ANDS FOUNDATION,DELHI vs. ITO, WARD- 1(1), EXEMPTIONS, NEW DELHI
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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘SMC’ NEW DELHI
SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No.7151/Del/2019 Assessment Year: 2015-16
Shri Ands Foundation, C/o. Vs. Income-Tax Officer, M/s. RRA Taxindia, D- Ward-1(1), 28,South Extension, Part-1, New Delhi New Delhi-1100 49 PAN :AABTA8346C (Appellant) (Respondent)
Appellant by Dr. Rakesh Gupta and Shri Shrey Jain, Adv. Respondent by Shri Om Parkash, Sr. DR
Date of hearing 01.09.2022 Date of pronouncement 30.11.2022
ORDER This is an appeal by the assessee against order dated 4.7.2019 of
learned Commissioner of Income-Tax(Appeals) -40, Delhi pertaining
to assessment year 2015-16.
The basic grievance of the assessee is against denial of
assessee’s claim of exemption under Section 11 and 12 of the Income-
Tax Act, 1961.
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Briefly the facts are, the assessee is a charitable trust created by
a registered trust deed. As observed by the Assessing Officer, the
assessee runs an educational institution in the name of Gurukul Public
School and Anand Samriddhi Vidyapitha. The Assessing Officer has
also accepted that the assessee was granted registration under Section
12A of the Act vide order dated 23.6.2008 and approval under Section
80G of the Act vide order dated 19.3.2010.For the assessment year
under dispute, assessee filed its return of income on 30.9.2015
declaring nil income after claiming exemption under Section 11 of the
Act.
In course of assessment proceeding, the Assessing Officer while
examining assessee’s claim of exemption under Section 11 of the Act
called for various details and after examining them, particularly the
balance sheet of the assessee, noticed that the assessee had made
investment in shares amounting to Rs.5,50,000. Being of the view that
investment in shares is not in accordance with the provisions of
section 11(5) of the Act, the Assessing Officer held that the assessee
had violated the provisions of Section 13(1)(d) of the Act. Thus, he
concluded that the assessee is not eligible to claim exemption under
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Section 11 and 12 of the Act. Accordingly, he proceeded to compute
assessee’s income by determining income at Rs.18,58,700. Though,
the assessee filed an appeal against the assessment order so passed,
however, the appeal was dismissed.
Before me, learned counsel appearing for the assessee submitted
that the assessee had not made any investment in shares, rather, the
shares were received as gift in the years 2006 and 2008. He submitted,
the assessee had been showing the shares under the head ‘investment’
in the balance sheet since 01.04.2008. In this regard, he drew our
attention to balance sheet for the preceding years placed in the paper
book. Proceeding further, he submitted, 55,000 shares having face
value of Rs.10 per share of a company, namely, M/s. Ands Lite (P)
Ltd. worth Rs.5,50,000 were gifted to the assessee in the years 2006
and 2008. Therefore, he submitted, the assessee had not made any
investment in shares in violation of section 11(5) read with sec.
13(1)(d) of the Act. Without prejudice, he submitted, even assuming
that there is violation of section 11(5) read with section 13(1)(d),
denial of exemption under Section 11 of the Act can only be made
with reference to the income derived from the investment made in
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violation of the said provisions and not in respect of all income. He submitted, since, the assessee had not earned any dividend income on the shares during the year, disallowance of exemption under Section 11 should not have been made. In this context, he drew our attention to proviso to section 164(2) of the Act to stress upon the fact that for violation of sec. 13(1)(d) of the Act read with sec. 11(5) of the Act, only that part of the income, which is derived in violation of the aforesaid provisions can be subjected to maximum marginal rate of tax. For such provisions, he relied upon following decisions:
• DIT v. Sheth Mafatlal Gaganbhai Foundation Trust [2001] 249 ITR 533 (Bom.) – (CLC 1-4); • Sri Ratan Tata Trust vs. DCIT, Exemption Circle 2(1), Mumbai 122 taxmann.com 273 (Mumbai) – (CLC 5-42); • DCIT (Exemption) Circle Jaipur v. Central Academy Jodhpur Education Society 119 taxmann.com 355 (Jaipur) – (CLC 43-53); • CIT v. Fr. Mullers Charitable Institutions 363 ITR 230 (Karnataka) – CLC 54-59); • CIT vs. Fr. Mullers Chritable Institution 227 taxman 369 (S.C) – (CLC 60); • DIT vs. Working Women’s Forum [2015] 53 taxman 85 (Madras High Court) – (CLC 61-63); & • DIT vs. Working Women’s Forum 235 taxman 516 (S.C) – (CLC 64).
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Further, he submitted, in assessment year 2016-17, while making
scrutiny assessment, the Assessing Officer has allowed assessee’s
claim of exemption under Sections 11 and 12 of the Act. As regards
the allegation of the Assessing Officer, that the assessee has modified
its object without prior approval of the competent authority, learned
counsel submitted, unless registration granted under Section 12A of
the Act is cancelled by the competent authority, exemption claimed
under Section 11 and 12 cannot be denied. He submitted, as on date,
assessee’s registration under Section 12A of the Act is continuing.
Further, he submitted, the clause added in the supplementary deed is
in the nature of clarificatory amendment and is in line with the object
of the original deed. He submitted, the requirement to make an
application to the competent authority in respect of modification of the
object has been brought to the statute w.e.f. Ist April, 2018, hence,
will not apply to this assessment year.
The learned Departmental Representative strongly relied upon
the observations of the Assessing Officer and learned Commissioner
(Appeals).
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I have considered rival submissions and perused the material
available on record. I have gone through the decisions relied upon.
Undisputedly, the assessee was granted registration under
Section 12A of the Act and approval under Section 80G of the Act,
which is still continuing. Therefore, assessee’s status as a charitable
trust is established.
On a perusal of the impugned assessment order, it is very much
clear, the Assessing Officer has declined assessee’s claim of
exemption under Section 11 and 12 of the Act, primarily for two
reasons. Firstly, the assessee had invested in shares amounting to
Rs.5,50,000, not in the mode and manner prescribed under Section
11(5) of the Act, thereby, violated the provisions of section 13(1)(d) of
the Act. Secondly, the assessee had modified the objects of the trust
deed without seeking approval of the competent authority.
As regards, the issue relating to investment in shares, it is
observed that the assessee had received the shares as gift from two
persons in the year 2006 and 2008. The value of shares is appearing in
the balance sheet of the assessee from past many years. The balance
sheet for the assessment years 2011-12, 2012-13, 2013-14 and 201-15
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placed in the paper book bears testimony to this fact. Thus, it is
evident, the assessee had not made any investment in shares in the
impugned assessment year in violation of section 11(5) of the Act, as
alleged by the Assessing Officer. In any case of the matter, it is fairly
well settled legal principle that for violation of section 13(1)(d) of the
Act, disallowance of exemption can be made only with reference to
the income derived from investment made in violation of section 11(5)
read with section 13(1)(d) of the Act. In the facts of the present case,
admittedly, the assessee has not derived any income from the
investment in shares. Therefore, assessee’s claim of exemption under
Section 11 of the Act in respect of other items of income cannot be
denied.
As regards, the allegation of the Assessing Officer that the
assessee has modified the object without taking prior approval of the
competent authority, suffice to say, inspite of such alleged violation,
the registration granted under Section 12A of the Act still subsists. It
is further relevant to observe while completing scrutiny assessment in
assessment year 2016-17, the Assessing Officer has allowed claim of
exemption under Section 11 and 12 of the Act.
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Thus, in my view, the reasons based on which the Assessing
Officer rejected assessee’ claim of exemption under Section 11 and 12
of the Act for the impugned assessment year, are unsustainable.
Accordingly, I direct the Assessing Officer to allow assessee’s
claim of exemption under Section 11 and 12 of the Act.
In the result, the appeal is allowed, as indicated above. Order pronounced in the open court on 30thNovember, 2022. Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER Dated: 30th November, 2022. Mohan Lal
