Income Tax Appellate Tribunal - Delhi
Abhudaya Shiksha Prasar Nayas, ... vs Addl. Cit, Ghaziabad on 31 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'SMC' NEW DELHI
BEFORE SHRI R.K.PANDA, ACCOUNTANT MEMBER
ITA No.2109/Del/2016
ASSESSMENT YEAR: 2010-11
Abhudaya Shiksha Prasar Nayas vs ACIT, Range 1
KE 81 Ghaziabad
Kavi Nagar
Ghaziabad
PAN: AABTA 4223 A
(Appellant) (Respondent)
Appellant by Sh. Kapil Goel, Adv.
Respondent by Ms. Bedobani, Sr.DR
Date of Hearing 08.05.2017
Date of Pronouncement 31.07.2017
ORDER
This appeal filed by the assessee is directed against the order dated 01st March, 2016 of the ld.CIT(A), Ghaziabad relating to Assessment Year (A.Y.) 2010-11.
2. Facts of the case, in brief, are that the assessee is a society registered under section 12AA of the I.T. Act, 1961. It filed its return of income on 30th September, 2010 declaring ITA No. 2109/Del/2016 A.Y. 2010-11 Abhudaya Shiksha Prasar Nyas nil income. During the course of assessment proceedings the A.O. observed from the income and expenditure account of the trust that there is no income from any activity of the trust and there is only expenditure of Rs.10,07,053/- shown on account of donation, legal expenses, scholarship and other miscellaneous expenses. Thus an expenditure over income of Rs.10,07,053/- has been shown in the income and expenditure account. Since the trust was set up for establishing educational establishments providing technical education, vocational education and regular courses and the trust has not carried out any such activities, the A.O. held that the trust is not covered under any of the above mentioned category for claim of exemption.
2.1. He further noted that the trust during the impugned assessment year has sold property of the trust for a consideration of Rs.10,00,000/- which was purchased during the year 2005-06 for Rs.8,10,600/-. After considering the cost of indexation at Rs.10,30,783/- the profit of Rs.1,89,400/- has been neutralized to nil. The sale proceeds have been 2 ITA No. 2109/Del/2016 A.Y. 2010-11 Abhudaya Shiksha Prasar Nyas utilised for payment of scholarships of Rs.4,00,000/- to students of another society. Similarly the trust have paid donation of Rupees 5 lakhs to M/s Gyan Bharti Shiksha Prasar Nyas. The A.O. therefore asked the assessee to justify the payment of donation.
2.2. The assessee in its reply submitted as under.
"that the trust was established on 19.12.2006 with the main object of doing charitable works for the benefit of general public irrespective of their castes, creed, colour etc. The trust intends to work in the field of establishing educational establishments for providing technical education, vocational educational and other regular courses. The trust facilitates the poor students and provide scholarship to poor and needy children. As regards the application of funds arrived from the sale of property assessee has given explanation that the trust has applied Rs.10,007,053/- as shown in income & expenditure account, which is more than the amount surplus received on sale of land hence it makes no difference whether trust has shown the amount in total income or not."3 ITA No. 2109/Del/2016
A.Y. 2010-11 Abhudaya Shiksha Prasar Nyas 2.3. However the AO was not satisfied with the explanation given by the assessee. Relying on the decision of Hon'ble Gujarat High Court in the case of CIT vs. Sorabji Nusserwanji Prekh (Guj.) 201 ITR 939 and Hon'ble Kerala High Court in the case of CIT vs. Saraswath Poor Students Fund (Ker) 150 ITR 142 wherein it was held that if the trust has been established with the aim of imparting education but the educational institution is not established and income of the trust is spent in providing scholarships and financial assistance to students then the trust is not entitled for exemption under section 10(22) of the Act, the A.O. disallowed the distribution of scholarship and the donation given to M/s Gyan Bharti Shiksha Prasar Nyas as not an allowable expenditure.
3. So far as the sale of the property is concerned the AO observed that the stamp value adopted by the stamp authorities was Rs. 24,86,000/-. He therefore asked the assessee to explain as to why provisions of section 50C of the Income Tax Act, 1961 (the Act) shall not be applicable. Rejecting the explanation given by the assessee and applying 4 ITA No. 2109/Del/2016 A.Y. 2010-11 Abhudaya Shiksha Prasar Nyas the provisions of section 50C of the Act the A.O brought to tax Rs.14,86,000/- after reducing the amount to Rs.1,89,400/- already shown by the assessee in the Income & Expenditure Account.
4. In appeal the Ld.CIT(A) upheld the disallowance of Rs.9 lakhs claimed by the assessee on account of distribution of scholarships and donation to charitable Institutions on the ground that the same was not proved by the assessee. So far as additional capital gain is concerned the Ld.CIT(A) sustained the same at Rs.12,04,990/- after allowing the cost of indexation which was not allowed by the A.O. and gave partial relief of Rs.2,81,010/-.
5. Aggrieved with such order of the Ld.CIT(A) the assessee is in appeal before us with the following grounds.
"1. That the A.O. and CIT(A) for confirming the addition are wrong, illegal, injudicious and erred in law in disallowing an amount of Rs.9,00,000/- being the utilisation in charitable activities made by assessee who is a charitable 5 ITA No. 2109/Del/2016 A.Y. 2010-11 Abhudaya Shiksha Prasar Nyas trust and is eligible for deduction under the provisions of the Income Tax Act, 1961.
2. That the A.O. and CIT(A) for confirming the addition are wrong, illegal, injudicious and erred in law by invoking the provisions of Section 50C of the Income Tax Act, 1961 which are not applicable in case of trust as per the provisions of the Income Tax Act, 1961 and thus making an addition of Rs.12,04,990/- in the income of the assessee.
3. The appellant craves leave to add, alter, modify or change any ground of appeal, at the time of hearing in the interest of natural justice."
6. I have considered the rival arguments made by the both sides, perused the orders of the AO and Ld.CIT(A) and the Paper Book filed on behalf of the assessee. I have also considered the various decisions cited before me. So far as Ground number 1 is concerned I find that the ld.CIT(A) after discussing the issue thoroughly had given a categorical finding that the assessee has not proved the genuineness of the donation/ scholarship. From the paper book filed by the assessee I find various details were filed. The ld.Counsel for the assessee submitted that given an opportunity assessee is in a position to substantiate with evidence to the satisfaction of the revenue authorities that such donation and scholarships 6 ITA No. 2109/Del/2016 A.Y. 2010-11 Abhudaya Shiksha Prasar Nyas are genuine. Considering the totality of the facts of the case and in the interest of justice I deem it fit and proper to restore the issue to the file of the Assessing Officer (AO) with the direction to give an opportunity to the assessee to substantiate with evidence to his satisfaction regarding the genuineness of such expenditure and decide the issue as per law. I hold and direct accordingly. The first ground raised by the assessee is accordingly allowed for statistical purposes.
7. So far as ground number 2 is concerned, as mentioned earlier the assessee has earned a capital gain of Rs.1,89,400/- which has been determined by the A.O. at Rs.14,86,000/- by applying provision of section 50C. The ld. CIT(A) determined such capital gain at Rs.12,04,990/- and gave part relief to the assessee. The Revenue is not in appeal against the order of the Ld. CIT(A). It is the submission of the Ld. Counsel for the assessee that the assessee is willing to pay tax on the surplus capital gain after deducting the expenditure incurred by it. According to him the profits so earned have been utilised for 7 ITA No. 2109/Del/2016 A.Y. 2010-11 Abhudaya Shiksha Prasar Nyas charitable purpose which should be allowed as deduction since the assessee is enjoying the benefit of section 12A. It is also his argument that the provisions of section 50C are not applicable to the facts of the present case. However, I find the ld. CIT(A) has already distinguished the Lucknow Bench of the Tribunal in the case of ACIT vs. The Upper India Chamber of Commerce relied on by ld. counsel for the assessee before me. I find some force in the argument of the Ld. Counsel for the assessee that if the capital gain on account of sale of property is brought to tax as income of the assessee, then genuine expenditure, if any incurred by the assessee has to be allowed as deduction subject to satisfaction of the A.O. regarding genuineness of such expenditure applied for charitable purposes. The ground of appeal number 1 has already been restored to the file of the A.O. with the direction to verify the genuineness of such expenditure, I, therefore, restore this issue also to the file of the AO with the direction to consider the allowability of the expenditure incurred for charitable purposes. 8 ITA No. 2109/Del/2016
A.Y. 2010-11 Abhudaya Shiksha Prasar Nyas The ground raised by the assessee is accordingly allowed for statistical purposes.
8. In the results the Appeal filed by the assessee is allowed for statistical purposes.
Pronounced in the open court on 31.07.2017.
Sd/-
(RK PANDA) ACCOUNTANT MEMBER * Manga/Sujeet Manga/Sujeet Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT //True Copy// ASSISTANT REGISTRAR ITAT NEW DELHI 9