DDIT, V. M/s Joggere Family Chartitable Trust,

ITA 1107/BANG/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7038 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 11-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: H NAGINCHAND KHINCHA
• Keywords: Depreciation; Charitable institution; Valuation report
• Section: 12A; 68; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.1107/BANG/2013 ASSESSMENT YEAR : 2008-09 THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS), CIRCLE 17(1), BANGALORE. VS. M/S. JOGGERE FAMILY CHARITABLE TRUST, NO.231, KRISHNA MARKET, CHICKPET, BANGALORE. PAN : AAATJ 7273J APPELLANT RESPONDENT APPELLANT BY : DR. P.K. SRIHARI, ADDL. CIT(DR) RESPONDENT BY : SHRI H. NAGINCHAND KHINCHA, C.A. DATE OF HEARING : 01.10.2014 DATE OF PRONOUNCEMENT : 10.10.2014 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 19.3.2013 OF THE CIT(APPEALS), MYSORE RELATING TO ASSESSMENT YEA R 2008-09. 2. THE GROUNDS RAISED BY THE REVENUE READ AS FOLLOW S:- ITA NO. 1107/BANG/2013 PAGE 2 OF 10 1. WHETHER THE LEARNED CIT (A) WAS RIGHT ON FACTS IN HOLDING THAT IT IS A MULTI PURPOSE COMMUNITY HALL WHEN AS P ER THE ASSESSEES OWN VALUATION REPORT BY THE NAME JSR KAL YANA MANTAPAM? 2. WHETHER LEARNED THE CIT(A) WAS RIGHT IN OVERLOO KING THE FACT THAT THE CONSTRUCTION OF MULTI PURPOSE COMMUNI TY HALL/KALYANA MANTAPAM WHICH FALLS UNDER THE CLAUSE OF ADVANCEMENT OF GENERAL PUBLIC UTILITY WAS NOT AT ALL AN OBJECT IN THE OBJECT OF THE TRUST WHICH ENLISTS ONLY MEDICAL RELIEF, RELIEF OF POOR AND EDUCATION AS ITS OBJECTS? 3. WHETHER THE LEARNED CIT(A) WAS RIGHT ON FACTS I N NOT APPRECIATING THE FACT THAT THE MULTI PURPOSE COMMUN ITY HALL/ KALYANA MANTAPAM WAS NOT FOR FURTHERING THE OBJECTS OF THE TRUST? 4. WHETHER THE LEARNED CIT (A) WAS RIGHT IN LAW IN HOLDING THAT THE INVESTMENT IN MULTI PURPOSE COMMUNITY HALL CONSTITUTED APPLICATION OF INCOME AND WAS ELIGIBLE FOR EXEMPTIO N U/S 11 DESPITE THE FACT THAT THE INVESTMENT IN THE MULTI P URPOSE COMMUNITY HALL/KALYANA MANTAPAM ITSELF WAS NOT IN A CCORDANCE WITH THE OBJECTS OF THE TRUST? 5. WHETHER THE LEARNED CIT (A) WAS CORRECT IN LAW I N GRANTING ALLOWANCE U/S 11 IN RESPECT OF THE INCOMES ASSESSED U/S 69B AS APPLICATION OF INCOME FOR THE OBJECTS OF THE TRUST, WHEN THE INVESTMENT IN THE MULTI PURPOSE COMMUNITY HALL/KALY ANA MANTAPAM WAS NOT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST? 6. WHETHER THE LEARNED CIT(A) WAS CORRECT IN LAW AN D ON FACTS IN ALLOWING RELIEF TO THE ASSESSEE BY RELYING UPON THE JUDGEMENT IN THE CASE OF DIT(E) VS. KESHAV SOCIAL & CHARITABLE FOUNDATION IN 278 ITR 152 DATED 3.2.2005, THOUGH TH E FACTS OF THE CASE WERE DISTINGUISHABLE? 7. WHETHER THE LEARNED CIT(A) WAS CORRECT IN LAW A ND ON FACTS IN ALLOWING RELIEF TO THE ASSESSEE FOR A YEAR WHEN THE PROVISIONS OF SEC. 115BBC WERE APPLICABLE AND ANONY MOUS DONATIONS, IF ANY, WERE TO BE TAXED? 8. ANY OTHER GROUNDS WHICH MAY ARISE AT THE TIME O F HEARING. ITA NO. 1107/BANG/2013 PAGE 3 OF 10 3. THE ASSESSEE IS A CHARITABLE TRUST WHICH WAS CRE ATED ON 22-09- 2005. ON 30-11-2005 THE ASSESSEE FILED AN APPLICATI ON FOR REGISTRATION U/S. 12A OF I.T. ACT, 1961 [THE ACT] WHICH WAS GRANTED T O IT VIDE ORDER DATED 21.04.2006. FOR FINANCIAL YEAR RELEVANT TO THE ASSE SSMENT YEAR 2005-06, THE ASSESSEE HAD STARTED CONSTRUCTION OF A MULTIPUR POSE COMMUNITY HALL AT CHAMPAKADHAMA SWAMY ROAD, BANNERGHATTA JIGANI HOBLI , ANEKAL TALUK, BANGALORE - 560 083. THE CONSTRUCTION WAS COMPLETED IN FINANCIAL YEAR 2006-07 RELEVANT TO ASSESSMENT YEAR 2007-08. THE TO TAL COST OF MULTIPURPOSE COMMUNITY HALL WAS RS.57,20,000/- WHIC H WAS DULY ACCOUNTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE LAST OF THE AMOUNT SPENT FOR BUILDING CONSTRUCTION WAS RS. 2,70 ,000/- ON 31.03.2007. AS THE CONSTRUCTION OF THE ABOVE COMMUNITY HALL WAS FOR OBJECTS OF THE TRUST, THE ENTIRE CONSTRUCTION COST WAS SHOWN AS AP PLICATION OF FUNDS. 4. THE ASSESSEE GOT THE VALUATION OF COST OF CONSTR UCTION DONE FROM R.S. RAMESH, A REGISTERED VALUER & ENGINEER. AS PER THE VALUATION REPORT, THE COST OF CONSTRUCTION WAS ESTIMATED AT RS.58,18, 000/-. A COPY OF THE VALUATION REPORT WAS ALSO FILED WITH THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS. AS PER THIS VALUATION REPOR T, THE YEAR OF COMPLETION OF THE BUILDING WAS SHOWN AS 2006. 5. NOT SATISFIED WITH THE COST OF CONSTRUCTION AS D ISCLOSED BY THE ASSESSEE, THE ASSESSING OFFICER REFERRED THE MATTER TO VALUATION OFFICER ITA NO. 1107/BANG/2013 PAGE 4 OF 10 U/S. 142A OF THE ACT. THE VALUATION OFFICER ARRIVED AT THE ESTIMATED COST OF CONSTRUCTION OF RS.1,10,99,000/-. RELYING ON THIS V ALUATION REPORT, THE AO ADDED RS.52,81,000/- BEING THE DIFFERENCE BETWEEN V ALUE AS PER DISTRICT VALUATION OFFICERS REPORT AND THE ACTUAL CONSTRUCT ION OF BUILDING RECORDED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS AS UNEXPLA INED INVESTMENT IN CONSTRUCTION U/S. 69B OF THE ACT FOR A.Y. 2008-09. 6. BEFORE THE CIT(APPEALS), THE ASSESSEE POINTED OU T THAT EVEN IN THE REPORT DATED 27-11-2007 OF DEPARTMENT VALUATION REP ORT AT PAGE NO.3 IT WAS ACCEPTED THAT AS PER LEDGER ACCOUNT, THE PERIOD OF CONSTRUCTION WAS DECEMBER 2005 TO 31-03-2007. THIS FACT HAS BEEN APP ROVED BY ASSESSING OFFICER ALSO. THE ASSESSEE DREW ATTENTION OF THE C IT(A) TO THE PROVISIONS OF SECTION 69B OF THE ACT WHICH WAS INVOKED BY THE AO FOR MAKING THE ADDITION. THE SAME READS AS UNDER:- WHERE IN ANY FINANCIAL YEAR THE ASSESSEE HAS MADE INVESTMENTS OR IS FOUND TO BE THE OWNER OF ANY BULLION, JEWELLE RY OR OTHER VALUABLE ARTICLE, AND THE ASSESSING OFFICER FINDS T HAT THE AMOUNT EXPENDED ON MAKING SUCH INVESTMENTS OR IN ACQUIRING SUCH BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE EXCEED S THE AMOUNT RECORDED IN THIS BEHALF IN THE BOOKS OF ACCOUNT MAI NTAINED BY THE ASSESSEE FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT SUCH EXCESS AMOUNT OR THE EXPLANA TION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFI CER, SATISFACTORY, THE EXCESS AMOUNT MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. 7. IT WAS SUBMITTED BY THE ASSESSEE THAT THE PREREQ UISITE FOR INVOKING THE PROVISIONS OF SEC.69B OF THE ACT IS THAT, THE I NVESTMENT SHOULD BE MADE ITA NO. 1107/BANG/2013 PAGE 5 OF 10 IN THE PREVIOUS YEAR/FINANCIAL YEAR AND THE RELEVAN T PREVIOUS YEAR/FINANCIAL YEAR FOR THE YEAR UNDER APPEAL IS FROM 01-04-2007 T O 31-03-2008. SINCE THE CONSTRUCTION OF MULTIPURPOSE HALL WAS COMPLETED IN FINANCIAL YEAR 2006-07 ITSELF (WHICH IS NOT THE RELEVANT FINANCIAL YEAR FO R THE YEAR UNDER APPEAL) THE PROVISIONS OF SECTION 69B ARE NOT APPLICABLE AT ALL . THE FACT THAT THE CONSTRUCTION GOT COMPLETED IN FINANCIAL YEAR 2006-0 7 ITSELF IS FURTHER SUPPORTED BY DISTRICT VALUATION OFFICERS REPORT, W HEREIN THE PERIOD OF CONSTRUCTION WAS MENTIONED AS 12-05 TO 31-03-2007. THUS ON THIS COUNT ITSELF NO ADDITION IS SUSTAINABLE, AND THE ENTIRE A DDITION DESERVES TO BE QUASHED. 8. ATTENTION OF THE CIT(A) WAS DRAWN TO THE DECISIO N OF THE HYDERABAD TRIBUNAL IN THE CASE OF VINOD KUMAR AGARWAL 77 TTJ 943 WHEREIN IT WAS HELD THAT ASSESSMENT OF AMOUNT AS UNEXPLAINED INVES TMENT SHOULD BE WITH REFERENCE TO FINANCIAL YEAR, DURING WHICH THE CONST RUCTION TOOK PLACE. 9. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE BEING A CHARITABLE TRUST, CONSTRUCTED THE MULTIPURPOSE COMMUNITY HALL FOR THE PURPOSE OF OBJECTS OF THE TRUST. THE ASSESSEE HAS APPLIED ITS INCOME FOR THE CONSTRUCTION OF THIS HALL WHICH IS USED FOR THE OBJECTS OF THE TRUST. T HE ASSESSEE REFERRED TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN SATYA VIJAYA PATEL HINDU DHARMASHALA TRUST VS CIT, 86 ITR 683 (GUJ) WHEREIN IT WAS HELD AS UNDER :- ITA NO. 1107/BANG/2013 PAGE 6 OF 10 WHERE THE DOMINANT OBJECT IN CREATING THE TRUST WA S TO ESTABLISH DHARMASHALA IT WAS HELD THAT USE OF THE TRUST MONEY IS CONSTRUCTION OF A NEW DHARMASHALA WAS APPLICATION O F INCOME OF THE TRUST PROPERTIES FOR CARRYING OUT A CHARITABLE PURPOSE OF THE TRUST 10. IT WAS FURTHER POINTED OUT THAT IN THE FOLLOWI NG CASES, APPLICATION OF SURPLUS FUNDS IN CONSTRUCTION OF ADDITIONAL BUILDIN GS WITH THE PURPOSE OF LETTING THEM OUT AND UTILIZING THE RENT FOR THE OBJ ECTS OF THE TRUST WOULD AMOUNT TO APPLYING FUNDS FOR RELIGIOUS AND CHARITAB LE PURPOSES:- CIT V. ST. GEORGE FORANA CHURCH (1988) 170 ITR 62 ( KER) THIRUPPANI TRUST (SRM MCTM) V. CIT (1998) 230 ITR 6 36 (SC) 11. IN ANY CASE AND WITHOUT PREJUDICE, THE ASSESSEE SUBMITTED THAT IF AT ALL ANYTHING IS ADDED TO INCOME ON ACCOUNT OF UNDER VALUATION OF CONSTRUCTION, THE CONSTRUCTION BEING FOR THE OBJECT S OF THE TRUST, THE ADDITION WOULD AMOUNT TO APPLICATION OF INCOME FOR CHARITABL E PURPOSE WHICH WOULD BE EXEMPT U/S. 11 OF THE ACT. 12. THE ASSESSEE ALSO RELIED ON THE DECISION OF BAN GALORE BENCH OF THE TRIBUNAL IN THE CASE OF CIT V. M/S. MBA NAHATA CHARITABLE TRUST IN ITA 11 8 & 112 / BANG/06 WHEREIN IT WAS HELD THAT, EVEN IF THE ADDITIONS ARE MADE U/S. 68 OF THE ACT, IF THE TRUST HAD APPLI ED ENTIRE DONATIONS FOR CHARITABLE PURPOSES. THE OBJECTS AND ACTIVITIES OF THE ASSESSEE TRUST WERE NOT DOUBTED / DISPUTED. THUS THE ADDITION MADE WAS TREATED AS APPLICATION OF INCOME AND ELIGIBLE FOR EXEMPTION U/S. 11 OF THE ACT. ITA NO. 1107/BANG/2013 PAGE 7 OF 10 13. RELYING ON THE ABOVE RATIO, THE ASSESSEE SUBMIT TED THAT IN ANY CASE AND WITHOUT PREJUDICE, IF THE ADDITIONS ARE CONFIRM ED, THE SAME IS ELIGIBLE FOR EXEMPTION U/S. 11 OF THE ACT, AS THE CONSTRUCTION M ADE IS FOR THE OBJECTS OF THE TRUST. 14. THE LD. CIT(APPEALS), FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF MBA NAHATA CHARITABLE TRUST (SUPRA) , HELD THAT EVEN IF THE ADDITION IS SUSTAINED, SINCE THE ASSESSEE HAS UTILI SED THE AMOUNT IN CONSTRUCTION OF A MARRIAGE HALL, IT IS TO BE HELD A S APPLICATION OF INCOME FOR THE OBJECTS OF THE TRUST AND THEREFORE THE SAME WOU LD BE ELIGIBLE FOR EXEMPTION U/S. 11 OF THE ACT. ACCORDINGLY, THE ADD ITION MADE BY THE AO WAS DELETED. THE LD. CIT(A) DID NOT GO INTO OTHER ISSUES RAISED BY THE ASSESSEE IN THE SUBMISSIONS FILED BEFORE HIM. 15. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 16. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR AND THE LD. COUNSEL FOR THE ASSESSEE. THE LD. DR REITERATED THE STAND OF T HE REVENUE AS REFLECTED IN GROUNDS NOS. 1 TO 5. IN THESE GROUNDS, THE ALLE GATION OF THE REVENUE IS THAT CONSTRUCTION OF MULTIPURPOSE HALL/KALYANA MANT APAM WAS NOT IN FURTHERANCE OF THE OBJECTS OF THE TRUST. PERUSAL O F THE ASSESSMENT ORDER SHOWS THAT THE AO NEVER RAISED SUCH AN OBJECTION IN THE ORDER OF ASSESSMENT. IN PARA 4 OF HIS ORDER, THE AO HAS OBS ERVED AS FOLLOWS:- ITA NO. 1107/BANG/2013 PAGE 8 OF 10 4. THE ASSESSEE HAS CONTENDED IN HIS LETTER AT PARA 29 THAT IN CASE ANYTHING IS ADDED TO INCOME O N ACCOUNT OF UNDER VALUATION OF CONSTRUCTION, THE CONSTRUCTION BEING FOR THE OBJECTS OF THE TRUST, AN Y SUCH ADDITION WOULD BE EXEMPT U/S. 11 OF THE INCOME TAX ACT. IN THIS CONNECTION, THE ASSESSEES ATTENTION IS DRAWN TO THE FACT THAT ANY DONATION RECEIVED BY THE ASSESSEE AFTER 1.4.2006, SUCH DONATIONS WILL BE TER MED AS ANONYMOUS DONATION AND WILL BE SUBJECTED TO TAX. I N THIS CASE, THE ASSESSEE MERELY SAYS THAT ANY INCOME IS GOING TO BE ADDED ON ACCOUNT OF UNDER VALUATION OF CONSTRUCTION WOULD AMOUNT TO APPLICATION OF INCOME FOR CHARITY PURPOSES IS INCORRECT AND WILL NOT QUALIFY FOR EXEMPTION U/S. 11 OF THE INCOME TAX ACT. THUS, THE DIFFERENCE OF RS.55,02,163/- IS BROUGHT TO TAX AS UNDISCLOSED INVESTMENT FROM UNKNOWN SOURCES UNDER SECTION 69B OF THE INCOME TAX ACT, 1961. 17. IT COULD BE SEEN FROM THE ABOVE THAT THE AO HAS ACCEPTED THE FACT THAT CONSTRUCTION OF MARRIAGE HALL WAS IN FURTHERAN CE OF THE OBJECTS OF THE TRUST AND THAT IT WAS FOR CHARITABLE PURPOSES. THE OBJECTION OF THE AO WAS ONLY THAT SINCE THE ASSESSEE HAS NOT ESTABLISHED TH AT THE FUNDS CAME IN THE FORM OF DONORS WHO COULD BE IDENTIFIED, IT WOULD BE AN ANONYMOUS DONATION AND THE SAME WOULD BE TAXABLE U/S. 115BBC OF THE AC T. WE ARE OF THE VIEW THAT GROUNDS NO.1 TO 5 RAISED BY THE REVENUE D OES NOT ARISE OUT OF THE IMPUGNED ORDER OR THE ORDER OF THE AO AND ARE THERE FORE HEREBY REJECTED. 18. WITH REGARD TO GROUND NOS.6 & 7, WE ARE OF THE VIEW THAT THE AFORESAID GROUND DOES NOT REQUIRE ANY ADJUDICATION FOR THE FOLLOWING REASONS. IT IS SEEN FROM THE REPORT OF THE DVO TO WHOM A REFERENCE WAS MADE BY THE AO, A COPY OF WHICH IS PLACED AT PAPERB OOK PAGES 49 TO 51, THAT THE DVO MENTIONS THE PERIOD OF CONSTRUCTION AS FOLLOWS:- ITA NO. 1107/BANG/2013 PAGE 9 OF 10 3.5 PERIOD OF CONSTRUCTION : AS PER THE LEDGER ACCOUNT THIS BUILDING WAS CONSTRUCTED DURING 12/05 TO 31/03/07. 19. IT IS FURTHER SEEM FROM THE SCHEDULE OF FIXED A SSETS AND DEPRECIATION FOR THE YEAR ENDED 31.3.2008 THAT THE OPENING BALAN CE OF THE BLOCK OF ASSETS FOR BUILDING AS ON 1.4.2007 IS RS.57,20,000 AND THERE WAS NO ADDITION IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2008 -09 AND DEPRECIATION HAS BEEN CLAIMED ON THE OPENING WDV AT 10% AND THE CLOS ING BALANCE AS ON 31.3.2008 IN THE BLOCK OF ASSETS FOR BUILDING IS RS .51,48,000. IT IS THUS CLEAR THAT NO INVESTMENT WAS MADE IN CONSTRUCTION D URING THE PREVIOUS YEAR RELEVANT TO A.Y. 2008-09. AS RIGHTLY CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE, ADDITION U/S. 69B OF THE ACT CAN BE MADE ONLY IN THE ASSESSMENT YEAR RELEVANT TO PREVIOUS YEAR IN WHICH THE ASSESSE E IS FOUND TO HAVE MADE ANY INVESTMENTS. SINCE, ADMITTEDLY, NO INVESTMENTS WERE MADE IN CONSTRUCTION BY THE ASSESSEE IN THE PREVIOUS YEAR R ELEVANT TO A.Y. 2008-09, NO ADDITION CAN BE MADE U/S. 69B OF THE ACT. THIS A SPECT WAS RAISED BY THE ASSESSEE IN THE PROCEEDINGS BEFORE THE CIT(A), BUT WAS NOT CONSIDERED BY THE CIT(A). IN OUR VIEW, SINCE INVESTMENT IN QUEST ION WAS NOT MADE DURING THE PREVIOUS YEAR, THE ADDITION MADE BY THE AO CANN OT BE SUSTAINED. 20. FOR THE AFORESAID REASONS, WE UPHOLD THE ORDER OF THE CIT(A) AND HOLD THAT GROUNDS 6 & 7 RAISED BY THE REVENUE DO NO T REQUIRE ANY CONSIDERATION. ITA NO. 1107/BANG/2013 PAGE 10 OF 10 21. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF OCTOBER , 2014 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 10 TH OCTOBER , 2014 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.