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Showing contexts for: charitable trust objects in M/S. Nabadigant Educational Trust, ... vs Ito, Ward-2(1), Bhubaneswar, ... on 17 May, 2022Matching Fragments
9. Ld. AR placing reliance on the decision in the case of CIT Vs. St. Peter's Educational Society [2016] 70 taxmann.com 171 (SC) to submit that where a surplus was made by educational institution which was ploughed back for educational purposes, said institution was to be held to be existed solely for educational purpose and not for purpose of profit. Further placing reliance on the decision of Hon'ble Supreme Court in the case of Queen's Educational Society Vs. CIT [2015] 55 taxmann.com 255 (SC), ld. AR submitted that where surplus was made by educational institutions for educational purpose, the said institution was to be held existed solely for educational purpose and not for purpose of profit. Ld. AR also drew our attention towards CBDT instruction No.1132, dated 5-1- 1978 to submit that the payment of a sum by one charitable trust to another for utilisation by the done trust towards its charitable objects is proper application of income for charitable purpose in the hands of the done trust; and the donor trust will not lose exemption under section 11 of the Income-tax Act, 1961, merely because the done trust did not spend the donation during the year of receipt itself. Ld.AR lastly submitted that there is no violation of any sub-clause of Section 13 of the Act as the surplus and extra fees received by the trust have been utilised or ploughed back for the purpose of charitable objects of the trust and there is no use of funds beyond a the scope of charitable objects. Ld. AR submitted that the donation to the similar kind of trust having similar charitable objects is also an application of income and the benefit of Section 11 cannot be denied to the assessee trust. Ld. AR also submitted that the foreign travel of the trustee of Shri Prabhat Ranjan Mallick was for the purpose of securing collaboration and educational exchange procurement with the universities at USA, therefore, the expenditure has been incurred for the growth and progress of the trust and benefit of Section 11 of the Act cannot be denied to the assessee. Ld.AR also submitted that the interest amount on the loan given to the managing trustee of the trust and the company where the trustee of the trust engaged as directors/shareholders was advanced at the generalize interest rate and the interest was paid thereon during the subsequent years merely the interest was not paid during the relevant financial period, it cannot be presumed that the loan has been advanced to the entities in violation of section 13(3) of the Act. Ld. AR lastly prayed that the AO should be directed to allow exemption u/s.11 of the Act by allowing appeal of the assessee.
5.3.2 There is another important aspect to the matter. It is not the case of the appellant that the advance was given to M/s Koustav Metals in furtherance of the charitable objective of the trust. In effect, this is an investment by the trust not connected with its charitable activities and again admittedly is not an investment approved u/s. 11(5) of the Act. Therefore, the provisions of section 13(1}(d) are clearly attracted in this case and based on the same, the trust is liable to lose the entire exemption and the surplus is to be brought to tax. When this fact was brought to the notice of the Ld.-ARJ he argued that the provisions of section 13(1)(d) are not attracted as the trust has made the advance after expending 85% of the gross receipt for charitable activities. It was argued that the provision of section 13(1)(d) do not apply to the surplus of 15% permitted in the statute. This view has no legal basis because section 13(1)(d) does not make any exception. Reliance in this regard is placed inthe decision of Hon'ble Kerala High Court in Mundakapadam Mandirams Society v, CIT (2002) 258 ITR 395 (Ker.) wherein the Hon'ble Court held as under:
19. The next issue for adjudication is outside training fees charged by the assessee. Undisputedly, the assessee trust has received outstanding training fees from students admitted in Koustuv Institute of Self Domain, College of Engineering, Bhubaneswar, it was explained before the AO that the fees were received in cash from the students of the respective colleges and included in the income and expenditure account and related expenditure for providing training has also been included in the administrative expenses of both the colleges. Ld. AR submitted that the surplus accrued to the assessee out of outside training fees has been utilised for the development of educational infrastructure of the institutions working under the management of the assessee trust cannot be allowed as profit motive activities to deny the benefit u/s.11 of the Act. In this regard, we are of the considered view that the ld. AR placed vehement reliance on the various decisions to contend that if the surplus fees has been utilised for infrastructure development and was ploughed back for educational purpose then it has to be held that the educational institution was existed solely for educational purposes and not for the purpose of profit. We are in complete agreement with the contention of the ld. AR and also take respectfully cognizance of the judgement of the Hon'ble Supreme Court in the case of St. Peter's Educational Society (supra) and Queens Educational Society (supra). However, to avail the benefit of proposition rendered by the Hon'ble Supreme Court it is the duty on the shoulders of the assessed trust to show that the surplus of the profit shows from outside tuition fee has been utilised or ploughed back for educational purposes of the assessee trust within the scope of its charitable objects. We are unable to see any plausible explanation and sustainable evidence on record from the assessee to establish that the surplus accrued to the trust from outside training fees has been utilised or ploughed back for the charitable objects of the assessee trust. Onus was on the trust to show that the surplus from outside training fees has been properly utilised for the charitable objects of the trust but this onus has not been discharged, therefore, we respectfully hold that the benefit of the proposition rendered by the Hon'ble Supreme Court in the case of St. Peter's Educational Society and Queens' Marry Educational Society (supra) is not available for the assessee in the present case having dissimilar facts and circumstances from those cases.
20. The last issue for adjudication is as to whether the assessee trust has made donations to other charitable trust and entities in violation of provisions of the Act amounting to Rs.3,94,65,532/-. In this regard, ld. AR has submitted that the donations to the other institutions/trust having similar charitable objects of imparting education is also an application of income in view of the several judgments of the Hon'ble High Courts and coordinate bench of the Tribunal, he has placed strong reliance on the CBDT Instruction No. 1132 dated 5-1-1978 to submit that the payment of non-utilisation by the done trust towards charitable object is proper application of income for charitable purpose in the hands of the done trust but we are unable to see any detailed document, copies of the trust deeds of donee to establish that they were having similar charitable objects and the purpose of donation was to utilise or use the sum for charitable purpose and development of education. Further, we are also unable to see any details or documents or trust deeds or utilisation of money by the donee to substantiate the explanation of the assessee-donor enabling the assessee-trust to get the benefit of proposition rendered by the Hon'ble High Courts, coordinate benches of the Tribunal and CBDT instruction No.1132 dated 5-1-1978 (supra), therefore, failure on the part of the assessee to substantiate its explanation supports the action of the AO, denying exemption u/s.11 of the Act to the assessee trust.