UNIVERSAL EDUCATION FOUNDATION, MUMBAI V. ASST DIT (E) II(2), MUMBAI

ITA 1097/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0631 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 22-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 03-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Keywords: Charitable institution; Opportunity of being heard; Principle of natural justice
• Section: 12; 11; 139

Judgement Text

, F , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM & SHRI SANDEEP GOSAIN, JM ITA NO.1097/MUM/2016 : ASST.YEAR 2011-2012 M/S. UNIVERSAL EDUCATION FOUNDATION 1 ST FLOOR, FILKA BUILDING, DAFTARY ROAD MALAD (WEST), MUMBAI 400 097. PAN : AAABCU0516D. / VS. THE ASST.DIRECTOR OF INCOME - TAX (EXEMPTION)-II (2) MUMBAI. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : SHRI ANANT N.PAI /RESPONDENT BY : MS.POOJA SWAROOP / DATE OF HEARING : 22.05.2017 / DATE OF PRONOUNCEMENT : 25.05.2017 / O R D E R PER SHAMIM YAHYA, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LEARNED CIT(A) DATED 03.12.2015 AND PERTAINS TO ASSESSMENT YEAR 2011-2012. 2. GROUNDS OF APPEAL READ AS UNDER:- 1. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLDING THAT THE AMOUNT OF RS.3,55,45,600 ACCRUED TO THE APPELLANT AS INCOME FOR THE YEAR UNDER APPEAL AND WAS ALSO RECEIVED. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COMMISSIONER (APPEALS) FAILED TO NOTE THAT THE AMOUNT OF RS.3,55,45,600 WAS NOT FACTUALLY RECEIVED DURING THE YEAR UNDER APPEAL AND THAT IN THIS CIRCUMSTANCE, THE SAME SHOULD BE DEEMED TO BE APPLIED TOWARDS CHARITABLE PURPOSES IN TERMS OF CLAUSE (2) OF EXPLANATION TO SECTION 11(1) OF THE INCOME TAX ACT, 1961. THIS IS MORE PARTICULARLY SO BECAUSE THE PROVISION, FOR EXERCISING OPTION IN WRITING UNDER THE SAID EXPLANATION BEFORE ITA NO.1097/MUM/2016. M/S.UNIVERSAL EDUCATION FOUNDATION 2 THE EXPIRY OF TIME ALLOWED FOR FURNISHING RETURN U/S 139(1) IS NOT MANDATORY, BUT DIRECTORY IN NATURE AND MUST THEREFORE BE LIBERALLY INTERPRETED TO CONFER EXEMPTION U/S 11 AND NOT DENY IT. 3. BOTH THE LOWER AUTHORITIES ERRED IN PASSING THEIR RESPECTIVE ORDERS WITHOUT GRANTING YOUR APPELLANT ADEQUATE OPPORTUNITY OF BEING HEARD. THE ORDERS PASSED BY THEM ARE IN CONTRAVENTION OF THE PRINCIPLES OF NATURAL JUSTICE AND HENCE, BAD IN LAW. 4. THE APPELLANT RESERVES THE RIGHT TO ADD TO, ALTER OR DELETE ANY OF THE ABOVE GROUNDS WITH PERMISSION OF HONBLE TRIBUNAL. 3. BRIEF FACTS OF THE CASE ARE AS UNDER:- 3.1 IN THIS CASE, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS SOLD IMMOVABLE PROPERTY OF RS.3,55,45,600. HOWEVER, THE ASSESSEE HAS FAILED TO DISCLOSE THIS TRANSACTION WHILE FILING RETURN OF INCOME. THE ASSESSEES EXPLANATION IN THIS REGARD IS SUMMARIZED AS UNDER:- THE APPELLANT SUBMITTED THAT DURING THE F.Y.2008-2009, IT HAD ENTERED INTO A LEASE DEED DATED 27.01.2009 WITH M/S.KABRA ASSOCIATES (LESSOR) FOR LEASE OF THE PROPERTY LAND BEARING SURVEY NO.124/1A, 124/2, 124/4/2M 124/5A, 125/5A ADMEASURING 4900.125 SQ. FT. SITUATED AT VILLAGE KOLSET, THANE FOR THE PURPOSE OF CONSTRUCTING AND ESTABLISHING A SCHOOL. THE APPELLANT HAD AT ITS OWN COST AND EXPENSE OBTAINED THE NECESSARY PERMISSION FROM THE REQUIRED AUTHORITIES FOR ESTABLISHING AND RUNNING SCHOOL UPTO PRIMARY SCHOOL. HOWEVER, THE APPELLANT WAS UNABLE TO CONSTRUCT THE ENTIRE STRUCTURE AS REQUIRED FOR RUNNING THE SCHOOL AND HENCE IN F.Y. 2010-11, IT ASSIGNED THE RIGHTS IN THE PROPERTY TO M/S SUPERVALUE PROPERTIES PVT. LTD. VIDE DEED OF ASSIGNMENT DATED 19.01.2011. THE SAID DEED OF ASSIGNMENT WAS AGREED BETWEEN THE PARTIES (1-UNIVERSAL EDUCATION FOUNDATION AS ASSIGNOR, 2-KABRA ASSOCIATES AS CONFIRMING PARTY AND 3-SUPER VALUE PROPERTIES PVT. LTD. AS ASSIGNEE) FOR THE CONSIDERATION OF ITA NO.1097/MUM/2016. M/S.UNIVERSAL EDUCATION FOUNDATION 3 RS.3,55,45,600/- TO BE PAID BY THE ASSIGNEE TO THE ASSIGNOR. FURTHER, AS PER THE ADDENDUM TO THE DEED OF ASSIGNMENT DATED 20.01.2011, THE CONSIDERATION OF RS.3,55,45,600/- WAS TO BE PAID BY THE ASSIGNEE TO THE ASSIGNOR ON OR BEFORE 31 ST MARCH, 2015 OR ON THE DATE ON WHICH THE B.C.C. OF THE BUILDING IS OBTAINED, WHICHEVER IS EARLIER. IT MAY BE NOTED THAT IN F.Y.2010- 11, THERE WAS NO INCIDENCE OF ACCRUAL OF INCOME IN THE HANDS OF THE APPELLANT (AS ACCRUAL OF INCOME DEPENDS UPON THE TERMS OF THE AGREEMENT), NO AMOUNT HAS BEEN ACTUALLY RECEIVED FROM THE TRANSFEREE ON SALE OF LEASE RIGHTS AND THERE WAS NO DEFINITE POSSIBILITY OF CASH INFLOW IN THE FUTURE YEARS. THEREFORE, THE CONSIDERATION OF RS.3,55,45,600/- WAS NOT TREATED AS INCOME FOR THE YEAR UNDER CONSIDERATION AND NOT APPLIED TOWARDS THE OBJECTS OF THE TRUST. 3.2 IN CONCLUSION, THE ASSESSEE SUMMARIZED THE SUBMISSIONS BEFORE THE ASSESSING OFFICER AS UNDER:- HENCE THERE IS NO TAX INCIDENCE IN A.Y. 2011-12 BECAUSE: 1. THERE WAS NO INCIDENCE OF ACCRUAL OF INCOME IN THE HANDS OF THE ASSESSEE. 2. NO AMOUNT HAS BEEN ACTUALLY RECEIVED FROM THE TRANSFEREE AGAINST THE SALE OF RIGHTS. 3. THERE IS NO DEFINITE POSSIBILITY OF INFLOW IN THE FUTURE YEARS. 4. AN ENFORCEABLE LEGAL RIGHT TO RECEIVE AN INCOME SHOULD VEST WITH THE ASSESSEE. 5. ACCRUAL OF INCOME DEPENDS UPON THE TERMS OF AN AGREEMENT AND ANY SUBSEQUENT AGREEMENTS WHICH SHOULD GIVE RISE TO A DEFINITE RIGHT TO THE RECIPIENT AND MERELY ONCE AGREEMENT SHOULD NOT BE THE ONLY TEST OF CHARGEABILITY TO TAX. THUS SINCE THE CONSIDERATION IS NOT PAID, NOT DUE AND NOT ACCRUED, THE CONSIDERATION OF RS.3.5 CRORE WILL NOT BE TAXED IN THE A.Y.2011-12 BUT IN THE YEAR OF ACTUAL RECEIPT OF THE SAME. HENCE THE ASSESSEE HAS NOT TAXED THE SAME IN A.Y. 2011-12 BUT WILL OFFER THE SAME FOR TAXATION IN THE YEAR OF RECEIPT. ITA NO.1097/MUM/2016. M/S.UNIVERSAL EDUCATION FOUNDATION 4 3.3 HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED, HE HELD AS UNDER:- THE ABOVE SUBMISSION OF THE ASSESSEE IS CONSIDERED BUT THE SAME CANNOT BE ACCEPTED. AS PER ASSESSEE, THE ASSESSEE HAS TAKEN LAND ON LEASE FROM KABRA ASSOCIATES AND AFTER TAKING THE PERMISSION FROM THE REQUIRED AUTHORITIES FOR ESTABLISHING AND RUNNING A SCHOOL AT ITS OWN COST, IT ASSIGNED THE RIGHT, TITLE AND INTEREST IN THE PROPERTY TO M/S. SUPER VALUE PROPERTIES PVT. LTD. THE ASSESSEE STATES THAT AS A RESULT OF THIS ASSIGNMENT, THE ASSESSEE WAS TO BE PAID OF RS.3,55,45,600 BY M/S. SUPER VALUE PROPERTIES PVT. LTD. THE ASSESSEES STATEMENT THAT IT HAS FORGONE THE CONSIDERATION OF RS.3,55,45,600 IS NOT ACCEPTABLE BECAUSE NOBODY CAN GIVE ITS RIGHT, TITLE AND INTEREST IN SUCH A PRECIOUS PROPERTY TO ANYONE WITHOUT ANY CONSIDERATION. IT IS AN INTERNAL ARRANGEMENT AGAINST THE INTERESTS OF THE TRUST. SECONDLY, THE ASSESSEE COULD NOT EXPLAIN AS TO WHAT PROFIT WILL M/S SUPER VALUE PROPERTIES PVT. LTD. GET BY CONSTRUCTING THE INFRASTRUCTURE ON THE SAID LAND. LIKE, THE ASSESSEE WAS TO RUN SCHOOL ON THIS PROPERTY BUT WHAT M/S SUPER VALUE PROPERTIES PVT. LTD. WAS TO DO ON THIS PROPERTY IS NOT MENTIONED. THIRDLY, WHEN THE ASSESSEE DID NOT GET ANY CONSIDERATION FROM M/S SUPER VALUE PROPERTIES PVT. LTD., THE SAME PROPERTY BELONG TO THE ASSESSEE ONLY AND IN THAT CASE WHY THE ASSESSEE WILL PAY ANY RENT TO M/S SUPER VALUE PROPERTIES PVT. LTD. ON HIS OWN PROPERTY. ALL THESE QUESTIONS COULD NOT BE EXPLAINED BY THE ASSESSEE. HOWEVER, IT IS LEARNT THAT BY TRANSFERRING THE LEASE RIGHTS TO M/S SUPER VALUE PROPERTIES PVT. LTD., THE ASSESSEE HAS FORGONE THE RIGHT TO EXPLOIT THE COMMERCIAL SHOPS THAT NOW ARE THAT OF THE ASSIGNORS. THUS ON THE FACTS AND CIRCUMSTANCES OF THE CASES, THE CLAIM OF THE ASSESSEE THAT IT HAS NOT RECEIVED THE CONSIDERATION OF RS.3,55,45,600 FROM M/S SUPER VALUE PROPERTIES PVT. TD. IS NOT ACCEPTED AND ACCORDINGLY RS.3,55,45,600 IS ADDED TO THE TOTAL RECEIPT OF THE ASSESSEE. COMING TO THE ISSUE OF ADDENDUM INVOLVING DEFERMENT OF RECEIPT TILL 31.03.2015 AND HENCE IS A CONTINGENT AGREEMENT, THE SAME CANNOT BE ACCEPTED AS BY THE DEED OF ASSIGNMENT DATED 19.01.2011, THE ASSIGNOR HAS ASSIGNED TO RIGHTS TO THE ASSIGNEE. THE ASSIGNEE HAS ALSO ACTED ON THOSE RIGHTS & CONSTRUCTED BUILDING. THE ISSUE THAT THE ITA NO.1097/MUM/2016. M/S.UNIVERSAL EDUCATION FOUNDATION 5 AMOUNT WILL BE RECEIVED BEFORE 31.03.2015 HAS NO RELEVANCE AS THE ASSESSEE IS FOLLOWING ACCRUAL METHOD AND THE DEED OF ASSIGNMENT HAS BEEN CONCLUDED. ALL OTHER TERMS REMAIN THE SAME EXCEPT THE DEFERMENT OF RECEIPT OF INCOME. IN FACT, THE ASSESSEE SHOULD HAVE CHARGED INTEREST ON THE ASSIGNEE FOR THE DEFERMENT OF INCOME WHEN RIGHTS TO POSSESSION OF THE PROPERTY HAS BEEN PASSED ON TO THE ASSIGNEE. THE ASSIGNEE IS ALSO LIABLE TO PAY LEASE RENTALS TO THE CONFIRMING PARTY AS PER THE LEASE DEED DATED 27.01.2009. THE DEFERMENT IS ONLY TECHNICAL AND DOES NOT MAKE THE ASSIGNMENT DEED CONTINGENT. THEREFORE, ADDENDUM IS ONLY FOR DEFERMENT OF INCOME RECEIPT AND NOT DEFERMENT OF TRANSFER OF RIGHTS. 3.4 AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) DECIDED AS UNDER:- I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, GONE THROUGH THE ASSESSMENT ORDER OF THE A.O. AND THE SUBMISSIONS OF THE APPELLANT AND ALSO DISCUSSED THE CASE WITH THE AR OF THE APPELLANT. THE CONTENTIONS AND SUBMISSIONS OF THE APPELLANT ARE BEING DISCUSSED AND DECIDED HERE IN UNDER: I. THE APPELLANT CONTENDED THAT THERE IS NO INCIDENT OF ACCRUAL OF INCOME IN THE YEAR UNDER CONSIDERATION SINCE AS PER THE ADDENDUM TO THE DEED OF ASSIGNMENT DATED 20.01.2011 THE CONSIDERATION OF RS.3,55,45,600/- WAS TO BE PAID BY THE ASSIGNEE TO THE ASSIGNOR ON OR BEFORE 31.03.2015. IN THIS REGARD IT IS MENTIONED THAT THE ORIGINAL DEED OF ASSIGNMENT DATED 19.01.2011 WAS SIGNED BY M/S. UNIVERSAL EDUCATION FOUNDATION I.E. THE APPELLANT (ASSIGNER), M/S. KABRA ASSOCIATION (THE CONFIRMING PARTY) AND M/S SUPER VALUE PROPERTIES (THE ASSIGNEE). THIS DEED WAS DULY REGISTERED ON 19.01.2011 ITSELF WITH THE SUB-REGISTRAR, THANE-II. IN THIS DEED FOLLOWING ARRANGEMENT REGARDING PAYMENT OF RS.3,55,45,600/- WAS MADE: NOW THIS DEED WITNESSETH THAT IN CONSIDERATION OF THE SUM OF RS.3,55,45,600/- (RUPEES THREE CRORE FIFTY FIVE LAKHS FORTY FIVE THOUSAND SIX HUNDRED ONLY) PAID BY THE ASSIGNEE TO ITA NO.1097/MUM/2016. M/S.UNIVERSAL EDUCATION FOUNDATION 6 ASSIGNOR (THE PAYMENT AND RECEIPT WHEREOF THE ASSIGNOR HEREBY ADMITS AND ACKNOWLEDGE AND OF AND FROM THE SAME AND EVERY PART WHEREOF DOTH HEREBY ACQUIT, RELEASE AND DISCHARGE THE ASSIGNEE FOREVER), THE ASSIGNER WITH THE CONSENT AND CONFIRMATION OF THE CONFIRMING PARTY HEREBY ASSIGNS ITS RIGHT, TITLE AND INTEREST IN RECEIPT OF LAND BEARING SURVEY NOS.124/1A, 124/2, 124/4/2.. FROM THE ABOVE IT MAY BE NOTED THAT THE SAID AMOUNT IS STATED TO HAVE BEEN PAID BY THE ASSIGNEE TO THE ASSIGNER WHICH HAS BEEN ACKNOWLEDGED BY THE APPELLANT AS RECEIVED AND IN CONSEQUENCE IT HAS DISCHARGED THE ASSIGNEE FOREVER AND IN CONFIRMATION OF WHICH, THE DEED HAS BEEN SIGNED. IT HAS NOT ONLY BEEN SIGNED BY ALL THE THREE PARTIES BUT ALSO BY THE WITNESSES AND HAS ALSO BEEN DULY REGISTERED ON 19.01.2011 ITSELF. THE APPELLANT CLAIMS THAT SUBSEQUENTLY IT HAS ENTERED INTO AN ADDENDUM ON 20.01.2011 WHEREIN THE CONDITIONS OF THIS PAYMENT HAVE BEEN MODIFIED. HOWEVER, THIS SO CALLED ADDENDUM HAS NOT BEEN REGISTERED WITH THE REGISTERING AUTHORITY. THE APPELLANT FAILED TO EXPLAIN AS TO WHY THE SUBSEQUENT AGREEMENT WAS NOT REGISTERED ALTHOUGH THE ORIGINAL DEED WAS DULY REGISTERED. FURTHER, IT IS NOTED THAT THE SO CALLED ADDENDUM IS NOT SIGNED BY M/S. KABRA & ASSOCIATES THE CONFIRMING PARTY. ACCORDINGLY, THE AUTHENTICITY OF THIS ADDENDUM IS NOT PROVED BY THE APPELLANT AND HENCE, NO COGNIZANCE OF THIS DOCUMENT CAN BE TAKEN. IT WAS HELD IN THE CASE OF SUMATI DAYAL V. CIT 214 ITR 801 BY HON. SUPREME COURT THAT THE APPARENT MUST BE CONSIDERED REAL UNLESS SHOWN OTHERWISE. TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO SURROUNDING CIRCUMSTANCES TO FIND OUT REALITY AND MATTER HAS TO BE DECIDED BY APPLYING THE TEST OF HUMAN PROBABILITIES. SIMILAR OBSERVATIONS WERE MADE BY HON. APEX COURT IN THE CASE OF DURGA PRASAD MORE 82 ITR 540. GOING BY THESE OBSERVATIONS OF HON. SUPREME COURT IT IS NOTED THAT THE APPELLANT HAS FAILED TO EXPLAIN THE NON REGISTRATION OF THE ADDENDUM AND ALSO NON-SIGNING BY M/S.KABRA ASSOCIATES, THE CONFIRMING PARTY. ACCORDINGLY, IT IS HELD THAT AS SPECIFICALLY MENTIONED IN THE ORIGINAL DEED DATED 19.01.2011 THE CONSIDERATION OF RS.3,55,45,600/- HAD ACCRUED TO THE APPELLANT IN A.Y. 2011-12 ITSELF AND WAS ALSO RECEIVED. ITA NO.1097/MUM/2016. M/S.UNIVERSAL EDUCATION FOUNDATION 7 II. THE APPELLANT ALSO ARGUED THAT AS PER THE PROVISIONS OF EXPLANATION (II) TO SECTION 11(1) SINCE IT HAS NOT RECEIVED THE CONSIDERATION THE SAME WAS NOT TO BE TREATED AS INCOME AND APPLIED TOWARDS THE OBJECTS OF THE TRUST. IN THIS REGARD IT IS MENTIONED THAT IN THE PROVISIONS ITSELF IT IS CLEARLY MENTIONED THAT IF THERE IS SUCH POSSIBILITY, THE ASSESSEE IS REQUIRED TO INTIMATE THE A.O. BEFORE THE DATE OF FILING OF RETURN U/S. 139(1). NO SUCH DOCUMENT HAS BEEN PLACED ON RECORD BEFORE ME THAT ANY SUCH INTIMATION WAS GIVEN TO THE AO. ACCORDINGLY THERE IS NO FORCE IN THIS CONTENTION OF THE APPELLANT WHICH IS REJECTED. III. IN VIEW OF THE FACTS OF THE CASE AND THE LEGAL POSITION AS DISCUSSED ABOVE, THE FINDINGS OF THE AO ARE UPHELD. 3.5 AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 4.1 AT THE OUTSET BEFORE US THE LEARNED COUNSEL OF THE ASSESSEE DID NOT CONTEST THE ASSESSEES SUBMISSION BEFORE THE AUTHORITIES BELOW THAT SUM OF RS.3,55,45,600 HAS NOT ACCRUED TO THE ASSESSEE AS INCOME DURING THE YEAR. THOUGH GROUND IN THIS REGARD HAS BEEN RAISED AS GROUND NO.1 BEFORE US, LEARNED COUNSEL SUBMITTED THAT HE SHALL NOT BE PRESSING FOR THIS GROUND. HOWEVER, LEARNED COUNSEL OF THE ASSESSEE EMPHASIZED UPON GROUND NO.2 FOR THE PROPOSITION THAT THE LEARNED CIT(A) FAILED TO NOTE THAT THE AMOUNT OF RS.3,55,45,600 WAS NOT ACTUALLY RECEIVED DURING THE YEAR UNDER APPEAL AND THAT IN THIS CIRCUMSTANCE THE SAME SHOULD BE DEEMED TO BE APPLIED TOWARDS CHARITABLE PURPOSES IN TERMS OF CLAUSE (2) OF EXPLANATION TO SECTION 11(1) OF THE INCOME-TAX ACT, 1916. THAT, THIS IS MORE PARTICULARLY SO BECAUSE THE PROVISION FOR EXERCISING OPTION IN WRITING UNDER THE SAID EXPLANATION BEFORE THE EXPIRY OF TIME ALLOWED FOR FURNISHING THE RETURN U/S 139(1) IS NOT MANDATORY BUT DIRECTORY IN NATURE AND MUST THEREFORE BE LIBERALLY INTERPRETED. ITA NO.1097/MUM/2016. M/S.UNIVERSAL EDUCATION FOUNDATION 8 4.2 IN THIS REGARD, LEARNED COUNSEL OF THE ASSESSEE REFERRED TO SECTION 11 OF THE INCOME-TAX ACT, AND FURTHER HE PLACED RELIANCE UPON CASE LAWS IN SUPPORT OF THE PROPOSITION. 4.3 IN THIS REGARD A QUERY WAS RAISED AS TO WHETHER THE ASSESSEE HAS RAISED THE ISSUE BEFORE THE ASSESSING OFFICER. IN THIS REGARD, LEARNED COUNSEL SUBMITTED THAT THOUGH THIS ISSUE WAS NOT SPECIFICALLY RAISED, BUT THE A.O. SHOULD HAVE REFERRED THE SAME. IN THIS REGARD, LEARNED COUNSEL FURTHER SUBMITTED THAT IT IS THE DUTY OF THE ASSESSING OFFICER TO ADVISE THE ASSESSEE REGARDING THE ACTUAL TAX PAYABLE BY THE ASSESSEE. 4.4 PER CONTRA, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ASSESSEE HAS BEEN ALTOGETHER SUBMITTING THAT THE SAID INCOME HAS NOT ACCRUED TO THE ASSESSEE. FOR THIS PURPOSE ASSESSEE HAS PROCEEDED TO PREPARE SELF-SERVING DOCUMENTS LIKE ADDENDUM TO THE DEED OF AGREEMENT. SHE SUBMITTED THAT ONLY AFTER IT WAS CLEARLY ESTABLISHED THAT AS PER THE VALID AGREEMENT THE SAID INCOME OF RS.3,55,45,600 HAS ACCRUED TO THE ASSESSEE, AND REVENUE WAS NOT GOING TO ACCEPT THE SAME, ASSESSEE HAS DEVELOPED A STORY OF HAVING EXERCISED OPTION INDIRECTLY. SHE CLAIMED THAT LEARNED CIT(A) IS QUITE CORRECT IN HOLDING THAT IN AVAILING THE BENEFIT OF CLAUSE 2 OF EXPLANATION TO SECTION 11(1), ASSESSEE IS REQUIRED TO INTIMATE THE A.O. BEFORE THE DATE OF FILING OF THE RETURN U/S 139(1). SHE POINTED OUT THAT LEARNED CIT(A) HAS NOTED THAT NO SUCH DOCUMENT HAS BEEN PLACED ON RECORD BEFORE THE LEARNED CIT(A) NOR BEFORE THE TRIBUNAL THAT ASSESSEE HAS GIVEN ANY SUCH INTIMATION TO THE A.O. IN THESE CIRCUMSTANCES, THE LEARNED DR PLEADED THAT THERE IS NO MERIT IN THE ASSESSEES SUBMISSION AND THE ADDITION NEEDS TO BE CONFIRMED. ITA NO.1097/MUM/2016. M/S.UNIVERSAL EDUCATION FOUNDATION 9 4.5 UPON CAREFUL CONSIDERATION WE NOTE THAT ASSESSEE IN THE PRESENT ASSESSMENT YEAR HAS SOLD THE PROPERTY FOR RS.3,55,45,600. THE ASSESSEE HAS NOT OFFERED THE SAME FOR TAXATION. WHEN CONFRONTED IN THIS REGARD ASSESSEE CAME UP WITH AN ADDENDUM TO THE AGREEMENT BY WHICH THE SALE WAS REGISTERED. THIS ADDENDUM WAS AN UNREGISTERED DOCUMENT AND TOTALLY SELF-SERVING DOCUMENT BY WAY OF WHICH THE ASSESSEE INTENDED TO DEFER THE ACCRUAL OF THE INCOME. ALL ALONG ASSESSEE AND THE COUNSEL HAD BEEN PLEADING THAT THE SAID INCOME HAD NOT ACCRUED. AUTHORITIES BELOW HAD TO REFER TO HONBLE APEX COURT DECISION IN THE CASE OF SUMATI DAYAL TO REJECT THIS CONTENTION OF THE ASSESSEE. 4.6 WHEN THIS PLEA OF THE ASSESSEE TOTALLY FAILED ASSESSEE CLAIMED THAT SINCE THE ASSESSEE HAS NOT RECEIVED THE AMOUNT PROVISIONS OF SECTION 11(1) EXPLANATION 2 SHOULD HAVE BEEN APPLIED BY THE ASSESSING OFFICER. IT IS NOTED THAT THERE WAS NO REQUEST IN THIS REGARD WHATSOEVER BEFORE THE ASSESSING OFFICER. THIS HAS BEEN RIGHTLY NOTED BY THE LEARNED CIT(A). IN THIS REGARD WE MAY GAINFULLY REFER TO THE CONCERNED EXTANT PROVISIONS, WHICH READ AS UNDER:- SECTION 11(1) (1) SUBJECT TO THE PROVISIONS OF SECTIONS 60 TO 63, THE FOLLOWING INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME [(A) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA; AND, WHERE ANY SUCH INCOME IS ACCUMULATED OR SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF [FIFTEEN] PER CENT OF THE INCOME FROM SUCH PROPERTY; ITA NO.1097/MUM/2016. M/S.UNIVERSAL EDUCATION FOUNDATION 10 (B) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST IN PART ONLY FOR SUCH PURPOSES, THE TRUST HAVING BEEN CREATED BEFORE THE COMMENCEMENT OF THIS ACT, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA; AND, WHERE ANY SUCH INCOME IS FINALLY SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOME SO SET APART IS NOT IN EXCESS OF [FIFTEEN] PER CENT OF THE INCOME FROM SUCH PROPERTY; (C) INCOME [DERIVED] FROM PROPERTY HELD UNDER TRUST (I) CREATED ON OR AFTER THE 1ST DAY OF APRIL, 1952, FOR A CHARITABLE PURPOSE WHICH TENDS TO PROMOTE INTERNATIONAL WELFARE IN WHICH INDIA IS INTERESTED, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES OUTSIDE INDIA, AND (II) FOR CHARITABLE OR RELIGIOUS PURPOSES, CREATED BEFORE THE 1ST DAY OF APRIL, 1952, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES OUTSIDE INDIA: PROVIDED THAT THE BOARD, BY GENERAL OR SPECIAL ORDER, HAS DIRECTED IN EITHER CASE THAT IT SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PERSON IN RECEIPT OF SUCH INCOME; [(D) INCOME IN THE FORM OF VOLUNTARY CONTRIBUTIONS MADE WITH A SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTION.] EXPLANATION FOR THE PURPOSES OF CLAUSE (A) AND (B), - (1) IN COMPUTING THE [FIFTEEN] PER CENT OF THE INCOME WHICH MAY BE ACCUMULATED OR SET APART, ANY SUCH VOLUNTARY CONTRIBUTIONS AS ARE REFERRED TO IN SECTION 12 SHALL BE DEEMED TO BE PART OF THE INCOME; (2) IF, IN THE PREVIOUS YEAR, THE INCOME APPLIED TO CHARITABLE OR RELIGIOUS PURPOSES IN INDIA FALLS SHORT OF [EIGHTY-FIVE] PER CENT OF THE INCOME DERIVED DURING THAT YEAR FROM PROPERTY HELD UNDER TRUST, OR, AS THE CASE MAY BE, HELD UNDER TRUST IN PART, BY ANY AMOUNT ITA NO.1097/MUM/2016. M/S.UNIVERSAL EDUCATION FOUNDATION 11 (I) FOR THE REASON THAT THE WHOLE OR ANY PART OF THE INCOME HAS NOT BEEN RECEIVED DURING THAT YEAR, OR (II) FOR ANY OTHER REASON, THEN (A) IN THE CASE REFERRED TO IN SUB-CLAUSE (I), SO MUCH OF THE INCOME APPLIED TO SUCH PURPOSES IN INDIA DURING THE PREVIOUS YEAR IN WHICH THE INCOME IS RECEIVED OR DURING THE PREVIOUS YEAR IMMEDIATELY FOLLOWING AS DOES NOT EXCEED THE SAID AMOUNT, AND (B) IN THE CASE REFERRED TO IN SUB-CLAUSE (II), SO MUCH OF THE INCOME APPLIED TO SUCH PURPOSES IN INDIA DURING THE PREVIOUS YEAR IMMEDIATELY FOLLOWING THE PREVIOUS YEAR IN WHICH THE INCOME WAS DERIVED AS DOES NOT EXCEED THE SAID AMOUNT, MAY, AT THE OPTION OF THE PERSON IN RECEIPT OF THE INCOME [(SUCH OPTION TO BE EXERCISED BEFORE THE EXPIRY OF THE TIME ALLOWED UNDER SUB-SECTION (1) OF SECTION 139 FOR FURNISHING THE RETURN OF INCOME, IN SUCH FORM AND MANNER AS MAY BE PRESCRIBED)] BE DEEMED TO BE INCOME APPLIED TO SUCH PURPOSES DURING THE PREVIOUS YEAR IN WHICH THE INCOME WAS DERIVED; AND THE INCOME SO DEEMED TO HAVE BEEN APPLIED SHALL NOT BE TAKEN INTO ACCOUNT IN CALCULATING THE AMOUNT OF INCOME APPLIED TO SUCH PURPOSES, IN THE CASE REFERRED TO IN SUB-CLAUSE (I), DURING THE PREVIOUS YEAR IN WHICH THE INCOME IS RECEIVED OR DURING THE PREVIOUS YEAR IMMEDIATELY FOLLOWING, AS THE CASE MAY BE, AND, IN THE CASE REFERRED TO IN SUB-CLAUSE (II), DURING THE PREVIOUS YEAR IMMEDIATELY FOLLOWING THE PREVIOUS YEAR IN WHICH THE INCOME WAS DERIVED.] .. (2) WHERE EIGHTY-FIVE PER CENT OF THE INCOME REFERRED TO IN CLAUSE (A) OR CLAUSE (B) OF SUB-SECTION (1) READ WITH THE EXPLANATION TO THAT SUB-SECTION IS NOT APPLIED, OR IS NOT ITA NO.1097/MUM/2016. M/S.UNIVERSAL EDUCATION FOUNDATION 12 DEEMED TO HAVE BEEN APPLIED, TO CHARITABLE OR RELIGIOUS PURPOSES IN INDIA DURING THE PREVIOUS YEAR BUT IS ACCUMULATED OR SET APART, EITHER IN WHOLE OR IN PART, FOR APPLICATION TO SUCH PURPOSES IN INDIA, SUCH INCOME SO ACCUMULATED OR SET APART SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME, PROVIDED THE FOLLOWING CONDITIONS ARE COMPLIED WITH, NAMELY: (A) SUCH PERSON SPECIFIES, BY NOTICE IN WRITING GIVEN TO THE ASSESSING OFFICER IN THE PRESCRIBED MANNER, THE PURPOSE FOR WHICH THE INCOME IS BEING ACCUMULATED OR SET APART AND THE PERIOD FOR WHICH THE INCOME IS TO BE ACCUMULATED OR SET APART, WHICH SHALL IN NO CASE EXCEED TEN YEARS; (B) THE MONEY SO ACCUMULATED OR SET APART IS INVESTED OR DEPOSITED IN THE FORM OR MODUS SPECIFIED IN SUB-SECTION (5); 4.7 A READING OF THE ABOVE PROVISIONS OF THE ACT MAKES IT CLEAR THAT INCOME FROM TRUST PROPERTY WILL BE EXEMPT FROM TAX IF 85% THEREOF IS APPLIED FOR THE PURPOSE OF THE TRUST. IF THE APPLICATION OF INCOME FALLS SHORT OF 85% FOR THE REASON OF NON-RECEIPT OF INCOME ASSESSEE MAY DEFER UTILIZATION OF 85% OF THE INCOME TO ANOTHER YEAR. FOR THIS ASSESSEE WAS REQUIRED TO GIVE NOTICE IN WRITING WITH THE ASSESSING OFFICER IN THE PRESCRIBED MANNER EXPLAINING THE PURPOSE FOR WHICH THE INCOME IS BEEN ACCUMULATED AND SET APART AND THE PERIOD FOR WHICH THE INCOME IS TO BE ACCUMULATED AND SET APART. IT HAS FURTHER BEEN PROVIDED THAT THE MONEY SO ACCUMULATED AND SET APART IS TO BE INVESTED AND DEPOSITED IN SPECIFIED MANNER. 4.8 WE FIND THAT ADMITTEDLY ASSESSEE HAS NOT EXERCISED ANY SUCH OPTION. ASSESSEE HAS BEEN ALL ALONG BEEN CLAIMING THAT THE SAID INCOME HAS NOT ACCRUED. HENCE THERE WAS NO OCCASION FOR THE ASSESSING OFFICER TO CONSIDER ITA NO.1097/MUM/2016. M/S.UNIVERSAL EDUCATION FOUNDATION 13 THE SAME. FURTHERMORE, THE PROVISIONS OF THE ACT ENVISAGE THAT THE ASSESSEE HAS TO EXPLAIN IN THE SAID NOTICE THE PURPOSE FOR WHICH THE INCOME IS BEING ACCUMULATED OR SET APART. THERE IS NO WHISPER WHATSOEVER IN THE ASSESSEE'S SUBMISSIONS IN THIS REGARD. HENCE WE ARE IN FULL AGREEMENT WITH THE LEARNED CIT(A) THAT THERE WAS NO OCCASION FOR THE ASSESSING OFFICER TO CONSIDER THIS ASPECT OF ASSESSEE'S PLEA. AS CLEAR FROM THE ABOVE DISCUSSION, SUCH A PLEA WAS NOT PRIMA FACIE TENABLE ALSO. 4.9 ACCORDINGLY IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENTS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A), ACCORDINGLY, WE UPHOLD THE SAME. 5. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED ORDER PRONOUNCED ON THIS 25 TH DAY OF MAY, 2017. SD/- SD/- ( SANDEEP GOSAIN ) ( SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 25 TH MAY, 2017. DEVDAS* / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A)-I, MUMBAI 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE.