DCIT (E), New Delhi V. M/s Umak Educational Trust, New Delhi

ITA 4831/DEL/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9958 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 09-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AND ITA NO DEL
• Keywords: Charitable institution; Tax effect; Benefit of exemption; Set aside
• Section: 143(3); 12A; 48; 22; 148; 12; 11

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH G : NEW DELHI ] BEFORE SHRI S UDHANSHU SRIVASTAVA , JUDICIAL MEMBER A N D SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 4831 /DEL/201 6 [BY DEPARTMENT] A N D ITA NO. 4873/DEL/2016 [BY ASSESSEE] ASSESSMENT YEAR: 20 0 9 - 1 0 M/S. UMAK EDUCATIONAL TRUST, S 135, GREATER KAILASH, PART - II, NEW DELHI 110 0 48 . PAN : A AATU2598P VS. DY. CIT , CIRCLE : 2 (1) , NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. KANIKA JAIN, ADV.; DEPARTMENT BY : SHRI SARAS KUMAR , SR. D. R.; DATE OF HEARING 24 / 06 /20 20 DATE OF PRONOUNCEMENT 2 9 /06/2020 O R D E R PER PRASHANT MAHARISHI, A. M. : 01 . ITA. NO. 4831/DEL/2016 FILED BY THE DY. COMMISSIONER OF INCOME TAX (APPEALS) - AND ITA. NO. 4873/DEL/2016 IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 3 6 , NEW DELHI , DATED 21 ST OF JUNE, 2016 FOR ASSESSMENT YEAR 2009 - 10. 02 . BRIEF FACTS OF THE CASE SHOWS THAT ASSESSEE IS A CHARITABLE TRUST RUNNING AN INSTITUTE IN THE NAME OF INSTITUTE FOR INTERNATIONAL MANAGEMENT & TECHNOLOGY, GURGAON. IT IS REGISTERED UNDER SECTION 12A OF THE OF THE INCOME TAX ACT, 1961 (THE ACT). THEREF ORE, ASSESSEE IS CLAIMING EXEMPTION UNDER SECTION 11 & 12 OF THE ACT. 03 . THE ASSESSEE FILED ITS RETURN OF INCOME AT NIL ON 30.09.2009. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ACCORDING TO THE ASSESSING OFFICER, ASSESSEE WAS NOT CARRYING ON EDUCATION AL ACTIVITY IN TERMS OF SECTION 2(15) OF THE ACT. THEREFORE, BENEFIT OF SECTION 11 AND 12 WAS DENIED TO THE ASSESSEE AND TOTAL TAXABLE INCOME OF RS.89,07,340/ - WAS ASSESSED. THIS ORDER TRAVELLED TO THE CO - ORDINATE BENCH IN ITA. NO. 5589/DEL/2012. THE CO - ORDINATE BENCH AS PER ORDER DATED 28.06.2013 THE REVENUE FILED THE PAGE | 2 APPEAL BEFORE THE CO - ORDINATE BENCH AGAINST THE ORDER OF THE LD. CIT (APPEALS) DATED 31.08.2012 WHEREIN AS PER PARA 9 DECIDING GROUND NO. 3 OF THE APPEAL HELD THAT ASSESSEE IS ENTITLED TO EXEMPTION UNDER SECTION 11 AND 12 OF THE ACT. THE CO - ORDINATE BENCH UPHELD THE ORDER OF THE LD. CIT (APPEALS). AGAINST THE ORDER OF THE CO - ORDINATE BENCH REVENUE APPEALED BEFORE THE HONBLE HIGH COURT WHICH WAS DISMISSED VIDE ORDER DATED 28 TH FEBRUARY, 2 019 DUE TO LOW TAX EFFECT. THUS, IT IS NOW CONCLUSIVELY HELD THAT THAT ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 11 AND 12 OF THE ACT. 04 . SUBSEQUENTLY IT WAS FOUND BY THE ASSESSING OFFICER THAT ASSESSEE HAS RECEIVED CORPUS DONATION OF RS.1.30 CRORES WHICH IS DIRECTLY TAKEN TO THE TRUST FUND ACCOUNT IN THE BALANCE SHEET NEEDS TO BE TAXED. THEREFORE, NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 28 TH MARCH, 2012 AFTER RECORDING THE ABOVE REASON. IN RESPONSE TO THE NOTICES HEARING TOOK PLACE AND S HOW CAUSE NOTICE WAS ISSUED THROUGH ORDER - SHEET. THE ASSESSEE SUBMITTED ON 18 TH MARCH, 2014 THAT THE ABOVE DONATION WAS RECEIVED AS A CORPUS DONATION . THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE HOLDING THAT THE ABOVE SUM IS NOT A CORPUS DONATION AND, THEREFORE, HE MADE AN ADDITION OF THE ABOVE SUM TO THE INCOME ALREADY DEDUCTION AS PER ORDER UNDER SECTION 143(3) OF THE ACT ON 20 TH DECEMBER, 2011 AT RS.89,07,340/ - . THUS THE TOTAL INCOME WAS ASSESSED AT RS. 2,19,07,340/ - . 05 . THE AS SESSEE AGGRIEVED WITH THAT ORDER PREFERRED THE APPEAL BEFORE THE LD. CIT (APPEALS), WHO VIDE PARA NO. 7 OF HIS ORDER HELD AS UNDER : - 7. IN THE ORDER UNDER APPEAL I.E. ORDER U/S. 148 DATED 25.03.2014, THE AO HAS ADDED THE AMOUNT OF RS. 1.30 CRORE AS REVE NUE RECEIPT WHICH WAS SHOWN BY THE ASSESSEE AS ADDITION TO CORPUS FUND STILL TREATING THE ASSESSEE AS AOP BECAUSE THE DEPARTMENT HAS FILED AN APPEAL IN HIGH COURT AGAINST THE ORDER OF ITAT. THE ADDITION OF RS. 1.30 CRORE HEATED AS REVENUE RECEIPT MADE BY TH E AO IS NOT JUSTIFIABLE AS THE HON'BIE ITAT HAS ALREADY ADJUDICATED THAT THE ASSESSEE IN INVOLVED IN EDUCATION AND THE BENEFIT OF SECTION 11/12 IS TO HE - CIIVEN TO THE ASSESSEE. DURING THE APPELLATE PROCEEDINGS, THE PAGE | 3 ASSESSEE HAS SUBMITTED 'HE ROPY OF RECEI PT OF DONATION AND A COPY OF REQUEST LETTER FOR D ONATION AT PAGE NO 2 1 AND 22 OF THE SUBMISSION MADE . IT IS OBSERVED THAT THE DONATION RECEIPT DATED 0 6.01 .2009 ONLY MENTIONS THAT AN AMOUNT OF RS. 1.30 CRORE HAS BEEN RECEIVED FROM UNITECH SOUTHCITY E DUCATIONAL TRUST AND THERE IS NO MENTION OF CORPUS FU ND AT ALL. THE DOCUMENT AT PAGE 22 IS A LETTER WRITTEN BY THE ASSESSEE TO THE DONOR REQUESTING FOR DONATION FOR CORPUS FUND. HOWEVER, THERE IS NO LETTER OR CONFIRMATION FROM THE DONOR THAT THE AMOUNT O F DONATION IS INDEED FOR CORPUS FUND NOR DOES THE RECEIPT MENTION IT. IN ABSENCE OF SUCH CONFIRMATION, THE AMOUNT CANNOT BE TREATED AS A PART OF CORPUS FUND BUT IT IS A PART OF INCOME TO BE APT LIED FOR CHARITABLE PURPOSE U/S. 11. TO THAT EXTENT THE ORDER OF A.O IS UPHELD THAT IT IS PART OF INCOME. THE BENEFIT OF SECTION 11 THOUGH IS AVAILABLE TO THE ASSESSEE AS PER ORDER O F HON'BIE ITAT AND MAY BE PROVIDED TO GIVE EFFECT TO THE ITAT ORDER . THUS, THE REVENUE AND ASSESSEE BOTH ARE AGGRIEVED WITH THAT ORDER HAS PREFERRED THE APPEAL BEFORE US. FIRST COMING TO THE APPEAL OF THE REVENUE WHERE THE ONLY GROUND OF APPEAL IS AS UNDER : - 1 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C IT (APPEALS) HAS ERRED IN LAW IN IGNORING THAT THE ASSESSEE WAS ENGAGED IN THE ACTIVITY OF COMMERCIALIZATION OF EDUCATION AND ITS ACTIVITIES DID NOT FALL UNDER THE SECOND LIMB OF CHARITABLE PURPOSE I.E. EDUCATION WITHIN THE MEANING OF SECTION 2(15) OF THE ACT, AND THEREFORE, WAS NOT ELIGIBLE FOR BENEFIT OF EXEMPTION OF SECTION 11 & 12 OF THE ACT . 2 . ON THE FACTS AND CIRCUMSATNCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN LAW IN IGNORING THE ASSESSEE CONDUCTED TECHNICAL EDUCATION COURSES WITHOUT TH E MANDATORY APPROVAL FROM ALL INDIA COUNCIL FOR TECHNICAL EDCIATION( AICTE) WHICH IS A STATUTORY BODY , IN VIOLATION OF RULE AND REGULATION OF AICTE ACT. PAGE | 4 06 . WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS APPEAL OF THE REVENUE AND FIND THAT THE LD. CIT (A PPEALS) HAS FOLLOWED ORDER OF THE CO - ORDINATE BENCH AND MENTIONED THE FACT IN PARA NO. 6 OF HIS ORDER AS UNDER : - 6. I HAVE CONSIDERED THE REASSESSMENT ORDER, GROUNDS OF APPEAL, SUBMISSION OF THE ASSESSEE AND THE ORDERS OF THE CIT(A) AND HON'BLE ITAT FOR A.Y. 2009 - 10. IN THE ORIGINAL ASSESSMENT ORDER THE HON'BLE ITAT HAS UPHELD THE DISALLOWANCE ON ACCOUNT OF BUSINESS PROMOTION AND ENTERTAINMENT EXPENSES & DELETED THE DISALLOWANCE OF ADVERTISEMENT EXPENDITURE AND AT THE SAME TIME ALLOWED THE BENEFIT OF SECTION 11/12 TO THE ASSESSEE. THE ITAT HAS IN ITS ORDER OBSERVED AS UNDER: ' 9. THE CHALLENGE OF THE DEPARTMENT IN THIS REGARD IS THAT WHEN ONCE THE CIT(A) UPHELD THE DISALLOWANCE OF BUSINESS PROMOTION AND ENTERTAINMENT EXPENDITURE, IT WAS NOT RIGHT ON HI S PART TO HAVE HELD THE ASSESSEE ENTITLED TO THE BENEFITS OF SECTION 11 AND 12 OF THE ACT. HERE, IT IS SEEN THAT THE TWO ACTIONS ARE MUTUALLY INTRINSICALLY EXCLUSIVE AND THE DISALLOWANCE NEED NOT NECESSARILY LEAD TO HOLDING THE ASSESSEE DISENTITLED TO THE BENEFITS OF SECTIONS 11 AND 12 OF HE ACT. AS CORRECTLY NOTED BY THE LD. CIT(A), FOLLOWING 'IDICULA TRUST SOCIETY', 20112 - ITS - 940 - ITAT, IF AN ASSESSEE HAS EXTENDED ANY UNDUE BENEFIT TO A PERSON MENTIONED IN SECTION 13(3), SUCH AMOUNT WOULD NOT BE CONSIDERED AS APPLICATION OF INCOME FOR THE PURPOSE OF FULFILMENT OF OBJECTS OF THE SOCIETY AND THE BENEFIT UNDER SECTION 11 AND 12WOULD NOT BE AVAILABLE OF SUCH AMOUNT. HOWEVER, THIS WOULD NOT LEAD TO ANY CONCLUSION OF THE ASSESSEE HAVING LOST ITS CHARITABLE STATUS . THERE IS NOTHING ON RECORD TO DISPUTE THE CHARITABLE NATURE OF THE ASSESSEE TRUST , AS ENVISAGED IN ITS TRUST DEED. THE ELEMENT OF PROFIT, AS SEEN ABOVE WOULD NOT RENDER SUCH CHARITABLE NATURE OTIOSE. THEREFORE, THERE IS NO PARADOX IN THE FINDINGS REC ORDED BY THE LD. CIT(A) IN FIRSTLY UPHOLDING THE DISALLOWANCE OF BUSINESS PROMOTION AND ENTERTAINMENT EXPENDITURE AND THEN, HOLDING THE ASSESSEE ENTITLED TO THE BENEFITS OF SECTION 11/12 OF THE I.T ACT. ' PAGE | 5 07 . AS THE LD. CIT (APPEALS) HAS FOLLOWED THE ORDER OF THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE FOR THE SAME ASSESSMENT YEAR, WHEREIN IT HAS BEEN HELD THAT ASSESSEE IS ENTITLED TO EXEMPTION UNDER SECTION 11 AND 12 OF THE INCOME TAX ACT, THE LD. CIT (APPEALS) FOLLOWED THE SAME. IN VIEW OF THIS BO TH THE GROUNDS OF APPEAL ARE DISMISSED. 08 . NOW WE COME TO THE APPEAL OF THE ASSESSEE IN ITA. NO. 4873/DEL/2016 WHERE THE ONLY GROUND RAISED WAS THAT THE LD. CIT (APPEALS) HAS ERRED IN NOT TREATING RS.1.30 CRORES AS CORPUS DONATION AND TREATING THE SAME AS PART OF INCOME TO BE APPLIED FOR CHARITABLE PURPOSES UNDER SECTION 11 OF THE ACT. 09 . WE HAVE HEARD THE LEARNED COUNSEL FOR THE ASSESSEE AS WELL AS THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE. THE BRIE F FACTS OF THE CASE SHOWS THAT ASSESSEE HAS RECEIVED A SUM OF RS.1.30 CRORES FROM UNITECH SOUTHCITY EDUCATIONAL CHARITABLE TRUST TOWARDS THE CORPUS OF THE TRUST. TO SUPPORT THE CONTENTIONS THAT THE ABOVE DONATION IS A CORPUS DONATION ASSESSEE SUBMITTED CO PY OF THE LETTER DATED 1 ST DECEMBER, 2008 TO THE DONOR WHEREIN THE ASSESSEE REQUESTED FOR THE DONATION STATING THAT THE ABOVE DONATION WOULD BE PART OF ASSESSEE TRUST. ASSESSEE ALSO SUBMITTED COPY OF THE DONATION RECEIPT. ASSESSEE ALSO SUBMITTED THE COPY OF THE BANK ACCOUNT WHERE THE ABOVE DONATION WAS RECEIVED. THE ASSESSEE CREDITED ABOVE AMOUNT DIRECTLY TO THE TRUST FUND AND TREATED IT AS A CORPUS DONATION. ACCORDING TO SECTION 11(1)(D) OF THE ACT WHEREIN CERTAIN INCOME ARE NOT TO BE INCLUDED IN THE I NCOME OF THE RECIPIENT WHEN INCOME IN THE FORM OF VOLUNTARY CONTRIBUTION MADE WITH A SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST. THEREFORE, IT IS NOT THE INTENTION OF THE DONEE BUT THE DIRECTION OF THE DONOR THAT IS IMPORTANT TO DETERMINE WHETHER THE VOLUNTARY CONTRIBUTION RECEIVED BY THE ASSESSEE TRUST IS TOWARDS CORPUS OR NOT. ADMITTEDLY BEFORE US NO SUCH DIRECTION OF THE DONOR WAS PLACED. ON A SPECIFIC QUERY BY THE BENCH THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE SAME WAS NEVER ASKED BY THE LOWER AUTHORITIES AND, THEREFORE, THE SAME WAS NOT SUBMITTED. HOWEVER, SHE HURRIEDLY AGREED THAT SAME WOULD BE SUBMITTED. THE LEARNED CIT (APPEALS) ALSO HELD THAT THERE IS NO LETTER OF CONFIRMATION FROM THE DONOR THAT TH E AMOUNT OF DONATION IS FOR THE CORPUS FUND AND NEITHER THE RECEIPT ISSUED BY THE ASSESSEE SAY THAT THE AMOUNT OF DONATION IS TOWARDS CORPUS OF THE TRUST. THE LEARNED PAGE | 6 DEPARTMENTAL REPRESENTATIVE DID NOT RAISE ANY SERIOUS OBJECTION TO THE FACT THAT IF THE ASSESSEE PRODUCES A DIRECTION OF THE DONOR I.E. UNITECH SOUTHCITY EDUCATIONAL TRUST THAT ABOVE SUM OF RS.1.30 CRORES RECEIVED BY THE ASSESSEE IS WITH A SPECIFIC DIRECTION THAT IT SHALL FORM THE PART OF THE CORPUS OF THE TRUST. IN VIEW OF THE ABOVE FACTS I F THE ASSESSEE DOES NOT HAVE THE DIRECTIONS OF THE DONOR THAT IT SHALL FORM PART OF THE CORPUS OF THE TRUST NATURALLY BENEFIT OF SECTION 11(1)(D) OF THE ACT CANNOT BE GIVEN TO THE ASSESSEE. ASSESSEE RELIED UP ON DECISION OF DATED 17.10.2011 OF THE HONOU RABLE KARNATAKA HIGH COURT IN THE CASE OF DIRECTOR OF IT & ORS. V. V. RAMAKRISHNA SEVA ASHRAMA REPORTED AS [2013] 357 ITR 731(KAR.) THE ISSUE BEFORE THE HONOURABLE COURT WAS THAT EVEN IF THE SUM IS CREDITED TO A SPECIFIC ACCOUNT CAN IT BE CONSIDERED TO BE CORPUS DONATION. FURTHER, THERE ARE NO DETAILS THAT HOW THIS MONEY IS UTILIZED AS HELD BY THE HIGH COURT IN PARA NO 16. THUS, IT DOES NOT HELP THE CASE OF THE ASSESSEE. IN VIEW OF THIS WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO THE ASSESSEE TO SUBMIT SUCH DIRECTION OF THE DONOR , IF AVAILABLE, AS PRESCRIBED UNDER SECTION 11(1)(D) OF THE ACT WITHIN 60 DAYS OF THIS ORDER. IF THE ASSESS EE FAILS TO DO SO, THE ASSESSING OFFICER IS DUTY BOUND TO CONSIDER IT AS VOLUNTARY CONTRIBUTION. IN THAT CIRCUMSTANCES THE ASSESSEE WOULD BE ENTITLED TO BENEFIT OF SECTION 11 AND 12 OF THE ACT ON THE ABOVE INCOME. IN VIEW OF THIS THE SOLITARY GROUND OF A PPEAL OF THE ASSESSEE IS ALLOWED WITH ABOVE DIRECTION. 10 . ACCORDINGLY, BOTH THE APPEALS ARE DISPOSED OF. ORDER PRONOUNCED IN THE OPEN COURT ON : 2 9 / 0 6 / / 2020 . - S D / - - S D / - ( SUDHANSHU SRIVASTAVA ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 2 9 /0 6 / 2020 . *MEHTA* COPY FORWARDED TO : 1 . APP ELLANT