MAHARAJA RANJIT SINGH WAR MUSEUM SOCIETY,LUDHIANA vs. INCOME TAX OFFICER, (EXAMPTION), JALANDHAR

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. No. 618/Asr/2017 Assessment Year: 2014-15

Maharaja Ranjit Singh War Vs. Income Tax Officer (Exemptions) Museum Society, P.O. Bhattian Ward, Jalandhar Bet, Ludhiana [PAN: AAATM 5624L] (Appellant) (Respondent)

Appellant by : Sh. Sunil Kumar Mukhi, Advocate Respondent by: Sh. Sandeep Chauhan, CIT-DR Date of Hearing: 31.05.2018 Date of Pronouncement: 28.08.2018

ORDER Per Sanjay Arora, AM: This is an Appeal by the Assessee agitating its’ assessment u/s. 143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) dated 19.12.2016 for the Assessment Year (AY) 2014-15, since confirmed by the Commissioner of Income Tax (Appeals)-2, Jalandhar ('CIT(A)' for short) vide his order dated 07.07.2017.

2 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO section 11(3) of the Act. The secondary issue is the manner of computation of the assessee’s income for the year.

‘Income from property held for charitable or religious purpose.

3 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income— (1) – (1A) ……

(2) Where eighty-five per cent of the income referred to in clause (a) or clause (b) of sub- section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:— (a) such a person specifies, by notice in writing given to the Assessing Officer in the prescribed manner, the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed ten years; (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5); (c) the statement referred to in clause (a) is furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year: Provided that in computing the period of ten years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded: Provided further, that in respect of any income accumulated or set apart on or after the 1at day of April, 2001, the provisions of this sub-section shall have effect as if for the words “ten years” at both the places where they occur, the words “five years” had been substituted. Explanation.—Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter. (3) Any income referred to in sub- section (2) which— (a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or

4 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO (b) ceases to remain invested or deposited in any of the forms or modes specified in sub- section (5), or (c) is not utilized for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub- section or in the year immediately following the expiry thereof, (d) is credited or paid to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub- clause (via) of clause (23C) of section 10, shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited, or credited or paid or, as the case may be, of the previous year immediately following the expiry of the period aforesaid.’ The assessee’s application of income being below 85% of the current income, including deemed as such u/s. 11(3) of the Act, he confirmed the AOs’ computation of income as well. Aggrieved, the assessee is in second appeal.

5 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO transfer of funds to a registered trust/institution, he would continue, for which there is a provision in the charter of most charitable funds, is deemed as an application of its’ income by the payer entity. This is apparent from the reading of section 11(3)(d), as also clarified per several decisions. As, however, this was being misused by transferring funds to another trust toward the end of the accumulation term, with the payee getting another term of five years (the maximum period for accumulation of income for application for charitable purposes), which could again transfer it to another, and so on, that the law stepped in (by Finance Act, 2002, w.e.f. 01.04.2003) to state that the same would no longer be regarded as an application of income for charitable purposes (refer Explanation below s.11(2)). The transfer of funds to a non-registered entity stands on a different footing as charity could only be qua a non-registered person. If, for example, a charitable institution donates to a hospital (say), the same is to be necessarily regarded as an application for charitable purposes as medical relief is a defined charitable purpose u/s. 21(5). The hospital may not be a registered as a charitable institution, as is the case for most hospitals, i.e., other than those set up under the aegis of a charitable trust, i.e., for undertaking medical treatment on charitable basis, but that is immaterial as far as the payer trust/institution is concerned. In the present case, he would continue, the funds in fact were transferred at the instance of Directorate of Defence Services, Punjab, a wing of a Government of Punjab (GoP), which is the principal donor (to the assessee-society), having donated substantial funds thereto in the past. The GoP decided to undertake the project of beautification of the city of Amritsar, including setting up of museums, and for that purpose required its’ various Departments as well as the assessee-society to contribute to the payee- society. The direction to the assessee-society is, again, for this purpose, and is to be understood in this context, i.e., the Government being a major donor of funds to the assessee-society, required it to contribute for a major initiative by it. In fact,

6 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO PSWHMMS was subsequently registered as the society under the name Punjab State War Heroes Memorial and Museum Foundation, and which stands granted registration u/s. 12AA of the Act on 29.11.2017, placing a copy of the order u/s. 12AA(1)(b)(i) on record. There is another aspect of the matter, he would continue further, drawing our attention to the statement of year-wise accumulation of funds (PB pg. 36). Though the total accumulated income as on 31.03.2013 is Rs.108.64 lacs, the five year period, for which the income accumulated or set apart could be carry forward for application in the maximum, expires – as at end of the relevant year, only for that set apart during the f.y. 2007-08, i.e., at Rs.26.73 lacs. This is as for the balance Rs. 81.91 lacs (108.64 lacs minus Rs.26.73 lacs), the assessee has a time period ranging from one year (accumulated during f.y. 2008-09) to four years (f.y. 2012- 13) to apply the accumulation for charitable purposes. Finally, he would submit that even if the entire Rs.100 lacs is to be deemed as the assessee’s income for the current year, i.e., in view of section 11(3), the assessee is to be allowed a period of five years to apply the same, i.e., up to f.y. 2018-19. True, the assessee per its Form 10, filed during the course of the assessment proceedings, did not seek time for application of these funds. But, then, how could it anticipate that the same, since applied, would stand to be assessed as its’ income for the current year? The ld. Departmental Representative (DR) would, relying on the orders by the Revenue authorities, submit that, sure, contribution only to a trust/institution registered as charitable under the Act is covered u/s. 11(3)(d), as it is only the contributions thereto that are deemed as application of income for charitable purposes in the hands of the donor trust/institution. It is by virtue of amendments effected by Finance Act, 2002, i.e., section 11(3)(d) read with Explanation below sec. 11(2), that the same is no longer regarded as an application for charitable

7 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO purposes, i.e., where out of accumulated income. Contribution to a trust/institution not so registered is even otherwise, i.e., de hors the amendments afore-said, are not eligible for being regarded as an application for charitable purposes. In fact, the purpose/s of accumulation has to be specified, and unless the amount had been accumulated specifically for being so applied, i.e., for contributing to another society with similar objects, which has not been shown, it could not be regarded as having been utilized for charitable purposes, and would attract s. 11(3)(c), to the same effect. There is, thus, no question of section 11(3) being not applicable in the instant case. Further, in-as-much as the same is deemed as the current year’s income, there is no question of any accumulation being allowed in its respect.

8 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO before April 1, 1952. Clause (d) exempts voluntary contributions made to a trust with a specific direction that it shall form part of its’ corpus. Such contributions, unless forming part of the corpus, are deemed to be the income derived from property held under trust (sec. 12) and, accordingly, shall be taken into account in computing the limit of 85% (Explanation below s. 11(1)). The said Explanation also provides for instances where income is deemed to have been applied for such purposes, i.e., where it could not be so applied in the relevant year on account of it being not received during the year or for any other reason. Section 11(2) provides for accumulation of income which could not be applied, or is not deemed to be applied, for such purposes in India, up to a maximum period of five years (scaled down from 10 years by Finance Act, 2015 w.e.f. 01.04.2016, substituting clauses (a) and (b) thereof as well as proviso thereto). So, however, an amount paid or credited out of such accumulated income to, inter alia, any trust or institution registered u/s. 12AA, shall not be treated as an application of income for charitable or religious purposes either during the period of accumulation or thereafter (Explanation to section 11(2)). Section 11(3) provides for circumstances where the accumulated income shall be deemed to be the assessee’s income, as well as the year for which it is to be. The same are where the income:

(a) is applied for other than such purposes, or ceases to be applied for such purposes; (b) ceases to be invested in any of the forms or modes specified in section 11(5);

(c) is not utilized for the purposes of its accumulation within the period specified u/s. 11(2)(a); (d) is credited or paid to, inter alia, any trust or institution registered u/s. 12AA.

That is, in any of the specified circumstances, the said deeming shall take effect. Section 12A(1) sets out the conditions subject to the satisfaction of which only the

9 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO provisions of sections 11 and 12 shall apply in relation to the income of any trust or institution. The same thus clearly includes a trust or institution formed for charitable or religious purposes. Clauses (a) and (aa) of section 12A(1) provide for application and registration of such trust/institution u/s. 12AA, also specifying the procedure per which the application for registration is to be made. Section 13 sets out the conditions and circumstances where sections 11 and 12 shall not operate to exclude from the total income of any person in receipt of such income. The same essentially seek to ensure that the income of the trust or institution enures for the benefit of general public, and not to connected persons, also providing for the manner of investment of the trust income/property.

5.2 The first issue before us is if the sum of Rs.100 lacs contributed by the assessee-society out of its accumulated income to PSWHMMS, at the instance of Directorate of Defence Services, Punjab, could regarded as an application of income for charitable purposes and, thus, eligible for exemption u/s. 11(1)(a). In our considered view, we are not, whichever way one may look at the transaction. In fact, but for that the payee-society is not registered u/s. 12AA, or at least at the time of the contribution, there can be no issue at all in its respect; the same being squarely covered under Explanation below section 11(2) clearly providing that such contribution shall not be, at any time, regarded as an application for charitable or religious purposes. In the facts of the instant case, it has not been, to begin with, shown that the income was being accumulated for being applied thus, being admittedly so applied only on the direction (dated 15/1/2014) by the Directorate of Defence Services, Punjab, a Department of the GoP. And which is a pre-requisite for regarding the same as a valid accumulation for application of income for charitable purposes u/s. 11(2), eligible for exemption u/s. 11(1)(a). Even as contended by the ld. CIT-DR, the application has to be in conformity with the

10 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO terms of the accumulation, and which is to be for specified purpose/s. As where, for example, the assessee-society has a particular project in mind (which may require funds beyond the income of one year as well as gestation period for planning and execution), and for which it therefore considers it necessary to accumulate or set apart income while, at the same time, working thereon. A general statement of being accumulated for being applied for its’ objects is not what is contemplated by law. Why, even as observed by the Bench during hearing, could the accumulation possibly have been for the purpose of being given to another society/institution for being applied by it for its’ (the latters’) purposes? That would defeat the very purpose and intent of an accumulation, which we have sought to explain hereinbefore. This, in fact, is precisely the purport of Explanation below section 11(2), albeit qua registered entities and, accordingly, it, as well as section 11(3)(d), have to be read in this context. Further, even assuming that the funds are indeed being accumulated for such a purpose, the same could, w.e.f. 01/4/2003, i.e., AY 2003-04, no longer regarded as for charitable purpose. In other words, can no longer be regarded as a valid accumulation. In the facts of the present case, it has not been shown that the accumulation was for the purpose of contributing them to another society, so as to contend, upon such contribution, as being applied for a charitable purpose/s. Rather, as explained, to say or suggest that the reason for the accumulation or set apart is for being given to another, is itself anomalous, and could not be countenanced or given sanction in law inasmuch as it cannot possibly be the reason for accumulation and, thus, a regarded as one contemplated by law. Whether the donee is registered u/s. 12AA, or not so, becomes, in view thereof, irrelevant. In fact, we may not press this point any further; the obtaining circumstance, i.e., the accumulated income being not utilized for the purpose for which it stands accumulated or set apart within the time

11 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO specified, being specified u/s. 11(3)(c) itself as a circumstance for deeming it as the assessee’s income for the year of credit/payment. Continuing further, so regarded, would it matter whether the donee-entity is registered or unregistered? In fact, the ld. counsel would himself explain that the provision of section 11(3)(d) stands incorporated to check the practice of the charitable entities claiming exemption by merely transferring their funds to another, with a view to either meet the shortfall in income (vis-à-vis application) (of the payee) or secure exemption (by the payer entity) without applying the funds for charitable purposes. That is, to check its misuse. That is, by transferring funds from one society to another. Why, there could be a case of cross donations, either directly or arranged in a circuitous manner, so that exemption is claimed without any net transfer of funds! The amendments (by Finance Act, 2002, w.e.f. 01.04.2013, target only accumulated income as the deferment of the application of the income takes place only thereby, saving genuine accumulations, as for some definite charitable purposes/projects, etc. In fact, we have explained as to why, ex facie, contribution to another, registered or unregistered, cannot be regarded as the valid accumulation in law. Now, when donation to an institution regarded as charitable under the Act is not to be considered as an application of income for charitable purposes, i.e., where out of accumulated funds, could that to one which is not registered as such under the Act, i.e., not recognized as a charitable institution under the Act, could conceivably be regarded as an application (of income) by the donor institution for charitable purposes? Surely, not. That would be a contradiction in terms. The purpose of confining the restriction u/s. 11(3)(d) to registered entities is that it is only contributions thereto that could possibly be, and were hitherto, regarded as an application of its’ income for charitable purposes. That to a non-charitable one, or one not regarded as a charitable institution under the Act, would get ousted at the threshold, as observed by the

12 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO Bench during hearing with reference to section 11(3)(a), further explaining that it is in this context (section 11(3)) that the ld. CIT(A) states of the insertion of the section 11(3)(d) (clauses (a), (b) and (c) of section 11(3) being on the statute-book w.e.f. 01.04.1971) having removed the distinction – in-so-far as the application of accumulated income is concerned, between registered and unregistered recipients. Continuing further, the difference between two, speaking in the context of the present case, is largely inconsequential, if not illusionary. This is as the donee- society has, as a matter of fact, been subsequently registered, as it was contemplated to be, formed only under the aegis of the GoP. The difference then is essentially one of timing and not of substance; the character of the contribution (by the assessee-society) thereto being the same. This is particularly so as the funds, as stated, have been utilized by the recipient-society for its’ purposes only upon its’ registration. That is, the recipient being at all times since its’ formation, a body, the character of which as a public institution was not in doubt, and the registration of which as such only a matter of procedure and, thus, time; the payment thereto, in substance and effect, is to a society registered u/s. 12AA. That is, considered either way, as a registered or unregistered institution, would be largely irrelevant in the context of the donee under reference even as we have found the same to be in law as of no moment, impinging only on the sub-clause of section 11(3), i.e., section 11(3)(a) or 11(3)(d), which would get attracted.

5.3 We may, next, consider the argument advanced by the ld. counsel, Shri Mukhi, citing the example of a hospital, i.e., of charity being only with reference to a non-charitable (or unregistered) person/entity. The same, not without merit, is, however, misplaced in the instant case where the registration, always in the offing, followed. Further, as afore-stated, the money was used, as it indeed could only be, upon its formal constitution as a charitable institution, in recognition of which

13 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO registration was granted. That apart, the argument obfuscates the issue. It is nobody’s case, nor possibly could be, that transfer of funds by one entity to another is charity per se. However, where the payee is also recognized as the charitable institution – which is the purport of the registration u/s. 12AA, engaged in a charitable activity similar to that of the donor institution, such donation, where otherwise authorized by the objects of the donor-trust, could only be regarded as an application of its’ income by the donor trust/institution for its objects and, thus, for charitable purposes. That is, is charity by implication, or inference. The actual activity (which we may term as charity per se) would, it may be appreciated, only be when the income is utilized by the recipient for any of its objects constituting a charitable purpose. Further, as afore-explained, it is this transfer that stands excluded (w.e.f. 01.04.2003) by section 11(3)(d), i.e., where out of accumulated income. No such inference can be drawn qua a donation to a non-charitable organization, so that the same could only be regarded as having been applied for other than a charitable purpose or as ceasing to be accumulated or set apart for application for charitable purposes, attracting section 11(3)(a). The donee institution is not shown to have the expertise or the wherewithal to construct or maintain museums (regarded as, as it appears, places of historic interest), or otherwise shown to be engaged in an activity construed charitable. The reference to a hospital by Shri Mukhi is thus misplaced in-as-much as a hospital is proven to be rendering medical services. In fact, even in the case of a hospital, the donation may not tantamount to medical relief and, thus, charity by implication, where the hospital is being run on commercial lines, unless of course where specifically for or by way of relief to the poor/needy, in which case the hospital merely becomes an agency for rendering relief to the poor or providing medical relief, both charitable purposes under the Act. The donor, however, could only claim deduction qua donation u/s. 80-G, as it is the donee who is undertaking charity.

14 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO Similarly, where toward augmenting it’s corpus – by adding medical equipment/infrastructure (say), or otherwise subsidize or meet the cost of the medical treatment for its’ patients. It is only where the donation is to a registered institution, of course assuming identity of objects, that the same would qualify to be an application of income for charitable purposes. That is, would be a case of charity by implication, covered u/s. 11(3)(d). The distinction, i.e., between charity by implication and charity per se, which is a matter of fact, and generally apparent, may in certain situations become fine, yet, is real and obtains. Why, section 11(3)(d) itself is a proof of this vital difference, i.e., applying funds directly for a charitable purpose, on one hand, and where they are given to another for being so utilized, on the other. Rather, the very fact of it being registered (under the Act) subsequently, again, is a proof of it being a case of the latter, i.e., charity by implication. That apart, the donee organization is not shown – nay, not even claimed to be, engaged in any charitable activity per se at the relevant time, for the donation thereto to be regarded as amounting to an application for charitable purposes, i.e., a charity by implication. The same therefore could only be regarded as a transfer of funds by one to another for being applied for its’ purposes – and which being not recognized as charitable under the Act, can definitely not be regarded as an application for charitable purposes, and attracts sec. 11(3)(a). In fact, even if recognized as constituted for charitable purposes, the same being out of accumulated income, would stand barred by s. 11(3)(d). That is, either way, whether recognized or not, the assessee’s claim becomes un-maintainable. It is to this irrelevance of the donee being a registered (under the Act) entity or otherwise at the relevant time that the ld. CIT(A) refers to.

15 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO 5.4 This brings us to the third limb of the assessee’s argument. That is, that the funds were transferred at the instance of the GoP, a major donor and contributor, thereby taking away (partly) what it had given the assessee-society in the first place. And, therefore, should not be regarded as covered by sec. 11(3). The argument, advanced on the basis of the material on record, only needs to be stated to be rejected. It, without prejudice to whatever we have observed and stated earlier, totally rubbishes the assessee’s claim for exemption. Once a donor makes a voluntary contribution, it is the donee who assumes full lien over and ownership of the subject property. If the donor retains any right thereon, including the manner in which it is to be utilized, it would not qualify to be a voluntary contribution in the first place. The initial donation/s having been regarded as the assessee-society’s property – be it for corpus or otherwise, there is no question of the GoP taking back any of its funds or dictating the manner in which the same ought to be utilized by the assessee-society. There is equally no question of the assessee-donor, a separate and distinct legal entity from the GoP, making donation at the instance or behest of the GoP, in which case it ceases to be a voluntary contribution, and which only qualifies it to be an application of income by it (the assessee). This is as without this essential attribute, the same is only an exaction. A quid pro quo, as the argument seems to suggest, disqualifies the transfer (of funds) for being regarded as a donation or voluntary contribution and, thus, as an application of its’ income. Why, for all we know, the same being in any case a matter of fact, the funds contributed by GoP may be toward corpus of the assessee-society, so that the same would not form part of the assessee’s income from property held under trust which is subject to exemption on application (section 11(1)(d) r/w s. 12(1)). It may also be that a substantial part of the donation (income) stands used for meeting expenditure of the assessee-society. Why, even otherwise, GoP, as afore-stated, cannot said to the retain any lien or title on the funds contributed by it.

16 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO 5.5 Finally, we may consider the assessee’s argument that even considering the contribution of Rs.100 lacs as not applied for charitable purposes, and thus ousted u/s. 11(3), only Rs.26.73 lacs could be deemed as the assessee’s income for the current year as, for the balance accumulated income of Rs. 81.91 lacs, the time limit of five years for applying it has not expired as on 31.03.2014 – the relevant year-end. True, the time limit has not expired as far as the accumulated income of Rs.81.91 lacs (out of Rs.108.64 lacs) But, even as observed during hearing, the assessee has already utilized or applied Rs.100 lacs out of the total accumulated income of Rs.108.64 lacs as on 31.03.2013. It thus has a balance of only Rs.8.64 lacs for being utilized for charitable purposes up to 31.03.2018. The argument is completely misconceived.

17 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO in-as-much as it is legal, is liable to be admitted. The same, though, again, only needs to be stated to be rejected. The said application is deemed as the assessee’s income only for the reason that it fails to satisfy the conditions under which the exemption u/s. 11(1)(a) was allowed in its respect for the year/s of accumulation, or to meet the terms thereof. The various clauses of section 11(3) only delineate the same. That is, it is not the income derived from property held under trust, for which it is entitled to exemption where applied to the extent of at least 85% for charitable purposes in the year in which it arises, or, in the alternative, is to be, subject to the procedure to be followed in its respect, accumulated or set apart for being so applied within a maximum period of five years. In other words, it is only the income arising from property held under trust by a charitable trust/institution that could, where not applied for its objects, be so applied in future, extending up to five years. The income under reference is deemed as the assessee’s income for the relevant year u/s. 11(3), i.e., for the reason that the terms of accumulation are not met. There is accordingly no question of the assessee being allowed further time for applying any part of it in future. Rather, as afore-noted, income having been already applied, there is no question or scope for it being applied again. The Revenue, apart from deeming Rs.100 lacs as the assessee’s income for the current year u/s. 11(3), i.e., on the assessee paying PSWHMMS during the year, also has brought the surplus of Rs.32.43 lacs to tax, which has also been disputed by the assessee. Though no particular argument in this respect was made during hearing, we find the same as essentially factually indeterminate. This is as there is no finding as to whether the assessee has, either with the return of income or even at any time during the assessment proceedings, applied for accumulation of any part of the unapplied income of Rs.32.43 lacs, and which is a must (CIT v. Nagpur Hotel Owner’s Association [2001] 247 ITR 201 (SC); CIT v. Simla Chandigarh Diocese Society [2009] 318 ITR 96 (P&H) – both referred to by the

18 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO AO). The orders by the Revenue authorities are sans any finding on this. Two, even if there is no such application, or no valid accumulation or set apart, the assessee being obliged to apply its income up to 85% thereof, only the same could be subject to tax as its total income for the year, i.e., after allowing the credit for that applied. That is, 15% of the income of Rs.67.65 lacs, or Rs.10,14,750/-, cannot be assessed as the assessee’s income for which there is no time limit for its application by a trust or institution for its objects/purposes. Before parting, we may issue a clarification. We are conscious that we have stated of the recipient as being only a name, while, on the other hand, considered it as an unregistered body, which, for all intents any purposes, must be regarded as registered. All of this may appear dichotomous. The same, however, is not contradictory and, in fact, complimentary. The donee is, as a matter of fact, not a legal person at the time of the contribution, in-as-much as there is no legal document evidencing its’ formation at the time. The payment therefore could only, as stated, be regarded as to the GoP, at whose behest and direction the payment has been made, toward which the assessee in fact adduces a letter dated 15/12/2014. And, accordingly, cannot be regarded as to a charitable organization, registered or unregistered. Further, the Revenue authorities as well as the assessee itself have regarded it as at a case of contribution to an institution not registered u/s.12AA of the Act. Though there is no nothing to suggest of the donee having been incorporated at the time of contribution, the same has yet been examined to find that in-as-much as it has not been shown to be at the relevant time undertaking any charitable activity, its’ non-registration would only impinge on the clause of section 11(3) that would stand attracted, so that the same (i.e., non-registration) becomes irrelevant. Again, having been since (post contribution) incorporated and registered, as conceived to be, the transaction, if at all it is to be regarded as to a legal person (other than the GoP), is essentially only to a registered entity,

19 ITA No. 618/Asr/2017 (AY 2014-15) Maharaja Ranjit Singh War Museum Society v. ITO constituted as a charitable institution, so that in substance and effect, it would attract section 11(1)(d). The order, thus, is not incoherent but attempts to examine the transaction in all its facets, considering the arguments contentions raised before the Revenue authorities as well that made before us. We decide accordingly. 7. In the result, the assessee’s appeal is partly allowed. Order pronounced in the open court on August 28, 2018

Sd/- Sd/- (N. K. Choudhry) (Sanjay Arora) Judicial Member Accountant Member Date: 28.08.2018 /GP/Sr. Ps. Copy of the order forwarded to: (1) The Appellant: Maharaja Ranjit Singh War Museum Society, P.O. Bhattian Bet, Ludhiana (2) The Respondent: Income Tax Officer (Exemptions) Ward, Jalandhar (3) The CIT(Appeals)-2, Jalandhar (4) The CIT concerned (5) The Sr. DR, I.T.A.T