TMI Blog2003 (1) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... as for the purpose of establishment of center for promoting computer education for poor and deserving candidates, for which land at SAS Nagar, Mohali, costing Rs. 291.55 lakhs + Rs. 53.71 lakhs as interest on instalments, payable in five years, has already been purchased from the Punjab Urban Development Authority, which was also duly confirmed by the AO in his remand report. 4. On the facts and in the circumstances of the case, the learned CIT(A) was not legally justified in holding that the assessee had merely repeated the objects of the trust in Form No. 10 and since the purposes do not have some individuality, the requirements of s. 11(2) have not been complied with, and as such, the assessee cannot be granted exemption for the purpose of accumulation of its income in terms of under s. 11(2) of the IT Act. 5. On the facts and in the circumstances of the case, since the assessee had categorically explained the authorities below in the course of assessment proceedings that the accumulation of income under s. 11(2) was for establishment of computer education center, which was a specific purpose, for which land at a huge cost had also been purchased, the learned CIT(A) was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case, the learned CIT(A) has erred in law and on facts in holding arbitrarily that the trust was not existing solely for educational purposes, on wholly erroneous, illegal and untenable grounds and irrelevant consideration. 11. On the facts and in the circumstances of the case. it may be held that the assessee trust existed for educational purposes during the year under consideration, and as such its income would be eligible for exemption under s. 10(22) of the IT Act. 12. On the facts and in the circumstances of the case, neither the computation of total income of the assessee at Rs. 1,44,31,205 nor the computation of tax is in accordance with law. 13. That each ground of appeal raised is independent of and without prejudice to the other grounds of appeal." 2. The brief facts of the case are that the appellant is a society registered under the Societies Registration Act, 1860, and it is also registered under s. 12A(a) of the IT Act, 1961. The objects for which the society has been established are as under: "(a) To spread Sikh religious education by means of lectures, Ragi Jathas, pamphlets, tracts, leaflets, newspapers, libraries, slides, films, and by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aras, hospitals, laboratories, nursing homes, libraries, cultural, social and research centers, and institutions, and awarding scholardships and carry out any other similar object of public ultility and repairs of existing building, and for making/acquiring land, buildings for the trust." 6. By means of an ordersheet entry dt.15th Nov., 1999, the assessee was asked to show-cause as to why accumulation not be disallowed, since no specific object had been indicated in Form No. 10. Attention was invited to the judgment of the Hon ble Calcutta High Court in the case of Director of IT (Exemption) vs. Trustees of Singhania Charitable Trust. In response to the show-cause the assessee replied that its facts were quite different to those prevailing in the case cited and the emphasis was on the fact that whereas in the case of Singhania Charitable Trust, all the objects of the trust had been enumerated in Form No. 10, whereas in the assessee s case it was not so. 7. The aforesaid submissions, however, did not find favour with the AO, who took the view that the purposes for which accumulation had been sought by the assessee did not give any idea as to why the funds were being accumulated, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the high cost involved. Attention was also invited to the fact that vis-a-vis the preceding assessment years the facts in the year under appeal were quite identical. It was stressed that the request for accumulation made in the previous 8 years had been allowed by the predecessor of the current AO and assessments also came to be framed and that also under s. 143(3) of the Act. 10. It was further stated that in the year under consideration as also in the previous years substantial funds had been accumulated to fulfil the legitimate and lawful needs to facilitate the attainment of the objects of the trust and no funds accumulated had been utilized for a purpose other than the one mentioned in Form No. 10. It was also highlighted before the CIT(A) that during the course of the assessment proceedings the assessee had placed on record relevant documentary evidence, which would show that the funds accumulated had been utilized for the purposes of establishing a computer center and which included the purchase of land at Mohali from PUDA. A reference was made to the fact that an instalment amounting to Rs. 59,12,500 was paid during the year under consideration and till date a further a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to adduce fresh evidence whether in the form of a resolution or otherwise and which would show the specific purpose for which the accumulation of the income existed. 14. On the observation of the AO that the assessee had not spent anything out of the accumulations made so far, the stand on behalf of the assessee was that this was factually incorrect since the assessee even during the year under consideration had paid a sum of Rs. 59 lakhs and odd to PUDA and even in the subsequent four assessment years huge amounts had been paid, i.e., Rs. 75.21 lakhs in asst. yr. 1998-99, Rs. 82.35 lakhs in asst. yr. 1999-2000; Rs. 64.47 lakhs in asst. yr. 2000-01 and Rs. 59.10 lakhs in asst. yr. 2001-02. The further submission was to the effect that plans for construction were under consideration and the land, which was being acquired was over 1,500 sq. yds. on which a multi-discipline building was being planned. Reliance was placed at this stage on the unreported decision of the Delhi Bench of the Tribunal in the case of Sir Sri Ram Foundation vs. D.D.I. in ITA No. 6034 (Del) of 1994, dt. 30th March, 1995, and this was for the proposition that in identical circumstances and after due con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that there is a reiteration of the objects of the trust, the purposes for which the accumulation was sought and there is a reproduction of relevant observations made in certain decisions, both of the Hon ble High Courts and the different Benches of the Tribunals. According to the CIT(A) a mere glance at the objects revealed that the trust had multifarious objects including educational and religious and it was, therefore, apparent that the trust did not exist solely for educational purposes. Further, according to the CIT(A), the purposes set out in Form No. 10 were not specific and concrete, but were vague. In relying on the decision of the Tribunal in the case of Cotton Textile Export Promotion Council vs. ITO (1983) 17 TTJ (Bom) 256 : (1983) 4 ITD 642 (Bom), the CIT(A) opined that it was open to the assessee to seek the accumulation only if it had in his mind some clear project, or proposal which required the use of more than one year s income and in such a case it was to clearly specify in Form No. 10 what such proposal was and how it required the accumulation of income for more than a year. Further, unless and until the purposes/proposals were not clearly indicated in the requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hanam Co. vs. CIT 1978 CTR (SC) 114 : (1978) 114 ITR 463 (SC) was also turned down by the CIT(A) as according to him the same was not applicable and this was also his observation with reference to the un-reported decision of the Delhi Bench of the Tribunal in the case of Sir Sri Ram Foundation vs. DDI. In concluding, the CIT(A) confirmed the view taken by the AO, observing as under: "By no stretch of imagination this purpose can be termed as specific, as held in the aforesaid judgments of the High Court in the Singhania case later followed in the case of CIT vs. M. Ct. Muthaiah Chettiar Family Trust. Doubtless, it is not necessary that the assessee has to mention only one specific object. There can be setting apart and accumulation of income for more objects than one but whatever the objects or purposes might be, the assessee must specify in the notice the concrete nature of the purposes for which the accumulation is being made. Plurality of the purposes for accumulation may not be precluded but it must depend on the exact and precise purposes for which the accumulation is intended for the statutory period of ten years. The generality of the objects of the trust cannot take the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground to allow the said exemption. The other grounds taken up before the CIT(A) are not being discussed since in the present appeal before the Tribunal, such grounds have not been taken up/repeated with the exception of ground No. 12 which is treated to be general and on which no arguments were advanced during the course of the present hearing. We would like to emphasize that during the hearing of the present appeal before the Tribunal the main thrust of the argument of both the sides was with reference to the request for accumulation made vis-a-vis the provisions of s. 11(2) and grounds pertaining to exemption under s. 10(22) were raised as an alternative. 22. Before us, the matter was argued at length by both the parties, the learned counsel for the appellant reiterating the arguments advanced before the tax authorities. The followings were emphasized: "(i) The amount accumulated as also the manner in which it has been invested had been clearly exhibited in the audit report prepared in Form No. 10-B under s. 12A(b) of the IT Act, 1961; (ii) Adequate provision had been made in the books of accounts in respect of the amount accumulated and the purpose had also been highlight ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n requested for only in a sum of Rs. 2 crores and odd. 23. In support of the aforesaid arguments, the learned counsel over and above the decisions already cited, relied upon 1978 CTR (SC) 114 : (1978) 114 ITR 463 (SC) at p. 465. The further argument of the learned counsel was an alternative one viz., claim for exemption under s. 10(22). The submission was that even the AO in his remand report, copy appended at p. 49 of the paper book, had accepted the assessee as "an educational and charitable trust". In concluding, the learned counsel referred to his written submissions addressed to the tax authorities, the AO, at pp. 107 to 109 of the paper book and the CIT(A) at pp. 50 to 61 of the paper book. It was finally urged that the request for accumulation be accepted and failing the same the assessee s case for exemption under s. 10(22) be processed. 24. The learned Departmental Representative, on the other hand, vehemently supported the orders passed by the tax authorities. According to her, s. 11(2) required specification of the purpose for which accumulation was being asked for and by reproducing cl. (b) of the objects in Form No. 10 it did not mean that the object of accumulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mental Representative also invited attention to the fact that 1978 CTR (SC) 114 : (1978) 114 ITR 463 (SC) cited by the assessee s counsel in the present hearing was not applicable and the same, according to her, had been rightly distinguished by the CIT(A). 27. Coming to the alternative contention pertaining to exemption under s. 10(22) the learned Departmental Representative strongly relied on the order of the CIT(A) emphasizing that the assessee was carrying on many other activities which were not at all related to the field of education and, therefore, the claim under s. 10(22) was required to be rejected on this ground itself. 28. In his short reply the learned counsel for the assessee stressed that the term used in s. 11(2) was "purposes" and not "purpose", i.e., the term used was in plural and not in singular. For the same submission our attention was invited to Form No. 10 and where also, according to the learned counsel, the term used was "purposes". In seeking to distinguish (2000) 162 CTR (Mad) 63 : (2000) 245 ITR 400 (Mad) relied upon by the Revenue, the argument of the learned counsel was that this decision was not applicable as it did not pertain to accumulation, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport are being reproduced as follows: "We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact, one way or the other, and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasoning, in the absence of any material change justifying the Revenue to take a different view of the matter and, if there was no change, it was in support of the assessee we do not think the question should have been reopened and contrary to what had been decided by the CIT in the earlier proceedings, a different and contradictory stand should have been taken." 33. Their Lordships in taking the aforesaid view referred to a Full Bench judgment of the Madras High Court reported in 4 ITC 226 as also the judgment of the Hon ble Supreme Court in Parashuram Pottery Works Co. Ltd. vs. ITO 1977 CTR (SC) 32 : (1977) 106 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent assessment years, i.e., 1998-99 and 1999-2000, the assessee-trust had paid instalments of Rs. 1.57 crores to PUDA and it had been accepted as an educational and charitable trust, and the request for accumulation allowed. 35. The CIT(A) has not given much importance to the aforesaid factual aspects highlighted by the learned Departmental Representative in the remand report, but has chosen to uphold the action of the AO by referring to certain reported judgements and which on minute perusal are not found to be applicable. That apart, the contents of the remand report aforesaid supports the argument of the learned counsel to the effect that in the present case res judicata should be applied. 36. It has been stated by the Revenue, moreso, in the order of the CIT(A) that no evidence has been placed on record about the accumulated funds being put to the use for which such accumulation was sought. We restrict ourselves to the assessee s submission about the purchase of land at Mohali and once again go back to the remand report, which categorically mentions the particulars of the amounts invested in the year under appeal as also the subsequent two assessment years. In the Thir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting the Division Bench. Both the learned Members have set out at length the facts of the case as also the scheme of the Act vis-a-vis the point under consideration. There is definitely a distinction between the two relevant provisions of the Act one allowing accumulation upto 25 per cent of the income where the objects do not have to be specific and the other allowing accumulation upto 75 per cent of the income and the period of accumulation being as long as 10 years but setting out specific objects. In the present case, the assessee while applying for accumulation in Form No. 10 mentioned six objects out of 19 and a minute perusal of these shows with reference to p. 7 of the order of the learned Accountant Member that the first three broadly pertained to education since they mention about setting up of schools, colleges, libraries, reading rooms and hostels for boys and girls studying in schools and colleges, etc. The next three objects, i.e., 4, 5 and 6 are in the field of medical education and medical aid since these pertain to the setting up of health centres, nursing homes, maternity centers as also construction of dharamshalas or sarais in or around hospitals in Delhi or Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umulate its income for a long period of 10 years to carry out the charitable objects as set out in the trust deed does required time to think, time to plan and time to garner its resources, etc., to fulfil those objects for which it has sought accumulation of funds and the legislature in its wisdom has allowed a long period of 10 years and I, therefore, really cannot appreciate the arguments of the learned Departmental Representative on behalf of the Revenue that even when the application for accumulation is filed the applicant trust must mention the type of institution, medical or educational, which it will set up as also the type of education or medical treatment which it will impart. This, in my opinion, it was never the intention of the law makers when the provision in the form of a concession was introduced whereby a charitable institution need not pay any tax on its income earned for a good period of 10 years provided it carried out charitable activities with a view to fulfilling the specific objects mentioned in the application seeking accumulation. In the final analysis, I am of the view that the decision of the Hon ble Calcutta High Court in Trustees of Singhania Charitabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is not expected to show immediately as to how the money has been utilized and we keep in mind the specific provision which seeks to penalize the assessee in case the money is not spent in the manner in which it should have been so done within the period laid down and in that eventuality how it would be brought to tax. The law is quite clear as to what has to be done if the amount is spent in a manner different to the one for which a request for accumulation has been made and there is also another condition, namely, the mode in which the funds shall remain invested. Any violation of this clause also leads to adverse action on the part of the Revenue. In concluding this aspect of the matter, we really wonder as to whether the CIT(A) was justified in referring to the manner in which the money was spent by the assessee. No doubt, in the present case, there is material on record, which would show that substantial money had been paid for acquisition of land at Mohali for setting up a center, which according to the assessee is an educational center with a lot of facilities including computer facilities. 38. A perusal of the material on record further shows that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
