THE ITO (Exemptions), Rajahmundry V. Vimala Women Charitable Society, Vijayawada

ITA 647/VIZ/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6398 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 17-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S ARAVINDAN
• Keywords: Charitable institution
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI G. MANJUNATHA, HONBLE ACCOUNTANT MEMBER ITA NO. 647 / VIZ /201 4 (ASST. YEAR : 20 11 - 1 2 ) ITO (EXEMPTIONS), RAJAHMUNDRY . V . M/S. VIMALA WOMEN CHARITABLE SOCIETY , 10 - 56, VIMALA SADAN CONVENT, PENAMALURU, VIJAYAWADA. PAN NO. AAATV 4505 F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI R.S. ARAVINDAN JCIT DATE OF HEARING : 2 4 / 0 1 /201 7 . DATE OF PRONOUNCEMENT : 22 / 0 3 /201 7 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , VIJAYAWADA , DATED 04/09/2014 FOR THE ASSESSMENT YEAR 2011 - 12 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT ASSESSEE IS A CHARITABLE SOCIETY MAINTAINED BY DEEN A SEVANA SABHA SISTERS TO CARRY OUT SOCIAL WORKS PARTICULARLY , IN THE FI E LD OF LEPROSY /AIDS / HIV AND OTHER VOCATIONAL TRAINING PROGRAMMES FOR EMPOWERMENT OF WOMEN AND FILED ITS RETURN OF INCOME ADMITTING TOTAL INCOME OF NIL . CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY A ND ASSESSMENT UNDER SECTION 2 ITA NO. 647 / VIZ /201 4 (M/S. VIMALA WOMEN CHARITABLE SOCIETY) 143(3) WAS COMPLETED BY DETERMINING TOTAL INCOME OF 55 LAKHS ON THE GROUND TH A T THE ASSESSEE IS NOT ENTITLED FOR EX E MPTION UNDER SECTION 11(2) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , T HE ASSESSING OFFICER HAS NOTED THAT ACCUMULATION OF INCOME F O R T H E P U R P O S E O F BUILDING CONSTRUCTION AND OTHER ACTIVITIES MENTIONED IN FORM NO. 10 IS NOT SPECIFIC . IN THIS CONNECTION, THE ASSESSING OFFICER CALLED THE ASSESSEE TO EXPLAIN THE SAME. THE ASSESSEE HAS EXPLAINED THAT IT HAS SET A SIDE THE ACCUMULATED AMOUNT FOR TWO DEFINITE PURPOSES (I) VIMALA WOMEN CHARITABLE SOCIETY CONSTRUCTION (II) MAINTENANCE OF TH E INSTITUTION I.E. MAINTENANCE OF SISTERS AND TRAINEES. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION GIVEN BY THE ASSESSEE. THE ASSESSING OFFICER FURTHER OBSERVED TH A T THE FUNDS OF 55 LAKHS ACCUMULATED UNDER SECTION 11(2) OF THE ACT WERE NOT INVESTED OR DEPOSITED BY THE ASSESSEE , AS P E R THE AUDIT RE PORT ENCLOSED TO THE RETURN OF INCOME , T HE INVESTMENT DETAILS WERE REPORTED AS NIL . I N THIS CONNECTION, THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT THEY MADE A FIXED DEPOSIT OF 60 LAKHS ON 04/05/2010 WHICH INCLUDED 55 LAKHS ACCUMULATED UNDER SECTION 11(2) OF THE ACT . H OWEVER, THE ASSESSING OFFICER DENIED THE ASSESSEES EXPLANATION STATING THAT DEPOSIT WAS MADE PRIOR TO THE DATE OF RESOLUTION FOR ACCUMULATION OF FUNDS AND HENCE , IT WAS NOT RELATED TO FUNDS ACCUMULATED ON THE DATE OF RES OLUTION. ACCORDINGLY , EXEMPTION CLAIMED BY THE ASSESSEE UNDER SECTION 11(2) OF THE ACT WAS DENIED. 3 ITA NO. 647 / VIZ /201 4 (M/S. VIMALA WOMEN CHARITABLE SOCIETY) 3 . BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). BEFORE COMMISSIONER OF INCOME TAX (APPEALS) , ASSESSEE MADE A DETAILED SUBMISSION AND ALSO FILED DETAILS OF FUNDS RECEIVED AND INVESTMENTS THEREOF. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE DETAILED EXPLANATION GIVEN BY THE ASSESSEE AND ALSO CONSIDERING OTHER DETAIL S, HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER AND HELD THAT ASSESSEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: - 5. I HAVE CAREFULLY GONE THROUGH THE ORDER OF THE ASSESSING OFFICER, THE GROUNDS OF APPEAL AND ALSO THE SUBMISSIONS MADE BY THE APPELLANT . ACCORDINGLY, THE ISSUES AGITATED IN THIS APPEAL ARE DEALT IN AS UNDER: - 5.1 THE ONLY ISSUE TO BE DEALT IN THIS APPEAL IS DENIAL OF EXEMPTION CLAIMED OF THE ACT OUT OF THE TOTA L INCOM E OF THE PREVIOUS YEAR 2010 - 11, THE ACCUMULATED RS.55,00,0007 - U/S.11(2) OF THE ACT FOR 'BUILDING CONSTRUCTION AND OTHER ACTIVITIES' AND CLAIMED EXEMPTION UNDER THAT SECTION. THE ASSESSING OFFICER BROUGHT THIS INCOME TO TAX MAINLY FOR THE FOLLOWING REASONS. (I) THE PURPOSE OF ACCUMULATION OF INCOME U/S. 11 (2) IS NOT SPECIFIC. (II) AMOUNT ACCUMULATED U/S.11(2) WAS NOT INVESTED OR DEPOSITED IN THE MANNER LAID DOWN IN SECTION 11 (2)(B) OF THE ACT. 5.1. 1 THE PURPOSE OF ACCUMULATION OF INCOME U/S. 1 1(2) OF THE ACT: A) THE ASSESSING OFFICER HAS OBSERVED THAT THE PURPOSE OF ACCUMULATION 'BUILDING CONSTRUCTION AND OTHER ACTIVITIES' MENTIONED IN FORM NO. 10 IS NOT SPECIFIC. IN THIS CONNECTION, THE ASSESSI NG OFFICER CALLED FOR THE APPELLANT'S EXPLANATION. THE APPELLANT HAS EXPLAINED THAT IT HAS SET ASIDE THE ACCUMULATED AMOUNT FOR TWO DEFINITE PURPOSES (I) VIMALA WOMEN CHARITABLE SOCIETY CONSTRUCTION (II) MAINTENANCE OF THIS INSTITUTION I.E, MAINTENANCE OF SISTERS AND TRAINEES. IT IS FURTHER EXPLAINED THAT IT HAS NEVER MENTIONED ALL THE OBJECTS OF THE SOCIETY AS PURPOSES FOR ACCUMULATION OF FUNDS. HOWEVER, THE AO DID NOT ACCEPT THE APPELLANT'S EXPLANATION. B) DURING THE COURSE OF APPEAL PROCEEDINGS, APPEL LANT HAS PRODUCED A COPY OF THE RESOLUTION PASSED FOR ACCUMULATION OF FUNDS ON 1/4/2011. THE APPELLANT HAS ALSO PRODUCED A COPY OF A LETTER ISSUED BY DSS GENERALATE, PATTUVAM TRANSFERRING FUNDS OF RS.60,00,000/ - TO THE APPELLANT'S ACCOUNT TO UTILIZE THE SA ME FOR CONSTRUCTION WORK AND OTHER PURPOSES MENTIONED IN THAT LETTER AND STATED THAT THESE FUNDS INCLUDE THE FUNDS OF RS.55,00,000/ - ACCUMULATED U/S.11(2) OF THE ACT. IN THIS LETTER, THE FUNDS WERE TRANSFERRED SPECIFYING VARIOUS PURPOSES FOR UTILIZATION OF THESE FUNDS. ON VERIFICATION OF THIS LETTER , IT IS OBSERVED THAT THE FUNDS WERE GIVEN 4 ITA NO. 647 / VIZ /201 4 (M/S. VIMALA WOMEN CHARITABLE SOCIETY) FOR THE PURPOSE OF THE APPE L LANT HAS CONTENDED THAT SECTION 11(2) OF PURPOSES, SO LONG AS ONE OR MORE OF THE PURPOSES BY TIE APPE L LANT FIND PLACE IN THE OBJECTS, FOR WHICH THE SOCIETY HAS BEEN LED AND SO LONG AS THE SAID PURPOSES ARE CHARITABLE IN NATURE, THE BENEFIT MUST FLOW TO THE APPELLANT. THE APPELLANT HAS ALSO PRODUCED THE DETAILS OF UTILIZATION OF THESE FUNDS IN THE SUBSEQUENT YEARS AS PER WHICH THE FUNDS WERE UTILIZED FOR THESE PURPOSES BY 31ST MARCH, 2014. THE APPELLANT HAS ALSO RELIED UPON THE DECISIONS OF VARIOUS COURTS. TAKING INTO CONSIDERATION THE TOTALITY OF THE FACTS IN THIS CASE, I AM OF THE OPINION THAT THE APPELLANT HAS ACCUMULATED THE FUNDS FOR DEFI NITE CHARITABLE PURPOSES SINCE THE INCOME SET APART WAS RECEIVED WITH A CLEAR MENTION TO UTILIZE THE SAME FOR CERTAIN DEFINITE PURPOSES. THE UTILIZATION OF THESE FUNDS SUBSEQUENTLY FOR THESE PURPOSES BEFORE THE TIME FRAME STIPULATED PROVES THIS FACT. IT IS NOT THE CASE OF THE APPELLANT THAT THE SAID FUNDS WERE UTILIZED FOR PURPOSES OTHER THAN CHARITABLE PURPOSES. HENCE, I AM NOT IN AGREEMENT WITH THE COMMENTS OF THE ASSESSING OFFICER ON THIS ISSUE AND ACCORDINGLY, THE GROUNDS OF THE APPELLANT ON THIS ISSUE ARE ALLOWED. 5.1.2 INVESTMENT OR DEPOSIT OF AMOUNT ACCUMULATED U/S.1 1(2) OF THE ACT : A) THE SECOND REASON FOR DISALLOWING THE EXEMPTION CLAIMED U/S. 1 1(2) IS THAT THE APPELLANT HAS NOT INVESTED OR DEPOSITED THE ACCUMULATED FUNDS IN THE MANNER LAID DOWN IN SECTION 11(2)(B) OF THE ACT. THE ASSESSING OFFICER HAS OBSERVE D THAT THE FUNDS OF RS. 55,00, 000 / - ACCUMULATED U/S.11(2) OF THE ACT WERE NOT INVESTED OR DEPOSITED BY THE APPELLANT AS IN THE AUDIT REPORT ENCLOSED TO THE RETURN OF INCOME, THE INVESTME NT DETAILS WERE REPORTED AS NIL. IN THIS CONNECTION, THE APPELLANT HAS EXPLAINED THAT THEY MAD E A FIXED DEPOSIT OF RS. 60,00,000 / - ON 4/5/2010 WHICH INCLUDED RS. 55,00, 000 / - ACCUMULATED U/S.11(2) OF THE ACT. HOWEVER, THE ASSESSING OFFICER DENIED THE APPELL ANT'S EXPLANATION STATING THAT THE DEPOSIT WAS MADE PRIOR TO THE DATE OF RESOLUTION FOR ACCUMULATION OF FUNDS AND HENCE IT WAS NOT RELATED TO FUNDS ACCUMULATED ON THE DATE OF RESOLUTION. HENCE, THE ASSESSING OFFICER DISALLOWED THE APPELLANT S CLAIM PLACING RELIANCE ON CERTAIN CASE LAWS . THE ASSESSING OFFICER HAS ALSO HELD THAT THE ACCUMULATION SHOULD NOT BE DONE ON REGULAR BASIS. B) IN THIS CONNECTION , THE APPELLANT HAS CONTENDED THAT A TYPOGRAPHICAL ERROR HAS TYPING THE RELEVANT COLUMN OF THE AUDIT REPORT SINCE DETAILS FOR MOST IN THAT REPORT ARE 'NO, NOT APPLICABLE'. THE APPELLANT PRODUCED A COPY L ETTER DATED 24/04/2010 GIVEN BY DSS GENERALATE, PATTUVAM TRANSFERRIN G FUNDS FRS.60,00,000/ - TO THE APPELLANT'S ACCOUNT TO UTILIZE THE SAME FOR CONSTRUCTION WORK OTHER PURPOSES MENTIONED IN THAT LETTER. IN THAT LETTER, THE APPELLANT WAS SUGGESTED TO KEEP THIS MONEY AS SHORT TERM FIXED DEPOSITS IF THE IMPLEMENTATION OF THE P ROJECTS MENTIONED IN THAT LETTER WOULD BE DELAYED. THE APPELLANT ALSO PRODUCED DETAILS OF FIXED DEPOSITS MADE DURING THIS PERIOD, AS PER WHICH, THE APPELLANT MADE FIXED DEPOSITS OF RS.60,00,000/ - ON 7/5/2010 AND RS.1,44,56,918.29 ON 31/3/2011. C) ON A CAREFUL CONSIDERATION OF ALL THE ABOVE FACTS, I AM OF THE OPINION THAT THE FUNDS ACCUMULATED U/S.11(2) WERE DEPOSITED IN THE MANNER LAID DOWN IN SECTION 11(2)(B) OF THE ACT. THE ASSESSING OFFICER HAS NOT OPPOSED THE MODE OF INVESTMENT MADE BY THE A PPELLANT BUT ONLY STATED THAT THE DEPOSIT WAS MADE PRIOR TO THE DATE OF RESOLUTION FOR ACCUMULATION OF FUNDS. SECTION 11(2)(B) OF THE ACT SPEAKS ABOUT THE MODES OF INVESTMENT OF FUNDS ACCUMULATED OR SET APART AND THERE IS NO MENTION ABOUT ANY TIME LIMIT FO R INVESTMENT OF FUNDS. EVEN AS PER PARAGRAPH 2 OF FORM NO. 10 ALSO, THE FUNDS ACCUMULATED ARE TO BE INVESTED BEFORE THE EXPIRY OF 6 MONTHS FROM THE END OF THE PREVIOUS YEAR. HOWEVER, IT DOES NOT PROHIBIT INVESTMENT OF FUNDS IN ADVANCE. THE POINT TO BE CHEC KED HERE IS WHETHER 5 ITA NO. 647 / VIZ /201 4 (M/S. VIMALA WOMEN CHARITABLE SOCIETY) THE MONIES INVESTED IN THE DEPOSITS DURING THE YEAR FLOWS FROM THE FUNDS ACCUMULATED DURING THE YEAR OR NOT. IN APPELLANT'S CASE, THE APPELLANT RECEIVED FUNDS DURING THE YEAR TO UTILIZE THE SAME FOR SPECIFIC PURPOSES AND IT HAS SET A PAR T THESE FUNDS AND INVESTED THE SA ME IN DEPOSITS DURING THE YEAR ITSELF FOR THE PURPOSE OF FUTURE UTILIZATION. D) IN ONE OF THE CASE - LAW RELIED UPON BY THE ASSESSING OFFICER IN HIS ORDER (IN PAGE 6 OF THE ORDER) IN THE CASE OF CIT VS. IND IAN NATIONAL THEATRE TRUST (2008) 305 ITR 149 (DELHI), THE HON'BLE HIGH COURT HELD AS UNDER: - IT IS ONE THING TO SAY THAT THE REQUIREMENT OF INVESTMENT IS DEEMED TO HAVE IF THE INVESTMENT WAS MADE IN THE YEAR IN WHICH INCOME WAS RECEIVED, A L T HOUGH SUCH INCOME WAS NOT NECESSARILY RECEIVED IN THE VERY YEAR THE ACCUMULATION WAS SOUGHT TO BE MADE. HOWEVER, TO STRETCH IT TO THE INVESTMENTS MADE IN YEARS EVEN EARLIER TO THE PREVIOUS YEAR IN QUESTION IS NOT WARRANTED ON A PLAIN READING OF THE SECTION . THE EXPRESS WORDING OF THE PROVISION INDICATES THAT IN ORDER TO SATISFY THE REQUIREMENT OF SECTION 11(2)(B), THE INVESTMENT MUST NECESSARILY COME OUT OF THE CURRENT YEAR'S INCOME. AN INVESTMENT MADE IN THE PAST OBVIOUSLY CANNOT SATISFY THIS REQUIREMENT. IT WAS NOT THE ASSESSEE'S CASE THAT THE SAID DEPOSIT MATURED DURING THE ASSESSMENT YEAR IN QUESTION AND WAS RENEWED SOON THEREAFTER.' E) IN VIEW OF THE FOREGOING FACTS AND ALSO AS THE APPELLANT HAS DEPOSITED THE MONIES RECEIVED AND SET APART DURING THE FI NANCIAL YEAR 2010 - 11 IN THAT YEAR ITSELF IN THE INVESTMENTS SPECIFIED IN SEC. 11 (5) OF THE ACT, I AM OF THE VIEW THAT THE APPELLANT HAS COMPLIED WITH THE PROVISIONS OF SEC.11(2)(B) OF THE ACT. ACCORDINGLY, THE GROUNDS OF THE APPELLANT ON THIS ISSUE ARE AL LOWED. 6. IN THE RESULT, THE APPEAL IS ALLOWED. 4 . ON BEING AGGRIEVED , REVENUE IS IN APPEAL BEFORE TH IS TRIBUNAL . 5. THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER PASSED BY THE ASSESSING OFFICER, WHEREAS LEARNED COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 6 . WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW . THE ASSESSEE IS A CHARITABLE SOCIETY AND CARRYING VARIOUS CHARITABLE ACTIVITIES, SUCH AS , CONSTRUCTION OF BUILDING F OR THE PURPOSE TO ACCOMMODATE HIV / AIDS PATIENTS AND ALSO ACCOMMODATION FOR SISTERS 6 ITA NO. 647 / VIZ /201 4 (M/S. VIMALA WOMEN CHARITABLE SOCIETY) AND TRA I NING CENTRES . THE ASSESSING OFFICER HAS NOT DOUBTED ABOUT THE CHARITABLE ACTIVITIES CARRIED - OUT BY THE ASSESSEE - SOCIETY. WE HAVE CONSIDERED ALL THE DETAILS AND FOUND TH A T THE ASSESSEE IS CARRYING CHARITABLE ACTIVITIES AS PER ITS OBJECTS. THE ONLY OBJECTION RAISED BY THE ASSESSING OFFICER IS THAT THE ACCUMULATION OF INCOME UNDER SECTION 11(2) IS NO T SPECIFIC AND THE DEPOSITS MADE IN THE BANK ARE NOT AS PER PROVISIONS OF SECTION 11(2)(B) OF THE ACT. THE ASSESSEE MADE A DETAILED SUBMISSION BEFORE THE ASSESSING OFFICER AND ALSO BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). SO FAR AS , THE ACCUMULATION OF INCOME, IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT IT IS FOR THE PURPOSE OF CONSTRUCTION OF VIMALA WOMEN CHARITABLE SOCIETY AND ALSO MAINTENANCE OF THE INSTITUTION . THE EXPLANATION OF THE ASSESSEE WAS SIMPLY REJECTED. BEFORE THE ASSESSING OFFICER THE ASSESSEE FILED ALL THE DETAILS ABOUT THE CONSTRUCTION AND ALSO EXPLAINED THAT HIS ACCUMULATION IS FOR THE PURPOSE OF CONSTRUCTION AND MAINTENANCE OF THE PROVINCE OF THE SOCIETY AND ALSO MAINTENANCE OF SISTERS ETC. THE ASSESSEE A LSO FILED THE DETAILS OF I N V E S T M E N T OF FUNDS. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE AND ALSO CONSIDERING THE DETAILS SUBMITTED , IN RESPECT OF THE PURPOSE FOR WHICH FUNDS ARE ACCUMULATED, HE GAVE A SPECIFIC FINDING THAT THE ASSESSEE SOCIETY HAS UTILIZED THE FUNDS FOR CHARITABLE PURPOSE AND THE ORDER OF THE ASSESSING OFFICER WAS REVERSED ON THIS COUNT. INSOFAR AS DEPOSITS MADE IN THE BANK ACCOUNT, THE COMMISSIONER OF INCOME TAX (APPEALS) GA VE A 7 ITA NO. 647 / VIZ /201 4 (M/S. VIMALA WOMEN CHARITABLE SOCIETY) SPECIFIC FIND ING THAT THE ASSESSEE RECEIVED FUNDS DURING THE YEAR TO UTILIZE THE SAME FOR SPECIFIC PURPOSES AND IT HAS SET APART THESE FUNDS AND INVESTED THE SAME IN THE FIXED DEPOSITS DURING THE YEAR ITSELF FOR THE PURPOSE OF FUTURE UTILIZATION . AFT ER CAREFUL CONSIDERATION, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TH IS 2 2 N D DAY OF MARCH , 201 7 . S D / - S D / - ( G. MANJUNATHA ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 2 N D MARCH , 201 7 . VR/ - COPY TO: 1 . THE ASSESSEE. M/S. VIMALA WOMEN CHARITABLE SOCIETY, 10 - 56, VIMALA SADAN CONVENT, PENAMALURU, VIJAYAWADA. 2 . THE REVENUE ITO (EXEMPTIONS), RAJAHMUNDRY. 3 . THE CIT, VIJAYAWADA . 4 . THE CIT(A) , VIJAYAWADA . 5 . THE D.R . 6 . GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY I.T.A.T., VISAKHAPATNAM .