[aaykarbhavan] Assessee can choose either sec. 10(23C) or sec. 11 relief; revenue can't impose its choice on assessee

IT: Revenue cannot deny exemption under section 11 on ground that assessee could have claimed exemption under section 10(23C)

IT: Where assessee-trust purchased shares of a co-operative bank as per pre-condition to avail loan from such bank, there was no violation of provisions of section 11(5) read with section 13(1)(d)

IT: Where coupon donation received by trust could not be treated as corpus donation but there was no violation of section 11(5)/13(1)(d), exemption under section 11 to be allowed on such donation

■■■

[2013] 37 taxmann.com 242 (Pune - Trib.)

IN THE ITAT PUNE BENCH 'B'

Bharati Vidyapeeth Medical Foundation

v.

Assistant Commissioner of Income-tax*

SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER 
AND R.K. PANDA, ACCOUNTANT MEMBER

IT APPEAL NOS. 969, 970 & 1042 (PUNE) OF 2010
[ASSESSMENT YEAR 2006-07]

DECEMBER  31, 2012 

I. Section 11, read with section 10(23C), of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under [Section 11 v. Section 10(23C)] - Assessment year 2006-07 - Whether when law permits assessee to claim exemption under section 10(23C) or section 11, choice should be left to assessee and department cannot force assessee to adopt only a particular provision - Held, yes - Whether, therefore, fact that assessee-trust was running a hospital and could have claimed exemption under section 10(23C), could not be basis to deny exemption under section 11 to assessee - Held, yes [Para 13] [In favour of assessee]

II. Section 13, read with section 11, of the Income-tax Act, 1961 - Charitable or religious trust - Denial of exemption [Investment in shares of bank] - Assessment year 2006-07 - Assessing Officer denied exemption under section 11 to assessee trust for investing in shares of a co-operative bank - Whether since purchase of shares of bank was made under compulsion for obtaining loan from said bank and assessee was still enjoying overdraft facilities from said bank, there was no violation of provisions of section 11(5) read with section 13(1)(d) - Held, yes [Para 18.2][In favour of assessee]

III. Section 11 of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under [Corpus donation] - Assessment year 2006-07 - Whether where coupon donation receipts did not contain complete addresses of donors, name of recipient on behalf of trust and there was no written direction by donor to treat donation towards corpus of trust, such donations could not be considered as corpus donations - Held, yes - Whether however, since there was no violation of provisions of section 11(5) read with section 13(1)(d), exemption under section 11 was allowable on such coupon donations - Held, yes [Para 23][Partly in favour of assessee]

IV. Section 246 of the Income-tax Act, 1961 - Commissioner (Appeals) - Appealable orders [Infructuous appeal] - Assessment year 2006-07 - Whether when order passed by Assessing Officer, which was subject-matter of appeal before Commissioner (Appeals) was set aside by Commissioner under section 263, Commissioner (Appeals) should have dismissed appeal filed by assessee as infructuous instead of deciding same on merit - Held, yes [Para 25.2] [In favour of revenue]

FACTS-I

 

■		The assessee was a charitable trust registered under section 12A. It was engaged in running colleges and hospitals.
■		The Assessing Officer denied exemption under section 11 to the assessee.
■		The Commissioner (Appeals) held that the assessee trust was not entitled to claim deduction under section 11 and it should have claimed exemption under section 10(23C) since the assessee was providing medical relief and the activities carried out by the assessee were covered under section 10(23C).
■		On second appeal:

HELD-I

 

■		As per provisions of section 2(15), as it stood at the relevant time applicable for this assessment year, 'charitable purpose' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility. Therefore, the activities of the assessee are covered under provisions of section 2(15). No doubt the assessee-trust is running a hospital and could have claimed exemption under section 10(23C) if it desires so and fulfils the formalities such as applying to the Chief Commissioner in the prescribed form etc. However, it cannot be said that the assessee-trust is not entitled to benefit of deduction under section 11. The assessee-trust in the instant case, has both the options available before it,i.e., either it can apply for exemption under section 10(23C) or claim exemption under section 11. The choice is left to the assessee.
■		There is no compulsion under the law to force the assessee to claim exemption under a particular section when more than one provision for exemption is available to the assessee. When the law permits the assessee to claim exemption under section 10(23C) or section 11, the choice should be left to the assessee and the department cannot force the assessee to adopt only a particular provision. Since in the instant case the assessee has been granted registration under section 12A which has not been cancelled and is still in force for the impugned assessment year and since the assessee was granted the benefit of exemption under section 11 in the past years under scrutiny assessments and no objection was raised by the revenue for such exemption under section 11, therefore following rule of consistency the Commissioner (Appeals) should have allowed exemption under section 11 and the Commissioner (Appeals) is not justified in holding that the assessee should have claimed exemption under section 10(23C). In this view of the matter, the order of the Commissioner (Appeals) on this issue is to be set aside and it is held that the assessee can claim exemption under section 11 if it fulfils the other conditions prescribed under the said section. [Para 13]

FACTS-II

 

■		The assessee-trust was denied exemption under section 11 on the ground that it had violated provisions of section 13(1)(d) read with section 11(5) by investing in shares of a co-operative bank and advancing sum to other medical colleges.
■		The Commissioner (Appeals) held that purchase of shares of Co-operative Bank resulted in violation of section 11(5) and therefore the provisions of section 13(1)(d) are clearly attracted. While doing so, he rejected the contention of the assessee that the investment in shares of the co-operative bank was made under compulsion for obtaining the loan for the purpose of the activity of the trust and therefore it should be treated as application of money and not investment.
■		On second appeal:

HELD-II

 

■		There is merit in the submission of the assessee that the purchase of shares of the bank amounting to Rs. 25,250 is very negligible considering the total assets of the trust at Rs. 23.24 crores and the same was under compulsion for obtaining loan from the bank and that the bank while disbursing the loan had deducted the amount towards such share subscription from the loan amount and therefore, the same should be considered as an application of income. Under the peculiar facts and circumstances of the case, the purchase of shares amounting to Rs. 25.250 in the past which the assessee continued to hold during this year cannot be a ground to hold the same as in violation of provisions of section 11(5) read with section 13(1)(d) especially when the assessee is still having an overdraft of Rs. 12,87,665 from the bank as mentioned by the Assessing Officer. Since the assessee is still enjoying overdraft facility from the bank, there was no logic on the part of the Assessing Officer and the Commissioner (Appeals) to hold that there is violation of provisions of section 11(5) read with section 13(1)(d) because the assessee continues to hold the shares once the loan was repaid.
■		Thus, there is no violation of provisions of section 11(5) read with section 13(1)(d) on account of holding the shares of the bank. The order of the Commissioner (Appeals) is set aside. [Para 18]

CASES REFERRED TO

 

CIT v. Bosotto Bros. Ltd. [1940] 8 ITR 41 (Mad.) (para 11), National Engg. Co-ordination Committee v. Asstt. CIT [1992] 43 ITD 612 (Pune)(para 17.3), Vidya Pratisthan v. Dy. CIT [2011] 44 SOT 90 (Pune)(URO), CIT v. Sarladevi Sarabhai Trust [1988] 40 Taxman 388 (Guj.) (para 17.3), DIT (Exemption) v. Alarippu [2000] 111 Taxman 511 (Delhi) (para 17.3), Brahmin Educational Society v. Asstt. CIT [1997] 227 ITR 317/89 Taxman 434 (Ker.) (para 17.4), Dy. CIT v. Nasik Gymkhana [2001] 77 ITD 500 (Pune) (para 20.3), Prabodhan Prakashan v. Asstt. DCIT[1994] 50 ITD 135 (Mum.) (para 20.3), Shri Digambar Jain Naya Mandir v. Asstt. DCIT [1999] 70 ITD 121 (Cal.) (para 21) and N.A. Rama Chandra Raja Charity Trust v. ITO [1985] 14 ITD 230 (Mad.) (para 21).

Sunil Pathak for the Appellant. S.K. Singh for the Respondent.

ORDER

 

1. ITA No. 969/Pn/2010 and ITA No. 970/Pn/2010 filed by the assessee and ITA No. 1042/Pn/2011 filed by the Revenue are directed against the order dt. 29th March, 2010 of the CIT(A)-IV, Pune relating to the asst. yr. 2006-07. For the sake of convenience, these were heard together and are being disposed of by this common order.

2. It may be pertinent to note here that the assessment for asst. yr. 2006-07 was originally completed by the AO on 28th Dec., 2007 at a total income of Rs. 1,42,91,840. The assessee filed an appeal against the said order of assessment on 29th Jan., 2008. However, during the pendency of this appeal, the CIT Central, Pune in exercise of his powers conferred under s. 263 of the IT Act held the order of the AO erroneous and prejudicial to the interest of the Revenue and therefore set aside the same with a direction to complete it de novo after removing the mistakes pointed out therein. Subsequently, the AO while giving effect to the order passed under s. 263 completed the assessment on a total income of Rs. 1,42,91,560. The assessee thereafter filed another appeal before the CIT(A). Since both the appeals relate to the same assessment order, the learned CIT(A) decided to adjudicate these orders together.

3. He noted that the first appeal, in reality, has lost its basis as the order against which the appeal has been filed is no more in existence after the same was set aside by the learned CIT Central, Pune under s. 263 of the IT Act. However, during the hearing of the appeal proceedings, the assessee expressed its unwillingness for withdrawing the first appeal on the ground that it has challenged s. 263 order before the Tribunal and in case the appeal is allowed second assessment order will lose its basis. Since the grounds raised by the assessee in both these appeals relate to the same assessment year and same in sum and substance, therefore, the learned CIT(A) disposed of both the appeals together on the ground that the appeal thereof will remain effective in either of the circumstances. Thus, there are 2 appeals filed by the assessee against the same order of the CIT(A).

4. Facts of the case, in brief, are that the assessee M/s Bharati Vidyapeeth Medical Foundation (in short 'BVPMF') was established through a deed of trust dt. 23rd March, 1990 by 7 persons with its office at Bharati Vidyapeeth Bhavan, L.B.S. Marg, Pune-411030. The main objectives of the above foundation were relating to education, research and relief of health. The trust obtained the certificate of registration under s. 12A(a) from the CIT, Pune vide No. Pn.T/Regn/4893/1990-91 dt. 5th Nov., 1990. It has since then availed exemption from payment of tax on income earned under ss. 11 and 12 of the IT Act till 1998-99. A search was conducted at the office premises of Bharati Vidyapeeth group situated at Bharati Vidyapeeth Bhavan, L.B.S. Marg, Pune-411030 in the case of Sri Ramchandra Dada Shinde on 20th July, 2005. Mr. Shinde was working as accounts officer and was looking after the accounts of the various trusts of the group including the admissions for various institutions run by Bharati Vidyapeeth.

5. The AO examined the various documents seized during the course of search which pertain to the assessee and also the statement of Mr. Shinde recorded during the said search. While completing the assessment the AO treated the donations received through coupon receipts as taxable in the hands of the assessee as unproved donations as against the claim of the assessee as corpus donation towards development fund. He further noted that the assessee has violated the provisions of s. 13(l)(d) r/w s. 11(5) on account of purchase of shares in Bharati Sahakari Bank and also had given advances to Bharati Vidyapeeth. Thus, as against "nil" returned income, the AO determined the income of the assessee at Rs. 1,42,91,560 in the assessment order dt. 12th June, 2008 passed under s. 143(3)/263 and as against Rs. 1,42,91,840 in the order passed under s. 143(3) on 28th Dec., 2007.

6. In appeal the learned CIT(A) while deciding both the appeals held that the assessee trust is not entitled to claim deduction under s. 11 and it, should have claimed exemption under s. 10(23C) since the assessee is providing medical relief and the activities carried out by the assessee are covered under s. 10(23C).

6.1 So far as the denial of exemption under s. 11 on the ground of violation of provisions of s. 11(5) r/w s. 13(l)(d) the learned CIT(A) upheld the action of the AO in treating the purchase of shares in Bharati Sahakari Bank as in violation of provisions of s. 11(5) r/w s. 13(l)(d). He, however, held that the advances to Bharati Vidyapeeth group do not constitute investments resulting in violation of s. 11(5).

6.2 As regards the treatment of donations received through coupons as revenue receipts, the learned CIT(A) upheld the action of the AO and held that such coupon donations received are not corpus donations. According to him for claiming exemption under s. 11(1)(d) the assessee should identify the donor and there should be direction of the donor that the donations are towards corpus of the trust. Since these conditions are not fulfilled in the case of the assessee, he upheld the action of the AO in treating the same as revenue receipts.

7. While deciding the appeal the learned CIT(A) allowed the claim of the assessee that set off of the excess application by the assessee trust in the earlier years should be granted against the income of the current year.

7.1 Aggrieved with such order of the CIT(A) the assessee as well as the Revenue are in appeal before us with the following grounds :

ITA No. 969/Pn/2010 (by assessee) [Against order passed by CIT(A) on the order of AO passed under s. 143(3)]:

"On facts and in law,

1. The learned CIT(A) erred in not appreciating that the assessment under s. 153C passed by the learned AO was null and void.

1.1 The learned CIT(A) erred in confirming the various additions which are beyond the scope of the provisions of s. 153C as the additions made are not based on the incriminating material found during the search but they are based on the enquiries in the assessment proceedings,

1.2 The learned CIT(A) erred in holding that in the assessment under s. 153C, all the additions could be made in the assessment and the aspect as to whether they were based on the incriminating material found during the search or not was not relevant.

2. The learned CIT(A) erred in holding that the activities of the assessee trust were covered under s. 10(23C) and therefore, the claim of exemption of the assessee could be examined only under s. 10(23C) and not under ss. 11 to 13.

2.1 The learned CIT(A) failed to appreciate that the assessee trust was duly registered under s. 12A and therefore, it was duly entitled to the exemption under s. 11.

3. The learned CIT(A) erred in holding that the appellant trust was not entitled to the exemption under s. 11 as it had violated the provisions of s. 13(l)(d) r/w s. 11(5).

3.1 The learned CIT(A) erred in holding that the appellant had violated the provisions of s. 13(l)(d) as it had made investment in shares of Bharati Sahakari Bank which was not permitted under s. 11(5) of the Act.

3.2 The learned CIT(A) failed to appreciate that the shares of Bharati Sahakari Bank were purchased for the purposes of obtaining loans from the bank for achieving the objects of the trust from time to time as per the precondition prescribed in the bye-laws of the bank that unless the appellant purchased the requisite number of shares of the bank, the loans could not be sanctioned and therefore, the same constituted an expenditure on the objects of the trust.

3.3 The learned CIT(A) erred in not appreciating that:

(a)		The amounts involved in these shares were very small compared to the total assets of the assessee trust and hence, they could not be considered as investments/deposits.
(b)		In the assessments completed under s. 143(3) prior to the search, the Department did not raise any objection on this issue and had granted the exemption under s. 11 to the assessee trust.

3.4 Accordingly, the learned CIT(A) was not justified in holding that the appellant trust had made any investments in violation of s. 13(l)(d) r/w s. 11(5).

3.5 Without prejudice to the above grounds, the learned CIT(A) ought to have taxed only the income arising from investments made in violation of s. 11(5.) and not the entire income of the assessee trust.

4. The learned CIT(A) erred in confirming the addition in respect of donation received through issue of coupons of Rs. 85,77,500 without appreciating that the said donations were received towards the corpus of the trust and hence, exempt under s. 11(l)(d) of the Act.

4.1 The learned CIT(A) failed to appreciate that the assessee trust had given affidavits of a few volunteers and the donors in support of the donations received and even the coupons issued clearly indicated that donations were towards the corpus of the trust and accordingly, the same could not be taxed.

5. The learned CIT(A) erred in holding that the assessee had not produced specific directions from the donors that the said donations were towards the corpus of the trust and hence, the assessee trust was not entitled to claim the exemption under s. 1 l(l)(d).

5.1 The learned CIT(A) failed to appreciate that the donations received were genuine and the same were received towards the corpus of the trust and accordingly, there was no reason to tax the said donations as income' of the trust.

5.2 Without prejudice to the above grounds, in case, the exemption under s. 11 is denied to the assessee trust, it is submitted that the above donations should be treated as capital receipts not chargeable to tax.

6. The learned CIT(A) erred in not granting benefit of 15 per cent of the income which is allowable as per law to be set apart and accordingly, the income computed should have been reduced by 15 per cent.

7. The learned CIT(A) erred in not allowing the application of income of Rs. 43,56,788 being expenditure of capital nature while computing the income of the assessee trust.

8. The learned CIT(A) erred in not granting depreciation to the assessee as per law.

9. The learned CIT(A) erred in denying the exemption under s. 11 to the appellant.

10. The learned CIT(A) erred in not appreciating that no interest was chargeable under s. 234B as per law.

11. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal."

ITA No. 970/Pn/2010 [Against the order passed by CIT(A) in the order of the AO passed under s. 143(3)/263]:

"On facts and in law,

1. The learned CIT(A) failed to appreciate that the additions made by the learned AO are not justified at all since the order passed under s. 263 was null and void and consequently, the assessment order framed by the learned AO was also bad in law.

1.1 The learned CIT(A) erred in not appreciating that the assessment under s. 153C passed by the learned AO was null and void.

1.2 The learned CIT(A) erred in confirming the various additions which are beyond the scope of the provisions of s. 153C as the additions made are not based on the incriminating material found during the search but they are based on the enquires in the assessment proceedings.

1.3 The learned CIT(A) erred in holding that in the assessment under s. 153C, all the additions could be made in the assessment and the aspect as to whether they were based on the incriminating material found during the search or not was not relevant.

2. The learned CIT(A) erred in holding that the activities of the assessee trust were covered under s. 10(23C) and therefore, the claim of exemption of the assessee could be examined only under s. 10(23C) and not under ss. 11 to 13.

2.1 The learned CIT(A) failed to appreciate that the assessee trust was duly registered under s. 12A and therefore, it was duly entitled to the exemption under s. 11.

3. The learned CIT(A) erred in holding that the appellant trust was not entitled to the exemption under s. 11 as it had violated the provisions of s. 13(l)(d)r/ws. 11(5).

3.1 The learned CIT(A) erred in holding that the appellant had violated the provisions of s. 13(l)(d) as it had made investment in shares of Bharati Sahakari Bank which was not permitted under s. 11(5) of the Act.

3.2 The learned CIT(A) failed to appreciate that the shares of Bharati Sahakari Bank were purchased for the purposes of obtaining loans from the bank for achieving the objects of the trust from time to time as per the precondition prescribed in the bye-laws of the bank that unless the appellant purchased the requisite number of shares of the bank, the loans could not be sanctioned and therefore, the same constituted an expenditure on the objects of the trust.

3.3 The learned CIT(A) erred in not appreciating that:

(a)		The amounts involved in these shares were very small compared to the total assets of the assessee trust and hence, they could not be considered as investments/deposits.
(b)		In the assessments completed under s. 143(3) prior to the search, the Department did not raise any objection on this issue and had granted the exemption under s. 11 to the assessee trust.

3.4 Accordingly, the learned CIT(A) was not justified in holding that the appellant trust had made any investments in violation of s. 13(l)(d) r/w s. 11(5).

3.5 Without prejudice to the above grounds, the learned CIT(A) ought to have taxed only the income arising from investments made in violation of s. 11(5) and not the entire income of the assessee trust.

4. The learned CIT(A) erred in confirming the addition in respect of donation received through issue of coupons of Rs. 85,77,500 without appreciating that the said donations were received towards the corpus of the trust and hence, exempt under s. 1 l{l)(d) of the Act.

4.1 The learned CIT(A) failed to appreciate that the assessee trust had given affidavits of a few volunteers and the donors in support of the donations received and even the coupons issued clearly indicated that donations were towards the corpus of the trust and accordingly, the same could not be taxed.

5. The learned CIT(A) erred in holding that the assessee had not produced specific directions from the donors that the said donations were towards the corpus of the trust and hence, the assessee trust was not entitled to claim the exemption under s. 11(1)(d).

5.1 The learned CIT(A) failed to appreciate that the donations received were genuine and the same were received towards the corpus of the trust and accordingly, there was no reason to tax the said donations as income of the trust.

5.2 Without prejudice to the above grounds, in case the exemption under s. 11 is denied to the assessee trust, it is submitted that the above donations should be treated as capital receipts not chargeable to tax.

6. The learned CIT(A) erred in not granting benefit of 15 per cent of the income which is allowable as per law to be set apart and accordingly, the income computed should have been reduced by 15 per cent.

7. The learned CIT(A) erred in not allowing the application of income of Rs. 43,56,788 being expenditure of capital nature while computing the income of the assessee trust.

8. The learned CIT(A) erred in not granting depreciation to the assessee as per law.

9. The learned CIT(A) erred in denying the exemption under s. 11 to the appellant.

10. The learned CIT(A) erred in not appreciating that no interest was chargeable under s. 234B as per law.

11. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal."

ITA No. 1042/Pn/2010 (by Revenue):

"1. On facts and circumstances of the case and in law, the learned CIT(A) erred in deciding the appeal on merits as the order appealed against had already been set aside by the CIT (Central), Pune under s. 263 of the IT Act. The learned CIT(A) should have dismissed the appeal as infructuous.

2. Without prejudice to ground No. 1, on facts and circumstances of the case and in law, the learned CIT(A) erred in directing the AO to set off the excess application of the earlier years against the income computed for this year.

3. The learned CIT(A) erred in not appreciating the fact that the concept of application of income towards the objects of the trust is relevant only when the trust is otherwise entitled to exemption under ss. 11 and 12 of the IT Act. As the exemption is not available to the trust in this year, the question of set off of excess application of the earlier years against the income of this year does not arise.

4. The learned CIT(A) erred in not appreciating the fact that only losses computed as per the provisions of the Act under certain heads can be carried forward and set off against income of subsequent years subject to the conditions set out in ss. 70 to 80 of the Act. The excess application as claimed for the earlier years in the case of the assessee not being losses computed for those years and the fulfilment of the conditions in ss. 70 to 80 of the Act not having been established, the said excess applications are not eligible for set off.

5. The learned CIT(A) erred in allowing the above claim in the case of this assessee when he himself had rejected a similar claim in a connected case of Bharati Vidyapeeth on similar set of facts as being untenable in law vide his appellate order in that case for asst. yr. 1999-2000 dt. 26th March, 2010.

6. The order of the CIT(A) may be vacated.

7. The appellant craves leave to add, alter, amend and modify any of the above grounds of appeal."

ITA No. 970/Pn/ 2010 :

8. The learned counsel for the assessee did not press ground of appeal Nos. 1 to 1.3, 8 and 11 being general in nature for which the learned Departmental Representative has no objection. Accordingly, these grounds are dismissed as not pressed.

9. Ground of appeal Nos. 2 to 2.1 by the assessee relate to denial of exemption under s. 11 on the ground that same should have been claimed exempt under s. 10(23C).

10. The AO has not discussed this issue. The learned CIT(A) while deciding the appeal of the assessee has discussed this legal issue and observed as under :

"The appellant is a charitable trust which is eligible for exemption from payment of taxes under ss. 11 Hand 12 of the IT Act. 'Charitable purpose' under the IT Act has been defined in s. 2(15) of the IT Act. As per the same (applicable in the relevant assessment years), 'charitable purpose' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility. The words 'not involving the carrying on of any activity for profit' occurring at the end of the above definition, have been omitted w.e.f. 1st April, 1984, to bring the above definition in harmony with the amendment brought in s. 11 of the IT Act whereunder the profits and gains of the business in the case of charitable or religious trusts were not entitled for exemption under that section, except in cases where the business fulfils the conditions specified in s. 11(4) of the IT Act. The definition available in s. 2(15) is also relevant for the purpose of s. 80G which deals with the deductions permissible in the computation of donor's income. The definition of the expression 'charitable purpose' is inclusive and not exhaustive. The definition of this expression has proved to be one of the most difficult and controversial subjects in the IT law and the Hon'ble Supreme Court in Addl. CIT v. Surat Art Silk Cloth. Mfrs. Association (1979) 13 CTR (SC) 378 : (1980) 121 ITR 1 (SC), has painstakingly summarized the legislative history of this expression. The expression, as was available in s. 2(15), before its amendment w.e.f. 1st April, 2009, had four heads : (i) relief of poor, (ii) education, (iii) medical relief and (iv) the advancement of any other object of general public utility. From the above, it is clear that only the word 'education' is included in the definition of charitable purposes without any qualifying word. In the case of trusts running hospitals, for them to qualify to be involved in charity, their activities must be that of granting medical relief to deserving public. Grant of medical service alone is not sufficient. It is also seen from various judicial pronouncements that charity does not mean grant of something for nothing. However, activities which are against the public policy and public law cannot be considered as charitable purpose. All the activities which have been included in the definition of 'charitable purposes' are professed responsibility of the welfare State having important bearing on the welfare of the society at large. Therefore, the legislature has brought in provisions for tax exemptions to incentivise specified public bodies to carry out activities of charitable purposes. Tax exemptions given to organizations engaged in such activities are indirect financial aids to such organizations. In view of the above, checks have been built in the scheme of provisions relating to these exemptions. To further augment this cause, benefits are also granted to the public also in their taxes under s. 80G or so, who contribute money to organizations engaged in such activities. Such large financial incentives increase the possibility of its abuse which necessitates in turn the existence of strict restrictive clauses and regular checks. Therefore, very rightly such checks and balances have been built in these provisions, which can be seen from a careful reading of provisions contained in ss. 11 to 13 and s. 10(23C) of the IT Act. In fact, it can further be seen that the rigour for allowing exemption is higher in respect of cases covered under s. 10(23C). A plain study of all the provisions relating to the assessments of assessees engaged in the activity of charitable purposes claiming exemption from payment of taxes, reveals a clear scheme. As per the same, firstly, the activities should be of the nature of charitable purposes as defined in s. 2(15) of the Act. Thereafter, such assessees have to follow the procedure as are laid in provisions contained under ss. 11 to 13 or s. 10(23C) of the IT Act. Any assessee engaged in any activity of charitable purposes can follow the procedure laid in ss. 11 to 13. However, if the activities are such which are covered under s. 10(23C)(iiiab) or (iiiac) or (iiiad) or (iiiae) or (iv) or (v) or (vi) or (via), then they are supposed to follow the procedure laid in these specific sections of the Act. A perusal of the sub-clauses available in s. 10(23C) relating to exemption to trusts etc., very clearly shows that they are generally applicable in the cases who are engaged in the establishment and running of educational institutions or university and hospitals of definite descriptions, which are of national spread and significance. The procedure and the concept based on which it has been laid is generally same in both the cases but the same appears more stringent in case of s. 10(23C). It is a trite law that the specific provisions cannot (sic) override general provisions. On that concept, the Hon'ble Tribunal, Hyderabad 'B' Bench in the case of Vodithala Education Society v. Asstt. Director of IT (2008) 20 SOT 353 (Hyd) in ITA No. 1138/Hyd/2006, following the judgment of the Kerala High Court given in the case of Brahmin Educational Society v. Asstt. CIT (1997) 140 CTR (Ker) 262 : (1997) 227 ITR 317 (Ker) held that 'when the legislature enacted a specific provision for grant of exemption of income in respect of educational institutions under ss. 10(23C)(iiiab), 10(23C)(iiiad) and 10(23C)(vi), the general provision contained in s. 11 may not override the provisions of specific section. In other words, the income of such educational institutions/ hospitals, as are covered in these provisions, has to be examined under ss. 10(23C)(iiiab), 10(23C)(iiiad) and 10(23C)(vi) and not under s. 11 of the IT Act. In the light of the discussions made above bringing forth the concept of charitable organizations and its taxation along with roles and responsibilities towards the society, it will not be out of place to conclude that they have a responsibility towards the nation/society at large to remain transparent in their operations so that it should be visible that they are truly engaged in the purpose of charity. There always would remain a requirement on their part to voluntarily come out with actions to dispel any adverse information/finding, if any such thing comes out in the public domain. On the contrary, any attempt to thwart such action taken by any authority in obligation of his duties to know the facts in such circumstances, would seem to give an adverse presumption on the affairs of the trust/society. The perusal of the grounds of appeal of the appellant seems to give that impression. Furthermore, this aspect is also required to be kept in mind while deciding many of the grounds raised by the appellant."

10.1 Aggrieved with such order of the CIT(A), the assessee is in appeal before us.

11. The learned counsel for the assessee submitted that it is a charitable trust and is running hospitals in Pune. The assessee trust is also registered under s. 12A of the Act vide registration certificate dt. 5th Nov., 1990. Referring to the copy of the assessment order for asst. yr. 2003-04 placed at paper book page No. 69, he submitted that for the earlier years the exemption under s. 10(22)/s. 11 was allowed to the assessee. He submitted that s. 11 allows the assessee to claim exemption if it is engaged in charitable activities as defined in s. 2(15). One of the activities specified in s. 2(15) is providing medical relief. Therefore, if a charitable trust is providing medical relief and has also obtained registration under s. 12A, it can claim exemption under s. 11. He submitted that if the contention of the learned CIT(A) is to be accepted then the legislature would not have provided medical relief in the definition of charitable activity. He submitted that exemption under s. 10(23C) is available only if the assessee has obtained the approval from the Chief CIT. If no approval is obtained, the exemption under s. 10(23C) cannot be claimed. He submitted that in the case of the assessee no such approval has been obtained and therefore there is no question of claiming exemption under s. 10(23C). He submitted that in case the assessee has received approval under s. 10(23C) as well as obtained registration under s. 12A, the choice is left with the assessee to claim exemption in either of the sections. Referring to the decision in CIT v. Bosotto Bros. Ltd. [1940] 8 ITR 41 (Mad.) he submitted that it has been held in the said decision that if the exemption is available to the assessee in 2 or more sections, the choice is for the assessee under which section exemption has to be claimed. He accordingly submitted that the CIT(A) was not justified in holding that the assessee can claim exemption only under s. 10(23C) and not under s. 11 of the IT Act.

12. The learned Departmental Representative, on the other hand, heavily relied on the order of the CIT(A). He submitted that the proper course of action for the assessee would have been to apply under s. 10(23C) and not under s. 11. Therefore, the learned CIT(A) was justified in denying exemption under s. 11 of the IT Act.

13. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions relied on by both the sides. There is no dispute to the fact that the assessee is a charitable trust and is running hospitals in Pune. There is also no dispute to the fact that the trust is registered under s. 12A of the IT Act vide registration certificate dt. 5th Nov., 1990 issued by the CIT, Pune, a fact noted by the CIT(A) himself. There is also no dispute to the fact that in the preceding assessment years the assessee trust was granted exemption under s. 11 of the IT Act. [Assessment order passed under s. 143(3) for asst. yrs. 2000-01 and 2003-04 placed at paper book page Nos. 70 to 72]. We find the learned CIT(A) while deciding the legal issue was of the opinion that since the assessee is providing medical relief and the activities carried out by the assessee are covered under s. 10(23C) of the IT Act, therefore, the exemption, if any, has to be allowed to the assessee under s. 10(23C) and not under s. 11. According to him specific provisions override the general provisions and therefore in case of hospitals the claim of exemption can be entertained only under s. 10(23C) and not under s. 11. It is the submission of the learned counsel for the assessee that s. 11 allows the assessee to claim exemption if it is engaged in charitable activities as defined in s. 2(15), that in the preceding years exemption under s. 11 was made available to the assessee, exemption under s. 10(23C) is available only if the assessee has obtained approval from the Chief CIT and that there is no compulsion under the law that the assessee must apply under s. 10(23C) and cannot claim exemption under s. 11. We find as per provisions of s. 2(15), as it stood at the relevant time applicable for this assessment year, 'charitable purpose' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility. Therefore, the activities of the assessee in our opinion are covered under provisions of s. 2(15). No doubt the assessee trust is running a hospital and could have claimed exemption under s. 10(23C) if it desires so and fulfils the formalities such as applying to the Chief CIT in the prescribed form etc. However, it cannot be said that the assessee trust is not entitled to benefit of deduction under s. 11. In our opinion, the assessee trust in the instant case, has both the options available before it, i.e. either it can apply for exemption under s. 10(23C) or claim exemption under s. 11. The choice is left to the assessee. In our opinion, there is no compulsion under the law to force the assessee to claim exemption under a particular section when more than one provision for exemption is available to the assessee. When the law permits the assessee to claim exemption under s. 10(23C) or s. 11, the choice should be left to the assessee and the Department cannot force the assessee to adopt only a particular provision. Since in the instant case the assessee has been granted registration under s. 12A which has not been cancelled and is still in force for the impugned assessment year and since the assessee was granted the benefit of exemption under s. 11 in the past years under scrutiny assessments and no objection was raised by the Revenue for such exemption under s. 11, therefore following rule of consistency the learned CIT(A) should have allowed exemption under s. 11 and the learned CIT(A) in our opinion is not justified in holding that the assessee should have claimed exemption under s. 10(23C) of the IT Act. The various decisions relied on by the learned CIT(A), in our opinion, are distinguishable and not applicable to the facts of the present case. In this view of the matter, we set aside the order of the CIT(A) on this issue and hold that the assessee can claim exemption under s. 11 if it fulfils the other conditions prescribed under the said section. The grounds raised by the assessee are accordingly allowed.

14. Ground of appeal Nos. 3 to 3.5 relate to denial of exemption under s. 11 on account of violation of s. 11(5) r/w s. 13(l)(d).

15. Facts of the case, in brief, are that during the course of assessment proceedings the AO noted that the assessee has violated the provisions of s. 13(l)(d) r/w s. 11(5) since it has invested the following amounts during asst. yr. 2006-07 :

(a) Shares in Bharati Sahakari Bank	25,250
(b) Advance to Bharati Vidyapeeth-Deemed university medical college	5,67,34,499
(c) Advance to ayurved hospital	1,06,40,099
(d) Advance to homeopathic hospital (trust)	59,90,016
(e) Rent advance to Bharati Vidyapeeth (trust)	8,76,26,124

Rejecting the various explanations given by the assessee, the AO held that the investment in shares in Bharati Sahakari Bank and the advances to Bharati Vidyapeeth deemed university and other group concerns were in clear violation of provisions of s. 13(l)(d) r/w s. 11(5).

16. In appeal the learned CIT(A) allowed the claim of the assessee in respect of the transactions with Bharati Vidyapeeth deemed university medical college and other concerns holding that the same shall not constitute investments resulting in violation of s. 11(5). However, he held that purchase of shares of Bharati Sahakari Bank resulted in violation of s. 11(5) and therefore the provisions of s. 13(l)(d) are clearly attracted. While doing so, he rejected the contention of the assessee that the investment in shares of the co-operative bank was made under compulsion for obtaining the loan for the purpose of the activity of the trust and therefore it should be treated as application of money and not investment.

17. The learned counsel for the assessee submitted that the AO had rejected the claim of exemption under s. 11 on account of investment in shares of Bharati Sahakari Bank and the advances to Bharati Vidyapeeth. The learned CIT(A) while adjudicating the issue has allowed the claim of the assessee in respect of the transactions with Bharati Vidyapeeth holding that the same does not constitute investments resulting in violation of s. 11(5). The Revenue is not in appeal against such relief by the learned CIT(A) . However, he upheld the action of the AO in holding that purchase of shares of Bharati Sahakari Bank resulted in violation of s. 11(5).

17.1 Referring to para 4 of the submission made before the CIT(A) in paper book page Nos. 15 and 16 he submitted that it was explained before the AO as well as the CIT(A) that the assessee trust had taken loan from Bharati Sahakari Bank over the years and for the purpose of obtaining the loans the assessee had to buy specific number of shares of the bank as per the bye-laws of the bank to become member of the society to be eligible for obtaining the loan. Referring to page No. 57 of the paper book the learned counsel for the assessee drew the attention of the Bench to the relevant clause of the bye-laws according to which the borrower should also purchase the shares of the bank in such proportion to his borrowing as may be fixed from time to time by the RBI. Referring to the copy of the balance sheet placed at paper book page No. 63 he drew the attention of the Bench to the total assets which is Rs. 23.24 crores. He submitted that since the assessee has to carry out its objects it had to obtain loan from the bank and under compulsion due to the provision in the bye-laws of the bank the assessee had to purchase the shares.

17.2 Referring to the copy of the assessment order he submitted that the AO in the said order has held that the shares purchased in the earlier years continued to be held by the assessee during this year. In the current year the assessee has not obtained any fresh loan from Bharati Sahakari Bank. Only overdraft liability of Rs. 12,87,665 is appearing in the balance sheet. Therefore, the AO was of the opinion that the shares of Bharati Sahakeri Co-operative Bank have been purchased for obtaining the loan as claimed by the assessee is not supported by facts and since the assessee continued to hold the shares purchased in earlier years this resulted in violation of provisions of s. 11(5) r/w s. 13(l)(d). He submitted that the learned CIT(A) had held that since the assessee had repaid the loans obtained in the earlier years, therefore, the continuation of holding the shares after the loan was repaid was in violation of the provisions of s. 13(l)(d). According to the learned CIT(A), the provisions of s. 13(l)(d) demanded strict interpretation and liberal interpretation of the same was not justified. According to him the same cannot be treated as an application of funds since it appears in the balance sheet of the assessee.

17.3 The learned counsel for the assessee submitted that the loan obtained from Bharati Sahakari Bank was duly reflected in balance sheet in the past and the loan was utilised for the charitable purposes of the trust. He reiterated that as per the bye-laws of the bank the assessee was under a binding obligation to purchase certain number of shares of the lender co-operative bank depending upon the amount of loan. In order to fulfil the precondition to obtain the loan the assessee had purchased the shares of the bank. He submitted that the bank had deducted the subscription towards shares from the loan amount granted to the assessee. Therefore, it was not an investment made in shares but an expenditure incurred in order to obtain the loan for the charitable objects that is setting up of and running a hospital. He submitted that since the shares were purchased as compulsion in order to raise the loan to attain the charitable objects of the trust, it does not matter whether outlay was revenue or capital in nature. According to him what has to be seen is whether the outlay of funds is for the purpose of attainment of the objectives of the trust. If that is so, the same has to be considered as application of income. The learned counsel for the assessee also relied on the following decisions :

(i)		National Engg. Co-ordination Committee v. Asstt. CIT [l992] 43 ITD 612 (Pune);
(ii)		Vidya Pratisthan v. Dy. CIT [2011] 44 SOT 90 (Pune)(URO)
(iii)		CIT v. Sarladevi Sarabhai Trust [l988] 40 Taxman 388 (Guj.)
(iv)		DIT (Exemption) v. Alarippu [2000] 111 Taxman 511 (Delhi).

17.4 He submitted that if the propositions laid down by the AO and the CIT(A) are accepted, then it would lead to violation of s. 11(5) in a number of cases. Giving an example he submitted that a trust having its own office building has to make a deposit with Electricity Board for getting electricity connection. In that case if the AO holds that the deposit is in violation of s. 11(5) and rejects the exemption, then in that case most of the trusts will lose exemption. He submitted that till this assessment year the Revenue never objected to these shares being purchased by the charitable trust. Referring to the written submissions filed, he submitted that investment in shares of the co-operative bank has been made in the past years for which the exemption under s. 11 was claimed and allowed and no objection was raised by Revenue at any time in the past. He submitted that merely because the amount was shown in the balance sheet as recoverable/investments the same does not disentitle the amount as an application of income. Referring to the decision of the Hon'ble Kerala High Court in the case of Brahmin Educational Society v. Asstt. CIT [1997] 227 ITR 317/89 Taxman 434 (Ker) he submitted that even the amount of loan /deposit/investment/membership fees given as per the charitable objects of the trust is also an application of income. He submitted that the CBDT has explained that a charitable trust having objects of granting loans for educational purpose would not lose the exemption if the loans are granted as these will not violate s. 11(5). He accordingly submitted that the learned CIT(A) was not justified in holding that the assessee had violated the provisions of s. 13(l)(d) by purchasing the shares of Bharati Sahakari Co-operative Bank.

17.5 The learned Departmental Representative on the other hand heavily relied on the order of the CIT(A).

18. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. In the instant case the AO denied the exemption under s. 11 on the ground that there is violation of provisions of s. 13(l)(d) r/w s. 11 (5) since the assessee has made the following investments or continued to hold the investments for the impugned assessment year as under :

(a) Shares in Bharati Sahakari Bank	25,250
(b) Advance to Bharati Vidyapeeth-Deemed university medical college	56,73,499
(c) Advance to ayurved hospital	1,06,40,099
(d) Advance to homeopathic hospital	59,90,016
(e) Rent advance to Bharati Vidyapeeth (trust)	8,76,26,124

18.1 We find the learned CIT(A) held that there is no violation of s. 13(1 )(d) r/w s. 11(5) on account of items (b), (c), (d) and (e) above for which the Revenue is not in appeal. However, he held that by continuing to hold the shares in Bharati Sahakari Bank after the loan was repaid the assessee has violated the provisions of s. 13(l)(d) r/w s. 11(5). It is the submission of the learned counsel for the assessee that the shares were purchased under compulsion for obtaining the loan from the bank as per the bye-laws of the bank. The investment in shares amounting to Rs. 25,250 is very meagre considering the total assets of the trust amounting to Rs. 23.24 crores. There was no objection by the Revenue in the past for holding such shares in the Bharati Sahakari Bank and exemption under s. 11 was granted, therefore, exemption under s. 11 should not be denied to the assessee. It is the case of the Revenue that by investing in shares of the co-operative bank the assessee has violated the provisions of s. 13(l)(d) r/w s. 11(5). The loan so obtained from the bank has already been repaid and assessee is having only overdraft from the bank amounting to Rs. 12,87,665. Therefore, the assessee is not entitled to benefit of exemption under s. 11.

18.2 The submission of the learned counsel for the assessee that in the instant case the assessee had availed loan from Bharati Sahakari Bank for which it had to buy certain number of shares of the bank as a precondition for such loan and the bank while granting such loan had deducted the subscription to such shares could not be controverted by the learned Departmental Representative. The further submission of the learned counsel for the assessee that there was no objection by the Revenue in the past for holding the shares of the bank in the scrutiny assessments and that still there is overdraft loan from the bank also could not be controverted by the Revenue. We find merit in the submission of the learned counsel for the assessee that the purchase of shares of the bank amounting to Rs. 25,250 is very negligible considering the total assets of the trust at Rs. 23.24 crores and the same was under compulsion for obtaining loan from the bank and that the bank while disbursing the loan had deducted the amount towards such share subscription from the loan amount and therefore, the same should be considered as an application of income. In our opinion under the peculiar facts and circumstances of the case, the purchase of shares amounting to Rs. 25,250 in the past which the assessee continued to hold during this year cannot be a ground to hold the same as in violation of provisions of s. 11(5) r/w s. 13(l)(d) especially when the assessee is still having an overdraft of Rs. 12,87,665 from the bank as mentioned by the AO. Since the assessee. is, still enjoying overdraft facility from the bank, therefore, we find no logic on the part of the AO and CIT(A) to hold that there is violation of provisions of s. 11(5) r/w s. 13(l)(d) because the assessee continues to hold the shares once the loan was repaid. Considering the totality of the facts of the case, considering the fact that the Revenue had no objection in the past for holding the shares of the bank during the tenure of loan utilised by the assessee trust and considering the fact that the assessee trust is still enjoying overdraft facilities from the bank we are of the considered opinion that there is no violation of provisions of s. 11(5) r/w s. 13(l)(d) on account of holding the shares of the bank. In this view of the matter, we set aside the order of the CIT(A) and the grounds raised by the assessee on this issue are allowed.

19. In ground of appeal Nos. 4 to 5.2 the assessee has challenged the order of the CIT(A) in treating the donations received through issue of coupons as revenue receipts.

20. Facts of the case, in brief, are that the assessee-trust had received donations by issue of coupons in denominations of Rs. 100, Rs. 500 and Rs. 1000 etc. The assessee trust had shown further addition of Rs. 86,77,500 towards development fund and Rs. 60,63,585 towards voluntary contribution received in cash or in kind through "Danpethi". The AO noted that while the voluntary contribution through "Danpethi" has been taken into consideration in the computation of income under ss. 11 and 12, the donations towards hospital equipment fund, development fund and building fund have been directly credited to the balance sheet as corpus donations. So far as the development fund of Rs. 85,77,500 is concerned it was explained by the assessee that the same has been received by the trust by way of collection by volunteers through coupons ranging from Rs. 100, Rs. 500 and Rs. 1,000 collected by them from friends, relatives, well wishers and public at large. A sample copy was also enclosed. However, the AO noted that the assessee specifically admitted that being small amount of each coupon no separate receipt was issued to the donors and therefore the names and addresses of the donors are not available.

20.1 The assessee filed confirmations from some of the donors and volunteers who have made collection of the coupons. However, the AO noted that the coupons did not carry their signature. Since the assessee was all along insisting on collection of funds through issuance of coupons and was claiming the same as corpus donation not forming the part of regular income to be routed through the P&L a/c the AO proceeded this issue from the following angles :

"(1)		Whether the donations claimed by the assessee are genuine donations ?
(2)		Whether the said donations can be termed as voluntary donations ?
(3)		Whether the same can come under the provisions of s. 1 l(l)(d) of the I IT Act, 1961 ?"

20.2 So far as the genuineness of the coupons is concerned, the AO noted that the coupons did not bear the names and addresses of the donors from whom the donation is claimed to have been received by the trust. The same did not even bear the signature of the person who has collected the donation on behalf of the trust nor any date is available on the said coupon. He, therefore, came to the conclusion that in absence of signature of the receiver and in absence of full details of the donor etc., verification of the same is not possible. The AO further noted that not only the assessee trust but the various other trusts of the group have also received similar donations running into lakhs of rupees from different villagers in rural areas in the similar manner by way of unnamed, unsigned coupon collection of small donations. He further noted that there is some difference between the collection of donation as submitted by the assessee and the entries appearing in the books of account. In view of all these defects, the AO held the donations through coupons and credited to development fund as not genuine.

20.3 The AO further noted that the donors who have given donation through coupons are neither aware of the nature nor the purpose of donation claimed in their names, therefore, these donations are dubious and cannot partake the character of 'corpus' donation within the meaning of s. 11(l)(d) of the IT Act. From the sample copy of the coupon donations filed, the AO noted that the word 'corpus' is found to be printed on these coupons. In other words the nature of donation is decided by the assessee trust itself without the knowledge of the donor. Relying on the decision of the Pune Bench of the Tribunal in the case of Dy. CIT v. Nasik Gymkhana [2001] 77 ITD 500 and the decision of the Mumbai Bench of the Tribunal in the case ofPrabodhan Prakashan v. Asstt. DIT [1994] 50 ITD 135 the AO held that such donations cannot be attributed towards corpus of the trust and have to be taxed in the hands of the assessee as unproved donations. Aggrieved with such order of the CIT(A), the assessee is in appeal before us.

21. In appeal the learned CIT(A) upheld the action of the AO in treating the donations received through coupons as revenue receipt. While doing so, he noted that the statement of Sri Ramachandra Dada Shinde was recorded during the course of search under s. 132(4) wherein he has stated that the funds collected have also been utilised for depositing money in various fund accounts of the group. Therefore, deposits appearing in the development fund account have to be considered from sources other than the genuine donors. He further noted that the coupon donations are from donors whose identities are not known even to the assessee and such receipts are in cash against the issue of coupons of fixed denominations printed with the words "corpus donation". According to him the statements of the volunteers, who collected donations, are only self-serving documents and cannot be relied upon. According to him even donations covered by written documents but without any specific directions cannot claim the benefit of exemption under s. 11(l)(d). The requirement of law is of a specific direction and not an indirect consent. Only in certain exceptional cases a specific confirmation with the specific direction can be accepted. According to him, donations without specific directions to treat it as corpus can be treated as voluntary contribution and the recipient organisation has no right to treat the donation as corpus donation. Relying on the decision of Calcutta Bench of the Tribunal in the case of Shri Digambar Jain Naya Mandir v. Asstt. DIT [1999] 70 ITD 121 the decision of the Mumbai Bench of the Tribunal in the case of Prabodhan Prakashan (supra) and the decision of the Chennai Bench of the Tribunal in the case of N.A. Ramachandra Raja Charity Trust v. ITO [1985] 14 ITD 230, he upheld the finding of the AO that the donations shown in the statement of account of the assessee received through issue of coupons are taxable being revenue receipts. He accordingly held that donations received through issue of coupons are revenue receipts and taxable as income of the trust and cannot be considered as exempt under s. 11(1)(d) of the IT Act. Aggrieved with such order of learned CIT(A), the assessee is in appeal before us.

22. The learned counsel for the assessee submitted that there is no justification for making the addition under s. 68 on account of donations. He submitted that if these are not held to be corpus donations, these would be includible in the income of the assessee under s. 11 of the IT Act. He submitted that since anonymous donations are being received by the charitable trusts, therefore, the legislature has brought in the provisions of s. 115BBC w.e.f. asst. yr. 2007-08. He accordingly submitted that if the donations are not treated as corpus donations they cannot be treated as cash credits but would be donations includible in the income under s. 11 and not exempt under s. 11(1)(d) of the IT Act. He submitted that the assessee has received coupon donations wherein it is clearly mentioned that these are towards "corpus" or "building fund". Referring to copies of affidavits of some of the volunteers placed at paper book page Nos. 15 to 47 he submitted that the assessee, during the course of assessment proceedings itself, had submitted these documents to substantiate that the volunteers had collected the donations on behalf of the assessee trust. Therefore, there is no reason to hold that the assessee has not collected such donations. He accordingly submitted that there is no reason to treat such donations as revenue receipts and the same should be treated as capital receipts under s. 11(1)(d).

22.1 Without prejudice to the above, the learned counsel for the assessee submitted that assuming but without admitting that such coupon donations are revenue receipts, still exemption under s. 11 should be allowed on these receipts since the same are applied for the objects of the trust or accumulated as per s. 11(2). He submitted that once the exemption under s. 11 is allowed, even if such donations are treated as revenue receipts, it does not make any difference. He accordingly submitted that exemption under s. 11 should be allowed on these donations received through issue of coupons.

22.2 The learned Departmental Representative, on the other hand heavily relied on the orders of the AO and the CIT(A). He submitted that the coupon donation receipts do not bear the names and addresses of the donors, the name of the recipient on behalf of the trust and any letter from the donor to substantiate that the donation is for the corpus of the trust. Therefore, these are nothing but unexplained cash credits and therefore the learned CIT(A) was justified in upholding the order of the AO in treating the same as income under s. 68 of the IT Act.

23. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. Since the coupon donation receipts do not contain the complete addresses of the donors, the name of the recipient on behalf of the trust and there is no written direction by the donor to treat the donation towards corpus of the trust, therefore, we are of the considered opinion that such donations cannot be considered as corpus donations. However, the alternative submission of the learned counsel for the assessee that the same should be considered as revenue receipts is acceptable. Since in the preceding paras we have held that there is no violation of provisions of s. 11(5) r/w s. 13(l)(d) and since the donations are treated as revenue receipts therefore it does not make any difference. We, therefore, hold that exemption under s. 11 is allowable on such coupon donations. The grounds by the assessee are decided accordingly.

23.1 So far as ground of appeal Nos. 6, 7 and 9 are concerned both the sides agreed that these are consequential in nature if exemption under s. 11 is allowed. Since in the preceding paras we have held that the assessee trust is entitled to claim exemption under s. 11, therefore, ground of appeal Nos. 6, 7 and 9 being consequential in nature are allowed.

24. Ground of appeal No. 10 relates to charging of interest under s. 234B. Since the exemption under s. 11 is allowed, therefore, this ground being consequential in nature is allowed.

ITA No. 1042/Pn/2010 (by Revenue):

25. The first ground raised by the Revenue relates to the order of the CIT(A) in deciding the appeal on merit instead of dismissing the same as infructuous.

25.1 After hearing both the sides, we find the assessment was framed by the AO under s. 143(3)/153C. The assessee filed appeal before the CIT(A). During the pendency of the appeal the learned CIT invoked the jurisdiction under s. 263. Subsequently, the AO passed the order under s. 143(3)/153C/263 and the assessee filed an appeal against the said order before the CIT(A). Since the assessee did not withdraw the appeal filed, the learned CIT(A) proceeded to decide the appeal on merit.

25.2 It is the case of the Revenue that when the order appealed against has already been set aside by the CIT under s. 263 the learned CIT(A) should have dismissed the appeal as infructuous. It is the case of the assessee that the grounds are wrongly worded by the Revenue, therefore, it is not maintainable. In our opinion, when the order passed by the AO, which was the subject-matter of appeal before CIT(A), was set aside by the CIT under s. 263, the learned CIT(A) should have dismissed the appeal filed by the assessee as infructuous instead of deciding the same on merit. We, therefore, find merit in the grounds raised by the Revenue and accordingly allow the same.

26. In the remaining grounds the Revenue has challenged the order of the CIT(A) in directing the AO to set off the excess application of the earlier years against the income computed for the year.

26.1 The learned CIT(A) has discussed this issue at p. 51 of the order. This issue was not raised before the AO. Before the CIT(A) the assessee submitted that in case the exemption under s. 11 is denied in that case the set off of the deficit pertaining to the earlier years, i.e. 1990-91 to 1998-99 should be adjusted out of the income of the current year. The learned CIT(A) following his order for asst. yr. 1999-2000 partly allowed such claim and directed the AO to allow set off of excess application in earlier years out of the income of the current year.

26.2 The learned Departmental Representative submitted that since there is no such provision in the Act for set off of excess application of expenditure over income of earlier years against the income of the current year and since the excess application claimed in the earlier years in case of the assessee is not loss computed for those years as prescribed under ss. 70 to 80 of the Act, therefore, the same should not be set off against the income of the current year.

26.3 The learned counsel for the assessee, on the other hand, submitted that the learned CIT(A) following his order for asst. yr. 1999-2000 has allowed the claim of the assessee which is just and proper. He, however, submitted that in case exemption under s. 11 is allowed to the assessee, in that case the grounds raised by the Revenue will become infructuous.

26.4 We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. In the preceding paras we have already held that the assessee is entitled to exemption under s. 11 of the IT Act since there is no violation of provisions of s. 13(l)(d) -r/w s. 11(5). Therefore, the grounds raised by the Revenue become academic in nature and do not require any adjudication. Accordingly, the same are dismissed.

ITA No. 969/Pn/2010 (by assessee):

27. This appeal filed by the assessee arises out of the order of the CIT(A) who passed the order against the assessment order passed by the AO under s. 143(3). In the appeal filed by the Revenue, we have already held that when the order of the AO, which was subject-matter of appeal before the CIT(A), was set aside under s. 263, the learned CIT(A) should have dismissed the appeal filed by the assessee as infructuous instead of deciding the same on merit. We, therefore, dismiss this appeal filed by the assessee being infructuous.

28. In the result, ITA No. 970/Pn/2010 filed by the assessee and ITA No. 1042/Pn/2010 filed by the Revenue are partly allowed and ITA No. 969/Pn/2010 filed by the, assessee is dismissed.

USP

 

Regards

Prarthana Jalan

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