INCOME TAX OFFICER (EXEMPTION)-1(1), MUMBAI, MUMBAI vs. APNE AAP WOMEN WORLD WIDE (INDIA) TRUST, MUMBAI

5.0 The only issue involved in this appeal is the addition of Rs. 52909261/-on the ground that there is a violation of the provisions of sec. 13 of the Act 5.1 As per disallowances AO has made the following disallowances- (1) Grants .. Rs.4,87,10,480 (2) other income (as per assessee) .. Rs.10,32,104 (3) Corpus donation .. Rs.46,20,684

The AO held that there is a violation of the provisions of sec. 13(1)(c)/ 13(2)(c) r.w.s.13(3) of the Act. The Assessee has made salary payment of Rs. 41,00,000/- to Mr. Ruchira Gupta, Managing Trustee. Ms. Ruchira Gupta is not only an employee of the assessee trust, but she was rather a brain and soul of the Assessee trust as admitted by the Assessee being Managing Trustee of the Assessee trust, who was running the entire affairs of the society. In these circumstances, I have no hesitation in holding that Ms. Ruchira Gupta falls within the category of persons enumerated in sub section (3) of section 13 of the Act and the increment in the salary was also unreasonable and not commensurate with the services rendered by her for the trust. As such the claim of exemption is hit by sec 13(1)(c) of the Income tax Act, 1961.

Considering these facts and circumstances of the case as narrated above, the claim of assessee u/s. 11 is hereby rejected in view of violation of section 13 of the Act.

5.1.1 Without prejudice to the above, as per sec. 11(1) of the Act, 85% of the donations received during the year are to be expanded for the objects of the trust. In the given case, total donations received during the year amounts to Rs. 4,87,10,840/-Thus, a total amount of Rs. 4,14,03,908/- needs to be expended during the year in order to comply with the provisions of law. The total receipts on account of grant is considered of rs. 4,87,10,480/- and only expenses which is related to earning the income and mandatory in nature of expenses which is required to run the trust is allowed to the assessee while computing the income of the assessee.

5.2 During the course of appellate proceedings, it is submitted that the appellant took required approvals and certificates like certificate of registration from Charity Commissioner, Registration Certificate u/s. 12A of the Act and the certificate u/s. 80G of the Act and thereafter started its full fledged activities towards achieving the object of the trust in A.Y. 2005-06. Ms Ruchira Gupta was the main founder trustee of the trust and the objectives of the trust have been mainly achieved on account of her sustained hard work extensive networking and professional background. For the year under consideration, the appellant received donations from 27 donors aggregating to Rs. 4,87,10,480/-. The appellant had applied Rs. 4,73,54,157/- (97.21% of income) from the said funds received and accordingly filed a nil income tax return. Sec 11(1) of the Act requires application of income of at least 85% out of the receipts by a trust. The appellant having complied with this condition, the chargeable income for tax purposes was NIL.

5.2.1 In A.Y. 2012-13, the Id. AO passed order u/s. 143(3) of the Act on 28.3.2015 assessing the income at Rs. 4,16,77,269/- as against the returned income field at Rs. Nil. The addition had been made by withdrawing the exemption claimed u/s. 11 of the Act on account of alleged violation of provision of sec. 13 of the Act. The additions made by the Id AO are as follows:

Gross total receipts

1. Grants .. 4,11,99,006 2. Other income .. 10,53,562 4,22,53,168 Less: Apne aap expenses 50,51,315

Less expenses disallowed: 1.Interest on TDS 1,546 2.Balance written off 1,71,313 3.Balance written off on Fixed assets 43,02,557 5,75,899 Total income .. 4,16,77,269

5.2.2 Aggrieved by the order passed by the Id. AO, the appellant had gone in appeal. Unfortunately, the Id.CIT(A) confirmed the addition made and also adopted the basis of the Id. AO for withdrawing the exemption claimed u/s. 11 of the Act. The appellant filed second appeal before the ITAT. In terms of order dated 03.10.2018 Hon'ble ITAT has given complete relief to the appellant and has held as under:

5.5. The above facts, discussion and observations lead us to an inevitable conclusion that the denial of deduction u/s. 11 for alleged violation of section 13 was not justified and therefore we reverse the stand of Id. First appellate authority in this regard. The ground raised in this regard, stands allowed".

5.3 I have gone through the grounds of appeal, statement of facts, assessment order and the submissions of the appellant. The order of the Hon'ble ITAT in the appellant's own case for the A.Y. 20212- 13 has also been perused. Relied on the decision of the Hon'ble ITAT A Bench Mumbai in the appellant's own case for the A.Y. 2012- 13, 2012-13, all the grounds raised in this appeal are allowed.

6. In the result, the appeal is ALLOWED.

Admittedly, the identical issue has also been cropped up in Assessee’s case pertaining to A.Y.2012-2013, which travelled upto the Tribunal, who vide order dated 03.10.2018 in has reversed the decision of the AO in rejecting the claim of the assessee u/s.11 of the Act on account of violation of provisions of Section 13 of the Act and as affirmed by the then CIT(A) and therefore the ld. Commissioner in the instant case by respectfully following the order of the Tribunal, allowed the claim of the Assessee. Even otherwise, there is nothing contrary material available on record and/or neither produced to controvert the findings of the Tribunal in allowing the claim of the assessee for A.Y.2012- 2013 under consideration. Hence, the appeal of the revenue deserves to be dismissed and thus we hold so.