Income Tax Appellate Tribunal - Delhi
Ito (E), New Delhi vs M/S. Maratha India, New Delhi on 1 January, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES: "E" NEW DELHI
BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
AND
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
ITA No: 2257/Del/2012
Asstt. Year 2008-09
ITO (E) vs. Maranatha India
Trust Ward-IV, 220, Vinoba Puri,
New Delhi. 1st Floor, Lajpat Nagar-II,
New Delhi - 110 024.
PAN: AABTM3060F
(Appellant) (Respondent)
Appellant by : Shri V.K. Bindal, CA
Ms. Sweety Kothari, CA
Respondent by : Shri P.Dam Kanunjna, Sr.DR
Date of Hearing : 05.10.2015
Date of pronouncement : 2016
ORDER
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
This appeal has been preferred by the Department against the order dated 30.11.2011 passed by the Ld. CIT (A)-XVI, New Delhi. The grounds of appeal raised by the Department are as under:-
1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing telephone expenses which was disallowed by the AO as being not related to the assessee trust and thereby an infringement of section 13(1) (c) of the Act.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the exemption u/s 11 and 12 of the Act, ITA No. 2257/Del/2012 ITO vs. M/s. Maratha India which was denied by the AO being an infringement of section 13(1)(c) of the Act.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate the fact the disallowance of telephone expenses and denial of exemption u/s 11 and 12 of the Act were made by the AO after giving ample opportunity to the assessee trust to present its case."
2. The brief facts of the case, as borne out from the records, are that the assessee is a trust and has been granted registration u/s 12A of the Income Tax Act, 1961 vide order dated 1.4.2003 w.e.f. 1.11.2002. For the assessment year 2008-09, the return of income declaring income of Rs. NIL was filed on 30.9.2008. The return was processed u/s 143(1) of the Act on 30.3.2010. Later the case was selected for scrutiny under compulsory category as provided in action plan for financial year 2009-10. During the assessment proceedings u/s 143(3) of the Income Tax Act,1961 the AO observed that part of expenditure incurred in respect to telephone expenses was in the name of the following persons :-
1. Marantha India Pvt. Ltd. (Rs. 16,083/-)
2. Dalia Clark - relative of trustee (Rs. 2,989/-)
3. Northern Union of Seventh Day Adventist - no relation indicated (Rs.
18,139/-)
4. Douglas Clark - Founder & Trustee (Rs. 7,735/-)
5. Bhagmal Nagrath - no relation indicated (Rs. 5,699/-)
6. M. Kumar Aggarwal - Trustee (Rs. 2,268/-)
3. The AO was of the opinion that there was a violation of provisions of section 13(1)(c) of the Income Tax Act, 1961 and accordingly the exemption u/s 11 & 12 of the Act was denied and the total income of the trust was calculated at Rs. 5,47,33,430/- in the status of AOP.
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4. Aggrieved, the assessee went into appeal wherein the Ld. CIT (A) gave a categorical finding that the AO had not brought anything adverse on record regarding the utilisation of telephone for purposes other than charitable. Ld. CIT (A) was of the view that registration of telephone bills in the name of another party could not be a reason for disallowance of such expenses if the telephones were used for the activities of the assessee trust. Accordingly payments made for telephone bills in the names of other person were deleted by the Ld. CIT (A). The assessee had also contested the calculation of surplus by the AO and had submitted that the taxable income was NIL as there was gross loss due to excess of expenditure over income amounting to Rs. 1,62,34,561/- as the gross receipts for the year were Rs. 10,37,67,107/- and the total expenditure incurred was Rs. 10,44,36,602/- which was entirely expended towards the attainment of the charitable objects. The assessee had objected before the Ld CIT (A) that the AO had included the closing value of work and progress in its receipts and the opening value in its expenditure. This ground of the assessee was also allowed by the Ld. CIT (A). As far as the applicability of section 13(1)(c) was concerned, the Ld. CIT(A) was of the opinion that the payments made to persons covered u/s 13(3) can be covered u/s 13(1)(c) only when the amount paid was excessive , unreasonable and not commensurate with the activities/ services rendered by these persons. The Ld. CIT(A) has given a categorical finding that the amounts paid / reimbursed towards telephone bills of the persons in question were quite reasonable and hence section 13(1)(c) did not come into play. Accordingly the exemption u/s 11 and 12 of the Act was allowed to the assessee.
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5. In the present appeal before us, the department has relied on the order of the AO whereas the Ld. AR has supported the order of the Ld. CIT (A).
6. It is gathered from records and submissions that the assessee is a trust formed to carry out charitable and benevolent work for the needy, destitute people regardless of nationality, race, creed, community, caste, language or social status. Its objects include promotion, taking over, establishing, running, managing, maintaining or developing institutions for spreading literal / vocational/academic/ moral education through schools, colleges, universities and institutions solely for philanthropic purposes. The trust holds registration u/s 12A of the Income Tax Act, 1961. As far as the first ground of appeal regarding the allowance of telephone expenses by the Ld. CIT (A) is concerned, it is seen from the records that the amount of Rs. 7,735/- has been paid towards bill for telephone in the name of Mr. Douglas Clark. Mr. Clark is a founder and managing trustee of the trust and a certificate from Mr. Clark regarding the use of telephone for the purposes of the trust is also on record. Ld. CIT (A) has given a categorical finding on this issue. Similarly, payment of telephone bills amounting to Rs. 2,989/- in the name of Ms. Dalia Clark has also been allowed by the Ld. CIT (A) on a specific finding that she has been assisting her husband Mr. Douglas Clark in charity matters as a volunteer and also that the certificate from her stating that the phone was used by her for the purpose of charitable activities of the trust was on record. Similarly telephone bills amounting to Rs. 18,139/- in the name of Northern Union of Seventh Day Adventist have been allowed by the Ld. CIT (A) on the ground that Mr. Douglas Clark had retained this number which was being used by the Northern Union of Seventh Day Adventist earlier. A confirmation from Northern Union of Seventh Day Adventist was 4 'v* ' ITA No. 2257/Del/2012 ITO vs. M/s. Maratha India also on record. Again, telephone expenses amounting to R. 5699/- in the name of Shri Bhagmal Nagrath were allowed by the Ld. CIT (A) on the ground that Shri Bhagmal Nagrath was the land lord of the premises hired by the assesee trust for running its charitable activities. The phone was also installed in the said premises and the assessee trust was using the said premises and the telephone expenses were paid by the trust and duly recorded in its books of accounts. As regards the phone registered in the name of Shri M Kumar Aggarwal, the Ld. CIT (A) has given a categorical finding that he was a trustee of the assessee trust during the period under consideration. He was looking after the finance and accounts of the trust and other day to day matters and was not taking any remuneration for his services and he had used his cell phone for the purposes of the trust. A confirmation from Shri M. Kumar Aggarwal was also on record. As regards the allowance of Rs. 16083/- of telephone bills in the name of M/s. Marantha India (P) Ltd., the Ld. CIT (A) has given a finding that these bills were actually pertaining to the assessee trust but due to wrongly mentioning of the name by the service provider, the amount was disallowed. A certificate from the Managing Director of the assessee trust certifying these facts was also on record. Ld. DR could not controvert these findings of the Ld. CIT (A) by bringing any other evidence on record. Ld. CIT (A) has also given a categorical finding that the additional documents in the form of confirmations from these six persons regarding the utilisation of telephones were duly forwarded to the AO for verification. However, the AO after verification of the documents and evidences did not bring anything adverse on record. Ld. CIT(A) has also given a finding that the amounts paid / reimbursed towards the telephone bills of these persons were quite reasonable as compared to the services rendered by them and 5 'v* ' ITA No. 2257/Del/2012 ITO vs. M/s. Maratha India were not at all excessive or unreasonable so as to attract the provisions of section 13(1)(c). In these circumstances we find no reason to interfere the orders of the Ld. CIT (A) on this issue and the ground is accordingly rejected.
6. As far as the issue of denial of exemption u/s 11 and 12 of the Income Tax Act, 1961 is concerned, it is our considered opinion that the exemption u/s 11 and 12 can be withdrawn only when there is an infringement u/s 13(1)(c) read with section 13(3) of the Income Tax Act, 1961. The AO has no where disputed the utilisation of funds for charitable activities. Under the provisions of section 13(1)(c), only when the income or property of the trust is used for applying directly or indirectly, for the benefit of any person, like author of the trust or the person who had made substantial contribution or any trustee and manager or any relative of such aforesaid persons , the exemption can be denied where the payment is found to be excessive or unreasonable. As has been duly found by the Ld. CIT (A), the payment made to the six persons towards their telephone expenses were for the services rendered by these persons and were commensurate with the nature of services rendered. There is no prohibition in the Income Tax Act to remunerate the interested person and the only condition is that such remuneration should be commensurate with the services rendered. Hence it cannot be said that provisions of section 13(1) (C) are attracted in the assessee's case so as to deny benefit of exemption u/s 11 and 12 of the Act. Accordingly we find no reason to interfere with the findings of the Ld. CIT (A) on this issue also and hence this ground is also dismissed.
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7. In the result appeal of the Department is dismissed.
Order pronounced in the open court on 01.01.2016.
Sd/- Sd/-
(INTURI RAMA RAO) (SUDHANSHU SRIVASTAVA )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: the 1st January, 2016
'veena'
Copy of the Order forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
6. Guard File By order
Dy. Registrar
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