DY. COMMISSIONER OF INCOME TAX (EXEMPTIONS), CIRCLE, PUNE, SWARGATE, PUNE vs. DR D Y PATIL UNITECH SOCIETY, PUNE

The assessee in response to the same filed the return of income on 26.04.2018. The reasons for reopening the assessment were also sought which were provided to the assessee. Subsequently, statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee in response to which the AR of the assessee appeared from time to time and filed the requisite details. After considering the submissions filed by the assessee the Assessing Officer restricted the accumulation u/s 11(1)(a) of the Act to the extent of surplus available to the assessee after allowing the expenditure incurred. Thus, the Assessing Officer determined the total income of the assessee at Nil.

Before the Ld. Addl / JCIT(A) it was argued that the Assessing Officer while restricting the accumulations u/s 11(1)(a) has relied on the decision of the Mumbai Bench of the Tribunal in the case of Dawat Institute of Dawoodi Bohra Community vs. ITO order dated 30.04.2013. However, the Hon’ble Supreme Court in the case of CIT vs. Rao Charitable Trust reported in 216 ITR 697 (SC) has held that exemption u/s 11(1)(a) of the Act i.e. 15% is an absolute exemption and the application of section 11(2) of the Act does not extend to nullify the absolute exemption. Similar view has been taken by the Hon’ble Supreme Court in the case of CIT vs. Programme for Community Organization reported in 248 ITR 1 (SC). The decision of the Pune Bench of the Tribunal in the case of Maharshi Karve Stree Shikshan Samstha vs. ITO reported in (2019) 101 taxmann.com 175 (Pune – Trib.) was also brought to the notice of the Ld. Addl / JCIT(A).

Based on the submissions and the arguments advanced by the assessee, the Ld. Addl / JCIT(A) directed the Assessing Officer to allow the deduction u/s 11(1)(a) of the Act on 15% of the receipt of the trust and allow the application of income after the remaining amount by observing as under:

Aggrieved with such order of the Ld. Addl / JCIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds:

The Ld. DR referring to the grounds of appeal submitted that the Ld. Addl / JCIT(A) while deciding the issue in favour of the assessee has relied on the decision of the Pune Bench of the Tribunal in the case of Maharshi Karve Stree Shikshan Samstha vs. ITO (supra) which has not been accepted by the department and an appeal has been filed before the Hon’ble Bombay High Court which is still pending. Therefore, the order of the Ld. Addl / JCIT(A) be reversed and that of the Assessing Officer be restored.

The Ld. Counsel for the assessee on the other hand while supporting the order of the Ld. Addl / JCIT(A) submitted that the issue has been decided by the Ld. Addl / JCIT(A) by following the decisions of the Hon’ble Supreme Court in the case of CIT vs. Rao Charitable Trust (supra), CIT vs. Programme for Community Organization and the decision of the Hon’ble Bombay High Court in the case of CIT vs. Institute of Banking Personnel Selection reported in (2003) 264 ITR 110 (Bom). He submitted that merely because the Revenue has filed an appeal against the order of the Tribunal, however, unless the order is reversed by the Hon’ble High Court, the view of the Tribunal shall prevail. In any case, since the Ld. Addl / JCIT(A) has also relied on the decision of the Pune Bench of the Tribunal which in turn has followed the decision of the Hon’ble Supreme Court, therefore, the same being in order, grounds raised by the Revenue should be dismissed.

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. Addl / JCIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case following the decision of the Mumbai Bench of the Tribunal in the case of Dawat Institute of Dawoodi Bohra Community vs. ITO (supra) restricted the exemption u/s 11(1)(a) of the Act from Rs.7,85,86,174/- to Rs.81,16,319/- on the ground that such exemption is available to the assessee only to the extent of surplus revenue after application of the expenditure. We find the Ld. Addl / JCIT(A) directed the Assessing Officer to allow the deduction u/s 11(1)(a) of the Act on 15% of the receipt of the trust and allow the application of income after the remaining amount, the reasons of which have already been reproduced in the preceding paragraphs. While doing so, he relied on the decisions of the Pune Bench of the Tribunal in the case of Maharshi Karve Stree Shikshan Samstha vs. ITO (supra) which in turn has followed the decision of the Hon’ble Delhi High Court in the case of DIT vs. Raghuvanshi Charitable Trust and Ors. reported in (2011) 197 Taxman 170 (Delhi) according to which the exemption u/s 11(1)(a) of the Act i.e. 15% is an absolute exemption and the application of section 11(2) of the Act does not extend to nullify the absolute exemption. Further, the Coordinate Bench of the Tribunal while deciding the issue has also followed the decision of the Hon’ble Supreme Court in the case of CIT vs. Programme for Community Organization (supra) and CIT vs. Rao Charitable Trust (supra). Since the Ld. Addl / JCIT(A) while deciding the issue in favour of the assessee has followed the decision of the Coordinate Bench of the Tribunal which in turn has followed two decisions of the Hon’ble Supreme Court and the decision of Hon’ble Bombay High Court and Hon’ble Delhi High Court, therefore, merely because the Revenue has not accepted the decision of the Pune Bench of the Tribunal in the case of Maharshi Karve Stree Shikshan Samstha vs. ITO (supra) and an appeal has been filed before the Hon’ble Bombay High Court, the same in our opinion cannot be a ground to decide the issue in favour of the Revenue by taking a different view other than the view taken by the Tribunal.

In the result, the appeal filed by the Revenue is dismissed.