M/s Mother India Foundation, New Delhi V. Addl. DIT, New Delhi

ITA 5231/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5141 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-05-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 04-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN KR YADAV
• Assessee Lawyers: C S AGGARWAL; RAVI PRATAP MAL
• Keywords: Depreciation; Charitable institution; Tangible material; Capital receipt; Reason to believe
• Section: 142(1); 133(6); 12A; 12

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A.NO. 5231 /DEL/20 1 6 AY : 2004 - 05 MOTHER INDIA FOUNDATION 3435, KRISHNA NIKETAN, DELHI GATE, NEW DELHI 11 0002 (PAN: AAATM9211B) VS. ITO(E), TRUST WARD - IV, LAXMI NAGAR, DELHI - 110 092 (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. C.S. AGGARWAL, SR. ADV. & SH. RAVI PRATAP MAL, ADV. DEPARTMENT BY : SH. ARUN KR. YADAV, SR. DR ORDER ORDER ORDER ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 25.7.2016 OF THE LD. CIT(A)-36, NEW DELHI PERTAININ G TO ASSESSMENT YEAR 2004-05 ON THE FOLLOWING GROUNDS:- I. THAT THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE A.O. IN INITIATING T HE PROCEEDINGS ULS 148 OF THE INCOME TAX ACT. HE HAS F AILED TO COMPREHEND THAT IN ORDER TO ENABLE THE A.D. TO INIT IATE PROCEEDINGS U.S 148 OF THE ACT, THERE SHOULD BE A M ATERIAL AVAILABLE WITH THE A.D. TO HAVE A REASON TO BELIEVE THAT THERE IS AN ESCAPEMENT OF INCOME. IN THE ABSENCE OF ANY T ANGIBLE MATERIAL MERE SUBJECTIVE OPINION COULD NOT BE MADE ANY BASIS. TO INITIATE THE PROCEEDINGS AND AS SUCH THE LEARNED 2 CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN SUSTAI NING THE INITIATION OF PROCEEDINGS. 2. THAT THE LEARNED CIT(A) HAS THUS FAILED TO COMPR EHEND THAT IN THE ABSENCE OF ANY TANGIBLE MATERIAL AVAILABLE W ITH THE A.O. FOR A REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT, THE LEARNED CIT(A) OUGHT TO HAVE FILED THE PROCEEDINGS INITIATED WERE NOT SUSTAINABL E IN LAW, MORE PARTICULARLY WHERE THE PROCEEDINGS HAVE ADMITT EDLY BEEN INITIATED. TO MAKE INVESTIGATION BY MAKING ROV ING AND FISHING ENQUIRY. (SEE PARA 7 OFCIT(A)'S ORDER). 3. THAT THE LEARNED CIT(A) HAVING FOUND THAT THE A. D. HAD NO TANGIBLE MATERIAL IN SUPPORT OF HIS REASON TO BELIE VE THAT ANY INCOME HAS ESCAPED ASSESSMENT, OUGHT TO HAVE HELD T HAT THE PROCEEDINGS INITIATED U/S. 148 OF THE ACT WERE UNTE NABLE BOTH ON FACTS AND IN LAW AND THUS HE OUGHT TO HAVE HELD THE PROCEEDINGS INITIATED ARE BAD IN LAW. 4. THE FINDINGS RECORDED BY THE CIT(A), 'THE INFORM ATION WITH THE A.O. WAS HAVING RATIONAL NEXUS OR RELEVANT MATE RIAL BEARING ON THE INFERENCE' IS WHOLLY ERRONEOUS BOTH ON FACTS AND IN LAW. HE HAS FAILED TO APPRECIATE THAT THE A. O. COULD BE SAID TO HAVE AN INFORMATION BY ITSELF CANNOT BE REGARDED TO BE ENOUGH UNLESS UNTIL THERE WAS ANY EXISTENCE O F TANGIBLE MATERIAL IN SUPPORT OF THE INFERENCE. THE LEARNED C IT(A) HAS FAILED TO APPRECIATE THE 'REASON TO BELIEVE' SINCE IS OF THE A.O. IT WAS NECESSARY FOR THE A.O. TO HAVE WITH HIM RELEVANT MATERIAL TO 'HAVE A REASON TO BELIEVE THAT THE INCO ME OF THE 3 ASSESSEE HAD ESCAPED ASSESSMENT AND AS SUCH RELEVAN T MATERIAL WAS A SINE-QUA-NON FOR ASSUMING JURISDICTI ON ULS 147 OF THE INCOME TAX ACT. 5. THAT THE LEARNED CIT(A) HAS FURTHER FAILED TO AP PRECIATE THAT THE ASSESSEE IS A CHARITABLE INSTITUTION AND T HE FINDINGS THAT THE ASSESSEE IS NOT ENTITLED TO AN EXEMPTION U /S 11 OF THE ACT WAS NOT JUSTIFIED. THE CONCLUSION THAT THE ASSE SSEE HAD FAILED TO EXPLAIN THE CHARITABLE ACTIVITIES HAS BEE N ARRIVED BY DISREGARDING THE EVIDENCE ON RECORD AND THE FINDIN GS FOR THE A. Y S. 2002-03 AND 2003-04 I.E. IMMEDIATELY PRECED ING YEARS. 6. THAT THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE ASSESSEE TRUST UNDISPUTEDLY HAS UTILIZED RS. 1,52,1 7,236/- ;WHEREAS THE GROSS RECEIPTS WERE ALSO OF RS. 1,42,0 0,062/- AND AS SUCH EVIDENTLY THERE WAS NO ESCAPEMENT OF AN Y INCOME AND IN ANY CASE AND WITHOUT PREJUDICE CIT(A) OUGHT TO HAVE HELD THAT THERE HAS NO INCOME LIABLE TO BE ASSESSED, THE ASSESSMENT MADE OF RS. 16,77,870/- WAS THUS ENT IRELY ERRONEOUS BOTH ON FACTS AND IN LAW AND THE INCOME W HICH HAD BEEN REDUCED ONLY BY RS. 3,74,010/-. 7. THAT THE LEARNED CIT(A) OUGHT TO HAVE HELD THE A SSESSEE HAD NO INCOME CHARGEABLE TO TAX AND THE INCOME COMP UTED BY THE A.O. AT RS. 16,77,870/- WAS UNTENABLE IN LA W. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME ON 31.10.2004 DECLARING NIL INCOME AFTER EXEMPTION U/S 11 & 12 OF THE INCOME TAX 4 ACT, 1961 (HEREINAFTER REFERRED THE ACT). THE RETUR N WAS PROCESSED U/S. 143(1) OF THE ACT. LATER ON, INFORMATION WAS RECEIVED FROM T HE ADDL. DIT (VIG.), NORTH ZONE-I, DELHI VIDE LETTER NO. ADDLDIT(V)INZ/MAY/211 4/897 DATED 17.10.2005 THAT THE TRUST WAS MAINTAINING BANK ACCOUNT NOS. 01 7701003031 & 01701007948 WITH GURGAON & LUDHIANA AND THERE, WERE LARGE DEPOSITS INCLUDING SEVERAL CASH SUCH AS RS.5 LACS AND RS.8 L ACS ON 24.11.2003 & 13.11.2003 RESPECTIVELY IN THESE COUNTS. SUBSEQUEN TLY, COPIES OF BOTH THE BANK ACCOUNTS WERE OBTAINED U/S. 133(6) OF THE ACT WHICH SHOWS TOTAL DEPOSITS OF RS.2,13,34,135/- DURING THE PERIOD 01.04.2003 TO 31.3.2004. IN THE COMPUTATION OF INCOME FILED WITH RETURN OF INCOME, TOTAL INCOME BEFORE EXEMPTION WAS SHOWN RS. 1,52,17,236/-, HOWEVER, AS PER AUDIT REPORT U/S. 12A(B) AND INCOME & EXPENDITURE ACCOUNT AND BALANCE SHEET FOR THE YEAR ENDING 31.3.2004, FILED WITH THE RETURN OF INCOME, THE TOTAL RECEIPTS WERE SHOWN AT RS. 1,42,00,062/-. APPLICATION OF INCOME IS SH OWN AT RS. 1,52,17,236/-. IN THE FACTS AND CIRCUMSTANCES ARISING OUT OF THE EXTE RNAL INFORMATION RECEIVED BY THE AO AND IN LIGHT OF THE APPARENT DIFFERENCE OF RS. 61,16,899/- BETWEEN THE RECEIPTS SHOWN IN THE RETURN OF INCOME AND DEPOSITS IN THE BANK ACCOUNT, PROCEEDINGS U/S. 147 OF THE ACT WERE INITIATED AND NOTICE U/S. 148 OF THE ACT WAS ISSUED ON 11.5.2006. IN RESPONSE TO THE STATUTORY NOTICE ISSUED U/S. 143(2) OF THE ACT, THE AR OF THE ASSESSEE APPEARED FROM TIME TO T IME AND FILED THE DETAILS AND INFORMATION CALLED FOR. MEANWHILE, THE LD. DIT(E), NEW DELHI VIDE OFFICE ORDER NO. 2 OF 2007 DATED 29.8.2007 ASSIGNED THE JURISDI CTION OVER THE CASE TO ADDL. DIT, RANGE-1, NEW DELHI. THUS, A FRESH NOTICE U/S. 143(2) AND 142(1) OF THE ACT ALONGWITH QUESTIONNAIRE DATED 24.9.2007 WERE ISSUED . IN RESPONSE TO THE SAME, THE AR OF THE ASSESSEE APPEARED FROM TIME TO TIME THEREAFTER, THE AO OBSERVED THAT ASSESSEE HAS FAILED TO FURNISH DOCUME NTARY PROOF WITH REGARD TO EITHER THE CONDUCT OF PUBLIC / PRIVATE FUNCTIONS CL AIMED TO BE ORGANIZED IN THE 5 COURSE OF ITS NORMAL ACTIVITY NOR HAS PROVIDED ANY PARTICULARS OF THE SOURCES OF CASH RECEIPTS FORMING A MAJOR CHUNK OF ITS INCOMING S. IN VIEW OF THE ABOVE, AO ALSO OBSERVED THAT, NOT ONLY DOES THE ACTIVITY AS S UCH ASSUME AN UNVERIFIABLE CHARACTER BUT, THE LACK OF EVIDENCE ON THE SOURCES OF THE CASH RECEIPTS / DONATIONS RAISES QUESTIONS ON THE NATURE OF ACCOUNT S MAINTAINED BY THE ASSESSEE. THEREFORE, THE AO HELD THAT ASSESSEE HAS FAILED TO JUSTIFY THE OBSERVANCE OF BASIC TENETS OF SECTION 2(15) GOVERNI NG THE CLAIM OF EXEMPTION, THE BENEFITS OF SECTION 11 & 12 WERE HELD NOT BE ALLOW ABLE TO THE ASSESSEE DURING THE PERIOD UNDER CONSIDERATION AND ACCORDINGLY THE ASS ESSEE WAS TREATED AS AN AOP AND THE EXCESS OF INCOME OVER EXPENDITURE, THER EFORE, RS. 13,03,859/- WAS TREATED AS TAXABLE INCOME AND DEPRECIATION CLAIM OF RS. 3,67,409/- WAS DISALLOWED BECAUSE THE ASSESSEE HAD ALREADY CLAIMED BENEFIT OF APPLICATION OF FUND IN REST OF THE ASSETS DECLARED AS WDV AT THE TIME OF ACQUISITION OF ASSETS AND AO ALSO NOT ALLOWED THE CLAIM OF EXPENDITURE OF RS. 6,601/- BEING DONATION PAID BEING TREATED AS AN AOP AND COMPLETED THE ASSE SSMENT AT RS. 16,77,869/- VIDE ORDER DATED 13.5.2010 PASSED U/S. 143(3)/147 OF THE INCOME TAX ACT, 1961. AGAINST THE ASSESSMENT ORDER DATED 13.5.2010, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUG NED ORDER DATED 25.7.2016 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY AL LOWING THE DEPRECIATION AND DONATION. 3. AGAINST THE IMPUGNED ORDER 25.7.2016 PASSED BY T HE LD. CIT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. DURING THE HEARING, LD. COUNSEL OF THE ASSESSEE HAS STATED THAT LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE ASSESSEE IS A CH ARITABLE INSTITUTION AND THE FINDINGS THAT THE ASSESSEE IS NOT ENTITLED FOR AN EXEMPTION U/S. 11 OF THE INCOME TAX ACT, 1961 WAS NOT JUSTIFIED. HE FURTHER STATED THAT THE CONCLUSION THAT THE 6 ASSESSEE HAD FAILED TO EXPLAIN THE CHARITABLE ACTI VITIES HAS BEEN ARRIVED BY DISREGARDING THE EVIDENCE ON RECORD AND THE FINDING S FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04 I.E. IMMEDIATELY PRECEDING YEAR S. HE FURTHER STATED THAT IT WAS ALSO NOT APPRECIATED BY THE LOWER AUTHORIT IES THAT THE ASSESSEE TRUST UNDISPUTEDLY HAS UTILIZED RS. 1,52,17,236/-; WHEREA S THE GROSS RECEIPTS WERE ALSO OF RS. 1,42,00,062/- AND AS SUCH EVIDENTLY THE RE WAS NO ESCAPEMENT OF ANY INCOME, HENCE, THE ASSESSMENT MADE OF RS. 16,77 ,870/- WAS UNTENABLE IN LAW AND DESERVE TO BE DELETED. IN SUPPORT OF HIS C ONTENTION, HE FILED A PAPER BOOK CONTAINING PAGES 1 TO 139 IN WHICH HE HAS ATTA CHED THE VARIOUS COPIES OF THE DECISIONS OF THE HONBLE HIGH COURTS AND THE HO NBLE SUPREME COURT OF INDIA AND STATED THAT THE ISSUE IN DISPUTE IS SQUAR ELY COVERED BY THE SAID DECISIONS. THE CASE LAWS RELIED BY THE LD. COUNSEL OF THE ASSESSEE ARE AS UNDER:- 1. COPY OF JUDGMENT IN THE CASE OF RANBAXY LABORATO RIES LTD. VS. CIT, REPORTED IN 336 ITR 136. 2. JET AIRWAYS INDIA LTD. REPORTED IN 331 ITR 236. 3. MOHINDER SINGH GILL REPORTED IN AIR 1978 PG. 851 . 4. 98 ITR 557 (ALL.) SHREE DWARKADHEESH CHARITABLE TRUST VS. CIT. 5. 128 ITR 456 (DEL.) CIT VS. ETERNAL SCIENCE OF MA NS SOCIETY. 6. 260 ITR 366 (GUJ) CIT VS. STHANAKVASI VARDHMAN V ANIK JAIN SINGH. 7. S.RM.M. CT. TIRUPPANI TRUST VS. CIT REPORTED IN 230 ITR 636. 8. SOLE TRUSTEE LOKA SHIKSHA TRUST VS. CIT REPORTED IN 101 ITR 234 AT PAGE. 237. 9. ACIT VS. SURAT CITY GYMKHANA (2008) 300 ITR 214 (SC) 7 6. LD. DR RELIED UPON THE ORDER OF THE LD. CIT(A) A ND STATED THAT LD. CIT(A) HAS PASSED A WELL REASONED ORDER WHICH DOES NOT NEE D ANY INTERFERENCE ON MY PART AND REQUESTED THAT THE APPEAL OF THE ASSESSEE MAY BE DISMISSED. 7. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS SPECIALLY THE ORDER OF THE LD. CIT(A) AND THE CASE LAWS RELIE D UPON THE LD. COUNSEL OF THE ASSESSEE AS WELL AS THE PAPER BOOK FILED BY THE ASS ESSEE. I FIND THAT THE ASSESSEE IS A CHARITABLE INSTITUTION BEING A TRUST. THE ASSE SSEE TRUST CAME INTO EXISTENCE UNDER A DEED OF TRUST EXECUTED ON 06.11.2002 (PG. 4 - 13 OF PB) AND THEREAFTER A SUPPLEMENTARY DEED WAS EXECUTED ON 27.03.2003 (PG . 14 - 16 OF THE PB). FOR THE SAKE OF CONVENIENCE, I AM REPRODUCING THE OBJEC TS OF THE TRUST WHICH READ AS UNDER:- 'AS PER THE TRUST DEED THE OBJECTS OF THE TRUST ARE : (SEE PG. 5) THE TRUST IS CREATED FOR CARRYING OUT ALL THE FOLLO WING OBJECTS OF THE PUBLIC CHARITY AND FOR THE BENEFITS OF ALL INDIANS WITHOUT ANY DISCRIMINATION OF CASTE, COLOUR, CREED, SECT, SEX, AGE AND/OR OTHER NATURAL OR MANMADE DIFFERENCES: B) TO PROMOTE AND CARRY OUT DIRECTLY OR INDIRECTLY RESEARCH INTO SCIENTIFIC, CULTURAL AND SPIRITUAL HERITAGE OF INDI A. C) TO PROMOTE AND CARRY OUT DIRECTLY OR INDIRECTLY RESEARCH ORIENTED STUDY OF INDIAN HISTORY AND CIVILIZATION. D) TO CONVEY AND SPREAD KNOWLEDGE AND INFORMATION R EGARDING (A) AND (B) ABOVE THROUGH ALL MEDIA INCLUDING ELECT RONIC MEDIA AND SATELLITE AND TELEVISION CHANNELS EITHER OWNED BY T HE TRUST OR THROUGH MEDIA CHANNELS OWNED BY OTHERS'. 8 THE OBJECTS INCIDENTAL OR ANCILLARY TO THE ATTAINME NT OF THE MAIN OBJECTS, AMONGST OTHERS AS PER THE TRUST DEED, INTE R ALIA INCLUDES, (PG. 65) A) TO START, PURCHASE, RUN ON OWNERSHIP/LEASE/RENT/ TIME- SHARING BASIS, A SATELLITE TELEVISION CHANNEL AND T O CREATE THE NECESSARY INFRASTRUCTURE FOR THIS. B) PUBLISH VIDEO CASSETTES, CDS,. DVDS, MULTIMEDIA PRESENTATIONS, BOOKS. JOURNALS AND NEWSPAPERS OR MA INTAIN WEBSITES. C) ARRANGE TO HOLD WORKSHOPS, LECTURES, CLASSES. SY MPOSIA, DECLAMATION CONTESTS, MEETINGS, SEMINAR, CONFERENCE S, EDUCATIONAL AND BHARAT DARSHAN TOURS. CULTURAL AND SPORTS MEETS ETC., 7.1 I FURTHER FIND THAT THE ASSESSEE TRUST SOUGHT R EGISTRATION U/S 12A OF THE INCOME TAX ACT WHICH HAD DULY BEEN GRANTED BY AN OR DER DATED 19.02.2003 (PG.17) OF THE DIRECTOR OF INCOME TAX (EXEMPTION) N EW DELHI. THE ASSESSEE HAD ALSO SOUGHT A CERTIFICATE ULS 80G(5)(VI) OF THE ACT WHICH TOO WAS GRANTED ON 19.02.2003 (PG. 18 OF THE PB). FOR THE AY 2003-04, I.E. THE IMMEDIATELY PRECEDING YEAR WHEN THE TRUST CAME INTO EXISTENCE, IT HAD FILED ITS RETURN OF INCOME SHOWING AN EXCESS OF RECEIPTS OVER EXPENDITU RE OF RS. 26~ (PG. 27). THE SOURCE OF RECEIPTS WAS EITHER CORPUS DONATION OR OT HERS DONATION I.E. OTHER THAN CORPUS DONATION AND AN INCOME FROM INTEREST OF RS. 14,966/-. THE AO MADE AN ORDER U/S 143(I) OF THE ACT, AND EXCESS OF RECEIPTS OVER EXPENDITURE WAS NOT BROUGHT TO TAX IN VIEW OF THE PROVISIONS OF SECTION II, WHICH PROVIDES THAT ANY INCOME OF A TRUST IS NOT TO BE INCLUDED IN THE TOTA L INCOME. AND FOR THE AY 2004-05, THE ASSESSEE HAD LIKEWISE FURNISHED ITS RE TURN OF INCOME ON 9 31.10.2004, DECLARING SIMILARLY NIL INCOME. PERUSAL OF THE INCOME AND EXPENDITURE ACCOUNT (PG. 51) SHOWS THAT FOR THE INS TANT ASSESSMENT YEAR, IT HAD RECEIVED A CORPUS DONATION OF RS. 1,41,93,101/-AND OTHERS OF RS. 2,808/-I.E. TOTAL RECEIPTS AGGREGATED TO RS. 1,42,00,062/-. AFT ER INCURRING THE EXPENDITURE THE NET SUM REPRESENTED EXCESS OF RECEIPTS OVER EXP ENDITURE WHICH AGGREGATES TO RS. 13,03,859/-, AS AGAINST A SUM OF RS.26,51,305.9 5 OF THE PRECEDING ASSESSMENT YEAR AND BROUGHT TO TAX THE EXCESS OF IN COME OVER EXPENDITURE WHICH AGGREGATED TO RS. 13,03,859/- WHICH WAS FAR LESS TH AN 15% OF ITS GROSS RECEIPTS WHICH WAS OTHERWISE IS A CAPITAL RECEIPT. IN DOING SO HE HAS FAILED TO APPRECIATE THAT THE ASSESSEE IS A TRUST AND THE RECEIPT IS BY WAY OF CORPUS DONATION, WHICH CORPUS DONATION IS NOT INCOME. IT IS WELL SETTLED T HE AMOUNT OF CORPUS DONATION IS NOT AN INCOME, AS HAS BEEN HELD IN 98 ITR 557 (ALL. ) SHREE DWARKADHEESH CHARITABLE TRUST VS. CIT. IN VIEW THEREOF THE EXCE SS OF RECEIPT WHICH IS NOT AN INCOME COULD NOT HAVE BEEN BROUGHT TO TAX UNDER ANY CIRCUMSTANCES. THE MERE FACT THAT THE ENTIRE CAPITAL RECEIPT HAS NOT BEEN U TILIZED WHICH IS NOT IN THE NATURE OF INCOME UNUTILIZED SUM CANNOT BE HELD AS INCOME. 7.2 I FURTHER FIND THAT ASSESSEE HAD RECEIVED A COR PUS DONATION OF RS. 1,41,93,101/- OUT OF AGGREGATE RECEIPT OF RS. I,42 ,00,062/-. IN FACT IT WAS FROM SUCH RECEIPTS, THE ASSESSEE HAD APPLIED SUCH CORPUS DONATION TO ACHIEVE ITS OBJECTS, WHEN IT WAS ONLY INCURRED EXPENSES AND NO INCOME HAS BEEN EARNED. THUS IT IS IN THE FIRST INSTANCE SUBMITTED THE REST RICTED IS NOT TAXABLE. IT IS A MATTER OF RECORD THE ASSESSEE HAS NO SOURCE OF INCOME OTHE R THAN OF RS. 6961/- (2808 + 4153) (SEE PG. 51) HE HAS ERRED IN BRINING TO TAX T HE EXCESS OF RECEIPTS OVER EXPENDITURE AS INCOME, WHICH HAS BEEN ADOPTED BY HI M AT RS. 1303859/-AND IN ANY CASE AS WOULD BE SEEN, AS HAS BEEN PROVIDED U/S 11(1) (A) OF THE ACT, INCOME DERIVED FROM PROPERTY HELD UNDER TRUST ONLY IN EXCE SS OF 15% OF THE INCOME OF THE PROPERTY, IF NOT APPLIED FOR CHARITABLE PURPOSES IS TO BE INCLUDED TO THE TOTAL 10 INCOME . IN FACT AT PAGE 34 IT WOULD BE SEEN THAT T HE AO HAD MISREAD THE AUDIT REPORT THE GROSS RECEIPTS WAS SHOWN AT RS. 1,42,00, 062/- AND THE AMOUNT OF UTILIZATION WAS REFLECTED AT RS. 1,52,17,236/- WHIC H WAS ALSO REFLECTED AT RS. 1,52,17,236/- WHICH WAS THE SUM OF UTILIZATION AND WAS CLAIMED EXEMPT. (SEE PG. 32) SECTION II (I )(A) OF THE ACT READS AS UNDE R: '11 (I) SUBJECT TO THE PROVISIONS OF SECTIONS 60 T O 63, THE FOLLOWING INCOME HALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PRE VIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME- (A) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA; AND, WHERE ANY SUCH INCOME IS AC CUMULATED OR SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FROM SUCH PROPERTY' 7.3 THUS IN THE INSTANT CASE, THE INCOME OF THE ASS ESSEE ON THE RECEIPT SIDE AS HAS BEEN REFLECTED IN THE INCOME AND EXPENDITURE AC COUNT AGGREGATED TO RS. 1,42,00,062/- AND AS SUCH IN NO CASE 15% THEREOF I. E. RS. 35,50,155/- COULD NOT BE INCLUDED IN THE TOTAL INCOME. IN THE INSTANT CASE THERE WAS ONLY AN EXCESS OF INCOME OVER EXPENDITURE OF RS. 13,03,859/-, WHIC H IS FAR LESS THAN RS. 21,30,009/-. IN FACT THE LEARNED CIT(A) HAS UPHELD THE ASSESSMENT AS IN HIS OPINION ASSESSEE HAS NOT 'CARRIED OUT' ANY CHARITAB LE ACTIVITY, WHICH IT IS SUBMITTED IS ENTIRELY MISCONCEIVED. IN FACT THERE I S NO INCOME DERIVED BY THE ASSESSEE. HAD THERE BEEN AN INCOME, ONLY THAN SUCH A QUESTION COULD HAVE BEEN ARISEN. IN FACT THE AFORESAID SUM HAS BEEN HELD TO BE INCLUDED IN THE TOTAL INCOME SINCE THE CIT(A) HAS RECORDED A FINDING THAT THE AS SESSEE HAD NOT ESTABLISHED THAT IT IS ENGAGED IN CHARITABLE ACTIVITIES. IT IS SUBMI TTED, DESPITE THE FACT THAT 11 ASSESSEE BEING A TRUST, A CHARITABLE INSTITUTION, I TS INCOME IS TO BE COMPUTED U/S II OF THE ACT, THE AO WENT WRONG IN BRINGING TO TAX SU CH EXCESS OF RECEIPT OVER EXPENDITURE. IN THE INSTANT CASE IT IS AN UNDISPUT ED FACT THE GROSS RECEIPTS WHICH INCLUDES CORPUS DONATION, COULD NOT HAVE BEEN ASSES SED TO TAX WHICH WAS LESS THAN 15% (BEING SPECIFIED PERCENTAGE) WHICH AGGREGA TES TO RS. 21,30,009/-; WHEREAS IN THE INSTANT CASE IT IS ADMITTEDLY ONLY O F RS. 13,03,859/-, IN EXCESS OR RECEIPTS OVER EXPENDITURE AS SUCH THE AFORESAID SUM COULD NOT HAVE BEEN HELD IN ANY CASE IN THE CASE OF A CHARITABLE INSTITUTION AS INCOME LIABLE FOR AN ASSESSMENT. THE SUPREME COURT IN ITS JUDGMENT IN TH E CASE OF S. RM. M. CT. M. TIRUPPANI TRUST VS. CIT REPORTED IN 230 ITR 636 AT PAGE 641 HAS HELD AS UNDER: 'BEFORE WE CONSIDER THIS SUBMISSION, WE WOULD LIKE TO MAKE IT CLEAR THAT THE DEPARTMENT HAS NOT ADDRESSED TO US A NY ARGUMENT ON THE QUESTION, WHETHER RS. 8 LAKHS CONST ITUTE THE INCOME OF THE ASSESSEE FOR THE ASSESS MENT YEAR 197 0-71 OR NOT. BEFORE THE TRIBUNAL, ELABORATE ARGUMENTS HAD B EEN ADVANCED ON THIS ISSUE, AND THE TWO MEMBERS OF THE TRIBUNAL DIFFERED, NECESSITATING A REFERENCE TO A THIRD MEMB ER. THE HIGH COURT DID NOT ACCEPT THE MAJORITY VIEW THAT TH E AMOUNT SHOULD BE TREATED AS INCOME FOR THE PURPOSE OF SECT ION I I. MR. HARISH CHANDRA, THE LEARNED COUNSEL APPEARING FOR T HE DEPARTMENT HAS. HOWEVER, STATED BEFORE US THAT THE SUM OF RS. 8 LAKHS DOES CONSTITUTE THE INCOME OF THE ASSES SEE-TRUST. BUT THIS INCOME WAS REQUIRED TO BE INVESTED IN THE GOVERNMENT SECURITIES IN VIEW OF THE DECLARATION FI LED BY THE ASSESSEE UNDER SECTION II (2). SINCE THE AMOUNT IS NOT SO INVESTED, THE BENEFIT OF SECTION II (I) CANNOT BE E XTENDED TO THE ASSESSEE. THIS IS THE ONLY SUBMISSION, WE HAVE TO C ONSIDER. 12 A MERE LOOK AT SECTION II (I) AND II(2) IS SUFFICIE NT TO DISPEL THIS ARGUMENT. UNDER SECTION II(I), EVERY CH ARITABLE OR RELIGIOUS TRUST, IRRESPECTIVE OF WHETHER IT HAS FIL ED A DECLARATION UNDER SECTION II(2) OR NOT, IS ENTITLED TO DEDUCTION OF CERTAIN INCOME FROM ITS TOTAL INCOME OF THE PREV IOUS YEAR. THE INCOME SO EXEMPT IS THE INCOME WHICH IS APPLIED BY THE CHARITABLE OR RELIGIOUS TRUST TO ITS CHARITABLE OR RELIGIOUS PURPOSES IN INDIA. IF THE ENTIRE INCOME IS SO APPL IED, THE ENTIRE EXEMPTED. IF THE ENTIRE INCOME IS NOT APPLI ED BUT SOME INCOME IS NOT APPLIED BUT SOME INCOME IS ACCUMULATE D BY SUCH A TRUST, THEN ALSO UNDER-SECTION 11(1)(A), SUC H ACCUMULATED INCOME TO THE EXTENT OF 25 PER CENT OF THE TOTAL INCOME (OR RS. 10,000, WHICHEVER IS HIGHER) WOULD B E EXEMPTED FROM INCOME-TAX. SECTION 11(2), IN TURN, P ROVIDES THAT THE RESTRICTION WHICH IS SPECIFIED IN CLAUSE ( A) OF SUB- SECTION (1) AS REGARDS ACCUMULATION, SHALL NOT APPL Y IF THE ASSESSEE GIVES NOTICE AS PRESCRIBED UNDER SECTION I I (2)(A) AND INVESTS THE AMOUNT ACCUMULATED IN THE GOVERNMENT SE CURITIES AS PER SECTION 11 (2)(B). THE RESTRICTION SPECIFIED IN CLAUSE (A) OF SUB-SECTION (1) IS CLEARLY THE RESTRICTION OF25 PER CENT OF THE ACCUMULATED INCOME (OR RS. 10,000, WHICHEVER IS HIG HER) BEING EXEMPT. IF MORE THAN 25 PER CENT (OR RS. 10, 000) IS TO BE EXEMPTED THEN THE ASSESSEE HAS TO COMPLY WITH TH E CONDITIONS PRESCRIBED UNDER SECTION 11(2). IN THE C ASE OF ADDL. CIT V. A.L.N. RAO CHARITABLE TRUST [19951 2161TR 69 7/83 TAXMAN 252, THIS COURT CONSIDERED THE PROVISIONS OF SECTION 11(1)(A) IN THE LIGHT OF SECTION 11(2) AND HELD THA T SECTION 11(2) 13 DOES NOT IN ANY MANNER RESTRICT THE OPERATION OF SE CTION II (I). THE ACCUMULATED INCOME WHICH IS EXEMPT UNDER SECTIO N II (I LEA) NEED NOT BE INVESTED IN THE GOVERNMENT SECURIT IES. IT IS ONLY IN RESPECT OF ANY ADDITIONAL ACCUMULATED INCOM E BEYOND 25 PER CENT THAT, IF THE ASSESSEE WANTS EXEM PTION OF THIS ADDITIONAL ACCUMULATED INCOME ALSO, THE ASSESS EE IS REQUIRED TO INVEST THE ADDITIONAL ACCUMULATED INCOM E IN THE MANNER LAID DOWN IN SECTION II(2) AFTER FOLLOWING T HE PROCEDURE LAID DOWN THEREIN. ' 7.4 I NOTE THAT AT THE RELEVANT TIME THE SPECIFIED PERCENTAGE WAS 25% OR RS. 10,000/- WHICHEVER IS HIGHER. HOWEVER BY THE FINANC E ACT 2002 W.E.F. 01.04.2003 IT IS ONLY IN EXCESS OF 15% WHICH COULD BE TAXED, WHICH IN THE INSTANT CASE IS ONLY OF RS. 13,03,859/- AND THAT TOO NOT OU T OR ANY INCOME BUT FORM THE CORPUS DONATION WHICH IS NOT AN INCOME. IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED VIEW THAT ASSESSEE HAS RECEIVED AND REFL ECTED IN THE BOOKS THE CORPUS DONATIONS, WHICH HAS NOT BEEN DISPUTED BY TH E AO AS CORPUS DONATION TO THE TRUST, IT BEING NOT THE INCOME AND IN ANY EXCES S OF RECEIPTS OVER EXPENDITURE WHICH IS LESS THAN 15% OF RECEIPT CANNOT ANY STRETC H BE BROUGHT TO TAX. IT IS ALSO NOT A CASE WHERE THERE WAS ANY INCOME FROM ANY SOUR CE AND HENCE THE AO HAS ERRED IN FAILING TO APPRECIATE THAT IN ANY CASE IT BEING A TRUST, THE EXCESS OF INCOME OVER EXPENDITURE SINCE DID NOT EXCEED 15% OF THE RECEIPT, THE SAME I.E. RS. 13,03,859/- IS NOT A PART OF TOTAL INCOME AS IS STATUTORILY PROVIDED AND LASTLY 14 THAT THE ASSESSEE BEING A TRUST THE CORPUS DONATION IS NOT TAXABLE AND IN THE ABSENCE OF ANY INCOME OF THE TRUST INCOME ASSESSED IS CONTRARY TO THE PROVISIONS OF SECTION 5 OF THE I.T. ACT. I ALSO NOTE THAT LOW ER AUTHORITIES HAS OVERLOOKED THAT THE ASSESSEE ADMITTEDLY IS A CHARITABLE INSTITUTIO N AND HAVE BEEN FORMED WITH THE CHARITABLE OBJECTS AND THAT IS HOW REGISTRATION U/S. 12A OF THE ACT WAS GRANTED. IN THE INSTANT YEAR THE ASSESSEE TRUST IN THE ABSENCE OF CORPUS DONATION WHICH IS NOT AN INCOME APPLIED SUCH CORPUS DONATIO N TO ACHIEVE THE AIMS AND OBJECTS OF THE TRUST. IT IS A CASE WHERE IT WOULD B E SEEN THAT WHAT THE AO HAD TAXED WAS A CAPITAL RECEIPT AND OTHERWISE TOO EVEN IF THE SAME WAS HELD TO BE INCOME THEN TOO THE EXCESS OF RECEIPTS WAS THAN 15 % OF RECEIPTS AND IN THE ABSENCE OF THERE BEING ANY INCOME SUCH EXCESS IS O UTSIDE THE SCOPE OF TOTAL INCOME. I FURTHER NOTE THAT LD. CIT(A) AT PAGE NO. 5 IN PARA NO. 6 OF HIS IMPUGNED ORDER HAS OBSERVED THAT ASSESSEE TRUST HAS CARRIED OUT EXTENSIVE RESEARCH ON TOPICS RANGING FROM INDIAS EDUCATIONAL SYSTEMS, IN DIAS SCIENTIFIC ACHIEVEMENTS, INDIAN PHILOSOPHY, INDIA MUSIC AND DANCES AND TRAVE L IN INDIA WITH A VIEW TO DEVELOP PROGRAMME CONTENT FOR LECTURES AND WORKSHOP S, TV PROGRAMMES ON DIGITAL VIDEO TAPES AS WELL AS FOR PUBLISHING CONTE NT THROUGH PRINT PLATFORM LIKE JOURNALS ETC. NUMEROUS WORKSHOPS AND LECTURES WERE ORGANIZED ALL OVER INDIA, YET WENT ON TO HOLD IT IS NOT ENGAGED IN ANY CHARIT ABLE ACITIVITY, WHICH IS CONTRARY TO THE JUDGEMENT OF THE HONBLE SUPREME COURT OF IN DIA IN THE CASE OF SOLE 15 TRUSTEE LOKA SHIKSHA TRUST VS. CIT REPORTED IN 101 ITR 234 AT PAGE 237. I ALSO NOTE THAT IN THE PECEDEING YEAR NOR IN THE SUCCEEDI NG YEAR ANY INCOME BY WAY OF DONATION, HAD BEEN BROUGHT TO TAX. HENCE, THE AS SESSMENT MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) IS NOT TENABLE AND HENCE, THE SAME ARE CANCELLED AND APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/08/2017. SD/- [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE17/08/2017 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES