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TMI Blog2017 (2) TMI 1089X X X X Extracts X X X X X X X X Extracts X X X X ..... currently the trust is running the school in the lease premises and there is an existing dispute with the owner of the property in respect of lease premises. The fact that assessee is eligible for the accumulation u/s 11(la) of the Act. We are of the view that under the provisions of sub-sec. of sec. 11 of the Act, there is no lower limit for the lock-in period nor there is stipulation that investments so made cannot be reshuffled during the outer limit of five years’ period. In this context, the AO's observation that one set of mutual funds were divested of within the period of sixty days is untenable. The most importantly during the year, the assessee trust have reshuffled one set of investments only with the purpose of safeguarding interest of the trust and in the view of the apprehension, that value of the mutual fund was fast declining. By doing so, the trustees of the trust have acted, in the best and paramount interests of the trust and not for the purpose of any benefit or a pecuniary gain to any person specified under sub-sec. 3 of sec. 11 of the Act. Again by doing so, the trust have not violated any stipulation or conditions, as a matter of fact there is no stipulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, 1961. It has field Form NO. 10B i.e. Audit report under section 12A(b) of the Income tax, 1961. It has also given notice u/s 11(2) of the Income Tax Act, 1961 in form no.10. Both the forms were field along with Return of Income for the year under consideration. The assessee also claimed exemption u/s 10(23C) of the Act being an education institute. The assessee trust is collecting moderate fees from the student and expense of the trust for the school are always more than educational receipts, which are made out of dividend / interest income of its investment made as per section 11(5) of the Act but the AO denied the exemption claimed by the assessee. The AO noted from income and expenditure account that it has shown profit from sale of mutual funds to the tune of ₹ 59,55,030/-, dividend income from mutual funds at ₹ 53,72,052/- and receipts out of fee students of school at ₹ 28,99,866/-. The AO noted that the assessee is carrying out a very organized and regular trading of mutual funds and hence he denied exemption u/s 11 of the Act by observing as under: - The sources of investments in mutual funds is out of the accumulations made by the assessee u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is required to be taxed as AOP without grating exemption u/s 11 of the IT Act. Accordingly, he added back the net profit discloses as per income expenditure account at ₹ 1,18,72,109/- and taxed accordingly. Aggrieved assessee preferred the appeal before CIT(A). 4. The CIT(A) allowed the claim of the assessee by observing that there is no violation of the provision of section 11(5) of the Act for making this investment and moreover profit derived from sale of mutual fund and dividend income, which are shown as surplus and are carried over in the balance sheet, is again reinvested into the specified mode of investment i.e. mutual funds as per section 11(5) of the Act and claimed the same as deemed application of income u/s 11(2) of the Act. We find that the CIT(A) relied on the coordinate Bench decision of Delhi Tribunal in ITA No.179/Del/2010 dated 10-03-2010 in the case of ITO v. Jesuit Conference of India and allowed the claim of assessee by observing as under: - 4.7 I have considered the facts and circumstances of the case, the submissions of the appellant and assessment order. It is noticed that the AO has denied the exemption to the appellant u/s 1Ibf the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 19.12.2008, para 2.1 that 'the newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(1), relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute charitable purpose even if it incidentally involves the carrying on of commercial activities. In view of the above discussion and of rthe reasons therein, Ground No.1 of appeal is allowed. Aggrieved against the order of CIT(A), Revenue came in second appeal before Tribunal. 5. We have heard rival contention and gone through the facts and circumstances of the case. We find from the facts of the case that the assessee is a trust duly registered under section 12A of the Act with the commissioner of Income Tax/ DIT (Exemptions), Mumbai. The assessee is running a school and existing solely for the purpose of education. Due to the reasons of subsidized fee structure expenditures on the education activities always exceed receipts by way of fees from the students. The assessee trust is eligible for the deemed exemption of 15% of the Income during the year und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly identical to the facts of the preceding assessment years, hence, according to us the principle of rules of consistency shall apply as laid down by the Supreme Court of India in the case of Radha Soami Satsang Vs. CIT (1992) 193 ITR 321 (SC). 6. Further, from the facts of the case it is inconceivable that assessee trust is doing the business and therefore the provision of section 1 1(4A) does not come into play. It was again a narrow interpretation by the AO to treat one single transaction of reshuffle of mutual fund as business activities carried on by the trust and not applying the income for the charitable purposes. The entire income earned by way of long term capital gain and dividend income is out of investments into specified securities as envisaged under the provisions of sec. 11(5) of the Act and the surplus arising out of dividend income and capital gain income has been diverted for the specific purpose u/s 11(2) of the Act for the school building construction. 7. Further, the case law relied on by the learned Counsel for the assessee in support of its contention of Delhi ITAT decision in the case of ITO Vs. Jesuit Conference of India (2011) 12 Taxman.com 297 (Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e showing a design or purpose, the incidents associated with the purchase and resale, the similarity of the transaction to operations usually associated with trade or business, the repetition of the transaction, the element of pride or possession, etc.; that the presence of all these relevant factors may help the Court to draw an inference that the transaction is in the nature of trade; that however, it is not a matter of merely counting the number of facts and circumstances pro and con; that what is important to consider is their distinctive character; and that in each case, it is the total effect of all relevant factors and circumstances that determines the character of the transaction. 16 . It is on the anvil of the above ratio laid down by the Hon'ble Supreme Court, that the facts of the present case are needed to be tested. The Assessing Officer, it is seen, did not consider of the attending factors. He merely went by the high frequency of the transactions in purchase and sale of mutual funds by the assessee. He overlooked the fact that the investments were made as prescribed by section 11(5) of the Act, as discussed hereinabove. He remained oblivious of the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned CIT(A), there was also due compliance of the provisions of section 11(4A) of the Act by the assessee. This section provides that exemption would not be denied if the business incidental to the attainment of the objectives of the trust and separate books of account are maintained in respect of such business. Undeniably, in view of what has been discussed herein above, the activity of the assessee in making investments in mutual funds, was incidental to the attainment of the objects of the trust. It was not a separate business activity. Then again, undeniably, the assessee was maintaining separate books of account, identifying each of the mutual funds separately. The bank account for purchase and sale of mutual funds was also separately maintained by the assessee. Copies of separate books of account as well as the mutual funds ledger were placed before the Assessing Officer. None of these was considered by the Assessing Officer. The assessee was able to identify each transaction, fund-wise. The prescription of section 11(4A) of the Act was thus duly met with. 8. In view of the above given facts and circumstances of the case, we confirm the order of the CIT(A) allowing the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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