was justified in disallowing the sum of Rs. 73,67,331/- being payments made to various persons during the year on which TDS was not deducted as per sec. 40(a)(ia) of the Act. The addition made at Rs. 73,67,331/- is sustained. The ground raised by the appellant regarding this issue is dismissed. 08. Ground no. 12 relates to the disallowance of Rs. 9100/- being donation paid. The AO noted that according to schedule 14 of the head' Administration and General Expenses' the assessee had shown to have paid Rs. 9,100/- as donation which was not an allowable expense under the provisions of section 37 as being given for non business purposes. Therefore, the AO disallowed the same. The appellant simply stated that the donation was as per trust objective and rightly claimed. I find that the I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 10 appellant failed to establish that this expense was related to its business. Hence, it is held that the AO rightly disallowed this amount Addition of Rs. 9100/- is hereby sustained. The ground of appeal is dismissed.” xxxx xxxx Ground No. 13. 9.2 The appellant submitted that University affiliation fees of Rs. 17,80,000/- was paid through cheque / DD to RTU, Kota and it is an expenditure for running the education institution and for taking the permission for providing higher technical education. The appellant further submitted that the AO had wrongly taken net working expenses of Rs. 15.32,000/- instead of Rs. 57653/- Actually Rs. 15,32,000/- was paid towards hostel fee and was of revenue in nature and it is clerical mistake by the AO. Further, the appellant contended that the AO erred in treating expenses on building insurance of Rs. 23480/- as capital expenditure. 9.3. I have considered the facts of the case and submissions of the appellant and I find that the appellant failed to controvert the observations of the AO while making these disallowances. No proper details or proof of these payments were submitted before the AO or before the undersigned. Accordingly, it is held that the AO was justified in making these disallowances. As regards the appellant's claim that the AO had wrongly taken net working expenses of Rs. 15,32,000/- instead of Rs. 57,653/- and committed clerical mistake in mentioning the figure. In the interest of natural justice, the AO is directed to verify the appellant's claim and correct the figure accordingly. However, if claim is found to be false then. the addition made on this account shall be sustained. Ground no. 13 is dismissed.” 6. As the assessee did not receive any favour from the appeal so filed before ld. CIT(A). The present appeal filed against the said order of the ld. CIT(A) by the assessee on the grounds as reiterated in para 2 above. To support the various grounds so raised by the assessee, the ld. AR appearing on behalf of the assessee has placed reliance on the written submission which is extracted herein below:- “1) That the appellant is an educational trust and the activities of the trust are charitable u/s 2(15) of the act. The appellant trust is working in the field of education since 2004. The trust is recognized by various renowned universities such as Technical Education Board, Rajasthan and Rajasthan Technical University, Kota. 2) That Ld. AO vide assessment order dated 27.03.2014 have denied the benefit of section 11 and 12 of the act holding that the assessee has violated the provisions of I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 11 Section 11(2) rw.s. 11(5) and 13(2) r.w.s. 13(3), and thereby computing the income by treating the activities of the appellant trust were in the nature of business. 3) That, subsequent to the completion of assessment proceedings, Ld. CIT, Udaipur had cancelled the registration of the appellant trust granted u/s 12AA of the act vide order u/s 12AA(3) rw.s. 2930 of the act dated 12.11.2014 on the basis of findings recorded by the assessing officer in the assessment order(PB Page No. 122-128). 4) That against the order u/s 12AA(3) rws: 293C of the act passed by Ld. CIT, Udaipur the appellant trust had preferred an appeal before Hon'ble ITAT, Jodhpur, which was decided vide order dated 19.05.2017 in ITA No.24 & 25/JODH/2015, wherein the Hon'ble FTAT. had allowed the appeal holding that the activities of the trust are being carried out for charitable purposes only and therefore directed to renew the registration u/s 12AA alongwith 80G of the income tax act, therefore all the benefits u/s 11, 12 and 13 are available with it. (PB Page No. 129-136) 5) That against the order passed by the Hon'ble ITAT, Jodhpur the department have preferred an appeal u/s 260A of the act before Hon'ble Rajasthan High Court vide DB income Tax Appeal No. 44 of 2017 on 24.10.2017 which is pending till date. Having discussed the facts of the case I would like to submit on each ground of appeal: 1. As regards to Ground of Appeal No. 1 and 5 to 8 relating to depriving the appellant trust the benefit of Section 11 and 12 and holding that appellant's activities are in nature of business: a) That during the proceedings before Ld. CIT(A), the observation of Hon'ble ITAT in assessee's own case was also put forth, in response to which, Ld. CIT(A) in its order in Para 6.4, have held that the Hon'ble tribunal has no jurisdiction in law to direct for registration of trust without there being satisfaction recorded by registering authority as contemplated by section 12AA. i. That the above inference was drawn by the CIT(A) after relying upon the decision of Hon'ble Allahabad High Court, in the matter of CIT vs. A.R. Trust [2017] 86taxmann.com 6(Allahabad). It is humbly submitted before your honours that the facts in the case of the appellant are completely different as in CIT vs. A.R. Trust(supra). In the case of CIT vs. A.R. Trust(supra) the trust had filed a fresh application of registration which was rejected by the Commissioner, and subsequently in appeal the tribunal lhad allowed the appeal and directed for registration of trust u/s 12AA of the act. The HusleAllahalsad High Court held that the tribunal could have ordered for setting aside order of registering authority refusing registration but could not have directed for registration straight away in as much as there was no satisfaction recorded by registering authority. Whereas in the case of appellant trust the Hon'ble ITAT, Jodhpur had adjudicated the issue relating to the validity of cancellation of registration in contravention to the provisions of law which is well within the jurisdiction of Hou 'bie ITAT. I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 12 ii. Further also, in the case of appellant the Ld. CIT(Exemptions) Le. the registering authority vide order dated 09.06.2020 u/s 254/80G(5)(vi) of the act have granted the registration u/s 12AA to the appellant trust by giving effect to the order passed by Hon'ble ITAT, Jodhpur (PB Page No.137-139) after recording its satisfaction and as such the Hon'ble ITAT was well within its jurisdiction in deciding as to whether or not the cancellation of registration is as per the provisions of law or not. Therefore, the tribunal may have no power to direct for grant of fresh registration in the light of CIT vs. A.R. Trust(supra), but holds a valid jurisdiction as to renew the registration holding the same has been rejected by the Commissioner arbitrarily in contravention to the provisions of law. Thus, Ld. CFT(A) erred in law by b) Further, the Ld. CIT(A) failed to consider the main premise of the observation of Hon'ble ITAT that "there is no iota of proof from the side of the department to doubt the fact that the activities of the assessee trust are not charitable in nature. There is no evidence to a whit to establish that the objects of the trust have been violated. We are convinced that the trust is being run for charitable purpose any. The trust is being run for imparting education without any profit motive. We find that the activities of the Trust are being carried out only for charitable purpose and not for the personal benefit of the founder and as such there is no violation of section 13(3) of the Act. Therefore in view of the above Ld, CIT(A) have grossly erred in going beyond the decision of Hon'ble ITAT, Jodhpur and holding that appellant was engaged in activity which is in nature of business and accordingly depriving the benefits of Section 11 and 12 of the act to the appellant trust. c) That the AO have aggravated certain factual allegations against the appellant for violation of Section 11(2) rws Sec 11(5), 13(2) and 13(3) of the income tax act. 1961 thereby holding that the activities of the appellant trust are in nature of business and thus denying the benefit u/s 11 to the entire income of the appellant: trust. It is submitted that the appellant trust is operating as per the objects of the trust and the same have not been disputed by the AO or Ld. CIT throughout the assessment and appellate proceedings. d) Further, it would lead to grave injustice as any mistake minor involving a small amount takes place by the Trust, the consequence would be denial of the benefit of exemption to the entire income otherwise admittedly used for charitable purposes. In support of my submission, reliance is placed on: 1. The High Court of Karnataka in CIT v. Fr. Mullers Charitable Institutions dealt with a similar issue. The Assessee was a Charitable Trust running a large number of Institutions. During the course of an enquiry, the Assessing Officer noticed that the assessee-trust had advanced a sum of INR 80,00,000 to 'J Ltd which was running a Kannada daily for the purpose of advertisements, printing, etc. The AO opined that advancing of such a huge amount was in violation of Section 11. Hence, the assessee was not entitled for exemption for the said amount. The Court observed that Section 13(1)(d) makes it clear that it is only the Income from such investment or deposit which has been made in violation of Section 11(5) that was liable to be taxed and that violation under Section 13(1)(d) does not tantamount to denial of entire exemption under Section 11 on the total income of the assessee trust I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 13 ii. The Bombay High Court in CIT v. AudyogikShikshan Mandal referring II to the above mentioned decision of the Karnataka High Court held that where funds of the assessee-trust were utilized for purchase of car in the name of its trustee, there was a violation of Section 13, however the denial of exemption under Section 11 should be limited only to the amount which was diverted in violation and not the entire exemption under Section 11 of the IT Act. e) Apart from the judicial precedents discussed above, it may also be of interest to refer to the language employed in Section 164 of the IT Act If exemption under Section 11 is not available due to application of Section 13, then the income of the trust is taxable under Section 164 of the IT Act. Section 164 provides that where the whole or any part of the relevant income' is not exempt under Section 11 or 12, tax shall be charged on the relevant income at the maximum marginal rate. The use of the expression 'whole or any part of the relevant income in Section 164, lends a meaning that denial of entire exemption is not contemplated in Section 13. In the light of above, the appellant humbly prays before your lordships that the income of the appellant may kindly be computed as a charitable trust ie, after giving the eligible benefits of Section 11 and 12 of the act. ii. As regards to Ground of appeal No. 9 and 10 relating to disallowance u/s 40(a)(ia) of the act. a) That the appellant is a charitable trust registered u/s 12AA of the act and thus the income of the trust is assessable as per the provisions of Section 11 and 12 of the income tax act. b) That the Ld. AO in the assessment order have disallowed the contractual payments of Rs. 52,52,531/- and payment of salary amounting to Rs. 21,04,800/-u/s 40(a)(ia) of the act on the ground of non-deduction of TDS c) It is humbly submitted that disallowance made under Section 40(a) will only go to enhance the business profit of an assessee whose income is assessable under Section 28 and not otherwise. Hence, provisions of Section 40(a) are not applicable in case of charitable trust or institution where income and expenditure is computed in terms of Section 11. In the light of above, since the provisions of section 40(a)(la) of the act is not applicable in the case of charitable trust the addition on account of disallowance u/s 40(a)(ia) of the act deserves to be deleted. III. As regards to Ground of appeal No. 11 and 12 relating to disallowance of expenses of capital nature. a) That the AO while passing the order had disallowed the certain expenditure debited in the income and expenditure account under the head Administrative and General Expenses such as University Affiliation Fee, Networking Expenses and building insurance solely on the ground that the impugned expenses are of capital expenditure I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 14 b] It is submitted that since the appellant is a charitable trust even the capital expenditure are allowed as application of income in the light of provision of Section 11 of the Income Tax Act, 1961. In the light of above, the addition on account of disallowance of capital expenditure deserves to be deleted.” 7. The ld. AR of the assessee also filed a detailed paper book in support of the grounds so taken and the index of the document submitted by the ld. AR of the assessee are as under:- I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 15 8. The ld. AR of the assessee also filed a synopsis of the arguments raised by him during the hearing and the relevant arguments made by the ld. AR of the assessee is also reproduced herein below for the sake of convenience and to decide the appeal of the assessee : Ground of appeal Short Submission CIT(A) ITAT 2&3 2,3,&4 Not Pressed 7&8 5 &6 Depriving the appellant trust from the benefit of Section 11 and 12 holding activities are in nature of business The assessment of the appellant trust was completed as AOP by holding that the activities of the trust are business in nature on the following grounds: a) No details of student to whom scholarship amounting to Rs. 38,81,300/- granted were furnished. No details was submitted in respect of students who had left. [Page 14 Para 6.3 of CIT(A) order] That the Ld. AO have disallowed the payment of Rs. 38,81,300/- to the students who have left the college shownunder the head Administrative and General Expenses, under the presumption that same is Scholarship Payments. During the course of appellate proceedings the appellant trust duly submitted that the impugned payments does not relates to the scholarship rather the same is the refund of the fees to the students who have left the college, in support of which the appellant submitted the list of left students along with the details of payment. [PB Page No. 99]. b) The assessee failed to explain purpose and circumstances for advancing money amounting to Rs. 7,34.000/- to three persons. [Page 6 Para 2(c) of AO order] [Page 14 Para 6.3 of CIT(A) order] The amount advanced was Rs. 6,85,000/- to N.1. Khaitan, Rukmani Khaitan and Robin Khaitan and the same was related to the year 2004. The appellant trust was unable to trace such old transaction due to change in management and non-cooperation of old management. Further, at most the Ld. AO could have charged the interest on the impugned amount advanced and can't take away the benefit of the exemption's u/s 11 of the act. c) Non-deposition of Rs. 2 crores in corpus fund. [Page 6 Para 3 of the AO order] [Page 15 Para 6.3 of CIT(A) order] The transfer of fund from unsecured loan to the Corpus Fund was proposed to be transferred and the same in no way be construed as I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 16 violation of Section 11(3) of the act. That on 16.11.2012, Mrs. Reena Gupta made an application before Additional District Judge-4, Udaipur agreeing to transfer Rs. 77,46,312/- (Reena Gupta) and Rs. 1,34,23,181/- (her husband, Vishal Gupta) from the unsecured loans standing in the books of trust to the corpus fund. Application before Additional District Judge-4 was brought on record at PB Page No. 77-81 d) Car used for personal purpose. [Page 7 Para 4(a)of the AO order] [Page 15 Para 6.3 of CIT(A) order] The EMI of the Car was paid by the trust and subsequently reimbursed by the Mrs. Reena Bansal through debiting the EMI from her salary. By no extent of imagination the expenditure can be considered as violation of Section 13(3) of the act when the expenditure is not even the part of application of income. Therefore, even if the car was used for her personal purposes, the EMI was paid by her and therefore, no cost bearing in the hands of appellant trust. Ledger Account of Mrs. Reena Bansal showing EMI was debited from her salary is available on record at PB Page No.73-76. e) There were excess payments of salary made to secretary and chairman. (Page 8 Para 4(b)of the AO order) [Page 15 Para 6.3 of CIT(A) order] Payments were made after considering the qualification, nature of work, devotion of time, caliber etc. That the secretary and chairmen devoted their full time and capabilities towards the betterment of the institutions and also managed other college of the trust. There work and devotion towards the trust can, by no extent of imagination the compared with the other person with similar qualification. Further also, the same cannot be the ground for treating the activities of the trust as business in nature when the activities of the trust are nowhere disputed by the ld. AO or CIT(A). F) No justifiable explanation submitted regarding huge cash in hand. [Page 8 Para 4(c)of the AO order] [Page 15 Para 6.3 of CIT(A) order] That neither the ld. AO nor the ld. CIT(A) was able to establish as to how and that in what manner the promoters/founders benefited directly or indirectly by the cash balance lying in the society. The cash in hand available with the appellant trust was ultimately utilized for the objects of the trust. Further there was no surplus or funds accumulated during the year under consideration which was required to be invested as per the provisions of Section 11(5) of the act. Reliance is placed on CIT v. Fr. Mullers Charitable Institutions ITA Nos. 588 and 59 of 2007 (Karnataka High Court) CIT(Exemptions) Pune v. AudyogikShikshan Mandal ITA No. 764 of 2016(Bombay High Court) 7& 8 That the Ld. AO in the case of appellant trust has completed the I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 17 assessment by treating the appellant trust as AOP holding that the activities of the appellant trust are in the nature of business. Subsequently, Ld. CIT(A) have sustained the addition by grossly ignoring the decision of Hon'ble ITAT in the appellant's own case wherein it has been held that there is no iota of proof to doubt the fact that the activities of the assesse trust are not charitable in nature, there is no evidence to a whit to establish that the objects of the trust have been violated and the activities of trust are being carried out only for charitable purpose and not for the personal benefit of the founder and as much there is no violation of Section 13(3) of the act." (PB Page No. 129 to 136] Ld. CIT(A) in its order in Para 6.4, have held that the Hon'ble tribunal has no jurisdiction in law to direct for registration of trust without there being satisfaction recorded by registering authority as contemplated by section 12AA. That the above inference was drawn by the CIT(A) after relying upon the decision of Hon'ble Allahabad High Court, in the matter of CIT vs. A.R. Trust [2017] 86taxmann.com 6(Allahabad). Further also, in the case of appellant the Ld. CIT (Exemptions) i.e. the registering authority vide order dated 09.06.2020 u/s 254/80G(5)(vi) of the act have granted the registration u/s 12AA to the appellant trust by giving effect to the order passed by Hon'ble ITAT, Jodhpur (PB Page No. 137-139) after recording its satisfaction. 11 9 & 10 Disallowance u/s 40(a) (ia) of the Act amounting to Rs. 52,62,531/-on contractual payments and Rs. 21,04,800/- on salary payments. Since the appellant is a charitable trust u/s 2(15) of the act and not carrying on any business, the trust is governed by the provisions Section 11 and the provisions of Section 40 applies to deductions claimed in computing the income chargeable under the head "profit and gains of business and profession". Moreover, the insertion of Explanation 3 to Section 11 by the Finance Act, 2018 making inter alia the provisions of Section 40(a)(ia) applicable in case of charitable or religious trust or institution with effect from 1st April, 2019 further shows that section 40(a)(ia) hitherto was not applicable in computing income of entities registration u/s 12A of the Act. Reliance is placed on Bombay Stock Exchange v. DyDIT, (Exemption)- 1(2), Mumbai and others 365 ITR 181 (Bom HC) Pediatric Infectious Diseases Academy v. LT.O. Ward 31(2) Kolkata ITA NO 2355/Kol/2017 12 11 Disallowance of Donation amounting to Rs. 9,100/- The appellant trust have shown donation of Rs. 9,100/ as application of income under Administration and General Expenses in the income and I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 18 expenditure account, which was disallowed by the Ld. AO on the ground of being not allowable expense under the provisions of Section 37 as given from non-business purpose. That since the appellant is a charitable trust u/s 2(15) of the act, the provisions of Section 37 are not applicable in the case of appellant as Section 37 is applicable only for the assesse is engaged in business of professions. 13 12 Disallowance of Expenses as Capital in Nature: University Affiliation Fee- 17,80,000/- and Building Insurance Rs. 23,480/- The Ld. AO have disallowed the University affiliation fee and building insurance on the ground of being capital in nature: University Affiliation Fees: The appellant trust is required to pay the affiliation fee to the universities which is recurring in nature and not one time, therefore the same is revenue expenditure and not capital expenditure. Further the affiliation fees was paid to Rajasthan Technical University, Kota and Council of Architecture through DD/Cheques and the details relating to the same were brought on record before Ld. CIT(A). [PB Page No. 98] Building Insurance: It is submitted that the capital expenditure is the expenditure which improves the life of assets and increase the efficiency of the assets, therefore building insurance paid neither improves the life of building nor improve the efficiency therefore it is revenue expenditure. [PB Page No. 95-96] Further, in the matters relating to the charitable trust u/s 2(15) so long as the expenditure had to be incurred out of the income earned by the trust, even if such expenditure is for capital purposes on the objects of the trust, the income would be exempt. Reliance is placed on Madras High Court in the case of CIT Vs. Kannika Parameswari Devasthanam & Charities, (1982) 133 ITR 779 (Mad.). 9. Per contra, the ld. DR relied upon the order of the lower authorities. The ld. DR representing the revenue vehemently argued that the ld. AO has raised each issue and has discussed in the assessment order. The assessee is supposed to deduct the TDS which is not done and as thus the disallowance made u/s. 40a(ia) is rightly sustained by the ld.CIT(A). Even the capital expenditure incurred by the assessee are claimed as revenue and therefore, the same is also I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 19 not allowable based on the reasoning discussed in the order of the lower authority. As regards the payment of scholar ship expenses the assessee unable to justify the claim by filling the relevant material and therefore, she relied upon the finding recorded in the orders of the lower authority. 10. We have heard the rival contentions, perused the material placed on record and gone through the judicial precedent cited by both the parties to drive home their respective contentions. Ground no. 1 being general in nature does not require any adjudication and ground no. 2 to 4 is not pressed and therefore, the same is dismissed. 10.1 The ground no. 5 & 6 raised by the assessee against the observation of the ld. AO and ld. CIT(A) that the activities of the society were in the nature of business and that the assessee violated the provisions of section 11(2) r.w. section 11(5), 13(2) and 13(3) of the Act were contrary to the facts of the case. The lower authority based on the fact thatthe assessee has not submitted details of student to whom scholarship amounting to Rs. 38,81,300/- granted disallowed the payment of Rs. 38,81,300/- to the students who have left the college shown under the head administrative and General Expenses under the presumption that the impugned payments does not relates to the scholarship rather the same is the refund of the fees to the students who have left the I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 20 college, in support of this contention the ld. AR of the assessee submitted the list of students along with the details of the payment [ APB page 99 ]. The ld. AO on the second issue noted that the assessee failed to explain purpose and circumstances for advancing money amounting to Rs. 7,34.000/- to three persons. [Page 6 Para 2(c) of AO order] [Page 14 Para 6.3 of CIT(A) order]. The ld. AR of the assessee submitted that the amount advanced was Rs. 6,85,000/- to N.1. Khaitan, Rukmani Khaitan and Robin Khaitan and the same was related to the year 2004. The assessee trust was unable to trace such old transaction due to change in management and non-cooperation of old management. Therefore, at most the Ld. AO could have charged the interest on the impugned amount advanced and can't take away the benefit of the exemption's u/s 11 of the act. Thus, even on this count the denial of benefit to the assessee trust is against the provision of law. The third issue raised by the ld. AO about Non-deposition of Rs. 2 crores in corpus fund. [Page 6 Para 3 of the AO order] [Page 15 Para 6.3 of CIT(A) order]. The ld. AO noted that the transfer of fund from unsecured loan to the Corpus Fund was proposed to be transferred and the same in no way be construed as violation of Section 11(3) of the Act. That on 16.11.2012, Mrs. Reena Gupta made an application before Additional District Judge-4, Udaipur agreeing to transfer Rs. 77,46,312/- (Reena Gupta) and Rs. 1,34,23,181/- (her husband, Vishal Gupta) from the unsecured loans standing in the books of trust to the corpus fund. Application I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 21 before Additional District Judge-4 was brought on record at PB Page No. 77-81. This passing of entry in the books of account of the trust does not violate the provision of law and exemption to the trust cannot be denied. The fourth issue raised by the ld. AO is that Car used for personal purpose. [Page 7 Para 4(a)of the AO order] [Page 15 Para 6.3 of CIT(A) order]. The instalment of the car was paid by the trust and subsequently reimbursed by the Mrs. Reena Bansal through debiting the Instalment / EMI from her salary. This is just an arraignment of employee and employer and by no means this arrangement be considered as violation of Section 13(3) of the act when the expenditure is not even the part of application of income and the ld. AO does not bring on record any contrary to what has been submitted by the assessee. Therefore, even if the car was used for her personal purposes, the EMI was paid by her and therefore, no cost bearing in the hands of the assessee trust. Ledger Account of Mrs. Reena Bansal showing EMI was debited from her salary is available on record at PB Page No.73-76. Based on these no controverted facts we are of the view that this cannot be a reason to deny the exemption benefit to the trust. The other ground raised by the ld. AO is that there were excess payments of salary made to secretary and chairman. (Page 8 Para 4(b)of the AO order) [Page 15 Para 6.3 of CIT(A) order]. These payments are in the nature of employer and employee relationship payments and they were made after considering the qualification, nature of work, devotion of time, calibre benefit to the assessee on their services I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 22 etc. As pointed out by the ld. AR of the assessee that the secretary and chairmen devoted their full time and capabilities towards the betterment of the institutions and also managed other college of the trust. There work and devotion towards the trust can, by no extent of imagination the compared with the other person with similar qualification. Further also, the same cannot be the ground for treating the activities of the trust as business in nature when the activities of the trust are nowhere disputed by the ld. AO or CIT(A) and therefore, this cannot be a reason to denial the exemption benefit to the assessee trust. The last reason given by the ld. AO that there exist huge cash in hand. [Page 8 Para 4(c)of the AO order] [Page 15 Para 6.3 of CIT(A) order]. On this issue we noted that neither the ld. AO nor the ld. CIT(A) was able to establish as to how and that in what manner the promoters/founders benefited directly or indirectly by the cash balance available in the books of the society. The cash in hand available with the assessee trust was ultimately utilized for the objects of the trust. These arguments placed were not controverted. Further there was no surplus or funds accumulated during the year under consideration which was required to be invested as per the provisions of Section 11(5) of the Act. Thus, we note that this also cannot be reason to deny the benefit of exemption to the assessee trust. The issue that has been raised in this case were already decided in the case of CIT v. Fr. Mullers Charitable Institutions ITA Nos. 588 and 59 of 2007 I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 23 (Karnataka High Court) CIT(Exemptions), in this case the Hon’ble High court held that: “10. With regard to the second and the third substantial questions of law are concerned, reading of section 13(1)(d) of the Act makes it clear that it is only the income from such investment or deposit which has been made in violation of section 11(5) of the Act that is liable to be taxed and that the violation under section 13(1)(d) does not tantamount to denial of exemption under section 11 on the total income of the assessee. An identical question came before the Bombay High Court in the case reported in DIT (Exemptions) v. Sheth Mafatlal Gagalbhai Foundation Trust MANU/MH/0448/2001: [2001] 249 ITR 533 (Bom.). The question before the Bombay High Court is "Whether violation of section 11(5) read with section 13(1)(d) by the assessee-trust attracts the maximum marginal rate of tax on the entire income of the trust?" The Bombay High Court held that in case of contravention of section 13(1)(d), the maximum marginal rate of tax under section 164(2), proviso is applicable only to that part of income of the trust which has forfeited exemption and not the entire income. The relevant paragraph reads as under: Section 164(2) refers to the relevant income which is derived from property held under trust wholly for charitable or religious purposes. If such income consists of severable portions, exempt as well as taxable, the portion which is exempt is to be left out and the portion which is not exempt is charged to tax as if it is the income of an association of persons. Therefore, a proviso was inserted by the Finance Act, 1984, with effect from April 1, 1985, under which in cases where the whole or any part of the relevant income is not exempt under section 11 or section 12 because of the contravention of section 13(1) (d), the tax shall be charged on such income or part thereof, as the case may be, at the maximum marginal rate. In other words, only the non-exempt income portion would fall in the net of tax as if it was the income of an association of persons... The phrase 'relevant income or part of the relevant income' in the proviso is required to be read in contradistinction to the phrase 'whole income" under section 161(1A). This is only by way of comparison. Under section 161(1A), which begins with a non obstante clause, it is provided that where any income in respect of which a person is liable as a representative assessee consists of profits of business, the tax shall be charged on the whole of the Income in respect of which such person is so liable at the maximum marginal rate. Therefore, reading the above two phrases shows that the Legislature has clearly indicated its mind in the proviso to section 164(2) when it categorically refers to forfeiture of exemption for breach of section 13(1)(d), resulting in levy of maximum marginal rate of tax only to that part of the income which has forfeited exemption. It does not refer to the entire income being subjected to the maximum marginal rate of tax. This interpretation is also supported by Circular No. 387, dated 6th July, 1984 ([1985] 152 ITR (St.) 1). Vide the said Circular, it has been laid down in paragraph 28.6 that where a trust contravenes I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 24 section 13(1)(d), the maximum marginal rate of Income Tax will apply only to that part of the income which has forfeited exemption under the said provision and not to the entire income. There is a vital difference between eligibility for exemption and withdrawal of exemption/forfeiture of exemption for contravention of the provisions of law. These two concepts are different. They have different consequences. In the circumstances, there is merit in the contention of the assessee that in the present case the maximum marginal rate of tax will apply only to the dividend income from shares held in contravention of section 13(1)(a) and not to the entire income. Therefore, income other than dividend Income shall be taxed at normal rate of taxation under the Act. A similar view has been taken by the Delhi High Court in a judgment reported in DIT (Exemption) v. Agrim Outran Foundation MANU/DE/1934/2001: [2002] 253 ITR 593 (Delhi). Reading of the proviso to section 142 is very clear that the Legislature has clearly contemplated that in a case, where the whole or part of the relevant income is not exempted under section 11 by virtue of violation of section 13(1)(d) of the Act, tax shall be levied on the relevant income or a part of the relevant income at the maximum marginal rate. The said analogy is applicable to the facts of the present case.” Respectfully following the ratio decided by the Karnataka High Court and Bombay High Court in the cases as referred above we consider the submission of the assessee contending that where the whole or part of the relevant income is not exempted under section 11 by virtue of section 13(1)(d) tax shall be levied on the relevant income and not the entire income of the assessee trust be taxed. In terms of this observation the ground no. 5 & 6 is allowed. 10.2 Ground no. 7 & 8 contended by the assessee as the Ld. AO in the case of assessee trust has completed the assessment by treating the assessee as AOP. The said ground has been dealt extensively by us in ground no. 5 & 6 and we hold that holding that the “where the whole or part of the relevant income is not I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 25 exempted under section 11 by virtue of section 13(1)(d) tax shall be levied on the relevant income and not the entire income of the assessee trust be taxed.”. Not only that the co-ordinate bench in the assessee’s own case held that there is no iota of proof to doubt the fact that the activities of the assessee trust are not charitable in nature, there is no evidence to a whit to establish that the objects of the trust have been violated and the activities of trust are being carried out only for charitable purpose and not for the personal benefit of the founder and as much there is no violation of Section 13(3) of the act." (PB Page No. 129 to 136]. Further also, in the case of assessee the Ld. CIT (Exemptions) i.e. the registering authority vide order dated 09.06.2020 u/s 254/80G(5)(vi) of the act have granted the registration u/s 12AA to the assessee trust by giving effect to the order passed by Hon'ble ITAT, Jodhpur (PB Page No. 137-139) after recording its satisfaction.Since these facts has not been controverted before us the ground no 7 & 8 raised by the assessee is allowed. 10.3 Ground no. 9 & 10 is in relation to the Disallowance u/s 40(a) (ia) of the Act amounting to Rs. 52,62,531/-on contractual payments and Rs. 21,04,800/- on salary payments. Since the assessee is a charitable trust u/s 2(15) of the act and not carrying on any business, the trust is governed by the provisions Section 11 and the provisions of Section 40 applies to deductions claimed in computing the income chargeable under the head "profit and gains of business and I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 26 profession". Moreover, the insertion of Explanation 3 to Section 11 by the Finance Act, 2018 making inter alia the provisions of Section 40(a)(ia) applicable in case of charitable or religious trust or institution with effect from 1st April, 2019 further shows that section 40(a)(ia) hitherto was not applicable in computing income of entities registration u/s 12A of the Act. The similar issue has been decided in the case of Bombay Stock Exchange v. Dy DIT, (Exemption)-1(2), Mumbai and others 365 ITR 181 (Bom HC) Pediatric Infectious Diseases Academy v. LT.O. Ward 31(2) Kolkata ITA NO 2355/Kol/2017. In the light of these facts and circumstances of the case we hold that the disallowance made by the ld. AO u/s. 40(a)(ia) and confirmed by the ld. CIT(A) is not sustainable and we direct to delete the same. Based on these observation ground no. 9 & 10 raised by the assessee are allowed. 10.4 Ground no. 11 and 12 related to disallowance of expenses of capital nature. The ld. AO disallowed certain expenditure considering it a in the nature of capital expenditure. Since we have in earlier ground that the assessee is not doing any business and after the co-ordinate bench decision in earlier round of litigation the assessee is trust and therefore, the provision of section 37 does not apply to the trust. It is also a matter of fact that in case of charitable trust so long as the expenditure had to be incurred out of the income earned by the trust, even if such expenditure is for capital purposes on the objects of the trust, the income I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 27 would be exempt. The issue has already been decided by the Hon’ble Madras High Court in the case of CIT Vs. Kannika Parameswari Devasthanam & Charities, (1982) 133 ITR 779 (Mad.), in this case the high court observed that provision of section requires consideration of the objects of the trust and also the income derived from the property held in trust. The income from the trust properties has to be applied on the objects of the trust. As far as the objects of the trust are concerned, the application of the amount can be for revenue or capital purpose. Considering that aspect of the matter the ground no 11 & 12 raised by the assessee is allowed. 10.5 Ground no. 13 being consequential in nature and ground no.14 being general in nature does not require our adjudication. In the result, the appeal of the assessee is partly allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- (Rathod Kamlesh Jayantbhai) (DR. S. Seethalakshmi) Accountant Member Judicial Member Dated 04/03/2024 Copy of the order forwarded to: (1)The Appellant I.T.A. No. 254/Jodh/2018 Parmatma Sharan ShikshanSansthan 28 (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order