Income Tax Appellate Tribunal - Ahmedabad
Dharampur Utthan Vahini,, Navsari vs Department Of Income Tax on 27 March, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "A"
Before SHRI T K SHARMA,JM &SHRI A N P AHUJ A, AM
ITA no.2126/Ahd/2009
(Assessment Year:-2006-07)
Deputy Commissioner of V/s
Dharampur Utthan Vahini
Income-tax, Navsari Circle, Vrindavan Campus, At &
Navsari PO: Lachhakadi, Tal:
Vansda, Distt.: Navsari
PAN: AAATD 4290 P
[Appellant] [Respondent]
Revenue by :- Shri A K Patel, DR
Assessee by:- Shri K N Bhatt, AR
O R D E R
A N Pahuja: This appeal by the Revenue against an order dated 27-03-2009 of the ld. CIT(Appeals), Valsad for the Assessment Year 2006-07, raises the following grounds:-
[1] "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the aggregate addition of Rs.10,81,240/- made by the AO on account of difference of interest received by the assessee-trust from the beneficiaries and paid to the NABARD, as the trust is not providing free services or cost to cost service to the beneficiaries. Besides, the surplus on sale of material viz. fertilizers, equipment etc. though the said business activities were out of purview of the object of the trust.
[2] On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the AO and dismissed the plea of the assessee.
[3] It is, therefore, prayed that the order of the Ld. CIT(A) be set-aside and that of AO be restored.
[4] The appellant craves leave to add alter or amend any grounds of appeal.
2 Adverting first to ground no. 1 in the appeal, facts, in brief, as per relevant orders are that return declaring nil income while claiming exemption u/s 11 of the Income-tax Act, 1961 [hereinafter referred to as the "Act"] filed on 30-10-2006 by the assessee-trust 2 ITA no.2126/Ahd/2009 (AOP), after being processed u/s 143(1) of the Act, was selected for scrutiny with the service of a notice u/s 143(2) of the Act issued on 09-07-2007. The Assessing officer[AO in short] noticed that the trust had shown total receipts of Rs.5,20,97,741/-,including receipts from rural development & Trading activities and other business activities, besides interest, rent and donations while claiming expenses of Rs.5,19,80,652/- for its objects in terms of report of audit in Form no. 10B as required u/s 12A(b) of the Act .The trust registered u/s 12A of the Act was stated to have been constituted by the instrument of trust deed and Memorandum of Association, late in the seventies in the name and style "Dharampur Utthan Vahini (DHRUVA)", having registered office at Village Lachhakdi. Tai. Vansda, Dist. Navsari with the following objects.
"i. To take up various programmes for self-employment and to promote self-confidence among rural communities;
ii. To plan and implement various programmes for socio-economic development of the rural families;
iii. To undertake various activities for comprehensive rural development;
iv. To take up development of water resource to provide adequate quantity of water to rural communities during all seasons;
v. To develop facilities and undertake programmes for rural health care;.
vi. To take up poverty alleviation programmes for the rural families and activities to ensure better nutrition;
vii. To take up educational and related programme in order to promote education, in rural area;
viii. To plan and implement or help to implement programmes for economic development of the rural families;
ix. To take up implementation of agricultural and livestock development activities for rural families;
x. To promote activities such as fisheries, poultry farming etc.; and 2
3 ITA no.2126/Ahd/2009 xi. To take up programme to promote modern scientific technical temper and approach; establish training centers and to take up credit, programmes for rural development."
2.1 On verification of accounts, the AO noticed that the trust borrowed funds from the NABARD and allotted the same for its objects as well as to the members / farmers / beneficiaries of the trust through Gram Seva Mandal. The Trust received funds from the NABARD on interest @ 6% and allotted to the Gram Vikas Mandal on interest @ 9.5% and the Gram Vikas Mandal alloted the said funds received from the Trust to the members / farmers / beneficiaries on interest @ 9.5% to 12.5%. The Gram Vikas Mandals were unregistered bodies, playing the role of intermediary between the Trust and the beneficiaries. Relying upon a statement recorded on oath of Shri V.C. Badve. Chief Programme Coordinator on 06/10/2006, during the course of assessment proceedings for the A.Y. 2004-05 and report of the inspector ,the AO concluded that the trust was carrying on the commercial activities by charging interest from the Gram Vikas Mandals and beneficiaries at higher rates than the rates at which loans were received from the NABARD. As such no free services or cost-to-cost services were provided to the beneficiaries while trust was also engaged in trading in fertilizers and equipment and thereby earned profit therefrom, the AO observed. Accordingly, the AO treated the excess interest of Rs.679198/- being difference of interest charged from the beneficiaries @ 12.5% pa and interest paid to the NABARD @ 6%, [Rs.1306150 - Rs.626952] as income of the trust from the business activities besides an amount of Rs.402042/- on account of "Surplus on material supplied for tribal development on the ground that the assessee entered into sales of fertilizers, equipment etc. beyond its objects , resulting in total addition of Rs.10,81,240/-.
3. On appeal, the learned CIT(A) deleted the addition in the following terms:-
34 ITA no.2126/Ahd/2009 "5.3 The AR of the appellant contended that the main object of the appellant trust is of rural development and the same falls within the purview of definition of charitable purposes u/s. 2(15) of the Act. He further contended that the appellant trust being a public charitable trust registered u/s.12A of the Act carries out of the various objects inclusive of object of rural development. The Memorandum of Association of the appellant trust furnished with the AO and the objects of the trust duly re-produced by the AR of the appellant reveals the fact that the appellant trust carried out the activities, which falls within the purview of section 2(15) of the Act, which define, the meaning of advancement any other object of general utility and contended that it partakes the character of charitable purpose. He placed reliance upon the following judgments;-
1. Addl. C1T v/s. Surat Art Manufacturers' Association (1980) 121 ITR O1 (SC)
2. CIT v/s. Andra Pradesh State Road Transport Association (1986) 159 ITR 01 (SC).
3. Victoria Technical Institute v/s. Addl. CIT (1991) 188 ITR 057 (SC).
4. Girijan Co.Op. Corporation Ltd. v/s. CIT (1989) 76 CTR 44 (AP)
5. Mahakoshal Shaheed Smarak Trust v/s. CIT (I983) 140 ITR 795(MP)
6. Jaipur Charitable Trust v/s. CIT(I981) 127 620 (Del.)
7. Add. CJT v/s. Automobile Association of Southern India (1981) 127 ITR 730 The AR of the, appellant thereafter contended that the alleged activity of the appellant trust deserves the benefit of section 11 of the Act furnished detailed summary of these activities vide Exhibit-A, which is placed on record. In reality, the appellant trust provides fertilizer to the farmers / beneficiaries / members at Free of Cost and for the sake of transparency and to report to the sponsorer organizations, the same is disclosed separately in the financial statements. The AR of the appellant also contended that even under the Act, there is no ban to carry out business activity by the charitable trust, so far as the same is for the attainment of the object of the trust. The AR of the appellant, thereafter referred to the Circular No. 621 and 642 dated 19.12.91 and 11.12.92 respectively, wherein, the CBDT has categorically stated that the trust is permitted to carry on the business activity for the attainment of the object of the trust. Referring to the said Circulars, the AR of the appellant contended that the appellant trust has fairly complied with the conditions stipulated u/s. 11(4A) of the Act and such an activity carried out for the attainment of the object of the trust is eligible for deduction u/s. 11 of the Act. He relied upon the understated pronouncements;-
(1) CIT v/s. Dharmodayam (2001) 165 CTR 12 (SC) (2) Addl.CIT v/s. Thanthi Trust (2001) 247 ITR 785 (SC) (3) Addl. CIT v/s. Surat Art Cloth Manufacturers Association (1980) 121 ITR 01 (SC) 4 5 ITA no.2126/Ahd/2009 I have considered the rival contentions. I found force in the arguments advanced by the AR of the appellant and satisfied in term's of objects of the trust, the rural development being an object falls within the definition of charitable purposes u/s. 2(15) of the Act. Since, the appellant trust complies with the provisions of section 11(4A) of the Act deserves exemption u/s. 1 1 of the Act, I found AO being not justified in drawing a conclusion that the appellant trust is carrying out purely a business activity and thereby denying the exemption u/s. 11 of the Act. Since, identical issue raised by the appellant in the A.Y. 2005-06 was decided by this office in favour of the appellant vide appellate order No.CIT/VLS/353/07-08 dated 17.04.2008, the appellant succeeds in these grounds of appeal for the year under consideration."
4. The Revenue is now in appeal before us against the aforesaid findings of the learned CIT(A). The learned DR supported the order of the AO. On the other hand, the learned AR on behalf of the assessee supported the findings of the learned CIT(A) while relying on the decision dated 04-06-2010 of the ITAT Ahmedabad Bench-B in the assessee's own case for the AY 2004-05 in ITA No.600/Ahd/2008 as also decision dated 23.12.2010 in ITA no.2811/Ahd./2008 for the AY 2005-06.
5. W e have heard both the parties and gone through the facts of the case as also the aforesaid decisions of the ITAT. W e find that the a co-ordinate Bench while adjudicating a similar issue in the assessee's own case for the AY 2004-05 ,concluded in their decision dated 4.6.2010 in the following terms:
" 7. On consideration of the rival submissions, we do not find it to be a fit case for interference the order of the learned CIT(A). It is undisputed fact that the assessee is a public charitable trust registered under the provisions of section 12A of the IT Act carrying out various objects inclusive of object of rural development. The assessee claimed that since the objects of the assessee trust being rural development, the same falls within the purview of section 2(15) of the IT Act which, defines meaning of advancement of any 5
6 ITA no.2126/Ahd/2009 other objects of general public utility which partakes the character of charitable trust. The assessee filed table of income and application of income before the learned CIT(A) for the assessment year under consideration which proved that the assessee met with the conditions stipulated in section 11 of the IT Act. Beneficiaries of the assessee trust are fanners of tribal area and the activities of the assessee trust are carried out for attainment of the objectives of the trust. Nothing is pointed out if there was diversion of any income to any person prohibited under the law. The assessee filed financial statement before the learned CIT(A) to show that the trust has provided fertilizers to the poor farmers even at free of cost. The learned CIT(A) on consideration of the materials before and the decisions cited before him satisfied with the objects of the assessee trust and its activities falling within the purview of advancement of any other object of general public utility as defined u/s 2(I5) of the IT Act. We may also note here that definition of advancement of any other object of general public utility was expanded by adding the proviso to section 5(15) of the IT Act with effect from 01-04-2009 which is not applicable to the assessment year under appeal. The learned CIT(A) on consideration of the material on record specifically held that the assessee has complied wife the provisions of section 11 of IT Act, therefore, the assessee cannot be denied the benefit u/s 11 of the IT Act. Hon'ble Delhi High Court in the case of Bharat Pratisthan vs. Director of Income-tax (Exemption) 299 ITR 406 held "Held, allowing the appeal, that the trust deed required the trust to utilize its funds for charitable purposes which were medical relief, education and relief to the poor. In the application for accumulation the assessee had specified these three objects. It was not required for the assessee to be more specific with regard to the utilization for the objects of the trust. Incidental income or accumulation of income for the objects of trust cannot deny benefit of section 11 of the 6 7 ITA no.2126/Ahd/2009 IT Act to assessee. The learned DR has not produced any evidence or material before us to contradict the findings of the learned CIT(A). In the absence of any contrary material on record, we do not find it to be a fit case for interference. We accordingly, confirm the findings of the learned CIT(A) and dismiss the appeal of the Revenue."
5.1 Following the aforesaid decision for the AY 2004-05, the ITAT vide their order dated 23.12.2010 in ITA no.2811/Ahd./2008 for the AY 2005-06 dismissed the appeal of the Revenue.
5.2 Indisputably, facts and circumstances for the year under consideration are similar to the facts obtaining in the preceding assessment years i.e.Ay 2004-05 & 2005-06.Though the principle of res judicata has no application to proceedings under the Act and the findings reached for one particular assessment year cannot be held to be binding in the assessment proceedings for a subsequent year, but this general rule is subject to the qualification that a finding reached in the assessment proceedings for an earlier year would not be reopened in a subsequent year if it is not arbitrary or perverse, has been arrived at after due enquiry and if no fresh facts are placed in the subsequent assessment year. This is on the principle that there should be f inality and certainty in all litigations including litigations arising out of the Act [see Burmah-Shell Refineries Ltd. v. G. B. Chand [1976] 61 ITR 493 (Bom) and CIT v. Dalmia Dadri Cement Ltd. [1970] 77 ITR 410 (P & H)]. In the instant case, no fresh material was brought in the assessment proceedings for the year under consideration and the ld. CIT(A) merely followed the order his predecessor for the AY 2005-06 while allowing the claim. In the case of Taraben Ramanbhai Patel [1995] 215 ITR 323 (Guj),Hon'ble High Court observed that it is no doubt true that the strict rule of the doctrine of resjudicata does not apply to proceedings under the Act, at the same time, it is equally true that 7 8 ITA no.2126/Ahd/2009 unless there is a change of circumstances, the authorities will not depart from previous decisions at their sweet will in the absence of material circumstances or reasons for such departures. The Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321 has approved the principle of consistency, when they observed that where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and the parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. Similar view has been expressed in a catena of cases including CIT v. Leader Valves Ltd. [2007] 295 ITR 273 (Punj. & Har.), DIT (Exemption) v. Guru Nanak Vidya Bhandar Trust [2004] 272 ITR 379 (Delhi), Director of Income-tax (Exemption) v. Apparel Export Promotion Council (No. 1) [2000], 244 ITR 734(Del.), CIT v. Neo Poly Pack P. Ltd. [2000] ,245 ITR 492 (Delhi), and CIT v. A.R.J. Security Printers [2003] 264 ITR 276(Del.). Though the principle of res- judicata is not applicable in the income-tax matter, but findings of earlier years on the same matter are relevant as per the ratio laid down in Sardar Kehar Singh v. CIT [1992] 195 ITR 769 (Raj), Taraben Ramanbhai Patel v. ITO [1995] 215 ITR 323 (Guj) and CIT v. Hindusthan Motors Ltd. [1991] 192 ITR 619 (Cal). Earlier Hon'ble Apex Court in Parashuram Pottery W orks Co. Ltd. v. ITO [1977] 106 ITR 1 (SC) observed :
"At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity."
5.3 Hon'ble Delhi High Court in A.R.J. Security Printers' case [2003] 264 ITR 276 and CIT v. Neo Poly Pack P. Ltd. [2000] 245 ITR 492 (Delhi), held that even when the doctrine of res judicata does not apply to income-tax proceedings, where an issue has been decided consistently in a particular manner for earlier assessment 8 9 ITA no.2126/Ahd/2009 years, the same view should prevail even during the subsequent years unless there is a material change in the facts. The law is, therefore, fairly well settled. For rejecting the view taken for the earlier assessment years, there must be a material change in the fact situation. There is no gainsaying that the previous view will have no application even in cases where the law itself has undergone a change but before an earlier view can be upset or digressed from, one of the two must be demonstrated, namely, a change in the fact situation or a material change in law whether enacted or declared by the Supreme Court. In the instant case, the ld. CIT(A) have followed the decision of his predecessor for the AY 2005-06 in allowing the claim, which has been upheld by the ITAT in their decision dated 23.12.2010. In the absence of material change in facts or any additional input, there is no compelling reason for taking a different view.
5.4 In view of the foregoing, especially when facts and circumstances in the year under consideration are indisputably, parallel to the facts and circumstances obtaining in the AYs 2004-05 & 2005-06 while the ld. DR have not placed before us any material so as to enable us to take a different view in the matter nor brought to our notice any contrary decision, we are not inclined to interfere with the findings of the ld. CIT(A). Therefore ,ground no.1 in the appeal of the Revenue is dismissed.
6. Ground nos.2 and 3 being mere prayer nor any submissions having been made on these grounds, do not require any separate adjudication while no additional ground having been raised before us in terms of residuary ground no.4 in the appeal, accordingly, these grounds are dismissed.
7. In the result, appeal is dismissed.
910 ITA no.2126/Ahd/2009 Order pronounced in the court today on 3 -06-2011 Sd/- Sd/-
(T K SHARMA) (A N P AHUJ A) JUDICI AL MEMBER ACCOUNTANT MEMBER Dated : 3 -06-2011 Copy of the order forwarded to:
1. Dharampur Utthan Vahini Vrindavan Campus, At & PO:
Lachhakadi, Tal: Vansda, Tal: Navsari
2. The Deputy Commissioner of Income-tax, Navsari Circle, Navsari
3. CIT concerned
4. CIT(A), Valsad
5. DR, ITAT, Ahmedabad Bench-A, Ahmedabad
6. Guard File BY ORDER Deputy Registrar Assistant Registrar ITAT, AHMEDABAD 10