Nalanda Foundation, New Delhi V. DDIT (E), New Delhi

ITA 371/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53296 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 01-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 21-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Assessee Lawyers: R K SEHGAL
• Keywords: Charitable institution
• Section: 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH E DELHI ] BEFORE SHRI I. P. BANSAL, JM & SHRI K. D. RANJAN, AM I. T. APPEAL NO. 371 (DEL) OF 2011. ASSESSMENT YEAR : 2007-08. NALANDA FOUNDATION, DY. DIRECTOR OF INCOM E-TAX, R 90, FIRST FLOOR, VS. [ EXEMP TION ]; GREATER KAILASH I, INV. CIRCLE : II, N E W D E L H I 110 048. N E W D E L H I. PAN / GIR NO. AAATN 8661N. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI R. K. SEHGAL, C. A.; DEPARTMENT BY : SHRI SALIL MISHRA, SR. D. R.; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 20 07-08 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)-XXI, NEW DELHI. 2. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS R EPRODUCED AS UNDER :- THE ASSESSMENT ORDER DENYING EXEMPTION TO THE ASSESSEE TRUST UNDER SECTION 11 & 12 OF THE INCOME TAX ACT, 1961 AND CON FIRMATION OF IT BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO FACTS AND LAW AND THEREFORE, THE ASSESSMENT ORDER CONFIRMED BY THE CO MMISSIONER OF INCOME TAX (APPEALS) IS LIABLE TO BE QUASHED AND TRUST BE ALLOWED EXEMPTION UNDER SECTION 11 & 12. 3. THE ONLY ISSUE FOR CONSIDERATION RELATES TO DENY ING EXEMPTION TO THE ASSESSEE UNDER SECTION 11 AND 12 OF THE INCOME TAX ACT, 1961 [HERE INAFTER REFERRED TO AS THE ACT]. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE IS A REGISTERED TRUST UNDER SECTION 12A OF THE ACT. 2 I. T. APPEAL NO. 371 (DEL) OF 2011. THE ASSESSEE TRUST IS ALSO REGISTERED UNDER SECTION 80-G(5)(VI) OF THE ACT, WHICH WAS VALID FROM 11/08/2006 TO 31 ST MARCH, 2008. THE ASSESSEE TRUST IS RUNNING A SCHO OL AT INDORE UNDER THE NAME & STYLE OF INDUS WORLD SCHOOL. DURING THE COURS E OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD TAKE N OVER ASSETS AND LIABILITIES OF ANOTHER SOCIETY NAMELY, CAREER LAUNCHER EDUCATION FOUNDATION [CLEF] . BY TAKING OVER THE ASSETS AND LIABILITIES OF CAREER LAUNCHER EDUCATION FOUNDATION , THE NET RESULT WAS THAT THE ASSESSEE HAD TAKEN OVER NET LOSS OF RS.50,82,405/-. THE ASSESSI NG OFFICER REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY EXEMPTION UNDER SECTION 11 SHOULD NOT BE DENIED ON THE GROUND THAT THE ASSESSEE HAD NOT DONE ANY CHARITABLE ACTIVITY AS DEFINED UNDER SECTI ON 2(15) OF THE INCOME TAX ACT BY TAKING OVER LOSS OF OTHER TRUST REDUCING ITS INCOME. THE ASSES SING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE DISALLOWED THE LOSS OF RS.50,82,405/- AND ASSESSED THE TRUST AT NET INCOME OF RS.11,37,983/-. 4. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED TH AT TAKING OVER OF ASSETS AND LIABILITIES OF ANOTHER TRUST IS AUTHORIZED BY TRUST DEED OF THE AS SESSEE. IT WAS ALSO SUBMITTED THAT THE ASSESSEE TRUST HAD ACQUIRED ASSETS AND LIABILITIES OF CAREER LAUNCHER EDUCATION FOUNDATION [CLEF], ANOTHER TRUST HAVING SIMILAR OBJECTS. CLEF HAD INC URRED LOSS IN ITS INITIAL YEAR OF OPERATION DUE TO LOW ENROLMENTS OF STUDENTS IN INDORE AND THE HIGHER EXPENDITURE. SUCH LOSS HAS ALSO BEEN TRANSFERRED TO THE BOOKS OF THE ASSESSEE. IT WAS A LSO SUBMITTED THAT ASSESSEE TRUST HAS NEITHER SET OFF THIS LOSS FROM ANY OF ITS INCOME NOR HAS DERIVE D ANY OTHER BENEFIT THEREFROM. DUE TO TAKING OVER OF ALL THE ASSETS AND LIABILITIES OF CLEF, THE LOSS INCURRED BY IT IN OPERATION OF INDORE SCHOOL WAS BOUND TO COME IN THE BOOKS OF THE ASSESSEE TRUS T, SINCE THE ASSETS AND LIABILITIES ALWAYS MATCH ACCORDING TO THE ACCOUNTANCY PRINCIPLE. HE F URTHER SUBMITTED THAT SINCE THE ASSETS AND LIABILITIES OF CLEF HAD BEEN TAKEN OVER AS PER THE TRUST DEED OF THE ASSESSEE TRUST, EXEMPTION UNDER SECTION 11 OF THE ACT COULD NOT BE DENIED. 5. ON CONSIDERATION OF ABOVE, THE LD. CIT (APPEALS) OBSERVED THAT THE ASSESSEE TRUST WAS TAKING ADVANTAGE OF REGISTRATION UNDER SECTION 12-A ISSUED IN THE CASE OF ASSESSEE TRUST. BY TAKING OVER ANOTHER ORGANIZATION, NAMELY, CAREER LA UNCHER EDUCATION FOUNDATION, THE ASSESSEE CLAIMED SAME EXEMPTION, WHICH WAS NOT AVAILABLE TO CLEF. THE LD. CIT (APPEALS) ALSO NOTED 3 I. T. APPEAL NO. 371 (DEL) OF 2011. THAT THE REGISTRATION GRANTED UNDER SECTION 12-A ON 19.02.2007 WITH EFFECT FROM 28/07/2006 WAS A CONDITIONAL REGISTRATION AND THE ASSESSING OFFICE R WAS EMPOWERED TO ALLOW EXEMPTION AFTER SATISFYING HIMSELF. THE LD. CIT (APPEALS), THEREFO RE, OBSERVED THAT BY TAKING OVER CAREER LAUNCHER EDUCATION FOUNDATION, THE NALANDA FOUNDATI ON HAS VIOLATED THE CONDITION PRESCRIBED IN THE REGISTRATION CERTIFICATE THAT NO CHANGE IN THE TRUST DEED / MEMORANDUM OF ASSOCIATION / INSTRUMENT SHALL BE EFFECTED WITHOUT THE APPROVAL O F THE JURISDICTIONAL HIGH COURT / APPROPRIATE AUTHORITY AND IT SHALL CONTINUE TO SERVE THE MAIN O BJECT OF THE TRUST IN FUTURE WITHOUT ANY CHANGE. THE LD. CIT (APPEALS), THEREFORE, UPHELD THE ORDER OF THE ASSESSING OFFICER DENYING EXEMPTION UNDER SECTION 11 OF THE ACT. 6. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED T HAT CAREER LAUNCHER EDUCATION FOUNDATION, ANOTHER CHARITABLE SOCIETY WAS REGISTER ED UNDER SECTION 12-A OF THE ACT AND HAS SIMILAR OBJECTS WITH THAT OF THE ASSESSEE. THE ASS ETS AND LIABILITIES HAVE BEEN TAKEN OVER BY THE ASSESSEE TRUST, WHICH IS IN ACCORDANCE WITH THE AIM S AND OBJECTS OF THE TRUST. THEREFORE, THERE IS NO VIOLATION OF ANY OF THE PROVISIONS UNDER WHICH T HE EXEMPTION COULD BE DENIED TO THE ASSESSEE. ON THE OTHER HAND, THE LD. SR. DR SUPPORTED THE ORD ER OF THE LD. CIT (APPEALS). 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE TRUST DEED WE FIND THAT THE ASSESSEE TRUST WAS CREATED ON 28 TH JULY, 2006 AND HAS BEEN REGISTERED ON 19 TH FEBRUARY, 2007 UNDER SECTION 12-A OF THE ACT BY DI T [EXEMPTION], NEW DELHI. AS PER CLAUSE 4-B OF THE TRUST DEED, THE AS SESSEE TRUST IS EMPOWERED TO ACQUIRE AND TAKE OVER ALL OR ANY PART OF MOVABLE OR IMMOVABLE PROPER TIES OF ANY SIMILAR TRUST, SOCIETY OR INSTITUTION OR ANYONE ELSE WHATSOEVER MAY BE FOR TH E PURPOSE OF THE TRUST AND TO MAINTAIN SUCH ASSETS. THEREFORE, THE TRUST DEED OF THE TRUST AUT HORIZES THE ASSESSEE TO TAKE OVER THE ASSETS AND LIABILITIES OF THE SOCIETY OR TRUST HAVING SIMILAR OBJECTS. CAREER LAUNCHER EDUCATION FOUNDATION IS ALSO REGISTERED UNDER SECTION 12-A VIDE REGISTRA TION CERTIFICATE DATED 23 RD MAY, 2006 WITH EFFECT FROM 20 TH NOVEMBER, 2005. THIS REGISTRATION WAS ALSO GRANTE D BY DIT (EXEMPTION), NEW DELHI. THE AIMS AND OBJECTS OF CAREER LAUNCHER EDU CATION FOUNDATION ARE SIMILAR TO THAT OF THE ASSESSEE TRUST. THEREFORE, THE TAKING OVER OF THE ASSETS AND LIABILITIES OF CLEF BY THE ASSESSEE TRUST WILL NOT POLLUTE THE CHARITABLE CHARACTER OF THE ASSESSEE TRUST. THE LD. CIT (APPEALS) HAS 4 I. T. APPEAL NO. 371 (DEL) OF 2011. DENIED THE EXEMPTION ON THE GROUND THAT THERE WAS A MENDMENT TO THE AIMS AND OBJECTS OF THE ASSESSEE TRUST. THE OBJECTION RAISED BY THE LD. CI T (APPEALS) IS NOT CORROBORATED BY ANY EVIDENCE. IN FACT CLAUSE 4-B WHICH AUTHORIZES THE ASSESSEE TO TAKE OVER ALL OR ANY PART OF MOVABLE OR IMMOVABLE PROPERTY OF ANY SIMILAR TRUST WAS IN THE TRUST DEED FROM THE VERY BEGINNING. HENCE, IT IS NOT A CASE OF AMENDMENT AT ALL. THEREFORE, IN OUR CONSIDERED OPINION, EXEMPTION UNDER SECTION 11 OF THE ACT CANNOT BE DEN IED MERELY ON THE GROUND THAT THE ASSETS AND LIABILITIES HAVE BEEN TAKEN OVER BY THE ASSESSEE TR UST OF ANOTHER TRUST ENGAGED IN SIMILAR ACTIVITIES. WE, THEREFORE, HOLD THAT ASSESSEE WILL BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11 SUBJECT TO FULFILLMENT OF ALL OTHER CONDITIONS SPECIFIED U/S 1 1, 12 AND 13 OF THE ACT. FROM THE ASSESSMENT ORDER WE ALSO FIND THAT THE ASSESSING OFFICER HAS N OT EXAMINED THE CASE WITH REFERENCE TO APPLICABILITY OF PROVISIONS OF SECTIONS 11 AND 13 O F THE ACT. WE, THEREFORE, SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIO NS TO EXAMINE THE CASE OF THE ASSESSEE UNDER SECTIONS 11 AND 13 OF THE ACT. IF THE ASSESSEE HAD APPLIED INCOME FOR CHARITABLE PURPOSE AS REQUIRED UNDER THE LAW AND HAD NOT VIOLATED ANY PRO VISIONS OF SECTIONS 11 AND 13 OF THE ACT, THE ASSESSEE WILL BE ELIGIBLE FOR EXEMPTION UNDER SECTI ON 11(1)(A) OF THE ACT. WE MAY ALSO LIKE TO OBSERVE THAT THERE IS NO CONCEPT OF CARRIED FORWARD OF LOSS FROM ONE YEAR TO ANOTHER YEAR. THE INCOME OF THE YEAR HAS TO BE SEEN WITH REFERENCE TO PROVISIONS OF SECTIONS 11 AND 13. THE LOSS INCURRED BY CAREER LAUNCHER EDUCATION FOUNDATION IN EARLIER YEARS CANNOT BE SET OFF AGAINST THE INCOME OF THE ASSESSEE, WHICH AS PER THE CONTENTION OF THE ASSESSEE HAS NOT BEEN DONE SO. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED, FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 09 TH DECEMBER, 2011. SD/- SD/- [ I. P. BANSAL ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 09 TH DECEMBER, 2011 . * MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 5 I. T. APPEAL NO. 371 (DEL) OF 2011. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. SR. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.