TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 1416
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.... 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 trust had applied its receipt from Kalyanamandapamas donation for educational and medical institutions. 9....
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....l 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 issue at length in light of certain observations made during the course of survey, including certain bills from the Graphic Systems, Coimbatore, which was on account of printing of Sahuwala Pariwar Directory-2019 which conta....
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.... 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 AO to examine the activities of the Trust and application of income. The books of accounts maintained and submitted by the assessee may not reveal the original affairs and activities of the Trust. Therefore, the opined that the....
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....stems, 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 objects of the Trust is to fund and maintain or aid educational institutions, which comes under the definition of education. If you see other objects, the Trust is providing medical relief and relief to the poor. The running of Kalya....
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.... 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 what is written in the objects of the Trust, the activity carried out by the Trust or Institution during relevant period has to be seen. In the present case, although the assessee has composite objects, but if you go by the activities car....
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....tivity 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 other object of GPU which is evident from the activities of the Trust for these assessment years. The Trust is only running Kalyan Mandapam at Chennai & Coimbatore on commercial lines by charging fees and cess. The AO took support from material....
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....e 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 assessment years. In order to ascertain the nature of a Trust, it is not necessary to consider only the objects specified in the deed of Trust, but it is necessary to consider the activities carried out by the Trust. If you consider the activities ....
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....see'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 Ratna Café, a Restaurant, at Chennai, towards amounts spent for Diwali get-together of the trustee's families at Chennai. The Ld. Counsel for the assessee has explained the purpose of spending amounts out of trust funds. We find that payment f....
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....rties, 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 donations' on the ground that the assessee is eligible for exemption u/s.11 of the Act. The AO has made addition towards 'corpus donations' as income of the assessee on the ground that when sec.11 of the Act, is inoperative and exemption is denied, 'corp....
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....ection 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 claiming exemption u/s.11 including for voluntary contributions is registration of trust u/s.12A of the Income Tax Act, 1961. This principle is supported by the decision of the Hon'ble Supreme Court in the case of M/s. U.P.Forest Corporation & Another vs. DCIT (supra), wh....
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....rpus 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 AO has denied exemption u/s.11 of the Act, and computed income as per provisions of Sec.2(15) of the Act, and proviso provided therein, in commercial lines after denying exemption, any expenditure incurred towards earning of income including donations, if any, paid in the course of carr....