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TMI Blog2018 (3) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... egistered under the Society Registration Act, 1860 on 11.08.1992 (copy of Registration Certificate on record), with the following aims and objects: On being called upon to furnish a certified english translation thereof, the ld. Authorized Representative (AR), the assessee's counsel, would draw our attention to page 5 of the impugned order whereat the same stands transcribed in english as under, further stating that the same represents a fairly accurate translation thereof; that the parties have proceeded on that basis, so that there is no conflict or disagreement qua the same: '1. The objective of this trust is to manage the Breakfast, Lunch & Dinner and also tea in evening at Hanuman Mandir. 2. To manage the eating and halting arrangements for pilgrims from outside. 3. To do public welfare programs from time to time. 4. To manage a vishal Bhagwati jagran, religious speeches and Kirtan at least once in a year.' We observe no issue qua the same and, therefore, the bringing on record of a certified english translation was dispensed with, and the hearing in the matter proceeded with, after obtaining concurrence of the ld. Departmental Representative (DR). There are thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .47 lacs for its various objects, so that its' financial accounts reflect a 'surplus' of Rs. 23.85 lacs, which was claimed exempt u/s. 11 of the Act, and which could not be in view of its non-registration u/s. 12AA of the Act. In fact, even if the assessee was to apply for the said registration now, i.e., at any time after the expiry of the relevant previous year, it could only be granted registration prospectively. 3. We have heard the parties, and perused the material on record. The purposes for which the assessee society, an incorporated entity, is formed, are clearly charitable and religious in nature. Charity - the selfless and unconditional expenditure of resources, including time and money, in service of another, is the cornerstone, an essential ingredient of all 'dharma', the core of all organized religions. Charity, inclusively defined u/s. 2(15) of the Act, is commonly understood as altruistic thought and action, with a view to benefit others selflessly. It may assume different forms, as, for example, philanthropy. If providing food to people or giving shelter to travelers is not charity, as observed by the Bench during hearing, what, we wonder, is? This, in effect, sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e institution may be in the process of accumulating funds for application on a particular project/program which it intends to execute/implement. The funds of any trust/institution are to be, after all, applied only for its purposes, which in the instant case, we have found as both charitable and religious in nature. Why, the law, per section 11, clearly provides for accumulation of income for its' application in future (for charitable or religious purposes). The question of observance of that procedure - which requires a notice by the assessee to the AO to that effect (section 11) (refer: CIT v. Nagpur Hotel Owner's Association [2001] 247 ITR 201 (SC)), in the present case does not arise as sec.11 itself is not applicable in view of the non-registration of the assessee-trust u/s. 12AA (refer section 12A(1)). The Revenue, thus, by allowing 'credit' / 'exemption' to the assessee qua the sum applied by it for its purposes during the year has acted inconsistently and, more importantly, not in accordance with the law; rather, contrary thereto. We use the word 'implicitly' in-as-much as there is no finding or specific allowance of such exemption to the assessee qua the sum applied by it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, deemed as derived from property held under trust, a form defined u/s.11(4). The same could only be exempt u/s. 11, which however would not apply in the instant case in view of section 12A(1), which provides for registration u/s. 12AA as a precondition for the application of sections 11 and 12. The law, per section 11, as afore-referred, provides a saving for the amount applied by a charitable (or religious) trust or institution for its purposes. Further, as afore-noted, the law also provides for subsequent such application, upon notice to the AO, stating the purpose/s of accumulation, where the retention exceeds 15% of the receipt - regarded thus as a normative carry over. No levy of tax is attracted under such circumstances, as well as where the income could not be applied on account of non receipt of any income. The assessee's further stand as to the applicability of the principle of mutuality, also argued before us, again, only needs to be stated to be rejected. The assessee is a separate legal entity, i.e., distinct and apart from both its' Management - managing it under a clear set of rules and regulations (copy of which was shown to us during hearing), as well as its' t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing exemption to the assessee on its' income u/s. 11 to whatever extent. We may accordingly answer the two aspects of the impugned assessment that we discern as arising for our consideration/adjudication. The voluntary contributions to the assessee-society qualify as income u/s. 2(24)(iia) of the Act, and is therefore, subject to the provisions of the Act, eligible for exemption u/s. 11 on application. Two, the assessee is not entitled to exemption u/s. 11 in-as-much as it is admittedly not registered u/s. 12AA of the Act, which issue stands settled by the decision by the Apex Court in U.P. Forest Corporation v. Dy. CIT [2008] 297 ITR 1 (SC). In this regard, it may relevant to state that it is the correct legal position that is relevant, and not the view that the parties may take of their rights in the matter (CIT v. C. Parakh & Co. (India) Ltd. [1956] 29 ITR 661 (SC))(also refer Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC)). That apart, it may be appreciated that not so holding, i.e., that the assessee is not entitled to any exemption u/s. 11 on account of non-registration u/s. 12AA, on which aspect there is no ambivalence in law (refer section 12A(1)), would ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in appeal cannot be considered as deciding a lis; their purview being the correct determination of the assessee's tax liability. The case law in the matter is legion, and toward which we may refer some other decisions, as follows:CIT v. Assam Travels Shipping Service [1993] 199 ITR 1 (SC); CIT v. C.C.C. Holdings [2003] 260 ITR 433 (Mad); Thanthi Trust v. Asst. CIT [1999] 238 ITR 117 (Mad); Controller of Estate Duty v. R.Brahadeeswaran [1987] 163 ITR 680 (Mad); CIT v. Cellulose Products of India Ltd. [1985] 151 ITR 499 (Guj-FB). The matter accordingly shall travel back to the file of the AO for adjudication afresh in accordance with law, in light of the foregoing findings/ observations. The assessee shall be allowed deduction qua any expenditure incurred, if any, including administrative expenditure, for the purposes of the running the institution or organizing its' activities. We say so, without anything on record to suggest that any such expenditure stands incurred; the assessee accepting and in fact returning a surplus of Rs. 23.85 lacs, i.e., after apparently applying Rs. 70.47 lacs toward the objects of the trust, only in the interest of justice inasmuch as some expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X
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