TMI Blog2014 (7) TMI 990X X X X Extracts X X X X X X X X Extracts X X X X ..... y one charitable trust to another for utilisation by the donee trust towards its charitable objects is proper application of income for charitable purposes in the hands of the done trust and the donor trust will not lose exemption u/s 11 of the Act - Following the decision in ASSTT DIRECTOR OF INCOME TAX Versus STERLITE FOUNDATION (FORMERLY KNOWN AS VEDANTA FOUNDATION) [2013 (12) TMI 1056 - ITAT MUMBAI] - the charitable trust will not lose its exemption u/s 11, if it passes some money to another charitable trust, for utilisation by the donee trust towards its charitable purposes – thus, the order of the CIT(A) is set aside – Decided in favour of Assessee. - ITA No. 1786/Mum./2014 - - - Dated:- 9-5-2014 - Shri N. K. Billaiya And Shri Sanjay Garg,JJ. For the Petitioner : Ms. Soumitra Choudhry For the Respondent : Mrs. A. C. Tejpal ORDER Per N. K. Billaiya, A. M. The present appeal is preferred by the assessee challenging the impugned order dated 24th January 2014, passed by the learned Commissioner (Appeals)-I, Mumbai, for the assessment year 2010-11. 2. Ground no.1, being general in nature, hence, no separate adjudication is required. 3. Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 772 towards the vocational training centre being the amount incurred for activities under section 35AC, for which the assessee has identified as per the notification issued by the Government of India. The Assessing Officer further observed that the funds utilised by the assessee for sponsored project under section 35AC is out of revenue account and not out of section 35AC account created by the assessee specifically for the notified project under section 35AC. The assessee was show caused to explain why this should not be viewed adversely and deny the benefit of section 11. The assessee filed a detail reply substantiating its claim. The reply of the assessee is incorporated in the body of the assessment order. The reply of the assessee was considered but was not found tenable by the Assessing Officer. The Assessing Officer was of the opinion that the assessee has incurred ₹ 8,75,58,615 on the objects of the trust inclusive of ₹ 6,53,68,821, being expenditure incurred for section 35AC project. The Assessing Officer was of the firm believe that ₹ 2,21,89,794, is utilised by the assessee for the purpose other than section 35AC which is inclusive of charity and donati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... least 75% of income is applied for charitable or religious purpose in India during the year and the remaining amount is invested in the forms or modes specified u/s 13(5). Thus, both the requirements will have to be fulfilled before the trust can claim and avail of the exemption u/s 11(1)(a) . Since the requirements u/s 11(1)(a) read with other provisions of section 11 and 13 are to be satisfied cumulatively for claiming exemption, which have not been done / satisfied by the appellant, as discussed above, therefore, appellant is not entitled for exemption u/s 11 of the I.T. Act for the reasons discussed as above. Accordingly, ground nos.1, 2, 3, 4, 5, 6, 7 are dismissed. 6. Insofar as the disallowance of ₹ 22,78,212 on account of donation is concerned, the assessee claimed before the learned Commissioner (Appeals) that the Act provides that the amount incurred by a trust, whether capital or revenue in nature, is an application of fund. The assessee relied upon the decision of the Hon ble Kerala High Court in CIT v/s St. George Forana Church, [1988] 170 ITR 62 (Ker.). However, the learned Commissioner (Appeals) was of the firm belief that the capital expenditure is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res is a corpus donation, which is not the case as per law and facts in the context of the particular transaction. The approval u/s 35AC continuing with the appellant is an entitlement for only receiving such payments with a benefit of 00% deduction to the person making such payment but the computation of such receipts, its maintenance and utilization in terms of section 11, 12 13 of the I.T. Act is a mandatory legal requirement for availing exemption from taxation under the very same provisions. Therefore, arguments relating to provisions of section 35AC or the approval notification for claiming exemption are not relevant to the extent they are inconsistent or lacking in required compliances with / or section 11, 12 13 of the I.T. Act or to the extent not specifically provided for consideration under these provisions. Thus, there is no sustainable and relevant submission and argument which has been forwarded by the appellant in the reply to the notice of enhancement which could be considered for this purpose. The learned Commissioner (Appeals) finally concluded as under:- 7.8 In view of above discussion and for the reasons therein, the income of the appellant for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e have heard both the sides on this issue and perused the material on record. It is observed that the copies of the past assessment orders available at page no 82 to 98 of the paper book reveal that the assessee has been treated as a public charitable trust in the earlier years. Given the same set of facts, we do not find any reason or basis for arriving at a conclusion that the assessee is engaged in the business of setting up and running of vocational training so as to presume that the assessee as a business entity in the year under consideration. It is also found that the assessee has not diverted any specified funds of 35AC projects towards non specified projects whereas the aseesee has spent corpus donation for 35AC projects and the same cannot be the basis for denying the benefits of exemption as the later is not prohibited by the provisions of the Act. In view of that matter, we do not find any justifiable reason to interfere with the decision of the Ld.CIT(A) on this count and accordingly Ground No. 1 is dismissed. 11. Since the issue arising out of ground no.2, 3 and 4 was considered by the Tribunal in an appeal preferred by the Revenue cited supra, wherein the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition on account of similar issue. In that year, the addition was of ₹ 85,15,239 which was considered by the learned Commissioner (Appeals) vide ground no.10 and 11 before him and at Para-7 of his order, the learned Commissioner (Appeals) followed the decision of the Kerala High Court in St. George Forana Church (supra) and held that construction of school / college building is allowable as application of income towards the object of the trust and even capital expenditure is allowable in the hands of the trust for the object of the trust. We also find that the Revenue has accepted this finding of the learned Commissioner (Appeals) as it has not challenged this finding before the Tribunal in ITA no.6641/Mum./2011. Since the Revenue itself has accepted the finding of the learned Commissioner (Appeals) in earlier assessment year, we do not find any reason to deviate from the findings of earlier assessment year and, accordingly, set aside the impugned order passed by the learned Commissioner (Appeals) and delete the addition of ₹ 80,34,375. Ground no.6 is thus allowed. 17. Ground no.7 relates to enhancement on account of capital expenditure. 18. Since we have held e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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