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2022 (10) TMI 169
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....der 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 Mrs. Samir Bujwal are the trustees of the trust. ii. Similarly, 10th floor of Mumbai Education Trust campus Bandra which was stated to be a Guest House is utilized as Palacial palace of Bhujbal family and being utilized as their private residence without any compensation. 06. During the course of assessment proceedings, it was noticed that there is a violation of the provision of Sections 13 of the Act and therefore, the provision of Section 11 and 12 of the Act are not applicable to the assessee and whole of the income is to be taxed. During the course of assessment proceed....
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....ving 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 its income‟ or only that part of the amount covered under the violation. 013. The learned CIT (A) has dealt with this as under:- "5. Ground of appeal 3 is against the action of the A.O. withdrawing the exemption under section 11 of the Income Tax Act, 1961. The appellant stated that AO erred in withdrawing the exemption U/s 11 of Act as property held under trust was given to interested party as defined in section 13(3) of the Act. The appellant further submitted in this ground of appeal without prejudice to the above ground to allow the benefit of the exemption U/s 11 of ....
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....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 Mumbai Education Trust during the year under consideration. It is also noticed that at least Rs.9,09,48,642/- was exempted u/s 11 of the IT Act in the assessment order dated 30.12.2011 for A.Y.2009-10. In view of the above, it is clearly established that as the assessee trust has violated provisions of section 13 of the IT Act, therefore, the provisions of section 11 of the LT. Act cannot be allowed to the assessee." The assessee filed a reply objecting re-opening of assessment vide letter dated: 16/12/2015. The assessee....
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....ious 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 or manager (by whatever name called) of the institution; (d) any relative of any such author, founder, person, member, trustee or manager as aforesaid; (e) any concern in which any of the persons referred to in clauses (a),(b),(c),(cc) and (d) has a substantial interest. 2. In this regard it is submitted that the applicability of section 13(2)(b) arises when any property of the trust is made available to specified persons exclusively. If the property....
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....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 u/s 10(23AAA) to amount of income generated out of Appellate Authority was justified in denying exemption to extent of income generated on investment made in violation of s 11(5) and not to entire income of Trust-held a reading of aforesaid provisions makes it clear that where any income received by any person on behalf of fund established for such purpose, for welfare of employees or their dependents and which fulfills that conditions th....
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....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 dated 22.12.2003-HIGH COURT in complete agreement with reasoning adopted by CIT(A) as well as Tribunal- In case of Fr. Mutters Charitable Institutions (supra) Karnataka High Court, held that S. 13(l)(d) clears that it was only the income from such-investment, or deposit which had been made in violation of S. 11(5) that was liable to be taxed and -violation u/s 13(l)(d) does not result in denial of exemption u/s 11 to total in....
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....rginal 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 property as per the provisions of the Act, We would like to state that some portion of the premises was intermittently used for some period and for such usage without prejudice to our contention on the facts, disputes in various judicial forums and our stand therein, Market value of Compensation not charged (inclusive of Rent, Electricity and Water Charges) is worked out as under: F.Y. 2007-2008 ....
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.... 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 that at the outset, appellant trust prima facie does not accept that entire 8th floor has been used by M/s. Ideen Furniture Pvt. Ltd. We would like to state that M/s. Ideen Furniture Pvt. Ltd. was incorporated on 22.5.2006. We state that both the directors of M/s. Ideen Furniture Pvt. Ltd. i.e. Mrs. Shephali S Bhujbal as well as Mrs. Vishakha P Bhujbal were rendering honorary services to Mumbai Education Trust in their Administrative as well as conducting Cultural and Social programs being integral part of A....
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....h 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 submissions discussing the provisions of section 13 of the Act during the course of assessment proceedings and the same were not referred by the Ld. AO while passing the assessment order. Ld AO had abruptly mentioned that trust property was used by specified persons as defined in section 13 of the Income Tax Act, 1961. 4.3 In this regard we would like to reproduce the provisions of section 13(2)(b) of Income Tax Act, 1961 as under: "(2) Without prejudice to the generality of....
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..... 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 segmented approach and allowing exemption to income from activities in Kerala and denying the exemption for the activities in Tamil Nadu. * India Habitat Centre Vs. Joint Director of Income Tax (2004) 87 TTJ (Del) 76. Main activity of assesses was to construct a building to provide space to various institutions engaged in the 'Habitat' concept which was subject to approval of Government and AO having ....
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....e 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 rate without denying the benefit of exemption U/s 11 of the Income Tax Act, 1961. It is submitted that to the extent of violation, the exemption shall be denied and in this regard we are relying on the following case laws: Director Of Income Tax Vs. Agrim Charan Foundation (2002) 253ITR 0593 Charitable trust-Exemption under s. 11-Contravention of s. 11(5)-Tribunal found that although the assessee-trust had made deposits with two concerns relying on their misrepresentation that the concerns were authorised to accept deposits from....
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....ehalf 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 CIT(A), Commissioner in exercise of his suo-motu power u/s. 263 held that, in view of violation of section 11(5), entire income of assesee Trust ought to have been assessed and they are not entitled for any exemption u/s. 11 and 12 - Tribunal set aside order passed by Commissioner - Held, Commissioner cannot invoke his revisional power to correct each and every mistakes committed by AO - Income, from investment or deposit made in violation of Section 11(5), is liable to be taxed - Violation u/s. 13(l)(d) does not tan....
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....eable 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, MumbaiFoundation Trust (2001) 249 ITR 0533 Liability in special cases-Assessment of trust- Maximum 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....
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....e 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, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any....
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.... 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 ,GBPx 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, had filed a bogus, baseless, vexatious and false case in the year 2012 against the said trust and other trustees of the said trust before the Hon'ble Charity Commissioner, Maharashtra State at Mumbai, thereby alleging misuse of trust property premises situate at 8th floor of said trust building by the trustees for the purpose and for the benefit of M/s Ideen Furniture and have further alleged that the same has resulted in the los....
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....r 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 trustees was never deliberate or wilful actuated by dishonest or corrupt motives and intentions to misuse trust property for personal gains and causing losses to the said trust. Further the trust has also represented that the said trust has never breached any of the provisions of law. It is to be noted that that while defending the said cases filed against the trust before the Charity Commissioner, Mumbai, the said tru....
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....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 by Charity Commissioner, Mumbai, which is binding on said trust and its trustees. The assess is aware that various representations have been made before this authority (IT authority) on behalf of the said trust wherein the said trust has consistently taken up stand that 8th Floor premises was occupied by M/s Ideen for some period and to some extent, however, the stand maintained by the assess was ....
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....anctioned 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 Ideen Furniture Pvt. Ltd. for AY 2008-09 as well as for AY 2012-13 till AY 2014-15 have been filed with the address other than MET address. Further Sales Tax Registration Certificate as well as Service Tax Registration Certificate of M/s. Ideen Furniture Pvt. Ltd. reflect the address as 5th Floor, Militia Apartments, M.P. Road, Mazgaon, Mumbai and not of M.E.T. The books of accounts ....
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....t, 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, even if the appellant has violated the provisions of Section 13(2) or 13(3), then the A.O. should have taxed the defaulted amount at the maximum marginal rate without denying the benefit of exemption u/s. 11 of the Act. The appellant has relied on the following case laws in this regard: (i) Director of Income Tax Vs. Agrim Charan Foundation ....
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....nd 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 subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision the appellate authority is vested with all the plenary powers....
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....e 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 be open for correction by a higher authority" In other words, the message from Bombay High Court is that if prima facie an information/evidence is necessary to be examine the claim of the assessee, the CIT(A) should consider the necessary evidence in exercise of power u/s 2....
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....eded 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 the applicant has submitted his application at Exh. 1 para No. 18 that in 2006 the 8th floor was occupied by the Ideen Furniture. The applicant relied upon the statements of the staff of Ideen Furniture given to ACB where they have stated that the commercial unit was occupying 8th floor since 2005. Thereafter in his correspondence he has shown that till 2012 he was demanding the 8th floor be vacate....
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....ole 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 politics and respondents No. 2 to 4 lacked the required qualification as well as experience, it was decided that the day to day academic development of the said trust be left with the applicant who was experienced, practicing CA having additional qualification as Law graduate and Company Sectary to lead the said trust in the area of academic and overall development of the said Trust. Therefore, though it i....
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.... 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 be correctly inferred. The mere failure to deposit the money would not, therefore, prove dishonesty. The false explanations are sufficient to prove the element of dishonesty. The test which must be applied are, whether the acts or omissions complained of, were brought about deliberately or wilfully, and whether the trustees were actuated by dishonest or corrupt motives or not. There may be cases wher....
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.... 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. Kingaonkar J.), it is observed in paragraphs 18 and 19 as under "The legal position, which may be kept at back of the mind, is that removal of a trustee is a drastic action. The charge of malfeasance and/or misfeasance is serious one. The proceedings are of quasi civil and quasi criminal nature. Though the proceedings under Section 41-D is not criminal proceeding as such, yet, proof required to sust....
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....t 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. 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, su....
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....irections 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 shall not invite punishment or dismissal. Therefore charge No. 1 stands disapproved." The draft charges 9, 10 and 11 are as under:- 9. Whether the applicant succeeded in establishing the proposed charge that the opponent trustees used/misused an area admeasuring 11000 sq.ft. with garden admeasuring 7000 sq.ft. on the 10th floor of the Trust building at Bandra, Mumbai for residential pu....
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....owever, 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 might be of the guest members. Therefore, respondents denied of misuse of any trust property siphoning of funds and therefore none of their act fall upon or attract Section 41D of The MPT Act. Similarly the applicant do not prove the use of 10th floor by the respondents for residential purposes, therefore it cannot be said that the trustees have improperly dealt with the trust property or accepted the position inconsistent with the Trust position or committed breach of Trust. Similarly, since the 10th floor....
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....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 its administrative work as well as conducting Cultural and Social programs for the students of Mumbai Educational Trust. In this contention the appellant is trying to indicate that the thrust was receiving honorary services from both the directors of M/s. Ideen Furniture Pvt. Ltd. and in lieu of their services the MET had allowed the portion of 8th floor to be utilized by M/s. Ideen Furniture Pvt. Ltd. without charging any compensation whatsoever. Even though the directors of M/s. Ideen Furniture Pvt....
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.... 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 a case by collecting evidences which could prove that the 10th floor of MET building was used by the family of trustees as their private residence. Further the AO has not discussed the issue of use of 10th floor of MET building in the findings and has mainly focused on the use of 8th floor by M/s. Ideen Furniture Pvt. Ltd., a specified person as per section 13(3)(e). This aspect has also been dealt with by the Joint Charity Commissioner, Mumbai in draft charges 9,10 & 11 of the order dated 3....
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.... 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 with regard to the market value of compensation not charged pertained to the alternative claim (without prejudice) of the appellant. It is pertinent hereto mention that the appellate proceedings are in continuation of the assessment proceedings wherein all the contentions of the assessee are being discussed in detail. 5.3.5.6 The next contention of the appellant is that the Hon'ble Charity Commissioner, Mumbai, after appreciation and consideration of all m....
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....sition 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 / deviation by the trustees as admitted by the respondent trustees is used of 8th floor of the Trust premises at Bandra, Mumbai without compensating the trust for the same. The very admission and willingness to compensate the Trust dilutes the possibility of ill-motive. In fact accommodating the respondent trustees on the 8th floor of the trust premises is within the knowledge and with the consent of the applicant, as there are records shown by the....
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....ppellant 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 appellant, it is held that the appellant Trust has not charged any compensation from the commercial unit, run by the family members of the trustees, which occupied one wing of 8th floor of MET Building. Therefore, the assessing officer's finding regarding inclusion of market value of compensation not charged (inclusive of rent, electricity and water charges) is held to be correct as per the facts of the case. The comm....
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....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 trust in part only for charitable or religious purposes or is of the nature referred to in sub-clause (iia) of clause (24) of section 2 or is of the nature referred to in sub-section (4A) of section 11, and either the relevant income applicable to purposes other than charitable or religious purposes (or any part thereof) is not specifically receivable on behalf ....
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....ome 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 09.09.2020. The relevant portion of the decision is reproduced below:- "Now the question before us for consideration is that if there is a violation u/s 13 of the Act then the entire surplus is to be charged to tax or only a part of income which is not exempt u/s 11 by virtue of Section13(1)(c) or 13(1)(d) of the Act sh....
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....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 decision, High Court confirmed the order of the Tribunal and dismissed the revenue's appeal. Special leave petition filed against impugned order was dismissed. (2) CIT v. Fr. Mullers Charitable Institutions [2014] 227 Taxman 369 (SC) :-High Court by impugned order held that in case of char....
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....oned 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 Section 11(5) r/w Section 13(l)(d) by the assessee-trust attracts maximum marginal rate of tax on the entire income of the Trust? The Bombay High Court held that in case of contravention of Section 13(l)(d), maximum marginal rate of tax under section 164(2), proviso is applicable on....
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....hese 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 facts of the present case". (4) CIT v. Orpat Charitable Trust [2015] 230 Taxman 66 (Guj.) (HC) :-Assessee filed it return of income for different assessment years. AOs examined the case of assessee and denied exemption to assessee on respective amounts in connection ....
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.... 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 assessee was required to dispose of the shares under the said proviso by 31st March, 1993, see the judgment of this Court in [IT Appeal No. 81 of 1999, dt, 14th Sept., 2000] [reported as Director of IT (Exemptions) v. Shardaben Bhagubhai Mafatlal Public Charitable Trust ....
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....rfeiture 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) DCIT v. Mahatma Gandhi Charitable Society for Education & Research [ITA No. 359/JP/19 dt. 23-1-2020] (Jaipur) (Trib.) -Hon'ble ITAT in Para 3.4.1 held as under 3.4.1 Similarly, we are also of the view that the even if it is held that assessee ha....
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....ginal 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 the same has become infructious in the facts and circumstances of the present case. The AO is accordingly, directed to allow exemption to the appellant trust u/s 11 and the addition made by the AO and confirmed by CIT(A) is hereby deleted. " ....
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....erred 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 precedents relied upon by the appellant and the judicial pronouncements in the cases of Central Academy Jodhpur Education Society (supra) and Jaya Educational Trust (supra) it becomes abundantly clear that the courts/tribunals have upheld the ....
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.... 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 25450274 Accumulation under Section 11(1)(a) @ 15% of Rs.828686069/- i.e. Rs.124302910/- Total Income 81147364 Round off 81147370 From the above it becomes abundantly clear that the Assessing Officer have applied different yardsticks in the subsequent assessment years with regards to the claim of exemption under Section 11. The principle of consistency has not been followed by the AOs. The allowing of exemption under Section 11 and making addition to the gross receipts of the trust by way of Notional House Property Income also supports the alternative contention of the appellant that in the event of any violation of provisions of Section 13, the entire exempti....
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....d 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 cogent evidence. Admittedly, the learned Assessing Officer also perused only the copy of the complaint before the Jt. Commissioner. The 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 the proceedings before the joint Charity Commissioner were altogether Under different provisions of the Bombay public trust act for the removal of the trustees. For the purpose of provisions of Section 11, 12 and 13 it needs to be verified whether the property has been used directly or indirectly for the benefit of the specified persons or not. Therefore the issue needs to be looked at from the perspective of the income tax act. Therefore, the learned AO should make necessary enquiries. In view of this fact, the learned Assessing Officer should make an independent enquiry in accordance with the law that whether the 10th ....