TMI Blog2016 (2) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... towards education, which is a charitable purpose of the assessee. Therefore, the grievance of the department that the ld. CIT(A), holding powers co-terminus with those of the AO, ought to have held the expenditure not to have been incurred for charitable purposes, is found to be devoid of force, particularly in the absence of any material on record to prove the expenditure to be towards any religious purpose. - Decided in favour of assessee - ITA No.136(Asr)/2014 - - - Dated:- 1-1-2016 - SH. A.D. JAIN, JUDICIAL MEMBER For The Appellant :Sh. Tarsem Lal, DR For The Respondent :Sh. K.V.S.R. Krishna, CA ORDER This is the Department s appeal for the assessment year 2003-04, taking the following grounds: 1. That, on the facts and in the circumstances of the case, the ld. CIT(A) has erred in law in condoning the delay in furnishing the appeal without appreciating that the assessee s persuasion of alternative remedies was not a sufficient and bonafide cause of delay in furnishing the appeal. 2. That, on the facts and in the circumstances of the case, the ld. CIT(A) has erred in not appreciating the addition of ₹ 12,40,475/- had been made by the AO on g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A), vide order dated 29.11.2006, dismissed the assessee s appeal against the aforesaid order dated 28.11.2005 passed u/s 154 of the Act. 7. Meanwhile, the assessee had moved another rectification application dated 04.05.2006 before the AO, contending therein, that for the assessment year 2003-04, an addition of ₹ 12,40,475/- had been made for violation of the provisions of section 11(3)(d) of the Act; that the said section had wrongly been interpreted during the assessment proceedings; and that the AO and the assessee s counsel had simply taken that no donation to other Trusts or Institutions could be given and hence, the addition had been made by the AO, whereas the exact legal position was that donations and contributions to other Trusts and Institutions could not be given out of accumulated income. 8. The above rectification application was also rejected by the AO vide order dated 23.05.2006, observing that the issue raised by the assessee was a debatable one and it could not be rectified u/s 154 of the Act. It was also held that there was no mistake apparent from the record. 9. Vide order dated 29.11.2006, the ld. CIT(A) dismissed the assessee s appeal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o consideration that the assessee did not object to the addition of ₹ 12,40,275/- under section 11(3)(d) of the Income tax Act in respect of the donation made by the assessee trust to another trust on a wrong interpretation of the section. The learned D.R. stated that when there is a consented addition made by the A.O., the assessee is debarred from filing the appeal further to the appellate authority. He requested that the impugned order may be cancelled and order of the A.O. may be upheld. 3. On the contrary, the learned counsel for the assessee has controverted the arguments advanced by the learned D.R. and relied upon the order passed by the learned first appellate authority and stated that the learned first appellate authority has rightly condoned the delay in dispute because the assessee remained busy in the assessment proceedings by filing an application under section 154 of the Income tax Act, 1961 before the A.O. He further submitted that the addition of ₹ 12,40,475/- has rightly been deleted by the learned CIT(A). He requested that the appeal filed by the Revenue be dismissed. 4. We have heard both the parties and have perused the relevant records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent cause preventing the filing of an application for revision in time. Reliance is also placed on Saurashtra Cement And Chemical Industries Ltd. vs. CIT , 115 ITR 27 (Guj.), Saurashtra Cement and Chemical Industries Ltd. vs. CIT , 168 ITR 231 (Guj.) and Delhi Cloth General Mills Co. Ltd. vs. CIT , 165 ITR 599 (P H). 20. I have heard the parties and have perused the material on record with regard to this issue. The issue is as to whether the ld. CIT(A) was justified in condoning the delay of almost seventeen months in filing the appeal where the assessee was pursing applications filed u/s 154 of the Act, by way of unsuccessful alternate remedy. In Nicco Corporation Ltd. (supra), as rightly considered by the ld. CIT(A), it was held that the delay should be condoned in a case where the litigant has proceeded with a proceeding, bona fide unsuccessfully and the time taken for the unsuccessful completion of this proceeding should be excluded. The ld. CIT(A) followed Saurashtra Cement and Chemicals Industries Ltd. vs. CIT 115 ITR 27 (Guj.). The decisions in Saurashtra Cement and Chemicals Industries Ltd. vs. CIT , 168 ITR 231 (Guj.) and Delhi Cloth General Mills Co. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred expenses of ₹ 17,31,291/- and out of these expenses, expenses to the extent of ₹ 12,40,475/- stood incurred on Community Centers which were run by the assessee itself, but were under the control of other charitable trusts. The AO observed that while incurring these expenses, the assessee had violated the provisions of section 11(3)(d) of the Act. It was observed that the assessee had itself given its no objection to the disallowance of these expenses of ₹ 12,40,475/-. The AO treated these expenses of ₹ 12,40,475/- as deemed income of the assessee as per the provisions of section 11(3)(d) of the Act. The ld. CIT(A) deleted this addition. 25. The ld. DR has contended that the ld. CIT(A) has erred in deleting the addition rightly made by the AO and for doing so, the ld. CIT(A) has gone wrong in following the order dated 30.01.2009 of his predecessor. It has been submitted that the ld. CIT(A) has also erred in holding that section 11(3)(d) of the Act has no application; that the ld. CIT(A) has further gone wrong in placing reliance on the fact that similar expenditure, as the one under consideration, was allowed by the AO in many subsequent years while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the assessee has further contended that since similar expenditure was allowed by the AO in many subsequent years under scrutiny assessment, under similar facts and circumstances, which facts have not been demonstrated to be dis-similar from those present for the assessment year under consideration, the ld. CIT(A) cannot be said to have committed any error in taking those scrutiny assessment orders for subsequent years into consideration. 28. Besides, it has also been urged that the argument of the department that the expenditure was of a religious nature and that therefore, it cannot be said that it was charitable, does not arise from the impugned order; that the AO has himself stated in the assessment order that the amount was given to another charitable trust; that therefore, there is no dispute regarding the expenditure being religious in nature; that the AO accepted the assessee s application of income; that the only dispute is regarding the applicability or otherwise of the provisions of section 11(3)(d) of the Act; and that under section 11(3)(d), which was introduced w.e.f. assessment year 2003-04, the accumulation is not allowed for being given to any other chari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection, which is not applied, but is accumulated or set apart, to any trust or institution registered u/s 12AA or to any fund or Institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter. Section 11(3)(d) read as under: (3) Any income referred to in sub-section (2) which- (a) (b) .. (c) .. (d) is credited or paid to any trust or institution registered u/s 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) { or sub-clause (via) of clause (23C) of section 10, shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or credited or paid or, as the case may be, of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 11(3)(d), which deems payments made to other trusts etc. as deemed income of the assessee, applies to income accumulated u/s 11(2), and would, therefore, not be applicable in respect of the current year s payment to another religious institution. In para 21 of the Circular no. 8 dated 27.08.2002, the CBDT has explained the implication of insertion of section 11(3)(d) and the Explanation inserted below section 11(2) of the Act. This is extracted as under: 1. Restriction on the application of accumulated income of the charitable or religious trusts 2.1. Through Finance Act, 2002, an Explanation has been inserted below sub-section (2) of section 11 so as to provide that any amount paid or credited out of income from property held under trust referred to in clause(a) or clause (b) of subsection (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered u/s 12AA or to any fund or institution referred to in sub-clause (iv) or sub-clause (for sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, either during the period of accumulation or thereafter, shall not be treate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome . However, as discussed, it remains unchallenged that the present assessee did not have any accumulated income and the payment was made out of the income of the current year. 33. Further, the ld. CIT(A) also took note of the fact that neither in the show cause notice, nor in the assessment order was any mention made of the provisions of section 11(2) of the Act, before invoking the provisions of section 11(3)(d). Therefore, obviously, the AO wrongly invoked the provisions of section 11(3)(d) without bringing on record anything with regard to the provisions of section 11(2) of the Act. In this regard, the Ground taken by the department states that the powers of the ld. CIT(A) being co-terminus with those of the AO, the erroneous invocation of the provisions of section 11(3)(d) of the AO ought to have been rectified by the ld. CIT(A), holding that the expenditure was not incurred for charitable purposes. 34. Now, firstly, if at all, this question ought to have been raised by the AO before the ld. CIT(A) in the first place itself. However, as available from Item no.10 at page 1 of the impugned order, none was present for the department in the proceedings before the ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available to the department at this stage. 36. Now, coming to the issue per se, i.e., as to whether the payment is towards religious purposes and not charitable purposes, it is to reiterate that it has not been disputed that the payment was for the purpose of the education of the Fathers, who serve in various schools run by the assessee, as teachers, supervisors and principals, etc. Before the AO, it was because of the wrong admission of the assessee that the addition was made. The two rectification applications filed by the assessee before the AO met with a negative fate qua the assessee, i.e., they were rejected. However, the fact remains that it has not been shown that the payment in question was not towards the education of the Fathers serving in the schools of the assessee. As such, the narration in the table contained at pages 14-15 of the impugned order does not make the payment to be for a religious purpose and not for a charitable one. This narration, by itself, is not determinative of the nature of the expense, particularly when education of the Fathers has not been shown not to be towards education, which is a charitable purpose of the assessee 37. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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