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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL
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 dated 07.02.2019. The assessment was framed by the DDIT, Exemptions-III, Chennai u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) for the assessment year 2011-12 vide order dated 25.03.2014.
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.
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.
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 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