TMI Blog2013 (9) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... or institution are continue to remain invested during the previous year in any concern in which such person as referred to in sub-section (3) has a substantial interest. The person referred to in sub-section (3) are the Author of the Trust or founder of the Institution, any person who has made a substantial contribution to the trust or institution where his contribution up to the end of the relevant previous year exceeds ₹ 50,000/-, any trustee of the trust or manager of the institution any relief of such other founder person, Member, Trustee or Manager any concern in which any of the persons referred to hereinabove has a substantial interest - The person who has shareholding in Matrix Laboratories of only 17.09% which cannot be considered as substantial for the purpose of section 13(2)(h) - Therefore, exemption to the assessee under section 11 is granted - Decided in favour of assessee. AO directed to o grant exemption to the assessee under section 11 of the Act. - Decided in favor of assessee. - ITA.No.670/Hyd/2012 - - - Dated:- 28-6-2013 - Shri Chandra Poojari And Shri Saktijit Dey,JJ. For the Appellant : Shri K. Sai Prasad (A.R.) For the Respondent : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing charitable purposes in such shares and proportions and in such manner in all respects as the Trustees shall in their absolute discretion think fit, that is to say :- (i) for the relief of the poor including the establishment maintenance and support of institutions or funds for the relief of any form of poverty; (ii) for the advancement and propagation of education and learning including the establishment, maintenance and support of colleges, schools or other educational institutions, professorship, lectureships, scholarships and prizes particularly for the benefit of the inhabitants of the State of Andhra Pradesh; (iii) for giving medical aid and relief including the establishment, maintenance and support of institutions or funds for medical aid and relief; and (iv) for the advancement of any other object of general public utility. 3. The assessee is also registered as a charitable trust under section 12AA of the Act vide order dated 11.9.2007 with effect from the date of creation of the trust. For the A.Y. under dispute, the assessee trust filed its return of income on 26.3.2008 declaring NIL income after claiming exemption u/s. 11 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es till the end of financial year 2007-2008. The Assessing Officer, further opined that though the assessee trust had surplus cash of ₹ 21,20,00,000/- from 24.1.2007 to 31.3.2007, the same was kept idle and further the trust had derived interest of ₹ 48,87,486/- on fixed deposits from Bank. The Assessing Officer, therefore, completed the assessment by holding that the assessee is not entitled for exemption under section 11 of the Act and brought the amount of ₹ 21,20,00,000/- to tax as capital gains and the interest on which fixed deposit amounting to ₹ 48,87,486/- as Income from other sources. Thus, the total income was determined at ₹ 21,68,87,486/-. The assessee being aggrieved of the assessment order passed for the impugned A.Y. preferred an appeal before the CIT(A). 4. In the course of hearing of the appeal before the CIT(A), it was contended on behalf of the assessee that the trust was created on 28.3.2006. It started receiving funds from 8.1.2007 only and it took some time to formulate the policies and activities to be carried out. The charitable activities commended in full strength from April, 2007. It was further contended that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He further stated that the assessee's contention with regard to revised Form No. 10 and additional ground should not be entertained, as DIT (Exemption) is the only competent authority to condone the delay in filing Form No.10. When the CIT(A), confronted the remand report to the assessee, the assessee submitted that section 119(2)(b) empowers the Board, for avoiding genuine hardship in any case or class of cases, authorise the Income Tax authorities to entertain any application or claim etc., under the Act after the expiry of the time limit in certain cases by making general or special orders. In support of such contention. the assessee relied upon various judicial precedents. The CIT(A) again forwarded a reply to the Assessing Officer seeking his comments. The Assessing Officer finally submitted his comments in letter dated 16.5.2011 stating therein that in assessee's case the addition was made in the absence of Form No.10 enclosed to the return of income. However, since the Director of Income Tax (Exemption) had condoned the delay in filing the same vide order under section 119 (2) (b) dated 8.4.2011, the assessee is eligible for exemption under section 11 of the Act. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the condonation of delay in filing Form No.10 for the revised accumulation of ₹ 12,22,70,585/- is concerned, the CIT(A) observed that the purpose of accumulation stated therein is general in nature and not specific one. He further observed that while accumulation has to be a conscious act, the assessee while mentioning the same in the purpose in Form 10 or resolution has not mentioned anything specific with regard to purpose and has merely mentioned some objects of the trust. He further observed that acquisition of immovable properties being mentioned as one of the purpose is not an object of the trust. On the basis of the aforesaid consideration, the CIT(A) held that the assessee is not entitled for exemption under section 11 of the Act. 6. The learned A.R. apart from making his oral submission has also filed written submission before us. The learned A.R. submitted before us that though the Assessing Officer while denying exemption under section 11 and bringing the entire amount of ₹ 21,68,87,486/- to tax did not specifically mention it in the assessment order, but the fact remains that the reason on the basis of which he denied the exemption, which has been expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exceptions as per which an asset which is prohibited to be held under section 13(1)(d) if is not held for a period of more than one year from the end of previous year in which it is acquired, there is no violation of section 13(1)(d). It was submitted that in the case of the assessee, the asset was disposed of within the previous year itself by investing it in one of the specified mode under section 11(5) of the Act. Hence, there cannot be any violation of provision of section 13(1)(d). In this respect, the learned A.R. relied upon the decision of the I.T.A.T. Delhi Bench in the case of Sera Foundation vs. ITO (Exemption) 55 SOT 303 (Del.). With regard to the CIT(A)'s conclusion that repayment of loan is not an application of income for charitable purpose, the learned A.R. refuted such conclusion by placing reliance on the following decisions. (i) DIT vs. Govindu Naicker 315 ITR 237 (Madras) (ii) DIT vs. Span Foundation 178 Taxman 436 (Del.) (iii) CIT vs. Janmabhoomi Press Trust 242 ITR 703 (Kar.) 7. With regard to CIT(A) observation that the purpose mentioned in revised Form No.10 is general in nature and the condonation of delay by Director of Exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vident from the word used namely 'applied' in section 11(1)(a). If the intention of the legislature was otherwise, nothing prevented the legislature from using the words 'spent' instead of 'applied' in section 11(1)(a). Relying upon the aforesaid ratio of the jurisdictional High Court, it was submitted that the assessee has kept funds in scheduled bank and as early as February 2007, it has decided and formulated a programme to donate ₹ 1 crore for the treatment of children with cardiac problem. This activity carried on in association with Care Hospital and A.P. State Government helped lot of children with cardiac ailment. That besides the delay in filing revised Form No. 10 having been condoned the issue of application of fund towards objects does not arise and cannot be a pre- condition for granting exemption under section 11 of the Act. 8. Learned D.R. submitted that since the settlor of the Trust had taken loans from a company for investment in shares of M/s. Matrix Labs which has been promoted by him, there is clear violation of section 13(2)(h) of the Act. He further submitted that since the assessee has not made investment in specified objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money accumulated or set apart as per sub-section (2). 10. It is a fact that the assessee initially has submitted Form 10 seeking permission for accumulation to the extent of ₹ 48,87,486/-. However, subsequently the assessee had field revised Form 10 along with an application for condonation of delay seeking accumulation of entire amount of ₹ 21,68,87,486/-. The DIT (Exemption) condoned the delay in filing Form No. 10 which in otherwords, means that assessee's application seeking permission of accumulation of income in terms of section 11(2) of the Act was approved by the DIT (Exemption). The Order dated 8.4.2011 of DIT (Exemption) (page 38 of paper book) further reveals the fact that he has passed the said order having been satisfied with the purpose or object for which the income was accumulated or set apart. The Order of the DIT (Exemption) further reveals the fact that it was passed after considering the report of the Assessing Officer. Thus, it is very much clear that not only the DIT (Exemption) but the Assessing Officer himself was satisfied with the object and purpose for which the surplus fund was accumulated or set apart. This being the factual posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the CIT(A) for denying exemption under section 11, are also not applicable to the facts of the case. Section 13(2)(h) of the Act provides that the income or the property of the trust be deemed to have been used or applied for the benefit of a person referred to in sub-section (3), if any funds of the trust or institution are continue to remain invested during the previous year in any concern in which such person as referred to in sub-section (3) has a substantial interest. The person referred to in sub-section (3) are the Author of the Trust or founder of the Institution, any person who has made a substantial contribution to the trust or institution where his contribution up to the end of the relevant previous year exceeds ₹ 50,000/-, any trustee of the trust or manager of the institution any relief of such other founder person, Member, Trustee or Manager any concern in which any of the persons referred to hereinabove has a substantial interest. Though Shri N. Prasad is a person covered under sub-section (3) however, as per the share holding disclosed from the certificate submitted by Shri N. Prasad shareholding in Matrix Laboratories is only 17.09% which cannot be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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