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TMI Blog2014 (6) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. Function hall used for commercial purposes – Held that:- Following CIT vs. Narayana Guruviah Chetty's Estate & Charities [2008 (9) TMI 528 - MADRAS HIGH COURT] - so long as the dominant object is of general public utility and there is no profit motive, it cannot be said that the trust/institution is not established for charitable purpose, even if there is some profit in the activity carried on by the trust/institution – thus, the order of the CIT(A) is upheld – Decided against Revenue. Deletion of corpus donations – Held that:- Following Sukhdeo Charity Estate vs. ITO [1991 (5) TMI 47 - RAJASTHAN High Court] - voluntary contributions received for 'specific purpose' are not assessable as income - even when the assessee had been assessed as AOP and deprived of Section 11 benefits, the AO could assess only net income of the assessee and not gross receipts – thus, the order of the CIT(A) is upheld – Decided against Revenue. Original audit report not consulted – Held that:- The earlier report showed that amount spent on the objects of the trust as NIL - such a mention was made by mistake - CIT(A) has rightly held that the AO has neither shown that the revised report filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per section 11 of the Act. The AO passed order u/s 143(3) of the Act on 23/11/2010 holding that the assessee was not entitled to the benefit u/s 11 of the Act. The AO held as follows: taking into account all the above defects, I am of the considered view that the society is not entitled to any benefit under section 11 as the funds of the trust/institution has not been applied for its objective. Moreover, this being a residuary trust having carried on business as discussed above, it loses its charitable character. 2.1 learned AR of the assessee contended before the AO that the assessee trust was granted registration u/s 12A of the Act after due consideration of its objects and, therefore, the same cannot be disturbed. It was argued that the activities are genuine and, hence, trust would enjoy the exemption of its income. AR also argued before the AO that propagation of Jagannadh Dharma is an essential part of Odisha culture and the same being one of the objects of the trust, construction of temple by application of funds of the trust is for fulfillment of authorized object. The AO felt that propagation of such philosophy does not justify construction of temple or worship of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contend that the intention of the donors and the done at the initial stage should be taken into consideration. A decision in the case of Sthanakvasi Vardhman Vanik Jain Sangh, 260 ITR 366 (Guj.) was also cited for explaining that voluntary contribution made with a specific direction is exempt u/s 12 of the Act. 4. After considering the submissions of the assessee, the CIT(A) noticed that the registration granted to the assessee society on 30/12/1995 u/s 12A of the Act was in force during the relevant year. The CIT(A) also noticed that while the objects of the assessee were not amended during the relevant year, even if the same were amended later to add some new objects it cannot be said that the original objectives were discarded altogether so as to say that the assessee s eligibility for being registered u/s 12A was required to be revisited. In this regard, the CIT(A) relied on the decision of Mumbai Bench of ITAT in the case of Mehta Jivraj Makandas Parekh Govindaji Kalyanji Modh Vanik Vidyarthi Public Trust Vs. DIT(E), 131 ITD 462 (Mum.) The CIT(A) also relied on the decision of the Apex Court in the case of ACIT Vs. Surat City Gymkhana, 300 ITR 214(SC) and noted that the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) also held that as regards construction of Jagannath Temple, it is clear that the construction was made only in terms of the aims and objectives of the assessee trust. As regards the decisions in the case of Arsha Vignan Trust Vs. D.P. Sharma, DIT(E) 295 ITR 437(AP), the CIT(A) stated that it is clear that in the light of the decision of Jurisdictional High Court in the case of Social Service Centre (supra) this too falls within the ambit of charitable activities. In fact, the CIT(A) observed, in the said decision construction of a church has been held as expenditure towards charitable purposes. Applying the said decision, the CIT(A) held that construction of Jagannath temple by the assessee also amounted to expenditure towards charitable purposes of the assessee. 5. Aggrieved by the order of CIT(A), the revenue is in appeal before us and has raised the following ground of appeal in AY 2008-09: 1. The order of the learned CIT(A) is erroneous both on facts and in law. 2. The learned CIT(A) ought to have appreciated the fact that propagation of Jagannath Dharma was not part of the objectives of the trust for the relevant assessment year. 3. The learned CIT(A) ought to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O in para 5.7 of the assessment order. 10. The learned CIT(A) was not justified in not considering the original audit report filed in form No. 10B, as per which no amount was applied for objectives of the trust. He further erred in considering the revised audit report, filed by the assessee during the assessment proceedings which was not correct. 11. The learned CIT(A) erred in deleting the disallowance of Rs. 1,47,485/- towards religious expenses, when the assessee trust was not entitled to benefit of section 11 of the Act. 12. The learned CIT(A) ought to have appreciated the fact that as the assessee was not entitled for exemption, the assessee s income should be computed on the basis of commercial principle and accordingly, provisions of section 40(a)(ia) are applicable in the case of the assessee to payment of a sum of Rs. 14,39,990/- which was of contractual nature. 13. The learned CIT(A) erred in deleting the disallowance of Rs. 9,16,704/- made by the AO out of the administrative and other expenses. The AO found that as the main activity of the assessee was construction of the temple, 50% of the said administrative expenses amounting to Rs. 9,16,704/- was attributabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious or charitable institution as far as s. 11(1)(a) is concerned, such distinct ion is recognised under s. 13 which is an exception to ss. 11 and 12. Cases which are covered under cls. (a), (b), (c) and (d) of s. 13 would not be entitled to exemption under s. 11 or 12. Clause (a) of above section relates to income from property under a trust for private religious purposes which does not enure for the benefit of the public. Clause (b) deals with cases of charitable institution created or established after the commencement of the Act. It is required to be seen whether such charitable trust or institution is established for the benefit of a particular religious community or caste. If it is so established, then provisions of s. 11 will not be attracted. But for application of above clause, it is to be shown that income of the trust enures and used or applied directly or indirectly for the benefit of the persons referred to in sub-s. (3). Clauses (c) and (d) are applicable to both type of trusts i.e. trust for charitable or religious purposes, unlike in cls. (a) and (b) which were applicable to private religious trust or to charitable trust. The legislature has specifically used in cl. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mosque and church must be treated as chari table purpose. Even if they are treated as religious, there is no justification for denying exemption to the assessee in the light of above discussion. It is nobody s case that purposes are partly charitable and partly non-charitable and, therefore, exemption under s. 11(1)(a) is not available as trusts were created after 1st April, 1962. No adverse inference can be drawn from what is stated by the assessee in letter dt. 27th March, 2006 wherein assessee claimed that its trust is wholly charitable. Facts and circumstances of the case are required to be considered in the light of statutory provisions to decide the case. On consideration of the relevant facts, the assessee is entitled to exemption under s. 11(1)(a). Ghulam Mohidin Trust vs. CIT (2001) 168 CTR (J K) 367 : (2001) 248 ITR 587 (J K), State of Kerala vs. M.P. Shanti Verma Jain (1998) 149 CTR (SC) 279 : (1998) 231 ITR 787 (SC) and East India Industries (Madras) (P) Ltd. vs. CIT (1967) 65 ITR 611 (SC) distinguished. (Paras 22, 24, 26.3) Conclusion : No distinction is made between charitable and religious purposes in s. 11(1)(a) and, therefore, a trust which is partly re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that exemption cannot be denied to the assessee on this count. 10. Aggrieved, the revenue is in appeal before us. 11. We have heard both the parties, perused the record and gone through the orders of the revenue authorities. According to the learned AR the hall was constructed as a suitable venue for carrying out and sustaining the activities of the assessee keeping in view its present and future needs. Spare capacity utilization ought not to have been viewed by the A.O as carrying out commercial activity. The submission of the learned AR is that the CIT(A) has taken a rational view and the same may be upheld. 11.1 In the case of CIT vs. Narayana Guruviah Chetty's Estate Charities 326 ITR 662 Mad), the Hon ble Madras High Court held as follows: Section 11 of Income-tax Act, 1961 - Charitable or religious trust - Income from property held under Assessee-trust running kalyan mandapam on rental basis was entitled to exemption under section 11 as mandapam was being used for charitable purposes [Assessment years 1996-97 to 1999-2000] ClT v. Sri Narayana Guruviah Chetty's Estate amp; Charities [2008J 220 CTR (Mad.) 310. The Assessing Officer denied exemption to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the confirmation letters were not genuine. 14. Aggrieved, the revenue is in appeal before us. 15. We have heard both the parties and perused the record. Before us, the assessee submits that since the above amounts are capital in nature, the same cannot be treated as income, especially when the assessee-society is assessed under normal provisions of the Act. Alternatively, if the above are considered to be incomes of the appellant, the corresponding payments of Rs.80,39,569 towards temple and Rs.3,05,000/- towards building, as confirmed by the learned Assessing Officer ought to be allowed as expenditures from the above receipts. 15.1 The Rajasthan High Court in Sukhdeo Charity Estate vs. ITO 192 ITR 615 Raj, on which reliance placed by the assessee, held that, voluntary contributions received for 'specific purpose' are not assessable as income. The above proposition has been accepted by the Hyderabad bench of the Tribunal in Society for Integrated Development in Urban Rural Areas vs. DC IT 90 ITD 493 Hyd. It has been so held by the Hyderabad bench of the Hon'ble Tribunal in the case of Nirmal Agricultural Society vs. ITO 71 ITD 152 Hyd. It is submitted that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve heard both the parties and perused the record. We are of the view that this disallowance will not survive once the assessee s claim for exemption u/s 11 is allowed. Even otherwise, there is no case for the disallowance because once the income from the pooja activity is included, the connected expenditure is to be allowed. Hence, we confirm the order of the CIT(A) and dismiss the ground raised by the revenue in all the appeals under consideration. 22. As regards Gr.No.12 in AY 2008-09 and ground No. 6 in AY 2006-07 and 2007-08 regarding deletion of disallowance u/s.40(a)(ia) , it is seen that the A.O disallowed Rs.14,39,990/- u/s.40{a)(ia). The details of disallowance u/s 40{a)(ia) were not provided by the A.O. Hence, the appellant is unable to rebut the claim of A.O and also not in a position to provide a detailed sectionwise break up to establish that the liability under Chapter XVII-B was complied with. 23. On appeal, the learned CIT(A)deleted the disallowance because he allowed the assessee's claim for exemption. 24. We have heard both the parties and perused the record. As held in earlier ground, this disallowance will not survive once the assessee's claim f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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