The DCITNavsari Circle, Navsari V. Dharampur Utthan Vahini, Navsari

ITA 3151/AHD/2010

• Counselvise Citation: 315120514 RSA 2010
• Duration Of Justice: 2 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 29-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: K N BHATT
• Keywords: Charitable institution
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEM BER DY. COMMISSIONER OF INCOME-TAX, NAVSARI CIRCLE, NAVSARI (APPELLANT) VS DHARAMPUR UTTHAN VAHINI, VRINDAVAN CAMPUS, AT & POST: LACHHAKADI, TAL: VANSADA, DIST: NAVSARI PAN: AAATD4290P (RESPONDENT) REVENUE BY: SRI O.P. BATHEJA , SR.D.R. ASSESSEE BY: SRI K.N. BHATT, A.R. DATE OF HEARING : 10-10-2013 DATE OF PRONOUNCEMENT : 25-10-20 13 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE REVENUES APPEAL AGAINST THE ORDER OF LD. CIT(A), VALSAD DATED 11-08-2010. ITA NO. 3151/AHD/2010 ASSESSMENT YEAR 2007-08 I.T.A NO.3151/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. DHARAMPUR UTTHAN VAHINI 2 2. REVENUE HAS TAKEN FOLLOWING EFFECTIVE GROUND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HONBLE CIT(A) ERRED IN ALLOWING THE CLAIM OF T HE ASSESSEE FOR DEDUCTION U/S. 11(1) OF THE ACT AND DELETING THE AD DITION OF RS. 11,77,679/- 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS AO OBSERVED FROM THE INCOME AND EXPENDI TURE ACCOUNT THAT ASSESSEE-TRUST HAD DISCLOSED TOTAL RECEIPTS OF RS. 4,53,46,906/- AND CLAIMED TO HAVE APPLIED IT FOR ITS OBJECTS AND CLAIMED EXEM PTION U/S. 11 OF THE I.T. ACT. IT WAS ALSO OBSERVED THAT THE TRUST RECEIVED FUNDS FROM THE NABARD @ 6% AND THE SAME WAS ALLOTTED FOR ITS OBJECTS AS W ELL AS TO THE MEMBERS/FARMERS/BENEFICIARIES OF THE TRUST THROUGH GRAM VIKAS MANDAL @ 9% AND GRAM VIKAS MANDAL ALLOTTED THE SAID FUNDS RE CEIVED FROM THE TRUST TO THE MEMBERS/FARMERS/BENEFICIARIES ON INTEREST @ 9 % TO 12%. FURTHER IT WAS ALSO SEEN THAT THE GRAM VIKAS MANDAL WERE UNREGISTE RED BODIES PLAYING ROLE OF INTERMEDIARIES BETWEEN THE TRUST AND BENEFICIARI ES THEREBY THE TRUST CREATED EXTRA BURDEN ON THE BENEFICIARIES OF THE TRUST IN AS MUCH AS THE INTEREST PAID TO THE GRAM VIKAS MANDAL. THE SERVICES PROVIDED BY THE TRUST TO BENEFICIARIES WERE NEITHER COST TO COST NOR FREE AT ALL. THERE WAS NO NEED TO INTRODUCE GRAM VIKAS MANDAL AS INTERMEDIARIES WHEN THE OBJECTS OF THE TRUST WAS FOR THE BENEFIT OF THE BENEFICIARIES. THE ABOV E ACTIVITIES OF THE TRUST WAS OUT OF PREVIEW OF OBJECTS WHICH LED TO BELIEF THAT THE TRUST WAS ENGAGED IN BUSINESS ACTIVITIES AND ANY GAIN EARNED FROM SUCH A CTIVITIES DID NOT QUALIFY FOR EXEMPTION U/S. 11 OF THE I.T. ACT. IT WAS ALSO HELD BY AO THAT THE GRAM VIKAS MANDAL WAS UNAUTHENTIC BODY AND ANY INTEREST PAID TO IT WAS NOT I.T.A NO.3151/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. DHARAMPUR UTTHAN VAHINI 3 ALLOWABLE AS EXPENDITURE IN THE HEAD OF THE ASSESSE E TRUST. THUS IT WAS CLEAR THAT THE TRUST WAS ENGAGED IN COMMERCIAL ACTIVITIES I.E. BORROWING FUNDS AT LOWER RATE OF INTEREST AND ADVANCING THE SAME TO TH E BENEFICIARIES AT HIGHER RATE WHICH WAS OUT OF THE PURVIEW OF ITS OBJECTS AS PER ITS TRUST DEED/MEMORANDUM OF ASSOCIATION. THEREFORE, THE AO REJECTED THE CLAIM OF DEDUCTION U/S. 11(1) AND TREATED THE DIFFERENCE OF INTEREST CHARGED FROM BENEFICIARIES AND PAID TO THE NABARD AMOUNTING TO R S. 11,77,697/- AS ITS INCOME. 4. IN APPEAL LD. CIT(A) DELETED THE ADDITION BY HOL DING THAT ASSESSEES TRUST SATISFIED IN TERMS OF OBJECTS OF THE TRUST, T HE RURAL DEVELOPMENT BEING AN OBJECT, FALLS WITHIN THE DEFINITION OF CHARITABLE P URPOSES U/S. 2(15) OF THE ACT. SINCE THE ASSESSEE-TRUST COMPLIED WITH THE PROVISIO N OF SECTION 11(4A) OF THE ACT, IT DESERVED EXEMPTION U/S. 11 OF THE ACT. HE WHILE DOING SO PLACED RELIANCE ON HIS EARLIER ORDERS FOR ASSESSMENT YEAR 2005-06 AND 2006-07 IN ASSESSEES OWN CASE. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT THE ISSUE IS NOW COVERED IN FAVOUR OF ASSESSEE AND AGAI NST THE REVENUE VIDE TRIBUNALS ORDER IN ASSESSEES OWN CASE VIDE ITA NO . 600/AHD/2008 FOR THE ASSESSMENT YEAR 2004-05 DATED 04-06-2010 WHEREIN FO LLOWING WAS HELD. 7 ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND IT TO BE A FIT CAS FOR INTERFERENCE WITH THE ORDER O F THE LEARNED CIT(A). IT IS UNDISPUTED FACT THAT THE ASSESSEE IS A PUBLIC CHARITABLE TRUST REGISTERED UNDER THE PROVISIONS OF SECTION 12A OF THE IT ACT CARRYING OUT VARIOUS OBJECTS INCLUSIVE OF OBJECT OF RURAL DE VELOPMENT. THE ASSESSEE CLAIMED THAT SINCE THE OBJECTS OF THE ASSE SSEE TRUST BEING I.T.A NO.3151/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. DHARAMPUR UTTHAN VAHINI 4 RURAL DEVELOPMENT, THE SAME FALLS WITHIN THE PURVIE W OF SECTION 2(15) OF THE I.T. ACT WHICH DEFINES MEANING OF ADVANCEMEN T OF ANY OTHER OBJECTS OF GENERAL PUBLIC UTILITY WHICH PARTAKES TH E CHARACTER OF CHARITABLE TRUST. THE ASSESSEE FILED TABLE OF INCO ME AND APPLICATION OF INCOME BEFORE THE LEARNED CIT(A) FOR ASSESSMENT YEAR UNDER CONSIDERATION WHICH PROVED THAT THE ASSESSEE MET WI TH THE CONDITIONS STIPULATED IN SECTION 11 OF THE I.T. ACT. BENEFIC IARIES OF THE ASSESSEE TRUST ARE FARMERS OF TRIBAL AREA AND THE ACTIVITIE S OF THE ASSESSEE TRUST ARE CARRIED OUT FOR ATTAINMENT OF THE OBJECTIVES O F THE TRUST. NOTHING IS POINTED OUT IF THERE WAS DIVERSION OF ANY INCOM E TO ANY PERSON PROHIBITED UNDER THE LAW. THE ASSESSEE FILED FINANC IAL STATEMENT BEFORE THE LEARNED C1T(A) TO SHOW THAT THE TRUST HAS PROVI DED FERTILIZERS TO THE POOR FARMERS EVEN AT FREE OF COST. LD. CIT(A) ON CONSIDERATION OF MATERIALS BEFORE HIM AND DECISIONS CITED BEFORE H IM WAS SATISFIED WITH THE OBJECTS OF THE ASSESSEE TRUST AND ITS ACTI VITIES WHICH ARE FALLING WITHIN THE PURVIEW OF ADVANCEMENT OF ANY OT HER OBJECT OF GENERAL PUBLIC UTILITY AS DEFINED U/S. 2(15) OF THE IT ACT WITH EFFECT FROM 01-04-2009 WHICH IS NOT APPLICABLE TO THE ASS ESSMENT YEAR UNDER APPEAL. THE LEARNED CIT(A) ON CONSIDERATION O F THE MATERIAL ON RECORD SPECIFICALLY HELD THAT THE ASSESSEE HAS COMP LIED WITH THE PROVISIONS OF SECTION 11 OF THE I.T. ACT, THEREFORE THE ASSESSEE CANNOT BE DENIED THE BENEFIT U/S. 11 OF THE IT ACT, HON'BL E DELHI HIGH COURT IN THE CASE OF BHARAT KALYAN PRATISTHAN VS DIRECTOR OF INCOME-TAX (EXEMPTION) 299 ITR 406 HELD 'HELD, ALLOWING THE AP PEAL, THAT THE TRUST DEED REQUIRED THE TRUST TO UTILIZE ITS FUNDS FOR CHARITABLE PURPOSES WHICH WERE MEDICAL RELIEF, EDUCATION AND RELIEF TO THE POOR. IN THE APPLICATION FOR ACCUMULATION THE ASSESSEE HAD SPECI FIED THESE THREE OBJECTS. IT WAS NOT REQUIRED FOR THE ASSESSEE TO BE MORE SPECIFIC WITH REGARD TO THE UTILIZATION OF THE FUNDS. THE ASSES SEE WAS ENTITLED TO ACCUMULATE THE INCOME FOR THE OBJECTS OF THE TRUST. INCIDENTAL INCOME OR ACCUMULATION OF INCOME FOR THE OBJECTS OF TRUST CANNOT DENY BENEFIT OF SECTION 11 OF THE IT ACT TO ASSESSEE. THE LEARNE D DR HAS NOT PRODUCED ANY EVIDENCE OR MATERIAL BEFORE US TO CONT RADICT THE FINDINGS OF THE LEARNED CIT(A). IN THE ABSENCE OF ANY CONTR ARY MATERIAL ON RECORD, WE NOT FIND IT TO BE FIT CASE FOR INTERFERE NCE. WE ACCORDINGLY, CONFIRM THE FINDINGS OF THE LEANED CIT(A) AND DISMI SS THE APPEAL OF THE REVENUE. I.T.A NO.3151/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. DHARAMPUR UTTHAN VAHINI 5 6. IN VIEW OF THE ABOVE, REVENUES APPEAL IS DISMIS SED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (T.R. MEENA) ( D.K. TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 25/10/2013 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,