M/S. INDIAN INSTITUTE OF ENGG. TECHNOLOGY,CHENNAI vs. DDIT, CHENNAI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 17, Chennai, dated 30.03.2016 relevant to the assessment year 2011-12. Vide common order in M.P. Nos. 219 & 220/Chny/2018 in & 2093/Chny/2016 dated 28.06.2019, the order passed by the Tribunal in I.T.A. No. 2092/Chny/2016 dated 22.06.2018 for the assessment 2011-12 alone has been recalled for limited purpose and relevant portion of the order is extracted as under: “6. For ay 2011-12, the exemption u/s.11 was denied only for the reason or issue that honorarium was paid. This issue was decided in favour of the assessee by the ITAT in the earlier year and by following that order this issue was allowed in this year as well in favour of the assessee. The AO did not raise the issue of amount parked with the other charitable institution in this year. Further, the AO did not deny exemption for the ay 2011- 12 as was made in ay 2012-13, as extracted in para 10, supra. Therefore, the denial of exemption u/s.11/12 for AY 2011-12 is an error and hence the assessee’s appeal in respect of ay 2011-12 alone is recalled to consider assessee’s other claims u/s 11. Thus, the assessee’s MP for assessment year 2011-12 alone is allowed to this extent.”

With regard to the claim of deduction under section 11 of the Act, while adjudicating the appeals of the assessee for the assessment years 2011-12 and 2012-13, in assessment year 2012-13, the assessee has raised a ground that the ld. CIT(A) has erred in confirming that the assessee has violated the provisions of section 11(1)(c)/11(1)(d) r.w.s. 11(5) of the Act.

However, while passing common order for the assessment years 2011-12 and 2012-13 in & 2093/Chny/2016 and adjudicating the above issue, the Tribunal has held that when the assessee’s activities or the purposes are considered as existing for purposes of profit, its claim under section 11 that it is existing for “charitable purposes” within the scope of section 2(15) of the Act also fails both the assessment years by observing as under: “8. On the amount parked with sister concern : 8.1 From the account copy furnished by the assessee , the AO found that the assessee had received Rs. 3,82,84,422/-, between 24.02.2003 & 30.3.2004 from Ganapathy Educational Trust. Against such receipts, the assessee paid Rs. 4,53,10,202/- between 19.9.2003 to 13.02.2007. Thus, it has paid Rs.70,25,780/-, in excess of the advance receipt, which was not received until 26.03.2012. The AO after considering the assessees submissions etc held that though the transaction pertained to earlier period, the excess advance was held by the sister concern all along without adequate consideration. Further, it was also not in the nature of an investment as per the prescribed modes specified in section 11(5) and hence there is a clear violation u/s. 11(1)(c)/11(1)(d) rw.s.11(5). Therefore, the provisions of Section 11 become in-operative and the surplus gained by the Trust for the year therefore needed to be brought to taxation and accordingly assessed the assessees income. 8.2 Before the Ld. CIT(A), the assessee submitted that the appellant had paid an excess amount of Rs.70,25,780/-, which was recoverable from Meenakshi College for Women as it was given to the other charitable institution for educational purpose to enable them to construct building as part of the college and therefore, cannot be considered as an investment and therefore, the provisions of Section 11, 12 & 13 were not violated. Further, Meenakshi College for Women cannot be considered as related person for the purpose of Section 11(1)(c) and 11(1)(d) rws 13(3). The loan given to another charitable Trust having similar objects for carrying out objects of such Trust could not be considered to have violated the provisions of Section 11(1)(c) and 11(1)(d) r.w.s 11(5), as contended by the A.O. The relevant portion of the order of the Ld. CIT (A) is extracted as under : 10.2. I have gone through the submissions made by the appellant on this issue along with the case laws relied on both by the A.O and by A.R and I find no substance in the submissions made by the A.R. It is quite clear that / the amount received as advance was repaid back by a higher amount of Rs.4,53,10,202/-, indicating that the differential excess amount of Rs.70,25,780/- was loaned to the sister trust, Ganapathy Educational Trust without adequate security or adequate interest or both and therefore, it had clearly violated the provisions of Section 13(1)(c) r.w.s.11(5) and [13(2)(a)] and therefore, the action of the A.O in making the addition of the difference between the amount received and paid back to the sister concern is upheld and the addition confirmed. This ground is, therefore, dismissed. 8.3 Before us, the Ld. AR submitted that the same submissions made before the Ld. CIT(A) and relied on certain case laws. Per contra, the Ld. DR supported the orders of the lower authorities.

We heard the rival submissions and gone through relevant material. The impugned transactions have happened long before. The assessee has received the excess amount after a long gap. Though, the rationale is questioned at assessment stage itself, it has not laid any contemporaneous material in support of its contentions, viz Minutes book, the facts and circumstances on which the alleged transactions happened, who and when took the alleged decisions etc , before the lower authorities and hence they have rejected assessees claim of exemption. Before us also, the assessee has not laid any material to assail the findings recorded by them. Therefore, the corresponding grounds of the assessee are dismissed for this ay.

We have considered all other claims of the assessee. The A O has denied the claim of exemption in ay 2012-13 , observing as under : 7.2 The taxation of income is not confined to the income derived from the units which operate like a business entity. Section 13(8) prohibits applicability of section 11 & 12 in respect of any income of the Trust and is not restricted to the business activity of the Trust. Therefore, the surplus derived by the Trust is entirely brought to taxation. In view of the findings recorded , supra, that the assessee is carrying its activities as a profitable venture , the A O held that the assessee is not undertaking any charitable activity within the scope of section 2(15) of the Act . Therefore, he denied the assessees exemption claim u/s 11, supra. It appears that this finding is not challenged by the assessee before the Ld. CIT (A). When the assessees activities or the purposes are considered as existing for purposes of profit , its claim u/s 11 that it is existing for charitable purposes within the scope of section 2 (15) of the Act also fails both the ays. Thus, when the assessee is not entitled for the benefit u/s 11, all its other claims u/s 11 are not allowable and hence they become academic and hence not dealt with.” 4. Since the assessee has claimed the exemption for the assessment year 2012-13 alone and there was no such claim in the assessment year 2011-12 and there would not be such denial for the assessment year 2011- 12, the common findings of the Tribunal is a mistake apparent on record. Thus, the denial of claim of exemption under section 11 of the Act relates to only for the assessment year 2012-13 alone and thus, ordered accordingly.