Lions Club of Industrial Area Community Trust, Ankleshwar V. The Income Tax Officer, Ward-1, Bharuch

ITA 2739/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9604 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-02-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 29-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B PANDA
• Assessee Lawyers: S N DIVETIA
• Keywords: Charitable institution
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: S H RI N. K. BILLAIYA , ACCOUNTANT MEMBER AND SHR I KUL BHARAT , JUDICIAL MEMBER LIONS CLUB OF INDUSTRIAL AREA COMMUNITY TRUST, PLOT NO. 5603/2, GIDC ESTATE, ANKLESHWAR - 393002 PAN: AAATL0833C (APPELLANT) VS THE INCOME TAX OFFICER, WARD - 1, BHARUCH (RESPONDENT) REVENUE BY : S H RI B. PANDA , S R. D . R. ASSESSEE BY: S H RI S.N. DIVETIA , A.R. DATE OF HEARING : 08 - 02 - 2 016 DATE OF PRONOUNCEMENT : 11 - 02 - 2 016 / ORDER P ER : N.K. BILLAIYA, ACCO UNTANT MEMBER : - THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT (A) - 5 , BARODA DATED 30 - 07 - 2015 PERTAINING TO ASSESSMENT YEAR 2011 - 12. I T A NO . 2739 / A HD/20 15 A S SESSMENT YEAR 2011 - 12 I.T.A NO. 2739 /AHD/20 15 A.Y. 2011 - 12 PAGE NO LIONS CLUB OF INDUSTRIAL AREA COMMUNITY TRUST VS. ITO 2 2. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDITION OF RS. 23,21,075/ - WHICH COMPRI SES OF RS. 16,69,875/ - BEING GRANT RECEIVED TREATED AS REVENUE RECEIPT AND RS. 6 ,5 1,200/ - BEING ADDITION ON ACCOUNT OF ADVANCE FEE AND DEPOSIT. 3. THE ASSESSEE IS A PUBLIC CHARITABLE TRUST AND IS REGISTERED U/S. 12A OF THE ACT. THE TRUST HAS ALSO BEEN GRANTED CERTIFICATE U/S 18G OF THE ACT. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN GRANT OF RS. 16,69,875/ - RECEIVED FROM LIONS CLUB INTERNATIONAL FOUNDATION (LCIF). THE ASSESSEE W AS ASKED TO EXPLAIN WHY THIS GRANT OF RS. 16,69,875/ - SHOULD NOT BE TREATED AS TAXABLE RECEIPT. IT WAS EXPLAINED THAT THE GRANT IS GIVEN FOR EXPANSI ON OF LIONS SCHOOL PROJECT. HOWEVER, ON FURTHER VERIFICATION, THE ASSESSING OFFICER FOUND THAT IN THE LETT ER ISSUED BY LCIF NOWHERE IT WAS MENTIONED THAT THE AMOUNT OF GRANT GIVEN WAS FOR THE CORPUS OF THE ASSESSEE TRUST. ONCE AGAIN, THE ASSSESSEE WAS ASKED TO EXP LAIN WHY AMOUNT OF RS. 16,69,875 / - SHOULD NOT BE TREATED AS TAXABLE. ON RECEIVING NO PLAUSIBLE REPL Y , THE ASSESSING OFFICER MADE THE ADDITION OF RS. 16,69,875/ - . 5. ON FURTHER PROBE, THE ASSESSING OFFICER FOUND A SUM OF RS. 6 , 5 1 ,200/ - SHOWN AS ADVANCE UNDER THE HEAD LIABILITIES. THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE SAME SHOULD NOT BE TREATED I.T.A NO. 2739 /AHD/20 15 A.Y. 2011 - 12 PAGE NO LIONS CLUB OF INDUSTRIAL AREA COMMUNITY TRUST VS. ITO 3 AS I NCOME. IT WAS EXPLAINED THAT THE REGISTRATION OF THE STUDENT WAS DONE IN THE MONTH OF MARCH, HENCE THE SCHOOL FEE RECEIVED WERE SHOWN AS THE CURRENT LIABILITIES, THOUGH THE RECEIPTS PERTAINED TO SUBSEQUENT ACADEMIC YEAR. THE ASSESSING OFFICER DID NOT ACC EPT THIS CONTENTION OF THE ASSESSEE. THE ASSESSING OFFICER OBSERVED THAT SINCE THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING, RS. 6 , 51,200/ - HAS TO BE TREATED AS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. ACCORDINGLY, ADDITION WAS MAD E. 6 . ASSESSEE CARRIED THE MATTER BEFORE CIT(A) BUT WITHOUT ANY SUCCESS. BEFORE US, THE COUNSEL TOOK US TO THE VARIOUS DOCUMENTARY EVIDENCES RELATING TO THE AMOUNT OF RS. 16,69,875/ - . IT IS THE SAY OF THE COUNSEL THAT LCIF HAS GIVEN THE GRANT FOR A VERY S PECIFIC PURPOSE WHICH WAS EXPANS ION OF LIONS SCHOOL AND THE GRANT HAS BEEN FULLY UTILIZED FOR THE PURPOSE FOR WHICH IT WAS RECEIVED. THE COUN SEL ALSO POINTED OUT TO THE DETAILS EXHIBITED AT PAGE 53 OF THE PAPER BOOK EXPLAINING HOW THE GRANT HAS BEEN FULLY UTILIZED FOR THE EXPANS ION OF SCHOOL BUILDING. TO SUBSTANTIATE THE CLAIM , THE COUNSEL R ELIED UPON THE DECISION OF THE TRIBUNAL AHMEDABAD B ENCH IN THE CASE OF LEELA CHAMPAK CHARITABLE TRUST IN ITA 1269/AHD /2013. PER CONTRA THE DR STRONGLY SUPPORTED THE FINDINGS OF REVENUE AUTHORITIES AND R ELIED UPON THE DECISION OF THE HIGH C OURT OF DELHI I N THE CASE OF ANGREGI HATAO NIDH I IT APPEAL NO. 1075 OF 2006. 7 . HAVING HEARD THE RIVAL SUBMISSIONS, WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND WITH THE ASSISTANCE OF THE I.T.A NO. 2739 /AHD/20 15 A.Y. 2011 - 12 PAGE NO LIONS CLUB OF INDUSTRIAL AREA COMMUNITY TRUST VS. ITO 4 LEARNED COUNSEL, WE HAVE ALSO GONE THROUGH THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD AND FILED IN THE FORM OF A PAPER BOOK. UNDISPUTEDLY, GRANT OF RS. 16,69,875/ - HAS BEEN ADDED IN THE BALANCE SHEET UNDER THE HEAD T RUST FUND OR CORPUS AS PER PAGE 23 OF THE PAPER BOOK. ON THE VERY SAME PAGE, WE ALSO FIND THAT THERE IS AN ADDITION OF RS. 41,71,499/ - ON ACCOUNT OF IMMOVABLE PROPERTIES. IT IS ALSO A N UNDISPUTED FACT THAT THIS ADDITION OF RS. 41,71,499/ - INCLUDES THE GRANT O F RS. 16,69 , 875/ - . A PERUSAL OF THE STANDARD GRANT REPORT O F LCIF PLACED AT PAGE 36 ONWARDS OF THE PAPER BOOK SHOW THAT THE LCIF TRUSTEES HAVE APPROVED THE GRANT FOR THE EXPANS ION OF LIONS SCHOOL ACT, ANKLESHWAR. THERE IS NO DISPUTE IN FAR AS THE PURPOSE OF GRANT IS CONCERNED, THE PERUSAL OF THE RELEVANT DOCUMENTARY EVIDENCES CLEARLY SHOW THAT THE GRANT WAS FOR THE PURPOSE OF THE EXPANSION OF THE SCHOOL BUILDING AND THE ASSESSING OFFICER HAS NOT DISPUTED THE UTILIZATION OF THE SAME BY THE ASSESSEE TRUST. ON SIMILAR SET OF FACTS , THE CO - ORDINATE BENCH IN THE CASE OF LEELA CHAMPAK CHARITABLE TRUST (SUPRA) HAS FOLLOWED THE DECISION OF THE HON BLE HIGH C OURT OF KARNAT A KA IN THE CASE OF RAMAKRISHNA SEVA ASHRAM. RESPECTFULLY FOL LOWING THE DECISION OF THE CO - ORDINATE B ENCH (SUPRA), WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 16,69,875/ - . 8 . BEFO RE PARTING THE DECISION RELIED UPON BY THE LEARNED DR DOES NOT SUPPORT THE FACTS OF THE PRESENT CASE. COMING TO THE SECOND ADDITION OF RS. 6,51,200/ - , WE FIND THAT THE SAME IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE I.T.A NO. 2739 /AHD/20 15 A.Y. 2011 - 12 PAGE NO LIONS CLUB OF INDUSTRIAL AREA COMMUNITY TRUST VS. ITO 5 HON BLE HIGH C OURT OF DELHI IN THE CASE OF DINESH KUMAR GOYAL 331 ITR 10. THE RELEVANT PORTI ON OF THE ORDER READS AS UNDER: LT IS IMPORTANT THAT RECEIPT OF A PARTICULAR AMOUNT IN THE RELEVANT YEAR SHOULD BE AN 'INCOME' UNDER THE PROVISION OF S. 5. WHAT IS THE RELEVANT YARDSTICK IS THE TIME OF ACC RUAL OR ARISAL FOR THE PURPOSE O F ITS TAXATION, VIZ., IN ORDER TO BE CHARGEABLE, THE INCOME SHOULD ACCRUE OR ARI SE TO THE ASSESSEE DURING THE PREVIOUS YEAR. IF INCOME HAS ACCRUED OR ARISEN, EVEN IF ACTUAL RECEIPT OF THE AMOUNT IS NOT THERE, IT WOULD BE CHARGEABLE TO TAX IN THE SAID YEAR. THOUGH THE AMOUNT MAY BE RECEIVED LAT ER IN THE SUCCEEDING YEAR, THE I NCOME WOUL D BE SAID TO ACCRUE OR ARISE IF THERE IS A DEBT OWED TO THE ASSESSEE BY SOMEBODY AT THAT MOMENT. FROM THIS, IT FOLLOWS THAT THERE MUST BE THE 'RIGHT TO RECEIVE THE INCOME ON A PARTICULAR DATE, SO AS TO BRING ABOUT A CREDITOR AND DEBTOR RELATIONSHIP ON THE RELEVANT DATE'. E.D. SASSOON & CO. LTD. & ORS. VS. CIT (1954) 26 ITR 27 (SC) FOLLOWED. AT THE TIME OF ADMISSION, THE STUDENTS ARE REQUIRED TO DEPOSIT THE WHOLE FEE OF THE ENTIRE COURSE, BUT THAT WOULD ONLY REMAIN A 'DEPOSIT' OR 'ADVANCE' AND IT CANNOT BE SAID THAT THIS FEE HAD BECOME 'DUE' AT THE TIME OF DEPOSIT. FEE IS CHARGED IN ADVANCE FOR THE ENTIRE COURSE, PRESUMABLY BECAUSE OF THE REASON THAT THERE SHOULD NOT BE ANY DEFAULT IN MAKING THE SAID FEE BY THE STUDENTS DURING THE PERIOD OF COURSE. INTERESTI NGLY, THE AO IN HIS ASSESSMENT ORDER HAS HIMSELF STATED THAT 'STUDENTS WERE REQUIRED TO DEPOSIT THE FEE FOR THE WHOLE MODULE OF COURSE AT THE TIME OF REGISTRATION ITSELF'. THE AO HAS USED THE EXPRESSION 'DEPOSIT'. IN THE VERY NEXT BREADTH, HE DRAWS THE CON CLUSION THAT THIS WOULD MEAN THAT THE FEE HAD BECOME 'DUE'. THUS, THE AO KNEW THE SIGNIFICANCE OF THE EXPRESSION 'DEPOSIT' VIS - A - VIS 'DUE', THOUGH HE COMMITTED THE MISTAKE IN TREATING THE SAID DEPOSIT AS THE FEE BECOMING DUE. IT BECOMES APPARENT THAT THE F EE WAS NOT DUE AT THE TIME OF DEPOSIT. THE SERVICES IN RESPECT OF FINANCIAL YEAR 1997 - 98, FOR WHICH ALSO THE PAYMENT WAS TAKEN IN ADVANCE WERE YET TO BE RENDERED. THEREFORE, THIS COULD ONLY BE TREATED AS ADVANCE OTHERWISE IT WOULD LEAD TO AN ANOMALOUS SITU ATION, HIGHLY DEROGATORY TO THE ASSESSEE, WHICH IS NOT INTENDED IN LAW, VIZ., EVEN WHEN THE VERY AMOUNT RECEIVED, EXPENSES ARE TO BE DEDUCTED TO ARRIVE AT THE NET INCOME AND THOSE EXPENSES ARE YET TO BE INCURRED (WHICH MAY BE INCURRED IN THE NEXT FINANCIAL YEAR), THE ENTIRE RECEIPTS BECOME INCOME WHICH WOULD BE EL IGIBLE TO MUCH I.T.A NO. 2739 /AHD/20 15 A.Y. 2011 - 12 PAGE NO LIONS CLUB OF INDUSTRIAL AREA COMMUNITY TRUST VS. ITO 6 HIGHER TAX. E.D. SASSOON & CO. LTD. & ORS. VS. CIT (1954) 26 ITR 27 (SC), CALCUTTA CO. LTD. VS. CIT (1959) 37 ITR 1 (SC) AND CIT VS. SHRI GOVERDHAN LTD. (1968) 69 ITR 675 (SC) APPLIE D. 9 . RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE HIGH COURT OF DELHI, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 6,51,200/ - . THE THIRD GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDITION OF RS . 50,000/ - . W HILE SCRUTINIZING THE RETURN OF THE INCOME, T HE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS PA ID A SUM OF RS. 50,000/ - AS CONTRIBUTION TO CHARITY C OMMISSIONER. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE SAID AMOUNT DOES NOT QUALIFY FOR DEDUCTION U/S. 11 OF THE ACT AND ACCORDINGLY MADE THE ADDITION OF RS. 50,000/ - . WHEN THE MATTER WAS AGITATED BEFORE THE CIT(A), CIT(A) WAS ALSO OF THE OPINION THAT HE ASESSEE HAS FAILED TO EXPLAIN HOW THIS CONTRIBUTION HELPS THE OBJECTS OF THE ASSESSEE TRUST. 10 . BEFORE US, THE COUNS EL FOR THE ASSESSEE STATED THAT IT IS MANDATORY TO PAY TO THE C HARITY C OMMISSIONER AND THE CONTRIBUTION OF RS. 50,000/ - HAS BEEN MADE AS PER THE RELATED PROVISIONS OF THE LAW. PER CONTRA, THE DR COULD NOT BRING ANY JUSTIFICATION FOR MAKING THE ADDITION OF RS. 5 0,000/ - . WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUTE THAT RS. 50,000/ - HAS BEEN PAID TO THE CHARITY COMMISSIONER FUND AS PER THE APPLICABL E PROVISIONS OF THE LAW. THE SAME HAS TO BE ALLOWED AS AN ELIGIBLE APPLICATION OF FUND OF THE ASSESSEE TRUST. WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 50,000/ - ACCORDINGLY. I.T.A NO. 2739 /AHD/20 15 A.Y. 2011 - 12 PAGE NO LIONS CLUB OF INDUSTRIAL AREA COMMUNITY TRUST VS. ITO 7 11 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 11 - 02 - 201 6 SD/ - SD/ - ( KUL BHARAT ) ( N.K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 11 /02 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCER NED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,