Jan Priya Trust , Kolkata V. I.T.O.(Exemption)-1(1), Kolkata

ITA 903/KOL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4525 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 24-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Assessee Lawyers: MANISH TIWARI
• Keywords: Charitable institution; Benefit of exemption; Revenue expenditure
• Section: 12A; 10B; 208; 264; 73; 11

Judgement Text

1 ITA NO.903/KOL/2019 JAN PRIYA TRUST, AY- 2012-13 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOLKATA ( ) . . , . . , ) [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT (KZ) &SHRI A. T. VARKEY, JM] ITA NO.903/KOL/2019 ASSESSMENT YEAR: 2012-13 JAN PRIYA TRUST (PAN: AAATJ0335M) VS. INCOME-TAX OFFICER (EXEMPTION), WARD- 1(1), KOLKATA. APPELLANT RESPONDENT DATE OF HEARING (VIRTUAL) 14.10.2020 DATE OF PRONOUNCEMENT 21.10.2020 FOR THE APPELLANT SHRI MANISH TIWARI, AR FOR THE RESPONDENT SMT. RANU BISWAS, ADDL. CIT ORDER PER A. T. VARKEY, JM: THIS APPEAL PREFERRED BY THE ASSESSEE TRUST IS AGAINST THE ORDER OF LD. CIT(A)-25, KOLKATA DATED 27-02-2018 FOR ASSESSMENT YEAR 2012-13. 2. AT THE OUTSET, THE LD. AR SHRI MANISH TIWARI SUBMITTED THAT GROUND NOS. 1 AND 6 ARE GENERAL IN NATURE AND GROUND NOS. 4 AND 5 ARE NOT PRESSED. THEREFORE, GROUND NOS. 1, 4, 5 AND 6 ARE DISMISSED. 3. REMAINING IS ONLY GROUND NOS. 2 AND 3, WHICH ACCORDING TO LD. AR ARE INTER- CONNECTED AND WHICH ARE REPRODUCED BELOW: 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN ALLOWING EXEMPTION U/S. 11(1)(A) OF INCOME TAX ACT AT RS.21,80,879/- ONLY AS AGAINST ALLOWABILITY OF SUCH EXEMPTION AT RS.22,13,582/- CALCULATED @ 15% OF GROSS RECEIPT OF RS.1,47,57,215/- AS PER AUDITED ACCOUNTS. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN UPHOLDING AOS VIEW THAT ADMINISTRATIVE AND ESTABLISHMENT EXPENSE OF RS.2,18,020/- ARE EXCLUDIBLE FOR CONSIDERING APPLICATION OF INCOME FOR CHARITABLE PURPOSES. 4. BRIEF FACTS OF THE CASE IN RESPECT OF GROUND NOS. 2 AND 3 ARE THAT THE ASSESSEE A CHARITABLE TRUST, WHICH HAS BEEN GRANTED REGISTRATION U/S. 12A OF THE INCOME-TAX ACT, 1961 2 ITA NO.903/KOL/2019 JAN PRIYA TRUST, AY- 2012-13 (HEREINAFTER REFERRED TO AS THE ACT) AND HAS FILED ITS RETURN OF INCOME AS NIL. THEREAFTER, THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND THE AO COMPLETED THE ASSESSMENT DETERMINING THE TAXABLE INCOME AT NIL BUT WITH AN ADVERSE FINDINGS ON (1) PERMISSIBLE ACCUMULATION U/S. 11(1)(A) OF THE ACT, (2) ADMINISTRATIVE & ESTABLISHMENT EXPENSES NOT TREATED AS APPLICATION AND (3) DENIAL OF CARRY FORWARD OF EXCESS APPLICATION OVER INCOME DURING THE YEAR. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO WAS PLEASED TO DISMISS THE SAME. AGGRIEVED, THE ASSESSEE IS BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. IN RESPECT OF GROUND NOS. 2 AND 3 (SUPRA), WE NOTE THAT ASSESSEE ENJOYS REGISTRATION UNDER SECTION 12A OF THE ACT AND THAT THE AO WITHOUT ASSIGNING ANY REASON HAS DISALLOWED RS.2,18,020/-, WHICH WAS CLAIMED BY THE ASSESSEE AS ADMINISTRATIVE & ESTABLISHMENT EXPENSES WHICH WAS INCLUDED IN THE APPLICATION OF INCOME U/S. 11 OF THE ACT. WE NOTE THAT THE ISSUE AS TO WHETHER THE ADMINISTRATIVE AND ESTABLISHMENT EXPENSES CAN BE INCLUDED AS APPLICATION OF FUND IS NO LONGER RES INTEGRA, SINCE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. BIRLA JANAHIT TRUST (1994) 208 ITR 372 (CAL) HAS HELD THAT SALARIES AND MISCELLANEOUS EXPENSES WHICH ARE INCURRED FOR CARRYING OUT THE OBJECT AND PURPOSE OF THE TRUST MUST BE CONSIDERED AS APPLICATION FOR CHARITABLE PURPOSE. WE NOTE THAT THE EXPENSES OF RS.2,18,020/- WAS ON ACCOUNT OF AUDIT FEE, BANK CHARGES, RATES AND TAXES ETC. EXPENSE ON ACCOUNT OF AUDIT FEE IS COMPULSORY BECAUSE ASSESSEE WHILE FILING THE RETURN OF INCOME NEEDS TO FILE FORM 10B WHICH IS PREPARED BY THE AUDITOR. SO, AUDIT FEE IS NECESSARY EXPENSE LIKEWISE BANK CHARGES, WHICH ASSESSEE HAS TO PAY TO THE BANK FOR RUNNING OF ITS ACTIVITIES, AND THE EXPENSES UNDER THE HEAD RATES AND TAXES ARE IN THE NATURE OF MUNICIPAL TAXES ETC. WHICH ARE NECESSARY FOR THE SURVIVAL AND THEN ONLY IT CAN RUN THE TRUST, THEREBY ACHIEVE THE OBJECTIVE OF THE TRUST, SO THE EXPENDITURE INCURRED BY THE ASSESSEE TRUST, NEEDS TO BE ALLOWED. THEREFORE, THE TOTAL EXPENSES OF RS.2,18,020/- INCURRED AS ADMINISTRATIVE & ESTABLISHMENT EXPENSES ARE ALLOWABLE EXPENSES. SO BY RELYING ON THE RATIO OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN BIRLA JANAHIT TRUST, SUPRA, WE DIRECT THE AO TO ALLOW THE ADMINISTRATIVE & ESTABLISHMENT EXPENSES CLAIMED BY THE ASSESSEE TO THE TUNE OF RS.2,18,020/- AS APPLICATION OF INCOME U/S. 11(1)(A) OF THE ACT. 6. COMING TO GROUND NO. 2 OF APPEAL OF THE ASSESSEE WHICH IS AGAINST THE ALLOWABILITY OF EXEMPTION U/S. 11(1)(A) OF THE ACT (I.E. 15% ACCUMULATION OF INCOME IS ON GROSS RECEIPT OR 3 ITA NO.903/KOL/2019 JAN PRIYA TRUST, AY- 2012-13 NOT). ACCORDING TO THE ASSESSEE, IT IS ENTITLED TO ACCUMULATE 15% OF ITS GROSS RECEIPT IN CASE IT IS NOT APPLIED FOR CHARITABLE PURPOSE U/S. 11(1)(A) OF THE ACT. ACCORDING TO THE LD. AR, THE AO HAS WRONGLY WORKED OUT SUCH EXEMPTION AT RS.21,80,879/-. ACCORDING TO LD. AR, THE ACCUMULATION IS REQUIRED TO BE COMPUTED ON TOTAL RECEIPT AS PER ACCOUNT I.E. RS.2,42,56,750/- WHICH IS RS.36,38,513/- AND NOT AS COMPUTED BY THE AO AT RS.21,80,879/-. WE NOTE THAT THE ISSUE UNDER CONSIDERATION IN RESPECT OF ACCUMULATION OF INCOME ALLOWED U/S. 11(1)(A) OF THE ACT IS NO LONGER RES INTEGRA. FOR THAT, WE RELY ON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL (BANGALORE BENCH) IN THE CASE OF GREENWOOD HIGH TRUST VS. ACIT (EXEMPTION) (2018) 62 ITR (TRIB.) (2018) 264 (ITAT BANGALORE) WHEREIN IT WAS HELD AS UNDER: 3.4.3 THE ISSUE TO BE DECIDED BY US IS AS TO WHETHER FOR THE PURPOSE OF ACCUMULATION OF INCOME FOR APPLICATION FOR CHARITABLE PURPOSES UNDER SECTION 11 (1 )(A) OF THE ACT IS TO BE ALLOWED AT 15 PER CENT. OF THE GROSS RECEIPTS OR THE NET RECEIPTS I.E. ; GROSS RECEIPTS LESS REVENUE EXPENDITURE. WE FIND THAT THE ISSUE IN QUESTION WAS CONSIDERED AND ADJUDICATED BY A COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MARY IMMACULATE SOCIETY AN IN ITS ORDER IN I. T. A. NOS. 240 AND 241/BANG/2015 DATED JUNE 23, 2015 HELD THAT THE ASSESSEE IS TO BE ALLOWED ACCUMULATION OF INCOME FOR APPLICATION FOR CHARITABLE PURPOSES UNDER SECTION 11 (1 )(A) OF THE ACT AT 15 PER CENT. OF THE GROSS RECEIPTS FOLLOWING THE DECISION OF THE INCOMETAX APPELLATE TRIBUNAL SPECIAL BENCH IN THE CASE OF BAISONABAIHIRJIAGIARY TRUST V. ITO [2005] 272 ITR (AT) 67 (MUMBAI) [SB] ; [2005] 93 ITO 70 (ITATMUM) [SB]. IN ITS ORDER (SUPRA), THE CO- ORDINATE BENCH HAS HELD AS UNDER AT PARAGRAPHS 15 AND 16 THEREOF: '15. THE ISSUE TO BE DECIDED IS THEREFORE AS TO WHETHER FOR THE PURPOSE OF COMPUTING ACCUMULATION OF INCOME OF 15 PER CENT. UNDER SECTION 11 (1 )(A) OF THE ACT, ONE HAS TO TAKE THE GROSS RECEIPTS OR GROSS RECEIPTS AFTER EXPENDITURE FOR CHARITABLE PURPOSE I.E., THE NET RECEIPTS. THIS IS ISSUE IS NO LONGER RES INTEGRA AND HAS BEEN DECIDED BY THE SPECIAL BENCH MUMBAI IN THE CASE OF BAISONABAIHIRJIAGIARY TRUST V. ITO [2005] 272 ITR (AT) 67 (MUMBAI) [SB] ;[2005] 93 ITO 70 (ITATMUM) [SB]. THE FACTS IN THE AFORESAID CASE WERE THAT THE ASSESSEE WAS A PUBLIC CHARITABLE TRUST ENJOYING EXEMPTION UNDER SECTION 11 OF THE INCOMETAX ACT. AS PER THE REQUIREMENT OF SECTION 11 (1) OF THE INCOMETAX ACT, AS IT PREVAILED AT THAT POINT OF TIME, THE ASSES SEE HAD TO APPLY 75 PER CENT. OF ITS INCOME FOR THE OBJECTS AND PURPOSES OF THE TRUST AND THE ASSESSEE WAS PERMITTED TO ACCUMULATE OR SET APART UP TO 25 PER CENT. OF ITS INCOME, WHICH WAS SUBJECT TO FULFILMENT OF OTHER CONDITIONS. WHILE CALCULATING THE AFORESAID 25 PER CENT., THE IMPORTANT QUESTION WHICH AROSE WAS AS TO WHETHER FOR THIS PURPOSE, THE GROSS INCOME EARNED BY THE ASSESSEE IS RELEVANT OR THE INCOME AS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF INCOMETAX ACT. IN OTHER WORDS, WHETHER OUTGOINGS FROM OUT OF GROSS INCOME WHICH ARE IN THE NATURE OF APPLICATION OF INCOME, SHOULD BE FIRST DEDUCTED FROM 6 I.T.A NO. 2496/KOL/2019 A.Y 2012-13 SHREE RAM TRUST THE GROSS INCOME AND 25 PER CENT. OF ONLY THE REMAINING AMOUNT SHOULD BE ALLOWED TO BE ACCUMULATED OR SET APART. THE SPECIAL BENCH OF THE INCOMETAX APPELLATE TRIBUNAL ON THE ISSUE HELD AS FOLLOWS (PAGE 73 OF 272 ITR (AT)) : '9. COMING TO THE MERITS OF THE ISSUE, WE ARE OF THE VIEW THAT THE SAME IS CLEARLY COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. PROGRAMME FOR COMMUNITY ORGANISATION [2001] 248 ITR 1 (SC). IN THE DECISION, THEIR LORDSHIPS, AFTER TAKING NOTE OF PROVISIONS OF SECTION 11 (1 )(A), HAVE HELD AS UNDER (PAGE 2 OF 248 ITR) : 'HAVING REGARD TO THE PLAIN LANGUAGE OF THE ABOVE PROVISION, IT IS CLEAR THAT A CHARITABLE OR RELIGIOUS TRUST IS ENTITLED TO ACCUMULATE TWENTYFIVE PER CENT OF ITS INCOME DERIVED FROM PROPERTY HELD UNDER TRUST. FOR THE PRESENT PURPOSES, THE DONATIONS THE ASSESSEE RECEIVED, 4 ITA NO.903/KOL/2019 JAN PRIYA TRUST, AY- 2012-13 IN THE SUM OF RS. 2,57,346 WOULD CONSTITUTE ITS PROPERTY AND IT IS ENTITLED TO ACCUMULATE TWENTYFIVE PER CENT. THEREOUT. IT IS UNCLEAR ON WHAT BASIS THE REVENUE CONTENDED THAT IT WAS ENTITLED TO ACCUMULATE ONLY TWENTY FIVE PER CENT. OFRS. 87,010. FOR THE AFORESAID REASONS, THE CIVIL APPEAL IS DISMISSED.' IT IS CLEAR FROM THE ABOVE THAT DEDUCTION OF TWENTYFIVE PER CENT. WAS HELD TO BE ALLOWABLE NOT ON TOTAL INCOME AS COMPUTED UNDER THE INCOMETAX ACT. ANY AMOUNT OR EXPENDITURE, WHICH WAS APPLICATION OF INCOME, IS NOT TO BE CONSIDERED FOR DETERMINING TWENTY FIVE PER CENT TO BE ACCUMULATED. THEIR LORDSHIPS, AS NOTED EARLIER AFFIRMED THE DECISION OF KERALA HIGH COURT IN CIT V. PROGRAMME FOR COMMUNITY ORGANISATION [1997] 228 ITR 620 (KER) ; [1997] 141 CTR 502 (KER) WHEREIN IT IS HELD AS UNDER (PAGE 623 OF 228 ITR) : 'AT THE OUTSET, THE STATUTORY LANGUAGE OF SECTION 11 (1 )(A) OF THE INCOMETAX ACT, 1961, RELATES TO THE INCOME DERIVED BY THE TRUST FROM PROPERTY. THE TRUST IS REQUIRED TO BE WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, AND THE INCOME IS EXPECTED TO HAVE RELATION TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA. IT IS THEREAFTER THE STATUTORY PROVISION PROCEEDS FURTHER THAT SUCH INCOME IS NOT TO BE UNDERSTOOD TO BE IN EXCESS OF 25 PER CENT. OF THE INCOME FROM SUCH PROPERTIES. IT OTHER WORDS, THE VERY LANGUAGE OF THE STATUTORY PROVISION UNDER CONSIDERATION SETS APART 25 PER CENT. OF THE INCOME FROM THE SOURCE OF PROPERTY WITH REFERENCE TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED FOR SUCH PURPOSES, CHARITABLE OR RELIGIOUS, IN OTHER WORDS, FOR THE PURPOSE OF SECTION 11 (1 )(A) OF THE ACT, THE INCOME IN TERMS OF RELEVANCE WOULD BE THE INCOME OF THE TRUST FROM AND OUT OF WHICH 25 PER CENT. IS SET APART IN ACCORDANCE WITH THE SPIRIT OF THE STATUTORY PROVISION.' THIS MEANS THAT, WHEN IT IS ESTABLISHED THAT TRUST IS ENTITLED TO FULL BENEFIT OF EXEMPTION UNDER SECTION 11 (1), THE SAID TRUST IS TO GET THE BENEFIT OF TWENTY-FIVE PER CENT. AND THIS TWENTY-FIVE PER CENT. HAS TO BE UNDERSTOOD AS INCOME OF THE TRUST UNDER THE RELEVANT HEAD OF SECTION 11 (1), IN OTHER WORDS, INCOME THAT IS NOT TO BE INCLUDED FOR THE PURPOSE OF COMPUTING THE TOTAL INCOME WOULD BE THE AMOUNT EXPENDED FOR PURPOSES OF TRUST IN INDIA. THEIR LORDSHIPS IN THE ABOVE CASE HAVE EMPHASIZED ON THE CLEAR AND UNAMBIGUOUS LANGUAGE OF SECTION 11 (1 )(A) AND DECIDED THE MATTER ON THE BASIS OF THE SAME. IT HAS BEEN HELD THAT AS PER THE STATUTORY LANGUAGE OF THE ABOVE SECTION THE INCOME WHICH IS TO BE TAKEN FOR PURPOSE OF ACCUMULATION IS THE INCOME DERIVED BY THE TRUST FROM PROPERTY. IF BOTH THE DECISIONS ARE CAREFULLY READ, IT BECOMES EVIDENT THAT ANY EXPENDITURE WHICH IS IN THE SHAPE OF APPLICATION OF INCOME IS NOT TO BE TAKEN INTO ACCOUNT. HAVING FOUND THAT TRUST IS ENTITLED TO EXEMPTION UNDER SECTION 11 (1), WE ARE TO GO TO THE STAGE OF INCOME BEFORE APPLICATION THEREOF AND TAKEN INTO ACCOUNT 25 PER CENT OF SUCH INCOME. THEIR LORDSHIPS HAVE POINTED THAT THE SAME HAS TO BE TAKEN ON 'COMMERCIAL' BASIS AND 7 I.T.A NO. 2496/KOL/2019 A.Y 2012-13 SHREE RAM TRUST NOT 'TOTAL INCOME' AS COMPUTED UNDER THE INCOMETAX ACT. THEIR LORDSHIPS IN THE DECIDED CASE REJECTED THE CONTENTION OF THE REVENUE THAT THE SUM OF RS. 1,70,369 WHICH WAS SPENT AND APPLIED BY THE ASSESSEE FOR CHARITABLE PURPOSES WAS REQUIRED TO BE EXCLUDED FOR PURPOSE OF TAKING AMOUNT TO BE ACCUMULATED. HAVING REGARD TO THE CLEAR PRONOUNCEMENT OF THEIR LORDSHIPS OF THE SUPREME COURT, IT IS DIFFICULT TO ACCEPT THAT OUTGOINGS WHICH ARE IN THE NATURE OF APPLICATION OF INCOME ARE TO BE EXCLUDED. THE INCOME AVAILABLE TO THE ASSESSEE BEFORE IT WAS APPLIED IS DIRECTED TO BE TAKEN AND THE SAME IN THE PRESENT CASE IS RS. 3,42,174. TWENTYFIVE PER CENT. OF THE ABOVE INCOME IS TO BE ALLOWED AS A DEDUCTION. SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE HON'BLE MADHYA PRADESH HIGH COURT IN PARSIZORASTRIANANJUMAN TRUST MHOW V. CIT [1987] 163 ITR 832 (MP). NO REASON WHATSOEVER HAS BEEN GIVEN BY THE REVENUE AUTHORITIES FOR DEDUCTING RS. 2,17,126 IN THIS CASE FOR PURPOSES OF SECTION 11(1)(A). THE DECISION CITED ON BEHALF OF THE REVENUE DID NOT TAKE INTO ACCOUNT THE DECISION OF THE SUPREME COURT REFERRED TO ABOVE. THE CIRCULAR OF THE CENTRAL BOARD OF DIRECT TAXES HAS ALSO BEEN CONSIDERED BY THE HON'BLE KERALA HIGH COURT IN ITS DECISION REFERRED TO ABOVE. ACCORDINGLY THE QUESTION REFERRED TO IS ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE.' 5 ITA NO.903/KOL/2019 JAN PRIYA TRUST, AY- 2012-13 16. THE AFORESAID DECISION CLEARLY SUPPORTS THE PLEA OF THE ASSESSEE. FOLLOWING THE SAME, WE HOLD THAT THE ACCUMULATION UNDER SECTION 11 (1 )(A) OF THE ACT SHOULD BE ALLOWED AS CLAIMED BY THE ASSESSEE.' 3.4.4 RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH IN THE CASE OF MARY IMMACULATE SOCIETY (SUPRA), WE HOLD AND DIRECT THE ASSESSING OFFICER THAT THE ACCUMULATION UNDER SECTION 11 (1 )(A) OF THE ACT IS TO BE ALLOWED AT 15 PER CENT. OF GROSS RECEIPTS, AS CLAIMED BY THE ASSESSEE. TAKING NOTE OF THE AFORESAID RATIO OF THE COORDINATE BENCH OF THE TRIBUNAL, WE DIRECT THE AO TO ALLOW ACCUMULATION INCOME U/S. 11(1)(A) OF THE ACT @ 15% OF THE GROSS RECEIPT OF RS. 2,42,56,750/- AS CLAIMED BY THE ASSESSEE AND CONSEQUENTLY GROUND RAISED BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER IS PRONOUNCED IN THE OPEN COURT ON 21ST OCTOBER, 2020 SD/- SD/- P. M. JAGTAP) (ABY. T. VARKEY) VICE PRESIDENT JUDICIALMEMBER DATED : 21 ST OCTOBER, 2020 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. JAN PRIYA TRUST, MAGMA HOUSE, 9 TH FLOOR, 24 PARK STREET, KOLKATA-700 016. 2 RESPONDENT ITO (EXEMPTION), WARD-1(1), KOLKATA. 3. 4. 5. CIT(A)-25, KOLKATA. (SENT THROUGH E-MAIL) CIT- , KOLKATA DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR ITAT, KOLKATA.