ITO (E) 2(3), MUMBAI vs. SRI SRI RADHA DAMODAR CHARITABLE TRUST, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH “F”, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No.3809/Mum/2016 (Assessment Year- 2009-10) ITO (E)-2(3) Shri Radha Damodar Charitable 513, 5th Floor, Trust, Hare Krishna Land, Juhu, Vs. Piramal Chambers, Lalbaug, Mumbai-400049 Mumbai-12. PAN:AAFTS2570L (Appellant) (Respondent) Revenue by : Shri Ram Tiwari (DR) Assessee by : Sh. Nishant Thakkar with Ms. Jasmin Amalsadwala- Advocates. Date of hearing : 20.03.2018 Date of Pronouncement : 04.04.2018 Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue under section 253 of Income Tax Act (‘the Act’) is

directed against the order of Ld. Commissioner of Income-Tax (Appeals)-1,

Mumbai, [for short the ld. CIT(A)] dated 03.03.2016 for Assessment Year

2009-2010. The Revenue has raised the following grounds of appeal:

ITA No. 3809/Mum/2016 - Shri Radha Damodar Charitable Trust 3. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to allow the expenses claimed as rent of Rs.1,08,00,000/-? 4. The Appellant prays that the order of the Commissioner of Income Tax (Appeals)-1, Mumbai be set aside and that of the Assessing Officer be restored.

registration under section 12A of the Act. The assessee is established with the

object to impart relief to poor, education, medical relief and promotion of

vegetarianism, distribution of Prasadam and advancement of other object or

general public utility in furtherance of ethical and philosophical principles of

Krishna Consciousness. The assessee filed return of income Assessment Year

2009-10 on 25.09.2009. With the return of income, the assessee filed audited

report under section 44AB in the Form No. 3CD and claimed exemption under

section 11 of the Act. The assessment was completed on 30.12.2011 under

section 143(3) of the Act. The Assessing Officer while passing the assessment

order disallowed exemption under section 11 of the Act. The Assessing Officer

disallowed the donation of Rs. 2,62,98,362/- and payment of rent Rs.

1,08,00,000/-to ISCON. On appeal before the ld. CIT(A) allowed the

exemption under section 11 to the assessee. Thus, further aggrieved by the

order ld. CIT(A), the Revenue has filed present appeal before us. 3. We have heard the ld. Departmental Representative (AR) for the Revenue and

ld. Authorized Representative (AR) of the assessee and perused the material

available on record. Ground No. 1 & 2 to allowing the exemption under section

11 of the Act. The ld. DR for the Revenue supported the order of Assessing

ITA No. 3809/Mum/2016 - Shri Radha Damodar Charitable Trust Officer. The ld. DR further submits that the Assessing Officer has clearly

brought out on record that the assessee has a sale of Rs. 7,07,25,469/- against the total purchase of Rs. 1,78,26,586/- and indirect expenditure of Rs. 18,8,14,423/- apart from taking the advance of Rs. 2,84,900/- for ‘parties sale’

and Rs. 36,84,500/- for ‘Hall Booking’. The assessee also earned income from ‘Mandap Services’ of Rs. 70,19,000/-. The activities and the receipt of the assessee are on commercial line. There was no element of any charity

conducted by the assessee. All source of income clearly falls in the definition of the business. In addition to the submission of ld DR, the ld. CIT- DR for the Revenue further submits that the aggregate receipt from the activities during

the previous year are in excess of prescribed limit of total receipt. Once the receipts are in excess of prescribed limit the proviso attached with sub-section (15) of section 2 of the Act would attract. 4. On the other hand, the ld. AR of the assessee submits that on identical facts the assessee was denied exemption under section 11 in Assessment Year 2008-09 by Assessing Officer. However, on appeal before the ld. CIT(A), the assessee was allowed exemption. The Revenue filed appeal before the Tribunal,

wherein the order of ld. CIT(A) was sustained vide order dated 18.07.2012 in ITA No. 5773/Mum/2011. Further, similar relief was given to the assessee in appeal for Assessment Year 2006-07 vide ITA No. 2461/Mum/2014 dated

03.11.2016 by following the decision of Tribunal in Assessment Year 2008-09, copies of both the decision of Tribunal are placed on record. The ld. AR of the

ITA No. 3809/Mum/2016 - Shri Radha Damodar Charitable Trust assessee further submits that there is no variance in the fact with the earlier

years and as such the grounds of appeal raised by Revenue are covered in

favour of assessee. 5. We have considered the rival submission of the parties and perused the orders

of authorities below. During the assessment the assessing officer observed that

the assessee was carrying on business activities by distribution of Prasadam

and Mandap services. And that the assessee derived a sale of Rs.70,725,469/-,

and purchases are of Rs. 17,826,586/- and indirect expenses of Rs.18,814,423/-

apart from the other items debited to the profit and loss account. The primarily

reason is that the assessee had generated substantial revenue. The ld CIT(A)

allowed the appeal of the assessee on the basis of order of ld CIT(A) in

assessment year 2010-11 dated 28.04.2015. The order of CIT(A) for

assessment year 2010-11 is based on the order of Tribunal in assessment year

2008-09. We have noted that the assessee was denied similar deductions in

assessment year 2008-09. On appeal ld. Commissioner (Appeals) the assessee

was allowed the relief. The Revenue filed appeal before Tribunal, the appeal of

the revenue was dismissed vide order dated 18.07.2012 in ITA

No.5773/M/2011. For appreciation of order the relevant part of the order is

extracted below;

“7. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that the principle objects of the trust include promotion of vegetarianism and distribution of Prasad. It was submitted by the ld. counsel

ITA No. 3809/Mum/2016 - Shri Radha Damodar Charitable Trust for the assessee that by not using onion and garlic in the food preparations, the assessee is propagating the Vaishnavi principles, thereby furthering the principles of Krishna consciousness and promoting the vegetarianism. According to the A.O. the assessee is not acting as chartable organization. The entire character and focus of the assessee has become totally commercial. There is generation of huge profits year after year, a part of which 7 ITA 5773/M/2011 is diverted to the related concern. Thus, the activities are being carried on commercial lines and also not in conformity with the objects of the assessee trust. However, we find that since the principle object of the trust includes promotion of vegetarianism, the business of preparing vegetarian food items and selling the same is very much incidental to the object of the assessee trust and such business can be conducted by a charitable trust as per provisions of section 11(4A) of the Act.

"3. We have considered the arguments advanced by both sides and perused the orders passed by the revenue authorities and the paper book filed by the assessee. We are of the considered opinion that no interference is called for in the impugned order of the CIT(A). The Assessing Officer held in his order that there is no charitable activity done by the trust but the trust is doing a business and the income from the business also was not utilized on any object of the trust and hence exemption under sec. 11 is not allowable in the present case. In his impugned order, the CIT(A) accepted the contention of the assessee holding as under:- "I have perused the contention raised by the appellant as well as in the assessment order. The figure of net profit as worked out by the assessing officer is incorrect and the net profit actually comes to Rs. 5.29 lakhs. The amount of Rs. 1.20 lakhs also does not represent sale proceeds as alleged by the assessing officer and is only a donation from one Public Charitable Trust to another. This incorrect fact as mentioned in the assessment order suggests that the accounts were not properly perused by the assessing officer and he was deeply influenced by the bumper profit in arriving at the conclusion that the appellant was conducting the business solely with the profit motive. Besides, the assessing officer has simply ignored the main object of the 5

ITA No. 3809/Mum/2016 - Shri Radha Damodar Charitable Trust appellant that is promotion of vegetarianism. The business of preparing vegetarian food items and selling the same was very much incidental to the objects of the appellant and such business can be of section 11(4A). In case the public charitable trust is engaged in a business which is incidental to its object the same will not disqualify the charitable trust from exemption u/s 11. In my 8 ITA 5773/M/2011 opinion the preparation of vegetarian food items and selling the same was mainly for popularizing the vegetarian food habits and in this way the appellant was engaged in promoting the vegetarianism among the people, which is undoubtedly a charitable object of the appellant. The major portion of the income received by the appellant was donated to ISKCON which is a public charitable trust of worldwide recognition and reputation and any donation from one charitable trust to another constitute application of income for the charitable purposes. The ISKCON are also publishing booklets and brochures for the promotion of vegetarianism among the people. Thus the contribution of the appellant to the ISKCON also helps to promote its own object indirectly. In view of the above discussion it is held that the appellant trust is conducting the business which is very much incidental to its charitable objects and the income from such business is applied for the fulfillment of charitable purposes and the appellant is eligible for the benefit of exemption u/s. 11. In view of the clear cut provision of section 11(4A), the exemption u/s 11(1) has to be allowed to the appellant. The Assessing Officer is directed to allow the same and to grant other consequential benefits of application and accumulation of income to the appellant trust u/s 11(1). However, the accumulation u/s 11(1) is hereby restricted to the extent of positive income which remain after allowing the expenses of the appellant trust for the application of income for its object. On a careful consideration of the matter, we fully agree with the reasoning given by the CIT(A) for coming to the conclusion that the assessee trust is eligible for the benefit of exemption under sec. 11 of the I.T. Act and uphold his order."

ITA No. 3809/Mum/2016 - Shri Radha Damodar Charitable Trust take the necessary steps for the betterment of humanity, which is undoubtedly a charitable object of the assessee. The major portion of the income received by the assessee was donated to ISKCON which is a Public Charitable Trust of worldwide recognition and reputation and any donation from one charitable trust to another charitable trust constitute application of income for the charitable purposes.

"In the present case, the assessee is not claiming double deduction on account of depreciation as has been suggested by learned counsel for the Revenue. The income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue. The judgment of the hon'ble Supreme Court in Escorts Ltd. case [1993] 199 ITR 43 is distinguishable for the above reasons. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for purposes of section 11. The questions proposed have, thus, to be answered against the Revenue and in favour of the assessee."

ITA No. 3809/Mum/2016 - Shri Radha Damodar Charitable Trust would constitute application of income for the charitable purposes according to the provisions of the Income Tax Act. This being so and keeping in view that the certificate u/s 80G of the Act for the period 1-4-2005 to 31-3-2008 has been granted to the ISKCON by the DIT (Exemption), Mumbai vide certificate dtd. 4- 4-2005, we are of the view that the amount of donation to be treated as spent for the charitable purposes of the trust and accordingly we are inclined to uphold the findings of the ld. CIT(A) in allowing both the claim of the assessee. The grounds taken by the Revenue are, therefore, rejected.”

Vs. Womens India Trust (2015) 379 ITR 506 (Bom) had upheld the

observations of the Tribunal that where a trust formed to carry out the object of

education and development of natural talents of the people having special

skills, more particularly the women in the society, had in the course of

imparting to them training in the field of catering, stitching, toy making, etc.,

therein carried out sale of certain finished products, viz. pickles, jams, etc.

which were in the course of such training produced by them, through shops,

exhibitions and personal contracts, the same could not be held to be activities

in the nature of trade, commerce or business as contemplated in the proviso of

Sec. 2(15).

(Exemption) Vs. The Chartered Accountant Study Circle (2012) 250 CTR 70

(Mad), had the occasion to .deliberate on the scope and gamut of the first

proviso of Sec. 2(15) in the case of an assessee trust whose objects among

other things was to conduct periodical meetings on professional subjects. The

High Court observed that the publishing and sale of books, booklets etc. on 8

ITA No. 3809/Mum/2016 - Shri Radha Damodar Charitable Trust professional subjects related to audit and not on any other subject by the

assessee. The sale of the books was primarily made to the members of the society, as well as made available to the general public, with the aim to help the society to get better, well-equipped and skilled set of Chartered

Accountants for maintaining audit quality, which however could not be construed as a trade or commerce or business. Thus, the High Court observed that the activities of the assessee trust in publishing and selling books of

professional interest, which were meant to be used as a reference material even by the general public as well as the professionals in respect of Bank Audit, Tax Audit, etc., could not be construed as a commercial activity. 8. We further find that a similar view had also been taken by the Hon'ble High Court of Delhi in the case of The Institute of Chartered Accountants of India Vs, Director General of Income (Tax (Exemption) (2013) 260 CTR l (Del).

The High Court held that no doubt the assessee institute was holding classes and providing coaching facilities for the members and articled clerks etc. who wanted to appear in the examination conducted by the Institute of Chartered Accountants, but these classes were not held for coaching or for appearance in

an examination conducted by some other entity. The High Court observed that as conducting of coaching classes was with the predominant object of maintaining and upholding the standards of the accountancy profession and in

furtherance of the object and purpose for which the institute was established, i.e., professional excellence and promotion of accountancy as a preferred

ITA No. 3809/Mum/2016 - Shri Radha Damodar Charitable Trust profession, and to sharpen the skills and knowledge of the members of Institute

who would attend the courses/lectures etc., therefore, the activities of

providing coaching classes or undertaking campus placement interviews for a

fee were in relation to the main object of the assessee institute, which could not

be held to be trade, business or commerce. The High Court while concluding

as hereinabove, had observed as under:

"After going through the provisions of the ICAI Act and the Regulations framed therein as well as various activities carried on by the petitioner, we are of the view that the petitioner institute does not carry on any business, trade or commerce. The activity of imparting education in the field of accountancy and conducting courses both at pre-qualification as well as post- qualification level are activities in furtherance of the object for which the petitioner has been constituted. Activities of providing coaching classes or undertaking campus placement interviews for a fee are in relation to the main object of the petitioner which as stated earlier cannot be held to be trade, business or commerce. Accordingly, even though fees are charged by the petitioner institute for providing coaching classes and for holding interviews with respect to campus placement, the said activities cannot be stated to be rendering service in relation to any trade, commerce or business as such activities are undertaken by the petitioner institute in furtherance of its main object which as held earlier are not trade, commerce or business.” 9. We have given a thoughtful our consideration on the facts qua the issue before

us. We find that the activities of the assessee trust were directed for promoting

its objects of vegetarianism and distribution of Prasadam and food to the

general public to support the cause of Lord Krishna consciousness movement.

The assessee trust follows the principle of Bhagwat Gita while Cooking,

selling and preparation of vegetarian Prasadam. The activities of the assessee

are essential to spread the thought of understanding the Lord Krishna

consciousness and vegetarianism. The assessing officer has not disputed that

the assessee trust is not spreading the Krishna consciousness and 10

ITA No. 3809/Mum/2016 - Shri Radha Damodar Charitable Trust vegetarianism. The assessing officer has not brought any material on record to

show that distribution of Prasadam has any commercial angel. We are of the

considered view that the providing of the aforesaid services is indispensably

required to facilitate the furtherance of the very interest of the Lord Krishna

consciousness in the society. Even, we are of a strong conviction that in the

absence of the aforesaid activities of the assessee trust, which as observed by

us hereinabove can safely be held to have been indispensably required to

achieve the object of the assessee trust.

the order passed by ld. CIT (A) in granting the exemption under section 11 of

the Act.

Sd/- Sd/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 04/04/2018 S.K.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai Guard file.�ािपत�ितC 6.

BY ORDER (Asstt.Registrar) ITAT, Mumbai