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Income Tax Appellate Tribunal, CHANDIGARH
Before: SHRI A.D.JAIN & SHRI VIKRAM SINGH YADAV
आदेश/ORDER
PER A.D.JAIN, VICE PRESIDENT is assessee's appeal against the order of the ld. Commissioner of Income Tax (Appeals)-4,
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 2 Ludhiana [in short ‘the ld. CIT(A)’] dated 30.07.2019 for 2015-16 assessment year.
The assessee has raised the following grounds of appeal:
“1. That the order passed by Ld.CIT(A) is contrary to law and facts of the case.
2. That the Ld. CIT(A) erred in law and on facts in not allowing exemption u/s 11 of the Income Tax Act, 1961 and taxing the assessee as AOP.
3. Without prejudice to ground no. 2, the Ld. CIT(A) erred in law and on facts in not allowing setoff of excess expenditure/loss from A.Y 2014-15 with the income of A.Y 2015-16. 4. Without prejudice to ground no. 2, the Ld. CIT(A) erred in law and on facts in not allowing Rs.33,39,384/- as expenditure incurred by the assessee on capital items. 5. That the Ld. CIT(A) had erred in law and on facts in not allowing exemption u/s 11(l)(d) on the corpus donations of Rs.6,00,00,000/- received during the year under consideration. 6. That the Ld. CIT(A) had erred in law and on facts in not allowing exemption u/s 11(l)(d) on the corpus donations of Rs.26,40,000/- received during the year under consideration. 7. That the Ld. CIT(A) had erred in law and on facts in not allowing accumulation or set apart of funds amounting to Rs. 1,20,93,334/- as per provisions of section 11(2) for a period of 5 years.
Ground No. 1 is general in nature and needs no adjudication.
Apropos Ground No.2, the assessee contends that the ld. CIT(A) has erred in not allowing exemption u/s 11 of the Income Tax Act, 1961 to the assessee and in taxing the assessee as an AOP.
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 3 5. The Assessing Officer (in short ‘the AO’) noted that the surplus generated by the assessee during the year, being excess of income over expenditure, was of Rs.8,92,79,605/-, i.e., 53.17% of the gross receipts; that the assessee was earning huge profits from its activities, charging huge fees from the students and collecting charges in various forms, resulting in surplus; that the assessee was spending only from 60% to 70% of its gross receipts for the claimed charitable activity and, over the years, huge surplus had been accumulated by the assessee, which had been kept in the form of FDRs and capital investments; that the large scale accumulation being generated was not being ploughed back into the stated objects of the assessee, mainly education; that the assessee had given buses on rent of Rs.4.98 lacs to M/s Vardhman Textiles Ltd.; that the charges received for usages had earned income of Rs.18,25,575/-; that during the year, income of Rs.2,48,02,031/- had been generated in the form of buses rental income, DG Set usages receipt, interest income, and miscellaneous income; that the assessee was, thus, earning huge surplus from activities other than education; that the assessee was not fulfilling the conditions of Section 11(1) of the Income Tax Act and was not doing charitable activities; that so, the status of ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 4 charitable activities was being denied to the assessee and the income of the assessee was being assessed as an AOP.
The AO made addition of surplus of Rs.2,92,18,989/-.
By virtue of the impugned order, the ld. CIT(A) confirmed the assessment order.
The ld. Counsel for the assessee has contended that the issue stands covered by the decision of the Tribunal in the assessee's own case, for assessment year 2014-15, vide order (APB 66 to 87) dated 27.02.2020, passed in holding that there was no basis to hold the activities of the assessee Trust to be commercial in nature; that the assessee is claiming exemption u/s 11 of the Act from assessment year 1994-95 and as per the principle of consistency, there was no reason to deny the exemption claimed; and that for the purpose of calculation of surplus, corpus donation should not be included. It has been contended that since there is no difference in the facts for the year under consideration, the decision of the Tribunal for assessment year 2014-15 be followed.
The ld. DR, on the other hand, has placed strong reliance on the impugned order. Though it has not been ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 5 disputed that this issue has been elaborately dealt with by the Tribunal in the assessee's case for A.Y. 2014-15., it has been contended that as rightly observed by the ld. CIT(A), that since assessee has earned huge surplus @ 72.72% (wrongly taken by the AO at 53.17%) of the total receipts, it cannot but be said that the assessee is running its Institution purely on a commercial basis for earning huge profit in a manner that is not at all transparent and the affairs of the assessee do not reflect any charitable purpose being carried out. It has been contended that accordingly, the disallowance of the claim u/s 11 of the Act and taxation of surplus as AOP, as upheld by the ld. CIT(A), be confirmed and Ground No.2 raised by the assessee be rejected.
8.1 The matter, it is seen, has been dealt with elaborately by the Tribunal in the assessee's own case for assessment year 2014-15, in the order dated 27.02.2020, a copy whereof has been placed at APB 66 to 87. For ready reference, the relevant portion thereof is reproduced hereunder :
“11. We have heard he rival contentions carefully, perused the orders of the authorities below. It is uncontroverted fact that the,, corpus donations were received through banking channel's by accounts payee cheque and PAN numbers of the donors in most of the cases had been filed. Further letters and original extracts of Board's Minutes had been received in case of all the donors submitting that the donation was towards corpus of the assessee trust. The only basis with the Revenue for treating the conations
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 6 as not eligible as corpus donations is that they were not genuine donations since they were received from sister concerns or their employees for malafide reasons. We do not find any merit in this argument of the Revenue since it is not backed with any evidence but mere allegation leveled on the assessee trust. The fact that the donors enjoyed the benefit u/s 80G of the Act on account of these donations does not take away the character of the donations made by the donors as corpus donations. Merely because it is the employees of the donor companies who made donations doe not establish that it was a mode of taking back the salaries paid to them by the sister concerns. These appear to be very farfetched allegations and deserved to be rejected outrightly. In view of the above, we do not find any infirmity in the order of the Ld.CIT(A) holding the corpus donations to be eligible for exemption u/s l l ( l )(d) r.w.s. 2(24)(iia) of the Act. Ground No.l raised by the Revenue is, therefore, dismissed”. ………………
“15. We have heard the rival contentions and carefully perused the orders of the authorities below. On going through the orders of the AO and the CIT(A), we find that the Revenue rests its case for denying the exemption u/s 11 of the Act to the assessee for two fold reasons; i) that its activities were commercial in nature for earning huge profits to the tune of 53.17% for the impugned year and; ii) that it was earning income from sources other than the education as under:
As on 31.03.2014 As on 31.03.2013 Other Receipts Schedule - IX Schedule - IX Bus Rental Income 23,31,050.00 21,02,100.00 D.G. Set Usages Receipt 20,00,544.00 - In c o m e fro in U TI 4,97,121.04 2,74,761.52 Liquid Fund Interest Income 1,24,96,330.48 1,32,05,294.30 Interest Income 11,28,244.00 Misc. Income 93,943.00 2,49,805.00 Prospectus Receipts 5,65,100.00 5,25,150.00 Rental Income 11,850.00 15,875.00 Sanitation & Sewerages 4,80,900.00 Charges Short & Excess 2,792.00 3,112.00 Re-Admission Fee 610.00 Fine 4,01,294.00 Industrial Training 4,66,800.00 Animal Scholarship 15,40,440.00 Function Run for Fitness 93,515.00
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 7
Teaching 4,66,800.00 Through Multimedia Honours Fee 7,70,000.00 Total 1,96,07,874.52 2,01,15,556.82 16. The calculation of surplus of 53.17% is as under : Particulars AY. 2013-14 A.Y. 2014-15 Total Receipts 6,67, 40,319/- 7,17,85, 575/- Revenue 2,30, 29,1 41/- 3.02.01.080/- Expenditure Capital Expenditure 5,91,92,922/- 34.15.376/- Total Expenditure 8,22,22,063/- 3,36,16,456/- Profit (-)!, 54,81, 744/- 3,81,69,1 19/-(53.17%)
It was also the case of the Revenue that the assessee was collecting huge amount from students under various heads like Annual Scholarship Fees, Computer Lab Charges, Extension' 'Lecture Fees, Case Study & Management Games Fees, Student & Management Software, Student Personality Development, etc. and was incurring huge expenses against the same and earning huge profits. The Ld.Counsel for the assessee, on the other hand, we find, has controverted the basic premise of the Department for holding its activities as commercial in nature as the generation of huge profits by demonstrating the fact to be incorrect submitting it is calculation of surplus generated and showing a negative figure in the same. The only distinction in the calculation of the assessee vis a vis that of the Revenue, is the exclusion of corpus donations in the receipts, which we find to be in order since as held by us in the earlier paragraph of our order, the donations were found to be in the nature of corpus donations and, therefore, they are entirely exempt u/s ll(l)(d) of the Act and were not to be included for the purpose of calculating the surplus generated. Therefore, the very premise of the Revenue for holding the activities of the assessee to be commercial in nature is demolished on account of the fact demonstrated by the assessee that it was actually not earning any profits. Even otherwise, as pointed out by the Ld.Counsel for the assessee and not controverted by the Revenue before us, the assessee trust has been claiming exemption u/s 11 right from assessment year 1994-95 to the immediately preceding year and the same has not been denied to it. Therefore in the absence of any distinguishing facts, as per the principle of consistency also there is no reason to deny exemption u/s 11/12 to the assessee. As for the invoking of the provisions of section 13(l(c) of the Act on account of giving undue benefit to a related concern of the assessee trust by way of letting out buses to them for the rental of Rs.4,98,000/-, we are in agreement with the Ld.Counsel for the assessee that it was not a case of ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 8 giving any undue benefit to the related concern but on the contrary, it was efficient utilization of the buses during their idle time when not being run for the school purposes thus generating further income to be used in the charitable activities of the assessee trust. Even otherwise, we find that the Revenue has not demonstrated as to how any benefit was given to the related concern by renting out buses for a sum of Rs.4,98,000/-. Therefore, we dismiss this contention of the Revenue.
On considering the entire facts and circumstances of the case as above, we hold that there was no basis at all for holding the activities of the assessee trust as commercial in nature and further we hold that the assessee had not given any benefit to-, /any of its related concern. The denial of exemption.; u/s 11(1) of the Act is, therefore, set aside and the AO is" directed to grant exemption to the assessee trust as per law. The grounds of appeal raised by the assessee are, therefore, allowed.” 8.2 For the year under consideration also, we find that whereas the taxing authorities have taken the surplus to be @ 72.72% of the total receipts, as per the comparative chart of surplus generated by the assessee from educational activity for assessment year 2014-15 and 2015-16 (APB 178), the surplus for the year under consideration in fact comes to 5.26% of the total receipts. This, in no manner, can be said to be excessive.
8.3 As for assessment year 2014-15, the only basis for treating the donations as not eligible for corpus donations is that they were not genuine donations, having been received from sister concerns, or their employees, for malafide reasons. However, such a reason had not been backed with any evidence and so, as found by the Tribunal in the earlier
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 9 year, there is no merit therein. The corpus donations are, thus, eligible corpus donations, requiring exemption under the provisions of Section 11(1)(d) read with those of Section 2(24)(iia) of the Act.
8.4 Exemption u/s 11 of the Act has been denied to the assessee, as in the earlier year, for the reason that the activities of the assessee are commercial in nature, aimed at earning huge profits to the tune of 72.72% for the year under consideration and that the assessee was earning income from sources other than education. The case of the Revenue is that the assessee was collecting huge amounts from students under different heads, like Annual Scholarship Fees, Computer Lab Charges, Extension Lecture Fees, Case Study & Management Games Fee, Student & Management Software, Student Personality Development etc., and that the assessee was incurring huge expenses against the same and was earning huge profits. On the other hand, it has been shown that corpus donations, which has been accepted by us and which, accordingly, cannot be included for the purpose of calculating the surplus generated. Thus, the assessee has successfully demonstrated that it was actually not earning any profit, as also held for assessment year 2014-15.
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 10 Further, exemption u/s 11 has been claimed from assessment year 1994-95 and it has been allowed to it consistently over all these years.
Apropos the letting out of the buses to related concerns, thereby allegedly providing undue benefit to them, attracting the provisions of Section 13(1)(c) of the Act, for the year under consideration also, such letting out is found to be not giving of undue benefit, but effective utilization of the buses during their idle time, when they were not being run for the purposes of the school, thereby generating further income to The Department has not shown otherwise, and even apart from that, as to how the renting out of the buses amounts to giving of any undue benefit to the related concerns, has not been established.
Thus, following the Tribunal order (supra) in the assessee's own case for assessment year 2014-15, Ground No. 2 is accepted and the exemption claimed u/s 11 of the Act is directed to be allowed.
11. Ground Nos. 3-4 are grounds taken without prejudice to Ground No.2. Since Ground No.2 has been accepted by ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 11 us, Ground Nos. 3 and 4 do not survive and they are rejected as infructuous.
12. As per Ground Nos. 5 and 6, the ld. CIT(A) has erred in not allowing exemption u/s 11(1)(d) of the Act on corpus donations of Rs.6 crores and Rs.26,40,000/- received by the assessee during the year.
13. The AO held that the assessee was providing undue tax benefit to its sister concern and accommodating them for reduced tax liability. It was also held that concerning donations from employees, the assessee was taking back salary from its persons in the mode of corpus donation.
14. The ld. CIT(A) allowed set off of expenditure of Rs.5,10,24,446/- out of the corpus donations received by the assessee. For support, the ld. CIT(A) placed reliance on the order dated 22.11.2017 passed by the Vishakhapatnam Tribunal in the case of ‘Touching Heart Ministries Vs ITO’, in ITA No. 101/viz/2015.
14.1 The contention on behalf of the assessee is that during the year, it had received an amount of Rs.6,26,40,000/- towards corpus of the Trust; that vide reply dated 04.09.2017, details of the donors had been ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 12 provided to the AO; that also, letters sent by the donors had been filed before the AO; that further, vide reply dated 18.11.2017, the assessee had also filed before the AO, true copies of Resolutions passed by the donor companies; and that in the letters issued, the donors have clearly stated that the donations were towards the corpus of the Trust. It has been stated that the donations were received through proper banking channels and that the PANs of the donors were duly mentioned in the letters. ‘Touching Heart Ministries’ (supra) is stated to have been wrongly relied on by the ld. CIT(A), since in that case, the party was not registered u/s 12A of the Income Tax Act. It has been contended that huge corpus donations were also received during assessment year 2014- 15 from the Vardhman Group of Industries and no adverse inference had been drawn; and that therefore, for the year under consideration, the ld. CIT(A) has erred in confirming the AO’s action in considering the corpus donations as part of the assessee's income.
The ld. DR has sought to place reliance on the impugned order in this regard, at the same time, not disputing that this matter too has been considered at length
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 13 by the Tribunal in the assessee's case for the immediately preceding assessment year, i.e., A.Y. 2014-15.
For the assessment year 2014-15, in the preceding paragraphs, we have held the corpus donations to be eligible for exemption u/s 11(1)(d) read with Section 2(24)(iia) of the Act. In accordance therewith, on parity of facts in the year under consideration also, Ground No.6 is accepted and exemption on corpus donation of Rs. Six Crores and Rs.26,40,000/- received by the assessee during the year under consideration is directed to be allowed.
17. Ground No. 7 states that the ld. CIT(A) has erred in not allowing accumulation or setting apart of funds amounting to Rs.1,20,93,334/- as per the provisions of Section 11(2) of the Act for a period of five years.
17.1 The AO held that the accumulation of the amount of Rs.1,20,93,334/- could not be allowed u/s 11(2) of the Act to the assessee, since the objects stated in the Form 10 (APB 140) filed were not specific, but were general in nature. The ld. CIT(A) confirmed the AOs action, holding that since the exemption u/s 11 had been denied, set off and carry forward of funds could not be allowed.
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 14 17.2 On behalf of the assessee, it has been contended that the objects mentioned in Form 10 are not general; that in fact, these are a few of the objects of the assessee as per its Trust Deed and out of its many objects, only a few were mentioned in Form 10; that the amount accumulated was to be spent on these stated objects, which mainly included establishment or maintenance of schools, libraries, Study Centers , Amusements, etc.; that the authorities below are, thus, not justified in refusing exemption u/s 11 on this accumulated amount. Reliance has been placed on : i) Director of Income Tax (Exemptions) Vs Envisions, 378 ITR 483 (Kar)”; ii) CIT Vs Gokula Education Foundation, 394 ITR 236 (Kar); and iii) Director of Income Tax (Exemption) Vs Daulat Ram Education Society, 278 ITR 260 (Del).
17.3 It has been stated that this issue did not arise in assessment year 2014-15, since in that year, there was no surplus.
17.4 The ld. DR has, here too, placed reliance on the impugned order.
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 15 17.5 This Ground corresponds to Ground No. 8 before the ld. CIT(A). The ld. DR has placed reliance on the findings recorded by the ld. CIT(A) with regard thereto, wherein the ld. CIT(A) has held that the objects for which the funds were set apart by the assessee, as per the Form No.10 filed, are of a general nature; and that since exemption u/s 11 has been denied to the assessee and its surplus, which includes the accumulated amount, has been taxed, set aside and carry forward of the funds cannot be allowed.
17.6 The assessee has maintained that the purposes mentioned in the Form No. 10 filed are not general in nature and that there are only a few of the objects/purposes of the assessee as per its Trust Deed; that the assessee is running a premier Educational Institution and Business School and the objects mentioned in the Form 10 are in line with the objects mentioned in the Trust Deed and even in the subsequent years, amounts have been utilized for the same purposes.
17.7 We find the contention of the assessee to be correct.
The objections mentioned in the Form No. 10 (APB 140) are as follows :
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 16 17.8 The objects mentioned in the Trust Deed (APB 130 to 134) are as follows :
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 17 ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 18 ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 19 ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 20 ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 21
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 22 17.9 Therefore, evidently, there is no force in the finding recorded that the objects of the Trust, as mentioned in Form No.10 are of general nature.
17.10 In this regard, in “CIT (Exemptions) Vs Bochasanwasi Shri Akshar Purshottam Public Charitable Trust”, 409 ITR 591 (Guj), it has been held that lack of declaration in Form No. 10 regarding specific purposes for which funds were accumulated by the assessee Trust would not be fatal to the exemption claimed u/s 11(2) of the Act. SLP against the said order stands dismissed.
17.11 “Bochasanwasi Shri Akshar Purshottam Public Charitable Trust” (supra) was followed by the Chennai Tribunal in “Arhatic Yoga Asharam Management Trust Vs ITO (Exemptions)”, 126 taxmann.com 76 (Chennai) (Trib), allowing exemption u/s 11(2) of the Act.
17.12 In “CIT Vs National Institute and Financial Management”, 322 ITR 694 (P&H), it has been held as follows:
“2. The assessee is a society registered under section 12A of the Act and is engaged in the business of imparting professional training to probationers of the Central Accounts and Finance Services. The Assessing Officer rejected the claim for exemption under section 11 on the ground that the assessee accumulated profits without explanation. However, the Commissioner of ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 23 Income-tax (Appeals) accepted the plea of the assessee and held that utilisation of accumulation was on the agenda of the governing body. The Tribunal upheld the said view relying upon the judgment of the Delhi High Court in Bharat Kalyan Pratisthan v. Director of Income-tax (Exemption) [2008] 299 ITR 406 . The Tribunal held that the assessee was entitled to accumulate the income (for objects of the institution}.”
17.13 In “Director of Income Tax (Exemptions) Vs Envisions”, (2015) 378 ITR 483 (Karnataka High Court), it has been held as follows :
“The facts of this case were that, "After holding that though the purpose stated in Form -10 by the assessee may be in terms of some of the 14 objects of the trust deed, the Assessing Officer disallowed the accumulation holding the purpose stated was vague and thus the benefit of Section 11(2) of the Act was denied. Reliance in this regard was placed by the learned Assessing Officer on the decision of the Calcutta High Court rendered in the case of DIT(Exemption) v. Trustees of Singhania Charitable Trust [1993] 199 ITR 819. ………………….
In the present case, we find that the revenue does not dispute the fact that all the three purposes specified by the Assessee in Form 10 are for achieving the objects of the trust, and that the purposes as well as objects, are both charitable. Merely because more than one purpose has been specified and details about the plan of such expenditure has not been given, the same would not, in our view, be sufficient to deny the benefit u/s 11(2) of the Act to the Assessee. As long as the objects of the trust are charitable in character and as long as the purpose or purposes mentioned in Form 10 are for achieving the objects of the trust, merely because of non-furnishing of the details, as how the said amount is proposed to be spent in future, the assessee cannot be denied the exemption as is admissible under sub-section 2 of Section 11 of the I.T Act, 1961."
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 24 17.14 In “CIT Vs Gokula Education Foundation” (2017)
394 ITR 236 (Karnataka High Court), it has been held as follows :
"The Assessing Officer found that there is no specific activity mentioned and the language used is general and therefore he disallowed the claim. The matter was carried in appeal before CIT (Appeals) and he concurred with the view of the Assessing Officer and allowed the appeal in part on other aspect which is not touching to the question involved. The Income Tax Appellate Tribunal in further appeal has more or less recorded the same reasoning and it relied upon its earlier decision in case of Dy. DIT (E) v. Gokula Education Foundation in dated 30.12.2014 (which is subject matter of ITA No.300/2015 being simultaneously heard and considered) and the Tribunal thereafter found that the issue could be said as covered by its earlier decision, wherein the reliance was placed upon the decision of Delhi High Court in case of DIT (Exemption) v. Daulat Ram Education Society [2005]'278 ITR 260/[2006] 156 Taxman 399 and therefore ultimately allowed the appeal of the assessee by the impugned order. Under the circumstances, the present appeal before this Court. ………………………… At this stage we may refer to the decision of this Court in case of DIT, Exemptions v. Envisions [2015] 378 ITR 483/232 Taxman 164/58 taxmann.com 184, wherein the decision of Calcutta High Court was also relied upon by the Revenue and this Court at paragraph-10 had observed thus:—
"10. In the present case, we find that the revenue does not dispute the fact that all the three purposes specified by the Assessee in Form 10 are for achieving the objects of the trust, and that the purposes as well as objects, are both charitable. Merely because more than one purpose has been specified and details about the plan of such expenditure has not been given, the same would not, in our view, be sufficient to deny the benefit u/s 11(2) of the Act to the Assessee. As long as the objects of the trust are charitable in character and as long as the purpose or purposes mentioned in Form 10 for achieving the objects
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 25 of the trust, merely because of non-furnishing of the details, as how the said amount is proposed to be spent in future, the assessee cannot be denied the exemption as is admissible under sub-section (2) of Section 11 of the I. T. Act, 1961."
The aforesaid shows that as per the view taken by this Court as long as the objects of the trust are charitable in character and as long as the purpose or purposes mentioned in Form No. 10 are for achieving the objects of the Trust, merely because the details are not furnished, the assessee cannot be denied benefit of the exemption under Section 11(2) of the Act."
17.15 In “Director of Income Tax (Exemptions) Vs Daulat Ram Education Society” (2005) 278 ITR 260 (Delhi High Court), it has been held as follows :
“Here too, out of 29 purposes/objects stipulated in the memorandum of association, the assessee has specified eight purposes in Form No. 10 for which it was accumulating the unspent income while claiming benefit under section 11. It is not the case of the revenue that any of these eight purposes not charitable or that the same do not figure in the memorandum of association. In the circumstances, just because more than one purpose have been specified and just because details about the plans which the assessee has for spending on such purposes are not given may not be sufficient to deny the exemption admissible to it under section 11. So long as one or more of the purposes specified by the assessee find place in the objects for which the society has been incorporated and so long as the said purpose are charitable in character, the benefit admissible under I on 11 must flow to the assessee.
In the light of what is stated above, no substantial question of law arises for consideration. The appeal fails and is hereby dismissed."
18. Reliance by the ld. DR on “Maharaja Ranjit Singh War Museum Society, Ludhiana Vs CIT”, rendered by the Hon'ble
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 26 Punjab & Haryana High Court in as rightly contended, is in-act, since the facts therein are different.
Therein, the assessee raised the following question of law before the Hon'ble High Court :
“a. Whether the ld. ITAT was justified in upholding that the amount give to PSWHMM is the income of the appellant- society in terms of Section 11(3)(d) by upholding that the status of the recipient-society is immaterial for the purposes of application of section ll(3)(d), when the departmental circular itself differentiate between the societies as enumerated in section ll(3)(d) and other societies? b. Whether in the present circumstances the Id. ITAT was justified in rejecting the revision of form No. 10 when the calculations have been changed by the authorities below? c. Whether in the present facts and circumstances of the case the order of the Ld. ITAT is perverse?"
18.1 It was held that the amount accumulated had not been utilized in accordance with the purpose mentioned in the Form 10 filed. No purpose had been specified by that assessee in the Form 10 filed with regard to payment made to the other society. It was held as follows :
"10. There is fallacy in the contention raised by learned counsel for the appellant. The requirement of section 11 is that atleast 85% of the income is to be applied for religious or charitable purpose in year of receipt and the accumulation cannot be more than 15%. However, subsection (2) provides for accumulation out of 85% income but the same has to be for a specified purpose and for a specific period. The reasons behind allowing such an accumulation is that in case there is a future project for which larger amount is required, the same may be accumulated and thereafter applied. As a built-in mechanism in section 11 itself, sub- section (3) provides that in case eventualities mentioned in ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 27 clauses (a) to (d), the income shall be deemed to be income of the person in receipt, in the previous year in which it was to be applied or ceased to be accumulated.
By insertion of explanation to sub section (2) and clause (d) in sub-section (3) by the Finance Act, 2002, the accumulated amount cannot be transferred to a registered Trust or institution or to the Trust or Institution or funds as specified in sub-clause (iv), (v), (vi) and (via) to section 10(23C). In case of such credit payment, same shall not be treated as application for charitable and religious purpose and further, it would be treated as income of such person i.e. the person who had made the payment.
From sub-section (2) and sub-section (3), it is clear that accumulation has to be for a specified purpose and the same is to be utilized within the time frame.
The aims and objects of the Trust cannot be reproduced as a specific purpose. The purpose must have some individuality, it is so because only from the purpose, the assessing officer would be able to monitor the amount so accumulated.
In the present case, it was not the claim of the appellant that the amount was being accumulated for the payment to PSWHMMS. At this stage, we are not dilating as to whether for such purpose there could be accumulation or Hot. In such circumstances, there is a clear violation of the conditions referred in sub-section (2) and subsection (3) of section 11. The amount has been spent for the purpose other than for what it was accumulated, it comes within the mischief o f section ll(3)(c)."
18.2 The Hon'ble High Court thus, held that the amount had been spent for a purpose other than for which it had been accumulated and, therefore, it came within the mischief of Section 11(3)(c).
Evidently, the facts in the two cases are entirely different. There, the amount accumulated had been used for a purpose other than for which it had been accumulated,
ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 28 which is not so in the case of the present assessee. Rather, it has not been disputed that out of the total accumulation of Rs.1,20,93,335/-, an amount of Rs.83,84,603/- was spent during assessment year 2016-17 and an amount of Rs.37,08,732/- was spent in assessment year 2017-18, i.e., that it is unchallenged that the assessee had also utilized the amount for the same purposes, as mentioned in the Form 10 filed, which objects are only a part of the objects mentioned in the Trust Deed of the assessee, in the subsequent years.
19.1 It has further been contended on behalf of the assessee and not disputed on behalf of the Department that in the assessment proceedings completed in the assessee's case for assessment year 2018-19, (APB 17-23) in scrutiny assessment proceedings, similar questions had been raised, but the matter was decided in favour of the assessee, allowing accumulation u/s 11(2) of the Act, as is evident from Form No. 10 ( APB 15) for assessment year 2018-19.
In view of the above, the grievance of the assessee by way of Ground No. 7 is accepted and accumulation or set apart of funds amounting to Rs.1,20,93,334/- is directed to ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 29 be allowed for a period of five years, in accordance with the provisions of Section 11(2) of the Act.
Accordingly, the appeal of the assessee is partly allowed.
ITA 1375/CHD/2019
This is Department’s appeal filed against the order of the ld. CIT(A)-4, Ludhiana dated 30.07.2017 pertaining to 2015-16 assessment year.
The Department has raised the following grounds :
“1. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in allowing benefit of utilization of Rs.5,10,24,445/- in the F.Y.2014-15 out of donation received from M/s Vardhman Textile Ltd. when the assessee had failed to submit any proof of the same and when the resolution by the donor for approving and ratifying the donation was passed in the subsequent Financial Year.
2. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in ,holding that the donations for setting up of school received from M/s Vardhman Textile Ltd. are tied up grants and are not income u/s 2(24) (iia) when "income" defined section 2(24)(iia) clearly states that it includes voluntary contributions received by a trust created wholly for charitable or religious purpose and does not qualify that the specific-purpose voluntary contributions are to be excluded. That the appellant craves to leave, add or amend the grounds of appeal
on or before the appeal heard and disposed off.”
24. The ground raised by the Department corresponds to Ground Nos. 5 and 6 raised by the assessee which we have ITA 1348 & 1375/CHD/2019 A.Y. 2015-16 30 decided in respect of the assessee, in the relevant preceding paragraphs. In accordance therewith, the grounds raised by the Department are rejected.
Accordingly, the appeal filed by the Department is dismissed.
In the result, whereas the assessee's appeal in is partly allowed, as indicated, Department’s appeal in ITA No.1375/CHD/2019 is dismissed.
Order pronounced on 01.05.2024.