Hans Raj Smarak Society, New Delhi v. DIT(E), New Delhi

ITA 4316/DEL/2009 | misc
Pronouncement Date: 14-01-2011 | Result: Allowed

Appeal Details

RSA Number 431620114 RSA 2009
Bench Delhi
Appeal Number ITA 4316/DEL/2009
Duration Of Justice 1 year(s) 2 month(s) 3 day(s)
Appellant Hans Raj Smarak Society, New Delhi
Respondent DIT(E), New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 14-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 14-01-2011
Date Of Final Hearing 22-12-2010
Next Hearing Date 22-12-2010
Assessment Year misc
Appeal Filed On 10-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C DELHI BEFORE SHRI A.D. JAIN AND SHRI K.G. BANSAL ITA NO. 2957(DEL)/2010 ASSESSMENT YEAR: 2006-07 HANS RAJ SAMARAK SOCIETY DEPUTY DIRECTOR OF INCOME J5/2 KRISHNA NAGAR DELHI. VS. TAX (EX EM.) TRUST CIRCLE-II PAN-AAATH0351B NEW DELH I. ITA NO. 2448(DEL)/2010 ASSESSMENT YEAR: 2006-07 DEPUTY DIRECTOR OF INCOME HANS R AJ SAMARAK SOCIETY TAX (EXEM.) TRUST CIRCLE-II VS. J5/2 KRISHNA NAGAR DELHI. NEW DELHI. ITA NO. 4316(DEL)/2009 ASSESSMENT YEAR: N.A HANS RAJ SAMARAK SOCIETY DIRECTO R OF INCOME J5/2 KRISHNA NAGAR DELHI. VS. TAX (EXE MPTIONS) PAN-AAATH0351B NEW DELH I. (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. VIBHA MAHAJAN ADVOCA TE DEPARTMENT BY: SMT. MONA MOHANTY SR. DR ORDER PER K.G. BANSAL : AM THESE THREE APPEALS IN THE CASE OF HANSRAJ SAMA RAK SOCIETY WERE ARGUED IN A CONSOLIDATED MANNER BY THE LD. COUN SEL FOR THE ASSESSEE AND ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 2 THE LD. DR. THEREFORE WE FIND IT CONVENIENCE TO PASS A CONSOLIDATED ORDER. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSE E-SOCIETY HAD FILED ITS RETURN FOR ASSESSMENT YEAR 2006-07 DECLARING N IL INCOME. THE RETURN WAS PROCESSED U/S 143(1) ON 31.1.2007. THEREAF TER STATUTORY NOTICE U/S 143(2) WAS ISSUED. 2.1 THE ASSESSEE IS A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT. THE ASSESSEE IS ALSO REGISTERED U/S 12A( A) OF THE ACT ON 20.9.1973. THE ASSESSEE HAS ALSO BEEN GRANTED APPROVAL U/ S 80G VIDE ORDER DATED 8.3.2007 FOR THE PERIOD 1.9.2006 TO 31.3.2009. IT IS RUNNING A MIDDLE SCHOOL IN KRISHNA NAGAR AND SENIOR SECONDARY SCHO OL IN DILSHAD GARDEN DELHI. IN THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS FOUND THAT THE ASSESSEE RECEIVED A SUM OF RS. 29 00 991/- AS CO RPUS FUND. THE ASSESSEE WAS REQUIRED TO FURNISH THE DETAILS OF THE DONAT IONS AND TO PROVE THAT THE SAME WERE MADE TOWARDS THE CORPUS FUND. IT WAS SUBMITTED THAT IT HAD RECEIVED THE AFORESAID DONATIONS FROM 962 PERS ONS. DONATIONS OF RS. 5 62 240/- WERE RECEIVED FROM SOME OF THE PARENT S OF THE STUDENTS WHO SOUGHT ADMISSION IN THE RELEVANT PREVIOUS YEAR. T HE REST OF THE DONATIONS ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 3 WERE RECEIVED FROM MEMBER OF THE PUBLIC (HENCEF ORTH CALLED AS SOCIETY DONATIONS). IT WAS FURTHER SUBMITTED THAT TH E DONATIONS WERE VOLUNTARY AND THERE WAS NO COMPULSION TO GIVE DONATION FOR SEEKING ADMISSION. THE AO CONSIDERED THE FACTS OF THE CASE THE PH RASEOLOGY USED IN THE RECEIPT STATUTORY PROVISIONS AND THE CASE LAW. ON FACTS HE CAME TO THE CONCLUSION THAT THE DONATIONS WERE NOT VOLUNTARY. THEREFORE IT WAS HELD THAT THE DONATIONS DO NOT CONSTITUTE INCOME FROM PROPERTY HELD UNDER TRUST. ACCORDINGLY DEDUCTION U/S 11 WAS NOT GRANTED I N RESPECT OF THESE DONATIONS AND THE AMOUNT OF RS. 29 00 990/- WAS BROUGHT TO TAX. 3. AGGRIEVED BY THIS ORDER THE ASSESSEE MOVED AN APPEAL BEFORE THE LD. CIT(APPEALS)-XXI NEW DELHI. AS MENTIONED E ARLIER THE APPEAL WAS DISPOSED OFF ON 29.3.2010. THE LD. CIT(A) CON SIDERED THE NATURE OF DONATIONS STATUTORY PROVISION CONTAINED IN SECTIO N 115BBC AND DELHI EDUCATION ACT 1973 AND RELEVANT PROVISIONS OF T HE ACT AND THE CASES DECIDED THEREUNDER. IT WAS HELD THAT THE DONATI ONS FROM THE PARENTS WERE NOT VOLUNTARY BUT QUID PRO QUO EXISTED BETWEEN D ONATION RECEIVED AND THE ADMISSION GRANTED TO STUDENTS. THEREFORE THE AMO UNT OF RS. 5 62 240/- WAS HELD TO BE TAXABLE. THE BALANCE AMOUNT REPRESEN TING SOCIETY DONATIONS ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 4 WAS DELETED FROM THE ASSESSMENT. AGGRIEVED BY T HIS ORDER BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL. 3.1 THE ASSESSEE HAD ALSO APPLIED FOR ITS APPRO VAL U/S 80G(5)(VI). THE LD. DIRECTOR OF INCOME-TAX (EXEMPTIONS) CONSIDERED THE APPLICATION AND ALSO OBTAINED FURTHER EXPLANATION FROM THE ASSE SSEE. HE REFERRED TO THE PHRASEOLOGY OF THE DONATION RECEIPT AND THE PROVI SIONS CONTAINED IN DELHI EDUCATION ACT 1973. IT WAS HELD THAT THE CONTRI BUTIONS IN ORDER TO BE VOLUNTARY HAVE TO BE MADE WILLINGLY AND WITHOU T COMPULSION. THIS CONDITION WAS NOT SATISFIED. HE ALSO REFERRED TO THE FACT THAT THE AO HAS BROUGHT A SUM OF RS. 29 00 991/- TO TAX IN THE PROCEEDINGS OF ASSESSMENT YEAR 2006-07 BY DENYING EXEMPTION U/S 11. IT WAS HELD THAT THE ACT OF TAKING FORCIBLE DONATION IS AGAINST THE PUBLIC P OLICY. THEREFORE THE DONATION CANNOT BE SAID TO BE VOLUNTARY. FURTHER IT WAS HELD THAT THIS AMOUNTS TO MAKING A PROFIT THROUGH ILLEGAL MEA NS. THEREFORE APPROVAL U/S 80G WAS DENIED. THE ASSESSEE IN APPEAL AGA INST THIS ORDER. ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 5 ITA NO. 2957(DEL)/2010-ASSESSMENT YEAR 2006-07-AP PEAL OF THE ASSESSEE 4. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE-SOCIETY IS PURSUING EDUCATIONAL AND MEDICA L OBJECTS. IN THIS YEAR TOTAL DONATIONS OF RS. 29 00 991/- WERE RECEIVE D FROM THE PARENTS OF THE CHILDREN AND SOCIETY AT LARGE. THE AO CALLED F OR CONFIRMATION OF DONATIONS. HOWEVER ALL THE CONFIRMATIONS COULD NOT BE FILED AS THE NUMBER OF DONORS WAS AS LARGE AS 962. HOWEV ER THE LIST OF DONORS WAS FURNISHED TO THE AO. THE AO CAME TO THE CONCLU SION THAT THE AMOUNT DOES NOT REPRESENT INCOME FROM PROPERTY HELD UNDE R TRUST AS THE DONATIONS WERE NOT VOLUNTARY. THEREFORE THE AMOUNT OF DON ATIONS WAS ADDED TO THE INCOME U/S 68 OF THE ACT. FURTHER EXEMPTION WA S NOT ALLOWED U/S 11. THE LD. CIT(A) HELD THAT QUID PRO QUO WAS INV OLVED ONLY IN RESPECT OF DONATIONS RECEIVED FROM PARENTS OF THE CHILDREN. THEREFORE HE BROUGHT TO TAX THE AMOUNT OF RS. 5 62 240/- AND THE BALANC E AMOUNT OF RS. 23 38 751/- WAS DELETED FROM THE ASSESSMENT. 4.1 COMING TO THE FACTS IT WAS SUBMITTED THAT DONATIONS WERE RECEIVED FROM 235 PARENTS AGAINST 383 STUDENTS ADMITTED I N THIS YEAR. THE DONATIONS ARE OF VARYING AMOUNTS. THE DONATIONS HAVE BEEN PAID THROUGHOUT THE YEAR. THESE FACTS SHOW THAT THE DONATIONS WERE NOT LINKED ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 6 WITH ADMISSION AND THERE WAS NO COMPULSION TO PAY DONATION FOR ADMISSION. SHE DISTINGUISHED THE FACTS OF THE CASE OF SMT. P. NARASAMMA VS. ITO (2005) 93 ITD 71. FURTHER SHE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. BI JLI COTTON MILLS PVT. LTD. (1979) 116 ITR 60. IT WAS ALSO SUBMITTED THAT THE PROVISIONS CONTAINED IN SECTION 115BC ARE NOT APPLICABLE TO THE PROCEE DINGS OF THIS YEAR AS THESE HAVE BEEN BROUGHT ON THE STATUTE BOOK WITH EFFEC T FROM 1.4.2007. 4.2 IN REPLY THE LD. DR REFERRED TO THE LIST O F DONATIONS AND SUBMITTED THAT SOME DONORS HAVE MADE REPEATED DONATIONS. IN PARTICULAR IT WAS SUBMITTED THAT SMT. POONAM HAS MADE DONATION OF RS. 700/- EACH ON 11.7.2005 18.8.2005 AND 18.10.2005. THEREFORE EVEN IF THE DONATIONS WERE PAID DURING THE YEAR THEY WERE PAID UNDE R COMPULSION AND IN CONSIDERATION OF THE ADMISSION GRANTED TO THE CHI LDREN ADMITTED IN THE SCHOOL. SHE ALSO RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF P.S. GOVINDSAMY NAIDU & SONS VS. AC IT (2010) 324 ITR 44. 4.3 IN THE REJOINDER THE LD. COUNSEL SUBMITTE D THAT THE LIST OF DONORS HAD BEEN FURNISHED TO THE AO. NO ENQUIRY WAS CO NDUCTED TO ASCERTAIN ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 7 WHETHER THE DONATIONS WERE MADE UNDER COMPULSION OR NOT. FURTHER NONE OF THE LOWER AUTHORITIES HAS RECORDED A FINDI NG WHETHER THE AMOUNTS WERE APPLIED TOWARDS CHARITABLE OBJECTS OR NOT. IN ABSENCE OF THE ENQUIRY AND THE FINDING NO AMOUNT COULD HAVE BEEN ADDED TO THE INCOME. 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE FACTS ARE THAT IN THIS YEAR THE ASSESSEE RECEIVED DONATIONS OF RS. 5 62 240/- FROM THE PARENTS OF THE CHILDRE N WHO WERE ADMITTED TO THE SCHOOL. THE TOTAL NUMBER OF STUDENTS ADMITT ED IS 383 WHILE DONATIONS HAVE BEEN RECEIVED FROM 235 PARENTS. PRIMARIL Y THE AO HAS RELIED ON THE PHRASEOLOGY OF THE RECEIPT WHICH IS AS UNDER :- TO WHOMSOEVER IT MAY CONCERN I .R/O.DO HEREBY CONFIRM AND CERTIFY THAT I H AD GIVEN A DONATION OF RSTO HANSRAJ SAMARAK SOCIETY/HAN SRAJ SAMARAK SE. SEC. SCHOOL VIDE RECEIPT NO.DT.. AT THE TIME OF SEEKING ADMISSION OF MY CHILD..OF CLASSOF HANSRAJ SAMARAK SR. SEC. SCHOOL OPPO. PKT. E DILSHAD GARDEN DELHI-11 0095. SIGNATURE NAME .. ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 8 5.1 FROM THE WORDING OF THE RECEIPT IT CAN BE SEE N THAT THE DONATIONS WERE MADE AT THE TIME OF SEEKING ADMISSION OF THE CHILDREN. MAY BE IN SOME CASES WHERE THE PARENTS WERE NOT IN A POSITION TO PAY THE WHOLE AMOUNT AT THE TIME OF ADMISSION THE DONATION WAS PAID OVER A PERIOD OF TIME. HOWEVER THE WORDING DOES NOT LEAD TO A CONCLUSION THAT THERE WAS ANY COMPULSION TO MAKE THE DONATION FOR SEEKING ADMISSION. THIS CONCLUSION ALSO GETS FORTIFIED BY THE FACT THAT ONLY 235 PARENTS MADE DONATIONS AGAINST TOTAL NUMBER OF 383 STUDENTS A DMITTED IN THIS YEAR. IN SO FAR AS THE ACCOUNTING OF THE DONATION TOWARDS CORP US FUND IS CONCERNED THE LD. COUNSEL DROPPED THIS CONTENTION IN THE COURSE OF HEARING BEFORE US. THEREFORE THE AMOUNT WHETHER CLASSIFIED AS DON ATION OR CREDITS U/S 68 IS NOT TOWARDS THE CORPUS FUND. 5.2 IN THE CASE OF SMT. P. NARASAMMA (SUPRA) TH E FACTS ARE THAT WHENEVER A STUDENT IS ADMITTED APART FROM PAYM ENT OF FEES THE STUDENT OR THE PARENT IS REQUIRED RATHER UNCONDITIONA LLY FORTH TO PAY THE AMOUNT TO THE TRUST IN THE NAME OF DONATION. THE TRUST HAS NOT ADMITTED ANY STUDENT WHO HAS NOT PAID SUCH DONATION. CONVERS ELY NO PERSON OTHER THAN A STUDENT HAS MADE ANY DONATION TO THE TRU ST HAS BEEN ADMITTED. THE SO-CALLED TRUST HAS NOT COMMENCED ANY OF ITS CH ARITABLE ACTIVITIES. THE ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 9 TRUST HAS SIMPLY ACQUIRED CERTAIN LAND ON WHI CH CONSTRUCTION HAS NOT COMMENCED. IT HAS BEEN HELD THAT TO SAY THAT TH E PAYMENTS HAVE MADE THE DONATIONS CONSIDERING THE CHARITABLE ACTIVIT IES CARRIED ON BY THE TRUST IS ONLY IMAGINARY AND AN EYEWASH. THE ASSESSEE HAS ADMITTED THAT PART OF THE FEES ITSELF IS ASKED TO BE DEPOSITED IN T HE ACCOUNT OF THE TRUST. THE CHALLAN ALONG WITH WHICH THE REMITTANCE IS PAID T O THE BANK ON ACCOUNT OF DONATION CLEARLY SHOWS THAT THE TRUST HAS ISSUE D THE CHALLAN. THE STUDENT IS REQUIRED TO SUBMIT THE COPY OF THE PAID CH ALLAN TO THE TRUST FOR ADMISSION. THIS PROVES THAT BUT FOR THE AMOUNT PAID TO THE TRUST THE STUDENT IS NOT ADMITTED. THEREFORE THE DONATIO N PAID IS PART AND PARCEL OF THE TOTAL FEES PAYABLE BY A STUDENT AND IT IS NOT A VOLUNTARY ACT OF PAYMENT OF DONATION. THE FACTS OF THIS CASE A RE DISTINGUISHABLE. IN THE FIRST PLACE THE ASSESSEE IS AN OLD INSTITUTIO N AND IT HAS BEEN CARRYING ON EDUCATIONAL AND MEDICAL ACTIVITIES. THE PARENTS OF ALL THE CHILDREN HAVE NOT PAID THE DONATION. THIS MEANS THAT SUCH CH ILDREN HAVE ALSO BEEN ADMITTED WHO HAVE NOT PAID DONATION. THEREFORE THE AMOUNT PAID BY THE PARENTS CANNOT BE CONSIDERED TO BE THE AD DITIONAL FEES. THE PHRASEOLOGY OF THE RECEIPTS MERELY STATES THA T THE DONATION IS PAID AT THE TIME OF ADMISSION WHICH DOES NOT INDICATE ANY COMPULSION. NO ENQUIRY HAS BEEN MADE IN THIS BEHALF. ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 10 5.3 COMING TO THE DECISION IN THE CASE OF BIJLI C OTTON MILLS (P) LTD. THE FACTS ARE THAT AT THE TIME OF SALE AN AM OUNT OVER AND ABOVE THE SALE PRICE WAS CHARGED AND EARMARKED FOR DHARMADA. T HESE AMOUNTS WERE RECEIVED AND HELD BY THE ASSESSEE UNDER AN OBLIGA TION TO SPEND THE SAME FOR CHARITABLE PURPOSES ONLY. THIS PRACTICE WAS CUSTOMARY IN THE LINE OF THE BUSINESS. THE HONBE COURT HELD THAT THE AMOUNT CHARGED AS DHARMADA DID NOT ACCRUE TO THE ASSESSEE AS INC OME AS HE DID NOT GET ANY DOMAIN OVER THE AMOUNT AS IT HAS TO BE USE D FOR CHARITABLE PURPOSES. THE CASE OF THE LD. COUNSEL IS THAT THE AMOUNT R ECEIVED FROM PARENTS WAS TO BE CHARGED FOR CHARITABLE ACTIVITIES AND TH EREFORE IT CANNOT BE SAID TO BE THE INCOME OF THE ASSESSEE. WE ARE OF THE VIE W THAT THE FACTS OF THIS CASE ARE ALSO DISTINGUISHABLE. FIRST OF ALL A LL RECEIPTS OF THE ASSESSEE ARE TO BE APPLIED TOWARDS CHARITABLE OBJECTS AS IT IS NOT A BUSINESS ORGANIZATION. THEN THE RECEIPT FILED BEFORE US DOES NOT SHOW THE PURPOSE FOR WHICH THE MONEY HAD TO BE USED. NO ONE ELSE BUT THE ASSESSEE GOT THE DOMAIN OVER THE MONEY AFTER ITS RECEIPT FROM THE PARENTS. THUS THERE IS NO OVERRIDING TITLE OVER THIS MONEY. ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 11 5.4 IN THE CASE OF P.S. GOVINDSAMY NAIDU & SO NS (SUPRA) THE FACTS ARE THAT THE ASSESSEE IS A PUBLIC CHARITABLE TR UST RUNNING SEVERAL EDUCATIONAL INSTITUTIONS. IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 1995-96 THE ASSESSEE RECEIVED THE AMOUNTS FROM STUDENTS ADMITTED TO THE EDUCATIONAL INSTITUTION AND CREDITED THE SAME TO WARDS THE CORPUS OF THE TRUST. THE AO REJECTED THE PLEA BY TAKING THE VI EW THAT THE DONATIONS WERE NOT VOLUNTARY BUT WERE RECEIVED AS CAPITATION FEE FOR ADMISSION TO THE INSTITUTION. THE TRIBUNAL HELD THAT THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT OF EXEMPTION U/S 10(22). THE HONBLE CO URT MENTIONED THAT FROM THE ORDER OF CIT(APPEALS) IT BECOMES CLEAR TH AT HE APPLIED THE DECISION TAKEN IN EARLIER YEAR AND CONSIDERED THE PAYMENT AS A VOLUNTARY CONTRIBUTION EXEMPT U/S 11(1)(D). HOWEVER ON PE RUSAL OF THE STATEMENTS OF THE PARENTS THE TRIBUNAL RIGHTLY CAME TO THE CONCLUSION THAT THE AMOUNTS WERE CAPITATION FEE AND NOT TOWARDS THE CORPUS O F THE ASSESSEE-TRUST. IN ABSENCE OF THE MATERIAL TO THE CONTRARY THE HON BLE COURT UPHELD THE FACTUAL FINDINGS OF THE TRIBUNAL. THE FACTS OF THIS CASE ALSO DISTINGUISHABLE AS THE ASSESSEE IS NO LONGER CL AIMING THE DONATIONS TO BE CORPUS DONATIONS AND THEREFORE NOT PART OF ITS INCOME. ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 12 5.5 IN THE COURSE OF HEARING ON THE CROSS APPEA L OF THE REVENUE THE LD. COUNSEL RELIED ON THE DECISION OF HONBLE DELHI H IGH COURT IN THE CASE OF DIRECTOR OF INCOME-TAX (EXEMPTIONS) VS. KESHAV SOCI AL & CHARITABLE FOUNDATION (2005) 278 ITR 152. THE FACTS O F THE CASE ARE THAT THE ASSESSEE RECEIVED DONATIONS AMOUNTING TO RS. 18 24 200/-. THE ASSESSEE WAS REQUIRED TO FURNISH THE DETAILS OF THE DONATI ONS IN TERMS OF NAMES ADDRESS MODE OF RECEIPT ETC. THE ASSESSEE WA S UNABLE TO SATISFACTORILY EXPLAIN THE DONATIONS AND THE DONORS WERE PERHA PS FICTITIOUS PERSONS. THEREFORE THE AO HELD THAT THE ASSESSEE HAS TRIE D TO INTRODUCE ITS OWN UNACCOUNTED MONEY IN THE BOOKS BY WAY OF DONATI ONS. THUS THE AMOUNT WAS TREATED AS CASH CREDIT U/S 68 AND THE BENEF IT OF SECTION 11 WAS DENIED. THE TRIBUNAL WAS OF THE VIEW THAT SINCE MORE THAN 75% OF THE AMOUNT OF DONATIONS WAS SPENT FOR CHARITABLE PURP OSE THE ADDITION OF RS. 18 24 200/- WAS NOT CORRECT. THE TRIBUNAL SEEMS TO HAVE ACCEPTED THE ARGUMENT OF THE ASSESSEE THAT ONCE A DONATION IS RECEIVED IT WILL BE DEEMED TO BE RECEIVED FOR A CHARITABLE PURPOSE UNLESS IT WAS RECEIVED AS CORPUS DONATION. AFTER HEARING BOTH THE PARTI ES THE HONBLE COURT WAS OF THE VIEW THAT NO SUBSTANTIAL QUESTION OF LAW ARO SE FOR ITS CONSIDERATION. IT WAS HELD THAT EVEN IF COMPLETE LIST OF DONORS WAS NOT FILED AND DONORS WERE NOT PRODUCED IT DOES NOT NECESSARILY LEA D TO THE CONCLUSION THAT ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 13 THE ASSESSEE WAS TRYING TO INTRODUCE UNACCOUNTE D MONEY AS DONATION RECEIVED. THE RELEVANT PORTION OF THE ORDER AT PL ACITUM 8 TO 11 IS REPRODUCED BELOW:- WE ARE AFRAID THAT IT IS NOT POSSIBLE FOR US TO AGREE WITH THE SUBMISSION OF LEARNED COUNSEL FOR THE REVENUE AND WE ARE OF THE VIEW THAT NO SUBSTANTIAL QUESTION OF LAW A RISES FOR OUR CONSIDERATION. IN S. RM. M. CT. M TIRUPPANI TRUST V. CIT [1998] 23 0 ITR 636 (SC) IT HAS BEEN HELD THAT UNDER SECTION 11(1) OF THE ACT EVERY CHARITABLE OR RELIGIOUS TRUST IS ENT ITLED TO DEDUCTION OF CERTAIN INCOME FROM ITS TOTAL INCOME OF THE PR EVIOUS YEAR. THE INCOME SO EXEMPT IS THE INCOME WHICH IS APP LIED BY THE CHARITABLE OR RELIGIOUS TRUST TO ITS CHARITABLE OR RELIGIOUS PURPOSES IN INDIA. THIS IS OF COURSE SUBJECT T O ACCUMULATION UP TO A SPECIFIED MAXIMUM WHICH IN THE PRESENT CASE WAS 25 PER CENT. IN THE APPEAL THAT WE ARE CONCERN ED WITH IT HAS BEEN FOUND AS A MATTER OF FACT THAT THE ASSESS EE HAD APPLIED MORE THAN 75 PER CENT OF THE DONATIONS FOR CHARIT ABLE PURPOSES AS PER ITS OBJECTS. TO OBTAIN THE BENEFIT OF THE EXEMPTION UNDER SEC TION 11 OF THE ACT THE ASSESSEE IS REQUIRED TO SHOW THAT THE DONATIONS WERE VOLUNTARY. IN THE PRESENT CASE THE ASSESS EE HAD NOT ONLY DISCLOSED ITS DONATIONS BUT HAD ALSO SUBMITT ED A LIST OF DONORS. THE FACT THAT THE COMPLETE LIST OF DO NORS WAS NOT FILED OR THAT THE DONORS WERE NOT PRODUCED DO ES NOT NECESSARILY LEAD TO THE INFERENCE THAT THE ASSES SEE WAS TRYING TO INTRODUCE UNACCOUNTED MONEY BY WAY OF DONATI ON RECEIPTS. THIS IS MORE PARTICULARLY SO IN THE FACTS OF T HE CASE WHERE ADMITTEDLY MORE THAN 75 PER CENT OF THE DONATIONS WERE APPLIED FOR CHARITABLE PURPOSES. SECTION 68 OF THE ACT HAS NO APPLICATION TO T HE FACTS OF THE CASE BECAUSE THE ASSESSEE HAD IN FACT DISCLOS ED THE ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 14 DONATIONS OF RS. 18 24 200/- AS ITS INCOME AND IT CANNOT BE DISPUTED THAT ALL RECEIPTS OTHER THAN CORPUS DO NATIONS WOULD BE INCOME IN THE HANDS OF THE ASSESSEE. THERE WAS THEREFORE FULL DISCLOSURE OF INCOME BY THE ASSESSEE AND ALSO APPLICATION OF THE DONATIONS FOR CHARITABLE PURPOS ES. IT IS NOT IN DISPUTE THAT THE OBJECTS AND ACTIVITIES OF THE ASSESSEE WERE CHARITABLE IN NATURE SINCE IT WAS DULY REGISTERE D UNDER THE PROVISIONS OF SECTION 12A OF THE ACT. 5.6 FACTS OF THE CASE OF THE ASSESSEE ARE ON BE TTER FOOTING THAN THE FACTS OF THE CASE OF KESHAV SOCIAL & CHARITABLE FOUNDATI ON. IN THIS CASE THE LIST OF THE DONORS IN TERMS OF THE NAME AND AMOUNT HA S BEEN FURNISHED. THE AO OR THE LD. CIT(APPEALS) HAS NOT DOUBTED THE EX ISTENCE OF THE PERSONS. IT IS NOT THEIR FINDING THAT THE MONEY WAS NOT SPENT FOR CHARITABLE PURPOSE. THE ONLY FINDING IS THAT THE DONATIONS WERE NOT VOLUNTARY AND THEREFORE DO NOT CONSTITUTE INCOME DERIVED FROM PROPERTY HELD UNDER THE TRUST. THE PROVISION OF SECTION 68 HAS BEEN IN VOKED WHICH IS APPLICABLE WHEN UNEXPLAINED CASH CREDIT FINDS PLACE IN TH E BOOKS OF ACCOUNT. THE ENTRIES IN THE BOOKS OF ACCOUNT BY WAY OF DONATI ONS DO NOT STAND UNEXPLAINED AS DONORS AND AMOUNTS DONATED HAVE BEEN CLEARLY MENTIONED THEREIN. SINCE THE DONATIONS FLOW FROM THE PARENTS OF THE ADMITTED STUDENTS THE IDENTITY ALSO CANNOT B E DOUBTED. THE SOCIETY HAS BEEN REGISTERED U/S 12A OF THE ACT AND THE REGI STRATION HAS NOT BEEN CANCELLED. THE MONEY HAS ALSO BEEN APPLIED TOW ARDS CHARITABLE PURPOSES. ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 15 THEREFORE WE ARE OF THE VIEW THAT IN THE LIGHT OF THE DECISION OF HONBLE DELHI HIGH COURT MENTIONED ABOVE SECTION 68 HAS NO APPLICATION. CONSEQUENTLY IT IS ALSO HELD THAT THE LD. CIT( A) ERRED IN BRINGING TO TAX THE AMOUNT OF RS. 5 62 240/-. ITA NO. 2448(DEL)/2010-A.Y. 2006-07-APPEAL OF THE R EVENUE 6. REVENUE IS IN APPEAL AGAINST DELETING THE ADDITION OF RS. 23 38 751/-. IT IS MENTIONED THAT THE ASSESSEE FAILED TO SUBSTANTIATE THAT THE DONATIONS WERE VOLUNTARY IN NATURE AND PAID BY GENERAL PUBLIC. THE FAILURE TO IDENTIFY EVEN A SMALL PERCENTAGE OF GENERAL PUBLIC LEADS TO AN INFERENCE THAT UNACCOUNTED MONEY NAMED AS DONAT IONS FROM PARENTS WAS SHOWN AS DONATIONS RECEIVED FROM THE GENERAL P UBLIC. IT IS FURTHER MENTIONED THAT THE ASSESSEE HAD TO PROVE THAT THE PROVISIONS CONTAINED IN SECTIONS 2(15) 11 AND 13 ARE COMPLIED WITH. ONCE IT IS DISCOVERED THAT ACTIVITIES ARE NOT CHARITABLE IN NATURE AND CONDI TION FOR GRANT OF REGISTRATION U/S 12A IS VIOLATED THE AO WAS JUSTIFIED THAT BENEFIT OF SECTION 11 IS NOT AVAILABLE TO THE ASSESSEE. ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 16 6.1 HIS CONNECTION THE LD. DR DREW OUR ATTENTIO N TO THE DISCUSSION IN ASSESSMENT AND THE IMPUGNED ORDERS. IN PARTICULA R OUR ATTENTION IS DRAWN TO PARAGRAPH 3.6 OF THE IMPUGNED ORDER IN WHICH IT IS MENTIONED THAT THE ASSESSEE SHOWED DONATIONS OF RS.23 38 751/- AS SO CIETY DONATIONS. THE QUESTION HOWEVER ARISES AS TO WHETHER THE DONA TIONS ARE VOLUNTARY OR NOT. THE DECISION IN THE CASE OF KESHAV SOCIAL & CHARITABLE FOUNDATION HAS BEEN DISCUSSED AND FINALLY THE APPEAL OF THE A SSESSEE ON THIS GROUND HAS BEEN ALLOWED. FOR THE SAKE OF READY REFERENCE THIS PARAGRAPH IS REPRODUCED BELOW:- 3.6 I HAVE CONSIDERED THE ASSESSMENT ORDER T HE WRITTEN SUBMISSIONS OF THE APPELLANT THE REMAND REPORT AS WELL AS THE ORAL ARGUMENTS OF THE AO AND THE AR. IT IS A FACT THAT THE APPELLANT HAS SHOWN RS. 29 00 991/- AS ITS INCO ME IN THE COMPUTATION OF INCOME FILED ALONG WITH THE RETURN. HOWEVER THE QUESTION ARISES AS TO WHETHER THE CONTRIBU TION/RECEIPT WHICH IS NOT VOLUNTARY WILL IT BE ELIGIBLE FO R EXEMPTION U/S 11 OR NOT. IN THIS REGARD THE APPELLANT IN HIS SUBMISSION HAS HIMSELF STATED VIDE PARA 6 OF HIS SUBMISSION DATED 23.4.2009 AS UNDER:- TO OBTAIN THE BENEFIT OF EXEMPTION U/S 11 THE ASSESSEE IS REQUIRED TO SHOW THAT THE DONATIONS WERE VOL UNTARY AND SECTION 68 HAS NO APPLICATION WHERE THE ASSESSEE HAS DISCLOSED DONATIONS AS ITS INCOME. THE OPENING OBSERVATION OF THE JURISDICTIONAL HIGH COURT I.E. HONBLE DELHI HIGH COURT IN THE CASE OF DIT (EXEMPTION) VS. KESHAV SOCIAL AND CHARITABLE FOUN DATION (2005) 146 TAXMAN 569 (DEL0 ALSO CITED BY THE APPELLANT ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 17 IN HIS ABOVE SAID SUBMISSION VIDE PARAGRAPH 7 IS QUITE RELEVANT TO THIS ISSUE. THE COURT HAS OBSERVED AS UNDER:- TO OBTAIN THE BENEFIT OF THE EXEMPTION U/S 11 OF THE ACT THE ASSESSEE IS REQUIRED TO SHOW THAT THE DONAT IONS WERE VOLUNTARY. THUS FROM THE ABOVE IT IS CLEAR THAT TO AVAIL OF THE EXEMPTION U/S 11 THE ASSESSEE IS REQUIRED TO SHOW THAT DONATIONS WERE VOLUNTARY. BUT IN APPELLANTS CASE FROM THE FACTS AS NARRATED IN THE ASSESSMENT ORDER IT AP PEARS THAT DONATIONS WERE FAR FROM VOLUNTARY. IN HIS LE TTER DATED 18.11.2008 FILED BEFORE THE AO THE APPELLANT HAS STATED AS UNDER:- PLEASE FIND THE CONFIRMATIONS FROM THE PERSONS WHO HAVE GIVEN THE DONATION WHILE SEEKING ADMISSION OF TH EIR CHILDREN. A SIMILAR STATEMENT WAS MADE VIDE HIS SUBMISS ION DATED 26.11.2008 FILED BEFORE THE AO DURING THE ASSES SMENT PROCEEDINGS. THE DONATION RECEIPT BOOKS WERE KEPT IN THE SCHOOL PREMISES. THUS FROM THE ABOVE IT IS CLEAR THAT THE DONATIONS WERE NOT VOLUNTARY BUT HAD AN ELEMENT OF QUID PROP QUO. THE ADMISSION TO THE SCHOOL WAS LINKED UP WITH THE GIVING OF DONATIONS. THUS THE APPELLANT IS NOT ELIGIBLE FOR THE BENEFITS OF EXEMPTION U/S 11 IN RESPECT OF D ONATIONS RECEIVED FROM PARENTS OF THE STUDENTS SEEKING A DMISSION TO THE SCHOOL TOTALING TO RS. 5 62 240/- AND THE SA ME IS TO BE BROUGHT TO TAX. THIS FINDING IS SUPPORTED BY TH E DECISION OF ITAT HYDERABAD B BENCH IN THE CASE OF SMT. P. NARASAMMA VS. ITO (2005) 94 TTJ (HYD.) 1569. WITH THESE REM ARKS GROUNDS OF APPEAL AT S. NOS. 1 TO 4 STAND DISPOSE D OFF. 6.2 IN REPLY THE LD. COUNSEL SUBMITTED THAT NO ENQUIRY HAS BEEN MADE TO SHOW THAT MONEY RECEIVED FROM STUDENTS AS CAP ITATION FEES FOR ADMISSION HAS BEEN ROUTED IN THE BOOKS AS SOCIETY DONAT IONS. FURTHER SHE HAS ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 18 RELIED ON THE DECISION IN THE CASE OF KESHAV SOCI AL & CHARITABLE FOUNDATION. 6.3 IN THE REJOINDER THE LD. DR SUBMITTED THAT THE MATTER SHOULD GO TO THE AO FOR VERIFICATION. 7. HAVE CONSIDERED THE FACTS OF THE CASE AND SUB MISSIONS MADE BEFORE US. THE FACTS IN THIS APPEAL ARE IN PARI-MATER IA WITH THE FACTS OF THE CASE OF KESHAV SOCIAL & CHARITABLE FOUNDATION IN WH ICH THE AO HAD RAISED THE ALLEGATION THAT THE DONORS WERE NOT EXISTIN G PERSONS. YET HIS FINDINGS WERE NOT ACCEPTED BY THE TRIBUNAL AND THE HONBLE HIGH COURT OF DELHI. WE HAVE ALREADY REPRODUCED THE RELEVANT PORTION OF THE DECISION OF HONBLE HIGH COURT. AS THE FACTS ARE IN PARI- MATERIA IT IS HELD THAT THE LD. CIT(APPEALS) WAS RIGHT IN DELETING THE ADDITION. WE MAY ADD THAT NO USEFUL PURPOSE WILL BE SERVED IN REMANDING TH E MATTER TO THE AO AS THE DECISION IN THE CASE OF KESHAV SOCIAL & CHA RITABLE FOUNDATION IS CLEARLY APPLICABLE. ITA NO. 4316(DEL)/2009- APPEAL OF THE ASSESSEE 8. MENTIONED EARLIER THE ASSESSEE HAD APPLIED FOR ITS APPROVAL U/S 80G(5)(VI). IT COMPLIED WITH ALL THE FORMALITIES PRESCRIBED IN RULE 11AA OF ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 19 THE INCOME-TAX RULES 1962. THE DIRECTOR INCOME-T AX (E) CONSIDERED THE FINDINGS IN THE ASSESSMENT ORDER FOR ASSESSMENT YE AR 2006-07 AND THE SUBMISSIONS OF THE ASSESSEE. HE REFUSED THE APP ROVAL ON THE GROUND INTER- ALIA THAT THE ASSESSEE NO LONGER ENJOYED THE BE NEFIT OF SECTION 11 BEING ONE OF THE BASIC PRE-CONDITIONS. FOR THE SAKE OF READY REFERENCE PARAGRAPH NOS. 4.1 AND 4.2 OF HIS ORDER ARE REPROD UCED BELOW:- 4.1 THE ASSESSEE HAS BEEN FOUND TO BE INDULGED IN TAKING FORCIBLE DONATIONS FROM THE PARENTS WHILE GETTIN G THEIR CHILD ADMITTED IN THE SCHOOL. THE CHARITABLE INSTITUTIO NS ARE REQUIRED TO ENGAGE IN CHARITABLE ACTIVITIES TO FULFILL TH E NEED OF SOCIETY AND ADVANCE THE PUBLIC PURPOSE. THEY ARE NOT EX PECTED TO INDULGE IN ACTIVITIES WHICH ARE AGAINST PUBLIC PURPOSE AND ARE ILLEGAL. THE ASSESSEES ACTIVITIES OF TAKIN G FORCIBLE DONATIONS DO NOT HAVE THE CHARACTER OF THE GENUI NENESS AND FOR THE CHARITABLE PURPOSES. IT IS CLEARLY A PR OFIT MAKING ACTIVITY OF THE SOCIETY TO MAKE MONEY THROUGH ILL EGAL MEANS. 4.2 IN VIEW OF THE FOREGOING FACTS THE INCOME OF THE ASSESSEE IS NO LONGER EXEMPT U/S 11 AND THEREFORE BAS IC CONDITIONS UNDER SECTION 80G(5) IS NOT SATISFIED. THE CA SE OF THE ASSESSEE IS THEREFORE NOT FIT FOR RENEWAL OF EXEMPTION U/S 80G. ACCORDINGLY REQUEST FOR RENEWAL UNDER SEC TION 80G IS REJECTED. 9. BEFORE US THE LD. COUNSEL DREW OUR ATTENTION T OWARDS THE FINDING OF THE LD. DIT(EXEMPTIONS). IT WAS SUBMITTED BY HER THAT THE APPROVAL WAS DENIED PRIMARILY FOR THE REASON THAT IT WAS HE LD IN THE ASSESSMENT ORDER THAT EXEMPTION U/S 11 IS NOT AVAILABLE TO THE A SSESSEE. SHE RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CA SE OF N.N. DESAI ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 20 CHARITABLE TRUST VS. CIT (2000) 246 ITR 452 IN WHICH IT HAS BEEN HELD INTER-ALIA THAT ONCE A TRUST IS REGISTERED U/S 12A ITS INCOME FROM PROPERTY WHICH INCLUDES DONATIONS WHETHER COVERE D U/S 11(1)(D) OR UNDER SECTION 12 SUCH DONATIONS ARE DEEMED TO BE INCOME FROM THE PROPERTY IS NOT TO BE INCLUDED IN ITS TOTAL INCOME U/S 11 OR SECTION 12. THE ENQUIRY U/S 80G(5) CANNOT GO BEYOND THAT. IT IS HER CASE THAT THE SOCIETY CONTINUES TO BE REGISTERED U/S 12A AND THERE IS NO EVIDENCE TO SUBSTANTIATE THE FINDING THAT THE SOCIETY INDULGE D IN TAKING FORCIBLE DONATIONS FROM PARENTS WHILE GIVING ADMISSIO N TO THEIR CHILDREN. 9.1 IN REPLY THE LD. DR STRONGLY RELIED ON TH E ORDER OF THE LD. DIT (EXEMPTIONS). IT IS HER CASE THAT TAKING COMP ULSORY DONATION FOR GIVING ADMISSION IS AGAINST THE PUBLIC POLICY. OUR ATTE NTION HAS BEEN DRAWN TO SUB-RULE (3) OF RULE 11AA WHICH EMPOWERS THE DIT TO CALL FOR SUCH FURTHER DOCUMENTS OR INFORMATION FROM THE SOCIETY OR CAUSE SUCH ENQUIRIES TO BE MADE AS HE MAY DEEM NECESSARY IN ORDER T O SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE SOCIETY. 10. WE HAVE CONSIDERED THE FACTS OF THE CASE AN D SUBMISSIONS MADE BEFORE US. CLAUSE (VI) OF SUB-SECTION 5 OF SECTI ON 80G CONTAINS A PROVISION TO THE EFFECT THAT THE SECTION A PPLIES TO ANY INSTITUTION OR ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 21 FUND ONLY IF IT IS ESTABLISHED IN INDIA FOR A CHARITABLE PURPOSE AND IT IS FOR THE TIME BEING APPROVED BY THE DIT(EXEMPTIONS ) IN ACCORDANCE WITH RULES MADE IN THIS BEHALF. IT IS A MATTER OF RE CORD THAT THE SOCIETY HAS BEEN REGISTERED U/S 12A AND THE SAME HAS NOT BEEN CA NCELLED TILL NOW. THEREFORE THE PROVISION CONTAINED IN CLAUSE (I ) OF THE SUB-SECTION STANDS SATISFIED. THERE IS NO FINDING THAT THE SOCIETY W ORKS FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE OR THA T THE WHOLE OR PART OF THE INCOME OR ASSETS OF THE INSTITUTION OR FUND HAS BEEN APPLIED FOR ANY PURPOSE OTHER THAN CHARITABLE PURPOSE. THE SOCI ETY ALSO MAINTAINS BOOKS OF ACCOUNT. IT HAS BEEN REGISTERED UNDER THE SOC IETIES REGISTRATION ACT 1860. THEREFORE THE CONDITIONS MENTIONED IN CLA USES (II) TO (V) ALSO STAND SATISFIED. IN THE CASE OF N.N. DESAI CHAR ITABLE TRUST (SUPRA) IT HAS BEEN INTER-ALIA HELD THAT WHEN A TRUST IS ENTIT LED TO EXEMPTION UNDER SECTIONS 11 AND 12 IT IS ENTITLED FOR APPROVAL U/S 80G(5). WE HAVE ALREADY HELD THAT THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 11. THEREFORE THE RATIO OF THIS CASE IS APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. FOR READY REFERENCE THE RELEVANT PORTION OF THE J UDGMENT IS REPRODUCED BELOW:- EXAMINING FROM THIS ANGLE WE FIND THAT FOR AP PLICABILITY OF SECTIONS 11 AND 12 WHAT IS REQUIRED IS THAT SU CH TRUST MUST HAVE MOVED AN APPLICATION FOR REGISTRATION UNDER SECTION 12A AND REGISTERED FOR THAT PURPOSE. ONCE A TRUST I S REGISTERED ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 22 UNDER SECTION 12A ITS INCOME FROM PROPERTY WHI CH INCLUDES DONATIONS WHETHER COVERED UNDER SECTION 11(1 )(D) OR UNDER SECTION 12 SUCH DONATIONS ARE DEEMED TO BE INCOM E FROM PROPERTY IS NOT TO BE INCLUDED IN ITS TOTAL I NCOME UNDER SECTION 11 OR SECTION 12. THE ENQUIRY UNDER SECTION 80G(5) CANNOT GO BEYOND THAT. 10.1 COMING TO THE POWERS OF THE DIRECTOR OF INC OME-TAX (EXEMPTIONS) FOR MAKING ENQUIRY UNDER RULE 11(3) NO QUESTION HAS BEEN RAISED BY THE LD. COUNSEL IN THIS REGARD. HOWEVER WE HAVE A LREADY GIVEN A FINDING THAT IN VIEW OF THE DECISION IN THE CASE OF KESHAV SO CIAL & CHARITABLE FOUNDATION THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 11. THEREFORE WE ARE OF THE VIEW THAT THERE IS NO REASON TO DENY APPR OVAL U/S 80G(5)(VI) TO THE ASSESSEE-SOCIETY. 11. IN THE RESULT BOTH THE APPEALS OF THE ASSE SSEE ARE ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 14 JANUARY 2011. SD/- SD/- (A.D. JAIN) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 14TH JANUARY 2011. SP SATIA ITA NOS. 2957 2448(DEL)/2010& 4316(DEL)/2009 23 COPY OF THE ORDER FORWARDED TO:- HANS RAJ SAMARAK SOCIETY KRISHNA NAGAR DELHI. DY. DIT(E) LAXMI NAGAR DELHI. DIRECTOR OF INCOME-TAX (E) DELHI CIT(A) CIT THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.