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TMI Blog2013 (10) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the assessee-trust on various activities undertaken to achieve its objects before any Revenue authorities - Learned first appellate authority has wrongly deleted the additions in dispute by passing the impugned orders which deserves to be cancelled – Order of the A.O. is upheld – Decided in favor of Revenue. - IT APPEAL NOS. 476 & 477 (ASR.) OF 2011 - - - Dated:- 15-1-2013 - H.S. SIDHU AND SH. B.P.JAIN , JJ. For the Appellant : R.L. Chhanalia. For the Respondent : J.P. Bhatia. ORDER:- The Revenue has filed these two appeals against two different orders of CIT(A), Amritsar, each dt. 20th June, 2011 for the asst. yrs. 2006-07 and 2008-09 respectively. The issues involved in both the appeals are almost common, therefore, these are being disposed of by this consolidated order for the sake of convenience. 2. The grounds raised by the Revenue in ITA No. 477/Asr/2011 are reproduced hereunder for the sake of convenience which are almost similar in ITA No. 476/Asr/2011 : "1. On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 5,38,12,792 made by the AO by treating the surplus income into busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r review has already been incorporated in Annex. 11. The AO perused the same and again asked the assessee that the information supplied by the assessee is not supplied in the proper format and the AO again asked the assessee to file information in a proper format as given by him. The assessment proceedings were adjourned many times and the AO perused the requisite information supplied by the assessee and found that most of the development activities has been carried out by the Improvement Trust in the area covered by its own scheme. The old area has been left untouched. He has also pointed out to the assessee's counsel that the objectives of the trust, are not confined to developing new housing/commercial projects but also includes development of old city for practically nothing has been done. The AO also stated to the assessee that in the earlier year, the registration under s. 12AA has been denied to the assessee for the reason that the assessee-trust has failed to fulfil the objectives for which addition (sic-assessee) is created. The assessee has given reply that in the earlier year, the Tribunal, Amritsar Bench, has allowed the registration to the assessee and assessee has als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng registration. The AO held that the Tribunal, Delhi Bench has reversed the order of the learned CIT(A) and granted registration under s. 12A by relying upon various decisions rendered by the High Courts. He held that it is the duty of the AO to obtain various details of expenditure incurred by the assessee-trust on the various activities undertaken to achieve the objectives of the trust. The various Improvement Trusts were created as per provision of Punjab Town Act, 1922. 6. After detailed discussions with the learned counsel for the assessee as well as after perusing the evidence filed by the assessee, the AO held that in spite of various opportunities given to the assessee for furnishing details of various activities along with the detail of expenses incurred, as undertaken by assessee trust to achieve the objectives for which it is created, the assessee has not filed the same. Whatever the assessee has filed shows that various development activities undertaken by it are confined to the area covered under the scheme floated by the Improvement Trust. But practically nothing has been done to achieve other objectives required for exemption under s. 11 of the Act. The AO also re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Improvement Trust v. Asstt. CIT [CWP No. 10265 of 2009] vide its orders dt. 3lst Oct., 2008 and 20th July, 2009 respectively that the activities of the trusts are charitable in nature. Finally, the learned CIT(A) held that CIT-II. Amritsar has refused registration to the assessee-trust and the order of the learned CTT-II has been reversed by the Tribunal. Amritsar Bench vide their order dt. 22nd Feb., 2008 and allowed registration to the assessee. Therefore, the activities of the trust are charitable in nature and the assessee is entitled for exemption under s. 11 of the Act. 9. As regards disallowing the claim on account of Employees Provident Fund of Rs. 20,78,026, the learned CIT(A) held that the status of the assessee has been declared as trust and registration under s. 12AA by virtue of finding of the Tribunal, Amritsar Bench has been granted and the assessee-trust has utilized the entire income towards its main object as well as the assessee had deposited provident fund amounting to Rs. 20,78,026. Even after considering this amount, there remains still deficit of Rs. 23,57,98,414. Therefore, the AO is not justified in considering assessee's book version and after takin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss. 11 to 13 of the Act become applicable for the asst. yr. 2006-07 to the trust by treating it as a charitable institution. Lastly, he stated that the assessee-trust is created as per provisions of Punjab Town Act, 1922 and there are many objects which are to be achieved by the assessee- trust. Those are of charitable nature. In support of his arguments, he has relied upon the decision of the Hon'ble Supreme Court in the case of Ahmedabad Rang Caste Association v. CIT [1971] 82 1TR 704 and has also given the copy of the order of the Jurisdictional High Court, dt. 20th July, 2009 passed in CWP No. 10265 of 2009 in the case of Improvement Trust (supra). 13. We have heard both the parties and perused the records available with us along with citations cited by both the parties as well as mentioned in orders passed by the Revenue Authorities. The assessee has filed its return of income for the asst. yr. 2006-07 along with audit report in Form 10B. But the AO found that the audit report attached by the assessee with its return was not based on accepted norms/principle of accountancy and it was not possible for him to draw the correct results from the details filed by the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not furnish any such details as the assessment was going to be barred by time limitation. He finally adjourned the case for 18th Aug., 2009 for filing the details by the assessee. In response to the same, the assessee did not file any details as required by the AO and the AO has held that the assessee is simply harping on one issue that though the registration under s. 12A was refused to the assessee by the CIT-II, the order of CIT-II, Amritsar was reversed by the Tribunal. Amritsar Bench vide its order dt. 22nd Feb., 2008 and the miscellaneous application filed by the Department has also been rejected vide dt. 21st May, 2009 and stated that some case laws relating to Improvement Trust Moga in which the Hon'ble Jurisdictional High Court has upheld the registration of the Improvement Trust Moga. The AO has also held that merely allowing registration to the assessee does not mean that the assessee got impunity (sic-immunity) from fulfilling the requirements of ss. 11 and 12 as the case may be. It is the duty of the AO that during assessment proceedings he should obtain details of various receipts and expenditure and verify whether the same has been utilized for achieving aims a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... special audit report and stated that the assessee has applied more than 85 per cent of the gross receipts towards aims and objectives. The learned first appellate authority has taken the help from the order of the Tribunal, Amritsar Bench, in which CIT-II. Amritsar, has rejected the registration under s. 12AA of the Act on 21st Sept., 2006, which was reversed by the Tribunal, Amritsar Bench on 22nd Feb., 2008. Secondly, the learned CIT(A) has taken the help of the decision dt. 31st Oct., 2008 passed by Jurisdictional High Court in the case of Improvement Trust (supra) wherein their Lordships upheld the registration of the Improvement Trust Moga and allowed the exemption as claimed by the assessee. For the sake of convenience, the relevant portion of the impugned order passed by the learned first appellate authority is reproduced as under : "8. Grounds No. 2 and 34 pertains to the appellant's grievance over its status having been taken/adopted as local authority as against it being a trust from its very name and nomenclature. The learned Authorised Representative for the appellant has explained that the appellant is an Improvement Trust constituted under the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipts without considering its claim for exemptions under s. 11 of the Act. It has been stated for and on behalf of the appellant that though for the assessment year under consideration, the appellant's accounts were not subjected to special audit under s. 142(2A) but on the basis of special audit report for the immediately preceding asst. yr. 2006-07 wherein the Special Auditors expressedly opinion that the provisions of ss. 11 to 13 are applicable to the case of the appellant-trust treating it as a charitable Institution and by implication, the concept of "Income received" and "Income applied" shall have to be kept in mind and by doing so the appellant has worked out its deficit/surplus and filed its income tax return for the asst. yr. 2007-08 accordingly. Surplus as per Income Expenditure Account Rs. 5,39,12,792 Less: (i) Income applied towards acquisition of fixed assets Rs. 26,81,01,075 (ii) Difference in value of stock Rs. 2,16,10,131 Total : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to have been granted registration under s. 12AA and thereafter provisions of ss. 11 to 13 comes into play. Now the only point on anvil is that whereas the AO is treating its entire income as taxable as not having been utilized towards its aims and objects, but on the other hand, the appellant's learned counsel has pleaded that after considering the income applied towards one of its main object of acquisition of fixed assets to the extent of Rs. 26,81,01,075 and further adding therein by way of adjustment claimed towards difference in its stock valuation amounting to Rs. 2,16,10,131, the total adjustable amount of Rs. 28,97,11,206 when adjusted from the surplus of Rs. 5,39,12,792, there remains deficit of Rs. 23,57,98,414. Further, it is urged that the appellant has deposited PF amounting to Rs. 20,78,026 and even after considering this amount, there remains still deficit of Rs. 23,78,76,440. Under these facts and circumstances of the case, I think that the AO is not justified in considering the appellant's book version and after taking into account the income applied towards its one of the main objects of acquisition of assets and depositing its employees' PF into FDR or SB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the application seeking registration the CIT was not expected to go in detail and prima facie the assessee was able to make out a case for registration. Even if registration is granted that will not be precluding the AO to examine in detail the very object of the assessee and to give the finding in assessment proceedings as to assessee had complied with the requirement of s. 11 or not. At the most registration certificate, if granted, will make out a prima facie case in favour of the assessee that its activities are charitable but that will not be obstacle in the way of the AO at the time when assessment proceedings are to be taken up and to decide as to whether assessee is entitled for benefits of s. 11 or 12, as the case may be. That will be the second stage. But at this stage the objects and activities of the assessee make out a case for granting registration. Accordingly, the order of the CIT is reversed and assessee is entitled for registration under s. 12A-Aggarwal Shiksha Samiti Trust v. CIT (1987) 66 CTR (Raj.) 95: (1987) 168 ITR 751 (Raj) and CIT v. Saraswati Poor Students Funds (1985) 46 CTR(Kar.) 107 : (1985) 150 ITR 142 (Kar.)." 13.4 The AO has rightly rejected the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m public itself. The objects of the assessee though claimed to be charitable, but actually are of purely commercial nature where profit motive is involved. It is a known fact that the assessee is acquiring a land at very low prices and selling the same land on very higher rates and is earning a profit therefrom. A new trend has also emerged that the assessee has started auctioning the plot by way of bidding at the market rate and sometime more than that and charging interest on belated payment. In such a situation, no charity is involved. Rather the assessee has converted itself into a big businessman. Similar development/infrastructure/facilities are also provided by private developers these days, then they will also claim the status of a charitable institution. The facilities which are provided to the plot holders are incidental to the commercial activity carried out by the assessee and if certain facilities like parts, community centre, school are provided, it is not only basic requirement, rather a tool of attracting the investors wherein the hidden cost of these facilities are already included. In the absence of these facilities, normally the purchaser may not invest and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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