The Assistant Commissioner of Income Tax, Jalandhar V. M/s. Ber Sahib Trust, Jalandhar

ITA 438/ASR/2014

• Counselvise Citation: 43820914 RSA 2014
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 12-10-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 02-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TARSEM LAL
• Assessee Lawyers: ANIL MIGLANI
• Keywords: Charitable institution

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH; AMRITSAR (SMC) BEFORE SH. A.D. JAIN, JUDICIAL MEMBER ITA NO.438(ASR)/2014 ASSESSMENT YEAR:2002-03 PAN: AAATB3686K ASSTT. COMMR. OF INCOME TAX, VS. M/S. BER SAHIB TR UST, CIRCLE-1, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.TARSEM LAL, RESPONDENT BY:SH.ANIL MIGLANI, ADVOCATE DATE OF HEARING: 12/10/2015 DATE OF PRONOUNCEMENT: 20/11/2015 ORDER THIS IS THE DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 2002-03 AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING TH E ADDITION OF RS.12,33,525/- MADE BY THE AO BY DISALLOWING THE EX EMPTION CLAIMED BY THE ASSESSEE UNDER SECTION 11(1)(A)/10(23C) OF T HE INCOME TAX ACT (IN SHORT, THE ACT), 1961. 2. IN THE ORIGINAL RETURN OF INCOME FILED BY THE AS SESSEE TRUST FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE DECLARED NIL INCOME AFTER CLAIMING EXCESS OF INCOME OVER EXPENDITURE DECLARED AT RS.12 ,33,525/-, AS EXEMPT UNDER SECTION 11(1)(A) OF THE ACT. THE AO OPINED TH AT SINCE THE ASSESSEE WAS NOT APPLYING ITS INCOME FOR THE PURPOSES WHICH COULD BE WHOLLY CATEGORIZED AS CHARITABLE IN NATURE, THE ASSESSEE WAS NOT ENTITLED FOR EXEMPTION U/S 11(1)(A) OF THE ACT. THE COMPLETED A SSESSMENT WAS ITA NO.438(ASR)/2014 2 REOPENED FOR THIS REASON AND THE AMOUNT OF RS.12,3 3,525/- WAS ASSESSED AS THE ASSESSEES INCOME. THE EXEMPTION U/ S 11(1)(A) OF THE ACT WAS DENIED. THE LD. CIT(A) DELETED THE ADDITION. 3. THE LD. DR HAS CONTENDED THAT LD. CIT(A) HAS ERR ED IN DELETING THE ADDITION OF RS.12,33,525/- RIGHTLY MADE BY THE AO B Y DISALLOWING EXEMPTION CLAIMED BY THE ASSESSEE U/S 11(1)(A) OF T HE ACT. 4. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, HAS STRONGLY SUPPORTED THE IMPUGNED ORDER. 5. I HAVE HEARD THE RIVAL CONTENTIONS IN THE LIGHT OF THE MATERIAL PLACED ON RECORD. THE AO DENIED EXEMPTION TO THE AS SESSEE ON THE BASIS THAT THE ASSESSEES TRUST WAS NOT EXISTING FOR EDUC ATIONAL PURPOSES, BUT IT ALSO GENERATED HUGE PROFITS BY CHARGING EXORBITANT FEE FROM THE STUDENTS, THEREBY MAKING HUGE PROFITS, SINCE THE ASSESSEE TRU ST WAS NOT APPLYING ITS INCOME WHOLLY AND EXCLUSIVELY FOR CHARITABLE PU RPOSES AS REQUIRED UNDER THE PROVISIONS OF SECTION 11(1)(A)/10(23C) OF THE ACT. THE ASSESSEE MAINTAINED THAT THE ENTIRE RECEIPTS WERE UTILIZED T O ACHIEVE THE OBJECTS OF THE ASSESSEE TRUST. THE RELIANCE WAS PLACED RELIANC E ON PINEGROVE INTERNATIONAL CHARITABLE TRUST, 327 ITR 73 P&H). 6. THE IRREFUTED FACTS ARE THAT DURING THE YEAR THE ASSESSEE TRUST WAS RUNNING AN EDUCATIONAL INSTITUTE. FOR THIS, IT HAD TO MAINTAIN TEACHING AND NON-TEACHING STAFF. SALARIES HAD TO BE PAID AND OTHER EXPENSES HAD TO BE INCURRED. THE FEE CHARGED FROM THE STUDENTS W AS UTILIZED, INTER-ALIA, ITA NO.438(ASR)/2014 3 FOR MEETING THE EXPENSES. THE CHARGING OF THE FEE W AS INCIDENTAL TO THE PRIME OBJECTS OF THE TRUST, I.E., IMPARTING OF EDUC ATION. SURPLUS WAS GENERATED. THIS, HOWEVER, DID NOT INDICATE THAT THE TRUST WAS BEING RUN FOR ANY PROFIT MOTIVE. THIS SURPLUS ENABLES THE ASS ESSEE TO ACQUIRE PROPERTY, COMPUTER, LIBRARY BOOKS, EQUIPMENTS FOR S PORTS, ETC. ALL THIS WAS FOR THE BENEFIT OF THE STUDENTS ONLY, FOR IMPAR TING BETTER EDUCATION. THE INVESTMENTS MADE DURING THE YEAR WERE IN FIXED ASSETS, FOR THE BENEFIT OF THE STUDENTS . THE AMOUNTS AS PER THE RE CEIPT AND EXPENDITURE ACCOUNT WERE UTILIZED TOWARDS CHARITABLE PURPOSES O NLY. THUS, JUST BECAUSE THERE ACCRUED A SURPLUS AFTER MEETING THE E XPENSES, THE ASSESSEE COULD NOT BE SAID TO BE NOT EXISTING SOLEL Y FOR EDUCATIONAL PURPOSES, WHICH WAS ITS PRIME OBJECTIVE. IMPORTANTL Y, NO PROFIT WAS SHOWN TO HAVE BEEN MADE BY THE ASSESSEE. ACCUMULATI ON OF SURPLUS TO THE EXTENT OF 15% OF THE INCOME STANDS PERMITTED B Y THE PROVISIONS OF SECTION 11(1)(A) OF THE ACT ITSELF. THE AO ASSESSED EXCESS RECEIPTS OF THE ASSESSEE, WHILE ALSO IGNORING THAT THE ASSESSEE DID NOT EXIST FOR ANY PROFIT MOTIVE. 7. THEN, EVEN AS PER THE DEED OF THE ASSESSEE TRUST , THE TRUSTEES SHALL NOT BE ENTITLED TO ANY REMUNERATION FOR PERSONAL SE RVICES RENDERED BY THEM FOR THE TRUST. THEY SHALL BE ENTITLED TO REIMB URSEMENT OUT OF THE TRUST ESTATE, OF ALL EXPENSES INCURRED BY THEM IN C ARRYING ON AFFAIRS AND ACTIVITIES OF THE TRUST. THE BENEFITS OF THE TRUST ARE OPEN TO THE GENERAL PUBLIC WITHOUT ANY DISTINCTION OR DISCRIMINATION ON ANY BASIS. THERE IS A ITA NO.438(ASR)/2014 4 RECITAL TO THIS EFFECT IN THE TRUST DEED. THE TRUST DEED ALSO STATES THAT ALL TRUST MONEY, WHETHER REALIZED AS INCOME, OR AS CAPI TAL ON SALE OF TRUST PROPERTY, SHALL FORM PART OF THE TRUST FUND AND SHA LL BE USED FOR THE PURPOSE OF THE TRUST. THE TRUSTEES CAN MANAGE THE T RUST MONEY/PROPERTY AND CARRY OUT THE OBJECTIVES OF THE TRUST AND THEY CANNOT USE THE TRUST MONEY AS PER THEIR OWN WILL. NOTHING OBJECTIONABLE WAS EITHER FOUND, OR POINTED OUT IN THE TRUST DEED BY THE AO. THUS, NOTH ING OTHER THAN THE SURPLUS WAS BROUGHT BY THE AO TO PROVE THAT THE ASS ESSEE TRUST DID NOT EXIST SOLELY FOR CHARITABLE PURPOSES, AS PER ITS TR UST DEED AND THAT IT, IN FACT, EXISTED FOR A PROFIT MOTIVE. THE AO WAS WRONG IN HOLDING THE ASSESSEE NOT TO BE ELIGIBLE FOR EXEMPTION U/S 10(23 C)/11(1)(A) OF THE ACT. IN FACT, THE AO WENT ENTIRELY WRONG IN NOT ABIDING BY THE ABOVE RATIO LAID DOWN IN THE DECISION OF THE HONBLE JURISDICT IONAL HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRU ST (SUPRA), WHEREIN, IT HAS, INTER-ALIA, BEEN HELD THAT THE FACT THAT THE INSTITUTION HAS EARNED PROFIT WOULD NOT BE THE DECISIVE FACTOR TO CONCLUD E THAT IT EXISTED FOR PROFIT; AND THAT EVEN IF THERE REMAINS A SURPLUS WITH THE EDUCATIONAL INSTITUTION, IT WOULD BE ENTITLED TO EXEMPTION U/S 10(23C)(VI) OF THE ACT, PROVIDED THE EDUCATIONAL INSTITUTION EXISTS SOLELY FOR EDUCATIONAL PURPOSES. 8. THE LD. CIT(A), WHILE CORRECTLY DELETING THE AD DITION WRONGLY MADE, HAS DULY TAKEN INTO CONSIDERATION ALL THESE ASPECTS OF THE MATTER. THEREFORE, FINDING NOT ERROR THEREIN, THE ORDER OF THE LD. CIT(A) IS ITA NO.438(ASR)/2014 5 CONFIRMED. THE GROUND TAKEN BY THE DEPARTMENT HOLDS NO FORCE AND THE SAME IS REJECTED. 9. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20TH NO VEMBER, 2015. SD/- (A.D. JAIN) JUDICIAL MEMBER DATED: 20/11/2015 /SKR/ COPY OF ORDER FORWARDED TO: 1. THE ASSESSEE: M/S. BER SAHIB TRUST, 44-B, ADARSH NAGAR, JALANDHAR. 2. THE ACIT, CIRCLE-1, JALANDHAR 3. THE CIT(A), JALANDHAR 4. THE CIT, JALANDHAR 5. THE SR. DR, ITAT, ASR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.