Exemption from Tax under sec. 11, 12 of Income Tax - to get the benefit under Sections 11 and 12 of the Act, Section 12(A) of the Act the trust has to get a registration as required.-
Section 12AA provides for procedure for registration. - granting registration does not ipsi dixit entitle the assessee to get the benefit under Section 11 or 12. - registration initially
recognizes the charitable activities of the trust. - to get the benefit under Sections 11 and 12, factually it has to be established that income derived from property held under trust wholly for charitable or religious purposes to the extent to which such income is applied to such purposes. If
this factual aspect is not established, the registration does not help otherwise. - found that the application of the fund is not made for charitable activity but for construction of the building, which again does not directly reflect the charitable activities. - Even on the
record, it does not appear that the assessee had intended to apply the future
income, which might be derived from the building so constructed. -In this context, what the learned Tribunal has noted on fact is required to be reiterated: - High court dismissed the appeal =
1. whether the Tribunal
was correct in law in perversely bolding that the investment made in
immovable property was not for charitable purpose despite the provisions of
Section 11(5) of the Income Tax Act, 1961 treating such investment as
application for charitable purpose?
2. Whether the learned ITAT was correct in law in wrongly applying Section
13(1)(bb) in the case of the appellant for assessment year 2001-02 despite the
fact that Section 13(1)(bb) was omitted with effect from 01st April 1984 by the
Finance Act, 1983 and the objects of the appellant trust have already been
approved to be charitable in nature?
whether on the facts and
circumstances of the case the authorities below is justified in refusing to
grant the benefit under Section 11 of the Act.
All the authorities below, on
fact, found that the funds received by way of donation have been utilized for
construction of commercial building and none of the clauses of the trust
provides for construction of building for charitable activities.
We find that in order to get the benefit under Sections 11 and 12 of the
Act, the conditions as mentioned in Section 12(A) of the Act have to be
fulfilled, meaning thereby, the trust has to get a registration as required.
Section 12AA provides for procedure for registration. We are of the view that
granting registration does not ipsi dixit entitle the assessee to get the
benefit under Section 11 or 12. According to us, registration initially
recognizes the charitable activities of the trust. However, in order to get the
benefit under Sections 11 and 12, factually it has to be established that income
derived from property held under trust wholly for charitable or religious
purposes to the extent to which such income is applied to such purposes. If
this factual aspect is not established, the registration does not help
otherwise. All the authorities below have found that the application of the
fund is not made for charitable activity but for construction of the building,
which again does not directly reflect the charitable activities. Even on the
record, it does not appear that the assessee had intended to apply the future
income, which might be derived from the building so constructed. In this
context, what the learned Tribunal has noted on fact is required to be
reiterated:
Therefore, we think that on the clear fact finding the learned Tribunal
has passed just and correct order and we do not find any reason to interfere
with the same, as we do not notice any question of law, which is required to be
decided.
2014 ( January part ) judis.nic.in/judis_andhra/filename=10764
THE HON'BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON'BLE SRI SANJAY KUMAR
ITTA No.613 OF 2013
22-01-2014
M/s. Kamma Sangham,Hyderabad. Appellant
The Director of Income Tax (Exemptions),Hyderabad.Respondent
Counsel for Appellant: Sri C.P. Ramaswami
Counsel for the respondent: None appeared
<GIST:
>HEAD NOTE:
?Cases referred
1. (1985) 156 ITR 323
2. (1988) 170 ITR 62
3. (2003) 262 ITR 194
4. (2000) 242 ITR 457
IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD
THE HON'BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA
AND
THE HON'BLE SRI JUSTICE SANJAY KUMAR
I.T.T.A. No. 613 OF 2013
DATE: 22.01.2014
This Court made the following:
THE HON'BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA
AND
THE HON'BLE SRI JUSTICE SANJAY KUMAR
I.T.T.A. No. 613 of 2014
JUDGMENT: (Per the Hon'ble The Chief Justice Sri Kalyan Jyoti Sengupta)
This appeal is sought to be preferred and admitted against the judgment
and order dated 23.11.2011 of the learned Tribunal in relation to the assessment
year 2001-02 on the following suggested questions of law.
"1. On the facts and in the circumstances of the case whether the Tribunal
was correct in law in perversely bolding that the investment made in
immovable property was not for charitable purpose despite the provisions of
Section 11(5) of the Income Tax Act, 1961 treating such investment as
application for charitable purpose?
2. Whether the learned ITAT was correct in law in wrongly applying Section
13(1)(bb) in the case of the appellant for assessment year 2001-02 despite the
fact that Section 13(1)(bb) was omitted with effect from 01st April 1984 by the
Finance Act, 1983 and the objects of the appellant trust have already been
approved to be charitable in nature?
2) In this matter, the learned Tribunal has refused to interfere with the
judgment and order of the Commissioner of Income Tax (Appeals) by which the
Commissioner dismissed the appeal filed by the appellant by confirming the order
of the Assessing Officer not allowing exemption under Section 11 of the Income
Tax Act, 1961 (for short, "the Act") to the assessee in respect of the income
said to have been derived in course of carrying on its business.
3) The brief facts of this case are as follows:
On earlier occasion, the Tribunal set aside the order of the Commissioner
of Income Tax (Appeals) by order dated 28.11.2007 and restored the matter back
to the file of the Assessing Officer on the ground that the Assessing Officer
has not given any findings as to
whether the money so accumulated or set apart
had been deposited in the form or modes specified in Section 11(5) of the Act.
On remand, it was submitted by the assessee that it had passed the resolution on
13.06.1992 to the effect that at the end of each year, 75% of the income of the
Sangham will be accumulated for the purpose of construction of building at its
Ameerpet landed property.
It was further submitted that out of the net income
of Rs.59,28,817/- of the year, Rs.44,46,614/-, being 75% thereof, has been
transferred to Building Fund Reserve Account.
It was further stated that most
of the donations have been collected for the specific purpose of construction of
building and the donors have instructed the management to use the funds only for
the said purpose.
It was also stated 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
authorities that donation of Rs.40,09,000/- should be treated as Corpus fund,
not forming part of the income of the trust.
It was further submitted that
though the excess of income over expenditure worked out to Rs.59,28,807/- before
transfer to building fund reserve, income for the purpose of Section 11, capital
gain is also to be considered as application of income.
It was explained by the
assessee that Form-10 was not filled along with the return of income for the
assessment year 2001-02 intentionally, as there was no surplus requiring
statutory compliance as provided under Section 11(2) of the Act.
However, the
assessee filed Form-10 along with letter dated 12.08.2009. However, the
Assessing Officer has not accepted the explanation and refused to grant the
relief as prayed for.
The Assessing Officer, on fact, noted that as per the
statement 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 said application,
Rs.3,60,388/- had been applied in building the committee hall, while
Rs.41,61,881/- were applied in building the commercial complex. So it was found
by the Assessing Officer that the application of the aforesaid fund in
construction of the building is not at all covered by any of its objects.
The Commissioner of Income Tax (Appeals) also upheld the findings of the Assessing
Officer.
On fact, the Commissioner of Income Tax (Appeals) found that the
aforesaid application of fund for construction of the building by the assessee
is not the charitable activity. This was also found by the learned Tribunal
itself.
4) In the context of the aforesaid, the learned counsel for the appellant
would argue that all the authorities should have taken a broader view in the
matter as this fund has been utilized for construction of the building and the
income therefrom would be utilized for fulfilling the objects.
As such, all the
authorities should have allowed the exemption.
He further argues that once
registration under Section 12 of the Act is granted, the authorities below do
not have any option but to allow the benefit under Section 11 of the Act. In
support of his argument, he has relied upon the following decisions in
Commissioner of Income Tax, Bangalore vs. J.H. Gotla1, Commissioner of Income
Tax vs. St. George Forana Churth2, Commissioner of Income Tax vs. Hyderabad Race
Club Charitable Trust3 and Commissioner of Income Tax vs. Janmabhumi Press
Trust4.
5) After going through the impugned judgment and order of the learned
Tribunal and considering the argument of the learned counsel for the appellant,
we think that the only issue in this matter is
whether on the facts and
circumstances of the case the authorities below is justified in refusing to
grant the benefit under Section 11 of the Act.
All the authorities below, on
fact, found that the funds received by way of donation have been utilized for
construction of commercial building and none of the clauses of the trust
provides for construction of building for charitable activities.
However, it
has been argued that this building itself is being utilized as a source of
income to augment the fund of the trust so much so to fulfill the charitable
activities in a broader sense.
It is also argued that once exemption is
granted, obviously the benefit under Section 11 of the Act has to to be applied.
6) Before we proceed further, we think it fit to reproduce the relevant
portion of Section 11 of the Act.
"11(1) Subject to the provisions of Sections 60 to 63, the following income
shall not be included in the total income of the previous year of the person in
receipt of the income-
(a) income derived from property held under trust wholly for charitable or
religious purposes, to the extent to which such income is applied to such
purposes in India; and where any such income is accumulated or set apart for
application to such purposes in India to the extent to which the income so
accumulated or set apart is not in excess of fifteen percent of the income from
such property;
(b) income derived from property held under trust in part only for such
purposes, the trust having been created before the commencement of this Act, to
the extent to which such income is applied to such purposes in India; and where
any such income is finally set apart for application to such purposes in India,
to the extent to which the income so set apart is not in excess of fifteen per
cent of the income from such property;
(c) income derived from property held under trust-
(i) created on or after the 1st day of April, 1952, for a charitable purpose
which tends to promote international welfare in which India is interested, to
the extent to which such income is applied to such purposes outside India, and
(ii) for charitable or religious purposes, created before the 1st day of April,
1952, to the extent to which such income is applied to such purposes outside
India"
Provided that the Board, by general or special order, has directed in either
case that it shall not be included in the total income of the person in receipt
of such income;
(d) income in the form of voluntary contributions made with a specific direction
that they shall form part of the corpus of the trust or institution.
Explanation - For the purposes of clauses (a) and (b) -
(1) in computing the fifteen per cent of the income which may be accumulated or
set apart, any such voluntary contributions as are referred to in Section 12
shall be deemed to be part of the income;
(2) if, in the previous year, the income applied to charitable or religious
purposes in India falls short of eighty five per cent of the income derived
during that year from property held under trust, or, as the case may be, held
under trust in part, by any amount -
(i) for the reason that the whole or any part of the income has not been
received during that year, or
(ii) for any other reason,
then -
(a) in the case referred to in sub-clause (i), so much of the income applied to
such purposes in India during the previous year in which the income is received
or during the previous year immediately following as does not exceed the said
amount, and
(b) in the case referred to in sub-clause (ii) so much of the income applied to
such purposes in India during the previous year immediately following the
previous year in which the income was derived as does not exceed the said
amount,
may, at the option of the person in receipt of the income (such option to
be exercised in writing before the expiry of the time allowed under sub-section
(1) of Section 139 for furnishing the return of income) be deemed to be income
applied to such purposes during the previous year in which the income was
derived; and the income so deemed to have been applied shall not be taken into
account in calculating the amount of income applied to such purposes, in the
case referred to in sub-clause (i), during the previous year in which the income
is received or during the previous year immediately following, as the case may
be, and, in the case referred to in sub-clause (ii) during the previous year
immediately following the previous year in which the income was derived."
7) We find that in order to get the benefit under Sections 11 and 12 of the
Act, the conditions as mentioned in Section 12(A) of the Act have to be
fulfilled, meaning thereby, the trust has to get a registration as required.
Section 12AA provides for procedure for registration. We are of the view that
granting registration does not ipsi dixit entitle the assessee to get the
benefit under Section 11 or 12. According to us, registration initially
recognizes the charitable activities of the trust. However, in order to get the
benefit under Sections 11 and 12, factually it has to be established that income
derived from property held under trust wholly for charitable or religious
purposes to the extent to which such income is applied to such purposes. If
this factual aspect is not established, the registration does not help
otherwise. All the authorities below have found that the application of the
fund is not made for charitable activity but for construction of the building,
which again does not directly reflect the charitable activities. Even on the
record, it does not appear that the assessee had intended to apply the future
income, which might be derived from the building so constructed. In this
context, what the learned Tribunal has noted on fact is required to be
reiterated:
"In assessee's case major portion of the income of the assessee has been
spent towards construction of a commercial complex. As seen from the object
clause of the bye-laws construction of commercial complex is not the object of
the assessee. Its main object is to establish educational institutions,
providing boarding and lodging to the students and working youth, rendering
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 organizations to earn rent. The income generated through that also
not fully used for the purpose of attainment of objects of the assessee.
Subsequently, income generated by the assesseef was regularly being ploughed
back into income generating assets without applying the same for charitable
purposes."
8) As far as the Corpus fund is concerned, the Tribunal has found as follows:
"The entire donation received in the assessment year under consideration
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 written by a single person. The said
letters only stated that the donations had been given as a token of assistance
to the programme of the assessee in general. There is no clear mentioning of
any desire for making the said donation towards corpus fund. There is no
specific direction in writing regarding that the donation has been made for the
specific purpose of construction of commercial complex. In view of this, the
donations so received are to be considered as normal donation and cannot be
considered as donations towards corpus fund."
9) The decision of the Supreme Court for taking liberal view in a tax matter
in case of J.H. Gotla (1 supra), according to us, is not disputed, but on the
aforesaid clear fact finding that it was not for the charitable activities, it
is difficult to follow the same in this case.
10) The decision of the Kerala High Court in case of St. George Forana Church
(2 supra) is not applicable on the facts and circumstances of this case, as in
that case it was found that the assessee has made addition to a building
belonging to the church and the addition to the building was made with the
intention of letting them out for rent and factually such intention was
reflected in that case. Here, the authorities below did not find such
intention. Hence, this decision is not helpful in this case.
11) The decision of this Court in case of Hyderabad Race Club Charitable Trust
(3 supra) rendered that the fund was applied for the charitable activities.
Here, all the authorities below, on fact, found that it was not applied for
charitable activities. Hence, this judgment is also not helpful in this case.
12) The decision of the Karnataka High Court in case of Janmabhumi Press Trust
(4 supra) is not helpful in this case as factually it was found that any
investment made in the construction of a building which in turn would augment
its income, such income would be applied for the charitable activities. In this
case, from the records such an intention was not reflected and this was found by
all the authorities below.
13) Therefore, we think that on the clear fact finding the learned Tribunal
has passed just and correct order and we do not find any reason to interfere
with the same, as we do not notice any question of law, which is required to be
decided.
14) Hence, we dismiss the appeal.
___________________
K.J. SENGUPTA, CJ
___________________
SANJAY KUMAR, J
Date: 22.01.2014
Section 12AA provides for procedure for registration. - granting registration does not ipsi dixit entitle the assessee to get the benefit under Section 11 or 12. - registration initially
recognizes the charitable activities of the trust. - to get the benefit under Sections 11 and 12, factually it has to be established that income derived from property held under trust wholly for charitable or religious purposes to the extent to which such income is applied to such purposes. If
this factual aspect is not established, the registration does not help otherwise. - found that the application of the fund is not made for charitable activity but for construction of the building, which again does not directly reflect the charitable activities. - Even on the
record, it does not appear that the assessee had intended to apply the future
income, which might be derived from the building so constructed. -In this context, what the learned Tribunal has noted on fact is required to be reiterated: - High court dismissed the appeal =
1. whether the Tribunal
was correct in law in perversely bolding that the investment made in
immovable property was not for charitable purpose despite the provisions of
Section 11(5) of the Income Tax Act, 1961 treating such investment as
application for charitable purpose?
2. Whether the learned ITAT was correct in law in wrongly applying Section
13(1)(bb) in the case of the appellant for assessment year 2001-02 despite the
fact that Section 13(1)(bb) was omitted with effect from 01st April 1984 by the
Finance Act, 1983 and the objects of the appellant trust have already been
approved to be charitable in nature?
whether on the facts and
circumstances of the case the authorities below is justified in refusing to
grant the benefit under Section 11 of the Act.
All the authorities below, on
fact, found that the funds received by way of donation have been utilized for
construction of commercial building and none of the clauses of the trust
provides for construction of building for charitable activities.
We find that in order to get the benefit under Sections 11 and 12 of the
Act, the conditions as mentioned in Section 12(A) of the Act have to be
fulfilled, meaning thereby, the trust has to get a registration as required.
Section 12AA provides for procedure for registration. We are of the view that
granting registration does not ipsi dixit entitle the assessee to get the
benefit under Section 11 or 12. According to us, registration initially
recognizes the charitable activities of the trust. However, in order to get the
benefit under Sections 11 and 12, factually it has to be established that income
derived from property held under trust wholly for charitable or religious
purposes to the extent to which such income is applied to such purposes. If
this factual aspect is not established, the registration does not help
otherwise. All the authorities below have found that the application of the
fund is not made for charitable activity but for construction of the building,
which again does not directly reflect the charitable activities. Even on the
record, it does not appear that the assessee had intended to apply the future
income, which might be derived from the building so constructed. In this
context, what the learned Tribunal has noted on fact is required to be
reiterated:
Therefore, we think that on the clear fact finding the learned Tribunal
has passed just and correct order and we do not find any reason to interfere
with the same, as we do not notice any question of law, which is required to be
decided.
2014 ( January part ) judis.nic.in/judis_andhra/filename=10764
THE HON'BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON'BLE SRI SANJAY KUMAR
ITTA No.613 OF 2013
22-01-2014
M/s. Kamma Sangham,Hyderabad. Appellant
The Director of Income Tax (Exemptions),Hyderabad.Respondent
Counsel for Appellant: Sri C.P. Ramaswami
Counsel for the respondent: None appeared
<GIST:
>HEAD NOTE:
?Cases referred
1. (1985) 156 ITR 323
2. (1988) 170 ITR 62
3. (2003) 262 ITR 194
4. (2000) 242 ITR 457
IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD
THE HON'BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA
AND
THE HON'BLE SRI JUSTICE SANJAY KUMAR
I.T.T.A. No. 613 OF 2013
DATE: 22.01.2014
This Court made the following:
THE HON'BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA
AND
THE HON'BLE SRI JUSTICE SANJAY KUMAR
I.T.T.A. No. 613 of 2014
JUDGMENT: (Per the Hon'ble The Chief Justice Sri Kalyan Jyoti Sengupta)
This appeal is sought to be preferred and admitted against the judgment
and order dated 23.11.2011 of the learned Tribunal in relation to the assessment
year 2001-02 on the following suggested questions of law.
"1. On the facts and in the circumstances of the case whether the Tribunal
was correct in law in perversely bolding that the investment made in
immovable property was not for charitable purpose despite the provisions of
Section 11(5) of the Income Tax Act, 1961 treating such investment as
application for charitable purpose?
2. Whether the learned ITAT was correct in law in wrongly applying Section
13(1)(bb) in the case of the appellant for assessment year 2001-02 despite the
fact that Section 13(1)(bb) was omitted with effect from 01st April 1984 by the
Finance Act, 1983 and the objects of the appellant trust have already been
approved to be charitable in nature?
2) In this matter, the learned Tribunal has refused to interfere with the
judgment and order of the Commissioner of Income Tax (Appeals) by which the
Commissioner dismissed the appeal filed by the appellant by confirming the order
of the Assessing Officer not allowing exemption under Section 11 of the Income
Tax Act, 1961 (for short, "the Act") to the assessee in respect of the income
said to have been derived in course of carrying on its business.
3) The brief facts of this case are as follows:
On earlier occasion, the Tribunal set aside the order of the Commissioner
of Income Tax (Appeals) by order dated 28.11.2007 and restored the matter back
to the file of the Assessing Officer on the ground that the Assessing Officer
has not given any findings as to
whether the money so accumulated or set apart
had been deposited in the form or modes specified in Section 11(5) of the Act.
On remand, it was submitted by the assessee that it had passed the resolution on
13.06.1992 to the effect that at the end of each year, 75% of the income of the
Sangham will be accumulated for the purpose of construction of building at its
Ameerpet landed property.
It was further submitted that out of the net income
of Rs.59,28,817/- of the year, Rs.44,46,614/-, being 75% thereof, has been
transferred to Building Fund Reserve Account.
It was further stated that most
of the donations have been collected for the specific purpose of construction of
building and the donors have instructed the management to use the funds only for
the said purpose.
It was also stated 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
authorities that donation of Rs.40,09,000/- should be treated as Corpus fund,
not forming part of the income of the trust.
It was further submitted that
though the excess of income over expenditure worked out to Rs.59,28,807/- before
transfer to building fund reserve, income for the purpose of Section 11, capital
gain is also to be considered as application of income.
It was explained by the
assessee that Form-10 was not filled along with the return of income for the
assessment year 2001-02 intentionally, as there was no surplus requiring
statutory compliance as provided under Section 11(2) of the Act.
However, the
assessee filed Form-10 along with letter dated 12.08.2009. However, the
Assessing Officer has not accepted the explanation and refused to grant the
relief as prayed for.
The Assessing Officer, on fact, noted that as per the
statement 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 said application,
Rs.3,60,388/- had been applied in building the committee hall, while
Rs.41,61,881/- were applied in building the commercial complex. So it was found
by the Assessing Officer that the application of the aforesaid fund in
construction of the building is not at all covered by any of its objects.
The Commissioner of Income Tax (Appeals) also upheld the findings of the Assessing
Officer.
On fact, the Commissioner of Income Tax (Appeals) found that the
aforesaid application of fund for construction of the building by the assessee
is not the charitable activity. This was also found by the learned Tribunal
itself.
4) In the context of the aforesaid, the learned counsel for the appellant
would argue that all the authorities should have taken a broader view in the
matter as this fund has been utilized for construction of the building and the
income therefrom would be utilized for fulfilling the objects.
As such, all the
authorities should have allowed the exemption.
He further argues that once
registration under Section 12 of the Act is granted, the authorities below do
not have any option but to allow the benefit under Section 11 of the Act. In
support of his argument, he has relied upon the following decisions in
Commissioner of Income Tax, Bangalore vs. J.H. Gotla1, Commissioner of Income
Tax vs. St. George Forana Churth2, Commissioner of Income Tax vs. Hyderabad Race
Club Charitable Trust3 and Commissioner of Income Tax vs. Janmabhumi Press
Trust4.
5) After going through the impugned judgment and order of the learned
Tribunal and considering the argument of the learned counsel for the appellant,
we think that the only issue in this matter is
whether on the facts and
circumstances of the case the authorities below is justified in refusing to
grant the benefit under Section 11 of the Act.
All the authorities below, on
fact, found that the funds received by way of donation have been utilized for
construction of commercial building and none of the clauses of the trust
provides for construction of building for charitable activities.
However, it
has been argued that this building itself is being utilized as a source of
income to augment the fund of the trust so much so to fulfill the charitable
activities in a broader sense.
It is also argued that once exemption is
granted, obviously the benefit under Section 11 of the Act has to to be applied.
6) Before we proceed further, we think it fit to reproduce the relevant
portion of Section 11 of the Act.
"11(1) Subject to the provisions of Sections 60 to 63, the following income
shall not be included in the total income of the previous year of the person in
receipt of the income-
(a) income derived from property held under trust wholly for charitable or
religious purposes, to the extent to which such income is applied to such
purposes in India; and where any such income is accumulated or set apart for
application to such purposes in India to the extent to which the income so
accumulated or set apart is not in excess of fifteen percent of the income from
such property;
(b) income derived from property held under trust in part only for such
purposes, the trust having been created before the commencement of this Act, to
the extent to which such income is applied to such purposes in India; and where
any such income is finally set apart for application to such purposes in India,
to the extent to which the income so set apart is not in excess of fifteen per
cent of the income from such property;
(c) income derived from property held under trust-
(i) created on or after the 1st day of April, 1952, for a charitable purpose
which tends to promote international welfare in which India is interested, to
the extent to which such income is applied to such purposes outside India, and
(ii) for charitable or religious purposes, created before the 1st day of April,
1952, to the extent to which such income is applied to such purposes outside
India"
Provided that the Board, by general or special order, has directed in either
case that it shall not be included in the total income of the person in receipt
of such income;
(d) income in the form of voluntary contributions made with a specific direction
that they shall form part of the corpus of the trust or institution.
Explanation - For the purposes of clauses (a) and (b) -
(1) in computing the fifteen per cent of the income which may be accumulated or
set apart, any such voluntary contributions as are referred to in Section 12
shall be deemed to be part of the income;
(2) if, in the previous year, the income applied to charitable or religious
purposes in India falls short of eighty five per cent of the income derived
during that year from property held under trust, or, as the case may be, held
under trust in part, by any amount -
(i) for the reason that the whole or any part of the income has not been
received during that year, or
(ii) for any other reason,
then -
(a) in the case referred to in sub-clause (i), so much of the income applied to
such purposes in India during the previous year in which the income is received
or during the previous year immediately following as does not exceed the said
amount, and
(b) in the case referred to in sub-clause (ii) so much of the income applied to
such purposes in India during the previous year immediately following the
previous year in which the income was derived as does not exceed the said
amount,
may, at the option of the person in receipt of the income (such option to
be exercised in writing before the expiry of the time allowed under sub-section
(1) of Section 139 for furnishing the return of income) be deemed to be income
applied to such purposes during the previous year in which the income was
derived; and the income so deemed to have been applied shall not be taken into
account in calculating the amount of income applied to such purposes, in the
case referred to in sub-clause (i), during the previous year in which the income
is received or during the previous year immediately following, as the case may
be, and, in the case referred to in sub-clause (ii) during the previous year
immediately following the previous year in which the income was derived."
7) We find that in order to get the benefit under Sections 11 and 12 of the
Act, the conditions as mentioned in Section 12(A) of the Act have to be
fulfilled, meaning thereby, the trust has to get a registration as required.
Section 12AA provides for procedure for registration. We are of the view that
granting registration does not ipsi dixit entitle the assessee to get the
benefit under Section 11 or 12. According to us, registration initially
recognizes the charitable activities of the trust. However, in order to get the
benefit under Sections 11 and 12, factually it has to be established that income
derived from property held under trust wholly for charitable or religious
purposes to the extent to which such income is applied to such purposes. If
this factual aspect is not established, the registration does not help
otherwise. All the authorities below have found that the application of the
fund is not made for charitable activity but for construction of the building,
which again does not directly reflect the charitable activities. Even on the
record, it does not appear that the assessee had intended to apply the future
income, which might be derived from the building so constructed. In this
context, what the learned Tribunal has noted on fact is required to be
reiterated:
"In assessee's case major portion of the income of the assessee has been
spent towards construction of a commercial complex. As seen from the object
clause of the bye-laws construction of commercial complex is not the object of
the assessee. Its main object is to establish educational institutions,
providing boarding and lodging to the students and working youth, rendering
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 organizations to earn rent. The income generated through that also
not fully used for the purpose of attainment of objects of the assessee.
Subsequently, income generated by the assesseef was regularly being ploughed
back into income generating assets without applying the same for charitable
purposes."
8) As far as the Corpus fund is concerned, the Tribunal has found as follows:
"The entire donation received in the assessment year under consideration
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 written by a single person. The said
letters only stated that the donations had been given as a token of assistance
to the programme of the assessee in general. There is no clear mentioning of
any desire for making the said donation towards corpus fund. There is no
specific direction in writing regarding that the donation has been made for the
specific purpose of construction of commercial complex. In view of this, the
donations so received are to be considered as normal donation and cannot be
considered as donations towards corpus fund."
9) The decision of the Supreme Court for taking liberal view in a tax matter
in case of J.H. Gotla (1 supra), according to us, is not disputed, but on the
aforesaid clear fact finding that it was not for the charitable activities, it
is difficult to follow the same in this case.
10) The decision of the Kerala High Court in case of St. George Forana Church
(2 supra) is not applicable on the facts and circumstances of this case, as in
that case it was found that the assessee has made addition to a building
belonging to the church and the addition to the building was made with the
intention of letting them out for rent and factually such intention was
reflected in that case. Here, the authorities below did not find such
intention. Hence, this decision is not helpful in this case.
11) The decision of this Court in case of Hyderabad Race Club Charitable Trust
(3 supra) rendered that the fund was applied for the charitable activities.
Here, all the authorities below, on fact, found that it was not applied for
charitable activities. Hence, this judgment is also not helpful in this case.
12) The decision of the Karnataka High Court in case of Janmabhumi Press Trust
(4 supra) is not helpful in this case as factually it was found that any
investment made in the construction of a building which in turn would augment
its income, such income would be applied for the charitable activities. In this
case, from the records such an intention was not reflected and this was found by
all the authorities below.
13) Therefore, we think that on the clear fact finding the learned Tribunal
has passed just and correct order and we do not find any reason to interfere
with the same, as we do not notice any question of law, which is required to be
decided.
14) Hence, we dismiss the appeal.
___________________
K.J. SENGUPTA, CJ
___________________
SANJAY KUMAR, J
Date: 22.01.2014
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