TMI Blog2012 (5) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... that the heavy expenditure in the month of March, 2005 was for purchase of heavy quantity of sweetmeats, namkin, dry fruits, cents, etc., which it had to in view of the inspection of the college on March 10 & 11, 2005 for starting of the classes of the Third Year - Held that: the incurring of the said expenditure for the object/s of the trust is not explained, much less proved. Where is the question of commercial expediency while incurring expenditure in extending common courtesy to the officials on an official visit, and in computing the income of a charitable trust, as the assessee, which itself pleads for the non-application for the provisions of Chapter IV-D of the Act in the computation of its income, an argument with which we have expressed our agreement. The said disallowance is thus upheld. Regarding cash donation - Held that:- a clear contradiction in the findings by the assessing authority and the first appellate authority. - The AO states that the identity has not been established - ld. CIT(A) admitted the assessee's plea - where the identity is not disclosed, the presumption would be that the same flows from the beneficiary of the assessee's activity, i.e., the stude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case." 3. We have heard the parties, and perused the material on record. The disallowance of expenditure on salary was on the premises that the assessee had employed staff in excess of the norms of the Dental Council. The assessee-trust is running a Dental College. In our view, the ld. CIT(A) is right when he says that the same; the norm being again per 100 students, cannot by itself form the basis of the disallowance. The only issue that is relevant is whether the claim for salary represents a genuine claim, i.e., actually paid by the assessee in lieu of the services rendered by the respective doctors for the dental college. The assessee has explained that some doctors had left and in their place other doctors were employed, so that the norms could not be strictly complied with, and which rather by itself shows the exigency of the situation. The argument cannot be faulted with. So however, we find that the assessee has not been able to lead satisfactory evidence with regard to its claim for expenditure, having been called upon to file the full names and addresses as well as proof of filing the return of income by the relevant doctors. If the ratio is high on account of a high ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on telephone/ mobile, disallowed @ 1/5th, the same is only on account of the relevant bills being in the personal name of the trustees, and the assessee being unable to furnish the complete details of the expense. The said disallowance is accordingly upheld. 5. The C.O. for A.Y. 2004-05 is largely supportive in nature, so that the same warrants no independent adjudication, apart from its Ground No. 3, which concerns the confirmation of the disallowance in the sum of Rs. 10,156 u/s. 40A(3) of the Act. While the basis of the AO's stand is the attraction of s. 40A(3), the ld. CIT(A) has not given any specific reason in upholding the AO's action, even as the assessee (refer pages 34 and 35 of the appellate order) specifically argues before him that the said provision is not applicable thereto in view of its income being subject to exemption u/s. 11 of the Act, so that its income would not be subject to computation under Chapter IV-D of the Act. We find much merit in the assessee's clam. The income of the assessee, holding property under trust, is to be computed according to the principles of commercial accounting. How could, one may ask, the income represented by the said disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch, 2005 was for purchase of heavy quantity of sweetmeats, namkin, dry fruits, cents, etc., which it had to in view of the inspection of the college on March 10 11, 2005 for starting of the classes of the Third Year. We are unable to appreciate as to why such huge expenditure had to be incurred? The inspection team would consist of only a few members. It is only the expenditure for their purpose/s, even as clarified by us in respect of the Revenue's appeal for the assessment year 2004-05, whereat such expenditure was disallowed at Rs. 12,000/-, and which stood deleted by us. The staff is in any case supposed to work, and all the facilities would already be in place. Even if some of the staff members were required to work overtime for a couple of days during the inspection period, or even for some time prior thereto, of which though there is no claim, this would not lead to such an exaggerated claim, i.e., the expenditure in that case would be on food, etc. for staff for those days. Under the circumstances, therefore, the incurring of the said expenditure for the object/s of the trust is not explained, much less proved. Where is the question of commercial expediency while incurri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the assessee; the disallowance having been made only in view of the inability of the assessee to establish the same as having been incurred for the purpose of college by the trustee/s. The ld. CIT(A) has not gone into this aspect of the matter, allowing the assessee's appeal on generalized grounds, even as the matter is purely factual. When the assessee itself says before the assessing authority that it is trying to obtain the necessary evidence/s to establish the business purpose of the visit to USA of Sh. Gaurav Gupta, a trustee, how else could the AO, we wonder, in the absence of such relevant materials frame the assessment, which has to be on the basis of the material on record, with the onus to prove its return or the claims preferred thereby being on the assessee. The assessment stands modified by the ld. CIT(A) without either reference to such material/s or by confronting the same to the AO, as required by law. There should in fact be a plethora of evidence in the form of, say, correspondences with the relevant college in New York, which is stated to have been visited by him, as well as the subsequent developments. The expenditure, where properly vouched, and its purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l obligation; As such, a voluntary contribution would qualify to form a part of the income of the recipient trust. The only exception is where such income is directed to form part of the corpus of the trust or institution, as being claimed in the instant case; it in that case, in view of the specific provision of section 11(1)(d) of the Act, which reads as under, being not even liable to be applied for charitable purposes, i.e., for being claimed exempt:- 11. Income from property held for charitable or religious purposes. (1) 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 ) . . ( d ) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution.' 14.2 Apart from the legal position as clarified above, we find a clear contradiction in the findings by the assessing authority and the first appellate authority. The AO states that the identity has not been established. Where, then, is the question of the donations having been received with a direction that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing out of the factual considerations and findings, in accordance with law. We decide accordingly. The ld. AR during hearing would contend that such a course would amount to allowing an opportunity to the Revenue to improve its case. We do not think so. Our foregoing observations emanate only from the respective cases of both the parties before us; we only endeavoring to clarify the legal position that obtains in the matter; particularly considering that the material on record in the matter is sparse. The ld. CIT(A), nevertheless, admitted the assessee's plea of the donations being for the corpus of the trust, which necessarily requires a donor/s and, secondly, of him to have no interest except philanthropy in giving donation to the assessee. The matter having been decided, thus, de hors the relevant material on record and without issuing proper findings, has necessarily to be restored back, delineating the issues arising in their proper perspective. 15. The C.O. of the assessee is supportive in nature and does not require any adjudication by us. 16. In the result, the Revenue's appeals are partly allowed and partly allowed for statistical purposes. The assessee's C.O. f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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