Appeal details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 0554 (ITAT-AGRA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 year(s) 10 month(s) 11 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
16-05-2019
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
27-02-2013
Assessment Year
2009-2010
Appeal Filed On
05-07-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 301/AGRA/2012 ASSTT. YEAR : 2009-10 A.C.I.T., CIRCLE 3(1), VS. M/S. PRATAP WAHINI SAMA J KALYAN SANSTHAN, GWALIOR. 67, VIVEK NAGAR, GWALIOR (M.P.) (PAN : AAATP 5148 P) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI WASEEM ARSHAD, SR. D.R. RESPONDENT BY : SHRI RAJENDRA SHARMA / MANUJ SHARM A, ADV. DATE OF HEARING : 27.02.2013 DATE OF PRONOUNCEMENT OF ORDER : 08.03.2013 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), GWALIOR DATED 30.04.2012 FOR THE ASSESSMENT YEAR 20 09-10 ON THE FOLLOWING GROUNDS : (I). WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .1,09,63,771/- MADE BY ASSESSING OFFICER ON ACCOUNT OF DISALLOWANC E OF EXEMPTION CLAIMED U/S. 11 OF THE INCOME TAX ACT. (II). WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.7,00,000/- MADE BY ASSESSING OFFICER ON ACCOUNT OF DISALLOWANC E U/S. 40(A)(IA) OF THE INCOME TAX ACT. ITA NO. 301/AGRA/2012 2 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT AS AGAIN ST NIL RETURNED INCOME, ASSESSMENT HAS BEEN MADE ON TOTAL INCOME OF RS.1,16 ,63,770/- BY MAKING ADDITION OF RS.7,00,000/- U/S. 40(A)(IA) FOR LEGAL EXPENSES ON WHICH TDS HAS NOT BEEN MADE AND OF RS.1,09,63,771/- ON ACCOUNT OF NET SURPLUS D ECLARED AS PER INCOME AND EXPENDITURE ACCOUNT BY DISALLOWING EXEMPTION CLAIME D U/S. 11 OF THE IT ACT. THE ASSESSEE IS ENGAGED IN EDUCATIONAL ACTIVITIES AND H AS DECLARED RECEIPTS FROM RUNNING OF TWO COLLEGES IN THE NAME OF MAHARANA PRATAP COLL EGE OF TECHNOLOGY AND MAHARANA PRATAP COLLEGE OF DENTISTRY & RESEARCH CEN TRE. THE ASSESSEE IN THE RETURN OF INCOME CLAIMED EXEMPTION U/S. 11 OF THE I T ACT. 3. AS REGARDS THE DISALLOWANCE MADE U/S. 11 OF THE IT ACT, THE SAID DISALLOWANCE HAS BEEN MADE BY THE AO BY APPLYING PR OVISIONS OF SECTION 13(1)(C) OF THE IT ACT SOLELY ON THE GROUND OF PAYMENT OF LI C RENEWAL PREMIUM OF RS. 70,872/- FROM THE FUNDS OF THE SOCIETY IN RESPECT O F ENDOWMENT INSURANCE POLICY OF SHRI NARENDRA SINGH DHAKRE, SECRETARY OF THE SOCIET Y. WHILE HOLDING SO, AO HAS MENTIONED AS UNDER: ON GOING THE THROUGH THE AUDIT REPORT IN FORM 108 DATED 28.09.2009, SUBMITTED ALONG WITH RETURN, IT IS SEEN THAT IN PART II OF ANNEXURE TO THE AUDIT REPORT THE CA AT PAINT NO.3 H AS MENTIONED THAT THE PAYMENT OF RS.18,95,000/- PAID TO OFFICE BEARER S OF SOCIETY AND OTHER STAFF AS HONORARIUM FOR MEETING OUT EXPENSES WHOLLY, NECESSARILY AND EXCLUSIVELY INCURRED FOR THE PURPOS E OF CARRYING AND PERFORMING FUNCTIONS FOR THE BENEFIT OF THE SOCIETY THE ASSESSEE VIDE ORDER SHEET DATED 25.11.2011 WAS ASKED TO FURNISH D ETAILS OF ITA NO. 301/AGRA/2012 3 HONORARIUM PAID. IN THIS REGARD, THE ASSESSEE SUBMI TTED VIDE ITS REPLY DATED 29.11.2011 AND AS PER DETAILS FILED, OUT OF H ONORARIUM PAID TO THE DIFFERENT OFFICE BEARERS. ONE PAYMENT OF RS.2,8 0,000/- WAS MADE TO MR. NARENDRA SINGH DHAKRE, AS SECRETARY OF THE S OCIETY. DURING THE COURSE OF ASSESSMENT OF PROCEEDINGS, THE AR OF THE ASSESSEE WAS ASKED TO FURNISH DETAILS AND JUSTIFICA TION OF EXPENDITURE OF RS.1,49,224/- AND RS.99,000/- INCURRED ON THE IN SURANCE AND KEY MAN INSURANCE RESPECTIVELY. VIDE ITS REPLY DATED 29 .11.2011, THE ASSESSEE SUBMITTED AS REGARDING INSURANCE EXPENSES OF RS.1,49,224/- IT CONSISTS OF RS.86,224/- INCURRED BY THE SOCIETY. THE EXPENDITURE OF RS.86,224/- BY MPCT INCLUDE A PAYMENT OF RS.70,872/ - TOWARDS THE KEY MAN INSURANCE POLICY OF NARENDRA SINGH DHAKRE, SECRETARY OF THE SOCIETY. ON EXEMPTION OF THE ABOVE SUBMISSION, IT WAS OBSERV ED THAT LIC PREMIUM RECEIPT IN THE NAME OF SHRI NARENDRA SINGH DHAKRE, WAS IN FACT AN ENDOWMENT POLICY AND NOT A KEY MAN INSURANC E POLICY AS CLAIMED BY THE ASSESSEE SOCIETY. FOR FURTHER CLARIF ICATION, THE INCOME TAX INSPECTOR-SHRI SURAJ RAM WAS DEPUTED TO MAKE EN QUIRY IN THIS REGARD AND SUBMIT THE REPORT, THE FINDINGS OF THE I TI IS REPRODUCED AS UNDER: MDR IKWFYLH DH TKWAP GSRQ ESA VKT FNUKAD 08-12-2011 DKS HKKJRH; THOU CHEK FUXE KK[KK UA- 4 FERRY DKWEYKSDL] U;K CKTKJ] XOKFY;J X; K VKSJ MDR KK[KK IZCA/KD JH JFOUNZ I.MKXJS LS FEYK VKSJ MIJKSDR IKWFYLH DS CKJS ESA IWNRKN] TKUDKJH YH] RKS MUDS }KJK VIUS FLLVE IJ MDR IKWFYLH UA- VAFDR DJ TK S TKUDKJH NH] OG ;G GS FD MDR IKWFYLH CUNKSCLRH CHEK ;KSTUK RKFYDK&14 ENDOWMENT (TABLE NO.14) GS TKS IFJIDRK VOF/K DS IPKR~ MLH O;FDR DKS O;FDRX R YKHK DS FY, GS RFKK DH&ESU CHEK (KEY MAN INSURANCE) FDLH LALFKK IZEQ[K DS UKE IJ GKSRH GS FTLDK YKHK FLQZ E`R;Q IPKR~ FLQZ LALFKK DKS FEYRK GSSA FROM THE ABOVE DISCUSSION IT IS CLEAR THAT, ABOVE M ENTIONED LIC PAID WAS NOT FOR THE KEY MAN INSURANCE BUT FOR THE ENDOW MENT POLICY OF SHRI NARENDRA SINGH DHAKRE, WHO HAS BEEN DIRECTLY B ENEFITED BY TAKING THIS POLICY. THE ASSESSEE SOCIETY WAS ASKED VIDE NOTICE DATED 29 .11.2011 WHY EXEMPTION U/S 11 OF INCOME TAX ACT, 1991, BE NOT DI SALLOWED AS OFFICE BEARER MR. NARENDRA SINGH DHAKRE HAS BEEN DIRECTLY BENEFITED BY TAKING LIC RENEWAL PREMIUM OF RS. 70,872/-. ASSESS EE VIDE LETTER DATED 14.12.2011, STATED THAT HONORARIUM OF RS. 2, 80,000/- WAS PAID ALONGWITH THE INSURANCE PREMIUM OF MR. NARENDRA SIN GH DHAKRE. ITA NO. 301/AGRA/2012 4 THE ASSESSEE SOCIETY HAS SUBMITTED CONTRADICTORY RE PLIES VIDE ITS LETTERS DATED 29.11.2011 AND 14.12.2011 RESPECTIVEL Y. IN ITS FIRST REPLY, THE ASSESSEE STATED THAT THE SOCIETY HAD PAID TOTAL RS. 2,80,000/- TO SHRI NARENDRA, AS HONORARIUM, WHILE IN THE SECOND R EPLY THE HONORARIUM PAID TO MR. NRAENDRA SINGH DHAKRE WAS IN CREASED TO RS. 3,50,000/-. IT IS VERY IMPORTANT TO BE NOTED HERE THAT THE SECO ND REPLY WAS SUBMITTED ONLY WHEN THE UNDERSIGNED HAD ISSUED NOTI CE ASKING THE ASSESSEE SOCIETY WHY THE EXEMPTION U/S 11 OF INCOME TAX ACT MAY NOT BE DISALLOWED ON ACCOUNT OF THAT MR. NARENDRA SINGH DHAKRE, THE SECRETARY OF THE SOCIETY HAS BEEN DIRECTLY BENEFITE D BY TAKING LIC RENEWAL PREMIUM. THE SECOND REPLY IS COMPLETELY FABRICATED ONE, AND IT IS CLEAR FROM THE FACTS AVAILABLE ON RECORD THAT THE ASSESSEE IS TRYI NG TO MANIPULATE THE ISSUE OF PERSONAL BENEFIT WHICH THE ASSESSEE SOCIET Y HAS GIVEN TO SHRI NARENDRA SINGH DHAKRE BY PAYING HIS PERSONAL LIC RE NEWAL PREMIUM OF RS. 70,872/-. IN THIS REGARD, THE RELIANCE IS PLACE ON THE DECISI ON OF THE HONBLE BOMBAY HIGH COURT DELIVERED IN THE CASE OF CIT VS. JAMUNA LAL BAJAJ SEWA TRUST (1988) 171 ITR 568 WHEREIN THE HONBLE H IGH COURT HELD AS UNDER. SECTION 13(1)(C) PROVIDES THAT WHERE AS PART OF THE INCOME OF A CHARITABLE OR RELIGIOUS TRUST OR INSTITUTION ENURES OR IS USED OR APPLIED, DIRECTLY OR INDIRECTLY, FOR THE BENEFIT OF THOSE PE RSONS, SPECIFIED IN SECTION 13(3), SUCH A TRUST OR INSTITUTION SHALL FO RFEIT THE EXCLUSION U/S 11. EVEN IF ONLY A SMALL PORTION OF THE INCOME ENUR ES OR IS USED OR APPLIED FOR THE BENEFIT OF A PERSON MENTIONED IN SE CTION 13(3), THE ENTIRE INCOME OF THE TRUST IS DENIED THE EXCLUSION, EXCEPT IN THE CASE PROVIDED IN SECTION 13(4). IN THIS LIGHT OF THE ABOVE DECISION AND THE FACTS N ARRATED ABOVE IT IS CONCLUDED THAT THE LIC RENEWAL PREMIUM PAID TO MR. NARENDRA SINGH DHAKRE, SECRETARY OF THE SOCIETY IS THE PERSON MENT IONED IN SECTION 13(3) OF THE INCOME TAX ACT, 1961 AND THE PAYMENT O F LIC RENEWAL PREMIUM MADE BY THE ASSESSEE SOCIETY IS TREATED AS DIVERSION OF SOCIETY WITHIN THE MEANING OF SECTION 13(2) OF THE INCOME TAX ACT, 1961 AND THEREFORE, THE ASSESSEE SOCIETY IS NOT ENT ITLED FOR EXEMPTION ITA NO. 301/AGRA/2012 5 U/S 11 OF INCOME TAX ACT, 1961, AS CLAIMED. THE SUR PLUS OF THE SOCIETY SHOWN IN THE INCOME AND EXPENDITURE ACCOUNT WILL BE ASSESSED AS INCOME FROM BUSINESS AND PROFESSION A CHARGEABLE TO TAX AND THE STATUS OF AOP AT A MAXIMUM MARGINAL RATE. THE TOTAL SURPLUS AS PER AUDITED STATEMENT RS. 1,09,63,770/- (RS. 11,40,03,7 99 RS. 10,30,40,028) IS TAXABLE. 3.1 THE ORDER OF THE AO WAS CHALLENGED BEFORE THE LD. CIT(A) AND WRITTEN SUBMISSIONS OF THE ASSESSEE IS REPRODUCED IN THE AP PELLATE ORDER AND READ AS UNDER : IT IS SUBMITTED THAT THE AO HAS ERRED IN LAW WHILE DENYING THE EXEMPTION U/S 11 IN AS MUCH AS: THE AO HAS PARTLY CONSIDERED THE PROVISION OF SECTI ON 13 OF THE IT ACT. HE HAS ONLY CONSIDERED THE PROVISIONS OF SECTI ON 13(1)(C) (II) OF THE IT ACT, WHICH STIPULATES THAT NOTHING CONTAINED IN SECTION 11 OR 12 SHALL OPERATE TO EXCLUDE FROM THE TOTAL INCOME OF C HARITABLE INSTITUTION, IF ANY PART OF INCOME OR ANY PROPERTY OF THE TRUST IS DURING THE PREVIOUS YEAR USED OR APPLIED DIRECTLY OR INDIR ECTLY FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SECTION 13(3) OF THE I T ACT. THE AO HAS FAILED & GROSSLY ERRED IN NOT CONSIDERING THE PROVI SIONS OF SECTION 13(2)(D) OF THE IT ACT WHICH OVERRIDES & FURTHER GO VERNS SECTION 13(2)(D). THE AO DID NOT APPRECIATE AND CONSIDER ASSESSEES S UBMISSION THAT NARENDRA SINGH DHAKRE IS DEEPLY INVOLVED IN CARRYIN G OUT OF THE FUNCTIONS FOR THE DEVELOPMENT AND EFFICIENT MANAGEM ENT OF THE INSTITUTIONS RUN BY THE SOCIETY. HE IS ALL THE TIME IN THE CAMPUS FOR CONTACTING VARIOUS AGENCIES FOR ADDING NEW COURSES, GETTING NEW AFFILIATIONS FOR ACADEMICS AND FULFILLING THE PRESC RIBED STANDARDS FOR CONTINUATION OF THE COURSES, WHICH ARE AFFILIATED T O VARIOUS EDUCATIONAL, APEX, AND NODAL BODIES/STATUTORY BODIE S OF THE STATE AND CENTRAL GOVERNMENT. THE INSTITUTION IS LOCATED AT T HE OUTSKIRTS OF THE CITY AND IS IN ISOLATED PLACE, WHICH IS NEAR TO CER TAIN VILLAGES INHABITED BY ROWDY & UNSCRUPULOUS ELEMENTS. HE HAS TO WORK THEREIN DAY AND NIGHT AND RETURNS HOME IN LATE HOURS, INVOL VING RISK TO THE PROPERTY AND LIFE INCLUDING KIDNAPPING BY UNSCRUPUL OUS ELEMENTS. THEREFORE THE GOVERNING BODY OF THE SOCIETY CONSIDE RED IT EXPEDIENT ITA NO. 301/AGRA/2012 6 AND APPROVED PAYMENT OF INSURANCE PREMIUM OF MR. NA RENDRA SINGH DHAKRE, SECRETARY IN ADDITIONS TO HONORARIUM PAID T O HIM IN APPRECIATION AND IN LIEU OF SERVICES RENDERED BY HI M AS A MEASURE OF INCENTIVE FOR DEDICATED SERVICES. DURING THE PREVIOUS YEAR 2008-09, THE SOCIETY HAS P AID A SUM OF RS. 2,80,000/- AS HONORARIUM AND ALSO PAID A INSURANCE PREMIUM SUM OF RS. 70,872/- TO SHRI NARENDRA SINGH DHAKRE, SECRETA RY MAKING A TOTAL HONORARIUM AND LIC PREMIUM OF RS. 3,50,872/- WHEREA S, THE SOCIETY HAS PAID RS. 9,61,000/- AS SALARY TO THE DEAN OF D ENTAL COLLEGE AND OTHER VARIOUS FACULTIES WERE ALSO PAID ANNUAL REMUN ERATION OVER RS. 4.00 LACS AND UPTO RS. 8.00 LACS PER ANNUM FOR THE SERVICES IN DENTAL & ENGINEERING COLLEGES. LOOKING TO THE PRESENT SCEN ARIO OF SALARY STRUCTURE IN PRIVATE SECTOR AND AFTER IMPLEMENTATIO N OF THE VITH PAY COMMISSION IN THE TECHNICAL COLLEGES, THE TOTAL REM UNERATION INCLUDING LIP PREMIUM PAID TO MR. NARENDRA SINGH DHAKRE ARE B ARE MINIMUM FOR RUNNING OF THE INSTITUTION PROVIDING TECHNICAL, MEDICAL, MANAGEMENT EDUCATION. TO SUMMARISE THE FACT THE TAB ULAR PRESENTATION SHOWING COMPARATIVE ANALYSIS ARE AS UN DER: NAME OF PERSON DUTIES FULFILLED GROSS HONORARIUM/SA LARY PAID DURING F.Y. 2008-09 NARENDRA SINGH DHAKRE SECRETARY IN THE SOCIETY AND IN THE INSTITUTIONS RUN BY THEM, HE INVOLVED ON DAY TO DAY WORKING OF THE INSTITUTIONS RUN BY THE SOCIETY AND LOOKING AFTER THE FACULTY DEVELOPMENT WORK, APPOINTMENT OF THE STAFF, ARRANGEMENT OF CAMPUS PLACEMENT, LIAISON WITH UNIVERSITIES AND ALSO LOOKING AFTER THE ACCOUNTS AND FINANCIAL MATTERS. RS. 3,50,872/- (INCLUDING LIC PREMIUM) DR. S. SUNDARRAJ DEAN OF DENTAL COLLEGE RS. 9,61,60 0/- ITA NO. 301/AGRA/2012 7 DR. BASA SHRINIVASA FACULTY IN DENTAL COLLEGE RS. 8 ,11,200/- DR. K. VINOD FACULTY IN DENTAL COLLEGE RS. 8,11,20 0/- DR. C.A. JEEVAN FACULTY IN DENTAL COLLEGE RS. 8.11. 200/- FROM THE ABOVE IT WOULD BE SENT THAT THE AMOUNT OF HONORARIUM PAID TO NARENDRA SINGH DHAKRE, THE KEY PERSON (SECRETARY OF THE SOCIETY) IT VERY SMALL AND MINUSCULE AMOUNT AS COMPARED TO THE SALARY AND HONORARIUM PAID TO THE FACULTY MEMBERS BY THE SOCIE TY, THE PAYMENT MADE IS FULLY COMMENSURATE WITH THE SERVICES RENDER ED BY HIM FOR ACHIEVING THE OBJECTIVES AND GROWTH OF THE SOCIETY. THEREFORE, THE PAYMENT MADE BY THE SOCIETY TO SHRI NARENDRA SINGH DHAKRE, SECRETARY IS INCURRED FOR THE PURPOSE FOR C ARRYING AND PERFORMING FUNCTION FOR THE BENEFITS OF THE SOCIETY & ACHIEVING ITS OBJECTIVES AND THE SAME IS QUITE REASONABLE & COMME NSURATE TO THE VALUABLE SERVICES RENDERED BY HIM. LOOKING TO THE FAIR MARKET VALUE OF THE SERVICES RE NDERED, THE RELIABILITY AND STABILITY OF THE SERVICES OF SHRI N ARENDRA SINGH DHAKRE, THE PAYMENT OF HONORARIUM PLUS LIP MADE TO THE SECR ETARY (SHRI NARENDRA SINGH DHAKRE) CAN NOT BE SAID EXCESSIVE OR UNREASONABLE. THE PAYMENT OF LIP HAS BEEN MADE WHOLLY & EXCLUSIVE LY FOR THE PURPOSE OF ADVANCEMENT AND IN FURTHERANCE OF CHARIT ABLE OBJECTS OF THE SOCIETY. THE EXPRESSION FOR THE PURPOSE OF ACH IEVEMENT OF CHARITABLE OBJECT IS WIDER IN SCOPE. IT MAY TAKE N OT ONLY THE DAY TODAY RUNNING OF THE INSTITUTION(S) BUT ALSO RELATIONSHIP OF ITS ADMINISTRATION. IT MAY COMPREHEND MANY OTHER EXPENSES INCIDENTAL TO ACHIEVING OF THE CHARITABLE OBJECTS. THIS MATTER MUST BE JUDGED NOT IN THE LIGHT OF 19 TH CENTURY LAISSEZ FAIRE DOCTRINE BUT IN THE CURRENT S CENARIO OF ECONOMIC AND WELFARE PHILOSOPHY THAT SUCH PAYMENTS ARE SUBSC RIBED TO THE DEDICATED PERSONS. THIS ALSO RESULTS IN REAPING IN OF THEIR WORKING EXPERIENCE, FULLY LOYALTY AND DEVOTION. IN VIEW OF ABOVE SUBMISSION, IT IS URGED THAT THE APPELLANT SOCIETY BE ALLOWED EXEMPTION/EXCLUSION OF ITS INCOME U/S 11 OF THE IT ACT. ITA NO. 301/AGRA/2012 8 3.2 THE LD. CIT(A), CONSIDERING THE ISSUE IN DETAIL IN THE LIGHT OF PROVISIONS OF SECTION 13 ACCEPTED THE CLAIM OF ASSESSEE FOR EXEMP TION U/S. 11 OF THE IT ACT AND DELETED THE ADDITION OF RS.1,09,83,771/-. THE FINDI NGS OF THE LD. CIT(A) IN PARAS 3.2 TO 3.4 IN THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 3.2 APPELLANTS SUBMISSIONS HAVE BEEN CONSIDERED C AREFULLY ALONGWITH ASSESSEMENT ORDER ASSESSMENT RECORDS HAVE ALSO BEEN PERUSED. THE APPELLANT IS A SOCIETY REGISTERED UNDE R SOCIETIES REGISTRATION ACT, 1973 VIDE REGISTRATION NO. GWL/31 36 DT. 27.11.1995. THE MAIN OBJECT OF THE SOCIETY IS TO PR OVIDE EDUCATION IN VARIOUS FIELDS LIKE ENGINEERING, MANAGEMENT, MEDICA L ETC. DURING THE YEAR, IT HAS SHOWN EDUCATIONAL ACTIVITIES FROM TWO COLLEGE OF ENGINEERING & DENTAL. THE SOCIETY HAS ALSO BEEN GRA NTED REGN. U/S 12AA OF THE IT ACT BY CIT, GWALIOR VIDE ORDER DATED 28.12.2001. AS PER THE RETURN FILED ON 29.09.2009, THE APPELLANT H AS FILED ITS AUDITED FINANCIAL STATEMENTS, PRESCRIBED AUDIT REPORT IN FO RM NO. 108 & CERTIFICATE REGARDING UTILIZATION OF FUNDS. AUDITED BOOKS OF ACCOUNTS WITH SUPPORTING BILLS AND VOUCHERS HAVE ALSO BEEN P RODUCED WHICH HAVE BEEN ACCEPTED BY THE AO. ALSO THE APPELLANT HA S DECLARED TOTAL RECEIPTS OF RS. 11,40,03,799/- OUT OF WHICH TOTAL E XPENDITURE OF RS. 10,30,40,028/- HAS BEEN INCURRED MEANING THEREBY TH AT ABOUT 90% OF FUNDS HAVE BE UTILIZED TOWARDS OBJECTS OF THE SOCIE TY. THE SOLE GROUND FOR DENIAL OF EXEMPTION CLAIMED U/S 11 IS THAT THE SOCIETY HAS PAID PREMIUM OF RS. 70,872/- OUT OF FUNDS FOR ITS LIFE I NSURANCE POLICY OF ITS SECRETARY VIZ. SHRI NARENDRA SINGH DHAKRE, AO HAS A CCORDINGLY HELD VIOLATION U/S 13(1)(C) OF THE IT ACT & BY RELYING O N DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. JAMUNA LAL BAJAJ SEWA TRUST (1988) 171 ITR 568, ENTIRE SURPLUS HAS B EEN BROUGHT TO TAX. HOWEVER, IN MY VIEW AO HAS NOT CONSIDERED THE PROVISIONS OF SEC. 13 IN TOTALITY. THE LEGISLATURE HAS ALSO CREATED A FICTION & ENUMERATED IN CLAUSES(A) TO (H) OF SUB-SECTION (2) OF SAME SEC TION 13 OF THE IT ACT, A LIST OF CIRCUMSTANCES IN WHICH THE INCOME SHALL B E DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF THE SPECIFI ED PERSONS, IF FOUND UNREASONABLE OR IN EXCESS. FOR CLARIFICATION, PROVI SIONS OF SECTION 13(1)(C), AS APPLIED BY THE AO & OF 13(2) (C) ARE R EPRODUCED HEREUNDER. ITA NO. 301/AGRA/2012 9 13(1) NOTHING CONTAINED IN SECTION 11 (OR SECTION 12) SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF T HE PREVIOUS YEAR OF THE PERSON IN RECEIPT THEREOF (C) IN THE CASE OF A TRUST FOR CHARITABLE OR RELIGI OUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITUTION, ANY INCOME T HEREOF (I) IF SUCH TRUST OR INSTITUTION HAS BEEN CREATED O R ESTABLISHED AFTER THE COMMENCEMENT OF THIS ACT AND UNDER THE TE RMS OF THE TRUST OR THE RULES GOVERNING THE INSTITUTION, ANY PART OF SU CH INCOME ENURES, OR (II) IF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR THE INSTITUTION (WHENEVER CREATED OR ESTABLISHED) IS DU RING THE PREVIOUS YEAR USED OR APPLIED, DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSO N REFERRED TO IN SUB- SECTION (3). 13(2) WITHOUT PREJUDICE TO THE GENERALITY OF THE PROVISIONS OF CLAUSE (C) [AND CLAUSE (D)] OF SUB-SECTION (1), THE INCOME OR THE PROPERTY OF THE TRUST OR INSTITUTION OR ANY PART OF SUCH INCOME OR PROPERTY SHALL, FOR THE PURPOSE OF THAT CLAUSE, BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF A PERSON REFERRE D TO IN SUB-SECTION (3), (C) IF ANY AMOUNT IS PAID BY WAY OF SALARY, ALLOWA NCE OR OTHERWISE DURING THE PREVIOUS YEAR TO ANY PERSON RE FERRED TO IN SUB- SECTION (3) OUT OF THE RESOURCES OF THE TRUST OR IN STITUTION FOR SERVICES RENDERED BY THAT PERSON TO SUCH TRUST OR INSTITUTIO N AND THE AMOUNT SO PAID IS IN EXCESS OF WHAT MAY BE REASONABLY PAID FO R SUCH SERVICES. 3.3 IN THE APPELLANTS CASE, SHRI NARENDRA SINGH DH AKRE, SECRETARY OF THE SOCIETY, HAS BEEN PAID TOTAL REMUNERATION (I NCLUDING HONORARIUM & INSURANCE) OF RS. 3,50,872/-. AO HAS N OT DISPUTED THE FACT THAT HE IS A KEY MEMBER IN THE FUNCTIONING OF THE SOCIETY. TOTAL AMOUNT OF REMUNERATION PAID TO HIM HAS ALSO NOT BEE N DOUBTED OR FOUND REASONABLE OR EXCESSIVE VIS--VIS SERVICES RE NDERED BY HIM OR S COMPARED TO OTHER SALARIED EMPLOYEES OF THE SOCIETY . AS PER PROVISIONS OF THE SECTION 13 OF THE IT ACT SPECIFYI NG CONDITIONS FOR DISALLOWANCE OF EXEMPTION U/S 11, ONUS IS ON THE AO TO CONCLUSIVELY ESTABLISH THE FACT OF UNREASONABLENESS OR EXCESSIVE NESS OF THE PAYMENT MADE TO CONCERNED SPECIFIED PERSON IN LIEU OF MARKE T VALUE OF ITA NO. 301/AGRA/2012 10 COMPARABLE SERVICES. AO HAS NOT BROUGHT ON RECORD A NY SUCH MATERIAL IN HIS SUPPORT BUT HAS MERELY STATED THAT THE SECRE TARY HAS DIRECTLY BENEFITED FROM SUCH PAYMENT & HAS MADE DISALLOWANCE U/S 13(1)(C). IT HAS BEEN HELD BY HONBLE GUJRAT HIGH COURT IN CASE OF SURAT CITY GYMKHANA VS. DCIT 245 ITR 733 (GUJ) THAT THAT THE L AW IS WELL SETTLED THAT: (A) A PERSON WHO MAKES POSITIVE AVERMENT IS REQUIR ED TO ESTABLISH THE SAME; & (B) IT IS NOT FOR THE PERSON AGAINST WHOM THE AVERM ENT IS MADE TO ESTABLISH NEGATIVELY THAT THE STATE OF AFFA IRS AVERRED BY OTHER PERSON DOES NOT EXIST. FURTHER, REASONABLENESS OF A PARTICULAR EXPENSES IS TO BE JUDGED FROM THE POINT OF VIEW OF THE TAXPAYER. IF THERE IS A NE XUS BETWEEN THE EXPENDITURE & BUSINESS PURPOSE OR THE OBJECTS OF TH E SOCIETY, AS IN THE APPELLANTS CASE, AO CANNOT BE ALLOWED TO SUBSTITUT E HIS OPINION FOR THAT OF THE APPELLANTS AS IF HE HIMSELF IS THE BUS INESSMAN OR THE TAXPAYER. ALSO, THE EXPRESSION FOR THE PURPOSE OF ACHIEVEMENT OF CHARITABLE OBJECT IS WIDER N SCOPE & INCLUDES EXPE NSES INCURRED FOR ITS FUNCTIONING CARRIED OUT BY PERSON CONCERNED. EV EN IN THE CASE LAW RELIED ON BY THE AO OF CIT VS. JAMUNA BAJAJ SEWA TR UST (1988) 171 ITR 568, HONBLE COURT ITSELF HAS TAKEN COGNIZANCE OF EXCEPTIONS PROVIDED IN SECTION 13(4), WHEREBY IT HAS BEN MENTI ONED THAT NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 13(1) (C), THE EXEMPTION U/S 11 SHALL NOT BE DENIED ON ACCOUNT OF INVESTMENT OF FUNDS FOR SPECIFIED PERSON IF IT DOES NOT EXCEED A CERTAIN SP ECIFIED AMOUNT. 3.4 ON THE BASIS OF ABOVE & THE FACT THAT NO ADVERS E VIEW HAS BEEN TAKEN BY THE AO IN RESPECT OF SIMILAR INSURANCE PRE MIUM PAID DURING EARLIER YEARS VIDE ASSESSMENTS COMPLETED U/S 143(3) , AO IS NOT FOUND JUSTIFIED N DISALLOWANCE OF EXEMPTION CLAIM MADE U/ S 11 WITHOUT BRINGING ON RECORD ANY MATERIAL TO PROVE THAT THE P AYMENT TO THE SECRETARY OF THE SOCIETY IS UNREASONABLE OR EXCESSI VE IN TERMS OF PROVISIONS OF SECTION 13(2)(C) OF THE IT ACT. ACCOR DINGLY, THE APPELLANT SOCIETY IS FUND ENTITLED FOR EXEMPTION U/S 11 AS PE R ITS RETURN & ADDITION OF RS. 1,09,63,771/- MADE IN PURSUANCE OF SUCH DISALLOWANCE OF EXEMPTION CLAIM IS, HEREBY, DELETED. ITA NO. 301/AGRA/2012 11 4. THE LD. DR RELIED UPON THE ORDER OF THE AO AND S UBMITTED THAT SINCE THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 13, THEREFORE, THE AO RIGHTLY DISALLOWED THE CLAIM OF EXEMPTION U/S. 11 OF THE IT ACT. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT IDENTICAL ISSUE CAME UP IN THE APPEAL OF THE DEPARTMENT BEFORE ITAT, AGRA BENCH IN ITA NO. 242/2011 FOR THE ASSESSMENT YEAR 2007-08, IN WHICH THE DEPARTMENTAL APPEAL HAS BEEN DISMISSED VIDE ORDER DATED 05.10.2012. COPY OF THE ORDER OF TRIBUNAL IS PLACED ON RECORD. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD. THE IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE TH E TRIBUNAL IN PRECEDING ASSESSMENT YEAR 2007-08 (SUPRA) AND THE TRIBUNAL VI DE ORDER DATED 05.10.2012 DISMISSED THE DEPARTMENTAL APPEAL. THE FINDINGS OF THE TRIBUNAL IN PARA 7 TO 10.2 ARE REPRODUCED AS UNDER : 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL ON RECORD AND DO NOT FIND ANY JUSTIFICATIO N TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITIO NS. THE AO HAS NOWHERE DOUBTED THE PAYMENT OF HONORARIUM TO THE OF FICE BEARERS OF THE SOCIETY FOR BONA FIDE SERVICES RENDERED BY THEM . THE HONORARIUMS HAVE BEEN PAID IN EARLIER YEAR ALSO AND HAVE BEEN A CCEPTED BY THE REVENUE DEPARTMENT IN THE PROCEEDINGS U/S. 143(3) O F THE IT ACT. ALL THE AMOUNTS HAVE BEEN MADE FOR WHOLLY AND EXCLUSIVE LY FOR THE PURPOSE AND BENEFIT OF ASSESSEE-SOCIETY. ALL THE PE RSONS HAVE RENDERED ACTUAL SERVICES TO THE ASSESSEE AND EVEN IN THE STA TEMENT OF SHRI NARENDRA SINGH, HE HAS EXPLAINED THE DETAILS OF THE SERVICES RENDERED BY HIM AGAINST THE PAYMENT. THERE IS ONLY MARGINAL INCREASE IN THE ITA NO. 301/AGRA/2012 12 CASE OF SOME OF THE OFFICER BEARERS, WHICH HAVE BEE N DULY APPROVED BY THE RESOLUTION OF THE SOCIETY. THE DETAILS ARE NOTE D ABOVE. THE LD. CIT(A) ALSO FOUND THAT THE TOTAL NUMBER OF STUDENTS IN THE EDUCATIONAL INSTITUTION RUN BY THE ASSESSEE HAVE INCREASED. THE REFORE, THE INCREASE IN THE HONORARIUM WAS JUSTIFIED AS COMPARED TO THE EARLIER YEARS. THE LD. CIT(A), THUS, RIGHTLY FOUND THAT THERE WERE NO VIOLATION OF PROVISIONS OF EXEMPTION CLAIMED IN THIS CASE. AS RE GARDS THE INTEREST FREE LOANS/ADVANCES, IT WAS FOUND THAT SAME HAVE BE EN GIVEN IN EARLIER YEARS ON WHICH EXEMPTION HAS ALREADY BEEN GRANTED B Y THE AO. THERE WERE NO FRESH LOAN/ADVANCES GIVEN IN THE ASSESSMENT YEAR UNDER APPEAL. WHATEVER LOANS WERE GIVEN IN EARLIER YEAR H AVE BEEN GIVEN WITH ADEQUATE SECURITIES AGAINST THE PROPERTIES AND SAME WERE ALSO AUTHORIZED BY THE RESOLUTION OF THE ASSESSEE SOCIET Y. THUS, THE LD. CIT(A) RIGHTLY FOUND THAT THERE WERE NO VIOLATION O F SECTION 13. THEREFORE, THE AO SHOULD NOT HAVE DENIED THE CLAIM OF EXEMPTION U/S. 11 OF THE IT ACT IN FAVOUR OF THE ASSESSEE. SINCE T HE ASSESSEE EXISTS WHOLLY AND EXCLUSIVELY FOR THE EDUCATION AND ALL TH E AMOUNTS HAVE BEEN SPENT FOR EDUCATIONAL PURPOSES AND FOR AIMS OF THE SOCIETY, THEREFORE, THE ASSESSEE WAS ENTITLED FOR EXEMPTION U/S. 11 OF THE IT ACT. IT IS WELL SETTLED LAW THAT THOUGH PRINCIPLE OF RES JUDICATA DOES NOT APPLY IN THE INCOME-TAX PROCEEDINGS, BUT RULE OF CO NSISTENCY SHOULD HAVE BEEN MAINTAINED AND FOLLOWED BY THE INCOME-TAX AUTHORITIES WHILE FINALIZING THE ASSTT. WE RELY UPON THE DECISI ON OF M.P. HIGH COURT IN THE CASE OF CIT VS. GODAVARI CORPORATION L TD., 156 ITR 835 AND DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF VIKAS CHEMI GUM INDIA, 276 ITR 32 AND THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. SAT ISH PANALAL SHAH, 249 ITR 221 AND RADHASWAMY SATSANG VS. CIT, 193 ITR 321. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ESCORTS LTD ., 338 ITR 435 HELD THAT THE DECISION REGARDING THE NATURE OF TRAN SACTION CONTINUED FOR SEVERAL YEARS, HAVE TO BE MAINTAINED ON PRINCIP LE OF CONSISTENCY. WE, THEREFORE, DO NOT FIND ANY VIOLATION U/S. 13(1) (C) OF THE IT ACT. THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S. 11 OF THE I T ACT. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES IN THE LIGH T OF FINDINGS OF LD. CIT(A), WE DO NOT FIND ANY INFIRMITY IN THE ORDER O F THE LD. CIT(A) IN GRANTING EXEMPTION U/S. 11 OF THE IT ACT TO THE ASS ESSEE AND ALSO IN DELETING THE ADDITION OF RS.12,47,250/- ON ACCOUNT OF DISALLOWANCE OF HONORARIUM. IN THE RESULT, GROUNDS NOS. 1 & 3 OF AP PEAL OF THE REVENUE ARE DISMISSED. ITA NO. 301/AGRA/2012 13 8. ON GROUND NO. 2 & 4, THE REVENUE CHALLENGED THE DELETION OF ADDITION ON ACCOUNT OF WRITING OFF OF THE CAPITAL E XPENDITURE AND DONATIONS. THE AO MADE ADDITION OF RS.11,37,483/- A S CAPITAL EXPENDITURE AND OF RS.10,00,000/- ON ACCOUNT OF DON ATION AS NON- BUSINESS EXPENSES. THE AMOUNT OF RS.11,37,483/- HAS BEEN ADDED IN RESPECT OF WRITE OFF OF ITM LOAN/ADVANCE PERTAINING TO THE YEAR 1997- 98, WHICH MATTER HAS ULTIMATELY BEEN DECIDED BY THE CIVIL COURT WITH NO RECOVERY TO THE ASSESSEE-SOCIETY. AO HAS TREATED THE SAME AS BUSINESS EXPENSES BEING IN THE NATURE OF CAPITAL EX PENDITURE AND ACCORDINGLY DISALLOWED THE SAME. THE ASSESSEE SUBMI TTED BEFORE THE LD. CIT(A) THAT BAD DEBTS IN THE BOOKS OF ACCOUNT A RE REQUIRED TO BE DEDUCTED WHILE COMPUTING ITS NORMAL INCOME. AS REGA RDS THE DONATIONS MADE, IT WAS SUBMITTED THAT THE SAME WAS MADE TO THE TRUST HAVING THE SIMILAR OBJECTS AND DONATIONS WERE GIVEN THROUGH BANKING CHANNEL AND IS ALLOWABLE DEDUCTION. THE LD. CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE DELETED BOTH THE ADDITI ONS. HIS FINDINGS IN PARAS 6.2 TO 6.4 OF THE APPELLATE ORDER ARE REPRODU CED AS UNDER : 6.2 APPELLANT SUBMISSIONS HAVE BEEN CONSIDERED CA REFULLY. AS MENTIONED IN PRECEDING PARAS THE APPELLANT IS FO UND ENTITLED FOR EXEMPTION U/S 11. A.O. HAS ADDED THE CAPITAL EXPEND ITURE MAINLY ON THE GROUND THAT THE APPELLANT IS CARRYING ON BUSINE SS ACTIVITY AND THE SAID EXPENDITURE HAS BEEN INCURRED AS A RESULT OF W RITE OFF OF BAD DEBTS OF EARLIER YEAR ADVANCE GIVEN TO ITM. IT IS WELL SETTLED IN LAW THAT IN THE CASE OF CHAR ITABLE INSTITUTIONS, ANY EXPENDITURE WHETHER REVENUE OR CAPITAL IN NATUR E, INCURRED FOR THE FURTHERANCE OF ITS OBJECTS IS AN APPLICATION OF INC OME TO THE OBJECTS OF THE INSTITUTION AND, THEREFORE, ALLOWABLE AS PER PR OVISIONS OF SECTION 11(1) OF THE I.T. ACT. AS PER SECTION 11(1)(A) OF T HE I.T. ACT, ANY INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLL Y FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA, SHALL NOT BE INCLUDED IN TH E TOTAL INCOME OF THE INSTITUTION. THUS, ANY INCOME APPLIED TO THE OBJECT S OF THE INSTITUTION, WHICH INCLUDES CAPITAL EXPENDITURE ALSO, WILL NOT B E INCLUDED IN THE TOTAL INCOME OF THE INSTITUTION. THEREFORE, ADDITIO N OF RS. 11,37,483/- IS HEREBY DELETED. 6.3 AS REGARDS DONATION OF RS. 10,00,000/- TO DELHI VASCULAR FOUNDATION TRUST, AO HAS ADDED THE SAME BEING NON-B USINESS ITA NO. 301/AGRA/2012 14 EXPENSE AND THE FACT THAT THE DONEE TRUST HAS NOT B EEN GRATED EXEMPTION U/S 80G OF THE IT ACT. 6.4 THE APPELLANT HAS SUBMITTED THAT THE DONEE TRUS T I.E. DELHI VASCULAR FOUNDATION TRUST IS APPROVED U/S 80G(5) OF THE IT ACT VIDE APPROVAL NO. DIT (E)/2004-05/813/00/2162/15-10-2004 WHICH IS VALID FROM 01.04.2004 TO 31.03.2007. THE SAID DONATION GI VEN THROUGH ACCOUNT PAYEE DEMAND DRAFTS ON 12.09.2006 AND 29.09 .2006 IS ALSO FOUND DULY REFLECTED IN THE BOOKS OF ACCOUNTS OF TH E APPELLANT. MAKING OF SUCH DONATION IS A NORMAL INCIDENCE OF APPELLANT S OBJECTIVES AND A CASE OF APPLICATION OF ITS INCOME IN TERMS OR PROVI SION OF SECTION 11. CBDT VIDE INSTRUCTION NO. 1132 DATED 05.01.1978 HAS STATED THAT PAYMENT OF A SUM BY A CHARITABLE TRUST TO ANOTHER C HARITABLE TRUST IS AN APPLICATION OF ITS INCOME FOR CHARITABLE PURPOSE S. THE SAME VIEW HAS ALSO BEEN HELD BY HONBLE ALLAHABAD HIGH COURT IN CASE OF CIT VS. J.K. CHARITABLE TRUST 196 ITR 31 (ALL).L IN THE REMAND REPORT DATED 02.03.2011 AO HAS SIMPLY STATED THE SAID DONATION I S NOT ALLOWABLE AS BUSINESS EXPENDITURE. SINCE THE APPELLANTS SOCIETY IS FOUND ELIGIBLE FOR EXEMPTION U/S 11 AND DONATION MADE TO ANOTHER C HARITABLE TRUST IS TO BE CONSIDERED APPLICATION OF ITS INCOME. THUS TH E AO IS NOT FOUND JUSTIFIED IN MAKING ADDITION OF RS. 10,00,000/- ON ACCOUNT OF DONATION TO THE APPELLANTS INCOME. THE SAME IS, HEREBY, DEL ETED. 9. THE LD. DR RELIED UPON THE ORDER OF THE AO AND S UBMITTED THAT BAD DEBT WRITTEN OFF IS NOT AS PER LAW AND THAT THE ASSESSEE SHOULD NOT HAVE GIVEN DONATIONS TO OTHER SOCIETIES. ON THE OTH ER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND REFERRED TO PB-41 TO SHOW THA T BAD DEBT WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT AND REFERRED TO BOARD CIRCULAR NO. 1132 AND DECISION OF DELHI HIGH COURT IN THE CASE O F DIT(EXEMPTION) VS. ACME INTERNATIONAL SOCIETY, 326 ITR 146 AND DIT (EXEMPTION) VS. ALARIPPU, 244 ITR 358. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND DO NOT FIND ANY MERIT IN BOTH THE GROUNDS OF APPEAL OF THE REVENUE. THE LD. CIT(A) GRANTED EXEMPTION TO THE ASSESSEE U/S. 11 OF THE IT ACT, WHICH IS CONFIRMED BY US ALSO IN THE PRECEDING PARAS. SINCE THE ASSESSEE IS DOING EDUCATIONAL ACTIVITIES AND WAS CONSIDERED AS CHARITABLE INSTITUTION, THEREFORE, ALL THE EXPENDITURE, REVENU E OR CAPITAL, INCURRED ITA NO. 301/AGRA/2012 15 IN FURTHERANCE OF ITS OBJECTIVES, ARE APPLICATION O F INCOME TO THE OBJECTS OF THE ASSESSEE-SOCIETY. THEREFORE, THE SAM E EXPENDITURES ARE ALLOWABLE DEDUCTION. THE AMOUNT ON ACCOUNT OF BAD D EBT WAS SPENT BY THE ASSESSEE AS PER AO FOR CAPITAL PURPOSES FOR THE OBJECT OF THE ASSESSEE-SOCIETY AND IN CASE, IT WAS NOT RETURNED, EVEN AFTER THE MATTER WAS SETTLED BY THE CIVIL COURT, THE WRITING OFF THE DEBT ARE NORMALLY TO BE NOTED IN THE BOOKS OF ACCOUNT AS PER LAW. THEREF ORE, THE ASSESSEE WAS ENTITLED FOR DEDUCTION OF THE SAME ON ACCOUNT O F APPLICATION OF INCOME TOWARDS THE OBJECTS OF THE ASSESSEE SOCIETY. THE LD. CIT(A) ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD RIGHTLY DELETED THE ADDITION OF RS.11,37,483/-. AS REGARDS THE DONA TIONS, THE ASSESSEE GAVE DONATIONS THROUGH BANKING CHANNELS TO THE TRUS TS HAVING SIMILAR OBJECTS, WHICH IS RECORDED IN THE BOOKS OF ACCOUNT OF BOTH THE CONCERNS. CBDT VIDE INSTRUCTION NO. 1132 NOTED BY T HE LD. CIT(A) IN THE APPELLATE ORDER CLEARLY CLARIFIED AND DECIDED T HAT THE PAYMENT OF SUM BY ONE CHARITABLE TRUST TO ANOTHER FOR UTILIZAT ION BY THE DONEE TRUST TOWARDS ITS CHARITABLE OBJECTS IS PROPER APPL ICATION OF INCOME FOR CHARITABLE PURPOSE IN THE HANDS OF THE DONEE TRUST AND DONOR TRUST WOULD NOT LOSE EXEMPTION U/S. 11 OF THE IT ACT. SAM E VIEW IS SUPPORTED BY THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF J.K. CHARITABLE TRUST (SUPRA). HONBLE DELHI HIGH COURT IN THE CASE OF ACME INTERNATIONAL SOCIETY (SUPRA) HELD ADVANCING OF INTEREST-FREE TEMPORARY LOAN BY ASSE SSEE SOCIETY TO ANOTHER SOCIETY HAVING SIMILAR OBJECTS IS NOT AN INVESTMENT OR A DEPOSIT, HENCE, THERE WAS NO VIOLATION OF PROVISI ON OF S. 13(1)(D) R/W S. 11(5) TO RENDER WITHDRAWAL OF EXEMPTION UNDE R S. 11. 10.1 HONBLE DELHI HIGH COURT IN THE CASE OF ALARIP PU (SUPRA) HELD CONCLUSION OF THE TRIBUNAL THAT AMOUNT ADVANCED A S TEMPORARY LOAN BY ASSESSEE-SOCIETY TO ANOTHER SIMIL AR SOCIETY WAS NEITHER AN INVESTMENT NOR DEPOSIT AND HENCE THERE W AS NO INFRINGEMENT OF S. 13(1)(D) R/W S. 11(5) BY ASSESSE E-SOCIETY BEING BASED ON FACTS FOUND BY TRIBUNAL, NO QUESTION OF LA W ARISES. 10.2 CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE LD. CIT(A) RIGHTLY DELETED THE ADDITION OF RS.10,00,000/- AS WELL. NO VIOLATION OF SECTION 13 F THE IT ACT HAS BEEN FOUND. THE LD. CIT(A), THEREFORE, RIGH TLY DELETED BOTH THE ITA NO. 301/AGRA/2012 16 ADDITIONS. IN THE RESULT, GROUNDS NOS. 2 & 4 OF APP EAL OF THE REVENUE ARE DISMISSED. 5.1 IN THE PRECEDING ASSESSMENT YEAR 2007-08, THE I SSUE OF HONORARIUM PAID TO VARIOUS PERSONS INCLUDING THE HONORARIUM PAID TO SH RI NARENDRA SINGH DHAKRE, SECRETARY WAS CONSIDERED IN DETAIL AND IN THE YEAR 2007-08, THE TOTAL REMUNERATION / HONORARIUM PAID WAS RS.24,94,000/- TO SEVERAL PERSO NS INCLUDING SHRI NARENDRA SINGH DHAKRE. IT WAS FOUND THAT SHRI NARENDRA SINGH DHAKRE HAS RENDERED ACTUAL SERVICES TO THE ASSESSEE AND THERE IS MARGINAL INCR EASE IN THE HONORARIUM AND NO MATERIAL WAS FOUND ON RECORD TO JUSTIFY THE FINDING S OF THE AO. FURTHER, SIMILAR HONORARIA WERE PAID IN EARLIER YEAR AND THE AO HAD ALLOWED EXEMPTION U/S. 11 OF THE IT ACT IN FAVOUR OF THE ASSESSEE. IT WAS, THERE FORE, HELD THAT SINCE THE ASSESSEE INCURRED EXPENSES WHOLLY AND EXCLUSIVELY FOR EDUCAT IONAL PURPOSE AND ALL THE AMOUNTS HAVE BEEN SPENT FOR EDUCATIONAL PURPOSES AN D FOR ACHIEVING THE AIMS OF ASSESSEE-SOCIETY, THEREFORE, THE ASSESSEE WOULD BE ENTITLED FOR EXEMPTION U/S. 11 OF THE IT ACT. NO VIOLATION U/S. 13(1)(C) WAS ACCORDIN GLY FOUND. IN THE ASSESSMENT YEAR UNDER APPEAL, TOTAL HONORARIUM / SALARY PAID T O SHRI NARENDRA SINGH DHAKRE WAS FOUND IN A SUM OF RS.3,50,872/- INCLUDING LIC P REMIUM. THE ASSESSEE IS ADMITTEDLY REGISTERED U/S. 12AA OF THE IT ACT AND P RODUCED COMPLETE BOOKS OF ACCOUNT SUPPORTED BY VOUCHERS AND 85% OF THE RECEIP TS WERE SPENT / UTILIZED TOWARDS THE OBJECTS OF THE ASSESSEE-SOCIETY. SMALL BENEFIT IS GIVEN TO SPECIFIED PERSONS, WHICH WAS INCLUDED IN THE HONORARIUM OF SH RI NARENDRA SINGH DHAKRE, ITA NO. 301/AGRA/2012 17 WHO IS THE KEY MEMBER OF FUNCTIONING OF THE SOCIETY , NOTHING COULD BE ATTRIBUTED TO THE ASSESSEE FOR VIOLATION OF PROVISIONS OF SECTION 13 OF THE IT ACT. THE AO HAS FAILED TO ESTABLISH THAT ANY UNREASONABLE OR EXCESS IVE PAYMENTS HAVE BEEN MADE TO ANY SPECIFIED PERSON. CONSIDERING THE ABOVE DISCUSS ION, WE ARE OF THE VIEW THAT THE LD. CIT(A) ON PROPER APPRECIATION OF FACTS AND MATE RIAL ON RECORD RIGHTLY DELETED THE ADDITION AND ALLOWED THE EXEMPTION TO THE ASSES SEE U/S. 11 OF THE IT ACT. IN THE RESULT, GROUND NO. 1 OF THE APPEAL OF REVENUE IS DI SMISSED. 6. ON GROUND NO. 2, THE AO MADE ADDITION OF RS.7,00 ,000/- FOR NON-DEDUCTION OF TDS IN RESPECT OF LEGAL EXPENSES. THE ADDITION W AS CHALLENGED BEFORE THE LD. CIT(A) AND WRITTEN SUBMISSIONS OF THE ASSESSEE ARE REPRODUCED IN THE IMPUGNED ORDER AS UNDER : IT IS SUBMITTED THE ASSESSMENT OF CHARITABLE TRUST OR INSTITUTION IS GOVERNED BY SECTION 11 TO 13 OF THE IT ACT, 1961 . SECTION 11 ENJOINS THAT THE INCOME TO THE EXTENT APPLIED FOR THE PURPO SES OF THE TRUST OR INSTITUTION IS EXEMPT. IN OUT CASE LEGAL CHARGES HA VE BEEN PAID (INCLUDING LEGAL CHARGES OF RS. 7.00 LACS PAID TO S HRI VIVEK TANKHA, SENIOR ADVOCATE OF SUPREME COURT) IS QUALIFIED AS A PPLICATION OF INCOME OF THE TRUST OR INSTITUTION AND IS THEREFORE TO THIS EXTENT THE INCOME IS EXEMPT. THE OTHER APPLICATIONS ON THE OBJ ECT OF THE TRUST OR INSTITUTION ARE ALSO EXEMPT U/S 11. IT IS IMMATERIA L THAT TDS HAS NOT BEEN INADVERTENTLY MADE ON THIS PAYMENT. NON DEDUCT ION OF TDS DOES NOT MEAN THAT THERE IS NO APPLICATION OF INCOME ON THE OBJECT AND PURPOSE OF THE SOCIETY. IT MAY ALSO BE STATED THAT THE INCOME OF A CHARITABLE TRUST OR INSTITUTION IS NOT COMPUTED UND ER THE HEAD BUSINESS OR PROFESSION AS THE OBJECT OF ANY CHARI TABLE INSTITUTION CAN NOT BE CARRYING ON OF ANY BUSINESS OR COMMERCIA L ACTIVITIES AND SECTION 40(A)(IA) HAS NO APPLICATION. SECTION 11 OF THE IT ACT, 1961 ITA NO. 301/AGRA/2012 18 DOES NOT OTHERWISE, PROVIDE THAT IF TDS IS NOT MADE IN RESPECT OF CERTAIN INCOME APPLIED ON THE PURPOSE AND OBJECT OF THE TRUST, SUCH AN APPLICATION WOULD NOT BE DEEMED AS APPLICATION OF INCOME. ACCORDINGLY THE AMOUNT OF RS. 7.00 LACS PAID ON ACC OUNT OF LEGAL EXPENSES AS CANNOT BE TREATED NON APPLICATION OF TH IS AMOUNT TOWARDS THE OBJECT OF THE TRUST. IT MAY ALSO BE STATED THAT APPLICATION OF INCOME OF EARLIER YEARS IN THE CASE OF ASSESSEE INSTITUTION WAS MORE THAT 85% OF I TS INCOME AND THE EXCESS APPLICATION OVER 85% IN EARLIER YEARS IS ALS O AVAILABLE TO THIS INSTITUTION IN THE CURRENT YEAR. THESE ARGUMENTS & PLEADINGS WERE MADE BEFORE THE AO IN WRITING. WITHOUT PREJUDICE TO ABOVE IT IS FURTHER SUBMITTED THAT THE APPELLANT SOCIETY BY RUNNING VARIOUS EDUCATION INSTITUTION DU LY AFFILIATED TO UNIVERSITIES OR OTHER REGULAR BODIES IS ENGAGED IN THE PHILANTHROPIC & CHARITABLE OBJECTS, IT IS NOT ENGAGED IN CARRYING O N A BUSINESS LIKE A COACHING CLASSES. THE INCOME IF ANY OF THAT APPELLA NT SOCIETY IS NOT BE COMPUTED UNDER THE HEAD INCOME FROM BUSINESS OR PR OFESSION. IF ANY INCOME HAS TO BE COMPUTED, IT WOULD BE COMPUTED UNDER THE HEAD OF INCOME FROM OTHER SOURCES. AND IN THE COMPUTAT ION OF INCOME UNDER THE HEAD OF OTHER SOURCES SECTION 58 TITLED A S AMOUNT NOT DEDUCTIBLE DOES NOT STIPULATED THAT PROVISION OF S ECTION 40(A)(IA) WOULD BE APPLICABLE. IN OTHER WORDS WHERE TDS IS NO T MADE ON PROFESSIONAL FESS IN INDIA (U/S 194 J) WHILE COMPUT ING THE INCOME OF A CHARITABLE INSTITUTION UNDER THE HEAD OTHER SOURCE S, NO DISALLOWANCE OF THE PROFESSIONAL FESS OR LEGAL CHARGES CAN BE MA DE. 6.1 THE LD. CIT(A) CONSIDERING THE EXPLANATION OF T HE ASSESSEE DELETED THE ADDITION. HIS FINDINGS IN PARA 4.2 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 4.2 APPELLANTS SUBMISSIONS HAS BEEN CONSIDERED CA REFULLY & ARE FOUND ACCEPTABLE. SINCE THE APPELLANTS SOCIETY CLAIM OF EXEMPTION U/S 11 HAS BEEN FOUND SUSTAINABLE AS PER PRECEDING PARAS OF THIS ORDER, SUCH DISALLOWANCE MADE U/S 40(A)(IA) BECOMES ONLY OF ACADEMIC IMPORTANCE ONLY AS THE ONLY CRITERIA TO EX AMINE IS TO SEE APPLICATION/UTILIZATION OF FUNDS OF THE SOCIETY TOW ARDS ITS OBJECTS. APPELLANTS INCOME IS TO BE ASSESSED AS PER PROVISI ONS OF SECTION ITA NO. 301/AGRA/2012 19 11/13 OF THE IT ACT IN PLACE OF REGULAR BUSINESS IN COME. IT HAS BEEN CATEGORICALLY HELD BY HONBLE ITAT, MUMBAI IN CASE OF S.B. BUILDERS & DEVELOPERS VS. ITO (2011) 136 TTJ (MUMBAI) 420 IN ITA NO. 1245/MUM/2009 THAT WHERE AO MAKES ADDITIONS TO INCO ME OF ASSESSEE U/S 40(A)(IA) FOR NON COMPLIANCE OF TDS PROVISION, SUCH ADDITIONAL INCOME ALSO SHOULD BE CONSIDERED FOR THE PURPOSE OF ALLOWING DEDUCTION U/S 80-IB(10), AS PER SECTION 80-AB R/W S ECTION 29. ON THE SAME ANALOGY, AMOUNT OF RS. 7,00,000/- IS TO BE CON SIDERED AS APPLICATION OF INCOME & ONLY FULFILLMENT OF REQUIRE MENTS OF SECTION 11 NEEDS TO BE SEEN WHICH THE APPELLANT SOCIETY IS FOU ND TO BE SATISFYING. ACCORDINGLY, ADDITION OF RS. 7,00,000/- IS NOT FOUN D SUSTAINABLE & HEREBY DELETED. 6.2 ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE A RE OF THE VIEW THAT THE ADDITION HAS BEEN RIGHTLY DELETED BY THE LD. CIT(A) . IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS UTILIZED MORE THAN 85% OF ITS INCOME F OR ACHIEVING THE OBJECTS OF THE SOCIETY. EVEN IF ADDITION WAS MADE FOR NON-DEDUCTIO N OF TDS, THE SAME CANNOT BE TREATED AS ADDITIONAL INCOME, FOR WHICH BENEFIT OF SECTION 11 HAVE TO BE GRANTED TO THE ASSESSEE. THIS ISSUE WAS ALSO CONSIDERED IN THE PRECEDING ASSESSMENT YEAR 2007-08 AND THE DEPARTMENTAL APPEAL HAS BEEN DISMIS SED. THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE PROVISIONS OF SECT ION 40(A)(IA) ARE MEANT FOR BUSINESS INCOME ONLY AND SINCE IN THE CASE OF THE A SSESSEE IT IS DOING CHARITABLE ACTIVITIES BY PROVIDING EDUCATION, THEREFORE, SUCH A PROVISION WOULD NOT BE ATTRACTED IN THE CASE OF ASSESSEE. FURTHER, WE FIND THAT THIS ISSUE HAS NOT BEEN DECIDED BY THE AUTHORITIES BELOW AND SINCE WE ARE D ISMISSING THE DEPARTMENTAL APPEAL ON THIS GROUND AS WELL, WE DO NOT FIND IT AP PROPRIATE TO GIVE ANY FINDING ON ITA NO. 301/AGRA/2012 20 THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE . IN VIEW OF THE ABOVE, THE DEPARTMENTAL APPEAL ON GROUND NO. 2 IS ALSO DISMISS ED. 7. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY
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