Atmeeya Yathra, Thiruvalla V. The ITO, Thiruvalla

ITA 527/COCH/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96785 (ITAT-COCHIN)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-11-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 17-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHANTAM BOSE
• Assessee Lawyers: VENKITACHALAM
• Keywords: Charitable institution; Opportunity of being heard; Question of law
• Section: 143(3); 12A; 12AA; 263; 11

Judgement Text

ITA NO . 527/C/201 4 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI B P JAIN , A M & G EORGE GEORGE.K , J M ITA NO . 527/COCH/201 4 (ASST YEAR 2011 - 12 ) ATHMEEYA YATHRA MANJADI PO THIRUVALLA VS THE INCOME TAX OFFICER WARD 1 THIRUVLLA ( APPELLANT) (RESPO NDENT) PAN NO. AAATA2143A ASSESSEE BY SH M S VENKITACHALAM REVENUE BY SH SHANTAM BOSE, CIT - DR DATE OF HEARING 2 ND NOV 2015 DATE OF PRONOUNCEMENT 4 TH NOV 2015 OR D ER PER GEORGE GEORGE. K. J M: THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE , IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER PASSED U/S 263 OF THE ACT (ORDER DATED 11.11.2014). THE RELEVANT ASSESSMENT YEAR IS 2011 - 12. 2 THE ISSUES THAT ARE RAISED IN THIS APPEAL ARE TW OFOLD NAMELY ; I) W HETHER THE ORDER PASSED U/S 263 OF THE ACT IS VALID; II) W HETHER THE CI T INVOKING POWER U/S 263 OF THE ACT IS JUSTIFIED IN DIRECTING THE AO NOT TO ALLOW A SUM OF RS. 2,90 CRORES AS APPLICATION OF INCOME, BEING THE AMOUNT PAID BY THE ASSESSEE TRUST TO ST THOMAS EDUCATIONAL TRUST. 3 BRIEFLY STATED FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS A CHARITABLE AND RELIGIOUS TRUST . IT IS REGISTERED U/S 12A OF THE I T ACT W.E.F 17.2.1988. FOR THE AY 2011 - 12, THE RETURN OF INCOME WAS FILED BY THE ITA NO . 527/C/201 4 2 ASSESSEE TRUST SHOWING NIL INCOME C LAIMING EXEMP TION U/S 11 OF THE ACT. THE ASSESSEE , WHILE ARRIVING AT NIL INCOME HAD SHOWN A PAYMENT OF RS. 2,90,00,000/ - AS APPLICATION OF INCOME. THIS AMOUNT OF RS. 2,90,00,000/ - WAS A PAYMENT MADE BY THE ASSESSEE TRUST TO M/S ST THOMAS EDUCATIONAL TRUST (ANOTHER CH ARITABLE SOCIETY). THE ASSESSMENT WAS TAKEN UP F OR SCRUTINY BY ISSUING NOTICE U/S 143(2) OF THE ACT. IN THE COURSE OF SCRUTINY ASSESSMENT , DETAILS WERE SUBMITTED WITH REGARD TO THE PAYMENT OF RS. 2,90,00,000/ - MADE BY THE ASSESSEE TRUST TO M/S ST THOMAS EDUCATIONAL TRUST. THE AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT VIDE ORDER DATED 19.2.2014 ASSESSING THE TOTAL INCOME AT NIL FOR THE RELEVANT ASSESSMENT YEAR. AS REGARDS THE CONCLUSION OF THE AO WITH REFERENCE TO THE APPLICATION OF INCOME OF R S. 2,90,00,000/ - , THE OBSERVATION WHILE CONCLUDING THE SCRUTINY ASSESSMENT ARE AS FOLLOWS: ' 3. ON VERIFICATION OF THE BOOKS OF ACCOUNT , IT IS NOTICED THAT DURING THE YEAR ; THE ASSESSEE HAS GIVEN AN AMOUNT OF RS. 2,90,00 , 000 / - TO SF . THOMAS EDUCATIONAL SOCI ETY AS DEPOSITS FOR HIGHER EDUCATION . THE BELIEVERS CHURCH OF INDIA HAS ENTERED INTO AN AGREEMENT ON 12/612010 WITH ST . THOMAS EDUCATION SOCIETY . AS PER THE AGREEMENT ST . THOMAS EDUCATION SOCIETY WILL PROVIDE ADMISSION TO 10 STUDENTS IN THE MANAGEMENT QUOTA NOMINATED BY THE BELIEVERS CHURCH OF INDIA FOR WHICH THE ASSESSEE TRUST HAS DEPOSITED AN AMOUNT OF RS.2, 90, 00, 0001 - . THE ADMISSIBILITY OF THE AMOUNT WAS DISCUSSED WITH THE AUTHORIZED REPRESENTATIVE . IN THIS CONNECTION , THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS CITED CIT(A)S DECISION IN THE CASE OF GOSPEL FOR ASIA, A TRUST COMING UNDER THE SAME CHURCH, EXTENDING LOAN TO M/S CHRIST EDUCATIONAL TRUST. AS PER CIT (A)S ORDER IN ITA NO22/TVLA/CIT(A)/TVM/13 - 14 DATED 16 /1/ 2014 FOR A . Y 2 010 - 11 , THE LO AN GIVEN BY GOSPEL FOR ASIA TO CHRIST EDUCATION TRUST IS CONSIDERED AS AN APPLICATION OF INCOME . HENCE, THE AMOUNT OF RS . 2,90,00 , 000 / - GIVEN AS DEPOS I T FOR H I GHER EDUCATION IS CONSIDERED AS APPLICATION OF INCOME AND THE RETURN OF INCOME IS ACCEPTED AND C OMPLETED AS UNDER . ' ITA NO . 527/C/201 4 3 4 SUBSEQUENTLY, T HE CIT ISSUED NOTICE U/S 263 OF THE A CT , DIRECTING THE AO TO RECTIFY THE ASSESSMENT ORDER COMPLETED ON 19.2.2014. ACCORDING TO THE CIT, THE AMOUNT PAID BY THE ASSESSEE TO M/S ST THOMAS EDUCATIONAL TRUST IS NOT APPLIC ATION OF INCOME AND THE ASSESSMENT ORDER ALLOWING THE SAME AS APPLICATION OF INCOME IS AN ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. VIDE ORDER DATED 11.11.2014, THE CIT SET ASIDE THE ASSESSMENT ORDER PASSED ON 19.2.2014 AND DIRECTING THE AO TO TAKE UP THE ASSESSMENT AFRESH AND NOT TO ALLOW THE PAYMENT OF RS. 2,90,00,000/ - TO M/S ST THOMAS EDUCATIONAL TRUST AS APPLICATION OF INCOME. THE RELE VA NT DIRECTION S OF THE CIT WHILE PASSING THE REVISIONARY ORDER U/S 263 READ AS UNDER: 6 . IN THE LIGHT OF THE FACT AND CIRCUMSTANCES ELABORATED IN THE FOREGOING PARAGRAPHS , THE FACTS EMERGES IS THAT THE SO - CALLED AGREEMENT STATED TO HAVE BEEN ENTERED INTO BETWEEN THE ASSESSEE TRUST AND MIS ST . THOMAS EDUCATION TRUST - THE TRUST FORMED BY THE TRUSTEES O F ERSTWHILE CARMEL EDUCATION TRUST IS A MERE AGREEMENT WITH AN OBJECTIVE TO FABRICATE FAVOURABLE EVIDENCE IN ORDER TO CIRCUMVENT TAXABILITY OF THE AMOUNT IN QUESTION . LIKEWISE, I AM SATISFIED THAT THE ASSESSEE TRUST HAS FAILED TO ADDUCE ANY PLAU SIBLE ACCO UNTS SUBSTANTIATING ITS CAUSE . IN THE LIGHT OF THE FACTS DELINEATED ABOVE , I AM INCLINED TO OBSERVE THAT THE ASSESSMENT FRAMED U/S 143(3) ON 19.02.2014 IN THE CASE OF THE ASSESSEE TRUST IS ERRONEOUS AND THEREBY PREJUDICIAL TO THE INTEREST OF THE REVENUE A ND HENCE NEEDS TO BE REVISED. THE ASSESSMENT ORDER PASSED U/S 1 43(3) DATED 19.02.2014 BY THE INCOME TAX OFFICER, WARD - 1, THIRUVALLA IN THE CASE OF ASSESSEE TRUST ( ATHMEEYA YATHRA) FOR THE ASSESSMENT YEAR 2011 - 12 IS HEREBY SET AS I DE AND THE AO IS DIRECTED T O TAKE - UP THE ASSESSMENT AFRESH TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES ELABORATED VIDE PARAGRAPH ABOVE. 5 THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS: ITA NO . 527/C/201 4 4 1 . THE LEARNED CIT ERRED IN CONCLUDING THAT ASSESSING OFFICER ' S ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2 . THE LEARNED CIT FAILED TO NOTE THAT THE ASSESSING OFFICER HAD CONSIDERED THE AGREEMENT BETWEEN ST . THOMAS EDUCATIONAL TRUST, AND ASSESSEE WHICH WAS PROVIDED AT THE TIME OF ASSES SMENT BEFORE THE ASSESSING OFFICER. 3 . THE LEARNED CIT ERRONEOUSLY CAME TO A CONCLUSION THAT THE ORDER OF THE ASSESSING OFFICER ALLOWING THE PAYMENT OF RS . 2 , 90,00,0001 - TO ST . THOMAS EDUCATIONAL TRUST AS APPLICATION OF INCOME WAS ERRONEOUS. ESPECIALLY SO SI NCE THE ASSESSING OFFICER HAS AT PARA 3 OF HIS ORDER MENTIONED ABOUT THE AGREEMENT AND APPLIED HIS MIND . 4 . THE LEARNED CIT ERRED IN CONCLUDING THAT THE ASSESSMENT ORDER WHICH RELIED ON CIT (APPEALS) ORDER IN RESPECT OF MIS . GOSPEL FOR ASIA, ANOTHER TRUST FO R AY 2010 - 11 WHICH HAD ALSO MADE A SIMILAR PAYMENT AND WHICH PAYMENT WAS CONSIDERED AS APPLICATION OF INCOME . THE VIEW OF THE CIT (APPEALS) WAS UPHELD BY HON ITAT COCHIN BENCH. 5 . THAT T H E PAYMENTS WERE I NTRICATELY CONNECTED TO MIS . BELIEVERS CHURCH INDIA, A NOTHER TRUST WAS CLEARLY MENTIONED IN THE AGREEMENT ENTERED BY ASSESSEE WITH ST . THOMAS EDUCATIONAL TRUST WHICH AGREEMENT WAS SPECIFICALLY MENTIONED AND STUDIED BY ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT . 6 . THE LEARNED CIT IS TRYING TO SUBSTITUTE A LAWFULLY CORRECT VIEW TAKEN BY THE ASSESSING OFFICER WITH THAT OF HIS OWN, BASED ON ASSUMPTIONS AND PRESUMPTIONS, PRESUMING THAT THE PAYMENTS EFFECTED BY THE ASSESSEE WERE PART OF OTHER EXTRANEOUS TRANSACTIONS OVER WHICH ASSESSEE HAD NO CONTROL OR KNOWLE DGE AND ALSO ERRONEOUSLY IMPUTING MOTIVES UNKNOWN TO ASSESSEE, ON THE ASSESSEE WITHOUT ANY CORROBORATION. 7 . LEARNED CIT (A) ERRED IN PASSING AN ORDER UNDER SECTION 263 ON ISSUE S TOTALLY ALIEN TO THE MATTERS MENTIONED IN THE SHOW CAUSE NOTICE . FOR THESE AND OTHER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING IT IS PRAYED THAT KINDLY QUASH THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX ULS 263 . ~ ~ 6 THE LD COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE GROUNDS RAISED. FURTHER IT WAS SUBMITTED BY THE LD COU NSEL THAT THE AMOUNT OF RS. 2.90 CRORES , WHICH WAS ADVANCED BY THE ASSESSEE TRUST TO ST THOMAS EDUCATIONAL TRUST , IS AN AMOUNT FOR SECURING SEATS EVERY YEAR IN THE ENGINEERING COLLEGE OWNED BY ST THOMAS EDUCATIONAL T R UST. IT WAS SUBM ITTED THAT THIS IS A VALUABLE RIGHT OBTAINED ITA NO . 527/C/201 4 5 BY THE ASSESSEE TRUST, WHICH ENSURES EDUCATIONAL GROW TH WHILE ALSO HELPING THE OBJECTS OF M/S ST THOMAS EDUCATIONAL SOCIETY ( A TRUST HAVING SIMILAR CHARITABLE OBJECTS). 6.1 THE LD DR, ON THE OTHER HAND SUBMITTED THAT IN ASSESSEES OWN SISTER CONCERN CASE , NAMELY ITO VS M/S BELIEVERS CHURCH INDI A AND ITO VS M/S GOSPEL FOR ASIA (ITA NO. 162 & 163/COCH/2014 ORDER DATED 12.12.2014), THE TRIBUNAL HAD REMANDED THE MATTER TO THE AO FOR D E - NOVO CONSIDERATION. THE LD DR WAS OF THE VIEW THAT THE SAME STAND IS TO BE TAKEN IN THE INSTANT CASE ALSO. 6. 2 IN THE REJOINDER, THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRIBUNAL IN THE CASES MENTION ED BY THE LD DR HAS REMITTED THE MATTER BACK TO THE AO FOR CONSIDERATION AFTER CONSIDERING THE IMPACT OF EXPLANATION TO SECTION 11(2 ) AND SECTION 11(3)(D) OF THE ACT , WHICH WAS INTRODUCED BY THE FINANCE ACT 2002 W.E.F 1.4.2003. THE LD AR FURTHER SUBMITTE D THAT THE AMOUNT OF RS. 2.90 CRORES , WHICH WAS ADVANCED TO M/S ST THOMAS EDUCATIONAL TRUST , HAVING SIMILAR OBJECTS , IS NOTHING BUT CURRENT YEAR S INCOME AND NOT ACCUMULATED INCOME AS PER THE PROVISIONS OF SEC. 11(2). IT WAS FURTHER SUBMITTED BY THE LD CO UNSEL THAT IN VIEW OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DIRECTOR INCOME TAX (EXEMPTION) VS BAGRI FOUNDATION REPORTED IN 344 ITR 0193, WHEN THE PAYMENTS ARE MADE TO OTHER CHARITABLE INSTITUTION , HAVING SIMILA R OBJECTS, OUT OF THE INCOME EARNED FOR THE CURRENT ASSESSMENT YEAR, THE SAME HAS TO BE ITA NO . 527/C/201 4 6 CONSIDERED AS APPLICATION OF INCOME. COPY OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF BAGRI FOUNDATION ( SUPRA ) IS PLACED ON RECORD. 7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDERED THE MATERIAL ON RECORD. THE TRIBUNAL IN THE CASE OF ASSESSEES OWN SISTER CONCERN (SUPRA) HAD REMITTED IDENTICAL ISSUE FOR DE - NOVO CONSIDERATION TO THE AO. THE TRIBUNAL, AFTER CONSIDERING THE IMPACT OF EXPLANATION TO S ECTION 11(2) AND SECTION 11(3)(D) OF THE ACT , INTRODUCED BY THE FINANCE ACT 2002 W.E.F 1.4.2003 , WAS OF THE VIEW THAT WHETHER THE AMOUNTS THAT ARE PAID TO OTHER CHARITABLE INSTITUTIONS HAVING SIMILAR OBJECTS CAN BE CONSIDERED AS APPLICATION OF INCOME, WA S NOT PROPERLY CONSIDERED BY THE AUTHORITIES BELOW. IN THE INSTANCE ALSO, THE AUTHORITIES BELOW HAVE NOT CONSIDERED THE ISSUE WHETHER THE AMOUNTS THAT ARE PAID TO ST THOMAS EDUCATIONAL TRUST IS H IT BY THE EXPLANATION TO SEC. 1 1(2) AND SEC. 11(3 ) (D). THE RELEVANT FINDINGS OF THE TRIBUNAL, IN THE CASE OF THE ASSESSEES SISTER CONCERN FOR READY REFERENCE, ARE REPRODUCED HEREUNDER : 6. EXPLANATION TO SECTION 11(2) AND CLAUSE (D) OF SECTION 11(3) INSERTED BY FINANCE ACT, 2002 WITH EFFECT FROM 01 - 04 - 2003 SAYS THAT INCOME WHICH WAS ACCUMULATED AS PROVIDED IN SECTION 11(2) IF CREDITED OR PAID TO ANOTHER TRUST OR INSTITUTION REGISTERED U/S 12AA OR APPROVED U/S 10(23C) SHALL BE 7 ITA NO. 162 & 163/COCH/2014 DEEMED TO BE THE INCOME OF SUCH PERSON OF THE PREVIOUS YEAR IN WHICH SUCH CREDIT WAS MADE OR PAID AS TH E CASE MAY BE. SECTION 11(3A) EMPOWERS THE ASSESSING OFFICER TO ALLOW THE TRUST TO APPLY THE INCOME SO ACCUMULATED FOR OTHER CHARITABLE OR RELIGIOUS PURPOSE OTHER THAN THE ONE FOR WHICH THE SAME WAS ACCUMULATED OR SET APART. HOWEVER, PROVISO TO SECTION 11( 3A) MANDATES THAT THE ASSESSING OFFICER SHALL NOT ALLOW THE APPLICATION OF INCOME BY WAY OF PAYMENT OR CREDIT FOR THE PURPOSES REFERRED TO IN CLAUSE (D) OF SUB SECTION (3) OF SECTION 11 OF THE ACT. THEREFORE, IN VIEW OF THE LATEST DEVELOPMENT OF LAW WITH E FFECT FROM 01 - 04 - 2003 IF THE INCOME IS PAID OR CREDITED TO ANOTHER ITA NO . 527/C/201 4 7 TRUST OR INSTITUTION EVEN THOUGH THEY ARE REGISTERED U/S 12AA OR APPROVED U/S 10(23C) OF THE ACT, THE SAME HAS TO BE TREATED AS INCOME OF THE ASSESSEE. 7. WE HAVE CAREFULLY GONE THROUGH TH E JUDGMENT OF THE DELHI HIGH COURT IN ACME EDUCATIONAL SOCIETY (SUPRA). THE ASSESSMENT YEAR INVOLVED IN THE CASE BEFORE THE DELHI HIGH COURT IS ASSESSMENT YEAR 2005 - 06. THE ASSESSEE TRUST BEFORE THE DELHI HIGH COURT GAVE A LOAN OF RS.90,50,000 TO ANOTHER E DUCATIONAL SOCIETY, WHOSE PRESIDENT WAS BROTHER OF THE ASSESSEE SOCIETYS PRESIDENT BEFORE THE DELHI HIGH COURT. THE DEPARTMENT CONTENDED THAT THERE WAS A VIOLATION OF SECTION 11(1)(D) R.W.S. 11(5) OF THE ACT SINCE THE AMOUNT WAS ADVANCED TO ANOTHER SOCIET Y. THE DELHI HIGH COURT FOUND THAT THE ADVANCE OF RS.90,50,000 TO NAVBHARAT EDUCATION 8 ITA NO. 162 & 163/COCH/2014 SOCIETY CANNOT BE CONSTRUED AS INVESTMENT OR DEPOSIT, THEREFORE, SUCH ADVANCE DOES NOT VIOLATE SECTION 11(1)(D) R.W.S. 11(5) OF THE INCOME - T AX ACT SINCE THE SAME CANNOT BE TREATED EITHER AS INVESTMENT OR AS DEPOSIT. APPARENTLY, THE PROVISIONS OF EXPLANATION TO SECTION 11(2) AND SECTION 11(3)(D) WHICH WAS INSERTED BY FINANCE ACT, 2002 WITH EFFECT FROM 01 - 04 - 2003 WAS NOT BROUGHT TO THE NOTICE O F THE DELHI HIGH COURT, THEREFORE, THE DELHI HIGH COURT HAD NO OCCASION TO CONSIDER THE IMPLICATIONS OF EXPLANATION TO SECTION 11(2) AND SECTION 11(3)(D) OF THE ACT. SIMILARLY, THE ATTENTION OF THE LUCKNOW BENCH OF THIS TRIBUNAL WAS NOT DRAWN TO THE PROVIS IONS OF EXPLANATION TO SECTION 11(2) AND SECTION 11(3)(D) OF THE ACT IN THE CASE OF KANPUR SUBHASH SHIKSHA SAMITI (SUPRA). THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE JUDGMENT OF THE DELHI HIGH COURT IN ACME EDUCATION SOCIETY (SUPRA) AND THE DECISION OF THE LUCKNOW BENCH OF THIS TRIBUNAL IN KANPUR SUBHASH SHIKSHA SAMITI (SUPRA) MAY NOT BE APPLICABLE TO THE FACTS OF THIS CASE. 8. BOTH THE AUTHORITIES BELOW HAVE FAILED TO CONSIDER THE PROVISIONS OF EXPLANATION TO SECTION 11(2) AND SECTION 11(3)(D) OF THE ACT. THE ASSESSING OFFICER PROCEEDED ON THE FOOTING THAT THERE WAS A VIOLATION OF SECTION 11(5) OF THE ACT SINCE THE INCOME OF THE ASSESSEE WAS NOT DEPOSITED IN THE FORM AND MODE PRESCRIBED IN SECTION 11(5) OF THE ACT. THE CIT(A), HOWEVER, PROCEEDED ON THE PRESUMPTION THAT ADVANCING MONEY TO 9 ITA NO. 162 & 163/COCH/2014 OTHER CHARITABLE INSTITUTION DOES NOT AMOUNT TO INVESTMENT OR DEPOSIT. THE FACT THAT THE PAYMENT OR CREDIT TO OTHER TRUST IS PROHIBITED BY EXPLANATION TO SECTION 11(2) AND S ECTION 11(3)(D) WAS NOT CONSIDERED BY BOTH THE AUTHORITIES BELOW. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED IN THE LIGHT OF THE LAW BROUGHT IN THE STATUTE BOOK BY FINANCE ACT, 2002 WITH EFFECT FROM 2003 INSERTING EXPLANATION TO SECTION 11(2) AND SECTION 11(3)(D) OF THE ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT BY REMANDING BACK THE MATTER, THE ASSESSEE ALSO WOULD GET AN OPPORTUNITY TO EXPLAIN THE ITA NO . 527/C/201 4 8 IMPLICATION OF THE PROVISIONS OF EXPLANATION TO SECTION 11(2) AND SECTION 11(3)(D) AS INSERTED BY FINANCE ACT, 2002 WITH EFFECT FROM 01 - 04 - 2003 BEFORE THE ASSESSING OFFICER. THEREFORE, IN THE INTEREST OF JUSTICE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER IN THE LIGHT OF THE PROVISIONS OF EXPLANATION TO SECTION 11(2) AND SECTION 11(3)(D) OF THE ACT AS INTRODUCED BY FINANCE ACT, 2002 WITH EFFECT FROM 01 - 04 - 2003. ACCORDINGLY, THE ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE IN BOTH THE APPE ALS AND THE ISSUE OF EXEMPTION U/S 11 IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE AFRESH IN THE LIGHT OF THE EXPLANATION TO SECTION 11(2) AND PROVISION OF SECTION 11(3)(D) OF THE ACT, AND THEREAFT ER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 10 ITA NO. 162 & 163/COCH/2014 9. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSE. 8 T HE LD AR HAS REFERRED TO THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF BAGRI FOUNDATION (SUPRA) WHEREIN IT WAS CATEGORICALLY HELD THAT UNDER SEC. 11(1)(A) , IF THE INCOME HAS BEEN DONATED OR GIVEN TO ANOTHER CHARITABLE TRUST, THE SAME WOULD TANTAMOUNT TO APPLICATION O F INCOME AND EXPLANATION TO SEC. 11(2) WILL HAVE APPLICATION ONLY FOR THE INCOME , WHICH IS ACCUMULATED IN EXCESS OF 15% U/S 11(2) AND NOT TO ACCUMULATION UPTO 15% U/S 11(1)(A) OF THE ACT. THE RELEVANT FINDINGS OF THE HONBLE DELHI HIGH COURT READ AS UNDE R: 16. THE EXPLANATION APPENDED AFTER SECTION 11(2) IS NOTHING BUT AN ADDITIONAL CONDITION ATTACHED TO ACCUMULATION IN EXCESS OF 15 PER CENT. PERMITTED UNDER SECTION 11(2). WE ARE UNABLE TO HOLD IT AS A CONDITION ON ACCUMULATION UP TO 15 PER CENT. AS PROVI DED FOR IN SECTION 11(1)(A) ALSO. WE ARE UNABLE TO FIND ANY RATIONAL CLASSIFICATION FOR IMPOSING THE RESTRICTION AS CONTAINED IN THE EXPLANATION TO THE ACCUMULATION OF UP TO 15 PER CENT. ALSO WHEN THERE IS NO SUCH RESTRICTION TO DONATING THE ENTIRE INCOME OF A YEAR TO ANOTHER CHARITABLE TRUST. IF THE LEGISLATURE INTENDED TO COMPLETELY BAN/ DISCOURAGE INTER SE DONATION BETWEEN TRUSTS, IT WOULD HAVE CHANGED THE POSITION AS EXISTING IN LAW AS NOTICED IN THE DIVISION ITA NO . 527/C/201 4 9 BENCH JUDGMENT OF THIS COURT IN CIT V. SHRI RAM MEMORIAL FOUNDATION [2004] 269 ITR 35 AFORESAID. THE LEGISLATURE DID NOT DO SO. EVEN AFTER THE INSERTION OF THE EXPLANATION, IF A TRUST DONATES ITS ENTIRE INCOME FOR A YEAR TO ANOTHER CHARITABLE TRUST, IT WOULD STILL BE ENTITLED TO EXEMPTION UNDER SECTION 11(1)(A). IT DEFIES LOGIC AS TO WHY SUCH DONATIONS CANNOT BE PERMITTED OUT OF 15 PER CENT. ACCUMULATION PERMITTED UNDER SECTION 11(1)(A) ITSELF. THERE IS, HOWEVER, RATIONALE FOR IMPOSING THE RESTRICTION AS CONTAINED I N THE EXPLANATION (SUPRA) TO ACCUMULATIONS IN EXCESS OF 15 PER CENT. SUCH ACCUMULATIONS, BUT FOR THE CONDITIONS IMPOSED IN SECTION 11(2) AND IN THE EXPLANATION AFORESAID, WOULD HAVE BEEN ELIGIBLE TO BE TAXED. ONE OF THE CONDITIONS IN SECTION 11(2)(A) IS TH AT THE PURPOSE FOR WHICH ACCUMULATION IN EXCESS OF 15 PER CENT. IS BEING MADE IS TO BE NOTIFIED ; ANOTHER CONDITION IS OF THE ACCUMULATION BEING PERMITTED FOR A PERIOD NOT EXCEEDING 10 YEARS ; YET ANOTHER CONDITION IS AS TO THE MODES IN WHICH THE ACCUMULAT ION CAN BE INVESTED. THERE ARE NO SUCH RESTRICTIONS ON ACCUMULATION UNDER SECTION 11(1)(A). THE SCHEME OF THE SECTION INDICATES THAT THE ADDITIONAL CONDITION BY WAY OF THE AFORESAID EXPLANATION IS ALSO INTENDED TO APPLY ONLY TO ACCUMULATIONS IN EXCESS OF 1 5 PER CENT. UNDER SECTION 11(2) AND NOT TO ACCUMULATIONS UP TO 15 PER CENT. UNDER SECTION 11(1)(A). THE EXPLANATION IS NOT FOUND TO BE INTENDED TO TAKE AWAY SOMETHING FROM THE ACCUMULATION UP TO 15 PER CENT. PERMITTED WITHOUT ANY CONDITIONS WHATSOEVER UNDE R SECTION 11(1)(A). 17. THE QUESTION OF LAW FRAMED IS ANSWERED ACCORDINGLY. 18. IT ALSO FOLLOWS THAT EVEN IF THE DONATIONS BY THE ASSESSEE HEREIN WERE TO BE OUT OF ACCUMULATIONS FROM THE PREVIOUS YEARS AND NOT OUT OF SURPLUS RESERVES, THE SAME WOULD STILL NOT BE LIABLE TO BE INCLUDED IN THE TOTAL INCOME AS ASSESSED BY THE INCOME - TAX OFFICER AND THE ORDER OF THE COMMISSIONER OF INCOME - TAX AND THE INCOME - TAX APPELLATE TRIBUNAL WOULD STILL BE UPHELD. IT IS NOBODY'S CASE THAT THE SAID ACCUMULATIONS WERE BEYOND THE ACCUMULATION OF 15 PER CENT. PERMITTED IN SECTION 11(1)(A). THE APPEAL IS ACCORDINGLY DISMISSED. NO ORDER AS TO COSTS. 9 THEREFORE, IN THE LIGHT OF THE ORDER S OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASES OF THE ASSESSEES OWN SISTER CONCERN AND THE JUDGMENT OF THE HON BLE DELHI HIGH COURT, CITED SUPRA, WE RESTORE THE ISSUE FOR DE - NOVO CONSIDERATION TO THE AO. THE AO SHALL EXAMINE WHETHER THE AMOUNT THAT WAS PAID TO ST THOMAS ITA NO . 527/C/201 4 10 EDUCATIONAL TRUST IS THE AMOUNT S PAID OUT OF THE CURRENT YEARS INCOME, WHICH IS NOT SET A PART/ ACCUMULATION , AS MANDAT ED UNDER SEC 11(2) OF THE ACT. THE AO SHALL GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND EXPEDITIOUSLY COMPLETE THE ASSESSMENT IN ACCORDANCE WITH LAW. IT IS ORDERED ACCORDINGLY. 10 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF NOV 2015 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 4 TH NOV 2015 RAJ* COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN