Income Tax Appellate Tribunal - Panji
Acit, Jaipur vs Shyam Lal Panwar Anandi Devi Memorial ... on 23 June, 2017
vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
Jh dqy Hkkjr] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k
BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No.378/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2007-08
The ACIT (Exemption), cuke M/s Shyma Lal Panwar Anandi
Circle-Jaipur, Jaipur. Vs. Devi Memorial Charitable Trust,
135, Ram Nagar Extension,
New Sanganer Road,
Sodala, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AADTS0692R
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No.295/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2007-08
M/s Shyma Lal Panwar cuke The ACIT (Exemption),
Anandi Devi Memorial Vs. Circle-Jaipur, Jaipur.
Charitable Trust,
135, Ram Nagar Extension,
New Sanganer Road,
Sodala, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AADTS0692R
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No.379/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2012-13
The ACIT (Exemption), cuke M/s Shyma Lal Panwar Anandi
Circle-Jaipur, Jaipur. Vs. Devi Memorial Charitable Trust,
135, Ram Nagar Extension,
New Sanganer Road,
Sodala, Jaipur.
ITA No. 379,296,378,295,851,897,852 & 898/JP/2016
ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AADTS0692R
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No.296/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2012-13
M/s Shyma Lal Panwar cuke The ACIT (Exemption),
Anandi Devi Memorial Vs. Circle-Jaipur, Jaipur.
Charitable Trust,
135, Ram Nagar Extension,
New Sanganer Road,
Sodala, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AADTS0692R
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No.851/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2008-09
M/s Shyma Lal Panwar cuke The ACIT (Exemption), Circle-
Anandi Devi Memorial Vs. Jaipur, Jaipur.
Charitable Trust,
135, Ram Nagar Extension,
New Sanganer Road,
Sodala, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AADTS0692R
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No.897/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2008-09
The ACIT (Exemption), Circle- cuke M/s Shyma Lal Panwar
Jaipur, Jaipur. Vs. Anandi Devi Memorial
Charitable Trust,
135, Ram Nagar Extension,
New Sanganer Road,
Sodala, Jaipur.
2
ITA No. 379,296,378,295,851,897,852 & 898/JP/2016
ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AADTS0692R
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No.852/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2013-14
M/s Shyma Lal Panwar cuke The ACIT (Exemption), Circle-
Anandi Devi Memorial Vs. Jaipur, Jaipur.
Charitable Trust,
135, Ram Nagar Extension,
New Sanganer Road,
Sodala, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AADTS0692R
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No.898/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2013-14
The ACIT (Exemption), cuke M/s Shyma Lal Panwar Anandi
Circle-Jaipur, Jaipur. Vs. Devi Memorial Charitable Trust,
135, Ram Nagar Extension,
New Sanganer Road,
Sodala, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AADTS0692R
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrhdh vksj ls@Assessee by : Shri G.M. Mehta (C.A..)
jktLo dh vksj ls@Revenue by : Shri D.S.Kothari (CIT)
lquokbZ dh rkjh[k@Date of Hearing : 02/05/2017
?kks"k.kk dh r kjh[k@Date of Pronouncement: 23/06/2017.
vkns'k@ORDER
PER: SHRI VIKRAM SINGH YADAV, A.M. 3 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
These are cross appeals filed by the assessee and the Revenue directed against orders of ld. CIT(A)-3, Jaipur for A.Y. 2012-13 & 2007-08 dated 30.01.2016 and for A.Y. 2008-09 & 2013-14 dated 29.07.2016. All these appeals involve common issues and were heard together and being disposed off by a consolidated order. As requested by the ld CIT DR and with the consent of the ld AR, AY 2012-13 is taken as the lead case for the purposes of discussions. In AY 2012-13, the respective grounds of appeal taken by the Revenue and the assessee are as under:
ITA No. 379/JP/2016 ( Revenue's Ground):"On the facts and circumstances of the case and in law the CIT(A)-3, Jaipur, has erred in:-
1. Deleting the addition of Rs. 5,29,48,789/- made on account of corpus donations received in the form of building fund treated by the AO as revenue receipts.
(a) building fund received by the assessee is part of fee receipt and it is not voluntary. Any non-voluntary contribution cannot be held as donation and never be covered u/s 11(1)(d).
(b) the fee receipts does not have word corpus mentioned there in thus it cannot be treated as corpus donation.
(c) funds received for specific purposes (i.e. building fund are for the application for specific purposes. It is not the capital of the society thereby not the corpus of the society.
2. Deleting the taxing of surplus amount to Rs. 11,95,189/- by holding that the provisions of Sec. 11 &12 will apply to any pending assessment as on date of such registration without appreciating the facts that the assessee has claimed exemption neither in original return of income nor any revised return was filed. The CIT(A) has erred by not applying the decision of Hon'ble Supreme Court in Goetze (India) Ltd. Vs CIT 284 ITR 323 (SC) in the assessee's case.
3. deleting the addition made on account of disallowance of depreciation amounting to Rs. 1,89,57,668/- without appreciating the 4 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
fact that the application of 100% expenditure of the capital asset is already allowed as capital expenditure hence further allowance of the depreciation on the same capital asset would tantamount to double deduction.
4. Deleting the addition on disallowance of Charity/Donation amounting to Rs. 18,039/- without appreciating the fact the assessee has not furnished any evidence in support of his claim.
5. Deleting the addition of Rs. 15,00,000/- made out of expenses."
ITA No. 296/JP/2016 ( Assessee's ground):"(1) Ld. CIT(A) has erred in law and on facts in sustaining additions of Rs. 42,13,871/- on account of presumed interest @ 12% p.a. for which ld. AO applied provisions of section 13(1)(c)(ii) r.w. sec.
13(2)(g) on outstanding balances of the following persons/ institutions to whom either no money was advanced out of current years' receipts or minor sum was advanced in one case as per following details:
Money advanced to Balance Balance During the Additions (31.03.2011) (31.03.2012) year sustained Mrs. Pratima Panwar 5,72,440 5,72,440 Nil 68,692 Mr. Kiran Singh 7,00,000 7,00,000 Nill 84,000 Prime Location Dev.P.Ltd. 2,89,67,745 2,89,67,745 Nill 34,76,129 Nirmal Panwar Finance P. Ltd. 42,33,751 35,33,751 Nil 84,000 Ambassy Tourism Dev. P. Ltd. 33,75,000 41,75,000 8,00,000 5,01,000 Addition sustained by ld. CIT(A) (for which ld. AO applied sec. 13(1)(c)(ii) r.w.sec. 42,13,821 13(2)(g) (2) Ld. CIT(A) has erred in law in denying statutory deduction under section 11 of IT Act (surplus up to 15%) on the following sums:
(i) On addition of Rs. 42,13,821/- sustained as per ground No. (1);
(ii) On addition of Rs. 26,260/- sustained under section 40(a)(ia) of IT Act.
(3) Ld CIT(A) was not justified in sustaining following additions:5
ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
(i) Rs. 18,039/- for the charitably and donations, though found to be allowable in A.Y. 2007-08;
(ii) Lump sum addition of Rs. 5,00,000/- out of payments made to civil construction Contractors on which applicable TDS u/s 194C of IT Act was deducted and paid to the credit of Central Govt."
2. Regarding ground no. 1 in Revenue's appeal, the facts of the case are that during the course of assessment proceedings, the AO observed that under the head "building fund" there is an addition of Rs. 5,29,48,789/-. In order to ascertain the genuineness of this increase in building fund, the AO issued a show cause as under:
"The details filed and records produced have revealed that the building fund is received from students as a part of regular fees. Copies of the receipts issued to these students have also been gone through wherein it is clearly mentioned that the building fund is received as part and parcel of the regular fees as any other fees under the head admission fees, tuition fees and caution money. Furthermore the building fund is fixed by the management of University. Prima facie these receipts of building fund is not a voluntary contribution but the students were bound to pay as a part of regular fees.
Similar issue was also dealt with by the AO while completing the assessment for A.Y. 2011-12 wherein the AO has held that the building fund was a part of revenue receipts. In view of the aforementioned facts you are required to furnish your explanation as to why the building fund should not be treated as revenue receipts as a part of the fees received from the students."6
ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
2.1 The ld CIT DR took us through the findings of the AO which are as under:
"5.2 The material available on record as well as the assessee's above mentioned submission has been considered. I have also considered the assessee's AR's submission that similar issue was involved in A.Y. 2011-12 wherein the building fund was treated by the AO as revenue receipt and the Ld. CIT(A), Jaipur-II, Jaipur has deleted the addition made. Similar issue is also involved in the scrutiny assessment proceeding for the A.Y. 2012-13, therefore, the material produced during the scrutiny assessment proceedings for A.Y. 2007-08 as well as A.Y. 2012-13 is considered. The copies of the receipts issued against building fund clearly shows that the building fund is received from the students as normal fees. There is no distinction between building fund or any other fees like tuition or under any other head. There is no option available to the students and without depositing the building fund they cannot be admitted. It is pre-condition for the students as such there is no voluntary contribution but it is a stipulated fees which is compulsory in nature. Therefore, building fund is treated as normal fees. In the assessee's case it is also worthwhile to discuss the nature of the receipt issued to the students.
"5.3 From the aforementioned receipt it is very much clear that the building fund is part of regular fees and it has been mentioned in the receipt issued in the name of building fund alongwith other receipts like Admission fees, Tuition fees. From the aforementioned receipt it is also clearly established that there is no directions from the students that these payments is voluntary and it will form part of corpus fund. Keeping in view of these facts and in the absence of voluntary donations as well as specific directions from the donor for a particular purpose it cannot be allowed as 7 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
corpus donation. This is vital factor which makes it very clear that the building fund received is part of regular fees."
"5.4 Furthermore the assessee's AR's submission that the addition made in A.Y. 2011-12 has been deleted by the Ld. CIT(A)-II, Jaipur is not maintainable for the reason that there are a number of inconsistencies in the order passed by the Ld. CIT(A) which have not been accepted by the department and further appeal has been filed before the Hon'ble ITAT, Jaipur Bench, Jaipur which is pending for decision. Furthermore each year is distinct year and the true nature of the assessee's receipt of building fund has been examined in detail which has resulted in holding that it is a receipt of revenue nature as such it has to be rounded through the Income and Expenditure account. Accordingly in view of aforementioned discussion the building fund of Rs. 5,29,48,789/- is held to be a revenue receipts for the year under consideration."
3. Per contra, the ld AR submitted that during the year, the assessee trust has received voluntary donation of Rs. 5,29,48,789/- from students/parents toward building fund from the students/parents which was one time donation. The building fund so received is neither fixed nor identical amount in all cases of donors, since it is voluntary.No donation toward building fund was received from more than 35% of the students.The amount so received was property accounted for and credited directly to Building fund account of the assessee (in balance sheet).The building fund donations were applied in construction of buildings for educational purposes in subsequent period whereas out of tuition fee, the major part was spent in imparting education. Assessee Trust was granted registration u/s 12AA of IT Act on 08.08.2014 (Paper book page 83), after considering the Trust deed dated 24th November 2001 meaning thereby, and assessee trust was qualifying and was eligible for 2001. Moreover, after insertion of proviso to 8 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
section 12A(2) of IT Act by Finance (No. 2) Act 2014 the benefit of registration u/s 12AA is to be allowed to all pending assessments before the AO. Had the donation toward building fund been treated as revenue receipt, the assessee Trust would not have resorted to charge separately the monthly/quarterly tuition fee. Onetime payment of voluntary donation toward building fund is capital receipt and is being used for construction of building (PB 84 to 91) and is non refundable whereas tuition fee so collected is spent for academic filed like on educational expenses like salary to Teachers, stationary, workshop expenses, computer education etc. Ld. AO had rather failed to distinguish the receipt of corpus fund as against tuition fees. There is a distinction between the 'corpus fund' and 'tuition fee'. Whereas ld. CIT(A) was justified in her finding that the said voluntary contributions were in the nature of corpus fund and as such exempt under section 12.
3.1 It was further submitted that Section 11(1)(d) provides that " Subject to provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipts of the income-
(a) Income in the form of voluntary contributions made with specific direction that they shall form part of the corpus of the trust or institution."
Therefore, the voluntary contributions with specific direction as toward building fund are corpus donation which cannot be treated as revenue receipts as held by ld. AO. Reliance is placed on the following judgments:
(1) J.B. Educational Society vs. ACIT (2014)159 TTJ (Hyd) 236:
Donations received for a specific object are to be considered as tied up fund and is capital receipt. Same cannot be held as income and taxed. Voluntary 9 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
contributions in nature of tide up grants received by the assessee society cannot be brought to tax even though it is not registered under section 12AA, if the same is used for specific purpose for which they were given.
(2) Direction of IT (Exemption) vs. National Association of software & service Companies (2012) 253 CTR 33(Del): One time donation for acquiring capital assets must be held to be corpus donation which is not taxable as income.
(3) Director of Income tax (Exemption) vs. Shri Ramakrishna Seva Ashram (2013) 357 ITR 731 (Karn):Voluntary contributions for specific purpose constitute Corpus fund. 85% of amount is not utilized for charitable purpose, not relevant. The word 'Corpus' used in context of Income Tax Act is to be understood in context of capital as opposed to an expenditure. If a voluntary contribution is made with a specific direction, it shall be treated as the capital of the Trust for carrying on its charitable or religious activities.
Then such income falls under section 11(1)(d) and is not liable to tax.
(4) Director of Income tax (Exemption) vs. National Association of Software & Services Companies (2012) 345 ITR 362 (Del): Corpus Donation" is one time admission fee paid by members who are aware that it could be spent by assessee only for acquiring capital asset is Corpus Donation, not taxable income.
(5) CIT vs. Children's Education Society (2014) 264 CTR (Kar) 389: If the donations are received by assessee from students who are studying in the School run by it and the same are properly accounted for in the Building fund/Infrastructure fund and said amount is utilized for construction of 10 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
building which is used for imparting education, it would constitute charity and therefore, the assessee society will be entitled for exemption.
(6) Sukhdeo Charity Estate vs. ITO (1984) 149 ITR 470 (Raj): When the amount is be spent for specific purposes, it cannot be said as assessable income under section 12(2).
(7) Sukhdeo Charity Estate vs. ITO (1991) 192 ITR 61 (Raj): The intention of the Donor and the Donee is to be seen. If the intention of the Donor is that the donation given is to be treated as capital and the income thereof has to be applied for charitable purposes, then the said voluntary contribution is towards the part of the corpus of Trust. Similarly, after receiving the amount if the done keeps it in deposit and only utilizes the income there from to carry on charitable activities, then also the said amount would amount to be contribution to the corpus of the Trust and the nomenclature in which the deposits are kept as capital and the income thereof is utilized for carrying on the charitable and religious activities of the Trust.
3.2 Regarding specific sub-grounds raised by the Revenue, it was further submitted by the ld AR as under:
(a) Building fund received as part of fee: Donations for building fund are voluntary donation. Had it been part of fee, it would have been identical amount in all cases of same course of studies and would have been charged from all students whereas it was not received from about 35% of the students.
(b) Fee receipts do not have the word corpus: No need under the Act that in receipts, Corpus word be mentioned. It should be for "specific 11 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
purpose" {357 ITR 731 (Karn) & 149 ITR 470 (Raj)}. The intention of Donor & Donee to be seen {Sukhdeo Charity Estate 192 ITR 61 (Raj)}.
(c) Fund received for specific purpose is not capital of society and therefore not corpus: This ground appears to be general in nature where ld. AO, after examining the records has admitted that donations were for specific purpose. When it is for specific purpose, it is corpus donation as held in various judicial pronouncements.
4. We have heard the rival submissions and pursued the material available on record. The facts of the case are identical to the facts in assessee's own case in AY 2011-12. Even the ld CIT(A) has followed her predecessor's order for AY 2011-12. While disposing off the revenue's appeal for AY 2011-12 in ITA No. 110/JP/15 vide our order dated 1.11.2016, we have already examined the matter at length and after referring to the contention of both the parties, have set-aside the matter to the file of the AO to examine the matter afresh. For the year under consideration, our findings and directions given for AY 2011-12 shall apply mutatis-mutandis to this appeal as well. For sake of convenience, the said findings are reproduced as under:
"3.6 If we were to read the ratio emerging out of the above two judgements, what clearly emerges is to determine the intention of the donor and the treatment of the receipts by the donee trust. Where the intention of the donor is that the amount/donation given is to be treated as capital and the income from that capital has to be utilized for the charitable purposes, then the said voluntary contribution is towards the part of the corpus of the assessee trust. It is not necessary that the persons who made these contributions specifically direct that they shall form part of the corpus of the trust. Similarly, the assessee trust after receiving the amount, keeps the amount in deposit and only utilise the income from the deposit to carry out the 12 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
educational activities, then also the said amount would be a contribution to the corpus of the trust and the nomenclature in which the amount is kept in deposit is of no relevance as long as the contribution received are kept in deposit as capital and only the income from the said capital is utilized for carrying on educational activities of the assessee trust. Further, the voluntary contribution/donation, can be made by the parents of the students studying in the education institutions, with a specific direction towards the building fund. The directions could be in writing or oral. Where the directions are oral, what is essential is that the contributions are properly accounted for and income from such contributions are utilized for construction of the building. In light of these discussions, ground no. 1(iii) and 1(iv) taken by the Revenue are dismissed.
3.7 In the instant case, the ld AR has submitted that the voluntary contributions made with specific direction towards building fund are corpus donation which cannot be treated as revenue receipts and the same is eligible for exemption under section 11(1)(d) of the Act. It was submitted that during the year, the assessee trust has received voluntary donation of Rs. 5,30,09,085/- from students/ parents toward building fund and this was one time donation distinct from the regular tuition fees. The building fund so received is neither fixed nor identical amount in all cases of donors, since it is voluntary. No donation towards building fund was received at all from 269 students. The amount so received was properly accounted for and credited directly to Building Fund account of the assessee. In support, reference was drawn to ledger of Building fund account available at APB 7-75. There is no discretion with the management of the assessee trust and the building fund donations so received were applied in construction of buildings for educational purposes after receipt whereas the other receipt-tuition fee, charged separately was utilized for imparting education. In support, reference was again drawn to expenditure incurred on building infrastructure and it was submitted that an amount of Rs 3,98,47,044 was spent during the year on construction of building infrastructure and as on 31.3.2014, an amount of Rs 19,16,31,482 has been spent on the building infrastructure. Per contra, the ld DR submitted that the students are 13 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
paying fees to pursue their educational qualifications and there is no voluntary element involved in it rather it is compulsory for them to pay fees for these courses. Further, the question of giving specific direction does not arise as this is not the "donation' but the fees received for acquiring educational qualifications. Mere assigning the name of "Building Fund" to receipts of "revenue nature" does not warrant that these receipts will be considered as capital receipts. Students do not have choice to donate the amount for "building fund with specific directions". There is no donor/donee relationship which is perquisite for "donation" but in the instant case the students are getting their educational qualification in lieu of payment made to institution and the amount in question is nothing but the fees received from students in the name of "building fund". It was further submitted that no separate books of accounts are being maintained for the use of this fund i.e. no separate account in the form of building fund is being maintained in any bank so that its use can be ascertained. Assessee has failed to establish that these funds are being utilized for the specific purpose and the management is free to use this fund as per their own suitability. A donation will be treated as corpus donation only if it is accompanied by a specific written direction of the donor. In the absence of any written direction of the donor, a contribution of grant cannot be transferred to corpus fund.
3.8 In our view, what is relevant to determine is whether there is a voluntary contribution/donations by the students/parents with a direction to utilise the same towards construction of the building infrastructure and secondly, how the same has been accounted for and utilised by the assessee trust. However, given the contradictory position taken by the assessee and the Revenue and in absence of any tangible material on record produced by either of the two parties, it would be in interest of justice and fair play that the matter is remanded back to the Assessing officer who shall taking into consideration the legal propositions as laid down by the various Courts as discussed above, will examine the matter a fresh. We accordingly set-aside the matter relating to eligibility to claim benefit of section 11(1)(d) of the Act to the file of the Assessing officer. Hence, Revenue's ground no. 1(ii) and assessee's ground no. 2(a) are allowed for statistical purposes."14
ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
5. In respect of ground No. 2 of the Revenue's appeal, the facts of the case are that there is no claim of exemption u/s 11 in the return of income filed on 06.05.2013 and this return has not been revised with the time allowed u/s 139(4) of the Act but during the assessment proceedings the assessee has raised claim of exemption u/s 11 on the basis of registration granted u/s 12A by the Commissioner of Income Tax, Jaipur-I, Jaipur vide letter No. CIT/JPR-I/ITO(T&J) u/s 12AA 2014-15/549 dated 08.08.2014 w.e.f. 26.03.2014. However, the assessee's contention that in view of proviso to section 12A the assessee is eligible for exemption for the year under consideration as the proceedings are pending before the AO was not accepted by the AO for the reason that when there is no claim in the Return of Income or in the revised return then this proviso does not come in picture. In the assessee's case in the original return of income filed on 06.05.2013 there is no claim of exemption u/s 11. Furthermore no revised return has been filed. There is no claim in the original return filed and as well as no revised return has been filed so as to make the claim for exemption u/s 11 based on the registration granted u/s 12AA of the Act. The assessee's claim cannot be entertained. The only available ground for claiming the exemption is by way of either making a claim in the original return of income or to file a revised return but this is not so in the assessee's case. Therefore, in view of the Hon'ble Apex Court's decision in the case of Goetze (India) Ltd. Vs. CIT 284 ITR 323 (SC), the assessee's claim was not accepted by the AO. However, the ld CIT(A) accepted the said claim and now, the Revenue is in appeal before us and the ld CIT DR relied on the findings of the AO.
6. In this regard, the ld AR submitted that the original return of income was submitted on 06.05.2013. On 07.04.2014 when request was made to 15 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
AO, the first proviso to section 12A(2) was not in statute book, nor the assessee could file revised return for a belated return, therefore, there was no occasion to file any revised return of income for claiming deduction u/s 11 and 12 of IT Act. The assessee had claimed the exemption which has also been admitted by ld. AO at para 1.8 of order appealed against. It was requested to the ld. AO that after insertion of first proviso to section 12A(2) of IT Act by Finance (No.2) Act 2014, the assessee Trust is eligible for deduction u/s 11 and 12 of IT Act which may please be allowed. Though the ld. AO had admitted the request of the assessee for claim of exemption u/s 11 & 12 of IT Act but the claim was not allowed by him stating that it was not claimed. It is relevant to refer the following judicial pronouncements, ignored by the ld. AO.
(a) Wipro Ltd. Vs. Dy. CIT(2016) 382 ITR 179 (Karn): It is duty of the AO to allow deduction, even if not claimed in return.
(b) Vijay Gupta vs. CIT (2016) 386 ITR 643 (Del): AO should not take advantage of ignorance, error or mistake of assessee.
(c) Pr. CIT vs. Western India Shipyards Ltd. (2015) 379 ITR 289 (Del) if there is any bar on AO in entertaining claim without revised return, no such restrain is on CIT(A) during appellate stage.
On the facts, ld CIT(A) was justified in allowing benefit of deduction u/s 11 and 12 of IT Act claimed during course of first appellate stage, considering the insertion of first proviso to section 12A(2) applicable to pending assessments.
7. The relevant findings of the ld CIT(A) are as under:
"4.3 I have carefully considered the findings of the AO as also arguments of the ld. AR of the appellant. On perusal of facts & the I.T. Act, it is seen that Assessee was granted registration u/s 12A vide letter dated 08.08.2014 w.e.f. 26.03.2014. Proviso to sec. 12A(2) provides:-16
ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
"Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made.
Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceeding are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year."
From the above it can be seen that once registration is granted u/s 12AA, the provisions of sec 11 &12 will apply to any pending assessment as on the date of such registration. In the present case registration was granted on 08.08.2014. On this date assessment for A.Y. 12-13 was pending & therefore benefit of section 11 &12 is available to the assessee. So far as AO's observation that assessee has not claimed deduction in return of Income, therefore the same is not allowable in view of Supreme Court decision in 284 ITR 323 (Goetze India), is concerned the same has no relevance as this decision is not applicable to appellant authorities.
Considering all these facts the AO is directed to allow the benefit of sec. 11 to the assessee.
8. We have heard the rival submissions and pursued the material available on record. Similar issue has come up in assessee's own case for AY 2011-12 where we have taken a view that where during pendency of appeal before the ld CIT(A), the assessee was granted registration under section 12AA, it would be a case of pendency of assessment proceedings and the assessee would be eligible to claim benefits of section 11 and 12 of the Act. In the instant case, the facts are on a better footing as registration was granted during the pendency of assessment proceedings before the AO itself. Further, we agree with the view of the ld CIT(A) that the decision of 17 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
Hon'ble Supreme Court in case of Goetze India relates to powers of the AO and not to the powers of the appellate authorities and hence, the said decision doesn't support the case of the Revenue. The assessee has made the necessary claim for exemption u/s 11 during the course of assessment proceedings and the ld CIT(A) has rightly allowed the same. We accordingly, confirm the order of ld CIT(A) on this account and the Revenue's ground no. 2 is dismissed.
9. In respect of ground No. 3 of the Revenue's appeal, briefly the facts of the case are that in the P&L Account, the assessee has claimed depreciation of Rs. 1,89,57,668/-. As per the AO, depreciation has been claimed when the investment made in purchase of fixed assets and other capital expenditure has already been allowed in year of expenditure as application of income u/s 11. In view of judgment of Hon'ble Apex Court in the case of Escorts Ltd. Vs Union of India (1993) 199 ITR 43 (SC) and followed in the cases of Lissie Medical Institutions vs. CIT (348 ITR 43), Charanjiv Charitable Trust 267 CTR 305 (Delhi), a sum of Rs. 1,89,57,668/- was disallowed and added to the total income of the assessee.
10. The ld AR submitted that depreciation is a statutory deduction which is allowable as per explanation 5 to section 32 of IT Act, even if not claimed by the assessee. The Ld. AO had placed wrong facts before this Hon'ble Tribunal through this ground of appeal that the assessee Trust was allowed application of 100% expenditure on capital asset. It was submitted that no such application was either claimed by the assessee Trust in any of the earlier years or allowed by the ld. AO. Copy of computation of total income for preceding two years (A.Y. 2010-11 and for A.Y 2011-12) are enclosed. It will prove that no such deduction of application on purchase of asset was claimed by the assessee Trust in past. Otherwise also in number of judicial 18 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
pronouncements it has been repeatedly held even if entire cost of the asset has been claimed as application of trust income, allowance of depreciation (before insertion of section 11(6) of IT Act w.e.f 01.04.2015) will not be a double deduction.
11. The relevant findings of the ld CIT(A) are as under:
"In respect of (f), depreciation of fixed assets, the same is allowable in view of decision of Rajasthan High Court in case of CIT vs. Krishi Upaj Mandi Samiti, Jaisalmer wherein it has held that in computing the income of a charitable trust/institution, depreciation of assets owned by such institution is a necessary deduction on commercial principles, hence, the amount of depreciation has to be deducted to arrive at the income available even though that capital expenditure has already been allowed in the year under consideration.
Respectfully following the decision of Hon'ble Jurisdictional High Court, the disallowance of depreciation of Rs. 18957668/- made by the AO is deleted."
12. The subject issue is no more res integra. As per Hon'ble Karnataka High Court in the case of DIT Vs. Al-Ameen Charitable Fund Trust (ITA No. 62 and 414 of 2010 vide order dated 22.02.2016), the plain language of the amendment by way of insertion of sub-section 6 to section 11 establishes the intent of the legislature in denying the depreciation deduction in computing the income of Charitable Trust is prospective in nature with effective from 1.4.2015. This view is further supported by the Notes on Clauses in Finance [No.2] Bill, 2014, memo explaining provisions and circulars issued by the Central Board of Direct Taxes in this regard.
13. As rightly held by the ld CIT(A), the matter is covered in favour of the case by the decision of the Hon'ble Rajasthan High Court in the case of CIT vs. Krishi Upaj Mandi Samiti reported in 388 ITR 605 (Raj) wherein it was held as under:
19ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
"(5) The assessee is a charitable institution registered u/s 12A of the Act, 1961 and 100 per cent capital expenditure was availed by it against the asset concerned, i.e. a building. Section 32(1) of the Act, 1961 provides for deprecation in respect of building, plant and machinery owned by the assessee and used for business purposes. Income of the charitable trust like the present assessee derives from the depreciable heads is also liable to be computed on commercial basis, however, while doing so it is to be kept in mind that ultimately the assessee is a charitable institution and its income for tax purposes is required to be determined by taking into consideration provisions of section 11 of the Act of 1961 after extending normal depreciation and deductions from its gross income. In computing the income of a charitable institution/trust depreciation of assets owned by such institution is a necessary deduction on commercials, hence, the amount of depreciation has to be deducted to arrive at the income available.
In view of the discussions made above, we find ourselves in agreement with the view taken by the Bombay High Court in DIT (Exemptions) vs. Framjee Cawasjee Institute (supra) and the Cit vs. Institute of Banking (supra). The substantial question framed in the instant matter , thus is answered in the terms that the Income Tax appellate Tribunal rightly allowed depreciation claimed by the assessee society on capital assets for which capital expenditure was already given in the year under consideration."
14. Respectfully following the decision of Hon'ble Karnataka High Court (supra) wherein the amendment to section 11 (6) has been held prospective in nature with effect from 01-04-2015 and the Hon'ble Rajasthan High Court 20 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
decision (supra), the depreciation is held admissible to the assessee society registered under section 12AA and held eligible for exemption under section 11 and 12 of the Act. In the result, the ground no. 3 of the Revenue's appeal is dismissed.
15. In respect of ground No. 4 of the Revenue's appeal, the AO has disallowed donation and charity of Rs 18,039 on ground of lack of evidence and fact that the claim of exemption under section 11 was rejected.
16. It was submitted by the ld AR that in addition to the education, charity and donations is also object of the assessee Trust. Books of accounts of the assessee Trust are audited u/s 44AB of IT Act and the issue was also examined by the Auditors. Otherwise also, the same is within limit of 15% of gross receipts of Rs. 10,10,74,418/- as provided under section 11(1) of IT Act, not liable to tax.
17. As we have held above, the assessee is eligible for claim of benefit under section 11 and 12 of the Act. We accordingly set aside this matter to the file of the AO to examine the claim of the assessee that it is within limits of 15%. The assessee is also directed to submit the necessary evidence in support of the said claim to the satisfaction of the AO. In the result, ground no. 4 of revenue's appeal is allowed for statistical purposes.
18. In respect of ground No. 5 of the Revenue's appeal and assessee's ground of appeal no. 3(ii), it was submitted by the ld AR that the AO made addition of Rs. 20,00,000/- on account of defect in vouchers under the head building construction account which was not claimed as revenue expenses but capital expenses. Even before applying provisions of section 145(3) of IT Act, no opportunity was provided to the assessee. Considering the fact that ld. AO did not pointed out specific and the payments were subjected to TDS u/s. 194C of IT Act, ld. CIT(A) reduced the addition to Rs. 5,00,000/-
21ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
as for minor defects no such addition could be made. Surprisingly when the assessee trust did not claim these payments and expenses as revenue payments, ld. AO made addition of Rs. 20,00,000/- and the ld. CIT(A) without considering the nature sustained it to Rs. 5,00,000/-.
19. We have heard the rival submissions and pursued the material available on record. It is assessee's contention that the expenses disallowed and partly sustained by the ld CIT(A) have not been claimed as revenue expenditure during the year. There is no finding recorded by the AO or ld CIT(A) in this regard. We accordingly set aside this matter to the file of the AO to examine the said contention of the assessee and decide the matter a fresh as per law. In the result, both the grounds of revenue and assessee are allowed for statistical purposes.
20. Now coming to the assessee's appeal, in respect of ground no. 1 of the assessee's appeal, it was submitted by the ld AR that the ld. CIT(A) has erred in law and on facts in sustaining the additions of Rs. 42,13,871/- on account of presumed interest @ 12% p.a. for which ld. AO applied provisions of section 13(1)(c)(ii) r.w.s 13(2)(g) of IT Act on outstanding balances of the following persons/institutions to whom either no money was advanced out of current year's receipts or minor sum was advanced in one case as per following details:
Money advanced to Balance Balance During the Additions (31.03.2011) (31.03.2012) year sustained Mrs. Pratima Panwar 5,72,440 5,72,440 Nil 68,692 Mr. Kiran Singh 7,00,000 7,00,000 Nill 84,000 Prime Location Dev.P.Ltd. 2,89,67,745 2,89,67,745 Nill 34,76,129 Nirmal Panwar Finance P. Ltd. 42,33,751 35,33,751 Nil 84,000 Ambassy Tourism Dev. P. Ltd. 33,75,000 41,75,000 8,00,000 5,01,000 Addition sustained by ld. CIT(A) (for which ld. AO applied sec. 13(1)(c)(ii) r.w.sec. 42,13,821 13(2)(g) 22 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
20.1 It was further submitted that the assessment for immediately preceding assessment year (A.Y 2011-12) was completed under section 143(3) of IT Act in which no addition was made u/s sec.
13(1)(c)(ii)/13(2)(g) of IT Act on advances to majority of the same debtors b/f. in year under appeal, considering nature of advances not covered u/s 13(3) of IT Act and interest free funds available with assessee Trust. However, in the year under appeal, in avoidance of the fact that major advances are b/f balances of preceding year and assessee Trust had interest free unsecured loans of Rs. 49,69,466/-, ld. AO made addition of Rs. 42,13,821/- equal to 12% as presumed interest. Such addition is inclusive of Rs. 34,76,129/- for advance to Prime Location Dev. Pvt. Ltd. for purchase of land for expansion of educational building.
21. The relevant findings of the ld CIT(A) are as under:
"6.3 I have carefully considered the facts of the case, findings of the AO and submission of the appellant. Regarding addition made in respect of ground 3 (a to e), it is seen that the assessee during assessment proceedings has not given any justification supported by evidence to prove that the advance given to various persons are for the benefit of the trust. Therefore the action of AO in assessing notional interest income is confirmed. Accordingly addition of (68692+84000+3476129+84000+501000) Rs. 4213871/- is confirmed. Further no deduction u/s 11 will be allowable with respect to these additions."
22. We have heard the rival submissions and pursued the material available on record. The principal contention raised by the ld AR is that except for an amount of Rs 8,00,000, none of the amounts have been advanced or invested during the relevant previous year and hence, the action of the AO is not justified. In order to address this contention, the relevant provisions 23 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
invoked by the AO and its applicability in respect of each of the transactions would require examination. .
23. It is noted that the AO has invoked the provisions of section 13(1)(c)(ii) r.w.s 13(2)(g) of Act in respect of transaction with Pratima Pawar and Kiran Singh. On perusal of these provisions, it is noted that 13(1)(c)(ii) provides that nothing contained in section 11 or section 12 shall operate as to exclude from the total income of the previous year of the person in receipt thereof, any income thereof if any part of such income or any property of the trust or the institution is during the previous year used or applied directly or indirectly for the benefit of any person referred to in section 13(3). The emphasis therefore is on receipt of income by the assessee during the previous year and use of such income directly or indirectly for the benefit of interested person during the previous year. The action u/s 13(1)(c)(ii) therefore lies in the year of receipt and utilisation of such income. Further, section 13(2)(g) also provides that if any income or property of the trust or institution is diverted during the previous year in favour of the person referred to in section 13(3). The action u/s 13(2)(g) therefore lies in the year of diversion of income in favour of interested person. In light of the same, given that no amount has been advanced to Pratima Pawar and Kiran Singh during the year under consideration, there is no cause of action that lies under section 13(1)(c)(ii) r.w.s 13(2)(g) of Act and hence, the addition made in this regard is deleted.
24. In respect of Prime Location Developers Ltd, the AO has invoked provisions of section 13(1)(c)(ii) r.w.s 13(2)(g) and section 11(5) of Act. The AO has stated in his order that the assessee is making payment since AY 2007-08 and upto year under consideration and the payment has reached to a level of Rs 2,89,67,745 for which no interest has been 24 ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
charged. Per contra, the ld AR has submitted that no payment has been made during the year. In view of the conflicting facts and no further material available on record, we are unable to take a view in the matter. Further, there is no finding as to how the provisions of section 11(5) are attracted in the instant case. The matter is accordingly set-aside to the file of the AO to examine the same afresh taking into consideration the discussion in para 23 above.
25. In respect of Embassy Tourism Developers Pvt Ltd, the AO has invoked the provisions of 13(1)(d)(i), 13(1)(d)(iii) read with section 13(2)(g) of the Act. The ld AR has submitted that only an amount of Rs 8,00,000 has been paid during the year towards share application money in M/s Embassy Tourism Development Pvt Ltd and no income has accrued during the year which call for disallowance. Further, the shares have been allotted in FY 2014-15. In our view, similar analogy will apply in respect of these provisions as we have discussed in respect of section 13(1)(c)(ii) in paragraph 23 above. What is relevant to examine is the year in which the money has been invested or shares have been brought otherwise than in the prescribed mode and income arising therefrom during the previous year. In absence of any finding of the AO in this regard, the matter is accordingly set-aside to the file of the AO to examine the same afresh taking into consideration the above discussions. Similarly, the matter relating to transaction with Nirmal Panwar Finance Pvt Ltd is also set aside to the file of the AO where the AO has invoked the similar provisions. In the result, ground no. 1 of the assessee's appeal is partly allowed for statistical purposes.
26. In respect of ground no. 2 of the assessee's appeal in respect of denying the deduction u/s 11, firstly, in respect of addition of Rs.
25ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
42,13,821/- as per ground No. 1, since we have set aside the ground no. 1 to the file of the AO, this ground no. 2(i) is also set-aside to the file of the AO.
27. In respect of addition of Rs. 26,260/- sustained u/s 40(a) (ia) of IT Act, since the assessee is held eligible for deduction u/s 11 and 12 of the Act as we have discussed above, the provisions of section 40(a)(ia) of IT Act are not attracted as the same are restricted to income chargeable under the head "profit and gains from business or profession". Similar view has been taken by the Coordinate Bench in case of ITO Vs. Haryana State Counselling Society (2016) 179 TTJ (Chennai) 660. In the result, ground no. 2(ii) is allowed.
ITA No. 378/JP16 & 295/JP/16 for AY 2007-08, ITA No. 897/JP16 & 851/JP/16 for AY 2008-09, ITA No. 898/JP16 & 852/JP/16 for AY 20013-14
28. In respect of cross appeals for AY 2007-08, 2008-09 and AY 2013-14, both parties agreed that the facts are pari-materia and similar grounds of appeal have been raised by the Revenue as well as assessee society as in ITA No. 379/JP/16 and 296/JP/16 decided supra. In view of the same, our observations and decision in 379/JP/16 and 296/JP/16 shall apply mutatis- mutandis to these cross appeals as well.
With the above directions, the appeals filed by the Revenue and the assessee are partly allowed for statistical purposes.
Order pronounced in the open court on 23/06/2017.
Sd/- Sd/-
¼dqy Hkkjr ½ ¼foØe flag ;kno½
(Kul Bharat) (Vikram Singh Yadav)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
26
ITA No. 379,296,378,295,851,897,852 & 898/JP/2016 ACIT (E) Vs. M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
Jaipur Dated:- 23/06/2017 Santosh vkns'k dh izfrfyfi vxzsf"kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- ACIT(E),Circle, Jaipur.
2. izR;FkhZ@The Respondent- M/s Shyma Lal Panwar Anandi Devi Memorial Charitable Trust, Jaipur.
3. vk;dj vk;qDr@CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT,
6. xkMZ QkbZy@Guard File (ITA No.379,296,378,295,851,897,852 & 898/JP/2016) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar.27