Jesus Calls, CHENNAI V. ADIT, CHENNAI

ITA 1401/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81193 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 21-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANALD
• Assessee Lawyers: G BASKAR
• Keywords: Charitable institution; Deemed to accrue or arise in india; Cost of acquisition; Revenue expenditure; Capital expenditure
• Section: 143(3); 12AA; 12; 154; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . , . ! '# , $ % BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T.A.NO.1401/MDS./2014 ( / ASSESSMENT YEAR :2008-09 ) M/S. JESUS CALLS , NO.16,DHINAKARAN ROAD, CHENNAI 600 028. VS. ASSISTANT COMMISSIONER OF INCOME TAX (EXEMPTIONS)-I, CHENNAI. PAN AAATJ 1073 F ( &' / APPELLANT ) ( ()&' / RESPONDENT ) / APPELLANT BY : MR.G.BASKAR, ADVOCATE / RESPONDENT BY : DR.S.MOHARANA,LD. CIT ,D.R / DATE OF HEARING : 12.08.2014 ! /DATE OF PRONOUNCEMENT : 10.10.2014 * / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED BY THE ORDER OF THE CIT(A)-VII, CHENNAI DATED 14.03.2014 IN ITA NO. 298/10-11 PASSED U/S. 143(3) READ WITH SECTION 250 OF THE ACT. ITA NO. 1401/MDS/14 M/S.JESUS CALLS 2 2. THE ASSESSEE HAS RAISED THREE ELABORATE AND ARG UMENTATIVE GROUNDS IN ITS APPEAL, HOWEVER THE CRUX OF THE ISSU ES ARE THAT: (I) LD.CIT(A) HAD ERRED IN DIRECTING THE ASSESSING OFFICER TO BRING TO TAX THE SUM OF ` 11.05 CRORES BEING THE EXCESS APPLICATION OF THE EARLIER YEAR SET OFF THIS YEAR. (II) LD.CIT(A) HAD ERRED IN CONFIRMING THE DISALLOW ANCE OF ` 14 CRORES MADE BY THE ASSESSING OFFICER BY HOLDING THAT THE S AID AMOUNT WAS NOT PAID TO THE SELLER. 3. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESS EE IS A TRUST REGISTERED U/S. 12AA OF THE ACT, FILED ITS RETURN O F INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 30.09.2008, ADMITTING GR OSS RECEIPT OF ` 51,07,87,543/- AND INCOME AS NIL AFTER CLAIMING E XEMPTION U/S. 11 OF THE ACT. SUBSEQUENTLY THE CASE WAS TAKE N UP FOR SCRUTINY AND SHORT FALL IN APPLICATION OF INCOME WAS TREATED AS ` 11,05,02,792/-. 3.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAD PURCHASED 8.83 ACRES OF LAND IN VANAGRAM BY MEANS OF THREE SALES DEEDS FOR A TOTAL CONSIDERATIO N OF ` 74.15 CRORES. ITA NO. 1401/MDS/14 M/S.JESUS CALLS 3 APART FROM THAT THE ASSESSEE HAD ALSO MADE PAYMENT OF ` 14 CRORES TO M/S.GOLDEN HOMES PVT. LTD., FOR THE PURCHASE OF THE AFORESAID LAND. THE ASSESSEE HAD EXPLAINED THAT THE AMOUNT OF ` 14 CRORES WAS PAID IN ORDER TO REIMBURSE THE COST OF IMPROVEMENT & DEVELOPING OF THE LAND AND MAKING THE LAND SUITABLE FOR SALE. IT WAS FURTHER EXPLAINED BY THE ASSESSEE THAT THE SELLERS OF THE L AND HAD INCURRED VARIOUS KINDS OF COST INCLUDING GUARDING OF THE LAR GER EXTENT OF THE LAND FOR SEVERAL YEARS. THUS, THE AGGREGATE COST OF ACQUISITION OF LAND AMOUNTED TO ` 88.15 CRORES. HOWEVER THE LD. ASSESSING OFFICER OPINED THAT SINCE THE ASSESSEE HAD ENTERED INTO UNR EGISTERED SALE AGREEMENTS WITH THE SELLERS OF THE LAND & THE COMPA NY, PRIOR TO THE DATE OF THE SALE DEED, AND SINCE THERE WAS NO REFER ENCE OF THESE SALE AGREEMENTS IN THE SALE DEEDS, THE PAYMENT MADE WAS NOT GENUINE. HE THEREFORE DENIED TO TREAT THE AMOUNT OF ` 14 CRORES PAID TO M/S.GOLDEN HOMES PVT LTD., AS COST OF ACQUISITION O F LAND AND CONSEQUENTLY DID NOT INCLUDE THE SAME AS PART OF AP PLICATION OF INCOME FOR COMPLIANCE U/S.11(1)(A) OF THE ACT. THER EAFTER THE LD. ASSESSING OFFICER ARRIVED AT THE FOLLOWING CONCLUSI ONS:- ITA NO. 1401/MDS/14 M/S.JESUS CALLS 4 3.2. THE ASSESSEES REPLY IS CONSIDERED. IT IS SEE N FROM THE RECITATION FROM THE SALE DEED COPIES OF WHICH ARE FILED THAT THE AS SESSEE HAS PURCHASED THE LANDS AS SUCH AS EXISTED ON THE DATE OF SALE AND TH ERE IS NO MENTION OF ANY COST OF REIMBURSEMENTS, DEVELOPMENT ETC., AS CLAIME D BY THE ASSESSEE. FURTHER, IT IS SEEN FROM THE NOTE SUBMITTED BY THE SELLER THAT HE ENTERED INTO AN AGREEMENT TO PURCHASE THE SAID LANDS FROM M/S.SI CAL LOGISTICS LTD ON 3.1.2007 ONLY. THEREFORE, THE ASSESSEE HAD NO OBLI GATION TO PAY THE EXTRA SUM OF RS.14 CRORES TO M/S.GOLDEN HOMES PVT. LTD. H ENCE IT CANNOT BE SAID THAT THAT THIS AMOUNT WAS SPENT FOR THE PURPOSE OF THE OBJECTS FOR THE TRUST. THEREFORE THIS SUM WILL BE DISALLOWED FROM THE COST OF ADDITIONS CLAIMED BY THE ASSESSEE. 3.3 IN THE LIGHT OF THE ABOVE THIS SUM OF RS.14 CR ORES WILL BE REDUCED FROM THE ADDITIONS TO BE FIXED ASSETS OF RS.98,22,31,253 CLAIMED AS APPLICATION OF INCOME IN THE RETURN. THE BALANCE WILL BE RS.84,22, 31,253/- 4. THE DETAILS OF THE INFLOW OF FUNDS AND PAYMENT IN RELATION TO THE PURCHASE OF THE ABOVE LANDS AT VANAGARAM WAS CALLED FOR. THE ASSESSEE IN VIEW OF THE SAME FURNISHED THE FOLLOWING INFORMATION:- ( CONCISED ) INFLOW OF FUNDS (A) LOAN FROM VARIOUS BANKING INSTITUTIONS 83,04, 00,000 (B) CLOSURE OF FIXED DEPOSIT WITH BANKS 11,72,0 0,000 TOTAL 94,74,00,000 APPLICATION OF FUNDS 4. 1 IT MAY BE SEEN FROM THE ABOVE THAT THE AS SESSEE OBTAINED BANK LOAN RS.83,04,00,000/- AND MADE PAYMENT FOR THE PURCHASE OF THE VANAGARAM 1. PAYMENT MADE TO RAJ KUMAR. B 78,21,04,400 2. REGISTRATION AND OTHER CHARGES 2,54,00,600 3. PAYMENT MADE TO GOLDEN HOME P LTD 14,00,00,000 TOTAL 94,74,05,000 ITA NO. 1401/MDS/14 M/S.JESUS CALLS 5 LANDS AND CLAIMED THE SAME AS APPLICATION OF INCOME IN THE RETURN. AS PER THE PROVISIONS OF SECTION 11 OF THE INCOME TAX ACT, THE ASSESSEE HAS TO SPEND 85% FOR THE CHARITABLE ACTIVITIES OF THE TRUST FROM INCOME RECEIVED AND NOT LOAN OBTAINED. IN OTHER WORDS LOAN OBTAINED FROM BA NK IS NOT INCOME OF THE ASSESSEE. THERE IS DIRECT NEXUS BETWEEN THE BANK L OAN RECEIVED AND PAID FOR THE PURCHASE OF THE LANDS. ANY AMOUNT SPENT OUT OF LOAN OBTAINED CANNOT BE TREATED AS APPLICATION OF INCOME FOR THE CHARITA BLE ACTIVITIES OF THE TRUST. THEREFORE, THE BANK LOAN TO THE EXTENT OF RS.83,04, 00,000 WILL NOT BE ALLOWED AND THE SAME AMOUNT WILL BE REDUCED FROM THE ADDITI ONS TO FIXED ASSETS OF RS.98,22,31,253 CLAIMED AS APPLICATION OF INCOME IN THE RETURN. THE RESULTANT BALANCE WILL BE RS.1,18,31,253 (RS.98,22,31,253 (R S.14,00,00,000 + RS.83,04,00,000). CONSEQUENTLY, RS.1,18,31,253 ALON E WILL BE TREATED AS APPLICATION OF INCOME TOWARDS ADDITIONS TO FIXED AS SETS CLAIMED AS APPLICATION OF INCOME IN THE PLACE OF RS.98,22,31,2 53/-. 3.2. THUS, THE ASSESSING OFFICER HAD:- (A) DISREGARDED THE PAYMENT OF ` 14 CRORES TOWARDS COST OF ACQUISITION OF THE LAND AND CONSEQUENTLY DID NOT C ONSIDER ` 14 CRORES FOR THE PURPOSE OF APPLICATION OF INCOME U/S .11(1)(A) OF THE ACT. (B) HAD DISALLOWED TO THE EXTENT OF ` 83,04,00,000/- FOR THE PURPOSE OF APPLICATION OF INCOME U/S.11(1)(A) OF THE ACT BE ING PAYMENT ITA NO. 1401/MDS/14 M/S.JESUS CALLS 6 MADE FOR PURCHASE OF LAND BECAUSE THE AMOUNT WAS OB TAINED FROM BANK AS LOAN AND SIMILARLY EXCLUDED THE SAME F ROM THE AGGREGATE RECEIPTS OF THE TRUST BECAUSE IT WAS NOT THE INCOME OF THE TRUST. 3.3 ACCORDINGLY, THE LD. ASSESSING OFFICER REDUCED THE AMOUNT OF ` 14 CRORES AND ` 83.04 CRORES FROM THE TOTAL INVESTMENT MADE ON LAND FOR ` 98,22,31,253/- AND THE BALANCE AMOUNT OF ` 1,18,31,253/- WAS CONSIDERED AS APPLICATION OF INCOME U/S. 11(1)(A) O F THE ACT. THEREAFTER, THE ASSESSMENT WAS MADE IN THE FOLLOWIN G MANNER:- GROSS RECEIPTS 51,07,87,543 85% THEREON 43,41,69,412 ------------------- APPLICATION OF INCOME: REVENUE EXPENDITURE 31,18,35,367 CAPITAL EXPENDITURE 1,18,31,253 (-)32,36,66,620 SHORTFALL 11,05,02,792 LESS: SET OFF OF THE BROUGHT FORWARD EXCESS APPLICATION OF INCOME FOR A.Y 2007-08 TO THE EXTENT OF SHORTFALL (-)11,05,02,792 TOTAL INCOME NIL ITA NO. 1401/MDS/14 M/S.JESUS CALLS 7 4.1. WHEN THESE ISSUES CROPPED UP BEFORE THE LD. CIT (A), THE LD. CIT (A) HELD THAT THE EXCESS EXPENDITURE INCURRED IN THE EARLIER YEARS CANNOT BE CARRIED FORWARD TO THE SUBSEQUENT YEARS F OR TREATING THE SAME AS APPLICATION OF FUNDS FROM THE INCOME GENER ATED BY THE TRUST DURING THAT PERIOD. IN VIEW OF THE SAME THE LD. CIT (A) DIRECTED THE ASSESSING OFFICER TO TAX THE SUM OF ` 11,05,02,792/-. IN DOING SO, THE LD. CIT (A) BRUSHED ASIDE CERTAIN DECISIONS POINTED OUT BY THE LD. A.R. AND OBSERVED AS FOLLOWS:- 4.6. THERE ARE NO OTHER SIGNIFICANT FINDINGS EX CEPT THE ABOVE TWO OBSERVATIONS BY ANY OF THE HIGH COURTS. THE INCOME OF THE TRUST IS NOT COMPUTED AS PER SEC.28 TO 44DB OF THE ACT UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION WHICH CONTAINS THE PROVISION OF CARRY FORWARD OF LOSSES OF EARLIER YEAR AND SET OF SUCH LOSSES AGAINST THE INCOME OF THE CURRENT YEAR. INCOME DERIVED FROM PROPERTY HELD UNDER TRUST EARNS REAL INCOME AND NOT THE INCOME CO MPUTED FOR ASSESSMENT. THE QUESTION OF SPENDING OF 85% OF INCO ME AND ACCUMULATION OF 15% OF INCOME ARISE ONLY WHEN THERE IS REAL INCOME. THE INCOME DERIVED SHOULD BE DURING THE CURRENT YEA R AND ACCUMULATION IS ALSO FROM CURRENT YEARS INCOME. I F THE TRUST IS ABLE TO SPEND THE ENTIRE INCOME DERIVED FROM TRUST, THE WHO LE EXPENDITURE IS TREATED AS APPLICATION AND EXEMPTED UNDER SECTION 1 1 OF THE ACT. ITA NO. 1401/MDS/14 M/S.JESUS CALLS 8 THERE IS NO PROVISION UNDER SECTION 11 OF THE ACT T O CARRY FORWARD EXCESS SPENDING IN EXCESS OF 85% STIPULATION. IF T HE TRUST SPENDS MORE THAN THE INCOME, IT SHOULD BE EITHER FROM CORP US OR FROM LOAN OBTAINED. THE APPLICATION SHOULD ALWAYS BE FROM INC OME DERIVED OR FROM INCOME SET APART OR ACCUMULATED INCOME. THEREF ORE, THE QUESTION OF CARRY FORWARD OF EXCESS EXPENDITURE AND SET OFF OF THE SAME SUBSEQUENTLY DOES NOT ARISE AT ALL IN THE CASE OF T RUSTS. RELIANCE IS PLACED ON THE DECISION OF ITAT DELHI BENCH F IN T HE CASE OF PUSHPAWATI SINGHANIA RESEARCH INSTITUTE FOR LIVER, RENAL & DIGESTIVE DISEASES VS. DDIT(E),INV. CIRCLE-II, NEW DELHI (200 9) 29 SOT 316(DELHI). IN THE ABOVE DECISION, THE HONBLE ITA T ANALYZED ALL THE DECISIONS WHILE ARE IN FAVOUR OF CARRY FORWARD AND SET OFF AND DISTINGUISHED THEM AND ARRIVED AT THE CORRECT DECIS ION AS DECLARED BY THE INCOME-TAX ACT. THE BOMBAY HIGH COURT IN THE C ASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (2003) 131 TAXMAN 386 OBSERVED THAT THE INCOME OF THE TRUST IS TO BE COMP UTED ON THE BASIS OF COMMERCIAL PRINCIPLES. IT IS NOT IN DISPUTE THAT T O ARRIVE AT THE ACTUAL INCOME, COMMERCIAL PRINCIPLES ARE TO BE APPLIED. T HIS DOES NOT MEAN THAT THE EXCESS EXPENDITURE IS TO BE CARRIED FORWAR D AND ALLOWED IN THE SUBSEQUENT YEAR. THE PRINCIPLES OF SET APART/ACCUM ULATION OF INCOME ARISE ONLY IF IT IS REAL INCOME. OTHERWISE, THE INV ESTMENT UNDER SECTION 11(5) OF THE ACT IS NOT POSSIBLE WITH DEEMED INCOME . THE INTENTION OF ITA NO. 1401/MDS/14 M/S.JESUS CALLS 9 THE LEGISLATURE IS TO INVEST REAL INCOME DERIVED FR OM PROPERTY OF THE TRUST IN SPECIFIC ASSES WHEN THEY ARE NOT UTILIZED/ APPLIED. THE VERY CONCEPT OF EXEMPTION/S 11 OF THE ACT IS DEFEATED IF PROVISIONS OF PROFITS AND GAINS OF BUSINESS OR PROVISION RELATING TO CARR Y FORWARD AND SET-OFF IS SUBSTITUTED FOR THE INCOME WHICH DO NOT FORM PA RT OF TOTAL INCOME INCLUDED UNDER CHAPTER-III OF THE INCOME-TAX ACT. I N VIEW OF THE ABOVE DISCUSSION, I DIRECT THE AO TO BRING TO TAX THE SUM OF RS.11,05,02,792/- . IF ALREADY BROUGHT TO TAX UNDER SECTION 154 OF TH E ACT, THE ACTION OF THE AO IS CONFIRMED. 4.2. WITH RESPECT TO THE TREATMENT GIVEN BY THE LD. ASSESSING OFFICER FOR ` 14 CRORES BEING THE PAYMENT MADE TOWARDS THE PURCHA SE OF LAND, THE LD. CIT (A) ACCEPTED THE VIEW OF THE LD. ASSESS ING OFFICER AND OBSERVED AS UNDER:- 5. REGARDING THE DISALLOWANCE OF RS.14,00,00,000/ -, THE AUTHORIZED REPRESENTATIVE OF ASSESSEE OF THE APPELL ANT IN HIS LETTER DATED 13.03.2014 CLAIMED THAT AN AGREEMENT FOR SALE WAS ENTERED ON 16.11.2007 AND THE AGREEMENT PROVIDES FOR PAYMENT O F RS.14 CRORES TO M/S.GOLDEN HOMES FOR CAUSING THE SALE AND DESCRIED AS ASSESSMENT FEE/NOMINATION FEES. IT WAS ADMITTED BY THE A.R TH AT AMOUNT WAS NOT INCLUDED IN THE REGISTERED SALE DEED. IT WAS ALSO C ONTENDED THAT THE ITA NO. 1401/MDS/14 M/S.JESUS CALLS 10 PAYMENT WAS COMPELLED BY THE SELLER AND HENCE MUST BE INCLUDED IN THE TOTAL COST OF THE PROPERTY AND ALLOWED AS APPLI CATION OF INCOME. BUT THE AO IN HIS ASSESSMENT ORDER CLEARLY BROUGHT O UT THAT THE AGREEMENT WAS NOT A REGISTERED ONE AND THE SALE DEE D DOES NOT CONTAIN ANY REFERENCE TO THE UNREGISTERED AGREEMENT. THE TI ME GAP BETWEEN THE AGREEMENT TO PURCHASE THE SAID LAND BY THE SELL ER J. RAJKUMAR BALSINGH (03.01.2007) AND ACTUAL SALE TO THE APPELL ANT BY THE SELLER (22.11.2007 & 26.11.2007) WAS BARELY ELEVEN MONTHS. THE AO ALSO STATED THAT THERE IS NO MENTION OF ANY COST OF REIM BURSEMENTS, DEVELOPMENTS AS CLAIMED BY THE APPELLANT IN THE SAL E DEED. THE AO ALSO BROUGHT OUT THE FACT THAT THERE IS NO OBLIGATI ON TO PAY EXTRA SUM OF RS.14 CRORES TO M/S.GOLEND HOMES PVT LTD. SECT.11 T O 12 OF THE ACT CLEARLY PROVIDES FOR EXEMPTION OF INCOME FROM TAXAT ION IF THE SUM IS SPENT WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES I N INDIA. IF THE SUM IS SPENT FOR SOME OTHER PURPOSE, THE SAME CANNOT BE AL LOWED AS EXEMPT. IN THIS CASE, PAYMENT OF RS.14 CRORES TO M/S.GOLDEN HOMES PVT. LTD., NOT BEING THE SELLER OF THE LAND CANNOT BE CONSIDER ED AS APPLICATION OF INCOME IN THE PURCHASE OF ASSET. THE PURPOSE FOR W HICH THE AMOUNT WAS PAID TO THE COMPANY WAS NOT DISCLOSED BY THE AP PELLANT EXCEPT SAYING THAT IT IS A COMPULSION BY THE SELLER. THER EFORE, I AM OF THE CONSIDERED VIEW THAT THE AO RIGHTLY DISALLOWED THE SUM AS NON- ITA NO. 1401/MDS/14 M/S.JESUS CALLS 11 APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS P URPOSE. HENCE THE ADDITION IS CONFIRMED. 5. BEFORE US, LD. A.R ADMITTED THAT THE LOAN OBTA INED FOR PURCHASE OF LAND CANNOT BE CONSIDERED AS THE INCOME OF THE TRUS T AND THE PAYMENT MADE FROM SUCH LOAN RECEIVED FOR THE PURCHA SE OF LAND CANNOT BE TREATED AS APPLICATION OF INCOME, HE HOWE VER ARGUED THAT THE WHEN SUCH LOAN IS REPAID FROM THE INCOME OF THE TRUST THEN IT SHOULD BE TREATED AS APPLICATION OF INCOME. L.D. A. R FURTHER ARGUED THAT EXCESS APPLICATION OF EARLIER YEARS SHOULD BE SET OFF AGAINST THE SHORTFALL OF THE LATER YEAR. THE LD. A.R. RELIED O N THE DECISION OF DIT (EXEMPTION) VS. GOVINDU NAICKER ESTATE IN 315 ITR 2 37(MAD.) AND 248 ITR 368(MAD.) AND SUBMITTED THAT THE ACTION OF THE LD. CIT (A) BY BRINGING TO TAX THE SUM OF ` 11,05,02,792/- IS NOT WARRANTED AND THEREFORE IT MAY BE DELETED. LD. A.R. FURTHER ARGUE D THAT THE PAYMENT MADE TO M/S.GOLDEN HOMES PVT LTD. FOR ` 14 CRORES WAS SOLELY INCURRED FOR THE PURPOSE OF PURCHASE OF LAND IN ORD ER TO MEET THE OBJECTS OF THE TRUST, AND THEREFORE, IT SHOULD BE A LLOWED AS APPLICATION OF INCOME. LD. A.R. POINTED OUT AND REFERRED TO THE SALE AGREEMENTS ITA NO. 1401/MDS/14 M/S.JESUS CALLS 12 ENTERED BETWEEN THE ASSESSEE AND THE VENDOR OF THE LAND BASED ON WHICH THE SALE DEED WAS EXECUTED. THE LD. D.R ON THE OTHER HAND RELIED ON THE ORDERS OF THE LD. ASSESSING OFFICER A ND THE LD. CIT (A) AND ARGUED IN SUPPORT OF THE SAME AND REQUESTED THE ORDER THE LD. CIT (A) TO BE CONFIRMED. 6.1. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY P ERUSED THE MATERIALS AVAILABLE ON RECORD. ON PERUSING THE TRI PARTITE AGREEMENT DATED 16 TH NOVEMBER, 2007 BETWEEN MR.J.RAJKUMAR BALSINGH, M/S.GOLDEN HOMES PVT LTD., AND THE TRUST M/S.JESUS CALLS, IT IS EVIDENT THAT M/S.GOLDEN HOMES PVT LTD., IS NOMINATE D TO RECEIVE ` 14 CRORES TOWARDS PURCHASE OF LAND BY M/S.JESUS CALLS (PAGE NO.10 OF THE PAPER BOOK). THE RELEVANT PARA IS REPRODUCED HE REIN BELOW:- PARA 2 CLAUSE-C SUB CLAUSE(II): (II) RS.14,00,00,000/-, BEING THE AGGREGATE OF RS .4,40,00,000/- ON OR BEFORE 22.11.2007 AND THE BALANCE RS.9,60,00,000/- TO BE PAID ON OR BEFORE 26.11.2007 OR WITHIN 2 WORKING DAYS OF THE F IRST PARTIES FULFILLING THE PROVISIONS CONTAINED IN PARA 1 ABOVE REGARDING RELEASE OF TITLE DEEDS AND DISCHARGE OF AMOUNTS DUE TO ICICI BANK LTD, WHI CHEVER IS LATER, SAID ITA NO. 1401/MDS/14 M/S.JESUS CALLS 13 SUM OF RS.14,00,00,000/- BEING THE ASSIGNMENT/NOMIN ATION FEE TO GHPL FOR CAUSING THE SALE OF THE LAND DESCRIBED IN ITEM NO.3 OF THE SCHEDULE HEREUNDER BY RBG IN FAVOUR OF JC/SECOND PARTY; FURTHER, MR.J. RAJKUMAR BALSINGH HAS CONFIRMED THA T THE AMOUNT RECEIVED BY M/S.GOLDEN HOMES PVT. LTD., WAS TOWARDS THE SALE CONSIDERATION OF THE PROPERTY SOLD BY HIM TO M/S.JE SUS CALLS (PAGE NO.94 OF THE PAPER BOOK). THE FACT THAT M/S.JESUS CALLS HAD MADE PAYMENT OF ` 14 CRORES TO M/S.GOLDEN HOMES PVT. LTD., BY WAY OF DEMAND DRAFT IS ALSO NOT DISPUTED. THE AMOUNT OF ` 9.60 CRORES AND ` 4.14 CRORES AGGREGATING TO ` 14 CRORES HAVE BEEN PAID TOWARDS PURCHASE OF LAND BY THE ASSESSEE ON THE DIRECTIONS OF THE VENDOR OF THE LAND AS A PART OF PURCHASE CONSIDERATION, THOUG H TERMED AS DEVELOPMENT AND IMPROVEMENT COST OF LAND ETC. CONS IDERING THESE FACTS, WE HOLD THAT THE PAYMENT OF ` 14 CRORES MADE BY THE ASSESSEE TO M/S.GOLDEN HOMES PVT. LTD., HAS TO BE TREATED AS GENUINE PURCHASE CONSIDERATION TOWARDS PURCHASE OF LAND. ITA NO. 1401/MDS/14 M/S.JESUS CALLS 14 6.2. FURTHER THE LD. ASSESSING OFFICER OBSERVED T HAT THE ASSESSEE HAD SPENT DURING THE RELEVANT ASSESSMENT YEAR ` 98,22,31,253/- TOWARDS ADDITION OF FIXED ASSETS. THE LD. ASSESSING OFFICER HAS ALSO OBSERVED THAT THE ASSESSEE HAD OBTAINED BANK LOAN O F ` 83,04,00,000/- BEING ONE OF THE SOURCES FOR THE A FORESAID INVESTMENT. WHILE COMPUTING THE COMPLIANCE U/S.11(1 )(A) OF THE ACT WHICH PROVIDES FOR APPLICATION OF INCOME OF A SPECI FIED AMOUNT FROM THE INCOME DERIVED FROM THE PROPERTY HELD UNDER TRU ST, THE LD. ASSESSING OFFICER HAD RIGHTLY EXCLUDED THE LOAN AMO UNT OBTAINED FROM THE BANK OF ` 83,04,00,000/- FROM THE INCOME OF THE TRUST AND ALS O FROM APPLICATION OF FUNDS. HOWEVER THE LD.A.O HAD E RRED BY HOLDING THAT RS. 14 CRORES PAYMENT MADE BY THE ASSESSEE TOW ARDS PURCHASE OF LAND IS UNNECESSARY AND THEREFORE CANNOT BE TREA TED AS APPLICATION OF INCOME FOR THE PURPOSE OF THE TRUST. MOREOVER TH E DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF D IT (EXEMPTION) VS. GOVINDU NAICKER ESTATE (SUPRA) HAS MADE IT CLEAR TH AT THE REPAYMENT OF LOAN OBTAINED FOR CAPITAL INVESTMENT HAS TO BE C ONSIDERED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE U/S. 1 1(1)(A) OF THE ACT. SINCE WE HAVE HELD THAT THE PAYMENT OF ` 14 CRORES MADE BY THE ITA NO. 1401/MDS/14 M/S.JESUS CALLS 15 ASSESSEE TOWARDS PURCHASE OF LAND TO BE GENUINE, TH E AMOUNT OF ` 15,18,31,253/- ( ` 98,22,31,253 - ` 83,04,00,000) HAS TO BE TREATED AS APPLICATION OF INCOME TOWARDS CAPITAL EXPENDITURE. CONSEQUENTLY, IN THE PRESENT CASE, TOTAL APPLICATION OF INCOME WOULD BE:- REVENUE EXPENDITURE 31,18,35,367/- CAPITAL EXPENDITURE 15,18,31,253/- TOTAL 46,36,66,620/- SINCE 85% OF THE ASSESSEES INCOME OF THE TRUST DU RING THE RELEVANT ASSESSMENT YEAR IS ` 43,41,69,412/- (51,07,87,543/- 85 100), IT IS EVIDENT FROM THE ABOVE COMPUTATION THAT THE ASSESSE E HAS APPLIED MORE THAN 85% OF ITS INCOME FOR CHARITABLE OR RELIG IOUS PURPOSE IN ACCORDANCE WITH THE PROVISIONS OF SEC.11(1)(A) OF T HE ACT. THEREFORE, THERE IS NO SHORTFALL IN APPLICATION OF FUND AS WOR KED OUT BY THE LD. ASSESSING OFFICER, AS A RESULT SETTING OFF THE BROU GHT FORWARD EXCESS APPLICATION OF INCOME FROM THE ASSESSMENT YEAR 2007 -08 TO THE RELEVANT ASSESSMENT YEAR IS NOT NECESSARY AND IRREL EVANT IN THE PRESENT CASE BEFORE US. FOR THE ABOVE SAID REASONS WE HEREBY SET ASIDE THE ORDER OF THE LD.A.O WHEREIN HE HAS DISALL OWED THE CAPITAL ITA NO. 1401/MDS/14 M/S.JESUS CALLS 16 EXPENDITURE OF RS.14 CRORES AND REDUCED THE SHORTFA LL IN APPLICATION OF FUNDS FROM THE EXCESS BROUGHT FORWARD APPLICATIO N OF INCOME OF THE ASSESSMENT YEAR 2007-08 TO THE EXTENT OF THE SHORTF ALL AND FURTHER WE HEREBY STRIKE DOWN THE ORDER OF THE LD.CIT(A) WHERE IN HE HAS DIRECTED THE LD.A.O TO BRING TO TAX THE SUM OF RS.1 1,05,02,792 BY DENYING THE BENEFIT OF CARRIED FORWARD OF EXCESS AP PLICATION OF INCOME. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN ITS FAVOUR AS INDICATED HEREIN ABOVE. ORDER PRONOUNCED ON 10 TH OCTOBER, 2014. SD/- SD/- (V. DURGA RAO) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 10 TH OCTOBER,2014. K S SUNDARAM. '# $%&% /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. '() /CIT(A) 4. ' /CIT 5. %*+ , /DR 6. +-. /GF