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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL,
Before: MANISH BORAD & MANISH BORAD & MANISH BORAD
Per Bench This is an appeal filed by the his is an appeal filed by the revenue against the order of the gainst the order of the CIT(A),II, Bhubaneswar , Bhubaneswar dated 27.3.2013 for the assessment year for the assessment year 2009- 2010.
The revenue has raised the following grounds: revenue has raised the following grounds:
“1. On the facts and in the circumstances of the case, ld CIT(A) was “1. On the facts and in the circumstances of the case, ld CIT(A) was “1. On the facts and in the circumstances of the case, ld CIT(A) was not justified in allowing exemption u/s.11 to the assessee when the not justified in allowing exemption u/s.11 to the assessee when the not justified in allowing exemption u/s.11 to the assessee when the AO had categorically found in course of assessment that the AO had categorically found in course of assessment that the AO had categorically found in course of assessment that the necessary conditi necessary conditions for the exemption wee not fulfilled by the ons for the exemption wee not fulfilled by the assessee during the relevant assessment year. assessee during the relevant assessment year. 2. On the facts and in the circumstances of the case, the ld CIT(A) is 2. On the facts and in the circumstances of the case, the ld CIT(A) is 2. On the facts and in the circumstances of the case, the ld CIT(A) is not justified in accepting the contentions of the assessee and not not justified in accepting the contentions of the assessee and not not justified in accepting the contentions of the assessee and not P a g e 1 | 7
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accepting the findings of the AO in violation of Rule 46A of the IT Rules.” 3. The appeal is time barred by 1510 days. The revenue has filed condonation petition u/s.253(5) of the Income tax Act, 1961, wherein, it is stated that the appellate order dated 27.3.2013 passed by the ld CIT(A)-II, Bhubaneswar was received in the office of CIT on 13.5.2013. However, due to restructuring of the department, the office of the ACIT (Exemptions), Bhubaneswar was created on 15.11.2014 and the jurisdiction was transferred. Later on the ACIT(Exemptions) noticed that the appeal for A.Y. 2009-10 has not been filed and, accordingly, submitted once again Form No.36 alongwith related documents on 24.8.2017 and, therefore, there was delay in filing of the appeal by 4 years 12 days.
None appeared on behalf of the respondent-assessee. Ld CIT DR reiterated the submissions made in the condonation petition and request to condone the delay because due to unavoidable circumstances, the delay has been occurred. Since, there was no response from the side of the respondent-assessee to oppose the condonation petition, we condone the delay and admit the appeal of the revenue for adjudication.
We have heard ld D.R. and perused the record of the case. We find that the ld CIT(A) has adjudicated the issue as under:
“ For assessment year 2009-10, the appellant had filed its return in ITR-7 showing taxable income of “ Nil” after claiming exemption u/s.11 of the I.T.Act. The AO completed the assessment u/s.143(1) of the I.T.Act on
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23.12.2011 by making an addition of Rs.34,58,752/-. The additions were made under the heads of land & development (Rs.7,52,136), loans and advance (Rs.9,51,120/-), G.B. meeting expenses (Rs.2,94,516/-), caution money refund (Rs.7,60,483), undisclosed income (Rs.1,61,553), Lab. Expenses (Rs.5,09,957/-) and capital expenditure (Rs.28,987/-) totaling to Rs.34,58,752/-. 2. The crux of the case is that the AO had observed in the beginning of his assessment order that although in the case of this appellant registration u/s.12AA had been granted, it would not be entitled to the benefit of Se.11 "because of the reasons elaborately discussed hereunder". As a matter of fact, unless there is a conclusive decision on this issue, the disallowance/additions under different heads would not be of any meaning or importance because the heads of expenditure would not be relevant as expenditure would then be relevant as application of income. Therefore, it is important to make some analysis of the AO's observation against grant of benefit u/s.11. 3. The trust is accumulating funds in the shape of FDs from year to year. The AO seems to have analysed the objectives of the trust and has highlighted some of the objectives in his order. At the end, he has noted that even though the trust had objectives of welfare/wellbeing of the public in general in form of charity, it kept on generating surplus which were being accumulated from year to year and were kept in the shape of FDs. If this is the objection of the AO, it should not be of any relevance now because, trusts having surplus have been legally allowed the benefit u/s.11 so long as their activities are charitable and they conform to the prescriptions of Sec.11(2), Sec.11(5), etc. without violating Sec.13. Not only that there have been many decisions from the High Courts, of late, the ITAT Cuttack Bench itself has elaborately dealt with the matter in the following decisions: i. M/s.Human Resource Development and ManagementTrust (ASBM Trust) (ITA N o.127/CTK//2011 and CO. No.14/CTK/2011 for A.Y. 2007-08) ii) M/s.Silicon Institute of Technology [ITANo.316/CTK/2011 a CO. No.18/CTK/2011 for A/Y.2007-08] iii. Kalinga Institute of Industrial Technology [l.T.(S.S.)A. Nos.86,87 & 88 iCTK.)/2009 for A/Ys.2003-04, 2004-05 & 2005-061 4. In the remand report, the AO has not objected to the written submission of the appellant regarding its entitlement u/s.11 on this issue. 4.1. The AO has been of the opinion that in the contract agreement with the contractors, the appellant trust through its chairman has been described as "owner". The AO felt that there was no committee of any kind for appointment of contractors and suppliers and the chairman had dictatorial powers of functioning. Although this discussion has been made
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under the head "improper maintenance of accounts", here the AO is basically questioning the functioning of the trust itself. It is however not brought on record that the trust was functioning in contravention of the ; provision of registered trust deed. Therefore, it is best left to the trust as to how the trustees manage its functioning on the basis of their mandate. The AO is not empowered to substitute his views for such functioning at all. This will not contravene any provision of Sec. 13 so as to debar the trust from the benefit of Sec.11. The appellant has submitted elaborate explanation on the AO's observation under the head security deposit from staff, land and development, loans and advances, general body meeting & chairman's visit expenses, caution money refund, undisclosed income of Rs.1,61,553/-, lab expenses, capital expenditure and other defects. During the remand proceedings the AO has examined the entire submission in detail and while accepting the views of the appellant in most of the cases, he has observed/objected only on the following two issues and I would restrict my discussion to those two points only.. 5. As regards the chairman’s visit expenses, the AO had observed during the assessment that the appellant trust had spent Rs.4,79,000/- under the head governing body meeting expenses and Rs.55,016/- towards chairman's visit expenses. The allegation of the AO was that the evidence of such expenses could not be produced and considering the venue and the number of members attending the meeting, the expenses appeared to be considerably on the higher side. Accordingly, the AO disallowed 50% on estimate. It is interesting to note that it was not the case of the AO that there was any excess remuneration paid or any expenditure was incurred for the persons covered u/s.13 so as to debar the trust from benefits u/s.11. On the other hand, during the remand proceedings, the AO does not have any objection regarding the expenditure not being supported by proper evidence. He has rather stated that it was not established that the visit of the chairman was only for the purpose of college and secondly an expenditure of Rs.4,79,000/- for 2 to 3 days for 11 members appeared to him to be excessive. Accordingly, the AO is of the opinion that expenses would be hit by the provisions of Sec.13(2)(1) of the l.T. Act. 5.1. I have carefully gone into the details pertaining to the aforesaid expenditure. It is seen that for the governing body meeting, seven members had come from USA. The Chairman Dr. R.K Mishra and his family members and friend who were governing body members and were NRls and were staying in USA. These members had come for the meeting by bearing the flight charges to India. The trust was to bear their expenses for accommodation, local conveyance and food etc. Accordingly, as per the practice in USA, the trust incurred "per-diem" expenditure at par with the "per-diem" these individuals would have otherwise got in dollar terms during their international travel. Such expenditure amounting to Rs.18,500/- "per-diem" per person for the 7 members. This was the bulk of the expenditure included in Rs.4.79 lakhs and the balance was spent for conducting the meeting and other miscellaneous petty expenses. Similarly,
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payment had been incurred for Dr. R.K. Mishra, Chairman of the trust who had come from USA. 5.2. Considering the status of the members of the governing body for whom the expenditure had been incurred and their regular practices regarding "per diem", this is not an unusual expenditure at all. Secondly, this was not a "Remuneration" paid in excess to any member covered u/s.13, nor had this resulted in any benefit to any of the concerned members so as to invite the violation of Sec.13. The aforesaid explanation was available to the AO during the remand proceedings and has been considered but he has not appreciated it in proper perspective. In my view in this regard there is no contravention of sec.13 at all. 6. Under the "Lab expenses", the AO-verified all the bills and has observed that bills for a total sum of Rs.1,07,669/- could not be produced by the AR. In the rejoinder, the appellant has explained as follows: "Due to frequent transfer of files during the protracted course of hearing, three bills/money receipts were misplaces amounting to Rs. 1,07,669/- (Rs.5,7451- + Rs. 1,924 + Rs. 1,00,000/-) out of total expenses of Rs.36,11,228/-. Out of Rs. 1,07,6691-, two small amounts were made in cash and Rs1,00,0001- was made in cheque. Request was made to the parties for issue of duplicate bills/receipts which could not be produced before the remand officer since the concerned parties have not complied to our request. 6.1. Even if one presumes that the bills are not available for these expenses, I do not understand as to how that will contribute in any way for rejection of the appellant's claim u/s.11. If the trust is assessed as a commercial institute for its commercial income, only then the sum of Rs.1,07,669/- could be disallowed as expenditure in computation of taxable income. On the other hand, if u/s.11 benefit is available to the trust, the entire income should be treated as exempt under this section including some possible enhancement of income and disallowance of expenses if it is otherwise warranted. Therefore, this cannot stand as a bar against grant of benefit u/s.11 to the trust. 7. Admittedly the trust had outsourced its transport service. Payments for the bus hiring and fuel of the bus have been made and are evidenced. Whether or not there is any agreement with the bus owner is of no consequence for taking a decision on the entitlement u/s.11. It is not the case of the AO that the payment had been made in excess, much less, that the payment had been in any way in contravention of the provision of Sec.11 to5ec.13. 8. In view of the aforesaid discussions, I am of the view that considering the entire discussion in the assessment order read with AR's written
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submission and the remand report, absolutely no case has been made out by the AC to deny the benefit u/s.11 to the trust. Therefore, I direct the AO to allow the benefit and compute income accordingly.”
Ld CIT DR dutifully supported the order of the Assessing Officer and further submitted that the assessee trust was accumulating funds in the shape of fixed deposits from year to year. Further, the assessee had not kept proper books of account or kept the books of account in such a manner from which the real state of affairs cannot be ascertained. However, ld CIT DR could not point out any specific error in the order of the ld CIT(A).
In view of above, we concur with the findings arrived at by ld CIT(A). Ld CIT(A) had called remand report from the Assessing Officer but the AO has not objected to the written submission filed by the assessee trust. Therefore, the ld CIT(A) is fully justified in directing the AO allow exemption u./s.11 of the Act. As regards the acceptance of submission of the assessee in violation of Rule 46A as claimed by the department, we find that after receiving the various written submissions and documents, the CIT(A) had called for the remand report and after getting the remand report, the explanation of the assessee was called for and the rejoinder was filed by the assessee. Therefore, it cannot be established that the CIT(A) has accepted the new evidence in violation of Rule 46A of the IT Rules. Therefore, we reject the grounds of appeal of the revenue. P a g e 6 | 7
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In the result, appeal of the revenue is dismissed.
Order pronounced on 22/10/2021.
Sd/- sd/- (Manish Borad) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 22 /10/2021 B.K.Parida, SPS (OS) Copy of the Order forwarded to : 1. The Appellant : DCIT (Exemptions), Bhubaneswar. 2. Respondent: M/s. Nilakantha Educational & Charitable Trust, At: Anantpur, Po: Phulnakhara, Dist:Khurda 3. The CIT(A)-II, Bhubaneswar 4. Pr.CIT-II, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// By order
Sr.Pvt.secretary ITAT, Cuttack
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