Income Tax Appellate Tribunal - Cochin
Sree Seetharama Anjaneya Veda Kendra vs Assistant Director Of Income-Tax ... on 11 June, 2001
Equivalent citations: [2002]83ITD235(COCH)
ORDER
K.P.T. Thangal, Judicial Member
1. These appeals by the assessee relate to the assessment years 1995-96 and 1996-97, and are directed against the common order of the Commissioner (Appeals) confirming denial of exemption under Section 11(2) of the Income-tax Act, 1961 and assessment of income at Rs. 4,87,600 for the assessment year 1995-96 and Rs. 6,60,854 for the assessment year 1996-97.
2. The assessee filed returns of income on 30-10-1995 and 30-10-1996 along with audit report under Section 12A(b) of the Act disclosing receipts of Rs. 6,25,752 and Rs. 8,47,274 by way of rent and interest respectively for the assessment years 1995-96 and 1996-97. The assessments were completed on 17-3-1998 and 27-11-1998 fixing the taxable income at Rs. 4,87,660 and Rs. 6,60,854 for the above two years. Along with the returns of income, the assessee had also filed application in Form No. 10 seeking accumulation of income to the extent of Rs. 4,50,000 upto 31-3-2000 for the assessment year 1995-96 and Rs. 5,35,000 upto 31-3-2006 for the assessment year 1996-97. The purpose was explained as under:
To impart instruction in Vedas and Upanishads and to grant scholarships to students and scholars of Vedas, Agamas, Aranyaka, Epics, Puranas and Upanishads and to undertake other objects of the trust including purchase, construct, obtain on lease or acquire in any other manner, land, buildings, etc. for the conduct of the activities of the trust.
The assessee trust also claimed exemption of its income under the provision of Sections 11 to 13 of the Income-tax Act, 1961.
3.1 The assessee trust came into existence on the strength of a deed dated 10-9-1981 with a corpus fund of Rs. 2,500. The Assessing Officer rejected the claim of the assessee for exemption of its income as the assessee cannot be considered to have set apart any income for the purposes for which the trust was created for a number of years relying on the decision of the Hon'ble Calcutta High Court in the case of Director of Income-tax (Exemption)v. Trustees of Singhania Charitable Trust[1993] 199 ITR 819. While coming to the above conclusion, the Assessing Officer in his order of assessment relating to the assessment year 1995-96, after enumerating 21 objects of the trust, noted the following facts :
3.2 The assessee trust acquired certain immovable assets out of the corpus fund and constructed new buildings out of its income earned in the assessment years 1988-89 and 1989-90. The assessee trust leased out one of its buildings by agreement dated 9-7-1986 to Mathrubhoomi Printing and Publishing House for a lease rent ranging from Rs. 25,000 to Rs. 29,000 per month and on a deposit of Rs. 4,00,000 for a period of ten years on condition that the assessee constructs additional floors as per the specifications made in the deed and that the deposit amount of Rs. 4,00,000 has to be adjusted against the rent at the rate of Rs. 3,350 per month. By another agreement the trust has also leased out another building to Mathrubhoomi Printing and Publishing House for a monthly rent of Rs. 11,000 and deposit of Rs, 6,72,000 for a period of 10 years with the condition that the assessee constructs additional floors as per the specifications made in the trust deed out of its deposits which has to be adjusted against the rent at the rate of Rs, 6,000 per month. The Assessing Officer noticed that the main object of the assessee trust is to encourage education in Vedas and Upanishads. The Assessing Officer noticed that instead of giving effect to the main object of the trust, the assessee was giving more emphasis for construction of new buildings in order to derive income from such activities. He noted that the assessee spent very little income for the application of its objects. The assessee was trying to accumulate the income over many years. The assessee's emphasis for accumulation of income for construction of new buildings is not peculiar to the two years under consideration, but this was so in almost all the previous years. The Assessing Officer noticed that although the institution had admitted students for taking courses in Vedas and Upanishads, it appeared that most of the students had left the institution without completing the course. It was also reported that the courses were conducted not in a regular and systematic manner. From the above facts, the Assessing Officer inferred that the assessee had not applied its income for a considerable period for the objects, so as to make the assessee eligible for exemption. Following the decision of the Hon'ble Calcutta High Court in the case of Trustees of Singhania Charitable Trust (supra), the Assessing Officer rejected the assessee's claim of exemption. Aggrieved by the order of the Assessing Officer, the assessee approached the learned first appellate authority.
3.3 It was contended before the learned first appellate authority that the assessee had complied with all the legal requirements to derive the benefit of the provisions of Section 11 of the Income-tax Act, 1961. The notice of accumulation was given in time specifying the purpose. The accumulated amount has been deposited in specified investments under Section 11(5). The mere fact that the amount actually spent during a particular year is very low is not a ground for denying the deduction. The assessee had also contended that the decision of the Calcutta High Court in Trustees of Singhania Charitable Trust's case (supra) relied on by the Assessing Officer did not prohibit plurality of the purpose of accumulation. The learned Commissioner (Appeals) noted that spending of comparatively smaller amounts for the purpose of the trust and larger amounts for accumulation by self is not a sufficient ground to deny the benefit provided under Section 11. However, the learned Commissioner (Appeals) concluded that "the Assessing Officer's argument that the purpose of accumulation should be concrete and specific is unassailable in view of the decision relied on by him as well as the assessee." The Commissioner (Appeals) further held that accumulation under Section 11(2) is not meant to be an escape route for balancing out fluctuations in income by charitable trusts. The income should be used for specific and identifiable purpose. The Commissioner (Appeals) further held that-
in the notice for assessment year 1995-96, I find that the purpose specified to impart in Vedas, Upanishads and to grant scholarships to the students and scholars of Vedas and to undertake other objects of the trust including purchase, construction of building etc. in my view this is too vague a purpose to be specific and definite. The purpose should have been something like creation of an impress fund of Rs. 10 lakhs, the interest from which will be used to institute an annual award of scholarship or to conduct competition in respect of Vedas or to erect a building to conduct a school at a specified cost at a specified place, etc. Therefore, I have to conclude that the interpretation given by the cited decision upholds the action of the Assessing Officer. Therefore, the appeal stands dismissed.
Aggrieved by the above order, the assessee is in second appeal before the Tribunal.
4. The learned counsel for the assessee submitted that the decision of the Calcutta High Court in Trustees of Singhania Charitable Trust's case (supra) relied on by the revenue, is distinguishable on facts. In that case, the assessee, while listing out the purposes of accumulation of income under Section 11(2) of the Income-tax Act, 1961, specified all the objects for which the assessee-trust was created in Form No. 10. It was under this circumstance, the Calcutta High Court held the view that the assessee must specify the purposes of accumulation and cannot list all the objects of the trust. In the instant case, there are as many as 21 objects and the assessee has specified only three objects in Form No. 10 notice. The accumulation was not for all the purposes of the trust. On the contrary, the learned counsel for the assessee submitted that the Calcutta High Court decision in Trustees of Singhania Charitable Trust's case (supra) supports the case of the assessee as their Lordships have held in that case that plurality of purposes for accumulation of income may not preclude the assessee from getting the exemption under Section 11. The learned counsel for the assessee made available to us a copy of the trust deed, which enumerates the various objects of the assessee-trust to contend that out of the 21 objects (a to u) only three objects have been specified in Form No. 10, viz., objects (a), (b) and (t). Hence the learned counsel submitted that the order of the Commissioner (Appeals) concurring with the view of the Assessing Officer denying the exemption claimed by the assessee is liable to be set aside.
5. Objecting to the above, the learned departmental representative submitted that in this case it was not because of the plurality of purposes the exemption was denied to the assessee, but because of the vagueness in the objects. The learned departmental representative brought to our attention the purposes of accumulation as specified in Form No. 10(1), which read as under :
To import instruction in Vedas and Upanishads and to grant scholarships to students and scholars of Vedas, Agamas, Aranyaka, Epics, Puranas and Upanishads and to undertake other objects of the trust including purchase, construct obtain on lease or acquire in any other manner land, buildings, etc. for the conduct of the activities of the trust.
The learned departmental representative contended that enumeration of the purposes for which fund is accumulated include "purchase, construct, obtain on lease or acquire in any other manner, land, buildings, etc." It is too vague and too broad an object which definitely is hit by the decision of the Hon'ble Calcutta High Court in Trustees of Singhania Charitable Trust's case (supra). The learned departmental representative therefore submitted that the orders of the lower authorities do not call for any interference.
6. We have heard rival submissions and gone through the orders of the revenue authorities, and the affidavits filed by the managing trustee of the assessee-trust. We are of the view that the assessee is entitled to succeed. The stand of the department that the benefit was denied to the assessee not because of the plurality of the purposes, but because of the vagueness of the objects cannot be simply appreciated. The objects for which the trust was formed, viz., the 21 objects are enumerated in Clause 4 of the trust deed under the head 'objects'. Accumulation of the income was intended only for three of the above objects and they are items (a), (b) and (t). We reproduce them for brevity, it is as follows :
(a) To impart instructions in Vedas and Upanishads;
(b) To grant scholarships to students and scholars of Vedas, Agamas, Aranyakas, Epics, Puranas and Upanishads; and
(c) To purchase, construct, obtain on lease or acquire in any other manner, land, buildings, etc. for the conduct of the activities of the Trust.
A reading of the above objects would make it amply clear that only three objects are specified in Form No. 10 for purpose of accumulation of income. The reason which weighed with the revenue authorities to deny the exemption to the assessee is the vagueness of the purposes enumerated in Form No. 10 notice. We are unable to subscribe to the above view canvassed by the department.
7. We are of the view that the reasons enumerated for the purpose of accumulation are drafted badly. In fact, the object specified in item No. (t) is intended for the achievement of the objects mentioned in items (a) and (b), namely,-
(a) To impart instructions in Vedas and Upanishads;
(b) To grant scholarships to students and scholars of Vedas, Agamas, Aranyakas, Epics, Puranas and Upanishads.
We also find considerable force in the arguments of the learned counsel for the assessee that, in fact, the decision of the Hon'ble Calcutta High Court in Trustees of Singhania Charitable Trust's case (supra) relied on by the authorities below is in support of the assessee's case. In that case, their Lordships of the Calcutta High Court at page 823 of the report observes thus :
Doubtless, it is not necessary that the assessee has to mention only one specific object. There can be setting apart and accumulation of income for more objects than one but whatever the objects or purposes might be, the assessee must specify in the notice the concrete nature of the purposes for which the accumulation is being made. Plurality of the purposes for accumulation may not be precluded but it must depend on the exact and precise purposes for which the accumulation is intended for the statutory period of ten years. The generality of the objects of the trust cannot take the place of the specificity of the need for accumulation.
Their Lordships further observed that the Tribunal was not right in allowing the benefit of the accumulation without first ascertaining whether the purpose has been precisely specified or not. In the case relied on by the department, the Hon'ble Calcutta High Court noticed that in Form No. 10 notice, the purposes of accumulation were enumerated in items (i) to (xvi), about which their Lordships observed -
What the assessee has sought to be permitted to do here is to accumulate not for any determinate purpose or purposes but for the objects as enshrined in the trust deed in a blanket manner. Accumulation in such a global manner is definitely not in the contemplation of Section 11(2) when it is considered in its setting.
Taking the totality of the facts and circumstances of the case, the reason given by the Assessing Officer to deny the benefit contemplated under Section 11(2) and the reasoning adopted by the Commissioner (Appeals) in concurring with the view of the Assessing Officer is not in conformity with the intent and purport of the above section. The decision of the Hon'ble Calcutta High Court in Trustees of Singhania Charitable Trust's case (supra) relied on by the revenue in fact supports the case of the assessee. In the light of the above facts, we set aside the orders of the revenue authorities.
8. In the result, the appeals preferred by the assessee for the two assessment years under consideration are allowed.