The Income-tax Oficer, Jammu V. M/s. Shirdee Charitable Trust, Jammu

ITA 408/ASR/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6993 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 02-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Depreciation; Charitable institution; Competent authority
• Section: 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO.408(ASR)/2012 A.Y. 2009-10 INCOME TAX OFFICER, VS. M/S SHIRDEE CHARITABLE TR UST, WARD 1 (3), JAMMU. 69/3, TRIKUTA NAGAR, JAMMU. (AAETS 6478 G) (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. RATINDER KAUR, D.R. RESPONDENT BY: SHRI P.N. ARORA, ADVOCATE DATE OF HEARING: 27.11.2014 DATE OF PRONOUNCEMENT: 28.11.2014 ORDER PER B.P. JAIN, ACCOUNTANT MEMBER : THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE LD. COMMISSIONER OF INCOME TAX(A), JAMMU DATED 08.08.2012 FOR THE A.Y. 2009-10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF A DVANCE TUITION FEE WHEN THE SAME FORMS THE PART OF THE GROSS ANNUAL RE CEIPTS OF THE YEAR UNDER CONSIDERATION. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF S URPLUS INCOME OF RS.27,96,335/- WHEN THE ASSESSEE HAS NOT OBTAINED E XEMPTION CERTIFICATE FROM THE COMPETENT AUTHORITY AS THE GRO SS ANNUAL RECEIPTS EXCEED RS. ONE CRORE. 3. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN HOLDING THAT NO EVIDENCE OF ANY SORT HAVE BEEN ADVANCED BY THE ASSESSING OFFICER THAT THE CARS WERE USED BY TH E SETTLER/TRUSTEE ITA NO.408(ASR)/2012 A.Y. 2009-10 2 WHEN THE CARS HAS BEEN PURCHASED ON THE NAME OF SH. R.K. PURI, WHO IS THE SETTLER OF THE TRUST. IN VIEW OF ABOVE, IT IS CLEAR THAT THE TRUST HAS BEEN CREATED FOR THE BENEFIT OF THE SETTLER/TRUSTEE AS THE ASSETS OF THE TRUST CAN NOT BE PURCHASED IN THE NAME OF SETTLER/T RUSTEE. 4. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN HOLDING THAT THE TRUST EXISTS FOR CHARITAB LE PURPOSE WHEN THERE IS A CLAUSE IN THE TRUST DEED THAT THE TRUSTEE SHAL L BE ENTITLED TO SALARY, ALLOWANCE & PERKS AS MUTUALLY DECIDED BY THE TRUSTE E WHICH CLEARLY SHOWN THE TRUST HAS BEEN CREATED FOR THE BENEFIT OF THE TRUSTEES. 5. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN HOLDING THAT THE TRUST EXISTS FOR CHARITAB LE PURPOSE WHEN HE HIMSELF HAS RESTRICTED THE DISALLOWANCES MADE UNDER VARIOUS HEADS FROM RS.1,53,312/- TO RS.50,000/- WHICH CLEARLY SHO WS THAT THE AID EXPENDITURE HAS NOT BEEN INCURRED FOR THE PURPOSE O F CHARITABLE BUT FOR THE BENEFIT OF THE TRUSTEES. THE APPELLANT CRAVES TO AMEND OR ADD ANY ONE OR MOR E GROUNDS OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED AT NIL ON 30.09.2010. THE ASSESSEE IS AN EDUCATIONAL INSTITU TION. THE ASSESSEE HAS CLAIMED EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF I.T. ACT AND THE A.O. NOTICED THAT IN ADDITION TO RECEIPTS SHOWN, AN AMOUNT OF RS.33,77,0 93/- WAS SHOWN AS ADVANCE TUITION FEES. IN HIS OPINION SINCE THE RECEIPTS D URING THE YEAR HAS EXCEED RS. ONE CRORE, THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION U NDER SECTION 10(23C)(IIIAD) OF I.T. ACT. THE ASSESSEE WAS NOT REGISTERED UNDER SE CTION 12AA OF THE I.T. ACT OR 10(23C)(VI) OF THE I.T. ACT. FURTHER, THE A.O. HAS OPINED THAT SINCE THE SURPLUS WAS RS.27,96,335/-, IT MEANT THAT 85% OF RECEIPTS WERE NOT APPLIED FOR THE OBJECTS OF THE TRUST. ON SHOW CAUSE, THE ASSESSEE MADE THE SUBMIS SIONS AVAILABLE IN THE ORDER OF ITA NO.408(ASR)/2012 A.Y. 2009-10 3 A.O. & CIT(A). AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE A.O. HELD THAT THE WORDS USED IN SECTION 10(23C)(IIIAD) OF I.T. ACT AR E IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDUCATIONAL INSTITUT ION ---- AND HENCE THE APPELLANT WAS NOT COVERED UNDER SECTION 10(23C)(IIIAD) OF I.T . ACT. HE FURTHER LISTED THE OBJECTS OF THE TRUST AND HELD THAT THE TRUST DID NO T EXIST SOLELY FOR EDUCATIONAL PURPOSES. HE FURTHER HELD THAT THE TRUST WAS CREAT ED FOR THE BENEFIT OF TRUSTEES. 4. IN VIEW OF THE ABOVE, THE A.O. HELD THAT THERE W AS VIOLATION OF SECTION 13 OF I.T. ACT AS WELL. HE ADDED RS.27,96,335/- BEING SU RPLUS FOR THE YEAR, RS.33,70,093/- BEING ADVANCE TUITION FEES, AND DISA LLOWED 1/5 TH OF VARIOUS EXPENSES AT RS.1,53,312/-. 5. THE LD. CIT(A) ACCEPTED THE PLEADINGS MADE BY TH E LD. COUNSEL FOR THE ASSESSEE THAT ACCOUNTS ARE MAINTAINED ON MERCANTILE BASIS AND THE ASSESSEE HAD ADOPTED THE CONSISTENT PRACTICE OF ACCOUNTING FOR T HE ADVANCE RECEIPTS AS LIABILITY IN THE BALANCE SHEET WHICH ARE TREATED AS INCOME IN TH E FOLLOWING YEARS AND, THEREFORE, THE ASSESSEE WAS NOT HAVING THE ANNUAL R ECEIPTS MORE THAN RS. ONE CRORE AND WAS ELIGIBLE FOR EXEMPTION UNDER SECTION 10(23C )(IIIAD) OF THE ACT AND, THEREFORE, DELETED THE ADDITION WITH REGARD TO ADVA NCE TUITION FEES OF RS.33,70,093/- AND ADDITION OF SURPLUS AMOUNT FOR THE YEAR OF RS.2 7,96,335/-. ITA NO.408(ASR)/2012 A.Y. 2009-10 4 6. WITH REGARD TO THE CARS PURCHASED IN THE NAME OF SHRI R.K. PURI, CHAIRMAN AND CAR BEING USED BY THE TRUSTEES, ON APPRECIATION OF FACTS ON RECORD, THE LD. CIT(A) OBSERVED THAT THE TRUSTEES WERE MEN OF MEANS AND HAVING SEPARATE LUXURY CARS AND NOTHING HAS BEEN ESTABLISHED THAT THESE CA RS BELONGED TO THE TRUST WERE USED BY THE CHAIRMAN OR THE TRUSTEES WHO HAD IN THE IR RESPECTIVE POSSESSION SEPARATE LUXURY CARS FOR THEIR USE AND ACCORDINGLY DELETED THE ADDITIONS AND HELD THAT THERE IS NO VIOLATION OF SECTION 13 OF THE ACT . ALSO, AS REGARDS THE SALARIES AND ALLOWANCES, WITH RESPECT TO SECTION 13 OF THE ACT, IT IS APPLICABLE IF IT IS PAID IN EXCESS OF WHAT MAY BE REASONABLY PAID. THE CLAUSES OF THE TRUST DEED PROVIDE OF PAYMENT OF SALARY AND ALLOWANCES SO PAID ARE WITHIN THE CLAUSES OF THE TRUST DEED AND NO VIOLATION OF SECTION 13(2)(C) OF THE ACT HAS BEEN MADE. WITH REGARD TO VARIOUS DISALLOWANCES @ 1/5 TH CLAIMED, SINCE VOUCHERS WERE NOT PRODUCED, IT WAS OBSERVED BY THE LD. CIT(A) THE NO SPECIFIC INSTANCE S HAVE BEEN CITED AND THE DISALLOWANCES HAVE BEEN MADE IN A ROUTINE MANNER TO MEET THE ENDS OF JUSTICE. DISALLOWANCE OF RS.50,000/- WAS RESTRICTED IN PLACE OF RS.1,53,312/- MADE BY THE A.O. ACCORDINGLY, THE LD. CIT(A) HELD THAT THE ASS ESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT. 7. LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HA ND, ARGUED THAT THE ASSESSEE WAS HAVING ANNUAL RECEIPT MORE THAN RS. ONE CRORE A ND, THEREFORE, PROVISIONS OF SECTION 10(23C)(IIIAD) ARE NOT APPLICABLE BUT THE P ROVISIONS OF SECTION 10(23C)(VI) ARE APPLICABLE AND ASSESSEE HAS NOT TAKEN ANY EXEMP TION CERTIFICATE UNDER SECTION ITA NO.408(ASR)/2012 A.Y. 2009-10 5 10(23C)(VI). ACCORDINGLY, SHE PRAYED TO REVERSE TH E ORDER OF THE LD. CIT(A) WITH REGARD TO GROUND NOS.1 & 2. 8. AS REGARDS GROUND NOS.3 & 4, LD. DEPARTMENTAL RE PRESENTATIVE ARGUED THAT THE CARS WERE PURCHASED IN THE NAME OF SHRI R.K. PU RI, CHAIRMAN OF THE TRUST AND IT IS QUITE PROBABLE THAT CARS HAVE BEEN USED FOR THE PURPOSE OF THE TRUSTEES AND NOT FOR THE PURPOSE OF TRUST AND THE SALARIES AND ALLOW ANCES WERE PAID TO THE TRUSTEES AND ACCORDINGLY PROVISIONS OF SECTION 13 ARE APPLIC ABLE FOR DIVERSION OF FUNDS. ACCORDINGLY SHE PRAYED TO REVERSE THE ORDER OF THE LD. CIT(A) AND ALLOW GROUND NOS.3 & 4 OF THE REVENUE. 9. AS REGARDS GROUND NO.5, LD. DEPARTMENTAL REPRESE NTATIVE ARGUED THAT THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO RS.60,000 /- AND, THEREFORE, AT LEAST THERE IS A PERSONAL ELEMENT OF EXPENDITURE IN THE SAID DI SALLOWANCE MADE BY THE A.O. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS REGARDS GROUND NOS.1 & 2 OF THE REVENUE, IT WAS EXP LAINED BY THE ASSESSEE THAT IT IS MAINTAINING THE ACCOUNT ON MERCANTILE SYSTEM OF ACC OUNTING SINCE INCEPTION OF THE TRUST. THIS FACT HAS NOT BEEN DENIED BY THE AUTHOR ITIES BELOW AND BY THE LD. DEPARTMENTAL REPRESENTATIVE APPEARING ON BEHALF OF THE REVENUE. NOTHING HAS BEEN BROUGHT ON RECORD TO ESTABLISH THAT THE ASSESS EE IS NOT MAINTAINING ACCOUNTS ON MERCANTILE SYSTEM SINCE INCEPTION OF THE TRUST. TH EREFORE, EXPLANATION OF THE ASSESSEE WHICH IS PART OF LD. CIT(A)S ORDER AT PAG E NOS.5, 6 & 7, THE ADVANCE TUITION FEE OF THE PRECEDING YEAR HAS BEEN TREATED AS INCOME IN THE IMPUGNED YEAR ITA NO.408(ASR)/2012 A.Y. 2009-10 6 AND ADVANCE TUITION FEE OF THE IMPUGNED YEAR HAS BE EN TREATED AS INCOME OF THE FOLLOWING YEAR. THEREFORE, THE A.O. IS NOT JUSTIFI ED IN TREATING THE ADVANCE TUITION FEES RECEIVED IN THE IMPUGNED YEAR FOR THE FOLLOWIN G YEAR AS THE INCOME OR THE RECEIPT OF THE IMPUGNED YEAR. BY DOING SO, IT WILL TANTAMOUNT TO DOUBLE TAXATION WHICH IS NOT PERMITTED IN LAW. THEREFORE, AS SUBMI TTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE ANNUAL RECEIPT OF THE IMPUGNED YEAR I S RS.84,57,429/- AND THE ASSESSEE TRUST FALLS UNDER THE PROVISIONS OF SECTIO N 10(23C)(IIIAD) AND NOT UNDER SECTION 10(23C)(VI) OF THE I.T. ACT SINCE THE ANNUA L RECEIPTS ARE LESS THAN RS. ONE CRORE. THERE IS NO DISPUTE TO THE OBJECT OF THE TR UST WHICH ARE MEANT FOR EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATI ONAL PURPOSE AND NOT FOR THE PURPOSE OF PROFIT AND THE CONDITIONS AS PER SECTION 10(23C)(IIIAD) AND RULE 2BC HAVE BEEN COMPLIED WITH AND THE ASSESSEE IS ENTITLE D FOR EXEMPTION UNDER SECTION 10(23C)(IIIAD) READ WITH RULE 2BC OF THE I.T. RULES , 1962. 11. AS REGARDS GROUND NOS.3, 4 & 5 OF THE REVENUE, AS PER THE TRUST DEED, SALARY AND ALLOWANCE OR OTHERWISE CAN BE PAID AND WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) THAT THERE IS NOTHING ON RECORD ANYTHING HAS BEEN PAID IN EXCESS OF WHAT MAY BE REASONABLY PAID AND ACCORDINGLY NO ADVERSE I NFERENCE CAN BE DRAWN BY THE A.O. IT IS NOT IN DISPUTE THAT CARS HAVE BEEN PURC HASED IN THE NAME OF SHRI R.K. PURI, CHAIRMAN OF THE TRUST OUT OF THE FUND OF THE TRUST BUT THE CARS HAVE NOT BEEN USED FOR THE PERSONAL PURPOSES OF THE SAID CHAIRMAN OR ANY OTHER TRUSTEE HAS NOT ITA NO.408(ASR)/2012 A.Y. 2009-10 7 BEEN ESTABLISHED. SINCE THE TRUSTEES WERE HAVING T HEIR SEPARATE LUXURY CARS AND IN THAT RESPECT THEIR RETURN OF INCOME WERE PLACED ON RECORD AND NO ADVERSE VIEW CAN BE DRAWN AGAINST THE ASSESSEE. IN THE ABSENCE OF A NYTHING ON RECORD THAT SUCH CARS WERE ACTUALLY USED BY THE CHAIRMAN OR TRUSTEES OF T HE TRUST FOR THEIR PERSONAL PURPOSE, NO ADDITION ON ACCOUNT OF USE OF CAR AND I TS DEPRECIATION ETC. CAN BE MADE AND IT CANNOT BE SAID THAT THERE IS VIOLATION OF SE CTION 13(1)(C)(I) & (II) READ WITH SECTION 13(2)(C) & 13(3)(C) OF THE ACT. 12. AS REGARDS DISALLOWANCES, THE LD. CIT(A) HAS RE ASONABLY RESTRICTED THE DISALLOWANCE AT RS.50,000/- TO MEET THE ENDS OF JUS TICE AND WE FIND NO INFIRMITY IN HIS ORDER IN THIS REGARD. THEREFORE, IN THE CIRCUM STANCES AND FACTS OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) WHO HA S RIGHTLY REVERSED THE ORDER OF A.O. AND HAS RIGHTLY DIRECTED THE A.O. TO ENTITLE T HE ASSESSEE FOR EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT AND ALL ADDITIONS SO MADE HAVE RIGHTLY BEEN DIRECTED TO BE DELETED EXCEPT RS.50,000/- ON ACCOUN T OF EXPENSES WHICH HAS BEEN RESTRICTED REASONABLY. THUS, ALL THE GROUNDS OF RE VENUE ARE DISMISSED. 13. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.11.2014. SD/- SD/- (A.D. JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28 TH NOVEMBER, 2014 PBN/* ITA NO.408(ASR)/2012 A.Y. 2009-10 8 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: M/S SHIRDEE CHARITABLE TRUST, 69/3, TRIKUTA NAGAR, JAMMU. 2. INCOME TAX OFFICER, WARD 1(3), JAMMU. 3. THE CIT(A), 4. THE CIT, 5. THE D.R., I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.