Appeal details
Counselvise Citation
[2023] 100 COUNSELVISE.COM (IT) 8269 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 month(s) 10 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
22-02-2023
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
C
Next Hearing Date
02-08-2023
Assessment Year
2018-2019
Appeal Filed On
12-07-2022
Judgement Text
आयकर अपीलीय अिधकरण ‘सी’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI माननीय +ी महावीर िसंह, उपा01 एवं माननीय +ी मनोज कु मार अ6वाल ,लेखा सद9 के सम1। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.587/Chny/2022 (िनधाBरण वषB / Assessment Year: 2018-19) Srimathi Laxmi Charities 5 th Main Road, Dr. Subbarayan Nagar, Kodambakkam, Chennai-600024. बनाम/ V s. ACIT (Exemptions) Ward-3, Chennai. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AAN TS -4 0 0 7 - N (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Appellant by : Shri S. Sridhar (Advocate) – Ld. AR थ की ओरसे/Respondent by : Shri P. Sajit Kumar (JCIT) –Ld. DR सुनवाई की तारीख/Date of Hearing : 09-02-2023 घोषणा की तारीख /Date of Pronouncement : 23-02-2023 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2018-19 arises out of the order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 03-06-2022 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) on 25-02-2021. The grounds raised by the assessee read as under: 1. The order of the National Faceless Appeal Centre, Delhi dated 03.06.2022 vide DIN & Order No.ITBA/NFAC/S/250/2022-23/10433 13076(1) for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case. 2. The NFAC erred in confirming the rejection of the claim of application of donation of Rs.24 Lakhs to Selvamuthukumar Trust within the scope of section ITA No.587/Chny/2022 - 2 - 11 of the Act and consequently erred in confirming the computation in para 5 of the assessment order dated 25.02.2021 without assigning proper reasons and justification. 3. The NFAC failed to appreciate that the sustenance of the rejection of the claim of application of the disputed donation to another recognized charitable entity was wrong, incorrect, invalid, unjustified, erroneous and not sustainable both on facts and in law. 4. The NFAC failed to appreciate that the misreading of the approved objects of the other charitable entity by the original authority would vitiate the computation made in para 5 of the order dated 25.02.2021 and ought to have appreciated that the principles of substance over form was completely overlooked and brushed aside while preferring erroneously for adopting the interpretation of the understanding of the transaction on the face of it. 5. The NFAC failed to appreciate that the findings in para 5.2 of the impugned order were wrong, incorrect, invalid, unjustified, erroneous and not sustainable both on facts and in law. 6. The NFAC failed to appreciate that there was no proper opportunity given before passing of the impugned order as well as before passing the DRP’s order and any order passed in violation of the principles of natural justice would be nullity in law. As is evident, the assessee is aggrieved by rejection of claim of application of donation of Rs.24 Lacs to another trust. 2. The Ld. AR advanced arguments and submitted that their was no bar under law that the donation could not be given to another Trust having different objects than that of the assessee. The Ld. AR submitted that the prohibition contemplated in Explanation-2 to Section 11(1) of the Act is only for corpus donation to another registered trust. The Ld. AR submitted that there is no restriction / condition in Section 11 of the Act for giving donation other than corpus donation to another 12A registered entity and Assessing Officer (AO) imposed an artificial condition that receiving entity should have similar objects thereby rejecting the claim for application of income. It was submitted that no such condition has been envisaged under the provisions. The Ld. AR also sought similarity in the objects of the assessee trust as well as the donee trust. The last argument of Ld. AR is that the assessee trust has ITA No.587/Chny/2022 - 3 - applied more than 85% of the gross receipts even without the claim of the donation and therefore, it could have no taxable income under such an eventuality. The Ld. Sr. DR, on the other hand, controverted the stand of Ld. AR and submitted that objects of done trust were different and the funds of the assessee trust were to be spent only as per the objects of the assessee trust which is not the case here. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Proceedings before lower authorities 3.1 During assessment proceedings, it transpired that the assessee trust donated Rs.24 Lacs to another registered trust i.e., M/s Selvamuthukumar Trust. The assessee donated another sum of Rs.4.15 Crores to N.R. Subramania Iyer Trust. Both the donations were towards non-corpus fund of the donee entities. The assessee also received donation of Rs.3.75 Crores as donation towards non- corpus funds from Sandipani Trust which was not disputed by Ld. AO. The donations made to N.R. Subramania Iyer Trust was also not disputed by Ld. AO since the objects of the assessee trust as well as donee trust were found to be similar. However, donation made to Selvamuthukumar Trust was not accepted since the objects of the donee trust were not similar to the objects of the assessee trust. It was noted by Ld. AO that the main object of the assessee Trust was to provide charities in the field of education and medical whereas the main object of the donee trust was the propagation of Sanathana Dharma in particular and do specific activities that would enable the propagation of religious activities, contribute to temples, mosques, churches, gurudhwaras and places of public worship, do religious ITA No.587/Chny/2022 - 4 - festivals, yagnas, homams, prayers, pay honorarium to vedic scholars and to other activities that are necessary and ancillary to the above. Since the object of Trust was completely different than those of the assessee Trust, the donation paid by the assessee was held to be not allowed to be claimed as application of trust income and accordingly, the same was brought to tax. 3.2 The assessee claimed application for Rs.440.83 Lacs which was reduced by impugned donation of Rs.24 Lacs. The amount accumulated to the extent of 15% of gross receipts was computed at Rs.42.33 Lacs. The amount of Rs.24 Lacs was thus brought to tax by Ld. AO. The Ld. CIT(A) endorsed the view of Ld. AO against which the assessee is in further appeal before us. Our findings and Adjudication 4. From assessee’s computation of income and financial statements as placed on record, it could be seen that the assessee has earned income of Rs.483.17 Lacs, the majority of which consist of donation received for Rs.375 Lacs. The assessee has claimed application of income for Rs.440.83 Lacs, the majority of which include donations given by assessee for Rs.439 Lacs. It could thus be seen that except for receiving donations and granting donations, no substantial charitable activity has been carried out by the assessee trust during the year. The amount of Honorarium and scholarship paid is quite miniscule to the extent of Rs.1.55 Lacs only. It could also be seen that as against income of Rs.483.17 Lacs, the assessee has claimed application for Rs.440.83 Lacs which far exceeds 85% of income of Rs.483.17 Lacs. The 85% of Rs.483.17 Lacs comes to Rs.410.69 Lacs as against which the assessee has ITA No.587/Chny/2022 - 5 - claimed application of Rs.440.83 Lacs and there is excess application for Rs.30.13 Lacs. In Form No.10B, the assessee has claimed application of income to the extent of Rs.440.83 Lacs and amount of Rs.42.33 Lacs has been accumulated or set apart for application towards charitable purpose in subsequent years. In the above background, the impugned issue is adjudicated as under. 5. As per extant provisions of Sec.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, is not included in the total income of the trust. Further, the accumulation of income for such purposes in India is also not included in total income subject to maximum accumulation of 15% of gross receipts. In other words, the assessee is obligated to apply its income in the current year or accumulate the same for application in subsequent years (subject to max. cap of 15% of gross receipts) only for such purposes in India. The expression ‘such purposes’ would be of paramount importance since the income of the trust cannot be diverted for any other purpose except for application towards fulfillment of its main objects only. It is sine qua non that application as well as accumulation should only be towards achievement of main objects of the assessee trust and not towards achievement of any other alien objects. The application or accumulation, in any other manner, would lead to an inevitable conclusion that such an income was not applied for such purposes and therefore, the same would be included in the total income of the assessee and the same cannot be claimed as an application of income. Therefore, the arguments of Ld. AR that the donee trust could have different objects and still the donation was to be ITA No.587/Chny/2022 - 6 - considered as an application of income is not acceptable. Upon perusal of trust deed of the assessee, it could clearly be seen that the main objects of the assessee is doing charities in the field of education and medical whereas the main object of the donee trust is the propagation of religious activities which are altogether different objects. Therefore, the impugned donations could not be held to be an application of income towards main objects of the assessee trust since the income was not applied for such purposes in India which necessarily has to be fulfillment of assessee’s main objects only. We order so. 6. Another argument raised before us is that excluding the impugned donation of Rs.24 Lacs, the assessee would have excess of income over expenditure for Rs.66.33 Lacs which is still less than 15% of gross receipts earned by the assessee and therefore, the same should be treated as deemed accumulation. This argument is clearly fallacious one since firstly the amount has already gone out of the coffers of the assessee during this year and the funds are no more available with the assessee for spending in subsequent years. Secondly, as per Form 10B, the assessee has made accumulation only to the extent of Rs.42.33 Lacs and therefore, the impugned amount could never be considered as an accumulation of income for the assessee. The accumulation as made by the assessee in Form 10B only has to be considered as accumulation for spending in subsequent years. Therefore, the arguments of Ld. AR, in this regard, stand rejected. 7. Finally, on the given facts and circumstances of the case, the assessment framed by Ld. AO could not be faulted with. We order so. ITA No.587/Chny/2022 - 7 - 8. The appeal stand dismissed. Order pronounced on 23 rd February, 2023. Sd/- (MAHAVIR SINGH) उपा01 /VICE PRESIDENT Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद9 / ACCOUNTANT MEMBER चे*ई / Chennai; िदनांक / Dated: 23-02-2023 EDN/- आदेश की Vितिलिप अ 6ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु /CIT 4. िवभागीय ितिनिध/DR 5. गाड फाईल/GF
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