9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (7) TMI 222 - HC - Income TaxJurisdiction u/s 263 Exemption u/s 11 and 12 of the Act Assessee charitable Trust or not - treating the assessee as AOP Held that - The Tribunal had concluded that the assessment was rightly framed u/s 143(3) of the Act on 21.3.2000 - the donations received by the assessee had been applied for the purpose for which the trust had been created which included the construction of the building and other charitable purposes - the appointment of trustees or the members of the committee was not within the exclusive powers of Shambhu Dayal Shastri as the same was done by the trustees - The plea regarding expenditure having not been incurred for charitable purposes was not accepted as out of the total receipts of ₹ 86 lacs, the trust had incurred ₹ 31 lacs for construction of the building and ₹ 19 lacs for langar expenses - other items of expenditure were those which were incurred by the charitable trust for regular functioning such as salaries, vehicle maintenance and miscellaneous expenses - the trust had also spent on various other items amounting to ₹ 5 lacs. The assessee was a charitable institution and was carrying on activities for charitable purposes - at the relevant time, the assessee trust was required to utilize 75% of its funds for charitable purposes to take benefit u/s 11 and 12 of the Act - more than 75% of the total income during the AY had been applied for charitable purposes as per return - The amounts invested for the construction of immovable property had to be treated as application of income - The requirement of 75% was enhanced to 85% by Finance Act 2002 w.e.f 1.4.2003 - revenue was unable to dislodge the finding of facts recorded by the Tribunal. Relying upon Commissioner Of Income-Tax Versus Barkate Saifiyah Society 1993 (11) TMI 13 - GUJARAT High Court - the AO was right in framing the assessment on 21.3.2000 and assumption of jurisdiction by CIT u/s 263 of the Act was improper thus, the registration granted to the assessee u/s 12A of the Act was in accordance with law and the assessee had complied with the requirement of Sections 11 and 12 of the Act, as a necessary corollary, the action of the assessing authority in treating the assessee as an association of persons and also to assess Shri Shambhu Dayal Shastri on protective basis cannot be legally sustained - the action of CIT in invoking provisions of section 263 of the Act cannot be justified Decided against Revenue.
Issues Involved:
1. Whether the respondent-trust is a charitable trust and, therefore, its income was exempt from tax under Sections 11 and 12 of the Income Tax Act, 1961. 2. Whether the Commissioner of Income Tax (CIT) was justified in assuming jurisdiction under Section 263 of the Income Tax Act, 1961 in the facts and circumstances of the present case. Detailed Analysis: Issue 1: Whether the respondent-trust is a charitable trust and, therefore, its income was exempt from tax under Sections 11 and 12 of the Income Tax Act, 1961. The respondent trust, M/s Janhit Sewa Charitable Trust, was registered under Section 12A of the Income Tax Act, 1961, which is a condition precedent for availing the benefit under Sections 11 and 12 of the Act. The trust deed outlined various charitable purposes such as education, medical relief, and general public utility. The trust was granted registration under Section 12A and exemption under Section 80G for five years from 1.4.1993 to 31.3.1998. The Tribunal found that the trust had applied its income for charitable purposes, including the construction of a building and langar expenses. The Tribunal also noted that the trust had spent more than 75% of its total income for charitable purposes, which was the requirement at the relevant time to avail benefits under Sections 11 and 12 of the Act. The court referred to several judgments to emphasize that there is no clear line of demarcation between religious and charitable purposes in the Hindu system. Construction of temples and other acts like providing food and shelter were considered charitable acts. The court also noted that the trust's activities, including running Gaushalas, organizing langar, holding medical camps, and running a Sanskrit school, were charitable in nature. Therefore, the court concluded that the respondent-trust was a charitable trust entitled to the benefits of Sections 11 and 12 of the Act, and the income was exempt from tax. Issue 2: Whether the Commissioner of Income Tax (CIT) was justified in assuming jurisdiction under Section 263 of the Income Tax Act, 1961 in the facts and circumstances of the present case. The CIT invoked Section 263 of the Act, holding that the assessment order was erroneous and prejudicial to the interest of the revenue. The CIT's grounds included non-examination of books of account by the Assessing Officer (AO), personal benefits derived by trustees, and improper application of trust funds. The Tribunal, however, found that the AO had examined the books of account, which were impounded and in the possession of the AO. The Tribunal also noted that the trust had incurred significant expenses for charitable purposes, including construction and langar expenses. The Tribunal rejected the CIT's allegations of personal benefits derived by trustees, noting that there was no material evidence to support these claims. The court emphasized that the registration under Section 12A does not automatically entitle a trust to benefits under Sections 11 and 12, but the AO cannot question the objects of the trust once registration is granted. The court found that the CIT's reasons for invoking Section 263 were not substantiated by evidence and that the AO's assessment was in accordance with the law. Consequently, the court held that the CIT was not justified in assuming jurisdiction under Section 263 of the Act, and the action of the AO in treating the assessee as an association of persons and assessing the trustee on a protective basis was not legally sustainable. Conclusion: The court dismissed the appeals, holding that the respondent-trust is a charitable trust entitled to tax exemption under Sections 11 and 12 of the Income Tax Act, 1961, and that the CIT was not justified in assuming jurisdiction under Section 263 of the Act.
|
