TMI Blog2022 (10) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption. The assessee has without prejudice submitted before the learned Assessing Officer which is also reproduced at page no.9 of the order of the learned CIT (A). It shows that the assessee submitted before the learned Assessing Officer that even if it is presumed that the trustees have used property then trust would be made liable for the income for relevant years to the extent of income that would be chargeable to tax - The assessee submitted that some portion of the premises was intermittently used by the Private Limited Company. Assessee has also stated that market value of compensation not charged is the above amounts. CIT (A) has categorically confirmed that M/s Ideen Furniture Pvt. Ltd. was occupying the 8th floor of the building of assessee‟s trust. Therefore, naturally the Provision of Section 13(1)(c) of the Act applies to this property. 10th Floor of the building was utilised by the Bujwal family as its Bunglow - Jt. Commissioner has held that complainant could not prove before him that 10th Floor is used as a residence by the Bujwal family beyond reasonable doubt . In the income tax proceedings the beyond reasonable doubt concept is unknown. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he National Faceless Appeal Centre, Delhi, wherein the appeal of the assessee filed against the assessment order passed under Section 143(3) read with section 147 of the Act dated 31st March, 2016, were partly allowed. 02. Facts related to all other three appeals for A.Y. 2009-10 to 2011-12 are identical. 03. Facts for A.Y. 2008-09 shows that assessee filed its return of income declaring a deficit of ₹15,36,50,493/- on 30th September, 2008. The assessment under Section 143(3) of the Act was completed on 29th December, 2020 at ₹nil. 04. Subsequently, notice was issued under Section 148 of the Act on 15th Mach, 2015 for violation of the provision of Section 13 of the Act and therefore, the action under Section 147 of the Act was taken. 05. It was found during the F.Y. 2009-10 i.e. A.Y. 2010-11 that properties of the assessee were used by the specified persons. It was found that i. M/s Ideen Furniture Pvt. Ltd had occupied 8th floor of the assessee‟s trust building at Bandra Reclamation without any payment. The above Pvt. Ltd. company is a related concern of Mr. Samir Bhujbal and Mr. Pankaj Bhujbal for the reason that Mrs. Vishaka Pankaj Bhujbal and Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, partly allowed the claim of the assessee. 09. It was also found that for AY 2010-11 , trust has received dividend income of ₹5,000/-. This dividend income was not treated as exempt income under Section 10(33) of the Act. The claim of the learned Assessing Officer is that when the income of the learned Assessing Officer computed under Section 11,12 and 13 of the Act, the provision of Section 10 do not apply. The learned CIT (A) following the various judicial precedents held that dividend income of ₹5,000/- is exempt under Section 10(34) of the Act despite assessee having its income exempt under Section 11 and 12 of the Act. 010. The learned Assessing Officer is aggrieved with the order of the learned CIT (A) is in appeal before us. 011. The learned Departmental Representative vehemently supported the order of the learned Assessing Officer. The assessee at the time of hearing was represented by Mr. Rajesh Dharap. 012. We have carefully considered the orders of the lower authorities. The only issue in this appeal is that while there is a violation of provision of Section 13(1)(c) and 13 (1)(d) of the Act whether the trust looses exemption on whole of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 11 of IT. Act, 1961 are as under: (Here whole of section is reproduced as it is and for the sake of brevity we have not reiterated here). . . 4. The Provision of section 13ofI.T. Act, 1961 are as under: (Here whole of section is reproduced as it is and for the sake of brevity we have not reiterated it here). 5. In view of the provisions of section 13 of the IT Act, 1961, it is clear that exemption u/s 11 of the IT Act, 1961 cannot be applied in certain conditions as laid down in the provisions of section 13 of the IT Act. It is pertinent to mention here that if any part of the property of the trust is used by the related persons/concerns as defined in section 139) of the IT Act, 1961 without adequate consideration or NIL consideration, then the exemption u/s 11 of the IT Act cannot be allowed to the concerned trust. It is noticed that the M/s. Ideen Furniture Pvt. Ltd. which is a related concern as defined u/s.13(3) of the IT Act, occupied / used the property of Mumbai Education Trust without any consideration during the F.Y.2009-10 i.e. A.Y 2010-11, therefore, the provisions of section 11 of the IT Act cannot be applicable to the M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (c)10 and clause (d) of sub-section: (1), the income, or the property of the trust or institution or any part of such income: or property shall, for the purposes of that clause, be deemed to have, been used or applied for the benefit of a person referred to in sub-section (3), (a) .. (b) if any land, building or other property*1 of the trust Or institution is, or continues to be, made available, for the use of any person referred to in subsection (3), for any period during, the previous year without charging adequate rent or other compensation; Further we would like to reproduce the provision of section of Section 13(3) which is as under: (3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following namely: (a) the author of the trust or the founder of the institution; (b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees; (c) where such author, founder or person is a Hindu undivided family, a member of the family; (cc) any trustee of the trust o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and circumstances of the case to exercise revisionary jurisdiction on the ground that provisions of s. 13 were violated. 3. Further without prejudice we would like to state that even if it is presumed that in the case of trust, trustee has used the property of the trust than in such case, without giving up the right of the trust to dispute on facts, trust would be made liable from Income for the relevant years where there has been alleged usage of the property as per the provisions of the Act. Charitable Trusts-Exemptions-Income of approved staff welfare funds- allowability Validity of Assessee filed return of income for assessment year 200-01 declaring total income as Nil by claiming exemption u/s 11 and 12/10(23AAA)- on scrutiny of Income and Expenditure Statement and Balance sheet, it was notice that assessee had made deposits with financial institutions-A.O. held that, as deposits of amount was not made as specified u/s 11(5), assessee was not entitled to benefit under said provision- Appellate Authority held, that violation of s 11(5) is due to mistaken impression of Secretary of fund- appellate Authority restricted denial of exemption denial of exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XMAN 0066(Gujarat) Charitable Trusts-Income From Property Held for Charitable or Religious Purposes-Denial of ExemptionAssessee filed it return of income of different assessment years-AOs examined case of Assessee and denied exemption to Assessee on respective amount in connection with deposits made by it in contravention of S. 11(5) read with S. 13(1)-CIT(A) directed A.O. to restrict disallowance of exemption u/s.11 in respect of deposits in contravention of S. 11(5) read with S. 13(l)(d) as against denial of exemption on entire income by AO-ITAT upheld Order of CJT(A) and held that exemption could be denied only to extent of investment contravening provisions of S. 11 and not entire amount-Held, CIT(A) very Clearly observed that provisions Section 11 (1)(a) are very clear and provide that income derived from property held under trust should not be included in income to extent it was applied for charitable or religious purposes (expenses incurred during the year) or accumulated/set apart to-be applied for that purpose in future out of 75% to which restriction u/s. 11(5) applied-ITAT had relied upon its own decision on similar issue rendered in ITA No. 644 to 646/Rjt/2003 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be denied of exemption-on appeal referring to the decision of the Bombay High Court in DIT (Exemptions) V. Sheth Mafatalal Gagalbhai Foundation Trust, the Tribunal had rejected the Revenue s appeals- Held in (Exemptions) V. Sheth Mafatlal Gagalbhai Foundation Trust, It was held by Bombay High Court that Violation of section 1 1(5), read with section 13(1)(d) by the assessee would result in the maximum marginal rate of tax only on the dividend income on shares, which was not the recognized mode of investment and that the assessee would not be vested with marginal rate of tax on the entire income-therefore, the income other than dividend income had to be taxed only to the extent to which the violation was found by the AO-Respectfully following the said decision, High Court had confirmed the order of the Tribunal- Revenue s appeal dismissed. 7. Further without prejudice we would like to state that even if it is presumed that in the case of trust, trustee has used the Property of the trust than in such case, without giving up the right of the trust to dispute on facts, trust would be made liable for Income for the relevant years where there has been alleged usage of the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umulation under section 11 (l) and,(2) is also not available to the assessee. 5.2. The appellant vide its submission dated 09.02.2022 for AY 2010-11 submitted as under: 4.2 With regard to the above ground of appeal we would like to brief certain facts which are as under+ Your appellant has is engaged in providing the education in form of various courses and has building at Bandra Reclamation with the name MET Building where the education is imparted. Further your appellant has rented few areas of its building located at Bandra Reclamation to outside parties from whom Rent and License fees are accounted in the books of accounts and which have been duly offered to tax. The copy of return of income, computation of total income and the copy of Annual accounts are enclosed as Annexure A For the year under consideration it was alleged that 8th floor of the said appellant building was occupied by a company namely Ideen Furniture Pvt. Ltd without any consideration. Further it was also alleged that 10th Floor of the appellant building was allegedly utilized for the family members of the Trustees. With regard to facts of the case, it is submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther we would like to state that MET (Appellant Trust) as such is created for granting of education and which is the main activities / objects of the trust. It is submitted that no where it can be held that letting out of property concern where trustees are beneficiaries are not in accordance of the objects of the trust. It is submitted that without prejudice, even assuming that there is utilization of the trust property than in such cases, trust can be made liable for taxation of the such sum which has not been taken from trustees. However, the same cannot be considered as base to held that activities of the trust are neither genuine not carried out as per object of the trust and therefore it cannot be said that appellant trust has violated provisions, of section 13 of the Income Tax Act,1961 and therefore, the provisions of section 11 of the Income Tax Act,1961 cannot be denied to your genuine appellant. It is submitted that the Ld. AO in the assessment order has merely stated that Appellant s Trust Property was used by specified persons defined in section 13 of the Act without going in to the facts of the case. It is submitted that the appellant had duly made the submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to other persons other than M/s Ideen Furniture s Pvt. Ltd as well. In view of the same it is submitted that the provisions of section 13(2)(b) are not applicable to the appellant. In this regard reliance is place on the following case law: George Educational, Medical and Charitable Society Vs. Asst. Director of Income Tax (2002) 80ITD 619 (Coch) Charitable trust-Exemption under s. 11'-Bar of s. 13(1)(c)-Assessee-society using the residential house of its chairman as a guest-house for accommodating the chairman and governing council members whenever they visited Madras and also other guestsit was not used as exclusive residence of the chairman after it was acquired on lease by the assessee-Provisions of s. 13(1)(c) and s. 13(2) were not attracted- property in question was not made available for the use of any person referred to in subs (3) of s. 13, within the meaning of s. 13(2) even if no rent or compensation was charged installation or the governing council members, directly or indirectly- equipments were not installed at the personal residence of the specified persons-Assessee entitled for exemption under s.11-AO was not justified in adopting a segmente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial programs being integral part of Academics of the overall Educational Program students of Mumbai Education Trust. In view of above, for Administrative convenience purpose, Telephone Charges of the same were paid by M/ s. Ideen Furniture Pvt. Ltd. In this regard it is submitted that your Appellant has not violated that provisions of the Income Tax Act, 1961. 4.8 Further with regard to the usage of 10th floor of MET campus at Bandra by private residence by Bhujbal family and no compensation was paid MET, in this regard it is submitted that we are enclosing the sample copies of requisition from for occupancy of Guest Room which shows that the said guest house was used for the purpose of Trust activities only Annexure G. It is further submitted that no such evidence was found regarding the usage of the guest house by the trustees and allegation were made only on the basis of conjectures and surmises. The above details were submitted to the Ld. AO vide submission dated 15.03.2016. 4.9 It is submitted that without prejudice even if the Appellant has violated the provisions of section 13(2) or 13(3), then the Ld. AO should have tax the defaulted amount at maximum marginal rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ests the funds and contributions and other sums received by it in the forms or modes specified in sub-s (5) of s 11 and the fund is approved by the Commissioner in accordance with Rules made in this behalf, the same would be exempted from payment of income tax as the said income does not form part of total income-ln this case, both the financial institutions do not fall within s 11 (S)-Therefore, in view of s 10(23AAA), assessee would not be entitled to benefit of said provision insofar as income received by any person on behalf of fund established-Order passed by Appellate Authorities cannot be found fault with. Commissioner Of Income Tax Vs. Fr. Mullers Charitable Institutions (2014) 363 ITR 0230 : (2015) 28 TAXMAN 0319 (Karn) Revision - Revision by commissioner of orders prejudicial to revenue - Assessee Charitable Trust running large number of Institutions claimed exemption u/s. 11- For A.Y. 2000-01 and 2001-02, assessee filed 'Nil' return of income on 31-10-2001 claiming exemption of income-AO held that amount given to M/s. A Ltd. as advance infringes provision of section 11(5) and hence, said amount was liable to be taxed-During pendency of appeal before C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 13(1) (d), tax should be levied on relevant income or part of relevant income at maximum marginal rateRevenue's Appeal dismissed. Director Of Income Tax (Exemptions) Vs. Sheth Mafatlal Gagalbhai Foundation Trust (2001) 249 ITR 0533 Liability in special cases-Assessment of trustMaximum marginal rate under s. 164 (2), proviso-As per proviso to s. 164(2) where whole or any part of relevant income of the trust is not exempt under s. 11 or s. 12 because of contravention of s. 13(1)(d), tax is chargeable on such income or part thereof at the maximum marginal rate - Only the non-exempt portion of income would fall in the net of tax as if it was the income of an AOP-Said proviso categorically refers only to that part of income which has forfeited exemption and not the entire income-This is also clarified by Circular No. 387, dt. 6th July, 1984 - Assessee-trust was required to dispose of the shares held by it in a company by 31st March, 1993, in view of s. 13(1)(d)(iii) - Same not done - Maximum marginal rate will apply only to dividend income and not to entire income. Director Of Income Tax (Exemptions) Vs. Sheth Mafatlal Gagalbhai Charity Commissioner, Mumbai Found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pectfully following the said decision, High Court had confirmed the order of the Tribunal - Revenue's appeal dismissed. 4.10 Further it is submitted that during the course of inspection ordered by the Hon'ble Charity Commissioner at the appellant trust premises. It was found out that the 8th and 10th floor is vacant and not occupied by anyone and same has been specifically mentioned in the inspection report issued by the Hon'ble Charity Commissioner dated 11.04.2012. Annexure H. The said inspection report is in Marathi Language and the same is translated in English for better understanding enclosed at Annexure I. It is submitted that in such report of Hon'ble Charity Commissioner has stated that the 8th floor and 10th Floors were not occupied by anyone. 4.11 It is submitted that the appellant trust has been continuously working towards achieving the objectives of trust and not to provide individual benefit to the specified persons or a particular section of the society. Further we would like to reproduce the definitions of Charitable purpose which states that:- charitablepurpose includes relief of the poor, education, yoga, medical relief, preservat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the above facts, case laws and clarifications, it is prayed that since trust is carrying out the activities as per the Objects of the trust and therefore, the action of the LD. AO to deny the exemption U/s 11 of the income Tax Act, 1961 is not according to the basic princpfes of Law and against natural justice to the appellant trust. Therefore it is requested before your honour to delete the addition made by the Ld. AO and the same should be allowed to the appellant trust. 5.2.1 The appellant vide its submission dated 04.05.2022 for AY 2010-11 submitted as under: With reference to the above, we would like to submit additional submission w.r.t submission dated 09/02/2022 under Ground No. 3, as under: Before the assessee is charged and held liable on the ground of utilising the trust property for the persons specified in section 13(3) of Income Tax Act and further holding the same as its violation and withdrawing the exemption under section 11 It is pertinent to note that Mr. Sun// Karve , x Trustee of the Mumbai Educational Trust (hereinafter referred to as the said trust for the sake of brevity) who had been ceased to be a trustee on 27.02.2012, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, Mumbai, as to use of some portion of 8th floor premises for some period by M/s Ideen furniture and have further submitted all evidences and proofs to substantiate and justify that the act to permit M/s Ideen was never intentional and or deliberate to cause any losses to the said trust and or to make any personal gains or benefit. The said trust has also represented that said trust did not yield any kind of income or rent nor any trustees of the said trust made any personal gains our of such use. In fact at relevant period said trust was not allowed and permitted to let out the said 8th floor premises to any one and could not charge any rent from it and therefore, question of causing any losses to trust or making personal income which could not be accounted for objects of trust does not arises at all. The said trust has also represent that M/s Ideen was always ready to compensate the said trust, if at all the said trust was losing its income but the said trust was not in a position to let out the same and yield any income therefrom which can be utilized for the objects of the said trust. The said trust has also represented that the act on the part of the said trust and trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le deciding the issues related to misuse of 8th floor premises of baking t is proved and established that at no point of time the said trust could any rent from the said premises which could have been utilised for the said tartherproved and established that the act of the said trust permitting M/s Ideen to occupy the 8th floor premises for some period and to some extent was not dishonest and coupled with ill motive to derive personal gains. It view of the said order passed by the Ld. Charity Commissioner, Mumbai, issue pertaining to 8th floor premises of the said trust and its use by M/s Ideen is resolved and settled with legal binding conclusion which establishes and demonstrates that the said trust could not be and cannot be held liable and or accounted for any assessment and or charge on the count of commercial use of the said premises by the said trust for the benefit of interested persons and further any concessions and exemptions granted to said trust shall not be withdrawn on the pretext of non disclosure of any income to trust and or trustees by letting the said premises to family members of the trustees of the said trust, rather it would be disregard of order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e. M/s Ideen Furniture Pvt. Ltd had occupied the 8th floor of MET at Bandra Reclamation, Mumbai was based on evidence and the assesseee trust has admitted to this fact. As per the AO the appellant had not received any payment whatsoever in the form of rent, lease rent or compensation from M/s. Ideen Furniture Pvt. Ltd. the AO has alleged that the 10th Floor of MET Campus at Bandra which was sanctioned as a guest house by the MCGM was been utilized as the private residence of the family of the Trustees for which no compensation of whatsoever nature has been paid to the appellant trust. 5.3.1 The appellant has made various contentions vide submissions dated 09.02.2022 and 04.05.2022. The submissions of the appellant can be categorized into following contentions. 1) The appellant prima facie does not accept that entire 8th floor has been used by M/s. Ideen Furniture Pvt. Ltd. Both the directors of M/s. Ideen Furniture Pvt. Ltd. Mrs. Vishaka P. Bhujbal and Mrs. Shefali S. Bhujbal were rendering honorary services to the M.E.T in its administrative work as well as they were conducting cultural social programs for the students of M.E.T. 2) The returns of income of M/s Id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Joint Charity Commissioner, Mumbai. The appellant has also submitted the copy of the order of Joint Charity Commissioner dated 30.03.2022. The appellant has made further contention which is as under :- the Hon'ble Charity Commissioner, Mumbai, after appreciation and consideration of all material, proofs and evidences submitted by the said trust, having detail inquiry as to facts and circumstances, has settled the said issue and the said trust's act allowing M/s Ideen to occupy 8th floor premises of the said trust is decided and declared as non-deliberate act and further held that the said trust has not improperly dealt with the said premises by allowing M/s Ideen, which consist of family members of trustees of the said trust and therefore, even for the purpose of the present assessment it cannot be held that there is any kind of breach and or violation by the said trust of any of the provisions of the income tax act and further the said trust cannot be made liable for withdrawal of exemption on the pretext that the trust property was given to any interested person as defined in section 13 of the income tax act. 5.3.3 Without prejudice to the above contentions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same before the assessing officer. The admissibility of the additional submission/evidence by the appellant is being looked into after discussing relevant Judicial pronouncements. 5.3.4.1 The Hon'ble Supreme Court in the case of Jute Corporation of India Ltd. Vs. CIT I87 ITR 688 (S.C) has observed and held as under: The Act does not contain any express provision debarring an assessee from raising an additional ground in appeal and there is no provision in the Act placing restriction on the power of the appellate authority in entertaining an additional ground in appeal. In the absence of any statutory provision, the general principle relating to the amplitude of appellate authority's power being co-terminus with that of the initial authority should normally be applicable. If the tax liability of the assessee is admitted and if the ITO is afforded opportunity of hearing by the appellate authority in allowing the assessee's claim for deduction on the settled view of law, there appears to be no good reason to curtail the powers of the appellate authority under section 251(1) (a). Even otherwise an appellate authority while hearing appeal against the order of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AAC to make further enquiry and to report the result of the same to him. This position has been made clear by sub-rule (4) which specifically provides that the restrictions placed on the production of additional evidence by the appellant would not affect the powers of the AAC to call for the production of any document or the examination of any witness to enable him to dispose of the appeal. Further, under sub-section (4) of section 250 of the Act, the AAC is empowered to make such further inquiry as he thinks fit or to direct the ITO to make further inquiry and to report the matter to him. It is, thus, clear that the powers of the AAC are much wider than the powers of an ordinary court of appeal. The scope of his powers is coterminous with that of the ITO. He can do what the ITO can do. He can also direct the ITO to do what he failed to do. The power conferred on the AAC under the said sub-section being quasi-judicial power, it is incumbent on him to exercise the same if the facts and circumstances justify. If the AAC fails to exercise his discretion judicially and arbitrarily refuses to make enquiry in a case where the facts and circumstances so demand, his action would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Points 1. Whether the applicant succeeded in establishing the proposed charge that the respondents used of 8th floor of the Trust premises admeasuring 15000 sq. ft. situated at Bandra, Mumbai and the same was with malafide and illmotive?. 2. Whether the applicant succeeded in establishing the proposed charge that the respondents used 8th floor of the Trust premises at Bandra, Mumbai was without his knowledge and permission of the Corporation? 3. Whether the applicant succeeded in establishing the proposed charge that the use of electricity was not compensated by the respondents with illmotive while using the 8th floor of the Trust premises at Bandra, Mumbai admeasuring 15000 sq.ft. ? The findings of the Joint Charity Commissioner on charge 1 are as under: Thus from the documents and submissions of the applicant it has proved that Ideen Furniture Pvt. Ltd. was occupying the 8th floor of the Trust premises, which has also admitted by the respondent trustees. However, the exact period of the occupation could not be established as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Chairman Respondent No. 1 showed his willingness to shift the commercial unit for the use of Trust of the wing of the 8th floor. Secondly, from the submissions of the either parties it has established that applicant was well aware when exactly the commercial unit occupied the trust premises on 8th floor, it was within his knowledge. The applicant has submitted time and again that he was the whole and sole in the administration of the Trust. He was taking all the decisions. He could not establish that he resisted the very use of the 8th floor of the Trust premises by the respondents. Therefore, his consent reflects. Also the applicant's submissions in his application that as a matter of facts the respondent No. 1 who was the founder trustee and chairman along with the applicant had taken upon himself the total responsibility of arranging all the funds for the development as he could not have contributed in other area of the Trust like academic, administration etc. and the applicant was to take care of the total academic and overall development of the Trust and its various institutes. The applicant also submitted that the respondent No. 1 being full time involved in politic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the party has no right or which he had contracted not to do so. Misfeasance constitutes breach of trust. It is more than mere negligence, which consists in the omission to do something which a reasonable man would do, or the doing something which a reasonable man would not do. Negligence depends upon the public duty which is incumbent upon everyone to exercise due care in his daily life; but a breach of trust depends upon the neglect of some special duty undertaken in regard to some specified person or body of persons. Misappropriation means improperly setting apart for one's use to the exclusion of the owner. Thus misappropriation is the wrongful setting apart, or assigning of, a sum of money to the purpose or use to which it should not be lawfully assigned or set apart. Mere retention of money entrusted to a person without any misappropriation or conversion even though he was directed by the person to pay it to so and so or to deal with the money in a particular way is not a misappropriation unless there is some actual user by him. Temporary retention of money would not by itself amount to criminal breach of trust, unless dishonesty, misappropriation or conversion can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at would prove criminal charge beyond a reasonable realm of doubt. The imputation reflecting on integrity of trustees have to be fortified by proof of high degree which would be somewhere in between standard of proof required in civil proceedings like suit and criminal proceedings like a trial for offence of criminal breach of trust, or that of cheating. Thus, unless the lapse on part of the trustee is proved to be actuated by dishonesty or active connivance with other trustees, who are guilty of misfeasance or malfeasance, the drastic action under section 41D of the BPT Act, may not be warranted. Shri. Mukund Waman Thatte Vs. Shri. Sudhir Parshuram Chitale Ors.; 2012(3)ALL MR 604 The scope of the enquiry under Section 41D will have to be considered, for taking drastic action of removal, suspension and dismissal from the posts of the trustees, a very high degree of proof is required and the person seeking removal has to prove that the irregularities within the scope of Section 41 -D (i) are proved without any manner of doubt. In the case of Mallikarjuanappa S/o. Sidramappa Bidve Others V/s. Joint Charity Commissioner and Others decided by the learned Single Judge Coram: V.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gives direction to a thought of a judge while imposing penalty. It is based on the idea of justice and objectivity. The penalty imposed on a person should be commensurate with the wrong done by him. Therefore, it is always a matter of fact depending on each case and the evidence tendered by the parties. When statute prescribes certain punishment and if charges are framed accordingly, then, the Court after weighing the wrong done by a person, can imposed a penalty, even though it is harsh, which is not the case before this authority. Section 41-D (1) of the Bombay Public Trusts Act confers a power upon the Charity Commissioner to suspend, remove or dismiss any Trustee/Trustees of the Public Trust if he/they are found guilty of the act/acts, which is/are mentioned in any of the Clauses (a) to (f) therein. In order to consider the question as to whether the Trustee or the Trustees, who is or are found guilty of any of the charges mentioned in Clauses (a) to (f) to sub-section (1) of section 41-D of the said Act, should be suspended, removed or dismissed, there has to be an application of mind to the aspect of proportionality of punishment on the basis of the charges held to be proved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spector or the Regional Officer were deliberately or wilfully actuated by dishonest or corrupt motives. It should be generally seen whether there is member in such commission or omissions. If the acts and omission are such which could be rectified by other actions an attempt should be first made to resort to the same. Only when the trustees persist in acts against the interest of the trust despite directions under Section 41 to put the trust in or action under section 41 (D) may be recommended. Thus it is incumbent on the officer so appointed under The MPT Act 1950 to see whether the acts or omission were deliberated or wilfully actuated by dishonest or corrupt motives. Secondly it is also incumbent to see that whether such acts and omission could be rectified and attempt should be first made to resort to the same. Thus from the provisions of the MPT Act, from various guidelines given in the case laws referred hereinabove, circular of the Hon'ble Charity Commissioner it is clear the act or omission on the part of the trustees should be with dishonest intention and if the same could be rectified such opportunity be given to the trustees. Every lapse or every act of misconduct s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to the respondents only. Mere the name written Sameer does not related to the respondent No.4 only. The voucher referring 10th floor cannot be said as trust premises only. Voucher at page No. 316 is from the chemist or medical store. Patient name is written Chhagan Bhujbal, Dr. name H. O. Lilavati. No signature on the voucher could be tress out, name of signatory not mentioned. Neither it is shown that the same was paid by the Trust as patient. The address on the voucher is written as MET College. However, it does not reflect that the respondent 1 was residing on the 10th floor of the Trust premises when this voucher was issued by the medical store. The voucher at page No. 317 is of Lucky Cleaning Centre in the name of Trust MET. The item could not be tress out what is written. The voucher cannot be said of the respondents only and for the 10th floor. Similar cases with vouchers at page 318, 319, 320, 345, 360 361. Therefore the submissions made by the Ld. Advocate for the respondents that vouchers cannot be considered as the same do not prove the use of 10th floor by the respondents for residence. The 10th floor was used for Guest House for faculty members. The vouchers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minal charge beyond a reasonable realm of doubt. The imputation reflecting on integrity of trustees have to be fortified by proof of high degree which would be somewhere in between standard of proof required in civil proceedings like suit and criminal proceedings like a trial for offence of criminal breach of trust, or that of cheating. Thus, unless the lapse on part of the trustee is proved to be actuated by dishonesty or active connivance with other trustees, who are guilty of misfeasance or malfeasance, the drastic action under section 41D of the BPT Act, may not be warranted. Therefore, the present charges cannot be established beyond doubt. Hence, Charges No.9, 10 11 are disapproved. 5.3.5 Now the various contentions of the appellant as enumerated in para 5.3.1 and para 5.3.2 above are being taken-up for discussion and deliberations in the subsequent paras. 5.3.5.1 The first contention of the appellant is that the entire 8th floor has not been used by M/s. Ideen Furniture Pvt. Ltd. and both the directors of M/s. Ideen Furniture Pvt. Ltd. i.e. Mrs. Vishakha P. Bhujbal and Mrs. Shefali S. Bhujbal were rendering honorary services to the Mumbai Educational Trust in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appellate proceedings the appellant has submitted the copy of returns from AY 2008-09 to AY 2014-15 vide submission dated 09.02.2022. The perusal of the acknowledgements of ITRs shows that for AY 2009-10 to AY 2011-12 the address of M/s Ideen Furniture Pvt. Ltd. is 8th Floor, MET Building, A.K. Vaidya chowk, Bandra. Further the order of Jt. Charity Commissioner, Mumbai dated 30.03.2022(supra) gives a finding that the company M/s Ideen Furniture Pvt. Ltd. was occupying the 8th Floor(one wing) from either 2005 or 2006 upto Feb,2012 based on evidences discussed elaborately. In view of these facts this contention of the appellant fails. 5.3.5.3. The third contention of the appellant is with regard to the usage of 10th floor of MET campus at Bandra by the family of the Trustees as their private residence without paying any compensation to the trust. The appellant submitted that the 10th floor of MET building was used as guest house for the faculty and sample copies of requisition slips were furnished during the course of re-assessment proceedings. From the perusal of orders of reassessment for AYs 2008-09 to 2011-12 it has been noticed that the AO has not been able to make out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson the provisions of section 13(2)(b) get attracted in this case. The reliance on the case laws i.e. George Educational, Medical and Charitable society vs DIT(2002) 80 ITD 619(Cochin) and India Habitat Centre vs Joint Director of I.T.(2004)87 TTJ76(Delhi) is misplaced as the facts of the present case are distinguishable from the facts of the cases relied upon by the appellant. In view of the above discussion, this contention of the appellant is not acceptable. 5.3.5.5 The fifth contention of the appellant is that the AO in the assessment order has abruptly come to the conclusion that the trust property has been used by the specified person as defined in section 13 of the Act, without dealing with the submissions/contentions of the appellant. This contention of the appellant is partly correct as the A.O. has taken into account the information and evidences in which possession as well as the submission of the appellant that one portion of 8th floor of the MET building was intermittently used for some period by M/s Ideen Furnitures Pvt Ltd. for which the market value of compensation not charged has also been submitted. But the AO failed to appreciate that the submission w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed. From the facts laid down it reveals that the respondents were walking on the path shown by the applicant without even having knowledge of the consequences. The very admission of the use of the 8th floor and willingness to compensate the trust in the event of any loss itself vitiated the allegation of negligence, breach of trust, malfeasance, misfeasance, dealt improperly with the properties of the trust, accepted position inconsistent with the trustees position etc. The punishment of either suspension, removal of dismissal, as the case may be, has to be proportionate to the gravity of the charge/charges held to be proved. It is not the every lapse or every act of misconduct, which invites the punishment of dismissal. The Charity Commissioner is, therefore, bound to record reasons for imposing a particular punishment. For taking a drastic action of removal, suspension and dismissal of a person from the post of trustee, a very high degree of proof is required and the person seeking removal has to prove that the irregularities within the scope of section 41D(1) of the Bombay Public Trusts Act are beyond any manner of doubt. In the present case the default / devi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified person u/s. 13(3)(e) i.e. M/s. Ideen Furniture Pvt. Ltd. has used the 8th Floor of MET Building from the year 2006 till the beginning of year 2012. It is pertinent to mention here that the proof of payment of any compensation by the specified person to the appellant Trust has not been furnished either before the Charity Commissioner or before the Assessing Officer. Even during the course of appellate proceedings the appellant has failed to submit any proof of the receipt of compensation from M/s. Ideen Furniture Pvt. Ltd. In view of the above facts, it becomes clear that the order of Hon'ble Jt. Charity Commissioner dated 30/03/2022 absolves the Trustees u/s. 41D of Maharashtra Public Trust Act, 1950 but the order strengthens the finding of the Assessing Officer that M/s. Ideen Furniture Pvt. Ltd. which is a person specified u/s. 13(3)(e) has used the 8th floor of MET Building without paying any compensation whatsoever to the appellant Trust. Therefore, this contention of the appellant also fails and the same is not acceptable as per the facts of the case. 5.3.5.7 In view of the above discussion and deliberations with regard to the main contentions of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of exemption u/s. 11 of the Act, has been considered and various aspects are discussed in the subsequent paras. 5.3.6.2 Section 13 spells out certain circumstances in which the exemption provided under section 11/ 12 is not applicable. Further, Section 164(2) and 164(3) which reads as under:- [(2) In the case of relevant income which is derived from property held under trust wholly for charitable or religious purposes, or which is of the nature referred to in sub-clause (iia) of clause (24) of section 2, or which is of the nature referred to in sub-section (4A) of section 11, tax shall be charged on so much of the relevant income as is not exempt under section 11 or section 12, as if the relevant income not so exempt were the income of an association of persons: Provided that In a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub-section (1) of section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate. (3) In a case where the relevant income is derived from property held under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forfeited exemption. 5.3.6.5 Further, the language of section 13(1)(c) and (d) also supports this view which provides to exclude from the total income, 'any income thereof which as a whole or in part has forfeited exemption. The word such used in the section 13(1)(c)(ii) is important and refers to only that part of income which goes to the benefit of specified persons. Further, similar treatment should be given in respect of cases covered under clause (d) of section 13(2) providing for disallowance in respect of services of the trust given to specified persons. 5.3.6.6 The appellant has relied upon catena of judicial pronouncements where in the courts have upheld the proposition that in case of any alleged violation u/s. 13, the benefit of Section 11 would not be available to the extent of quantum of undue benefit to the specified person as per Section 13(3) and the entire exemption cannot be forfeited/denied. 5.3.6.7 Recently Hon'ble ITAT Jaipur Bench has dealt the issue in detail in the case of Deputy Commissioner of Income-tax (Exemptions) Circle Jaipur v. Central Academy Jodhpur Education Society [2020] 119 taxmann.com 355 (Jaipur - Trib.) dated 09.09. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... victim of national calamities, etc. It invested a sum of Rs. 20,000 in the share of MIOT Hospitals Ltd. AO denied the exemption u/s 11 and 12 on ground that since section 13(1)(d) recognizes investment only in specified assets, failure to invest in such specified business would disentitle the assessee for exemption. CIT(A) allowed the assessee's appeals that the entirety of the income of the assessee could not be denied of exemption. On appeal, referring to the decision of the Bombay High Court in DIT (Exemptions) v. Sheth Mafatlal Gagalbhai Foundation Trust, the Tribunal rejected the Revenue's appeals. High Court held that in DIT (Exemptions) v. Sheth Mafatlal GagalbhaiFoundation Trust, it was held by Bombay High Court that violation of section 11(5), read with section 13(1)(d) by the assessee would result in the maximum marginal rate of tax only on the dividend income on shares, which was not the recognized mode of investment and that the assessee would not be vested with marginal rate of tax on the entire income. Therefore, the income other than dividend income had to be taxed only to the extent to which the violation was found by the AO. Respectfully following the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as of the opinion that in view of violation of Section 11(5), the entire income of the respondent-trust ought to have been assessed and they are not entitled for any exemption under sections 11 and 12 of the Act and revised the order passed by the Assessing Officer. The said order was questioned before the Tribunal. The Tribunal allowed the appeals and set aside the order passed by the Commissioner of Income-tax under section 263 of the Act. Being aggrieved by the said order, the revenue preferred these two appeals . On these facts the Hon'ble High Court in para 11 held as under- With regard to second and third substantial questions of law are concerned, reading of section 13(l)(d) of the Act makes it clear that it is only the income from such investment or deposit which has been made in violation of Section 11 (5) of the Act that is liable to be taxed and that violation under section 13(l)(d) does not tantamount to denial of exemption under section 11 on the total income of the assessee. An identical question came before the Bombay High Court in the case reported in [2001] 249 ITR 533 (Bom.) (supra). The question before the Bombay High Court is Whether violation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply only to that part of the income which has forfeited exemption under the said provision and not to the entire income. There is a vital difference between eligibility for exemption and withdrawal of exemption/forfeiture of exemption for contravention of the provisions of law. These two concepts are different. They have different consequences. In the circumstances, there is merit in the contention of the assessee that in the present case the maximum marginal rate of tax will apply only to the divided income from shares held in contravention of s. 13(1)(a) and not to the entire income. Therefore, income other than dividend income shall be taxed at normal rate of taxation under the Act. A similar view has been taken by the Delhi High Court in a judgment reported in [2002] 253 ITR 593 (supra).Reading of the proviso to Section 142 is very clear that the legislature has clearly contemplated that in a case, where the whole or part of the relevant income is not exempted under section 11 by virtue of violation of Section 13(1)(d) of the Act, tax shall be levied on the relevant income or a part of the relevant income at the maximum marginal rate. The said analogy is applicable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the portion which is not exempt is charged to tax as if it is the income of an AOP. Therefore, a proviso was inserted by the Finance Act, 1984 w.e.f. 1st April, 1985, under which in cases where the whole or any part of the relevant income is not exempt under s. 11 or s. 12 because of the contravention of s. 13(1)(d), then the tax shall be charged on such income or part thereof, as the case may be, at the maximum marginal rate. In other words, only the non exempt income portion would fall in the net of tax as if it was the income of an AOP. Sec. 11(5) lays down various modes or forms in which a trust is required to deploy its funds. Sec. 13(1) lays down cases in which s. 11 shall not apply. Under s. 13(1)(d)(iii), it has been laid down that any share in a company, not being a Government company, held by the trust after 30th Nov., 1983, shall result in forfeiture of exemption. By virtue of the proviso (Ha) it has been laid down that any asset which does not form part of permissible investment under s. 11(5) shall be disposed of within one year from the end of the previous year in which such asset is acquired or by 31st March, 1993, whichever is later. In the present case, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of incometax will apply only to that part of the income which has forfeited exemption under the said provision and not to the entire income. We may also add that in law there is a vital difference between eligibility for exemption and withdrawal of exemption/forfeiture of exemption for contravention of the provisions of law. These two concepts are different. They have different consequences. It is interesting to note that although the legislature withdrew s. 164(2) by the Direct Tax Laws (Amendment) Act, 1987, which provision was reintroduced by the Direct Tax Laws (Amendment) Act, 1989, the legislature did not touch the proviso to s. 164(2) which has been on the statute book right from 1st April 1985. The said proviso was inserted by the Finance Act, 1984. The proviso specifically refers to violation of s. 13(1)(d) and its consequences. In the circumstances, we find merit in the contention of the assessee that in the present case the maximum marginal rate of tax will apply only to the dividend income from shares in Mafatlal Industries Ltd. and not to the entire income. Therefore, income other than dividend income shall be taxed at normal rate of taxation under the Act. (6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified persons. (8) Rajkala Charitable Trust v. ACIT [ITA No. 140/JP/15 dt. 28-4-2016] (Jaipur) (Trib.) In this case it was held that where there is violation of section 13, the entire income of the trust is not chargeable to tax at maximum marginal rate and it is only that income which has violated section 13 which shall suffer maximum marginal rate as per proviso to section 164(2) of the Act. Further, the appellant has submitted that the amount of Rs. 20,00,000/- with interest of Rs. 2,16,000/- ie. Rs. 22,16,000/- was received back by the trust and the interest income of Rs. 2,16,000/- was offered in the return for AY 2012-13 and there is no income generated on amount of Rs. 20 lacs advanced to M/s Rajakala Industries Limited during the year. There is nothing on record to controvert the said submissions of the appellant. Thus, there is no income during the year which can be brought to tax at maximum marginal rate in the hands of the trust in a scenario where it is held that there is violation of provisions of section 13. In view of the same, we don't think it would be relevant to examine whether the appellant trust has violated the provisions of section 13 of the Act as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritable Institutions [2014] 51 taxmann.com 378/227 Taxman 369 (SC). In view of the clear provisions of the Act, and also the decision of the Hon'ble Supreme Court in the case, cited supra, it is clear that in case there is violation referred to under section 13(1)(c), then tax can be charged on such income which violates the provisions of section 13(1)(c); but not whole income of the Trust. This position is further strengthened by the decision of Hon'ble Jurisdictional High Court of Madras in the case of Working Women's Forum (supra), where it was held that denial of exemption u/s. 11 should be restricted to the extent of income, which is in violation of section 13(1)(c) 13(1)(d) of the Act. The Hon'ble Supreme Court had dismissed the SLP filed by the Revenue and affirmed the findings of the Hon'ble Jurisdictional High Court of Madras. In this case, the AO has levied tax on total income of the Trust at maximum marginal rate, contrary to settled position of law. We, therefore, are of the considered view that the AO as well as the Id. CIT (A) were erred in rejecting exemption claimed u/s 11 to total income of the trust. 5.3.6.9 In view of the legal precede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7;54,73,635/- 6. The expenditure incurred for the objects of the trust as detailed in the income and expenditure account has been examined. The assessee has claimed exemption under Section 11 of the I.T. Act, which has been examined. 7. Subject to the above remarks and discussion and after verification of details furnished, total income of the assessee is being worked as under: Mumbai Education Trust Computation of Income Income from other sources 823207434 Income from Notional House Property 5473635 Add: Dividend income as discussed above in para 2. 5000 828686069 Less: Application of income amount applied to the object 709568514 Less: ii) Depreciation as discussed above in para 1 86332719 623235795 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax would be ₹31,18,800/- for A.Y. 200809, ₹34,15,080/- for A.Y. 2009-10 and ₹ 37,48,176/- for A.Y. 2010-11 and ₹41,12,424/- for A.Y. 2011-12. The assessee submitted that some portion of the premises was intermittently used by the Private Limited Company. Assessee has also stated that market value of compensation not charged is the above amounts. The learned CIT (A) in paragraph no. 5.3.5.2 has categorically confirmed that M/s Ideen Furniture Pvt. Ltd. was occupying the 8th floor of the building of assessee‟s trust. Therefore, naturally the Provision of Section 13(1)(c) of the Act applies to this property. 017. The second issue was that 10th Floor of the building was utilised by the Bujwal family as its Bunglow. The learned CIT (A) in paragraph no. 5.3.5.3 has accepted the contention that the learned Assessing Officer has not been able to make out by collecting any evidence and further, the Jt. cum Charity Commissioner vide order dated 30th March, 2022 decided that applicant (the complainant before the charity commissioner) has not proved the allegation of misuse of 10th floor of Mumbai Education Trust building by the family of trustees with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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