DCIT (EXEMPTIONS) , CHENNAI vs. SRI NANDHANAM EDUCATIONAL & SOCIAL WELFARE TRUST, VELLORE

आयकर अपीलीय अिधकरण, ‘सी’ �यायपीठ,चे�ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI �ी महावीर �सह, उपा�य� एवं �ी मनोज कुमार अ�वाल, लेखा सद�य के सम� BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपीलसं./ITA No.: 1109/CHNY/2019 िनधा�रण वष�/Assessment Year: 2011-12 The DCIT, M/s. Sri Nandhanam Exemptions Circle, vs. Educational & Social Welfare Chennai. Trust, No.184/1, Small Bazaar Street, Tirupattur, Vellore – 635 602. PAN: AACTS 8283R (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/Appellant by : Shri P. Sajit Kumar, JCIT ��यथ� क� ओर से/Respondent by : None सुनवाई क� तारीख/Date of Hearing : 08.02.2023 घोषणा क� तारीख/Date of Pronouncement : 08.02.2023 आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: This appeal by the Revenue is arising out of the order ofthe Commissioner of Income Tax (Appeals)-7, Chennai in ITA No.71/2014-15 dated 07.02.2019. The assessment was framed by the DDIT, Exemptions-III, Chennai u/s.143(3) of the Income Tax

2 ITA No. 1109/Chny/2019 Act, 1961 (hereinafter the ‘Act’) for the assessment year 2011-12 vide order dated 25.03.2014. 2. The only issue in this appeal of Revenue is against the order of CIT(A) allowing exemption u/s.11 of the Act without considering the impact of section 11 & 12 of the Act which operates as to exclude from total income if violations are as mentioned in section 13(1) of the Act. For this, Revenue has raised the following grounds:- 2.1 The Ld CIT(A) allowed the exemption u/s 11 of the I.T.Act, 1961 without realizing the fact that Sec. 13(1) clearly states that nothing contained in Sec.11 or 12 shall operate so as to exclude from total income if violations as mentioned is those clauses are attracted. 2.2 The Ld.CIT(A) failed to follow the decision of Hon'ble ITAT, Chennai in the case of Paramasiva Naidu Muthuvel Raj Education Trust Vide ITA No. 2005/CHNY/ 20 12 dated 09.07.2018 wherein the decision of Hon'ble Karnataka High Court in the case of CIT Vs. Fr. Mullers Charitable Institutions reported in (2014] 363 ITR 230 and Hon'ble Madras High Court decision in the case of CIT vs. Working Women Forum reported in (2014] 365 ITR 353 have been considered. 2.3 The Ld.CIT(A) failed to follow the decision of Hon'ble ITAT, Chennai in the case of DDIT(Exemptions )Vs. India Cements Educational Society [2016] 67 taxmann.com 236 dated 20.01.2016 and DDIT(Exemptions)-III Vs. Mahalakshmi Kunjitha Patham Educational & Charitable Trust[2016] 69 taxmann.com 71 wherein it was held that where funds of the trust are transferred to the trustee for his benefit, exemption u/s 11 of Tax act, 1961 would not be available to the assessee. 2.4 The Ld.CIT(A) failed to follow the Hon’ble Supreme Court Judgment in the case of DIT vs. Bharat Diamond Bourse [2003] 126 Taxmann 365.

3 ITA No. 1109/Chny/2019 3. Despite service of notices from the first date of hearing till today, none is present from assessee’s side, hence, qua assessee, we are hearing this appeal ex-parte. On behalf of Revenue, Shri P. Sajit Kumar, JCIT argued. 4. Brief facts are that the assessee is a public charitable trust registered u/s.12AA of the Act and is running an educational institution. The assessee trust filed its return of income declaring taxable income at ‘nil’ accompanied by audited accounts and report in Form No.10B. The AO during the course of assessment proceedings noticed that the assessee’s trust has advanced an amount of Rs.32.45 lakhs for purchase of a property for assessee’s trust. According to AO, this investment violates provisions of section 13(1)(d) of the Act and accordingly, he taxed the surplus amount at Maximum Marginal Rate denying exemption u/s.11 of the Act. The AO noted that the assessee has made investment in the modes other than specified instruction 11(5) and this investment in capital land of advance of Rs.32.45 lakhs could not be proved by filing any evidence, copy of agreement, details of said advance and since the funds of the assessee’s trust have remained with the proposed seller, it violated the principles of section 13(1)(d) of the Act. Therefore, the AO computed the statement of total income

4 ITA No. 1109/Chny/2019 and taxable income was at Rs.4,21,39,754/- as against the violation by assessee by making investment being advance for purchase of property at Rs.32.45 lakhs. Aggrieved, assessee preferred appeal before CIT(A). 5. The CIT(A) also upheld the violation as the assessee did not produce any detail regarding the said advance i.e., copy of agreement etc., and the purpose of advance. Hence, he upheld the action of the AO treating the said advance as investment not to be allowed as per section 11(5) of the Act and consequent violation of provisions of section 13(1)(d) of the Act. But the CIT(A) following the decision of Hon’ble High Court of Madras in the case of CIT vs. Working Women’s Forum, [2014] 365 ITR 353 restricted the disallowance of exemption to the extent of amount advanced which could not be proved to be genuine towards purchase of property for the trust amounting to Rs.32.45 lakhs by observing in para 6.4, 6.5.1, 6.5.2 & 6.6 as under:- 6.4 In the written submission the A.R made alternate plea that as per the decision of the Madras High Court in 365 ITR 353, only income attributable to the investment contravening Sec.13(1) (d) could be taxed at MMR and that the other income of the educational institution is exempt u/s 11. 6.5.1 In (2015] 53 taxmann.com 85 (Madras) Commissioner of Income-tax vs Working Women's Forum, the Hon'ble High Court of Madras held -In case of a trust registered under section 12AA, only such part of income

5 ITA No. 1109/Chny/2019 which is violative of section 13(1) (d) can be brought to tax at maximum marginal rate and entirety of income cannot be denied exemption under section 11. 6.5.2 In [2015] 63 taxmann.com 324 (SC) Director of Income-tax, Chennai vs Working Women's Forum, the Hon'ble Supreme Court of India dismissed SLP against High Court's ruling (arising out of order of High Court of Madras in CIT VS Working Working Women's Forum [2014] 365 ITR 353) that in case of a trust registered under section 12AA, only such part of income which is violative of section 13(1) (d) can be brought to tax at maximum marginal rate and entirety of income of income cannot be denied exemption under section 11. 6.6 Respectfully following the above stated decisions of the Hon'ble Supreme Court of India and Hon'ble High Court of Madras, it is held that only such part of income which is violative of section 13(1)(d) can be brought to tax at maximum marginal rate and entirety of income cannot be denied exemption under section 11. Aggrieved, now Revenue is in appeal before the Tribunal. 6. After hearing ld.Senior DR, we noted that the CIT(A) has restricted the disallowance of exemption to the extent of violation in term of section 13(1)(d) of the Act to the extent of amount advanced for purchase of property for the trust of Rs.32.45 lakhs. But the CIT(A) allowed exemption to the trust on the rest of the income because that has not violated any of the provisions as mentioned in section 13(1)(d) of the Act. The ld.CIT(A) relied on the decision of Hon’ble Madras High Court in the case of Working Women’s Forum, supra, got which even the Hon’ble Supreme Court

6 ITA No. 1109/Chny/2019 dismissed the SLP of the Revenue. As the issue is squarely covered by the decision of Hon’ble Madras High Court, respectfully following the same, we confirm the order of CIT(A) restricting the disallowance of exemption to the extent of Rs.32.45 lakhs and dismiss the appeal of the Revenue. 7. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open court on 8th February, 2023 at Chennai. Sd/- Sd/- (महावीर �सह ) (मनोज कुमार अ�वाल) (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा�य� /VICE PRESIDENT लेखा सद�य/ACCOUNTANT MEMBER चे�ई/Chennai, �दनांक/Dated, the 8th February, 2023 RSR आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु� /CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF.