9911796707
TMI Blog2014 (8) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) erred in upholding the validity of the proceedings and the order of assessment u/s. 147 of the Act even though the conditions precedent for valid initiation of re-assessment proceedings were not fulfilled. 2) For that on the facts and in the circumstances of the case, the order of the assessment u/s. 147/143(3) deserves to be quashed as the proceeding u/s 147 were ab initio void because no income chargeable to tax had escaped assessment. 3. At the outset, Ld. counsel for the assessee Shri D. S. Damle fairly stated that he has instructions from the assessee trust not to press these grounds in all these three years. Ld. Sr. DR has not objected to the withdrawal of these grounds. Hence, we dismiss the same as withdrawn. 4. The second issue, on merits, against the order of CIT(A) confirming the action of AO is as regards to denying the exemption u/s. 11 of the Act even though the assessee is a charitable trust and fulfilled all the conditions for claiming exemptions under this section. This issue was raised by the assessee in all the three years and the grounds raised are identically worded. Hence, we are reproducing the grounds as raised in ITA No. 1540/K/2013 for AY 2007-08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Ven. Bokar Tulku Rinpoche, who is described in the declaration of deed of trust to be the settlor. Ld. counsel for the assessee drew our attention to Part III of the declaration of this trust deed, wherein the objects of the trust are set out. The copy of this trust deed is enclosed in assessee's paper book pages 1 to 9. Object clauses of the trust deed clearly reveal that the object for which the trust was established is charitable in nature. Assessee drawn our attention to page 10 of assessee's paper book whereby the registration certificate issued by CIT, WB-1, vide no. Assmt./3563/CT/8E/21/88-89 dated 17/23.1.90 u/s./ 12A of the Act is enclosed. According to Ld. counsel for the assessee, this registration granted u/s. 12A of the Act is valid as on the date and still in force. Ld. Sr. DR has not objected to the same. Ld. counsel for the assessee brought to our notice that despite these three assessment orders passed by AO, the department has not withdrawn or revoked the registration granted u/s. 12A of the Act to the assessee trust. According to Ld. counsel, the AO himself allowed the exemption u/s. 11 of the Act on being satisfied that the assessee trust has applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve also perused the remand reports submitted by the Ld AO. On perusal it is found that the assessee on its own applied vide letter dated 19.05.2006 for issuance of NOC from the Pradhan of the Damdim Gram Panchayat for construction of Buddha Temple at Chakla Busty. The details of land to be taken under construction along with the proposed Buddha Temple were enclosed with the application dated 19.04.2006 of the assessee which was received by the Damdim Gram Panchayat on 22.05.2006. The Pradhan of the Damdim Gram Panchayat issued accordingly NOC dated 27.05.2006 for construction of Buddha temple. This NOC dated 27.05.2006 of the Damdim Gram Panchayat refers to establishment of beautiful temple subject to supervision of authorized engineering agency. Subsequently, another NOC dated 27.07.2006 was issued by the members of the Damdim Gram Panchayat, Damdim to the assessee for construction of Buddha Temple at Chakla Busty. In both the NOCs the Damdim Gram Panchayat wished successful completion of the temples early as possible. These documents clearly reveal the fact of construction of Buddha Temple by the assessee at Chakla Busty. However, perusal of the audited accounts for the FY 2006-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these NOCs have caused objection from certain Government Departments and therefore, a fresh NOC may be issued as per the application dated 28.05.2006. The Pradhan of the Damdim Gram Panchayat issued NOC dated 21.02.2012 on the basis of the application dated 21..02.2012 for construction of Obar Chhimeyling Institute for Higher Buddhist Studies and Research in supersession of the earlier NOCs dated 27.05.2006 and 27.07.2006. Interestingly this NOC does not refer to any application dated 28.05.2006 made by the assessee to the Damdim Gram Panchayat. It is crystal clear that the assessee has obtained NOC dated 21.02.2012 subsequent to passing of assessment order dated 27.12.2011. It is not clear why the assessee did not raise the issue that it had submitted application dated 28.05.2006 to the Damdim Gram Panchayat for some NOC for construction of Obar Chhimeyling Institute for Higher Buddhist Studies and Research. This evidence submitted by the assessee in course of appellate proceedings which was not in existence till the finalization of assessment has been collected by the assessee in the post assessment stage obviously emphasize that the building under construction was meant for Oba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstructed was to be used for the purpose of temple or educational institution. When the services of the Chartered Engineer were commissioned by the assessee, the Chartered Engineer was bound to value different parts of the building as per the description provided by the assessee. If a certain part of the building was referred to classroom or hostel by the assessee in course of valuation, naturally the Chartered Engineer gave the same description as provided to him. Therefore the report of the Chartered Engineer for valuation of completed construction of building cannot be considered as reliable and acceptable evidence of construction of building for educational institution. In course of appellate proceedings the assessee did not produce any documentary evidence which could have convincingly proved the construction of building for establishment of Obar Chhimeyling Institute for Higher Buddhist Studies and Research. The assessee did not provide any information relating to the Institute e.g. a) Whether the Institute is registered/proposed to the registered with any Government agency or affiliated/proposed to be affiliated with any national/international University/Association/Insti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ualify for exemption. Similarly, where there are several objects of a trust, some of which are charitable and some non-charitable and the trustees are permitted to apply its income to any of the objects in their discretion, exemption u/s 11 of the IT Act, 1961 will not be available. In the following cases where there were charitable and non charitable objects and trustees can apply income to any of these objects it was held that the trusts were not eligible for exemption u/s 11 of the Act: Daulat Ram Public Trust vs. CIT (Del 244 ITR 514 Yogiraj Charity Trust v. CIT (SC) 103 ITR 777 Further as stated by the Ld AO in his remand report dated 16.10.2012 it is true that the Trustees have to utilize the funds as per the objects in the Deed of Trust. The terms of the constitution are binding on the trustees or the members of an association. Any departure either by the trustees or the members from the rules would be a breach of trust. Thus, the income from the property held under Trust applied not on objects of the trust will not be eligible for any exemption under the provisions of section 11 of the Act. In the cases of Saurashtra Education Foundation vs. CIT (Guj) 273 ITR 139 and Bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, a no objection certificate issued by Damdin Gram Panchayat dated 27.05.2006. Admittedly, in both the documents reference was for construction of a temple for Buddhist learning. But as per valuation report submitted by a Chartered Engineer Shri S. K. Sikder, which forms part of assessee's paper book pages 112 to 115 by which the valuer has estimated the cost of four storied institute building then under construction at Chakla Basti, area constructed in three Financial Years was as under: (i) F.Y 2006-07 12,694 Sft. (ii) F.Y 2007-08 44,391 Sft (iii) FY 2008-09 42,129 Sft. 8. Admittedly, construction of the building was started after May, 2006, which housed an institution of higher Buddhist studies including a temple. The revenue's entire base for disallowing the exemption u/s. 11 of the Act was only on one fact that the building constructed was a temple. The said finding was recorded on the basis that the nature of building could not have been any different from the one described in the initial application. This building got constructed partially till February, 2009 and was being used as institute for Buddha studies. The building was designed and constructed in such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted by Damdin Gram Panchayat but not considered another application made by assessee before the authorities in February, 212 and the relevant NOC issued by Damdin Gram Panchayat letter dated 21.12.2012 for construction of institute building. The AO's comment in the remand report called for by CIT(A) reads as under: "As the appellant has submitted a revised NOC dated 21.02.2012 from the Pradhan of the Damdim Gram Panchayat in supersession of the earlier NOC dated 27.05.2006. The revised NOC appears to have been given for the Institute for Higher Buddhist Studies & Research. Therefore, at this juncture, it is not possible for the undersigned to state specifically which NOC is relevant for the assessment years involved in Appeal No. 139, 138 & 137/CIT(A)/Slg/2011-12 as the jurisdictional decision lies with the Ld. CIT(A), Siliguri in the matter." 9. It is also a fact that the AO made detailed enquiries and conducted hearings on several dates and made detailed noting in the order sheet entries. One more fact brought to our notice by the assessee that in AY 2010-11 and 2011-12, the AO allowed the claim for exemption on being satisfied that the assessee trust applied its incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purposes' shows that the income from trust property would be exempt only if the objects of the trust are of charitable or religious purpose. Where the trust is partly religious and partly charitable, so long as no part of the income or corpus can be utilised for a purpose which is not either charitable or religious there is no doubt that the exemption u/s. 11 of the Act will be available to the assessee trust. Hon'ble High Court has elaborated the issue as under: "According to Mr. Justice Marten, these purposes were all charitable and, at the end of page 1102, he observed : "Assuming, however, for the sake of argument that the items of Dawat expenditure put forward for the defendants are correct, the question still remains whether they are not all charitable. In my opinion they are charitable. The funds are held by a religious head for the benefit of the community as a whole. The particular applications of this fund as shown in those items are to my mind consistent with the central object of the fund. The selection of individual objects of relief does not necessarily negative a charity. He pointed out that the purposes in the case before him, as also in the case before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the apparently wide discretion has to be exercised within the four corners of the wakf and for Dawat purposes. What are Dawat purposes, have been described by Marten J., at page 1102, in Advocate-General of Bombay v. Yusufally (1) and, in our opinion, it is only within the four corners of Dawat purposes as recognised by the Dawoodi Bohra community that the Mullaji Saheb can use the corpus or the income of this fund. Under these circumstances, in our opinion, the Tribunal was right in coming to the conclusion that the assessee is entitled to exemption under section 11(1)(a) of the Act. We, therefore, answer the question referred to us as follows: "On the facts and in the circumstances of the case, the trusts are entitled to exemption under section 11(1)(a) of the Income-tax Act, 1961. " We, accordingly, answer the question in favour of the assessee. The Commissioner will pay the costs of this reference to the assessee." 11. Another case law cited by Ld. counsel for the assessee of Hon'ble Bombay High Court in the case of CIT Vs. Rajneesh Foundation (2006) 280 ITR 553(Bom), wherein Hon'ble Bombay High Court has considered the case law of Hon'ble Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a community would normally be a purpose beneficial to the community and the purpose set out in the first part of sub-clause (5) of clause 3 must be held to be within the statutory definition. Turning to the second part of sub-clause (5) of clause 3, the purpose there set out is to do all acts which bring about complete development of all aspects of life of the male and female members of the community. It is difficult to see how, having regard to modern concepts and ideas, complete development of all aspects of life of each member of the community can be regarded as anything other than an object of general public utility. It is axiomatic to say that a complete integrated development of every member of the community would certainly be beneficial to the community. The community is after all nothing but a conglomeration of the members and a purpose which is calculated to bring about complete development of all aspects of life of every member of the community would certainly be of immense benefit to the community. . . ." With these observations, Gujarat High Court upheld the decision of the Appellate Tribunal granting exemption to the Trust under section 11(1)(a). The Appeal against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. It would indeed be difficult for persons in charge of a trust or institution to so carry on the activity that the expenditure balances the income and there is no resulting profit. That would not only be difficult of practical realisation but would also reflect unsound principle of management. We, therefore, agree with Beg., J. when he said in Sole Trustee, Loka Sikhsana Trust's case [1975] 101 ITR 234, 256 (SC) that : 'If the profits must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust. The test now is, more clearly than in the past, the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on charity.' The learned judge also added that the restrictive condition 'that the purpose should not involve the carrying on of any activity for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act includes the words advancement of any other object of general public utility and admittedly in the present case the objects claims the activities of the trust are for the advancement of objects like the teachings of Buddha to spread and for that purpose the assessee has claimed application of income towards construction of study and research centre for higher Buddhist study including construction of Buddhist temple. Since inception the assessee trust is pursuing the activities connected or associated with preaching, spreading and disseminating the ideas, ideals and the teachings of Lord Buddha. Considering the need for spreading the ideas and teachings of Lord Buddha to the persons of every walk of life and institution for higher Buddhist learning was set up. In the eyes of the ordinary folks, the places where the Buddhist discourses are held are regarded as to be religious places. Side by side, the assessee trust also constructed a small temple and in percentage terms the temple area comprised in the building constructed was barely 3.05% of the total area. It is also a temple and assessee trust is performing religious functions and it is established for charitable purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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