Charitable or Religious Trust-Expenses incurred by president of society on foreign tour allowed as assessee was to start various educational courses and the tour was to explore opportunities in that area and approved by vice chancellor

HIGH COURT OF ALLAHABAD

IT Appeal No. 186 of 2005

Commissioner of Income-tax-I, Lucknow........................................................Appellant.
v.
Babu Banarsi Das Educational Society ...........................................................Respondent

RAJIV SHARMA AND DR. SATISH CHANDRA, JJ.

Date :NOVEMBER 28, 2013

Appearances

D.D. Chopra for the Appellant.
J.N. Mathur and Mudit Agarwal for the Respondent.

Section 13 read with section 11 of the Income Tax Act, 1961 — Trust — Charitable or Religious Trust — Expenses incurred by president of society on foreign tour allowed as assessee was to start various educational courses and the tour was to explore opportunities in that area and approved by vice chancellor —

FACTS:

Assessee was a society registered under the Societies Registration Act, 1860. As the object of the assessee society was charitable in nature and as such Society was granted registration u/s 12A. A.O. opined that President of Society & his wife incurred expenditure on account of foreign tour and the same has been claimed out of the account of the assessee society. It has also been observed by A.O. that expenditure was claimed under the head of telephone and mobile expenses and further, amount was spent for obtaining the membership of Indian Habitat World Centre. A.O. observed that expenses were not incurred in the interest of the Society or related to the business and it reflected the misuse of the exemption granted to assessee. AO was of the opinion that income of assessee had been diverted in favour of the trustees which was a violation of section 13, therefore, exemption u/s 11 was denied to the Society. CIT (A) confirmed the order of AO but Tribunal allowed the claim of the assessee. Being aggrieved, Revenue went on appeal before High Court.

HELD,

That on perusal of the record, the limited issue was pertaining to the foreign trip undertaken by the Chairman and Vice-Chairman of the Institution. From the record, it appeared that institution was going to start courses of Bachelor of Hotel Management and Catering Technology, Master of Tourism, Hospitality Management and Information Technology and the tour was to explore the opportunities in that area and also tour was approved by vice chancellor. Tribunal held that the said expenses were for the business purpose. Regarding other expenses for telephones, securities and membership of Indian Habitat World Centre, assessee has accepted the order of the A.O. Further, it may be mentioned that if, there were sufficient reasons for withdrawal of the exemption u/s 11 then necessary proceedings will have to be started u/s 13 and finally an order may be passed u/s 13(3). It was an independent proceeding. So, the independent proceedings were required for this purpose and the Department was always at liberty to do so. In the result, appeal was answered partly allowed in favour of assessee.

ORDER

1. The present appeal has been filed by the appellant-department under Section 260-A of the Income-tax Act, 1961, against the judgment and order dated 07.07.2005, passed by the Income Tax Appellate Tribunal, Lucknow, in I.T.A. No.303/Luc/05, for the assessment year 2000-01.

2. On 09-12-2005, a Coordinate Bench has admitted the appeal on the following substantial questions of law:—

"1.		Whether the Assessing Authority ought to have assessed only the income which according to him was not used for educational purposes or the entire income could have been assessed?
2.		Whether on the facts and circumstances of the case the learned ITAT was justified in holding that the income of the assessee society is entitled for exemption under section 11 of the Income Tax Act, 1961 ?"

3. The brief facts of the case are that the assessee is a society registered under the Societies Registration Act, 1860 vide certificate dated 13.08.1997. As the object of the assessee society is charitable in nature and as such the Society was granted registration under Section 12-A of the Income Tax Act. During the assessment year under consideration, the A.O. opined that the President of the Society namely Sri Akhilesh Das & his wife Smt. Alka Das has incurred expenditure of Rs.6,79,409/- on account of foreign tour and the same has been claimed out of the account of the assessee society. It has also been observed by the A.O. that a sum of Rs.4,69,383/- was claimed under the head of telephone and mobile expenses. Further, Rs.14,000/- was spent for obtaining the membership of Indian Habitat World Centre. So, the A.O. observed that the expenses were not incurred in the interest of the Society or related to the business. He further observed that the same reflects to the misuse of the exemption granted to the assessee. He also opined that the income of the assessee had been diverted in favour of the trustees namely, Dr. Akhilesh Das Gupta and Vice-President, Smt. Alka Das who is also the founder member of the Society. This is a violation of Section 13, therefore, exemption under Section 11 of the Income-tax Act was denied to the Society for the assessment year under consideration. In appeal, the CIT(A) has confirmed the same, but the Tribunal has allowed the claim of the assessee. Being aggrieved, the department has filed the present appeal.

4. With this background, learned counsel for the department has justified the order of the A.O. He submits that in the relevant assessment year, the assessee-Society was engaged in running an educational institution in the name of Babu Banarsi Das National Institute of Technology and Management, (hereinafter known as the Institution) Lucknow, which was affiliated with Dr. B.R. Ambedkar University, Agra. He also submits that Dr. Akhilesh Das Gupta and his wife Smt. Alka Das are the Chairman and Vice-Chairman of the Institute respectively. He further submits that the couple went alongwith their children by the ship "Legend of the Seas" through Royal Carribbean Cruise Lines from Barcelona, Spain on 29.05.1999 to various countries. It was a pleasure trip. The said expenses were incurred for the personal purposes. He also submits that the family members were first flown from Delhi to Barcelona and from there they took the sea journey. So, it is the misuse of the Society's fund for personal purposes. Similarly, he submits that the personal expenses were incurred for electricity bill, telephone, security etc. and same can not be claimed from the society. Further, Chairman, Dr. Akhilesh Das Gupta has obtained the membership of Indian Habitat World Centre by paying a sum of Rs.14,000/- i.e. in personal capacity and the same can not be treated as business expenses. Lastly, he justified the addition made by the A.O.

5. On the other hand, Sri J. N. Mathur, learned Senior Counsel, assisted by Sri Mudit Agarwal, learned counsel for the assessee has justified the order passed by the Tribunal. He submits that Dr. Akhilesh Das Gupta and his wife are the Chairman and Vice-Chairman of the Institute respectively. He further submits that the Institution was going to start various courses in the Hospitality Management. So, the tour was for the purpose to explore (i) the admission of NRI & foreign students; (ii) job opportunities for the Indian students abroad; (iii) Infra-structure and Infra-structural facilities of the eminent technical Institutions, (iv) study hospitality and tourism industry alongwith developing water transport facility including packages of tours and luxury cruises. He also submits that the Director of the Institution, Prof. A.K. Raza had submitted a report and made a request to send a delegation of three-four members, then it was approved by the Vice-Chairman of Dr.B.R. Ambedkar University. When Dr. Akhilesh Das expressed his unwillingness to go abroad because he has two minor children, then Vice Chancellor approved the tour of children also as they cannot be left alone at the residence. He also submits that after completing the tour, a report was submitted. He further submits that a total expenditures were incurred at about Rs.6.69 lacs.

6. Sri J. N.Mathur, learned Senior Counsel has not pressed any argument for the expenses incurred for telephone, securities as well as for the membership of Indian Habitat World Centre. To this effect, he has admitted the order passed by the A.O.

7. After hearing both the parties and on perusal of the record, before us, the limited issue is pertaining to the foreign trip undertaken by the Chairman and Vice-Chairman of the Institution. From the record, it appears that the institution was going to start courses of Bachelor of Hotel Management and Catering Technology, Master of Tourism, Hospitality Management and Information Technology. As per the report submitted by the Chairman and Vice-Chairman, it appears that on 30.05.1999 at 10.00 A.M., they reached Ville France and discussed the issue with the Director, Prof. David Weir of University Nice Sophia Antipolis about Management for Global Market. On 01.06.1999, they reached at Civitavecchia, Italy at 7.00 A.M. and discussed the issue with the concerned persons of the Instituteo Professionali per/Industria/Artigiantito. On 02-06-1999, they reached Sicily and visited Boston College Campus 1 and 2 and met directors. Each day itinerary contains full details about the persons with whom the Chairman and Vice-Chairperson met and discussed the issues with them. A detail report was submitted.

8. It also appears that in the relevant assessment year, the institute was affiliated with Dr. B.R.Ambedkar University, Agra, but presently, the institute itself is an University and having the above mentioned courses, it means that the institution being developed to the University. In the instant case, the tour was approved by the Vice-Chancellor, who has also permitted to carry both the children and the expenses to the tune of Rs.6.69 lacs were incurred.

9. By considering the totality of the facts and circumstances of the case, it appears that the foreign tour and obtaining the business is a question of fact which has already been decided by the Tribunal. The Tribunal is a final fact finding authority as per the ratio laid down in the following cases:—

1.		Kamala Ganapathy v. Collector of Estate Duty ; [2002] 253 ITR 692/121 Taxman 615 (SC);
2.		Anjani Goal Agency v. CIT 2005 (37) STJ 294 (All.); and
3.		CIT v. Suraj Dal Mill 2005 (37) STJ 547 (All.)

10. In view of above, we decline to interfere with the observation made by the Tribunal that the said expenses were for the business purpose.

11. Regarding other expenses for telephones, securities and membership of Indian Habitat World Centre, the Senior Counsel for the assessee has accepted the order of the A.O. So, in this regard, the order of the A.O. is hereby restored. Further, it may be mentioned that if, there were sufficient reasons for withdrawal of the exemption under Section 11 of the Act, then necessary proceedings will have to be started under Section 13 of the Act and finally, an order may be passed under Section 13(3) of the Income-tax Act. It is an independent proceeding. So, the independent proceedings are required for this purpose and the Department is always at liberty to do so.

12. In view of above, the answer to the substantial questions of law is partly in favour of the department.

13. In the result, appeal filed by the department is partly allowed.

[2014] 221 TAXMAN 130 (ALL)