NEKRTC Passenger Accident Relief Fund Trust, Gulbarga V. Assistant Commissioner of income tax, Gulbarga

ITA 126/BANG/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5409 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 19-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHREEHARI KUTSA
• Keywords: Charitable institution
• Section: 12A; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH - SMC A BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER I.T.A. NO. 126 /BANG/201 7 (ASSESSMENT YEAR : 20 10 - 11 ) M/S. NEKRTC PASSENGER ACCIDENT RELIEF FUND TRUST, NEKRTC CENTRAL OFFICE, SARIGE SADAN, MA IN ROAD, KALABURAGI - 585 102 PAN AAATN 6627L VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1, KALABURAGI. APPELLANT RESPONDENT. APPELLANT BY : SHRI SHREEHARI KUTSA, C.A. RESPONDENT BY : SHRI AR.V.SREENIVASAN, JCIT (D.R) DATE OF H EARING : 23.03 .2017. DATE OF P RONOUNCEMENT : 28 .04. 201 7 . O R D E R PER SHRI VIJAY P AL RAO, J. M. : THIS APPEAL BY THE ASS ESSEE IS DIRECTED AGAINST THE ORDER DT.2 5.11. 2016 OF COMMISSIONER OF INCOME TAX (APPEALS), GULBARGA FOR THE ASSESSMENT YEAR 2010 - 11 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 2 ITA NO. 126 /BANG/ 2017 NEKRTC PAR FUND TRUST 3 ITA NO. 126 /BANG/ 2017 NEKRTC PAR FUND TRUST 3. THE ASSESSEE IS A REGISTERED CHARITABLE TRUST CREATE D BY THE ORDER OF GOVT. OF KARNATAKA. THE ASSESSEE IS ALSO REGISTERED UNDER SECTION 12A OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') W.E.F. 15.1.2004 VIDE ORDER DT.8.3.2004. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE TRUST HAS CREDITED RS .6 CRORES TO THE RECEIPTS AND PAYMENT ACCOUNT ON MATURITY OF FIXED DEPOSIT FROM BANKS AND FURTHER AN AMOUNT OF RS.2.5 CRORES HAS BEEN DEBITED TO THE EXPENDITURE ACCOUNT TOWARDS DEPOSITS IN NEKRTC CENTRAL OFFICE, GULBARGA. THUS THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE TRUST HAS INVESTED ITS FUNDS IN VIOLATION OF CLAUSE (F) OF SUB - SECTION 2 OF SECTION 13 OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') AS THE FUNDS INVESTED ARE BEING USED OR APPLIED FOR THE BENEFIT OF A PERSON REFERRED TO IN SEC TION 13(3) OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT NEKRTC, GULBARGA IS THE SOLE FUND PROVIDER TO THE ASSESSEE TRUST AND THEREFORE THE ASSESSEE IS NOT ELIGIBLE TO THE EXTENT CLAIMED OF RS.18,81,498 UNDER SECTION 11 OF THE ACT. THE ASSESSEE CHALLEN GED THE ACTION OF THE A.O. BEFORE THE CIT(APPEALS) AND SUBMITTED THAT THE PROVISIONS OF SECTION 13(1)( F ) ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE AS 4 ITA NO. 126 /BANG/ 2017 NEKRTC PAR FUND TRUST BOTH THE ASSESSEE TRUST AND NEKRTC ARE REGISTERED UNDER SECTION 12A OF THE ACT THEREFORE NO SUBSTANTI AL INTEREST IS INVOLVED BETWEEN THEM. FURTHER IT WAS CONTENDED THAT THIS AMOUNT OF RS.2.5 CRORES AND NET AMOUNT OF RS.1.97 CRORES TO NEKRTC IS ONLY 1.22% OF THE CAPITAL OF THAT CONCERN. THEREFORE IT DOES NOT EXCEED 5% OF THE CAPITAL OF THE NEKRTC. THE C IT (APPEALS) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER BY HOLDING THAT NEKRTC HAS SUBSTANTIAL INTEREST IN THE ASSESSEE TRUST WITHIN THE MEANING OF SECTION 13(3)(B) OF THE ACT AND THEREFORE THE D EPOSITS MADE OF RS.2.5 CRORES WITH THE NEKRTC, GULBARGA ATTRACTS THE PROVISIONS OF SECTION 13(1)(C)(II) OF THE ACT AND CONSEQUENTLY THE EXEMPTION CLAIMED UNDER SECTION 11 OF THE ACT OF RS.18,81,498 FOR THE YEAR UNDER CONSIDERATION IS RIGHTLY DISALLOWED. 4. BEFORE THE TRIBUNAL, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT BOTH THE ASSESSEE AS WELL AS NEKRTC, GULBARGA ARE REGISTERED UNDER SECTION 12A OF THE ACT. THEREFORE LENDING TO SUCH CHARITABLE INSTITUTION AMOUNTS TO APPL ICATION AND THEREFORE THE PROVISIONS OF SECTION 13 OF THE ACT HAVE BEEN WRONGLY INVOKED. HE HAS RELIED UPON THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF JCIT VS. BAKTAVATSALAM MEMORIAL TRUST 30 ITR (TRIB) 264. HE HAS RELIED UPON THE DECISION OF MUMBAI TRIBUNAL IN THE CASE 5 ITA NO. 126 /BANG/ 2017 NEKRTC PAR FUND TRUST OF ST. JOSEPH S TECHNICAL SCHOOL VS. ADIT (EXEMPTIONS) 42 ITR (TRIB) 67. THE LEARNED AUTHORISED REPRESENTATIVE HAS THEN RELIED UPON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF DIT (EXEMPTIONS) VS. ACM E EDUCATIONAL SOCIETY 326 ITR 146. THUS HE HAS CONTENDED THAT WHEN BOTH THE INSTITUTIONS ARE REGISTERED UNDER SECTION 12A OF THE ACT THEN LENDING TO THE OTHER CHARITABLE INSTITUTION AMOUNTS TO APPLICATION OF INCOME AND THE PROVISIONS OF SECTION 13 ARE NOT A TTRACTED. ALTERNATIVELY, HE HAS SUBMITTED THAT AS PER SECTION 13(4) OF THE ACT, IF THE INVESTMENT MADE DOES NOT EXCEED 5% OF THE CAPITAL OF THE INVESTEE CONCERN THEN THE EXEMPTION UNDER SECTION 11 AND 12 ARE NOT TO BE DENIED IN RELATION TO ANY OTHER INCOM E. HE HAS REFERRED TO THE CAPITAL OF NEKRTC, BELGAUM IS ABOUT RS.204 CRORES AND THEREFORE THIS AMOUNT OF RS.2.5 CRORES IS ONLY 1.22% OF THE CAPITAL OF THE NEKRTC. HE HAS FURTHER CONTENDED THAT THE SAID LOAN AMOUNT HAS BEEN REP AID BY NEKRTC IN THE FOLL OWING YEAR I.E. F.Y. 2010 - 11. THE QUESTION OF BRINGING THE SAME TO TAX DOES NOT ARISE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. HE HAS ALSO PLACED RELIANCE ON CBDT CIRCULAR NO.100 DT.24.1.1973 AND SUBMITTED THAT CBDT HAS EXPLAINED THAT ADVANCE OF LOAN TO TRUST HAVING SIMILAR OBJECTS AMOUNTS TO APPLICATION OF INCOME. 6 ITA NO. 126 /BANG/ 2017 NEKRTC PAR FUND TRUST 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT NEKRTC IS NOT A TRUST AND THE OBJECT ARE NOT SAME. HE HAS REFERRED TO THE FINDING OF THE CIT (APPEALS) AND SUBMITTED THAT THE CONDITIONS AS PROVIDED UNDER SECTION 13(4) ARE SATISFIED AS NEKRTC HAS SUBSTANTIAL INTEREST IN THE ASSESSEE AND THEREFORE THE ADVANCE GIVEN TO THE SAID CONCERN FALLS IN THE CATEGORY OF THE FUND PROVIDED TO A PERSON OR CONCERN HAVING SUBSTANTIAL INTEREST IN THE ASSESSEE TRUST. HE HAS RELIED UPON THE DECISION OF HON'BLE DELHI HIGH COURT JUDGMENT IN THE CASE OF DIT (EXEMPTIONS) VS. CHARANJIVI CHARITABLE TRUST 223 TAXMAN 71 AND SUBMITTED THAT THE ADVANCE GIVEN TO THE PERSON HAVING SUBSTANTIAL INTER EST AMOUNTS TO VIOLATION OF PROVISIONS OF SECTION 13(1)(C)(II) R.W.S 13(2) AND SECTION 13(3) OF THE ACT. ACCORDINGLY THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. HE HAS RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 6. I HA VE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. AS FAR AS THE RELATION BETWEEN THE ASSESSEE TRUST AND NEKRTC IS CONCERNED THERE IS NO DISPUTE THAT NEKRTC IS HAVING A SUBSTANTIAL INTEREST IN THE ASSESSEE TRUST. HOWEVER THE ASSESSEE HAS CLAIMED THAT WHEN NEKRTC IS REGISTERED UNDER SECTION 12A OF THE ACT THEN THE PROVISIONS OF SECTION 13 ARE NOT ATTRACTED IN RESPECT OF THE ADVANCE GIVEN BY THE ASSESSEE TO NEKRTC . THE 7 ITA NO. 126 /BANG/ 2017 NEKRTC PAR FUND TRUST ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND ON TH E POINT THAT THIS ADVANCE OF RS.2.5 CRORES IS ONLY 1.22% OF THE CAPITAL OF NEKRTC AND FURTHER WHEN NEKRTC IS ALSO REGISTERED UNDER SECTION 12A OF THE ACT THEN THIS ADVANCE WIL BE CONSIDERED AS APPLICATION AND THEREFORE THE EXEMPTION UNDER SECTION 11 CANNOT BE DENIED. THE LEARNED AUTHORISED REPRESENTATIVE HAS ALSO FILED AN ORDER DT.8.3.2004 PASSED UNDER SECTION 12A OF THE ACT IN THE CASE OF NEKRTC AND SUBMITTED THAT BOTH ASSESSEE AS WELL AS NEKRTC ARE REGISTERED UNDER S ECTIO N 12A OF THE ACT. B OTH THESE ASPECTS REGARDING NEKRTC REGISTERED UNDER SECTION 12A AS WELL AS AMOUNT OF RS.2.5 CRORES ADVANCE BY THE ASSESSEE IS ONLY 1.22% OF CAPITAL OF NEKRTC, GULBARGA HAVE NOT BEEN EXAMINED EITHER BY THE ASSESSING OFF ICER OR BY THE CIT (APPEALS). T HEREFORE , A PROPER VERIFICATION AND EXAMINATION OF THESE FACTS IS REQUIRED IN THIS CASE. AS FAR AS THE DECISIONS RELIED UPON BY THE ASSESSEE, THE SAME CAN BE APPLIED ONLY WHEN THESE TWO FACTS ARE PROPERLY VERIFIED AND ACCEPTED BY THE REVENUE THAT BOTH THE INSTITUTION S ARE REGISTERED UNDER SECTION 12A AND FURTHER THE AMOUNT IN QUESTION IS LESS THAN 5% OF THE TOTAL CAPITAL OF NEKRTC, GULBARGA. HENCE IN VIEW OF THE FACT THAT THESE TWO ASPECTS HAVE NOT BEEN CONSIDERED BY THE AUTHORITIES BELOW, THIS MATTER IS REMANDED TO THE RECORD OF THE CIT (APPEALS) FOR CONSIDERING THESE FACTS AND DECIDE THE ISSUE IN ACCORDANCE WITH THE PROVISIONS OF LAW. NEEDLESS TO 8 ITA NO. 126 /BANG/ 2017 NEKRTC PAR FUND TRUST SAY AN OPPORTUNITY OF HEARING BE AFFORDED TO THE ASSESSEE BEFORE PASSING THE ORDER. 7. IN THE RESULT, THE APPEAL I S ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH APRIL, 201 7 . SD/ - (VIJAY PAL RAO) JUDICIAL MEMBER BANGALORE, DT. 28 .04 .2017. *REDDY GP COPY TO : 1 . APPELLANT 2 . RESPONDENT 3 . C.I.T. 4 . CIT(A) 5 . DR, ITAT, BANGALORE. 6 . GUARD FILE. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL BANGALORE.