TMI Blog2019 (12) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred by the Revenue is, thus, found to be devoid of any merit and hence dismissed. - I.T.A. No.1720/Ahd/2015 - - - Dated:- 2-12-2019 - SHRI AMARJIT SINGH, ACCOUNTANT MEMBER And Ms. MADHUMITA ROY, JUDICIAL MEMBER For the Appellant : Shri O. P. Sharma, CIT DR For the Respondent : Shri S. N. Soparkar, Sr.Advocate Shri Nishit Shah ORDER PER Ms. MADHUMITA ROY - JM: The instant appeal filed by the Revenue is directed against the order dated 31.03.2015 passed by the Commissioner of Income Tax (Appeals) 7, Ahmedabad under section 143(3)of the Income Tax Act, 1961 (hereinafter referred as to the Act ) arising out of the order dated 20.02.2013 passed by the ACIT, Gandhinagar Circle, Gandhinagar for Assessment Year 2010-11. 2. The deletion of addition of ₹ 46,49,38,848/- made by the AO on capital expenditure incurred by the appellant on the asset of Pandit Deendayal Petroleum University (PDPU) (hereinafter referred to as the university ) has been challenged by Revenue before us. During the course of assessment proceeding a show-cause was issued by the Ld. AO as to why the said expenditure will not be disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve parties and also perused the relevant materials available on records. It appears that during the course of assessment proceeding it was found that the assessee claimed capital expenditure on an amount of ₹ 46,86,14,891/- in the statement of income as expenditure incurred for charitable purpose u/s. 11 of the Act. It is relevant to mention that the assessee is a society registered u/s. 12AA of the Act; has been promoted by Gujarat State Petroleum Corporation Ltd. and Pandit Deendayal Petroleum University (PDPU) has been established by the Gujarat Act No. 14 of 2007 which has been notified in the Official Gazette of 14.04.2007. It further appears that in respect of the query by and under the notice u/s. 142(1) dated 12.11.2012 as to how the capital expenditure was treated as applied for charitable purposes, the appellant furnished the details of expenditure which was incurred on the universitie s assets. It was further clarified that both the appellant and the said university are two separate entities and are filing separate income tax returns and annual accounts accordingly. In terms of the provision of Pandit Deendayal Pandit University Act, 2007 the appellant has been aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lete. That even though the donee is required to keep intact the subject-matter of the donation and it is entitled to utilised the income only for its religious and charitable purposes, it would not detract from the applicability of section 11(1)(a) so far as the donor trust is concerned. The donor rust cannot be called upon to always keep a vigil over the activities of the donee trust and even assuming that the donee trust commits breach of the conditions of the donation, it may affect the assessment of the donee but so far as the donor is concerned, once it is found that it has applied its income for religious or charitable purposed by making it available to the donee trust which has similar objects, the benefit of section 11(1)(a) can be said to have been earned by the donor. 10. Mr. Patel also submitted that the circular letter of the Central Board of Direct Taxes dated January 5, 1978, a copy of which was made available to us by Mr. Patel and which is kept on the record of this case, squarely applies to the facts of the present case and even on that basis, the referred questions have to be answered in favour of the assessee. Mr. Patel, in this connection, placed rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainsaid that the assessee had made use of is income for the purpose of making it available to another trust, objects of which were also of charitable or religious nature. Consequently, it cannot be said that the assessee-trust had not complied with the provisions of section 11 when it made a donation out of its income in favour of the donee trust which was also a religious and charitable trust. However, Mr. Soparkar, for the Revenue, submitted that the assessee-trust itself could not have earned exemption under section 11(1) if it had blocked its income and had not spent it for the purposes for which it was created. In that connection, he invited our attention to section 11(1)(a) itself and submitted that the maximum income which can be accumulated would be 25% of the income of such property and not more than that. This contention of the learned advocate for the Revenue is met by Mr. Patel, appearing for the assessee. He invited our attention to subITA section (2) of section 11 which provided for accumulation even the remaining 75% of the income for a maximum period of ten years subject to a notice in writing being given by the assessee to the Income-tax Officer in the prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpus for any other purposes nor can it utilise the income arising from such corpus for any extraneous purposes. It is also easy to visualise that keeping the corpus intact and utilising the income accruing from the corpus for religious and charitable purposes would itself amount to application of the income arising from the corpus for religious and charitable purposes. Corpus funds also can be treated to be held for such religious and charitable purposes by the donee trust. Consequently, the contention of Mr.Soparkar that at least in cases where the assessee-trust had donated the amount to the donee trust subject to the condition that the donated amount would not be utilised but should be treated to be a donation to the corpus, the provisions of section 11(1)(a) would not apply, cannot be accepted. If any authority were needed to support the aforesaid conclusion of ours, it is supplied by the decision of the Decision Bench of the Bombay High Court in the case of CIT v. Trustees of the Jadi Trust [1982] 133 ITR 494. In that case, the Division Bench consisting of Chandurkar J. (as he then was) and Sawant J. had to consider a similar question. The assessee-trust, called the Jadi trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holds property for charitable or religious purposes hands over a donation to another trust which is also a trust made for the application of its funds for charitable or religious purposes, there can hardly be any doubt that it would amount o an application of income for charitable or religious purposes by the donor trust. As already pointed out, it would be permissible for a trust either to directly apply the income for charitable purposes or to a charitable work in the field as put by Slade J. or the same funds or income could be utilised through the medium of another charitable institution which applies its funds or income to charitable purposes. The Tribunal is, in our view, right in holding that the assessee was entitled to the relief under section 11(a) of the Income-tax Act, but the propriety of the direction given by the Tribunal need not be dealt with in this reference. 16. We respectfully agree with the view expressed by the Bombay High Court on the point. Our attention was also invited by Mr. Patel for the assessee to a decision of the Calcutta High Court in the case of CIT v. Hindusthan Charity Trust [1983] 139 ITR 913. In that case, a Division Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act, 1961, merely because the donee trust did not spend the donation during the year of receipt itself. The above position may kingly be brought to the notice of all officer working in your charge. 18. This instruction shows that apart from the legal position that may be emanating from various provisions of the Act, the Central Board of Direct Taxes itself has issued a clear-cut guideline to all the Commissioners of Income-tax that a charitable trust will not lose exemption under section 11 of the Act if it passes a sum of money to another charitable trust for utilisation by the donee trust towards its charitable purposes and that it shall be proper utilisation of money by the donor trust for a charitable purpose. We agree with Mr. Patel for the assessee that the said instruction squarely covers the facts of the present case. It cannot be disputed that the donor trust had made payment of the sum of money covered by the donation to another charitable trust, viz., the donee trust and also it was for utilisation by the donee rust for its charitable purpose. Utilisation does not mean that the entire amount has to be spent forthwith and that it ca ..... 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