Leela Champak Charitable Trust, ... vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL " C " BENCH, AHMEDABAD (BEFORE SHRI SHAILENDRA Kr. YADAV, J.M. & SHRI ANIL CHATURVEDI, A.M.)

I.T. A. No.1269/AHD/2013 (Assessment Year: 2009-10)

Leela Champak Charitable V/S Assistant Director of Income- Trust. C/o Atulbhai Tax (Exemption), Champaklal Shah Atul Ahmedabad Prakashan, Besides DCB Bank, Opp Doctor House, Parimal Garden, C.G. Road, Ahmedabad-380006 (Appellant) (Respondent)

PAN: AAATL5860F

Appellant by : Shri Prashant B. Shah, Respondent by : Shri M.K. Singh, Sr. D.R.

(आदेश )/ORDER

Date of hearing : 05-02-2015 Date of Pronouncement : 19-02-2015

PER SHRI ANIL CHATURVEDI,A.M.

1. This appeal filed by the Assessee is against the order of ADIT, (Exemption), Ahmedabad dated 20.02.2013 for A.Y. 2009-10.

2. The relevant facts as culled out from the material on record are as under.

3. Assessee is a trust registered u/s. 12AA of the Act. Assessee filed its return of income for A.Y. 2009-10 on 13.1.2010 declaring its income at Rs. (-) 2,24,623/-. The case was selected for scrutiny and thereafter the assessment 2 ITA No 1269/AHD/2013 . A.Y. 2009-10

was framed under section 143(3) vide order dated 22.12.2011 and the total income was determined at Rs. 78,39,750/-. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who vide order dated 20.02.2013 dismissed the appeal of the Assessee. Aggrieved by the aforesaid order of l.d CIT(A), Assessee is now in appeal before us and has filed the grounds of appeal which were later revised vide letter dated 19.06.2014 and the revised/modified ground reads as under:-

1. The Assessing Officer and the Appellate Commissioner respectively, have erred in Law and on Facts in holding contrary to the Law as laid down u/s 11 and 12 of the Income Tax Act. The Order is therefore, illegal, liable to be quashed;

2. The Assessing Officer and the Appellate Commissioner respectively, have erred in Law and on Facts in not accepting the Returned Income without properly applying mind to the facts of the case although the relevant evidences were on record. The Order is therefore, liable to be set aside;

3. 3.1 The Assessing Officer and the Appellate Commissioner respectively, have erred in Law and on Facts in making addition of Rs. 79,10,000/- to the returned Income without appreciating the facts of the case disallowing the bona fide and genuine claim of the Appellant u/s 11(1 )(d) of the Act. The Addition is therefore, bad in Law liable to be deleted;

3.2 That assuming for the time being without admitting that Section 11 (1 )(d) does not apply, the addition of Rs. 79,10,000/- is still bad in Law liable to be deleted as the same would even otherwise be eligible for exemption u/s 12 (1) r.w.s 11 of the Act as the said voluntary contribution is utilized for the purpose of the objects of the trust, i.e. Construction of College Building.

4.That the Assessing Officer has erred in Law and on facts in initiating Penalty proceedings u/s 271(1)(c) of the Act on the basis of an unlawful Assessment Order and therefore, the initiation of Penalty proceedings ought to be quashed;

4. Before us, at the outset ld. A.R. submitted that though Assessee has raised various grounds but the only issue is with respect to disallowing the claim u/s. 11 of the Act.

5. Before us, ld. A.R. submitted that Assessee is a charitable trust duly registered under the trust Act and also u/s. 12AA of the I.T. Act vide Registration No. DIT(E)/12AA/513/2008-09 dated 28.03.2007. The objects of the trust interalia is to open, establish, maintain, acquire, support, aid or grant monetary assistance to any schools or colleges, Polytechnic institution, Research laboratories or institutions imparting education and training to students. The ld. A.R. submitted that while framing the assessment A.O had 3 ITA No 1269/AHD/2013 . A.Y. 2009-10

made disallowance of Rs. 79,10,000/- on the alleged ground that Assessee has not fulfilled the criteria laid down u/s. 11(1)(d) of the Act. He submitted that the trust had received voluntary contributions aggregating to Rs.

79,10,000/- and it was credited to the corpus of the trust for construction of college building as per the specific directions/instructions of the donors. He further submitted that the funds was actually used for the purpose of construction of college building and thus was used for the fulfillment of the objects of the trust and therefore the Assessee had rightly claimed the exemption of the voluntary contributions being of capital in nature as provided u/s. 11(1)(d) of the Act. A.O was however, of the view that the specific directions as contemplated u/s. 11(1)(d) has to be in writing and the oral directions of the donors cannot be considered to be a direction as required u/s. 11(1)(d) of the Act. He further submitted that before ld. CIT(A), Assessee had taken an additional ground and submitted that amount of Rs. 93.64 lacs was spent for acquisition of the assets and, therefore, the voluntary contribution of Rs. 79.10 lacs being fully utilized should be considered as application of the funds. He submitted that ld. CIT(A) relying on the decision of Apex Court in the case of Goetze India Ltd. vs. CIT 284 ITR 322 held that the plea of the Assessee cannot be considered unless Assessee files a revised return and accordingly upheld the order of A.O. Ld. A.R. submitted that in the present case the claim of application of funds towards the objects of the trust was already made in the return of income and in view of the decision of Hon'ble Apex Court in the case of NTPC 229 ITR 383, the claim of Assessee should have been considered by ld. CIT(A) more so as the decision of Apex Court which was relied upon by ld. CIT(A) was only applicable to the powers of the A.O and was not applicable to appellate authorities. With respect to the direction by the donors could be oral 4 ITA No 1269/AHD/2013 . A.Y. 2009-10

directions also he relied on the decision DIT vs. Ramkrishna Seva Ashram (2013) 357 ITR 731 (Karnataka). He also placed on record the copy of the aforesaid decision. He therefore submitted that the addition made by A.O be deleted and further submitted that no such addition was made by the A. O in subsequent years. The ld. D.R. on the other hand supported the order of A.O and ld. CIT(A).

6. We have heard the rival submissions and perused the material on record. It is an undisputed fact that Assessee is a trust registered u/s. 12AA of the I.T. Act. It is also a fact that the amount of Rs. 79.10 lacs was received by the Assessee and was shown as "addition to Polytechnic (Technical) College fund" in the Balance sheet as at 31st March, 2009. On perusing the balance sheet, it is also seen that Assessee had shown expenditure of Rs. 271.93 lacs towards construction of Polytechnic (Technical) College and thus the fact that the amount received by the Assessee towards polytechnic fund has been spent on the construction of building for Polytechnic is apparent from the Balance sheet. Further the aforesaid disclosure about the receipt of fund and expenditure towards the construction of polytechnic in the Balance sheet of the Assessee has not been disputed by the Revenue. With respect to the oral directions of the donors to treat their contributions towards the corpus of the fund, we find that Hon'ble Karnataka High Court in the case of DIT vs. Ramkrishan Seva Ashram (supra) held as under:-

"Insofar as the argument that the persons who made these contributions does not specifically direct that they shall form part of the corpus of the trust is concerned, it has no substance. In view of the language employed in Clause (b) of sub-section (a) of Section 11, the requirement is that the voluntary contributions have to be made with a specific direction. The law does not require that the said direction should be in writing. In the absence of the direction in writing, the only way that one can find out whether there was a specific direction and to find out how the money so paid it is utilized, if the money so received by way of voluntary contributions, it is mean to use for the Leprosy patients and is credited to a particular account and from the income from the said capital, the said activity is carried on the requirement of Clause (b) of sub-section (1) of Section 11 is complied with. In the instant case, on record, we see that those people who have paid amounts by way of donation that includes the cheque with a letter with a specific direction, 5 ITA No 1269/AHD/2013 . A.Y. 2009-10 which is in compliance with Section (1) (b) of the Act. But, in case if the contributions are made without cheques i.e., by cash, and oral direction has been issued to the trust to utilize the said fund for the purpose of treating the leprosy patients and if such amounts arc credited to the account meant for it, even then the requirement of clause (b) of sub-section (1) of Section 11 is complied with. Therefore, we do not see any substance in the said contention."

7. In the present case, considering the fact that the amount of Rs. 79.10 lacs received by the Assessee towards the polytechnic fund has been utilized for the construction of Polytechnic Building and relying on the decision of Hon'ble Karnataka High Court and more so when no binding contrary decisions has been brought to our notice by the Revenue, we are of the view that the Assessee could not be denied exemption u/s. 11(1)(d) of the Act. We therefore direct that the exemption be allowed to Assessee u/s. 11(1)(d) of the Act.

8. In the result, the appeal of Assessee is allowed.

Order pronounced in Open Court on 19 - 02 - 2015.

Sd/- Sd/- (SHAILENDRA Kr. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad. Rajesh

Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) - 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER

Deputy/Asstt.Registrar ITAT,Ahmedabad