TaxTMI 
TaxTMI 
2011 (7) TMI 767
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....ations which were not in conformity with its objects as contained in the Trust Deed. Being aggrieved, the assessee preferred first appeal. The ld. CIT(A), following the decision of Hon'ble A.P High Court rendered in the case of Trustees of H.E.H. the Nizam's Pilgrimage Money Trust vs CWT/IT (171 ITR 323), which was later approved by the Apex court, in which it was held that the donation made by the assessee are primarily for charitable activities recognized in law and also within the objects of the Trust, directed the Assessing Officer to allow the donation made by the assessee as claimed and to further allow the exemption u/s 11 of the Act. Now, the Revenue is aggrieved and has raised the following grounds before us: "1) The order of the learned CIT(A) is contrary to the law and facts of the case. 2) Learned CIT(A) has erred to hold in para 9 of the appeal order that" it is immaterial whether the charitable or religious purposes for which the trust is created are confined to the objects of the Trust Deed. What is required is that the income must be applied or accumulated for application or set apart for application as per the provisions of the Income Tax Act, 1961" If the ab....
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....red on the institution can be withdrawn by the Central Government on the recommendations of the UGC. 2.5. The learned CIT(A) ought to have seen that as per the records the objects are only educational in nature and do not include giving donations to religious institutions or political parties. The assessee-trust, at the time of filing Form 35, has stated in the grounds of appeal that "no part of the funds of the Trust had been used for noncharitable purposes It is submitted that on verification records, it was found that the assessee had made donations to political parties / others which were not in line with their objects It was stated before the learned CIT(A) vide SI. NO.6 of the grounds of appeal that "without prejudice to the above, the appellant submits that the gross revenue of the appellant was in excess of Rs. 60 crores and the amount involved is less than 0.4% of the gross revenue". It is submitted that the assessee considers only the amount involved neglecting the objects of the trust. 2.6. The learned CIT(A) ought to have seen that five major donations amounting to Rs. 6.5 crores were made to the trusts wherein the trustees in SASTRA or their relatives are also th....
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.... the details of donations made during the year. On 27.10.2009, the assessee filed details of investments, addition to fixed assets, donations received during the year, donations paid during the year etc. alongwith a covering letter before the Assessing Officer. On perusal of the details so furnished, in box files, it was noticed that the assessee had paid donations through SASTRA an amount of Rs. 6,70,21,273/- which included donations paid to the donees as per Annexure 'A' including donations made to some political parties, individuals and others. The assessee has claimed donations paid as Rs. 6,65,60,886/-in its return of income under the head 'donations and charities'. The difference has been explained as additional donation of Rs. 39,613/- towards charities for Tsunami and donation of Rs. 5,00,000/- received from S.Ramachandra Iyer which has been deducted from the total amount paid as per Annexure A. The details of donations paid and money spent towards charitable activities were also given. The Assessing Officer found the details given in the list and the covering letter to be contrary to each other, so, he asked the assessee to explain whether such donations were towards the a....
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....7 Shri Thangamuthy 2,00,000 8 Shri Ramkumar 50,000 9 Communist Party .. 50,000 10 Shanmugha Desiga Gnana Sambanda Swamiqal Sathabisheka Committee, Mayuram 1,75,000 11 Jawaharlal Nehru Centre 48,000 12 Station Commander, Air Force Station 18,000 13 Shri Java Bhamini Trust 25,000 14 Shri Nanjil K. Varadarajan - GKMoopanar Memorial Celebration 15,000 15 Grama Kovil Poojaris Peravai 2,00,000 16 Shiv Mandir Trust, Lucknow. 50,001 17 Indian Youth People Federation 2,000 18 Sri Vishnu Sahasranama Satsanqam 12,500 19 Sri Sri Mahalakshmi Mathrubutheswarar Trust 5,00,000 20 Security Systems installed at Guruvayur Temple 1,00,000 21 MMTC Limited (Gift Items) 60,772 22 Delhi Guru Charan Singh's marriage 25,000 23 Thanjavur Ewari Nagar Prithvinga Temple 25,000 24 Congress party 50,000 25 Shri V Raghava Iyer Foundation 1,25,00,000 26 S. Ramachandra Iyer & Rajalakshmi Ramachandra Iyer Sathabisheka Trust 1,25,00,000 27 Nemmeli Subramaniya Ramachandra Iyer Foundation 1,50,00,000 28 N. R. Subramania Iyer Founda....
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....ntended for charitable purposes and also not in order to carry on the activities in conformity with its objects of the appellant. A total of Rs. 6, 70,60,886/- has been incurred towards 'Charity and Donations' during the year 2006-07 ( Asst. Year 2007-08) out of which the Assessing Officer has accepted a sum of Rs. 6,50,00,000/- as donations made in pursuant to the objects of the appellant and the balance of Rs. 20,60,886/- according to the Assessing Officer are not for charitable purposes and also not in pursuant to the objects of the appellant. The details of the donations paid by the appellant and not accepted by the Assessing Officer are as under: (A). Donations to various trusts having the benefit of 80G granted by the Income-tax Department in respect of donations received by them: SNo. Name of the trust 80G No. Amount (in Rs. ) 1. Sri Sri Mahalakshmi Mathurbutheswarar Temple DIE(E)No.231/91- 92 dated 27.6.05 5,00,000 2. Grama Koil Poojari Peravai DIT(E) No.2(525)/95-96 dated 22.2.06 2,00,000 3. Jayabhamini Trust C.1752 E(34)/CIT/II/Pry 25,000 4. Vishnu Sahasranama Sathsangham New Delhi DIT(E)2004-05 S- 3257/02/....
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....alls and catamaran boats etc. at two places in TSUNAMI affected area. The appellant was associated with the work and after settlement of the bills and submission of accounts, a few masons represented for wages belatedly and it was settled by SASTRA. The first death anniversary of late Shri G. K. Moopanar was organised at Kumbalwnam with poor feeding and distribution of clothes to school children's. A sum of Rs. 50000/- was incurred in this regard. (E) Advertisement Charges - Rs. 1,75,000/- One of the objects of the appellant is to promote other charitable institutions by way of grants engaged in welfare activities of the general public like propagating philosophy that sustains human life harmony with nature and with the law that sustains the universe and 'to truths/institutions that propagate the natural laws associated with the physical phenomenon of the universe, such as the laws of matter, science, and planetary motions and human actions which maintain the individual, social and environmental order. In this regard the appellant has paid a sum of Rs. 1, 75,000/- to Shanmugha Desika Gnanasambandar Paramacharaya Swamigal Committee who are engaged in the above activities. ....
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....nations paid be allowed as claimed and the exemption u/s 11 of the Income-tax Act, 1961 be restored. 5. The above written submission was sent to the Assessing Officer for his comments/remand report. The Assessing Officer, vide her letter dated 25.5.2010, submitted remand report called for which has been extracted by the ld. CIT(A) in para 5 of order and we are also reproducing the same, for ready reference: "2. The assessee during the course of scrutiny hearings, had filed details of donations paid by it. These details had been filed under the caption "paid donations through SASTRA" for an amount of Rs. 6,70,21,273/-. These are enumerated as per Annexure-A These details include donations made to political parties, individuals etc. Annexure A, of the assessee is reproduced here for easy and ready comprehension. Annexure A Sl No. Name of the donee Amount 1. Charities for Tsunami 39,613 2. Sivanand Saraswathi Sevashram, Chennai 10,000 3. Senthalai Villa Shri Muthumariamman Temple 5,000 4. Shri Tindivanam Ramamurthy 2,00,000 5 Shri Rama Ramanathan 1,00,000 6 Shri Kosi Mani 1,00,000 7 Shri Thangamuthu ....
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.... Annexure B. It would be pertinent to note here that the assessee has clubbed donations not covered by Sec. 80G under the umbrella of "sundries ". 5. It is noticed that as per para H of the written submissions of the assessee made before CIT (A) -XII, the assessee has claimed that the following donations made by the trust have been recovered from the founder trustee Shri, S, Ramachandra Iyer within the same financial year. However, during the course of these proceedings at no point of time did the assessee provide any evidence for such recoveries being effected form the founder trustee. In light of the same this contention of the assessee is uncorroborated. The list of the donations claimed to be recovered is as under: 1 Charities for Tsunami 39,613 4 Shri Thindivanam Ramamurhty 2,00,000 6 Shri Kosi Mani 1,00,000 9 Communitst Party 50,000 20 Security Systems installed at Guruvayur Temple 1,00,000 24 Congress party 50,000 6. On perusal of the submissions of the assessee and the paper book forwarded by the learned CIT (A) - XII, it is verified and found that the following donations were made towards educational activities an....
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....e instant case, the assessee is a deemed university & has objects solely educational in nature. As it has already been held in the case of Aditanar Educational Institution Vs. Addl.CIT (224 ITR 310)(SC), the availability of exemption has to be evaluated each year in each case. Likewise, the benefit of exemption is to be evaluated each year even in this case. The assessee's contention vide his additional written submissions before CIT(A)-XII dated 19-4-2010 that exemption u/s 11 can be denied only if the registration u/s Sec 12A or 12AA is not granted or when the trust has contravened Sec. 13 of the Act, is not correct because withdrawal of registration u/s 12AA is not a prerequisite for withdrawal of exemption u/s 11. 9. As per the list of donations filed by the assessee, it was noticed that it had deviated from the objects stated in the trust deed by making the above donations, especially out of the fees received from the students, which is the main resource for the trust to carry out the objectives laid down in the trust deed. It had carried out activities not enabled by the objects of the trust. Hence, the trust was not eligible for exemption u/s 11 for the said. Assessment y....
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....donations have been made. It may be noted as per Trust Deed the trustees are given absolute discretion to apply the trust funds to anyone or more of the specified objects of the trust, the trustees having done so the same does not call for interference from the Assessing Officer; 5. The Assessing Officer has not even accepted a sum of Rs. 715000 being donations paid to public charitable trusts which also enjoy exemption u/s 80G of Income Tax Act, 1961 as the assessee could not produce evidence .that these particular donations were towards educational activities. The appellant submits that its trust deed allows for giving of donations to trusts which are generally carrying on charitable activities (clause 14 of the Incidental objects clause of the Trust Deed). A trust which is registered u/s 12A/12AA and also has the benefit of exemption u/s 8OG in respect of donations received by it is certainly a trust which carries on charitable activity and therefore there is no violation of the Trust Deed. 6. In view of the above, the fact that all of the donations are covered by the object clauses of the Trust Deed of the appellant, it cannot be considered as not a proper charge to the i....
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....tion by the Court and not a judgement on the questions referred therein. Hence, the Assessing Officer's view that the appellant is not eligible for exemption u/s 11 based on the directions in the judgement of Rukmani Kannan Vidyalaya Trust vs. CIT (249 ITR 111) is an incorrect application of a direction. 9. The assessee's reliance of the judgement of Aditanar Educational Institution vs. Add!. CIT (224 ITR 310) (SC) is totally out of place for that judgement dealt with the provisions of Section 10(22) of the Income Tax Act, 1961 whereas this is a case of exemption u/s 11 of the Income Tax Act, 1961. 10. The appellant also submits the following well accepted propositions of law for your kind consideration: (a) It has been held in the case of Baroda Cricket Association vs ITO 8 SOT 735 that an association, as a running concern, does not require the continuous support of its members. By appreciating their services, therefore, it was not only celebrating its long history, a sense of which was necessary for an Institution to remain on course, but also encouraging them by generating some self-esteem, and thus, targeting its needs. There was thus, a live link between the 'object' ....
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....12AA(3) of the Income Tax Act, 1961 provides for withdrawal of registration granted u/s 12A under certain circumstances. Therefore, if the Assessing Officer wanted to deny exemption u/s 11, she would have first referred the matter to the Commissioner of Income Tax for withdrawal of registration u/s 12AA(3) of the Act and upon receipt of the Order of the Commissioner cancelling the registration u/s 12, proceeded to deny the exemption u/s 11 of the Act. The appellant therefore submits that since the Assessing Officer has not followed the procedure laid down under the Income Tax Act, 1961. In this regard the appellant would like to bring to your kind attention the observations of the Bombay High Court in the case of S. C. Prashar VS. Vasantsen Dwarkadas (29 ITR 857) 'Therefore, these authorities clearly establish that a patent want of jurisdiction entitles the petitioner to obtain immediate relief from the High Court, even though he could raise the plea of want of jurisdiction in a higher tribunal even though, as the English cases point out, he may have acquiesced in the want of jurisdiction must be a patent one. In our opinion, the want of jurisdiction pleaded by the petitioner in th....
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....uld be given to the expression "applied or accumulated for application" in the first part of the clause, for on principle, there cannot be any possible distinction between such income from the property wholly held under trust or a part of the property held in trust. The words "applied" and "accumulated", therefore, must mean "applied or finally set apart". "Applied" means that the income is actually applied for the said purposes. It is, therefore, manifest that under clause (i), only income from the property wholly or in part held in trust actually applied or set apart for application for future spending on charitable purposes is exempted from inclusion in the total income. Further, Under the Income Tax Act, it is immaterial whether the charitable or religious purposes for which the trust is created are confined to the objects of the Trust Deed, what is required is that the income must be applied or accumulated for application or set apart for application as per the provisions of the Income Tax Act, 1961. For what is relevant under the Income Tax Act is the 'application of income'. Thus even though the objects of the trust do not empower the trustees to spend any part of the inc....
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....f construction. " 7. From the above it becomes manifestly clear that out of total sum of Rs. 6,65,60,886/- disbursed by the assessee-trust towards 'charities and donations' during the previous year relevant to the assessment year under consideration, the Assessing Officer has accepted an amount of Rs.6,50,66,000/- as donation made in pursuance of the objects of the assessee-trust. The balance amount of Rs. 14,94,886/- constituting 0.34% of the total expenditure are found not in accordance with the objects of the trust though the donations were made for the charitable purposes. The trust deed contains main objects, secondary objects and other incidental objects to achieve the main objects. The Assessing Officer has accepted the major share of donations but has not accepted the paltry amount of donations. Most of the donations denied by the Assessing Officer are in relation to trust having exemption u/s 80G of the Act. The other donations were in relation to Tsunami relief, staff welfare activities, advertisement to promote environment/nature, disbursement of cloth and feeding of the poor and small donation given to youth organization. The assessee has also spent a small amount to....
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.... of the Trust. The Remand Report, which is a detailed report, speaks otherwise. The ld. CIT(A) has mainly relied on this report. The Assessing Officer has not detailed any valid reason(s) based on which exemption u/s 11 can be refused to the Trust. The ld. CIT(A) has verily made the remand report, which is extracted in the earlier part of the order, as a basis to arrive at his conclusion that the Trust was entitled to exemption u/s 11 of the Act. Although, prima-facie, there seems to be no fallacy in this finding of the ld. CIT(A) yet we would like to further discuss this controversy. 10. The main issue for our consideration is whether the donations/expenses referred to in paragraphs 5,6 & 7 of the Remand Report are within the objects of the Trust or not. We have already detailed such expenditure/ donations in the earlier part of the order. We may mention even at the cost of repetition that very small amount compared to the donations accepted by the Assessing Officer, is disputed by him. The major portion of the amount disallowed by the Assessing Officer pertains to the donations made to various Trusts having exempt u/s 80G of the Act and other donations are very small amounts r....