ACIT (EXEMPTION), JODHPUR vs. M/S.MAHESH SIKSHAN SANSTHAN, JODHPUR

आदेश / O R D E R

Manoj Kumar Aggarwal (Accountant Member): - 1. Aforesaid appeal by revenue for Assessment Year [in short referred to as ‘AY’] 2016-17 contest the order of learned Commissioner of Income Tax (Appeals)-2,Jodhpur, [in short

ITA No.375/Jodh/2019 M/s. Mahesh Sikshan Sansthan Assessment Year: 2016-17 referred to as ‘CIT(A)’], Appeal No.142/2018-19, dated 07/08/2019 on following effective grounds:-

1) On the facts and the circumstances of the case and in law the Ld. CIT(Appeals) has erred in allowing exemption u/s.11 of the I.T. Act, 1961 to the assessee without appreciating the fact that the assessee society has provided undue benefit to the Persons Specified u/s. 13(3) of the I.T. Act, 1961, and thus provisions of Section 13(1)(c)(ii) of the Income Tax Act, 1961 were clearly attracted in this case. 2) On the facts and the circumstances of the case and in law the Ld. CIT (Appeals) has erred in allowing exemption u/s 11 without appreciating the fact that the assessee society has made donation amounting to Rs. 4,00,000/- to Shree Maheshwari Samaj, which was a Person Specified u/s 13(3) of the I.T. Act,1961 and had dissimilar objectives thus provisions of section 13(l)(d) r.w.s 11(5) of the Income Tax Act, 1961 were clearly attracted in this case. 3) On the facts and the circumstances of the case and in law the Ld. CIT (Appeals) has erred in allowing exemption u/s 11 without appreciating the fact that Shree Maheshwari Samaj, the donee has been assessed as an AOP after denying benefit of section 11, during the year under consideration and hence the assessee was hit by provisions of section 13(3)(e) of the Act. 4) On the facts and circumstance of the case and in law the Ld.CIT (Appeals) has erred in allowing income tax demand and interest thereon without appreciating the fact that the assessee society has paid tax even if it is claiming exemption u/s 11 of the Act that shows that it has been working for profit motive.

3 ITA No.375/Jodh/2019 M/s. Mahesh Sikshan Sansthan Assessment Year: 2016-17 3.2 The assessee claimed application of income for Rs.5.32 Lacs under the head grant-in-aid. The same was denied since the same represented unspent portion of grant received and the same was utilized only in subsequent years. 3.3 Another disallowance of Rs.2400/- representing Income Tax payment as well as Rs.240/- representing interest on late payment of TDS was also made since the same would not amount to application of income and moreover, they pertained to AY 2013-14. It transpired that the assessee made donation of Rs.4 Lacs to another trust Shri Maheshwar Samaj, inside Jalori Gate, Jodhpur which was also registered u/s 12AA. However, the assessee as well as that trust had common trustees / member which, in the opinion of Ld.AO, would trigger clause (e) of Section 13(3). The assessee submitted that the donee trust gave land to assessee on nominal rent of Rs.3 Lacs per annum which remained unchanged since 2004. Three of the schools being run by the assessee trust were stated to be running on this land. Accordingly, corpus donation was made to the said trust which was hardly 0.92% of donation received by the assessee. Reliance was placed, inter-alia, on CBDT circular no. 1132 dated 05/01/1978 which would consider such donations as application of income for charitable purpose. 3.4 However, the aforesaid pleas were rejected in the light of the fact that that done trust was assessed as AOP after denying the benefit of Sec.11 exemption. Therefore, the stated donations were disallowed. Since the assessee violated the provisions of Sec.13(1)(c) and 11(5), the trust would lose exemption u/s 11.

4 ITA No.375/Jodh/2019 M/s. Mahesh Sikshan Sansthan Assessment Year: 2016-17 Accordingly, the deduction so claimed was denied and total income was determined at Rs.354.90 Lacs. 4.1 The Ld. CIT(A), inter-alia, observed that the assessee as well as the donee were charitable institutions and there was no profit motive involved in the activities being carried out by them. Both the societies would not distribute the surplus to its trustees. The trustees / common trustees have no right in the surplus in either of the society. Consequently, there would be no violation of statutory provisions as alleged by Ld. AO. Reliance was placed on various judicial precedents as well as CBDT circular No. 1132 dated 05/01/1978 in support of such a conclusion. Accordingly, it was held that the assessee was entitled for benefits of Sec.11 & 12. 4.2 The disallowance of Rs.3,140/- was deleted since the outgoings were incidental to carrying out the objects of the trust. Partial relief was granted against disallowance of grant-in-aid. Aggrieved as aforesaid, the revenue is in further appeal before us. 5. Upon perusal of impugned order, we find that the issues has been clinched in correct perspective by Ld. CIT(A). The assessee made donations to another trust which was also registered u/s 12AA. The donations so paid were less than 1% of donations received by the assessee. The common trustees did not have any right to share the surplus in either of the society. The donee provided land to assessee to run education institutions on nominal rent of Rs.3 Lacs per annum which remained unchanged since 2004. The stated CBDT circular was clearly applicable to the facts of the case and the donation so made by the assessee was to be

5 ITA No.375/Jodh/2019 M/s. Mahesh Sikshan Sansthan Assessment Year: 2016-17 treated as application of income. Therefore, the impugned order, in our considered opinion, would not require any interference on our part. We also concur with the findings that the payment of income tax was incidental to carrying out the objects of the trust. 6. The appeal stand dismissed. Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963.

Sd/- Sd/- (Sandeep Gosain) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांकDated : 21/12/2020 Sr.PS:-Jaisy Varghese आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, जोधपुर / DR, ITAT, Jodhpur 5. गाड�फाईल / Guard File 6.

आदेशानुसार/ BY ORDER,

उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, जोधपुर / ITAT, Jodhpur.