DCIT (Exemption), Ghaziabad V. Om Charitable Trust, Meerut

ITA 4961/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8390 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 03-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Assessee Lawyers: K SAMPATH ADV SH V RAJAKUMAR
• Keywords: Charitable institution; Capital expenditure
• Section: 143(3); 12A; 12AA; 148; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBE R AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO. 4961/DEL/2015 ASSESSMENT YEAR: 2011-12 DCIT(EXEMPTION) ROOM NO. 208, 2 ND FLOOR, CGO-1, HAPUR ROAD, GHAZIABAD. VS OM CHARITABLE TRUST 47/L-4, JAWAHAR QUARTERS, MEERUT. AAATO1865D APPELLANT RESPONDENT CO NO. 185/DEL/2016 (IN ITA NO. 4961/DEL/2015) ASSESSMENT YEAR: 2011-12 OM CHARITABLE TRUST 47/L-4, JAWAHAR QUARTERS, MEERUT. AAATO1865D VS DCIT(EXEMPTION) ROOM NO. 208, 2 ND FLOOR, CGO-1, HAPUR ROAD, GHAZIABAD. APPELLANT RESPONDENT REVENUE BY SMT. NAINA SOIN KAPIL, SR. DR ASSESSEE BY SH. K. SAMPATH, ADV. SH. V. RAJA KUMAR, ADV. DATE OF HEARING 13.12.2018 DATE OF PRONOUNCEMENT 01.01.2019 2 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST ORDER PER SHRI BHAVNESH SAINI, J.M. THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJECTION BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT( A)-MEERUT DATED 08.05.2015 FOR AY 2011-12. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 3. IN THE DEPARTMENTAL APPEAL REVENUE RAISED THE FO LLOWING GROUNDS: 1. THAT THE LD. CIT(A) HAS ERRED IN FACTS AND CIRCUM STANCES OF THE CASE WHILE HOLDING THAT THERE IS NO VIOLATIO N OF SECTION 11(5)(X) IGNORING THE FACT THAT THE ASSESSE E COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THE ACTIVITI ES WHICH HAVE BEEN STARTED TO OPEN THE EDUCATIONAL INS TITUTE. AND THE ASSESSEE HAS ALSO NOT PRODUCED ANY EVIDENCE THAT ACTIVITIES OF THE TRUST AS MENTIONED IN THE DE ED CAN BE DONE IN THE FLATS PURCHASED BY THE TRUST. 2. THE LD. CIT(A) HAS ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE WHILE DIRECTING THE AO TO RECOMPUTED THE INCOM E OF THE ASSESSEE BY ALLOWING THE EXEMPTION CLAIMED BY T HE ASSESSEE IGNORING THE FACT THAT THE ASSESSEE HAS AP PLIED LESS THAN 85% OF THE RECEIPTS OF THE TRUST FOR CHAR ITABLE PURPOSE. 4. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE TRUST IS REGISTERED U/S 12AA OF THE ACT. AS PER TRUST DEED THE MAIN OBJECTS OF THE TRUST ARE TO WORK FOR UPLIFTMENT OF RURAL AR EA, TO PROMOTE HIGHER AND CONTINUING EDUCATION, TO PROMOTE WORKING WOMENS HOSTEL, TO RUN FAMILY PLANNING CENTRE, MATERNITY AN D CHILD WELFARE 3 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST CENTRES, ETC. THE AO ON THE BASIS OF THE DETAILS F ILED ON RECORD NOTED THAT ASSESSEE HAS MADE INVESTMENT IN PURCHASE OF LAND AND FLATS AMOUNTING TO RS. 3,44,27,160/- AND RS. 20,25, 000/-. ASSESSEE TRUST HAS ALSO GIVEN ADVANCE OF RS. 48,10, 240/- FOR FLAT. THE AO ISSUED NOTICE TO ASSESSEE AS TO WHY THE AMOU NT OF RS. 48,10,240/- SHOULD NOT BE ADDED TO THE INCOME OF TH E ASSESSEE, WHICH WAS NOT INVESTED FOR CHARITABLE PURPOSES. TH E ASSESSEE IN THE WRITTEN SUBMISSION SUBMITTED BEFORE AO THAT BES IDES THE OPENING BALANCE OF RS. 40,24,000/- BROUGHT FORWARD FROM THE PRECEDING YEAR, ASSESSEE TRUST HAS FURTHER GIVEN A SUM OF RS. 7,86,240/- AS ANOTHER INSTALLMENT IN ADVANCE TO M/S JAY PEE GREENS, GREATER NOIDA FOR BOOKING A FLAT THEREIN TO BE USED FOR HOUSING THE VICE CHANCELLOR OF THE PROPOSED UNIVERS ITY. IT WAS EXPLAINED THAT TRUSTEES ARE MAINLY DOCTORS WITH EST ABLISHED PRACTICE AND HAVE SETTLED NURSING HOME IN MEERUT AN D DO NOT STAY IN GREATER NOIDA, HENCE, THE FEARS EXPRESSED DURING HEARING THAT THEY ARE INVESTING IN THIS FLAT FOR A HOUSE FOR THE MSELVES ARE UNCONFIRMED AND REMAIN A MERE SUSPICION ONLY. IT I S PREMATURE TO HOLD A PREJUDICE THAT THE LAND PURCHASED AND THE FL ATS SUBSCRIBED ARE NOT GOING TO SERVE THE INTEREST OF THE OBJECTS OF THE TRUST ESPECIALLY IN THE ABSENCE OF ANY EVIDENCE TO THE CO NTRARY. THE INVESTMENTS IN IMMOVABLE PROPERTIES ARE MADE IN FUR THERANCE OF OBJECTS OF THE TRUST. THE AO ASKED THE EXPLANATION OF THE ASSESSEE THAT TILL MARCH, 2014 NO EDUCATION ACTIVITIES HAVE BEEN STARTED. THE ASSESSEE EXPLAINED THAT IT IS ON THE LOOK OUT T O ESTABLISH A PRIVATE UNIVERSITY UNDER THE AEGIS OF THE TRUST. T HE ESTABLISHMENT 4 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST OF SUCH A UNIVERSITY IS A GIGANTIC EFFORT AND AMONG OTHER THINGS BEGINS WITH OWNERSHIP OF MINIMUM 50 ACRES OF LAND S OME OF WHICH ASSESSEE HAS ACQUIRED AND THE BALANCE IS FURTHER BE ING ACQUIRED. THE ASSESSEE HAS ALREADY SUBMITTED THE DETAILS AS P ER RULES AND BYE LAWS OF FORMING THE UNIVERSITY. ONCE THE DESIR ED LEVEL OF THE LAND IS AVAILABLE WITH THE ASSESSEE, IT INTENDS TO ROPE IN EXISTING EDUCATIONAL INSTITUTIONS IN THEIR TRUST AND THEREBY PROCEED TO ESTABLISH A UNIVERSITY. BESIDES THE ABOVE, THE TRU ST HAS TAKEN VARIOUS STEPS TO RUN FOLLOWING PROGRAMMES FOR BENEF IT OF THE POOR SECTION OF THE SOCIETY: A) DISTRIBUTED VACCINATION MEDICINES/INJECTIONS FOR P OOR IN A MEDICAL CAMP. B) DONATED RATION FOR POOR PEOPLE (COPY OF ACCOUNT AS WELL AS SUPPORTING BILLS AS WELL AS LETTER FROM GRAM PRADHA N CERTIFYING THE NARRATED FACTS ARE PLACED ON RECORD) . C) ORGANIZED TEACHING PROGRAMME FOR VARIOUS SLUM STUDE NTS. D) AMBULANCE IS BEING RUN FOR THE POOR PATIENTS FREE O F CHARGE. 5. THE AO NOTED THAT SINCE THE ASSESSEE DID NOT FIL E ANY EVIDENCE IN SUPPORT OF THE CLAIM THAT LAND AND FLAT S HAVE BEEN PURCHASED FOR CARRYING OUT CHARITABLE ACTIVITIES, T HE ASSESSEE TRUST WAS ASKED TO PRODUCE THE EVIDENCE AND ALSO TO EXPLA IN WHETHER ACTIVITIES MENTIONED IN THE DEED CAN BE DONE IN THE SE FLATS. THE ASSESSEE REITERATED THE SUBMISSIONS BEFORE AO. THE AO, THEREFORE, NOTED THAT ASSESSEE DID NOT PRODUCE ANY EVIDENCE IN SUPPORT OF ACTIVITIES WHICH HAVE BEEN STARTED TO OPEN THE EDUC ATIONAL INSTITUTE. THE ASSESSEE HAS NOT PRODUCE ANY EVIDEN CE THAT ACTIVITIES OF THE TRUST AS MENTIONED IN THE DEED CA N BE DONE IN THE 5 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST FLATS. THEREFORE, INVESTMENT MADE IN PURCHASE OF L AND, TUBE WELL, FLAT, ETC. TOTALING TO RS. 2,67,51,128/- WAS DISALL OWED AS INVESTMENT MADE IS NOT FOR CHARITABLE PURPOSES. TH E ASSESSEE MADE SIMILAR ADVANCE OF RS. 7,86,240/- GIVEN DURING AY 2011-12 FOR PURCHASE OF FLAT WAS ALSO DISALLOWED, AS IT WAS NOT FOR CHARITABLE PURPOSE. THE AO, THEREFORE, NOTED THAT ASSESSEE HA S VIOLATED PROVISIONS OF SECTION 13(1)(D) OF THE ACT AND CONSE QUENTLY THE BENEFIT OF PROVISIONS OF SECTION 11(5)(X) OF THE AC T CANNOT BE GRANTED. THE AO COMPUTED THE INCOME OF ASSESSEE AT RS. 2,22,04,300/- AND TREATED THE ASSESSEE AS AOP. 6. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(A). THE WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE APPELLATE ORDER IN WHICH THE ASSESSEE EXPLAINED THAT THERE IS NO VIOLATION OF SECTION 13(1)(D) OF THE ACT BECAUSE SECTION 11(5)(X ) AUTHORIZES INVESTMENT IN IMMOVABLE PROPERTY. THE ASSESSEE HAS MADE INVESTMENT IN IMMOVABLE PROPERTY AS PER ABOVE PROVI SION, THEREFORE, THERE IS NO VIOLATION OF PROVISIONS OF L AW. IT WAS ALSO EXPLAINED THAT ASSESSEE HAD RECEIVED RS. 2,25,50,00 0/- AS CORPUS DONATION DURING THE YEAR AND ITS INCOME AS PER INCO ME EXPENDITURE ACCOUNT IS ONLY TO THE EXTENT OF RS. (- ) 3,07,905/-, THEREBY GIVING SURPLUS ON EXPENDITURE OVER INCOME A T RS. 3,07,905/-. THE ASSESSEE IS A CHARITABLE TRUST FUN CTIONING TOWARDS ACHIEVEMENT OF ITS SOCIAL SERVICES GOALS WHICH IT I S DOING BY MEANS OF PROVIDING FREE AMBULANCE SERVICES IN THE REMOTE AREA FOR THE PATIENTS ETC. MANY CASE LAWS WERE RELIED UPON. THE ASSESSEE 6 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST PRODUCED BOOKS OF ACCOUNTS TO GET VERIFIED THE ENTR IES OF THE CORPUS DONATION FROM THE BANK ACCOUNT OF THE DONOR. COPY OF THE CONFIRMATION LETTER FROM THE DONOR WAS ALSO FILED. THE CONFIRMATION AND BANK ACCOUNT REVEALED THAT ASSESSEE HAS RECEIVE D CORPUS AMOUNT OF RS. 2,25,50,000/-. THE CORPUS DONATION C ANNOT BE ADDED TO THE INCOME OF THE ASSESSEE. INVESTMENT IN IMMOVABLE PROPERTY IS NOT BARRED UNDER INCOME TAX ACT. THERE FORE, ENTIRE ADDITION IS LIABLE TO BE DELETED. 7. THE LD. CIT(A) CONSIDERING THE EXPLANATION OF AS SESSEE AND MATERIAL ON RECORD DELETED THE ENTIRE ADDITION HIS FINDINGS IN PARA 3.3 TO 3.5 OF THE ORDER ARE REPRODUCED AS UNDER: 3.3 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE WRITTEN SUBMISSION OF THE AR OF THE APPELLANT. FROM A STUDY OF THE WRITTEN SUBMISSION OF THE AR AND THE ASSESSMENT ORDER, IT SEEMS TO THAT THE ASSESSING OFFICER HAS COMPUTED THE TOTAL INCOME OF THE APPELLANT ON THE BASIS OF FOLLOWING TWO CONSIDERATI ONS: 1. THAT THE INVESTMENT MADE IN LAND AND FLAT IS IN VIOLATION OF SECTION 11(5)(X) OF THE I.T. ACT. 2. 85% OR MORE OF THE RECEIPTS OF THE TRUST HAVE NOT B EEN APPLIED TO CHARITABLE PURPOSE. 3.4 THE AR HAD EXPLAINED DURING THE ASSESSMENT PROCEEDING THAT THE MAIN FOCUS OF THE TRUST DURING THE CONCERNED ASSESSMENT YEAR WAS FOR ESTABLISHING INSTITUTION TO PROMOTE HIGHER EDUCATION. FOR THIS PURPOSE LAND HAS BEEN PURCHASED. THE AR HAD FURTHER MENTIO NED THAT FOR ESTABLISHING A UNIVERSITY THERE IS A MINIM UM LAND REQUIREMENT OF 50 ACRES AND THAT IS SOMETHING WHICH CANNOT BE DONE IN ONE GO. APART FROM THIS THE AR H AD ALSO SUBMITTED EVIDENCE BEFORE THE AO TO SHOW THAT IT HA S RUN 7 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST VARIOUS PROGRAMS FOR THE BENEFIT OF POOR SECTION OF THE SOCIETY. IT IS A FACT THAT SECTION 11(5)(X) AUTHOR IZES INVESTMENT IN IMMOVABLE PROPERTY. THE AO HAS NOT CONSIDERED THAT INVESTMENT IN LAND AND FLAT HAS BEE N DONE FOR THE PURPOSES OF CHARITY. HE HAS NOT ACCEPTED T HE ARGUMENTS OF THE APPELLANT THAT THE INVESTMENT IN IMMOVABLE PROPERTY HAS BEEN DONE AS PRELIMINARY STE PS TOWARDS ESTABLISHMENT OF UNIVERSITY. IT SEEMS THAT THE AO WAS UNDER AN IMPRESSION THAT IN ORDER TO QUALIFY FO R CHARITABLE PURPOSE THE TRUST HAS TO SPEND THE MONEY HERE AND NOW ON CHARITABLE ACTIVITIES. BY THIS LOGIC NO LONG TERM INVESTMENT WOULD BE QUALIFIED AS BEING DONE FOR CHA RITABLE PURPOSE. CLEARLY THIS IS NOT THE POSITION OF LAW I N SECTION 11(5)(X). THE CLAUSE 5 OF SECTION 11 SAYS THE FORMS AND MODES OF INVESTING AND DEPOSITING THE MONEY REFERRED TO IN CLAUSE (B) OF SUB SECTION (2) SHALL BE THE FOLLOWING, NAMELY; .THE SUB CLAUSE (X) SIMPLY SAYS INVESTMENT IN IMMOVABLE PROPERTY . THUS THERE IS NO VIOLATION OF SECTION 11(5)(X) AND CONSEQUENTLY SECT ION 13(1)(D). 3.5 THERE IS ANOTHER LINE OF ARGUMENT WHICH HAS BEEN TAKEN UP BY THE AR. THE QUESTION OF APPLYING 85% O F THE INCOME WILL ARISE ONLY WHEN CONTRIBUTIONS RECEIVED BY THE TRUST ARE NOT FORMING PART OF THE CORPUS OF THE TRU ST. THE AR HAS GIVEN DOCUMENTARY EVIDENCE BEFORE THE AO THA T THE AMOUNT OF RS. 2,25,50,000/- WHICH HAS BEEN TAKEN AS TOTAL RECEIPTS OF THE TRUST BY THE AO IS IN FACT TO WARDS CORPUS DONATION. LETTER OF THE DONOR CONFIRMING TH IS FACT HAS BEEN PRODUCED BEFORE THE AO. IN THE BALANCE SH EET OF THE TRUST ALSO RS. 2,25,50,000/- HAS BEEN SHOWN AS PART OF CAPITAL RECEIVED DURING THE YEAR. FURTHER, IN T HE INCOME AND EXPENDITURE ACCOUNT RS. 2,25,50,000/- HAS NOT B EEN SHOWN AS INCOME OR RECEIPT. THE DONATION HAS BEEN MADE THROUGH BANKING CHANNEL. THE DONOR IS AN INCOME TA X ASSESSEE AND ITS PAN AND COPY OF ACKNOWLEDGEMENT OF IT RETURN FOR AY 2010-11 HAS BEEN PRODUCED BEFORE THE AO. IT IS CLEAR FROM FACTS THAT THE AO DID NOT ACCEPT T HAT THE RECEIPT OF RS. 2,25,50,000/- ARE PART OF CORPUS DON ATION OF 8 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST THE TRUST EVEN THOUGH THE FACTS CLEARLY POINTS TOWA RDS IT. THUS NEITHER OF THE GROUNDS TAKEN BY THE AO AS MENT IONED IN PARA 3.3 ABOVE SUCCEEDS. CONSEQUENTLY, THE GROU NDS OF APPEAL 1 TO 6 AND 8 ARE ALLOWED. THE AO IS ACCORDI NGLY DIRECTED TO RE-COMPUTE THE INCOME OF THE APPELLANT BY ALLOWING THE EXEMPTION CLAIMED BY IT. 8. LD. DR RELIED UPON ORDER OF THE AO AND SUBMITTED THAT ASSESSEE DID NOT PRODUCE ANY EVIDENCE FOR CARRYING OUT ANY CHARITABLE ACTIVITIES. THEREFORE, ADDITION WAS RIG HTLY MADE BY THE AO. 8.1 ON THE OTHER HAND, LD. COUNSEL FOR ASSESSEE REI TERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMI TTED THAT ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY ORDER OF ITAT DELHI G BENCH IN THE CASE OF M/S THE SCIENTIFIC AND EDUCATI ONAL ADVANCEMENT SOCIETY IN ITA NO. 4944/DEL/2012 AND 4430/DEL/2012 DATED 15/10/2018. COPY OF THE ORDER IS PLACED ON RECORD. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO N OT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. IT IS AN ADMITTE D FACT THAT ASSESSEE TRUST IS REGISTERED U/S 12AA OF THE ACT. THE MAIN OBJECTS OF THE ASSESSEE TRUST ARE TO WORK FOR UPLIFTMENT OF THE RURAL AREA AND TO PROMOTE EDUCATION. THE ASSESSEE IN PURSUANC E OF THE OBJECTS OF THE TRUST CARRIED OUT CERTAIN ACTIVITIES AS EXPLAINED ABOVE. THE ASSESSEE FURTHER EXPLAINED THAT IT WANT ED TO OPEN A PRIVATE UNIVERSITY AND FOR THAT EFFORTS WERE GOING ON TO ACQUIRE HUGE LAND AND TO COMPLY WITH THE RULES AND REGULATI ONS FOR FORMING 9 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST PRIVATE UNIVERSITY. IN REFERENCE THERETO ASSESSEE MADE INVESTMENT IN LAND AND FLATS WHICH WERE ULTIMATELY TO BE CONVE RTED INTO SOURCE OF OPENING OF A PRIVATE EDUCATIONAL UNIVERSITY. IT IS A FACT THAT SECTION 11(5)(X) AUTHORIZES INVESTMENT IN IMMOVABLE PROPERTY. THE AO HAS NOT CONSIDERED THE INVESTMENT IN LAND AND FL AT HAS BEEN DONE FOR CHARITABLE PURPOSES. HE HAS NOT ACCEPTED THE EXPLANATION OF ASSESSEE THAT INVESTMENT IN IMMOVABLE PROPERTY H AS BEEN DONE AS PRELIMINARY STEPS TOWARDS ESTABLISHMENT OF UNIVE RSITY. THE AO WAS UNDER THE IMPRESSION THAT IN ORDER TO QUALIFY F OR CHARITABLE PURPOSE, THE TRUST HAS TO SPEND THE AMOUNT ON CHARI TABLE ACTIVITIES ONLY. HOWEVER, SECTION 11(5)(X) OF THE ACT CLEARLY AUTHORIZE INVESTMENT IN IMMOVABLE PROPERTY FOR CLAIMING EXEMP TION U/S 11 OF THE ACT. IF THE FINDINGS OF THE AO ARE ACCEPTED TH EN NO INVESTMENT WOULD BE QUALIFIED U/S 11(5) OF THE ACT. SINCE THE INVESTMENT IN IMMOVABLE PROPERTY IS PERMITTED AS PER SECTION 11(5 )(X) OF THE ACT, THEREFORE, THERE WAS NO NECESSITY FOR THE ASSESSEE TO PROVE THAT IT WAS DONE SO FOR CHARITABLE PURPOSES. SECTION 11(5) PROVIDES THAT ACCUMULATED AMOUNT U/S 11(2) HAS TO BE KEPT IN SPEC IFIED MOODS OF INVESTMENT WHICH INCLUDE INVESTMENT IN IMMOVABLE PROPERTY. IT DOES NOT PROVIDE SUCH IMMOVABLE PROPERTY MUST BE ME ANT FOR ANY SPECIFIC PURPOSES. THEREFORE, THERE IS NOTHING WRO NG COMMITTED BY ASSESSEE SO AS TO VIOLATE ANY PROVISIONS OF LAW. T HE IDENTICAL ISSUE WAS CONSIDERED AND DECIDED BY ITAT DELHI G BENCH IN THE CASE OF M/S THE SCIENTIFIC & EDUCATIONAL ADVANCEMENT SOCIET Y (SUPRA) IN WHICH IN PARA 13 IT WAS HELD AS UNDER: 10 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST 13. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ONE RECO RD. THE LD.CIT(A) RECORDED IN THE ORDER THAT LAND AT DH OKRA WAS PURCHASED BY THE ASSESSEE-SOCIETY IN THE YEARS 2001 AND 2003. IT WAS SOLD FOR A CONSIDERATION OF RS. 9 .11 CRORES IN AY 2007-08 WHICH RESULTED INTO PROFIT/INC OME AT RS. 8.44 CRORES WHICH WAS CLAIMED AS EXEMPT U/S 11( 1A) OF THE I.T. ACT, 1961, IN AY 2007-08. THE ASSESSEE -SOCIETY ALSO FILED FORM-10 ALONG WITH RETURN OF INCOME IN W HICH INCOME TO THE EXTENT OF RS. 7,22,67,210/- WAS SET A PART FOR UTILIZATION IN FUTURE PURSUANT TO THE RESOLUTION DA TED 31.10.2007 WHEREIN IT WAS RESOLVED THAT MONEY RECEI VED AFTER SALE OF THE ABOVE PROPERTY MAY BE REINVESTED FOR PURCHASE OF LAND IN GURGAON FOR EDUCATIONAL/VOCATIO NAL PURPOSES. THE ASSESSEE-SOCIETY, OUT OF THE SALE CONSIDERATION, MADE INVESTMENT IN IMMOVABLE PROPERT IES AT SADHRANA, ARAVALLI, GOPALPURA AND LOHARI. IT IS NO T IN DISPUTE THAT LAND AT VILLAGE-DHOKRA HELD FOR EDUCAT IONAL PURPOSES WHICH IS ALSO EVIDENT LOHARI. IT IS NOT I N DISPUTE THAT LAND AT VILLAGE-DHOKRA HELD FOR EDUCATIONAL PU RPOSES WHICH IS ALSO EVIDENT FROM THE ORDERS PASSED UNDER SECTION 10(23C)(VI) BY CCIT FOR A.YS. 2002-2003 TO 2004-200 5 AND FOR A.Y. 2005-2006. THE LD. CCIT WOULD NOT HAVE GRA NTED APPROVAL UNDER THIS PROVISION IF SUCH LAND HAD NOT BEEN MEANT FOR EDUCATIONAL PURPOSES. SIMILARLY, THE ASSE SSMENT ORDER FOR A.Y. 2006-2007 WAS PASSED UNDER SECTION 143(3)/148, BUT, PROCEEDINGS UNDER SECTION 148 HAVE BEEN DROPPED VIDE ORDER DATED 16.12.2010 BY VERIFYING TH AT ASSESSEE-SOCIETY IS REGISTERED UNDER SECTION 12A OF THE I.T. ACT. SIMILARLY, ASSESSMENT ORDER FOR A.Y. 2007-2008 WAS PASSED UNDER SECTION 143(3) WHICH WAS APPEALED BEFO RE LD. CIT(A) WHO HAS GRANTED BENEFIT UNDER SECTIONS 1 1 AND 12 OF THE I.T. ACT TO THE ASSESSEE-SOCIETY. THE ORD ER OF LD. CIT(A) HAVE BEEN UPHELD BY THE TRIBUNAL. THE LD. CI T(A) IN THE ORDER FOR A.Y. 2007-2008 HAS SPECIFICALLY NOTIC ED THAT IN RESPECT OF UNUTILIZED AMOUNTS, ASSESSEE-SOCIETY HAS FOR THE PURPOSE OF SECTION 11(1) SET APART/ACCUMULATED PROFITS OF RS.7,22,67,210/- FILED FORM NO. 10 ALONG WITH RE TURN OF 11 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST INCOME AND ALSO SUBSEQUENTLY, MADE INVESTMENT IN PURCHASE OF LAND TO THE EXTENT OF RS.8,71,42,582/-. HENCE, THE INCOME TO THE EXTENT OF RS.7.22 CRORES WAS TREA TED TO HAVE BEEN APPLIED FOR CHARITABLE PURPOSES. IT IS WE LL SETTLED LAW THAT EXEMPTION UNDER SECTION 11(1A) FOR CAPITAL GAINS FOR A CHARITABLE TRUST HAS BEEN UPHELD IN THE CASE OF CIT VS. AUROBINDO MEMORIAL FUND SOCIETY (2001) 247 ITR 93 (MAD.) AND DIT (EXEMPTIONS) VS. DLF QUTAB ENCLAV E COMPLEX MEDICAL CHARITABLE TRUST (2001) 248 ITR 41 (DEL.) (SUPRA). IF THE LAND AT DHOKRA VILLAGE WAS NOT MEAN T FOR CHARITABLE PURPOSES, THE ASSESSEE-SOCIETY WOULD NOT HAVE GOT BENEFIT OF SECTIONS 11 AND 12 FOR ALL THESE YEA RS. WE, THEREFORE, HELD THAT THE LAND AT VILLAGE- DHOKRA WH ICH WAS SOLD IN A.Y. 2007-2008 WAS MEANT FOR EDUCATIONAL PURPOSES ONLY. COPY OF FORM NO. 10 IS FILED AT PAGE -146 OF THE PAPER BOOK AND COPY OF THE RESOLUTION OF ASSESS EE- SOCIETY IS FILED AT PAGE-147 OF THE PAPER BOOK AND CONTENTION OF ASSESSEE-SOCIETY HAS BEEN ACCEPTED BY LD. CIT(A) IN A.Y. 2007-2008 ABOVE AND HIS VIEW HAVE BE EN CONFIRMED BY THE TRIBUNAL. IT IS ALSO NOT IN DISPUT E THAT ASSESSEE-SOCIETY PURCHASED LANDS AT SADHRANA, GOPALPURA AND LOHARI AGGREGATING TO RS.7,20,56,368/ -. THEREFORE, SHORT FALL OF RS.2,10,842/- IS THE INCOM E REMAINING TO BE APPLIED TO FIVE YEARS PERIOD ALLOWE D UNDER SECTION 11(2) WHICH HAS NOT BEEN EXPIRED IN ASSESSM ENT YEAR UNDER APPEAL I.E., A.Y. 2008-2009. THEREFORE, THIS AMOUNT ALSO CANNOT BE BROUGHT TO TAX. SINCE THE ASS ESSEE- SOCIETY PURCHASED THE LANDS FOR A SUM OF RS.7.20 CR ORES FOR EDUCATIONAL PURPOSES, THEREFORE, THERE IS NOTHING W RONG IN THE EXPLANATION OF ASSESSEE-SOCIETY. THE LD. CIT(A) ALREADY FOUND THAT LAND AT SADHAMA HAVE BEEN USED F OR EDUCATIONAL PURPOSES. THE REMAINING TWO PROPERTIES AT GOPALPURA AND LOHARI CANNOT BE TREATED AS NOT FOR CHARITABLE PURPOSES MERELY FOR THE REASONS THAT THE SE HAVE NOT BEEN USED. NON-USER OR PASSIVENESS OF THE LANDS PURCHASED CANNOT BE TREATED AS USER FOR NON-CHARITA BLE PURPOSES. SECTION 11(5) PROVIDES THAT ACCUMULATED A MOUNT UNDER SECTION 11(2) HAS TO BE KEPT IN SPECIFIED MOD ES OF INVESTMENT, WHICH INCLUDE INVESTMENT IN IMMOVABLE 12 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST PROPERTY. IT DOES NOT PROVIDE THAT SUCH IMMOVABLE P ROPERTY MUST BE MEANT FOR ANY SPECIFIC PURPOSE. THEREFOREMH ERE IS NOTHING WRONG IN EXPLANATION OF ASSESSEE-SOCIETY IN PURCHASING THE PROPERTIES. I N THE CASE OF SHRI SURAT PANJARAPOLE TRUST VS. AC IT (SUPRA), IT WAS HELCTTH AT NON- USE OF THE LAND OR PASSIVENESS OF LAND IS NOT EQUAL TO ITS HOLDING THE LAND FOR NON-CHARITABLE PURPOSES. THUS, IN OUR VIEW, THE ASSESSEE- SOCIETY HAVING PURCHASED THE ABOVEMENTIONED LAND, HAS USED THE ACCUMULATED AMOUN T FOR CHARITABLE AND EDUCATIONAL PURPOSES. NO EVIDENC E HAVE BEEN BROUGHT ON RECORD BY THE REVENUE TO PROVE THAT LAND AT GOPALPURA AND LOHARI WERE USED FOR NON-EDUCATION AL AND NON-CHARITABLE PURPOSES. THE LD. CIT(A) MADE A REFERENCE TO TWO PROPERTIES AT ARAVALLI WHICH HAVE GOT NO BEARING ON THE ISSUE, AS THE SAID TWO PROPERTIES AC CORDING TO THE EXPLANATION OF ASSESSEE-SOCIETY, ARE NOT UTI LISED FOR ACCUMULATED PROFITS UNDER SECTION 11(2) OF THE I.T. ACT BECAUSE THE ACCUMULATION HAVE BEEN MADE UNDER SECTI ON 11(2) IN RESPECT OF THREE PROPERTIES ONLY I.E., SAD HARNA, GOPALPURA AND LOHARI. LD. CIT(A) WRONGLY APPLIED SE CTION 11(1B) OF THE I.T. ACT AS THE ASSESSEE-SOCIETY ACCU MULATED ITS INCOME UNDER SECTION 11(2) AND IN THAT SITUATIO N SECTION 11(1B) IS NOT APPLICABLE. ACCUMULATION WAS UNDER SE CTION 11(2) AND NOT UNDER EXPLANATION TO SUB-SECTION 11(1 ) AS IS CLEAR FROM THE ORDER PASSED BY THE LD. CIT(A) AND T HE TRIBUNAL IN AY 2007-2008 AND IT WAS CLEARLY NOTICED THAT FORM-10 HAVE BEEN FILED IN A.Y. 2007-2008 WHICH IS APPLICABLE FOR ACCUMULATION OF INCOME UNDER SECTION 11(2) ONLY. THE FINDINGS OF THE LD. CIT(A) AT SECTION 11( 3) IS APPLICABLE IS ALSO NOT CORRECT BECAUSE INCOME ACCUM ULATED UNDER SECTION 11(2) WAS APPLIED FOR EDUCATIONAL PUR POSES. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE NOTED ABOVE IN THE LIGHT OF FINDING OF FAC T RECORDED BY THE LD. CIT(A) AND TRIBUNAL IN A.Y. 2007-2008, I T IS CLEAR THAT NO ADDITION COULD BE MADE AGAINST THE AS SESSEE- SOCIETY OF SUCH NATURE. THE ORDER OF THE LD. CIT(A) , THEREFORE, CANNOT BE SUSTAINED IN LAW FOR ENHANCING THE INCOME OF ASSESSEE-SOCIETY OF RS.6,77,16,875/- AND THAT TOO BY INVOKING SECTION 11(1B) AND SECTION 11(3) OF THE I.T. 13 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST ACT, WHICH ARE NOT APPLICABLE TO THE CASE OF THE AS SESSEE- SOCIETY. THE DECISIONS RELIED UPON BY THE LD. D.R. ARE NOT APPLICABLE TO THE FACTS OF THE CASE. IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE THE ORDER OF THE LD. CIT(A ) AND DELETE THE ADDITION OF RS.6,77,16,875/-. ACCORDINGL Y, APPEAL OF THE ASSESSEE-SOCIETY IS ALLOWED. 10. FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL, WE D O NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD . CIT(A). WE MAY ALSO NOTE THAT ASSESSEE HAS EXPLAINED THAT OUT OF T HE ADDITION IN QUESTION AS MADE BY AO, THE AMOUNT OF RS. 2,25,50,0 00/- WAS IN FACT TOWARDS CORPUS DONATION. THE ASSESSEE PRODUCE D CONFIRMATION AND BANK ACCOUNT AND RELEVANT DETAILS TO PROVE IT WAS A CORPUS DONATION. THEREFORE, IT COULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE. THE LD. CIT(A) CORRECTLY D IRECTED TO DELETE THE ADDITION. THE REVENUE DID NOT CHALLENGE THE DE LETION OF ADDITION ON ACCOUNT OF CORPUS DONATION. THEREFORE, FINDINGS OF FACT RECORDED BY LD. CIT(A) ARE CONFIRMED. IF THE CORPU S DONATION IS EXCLUDED NOTHING WOULD SURVIVE AGAINST THE ASSESSEE SO AS TO MAKE ANY ADDITION. IN THIS VIEW OF THE MATTER, THE RE IS NO MERIT IN DEPARTMENTAL APPEAL. SAME IS ACCORDINGLY DISMISSED . 11. THE ASSESSEE IN THE CROSS OBJECTION HAS RAISED THE FOLLOWING GROUNDS: 1. THE LD.CIT(A) HAS FAILED TO APPRECIATE THE CONTENT AND TENOR OF VARIOUS HIGH COURT AND TRIBUNAL JUDGMENT C ITED BEFORE HIM WHICH ARE A DIRECT AUTHORITY ON THE ISSU E AT HAND AND HAS THEREBY VIOLATED THE PRINCIPLES OF JUD ICIAL DISCIPLINE. 14 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST 2. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT I NCOME HAS TO BE COMPUTED COMMERCIALLY EVEN IN CASES COVER ED U/S 11-13 OF THE ACT AND RESULTANT LOSS, IF ANY, AR ISING DUE TO SURPLUS APPLICATION OF INCOME, HAS TO BE COMPUTE D AND CARRIED FORWARD TO NEXT YEAR TO BE SET OFF THEREIN ACCORDINGLY. 3. THE LD. CIT(A) HAS ALSO FAILED TO APPRECIATE THAT N EITHER SECTION 11 NOR SECTION 72 OF THE INCOME TAX ACT, 19 61 HAVE A MUTUAL RIDER FOR COMPUTATION OF INCOME OR FOR ITS CARRY FORWARD AND SET OFF AND HENCE THE IMPUGNED ORDER DESERVES TO BE QUASHED. 12. THE LD. CIT(A) NOTED THAT THIS ISSUE RELATES TO CARRY FORWARD OF LOSS AMOUNTING TO RS. (-) 4,15,70,160/- TO THE A Y 2012-13. THE AO HAS NOT MADE ANY COMMENT ON THE SAME. THE ASSES SEE EXPLAINED BEFORE THE LD. CIT(A) THAT RETURN WAS FIL ED ON 28.09.2011 CLAIMING A LOSS OF THE ABOVE AMOUNT TO B E CARRY FORWARD IN SUBSEQUENT AY 2012-13. COPY OF THE RETU RN FILING THE RECEIPT AS WELL AS COMPUTATION OF INCOME WAS FILED. THE ASSESSEE IN THE RETURN OF INCOME AS DECLARED LOSS OF RS. 2,3 0,09,033/- BEING SURPLUS INVESTED IN CHARITABLE ACTIVITIES WHICH WAS TO BE SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEAR. THEREFO RE, CARRY FORWARD LOSS TO BE ALLOWED IN NEXT YEAR. THE AO SH OULD HAVE COMPUTED THE INCOME IN COMMERCIAL MANNER AND IF ACC ORDING TO HIM ANY INCOME RESULTED, AO SHOULD HAVE SET IT OFF AGAINST THE BROUGHT FORWARD LOSS. THE DEFICIT/SURPLUS WHICH HA S BEEN SHOWN AS A LOSS IS ACTUALLY THE RESULT OF EXPENDITURE/INV ESTMENT OF CAPITAL NATURE SUCH AS ERECTING THE BUILDING SO THAT CHARIT ABLE ACTIVITIES COULD BE CONDUCTED THEREON. THE CAPITAL INVESTMENT OF THIS NATURE HAS CONSISTENTLY BEING HELD TO BE APPLICATION FOR T HE PURPOSE OF 15 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST INCOME TAX ACT. HENCE, THE SAME IS TREATED AS EXPE NDITURE DONE TOWARDS CHARITABLE ACTIVITIES. THE ASSESSEE RELIED UPON SEVERAL DECISIONS IN SUPPORT OF THE SAME PROPOSITION I.E. C IT VS. ST. GEORGE FORANA CHURCH 170 ITR 62, S.R.M. M.CT.M. TIRUPPANI TRUST VS. CIT 230 ITR 636 (SC) 13. THE LD. CIT(A), HOWEVER, DID NOT ACCEPT THE CON TENTION OF THE ASSESSEE AND NOTED THAT INCOME OF THE CHARITABLE TR UST IS NOT ASSESSABLE UNDER THE HEAD PROFIT AND GAINS OF THE BUSINESS. SECTION 11 PROVIDES EXEMPTION OF INCOME OF CHARITAB LE ORGANIZATION, THEREFORE, THE CLAIM OF ASSESSEE FOR CARRY FORWARD OF EXCESS CAPITAL EXPENDITURE WAS DISMISSED. 14. LD. COUNSEL FOR ASSESSEE SUBMITTED THAT THE CIT (A) HAS FAILED TO APPRECIATE THE JUDGMENT CITED BEFORE HIM AND THU S, VIOLATED THE PRINCIPLE OF JUDICIAL DISCIPLINE. THE LD. CIT(A) F AILED TO APPRECIATE THAT INCOME HAS TO BE COMPUTED COMMERCIALLY EVEN IN CASES COVERED U/S 11-13 OF THE INCOME TAX ACT AND RESULTA NT LOSS, IF ANY, ARISING DUE TO SURPLUS APPLICATION OF INCOME H AS TO BE COMPUTED AND CARRY FORWARD TO NEXT YEAR TO BE SET O FF THEREIN ACCORDINGLY. HE HAS RELIED UPON DECISION OF THE SU PREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX (EXEMPTION) VS. SUBROS EDUCATIONAL SOCIETY - 303 CTR 0001 (SC) [2018], IN WHICH IT HAS HELD AS UNDER: 1. IN THIS APPLICATION FILED BY THE INCOME TAX DE PARTMENT IT IS STATED THAT CIVIL APPEAL NO. 5171 OF 2016 ARI SES OUT OF SPECIAL LEAVE PETITION (C)CC NO. 8982/2016 WAS TAG GED WITH OTHER APPEALS AND THE BATCH MATTERS WERE DECID ED BY 16 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST THIS COURT ON 13.12.2017. HOWEVER, THE FOLLOWING Q UESTION WAS ALSO RAISED IN THE INSTANT APPEAL WHICH WAS NOT THE SUBJECT MATTER OF THOSE APPEALS: (A). WHETHER ANY EXCESS EXPENDITURE INCURRED BY T HE TRUST/CHARITABLE INSTITUTION IN EARLIER ASSESSMENT YEAR COULD BE ALLOWED TO BE SET OFF AGAINST INCOME OF SUBSEQUENT YEARS BY INVOKING SECTION 11 OF THE INCOME TAX ACT, 1961? TO THIS EXTENT, MR. K. RADHAKRISHNAN, LEARNED SENIO R COUNSEL APPEARING ON BEHALF OF THE APPLICANT/APPELL ANT IS CORRECT. THEREFORE, WE HAVE HEARD HIM ON THE AFORESAID QUEST ION OF LAW AS WELL BUT DID NOT FIND ANY MERIT THEREIN. 14.1 ON THE OTHER HAND, LD. DR RELIED UPON ORDERS O F THE AUTHORITIES BELOW. 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY JUSTIFICATION FOR LD. CIT(A) TO REJECT THE CLAIM OF ASSESSEE. LD. COUNSEL FOR ASSESSEE RIGHTLY CONTENDED THAT THE AUT HORITIES BELOW HAVE FAILED TO APPRECIATE THAT INCOME HAS TO BE COM PUTED COMMERCIALLY EVEN IN CASES COVERED U/S 11 13 OF T HE ACT AND RESULTANT LOSS, IF ANY, ARISING DUE TO SURPLUS APPL ICATION OF INCOME HAS TO BE COMPUTED AND CARRY FORWARD TO THE NEXT YE AR TO BE SET OFF THEREIN. THE AO HAS NOT GIVEN ANY FINDINGS ON THE SAME. THE LD. CIT(A) WITHOUT EXAMINING THE ISSUE IN DETAIL DISMIS SED THE CLAIM OF ASSESSEE BECAUSE SECTION 11 PROVIDES FOR EXEMPTION OF INCOME OF CHARITABLE ORGANIZATION. HOWEVER, IT IS A FACT THAT ASSESSEE CLAIMED CARRY FORWARD OF THE LOSSES FOR SUBSEQUENT YEAR AS PER LAW WHICH SHOULD HAVE BEEN APPRECIATED AND SHOULD BE CONSIDER ED IN FAVOUR OF THE ASSESSEE. THE ISSUE IS COVERED BY ABOVE JUD GMENT REFERRED 17 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST ABOVE. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF THE CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF THE AO WITH DIREC TION TO ALLOW THE CLAIM OF ASSESSEE AFTER VERIFYING THE FACTS ON RECO RD. THE AO SHALL GIVE REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. IN THE RESULT, CROSS OBJECTION OF THE AS SESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (O.P. KANT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 01.01.2019 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI 18 ITA NO. 4961/DEL/ 2015 & CO NO. 185/DEL/2016 AY 2011-12 OM CHARITABLE TRUST