A.P.VULNERABILITY REDUCTION FUND TRUST vs. ASSISTANT DIRECTOR OF INCOME TAX

Heard Mr. C.V. Narasimham, learned counsel for the appellant, and Mr. Sri Vrjhay K. Punna, learned Senior Standing Counsel for the Income Tax Department, for the respondent.

Vide th,e impugned order, the Tribunal had allowed the appeal preferred by respondent ald reversed the order passed by the Commissioner of Income Tax (Appeals).

The Tribunal in the course of passing the impugned order had reversed the hnding given by the Commissioner of Income Tax (Appeals) so far as provision of Section 13 of the Income Tax Act, 1961 lfor short, 'the Act'l being violative and also insofar as the appellant being entitled for exemption under Section 11 of the Act.

The appellant, viz., A.P. Vulnerability Reduction Fund Trust, was formed by the Government of Andhra Pradesh in accordance with provisions of the Indian Trust Act, 1882 on 27.11.1997 with Registration No.33/ 1998. The Trust was established to provide protection to the vulnerable areas of the State coastline, human and animal life, public and private property as against ravages of nature including cyclones, floods, etc. Since the purpose and object of the Trust being charitable it was also registered under the provisions of Section 12AA of the Act. The entire corpus of the appellant is one which is contributed by the State

For the Assessrnent Year 2004-05, the appellant claimed exemption underSectionlloftheActontheincomeearnedasinterestonfixed deposits as the incoll1e was accumuiated as per Section 11(2) of the Act' The Assessing Offrcer initiated the assessment proceedings wherein the ?age 4 of rc appellant informed the Assessing Officer of having granted Rs.3,05,00,860/- in Ju1y, 2003 for the purpose of purchasing high-end computing equipment and accessories by which collection, storage arrd anaTyzirg, using and disseminating data relevant for the Andhra Pradesh iHazard Mitigation & Emergency Cyclone Recovery project. However, the Assessing offrcer did not accept the same and doubted the contention of the appellant in the course of passing the Assessment Order dated 29.12.2006 and subjecting the entire interest income to tax by denying the exemption under Section 1 1 of the Act and raised a tax demald of Rs.79,23,a781-. Thereafter, the order passed by the Assessing Officer dated 29.12.2006 was subjected to challenge before the Commissioner of Appeals who reversed the order of the Assessing Officer by allowing the appeal vide order dated,28.Ol.2011 holding that appellart be entitled for exemption under Section 11 of the Act. The order passed by the Commissioner of Appeals dated 28'0 1 '201 1 was subjected to challenge before the I.T.A.T. vide ITA.No. ll38lHYDl2011, which stood allowed in favour of respondent vide the impugned order dated 23.07 .2012 by reversing the order passed by the Commissioner of Appeals by holding that the appellant herein is not entitled for exemption under Section I 1 of the Act. 7 Aggrieved, the instant appeal has been frled by the appellant

Learned corlnsel for the appellalt contended that the Tribunal failed to appreciat.e the aims, objectives arrd activities of the appellant in the course of de<:iding the appeal. It was also the contention of the learned counsel frrr the appellant that the Tribunal having lost sight of the fact that the activities undertaken by the appellant was for ensuring protection of the vulnerable areas in the State coastline so also the human and anim al life in those areas by giving protection against ravages of nature like cyclones, floods, etc. According to him, the Tribunal failed to take note of the fact that the nature of activities undertaken by th,: appellant was duly covered under the charitable purpose as defrned under the Income Tax Act itself. Likewise, it was also the contention of the learned counsel for the appellalt that the Tribunal ignored the fact that Clause (5) of the Trust Deed permitted the appellant to use the interest on income as grants to achieve the objects of the appellant. It was also the contention of the learned counsel for the appellant that the Tribunal ought to have appreciated the fact that merely non-entry of the purchases made in the Books of Account cannot by itself be permitted to draw an adverse inference so far as the actual usage of the funds are concerned. According to the appellant, the Tribunal failed to ta{e note of its decision ald the previous Assessment c

Per contra, learned counsel for the respondent, opposing the appeal contended that the order passed by the Assessing Officer and the order passed by the Tribunal, when read in conjunction, would give a clear indication of the shortcomings in the case of appellant which would disentitle him from exemption under Section 11 of the Act. It was the contention of the learned Standing Counsel for the respondent- Department that in the course of the assessment, the assessee-appellant failed to explain as to how the so-called purchases of computer and other equipments made from M/s.Sitcon Graphics were not reflected in the Books of Account nor was it reflected in the Balance Sheet; and therefore, contended that the frnding arrived at by the Tribunal reversing the frnding given by the Commissioner of Appeals cannot be said to be in any manner erroneous or contrary to law and thus prayed for rejection of the appea-l by holding that the question of law raised does not have any merit.

Having heard the contentions put forth .on either side and on a perusal of the records certain undisputed facts which are reveared from the pleadings are, viz.,

In addition to the aforesaid grounds what is also evidently apparent from the materials available on record is that the appellant produced certificates from its bank to show that the money was transferred for issuing Letter of Credit in favour of M/s. Silicon Graphics Pvt. Ltd. The Tribunal also in fact had at one point of time noted that invoices of M/s.Silicon Graphics hrt. Ltd. were in the name of Government of Andhra Pradesh Disaster Management. The Tribunal also found that the Assessing Offrcer did frnd purchase of equipment \rith M/s.Silicon Graphics Pvt. Ltd. and those purchases were made by the A.P. Hazard Mitigation and Emergency Cyclone Recovery project of the Government of Andhra Pradesh; and it was under this project that the Government had awarded the contract for purchase of high-end computing equipment and other accessories under the aforementioned A.p. Hazard. Mitigation and Emergency Cyclone Recovery project.

Another aspect which goes strongly in favour of appellant is that the assessment ordel s for the previous years' more particularly of the immediate preceding year, i'e , Assessment Year 2003-04' wherein the ?age rc of rc very same Tribunal vide I.T.A.No.283 of 2oo7 lnad upheld a similar stand ta-ken by the Commissioner of Income Tax (Appeals) for the Assessment Year 2003-04 by holding that the appellalt is entitled for exemption under Section 11 of the Act. L4. For all the aforesaid reasons, this court is inclined to allow the appeal by setting aside the impugned order passed by the Tribunal in I.T.A.No.1138 lHydl2oll, dated 23.07.2012, and conhrming the order passed by the Commissioner of Income Tax (Appeals) in I.T.A.No.649lTr. /CIT(A)/GNT/06-07, dated 28.01.2o 1 1. 15. Accordingly, the appeal stands allowed as above No costs'

As a sequel, miscellaneous petitions pending if any, shall stand closed. M.VIJAYA BHASKER orNT REGISTRAR i !- To, DL/KAw //// SE ION OFFICER