Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
Before: SH. R.K. PANDA & SMT. BEENA A. PILLAI
ORDER PER R.K. PANDA, AM:
This appeal filed by the assessee is directed against the order dated 25.03.2015 of the CIT (A)-II, Kanpur relating to A. Y. 2010-11
The assessee filed its return of income on 14.10.2010 declaring Nil income. The assessee has claimed its income exempt u/s 12A of the Act on the basis of exemption certificate granted to the assessee vide Certificate No.571/18505 dated 31.10.1996 issued by the Commissioner of Income Tax, Kanpur.
The Assessing Officer during the course of assessment proceedings observed that the assessee is running the following schools during the year under consideration:-
(i) Delhi Public School, Mainwati Marg, Azad Nagar, Kanpur (ii) Delhi Public School, Sarvodaya Nagar, Kanpur (iii) Bhavan Public School, Kidwai Nagar, Kanpur (iv) Delhi Public School Meharban Singh Ka Purwa, Barra, Kanpur
The Assessing Officer asked the assessee to show cause as to why the exemption u/s 11 & 12 of the Act should not be denied because the schools are being run under the society ( Not under trust to which exemption was granted by Hon’ble CIT, Kanpur) which is separate entity as per record.
Rejecting various explanation given by the assessee, the Assessing Officer denied the claim of exemption u/s 11 by recording the following reasons :-
(i) The schools were being run by the assessee Shyam Bihari Mishra Memorial Charitable Trust which got itself registered as a society with the Registrar of Society, Kanpur and the registration certificate was issued on 23.6.2001 vide Registration No/.273/2001-02. Thus, the society came into existence on 23.6.2001 (hereinafter referred as society). Prior to this, a charitable trust in the same name of Shyam Bihari Mishra Memorial Charitable Trust was created on 16.10.1995 and the said trust was granted registration u/s 12 A by Ld. CIT, Kanpur on 30.1.1996 vide Registration No.571/8505/Reg./Judl/95-96. Although the schools were run by the society having separate and distinct legal status, constitution, by laws & objects as compared to the trust, still on the basis of registration granted u/s 12 A to the trust, the assessee claimed that the benefit u/s 12 A should be extended to the society as the society and trust are one and the same and as per clause 10 (xiii) the trustees were competent to establish trust and other institutions having similar objects than those of the trust. (ii) The assessee has furnished a letter dated 03.02.2010 addressed to Smt. Vandana Mishra, (Secretary) from Dy. Registrar, Firms, Societies and Chits stating therein only the fact that the trust has been registered on 30.6.2001. This letter nowhere states that this trust is the same trust which was registered in the year 1995 and it is in continuance of that Trust, therefore, it can be inferred that this is a new society other than the trust to which registration u/s 12A of the Act was granted by Ld. CIT Kanpur on 30.1.1996. (iii)The Trust was created on 16.10.1995 by Shri Alok Mishra by a trust deed executed and registered appointing trustees and stating the object of the trust. Vide para 10 (13) the trustees were given power as under :-
“to establish trusts and other institution have similar objects to those of this trust”
By virtue of such powers vested upon the trustees, it has been contended that the trustees and some other persons formed the society in the same name and therefore, the society should be allowed be allowed benefit of registration u/s 12A which was granted to the trust. The trust was not one of the member of the society and its trustees were members of the society in their individual capacity and also included some other persons as founder members of the society. Therefore, the society has got its own legal identity distinct from that of the trust. The society is also governed by the Society Registration Act, 1908 which lays down different rights and obligation as compared to the trust which was governed by Indian Trust Act. The trust was not even a member of the society through its trustee. (iv) The power given to the trustees to establish trust and other institutions can not be construed to enable trustees to form a society in their individual capacity together with other member and such society could be said to be run by the trust. (v) The objects of the trusts were mainly :- a. Medical Relief b. Relief to the poors c. General Public Utility d. Education
(vi) The Trust was accorded registration u/s 12 A by the Commissioner of Income Tax-1, Kanpur on 31.01.1996 to the trust created on 16.10.1995. The assessee also filed application for the renewal of exemption u/s 80G (5) on 06.03.2007 for the above mentioned Trust. Thereafter, the assessee requested for withdrawal of its application dated 06.03.2007, and finally the application has been withdrawn vide CIT-I, Kanpur’s order dated 24.08.2007.
Further the assessee created as society namely Shyam Bihari Mishra Memorial Trust on 30.06.2001. The objects of the Society are :- (a) Medical Relief (b) Relief to the poor (c) Objects of General Public Utility
(d) Education (e) General Utilitarian Purpose On perusal of objects of the Trust and society are quite different to each other. There was a difference in objects under the heads of Medical Relief & Education. The objects of Society named as General Utilitarian Purpose were not in the Trust deed. Thus, both Trust and Society have different identity, constitution and objects. Therefore, it cannot be said that the trust and the society are one and same entity. (vii) The erstwhile trust has transferred its property by book entry to the assesses society which is not permitted as the property of the trust can only be transferred to another trust and that too after taking the approval of the Competent Court of Law. (viii) Without prejudice the reasons given above, it is noticed that the assessee itself has shown to have given loan of Rs.1 lacs to Shri Shyam Bihari Mishra Memorial Charitable Society and it is admitted that it is a person specified u/s 13 (3) of the Act. The loan was given free of interest in violation of provisions of section 13 (2) (a) which disentitle the society to claim exemption u/s 11 of the IT Act.
In view of foregoing discussions, it is held that the benefit of exemption u/s 12 A as claimed by the trust cannot be extended to the assessee society. The claim of exemption u/s 11 is, therefore, denied.
The Assessing Officer accordingly determined the total income of the assessee at Rs.1,07,37,610/-. Before CIT (A) the assessee made elaborate submissions based on which the Ld. CIT(A) allowed the claim of exemption u/s 11 by observing as under : -
I have considered the order of the Assessing Officer (Assessing Officer), submissions and the arguments made by the learned counsel of the assessee. The main issue in the appeal is regarding the fact whether the trust is owing the schools or the society is owing the schools. The trust is registered under section 12A of the Income Tax Act, 1961. The Assessing Officer has placed reliance on the facts that the trust and society are separate entities and the schools are being run by the society and not the trust. The above addition is continuing from the assessment year 2006-07 and the first appeal for the assessment year 2006-07 on this issue was confirmed by the CIT – (Appeals)-II, Kanpur on the pretext that the schools are being run by the society and thus had protectively confirmed the additions in the hands of the trust. The issue to be decided before me is again the same, however the following additional facts have been brought on record both at the times of assessment and also before me which are given below :
The Learned Counsel has placed on record the papers whereby the assessee was informing the Commissioner of Income Tax-1, Kanpur of the developments that the assessee vide its resolutions dated 05.03.2001 is getting the trust registered under the Society Registration Act, 1961. The copies of communication of the same have been duly filed before the Assessing Officer and me. The Learned Counsel has also placed evidence which has been duly certified by the office of Commissioner of Income Tax-1, Kanpur which is regarding renewal of 80G exemption in the trust for the period 01.04.2004 to 31.03.2007. At the time of filing for exemption, the bye laws of the society have been filed which have been examined alognwith the bye laws of the trust.
The Commissioner of Income Tax-1 vide its letter folio no CIT-I/KNP/Tech/2004- 05/6673 dated 23.03.2005 has required the following documents from the assessee at the time of granting of renewal of 80G.
Please furnish the original deed alongwith a certified copy of the same. Please furnish the documentary evidence of filing of return for the last three years. Please furnish the bank statements of the society for the period 1st April 2003 to 31st March 2004. You have filed Form No. 10 G in duplicate. Please furnish one copy of form no 10G. • Please furnish a certified copy of registration of society. Please furnish the audited final accounts for the assessment year 2001-2002 to 2004-05
The learned Counsel argued that the above issue stands decided by the Commissioner of Income Tax - 1, Kanpur by considering the same at the time of granting of exemption under section 80G of the Income Tax Act, 1961 as 80G cannot be granted unless and until charitable institution has registration under section 12AA of the Income Tax Act, 1961, Further the (earned Counsel also submitted that there was no transfer of property by book entry as the fees is being deposited in the bank account wn.th was opened with constitution as a trust. The transfer of assets by book entry is mere a fiction created by the Assessing officer.
In my View and after going through the aforesaid, I am clear that the above addition needs to be deleted in view of the under-mentioned reasons :-
The most important fact is that above assessment is the assessment of the trust and the trust is registered under section 12AA so in no way the income of the trust can be taxed unless the registration under section 12AA is cancelled which has not been done. This fact is also confirmed the Hon'ble ITAT, in his decision in the assessee's own case for A.Y.2006-07 vide order dt. 08.01.2015. • The above issue already stands answered by the Commissioner of Income tax - 1, granting renewal of exemption under section BOG as all the facts were truly disclosed and placed before him and only after verifying all the facts the renewal of exemption under BOS was granted. It may also be important to note that these facts duly supported by the evidences which are certified by the office of Commissioner of Income Tax - 1, Kanpur were not available at the time of adjudication by my predecessor. • There has been no transfer of properties by means of book entry as the balance sheets filed at the time of renewal of exemption before the Commissioner of Income tax - 1, Kanpur under section BOG do not show any transfer of assets by book entries. Once the issue has been decided by the Commissioner of Income Tax-1, Kanpur the Assessing Officer cannot step into the shoes of the Commissioner and overrule such decision already taken up by him. The above facts have already been considered for A. Y. 2008-09 to 2009-10, and the Dept. has accepted the same by not filing one second appeal to the Hon’ble ITAT, Lucknow. This clearly keeps the issue beyond doubt and further discussion as the issues are already settled. Thus, in the light of the above, I strongly believe that the income shown is income of trust as the issue stands already covered by the 80G renewal by Commissioner of Income Tax-1, Kanpur. Thus the addition made by rejecting exemption under section 12 AA is hereby deleted. The other two grounds of appeal pertains to disallowance of items relating to previous year amounting to Rs.2,99,364/- and charity and donation amounting to Rs.2,000. Charity and Donation being a trust registered under section 12AA of the Income Tax Act, 1961 will be to be allowed. For the other two additions even the contentions of the Learned Counsel are not accepted as following the mercantile system of accounting income and expenses will have to be recognized in the period in which the expenditure is incurred. However, the disallowance of the expenses even if is not considered as a utilization for the purposes of the objects of the trust will have to reduced from the total utilization and then if 85% of the receipts is not expended, then only the remaining amount can be taxed which is not the case i.e. Even after the removal of the items relating to prior period and depreciation 85% of the trust is met. Hence, the same cannot be taxed. Thus, these grounds of appeal are partly allowed.
Aggrieved with such order of the CIT(A), the revenue is in appeal before the Tribunal by raising the following grounds of appeal :-
1. Ld. CIT (A) has erred in law and on facts in partly allowing the appeal of the assessee ignoring the fact that both trust and society have different identity, constitution and objects.
2. Ld. CIT (A) has erred in law and on facts in partly allowing the appeal of the assessee ignoring the fact that the erstwhile trust has transferred its property by book entry to the assessee society which is not permitted as the property of the trust can only be transferred to another trust and that too after taking the approval of the Competent Court of Law.
3. Ld. CIT(A) has erred in law and on facts in partly allowing the appeal of the assessee ignoring the fact that the assessee itself has shown to have given loan of Rs. 1 lacs to Shri Shayam Bihari Mishra Memorial Charitable Society which is a person specified u/s 13 (3) of the Act. The loan was given free of interest in violation of provisions of section 13 (2) (a) which disentitle the society to claim exemption u/s 11 of the I. T. Act.
The Ld. DR strongly supported the order of the Assessing Officer. He submitted that the trust is running 4 schools. He submitted that these schools which are being run by the trust got itself registered as society with the Registrar of Society, Kanpur bearing registration number 273/2001-02 issue on 23.06.2001 by the identical name Shyam Bihari Mishra Memorial Trust. Now the "trust” has transferred its property by book entry to “society” by book entry without obtaining any approval from competent authority. The power given to the trustee of the trust or establish another trust or institution cannot be construed to enable trustee to form society in their individual capacity together with other members and such society could be said to be run by the trust. Notwithstanding above, it is noticed that the assessee itself has given loan of Rs. 1 lacs to Shri Shyam Bihari Mishra Memorial Trust and it is admitted that it is a person specified u/s 13(3) which disentitled the society to claim exemption u/s 11. Thus the society is separate entity different from the trust registered u/s 12A of the ITAT Act, the object of the trust and the society are different therefore the transfer of the property from the trust is not treated as application of income u/s 11 of the IT Act.
Relying on the following decisions he submitted that the exemption granted by the CIT (A) is not correct.
(i) DIT Vs. Charanjiv Charitable Trust [2014] 43 taxmann.com 300 (Delhi)/[2014] 223 Taxman 71 (Delhi)/[2014] 267 CTR 305 (Delhi)] (ii) ACIT Vs. Space Age Research & Technology Foundation, Charitable Trust [2014] 43 taxmann.com 300 (Delhi)/[2014] 223 Taxman 71 (Delhi)/[2014] 267 CTR 305 (Delhi)] (iii) Pt. Kanahya Lal Punj Charitable Trust Vs DIT (2007-TIOL-406- Hon'ble High Court-DEL-IT)
(iv) CIT Vs Vijeta Educational Society (2011-TIOL-591-Hon'ble High Court-ALL-IT)
(v) CIT Vs Audh Educational Society [2011] 15 taxmann.com 235 (Allahabad)/[2011] 203Taxman 166 (Allahabad)
(vi) Budha Vikas Samity Vs CIT [2011] 11 taxmann.com 234 (Patna) /[2011] 199 Taxman 395 (Patna ) / [2011] 242 CTR 324 (Patna)
(vii) Dy. DIT V. India Cements Educational Society {157ITD 1008/46 ITR 80)
(viii) Shri Agarwal Sabha Vs CIT [2013] 40 taxmann.com 170 (Agra- Trib.)/[2014] 61 SOT 127 (Agra – Trib. ).
Ld. Counsel for the assessee on the other hand filed the copy of the decisions of the Tribunal in assessee’s own case for A.Y. 2012-13 vide order dated 15.03.2018 and submitted that the issue has been decided in favour of the assessee by the order of the Tribunal and the appeal filed by the revenue has been dismissed. Therefore, this being a covered matter the issue should be decided in favour of the assessee.
We have considered the rival arguments made by both the sides and perused the orders of the authorities below. We find identical issue had come up before the Tribunal in assessee’s own case in the immediately preceding assessment year wherein the appeal filed by the revenue against the order of the CIT(A) granting exemption u/s 11 was up held. The Tribunal in the said decision, following the order of the Tribunal for A. Y. 2006-07, 2007-08, 2008-09, 2009-10 allowed the claim of exemption u/s 11 made by the assessee and dismissed the appeal filed by the revenue.
Since the Ld. CIT (A) in the instant case, following the decisions of the Tribunal in assessee’s own case for A. Y. 2006-07, 2007-08, 2008-09 and 2009-10 has allowed the claim of exemption by passing an elaborate order which has been reproduced in the preceding paragraph, therefore, in absence of any contrary material brought to our notice, we do not find any infirmity in the order of the CIT (A) allowing the claim of exemption u/s 11. of the I.T. Act. Various decisions relied on by the Ld. DR are distinguishable and not applicable to the facts of the present case. The argument advanced by the Ld. DR has already been considered by the Tribunal in the earlier orders. Under these circumstances we do not find any infirmity in the order of the CIT(A). Accordingly, the same is upheld and the grounds raised by the revenue are dismissed.
In the result, the appeal filed by the revenue is dismissed.
The order pronounced in the open court on 14.09.2018