ADIT, New Delhi V. Indian Youth Centre Trust, New Delhi

ITA 5502/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69239 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-06-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 31-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAMUNA SEN
• Keywords: Capital asset; Business income; Depreciation; Charitable institution; Source of fund; Revenue expenditure; Capital expenditure
• Section: 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI T.S.KAPOOR, ACCOUNTANT MEMBER I.T.A .NO.-5502/DEL/2012 (ASSESSMENT YEAR-2009-10) ADIT, VS INDIAN YOUTH CENTRE, TC-II, VISHWA YUVAK KENDRA, NEW DELHI. CIRCULAR ROAD, CHANAKYAPURI, NEW DELHI. PAN-AAATI0141C (APPELLANT) (RESPONDENT) APPELLANT BY: MS. SHAMUNA SEN, DR. RESPONDENT BY: SH. VED JAIN AND RANO JAIN, CA ORDER PER DIVA SINGH, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 31.08.2012 OF CIT(A)-XXI, NEW DELHI PERTAINING TO 2009-10 ASSE SSMENT YEAR ON THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE EXEMPTIONS U/S 11 OF THE INCOME TAX ACT, 1961, WHICH WAS DENIED BY THE AO BECAUSE ASSES SEE EARNED PROFITS FROM COMMERCIAL ACTIVITIES WHICH IS CLEAR VIOLATION OF SECTION 11(1) AND 11(1)(B) OF THE I.T.ACT, 1961. 2. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING DOUBLE DEDUCTION ON AC COUNT OF CAPITAL EXPENDITURE ON PURCHASE OF FIXED ASSETS IN THE EARL IER YEARS AND THEN DEPRECIATION ON SAME ASSETS IN THE F.Y.2008-09 AS P ER THE COMPUTATION OF INCOME OF THE ASSESSEE. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR AMEN D ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESS EE FILED A RETURN DECLARING NIL INCOME AFTER ISSUANCE OF NOTICE U/S 143(2) ETC WAS SUBJECTED TO SCRUTINY ASSESSMENT. A PERUSAL OF THE ASSESSMENT ORDER SHOW S THAT THE ASSESSEE IS REGISTERED U/S 12A OF THE INCOME TAX ACT, 1961 VIDE REGISTRATION DATED I.T.A .NO.-5502/DEL/2012 2 15.05.1973. THE TRUST IS ALSO IN RECEIPT OF ORDER U /S 80G(5)(VI) VIDE DIT (EXEMPTION) DELHI ORDER DATED 02.12.2009 APPLICABLE FOR THE PERIOD COMMENCING FROM 2010-11 ASSESSMENT YEAR TO 2012-13 ASSESSMENT YEAR. THE AO RECORDS THAT THE OBJECTS OF THE SOCIETY AS PER ITS MEMORANDUM OF ASSOCIATION(MOA) ARE TO ESTABLISH, MAINTAIN AND CONDUCT ONE OR MORE NATIONA L OR INTERNATIONAL YOUTH CENTRES AT SUITABLE CENTRES IN INDIA FOR THE BENEFI T OF THE FOREIGN STUDENTS AND YOUTH DELEGATIONS AS WELL AS INDIVIDUALS VISITING I NDIA. THE SOCIETY ALSO SPONSORS PROGRAMMES FOR INTERACTION OF YOUTH LEADERS, YOUNG WORKERS AND STUDENTS ETC. 2.1. BEING OF THE VIEW THAT THE ASSESSEE IS NEITHER IN THE FIELD OF EDUCATION NOR IN THE FIELD OF MEDICAL RELIEF, THE AO CONSIDERING THE MAIN HEADS OF INCOME AND THE MAIN HEADS OF EXPENDITURE OBSERVED THAT THE ACT IVITIES ATTRACTED AMENDMENT IN SECTION 2(15) OF THE INCOME TAX ACT APPLICABLE W .E.F 2009-10 ASSESSMENT YEAR ONWARDS. AS THE MAIN SOURCE OF RECEIPTS WERE FROM HOSTEL/CANTEEN ACTIVITIES AND BOOKINGS OF THE AUDITORIUM AND CONFERENCE HALL, THE AO WAS OF THE VIEW THAT THESE ARE OF COMMERCIAL NATURE AND THE EXPENSES WER E CO-RELATING TO THESE SOURCES OF INCOME ONLY. THE PROVIDING OF FACILITIES ON HIR E ON DAY-TO-DAY BASIS TO ALL TYPES OF CUSTOMERS BY RUNNING HOSTEL/CANTEEN AND GI VING AUDITORIUM & CONFERENCE HALL ON HIRE ON COMMERCIAL LINES WAS CON SIDERED TO SATISFY THE REQUIREMENTS OF RUNNING A BUSINESS ON COMMERCIAL LI NES. THE AO OBSERVED THAT MAIN HEADS OF INCOME OF THE ASSESSEE WERE AS UNDER :- S.NO. ITEMS AMOUNT (IN RS.) 1. HOSTEL/CANTEEN ACTIVITIES 28,776,064 2. AUDITORIUM & CONFERENCE HALL 14,379,330 2.2. THE MAIN HEADS OF EXPENDITURE NOTED BY THE AO WERE AS UNDER :- S.NO. ITEMS AMOUNT (IN RS.) 1. EMPLOYEE/STAFF COST 7,676,857 2. HOSTEL/CANTEEN ACTIVITIES 4,147,031 3. TRAINING COURSES & SEMINARS 7,183,175 4. ELECTRICITY & WATER 1,442,410 5. DEPRECIATION 3,056,716 I.T.A .NO.-5502/DEL/2012 3 2.3. CONSIDERING THE LEGAL POSITION ON RENDERING SERVICE S IN LIEU OF CHARGES. THE AO WAS OF THE VIEW THAT THE ASSESSEE SATISFIED ALL THE FEATURES OF BUSINESS AS ITS NATURE OF ACTIVITIES INCLUDE PROVIDING CANTEEN SERVICES TO PERSONS USING HOSTEL ETC, THE PROFIT MOTIVE IS SATISFIED AS THE ACTIVITY IS NOT UNDERTAKEN MERELY FOR A SPORT AND PLEASURE AND INSTEAD THE PERSONS USING TH E FACILITIES ARE CHARGED BY THE ASSESSEE. SIMILARLY ANOTHER FEATURE OF BUSINESS IS THAT THE TRANSACTION SHOULD BE BETWEEN TWO PERSONS WHICH WAS ALSO SATISFIED. THE FREQUENCY OF TRANSACTION MADE IT IN THE NATURE OF BUSINESS AND IT ALSO HAD A TWIN ACTIVITY AS IT WAS RECIPROCAL SHOWED THAT THE RECEIPTS ARISING OUT OF THE ACTIVITY WHICH WERE IN THE NATURE OF BUSINESS OR COMMERCE ATTRACTED THE FIRST ACCORDINGLY FIRST PROVISO TO SECTION 2(15) AS THE ASSESSEES RECEIPTS WERE MORE THAN RS.10 LACS. 2.4. CONSIDERING THE REPLY OF THE ASSESSEE THAT THE FAC ILITIES ARE RESTRICTED ONLY TO MEMBERS, THE AO GOT THIS FACT VERIFIED FROM THE INS PECTOR IN O/O-ADIT(E), TRUST CIRCLE-II WHO WAS SENT ON 02.12.2011 TO THE PREMISE S OF THE ASSESSEE. THE REPORT OF THE INSPECTOR INCORPORATED IS EXTRACTED I N PARA 5.0 OF THE ASSESSMENT ORDER. 2.5. ACCORDINGLY IT WAS CONCLUDED THAT THE INSPECTORS REPORT SHOWS THAT ALL THE FACILITIES OF THE ASSESSEE WERE OPEN TO EVERYONE AN D WERE NOT RESTRICTED TO MEMBERS ONLY. IN VIEW OF THIS FACT, THE ASSESSEE W AS SHOW-CAUSED ON THE BASIS OF THE INSPECTORS REPORT TO EXPLAIN AS TO WHY IT WAS NOT HIT BY THE AMENDMENT IN SECTION 2(15) OF THE INCOME TAX ACT AND WHY EXEMPTI ON U/S 12A SHOULD NOT BE DENIED TO IT. THE REPLY OF THE ASSESSEE EXTRACTED BY THE AO IS REPRODUCED FROM PARA 5.2, 5.3, 5.4 & 5.5 WHICH ARE EXTRACTED FOR RE ADY-REFERENCE:- 5.2. THE INDIAN YOUTH CENTER TRUST IS MAINLY INTENDED TO BE MULTI PURPOSE IN CHARACTER FUNCTIONING AS MODEL YOUTH CENTRE FOR INT ELLECTUAL AND RECREATIONAL SERVICE TO YOUTH A COORDINATING AGENCY FOR YOUTH OR GANISATIONS; A CENTRE FOR BUILDING UP YOUTH; LEADERSHIP THROUGH A VARIETY OF PROGRAMMES AND A COUNSELING PROGRAMS AND COUNSELING BUREAU TO ADVISE ON VARIOUS PROBLEMS CONFRONTING YOUTH. THE TRUST DEED ALSO ENVISAGES PR OVIDING INTER ALIA ALL OR ANY OF THE FACILITIES AND CONDUCTS ANY OF THE ACTIV ITIES AS MENTIONED IN THE TRUST DEED (ALREADY SUBMITTED).FURTHER, TRUST IS AL SO PROVIDING FORMAL AND INFORMAL EDUCATION IN J.J. CLUSTERS FOR UNDER PRIVI LEGED BY WAY OF ADULT I.T.A .NO.-5502/DEL/2012 4 EDUCATION AND EDUCATION TO THE DROPOUT CHILDREN AND ARE ALSO PROVIDING MEDICAL RELIEF TO THE POOR BY ENGAGING DOCTORS AND PROVIDING DRUGS, VOCATIONAL EDUCATION TO THE UNEMPLOYED. THESE ARE B EING PROVIDED BY THE TRUST WITHOUT CHARGING ANY FEE AND OR CHARGES. THEREFORE, THE CANTEEN IS BEING USED ONLY BY THE OC CUPANTS OF THE HOSTEL BUT ALSO BY ALL THOSE WHO CAME TO ATTEND THE VARIOUS CO NFERENCES CONDUCTED IN THE VARIOUS FACILITIES CREATED IN THE YOUTH CENTRE INCL UDING THE AUDITORIUM. NATURALLY, THE PARTICIPANTS IS THAT THOSE WHO USED THE CANTEEN HAVE COME THERE ARE THOSE WHO HAVE COME TO THE YOUTH CENTRE CONNECT ED WITH THE ACTIVITIES CONDUCTED. HENCE AS A MATTER OF COURTESY THE CANTEEN STAFFS NO RMALLY DO NOT ABLE FOR THE IDENTIFICATION. THESE ARE PERHAPS THE REASON THAT I S WHY YOUR OFFICERS WHEN THEY VISITED THE CANTEEN WERE ENTERTAINED WITHOUT B EING QUESTIONED. 5.3. YOU WOULD ALSO APPRECIATE THAT THE YOUTH CENTER IS NOT LOCATED IN AN AREA OF ANY COMMERCIAL ACTIVITIES (SURROUNDED BY GO VT. QUARTERS, EMBASSIES I.E. SHANTIPATH, CHANAKYAPURI POLICE STATION AND MP FLATS) AND THEREFORE, IS NOT INTENDED TO BE RUN ON A COMMERCIAL ACTIVITY BA SIS. IT WOULD NOT BE OUT OF PLACE TO MENTION THAT THE GO VT. OF INDIA HAS ALSO ISSUED A CERTIFICATE (COPY OF THE SAME HAS ALREADY BEEN SU BMITTED) THAT THE HOSTEL RUN BY THE KENDRA IS INTENDED FOR CATERING TO THE YOUTH S, SCHOLARS AND PROFESSORS ON TEMPORARY BASIS ALSO IF THEY VISITS DELHI- YOUTH CENTER FOR ANY CONFERENCE / WORKSHOP ETC. OF THE TRUST. 5.4 AS REGARDS YOUR OBSERVATION THAT MEMBERS FOR HOSTE L ARE ADMITTED ON ARRIVAL BASIS IT MAY BE STATED THAT THERE IS NO INC ONGRUITY IN THAT SINCE THE HOSTEL IS MEANT ESPECIALLY FOR THE BENEFIT OF FOREI GN STUDENTS AND YOUTH DELEGATES AS WELL AS INDIVIDUALS VISITING INDIA ARE PARTICULARLY DELHI FROM OTHER PARTS OF INDIA TO ATTEND TO THE PROGRAMMES / WORKSHOP. 5.5 IN ADDITION TO THE ABOVE WE WOULD ALSO LIKE TO SUB MIT HERE THAT THE TOTAL RECEIPTS OF CANTEEN IS RS. 82.95 LACES WHICH INCLUD E RS. 61.19 LACES AGAINST THE WORKSHOP / SEMINAR IN WHICH BUFFET LUNCH WAS SE RVED TO PARTICIPANTS AND RS.13.14 LACES FOR THE PERSONNEL STAYED IN THE HOST ELS. BALANCE RS.8.62 LACES FROM OTHERS THAT INCLUDES FROM STAFF/STAFFS' GUEST/ TRUST GUEST (VIZ. AUDITORS, LOWERS, ARCHITECT, CONTRACTORS ETC) AND THOSE WHO H AD COME TO ATTEND SOME FUNCTION OR OTHER. THEREFORE, IT WOULD NOT BE POSSIBLE TO ASCERTAIN TH E AMOUNT OF CANTEEN COLLECTION FROM THOSE PERSONS WHO WERE NOT STAYED I N THE HOSTEL. IN ANY CASE IT IS BOUND TO BE VERY NEGLIGIBLE AND WITHIN PERMISSIB LE LIMITS OF SECTION 2(15) OF THE INCOME TAX ACT. FURTHER, IT CAN BE SEEN FROM TH E DOCUMENTS SUBMITTED THAT THE TRUST SERVES BUFFET MEALS DURING THE PROGRAM/WO RKSHOP CONDUCTED BY MEMBERS ORGANIZATIONS AND/OR DURING OWN PROGRAM AND WORKSHOP BUT NOT FOR ANY OTHER PURPOSES. THIS CAN BE REVIEWED FORM T HE RELATED DOCUMENTS ENCLOSED HEREWITH FOR YOUR KIND PERUSAL I.E. BILLS OF BUFFETS SERVED DURING WORKSHOP AND SEMINARS. FURTHER, WE ALSO LIKE TO SUBMIT THAT FOR THE BOOKIN G OF THE FACILITIES (BUFFET, AUDITORIUM, CONFERENCE HALL ETC.) OF THE TRUST, OFF ICIALS OF THE TRUST DESIGNATED FOR THE SAID PURPOSES (AT THE RANK OF MANAGER) ARE ONLY AUTHORIZED. HENCE, AS I.T.A .NO.-5502/DEL/2012 5 REGARD THE REMARKS MADE BY OUR CANTEEN STAFF THEY H AD MERELY GIVEN THE INFORMATION IN REGARD TO TARIFF RATE BOTH FOR VEGET ARIAN AND NON VEGETARIAN BUFFETS ARRANGEMENT. THERE IS NOTHING WRONG IN WHAT HAS BEEN STATED BY THEM AND NO WHERE THEY HAD COMMITTED THAT IT WILL BE SER VED ALSO FOR THE PURPOSES OTHER THAN THE OBJECTIVES OF THE ACTIVITIES FOR WHI CH IT WAS INTENDED. THEY HAD MERELY ANSWERED A QUERY. THEREFORE, IT WOULD BE INA PPROPRIATE TO CONCLUDE THAT WHAT THEY HAD STATED INVOLVE COMMERCIAL ACTIVI TIES. 2.6. HOWEVER THE SAID SUBMISSIONS WERE NOT ACCEPTED BY THE AO WHO WAS OF THE VIEW THAT NO DOUBT THE OBJECTS OF THE ASSESSEE ARE CHARITABLE BUT ITS ACTIVITIES ARE NO LONGER CHARITABLE AND ARE OF COMM ERCIAL NATURE AS THERE IS NO CHECK FOR RESTRICTING THE SERVICES TO THE MEMBERS O NLY AND THE FACILITIES ARE OPEN FOR EVERYONE. THE STATEMENT THAT THE CANTEEN STAF F DID NOT ASK FOR IDENTIFICATION OUT OF COURTESY WAS HELD TO BE INCORRECT. 2.6.1. SIMILARLY THE ARGUMENTS THAT IT WAS NOT LOCATED IN THE COMMERCIAL AREA WAS ALSO HELD TO BE NOT TENABLE. COGNIZANCE WAS TAKEN OF THE FACT THAT IT WAS ONE OF THE PRIME LOCATIONS AND THE VOLUME OF RECEIPTS DEMO NSTRATED THAT IT WAS REGULARLY VISITED BY CUSTOMERS. THE RELIANCE PLACED ON THE C ERTIFICATE ISSUED BY THE GOVERNMENT IN 1970S WAS HELD TO BE NOT RELEVANT AS THE ASSESSEE HAD DIVERTED ITS ACTIVITIES FROM ITS ORIGINAL TO PROFIT MOTIVE. THE EXAMPLE OF MAKING THE FACILITIES OF THE AUDITORIUM/CONFERENCE HALL AVAILABLE TO ENGI NEER INDIA LTD. ON RENT BASIS WAS CONSIDERED TO BE AN ACT OF BUSINESS AS NEITHER ENGINEER INDIA LTD. CONSTITUTED THE YOUTHS, SCHOLAR OR PROFESSOR VISITING DELHI AS IT WAS ONLY A CORPORATE ENTITY. 2.6.2. THE AO ALSO OBSERVED THAT THE PRODUCTION OF MEMBER SHIP LIST CALLED FOR WAS ONLY FROM 01.04.2008 TO 31.03.2009 AND COULD NO T BE REGARDED AS A MEMBERSHIP LIST. SIMILARLY A PERUSAL OF THE REVENU E, SUMMARY OF THE HOSTEL FROM 01.04.2008 TO 31.03.2009 ALSO MENTIONED VARIOUS AM OUNTS OF THE FEE RANGING FROM RS.50 TO RS.100 AND ALSO ODD TYPES OF FIGURES LIKE RS.1472 AND RS.2550/-. AS SUCH IT WAS CONCLUDED THAT THE ASSESSEE IS JUST WELCOMING ITS CUSTOMERS AND MOREOVER DID NOT MENTION ANY OF THE NAMES FOUND MEN TIONED IN FORM NO-26AS. I.T.A .NO.-5502/DEL/2012 6 2.6.3. A FURTHER PERUSAL OF THE SAME ALSO SHOWED THAT SOME OF THE TRANSACTIONS WERE WITH ENTITIES AS WAS EVIDENT FROM FORM NO.-26A S, THE SAME ARE REPRODUCED FOR READY-REFERENCE FROM THE ASSESSMENT ORDER:- FORM 26AS ENTRY AMOUNT PAID (RS.) AMWAY INDIA ENTERPRISES PRIVATE LTD. 33403 ENGINEERS INDIA LIMITED 143934 RURAL ELECTRIFICATION CORPORATION LIMITED 221106 THE ENERGY AND RESOURCES INSTITUTE 257792 CARE INDIA 57400 NAME OF CUSTOMER DATE OF TRANSACTION AMOUNT PAID (RS.) C/O VIETNAM EMBASSY 03.04.2008 3750 C/O TOSHNIWAL ENTERPRISES CONTROLS PVT. LTD. 05.04. 2008 29600 C/O WORLD EXPEDITION (INDIA) PVT. LTD. 07.04.2008 2 1800 C/O LANDMARK EDUCATION INDIA 26.04.2008 3650 C/O S I S INDIA LTD. 30.04.2008 14700 C/O IMT FARIDABAD 01.05.2008 3678 C/O ELECTRONIC MEDIA PVT. LTD. 11.05.2008 9750 C/O TRIPS TREKS & TOURS 27.06.2008 50100 C/O PROJECT CONCERN INTERNATIONAL 08.07.2008 9100 C/O PROVITI CONSULTING PRIVATE LIMITED 21.07.2008 1 4600 C/O TITAN ENERGY SYSTEMS LTD. 21.08.2008 3650 C/O MATRIX LABORATORIES LIMITED 07.10.2008 3700 C/O SPC MANAGEMENT SERVICES PVT. LTD. 05.11.2008 80 850 C/O MICROCOSM INTEGRATED SOLUTIONS (P) LTD. 19.11.2 008 273500 M/S FAIR TRADE FORUM-INDIA 24.11.2008 120690 C/O ASIANET 13.03.2009 7300 2.7. ACCORDINGLY, IT WAS CONCLUDED THAT TRANSACTIONS AR E WITH NON-MEMBERS AND THE OFFERING OF BUFFET MEALS ETC. IN THE AUDITORIUM /CONFERENCE HALL/HOSTEL ON RENT ON DAY-TO-DAY BASIS WAS CONSIDERED TO BE BUSIN ESS ACTIVITY. ACCORDINGLY, THE SUBMISSIONS THAT THE RECEIPTS ARE USED FOR OBJECTIV ES OF THE ASSESSEE WERE HELD TO BE NOT TENABLE. RELIANCE WAS PLACED UPON JALANDHAR DEVELOPMENT AUTHORITY VS. CIT, INDIAN CHAMBER OF COMMERCE VS CIT 1975 CTR (SC ) 271 AND ON PUNJAB URBAN PLANNING AND DEVELOPMENT AUTHORITY ORDER OF T HE CHANDIGARH BENCH OF THE TRIBUNAL TO HOLD THAT THE ASSESSEE CANNOT BE SA ID TO BE ENGAGED IN ANY CHARITABLE ACTIVITY AS ITS ACTIVITIES FALL WITHIN T HE PURVIEW OF THE TRADE, BUSINESS OR COMMERCE. RELIANCE WAS ALSO PLACED UPON SMALL MEDIU M EXPORTER VS I.T.A .NO.-5502/DEL/2012 7 DIT(EXEMPTION), DELHI BENCH OF THE TRIBUNAL AND THE JUDGEMENT OF THE HONBLE APEX COURT IN MCD VS CHILDREN BOOK TRUST (1992) 3 S CC 390. ACCORDINGLY IT WAS HELD THAT THE ASSESSEES CLAIM THAT IT WAS A CH ARITABLE INSTITUTION COULD NOT BE ACCEPTED AND A PROPOSAL FOR WITHDRAWAL OF REGISTRAT ION U/S 12AA HAD ALREADY BEEN MOVED AND THE ASSESSEE WAS TAXED AT THE RATE APPLIC ABLE TO AOP, AND TAXABLE INCOME OF THE ASSESSEE WAS COMPUTED AT RS.1,74,89,6 55/-. 3. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, TH E ASSESSEE FILED VARIOUS GROUNDS WHICH WERE SUBSEQUENTLY REVISED. IT IS ALS O SEEN THAT IN THE COURSE OF THE APPEAL PROCEEDINGS LETTER DATED 06.07.2012 WAS RECE IVED FROM THE AO WHICH IS EXTRACTED HEREUNDER FROM PARA 4 OF THE IMPUGNED ORD ER :- 'ASSESSMENT ORDER IN CASE OF INDIAN YOUTH CENTRE TR UST, PAN-AAAT10141C WAS MADE ON 29.12.2011 AND THE CASE WAS HIT BY AMENDMENT IN SEC.2(L5) OF THE IT ACT ON THE BASIS THAT ASSESSEE IS DOING COMM ERCIAL ACTIVITIES WHICH ARE COMMON TO ALL AND IS MAKING MOCKERY OF THE 'MEMBERSHIP CONCEPT BY OFFERING MEMBERSHIP TO ONE AND ALL ON ARRIVAL BASIS . IN THIS REGARD, A NEW CUTTING IN THE PAPER 'THE WEE K' IS ENCLOSED WITH THIS LETTER WHEREIN THE SUBJECT ASSESSEE HAS MADE THE AD VERTISEMENT ABOUT ITS VARIOUS ROOMS AND OTHER FACILITIES ON 06.01.2012, O NLY 8 DAYS AFTER PASSING OF THE ASSESSMENT ORDER FOR A.Y. 2009- 10. IN THIS ADV ERTISEMENT, ASSESSEE HAS HIGHLIGHTED ITS VARIOUS FACILITIES AND ALSO INDICAT ED THAT 'A MEMBERSHIP FEE OF RS.50/- PER PERSON FOR ROOMS AND RS 100/- FOR DORMI TORIES WOULD BE CHARGED ON THE FIRST DAY (VALID FOR 28 DAYS). AT ANOTHER PLACE OF CLASSIFIED ADS, IT HAS INDICATE D THE EXORBITANT ROOM CHARGES AND HAS STATED THAT TAXES APPLICABLE AND ME MBERSHIP FEE EXTRA. THESE ABOVE TWO ADVERTISEMENTS CLEARLY SHOWS THAT H OW BRAZENLY THE ASSESSEE IS MAKING ADVERTISEMENT OF ITS VARIOUS FACILITIES T O LURE THE CUSTOMERS IN THE MARKET AND THUS ASKING FOR EXEMPTION FROM THE MONEY EARNED ON SUCH COMMERCIAL & BUSINESS INCOME. ASSESSEE IS MAKING MO CKERY OF THE MEMBERSHIP CONCEPT AND IS CLEARLY MISUSING THE CHAR ITABLE PROVISIONS OF THE IT ACT. THIS IS CLEAR VIOLATION OF SEC. 11 OF THE I T ACT AND ASSESSEE IS NOT RUNNING ITS ACTIVITIES AS PER OBJECTIVES OF ITS TRU ST, ACCORDINGLY, ASSESSEE DOES NOT DESERVE EXEMPTION. A COPY OF THE ABOVE ADVERTISEMENTS (2 PAGES) IS BEI NG FORWARDED TO YOU FOR YOU CONSIDERATION BEFORE DECIDING THE APPEAL IN THI S CASE. 3.1. COPY OF THE SAME WAS PROVIDED TO THE ASSESSEE WHO FILED A DETAILED RESPONSE THERETO. THE SAME IS EXTRACTED FROM PARA 4.1 OF THE IMPUGNED ORDER HERE UNDER :- '1. THIS HAS REFERENCE TO THE ISSUE RAISED REGARDIN G NEWS CUTTING IN THE PAPER THE WEEK' ON THE BASIS OF WHICH IT IS BEING ALLEGE D THAT THE APPELLANT TRUST IS I.T.A .NO.-5502/DEL/2012 8 DOING COMMERCIAL ACTIVITIES AND AS SUCH IT IS HIT B Y THE PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT. 2. IN THIS CONNECTION IT IS SUBMITTED THAT THIS NEW SPAPER CUTTING ARE THE INFORMATION PUBLISHED BY THE JOURNAL 'THIS WEEK' GI VING INFORMATION ABOUT THE APPELLANT TRUST AND IT IS MEANT FOR PROMOTING T HE ACTIVITIES OF INDIAN YOUTH. IN THIS CONNECTION WE WELL INVITE YOUR HONOU R'S ATTENTION TO THE OBJECT OF THE TRUST WHICH STATED IN THE MEMORANDUM SIGNED BY THE LEADERS, WHICH INCLUDE SHRI MORARJI DESAI, SMT.1NDIA GANDHI, SHRI RAM KRISHNA BAJAJ, ETC. WHEREBY THE OBJECT ARE- A) TO ESTABLISH, MAINTAIN AND CONDUCT ONE OR MORE N ATIONAL OR 1NTERNATIONAL YOUTH CENTERS AT SUITABLE CENTERS IN INDIA FOR PROM OTING INTERNATIONAL UNDERSTANDING AND COOPERATION AND DEVELOPING YOUTH LEADERSHIP. B) EACH SUCH YOUTH CENTRE MAY BE MULTI-PURPOSE IN C HARACTER, FUNCTIONING AS A MODEL YOUTH CENTRE FOR INTELLECTUAL AND RECREATIO NAL SERVICE TO YOUTH; A COOPERATING AGENCY FOR YOUTH ORGANIZATION; A CENTR E FOR BUILDING UP YOUTH; LEADERSHIP THROUGH A VARIETY OF PROGRAMS AND A COUN SELING BUREAU 0 ADVISE ON VARIOUS PROBLEMS CONFRONTING YOUTH. C) FOR THE BENEFIT OF FOREIGN STUDENTS AND YOUTH DE LEGATES AS WELL AS INDIVIDUALS VISITING INDIA, THE YOUTH CENTRE MAY PR OVIDE HOSTEL FACILITIES, IT MAY SERVE AS AN INFORMATION CENTRE AND PROVIDE THEM WIT H AN OPPORTUNITY FOR COMING IN CLOSE CONTACT WITH THEIR COUNTERPARTS IN INDIA AND FOR STUDYING INDIA'S EFFORTS TO ACHIEVE PROGRESS THROUGH DEMOCRA TIC METHODS. D) THE HOTEL FACILITIES AT THE YOUTH CENTRE SHALL B E AVAILABLE TO STUDENTS OR OTHER PERSONS ON PAYMENT OF SUCH CHARGES AS THE TRU STEES MAY DECIDE FROM TIME TO TIME. E) THE CENTRE MAY ALSO SPONSOR PROGRAMS FOR BILATER AL EXCHANGE OF YOUTH LEADERS, YOUNG WORKERS AND STUDENTS WITH A VIEW TO BETTER NATIONAL INTEGRATION AND INTERNATIONAL UNDERSTANDING AND COOPERATION PRO GRAMS. 3. THIS INFORMATION WHICH HAS BEEN PUBLISHED IS TOW ARDS THAT CAUSE. IN THIS CONNECTION WE WILL INVITE YOUR HONOUR'S ATTENTION T O THE INFORMATION WHICH IS PART OF THE NEWSPAPER CUTTING, THE SAME READS AS UN DER:- 'THE INDIAN YOUTH CENTRE TRUST SET UP ON 10 AUGUST 1961, ESTABLISHED VISHWA YUVAK KENDRA (INTERNATIONAL YOUTH CENTRE) AS A MULT IPURPOSE YOUTH CENTRE. THE PROJECT HAD THE ACTIVE SUPPORT OF PANDIT JAWAHA RLAL NEHRU, INDIA'S FIRST PRIME MINISTER. THE KENDRA HAS GROWN TO BE A PREMIE R TRAINING INSTITUTE FOR YOUTH WORKERS AND HAS BEEN RECOGNIZED BY A LARGE NU MBER OF AGENCIES IN INDIA AND ABROAD. THE KENDRA FUNCTIONS AS A MODEL CENTRE FOR BUILDING UP YOUTH LEADERSHIP THROUGH A VARIETY OF CONSTRUCTIVE AND EDUCATIONAL P ROGRAMMES IN DELHI AND PARTS OF RURAL INDIA HELP OF REPUTED RESOURCE PERSO NS; ORGANIZES NATIONAL AND INTERNATIONAL SEMINARS AND CONFERENCES ON ISSUES OF CONTEMPORARY IMPORTANCE, AND HAS A WELL EQUIPPED LIBRARY AND DOC UMENTATION CENTRE, BESIDES EXCELLENT INFRASTRUCTURAL FACILITIES.' 4. ON GOING THROUGH THE SAME IT MAY BE NOTICED THAT IT IS A DISSEMINATION OF THE INFORMATION REGARDING THE OBJECT AND THE ACTIVI TIES OF THE TRUST AND THE FACILITIES WHICH HAVE BEEN CREATED FOR THE INDIAN Y OUTH. ACCORDINGLY TO ALLEGE ON THIS BASIS THAT THE TRUST EXISTING FOR COMMERCIA L PURPOSE IS NOT JUSTIFIED AS EXPLAINED IN OUR EARLIER SUBMISSIONS. THE TRUST IS CARRYING OUT THESE ACTIVITIES FOR THE PROMOTION OF THE INDIAN YOUTH AND NONE 0 TH E ACTIVITIES ARE COMMERCIAL I.T.A .NO.-5502/DEL/2012 9 IN NATURE. 5. IN THIS REGARD WE HAVE GIVEN A DETAILED ANALYSIS ON THE SOURCE OF THE INCOME OF THE TRUST AND THE APPLICATION THERE OF WHICH CLE ARLY SHOWS THAT THE TRUST IS ENGAGED ONLY IN ACTIVITIES AS PER THE OBJECT AND NO NE OF THE ACTIVITIES BEING CARRIED OUT BY IT IS COMMERCIAL IN NATURE. 6. AS REGARDS THE ISSUE OF MEMBERSHIP FEE WE HAVE T O CLARIFY THAT THE TRUST IS MEANT FOR INDIAN YOUTH AND THE MEMBERSHIP IS AS PER THE TRUST DEED AND IS WIDE OPEN TO INDIAN YOUTH. THERE IS NOTHING WRONG I N PRESCRIBING A FEW BECAUSE THE TRUST IS INTEREST IN ATTRACTING MORE AN D MORE YOUTH TO BECOME ITS MEMBER SO THAT IT CAN CARRY FORWARD THE MOVEMENT OF INDIAN YOUTH FOR WHICH IT HAS BEEN SET UP. 3.2. APART FROM THAT THE ASSESSEE MADE FURTHER WRITTEN SUBMISSIONS ON MERITS WHICH IS FOUND REPRODUCED IN PARA 6 TO PARA 6.6 OF THE IMPUGNED ORDER. A PERUSAL OF THE SAME SHOWS THAT INVITING ATTENTION TO SECTIO N 2(15) OF THE INCOME TAX ACT, IT WAS SUBMITTED THAT THE DEFINITION OF THE CHARITA BLE PURPOSE IS AN INCLUSIVE DEFINITION WHICH INCLUDES RELIEF TO POOR, EDUCATION , MEDICAL RELIEF AND ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY; THAT THE TRUST HAS BEEN ENGAGED IN CHARITABLE ACTIVITY ALL ALONG AND GETTIN G EXEMPTION; THAT THERE IS NO CHANGE OF ACTIVITY DURING THE YEAR; THAT THE TRUST SET UP WAY BACK IN THE YEAR 1961 WITH EMINENT PERSONS WHO HAD THE PRIVILEGE OF BEING THE PRIME MINISTERS OF THE COUNTRY LATER ON, AS TRUSTEES; THAT THE OBJECT OF T HE TRUST WAS TO ESTABLISH, MAINTAIN AND CONDUCT NATIONAL OR INTERNATIONAL YOUT H CENTRES AT SUITABLE CENTRES IN INDIA; THAT EACH YOUTH CENTRE IS SUPPOSED TO BE MUL TI-PURPOSE IN CHARACTER; THAT AS PER ITS OBJECT THE YOUTH CENTRE IS TO PROVIDE YOUTH HOSTEL AND BOARDING HOUSE, AUDITORIUM FOR EDUCATIONAL/CULTURAL ACTIVITIES, SPO RTS CENTRE, CAFETERIA; THAT IN ACCORDANCE WITH THIS OBJECT THE TRUST HAS SET UP TH IS TRUST CENTRE AT CHANAKYAPURI AND USING THE SAME FOR THE PURPOSE OF THE OBJECTS O F THE TRUST. IT WAS SUBMITTED THAT A PART OF THE YOUTH CENTRE HAS BEEN LET OUT AN D RENTALS ARE BEING RECEIVED IN RESPECT OF THE SAME UTILIZED FOR THE OBJECTS OF THE TRUST AND THE RECEIPTS OF CAFETERIA ARE ALSO USED FOR THE YOUTH HOSTEL AND UT ILIZED BY IT. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS CONSIDERED ALL THESE ACTIVITIES AS COMMERCIAL IN NATURE IGNORING THE FACT THAT INCOME EARNED BY WAY OF INTEREST, RENTALS AND I.T.A .NO.-5502/DEL/2012 10 CAFETERIA TO SUPPORT THE CONFERENCE/HOSTEL ACTIVITI ES CANNOT BE CONSIDERED COMMERCIAL IN NATURE AS IT IS UTILIZED FOR THE OBJE CTS OF THE TRUST. 3.3 . INVITING ATTENTION TO PAGE 2 PARA 3 OF THE ASSESS MENT ORDER, IT WAS SUBMITTED THAT THE MAIN HEADS OF INCOME WERE HOSTEL /CANTEEN ACTIVITIES AND AUDITORIUM AND CONFERENCE HALL AND THE AO HAS CONCL UDED THAT THE SAME ARE COMMERCIAL IN NATURE WITHOUT VERIFYING THE DETAILS OF SUCH INCOME. IT WAS SUBMITTED THAT ONCE THE DETAILS ARE SEEN, IT WOULD SHOW THAT THE HOSTEL/CANTEEN ACTIVITIES WHICH IS FORMING PART OF THE BALANCE SHE ET SCHEDULE COMPRISES OF 2 COMPONENTS NAMELY BOARDING AND LODGING AND FOOD AND BEVERAGE, THE SAME IS AS UNDER :- (I) BOARDING AND LODGING RS.2,04,80,684 (II) FOOD AND BEVERAGE RS.82,95,380 3.4. ACCORDINGLY IT WAS CONTENDED THAT THE AMOUNT OF RS. 2 CRORE ODD IS SOLELY ON ACCOUNT OF HOSTEL FACILITY WHICH CANNOT BE REGAR DED AS AN ACTIVITY OF COMMERCIAL NATURE. SIMILARLY, THE FOOD AND BEVERAG E COLLECTION IS SOLELY ON ACCOUNT OF CAFETERIA FOR THE HOSTEL AND WHICH IS A S PER THE OBJECTS OF THE TRUST. IN REGARD TO THE INCOME FROM AUDITORIUM AND CONFERENCE HALL, IT WAS SUBMITTED THAT THESE WERE SPONSORED BY THE CORPORATES WHO HAD DEDU CTED TAX AT SOURCE BEFORE MAKING THE PAYMENT. IT WAS SUBMITTED THAT THE ADVA NCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY HAS NOT BEEN MADE NON-CHA RITABLE, IT CONTINUES TO BE CHARITABLE HOWEVER IN CASE THE OBJECT IS ADVANCED W HILE CARRYING ON TRADE, COMMERCE ONLY THEN IT CAN BE CONSIDERED TO BE NOT C HARITABLE. IN THE FACTS OF THE PRESENT CASE, THE OBJECTS HAVE NOT BEEN DISPUTED TO BE NON-CHARITABLE. THE ACTIVITIES ARE CARRIED OUT TO PROMOTE THE CAUSE OF THE YOUTH. IT WAS SUBMITTED THAT MERELY BECAUSE THE CANTEEN STAFF IN THE CAFETERIA H AD NOT ASKED FOR IDENTIFICATION, IT DOES NOT MEAN THAT THE CAFETERIA IS OPEN FOR EAC H AND EVERYONE. A LAPSE ON THE PART OF THE CAFETERIA ATTENDANTS, IT WAS ARGUED DOE S NOT MEAN THAT THE ACTIVITIES HAVE BECOME NON-CHARITABLE FROM CHARITABLE. THE CER TIFICATE ISSUED IN 1970 I.T.A .NO.-5502/DEL/2012 11 DISREGARDED BY THE AO IT WAS STATED CONTINUES TO BE IN OPERATION AND THE BELIEF OF THE AO THAT IT WAS NOT RELEVANT WAS ASSAILED. THE TRUST IT WAS SUBMITTED HAD BEEN SET UP FOR THE CAUSE OF THE YOUTH AND THE HOSTEL FA CILITIES ARE PROVIDED TO THE YOUTH. IT WAS SUBMITTED THAT THE TRUST IS ENTITLED TO GENERATE ITS INCOME FROM RENT, INTEREST BY WAY OF BONUS, SPONSORSHIP ETC. 3.5. ACCORDINGLY IT WAS CONTENDED THAT THE AO IS NOT RI GHT IN DENYING THE EXEMPTION U/S 11(1)(A) OF THE ACT BY RELYING UPON T HE SECTION 2(15) OF THE INCOME TAX ACT. IT WAS SUBMITTED THAT THE RELIANCE PLACED ON THE DECISION IN THE CASE OF JALANDHAR DEVELOPMENT AUTHORITY IS INCORRECT. AS T HE SAID AUTHORITY IT WAS SUBMITTED WAS ENGAGED IN SELLING LAND AND MAKING A PROFIT THEREON AND THERE WAS NO CHARITABLE ACTIVITY WITHIN THE MEANING OF SECTIO N 2(15) OF THE ACT. 3.6. SIMILARLY, THE RELIANCE PLACED UPON THE JUDGEMENT OF THE HONBLE APEX COURT IN THE CASE OF INDIAN CHAMBER OF COMMERCE WAS ALSO ASSAILED ON THE GROUND THAT THERE WAS A BREACH BY WHICH THE PROFIT GENERATED BY THE CHAMBER COULD HAVE BEEN DISTRIBUTED TO ITS MEMBERS AND THAT IS WHY IT WAS HELD TO BE A PROFIT MOTIVE ORGANIZED NOT ELIGIBLE FOR EXEMPTION. 3.7. IT WAS SUBMITTED THAT THE POSITION IN THE DECISION OF PUNJAB URBAN PLANNING AND DEVELOPMENT AUTHORITY WAS ALSO SAME AS THE SAID AUTHORITY WAS MAKING INCOME OR EARNING INCOME WITHOUT APPLYING THE SAME. IN THE FACTS OF THE PRESENT CASE, IT WAS SUBMITTED THAT THE SURPLUS GENERATED B Y THE ASSESSEE WAS DEPLOYED AND USED FOR CHARITABLE PURPOSES AND WOULD BE EVIDE NT FROM THE BALANCE-SHEET FROM THE PAPER BOOK. 3.8. THE RELIANCE PLACED UPON THE DECISION IN THE CASE O F SMALL & MEDIUM EXPORTERS VS. DIT (EXEMPTION) WAS STATED TO BE MISP LACED AS THE OBJECT OF THE ASSESSEE THEREIN WAS TO HELP SMALL EXPORTERS FOR WH ICH IT WAS CHARGING A FEE AND THIS WAS CONSIDERED TO BE A COMMERCIAL ACTIVITY. 3.9. SIMILARLY, THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN MCD VS CHILDREN BOOK TRUST, IT WAS SUBMITTED WAS NOT APPLI CABLE AS THE SAID DECISION I.T.A .NO.-5502/DEL/2012 12 WAS RENDERED UNDER THE MUNICIPAL CORPORATION OF DEL HI ACT AND THE ISSUE WAS RELATING TO HOUSE TAX ON THE CHILDREN BOOK TRUST. IT WAS NOT A CASE UNDER THE INCOME TAX ACT, 1961. 4. CONSIDERING THE SUBMISSIONS, THE CIT(A) REFERRING TO THE OBJECTS OF THE TRUST FOUNDED IN 1961 BY THE EMINENT PERSONALITIES, SH. MORARJI DESAI (CHAIRMAN), SMT. INDIRA GANDHI, SHRI NAVAL H.TATA, SHRI. RAVINDRA VARMA, SHRI VIREN J.SHAH AND SHRI RAM KRISHNA BAJAJ (MANAGING T RUSTEE) OBSERVED THAT THE OBJECTS OF THE TRUST WAS TO PROMOTE ALL ROUND WELF ARE OF THE INDIAN YOUTH. HE OBSERVED THAT THE TRUST HAS BEEN WORKING IN THAT DI RECTION ONLY AND IS MULTI- PURPOSE IN CHARACTER AND FUNCTIONING AS A MODEL YOU TH CENTRE IN INTELLECTUAL AND RECREATIONAL SERVICES TO THE YOUTH. HE ALSO OBSERVE D THAT THE TRUST HAS A YOUTH CENTRE ALONG WITH A HOSTEL FOR THE YOUTH AND FOR TH E BENEFIT OF THE HOSTEL/ A CANTEEN IS ALSO RUNNING WHERE IT IS PROVIDING FOOD TO THE Y OUTH STAYING IN THE HOSTEL. THE CONFERENCE HALL AND AUDITORIUM, IT WAS OBSERVED WAS USED FOR THE PURPOSES OF ORGANIZING VARIOUS PROGRAMMES FOR THE YOUTH. HE OB SERVED THAT IN THIS MANNER IT IS RAISING, ITS REVENUE FOR MEETING ITS OBLIGATION TO CARRYING OUT ITS ACTIVITIES BY WAY OF RENTING OUT PART OF ITS PREMISES AND ALSO EA RNING INTERESTS ON THE DEPOSITS. IT WAS FURTHER HELD BY HIM THAT THE FUNDS GENERATED HAVE BEEN DEPLOYED AND USED EXCLUSIVELY FOR THE TRUST. THE FINDING OF THE AO T HAT THE ACTIVITIES WERE COMMERCIAL IN NATURE WERE HELD TO BE INCORRECT AS T HE ACTIVITIES WERE FOUND TO BE IN FURTHERANCE OF THE AIMS AND CAUSE OF THE OBJECTS OF THE WELFARE OF THE YOUTH AS SUCH IT WAS HELD THAT THE VIEW OF THE AO THAT IT WA S NOT COVERED WITHIN THE MEANING OF SECTION 2(15) OF THE ACT WAS FOUND TO BE NOT CORRECT. 4.1. THE CIT(A) FURTHER ELABORATED THE FINDING ARRIVED AT IN PARA 6.2 BY HOLDING THAT THE AO HAS NOT BEEN ABLE TO APPRECIATE THE NAT URE OF THE HOSTEL AND CANTEEN ACTIVITIES AND THE AO HAD ALSO NOT APPRECIATED THAT THE RECEIPT ON ACCOUNT OF THE AUDITORIUM AND CONFERENCE HALL OF RS. 1.43 CRORE OD D INCLUDED THE SUM OF RS.1.02 CRORE ODD ON ACCOUNT OF THE RENTAL AND THE BALANCE AMOUNT REPRESENTED I.T.A .NO.-5502/DEL/2012 13 THE RECEIPT ON ACCOUNT OF CONFERENCES ORGANIZED IN THE AUDITORIUM. HE HELD THAT ALL THESE ACTIVITIES WERE PART OF THE OBJECTS OF TH E TRUST AND FOR THE CAUSE OF THE YOUTH ONLY. CONSIDERING THE FINDING OF THE AO THAT THE ASSESSEE HAD RECEIVED MONEY FROM CORPORATE HOUSES, HE HELD THAT THE RECEI PTS WERE IN THE NATURE OF SPONSORSHIP FEES RECEIVED FOR ORGANIZING CONFERENCE IN THE AUDITORIUM AS SUCH COULD NOT BE CONSIDERED TO BE A COMMERCIAL ACTIVITY . EXAMINING THE ALLEGATIONS OF THE AO AS PER INSPECTORS REPORT THAT THE FOOD B Y THE CANTEEN WAS PROVIDED TO EVERYONE AND THERE WAS NO CONTROL ON AN OUTSIDER HA VING FOOD, THE CIT(A) WAS OF THE VIEW THAT MERELY BECAUSE SOMEBODY HERE AND THER E OBTAINED A SERVICE BECAUSE OF THE LACK OF CONTROL WILL NOT MEAN THAT THE TRUST HAS BECOME COMMERCIAL AND AS SUCH LOST ITS CHARITABLE CHARACTER. THE OBJECTS A ND THE ACTIVITIES CONTINUED TO BE CHARITABLE DESPITE THE STRAY INSTANCE AND CANNOT BE THE GROUND FOR HOLDING THAT THE TRUST IS NOT CHARITABLE. SIMILARLY, THE INSTANCES OF SPONSORSHIP FOR WHICH TAX HAD BEEN DEDUCTED BY VARIOUS CORPORATES AS PER FORM NO. -26AS, IT WAS HELD WILL NOT MAKE THE TRUST NON-CHARITABLE. THE RELIANCE PLACED UPON THE DECISIONS BY THE AO WHICH WERE ASSAILED BY THE ASSESSEE AND ARGUED TO B E DISTINGUISHABLE AFTER DISCUSSION WERE FOUND TO BE RIGHTLY OBJECTED TO BY THE ASSESSEE. ADDRESSING THE ADVERTISEMENT IN THE NEWSPAPER OBJECTED TO BY THE A O, THE CIT(A) ACCEPTED THE EXPLANATION OF THE ASSESSEE AND HELD THAT THERE WAS NOTHING WRONG IN ATTRACTING MORE AND MORE YOUTHS TO BECOME ITS MEMBERS BY WAY O F ADVERTISEMENTS. 4.2. ACCORDINGLY HE HELD THAT THE AO WAS NOT JUSTIFIED IN DENYING THE EXEMPTION CLAIMED BY THE ASSESSEE UNDER SECTION 11 OF THE ACT AND DIRECTED THE AO TO ALLOW EXEMPTION AS CLAIMED BY THE ASSESSEE UN DER SECTION 11. THE CIT(A) FURTHER WENT ON TO EXAMINE THE ASPECT OF MUTUALITY WHICH WAS HELD TO BE ACADEMIC IN NATURE IN VIEW OF THE FINDING GIVEN ON MERIT. 5. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5.1. THE LD. SR. DR, MS. SHAMUNA SEN PLACED HEAVILY RE LIANCE ON THE ASSESSMENT ORDER SO AS TO CONTEND THAT THE ACTIVITI ES OF THE TRUST ARE NOT IN I.T.A .NO.-5502/DEL/2012 14 CONSONANCE WITH THE REQUIREMENTS OF THE ACT. IT WA S HER SUBMISSION RELYING UPON THE INSPECTORS REPORT THAT CANTEEN FACILITIES WERE AVAILABLE TO EVERYONE AND WAS BEING RUN AS A COMMERCIAL ACTIVITY. IT WAS HER SUB MISSION THAT THE AO HAS CONSIDERED AFTER CONFRONTING IT TO THE ASSESSEE WH ICH DEMONSTRATED THAT ANY AND EVERYONE COULD ENTER THE PREMISES AND HAVE THE MEAL AND PAY FOR THE SAME WITHOUT ANY EFFORT TO CHECK WHETHER THE CUSTOMER WA S A RESIDENT OF THE HOSTEL OR NOT. IT WAS SUBMITTED THAT THERE WAS NO CONTROL TO ENSURE THAT OUTSIDERS DO NOT UTLIZE THE SERVICES OF THE CANTEEN/CAFETERIA. ACCO RDINGLY THE GENERAL AND VAGUE ANSWER OF THE ASSESSEE HAVE RIGHTLY BEEN REJECTED B Y THE AO WHO HAS HELD THAT THE HOSTEL/CANTEEN FACILITY WERE UTILIZED BY THE ASSESS EE AND RUN ON COMMERCIAL LINES. INVITING ATTENTION TO SECTION 2(15) OF THE INCOME TAX ACT, IT WAS HER SUBMISSION THAT THE ACTIVITIES WHICH WERE IN THE NATURE OF TRA DE, COMMERCE, BUSINESS AS PER THE PROVISO CANNOT TERMED TO BE COMING UNDER THE UM BRELLA OF OTHER CHARITABLE ACTIVITIES AS ENVISAGED BY THE STATUTE AND THE CLA IM OF THE ASSESSEE HAS RIGHTLY BEEN REJECTED BY THE AO. THE AO IT WAS HER SUBMIS SION HAS IDENTIFIED THE FEATURES WHICH DISTINGUISH AN ACTIVITY WHICH IS IN THE NATURE OF TRADE AND BUSINESS AND ALL THE REQUIREMENTS ARE FULFILLED BY THE ASSES SEE. THE JUDGEMENTS RELIED UPON BY THE AO IT WAS HER SUBMISSION HAVE BEEN DIST INGUISHED ON FRIVOLOUS REASONS BY THE ASSESSEE. INVITING ATTENTION TO THE LIST OF SPONSORS AS WERE AVAILABLE IN THE 26AS INFORMATION AVAILABLE TO THE DEPARTMENT VIS--VIS THE LIST GIVEN BY THE ASSESSEE, IT WAS HER SUBMISSION THAT T HERE WERE A LOT OF DISCREPANCIES. IT WAS ALSO HER SUBMISSION THAT MEM BERSHIP LIST GIVEN BY THE ASSESSEE PERTAINING TO SPECIFIC PERIOD I.E 01.04.20 08 TO 31.03.2009 AND COULD NOT BE SAID TO BE A MEMBERSHIP LIST PER SE. THE CHARGE S LEVIED TO DIFFERENT PEOPLE FOR THE SO-CALLED MEMBERSHIP FEE, IT WAS HER SUBMISSION ALSO VARIED AND INFACT HAD ODD FIGURES. IT WAS ALSO HER ARGUMENT THAT THE COR PORATE ENTITIES WHO HAVE MADE PAYMENTS TO THE ASSESSEE FOR UTILIZING AUDITORIUM A ND CONFERENCE HALL CANNOT BE SAID TO BE RENDERING ANY SERVICE TO THE YOUTH AND A LL THESE FACTS HAVE BEEN BROUGHT I.T.A .NO.-5502/DEL/2012 15 ON RECORD BY THE AO. INVITING ATTENTION TO THE MAN NER IN WHICH THE ASSESSEES BILLS ARE RAISED, IT WAS HER ARGUMENT NO DETAILS AR E RECORDED. SPECIFIC ATTENTION WAS INVITED TO PAGE 78, IT WAS HER SUBMISSION THAT IT MERELY MENTIONS THE NAME AS C/O NAWO AND MERELY MENTIONING TARIFF THEREIN DOES NOT PROVE ANYTHING. INVITING ATTENTION TO PAGE 443 WHICH CONTAINS THE R EVENUE SUMMARY, IT WAS HER SUBMISSION THAT THE SAME IS MERELY A LIST AND IN TH E FACE OF THE INSPECTORS REPORT APPEARING ON PAGE 489 WHICH WAS HEAVILY RELIED UPON BY THE REVENUE. IT WAS ARGUED THAT IT CLEARLY BRINGS OUT THE FACT THAT THE FACILITIES ARE OPEN TO THE ANYONE AND EVERYONE AND IS RUNNING ON COMMERCIAL LINES. F OR READY-REFERENCE, THE SAID REPORT IS REPRODUCED HREUNDER :- I WAS SENT BY ADIT(E), TC-II, NEW DELHI, FOR ENQUI RY IN CASE OF INDIA YOUTH CENTRE TRUST, CIRCULAR ROAD, CHANAKYA P URI, NEW DELHI ON 02.12.2011. AFTER REACHING VISHWA YUVAK KENDRA (INDIA YOUTH CE NTRE TRUST), WE WENT TO DINING HALL ALONGWITH SR. TA SH. OMVIR S INGH AND TA SH. ARUN KUMAR, FOR TAKING LUNCH. WE WERE OFFERED BUFF ET AS WELL AS ITEM- WISE LUNCH OPTION AND WE OPTED FOR ITEM-WISE LUNCH AND TOOK FOOD ITEMS COSTING RS. 957/-(APPROX.). VARIOUS OTHER PERSONS WERE ALSO TAKING LUNCH ON PAYMENT BASIS AND THERE WAS NO CHECK IN THE CENT RE FOR OUTSIDERS TAKING FOOD AT THE DINING HALL. AFTER TAKING THIS LUNCH WE ENQUIRED ABOUT A GET-TO GETHER ARRANGEMENT FROM THE PERSONS INVOICING BILLS MR. RA KESH CHOPRA AND MR. VIPIN AND TOLD HIM THAT WE WANT A BUFFET ARRANGEMEN T OF AROUND 25 PERSONS AND ASKED HIM TO GIVE THE COSTING DETAILS. HE STATED THAT RS.300/- PER PLATE COST WILL BE THERE FOR VEGETARIAN FOOD PL ATE, RS. 350/- FOR INCLUDING CHICKEN IN VEGETARIAN FOOD, RS.400/- FOR INCLUDING MUTTON IN VEGETARIAN FOOD AND FOR RS.500/- EVERYTHING INCLUDE D. ON ENQUIRING ABOUT HALL CHARGES, THEY STATED THAT NO CHARGES WIL L BE THERE FOR HALL AND IT IS INCLUDED IN FOOD. THEY TOLD THAT WE SHOULD I NFORM TWO DAYS PRIOR TO THEM FOR MAKING THESES ARRANGEMENTS PERSONALLY OR O VER PHONE. AFTER ENQUIRY WE LEFT THE PLACE. SD/- SUSHMA RANI INSPECTOR TRUST CIRCLE-II, NEW DELHI WITNESS 1. OMVIR SINGH, SR. TA 2. ARUN KUMAR, TA I.T.A .NO.-5502/DEL/2012 16 5.2. LD. AR ON THE OTHER HAND HEAVILY RELYING UPON THE IMPUGNED ORDER CONTENDED THAT THE CIT(A) HAS MET EACH AND EVERY AR GUMENT/OBJECTIONS OF THE AO WITH COGENT REASONING. IT WAS HIS SUBMISSION TH AT THE AO ON THE OTHER HAND HAS FAILED TO APPRECIATE THAT THE ACTIVITIES OF THE TRUST WERE TOWARDS THE AIMS AND OBJECTS OF THE TRUST ALONE. IT WAS ALSO HIS CONTEN TION THAT UNDUE EMPHASIS HAS BEEN LAID UPON THE INSPECTORS REPORT BY THE AO AS APART FROM THAT THIS WHICH HAS BEEN EXPLAINED THERE ARE ONLY SUSPICIOUS WHICH IT W AS SUBMITTED CANNOT TAKE THE PLACE OF EVIDENCE. IT WAS ARGUED WHERE THE INMATES OF THE HOSTEL NECESSARILY UTILIZE THE FACILITY FOR SHORT DURATION THE HOSTEL INMATES FREQUENTLY CHANGE IN SUCH A SCENARIO IT IS PRACTICALLY IMPOSSIBLE FOR ANYONE TO ENSURE CONTROL TO THE EXTENT THAT NO STRAY INCIDENT OF OUTSIDER EATING OCCURS. IT WAS ARGUED THAT THE ASSESSEE CANNOT BE PENALIZED TO DO THE IMPOSSIBLE BASED ON S USPICIOUS. THE VERY FACT THAT THE HOSTEL IS NOT SITUATED IN A COMMERCIAL HUB AND IS SITUATED IN A DIPLOMATIC AREA ENSURES THAT STRAY OUTSIDERS DO NOT COME UNLESS THE Y ARE RESIDING IN THE HOSTEL OR ATTENDING SEMINARS OR CONFERENCES HELD TOWARDS THE AIMS OF THE TRUST. ADDRESSING THE BACKGROUND OF THE TRUST THE FACTS LEADING THE C REATORS OF THE TRUST WHOSE AIMS AND OBJECTS HAVE CONTINUOUSLY BEEN CONSIDERED TO BE CHARITABLE IN NATURE AS THEY AIM TO ADDRESS, HARNESS, CHANNEL AND FOCUS THE ENER GIES OF THE YOUTH AIMING AND PREPARING THE YOUTH TO PERFORM PRODUCTIVE, GAINFUL AND RESPONSIBLE ROLES IN THE ENVIRONMENT HAS ALL ALONG BEEN ACCEPTED AND IT CANN OT BE DOUBTED TO BE A NON- CHARITABLE MERELY BECAUSE THE CANTEEN STAFF IN GOOD FAITH ALLOWED THE INSPECTOR AND HER TEAM OF TWO TAX ADVISORS TO HAVE A MEAL. T HE QUERIES ANSWERED IN GOOD FAITH BY THE CANTEEN STAFF ALSO DO NOT MAKE TRUST T O BE OPERATING ON COMMERCIAL LINES. IT WAS HIS SUBMISSION THAT AUDITORIUM AND S EMINAR HALLS ARE MADE ROUTINELY AVAILABLE TO GOVERNMENT EDUCATION BODIES ETC. AND N GOS HAVING THE SAME AIMS AND OBJECTS AS THE ASSESSEE AND STRINGENT DOCUMENTA TIONS IS MAINTAINED BY THE ASSESSEE TRUST WHICH HE WOULD ADDRESS WHICH HAS BEE N BEFORE THE AO AND THE CIT(A). ACCORDINGLY MERE ORAL QUERIES CASUALLY AN SWERED BY CANTEEN STAFF WHO I.T.A .NO.-5502/DEL/2012 17 DEFINITELY WERE NOT MAKING THE BOOKING DOES NOT LEA D TO ANY CONCLUSION AGAINST THE ASSESSEES TRUST. IT WAS HIS SUBMISSION THAT T HE ASSESSEE TRUST STARTED WITH A VERY HUMBLE CORPUS OF RS. 1000/- TOWARDS ITS LAUDAB LE AIM. THE HOSTEL FACILITIES IT WAS SUBMITTED ARE UTILIZED BY VARIOUS STUDENTS EITHER FROM DIFFERENT PARTS OF THE COUNTRY OR THE WORLD AND PROVIDES A PLATFORM WHERE THE YOUTH CAN BE EXPOSED TO CONFERENCES AND ACTIVITIES IN THE AUDITORIUM WHICH CO-INCIDE WITH THE AIMS AND OBJECTS OF THE ASSESSEE TRUST. IT WAS SUBMITTED THA T AS AND WHEN THE SAME ARE NOT REQUIRED BY THE ASSESSEE TOWARDS THE SAME, THEY ARE AVAILABLE ON RENT TO THE CORPORATE ENTITIES ETC. AND THE RECEIPTS SO GENERAT ED ARE FULLY UTILIZED ONLY TO MEET THE OBJECTS OF THE TRUST. THE CANTEEN/CAFETERIA FA CILITY IS EXCLUSIVELY FOR THE BENEFIT OF THE STUDENTS STAYING IN THE HOSTEL FACIL ITIES AND CONSIDERING THE FACT THAT THE HOSTEL CANNOT BE IN CONTINUOUS USE OF MORE THAN 28 DAYS THE AMOUNTS VARY. LOOKING AT THE SHEER NUMBER OF STUDENTS WHO UTILIZE THE FACILITIES IT WAS SUBMITTED MAKES IT IMPOSSIBLE TO MONITOR WHETHER TH E PERSON UTILIZING THE FACILITIES IS ACTUALLY A RESIDENT OF THE HOSTEL OR AN OUTSIDER AND IF ANY STRAY PERSON HAS UTILIZED THESE FACILITIES HOODWINKING THE SERVI NG STAFF THAN THE ASSESSEE TRUST CANNOT PENALIZED. INVITING ATTENTION TO PAPER BOOK PAGE NO-27 WHICH CONTAINS THE COPY OF THE TRUST DEED WHOSE OBJECTS ARE ENSHRINED AT PAGE 31, THE SAID DEED IT WAS SUBMITTED UNDERWENT A CHANGE IN REGARD TO ITS N AME BY WAY OF A SUPPLEMENTARY DEED OF TRUST COPY PLACED AT PAGE 23- 35 OF THE PAPER BOOK. ADDRESSING THE SAME IT WAS SUBMITTED THAT THE NAME OF THE ASSESSEE TRUST WAS CHANGED FROM WORLD ASSEMBLY OF YOUTH INDIA TO I NDIA YOUTH CENTRE. THE OBJECTS CONTINUED TO REMAIN THE SAME. INVITING ATT ENTION TO PAGE 30 IT WAS SUBMITTED THAT THE TRUST WAS HAVING A CORPUS OF RS. 1000/- AS THE TRUSTS FUNDS AND INVITING ATTENTION TO PAGE 619-814 IT WAS SUBMITTED THAT THIS CONTAINS A COPY OF LIST OF THE ORGANIZATIONS/NGOS, MEMBERS AND THE DOC UMENTS WHICH HAVE BEEN SUBMITTED OR COLLECTED SHOWING THEIR ELIGIBILITY OF MEMBERSHIP AND BEFORE THE HOSTEL FACILITY OR SEMINAR HALLS/AUDITORIUM IS ALLO WED TO BE USED EVIDENCE I.T.A .NO.-5502/DEL/2012 18 DEMONSTRATING THE ORGANIZATION/TRUST ETC. WHO IS UT ILIZING THE SERVICES ARE ALWAYS TAKEN AND THEY HAVE BEEN SHOWN TO THE AO ALL ALONG WHO CHOSE TO TALK ONLY OF INSPECTORS REPORT. A SAMPLE COPY OF MEMBERSHIP AN D ENROLLMENT FORM WITH PRE-PRESCRIBED ELIGIBILITY CRITERIA, IT WAS SUBMITT ED WAS MADE AVAILABLE TO THE AO, ATTENTION WAS INVITED TO PAGE 517-590. INVITING AT TENTION TO THE PAPER BOOK IT WAS SUBMITTED COPY OF LEDGER OF CANTEEN SALE AND ITS B REAK-UP SHOWING AMOUNT OF SALE MADE TO MEMBERS/MEMBER ORGANIZATIONS AND SALES MADE TO OTHERS. THE OTHERS INCLUDED DIRECTORS AND MANAGEMENT STAFF, A UDITORS, INSPECTORS, LAWYERS ETC. THE SAME IS APPEARING AT PAGES 607-618. ALL T HESE DOCUMENTS IT WAS SUBMITTED WERE FILED BEFORE THE AO VIDE LETTER DATE D 19.12.2011. 5.2.1. AS AN ILLUSTRATION FROM THE LIST OF MEMBERSHIP OF NGOS ETC, ATTENTION WAS INVITED TO PAGE 650 WHICH WOULD SHOW THAT THE MEMB ERSHIP REGISTRATION FORM HAS BEEN FILLED BY SAMVEDNA FOUNDATION GIVING ITS CONTACT, ADDRESS, TELEPHONE NO, THE SOURCE OF ITS FUNDS (HEREIN GOVERNMENT) ME NTIONING, THE NO. OF STAFF VISITING AND THE STATE FROM WHERE THEY BELONG (HERE IN GUJARAT). THE AIMS AND THE OBJECTS OF THE ORGANIZATIONS ARE MENTIONED IN THE COLUMN INDICATED THEREIN FOR SAMVEDNA FOUNDATION IS AS UNDER :- TO IMPROVE LIFE STANDARD OF WOMEN AT POOR SECTION THROUGH MAKING THEM SKILLFUL AND SELF RELIANT. THE INFORMATION REQUIRED TO BE MENTIONED UNDER T HE TARGET GROUP IS AS UNDER :- WOMEN AND CHILD THE COLUMN REQUIRING INFORMATION ON THRUST AREA IS GIVEN AS UNDER :- WE ARE RUNNING VOCATIONAL TRAINING, CLASSES FOR PO OR SECTION WOMEN IN RURAL AREA 5.2.2. IT WAS SUBMITTED THAT THE SAID INFORMATION IS ACC OMPANIED BY THE COPY OF THE MEMORANDUM OF ASSOCIATION, REGISTRATION CERTIFI CATE, AUDITED STATEMENT OF THE ACCOUNTS OF THE SAID TRUST WHICH ARE APPEARING IN T HE FOLLOWING PAGES. 5.2.3. SIMILARLY AT PAGE 667 IT WAS SUBMITTED IT WILL BE SEEN THAT THE NAME OF THE ORGANIZATION IS GIVEN AS SHREE CHANNAPPASWAMY VIDYAPEETH AND AFTER I.T.A .NO.-5502/DEL/2012 19 RECORDING OF THE RELEVANT INFORMATION OF ADDRESS, T ELEPHONE NO., NO. OF STAFF (HERE IN BEING 217); SOURCE OF FUNDS HEREIN DONATION, MEMBERSHIP AND STATE GOVERNMENT OF KARNATAKA. IN THE INFORMATION REQUIR ED UNDER THE HEADING AIMS AND OBJECTS ARE DESCRIBED AS PER THE LAWS COPY KARNATAKA ST ATE. THE TARGET GROUP IS IDENTIFIED AS UNDER :- TARGGET GROUP (E.G. CHILDREN/WOMEN/YOUTH ETC.)-SCH OOLS, COLLEGES, TECHNICAL COLLEGES STUDENTS, SHG GROUPS, HOSTEL ETC . THE THRUST AREA IS THE STATE OF KARNATAKA. THE PROJECT UNDERTAKEN IS STATE GOVERNMENT GRANT PROJECT, ADED SCHOOL GRANT, WATERSHED GRANT, ZILLA PANCHAYAT GRANT ETC. 5.2.4. HEREIN ALSO, IT WAS SUBMITTED THAT THE RELEVANT DO CUMENTS ARE ATTACHED NAMELY COPY OF REGISTRATION CERTIFICATE, COPY OF TH E TRUST DEED, ANNUAL REPORT, AUDITED STATEMENT OF ACCOUNT, MEMORANDUM OF ASSOCIA TION, ETC. ARE ATTACHED ALONG WITH THIS. ACCORDINGLY IT WAS HIS SUBMISSION THAT THE SUSPICION RAISED BY THE SR. DR BY REFERRING TO THE FACT THAT THERE IS N O NAME RECORDED IN THE BILL IS INCORRECT AND EACH AND EVERY BILL WILL SHOW THAT NO T ONLY THE NAME BUT EVEN THE COPY OF THE TRUST DEED OR REGISTRATION ETC. OF THE ORGANIZATION REQUIRED TO BE FURNISHED AND IS AVAILABLE ON RECORD AND AN ABBREVI ATION OF THE NGO RECORDED DOES NOT MEAN THAT THE DOCUMENTATION IS WANTING. I T WAS HIS SUBMISSION THAT THE DOCUMENTS WERE AVAILABLE BEFORE THE AO, HE DOES NOT CARE TO LOOK AT THEM AND OPERATES ON SUSPICION AND EVEN TODAY THE PAPER BOOK IS AVAILABLE ON RECORD WHICH HAS BEEN CONSIDERED BY THE CIT(A) AND THE SR. DR DO ES NOT ASSAIL AT THE SAME AND MERELY RELIES ON THE AOS VERSION BASED ON THE INSPECTORS REPORT WITHOUT FAULTING THE ASSESSEE IN THE STRINGENT DOCUMENTATIO N MAINTAINED BY THE ASSESSEE TRUST. ALL THESE DOCUMENTS IT WAS SUBMITTED ARE FU RNISHED AND SUBMITTED BEFORE MAKING ITS FACILITIES TO THE N.G.OS ETC WHO HAVE TH E SAME AIMS AND OBJECTS AS THE ASSESSEE TRUST. INVITING ATTENTION TO PAGE 9 OF TH E ASSESSMENT ORDER PARA 5.5 IT WAS HIS SUBMISSION THAT SOME OF THESE FACTS HAVE BEEN R ECORDED BY THE AO HIMSELF IN I.T.A .NO.-5502/DEL/2012 20 HIS ORDER BUT FOR REASONS BEST KNOWN TO HIM, HE CHO OSES TO RELY ON INSPECTORS REPORTS. FOR READY-REFERENCE ARGUMENTS OF THE ASSE SSEE AS RECORDED BY THE AO AND RELIED UPON BY THE ASSESSEE ARE REPRODUCED FROM THE ASSESSMENT ORDER HEREUNDER:- 5.5 IN ADDITION TO THE ABOVE WE WOULD ALSO LIKE TO SUBMIT HERE THAT THE TOTAL RECEIPTS OF CANTEEN IS RS. 82.95 LACES WHICH INCLUDE RS. 61.19 LACES AGAINST THE WORKSHOP / SEMINAR IN WHICH BUFFE T LUNCH WAS SERVED TO PARTICIPANTS AND RS.13.14 LACES FOR THE PERSONNE L STAYED IN THE HOSTELS. BALANCE RS.8.62 LACES FROM OTHERS THAT INC LUDES FROM STAFF/STAFFS' GUEST/TRUST GUEST (VIZ. AUDITORS, LOW ERS, ARCHITECT, CONTRACTORS ETC) AND THOSE WHO HAD COME TO ATTEND S OME FUNCTION OR OTHER. THEREFORE, IT WOULD NOT BE POSSIBLE TO ASCERTAIN TH E AMOUNT OF CANTEEN COLLECTION FROM THOSE PERSONS WHO WERE NOT STAYED I N THE HOSTEL. IN ANY CASE IT IS BOUND TO BE VERY NEGLIGIBLE AND WITHIN P ERMISSIBLE LIMITS OF SECTION 2(15) OF THE INCOME TAX ACT. FURTHER, IT CA N BE SEEN FROM THE DOCUMENTS SUBMITTED THAT THE TRUST SERVES BUFFET ME ALS DURING THE PROGRAM / WORKSHOP CONDUCTED BY MEMBERS ORGANIZATIO NS AND/OR DURING OWN PROGRAM AND WORKSHOP BUT NOT FOR ANY OTH ER PURPOSES. THIS CAN BE REVIEWED FORM THE RELATED DOCUMENTS ENCLOSED HEREWITH FOR YOUR KIND PERUSAL I.E. BILLS OF BUFFETS SERVED DURING WO RKSHOP AND SEMINARS. FURTHER, WE ALSO LIKE TO SUBMIT THAT FOR THE BOOKIN G OF THE FACILITIES (BUFFET, AUDITORIUM, CONFERENCE HALL ETC.) OF THE T RUST, OFFICIALS OF THE TRUST DESIGNATED FOR THE SAID PURPOSES (AT THE RANK OF MANAGER) ARE ONLY AUTHORIZED. HENCE, AS REGARD THE REMARKS MADE BY OU R CANTEEN STAFF THEY HAD MERELY GIVEN THE INFORMATION IN REGARD TO TARIFF RATE BOTH FOR VEGETARIAN AND NON VEGETARIAN BUFFETS ARRANGEMENT. THERE IS NOTHING WRONG IN WHAT HAS BEEN STATED BY THEM AND NO WHERE THEY HAD COMMITTED THAT IT WILL BE SERVED ALSO FOR THE PURPO SES OTHER THAN THE OBJECTIVES OF THE ACTIVITIES FOR WHICH IT WAS INTEN DED. THEY HAD MERELY ANSWERED A QUERY. THEREFORE, IT WOULD BE INAPPROPRI ATE TO CONCLUDE THAT WHAT THEY HAD STATED INVOLVE COMMERCIAL ACTIVITIES. 5.2.5. ADDRESSING PAGES 46 OF THE IMPUGNED ORDER WHICH CO NTAINS THE OBJECTIONS WHICH THE AO MADE BEFORE THE CIT(A) WHICH HAVE BEEN REPRODUCED IN THE ORDER, ATTENTION WAS INVITED TO COPY OF THE ADVERTISEMENT PLACED AT PAGE 845 OF THE PAPER BOOK. REFERRING TO THE SAME IT WAS POINTED OUT THA T IT MERELY POINTS OUT THE FACT THAT VISHWA YUVAK KENDRA I.E INDIAN YOUTH CENTRE WA S SITUATED AT THE ADDRESS GIVEN AND WAS DESCRIBED AS CENTRALLY LOCATED KENDRA HOSTEL HAD 38 WELL-FURNISHED I.T.A .NO.-5502/DEL/2012 21 AC ROOM AND 2 DORMITORIES (20-BEDDED EACH), WHICH A RE LET OUT TO MEMBER NGOS/ OTHER MEMBERS WHEN NOT USED FOR KENDRA PROGRA MMES AND IT ALSO ADVERTISES THE FACT THAT NEW DORMITORY BUILDING WIT H 120 BEDS FOR WHICH BOOKING HAS COMMENCED IS ALSO AVAILABLE. THE SAID ADVERTIS EMENT, IT WAS SUBMITTED APART FROM GIVING THE LOCATION, PHOTOGRAPHS OF THE ROOMS AND DORMITORIES ALSO SPELLS OUT THAT IT WAS SET UP ON 10.08.1961 AS MULTI-PURPO SE YOUTH CENTRE HAVING THE ACTIVE SUPPORT OF INDIAS FIRST PRIME MINISTER; HAD GROWN TO BE A PREMIER TRAINING INSTITUTE FOR YOUTH WORKERS AND HAS BEEN RECOGNIZED BY A LARGE NUMBER OF AGENCIES IN INDIA AND ABROAD. IT ALSO ADVERTISES T HE FACT THAT IT FUNCTIONS AS A MODEL CENTRE FOR BUILDING UP YOUTH LEADERSHIP THROU GH A VARIETY OF CONSTRUCTION AND EDUCATIONAL PROGRAMMES IN DELHI AND PARTS OF RU RAL INDIA WITH THE HELP OF REPUTED RESOURCE PERSONS, ORGANIZES NATIONAL AND I NTERNATIONAL SEMINARS AND CONFERENCES ON ISSUES OF CONTEMPORARY IMPORTANCE AN D HAS A WELL-EQUIPPED LIBRARY AND DOCUMENTATION CENTRE BESIDES EXCELLENT INFRASTRUCTURAL FACILITIES. IT ALSO ADVERTISES THAT THERE IS A CAFETERIA OFFERING FOOD, CATERING TO HOSTEL RESIDENTS AND NON-RESIDENT GUESTS ATTENDING CONFERENCE, SEMIN ARS AND TRAINING COURSES AND AIR-CONDITIONED AUDITORIUM AND SEMINAR HALLS ETC. REFERRING TO THE SAME, IT WAS HIS SUBMISSION THAT WHAT IS WRONG WITH SUCH AN ADVE RTISEMENT IF THE ASSESSEE IS TRYING TO ATTRACT ATTENTION OF NGOS AND OTHER SUCH GROUPS WHO ARE INTERESTED IN PROMOTING AND CREATING LEADERSHIP PROGRAMME FOR THE YOUTH IN ORDER TO HARNESS THEIR ENERGY AND INTELLECTUAL CAPACITY. THE FACT T HAT THE ASSESSEES TRUST PROVIDES THEM A PLACE FOR BOARDING, LODGING AND CONFERENCE F ACILITIES WHICH ARE TOWARDS THE AIMS AND OBJECTS OF THE TRUST CANNOT BE HELD TO BE CONTRARY TO THE OBJECTS OF THE TRUST BY MERELY ADVERTISING THIS FACT. IT WAS SUBM ITTED THAT THE ADVERTISEMENT OF THE AVAILABILITY AND EXISTENCE OF THE TRUST DOES NO T MAKE THE ACTIVITY COMMERCIAL IN NATURE. ATTENTION WAS ALSO INVITED TO PAGE 74 W HICH IS ISSUED BY THE TRANSPORT BHAWAN, PARLIAMENT STREET, DEPARTMENT OF TOURISM CE RTIFYING THAT THE KENDRA HOSTEL IS NOT A HOTEL AND IT IS A NON-COMMERCIAL HO STEL CONSTRUCTED TO CATER TO THE I.T.A .NO.-5502/DEL/2012 22 NEEDS OF YOUTHS, SCHOLARS AND PROFESSORS ON TEMPORA RY VISIT TO NEW DELHI. IT WAS SUBMITTED THAT IT IS A CONCERN FOR THE DEPARTMENT O F TOURISM TO CONSIDER WHETHER A PARTICULAR PREMISES IS RUNNING AS HOSTEL AND THEY HAVE CERTIFIED THAT IT IS NOT RUN AS A HOTEL. INVITING ATTENTION TO PAGE 22 OF THE P APER BOOK, IT WAS SUBMITTED THE 80G(V) REGISTRATION IS AVAILABLE TO THE ASSESSEE IN THE YEAR UNDER CONSIDERATION AND THE SAID CERTIFICATE IS DATED 02.12.2009. ACCO RDINGLY IT WAS HIS PRAYER THAT THE IMPUGNED ORDER DESERVES TO BE UPHELD. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. THE DOCUMENTS RELIED UPON BEFORE US IN THE PAPER BOOK AND THE CASE LAWS REFERRED TO AND THE ORDERS OF THE AUTHORITIES HAVE BEEN TAKEN INTO CONSIDERATION. THE OBJECTS OF THE TRUST AVAILABLE AT PAGES 31 & 32 READ AS UNDER :- 4.(A) TO ESTABLISH, MAINTAIN AND CONDUCT ONE OR MO RE NATIONAL OR INTERNATIONAL YOUTH CENTRE AT SUITABLE CENTRES IN I NDIA FOR PRACTICING INTERNATIONAL UNDERSTANDING AND COOPERATION AND DEV ELOPING YOUTH LEADERSHIP; (B) EACH SUCH YOUTH CENTRE MAY BE MULTI-PURPOSE IN CHARACTER FUNCTIONING AS A MODEL YOUTH CENTRE FOR INTELLECTUA L AND RECREATIONAL SERVICES TO YOUTH; A CO-ORDINATING AGENCY FOR YOUTH ORGANIZATIONS A CENTRE FOR BUILDING UP YOUTH LEADERSHIP THROUGH A V ARIETY OF PROGRAMMES; AND A COUNSELING BUREAU TO ADVISE ON VARIOUS PROBLE MS CONFRONTING YOUTH; (C) FOR THE BENEFIT OF FOREIGN STUDENTS AND YOUTH D ELEGATIONS IAS WELL AS INDIVIDUALS VISITING INDIA, THE YOUTH CENTRE MAY PROVIDE HOSTEL FACILITIES, IT MAY SERVE AS AN INFORMATION CENTRE, AND PROVIDE THEM WITH OPPORTUNITY FOR .. (D) THE HOSTEL FACILITIES AT THE YOUTH CENTRE SHALL BE AVAILABLE TO STUDENTS OR OTHER PERSONS ON PAYMENT OF SUCH CHARGE S AS THE TRUSTEE MAY DECIDE FROM TIME TO TIME. (E) THE CENTRE FOR ALSO SPONSOR PROGRAMMES FOR BILA TERAL ..OF YOUTH LEADERS, YOUNG WORKERS AND STUDENTS WITH A VI EW TO BETTER NATIONAL INTEGRATION AND INTERNATIONAL UNDERSTANDING AND CO- OPERATION. (F) THE TRUSTEE MAY JOIN, CONTRIBUTE TO OR ..FINAN CIALLY OR OTHERWISE, ANY OTHER INSTITUTIONS WITH SIMILAR OBJECTS TO CARR Y OUT OR IMPLEMENT ANY OF THE OBJECTS OF THIS TRUST. 6.1. THE INSPECTORS REPORT REPRODUCED IN THE EARLIER P ART OF THIS ORDER IN PARA 5.1 HAS ALSO BEEN TAKEN INTO CONSIDERATION. IT IS SEEN THAT THE AO HAS BEEN GUIDED I.T.A .NO.-5502/DEL/2012 23 BY THE FACT THAT THE ASSESSEE IS CHARGING FEES FOR HOSTEL FACILITIES AND HAS ALSO IN ITS INCOME SHOWN RECEIPTS FROM CANTEEN FACILITIES OVER AND ABOVE RECEIPTS FROM HIRING OF CONFERENCE HALL/AUDITORIUM ETC. APART FR OM THAT HE HAS ALSO BEEN GUIDED BY THE FACT THAT THE INSPECTOR ACCOMPANIED BY TAX A DVISORS WAS ALLOWED TO UTILIZE THE CANTEEN FACILITIES WITHOUT ANY EFFORT OR THE PA RT OF THE SERVING PERSONNEL TO ENSURE THAT ONLY INMATES OF THE HOSTEL WERE BEING S ERVED. THE EXPLANATION OF THE ASSESSEE THAT ITS HOSTEL FACILITIES ARE UTILIZED BY NGOS AND GOVERNMENT SCHOOLS, EDUCATION DEPARTMENTS ETC. WHO STAY/ATTEND FOR A FE W DAYS AS STUDENTS, PROFESSORS, SCHOLARS ETC ATTENDING SEMINARS, CONFER ENCES AND THEN MOVE ON THEREBY MAKING IT DIFFICULT FOR CANTEEN STAFF TO AS CERTAIN WHETHER THE PERSONS ARE STAYING IN THE HOSTEL OR NOT HAS NOT BEEN ACCEPTED. THE CHANCES OF STRAY INCIDENTS WHERE UNCONNECTED PERSON MAY AVAIL OF SERVICES HAS NOT BEEN ACCEPTED AS SUFFICIENT COMPLIANCE. THE ARGUMENT THAT CANTEEN S TAFF MAY NOT BE IN A POSITION TO IDENTIFY WHETHER THE PERSON AVAILING THE SERVICE S IS STAYING IN THE HOSTEL OR IS MERELY ATTENDING CONFERENCE OR IS A RANK OUTSIDER H AS NOT BEEN ACCEPTED. ON ACCOUNT OF THIS LACK OF FULL CONTROL BY THE CANTEEN STAFF ON THEIR FACILITIES BEING USED AS IS EVIDENCED BY INSPECTORS REPORT, THE REV ENUE WOULD WANT TO ARGUE THAT THE ASSESSEE TRUST THROUGH ITS CANTEEN FACILITIES I S FUNCTIONING ON COMMERCIAL LINES. SIMILARLY THE REVENUE HAS ALSO ASSAILED THE IMPUGNE D ORDER ON THE GROUND THAT INFORMATION AS PER THE 26 AS IS THAT CERTAIN CORPOR ATE ENTITIES HAVE UTILIZED THE FACILITIES THEREBY LEADING TO THE PRESUMPTION THAT THE HOSTEL AND CANTEEN FACILITIES ARE BEING USED ON COMMERCIAL LINES. ON THE OTHER H AND, ON BEHALF OF THE ASSESSEE, THE CONTENTION HAS BEEN THAT THE ASSESSEE MAINTAINS VERY STRICT CHECKS FOR MAKING AVAILABLE ITS HOSTEL FACILITIES. VARIOUS PAGES IN THE PAPER BOOK REFERRED TO SHOW THAT THE ASSESSEE REQUIRES THE FILLING OF MEMBERSHI P FORM WHICH REQUIRES THE SPECIFIC AND RELEVANT INFORMATION OF THE ORGANIZATI ON MAKING A BOOKING. IF IT IS A TRUST/NGO ETC., THE COPY OF THE DEED OF REGISTRATIO N, FINANCIAL STATEMENTS, SOURCES OF FUND, THE PURPOSE OF THE STAY, THE AIMS AND OBJECTS THE THRUST AREA, THE I.T.A .NO.-5502/DEL/2012 24 TARGET GROUP ETC. ARE REQUIRED TO BE MENTIONED. IT HAS ALSO BEEN STATED THAT THE FACILITIES ARE AVAILABLE TO OUTSIDERS ONLY WHEN THE Y ARE NOT BEING UTILIZED BY THE ASSESSEE TRUST OR NGOS ETC. HAVING IDENTICAL AIM A ND THEN TOO THE RECEIPTS THEREOF ARE UTILIZED FOR THE OBJECTS OF THE TRUST AS IN RES PONSE TO THE SR. DRS OBJECTIONS BASED ON PAPER BOOK PAGE -78. LD. AR HAS POINTED O UT THAT BILL NO-26949 HAS BEEN ISSUED FOR NAWO GIVING CUSTOMER NO-12306 DATED 07.09.2008. THE SPECIFIC ORGANIZATION HAD BOOKED 15 ROOMS FOR 17 PE RSONS BELONGING TO NAWO AND THE PERIOD OF BOOKING WAS 07.09.2008 TO 10.09.2 008. DETAILS OF THIS ARE AVAILABLE ON THE LIST AT PAGE 465 SL. NO-631 GIVEN AGAIN TO THE AO. NOTE MENTIONED AT THE BOTTOM OF THE BILL HAS BEEN POINTE D OUT SHOWING THAT MEMBERSHIP FEE IS VALID ONLY FOR 28 DAYS AND THE LD . AR HAS SAID THAT AS PER THE RULES THE HOSTEL CANNOT BE USED FOR MORE THAN 28 DA YS BY THE PERSON/ORGANIZATION AS EVIDENTLY HOSTEL INMATES ARE NOT ADMITTED FOR AN ACADEMIC YEAR AS IS NORMALLY DONE IN HOSTEL OF COLLEGES ETC. WHERE STUDENTS ARE STUDYING FOR GRADUATION AND POST-GRADUATION COURSES. THE HOSTEL OF THE TRUST I S ONLY FOR STUDENTS, SCHOLARS, PROFESSORS ATTENDING SEMINARS/CONFERENCES WHICH AIM TO BUILD LEADERSHIP QUALITIES IN THE YOUTH; EDUCATE, INFORM, ENCOURAGE AND EMPOWE R THEM BY KNOWLEDGE ETC. BY PROGRAMMES/CONFERENCE HELD BY NGOS OR BY FOREIGN VISITING ORGANIZATIONS WHOSE AIMS ARE IDENTICAL. CONSEQUENTLY AT THE TIME OF ADMISSION IT IS SEEN THAT HOSTEL FACILITIES ARE MADE AVAILABLE ONLY AFTER THE ASSESSEE TRUST IS SATISFIED THAT THE AIMS AND OBJECTS OF THE CHARITABLE TRUST ORGANIZATI ONS ARE ALSO FOR PROMOTION OF YOUTH ACTIVITIES EVIDENCED BY RELEVANT FINANCIAL ST ATEMENT, CERTIFICATIONS OF REGISTRATION NARRATING THE PURPOSE OF VISIT ETC AND ONLY THEN HOSTEL FACILITIES ARE MADE AVAILABLE FOR A MAXIMUM PERIOD OF ONLY 28 DAYS WHICH RESULTS AT TIMES WHERE ODD FIGURES MAY BE WORKED OUT DEPENDING ON FA CILITIES USED. WE MAY REPRODUCE FOR READY-REFERENCE FROM PAGE 78 OF PAPER BOOK, THE NOTE PRINTED AT THE BOTTOM OF THE BILL DEMONSTRATING THE DURATION:- I.T.A .NO.-5502/DEL/2012 25 NAWO NOTE:-THIS MEMBERSHIP FEE IS VALID FOR THE NEXT 28 DAYS FROM THE DATE OF CHECKIN 07 SEP 2008 AND UPTO DATE 04 OCT 2008 FOR ROOMS ONLY. PLEASE RETAIN COPY OF THIS BILL TO AVOID THE REPAYM ENT OF MEMBERSHIP FEES. THIS MEMBERSHIP FEES IS VALID FOR ROOM(S) ONLY AND CANNOT BE ADJUSTED AGAINST THE OTHER SERVICES. 6.2. A PERUSAL OF PAGES 79, 80 & 81 ALSO DEMONSTRATE TH AT SPECIFIC NO FOR ROOMS HAVE BEEN BOOK BY SPECIFIED ORGANIZATIONS ON SPECIF IED DATES NAMELY M/S POSITIVE WOMEN NETWORK; SOCIO LEGAL INFORMATION CEN TRE; AND INDO-GLOBAL SOCIAL SERVICE SOCIETY RESPECTIVELY AND ALL THESE B ILLS HAVE A SIMILAR NARRATION WITH REGARD TO THE MEMBERSHIP FEE THAT IT IS ONLY F OR 28 DAYS STARTING FROM THE DATE OF CHECKIN WHICH NECESSARILY DIFFERS FOR EACH ONE OF THEM. FOR READY- REFERENCE, WE REPRODUCE FROM PAGES 79-81 OF THE PAP ER BOOK AS UNDER :- M/S POSITIVE WOMEN NETWORK NOTE:-THIS MEMBERSHIP FEES IS VALID FOR THE NEXT 2 8 DAYS FROM THE DATE OF CHECKIN 01-OCT-2008 AND UPTO 28-OCT-2008 FOR ROOMS ONLY. PLEASE RETAIN COPY OF THIS BILL TO AVOID THE REPAYM ENT OF MEMBERSHIP FEES. THIS MEMBERSHIP FEES IS VALID FOR ROOM(S0 ONLY AND CANNOT BE ADJUSTED AGAINST THE OTHER SERVICES. SOCIO LEGAL INFORMATION CENTRE NOTE:-THIS MEMBERSHIP FEES IS VALID FOR THE NEXT 2 8 DAYS FROM THE DATE OF CHECKIN 26-JUN-2008 AND UPTO DATE 23-JUL-20 08 FOR ROOMS ONLY. PLEASE RETAIN COPY OF THIS BILL TO AVOID THE REPAYM ENT OF MEMBERSHIP FEES. THIS MEMBERSHIP FEES IS VALID FOR ROOM(S) ONLY AND CANNOT BE ADJUSTED AGAINST THE OTHER SERVICES. INDO-GLOBAL SOCIAL SERVICE SOCIETY NOTE:-THIS MEMBERSHIP FEES IS VALID FOR THE NEXT 2 8 DAYS FROM THE DATE OF CHECKIN 31-JUN-2008 AND UPTO DATE 27-AUG-20 08 FOR ROOMS ONLY. PLEASE RETAIN COPY OF THIS BILL TO AVOID THE REPAYMENT OF MEMBERSHIP FEES. THIS MEMBERSHIP FEES IS VALID FOR ROOM(S) ONLY AND CANNOT BE ADJUSTED AGAINST THE OTHER SERVICES. 6.3. IT IS ALSO SEEN ON A PERUSAL OF DOCUMENTS PLACED A T PAGES 517 814 WHICH ARE THE DOCUMENTS MADE AVAILABLE TO THE AO ALONGWIT H ACCOMPANYING LETTER DATED 19.12.2011, COPY OF WHICH IS ALSO PLACED AT P AGES 510-516. IT IS SEEN THAT THE ASSESSEE AT THE TIME OF BOOKING ITS HOSTEL ROOM S IS STRICTLY ADHERING TO MAINTAINING, RECORDING AND KEEPING THE DOCUMENTATIO N EVIDENCING THE AIMS AND I.T.A .NO.-5502/DEL/2012 26 OBJECTS OF THE ORGANIZATION THE PURPOSE OF VISITING THE TARGET GROUP AND THRUST AREA QUA THE VISIT OR PROGRAMME CONTEMPLATED. A PE RUSAL OF THE SAMPLE FORM OF ENROLMENT PLACED AT PAGE 517 AND MEMBERSHIP FORM AT PAGE 518 HAS BEEN DEMONSTRATED TO SHOW THAT IT IS STRICTLY ADHERED TO IN STRICT AND SPECIFIC COMPLIANCE. REFERENCE MAY ALSO BE MADE TO PAGE 63 OF THE PAPER BOOK ADDRESSED TO THE ADIT(E) DATED 08.08.2011 REFERRING TO THE PO SITION FOR 2009-10 WHEREIN COLUMN-8, IT IS SAID THAT THE ASSESSEE TRUST HAS NO T GIVEN ANY DONATION AND NEITHER ANY DONATION HAS BEEN RECEIVED. SIMILARLY IN REGAR D TO THE CONTRIBUTION TO THE CORPUS COLUMN-9 INDICATES THAT THE ASSESSEES TRUST HAS NOT RECEIVED ANY CONTRIBUTION TO CORPUS DURING THE YEAR. A PERUSAL OF PAGE 815-816 ADDRESSED AGAIN TO THE ADIT(E) DATED 29.12.2011 INDICATE THAT THE ACCUMULATED FUND HAS BEEN UTILIZED IN THE TIME LIMIT AS PRESCRIBED IN TH E INCOME TAX ACT FOR THE PURPOSE OF CONSTRUCTION OF THE ANNEX BUILDING OF TR UST AND RENOVATION OF OLD BUILDING. THE DETAILS OF THIS SURPLUS FOR THE FIVE YEARS AND ITS UTILIZATION AS PER PAGE 816 INDICATED AS UNDER :- ASST. YEARS TOTAL SURPLUS/(DEFICIT) ACCUMULATION U/S 11(2) U/S 11(1) UP TO 15% 2004-05 16,83,695 NOT REQUIRED 16,83,695 2005-06 (54,52,886) NOT REQUIRED 0 2006-07 (50,03,098) NOT REQUIRED 0 2007-08 86,88,124 80,00,000 6,88,124 2008-09 1,85,47,381 1,25,00,000 60,47,381 2009-10 CASE IS UNDER PROCESS THE ABOVE ACCUMULATION IS STARTED UTILIZATION FROM 2009-10 ONWARDS FOR THE CONSTRUCTION OF BUILDING & RENOVATI ON OF OLD BUILDING OF THE 2009-10 APPROX. RS. 2.20 CRORES WAS UTILIZED FOR SAID PURPOSES. 6.4. WE HAVE ALSO TAKEN INTO CONSIDERATION, THE OBJECTI ONS POSED BY THE AO TO THE ADVERTISEMENT WHICH WAS PLACED BY THE ASSESSEE IN ORDER TO INVITE ATTENTION OF THE NGOS ETC. TO UTILIZE THE HOSTEL FACILITIES AND AUDITORIUM AND SEMINAR FACILITIES IN ORDER TO PROMOTE LEADERSHIP ACTIVITIES FOR THE Y OUTH OF THE COUNTRY AND FIND OURSELVES IN HARMONY WITH THE FINDINGS OF THE CIT(A ) AS IT DOES NOT LEAD TO THE CONCLUSION THAT THE ACTIVITIES ARE IN THE NATURE OF COMMERCIAL ACTIVITY. MERELY I.T.A .NO.-5502/DEL/2012 27 ADVERTISING THE FACT THAT FACILITY OF HOSTEL, SEMIN AR HALLS, AUDITORIUM ETC. CAN BE USED BY ORGANIZATIONS INTERESTED IN HAVING LEADERSH IP PROGRAMS FOR THE BENEFIT OF YOUTH DOES NOT MAKE THE ACTIVITY A COMMERCIAL ACTIV ITY. WE HAVE ALSO TAKEN INTO CONSIDERATION THE ARGUMENTS ADVANCED BY THE ASSESSE E BEFORE US IN SUPPORT OF THE IMPUGNED ORDER WHICH ARE FOUND SUPPORTED BY THE EXP LANATION DTD. 19.12.2011 AFFORDED BY THE ASSESSEE BEFORE THE AO, COPIES PLAC ED AT PAGES 510-516 OF THE PAPER BOOK IN RESPONSE TO SHOW CAUSE NOTICE DATED 1 9.12.2011 WHEREIN APART FROM RELYING UPON THE LETTERS DATED 8.8.2011, 8.9.2 011.13.10.2011, 20.11.2011, 28.11.2011, 5.12.2011 AND 12.12.2011 THE ASSESSEE A S AN ILLUSTRATION HAS MADE REFERENCE TO A CERTIFICATE COURSE CONDUCTED BY THE TRUST FOR THE DURATION 01 ST DECEMBER TO 23 RD DECEMBER 2011 WHICH WAS HELD FOR UNEMPLOYED YOUTH AND PARTICIPANTS WHO WERE STATED TO BE FROM DIFFERENT P ARTS OF INDIA AS WELL AS FROM ABROAD INCLUDING GIRL PARTICIPANTS. IT IS FOUND EX PLAINED ON BEHALF OF THE ASSESSEE THAT SOMETIMES THE GUARDIANS OF THE GIRL PARTICIPAN TS COME TO THE CENTRE TO MEET THEM AND CANTEEN STAFF HAD BEEN INSTRUCTED NOT TO S TOP THEM FROM TAKING SNACKS AND LUNCH IF THEY SO WANT, KEEPING IN MIND THE FACT THAT THE LOCATION OF THE TRUST WAS NOT CLOSE TO THE COMMERCIAL AREAS WHERE THE GUA RDIANS OF THESE GIRLS VISITING THEM COULD HAVE GONE. THE MERE AFFORDING OF SUCH A COURTESY DOES NOT LEAD TO THE CONCLUSION THAT THE TRUST WAS OPERATING ON COMM ERCIAL LINES. IN THE COURTESY SO AFFORDED IF THE LADY INSPECTOR ACCOMPANIED BY TW O TAX ADVISORS WERE ALLOWED TO HAVE LUNCH/SNACKS WITHOUT REQUIRING THEM TO SHOW ANY IDENTIFICATION IN NO WAY DETRACTS FROM THE MERITS OF THE CASE. ON A CONSID ERATION OF THE FACTS. EVIDENCES, MATERIAL AND ARGUMENTS ADVANCED BY THE PARTIES BEFO RE THE BENCH, WE DO NOT FIND ANY INFIRMITY ARRIVED AT BY THE CIT(A) IN THE IMPUG NED ORDER WHICH WARRANTS OUR INTERFERENCE. WE HAVE TAKEN INTO CONSIDERATION THE DECISIONS RELIED UPON BY THE AO AND FIND NO FAULT IN THE CONCLUSION OF THE CIT(A ) WHO HAS HELD THE JUDGEMENT OF JALANDHAR DEVELOPMENT AUTHORITY TO BE INAPPLICAB LE ON FACTS AS THE SAID AUTHORITY WAS ENGAGED IN SELLING LAND AFTER DEVELOP MENT COULD NOT PROVE ITS I.T.A .NO.-5502/DEL/2012 28 OBJECTS TO BE CHARITABLE. SIMILAR WAS THE POSITION FOR PUNJAB URBAN PLANNING & DEVELOPMENT AUTHORITY WHO WAS FOUND TO BE FUNCTIONI NG ON COMMERCIAL LINES. IN THE CASE OF INDIAN CHAMBER OF COMMERCE, THE SURP LUS WAS AVAILABLE FOR DISTRIBUTION WHICH IS NOT A FACT IN THE PRESENT CAS E. THE JUDGEMENT RENDERED IN THE CASE OF MCD VS. CHILDREN BOOK TRUST WAS ALSO NO T APPLICABLE AS IT WAS RENDERED INTERPRETING MUNICIPAL CORPORATION OF DELH I ACT FOR THE PURPOSES OF HOUSE TAX. 6.5. ACCORDINGLY ON ACCOUNT OF THE ARGUMENTS DETAILED R EASONING ON FACTS AND LAW DISCUSSED AT LENGTH IN THE EARLIER PART OF THIS ORDER, WE FIND NO GOOD REASON TO INTERFERE WITH THE FINDING ARRIVED AT IN THE IMPUGN ED ORDER. BEING SATISFIED BY THE REASONING AND FINDING OF THE CIT(A), GROUND NO-1 OF THE REVENUE IS REJECTED. 6.6. THE FACTS QUA THE SECOND ISSUE AGITATED BY THE REV ENUE ARE FOUND DISCUSSED AT PAGE 11 OF THE ASSESSMENT ORDER BY VIRTUE OF WHI CH DEPRECIATION FOR THE ASSETS PURCHASED DURING THE RELEVANT FINANCIAL YEAR ONLY W ERE ALLOWED. AGGRIEVED BY THIS, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) BEFORE WHOM THE ASSESSEE VIDE WRITTEN SUBMISSIONS DATED 09.08.2012 MADE THE FOLLOWING SUBMISSIONS WHICH ARE EXTRACTED FROM PARA 8.1 OF THE IMPUGNED O RDER AND READ AS UNDER :- ' 4.0 DISALLOWANCE OF DEPRECIATION IS WRONG THE ASSESSING OFFICER WHILE COMPUTING THE INCOME HA S ADDED THE DEPRECIATION OF RS.30.56.176/- AND HAS ALLOWED A CLAIM OF DEPREC IATION OF RS.L5.43.808 ONLY IN RESPECT OF THE FIXED ASSETS ACQUIRED DURING THE YEAR. THE ASSESSING OFFICER ACCORDINGLY HAS DISALLOWED DEPRECIATION IN RESPECT OF THE ASSETS ACQUIRED IN EARLIER YEARS ON THE GROUND THAT THOSE ASSETS HAVE BEEN CLAIMED AS APPLICATION OF INCOME IN EARLIER YEARS. THIS IS LEG ALLY UNTENABLE. AS PER THE PROVISIONS OF SECTION 11(1)(A) INCOME TO THE EXTENT WHICH IS APPLIED FOR CHARITABLE PURPOSE IS EXEMPT. THE APPLICATION HERE INCLUDES CAPITAL AS WELL AS REVENUE EXPENDITURE. THIS DOES NOT MEAN THAT THE DE PRECIATION ON THE CAPITAL ASSETS ACQUIRED STANDS ALLOWED. IT IS A PROVISION W HICH ENABLE A TRUST TO APPLY ITS SURPLUS FOR THE PURPOSE OF ITS OBJECT AS WELL A S CAPITAL EXPENDITURE. THIS DOES NOT RESTRICT THAT THE NEXT YEAR THE COMPUTATIO N OF THE INCOME SHOULD NOT HE DONE APPLYING NORMAL COMMERCIAL PRINCIPLES. ACCO RDINGLY WHILE COMPUTING INCOME OF YEAR UNDER CONSIDERATION A NORM AL COMMERCIAL PRINCIPLE WILL BE APPLICABLE AND IT WILL INCLUDE DEPRECIATION ON THE ASSETS USES DURING THE YEAR. IN THE PRESENT CASE IT CANNOT HE SAID THA T THE ASSET WHICH HAVE BEEN ACQUIRED IN THE EARLIER YEAR WERE NOT USED DURING T HE YEAR. THIS ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF THE DELHI TRIBU NAL IN CASE OF ACIT VS. I.T.A .NO.-5502/DEL/2012 29 TINY TOTS EDUCATIONAL SOCIETY ITA NO. 3182/DEL/2008 . THE ABOVE JUDGMENT ALSO IS CONFIRMED BY THE PUNJAB AND HARYANA HIGH CO URT IN THE CASE OF ACIT VS. TINY TOTS EDUCATION SOCIETY 330 ITR 21. SIMILA R VIEW HAS ALSO BEEN TAKEN IN THE CASE OF DIT VS. VISHWA JAGRITI MISSION ITA N O. 140/2012. ACCORDINGLY THE ASSESSING OFFICER WAS NOT JUSTIFIED IN NOT ALL OWING DEPRECIATION IN RESPECT OF THE ASSETS ACQUIRED IN THE EARLIER YEARS AS CLAI MED AT RS.30,56,716/-.' 6.7. CONSIDERING THE SAME, THE CIT(A) RELYING UPON THE DECISION OF THE TRIBUNAL RENDERED IN THE CASE OF ACIT VS. TINY TOT S EDUCATION SOCIETY 330 ITR 21 (PUNJAB & HARYANA)AND THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF DIT VS VISHWA JAGRITI MISSION REPORTED AT 2012-TIOL -271-HC-DEL-IT ALLOWED THE APPEAL OF THE ASSESSEE. 6.8. AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. DR PLACED RELIANCE ON THE ASSESSMENT ORDER HOWEVER NO CONTRARY DECISION OR JUDGEMENT OF THE JURISDICTIONAL HIGH COURT OR THE H ONBLE APEX COURT WAS RELIED UPON IN SUPPORT OF THE GROUND RAISED. THE LD. AR O N THE OTHER HAND RELIED UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT AND T HE HONBLE PUNJAB & HARYANA HIGH COURT WHICH HAVE BEEN FOLLOWED BY THE CIT(A) S O AS TO CONTEND THAT THE GROUND DESERVES TO BE REJECTED.. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT NO DISTINCTION ON FACTS HA S BEEN MADE ON BEHALF OF THE REVENUE NOR ANY CONTRARY DECISION IN SUPPORT OF THE CLAIM EITHER OF THE JURISDICTIONAL HIGH COURT OR THE HONBLE APEX COURT HAS BEEN REFERRED TO FOR OUR CONSIDERATION. IT IS SEEN THAT THE ISSUE WAS DECID ED BY THE CIT(A) IN THE FOLLOWING MANNER :- 8.2. I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND I HAVE PERUSED THE RECORD. ON GOING THROUGH THE SAME, I HA VE NOTICED THAT THE ISSUE OF DEPRECIATION IS COVERED BY THE JUDGMENT OF DELHI TR IBUNAL IN THE CASE OF ACIT VS. TINY TOTS EDUCATION SOCIETY ITA NO. 3182/DEL/2008 W HICH HAS ALSO BEEN CONFIRMED BY THE PUNJAB AND HARYANA HIGH COURT IN T HE CASE OF CIT VS. TINY TOTS EDUCATION SOCIETY 330 ITR 21. THE CONTENTION OF THE ASSESSING OFFICER THAT DEPRECIATION ON ASSETS PURCHASED IN EARLIER YEARS C ANNOT BE ALLOWED BECAUSE THOSE ASSETS HAVE BEEN CLAIMED AS APPLICATION OF IN COME IN EARLIER YEARS IS NOT CORRECT. AS PER THE PROVISIONS OF SECTION 11(1)(A) INCOME OF THE CHARITABLE TRUST TO THE EXTENT IT IS APPLIED TOWARDS CHARITABLE PURPOSE IS CONSIDERED TO BE EXEMPT. ACCORDINGLY, FOR THE PURPOSE OF COMPUTATION OF INCO ME, IT IS MANDATORY TO I.T.A .NO.-5502/DEL/2012 30 COMPUTE THE SAME APPLYING THE ORDINARY PRINCIPLE OF COMPUTATION OF INCOME. THIS WILL INCLUDE DEPRECIATION OF THE ASSETS USED IN EAR NING SUCH INCOME. AFTER HAVING DETERMINED SUCH INCOME, THE APPLICATION THEREOF HAS TO BE SEEN. THE PROVISION OF SECTION 11(1)(A) ALLOWS DEDUCTION OF SUCH INCOME TO WARDS REVENUE AS WELL AS CAPITAL EXPENDITURE BOTH. SO IF THE INCOME IS USED FOR PURCHASING OF ASSETS THAT IS AN APPLICATION OF INCOME, NOT ALLOWANCE OF THE DEP RECIATION. IF IN THE SUBSEQUENT YEARS ASSET IS USED TO GENERATE INCOME, THE INCOME HAS TO BE COMPUTED AFTER ALLOWING DEPRECIATION ON THE ASSETS SO USED. THE AS SESSING OFFICER IS NOT JUSTIFIED IN NOT ALLOWING DEPRECIATION BECAUSE THESE ASSETS H AVE BEEN CLAIMED AS APPLICATION OF INCOME IN EARLIER YEARS. 8.3 APPLICATION OF INCOME AND DEPRECIATION ARE TWO DIFFERENT ASPECTS. THIS VIEW HAS BEEN UPHELD BY HON'BLE DELHI HIGH COURT IN THE CASE OR DIT VS. VISHWA JAGRITI MISSION REPORTED AT 2012-TLOL-271-HC-DEL-IT , WHEREIN, HON 'BLE DELHI HIGH COURT HAS OBSERVED AS UNDER:- 'THERE IS NO DISPUTE THAT THE ASSESSEE HAS BEEN GRA NTED REGISTRATION UNDER SECTION 12AA VIDE ORDER DATED 11TH SEPTEMBER, 2009 AND, THE REFORE, IT WAS ENTITLED TO EXEMPTION OF ITS INCOME UNDER SECTION 11. THE ONLY QUESTION IS WHETHER THE INCOME OF/HE ASSESSEE SHOULD BE COMPUTED ON COMMERC IAL PRINCIPLES AND IN DOING SO WHETHER DEPRECIATION ON FIXED ASSETS UTILIZED FO R THE CHARITABLE PURPOSES SHOULD HE ALLOWED. ON THIS ISSUE. THERE SEEMS TO BE A CONS ENSUS OF JUDICIAL THINKING AS IS SEEN FROM THE AUTHORITIES RELIED UPON BY THE CIT(AP PEALS) AS WELL AS THE TRIBUNAL. IN CLT VS. THE SOCIETY OF THE SISTERS OF ST. ANME ( SUPRA), AN IDENTICAL QUESTION AROSE BEFORE THE KARNATAKA HIGH COURT. THERE THE SO CIETY WAS RUNNING A SCHOOL IN BANGALORE AND WAS ALLOWED EXEMPTION UNDER SECTIO N11. THE QUESTION AROSE AS TO HOW THE INCOME AVAILABLE FOR APPLICATION TO CHAR ITABLE AND RELIGIOUS PURPOSES SHOULD BE COMPUTED. JAGANNATHA SETTY, J SPEAKING FO R THE DIVISION BENCH OF' THE COURT HELD THAT INCOME DERIVED FROM PROPERTY HELD U NDER TRUST CANNOT BE THE 'TOTAL INCOME' AS DEFINED IN SECTION 2(45) OF THE A CT AND THAT THE WORD 'INCOME' IS A WIDER TERM THAN THE EXPRESSION 'PROFITS AND GA INS OF BUSINESS OR PROFESSION'. REFERENCE WAS MADE TO THE NATURE OF DEPRECIATION AN D IT WAS POINTED OUT THAT DEPRECIATION WAS NOTHING BUT DECREASE IN THE VALUE OF PROPERTY THROUGH WEAR, DETERIORATION OR OBSOLESCENCE. IT WAS OBSERVED THAT DEPRECIATION, IF NOT ALLOWED AS A NECESSARY DEDUCTION FOR COMPUTING THE INCOME OF C HARITABLE INSTITUTIONS, THEN THERE IS NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERIVING THE INCOME. THE CIRCULARNO.5-P (LXX-6) OF 1968, DATED JULY 19,1968 WAS REPRODUCED IN THE JUDGMENT IN WHICH THE BOARD HAS TAKEN THE VIEW THA T THE INCOME OF THE TRUST SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE. THE CIRCULAR IS AS UNDER:- 'WHERE THE TRUST DERIVES INCOME FROM HOUSE PROPER TY, INTEREST ON SECURITIES. CAPITAL GAINS, OR OTHER SOURCES, THE WORD 'INCOME' SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE, I.E., BOOK INCOME, AFTER ADDING B ACK ANY APPROPRIATIONS OR APPLICATIONS THEREOF TOWARDS THE PURPOSE OF THE TRU ST OR OTHERWISE, AND ALSO AFTER ADDING BACK ANY DEBITS MADE FOR CAPITAL EXPENDITURE INCURRED FOR THE PURPOSES OF THE TRUST OR OTHERWISE. IT SHOULD BE NOTED, IN THIS CONNECTION, THAT THE AMOUNTS SO ADDED BACK WILL BECOME CHARGEABLE TO TAX U/S. 11(3) TO THE EXTENT THAT THEY REPRESENT OUTGOINGS FOR PURPOSES OTHER THAN THOSE O F THE TRUST. THE AMOUNTS SPENT OR APPLIED FOR THE PURPOSES OF THE TRUST FROM OUT O F THE INCOME COMPUTED IN THE AFORESAID MANNER, SHOULD BE NOT LESS THAN 75 PER CE NT. OF THE LATTER, IF THE TRUST IS TO GET THE FULL BENEFIT OF THE EXEMPTION U/S. 11(1) . ' I.T.A .NO.-5502/DEL/2012 31 12. A SIMILAR VIEW WAS EARLIER EXPRESSED BY THE AND HRA PRADESH HIGH COURT IN COMMISSIONER OF INCOME-TAX. V. NIZAM'S SUPPL. RELIG IOUS ENDOWMENT TRUST (1981) 127 ITR 378 AND BY THE MADRAS HIGH COURT IN COMMISSIONER OF INCOME- TAX VS RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES (1982) 135 ITR 485. THE MADHYA PRADESH HIGH COURT IN CIT VS. RAIPUR PALLOTT INE SOCIETY (SUPRA) HAS HELD, FOLLOWING THE JUDGEMENT OF THE KARNATAKA HIGH COURT CITED ABOVE, THAT IN COMPUTING THE INCOME OF A CHARITABLE INSTITUTION/TR UST, DEPRECIATION OF ASSETS OWNED BY THE TRUST/INSTITUTION IS A NECESSARY DEDUC TION ON COMMERCIAL PRINCIPLES. THE GUJARAT HIGH COURT, AFTER REFERRING TO THE JUDG EMENTS OF THE KARNATAKA, MAHARASHTRA AND MADHYA PRADESH HIGH COURTS CITED AB OVE, ALSO CAME TO THE SAME CONCLUSION AND HELD THAT THE AMOUNT OF DEPRECI ATION DEBITED TO THE ACCOUNTS OF THE CHARITABLE INSTITUTION HAS TO BE DEDUCTED TO ARRIVE AT THE INCOME AVAILABLE FOR APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSE S. 7.1. IN THE AFORE-MENTIONED FACTS WHERE THERE IS NO INFI RMITY POINTED OUT BY THE REVENUE NOR ANY CONTRARY DECISION HAS BEEN REFERRED TO FOR OUR CONSIDERATION WE FIND NO MERIT IN THE DEPARTMENTAL GROUND. BEING SATISFIED WITH THE REASONING AND FINDING OF THE CIT(A), THE GROUND IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DIS MISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 23 RD OF AUGUST 2013. SD/- SD/- (T.S.KAPOOR) (DIVA SINGH) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED: 23/08/2013 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI