Arhatic Yoga Ashram Management Trust, CHENNAI V. ITO (Exemptions) Ward 1, CHENNAI

ITA 2920/CHNY/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7197 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 30-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G JOHNSON
• Keywords: Charitable institution; Benefit of exemption; Set aside
• Section: 12; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . . , . , $ BEFORE SHRI JUSTICE P.P.BHATT, PRESIDENT AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER I.T.A.NO.2920/CHNY/2017 ( / ASSESSMENT YEAR: 2012-13) ARHATIC YOGA ASHRAM MANAGEMENT TRUST 31/14, KRISHNASWAMY AVENUE, LUZ, MYLAPORE, CHENNAI-600 004. VS THE INCOME TAX OFFICER (EXEMPTIONS) WARD-1, CHENNAI. PAN: AABTA 3404D ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : NONE /RESPONDENT BY : MR. G.JOHNSON, ADDL.CIT /DATE OF VIRTUAL HEARING : 09.12.2020 /DATE OF PRONOUNCEMENT : 20.01.2021 / O R D E R PER G.MANJUNATHA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -17, CHENNAI DATED 13.09.2017 AND PERTAINS TO ASSESSMENT YEAR 20 12-13. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. FILING FORM 10 IN A ROUTINE MANNER TO AVOID TAXATION: THE INTENT AND PURPOSE OF PROVIDING EXEMPTIONS U/SECTIONS 11 & 12 IN THE INCOME TAX ACT ARE TO ENCOURAGE AND FACILITATE CHANNELLING OF PUBLIC MONE Y INTO CHARITABLE ACTIVITIES, SUBJECT TO FULFILMENT O F CERTAIN CONDITIONS. 2 ITA NO.2920/CHNY/2017 PUBLIC CHARITABLE TRUSTS PLAY A VERY VITAL ROLE IN OUR SOCIETY. BUT, WITHOUT THESE EXEMPTIONS, IT IS VIRTU ALLY IMPOSSIBLE FOR TRUSTS TO SURVIVE AND GROW. IN THE INSTANT CASE, AT THE END OF EVERY YEAR, AFTE R DRAWING UP ITS FINANCIAL STATEMENTS, THE TRUST ARRI VES AT THE SURPLUS FOR THE YEAR, IF ANY. BASED ON THE SURPLUS, THE TRUST DECIDES THE END-USE , FIRST, FUNDS ARE SET ASIDE FOR THE LONG-TERM REPAIR S AND RENOVATIONS TO BE CARRIED OUT IN ITS PREMISES. THESE ARE APART FROM THE REGULAR MAINTENANCE EXPENSES. FOR THIS, THE ACCUMULATION IS DONE UNDER THE ASHRAM MAJOR REPAIR FUND. NEXT, THE TRUST ALLOCATES FUNDS FOR THE FOLLOWING T WO CHARITABLE PURPOSES- A) POOR CHILDRENS EDUCATION FUND; AND B) MEDICAL AID FUND THE AMOUNT SET APART DIFFERS FROM YEAR TO YEAR, DEPENDING UPON THE NEED OR REQUESTS RECEIVED FOR SUPPORT. IN CERTAIN YEARS, THE TRUST SETS APART FUN DS U/SEC 11(2) WITHOUT EVEN ACCUMULATING THE ELIGIBLE15% TOWARDS CORPUS. THE AUDITED FINANCIAL STATEMENTS FOR AY 2012-13 ARE ATTACHED HERETO. IN ADDITION, THE AUDITED FINANCIAL STATEMENTS FOR AY 2014-15 AND 2016-17 ARE ALSO ATTACHED FOR REFERENCE. THE ABOVE PURPOSES ARE PERFECTLY VALID AND ALLOWABLE UNDER THE PROVISIONS OF THE ACT AND ARE ALSO AUTHORISED VIDE CLAUSE 4(K) OF THE TRUST DEED. COPY OF THE TRUST DEED IS ENCLOSED]. 2. REPETITION OF PURPOSES: EDUCATION SUPPORT AND MEDICAL AID ARE PERENNIAL NEEDS FOR THE ECONOMICALLY WEAKER SECTIONS OF OUR 3 ITA NO.2920/CHNY/2017 SOCIETY. WHILE EDUCATION PROVIDES FOR A BRIGHT FUTU RE FOR THE CHILDREN, MEDICAL AID HELPS THE FAMILY TIDE OVER A CRISIS THAT COULD DESTABILISE THE FAMILY. THE TRUST HAS DECIDED TO FOCUS ITS ACTIVITIES IN T HESE TWO AREAS AND HENCE REGULARLY ALLOCATES ITS SURPLUS TO THESE END USES. 3. CHARACTER OF EXPENSES ARE REVENUE IN NATURE: SECTION 11(2) IS REPRODUCED BELOW: (2) WHERE EIGHTY FIVE] PER CENT OF THE INCOME REFERRED TO IN CLAUSE(A) OR CLAUSE(B) OF SUB SECTIO N(I) READ WITH THE EXPLANATION TO THAT SUB-SECTION IS NO T APPLIED, OR IS NOT DEEMED TO HAVE BEEN APPLIED, TO CHARITABLE OR RELIGIOUS PURPOSES IN INDIA DURING TH E PREVIOUS YEAR BUT IS ACCUMULATED OR SET APART , EITHER IN WHOLE OR IT, PART, FOR APPLICATION TO SUC H PURPOSES IN INDIA, SUCH INCOME SO ACCUMULATED OR SET APART SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME, PROVIDED THE FOLLOWING CONDITIONS ARE COMPLIED WITH NAMELY: (A) SUCH PERSON SPECIFIES BY NOTICE IN WRITING GIVE N TO THE ASSESSING OFFICER IN THE PRESCRIBED MANNER THE PURPOSE FOR WHICH THE INCOME IS BEING ACCUMULATED OR SET APART AND THE PERIOD FOR WHICH THE INCOME IS TO BE ACCUMULATED OR SET APART WHICH SHALL IN NO CASE EXCEED TEN YEARS; (B) THE MONEY SO ACCUMULATED OR SET APART IS INVESTED OR DEPOSITED IN THE FORMS OR MODES SPECIFIED IN SUB SECTION (5) FROM THE ABOVE, IT IS CLEAR THAT THE ONLY CONDITION REGARDING PURPOSE IS THAT THEY SHOULD BE CHARITABL E IN NATURE. 4 ITA NO.2920/CHNY/2017 THERE IS NO STIPULATION THAT THE PURPOSE SHOULD CAPITAL OR REVENUE IN NATURE, FUNDING A SCHOOL/HOSPITAL BUILDING, PROVIDING SCHOLARSHIP FOR EDUCATION AND MEETING THE COSTS OF MEDICAL TREATMENT/MEDICINES ARE ALL CHARITABLE II NATURE AN D ARE THUS ELIGIBLE EXPENSES. 4. PROOF OF UTILISATION FINALLY, THE AMOUNTS SO SET APART HAVE ACTUALLY BEE N UTILIZED FOR THE VERY SAME PURPOSES FOR WHICH THEY WERE ACCUMULATED. THE DETAILS OF EXPENSES HAVE BEEN DULY VERIFIED BY THE ASSESSING OFFICER. A STATEMENT OF SUMMARY OF ACCUMULATIONS AND UTILISATION IS ATTACHED. COPIES OF THE LEDGER ACCOUNTS, BILLS AND OTHER DOCUMENTS ARE ALSO SUBMITTED HEREWITH FOR YOUR RECORDS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE TR UST IS REGISTERED U/S.12AA OF THE INCOME TAX ACT, 1961 (HEREINAFTER R EFERRED TO AS THE ACT) FILED ITS RETURN OF INCOME FOR THE ASSES SMENT YEAR 2012-13 ON 29.12.2010 DECLARING NIL TOTAL INCOME AFTER CLAI MING EXEMPTION U/S.11 OF THE ACT. DURING THE YEAR UNDER CONSIDERAT ION, THE ASSESSEE HAS FILED FORM NO.10 ALONG WITH RETURN OF INCOME ON 18.09.2010 AND ACCUMULATED SUM OF ` 60.00 LAKHS U/S.11(2) OF THE ACT FOR THE PURPOSE OF OBJECTS OF THE TRUST INCLUDING SPECIFIC OBJECTS SUCH AS ASHRAM MAJOR REPAIR FUND, POOR CHILDREN EDUCATION FUND AND 5 ITA NO.2920/CHNY/2017 MEDICAL AID FUND. THE ASSESSING OFFICER HAS REJECTE D ACCUMULATION OF INCOME U/S.12AA OF THE ACT, ON THE GROUND THAT T HE ASSESSEE HAS ACCUMULATED ITS INCOME NOT FOR SPECIFIC PURPOSE, BU T MERELY TO DEFER TAXATION OF SURPLUS OF AMOUNT WHICH HAS NOT BEEN AP PLIED TOWARDS ITS OBJECTS IN THE CORRESPONDING ACCOUNTING PERIOD. ACC ORDING TO THE ASSESSING OFFICER, FILING FORM NO.10 IS NOT AN EMPT Y FORMALITY AND ASSESSEE NEEDS TO SPECIFY THE PURPOSE FOR WHICH SUC H INCOME HAS BEEN ACCUMULATED. SINCE, THE ASSESSEE HAS ACCUMULAT ED INCOME FOR GENERAL PURPOSE, THE SAME CANNOT BE ALLOWED TO BE ACCUMULATED U/S.11(2) OF THE ACT, ACCORDINGLY, ALLOWED ACCUMULA TION OF INCOME FOR THE PURPOSE OF ASHRAM MAJOR REPAIR FUND, BUT REJEC TED ACCUMULATION OF INCOME FOR THE PURPOSE OF POOR CHILDREN EDUCATIO NAL FUND AND MEDICAL AID FUND AMOUNTING TO ` 10.00 LAKHS AND ADDED BACK TO TOTAL INCOME. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE PREFERRED AN APPEAL BEFORE THE LEARNED CIT(A). BEFO RE THE LEARNED CIT(A), THE ASSESSEE HAS REITERATED ITS ARGUMENTS M ADE BEFORE THE ASSESSING OFFICER AND CLAIMED THAT TRUST HAS ACCUMU LATED INCOME U/S.11(2) FOR SPECIFIED PURPOSE AND THE SAME HAS BE EN SPENT IN 6 ITA NO.2920/CHNY/2017 SUBSEQUENT FINANCIAL YEARS FOR THE PURPOSE FOR WHI CH SAID FUNDS HAS BEEN ACCUMULATED. THEREFORE, THE ASSESSING OFFICER HAS ERRED IN REJECTION OF ACCUMULATION OF INCOME, EVEN THOUGH TH E PURPOSE MENTIONED IN FORM NO.10 IS AS PER OBJECTS OF THE TR UST. THE LEARNED CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO BY RELIED UPON CERTAIN JUDICIAL PRECEDENTS INC LUDING THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F CIT VS M. CT. MUTHIAH CHETTIAR FAMILY TRUST REPORTED IN (245 ITR 400), HELD THAT PURPOSE FOR WHICH ACCUMULATION OF INCOME WAS SOUGHT TO BE MADE BY THE ASSESSE FOR CARRYING OUT POOR CHILDREN EDUC ATION FUND AND MEDICAL AID FUND IS GENERAL IN NATURE AND SUFFERS FROM VAGUENESS. THE ASSESSEE ACCUMULATES INCOME FOR SOME VAGUE REAS ONS TO EXPLAIN SHORTFALL IN APPLICATION OF INCOME FOR CHAR ITABLE PURPOSE FOR THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR U NDER CONSIDERATION. THEREFORE, THERE IS NO REASON TO INT ERFERE WITH THE FINDINGS RECORDED BY THE ASSESSING OFFICER TO REJEC T ACCUMULATION OF INCOME FOR POOR CHILDREN EDUCATIONAL FUND AND MEDIC AL AID FUND AND ACCORDINGLY, REJECTED THE ARGUMENTS OF THE ASSESSEE AND DISMISSED THE APPEAL FILED BY THE ASSESSE. AGGRIEVED BY THE C IT(A)S ORDER THE ASSESSEE IS IN APPEAL BEFORE US. 7 ITA NO.2920/CHNY/2017 5. AT THE TIME OF VIRTUAL HEARING , NONE APPEARE D ON BEHALF OF THE ASSESSEE. HOWEVER, SINCE THE ISSUE INVOLVED IN TH IS APPEAL IS COVERED, WE PROCEED TO DISPOSE OF APPEAL, AFTER HEA RING THE LEARNED DR. 6. THE LEARNED DR, SUPPORTING THE ORDER OF THE LEAR NED CIT(A) SUBMITTED THAT ASSESSEE IS ACCUMULATING INCOME U/S. 11(2) ON VAGUE REASONS WITHOUT SPECIFYING THE PURPOSE FOR WHICH S UCH INCOME HAS BEEN ACCUMULATED, EVEN THOUGH SECTION 11(2) CLEARLY MANDATES THE ASSESSEE TO SPECIFY PURPOSE FOR ACCUMULATION OF INC OME, THEREFORE, THERE IS NO REASON TO INTERFERE WITH THE FINDINGS R ECORDED BY THE LEARNED CIT(A) TO DENY ACCUMULATION OF INCOME U/S.1 1(2) OF THE ACT. 7. WE HAVE HEARD THE LEARNED DR AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. THE ASSESSEE IS A CHARITABLE T RUST CLAIMING BENEFIT OF EXEMPTION U/S.11 OF THE ACT, HAS ACCUMUL ATED INCOME U/S. 11(2) OF THE ACT FOR SPECIFIED PURPOSE AND FOR WHIC H FORM NO.10 HAS BEEN FILED SPECIFYING THE AMOUNT AND PURPOSE. THE ASSESSEE HAS ACCUMULATED FUNDS FOR POOR CHILDREN EDUCATION FUND AND MEDICAL AID FUND AND CLAIMED THAT PURPOSE SPECIFIED IN FORM NO. 10 IS IN ACCORDANCE WITH MAIN OBJECTIVES OF THE TRUST. WE HA VE GONE THROUGH FORM NO.10 FILED BY THE ASSESSEE ALONG WITH OBJEC TS OF THE TRUST AND 8 ITA NO.2920/CHNY/2017 FIND THAT OBJECTS OF THE TRUST SPECIFIES EXTEND HELP AND RELIEF TO THE DISTRESSED, POOR DESTITUTE, HOMELESS AND UNDERPRIV ILEGED STUDENTS AND PROVIDING MEDICAL RELIEF TO THE NEEDY PERSONS. FURTHER, THE ASSESSEE TRUST IS REGULARLY ACCUMULATING FUNDS FOR THE ABOVE PURPOSE AND SUCH EARMARKED FUNDS ARE CONTINUOUSLY SPENT FOR THE PURPOSE FOR WHICH THEY HAVE ACCUMULATED. ONCE ASSESSEE HAS ACCU MULATED INCOME WITH A SPECIFIC PURPOSE AND SUCH PURPOSE IS SPECIFIED IN THE MAIN OBJECTS OF THE TRUST, THEN THE ASSESSING OFFIC ER CANNOT DENY SUCH ACCUMULATION OF INCOME MERELY FOR THE REASON T HAT PURPOSE SPECIFIED IN FORM NO.10 IS VAGUE AND GENERAL IN NAT URE. AS LONG AS OBJECTS OF THE TRUST PROVIDE FOR SUCH PURPOSE, THEN THE ASSESSEE CAN ACCUMULATES FUNDS FOR THE PURPOSE WHICH IS SPECIFIE D IN TRUST DEED. THIS VIEW IS FORTIFIED BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT (EXEMPTION) VS. BOCHASANWASI SH RI AKSHAR PURSHOTTAM PUBLIC CHARITABLE TRUST REPORTED IN [201 9] 102 TAXMANN.COM 122, WHERE IT WAS HELD THAT LACK OF DEC LARATION IN FORM NO.10 REGARDING SPECIFIC PURPOSE FOR WHICH FUNDS WERE BEING ACCUMULATED BY THE ASSESSEE TRUST WOULD NOT BE F ATAL TO THE EXEMPTION CLAIMED U/S.11(2) OF THE ACT. THE HONBL E SUPREME COURT REPORTED IN (2019) 263 TAXMANN.COM 247(SC) HAS DIS MISSED SLP 9 ITA NO.2920/CHNY/2017 FILED BY THE DEPARTMENT IN THE ABOVE CASE AND HAS U PHELD THE FINDINGS OF THE HONBLE GUJARAT HIGH COURT. 8. IN THIS CASE, ON PERUSAL OF FACTS AVAILABLE ON R ECORD, CLAUSE 4K OF TRUST DEED PROVIDES FOR EXTENDING HELP AND REL IEF TO DISTRESSED AND DESTITUTE, HOMELESS AND UNDERPRIVILEGED AND FUNDS ACCUMULATED U/S.11(2) IS COVERED UNDER MAIN OBJE CTS OF THE TRUST. WE, THEREFORE ARE OF THE CONSIDERED VIEW THAT ASSE SSING OFFICER AS WELL AS LEARNED CIT(A) HAS ERRED IN DENYING BENEFIT OF ACCUMULATION OF INCOME U/S.11(2) OF THE ACT. HENCE, WE DIRECT T HE ASSESSING OFFICER TO DELETE THE ADDITIONS MADE TOWARDS DENIAL OF ACCUMULATION OF INCOME U/S.11 (2) OF THE ACT AND DIRECT HIM TO ALLOW BENEFIT OF ACCUMULATION AS CLAIMED BY THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2021 SD/- SD/- ( . . ) ( . ) (JUSTICE P.P.BHATT ) (G. MANJUNATHA ) / PRESIDENT ' / ACCOUNTANT MEMBER $ /CHENNAI, % /DATED 20 TH JANUARY, 2021 DS )* +* /COPY TO: 1. APPELLANT 2. RESPONDENT 3. , () /CIT(A) 4. , /CIT 5. * 1 /DR 6. /GF .