Income Tax Appellate Tribunal - Hyderabad
M/S. Kamma Sangham, Hyd, Hyderabad vs Assessee on 5 October, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'B', HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and
SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
I.T.A. No. 477/Hyd/2011
Assessment year : 2001-02
M/s. Kamma Sangham Vs. DDIT (Exemptions)-II
Hyderabad Hyderabad
PAN: AAATK2547C
Appellant Respondent
Appellant by: Dr. C.P. Ramaswami
Respondent by: Shri B.V. Prasad Reddy
Date of hearing: 05.10.2011
Date of pronouncement: 22.11.2011
ORDER
PER CHANDRA POOJARI, AM:
This appeal by the assessee is directed against the order of the CIT(A)-IV, Hyderabad dated 30.12.2010 for assessment year 2001-02.
2. The assessee raised the following grounds of appeal:
a) The order of the learned CIT(A) is against law, weight of evidence and probabilities of the case.
b) The learned CIT(A) grossly erred in not following the ratio laid down by the Supreme Court in the case of ACIT vs. Surat City Gymkhana (2008) (300 ITR 214 and consequently erred in confirming the action of the Assessing Officer in probing into the objects of the appellant trust, which is approved in terms of section 12A.
c) i) The learned CIT(A) failed to appreciate that investment in immovable properties to generate income for being applied to the attainment of the objectives of the appellant is a specified investment in terms of section 11(5) and consequently the appellant cannot be denied exemption.
ii) The learned CIT(A) failed to appreciate that for such investments the appellant would not have disbursed scholarships worth more than Rs. 2.24 crore in the succeeding years when there was no donation received by the appellant.2 I.T.A. No. 477/Hyd/2011
M/s. Kamma Sangham ==================
iii) The learned CIT(A) failed to appreciate that investment in the construction of commercial complex, etc., was properly decided by the appellant society and intimated in Form-10 for the purpose of accumulation in the earlier years. Consequently, there was no violation of section 11(2) either. Thus the CIT(A) erred in dismissing the appeal.
iv) The learned CIT(A) failed to follow the ratio of jurisdictional High Court in the case of Hyderabad Race Club Charitable Trust, 262 ITR 194 and consequently wrongly confirmed the order of the Assessing Officer applying section 13(1)(b), which is unwarranted in the case of the appellant.
d) For the above grounds and such other grounds that may be urged at the time of hearing, the appellant prays that the appeal be allowed.
3. Brief facts of the case are that on earlier occasion the Tribunal set aside the order of the CIT(A) vide order dated 28.11.2007 and restored the matter back to the file of the Assessing Officer on the reason that the Assessing Officer had not given any findings as to whether the money so accumulated or set apart had been deposited in the form or modes specified in section 11(5) of the Income-tax Act, 1961. On setting aside the case back to the file of the Assessing Officer the assessee submitted that the managing committee of the assessee had passed the resolution on 13.6.1992 to the effect that at the end of each year, 75% of the income of the sangham will be accumulated for the purpose of construction of building at its Ameerpet landed property. It was submitted that out of the net income of Rs. 59,28,817 of the year, Rs. 44,46,614, being 75% thereof, had been transferred to "Building Fund Reserve Account". It was stated that most of the donations had been collected for the specific purpose of construction of building and the donors had instructed the management to use the funds only for the said purpose. It was submitted that though the funds were accounted for under the head "Donation", legally those came under "Corpus fund" to be used only for building construction. As such the assessee claimed before the lower 3 I.T.A. No. 477/Hyd/2011 M/s. Kamma Sangham ================== authorities that donation of Rs. 40,09,000 should be treated as "corpus fund", not forming part of the income of the trust. It was further submitted that though the excess of income over expenditure worked out to Rs. 59,28,807 before transfer to building fund reserve, income for the purpose of income-tax was computed at 'nil' because for the purpose of section 11, capital gain is also to be considered as application of income. It was submitted by the assessee that Form-10 was not filed along with the return of income for the A.Y. 2001-02 intentionally, as there was no surplus requiring statutory compliance as provided under section 11(2) of the Act. However, the assessee filed Form No. 10 along with the letter dated 12.8.2009 contending that in view of the judgement of Supreme Court in the case of CIT vs. Nagpur Hotel Owners' Association [247 ITR 201 (SC)] the same can be filed any time before the Assessing Officer completing the assessment. According to the Assessing Officer, the assessee failed to adhere to the resolution passed on 13.6.1992 and the assessee has failed to wait till the accumulation reached Rs. 10 crores and undertook construction every year, against the terms of the resolution dated 13.6.1992. Secondly, the amount never reached Rs. 10 crores. Thirdly, in at least four out of 10 A.Ys., the assessee totally failed to deposit the amount as stipulated in its own resolution. The Assessing Officer pointed out that for the A.Ys. 1994-95, 1996-97 and 1998-99, the amount invested in deposits was 'zero', whereas the unapplied amounts for constructions amounted to Rs. 6,20,365, Rs. 6,74,347 and Rs. 8,69,114, respectively. The Assessing Officer observed that for the A.Y. 1999-2000, the assessee deposited Rs. 5 lakhs only, whereas unapplied amount was Rs. 7,05,132 thereby failing to deposit of Rs. 2,05,132 in violation of its own resolution. The resolution passed by the managing committee of the assessee is as under:
"Resolved that 75% of the total income of the Kamma Sangham as is available at the end of each year shall be accumulated for a period of ten years ending on 31.3.2002 or till the amount accumulated reaches a figure of Rs.10,00,00,000/- (Rupees Ten Crores only) whichever is earlier and the same will be utilised for the 4 I.T.A. No. 477/Hyd/2011 M/s. Kamma Sangham ================== purpose of construction of buildings at Ameerpet, Hyderabad for achieving the objects of the Sangham. The amount so accumulated shall be invested in the form of deposits in any Scheduled Bank. The interest on such deposits also will be set apart for the said purpose."
4. the Assessing Officer noted that as per the statement of computation of total income the total income was of Rs. 82,02,415 whereas the application was of Rs. 66,32,281. Out of the application, Rs. 3,60,388 had been applied in building the "committee hall", while Rs. 41,61,881 were applied in building the "commercial complex". Reproducing the objects, as reproduced in the order of the ITAT dated 28.11.2007, the Assessing Officer noted that mere construction activity for years together was not at all covered by any of its objects. He noted that only in respect of the objects relating to establishment of educational institutions, providing boarding and lodging facilities for students and working youth, establishing hospital and providing medical facilities and establishing libraries, there was any requirement for building that too for either educational or boarding or medical or library facilities. The assessee however, had no obligation to construct commercial buildings and let those out to big business houses. The Assessing Officer also cited the decision of Punjab & Haryana High Court in the case of Gundumal Dharmarth Trust (180 ITR 137) in this regard.
5. The Assessing Officer further took note of the fact that as per the break-up of the expenditure, Rs. 1,52,100 only were paid as scholarships to students, while the remaining out of Rs. 16,49,718 was incurred towards overheads. He also noted that even the "petty" sum of Rs. 1,52,100 had been contentedly applied for charitable purposes had been distributed to students belonging to a particular caste, as per the finding given by the Assessing Officer for the A.Y. 2004-05. The Assessing Officer has reproduced the relevant portion of the Assessing Officer for the A.Y. 2004-05 as under:
"Details of scholarship expenditure, including the applications from the beneficiaries and the files containing the sanction orders of the Sangham 5 I.T.A. No. 477/Hyd/2011 M/s. Kamma Sangham ================== functionaries, were called for and verified. They revealed that the printed application forms supplied by the society contain a column for declaring the caste to which the applicant belongs and that practically every one of the beneficiaries is a member of the Kamma community, so much for the charitable activity."
6. The Assessing Officer attempted to verify the caste or sect for the year under consideration also for calling for the copies of application of those students for scholarship. However, it was submitted by the assessee that the same had been misplaced. He, therefore, proceeded to draw a similar adverse inference for the A.Y. 2001-02 also.
7. Finally, the Assessing Officer noted that the assessee had admitted that it was required to be registered u/s. 43(1) of the A.P. Charitable and Hindu Religious Institutions and Endowments Act, 1987, as per the advice of their advocate. However, the assessee could not furnish a copy of its application for such registration. The Assessing Officer concluded that the assessee never cared for the same, though the same is mandatory. He opined that extending statutory benefits to such bodies, tantamount to going against the public policy, as the assessee had caused continuous revenue loss to the State Government for years together. Citing the decision of the Supreme Court in the case of Biharilal Jaiswal vs. CIT (217 ITR 746), he noted that if what is not allowed by one arm of law, is encouraged by another arm of law, it goes against the public policy as it leads to mockery of justice.
8. On appeal, the CIT(A) observed that the Assessing Officer did not go to probe into the fact whether the objects of the assessee were of a charitable nature or not, but only he tried to examine whether the income earned by the assessee had been applied towards the aim and objects considering which the assessee had been granted registration u/s. 12A of the Act. Further, he observed that in assessee's own case most of the income of the assessee had been spent towards construction of commercial complex. The construction of commercial 6 I.T.A. No. 477/Hyd/2011 M/s. Kamma Sangham ================== complex is not the object of the assessee trust and its main object is to establish educational institutions, providing boarding and lodging to the students and working youth, rendering financial help to the deserving students, providing scholarships, to establish hospitals, libraries, etc. and the assessee had spent during the last 10 years only a meagre portion of its income towards its objects and had utilised a major portion thereof for the purpose of construction of commercial complex. Even the said commercial complex was not used for any of the objects for which the assessee trust was created, but had been let out to commercial organisations to earn huge rent. It was also seen that the substantial income generated by the assessee was regularly being ploughed back into income generating assets only, year after year, without any care for application of money towards charitable activities. Accordingly, the CIT(A) confirmed the order of the Assessing Officer by denying the exemption of income u/s. 11 of the Act and brought the same into taxation.
9. With regard to the contention of the assessee that provisions of section 13(1)(b) would not apply, it was observed by the CIT(A) that even if the scholarships granted to the children of Kamma community, the recipients cannot be considered as "children". The assessee trust is not created for the benefit of "children" only. Since the scholarships have been given only to the students belonging to Kamma caste exemption u/s. 11 of the Act cannot be given and provisions of section 13(1)(b) are applicable. As per the resolution dated 13.6.92, only the persons from the Kamma community were to get 25% discount or concession in hiring charges of the Kalyana Mandapam or hall given for marriages, etc. Therefore, he confirmed the denial of exemption u/s. 11 of the Act.
10. Even otherwise, it was observes by the CIT(A) that admittedly no form No. 10 had been filed by the assessee in respect of any accumulation out of the income for the A.Y. 2001-02. It is claimed that after the transfer of Rs. 44,46,614 to the "Building Fund Reserve 7 I.T.A. No. 477/Hyd/2011 M/s. Kamma Sangham ================== Account", 75% of the net income of Rs. 59,28,817 was considered as applied and, therefore, the assessee opined that there was no need for filing any Form No. 10. However, he was of the view that such contention is not acceptable. The mere transfer of funds to the "Building Fund Reserve Account' cannot be considered as application of income. Even if any funds were to be set apart for such purpose, the assessee was statutorily required to file Form No. 10, duly intimating the purpose and extent of such accumulation. On the other hand, as made out by the Assessing Officer, even though the assessee had passed a resolution on 13.6.1992 for accumulating 75% of the income for the purpose of construction of building for the next 10 years, such resolution alone cannot be considered as a valid notice of accumulation, as envisaged under the provisions of the Act. As regards Form No. 10 filed by the assessee during the set aside proceedings, it is clear that even in view of the decision of the Hon'ble Supreme Court in the case of Nagpur Hotel Owners' Association (supra), the assessment proceedings taken in view of the set aside order of the ITAT cannot be considered as the appropriate occasion for filing the same. Besides, it is also seen that despite a clear cut observations of the ITAT regarding modes of keeping the accumulated funds, the assessee has not been able to explain as to in what modes the same were kept till the funds were spent for the purpose of construction of the building. Accordingly, the assessee is not entitled to get any benefit of the provisions regarding accumulation.
11. As regards the contention that the entire donation of Rs. 40,09,000 was in the nature of corpus donations, it has been amply brought out by the Assessing Officer that all the 164 letters from the donors in this regard were stereotype letters in Telugu, apparently written by a single person. Besides, even the said letters only stated that the donation had been given as a token of assistance to the programmes of the assessee in general. In fact, no donor had clearly expressed any desire for making the said donation towards the "corpus fund". In the case of Probhodan Prakashan vs. ADIT (50 ITD 135), the 8 I.T.A. No. 477/Hyd/2011 M/s. Kamma Sangham ================== Mumbai ITAT have opined that in view of the expression "specific direction", such direction should be necessarily in writing and there should be evidence that such direction came from the donor. Obviously, in the facts of the assessee case, it cannot be said that the donors had given any specific direction to utilise the funds provided by them for the specific purpose of construction of the building. Under the circumstances, the CIT(A) agreed with the view of the Assessing Officer that the donations received by the assessee were in the nature of normal donations and claim regarding the same being "corpus donation" is a mere after thought. Accordingly, the CIT(A) dismissed the claim of the assessee on this count.
12. The learned AR submitted that the Assessing Officer cannot examine the objects of the assessee trust during the assessment proceedings as the assessee was duly granted with the registration u/s. 12A of the IT Act and the assessee's objects were approved as charitable in nature. He relied on the judgement of the Supreme Court in the case of CIT vs. Surat City Gymkhana (300 ITR 214). Further he submitted that the accumulated amount was utilised for the purpose of construction of community hall as well as commercial complex with an intention to generate income for the purpose of attainment of assessee's objectives mentioned in Articles of Bye-laws. Further he submitted that as per provisions of section 11(5)(x), the assessee is permitted to make investment in immovable property which either may be residential or commercial. The investment in commercial complex is also one of the specified modes of the investment and assessee has complied with the provisions of section 11(2) r.w.s. 11(5) of the IT Act. He relied on the judgement of jurisdictional High Court in the case of CIT vs. Hyderabad Race Club Charitable Trust (262 ITR 194) wherein held that "it could not be held that there had been business in the normal sense in such arrangement and in the facts and circumstances, it was not such a business which would be hit by section 13(1)(bb) and consequently, the trust was entitled for exemption." According to the AR, this judgement is squarely applicable to the facts of the present 9 I.T.A. No. 477/Hyd/2011 M/s. Kamma Sangham ================== case. Further he submitted that the provisions of section 13(1)(b) of the Act are not applicable as the recipients of scholarship are not the members of the family of the trustees or author or founder or any concern in which these persons have substantial interest. It was submitted that in view of the Explanation 2 below sub-section (7) of section 13, when scholarships are being awarded to children studying in colleges the assessee does not fall within the mischief of section 13(1)(b) of the IT Act, though the assessee disbursed the scholarships to the children of a particular caste.
13. Regarding non-filing of Form No. 10 within due date, the learned AR submitted that after the transfer of Rs. 44,46,614 to the 'Building Fund Reserve Account', 75% of the net income of Rs. 59,28,817 was considered as applied for charitable purposes and there was no need for filing any Form No. 10. He also contended that the assessee has filed Form No. 10 along with the letter dated 12.8.2009 and in view of the judgement of the Supreme Court in the case of CIT vs. Nagpur Hotels Owners' Association (supra) the same can be filed any time before the Assessing Officer completing the assessment for the concerned assessment year. Further, he submitted that had the assessee not made the investment in commercial complex it would not have disbursed scholarships worth more than Rs. 2.24 crores in the succeeding year when there was no donation received by the assessee. The investment in commercial complex was decided by the assessee and intimated in Form No. 10 for the purpose of accumulation in earlier years. Consequently, there was no violation of section 11(2) also. He relied on the following judgements:
a) ACIT vs. Surat City Gymkhana [300 ITR 214 (SC)] wherein it was held that the registration of a trust under section 12A of the Income-tax Act, 1961 once done is a fait accompli and the Assessing Officer cannot thereafter make further probe into the objects of the trust.
The decision of the High Court in Hiralal Bhagwati v. CIT (2000), 246 ITR 188 (Guj) attained finality on this po8nt also since that 10 I.T.A. No. 477/Hyd/2011 M/s. Kamma Sangham ================== decision also covered this point and the Department had not challenged that decision before the Supreme Court.
b) CIT vs. Hyderabad Race Club Charitable Trust, 262 ITR 194 (AP) wherein it was held that the objects of the trust were purely charitable in nature. The main objects of the trust were advancement and propagation of education, medical aid and relief of the poor. In fact, promotion of sports and games was also one of the charitable objects. Merely because a discretion was vested in the trustees to utilise the income to any one or more of the objects that would not make any difference. The transactions in conducting the races and inter-venue betting were meant for achieving the primary objects of the trust and could not be called a business and the income derived from such transactions could not be called an income from the business. Assuming that it was a business as contemplated under section 2(13) of the Act, the same was exempted under section 11. The licence to run races and betting itself could not be treated as property and the said property was obtained with the consent of the club and with the licence granted by the Government of Andhra Pradesh. The term "property" itself had widest import for income tax purposes and was inclusive of holding a licence. The income derived by the trust for the relevant assessment years was from property held under trust and, as such, it was computed under section 11. Even if it were not treated as income from the property held under trust, it could be treated as voluntary contribution give by the club to the assessee trust as contemplated under section 12. Such voluntary contributions could be characterised only as a capital receipt in the assessee's hands. Thus, it could not be held that there had been business in the normal sense in such arrangement and in the facts and circumstances, it was not such a business which would be hit by section 13(1)(bb). The trust was entitled to exemption.
c) CIT vs. Janmabhumi Press Trust, 242 ITR 457 (Kar) wherein it was held that when the assessee is a trust entitled to benefit under section 11 of the Income-tax Act, 1961, the only question that arises for consideration is whether that income or the accumulated income thereof is applied for charitable purposes. If investments have been made in the construction of a building which in turn would augment its income, it should be held that the application of the funds is for the purpose of the trust. The repayment of the debt incurred by the trust for construction of the building should be treated as application of the income of the trust for charitable purposes.
14. The learned DR relied on the order of the CIT(A).
11 I.T.A. No. 477/Hyd/2011M/s. Kamma Sangham ==================
15. We have heard Dr. C.P. Ramaswami, the learned Advocate appearing for the assessee and Shri B.V. Prasad Reddy, the learned Addl. CIT appearing for the Revenue. There is no dispute on the facts surrounding this case as explained in the order of the CIT(A). It is true that the assessee is granted with registration u/s. 12A of the I.T. Act acknowledging its eligibility for the purpose of section 11 of the IT Act, 1961. In spite of valid registration u/s. 12A of the IT Act, the assessee was not successful before the lower authorities to convince that the assessee had, in fact, carried out only charitable activities during the relevant period and the income of the assessee has been applied for charitable purposes only. The assessee has been established for carrying out the following activities:
a) To establish educational institutions;
b) To provide boarding and lodging facilities for students
and the working youth.
c) To render financially deserving students by giving loans,
scholarships, awards, etc., in furtherance of their studies in India and abroad.
d) To establish hospitals and providing medical facilities.
e) To establish libraries, publish books, pamphlets, journal, etc.
f) To honour and encourage outstanding and deserving persons in public life, social service, music, literature and arts, etc.
g) To assist and guide the educated un-employees in the matter of employment.
h) To absorb, merge or amalgamate, affiliate any other body, institution or organisation with this Sangham having objects similar to those of this Sangham.
i) To do whatever is necessary for the attainment of the above objects.
j) To promote better understanding among members of all communities.
16. In the assessment year under consideration, the assessee paid scholarships to students at Rs. 1,52,100. This scholarship has been given to the students of one particular community/caste i.e., Kamma caste only. In other words, income has not been applied directly for 12 I.T.A. No. 477/Hyd/2011 M/s. Kamma Sangham ================== charitable purposes mentioned above. It is also on record that the persons from Kamma community would get 25% discount on hire charges of Kalyana Mandapam or Hall given for marriages. In view of the provisions of section 13(1)(b) of the IT Act, as the benefit has been given to particular community, the exemption u/s. 11 cannot be given. Further, the income has been applied for the construction of a commercial complex, the income from which is to be applied for charitable purpose. The question for consideration before us is whether in such cases, application of income for the purpose of the construction of commercial complex can be treated as application of the income for charitable purposes. The learned Representative for the assessee relied on the judgement of Supreme Court in the case of Surat City Gymkhana (300 ITR 214). In that case it was held that registration of trust u/s. 12A of the IT Act, once done is a fait accompli and the Assessing Officer cannot thereafter make further probe into the objects of the trust. However, in the present case the Assessing Officer is only examining whether the income earned by the assessee is applied towards the objects for which it was formed. He has not probed the genuineness of the activities carried on by the assessee. He has only examined the application of fund of the assessee. As regards the relevance of registration u/s. 12A at the stage of grant of registration, it is not necessary to first establish as to how the assessee would be able to claim exemption u/s. 11 or section 12. Even an institution of religious nature is not precluded from getting registration u/s. 12A. The only purpose for which registration is required is for establishing its identity as an institution for being able to claim the benefits u/s. 11 and 12. Therefore, the assessee could not argue that with the registration u/s. 12A, the fact that the assessee was a charitable institution stood concluded and the tax authorities could not question it. The fact, whether an institution is a charitable institution or not is not only a question of the trust deed or Memorandum of Association, etc., but also how the institution has conducted its 13 I.T.A. No. 477/Hyd/2011 M/s. Kamma Sangham ================== activities. The authorities below have found a breach in that regard inasmuch as while the main objects the assessee performed very little.
17. The expenditure in charities need not be in the nature of revenue expenditure only. If a trust or society applies its income for constructing a hospital or school building or purchasing apparatus or furniture thereof, it would be application of the income to charitable purpose. This, however, does not mean that if a trust spends or invests its income for acquiring a capital asset for earning income, it would still tantamount to the application of the income to the charitable purposes. If the assets acquired have direct nexus with the charitable purpose, it is only then that it will amount to the application of the income within the meaning of section 11. Investment in an income earning asset would not be application of the income as envisaged by the section.
18. It was contended by the learned AR that we should have a wider outlook and should take a more liberal view of the matter by holding that the investment of the income in a venture which would bring a higher income which could ultimately be applied for charitable purposes, should be held to be application of the income for charitable purposes. For this proposition, he relied on the judgement of Karnataka High Court in the case of CIT vs. Janmabhumi Press Trust (242 ITR 457). It appears to be unsafe to accept such a proposition. If the proposition is accepted, a charitable trust can apply its entire income on commercial activities and claim the same to be application of the income for charitable purposes, merely because the income ultimately obtained from the commercial activities is to be applied for charitable purposes. Similarly, a charitable institution can spend the entire income on the acquisition of the capital asset which has nothing to do with the charitable activities on the plea that the income derived from the capital asset is going to be used for charitable purposes. The essential requirement of section 11 is that the income for which exemption is sought must be one which has been applied for charitable 14 I.T.A. No. 477/Hyd/2011 M/s. Kamma Sangham ================== purposes during the relevant previous year. If we view the matter in the above background in the present case the income has not been applied for charitable purposes. The amount herein was not spent for the dominant and primary purpose of charitable activities and it cannot be construed as spending money on charitable activities.
19. In the assessment year under consideration the assessee spent a paltry amount of Rs. 1,52,100 for giving scholarships out of its income and invested money in construction of the commercial complex or transferred the fund to "Building Fund Reserve Account". This pattern of investment cannot be considered as application of fund in terms of section 11. The investment in commercial complex cannot be said to have been made to help in achieving the main objects. Further any benefit that is to accrue to a specific person from amongst the particular community could never be public utility because; it always implies a general application without any reference to any person of particular community. In our opinion, the construction of commercial complex which is carried on commercial level did not make assessee society existing solely for charitable purpose. The assessee spent a large portion of the income either to construct commercial complex or transfer to "Building Fund Reserve Account'. Further the assessee has not given required intimation regarding accumulation before the due date as prescribed in the Act. Under section 11, an assessee is required to apply the income to the extent of 75% to the objects of the trust. In a case where income is not applied, the income can be accumulated or set apart in excess of 75% of the income to be utilised subsequently. For this purpose, the assessee has to exercise option in writing before the expiry of time allowed under subsection (1) of section 139 for furnishing the return of income. In the instant case, the entire income from fund generated was not utilised in the year under consideration, therefore, the assessee was required to exercise option to accumulate the excess income for the purpose of applying the same in the subsequent year. But no such option was exercised. Therefore, the claim of the assessee cannot be entertained though the assessee 15 I.T.A. No. 477/Hyd/2011 M/s. Kamma Sangham ================== made a claim before us that the transfer of Rs. 44,46,614 to "Building Fund Reserve Account", 75% net income of Rs. 59,28,817 was considered as applied and there is no necessity of filing Form No. 10. The mere transfer of fund to the "Building Fund Reserve Account"
cannot be considered as application of fund as discussed in earlier para.
20. We have also carefully gone through all the judgements cited by the assessee. In the case of CIT vs. Hyderabad Race Club Charitable Trust (262 ITR 194) it was held "it could not be held that there had been business in the normal sense in such arrangement and in the facts and circumstances, it was not such a business which would be hit by sec. 13(1)(bb) and consequently, the trust was entitled for exemption." In assessee's case major portion of the income of the assessee has been spent towards construction of a commercial complex. As seen from the object clause of the bye-laws construction of commercial complex is not the object of the assessee. Its main object is to establish educational institutions, providing boarding and lodging to the students and working youth, rendering financial help to the deserving students, providing scholarships, to establish hospitals and libraries. Even the commercial complex was not used for any of the objects for which the trust was created but had been used to let out to commercial organisations to earn rent. The income generated through that also not fully used for the purpose of attainment of objects of the assessee. Substantial income generated by the assessee was regularly being ploughed back into income generating assets without applying the same for charitable purposes. Being so, in our opinion, this case has no application to the facts of present case.
21. Further the learned AR made a plea before us that the entire donation received in the assessment year under consideration was in the nature of corpus donation. It has been brought on record by the lower authorities that all the 164 letters from the donors in this regard were stereotype letters in Telugu apparently written by a single person.16 I.T.A. No. 477/Hyd/2011
M/s. Kamma Sangham ================== The said letters only stated that the donations had been given as a token of assistance to the programme of the assessee in general. There was no clear mentioning of any desire for making the said donation towards 'corpus fund'. There is no specific direction in writing regarding that the donation has been made for the specific purpose of construction of commercial complex. In view of this, the donations so received are to be considered as normal donation and cannot be considered as donations towards corpus fund.
22. In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 22nd November, 2011.
Sd/- Sd/-
(ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated 22nd November, 2011
tprao
Copy forwarded to:
1. M/s. Kamma Sangham, c/o. Dr. C.P. Ramaswami,
Advocate, Flat No. 303, Gitanjali Apts., Plot No. 108, Srinagar Colony, Hyderabad-500 073.
2. The Deputy Director of Income-tax (Exemptions)-II, Hyderabad.
3. The CIT(A)-IV, Hyderabad.
4. The DIT (Exemptions), Hyderabad.
5. The DR - B Bench, ITAT, Hyderabad