DCIT, C-1, (E), CHANDIGARH vs. OM PRAKASH BANSAL CHARITABLE TRUST, JAMMU

आदेश/Order

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the Revenue against the order dated 30.05.2017 of the Commissioner of Income Tax (Appeals)- J&K, Jammu [hereinafter referred to as CIT(A)].

ITA No. 1422-Chd-2017- Om Prakash Bansal Charitable Trust, Jammu 2

registered u/s 12AA of the Income tax Act, 1961 with the CIT, J&K,

vide order no. IT/J&K/JMU/ITO (TECH)/06-07/3112, dated 29/08/2006.

The assessee society was imparting and providing educational direction

ITA No. 1422-Chd-2017- Om Prakash Bansal Charitable Trust, Jammu 3

and expert guidance to establish, manage and develop progressive

schools to meet the needs and demand. During the assessment

proceedings, it was noticed by the AO that the assessee was not

fulfilling conditions as provided under section 11 r.w.s. 2(15) of the

Income tax Act. It was noted by the AO that the assessee Trust was

imparting education on commercial principles and earning huge profits,

generating large scale surplus and not being ploughed back into the

stated objects of the Trust, diverting the receipts of the Trust to a

private Ltd. Company in the name of business services provided by the

company to the Trusts, paying huge amounts to M/S. G.D. Goenka Pvt.

Ltd. under the head ‘Royalty' by making a profit sharing agreement,

paying lease rent to Smt. Suman Bansal, who was covered under specific

person u/s 13(3) of the Act. The AO, therefore, issued show cause notice

to the assessee society dated 9.12.2006 asking the assessee to explain as

to why the claim of exemption u/s 11 should not be disallowed and

surplus be taxed as AOP as the assessee is not following the objects of

the Trust for which it was established.

In response to the show cause notice, the assessee filed its written

reply on 22/12/2016 stating therein that CBDT vide its circular No. 14/2015 dated 17th August 2015 has clarified that the generation of

surplus out of gross receipts would not necessarily be breach of the

threshold condition that the educational institutions should exist slowly

for educational purpose and for the purpose of the profit and some

ITA No. 1422-Chd-2017- Om Prakash Bansal Charitable Trust, Jammu 4

generation of surplus cannot be the basis for rejection of the exemption

on the ground that it amounts to an activity of the nature of profit

making subject to the condition that such amount was applied wholly

and exclusively to the object for which it was established. Further the

allegation, that the assessee was recovering certain amounts from the

students as admission fee etc. was wholly baseless and there was no

justification for treating the said amount as profit making activity unless

the amount was in the nature of capitation fee directly or indirectly. The

assessee also placed reliance on a number of judgments, wherein, it has

been held that the generation of surplus by the assessee is no ground to

deny exemption under Section 80-G of the Income Tax Act.

The reply given by the assessee was duly considered by the AO

but he did not accept its contention and held that the perusal of the

nature of receipts and percentage of profit clearly revealed that the

assessee was involved in commercial activity. He, therefore, denied the

deduction to the assessee, claimed u/s 11 of the Income Tax Act, 1961.

assessee preferred appeal before the Ld. CIT(A). However, the Ld.

CIT(A) relying upon the various case laws wherein it has been held that

mere generation of sum surpluses was not a ground to deny the

ITA No. 1422-Chd-2017- Om Prakash Bansal Charitable Trust, Jammu 5

exemption, allowed the appeal of the assessee. The Revenue, thus, has

come in appeal before us.

file. The Ld. Counsel for the assessee, at the outset, has submitted that

the findings of the Assessing Officer that the assessee was involved in

large scale commercial activity was wrong. That the Assessing Officer

has taken into consideration some of the figures mentioned of next year

not belonging to the financial year under consideration to arrive at such

an erroneous conclusion.

The Ld. DR, on the other hand, has invited our attention to the

impugned order of the CIT(A) to submit that even the Ld. CIT(A) has

not considered the relevant figures of income of the assessee, rather, the

Ld. CIT(A) has straightway relied upon certain case laws and allowed

the appeal of the assessee without discussing as to how those case laws

were applicable to the facts of the case of the assessee especially to the

quantum of income earned by the assessee or the generation of huge

surplus.

Both the Ld. representatives of the parties, therefore, submitted

that since the matter has not been properly examined either by the

Assessing Officer or by the CIT(A), hence, the same be restored to the

file of the Assessing Officer for proper appreciation of the facts and the

decision in accordance with law.

ITA No. 1422-Chd-2017- Om Prakash Bansal Charitable Trust, Jammu 6

parties, the order of the lower authorities are set aside and the matter is

restored to the file of the Assessing Officer for decision afresh in the accordance with law. Needless to say that the Assessing Officer will

provide proper opportunity to the assessee to present its case. The

assessee is also directed to promptly appear before the Assessing

Officer, as and when called for, and will not contribute in delaying the

proceedings.

The appeal of the assessee stands allowed for statistical purposes.

Order pronounced in the Open Court on 21.10.2019.

Sd/- Sd/- (संजय गग� / SANJAY GARG) (एन. के. सैनी / N.K. SAINI) उपा�य� /Vice President �या�यकसद�य/ Judicial Member Dated : 21.10. 2019 “आर.के.”

आदेशक���त�ल�पअ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु�त/ CIT 4. आयकरआयु�त (अपील)/ The CIT(A) 5. �वभागीय��त�न�ध, आयकरअपील�यआ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड�फाईल/ Guard File

आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar