ITO (E), New Delhi V. M/s Pt. Kanhaya Lal Dayawanti Punj Foundation, New Delhi

ITA 6156/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3290 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 01-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAHUL CHO W RASIA
• Keywords: Charitable institution
• Section: 147; 148; 12; 154; 11

Judgement Text

THE ITO V PT. KANHYALAL DAYAWANTI PUNJ FOUNDATION ITA NO 6155 & 6156 /DEL/2016 A Y 2006 - 07 & 2007 - 08 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI SUDHANSHU SRIVASTAV A, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 6155 & 6156 /DEL/2016 ASSESSMENT YEAR : - 2006 - 07 & 2007 - 08 THE INCOME TAX OFFICER (EXEMPTION) WARD 2 (4) NEW DELHI VS. PT. KANHAYA LAL DAYAWANTI PUNJ FOUNDATION 17 - 18, NEHRU PLACE NEW DELHI PAN AAATP0913B (APPELLANT) (RESPONDENT) APPELLANT BY : MR. ATIQ AHMED SR. DR RESPONDENT BY: MR. RAHUL CHO W RASIA CA DATE OF HEARING 08/1/2018 DATE OF PRONOUNCEMENT 06/3/2018 O R D E R PER PRASHANT MAHARISHI, ACCOUNTANT MEMBER 1. THESE ARE THE TWO APPEALS FILED BY THE LD . INCOME TAX OFFICER (EXEMPTION) , WARD TO (4) NEW DELHI ( T HE LD. AO ) AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 40, DELHI ( T HE LD. CIT (A)) FOR ASSESSMENT YEAR 2006 07 AND 2007 08 PASSED ON 23/9/2016 WHEREIN THE CLAIM OF EXEMPTION U/ S 11 AND 12 OF THE INCOME TAX ACT WAS ALLOWED. THE ITO V PT. KANHYALAL DAYAWANTI PUNJ FOUNDATION ITA NO 6155 & 6156 /DEL/2016 A Y 2006 - 07 & 2007 - 08 2 2. IN BOTH THE ABOVE APPEALS THE REVENUE HAS RAISED SIMILAR GROUNDS AS UNDER : - I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN IGNORING THAT ACTIVITIES OF THE ASSESSEE IS OF COMMERCIAL NATURE AND PROFIT MOTIVE. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN LAW IN IGNORING THAT ACTIVITIES OF ASSESSEE TO ENTER INTO AN AGREEMENT TO OPERATE AND RUN THE HOSPITAL ON SHARING OF SURPLUS IN THE RATIO OF 80 : 20 IS NOT A CHARITABLE ACTIVITIES AND THEREFORE THE EXEMPTION FOR THE CORPUS DONATION CANNOT BE ALLOWED TO THE ASSESSEE UNDER SECTION 11 (1) (D). 3. BRIEFLY STATED THE FACTS OF THE CASE SHOWS THAT ASSESSEE IS A PUBLIC CHARITABLE TRUST WHO FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2006 07 SHOWING NIL INCOME ON 2 5/10/2006. ASSESSEE IS REGISTERED UNDER SECTION 12 A OF THE INCOME TAX ACT V IDE REGISTRATION DATED 15/3/1991. SUBSEQUENTLY NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT WAS ISSUED ON 27 / 3/2012 FOR THE REASON THAT IT HAS COME TO THE KNOWLEDGE OF THE DEPARTMENT THAT ASSESSEE HAS MADE AN AGREEMENT ON 7/2/ 2001 WITH ANOTHER TRUST TO RUN THE HOSPITAL AND RESEARCH CENTRE. ACCORDING TO THE AGREEMENT, 80% OF THE SURPLUS WILL BELONG TO THE THE ITO V PT. KANHYALAL DAYAWANTI PUNJ FOUNDATION ITA NO 6155 & 6156 /DEL/2016 A Y 2006 - 07 & 2007 - 08 3 ASSESSE E. IT WAS NOTED BY THE LD. ASSESSING OFFICER THAT INCOME AND EXPENDITURE ACCOUNT OF SUCH INCOME IS NOT REFLECTED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. IT WAS FURTHER NOTED BY THE LD. AO THAT THE ASSESSEE HAS SHOWN INCOME OF RS. 9509566/ PLUS CORPUS D ONATION OF RS. 8 507 2 20/ AN D EXPENDITURE OF RS. 9 652732/ RELATING TO HOSPITAL HAS NOT BEEN REFLECTED IN THE BOOKS OF ACCOUNTS , THEREFORE BENEFIT OF SECTION 11 SECTION 12 SHOULD HAVE BEEN DENIED TO THE ASSESSEE. 4. IN RESPONSE TO THE NOTICE UNDER SECTIO N, 148 OF THE INCOME TAX ACT THE ASSESSEE REQUESTED THE LD. AO TO ACCEPT THE ORIGINAL RETURN FILED ON 25/10/2006 AS RETURN FILED IN RESPONSE TO HIS NOTICE UNDER SECTION 148 WHILE V IDE LETTER DATED 9/4/2012. 5. BEFORE THE LD. ASSESSING OFFICER ASSESSEE EXPLAIN ED THAT IT HAS ENTERED INTO A MANAGEMENT AND OPERATION AGREEMENT TO MANAGE HOSPITAL OF ANOTHER TRUST THAT IS RUNNING IN TO LOSSES, TO SUPPORT IT BY PROVIDING DONATION V IDE AGREEMENT DATED 7/2/2001. IT WAS FURTHER EXPLAINED THAT AS PER PARAGRAPH NO. 8 O F THE AGREEMENT WHEREVER THERE IS A SURPLUS IN THE ACCOUNT OF THE HOSPITAL THEN 20% OF THE EXCESS WOULD BE USED BY THAT PARTICULAR CHARITABLE TRUST FOR THE CHARITABLE ACTIVITIES AND THE BALANCE FUNDS WOULD BE AVAILABLE TO THE ASSESSEE FOR BETTERMENT AND OT HER CHARITABLE PURPOSES. THE ASSESSEE HAS PAID TO THAT PARTICULAR HOSPITAL DONATION FOR RUNNING AND OPERATION OF HOSPITAL, WHICH IS CLAIMED AS A DONATION PAID DURING THE YEAR. SINCE THE HOSPITAL, WHICH IS THE ITO V PT. KANHYALAL DAYAWANTI PUNJ FOUNDATION ITA NO 6155 & 6156 /DEL/2016 A Y 2006 - 07 & 2007 - 08 4 MANAGED BY THE ASSESSEE BY THIS AGREEMENT, IS RUN NING INTO CONTINUING LOSSES SO THERE IS NO SURPLUS OF FUNDS FOR THE ASSESSEE TRUST AND HENCE THERE IS NO INCOME EARNED BY THE ASSESSEE TRUST FROM THIS AGREEMENT. 6. THE ASSESSEE FURTHER INTIMATED TO THE LD. ASSESSING OFFICER THAT IDENTICAL ISSUE AROSE IN ASSE SSMENT YEAR 2004 05 WHERE THE SIMILAR ADDITION WAS MADE AND THE LD. CIT (A) HAS ALLOWED THE APPEAL IN THE FAVOUR OF THE ASSESSEE. 7. THE LD. ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND HELD THAT THE SHARING OF THE EXCESS OF INCOME O VER EXPENDITURE BETWEEN THE ASSESSEE TRUST AND THE OTHER TRUST SHOWS THE PROFIT MOTIVE OF THE ASSESSEE TRUST AND THE COMMERCIAL NATURE OF THE AGREEMENT. THEREFORE, HE DENIED EXEMPTION TO THE ASSESSEE TRUST UNDER SECTION 11 AND 12 OF THE INCOME TAX ACT. THE DONATION PAID BY THE ASSESSEE TRUST TO THE OTHER TRUST OF RS. 2854058/ WAS ALSO DISALLOWED . C ONSEQUENTLY THE TOTAL INCOME OF THE SOCIETY WAS ASSESSED AT RS. 2 710883/ AND ASSESSMENT UNDER SECTION 143 (3) READ WITH SECTION 147 OF THE INCOME TAX ACT WAS P ASSED ON 25/3/ 2013. IDENTICALLY ORDER FOR THE ASSESSMENT YEAR 2007 08 WAS ALSO PASSED. 8. SUBSEQUENTLY ASSESSEE PREFERRED AN APPLICATION UNDER SECTION 154 DATED 28/7/2015 FOR A Y 2006 07 AND 2007 08 STATING THE FACTS THAT THE ISSUE HAS ALREADY BEEN DECI DED BY THE LD. CIT (A) IN ASSESSEES OWN CASE FOR SEVERAL EARLIER YEARS AND THE BENEFIT DENIED TO THE ASSESSEE THE ITO V PT. KANHYALAL DAYAWANTI PUNJ FOUNDATION ITA NO 6155 & 6156 /DEL/2016 A Y 2006 - 07 & 2007 - 08 5 UNDER SECTION 11 AND 12 OF THE INCOME TAX ACT IS INCORRECT. THE LD. ASSESSING OFFICER REJECTED THE APPLICATIONS OF THE ASSESSEE VIDE ORDER DATED 30/7/2015 FOR BOTH THE YEARS . 9. THE ASSESSEE AGGRIEVED WITH THE ORDER OF THE LD. ASSESSING OFFICER PREFERRED APPEAL BEFORE THE LD. CIT (A) WHO AS PER ORDER DATED 23/9/2016 ALLOWED THE CLAIM OF THE ASSESSEE FOR BOTH THE YEARS HOLDING THAT IN EARL IER YEARS THE CLAIM OF THE EXEMPTION UNDER SECTION 11 AND 12 OF THE INCOME TAX ACT HAS BEEN ALLOWED BY THE LD. CIT (A). 10. THE REVENUE AGGRIEVED WITH THE ORDER OF THE LD. CIT (A) HAS PREFERRED THIS APPEAL BEFORE US . 11. TH E LD. DEPARTMENTAL REPRESENTATIVE SUPPOR TED THE ORDER OF THE LD. ASSESSING OFFICER AND STATED THAT WHEN THE ASSESSEE HAS ENTERED INTO A COMMERCIAL AGREEMENT WITH ANOTHER TRUST FOR RUNNING A HOSPITAL, ON PROFIT SHARING BASIS IT HAS A PROFIT MOTIVE AND COMMERCIAL NATURE AND THEREFORE THE EXEMPTION UNDER SECTION 11 IN SECTION 12 OF THE INCOME TAX HAVE BEEN CORRECTLY DENIED TO THE ASSESSEE. 12. THE LD. AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF THE LD. CIT (A) AND SUBMITTED THAT WHEN THE ISSUE HAS ALREADY BEEN DECIDED BY THE LD. CIT (A) IN ASSESSEE S FAVOUR AND WHICH HAS NOT BEEN CHALLENGED BEFORE THE HIGHER FORUM THERE IS NO REASON TO AGITATE THIS APPEAL BY REVENUE BEFORE THE COORDINATE BENCH. ON THE MERITS, IT WAS SUBMITTED THAT WHEN THERE IS NO INCOME EARNED BY THE ASSESSEE THERE CANNOT BE THE ITO V PT. KANHYALAL DAYAWANTI PUNJ FOUNDATION ITA NO 6155 & 6156 /DEL/2016 A Y 2006 - 07 & 2007 - 08 6 ANY REASON TO SHOW THAT PARTICULAR INCOME IN THE PROFIT AND LOSS ACCOUNT. HE FURTHER SUBMITTED THAT THAT ASSESSEE IS ENGAGED IN THE RUNNING OF THE HOSPITAL ON CHARITABLE BASIS. IT WAS FURTHER STATED THAT THE OTHER TRUST WAS INCURRING HUGE LOSSES AND DID NOT HA VE FINANCIAL SUPPORT AND THEREFORE THE ASSESSEE TRUST DECIDED TO GIVE FINANCIAL SUPPORT TO THAT PARTICULAR TRUST IN RUNNING A HOSPITAL AND IF THERE IS A SURPLUS ARISING OUT OF THAT ACTIVITY THAN 20% OF SUCH EXCESS OF INCOME OVER EXPENDITURE WOULD BE KEPT B Y THAT PARTICULAR TRUST FOR ITS CHARITABLE ACTIVITIES AND THE BALANCE FUND WOULD BE GIVEN TO THE ASSESSEE FOR ITS ON CHARITABLE ACTIVITIES. HE FURTHER STATED THAT THERE IS NEITHER A PROFIT MOTIVE OR COMMERCIAL NATURE IN THIS AGREEMENT 13. WE HAVE CAREFULLY CON SIDERED THE RIVAL CONTENTION AND T HE ORDERS OF THE LOWER AUTHORITIES. I N THE PRESENT CASE, THE LD. CIT (A) HAS ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING ORDERS OF HIS PREDECESSORS FOR EARLIER YEARS. IN THE PRESENT CASE THOUGH ORIGINAL APPEAL AGAINST THE ORDER PASSED BY THE LD. ASSESSING OFFICER UNDER SECTION 143 (3) READ WITH SECTION 147 OF THE INCOME TAX ACT WAS PENDING BEFORE THE LD. CIT (A) THE NOTICE UNDER SECTION 154 WAS ISSUED BY THE LD. AO FOR TREATING THE CORPUS DONATION OF RS. 8 507 2 20/ AS INCOM E OF THE APPELLANT SINCE BENEFIT UNDER SECTION 11 AND SECTION 12 HAS NOT BEEN ALLOWED. IT IS A FACT THAT IN THE EARLIER YEARS THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR ASSESSMENT YEAR 2004 05 TO ASSESSMENT YEAR 2008 THE ITO V PT. KANHYALAL DAYAWANTI PUNJ FOUNDATION ITA NO 6155 & 6156 /DEL/2016 A Y 2006 - 07 & 2007 - 08 7 09 THE CLAIM OF THE ASSESSEE FOR EXEMPTION UNDER SECTION 11 IS ALLOWED. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE ABOVE FACT AND COULD NOT SHOW US WHETHER THE ABOVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR ALL THESE YEARS HAVE BEEN CHALLENGED BY THE REVENUE BEFORE THE HIGHER APPELLATE FORUMS. IN VIEW OF ABOVE FACTS , WE DO NOT HAVE ANY HESITATION IN UPHOLDING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING THE EXEMPTION TO THE ASSESSEE UNDER SECTION 11 AND 12 OF THE INCOME TA X ACT AND CONSEQUENTLY HOLDING THAT CORPUS DONATION IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 (1) (D ) OF THE ACT. IN VIEW OF THIS, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2006 07 AND 2007 08 AND HENCE THEY ARE DISMISSED. 14. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 06.03.2018. S D / - S D / - ( SUDHANSHU SRIVASTAVA ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 06 /03/2018 *NEHA* COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT THE ITO V PT. KANHYALAL DAYAWANTI PUNJ FOUNDATION ITA NO 6155 & 6156 /DEL/2016 A Y 2006 - 07 & 2007 - 08 8 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI THE ITO V PT. KANHYALAL DAYAWANTI PUNJ FOUNDATION ITA NO 6155 & 6156 /DEL/2016 A Y 2006 - 07 & 2007 - 08 9