M/s. Kamma Sangham, Hyd, Hyderabad v. The DDIT (Exemptions)-II, Hyderabad

ITA 477/HYD/2011 | 2001-2002
Pronouncement Date: 22-11-2011 | Result: Dismissed

Appeal Details

RSA Number 47722514 RSA 2011
Assessee PAN AAATK2547C
Bench Hyderabad
Appeal Number ITA 477/HYD/2011
Duration Of Justice 7 month(s) 30 day(s)
Appellant M/s. Kamma Sangham, Hyd, Hyderabad
Respondent The DDIT (Exemptions)-II, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 22-11-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 22-11-2011
Assessment Year 2001-2002
Appeal Filed On 23-03-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B' HYDERABAD BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN JUDICIAL MEMBER I .T.A. NO. 477/HYD/2011 ASSESSMENT YEAR : 2001-02 M/S. KAMMA SANGHAM HYDERABAD PAN: AAATK2547C VS. DDIT (EXEMPTIONS)-II HYDERABAD APPELLANT RESPONDENT APPELLANT BY: DR. C.P. RAMASWAMI RESPONDENT BY: SHRI B.V. PRASAD REDDY DATE OF HEARING: 05.10.2011 DATE OF PRONOUNCEMENT: 22.11.2011 O R D E R PER CHANDRA POOJARI AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-IV HYDERABAD DATED 30.12.2010 FOR ASSESSMEN T YEAR 2001-02. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APP EAL: A) THE ORDER OF THE LEARNED CIT(A) IS AGAINST LAW WEIGHT OF EVIDENCE AND PROBABILITIES OF THE CASE. B) THE LEARNED CIT(A) GROSSLY ERRED IN NOT FOLLOWIN G THE RATIO LAID DOWN BY THE SUPREME COURT IN THE CASE OF ACIT VS. SURAT CITY GYMKHANA (2008) (300 ITR 214 AND CONSEQUENTLY ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN PROBING INTO THE OBJECTS OF TH E APPELLANT TRUST WHICH IS APPROVED IN TERMS OF SECT ION 12A. C) I) THE LEARNED CIT(A) FAILED TO APPRECIATE THAT INVESTMENT IN IMMOVABLE PROPERTIES TO GENERATE INCOME FOR BEIN G APPLIED TO THE ATTAINMENT OF THE OBJECTIVES OF THE APPELLANT IS A SPECIFIED INVESTMENT IN TERMS OF SECTION 11(5) AND CONSEQUENTLY THE APPELLANT CANNOT BE DENIED EXEMPTI ON. II) THE LEARNED CIT(A) FAILED TO APPRECIATE THAT FO R SUCH INVESTMENTS THE APPELLANT WOULD NOT HAVE DISBURSED SCHOLARSHIPS WORTH MORE THAN RS. 2.24 CRORE IN THE SUCCEEDING YEARS WHEN THERE WAS NO DONATION RECEIVE D BY THE APPELLANT. I.T.A. NO. 477/HYD/2011 M/S. KAMMA SANGHAM ================== 2 III) THE LEARNED CIT(A) FAILED TO APPRECIATE THAT INVESTMENT IN THE CONSTRUCTION OF COMMERCIAL COMPLE X ETC. WAS PROPERLY DECIDED BY THE APPELLANT SOCIETY AND INTIMATED IN FORM-10 FOR THE PURPOSE OF ACCUMULATIO N IN THE EARLIER YEARS. CONSEQUENTLY THERE WAS NO VIOL ATION OF SECTION 11(2) EITHER. THUS THE CIT(A) ERRED IN DIS MISSING THE APPEAL. IV) THE LEARNED CIT(A) FAILED TO FOLLOW THE RATIO O F JURISDICTIONAL HIGH COURT IN THE CASE OF HYDERABAD RACE CLUB CHARITABLE TRUST 262 ITR 194 AND CONSEQUENTLY WRONGLY CONFIRMED THE ORDER OF THE ASSESSING OFFICE R APPLYING SECTION 13(1)(B) WHICH IS UNWARRANTED IN THE CASE OF THE APPELLANT. D) FOR THE ABOVE GROUNDS AND SUCH OTHER GROUNDS THA T MAY BE URGED AT THE TIME OF HEARING THE APPELLANT PRAY S THAT THE APPEAL BE ALLOWED. 3. BRIEF FACTS OF THE CASE ARE THAT ON EARLIER OCCA SION THE TRIBUNAL SET ASIDE THE ORDER OF THE CIT(A) VIDE ORDER DATED 28.11.2007 AND RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSI NG OFFICER ON THE REASON THAT THE ASSESSING OFFICER HAD NOT GIVEN ANY FINDINGS AS TO WHETHER THE MONEY SO ACCUMULATED OR SET APART HAD B EEN DEPOSITED IN THE FORM OR MODES SPECIFIED IN SECTION 11(5) OF THE INCOME-TAX ACT 1961. ON SETTING ASIDE THE CASE BACK TO THE FILE O F THE ASSESSING OFFICER THE ASSESSEE SUBMITTED THAT THE MANAGING CO MMITTEE OF THE ASSESSEE HAD PASSED THE RESOLUTION ON 13.6.1992 TO THE EFFECT THAT AT THE END OF EACH YEAR 75% OF THE INCOME OF THE SANG HAM WILL BE ACCUMULATED FOR THE PURPOSE OF CONSTRUCTION OF BUIL DING AT ITS AMEERPET LANDED PROPERTY. IT WAS SUBMITTED THAT OUT OF THE NET INCOME OF RS. 59 28 817 OF THE YEAR RS. 44 46 614 BEING 75% THE REOF HAD BEEN TRANSFERRED TO 'BUILDING FUND RESERVE ACCOUNT'. IT WAS STATED THAT MOST OF THE DONATIONS HAD BEEN COLLECTED FOR THE SP ECIFIC PURPOSE OF CONSTRUCTION OF BUILDING AND THE DONORS HAD INSTRUC TED THE MANAGEMENT TO USE THE FUNDS ONLY FOR THE SAID PURPOSE. IT WAS SUBMITTED THAT THOUGH THE FUNDS WERE ACCOUNTED FOR UNDER THE HEAD 'DONATION' LEGALLY THOSE CAME UNDER 'CORPUS FUND' TO BE USED ONLY FOR BUILDING CONSTRUCTION. AS SUCH THE ASSESSEE CLAIMED BEFORE THE LOWER I.T.A. NO. 477/HYD/2011 M/S. KAMMA SANGHAM ================== 3 AUTHORITIES THAT DONATION OF RS. 40 09 000 SHOULD B E TREATED AS 'CORPUS FUND' NOT FORMING PART OF THE INCOME OF THE TRUST. IT WAS FURTHER SUBMITTED THAT THOUGH THE EXCESS OF INCOME OVER EXP ENDITURE WORKED OUT TO RS. 59 28 807 BEFORE TRANSFER TO BUILDING FU ND RESERVE INCOME FOR THE PURPOSE OF INCOME-TAX WAS COMPUTED AT 'NIL' BECAUSE FOR THE PURPOSE OF SECTION 11 CAPITAL GAIN IS ALSO TO BE C ONSIDERED AS APPLICATION OF INCOME. IT WAS SUBMITTED BY THE ASS ESSEE THAT FORM-10 WAS NOT FILED ALONG WITH THE RETURN OF INCOME FOR T HE A.Y. 2001-02 INTENTIONALLY AS THERE WAS NO SURPLUS REQUIRING ST ATUTORY COMPLIANCE AS PROVIDED UNDER SECTION 11(2) OF THE ACT. HOWEVER THE ASSESSEE FILED FORM NO. 10 ALONG WITH THE LETTER DATED 12.8.2009 C ONTENDING THAT IN VIEW OF THE JUDGEMENT OF SUPREME COURT IN THE CASE OF CIT VS. NAGPUR HOTEL OWNERS ASSOCIATION [247 ITR 201 (SC)] THE SAME CAN BE FILED ANY TIME BEFORE THE ASSESSING OFFICER COMPLETING TH E ASSESSMENT. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE FA ILED TO ADHERE TO THE RESOLUTION PASSED ON 13.6.1992 AND THE ASSESSEE HAS FAILED TO WAIT TILL THE ACCUMULATION REACHED RS. 10 CRORES AND UND ERTOOK CONSTRUCTION EVERY YEAR AGAINST THE TERMS OF THE RESOLUTION DAT ED 13.6.1992. SECONDLY THE AMOUNT NEVER REACHED RS. 10 CRORES. THIRDLY IN AT LEAST FOUR OUT OF 10 A.YS. THE ASSESSEE TOTALLY FAILED T O DEPOSIT THE AMOUNT AS STIPULATED IN ITS OWN RESOLUTION. THE ASSESSING OFFICER POINTED OUT THAT FOR THE A.YS. 1994-95 1996-97 AND 1998-99 TH E AMOUNT INVESTED IN DEPOSITS WAS 'ZERO' WHEREAS THE UNAPPLIED AMOUN TS FOR CONSTRUCTIONS AMOUNTED TO RS. 6 20 365 RS. 6 74 34 7 AND RS. 8 69 114 RESPECTIVELY. THE ASSESSING OFFICER OBSE RVED THAT FOR THE A.Y. 1999-2000 THE ASSESSEE DEPOSITED RS. 5 LAKHS ONLY WHEREAS UNAPPLIED AMOUNT WAS RS. 7 05 132 THEREBY FAILING T O DEPOSIT OF RS. 2 05 132 IN VIOLATION OF ITS OWN RESOLUTION. THE R ESOLUTION PASSED BY THE MANAGING COMMITTEE OF THE ASSESSEE IS AS UNDER: RESOLVED THAT 75% OF THE TOTAL INCOME OF THE KAMMA SANGHAM AS IS AVAILABLE AT THE END OF EACH YEAR SHA LL BE ACCUMULATED FOR A PERIOD OF TEN YEARS ENDING ON 31.3.2002 OR TILL THE AMOUNT ACCUMULATED REACHES A FIGURE OF RS.10 00 00 000/- (RUPEES TEN CRORES ONLY) WHICHEVER IS EARLIER AND THE SAME WILL BE UTILISED FOR THE I.T.A. NO. 477/HYD/2011 M/S. KAMMA SANGHAM ================== 4 PURPOSE OF CONSTRUCTION OF BUILDINGS AT AMEERPET HYDERABAD FOR ACHIEVING THE OBJECTS OF THE SANGHAM. THE AMOUNT SO ACCUMULATED SHALL BE INVESTED IN THE FORM OF DEPOSITS IN ANY SCHEDULED BANK. THE INTEREST ON SUCH DEPOSITS ALSO WILL BE SET APART FOR THE SAID PURPOS E. 4. THE ASSESSING OFFICER NOTED THAT AS PER THE STAT EMENT OF COMPUTATION OF TOTAL INCOME THE TOTAL INCOME WAS OF RS. 82 02 415 WHEREAS THE APPLICATION WAS OF RS. 66 32 281. OUT OF THE APPLICATION RS. 3 60 388 HAD BEEN APPLIED IN BUILDING THE 'COMM ITTEE HALL' WHILE RS. 41 61 881 WERE APPLIED IN BUILDING THE 'COMMERC IAL COMPLEX'. REPRODUCING THE OBJECTS AS REPRODUCED IN THE ORDER OF THE ITAT DATED 28.11.2007 THE ASSESSING OFFICER NOTED THAT MERE C ONSTRUCTION ACTIVITY FOR YEARS TOGETHER WAS NOT AT ALL COVERED BY ANY OF ITS OBJECTS. HE NOTED THAT ONLY IN RESPECT OF THE OBJECTS RELATING TO ESTABLISHMENT OF EDUCATIONAL INSTITUTIONS PROVIDING BOARDING AND LO DGING FACILITIES FOR STUDENTS AND WORKING YOUTH ESTABLISHING HOSPITAL A ND PROVIDING MEDICAL FACILITIES AND ESTABLISHING LIBRARIES THER E WAS ANY REQUIREMENT FOR BUILDING THAT TOO FOR EITHER EDUCATIONAL OR BOA RDING OR MEDICAL OR LIBRARY FACILITIES. THE ASSESSEE HOWEVER HAD NO O BLIGATION TO CONSTRUCT COMMERCIAL BUILDINGS AND LET THOSE OUT TO BIG BUSIN ESS HOUSES. THE ASSESSING OFFICER ALSO CITED THE DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF GUNDUMAL DHARMARTH TRUST (180 ITR 137) IN THIS REGARD. 5. THE ASSESSING OFFICER FURTHER TOOK NOTE OF THE F ACT THAT AS PER THE BREAK-UP OF THE EXPENDITURE RS. 1 52 100 ONLY WERE PAID AS SCHOLARSHIPS TO STUDENTS WHILE THE REMAINING OUT O F RS. 16 49 718 WAS INCURRED TOWARDS OVERHEADS. HE ALSO NOTED THAT EVE N THE 'PETTY' SUM OF RS. 1 52 100 HAD BEEN CONTENTEDLY APPLIED FOR CH ARITABLE PURPOSES HAD BEEN DISTRIBUTED TO STUDENTS BELONGING TO A PAR TICULAR CASTE AS PER THE FINDING GIVEN BY THE ASSESSING OFFICER FOR THE A.Y. 2004-05. THE ASSESSING OFFICER HAS REPRODUCED THE RELEVANT PORTI ON OF THE ASSESSING OFFICER FOR THE A.Y. 2004-05 AS UNDER: 'DETAILS OF SCHOLARSHIP EXPENDITURE INCLUDING THE APPLICATIONS FROM THE BENEFICIARIES AND THE FILES CONTAINING THE SANCTION ORDERS OF THE SANGHAM I.T.A. NO. 477/HYD/2011 M/S. KAMMA SANGHAM ================== 5 FUNCTIONARIES WERE CALLED FOR AND VERIFIED. THEY REVEALED THAT THE PRINTED APPLICATION FORMS SUPPLIED BY THE SOCIETY CONTAIN A COLUMN FOR DECLARING THE CASTE TO WHICH T HE APPLICANT BELONGS AND THAT PRACTICALLY EVERY ONE OF THE BENEFICIARIES IS A MEMBER OF THE KAMMA COMMUNITY S O MUCH FOR THE CHARITABLE ACTIVITY.' 6. THE ASSESSING OFFICER ATTEMPTED TO VERIFY THE CA STE OR SECT FOR THE YEAR UNDER CONSIDERATION ALSO FOR CALLING FOR T HE COPIES OF APPLICATION OF THOSE STUDENTS FOR SCHOLARSHIP. HOW EVER IT WAS SUBMITTED BY THE ASSESSEE THAT THE SAME HAD BEEN MI SPLACED. HE THEREFORE PROCEEDED TO DRAW A SIMILAR ADVERSE INFE RENCE FOR THE A.Y. 2001-02 ALSO. 7. FINALLY THE ASSESSING OFFICER NOTED THAT THE AS SESSEE HAD ADMITTED THAT IT WAS REQUIRED TO BE REGISTERED U/S. 43(1) OF THE A.P. CHARITABLE AND HINDU RELIGIOUS INSTITUTIONS AND END OWMENTS ACT 1987 AS PER THE ADVICE OF THEIR ADVOCATE. HOWEVER THE ASSESSEE COULD NOT FURNISH A COPY OF ITS APPLICATION FOR SUC H REGISTRATION. THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE NEVER CARED FOR THE SAME THOUGH THE SAME IS MANDATORY. HE OPINED THAT EXTENDING STATUTORY BENEFITS TO SUCH BODIES TANTAMOUNT TO GO ING AGAINST THE PUBLIC POLICY AS THE ASSESSEE HAD CAUSED CONTINUOU S REVENUE LOSS TO THE STATE GOVERNMENT FOR YEARS TOGETHER. CITING TH E DECISION OF THE SUPREME COURT IN THE CASE OF BIHARILAL JAISWAL VS. CIT (217 ITR 746) HE NOTED THAT IF WHAT IS NOT ALLOWED BY ONE ARM OF LAW IS ENCOURAGED BY ANOTHER ARM OF LAW IT GOES AGAINST THE PUBLIC P OLICY AS IT LEADS TO MOCKERY OF JUSTICE. 8. ON APPEAL THE CIT(A) OBSERVED THAT THE ASSESSIN G OFFICER DID NOT GO TO PROBE INTO THE FACT WHETHER THE OBJECTS O F THE ASSESSEE WERE OF A CHARITABLE NATURE OR NOT BUT ONLY HE TRIED TO EXAMINE WHETHER THE INCOME EARNED BY THE ASSESSEE HAD BEEN APPLIED TOWA RDS THE AIM AND OBJECTS CONSIDERING WHICH THE ASSESSEE HAD BEEN GRA NTED REGISTRATION U/S. 12A OF THE ACT. FURTHER HE OBSERVED THAT IN ASSESSEE'S OWN CASE MOST OF THE INCOME OF THE ASSESSEE HAD BEEN SPENT T OWARDS CONSTRUCTION OF COMMERCIAL COMPLEX. THE CONSTRUCTI ON OF COMMERCIAL I.T.A. NO. 477/HYD/2011 M/S. KAMMA SANGHAM ================== 6 COMPLEX IS NOT THE OBJECT OF THE ASSESSEE TRUST AND ITS MAIN OBJECT IS TO ESTABLISH EDUCATIONAL INSTITUTIONS PROVIDING BOARD ING AND LODGING TO THE STUDENTS AND WORKING YOUTH RENDERING FINANCIAL HEL P TO THE DESERVING STUDENTS PROVIDING SCHOLARSHIPS TO ESTABLISH HOSP ITALS LIBRARIES ETC. AND THE ASSESSEE HAD SPENT DURING THE LAST 10 YEARS ONLY A MEAGRE PORTION OF ITS INCOME TOWARDS ITS OBJECTS AND HAD U TILISED A MAJOR PORTION THEREOF FOR THE PURPOSE OF CONSTRUCTION OF COMMERCIAL COMPLEX. EVEN THE SAID COMMERCIAL COMPLEX WAS NOT USED FOR A NY OF THE OBJECTS FOR WHICH THE ASSESSEE TRUST WAS CREATED BUT HAD B EEN LET OUT TO COMMERCIAL ORGANISATIONS TO EARN HUGE RENT. IT WAS ALSO SEEN THAT THE SUBSTANTIAL INCOME GENERATED BY THE ASSESSEE WAS RE GULARLY BEING PLOUGHED BACK INTO INCOME GENERATING ASSETS ONLY Y EAR AFTER YEAR WITHOUT ANY CARE FOR APPLICATION OF MONEY TOWARDS C HARITABLE ACTIVITIES. ACCORDINGLY THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY DENYING THE EXEMPTION OF INCOME U/S. 11 OF THE ACT AND BROUGHT THE SAME INTO TAXATION. 9. WITH REGARD TO THE CONTENTION OF THE ASSESSEE TH AT PROVISIONS OF SECTION 13(1)(B) WOULD NOT APPLY IT WAS OBSERVED B Y THE CIT(A) THAT EVEN IF THE SCHOLARSHIPS GRANTED TO THE CHILDREN OF KAMMA COMMUNITY THE RECIPIENTS CANNOT BE CONSIDERED AS 'CHILDREN'. THE ASSESSEE TRUST IS NOT CREATED FOR THE BENEFIT OF 'CHILDREN' ONLY. SINCE THE SCHOLARSHIPS HAVE BEEN GIVEN ONLY TO THE STUDENTS BELONGING TO K AMMA CASTE EXEMPTION U/S. 11 OF THE ACT CANNOT BE GIVEN AND PR OVISIONS OF SECTION 13(1)(B) ARE APPLICABLE. AS PER THE RESOLUTION DAT ED 13.6.92 ONLY THE PERSONS FROM THE KAMMA COMMUNITY WERE TO GET 25% DI SCOUNT OR CONCESSION IN HIRING CHARGES OF THE KALYANA MANDAPA M OR HALL GIVEN FOR MARRIAGES ETC. THEREFORE HE CONFIRMED THE DE NIAL OF EXEMPTION U/S. 11 OF THE ACT. 10. EVEN OTHERWISE IT WAS OBSERVES BY THE CIT(A) T HAT ADMITTEDLY NO FORM NO. 10 HAD BEEN FILED BY THE ASSESSEE IN RE SPECT OF ANY ACCUMULATION OUT OF THE INCOME FOR THE A.Y. 2001-02 . IT IS CLAIMED THAT AFTER THE TRANSFER OF RS. 44 46 614 TO THE 'BUILDIN G FUND RESERVE I.T.A. NO. 477/HYD/2011 M/S. KAMMA SANGHAM ================== 7 ACCOUNT' 75% OF THE NET INCOME OF RS. 59 28 817 WA S CONSIDERED AS APPLIED AND THEREFORE THE ASSESSEE OPINED THAT TH ERE WAS NO NEED FOR FILING ANY FORM NO. 10. HOWEVER HE WAS OF THE VIE W THAT SUCH CONTENTION IS NOT ACCEPTABLE. THE MERE TRANSFER OF FUNDS TO THE 'BUILDING FUND RESERVE ACCOUNT' CANNOT BE CONSIDERE D AS APPLICATION OF INCOME. EVEN IF ANY FUNDS WERE TO BE SET APART FOR SUCH PURPOSE THE ASSESSEE WAS STATUTORILY REQUIRED TO FILE FORM NO. 10 DULY INTIMATING THE PURPOSE AND EXTENT OF SUCH ACCUMULAT ION. ON THE OTHER HAND AS MADE OUT BY THE ASSESSING OFFICER EVEN TH OUGH THE ASSESSEE HAD PASSED A RESOLUTION ON 13.6.1992 FOR ACCUMULATI NG 75% OF THE INCOME FOR THE PURPOSE OF CONSTRUCTION OF BUILDING FOR THE NEXT 10 YEARS SUCH RESOLUTION ALONE CANNOT BE CONSIDERED AS A VAL ID NOTICE OF ACCUMULATION AS ENVISAGED UNDER THE PROVISIONS OF THE ACT. AS REGARDS FORM NO. 10 FILED BY THE ASSESSEE DURING TH E SET ASIDE PROCEEDINGS IT IS CLEAR THAT EVEN IN VIEW OF THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NAGPUR HOTEL OWNERS' A SSOCIATION (SUPRA) THE ASSESSMENT PROCEEDINGS TAKEN IN VIEW O F THE SET ASIDE ORDER OF THE ITAT CANNOT BE CONSIDERED AS THE APPRO PRIATE OCCASION FOR FILING THE SAME. BESIDES IT IS ALSO SEEN THAT DE SPITE A CLEAR CUT OBSERVATIONS OF THE ITAT REGARDING MODES OF KEEPING THE ACCUMULATED FUNDS THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN AS TO IN WHAT MODES THE SAME WERE KEPT TILL THE FUNDS WERE SPENT FOR TH E PURPOSE OF CONSTRUCTION OF THE BUILDING. ACCORDINGLY THE ASS ESSEE IS NOT ENTITLED TO GET ANY BENEFIT OF THE PROVISIONS REGARDING ACCU MULATION. 11. AS REGARDS THE CONTENTION THAT THE ENTIRE DONAT ION OF RS. 40 09 000 WAS IN THE NATURE OF CORPUS DONATIONS IT HAS BEEN AMPLY BROUGHT OUT BY THE ASSESSING OFFICER THAT ALL THE 1 64 LETTERS FROM THE DONORS IN THIS REGARD WERE STEREOTYPE LETTERS IN TE LUGU APPARENTLY WRITTEN BY A SINGLE PERSON. BESIDES EVEN THE SAID LETTERS ONLY STATED THAT THE DONATION HAD BEEN GIVEN AS A TOKEN OF ASSI STANCE TO THE PROGRAMMES OF THE ASSESSEE IN GENERAL. IN FACT NO DONOR HAD CLEARLY EXPRESSED ANY DESIRE FOR MAKING THE SAID DONATION T OWARDS THE 'CORPUS FUND'. IN THE CASE OF PROBHODAN PRAKASHAN VS. ADIT (50 ITD 135) THE I.T.A. NO. 477/HYD/2011 M/S. KAMMA SANGHAM ================== 8 MUMBAI ITAT HAVE OPINED THAT IN VIEW OF THE EXPRESS ION 'SPECIFIC DIRECTION' SUCH DIRECTION SHOULD BE NECESSARILY IN WRITING AND THERE SHOULD BE EVIDENCE THAT SUCH DIRECTION CAME FROM TH E DONOR. OBVIOUSLY IN THE FACTS OF THE ASSESSEE CASE IT CA NNOT BE SAID THAT THE DONORS HAD GIVEN ANY SPECIFIC DIRECTION TO UTILISE THE FUNDS PROVIDED BY THEM FOR THE SPECIFIC PURPOSE OF CONSTRUCTION OF TH E BUILDING. UNDER THE CIRCUMSTANCES THE CIT(A) AGREED WITH THE VIEW OF T HE ASSESSING OFFICER THAT THE DONATIONS RECEIVED BY THE ASSESSEE WERE IN THE NATURE OF NORMAL DONATIONS AND CLAIM REGARDING THE SAME BE ING 'CORPUS DONATION' IS A MERE AFTER THOUGHT. ACCORDINGLY TH E CIT(A) DISMISSED THE CLAIM OF THE ASSESSEE ON THIS COUNT. 12. THE LEARNED AR SUBMITTED THAT THE ASSESSING OFF ICER CANNOT EXAMINE THE OBJECTS OF THE ASSESSEE TRUST DURING TH E ASSESSMENT PROCEEDINGS AS THE ASSESSEE WAS DULY GRANTED WITH T HE REGISTRATION U/S. 12A OF THE IT ACT AND THE ASSESSEES OBJECTS W ERE APPROVED AS CHARITABLE IN NATURE. HE RELIED ON THE JUDGEMENT O F THE SUPREME COURT IN THE CASE OF CIT VS. SURAT CITY GYMKHANA (300 ITR 214). FURTHER HE SUBMITTED THAT THE ACCUMULATED AMOUNT WAS UTILISED FOR THE PURPOSE OF CONSTRUCTION OF COMMUNITY HALL AS WELL AS COMMERCIA L COMPLEX WITH AN INTENTION TO GENERATE INCOME FOR THE PURPOSE OF ATT AINMENT OF ASSESSEES OBJECTIVES MENTIONED IN ARTICLES OF BYE- LAWS. FURTHER HE SUBMITTED THAT AS PER PROVISIONS OF SECTION 11(5)(X ) THE ASSESSEE IS PERMITTED TO MAKE INVESTMENT IN IMMOVABLE PROPERTY WHICH EITHER MAY BE RESIDENTIAL OR COMMERCIAL. THE INVESTMENT IN CO MMERCIAL COMPLEX IS ALSO ONE OF THE SPECIFIED MODES OF THE INVESTMEN T AND ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF SECTION 11(2) R.W.S . 11(5) OF THE IT ACT. HE RELIED ON THE JUDGEMENT OF JURISDICTIONAL HIGH C OURT IN THE CASE OF CIT VS. HYDERABAD RACE CLUB CHARITABLE TRUST (262 I TR 194) WHEREIN HELD THAT IT COULD NOT BE HELD THAT THERE HAD BEEN BUSINESS IN THE NORMAL SENSE IN SUCH ARRANGEMENT AND IN THE FACTS A ND CIRCUMSTANCES IT WAS NOT SUCH A BUSINESS WHICH WOULD BE HIT BY SE CTION 13(1)(BB) AND CONSEQUENTLY THE TRUST WAS ENTITLED FOR EXEMPTION. ACCORDING TO THE AR THIS JUDGEMENT IS SQUARELY APPLICABLE TO THE FA CTS OF THE PRESENT I.T.A. NO. 477/HYD/2011 M/S. KAMMA SANGHAM ================== 9 CASE. FURTHER HE SUBMITTED THAT THE PROVISIONS OF SECTION 13(1)(B) OF THE ACT ARE NOT APPLICABLE AS THE RECIPIENTS OF SCH OLARSHIP ARE NOT THE MEMBERS OF THE FAMILY OF THE TRUSTEES OR AUTHOR OR FOUNDER OR ANY CONCERN IN WHICH THESE PERSONS HAVE SUBSTANTIAL INT EREST. IT WAS SUBMITTED THAT IN VIEW OF THE EXPLANATION 2 BELOW S UB-SECTION (7) OF SECTION 13 WHEN SCHOLARSHIPS ARE BEING AWARDED TO CHILDREN STUDYING IN COLLEGES THE ASSESSEE DOES NOT FALL WITHIN THE M ISCHIEF OF SECTION 13(1)(B) OF THE IT ACT THOUGH THE ASSESSEE DISBURS ED THE SCHOLARSHIPS TO THE CHILDREN OF A PARTICULAR CASTE. 13. REGARDING NON-FILING OF FORM NO. 10 WITHIN DUE DATE THE LEARNED AR SUBMITTED THAT AFTER THE TRANSFER OF RS. 44 46 6 14 TO THE BUILDING FUND RESERVE ACCOUNT 75% OF THE NET INCOME OF RS. 59 28 817 WAS CONSIDERED AS APPLIED FOR CHARITABLE PURPOSES AND T HERE WAS NO NEED FOR FILING ANY FORM NO. 10. HE ALSO CONTENDED THAT THE ASSESSEE HAS FILED FORM NO. 10 ALONG WITH THE LETTER DATED 12.8. 2009 AND IN VIEW OF THE JUDGEMENT OF THE SUPREME COURT IN THE CASE OF C IT VS. NAGPUR HOTELS OWNERS ASSOCIATION (SUPRA) THE SAME CAN BE FILED ANY TIME BEFORE THE ASSESSING OFFICER COMPLETING THE ASSESSM ENT FOR THE CONCERNED ASSESSMENT YEAR. FURTHER HE SUBMITTED T HAT HAD THE ASSESSEE NOT MADE THE INVESTMENT IN COMMERCIAL COMP LEX IT WOULD NOT HAVE DISBURSED SCHOLARSHIPS WORTH MORE THAN RS. 2.2 4 CRORES IN THE SUCCEEDING YEAR WHEN THERE WAS NO DONATION RECEIVED BY THE ASSESSEE. THE INVESTMENT IN COMMERCIAL COMPLEX WAS DECIDED BY THE ASSESSEE AND INTIMATED IN FORM NO. 10 FOR THE PURPO SE OF ACCUMULATION IN EARLIER YEARS. CONSEQUENTLY THERE WAS NO VIOLATION OF SECTION 11(2) ALSO. HE RELIED ON THE FOLLOWING JUD GEMENTS: A) ACIT VS. SURAT CITY GYMKHANA [300 ITR 214 (SC)] WHEREIN IT WAS HELD THAT THE REGISTRATION OF A TRUST UNDER SEC TION 12A OF THE INCOME-TAX ACT 1961 ONCE DONE IS A FAIT ACCOMPLI A ND THE ASSESSING OFFICER CANNOT THEREAFTER MAKE FURTHER PR OBE INTO THE OBJECTS OF THE TRUST. THE DECISION OF THE HIGH COURT IN HIRALAL BHAGWATI V. CIT (2000) 246 ITR 188 (GUJ) ATTAINED FINALITY ON THIS PO8NT A LSO SINCE THAT I.T.A. NO. 477/HYD/2011 M/S. KAMMA SANGHAM ================== 10 DECISION ALSO COVERED THIS POINT AND THE DEPARTMENT HAD NOT CHALLENGED THAT DECISION BEFORE THE SUPREME COURT. B) CIT VS. HYDERABAD RACE CLUB CHARITABLE TRUST 262 I TR 194 (AP) WHEREIN IT WAS HELD THAT THE OBJECTS OF THE TRUST WERE PURELY CHARITABLE IN NATURE. THE MAIN OBJECTS OF THE TRUS T WERE ADVANCEMENT AND PROPAGATION OF EDUCATION MEDICAL A ID AND RELIEF OF THE POOR. IN FACT PROMOTION OF SPORTS A ND GAMES WAS ALSO ONE OF THE CHARITABLE OBJECTS. MERELY BECAUSE A DISCRETION WAS VESTED IN THE TRUSTEES TO UTILISE THE INCOME TO ANY ONE OR MORE OF THE OBJECTS THAT WOULD NOT MAKE ANY DIFFERE NCE. THE TRANSACTIONS IN CONDUCTING THE RACES AND INTER-VENU E BETTING WERE MEANT FOR ACHIEVING THE PRIMARY OBJECTS OF THE TRUST AND COULD NOT BE CALLED A BUSINESS AND THE INCOME DERIV ED FROM SUCH TRANSACTIONS COULD NOT BE CALLED AN INCOME FRO M THE BUSINESS. ASSUMING THAT IT WAS A BUSINESS AS CONTE MPLATED UNDER SECTION 2(13) OF THE ACT THE SAME WAS EXEMPT ED UNDER SECTION 11. THE LICENCE TO RUN RACES AND BETTING I TSELF COULD NOT BE TREATED AS PROPERTY AND THE SAID PROPERTY WAS OB TAINED WITH THE CONSENT OF THE CLUB AND WITH THE LICENCE GRANTE D BY THE GOVERNMENT OF ANDHRA PRADESH. THE TERM PROPERTY ITSELF HAD WIDEST IMPORT FOR INCOME TAX PURPOSES AND WAS INCLU SIVE OF HOLDING A LICENCE. THE INCOME DERIVED BY THE TRUST FOR THE RELEVANT ASSESSMENT YEARS WAS FROM PROPERTY HELD UN DER TRUST AND AS SUCH IT WAS COMPUTED UNDER SECTION 11. EV EN IF IT WERE NOT TREATED AS INCOME FROM THE PROPERTY HELD UNDER TRUST IT COULD BE TREATED AS VOLUNTARY CONTRIBUTION GIVE BY THE CL UB TO THE ASSESSEE TRUST AS CONTEMPLATED UNDER SECTION 12. S UCH VOLUNTARY CONTRIBUTIONS COULD BE CHARACTERISED ONLY AS A CAPITAL RECEIPT IN THE ASSESSEES HANDS. THUS IT COULD NO T BE HELD THAT THERE HAD BEEN BUSINESS IN THE NORMAL SENSE IN SUCH ARRANGEMENT AND IN THE FACTS AND CIRCUMSTANCES IT WAS NOT SUCH A BUSINESS WHICH WOULD BE HIT BY SECTION 13(1)(BB). THE TRUST WAS ENTITLED TO EXEMPTION. C) CIT VS. JANMABHUMI PRESS TRUST 242 ITR 457 (KAR) WHEREIN IT WAS HELD THAT WHEN THE ASSESSEE IS A TRUST ENTITLED TO BENEFIT UNDER SECTION 11 OF THE INCOME-TAX ACT 1961 THE O NLY QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER THAT INCOM E OR THE ACCUMULATED INCOME THEREOF IS APPLIED FOR CHARITABL E PURPOSES. IF INVESTMENTS HAVE BEEN MADE IN THE CONSTRUCTION O F A BUILDING WHICH IN TURN WOULD AUGMENT ITS INCOME IT SHOULD B E HELD THAT THE APPLICATION OF THE FUNDS IS FOR THE PURPOSE OF THE TRUST. THE REPAYMENT OF THE DEBT INCURRED BY THE TRUST FOR CON STRUCTION OF THE BUILDING SHOULD BE TREATED AS APPLICATION OF TH E INCOME OF THE TRUST FOR CHARITABLE PURPOSES. 14. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A ). I.T.A. NO. 477/HYD/2011 M/S. KAMMA SANGHAM ================== 11 15. WE HAVE HEARD DR. C.P. RAMASWAMI THE LEARNED A DVOCATE APPEARING FOR THE ASSESSEE AND SHRI B.V. PRASAD RED DY THE LEARNED ADDL. CIT APPEARING FOR THE REVENUE. THERE IS NO D ISPUTE ON THE FACTS SURROUNDING THIS CASE AS EXPLAINED IN THE ORDER OF THE CIT(A). IT IS TRUE THAT THE ASSESSEE IS GRANTED WITH REGISTRATION U/S. 12A OF THE I.T. ACT ACKNOWLEDGING ITS ELIGIBILITY FOR THE PURPOSE OF SE CTION 11 OF THE IT ACT 1961. IN SPITE OF VALID REGISTRATION U/S. 12A OF T HE IT ACT THE ASSESSEE WAS NOT SUCCESSFUL BEFORE THE LOWER AUTHORITIES TO CONVINCE THAT THE ASSESSEE HAD IN FACT CARRIED OUT ONLY CHARITABLE ACTIVITIES DURING THE RELEVANT PERIOD AND THE INCOME OF THE ASSESSEE HAS BEEN APPLIED FOR CHARITABLE PURPOSES ONLY. THE ASSESSEE HAS BEEN ES TABLISHED FOR CARRYING OUT THE FOLLOWING ACTIVITIES: A) TO ESTABLISH EDUCATIONAL INSTITUTIONS; B) TO PROVIDE BOARDING AND LODGING FACILITIES FOR S TUDENTS AND THE WORKING YOUTH. C) TO RENDER FINANCIALLY DESERVING STUDENTS BY GIVI NG LOANS SCHOLARSHIPS AWARDS ETC. IN FURTHERANCE OF THEIR STUDIES IN INDIA AND ABROAD. D) TO ESTABLISH HOSPITALS AND PROVIDING MEDICAL FAC ILITIES. E) TO ESTABLISH LIBRARIES PUBLISH BOOKS PAMPHLETS JOURNAL ETC. F) TO HONOUR AND ENCOURAGE OUTSTANDING AND DESERVIN G PERSONS IN PUBLIC LIFE SOCIAL SERVICE MUSIC LITE RATURE AND ARTS ETC. G) TO ASSIST AND GUIDE THE EDUCATED UN-EMPLOYEES IN THE MATTER OF EMPLOYMENT. H) TO ABSORB MERGE OR AMALGAMATE AFFILIATE ANY OT HER BODY INSTITUTION OR ORGANISATION WITH THIS SANGHAM HAVING OBJECTS SIMILAR TO THOSE OF THIS SANGHAM. I) TO DO WHATEVER IS NECESSARY FOR THE ATTAINMENT O F THE ABOVE OBJECTS. J) TO PROMOTE BETTER UNDERSTANDING AMONG MEMBERS OF ALL COMMUNITIES. 16. IN THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE PAID SCHOLARSHIPS TO STUDENTS AT RS. 1 52 100. THIS SCH OLARSHIP HAS BEEN GIVEN TO THE STUDENTS OF ONE PARTICULAR COMMUNITY/C ASTE I.E. KAMMA CASTE ONLY. IN OTHER WORDS INCOME HAS NOT BEEN AP PLIED DIRECTLY FOR I.T.A. NO. 477/HYD/2011 M/S. KAMMA SANGHAM ================== 12 CHARITABLE PURPOSES MENTIONED ABOVE. IT IS ALSO O N RECORD THAT THE PERSONS FROM KAMMA COMMUNITY WOULD GET 25% DISCOUNT ON HIRE CHARGES OF KALYANA MANDAPAM OR HALL GIVEN FOR MARRI AGES. IN VIEW OF THE PROVISIONS OF SECTION 13(1)(B) OF THE IT ACT A S THE BENEFIT HAS BEEN GIVEN TO PARTICULAR COMMUNITY THE EXEMPTION U/S. 1 1 CANNOT BE GIVEN. FURTHER THE INCOME HAS BEEN APPLIED FOR THE CONSTR UCTION OF A COMMERCIAL COMPLEX THE INCOME FROM WHICH IS TO BE APPLIED FOR CHARITABLE PURPOSE. THE QUESTION FOR CONSIDERATION BEFORE US IS WHETHER IN SUCH CASES APPLICATION OF INCOME FOR TH E PURPOSE OF THE CONSTRUCTION OF COMMERCIAL COMPLEX CAN BE TREATED A S APPLICATION OF THE INCOME FOR CHARITABLE PURPOSES. THE LEARNED RE PRESENTATIVE FOR THE ASSESSEE RELIED ON THE JUDGEMENT OF SUPREME COU RT IN THE CASE OF SURAT CITY GYMKHANA (300 ITR 214). IN THAT CASE IT WAS HELD THAT REGISTRATION OF TRUST U/S. 12A OF THE IT ACT ONCE DONE IS A FAIT ACCOMPLI AND THE ASSESSING OFFICER CANNOT THEREAFTER MAKE FU RTHER PROBE INTO THE OBJECTS OF THE TRUST. HOWEVER IN THE PRESENT CASE THE ASSESSING OFFICER IS ONLY EXAMINING WHETHER THE INCOME EARNED BY THE ASSESSEE IS APPLIED TOWARDS THE OBJECTS FOR WHICH IT WAS FOR MED. HE HAS NOT PROBED THE GENUINENESS OF THE ACTIVITIES CARRIED ON BY THE ASSESSEE. HE HAS ONLY EXAMINED THE APPLICATION OF FUND OF THE ASSESSEE. AS REGARDS THE RELEVANCE OF REGISTRATION U/S. 12A AT T HE STAGE OF GRANT OF REGISTRATION IT IS NOT NECESSARY TO FIRST ESTABLIS H AS TO HOW THE ASSESSEE WOULD BE ABLE TO CLAIM EXEMPTION U/S. 11 OR SECTION 12. EVEN AN INSTITUTION OF RELIGIOUS NATURE IS NOT PRECLUDED FR OM GETTING REGISTRATION U/S. 12A. THE ONLY PURPOSE FOR WHICH REGISTRATION I S REQUIRED IS FOR ESTABLISHING ITS IDENTITY AS AN INSTITUTION FOR BEI NG ABLE TO CLAIM THE BENEFITS U/S. 11 AND 12. THEREFORE THE ASSESSEE C OULD NOT ARGUE THAT WITH THE REGISTRATION U/S. 12A THE FACT THAT THE A SSESSEE WAS A CHARITABLE INSTITUTION STOOD CONCLUDED AND THE TAX AUTHORITIES COULD NOT QUESTION IT. THE FACT WHETHER AN INSTITUTION IS A CHARITABLE INSTITUTION OR NOT IS NOT ONLY A QUESTION OF THE TRUST DEED OR MEM ORANDUM OF ASSOCIATION ETC. BUT ALSO HOW THE INSTITUTION HAS CONDUCTED ITS I.T.A. NO. 477/HYD/2011 M/S. KAMMA SANGHAM ================== 13 ACTIVITIES. THE AUTHORITIES BELOW HAVE FOUND A BRE ACH IN THAT REGARD INASMUCH AS WHILE THE MAIN OBJECTS THE ASSESSEE PER FORMED VERY LITTLE. 17. THE EXPENDITURE IN CHARITIES NEED NOT BE IN THE NATURE OF REVENUE EXPENDITURE ONLY. IF A TRUST OR SOCIETY AP PLIES ITS INCOME FOR CONSTRUCTING A HOSPITAL OR SCHOOL BUILDING OR PURCH ASING APPARATUS OR FURNITURE THEREOF IT WOULD BE APPLICATION OF THE I NCOME TO CHARITABLE PURPOSE. THIS HOWEVER DOES NOT MEAN THAT IF A TR UST SPENDS OR INVESTS ITS INCOME FOR ACQUIRING A CAPITAL ASSET FO R EARNING INCOME IT WOULD STILL TANTAMOUNT TO THE APPLICATION OF THE IN COME TO THE CHARITABLE PURPOSES. IF THE ASSETS ACQUIRED HAVE DIRECT NEXUS WITH THE CHARITABLE PURPOSE IT IS ONLY THEN THAT IT WILL AMOUNT TO THE APPLICATION OF THE INCOME WITHIN THE MEANING OF SECTION 11. INVESTMEN T IN AN INCOME EARNING ASSET WOULD NOT BE APPLICATION OF THE INCOM E AS ENVISAGED BY THE SECTION. 18. IT WAS CONTENDED BY THE LEARNED AR THAT WE SHOU LD HAVE A WIDER OUTLOOK AND SHOULD TAKE A MORE LIBERAL VIEW OF THE MATTER BY HOLDING THAT THE INVESTMENT OF THE INCOME IN A VENTURE WHIC H WOULD BRING A HIGHER INCOME WHICH COULD ULTIMATELY BE APPLIED FOR CHARITABLE PURPOSES SHOULD BE HELD TO BE APPLICATION OF THE I NCOME FOR CHARITABLE PURPOSES. FOR THIS PROPOSITION HE RELIED ON THE J UDGEMENT OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS. JANMABH UMI PRESS TRUST (242 ITR 457). IT APPEARS TO BE UNSAFE TO ACCEPT SUCH A PROPOSITION. IF THE PROPOSITION IS ACCEPTED A CHARITABLE TRUST CAN APPLY ITS ENTIRE INCOME ON COMMERCIAL ACTIVITIES AND CLAIM THE SAME TO BE APPLICATION OF THE INCOME FOR CHARITABLE PURPOSES MERELY BECAU SE THE INCOME ULTIMATELY OBTAINED FROM THE COMMERCIAL ACTIVITIES IS TO BE APPLIED FOR CHARITABLE PURPOSES. SIMILARLY A CHARITABLE INST ITUTION CAN SPEND THE ENTIRE INCOME ON THE ACQUISITION OF THE CAPITAL ASS ET WHICH HAS NOTHING TO DO WITH THE CHARITABLE ACTIVITIES ON THE PLEA TH AT THE INCOME DERIVED FROM THE CAPITAL ASSET IS GOING TO BE USED FOR CHAR ITABLE PURPOSES. THE ESSENTIAL REQUIREMENT OF SECTION 11 IS THAT THE INC OME FOR WHICH EXEMPTION IS SOUGHT MUST BE ONE WHICH HAS BEEN APPL IED FOR CHARITABLE I.T.A. NO. 477/HYD/2011 M/S. KAMMA SANGHAM ================== 14 PURPOSES DURING THE RELEVANT PREVIOUS YEAR. IF WE VIEW THE MATTER IN THE ABOVE BACKGROUND IN THE PRESENT CASE THE INCOME HAS NOT BEEN APPLIED FOR CHARITABLE PURPOSES. THE AMOUNT HEREIN WAS NOT SPENT FOR THE DOMINANT AND PRIMARY PURPOSE OF CHARITABLE ACTI VITIES AND IT CANNOT BE CONSTRUED AS SPENDING MONEY ON CHARITABLE ACTIVI TIES. 19. IN THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE SPENT A PALTRY AMOUNT OF RS. 1 52 100 FOR GIVING SCHOLARS HIPS OUT OF ITS INCOME AND INVESTED MONEY IN CONSTRUCTION OF THE CO MMERCIAL COMPLEX OR TRANSFERRED THE FUND TO BUILDING FUND RESERVE A CCOUNT. THIS PATTERN OF INVESTMENT CANNOT BE CONSIDERED AS APPLI CATION OF FUND IN TERMS OF SECTION 11. THE INVESTMENT IN COMMERCIAL COMPLEX CANNOT BE SAID TO HAVE BEEN MADE TO HELP IN ACHIEVING THE MAI N OBJECTS. FURTHER ANY BENEFIT THAT IS TO ACCRUE TO A SPECIFIC PERSON FROM AMONGST THE PARTICULAR COMMUNITY COULD NEVER BE PUBLIC UTILITY BECAUSE; IT ALWAYS IMPLIES A GENERAL APPLICATION WITHOUT ANY REFERENCE TO ANY PERSON OF PARTICULAR COMMUNITY. IN OUR OPINION THE CONSTRUC TION OF COMMERCIAL COMPLEX WHICH IS CARRIED ON COMMERCIAL LEVEL DID NO T MAKE ASSESSEE SOCIETY EXISTING SOLELY FOR CHARITABLE PURPOSE. TH E ASSESSEE SPENT A LARGE PORTION OF THE INCOME EITHER TO CONSTRUCT COM MERCIAL COMPLEX OR TRANSFER TO BUILDING FUND RESERVE ACCOUNT. FURTH ER THE ASSESSEE HAS NOT GIVEN REQUIRED INTIMATION REGARDING ACCUMULATIO N BEFORE THE DUE DATE AS PRESCRIBED IN THE ACT. UNDER SECTION 11 A N ASSESSEE IS REQUIRED TO APPLY THE INCOME TO THE EXTENT OF 75% T O THE OBJECTS OF THE TRUST. IN A CASE WHERE INCOME IS NOT APPLIED THE INCOME CAN BE ACCUMULATED OR SET APART IN EXCESS OF 75% OF THE IN COME TO BE UTILISED SUBSEQUENTLY. FOR THIS PURPOSE THE ASSESSEE HAS T O EXERCISE OPTION IN WRITING BEFORE THE EXPIRY OF TIME ALLOWED UNDER SUB SECTION (1) OF SECTION 139 FOR FURNISHING THE RETURN OF INCOME. IN THE IN STANT CASE THE ENTIRE INCOME FROM FUND GENERATED WAS NOT UTILISED IN THE YEAR UNDER CONSIDERATION THEREFORE THE ASSESSEE WAS REQUIRED TO EXERCISE OPTION TO ACCUMULATE THE EXCESS INCOME FOR THE PURPOSE OF APPLYING THE SAME IN THE SUBSEQUENT YEAR. BUT NO SUCH OPTION WAS EXE RCISED. THEREFORE THE CLAIM OF THE ASSESSEE CANNOT BE ENTERTAINED THO UGH THE ASSESSEE I.T.A. NO. 477/HYD/2011 M/S. KAMMA SANGHAM ================== 15 MADE A CLAIM BEFORE US THAT THE TRANSFER OF RS. 44 46 614 TO BUILDING FUND RESERVE ACCOUNT 75% NET INCOME OF RS. 59 28 817 WAS CONSIDERED AS APPLIED AND THERE IS NO NECESSITY OF FILING FORM NO. 10. THE MERE TRANSFER OF FUND TO THE BUILDING FUND RES ERVE ACCOUNT CANNOT BE CONSIDERED AS APPLICATION OF FUND AS DISC USSED IN EARLIER PARA. 20. WE HAVE ALSO CAREFULLY GONE THROUGH ALL THE JUD GEMENTS CITED BY THE ASSESSEE. IN THE CASE OF CIT VS. HYDERABAD RAC E CLUB CHARITABLE TRUST (262 ITR 194) IT WAS HELD IT COULD NOT BE HE LD THAT THERE HAD BEEN BUSINESS IN THE NORMAL SENSE IN SUCH ARRANGEME NT AND IN THE FACTS AND CIRCUMSTANCES IT WAS NOT SUCH A BUSINESS WHICH WOULD BE HIT BY SEC. 13(1)(BB) AND CONSEQUENTLY THE TRUST WAS E NTITLED FOR EXEMPTION. IN ASSESSEES CASE MAJOR PORTION OF TH E INCOME OF THE ASSESSEE HAS BEEN SPENT TOWARDS CONSTRUCTION OF A C OMMERCIAL COMPLEX. AS SEEN FROM THE OBJECT CLAUSE OF THE BYE -LAWS CONSTRUCTION OF COMMERCIAL COMPLEX IS NOT THE OBJECT OF THE ASSE SSEE. ITS MAIN OBJECT IS TO ESTABLISH EDUCATIONAL INSTITUTIONS PR OVIDING BOARDING AND LODGING TO THE STUDENTS AND WORKING YOUTH RENDERIN G FINANCIAL HELP TO THE DESERVING STUDENTS PROVIDING SCHOLARSHIPS TO ESTABLISH HOSPITALS AND LIBRARIES. EVEN THE COMMERCIAL COMPLEX WAS NOT USED FOR ANY OF THE OBJECTS FOR WHICH THE TRUST WAS CREATED BUT HAD BEEN USED TO LET OUT TO COMMERCIAL ORGANISATIONS TO EARN RENT. THE INCO ME GENERATED THROUGH THAT ALSO NOT FULLY USED FOR THE PURPOSE OF ATTAINMENT OF OBJECTS OF THE ASSESSEE. SUBSTANTIAL INCOME GENERATED BY T HE ASSESSEE WAS REGULARLY BEING PLOUGHED BACK INTO INCOME GENERATIN G ASSETS WITHOUT APPLYING THE SAME FOR CHARITABLE PURPOSES. BEIN G SO IN OUR OPINION THIS CASE HAS NO APPLICATION TO THE FACTS OF PRESEN T CASE. 21. FURTHER THE LEARNED AR MADE A PLEA BEFORE US TH AT THE ENTIRE DONATION RECEIVED IN THE ASSESSMENT YEAR UNDER CONS IDERATION WAS IN THE NATURE OF CORPUS DONATION. IT HAS BEEN BROUGHT ON RECORD BY THE LOWER AUTHORITIES THAT ALL THE 164 LETTERS FROM THE DONORS IN THIS REGARD WERE STEREOTYPE LETTERS IN TELUGU APPARENTLY WRITTE N BY A SINGLE PERSON. I.T.A. NO. 477/HYD/2011 M/S. KAMMA SANGHAM ================== 16 THE SAID LETTERS ONLY STATED THAT THE DONATIONS HAD BEEN GIVEN AS A TOKEN OF ASSISTANCE TO THE PROGRAMME OF THE ASSESSE E IN GENERAL. THERE WAS NO CLEAR MENTIONING OF ANY DESIRE FOR MAK ING THE SAID DONATION TOWARDS CORPUS FUND. THERE IS NO SPECIF IC DIRECTION IN WRITING REGARDING THAT THE DONATION HAS BEEN MADE FOR THE S PECIFIC PURPOSE OF CONSTRUCTION OF COMMERCIAL COMPLEX. IN VIEW OF THI S THE DONATIONS SO RECEIVED ARE TO BE CONSIDERED AS NORMAL DONATION AN D CANNOT BE CONSIDERED AS DONATIONS TOWARDS CORPUS FUND. 22. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER 2011. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD DATED 22 ND NOVEMBER 2011 TPRAO COPY FORWARDED TO: 1. M/S. KAMMA SANGHAM C/O. DR. C.P. RAMASWAMI ADVOCATE FLAT NO. 303 GITANJALI APTS. PLOT NO. 1 08 SRINAGAR COLONY HYDERABAD-500 073. 2. THE DEPUTY DIRECTOR OF INCOME-TAX (EXEMPTIONS)-I I HYDERABAD. 3. THE CIT(A)-IV HYDERABAD. 4. THE DIT (EXEMPTIONS) HYDERABAD. 5. THE DR B BENCH ITAT HYDERABAD