ACIT (EXemption), Jodhpur V. M/s.Mahesh Sikshan Sansthan, Jodhpur

ITA 375/JODH/2019

• Counselvise Citation: [2020] 109 COUNSELVISE.COM (IT) 9719 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 07-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; TDS
• Section: 11; 143(3)

Judgement Text

1 ITA NO.375/JODH/2019 M/S. MAHESH SIKSHAN SANSTHAN ASSESSMENT YEAR: 2016-17 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR , , BEFORE HONBLE SHRI SANDEEP GOSAIN, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.375/JODH/2019 ( / ASSESSMENT YEAR: 2016-17) A CIT - CIRCLE (EXEMPTION) ROOM NO.64, AAYKAR BHAWAN PAOTA C ROAD, JODHPUR RAJASTHAN-342 006. / VS. M/S. MAHESH SIKSHAN SANSTHAN UMAID HOSPITAL ROAD JODHPUR, RAJASTHAN-342 001. ./ ./PAN/GIR NO. AAATM-6333-L ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI P.C. PARWAL (CA)- LD. AR REVENUE BY : SHRI A.S. YADAV - LD. CIT- DR / DATE OF HEARING : 04/11/2020 / DATE OF PRONOUNCEMENT : 21/12/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2016-17 CONTEST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2,JODHPUR, [IN SHORT 2 ITA NO.375/JODH/2019 M/S. MAHESH SIKSHAN SANSTHAN ASSESSMENT YEAR: 2016-17 REFERRED TO AS CIT(A)], APPEAL NO.142/2018-19, DA TED 07/08/2019 ON FOLLOWING EFFECTIVE GROUNDS:- 1) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(APPEALS) HAS ERRED IN ALLOWING EXEMPTION U/S.11 OF THE I.T. ACT, 1961 TO THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE ASS ESSEE SOCIETY HAS PROVIDED UNDUE BENEFIT TO THE PERSONS SPECIFIED U/S. 13(3) OF THE I.T. ACT, 1961, AND THUS PROVISIONS OF SECTION 13(1)(C)(II) OF THE INCOME TAX ACT, 1961 WERE CLEARLY ATTRACTED IN THIS CASE. 2) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN ALLOWING EXEMPTION U/S 11 WI THOUT APPRECIATING THE FACT THAT THE ASSESSEE SOCIETY HAS MADE DONATION AMOUNTING TO RS. 4,00,000/- TO SHREE MAHESHWARI SAMAJ, WHICH WAS A PERSON SPECIFIED U/S 13(3) OF THE I.T. ACT,1961 AND HAD DISSIMILAR OBJECTIVES THUS PROVISIONS OF SECTIO N 13(L)(D) R.W.S 11(5) OF THE INCOME TAX ACT, 1961 WERE CLEARLY ATTRACTED IN THIS CASE. 3) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN ALLOWING EXEMPTION U/S 11 WI THOUT APPRECIATING THE FACT THAT SHREE MAHESHWARI SAMAJ, THE DONEE HAS BEEN ASSESSED AS AN AOP AFTER DENYING BENEFIT OF SECTION 11, DURING THE YEAR UNDER CONSID ERATION AND HENCE THE ASSESSEE WAS HIT BY PROVISIONS OF SECTION 13(3)(E) OF THE AC T. 4) ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW THE LD.CIT (APPEALS) HAS ERRED IN ALLOWING INCOME TAX DEMAND AND INTERE ST THEREON WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE SOCIETY HAS PAID TAX EVE N IF IT IS CLAIMING EXEMPTION U/S 11 OF THE ACT THAT SHOWS THAT IT HAS BEEN WORKING FOR PROFIT MOTIVE. 2. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING IMPUGNED ORDE R, WRITTEN SUBMISSIONS AND DOCUMENTS PLACED IN THE PAPER BOOK. THE JUDICIAL PRECEDENTS AS RELIED UPON DURING THE COURSE OF HEAR ING HAVE DULY BEEN DELIBERATED UPON. OUR ADJUDICATION TO THE SUBJ ECT MATTER WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 3.1 IN AN ASSESSMENT FRAMED U/S 143(3) ON 15/12/201 8, THE EXEMPTION CLAIMED BY THE ASSESSEE U/S 11 FOR RS.345 .55 LACS, AS AVAILABLE TO REGISTERED TRUST, WAS DENIED. THE ASSE SSEE TRUST WAS REGISTERED SINCE 1977 AND WAS ENGAGED IN RUNNING ED UCATIONAL INSTITUTIONS AT JODHPUR. 3 ITA NO.375/JODH/2019 M/S. MAHESH SIKSHAN SANSTHAN ASSESSMENT YEAR: 2016-17 3.2 THE ASSESSEE CLAIMED APPLICATION OF INCOME FOR RS.5.32 LACS UNDER THE HEAD GRANT-IN-AID. THE SAME WAS DENIED SI NCE THE SAME REPRESENTED UNSPENT PORTION OF GRANT RECEIVED AND T HE SAME WAS UTILIZED ONLY IN SUBSEQUENT YEARS. 3.3 ANOTHER DISALLOWANCE OF RS.2400/- REPRESENTING INCOME TAX PAYMENT AS WELL AS RS.240/- REPRESENTING INTEREST O N LATE PAYMENT OF TDS WAS ALSO MADE SINCE THE SAME WOULD NOT AMOUN T TO APPLICATION OF INCOME AND MOREOVER, THEY PERTAINED TO AY 2013-14. IT TRANSPIRED THAT THE ASSESSEE MADE DONATION OF R S.4 LACS TO ANOTHER TRUST SHRI MAHESHWAR SAMAJ, INSIDE JALORI G ATE, JODHPUR WHICH WAS ALSO REGISTERED U/S 12AA. HOWEVER, THE AS SESSEE AS WELL AS THAT TRUST HAD COMMON TRUSTEES / MEMBER WHICH, I N THE OPINION OF LD.AO, WOULD TRIGGER CLAUSE (E) OF SECTION 13(3). T HE ASSESSEE SUBMITTED THAT THE DONEE TRUST GAVE LAND TO ASSESSE E ON NOMINAL RENT OF RS.3 LACS PER ANNUM WHICH REMAINED UNCHANGE D SINCE 2004. THREE OF THE SCHOOLS BEING RUN BY THE ASSESSE E TRUST WERE STATED TO BE RUNNING ON THIS LAND. ACCORDINGLY, COR PUS DONATION WAS MADE TO THE SAID TRUST WHICH WAS HARDLY 0.92% OF DO NATION RECEIVED BY THE ASSESSEE. RELIANCE WAS PLACED, INTER-ALIA, O N CBDT CIRCULAR NO. 1132 DATED 05/01/1978 WHICH WOULD CONSIDER SUCH DONATIONS AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE. 3.4 HOWEVER, THE AFORESAID PLEAS WERE REJECTED IN T HE LIGHT OF THE FACT THAT THAT DONE TRUST WAS ASSESSED AS AOP AFTER DENYING THE BENEFIT OF SEC.11 EXEMPTION. THEREFORE, THE STATED DONATIONS WERE DISALLOWED. SINCE THE ASSESSEE VIOLATED THE PROVISI ONS OF SEC.13(1)(C) AND 11(5), THE TRUST WOULD LOSE EXEMPT ION U/S 11. 4 ITA NO.375/JODH/2019 M/S. MAHESH SIKSHAN SANSTHAN ASSESSMENT YEAR: 2016-17 ACCORDINGLY, THE DEDUCTION SO CLAIMED WAS DENIED AN D TOTAL INCOME WAS DETERMINED AT RS.354.90 LACS. 4.1 THE LD. CIT(A), INTER-ALIA, OBSERVED THAT THE A SSESSEE AS WELL AS THE DONEE WERE CHARITABLE INSTITUTIONS AND THERE WAS NO PROFIT MOTIVE INVOLVED IN THE ACTIVITIES BEING CARRIED OUT BY THEM. BOTH THE SOCIETIES WOULD NOT DISTRIBUTE THE SURPLUS TO ITS T RUSTEES. THE TRUSTEES / COMMON TRUSTEES HAVE NO RIGHT IN THE SUR PLUS IN EITHER OF THE SOCIETY. CONSEQUENTLY, THERE WOULD BE NO VIOLAT ION OF STATUTORY PROVISIONS AS ALLEGED BY LD. AO. RELIANCE WAS PLACE D ON VARIOUS JUDICIAL PRECEDENTS AS WELL AS CBDT CIRCULAR NO. 11 32 DATED 05/01/1978 IN SUPPORT OF SUCH A CONCLUSION. ACCORDI NGLY, IT WAS HELD THAT THE ASSESSEE WAS ENTITLED FOR BENEFITS OF SEC. 11 & 12. 4.2 THE DISALLOWANCE OF RS.3,140/- WAS DELETED SINC E THE OUTGOINGS WERE INCIDENTAL TO CARRYING OUT THE OBJEC TS OF THE TRUST. PARTIAL RELIEF WAS GRANTED AGAINST DISALLOWANCE OF GRANT-IN-AID. AGGRIEVED AS AFORESAID, THE REVENUE IS IN FURTHER A PPEAL BEFORE US. 5. UPON PERUSAL OF IMPUGNED ORDER, WE FIND THAT THE ISSUES HAS BEEN CLINCHED IN CORRECT PERSPECTIVE BY LD. CIT(A). THE ASSESSEE MADE DONATIONS TO ANOTHER TRUST WHICH WAS ALSO REGI STERED U/S 12AA. THE DONATIONS SO PAID WERE LESS THAN 1% OF DO NATIONS RECEIVED BY THE ASSESSEE. THE COMMON TRUSTEES DID N OT HAVE ANY RIGHT TO SHARE THE SURPLUS IN EITHER OF THE SOCIETY . THE DONEE PROVIDED LAND TO ASSESSEE TO RUN EDUCATION INSTITUT IONS ON NOMINAL RENT OF RS.3 LACS PER ANNUM WHICH REMAINED UNCHANGE D SINCE 2004. THE STATED CBDT CIRCULAR WAS CLEARLY APPLICAB LE TO THE FACTS OF THE CASE AND THE DONATION SO MADE BY THE ASSESSE E WAS TO BE 5 ITA NO.375/JODH/2019 M/S. MAHESH SIKSHAN SANSTHAN ASSESSMENT YEAR: 2016-17 TREATED AS APPLICATION OF INCOME. THEREFORE, THE IM PUGNED ORDER, IN OUR CONSIDERED OPINION, WOULD NOT REQUIRE ANY INTER FERENCE ON OUR PART. WE ALSO CONCUR WITH THE FINDINGS THAT THE PAY MENT OF INCOME TAX WAS INCIDENTAL TO CARRYING OUT THE OBJECTS OF T HE TRUST. 6. THE APPEAL STAND DISMISSED. ORDER PRONOUNCED U/R 34(4) OF INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963. SD/- SD/- (SANDEEP GOSAIN) (MAN OJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 21/12/2020 SR.PS:-JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$' / THE RESPONDENT 3. % ( ) / THE CIT(A) 4. % / CIT CONCERNED 5. &'#( ) , ) , ) / DR, ITAT, JODHPUR 6. '+,-! / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, JODHPUR.