Shri Kantilal Manilal Charitable Trust, Ahmedabad V. The DIT(Exem.), Ahmedabad

ITA 664/AHD/2010

• Counselvise Citation: 66420514 RSA 2010
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-03-2012
• Assessment Year: misc
• Appeal Filed On: 02-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Charitable institution

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI D K TYAGI - JM AND SHRI A MOHAN ALANKAMONY - AM ITA NO.664/AHD/2010 KANTILAL MANILAL CHARITABLE TRUST, BRIJ HOUSE, OPP. OLD GUJARAT HIGH COURT, AHMEDABAD- 380 014 V/S THE DIRECTOR OF INCOME TAX (EXEMPTION), AHMEDABAD PAN: AAATK 1266 G [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI S N SOPARKAR, AR REVENUE BY:- SHRI DINESH SINGH, SR. DR DATE OF HEARING:- 27-03-2012 DATE OF PRONOUNCEMENT:- 20-04-2012 O R D E R PER D K TYAGI (JM) :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER DATED 21-01-2010 PASSED B Y THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTION), AHMEDABAD REJEC TING THE APPLICATION FOR RENEWAL OF EXEMPTION U/S 80G(5) OF THE INCOME- TAX ACT, 1961. 2 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE -TRUST FILED AN APPLICATION FOR RENEWAL OF EXEMPTION U/S 80G(5) OF THE ACT. ON PERUSAL OF THE ACCOUNTS, IT WAS NOTICED BY THE D IRECTOR OF INCOME TAX (EXEMPTION), AHMEDABAD THAT AS ON 31-03- 2008 A 2 2 SUM OF RS.51.59 LACS WAS ADVANCED TO 3 (THREE) TRUS TS IN RESPECT OF WHICH THE AUDIT REPORT OF THE CHARTERED ACCOUNTA NT REMARKED AS UNDER:- REMARKS THE TRUST HAS GIVEN ADVANCES TO FOLLOWING TRUSTS A ND AT THE END OF THE YEAR FOLLOWING AMOUNT IS OUTSTANDING FOR WHICH PERMISSION OF CHARITY COMMISSIONER IS NOT OBTAINED. -------------------------------------------------- -------------------- NAME OF THE TRUST BALANCE OUTSTANDING AS ON 31-03-2008 -------------------------------------------------- -------------------- 1. K M HOSPITAL TRUST 4534865.00 2. PATHIK FOUNDATION 45000.00 3. P K CHARITABLE TRUST 580000.00 --------------- 5159865.00 THE ASSESSEE-TRUST WAS ASKED TO EXPLAIN THE ABOVE T RANSACTIONS. IN REPLY, IT WAS CONTENDED THAT THESE ADVANCES WERE MADE FOR THE OBJECTS OF THE TRUST AND WERE VERY OLD HAVING BEEN MADE YEAR TO YEAR. IT WAS FURTHER EXPLAINED THAT EVERY YEAR 85% OF THE INCOME WAS APPLIED AND HENCE THERE WAS NO ACCUMULATION U/S 11(2). TO SPECIFIC QUERY WITH REFERENCE TO SECTION 11(1) EXPL ANATION THAT 15% PERMISSIBLE LIMIT U/S 11(1)(A) IS ALSO A INCOME WHICH IS ACCUMULATED AS SET APART AND ANY PAYMENT OUT OF THE SAME READ WITH EXPLANATION BELOW SECTION 11(2) TO ANY OTHER T RUSTS OR INSTITUTIONS SHALL NOT BE TREATED AS APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES, IT WAS CONTENDED THAT SUCH ADVANCES WERE NOT TAKEN INTO ACCOUNT IN THEIR COMPU TATION OF INCOME. IT WAS FURTHER SUBMITTED THAT THE ADVANCES WERE MADE TO OTHER TRUSTS AS PER THE RESOLUTION OF THE TRUST AND THAT THEY WOULD 3 3 RETRIEVE THE SAME IN DUE COURSE OF TIME. AFTER TAKI NG INTO CONSIDERATION THESE SUBMISSIONS OF THE ASSESSEE, TH E LEARNED DIRECTOR OF INCOME TAX (EXEMPTION), AHMEDABAD REJEC TED THE APPLICATION FOR THE RENEWAL OF EXEMPTION U/S 80G(5) OF THE ACT READ WITH PROVISO TO RULE 11AA OF THE IT RULES, BY OBSERVING AS UNDER:- 2. AS STATED EARLIER, ADVANCES TO THREE OTHER TRUS TS WERE WITHOUT THE PERMISSION THE CHARITY COMMISSIONER AND DULY NOTED BY THE CHARTERED ACCOUNTANT IN THE AUDIT REPORT. FURTHER AS PER THE DETAILS FILED, THE ACCOUNTS ARE RUNNING ACCOUNT TRANSACTION AND EVEN D URING THE YEAR ENDED 31-3-2008 THERE WERE THREE PAYMENTS OF RS.20, 000/- ON 7-4- 2007, RS.10,000 ON 7-7-2007 AND RS.45,000/- ON 30-1 0-2007. THERE WERE TWO RECOVERIES OF RS.25,000 AND RS.20,000/- IN OCTOBER, 2007. THUS, ADVANCES MADE HAD NO BEARING TO 15% INCOME OF EARLIER YEARS. IN FACT, THE INCOME FOR YEAR ENDED 31-3-2008 WAS ON LY ABOUT RS.6300/-. THE TRUST IS NOT IN EXISTENCE FOR THE PU RPOSE OF ADVANCING MONEY TO OTHER CHARITABLE TRUST BUT TO CARRY OUT IT S OWN OBJECTS OF CHARITY. IN SHORT, THERE ARE VIOLATIONS/DEFICIENCIE S WHICH ARE BEING PERPETUATED WITHOUT ANY CORRECTIVE ACTION EVEN AFTE R AUDITOR'S REMARKS. MERE STATEMENT THAT THEY WOULD RETRIEVE TH E ADVANCE IN DUE COURSE OF TIME CANNOT JUSTIFY THE ACTION OF THE TRU ST SO FAR. AS SUCH, THE REPLY OF THE ASSESSEE IS NOT PERSUASIVE TO PROVE TH AT THEIR ACTIVITIES WERE IN ACCORDANCE WITH THE OBJECT OF THE TRUST REA D WITH SECTION 80G(5) AND RULE 11AA OF THE I.T. RULES. ACCORDINGLY , I AM NOT SATISFIED ABOUT THE GENUINENESS OF THE ACTIVITIES O F THE TRUST IN THE LIGHT OF RULE 11AA(2)(3) OF THE I.T. RULES. THUS, CONDITI ONS (II) AND (V) OF SECTION 80G(5) ARE NOT SATISFIED IN THIS CASE ESPEC IALLY IN VIEW OF THE TRANSFER OF FUNDS WITHOUT THE APPROVAL OF THE CHARI TY COMMISSIONER AND AGAINST THE OBJECT OF THE TRUST AS DISCUSSED AB OVE. 3 ACCORDINGLY, THE APPLICATION FOR RENEWAL OF EXEM PTION U/S 80G(5) OF THIS TRUST IS REJECTED READ WITH PROVISO TO RULE 11AA(6) OF THE I.T. RULES. 4 HOWEVER, FOR THE SAKE OF CLARITY IT IS STATED TH AT AFTER COMPLETE RECOVERY OF THE LOANS SO ADVANCED, THE TRUST MAY AP PLY AFRESH WITH NECESSARY AUDIT REPORT FOR CONSIDERATION U/S 80G(5) OF THE I.T. ACT, 1961. 4 4 3 AGGRIEVED BY THIS ORDER THE ASSESSEE-TRUST IS NOW IN APPEAL BEFORE US. AFTER HEARING BOTH THE PARTIES AT LENGTH , WE ARE OF THE VIEW THAT THE ENTIRE FACTS IN RESPECT OF THIS ISSUE IN APPEAL HAVE NOT BEEN BROUGHT ON RECORD. IT IS NOT CLEAR WHETHER THESE ADVANCES WERE GIVEN OUT OF THE CORPUS OF THE TRUST OR THE DONATIONS RECEIVED BY THE TRUST DURING THE YEARS. T O A SPECIFIC QUERY BY THE BENCH ABOUT THE REMARKS OF THE CA THAT THE ADVANCES WERE GIVEN TO THREE TRUSTS WITHOUT PERMISS ION OF THE CHARITY COMMISSIONER AS TO UNDER WHAT PROVISIONS OF LAW, THIS PERMISSION IS REQUIRED, BOTH THE PARTIES FAILED TO ASSIST THE BENCH. SINCE NON-APPROVAL OF THE CHARITY COMMISSIONER HAS WEIGHED HEAVILY AGAINST THE ASSESSEE-TRUST WITH LD. DIT (EX EMPTION) WHILE REJECTING THE APPLICATION FOR RENEWAL, IT IS IMPERATIVE TO ASCERTAIN WHETHER IN FACT SUCH APPROVAL IS OF SUCH A VITAL IMPORTANCE OR NOT. UNLESS THE RELEVANT MATERIAL IS ON RECORD, IT WILL NOT BE PROPER ON OUR PART TO ADJUDICATE THE MA TTER. THEREFORE, THE MATTER IS RESTORED BACK TO THE FILE OF THE DIRE CTOR OF INCOME TAX (EXEMPTION), AHMEDABAD FOR FRESH ADJUDICATION A FTER BRINGING ALL THE MATERIAL RELEVANT FOR GRANTING OF EXEMPTION INCLUDING THOSE MENTIONED ABOVE. 4 IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTI CAL PURPOSE. ORDER PRONOUNCED IN THE COURT TODAY ON 20-04-2012 SD/- SD/- (A MOHAN ALANKAMONY) ACCOUNTANT MEMBER (D K TYAGI) JUDICIAL MEMBER DATE : 20-04-2012 5 5 COPY OF THE ORDER FORWARDED TO: 1. KANTILAL MANILAL CHARITABLE TRUST, BRIJ HOUSE, O PP. OLD GUJARAT HIGH COURT, AHMEDABAD-380 014 2. THE DIRECTOR OF INCOME TAX (EXEMPTION), AHMEDABA D 3. CIT CONCERNED 4. CIT(A) 5. DR, ITAT, AHMEDABAD BENCH-A, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD