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TMI Blog2020 (7) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... ting precedents on this point, we have no hesitation in holding that the CIT(A) has rightly decided the issue in favour of the assessee Association by directing relief u/s 11 read with Section 12AA. The assessee trust s income is also required to be computed on the commercial basis. In view of this all the grounds of appeal filed by the ld. Assessing Officer are dismissed. - Decided in favour of assessee. - ITA No. 1671/Del/2018 - - - Dated:- 13-7-2020 - Ms. Sushma Chowla, Vice President And Shri Prashant Maharishi, Accountant Member For the Assessee : Shri S. Krishnan, Adv.; For the Department : Ms. Rakhi Vimal, Sr. D.R.; ORDER PER PRASHANT MAHARISHI, A. M. : 01. This appeal is filed by the by the Assistant Commissioner of Income Tax (Exemption), Circle 2(1), New Delhi, [ the ld AO ] against the order of Commissioner of Income Tax (Appeals)-40, New Delhi, [ The Ld. CIT (A) ] dated 22.12.2017 for Assessment Year 2013-14 raising following three effective grounds of appeal:- 1. On the basis of facts and circumstances of the case and in law, whether the Ld. CIT(A) has erred in law in ignoring the fact that the assessee is not eligible for exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re home away from home and it runs a full-fledged hotel in the guise of hostel services. In view of this, he held that assessee is not entitled to the benefit of Section 11 and 12 of the Act. While computing the total income he further disallowed provisions for contingencies, leave encashment, bad and doubtful debts and provisions of gratuity holding that they are un-ascertained liability. Accordingly, he computed the total income of the assessee at ₹ 8,98,66,875/- as per order under Section 143(3) of the Act dated 1March 2016. 05. Assessee aggrieved with the order of the ld. Assessing Officer preferred appeal before the ld. CIT (Appeals). The ld. CIT (Appeals) with respect to the denial of exemption under Section 11 and 12 of the Act held vide para No. 5 of his order as under:- 5. Determination 5.1 Grounds of appeal nos. 1 and 2 challenge the denial of exemption under sections 11 and 12. Since these grounds of appeal are inter-linked, these are being adjudicatedtogether. 5.1.1The Assessing Officer denied exemption under sections 11 and 12 since the major activities of the assessee were held to fall under the last limb of section 2(15) and were hit by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hostel facilities, the same as urged on behalf of the assessee is aligned to the objective of the Association to provide education. Nothing has been brought on record by the Assessing Officer to show that the hostel facilities are de hors the educational activities of the Association and are for commercial purpose. That being the case the provision of hostel facilities cannot in the facts of this case, be held to fall under the 4th limb of charity viz any other object for public utility. So long as hostel facility is aligned to education, no plausibleobjection can be raised as to the charitable nature of the activities. The amendment as made to the definition of charity by insertion of the proviso by the Finance Act, 2 010 is thus of no consequence to the facts in the subject case. 26. We notice that in the past similar objections have been taken in assessment by the respective Assessing Officers. In AY 1989-90 the Tribunal in the assessee's own case dismissed the departmental ground of appeal where it was alleged that the CIT(A) had erred in holding that the assessee was entitled to benefit u/s 11(1) of the Act read with Section 2(15)of the Act. In the AY 1990-91 the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 read with Section 12AA of the Act. Resultantly the appeal filed by the Department is dismissed. 5.1.3 Since the facts of the case are similar to those for assessment year 2013-14, respectfully following the decision of Hon'ble ITAT for assessment year 2012-13 in appellant's own case, the Assessing Officer is directed to allow exemption with all consequential benefits. As regards the disallowances made on account of provision for doubtful debts, provision for leave encashment and provision for gratuity, the Hon'ble Delhi Court, in the case of DIT (E) vs. NASSCOM [345 ITR 362 (DEL)] have observed as under: 40. ...Be that as it may, under the commercial principles it has always been recognized that a provision, reasonably made for a loss or an outgoing, can be deducted from the income if there isapprehension that the debt might become bad. There is nothing brought on record to show that the provision was not made bona fide. In such a situation, the ratio of the decisions cited by us while dealing with the deductibility of the taxes paid under the VDIS will equally apply. We accordingly hold that while computing the income available to the trust for applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that all the grounds in the appeal of the Revenue are covered against the Revenue. 11. We have carefully considered the rival contentions. The Co-ordinate Bench in Assessment Year 2012-13 vide order dated 20.11.2017 [ ITA No 4983/Del/2015 Co No 82/del/2016] held as under:- 25. We have considered rival contentions and have gone through the impugned order, the Paper Book and also the case laws which have been cited before us. We are of the view that the order of the CIT(A) is flawless and so the assessee has to succeed in this case. That is because the assessee Association, which is registered as a charitable entity u/s 12A of the Act, has carried out its activities in terms of the objectives as approved by the Department at the time of securing Section 12A registration. Nothing is brought on record by the Assessing Officer to indicate that there has since been any change in the objectives or the Rules and Regulations of the Association or that the activities as undertaken during the year are not in conformity with the registration conditionalities. The Association has been held as a charitable entity in the past. The Assessing Officer has not brought any specific m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(4)(A) of the Act by holding the same as business activity. It seems that the CIT(A)'s first appeal order in AY 1992-93 became final where it was held by the CIT(A) that the Appellant was entitled to exemption u/s 11of the Act and the provisions of Section 11(4)(A) of the Act were not applicable to the case. There-after in AY 1997-98 the Assessing Officer himself in the assessment order dated 11.01.2000 conferred charitable status to the assessee by applying Section 11 of the Act. While fees may be charged and there may even to be a surplus out of charitable activities, the principle that so long as the surplus funds are redeployed in charitable activities no objection can be taken as to the charitable pursuits is inexceptionable. This has been so held by the apex court in Thiagarajar Charities vs. Addl CIT (1997) 225 ITR 1010 (SC). 27. Further the Hon'ble Delhi High Court has ruled that the expression charitable purpose as defined in Section 2(15) of the Act could not be construed literally and in absolute terms. The expression would take its colour and had to be considered in the context of Section 10(23C)(iv) of the Act. The court held that if in terms of the dominan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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