DCIT CENTRAL CIRCLE 1, MADURAI V. MAHASEMAM TRUST, MADURAI

ITA 1323/CHNY/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5735 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 01-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Charitable institution; Bad and doubtful debts; Assessment record; Condonation of delay; Set aside
• Section: 12; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . . . , , ' BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NOS.1323 TO 1325/CHNY/2019 ( ( /ASSESSMENT YEARS: 2013-14 TO 2015-16 THE DY. COMMISSIONER OF- INCOME TAX, CENTRAL CIRCLE-1, MADURAI. VS. M/S.MAHASEMAM TRUST, NO.2/47-B, MELUR ROAD, UTHANGUDI, MADURAI-625 107. [PAN: AAATM 7040 C ] ( + /APPELLANT) ( ,-+ /RESPONDENT) DEPARTMENT BY : MR. SRIDHAR DORA, CIT ASSESSEE BY : NONE (AD CARD FOR SERVICE OF HEARING NOTICE ON RECORD) / /DATE OF HEARING : 05.08.2019 / /DATE OF PRONOUNCEMENT : 30.09.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THESE ARE THE APPEALS FILED BY THE REVENUE DIRECTE D AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)-19, CHENNAI, IN ITA NOS.119, 120 & 121/17-18 DATED 11.01.2019 FO R THE AYS 2013-14 TO 2015-16. 2. THE APPEALS FILED BY THE REVENUE ARE DELAYED BY 10 DAYS. THE REVENUE HAD FILED PETITION PRAYING FOR CONDONATION OF DELAY BY STATING THAT THE RELEVANT INCOME TAX ASSESSMENT RECORDS AND DOCU MENTS, WHICH WERE ITA NOS.1323-1325/CHNY/2019 :- 2 -: ON TRANSIT FROM THE HIGHER AUTHORITIES. THE LD.AR D ID NOT RAISE ANY OBJECTION IN THIS REGARD. HENCE, WE CONDONED THE D ELAY IN FILING OF THESE APPEALS AND ADMITTING THE APPEALS ON MERITS. 3. BRIEFLY, THE FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT IS A CHARITABLE TRUST DULY REGISTER ED UNDER THE PROVISIONS OF SEC.12AA OF THE INCOME TAX ACT. THE OBJECTS OF THE RESPONDENTTRUST WERE TO WORK FOR UPLIFT OF POOR, D ESTITUTE AND DOWNTRODDEN PEOPLE IRRESPECTIVE OF THEIR CAST, CREE D AND RELIGION. THERE WAS A SEARCH AND SEIZURE WAS CONDUCTED U/S.132 OF T HE ACT IN THE CASE OF DR.S.GURUSHANKAR & OTHERS ON 26.11.2014. IT IS MEN TIONED BY THE AO THAT DURING THE COURSE OF SEARCH AND SEIZURE IN THE CASE OF DR.S.GURUSHANKAR & OTHERS, CERTAIN DOCUMENTS ALLEGE D TO BE INCRIMINATING PERTAINING TO THE RESPONDENT-TRUST, WERE FOUND. CO NSEQUENTLY, THE NOTICES U/S.153C OF THE ACT WERE ISSUED FOR THE AYS 2013-14 TO 2015-16. IN RESPONSE TO SUCH NOTICES U/S.153C, THE RESPONDEN T-TRUST FILED THE RETURN OF INCOME ON 21.04.2016 DISCLOSING NIL INC OME. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY T HE ASST. COMMISSIONER OF INCOME TAX, MADURAI, (HEREINAFTER C ALLED AS AO) VIDE AN ORDER DATED 30.11.2016 PASSED U/S.143(3) R.W.S.1 53C OF THE IT ACT AT A TOTAL INCOME OF RS.1,43,96,703/- FOR THE AY 2013- 14, RS.2,29,37,011/- FOR THE AY 2014-15 & RS.3,20,94,872/- FOR THE AY 20 15-16. WHILE DOING SO, THE AO HAD DENIED THE EXEMPTION U/S.11 BY INVOK ING THE PROVISO TO SEC.2(15) OF THE IT ACT BY HOLDING THAT THE RESPOND ENT-TRUST WAS ITA NOS.1323-1325/CHNY/2019 :- 3 -: INDULGING IN MICRO FINANCE ACTIVITIES, WHICH TANTAM OUNT TO BUSINESS ACTIVITIES. TO COME TO THE CONCLUSION, THE AO HAD TAKEN NOTE OF THE FACT THAT THE RESPONDENT-TRUST WAS ENGAGED IN THE ACTIVI TY OF LENDING MONEY TO SELF-HELP GROUPS AND THE METHOD OF CHARGING INTE REST AT THE RATE OF ETC., AND THEREFORE INFERRED THAT THE RESPONDENT-TR UST HAS INDULGED IN THE BUSINESS ACTIVITIES AND ACCORDINGLY INVOKED THE PRO VISO TO SEC.2(15) OF THE IT ACT AND DENIED THE EXEMPTION. FURTHER, THE AO T AKING NOTE OF THE FACT THAT THE PRESIDENT OF THE RESPONDENT-TRUST NAMELY D R.N.SETHURAMAN WAS PAID HONORARIUM OF RS.12.00 LAKHS IN VIOLATION OF P ROVISIONS OF CLAUSE (C) OF SUB-SECTION (1) OF SECTION 13 OF THE ACT. THE A O HELD THAT 15% OF THE HONORARIUM, SUCH PAYMENT IS UNREASONABLE AND ACCORD INGLY DISALLOWED A SUM OF RS.1,80,000/-. THUS, THE AO COMPLETED THE A SSESSMENT BY ASSESSING THE EXCESS OF INCOME OVER EXPENDITURE AND ADDITION MADE ON ACCOUNT OF EXCESSIVE REMUNERATION PAID TO THE PRECE DENT TO THE RESPONDENT-TRUST. 4. BEING AGGRIEVED BY THE ABOVE ASSESSMENT ORDER, THE APPEALS WERE FILED BEFORE THE LD.CIT(A) WHO VIDE IMPUGNED ORDER BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NOS.2919 & 2920/MDS/2016 FOR THE AYS 2011-12 & 2012-13 DATED 0 9.08.2017, ALLOWED THE APPEALS. 5. BEING AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE US IN THE PRESENT APPEALS. THE LD.SR .DR PLACED ORDERS OF THE LOWER AUTHORITIES. THE LD.SR.DR SUBMITTED THAT THE ACTIVITIES OF THE ITA NOS.1323-1325/CHNY/2019 :- 4 -: RESPONDENT-TRUST ARE IN THE NATURE OF TRADE, COMMER CE AND BUSINESS AND THEREFORE, PROVISO TO SEC.2(15) OF THE ACT IS SQUAR ELY APPLICATION AND HE PLACED RELIANCE ON THE ASSESSMENT ORDER. THE LD.DR SUBMITTED THAT THE RESPONDENT-TRUST CONTINUES TO ENJOY THE EXEMPTION U /S.11. THE QUESTION OF DENIAL OF EXEMPTION U/S.11 DOES NOT ARISE. HE F URTHER SUBMITTED THAT THE ISSUES IN THESE APPEALS ARE SQUARELY COVERED BY THE DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES O WN CASE FOR THE AYS 2011-12 & 2012-13. 6. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MAT ERIALS PLACED ON RECORD. 7. THE ISSUES IN THESE APPEALS ARE SQUARELY COVERED IN FAVOUR OF THE RESPONDENT-TRUST BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AYS 2011-12 & 20 12-13, REFERRED TO SUPRA, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CARE FULLY PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE, IT IS APPARENT THAT THE REVENUE HAD WITHDRAWN THE BENEFIT OF SECTION 11 & 12 OF THE ACT TO THE ASSESS EE ONLY FOR THE REASON THAT THE ASSESSEES ACTIVITY IS MICRO-FINANCING BY OBTAINING LOAN FROM BANK AND LENDING THEM TO SHGS AT A HIGHER INTEREST. HOWEVER, SURPRISINGLY WE FIND THAT THE REVENUE HAS GRANTED REGISTRATION TO THE ASSESSEE TRUST WHOSE MAIN OBJECTIVE IS MICRO-FI NANCING. FURTHER FROM THE DECISION CITED BY THE ASSESSEE HEREIN ABOVE, IT IS CLEAR THAT THE ACTIVITY OF MICRO-FINANCING BY ITSELF CANNOT BE CONSIDER AS NOT PROVIDING RELIEF TO THE POOR U NLESS AND UNTIL THERE IS A FINDING THAT THE MICRO-FINANCING ACTIVITY IS RENDERED TO SERVICE THE RICH AND THE AFFLUENT. IN THE CASE OF THE ASSESSEE, THERE IS NO FINDING BY THE REVENUE THAT T HE ASSESSEE TRUST HAS EXTENDED THE MICRO-FINANCING FACILITY TO RICH AND THE AFFLUENT. MOREOVER, THE ASSESSEE HAS CLAIMED THROUGHOUT IN THE ASSESSMENT PROCEEDINGS AS WELL AS THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, THAT THE TRUST HAS BEEN EXTEND ING SERVICE TO THE POOR IN RURAL AREAS FOR UPLIFTING THE DOWNTRODDEN; HOWEVER THE REVENUE HAD NOT MADE ANY FINDING OTHERWISE. FURTHER FROM THE HONBLE APEX COURT DECISION IN THE CASE OF THANTHI TRUST SUPRA, IT CAN BE INFERRED THAT MERE GENERATION OF SURPLUS CANNOT FRU STRATE THE PROVISIONS OF SECTION 2(15) OF THE ACT, WHEN SUCH SURPLUS IS UTILIZED FOR OBTAININ G THE OBJECTS OF THE TRUST. THE CLAIM OF THE ASSESSEE WHICH IS SUPPLEMENTED BY THE PAPER BOOK FU RNISHED BY THE ASSESSEE IS THAT, THE ASSESSEES TRUST IS RENDERING SERVICE TO THE POOR A ND NEEDY BY EXTENDING MICRO-FINANCE LOANS IN ORDER TO HELP THE POOR AND DOWNTRODDEN TO EARN THEIR LIVELIHOOD. THIS CLAIM OF THE ASSESSEE IS NOT NEGATED BY THE REVENUE IN ANY OF TH EIR FINDINGS WHICH ESTABLISHES THE FACT THAT THE ASSESSEE TRUST IS LENDING ONLY TO SHGS CO NSISTING OF POOR AND DOWNTRODDEN. FURTHER IT IS APPARENT FROM THE ORDERS OF THE LD.AO THAT FOR THE ASSESSMENT YEAR 2011-12, ITA NOS.1323-1325/CHNY/2019 :- 5 -: THE ASSESSEE TRUST HAS EARNED INTEREST INCOME OF RS .24,46,05,545/- AND RS.14,40,12,032/- FOR THE ASSESSMENT YEAR 2012-13. EVEN THOUGH THE AS SESSEE HAD RECEIVED SUCH ENORMOUS INTEREST INCOME, THE EXCESS OF INCOME OVER EXPENDIT URE FOR THE ASSESSMENT YEAR 2011-12 AND 2012-13 COMPUTED BY THE LD.AO IS ONLY RS.21,22,3 19/- AND RS.91,51,142/- RESPECTIVELY. THUS IT IS EVIDENT THAT MOST OF THE I NCOME EARNED BY THE ASSESSEE IS UTILIZED FOR ATTAINING THE OBJECTS OF THE ASSESSEE TRUST. PR OVISO TO SECTION 2(15) OF THE ACT ALSO DOES NOT BAR THE ASSESSEE FROM EARNING INCOME DURING THE COURSE OF ITS ACTIVITIES SUCH AS RELIEF TO THE POOR. WHEN THE ASSESSEE HAS UTILIZED ITS ENTIRE FUNDS FOR MICRO-FINANCING IN ORDER TO UPLIFT THE POOR THEN THE BENEFIT OF SECTION 11 & 12 OF THE ACT CANNOT BE DENIED TO THE ASSESSEE JUST BECAUSE THE ASSESSEE HAS CHARGED SOME MARKUP IN ITS LENDING RATES OF INTEREST. IT IS PERTINENT TO MENTION THAT SOME MARK UP IN THE LENDING RATES IS ESSENTIAL TO COVER UP THE ADMINISTRATION COST AND BAD DEBTS ARIS ING OUT OF THE ADVANCES. IT IS ALSO A WELL-KNOWN FACT THAT TO OBTAIN LOAN FROM BANKS IS A CUMBERSOME PROCESS WHICH ANY ORDINARY PERSONS CANNOT SUCCEED. ENTITIES SUCH AS T HE ASSESSEE TRUST ONLY HAS A POTENTIAL TO REACH OUT TO SUCH PERSONS AND EFFECTIVELY AVOID LOSS OF CAPITAL AND YET LIFT THE POOR AND THE DOWNTRODDEN. CONSIDERING THE FACTS AND CIRCUMST ANCE OF THE PRESENT CASES BEFORE US, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE TRU ST HAS RENDERED SERVICE IN THE NATURE OF PROVIDING RELIEF TO THE POOR AS ENVISAGED IN THE ACT AND THEREFORE THE BENEFIT OF SECTION 11 & 12 OF THE ACT CANNOT BE DENIED. HENCE, WE HEREBY SET ASIDE THE ORDER OF THE LD.A.O AND THE LD. CIT(A) AND FURTHER DIRECT THE LD.AO TO GRANT THE BENEFIT OF SECTION 11 & 12 OF THE ACT, TO THE ASSESSEE. WE HAVE ALSO EXAMINED THE VAR IOUS EXTENSIVE ACTIVITIES CONDUCTED BY THE ASSESSEE TRUST AND THE CONSIDERABLE TIME SPENT BY THE TRUSTEES AS WELL AS THEIR RELATIVES AND IS OF THE CONSIDERED VIEW THAT THE CO NSULTATION FEE RANGING FROM RS.4 LAKHS TO RS.12 LAKHS PAID TO THE TRUSTEES IS QUITE REASONABL E. THEREFORE, WE DO NOT FIND THE ASSESSEES TRUST TO HAVE VIOLATED ANY OF THE PROVIS IONS OF THE ACT. 8. THE DECISION OF THE LD.CIT(A) IS BASED ON THE ORDE R OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN THE PRECEDING YEARS AND THEREFORE, WE DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEALS FILED BY T HE REVENUE. 9. IN THE RESULT, THE APPEALS FILED BY THE REVENUE AR E DISMISSED. ORDER PRONOUNCED ON THE 30 TH SEPTEMBER, 2019 IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) ( INTURI RAMA RAO ) /ACCOUNTANT MEMBER /CHENNAI, 3 /DATED: 30 TH SEPTEMBER, 2019. TLN / ,45 65 /COPY TO: 1. + /APPELLANT 4. 7 /CIT 2. ,-+ /RESPONDENT 5. 5 , /DR 3. 7 ( ) /CIT(A) 6. ( /GF