GUJRATI MAHAMANDAL HATI BHATA,AJMER vs. INCOME TAX OFFICER (EXEMPTION), AJMER

आयकरअपीलीय अधिकरण] जयपुरन्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, ‘A” JAIPUR JhlanhixkslkbZ]U;kf;dlnL; ,oaJhjkBksMdeys'kt;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 810/JP/2018 fu/kZkj.k o"kZ@Assessment Year : 2013-14 cuke M/s. Gujrati Mahamandal The ITO (Exemption) Hati Bhata, Vs. Ajmer Ajmer LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAATG 0756 B vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Ankur Saliga, CA jktLo dh vksj ls@Revenue by: Smt. Monisha Choudhary, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing : 19/07/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 24/08/2023 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This is an appeal filed by the asseseess against the order of the ld. CIT(A)- Ajmer dated 19-03-2018 for the assessment year 2013-14 raising therein following grounds of appeal. ‘’In the facts & circumstances of the case the Ld. CIT Appeals, Ajmer has erred in not admitting the appeal for order passed u/s, 143(3) 1.T. Act 1. The assesse has filed an appeal with Ld CIT(appeals) Ajmer against the order dated 16/08/2016 passed 143(3) IT. Act ITO (Exemption). Ajmer against the addition of Rs 2580033/- and charging tax thereon without appreciating the full facts and circumstances of the case. The Difference of addition made on different account was quite unreasonable and unjustified.

2 ITA NO. 810/JP/2018 GUJRATI MAHAMANDAL VS ITO (EXEMPTION), AJMER 2. That the Ld CIT (appeals) has erred in conforming the order of the learned ITO (Exemption) Ajmer in respect of different accounts (Mention Below) was quite unreasonable and unjustified. 3. That the addition an account of development fees for Rs. 881362.50 was wrong as it is a corpus fund for building construction cannot become part of Income as it is capital assets and will be used in development of Building Constructions. 4. The addition made for surplus of Rs. 215235/- for both funds of students is quite wrong and unjustified. The Boys Fund. surplus of students fund can never be utilized at the discretion of Management but it has been controlled by Head of the institution for the welfare of students only. 5. That the disallowance of corpus donation of Rs. 108340/ Received From Manju Mittal (Rs 22500/-), Ram singh (Rs 34880/-) and Maitra saraswat (Rs 51000/-) is quite wrong and unjustified in view of complete address & name with PAN supplied, As Previously the address supplied was old as per records available. 6. That the disallowance of capital expenditure on account of Inverter Rs 14000/- is also wrong as payment is being made by chque. 7. That the Ld CIT(appeals) has erred in not following the Board itself in Circular No. 52 dated December 30, 1970 which has accepted fixed deposit for duration of more than six months as a capital asset. Similar view has been taken in CIT v Hindusthan Welfare Trust (1994) 206 ITR 138 (Cal). The CBDT circular No 52 dated December 30,1970 has accepted fixed deposit for duration of more than six month as a capital asset. Fixed deposits (FDs), debentures and bonds are ordinarily capital assets Hence Investment in Fixed Deposit should be treated as Capital Expenditure. 8. That the Ld CIT(appeals) has erred in not allowing exemption benefit u/s 10 (23C) (iiirad) as against section 11 and hence there is no liability on school income u/s 10 (23C) (iiirad) as our society is running educational institution only and not for purposes of profit and annual receipt is below one crore. A separate books of Accounts is being Kept. Merely a society is doing two different charitable activity the benefit of exemption cannot be denied. 9. Form 10 is already submitted but misplaced by department in file transfer the additional Commissioner has given a direction to give the benefit after considering the Resolution, but AO was failed to do so. 10. That the order is bad in law. 11.The Appellant has not taken the following grounds of appeal at CIT (Appeal). Ajmer request your honor to please consider the following grounds with above mention grounds of appeal as it will have material affect.

3 ITA NO. 810/JP/2018 GUJRATI MAHAMANDAL VS ITO (EXEMPTION), AJMER (i) In reference to Addition of surplus of boys fund Rs 215235/- was added twice in Income and needs to be corrected. (ii) In reference to disallowance of capital expenses Rs 14000/- Inverter was added twice while calculating Tax liability.’

2.1 In this case, it will be worthwhile to mention that earlier the ITAT Jaipur Bench vide its order dated 26-09-2022 had dismissed the appeal of the assessee ex-parte in view of the documents available on record as well as considering the order of the ld. CIT(A), Ajmer dated 19-03-2018 as none attended the case on behalf of the assessee on date of hearing on 07-09-2022. 2.2 Subsequently, the Assessee filed the Misc. application No. 4/JP/2023 (arising out of ITA No.810/JP/2018 for the assessment year 2013-14 ) praying therein to recall the ex-parte order dated 20-02-2023. In view of the arguments/ submissions of both the parties, the Bench recalled its order dated 20-02-2023 and directed the Registry to list the appeal of the assessee for fresh hearing in due course of time. 2.3 Now the appeal of the assessee is refixed for hearing on 19-07-2023 wherein both the parties appeared for arguments. 3.1 Brief facts of the case are that the return of income was filed by the asseessee trust on 29-09-2013 declaring Nil total income. The case was selected for the scrutiny under CASS. Notice u/s 143(2) of the Act was issued on 22-09-2014

4 ITA NO. 810/JP/2018 GUJRATI MAHAMANDAL VS ITO (EXEMPTION), AJMER which was served upon the assessee fixing the date of hearing on 29-09-2014. Subsequently notices u/s 142(1) of the Act and the query letter were issued from time to time. In response to notices issued the ld. AR of the assessee attended the proceedings. It is also noted that the assessee is a Registered as a Society under the Registration of Societies Act, 1958 and assessee is also registered u/s 12A(a) of the Act vide letter No. SIB/Sec12A(a)/CIT.Raj-1/2809 dated 22-01-1976 which is engaged in imparting education to the students alongwith other activities. It is further noted that the assesses society is in appeal against the order of the ld. CIT(A) who had confirmed the action of the AO as mentioned in the assessment order. 4.1 During the course of hearing, the Bench noted that the Ground No. 1, 2, 10 & 11 of the assessee are general in nature which do not require any adjudication for which the ld. AR of the assessee during the course of hearing has raised no point of argument. Hence, the Ground Nos. 1, 2, 10 & 11 of the assessee are dismissed being them as general in nature. 4.1 Apropos Ground No. 3 of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:- ‘’5.3 I have gone through the assessment order, statement of facts, ground of appeal, written submission, remand report and rejoinder carefully. It is seen that the appellant has taken the 50% of development fee i.e. Rs.8,81,362/- directly to the Balance Sheet on the ground that this was donation for the specific object. i.e. corpus

5 ITA NO. 810/JP/2018 GUJRATI MAHAMANDAL VS ITO (EXEMPTION), AJMER donation. The assessee has not produced any evidence to show that 50% of development was the donation received with the specific direction for corpus fund. Therefore, the addition of Rs.8,81,362/- is hereby confirmed.’’

4.2 During the course of hearing, the ld. AR of the assessee has not pressed the Ground No. 3 for which the ld. DR has no objection. Hence, the Ground No. 3 is dismissed being not pressed. 5.1 Apropos Ground No. 4 of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:- ‘’6.3 I have gone through the assessment order, statement of facts, ground of appeal, written submission, remand report and rejoinder carefully. It is seen that both the schools are run by the Trust only but the appellant has not taken into account surplus of both these schools into account while consolidating the total accounts of the Trust. Therefore, the addition of Rs.2,15,235/- made by the AO is held to be in accordance with the provisions of law. Hence, this ground of appeal is dismissed.’’

5.2 During the course of hearing, the ld. AR submitted that the addition made for surplus of Rs. 2,15,235/- for both funds of students is quite wrong and unjustified. The Boys Fund surplus of students fund can never be utilized at the discretion of Management but it has been controlled by Head of the institution for the welfare of students only. He further submitted that addition made for surplus of Rs.2,15,235/- for both funds of students is quite wrong and illegal as it is also

6 ITA NO. 810/JP/2018 GUJRATI MAHAMANDAL VS ITO (EXEMPTION), AJMER covered other in Section 10 (23C)(iii) which is fully exempted i.e. total income not form part of income. 5.3 On the other hand, the ld. DR supported the order of the ld . CIT(A). 5.4 We have heard both the parties and perused the materials available on record. During the course of assessment proceedings the AO made the addition of Rs.2,15,235/- by observing that the assessee society neither had taken the income/ the expenditure of the funds nor did it take the surplus so generated of both funds while computing the surplus of the society in consolidation. Thus a sum of Rs.2,15,235/- being surplus of both funds was not taken into account while consolidating the total accounts. In first appeal, the ld. CIT(A) has confirmed the addition of Rs.2,15,235/- made by the AO. The Bench has noted the submission of the ld. AR of the assessee and found that the submission made by the ld. AR of the assessee is appropriate as surplus fund can never by utilized at the discretion of the Management as it is controlled by the Head of the Institution for the welfare of students only. In this view of the matter, we concur with the submissions of the ld. AR of the assessee and thus the Ground No. 4 of the assessee is allowed. 6.1 Apropos Ground No. 5 of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:- ‘’7.3 I have gone through the assessment order, statement of facts, ground of appeal, written submission, remand report and rejoinder carefully. It is seen that appellant had failed even to furnish

7 ITA NO. 810/JP/2018 GUJRATI MAHAMANDAL VS ITO (EXEMPTION), AJMER complete address of the person from whom corpus donation of Rs.1,08,340/- was claimed to have been received by the appellant. Therefore, the addition of Rs.1,08,340/- made by the AO is hereby confirmed.’’ 6.2 During the course of hearing, the ld. submitted that disallowance of corpus donation of Rs.1,08,345/- out of Rs.3,62,340/- is wrong and unjustified in view of the complete address and name with PAN supplied by the assesee and nobody denied from giving donation to the assessee trust. 6.3 On the other hand, the ld. DR supported the order of the ld. CIT(A). 6.4 We have heard both the parties and perused the materials available on record. It is noted that the ld. AR of the assessee during the course of hearing produced the certificates from the donors who confirmed the above payments made to the assessee trust at PBP 42-45. Taking into consideration confirmation by the donors for above payments, we allow the Ground No. 5 of the assessee. 7.1 Apropos Ground No. 6 of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:-

‘’8.3 I have gone through the assessment order, statement of facts, ground of appeal, written submission, remand report and rejoinder carefully…… Further, the addition of Rs.14,000/- made by the AO in respect of the inverter claimed as application in form of purchase of inverter is also confirmed because the appellant has failed to furnish any documentary evidence to substantiate the claim.’’

8 ITA NO. 810/JP/2018 GUJRATI MAHAMANDAL VS ITO (EXEMPTION), AJMER 7.2 During the course of hearing, the ld. AR submitted that the ld. CIT(A) has confirmed the disallowance of small amount of 14,000/- for purchase of Invertor for the use of students of school for which he had confirmed that the invertor was really purchased for welfare of the students and the payment of the Invoice No. 5186 dated 27-04-2012 amounting to Rs.14,000/- was made through cheque bearing No.546575 dated 27-04-2012 to the party M/s. Kiran Battery Co., Ajmer. 7.3 On the other hand, the ld. DR supported the order of the ld. CIT(A). 7.4 We have heard both the parties and perused the materials available on record. At the time of hearing, the ld. AR placed details of payment of Rs.14,000/- for purchase of Invertor for the welfare of the students of the school. Hence, looking to the fairness of the assessee with regard to payment of Rs.14,000/- to the party M/s.Kiran Battery Co. Ajmer, we allow the Ground No.6 of the assessee. 8.1 Apropos Ground No. 7 & 8 of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:- ‘’9.3 I have gone through the assessment order, statement of facts, ground of appeal, written submission, remand report and rejoinder carefully. The AO has taxed the net surplus of Rs.25,80,833/- as the appellant had failed to apply 85% of total receipts of Rs.1,36,01,164/-. The appellant was required to apply Rs.1,15,60,989/- whereas the appellant had applied only Rs.1,08,63,975/-. The appellant had not submitted Form No. 10 as

9 ITA NO. 810/JP/2018 GUJRATI MAHAMANDAL VS ITO (EXEMPTION), AJMER required u/s 11(2)(a) of the Act before the due date of filing of return of income. Thus, the accumulation of income was more than 15% of the gross receipts. As the appellant had failed to fulfill the condition laid down u/s 11 (2)(a), hence the action of the AO denying the benefit of Section 11(2) of the appellant is held to be fully justified and in accordance with the provisions of law. Further, the AO has also discussed the objects of the Trust. I agree with the view of the AO that the Trust was not existing solely for education purposes. Therefore, the exemption denied by the AO u/s 10(23c)(iiiad) is also held to be valid and in accordance with the provisions of law. Hence, this ground of appeal is dismissed.’’

8.2 After hearing both the parties and perusing the materials available on record, the Bench noted that the ld. AR of the assessee has not pressed the Ground No. 7 which is dismissed being not pressed. As regards the Ground No.8 of the assessee, the Bench noted that it is not tenable in the eyes of law and thus the same is dismissed. 9.1 In Ground No. 9, the assessee is aggrieved that Form 10 is already submitted but misplaced by department in file transfer the additional Commissioner has given a direction to give the benefit after considering the Resolution, but AO was failed to do so.

10 ITA NO. 810/JP/2018 GUJRATI MAHAMANDAL VS ITO (EXEMPTION), AJMER 9.2 During the course of hearing, the ld. AR of the assessee submitted that Form 10 was submitted by the assessee but it was misplaced by the AO in file transfer for which the additional Commissioner has given a direction to the AO to give the benefit after considering the Resolution, but AO was failed to do so. This direction was given by the Addl. CIT (Exemption) Shri Rajendra Singh vide his letter No. Addl. CIT(E)/JPR/2015-16/144A/1011 dated 21-03-2016 to the Income Tax Officer (Exemption) Ajmer. The contents of the direction are reproduced as under:- Form 10 Regarding the contention of assessee of alleging the department of misplacing copy of Form 10 during transfer of file appears to be misplaced and misconstrued the AO is directed to allow or otherwise the benefit of filing form 10 as per law / rules.’’

9.3 On the other hand, the ld. DR supported the order of the ld.CIT(A) 9.4 After hearing both the parties and perusing the materials available on record, this issue is restored to the file of the AO with the direction to act upon as per the instruction of the ld. Addl.CIT vide his letter dated 21-03-2016. Hence, the Ground No.9 of the assessee is allowed for statistical purposes.

11 ITA NO. 810/JP/2018 GUJRATI MAHAMANDAL VS ITO (EXEMPTION), AJMER

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