TMI Blog2011 (7) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... , JJ. Represented By: Appellant by : Shri P.B.Sekaran, CIT/DR Respondent by : Shri G.Narayanaswmy Per: Hari Om Maratha: This appeal of the Revenue, for assessment year 2007-08, is directed against the order of the ld. CIT(A), Chennai, dated 29.6.2010. 2. Briefly stated, the facts of the case are that the assessee is a Public Charitable Trust registered u/s 12A(a) of the Act. The Trust owns and runs an educational institution by the name SASTRA UNIVERSITY . It filed its return of income on 6.1.22006 showing NIL income for the assessment year 2007-08 which was accepted u/s 141. Subsequently, scrutiny assessment was completed u/s 143(1) on 31.3.2009 determining the total income of the assessee at Rs. 12,19,15,648/-. While doing so, the exemption u/s 11 of the Act was denied on the ground that the assessee-trust had made certain donations which were not in conformity with its objects as contained in the Trust Deed. Being aggrieved, the assessee preferred first appeal. The ld. CIT(A), following the decision of Hon'ble A.P High Court rendered in the case of Trustees of H.E.H. the Nizam s Pilgrimage Money Trust vs CWT/IT (171 ITR 323), which was later approved by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restricted the objects of the Trust to only educational purposes. It is submitted that where the amendment is relevant to the Assessment Year 2007-08, the act of the assessee giving donation as described in para 2 above for other than educational purposes amounts to violation of the objects of the Trust. 2.4. The learned CIT(A) ought to have seen that in order to get deemed university status, the assessee trust had made the changes in the trust deed It is submitted that relying on this amendment only the assessee trust has been notified for claiming exemption u/s. 10(23C)(vi) of the Act It is submitted here that in case. the institution (deemed-to-be-University) fails to comply with the direction(s) of the Central Government/UGC and I or fails to perform as per expectations of the Central Government IUGC the deemed to be University status conferred on the institution can be withdrawn by the Central Government on the recommendations of the UGC. 2.5. The learned CIT(A) ought to have seen that as per the records the objects are only educational in nature and do not include giving donations to religious institutions or political parties. The assessee-trust, at the time of filing Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f exemption is to be evaluated each year in each case, the learned CIT(A) ought to have upheld the findings of the assessing officer that on violation the trust was not eligible for exemption u/s 11 for the relevant assessment year. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) be set aside and that of the assessing officer restored." 3. We have considered the rival submissions and have carefully perused the entire record. In effect, only one issue has been raised in this appeal. The ld. CIT/ DR, Shri P.B.Sekaran, argued that the income of the trust must be applied for or set apart for application as per the provisions of the Income-tax Act, 1961. According to him, donations were made in violation of the objects of the trust. The assessee was asked to furnish the details of donations made during the year. On 27.10.2009, the assessee filed details of investments, addition to fixed assets, donations received during the year, donations paid during the year etc. alongwith a covering letter before the Assessing Officer. On perusal of the details so furnished, in box files, it was noticed that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the head 'Donations and Charities'. The difference has explained as additional donation of Rs. 39,613/- - Charities for Tsunami and donation of Rs.5,00, 000/- received from S. Ramachandra Iyer which has been deducted from the total amount paid as per Annexure A. As per Point No.8 of the letter filed on 27.10.09, the details of donations paid and money spent towards charitable activities were given (Annexure -B), wherein some of the donations listed in Annexure A were clubbed under sundries. Annexure A Name of the Donee Amount(in Rs.) 1 Charities for Tsunami 39,613 2 Sivanand Saraswathi Sevashram, Chennai. 10,000 3 Senthalai Villa Shri Muthumariamman Temple 5,000 4 Shri Tindivanam Ramamurthy 2,00,000 5 Shri Rama Ramanathan 1,00,000 6 Shri Kosi Mani 1,00,000 7 Shri Thangamuthy 2,00,000 8 Shri Ramkumar 50,000 9 Communist Party .. 50,000 10 Shanmugha Desiga Gnana Sambanda Swamiqal Sathabisheka Committee, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,25,00,000 5. Shri R.Sethuraman Chandra Sethuraman Silver Jubilee Trust AAATS2951G 1,25,00,000 No explanation has been offered in respect of the other donations, as called for. In the absence of any satisfactory explanation, it is concluded that the other donations like donations made to political parties, individuals and towards other purposes are not towards any charitable purpose and not in order to carry out the activities in conformity with the objects of the trust. As the trust has carried out activities not enabled by the objects of the trust, the trust is not eligible for exemption u/s 11 and the income is brought to tax in the status of AOP. The assessee has claimed capital expenditure of Rs. 22,00,56,146/- as application of income. The same is not considered as the assessee is being faxed in the status of AOP. The Depreciation of Rs. 10,09,67,711/- though not claimed by the assessee is allowed for the reason that the assessee is being taxed in the status of AOP." 4. At the time of hearing of appeal before the ld. CIT(A) , following written submission, alongwith evidence in respect of claim made therein, were filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r programme at Thanjavur on 23.06.06 and an indoor programme on 25.06.06 to create awareness among the students of various colleges and schools and to make the people understand the existence of Air Force and its purpose. A request from Group Captain Shri R. Nagarajan was made in this regard and SASTRSA was willingly participated in that event by sponsoring hiring of projector and screen for the event. 3. Donation of Rs. 2000/- has been made to Indian People Youth Federation for their conducting a camp against religious, communal and linguistic chauvinism. (C) Staff Welfare Activities Rs. 85,772/- 1. Rs. 60,772/- represents gift items purchased from MMTC for presentation at the time of marriage and other important occasions relating to staff members. The appellant believes in keeping its staff happy. There is no arguing about the fact that the giving of gifts on special occasions (such as marriages etc.) has become a very big part of staff welfare activities because the employees perceive gesture of thanks and as an expression of gratitude to the employees. 2. Rs. 25,000/- Gift made at the time of marriage of the daughter of Shri Guru Charan Singh, former Joint Secretar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervision of the following individuals viz 1. Mr.Thangamuthu Rs. 2,00,000 2. Mr.Ramkumar Rs. 50,000 3. Mr Ramanathan Rs. 1,00,000 (G) Donations given for religious activities :Rs. 80,001/- The appellant has incurred a sum of Rs. 80,001/- towards partial renovation of various temples near the campus and far off places. The expenditure is within the limits of 5% allowed under the Income Tax Act, 1961. 1. Shiva Mandir Trust, Lucknow Rs. 50,001 2. Thanjavur Eswari Nagar Pratyinga Temple Rs. 25,000 3. Muthumariamman Temple Rs. 5,000 (H) Others: Nil A sum of Rs. 5, 00, 000/- represents payments made during the year to the following Temples/Persons/Institutions at the request of the Founder of this Institution and the amount has been remitted by him to the institution in the relevant financial year itself: 1. Guruvayur Temple Rs. 1,00,000 2. Mr.Tindivanam Ramamurthy Rs. 2,00,000 3. Communist Party Rs. 50,000 4. Congress Party Rs. 50,000 5. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndir Trust, Lucknow 50,001 17 Indian People Youth Federation 2,000 18 Sri Vishnu Sahasranama Satsangam 12,500 19 Sri Sri Mahalakshmi Mathrubutheswarar Trust 5,00,000 20 Security Systems installed at Guruvayur Temple 1,00,000 21 MMTC Ltd.(Gift Items) 60,772 22 Delhi Guru Charan Sinqh's Marriaqe 25,000 23 Thanjavur Eswari Naqar Prithyinga Temple 25,000 24 Congress Party 50,000 25 Shri V. Raghava Iyer Foundation 1,25,00,000 26 S. Ramachandra Iyer Rajalakshmi Ramachandra Iyer 1,25,00,000 Sathabisheka Trust 27 Nemmeli Subramaniya Ramachandra Iyer Foundation 1,50,00,000 28 N.R. Subramania Iyer Foundation 1,25,00,000 29 Shri R. Sethuraman Chandra Sethuraman Silver Jubilee Trust 1,25,00,000 Total 6,70,60,886 3. On perusal of the return of income and the annexure A discussed above, it is noticed that the assessee had claimed to have paid donations of Rs. 6,65,60,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 1,25,00,000 26 S. Ramachandra Iyer Rajalakshmi Ramachandra Iyer Sathabisheka Trust 1,25,00,000 27 Nemmeli Subramaniya Ramachandra Iyer Foundation 1,50,00,000 28 N.R. Subramania Iyer Foundation 1,25,00,000 29 Shri R. Sethuraman Chandra Sethuraman Silver Jubilee Trust 1,25,00,000 6. In respect of the following donations, though the donees have exemption u/s 80G, the assessee during the course of these proceedings, could not produce any evidence that I! these particular donations were towards educational activities. The list of such donees is as under: 15 Grama Kovil Poojari's Peravai 2,00,000 18 Sri Vishnu Sahasranama Satsangam 12,500 19 Sri Sri Mahalakshmi Mathrubutheswarar Trust 5,00,000 7. In regard to the following donees, it is noticed that neither exemption u/s 80G is available to these donees nor has the assessee been able to furnish any evidence that the following donations were made for solely educational activities. The assessee vide his written submissions before the CIT(A)-XII in para G has accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not eligible for exemption u/s 11 for the said. Assessment year. The activity should be covered by the ambit of the document i.e., the trust deed as enumerated in Rukmani Kannan Vidyalaya Trust vs CIT (2001) 249 ITR 111(Mad). In light of the above discussions, it is abundantly clear that the assessee trust has made donations in violation of the objects of the trust. The natural follow-up of this would be denial of exemption u/s 11." 6. To the above remand report, the assessee furnished a rejoinder dated 15.6.2010 which reads as under: "Of the total sum of Rs. 6,70,60,886/-, disbursed by the appellant towards 'Charity and Donations' during the year 2006-07 (Asst. Year 2007-08, the Assessing Officer has accepted a sum of Rs. 6,50, 66,000 as donations made in pursuant of the objects of the appellant and the balance of Rs. 19,94,886/- (constituting 0.36% of the total expenditure of the appellant) according to the Assessing Officer are held not in accordance with the objects of the trust (even though the donation made is for charitable purposes) hence exemption u/s 11 of the Incometax Act, 1961 needs to be denied. In this regard, the appellant would like to highlight the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it cannot be considered as not a proper charge to the income and expenditure account of the appellant i.e. one which would not qualify as falling within its 'objects' and once it is so, there cannot be any question of its disallowance and/or considered as not a proper application (of income). Further, income under the Act, has to be considered not in a technical sense, but as a man of business/commerce would understand, so that all expenses that go in the conduct of the business would warrant a deduction, as per the settled law. Thus, there is an error on the part of the Assessing Officer, in construing certain sums as an application of income, so as to merit examination u/s 11 (1)(a), being only an expense incurred in the running of the Trust by its management, and over the affairs of which it has complete charge, and no interference from any quarter can be called for, least of all from the tax authorities. 7. The case relied by the Assessing Officer Rukmani Kannan Vidyalaya Trust vs. CIT (2001) 249 ITR 111 (Mad.) was on the following issues : (a) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the income of the trust fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was thus, a live link between the object of the association and the impugned layout. Therefore, the assessee s claim of deduction was sustainable. (b) It has been held in the case of Shrimad Vallabh Vishwa Dharma Sanstha vs. Addl. CIT 102 TTJ 653, that particularly when genuineness of payments incurred by assessee was not doubted, the Assessing Officer should not make any disallowance. 11. In para 5 of the remand report, the Assessing Officer has stated that the appellant did not provide any evidence for recoveries being effected from the founder trustee Shri S. Ramachandra Iyer of a sum of Rs. 5, 00, 000 in respect of certain donations paid on his behalf and hence the contention of the assessee is uncorroborated. The Assessing Officer in para 3 of her remand report, has stated that the donations paid were Rs. 665,60,886 only. The very fact that the total amount of donations disbursed by the appellant is lower than the donations actually claimed by the appellant (both in her assessment order and in her remand report) clearly proves that there has been a recovery of Rs. 5. 00 lakhs from Shri S. Ramachandra Iyer. In view of the above submissions on facts, the appellant here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion pleaded by the petitioner in the case before us is undoubtedly a patent one, and if it is a patent want of jurisdiction, not only would be rightly exercising our discretion in interfering, but according to the English Courts it would be our duty and our obligation to prevent an authority from assuming jurisdiction which it patently does not possess". 2. Even assuming, but not conceding the contention of the Assessing Officer that the donations mentioned in the assessment order as not covered by the objects of the trust it would by itself disentitle the assessee the exemption u/s 11 as long as the amount spent is for charitable purposes, for Sec. 11 of the Income Tax Act, 1961 states that: "Subject to the provisions of Sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income; (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spend any part of the income of the trust property for a particular purpose, still, if they do spend any part of the income, or accumulate or set it apart for application, for charitable or religious purposes in India, it would be entitled to exemption u/s 11(1)(a) for that year. It may be that the trustees would be acting contrary to the terms of the trust deed, but that may not be a relevant circumstance u/s 11 (1 )(a), since under this provision what is relevant is the application of the income and not the objects. A similar view has been taken by the Andhra Pradesh High Court in the case of Trustees of H.E.H. the Nizam's Pilgrimage Money Trus vs. CWT/IT (171 ITR 323) wherein the Hon'ble Court has held that "If any part of the income of the trust has been applied to charitable or religios purposes in India in the assessment year 1974-75 or is accumulated or is set apart for application to such purposes in India, the income to that extent is entitled to be dealt with under section 11(1)(a) and exemption granted in accordance with the said section. It may be noted that the Hon'ble Supreme Court had upheld the aforesaid order of the Andhra Pradesh High Court, reported in 243 ITR 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spent a small amount towards renovation of various temples falling within the limit of 5% permitted in the Act. Some donations were made during the year to various persons/institutions at the request of the founder of the assesseetrust. Since the money was remitted back by the founder in the same financial year, the assessee-trust has not claimed it as expenditure. It cannot be disputed now that such donations are not permitted by the objects of the Trust and the trustees are given absolute discretion to apply the trust funds to any one or the other specific objects of the Trust. The Assessing Officer, in his remand report, has accepted almost all the donations. 8. In his remand report, the Assessing Officer has not found the application of funds of the Trust to be contrary to the objects of the Trust. Needless to say that the objects of the Trust Deed are binding on the trustees. What is required by the Trust is that the income must be applied or accumulated for application or set apart for application, to achieve the objects of the Trust, as per the provisions of the Income-tax Act, 1961. The application of income is relevant. Even if the objects of the Trust do not empower th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very small amounts related to expenses towards various welfare activities as discussed above. In our opinion, the decision of Hon'ble Supreme Court in the case of Aditanar Educational Institution vs Addl. CIT (224 ITR 310) is not applicable to the facts of the given case because that judgment deals with the provisions of section 10(22) of the Act whereas this case is regarding exemption u/s 11 of the Act. Section 10(22) deals with total exemption from income-tax of a University or other Educational Institutions, existing solely for educational purposes and not for the purpose of profit, whereas the assessee in this case is a normal Public Charitable Trust which is governed by the provisions of section 11 of the Act and its activities are not restricted only to the educational activities but all public charitable activities. It is a well settled proposition of law that minor discrepancies found in any Trust s case have to be ignored. To be more specific, minor discrepancies cannot terminate into denial of benefit of exemption u/s 11 of the Act. In this regard, decisions of J.K. Trust vs CWT, 205 ITR 524 (Cal), and Dy. CIT vs Cosmopolitan Education Society, 244 ITR 494(Raj), are rel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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