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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: Shri Joginder Singh, JM & Shri Rajesh Kumar, AM
O R D E R Per Rajesh Kumar, Accountant Member
The aforesaid appeal has been filed by the assessee against the impugned order dated 14.03.2014, passed by the CIT(A)- I, Mumbai, for the assessment year 2010-11.The assessee filed revised revised grounds of appeal vide letter dated 14.10.2015 as the original arguments were lengthy and argumentative. The revised grounds raised by the assessee are as under:-
I. Denial of Exemption u/s.11 1. The learned CIT(A) erred in denying the exemption u/s 11 and assessing income at Rs.12,86,05,122/- as against the NIL income shown by the Appellant.
2. The learned CIT(A) failed to appreciate that the appellant Trust has not made any changes in the objects of the Trust during the relevant year,
however, amendment which were made in the year 1975 and 1979 were mainly enlarging the scope of the charitable objects with the permission of the Charity Commissioner, hence, denial of exemption was not justified. Therefore exemption under section 11 may be granted.
II. Enhancement of Income
3. The learned CIT(A) erred in enhancing the income of the Trust from Rs.98,19,681/- to Rs.12,86,05,122/- on the ground that assessee has not maintained separate books of accounts for claim u/s35AC, and the Trust has not spent 85% of total income, without issuing the specific
notice or providing any opportunity to the assessee for enhancement ofn the said issues, hence, order CIT(A) for enhancing the taxable income at Rs.12,86,05,122/- may be quashed.
Without prejudice to above, the assesse has maintained separate
Accounts as per Section 35AC and has spent 90.18% of 4receipts which are part of Accounts produce before AO and CIT(A), hence the enhancement is bad in law and the same may be quashed.
The issue raised in ground nos. 1 & 2 is against the confirmation of the action of the AO denying exemption u/s.11 of the Act.
The brief facts of the case are that the assessee is a charitable trust registered u/s 12A with the D.I.T.(E), Mumbai, vide Registration No.BMY/TR/B(a)/2/73-74 dated 27.11.1973 and with Charity Commissioner, Mumbai, vide Regn. No.E-3995. The assessee filed its return of income on 15.10.2010 declaring income at ‘nil’. The case of the assessee was selected for scrutiny and notice u/s. 143(2) and 142(1) were issued and duly served on the assessee. The assessee claimed exemption u/s. 11 of the Act, which was denied by the AO on the ground that the trust deed of the assessee was amended twice vide order of the Charity Commissioner dated 28.03.1975 and again on 19.07.1979 respectively u/s. 50A of BPT Act 1950. The AO held that since the original trust deed on the basis of which exemption u/s. 12A was granted stands altered, the exemption/registration granted u/s. 12A ceases to exist as the amended trust deed was not filed before the Commissioner and no revised registration was obtained by the assessee.
4. Aggrieved by the order of the AO, the assessee preferred appeal before the CIT(A), who not only dismissed the appeal of the assessee but also enhanced the assessment from Rs.98,19,681/- to Rs.12,86,05,122/- on the ground that the assessee had not maintained separate books of accounts for its claim u/s. 35AC of the Act and the Trust had not spent 85% of its income.
The learned AR submitted before us that the assessment of the assessee was made in the earlier years also viz. A.Ys 2004-05, 2007-08 and 2008-09 and exemption u/s. 11/12 of the Act were allowed and the returned income of the Trust was accepted without raising any said objections as to revised registration u/s. 12A.
Further, the learned AR brought to our notice that similar issue was raised by the revenue in A.Y. 2009-10, which was decided in favour of the assessee by the CIT(A) and the revenue preferred appeal before the ITAT, which was decided vide order dated 21.08.2015 in favour of the assessee. The learned counsel submitted that the case of the assessee is thus, covered in its favour by the said order of the Tribunal.
Per contra, the learned DR relied upon the order of the authorities below on this issue.
We have heard the rival submissions and perused the material on record and find that the Tribunal in for A.Y. 2009-10 decided same issue in favour of the assessee its own case by the coordinate bench in AY 2009-10 and thus the issue for the year under appeal is covered in favour of the assessee.
The relevant paras of the said order are reproduced as under:
“7. We have carefully considered the rival submission. In the present case, as the aforesaid discussion shows, the only plea raised by the Assessing Officer to deny the exemption under section 11/12 of the Act is to the effect that there has been an addition in the object clause of the assessee Trust, subsequent to the grant of registration under section 12A of the Act, which has not been intimated to DIT(E). Thus, as per the Assessing Officer, it has to be presumed that the registration originally granted under section 12A of the Act does not survive, which would lead to the denial of the benefits of section 11/12 of the Act. 7.1 Factually speaking, the respondent assessee is a Trust set up on the basis of Trust Deed dated 19/3/1969 and it has undergone amendments vide orders of the Charity Commissioner dated 20/3/1975 and19/7/1979 under section 50A of the Bombay Public Trust Act, 1952, which is subsequent to the registration of the Trust under section 12A of the Act as a ‘charitable institution’ dated 27/11/1973. 7.2 There is no denying the fact that so far as the objects contained in the original Trust Deed dated 19/3/1969 are concerned, they are charitable in nature because not only assessee was granted registration under section 12A of the Act on 27/11/1973 but it has also been allowed exemption under section 11/12 of the Act. The moot question is as to whether assessee can be said to be a charitable institution even after the amendment to the Trust Deed dated 20/3/1975 and 19/7/1979. The aforesaid point is relevant because in the impugned order of assessment there is no finding by the Assessing Officer that the activities added in 1975 and 1979 do not fall within the purview of charitable purpose. In fact the only basis for the Assessing Officer to have denied the exemption under section 11/12 of the Act is the failure of the assessee to intimate the amendments of 1975 and 1979 and reregister with the DIT(Exemption) for the purposes of section 12A of the Act. The registration granted to the assessee under section 12A of the Act can be cancelled only as per the statutory requirements, which prescribe that either the activities being carried out are not genuine or that they are not being carried out in accordance with the objects, meaning thereby that the amended objects being pursued are non charitable. 7.3 In fact the decision in the case of Board of Control for Cricket in India. vs. ITO (supra) relied upon by the Ld. Departmental Representative before us is a case where the amendments in the Memorandum of Association were found to be ‘substantial and material changes’ and, therefore, the Tribunal opined that such activities were required to be examined by the income tax authorities so as to enable the assessee to continue availing the benefits of section 11/12 of the Act. Notably, in this context, the impugned order of the Assessing Officer does not contain any adverse finding as to whether the additions in the objects have rendered the activities of the assessee as non- charitable. 7.4 In our considered opinion, a mere non-intimation of the amendments in the Trust Deed to the Department cannot ipso-facto lead to cancellation of registration because the statutory requirement of cancellation of registration contained in section 12AA(3) of the Act prescribe that the cancellation of registration cannot be effectuated unless a case is made out that the new objects do not fit-in with the existing objects (i.e. new objects are ‘non- charitable’ in nature) or that the activities are in-genuine. A pertinent question is as to whether, on facts, can such a finding be reached in the present case. For this purpose, we have perused the amendments to the Trust Deed made in 1975 and 1979, which have been tabulated by the Assessing Officer in the assessment order and a comparative chart has also been placed in the Paper Book filed before us at pages 52 to 53. A perusal of the same shows that in the original Trust Deed the objects of the assessee are in the sphere of education purpose, medical purpose and relief of poverty, etc. In the context of the objects of medical purpose and relief to poverty, the activities enumerated inter-alia, included:- “aid and relief in kinds such as giving clothes, grains and free distribution of medicines or providing free medical aid.” Subsequently, in the 1975 amendment, the activities of aid or relief in kind has been supplemented by enabling providing of loan and relief in cash also. 7.5 Further, the medical purpose and other objects meant for the benefit of general public in India was contained in the original deed in the context of giving donations to hospitals and charitable dispensaries, etc. This aspect was extended in the amendment of 1975 to include running and managing of hospitals, Panjarapoles, etc., notably, in the original Trust Deed also, objects of the assessee included the sphere of schools, colleges, educational institutions, etc. 7.6 Thirdly, in the original Trust Deed the assessee envisaged help by way grants and contributions to institutions carrying on the work of public charitable purpose in India. In the amendment made in 1975 such activities was supplemented by incorporating the activity of giving loans alongwith the activity of giving grants and contributions to institutions carrying on work for public charitable purposes in India. 7.7 Lastly, in the original Trust Deed assessee was having activity of providing grants and contributions to institutions established for carrying on an object of general public utility not involving an activity for profit. In the amendment made in 1979, it was incorporated that assessee would also promote rural development, including the programme of promoting socio and economic welfare and up-lift in rural areas. 7.8 In the background of the above analysis of the changes in the object clause, in our view, there is no change in the tone and tenor of the objects pursued by the assessee in a real sense. In fact, our aforesaid analysis of the changes in the Trust deed, do not reflect that the objects of the assessee Trust has undergone changes but the amendments are merely enabling clauses which provide only ‘means’ or ‘power’ to achieve objects in the Trust Deed. In our considered opinion, having regard to the aforesaid fact situation, it would be inappropriate to construe the amendments of 1957 and 1979 as insertions of any new objects of the assessee Trust, rather the amendments only seek to provide enabling powers to the Trust to accomplish its original objects which are in the fields of educational purpose, medical purpose, relief of poverty and objects of general public utility not involving carrying on any activity for profit. In fact, Hon’ble Bombay High Court in the case of Deccan Gymkhana vs. CIT, 262 ITR 459 (Bom) as well as the judgment of Hon’ble Supreme Court in the case of PHD Chamber of Commerce & Industry vs. DIT,130 ITR 186 (SC) has laid down that a distinction has to be made between the ‘purpose’ of a Trust and the ‘powers’ conferred upon the Trustees as being incidental to accomplish the purpose of the Trust. In our considered opinion, the amendments in 1975 &1979, which have been noticed above only seek to enable the Trustees to carry out activities for accomplishing the purpose of the Trust which we have found earlier to be for a ‘charitable purpose’ as per original Trust deed. Therefore, factually speaking, even if one has to consider the amendments of 1975 & 1979 made in the Trust Deed, in our view it does not signify that the registration granted to the assessee on 27/11/1973 under section 12A of the Act is rendered nugatory. 7.9 At the time of hearing, the Ld. Departmental Representative had relied upon the judgment of the Mumbai Bench of the Tribunal in the case Board of Control for Cricket in India. (supra) as also the judgment of Hon’ble Allahabad High Court in the case of Allahabad Agricultural Institute & Another (supra). In this context, it has to be observed that so far as the decision of the Mumbai Tribunal in the case of Board of Control for Cricket in India (supra) is concerned, the same has been rendered in the context of the fact situation therein. In the case of Board of Control for Cricket in India (supra), the Tribunal found the amendments to the Memorandum of Association as being substantive, which included amendment of rules and regulations providing for promotion of commercial interests towards administration of IPL Championship League, etc. Quite clearly in the present case, there is no such fact situation and for that matter, there is no charge against the assessee that the amendments of 1975 and 1979 have resulted in carrying on of any commercial activity by the assessee. Rather, in the present case, in the assessment finalized u/s. 143(3) of the Act on 7/11/2006 for assessment year 2004-05, the Assessing Officer allowed exemption to the assessee under section 11/12 of the Act. While doing so, the Assessing Officer has specifically noted that the activities of the assessee are in the field of education and health and running of Angadwadies in 600 villages and five High Schools with hostel facilities in backward areas. It was also specifically noted that the Trust was running 190 bedded General hospital at Dissa, where poor people were being treated. Similarly, in the assessment order for assessment year 2007-08 passed under section 143(3) of the Act dated 11/12/2009, the Assessing Officer has noticed the activities of the assessee in the field of education, income generation for Angadwadies, de- addiction and other social and economic fields. The Assessing Officer has also noticed that assessee has carried out various projects during natural calamities, apart from the activities of running Angadwadies in villages, High Schools in backward areas and the providing of medical facilities to the poor people. Therefore, the fact situation in the present case, which the AO has also accepted in the scrutiny assessment in past, does not reflect any charge that the activities of the assessee as consequence of the amendment in the Trust Deed of 1975 and 1979 have been of noncharitable nature. Thus, the decision in the case of Board of Control for Cricket in India stands on a different footing and, is of no help to the Revenue in the present case.
In so far as the reliance placed by the Ld. Departmental Representative in the case of Allahabad Agricultural Institute (supra) is concerned, it was pointed out by the Ld. Representative for the assessee that the same was distinguishable as the facts therein were on a different footing. It was pointed out that in the case before the Hon’ble Allahabad High Court, there were several changes made in the objects of the Trust which is not the situation in the present case. In our considered opinion, the decision of the Hon’ble High Court of Allahabad in the case of Allahabad Agricultural Institute & Another (supra), has been rendered in the specific facts and circumstances prevailing therein. The Hon’ble High Court therein had noted wholesale changes in the objects of the assessee and further the Hon’ble High Court observed that the assessee could not show that the revised objects were charitable in nature. It was under the aforesaid situation, the judgment of the Hon’ble Allahabad High Court has to be understood. In the present case, fact-situation which we have analyzed above, stands on an entirely different footing. Therefore, the judgement of Allahabad High court in the case Allahabad Agricultural Institute (supra), does not help the case of the Revenue in the present case. 8.1. In view of our aforesaid discussion, we find no merit in the appeal of the Revenue and we hereby affirm the decision of the CIT(A) directing the Assessing Officer to allow the exemption to the assessee under section 11/12 of the Act.
In the result, the appeal of the Revenue is dismissed.” We, therefore, respectfully following the decision of the co-ordinate Bench of the Tribunal, allow ground nos. 1 & 2 raised by the assessee. The AO is directed accordingly.
8. The issue raised in ground nos. 3 & 4 relates to enhancement of income by the CIT(A) without issuing specific notice or providing any opportunity to the assessee for enhancement of its income to Rs.12,86,05,122/- from Rs. 98,19,681/-.
9. The brief facts of the case are that the CIT(A) during the course of appeal proceedings noticed that the assessee carried new activities u/s 35AC of the Act and the asked the AO to send a remand report vide letter dated 27.11.2013 which was filed 24.02.2014. The ld AO in the remand report submitted the details of donations above Rs. 1,00,000/- to institutions which were not registered u/s 12A. The report also contained details as to receipts of Rs. 2,51,75,000/- u/s 35AC of the Act which were not included in the income and expenditure account of the assessee and no separate accounts in respect eligible projects and schemes and enhanced the income of the assessee trust to Rs. 12,86,05,122/- from the income assessed by AO Rs. 98,19,681/- by giving various reasons which were discussed from para 5.6 to 5.27 of the appeal order. The said disallowance of Rs.12,86,05,122/- was worked out in the light of the fact that registration of the trust u/s 12A of the Act ceased to exist.
The learned AR submitted before us that the CIT(A) has enhanced the assessment of the assessee from Rs.98,19,681/- to Rs.12,86,05,122/- without giving any reasonable opportunity or any notice to that effect thereby denying natural justice to the assessee. The learned counsel drew our attention to letter dated 13.05.2014 addressed to the CIT(A) contained at page 107 of the paper- book. In para 2 of the said letter it has been clearly stated that the assessee has maintained separate books of account in respect of the activities carried out u/s. 35AC. It has also maintained separate balance sheet, profit & loss account which were produced before the CIT(A). The learned counsel further contended that the issue involved in the grounds be restored to the file of the AO to verify the said facts and be directed to allow the relief to the assessee. The ld counsel also submitted that the main issue on the basis of which the disallowance was worked out on the basis of wrong belief of the CIT(A) that registration of the trust u/s12A ceased to exist with the alteration of object of the trust by overlooking the fact that the objects of the trust as originally contained in the trust deed were retained and it is only some additional charitable objects were included in the trust deed. The ld. Counsel further submitted that now the issue was provision of section 12A stand decided in favour of the assessee in its own case by the decision of the tribunal in AY 2009-10.
The learned DR, on the other hand, objected to the arguments of the AR and relied upon the order of the CIT(A) on the issue.
We have heard the rival submissions and have perused the material available on record. We find at pages 107 & 108 of the paper-book the letter dt 13.05.2014, addressed to the CIT(A), clearly stating that the assessee maintains separate books of account in respect of activities carried out u/s. 35AC and separate annual accounts comprising income and expenditure accounts and balance sheet, which were filed before the CIT(A). The relevant paragraphs are reproduced as under:
“2. On page no.17 at para no.5.20 Your Honour has mentioned that no separate account has been maintained for the activities carried out u/s. 35AC. This is also not factually correct. The assessee has maintained a separate account for 35AC and separate income and expenditure account and balance sheet has been prepared and the same has been filed with Your Honour in the Appeal proceedings. However, we attach herewith the separate account for 35AC, income and expenditure account and balance sheet. So, kindly rectify this mistake.
3. On page no.17 at Para 5.22 Your Honour has mentioned that expenditure incurred at Radhanpur General Account, Deesa General Account and Bihar Eye Camp totalling Rs.6,58,60,574/- is for 35AC project. This is factually not correct. There are the expenditures incurred at various centres of the trust which are not under 35AC. Kindly rectify above mistakes which are apparent from record and kindly amend your order and oblige.”
12.1. In view of the above, we are of the opinion that the finding of facts as recorded by the CIT(A) is factually incorrect and needs to be re-examined. We, therefore, in the interest of justice, restore the issue back to the file of the AO with the direction to verify the claim of the assessee of separate books and allow deduction u/s. 35AC as claimed by the assessee. Thus, the issue is allowed for statistical purpose.
In the result, the appeal is allowed for statistical purpose.
Order pronounced in the open court on this day of 6th January, 2016.