DEPUTY COMMISSIONER OF INCOME TAX (E), circle, Jaipur V. CENTRAL ACADEMY JODHPUR EDUCATION SOCIETY, JAIPUR

ITA 790/JPR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6980 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 27-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUNI PAUL CITD; B K GUPTA CIT LD
• Keywords: Charitable institution; Maximum Marginal Rate; Diversion of income; Earning of tax free income; Notional interest; Benefit of exemption; Set aside
• Section: 143(3); 11A; 12AA; 43; 13(2); 13; 119; 22; 263; 12; 11; 15

Judgement Text

1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,B JAIPUR JH JESK LH-'KEKZ] YS[KK LNL; ,O LAANHI XKSLKBZ] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C SHARMA, AM & SHRI SANDEEP GOS AIN, JM VK;DJ VIHY LA-@ ITA NO.790, 793 & 794/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2013-14, 2014-15 & 2015-16 THE DCIT (EXEMPTIONS) CIRCLE-JAIPUR JAIPUR CUKE VS. CENTRAL ACADEMY JODHPUR EDUCATION SOCIETY,585A, VAIDH JI KA CHOURAHA, PRATAP NAGAR, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAATC 8759 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL, CA JKTLO DH VKSJ LS@ REVENUE BY: SHRI B.K. GUPTA , CIT -LD. DR AND SMT. RUNI PAUL, ADDL. CIT-DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01/09/2020 MN?KKS'K.KK DH RKJH[K@ DATE OF PRONOUNCEMENT: 09/09/2020 VKNS'K@ ORDER PER SANDEEP GOSAIN, J.M. T HESE THREE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THREE DIFFERENT ORDERS OF LD.CIT (A)-3, JAIPUR DATED 06-03-2019 FOR THE ASSESSMENT YEARS 2013-14, 2014-15 & 2015-16 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). DUE TO PREVAILING COVID-19 PANDEMIC CONDITION, THE HEARING OF THESE APPEALS AR E CONCLUDED THROUGH ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 2 VIDEO CONFERENCE. THE GROUNDS OF APPEAL RAISED BY T HE REVENUE IN THE RESPECTIVE APPEALS ARE COMMON WHICH ARE AS UNDER:- ITA NO. 790, 793 & 794/JP/2013 A.Y.2013-14 TO 2 015-16 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN ALLOWING THE BENEFIT OF EXEMPTION U /S 11 & 12 OF THE ACT TO THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT ASS ESSEE TRUST HAS PROVIDED UNDUE BENEFIT IN LIEU OF SALARY AND ALLOWANCES TO T HE PERSONS SPECIFIED U/S 13(3) OF THE ACT AND THUS PROVISIONS OF SECTION 13( 1)(C)(II) R.W.S. 13(2)(G) OF THE ACT WERE CLEARLY ATTRACTED IN THIS CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN ALLOWING EXEMPTION U/S 11 OF THE AC T TO THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT ASSESSEE TRUST HAS MADE INTEREST FREE ADVANCES AGAINST THE PROVISION OF SECTION 11(5) AND THUS PROVISIONS OF SECTION 13(1)(D) R.W.S. 13(2)(G) OF THE ACT WERE CLEARLY ATTRACTED IN THIS CASE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN NOT APPLYING THE PROVISIONS OF SECT ION 164(2) OF THE ACT NOTWITHSTANDING THE FACT THAT THE BENEFIT OF EXEMPT ION OF SECTION 11 WAS DISALLOWED BY THE AO ON ACCOUNT OF VIOLATION OF PRO VISIONS OF SECTION 13(1)(C) AND 13(1)(D) R.W.S. 13(2) & 13(3) OF THE ACT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) ERRED IN ALLOWING TRAVELLING EXPENSES, STAFF EXPENSES, STAFF WELFARE EXPENSES, SOCIAL WELFARE EXPENSES AND STUDENT WELFARE EXPENSE S TO THE EXTENT OF 95% WITHOUT APPRECIATING THE FACT THAT NO PROPER BILLS & VOUCHE RS WERE MAINTAINED BY ASSESSEE. 2.1 FIRST OF ALL, WE TAKE UP THE APPEAL OF THE REVE NUE IN ITA NO.790/JP/2013 FOR THE ASSESSMENT YEAR 2013-14 FOR ADJUDICATION. 2.2 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE S OCIETY REGISTERED UNDER RAJASTHAN SOCIETIES REGISTRATION ACT, 1958 AND IS A LSO REGISTERED U/S ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 3 12AA OF THE ACT. THE ASSESSEE SOCIETY FILED ITS RET URN OF INCOME DECLARING NIL INCOME AFTER CLAIMING EXEMPTION U/S 11 OF THE A CT. 2.3 HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEE DING, THE AO OBSERVED THAT THE SOCIETY HAS VIOLATED THE PROVISIO NS OF SECTION 11A OF THE ACT. THEREFORE, INTEREST @ 12% WAS CONSIDERED T O BE DIVERSION OF INCOME OF THE SOCIETY AND ACCORDINGLY EXEMPTION U/S 11 AND 12 OF THE ACT WAS DENIED AND SURPLUS AS PER INCOME AND EXPENDITUR E ACCOUNT ALONGWITH VARIOUS ADDITIONS MADE IN THE ASSESSMENT ORDER WERE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS & PROFESSION AND CHARGED TO TAX U/S 164(2) OF THE ACT AT MAXIMUM MARGIN RATE (MMR). 2.4 AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREF ERRED APPEAL BEFORE THE LD. CIT(A) WHO AFTER CONSIDERING THE CASE OF BO TH THE PARTIES DELETED THE DISALLOWANCE OUT OF SALARY AND ALLOWANCES BUT C ONFIRMED THE ADDITION OF RS. 45.00 LACS IN RESPECT OF NOTIONAL INTEREST O N ADVANCE OF RS. 3.75 CRORES GIVEN AGAINST THE PURCHASE OF IMMOVABLE PROP ERTIES. THE LD. CIT(A) ALSO DIRECTED THE AO TO REDUCE THIS AMOUNT F ROM THE APPLICATION OF INCOME AND DIRECTED THAT WHERE THERE IS VIOLATIO N OF SECTION 13(1)(C) OR 13(1)(D) OF THE ACT ONLY THE RELEVANT PART OF INCOM E WAS NOT EXEMPT U/S 11 AND 12 OF THE ACT, SHALL BE CHARGED TO TAX AT MM R. ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 4 2.5 NOW AGGRIEVED BY THE ORDER OF THE LD. CIT(A), T HE REVENUE FILED PRESENT APPEALS BEFORE US ON THE GROUNDS MENTIONED HEREINABOVE. 2.6 THE ONLY ISSUE TAKEN BY THE DEPARTMENT THROUGH ITS GROUNDS NO. 1 TO 3 ARE WHETHER THERE IS A VIOLATION OF SECTION 13(1)(C) OR 13(1)(D) OF THE ACT AND WHETHER EXEMPTION U/S 11 AND 12 OF THE ACT IS TO BE DENIED IN TOTO OR ONLY THE RELEVANT PART OF THE INCOME IS TO BE CHARGED TO TAX U/S 11 IN VIEW OF SECTION 164(2) OF THE ACT. 2.7 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDER PASSED BY THE AO AND REITERATED THE SAME ARGUMENTS, SUPPOR TING THE ORDER OF THE AO AND ALSO RELIED ON THE JUDGMENTS CITED BEFORE US WHICH ARE AS UNDER:- 1.DIRECTOR OF INCOME TAX VS BHARAT DIAMOND BOURSE ( 2013) 126 TAXMAN 365 (SC). 2.DIRECTOR OF INCOME TAX (EXEMPTION) VS CHARANJIV CHARITABLE TRUST 92014) 43 TAXMANN.COM 300 (DELHI H IGH COUR) 3. CIT-II, LUCKNOW VS AUDH EDUCATIONAL SOCIETY (201 1) 13 TAXMANN.COM 235 (ALLAHABAD HIGH COURT) 4. CIT VS GURUKUL GHATKESWAR TRUST (2011) 13 TAXMANN.COM 68 (ANDHRA PRADESH HIGH COURT) 5. HYDERABAD STOCK EXCHANGE LTD VS ADIT(EXEMPTIONS) (2011) 10 TAXMANN.COM132 (ITAT HYDERABAD BENCH B) ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 5 6. DDIT (EXEMPTIONS)-1, CHENNAI VS INDIA CEMENTS EDUCATIONAL SOCIETY (2016) 67 TAXMANN.COM 236 (ITAT CHENNAI BENCH C) 7. LITTLE FLOWER EDUCATIONAL SOCIETY VS ITO, COMPAN Y WARD-1, COIMBATORE (2016) 71 TAXMAN.COM 153, ITAT CHENNAI BENCHA 8. FREE TRADE UNION MULTIPURPOSE PROJECT TRUST VS I TO (EXEMPTIONS)-1(3), MUMBAI (2018) 95 TAXMANN.COM 297 , ITAT MUMABI BENCH F 9. LITTLE TRADITION VS DDIT (EXEMPTION), TRUST CIRC LE- IV,NEW DELHI (2009) 119 ITD 127 (ITAT DELHI BENCH B) 10. LD. CIT VS FR. MULLERS CHARITABLE INSTITUTIONS (2014) 44 TAXMANN.COM 275 [KERALA HIGH COURT RELIED UPON BY LD. CIT(A)] 2.8 ON THE CONTRARY, THE LD.AR APPEARING ON BEHALF OF THE ASSESSEE RELIED ON THE ORDERS OF THE LD. CIT(A) AND REITERA TED THE SAME ARGUMENTS AS WERE RAISED BY HIM BEFORE US AND ALSO RELIED ON THE WRITTEN SUBMISSIONS SUBMITTED BEFORE US WHICH IS REPRODUCED BELOW. FACTS:- 1. THE ASSESSEE SOCIETY IS REGISTERED UNDER RAJAS THAN SOCIETIES REGISTRATION ACT 1958 VIDE REGISTRATION NO.840/JAIP UR/2006-07DT. 09.03.2007. IT IS ALSO REGISTERED U/S 12AA OF THE INCOME TAX AC T BY CIT-I, JAIPUR VIDE ORDER DT. 20.11.2007. IT IS SOLELY ENGAGED IN IMPAR TING EDUCATION AND RUNNING 4 SCHOOLS NAMELY CENTRAL ACADEMY SCHOOL AT SHASTRI NA GAR, RATANADA, PAOTA AND CHB AT JODHPUR. THE ASSESSEE FILED ITS RETURN D ECLARING NIL INCOME ON 30.09.2013AFTER CLAIMING EXEMPTION U/S 11. 2. DURING THE ASSESSMENT PROCEEDINGS AO OBSERVED TH AT THE SOCIETY HAS PAID SALARY AND ALLOWANCE TO THREE PERSONS COVERED U/S 13(3) OF RS.27,33,600/- OUT OF WHICH HE CONSIDERED RS.16,21,600/- AS EXCESS IVE AND HAS GIVEN ADVANCE ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 6 OF RS.3.75 CRORES TO VARIOUS PARTIES STATED TO BE A GAINST PURCHASE OF IMMOVABLE PROPERTIES BUT HAS NOT GIVEN JUSTIFICATION FOR THE SAME AND THEREFORE, THERE IS VIOLATION OF SECTION 11(5), HENCE, INTEREST @ 12% O N SUCH ADVANCE, I.E. RS.45 LACS IS DIVERSION OF THE INCOME OF SOCIETY. ACCORDI NGLY, EXEMPTION U/S 11 & 12 IS DENIED AND THE SURPLUS AS PER THE INCOME & EXPEN DITURE A/C ALONG WITH VARIOUS ADDITIONS MADE IN THE ASSESSMENT ORDER IS A SSESSED UNDER THE HEAD INCOME FROM BUSINESS & PROFESSION AND CHARGED TO TA X U/S 164(2) AT MMR. 3. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE DELETED THE DISALLOWANCE OUT OF SALARY & ALLOWANCE (PG 5-16 OF CIT(A) ORDER) BUT CONFIRMED THE ADDITION OF RS.45 LACS IN RESPECT OF NOTIONAL INTEREST ON ADVANCE OF RS.3.75 CRORES GIVEN AGAINST PURCHASE OF IMMOVAB LE PROPERTIES BUT DIRECTED THE AO TO REDUCE THIS AMOUNT FROM THE APPLICATION O F INCOME (PG 19-21 OF CIT(A) ORDER). HE FURTHER HELD AT PG 3-10 OF THE AS SESSMENT ORDER THAT U/S 164(2) WHERE THERE IS VIOLATION OF SECTION 13(1)(C) OR 13(1)(D), ONLY THE RELEVANT PART OF INCOME NOT EXEMPT U/S 11 OR 12 SHA LL BE CHARGED TO TAX AT MMR AND THEREFORE, DIRECTED THE AO TO COMPUTE THE I NCOME AFTER ALLOWING EXEMPTION U/S 11. 4. AGAINST THE ORDER OF LD. CIT(A) DIRECTING TO ALL OW EXEMPTION U/S 11, THE DEPARTMENT HAS FILED THE APPEAL BY TAKING THE 3 GROUNDS STATED ABOVE AND THEREFORE, SINCE ALL THE 3 GROUNDS RELATE TO ONE IS SUE AS TO THE APPLICABILITY OF SECTION 164(2) VIS--VIS DENIAL OF EXEMPTION U/S 11 , ALL THESE GROUNDS ARE DEALT TOGETHER. SUBMISSION:- 1. THE ONLY ISSUE IN THE GROUNDS TAKEN BY THE DEPAR TMENT IS WHERE THERE IS A VIOLATION OF SECTION 13(1)(C) OR 13(1)(D), WHETHE R THE EXEMPTION U/S 11 OR 12 IS TO BE DENIED IN TOTO OR WHETHER THE ONLY RELEVAN T PART OF THE INCOME IS CHARGED TO BE TAX U/S 11 OF THE ACT IN VIEW OF SECT ION 164(2) OF THE ACT. 2. FROM THE FACTSSTATED ABOVE IT CAN BE NOTED THAT THE AO HAS DENIED THE EXEMPTION U/S 11 OF THE ACT ON ACCOUNT OF ALLEGED U NREASONABLE PAYMENTS OF SALARY AND ALLOWANCES TO THE PERSONS COVERED U/S 13 (3), THEREBY VIOLATING SECTION 13(1)(C) AND INVESTMENT OF FUNDS IN THE MOD E OTHER THAN THAT SPECIFIED U/S 11(5), THEREBY VIOLATING SECTION 13(1)(B). IT M AY BE NOTED THAT THE SALARY/ ALLOWANCE PAID TO THE PERSONS SPECIFIED U/S 13(3) I S REASONABLE AS HELD BY CIT(A) CONSIDERING THE QUALIFICATION AND THE DUTIES PERFORMED BY THESE PERSONS AS DISCUSSED IN PARA 5.2 & 5.3 OF THE ORDER .THE DISALLOWANCE SO DELETED BY THE LD. CIT(A) AS SUCH HAS NOT BEEN CHAL LENGED BY THE DEPARTMENT. THUS, THERE IS NO VIOLATION OF SECTION 13(1)(C). IN RESPECT OF ADVANCES GIVEN TO THE VARIOUS PARTIES, THE SAME IS AGAINST THE PURCHA SE OF IMMOVABLE PROPERTIES WHICH IS ONE OF THE MODE SPECIFIED U/S 11(5). HOWEV ER, LD. CIT(A) AT PARA 7.2 & 7.3 OF THE ORDER HAS HELD THAT THE ASSESSEE HAS N OT FILED ANY AGREEMENT FOR PURCHASE OF LAND IN RESPECT OF THESE ADVANCES AND T HEREFORE, DIRECTED THAT ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 7 NOTIONAL DISALLOWANCE OF INTEREST OF RS.45 LACS SHO ULD BE REDUCED OUT OF APPLICATION OF INCOME. THIS FINDING IS NOT CHALLENG ED BY THE DEPARTMENT. THUS, THE ORDER OF LD. CIT(A) ON THESE TWO ISSUES HAVE AT TAINED FINALITY AND THEREFORE, THERE IS NO VIOLATION OF SECTION 13(1)(C ) OR 13(1)(D) OF THE ACT AND THEREFORE, THELD. CIT(A) HAS RIGHTLY HELD THAT EXEM PTION U/S 11 AND 12 DENIED BY AO HAS IS UNCALLED FOR. 3. WITHOUT PREJUDICE TO ABOVE, EVEN IF IT IS PRESUM ED THAT THERE IS A VIOLATION UNDER SECTION 13, THE ENTIRE SURPLUS CANN OT BE CHARGED TO TAX BUT ONLY THAT PART OF THE INCOME WHICH IS NOT EXEMPT U/S 11 BY VIRTUE OF SECTION 13(1)(C) OR 13(1)(D) SHALL BE CHARGED TO TAX AT MMR. IN THIS CONNECTION IT IS RELEVANT TO CONSIDER SECTION 164 WHICH DEALS WITH THE CHARGE OF THE TAX WHERE THE SHARES OF THE BENEFICIARY ARE UNKNOWN. SEC. 164(2) DEALS W ITH THE CHARGE OF TAX ON THE INCOME OF THE TRUST WHICH IS DERIVED BY IT FROM THE PROPERTY HELD WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSE. THE PROVISO TO THI S SECTION WHICH IS RELEVANT FOR THE PRESENT PURPOSE READS AS UNDER:- PROVIDED THAT IN A CASE WHERE THE WHOLE OR ANY PAR T OF THE RELEVANT INCOME IS NOT EXEMPT UNDER SECTION 11 OR S ECTION 12 BY VIRTUE OF THE PROVISIONS CONTAINED IN CLAUSE (C) OR CLAUSE (D) OF SUB-SECTION (1) OF SECTION 13, TAX SHALL BE CHARGED ON THE RELE VANT INCOME OR PART OF RELEVANT INCOME AT THE MAXIMUM MARGINAL RATE. FROM THE PLAIN READING OF THIS PROVISO, IT IS EVIDE NT THAT WHERE THE WHOLE OR ANY PART OF THE RELEVANT INCOME IS NOT EXEMPT U/S 1 1 OR 12 BECAUSE OF THE PROVISIONS OF THE SECTION 13(1)(C) OR 13(1)(D), TAX IS CHARGEABLE ON THE RELEVANT INCOME OR PART OF THE RELEVANT INCOME AT THE MAXIMU M MARGINAL RATE (MMR). THEREFORE, IN CASE THERE IS VIOLATION OF SEC.13, TH E ENTIRE INCOME OF THE TRUST IS NOT LIABLE TO TAX AT MMR BUT ONLY THE RELEVANT PART OF THE INCOME WHICH VIOLATES SEC.13 ATTRACTS THE MMR. IN THE PRESENT CA SE, EVEN IF IT IS HELD THAT THERE IS VIOLATION OF SEC.13, THEN ONLY THE AMOUNT OF BENEFIT GIVEN TO THE PERSONS SPECIFIED U/S 13(3) OUT OF THE INCOME OF TH E TRUST IS CHARGEABLE TO TAX AT MMR. HENCE, THE ACTION OF AO IN TAXING THE SURPLUS AT MAXIMUM MARGINAL RATE WITHOUT CONSIDERING THE PROVISIONS OF SECTION 11 & 12 IS BAD IN LAW. 2.9 THE LD.AR OF THE ASSESSEE RELIED ON THE FOLLOWI NG DECISIONS:- 1. DIT VS WORKING WOMENS FORUM 235 TAXMAN 516 (SC). 2. CIT VS FR. MULLERS CHARITABLE INSTITUTION 227 TA XMAN 369 (SC) ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 8 3. DIT(E) VS SHETH MAFATLAL GAGALBHJAI FOUNDATION TRUST , 249 ITR 533 (BOMBAY HIGH COURT) 4. DCIT(E) VS MAHATMA GANDHI CHARITABLE SOCIETY FOR EDUCATION AND RESEARCH (ITA NO. 359/JP/2019 DATE OF ORDER 23-01-2020 ITAT JAIPUR BENCH) 5. GLOBAL INSTITUTE OF TECHNOLOGY SOCIETY VS DCIT(E ) (ITA NO. 1066/JP/2018 DATE OF ORDER 5-11-2018 ITAT JAIPUR BENCH) 6. M/S. RAJKALA CHARITABLE TRUST VS ACIT (ITA NO.140/JP/2015 DATE OF ORDER 28-04-2016 ITAT JAIPUR BENCH) 7. CIT VS RAJASTHAN & GUJARAT FOUNDATION , 402 ITR 441 (SC) 2.10 WE HAVE HEARD THE LD. COUNSELS FOR BOTH THE PA RTIES AND WE HAVE PERUSED THE MATERIALS AVAILABLE ON RECORD, DELIBER ATED AND THROUGH EVERY JUDGEMENT CITED BY THE PARTIES AS WELL AS THE ORDER S PASSED BY THE REVENUE AUTHORITIES. FROM THE FACTS OF THE PRESENT CASE, WE NOTICED THAT THE AO HAD DENIED EXEMPTION U/S 11 OF THE ACT TO T HE ASSESSEE ON THE GROUND OF UNREASONABLE PAYMENTS OF SALARY AND ALLOW ANCES TO THE PERSONS COVERED U/S 13(3) OF THE ACT THEREBY VIOLATING SECT ION 13(1) AND INVESTMENT OF FUNDS IN THE MODE OTHER HAND THAT SPE CIFIED U/S 11(5), THEREBY VIOLATING SECTION 13(1)(B) OF THE ACT. ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 9 2.11 ACCORDING TO THE ASSESSEE , SALARY / ALLOWANCE S PAID TO THE PERSON SPECIFIED U/S 13(3) OF THE ACT ARE REASONABLE CONSI DERING THE QUALIFICATION AND DUTIES PERFORMED BY THESE PERSONS AS DISCUSSED BY THE LD. CIT(A) IN PARA 5.2 AND 5.3 OF HIS ORDER. AS FAR AS THE ADVANC E GIVEN BY THE ASSESSEE TO VARIOUS PARTIES, THE SAME WAS AGAINST PURCHASE O F IMMOVABLE PROPERTY AND IT WAS HELD BY THE LD. CIT(A) IN PARA 7.2 AND 7 .3 OF HIS ORDER THAT SINCE THE ASSESSEE HAS NOT FILED ANY AGREEMENT FOR PURCHASE OF LAND IN RESPECT OF THESE ADVANCES, THEREFORE, HE DIRECTED T HAT NOTIONAL DISALLOWANCE OF INTEREST OF RS. 45.00 LACS SHOULD B E REDUCED OUT OF APPLICATION OF INCOME. NOW THE QUESTION BEFORE US F OR CONSIDERATION IS THAT IF THERE IS A VIOLATION U/S 13 OF THE ACT THE N THE ENTIRE SURPLUS IS TO BE CHARGED TO TAX OR ONLY A PART OF INCOME WHICH IS NOT EXEMPT U/S 11 BY VIRTUE OF SECTION13(1)(C) OR 13(1)(D) OF THE ACT SH ALL BE CHARGED TO TAX AT MMR. 2.12 IN ORDER TO DECIDE THIS CONTROVERSY, CONSIDERI NG THE FACTS OF THE PRESENT CASE, IT IS RELEVANT TO CONSIDER SECTION 16 4 OF THE ACT WHICH DEALS WITH CHARGE OF TAX AND WHERE THE SHARE OF BENEFICIA RY IS UNKNOWN. SECTION 164(2) OF THE ACT DEALS WITH THE CHARGE OF TAX ON THE INCOME OF THE TRUST WHICH IS DERIVED BY IT FROM THE PROPERTY HELD WHOLL Y FOR CHARITABLE OR ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 10 RELIGIOUS PURPOSES. THE PROVISO TO THIS SECTION WHI CH IS RELEVANT FOR DECIDING THE PRESENT CASE READS AS UNDER:- PROVIDED THAT IN A CASE WHERE THE WHOLE OR ANY PAR T OF THE RELEVANT INCOME IS NOT EXEMPT UNDER SECTION 11 OR SECTION 12 BY VIRTUE OF THE PROVISIONS CONTAINED IN CLAUSE (C) OR CLAUSE (D) OF SUB-SECTION (1) OF SECTION 13, TAX SHALL BE CHARGED ON THE RELEVANT IN COME OR PART OF RELEVANT INCOME AT THE MAXIMUM MARGINAL RATE. FROM THE PLAIN READING OF THIS PROVISO, IT IS EVIDE NT THAT WHERE THE WHOLE OR ANY PART OF THE RELEVANT INCOME IS NOT EXEMPT U/ S 11 OR 12 BECAUSE OF THE PROVISIONS OF THE SECTION 13(1)(C) OR 13(1)(D), TAX IS CHARGEABLE ON THE RELEVANT INCOME OR PART OF THE RELEVANT INCOME AT T HE MAXIMUM MARGINAL RATE (MMR). THEREFORE, IN CASE THERE IS VIOLATION O F SEC.13 OF THE ACT THEN THE ENTIRE INCOME OF THE TRUST IS NOT LIABLE T O TAX AT MMR, BUT ONLY THE RELEVANT PART OF THE INCOME WHICH VIOLATES SEC. 13 ATTRACTS THE MMR. IN THE PRESENT CASE, EVEN IF IT IS HELD THAT THERE IS VIOLATION OF SEC.13, THEN ONLY THE AMOUNT OF BENEFIT GIVEN TO THE PERSONS SPE CIFIED U/S 13(3) OUT OF THE INCOME OF THE TRUST IS CHARGEABLE TO TAX AT MMR . HENCE, THE ACTION OF AO IN TAXING THE SURPLUS AT MAXIMUM MARGINAL RATE W ITHOUT CONSIDERING THE PROVISIONS OF SECTION 11 & 12 IS BAD IN LAW. FO R REACHING THE ABOVE CONCLUSION, WE ALSO DRAW THE STRENGTH FROM THE FOLL OWING DECISIONS. ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 11 (1) DCIT VS. WORKING WOMENS FORUM (2015) 235 TAXMAN 516 (SC) :- ASSESSEE WAS A TRUST REGISTERED UNDER SECTION 12AA AND WAS PROVIDING EMPLOYMENT TO POOR WOMEN, AS SISTING WEAKER SECTIONS OF THE SOCIETY FOR PERSONAL DEVELOP MENT, MAINTAINING DESTITUTE HOMES, REHABILITATION OF VICTIM OF NATION AL CALAMITIES, ETC. IT INVESTED A SUM OF RS. 20,000 IN THE SHARE OF MIOT H OSPITALS LTD. AO DENIED THE EXEMPTION U/S 11 AND 12 ON GROUND THAT S INCE SECTION 13(1)(D) RECOGNIZES INVESTMENT ONLY IN SPECIFIED AS SETS, FAILURE TO INVEST IN SUCH SPECIFIED BUSINESS WOULD DISENTITLE THE ASSESSEE FOR EXEMPTION. CIT(A) ALLOWED THE ASSESSEE'S APPEALS TH AT THE ENTIRETY OF THE INCOME OF THE ASSESSEE COULD NOT BE DENIED OF E XEMPTION. ON APPEAL, REFERRING TO THE DECISION OF THE BOMBAY HIG H COURT IN DIT(EXEMPTIONS) V. SHETH MAFATLAL GAGALBHAI FOUNDAT ION TRUST, THE TRIBUNAL REJECTED THE REVENUE'S APPEALS. HIGH COURT HELD THAT IN DIT (EXEMPTIONS) V. SHETH MAFATLAL GAGALBHAIFOUNDATION TRUST, IT WAS HELD BY BOMBAY HIGH COURT THAT VIOLATION OF SECTION 11(5),READ WITH SECTION 13(1)(D) BY THE ASSESSEE WOULD RESULT IN TH E MAXIMUM MARGINAL RATE OF TAX ONLY ON THE DIVIDEND INCOME ON SHARES, WHICH WAS NOT THE RECOGNIZED MODE OF INVESTMENT AND THAT THE ASSESSEE WOULD NOT BE VESTED WITH MARGINAL RATE OF TAX ON THE ENTIRE INCO ME. THEREFORE, THE INCOME OTHER THAN DIVIDEND INCOME HAD TO BE TAXED O NLY TO THE EXTENT TO WHICH THE VIOLATION WAS FOUND BY THE AO. RESPECT FULLY FOLLOWING THE SAID DECISION, HIGH COURT CONFIRMED THE ORDER O F THE TRIBUNAL AND DISMISSED THE REVENUES APPEAL. SPECIAL LEAVE PETIT ION FILED AGAINST IMPUGNED ORDER WAS DISMISSED. (2) CIT VS. FR. MULLERS CHARITABLE INSTITUTIONS (2014) 227 TAXMAN 369 (SC) :- HIGH COURT BY IMPUGNED ORDER HELD THAT IN CASE OF CHARITABLE TRUST, IT IS ONLY INCOME FROM IN VESTMENT OR DEPOSIT WHICH HAD BEEN MADE IN VIOLATION OF SECTION 11(5) T HAT WAS LIABLE TO BE TAXED AND THAT VIOLATION U/S 13(1)(D) DOES NOT TANT AMOUNT TO DENIAL OF EXEMPTION U/S 11 ON TOTAL INCOME OF ASSESSEE TRUST. SPECIAL LEAVE PETITION FILED AGAINST IMPUGNED ORDER WAS TO BE DIS MISSED. (3) CIT V. FR. MULLERS CHARITABLE INSTITUTIONS (201 4) 363 ITR 230 (KAR.) (HC) :- IN THIS CASE THE FACTS AS NARRATED IN PARA 8 OF THE ORDER READS AS UNDER:- THE RECORDS CLEARLY DISCLOSE THAT THE RESPONDENT- ASSESSEE IS ADMINISTERING NUMBER OF INSTITUTIONS AND IT HAD OBT AINED EXEMPTION UNDER SECTION 11 AND 12 OF THE ACT. THE ASSESSEE FI LED NIL RETURN OF INCOME FOR THE AFORESAID ASSESSMENT YEARS. ON THE B ASIS OF THE TAX EVASION PETITION, AN ENQUIRY WAS CONDUCTED AND DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE RESPONDENT-TRUST ADVANCED A SUM OF RS. 30,00,000/- DURING THE ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 12 ASSESSMENT YEAR 2000-01 AND ADVANCED ANOTHER SUM OF RS.50,00,000/- DURING THE ASSESSMENT YEAR 2001-02 TO M/S. JANAMADHYAMAPRAKASHANA LIMITED, WHICH WAS RUNNING A KANNADA DAILY KNOWN AS ' JANAVAHINI. IN THE BALANCE SHEET OF THE RESPONDENT- TRUST, THE SAID AMOUNTS WERE MENTIONED UNDER THE HE AD KNOWN AS 'LOANS AND ADVANCES'. THE CHARITABLE INSTITUTION, A DVANCING LOAN AMOUNT TO M/S JANAMADHYAMAPRAKASHANA LIMITED AND OB TAINING EXEMPTION IN PAYMENT OF INCOME TAX IS IN VIOLATION OF SECTION 11(5) OF THE ACT. AS PER SECTION 13(1)(A), INCOME OF THE TRU ST SHALL NOT BE ENTITLED FOR EXEMPTION UNDER SECTIONS 11AND 12 OF T HE ACT. ACCORDINGLY, THE ASSESSING OFFICER ASSESSED THE ADVANCE MADE TO M/S. JANAMADHYAMAPRAKASHANA LIMITED FOR TAX. BEING AGGRI EVED BY THE SAID ASSESSMENT ORDER, THE RESPONDENT ASSESSEE PREF ERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX. THE COMMISSI ONER OF INCOME TAX, AFTER VERIFICATION OF THE RECORDS OF THE ASSES SING OFFICER FOUND THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, HE INI TIATED THE PROCEEDINGS UNDER SECTION 263 OF THE ACT. THE COMMISSIONER WAS OF THE OPINION THAT IN VIEW OF VIOLATION OF SECTION 11(5), THE ENT IRE INCOME OF THE RESPONDENT-TRUST OUGHT TO HAVE BEEN ASSESSED AND TH EY ARE NOT ENTITLED FOR ANY EXEMPTION UNDER SECTIONS 11 AND 12 OF THE A CT AND REVISED THE ORDER PASSED BY THE ASSESSING OFFICER. THE SAID ORD ER WAS QUESTIONED BEFORE THE TRIBUNAL. THE TRIBUNAL ALLOWED THE APPEA LS AND SET ASIDE THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT. BEING AGGRIEVED BY THE SAID ORDER, THE REVENUE PREFERRED THESE TWO APPEALS. ON THESE FACTS THE HONBLE HIGH COURT IN PARA 11 HE LD AS UNDER:- WITH REGARD TO SECOND AND THIRD SUBSTANTIAL QUESTI ONS OF LAW ARE CONCERNED, READING OF SECTION 13(L)(D) OF THE ACT M AKES IT CLEAR THAT IT IS ONLY THE INCOME FROM SUCH INVESTMENT OR DEPOSIT WHI CH HAS BEEN MADE IN VIOLATION OF SECTION 11 (5) OF THE ACT THAT IS LIAB LE TO BE TAXED AND THAT VIOLATION UNDER SECTION 13(L)(D) DOES NOT TANTAMOUN T TO DENIAL OF EXEMPTION UNDER SECTION 11 ON THE TOTAL INCOME OF T HE ASSESSEE. AN IDENTICAL QUESTION CAME BEFORE THE BOMBAY HIGH COUR T IN THE CASE REPORTED IN (2001) 249 ITR 533 (BOM) (SUPRA). THE QUESTION BEFORE THE BOMBAY HIGH COURT IS 'WHETHER VIOLATION OF SECTION 11(5) R/W SECTION 13(L)(D) BY THE ASSESSEE-TRUST ATTRACTS MAXIMUM MAR GINAL RATE OF TAX ON THE ENTIRE INCOME OF THE TRUST? THE BOMBAY HIGH COU RT HELD THAT IN CASE OF CONTRAVENTION OF SECTION 13(L)(D), MAXIMUM MARGI NAL RATE OF TAX UNDER SECTION 164(2), PROVISO IS APPLICABLE ONLY TO THAT PART OF INCOME OF THE TRUST WHICH HAS FORFEITED EXEMPTION AND NOT THE ENT IRE INCOME. RELEVANT PARAGRAPH READS AS UNDER: ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 13 SEC. 164(2) REFERS TO THE RELEVANT INCOME WHICH IS DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES. IF SUCH INCOME CONSISTS OF SEVERABLE PORTIONS, EXEMPT AS WELL AS TAXABLE, THE PORTION WHICH IS EXEMPT IS TO BE LEFT OUT AND THE P ORTION WHICH IS NOT EXEMPT IS CHARGED TO TAX AS IF IT IS THE INCOME OF AN AOP. THEREFORE, A PROVISO WAS INSERTED BY THE FINANCE ACT, 1984 W.E.F 1ST APRIL 1985, UNDER WHICH IN CASES WHERE THE WHOLE OR ANY PART OF THE R ELEVANT INCOME IS NOT EXEMPT UNDER S. 11 OR S. 12 BECAUSE OF THE CONTRAVE NTION OF S.13 (L)(D), THE TAX SHALL BE CHARGED ON SUCH INCOME OR PART THEREOF , AS THE CASE MAY BE, AT THE MAXIMUM MARGINAL RATE. IN OTHER WORDS, ONLY THE NON-EXEMPT INCOME PORTION WOULD FAIL IN THE NET OF TAX AS IF I T WAS THE INCOME OF AN AOP. THE PHRASE RELEVANT INCOME OR PART OF THE REL EVANT INCOME IN THE PROVISO IS REQUIRED TO BE READ IN CONTRADISTINCTION TO THE PHRASE WHOLE INCOME UNDER S.161(1A). THIS IS ONLY BY WAY OF COM PARISON. UNDER S. 161(1A), WHICH BEGINS WITH A NON OBSTANTE CLAUSE, I T IS PROVIDED THAT WHERE ANY INCOME IN RESPECT OF WHICH A PERSON IS LI ABLE AS A REPRESENTATIVE ASSESSEE CONSISTS OF PROFITS OF BUSI NESS, THE TAX SHALL BE CHARGED ON THE WHOLE OF THE INCOME IN RESPECT OF WH ICH SUCH PERSON IS SO LIABLE AT THE MAXIMUM MARGINAL RATE. THEREFORE, REA DING THE ABOVE TWO PHRASES SHOWS THAT THE LEGISLATURE HAS CLEARLY INDI CATED ITS MIND IN THE PROVISO TO S. 164(2) WHEN IT CATEGORICALLY REFERS T O FORFEITURE OF EXEMPTION FOR BREACH OF S,13(L)(D), RESULTING IN LEVY OF MAXI MUM MARGINAL RATE OF TAX ONLY TO THAT PART OF THE INCOME WHICH HAS FOR FORFE ITED EXEMPTION. IT DOES NOT REFER TO THE ENTIRE INCOME BEING SUBJECTED TO M AXIMUM MARGINAL RATE OF TAX. THIS INTERPRETATION IS ALSO SUPPORTED BY CI RCULAR NO.387, DT. 6TH JULY, 1984. VIDE THE SAID CIRCULAR, IT HAS BEEN LAI D DOWN IN PARA 28,6 THAT WHERE A TRUST CONTRAVENES S,13(L)(D), THE MAXIMUM M ARGINAL RATE OF INCOME-TAX WILL APPLY ONLY TO THAT PART OF THE INCO ME WHICH HAS FORFEITED EXEMPTION UNDER THE SAID PROVISION AND NOT TO THE E NTIRE INCOME. THERE IS A VITAL DIFFERENCE BETWEEN ELIGIBILITY FOR EXEMPTIO N AND WITHDRAWAL OF EXEMPTION/FORFEITURE OF EXEMPTION FOR CONTRAVENTION OF THE PROVISIONS OF LAW. THESE TWO CONCEPTS ARE DIFFERENT. THEY HAVE DI FFERENT CONSEQUENCES. IN THE CIRCUMSTANCES, THERE IS MERIT IN THE CONTENT ION OF THE ASSESSEE THAT IN THE PRESENT CASE THE MAXIMUM MARGINAL RATE OF TA X WILL APPLY ONLY TO THE DIVIDED INCOME FROM SHARES HELD IN CONTRAVENTIO N OF S. 13(1)(A) AND NOT TO THE ENTIRE INCOME. THEREFORE, INCOME OTHER T HAN DIVIDEND INCOME SHALL BE TAXED AT NORMAL RATE OF TAXATION UNDER THE ACT. A SIMILAR VIEW HAS BEEN TAKEN BY THE DELHI HIGH COU RT IN A JUDGMENT REPORTED IN (2002) 253 ITR 593 (SUPRA). READING OF THE PROVISO TO SECTION 142 IS VERY CLEAR THAT THE LEGISLATURE H AS CLEARLYCONTEMPLATED THAT IN A CASE, WHERE THE WHOLE OR PART OF THE RELE VANT INCOME IS NOT EXEMPTED UNDER SECTION 11 BY VIRTUE OF VIOLATION OF SECTION 13(1)(D) OF THE ACT, TAX SHALL BE LEVIED ON THE RELEVANT INCOME OR A PART OF THE RELEVANT INCOME AT THE MAXIMUM MARGINAL RATE. THE SAID ANALO GY IS APPLICABLE TO THE FACTS OF THE PRESENT CASE. ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 14 4. CIT VS. ORPAT CHARITABLE TRUST (2015) 230 TAXMAN 66 (GUJ.) (HC) :- ASSESSEE FILED IT RETURN OF INCOME FOR DIFFERENT AS SESSMENT YEARS. AOS EXAMINED THE CASE OF ASSESSEE AND DENIED EXEMPTION TO ASSESSEE ON RESPECTIVE AMOUNTS IN CONNECTION WITH D EPOSITS MADE BY IT IN CONTRAVENTION OF SEC.11(5) READ WITH SEC.13(1). CIT (A) DIRECTED AO TO RESTRICT DISALLOWANCE OF EXEMPTION U/S11 IN RESPECT OF DEPOSITS IN CONTRAVENTION OF SEC.11(5) R.W.S. 13(1)(D) AS AGAIN ST DENIAL OF EXEMPTION ON ENTIRE INCOME BY AO. ITAT UPHELD THE ORDER OF CI T(A) AND HELD THAT EXEMPTION COULD BE DENIED ONLY TO EXTENT OF INVESTM ENT CONTRAVENING PROVISIONS OF SEC. 11(5)AND NOT ENTIRE AMOUNT. HELD , CIT(A) VERY CLEARLY OBSERVED THAT PROVISIONS OF SECTION 11(1)(A) ARE VE RY CLEAR AND PROVIDE THAT INCOME DERIVED FROM PROPERTY HELD UNDER TRUST SHOULD NOT BE INCLUDED IN INCOME TO EXTENT IT WAS APPLIED FOR CHARITABLE O R RELIGIOUS PURPOSES(EXPENSES INCURRED DURING THE YEAR) OR ACCU MULATED/SET APART TO BE APPLIED FOR THAT PURPOSE IN FUTURE OUT OF 75% TO WHICH RESTRICTION U/S. 11(5) APPLIED. ITATHAD RELIED UPON ITS OWN DECISION ON SIMILAR ISSUE RENDERED IN ITA NO. 644 TO646/RJT/2003 DATED 22.12. 2003. HIGH COURT IN COMPLETE AGREEMENT WITH REASONING ADOPTED BY CIT(A) AS WELL AS TRIBUNAL. IN CASE OF FR. MULLERS CHARITABLE INSTITU TIONS, KARNATAKA HIGH COURT HELD THAT SEC.13(1)(D) CLEARS THAT IT WAS ONL Y THE INCOME FROM SUCH INVESTMENT OR DEPOSIT WHICH HAD BEEN MADE IN VIOLAT ION OF SEC.11(5) THAT WAS LIABLE TO BE TAXED AND VIOLATION U/S 13(1)(D) D OES NOT RESULT IN DENIAL OF EXEMPTION U/S 11 TO TOTAL INCOME OF ASSESSEE. WH ERE WHOLE OR PART OF RELEVANT INCOME WAS NOT EXEMPTED U/S 11 BY VIRTUE O F VIOLATION OF SEC.13(1)(D),TAX SHOULD BE LEVIED ON RELEVANT INCOM E OR PART OF RELEVANT INCOME AT MAXIMUM MARGINAL RATE. REVENUE'S APPEAL D ISMISSED. (5) DIT(E) VS. SHETH MAFATLAL GAGALBHAI FOUNDATION TRUST 249 ITR 533 (BOM.) (HC) :- IN THIS CASE AT PARA 6 OF THE ORDER IT WAS HELD AS UNDER:- SEC. 164 DOES NOT CREATE A CHARGE ON THE INCOME OF A DISCRETIONARY TRUST. THE WORD CHARGE IN S. 164 ME ANS LEVY. SEC. 164(2) REFERS TO THE RELEVANT INCOME WHICH IS DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES. IF SUCH INCOME CONSISTS OF SEVERABLE PORTIONS, EXEMPT AS WELL AS TAXABLE, T HE PORTION WHICH IS EXEMPT IS TO BE LEFT OUT AND THE PORTION WHICH IS N OT EXEMPT IS CHARGED TO TAX AS IF IT IS THE INCOME OF AN AOP. THEREFORE, A PROVISO WAS INSERTED BY THE FINANCE ACT, 1984 W.E.F. 1ST APRIL, 1985, UNDER WHICH IN CASES WHERE THE WHOLE OR ANY PART OF THE RELEVANT INCOME IS NOT EXEMPT UNDER S. 11 OR S. 12 BECAUSE OF THE CONTRAVENTION OF S. 13(1)(D), THEN THE TAX SHALL BE CHARGED ON SUCH INCOME OR PART THEREOF, AS THE CASE MAY BE, AT THE MAXIMUM MARGINAL RATE. IN OTHER WORDS, ONLY THE NON EXEMPT INCOME PORTION WOULD FALL IN THE NET OF TAX AS IF IT WAS T HE INCOME OF AN AOP. SEC. 11(5) LAYS DOWN VARIOUS MODES OR FORMS IN WHICH A T RUST IS REQUIRED TO DEPLOY ITS FUNDS. SEC. 13(1) LAYS DOWN CASES IN WHI CH S. 11 SHALL NOT APPLY. ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 15 UNDER S. 13(1)(D)(III), IT HAS BEEN LAID DOWN THAT ANY SHARE IN A COMPANY, NOT BEING A GOVERNMENT COMPANY, HELD BY THE TRUST A FTER 30TH NOV., 1983, SHALL RESULT IN FORFEITURE OF EXEMPTION. BY VIRTUE OF THE PROVISO (IIA) IT HAS BEEN LAID DOWN THAT ANY ASSET WHICH DOES NOT FORM P ART OF PERMISSIBLE INVESTMENT UNDER S. 11(5) SHALL BE DISPOSED OF WITH IN ONE YEAR FROM THE END OF THE PREVIOUS YEAR IN WHICH SUCH ASSET IS ACQ UIRED OR BY 31ST MARCH, 1993, WHICHEVER IS LATER. IN THE PRESENT CASE, THE ASSESSEE WAS REQUIRED TO DISPOSE OF THE SHARES UNDER THE SAID PROVISO BY 31S T MARCH, 1993, SEE THE JUDGMENT OF THIS COURT IN IT APPEAL NO. 81 OF 1999, DT, 14TH SEPT., 2000 [REPORTED AS DIRECTOR OF IT (EXEMPTIONS) VS. SHARDA BENBHAGUBHAI MAFATLAL PUBLIC CHARITABLE TRUST (2000) 164 CTR (BO M) 97]. THE SHARES HAVE NOT BEEN DISPOSED OF EVEN DURING THE ASSESSMEN T YEAR IN QUESTION. NOW, UNDER S. 164(2), IT IS, INTER ALIA, LAID DOWN THAT IN THE CASE OF RELEVANT INCOME WHICH IS DERIVED FROM PROPERTY HELD UNDER TRUST FOR CHARITABLE PURPOSES, WHICH IS OF THE NATURE REFERRE D TO IN S. 11(4A), TAX SHALL BE CHARGED ON SO MUCH OF THE RELEVANT INCOME AS IS NOT EXEMPT UNDER S. 11. SEC. 164(2) WAS REINTRODUCED BY THE DI RECT TAX LAWS (AMENDMENT) ACT, 1989, W.E.F. 1ST APRIL, 1989. EARL IER IT WAS OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987. HOWEVER, THE LEGISLATURE INSERTED A PROVISO BY THE FINANCE ACT, 1984, W.E.F. 1ST APRIL, 1985. BY THE SAID PROVISO, IT IS, INTER ALIA, LAID DOWN THAT WHE RE WHOLE OR PART OF THE RELEVANT INCOME IS NOT EXEMPT BY VIRTUE OF S. 13(1) (D), TAX SHALL BE CHARGED ON THE RELEVANT INCOME OR PART OF THE RELEVANT INCO ME AT THE MAXIMUM MARGINAL RATE. THE PHRASE RELEVANT INCOME OR PART OF THE RELEVANT INCOME IS REQUIRED TO BE READ IN CONTRADISTINCTION TO THE PHRASE WHOLE INCOME UNDER S. 161(1A). THIS IS ONLY BY WAY OF CO MPARISON. UNDER S. 161(1A), WHICH BEGINS WHICH A NON OBSTANTE CLAUSE, IT IS PROVIDED THAT WHERE ANY INCOME IN RESPECT OF WHICH A PERSON IS LI ABLE AS A REPRESENTATIVE ASSESSEE CONSISTS OF PROFITS OF BUSI NESS, THE TAX SHALL BE CHARGED ON THE WHOLE OF THE INCOME IN RESPECT OF WH ICH SUCH PERSON IS SO LIABLE AT THE MAXIMUM MARGINAL RATE. THEREFORE, REA DING THE ABOVE IS SO LIABLE AT THE MAXIMUM MARGINAL RATE. THEREFORE, REA DING THE ABOVE TWO PHRASES SHOWS THAT THE LEGISLATURE HAS CLEARLY INDI CATED ITS MIND IN THE PROVISO TO S. 164(2) WHEN IT CATEGORICALLY REFERS T O FORFEITURE OF EXEMPTION FOR BREACH OF S. 13(1)(D), RESULTING IN LEVY OF MAX IMUM MARGINAL RATE OF TAX ONLY TO THAT PART OF THE INCOME WHICH HAS FORFE ITED EXEMPTION. IT DOES NOT REFER TO THE ENTIRE INCOME BEING SUBJECTED TO M AXIMUM MARGINAL RATE OF TAX. THIS INTERPRETATION OF OURS IS ALSO SUPPORT ED BY CIRCULAR NO. 387, DT. 6TH JULY, 1984. VIDE THE SAID CIRCULAR, IT HAS BEEN LAID DOWN IN PARA 28.6 THAT WHERE A TRUST CONTRAVENES S. 13(1)(D) OF THE ACT, THE MAXIMUM MARGINAL RATE OF INCOME-TAX WILL APPLY ONLY TO THAT PART OF THE INCOME WHICH HAS FORFEITED EXEMPTION UNDER THE SAID PROVIS ION AND NOT TO THE ENTIRE INCOME. WE MAY ALSO ADD THAT IN LAW THERE IS A VITAL DIFFERENCE BETWEEN ELIGIBILITY FOR EXEMPTION AND WITHDRAWAL OF EXEMPTION/FORFEITURE OF EXEMPTION FOR CONTRAVENTION OF THE PROVISIONS OF LAW. THESE TWO CONCEPTS ARE DIFFERENT. THEY HAVE DIFFERENT CONSEQU ENCES. IT IS INTERESTING ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 16 TO NOTE THAT ALTHOUGH THE LEGISLATURE WITHDREW S. 1 64(2) BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, WHICH PROVISION WAS REI NTRODUCED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1989, THE LEGISLAT URE DID NOT TOUCH THE PROVISO TO S. 164(2) WHICH HAS BEEN ON THE STATUTE BOOK RIGHT FROM 1ST APRIL 1985. THE SAID PROVISO WAS INSERTED BY THE FI NANCE ACT, 1984. THE PROVISO SPECIFICALLY REFERS TO VIOLATION OF S. 13(1 )(D) AND ITS CONSEQUENCES. IN THE CIRCUMSTANCES, WE FIND MERIT IN THE CONTENTI ON OF THE ASSESSEE THAT IN THE PRESENT CASE THE MAXIMUM MARGINAL RATE OF TA X WILL APPLY ONLY TO THE DIVIDEND INCOME FROM SHARES IN MAFATLAL INDUSTR IES LTD. AND NOT TO THE ENTIRE INCOME. THEREFORE, INCOME OTHER THAN DIVIDEN D INCOME SHALL BE TAXED AT NORMAL RATE OF TAXATION UNDER THE ACT. (6) DCIT VS. MAHATMA GANDHI CHARITABLE SOCIETY FOR EDUCATION & RESEARCH ITA NO.359/JP/19 DT. 23.01.202 0 (JAIPUR) (TRIB.) :- HONBLE ITAT IN PARA 3.4.1 HELD AS UNDER:- 3.4.1 SIMILARLY, WE ARE ALSO OF THE VIEW THAT THE EVEN IF IT IS HELD THAT ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTIO N 13 OF THE ACT, EVEN THEN THE EXEMPTION U/S 11 OR 12 OF THE ACT CANNOT B E DENIED NOR THE SURPLUS AS SUCH CAN BE CHARGED TO TAX AT MAXIMUM MA RGINAL RATE. EVEN OTHERWISE, THE PROVISION OF SECTION 164 SPECIFICALL Y DEALS WITH THE CHARGE OF TAX WHERE THE SHARES OF THE BENEFICIARY IS UNKNO WN. SECTION 164(2) DEALS WITH CHARGE OF TAX ON THE INCOME OF THE TRUST WHICH IS DERIVED BY IT FROM THE PROPERTY HELD WHOLLY FOR CHARITABLE OR REL IGIOUS PURPOSES. FROM THE PLAIN READING OF THIS PROVISO, IT IS EVIDENT TH AT WHERE THE WHOLE OR ANY PART OF THE RELEVANT INCOME IS NOT EXEMPT U/S 11 OR 12 BECAUSE OF THE PROVISIONS OF THE SECTION 13(1)(C) OR 13(1)(D) THEN TAX IS CHARGEABLE ON THE RELEVANT INCOME OR PART OF THE RELEVANT INCOME AT THE MAXIMUM MARGINAL RATE (MMR). THUS IN THAT EVENTUALITY, EVEN IN CASE THERE IS VIOLATION OF SEC 13, THE ENTIRE INCOME OF THE TRUST IS NOT LIABLE TO BE TAXED AT MMR BUT ONLY THE RELEVANT PART OF THE INCOME WHI CH VIOLATES SEC. 13 ATTRACTS THE MMR. WE ALSO FOUND SUPPORT FROM THE DE CISION IN THE CASE OF DCIT VS WORKING WOMENS FORM (2015) 235 TAXMAN 516 AND CIT VS FR.MULLERS CHARITABLE INSTITUTIONS (2014) 227 TAXMA N 369 (SC). NO NEW FACTS OR CIRCUMSTANCES HAVE BEEN BROUGHT BEFORE US IN ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY THE LD. CIT(A) . THEREFORE, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A). HENCE, THE GROUND NOS. 1 AND 2 OF THE REVENUE ARE DISMISSED. (7) GLOBAL INSTITUTE OF TECHNOLOGY SOCIETY VS. DCI T(E) ITA NO. 1066/JP/2018ORDER DT. 05.11.2018 (JAIPUR) (TRIB .) :- THE HONBLE ITAT HELD THAT EVEN IF ANY PART OF THE INCOME OR PR OPERTY WHICH IS FOUND TO BE USED OR APPLIED FOR THE BENEFIT OF THE PERSON S SPECIFIED TO IN SUB- SECTION (3) OF SECTION 13 OF THE ACT, THE BENEFIT O F SECTIONS 11 AND 12 IS NOT AVAILABLE ONLY TO THAT EXTENT AND THE CLAIM OF THE ASSESSEE CANNOT BE DENIED IN TOTO. ACCORDINGLY, IT IS HELD THAT THE DE NIAL OF EXEMPTION TO THE ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 17 ASSESSEE U/S 11 AND 12 OF THE ACT IS NOT JUSTIFIED EXCEPT TO THE EXTENT WHERE THE SPECIFIC PART OF THE INCOME OR PROPERTY I S FOUND TO BE USED OR APPLIED FOR THE BENEFIT OF SPECIFIED PERSONS. (8) M/S RAJKALA CHARITABLE TRUST VS. ACIT ITA NO.1 40/JP/15 DT. 28.04.2016 (JAIPUR) (TRIB.) :- IN THIS CASE IT WAS HELD THAT WHERE THERE IS VIOLATION OF SECTION 13, THE ENTIRE INCOME OF TH E TRUST IS NOT CHARGEABLE TO TAX AT MAXIMUM MARGINAL RATE AND IT IS ONLY THAT INCOME WHICH HAS VIOLATED SECTION 13 WHICH SHALL SUFFER MAXIMUM MARG INAL RATE AS PER PROVISO TO SECTION 164(2) OF THE ACT. FURTHER, THE APPELLANT HAS SUBMITTED THAT THE AMOUNT OF RS.20,00,000/- WITH INTEREST OF RS.2,16,000/- I.E. RS.22,16,000/- WAS RECEIVED BACK BY THE TRUST AND T HE INTEREST INCOME OF RS.2,16,000/- WAS OFFERED IN THE RETURN FOR AY 2012 -13 AND THERE IS NO INCOME GENERATED ON AMOUNT OF RS. 20 LACS ADVANCED TO M/S RAJAKALA INDUSTRIES LIMITED DURING THE YEAR. THERE IS NOTHIN G ON RECORD TO CONTROVERT THE SAID SUBMISSIONS OF THE APPELLANT. T HUS, THERE IS NO INCOME DURING THE YEAR WHICH CAN BE BROUGHT TO TAX AT MAXI MUM MARGINAL RATE IN THE HANDS OF THE TRUST IN A SCENARIO WHERE IT IS HE LD THAT THERE IS VIOLATION OF PROVISIONS OF SECTION 13. IN VIEW OF THE SAME, W E DONT THINK IT WOULD BE RELEVANT TO EXAMINE WHETHER THE APPELLANT TRUST HAS VIOLATED THE PROVISIONS OF SECTION 13 OF THE ACT AS THE SAME HAS BECOME INFRUCTIOUS IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. TH E AO IS ACCORDINGLY, DIRECTED TO ALLOW EXEMPTION TO THE APPELLANT TRUST U/S 11 AND THE ADDITION MADE BY THE AO AND CONFIRMED BY CIT(A) IS HEREBY DE LETED. THE LD. DR ALSO RELIED ON THE CASE LAWS MENTIONED H EREIN ABOVE. HOWEVER. AFTER GOING THROUGH THE CONTENTS AND PARI MATERIA IN THOSE CASES, WE FOUND THAT NONE OF THOSE CASES ARE APPLIC ABLE TO THE FACTS OF THE PRESENT CASE AS MOST OF THE CASES ARE NOT DEALING W ITH THE PROVISIONS OF SECTION 164(2) OF THE ACT. THE CASE LAW MENTIONED A T SERIAL NO. 6 I.E. DDIT (EXEMPTIONS)-1, CHENNAI VS INDIA CEMENTS EDUCA TIONAL SOCIETY (2016) 67 TAXMANN.COM 236 (ITAT CHENNAI BEN CH C) DISCUSSES THE APPLICABILITY OF SECTION 164(2) OF TH E ACT WHERE EXEMPTION U/S 11 IS DENIED DUE TO APPLICABILITY OF SECTION 13 . IN THAT CASE, ALTHOUGH IT ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 18 WAS HELD THAT WHERE THERE IS VIOLATION OF SECTION 1 3(1) OF THE ACT, THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S 11 AND TH EREFORE, THE INCOME FROM CAPITAL GAIN ON SALE OF LAND IS TO BE ASSESSED U/S 164(2) OF THE ACT AT MMR WITHOUT ALLOWING THE BENEFIT OF SECTION 112 WHI CH PROVIDES FOR REDUCED RATE OF TAXATION AS SUCH INCOME HAS BECOME NON-EXEMPT CONSEQUENT TO CONTRAVENTION OF SECTION 13(1) OR 13 (1)(D ) OF THE ACT. THUS THE DECISION CITED BY THE LD. DR ALSO SUPPORTS THE CASE OF THE ASSESSEE WHERE IT WAS HELD THAT IF THERE IS A CONTR AVENTION OF SECTION 13(1) OR 13(1)(D) OF THE ACT, THAT PART OF INCOME WHICH IS IN VIOLATION OF THIS SECTION ATTRACTS THE TAX AT MMR AND NOT THAT T HE ENTIRE SURPLUS IS CHARGED TO TAX AT MMR. THE LD. DR ALSO RELIED ON TH E DECISION OF HON'BLE ALLAHABAD HIGH IN THE CASE OF CIT (EXEMPTIONS) VS ARMY WIVES WELFARE ASSOCIATION, LUCKNOW (2020) 116 TAXMANN.COM 215 (ALL.). HOWEVER, IN THE SAID DECISION, THE APPLICABILITY OF SECTION 164(2) HAS NOT BEEN DISCUSSED BUT ONLY REFERENCE HAS BEEN MADE TO THIS SECTION, WHEREAS THE PROVISION OF SECTION 164(2) LAYS DOWN THAT WHER E RELEVANT INCOME OR PART OF THE INCOME IS NOT EXEMPT U/S 11 DUE TO VIOL ATION OF SECTION 13(1)(C ) OR 13(1)(D) OF THE ACT, THEN IN THAT EVEN TUALITY TAX SHALL BE CHARGED ON THE RELEVANT INCOME OR PART OF THE RELEV ANT INCOME AT MMR AND NOT THAT ENTIRE INCOME OF THE TRUST WOULD BE CH ARGED TO TAX AT MMR. ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 19 THEREFORE, THIS DECISION IN THE CASE OF CIT (EXEMPT IONS) VS ARMY WIVES WELFARE ASSOCIATION, LUCKNOW (SUPRA) WITHOUT CONSIDERING THE PROVISO TO SECTION 164(2) IS NOT APPLICABLE TO THE FACTS OF TH E PRESENT CASE. THE LD.AR HAD RELIED ON VARIOUS DECISIONS OF HON'BLE HI GH COURTS AND HON'BLE SUPREME COURT WHICH HAVE ALREADY BEEN DISCU SSED BY US IN THE ABOVE PARAGRAPHS WHEREIN IT WAS UNANIMOUSLY HELD TH AT ONCE THERE IS A VIOLATION OF SECTION 13 OF THE ACT THEN ENTIRE INCO ME OF THE TRUST IS NOT CHARGEABLE TO TAX AT MMR AND ITS ONLY THAT PART OF INCOME WHICH HAS VIOLATED SECTION 13 SHALL SUFFER MMR AS PER PROVISO TO SECTION 164(2) OF THE ACT. 2.13 NO NEW FACTS AND CIRCUMSTANCES HAVE BEEN BROUG HT BEFORE US BY THE LD. DR IN ORDER TO CONTROVERT OR REBUT THE LAWF UL FINDINGS RECORDED BY THE LD. CIT(A), THEREFORE, WE SEE NO REASON TO INTE RFERE OR DEVIATE FROM THE FINDINGS SO RECORDED BY THE LD. CIT(A). THUS GR OUND NO. 1 TO 3 OF THE REVENUE ARE DISMISSED. 3.1 IN GROUND NO. 4, THE DEPARTMENT IS AGGRIEVED TH AT THE LD. CIT(A) HAS ERRED IN ALLOWING TRAVELLING EXPENSES, STAFF EX PENSES, STAFF WELFARE EXPENSES, SOCIAL WELFARE EXPENSES AND STUDENT WELFA RE EXPENSES TO THE EXTENT OF 95% WITHOUT APPRECIATING THE FACT THAT NO PROPER BILLS & VOUCHERS WERE MAINTAINED BY ASSESSEE. ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 20 3.2 BRIEF FACTS OF THE CASE ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE H AD INCURRED EXPENDITURE OF RS. 1,77,12,406/- UNDER THE ABOVE HE ADS BUT THEY ARE NOT SUBJECT TO VERIFICATION AS THE KACHHA BILLS AND VOU CHERS ARE NOT COMPLETE. THEREFORE, THE AO DISALLOWED 20% OF SUCH EXPENSES W HICH COMES TO RS. 35,42,481/- UNDER THE ABOVE HEADS. 3.3 IN FIRST APPEAL, THE LD. CIT(A) HAD RESTRICTED THE DISALLOWANCE TO RS. 8,85,620/- I.E. 5% OF THE TOTAL EXPENSES HOLDING TH AT THE DISALLOWANCE MADE BY THE AO IS EXCESSIVE AND WITHOUT BASIS. 3.4 AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE D EPARTMENT PREFERRED AN APPEAL BEFORE US AND THE LD. DR RELIED ON THE OR DER OF THE AO AND SUBMITTED THAT AO HAD RIGHTLY MADE THE ADDITION OF RS. 35,42,481/-. 3.5 ON THE CONTRARY, THE LD.AR APPEARING ON BEHALF OF THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A) AND REITERAT ED THE SAME ARGUMENTS AS WERE RAISED BY HIM BEFORE US AND ALSO RELIED ON THE WRITTEN SUBMISSIONS SUBMITTED BEFORE US WHICH IS REPRODUCED BELOW. 1. AO IN THE ASSESSMENT ORDER OBSERVED THAT ASSESSEE H AS INCURRED EXPENDITURE OF RS.1,77,12,406/- UNDER THE ABOVE HEA DS BUT THEY ARE NOT SUBJECT TO VERIFICATION AS THE KACCHA BILLS AND VOUCHERS AR E NOT COMPLETE, HE ACCORDINGLY DISALLOWED 20% OF THESE EXPENSES, I.E. RS.35,42,481/- (1,02,812 + 8,66,915 + 25,72,754). ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 21 2. THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO RS .8,85,620/-, BEING 5% OF THE TOTAL EXPENSES HOLDING THAT DISALLOWANCE MAD E BY AO IS EXCESSIVE AND WITHOUT BASIS. HE FURTHER HELD THAT SUCH DISALLOWAN CE IS TO BE REDUCED FROM APPLICATION OF INCOME. 3. IT IS SUBMITTED THAT DURING THE ASSESSMENT PROCE EDINGS ASSESSEE HAD FILED COMPLETE LEDGER ACCOUNT OF THESE EXPENSES ALO NG WITH BILLS AND VOUCHERS AND THE AFFIDAVIT OF TEMPORARY STAFF TO WHOM SALARY HAS BEEN PAID BUT DEBITED UNDER THE HEAD SOCIAL WELFARE AD STUDENT WELFARE EX PENSES. IN THE VOUCHERS COMPLETE DETAILS OF THE NATURE OF EXPENSES ARE MENT IONED. IN SOCIAL AND STAFF WELFARE EXPENSES THE ASSESSEE HAS DEBITED MAINLY TH E SALARY OF THE TEMPORARY EMPLOYEES IN RESPECT OF WHICH NO PF IS DEDUCTED. IN SUPPORT OF THE SAME AFFIDAVITS OF FEW EMPLOYEES WERE FILED. THEY COULD NOT BE PRODUCED AS THEY WERE WORKING IN DIFFERENT SCHOOLS OF THE SOCIETY. T HE LD. CIT(A) HAS THEREFORE, CONSIDERING THE DETAILS MENTIONED IN THE VOUCHERS AND THE FACTS AND CIRCUMSTANCES OF THE CASE HAS RIGHTLY RESTRICTED TH E DISALLOWANCE OUT OF THESE EXPENSES AT 5%. THE SAME BE UPHELD BY DISMISSING TH E GROUND OF DEPARTMENT. 3.6 WE HAVE HEARD THE LD. COUNSELS FOR BOTH THE PAR TIES AND WE HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD AND THE ORDERS OF THE LOWER AUTHORITIES. FROM THE RECORDS, WE NOTICED THAT DURI NG THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE HAD FILED COMP LETE LEDGER ACCOUNT OF THESE EXPENSES ALONGWITH BILLS AND VOUCHERS AND THE AFFIDAVIT OF TEMPORARY STAFF TO WHOM SALARY HAS BEEN PAID BUT DE BITED UNDER THE HEAD SOCIAL WELFARE AND STUDENT WELFARE EXPENSES. IN THE VOUCHERS, COMPLETE DETAILS OF THE NATURE OF EXPENSES ARE MENTIONED. IN SOCIAL AND STAFF WELFARE EXPENSES THE ASSESSEE HAD DEBITED MAINLY THE SALARY OF THE TEMPORARY EMPLOYEES IN RESPECT OF WHICH NO PF WAS DEDUCTED. S INCE THE ASSESSEE COULD NOT PRODUCE SOME OF THE DOCUMENTS OF THE EMPL OYEES AS THEY WERE ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 22 WORKING IN DIFFERENT SCHOOLS OF THE SOCIETY. THEREF ORE, THE LD. CIT(A) CONSIDERING THE DETAILS MENTIONED IN THE VOUCHERS A ND FACTS & CIRCUMSTANCES OF THE HAD RIGHTLY RESTRICTED THE DIS ALLOWANCE OUT OF THESE EXPENSES AT 5%. IN THIS VIEW OF THE MATTER, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) WHICH IS CONFIRMED . THUS GROUND NO. 4 OF THE REVENUE IS DISMISSED. 4.1 DURING THE COURSE OF HEARING, THE BENCH OBSERVE D THAT THE DEPARTMENT HAS RAISED THE SIMILAR GROUNDS IN ITA NO . 793 & 794/JP/2019 FOR THE ASSESSMENT YEAR 2014-15 AND 2015-16 AS RAIS ED IN ITA NO. 790/JP/2019 FOR THE ASSESSMENT YEAR 2013-14. WE FUR THER NOTED THAT THE FACTS AND CIRCUMSTANCES IN RESPECT OF THE DEPARTMEN TAL APPEALS FOR THE ASSESSMENT YEARS 2014-15 & 2015-16 ARE SAME AND IT IS NOT IMPERATIVE TO REPEAT THE FACTS OF THE CASE. SINCE THE DEPARTME NTAL APPEAL IN ITA NO. 790/JP/2016 HAS BEEN DISMISSED BY US, THEREFORE, TH E DECISION TAKEN THEREIN SHALL APPLY MUTATIS MUTANDIS IN THE APPEALS OF THE DEPARTMENT FOR THE ASSESSMENT YEAR 2014-15& 2015-16. THUS ALL THE APPEALS OF THE DEPARTMENT ARE DISMISSED. ITA NO.790/JP/2019 DCIT (E), CIRCLE JAIPUR VS CENTRAL ACADEMY JODHP UR EDUCATION SOCIETY, JAIPUR 23 5.0 IN THE RESULT, THE APPEALS OF THE REVENUE ARE D ISMISSED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 09/09/2 020. SD/- SD/- JESK LH-'KEKZ LANHI XKSLKBZ (RAMESH C. SHARMA) (SANDEEP GOSAI N) YS[KKLNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 09/09/2020. *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT - THE DCIT, (E), JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- CENTRAL ACADEMY JODHPUR EDUCATION S OCIETY,, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR . 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 790, 793 & 794/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSTT. REGISTRAR