M/s Advanced Vision Foundation, Jalandhar V. The Income Tax Officer, III(I), Jalandhar

ITA 768/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8871 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 30-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: Y K SUD
• Keywords: Gift; Charitable institution; Assessment record
• Section: 143(3); 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH; AMRITSAR (SMC) BEFORE SH. A.D. JAIN, JUDICIAL MEMBER ITA NO.768(ASR)/2014 ASSESSMENT YEAR:2010-2011 PAN: AACTA7703H M/S. ADVANCED VISION FOUNDATION VS. INCOME TAX OFFI CER, 49-R, MODEL TOWN, WARD-III(1), JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. Y.K. SUD, CA RESPONDENT BY: SMT. RATINDER KAUR, DR DATE OF HEARING: 19/11/2015 DATE OF PRONOUNCEMENT: 03/02/2016 ORDER THIS IS THE ASSESSEES APPEAL FOR THE ASSESSMENT Y EAR 2010-11, AGAINST THE ORDER DATED 22.10.2014, PASSED BY THE L D. CIT(A), JALANDHAR. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE AO HAS WRONGLY CHANGED THE STATUS OF T HE ASSESSEE FROM AOP (TRUST) TO INDIVIDUAL HENCE THE ASSESSMENT ORDER FRAMED BY HIM IN CHANGED STATUS DESERVES TO BE QUAS HED. 2. THAT EVEN THE CIT(A) CHANGED THE STATUS OF THE A SSESSEE AS PER ASSESSMENT ORDER FROM INDIVIDUAL TO TRUST WHICH HE WAS NOT COMPETENT TO CHANGE THE STATUS. THE ORDER OF C IT(A) DESERVES TO BE QUASHED ON THIS GROUND ALSO. 3. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DENYING THE EXEMPTION CLAIMED BY THE ASSESSEE U/S 10(23C)(IIIAE ). HE FAILED TO APPRECIATE THAT AO DID NOT CONSIDER THIS EXEMPTION IN HIS ASSESSMENT ORDER AND THE ASSESSEE FULFILLED ALL THE CONDITIONS MENTIONED IN THE SECTION. ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 2 4. THAT THE FINDING OF THE CIT(A) WHILE DISALLOWING THE EXEMPTION U/S 10(23C)(IIIAE) THAT THE ASSESSEE TRUS T IS NEITHER A HOSPITAL OR ANY INSTITUTION RECEIVING INC OME FOR THE PURPOSE OF SPECIFIED IN THIS SECTION IS FACTUALLY INCORRECT AND CONTRARY TO THE FINDING OF THE AO THAT ASSESSEE IS RUNNING A MEDICAL HOSPITAL. 5. THAT BOTH AO AND CIT(A) HAVE EXCEEDED THEIR JURI SDICTION BY GIVING OBSERVATIONS THAT THE TRUST IS NOT A CHARITA BLE TRUST. THEY FAILED TO APPRECIATE THAT ONCE THE REGISTRATIO N IS GRANTED TO THE TRUST U/S 12AA THE AO CANNOT INTERFERE INTO THE OBJECTS OF THE TRUST. EVEN OTHERWISE THE OBSERVATIO NS MADE BY THE AO AND THE CIT(A) ARE CONTRARY TO THE FACTS AND DESERVES TO BE VACATED. 2. THE LD. COUNSEL FOR THE ASSESSEE HAS STATED AT T HE BAR THAT HE DOES NOT WISH PRESS GROUND NOS. 1 & 2. REJECTED AS NOT P RESSED. 3. APROPOS GROUND NOS. 3 TO 5, THE FACTS ARE THAT T HE ASSESSEE TRUST, WHOSE OBJECTS ARE STATED TO BE OF GENERAL PUBLIC UT ILITY, FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 20.10.20 10 DECLARING THEREIN NIL INCOME AFTER CLAIMING EXCESS OF INCOME OVER EXP ENDITURE TO THE EXTENT OF RS.11,22,631/- AS EXEMPT U/S 10(23C)(IIIAE) OF T HE ACT. HOWEVER, THE ASSESSMENT IN THIS CASE WAS COMPLETED BY THE AO U/S 143(3) OF THE ACT VIDE ORDER DATED 26.12.2012 AT AN ASSESSED INCOME O F RS.11,22,613/-. WHILE COMPLETING THE ASSESSMENT, THE AO HAS DENIED DEDUCTION OF RS.11,22,631/- CLAIMED BY THE ASSESSEE TRUST U/S 10 (23C)(IIIAE) OF THE ACT, WHICH REPRESENTS EXCESS OF INCOME OVER EXPENDI TURE. 4. THE AO OBSERVED THAT THE ASSESSEE IS RUNNING A M EDICAL HOSPITAL AND HAS CLAIMED EXEMPTION U/S 13(23C)(IIIA) OF THE ACT FOR THE YEAR UNDER CONSIDERATION. ON 21.09.2011, THE TRUST HAS GOT REG ISTRATION U/S 12AA OF THE ACT W.E.F. 1.4.2010 VIDE ORDER PASSED BY THE CI T-II, JALANDHAR DATED ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 3 21.09.2011. WHILE PASSING THE ORDER U/S 12AA OF THE ACT, THE CIT AT PAGE 3, IN PARA 5(2 TO 4), HAS OBSERVED AS UNDER: ..THE MERE FACT THAT THE TRUST HAS BEEN GRANTED REGISTRATION U/S 12A OF THE INCOME- TAX ACT, 1961 DOES NOT CONFER AN Y RIGHT OR ENTITLEMENT UPON THE ASSESSEE REGARDING THE OPERATI ON OF SECTION 11.12 AND 12 OR ANY OTHER PROVISION OF THE INCOME-T AX ACT, 1961. THE ASSESSEE TRUST IS TO FILE RETURNS OF INCOME REGULAR LY AND THE OPERATION OF SECTION 11, 12 AND 12 OR ANY OTHER PROVISION OF THE ACT IS TO BE DECIDED BY THE AO DEPENDING UPON THE MERITS OF THE CASE FOR EACH SUCH YEAR UNDER CONSIDERATION............ 3. ALTHOUGH IN THE YEAR UNDER ASSESSMENT, THE ASSES SEE HAS CLAIMED EXEMPTION U/S 10(23C)(IIIA), YET IT HAS ALSO OBTAIN ED REGISTRATION U/S 12AA OF THE ACT AS REFERRED TO ABOVE W.E.F 1.4.2010 . HENCE THE INCOME OF THE ASSESSEE FOR THE FM.YEAR 2009-10 IS A SSESSABLE UNDER THE* ACT IN THE YEAR 2010-11 DURING WHICH IT HAS OB TAINED REGISTRATION U/S 12AA/THE TRUST AND ITS INCOME SHAL L BE GOVERNED BY ALL THE PROVISIONS SOF SECTIONS 11. 12 AND 13 THE A CT. AS PER PROVISIONS OF SECTION 11(2) OF THE ACT, THE ASSESSE E IS SUPPOSED TO APPLY ITS 85% INCOME FOR THE PURPOSES OF ACHIEVING THE OBJECTS OF THE TRUST. PERUSAL OF THE P&L ACCOUNT REVEALS THAT DURI NG THE YEAR THE ASSESSEE TRUST HAS TOTAL RECEIPT TO THE TUNE OF RS. 13,09,636/- AND 85% OF THIS AMOUNT WORKS OUT TO RS.LL,10,641/- BUT IT HAS UTILIZED ONLY AN AMOUNT OF RS. 1,87,005/-. MIEN CONFRONTED I T HAS BEEN EXPLAINED BY THE COUNSEL FOR THE ASSESSEE SINCE THE ASSESSEE TRUST'S INCOME IS EXEMPT U/S 10(23C(IIIA) OF THE ACT, THIS CONDITION IS NOT APPLICABLE TO THE ASSESSEE TRUST. IF THIS ARGUMENT OF THE ASSESSEE IS ACCEPTED THEN THE QUESTION ARISES AS WHY THE TRUST APPLIED FOR REGISTRATION U/S 12AA ANTI OBTAINED IT FROM THE DEP ARTMENT. FURTHER IT IS ALSO HELD THAT SINCE THE TRUST IS REGISTERED U/S 12AA W.E.F 1.4.2010, I.E. DURING THE YEAR WHEN THE INCOME OF T HE ASSESSEE WAS ASSESSABLE, THE PROVISIONS OF SECTION 11 OF THE ACT WILL BE APPLICABLE IN THIS CASE BECAUSE AS PER ORDER OF THE ID. CIT, J ALANDHAR THE OPERATION OF THIS SECTION IS TO BE DECIDED BY THE A O FOR EACH YEAR. IN THIS VIEW OF THE MATTER, THE TRUST IS NOT ENTITLED FOR EXEMPTION. 4. APART FROM ABOVE, IT IS NOTICED THAT THE TR UST DEED, A COPY OF WHICH IS SUPPLIED DURING THE COURSE OF THE ASSTT. P ROCEEDINGS, TEA * THE ASSESSEE TRUST HAS INCORPORATED THE FOLLOWING C LAUSE-IN ITS TRUST DEED: THAT IN CASE OF THIS TRUST BECOMING REDUNDANT OR DE FUNCT FOR SOME REASON OR THE OTHER, THE LIFE TRUSTEES SHALL BE AT LIBERTY TO PASS BY L/3RD MAJORITY OF ITS TOTAL STRENGTH A RESOLUTION F OR APPLYING THE ENTIRE ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 4 CORPUS OF THE TRUST INCLUDING MOVABLE AND IMMOVABLE PROPERTY(IES) OF THE TRUST TO FORM A NEW TRUST, OR TO 1GIVE IT TO SO ME OTHER TRUST BY WAY OF TRANSFER OR GIFT OR MERGE OR AMALGAMATION, T HIS TRUST WITH SOME OTHER EXISTENT AND RUNNING TRUST, AS THE BOARD OF TRUSTEES, THINK FIT AND PROPER'. BUT AS PER INDIAN TRUST ACT, A PUBLIC TRUST IS FORMED AND RUN FOR THE BENEFITS OF THE GENERAL PUBL IC, CHARITY OR FOR ANY OTHER WORK OF PUBLIC UTILITY. IN CASE A TRUST I S DISSOLVED BY A L/3RD MAJORITY AND THAT TOO OF LIFE MEMBERS AND ITS PROCEEDS ARE UTILIZED OR GIFTED TO ANY OTHER TRUST AS THOUGHT FI T AND PROPER BY SUCH LIFE MEMBERS, THE SPIRIT OF BENEFIT OF PUBLIC VANIS HES. AS PER LAW THERE SHOULD BE A DISSOLUTION CLAUSE IN A TRUST DEE D ACCORDINGLY TO WHICH THE PROCEEDS OF A TRUST SHOULD BE IMPARTED TO A TRUST HAVING THE SIMILAR/SAME OBJECTIVES IN THE EVENT OF ITS DIS SOLUTION. THIS PROVISION OR CLAUSE IS NOT INCORPORATED BY THE ASSE SSEE TRUST AND HENCE THERE IS EVERY APPREHENSION THAT IN THE TIMES TO COME THE PROCEEDS OF THE TRUST SHALL BE SWALLOWED BY THE LI FE TRUSTEES FOR THEIR OWN BENEFIT OR FOR THE BENEFIT OF A TRUST WHERE THE IR NOMINEES ARE THE TRUSTEES OR MANAGERS HENCE THE SPIRIT OF PUBLIC UTI LITY'S ABSENT IN THIS TRUST. FOR THIS LEGAL LACUNA, THE TRUST IS NOT ENTI TLED TO AVAIL THE EXEMPTION U/S I0(23C(IIIA) ALSO AND U/S 12AA OF THE ACT AS WELL. IN VIEW OF ABOVE, IT IS HELD THAT THE ABOVE NOTED E XPENSES INCURRED BY THE ASSESSEE TRUST ARE NOT SPENT FOR ACHIEVEMENT OF ITS AIMS AND OBJECTS. THUS IT IS INFERRED THAT THE TRUST IS NOT ENTITLED FOR CLAIMING EXEMPTION U/S 12AA OF THE ACT, AS THE AO WHO FRAMES THE ASSESSMENT OF A TRUST REGISTERED U/S 12AA HAS TO MA KE HIMSELF SATISFIED THAT THE TRUST IS FULFILLING ALL THE COND ITIONS LAID DOWN IN SECTION 11 & 13 OF THE IT. ACT. HENCE I AM SATISFIE D THAT THE ASSESSEE TRUST HAS FAILED TO FULFIL THE CONDITIONS LAID DOWN IN SECTION 11 OF THE AC! AND IT IS NOT ENTITLED FOR EXEMPTION U/S 12AA O F THE ACT FOR THE YEAR UNDER CONSIDERATION AND IT IS ALSO NOT ENTITLE D FOR CLAIMING EXEMPTION U/S 10(23C(IIIA) OF THE ACT. ACCORDINGLY, THE INCOME OF THE TRUST IS HELD TO BE TAXABLE IN THE YEAR UNDER ASSES SMENT. NET PROFIT SHOWN BY THE ASSESSEE AS PER P&L ACCOUNT IS RS.L 1,22,- 631/-WHICH IS HELD TO BE THE TAXABLE INCOME OF THE ASSESSEE. 5. THUS, THE AO OBSERVED THAT: I) THE INCOME OF THIS ASSESSMENT YEAR IS ASSESSABLE DURING THIS YEAR, IN WHICH THE REGISTRATION WAS GRANTED TO THE ASSESSEE . ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 5 II) THE PROVISIONS OF SECTION 11(2) OF THE I.T. ACT , WERE VIOLATED AS 85% OF THE INCOME HAD NOT BEEN UTILIZED FOR THE PURPOSE OF ACHIEVEMENT OF THE OBJECTS OF THE ASSESSEE. III) THE TRUST DEED CONTAINS A CLAUSE REGARDING FOR MATION OF NEW TRUST/TRANSFER OF ENTIRE CORPUS OF THE TRUST AND IT DOES NOT CONTAIN ANY DISSOLUTION CLAUSE. 5. BEFORE THE LD. CIT(A), THE ASSESSEE FILED THE FO LLOWING WRITTEN SUBMISSIONS: THAT THE TRUST WAS FORMED BY SARDAR KABUL SINGH. FORMER VICE PRESIDENT OF SHIROMANI GURUDAWARA PARBHANDAK COMMIT TEE VIDED TRUST DEED DATED 18 DAY OF AUGUST, 2008 AT JALANDHA R. AS PER THAT DEED, THE OBJECTIVE IS TO START, RUN, MANAGE, LOOK AFTER, OPERATE, VARIOUS TYPES OF MEDICAL INSTITUTION(S), HOSPITAL(S ), INCLUDING EYE CLINICS, FOR EXAMINING, TREATING AND PERFORMING ALL TYPES OF OPERATIONS RELATED TO EYE DISEASES OR INFIRMITIES, MEDICAL PAR A MEDICAL AND THE LIKE, SCHOOLS, COLLEGE(S) WITH HOSPITALS), PRIVATE SELF FINANCED OR GOVERNMENT AIDED UNIVERSITY (IES), WITHIN THE TERRI TORY OF INDIA OR ABROAD. 1. IT WAS ALSO MENTIONED IN THE DEED BY THE FOUNDER, S ETTLER AND EXECUTOR THAT HE WILL NOT CLAIM OR RESERVE ANY BENE FICIAL INTEREST IN THE FOUNDATION NOR SHALL ANY OF THE MEMBERS, HEREBY APPOINTED HAVE OR CLAIM ANY BENEFICIAL INTEREST IN FOUNDATION . 2. THE A.O. IGNORED THE FACT THAT THE TRUST WAS IR REVOCABLE AND DUE SAFEGUARDS WERE PROVIDED IN THE TRUST DEED. HE COMPLETELY IGNORED THAT THE FOUNDER, SETTLER AND EXECUTOR DID NOT CLAIM OR RESERVE ANY BENEFICIAL INTEREST IN THE FOUNDATION A ND NOR SHALL ANY OF THE MEMBERS TO BE APPOINTED WOULD CLAIM ANY BENEFIC IAL INTEREST IN THE FOUNDATION AND THE TRUST WAS FOR PUBLIC CHARITA BLE EDUCATIONAL PURPOSES AND WORKING ON PRINCIPLES OF MUTUALITY AND PHILANTHROPY. FURTHER IT WAS ALSO LAID DOWN THAT ALL INCOME, EARN INGS, MOVABLE AND IMMOVABLE PROPERTIES OF THE TRUST WERE TO BE UT ILIZED AND APPLIED TOWARDS THE PROMOTION OF IT'S AIMS AND OBJE CTIVES ONLY AND NO PROFIT OR INCOME OF THE TRUST SHALL BE PAID OR T RANSFERRED DIRECTLY OR INDIRECTLY BY WAY OF DIVIDEND, BONUS, SHARE, INCOME OR IN ANY MANNER WHATSOEVER TO THE PRESENT OR THE PAST TRUSTE ES OF THE TRUST OR TO ANY PERSON CLAIMING THROUGH THE PAST OR PRESENT TRUSTEE OR ANY MOVABLE OR IMMOVABLE PROPERTIES OF THE TRUST OR TAK E ANY PORTION, SHARE OR WHOLE OF THE PROFIT WHATSOEVER BY VIRTUE O F HIS MEMBERSHIP. 2. THE TRUST WAS REGISTERED BY THE COMMISSIONER OF IN COME TAX U/S I2AA OF THE INCOME TAX ACT. 1961 (HEREIN AFTER TO BE REFERRED AS ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 6 ('THE ACT') WITH EFFECT FROM 01/04/2004. THE GUJARA T HIGH COURT IN HIRALAL DHAGWATI V. CIT (2000) 246 ITR 188(GUJ.), EXPLAINING EFFECT OF REGISTRATION, HAD HELD, THAT IN THE MATTER OF AN Y JUDGMENT ON THE VALIDITY OR OTHERWISE OF OBJECTS OF THE TRUST AS TO WHETHER CHARITABLE OR NOT IS A MATTER FALLING WITHIN THE JURISDICTION OF REGISTERING AUTHORITY AND THAT IT WILL NOT BE OPEN TO THE ASSES SING OFFICER TO QUESTION THE SAME. THIS DECISION HAS SINCE BECOME F INAL, SINCE THE SUPREME COURT HAD DECLINED TO GRANT SPECIAL LEAVE O N A DIFFERENT ISSUE IN THE SAME CASE AS TO WHETHER THE OBJECT OF THE TRUST RELATING TO THE BENEFIT OF MEMBERS OF THE CLUB IS AN OBJECT OF GENERAL PUBLIC UTILITY. AS FOR THE OTHER QUESTION ON JURISDICTION, THE DEPARTMENT HAD ACCEPTED THE JUDGMENT OF HIGH COURT. HENCE, THE MAT TER SHOULD STAND CONCLUDED ON BOTH THE ISSUES. IT WAS IN THIS CONTEXT, THAT THE APPEAL ON ISSUE OF LIMITATION OF JURISDICTION FOR T HE ASSESSING OFFICER WAS DISMISSED BY THE SUPREME COURT IN ACIT VS SURAT CITY GYMKHANA(2008) 5 DTR (SC) 115. 3. HOWEVER AT PAGE 4 OF THE ASSESSMENT ORDER THE A.O. MISINTERPRETED ONE. CLAUSE OF THE TRUST ACCORDING T O WHICH IT WAS MENTIONED THAT IF THE TRUST BECAME DEFUNCT THE ENTI RE CORPUS OF THE TRUST WAS TO BE TRANSFERRED TO SOME OTHER TRUST EXI STING JAR SUCH CHARITABLE PURPOSES. THE WORDS USED IN THAT DEED AR E 'AS THE BOARD OF TRUSTEE MAY THINK FIT PROPER'. THE A. O. HELD THAT AS A LACUNAE IN THE DEED AND OBSERVED THAT THE TRUST WAS NOT CLAIMI NG EXEMPTION U/S 12AA OF THE ACT, AS THE AO WHO IS TO FRAME THE ASSESSMENT OF A TRUST REGISTERED U/SL2AA WAS TO MAKE HIMSELF SATISF IED THAT THE TRUST WAS FULFILLING ALL THE CONDITIONS LAID DOWN IN SECT ION 11 AND 13 OF THE INCOME TAX ACT. 4. THE A. O. EXCEEDED HIS POWERS AND COMMENTED ON T HE WISDOM AND VALIDITY OF THE ORDER OF COMMISSIONER OF INCOME TAX WHO REGISTERED THE TRUST U/S 12AA OF THE ACT AFTER SATI SFYING HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUS T. A PHOTOCOPY OF THE TRUST DEED IS ENCLOSED FOR YOUR KIND PERUSAL AN D RECORD. IT IS PRAYED THAT THE ASSESSMENT ORDER MAY HE CANCELLED. GROUND NO. 2 THE STUDY OF CLAUSE (IIIA) OF SEC. 23C OF SEC. 10 O F THE ACT SHOWS THAT THE SAME IS MEANT FOR NATIONAL FOUNDATION FOR COMMU NAL HARMONY. ACTUALLY CLAUSES (IIIAD) A- (IIIAE) OF SECTION 10 (23 C) ARE APPLICABLE TO THE TRUST BECAUSE IT IS RUNNING CHARITABLE MEDICAL FACILITIES FOR GENERAL PUBLIC AND THE ANNUAL RECEIPTS OF THE TRUST DID NOT EXCEED RS. ONE CRORE AS PRESCRIBED UNDER RULE 2BC (1) OF THE I NCOME TAX RULES 1962. IT MAY EVEN RUN EDUCATIONAL INSTITUTIONS. TOT AL INCOME OF THE TRUST IS EXEMPT. IT IS PRAYED THAT THE ASSESSMENT M AY BE CANCELLED OR ADDITION OF RS.11,22.631.00 MAY BE DELETED ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 7 6. THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM T HE AO. THE AO VIDE REMAND REPORT DATED 07.10.2014 STATED AS FOLLOWS: IN THIS REGARD IT IS SUBMITTED THAT THE TRUST HAS GOT REGISTRATION U/S 12AA OF THE ACT W.E.F 01.04.2010 VIDE ORDER PASSED BY THE CIT-II, JALANDHAR DATED 21.09.2011. ALTHOUGH, THE YEAR UNDE R CONSIDERATION, THE ASSESSEEE HAS CLAIMED EXEMPTION U/S 10(23C)(IIIAE), YET IT HAS ALSO OBTAINED REGISTRATI ON U/S 12AA OF THE ACT W.E.F. 01.04.2010. HENCE THE INCOME OF THE ASSE SSEE FOR THE F.Y. 2009-10 IS ASSESSABLE UNDER THE ACT BUT THE ASSESSE E OBTAINED REGISTRATION U/S 12AA DURING THE FINANCIAL YEAR 201 0-11, SO THE TRUST AND ITS INCOME SHALL BE GOVERNED BY ALL THE P ROVISIONS OF SECTION 11,12 & 13 OF THE ACT. AS PER PROVISIONS OF SECTION 11(2) OF THE ACT, THE ,ASSESSEE IS SUPPOSED TO APPLY ITS 85% OF INCOME FOR THE PURPOSES OF ACHIEVING THE OBJECTS OF THE TRUST. DUR ING ASSESSMENT PROCEEDINGS IT WAS EXPLAINED BY THE COUNSEL OF THE ASSESSEE THAT THE TRUST INCOME IS EXEMPT U/S 10(23C)(IIIAE) OF THE AC T. THIS CONDITION IS NOT APPLICABLE TO THE TRUST. IF THIS ARGUMENT OF TH E ASSESSEE IS ACCEPTED THEN THE QUESTION ARISES AS TO WHY THE TRU ST APPLIED FOR REGISTRATION U/S 12AA AND OBTAINED FROM THE DEPARTM ENT. FURTHER IT IS ALSO HELD THAT THE TRUST WAS REGISTERED U/S 12AA W.E.F 01.04.2010. THE INCOME OF TRUST WAS ASSESSABLE FOR THE FINANCIAL YEAR 01.04.2009 TO 31.03.2010, SO THE PROVISIONS OF SECTION 11 OF THE ACT WILL BE APPLICABLE. IT IS ALSO SUBMITTED THAT AS PER COPY OF TRUST DEED SUPPLIED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE TRUST HAS INCORPORATED A CLAUSE IN ITS TRUST DEED REGARDING ' DIVERSIFICATION . AS PER INDIAN TRUST ACT, A PUBLIC TRUST IS FORMED A ND RUN FOR THE BENEFITS OF THE 'GENERAL PUBLIC', CHARITY OR FOR AN Y OTHER WORK OF PUBLIC UTILITY. IN CASE A TRUST IS DISSOLVED BY A I/3' LI MAJORITY AND TOO OF LIFE MEMBERS AND THE PROCEEDS ARE UTILIZED OR GIFTED TO ANY OTHER TRUST BY SUCH LIFE MEMBERS, THE SPIRIT OF BENEFIT OF PUBLIC VANISHES. HENCE THE SPIRIT OF PUBLIC UTILITY IS ABSENT IN THIS TRUST, S O THE TRUST IS NOT ENTITLED TO AVAIL THE EXEMPTION U/S I0(23C)(IIIAE) AS WELL AS U/S I2AA OF THE ACT. IN THE SECOND GROUND IT IS CONTENDED THAT THE TRUST INCOME WAS EXEMPT UNDER CLAUSE (IIIAD) & (IIIAE) OF SECTION 10 (23C) ARE APPLICABLE TO TRUST BECAUSE IT IS RUNNING CHARITABLE MEDICAL F ACILITIES FOR GENERAL PUBLIC AND ALSO RUNNING EDUCATIONAL INSTITUTIONS. IN THIS REGARD IT IS ALSO SUBMITTED THAT THE TRUST HAS GOT REGISTRATION U/S I2AA OF THE ACT W.E.F. 01.04.2010 VIDE ORDER PASSED BY THE CIT-II, JALANDHAR DATED 21.09.2011. A LTHOUGH, THE YEAR UNDER CONSIDERATION, THE ASSESSEEE HAS CLAIMED EXEMPTION U/S 10(23C)(IIIAE), YET IT HAS ALSO OBTAINED REGISTRATI ON U/S 12AA OF THE ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 8 ACT W.E.F. 01.04.2010. IT IS STATED THAT THE TRUST IS CLAIMING BOTH EXEMPTIONS AS WELL AS 12AA AND 10(23C) (IIIAE). AS THE TRUST GOT REGISTRATION UNDER SECTION 12AA W.E.F. 01.04.2010 S O THE INCOME OF THE TRUST FOR THE ABOVE SAID PERIOD WAS NOT ASSESSA BLE UNDER THESE PROVISIONS. 7. IN ITS COUNTER COMMENTS, TO THE REMAND REPORT OF THE AO, THE ASSESSEE STATED AS FOLLOWS: LT IS SUBMITTED THAT THE TRUST WAS FORMED BY SARDA R KABUL SINGH, FORMER VICE PRESIDENT OF SHIROMANI GURUDAWARA PARBH ANDAK COMMITTEE VIDE TRUST DEED DATED I8TH' DAY OF AUGUST , 2008 AT JALANDHAR. THE LEARNED ASSESSING OFFICER IS HAVING MAIN OBJECTION REGARDING REGISTRATION OF TRUST UNDER SECTION 12AA OF THE ACT W.E.F.01.04.2010. THOUGH REGISTRATION OF THE TRUST DOES NOT IN ANY WAY PREJUDICE THE CLAIM OF EXEMPTION U/S 10(23C)(II IAE), YET THE ARGUMENT OF THE LEARNED A. O. IS MISPLACED AS THE R ELEVANT PREVIOUS YEAR ENDED ON 31-03-2010. THE REGISTRATION WAS GRAN TED W.E.F 01- 04-2010. THUS THE ARGUMENT OF THE LEARNED A.O IS NO T APPLICABLE TO THE ASSESSMENT YEAR 2010-11. IT IS PRAYED THAT THE ARGUMENT MAY BE IGNORED. IT IS ALSO BROUGHT TO YOUR KIND NOTICE THAT THE LEA RNED CIT-I1, JALANDHAR GRUNTED REGISTRATION TO THE TRUST U/S 12 AA ON 21-09- 2011. THE APPELLANT COULD NOT ANTICIPATE DURING THE RELEVANT PREVIOUS YEAR OR AT THE TIME OF FILING THE RETURN O F INCOME ON 20-10- 2010 THAT THE TRUST WOULD BE REGISTERED W.E.F. 01.0 4.2010. TINTS THE ARGUMENT OF THE A. O IS NOT RELEVANT ON THIS GROUND AS WELL. REGARDING DIVERSIFICATION, YOUR KIND ATTENTION IS I NVITED TO THE WRITTEN SUBMISSION DATED 07- 08-2014. THE RELEVANT PART OF THE SUBMISSION IS REPRODUCED AS UNDER. A. IT WAS ALSO MENTIONED IN THE DEED BY THE FOUNDER , SETTLER AND EXECUTOR THAT HE WILL NOT CLAIM OR RESERVE ANY BENE FICIAL INTEREST IN THE FOUNDATION NOR SHALL ANY OF THE MEMBERS, HEREBY APPOINTED HAVE OR CLAIM ANY BENEFICIAL INTEREST IN FOUNDATION . B. THE A. O. IGNORED THE FACT THAT THE TRUST WAS IR REVOCABLE AND DUE SAFEGUARDS WERE PROVIDED IN THE TRUST DEED. HE COMP LETELY IGNORED THAT THE FOUNDER, SETTLER AND EXECUTOR DID NOT CLAI M OR RESERVE ANY BENEFICIAL INTEREST IN THE FOUNDATION AND NOR SHALL ANY OF THE MEMBERS TO BE APPOINTED WOULD CLAIM ANY BENEFICIAL INTEREST IN THE FOUNDATION AND THE TRUST WAS FOR PUBLIC CHARITABLE EDUCATIONAL ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 9 PURPOSES AND WORKING ON PRINCIPLES OF MUTUALITY AND PHILANTHROPY. FURTHER IT WAS ALSO LAID DOWN THAT ALL INCOME, EARN INGS, MOVABLE AND IMMOVABLE PROPERTIES OF THE TRUST WERE TO BE UT ILIZED AND APPLIED TOWARDS THE PROMOTION OF IT'S AIMS AND OBJE CTIVES ONLY AND NO PROFIT OR INCOME OF THE TRUST SHALL BE PAID OR T RANSFERRED DIRECTLY OR INDIRECTLY BY WAY OF DIVIDEND, BONUS, SHARE, INCOME OR IN ANY MANNER WHATSOEVER TO THE PRESENT OR THE PAST TRUSTE ES OF THE TRUST OR TO ANY PERSON CLAIMING THROUGH THE PAST OR PRESENT TRUSTEE OR ANY MOVABLE OR IMMOVABLE PROPERTIES OF THE TRUST OR TAK E ANY PORTION, SHARE OR WHOLE OF THE PROFIT WHATSOEVER BY VIRTUE O F HIS MEMBERSHIP. 8. THE LD. CIT(A) HELD AS FOLLOWS: ON CAREFUL CONSIDERATION OF THE RIVAL CONTENTIONS, I AM OF THE OPINION THAT THE ASSESSEE TRUST IS NOT ENTITLED TO EXEMPTI ON UNDER SECTIONS 11,12 AND 13 OF THE ACT AS IT HAS GOT REGISTRATION UNDER SECTION 12AA OF THE ACT ONLY WITH EFFECT FROM 01.04.2010. I AM ALSO OF THE OPINION THAT THE ASSESSEE TRUST IS NOT ENTITLED FOR EXEMPTION OF ITS INCOME UNDER SECTION 10(23C)(IIIAE)/L 0(23C)(IIIAD) OF THE ACT AS IT IS NEITHER RUNNING A UNIVERSITY/EDUCATIONAL INSTITUTIO N/HOSPITAL OR ANY OTHER INSTITUTION NOR RECEIVING INCOME FOR THE PURP OSES SPECIFIED IN THESE SECTIONS. MOREOVER, THE ASSESSEE TRUST HAS SP ENT RS. 1,87,005/- ONLY DURING THE YEAR UNDER CONSIDERATION OUT OF ITS TOTAL RECEIPTS OF RS. 13,09,636/- AND THE TOTAL EXPENDITU RE INCLUDES EXPENSES OF RS. 1,73,803/- STATED TO BE INCURRED ON MEDICINES. ON PERUSAL OF THE ASSESSMENT RECORDS, IT HAS ALSO BEEN NOTICED THAT ONE MS. HARPREET KAUR HAS BEEN SHOWN AS EMPLOYEE OF THE TRUST AND GETTING SALARY OF RS.6,000/- PER MONTH. HOWEVER, NO EXPENSES HAVE BEEN DEBITED TO INCOME AND EXPENDITURE ACCOUNT ALTH OUGH SHE IS WORKING WITH THE TRUST SINCE 2009. IN MY OPINION, T HE ASSESSING OFFICER HAS RIGHTLY POINTED OUT THAT THE TRUSTEES O F THE TRUST CAN MISUTILIZE THE FUNDS OF THE TRUST AT ANY TIME AS PR OPER SAFEGUARDS IN THE TRUST DEED HAVE NOT BEEN PROVIDED. IN VIEW OF THE ABOVE STATED FACTS AND IN THE CIRCUM STANCES OF THE CASE AND MORE PARTICULARLY THE FACT THAT PROPER SAF EGUARDS HAVE NOT BEEN PROVIDED FOR THE UTILIZATION OF TRUST FUNDS, I AM OF THE OPINION THAT THE ASSESSEE TRUST IS NOT EVEN ENTITLED FOR EX EMPTION OF ITS INCOME UNDER SECTION 10(23C)(IIIAE) OF THE ACT. I, THEREFORE, FIND NO REASON TO INTERFERE WITH THE ACTION OF THE ASSESSIN G OFFICER IN DENYING DEDUCTION TO THE ASSESSEE TRUST UNDER SECTI ON 10(23C)(IIIAE) OF THE ACT AND UPHOLD HIS ACTION. THE ADDITION OF R S.L 1,22,631/- MADE BY THE ASSESSING OFFICER TO THE RETURNED INCOM E OF THE ASSESSEE TRUST IS, THEREFORE, UPHELD. IN THE RESULT , GROUNDS NO. 1, 2 AND 3 OF APPEAL TAKEN BY THE ASSESSEE TRUST ARE DIS MISSED. ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 10 9. THUS, THE LD. CIT(A) OBSERVED THAT: (I) THE REGISTRATION OF THE ASSESSEE WAS ONLY W.E. F. 01.04.2010. II) THE ASSESSEE WAS NOT RUNNING ANY HOSPITAL. III) 85% OF THE INCOME OF THE ASSESSEE DURING THE YEAR W AS NOT APPLIED FOR THE PURPOSE OF ACHIEVEMENT OF ITS OBJEC TS. IV) ONE MS. HARPREET KAUR HAD BEEN SHOWN AS EMPLOYEE OF THE TRUST GETTING SALARY OF RS.6000/- PER MONTH, BUT NO EXPENSES HAD BEEN DEBITED TO THE INCOME AND EXPENDI TURE ACCOUNT, THOUGH SHE HAD BEEN WORKING WITH THE TRUST SINCE 2009. V) THE TRUST DEED DID NOT CONTAIN ANY PROPER SAFEGUARD S AND SO, THERE WAS APPREHENSION OF MIS-UTILISATION OF T HE FUNDS OF THE TRUST AT ANY TIME BY THE TRUSTEES OF THE TRUST. 10. THE LD. COUNSEL FOR THE ASSESSEE HAS BROADLY RE PEATED THE STAND OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW, AS DELI NEATED HEREINABOVE. 11. ON THE OTHER HAND, THE LD. DR HAS PLACED STRONG RELIANCE ON THE ORDERS OF BOTH THE TAXING AUTHORITIES. 12. HAVING HEARD THE RIVAL CONTENTIONS IN THE LIGHT OF THE MATERIAL AVAILABLE ON RECORD, I FIND THAT THE ASSESSEE WAS G RANTED REGISTRATION W.E.F. 01.04.2010. IT CLAIMED EXEMPTION U/S 10(23C) (IIIAE) OF THE I.T.ACT. NOW, SECTION 10 OF THE ACT STARTS WITH THE WORDS I N COMPUTING THE TOTAL INCOME OF PREVIOUS YEAR OF ANY PERSON THEREAFTE R, THE SECTION CONTAINS CLAUSES, INCOME UNDER WHICH SHALL NOT BE I NCLUDED IN COMPUTING THE TOTAL INCOME A PREVIOUS YEAR. SECTIO N 10(23C)(IIIAE) OF THE ACT READS AS FOLLOWS: ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 11 SECTION 10(23C)(IIIAE): ANY HOSPITAL OR OTHER INSTITUTION FOR THE RECEPTION AND TREATMENT OF PERSONS SUFFERING FROM I LLNESS OR MENTAL DEFECTIVENESS OR FOR THE RECEPTION AND TREATMENT OF PERSONS DURING CONVALESCENCE OR OF PERSONS REQUIRING MEDICAL ATTE NTION OR REHABILITATION, EXISTING SOLELY FOR PHILANTHROPIC P URPOSES AND NOT FOR PURPOSES OF PROFIT, IF THE AGGREGATE ANNUAL RECEIP TS OF SUCH HOSPITAL OR INSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL R ECEIPTS AS MAY BE PRESCRIBED. 13. THUS, AS PER SECTION 10(23C)(IIIAE), THE INCOM E FROM A HOSPITAL EXISTING SOLELY FOR PHILANTHROPIC PURPOSES SHALL NO T BE INCLUDED IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR. 14. NOW, AS PER THE ARTICLES OF ASSOCIATION (APB 6 -28) OF THE ASSESSEE TRUST, THE OBJECT OF THE ASSESSEE IS AS FOLLOWS: THE OBJECTIVE TO START, RUN, MANAGE, LOOK AFTER, O PERATE, VARIOUS TYPES OF MEDICAL INSTITUTION(S), HOSPITAL(S), INCLU DING EYE DISEASES OR INFIRMITIES. MEDICAL, PARA-MEDICAL AND THE LIKE, SC HOOLS, COLLEGES(S) WITH HOSPITAL(S), PRIVATE SELF FINANCE OR GOVERNMEN T AIDED UNIVERSITY(IES), WITHIN THE TERRITORY OF INDIA OR A BROAD. 15. THIS IS ALSO EVIDENT FROM THE ORDER DATED 21.09 .2011 (APB 30-31) PASSED U/S 12AA(1)(B)(I) OF THE ACT BY THE LD. CIT, JALANDHAR-II, JALANDHAR, ALLOWING REGISTRATION TO THE ASSESSEE W. E.F. 01.04.2010. 16. THE FACT THAT THE ASSESSEE IS RUNNING A MEDICAL HOSPITAL STANDS ACKNOWLEDGED BY THE AO IN PARA-2 OF THE ASSESSMENT ORDER. AS PER THE ASSESSEES INCOME AND EXPENDITURE ACCOUNT (APB-33), THE ASSESSEE HAS INCURRED EXPENDITURE OF RS.1,73,803/- ON MEDICAL CA MPS. THIS INCOME AND EXPENDITURE ACCOUNT HAS NOT BEEN DOUBTED. 17. THE LD. CIT(A)S OBJECTION IS THAT THE REGISTRA TION WAS GRANTED TO THE ASSESSEE W.E.F. 01.04.2010 AND SO, THE INCOME OF F .Y. 2009-10 IS ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 12 GOVERNED BY SECTIONS 11 TO 13 OF THE ACT AND IT IS NOT ENTITLED FOR EXEMPTION UNDER THESE SECTIONS. 18. IN THIS REGARD, THE PROVISIONS OF SECTION 10(23 C)(IIIAE) ARE CLEAR. THE ASSESSEE IS RUNNING A HOSPITAL IN ACCORDANCE WITH I TS AVOWED OBJECTIVES, FOR WHICH IT HAS BEEN GRANTED REGISTRATION . ITS AN NUAL RECEIPTS FROM THIS HOSPITAL FOR THE PREVIOUS YEAR, I.E., F.Y. 2009-10 DO NOT EXCEED THE LIMIT OF ONE CRORE RUPEES, AS PRESCRIBED BY RULE 23C(1) O F THE I.T. RULES, 1962, AS THESE RECEIPTS AMOUNT TO ONLY RS.13,09,636/-. TH US, IN ACCORDANCE WITH SECTION 10(23C)(IIIAE) OF THE ACT, THESE RECEI PTS OF RS.13,09,636/- ARE NOT TO BE INCLUDED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PREVIOUS YEAR, I.E., F.Y. 2009-10. 19. APROPOS THE APPLICABILITY OF SECTION 11 OF THE ACT, SECTION 12A LAYS DOWN THE CONDITIONS FOR THE SAME. AS PER SECTION 12 A(1)(A): THE PERSON IN RECEIPT OF THE INCOME HAS MADE AN AP PLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION IN THE PRE SCRIBED FORM AND IN THE PRESCRIBED MANNER TO THE COMMISSIONER BEFORE TH E IST DAY OF JULY, 1973, OR BEFORE THE EXPIRY OF A PERIOD OF ONE YEAR FROM THE DATE OF THE CREATION OF THE TRUST OR THE ESTABLISHMENT O F THE INSTITUTION, WHICHEVER IS LATER AND SUCH TRUST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA. 20. THIS CLAUSE IS INAPPLICABLE, AS NEITHER HAS THE ASSESSEE APPLIED FOR THE REGISTRATION BEFORE 01.07.1973 [IT HAS DONE SO ON 21.3.2011, AS PER CITS ORDER (SUPRA) DATED 21.09.2011], NOR BEFORE T HE EXPIRY OF ONE YEAR FROM THE DATE OF ITS CREATION ( IT WAS CREATED ON 18.8.2008, AS NOTED BY THE CIT IN THE SAID ORDER). ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 13 21. THE CONDITION AS PER SECTION 12A(1)(AA) IS THAT : SECTION 12A(1)(AA): THE PERSON IN RECEIPT OF THE I NCOME HAS MADE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INS TITUTION ON OR AFTER THE IST DAY OF JUNE, 2007 IN THE PRESCRIBED FORM AN D MANNER TO THE PRINCIPAL COMMISSIONER OR COMMISSIONER AND SUCH TRU ST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA. 22. IN THE PRESENT CASE, AS PER THE AFORESAID ORDER OF THE CIT, THE APPLICATION FOR REGISTRATION OF THE TRUST WAS FILED BY THE ASSESSEE ON 21.03.2011, I.E., AFTER 01.06.2007 . THE ASSESSEE W AS GRANTED REGISTRATION W.E.F. 01.04.2010. THUS, THE CONDITIONS OF SECTION 12A(1)(AA) ARE DULY MET. 23. SECTION 12A(1)(B) PROVIDES THAT WHERE THE TOTAL INCOME OF THE TRUST OR INSTITUTION, AS COMPUTED UNDER THIS ACT WITHOUT GIVING EFFECT TO THE PROVISIONS OF SECTION 11 AND SECTION 12 EXCEEDS TH E MAXIMUM AMOUNT NOT CHARGEABLE TO TAX IN ANY PREVIOUS YEAR, THE ACC OUNTS OF THE TRUST OR INSTITUTION FOR THAT YEAR HAVE BEEN AUDITED BY AN A CCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB-SECTION(2) OF SECTION 288 AND THE PERSON IN RECEIPT OF THE INCOME FURNISHES ALONG WITH THE RETU RN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR THE REPORT OF SUCH AUDIT I N THE PRESCRIBED FORM DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT AND SET TING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED. 24. SECTION 12A(1)(B) THUS TALKS OF TOTAL INCOME. H OWEVER, AS DISCUSSED, THE ASSESSEES RECEIPTS FOR F.Y. 2009-10 FROM ITS HOSPITAL ARE NOT TO BE INCLUDED IN COMPUTING THE ASSESSEES TOTA L INCOME FOR THE SAID YEAR. BUT THE TAXING AUTHORITIES HAVE NOT SHOWN ANY OTHER INCOME OF THE ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 14 ASSESSEE TO BE EXCEEDING MAXIMUM AMOUNT NOT CHARGEA BLE TO TAX. THEREFORE. SECTION 12A(1)(B) ALSO DOES NOT GET ATT RACTED. 24.1 AS PER SECTION 12A(2), WHEN AN APPLICATION HAS BEEN MADE ON OR AFTER 01.06.2007, THE PROVISIONS OF SECTION 11 SHAL L APPLY IN RELATION TO THE INCOME OF SUCH TRUST FROM THE ASSESSMENT YEAR I MMEDIATELY FOLLOWING THE FINANCIAL YEAR IN WHICH SUCH APPLICATION IS MAD E. THE ASSESSEE APPLIED FOR REGISTRATION ON 21.03.2011, IN F.Y. 201 0-11. SO, SECTION 11 IS APPLICABLE FROM ASSESSMENT YEAR 2011-12 AND NOT FRO M AY 2010-11. MOREOVER, THE CONDITIONS CONTAINED IN SECTIONS 12A( 1)(A) TO (B) ARE NOT FULFILLED AND IT IS ALL THE CONDITIONS IN SECTIONS 12A(1) AND (2) WHICH NEED TO BE MET IN ORDER TO ATTRACT APPLICABILITY OF SECT ION 11, WHICH IS NOT THE POSITION HERE, AS DISCUSSED. 25. THEREFORE, SINCE NONE OF THE CONDITIONS OF APPL ICABILITY OF SECTION 11 AS LAID DOWN IN SECTION 12A OF THE ACT STAND FULFIL LED, SECTION 11 DOES NOT APPLY AND IT HAS BEEN WRONGLY INVOKED, IN THE ABSEN CE OF ANYTHING CONTRARY BROUGHT ON RECORD BY EITHER OF THE TAXING AUTHORITIES IN THEIR RESPECTIVE ORDERS. 26. THE NEXT OBJECTION OF THE LD. CIT(A) IS THAT TH E ASSESSEE IS NOT RUNNING ANY HOSPITAL. NOW, THIS OBJECTION IS IN DIR ECT CONTRADICTION TO THE AOS SPECIFIC FINDING IN PARA-2 OF HIS ORDER THAT THE ASSESSEE IS RUNNING A MEDICAL HOSPITAL.. THE LD. CIT(A) HAS ALSO NOT STATED THE BASIS FOR ARRIVING AT HIS CONCLUSION THAT THE ASSESSEE IS NO T RUNNING ANY HOSPITAL. SO, THIS OBJECTION/FINDING OF THE LD. CIT IS WRONG. ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 15 27. THE LD. CIT(A) HAS NEXT OBJECTED ABOUT THE ASSE SSEE HAVING SPENT ONLY RS.1,87,005/- DURING THE YEAR OUT OF ITS TOTAL RECEIPTS OF RS.13,09,636/-. NOW, THIS OBJECTION IS OBVIOUSLY IN CONSONANCE WITH THE AOS FINDING THAT 85% OF ITS INCOME HAS NOT BEEN UT ILIZED BY THE ASSESSEE FOR THE PURPOSES OF ACHIEVEMENT OF ITS OBJECTS, AS PROVIDED U/S 11(2). IN THIS REGARD, IN THE PRECEDING PORTION OF THIS ORDER , IT HAS BEEN HELD THAT THE PROVISIONS OF SECTION 11 ARE NOT APPLICABLE. IN ACCORDANCE WITH THE DISCUSSION WITH REGARD THERETO, THIS OBJECTION OF T HE LD. CIT(A) IS FOUND TO BE DEVOID OF FORCE. 28. THE LD. CIT(A) HAS OBSERVED THAT MS. HARPREET K AUR HAS BEEN SHOWN TO BE AN EMPLOYEE OF THE TRUST, GETTING A SAL ARY OF RS.6000/- PER MENSEM, BUT NO SUCH EXPENDITURE HAS BEEN DEBITED TO THE ASSESSEES INCOME AND EXPENDITURE ACCOUNT, THOUGH SHE IS WORKI NG WITH THE TRUST SINCE 2009. IN THIS CONNECTION, THE LD. COUNSEL FOR THE ASSESSEE HAS STATED AT THE BAR THAT NO SUCH EXPENDITURE WAS INCU RRED DURING THIS YEAR BY THE ASSESSEE. THE DEPARTMENT HAS NOT BEEN ABLE T O CONTROVERT THIS. BESIDES, FIRSTLY, THE AO NEVER RAISED ANY SUCH OBJE CTION. THEN, EVEN IN THE IMPUGNED ORDER, NOTHING WAS ENQUIRED OF THE ASS ESSEE BY THE LD. CIT(A) AND ONLY THE BALD OBSERVATION HAS BEEN MADE. AS SUCH, THIS OBJECTION TOO DOES NOT HAVE ANY LEGS TO STAND ON. 29. LASTLY, THE LD. CIT(A) OBSERVED THAT THE AO COR RECTLY POINTED OUT THAT THE TRUSTEES OF THE TRUST CAN MISUTILISE THE F UNDS OF THE TRUST AT ANY TIME, SINCE NO PROPER SAFEGUARDS HAVE BEEN PROVIDED IN THE TRUST DEED. ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 16 APROPOS THIS MATTER, AS RIGHTLY POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE, THE TRUST WAS FORMED BY SARDAR KABUL SINGH, FORMER VICE PRESIDENT OF SHIROMANI GURUDAWARA PARBHANDAK COMMIT TEE, VIDE TRUST DEED DATED I8TH DAY OF AUGUST, 2008 AT JALANDHAR. T HE ASSESSING OFFICER IS HAVING MAIN OBJECTION REGARDING REGISTRATION OF THE TRUST UNDER SECTION 12AA OF THE ACT W.E.F.01.04.2010. THOUGH REGISTRATI ON OF THE TRUST DOES NOT IN ANY WAY PREJUDICE THE CLAIM OF EXEMPTION U/S 10(23C)(IIIAE), YET THE ARGUMENT OF THE A. O. IS MISPLACED, AS THE REL EVANT PREVIOUS YEAR ENDED ON 31-03-2010. THE REGISTRATION WAS GRANTED W .E.F 01-04-2010. THUS THE ARGUMENT OF THE A.O IS NOT APPLICABLE TO THE ASSESSMENT YEAR 2010-11. 30. IN THIS REGARD, IT IS FURTHER SEEN THAT THE AR TICLES OF ASSOCIATION OF THE ASSESSEE TRUST SHOWS THE FOLLOWING RECITALS T O BE CONTAINED THEREIN: A) AND WHEREAS THE FOUNDER, SETTLER AND EXECUTOR DO ES NOT CLAM OR RESERVE ANY BENEFICIAL INTEREST IN THE FOUNDATIO N NOR SHALL ANY OF THE MEMBERS HEREBY APPOINTED HAVE OR CLAIM A NY BENEFICIAL INTEREST IN FOUNDATION (APB 6B). B) ALL THE INCOME, EARNINGS, MOVABLE PROPERTIES OF THE TRUST SHALL BE UTILIZED AND APPLIED TOWARDS THE PROMOTION OF ITS AIMS AND OBJECTS ONLY, AS SET FORTH HEREOF AND NO P ROFIT OR INCOME THEREOF SHALL BE PAID OR TRANSFERRED DIRECTL Y OR INDIRECTLY BY WAY OF DIVIDEND, BONUS, SHARE, INCOME OR IN ANY MANNER WHATSOEVER, TO THE PRESENT OR PAST TRUST EES OF THE TRUST OR TO ANY PERSON CLAIMING THROUGH THE PRE SENT OR PAST TRUSTEES OR FROM ANY MOVABLE OR IMMOVABLE PRO PERTIES ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 17 OF THE TRUST OR TAKE ANY PORTION, SHARE OR WHOLE OF THE PROFIT WHATSOEVER, BY VIRTUE OF HIS MEMBERSHIP (APB 7A) C) IT IS DECLARED THAT THE TRUST IS IRRECOVERABLE. THE NET ASSETS OF THE TRUST BOTH MOVABLE AND IMMOVABLE SHALL FOR ALL TIMES BE AND DEEMED TO BE THE PROPERTY AND CORPUS OF THE TRU ST AND THE FOUNDER DOES NOT AND WILL NOT CLAIM ANY NATURE OF INTEREST, RIGHT OR TITLE IN THE SAME (APB 27A). 31. NEITHER OF THE AUTHORITIES BELOW HAS DEMONSTRAT ED AS TO HOW THE ABOVE SPECIFIC RECITALS IN THE ARTICLES OF ASSOCIAT ION OF THE ASSESSEE TRUST ARE NOT PROPER SAFEGUARDS. IN FACT, THE OBSERVAT ION OF THE LD. CIT(A) IS NOTHING OTHER THAN A HYPOTHETICAL APPREHENSION RAIS ED WITHOUT ANY BASIS, IN OBLIVION OF THE ABOVE-QUOTED RECITALS IN THE ARTICLES OF ASSOCIATION OF THE TRUST. THIS OBSERVATION OF THE L D. CIT(A) IS, THUS, UNSUSTAINABLE IN LAW. 32. ALL CONSIDERED, THE ASSESSEES GRIEVANCE BY WA Y OF GROUND NOS. 3 TO 5 IS JUSTIFIED AND IS ACCEPTED, FOR THE ABOVE DI SCUSSION. ACCORDINGLY, THE ORDER UNDER APPEAL, DENYING THE EXEMPTION CLAIM ED BY THE ASSESSEE U/S 10(23C)(IIIAE) OF THE ACT, IS REVERSED. THE AO IS DIRECTED TO GRANT THIS EXEMPTION TO THE ASSESSEE. 33. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED, AS INDICATED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/02/201 6 SD/- (A.D. JAIN) JUDICIAL MEMBER DATED: 03/02/2016 /SKR/ COPY OF ORDER FORWARDED TO: 1. THE ASSESSEE: M/S. ADVANCED VISION FOUNDATION, J ALANDHAR. ITA NO.768(ASR)/2014 ASSTT. YEAR : 2010-11 18 2. THE ITO, WARD III(1), JALANDHAR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR. DR, ITAT, ASR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR.