Income Tax Appellate Tribunal - Ahmedabad
Ahmedabad South Indian Association ... vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH " A"
Before Shri H.L. KARWA, JUDICIAL MEMBER and
Shri D.C. AGRAWAL, ACCOUNTANT MEMBER
Date of hearing : 03/08/09 Drafted on: 03/08/09
ITA Nos.4482 & 4483/AHD/2003
Assessment Years : 1999-2000 & 2000-01
Ahmedabad South Vs. The Asst.CIT
Indian Association Central Circle-1(3)
Charitable Trust Ahmedabad
A-1, Sunrise Park
Opp. Drive-in-
Cinema
Thaltej,Ahmedabad
PAN/GIR No. : AAATA 2642 L
(APPELLANT) .. (RESPONDENT)
Appellant by : Shri P.F. Jain, A.R.
Respondent by: Shri Jagev, CIT-D.R.
ORDER
PER D.C.AGRAWAL , ACCOUNTANT MEMBER :-
These are the two appeals filed by the Assessee against the orders of the ld.CIT(Appeals)-I, both dated 17/11/2003 passed for Assessment Years 1999-2000 & 2000-01.
2. The main grievance of the assessee is that the Ld.CIT(Appeals) has denied exemption under sections 10, 11 of the I.T. Act, 1961 to the assessee-trust.
ITA Nos.4482 & 4483//Ahd/2003 Asia Charitable Trust vs. ACIT Asst.Years - 1999-2000 & 2000-01 -2-
3. Facts leading to this appeal, briefly, are that the assessee is a Public Charitable Trust engaged in educational activities which is registered with concerned authorities, such as, Secondary Board, University, etc. The income of the Trust was granted exemption u/s.10(22) of the I.T. Act, 1961 and, accordingly, assessment were completed upto Assessment Year 1998-99. The Revenue Authorities carried out search at the premises of "Sale India Group" and survey conducted u/s.133A of the I.T. Act, 1961 in the case of assessee-trust. Certain documents were found and seized. These evidences indicated that money was collected by the Trustees for the purpose of admission of the children and such funds were not accounted for in the books of the trust. The DGIT(Investigation), Ahmedabad vide his order dated 18/03/2002 passed u/s.10(23C)(vi) of the I.T. Act, 1961 held that trust is not entitled to exemption u/s.10(22) / 10(23C)(vi) of the I.T. Act, 1961 for Assessment Years 1999-2000 & 2000-01. This order has been challenged before the Hon'ble Gujarat High Court which is pending for adjudication. Since the exemption u/s.10(23C) of the I.T. Act, 1961 was refused to the assessee, it contended before ITA Nos.4482 & 4483//Ahd/2003 Asia Charitable Trust vs. ACIT Asst.Years - 1999-2000 & 2000-01 -3- the Assessing Officer to invoke the provisions of sections 11 & 12 of the I.T. Act, 1961. The Assessing Officer did not agree and held that on account of overwhelming evidence of unaccounted profit earned through coercion & threat and unearthed during the course of search, it could not be said that trust is engaged in the activities which are in the nature of charity. He, accordingly, declined to grant exemption under sections 11 & 12 of the I.T. Act, 1961 and in view of provisions of section 13 of the I.T. Act, 1961, the matter was referred by the assessee to Addl.CIT u/s.144A of the I.T. Act, 1961 who rejected the contentions of the assessee and held that the assessee violated the provisions of sections 11 & 12 read with section 13 of the I.T. Act, 1961. He held that the assessee is carrying on activity of generating cash donations, keeping such an unaccounted receipt and siphoning of such money for the benefit of few or the trustees. Accordingly, the Assessing Officer denied exemption under sections 10 & 11 of the I.T. Act, 1961.
4. In appeal, the Ld.CIT(Appeals) confirmed the action of the Assessing Officer, but he held that a sum of Rs.48,04,355/- would ITA Nos.4482 & 4483//Ahd/2003 Asia Charitable Trust vs. ACIT Asst.Years - 1999-2000 & 2000-01 -4- be a corpus donation in view of the decision of Hon'ble Jurisdiction High Court in the case of CIT vs. Sthanakvasi Vanik Vardhaman Vanik Jain Sangh 260 ITR 366 (Guj.), wherein it has been held that any voluntary contribution made with the specific direction that it shall form part of the corpus of the trust will not be deemed to the income of the assessee. He accordingly partly allowed the appeal of the assessee.
5. Against this, the Ld. Authorised Representative of the assessee submitted that order passed by the Ld. DG(IT) withdrawing exemption u/s.10(22) / 10(23C) of the I.T. Act, 1961 has been challenged before the Hon'ble Gujarat High Court and is pending for decision. The Trust has been granted Registration u/s.12AA of the I.T. Act, 1961 which is in operation even till date. This Registration was granted by the ld.CIT vide his order No.HQ.III/12AA/36(57)/73-74 dated 02/11/1974. This was reiterated by the ITO (HQ) (Exem.) for Director of Income-tax(Exemptions) Ahmedabad vide his order No.DIT(E)/12AA/36/2005-06 dated 21/10/2005 addressed to the Managing Trustee of the assessee. Thus, there is no material on record to suggest that the assessee is ITA Nos.4482 & 4483//Ahd/2003 Asia Charitable Trust vs. ACIT Asst.Years - 1999-2000 & 2000-01 -5- carrying out its educational activities without having been registered u/s.12AA of the I.T. Act, 1961. According to him, even for the sake of argument, if it is presumed that exemption to the assessee u/s.10(22)/10(23C) of the I.T. Act, 1961 is not available, then income of the assessee should be assessed under sections 11, 12 & 13 of the I.T. Act, 1961.
6. Further, the Ld. Authorised Representative of the assessee invited our attention towards paragraph No.11 of DGIT (Investigation) order dated 18/03/2002, wherein it has been held that cash colleted from the parents of children seeking admission to the ASIA School (run by the assessee) in cash never came to the coffers of the Trust or the School. It is pertinent to reproduce the relevant paragraph No.11 of the said order, which is as under:-
"11. There is another distinction between the case of Cosmopolitan Education Society and the present case. It is case of Cosmopolitan Education Society it was an agreed finding of all the authorities that the funds or income accrued to the society and the only allegation was that the funds of the society were mis-utilised by it's members. In the present case, the money collected from the parents of ITA Nos.4482 & 4483//Ahd/2003 Asia Charitable Trust vs. ACIT Asst.Years - 1999-2000 & 2000-01 -6- children seeking admission to the ASIA School in cash never came to the coffers of the Trust or the School. These funds were at source diverted to the Chairman of the Trust Shri John Gee Varghese and were never handed over the Trust or the society. Therefore, these funds never accrued as the income and never became the funds of the Trust/School. In the present case, money making exercise was carried out in the capacity of Chairman of the Trust which runs the school) and it is not that the funds were mis-utilised after they became property of the Trust/School."
7. Moreover, the Ld. Authorised Representative of the assessee submitted that investment in building should be treated as application for charitable purposes, in case, the Assessing Officer is to compute income in accordance with sections 11, 12 & 13. Even where a receipt is not considered as corpus receipts, then it should be considered as revenue receipt and should be considered for application of income.
8. The ld.Departmental Representative submitted that assessee has been receiving cash from the parents of the children who were seeking admissions in the school run by the assessee.
ITA Nos.4482 & 4483//Ahd/2003 Asia Charitable Trust vs. ACIT Asst.Years - 1999-2000 & 2000-01 -7- Relevant documents have been found during the course of search and, therefore, the assessee-trust is not existing solely for educational purposes.
9. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. In our considered view, the question whether the assessee is entitled to exemption u/s.10(22) / 10(23C) of the I.T. Act, 1961 is subjudice before the Hon'ble High Court of Gujarat, as submitted by the Ld. Authorised Representative of the assessee. Therefore, the question whether the assessee is entitled to exemption under that section or not can be decided after the judgement is received from the Jurisdictional High Court.
10. The next argument of the Ld. Authorised Representative of the assessee was that if the assessee is not entitled to deduction u/s.10(22) / 10(23C) of the I.T. Act, 1961, then its income should be computed in accordance with sections 11, 12 & 13 of the I.T. Act, 1961. In fact, we do not find any dispute with this proposition.
ITA Nos.4482 & 4483//Ahd/2003 Asia Charitable Trust vs. ACIT Asst.Years - 1999-2000 & 2000-01 -8- Once the assessee is granted certificate of exemption u/s.12AA of the I.T. Act, 1961, then income of the assessee has to be computed under sections 11, 12 & 13 of the I.T. Act, 1961. The Assessing Officer has mainly proceeded on the presumption that the assessee is not entitled to exemption u/s.10(22) of the I.T. Act, 1961 and, therefore, its income is taxable. He has not considered the total receipts of the assessee and its application for charitable purposes. So far as investment in building is concerned, it should be treated as application of income of the assessee-trust for charitable purposes in view of the decision of Hon'ble Karnataka High Court in the case(s) of CIT vs. Janmaboomi Press Trust (2000) 242 ITR 703 (Kar.) and (2002) 242 ITR 457 (Kar.). The Hon'ble Karnataka High Court has followed the Madras High Court decision in the case of CIT vs. Kannika Parameswari Devasthanam & Charities (1982) 133 ITR 779 (Mad.). The Hon'ble Kerala High Court in the case of CIT vs. St.George Forana Church (1988) 170 ITR 62 (Ker.) and the Hon'ble Gujarat High Court in the case of Satya Vijay Patel Hindu Dharamshala Trust vs. CIT (1972) 86 ITR 683 (Guj.) held a similar view.
ITA Nos.4482 & 4483//Ahd/2003 Asia Charitable Trust vs. ACIT Asst.Years - 1999-2000 & 2000-01 -9-
11. In addition above, we are of the view that so far as registration u/s.12A of the I.T. Act, 1961 is in operation, it is sufficient proof that activities of the assessee are charitable. Reference may be made to the case of Sonepat Hindu Educational and Charitable Society vs. CIT (2005) 278 ITR 262 ( P&H) where educational institution is existing solely for the purpose of educational, then conditions laid down in sections 11 & 13 would not be relevant for the purpose of section 10(22) of the I.T. Act, 1961. Further, reference may also be in the case of CIT vs. Lagan Kala Upvan 259 ITR 489 (Delhi). Further, there is no clear-cut finding given by the Assessing Officer as to which sub-section of section 13 is violated and whether entire income of the assessee would be denied exemption or only that part of income which does not inure for the benefit of public directly or indirectly or applied for the benefit of any person referred to sub-section(3) of section 13 of the I.T. Act, 1961, would be subjected to tax The Assessing Officer has, by a general observation, held that there is a violation of section 13 of the I.T. Act, 1961 without specifically ITA Nos.4482 & 4483//Ahd/2003 Asia Charitable Trust vs. ACIT Asst.Years - 1999-2000 & 2000-01
- 10 -
pointing out as to how and under what sub-section of section 13 and to what extent such violation has taken place. Since the application of provisions of sections 11, 12 & 13 of the I.T. Act, 1961 had not been examined properly by the Assessing Officer, we restore the matter to his file for deciding the issue afresh in accordance with law, after allowing proper opportunity of being heard to the assessee.
12. In the result, both the appeals of the Assessee are treated as allowed for statistical purposes.
Order signed, dated and pronounced in the Court on 07/08/2009.
Sd/- Sd/- (H.L. KARWA) ( D.C.AGRAWAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 07/08/2009 T.C. NAIR Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent 3. The CIT Concerned. 4. The ld. CIT(Appeals)-I, Ahmedabad
5. The DR, Ahmedabad Bench. 6. The Guard File.
BY ORDER, स×याǒपत ूित //True Copy// (Dy./Asstt.Registrar), ITAT, Ahmedabad