M/s Chandravadani Mahila Shiksha Samiti, Bhopal v. The ACIT, 3(1), Bhopal

CO 37/IND/2011 | 2005-2006
Pronouncement Date: 08-02-2012 | Result: Dismissed

Appeal Details

RSA Number 3722723 RSA 2011
Assessee PAN AAATC2617H
Bench Indore
Appeal Number CO 37/IND/2011
Duration Of Justice 6 month(s) 4 day(s)
Appellant M/s Chandravadani Mahila Shiksha Samiti, Bhopal
Respondent The ACIT, 3(1), Bhopal
Appeal Type Cross Objection
Pronouncement Date 08-02-2012
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 08-02-2012
Assessment Year 2005-2006
Appeal Filed On 03-08-2011
Judgment Text
1 THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NOS. 141 TO 143 AND 281/IND/2011 A.YS. 2004-05 TO 2006-07 AND 2008-09 ASSTT. COMMISSIONER OF INCOME TAX 3(1) BHOPAL ... APPELLANT VS CHANDRAVADANI MAHILA SHIKSHA SAMITI BHOPAL PAN AAATC 2617H ... RESPONDENT AND CO NOS. 36 TO 38/IND/2011 AND 01/IND/2012 (ARISING OUT OF ITA NOS. 141 TO 143 AND 281/IND/20 11) CHANDRAVADANI MAHILA SHIKSHA SAMITI BHOPAL ... APPELLANT VS ASSTT. COMMISSIONER OF INCOME TAX 3(1) BHOPAL ... RESPONDENT 2 APPELLANT BY : SHRI KESHAV SAXENA RESPONDENT BY : SHRI SUMIT NEMA DATE OF HEARING : 07.2.2012 DATE OF PRONOUNCEMENT : 08.2.2012 O R D E R PER JOGINDER SINGH JUDICIAL MEMBER THE REVENUE IS IN APPEAL AGAINST THE ORDERS OF LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) DATED 19.1.201 1 AND 5.7.2011 FOR THE ASSESSMENT YEARS 2004-05 TO 2006-0 7 AND 2008-09 RESPECTIVELY AND THE ASSESSEE HAS PREFERR ED CROSS OBJECTIONS ARISING OUT OF THE APPEALS PREFERRED BY THE REVENUE. THE REVENUE HAS RAISED THE FOLLOWING COMMON GROUNDS :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) HAS ERRED IN :- 1. HOLDING THAT THE ASSESSEE INSTITUTION IS NOT AN ASSOCIATION OF PERSONS AND THEREFORE THE FINDINGS OF THE A.O. THAT THE ASSESSEE IS WHOLLY WRONG AND UNLAWFUL AND THEREFORE SUCH FINDING BE QUASHED AND THE ASSESSMENT BE CANCELLED. 2. HOLDING THAT THE EXPENDITURE ON TELEPHONE WAS FOR THE PURPOSE AND THE BENEFITS OF THE SOCIETY AND THERE IS NO PERSONAL BENEFITS OF THE MEMBERS OF THE SOCIETY IS INVOLVED IN SUCH EXPENSES AND THERE IS NO VIOLATION OF SECTION 3 13 AND THE ASSESSEE IS FULLY ELIGIBLE FOR EXEMPTION U/S 11 & 12 OF THE IT ACT. 3. DELETING THE ADDITION OF RS. 6 464/- (A.Y. 2004- 05) RS. 12 637/- (A.Y. 2005-06) RS. 3 793/- (A.Y. 2006-07) RS. MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF TELEPHONE EXPENSES IS WHOLLY UNJUSTIFIED AND UNLAWFUL. 4. HOLDING THAT THE PROVISIONS OF SECTION 13(1)(D)(I) AND 13(1)(C)(II) ARE NOT ATTRACTED AND DIRECTING THE A.O. TO ALLOW THE BENEFIT OF SECTION 11 & 12 OF THE IT ACT 1961. 5. DELETING THE ADDITION OF RS. 349417 (A.Y. 2004-05) RS. 2 59 417/- (A.Y. 2005-06) RS. 2 59 417/- (A.Y. 2006-07) MADE BY THE A.O. ON ACCOUNT OF BENEFIT OF INTEREST PASSED ON TO OTHER SOCIETY. 6. HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTION U/S 11(1)(A) OF THE I.T. ACT 1961. 7. HOLDING THAT THE ASSESSEE IS FULLY ELIGIBLE FOR DEDUCTION CLAIMED AT RS. 2 34 93 995/- (A.Y. 2004-05) RS. 2 76 78 826/- (A.Y. 2005-06) RS. 2 82 09 507/- (A.Y. 2006-07) AS AN APPLICATION OF INCOME U/S 11 AND 12 FOR THE ACQUISITION OF FIXED ASSETS. 2. SO FAR AS THE FIRST GROUND RAISED BY THE REVENUE IS CONCERNED THE CRUX OF ARGUMENTS ON BEHALF OF THE R EVENUE IS IN 4 SUPPORT TO THE ASSESSMENT ORDER WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDER. 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS A ND PERUSED THE MATERIAL AVAILABLE ON FILE. WITHOUT GOING INTO MUCH DELIBERATION WE ARE REPRODUCING HEREUNDER THE CONC LUDING PARA FROM THE IMPUGNED ORDER :- I FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE WHICH ARE DULY SUPPORTED BY THE VARIOUS JUDICIAL CITATIONS INCLUDING THE DECISION OF THE JURISDICTIONAL HON'BLE M.P. HIGH COURT. IN MY OPINION CHANGE OF STATUS IN THE ASSESSMENT IS NOT PERMITTED WITHOUT A NOTICE TO THE ASSESSEE AND THEREFORE THE A.O. IS NOT JUSTIFIED IN MAKING THE ASSESSMENT IN THE STATUS OF AOP SOCIETY. FURTHER THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE ASSESSEE SOCIETY IS AN AOP CONSTITUTED BY MEMBERS FOR EARNING AND SHARING THE INCOME OF THE SOCIETY AND THEREFORE IT IS NOT AN AOP BUT ITS PROPER STATUS IS ARTIFICIAL JUDICIAL PERSON AS MENTIONED IN SECTION 2(31)(VII) OF THE I.T. ACT. IT IS IN THIS STATUS THAT THE ASSESSEE HAS BEEN CONSISTENTLY ASSESSED IN THE PAST AND SHOULD BE ASSESSED ACCORDINGLY. THUS I DECIDE THE GROUND NO. (2) & (3) IN FAVOUR OF THE ASSESSEE. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN IN THE STATUS OF ARTIFICIAL JURIDICAL PERSON AS DEFI NED U/S 2(31)(VII) OF THE ACT WHEREAS THE LEARNED ASSESSING OFFICER CO MPLETED 5 THE ASSESSMENT IN THE STATUS OF AOP. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE INSTITUTION IS NOT TH E ASSOCIATION OF PERSONS THEREFORE DECLARING THE ASSESSEE AS AO P IS QUITE UNJUSTIFIED. WE FIND THAT IN THE IMPUGNED ORDER L EARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DULY CONSI DERED THE SUBMISSIONS OF THE ASSESSEE AND THE FACTUM THAT THE ASSESSEE NEVER FILED THE RETURN IN THE STATUS OF AO P THEREFORE HE RELIED UPON VARIOUS JUDICIAL PRONOUNCEMENTS AND ESPECIALLY THE DECISION FROM HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. SOBHAGMAL MISHRILAL SEMLAVADA (223 ITR 55 4) WHEREIN IT WAS HELD THAT WHERE THE ASSESSEE FILED T HE RETURN IN THE STATUS OF HUF THERE COULD NOT BE ANY VALID ASS ESSMENT IN THE STATUS OF INDIVIDUAL WITHOUT AFFORDING OPPORTUN ITY TO THE ASSESSEE AND ON THIS GROUND THE CANCELLATION OF AS SESSMENT WAS UPHELD. THE DECISION OF THE HON'BLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS. SHARDAPRASAD MOTILAL A ND OTHERS; 191 CTR (MP) 487 WHEREIN IT WAS HELD THAT IN THE AB SENCE OF ANY CONCLUSIVE EVIDENCE ASSUMING THE EXISTENCE OF A OP THE ASSESSMENT IS BAD IN LAW THERE IS AN UNCONTROVERTE D FINDING IN 6 THE IMPUGNED ORDER THAT THE ASSESSEE DECLARED THE S TATUS AS ARTIFICIAL JURIDICAL PERSON IN ITS RETURN THEREFO RE THE CHANGE OF STATUS BY THE ASSESSING OFFICER IS NOT PERMISSIBLE THAT TOO WITHOUT GIVING A NOTICE TO THE ASSESSEE. THE ASSESS EE HAD BEEN CONTINUOUSLY ASSESSED AS ARTIFICIAL JURIDICAL PERSON IN EARLIER YEARS THEREFORE THERE WAS NO JUSTIFICATIO N IN CHANGING THE STATUS BY THE ASSESSING OFFICER CONSEQUENTLY WE AFFIRM THE STAND OF LEARNED COMMISSIONER OF INCOME TAX (APPEAL S). 3. SO FAR AS GROUND NOS. 2 AND 3 RAISED BY THE REVE NUE ARE CONCERNED THE CRUX OF ARGUMENTS ON BEHALF OF THE R EVENUE IS IN SUPPORT TO THE DISALLOWANCE OF TELEPHONE EXPENSES WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE I MPUGNED ORDER. 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON FILE. BEFORE COMING TO ANY C ONCLUSION WE ARE REPRODUCING HEREUNDER THE CONCLUSION AND THE FA CTUAL FINDING DRAWN IN THE IMPUGNED ORDER :- I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND HAVE ALSO GONE THROUGH 7 THE ASSESSMENT ORDER OF THE A.O. MRS. SADHANA KARSOLIYA IS A FULL TIME CHAIR PERSON OF THE SOCIETY AND SHE IS WORKING AND RENDERING HER SERVICES TOWARDS THE DEVELOPMENT OF THE EDUCATIONAL INSTITUTIONS OF THE ASSESSEE SOCIETY AND IT IS ALWAYS NOT POSSIBLE/FEASIBLE TO HAVE RECORD FOR EVERY TELEPHONE CALL SHE HAS TO MAKE IN CONNECTION WITH THE AFFAIRS OF THE SOCIETY SHE WOULD TRAVEL ALL THE TIME TO THE COLLEGE RUN BY THE SOCIETY WHICH IS ON THE OUTSKIRTS OF BHOPAL AND IT IS MATTER OF COMMON KNOWLEDGE THAT WHEN A PERSON WHO IS RENDERING SERVICES TO INSTITUTIONS PARTICULARLY IN THE CAPACITY OF THE CHAIR PERSON SHE MAY REQUIRE TO SPEAK ON PHONE FROM HER RESIDENCE ALSO IN CONNECTION WITH THE AFFAIRS OF THE SOCIETY. AS SHE HAS TO SUPERVISE AND MANAGE ADMINISTRATIVE FINANCIAL AND OTHER AFFAIRS OF THE EDUCATIONAL INSTITUTIONS RUN BY THE SOCIETY FOR WHICH TELEPHONE CALLS ARE REQUIRED TO BE MADE FROM THE RESIDENCE WHICH ARE NOT ONLY NECESSARY BUT INEVITABLE. MOREOVER FROM THE TOTAL EXPENDITURE OF RS. 6464/- INCURRED ON THE TELEPHONE CALLS FOR THE ENTIRE YEAR IT WOULD BE UNJUSTIFIED TO HOLD THAT IT COULD BE FOR THE PERSONAL BENEFITS OF THE CHAIRPERSON. MOREOVER THE EXPENDITURE INCURRED IS QUITE REASONABLE BY ANY YARDSTICK COMPARED TO THE MAGNITUDE OF SERVICE RENDERED AND THE ACTIVITIES OF THE SOCIETY. MOREOVER THERE IS NO EVIDENCE ON RECORD THAT THE APPELLANT HAS PASSED ON ANY BENEFIT BY WAY OF PERSONAL USE OF THE TELEPHONE TO THE CHAIRPERSON OF THE SOCIETY. IT APPEARS TO BE ONLY THE PRESUMPTION ON THE PART OF THE A.O. THAT TELEPHONE INSTALLED AT THE RESIDENCE OF MRS. SADHNA KARSOLIYA WAS USED BY HER FOR PERSONAL PURPOSE. 8 THE A.O. HAS BASED HIS FINDINGS THAT PERSONA BENEFIT HAS BEEN DERIVED BY THE CHAIRPERSON BY CLAIMING EXPENSES ON THE TELEPHONE INSTALLED AT HER RESIDENTIAL PREMISE WHEREAS IT HAS BEEN CONTENDED BY THE LD.AR THAT THE EXPENSES HAVE BEEN INCURRED IN THE PERFORMANCE OF HER DUTIES AS THE CHAIRPERSON OF THE SOCIETY. IT HAS BEEN HELD BY VARIOUS COURTS THAT REASONABLE COMPENSATION FOR THE SERVICES RENDERED IS NO BENEFIT AND DOES NOT COME IN THE WAY OF EXEMPTION PROVIDED U/S 11 AND 12. IN MY VIEW SECTION 13 WOULD BAR PRIVATE BENEFIT TO THE AUTHOR FOUNDER A SUBSTANTIAL CONTRIBUTOR TRUSTEES OF THE TRUST OR MANAGER OR THE INSTITUTION ANY RELATIVE OF SUCH PERSONS OR CONCERN IN WHICH THEY ARE INTERESTED. THIS HAS OFTEN LED REVENUE TO WRONGLY INFER BENEFIT EVEN WHERE THERE IS NONE AS WAS DONE IN DIRECTOR OF INCOME-TAX (EXEMPTION) V. PARIWAR SEWA SANSTHAN (2002) 254 ITR 268 (DEL) WHERE IT WAS HELD THAT NO QUESTION OF LAW WOULD ARISE MERELY BECAUSE THE CHIEF EXECUTIVE OFFICER WAS GIVEN SALARY AND RENT FREE ACCOMMODATION OF A HOUSE RENTED FROM HER HUSBAND AND LOAN TO A FOUNDATION IN WHICH SHE WAS A PARTNER. THE TRIBUNAL HAD HELD THAT THE LADY WAS RENDERING VALUABLE SERVICE AND THE REMUNERATION GIVEN WAS REASONABLE. SO WERE THE OTHER EXPENSES INCURRED AND LOAN GIVEN IN THE COURSE OF CARRYING OUT THE OBJECTIVE OF PROVIDING SERVICE IN THE FIELD OF FAMILY PLANNING ETC. THE PAYMENT IT WAS FOUND DID NOT VIOLATE THE MANDATE OF SECTION 13(5) OF THE ACT. FURTHER IN THE CASE OF ACIT VS. SOUTH POINT MONTESSORI SCHOOL (2007) 294 ITR (AT) 149(GAU) IT WAS FOUND THAT THE MERE FACT THAT 9 THE INTERESTED PERSONS WERE GIVEN SALARIES FOR SERVICE OR RENT FOR THE PREMISES MADE AVAILABLE CANNOT BE TREATED AS A BENEFIT TO THEM WHEN THE REWARD IS REASONABLE. THE LD. AR HAS ALSO REFERRED TO VARIOUS JUDICIAL PRONOUNCEMENTS IN HIS WRITTEN SUBMISSION. ON THE IDENTICAL ISSUE IN THE CASE OF VICHAR BHARTI EDUCATION SOCIETY FOR A.Y. 2002-03 THE APPELLATE TRIBUNAL INDORE BENCH HAS HELD THAT THE PROVISIONS OF SECTION 13 COULD NOT BE APPLIED IN THE REALM PRESUMPTION AND SUSPICION. THE PRINCIPLES LAID DOWN IN THE DECISION OF JURISDICTIONAL TRIBUNAL IN MY VIEW IS APPLICABLE IN THE CASE OF ASSESSEE ALSO. ACCORDINGLY I HOLD THAT THE APPELLANT HAD NOT VIOLATED THE PROVISIONS OF SECTION 13 SO AS TO DISENTITLE IT TO THE BENEFIT OF SECTION 11 AND 12 OF THE IT ACT. THUS THE ADDITION ON ACCOUNT OF TELEPHONE EXPENSES OF RS. 6 464/- IS DELETED AND THE A.O. IS DIRECTED TO ALLOW THE BENEFITS AVAILABLE U/S 11 AND 12. THIS GROUND NO. 4 & 5 ARE DECIDED IN FAVOUR OF THE APPELLANT. 3.2 THE FACTUAL FINDING CONTAINED IN THE AFORESAI D CONCLUSION WAS NOT CONTROVERTED BY THE REVENUE. WE FIND THAT THE BASIS DRAWN BY THE LEARNED ASSESSING OFFICER IN THE ASSES SMENT ORDER IS SELF CONTRADICTORY. MRS. SADHNA KARSOLIA AT THE RELEVANT TIME WAS THE CHAIRPERSON OF THE ASSESSEE INSTITUTION AND THE TELEPHONE EXPENSES SO INCURRED WERE DEBIT ED IN THE BOOKS OF ACCOUNT. SUCH EXPENSES WERE NOT FOR THE B ENEFIT OF 10 THE CHAIRPERSON RATHER INCURRED FOR THE INSTITUTION CONSEQUENTLY IT CANNOT BE SAID TO BE A BENEFIT PASSED ON TO THE CHAIRPERSON. IN VIEW OF THIS FACT WE AFFIRM THE STAND OF LEARNE D COMMISSIONER OF INCOME TAX (APPEALS). 4. SO FAR AS GROUND NOS. 4 AND 5 RAISED BY THE REVENUE ARE CONCERNED THESE ARE IN RESPECT OF PROVISIONS O F SECTION 13(1)(D)(I) AND 13(1)(C)(II) WHEREIN THE ASSESSING OFFICER WAS DIRECTED TO ALLOW THE BENEFIT OF SECTIONS 11 AND 12 OF THE ACT. THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS I N SUPPORT TO THE ASSESSMENT ORDER WHEREAS THE LEARNED COUNSEL F OR THE ASSESSEE DEFENDED THE IMPUGNED ORDER. 4.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON FILE. IN VIEW OF THE ABO VE RIVAL SUBMISSIONS WE ARE REPRODUCING HEREUNDER THE CONCL USION DRAWN BY LD. FIRST APPELLATE AUTHORITY :- I HAVE CONSIDERED THE SUBMISSION OF THE ASSESSEE. I HAVE ALSO GONE THROUGH THE ORDER OF THE A.O. IN THE INSTANT CASE IT IS SEEN THAT BOTH THE SOCIETIES EXISTS FOR A SIMILAR OBJECT OF IMPARTING AND PROMOTING EDUCATION AND IF ONE OF THE SOCIETY PROVIDES FUNDS TO THE OTHER BY 11 WAY OF LOAN/ASSISTANCE TO THE OTHER SOCIETY FOR THE DEVELOPMENT AND PROMOTION OF EDUCATION THE SAME SHOULD NOT BE CONSTRUED AS A VIOLATION OF SECTION 13 OF THE IT ACT. EVEN OTHERWISE REWA SHIKSHA SAMITI IS ALSO NOT A CONCERN IN WHICH THE MEMBERS/TRUSTEE OF THE ASSESSEE INSTITUTION HAVE ANY SUBSTANTIAL INTEREST AND THEREFORE IT IS NOT A CONCERN UNDER SUB-SECTION 13(3)(E). BY GIVING THIS LOAN NO PERSONAL BENEFIT HAS BEEN PASSED TO THE MEMBERS OF REWA SHIKSHA SAMITI BECAUSE IT IS GIVEN TO A CHARITABLE SOCIETY FOR THE PROMOTION OF EDUCATIONAL FACILITIES AND DEVELOPMENT OF INFRASTRUCTURE THE FACT WHICH HAS NOT BEEN DISPUTED BY THE A.O. THE A.O. IS ALSO NOT JUSTIFIED IN HIS FINDINGS THAT REWA SHIKSHA SAMITI IS A PERSON FALLING U/S 13(3)(E) BECAUSE IN VIEW OF EXPLANATION 3 TO SUB- SECTION 13(3) DEFINES SUBSTANTIAL INTEREST IN A CONCERN. THE A.O. HAS NOT PROVED AS TO HOW REWA SHIKSHA SAMITI FALLS WITHIN THE TWO SUB- CLAUSES BECAUSE SUB-CLAUSE (I) APPLIES TO COMPANIES WHICH HAVE SHARE CAPITAL. THE SUB-CLAUSE BECOMES APPLICABLE IN A SITUATION WHERE THE PERSONS REFERRED TO IN CLAUSES (A) (B) (C) (CC) AND (D) HAVE SHARE HOLDING OF 20% AND ABOVE IN THE SAID COMPANY WHICH IS NOT A CASE HERE. FURTHER SUB-CLAUSE (II) IS ALSO NOT APPLICABLE BECAUSE IT APPLIES TO CONCERN IN WHICH THE PERSONS REFERRED TO IN CLAUSES (A) (B) (C) (CC) AND (D) HAVING INTEREST OF 20% OR MORE IN THE PROFITS OF SUCH CONCERN. THE A.O. HAS ALSO ERRED IN HIS FINDINGS THAT THE APPELLANT HAS VIOLATED PROVISIONS OF SECTION 11(5) FOR WHICH SECTION 13(1)(D)(I) IS ATTRACTED. SO FAR AS SECTION 11(5) IS CONCERNED THE SAID SECTION PRESCRIBES THE FORMS AND THE MODES OF 12 INVESTING OR DEPOSITING THE MONEY REFERRED TO IN CLAUSE (B) OF SUB-SECTION (2) OF SECTION 11. SUB-SECTION (2) OF SECTION 11 PROVIDES AN OPTION TO THE ASSESSEE IF 85% OF ITS INCOME REFERRED TO IN CLAUSE (A) OR CLAUSE (B) OF SUB- SECTION (1) IS NOT APPLIED. THE ASSESSEE SUBMITS THAT FOR SUCH INCOME THE LAW IS THAT THE INCOME IS TO BE ACCUMULATED AND SET APART AND THE ASSESSEE IS REQUIRED TO NOTIFY SUCH ACCUMULATION TO THE A.O. THE ASSESSEE SUBMITS THAT IN THE RELEVANT YEAR THE ASSESSEE DID NOT ACCUMULATE OR SET APART RESERVE U/S 11(2) AND THEREFORE THE INVESTMENT OF SUCH MONEY DOES NOT ARISE AT ALL. THEREFORE SECTION 13(1)(D)(I) AND 13(1)(C)(II) ARE NOT ATTRACTED AND THE ASSESSEE SHOULD BE GIVEN BENEFIT OF SECTION 11 & 12. THE IDENTICAL ISSUE HAS ALSO BEEN DECIDED IN THE CASE OF VICHAR BHARTI EDUCATION SOCIETY AND THE APPELLATE TRIBUNAL INDORE HAS HELD THAT PROVISIONS OF SECTION 13(3) ARE NOT APPLICABLE WHEN ONE CHARITABLE SOCIETY GIVES LOAN TO ANOTHER CHARITABLE SOCIETY HAVING SIMILAR OBJECTS. I FIND THAT THE PRESENT ISSUE IS SIMILAR TO THE ISSUE WHICH CAME FOR CONSIDERATION IN THE CASE OF VICHAR BHARTI EDUCATION SOCIETY BHOPAL. IN THAT CASE ALSO THE VICHAR BHARTI EDUCATION SOCIETY HAD GIVEN INTEREST FREE LOAN TO ANOTHER SOCIETY IN WHICH THE MEMBERS/OFFICE BEARERS ARE COMMON AND THE PROVISIONS OF SECTION 13 WAS ATTRACTED THE A.O. DENIED THE BENEFIT OF SECTION 11 & 12 OF THE IT ACT. THE APPELLATE TRIBUNAL IN THE SAID CASE VIDE ITS ORDER DATED 13.07.2010 IITA NOS. 540 TO 542/IND/2007 317 & 318/IND/2006 & 256/IND/2007) HELD THAT GIVING INTEREST FREE LOAN TO ANOTHER SOCIETY DOES NOT ATTRACT THE PROVISIONS OF SECTION 13 AND IN THAT CASE THE 13 ASSESSEE VICHAR BHARTI EDUCATION SOCIETY WAS ALLOWED THE BENEFITS OF SECTION 11 & 12. RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL TRIBUNAL ON SIMILAR ISSUE I DECIDE THE ISSUE RAISED IN GROUND NO. (6) IN FAVOUR OF THE ASSESSEE AND DIRECT THE A.O. TO ALLOW THE BENEFIT OF SECTION 11 & 12 OF THE IT ACT. INTEREST SO FAR AS THE ADDITION OF RS.3 49 417/- BEING INTEREST @ 12% ATTRIBUTABLE TO THE LOAN GIVEN BY THE ASSESSEE TO REWA SHIKSHA SAMITI IS CONCERNED I FIND THAT THE SAID ADDITION IS NOT JUSTIFIED BECAUSE THE ASSISTANCE WAS GIVEN TO THE OTHER SOCIETY FOR A NOBLE AND CHARITABLE CAUSE AS BOTH THE SOCIETIES EXISTS FOR THE PURPOSE OF PROMOTION AND DEVELOPMENT OF EDUCATION. THOUGH THE A.O. HAS PROCEEDED TO MAKE ADDITION OF INTEREST INCOME OF RS. 3 49 417/- THE INCOME WAS NEITHER RECEIVED NOR ACCRUED TO THE ASSESSEE. THERE IS NO CONCEPT IN THE INCOME TAX REGARDING TAXING OF NOTIONAL INCOME. THE LEARNED COUNSEL OF THE APPELLANT HAS RIGHTLY PLACED RELIANCE IN THE CASE OF CIT VS. CHOORJI VALLABHDAS & CO. (1962) 46 ITR 144(SC) WHEREIN IT HAS BEEN HELD THAT INCOME TAX IS A LEVY ON INCOME. IF COME DOES NOT RESULT AT ALL THERE CANNOT BE A TAX. FURTHER AS IS EVIDENT FROM THE CHART SUBMITTED BY THE APPELLANT FOR THE LOAN GIVEN THAT FOR THE SAME LOAN NO ADDITION WERE MADE FOR THE ALLEGED NOTIONAL INTEREST INCOME PRIOR TO A.Y. 2004-05 AND THUS THIS IS THE FIRST YEAR WHEN INTEREST INCOME HAS BEEN BROUGHT TO TAX. I THEREFORE 14 DO NOT SEE ANY JUSTIFICATION IN THE ADDITION MADE AND THEREFORE THE ADDITION OF RS.3 49 417/- IS DELETED. THUS GROUND NO. (7) IS DECIDED IN FAVOUR OF THE ASSESSEE. 4.2 ON PERUSAL OF RECORD AND AFTER HEARING THE R IVAL SUBMISSIONS AND THE CONCLUSION DRAWN IN THE ASSESSM ENT ORDER AS WELL AS IN THE IMPUGNED ORDER WE FIND THAT LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) HAS DULY CONSI DERED THE WRITTEN SUBMISSIONS OF THE ASSESSEE VIS-A-VIS T HE FINDING CONTAINED IN THE ASSESSMENT ORDER ALONG WITH THE SU MMARY OF TRANSACTIONS IN THE BOOKS OF THE ASSESSEE. IN THE I MPUGNED ORDER IT WAS FOUND THAT REWA SHIKSHA SAMITI IS A R EGISTERED CHARITABLE INSTITUTION WITH EFFECT FROM 6.9.1999 AN D ITS CONSTITUTION AND OBJECTS WERE ALSO EXAMINED. THE SA ID SAMITI STARTED THE ENGINEERING COLLEGE FROM ACADEMIC YEAR 2001-02 FOR WHICH APPROVAL WAS GRANTED BY ALL INDIA COUNCIL FOR TECHNICAL EDUCATION. THE DECISION FROM MUMBAI BENC H IN ST. THOMAS EDUCATION SOCIETY (11 SOT 340) WHEREIN IT WA S HELD THAT IF THE PAYMENTS ARE MADE TO A SOCIETY EXISTING FOR EDUCATIONAL PURPOSES THEN SUCH PAYMENTS SHALL BE C ONSIDERED 15 AS EXPENDITURE FOR THE PURPOSES OF EDUCATION ALONG WITH THE DECISION FROM HON'BLE BOMBAY HIGH COURT IN THE CASE OF TRUSTEES OF JADI TRUST (133 ITR 494) LAID DOWN IDE NTICAL RATIO WERE CONSIDERED. THE HON'BLE DELHI HIGH COURT IN T HE CASE OF DIRECTOR OF INCOME TAX VS. ACME EDUCATION SOCIETY (2010) 326 ITR 146 WHEREIN ADVANCING OF INTEREST FREE TEMP ORARY LOAN BY ONE SOCIETY TO ANOTHER SOCIETY HAVING SIMILAR O BJECTS WHOSE PRESIDENT WAS BROTHER OF PRESIDENT OF ASSESSE E SOCIETY HELD THAT IT WOULD NOT AMOUNT TO AN INVESTMENT OR D EPOSIT ATTRACTING SECTION 13(1)(D) OF THE ACT. WHILE COMI NG TO THIS CONCLUSION THE HON'BLE COURT ALSO CONSIDERED FOLLO WING JUDICIAL PRONOUNCEMENTS :- 1. BAIDYANATH PLASTIC IND. PVT. LTD. V.ITI; 230 IT R 522 (DEL) 2. DIT (EXEMPTION) VS. ALARIPPU; 244 ITR 358 (DEL) 3. DIT (EXEMPTION) VS. KESHAV FOUNDATION; 278 ITR 1 52 (DEL) 4. DIT (EXEMPTION) VS. PARIWAR SEWA SANSTHAN; 254 I TR 268 (DEL) IDENTICAL RATIO WAS LAID DOWN BY THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF KANPUR SUBHASH SHIKSHA SAMI TI VS. DCIT; (2011) 133 ITD 182 (LUCK.) AND CIT V. KAMLA T OWN 16 TRUST; 150 TAXMAN 107 (ALL). WE FIND THAT THE PERCE NTAGE OF 20% OF SHARES/PROFITS HAS ALREADY BEEN CONSIDERED B Y LEARNED COMMISSIONER OF INCOME TAX (APPEALS). THERE IS A F ACTUAL FINDING IN THE IMPUGNED ORDER THAT BOTH THE SOCIETI ES WERE HAVING SIMILAR OBJECT OF IMPARTING AND PROMOTING ED UCATION. THERE IS A FURTHER FINDING THAT THE TRUSTEES OF THE ASSESSEE INSTITUTION WERE NOT HAVING ANY SUBSTANTIAL INTERES T IN REWA SHIKSHA SAMITI AND NO PERSONAL BENEFIT WAS PASSED T O ITS MEMBERS. WE FURTHER FIND THAT THE LEARNED ASSESSIN G OFFICER HAS NOT CONCLUSIVELY SUBSTANTIATED WITH EVIDENCE IN REACHING TO A PARTICULAR CONCLUSION CONSEQUENTLY IN VIEW OF T HE CLEAR PROVISIONS OF THE ACT AS CONTAINED IN SECTION 13(3) (E) ALONG WITH EXPLANATION 3 WE FIND NO INFIRMITY IN THE STAND OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND CONFIRM TH E SAME. IDENTICAL IS THE SITUATION FOR THE ADDITION OF INTE REST @ 12% AS ASSISTANCE WAS GIVEN TO THE SOCIETY FOR A NOBLE CAU SE AND EVEN OTHERWISE IT IS CONSEQUENTIAL IN NATURE. 5. SO FAR AS GROUND NO. 6 WHICH PERTAINS TO ELIGIBILITY FOR DEDUCTION U/S 11(1)(A) OF THE ACT RAISED BY THE REV ENUE IS 17 CONCERNED THE CRUX OF ARGUMENTS ON BEHALF OF THE R EVENUE IS IN SUPPORT TO THE ASSESSMENT ORDER WHEREAS THE LEARNE D COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDER. 5.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON FILE. BEFORE ADVERTING F URTHER WE ARE REPRODUCING HEREUNDER THE CONCLUSION DRAWN BY LD. F IRST APPELLATE AUTHORITY :- I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT. I FIND THAT IN THE RELEVANT YEAR THERE WAS AN EXCESS OF EXPENDITURE OVER INCOME TO THE TUNE OF RS. 71 45 738/- AND THE PROVISIONS OF SECTION 13 WERE MADE APPLICABLE BY THE A.O. HENCE THE ASSESSEE WAS NOT ALLOWED DEDUCTION AS AN APPLICATION OF INCOME U/S 11(1)(A). IN THIS APPELLATE ORDER VIDE GROUND NO. (6) I HAVE HELD THAT THE ASSESSEE HAS NOT VIOLATED THE PROVISIONS OF SECTION 13 AND IS ENTITLED FOR THE DEDUCTION U/S 11 & 12 OF THE I.T. ACT THEREFORE I HOLD THAT THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTION U/S 11(1)(A) OF THE I.T.ACT. THUS THIS GROUND IS DECIDED IN FAVOUR OF THE ASSESSEE. 5.2 IF THE CONCLUSION DRAWN IN THE IMPUGNED ORDER/ASSES SMENT ORDER AND THE ASSERTION MADE BY THE LEARNED RESPECT IVE COUNSEL ARE KEPT IN JUXTAPOSITION AND ANALYSED THE RE IS AN 18 UNCONTROVERTED FINDING IN THE IMPUGNED ORDER THAT T HERE WAS AN EXCESS OF EXPENDITURE OVER THE INCOME TO THE TUNE O F RS.71 45 738/- CONSEQUENTLY WE FIND NO VIOLATION OF THE PROVISIONS OF THE ACT ESPECIALLY WHEN THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION AS HAS BEEN CONCLUDED IN THE IMPUGNED ORDER. WE FIND NO INFIRMITY IN THE SAME AND CONFIRM THE SA ME. 6. SO FAR AS GROUND NO. 7 RAISED BY THE REVEN UE IS CONCERNED IT PERTAINS TO ELIGIBILITY FOR DEDUCTION CLAIMED AT RS. 2 34 93 995/- AS AN APPLICATION OF INCOME U/SS 11 A ND 12 FOR ACQUISITION OF FIXED ASSETS. THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS IN SUPPORT TO ASSESSMENT ORDER WHE REAS THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUG NED ORDER. 6.1 BEFORE COMING TO ANY CONCLUSION WE ARE REPR ODUCING HEREUNDER THE CONCLUSION DRAWN BY LD. FIRST APPELLA TE AUTHORITY :- I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE LD. AR. THE A.O. HAS DENIED THE DEDUCTION FOR INCOME APPLIED BY THE APPELLANT FOR ACQUISITION OF FIXED ASSETS AS 19 BENEFITS OF SECTION 11 AND 12 WERE NOT MADE AVAILABLE TO THE APPELLANT. THE APPELLANT HAS CONTENDED THAT THE PROVISION OF SECTION 13 ARE NOT APPLICABLE HENCE IT IS ENTITLED FOR BENEFITS O F SECTION 11 & 12. WHILE ADJUDICATING GROUND NO. 6 I HAVE ALREADY HELD THAT THE APPELLANT HAS NOT VIOLATED THE PROVISIONS OF SECTION 13 AND THEREFORE SECTION 11 AND 12 WILL OPERATE IN THE CASE OF THE APPELLANT. ON SIMILAR ISSUE THE APPELLATE TRIBUNAL INDORE IN THE CASE OF VICHAR BHARTI EDUCATION SOCIETY VIDE ORDER DATED 13.07.2010 (ITA NOS. 540 TO 542/IND/2007 317 & 318/IND/2006 AND 256/IND/2007) HAS HELD THAT THE ASSESSEE IS ELIGIBLE FOR SUCH DEDUCTION OF INCOME SINCE THERE WAS NO VIOLATION OF SECTION 13. THE FINDINGS OF HON'BLE I.T.A.T. IN ABOVE REFERRED CASE IS AS UNDER :- 27. AS REGARD TO ISSUE OF APPLICATION OF INCOME IN RESPECT OF ACQUISITION OF FIXED ASSETS WE FIND THAT IT IS NOT IN DISPUTE THAT SUCH ASSETS HAVE BEEN ACQUIRED FOR THE PURPOSE OF ADVANCEMENT OF THE OBJECTS OF THE SOCIETY AND THEREFORE SUCH INVESTMENT SHOULD BE TREATED AS AN APPLICATION OF INCOME IN TERMS OF THE PROVISIONS OF SECTION 11 OF THE ACT. THUS THESE GROUNDS OF THE REVENUE ARE WITHOUT ANY MERIT HENCE DISMISSED IN ALL THE YEARS. . I FIND THAT THIS ISSUE IS COVERED BY THE AFORESAID DECISION OF THE JURISDICTIONAL TRIBUNAL. ACCORDINGLY I DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND HOLD THAT THE ASSESSEE IS FULLY ELIGIBLE FOR DEDUCTION CLAIMED AT RS. 2 34 93 995/- AS AN APPLICATION OF INCOME U/S 11 AND 12 FOR THE ACQUISITION OF FIXED ASSETS. 20 THIS GROUND IS THEREFORE ALLOWED TO THE APPELLANT. 6.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON FILE ALONG WITH THE ASSER TIONS PUT-FORTH BY THE LEARNED RESPECTIVE COUNSELS AND THE CONCLUSI ON DRAWN IN THE IMPUGNED ORDER AS WELL AS IN THE ASSESSMENT ORD ER. BRIEF FACTS OF THE CASE ARE THAT THE LEARNED ASSESSING OF FICER DENIED THE IMPUGNED AMOUNT AS APPLICATION OF INCOME FOR AC QUISITION OF FIXED ASSETS ON THE GROUND THAT THE BENEFIT OF S ECTIONS 11 AND 12 OF THE ACT IS NOT ALLOWABLE TO THE ASSESSEE. THE STAND OF THE ASSESSEE IS THAT SINCE THE ASSESSE E IS REGISTERED U/S 12A OF THE ACT BY THE DEPARTMENT TH EREFORE THE BENEFIT OF SUCH DEDUCTION IS ALLOWABLE TO THE ASSES SEE. WE FIND THAT THE TRIBUNAL IN THE CASE OF VICHAR BHARTI EDUC ATION SOCIETY (ITA NOS. 540 TO 542/IND/2007 AND 317 AND 318/IND/ 2006 AND 256/IND/2007) VIDE ORDER DATED 13.10.2010 IDENTICA LLY HELD THAT THE ASSESSEE IS ELIGIBLE FOR SUCH DEDUCTION ESPECIA LLY WHEN THERE WAS NO VIOLATION OF SECTION 13 OF THE ACT. TH E FINDING OF THE TRIBUNAL HAS BEEN REPRODUCED AT PAGE 17 OF THE IMPUGNED 21 ORDER. THE ISSUE WAS UNCONTROVERTEDLY FOUND TO BE COVERED BY THE AFORESAID DECISION. IN THE ABSENCE OF ANY CONTR ARY DECISION BROUGHT TO OUR NOTICE BY EITHER SIDE WE AFFIRM THE STAND OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 7. NOW WE SHALL DEAL WITH ITA NO. 281/IND/2011 W HEREIN FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE : - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN :- 1. ADOPTING THE STATUS OF THE ASSESSEE AS ARTIFICI AL JURIDICAL PERSON (AJP) U/S 2(31)(VII) OF THE IT ACT WHEN THE A.O. MADE THE ASSESSMENT OF THE ASSESSEE IN THE STATUS OF A.O.P. 2. DELETING THE ADDITION OF RS. 1313137/- MADE BY THE A.O. ON ACCOUNT OF BENEFIT OF INTEREST PASSED ON TO OTHER SOCIETY. 3. DIRECTING THE A.O. TO ALLOW THE CLAIM OF DEPRECIATION AT RS. 23098929/- WHEN THE SOCIETY HAS BEEN CLAIMING THE COST OF ASSETS TO BE FULLY ALLOWED AS APPLICATION OF INCOME YEAR AFTER YEAR. 4. DELETING THE ADDITION OF RS.61984/- MADE BY THE A.O. ON ACCOUNT OF TELEPHONE EXPENSES 5. DIRECTING THE A.O. TO ALLOW THE DEDUCTION CLAIME D AT RS.101430156/- AS AN APPLICATION OF INCOME U/S 11 & 12 FOR THE COST OF ACQUISITION OF THE FIXE D APPLICATION OF INCOME U/S 11 & 12 FOR THE COST OF ACQUISITION OF THE FIXED ASSETS WITHOUT APPRECIATING THE FACTS NARRATED IN THE ASSESSMENT ORDER. 22 8. SO FAR AS GROUND NOS. 1 2 4 AND 5 ARE CONCE RNED THE SAME ARE COVERED BY OUR AFORESAID ORDER THEREFORE FOLLOWING THE REASONINGS CONTAINED ABOVE WE DISMISS THESE GR OUND. 9. THE ONLY GROUND REMAINS FOR OUR CONSIDERATI ON IS GROUND NO. 3 WHICH PERTAINS TO CLAIM OF DEPRECIATION AT RS . 2 30 98 929/-. THE STAND OF THE REVENUE IS THAT WHE N THE SOCIETY HAD BEEN CLAIMING THE COST OF ASSETS TO BE FULLY ALLOWABLE AS APPLICATION OF INCOME YEAR AFTER YEAR THEREFORE DEPRECIATION CANNOT BE ALLOWED WHEREAS LEARNED COU NSEL FOR THE ASSESSEE DEFENDED THE CONCLUSION DRAWN IN THE IMPUGNED ORDER. 9.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON FILE. BEFORE COMING TO A NY CONCLUSION WE ARE REPRODUCING HEREUNDER THE CONCLUDING PORTION OF THE IMPUGNED ORDER :- I HAVE CONSIDERED THE APPELLANTS SUBMISSION AND ALSO GONE THROUGH THE ASSESSMENT ORDER. IN VIEW OF THE JUDICIAL DECISIONS CITED INCLUDING THAT OF HON'BLE JUDICIAL INDORE TRIBUNAL IN THE CASE OF MADHYA PRADESH MADHYAM FOR A.Y. 2005-06 (ITA NO. 458/IND/08) I DIRECT THE A.O. TO ALLOW TH E 23 CLAIM OF DEPRECIATION OF RS.2 30 98 929/- AND THUS THIS GROUND IS DECIDED IN FAVOUR OF THE APPELLANT. 9.2 ON PERUSAL OF RECORD WE FURTHER FIND THAT THE ISSUE IS ALSO COVERED BY THE DECISION OF THIS BENCH IN THE CASE O F GUJRAT SAMAJ VS. ACIT (2011) 17 ITJ 684 ORDER DATED 31.1.2 011 WHICH WAS AFFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COU RT IN CIT V. GUJRAT SAMAJ (2011) 18 ITJ 255 (MP) WHEREIN IT WAS CLEARLY HELD THAT THE TRIBUNAL HAS RIGHTLY DECIDED THE ISSU E ABOUT DISALLOWANCE OF CLAIM OF DEPRECIATION WHILE COMPUTI NG THE INCOME OF CHARITABLE TRUST AND BY FURTHER HOLDING T HAT THE ASSESSEE BEING A CHARITABLE TRUST IS ENTITLED TO CLAIM OF DEPRECIATION ON THE ASSET OWNED BY IT THEREFORE W E FIND NO INFIRMITY IN THE CONCLUSION DRAWN IN THE IMPUGNED O RDER. RESULTANTLY ALL THE APPEALS OF THE REVENUE A RE DISMISSED. 10. NOW WE SHALL DEAL WITH THE CROSS OBJECTIONS FI LED BY THE ASSESSEE. IN CO NOS. 36 TO 38/IND/2011 THE ASSESSE E HAS RAISED THE FOLLOWING COMMON GROUND :- 24 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN NOT CANCELLING THE ASSESSMENT BECAUSE THE A.O. HAS MADE AN ASSESSMENT IN THE STATUS DIFFERENT THAN THE ONE SHOWN IN THE RETURN WITHOUT ANY NOTICE TO THE ASSESSEE. THE ASSESSMENT THEREFORE BE HELD AS INVALID AND WITHOUT JURISDICTION HENCE BE CANCELLED. IN CO NO. 1/IND/2012 THE ASSESSEE HAS RAISED THE F OLLOWING GROUND :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW AS THE ASSESSMENT HAS BEEN MADE IN THE STATUS DIFFERENT THAN THE STATUS SHOWN IN THE R ETURN HENCE THE ASSESSMENT IS BAD IN LAW AND THEREFORE BE CANCELLED. 10.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON FILE. SINCE WE HAVE AFFIR MED THE STAND OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THE ABOVE ISSUE THEREFORE THE CROSS OBJECTIONS FILED BY THE ASSESSEE HAVE REMAINED FOR ACADEMIC INTEREST ONLY THEREFORE THE SAME HAVE BECOME INFRUCTUOUS. 25 FINALLY THE APPEALS OF THE REVENUE ARE DI SMISSED AND THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISPOSED OF BE ING INFRUCTUOUS. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESE NCE OF LEARNED REPRESENTATIVES FROM BOTH THE SIDES AT THE CONCLUSION OF THE HEARING ON 8.2.2012. SD SD (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8.2.2012 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR GU ARD FILE DN/-