TaxTMI 
TaxTMI 
2013 (9) TMI 84
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....of the assessee. 3. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing." 2. The relevant facts of the case are that the assessee filed a return declaring NIL income after issuance of notice u/s 143(2) etc was subjected to scrutiny assessment. A perusal of the assessment order shows that the assessee is registered u/s 12A of the Income Tax Act, 1961 vide registration dated 15.05.1973. The Trust is also in receipt of order u/s 80G(5)(vi) vide DIT (Exemption) Delhi order dated 02.12.2009 applicable for the period commencing from 2010-11 assessment year to 2012-13 assessment year. The AO records that the objects of the society as per its Memorandum of Association(MOA) are to establish, maintain and conduct one or more National or International Youth Centres at suitable centres in India for the benefit of the foreign students and youth delegations as well as individuals visiting India. The society also sponsors programmes for interaction of youth leaders, young workers and students etc. 2.1. Being of the view that the assessee is neither in the field of education nor in the field of medical relief, the AO c....
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....orporated is extracted in para 5.0 of the assessment order. 2.5. Accordingly it was concluded that the Inspector's Report shows that all the facilities of the assessee were open to everyone and were not restricted to Members only. In view of this fact, the assessee was show-caused on the basis of the Inspector's report to explain as to why it was not hit by the Amendment in section 2(15) of the Income Tax Act and why exemption u/s 12A should not be denied to it. The reply of the assessee extracted by the AO is reproduced from para 5.2, 5.3, 5.4 & 5.5 which are extracted for ready-reference:- "5.2. The Indian Youth Center Trust is mainly Intended to be multi purpose in character functioning as model youth centre for intellectual and recreational service to youth a coordinating agency for youth organisations; a centre for building up youth; leadership through a variety of programmes and a counseling programs and counseling bureau to advise on various problems confronting youth. The Trust Deed also envisages providing inter alia all or any of the facilities and conducts any of the activities as mentioned in the Trust Deed (already submitted).Further, Trust is also p....
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.... Guest/Trust Guest (viz. Auditors, Lowers, Architect, Contractors etc) and those who had come to attend some function or other. Therefore, it would not be possible to ascertain the amount of canteen collection from those persons who were not stayed in the hostel. In any case it is bound to be very negligible and within permissible limits of section 2(15) of the Income Tax Act. Further, it can be seen from the documents submitted that the trust serves buffet meals during the program/workshop conducted by Members Organizations and/or during own program and workshop but not for any other purposes. This can be reviewed form the related documents enclosed herewith for your kind perusal i.e. Bills of buffets served during workshop and seminars. Further, we also like to submit that for the booking of the facilities (Buffet, Auditorium, Conference Hall etc.) of the Trust, officials of the trust designated for the said purposes (at the rank of Manager) are only authorized. Hence, as regard the remarks made by our Canteen staff they had merely given the information in regard to tariff rate both for vegetarian and non vegetarian buffets arrangement. There is no....
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....on Corporation Limited 221106 The Energy and Resources Institute 257792 Care India 57400 Name of Customer Date of Transaction Amount Paid (Rs.) C/o Vietnam Embassy 03.04.2008 3750 C/o Toshniwal Enterprises Controls Pvt. Ltd. 05.04.2008 29600 C/o World Expedition (India) Pvt. Ltd. 07.04.2008 21800 C/o Landmark Education India 26.04.2008 3650 C/o S I S India Ltd. 30.04.2008 14700 C/o IMT Faridabad 01.05.2008 3678 C/o electronic Media Pvt. Ltd. 11.05.2008 9750 C/o Trips Treks & Tours 27.06.2008 50100 C/o Project Concern International 08.07.2008 9100 C/o Proviti Consulting Private Limited 21.07.2008 14600 C/o Titan Energy Systems Ltd. 21.08.2008 3650 C/o Matrix Laboratories Limited 07.10.2008 3700 C/o SPC Management Services Pvt. Ltd. 05.11.2008 80850 C/o Microcosm Integrated Solutions (P) Ltd. 19.11.2008 273500 M/s Fair Trade Forum-India 24.11.2008 120690 C/o Asianet 13.03.2009 7300 2.7. Accordingly, it was concluded that transactions are with non-Members and the offering of buffet meals etc. in the Auditor....
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....nd membership fee extra. These above two advertisements clearly shows that how brazenly the assessee is making advertisement of its various facilities to lure the customers in the market and thus asking for exemption from the money earned on such commercial & business income. Assessee is making mockery of the membership concept and is clearly misusing the charitable provisions of the IT Act. This is clear violation of Sec. 11 of the IT act and assessee is not running its activities as per objectives of its Trust, accordingly, assessee does not deserve exemption. A copy of the above advertisements (2 pages) is being forwarded to you for you consideration before deciding the appeal in this case." 3.1. Copy of the same was provided to the assessee who filed a detailed response thereto. The same is extracted from para 4.1 of the impugned order here under :- "1. This has reference to the issue raised regarding news cutting in the paper 'The Week' on the basis of which it is being alleged that the appellant Trust is doing commercial activities and as such it is hit by the proviso to Section 2(15) of the income Tax Act. 2.....
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.... has been recognized by a large number of agencies in India and abroad. The Kendra functions as a model centre for building up youth leadership through a variety of constructive and educational programmes in Delhi and parts of rural India help of reputed resource persons; organizes national and international seminars and conferences on issues of contemporary importance, and has a well equipped library and documentation centre, besides excellent infrastructural facilities." 4. On going through the same it may be noticed that it is a dissemination of the information regarding the object and the activities of the trust and the facilities which have been created for the Indian youth. Accordingly to allege on this basis that the trust existing for commercial purpose is not justified as explained in our earlier submissions. The trust is carrying out these activities for the promotion of the Indian youth and none 0 the activities are commercial in nature. 5. In this regard we have given a detailed analysis on the source of the income of the Trust and the application there of which clearly shows that the Trust is engaged only in activities as....
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....nt order, it was submitted that the main heads of income were hostel/canteen activities and auditorium and conference hall and the AO has concluded that the same are commercial in nature without verifying the details of such income. It was submitted that once the details are seen, it would show that the hostel/canteen activities which is forming part of the balance sheet schedule comprises of 2 components namely "boarding and lodging" and "food and beverage", the same is as under :- "(i) Boarding and lodging Rs.2,04,80,684 (ii) Food and beverage Rs.82,95,380" 3.4. Accordingly it was contended that the amount of Rs. 2 crore odd is solely on account of hostel facility which cannot be regarded as an activity of commercial nature. Similarly, the food and beverage collection is solely on account of cafeteria for the hostel and which is as per the objects of the trust. In regard to the income from auditorium and conference hall, it was submitted that these were sponsored by the corporates who had deducted tax at source before making the payment. It was submitted that the advancement of any other object of general public utility has not been made non-charitable, it continue....
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....bject of the assessee therein was to help small exporters for which it was charging a fee and this was considered to be a commercial activity. 3.9. Similarly, the judgement of the Hon'ble Delhi High Court in MCD vs Children Book Trust, it was submitted was not applicable as the said decision was rendered under the Municipal Corporation of Delhi Act and the issue was relating to house tax on the Children Book Trust. It was not a case under the Income Tax Act, 1961. 4. Considering the submissions, the CIT(A) referring to the objects of the trust founded in 1961 by the eminent personalities, Sh. Morarji Desai (Chairman), Smt. Indira Gandhi, Shri Naval H.Tata, Shri. Ravindra Varma, Shri Viren J.Shah and Shri Ram Krishna Bajaj (Managing Trustee) observed that the objects of the trust was to promote all round welfare of the Indian youth. He observed that the trust has been working in that direction only and is multipurpose in character and functioning as a model Youth Centre in intellectual and recreational services to the youth. He also observed that the trust has a Youth centre along with a hostel for the youth and for the benefit of the hostel/ a canteen is also running where it....
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....The reliance placed upon the decisions by the AO which were assailed by the assessee and argued to be distinguishable after discussion were found to be rightly objected to by the assessee. Addressing the advertisement in the newspaper objected to by the AO, the CIT(A) accepted the explanation of the assessee and held that there was nothing wrong in attracting more and more youths to become its members by way of advertisements. 4.2. Accordingly he held that the AO was not justified in denying the exemption claimed by the assessee under section 11 of the Act and directed the AO to allow exemption as claimed by the assessee under section 11. The CIT(A) further went on to examine the aspect of mutuality which was held to be academic in nature in view of the finding given on merit. 5. Aggrieved by this, the Revenue is in appeal before the Tribunal. 5.1. The Ld. Sr. DR, Ms. Shamuna Sen placed heavily reliance on the assessment order so as to contend that the activities of the trust are not in consonance with the requirements of the Act. It was her submission relying upon the Inspector's Report that canteen facilities were available to everyone and was being run as a commercial a....
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....evenue summary, it was her submission that the same is merely a list and in the face of the Inspector's Report appearing on page 489 which was heavily relied upon by the Revenue. It was argued that it clearly brings out the fact that the facilities are open to the anyone and everyone and is running on commercial lines. For ready-reference, the said Report is reproduced hreunder :- "I was sent by ADIT(E), TC-II, New Delhi, for enquiry in case of India Youth Centre Trust, Circular Road, Chanakya Puri, New Delhi on 02.12.2011. After reaching Vishwa Yuvak Kendra (India Youth Centre Trust), We went to Dining Hall alongwith Sr. TA Sh. Omvir Singh and TA Sh. Arun Kumar, for taking Lunch. We were offered Buffet as well as Itemwise Lunch option and we opted for item-wise Lunch and took food items costing Rs. 957/-(approx.). Various other persons were also taking Lunch on payment basis and there was no check in the Centre for outsiders taking food at the Dining Hall. After taking this Lunch we enquired about a get-together arrangement from the persons invoicing bills Mr. Rakesh Chopra and Mr. Vipin and told him that we want a Buffet arrangement....
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....because the canteen staff in good faith allowed the Inspector and her team of two tax advisors to have a meal. The queries answered in good faith by the canteen staff also do not make trust to be operating on commercial lines. It was his submission that auditorium and seminar halls are made routinely available to Government Education Bodies etc. and NGOs having the same aims and objects as the assessee and stringent documentations is maintained by the assessee trust which he would address which has been before the AO and the CIT(A). Accordingly mere oral queries casually answered by canteen staff who definitely were not making the booking does not lead to any conclusion against the assessee's trust. It was his submission that the assessee trust started with a very humble corpus of Rs. 1000/- towards its laudable aim. The hostel facilities it was submitted are utilized by various students either from different parts of the country or the world and provides a platform where the youth can be exposed to conferences and activities in the auditorium which co-incide with the aims and objects of the assessee trust. It was submitted that as and when the same are not required by the assessee....
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.... an illustration from the list of membership of NGO's etc, attention was invited to page 650 which would show that the "Membership Registration Form" has been filled by "Samvedna Foundation" giving its contact, address, telephone no, the source of its funds (herein Government) mentioning, the no. of staff visiting and the State from where they belong (herein Gujarat). The "aims and the objects" of the organizations are mentioned in the Column indicated therein for 'Samvedna Foundation' is as under :- "To improve life standard of women at poor section through making them skillful and self reliant." The information required to be mentioned under the "target group" is as under :- "Women and child" The Column requiring information on "thrust area" is given as under :- "We are running vocational training, classes for poor section women in rural area" 5.2.2. It was submitted that the said information is accompanied by the copy of the Memorandum of Association, registration certificate, audited statement of the accounts of the said trust which are appearing in the following pages. 5.2.3. Similarly at page 667 it was submitted it ....
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....from the assessment order hereunder:- "5.5 In addition to the above we would also like to submit here that the total receipts of Canteen is Rs. 82.95 laces which include Rs. 61.19 laces against the workshop / seminar in which buffet lunch was served to participants and Rs.13.14 laces for the personnel stayed in the Hostels. Balance Rs.8.62 laces from others that includes from Staff/Staffs' Guest/Trust Guest (viz. Auditors, Lowers, Architect, Contractors etc) and those who had come to attend some function or other. Therefore, it would not be possible to ascertain the amount of canteen collection from those persons who were not stayed in the hostel. In any case it is bound to be very negligible and within permissible limits of section 2(15) of the Income Tax Act. Further, it can be seen from the documents submitted that the trust serves buffet meals during the program / workshop conducted by Members Organizations and/or during own program and workshop but not for any other purposes. This can be reviewed form the related documents enclosed herewith for your kind perusal i.e. Bills of buffets served during workshop and seminars. Further, we also like to ....
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....ts attending conference, seminars and training courses and air-conditioned auditorium and seminar halls etc. Referring to the same, it was his submission that what is wrong with such an advertisement if the assessee is trying to attract attention of NGOs and other such groups who are interested in promoting and creating leadership programme for the youth in order to harness their energy and intellectual capacity. The fact that the assessee's trust provides them a place for boarding, lodging and conference facilities which are towards the aims and objects of the trust cannot be held to be contrary to the objects of the trust by merely advertising this fact. It was submitted that the advertisement of the availability and existence of the trust does not make the activity commercial in nature. Attention was also invited to page 74 which is issued by the Transport Bhawan, Parliament Street, Department of Tourism certifying that the Kendra hostel is not a hotel and it is a non-commercial hostel constructed to cater to the needs of youths, scholars and professors on temporary visit to New Delhi. It was submitted that it is a concern for the Department of Tourism to consider whether a part....
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.... in its income shown receipts from canteen facilities over and above receipts from hiring of conference hall/auditorium etc. Apart from that he has also been guided by the fact that the Inspector accompanied by tax advisors was allowed to utilize the canteen facilities without any effort or the part of the serving personnel to ensure that only inmates of the hostel were being served. The explanation of the assessee that its hostel facilities are utilized by NGOs and Government schools, Education Departments etc. who stay/attend for a few days as students, professors, scholars etc attending seminars, conferences and then move on thereby making it difficult for canteen staff to ascertain whether the persons are staying in the hostel or not has not been accepted. The chances of stray incidents where unconnected person may avail of services has not been accepted as sufficient compliance. The argument that canteen staff may not be in a position to identify whether the person availing the services is staying in the hostel or is merely attending conference or is a rank outsider has not been accepted. On account of this lack of full control by the canteen staff on their facilities being us....
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....ntical. Consequently at the time of admission it is seen that hostel facilities are made available only after the assessee trust is satisfied that the aims and objects of the charitable trust organizations are also for promotion of youth activities evidenced by relevant financial statement, certifications of registration narrating the purpose of visit etc and only then hostel facilities are made available for a maximum period of only 28 days which results at times where odd figures may be worked out depending on facilities used. We may reproduce for ready-reference from page 78 of paper book, the Note printed at the bottom of the Bill demonstrating the duration:- NAWO "Note:-This membership fee is valid for the next 28 days from the date of checkin 07 Sep 2008 and upto date 04 Oct 2008 for rooms only. Please retain copy of this bill to avoid the repayment of membership fees. This membership fees is valid for Room(s) only and cannot be adjusted against the other services. 6.2. A perusal of pages 79, 80 & 81 also demonstrate that specific no for rooms have been book by specified organizations on specified dates namely M/s Positive Women Network; Socio Legal Info....
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....e contribution to the corpus column-9 indicates that the assessee's trust has not received any contribution to corpus during the year. A perusal of page 815-816 addressed again to the ADIT(E) dated 29.12.2011 indicate that the accumulated Fund has been utilized in the time limit as prescribed in the Income Tax Act for the purpose of construction of the Annex Building of trust and renovation of old building. The details of this surplus for the five years and its utilization as per page 816 indicated as under :- Asst. Years Total Surplus/(Deficit) Accumulation u/s 11(2) u/s 11(1) up to 15% 2004-05 16,83,695 Not required 16,83,695 2005-06 (54,52,886) Not required 0 2006-07 (50,03,098) Not required 0 2007-08 86,88,124 80,00,000 6,88,124 2008-09 1,85,47,381 1,25,00,000 60,47,381 2009-10 Case is under Process The above accumulation is started utilization from 2009-10 onwards for the construction of Building & renovation of old Building of the 2009-10 approx. Rs. 2.20 crores was utilized for said purposes. 6.4. We have also taken into consideration, the objections posed by the AO to the advert....
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....nd no fault in the conclusion of the CIT(A) who has held the judgement of Jalandhar Development Authority to be inapplicable on facts as the said authority was engaged in selling land after development could not prove its objects to be charitable. Similar was the position for Punjab Urban Planning & Development Authority who was found to be functioning on commercial lines. In the case of Indian Chamber of Commerce, the surplus was available for distribution which is not a fact in the present case. The judgement rendered in the case of MCD vs. Children Book Trust was also not applicable as it was rendered interpreting Municipal Corporation of Delhi Act for the purposes of house tax. 6.5. Accordingly on account of the arguments detailed reasoning on facts and law discussed at length in the earlier part of this order, we find no good reason to interfere with the finding arrived at in the impugned order. Being satisfied by the reasoning and finding of the CIT(A), Ground No-1 of the Revenue is rejected. 6.6. The facts qua the second issue agitated by the Revenue are found discussed at page 11 of the assessment order by virtue of which depreciation for the assets purchased during t....
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.... in the case of DIT vs Vishwa Jagriti Mission reported at 2012-TIOL-271-HC-DEL-IT allowed the appeal of the assessee. 6.8. Aggrieved by which the Revenue is in appeal before the Tribunal. The Ld. DR placed reliance on the assessment order however no contrary decision or judgement of the Jurisdictional High Court or the Hon'ble Apex Court was relied upon in support of the ground raised. The Ld. AR on the other hand relied upon the decision of the Jurisdictional High Court and the Hon'ble Punjab & Haryana High Court which have been followed by the CIT(A) so as to contend that the ground deserves to be rejected. 7. We have heard the rival submissions and perused the material available on record. It is seen that no distinction on facts has been made on behalf of the Revenue nor any contrary decision in support of the claim either of the Jurisdictional High Court or the Hon'ble Apex Court has been referred to for our consideration. It is seen that the issue was decided by the CIT(A) in the following manner :- "8.2. I have considered the submission made by the appellant and I have perused the record. On going through the same, I have noticed that the issue of deprec....
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....High Court. There the society was running a school in Bangalore and was allowed exemption under Section11. The question arose as to how the income available for application to charitable and religious purposes should be computed. Jagannatha Setty, J speaking for the Division Bench of' the Court held that income derived from property held under trust cannot be the "total income" as defined in Section 2(45) of the Act and that the word "income" is a wider term than the expression "profits and gains of business or profession". Reference was made to the nature of depreciation and it was pointed out that depreciation was nothing but decrease in the value of property through wear, deterioration or obsolescence. It was observed that depreciation, if not allowed as a necessary deduction for computing the income of charitable institutions, then there is no way to preserve the corpus of the trust for deriving the income. The circularNo.5-P (LXX-6) of 1968, dated July 19,1968 was reproduced in the judgment in which the Board has taken the view that the income of the trust should be understood in its commercial sense. The circular is as under:- "Where the trust derives income f....