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TMI Blog2022 (8) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... no adverse remark as held by the assessee violated the provisions of section 13 of the Act while incurring the said expenditure. CIT(A) by placing reliance on the decision of St. George Forana Church [ 1987 (7) TMI 44 - KERALA HIGH COURT] held that where surplus funds were utilized for additions to a building, which was let out and the income thereof applied for charitable or religious purposes, the utilization of such surplus was held to amount to application of income for religious or charitable purposes. CIT(A) placed reliance on the decision of Karimla Trust [ 2007 (9) TMI 229 - JHARKHAND HIGH COURT] which held that breach of conditions would not disentitle assessee from getting benefits. CIT(A) examined the issue in detail from Page No. 11 of the impugned order and held the assessee is entitled to claim exemption u/s. 11 of the Act. Thus, we agree with the reasons recorded by the CIT(A) and it is justified. Thus, ground No. 6 raised by the Revenue is dismissed. Non-applicability of section 60 - HELD THAT:- The provisions u/s. 60 of the Act explains all the income arising to any person by virtue of a transfer is chargeable to Income Tax as the income of the transferor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the order of CIT(A), the Revenue is before us. 5. Heard both the parties and perused the material available on record. We note that a similar issue on identical facts came up before this Tribunal in assessee s own case in ITA No. 2439/PUN/2017 and vide order dated 16-09-2020, considering the order for A.Ys. 2010-11 and 2011-12 remanded the issue to the file of AO for deciding the issue afresh as per directions as rendered by this Tribunal in A.Ys. 2010-11 and 2011-12. The ld. DR placed on record report dated 01-08-2022 enclosing factual report in the case of assessee, objects of assessee and order giving effect to the directions of this Tribunal. On perusal of giving effect order dated 23- 03-2021 passed by the AO it is clear that the AO allowed exemption and held chargeable of Rs.3,11,664/- on account of violation of provisions u/s. 13 of the Act. Therefore, in view of the said fact following the order latest being in A.Y. 2013-14 we deem it proper to remand the matter to the file of AO for its fresh consideration to pass order in accordance with the directions rendered by this Tribunal in A.Ys. 2010-11 and 2011-12 vide its order dated 28-06-2017. For ready reference paras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub- section (3) in so far as such use or application relates to any period before the 1st day of June, 1970 ; A bare perusal of the above provisions of section 13(1)(c)(ii) show that in case any income or property of the trust is used either directly or indirectly for the benefit of trustee or any person referred to sub-section (3) of section 13, the benefits granted to the trust u/s. 11 shall be forfeited. However, the first proviso to section 13(1)(c) provides an exception. According to first proviso benefit derived by the trustee or the person mentioned in sub-section (3) shall not debar the trust from availing the benefit of section 11 and 12, if : (i) the trust is created or established prior to the commencement of the Act; and (ii) the benefit extended to the trustee or the person referred to in subsection (3) is in compliance with the mandatory terms of the trust. 7. In the present case, the assessee has placed on record a copy of the Trust Deed at pages 40 to 48 of the paper book. The Trust Deed is in Marathi language. The English translation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal in the case of Sinhgad Technical Education Society Vs. ACIT in ITA No. 320/PUN/2010 for assessment year 2006- 07 decided on 14-12-2016 has held that there cannot be denial of exemption in toto u/s. 11 of the Act. The benefit of exemption shall not be available to the extent there is violation of provisions of section 13(1)(c) and the same be brought to tax at the maximum marginal rate. In case the Assessing Officer comes to the conclusion that shops are not part of the property as mandated in the Trust Deed, the addition has to be made to the extent of violation of provision of section 13(1)(c)(ii) and 13(2)(b) of the Act. The Assessing Officer before deciding this issue afresh in accordance with our directions shall grant opportunity of hearing to the assessee, in accordance with law. 4. As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to A.Y. 2010-11 and A.Y. 2011-12, we respectfully follow the order of the Tribunal for A.Y. 2010-11 and A.Y. 2011- 12 and restore this issue to the file of the Assessing Officer for deciding the same afresh as per the same direction as given by the Tribunal vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust property or in the nature of administrative and other expenses. If there is property held in trust, then exemption to a Trust under Section 11 can be granted when the source of its income is some property, which is held under Trust or under any other legal obligation for religious or charitable purposes. The exemption will be allowed if the source of income, viz. the property, is held upon a Charitable Trust. The word 'Property' is used in the widest import indicating all that a person has dominance over. As held by the Bombay High Court in the case of A.J. Patel v. CIT (1974) 97 ITR 683, even the right to exploit either side of the bridge as advertising space so as to yield income, was property which could be held in Trust. In the case of Institute of Banking Personnel Selection vs. Asst. Dir. of IT, 67 ITO 160 (Mum.Trib.), the Trust was formed with the object of promoting efficiency in the financial sector in the country. Substantial income was earned in the course of conducting examinations for recruitment of personnel to various public sector banks. The Assessing Officer treated the activity as commercial. The Tribunal held that the activities undertaken were inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Wealth Tax are not expenditure by themselves for the purpose of the Trust, but an incidence of the income or accumulation of income, and as such, must be deducted from the income of the Trust [CIT vs. Trustees of H.E.H. the Nizam's Supplemental Religious Endowment Trust, (1981) 127 ITR 378 (A.P.)]. Further, in the case of CIT vs. Baroda Industrial Development Corporation Limited, (1986) 24 Taxman 36, the Gujarat High Court held that the Income Tax liability of a Charitable Trust has to be deducted as a necessary outgoing before the net income capable of obligation for the purpose of the Trust under Section 11(1)(a) of the Income-tax Act could be ascertained. A similar view was taken by the Gujarat High Court in C1T vs. Ganga Charity Trust Fund, (1986) 162 ITR 612. Under the circumstances, no adverse inference can be drawn on the basis of the factual data culled out by the AO in the assessment order. (vi) Further, the total expenditure has to be considered to be inclusive of the depreciation. The total expenditure, rather application, is Rs. 917.05 lakhs. The AO has further observed that capital expenditure has been incurred on other than the objects of the trust amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse remark as held by the assessee violated the provisions of section 13 of the Act while incurring the said expenditure. We note that the CIT(A) by placing reliance on the decision of Hon ble High Court of Kerala in the case of St. George Forana Church reported in 170 ITR 62 held that where surplus funds were utilized for additions to a building, which was let out and the income thereof applied for charitable or religious purposes, the utilization of such surplus was held to amount to application of income for religious or charitable purposes. Further, we note that the CIT(A) placed reliance on the decision of Hon ble High Court of Jharkhand in the case of Karimla Trust reported in 302 ITR 57 which held that breach of conditions would not disentitle assessee from getting benefits. The CIT(A) examined the issue in detail from Page No. 11 of the impugned order and held the assessee is entitled to claim exemption u/s. 11 of the Act. Thus, we agree with the reasons recorded by the CIT(A) and it is justified. Thus, ground No. 6 raised by the Revenue is dismissed. 10. Ground No. 7 raised by the Revenue challenging the action of CIT(A) in holding non-applicability of section 60 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome or Charitable purposes by the donor Trust and the same would be entitled to exemption under Section 11. Reiterating this View, the Gujarat High Court held in the case of CIT Vs. Sarladevi Sarabhai Trust, (No.2) (1988) 172 ITR 698 that such a donation would constitute application for religious or charitable purposes, even if it was towards the corpus of the other Trust. Similar is the decision of the Delhi High Court in CIT v. Shri Ram Memorial Foundation (2004) 269 ITR 35. (iii) I have considered the submission of the appellant and gone through the provision of Section 60 of the I.T. Act. I find force in the argument of the appellant on the simple reason that the provisions of section 11 to 13 are an independent scheme of taxation of trust and accordingly, the general provision of section 60 may not be applied unless or otherwise so specified. Hence, in my considered view, the provision of section 60 is not attracted in the case of the appellant on present facts of the case. 12. Heard both the parties and perused the material available on record. We note that the assessee allowed a building belonging to it another trust by name Lohia Pratisthan. We note that the said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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