TMI Blog2018 (10) TMI 1221X X X X Extracts X X X X X X X X Extracts X X X X ..... tory of the assessee-society, in the light of Order of the Tribunal for A.Y. 2007-2008 dated 24.09.2014 (supra), we do not find any justification to interfere with the Order of the Ld. CIT(A) in granting exemption under section 11 of the I.T. Act. The Order of the CIT(A) is confirmed and Departmental Appeal stands dismissed. Denying exemption for investments in properties - Held that:- The findings of the Ld. CIT(A) that Section 11(3) is applicable is also not correct because income accumulated under section 11(2) was applied for educational purposes. Considering the totality of the facts and circumstances of the case noted above in the light of finding of fact recorded by the Ld. CIT(A) and Tribunal in A.Y. 2007-2008, it is clear that no addition could be made against the assessee-society of such nature. The order of the Ld. CIT(A), therefore, cannot be sustained in law for enhancing the income of assessee-society of ₹ 6,77,16,875/- and that too by invoking Section 11(1B) and Section 11(3) of the I.T. Act, which are not applicable to the case of the assesseesociety. The decisions relied upon by the Ld. D.R. are not applicable to the facts of the case. In view of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008-09 under appeal was rejected by the CCIT, Panchkula vide order dated 07.10.2008 and the said order was affirmed by the Hon ble Punjab and Haryana High Court. It was further observed that the assessee-society made investment of ₹ 8,90,85,122/- in purchase of land and farm houses during the year out of the sale proceeds of land sold in A.Y.2007-08, which were not used for the purpose of education. The AO issued show cause notice giving reference to the substantial profits generated year after year, rejection of approval under section 10(23C)(vi) and investment in purchase of farm houses and land not used for the purpose of education. After considering the reply of the assessee-society on these issues, the AO had denied the benefit of exemption u/s 11(1) and computed income under chapter-IVD of the I.T. Act, by treating the surplus of ₹ 22,63,331/- and ₹ 88,46,999/-, from assessee-society and CCA, respectively, aggregating to ₹ 1,11,10,330/- as income mainly on the ground that the assessee-society was not engaged in providing education but for earning profits only. 3.1. The assessee-society aggrieved against these findings, challenged the assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven if finding of the A.O. are correct, then also the difference between 85% and the percentage treated as applied alone can be charged to tax. The decision relied upon by A.O. is not applicable. The decision of Uttarakhand High Court in the case of Queens Educational Society and St. Paul s Senior Secondary School, relied upon by the A.O. is contrary to the Judgment of the Hon ble Supreme Court in the case of Aditanar Educational Institution vs. Addl. CIT (1997) 224 ITR 310 (SC). Moreover, these decisions have been rendered in the context of Section 10(23C), while assessee-society has been claiming exemption under section 11 of the I.T. Act, 1961. Therefore, there is no requirement that the Trust should exist solely for education and not to earn profit. The finding of the A.O. are incorrect that no concession education have been given to the weaker sections, the details of the same are filed. The assessee-society explained all the issues which were asked for by the Ld. CIT(A) along with details of all capital investments made on the land purchased from the consideration received from sale of Dhorka Land along with evidences for the same. Generator set and digging a tube well at S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety has been established or are intended to be put to use for the same. The assessee-society, therefore, satisfies the condition of Section-11(1A) which requires capital gains to be reinvested in another capital asset to avoid tax on capital gains. The exemption under section 11(1A) for capital gains for a charitable Trust has been upheld in the case of CIT vs Aurobindo Memorial Fund Society (2001) 247 ITR 93 (Mad) and Director of Income Tax (Exemptions) vs DLF Qutab Enclave Complex Medical Charitable Trust (2001) 248 ITR 41 (Del.). It is, therefore, clear that reinvestment in capital assets is the only condition which is required to be fulfilled to qualify for deemed application of income from capital gains under section 11(1 A) of the I.T. Act, 1961. The investment in land is a prescribed and approved mode of investment for Trusts as per Section 11(5) and cannot be faulted on this ground. 3.2. As for invoking the provisions of section 11(1B), it was submitted that since the assessee-society has not exercised the option under clause 2 of the Explanation to sub section (1) of section 11, the question of invoking Section 11(IB) does not arise. In fact, the assessee-society has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the land held at Dhorka was accepted for the educational purpose as per the records with the Revenue Department. The Ld. CIT(A) also noted that assessee-society has filed list of students to whom concessional treatment have been given by offering scholarships. Therefore, finding of the A.O. is contrary to facts. The Ld. CIT(A) also noted that assessee-society is entitled for depreciation as per law and assessee-society has incurred 85.63% for the purpose of charitable activity. Therefore, the claim of assessee-society for depreciation was found allowable, which was allowed. The Ld. CIT(A), accordingly, granted benefit of Section 11(1) of the I.T. Act and deleted the addition of ₹ 1,11,10,330/-. 3.4. The Ld. CIT(A), thereafter, considered the lands purchased by assessee-society and noted that sale consideration of land was not utilised in purchase of any asset during the previous year relevant to A.Y. 2007-2008 and the deduction under section 11(1A)(a) for capital gain was not allowable. The assessee-society, therefore, set apartaccumulated sale consideration to the extent of ₹ 7,22,67,210/- in A.Y. 2007-2008 and made investment of ₹ 8,71,42,582/- in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , A.O. rightly denied exemption under section 11 of the I.T. Act. He has submitted that assessee-society will not get benefit of Section 11(1A) because it has incurred less than 85% of the total income for the purpose of charitable activities. 6. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that issue is identical as have been considered in preceding A.Y. 2007-2008 in which the Ld. CIT(A) allowed the claim of assessee-society and Departmental Appeal have been dismissed by ITAT, Delhi, H-Bench, in ITA.No.1742/Del./2012 and ITA.No.1880/Del./2012, Dated 24.09.2014 whereby the departmental appeal have been dismissed. He has submitted that ground of appeal raised in A.Y. 2007-2008 was identical as have been raised in assessment year under appeal i.e., 2008-2009. He has submitted that assessee-society made a claim of exemption under section 11 of the I.T. Act and not under section 10(23C)(vi) of the I.T. Act. A.O. followed the Order for A.Y. 2007-2008 for the purpose of denying exemption under section 11 of the I.T. Act. PB-186 is Order of Ld. CIT(A) dated 18.01.2012 for A.Y. 2007-2008. PB-186 to PB-227 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Society vs. CIT (supra). The A.O. after making his own calculation and denying depreciation to assessee-society noted that assessee has applied only 76.53% of the total receipts. However, assessee-society explained that if depreciation is included, it would be more than 85% receipts applied by the assesseesociety for charitable purposes. The claim of assessee-society is supported by the decision of Hon ble Supreme Court in the case of CIT vs. Rajasthan and Gujarati Charitable Foundation Poona (supra). The A.O. relied upon his own order for A.Y. 2007-2008 for denying exemption to assessee-society which have been set aside by the Ld. CIT(A) and the Tribunal has dismissed the departmental appeal on identical facts. The Tribunal in para-5.2 of the Order dated 24.09.2014 held - We find no infirmity in these findings of the Ld. CIT(A). The assessee is definitely entitled to claim deduction under section 11 of the I.T. Act as registration under section 12AA is in force. It is not in dispute that the registration under section 12AA is still continue in favour of the assessee-society. No distinguishable facts have been brought on record to say that facts in A.Y. 2007-2008 are different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the year under appeal and thus, such investment is hit by Section 11(1B) and alternatively by Section 11(3) of the I.T. Act. The assessee-society was holding land at village-Dhorka from the year 2001 and 2003 for charitable/ educational purposes. The said land was sold in A.Y. 2007-2008 for ₹ 9,11,97,187/- and its cost was ₹ 67,18,729/- and there was thus, profit/income of ₹ 8,44,78,187/- on its sale in A.Y. 2007-2008. Such profit was accumulated to the extent of ₹ 7,22,67,210/- under section 11(2) for the purpose of purchasing land within vicinity of Gurgaon which is suitable for Educational/Vocational Institute after obtaining necessary CLU. Such accumulation for charitable purposes was accepted by Ld. CIT(A) in A.Y. 2007-2008 which have been affirmed by the Tribunal. PB-146 is copy of Form-10 applied to the A.O. of accumulated amount in the year under consideration. Further investments have been made in the properties. PB-147 is resolution of the assessee-society in which it was noted that the land of the assessee-society is likely to be acquired for industrial zone, therefore, it has to be disposed-off to purchase another property for educational purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o other object for which the trust is utilized then property of the trust so held and thereafter so transferred can only income/capital gains which has to be considered within the provisions of ss. 11(1) and 11(1 A) only. There was no material on record to show that the land sold by assessee trust was used for non-charitable assessee cannot be denied exemption of the capita! gains in accordance with provisions of s. 11(1A) . 11. The Ld. CIT(A), alternatively, applied Section 11(3) which will come into operation after five years on completion of five years of accumulation of income. So, no tax can be levied in assessment year under appeal. In fact, Section 11(3) is also not applicable in this case which is applicable if income accumulated under section 11(2) is applied to purposes other than charitable or ceased to be accumulated for application. In this case, income accumulated under section 11(2) amounting to ₹ 7,22,67,210/- has been applied for purchasing Sadhrana, Gopalpura and Lohari properties. The short fall in the application to the tune of ₹ 2,10,842/- at best could be treated as un-complied. Moreover, five years period for accumulation to last was not yet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uture pursuant to the resolution dated 31.10.2007 wherein it was resolved that money received after sale of the above property may be re-invested for purchase of land in Gurgaon for Educational/Vocational purposes. The assessee-society, out of the sale consideration, made investment in immovable properties at Sadhrana, Aravalli, Gopalpura and Lohari. It is not in dispute that land at Village-Dhokra held for educational purposes which is also evident from the orders passed under section 10(23C)(vi) by CCIT for A.Ys. 2002-2003 to 2004-2005 and for A.Y. 2005-2006. The Ld. CCIT would not have granted approval under this provision if such land had not been meant for educational purposes. Similarly, the assessment order for A.Y. 2006-2007 was passed under section 143(3)/148, but, proceedings under section 148 have been dropped vide Order dated 16.12.2010 by verifying that assessee-society is registered under section 12A of the I.T. Act. Similarly, assessment order for A.Y. 2007-2008 was passed under section 143(3) which was appealed before Ld. CIT(A) who has granted benefit under sections 11 and 12 of the I.T. Act to the assessee-society. The order of Ld. CIT(A) have been upheld by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment, which include investment in immovable property. It does not provide that such immovable property must be meant for any specific purpose. Therefore, there is nothing wrong in explanation of assessee-society in purchasing the properties. In the case of Shri Surat Panjarapole Trust vs. ACIT (supra), it was held that non-use of the land or passiveness of land is not equal to its holding the land for non-charitable purposes. Thus, in our view, the assesseesociety having purchased the abovementioned land, has used the accumulated amount for charitable and educational purposes. No evidence have been brought on record by the Revenue to prove that land at Gopalpura and Lohari were used for non-educational and non-charitable purposes. The Ld. CIT(A) made a reference to two properties at Aravalli which have got no bearing on the issue, as the said two properties according to the explanation of assessee-society, are not utilised for accumulated profits under section 11(2) of the I.T. Act because the accumulation have been made under section 11(2) in respect of three properties only i.e., Sadharna, Gopalpura and Lohari. Ld. CIT(A) wrongly applied Section 11(1B) of the I.T. Act as the ..... 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