Parisar Trust, Baroda V. The Income tax Officer, Ward-5(1), Baroda

ITA 1332/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5620 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 11-04-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDAN SRDR
• Assessee Lawyers: S N SOPARKAR SRAR
• Keywords: Depreciation; Charitable institution; Maximum Marginal Rate; Set aside
• Section: 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N.PHAUJA, ACCOUNTANT MEMBER ITA NO.1332/AHD/2008 ASSESSMENT YEAR:2004-05 DATE OF HEARING:13.7.10 DRAFTED:13.7.10 PARISAR TRUST, STHAPATYA KENDRA KIRTI MANDIR, TILAK ROAD, VADODARA PAN NO.AAATP1637L V/S. INCOME TAX OFFICER, WARD-5 (TAX (APPEALS)-V, VADODARA (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S.N.SOPARKAR, SR-AR & SHRI JAIMIN GANDHI RESPONDENT BY:- SHRI K. MADHUSUDAN, SR-DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-V, BARODA IN APPEAL NO.CAB/(A)- V/293/06-07 DATED 25-01- 2008. THE ASSESSMENT WAS FRAMED BY THE ITO, WARD-5( 3) BARODA U/S.143(3) R.W.S 147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERR ED TO AS THE ACT) VIDE HIS ORDER DATED 28-12-2006 FOR THE ASSESSMENT YEAR 2004-05. 2. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A) CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFIC ER IN DISALLOWING THE EXEMPTION CLAIM U/S.11 & 12 OF THE ACT ON THE GROUND THAT THE ADVANCES GIVEN WERE TO THE SPECIFIED PERSONS U/S.13(3) OF THE ACT WITHOUT ADEQ UATE SECURITY OR INTEREST AND TAXING THE TRUST ON MAXIMUM MARGINAL RATE BY TREATI NG THE SAME AS AN AOP. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.1.0 AND 1.1 :- 1.0 THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN LAW AND ON FACTS HAS CONFIRMED THE ADDITIONS MADE BY THE LEARN ED ASSESSING OFFICER BY ITA NO.1332/AHD.2008 A.Y.2004 -05 PARISAR TRUST V. ITO WD-5 BRD PAGE 2 PARTLY ALLOWING THE APPELLANT CLAIM OF RS.11,80,986 /- ON ACCOUNT NOTIONAL RENT FROM OWN INSTITUTION AND RS.3,14,000/- ON ACCOUNT O F REPAYMENT OF DEPOSITS AND CONFIRMED THE ADDITION OF RS.27,42,434/- BY INV OKING THE PROVISIONS UNDER SECTION 13(2)(A) OF THE INCOME TAX ACT, 1961 AND FO RFEITING THE EXEMPTIONS CLAIMED UNDER SECTION 11/12 OF THE INCOME TAX ACT, 1961 ON THE GROUND THAT THE APPELLANT TRUST HAS GIVEN ADVANCES TO THE PERSO NS SPECIFIED UNDER SECTION13(3) OF THE ACT WITHOUT ADEQUATE SECURITY O R INTEREST AND THEREBY ASSESSING THE TRUST AT THE MAXIMUM MARGINAL RATE BY TREATING IT AS AN AOP. 1.1 THE ADVANCE GIVEN TO MR. SIDDARTH PATEL, WHO IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF LAND & BUILDING, WAS AGAINST A BANAKHAT, WHICH IS A LEGALLY BINDING AGREEMENT GI VING THE TRUST THE RIGHT TO ACQUIRE THE LAND ON FULFILLMENT OF THE CONDITIONS P RESCRIBED IN THE AGREEMENT. THE COPY OF THE BANAKHAT WAS FILED WITH THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), HOWEVER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DECLINED TO CONSIDER IT AS AN ADEQUATE SECURITY FOR THE ADVANCE GIVEN AT THE TIME OF PASSING THE ORDER. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FOLLOWED THE DECISION OF EARLIER CIT( A) IN THE A.Y.. 2002-03 WHICH WAS THE YEAR OF ADVANCE AND DID NOT APPRECIAT E THE FACT THAT THIS WAS MERELY AN OPENING BALANCE IN THE YEAR UNDER CONSIDE RATION. 3. AT THE OUTSET IT IS NOTICED THAT EXACTLY SIMILAR ISSUE IN ASSESSEES OWN CASE, EXACTLY ON IDENTICAL FACTS IN ITA NO.S 422/AHD/2006, ITA NO.4095-4096/AHD/2008 DATED 30-10-2009 FOR THE ASSESSMENT YEARS 2002-03 T O 2003-04 AND 2005-06, WHEREIN THE TRIBUNAL HELD IN PARA-14 AS UNDER:- 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE, THE ASSESSEE IS A CHARITABLE TRUST REGISTERED UNDER SEC TION 12A OF THE ACT AND IS ENTITLED FOR DEDUCTION UNDER SECTION 11 OF THE ACT BUT FOR THE PROVISIONS OF SECTION 13(2) OF THE ACT, THE EXEMPTION CLAIMED UND ER SECTION 11 WAS DENIED TO THE ASSESSEE FOR THE ASSESSMENT YEARS 2002-2003, 2003-04 AND 2005-06. THE RELEVANT FACTS ARE THAT THE ASSESSEE PAID RS.14 LACS TO ONE SHRI SIDDHARTH S. PATEL WHO IS SON OF SHRI SURYAKANT L. PATEL SETT LER OF THE TRUST RS.5 LACS ON 31.12.2001, RS.5 LACS ON 29.01.2002 AND RS.4 LACS O N 13.03.2002, WHICH WAS RETURNED TO THE TRUST RS.4 LACS ON 25.09.2004, RS.5 LACS ON 12.02.2005 AND RS.5 LACS ON 29.03.2005. THE CLAIM OF THE ASSESSEE IS THAT THE MONEY WAS GIVEN TO SAID SHRI SIDDHARTH S. PATEL FOR ACQUIRING OF LAND FROM HIM AND FOR THE DEVELOPMENT THAT LAND. IN SUPPORT OF THE ABOVE CLAI M, THE ASSESSEE FILED BEFORE THE LOWER AUTHORITIES AND AGREEMENT DATED 23 .01.2002. HOWEVER, ACCORDING TO THE LEARNED ASSESSING OFFICER THE SAID AGREEMENT WAS ONLY TO CAMOUFLAGE THE TRANSACTION AND ACTUALLY MONEY WAS G IVEN AS A LOAN FOR THE BENEFIT OF SAID SHRI SIDDHARTH S. PATEL AND THEREFO RE, IN VIEW OF THE PROVISIONS OF SECTION 13(2) OF THE ACT, THE ASSESSEE TRUST WA S NOT ENTITLED FOR THE BENEFIT OF DEDUCTION UNDER SECTION 11 AND 12 AND IS LIABLE TO PAY TAX AT THE MAXIMUM MARGINAL RATE. THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS) ON APPEAL CONFIRMED THE ABOVE ACTION OF THE LEARNED ASSESSING OFFICER. BEFORE US, THE CONTENTION OF THE ASSESSEE IS SAME AND THE ASSESSEE ALSO POINTED OUT THAT SUM OF RS.14 LACS WAS ADVANCED IN PURSUANCE TO A WR ITTEN AGREEMENT WITH ITA NO.1332/AHD.2008 A.Y.2004 -05 PARISAR TRUST V. ITO WD-5 BRD PAGE 3 SHRI SIDDHARTH S. PATEL. IT WAS EXPLAINED THAT THE ASSESSEE TRUST WAS FORMED WITH THE OBJECT OF IMPARTING OF EDUCATION FOR ENVIR ONMENTAL DESIGN AND/OR ANY OTHER ARCHITECTURAL SUBJECT DEALING WITH THE ENVIRO NMENT AND OTHER ASPECTS OF LIVING AND WORKING CONDITIONS OF HUMAN BEING AND TH E ASSESSEE WAS ALREADY RUNNING AN EDUCATIONAL INSTITUTION. TO FURTHER PROM OTE THIS OBJECT, THE ASSESSEE DECIDED TO OPEN AN ARCHITECTURAL INSTITUTI ON AND FOR THAT PURPOSE, IT WAS IN NEED OF A LAND. SHRI SIDDHARTH S. PATEL AGRE ED TO PROVIDE APPROXIMATELY 6.5 ACRES OF LAND TO THE TRUST AT A C ONCESSIONAL RATE OF RS.11 LACS. AS SHRI SIDDHARTH S. PATEL WAS ALSO ENGAGED I N DEVELOPMENT OF REAL ESTATE, THE ASSESSEE TRUST ENTERED INTO AN AGREEMEN T WITH HIM FOR THE DEVELOPMENT OF THE SAID LAND AT A TOTAL CONSIDERATI ON OF RS.70 LACS. IN PURSUANCE TO THE ABOVE AGREEMENT WHEREBY THE ASSESS EE TRUST WAS LIABLE TO PAY RS.81 LACS TO SAID SHRI SIDDHARTH S. PATEL, THE TRUST PAID RS.14 LACS TO HIM AS AN ADVANCE FOR THE SAID PURPOSES. HOWEVER, AS CH AROTAR NAGRIK SAHAKARI BANK WITH WHOM THE ASSESSEE WAS MAINTAINING DEPOSIT S BECAME BANKRUPT THE ASSESSEES FINANCIAL POSITION SUFFERED A BLOW AND T HE ASSESSEE WAS NOT IN A POSITION TO MAKE PAYMENT OF THE BALANCE AMOUNT AND FURTHER MONEY REQUIRED FOR THE NEW PROJECT AND THEREFORE, THE ASSESSEE CAN CELLED THE PLAN OF STARTING OF NEW SCHOOL. IN THE ABOVE CIRCUMSTANCES, SAID SHR I SIDDHARTH S. PATEL RETURNED THE FULL AMOUNT OF ADVANCE TO THE ASSESSEE TRUST. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE CLAIMED T HAT THE PROJECT FOR ESTABLISHING OF NEW SCHOOL WAS IN FACT COMMENCED AN D NOT ONLY BHUMI PUJAN FOR THE SAID PURPOSE WAS DONE BUT ALSO DRAWINGS AND PLANS WERE GOT APPROVED. WE THUS, FIND THAT THE ISSUE TO BE ADJUDI CATED BY US IS WHETHER MONEY OF RS.14 LACS PAID BY THE ASSESSEE TO SAID SH RI SIDDHARTH S. PATEL WAS IN THE NATURE OF ADVANCE FOR ACQUIRING OF SOME PROP ERTY BY THE TRUST AND BY WAS NOT A MONEY ADVANCED BY THE TRUST FOR THE BENEF IT OF SAID SHRI SIDDHARTH PATEL OR WHETHER MONEY WAS ADVANCED FOR THE PURPOSE OF BENEFIT OF SHRI SIDDHARTH S. PATEL. WE FIND THAT THE CLAIM OF THE A SSESSEE WAS THAT IT PLANNED TO OPEN AN ARCHITECT SCHOOL AND FOR THAT PURPOSE FO R ACQUIRING THE LAND FOR RS.11 LACS AND FOR GETTING THAT LAND A DEVELOPED FO R RS.70 LACS, IT ADVANCED RS.14 LACS TO SHRI SIDDHARTH S. PATEL WHO IS A PERS ON COVERED BY THE PROVISIONS OF SECTION 13(3) OF THE ACT. WE FIND THA T NO MATERIAL WAS BROUGHT BEFORE US OR BEFORE ANY LOWER AUTHORITIES TO SHOW T HAT THE ASSESSEE TRUST ENTERED INTO ANY UNDERSTANDING WITH ANY UNIVERSITY OR AUTHORITY FOR THE PURPOSE OF OPENING OF ARCHITECT INSTITUTION. FURTHER, THE A SSESSEE CLAIMED THAT ON THE LAND IN QUESTION, BHUMI PUJAN WAS DONE BUT EVIDENCE IN RESPECT OF THE SAME ALSO WAS NOT FILED. THE ASSESSEE CLAIMED THAT DRAWI NG AND PLAN OF SCHOOL TO BE CONSTRUCTED ON THE SAID LAND WAS APPROVED IS ALS O NOT SUBSTANTIATED BY BRINGING ANY MATERIAL ON RECORD. FURTHER, WHEN CONS IDERATION OF LAND WAS FULLY PAID BY THE ASSESSEE TO THE SAID SHRI SIDDHARTH S. PATEL IT COULD NOT BE APPRECIATED WHY THE LAND WAS NOT REGISTERED IN THE NAME OF THE ASSESSEE TRUST. THE ASSESSEE TRUST HAS FILED A VALUATION REP ORT WHICH SHOWS THAT THE VALUE OF THE LAND AS ON 23.01.2002 WAS RS.23.15 LAC S. IN THE ABOVE CIRCUMSTANCES, THE ASSESSEE AFTER PAYING FULL AMOUN T OF AGREED CONSIDERATION OF RS.11 LACS COULD HAVE REALIZED MORE THAN RS.23 L ACS BY SELLING THE LAND IN THE MARKET, THEN WHY IT RETURNED THE LAND TO SAID S HRI SIDDHARTH S. PATEL FOR THE AMOUNT PAID BY IT TO HIM ONLY. THE SUBMISSION O F THE ASSESSEE THAT RS.2.50 LACS TO RS.3 LACS WAS SPENT BY SHRI SIDDHAR TH S. PATEL ON DEVELOPMENT OF THE SAID LAND IS ALSO NOT SUPPORTED BY ANY MATERIAL BROUGHT ON ITA NO.1332/AHD.2008 A.Y.2004 -05 PARISAR TRUST V. ITO WD-5 BRD PAGE 4 RECORD. EVEN AFTER MAKING PAYMENT OF THE AFORESAID AMOUNT TO SHRI SIDDHARTH S. PATEL, THE ASSESSEE WOULD HAVE REALIZED MUCH MOR E AMOUNT IF THE ASSESSEE WOULD HAVE SOLD THE LAND AT THE MARKET PRI CE. KEEPING IN VIEW, THE FULL FACTS AND CIRCUMSTANCES OF THE CASE, IN MIND I N OUR CONSIDERED OPINION, THE EXPLANATION FURNISHED BY THE ASSESSEE IS NOT CO NVINCING. THE ASSESSEE HAS NOT BROUGHT ON RECORD THE EXACT AMOUNT, IT LOST DUE TO BANKRUPTCY OF CHAROTAR NAGRIK SAHAKARI BANK AND HOW THAT AMOUNT H AD AFFECTED THE PLAN OF THE ASSESSEE. THE ASSESSEE ALSO COULD NOT EXPLAIN W HY IF NOT THE FULL AMOUNT THEN A SUBSTANTIAL PORTION OF RS.14 LACS RECEIVED B Y SHRI SIDDHARTH S. PATEL FROM ASSESSEE WAS NOT UTILISED FOR THE DEVELOPMENT OF THE LAND AND WHY ONLY RS.2.5 LACS TO RS.3 LAC WAS ONLY UTILISED FOR THE A CTUAL DEVELOPMENT OF LAND. FURTHER, WHEN THE DEAL WAS REVOKED IN SEPTEMBER 200 3, WHY THE AMOUNT WAS REFUNDED ONLY IN MARCH 2005 AND WHY NO INTEREST WAS CHARGED FOR THE PERIOD. IN VIEW OF THE ABOVE, WE FIND GOOD REASON TO INTERF ERE WITH THE FINDINGS OF THE LOWER AUTHORITIES THAT THE AMOUNT ADVANCED BY THE A SSESSEE TO SAID SHRI SIDDHARTH S. PATEL WAS IN THE NATURE OF LOAN WITHOU T INTEREST. THUS, IN OUR CONSIDERED OPINION, THE LOWER AUTHORITIES WERE JUST IFIED IN DENYING DEDUCTION UNDER SECTIONS 11 AND 12 OF THE ACT TO THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER APPEAL. THUS, THE GROUND OF APPEAL OF THE ASS ESSEE IS DISMISSED FOR ALL THE YEARS UNDER APPEAL. 4. THE LD. COUNSEL FOR ASSESSEE ADMITTED THE POSITI ON THAT THE TRIBUNAL IN EARLIER YEAR, EXACTLY ON SAME FACTS HAS DISALLOWED THE CLAI M OF THE ASSESSEE. WE FIND THAT THE ISSUE BEING IDENTICAL IN THIS YEAR, AS WAS IN E ARLIER YEARS AS NOTED ABOVE, RESPECTFULLY FOLLOWING THE TRIBUNALS DECISION, WE DISMISS THIS ISSUE OF THE ASSESSEES APPEAL 5. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS RAISED BY WAY OF ADDITIONAL GROUND, WHICH READS AS UNDER:- APPELLANT CRAVES LEAVE TO RAISE THIS ADDITIONAL GR OUND OF APPEAL BEFORE THE HONBLE ITAT. THIS IS A LEGAL GROUND AND THEREFORE AS PER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERM AL POWER (229 ITR 383), IT CAN BE RAISED BEFORE THE HONBLE ITAT. 1. BOTH THE AUTHORITIES HAVE ERRED IN LAW AND ON FA CTS IN FAILING TO CONSIDER EXPENSES OF RS.18,5000/-- ON A/C. OF LEGAL AND PROF ESSIONAL CHARGES, RS.19,194/- ON A/C OF AUDIT FEES AND RS.22,60,890/- ON A/C OF DEPRECIATION EXPENSES. BOTH THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE THE FACT THAT THE ABOVE EXPENSES WERE INCURRED FOR THE PURPOSE OF CAR RYING OUT THE OBJECT OF THE TRUST. 6. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STAT ED THAT THE ASSESSING OFFICER HAS CONSIDERED TOTAL RECEIPT OF THE ASSESSEE-TRUST AT RS.1,08,73,711/- AND CLAIMED EXCESS OF INCOME OVER EXPENDITURE AMOUNTING TO RS.1 4,62,678/- FROM RUNNING OF ITA NO.1332/AHD.2008 A.Y.2004 -05 PARISAR TRUST V. ITO WD-5 BRD PAGE 5 EDUCATIONAL INSTITUTIONS. HOWEVER, THE AO HAS NOT ALLOWED THE ABOVE EXPENDITURE AS CLAIMED IN THE ADDITIONAL GROUND. LD. COUNSEL FOR A SSESSEE STATED THAT EVEN THOUGH THE ASSESSEE HAS RAISED ADDITIONAL GROUND BUT THIS CAN BE TREATED AS ALTERNATIVE CLAIM OF THE ASSESSEE. 7. AFTER HEARING THE RIVAL CONTENTIONS, WE FIND THA T THE BASIC FACTS ARE NOT DISCUSSED BY THE LOWER AUTHORITIES, WHETHER THESE E XPENDITURES ARE ALLOWABLE OR NOT IN VIEW OF THE FACTS OF THE CASE. THE AO IS DIRECT ED TO EXAMINE THESE EXPENSES VIS- -VIS ALLOWABILITY OF THE SAME. ACCORDINGLY, THIS ISSUE IS SET ASIDE TO THE FILE OF ASSESSING OFFICER. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 13 /07/2010 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 13/07/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-V, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD