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Income Tax Appellate Tribunal, VIRTUAL COURT
Before: SHRI C.N. PRASAD, HONBLE
O R D E R PER C.N. PRASAD (JM)
This appeal is filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-3, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 01.02.2019 for the Assessment Year 2012-13.
Assessee has raised following grounds in its appeal: - (A.Y: 2012-13) LIC Golden Jubilee Foundation “1. The Commissioner of Income Tax (Appeals) erred in upholding the order of the Deputy Commissioner of Income Tax (Exemption) dated 25/02/2015 assessing the Appellant to income of Rs. 12461 ISA as against the income of Rs. NIL returned by the appellant, 2. The Commissioner of Income Tax (Appeal) erred in holding that the appellant’s case was hit by section 11(2) and the Explanation to Section 11(2) of the IT.Act 1961.
3. The Commissioner of Income Tax (Appeal) erred in upholding only a sum of Rs.82975213/- against the claim of the assessee for Rs.84221328/- having spent on the object of the Trust, 4. The Commissioner of Income Tax (Appeal) erred is not considering the amount spent by the appellant Rs.1,15,95000/- against accumulation u/s 11(2) of the Income Tax Act 1961 of Asstt. Year 2009-10 and Rs.4766156/- against the accumulation u/s 11 (2) of the Income Tax Act, for Asstt. Year 2010-11 5. The Commissioner of Income Tax (Appeal) erred is not considering the assessment order passed u/s 1.43(3) for the A.Y. 2015-16 and 2016-17 by A.O. allowing the amount spent on account of earlier year sanction as amount utlized during the year of disbursement, 6. The Commissioner of Income Tax (Appeal) erred in disregarding the submission of the appellant and thereby erred in not only upholding the income of the trust in arbitrary manner but also upholding an assessment, which is bad in law, 7. The appellant prays for leave to add amend and/or alter all or any of the above grounds of appeal”
At the outset, Learned Counsel for the assessee submitted that the issue in grounds of appeal No. 1 to 3 are covered by the Tribunal in assessee’s own case in ITA.No. 5281/Mum/2015, ITA.Nos. 83 & 6813/Mum/2016 for the A.Y. 2010-11, A.Y. 2011-12 and A.Y. 2013-14 by order dated 21.05.2019 wherein the Tribunal held that assessee is eligible for exemption u/s. 11(1)(a) of the Act. Ld. Counsel for the assessee
(A.Y: 2012-13) LIC Golden Jubilee Foundation further submitted that Tribunal observed that in view of the decision of the Hon'ble Andhra Pradesh High Court in the case of CIT v. Trustees of H.E.H. the Nizam’s Charitable Trust [1981] 131 ITR 497, in order to secure exemption u/s. 11(1)(a) of the Act it is sufficient if the assessee provides or sets apart the funds for a charitable purpose and it is not necessary that the assessee must have spent the amount specifically for charitable purpose during the relevant assessment year.
Ld. DR vehemently supported the orders of the authorities below.
We have heard the rival submissions, perused the orders of the authorities below and the judgement of the Tribunal in assessee’s own case. The Tribunal allowing the claim for exemption u/s. 11(1)(a) of the Act to the assessee, observed as under: - “8. We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the assessee has, since its inception, has been consistently claiming application of the amounts sanctioned on the basis of sanction. This method was accepted by the Revenue while framing assessment under section 143(3) of the Act for AYs 2008-09 and 2009-10, wherein the copies of the assessment orders were filed by the assessee. It is a fact that during FY 2009-10 relevant to AY 2010-11, the assessee had not applied any income accumulated under section 11(2) of the Act for AY 2009-10. The amount so spent amounting to ₹ 2,11,47,228/- represented the amounts sanctioned in the earlier years but disbursed during the FY 2009-10 relevant to this AY 2010-11. We noted that accumulated income of ₹ 3.20 crores remained unutilized
(A.Y: 2012-13) LIC Golden Jubilee Foundation even during AY 2010-11 and outstanding amounts of the projects sanctioned and the unutilized accumulated income under section 11(2) of the Act. We noted that the amounts spent / disbursed during the assessment year under appeal amounting to ₹ 2,11,47,228 was not the utilization of income accumulated under section 11(2) of the Act for the AY 2009-10. The Assessee has already claimed the said sum as an application of income in the year of sanction i.e. ₹ 5 lacs in AY 2008-09 and ₹ 2,06,47,228 in AY 2009-10 on the basis of projects sanctioned during the previous years relevant to those assessment years. Though the said amount was sanctioned in earlier years, actual disbursal of the same had taken place during FY 2009- 10 relevant to this assessment year. We noted that the Revenue has accepted this system consistently that the claim of the assessee to treat the said sum as an application of income in the year of sanction. This has the support of the decision of Hon’ble Andhra Pradesh High court in the case of Trustees of H.E.H. the Nizam's Charitable Trust (supra), wherein Hon’ble High Court has held as under: - “We shall first consider the second question referred to us for decision. From the facts set out earlier, it is clear that the donees concerned make a request for a grant from the trust and the trustees after considering the request, sanction certain amounts in deserving cases. As soon as the resolution is passed, the secretary informs the institution that such and such amounts have been sanctioned by the trustees at a meeting held on a particular date and also intimates the purposes for which they are sanctioned. In cases where the amounts are not disbursed during the accounting year, the amounts are debited to the income and expenditure account and credited to the outstanding payment account, which contains the amount due to the various donees as per the resolutions passed by the board. When the payment is made, this amount is debited. The amounts debited to the income and expenditure account but which are not actually disbursed are shown as liabilities in the balance-sheet. In our view, these facts and circumstances would constitute application of the funds for charitable purposes within the meaning of section 11(1)(a) of the Act. We agree with the Tribunal that it is not correct to equate the word "applied" with the word "spent". If the Legislature intended that the amounts should (A.Y: 2012-13) LIC Golden Jubilee Foundation actually be spent, there was nothing preventing it from using that word. There cannot be any doubt that the money which was sanctioned was applied for a specific purpose as there was nothing else to be done except the actual payment. The Tribunal was right in holding that the actual payment is irrelevant for purposes of finding out whether there has been an application of the funds. In this connection, we may refer to the observations in CIT v. Radhaswami Satsang Sabha [1954] 25 ITR 472 (All.). Dealing with the word "applied" in the Indian Income-tax Act, 1922, the learned judges observed as follows (p. 522): The word 'applied' in this clause means actually spent and it was pointed out that while in clause (i) of sub- section (3) of section 4 of the Act, the words used are 'income applied or finally set apart', the words 'finally set apart' have not been repeated in clause (ia) of that sub-section. We do not think that the word 'applied' necessarily means 'spent'. Even if it has been earmarked and allocated for the purposes of the institution, it might, to our minds, be deemed to have been applied for the purpose."
Hon’ble High Court has considered that in order to secure exemption under section 11(1)(a) of the Act, it is sufficient if the assessee provides or sets apart the funds for a charitable purpose and it is not necessary that the assessee must have spent the amount specified for a charitable purpose during the relevant assessment year. That this is the intention of the legislature as is evident from the words used i.e. “applied” in section 11(1)(a) of the Act. It was explained that if the intention of the legislature was otherwise, nothing prevented the legislature from using the words “spent” instead of “applied” in section 11(1)(a) of the Act. In view of the above facts and circumstances, we are of the view that the assessee is eligible for the claim of exemption under section 11(1)(a) of the Act and we order accordingly.
Similar are the facts in and 6813/Mum/2016 for AYs 2011-12 and 2012-13, taking a consistent view, we direct the AO to allow exemption under section 11(1)(a) of the Act in these years also.
(A.Y: 2012-13) LIC Golden Jubilee Foundation In the result, all the appeals of the assessee are allowed.” 11.
Facts being identical, respectfully following the said decision we direct the Assessing Officer to allow the exemption u/s. 11(1)(a) of the Act for the assessment year under consideration. Ground Nos. 1 to 3 are allowed.
In so far as Ground Nos. 4 to 7 are concerned, Learned Counsel for the assessee submitted that once exemption u/s. 11(1)(a) of the Act is allowed these grounds will not survive. As we have allowed Ground Nos. 1 to 3 granting exemption u/s. 11(1)(a) of the Act to the assessee and in view of the submissions of the Ld. Counsel for the assessee these grounds are not adjudicated as they will not survive.
In the result, appeal of the assessee is partly allowed as indicated above.
Order pronounced in the virtual court on 30.07.2021.