TMI Blog2022 (4) TMI 1124X X X X Extracts X X X X X X X X Extracts X X X X ..... of any material. The conclusion of the Tribunal to reverse the well considered and well recorded findings of the assessing authority and the first appellate authority, on disallowing claim it is nothing short of perverse conclusion as it is neither conclusion based on any material on record nor after giving any reasons to reverse the findings of the assessing authority and the first appellate authority who have givenwell supported reasons and discussed the material available. Whether the advance made by the assessee is in violation of the provisions of section 11 read with section 13(1)(d)? - We note that the advance was made by the assessee in the financial year 2011-12 which was subject to the assessment under the provisions of section 143(3) of the Act and there was no allegation against the assessee for having contravened the provisions of section 11(5) read with section 13(1)(d). Likewise the amount of advance received back in full in the assessment AR 2016-17 which was also the subject matter of assessment under section 143(3) of the Act but no adverse inference was drawn by the AO during the relevant assessment proceedings. Accordingly, the case of the assessee was in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .R ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-7, Ahmedabad, dated 16/01/2017 arising in the matter of penalty order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as the Act ) relevant to the Assessment Year 2014-15. 2. The only issue raised by the Revenue is that the learned CIT(A) erred in granting the benefit of exemption under the provisions of section 11 of the Act whereas the activities of the assessee were not in consonance with its object clause being charitable in nature. 3. The facts in brief are that the assessee in the present case is a trust and registered under the Bombay Public Trust Act 1950 vide registration No. E/8846/Rajkot dated 18th March 2010 with the Assistant Charity Commissioner of Rajkot region. The assessee was also registered under the provisions of section 12A and 80G of the Act by the Commissioner of Income Tax with effect from the financial year 2010-11. 3.1 It was claimed by the assessee that it is engaged in the activity of education, medical relief, monetary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D Trivedi (Sompuraj and bills of statues of deities submitted during the assessment proceedings too point out to the religious nature of the so called prayerhall . Out of total fixed assets of ₹ 19.25 crores, the assessee claims to have spent a sum of ₹ 16.36 crores on prayerhall which is essentially a temple. From the details submitted, it is noticed that the trust is not involved in any other major charitable activity, which have been specified in the trust-deed. Perusal of the website of the assessee trust, khodaldhamtrust.org, clearly establishes that the primary activity of trust is religious and most of the expenses were also incurred for religious purposes. The work in progress section of this website clearly shows that temple' is being built in garb of prayer hall - The printout of same is made part of this order as annexure-B. This website also states that the trust publishes a religious and spiritual magazine Khodaldharn Smruti . Expenditure on its stated objects of the trust deed, i.e.-educational, Medical, Monitory help, refinement and social development could not be deciphered from any bills or details pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying out religious activities and there enjoy the status of charitable activities. Similarly, there are various meditation hall constructed by Ramakrishna Ashram which contains idol of Saint Ramakrishna Param Hans and Vivekananda but those organisations do not become as religious in nature. Same is the case with the charitable institution run by Mother Teresa, having the idol of Jesus as a matter of symbol but that doesn t become the religious nature. There are various temples/mosques/gurudwara which are carrying out charitable activities for education/health/environment but their activities do not turn as religious nature. 4.3 The architecture of the prayer hall depicting the Garbhgrah and Rangmandap does not portray the temple rather these are the architectural design wherein the cultural activities like Independence Day, teachers day and other such public festivals are organised. Accordingly, the prayer hall constructed by the assessee cannot be treated as temple as alleged by the AO based on the bills of architect, amount of expenditures. 4.4 The assessee in the year under consideration has also incurred an expense of ₹30.92 lakhs towards the charitable activities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dj in respect of advance of ₹ 1.5 crores to Sardar Patel Cultural Foundation, had bearing on disallowance of exemption u/s 11 of the Act, the same are taken up together for sake of convenience. The facts of the case as reflected in the assessment order as also made available in the course of the appellate proceedings are that the appellant trust came into existence vide trust deed dated 28.12.2009 and was registered by the charity Commissioner on 18.03.2010. It is also registered u/s 12A of the Income tax Act as well as u/s 80G(5) of the Income tax Act. These facts have not been disputed by the Assessing Officer. Therefore, the trust is a legal entity registered with the Charity Commissioner and Income Tax Department. The computation of income reveals that during the year under consideration, the trust had income from other sources to the tune of ₹ 2,34,66,269/- (comprising of bank interest and other income). It had further received Voluntary Contribution to the tune of ₹ 5,86,49,331/- (which consists general donation of ₹ 3,02,325/-and ₹ 5,83,47,006/- being income in the form of voluntary contributions made with a specific direction that they shall fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rimary activity of the trust as religious and most of the expenses are incuri'ed for religious purpose, the W1P of the web site shows that the temple is being built on the 'garbh' of Prayer Hall,the trust publishes a religious and spiritual magazine, the expenditure 011 stated objects i.e. Educational, Medical, Monitory help, refinement and social development could not be found in the bilis, details furnished, and there is violation of provisions of section 11(5) being advance of ₹ 1.50 crore given to Shri Sardar Patel Cultural Foundation. 6.5 I have gone through the findings of the AO as well as the written submission filed by the AR. The primary argument of the Appellant is that when the registration granted by the Commissioner of Income Tax - I, Rajkot, is in vogue, the Assessing Officer cannot disturb the claim of benefit under Section 11. This contention of Appellant is supported by decision of the Hon'ble Gujarat High Court in Tax Appeal No. 376 of 2010 in the case of Commissioner of Income tax-1 Rajkot v/s. Saurastra Kutch Stock Exchange Ltd dated 8.8.2011 wherein it has been held that, while granting registration under Section 12A of the Act, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e trust has earned out charitable activities and activities of general public utility which are charitable in nature, for the community and village in which the Derasar is located. While confirming the order of the CIT(Appeals), the Tribunal a/so observed, that in the assessee's case, apart from the religious activities, i.e. propagation of-Jain philosophy and ideology, the trust is also engaged in the spreading religious and dharmic knowledge and providing amenities and facilities to the pilgrims and renovation of Jain temples all over India, The Tribunal further observed the trust is engaged in carrying out objects of general public utilities which are charitable in nature. Further, SLP filed bij the Department against the above decision is also dismissed by Hon'ble Supreme Court vide order dated 1 0 ' May, 2011 referred supra. 6.8 From the above it is clear that the AO cannot deny the benefits of section 11 to the Appellant trust, when, the registration u/s. 12A granted by the Commissioner subsists. 7. With regard to observation made by AO at para 5.2 that Assessee is primarily a religious trust and while arriving at such conclusion he has made specific ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also registered with the Income tax department u/s. 12A of the I T Act. Hence, the finding that the appellant violated its objects by constructing a prayer hall, is incorrect and not supported by facts available on record. 7.2 The AO denied the benefits of section 11 on the ground that the prayer hall is a temple of the deity 'Khodal ma' and in the prayer hall, more than dozen deities are worshipped. On the other hand, the plea of the appellant is that, the presence of deities represent the sanctity of the place and does not confine to any particular religious nature. The AR also submitted that, Hinduism is a way of living and it is not a religion. This is the basic preamble of the Hindu ideology. Any person, irrespective of the religious belief, can come and visit the premises and enjoy its serenity. I find substantial force in the argument of the AR. The assessing officer has taken a very narrow interpretation of the presence of statutes of various deities. In fact, the AO himself admits that there was presence of dozen different deities. This again shows that the appellant trust ' has 'taken care of wide range of people with their multiple beliefs and trusts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards charity expenses, ₹ 60 lacs towards magazine expenses, etc. What is important is that, the AO failed to point out a single expenditure, which is noncharitable in nature. Merely by saying that, the appellant trust had not carried out major charitable activities, the AO cannot ignore the facts of the case. Hence, the finding of the AO is not in consonance with the fact. 1L is also observed that income and expenditure submitted along with the return of income reflects expenditure incurred for the purpose of object of the Trust at ₹ 2,35,03,780 and none of the expenditure is related to have been incurred for religious purpose. Even while passing the Assessment Order AO has allowed such expenditure from gross total income which supports the contention of Appellant that it has incurred substantial expenditure towards the object of the Trust. While making the above observation that Appellant has not carried out major charitable activities, the AO has considered expenditure incurred out of corpus but, as held herein above, incurring of such expenditure does not make activity of trust as religious activity of the Trust as held by various Courts, supra. 7.5 The next, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... norms specified in section 11 (5) of the I T Act. Against this, the AR submits that, the appellant had made advance of ₹ 1,50,00,000 to Sardar Patel Cultural Foundation not during (.he year under consideration but during the financial year 2011-12. The assessment for this year has already been finalized u/s, 143(3). Therefore, funds are not advanced during the year under appeal. The AR further contends that, Sardar Patel Cultural Foundation is an institution which provides training, coaching and mentoring of aspirant students who wants to pursue for UPSC and GPSC courses. Besides, it also engages in running yoga shibir for old aged and disabled people. This is similar to the object of the appellant trust. In support of this, the AR has filed object clause of Sardar Patel Cultural Foundation, which have been perused by me. Thus it is the plea of the AR that, the objects of both the trusts are similar. Hence, the appellant trust can provide loans / aids to like-minded organizations. In this connection, he submitted that, it has been held by various Hon'ble High Courts that, interest free Joans provided by a trust to its associate trust did not violate provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 13(l)(d)w. Further, Hon'ble Delhi ITAT in the case of Puran Chaiid Dharmarth Trust Vs ITO 93 taxman.com 367 has held as under: Section 13, read with sections 11and 10(23C)(vil), of the Income-tax: Act, 1961 - Charitable or religious trust - Denial of exemption (Sub-section (l)(d)) - Assessment year 2007-08 - Assessee-trust was granted exemption under section 10(23C)(vi) - Assessee had advanced an amount as loan to another trust - Assessing Officer treated said amount advanced out of corpus fund to .other charitable trust as not eligible for deduction under section 11 as it was in contravention to investment modes and forms as defined under section 11(5) - Further, Commissioner (Appeals) traversed a step further by denying registration under section 10(23C) by invoking provisions of section 13(l)(d) on ground that assesses had violated condition of investment specified under section J 1(5) - Whether since money was advanced as a loan by assessee-trust to other trust for which assessee had not received any securities or interest and said sum was returned by other trust and common trustees had no substantial interest in said other trust, amount advanced c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding of the learned CIT-A. In this regard we find support and guidance from the order of the Hon ble Karnataka High Court in case of CIT vs. United Brewage reported in 190 Taxman 92 the relevant observation of the court extracted as under: 55. In the absence of any material on appreciation of which material the finding is required to be recorded, there is no question of the matter being remanded to the Tribunal as the Tribunal will not be able to record a finding in the absence of any material. The conclusion of the Tribunal to reverse the well considered and well recorded findings of the assessing authority and the first appellate authority, on disallowing claim towards written off bad debts in terms of section 36(1)(vii) of the Act is concerned, it is nothing short of perverse conclusion as it is neither conclusion based on any material on record nor after giving any reasons to reverse the findings of the assessing authority and the first appellate authority who have givenwell supported reasons and discussed the material available. 8.2 With respect to the 2nd question for advancing the sum of ₹1.50 crores, we note that the advance was made by the assessee in the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion that contribution made towards corpusfund cannot be treated as income for the purpose of levying of tax. Even if that corpusfund is misused it cannot be treated as income and income tax levied. The only course is to seek for cancellation of the registration granted under section 12A of the Act. 4. In that view of the matter we do not see any merit in this appeal. Thus the substantial questions of law is answered in favour of the assessee and against the revenue. 8.4 With respect to the other receipts i.e. interest income and regular donations of Rs. ₹ 2,34,66,269/- and ₹ 3,02,325/- respectively, out of such receipt, we find that the assessee has incurred an expense of ₹ 30.92 Lacs leaving a surplus amount of ₹ 2.06 crore approx. which in our considered view at the most can be brought to tax in the situation where the benefit of section 11 is denied to the assessee. Admittedly, in the case on hand, the benefit of section 11 has been denied to the assessee for the activities carried out for the construction of the prayer hall. Accordingly, we hold that the activity of the assessee was in consonance with the object clause and therefore the as ..... 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