Dr. D.Y. Patil Pratisthan v. Dy. CIT

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The Tax Publishers2013 TaxPub(DT) 1557 (Pune-Trib) : (2013) 154 TTJ 0320 : (2013) 087 DTR 0097 Income Tax Act, 1961 --Charitable trust--Bar to exemption under section 231)(c) No violation of provision of section 13(1)() vis-a-vis advertisement expenses--Assessee was engaged in business of running educational institutions. A survey under section 133A and a search under section 132 were carried out at assessee's group. Assessing officer noticed that expenses incurred not on the objects of the trust to the extent of Rs. 52,40,819 were debited by the assessee to the P&L a/c. On being questioned by the assessing officer to explain as to why the same should not be disallowed as per section 37(1) assessee replied that expenditure on advertisement and donation to charitable trust was given for object of assessee institution and also not violating of any of Income Tax Act. However, assessing officer did not satisfy with explanation of assessee. He observed that advertisement expenses were incurred on birthdays of trustees. These advertisement expenses on birthdays of trustees were for purpose of image building of trustees and their personal benefit and in the was can be considered for being incurred for objects of trust. The same is nowhere mentioned in objects of trust decided. As regards donation expenses, he noted that donations were given to institutions to whom provisions of section 80G do no apply and, therefore, these donations to other institutions cannot be considered for deduction. Therefore, e disallowed expenses to tune of Rs. 52,40,819 incurred not on the objects of the trust as per Annex XII of the audit report and as such same covered under section 13(1)(c). He also disallowed exempt under section 11 to assessee trust. Further, it was also observed the flats No. G1. G2 and F8 were not used as guest hose of that as claimed by assessee and only used by trustees as such on this expenses proviso, of section 13(2)(c) was also applied. Commissioner (Appeals) allowed 50 percent of advertisement and entire expenses on maintenance of flats. *Held:* Not proper. No part of advertisement expenses could be disallowed especially when there was no dispute about genuineness of such expenditure. It is the submission of the learned counsel for the assessee that advertisement expenses were incurred for the purpose of image building of the trust by highlighting the achievements of the various institutes and that such expenses were allowed in the past there is some force in the above arguments made by the learned counsel for the assessee. There is no dispute to the fact that advertisements were published in various newspapers on the occasion of the birthdays of the trustees highlighting the achievements of the various institutes run by the trust. In the present day, when there are hundreds of institutions imparting education in various fields, it is very difficult for the common man to find out which is the best institution. It is only when he comes to know of the persons behind running of the educational institutions that the confidence level of the layman increases. Therefore, highlighting the achievements of the institutions run by the trust along with the names of the trustees on their birthday cannot be said to be image building of the trustees. Rather it indirectly helps the various institutes run by the trust in getting more number of students. Further, the submission of the learned counsel for the assessee that similar expenses were allowed in the past, therefore, no adverse view should be taken for the impugned assessment year also finds some force in it. [Para 13] Considering the totality of the facts of the case and considering the fact that similar expenses were allowed in the past, no part of the advertisement expenses should have been disallowed especially when there is no dispute about the genuineness of such expenditure. Therefore, there is no violation of provisions of section 13(1)(c) of the Income Tax Act. Accordingly, the order of the Commissioner (Appeals) and direct the assessing officer to allow the entire amount of advertisement expenditure as allowable expenditure. [Para 13.1] Income Tax Act, 1961 Section 13(1)(c) Income Tax Act, 1961 Section 11 Income Tax Act, 1961 --Charitable trust--Bar to exemption under section 13(1)(c) Expenditure incurred on car and depreciation thereon--Issue relates to disallowance of expenditure on mercedez car and depreciation thereon assessee that assessee trust had acquired the Mercedez car for the purpose of the trust and incurred expenditure on repairs and has debited such expenses and depreciation to the income and expenditure account. He contended that various VIP guests keep visiting the trust and therefore the assessee had purchased the Mercedez car. He contended that the assessing officer has simply rejected the claim of the assessee without any contrary evidence and therefore he has not discharged the burden cast on him under section 13. He contended that assessing officer allowed expenditure of various other cars owned by the trust but has simply disallowed expenditure and depreciation on Mercedez car on the ground that it has benefited the trustees under section 13(1)(c) which has been upheld by Commissioner (Appeals). *Held:* Was not justified. As in 2001-02 no such disallowance was made by revenue when car was purchased, disallowance of expenditure on car and depreciation thereon was not disallowable and as such provisions of section 13(1)(c) were not violated. It is found from the copy of the assessment order for assessment year 2001-02 that no such disallowance has been made by the assessing officer on account of expenditure and depreciation on the Mercedez car which was purchased during financial year 2000-01 relevant to assessment year 2001-02. There is merit in the submission of the counsel for the assessee that only because of the brand name of the Mercedez car the assessing officer has problem whereas he has no problem on account of expenditure incurred by the assessee for various other cars owned by the trust. In our opinion, when the assessing officer has allowed the expenditure on account of various other cars owned by the trust, therefore, merely because the assessee has purchased the Mercedez car to be used by the VVIP guests the assessing officer should not have disallowed the expenditure and depreciation on such motor car especially when the assessing officer in the past has not disallowed any expenditure on the Mercedez car owned by the trust. Therefore, in view of rule of consistency and in absence of any adverse material before the assessing officer to take a contrary view there is no justification on the part of the assessing officer and Commissioner (Appeals) to hold that there is violation of provisions of section 13(1)(c). In this view of the matter, the order of the Commissioner (Appeals) is set aside and direct the assessing officer to allow the expenditure claimed by the assessee and hold that there is no violation of provisions of section 13(1)(c). [Para 17] Income Tax Act, 1961 Section 13(1)(c) SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 1557 (Pune-Trib) : (2013) 154 TTJ 0320 : (2013) 087 DTR 0097

Income Tax Act, 1961

--Charitable trust--Bar to exemption under section 231)(c) No violation of provision of section 13(1)() vis-a-vis advertisement expenses--Assessee was engaged in business of running educational institutions. A survey under section 133A and a search under section 132 were carried out at assessee's group. Assessing officer noticed that expenses incurred not on the objects of the trust to the extent of Rs. 52,40,819 were debited by the assessee to the P&L a/c. On being questioned by the assessing officer to explain as to why the same should not be disallowed as per section 37(1) assessee replied that expenditure on advertisement and donation to charitable trust was given for object of assessee institution and also not violating of any of Income Tax Act. However, assessing officer did not satisfy with explanation of assessee. He observed that advertisement expenses were incurred on birthdays of trustees. These advertisement expenses on birthdays of trustees were for purpose of image building of trustees and their personal benefit and in the was can be considered for being incurred for objects of trust. The same is nowhere mentioned in objects of trust decided. As regards donation expenses, he noted that donations were given to institutions to whom provisions of section 80G do no apply and, therefore, these donations to other institutions cannot be considered for deduction. Therefore, e disallowed expenses to tune of Rs. 52,40,819 incurred not on the objects of the trust as per Annex XII of the audit report and as such same covered under section 13(1)(c). He also disallowed exempt under section 11 to assessee trust. Further, it was also observed the flats No. G1. G2 and F8 were not used as guest hose of that as claimed by assessee and only used by trustees as such on this expenses proviso, of section 13(2)(c) was also applied. Commissioner (Appeals) allowed 50 percent of advertisement and entire expenses on maintenance of flats. Held: Not proper. No part of advertisement expenses could be disallowed especially when there was no dispute about genuineness of such expenditure.

It is the submission of the learned counsel for the assessee that advertisement expenses were incurred for the purpose of image building of the trust by highlighting the achievements of the various institutes and that such expenses were allowed in the past there is some force in the above arguments made by the learned counsel for the assessee. There is no dispute to the fact that advertisements were published in various newspapers on the occasion of the birthdays of the trustees highlighting the achievements of the various institutes run by the trust. In the present day, when there are hundreds of institutions imparting education in various fields, it is very difficult for the common man to find out which is the best institution. It is only when he comes to know of the persons behind running of the educational institutions that the confidence level of the layman increases. Therefore, highlighting the achievements of the institutions run by the trust along with the names of the trustees on their birthday cannot be said to be image building of the trustees. Rather it indirectly helps the various institutes run by the trust in getting more number of students. Further, the submission of the learned counsel for the assessee that similar expenses were allowed in the past, therefore, no adverse view should be taken for the impugned assessment year also finds some force in it. [Para 13] Considering the totality of the facts of the case and considering the fact that similar expenses were allowed in the past, no part of the advertisement expenses should have been disallowed especially when there is no dispute about the genuineness of such expenditure. Therefore, there is no violation of provisions of section 13(1)(c) of the Income Tax Act. Accordingly, the order of the Commissioner (Appeals) and direct the assessing officer to allow the entire amount of advertisement expenditure as allowable expenditure. [Para 13.1]

Income Tax Act, 1961 Section 13(1)(c)

Income Tax Act, 1961 Section 11

Income Tax Act, 1961

--Charitable trust--Bar to exemption under section 13(1)(c) Expenditure incurred on car and depreciation thereon--Issue relates to disallowance of expenditure on mercedez car and depreciation thereon assessee that assessee trust had acquired the Mercedez car for the purpose of the trust and incurred expenditure on repairs and has debited such expenses and depreciation to the income and expenditure account. He contended that various VIP guests keep visiting the trust and therefore the assessee had purchased the Mercedez car. He contended that the assessing officer has simply rejected the claim of the assessee without any contrary evidence and therefore he has not discharged the burden cast on him under section 13. He contended that assessing officer allowed expenditure of various other cars owned by the trust but has simply disallowed expenditure and depreciation on Mercedez car on the ground that it has benefited the trustees under section 13(1)(c) which has been upheld by Commissioner (Appeals). Held: Was not justified. As in 2001-02 no such disallowance was made by revenue when car was purchased, disallowance of expenditure on car and depreciation thereon was not disallowable and as such provisions of section 13(1)(c) were not violated.

It is found from the copy of the assessment order for assessment year 2001-02 that no such disallowance has been made by the assessing officer on account of expenditure and depreciation on the Mercedez car which was purchased during financial year 2000-01 relevant to assessment year 2001-02. There is merit in the submission of the counsel for the assessee that only because of the brand name of the Mercedez car the assessing officer has problem whereas he has no problem on account of expenditure incurred by the assessee for various other cars owned by the trust. In our opinion, when the assessing officer has allowed the expenditure on account of various other cars owned by the trust, therefore, merely because the assessee has purchased the Mercedez car to be used by the VVIP guests the assessing officer should not have disallowed the expenditure and depreciation on such motor car especially when the assessing officer in the past has not disallowed any expenditure on the Mercedez car owned by the trust. Therefore, in view of rule of consistency and in absence of any adverse material before the assessing officer to take a contrary view there is no justification on the part of the assessing officer and Commissioner (Appeals) to hold that there is violation of provisions of section 13(1)(c). In this view of the matter, the order of the Commissioner (Appeals) is set aside and direct the assessing officer to allow the expenditure claimed by the assessee and hold that there is no violation of provisions of section 13(1)(c). [Para 17]

Income Tax Act, 1961 Section 13(1)(c)