DEPUTY COMMISSIONER OF INCOME TAX(EXEMPTIONS) CIRCLE, JAIPUR V. M/S RATH VIDHYA PEETH, BEHROR, ALWAR

CO 14/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7829 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 19-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUNI PAUL
• Keywords: Notional interest; Tax effect
• Section: 13

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,B JAIPUR JH LAANHI XKSLKBZ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SING H YADAV, AM C.O. NO. 14/JP/2019 (ARISING OUT OF VK;DJ VIHY LA- @ ITA NO. 1247/JP/2018) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2013-14 M/S. RATH VIDHYA PEETH VILLAGE: DUGHERA, TEHSIL: BEHROR ALWAR CUKE VS. THE DCIT (E) CIRCLE - JAIPUR JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAATR 8746 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI P.C. PARWAL, CA JKTLO DH VKSJ LS @ REVENUE BY: SMT.RUNI PAUL, JCIT DR LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 15/01/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 23 /01/2020 VKNS'K@ ORDER PER SANDEEP GOSAIN, J.M. THE PRESENT CROSS OBJECTION HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), ALWAR DATED 03.08.2018 FOR THE ASSESSMENT YEAR 2013-14 RAISING THEREIN FOLLOWING GROUNDS. 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE ADDITION OF RS. 3,20,000/- BY APPLYI NG NOTIONAL INTEREST RATE OF 16% ON THE AMOUNT OF RS. 83.00 LACS ADVANCED TO M/S. SLATES INDIA IGNORING THAT THE FUN DS HAVE BEEN ADVANCED FOR BUSINESS PURPOSE ONLY. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 70,000/- BY APPLYING THE NOTIONAL INTEREST RATE OF 16% ON THE AMOUNT OF RS. 15 LACS C.O. NO. 14/JP/2019 M/S. RATH VIDHYA PEETH, ALWAR VS DCIT (E), CIRCLE-JA IPUR, JAIPUR 2 ADVANCED TO M/S. MAHARANI RESORTS IGNORING THAT THE FUNDS HAVE BEEN ADVANCED FOR BUSINESS PURPOSE ONLY. 2.1 FROM THE RECORDS WE NOTICED THAT THE MAIN APPEA L WAS FILED BY THE REVENUE VIDE ITA NO. 1247/JP/2018 FOR THE ASSESSMEN T YEAR 2013-14 IN WHICH THE C.O. WAS FILED BY THE ASSESSEE. THE MAIN APPEAL OF THE REVENUE WAS DISMISSED VIDE ORDER DATED 22-08-2019 O N ACCOUNT OF LOW TAX EFFECT. THUS ONLY THE PRESENT C.O. IS REQUIRED TO BE ADJUDICATED BY THIS BENCH. 3.1 THE ASSESSEE HAS RAISED TWO GROUNDS WHICH ARE I NTERRELATED AND INTERCONNECTED THEREBY CHALLENGING THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE ADDITIONS BY APPLYING NOTIONAL INTER EST @16% ON THE AMOUNTS ADVANCES MADE BY THE ASSESSEE TO M/S. SLATE X INDIA AND M/S. MAHARANI RESORTS. THEREFORE, WE FIND IT FIT TO DISPOSE OFF BOTH THE GROUNDS RAISED ABOVE BY THE ASSESSEE BY THIS CONSOLIDATED O RDER. 3.2 THE LD.AR OF THE ASSESSEE REITERATED THE SAME A RGUMENTS AS WERE RAISED BY HIM BEFORE THE LD. CIT(A). IT WAS SUBMITT ED THAT THE AO WHILE COMPLETING THE ASSESSMENT HAD NOT CONSIDERED THE F ACTS THAT THE ASSESSEE HAD NOT DIVERTED ANY FUNDS DURING THE YEAR UNDER CO NSIDERATION. IT WAS SUBMITTED THAT THE FUNDS OF THE TRUST WERE USED FOR THE PURPOSE OF BUSINESS ONLY. THE LD.AR OF THE ASSESSEE FURTHER SUBMITTED T HAT THE ASSESSEE HAD C.O. NO. 14/JP/2019 M/S. RATH VIDHYA PEETH, ALWAR VS DCIT (E), CIRCLE-JA IPUR, JAIPUR 3 GIVEN ADVANCE OF RS. 83.00 LACS TO M/S. SLATEX IND IA FOR CONSTRUCTION OF SCHOOL BUILDING WHICH WAS THE REQUIREMENT OF INCREA SED STRENGTH OF STUDENTS AND FOR THIS PURPOSE PROPER AGREEMENT ON L ETTER PAD WAS EXECUTED AND THE SAME WAS DULY APPROVED IN THE EXECUTIVE COM MITTEE MEETING. THEREFORE, ANY ADDITION ON ACCOUNT OF NOTIONAL INTE REST IS UNJUSTIFIED AND UNLAWFUL. IT WAS FURTHER SUBMITTED THAT A SUM OF RS . 15.00 LACS WAS GIVEN TO M/S. MAHARANI RESORTS FOR VARIOUS ACTIVITIES OF STUDENTS OF THE SCHOOL AND THEREFORE, THE ADDITION ON ACCOUNT OF NOTIONAL INTEREST ON THAT AMOUNT IS ALSO UNJUSTIFIED AND UNLAWFUL. THE LD.AR OF THE ASSESSEE SUBMITTED THAT SINCE THE AGREEMENT COULD NOT BE MATERIALIZED, THER EFORE, THE SAME WAS CANCELLED BECAUSE OF DISPUTE IN RESPECT OF QUALITY OF BUILDING MATERIALS USED BY M/S. SLATEX INDIA. THEREFORE, THE AMOUNT OF ADVANCE OF RS. 83.00 LACS WAS RECEIVED BACK THROUGH BANKING CHANNEL AND THE ORDER WAS CANCELLED OWING TO THE QUALITY OF THE MATERIALS. IN THIS RESPECT, THE LD.AR OF THE ASSESSEE HAS DRAWN OUR ATTENTION TO THE RELE VANT LETTER OF CANCELATION OF THE AGREEMENT. IN RESPECT OF THE AMO UNT PAID TO M/S. MAHRANI RESORTS IS CONCERNED, THE SAME WAS ALSO RET URNED BACK. THE LD.AR OF THE ASSESSEE SUBMITTED THAT THE AO HAD WRO NGLY INVOKED THE PROVISIONS OF SECTION 13(1) READ WITH SECTION 13(2 )(G) OF THE ACT AS IT WAS PROVIDED IN THE SAID PROVISION THAT IF THE INCO ME OF TRUST OR SOCIETY IS C.O. NO. 14/JP/2019 M/S. RATH VIDHYA PEETH, ALWAR VS DCIT (E), CIRCLE-JA IPUR, JAIPUR 4 DIVERTED DURING THE PREVIOUS YEAR IN FAVOUR OF ANY PERSON REFERRED TO IN SECTION 13(3) OF THE I.T. ACT, 1961 THEN IN THAT EV ENTUALITY THE PROVISION OF SECTION 13(1) AND 13 (2)(G) CAN BE INVOKED WHER EAS IN THE INSTANT CASE THE ADVANCE WAS MADE TO THE PERSONS REFERRED T O IN SECTION 13(3) OF THE I.T. ACT, 1961 BUT NO FUNDS WERE DIVERTED DURIN G THE YEAR UNDER CONSIDERATION. THE LD.AR OF THE ASSESSEE RELIED ON FOLLOWING DECISIONS. (I) CIT VS CALCUTTA NATIONAL BANK LTD. (1959) 37 ITR 171 (SC) (II) CIT VS SHRI P SUBRAMANIUM RELIGIOUS TRUST (2009) 179 TAXMAN 144 (KERALA) (III) DIRECTOR OF INCOME TAX VS ACME EDUCATIONAL SOCIETY (2010) 326 ITR 146B (DEL.) (IV) KANPUR SUBHASH SHIKSHA SAMITI VS DCIT , KANPUR (2011) 11 ITR (T) 23 (LUCKNOW) (V) DIT (EXEMPTION) VS ALARIPPU (2000) 244 ITR 358 (DEL) 3.3 ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF THE LOWER AUTHORITIES. 3.4 WE HAVE HEARD THE LD. COUNSEL FOR BOTH THE PART IES AND HAVE PERUSED THE MATERIALS PLACED ON RECORD. AS PER PRESENT FACT S OF THE CASE THE AMOUNT OF RS. 83.00 LACS WAS ADVANCED BY THE ASSESS EE TO M/S. SLATEX INDIA FOR SUPPLY OF BUILDING MATERIALS. LATER ON TH E AGREEMENT WAS CANCELLED DUE TO DISPUTE WITH REGARD TO QUALITY OF THE BUILDING MATERIALS AND THUS THE ENTIRE ADVANCE OF RS. 83.00 LACS WAS R ECEIVED BACK THROUGH C.O. NO. 14/JP/2019 M/S. RATH VIDHYA PEETH, ALWAR VS DCIT (E), CIRCLE-JA IPUR, JAIPUR 5 BANKING CHANNEL. SIMILARLY, THE ADVANCE OF RS. 15.0 0 LACS WAS PAID TO M/S.MAHARANI RESORTS WHICH WAS RECOVERED BACK ON 21-01-2013. THE SAID AMOUNT WAS PAID FOR VARIOUS ACTIVITIES OF THE STUDENTS OF THE SCHOOL. IN OUR VIEW, THE PROVISIONS OF SECTION 13(1) READ WITH SECTION 13(2)(G) OF THE ACT WAS WRONGLY INVOKED BY THE AO AS IT HAS BEEN PROVIDED IN THE SAID PROVISION THAT IF THE INCOME OF THE TRUST OR S OCIETY IS DIVERTED DURING THE PREVIOUS YEAR IN FAVOUR OF ANY PERSON REFERRED TO ANY SECTION 13(3) OF THE I.T. ACT, 1961. AS PER FACTS OF THE PRESENT CAS E, THE ADVANCE WAS MADE BY THE ASSESSEE TO THE PERSONS REFERRED IN SECTION 13(3) BUT NO FUNDS WERE DIVERTED DURING THE YEAR UNDER CONSIDERATION AND TH E ENTIRE AMOUNT PAID AS ADVANCE WAS RECEIVED BACK IN FULL IN THE IMMEDIA TE ASSESSMENT YEAR BECAUSE OF CANCELLATION OF AGREEMENT. EVEN OTHERWIS E, NO EXPENDITURE HAS BEEN DEBITED BY THE ASSESSEE IN THE INCOME AND EXPE NDITURE ACCOUNT. THUS WHEN NO EXPENDITURE HAS BEEN DEBITED OR CLAIMED ON ACCOUNT OF INTEREST EXPENDITURE AND THE AMOUNT WAS PAID AS ADVANCE FOR THE ACTIVITIES CARRIED OUT BY THE ASSESSEE, HENCE IN THAT EVENTUALITY NO A DDITION CAN BE MADE ON ACCOUNT OF NOTIONAL INTEREST AND THIS RESPECT WE F OUND SUPPORT FROM THE DECISIONS MENTIONED AS UNDER:- (I) CIT VS CALCUTTA NATIONAL BANK LTD. (1959) 37 ITR 171 (SC) (II) CIT VS SHRI P SUBRAMANIUM RELIGIOUS TRUST (2009) 179 TAXMAN 144 (KERALA) C.O. NO. 14/JP/2019 M/S. RATH VIDHYA PEETH, ALWAR VS DCIT (E), CIRCLE-JA IPUR, JAIPUR 6 (III) DIRECTOR OF INCOME TAX VS ACME EDUCATIONAL SOCIETY (2010) 326 ITR 146B (DEL.) (IV) KANPUR SUBHASH SHIKSHA SAMITI VS DCIT , KANPUR (2011) 11 ITR (T) 23 (LUCKNOW) (V) DIT (EXEMPTION) VS ALARIPPU (2000) 244 ITR 358 (DEL) THEREFORE, KEEPING IN VIEW THE FACTS, CIRCUMSTANCES OF THE CASE AND ALSO THE DECISIONS RELIED ON (SUPRA), THE GROUNDS NO. 1 AND 2 RAISED BY THE ASSESSEE IN ITS C.O. ARE ALLOWED. 4.0 IN THE RESULT, THE C.O. FILED BY THE ASSESSEE I S ALLOWED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 23 /01/2020 . SD/- SD/- FOE FLAG ;KNO LANHI XKSLKBZ (VIKRAM SINGH YADAV) (SANDEEP GOSAIN) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23/01/2020. *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. RATH VIDHYA PEETH, ALWAR 2. IZR;FKHZ@ THE RESPONDENT-THE DCIT (E), CIRCLE - JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 4. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR . 5. XKMZ QKBZY@ GUARD FILE {C.O. NO.14/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSTT. REGISTRAR