Bandel Auxilium Educational Society, Kolkata V. JCIT, Range-2, Hooghly

ITA 1271/KOL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7933 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 04-09-2012
• Court: TRIBUNAL
• Department Lawyers: A P ROY
• Assessee Lawyers: MIRAJ D SHAH FCA LD AR
• Keywords: Charitable institution; Opportunity of being heard; Principle of natural justice
• Section: 12AA; 11

Judgement Text

ITA NOS..1271 & 1272/KOL/2012-C-AM M/S. BANDELL AUX ILIUM EDUCATIONAL SOCIETY 1 , IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH: KO LKATA ( ) , , BEFORE HONBLE SRI MAHAVIR SI NGH, JM & HONBLE SRI SHAMIM YAHYA, AM I.T.A NOS. 1271 & 1272/KOL/2012 / ASSESSMENT YEARS :2008-09 & 2009-10 M/S. BANDEL AUXILIUM EDUCATIONAL VS. J.C. I.T, RANGE-2, HOOGHLY SOCIETY PAN : AAATB 8373R ( $ /APPELLANT ) ( %&$ / RESPONDENT ) $ / FOR THE APPELLANT/ ASSESSEE : / SHRI MIRAJ D.SHAH, FCA, LD.AR %&$ / FOR THE RESPONDENT/DEPARTMENT: / SHRI A.P ROY, SR.DR + , /DATE OF HEARING: 15-09-2014 + , /DATE OF PRONOUNCEMENT: 14-10-2014 / ORDER , SHRI SHAMIM YAHYA, AM THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAIN ST THE RESPECTIVE ORDERS OF THE LD. CIT(A) BOTH DATED 04/07/2012 PERTAINING TO ASSESS MENT YEARS 2008-09 AND 2009-10. 2. SINCE SOME OF THE ISSUES ARE COMMON, THE APPEA LS WERE HEARD TOGETHER. THESE ARE BEING DISPOSED OFF BY A CONSOLIDATED ORDER FOR TH E SAKE OF CONVENIENCE. 3. ONE COMMON ISSUE RAISED IN BOTH THE APPEALS IS THAT THE AO HAS ERRED IN MAKING ADDITION OF RS. 84,00,000/- AS INCOME OF THE ASSESS EE. SINCE THE ISSUES ARE COMMON AND FACTS ARE ANALOGICAL, WE ARE ADJUDICATING THE ISSUE WITH REFERENCE TO THE FACTS AND FIGURES FROM ASSESSMENT YEAR 2008-09. 4. THE SALESIAN SISTERS, A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT WERE HAVING DIFFERENT UNITS WHICH WERE IMPARTING EDUCAT ION AND WERE CARRYING ON OTHER RELATED ACTIVITIES. AS PER DECISION OF THE GOVERNING BODY O F THE SALESSIAN SISTERS TAKEN ON 29/08/2003 AND DULY APPROVED BY THE ANNUAL GENERAL BODY MEETIN G HELD ON 13/09/2003, TWO UNITS, VIZ. ITA NOS..1271 & 1272/KOL/2012-C-AM M/S. BANDELL AUX ILIUM EDUCATIONAL SOCIETY 2 AUXILIUM CONVENT SCHOOL, BANDEL AND AUXILIUM CONVEN T, BANDEL WERE REGISTERED AS A NEW SOCIETY UNDER THE NAME OF BANDEL AUXILIUM EDUCATI ONAL SOCIETY U/S. 12AA OF THE I.T ACT. THE APPELLANT-SOCIETY, BANDEL AUXILIUM EDUCATIONAL SOCIETY, IS AN EDUCATIONAL INSTITUTION AND ITS MAIN ACTIVITY IS IMPARTING EDUCATION BY RUNNIN G SCHOOLS. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE APP ELLANT-SOCIETY CLAIMED TO HAVE DONATED ON DIFFERENT DATES AN AGGREGATE AMOUNT OF RS.84,00,00 0/- TO THE SALESSIAN SISTERS. CONFIRMATION TO THIS EFFECT WAS GIVEN BY THE DONE, THE SALESIAN SISTERS, THAT IT RECEIVED DONATIONS OF RS.48 LAKHS FROM AUXILIUM CONVENT SCHOOL, BANDEL AND RS.3 6 LAKHS FROM BANDEL AUXILIUM EDUCATIONAL SOCIETY, TOTALING TO RS.84 LAKHS. ACCO RDING TO THE ASSESSING OFFICER, THE DONATION GIVEN TO THE SALESIAN SISTERS, BEING THE FOUNDER O F THE APPELLANT ENTITY WAS IN VIOLATION OF THE PROVISIONS OF SEC. 13 R.W.S 13(3)(II) OF THE I.T AC T AND IT IS IMMATERIAL AS TO HOW THE DONATIONS HAVE BEEN USED BY THE FOUNDER WHICH IS A SEPARATE E NTITY. ACCORDING TO HIM, THEREFORE, EXEMPTION ENVISAGED IN THE PROVISIONS OF SECTIONS 1 1 AND 12 OF THE I.T ACT WILL NOT APPLY IN THE CASE OF THE APPELLANT-SOCIETY FOR THE ASSESSMENT YE AR UNDER CONSIDERATION, WHICH PROMPTED HIM TO ASSESS THE APPELLANT AS A SOCIETY AS PER OTHER PROVISIONS OF THE ACT, TREATING IT AS AOP AND ULTIMATELY ADDING THE ENTIRE AMOUNT OF CORPUS, DO NATION OF RS. 84 LAKHS TO ITS TOTAL INCOME FOR TAXATION AT THE NORMAL RATE OF TAX PROVIDED F OR THIS PURPOSE. 5. BEFORE THE LD.CIT(A) THE ASESSEE HAS SUBMITTED A N ELABORATE SUBMISSION WITH REGARD TO THE ABOVE. CONSIDERING THE ASSESSEES SUBMISSIONS THE LD.CIT(A) DID NOT DEAL WITH THE GROUNDS AND BASIS ON WHICH THE AO HAS MADE THE ADDITION. H OWEVER, THE LD.CIT(A) CONSIDERED A DIFFERENT ASPECT. HE OBSERVED THAT THERE IS NO DEN IAL OF THE FACT THAT THE SALESIAN SISTERS AND THE APPELLANT SOCIETY BOTH ARE REGISTERED CHARITABL E SOCIETIES FOR CARRYING ON THEIR RESPECTIVE OBJECTS. THE LD.CIT(A) OBSERVED THAT HOWEVER, IT IS IMPERATIVE TO NOTE THAT FOR ANY DONATION TO BE CONSIDERED AS EXEMPT THE CRUCIAL POINT TO BE SA TISFIED IS THAT IT MUST BE VOLUNTARY. IN OTHER WORDS, THE ELEMENT OF QUID PRO QUO MUST BE TOTALLY ABSENT. THE LD.CIT(A) PROCEEDED TO EXAMINE THE LEASE AGREEMENT DATED 01/04/2005 EXECU TED BETWEEN THE SALESIAN SISTERS, LICENSOR AND THE APPELLANT SOCIETY, LICENSEE. THE L D. CIT(A) OBSERVED THAT THE LICENSOR WAS OWNING IMMOVABLE ASSETS AT AUXILIUM CONVENT SCHOO L, BANDEL AND AUXILIUM CONVENT, BANDEL AND AFTER THE FORMATION AND REGISTRATION OF THE LICENSEE (APPELLANT-SOCIETY) AS A SEPARATE ITA NOS..1271 & 1272/KOL/2012-C-AM M/S. BANDELL AUX ILIUM EDUCATIONAL SOCIETY 3 SOCIETY, THE LICENSOR HANDED OVER THE SAID IMMOVAB LE ASSETS TO THE APPELLANT LICENSEE AND GRANTED LEASE AND LICENSE TO THE LICENSEE TO USE T HOSE IMMOVABLE ASSETS WITH CONTINUITY OF THE OWNERSHIP REMAINING WITH THE LICENSOR, I.E. THE SAL ESIAN SISTERS. IT WAS ALSO AGREED BETWEEN THE LICENSOR AND THE LICENSEE THAT THE LICENSEE (AP PELLANT SOCIETY) WILL HAVE TO PAY NO RENT TO THE LICENSOR FOR THE USE OF THE IMPUGNED IMMOVABLE ASSETS. THEREFORE, LD.CIT(A) HELD THAT THE NATURE OF DISBURSEMENT OF AMOUNT IN THE SUN OF RS. 84 LAKHS WAS NOTHING BUT RENT PAID TO THE LICENSEE TO THE LICENSOR AND, THEREFORE, CLAIM OF DONATION MADE BY THE APPELLANT-SOCIETY WAS REJECTED AS NOT FALLING WITHIN THE SCOPE OF AMBIT OF THE PROVISIONS OF S. 11 & 12 OF THE ACT AND THE ADDITION OF RS. 84 LAKHS TO THE TOTAL INCOME OF THE APPELLANT SOCIETY WAS SUSTAINED, THOUGH ON OTHER GROUNDS. LD.CIT(A) ALSO OBSERVED THAT THE APPELLANT SOCIETY INSPITE OF SHOW CAUSE ISSUED VIDE NOTE SHEET ENTRY DATED 28.05.2012 DID NOT SUBMIT ANY REPLY. 6. AGAINST THE ABOVE ORDER OF THE LD.CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE LD. COUNSEL AND PERUSED THE RECORD. WE FIND THAT IN THIS CASE THE AO HAS MADE THE ADDITION OF RS. 84 LAKHS, WHICH WAS CLAIMED BY THE ASSESSEE AS DONATION GIVEN TO DONEE, THE SALESIAN SISTERS. THE AO HELD THAT DONATION WAS RECEIVED IN CONTRAVENTION OF PROVISIONS OF SECTION 13 R.W.S 13 (3)(A)/(B) OF THE I.T ACT 1961. HENCE, THE PAYMENT OF RS. 84 LAKHS TO THE SALESIAN SISTERS BE ING FOUNDER WAS IN VIOLATION OF PROVISIONS OF SECTION 13 R.W.S 13(3)(A) OF THE I.T ACT 1961 B ECAUSE THE SALESIAN SISTERS HAD ALSO CONTRIBUTED RS.1,20,270/- (MORE THAN RS.50,000/-). THEREFORE, THE AO HELD THAT THE DONATION TO THE SALESIAN SISTERS WAS IN VIOLATION OF PROVISIO NS OF SECTION 13 R.W.S 13(3)(B) OF THE ACT. BEFORE THE LD. CIT(A) THE ASSESSEE HAS MADE AN ELAB ORATE SUBMISSIONS AGAINST THE ABOVE FINDINGS OF THE AO. CONSIDERING THE ABOVE, THE LD. CIT(A) HAS CHOSEN TO IGNORE THE BASIS AND FINDING OF THE AO FOR MAKING SUCH ADDITION. HENCE, IN THIS REGARD THERE IS CONSIDERABLE COGENCY IN THE SUBMISSIONS OF THE LD. COUNSEL OF TH E ASSESSEE THAT THE LD.CIT(A) HAS SET ASIDE THE FINDING OF THE AO. IT IS ALSO NOTED THAT THE RE VENUE IS NOT IN APPEAL AGAINST THE ACTION OF THE LD.CIT(A). 7.1 THE LD. CIT(A) HELD THAT DONATION WAS ACTUAL LY PAYMENT OF RENT FOR THE PREMISES OF THE SALESIAN SISTERS BEING USED BY THE ASSESSEE. WE FIND THAT THE AO HAS NOT MADE OUT ANY ITA NOS..1271 & 1272/KOL/2012-C-AM M/S. BANDELL AUX ILIUM EDUCATIONAL SOCIETY 4 SUCH CASE. NOW WE FIND THAT IN THE ASSESSEES GROU NDS OF APPEAL THERE IS ISSUE OF VIOLATION OF NATURAL JUSTICE. WE FIND THAT THERE IS CONSIDERABL E COGENCY IN THE SUBMISSIONS OF THE ASSESSEE. THE LD.CIT(A) HAS ALSO NOTED THAT THE ASSESSEE SOCI ETY INSPITE OF SHOW CAUSE ISSUED VIDE NOTE SHEET ENTRY DATED 28.05.2012 DID NOT SUBMIT ANY REP LY. THUS, IT IS CLEAR THAT THE ASSESSEE HAS NOT BEEN GIVEN ADEQUATE OPPORTUNITY TO PUT FORTH IT S SUBMISSIONS AGAINST THE LINE OF ACTION BEING TAKEN BY THE LD.CIT(A), WHICH IS DIFFERENT F ROM THE ONE ADOPTED BY THE AO. IN THIS REGARD, WE NOTE THAT THE LD. COUNSEL OF THE ASSESS EE HAS VEHEMENTLY ARGUED THAT THIS ACTION OF THE LD.CIT(A) IS NOT SUSTAINABLE. THE LD. COUNSEL OF THE ASSESSEE HAS INTER-ALIA SUBMITTED THAT IF THE DONATION IS TREATED AS RENT PAID, THE APPLICATI ON FOR THE PURPOSE OF RENT FOR THE PREMISES OF AN EDUCATIONAL INSTITUTION DOES NOT BENEFIT FOR TH E RECIPIENT RATHER FOR BENEFIT OF THE ASSESSEE TO RUN THE SCHOOL. IN THIS REGARD, THE LD. COUNSEL O F THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS :- * SMT. CHANDRAKALA SOMANY CHARITABLE TRUST (1991) 38 ITD 70 (BOM) VS.SEVENTH INCOME-TAX OFFICER [ITAT BOMBAY] * VIDYA PRATISTHAN (2011) 44 SOT 90 (PUNE) VS.DY. COMMISSIONER OF INCOME-TAX [ITAT PUNE] 7.2 UPON CAREFUL CONSIDERATION, WE ARE OF THE CONSI DERED OPINION THAT THE ASSESSEE HAS NOT BEEN GIVEN ADEQUATE OPPORTUNITY TO MAKE ITS SUBMISS ION. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION THAT INTEREST OF JUSTICE WOULD BE SERVED, IF THE ISSUE OF TREATMENT OF DONATION OF RS. 84 LAKHS AS RENT PAID AND CONSEQUE NT DISALLOWANCE THEREOF IS REMITTED TO THE FILE OF THE AO AND ALSO THE CONSEQUENT REJECTION O F THE ASSESSEE SOCIETYS CLAIM AS NOT FALLING WITHIN THE SCOPE OF AMBIT OF PROVISIONS OF SECTION 11 & 12 OF THE I.T ACT 1961. ACCORDINGLY, THIS ISSUE IS REMITTED TO THE FILE OF THE AO . NEE DLESS TO ADD THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 8. ANOTHER GROUNDS RAISED IN ITA NO.1271/KOL/2012 FOR THE ASSESSMENT YEAR 2008-09 ARE THAT THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADD ITIONS OF RS. 10,000/- AND 1,79,904/- ON THE GROUNDS IN VIOLATION OF SECTION 13 OF THE IT ACT 19 61. ITA NOS..1271 & 1272/KOL/2012-C-AM M/S. BANDELL AUX ILIUM EDUCATIONAL SOCIETY 5 9. ON THIS ISSUE THE AO HAS NOTED THAT THE ASSESSE E SOCIETY HAS PAID RS. 10,000/- TO ARCH BISHOP OF THE DIOCESE, WHICH IS A RELIGIOUS DONATIO N NOT CONNECTED WITH THE BUSINESS OF THE ASSESSEE. SIMILARLY, IT HAS BEEN HELD BY THE AO THA T A SUM OF RS.1,79,904/- PAID BY THE ASSESSEE AS DONATION AND CHARITY, WHICH IS NOT CON NECTED TO THE BUSINESS OF THE ASSESSEE. THEREFORE, HE DISALLOWED THIS AMOUNT. 10. AGAINST THE ABOVE ORDER BEFORE THE LD.CIT(A) TH E ASSESSEE HAS MADE ELABORATE SUBMISSIONS. HOWEVER, WE NOTE THAT THE LD.CIT(A) HA S NOT DEALT WITH THE SUBMISSION OF THE ASSESSEE. HE HAS SUMMARILY HELD THAT DONATION IS PA ID FOR THE RELIGIOUS PURPOSE AND NOT FOR THE ACTIVITY OF THE ASSESSEES BUSINESS. THE ADDITION S OF RS. 10,000/- AND RS.1,79,904/- MADE BY THE AO WAS CONFIRMED. 11. AGAINST THE ABOVE ORDER THE ASSESSSEEE IS IN A PPEAL BEFORE US. 12. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORD. WE FIND THAT THE ADDITION HAS BEEN MADE BY THE AO AND SUSTAINED BY THE LD. CIT( A) WITHOUT PROPERLY DEALING WITH THE SUBMISSIONS OF THE ASSESSEE. IT IS SETTLED LAW THA T EVEN ADMINISTRATIVE ORDERS HAVE TO BE CONSISTENT WITH THE RULES AND NATURAL JUSTICE. ACCO RDINGLY, WE REMIT THE ISSUE TO THE FILE OF THE AO. THE AO IS DIRECTED TO CONSIDER THE ISSUE AFRES H AFTER TAKING INTO ACCOUNT THE SUBMISSIONS OF THE ASSESSEE MADE BEFORE THE LD.CIT( A) AND OTHER SUBMISSION AS MAY BE SUBMITTED BY THE ASSESSEE. NEEDLESS TO ADD THE ASSE SSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. THIS ISSUE IS ALLOWED F OR STATISTICAL PURPOSE. 13. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE AS STATED ABOVE. . , ORDER PRONOUNCED IN THE OPEN COURT ON 14/10 /2014 SD/- SD /- [ , ] [ , ] [ MAHAVIR SINGH, JUDICIAL MEMBER ] [ SHAMIM YAHYA, ACCOUNTANT MEMBER ( , ) DATED : 14/10 /2014 ITA NOS..1271 & 1272/KOL/2012-C-AM M/S. BANDELL AUX ILIUM EDUCATIONAL SOCIETY 6 ** PRADIP SPS + %1 21 / COPY OF THE ORDER FORWARDED TO: 1. . $ / THE APPELLANT : M/S. BANDEL AUXILIUM EDUCATIONA L SOCIETY C/O D.J SHAH & CO, KALYAN BHAVAN, 2 ELGION ROAD, KOL-20. 2 %&$ / THE RESPONDENT- JCIT, RANGE-2, AAYKAR BHAVAN, G .T ROAD, CHINSURAH, HOOGHLY 712103. 3. 5. / THE CIT, 4. ( )/ THE CIT(A) % / DR, KOLKATA BENCH 6.GUARD FILE . &1 % / TRUE COPY, / BY ORDER, / ASSTT REGIST RAR