2013 (11) TMI 1705 - AT - Income Tax

2017 (10) TMI 178 - HC

Issues Involved:
1. Jurisdictional Issue
2. Validity of Special Audit u/s 142(2A)
3. Exemption u/s 11
4. Application of Section 10(23C)
5. Violation of Section 13(1)(d)
6. Violation of Section 13(1)(c)
7. Capitation Fee Allegations
8. Cash Seized from Employee
9. Disallowances under Various Sections
10. Set-off of Excess Deficit
11. Donations and Corpus Fund

Summary:

1. Jurisdictional Issue:
The appeals arose from assessments framed u/s 153C r.w.s. 143(3) of the Income-tax Act for A.Ys. 2006-07 and 2007-08. The jurisdictional issue was previously disposed of, and the current appeals focus on other substantive matters.

2. Validity of Special Audit u/s 142(2A):
The assessee did not press the grounds related to the reference for special audit u/s 142(2A), and thus, the discussion on this issue was skipped.

3. Exemption u/s 11:
The core issue was whether the assessee trust was entitled to exemption u/s 11. The Assessing Officer denied the exemption, alleging violations of Section 11(5) r.w.s. 13(1)(d) and 13(1)(c) and charging capitation fees. The Tribunal restored the registration u/s 12A, which was initially canceled by the CIT(Central), Pune.

4. Application of Section 10(23C):
The CIT(A) held that the activities of the trust were covered under Section 10(23C), and thus, exemption u/s 11 was not allowable. However, the Tribunal disagreed, stating that the assessee could opt for benefits under either Section 10(23C) or Section 11.

5. Violation of Section 13(1)(d):
The Assessing Officer alleged that the trust violated Section 13(1)(d) by investing in shares of Bharati Sahakari Bank Ltd. The Tribunal, however, held that such investments were made as a condition for obtaining loans and did not constitute a violation of Section 11(5) r.w.s. 13(1)(d).

6. Violation of Section 13(1)(c):
The Assessing Officer claimed that the trust violated Section 13(1)(c) by incurring agricultural expenses for trustees. The Tribunal found no evidence supporting this claim and held that the trust did not violate Section 13(1)(c).

7. Capitation Fee Allegations:
The Assessing Officer alleged that the trust charged capitation fees for admissions, based on cash and documents seized from an employee, Shri R.D. Shinde. The Tribunal found that the evidence did not support the claim that the seized cash belonged to the trust and held that the cash belonged to Shri Shinde.

8. Cash Seized from Employee:
The Tribunal held that the cash seized from Shri R.D. Shinde did not belong to the assessee trust. The presumption u/s 132(4A) was that the cash belonged to the person from whom it was seized, i.e., Shri Shinde.

9. Disallowances under Various Sections:
The Tribunal addressed several disallowances made by the Assessing Officer, including those under Sections 40(a)(ia), 40A(3), and others. Given the restoration of the trust's registration and entitlement to exemption u/s 11, these disallowances became redundant.

10. Set-off of Excess Deficit:
The assessee did not press the ground related to the set-off of excess deficit, and thus, it was dismissed as not pressed.

11. Donations and Corpus Fund:
The Tribunal held that donations collected through coupons could not be treated as part of the corpus fund but were revenue receipts. However, specific donations received by cheques for the corpus were accepted as capital receipts.

Conclusion:
The Tribunal allowed the appeals for A.Ys. 2006-07 and 2007-08, holding that the assessee trust was entitled to exemption u/s 11 and had not violated Sections 11(5) r.w.s. 13(1)(d) or 13(1)(c). The cash seized from Shri R.D. Shinde was held to belong to him, not the trust.

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