MAHIMA SHIKSHA SAMITI, Jaipur V. ITO, Jaipur

ITA 522/JPR/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74876 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 13-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA
• Keywords: Business income; Depreciation; Charitable institution; Principle of natural justice; Diversion of income; Benefit of exemption
• Section: 143(3); 234B; 80G; 12A; 12AA; 32; 12; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR ( BEFORE SHRI HARI OM MARATHA AND SHRI N.K. SAINI ) ITA NO. 522/JP/2013 ASSESSMENT YEAR: 2009-10 PAN: AATM 1883 H M/S. MAHIMA SHIKSHA SAMITI VS. THE ITO A-18, SHANTI PATH, TILAK NAGAR WARD 6(1) JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ITA NO. 789/JP/2013 UNDER SECTION 80G(5)(VI) OF THE I.T. ACT, 1961 PAN: AATM 1883 H M/S. MAHIMA SHIKSHA SAMITI VS. THE CIT-II A-18, SHANTI PATH, TILAK NAGAR JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY JHANWAR DEPARTMENT BY : SHRI SUBHASH CHANDRA DATE OF HEARING : 31.01.2014. DATE OF PRONOUNCEMENT : 11.03.2014 ORDER PER HARI OM MARATHA, J.M. BOTH THESE APPEALS FILED BY THE ASSESSEE WERE HEAR D TOGETHER AND, THEREFORE, THESE ARE BEING DISPOSE OFF BY THIS COMM ON ORDER FOR THE SAKE OF CONVENIENCE. THESE APPEALS WERE HEARD ON 31-01-2014 BOTH THE PARTIES HAVE 2 PUT THEIR ORAL SUBMISSIONS IN DETAIL. FROM THE SIDE OF THE ASSESSEE, DETAILED WRITTEN SUBMISSIONS ALONGWITH PAPER BOOK WAS FILED. THE BENCH WAS OF THE VIEW THAT LD. CIT DR SHOULD ALSO FILE HIS DETAILED WRITTEN SUBMISSIONS SO THAT BETTER ASSISTANCE IS AVAILED OF FROM THAT SIDE. THE LD. CIT DR WAS GIVEN TIME TO FILE HIS WRITTEN SUBMISSIONS. A DETAILED WRITTEN SUBMISSION DATED 24-02- 2014 IS FILED AND RECEIVED AND THE SAME HAS BEEN CO NSIDERED. ITA NO.522/JP/2013 A.Y. 2009-10 2.1 THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD CIT(A)-II, JAIPUR DATED 18-04-2013 FOR THE A.Y. 200 9-10. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL. 1 UNDER THE FACTS AND CIRCUMSTANCES OF THE CAS E IN LAW, LD. CIT(A)-II JAIPUR HAS ERRED IN HOLDING THAT TH E CONTRIBUTION MADE TO THE JAIPUR NATIONAL UNIVERSITY BY THE AP PELLANT SOCIETY IS NOT APPLICATION OF INCOME FOR THE PURPOSE OF COMPUTATION OF EXEMPTION UNDER SECTION 11 OF THE IT ACT, 1961 AN D THAT THE SAME IS DIVERSION OF INCOME OF THE SOCIETY BY ALS O HOLDING THAT: (I) THE JAIPUR NATIONAL UNIVERSITY IS COVERED U/S 13(3)(E) OF THE ACT IN RESPECT OF APPELLANT SOCIETY. (II) THE APPELLANT SOCIETY HAS VIOLATED THE PROV ISION OF SECTION 13(3)(A), (B) , (CC) AND (D) BY PROVIDING ASSISTANCE TO THE JAIPUR NATIONAL UNIVERSITY. (III) CONTRIBUTION OF THE JAIPUR NATIONAL UNIV ERSITY AMOUNTED TO TAKING DOUBLE BENEFIT U/S 11 OF THE ACT (IV) THE APPELLANT SOCIETY HAS VIOLATED THE PROVI SIONS OF SECTION 13(L)(C)(II) AND 13(2)(A) AND (G) OF THE ACT BY EXTENDING ASSISTANCE TO JAIPUR NATIONAL UNIVERSITY AND THAT IN FACT THE 3 ASSISTANCE IS PROVIDED TO THE BAKSHI FAMILY AND I N PARTICULAR TO MR. SANDEEP BAKSHI WHO ARE COVERED U/S 13(3) OF T HE ACT. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IN LAW, LD. CIT(A)-II JAIPUR HAS ERRED IN UPHOLDING THE D ISALLOWANCE OF DEPRECIATION U/S 32 ON THE GROUND THAT THE SAME I S NOT ADMISSIBLE IN RESPECT OF THE ASSETS ON WHICH EXE MPTION HAS BEEN ALLOWED U/S 11 OF THE ACT WHILE APPLYING THE INCOME FOR CHARITABLE PURPOSE. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IN LAW, LD. CIT(A)-II JAIPUR HAS ERRED IN UPHOLDING THE D ISALLOWANCE OF THE FOREIGN TRAVELLING EXPENSES AMOUNTING TO RS. 4,00,000/- OUT OF FOREIGN TRAVELLING EXPENSES INCURRED ON FOREIG N TOUR OF SMT. PREETI BAKSHI DESPITE FILING OF ALL THE NECESSARY DETAILS IN THIS REGARD. 4. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IN LAW, LD. CIT(A)-II JAIPUR HAS ERRED IN UPHOLDING THE L EVY OF INTEREST U/S 234A AND 234B OF THE INCOME TAX ACT, 1961. 5. THE APPELLANT CRAVES TO ALTER, AMEND AND MODIF Y THIS GROUND OF APPEAL. 2.2 BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE SAMITI WAS CONSTITUTED ON 19-02-1986 AND WAS REGISTERED U/S 12 A OF THE INCOME-TAX ACT, 1961 (THE ACT FOR SHORT) ON 17-12-1990. FRO M THE COMPUTATION OF INCOME FILED ALONGWITH RETURN, IT WAS NOTICED THAT THE ASSESSEE HAS DECLARED INCOME FROM BUSINESS AND PROFESSION UNDER CHAPTER I VD AT RS. 6,26,04,318/- AND HAS DECLARED GROSS TOTAL INCOME A T RS. 6,26,04,319/-. THE ASSESSEE SAMITI HAS CLAIMED AN AMOUNT OF RS. 1,89,4 7,976/- AS APPLICATION OF MONEY AGAINST ADDITIONS IN FIXED ASSETS AND RS. 35, 04,73,177/- AS APPLICATION 4 U/S 11 OF THE ACT ON ACCOUNT OF LOAN GIVEN TO THE J AIPUR NATIONAL UNIVERSITY. ACCORDINGLY, TOTAL NET INCOME HAS BEEN SHOWN AS NIL . AGAINST THIS NIL INCOME RETURN OF THE ASSESSEE SAMITI, THE TOTAL INC OME HAS BEEN ASSESSED AT RS. 7,09,33,240/- VIDE PARA 13 OF THE ASSESSMENT OR DER DATED 29-12-2011 PASSED U/S 143(3) OF THE ACT AS UNDER:- 13. SUBJECT TO THE REMARKS ABOVE, THE INCOME OF THE ASSESSEE IS RECOMPUTED AS UNDER:- INCOME FROM BUSINESS & PROFESSION NET INCOME AS DECLARED BY THE ASSESSEE BEFORE DEPRECIATION:- RS.6,99,44,492/- ADD:- DISALLOWANCE OUT OF SALARIES RS. 5,88,750/- DISALLOWANCE OUT OF FOREIGN TRAVEL EXPENSES RS. 4,00,000/- TOTAL RS. 7,09,33,242/- THE ASSESSEE SAMITI HAS BEEN FORMED WITH THE OBJECT IVE OF IMPARTING EDUCATION, IS A REGISTERED SOCIETY SINCE 19-02-1986 UNDER RAJASTHAN SOCIETY REGISTRATION ACT, 1958, HAS ALSO BEEN GRANTED REGIS TRATION U/S 12A(A) OF THE ACT, 1961 W.E.F. 17-12-1990. THE ASSESSEE SAMITI HA S BEEN RUNNING FOLLOWING EDUCATIONAL INSTITUTIONS TILL A.Y. 2008-0 9. (I) SEEDLING PUBLIC SCHOOL, JAWAHAR NAGAR, JAIPUR (II) SEEDING MODERN HIGH SCHOOL, MAHAVEER NAGAR, J AIPUR (III) SEEDLING ACADEMY OF DESIGN, TECHNOLOGY AND M ANAGEMENT, JAGATPURA, JAIPUR (HENCEFORTH REFERRED AS SADTM). 5 (IV) SEEDLING INSTITUTE OF INTEGRATED LEARNING AND ADVANCED SCIENCE (HENCEFORTH REFERRED AS SILLAS). DURING A.Y. 2008-09, THE INSTITUTIONS LISTED UNDER POINT (III) AND (IV) ABOVE, THE BEING ONE OF THEM CAME UNDER THE UMBRELLA / STA MP OF JAIPUR NATIONAL UNIVERSITY WHICH WAS CREATED THROUGH JAIPUR NATIONA L UNIVERSITY ACT, 2008 PASSED BY THE STATE GOVT. WHICH RECEIVED GOVERNORS ASSENT ON 29-03-2008. AS PER THE A.O., THE ASSESSEE SAMITI HAS BEEN CHARG ING HEAVY FEES AND IT IS INCREASING IT EVERY YEAR BY 10%. THE ASSESSEE SAMIT I IS ALSO WORKING FOR PROFIT MOTIVE THAT IS WHY IT IS GENERATED SYSTEMATI C SURPLUS YEAR AFTER YEAR. THIS SURPLUS BEFORE DEPRECIATION HAS BEEN LISTED AT PAGE 2 OF THE ASSESSMENT ORDER. AS PER THE A.O., THE ASSESSEE SAMITI IS NOT GIVING ANY REBATE OR CONCESSION TO CHILDREN OF ECONOMICALLY WEAKER SECTI ONS OF THE SOCIETY, RATHER IT WAS GIVING REBATE TO CHILDREN OF TRUSTEES ETC. H E HAS FURTHER OBSERVED THAT ASSESSEE SAMITI WAS MAKING PAYMENTS FOR THE BENEFIT OF INTERESTED PERSONS SPECIFIED IN SECTION 13(3) OF THE ACT WHICH IS VIOL ATION OF SECTION 13(1) (C )(III) AND IT BARS INCOME OF THE PROPERTY OF TRU ST TO BE USED OR APPLIED DIRECTLY OR INDIRECTLY FOR BENEFIT OF ANY PERSON SPECIFIED IN SECTION 13(3) OF THE ACT. THE A.O. HAS ALSO OBSERVED THAT THE ASSES SEE SAMITI IS ADVANCING LOAN OF RS. 35,04,73,177/- AS APPEARING IN THE BALA NCE SHEET PERTAINING TO A.Y. 2009-10 TO JAIPUR NATIONAL UNIVERSITY AND AS S UCH CLAIMED IT AS APPLICATION OF INCOME U/S 11 OF THE ACT. IN THE OPI NION OF THE A.O., THIS IS 6 NOT AN APPLICATION OF INCOME AND IT IS NOT IN ACCOR DANCE WITH THE BYE-LAWS / OBJECTIVES FOR WHICH THE ASSESSEE SAMITI WAS CONSTI TUTED. THE BYE-LAWS AS PER THE A.O. SAYS THAT ASSESSEE SAMITI MAY RUN DIFF ERENT EDUCATIONAL INSTITUTES INCLUDING INSTITUTES OF ENGINEERING AND HIGHER EDUCATION BUT NOWHERE IT IS MENTIONED THAT THE SAMITI WILL PROVID E FINANCIAL ASSISTANCE TO OTHER EDUCATIONAL INSTITUTIONS. ACCORDING TO THE A. O., THE ASSESSEE SAMITI HAD PROVIDED RS. 2.00 CRORES AS SECURITY DEPOSIT TO THE UNIVERSITY WHICH IS NOT IN ACCORDANCE WITH THE BYE-LAWS AS THEY DID NOT SAY TH AT SUCH CONTRIBUTION CAN BE MADE. THE JAIPUR NATIONAL UNIVERSITY IS A DIFFER ENT ENTITY AND NOT WORKING UNDER THE AEGIS OF MAHIMA SHIKSHA SAMITI. T HEREFORE, BY TREATING THIS CONTRIBUTION AS APPLICATION OF INCOME IS NOT I N ACCORDANCE WITH THE PROVISIONS OF SECTION 11 AND AS PER BOARDS CIRCULA R DATED 24-01-1973 LOAN FOR HIGHER STUDIES CAN BE TREATED AS APPLICATION OF INCOME BUT SUCH LOAN WILL BE TREATED AS INCOME WHEN IT IS RETURNED. THEREFORE , FINALLY HE HAS OBSERVED THAT RS. 35,04,73,177/- CONSTITUTES VIOLATION OF SE CTION 13(3)(G) OF THE ACT WHICH PROHIBITS THE ASSESSEE TO DIVERT TRUST PROPER TY IN FAVOUR OF A RELATED PERSON. THE A.O. HAS TREATED THAT JAIPUR NATIONAL UNIVERSITY FALLS IN SECTION 13(3) OF THE ACT. FINALLY, THE A.O. HAS DENIED EXE MPTION U/S 11 OF THE ACT TO ASSESSEE SAMITI AND ASSESSED ITS INCOME AS BUSINESS INCOME, TAKING THE INCOME OF RS. 6,99,44,492/- DECLARED IN THE COMPUTA TION FILED WITH RETURN 7 BEFORE DEPRECIATION AND MAKING DISALLOWANCES OUT OF SALARY AND FOREIGN TRAVELLING EXPENSES TO THIS INCOME. 2.3 AGGRIEVED, THE ASSESSEE HAS FILED AN APPEAL BEF ORE THE LD CIT(A) AND THE LD CIT(A) AFTER MAKING DETAILED DISCUSSION HAS CONFIRMED THIS ACTION OF THE A.O. BY GIVING PARTIAL RELIEF REGARDING OTHER A DDITIONS. 2.4 NOW THE ASSESSEE IS FURTHER AGGRIEVED AND HAS R AISED BEFORE US THE ABOVE EXTRACTED GROUNDS IN ITS APPEAL. 1 UNDER THE FACTS AND CIRCUMSTANCES OF THE CAS E IN LAW, LD. CIT(A)-II JAIPUR HAS ERRED IN HOLDING THAT TH E CONTRIBUTION MADE TO THE JAIPUR NATIONAL UNIVERSITY BY THE AP PELLANT SOCIETY IS NOT APPLICATION OF INCOME FOR THE PURPOSE OF COMPUTATION OF EXEMPTION UNDER SECTION 11 OF THE IT ACT, 1961 AN D THAT THE SAME IS DIVERSION OF INCOME OF THE SOCIETY BY ALS O HOLDING THAT: (I) THE JAIPUR NATIONAL UNIVERSITY IS COVERED U/S 13(3)(E) OF THE ACT IN RESPECT OF APPELLANT SOCIETY. (II) THE APPELLANT SOCIETY HAS VIOLATED THE PROV ISION OF SECTION 13(3)(A), (B) , (CC) AND (D) BY PROVIDING ASSISTANCE TO THE JAIPUR NATIONAL UNIVERSITY. (III) CONTRIBUTION OF THE JAIPUR NATIONAL UNIV ERSITY AMOUNTED TO TAKING DOUBLE BENEFIT U/S 11 OF THE ACT (IV) THE APPELLANT SOCIETY HAS VIOLATED THE PROVI SIONS OF SECTION 13(L)(C)(II) AND 13(2)(A) AND (G) OF THE ACT BY EXTENDING ASSISTANCE TO JAIPUR NATIONAL UNIVERSITY AND THAT IN FACT THE ASSISTANCE IS PROVIDED TO THE BAKSHI FAMILY AND I N PARTICULAR TO MR. SANDEEP BAKSHI WHO ARE COVERED U/S 13(3) OF T HE ACT. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IN LAW, LD. CIT(A)-II JAIPUR HAS ERRED IN UPHOLDING THE D ISALLOWANCE OF DEPRECIATION U/S 32 ON THE GROUND THAT THE SAME I S NOT 8 ADMISSIBLE IN RESPECT OF THE ASSETS ON WHICH EXE MPTION HAS BEEN ALLOWED U/S 11 OF THE ACT WHILE APPLYING THE INCOME FOR CHARITABLE PURPOSE. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IN LAW, LD. CIT(A)-II JAIPUR HAS ERRED IN UPHOLDING THE D ISALLOWANCE OF THE FOREIGN TRAVELLING EXPENSES AMOUNTING TO RS. 4,00,000/- OUT OF FOREIGN TRAVELLING EXPENSES INCURRED ON FOREIG N TOUR OF SMT. PREETI BAKSHI DESPITE FILING OF ALL THE NECESSARY DETAILS IN THIS REGARD. 4. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IN LAW, LD. CIT(A)-II JAIPUR HAS ERRED IN UPHOLDING THE L EVY OF INTEREST U/S 234A AND 234B OF THE INCOME TAX ACT, 1961. 5. THE APPELLANT CRAVES TO ALTER, AMEND AND MODIF Y THIS GROUND OF APPEAL. 2.5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. WE HAVE ALSO GONE THROUG H THE WRITTEN SUBMISSIONS AND PAPER BOOK FILED BY THE LD. AR SHRI SANJAY JHANWAR, ADVOCATE AND HAVE GONE THROUGH THE ORAL SUBMISSION MADE BY THE LD CIT DR SHRI SUBHASH CHANDRA AND WE HAVE ALSO GONE THRO UGH THE ASSESSMENT ORDER AND LD CIT(A)S ORDER. WE HAVE ALSO PROPERLY EXAMINED THE ARGUMENTS OF THE LD. CIT DR MENTIONED IN HIS WRITTEN SUBMI SSIONS DATED 24-02-2014. BEFORE US, WHILE ARGUING GROUND NO. 1, THE LD. A/R HAS SUBMITTED THAT THE MAIN OBJECTS OF THE ASSESSEE SOC IETY ARE SETTING UP OF EDUCATIONAL INSTITUTIONS AND OPERATING THEM FOR THE PROMOTION OF EDUCATION AND SPREADING OF SYSTEMATIC EDUCATION TO THE STUDEN TS. IT WAS FURTHER 9 SUBMITTED THAT THE ASSESSEE SOCIETY HAS BEEN CARRYI NG OUT VARIOUS ACTIVITIES FOR IMPARTING SYSTEMATIC EDUCATION TO THE STUDENTS THROUGH SETTING UP OF EDUCATIONAL INSTITUTIONS AT DIFFERENT PLACES AND TH AT THE ASSESSEE SOCIETY IS NOT CARRYING ON ANY BUSINESS OR ACTIVITY WITH A MOTIVE OF PROFIT FOR ANY INDIVIDUAL(S) AND THE SURPLUS FROM THE ACTIVITIES O F THE ASSESSEE SOCIETY IS DEPLOYED FOR THE PROMOTION OF EDUCATION THROUGH SET TING UP EDUCATIONAL INSTITUTIONS, OPERATING THEM AND ALSO UPGRADING THE M FROM TIME TO TIME FOR FURTHER BENEFITS TO THE STUDENTS AT LARGE. THE LD. A/R REFERRED TO THE DECISIONS IN ITS OWN CASE OF THE TRIBUNAL TO THE EFFECT THAT THE APPELLANT WAS ENGAGED IN CHARITABLE ACTIVITIES AND HAS BEEN GRANTED THE EXEM PTION U/S 11 FOR ALL THE PRECEDING YEARS BY ITAT WHICH HAVE BEEN FOLLOWED BY LD. CIT(A) IN THE PRESENT CASE. IT WAS SUBMITTED BY LD. A/R THAT DESP ITE FOLLOWING THE ITAT ORDERS IN PRINCIPLE, THE FIRST APPELLATE AUTHORITY HAS NOT GRANTED THE EXEMPTION BY NOT TREATING THE FINANCIAL ASSISTANCE TO JAIPUR NATIONAL UNIVERSITY AS ELIGIBLE APPLICATION OF INCOME FOR TH E PURPOSE OF GRANTING EXEMPTION U/S 11 OF THE ACT. BY MAKING REFERENCE TO THE OBJECTIVES OF THE SOCIETY, IN PARTICULAR OBJECTIVE NO. 3 AND 7, IT WA S SUBMITTED THAT THEY PROVIDE FOR ESTABLISHMENT, PROMOTION, MANAGEMENT AN D CONTROL OF VARIOUS EDUCATIONAL INSTITUTIONS INCLUDING SCHOOLS, COLLEGE S AND UNIVERSITIES. IN PURSUANCE OF THESE OBJECTIVES, THE ASSESSEE SOCIETY SPONSORED A UNIVERSITY IN 10 THE NAME OF JAIPUR NATIONAL UNIVERSITY WHICH HAS BE EN ESTABLISHED AND INCORPORATED IN RAJASTHAN AS A PRIVATE UNIVERSITY U NDER THE LEGISLATION PASSED BY STATE LEGISLATURE VIZ. JAIPUR NATIONAL UN IVERSITY, JAIPUR ACT, 2008 (ACT NO. 5 OF 2008) WITH THE OBJECT TO UNDERTAKE RE SEARCH AND STUDIES IN VARIOUS DISCIPLINES OF SYSTEMATIC EDUCATION/KNOWLED GE. AS PER THE PREAMBLE AND SECTION 3 OF THE JAIPUR NATIONAL UNIVERSITY, JA IPUR ACT, 2008, THE ASSESSEE SOCIETY AGREED TO INVEST ITS EDUCATIONAL I NFRASTRUCTURE ALONGWITH A CONTRIBUTION OF RS.2 CRORES UTILIZED IN ESTABLISHME NT OF AN ENDOWMENT FUND FOR JAIPUR NATIONAL UNIVERSITY. WITH RESPECT TO T HE ALLEGED VIOLATION OF SECTION 13(3) READ WITH SECTION 13(2) OF THE INCOME TAX ACT, 1961, THE LD. A/R ARGUED THAT JAIPUR NATIONAL UNIVERSITY CANNOT B E CONSIDERED TO BE A PERSON COVERED BY THE PROVISIONS OF SECTION 13(3) O F THE INCOME TAX ACT, 1961 WITH RESPECT TO THE ASSESSEE SOCIETY INASMUCH AS JNU TO WHOM THE CONTRIBUTION WAS MADE IS ITSELF A PUBLIC CHARITABLE INSTITUTION IMPARTING HIGHER EDUCATION IN VARIOUS AREAS/SUBJECTS. THE SAM E IS ALSO REGISTERED U/S 12AA OF THE ACT AND IS ELIGIBLE FOR EXEMPTION OF IT S INCOME U/S 11 OF THE ACT. SINCE IT IS A PUBLIC CHARITABLE TRUST, THE SAM E IS NOT COVERED WITHIN THE DEFINITION OF SPECIFIED PERSONS U/S 13(3) OF THE AC T. THE PROVISIONS OF SECTION 13(3) OF THE ACT IS REPRODUCED HEREIN FOR R EADY REFERENCE:- 11 THE PERSONS REFERRED TO IN CLAUSE (C) OF SUB SECTI ON (1) AND SUB SECTION (2) ARE THE FOLLOWING NAMELY:- (A) THE AUTHOR OF THE TRUST OR THE FOUNDER OF THE INSTI TUTION, (B) ANY PERSON WHO HAS MADE A SUBSTANTIAL CONTRIBUTION TO THE TRUST OR INSTITUTION, THAT IS TO SAY ANY PERSON WHOSE TOT AL CONTRIBUTION UPTO THE END OF THE RELEVANT PREVIOUS YEAR EXCEEDS FIFTY THOUSAND RUPEES, (C) WHERE SUCH AUTHOR, FOUNDER OR PERSON IS A HINDU UND IVIDED FAMILY, A MEMBER OF THE FAMILY, (CC) ANY TRUSTEE OF THE TRUST OR MANAGER (BY WHATEV ER NAME CALLED) OF THE INSTITUTION, (D) ANY RELATIVE OF ANY SUCH AUTHOR, FOUNDER, PERSON, M EMBER, TRUSTEE OR MANAGER AS AFORESAID, (E) ANY CONCERN IN WHICH ANY OF THE PERSONS REFERRED TO IN CLAUSES (A), (B), (C), (CC) AND (D) HAS A SUBSTANTIAL INTER EST. THE LAST CLAUSE (E) ALSO REFERS TO ANY CONCERN IN W HICH SPECIFIED PERSON HAS A SUBSTANTIAL INTEREST. THE TERM SUBST ANTIAL INTEREST HAS BEEN DEFINED IN EXPLANATION 3 BELOW SECTION 13 AS F OLLOWS: FOR THE PURPOSES OF THIS SECTION, A PERSON SHALL B E DEEMED TO HAVE A SUBSTANTIAL INTEREST IN A CONCERN- (I) IN A CASE WHERE THE CONCERN IS A COMPANY, IF ITS SH ARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVID END WHETHER WITH OR WITHOUT A FURTHER RIGHT TO PARTICIP ATE IN PROFITS) CARRYING NOT LESS THAN TWENTY PERCENT OF T HE VOTING POWER ARE AT THE TIME DURING THE PREVIOUS YE AR, OWNED BENEFICIALLY BY SUCH PERSON OR PARTLY BY SUCH PERSON AND PARTLY BY ONE OR MORE OF THE OTHER PERSO NS REFERRED TO IN SUB SECTION (3); 12 (II) IN THE CASE OF ANY OTHER CONCERN, IF SUCH PERSON IS ENTITLED, OR SUCH PERSON AND ONE OR MORE OF THE OTH ER PERSONS REFERRED TO IN SUB SECTION (3) ARE ENTITLED IN THE AGGREGATE, AT ANY TIME DURING THE PREVIOUS YEAR, TO NOT LESS THAN TWENTY PERCENT OF THE PROFITS OF SUCH CON CERN. IT IS EVIDENT THAT CLAUSE (I) ABOVE COVERS ONLY COM PANIES, WHEREAS CLAUSE (II) COVERS ONLY THOSE CONCERNS WHERE A PERS ON IS ENTITLED TO PROFITS OF THE CONCERN. IN CHARITABLE INSTITUTIONS, NO PERSON IS ENTITLED TO ANY PROFITS. THEREFORE, IT CANNOT BE SAID THAT ANY SPECIFIED PERSON HAS INTEREST IN THE CHARITABLE TRUST. ACCORDINGLY, THE PROVISIONS OF SECTION 13(3) READ WITH SECTION 13(2) HAVE BEEN INCORRECTLY INVOKED BY THE A.O. RELIANCE WAS ALSO PLACED ON VARIOUS JUDICIAL P RONOUNCEMENTS TO THE EFFECT THAT CONTRIBUTION TO THE OTHER INSTITUTI ONS WHICH QUALIFIES FOR EXEMPTION U/S 11 OF THE ACT IS ELIGIBLE FOR EXEMPTI ON BEING APPLICATION U/S 11(1)(A) OF THE ACT:- (I) CIT VS. THANTHI TRUST (1999) 239 ITR 502 (SC) (II) CIT VS. SRI RAM MEMORIAL FOUNDATION (2004) 269 ITR 35 (DEL.) (III) CIT VS. SALADEVI SARABHAI TRUST (1988) 173 ITR 698 (GUJ.) (IV) CIT V. HINDUSTAN CHARITY TRUST (1983) 139 ITR 913 ( CAL.) (V) CIT VS. ARBINDO MEMORIAL FUND SOCIETY (2001) 247 IT R 93 (MAD.) (VI) ST. THOMAS EDUCATION SOCIETY V. ASSTT,. DIT (2007) 11 SOT 240 (MUM.) IN VIEW OF THE ABOVE SUBMISSIONS AND CASE LAWS REFE RRED, THE CONTRIBUTION MADE BY THE APPELLANT SOCIETY TO JAIPU R NATIONAL 13 UNIVERSITY WAS CONTENDED TO BE ALLOWABLE AS APPLICA TION OF INCOME FOR THE PURPOSE OF EXEMPTION U/S 11 OF THE ACT. SO FAR AS THE DEPARTMENTS ALLEGATION OF DOUBLE BENEFIT OF APPLICATION OF INCO ME IN RESPECT OF CONTRIBUTION TO JAIPUR NATIONAL UNIVERSITY AMOUNTIN G TO RS.35,04,73,177/- IS CONCERNED, LD. A/R SUBMITTED T HAT THE VALUE OF ASSETS VESTED IN THE JAIPUR NATIONAL UNIVERSITY BY VIRTUE OF THE PROVISIONS OF THE JAIPUR NATIONAL UNIVERSITY, JAIPU R ACT, 2008 AMOUNTED TO APPLICATION OF INCOME, SINCE THE WORD APPLIED HAS A WIDER CONNOTATION THAN THE WORD SPENT AND IN THE CONTEXT OF SECTION 11, WHAT IS IMPORTANT IS APPLICATION AND NOT SPENDI NG. IN THE ALTERNATIVE, IT WAS SUBMITTED THAT EVEN IF ENTIRE RS.35,04,73,17 7/- IS NOT CONSIDERED AS APPLICATION, STILL THE ENTIRE INCOME OF THE ASSE SSEE SOCIETY WOULD BE EXEMPT INASMUCH AS THE AMOUNT SPENT IS ALSO SUFFICI ENT FOR THE EXEMPTION OF INCOME AMOUNTING TO RS.6,26,04,319/- B EING THE GROSS INCOME OF THE SOCIETY. ACCORDING TO THE LD. A/R, TH E FOLLOWING APPLICATIONS OF INCOME WERE EVIDENCED FROM THE MATE RIAL ON RECORD:- I. ADDITION TO FIXED ASSETS OF MAHIMA SHIKSHA SAMITI DURING THE YEAR UNDER CONSIDERATION OF RS. 1,89,47,896/- (PAGE NO. 144 AND 145 OF PAPER BOOK) II. CASH CONTRIBUTION TO JAIPUR NATIONAL UNIVERSITY AY 2009-10 RS. 43,31,810/- 14 AY 2008-09 RS. 5,70,70,770/- (PAGE A 46 AND 47 OF THE PAPER BOOK) III. EXCESS APPLICATION IN AY 2007-08 RS. 6,31,14,195/- (RS. 11,25,15,384-RS. 4,94,01,189) TO BE ADJUSTED AGAINS T THE INCOME OF AY 2009-10 IT WAS SUBMITTED THAT EXCESS APPLICATION OF AY 2007 -08 DESERVES TO BE ADJUSTED AGAINST THE INCOME OF AY 2009-10 IN TERMS OF THE JUDGEMENT OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION REPORTED AT 164 ITR 439 WHEREIN THE FOLLOWING WAS HELD:- 8 . WE ARE UNABLE TO ACCEPT THE AFORESAID CONTENTION OF SHRI ARORA. IN OUR VIEW, THERE IS NOTHING IN THE LANGUAG E OF S. 11(1)(A) WHICH LENDS SUPPORT TO THE CONTENTION OF S HRI ARORA THAT THE EXPENDITURE INCURRED IN THE EARLIER YEAR C ANNOT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND UTILIS ATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF THE EARLIER Y EAR WOULD NOT AMOUNT TO SUCH INCOME BEING APPLIED FOR CHARITA BLE OR RELIGIOUS PURPOSES. IN OUR OPINION, THE WORDS USED IN S. 11(1)(A) MUST BE GIVEN THEIR NATURAL MEANING. THE WORD 'APPL IED' AS DEFINED IN CHAMBERS' DICTIONARY MEANS 'TO PUT TO US E' OR 'TO TURN TO USE'. ACCORDING TO THE OXFORD DICTIONARY, THE WORD 'APPLIED' MEANS 'TO MAKE USE' OR 'TO PUT TO PRACTIC AL USE'. WHEN THE INCOME OF A TRUST IN USED OR PUT TO USE TO MEET THE EXPENSES INCURRED FOR RELIGIOUS OR CHARITABLE PURPO SES, IT IS APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. THE S AID APPLICATION OF THE INCOME FOR CHARITABLE OR RELIGIO US PURPOSES TAKES PLACE IN THE YEAR IN WHICH THE INCOME IS ADJU STED TO MEET THE EXPENSES INCURRED FOR CHARITABLE OR RELIGIOUS P URPOSES. IN OTHER WORDS, EVEN IF THE EXPENSES FOR CHARITABLE AN D RELIGIOUS PURPOSES HAVE BEEN INCURRED IN THE EARLIER YEAR AND THE SAID EXPENSES ARE ADJUSTED AGAINST THE INCOME OF A SUBSE QUENT YEAR, THE INCOME OF THAT YEAR CAN BE SAID TO HAVE BEEN AP PLIED FOR 15 CHARITABLE AND RELIGIOUS PURPOSES IN THE YEAR IN WH ICH THE EXPENSES INCURRED FOR CHARITABLE AND RELIGIOUS PURP OSES HAD BEEN ADJUSTED. 9. IN THIS CONTEXT, IT MAY BE MENTIONED THAT THE CB DT HAS ISSUED A CIRCULAR DT. 24TH JAN., 1973, WHEREIN THE CBDT HAS CONSIDERED THE QUESTION AS TO WHETHER, WHERE A TRUS T INCURS A DEBT FOR THE PURPOSE OF THE TRUST, THE REPAYMENT OF THE DEBT WOULD AMOUNT TO AN APPLICATION OF INCOME FOR THE PU RPOSES OF THE TRUST. IN THE SAID CIRCULAR, THE CBDT HAS EXPRE SSED THE VIEW THAT THE REPAYMENT OF THE LOAN ORIGINALLY TAKEN TO FULFIL ONE OF THE OBJECTS OF THE TRUST WILL AMOUNT TO AN APPLICAT ION OF THE INCOME FOR CHARITABLE AND RELIGIOUS PURPOSES. IN OT HER WORDS, ACCORDING TO THE SAID CIRCULAR, IF THE TRUST WANTS TO SPEND MORE MONEY ON CHARITABLE AND RELIGIOUS PURPOSES, THEN, I N A PARTICULAR YEAR, IT CAN TAKE A LOAN AND THE SAID LO AN CAN BE REPAID OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND THE REPAYMENT OF THE SAID LOAN OUT OF THE INCOME OF THE SUBSEQUENT YEAR WOULD AMOUNT TO APPLICATION OF INCOME FOR CHAR ITABLE AND RELIGIOUS PURPOSES UNDER S. 11(1)(A) OF THE ACT. 10. IF THE CONTENTION OF SHRI ARORA IS ACCEPTED, IT WOULD LEAD TO AN ANOMALOUS SITUATION, NAMELY, IF THE TRUST TAKES A LOAN FOR THE PURPOSES OF INCURRING EXPENSES FOR CHARITABLE AND R ELIGIOUS PURPOSES IN A PARTICULAR YEAR AND THE SAID LOAN IS REPAID OUT OF THE INCOME OF THE SUBSEQUENT YEAR, THE SAID REPAYME NT WOULD BE ENTITLED TO EXEMPTION FROM TAX UNDER S. 11(1)(A) OF THE ACT. BUT IF THE TRUST, INSTEAD OF TAKING A LOAN, INCURS EXPE NDITURE FOR CHARITABLE AND RELIGIOUS PURPOSES OUT OF THE CORPUS OF THE TRUST AND SEEKS TO REIMBURSE THE SAID AMOUNT OUT OF THE I NCOME OF THE SUBSEQUENT YEAR, THE TRUST WOULD NOT BE ENTITLED TO CLAIM EXEMPTION IN RESPECT OF SUCH REIMBURSEMENT UNDER S. 11(1)(A) OF THE ACT. IN OUR OPINION, A CONSTRUCTION WHICH LE ADS TO SUCH AN ANOMALY MUST BE AVOIDED. 11. WE ARE, THEREFORE, OF THE OPINION THAT THE ADJU STMENT OF THE EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND R ELIGIOUS PURPOSES IN THE EARLIER YEAR AGAINST THE INCOME EAR NED BY THE TRUST IN THE SUBSEQUENT YEAR WOULD AMOUNT TO APPLYI NG THE INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PU RPOSES IN THE SUBSEQUENT YEAR IN WHICH SUCH ADJUSTMENT HAS BEEN M ADE AND 16 WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRU ST UNDER S. 11(1)(A) OF THE ACT. IT WAS FURTHER SUBMITTED THAT IT WOULD BE UNFAIR AN D IRRATIONAL NOT TO CONSIDER THE EXCESS APPLICATION OF RS. 6,31,14,195/ - OF AY 2007-08 AND AMOUNT GIVEN TO JAIPUR NATIONAL UNIVERSITY IN AY 20 08-09 AS APPLICATION OF INCOME IN ANY OF THE YEARS. THEREFOR E, IF APPLICATION OF INCOME IN AY 2009-10 IS DENIED ON THE BASIS OF TRAN SFER OF ASSETS PURSUANT TO JAIPUR NATIONAL UNIVERSITY, JAIPUR ACT, 2008, THEN ATLEAST THESE AMOUNTS APPLIED IN PRECEDING YEARS SHOULD BE TREATED TO BE APPLICATION OF INCOME IN THE YEAR UNDER CONSIDERATI ON BECAUSE IT CANNOT BE DENIED AT BOTH THE PLACES. ONCE EVEN SUCH APPLIC ATION OF PRECEDING YEARS IS ALLOWED ON THE BASIS OF THE JUDGEMENTS OF HONBLE RAJASTHAN HIGH COURT (SUPRA), NO INCOME CHARGEABLE TO TAX REM AINS AS THE GROSS INCOME OF THE YEAR UNDER CONSIDERATION IS RS. 6,26 ,04,318/- (PAPER BOOK PG 144) WHEREAS THE APPLICATION MENTIONED HERE IN AGGREGATES TO RS. 14,34,64,671/. THEREFORE SINCE THE APPLICATION EXCEEDS INCOME, ENTIRE INCOME WOULD BE EXEMPT U/S 11 OF THE ACT. 2.6 IN RESPECT OF GROUND NO. 2 RELATING TO DISALLOW ANCE OF DEPRECIATION, LD. A/R RELIED UPON PRECEDING ORDERS OF ITAT IN ITS OWN CASE AND THE JUDGMENTS OF FEW OTHER COURTS. IN RESP ECT OF GROUND NO. 3 17 RELATING TO DISALLOWANCE OUT OF FOREIGN TRAVEL EXPE NSES ALSO, THE ORDERS OF THE ITAT FOR PREVIOUS YEARS WERE REFERRED TO AND IT WAS ARGUED THAT IN PAST WHERE COMPLETE DETAILS AND EVIDENCES WERE A VAILABLE ON RECORD, THE ITAT HAS ALLOWED THE FOREIGN TRAVEL EXPENSES CO MPLETELY; AND DURING THE YEAR UNDER CONSIDERATION, COMPLETE DETAI LS AND JUSTIFICATION OF THE SAME IS AVAILABLE ON RECORD IN RESPECT OF TR AVEL OF MRS. BAKSHI AS WELL AS OTHER PERSONS. THE BENEFITS DERIVED BY THE ASSESSEE SOCIETY FROM SUCH FOREIGN TRAVEL WERE ALSO SHOWN FROM RECORD. IT WAS SUBMITTED THAT THE PERSONS AT THE HELM OF EDUCATIONAL INSTITUTIONS ARE THE MENTORS FOR THE STUDENTS OF ALL KINDS, THEREFORE, THEY HAVE TO BE CONVERSANT WITH VARIOUS MACRO INFORMATION ABOUT EDUCATIONAL OPPORTU NITIES GLOBALLY SO AS TO PROPERLY GUIDE THE STUDENTS. THE FOREIGN TRAV EL HAS ALSO HELPED IN CARRYING OUT TEACHERS AND STUDENTS EXCHANGE PROGRAM S. ON THE BASIS OF THESE ARGUMENTS, IT WAS ARGUED THAT THE AD-HOC DISA LLOWANCE OF RS 4,00,000 (RUPEES FOUR LAKHS ONLY) ON ACCOUNT OF FOR EIGN TRAVEL OF MRS. PREETI BAKSHI WAS NOT JUSTIFIED. 2.7 THE LD. D/R ON THE OTHER HAND, HAS SUBMITTED WR ITTEN SUBMISSION REQUESTING TO CONSIDER THE FINDINGS OF L D. AO IN PARA 9, 11, & 12 OF THE ASSESSMENT ORDER SUMMARIZED BY LD CIT ( A) AT PAGE NO 7 TO 9 OF THE FIRST APPELLATE ORDER. IT WAS ALSO REQUEST ED TO CONSIDER THE 18 DETAILED LD CIT (A) ORDER WHILE DECIDING THIS APPEA L. IT WAS ALSO SUBMITTED THAT JAIPUR NATIONAL UNIVERSITY WOULD FAL L WITHIN THE AMBIT OF SPECIFIED PERSON ON ACCOUNT OF THE MANAGEMENT OF THE TWO INSTITUTIONS BY THE SAME GROUP OF PERSONS. APART FROM THIS, THE OBSERVATION OF LD. AO & FIRST APPELLATE AUTHORITY TO THE EFFECT OF VIO LATION OF SECTION 13(1)(C)(II) & SECTION 13(2) READ WITH SECTION 13(3 ) WERE HIGHLIGHTED TO CONTEND THAT EXTENDING ASSISTANCE TO JAIPUR NATIONA L UNIVERSITY AND GIVING BENEFIT TO BAKSHI FAMILY SHOULD ALSO BE CONS IDERED WHILE CONSIDERING THE EXEMPTION UNDER SECTION 11. FURTHER , IT WAS ALSO HIGHLIGHTED THAT IF THE CONTRIBUTION TO JAIPUR NATI ONAL UNIVERSITY IS CONSIDERED AS APPLICATION OF INCOME, IT WOULD TANTA MOUNT TO GIVING DOUBLE BENEFIT OF EXEMPTION TO THE ASSESSEE SOCIETY ; ONE AT THE TIME OF INCURRING THE EXPENDITURE AND THE OTHER AT THE TIME OF VESTING OF ASSETS TO JAIPUR NATIONAL UNIVERSITY. IN RESPECT OF CLAIM OF DEPRECATION VIDE GROUND NO. 2, THE JUDGEMENT OF ITAT COCHIN IN THE C ASE OF LISSI MEDICAL INSTITUTION WAS RELIED UPON. FURTHER, IN RE SPECT OF GROUND NO. 3, THE DISALLOWANCE OUT OF FOREIGN TRAVEL EXPENSES WAS ALSO PRAYED TO BE UPHELD ON THE GROUNDS STATED IN THE ASSESSMENT ORDE R. WE MAY MENTION THAT THE LD. CIT DR HAS OBTAINED WRITTEN S UBMISSIONS FROM ACIT-CIRCLE-5,JAIPUR ALONGWITH A COVERING LETTER . FOR READY REFERENCE, 19 WE EXTRACT THIS LETTER OF LD CIT DR DATED 24-02 -2014 ALONGWITH WRITTEN SUBMISSIONS BY ACIT, CIRCLE5, JAIPUR AS UND ER:- BEFORE HON'BLE ITAT , JAIPUR BENCH, JAIPUR IN THE CASE OF MAHIMA SHIKSHA SAMITI VS ACIT, C-5, JAIPUR (IN ITA NO.522/JP?13 A.Y. 2009- 10) WRITTEN SUBMISION IT MAY BE SUBMITTED AS UNDER:- VIDE THIS OFFICE LETTER NO. CIT(DR-II)/ITAT/JPR/201 3-14/435 DATED 31/1/14, THE ADDL.CIT, RANGE-5, JAIPUR (COPY ENDORS ED TO HON'BLE ITAT BENCH) WAS REQUESTED TO SUBMIT THE COMMENTS/WRITTEN SUBMISSION, IN RESPECT OF THE SAID GROUNDS AFTER CONSIDERING THE CONTENTS OF FINDING OF AO & CIT(A) AND PAPER BOOK/WRITTEN SUBMISSION OF THE AR OF THE APPELLANT, ALONGWITH PAPER BOOK, AS PER RULE 18(3) OF THE ITAT RULES, 1963. IN COMPLIANCE, THE AO VIDE LETTER NO. ACIT/CIR.-5/JPR/ 2013-14/2176 DATED 17.02.2014 AND THE ADDL.CIT VIDE LETTER .(HINDI).. 1513/ 1528 DATED 18.2.2014 (24.02.2014) , HAVE SUBMITTED THE DETAILE D WRITTEN SUBMISSION/ PAPER BOOK. THE SAME ARE FORWARDED HEREWITH, FOR IN FORMATION & KIND CONSIDERATION OF HON'BLE BENCH. I HAVE CAREFULLY CONSIDERING THE FINDING OF THE AO IN PARA NO. 9, 11 & 12 OF THE ASSESSMENT ORDER AND SEEN THAT THE AO HAS DENIE D THE EXEMPTION U/S 11 OF THE IT ACT AFTER GIVING THE DETAILED FINDING. TH E FINDING OF THE AOS IN PARA NO. 9, 11 & 12 OF THE ASSESSMENT ORDER, HAVE B EEN SUMMARIZED BY THE CIT(A) AT PAGE NO. 7 TO 9 OF THE APPEAL ORDER, WHIC H ARE SELF EXPLANATORY. THE HON'BLE BENCH IS REQUESTED TO CONSIDER THE SAME , WHILE DECIDING THE GROUND UNDER QUESTION. THE CIT(A) HAS CONSIDERED THIS ISSUE IN LENGTH FROM PAGE NO. 6 TO 46 OF THE APPEAL ORDER. SHE HAS GIVEN DETAILED FINDING/REASON ING FOR DISMISSING THE CLAIM OF THE APPELLANT. THE HON'BLE BENCH IS, HEREB Y, HUMBLY REQUESTED TO CONSIDER THESE ASPECTS/FINDINGS/REASONING/CASE LAWS ETC., CAREFULLY AND MAKE PART OF THE APPEAL ORDER, WHILE DECIDING THE GROUND . 20 REGARDING OTHER GROUNDS OF THE APPEALS, THE AO AS W ELL AS THE CIT(A) HAVE GIVEN DETAILED FINDINGS. THE SAME MAY BE CONSIDERED ACCORDINGLY.WITH ABOVE REMARKS, I AM ENCLOSING HEREWITH, THE WRITTEN SUBMISSION/COMMENTS/ PAPER BOOK, IN DUPLICATE, RECEIVED FROM THE OFFICE OF THE ADDL.CIT, RANGE-5, JAIPUR, FOR KIND CONSIDERATION OF HON'BLE BENCH. SUBMITTED PLEASE. DATED 24-02-2014 SD/-. (SUBHASH CHANDRA) CIT(DR-III), ITAT, JAIPUR ADDL. COMMISSIONER OF INCOME TAX,RANGE-5, JAIPUR DATED 24-02-2014 TO, THE COMMISSIONER OF INCOME-TAX (DR II) JAIPUR SUB: FILING OF PAPER BOOK / WS IN APPEAL ITA NO.5 22/JP/13 & ITA NO879/JP/13 IN THE CASE OF MAHIMA SHIKSHA SAMIT I- REGARDING SIR, KINDLY REFER TO YOUR OFFICE LETTER NO, 435 DATED 31 .01.2014 ON THE SUBJECT MENTIONED ABOVE. IN THIS REGARDS, IT IS SUBMITTED THAT THE GROUNDS T AKEN BY THE APPELLANT DO NOT STAND TRUE AND LOGICAL FOR THE FOLLOWING REASONS:- 1) CONTRIBUTION TO JNU IS NOT IN ACCORDANCE WITH I TS TRUST DEED AS NOWHERE IT IS MENTIONED THAT MAHIMA SHIKSHA SAM ITI SHALL CONTRIBUTE TO JNU SPECIFICALLY. 2) CONTRIBUTION TO JNU CANNOT BE CONSIDERED AS AN APPLICATION BECAUSE IT DOES NOT HAVE SUPPORT OF OBJECTS MENTION ED IN THE TRUST DEED AND IT IS NOT ANY CHARITABLE ACTIVITY PER SAY. 21 3) THE GOVERNING PERSONS OF BOTH THE ASSESS EE SOCIETY AND THE UNIVERSITY ARE MORE OR LESS SAME. IT IS A FAMILY AF FAIRS. BOTH THE ORGANIZATIONS ARE CONTROLLED BY BAKSHI FAMILY. THUS JNU IS A PERSON FALLING WITHIN THE MEANING OF CLAUSE (B) OF SECTION 13(3). 4) THEREFORE, ANY CLAIM OF ASSISTANCE IN THE FORM OF TRANSFER OF FIXED ASSETS ETC . OF RS, 35,04,73, 177/- DOES VIOLATE PROVISION S OF 13(1) & 13(2) READ WITH 13(3)(A)/(B)/(CC) OF THE IT ACT, 1961. 5) THE UNIVERSITY IS A NAME GIVEN TO THE INSTITUTI ONS WITH FULL FLEDGED INFRASTRUCTURE ALREADY RUN BY THE APPELLANT SAMITI AND ARE STILL RUN UNDER ABSOLUTE CONTROL OF THE APPELLANT SAMITI WITH THE A PPELLANT'S TREASURER NOW WORKING AS THE HEAD OF THE UNIVERSITY. HENCE, IT AL SO A CASE OF TAKING DOUBLE BENEFITS OF SECTION 11. DETAILED REPORT OF THE AO ALONG WITH A PAPER BOOK I S SUBMITTED HEREWITH FOR YOUR KIND REFERENCE IN TRIPLICATE. YOURS FAITHFULLY, SD/- ENCL: AS ABOVE N.S. JANGPANGI ADDL. CIT , RANG-5, JAIPUR M/S. MAHIMA SHIKSHA SAMITI (A.Y. 2009-10) FACTS OF THE CASE IN THIS CASE ASSESSMENT FOR THE A.Y. 2009-10 WAS CO MPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 29-12-2011 ON TOTAL INC OME OF RS.7,09,33,240/- AS AGAINST NIL SHOWN BY THE ASSESS EE TRUST IN THE RETURN OF INCOME. WHILE COMPLETING THE ASSESSMENT FOLLOWING A DDITIONS/DISALLOWANCES WERE MADE:- NET INCOME AS DECLARED BY THE ASSESSEE TRUST BEFORE DEPRECIATION RS. 6,99,44,492/- DISALLOWANCES OUT OF SALARY RS. 5,88,750/- 22 DISALLOWANCES OUT OF FOREIGN TRAVEL EXPENSES RS. 4.00,0.00/- TOTAL INCOME RS.7,09,33,240/- BASIS FOR MAKING ADDITIONS: DURING THE ASSESSMENT PROCEEDINGS , THE AO DENIED S ECTION 11 EXEMPTION TO THE APPELLANT SAMITI AND ASSESSED ITS INCOME AS BUS INESS INCOME, TAKING THE INCOME OF RS. 6,99,44,492/- DECLARED IN THE COMPUTA TION FIELD WITH RETURN BEFORE DEPRECIATION AND MAKING DISALLOWANCES OUT OF SALARY AND FOREIGN TRAVELLING EXPENSE TO THIS INCOME. FURTHER AO HAS NOTICED THAT (I) CONTRIBUTION MADE TO THE JAIPUR NATIONA L UNIVERSITY DURING THE YEAR UNDER CONSIDERATION IS NOT APPLICATION OF INCOME FOR THE PURPOSE OF COMPUTATION OF EXEMPTION UNDER SECTION 11 OF TH E INCOME TAX ACT, 1961; (II) ALLEGING THAT PROVIDING ASSISTANCE TO JAI PUR NATIONAL UNIVERSITY WAS VIOLATION OF THE BYELAWS OF THE SOCIETY (III) ALLEGING THAT THE ASSESSEE SOCIETY HAS V IOLATED THE PROVISIONS OF SECTION 13(L)(C) AND 13(2)(A) OF THE ACT BY EXTEN DING ASSISTANCE TO JAIPUR NATIONAL UNIVERSITY. THEREFORE IN A,Y, 2009-10 (YEAR UNDER CONSIDERATION ) THE AO HAS RAISED AN OBJECTION WHICH WAS NEVER RAISED EARLIER- IT WAS TH AT THE CONTRIBUTION OF RS. 35,04,73,177/- TOWARDS JAIPUR NATIONAL UNIVERSITY C LAIMED AS APPLICATION OF INCOME BY THE APPELLANT IS_ NOT APPLICATION OF INCO ME UNDER SECTION 11 BECAUSE THIS IS AGAINST THE OBJECTIVES OF THE APPEL LANT SOCIETY. ON THE SAME ISSUE THE AO ALSO CONCLUDED THAT SUCH PAYMENTS ARE COVERED U/S 13 AND THE TRUST SHOULD NOT BE ELIGIBLE FOR THE EXEMPTION U/S 11. THE LD. CIT(A)-II, JAIPUR HAS CONFIRMED THE FINDING S OF THE AO AND DISMISSED THE APPEAL OF THE ASSESSEE SOCIETY. NOW THE APPEAL IS BEFORE THE HON'BLE ITAT ON THE FO LLOWING GROUNDS: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IN LAW. LD. CIT(A)-II JAIPUR HAS ERRED IN HOLDING THAT THE CONTRIBUTION MADE TO THE JAIPUR NATIONAL UNIVERSITY BY THE APPELLANT SOCIETY IS NOT APPLICAT ION OF INCOME FOR THE PURPOSE OF COMPUTATION OF EXEMPTION UNDER SECTION I X OF THE IT ACT, 1961 AND THAT THE SAME IS DIVERSION OF INCOME OF THE SOC IETY BY ALSO HOLDING THAT: - 23 (I) THE JAIPUR NATIONAL UNIVERSITY IS COVERED U/S 1 3(3)(E) OF THE ACT IN RESPECT OF APPELLANT SOCIETY (II) THE APPELLANT SOCIETY HAS VIOLATED THE PROV ISION OF SECTION 13(3)(A),(B), (CC) AND (D) BY PROVIDING ASSISTANCE TO THE JAIPUR NATIONAL UNIVERSITY. (III) CONTRIBUTION OF THE JAIPUR NATIONAL UNIVE RSITY AMOUNTED TO TAKING DOUBLE BENEFIT U/S 11 OF THE ACT (IV) THE APPELLANT SOCIETY HAS VIOLATED THE PROVISI ONS OF SECTION 13(L)(C)(II) AND 13(2)(A) AND (G) OF THE ACT BY EXTENDING ASSIST ANCE TO JAIPUR NATIONAL UNIVERSITY AND THAT IN FACT THE ASSISTANCE IS PROVI DED TO THE BAKSHI FAMILY AND IN PARTICULAR TO MR. SANDEEP BAKSHI WHO ARE COV ERED U/S 13(3) OF THE ACT. AFTER CONSIDERING THE WRITTEN SUBMISSION OF THE LD. AR, FOLLOWING IS SUBMITTED HERE:- 1. THE JAIPUR NATIONAL UNIVERSITY IS COVERED U/S 13(3)(E) OF THE ACT IN RESPECT OF APPELLANT SOCIETY WITH RESPECT TO THIS ISSUE, THE LD AR HAS SUBMITTED THAT GIVING CONTRIBUTION TO JNU IS WITHIN THE PREVIEW OF THE OBJECTS MENTIONED IN THE TRUST DEED (PARA 3 & 7) OF THE ASSESSEE. MAHIMA SHIKSHA SMAITI HAS SET UP AN INSTITUTION OF JNU AND IT HELPS AS A SPONSORING BODY TO JNU. JNU ACT MENTIONS MAHIMA SHIKSHA SAMITI AS SPONSO RING BODY AND AS MANAGING AND CONTROLLING BODY CONTROLLING AND PROVIDING FINANCIAL ASSISTA NCE TO INSTITUTION HAVING SIMILAR OBJECTS IS CONSIDERED AS APPLICATION. APPLICATION CAN BE OF CAPITAL OR REVENUE IN NATU RE GRANTING LOAN IS AN APPLICATION OF THE INCOME. IN THIS REGARD, IT IS SUBMITTED THAT AS PER BYE- LA WS OF THE SAMITI, THE SAMITI IS 24 AUTHORIZED TO RUN DIFFERENT EDUCATIONAL INSTITUTES INCLUDING INSTITUTES FOR ENGINEERING AND HIGHER EDUCATION BUT NOWHERE IT WAS MENTIONED THE SOCIETY WILL PROVIDE FINANCIAL ASSISTANCE TO OTHER EDUCATIO NAL INSTITUTES. IT MAY BE MENTIONED THAT IN THE JAIPUR NATIONAL UNIVERSITY AC T, 2008, IT WAS MENTIONED THAT MAHIMA SHISHA SAMITI HAS PROVIDED SECURITY DEP OSIT OF RS. 2 CRORES, BUT IT DOES NOT MEAN THAT THE PROVIDING CONTRIBUTION LE NDING MONEY TO UNIVERSITY WAS THE OBJECTIVE OF THE SAMITI. THEREFORE, PROVIDI NG LOANS/ASSISTANCE/CONTRIBUTION BY WHATEVER NAME IT I S CALLED, TO JNU IS SPECIFIC VIOLATION BYE-LAWS OF THE SOCIETY. THE OFF ICE BEARERS OF THE SAMITI HAVE MISUSED THEIR POWERS TO UTILIZE THE PROPERTY O F THE SOCIETY AGAINST THE OBJECTIVES OF THE SOCIETY. THE ISSUE HERE THAT WHETHER THE ASSESSEE SAMITI CAN LEND ITS PROPERTY TO OTHER EDUCATIONAL INSTITUTIONS OR NOT. IT MAY BE MENTIONED THAT JNU IS DIFFERENT ENTITY WHICH HAS ITS OWN ACT AND MANDATE. IT WAS ESTABLISHED BY AN ACT PASSED BY THE GOVERNMENT BUT WORKING INDEPENDEN TLY AND THE SAMITI HAS NO SAY IN IT THAT UNIVERSITY EXCEPT THE FACT THAT T HE OFFICE BEARER OF THIS SAMITI ARE THE MEMBER OF BOARD OF GOVERNING BODY OF THE UN IVERSITY, AS FAR AS TREATING CONTRIBUTION AS APPLICATION OF F UNDS IS NOT IN ACCORDANCE WITH THE PROVISION OF SECTION 11 OF THE IT ACT. 196 1. IN THIS MATTER BOARD'S CIRCULAR NO. 100 DATED 24,01.1973 IS VERY CLEAR THA T IN CASE IF LOAN IS PROVIDE FOR HIGHER STUDIES IT CAN BE TREATED AS APPLICATION OF INCOME PROVIDED IT WAS UNDER THE OBJECTS OF THE SOCIETY, HOWEVER ON RETURN OF SUCH LOAN IT WILL BE TREATED AS INCOME OF THE SOCIETY. SO EXCEPT COMMON MANAGEMENT THEY DO NOT HAVE ANYTHING COMMON IN THEM. SO, CONTRIBUTION TO JNU IS JUST A TOOL TO DIVERT REVENUE FROM MAHIMA SHIKSHA SAMITI TO JNU, F ROM THE ABOVE DISCUSSION, TWO POINTS ARE CLEAR:- 1) CONTRIBUTION TO JNU IS NOT IN. ACCORDANCE WITH ITS TRUST DEED AS NOWHERE IT IS MENTIONED THAT MAHIMA SHIKSHA SAM ITI SHALL CONTRIBUTE TO JNU SPECIFICALLY. 2) CONTRIBUTION TO JNU CANNOT BE CONSIDER ED AS AN APPLICATION BECAUSE IT DOES NOT HAVE SUPPORT OF OBJECTS MENTION ED IN THE TRUST DEED AND IT IS NOT ANY CHARITABLE ACTIVITY PER SAY. OTHER POINTS RAISED BY THE LD AR ARE REQUIRED TO BE CONSIDERED ONLY WHEN WE ARE TREATING SUCH FUNDS AS AN APPLICATION, SINCE , CONSTRIBUTION TO JNU IS 25 NOT CONSIDERED AS AN APPLICATION OF INCOME, THE ARG UMENT WHETHER IT IS CAPITAL OR REVENUE IN NATURE DOES NOT MAKE ANY SENS E. ANOTHER ISSUE RAISED BY THE LD AR IS THAT THE AS SESSES HAS BEEN DENIED EXEMPTION U/S 11 AS PER THE PROVISIONS OF SE CTION 13(3)(E) OF THE IT.ACT, 1961. SECTION 13(3)(E) READS AS FOLLOWS: THE PERSONS REFERRED TO IN CLAUSE (C) OF SUB-SECTIO N (1) AND SUB SECTION (2) ARE (E) ANY CONCERN IN WHICH ANY OF THE PERSONS REFERRE D TO IN CLAUSES (A)(B),(C),(CC) AND (D) IS SUBSTANTIAL INTEREST THUS, SUB CLAUSE (E) OF SECTION 13(3) WHICH PROHIBI TS ANY TRUST PROPERTY OR INCOME TO BE DIVERTED DIRECTLY OR INDIRECTLY FOR BE NEFIT OF ANY CONCERN IN WHICH ANY OF THE TRUSTEES HAS A SUBSTANTIAL INTERES T. IN THE CASE OF JNU AS CLEAR FROM CLAUSE 3 OF THE JNU ACT REPRODUCED BELOW :- ' 3 INCORPORATION (1) THE FIRST CHANCELLOR AND THE FIRST VICE-CHANCELLOR OF THE UNIVERSITY AND THE FIRST MEMBER OF THE BOARD OF MAN AGEMENT AND THE ACADEMIC COUNCIL AND ALL PERSONS WHO MAY HEREAFTER BECOME SUCH OFFICERS OR MEMBERS, SO LONG AS THEY CONTINUE TO HOLD SUCH O FFICE OR MEMBERSHIP, ARE HEREBY CONSTITUTED A BODY CORPORATE BY THE NAME OF JNU, JAIPUR, (2) THE MOVEABLE AND IMMOVABLE PROPERTY SPECIFIED I N THE SCHEDULE I SHALL BE VESTED, IN THE UNIVERSITY AND THE SPONSORING BOD Y SHALL, IMMEDIATELY AFTER COMMENCEMENT OF THIS ACT, TAKE STEPS FOR SUCH VESTING. (3) THE UNIVERSITY SHALL, HAVE PERPETUAL SUCCESSION AND A COMMON SEAL AND SHALL SUE AND BE SUED BY THE SAID NAME. (4) THE UNIVERSITY SHALL SITUATE AND HAVE ITS HEAD QUARTERS AT JAGATPURA, TEHSIL SANGANER, JAIPUR RAJASTHAN. AS PER CLAUSE 22 (2) OF THE JNU ACT THE BOARD OF MA NAGEMENT SHALL BE THE PRINCIPAL EXECUTIVE BODY OF THE UNIVERSITY, AND HAS ABSOLUTE POWER TO 26 CONTROL AND RUN THE UNIVERSITY, THE BOARD OF MANAGE MENT IS UNDER ABSOLUTE CONTROL AND SUPERVISION OF THE CHANCELLOR, WHO NOMI NATES MAJORITY MEMBERS INCLUDING THE VICE CHANCELLOR. THE CHANCELLOR OF TH E UNIVERSITY IS NONE OTHER THAN THE TREASURER OF MAHIMA SHIKSHA SAMIT-SH RI SANDEEP BAKSHI. FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT MEMBERS OF BAKSHI FAMILY ARE OCCUPYING KEY POSITION AND HOLDING POWERFUL POSTS I N JNU, THE JNU ACT ALSO VESTS ATMOST POWER TO THESE MEMBERS AND HENCE IT BECOMES VERY OBVIOUS THAT THESE PERSONS WHO ARE ALSO MEMBER AND SECRETARY/ TREASURER OF MAHIMA SHIKSHA SAMITI HAVE SUBSTANTIAL INTEREST IN JNU. 2. THE APPELLANT SOCIETY HAS VIOLATED THE PROVISION OF SECTION 13(3)),(A),(B) (CC) AND (D) BY PROVIDING ASSISTANCE TO THE JAIPUR NATIONAL UNIVERSITY . SECTION 13 OF THE IT ACT, 1961 PROHIBITS ANY TRUST TO DIVERT ITS PROPERTY TO THE RELATED PERSONS SPECIFIED IN SECTION 13(3), MAHIMA SHIKSHA SMAITI IS CONTRIBUTING TO JNU- THE CONCERN WHICH IS COVERED B Y VARIOUS SUB CLAUSES OF SECTION 13(3). IN THIS REGARD, IT IS SUBMITTED THAT JNU FALLS IN S ECTION 13(3)(A). SECTION 13 (A) BARS TO TRANSFER THE BENEFITS/PROPERTY OF THE T RUST TO THE AUTHOR OF THE TRUST OR THE FOUNDER OF THE INSTITUTION. HERE, MR SANDEEP BAKSHI IS SUCH PERSON WHO IS FOUNDER/ AUTHOR OF THE APPELLANT TRUST AND A LSO HAS ABSOLUTE POWER IN THE UNIVERSITY. HE FALLS WITHIN SECTION 13(3)(B) ALSO WHICH PROHIBI TS DIVERTING TRUST'S PROPERTY FOR THE BENEFIT OF ANY PERSON WHO HAS MADE A SUBSTANTIAL CONTRIBUTION TO THE TRUST OR INSTITUTION. MR SANDEE P BAKSHI WHOLE AND SOLE OF THE APPELLANT SOCIETY AND ALSO HAS SUBSTANTIAL INTE REST IN THE UNIVERSITY. MR. BAKSHI IS ALSO COVERED BY SECTION 13(3)(CC) AS WELL AS HE IS ONE OF THE TRUSTEES OF THE APPELLANT SAMITI. THE CONTRIBUTIONS MADE BY THE SAMITI ALSO HITS SECT ION 13(3)(D) WHICH RESTRICTS TRANSFERRING TRUST'S BENEFITS TO ANY RELA TIVE OF ANY SUCH AUTHOR, FOUNDER, PERSON. JNU IS AN INSTITUTION IN WHICH NOT ONLY MR SANDEEP BAKSHI BUT ALSO HIS FAMILY MEMBERS HAVE SUBSTANTIAL INTERE ST AND THEY HOLD KEY POSITIONS IN UNIVERSITY. IN THIS WAY CONTRIBUTIONS MADE BY THE APPELLANT SAMITI CAN BE TREATED AS DIVERSION OF FUNDS FOR THE BENEFITS OF RELATIVES OF ANY SUCH AUTHOR, FOUNDER, PERSON (MEMBER, TRUSTEE OR MA NAGER). 27 THE FACTS OF THE CASE ARE THAT THE GOVERNING PERSON S OF BOTH THE ASSESSEE SOCIETY AND THE UNIVERSITY ARE MORE OR LESS SAME. I T IS A FAMILY AFFAIRS. BOTH THE ORGANIZATIONS ARE CONTROLLED BY BAKSHI FAMILY. THUS JNU IS A PERSON FALLING WITHIN THE MEANING OF CLAUSE (B) OF SECTION 13(3). THE CHANCELLOR IS NO ONE ELSE BUT THE FOUNDER MEMBE R OF THE APPELLANT TRUST, ITS TREASURER AND KEY TRUSTEE SHRI SANDEEP BAKSHI. JNU IS DIFFERENT FROM OTHER UNIVERSITIES IN THE SENSE IT CANNOT AFFILIATE ANY INSTITUTION UNDER ITS AEGIS, IS NOT CONTROLLED BY THE STATE GOVERNMENT BU T BY THE APPELLANT AND CONDUCTS ITS BUSINESS AS PER DECISIONS TAKEN BY THE BOARD OF MANAGEMENT UNDER THE CHANCELLOR WHO IS A KEY TRUSTEE OF THE AP PELLANT TRUST. THE INVOLVEMENT OF STATE GOVERNMENT IS TO THE EXTENT TH AT IT HAS GIVEN PERMISSION THAT CERTAIN INSTITUTES RUN BY THE SAMIT I ARE PLACED UNDER THE NOMENCLATURE OR PRESTIGIOUS NAME OF A UNIVERSITY AS JNU. ITS KEY PERSONS /TRUSTEE ARE ALL IN ALL OF THE UNIVERSITY IN THE FO RM OF THE CHANCELLOR OF THE UNIVERSITY AND BOARD OF MANAGEMENT OF THE UNIVERSIT Y. THEREFORE, ANY CLAIM OF ASSISTANCE IN THE FORM OF TRANSFER OF FIXE D ASSETS ETC. OF RS. 35,04,73,177/- DOES VIOLATE PROVISIONS OF 13(1) & 1 3(2) READ WITH 13(3)(A)/(B)/(CC) OF THE IT ACT, 1961 BECAUSE THE U NIVERSITY IS A NAME GIVEN TO THE INSTITUTIONS WITH FULL FLEDGED INFRASTRUCTUR E ALREADY RUN BY THE APPELLANT SAMITI AND ARE STILL RUN UNDER ABSOLUTE C ONTROL OF THE APPELLANT SAMITI WITH THE APPELLANT'S TREASURER NOW WORKING A S THE HEAD OF THE UNIVERSITY. TO SUM UP, SMT. MOHINI BAKSHI AND SHRI SANDEEP BAKS HI ARE THE FOUNDER/AUTHORS OF THE APPELLANT SAMITI/ CHARITABLE INSTITUTION. THEY WERE THERE AS SECRETARY AND TREASURER WHEN MAHIMA SHIKSH A SAMITI CAME INTO EXISTENCE WAY BACK IN 1986 AND HAVE BEEN SO FAR LAS T SEVERAL DECADES AND CONTINUE SO. SO THEY ARE COVERED UNDER SUB CLAUSES (A) AND (B) OF SECTION 13(3). THEY ARE THE TRUSTEES OF MAHIMA SHIKSHA SAMI TI RIGHT FROM THE BEGINNING WHEN MAHIMA SHIKSHA SAMITI CAME INTO EXIS TENCE. THEY ARE ALSO COVERED BY SUB CLAUSE (CC) OF SECTION 13(3). RELATI VE OF THESE TRUSTEES LIKE SMT. PREETI BAKSHI IS ALSO A TRUSTEE IN MAHIMA SHIK SHA, SAMITI AND SO SUB CLAUSE (D) IS ALSO ATTRACTED, BECAUSE JNU IS ABSOLU TELY MANAGED AND CONTROLLED BY THE APPELLANT THAT IS MAHIMA SHIKSHA SAMITI. 3. CONTRIBUTION OF THE JAIPUR NATIONAL UNIVERSITY A MOUNTED TO TAKING DOUBLE BENEFIT U/S 11 OF THE ACT 28 IN THIS REGARD, IT IS SUBMITTED THAT ANY TRANSFER O F FIXED ASSETS WILL HAPPEN OF THOSE FIXED ASSETS WHICH ARE APPEARING THE BALANCE SHEET AND FIXED ASSETS TABLE OF THE BALANCE SHEET OF A.Y. 2008-09 OF THE A PPELLANT SHOWS THAT OUT OF GROSS FIXED ASSETS OF RS. 53,59,03,403/- ASSETS TOT OTALING TO 40,90,32,257/- WERE TRANSFERRED TO JNU ( COMPRISING LAND ITSELF OF RS. 2,20,57,926/- AND BUILDING OF RS. 26,59,68,000 + OTHER ASSETS LIKE OF FICE APPLIANCE OF RS. 4,62,80,344/-, ELECTRIC INSTALLATION OF RS. 1,59,89 ,999/-COMPUTER OF RS. 1,48,17,519/- ETC.) . THEREFORE, NET BLOCK (AFTER D EPRECIATION) TRANSFERRED TO JNU AT RS. 36,18,31,978/-. THE APPELLANT CANNOT TAKE APPLICATION BENEFIT IN A. Y. 2009-10 BECAUSE ADDITION IN FIXED ASSETS HAS BEEN CLAIMED AS APPLIC ATION OF INCOME U/S 11 IN EARLIER ASSESSMENT YEARS ALSO SO CLAIMING ONCE A GAIN APPLICATION UNDER SECTION 11 OF SUCH FIXED ASSETS TRANSFERRED TO JNU IS CLAIMING DOUBLE EXEMPTION OF SAME INCOME. CLAIMING OF DEPRECIATION ON SUCH ASSETS WOULD TANTAMOUNT TO DOUBLE BENEFIT. RELIANCE IS PLACED ON THE DECISION OF HON'BLE ITAT KOCHI OF 2011 -TIOL-369-ITAT-COCHIN- IN WHICH THEY FOLLOWED THEIR DECISION IN THE CASE OF LISSIE MEDICAL INSTITUTION, 4. THE APPELLANT SOCIETY HAS VIOLATED THE PROVISION S OF SECTION 13FLUCUII) AND 13(2)(A) AND (G) OF THE ACT BY EXTENDING ASSIST ANCE TO JAIPUR NATIONAL UNIVERSITY AND THAT IN FACT THE ASSISTANCE IS PROVI DED TO THE BAKSHI FAMILY AND IN PARTICULAR TO MR. SANDEEP BAKSHI WHO ARE COV ERED U/S 13(3) OF THE ACT. IN THIS REGARD, IT IS SUBMITTED THAT AS PER ABOVE D ISCUSSION THE APPELLANT SOCIETY HAS VIOLATED THE PROVISIONS OF SECTION 13(L )(C)(II) AND 13(2)(A) AND (G) OF THE ACT. CLAUSE 12(3) OF THE JNU ACT STATES THE CHANCELLOR TO BE THE HEAD OF THE UNIVERSITY AND HERE THIS IS NO ONE ELSE BUT THE TREASURER/ FOUNDER/ A KEY TRUSTEE OF THE APPELLANT SAMITI - SHRI SANDEEP BAKSHI. SO THERE I.S VIOLATION OF SECTION 13(1 )(C) WHICH BARS ANY TRUST INCOME OR PROPERTY TO BE USED OR APPLIED DIRECTLY OR INDIRECTLY FOR BENEFIT OF ANY PERSON REFERRED TO IN SECTION 13(3). AND AS PER SECTION 13(3)(A) SHRI SAN DEEP BAKSHI IS SUCH PERSON AS HE IS THE FOUNDER/AUTHOR OF THE APPELLANT TRUST WHO IS GIVEN ABSOLUTE POWER IN THE UNIVERSITY. HE COMES UNDER SE CTION 13(3)(CC) AS WELL, AS HE IS ONE OF THE TRUSTEES OF THE APPELLANT SAMIT I, THE APPELLANT SAMITI VIOLATES SECTION 13(1), 13(2) AND 13(3) BY VESTING IN HIM SO MUCH POWER AND CONTROL WITH RESPECT TO THE UNIVERSITY. HOW ELSE WO ULD TRUST INCOME OR PROPERTY BE USED FOR GIVING DIRECTLY OR INDIRECTLY BENEFIT TO THE PERSONS BARRED FROM BEING GIVEN SUCH BENEFIT UNDER SECTION 13(3). 29 IN VIEW OF THE ABOVE FACTS, IT IS SUBMITTED THAT TH E ARGUMENTS PRESENTED BY THE LD AR IN RESPECT OF THE ABOVE MENTIONED GROUND IS NOT SUPPORTED BY LOGICAL ANALYSIS OF VARIOUS PROVISIONS OF SECTIONS 13. YOURS FAITHFULLY, SD/- POOJA PAREKH ACIT, CIRCLE-5, JAIPUR 2.8 WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVA NCED BY THE PARTIES IN LIGHT OF THE MATERIAL ON RECORD. THE SCHEME OF S TATUTORY EXEMPTION AS CONTAINED IN SECTIONS 11, 12, 12A, 12AA READ WITH T HE PROVISIONS OF SECTION 13 IS DEVISED BY THE LEGISLATURE IN SUCH A MANNER T HAT THE INSTITUTIONS WHO EARN FROM CHARITABLE WORK ARE NOT LIABLE TO TAX IF THEY PLOUGH-BACK SUCH EARNINGS FOR FURTHER ACHIEVING THE CHARITABLE PURP OSE AND DO NOT WITHDRAW SUCH INCOME FOR UTILIZATION FOR ANY PURPOSES OTHER THAN CHARITABLE PURPOSES. THE ACTIVITIES OF APPELLANT SOCIETY HAVE BEEN HELD TO BE CHARITABLE IN ALL PRECEDING YEARS BY THE TRIBUNAL AND THEREFORE, FOLL OWING THE SAME, THE APPELLANT IS ENTITLED TO THE EXEMPTION U/S 11 OF TH E ACT DURING THE YEAR UNDER CONSIDERATION ALSO. IT HAS ALSO BEEN DISPUTED BY TH E ASSESSING OFFICER AND UPHELD BY THE LD. CIT(A) THAT THE JAIPUR NATIONAL U NIVERSITY IS A SPECIFIED PERSON WITHIN THE MEANING OF THE SECTION 13(3) OF T HE ACT FOR THE APPELLANT SOCIETY AND ACCORDINGLY, THE ASSISTANCE TO JAIPUR N ATIONAL UNIVERSITY DOES 30 NOT QUALIFY FOR EXEMPTION U/S 11 AND RATHER, BECAUS E OF SUCH CONTRIBUTION, THE EXEMPTION U/S 11 SHOULD BE DENIED IN ENTIRETY. WE, HOWEVER, DO NOT AGREE WITH THE DEPARTMENTAL AUTHORITIES ON ACCOUNT OF THE REASONS THAT JAIPUR NATIONAL UNIVERSITY IS AN INSTITUTION INCORPORATED VIDE LEGISLATIVE ENACTMENT AND AS PER THE PROVISIONS OF SUCH ENACTMENT, NO IND IVIDUAL OR A PERSON IS ENTITLED TO ANY PROFITS FROM SUCH UNIVERSITY AND TH US, THE UNIVERSITY CANNOT BE TREATED TO BE SPECIFIED PERSON. THIS IS EVIDENT FROM THE DEFINITION OF SUBSTANTIAL INTEREST GIVEN IN EXPLANATION 3 IN SECT ION 13 OF THE ACT REPRODUCED HEREIN: EXPLANATION 3. FOR THE PURPOSES OF THIS SECTION, A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INTEREST IN A CONCE RN, (I) IN A CASE WHERE THE CONCERN IS A COMPANY, IF IT S SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND W HETHER WITH OR WITHOUT A FURTHER RIGHT TO PARTICIPATE IN PROFITS) CARRYING NOT LESS THAN TWENTY PER CENT OF THE VOTING POWER ARE, AT ANY TIME DURING THE PREVIOUS YEAR, OWNED BENEFICIALLY BY SUC H PERSON OR PARTLY BY SUCH PERSON AND PARTLY BY ONE OR MORE OF THE OTHER PERSONS REFERRED TO IN SUB-SECTION (3); (II) IN THE CASE OF ANY OTHER CONCERN, IF SUCH PERS ON IS ENTITLED, OR SUCH PERSON AND ONE OR MORE OF THE OTHER PERSONS RE FERRED TO IN SUB-SECTION (3) ARE ENTITLED IN THE AGGREGATE, AT A NY TIME DURING THE PREVIOUS YEAR, TO NOT LESS THAN TWENTY PER CENT OF THE PROFITS OF SUCH CONCERN. 31 WE HAVE ALSO SEEN THAT THE JAIPUR NATIONAL UNIVERSI TY DOES NOT FALL IN ANY OF THE CLAUSES OF SECTION 13(3) AND THEREFORE, IT IS NOT A SPECIFIED PERSON. RATHER, THIS UNIVERSITY ITSELF IS A CHARITA BLE INSTITUTION AND HAS BEEN RECOGNIZED AS SUCH BY THE INCOME TAX DEPARTMEN T ITSELF U/S 12. 2.9 NOW, COMING TO THE MAIN ISSUE AS TO WHETHER TH E AMOUNT OF RS.35,04,73,177/-, SHOULD BE TREATED TO THE APPLICA TION OF INCOME FOR THE PURPOSE OF COMPUTING EXEMPTION U/S 11 OF THE AC T. WE FIND THAT THIS ISSUE IS ONLY ACADEMIC DURING THE YEAR UNDER CONSID ERATION INASMUCH AS THE INCOME OF THE APPELLANT BEFORE GRANTING EXEMPTI ON U/S 11 IS ONLY RS. 6,26,04,319/- AS PER THE RETURN FILED AND RS. R S.7,09,33,240/- AS PER THE ASSESSMENT ORDER ALSO. ON THE OTHER HAND, THE A PPLICATION OF INCOME WITHOUT CONSIDERATION OF THE VALUE OF ASSETS VESTED IN JAIPUR NATIONAL UNIVERSITY AND ONLY BY CONSIDERING THE AMOUNT SPENT BY APPELLANT SOCIETY AND CASH CONTRIBUTION GIVEN TO JAIPUR NATIO NAL UNIVERSITY ALONE ARE SUFFICIENT TO EXEMPT THE ENTIRE INCOME OF THE A PPELLANT U/S 11 OF THE ACT. IN OUR VIEW AND ON THE BASIS OF THE MATERIAL O N RECORD, THE FOLLOWING AMOUNTS QUALIFY AS APPLICATION OF INCOME EVEN BY IGNORING THE VALUE OF ASSETS VESTED IN JAIPUR NATIONAL UNIVE RSITY:- 32 S.NO. PARTICULARS AMOUNT I. ADDITION TO FIXED ASSETS OF MAHIMA SHIKSHA SAMITI DURING THE YEAR UNDER CONSIDERATION (PAGE NO. 144 AND 145 OF PAPER BOOK) RS. 1,89,47,896/- II. CASH CONTRIBUTION TO JAIPUR NATIONAL UNIVERSITY FOR AY 2009-10 (PAGE A 46 AND 47 OF THE PAPER BOOK) RS. 43, 31,810/- III. CASH CONTRIBUTION TO JAIPUR NATIONAL UNIVERSITY FOR AY 2008-09 (PAGE A 46 AND 47 OF THE PAPER BOOK) RS. 5, 70, 70,770/- IV. EXCESS APPLICATION IN AY 2007-08 TO BE ADJUSTED AGAINST THE INCOME OF AY 2009-10 (RS. 11,25,15,384-RS. 4,94,01,189) RS. 6,31,14,195/- THE DEPARTMENT HAS NOT DISPUTED THESE FIGURES IN TH EIR WRITTEN SUBMISSIONS WHICH ARE ALSO EVIDENT FROM THE DOCUMEN TS PLACED IN THE PAPER BOOK. THE EXCESS APPLICATION OF AY 2007-08 IS ALSO ELIGIBLE FOR CONSIDERATION OF EXEMPTION OF INCOME OF PRESENT ASS ESSMENT YEAR IN VIEW OF JURISDICTIONAL HIGH COURT JUDGEMENT IN CASE OF CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION REPORTED AT 164 ITR 439. THUS, SINCE THE APPLICATION OF INCOME EXCEEDS THE G ROSS INCOME OF THE APPELLANT, ENTIRE INCOME OF THE APPELLANT IS EXEMPT U/S 11 OF THE ACT. THE GROUND NO. 1 OF THE ASSESSEE IS ALLOWED IN FAVO UR OF THE ASSESSEE. 3.1 THE NEXT GROUND OF APPEAL RELATES TO THE UPHOLD ING BY THE LD. CIT(A) OF THE DISALLOWANCE OF DEPRECIATION UNDER SE CTION 32 ON THE GROUND THAT THE SAME IS NOT ADMISSIBLE IN RESPECT O F THE ASSETS ON WHICH EXEMPTION HAS BEEN ALLOWED U/S 11 OF THE INCOME TAX ACT, 1961 WHILE 33 APPLYING THE INCOME FOR CHARITABLE PURPOSE. THE LD. A/R MENTIONED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E SOCIETY BY THE ORDERS OF THE HONBLE ITAT FOR AY 2001-02, 2002-03, 2003-0 4, 2004-05, 2005-06, 2006-07 AND 2007-08. THE LD. A/R ALSO MENT IONED THAT THIS ISSUE WAS NOT PRESSED BY THE ASSESSEE SOCIETY IN AY 2008-09 BEING ACADEMIC IN NATURE NOT AFFECTING TAX LIABILITY. IN THIS YEAR ALSO, WE HAVE ALLOWED GROUND NO. 1 IN FAVOUR OF THE ASSESSEE AND THEREFORE, THE GROUND NO. 2 OF DEPRECIATION HAS BECOME ACADEMIC SI NCE THE ENTIRE INCOME OF THE ASSESSEE WOULD BE EXEMPT FROM TAX. 4.1 THE NEXT GROUND OF APPEAL RELATES TO THE UPHOL DING BY THE LD. CIT(A) OF THE DISALLOWANCE OF THE FOREIGN TRAVELING EXPENSES AMOUNTING TO RS.4,00,000/- OUT OF FOREIGN TRAVELING EXPENSES INCURRED ON THE FOREIGN TOUR OF SMT. PREETI BAKSHI. THE LD. A/R MENTIONED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE SOC IETY BY THE ORDERS OF THE ITAT FOR AY 2003-04, 2004-05, 2006-07, 2007-08 AND 2008-09. THE LD. A/R ALSO MENTIONED THAT IN THE COMMON ORDER DATED 31.07.2009 FOR THE AY 2001-02, 2002-03 AND 2005-06, THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE SOCIETY BY THE ITAT A S THE FACTS INVOLVED THEREIN WERE DIFFERENT. WE HAVE HEARD BOTH THE PART IES AND ARE OF THE VIEW THAT THE FACTS INVOLVED IN THE RELEVANT ASSESS MENT YEAR 2009-10 ARE 34 SIMILAR TO THE AY 2003-04, 2004-05, 2006-07, 2007-0 8 AND 2008-09 AND THEREFORE, THIS ISSUE IS ALSO COVERED BY THE OR DERS OF THE ITAT FOR SUCH ASSESSMENT YEARS. ACCORDINGLY, WE DECIDE THIS ISSUE RELATING TO GROUND NO.3 IN FAVOUR OF THE ASSESSEE SOCIETY. 5.1 THE NEXT ISSUE RELATES TO UPHOLDING OF THE LE VY OF INTEREST U/S 234A AND 234B OF THE INCOME TAX ACT, 1961 WHICH IS CONSEQUENTIAL IN NATURE. IN, THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ITA NO.789/JP/2013 (U/S 80G(5)(VI) OF THE ACT) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT- II, JAIPUR DATED 09-09-2013 PASSED U/S 80G(5)(VI) O F THE INCOME-TAX ACT, 1961 (THE ACT FOR SHORT). 6.1 BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT APPLICANT SOCIETY FILED AN APPLICATION IN THE FORM NO. 10G ON 15-03-2013 ALONG WITH A COPY OF TRUST DEED AND COPIES OF ACCOUNTS, SEEKING APPROVAL FOR E XEMPTION U/S 80G(5)(VI) OF THE ACT. THE LD. CIT SOUGHT REPORT ON THIS APPLI CATION FROM THE A.O. I.E. ACIT CIRCLE-5, JAIPUR WHICH WAS FORWARDED VIDE LET TER DATED 30-08-2013. THE APPLICANT SOCIETY WAS CONSTITUTED ON 19-02-1986 . THE APPLICANT SOCIETY IS REGISTERED U/S 12A OF THE ACT AS ITS OBJECTIVES ARE FOUND CHARITABLE IN NATURE. ON THE BASIS OF THE REPORT OF THE A.O. THE APPLICANT SOCIETY IS BEING 35 MANAGED AND CONTROLLED BY BAKSHI FAMILY AND THE MAI N MOTIVE OF THE SOCIETY IS TO EARN PROFIT AND NOT TO DO ANY CHARITA BLE ACTIVITIES AS DEFINED U/S 2(15) OF THE ACT. FOR A.Y. 2009-10, THE A.O. HAS AS SESSED THE INCOME OF THE APPLICANT SOCIETY VIDE ORDER DATED 29-12-2011 AT A TOTAL INCOME OF RS. 7,09,33,240/- AGAIN NIL RETURNED INCOME. IN THE BAC KDROP OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT HAS NOT FOUN D THE APPLICANT SOCIETY FIT FOR EXEMPTION U/S 80G(5)(VI) OF THE ACT AND HE HAS REJECTED ITS APPLICATION. 6.2 AGAINST THIS REJECTION OF THE APPLICATION, THE APPLICANT SOCIETY HAS COME IN APPEAL BEFORE US BY RAISING THE FOLLOWING G ROUNDS. 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW , THE LD CIT-II, JAIPUR HAS ERRED IN PASSING THE NON-REASONED AND NON-SPEAKING ORDER U/S 80G(5)(VI) OF THE INCOME-T AX ACT, 1961 DATED 09-09-2013 REJECTING THE APPLICATION OF THE APPELLANT SAMITI WITHOUT FOLLOWING THE PRINCIPLES OF NATURA L JUSTICE AND IN NOT PROVIDING ANY OPPORTUNITY OF HEARING TO THE A PPELLANT SAMITI. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE LD CIT-II, JAIPUR HAS ERRED IN REJECTING TH E APPLICATION OF THE APPELLANT SAMITI U/S 80G(5)(VI) OF THE INCOME -TAX ACT, 1961, HOLDING THAT THE ACTIVITIES OF THE APPELLANT SOCI ETY ARE NOT CHARITABLE IN NATURE AND ON THE BASIS OF ASSESSME NT ORDER FOR THE A.Y. 2009-10. 3. THE APPELLANT CRAVES FOR LEAVE TO ALTER, AMEND , ADD AND MODIFY ANY GROUND OF APPEAL. 36 6.3 BOTH THE PARTIES HAVE REITERATED THEIR ARGUMENT S ON THE SAME LINES AS WERE TAKEN BEFORE THE LD. CIT. 6.4 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HAV E FOUND THAT THE ASSESSEE SOCIETY HAS RAISED THIS GROUND OF APPEAL T HAT THE AFORESAID ORDER DATED 09.09.2013 HAS BEEN PASSED WITHOUT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. IN THIS REGARD, THE LD. A/R HAS SUBMITTED THAT THAT LD. CIT, JAIPUR-II HAS NOT FOLLOWED THE PROCEDURE LAID DOWN IN RULE 11 AA OF THE INCOME TAX RULES, 1962 IN NOT PROVIDING AN OPPORTUNITY OF BEIN G HEARD. THE LD. A/R HAS ALSO SUBMITTED A DETAILED CASE COMPILATION WHEREIN IT HAS BEEN HELD THAT THE BENEFIT OF EXEMPTION U/S 11 AND THE APPLICATION FOR REGISTRATION U/S 80G ARE TWO SEPARATE PROCEEDINGS, HOWSOEVER CONNECTED THEY MAY BE. THE LD. D/R PLACED RELIANCE ON THE ORDER DATED 09.09.2013 REJEC TING THE ASSESSEES APPLICATION. WE HAVE HEARD AND CONSIDERED THE ARGUM ENTS ADVANCED BY THE PARTIES IN VIEW OF THE MATERIAL ON RECORD INCLUDING THE REGISTRATION GRANTED BY THE CIT UNDER SECTION 12 OF THE ACT TO THE ASSESSEE SOCIETY WHICH IS IN FORCE. WE ARE IN AGREEMENT WITH THE CONTENTIONS OF THE LD. A/R AND ARE OF THE VIEW THAT THE CASE OF THE ASSESSEE SOCIETY IS SQUARELY C OVERED BY THE RATIO LAID DOWN BY THE VARIOUS HIGH COURTS IN THE CASES RELIED UPON BY THE ASSESSEE SOCIETY IN SUPPORT OF ITS CONTENTION VIZ. SONEPAT H INDU EDUCATIONAL & CHARITABLE SOCIETY VS CIT & ANR (2005) 278 ITR 262 (P&H); ORPAT 37 CHARITABLE TRUST VS CIT (2002) 256 ITR 690 (GUJ); N N DESAI CHARITABLE TRUST VS CIT (2000) 246 ITR 452 (GUJ). WE AGREE THA T WHILE DEALING WITH THE APPLICATION U/S 80G(5) OF THE INCOME TAX ACT, 1 961, THE SCOPE OF ENQUIRY BY THE COMMISSIONER EXTENDS TO ELIGIBILITY OF THE APPLICANT UNDER VARIOUS PROVISIONS REFERRED TO IN THAT SUB-SECTION BUT NOT TO ACTUAL COMPUTATION OF INCOME UNDER THE ACT. THE COMMISSION ER OUGHT TO SEE THE OBJECTIVES FOR WHICH THE SOCIETY IS BEING SET UP. A S A MATTER OF FACT, REGISTRATION OF AN INSTITUTION U/S 12A BY ITSELF IS A SUFFICIENT PROOF THAT THE INSTITUTION IS CREATED OR ESTABLISHED FOR CHARITABL E OR RELIGIOUS PURPOSES. THEREFORE, THE ASSESS SOCIETY IS HELD TO BE ENTITLE D TO THE BENEFIT OF SECTION 80G(5) OF THE ACT. EVEN OTHERWISE, THE SOLE GROUND FOR DENIAL OF BENEFIT UNDER SECTION 80G(5) WAS THE REJECTION OF THE CLAIM OF THE ASSESSEE UNDER SECTION 11 OF THE ACT IN AY 2009-10. WE HAVE SEPARA TELY DECIDED THE ITA NO. 522/JPR-2013 IN FAVOUR OF THE ASSESSEE SOCIETY AND HELD THAT THE ACTIVITIES OF THE ASSESSEE SOCIETY ARE CHARITABLE I N NATURE, THE VERY FOUNDATION UPON WHICH THE APPLICATION OF THE ASSESSEE SOCIETY FOR REGISTRATION U/S 80G(5) OF THE INCOME TAX ACT, 1961 WAS REJECTED DISAPPEARS . ACCORDINGLY, THIS APPEAL, BEING CONSEQUENTIAL TO ITA NO. 522/JPR-2013 , IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE SOCIETY AND CIT IS DIRECTED TO GRANT THE REQUISITE 38 APPROVAL UNDER SECTION 80G OF THE ACT TO THE APPELL ANT. THUS, THIS APPEAL OF THE ASSESSEE SOCIETY IS ACCORDINGLY ALLOWED. 7.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.522/JP/2013 IS PARTLY ALLOWED AND APPEAL IN ITA NO.783/JP/2013 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 11-0 3-2014. SD/- SD/- ( N.K. SAINI ) (HARI OM MARATHA ) ACCOUNTANT MEMBER JUDICIAL MEMBER *MISHRA COPY FORWARDED TO :- 1. M/S. MAHIMA SHIKSHA SAMITI, JAIPUR 2. THE ITO, WARD 6 (1), JAIPUR 3. THE LD. CIT-II, JAIPUR 4. THE LD.CIT(A) 5. THE LD CIT 6. THE D/R 7. GUARD FILE (ITA NO.522 &789/JP/2013) BY ORDER, AR ITAT, JAIPUR 39