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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: HON’BLE SHRI SANDEEP GOSAIN & HON’BLE SHRI RAJESH KUMAR
O R D E R SANDEEP GOSAIN, J.M.: Both these appeals arising out of a common order of learned Commissioner of Income Tax (Appeals)-1, Mumbai dated 20.12.2017 and pertains to the assessment years 2012-13 and 2013-14. Following grounds have been raised by the Revenue:-
1. Whether on the facts of the case and in law the Ld. CIT(A) was justified by relying upon the decision of Hon'ble ITAT in assessee's own case for A.Y.2011-12 without appreciating the fact that the Revenue has not been accepted the said decision and filed an appeal before Hon'ble High Court and the issue is still pending for adjudication.
2. Whether on the facts of the case and in law the Ld. CIT(A) was justified by relying upon the decision of Hon'ble ITAT in assessee's own case for A.Y.2011-12 in which the Hon'ble ITAT erred in allowing the claim of exemption u/s 11 inspite of the fact that the trust has violated the provision of section 11 of the 1. T. Act.
3. Whether, on the facts and in the circumstances of the case and in law, the Ld, CIT(A) was right by ignoring the decision in the case of Allahabad Agriculture Institute vs. Union oflndia(291 FTR 116, 119) (All), wherein it has been clearly held "However, where the objects of the trust or institution, which were the basis for grant of registration, are altered after such grant of registration, the very foundation of the registration having been removed by a voluntary act of the assessee, the registration would not survive."
4. Whether on the facts of the case and in law the Ld. CIT(A) was justified by relying upon the decision of Hon'ble ITAT in assessee's own case for A.Y.2011-12 in which the Hon'ble ITAT failed to appreciate the fact that the as the application of funds are much less and the assessee should have spent 85% of the total income on the objects of the trust during the year; and therefore not eligible for exemption u/s 11 of the Income Tax Act, 1961.
5. The appellant prays that the order of the Commissioner of Income Tax (Appeals)-!, Mumbai be set aside and that of the Assessing Officer be restored.
At the very outset, learned AR submitted before us that the grounds raised
in the present appeal by the Revenue have already been decided by the Co-ordinate Bench of ITAT in assessee’s own case in for the A.Y. 2011-12 decided on 26.4.2017. The operative portion is contained in para 6 to 10 which is reproduced below:- “6. We have heard both the parties and perused the orders of the Revenue Authorities as well as the relevant material placed before us. We have also perused the synopsis of the arguments containing the list of findings of the AO and the submissions of the assessee replying to each of such findings. AO alleged that the assessee is into commercial education, changed the name of the trust, failed to inform the Charity Commissioner and the DIT(E), claim of exemption u/s 10(22) or 10(23)(vi) or 11 of the Act etc, volition of the provisions relating to non application of 85% of the total receipts during the year etc.
7. Replying to the said allegations, we find the assessee submitted that the amendments to the objects of the trust in principle are aimed at the PAN India presence and without compromising on the education - charity as the principle object of the trust. The fact of not commercializing any of the charitable educational projects was also emphasized uncompromisingly. Referring to the allegation of change in name of the trust, assessee submitted that the name of trust has always been “Sri Rajasthani Seva Sangh” and the same was never changed in any form at any time. In support, assessee relied on the Registration u/s 12A dt 26/5/1973. Referring to the fact of intimation of the amended objects to the DIT (E), assessee submitted that there has never been any such requirement under the law till 31.3.2017 till the insertion of new clause to section 12A of the Act. Notwithstanding the same, assessee informed that the assessee intimated the o/o DIT(E) on 1.11.2013 prior to the date of the assessment order dated 28th Feb 2014. These submissions were made as part of the proceedings u/s 10(23)(vi) of the Act and the CCIT granted, vide the order dated 30.9.2015, necessary approval in this regard. Referring to the multiple provisions relating to non taxation of the excess profits of this kind, assessee submitted that there is no bar for the assessee to claim exemption of the profits u/s 11 of the Act which there are other provisions in the form of section 10(22) or 10(23)(vi) of the Act. Further, referring to allegation of non utilization of funds as per the provisions, assessee submitted that the applied funds as per the set provisions in this regard. Referring to various decisions, assessee justified the above stating that the utilisation of total receipts for “capital expenditure” should also be considered as application of total receipts. From the above, we find the assessee has filed exhaustive replies and written submissions meeting each and every objection raised by the AO in the assessment order. On consideration of the above submissions, we find, the allegations of the AO are not well founded. On considering the above, the CIT(A) has reversed the order of the AO and granted relief to the assessee.
In this regard the operational paragraphs at 4.9 and 4.14 of the CIT (A) are relevant and the said paragraphs read as under: “4.9. …It is noticed that certain alterations/additions were made by the appellant trust in its MOA in the nature of prefixing title of the trust and for expansion of activities of education already being carried out from year to year. The reasons for such change is stated to be operational requirement and efficiency. Such alterations /additions have been approved by Asst. Commissioner of Charit, Greater Mu,bai Region vide order dated 12the December, 2011. It is also stated that the updated MOA was submitted to the I T D on 1.11.2013. Therefore, … the alterations and modifications under question taken upon 12.12.2011, do not come into operation for the relevant Assessment Year under appeal and could be considered as such for AY 2012-13 onwards and not to the current AY 2011-12. ….under the circumstances, the further discussion on the nature of change and its implications on the exemption u/s 11 of the I T Act is not relevant for the year under the appeal. In view of the above, the findings of the AO for denying exemption u/s 11 of the IT Act for the AY 11-12 are held to be invalid and there is no other material on this issue requiring further consideration because the appellant has confined its activities under the existing approved memborandum registered u/s 12A of the Act”. 8.1. Further, the issue of application of accumulation of total receipts to the extent of 85%, we find the contents of para 4.14 are relevant and the read as under: “4.14 the discussion made by the AO in para 3.4 of the assessment order referring to accumulation of income from year to year is considered by AO in proving the profit motive involved in the operation of the appellant. However, since appellant is claiming exemption u/s 11 of the I T Act 1961 in reference to educational activities, the existence of surplus and profit motive irrelevant in view of Circular no 11/2008 dt 19.12.2008. As for as the issue of required application of 85% of income and accumulation of income within the prescribed limits during the year is concerned, there is no such finding given by the AO hence required compliance u/s 11 of the Act for claiming exemption are held to be fulfilled by the appellant.”
Thus, after considering the timing of the amendments dated 12.12.2011, CIT(A) rightly held that they are inapplicable to the current AY. Further, on the Assessing Officer’s allegation relating to non application of receipts to the extent of 85%, CIT(A) has rightly invoked the provisions of the CBDT Circular and various judgments and they permits for inclusion of capital expenditure‟ also for the purpose of the calculation of 85%.
Therefore, to sum up, the alteration /amendments made to the objects of the trust are not substantial in nature that effects the charitable nature of the existing objects of the trust. They merely expand the operational scope geographically to various states in India only. Therefore, so long as the amendments in objects is restricted to the such scope expansion in India and large number Indians are roped in to reap the benefits of the charitable objects of the Trust, in our opinion, such amendments, if any, ought not work detrimental to the trust in any way. As such, it is on records that the CCIT approved the „charitable nature of the Object of the Trust‟ during the proceedings u/s 10(23)(vi) of the Act. Further, we find that the allegations of the AO ie change in name of the trust, and non-utilisation of the 85% of the total receipts, are ill-conceived. As stated earlier, it is a settled legal proposition that the utilization of receipts for „capital expenditure‟ needs to be considered for the purpose of working out the said 85%. Further also, it is an undisputed fact that, during the year, the assessee has not earned any commercial receipts relatable to the said amendments / alteration of the objects and no new projects of that nature were initiated by the trust in this year for earning such ineligible income for AO to deny the benefits of the provisions of section 11 of the Act. Next it is very important to note that the AO/DIT(E) have not disturbed the existing Registration granted u/s 12A of the Act. Therefore, while the registration u/s 12A is in force and while the objects and the activities of the trust are genuine, denying the benefits of the provisions of section 11 of the Act constitutes premature and unsustainable. In our view, the CIT(A) as discussed in his order vide para 4.9 extracted above is very categorical that the amendments are inapplicable to the year under consideration. Revenue has not given any contrary arguments or decisions that necessitate the reversal of the finding of the CIT(A) by us. Thus, we confirm the CIT (A)’s findings and order for restoring the claim of deduction in favour of the assessee.” 3. After having gone through the decision of the Coordinate Bench of ITAT in assessee’s own case, we found that identical ground has already been decided by the Coordinate Bench and even learned CIT(A) while deciding these grounds have also followed the said order of learned CIT(A). Therefore, following the principles of judicial consistency and judicial discipline, we adopt the same finding and thus these grounds raised
by the Revenue in the present appeal stands dismissed.