The ACIT, 3(1), Bhopal V. M/s Holy Family Society, Bhopal

ITA 576/IND/2010

• Counselvise Citation: 57622714 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 03-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K GEORGE CAS
• Assessee Lawyers: ARUN DEWAN
• Keywords: Charitable institution

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.576/IND/2010 A.Y. 2007-08 ASSTT. COMMISSIONER OF INCOME TAX 3(1), BHOPAL ... APPELLANT VS M/S. HOLY FAMILY SOCIETY, BHOPAL PAN AAATH 4529 H ... RESPONDENT APPELLANT BY : SHRI ARUN DEWAN DEPARTMENT BY : SHRI K.V.S.R. KRISHNA & SHRI K.K. GEORGE, CAS DATE OF HEARING : 10.10.2011 DATE OF PRONOUNCEMENT : 10.10.2011 O R D E R PER JOGINDER SINGH 2 BY WAY OF THIS APPEAL THE REVENUE IS BEFORE US ON T HE SOLITARY GROUND THAT THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) WAS NOT JUSTIFIED IN DELETING THE ADDITIO N OF RS.30,76,574/- MADE BY THE ASSESSING OFFICER OUT OF TOTAL DONATION OF RS.88,80,000/- MADE BY THE ASSESSEE TO OTHER CHARITABLE INSTITUTIONS, BY INVOKING SECTION 11(2) OF THE I.T. ACT, 1961. 2. DURING HEARING, THE LEARNED SENIOR DR SHRI ARUN DEWAN STRONGLY OPPOSED THE DELETION OF THE IMPUGNED ADDIT ION. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A). 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSIO N, WE ARE REPRODUCING HEREUNDER THE FINDING OF THE LD. CIT(A) : I HAVE GONE THROUGH THE ASSESSMENT ORDER, SUBMISSION MADE BY THE LD. COUNSEL AND THE SUPPORTING DOCUMENTS FILED WHICH IS ON RECORD. IT IS SEEN THAT DURING THE RELEVANT YEAR THE GROSS RECEIPTS OF THE APPELLANT ARE 3 RS.2,08,09,406/- OUT OF WHICH TOTAL APPLICATION OF INCOME INCLUDING DONATION IS RS.2,07,64,569/-. THE AMOUNT OF APPLICATION RS.2,07,64,569/- COMPRISES OF FOLLOWING CLAIM: DONATION RS.88,80,000 RECURRING EXPENDITURE RS.1,08,83,280 NON RECURRING EXPENDITURE RS.10,01,289 RS.2,07,64,569 FROM THE ABOVE, IT IS CRYSTAL CLEAR THAT TOTAL DONATION OF RS.88,80,000/- WERE GIVEN OUT OF CURRENT YEARS RECEIPTS. THE CALCULATION OF THE ASSESSING OFFICER WORKING OUT THE AMOUNT OF DONATION OUT OF A PORTION OF ACCUMULATED INCOME IS NOT CORRECT. THE ASSESSING OFFICER HAS ASSUMED THAT THE APPELLANT HAD APPLIED ONLY 85% THE RECEIPTS OF THE CURRENT YEAR DURING THE YEAR UNDER CONSIDERATION, WHEREAS IN FACT, THE SURPLUS AS PER INCOME AND EXPENDITURE ACCOUNT IS ONLY RS.44,837/- (0.22%). HENCE, THE APPLICATION FROM CURRENT YEAR APPLICATION IS 99.78%. THUS, THE TOTAL DONATION OF RS. 88,80,000/- WAS GIVEN OUT OF CURRENT YEARS RECEIPTS. AS PROVIDED IN SECTION 11(1)(A) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA AND WHERE ANY SUCH INCOME IS ACCUMULATED OR SET APART IS NOT IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FROM SUCH PROPERTY. IN THE INSTANT CASE, THE 4 EXPENDITURE INCURRED DURING THE YEAR INCLUDING THE CONTRIBUTION TO EDUCATIONAL INSTITUTION IS OUT OF CURRENT YEAR INCOME ONLY WHICH IS EVIDENT FROM THE COPY OF INCOME & EXPENDITURE ACCOUNT ATTACHED WITH THE RETURN, THE QUESTION OF CONTRIBUTION MADE FROM A PORTION OF ACCUMULATED INCOME DOES NOT ARISE. IT IS ALSO PERTINENT TO NOTE THAT THE DONATION HAS BEEN GIVEN BY THE APPELLANT TO THE OTHER TRUSTS HAVING THE SAME OBJECTIVES. THE ASSESSING OFFICER HAS PROCEEDED ON A WRONG FOOTING THAT THE CONTRIBUTION MADE TO THE EDUCATIONAL INSTITUTION IS OUT A PORTION OF ACCUMULATED INCOME AND HENCE AS PROVIDED IN SECTION 11(2) THE SAME IS LIABLE TO TAXED. THE ASSESSING OFFICER HAS WRONGLY APPLIED SECTION 11(2) IN THE PRESENT CASE BECAUSE SECTION 11(2) COMES INTO PICTURE WHEN THERE IS APPLICATION OF FUND OR INCOME FROM THE ACCUMULATED INCOME OF EARLIER YEARS OR THE BALANCE OUTSTANDING DURING THE YEAR WOULD HAVE EXCEEDED 15% OF THE GROSS RECEIPTS. AS ALREADY MENTIONED ABOVE, THERE IS APPLICATION OF INCOME OUT OF CURRENT YEAR ONLY AND NOT OUT OF ACCUMULATED INCOME AND THE BALANCE OUTSTANDING AMOUNT OF RS.44,837/- IS ALSO LESS THAN 15% HENCE THE ENTIRE AMOUNT OF DONATION AMOUNTING TO RS.88,80,000/- IS AN ALLOWABLE DEDUCTION U/S 11(1)(A). 5 4. THE AFORESAID FACTUAL FINDING RECORDED BY THE LD . CIT(A) WAS NOT CONTROVERTED IN ANY MANNER BY THE REVENUE, THEREFORE WE PROCEED TO ANALYSE THE FACTS, IN BRIEF, WHICH AR E THAT DURING THE RELEVANT PERIOD, THE ASSESSEE DONATED RS.88,80, 000/- TO OTHER CHARITABLE INSTITUTIONS OUT OF ACCUMULATED IN COME. THE LD. ASSESSING OFFICER WAS OF THE VIEW THAT IN VIEW OF P ROVISIONS OF SECTION 11(2), THE DONATION MADE TO OTHER INSTITUTI ONS/SOCIETIES IS NOT ALLOWABLE AS APPLICATION OF INCOME, CONSEQUE NTLY, HE ADDED THE IMPUGNED AMOUNT TO THE INCOME OF THE ASSE SSEE. HE WORKED OUT THE DISALLOWANCE OF RS.30,76,574/- AFTER DEDUCTING 15% OUT OF THE GROSS RECEIPT OF RS.2,08,09,406/-. H E FURTHER NOTED THAT OUT OF THE DONATED AMOUNT OF RS.88,03,42 6/-, A SUM OF RS.58,07,426/- WAS GIVEN OUT OF CURRENT YEAR INC OME AND THE BALANCE AMOUNT OF RS.30,76,574/- OUT OF ACCUMULATED INCOME. THUS, HE ADDED RS. 30,76,574/- TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THIS ADDITION BEF ORE THE LD. CIT(A) WHO AFTER CONSIDERING THE OBJECTS, WHICH WER E FOUND TO BE CHARITABLE, DELETED THE ADDITION AGAINST WHICH T HE REVENUE IS 6 IN APPEAL BEFORE THIS TRIBUNAL. THE ACCUMULATION AN D APPLICATION OF INCOME OF THE ASSESSEE IS SUMMARISED AS UNDER: DESCRIPTION ACCUMULATION (IN RS.) APPLICATION OF INCOME (IN RS.) PERCENTAGE 2,08,09,406 1,97,63,280 100% FIXED ASSETS ACQUIRED AS PER SCHEDULE 10,01,289 TOTAL INCOME APPLIED 2,07,64,569 99.78% INCOME ACCUMULATED U/S 11(1)(A) OR AVAILABILITY OF SURPLUS FUNDS 44,837 0.22% IF THE AFORESAID TABLE IS ANALYSED, WE FIND THAT AS PER SUB- SECTION (2) TO SECTION 11OF THE ACT, THE ASSESSEE I S SUPPOSED TO APPLY 85% OF THE INCOME REFERRED TO IN CLAUSE (A) O R CLAUSE (D) OF SUB-SECTION (1) R.W. EXPLANATION TO THAT SUB-SEC TION. THE ASSESSEE HAS APPLIED 99.78% OF THE TOTAL ACCUMULATI ON OF RS.2,08,09,406/- AND ONLY 0.22% OF SUCH ACCUMULATIO N IS AVAILABLE SURPLUS WITH THE ASSESSEE, THEREFORE, THE RE IS NO VIOLATION OF THIS SECTION AS HAS BEEN ALLEGED BY TH E LD. ASSESSING OFFICER. EVEN THE LD. CIT(A) EXAMINED THE SUPPORTING DOCUMENTS FILED BY THE ASSESSEE BEFORE HIM AND THE DONATED AMOUNT OF RS.88,80,000/- WERE GIVEN OUT OF CURRENT YEAR RECEIPT AND THE SURPLUS FUNDS/INCOME REMAINED WITH THE ASSE SSEE IS 7 ONLY RS.44,837/- WHICH IS WITHIN THE PRESCRIBED LIM IT. IT IS NOT THE CASE THAT THE DONATED AMOUNT WAS GIVEN TO THE INSTITUTIONS/SOCIETIES WHICH ARE OF NON-CHARITABLE NATURE. THE EXPENDITURE INCURRED DURING THE YEAR INCLUDES THE C ONTRIBUTION TO EDUCATIONAL INSTITUTIONS AS IS EVIDENT FROM INCO ME & EXPENDITURE ACCOUNT ATTACHED WITH THE RETURN DURING ASSESSMENT PROCEEDINGS ALSO. THE OBJECTS OF THE INSTITUTIONS/TRUSTS/SOCIETIES TO WHOM THE AMOUNT WA S DONATED ARE HAVING SIMILAR OBJECTS. EVEN OTHERWISE, THE APP LICATION OF INCOME IS OUT OF CURRENT YEARS ACCUMULATION AND NO T OUT OF ACCUMULATED INCOME. ADMITTEDLY, THE FINANCE ACT, 20 02 PUT SOME RESTRICTIONS ON THE APPLICATION OF ACCUMULATED INCOME BY WAY OF EXPLANATION TO SECTION 11(2). THE LD. CIT(A) HAS ALREADY PLACED RELIANCE UPON CERTAIN JUDICIAL PRONOUNCEMENT S LIKE ADDL. CIT VS. ALN RAO CHARITABLE TRUST (1195) 216 ITR 697 (SC). THE ASSESSEE FURTHER FINDS SUPPORT FROM THE DECISIO N IN CIT VS. SARLA DEVI SARABHAI TRUST (172 ITR 698) (GUJ), CIT VS. HINDUSTAN CHARITY TRUST (139 ITR 913) (CAL), CIT VS . THANTI 8 TRUST (239 ITR 502) (SC), CONSEQUENTLY, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. CIT(A). FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. SD/- SD/- (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10.10.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE !VYAS!