The ITO, (Exemptions), Ward-1, Ahmedabad V. M/s. Gujarat Institute of Chemical Technology, Ahmedabad

ITA 2736/AHD/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8293 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 06-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Gift; Charitable institution
• Section: 143(3); 12AA; 12; 11

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 2736/AHD/2017 ( ASSESSMENT YEAR : 2014-15) INCOME TAX OFFICER (EXEMPTIONS) WARD 1, AHMEDABAD / VS. GUJARAT INSTITUTE OF CHEMICAL TECHNOLOGY SURAKSHA SANKOO, THALTEJ- GANDHINAGAR HIGHWAY, THALTEJ, AHMEDABAD 380054 ./ ./ PAN/GIR NO. : AAATG2481M ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI ALOK SINGH, CIT.D.R. / RESPONDENT BY : SHRI S. N. SOPARKAR, A.R. DATE OF HEARING 29/08/2019 !'# / DATE OF PRONOUNCEMENT 04/10/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS)-7, AHMEDABAD (CIT(A) IN SHORT), DATED 01 .09.2017 ARISING IN THE ASSESSMENT ORDER DATED 20.12.2016 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2014-15. ITA NO. 2736/AHD/17 [ITO(E) VS. GUJARAT INSITUTE OF CHEMICAL TECHNOLOGY] A.Y. 2014-15 - 2 - 2. THE SUBSTANTIVE GROUND OF APPEAL RAISED BY THE R EVENUE READS AS UNDER:- 1) THE LD. CIT(A) HAS ERRED IN THE LAW AND ON FACT S IN DELETING THE ADDITION OF RS.8,95,00,000/- MADE ON ACCOUNT OF DISALLOWANCE OF DONATION GIVEN BY THE ASSESSEE AND WITHOUT APPRECIATING THAT UNDUE BENEFI T TO THE MANUFACTURER OF PRODUCT OVER A PERIOD OF TIME AND ALSO ALL THE PART IES INVOLVED IN RESEARCH WILL ENJOY COMMERCIAL BENEFITS IN FUTURE. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED AR FOR THE ASSESSEE IN THE REVENUES APPEAL REFERRED TO THE DE CISION OF THE CO- ORDINATE BENCH OF TRIBUNAL IN AY 2013-14 WHERE IDEN TICAL ISSUE HAS BEEN ADJUDICATED IN FAVOUR OF THE ASSESSEE. 4. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE AO. 5. THE SHORT QUESTION IN CONTROVERSY IS WHETHER THE TRUST IS ENTITLED TO TREAT DONATION GIVEN BY IT TO ANOTHER TRUST AS A PPLICATION OF INCOME IN THE LIGHT OF THE OBSERVATION OF THE AO THAT SUCH DONATION TO THE ANOTHER TRUST WOULD RESULT IN SUBSTANTIAL COMMERCIA L BENEFIT IN FUTURE TO THE DONEE TRUST. WE FIND THAT THE IDENTICAL ISSU E HAS CROPPED UP IN ASSESSEES OWN CASE IN ITA NO. 219/AHD/2018 CONCERN ING AY 2013-14 ORDER DATED 10.07.2019. THE RELEVANT OPERATIVE PAR A OF THE ORDER OF THE CO-ORDINATE BENCH CONCERNING AY 2013-14 IS REPR ODUCED HEREUNDER: 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS MADE THE DONATION TO THE INSTITUTION REGISTERED UNDER SECTION 12AA OF THE ACT. THEREFORE IN OUR CONSIDERED VIEW THE ASSESSEE CANNOT BE DENIED THE T REATMENT OF SUCH DONATION AS APPLICATION OF INCOME MERELY ON THE GRO UND THAT THE OUTCOME OF THE RESEARCH WILL RESULT IN COMMERCIAL B ENEFITS IN FUTURE. THE RELEVANT POINT THAT IS TO BE SEEN IN THE GIVEN CASE WHETHER THE DONATION HAS BEEN MADE BY THE ASSESSEE TO ANOTHER I NSTITUTION HAVING VALID REGISTRATION UNDER SECTION 12AA OF THE ACT. T HIS FACT HAS NOT BEEN DISPUTED BY THE AO. ITA NO. 2736/AHD/17 [ITO(E) VS. GUJARAT INSITUTE OF CHEMICAL TECHNOLOGY] A.Y. 2014-15 - 3 - IN THIS REGARD WE FIND SUPPORT AND GUIDANCE FROM TH E JUDGEMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. S ARLADEVI SARABHAI TRUST REPORTED IN 172 ITR 698 WHEREIN IT W AS HELD AS UNDER: WHEN A DONOR-TRUST WHICH IS ITSELF A CHARITABLE AN D RELIGIOUS TRUST DONATES ITS INCOME TO ANOTHER TRUST, PROVISIO NS OF SECTION. 11(1 )(A) CAN BE SAID TO HAVE BEEN MET OUT BY SUCH DONOR-TRUST AND THE DONOR-TRUST CAN BE SAID TO HAVE APPLIED ITS INCOME FOR RELIGIOUS AND CHARITABLE PURPOSES, NOTWITHSTANDING THE FACT THAT DONATION IS SUBJECTED TO ANY CONDITIONS THAT D ONEE-TRUST WILL TREAT THE DONATION AS TO ITS CORPUS AND CAN ON LY UTILISE THE ACCRUED INCOME FROM THE DONATED CORPUS FOR RELIGIOU S AND CHARITABLE PURPOSES, AND THAT THE QUESTION WHETHER GIFTED INCOME IS TO BE UTILISED BY DONEE-TRUST FULLY FOR I TS RELIGIOUS AND CHARITABLE PURPOSES OR WHETHER DONEE-TRUST HAS TO KEEP INTACT THE CORPUS OF THE DONATION AND HAS TO UTILIS E ONLY THE INCOME THEREFROM FOR ITS RELIGIOUS AND CHARITABLE P URPOSES WOULD NOT MAKE THE SLIGHTEST DIFFERENCE, SO FAR AS ENTITLEMENT OF THE DONOR-TRUST FOR EXEMPTION UNDER SECTION 11(1 ) GOES. 6.1 WE ALSO FIND SUPPORT AND GUIDANCE FROM THE JUDG EMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TR USTEES OF JADI TRUST REPORTED IN 133 ITR 494 WHEREIN IT WAS HELD A S UNDER: IT HAD NOT BEEN DISPUTED THROUGHOUT THE PROCEEDING S THAT THE DONEE TRUST WAS A TRUST FOR CHARITABLE PURPOSES. TH E RECITALS OF THE TRUST DEED OF ASSESSEE-TRUST MADE IT OBLIGATORY ON THE TRUSTEES TO HAND OVER THE NET INCOME OF THE TRUST F UND TO THE TRUSTEES OF THE DONEE TRUST. THERE WAS A FURTHER DI RECTION IN THE TRUST DEED THAT THE TRUSTEES OF THE DONEE TRUST WOU LD UTILIZE THE NET INCOME OF THE TRUST SO GIFTED OR DONATED TO THE TRUSTEES FOR ALL OR ANY ONE OR MORE OF THE CHARITABLE PURPOSES M ENTIONED IN THE DEED OF THE DONEE TRUST. THERE IS NOTHING IN LA W TO PREVENT A SETTLOR FROM CREATING A TRUST WHOLLY FOR CHARITAB LE OR RELIGIOUS PURPOSES AND DIRECTING THAT THE INCOME OF THE PROPERTY SETTLED UPON THE TRUST SHOULD BE HANDED OV ER TO ANOTHER TRUST OR INSTITUTION WHOSE INCOME IS UTILIS ED WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES. THERE IS A INTRIN SIC EVIDENCE IN THE ACT ITSELF WHICH INDICATES THE PERMISSIBILIT Y OF THE TRUSTEES OF THE TRUST FOR A CHARITABLE OR RELIGIOUS PURPOSE PASSING ON THE INCOME OF THE TRUST TO ANOTHER TRUST WHICH IS CONDUCTING A CHARITABLE OR RELIGIOUS ACTIVITY. THER E IS A CLEAR INDICATION IN SECTION 12 THAT THE TRUST TO WHICH SE CTION11 APPLIES CAN MAKE A VOLUNTARY CONTRIBUTION TO ANOTHE R TRUST TO WHICH ALSO SECTION 11 IS MADE APPLICABLE SUBJECT, O F COURSE, TO THE SATISFACTION OF THE CONDITIONS IN SECTION 11. I T DOES NOT, THEREFORE, APPEAR THAT IT WAS CONTEMPLATED THAT THE APPLICABILITY OF SECTION 11 SHOULD BE RESTRICTED ON LY TO A TRUST WHICH ITSELF CARRIES ON A CHARITABLE OR RELIGIOUS A CTIVITY IN ITA NO. 2736/AHD/17 [ITO(E) VS. GUJARAT INSITUTE OF CHEMICAL TECHNOLOGY] A.Y. 2014-15 - 4 - RESPECT OF THE INCOME DERIVED FROM THE PROPERTY HEL D UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES. THE PROVISIONS OF SECTION 11 CAN BE EQUALLY AVAILED OF BY A TRUST OR THE TRUSTEES WHO PASS ON THE INCOME OF THE TRUST TO ANOTHER TRUST OR INSTITUTION FOR CHARITABLE OR RELIGIOUS PU RPOSES. IT APPEARS THAT THE QUESTION WHETHER THE TRUST, WHICH GIVES THE VOLUNTARY DONATION TO ANOTHER TRUST FOR CHARITABLE PURPOSES, CAN AVAIL OF THE PROVISIONS OF SECTION 11, DOES NOT SEEM TO DEPEND ON WHETHER UNDER THE PROVISIONS CONTEMPLATED BY SECTION 12(2) THE DONEE-TRUST APPLIES THAT INCOME F OR CHARITABLE OR RELIGIOUS PURPOSES. THIS DOES NOT, HO WEVER, MEAN THAT EVEN IF IN A GIVEN CASE IT IS FOUND THAT THROU GH THE MEDIUM OF DONATION TO THE CHARITABLE INSTITUTION FUNDS ARE BEING DIVERTED TO NON-CHARITABLE PURPOSES, THE DONEE-TRUS T WILL STILL BE ENTITLED TO CLAIM THE BENEFIT OF SECTION 11 OF T HE ACT. AS REGARDS THE APPLICABILITY OF SECTION 161(1)(C), IT COULD NOT BE DISPUTED THAT THE ASSESSEE-TRUST WAS RECEIVING INCO ME FOR THE BENEFIT OF THE DONEE-TRUST AND CONSEQUENTLY, THE PR OVISIONS OF SECTION 161(1) WOULD BE ATTRACTED FOR THE PURPOSES OF DETERMINING WHETHER THE ASSESSEE WAS LIABLE TO BE A SSESSED TO ANY TAX ON THE INCOME BY WAY OF DONATION TO THE DON EE TRUST. 6.2 WE ALSO FIND THAT THE CBDT IN ITS CIRCULAR BEAR ING NO. 1132 DATED 5 JANUARY 1978 HAS ALSO CLARIFIED AS UNDER: A QUESTION HAS BEEN RAISED REGARDING THE AVAILABIL ITY OF EXEMPTION IN THE HANDS OF CHARITABLE TRUSTS OF AMOU NTS PAID AS DONATION TO OTHER CHARITABLE TRUSTS. THE ISSUE HAS BEEN CONSIDERED BY THE BOARD AND IT H AS BEEN DECIDED THAT AS THE LAW STANDS AT PRESENT, THE PAYM ENT OF A SUM BY ONE CHARITABLE TRUST TO ANOTHER FOR UTILISATION BY THE DONEE TRUST TOWARDS ITS CHARITABLE OBJECTS IS PROPER APPL ICATION OF INCOME FOR CHARITABLE PURPOSE IN THE HANDS OF THE D ONEE TRUST; AND THE DONOR TRUST WILL NOT LOSE EXEMPTION UNDER S ECTION 11 OF THE INCOME-TAX ACT, 1961, MERELY BECAUSE THE DONEE TRUST DID NOT SPEND THE DONATION DURING THE YEAR OF RECEIPT I TSELF. THE ABOVE POSITION MAY KINDLY BE BROUGHT TO THE NOT ICE OF ALL OFFICERS WORKING IN YOUR CHARGE. 6.3 IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ELIGIBLE TO CLAIM THE DON ATION, AS APPLICATION OF INCOME, GIVEN TO ILS BEING AN INSTIT UTION REGISTERED UNDER SECTION 12AA OF THE ACT. THE LD. DR HAS ALSO NOT BROUGHT ANYTHING ON RECORD CONTRARY TO THE FINDING OF THE L D.CIT (A). HENCE WE DO NOT FIND ANY REASON TO INTEREFERE WITH THE FI NDING OF THE LD.CIT (A). THUS THE GROUND OF APPEAL OF THE REVENUE IS DI SMISSED. ITA NO. 2736/AHD/17 [ITO(E) VS. GUJARAT INSITUTE OF CHEMICAL TECHNOLOGY] A.Y. 2014-15 - 5 - NO VARIATION IN FACTS PER SE WAS BROUGHT TO OUR NOTICE. IN PARITY WITH THE VIEW TAKEN IN THE PRECEDING AY 2013-14, WE DO N OT SEE ANY ERROR IN THE CONCLUSION DRAWN BY THE CIT(A). 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 04/10/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 04/10/2019