TaxTMI 
TaxTMI 
2023 (10) TMI 1416
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....the order of Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case to the extent prejudicial to the interest of the appellant and at any rate is opposed to the principles of equity, natural justice and fair play. 2. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the order of the Assessing Officer is without jurisdiction. Reopening of Assessment 3. For that the reassessment was bad in law. 4. For that the reopening was not made based on any new tangible material Denial of Exemption u/s.11 5. For that the Commissioner of Income Tax (Appeals) erred in upholding the denial of exemption u/s.11 of the Income Tax Act. 6. For that the Commissioner of Income Tax failed to appreciate that the appellant Trust is having composite object and not a Trust with the sole object of advancement of General Public utility. 7. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the activities carried on by the appellant trust are charitable in nature. 8. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the appellant....
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....ng Kalyan Mandapam in Chennai & Coimbatore, and charging rent on par with the market rates. The predominant activity of the assessee's Trust is running marriage hall and also major income comes from running of marriage hall and interest income, etc. The major expenses incurred by the assessee pertain to the activity of running of marriage hall only. It was further observed that the Trust is managing a temple called Bhawan at Kulod exclusively for the benefit of Sahuwala family. A statement on oath was recorded from Shri. Rajavel, Manager (Accounts) of the Trust and Shri Ashok Kumar Gupta, Chairman of the Trust, and in response to the specific questions, they have stated that the Trust is running Kalyan Mandapam at Chennai & Coimbatore, and charging rent. 4. Consequent to survey action u/s.133A of the Act, assessment has been re-opened u/s.147 of the Act. During the course of assessment proceedings, the AO noticed that the objects of the assessee's Trust and activities carried out during these assessment years predominantly running of marriage hall. Further, Trust is not running any Educational Institution or Old Age Home as per the objects of the Trust. The AO has discussed the ....
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....ee preferred an appeal before the Ld. CIT(A). Before the Ld.CIT(A), the assessee has reiterated its arguments made before the AO and submitted that the Trust was formed in the year 1972 and registered u/s.12AA of the Act, as a charitable institution. The main object of the Trust is relief to the poor, education and medical relief and to achieve its objects, the Trust has constructed and maintained a Kalyan Mandapam in Chennai & Coimbatore, to generate income for the purpose of achieving its objects. Therefore, the AO is incorrect in stating that the predominant activity of the Trust is running Kalyan Mandapam and not charity. The assessee had also challenged the re-opening of assessment u/s.147 of the Act, for AYs 2013-14 to 2015-16 on the ground that re-opening of assessment was a change of opinion. 6. The Ld. CIT (A) after considering relevant submissions of the assessee and also taken note of reasons recorded for re-opening of assessment opined that the AO has formed reasonable belief of escapement of income on the basis of tangible materials which came to the knowledge of the AO during the course of survey and without survey there may not have any occasion on the part of the....
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.... expenses incurred by the assessee. The Ld.CIT(A) had also discussed the issue of violation of provisions of Sec.13(1)(c) of the Act, in light of certain evidences found during the course of survey, including bills from Graphic Systems, Coimbatore, with regard to printing of Sahuwala Pariwar Directory-2019 and observed that the benefit of the Trust is limited to a particular community or family but not for general public. The Ld.CIT(A) had also discussed the issue in light of bills received from Ratna Café, Chennai, with regard to amounts spent for Diwali get together of the Trust and family members and observed that the benefit of the Trust has been extended to Trust and their family members. Therefore, rejected the arguments of the assessee and upheld additions made by the AO towards excess of income over expenditure. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us. 8. The Ld. Counsel for the assessee, Shri T. Banusekar, Adv. & Shri H. Yeshwanth kumar, CA, submitted that the Ld.CIT(A) erred in upholding the denial of exemption u/s.11 of the Act. The Ld. Counsel for the assessee referring to Deed of Trust dated 22.06.1972 submitted that the o....
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....on u/s.11 of the Act, depreciation on fixed assets is allowable even in a case where entire cost of asset has been allowed as application of income in the year acquisition of said fixed assets as held by various courts and the Hon'ble Supreme Court and this issue is settled before the law has been amended from the AY 2015-16 . The Ld. Counsel for the assessee further submitted that the AO & the Ld. CIT(A) erred in treating 'corpus donations' as income of the Trust without appreciating the fact that the 'corpus donations' forming part of corpus of the Trust, is capital receipt which cannot be included in the income of the Trust' whether the trust is claiming exemption or not? The AO and the Ld.CIT(A) without appreciating the relevant facts simply treated 'corpus donations' as income of the Trust. In this regard, the counsel for the assessee has relied upon the decision of ITAT, Mumbai benches in the case of Chandraprabhu Jain Swetamber Mandir vs. ACIT (2016) 50 ITR (Trib) 355 10. The Ld. Sr.AR, Shri P. Sajit Kumar, supporting the order of the Ld. CIT (A) submitted that in order to consider any Trust or institution for the benefit of exemption u/s.11 of the Act, irrespective of wh....
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.... 12. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The AO rejected exemption u/s.11 of the Act, for these assessment years on the ground that the objects and activity of the assessee's Trust comes under the last limb of the definition of charitable purpose u/s.2(15) of the Act i.e. the advancement of any other object of GPU and activities carried out by the assessee for these assessment years, is in the nature of trade, commerce and business and hit by proviso to s.2(15) of the Act. Since, the assessee is a GPU Trust and hit by proviso to s.2(15) of the Act, and further, the gross-receipts from the activity is exceeded the prescribed limit, the assessee is not entitled for exemption u/s.11 of the Act. The AO has arrived at a conclusion on the basis of objects of the Trust as per their deed of Trust dated 22.06.1972 and the activities carried out during these assessment years. According to the AO, although the assessee' Trust is having composite object which may be falls under other limbs of the definition of the charitable purpose, but the Trust has carried out only the object of advancement of any othe....
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....omes under the definition of 'education'. Further, the definition of "education" has been defined by the Hon'ble Supreme Court in the case of CIT v. Lok Shikshana Trust reported in [1970] 77 ITR 61 (Mys.) and as per the judgment of the Hon'ble Supreme Court, a systematic instruction, schooling or training given to the young in preparation for the work of life and the process of training and developing the knowledge, skill mind, and character of students by normal schooling. In other words, 'education' means educational institutions imparting education to students and award a formal degree, diploma etc., In the present case, none of the objects specified in the Trust Deed and activities carried out by the Trust, does come under the definition of 'education', and thus, there is no merit in the arguments of the assessee that its objects and activities are come under the definition of 'education'. 14. Having said so, let us come back to the reasons given by the AO to tax excess of income over expenditure under normal provisions of the Act by denying exemption u/s.11 of the Act. Admittedly, the assessee is a GPU Trust which is evident from the activities carried out during these asse....
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....s Trust is nothing but carrying out activities in the nature of trade, commerce, business or service in relation to such activities. Hence, we are of the considered view that the AO has rightly rejected exemption u/s.11 of the Act, to the assessee's Trust. 15. Coming back to other observations of the AO in light of provisions of Sec.13(1)(c) of the Act. The AO has also considered violations of section 13(1)(c) to reject the exemption u/s.11 of the Act, on the ground that there is a violation referred to u/s.13(1)(c) of the Act, and thus, the assessee's Trust is not entitled for exemption u/s.11 of the Act. According to the AO, the assessee has allowed the funds for the benefit of the trustees and their family members and for this purpose; the AO has considered two solitary instances of expenses incurred by the assessee. According to the AO, the assessee has paid a bill pertains to printing of Sahuwala Pariwar Directory-2019 for exclusive benefit of trustees and their family members, which amounts to allowing the benefit of trust funds for the trustees and their family members in violation of provisions of Sec.13(1)(c) of the Act. The AO had also considered a bill payment to Ratn....
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....come u/s.11 of the Act, and thus, further claiming depreciation on said assets amounts to double deduction. Accordingly, the AO disallowed depreciation on fixed assets and added back to the total income of the assessee. 18. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. Since, the assessee's Trust has been denied exemption u/s.11 of the Act, income of the Trust needs to be computed under normal commercial accounting principles and further, depreciation, if any, needs to be allowed as per the provisions of the Act. Further, before amendment, depreciation is an allowable deduction even if the cost of asset acquired during the relevant previous year, has been allowed as application of income u/s.11 of the Act. Therefore, we are of the considered view that the AO needs to verify these facts and consider the issue of allowability of depreciation in accordance with law. 19. The next issue that came up for our consideration from grounds of appeal of the assessee's for AYs 2015-16, 2016-17 & 2019-20 is assessment of 'corpus donations' as income of the assessee. The assessee has claimed exemption for 'corpus ....
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....institution is exempt from tax with certain conditions. The provisions of section 11(1)(d) of the Act excludes voluntary contributions received by trust, with a specific direction that they shall form part of corpus of trust or institution. Similarly, provisions of section 12 also states that any voluntary contribution received by a trust or institution, excluding contributions with a specific direction shall for the purpose of section 11 be deemed to be income derived from property held under trust. Further, provisions of section 12A states that provisions of section 11 & 12 shall not apply in relation to income of any trust or institution, unless such trust or institution fulfill certain conditions. As per said section one of the conditions for claiming benefit of exemption u/s. 11 & 12 of the Act is registration of trust under sub-section (aa) of the Act . From conjoint reading of the above provisions, it is very clear that income of any trust including voluntary contributions received with a specific direction is not includable in the total income of the trust, if such trust is registered u/s.12A / 12AA of the Income Tax Act, 1961. In other words, conditions precedent for claim....
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.... far as case relied upon by the counsel for the assessee, although ITAT Mumbai has taken view and held that corpus donation is capital receipt and not taxable, but fact remains that the ITAT Chennai Bench after considering ITAT Mumbai bench decision has taken a view and held that corpus donation is income when section 11 benefit is not applicable, we prefer to follow jurisdictional ITAT decision and thus, we are inclined to uphold the findings of the AO and the Ld.CIT(A) and reject the ground taken by the assessee for these assessment years. 24. The next issue that came up for our consideration from grounds of appeal of the assessee's for AYs 2017-18 & 2019-20 is additions towards donations paid. The assessee has claimed exemption towards donations paid to other Trust as application of income u/s.11 of the Act. Since, the AO has denied exemption u/s.11 of the Act, and taxed excess of income over expenditure, he has disallowed donation paid for charitable purpose on the ground that said expenditure has not been incurred for earning income. 25. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. Since, the ....