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TMI Blog2018 (7) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... cts, we find that the AO as well as the ld. CIT(A) gave categorical findings that the assessee failed to file any evidences to prove that these donation are corpus donations. Once, these donations are not corpus donations, then, automatically all receipts including corpus donations shall be treated as receipts of the trust and income wherefrom shall be computed in normal commercial practices by deducting all expenses. The CIT(A) after considering relevant facts has rightly treated corpus donation as part of gross receipts to determine income. We do not find any error in the order of the ld. CIT(A). Hence, we are inclined to uphold the CIT(A) order and reject ground taken by the assessee for all years. Addition towards expenditure in the assessment - Held that:- There is no cause of grievance for the assessee insofar this issue is concerned. But, fact remains that, the AO has said in para 2 of his order that the amount of expenditure is taxable. Once, exemption is denied, income shall be computed under normal accounting principles by considering all income and expenses to determine profit/loss, but at no stretch of imagination expenditure shall be treated as income, unless such e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as income, unless such expenses is unexplained within the provisions of section 69C or such expenses has not be substantiated with evidences. In this case, there is no finding from the AO on these aspects. Therefore, we are of the considered view that no addition can be made towards expenditure incurred for objects of the trust, purchase of car being capital in nature and treated as such in books and amount paid to Shankar Gadam of M/s Mahalaxmi Enterprises. - ITA No. 3080 To 3084/Mum/2016 and ITA No. 6952 To 6954/Mum/2017, ITA No. 1336/Mum/2014, ITA No. 3793 To 3795/Mum/2016 and ITA No. 3800 To 3801/Mum/2016 - - - Dated:- 4-7-2018 - SRI MAHAVIR SINGH, JM AND G. MANJUNATHA, AM For The Assessee : N. R Agrawal, AR For The Revenue : Pooja Swaroop, Sr.DR ORDER Per Bench: These cross appeals filed by the assessee, as well as the Revenue are directed against separate, but identical orders of the Commissioner of Income Tax (Appeals), Mumbai -37 [in short CIT(A)], dated 20/12/2013 and The Commissioner of Income Tax (Appeal), Mumbai-1 [in short CIT(A)], even dated for the A.Y. 2003-04, 2005-06, 2006-07, 2007-08, 2008-09, 2009-10, 2012-13, 2013-14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(2) and 142(1) of the Act, were issued. In response to notices, the authorized representative of the assessee appeared from time to time and filed various details, as called for. The assessments has been completed u/s 143(3), r.w.s.147 of the Act, for assessment years 2003-04 to 2009-10, and for A. Y 2012-13 to 2014-15 u/s 143(3) of the Act, and rejected exemption claimed u/s 11 of the Income Tax Act, 1961 by invoking provisions of section 13(1)(c ) and 13(2) of the Act, for the reasons of siphoning of funds of the trust for ultimate benefit of trustees and for non genuine activities. The AO has determined total income by making additions towards, loans and dances given to Engineering Mazdoor Sabha (EMS) and Mumbai Mazdoor Sabha(MMS), corpus donations received, addition towards expenditure incurred for objects as per P L account and purchase of Motor car in the name of R J. Mehta one of the trustee. 5. The assessee carried matter in appeal before the first appellate authority. Before the CIT(A), the assessee has challenged rejection of exemption claimed u/s 11 of the Act and also challenged various additions made by the AO towards loans and advances given to two trade union ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee happen to be the final beneficiaries as mentioned at Para-3. Let us see the conduct of the assessee in the light of the provisions of section 13(1)(c) r.w.s. 13(3)of the Act, which are as under:- Section 13(1)(c) ( c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof- ( i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or ( ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in subsection (3): Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub- clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person refer- red to in sub- section (3), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust or institution invested or deposited before the 1st day of March, 1983 otherwise than in any one or more of the forms or modes specified in sub- section (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983 ; or These clauses referred to the amount invested or deposited otherwise, than the modes specified in section 11(5) of the Act. We fail to understand how a loan amount given to two Mazdoor Sabhas fit into the category of making investment or deposit as per provisions of section 11(5) of the Act, wherein investment have been referred to the investment in saving certificates of the Government as defined in clause (c) of section -2 of the Government Saving Certificate Act and deposits have been referred to being deposit in Post Office Saving Bank account or in Schedule Bank. Thus, it can be safely concluded that the assessee is not covered by the provisions of section 13(1)(d) of the Act. Therefore, the decisions relied upon by the assessee as mentioned elsewhere do not support. 6.2 As mentioned elsewhere the assessee has clearly violated the provisions of section 13(1)(c) r.w.s. 13(3) of the Act. Hence, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive parties, we find that non-consideration of grounds of appeal and the fact thereof are mistake apparent. Hence, the order qua the appeal of revenue being ITA No. 1336/M/14 for AY 2003-04 is recalled. The case if now fixed for hearing on 05.04.2018. Issuance of fresh notice is dispensed with as the parties were informed in the Court during the hearing of the case. 8. The recalled revenue appeal in ITA No. 1336/Mum/2014 is heard along with other appeals for subsequent Asst. years filed by the assessee as well as the revenue, as the issue involved in this appeal is identical to the issues in all appeals of the assessee and revenue for all assessment years. 9. The first issue that came up for our consideration from assessee appeal is denial of exemption u/s 11 of the Act. Although, the issue has been decided against the assessee by the ITAT, for Asst. year 2003-04 in ITA No. 352/Mum/2014, the ld. Authorized representative vehemently argued the matter at length with the help of certain judicial precedents to keep the issue alive. The ld. A R for the assessee submitted that the ld. AO as well as the Ld. CIT(A) failed to appreciate the fact is right perspective in the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e coordinate bench of ITAT, F bench has already decided the issue against the assessee in ITA No. 1336/Mum/2014. The Tribunal after considering relevant facts in light of provisions of section 13(1)( c), 13(2) and 13(1)(d) observed that the assessee has violated provisions of section 13(1)(c ) r.w.s 13(3) of the Act, and hence not eligible for exemption u/s 11 of the Act. The relevant portion of ITAT order from Para 6 to 6.2 is reproduced at Para 6 of this order. 12. Facts remain unchanged. When the bench pose a specific question about continuation of violation referred to u/s 13(1)(c) for subsequent years, the ld. AR for the assessee fairly accepted that such violation is perpetuated in subsequent years, however tried to argued that violations brought out by the AO shall not be reason for denial of exemption, when the assessee continued to carry out its activities in accordance with its objects. We find that, the assessee failed to negate observation of the lower authorities in the light of provisions of section 13(1)(c ) of the Act. Therefore, consistent with the view taken by the Coordinate bench, we are of the considered view that the assessee is not eligible for exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ience of Man s society 128 ITR 456 (Del) 14. We have heard both the parties, perused materials on record and gone through orders of authorities below. It is an admitted fact that exemption u/s 11 has been denied to the assessee. It is also an admitted fact that the assessee has failed to file necessary evidences to prove corpus donations are made with specific direction that they shall form part of corpus of the trust. No doubt, corpus donation received with a direction that they shall form part of corpus of the trust shall not be treated as income derived from property held under trust. But, the onus is on the assessee to prove that such donations are in fact corpus donations which shall not form part of income of the trust u/s 11(1) of the Act. In this case, on perusal of facts, we find that the AO as well as the ld. CIT(A) gave categorical findings that the assessee failed to file any evidences to prove that these donation are corpus donations. Once, these donations are not corpus donations, then, automatically all receipts including corpus donations shall be treated as receipts of the trust and income wherefrom shall be computed in normal commercial practices by deducting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration from assessee additional ground of appeal is carry forward and set off of loss of earlier years. The assessee has taken additional ground in as much as, if benefit of exemption is denied and income is computed under commercial principles, then loses hall be allowed to carry forward and set off against income of subsequent years. We find that the assessee has claimed exemption u/s 11 and hence, not exercised option to carry forward and set off losses. The AO denied benefit of exemption u/s 11 and computed income under normal commercial principles. Once, benefit of exemption is denied and income is considered under normal commercial principles, then the benefit of carry forward and set off of losses shall be allowed, provided all other conditions of carry forward and set off of losses as provided under section 72 are satisfied. Therefore, we set aside the issue to the file of the AO to cause necessary enquiries and allow the benefit accordingly. 19. The next issue that came up for our consideration from revenue appeals is additions towards loans and advances given to two trade unions, i.e. Engineering Mazdoor Sabha(EMS) and Mumbai Mazdoor Sabha(MMS). The AO made addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are treated as current assets in books of accounts. The facts gathered during assessment and violations of section 13(1)(c) brought out by the AO may be a good reason for rejection of exemption, but loans and advances being current assets cannot be treated as income of the assessee. The ld. CIT(A) after considering relevant facts has rightly deleted additions towards loan and advances. We do not find any error in the order of the ld. CIT(A) and hence, we are inclined to upheld findings of the CIT(A) and reject grounds of revenue for all assessment years. 23. The next issue that came up for our consideration from revenue appeals is additions towards purchase car in the name of trustee and repairs and also other expenses. The AO, while completing assessment made additions towards expenditure incurred for objects of the trust, purchase car in the name of trustee and non genuine repair expenses on the ground that the trustees have siphoned off money by purchasing car in personal name and booking non genuine expenditure. It is the contention of the assessee that the facts gathered by the AO to hold there is violation of section 13(1)(c ) may be a good reason for rejection of exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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