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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLEShri Tanzil Padvekar
O R D E R PER S. RIFAUR RAHMAN (AM)
This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [hereinafter in short “Ld.CIT(A)”] dated 03.12.2021 for the A.Y.2013-14
(A.Y. 2013-14) M/s. Rogay Charities No. 1 2. Brief facts of the case are, assessee filed return of income on 15.10.2013 alongwith the Income and Expenditure Account, Balance Sheet and Audit Report in From No. 10B declaring total income of ₹.Nil. Subsequently, the case was selected for scrutiny under CASS and notice u/s. 143(2) and 142(1) of Income-tax Act, 1961 (in short “Act”) were issued and served on the assessee. In response AR of the assessee attended and submitted relevant information as called for.
The Trust is registered with the Directorate of Income Tax (Exemption), Mumbai u/s.12A of the Act vide registration BMY/TR/N(a)/44/73-74. The Trust is also registered with the Charity Commissioner, Mumbai vide registration No. B-294 (Mumbai). The Trust is engaged in charitable activities in the field of Scholarship to the poor and needy students and to maintain and repair the mosque and burial ground.
The Assessing Officer observed that assessee has received dividend income which is exempt from tax and was asked the details. Assessee has filed the information vide letter dated 28.12.2015 and for the sake of convenience the reply of the assessee is reproduced below: -
(A.Y. 2013-14) M/s. Rogay Charities No. 1 “The assessee is a Charitable Trust and the dividend income on investments in Mutual Funds, received by it during the year. The said income was claimed as exemption u/s 10(35). Section 10 deals with the specific types of income which will not form of total income of an Assessee. Section 10 is universally applicable to all the Assessees and Section 11 does not in any manner take away the exemption available to the assessee u/s 10(35). Section 11 only provides for additional exemption in respect of income for a Charitable Trust which is derived from the property held for Charitable or religious purposes and there is nothing in the said. which can deprive the assessee from other exemption which are available to all Assesses. The operation of the Section 10(35) is independent of any other section and the income covered by the said section will not form part of the Total income of the Assessee. In the light of the above adding back dividend income will amount to double taxation and hence is to be allowed as exempt income.”
After considering submissions of the assessee, Assessing Officer rejected the same and observed that dividend income of ₹.1,03,35,205/- is included in the total income as the dividend income and it is earned on the asset which are part of the property held under Trust and as such the income so earned has to be part of the income of the Trust which is available for application and the same is not optional to the assessee trust is to avail exemption. Accordingly, he added the dividend income to the total income of the Trust and disallowed the claim made by the assessee as exempt income u/s. 10(34) of the Act and finally he included the dividend income in the total income of the Trust and then allowed the establishment expenses and other expenses applied towards the objects of the Trust and determined the total income at ₹.Nil.
(A.Y. 2013-14) M/s. Rogay Charities No. 1 6. Aggrieved assessee preferred an appeal before National Faceless Appeal Centre, Delhi and filed submissions. After considering the submissions of the assessee CIT(Appeal Unit)-18, New Delhi, rejected the submissions of the assessee and held that sections 11, 12, 12A, 12AA and 13 of the Act constitute a complete code governing the grant, cancellation or withdrawal of registration, providing exemption to income, and also the conditions subject to which a charitable trust or institution is required to function in order to be eligible for exemption and further, he held that where a trust or an institution has been granted registration for purposes of availing exemption under section 11, and the registration is in force for a previous year, then such trust or institution cannot claim any exemption under any provision of section 10 [other than that relating to exemption of agricultural income and income exempt under section 10(23C) of the Act] of the Act.
Aggrieved assessee preferred appeal before us raising following grounds in its appeal: - “(1) On the facts of the circumstances of the case and in law, the Ld. CIT (A) erred in conforming the addition made by the Ld. Assessing Officer disallowing dividend income under Section 10(35) of the Act. (2) On the facts of the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that exemption under Section 10 of (A.Y. 2013-14) M/s. Rogay Charities No. 1 the Act is not available to Institutions claiming benefit of Section 11 of the Act, which is contrary to the law. (3) On the facts of the circumstances of the case and in law, the Ld. CIT(A) erred by confirming the disallowance made by the Ld. Assessing Officer whereas on contrary the CIT(A) had allowed the appeal of the Appellant for the A.Y.2000-01 on the exact same issue. (5) The appellant may be allowed to amend to, modify, add or delete any of the grounds in the in the interest of justice.”
Considered the rival submissions and material placed on record, and we observe that similar issue was already considered by Hon'ble Jurisdictional High Court in the case of DIT (Exemptions) v. M/s. Jasubhai Foundation [2015] 374 ITR 315 (BOM)], wherein it is held as under: - “8. Upon a perusal of the order of the Assessing Officer and that of the Commissioner upholding it, we are of the view that the Tribunal was correct in setting aside these concurrent orders. The language of the two sections is plain and clear. The provisions, namely, sections 10 and 11 fall under a Chapter which is titled “Incomes Which Do Not Form Part of Total Expenditure” (Chapter III). Section 10 deals with incomes not included in total income whereas section 11 deals with income from property held for charitable or religious purposes. We have not found anything in the language of the two provisions nor was Mr. Malhotra able to point out as to how when certain income is not to be included in computing total income of a previous year of any person, then, that which is excluded from section 10 could be included in the total income of the previous year of the person / assessee. That may be a person who receives or derives income from property held under trust wholly for charitable or religious purposes. Thus, the income which is not to be included in computation of the total income is a matter dealt with by section 10 and by section 11 the case of an assessee who has received income derived from property held under trust only for charitable or religious purposes to the extent to which such income is applied to such property in India and that any such income is accumulated or set apart for application for such purposes in India to the extent of which the income so accumulated or set apart in (A.Y. 2013-14) M/s. Rogay Charities No. 1 computing 15% of the income of such property, is dealt with. Therefore, it is a particular assessee and who is in receipt of such income as is falling under clause (a) of sub-section (1) of section 11 who would be claiming the exemption or benefit. That is a income derived by a person from property. It is that which is dealt with and if the property is held in trust for the specified purpose, the income derived therefrom is exempt and to the extent indicated in section 11(1)(a) of the Income Tax Act, 1961. There is nothing in the language of sections 10 or 11 which says that what is provided by section 10 or dealt with is not to be taken into consideration or omitted from the purview of section 11. If we accept the argument of Mr. Malhotra and the Revenue, the same would amount to reading into the provisions something which is expressly not there. In such circumstances, the Tribunal was right in its conclusion that the income which in this case the assessee trust has not included by virtue of section 10, then, that cannot be considered under section 11.”
Further, similar view was held in the case of Jamsetji Tata Trust v. JDIT (Exemption) in ITA.No. 7006/Mum/2013 dated 26.03.2014 as under:- “9.6 We have considered the rival submissions as well as relevant provisions of law. The exemption u/s 10 is income specific irrespective of the status/class of person. Whereas the exemption under section 11 is person specific though on the income derived from the property held under the trust. Further the exemption u/s 11 is subject to the application of income and modes or form of deposit and investment. The Hon’ble High Court in the case of CIT Vs. Divine Light Mission (supra) while dealing with an identical issue has held in para 9 as under “So far as question No.4 of paragraph No. 3 with regard to agricultural income is concerned, section 10(5) of the Act specifically points out that agricultural income shall not be included in computing the total income of a previous year and hence the question is required to be answered in favour of the assessee and against the Revenue. This income is not required to be considered at all even for the purpose of section 11 of the Act.”
(A.Y. 2013-14) M/s. Rogay Charities No. 1 9.7 While deciding the question that the agricultural income was income from the property held under the trust can be denied exemption u/s 11 of the Income Tax Act. the Hon’ble High Court has held that the agricultural income shall not be included in the computation of total income of previous year in view of section 10(5) of the Act. Therefore, this income is not required to be considered for the purpose of section 11 of the Act. In the case of his holiness Silasari Kasivasi Muthukumaraswami Thambiran AVL & Ors. Vs. Agricultural Income Tax Officer & Ors. (113 ITR 889) the Hon’ble High Court of Madras has held that the agricultural income derived by charitable or religious trust is exempt u/s 10 could not be said to be brought to tax u/s 11 to 13. Similar view has been taken in the series of decisions as relied upon by the Ld. Senior Counsel when the question involved was the allowability of exemption u/s 10, (22), (23) Vs. section 11 and 13. In our view the exemption u/s 11 is available on the income of the public charitable /religious trust or institution which is otherwise taxable in the hands of other persons. Thus the income which is exempt u/s 10 cannot be brought to tax by virtue of section 11 and 13 of the Act because no such pre condition is provided either u/s 10 or 11 to 13 of Income Tax Act. Therefore, section 11 to 13 would not operate as overriding affect to the section 10 of the Act. The language of these provisions does not suggest that either section 10 is subjected to the provisions of section 11 to 13 or section 11 to 13 has any overriding affect over section 10. Therefore, the benefit of section 10 cannot be denied by invoking the provisions of section 11 to 13 of the Act. Once the conditions of section 10 are satisfied then no other condition can be fastened for denying the claim under section 10 of the Act. 9.8 In view of the above discussion and following the various decisions (supra) we hold that the dividend income on shares and mutual funds and long term capital gain on sale of shares an exempt u/s 10(34) 10(35) and 10(38) respectively and cannot be brought to tax by applying section 11 and 13 of the Act.”
Respectfully following the above said decisions, we are in agreement that the income earned by the assessee u/s. 10 of the Act are income based whereas the section 11 to 13 are application based. Therefore, the dividend income earned by the assessee has to be (A.Y. 2013-14) M/s. Rogay Charities No. 1 excluded from the total income earned by the Trust. We observe that the total income earned by the assessee are more or less applied for the purpose of Trust and even Assessing Officer has assessed the taxable income as NIL. However, as a principle assessee can apply his income based on the income earned by them and in line with the juridical precedents. Therefore, respectfully following the decisions of the Hon'ble Jurisdictional High Court and Coordinate Bench, we are inclined to allow the ground raised by the assessee.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 03rd August, 2022.