BHPE Society, Ahmednagar V. Income-tax Officer, Ahmednagar

CO 105/PUN/2011

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8256 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 4 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-01-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 20-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Benefit of exemption
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K.PANDA, ACCOUNTANT MEMBER. ITA.NO.1442/PN/2011 (ASSTT. YEAR : 2007-08) ITO, WARD-3, AHMEDNAGAR. .. APPELLANT VS. B.P.H.E. SOCIETY, C/P AHMEDNAGAR COLLEGE, SAMBHAJI CHOWK, AHMEDNAGAR. .. RESPONDENT PAN: AAATT4050H CO.NO.105/PN/2011 (ASSTT. YEAR : 2007-08) B.P.H.E. SOCIETY, C/P AHMEDNAGAR COLLEGE, SAMBHAJI CHOWK, AHMEDNAGAR. .. APPELLANT PAN: AAATT4050H VS. ITO, WARD-3, AHMEDNAGAR. .. RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK DEPARTMENT BY : MS.ANN KAPTHUAMA DATE OF HEARING : 22.01.2013 DATE OF PRONOUNCEMENT : 24.01.2013 ORDER PER SHAILENDRA KUMAR YADAV, JM : THIS APPEAL HAS BEEN FILED BY THE REVENUE ON FOLLO WING GROUNDS: 2 1. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GRO SSLY ERRED IN NOT CONSIDERING THE FACT THAT THE PRINCIPA L HAD DERIVED BENEFIT FROM THE SOCIETY BY PAYING LOW RENT COMPARE D TO MARKET RATES. 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GRO SSLY ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLA NT ASSESSEE HAD VIOLATED THE PROVISIONS OF SECTION 13(1)(C) OF THE INCOME- TAX ACT, 1961 BY PROVIDING RESIDENCE TO THE PRINCIP AL OF THE SOCIETY AND HENCE WAS NOT ELIGIBLE FOR EXEMPTION U/ S.11 OF THE ACT. 3. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GRO SSLY ERRED IN REACHING A CONTRADICTORY VIEW THAT : ON ON E HAND THE LD. CIT(A) HELD THAT THERE WAS NO INFRINGEMENT OF S ECTION 13(1)(C) OF THE ACT, WHILE ON THE OTHER THE LD. CIT (A) ADMITTED THAT THERE WAS A BENEFIT TO THE PRINCIPAL AND TRUST EE AND THE SAME COULD BE TREATED AS A PERQUISITE. 4. FOR THESE AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING THE ORDER OF THE LD. COMMISSIONER OF INC OME- TAX(APPEALS) MAY BE VACATED AND THAT OF THE ASSESSI NG OFFICER BE RESTORED. 2. THE ASSESSEE IS A SOCIETY FORMED FOR THE PURPOSE OF EDUCATIONAL ACTIVITIES AND HAS BEEN RUNNING VARIOUS INSTITUTION S FOR THE SAME PURPOSE IN ITS CAMPUS SITUATED AT AHMEDNAGAR. THE CAMPUS IS REPORTEDLY SPREAD IN AN AREA OF 52 ACRES. AS PER T HE ASSESSING OFFICER THE GROSS RECEIPT OF THE SOCIETY IN THIS YE AR WAS OF RS.13,05,23,789/- CONSISTING OF FEES AND MISCELLANE OUS RECEIPTS OF RS.6,2,97,117/-, GRANT OF RS.6,16,04,795/-, INTERES T OF RS.22,72,370/- AND DONATION OF RS.23,49,506/-. AFT ER APPLICATION OF MONEY FOR THE PURPOSE OF THE OBJECTIVE INCLUDING THE EXPENSES, A SURPLUS OF RS.2,62,24,003/- WAS COMPUTED WHICH WAS CLAIMED AS EXEMPT U/S.11 OF THE ACT. THE ASSESSING OFFICER DE NIED THIS BENEFIT OF EXEMPTION U/S.11 ON THE GROUND THAT DR.R.J.BARNA BAS, THE PRINCIPLE AND EX-OFFICIO TRUSTEE OF THE SOCIETY HAS LIVED IN BUNGALOW OF THE TRUST SITUATED WITHIN THE EDUCATIONAL CAMPUS ON A PAYMENT OF HRA OF RS.1681/- PER MONTH. AS PER THE ASSESSIN G OFFICER THE MARKET RENT OF THE SAID BUNGALOW WAS OF RS.8,000/- PER MONTH AND THEREFORE, THE ASSESSING OFFICER CONCLUDED THAT HE HAS DERIVED THE BENEFIT FROM THE PROPERTY OF THE TRUST FOR WHICH IT CAN BE HELD THAT SECTION 13(1)(C) HAS BEEN VIOLATED. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE POINTING OUT VARI OUS 3 DISCREPANCIES NOTED BY HER BASED ON WHICH SHE HAD D ERIVED HER SATISFACTION THAT THE ASSESSEE TRUST HAS VIOLATED T HE PROVISIONS OF SECTION 13(1)(C). IN RESPONSE TO THE SHOW CAUSE NO TICE, VARIOUS CONTENTIONS WERE RAISED BEFORE THE ASSESSING OFFICE R BUT HE WAS NOT SATISFIED WITH THE EXPLANATIONS GIVEN AND CONCLUDED THAT SHRI R.J.BARNABAS IS NOT ONLY THE PRINCIPAL AND TRU STEE OF THE COLLEGE BUT WAS CLOSELY RELATED TO DR.PHILIP R.BARN ABAS, THE SECRETARY OF THE SOCIETY AND OTHER MEMBERS OF THE S OCIETY. IN VIEW OF THESE FACTS, THE ASSESSING OFFICER CONCLUDED THA T SHRI R.J.BARNABAS WAS AN INTERESTED PARTY COVERED U/S.13 (3) OF THE ACT. THE ASSESSING OFFICER ALSO STATED THAT HE IS WORKIN G AS PRINCIPAL OF THE COLLEGE WAS SECONDARY TO THE MAIN FUNCTION OF B EING THE TRUSTEE AND FOR WORKING AS PRINCIPAL HE WAS PAID SALARY. I N OTHER WORDS, THOUGH NOT SPECIFICALLY MENTIONED, THE ASSESSING OF FICER WAS OF THE VIEW THAT THE RESIDENCE WAS NOT PROVIDED AS PART OF HIS FUNCTIONING AS PRINCIPAL. THE ASSESSING OFFICER ULTIMATELY CON CLUDED THAT PROVISIONS OF SECTION 13(1)(C) R.W.S. 13(2) AND 13( 3) WERE VIOLATED AND FOR THE SAME REASON THE EXEMPTION AVAILABLE U/S .11 WAS DENIED. 3. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AU THORITY, WHO GRANTED RELIEF TO ASSESSEE TRUST. SAME HAS BEEN OP POSED ON BEHALF OF THE REVENUE. LD. DEPARTMENTAL REPRESENTATIVE ST RONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHILE LD. AUTHORISED REPRESENTATIVE STRONGLY SUPPORTED THE ORDER OF THE CIT(A). 4. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERI AL ON RECORD, UNDISPUTED FACTS EMERGED THAT THE BUNGALOW IN QUEST ION HAS BEEN PROVIDED TO SHRI R.J.BARNABAS, PRINCIPAL, WHO IS A PERSON COVERED U/S.13 OF THE ACT. AS PER THE ASSESSING OFFICER, F OR USING THIS BENEFIT ONLY HRA OF RS.1,681/- PER MONTH HAS BEEN C HARGED WHEREAS THE MARKET RENT IS OF RS.8,000/-. THUS, IT WAS HELD THAT THE BENEFIT HAS BEEN AVAILED BY A PERSON COVERED U/ S.13 OF THE ACT. THE STAND OF THE ASSESSEE HAS BEEN THAT SHRI R.J.BA RNABAS HAS BEEN GIVEN THE BUNGALOW ONLY BECAUSE HE WAS WORKING AS PRINCIPAL 4 OF THE INSTITUTION. THE CAMPUS OF THE INSTITUTION IS SPREAD IN AN AREA OF 52 ACRES AND STAY OF FACULTY MEMBERS INCLUD ING THE PRINCIPAL INSIDE THE CAMPUS IS BENEFICIAL FOR THE RUNNING OF THE EDUCATIONAL INSTITUTIONS WHICH HAS MANY COLLEGES AND HOSTELS ET C. THERE ARE IN ALL 13 RESIDENTIAL QUARTERS FOR TEACHING, NON-TEACH ING MEMBERS OF THE STAFF AS WELL AS OTHER STAFF. OUT OF 13 SUCH A CCOMMODATIONS AVAILABLE, ONLY 4 OF THE TEACHING STAFF HAVE BEEN O CCUPYING AND OTHER QUARTERS OF THE TEACHING STAFF ARE LYING VACA NT FOR WANT OF WILLINGNESS ON THE PART OF OTHER TEACHING STAFF MEM BERS TO STAY INSIDE THE CAMPUS. TEACHING STAFF ARE RELUCTANT TO STAY IN THE CAMPUS AS THEY PREFERRED TO STAY OUTSIDE FOR BETTER SOCIAL AMENITIES. IT HAS BEEN CLAIMED THAT THE PRESENCE OF THE PRINCI PAL/FACULTY MEMBER IN THE PREMISES MAKE THEIR SERVICES AVAILABL E THROUGHOUT THE DAY AND IT HAS A GENERAL SOOTHING AND BENEFICIA L EFFECT ON THE GENERAL ATMOSPHERE. THE SOCIETY DID NOT PROVIDE 25 % ACCOMMODATION TO THE STAFF MEMBERS AS PER THE GUIDE LINES OF THE MAHARASHTRA UNIVERSITY ACT AS THERE WAS RELUCTANCE AMONGST STAFF MEMBERS TO STAY INSIDE THE CAMPUS. SINCE THE AVAI LABLE QUARTERS OF THE TEACHING STAFF ARE NOT GETTING FILLED, THEN NO PURPOSE WOULD BE SERVED IN CONSTRUCTING FURTHER ACCOMMODATION. THIS WOULD HAVE BEEN LED MISUSE OF THE FUND. AS STATED ABOVE, SHRI R.J.BARNABAS WAS PAYING ONLY HRA. THE STAND OF THE ASSESSING O FFICER IS THAT MARKET RENT OF THE SAID BUNGALOW WAS AT RS.8,000/- PER MONTH. THE HRA HAS BEEN DECIDED BY COMMITTEE VIDE RESOLUTION D ATED 22.03.1981 THAT SUCH PERSONS WILL NOT BE ENTITLED T O ANY HRA AND THE HRA COMPONENT WOULD BE ADJUSTED DIRECTLY BY THE SOCIETY TOWARDS THE RENT RECEIVABLE FOR THE USE OF THE QUAR TERS. AS PER THE RESOLUTION NO.7:81 DATED 22.03.1981, IT WAS RESOLVE D THAT STAYING OF PRINCIPAL AND TEACHING AND NON-TEACHING STAFF IN THE CAMPUS IS BENEFICIAL AND ESSENTIAL. ACCORDINGLY NO EXTRA AMO UNT OVER AND ABOVE THE HRA WILL BE CHARGED. IN VIEW OF THE SAME , IT WAS THE STAND OF THE ASSESSEE THAT HOUSES WERE PROVIDED TO THE PRINCIPAL AND OTHER WILLING STAFF TO STAY INSIDE THE CAMPUS F OR THE PURPOSE OF FULFILMENT OF THE OBJECTIVE OF THE TRUST AND WERE P ROVIDED IN UNIFORM MANNER WHO HAD OCCUPIED THE HOUSES WHETHER THE SAID PERSON WAS 5 TRUSTEE OR RELATIVE OF TRUSTEE OR NOT. IN OTHER WO RDS THE FINDING OF THE ASSESSING OFFICER THAT BENEFIT WAS DERIVED BY S HRI R.J.BARNABAS ONLY BECAUSE HE WAS TRUSTEE OR THE RELATIVE OF THE TRUSTEE WAS NOT CORRECT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THEREFORE, IT WAS CLAIMED THAT THERE WAS NO VIOLATION OF PROVISIONS O F SECTION13(1)(C). HAD THERE BEEN NO OCCUPANCY BY SHRI R.J.BARNABAS, E VEN THE ASSESSEE TRUSTEE WOULD HAVE BEEN LOSING HRA BECAUSE NOBODY WAS WILLING TO OCCUPY THE BUNGALOWS AS DISCUSSED ABOVE. THE ASSESSEE ALSO CONTENDED THAT SIMILAR FACTS WERE EXISTING FOR THE LAST MANY YEARS AND THE ASSESSING OFFICER NEVER IN THE PAST E VEN WHILE COMPLETING THE ASSESSMENT U/S.143(3) HAD OBJECTED T O THESE FACTS AND THEREFORE, IT WAS STATED THAT THE FINDING OF TH E ASSESSING OFFICER SHOULD NOT BE JUSTIFIED. THE ONUS IS ON THE DEPART MENT TO ESTABLISH THE VIOLATION OF SECTION 13 AND THE ASSESSING OFFIC ER HAS FAILED TO DISCHARGE THE SAME IN FACTS OF THE CASE. ACCORDING LY IT WAS CLAIMED THAT BENEFIT OF PROVISIONS OF SECTION 11 BE ALLOWED . THERE IS NO DISPUTE THAT SAID SHRI R.J.BARNABAS IS AN INTERESTE D PARTY COVERED U/S.13 OF THE ACT BECAUSE HE IS A TRUSTEE AS WELL A S THE RELATIVE OF THE OTHER TRUSTEES. 5. IT IS ALSO UNDISPUTED THAT SHRI R.J.BARNABAS WAS WORKING WITH THE SAID EDUCATIONAL INSTITUTION INITIALLY AS A TEA CHER AND AT RELEVANT TIME AS PRINCIPAL OF THE INSTITUTION. THERE IS NOT HING ON RECORD TO SUGGEST THAT THIS POSITION WAS ACQUIRED INCORRECTLY OR WITH AN OBJECTIVE TO ENJOY THE INCOME/ASSETS OF THE TRUST. THE PRESENCE OF PRINCIPAL AS WELL AS TEACHING STAFF IN THE BIG CAMP US HAS POSITIVE IMPACT IN RUNNING OF THE INSTITUTION FOR EDUCATION WHICH IS THE OBJECTIVE OF THE TRUST. THERE IS NO DENIAL OF THE FACT THAT THE TRUST HAS PROVIDED ACCOMMODATION TO SHRI R.J.BARNABAS ON THE RENT OF RS.1,681 PER MONTH WHICH IS EQUIVALENT TO HRA AVAIL ABLE TO HIM AS PER HIS SALARY, ASSESSING OFFICER HAS STATED THAT M ARKET VALUE OF THE SAID QUARTER WOULD HAVE BEEN RS.8,000/- BUT HE HAS NOT SUBSTANTIATED THE SAME, ESPECIALLY WHEN SO MANY BUN GALOWS WERE LYING VACANT. AS DISCUSSED ABOVE, IT IS NOT IN DIS PUTE THAT SHRI R.J.BARNABAS IS THE PRINCIPAL OF THE INSTITUTI ON. IT CANNOT BE 6 DENIED THAT THE STAY OF PRINCIPAL IN THE CAMPUS IS NOT BENEFICIAL FOR THE PURPOSE OF EDUCATIONAL INSTITUTION. APPARENTLY IT IS ALSO REQUIRED BY MAHARASTHRA UNIVERSITY ACT. AT THE SAM E TIME IT IS OBVIOUS THAT TEACHING STAFF IS RELUCTANT TO OCCUPY THE BUNGALOWS IN THE CAMPUS. THE ABOVE SAID BUNGALOW HAS BEEN PROVI DED IN THE CAPACITY OF PRINICIPAL AND NOT AS A TRUSTEE OF THE TRUST. THERE IS NO QUESTION OF USING INFLUENCE AS A TRUSTEE TO OCCUPY THE SAME BECAUSE OTHER BUNGALOWS ARE UNDISPUTEDLY LYING VACANT. AS PER RESOLUTION PASSED BY THE TRUST LONG AGO ON 22.03.1981, THE TRU ST HAS TO CHARGE ONLY THE HRA FROM THE ELIGIBLE PERSONS AND THIS RES OLUTION HAS BEEN EXPLAINED TO HAVE BEEN UNIFORMLY APPLIED TO ALL THE OCCUPANTS OF THE HOUSES AVAILABLE IN THE CAMPUS. SO THERE IS NO QUE STION OF USING INFLUENCE OF SHRI R.J.BARNABAS AS A TRUSTEE WHO IS A PERSON COVERED UNDER THE PROVISIONS OF SECTION 13 OF THE ACT. IF A PERSON COVERED U/S.13 HAS NOT DERIVED ANY BENEFIT IN A MANNER WHIC H CAN INFRINGE SECTION 13(1)(C), THEN THIS SUB SECTION SHOULD NOT HAVE BEEN INVOKED FOR DENYING THE BENEFIT U/S.11 OF THE ACT. IF THE PAYMENT OR THE BENEFIT WAS IN EXISTENCE OF A RELATIONSHIP OF EMPLO YER AND EMPLOYEE, THE BENEFIT CAN AT BEST BE HELD TO BE TAXABLE UNDER THE HEAD SALARY ONLY AS PERQUISITE. EVEN THAT IS NOT SITUATION IN THIS CASE. IN VIEW OF ABOVE DISCUSSIONS, THE CIT(A) WAS JUSTIFIED IN G RANTING RELIEF TO THE ASSESSEE, WHICH NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 6. AS A RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. 7. THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS, IN TER ALIA, RAISING FOLLOWING GROUNDS: 1. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESS EE TRUST WAS NOT ENTITLED TO EXEMPTION U/S.10(23C)(IIIAB). 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESS EE TRUST WAS NOT SUBSTANTIALLY FINANCED BY THE GOVT. AND HENCE, IT WAS NOT ENTITLED TO CLAIM THE EXEMPTION U/S. 10(23C)(IIIAB) . 3. THE LEARNED CIT(A) ERRED IN HOLDING THAT ONLY THOSE CASES WHERE THE GOVT. FINANCE IS UPTO 90% OF THE TOTAL FU NDS, THE INSTITUTION CAN BE SAID TO BE SUBSTANTIALLY FINANCE D BY THE 7 GOVT. WITHOUT APPRECIATING THAT SUCH INTERPRETATION OF THE PROVISIONS OF SECTION 10(23C)(IIIAB) WAS NOT JUSTIF IED IN LAW. 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THE A. THE ASSESSEE TRUST WAS EXISTING SOLELY FOR EDUCATIO NAL PURPOSES AND WAS SUBSTANTIALLY FINANCED BY THE GOVT . AND HENCE, WAS ENTITLED TO CLAIM THE EXEMPTION U/S.10(23C). B. AROUND 47% OF THE TOTAL FUNDS OF THE ASSESSEE WERE CONTRIBUTED BY THE GOVT. AND HENCE, THE ASSESSEE TR UST WAS SUBSTANTIALLY FINANCED BY THE GOVT. 8. WE HAVE DECIDED THE REVENUES APPEAL IN FAVOUR O F THE ASSESSEE, SO THE ISSUE RAISED BY WAY OF CROSS OBJEC TIONS GOES ACADEMIC. SO THE SAME IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTIONS ARE DISMISSED, AS DISCUSSED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 24 TH DAY OF JANUARY, 2013. SD/- SD/- ( R.K.PANDA ) ( SHAILENDRA KUMAR YAD AV ) ACCOUNTANT MEMBER JUDICIAL MEMBER GSPS PUNE, DATED THE 24 TH JANUARY, 2013 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE ITO, WARD-3, AHMEDNAGAR. 3. THE CIT(A)- I, PUNE. 4. THE CIT-I, PUNE. 5. THE DR A BENCH, PUNE. 6. GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.