INCOME TAX OFFICER WARD-1, Akola V. Gyan Seva Society, Akola

ITA 308/NAG/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1730 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 12-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Assessee Lawyers: R V LOYA
• Keywords: Charitable institution
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 308/NAG./2013 ( ASSESSMENT YEAR : 2008-09 ) INCOME TAX OFFICER WARD-1, AAYAKAR BHAVAN MURTIZAPUR ROAD AKOLA 444 001 APPELLANT V/S GYAN SEVA SOCIETY HOLLY CROSS CONVENT JATHARPETH, AKOLA PAN AAATG0798H .... RESPONDENT REVENUE BY : SHRI NARENDRA KANE ASSESSEE BY : SHRI R.V. LOYA DATE OF HEARING 17.07.2015 DATE OF ORDER O R D E R PER SHAMIM YAHYA, A.M. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 1 ST APRIL 2013, PASSED BY THE LEARNED COMMISSIONER (APPEALS)-I, NAGPUR, FOR THE ASSESSMENT YEAR 2008-09, ON THE FOLLOWING GROUNDS OF APPEAL:- GYAN SEVA SOCIETY 2 1. THE LEARNED CIT(A) ERRED IN ALLOWING THE EXEMPTI ON FO ` 33,12,795, UNDER SECTION 11(2) OF THE ACT WITHOUT APPRECIATING THAT IN THE FORM NO.10 SUBMITTED ALONG WITH THE RETURN OF INCOME, THE PURPOSE FOR ACCUMULATION OF INCO ME UNDER SECTION 11(2) OF THE ACT BY THE ASSESSEE WAS NO T SPECIFIED. 2. THE LEARNED CIT(A) ERRED IN ALLOWING THE EXEMPTION OF ` 33,12,795 UNDER SECTION 11(2) OF THE ACT WITHOUT APPRECIATING THAT IN THE FORM NO.10, THE OBJECT WISE AND AMOUNT WISE ACCUMULATION WAS NOT SPECIFIED AND THERE FORE, THE EXEMPTION CLAIMED BY THE ASSESSEE UNDER SECTION 11(2) OF THE ACT WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF LAW. 2. IN THIS CASE, THE ASSESSEE TRUST HAS SHOWN ` 28,00,000, BEING INCOME ACCUMULATED UNDER SECTION 11(3) OF THE ACT AFT ER SETTING APART OF ` 5,12,795 UNDER SECTION 11(1)(A) OF THE ACT FOR THE CURR ENT YEAR AS THE SURPLUS IS EXCEEDING 15% OF THE GROSS RECEIPTS. TH E APPELLANT SOCIETY HAS FILED FORM NO.10 ALONG WITH THE RETURN OF INCOME. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 10 TH OCTOBER 2008. IN THE SAID FORM, IT IS MENTIONED THAT FUNDS ARE FOR THE PURPOSE OF CONSTRUCTION OF SCHOOL BUILDING, PAINTING A ND RENOVATION OF BUILDING, PURCHASE OF FIXED ASSETS AND OBJECTS OF THE TRUST . THE ASSESSING OFFICER WAS OF THE OPINION THAT THE SAID DES CRIPTION IN FORM NO.10, WAS NOT CLEAR, HENCE, THE ASSESSMENT WAS RE-OPEN ED. THE ASSESSING OFFICER WAS OF THE OPINION THAT SPECIFICS LIKE CONSTRUCTION OR PAINTING OR RENOVATION OF WHICH BUILDING, THE PURCHAS E OF WHICH ASSETS, ETC., HAVE NOT BEEN SPECIFIED. THE ASSESSING OFFICER FURTHE R REFERRED TO GYAN SEVA SOCIETY 3 THE CASE LAW OF THE HONBLE CALCUTTA HIGH COURT IN DIT (E) V/S TRUSTEES OF SINGHANIA CHARITABLE TRUST , [1993] 199 ITR 819 (CAL.). ACCORDINGLY, THE ASSESSING OFFICER HELD THAT THE SURPLUS WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. UPON ASSESSEES APPEAL, THE LEARNED CIT(A) CONSIDERED T HE ASSESSEES SUBMISSIONS. HE OPINED THAT WHILE DENYING THE CLAIM OF ACCUMULATION OF INCOME UNDER SECTION 11(2) OF THE ACT, THE ASSESSING OFFICER HAS HEAVILY RELIED ON THE JUDGMENT OF THE HON BLE CALCUTTA HIGH COURT IN TRUSTEES OF SINGHANIA CHARITABLE TRUST (SUPRA) . THE LEARNED CIT(A) FOUND THAT THERE ARE VARIOUS OTHER JUDGMENTS CI TED BY THE ASSESSEE SOCIETY WHEREIN IT WAS HELD THAT IT NEED N OT NECESSARILY OR SPECIFICALLY STATE FOR WHICH THE PURPOSE OF ACCUMULAT ION IS SOUGHT FOR. THE LEARNED CIT(A) FURTHER OBSERVED THAT THE PURPOSE OF ACCUMULATION CANNOT BE BEYOND THE OBJECTS OF THE TRUST FOR WHICH IT IS CREATED. THAT IN THE PRESENT CASE, IT IS NOT DISPUTED THAT THE APPELL ANT SOCIETY IS A TRUST ENGAGED FOR CHARITABLE ACTIVITIES UNDER SECTION 2(15 ) OF THE ACT. THAT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION THE APPELLA NT SOCIETY IS HAVING VALID REGISTRATION UNDER SECTION 12A OF THE ACT, WHICH WAS NOT DISTURBED BY ANY OF THE AUTHORITIES AND THE APPELLANT SOCIETY ALSO FILED FORM NO.10 AS REQUIRED UNDER SECTION 11(2) READ WITH RULE 17 O F THE INCOME TAX RULE, 1962. THAT THE ONLY DISPUTE OF THE ASSESSING OFFICER IS THAT THE GYAN SEVA SOCIETY 4 APPELLANT SOCIETY HAS NOT MENTIONED THE SPECIFIC PUR POSE FOR WHICH THE ACCUMULATION IS SOUGHT FOR. 4. THE LEARNED CIT(A) FURTHER REFERRED TO THE DECISION OF D IT V/S DAULAT RAM EDUCATION SOCIETY, [2005] 278 ITR 260 (DEL.) AND DIT V/S MITSUI AND CO. ENVIRONMENTAL TRUST, [2007] 278 ITR 111 (DEL.). BASED ON THESE CASE LAWS, THE LEARNED CIT(A) HELD THAT THE AS SESSING OFFICER WAS NOT CORRECT IN LEVYING OF TAX ON ENTIRE ACCUMULA TED INCOME. HE DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION. AGAINST THIS ORDER, THE REVENUE IS IN APPEAL BEFORE US. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT FOR THE YEA R UNDER CONSIDERATION, THE ASSESSEE SOCIETY IS HAVING VALID REGISTRATION UNDER SECTION 12A OF THE ACT. THIS HAS NOT BEEN DISTURBED B Y ANY OF THE AUTHORITIES BELOW. THE ASSESSEE SOCIETY HAS ALSO FIL ED FORM NO.10, AS REQUIRED UNDER SECTION 11(2) OF THE ACT READ WITH RUL E 17 OF THE RULES. THE ONLY DISPUTE OF THE ASSESSING OFFICER IS THAT THE A SSESSEE SOCIETY HAS NOT MENTIONED THAT THE SPECIFIC OBJECT FOR WHICH T HE ACCUMULATION IS SOUGHT FOR. WE FIND THAT IN THE SAID FORM NO.10, ALONG W ITH THE RETURN OF INCOME, THE FOLLOWING PURPOSE IS MENTIONED FOR ACCUMULATION: - GYAN SEVA SOCIETY 5 (A) CONSTRUCTION OF SCHOOL BUILDING; (B) PAINTING AND RENOVATION OF BUILDING; (C) PURCHASE OF FIXED ASSETS; AND (D) OBJECTS OF THE TRUST. NOW THE ASSESSING OFFICER HAS FOUND FAULT WITH THE ABOVE , HOLDING THAT THEY ARE NOT SPECIFIC. FOR THIS PURPOSE, HE HAS R ELIED UPON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN TRUSTEE S OF SINGHANIA CHARITABLE TRUST (SUPRA) WHEREIN IT HAS BEEN, INTER-A LIA, MENTIONED THAT THE ASSESSEE MUST BE SPECIFIC IN THE NOTICE, ABOUT THE CO NCRETE NATURE OF THE PURPOSE FOR WHICH THE ACCUMULATION IS BEING MADE FOR. NOW WE FIND THAT THE ASSESSEES COUNSEL AS WELL AS THE LEARNED CIT(A) HAS RELIED UPON THE DECISION OF OTHER HONBLE HIGH COURTS. IN THI S REGARD, WE MAY REFER TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN MITSUI AND CO. ENVIRONMENTAL TRUST (SUPRA) FOR THE FOLLOWING PROPOSI TION (HEAD NOTE ONLY):- CHARITABLE TRUST ACCUMULATION OF INCOME SPECULATI ON OF PURPOSE ASSESSEE HAS STATED IN THE APPLICATION TH AT THE AMOUNT WOULD BE UTILIZED FOR THE OBJECTS OF THE TRUST IT COULD NOT BE SAID THAT THE PURPOSE OF ACCUMULATION WAS NOT SPECIFI ED AND THE PRIMARY CONDITION OF S. 11(2) WAS NOT FULFILLE D. PURPOSE OF ACCUMULATION CANNOT BE BEYOND THE OBJECT OF THE TRUST THUS, IT NEED NOT NECESSARILY BE SPECIFICALLY STATED FOR WHICH PURPOSE THE ACCUMULATION IS SOUGHT. GYAN SEVA SOCIETY 6 6. FURTHERMORE, THE HONBLE PUNJAB & HARYANA HIGH COURT IN CIT V/S MARKET COMMITTED, [2011] 201 TAXMAN 234 (P&H), HELD AS UNDER (HEAD NOTE ONLY):- A TRUST REGISTERED AS A CHARITABLE TRUST WHICH AC CUMULATED ITS INCOME UNDER SECTION 11(2) BY STATING IN FORM N O.10, THAT ACCUMULATION OF THE FUNDS HAS BEEN MADE FOR DEVELOPMENT OF WORK IT COULD NOT BE SAID THAT THE PURPOSE OF ACCU MULATION WAS NOT SPECIFIED AND THAT PRIMARY CONDITION OF SECTI ON 11(2) WAS NOT FULFILLED. 7. THE HONBLE DELHI HIGH COURT IN DIT(E) V/S DAULAT RA M EDUCATION SOCIETY, [2005] 278 ITR 260 (DEL.), HELD AS UNDER (HEAD NOTE ONLY ):- PURPOSE FOR ACCUMULATION WHILE CLAIMING EXEMPTION UNDER SECTION 11, ASSESSEE SPECIFIED EIGHT PURPOSES IN FORM NO.10 IT IS NOT THE CASE OF REVENUE THAT PURPOSE ARE NOT CHARITABLE AS SOME DO NOT FIGURE IN THE MEMORANDUM O F ASSOCIATION JUST BECAUSE MORE THAN ONE PURPOSE HAV E BEEN SPECIFIED AND DETAILS ABOUT PLANS NOT GIVEN MAY NO T BE SUFFICIENT TO DENY EXEMPTION ADMISSIBLE UNDER SECTION 11. 8. THE HONBLE DELHI HIGH COURT IN BHARAT KALYAN PRTISTHA N V/S DIT(E), [2008] 299 ITR 406 (DEL.), OBSERVED AS UNDER:- THE ASSESSEE HAS ONLY THREE OBJECTS AS FAR AS ITS T RUST DEED IS CONCERNED. THE TRUST DEED REQUIRES THE TRUST TO UTILIZE ITS FUNDS FOR CHARITABLE PURPOSES WHICH ARE MEDICAL RELIE F, EDUCATION AND RELIEF TO THE POOR. IN THE APPLICATION SEEKING EXEMPTION, THE ASSESSEE HAS SPECIFIED THESE THREE OB JECTS. IT WAS NOT REQUIRED FOR THE ASSESSEE TO BE MORE SPECIFIC WITH REGARD TO THE UTILIZATION OF THE FUNDS. PLURALITY OF PU RPOSES IS PERMITTED AND IF IT SO HAPPENS THAT AN ASSESSEE HAS ONLY GYAN SEVA SOCIETY 7 THREE OBJECTS OR PURPOSES, IT MAY WELL UTILIZE THE FU NDS FOR ALL THE THREE OBJECTS AND HAS ONLY THREE OBJECTS OR PURP OSES, IT MAY WELL UTILIZE THE FUNDS FOR ALL THE THREE OBJECTS A ND PURPOSE. 9. THE BOVE CASE LAWS CLEARLY PROVIDE THAT THE PURPOSE OF ACCUMULATION SHOULD NOT BE BEYOND THE OBJECTS OF THE TRUST. DETAILS PLAN OF THE PURPOSE NEED NOT BE SPECIFIED. NOW, WE MAY EXAMI NE THE OBJECT STATED BY THE ASSESSEE IN THIS CASE ON THE ANVIL OF THE ABOVE STATED CASE LAWS. IT IS CLEAR THAT IT IS NOT THE CASE OF THE REV ENUE THAT THE PURPOSES AS SPECIFIED ARE BEYOND THE OBJECTS OF THE TRUST. THE LEARNED CIT(A) HAS OBSERVED THAT THE ASSESSEE SOCIETY HAS STATED THAT THE SCHOOL BUILDINGS ARE IN A DILAPELATED CONDITION AND ARE NOT IN A POS ITION TO BE USED FOR SMALL CHILDREN. THAT THE BUILDING CONSTRUCTION WAS COMPLETED AND THE BUILDING FUNDS ACCUMULATED OVER THE YEARS HAVE BEEN UTILIZED. IN THIS REGARD, THE LEARNED CIT(A) HAS GIVEN A FINDING THAT FOR THIS PURPOSE, THE ASSESSEE SOCIETY HAS ALSO FILED COMPUTATION OF INCOME ALONG WITH RETURN OF INCOME FOR THE FINANCIAL YEAR 2009-10. THUS, WE AGREE WITH THE FINDINGS OF THE LEARNED CIT(A) THAT WHEN THE OBJECTS OF THE TRUST INCLUDES IMPARTING EDUCATION, THEN THE CAPITAL EXPEN DITURE INCURRED FOR CONSTRUCTION / RENOVATION / REPAIRS TO THE SCHOOL B UILDING IS ALSO WITHIN THE OBJECTS OF THE SOCIETY. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE SOCIETY HAS NOT UTILIZED THE ACCUMULATION IN FINANCI AL YEAR 2009-10 AND FILED PROOF IN SUPPORT OF THE CLAIM. GYAN SEVA SOCIETY 8 10. THUS, WE FIND THAT IN THE BACKGROUND OF THE AFORESAID D ISCUSSION AND CASE LAWS FROM THE HONBLE DELHI HIGH COURT, HON BLE PUNJAB & HARYANA HIGH COURT, THE DISALLOWANCE BY THE ASSESSING OFFICER ON THE GROUND THAT THE OBJECT OF ACCUMULATION ARE NOT SPECIFI C ARE NOT SUSTAINABLE THOUGH THE ASSESSING OFFICER HAS REFERRED TO THE DECISION OF THE HONBLE CALCUTTA HIGH COURT. FIRSTLY, THE SAID DECI SION DOES NOT EXACTLY SUPPORT THE CASE OF THE ASSESSING OFFICER. IN TH E SAID CASE LAW, IT WAS HELD THAT THE GENERALITY OF THE OBJECT OF THE TRUS T CANNOT TAKE THE PLACE OF SPECIFICITY OF THE NEED FOR ACCUMULATION. NOW, T HERE ARE OTHER CASE LAWS FROM OTHER HIGH COURTS WHICH DO NOT CALL FOR THE PURPOSE OF ACCUMULATION TO BE VERY SPECIFIC. HOWEVER, IT HAS BEEN HELD THAT THE PURPOSE OF ACCUMULATION CANNOT BE BEYOND THE OBJECT O F THE TRUST AS WE HAVE ALREADY FOUND OUT ABOVE THE PURPOSE OF ACCUMULAT ION IN THE PRESENT CASE CANNOT BE SAID TO BE BEYOND THE OBJECT OF THE TRUST. AE NOTE THAT THERE IS NO DECISION OF HONBLE JURISDICTI ONAL HIGH COURT CITED BEFORE US SPECIFICALLY ON THE SUBJECT. THE HONBLE SU PREME COURT IN CIT V/S VEGETABLE PRODUCTS LTD. [1973] 88 ITR 192 (SC), HAS HELD THAT IF THERE ARE TWO CONSTRUCTION POSSIBLE, ONE IN FAVOUR OF THE ASSESSEE SHOULD BE ADOPTED. HENCE, RESPECTFULLY FOLLOWING THE P RECEDENTS OF THE HONBLE DELHI HIGH COURT AND THE DECISION OF THE HON BLE P&H HIGH COURT CITED SUPRA AND IN THE BACKGROUND OF OUR DISCUSSION HEREIN ABOVE, WE DO GYAN SEVA SOCIETY 9 NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT( A). ACCORDINGLY, WE UPHOLD THE SAME. THE GROUNDS RAISED BY THE REVENUE ARE DISM ISSED. 11. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.08.2015 SD/ - MUKUL K. SHRAWAT JUDICIAL MEMBER SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER NAGPUR, DATED: 21.08.2015 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR; (6) GUARD FILE. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY A SSISTANT REGISTRAR ITAT, NAGPUR