The DCIT (Exemptions) Circle-2, Ahmedabad V. Shree Khodal Dham Trust, Kagwad, Rajkot

ITA 904/AHD/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4288 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 23-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Bad and doubtful debts; Capital receipt; Benefit of exemption; Capital expenditure
• Section: 12; 11; 143(3); 80G; 12A; 12AA; 13

Judgement Text

Page 1 of 15 आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ A’’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER अपील सं./ITA No.904/Ahd/2019 िनधाᭅरण वषᭅ/Asstt. Year: 2014-2015 D.C.I.T.(Exemptions) Circle-2, Ahmedabad. Vs. Shree Khodal Dham Trust, Kagwad, Alka Society, 4 th floor, Shri Sardar Patel Bhavan, Near Water Tank, Rajkot-360004. PAN: AAJTS1017J (Applicant) (Respondent) Revenue by : Shri Vijaykumar Jaiswal, CIT.D.R Assessee by : Shri Mehul Ranpura, A.R सुनवाई कᳱ तारीख/Date of Hearing : 08/02/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 20/04/2022 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-7, Ahmedabad, dated 16/01/2017 arising in the matter of penalty order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2014-15. ITA no.904/Ahd/2019 Asstt. Year 2014-15 Page 2 of 15 2. The only issue raised by the Revenue is that the learned CIT(A) erred in granting the benefit of exemption under the provisions of section 11 of the Act whereas the activities of the assessee were not in consonance with its object clause being charitable in nature. 3. The facts in brief are that the assessee in the present case is a trust and registered under the Bombay Public Trust Act 1950 vide registration No. E/8846/Rajkot dated 18 th March 2010 with the Assistant Charity Commissioner of Rajkot region. The assessee was also registered under the provisions of section 12A and 80G of the Act by the Commissioner of Income Tax with effect from the financial year 2010-11. 3.1 It was claimed by the assessee that it is engaged in the activity of education, medical relief, monetary help, refinement and social development and general public utilities which were provided to the public at large irrespective of the religion, caste, race, community or social status. There was no element of profit motive in the activities carried out by it (the assessee). The assessee has shown the gross receipts of ₹ 8,21,15,600/- in the year under consideration, the breakup of the same stand as under: - Bank Interest and other income Rs. 2,34,66,269/- - General donation Rs. 3,02,325/- - Specific donation for building Rs. 5,83,47,006/- 3.2 However, the AO during the assessment proceedings on verification of the balance sheet as on 31 st March 2014 found that the assessee has shown different kind of fixed assets which were located at different locations where the society was functioning. The total value of the fixed assets as on the balance sheet date stand at ₹ 19,14,15,828/- only. Out of such value of the total fixed assets, a sum of ₹ 16,36,32,375/- as on the balance sheet date was shown towards the construction ITA no.904/Ahd/2019 Asstt. Year 2014-15 Page 3 of 15 of the prayer hall. As per the AO, the activity of construction of the prayer hall was in the nature of religious activities which was not specified in the trust deed. Thus the AO proposed to deny the exemption claimed by the assessee under section 11 of the Act. 3.3 On question by the AO, the assessee replied that the construction of the prayer hall was very much in line with the objects of the trust. The prayer hall was constructed for the purpose of meditation in order to achieve/attain the piece in mind and satisfaction in the heart. The use of the prayer hall was not limited to any particular caste, creed or religion, rather it was open to all and general public. 3.4 However, the AO made certain observations as recorded in paragraph No. 5.2 of his order which is reproduced as under: 5.2 The reply of the assessee and details submitted were carefully perused and following facts emerge: • The prayer hall is basically a temple of deity "Khodiyar Ma" as evident from the layout (copy made part of this order as annexure-A). • The so called prayer hall has more than dozen other deities to be worshipped. • The architecture of the Prayer hall shows "Garbhagrah" and "Rangmandap", which are in fact essential features of a Hindu Temple. • The bills of "temple architect" Sh. Prariay D Trivedi (Sompuraj and bills of "statues of deities" submitted during the assessment proceedings too point out to the religious nature of the so called "prayerhall”. • Out of total fixed assets of Rs.19.25 crores, the assessee claims to have spent a sum of Rs. 16.36 crores on prayerhall which is essentially a temple. • From the details submitted, it is noticed that the trust is not involved in any other major charitable activity, which have been specified in the trust-deed. • Perusal of the website of the assessee trust, khodaldhamtrust.org, clearly establishes that the primary activity of trust is religious and most of the expenses were also incurred for religious purposes. • The work in progress section of this website clearly shows that "temple' is being built in garb of "prayer hall"- The printout of same is made part of this order as annexure-B. • This website also states that the trust publishes a religious and spiritual magazine "Khodaldharn Smruti". ITA no.904/Ahd/2019 Asstt. Year 2014-15 Page 4 of 15 • Expenditure on its stated objects of the trust deed, i.e.-educational, Medical, Monitory help, refinement and social development could not be deciphered from any bills or details produced during assessment proceedings. 5.3 From the perusal of the details on record and the website of the assessee trust, it is established that the assessee is primarily a religious trust. It is likely that the assessee has attempted to hide its true nature of being a religious trust as a charitable one, ostensibly to garner benefit u/s.80G. However, such religious activities are outside the objects as stated in trust-deed. 3.5 In view of the above, the AO was of the opinion that the activities of the assessee are in the nature of religious which were camouflaged as charitable in nature. Thus the activities carried out by the assessee were not in accordance with the trust deed. Thus the AO denied the benefit of exemption under section 11, 12 and 13 of the Act. 3.6 In addition to the above, the AO also found that the assessee has given an advance of ₹ 1.50 crores to Sardar Patel Cultural Foundation which is in violation of the provisions of section 11(5) and 13(1)(d) of the Act. The AO for this reason as well has denied exemption claimed under section 11 of the Act. 4. The aggrieved assessee preferred an appeal before the learned CIT(A). 4.1 The assessee before the learned CIT(A) submitted that it was granted status of charitable trust under Bombay Public Trust Act 1950 as well as by the ld. CIT under section 12A since 2010 after verification of its object and activities. It was enjoying the status of charitable trust since then. However, the AO in the year under consideration due to misinterpretation of fact held its activities as not charitable in nature which is ultra vires to the satisfaction of ld. CIT(Exemption) and charity commissioner which has granted the status of charitable trust to it. The assessee also drawn the attention of the learned CIT-A on the objects for which the trust was established. In none of the object, the religious activity was mention. All the objects were relating to the charitable activities. ITA no.904/Ahd/2019 Asstt. Year 2014-15 Page 5 of 15 4.2 It is a common practice to keep the statue/idol of some deity in the meditation hall in order to develop the concentration which does not amount to a temple as alleged by the AO. It was also submitted that it is quite common in the educational institution/ universities to have the temple of goddess ‘ SARASWATI’ which is known as deity of the education. But those educational institutions are not termed as carrying out religious activities and there enjoy the status of charitable activities. Similarly, there are various meditation hall constructed by Ramakrishna Ashram which contains idol of Saint Ramakrishna Param Hans and Vivekananda but those organisations do not become as religious in nature. Same is the case with the charitable institution run by Mother Teresa, having the idol of Jesus as a matter of symbol but that doesn’t become the religious nature. There are various temples/mosques/gurudwara which are carrying out charitable activities for education/health/environment but their activities do not turn as religious nature. 4.3 The architecture of the prayer hall depicting the Garbhgrah and Rangmandap does not portray the temple rather these are the architectural design wherein the cultural activities like Independence Day, teachers day and other such public festivals are organised. Accordingly, the prayer hall constructed by the assessee cannot be treated as temple as alleged by the AO based on the bills of architect, amount of expenditures. 4.4 The assessee in the year under consideration has also incurred an expense of ₹30.92 lakhs towards the charitable activities. These expenses were incurred towards the supply of books to the students, donation to chief minister relief fund, Khel Mahotsav, Samulagan Event expenses, group woman welfare and empowerment expenses. As such the amount of ₹5.83 crores was representing the corpus fund received for the purpose of the building and incurred accordingly. Therefore it is not correct to allege by the AO based on the website of the trust that it was mainly engaged in the religious activities. ITA no.904/Ahd/2019 Asstt. Year 2014-15 Page 6 of 15 4.5 The words used the construction of the temples in the website shall not alter the character of the intent of the trust which is charitable in nature. The words temple were the denoting the place for worship /meditation. 4.6 The magazine published by the trust does not promote any religion, rather it encourages for spiritual motivations which cannot be connected to any religion but it relates to the mankind. The contents of the magazines relate to the celebration of Independence Day, solutions for the social problems, blood donation camps, food packets distribution etc. Thus no adverse inference can be drawn against the assessee based on the magazine published by it. 4.7 The assessee has also received the certificate of registration from the Ministry of Home affairs New Delhi under the provisions of Foreign Contribution Regulations Act 2010 which contains rigorous provisions than the other Acts. However, the registration was granted under the clause ‘for cultural economic educational social’ for 5 years. 4.8 The assessee further submitted that it has not violated the provisions of section 11(5) of the Act by giving advance to the other trust namely Shri Sardar Patel Cultural Foundation. The advance was given for carrying out educational activity which is also the object of the assessee. 5. The learned CIT-A after considering the submission of the assessee allowed the appeal in its favour by observing as under: 6.1 I have gone through the Assessment order and duly considered the submission filed by appellant. On careful consideration of the issue as brought out in the assessment order, the grounds of appeal and the submission of appellant, the ground raised by the appellant is decided hereunder. 6.2 Since the issue of denial of exemption u/s 11 cm the ground that construction of prayer hall is religious activities and applicability of section 11(5] r.w.s. 13(l](dj in respect of advance of Rs. 1.5 crores to Sardar Patel Cultural Foundation, had bearing on disallowance of exemption u/s 11 of the Act, the same are taken up together for sake of convenience. The facts of the case as reflected in the assessment order as also made available in the ITA no.904/Ahd/2019 Asstt. Year 2014-15 Page 7 of 15 course of the appellate proceedings are that the appellant trust came into existence vide trust deed dated 28.12.2009 and was registered by the charity Commissioner on 18.03.2010. It is also registered u/s 12A of the Income tax Act as well as u/s 80G(5) of the Income tax Act. These facts have not been disputed by the Assessing Officer. Therefore, the trust is a legal entity registered with the Charity Commissioner and Income Tax Department. The computation of income reveals that during the year under consideration, the trust had income from other sources to the tune of Rs. 2,34,66,269/- (comprising of bank interest and other income). It had further received Voluntary Contribution to the tune of Rs.5,86,49,331/- (which consists general donation of Rs. 3,02,325/-and Rs.5,83,47,006/- being income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust towards building construction fund). Thus, the gross income of the trust was Rs.8,21,15,600/-. On the perusal of income and expenditure account of Trust, it is observed that Appellant Trust has transferred amount of Rs.5,83,47,006 towards building fund. The above voluntary contributions were received for specific purpose as mentioned in receipts issued by the Appellant Trust hence ;----same were specifically transferred to building fund in Balance Sheet and accumulated building fund as per Audited Annual Accounts submitted before Assessing Officer is Rs.34.05 crores as on 31st March, 2014, which includes above transfer of Rs.5.83 crores. The above voluntary contributions hay been claimed as exempt as per the provisions of Section 1 l(l)(d) while filing return of income. On perusal of income and expenditure account, it is apparent that during the year under consideration, Appellant Trust had incurred expenses towards the object of the trust to the tune of Rs. 2,35,03,780 out of gross income of Rs.2,37.68,594 which is allowed by AO in Assessment Order. This fact clearly proves that Appellant Trust has incurred expenditure of more than 85% of gross total income for the object of the Trust, 6.3 It is further seen from the balance sheet that, the appellant trust had temporarily advanced funds of Rs. 1.5 crores to one Sarclar Patel Cultural Foundation, which is another trust engaged in the field of imparting education and other related activities. This loan was advanced in the financial year 2011-12 relevant to AY 2012-13 and not during the year under consideration. It is further seen that the impugned advance was returned in AY 2016-17. It is also seen that x the assessments for both the years (AY 2012-13 and 2016-17) have been finalized u/s. 143(3) and none of the Assessing Officers had drawn adverse inference on such interest, free advances, 6.4 The AO has denied the claim of exemption u/s 11 on the ground that the prayer hall is basically a temple of deity Khocliyar Ma, the architecture of pra}'cr hall shows "Garbhgrah" and "Rangmaiidap" which are features of Hindu temple, the amount of Rs. 16.36 crores spent for Prayer Hall is essentially a temple, the details of expenses shows trust is not involved in other major charitable activities, the web site of the trust reveals the primary activity of the trust as religious and most of the expenses are incuri'ed for religious purpose, the W1P of the web site shows that the temple is being built on the 'garbh' of Prayer Hall,the trust publishes a religious and spiritual magazine, the expenditure 011 stated objects i.e. Educational, Medical, Monitory help, refinement and social development could not be found in the bilis, details furnished, and there is violation of provisions of section 11(5) being advance of Rs 1.50 crore given to Shri Sardar Patel Cultural Foundation. 6.5 I have gone through the findings of the AO as well as the written submission filed by the AR. The primary argument of the Appellant is that when the registration granted by the Commissioner of Income Tax - I, Rajkot, is in vogue, the Assessing Officer cannot disturb the claim of benefit under Section 11. This contention of Appellant is supported by decision of the Hon'ble Gujarat High Court in Tax Appeal No. 376 of 2010 in the case of Commissioner of Income tax-1 Rajkot v/s. Saurastra Kutch Stock Exchange Ltd dated 8.8.2011 wherein it has been held that, while granting registration under Section 12A of the Act, the Commissioner has to make necessary inquiries and such registration would be granted only if necessary requirements are fulfilled. It was in this background ITA no.904/Ahd/2019 Asstt. Year 2014-15 Page 8 of 15 that this Court in case of Hirala Whagwati (supra) held and observed that "It is also required to be noted that once the registration under Section 12A(a) of the Act is granted, the grant of benefit cannot be denied. The Income Tax Officer was not justified in refusing the benefits, which would otherwise accrue under the registration. If there is no registration, as contemplated under Section 12A(a) read with Rule 17(A), the revenue would have been justified in making the submission that the benefit cannot be granted but where the application for registration is submitted and the registration having been granted, the benefit cannot be denied on the ground that the scheme is not for the benefit of the public at large". The above decision is upheld by the Hon’ble Supreme Court. 6.6 Thus, considering these facts, it is observed that the AO was beyond his jurisdiction To deny the benefits of section 11 based on the objects of the trust, when once such object has been verified by the Commissioner of Income tax, while granting registration u/s. 12A and also, when such registration has not been withdrawn or cancelled. It is also found that Assessment Order under Section 143(3) of the Act has also been passed in AY 2012-13 as well as in AY 2016-17 wherein AO has accepted returned income which also supports the contention of Appellant that expenditure have been incurred for the object of the Trust. 6.7 Reliance is placed on decision of the Hon'ble Gujarat High Court in the case of ShethJivandasGodidasSaukhcshwarParshwiiiiathji Jain Derasar inj the tax appeal Ho. 912 and 912 of 2009 upholding the decision of CIT[A) and Hon’ble ITAT, ‘D’ Bench Ahmedabad in ITA No. 3232/Ahd/2007 and 1818/Ahd/2008 wherein it has been held that, "activities of the trust are not restricted to a particular family or particular person or group of people but it is open to all. persons of Jain community as also to the persons visiting Jain temples from the people in general. The CIT has further observed that the nature of expenses incurred by the trust are for the benefits of public at large and none of it relates to trustee of a particular trust or person, The CIT has further observed that besides religious activities, the trust has earned out charitable activities and activities of general public utility which are charitable in nature, for the community and village in which the Derasar is located. While confirming the order of the CIT(Appeals), the Tribunal a/so observed, that in the assessee's case, apart from the religious activities, i.e. propagation of-Jain philosophy and ideology, the trust is also engaged in the spreading religious and dharmic knowledge and providing amenities and facilities to the pilgrims and renovation of Jain temples all over India," The Tribunal further observed the trust is engaged in carrying out objects of general public utilities which are charitable in nature. Further, SLP filed bij the Department against the above decision is also dismissed by Hon'ble Supreme Court vide order dated 1 0"' May, 2011 referred supra. 6.8 From the above it is clear that the AO cannot deny the benefits of section 11 to the Appellant trust, when, the registration u/s. 12A granted by the Commissioner subsists. 7. With regard to observation made by AO at para 5.2 that Assessee is primarily a religious trust and while arriving at such conclusion he has made specific observations which are already summarised at para - 6.3, it is found that Appellant Trust in its income and expenditure account has included donation of Rs.5,83,57,006 received for specific purpose being building construction and same is transferred to building fund in year under consideration which is apparent from building fund lying in Balance Sheet as on 31 st March, 2014. This voluntary contribution received for specific purpose was claimed as exempt under Section ll(l)(d) in return of income. Section ll(l)(dj clearly states that total income for the current year will not include income in the form of voluntary contribution made with a specific direction that they shall form part of corpus of Trust. The Appellant has received above donation with specific direction which is not disputed by AO hence Ihis income •-•cannot be included as income of the trust for the year under consideration. ITA no.904/Ahd/2019 Asstt. Year 2014-15 Page 9 of 15 7.1 It is observed that Building Construction expenses were incurred out of the Corpus fund available with the appellant trust, accumulated over a period of time. Since the assessment for various year (before AY 2014-15 and after AY 2014-15) have already been finalized by different AOs on different dates and as no adverse inference on the corpus and its genuineness have been raised, it is held that, the extent of corpus as recorded in the balance sheet is not disputed. It is also an undisputed fact that the Building Construction Expenses have been met out of the available corpus. It is also a fact that, the object: clause contains one of the object as 'cultural and social development which inter-alia contains to establish and maintain worship centers, to set up and maintain memorials for preserving the historical era of the country.....This object clause formed basic information / criteria at the time of application and obtaining of registration u/s. 12A. Therefore, the contention of the AO that construction of Prayer hall led to violation of objects is incorrect because, the object clearly spells out construction of worship center and also, such cost have been borne out of the corpus and not out of the revenue receipts. The AO also failed to appreciate the fact that, in order to carry out the religious activities of the appellant trust, there exists another trust which is registered as 'religious trust' known as KhodaldhamMaridir Trust. This trust is also registered with the Income tax department u/s. 12A of the I T Act. Hence, the finding that the appellant violated its objects by constructing a prayer hall, is incorrect and not supported by facts available on record. 7.2 The AO denied the benefits of section 11 on the ground that the prayer hall is a temple of the deity 'Khodal ma' and in the prayer hall, more than dozen deities are worshipped. On the other hand, the plea of the appellant is that, the presence of deities represent the sanctity of the place and does not confine to any particular religious nature. The AR also submitted that, Hinduism is a way of living and it is not a religion. This is the basic preamble of the Hindu ideology. Any person, irrespective of the religious belief, can come and visit the premises and enjoy its serenity. I find substantial force in the argument of the AR. The assessing officer has taken a very narrow interpretation of the presence of statutes of various deities. In fact, the AO himself admits that there was presence of dozen different deities. This again shows that the appellant trust ' has 'taken care of wide range of people with their multiple beliefs and trusts. Hence, the presence of statutes of different deities in. no way construe that the appellant trust is a religious trust. The ratio of decision of Hon'ble GujaraL High Court in the case of ShethJivandasGodidasSankheshwar Paryhwanath Jain Derasar referred supra is applicable on present facts. 7.3 The next finding of the AO, while holding that the appellant trust is a religious trust is that, the architecture of the prayer hall shows 'Garbhgruh' and 'Rangmandap' which are the features of a Hindu temple. For this the AR contended that, Garbhgruhand Rangmandap are ancient mystic names and it has no religious importance. Even if it depicts as sanctified place, still il is open for all to enter the Garbhgruh. Further, Rangmandap is an open area of land where cultural activities taken place. 1 find substantial force in this argument. There can be no classification if any organization decides to hold certain place as sanctified place. By doing so, nowhere the nomenclature of the trust or the place becomes religious in nature. Even otherwise, as held supra, the entire structure / building has been constructed out of the corpus fund and such claim has been accepted to be correct in earlier Assessment Year as well as in subsequent Assessment Years coupled with the fact that Appellant Trust is having valid registration under Section 12AA in existence. The finding of the AO that the presence of Garbhgruh and Rangmandap means that the trust is religious, is held to be factually incorrect. 7.4 The next finding of the AO is that, the details so provided by the appellant trust nowhere reveal that the trust had done major charitable activities. He also held that, from the bills filed before him. he could not find activities in. the nature of education, medical and minority help. At the outset, this very sentence shows that, the trust had carried out charitable ITA no.904/Ahd/2019 Asstt. Year 2014-15 Page 10 of 15 activities, though however, to the expectation of the AO, it was not major. On the other hand, the AR contends that, the trust spent Rs 78.10 lacs for mass marriage (which is of poor daughters who cannot afford marriage expenses), Rs 6.76 lacs for development of animal husbandary, Rs 14,98 lacs for khelMahotsav (organizing sports events), contribution made to the Chief Minister's funds, Rs.5.67 lacs towards distribution of books to poor children, Rs 30 lacs towards charity expenses, Rs 60 lacs towards magazine expenses, etc. What is important is that, the AO failed to point out a single expenditure, which is non- charitable in nature. Merely by saying that, the appellant trust had not carried out major charitable activities, the AO cannot ignore the facts of the case. Hence, the finding of the AO is not in consonance with the fact. 1L is also observed that income and expenditure submitted along with the return of income reflects expenditure incurred for the purpose of object of the Trust at Rs.2,35,03,780 and none of the expenditure is related to have been incurred for religious purpose. Even while passing the Assessment Order AO has allowed such expenditure from gross total income which supports the contention of Appellant that it has incurred substantial expenditure towards the object of the Trust. While making the above observation that Appellant has not carried out major charitable activities, the AO has considered expenditure incurred out of corpus but, as held herein above, incurring of such expenditure does not make activity of trust as religious activity of the Trust as held by various Courts, supra. 7.5 The next, finding of the AO is that, the website shows that the trust publishes a religious magazine known as 'KhodaldhamSmruti'. However, in support of his argument, the AR produced before me some editions of the magazine. I have gone through the magazines. I find that the same is published in Gujarati language. It is seen that, the magazine is very secular in nature. It contains articles relating to agrictiiture, education, medical, national and other general awareness topics. From the plain, reading of the magazine, nowhere a person can make out that it is published to propagate and spread the beliefs of a particular sect. Therefore, this finding of the AO is also held to be factually incorrect. 7.6 From the above discussion, it is very clear that the appellant trust had constructed building out of the corpus fund available with it. Besides, the assessments for various years have been finalized and no additions have been made. In all the assessment orders, the nature of the trust is held to be charitable in nature. Therefore, taking a consistent view, I hold that the appellant trust is a charitable organization. There is substantial force in the argument of the AR that, the appellant has incurred capital expenditure on construction of Prayer Hall in FY 2011- 12 relevant to assessment year 2012-l-'fS'/'-and facts of the case during the year under consideration being similar and as there is no amendment in Act and no change in constitution of the Crust, therefore the AO cannot take different stand merely for rejecting claim of exemption of section 11(1) of the Income Tax Act. Though, doctrine of res Judicata does not apply to proceedings under the income-tax Act, however it is equally true that unless there is a change of circumstances, the authorities will not depart from previous decision in the absence of material circumstances for reasons for such departure, as held by the Hon'ble Supreme Court in the case of Bharat Sanchar Nigam Ltd. v. Union of India (282 1TR 273). 8. In the next ground, the appellant has challenged the action of the AO in treating the interest free advance given to Shri Sardar Patel Cultural Foundation, as contraventions of provisions of section 11(5) r.w.s. 13(l)(d) of the I T Act. According to the AO, the appellant trust cannot give loan to another trust and that, it has to utilize its funds only as per the norms specified in section 11 (5) of the I T Act. Against this, the AR submits that, the appellant had made advance of Rs 1,50,00,000 to Sardar Patel Cultural Foundation not during (.he year under consideration but during the financial year 2011-12. The assessment for this year has already been finalized u/s, 143(3). Therefore, funds are not advanced during the year under appeal. The AR further contends that, Sardar Patel Cultural Foundation is an institution which provides training, coaching and mentoring of aspirant students who wants ITA no.904/Ahd/2019 Asstt. Year 2014-15 Page 11 of 15 to pursue for UPSC and GPSC courses. Besides, it also engages in running yoga shibir for old aged and disabled people. This is similar to the object of the appellant trust. In support of this, the AR has filed object clause of Sardar Patel Cultural Foundation, which have been perused by me. Thus it is the plea of the AR that, the objects of both the trusts are similar. Hence, the appellant trust can provide loans / aids to like-minded organizations. In this connection, he submitted that, it has been held by various Hon'ble High Courts that, interest free Joans provided by a trust to its associate trust did not violate provisions of section 13(3) and hence exemption under section 12 cannot be- denied. The following decisions have been relied upon. 1. Hon'ble High Court of Madhya Pradesh has in the case of CIT, Bhopal v. MaaVaishnav Education Society [2013] 38 taxmann.com 193 (Maclhya Pradesh) 2. Hon'ble High Court of Delhi in the case of DIT u. Acme Educational Society [2010] 326 ITR 146 (Delhi). 3. Hon'ble High Court of Allahabad in the case of CIT v. Kanpur Subhash ShikshaSamiti [2013] 36 taxmann.com 536 (Allahabad) 8.1 1 have perused the assessment order and the written submission filed by the AR of the appellant. It is seen from the assessment order that, \the AO has held that, the appellant trust has made investment in contravention of provisions of section 11(5) hence provisions of Section 13(l)(d) is attracted and Assessee cannot be allowed benefits of Section 11. On careful consideration of relevant facts available on record, it is found that funds were advanced to above trust riol in year under consideration but in Financial Year 2011-12 and assessment for such year has already been completed under Section 143(3} of (he Act without making any adverse finding regarding violation of provisions of Section 11(5) r.w.s. 13(l)(d). Further, above amount, were received back fully in AY 2016-17. Further, the assessment for AY 2016-17 has also been finalized u/s. 143(3) and no adverse inference has been drawn by the AO. It is pertinent to note that as above advances are not given in year under consideration, there is no investment in contravention of norms as specified in Section 11(5) in year under consideration. Even as per observation of AO, provisions of Section 11 (5) r.w.s. 13(l)(d] triggers only in the year in which there is outflow of funds. As there is no advancement of fund during the year under consideration along with the fact that assessment under Section 143(3) is already completed in the year in which outflow was made, AO was incorrect in denying benefits under Section 11 by holding that Appellant Trust has violated above provisions. Even otherwise, case of the Appellant is further supported by decision of Hon'ble Chennai ITAT in the case of JCIT V/s Bhaktavatsalam Memorial Trust[201'1] 5 I taxmaiin.com 248 has held that "Advancement of interest free loan by ti charitable institution to other having similar objects is not in violation of provisions of section 13(l)(d) w . Further, Hon'ble Delhi ITAT in the case of Puran Chaiid Dharmarth Trust Vs ITO 93 taxman.com 367 has held as under: "Section 13, read with sections 11and 10(23C)(vil), of the Income-tax: Act, 1961 - Charitable or religious trust - Denial of exemption (Sub-section (l)(d)) - Assessment year 2007-08 - Assessee-trust was granted exemption under section 10(23C)(vi) - Assessee had advanced an amount as loan to another trust - Assessing Officer treated said amount advanced out of corpus fund to .other charitable trust as not eligible for deduction under section 11 as it was in contravention to investment modes and forms as defined under section 11(5) - Further, Commissioner (Appeals) traversed a step further by denying registration under section 10(23C) by invoking provisions of section 13(l)(d) on ground that assesses had violated condition of investment specified under section J 1(5) - Whether since money was advanced as a loan by assessee-trust to other trust for which assessee had not received any securities or interest and said sum was returned by other trust and ITA no.904/Ahd/2019 Asstt. Year 2014-15 Page 12 of 15 common trustees had no substantial interest in said other trust, amount advanced could not be held to be in violation of section 13(l)(d) and section 11(5} could not be applied to present facts as money advanced was not an investment but a loan - Held, yes -Whether, thus, denial of registration under section 10(23C)(vi} and exemption under section 11 to assessee was unjustified - Held, yes [Paras 29 to 31 and 33] [In favour of assessee]" 8.2 In view of the above, the appellant trust is eligible for benefits of section 11 of the I T Act, as there is no violation of Section 11(5) and thus provisions of Section 13fl)(d]is not attracted. The AO is directed to grant benefit of Section 11 and 12 to the Appellant trust. The related grounds of appeal are thus Allowed. 9. In the result, the appeal of the appellant is allowed. 6. Being aggrieved by the order of the learned CIT-A the revenue is in appeal before us. 7. Before us both the learned DR and the AR vehemently supported the order of the authorities below as favourable to them. 8. We have heard the rival contentions of both the parties and perused the materials available on record. The facts on the case on hand are not in dispute and therefore we are not inclined to repeat the same for the sake of brevity and convenience. From the preceding discussion, the following questions arises for our consideration: i. Whether the activity of the assessee in relation to the construction of the prayer hall is religious in nature in the given facts and circumstances. ii. Whether the advance made by the assessee for ₹1.50 crore to Shri Sardar Patel Cultural Foundation is in violation of the provisions of section 11 read with section 13(1)(d) of the Act. 8.1 As regards the 1 st question, we note that the prayer hall constructed by the assessee has been treated as a temple by the AO and therefore the benefit of exemption was denied by him by observing that the objects clause of the society are not in line with the activities carried out by it. The reasons for treating the prayer hall as temple has already been reproduced somewhere in the preceding paragraph. Therefore, we are not repeating the same for the sake of convenience and brevity. ITA no.904/Ahd/2019 Asstt. Year 2014-15 Page 13 of 15 The learned CIT-A has allowed the appeal of the assessee after passing the detailed and reasoned order which has been reproduced in the preceding paragraph. The learned DR at the time of hearing has not brought anything contrary to the finding of the learned CIT-A. In this regard we find support and guidance from the order of the Hon’ble Karnataka High Court in case of CIT vs. United Brewage reported in 190 Taxman 92 the relevant observation of the court extracted as under: 55. In the absence of any material on appreciation of which material the finding is required to be recorded, there is no question of the matter being remanded to the Tribunal as the Tribunal will not be able to record a finding in the absence of any material. The conclusion of the Tribunal to reverse the well considered and well recorded findings of the assessing authority and the first appellate authority, on disallowing claim towards written off bad debts in terms of section 36(1)(vii) of the Act is concerned, it is nothing short of perverse conclusion as it is neither conclusion based on any material on record nor after giving any reasons to reverse the findings of the assessing authority and the first appellate authority who have givenwell supported reasons and discussed the material available. 8.2 With respect to the 2 nd question for advancing the sum of ₹1.50 crores, we note that the advance was made by the assessee in the financial year 2011-12 which was subject to the assessment under the provisions of section 143(3) of the Act and there was no allegation against the assessee for having contravened the provisions of section 11(5) read with section 13(1)(d). Likewise the amount of advance received back in full in the assessment AR 2016-17 which was also the subject matter of assessment under section 143(3) of the Act but no adverse inference was drawn by the AO during the relevant assessment proceedings. Accordingly, the case of the assessee was in its favour based on the principles of consistency. Furthermore, the assessee has achieved its own goals by advancing money without charging any interest to the institution which was engaged in charitable activities. Thus no adverse inference can be drawn against the assessee. 8.3 Without prejudice to the above, it is also important to note that even assuming that the assessee has contravened the provisions of section 11(1)(a), (b) or (c) of the Act, in other words, it has not applied the income derived from property held under trust for the purpose of charitable activity and therefore it is not eligible for exemption under the provisions of law. However the provision of section 11(1)(d) ITA no.904/Ahd/2019 Asstt. Year 2014-15 Page 14 of 15 provide that voluntary contribution made with a specific direction which shall form the part of corpus of the trust will be excluded from the income. Under the provision of section 11(1)(d) only twin condition that the contribution has been made voluntary and made with specific direction has to satisfy. As such with regard to corpus donation there is no criteria to apply the 85% of receipt toward charitable purpose. Coming to the case on hand, we find that out of the total receipt of ₹ 8,21,15,600/- a sum of Rs. 5,83,47,006/- represents the corpus fund which was received for the specific purposes i.e. construction of prayer hall. Thus in our considered view, the corpus fund represents the capital receipt which has to be utilized for the specific purposes and therefore the same cannot be subject to tax being receipt in the nature of capital. In holding so we draw support and guidance from the judgment of Hon’ble Karnatka High Court in case of CIT vs. Sri Durga Nimishmba Trust reported in 18 taxmann.com 173, where it was held as under: 3. The Tribunal has set out the decision on which the Appellate Commissioner relied on to come to the conclusion that contribution made towards corpusfund cannot be treated as income for the purpose of levying of tax. Even if that corpusfund is misused it cannot be treated as income and income tax levied. The only course is to seek for cancellation of the registration granted under section 12A of the Act. 4. In that view of the matter we do not see any merit in this appeal. Thus the substantial questions of law is answered in favour of the assessee and against the revenue. 8.4 With respect to the other receipts i.e. interest income and regular donations of Rs. Rs. 2,34,66,269/- and Rs. 3,02,325/- respectively, out of such receipt, we find that the assessee has incurred an expense of Rs. 30.92 Lacs leaving a surplus amount of Rs. 2.06 crore approx. which in our considered view at the most can be brought to tax in the situation where the benefit of section 11 is denied to the assessee. Admittedly, in the case on hand, the benefit of section 11 has been denied to the assessee for the activities carried out for the construction of the prayer hall. Accordingly, we hold that the activity of the assessee was in consonance with the ITA no.904/Ahd/2019 Asstt. Year 2014-15 Page 15 of 15 object clause and therefore the assessee is entitled for the exemption under section 11 of the Act. Hence the ground of appeal of the revenue is hereby dismissed. 9. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the Court on 20/04/2022 at Ahmedabad. Sd/- Sd/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 20/04/2022 Manish