2015 (7) TMI 156 - AT - Income Tax

Eligibility for exemption u/s. 11 - Assessing Officer has acknowledged that the appellant has carried out activities related to the consultancy, public awareness and research in the field of renewable energy, his view that such activities were not of general public utility - Held that - Activities were not of general public utility, is not a correct as the various activities carried out by the appellate in the field of education training, public awareness, policy advocacy and research in the cause of sustainable development and environmental protection have been discussed and in the absence of the any specific negative finding by the Commissioner of Income Tax-IV, Pune, it has been held that his action in cancelling the registration granted to the appellant trust u/s 12A(a) by invoking the provision of sec. 12AA(3) of the IT Act was not justified. Activities of the assessee extend beyond Indian geographical boundaries - Held that - The Revenue has not been able to show that the assessee has carried out any of its activities abroad. One of the essential conditions for claiming benefit of exemption u/s. 11 is that the activities have to be carried out by the trust in India. In case the charitable activities of the assessee are beyond India territory, the assessee will not be eligible for the benefit of section 11. The Commissioner of Income Tax (Appeals) in his orders has observed that there is no material on record to show that the activities of the assessee extend outside India. Trustees are the Directors of the companies from which the assessee has purchased windmills - Held that - when the question of denying the benefit or exemption u/s. 11 to the trust arises, the decision cannot be taken on such assumptions or possibilities. Hard facts and evidences have to be brought on record by the Assessing Officer before invoking sec. 13(1)(c) for denying the benefit of sec. 11. More so when courts are of the opinion that the onus to invoke the exception contained in section 13(1)(c) is on revenue. For the discussions made above and in the law which demands the Assessing Officer to discharge the onus of application of sec. 13(1)(c) for denying the benefit of sec. 11, it has to be held that in the face of the fact that no evidences have been brought on record by the Assessing Officer to hold the payment to Suzlon and Enercon as undue or excessive, the finding that there is some infringement of sec. 13(1)(c) is erroneous. The Assessing Officer has failed to bring on record adequate materials which can support his findings. Excessive remuneration/perquisites paid to Shri G.M. Pillai, Director General of the assessee - Held that - Undisputedly, Shri G.M. Pillai is an employee of the assessee trust and not its trustee. Therefore, the provisions of section 13(2)(c) are not attracted.There is no bar under the law that charitable trust or institutions should not be efficiently or professionally managed. So long as the institution is not engaged in making private profit or its income has not been diverted for the benefit of interested persons, there is no reason to deny an assessee the benefit of sec. 11, so long as the other statutory provisions are satisfied. Therefore, the Assessing Officer s contentions that the salary and remuneration paid to. the Director General is more than what should have been paid is held to have no basis and cannot be sustained - Decided against revenue.

Summary

Issues Involved:

1. Eligibility of the assessee as a charitable institute.
2. Charitable activities carried out by the assessee.
3. Operations of the assessee extending to foreign countries.
4. Trustees' connection with windmill manufacturing companies.
5. Excessive salary paid to the Director General.

Detailed Analysis:

1. Eligibility of the Assessee as a Charitable Institute:

The Revenue challenged the findings of the Commissioner of Income Tax (Appeals) in holding the assessee as a charitable institute eligible for exemption under section 11 of the Income Tax Act, 1961. The assessee, a Trust registered under the Societies Registration Act, 1860, and the Bombay Public Trust Act, 1950, was formed with the primary object of providing training in Sustainable Energy and Conservation of Energy. The Tribunal had previously set aside the cancellation of the assessee's registration under section 12A, restoring it. The Commissioner of Income Tax (Appeals) upheld the assessee's eligibility for exemption under section 11, which the Revenue contested.

2. Charitable Activities Carried Out by the Assessee:

The Assessing Officer denied the exemption on the grounds that the assessee had not carried out any charitable activities. However, the Commissioner of Income Tax (Appeals) found irrefutable evidence of the assessee's activities related to consultancy, public awareness, and research in renewable energy, which were aligned with charitable purposes. The Tribunal concurred, noting that the definition of 'charity' is broad and encompasses various public utility activities.

3. Operations of the Assessee Extending to Foreign Countries:

The Assessing Officer argued that the assessee's operations extended to foreign countries, violating the condition that charitable activities must be carried out in India to qualify for exemption under section 11. However, the Commissioner of Income Tax (Appeals) found no material evidence to support this claim. The Tribunal agreed, emphasizing that the Revenue failed to show any activities conducted abroad by the assessee.

4. Trustees' Connection with Windmill Manufacturing Companies:

The Assessing Officer contended that the trustees, being directors of windmill manufacturing companies from which the assessee purchased windmills, had a substantial interest in these companies, thereby serving their cause. The Commissioner of Income Tax (Appeals) dismissed this argument, stating that the Assessing Officer did not provide concrete evidence to show that the income of the society was used for the benefit of these companies. The Tribunal supported this view, noting that assumptions and possibilities were not sufficient grounds to deny exemption under section 11.

5. Excessive Salary Paid to the Director General:

The Assessing Officer also denied the exemption on the basis that the salary paid to Shri G.M. Pillai, the Director General, was excessive. The Commissioner of Income Tax (Appeals) clarified that Shri G.M. Pillai was an employee, not a trustee, and his remuneration was justified given his qualifications and experience. The Tribunal agreed, stating that efficient management does not negate the charitable nature of an institution, and there was no evidence of private profit or diversion of income for personal benefit.

Conclusion:

The Tribunal upheld the findings of the Commissioner of Income Tax (Appeals) on all grounds, confirming the assessee's eligibility for exemption under section 11 of the Income Tax Act. The appeals of the Revenue were dismissed, and the impugned order was confirmed. The judgment emphasized the importance of concrete evidence over assumptions in tax assessments and reinforced the broad interpretation of charitable activities under the law.