TaxTMI 
TaxTMI 
2025 (8) TMI 295
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....te with regard to the fact that assessee enjoys the registration under the Income Tax Act u/s 12A(a) of the Income Tax Act, which was granted on 25.01.2001 vide CIT/CHD, TECH 3812A7869. The assessee Trust has filed its return of income on 30.09.2014 and 28.09.2015 declaring 'nil' income for assessment year 2014-15 and 2015-16 respectively. The case of the assessee for both the years was selected for scrutiny assessment and notices u/s 143(2) were issued on 31.08.2015 and 06.09.2016 which were duly served upon the assessee. The AO, thereafter issued questionnaires u/s 142(1) of the Income Tax Act on 16.03.2016 and 01.02.2017 listing the cases for hearing on 18.05.2016 and 06.03.2017 for assessment year 2014-15 and 2015-16. The AO has made a detailed analysis and thereafter determined the taxable income of the assessee at Rs. 5,23,74,106/- in assessment year 2014-15 and Rs. 10,47,74,451/- in assessment year 2015-16. The assessments have been passed u/s 143(3) on 23.12.2016 and 26.12.2017 respectively. 4. Appeals to the CIT (Appeals) did not bring any relief to the assessee. The ld. counsel for the assessee has briefly filed the details in tabular form exhibiting the amounts added ....
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....Thus, the activities of the assessee do not fall in the ancillary object contemplated in the definition under the head 'Advancement of any other object of general public utility', rather its activity falls under the main compartment of the definition which if carried out by an Institution, then it will be per-se charitable. 6. With the assistance of ld. Representative, we have perused the record carefully. We find that ld. AO independently did not point out as to how assessee is not performing charitable objectives. He has only narrated 2-3 circumstances vide which he has observed that assessee has violated Section 13(1)(c) read with Section 13(3) by making payments of honorarium to the Chairperson, Vice Chairperson, General Secretary, Finance Secretary of the assessee Trust. He has also observed that assessee has provided travelling facility to these persons and therefore, this is not part of its objectives. Similarly, he has pointed out one more circumstance vide which incurrence of expenditure on start of an Aviation Maintenance Engineering Course is not covered under 'Charitable Activities'. On accumulative setting of these 2-3 circumstances, which we will be adverting upon ....
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....fit is granted which deserves to be disallowed u/s 13(1)(c) read with Section 13(3), then the disallowance is to be restricted qua that amount and benefit of Section 11 cannot be denied in total to the assessee. The AO has not pin-pointed as to how assessee has violated its objectives while imparting education. The circumstances referred in the assessment order which we will be taking independently in the subsequent part is not sufficient to say that assessee is not entitled for the benefit of Section 11 and 12 of the Income Tax Act. Thus, this finding of both the Revenue Authorities is set aside. It is held that assessee is entitled for the benefit of Section 11 and 12 of the Income Tax Act. 10. The Ground Nos. 2 and 3 of assessment year 2014-15 are inter-connected with Ground No.3 and 4 of assessment year 2015-16. We take all these grounds of appeal together. The assessee has pleaded that ld. CIT (Appeals) has erred in confirming the disallowance of Rs. 37,80,000/- and Rs. 30,61,129/- which were added by the AO with the aid of Section 13(1)(c) read with Section 13( 3) and 164(2) of the Income Tax Act in assessment year 2014-15 and 2015-16 respectively. Similarly, in Ground No.....
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....s dated 31.03.2014 whereas the questionnaire in assessment year 2011-12 was dated 30.01.2013. Identical question has been asked in assessment year 2013-14. In all these three years, ultimately no disallowance was made. Thus, remuneration paid to specified persons contemplated in the list u/s 13(3) has been continuously allowed in the past, for the first time, AO has disallowed it. 11. The ld. DR, on the other hand, relied upon the orders of the AO. 12. We have duly considered the rival contentions and gone through the record carefully. If scheme of Section 11 is being perused, then it would reveal that income derived from the property held under the Trust wholly for charitable or religious purpose, if applied to the extent of 85% on its objectives, then such income will not fall in the total income assessable of an assessee. In other words, if Rs. 100/- is being derived from the property held under the Trust and Rs. 85/- is being applied towards the charitable objective of the Trust, then nothing will be taxable upon such a 'Charitable Society' or Trust. However, Section 13 has contemplated certain exceptions. Therefore, for the facility of reference, we are taking note of re....
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....ion (3),- x x x (c) if any amount is paid by way of salary, allowance or otherwise during the previous year to any person referred to in sub-section (3) out of the resources of the trust or institution for services rendered by that person to such trust or institution and the amount so paid is in excess of what may be reasonably paid for such services; x x (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)] an....
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....t he has not carried out any Investigation in that area. The AO has not assigned any reason as to why he is departing from the principle of consistency where such honorarium has been allowed to these persons. Similarly Traveling Expenses has been allowed to the assessee in earlier years. The CIT (Appeals) failed to record any finding qua this aspect in right perspective and blindly up held the assessment order. Therefore, we allow all these grounds of appeal. 13. Ground No. 5 in assessment year 2014 -15 is inter- connected with Ground No. 6 in assessment year 2015 -16. The grievance of the assessee in both these grounds is that CIT (Appeals) has erred in confirming the addition of Rs. 2, 90,55,422/- and Rs. 6,27,75,303 /-. These additions have been made on the ground that funds accumulated in the past have not been used within five years as contemplated in sub-clause (2) of Section 11 of the Income Tax Act. The ld. counsel for the assessee while impugning the orders of Revenue Authorities contended that similar question was asked by the AO in assessment year 2012 - 13 wherein it was contended by the assessee that on account of stay granted by the Addl. District Judge, Ropar, the....
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.... that the non-utilization of accumulated funds in the earlier years and. more particularly, in the year under assessment may kindly be condoned as the same could not be utilized on account of reasons beyond the control of the assessee-Trust. Although there is no fulfillment of Section 11(2) of the Act and in order to avoid contempt proceedings from the Court the violation has been made, and it is requested that the non-compliance of the provisions may be ignored. Sd/ Chairman 13.1 The AO did not make any disallowance in assessment year 2012 -13 in assessment order passed u/s 143( 3) of the Income Tax Act but took a contrary stand in these years. He submitted that as per the proviso to Section 11 (2), the period of the stay is required to be excluded from the alleged period of five years, therefore, assessee is protected by the proviso appended with the Section. 13.2 The ld. CIT DR, on the other hand, was unable to controvert the contention of the assessee as he relied upon the orders of the Revenue Authorities. 14. We have duly considered the rival contentions and gone through the record carefully. As observed earlier, the scheme of Section 11 contemplates t....
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....ated or set apart, due to an order or injunction of any Court, shall be excluded. In other words, during the period if some restrain is being put by a Court for spending such money, then that period is to be excluded. It is demonstrated before us that a litigation arose between the Management Committee which ultimately travelled to the First Appellate Authority before Addl. District Judge, Ropar, who has granted status-quo and restrained incurrence of any major expansion in capital field, therefore, assessee is protected by the proviso appended to the Section itself. If that period is to be excluded, then it has incurred the accumulated fund and no disallowance ought to be made. Even on the principle of consistency, this plea has been accepted by the AO in the assessment year 2012 -13 but we fail to understand as to why AO has taken a different stand in these two years. Accordingly, we allow this ground of appeal in both the years and delete the disallowance made by the AO and confirmed by the CIT (Appeals). The relevant documents are placed on page No. 206 to 238 of Volume-III of the Paper Book. The assessee has placed on record details of relevant forms whereby accumulation was m....
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....ction and various other details including High Sea Sale Agreement for aeroplane. 16.2 The brief summary is being noticed by the AO while taking note of the reply of the assessee in paragraph No. 4 of the assessment order for assessment year 2014-15. The ld. AO did not accept the contention of the assessee and the reason assigned by him is that assessee has started the working of this course without any approval of DGCA, therefore, these expenses are to be considered not incurred towards fulfilment of the objective of the assessee. 16.3 The appeal to the CIT (Appeals) did not bring any relief to the assessee. 17. With the assistance of ld. Representative, we have gone through the record carefully. It is pertinent to note that assessee is a Charitable Institution who got registration u/s 12 A on 25.01.2001. It has explored new area of imparting education in the Branch of Aviation Maintenance Engineering Course. The AO failed to appreciate that approval to start a course would not be granted to any Institution unless infrastructure is placed in order. Thus, even for getting approval, assessee has to fist develop the infrastructure, only then approval would be admissible. The ....
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....f the assessment order. The scheme of Section 11 would contemplate that income derived from the Trust property is to be applied to the extent of 85 % on the objective of the Trust. This application would also include purchase of capital asset or construction of building. For example, the assessee has Rs. 100 /- as an income. It has spent Rs. 60/- for purchase of a capital asset or construction of a building, then prior to 01.04.2015, assessee was entitled for claiming the depreciation on such capital asset or building because income of the assessee was to be determined according to the principle of determination of business income. However, w.e.f. 01.04.2015, sub- clause (6) has been appended in Section 11 which prohibits claim of depreciation on such capital asset whose cost was claimed towards application of income. In other words, if 85% of the income of the Trust is applied on its objective, then it will not be taxable. Hence, if a capital asset is being purchased from that money, which was claimed as exemption being 85% of the receipts, then again assessee will not be entitled to claim the depreciation on it. The AO was of the view that assessee has claimed application of inco....