2022 (4) TMI 289

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....ering the documents and submission made by the assessee during assessment proceedings. 2. On the facts and in the circumstances of the case and in law, the learned CIT (Exemptions) erred in not considering Donation of Rs. 2,75,00,000/- to M/s. Sind Education Trust for Educational purpose which is object of the assessee trust & therefore, the A.O. allowed as an expenditure of the trust. 3. On the facts and in the circumstances of the case and in law, the learned CIT (Exemptions) has erred in holding & confirming that A.O. invoked the provisions of section 13(2) of the Act to deny exemptions claimed u/s 11 of the Act. Consequently, the A.O. taxed the surplus of the appellant of Rs. 11,64,89,840/-. The learned CIT (Exemptions) & the Assessing Officer erred in holding that the appellant has violated section 13 of the Act. 4. On the facts and in the circumstances of the case and in law, the learned CIT (Exemptions) failed to appreciate that various case laws discussed in length and also not felt relevant that on this issue assessee trust is in appeal." 3. The assessee is a charitable trust and was granted registration under section 12A of the Income-tax Act, 1961. The assesse....

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....icable. The assessee also contended that even the loan given to another charitable trust where the trustee of the assessee is also one of the trustees is hit by the provisions of section 13, the same would not tantamount to denial of the total exemption under section 11 of the Income-tax. The order of the Assessing Officer was challenged before the Commissioner of Incometax (Appeals) and the appeal of the assessee is pending disposal. The Commissioner of Income-tax (Exemption) was not impressed with the reply and contention of the assessee and passed the impugned order by holding as under:- "3. The matter is considered. It is apparent from the facts and circumstances of the case that provisions of Section 13(2) were invoked to deny exemptions under Section 11 of the Act. The fact that the assessee has disputed the findings of the AO in appeal is not of relevance here. The matter in the present proceedings, are whether the assessment framed is prejudicial to the interests of revenue within the meaning of Section 263 of the Act. The AO, in the assessment proceedings has allowed expenses aggregating to Rs. 3,13,09,693/-that included donation of Rs. 2,75,00,000/- to M/s. Sind Educati....

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....ligibility of exemption is binding in appeal before the Commissioner of Income-tax (Appeal), therefore, the Commissioner of Income-tax (Exemption) has no jurisdiction to invoke the provisions of section 263 on such issue pending in appeal. He has referred to clause (c) of Explanation (1) of section 263(1) of the Income-tax Act and submitted that the jurisdiction of the Commissioner is barred on an order of the Assessing Officer which is subject matter of any appeal and only to the extent where such matters had not been considered and decided in such appeal can be taken up under the provisions of section 263. The decision of the Assessing Officer in allowing the donation to another trust as expenditure while determining the total income of the assessee is one of the possible views and, therefore, the Commissioner is not permitted to invoke the provisions of section 263 merely because he does not agree with the view of the Assessing Officer. In support of his contention, he has relied upon the judgement of Hon'ble Supreme Court in case of Malabar Industries Ltd vs CIT 243 ITR 83(SC) as well as in case of CIT vs Max India Ltd 295 ITR 282 (SC) and submitted that the Hon'ble Apex Court ....

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.... one of the trustees of the assessee is also the trustee of that trust. The assessee has not disputed the factual position on the transaction of advancing loan of Rs. 12,51,00,000/- during the year under consideration to another trust where the trustee of the assessee is also one of the trustees. The Assessing Officer finally held in para 4.3 as under:- "4.3. In view of the above discussion, once the assessee has committed default / violation of provisions of Section 13 of the Act, the assessee is not allowed to claim exemption under section 11 and 12 of the Act in respect of any income of the assessee. I therefore reject the claim of the assessee and hold that the assessee trust is not eligible for any exemption U/s.11 and accordingly tax entire income of the assessee trust denying the benefit of exemption U/s.11I in totality. Thus, surplus of Rs. 11,64,89,8407- is being added back to the income of the assessee." 8. It is clear from the finding of the Assessing Officer that he held the assessee trust is not eligible for any exemption under section 11 and consequently taxed the entire income of the assessee trust by denying the benefit of exemption under section 11 in totality.....