THE DEPUTY COMMISSIONER OF INCOME TAX(EXEMPTIONS), , VIJAYAWADA vs. CARE AND SHARE CHARITABLE TRUST, , VIJAYAWADA

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HON’BLE ACCOUNTANT MEMBER I.T.A. No.337/VIZ/2019 (Asst. Year : 2013-14) DCIT (Exemptions), vs. M/s. Care and Share Exemptions Circle, Charitable Trust, Vijayawada. D.No.40-9-76/3, AVR Arcades, Benz Circle, Vijayawada. PAN No. AAATC 1954 F (Appellant) (Respondent) C.O.No. 123/VIZ/2019 (Arising out of I.T.A. No.337/VIZ/2019) (Asst. Year : 2013-14) M/s. Care and Share vs. DCIT (Exemptions), Charitable Trust, Exemptions Circle, D.No.40-9-76/3, Vijayawada. AVR Arcades, Benz Circle, Vijayawada. PAN No. AAATC 1954 F (Applicant) (Respondent) Assessee by : Shri G.V.N. Hari, Advocate. Department By : Shri S.R.S. Narayan, CIT DR Date of hearing : 16/03/2020. Date of pronouncement : 05/03/2020. O R D E R PER V. DURGA RAO, JUDICIAL MEMBER

This appeal by the Revenue and the cross objection by the assessee are directed against the order of Commissioner of

2 ITA No. 337/VIZ/2019 C.O.No. 123/VIZ/2019 (M/s. Care and Share Charitable Trust) Income Tax (Appeals), Rajamahendravaram, dated 20/02/2019 for the Assessment Year 2013-14. 2. The grounds raised by the department are as follows:- i The CIT(A) erred in allowing the appeal of - the assessee. ii The ld. CIT(A) erred in directing the Assessing Officer to delete the expenditure incurred on construction, based on the submissions made by the assessee, without calling for a remand report from the Assessing Officer in this regard. iii The ld. CIT(A) erred in admitting additional evidence without offering an opportunity to the Assessing Officer for examining the Rs. 3,63,96,696/- same, in violation of Rule 46A of the I.T. Rues. iv The ld. CIT(A) erred in deleting the addition of Rs. 3,63,96,696/- when the assessee did not produce any evidence in respect of the building expenditure, before the Assessing Officer during the course of assessment proceedings. v The order of the CIT(A) is perverse as the - CIT(A) has mentioned that the assessee has spent 85% of the gross receipts (i.e. Rs. 14,82,12,178/-) for charitable purpose, whereas no evidence was filed before the Assessing Officer to establish that it was spent for charitable purpose. vi Any other ground that may be taken up at - the time of hearing before the Hon'ble ITAT Total tax effect 3,63,96,696/-

3 ITA No. 337/VIZ/2019 C.O.No. 123/VIZ/2019 (M/s. Care and Share Charitable Trust) School: 2,624— In Colleges: 837 —Technical & Professional: 270 - Nursing & Pharmacy: 96 - Masters, Engineering & Medicine: 121 - Studying Abroad: 3 - Not studying: 1). A further 2,000 un-sponsored children are also assisted through the programme. The Trust seeks to promote a person-to-person programme for the principle purpose of caring for poor and deserving children. Through the Trust a Family or Individual sponsors a child and in a spirit of caring and sharing offers support for the education and welfare of the child This support continLies 1i the child completes his/her education. 7.2 Street Children Rehabilitation Programme: Vijayawada is one of the biggest Railway Junctions in South India and many runaway kids land up here. We are involved in the rescue of street kids and have set up Homes for their rehabilitation. We have 2 Children's villages and 4 other Homes for street and destitute children. At present 930 (461 boys and 469 girls) children are staying in our Homes. The majority of these children are studying, in English medium schools set up on our campuses. Others are in schools, colleges and in technical and professional institutions in and around Vijayawada. 7.3 Daddy's Home: In 1999 the Trust acquired 27 acres of land at Buddavaram, on the outskirts of Vijayawada, and we built - Daddy's Home - a Rescue and Rehabilitation Home for street children and orphans. There are 12 Homes for the children, a Dispensary, Cafeteria, Laundry, School, an Auditorium, Playgrounds, a Football, Basketball and Volleyball courts and a Skating Rink. There is also a Farm and Poultry. Today there are 435 children (Boys: 210 and Girls: 225) on the campus. Daddy's Home has a staff of 120 (On campus: 29 - Off campus: 91). 7.4 Daddy's Home Care & Share School: To provide education facilities for our children we started our own English Medium School in June 2000. The School is also open, free of cost, to the children of the surrounding villages. In the academic year 2014-15 there were 692 children in the school. In 2014 the school introduced e learning in the class rooms from Classes 6 to 10. 7.5 Butterfly Hill - Home for AIDS Orphans & HIV+ Children: In March 2005 the Trust purchased 38 acres of land at Veerapanenigudem about 34 kms from Vijayawada city. The campus was named Butterfly Hill and here we have built Homes to provide care and protection for children with HIV/AIDS. 10 Homes for boys and girls, a Dispensary, Kitchen, Cafeteria and 2 School Blocks have been built. The campus has Mango trees and 8 acres of vegetable cultivation. Today 266 children (196 boys and 70 girls) live on the

4 ITA No. 337/VIZ/2019 C.O.No. 123/VIZ/2019 (M/s. Care and Share Charitable Trust) campus. Of these 60 children are HIV+ (Boys: 36 and Girls: 24). Butterfly Hill has a staff of 68 (On campus: 30 and Off campus: 38). 7.6 Butterfly Hill School: The school caters mainly to the children on campus but a few children from the surrounding villages also attend the school. There are 329 children (Boys: 221 and Girls: 108) in the school with a staff of 25 (Men: 11 and Women: 14) 7.7 Night Shelter: The Night Shelter for boys is run in a school building of the Vijayawada Municipal Corporation near the Benz Circle area. This provides a rof over their heads for boys who are on the streets. n opportunity for boys who have , for the welfare of the street children in Benz Circle area. Dinner and breakfast are provided. The children are counseled and repatriated of possible. 7.8 Observation Home (Home for Juvenile Delinquents), Vijayawada: On the request of the Superintendent we are offering our service at the Government Observation Home for Boys. Our work at the Home is to ensure that the boys are treated in a humane way. Our Trust provides on a regular basis toilet items, clothes, bedsheets, mats for the comfort of the boys and cleaning products to ensure that the boys live in a clean environment. We have also provided a TV and indoor games for the entertainment of the boys. Mosquito nets and repellents are- provided to the Home. We also supply milk, fruits and chicken to supplement the boys' diet. On an average there were 30 boys lathe Home during the year. The Director, Juvenile Welfare, Correctional Services & Welfare of Street Children issued Orders on 25. 09.2003 nominating Care & Share on the Home Committee of the Observation Home for Boys, Vijayawada. On 22.11.2008 the Trust was nominated as a member of the Task Force Committee for the formulation of the Citizen's Charter and to monitor the implementation of the Charter. Care & Share is also involved in the support of the Observation Home for Boys at Eluru which has 150 inmates. 7.9 Physically Handicapped Children Welfare Programme: In 1996 we started Asha Kiran - a workshop for the fabrication of Callipers, Crutches and Prosthesis. These are given free of cost to poor handicapped children. About 4,329 patients were screened till date and 5,978 children & adults have been assisted with callipers, crutches, artificial limbs, tricycles, wheel chairs, CP chairs, corrective surgeries and repairs & reviews. Our staff also work with the mentally challenged children of Asha Jyothi, Hanuman Junction and Premniketan, Ibrahimpatnam.

5 ITA No. 337/VIZ/2019 C.O.No. 123/VIZ/2019 (M/s. Care and Share Charitable Trust) 7.10 Health Programme: The Trust provides help for Medical treatment and Operations for poor children and their families from the rural and urban areas. At Daddy's Home and Butterfly Hill we have two Dispensaries manned by resident Nurses. Many of our Nursing students educated by us volunteer a year of service with Care & Share. Health camps are organised in the slums where we are present. Since 2002 Doctors from Italy are offering their services to the poor and needy. For several years we conducted free operations in Vijayawada by the Doctors from Padova Ospedale. Paediatricians from CCWW (Child Care World Wide), Padova and Italy now spend about 6 months every year treating our children in the Homes and in the slums. The Doctor Clown group and other dentists and orthodontists from Italy visit our children for several months during the year. The Dispensaries at Daddy's Home and Butterfly Hill have two self-contained Dental clinics. 7.11 Technical and Professional Training Programme: Several of our boys and girls are sent for technical training to NTTF, Gannavaram, Boys Town, Hyderabad, Don Bosco Technical School, Guntur, St. Joseph's ITI, Gunadala, Asha Nilayam, Gollapudi, Kolping centre, Guntur and Apple Computers, Vijayawada. Several are also sent for Hair Cutting and Beautician courses and for Hotel Management. On our Daddy's Home campus we also have training for older boys and girls in Tailoring, Embroidery, Book Binding, Bag making and Footwear making. Several are also trained in Electrical work, Plumbing, Air Conditioning and Building Painting. 7.12 Slum Schools: We are working in 7 slum areas in Vijayawada: 1. Brahmarambhatiuram 2. Kandrika/ Rajiv Nagar 3. New Rajarajeswaripeta 4. Alankar Centre/Sambamurty Road 6. Autonagar 7. Vambey Colony 8. Bhaskaraopeta In the slums our activity is focussed on the children. Since many of the street children come from the slums our activity here is a preventive measure. In each of these slums we have started a Literacy Centre. At New Raja rajeswari peta we also run a regular Elementary and High school in collaboration with the

6 ITA No. 337/VIZ/2019 C.O.No. 123/VIZ/2019 (M/s. Care and Share Charitable Trust) Vijayawada Municipal Corporation. In these Literacy centres the children are also given milk and a mid-day meal. Recreation facilities for the children are also provided in these centres. After learning the rudiments of reading and writing the children are placed in regular schools in the area. There are 1,317 children in these Literacy centres and schools with 30 staff members. 7.13 Community Development Programme: In addition to the Literacy programme for the children in the slums we have Awareness programmes for the adults. There are Self-help groups of women with the aim of improving their living conditions through savings and skill development programmes. Several of the women have been given Pushcarts for starting small businesses. Most of the men are illiterate and have no skills. They depend on pulling Rickshaws for their livelihood. Our Trust has given out 454 Cycle Rickshaws, 142 pushcarts, 23 petty shops and 400 sewing machines free of cost for these slum dwellers and villagers. We are also conducting regular health camps at the Slums and distributing medicines free of cost. 7.14 Sishu Gruha - Babies' Home: On the request of the Government the Trust started a Home for abandoned babies in June 2005. Since its inception 256 abandoned infants have been sheltered in our Babies' Home. Till date 153 babies have been given in adoption to local families and 6 to NRI/Foreign couples. Today there are 19 babies in the Home. 19 children (3 years +) are in our Children's villages -Daddy's Home and. Butterfly Hill. 7.15 Emergency Relief: The Trust has responded to the emergency needs of the community on several occasions during the last years. The assistance given to the flood victims of Vijayawada and the victims of the Tsunami of 26th December 2004 is notable.

The assessee had field its return of income for the A.Y. 2013-14 on 27/02/2014 declaring total income at Rs. NIL. The Assessing Officer has disallowed an amount of Rs. 3,63,96,696/- on the ground that assessee has not applied/expended towards

7 ITA No. 337/VIZ/2019 C.O.No. 123/VIZ/2019 (M/s. Care and Share Charitable Trust) charitable purposes. Accordingly, assessment was completed u/sec. 143(3), dated 31/03/2016. 4. On appeal, ld. CIT(A) by considering all the details directed the Assessing Officer to delete the addition made by the Assessing Officer. 5. On being aggrieved, the department is in appeal before this Tribunal. 6. Ground Nos. 1 & 6 are general in nature, no adjudication is required, therefore, same are dismissed. 7. Ground Nos. 2 & 3 raised by the department on the ground that ld. CIT(A) deleted the addition without giving opportunity to the Assessing Officer which is amounting to violation of rule 46A of the I.T. Rules. In the assessment order, the Assessing Officer has noted that the assessee has debited expenses on account of construction to the tune of Rs.3,63,96,696/- during the year. During the course of hearing, on 28/03/2016 only partial bills were furnished. The assessee not filed other details such as where such activity has happened, what is the activity undertaken and whether Government permission were obtained are not were not furnished. He further observed that the assessee furnished the photographs and submitted that the construction activity carried by the assessee pertains to existing structure, however no

8 ITA No. 337/VIZ/2019 C.O.No. 123/VIZ/2019 (M/s. Care and Share Charitable Trust) details were given by the assessee. Therefore, the Assessing Officer adjourned the case to 30/03/2016 and asked the assessee to furnish further details. The assessee could not furnish any further details, therefore the Assessing Officer considered the report of the Inspector submitted earlier on 15/02/2016 wherein he stated that the total construction cost claimed by the assessee from last several years is Rs. 20 to 25 crores, however, the total cost of buildings appearing on the land cannot exceed Rs.10 to 12 crores. Accordingly, the Assessing Officer has denied the claim made by the assessee to the extent of Rs. 3,63,96,696/-. Before the ld.CIT(A) the assessee has filed all the details in respect of cost of construction in the form of paper book, the same is filed before us at page Nos. 58 to 97. The ld. CIT(A) after examining all the details deleted the addition made by the Assessing Officer by observing that the assessee has actually carried the construction activity which is in pursuance to the objects of the assessee trust, therefore directed the Assessing Officer to delete the addition. 8. We have perused the assessment order and also the order of the ld.CIT(A) and also the paper book find that the finding given by the ld. CIT(A) is based on the material available on record. The assessee has carried out construction activity and incurred

9 ITA No. 337/VIZ/2019 C.O.No. 123/VIZ/2019 (M/s. Care and Share Charitable Trust) expenditure through cheque payments. We have gone through the entire material, prima-facie find that almost all the payments are made by cheques, therefore ld. CIT(A) came to a conclusion that no remand report is required therefore directed the Assessing Officer to delete the addition. Further, in the assessment order the Assessing Officer has noted that some details have been filed in respect of construction work carried by the assessee and he gave only two days time to file the remaining details. How it is possible to the assessee being a charitable trust to file the details within two days. That apart, the Assessing Officer himself has mentioned that the assessee has given some details which were accepted and the addition was made on the entire cost incurred by the assessee, so prima-facie it appears that the Assessing Officer has not examined the bills produced by the assessee, simply based on the report given by the Inspector of Income-tax addition was made. The assessee is running various institutes for that purpose various buildings have been constructed for the A.Ys. 2010-11, 2011-12, 2012-13 & 2014-15, in all the years the cost incurred by the assessee is allowed in the scrutiny assessment. The year under consideration the Assessing Officer based on the Inspector’s report (who is not competent to estimate the cost of construction) disallowed the expenditure incurred by the assessee

10 ITA No. 337/VIZ/2019 C.O.No. 123/VIZ/2019 (M/s. Care and Share Charitable Trust) is highly improper and unjustified. This is continues activity carried by the assessee by utilizing the funds received from various people. The objects of the assessee are very clear that the assessee is running various homes for different purposes to run such huge activity various buildings are required, therefore the assessee continuously carrying the construction activity according to the objects of the society, therefore the Assessing Officer without examining the issue and without considering the details filed, simply disallowed the entire expenditure incurred by the assessee is not correct. Further, the assessee started the construction activity in earlier years i.e. A.Ys. 2010-11, 2011-12, 2012-13 & 2014-15 all the years the Assessing Officer has allowed the expenditure incurred by the assessee. The only year under consideration, the Assessing Officer without giving proper opportunity has disallowed the expenditure incurred by the assessee is not correct. Therefore, the ld. CIT(A) after examining each and every detail directed the Assessing Officer to delete the addition. Under the above facts and circumstances of the case the ld. CIT(A) has not violated rule 46A of the I.T. Rules and adjudicated the issue after examining all the details. Under these facts and circumstances of the case, we are of the opinion that no remand report is required, for the reason that the expenditure

11 ITA No. 337/VIZ/2019 C.O.No. 123/VIZ/2019 (M/s. Care and Share Charitable Trust) incurred by the assessee is very clear from the records. Therefore, the ld. CIT(A) rightly directed the Assessing Officer to delete the addition. In view of the above, the ld. CIT(A) not violated rule 46A of the I.T. Rules. Thus, ground Nos. 2 & 3 raised by the department are dismissed. 9. Ground No.4 also relates to addition made by the Assessing Officer and deleted by the ld. CIT(A) in respect of Rs.3,63,96,696/-. We have discussed elaborately this issue in the above paragraphs, therefore no separate adjudication is required. The addition made by the Assessing Officer is deleted by the ld.CIT(A) by considering the relevant material available on record, no interference is warranted, therefore same is dismissed. 10. Ground No.5 relates incurring expenditure to the extent of 85%. The total income of the assessee for the impugned assessment year is Rs. 16,66,37,767/-. The assessee is required to spend 85% of the amount which worked out to Rs.14,16,42,102/-. The total expenditure incurred by the assessee was Rs.13,25,14,186/- excluding depreciation. The depreciation claimed by the assessee for the year under consideration Rs.1,56,97,992/- which is also eligible for exemption u/sec. 11 of the Act. The total expenditure including depreciation is Rs.14,82,12,178/-, the assessee would be required to spend only

12 ITA No. 337/VIZ/2019 C.O.No. 123/VIZ/2019 (M/s. Care and Share Charitable Trust) Rs.14,16,42,102/-, against this assessee incurred Rs.14,82,12,178/- even after deducting the expenditure disallowed by the Assessing Officer. According to the ld. CIT(A) the entire income of the assessee is exempt u/sec. 11 of the Act and the net income to be assessed at Rs. NIL. He further observed that in the A.Y. 2014-15 also, the assessment u/sec. 143(3) was completed in this method. Therefore, the assessee’s income is exempt u/sec. 11(1) of the Act even after excluding the cost of construction of the buildings. From the above facts, it is very clear that assessee’s total income for the year under consideration is Rs. 16,66,37,767/-, the expenditure of the assessee is Rs. 14,82,12,178/- the assessee has spent more than 85% of the income for the year under consideration. As per section (11)(1)(a), the income accumulated by the assessee is less than 15%, therefore the entire income of the assessee is exempt u/sec. 11(1) of the Act. We have examined the entire facts and circumstances of the case and find that assessee is running the trust in accordance with the objects. The activities carried by the assessee in running the trust are charitable in nature, the expenditure incurred by the assessee is also a genuine expenditure. The ld. CIT(A) after examining the details in respect of expenditure incurred by the assessee gave a finding that the

13 ITA No. 337/VIZ/2019 C.O.No. 123/VIZ/2019 (M/s. Care and Share Charitable Trust) assessee has applied his income more than 85%, therefore as per section 11(1), the entire income of the assessee is exempt. We find no reason to interfere with the order passed by the ld. CIT(A). Thus, this ground of appeal raised by the department is dismissed. 11. So far as cross objection filed by the assessee is concerned, it is only supportive to the order of the ld.CIT(A). As no grievance against the order of the ld. CIT(A), this cross objection filed by the assessee has become infructuous and is dismissed accordingly. 12. In the result, appeal filed by the Revenue and the cross objection filed by the assessee are dismissed. Order Pronounced in open Court on this 05th day of June, 2020.

Sd/- sd/- (D.S. SUNDER SINGH) (V. DURGA RAO) Accountant Member Judicial Member Dated: 05th June, 2020. vr/- Copy to: 1. The Assessee - M/s. Care and Share Charitable Trust, D.No. 40-9-76/3, AVR Arcades, Benz Circle, Vijayawada. 2. The Revenue – DCIT (Exemptions), Exemptions Circle, Vijayawada. 3. The Pr.CIT (Exemptions), Hyderabad. 4. The CIT(A), Rajamahendravaram. 5. The D.R., Visakhapatnam. 6. Guard file. By order

(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.