KAMALAM SAMBANDAM ALAGIRI EDUCATIONAL AND CHARITABLE TRUST,CUDDALORE vs. ITO, DELHI

आदेश / O R D E R

PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter in short "the Ld.CIT(A)”), Delhi, dated 14.02.2024 for the Assessment Year (hereinafter in short "AY”) 2018-19.

(AY 2018-19) Kamalam Sambandam Alagiri Educational & Charitable Trust :: 2 ::

(AY 2018-19) Kamalam Sambandam Alagiri Educational & Charitable Trust :: 3 ::

4.1. The income of an assessee derived from a property held under trust wholly for charitable or religious purposes would qualify for exemption under Section 11 even if it is applied to the incidental and ancillary objects/provided there is a nexus between such incidental and ancillary objects and the charitable purposes. Further such incidental or ancillary purposes must be precisely that - incidental or ancillary purposes. They cannot be the main or dominant purposes unconnected with or unrelated to the charitable purpose. They must be in aid of, pursuant to, in furtherance of and towards achieving the charitable purpose.

4.2. Thus, if in the present case, the assessee's activities were in conformity with its main object, it would necessarily have to incur expenditure in respect of its incidental and ancillary objects. For instance to support research and scientific activities, the assessee would necessarily have to incur expenditure on infrastructure, labour, professional services etc. If however, the main objects are abandoned, it can hardly be said that the expenditure towards the incidental objects was towards a charitable purpose.

4.3. The assessee, however, never engaged itself in any activity relating to its main or dominant object which could be said to be for a charitable purpose. The question, therefore, of its incidental or ancillary objects even having a nexus to the main object does not arise. The assessee has failed to establish that it applied its income towards the charitable purpose.

(AY 2018-19) Kamalam Sambandam Alagiri Educational & Charitable Trust :: 4 :: object, as observed by the Hon’ble Bombay High Court judgment referred above, there was no question of examining nexus of the incidental objects with main object. Therefore, exemption claimed by Trust u/s 11 was denied; and the AO added Rs.6,45,88,536/- which was treated as business income of the assessee and added to the income of assessee.

7.1 The assessee has filed additional evidence during the course of appellate proceedings which does not explain the case of the assessee. However, no petition has been filed by the assessee for admission of additional evidence justifying and explaining as to under which Clause of Rule 46A(1), the assessee's case is covered and as to why the additional evidence should be admitted. Therefore, I am of the considered view that the additional evidence filed by the assessee is not admissible. Accordingly, the same is not admitted. Moreover, the additional evidence filed is incomplete and does not in way buttress the grounds of appeal filed by the assessee. The assessee has a long history of non cooperation and non compliance as clear from his conduct during the assessment proceedings as well as during the appellate proceedings. In the circumstances, I do not see any reason to interfere with the well reasoned and speaking order of the AO. Therefore, the additions of, which was added to the income of Rs. 6,45,88,536/- by the AO is confirmed.

year under consideration (AY 2018-19), while e-filing the return, there was an inadvertent mistake while filling up column in Schedule-AI, wherein, assessee had shown receipts from the main objects as blank; and by mistake had shown receipts from other income as Rs.6,44,88,064/-. The AO taking note of the erroneous entries in Schedule-AI, has inferred that assessee didn’t carry out any activity for the main-object for which it was created, because, no receipt was shown from such activity. And instead, since, assessee had offered Rs.6,44,88,064/- from other income/incidental income, he presumed that assessee didn’t carry out any activity for the primary objects for which it was created; and therefore, the AO added the entire amount as business income. On appeal, before the Ld.CIT(A), even though, the assessee had filed explanation as to how the mistake happened in Schedule AI (supra) and asserted that it had explained to the AO, but for no reasons, he has brushed it aside and had made the impugned addition; and in that process, the assessee filed papers/documents to substantiate its case, but the Ld.CIT(A) simply dismissed the appeal merely on the ground that the assessee didn’t file petition for admission of additional evidences. This impugned action of the Ld.CIT(A) cannot be countenanced. It should be borne in mind that the Ld.CIT(A) is a quasi judicial body and the assessee if aggrieved by the order of the AO, has statutory right to file appeal before the Ld.CIT(A)/First Appellate Authority; and in such an event, the (AY 2018-19) Kamalam Sambandam Alagiri Educational & Charitable Trust :: 6 ::

First Appellate Authority is duty bound to adjudicate the grounds of appeal as stipulated u/s.250(6) of the Act. It is noted that the assessee had filed relevant documents before the AO to show that its income was from educational activities and the very same documents were filed by the assessee before the Ld.CIT(A). Be that as it may, we note that the AO has made addition merely on the strength of the inadvertent mistake reflected in the Schedule AI as noted (supra). The AO has not properly evaluated the explanation given by assessee explaining the mistake.

Therefore, we are inclined to set aside the impugned order of the Ld.CIT(A) and restore the same to the file of JAO for the limited purpose of ascertaining the explanation given by the assessee that college fees of Rs.5,01,00,283/- and other incidental income (total of Rs.6,44,83,064/-) are receipts from the main object of the assessee trust; and it is noted that in earlier AY 2017-18, the AO had accepted the RoI filed by the assessee Trust. And the AO after hearing the assessee to pass order in accordance to law.

Order pronounced on the 25th day of June, 2024, in Chennai.