Vels Institute of Science Technology and Advanced Studies (Vistas), CHENNAI V. Addl. CIT, CHENNAI

ITA 1548/CHNY/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7816 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 06-07-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: R SIVARAMAN
• Keywords: Capital asset; Gift; Charitable institution; Diversion of income; Capital receipt; Capital expenditure
• Section: 12AA; 12; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! ' , # '$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NO.1548/MDS/2015 / ASSESSMENT YEAR : 2011-12 VELS INSTITUTE OF SCIENCE TECHNOLOGY AND ADVANCED STUDIES (VISTAS), NO.521/2, ANNAI SALAI, NANDANAM, CHENNAI 600 035. PAN AAATV9804F ( /APPELLANT) V. THE ADDITIONAL COMMISSIONER OF INCOME-TAX, (EXEMPTIONS), CHENNAI RANGE, CHENNAI. RESPONDENT) / APPELLANT BY : SHRI R. SIVARAMAN, ADVOCATE / RESPONDENT BY : SHRI PATHLAVATH PEERYA, CIT ! / DATE OF HEARING : 20.10.2016 '# ! / DATE OF PRONOUNCEMENT : 19.12.2016 % / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-17, CHEN NAI DATED 09.03.2015. - - ITA 1548/15 2 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A TRUST REGISTERED U/S.12AA OF THE ACT VIDE ORDER OF THE DI T(E) DATED 25.09.2007. THE ASSESSEE FILED ITS RETURN FOR THE AY 2011-12 ON 30.09.2011 ADMITTING NIL INCOME. THE CASE WAS SE LECTED FOR SCRUTINY AND NOTICE U/S.143(2) OF THE ACT WAS ISSUE D ACCORDINGLY. IN RESPONSE, THE LD. A.R. APPEARED FROM TIME TO TIM E. DETAILS CALLED FOR WERE FILED. AFTER SCRUTINIZING THE DETA ILS FILED AND DISCUSSING THE CASE WITH THE AUTHORIZED REPRESENTAT IVE, THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 2 7.3.2014 DETERMINING THE TOTAL INCOME AT 14,53,26,850/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT A SUM OF 42,01,66,152/- REMAINED OUTSTANDING AS ON 31.3.2011 UNDER THE HEAD LOANS AND ADVANCES IN THE BALANCE SHEET. OUT OF THE ABOVE SUM, 21,85,60,000/- WAS SHOWN AS ADVANCE FOR PROPERTY UNDER VELS UNIVERSITY AND THE DETAILS OF PAYMENT MADE BY THE ASSESSEE ARE AS UNDER: S. NO. DATE LOCATION OF PROPERTIES PAID TO WHOM AMOUNT ( ) (OB) 15,76,00,000 1. 28.06.2010 THALAMBUR ANTHEM FOUNDATION 2,25,00,000 2. 08.07.2010 THALAMBUR -DO- 25,00,000 3. 08.02.2011 THALAMBUR -DO- 1,00,00,000 4. 10.03.2011 MANJAKARUNAL DR. ISARI K. GANESH 1,15,00, 000 5. 14.03.2011 MADURAI ARTHI ASSOCIATES 94,60,000 6. 14.03.2011 MADURAI -DO- 50,00,000 TOTAL 21,85,60,000 - - ITA 1548/15 3 ACCORDING TO THE AO, OUT OF THE ABOVE TRANSACTIONS, THE AMOUNTS OUTSTANDING AS ON 31.03.2011 AGAINST MANAGING TRUST EE, MR. ISARI K. GANESH WAS 16,91,00,000/- AND TRUSTEE, MRS. ARTHI GANESH WAS 1,44,60,000/-. 2.1 THE AO OBSERVED THAT THE ABOVE MENTIONED SUMS W ERE PAID TO MANAGING TRUSTEE AND A COMPANY IN WHICH MR S. ARTHI, TRUSTEE IS ONE OF THE DIRECTORS FOR PURCHASE OF LAN D. OUT OF 16,91,00,000/- PAID, 15,76,00,000/- WAS GIVEN TO DR. ISARI K. GANESH DURING THE AY 2010-11 AND 1,15,00,000/- WAS GIVEN DURING AY 2011-12. THE DETAILS ARE AS UNDER : 01.07.2009 20,00,000 04.12.2009 5,00,00,000 23.01.2010 55,00,000 27.01.2010 10,00,00,000 27.01.2010 50,000 01.02.2010 50,000 SUB-TOTAL 15,76,00,000 10.03.2011 1,15,00,000 ----------------------- TOTAL 16,91,00,000 ============= 2.2 ACCORDING TO THE AO, COPY OF AGREEMENT FOR SALE DATED 01.07.2009 BETWEEN DR. ISARI K. GANESH AND THE ASSE SSEE REVEALS THAT THE CONSIDERATION FIXED FOR SALE WAS 20 CRORES AND - - ITA 1548/15 4 20 LAKHS WAS PAID TO DR. ISARI K. GANESH ON 1.7.20 09 I.E. ON THE DATE OF AGREEMENT ITSELF. THE AGREEMENT ALSO R EVEALS THAT THE PROPERTIES MENTIONED IN SL.NOS.1 TO 10 THEREIN WERE PURCHASED BY DR. ISARI K. GANESH ONLY ON 5.3.2008 F ROM DIFFERENT PARTIES BY DIFFERENT SALE DEEDS I.E. EXACTLY 15 MON THS BEFORE THE AGREEMENT OF SALE. THE AO OBSERVED THAT DR. ISARI K. GANESH PURCHASED THE ABOVE LAND FOR A CONSIDERATION OF 1.73 CRORES ONLY. THE AO OBTAINED THE GUIDELINE VALUE FOR THE SAID PROPERTIES FOR THE PERIOD 1.8.2007 TO 31.3.2012 FRO M THE REGISTRATION DEPARTMENT, WHICH WORKS OUT TO 2,52,41,000/- ONLY. THEREFORE, THE AO SURPRISED THAT AS TO HOW T HE ASSESSEE TRUST CAME FORWARD TO PAY 20 CRORES TO PURCHASE THE ABOVE PROPERTY WHICH WAS PURCHASED ONLY FOR 1.73 CRORES JUST 15 MONTHS BACK AND HE WORKED OUT THE ACTUAL COST OF T HE LAND AS ON 5.3.2008 (I.E. DATE OF PURCHASE BY DR. ISARI K. GANESH) BY APPLYING COST INFLATION INDEX NOTIFIED BY THE CBDT FOR CAPITAL GAINS. 1,73,31,000 X 582 = 1,94,34,763/- @ 75% INFLATION 519 THE AO AGAIN WORKED OUT @ 100% INFLATION AND ARRIV ED THE VALUE AT 2,59,13,017 (I.E. 1,94,34,763 X 4/3). THE AO FUR THER - - ITA 1548/15 5 TOOK A LENIENT STEP AND DOUBLE THE COST TO ARRIVE A T 5.18 CRORES. THEREFORE, THE AO OBSERVED THAT THE VALUE OF THE LA ND TO BE PURCHASED BY THE ASSESSEE CANNOT EXCEED 5.18 CRORES AT ANY COST. BUT THE ASSESSEE WAS PREPARED TO GIVE 20 CRORES TO BUY THE PROPERTY FROM DR. ISARI K. GANESH, WHO IS THE M ANAGING TRUSTEE OF THE ASSESSEE. HENCE, ACCORDING TO THE A O, THE TRANSACTION IS COVERED BY THE PROVISIONS OF SEC.13( 1)(C) AND SEC.13(1)(D) OF THE ACT. 2.3 WHEN QUESTIONED BY THE AO ABOUT IT, THE ASSESS EE COULD NOT FURNISH ANY COMPARABLE SALE BY THIRD PARTY IN T HE NEARBY LOCALITY. HENCE, THE AO OBSERVED THAT THE TRANSAC TION ATTRACTS PROVISIONS OF SEC.13(2)(A) OF THE ACT. THE AO, F URTHER OBSERVED THAT BEFORE THE C IT(A) FOR THE AY 2010-11, IT WAS CONTENDED THAT DR. ISARI K. GANESH PLEDGED HIS PROPERTIES AS A SEC URITY FOR THE LOANS AVAILED BY M/S. VELS EDUCATIONAL TRUST (VET). THE LOANS AVAILED BY VET WERE IN TURN ADVANCED TO THE ASSESSE E AND THE AMOUNT OUTSTANDING AS ON 31.3.2012 WAS 8.40 CRORES. THE ASSESSEE CLAIMED THAT THE MD HAS NOT CHARGED ANY COMMISSION/FEE EITHER FROM VET OR FROM THE ASSESSEE . HENCE, - - ITA 1548/15 6 THE ASSESSEE IS DERIVING NO BENEFIT FROM THE TRANSA CTION WITH RELATED PERSONS, RATHER THE RELATED PERSONS BENEFIT TING OF 8.4 CRORES FROM VET AT THE TIME OF ENTERING INTO AGREEM ENT OF SALE. THE AO ALSO OBSERVED THAT THE ASSESSEE INFORMED TH E CIT(A) DURING APPELLATE PROCEEDINGS RELATING TO AY 2010-11 THAT 4.06 CRORES AS COMPENSATION/INTEREST RECEIVED FROM DR. I SARI K. GANESH BY THE TRUST. IT WAS CLARIFIED BY THE AO TH AT THE RECEIPT WAS CONSEQUENT TO THE CANCELLATION OF SALE AGREEMEN T IN THE SUBSEQUENT ASSESSMENT YEAR AND IN NO WAY CONNECTED TO THE PROCEEDINGS OF THE AY 2011-12, WHICH IS UNDER APPEA L. THUS, ACCORDING TO THE AO, THE TRANSACTION OF THE ASSESSE E WITH THE MANAGING TRUSTEE, DR. ISARI K. GANESH IS HIT BY PRO VISIONS OF SEC.13(1)(C), 13(3) AND 13(3) OF THE ACT AND THE AS SESSEE TRUST IS NOT ENTITLED FOR EXEMPTION U/S.11 OF THE ACT AND TO SUPPORT HIS VIEW, HE RELIED ON THE FOLLOWING DECISIONS: 1. KANAHYALAL PUNJ CHARITABLE TRUST VS.DIT(E)297 IT R 66(DELHI) 2. DIT VS. BHARAT DIAMOND BOURSE (126 TAXMAN 365)( SC) 3. CIT VS. V.G.P. FOUNDATION (2003) 263 ITR 187 (M AD) 4. CIT VS. SHREE P. SUBRAMANIAM RELIGIOUS TRUST (1 29 TAXMAN 144(KER.) - - ITA 1548/15 7 2.4 THE AO OBSERVED THAT A SUM OF 16.91 CRORES HAS BEEN LENT TO THE MANAGING TRUSTEE WITHOUT INTEREST. SIM ILARLY, 1.44 CRORES WAS LENT TO M/S. ARTHI ASSOCIATES (IN WHICH MRS. ARTHI GANESH TRUSTEE IS ONE OF THE DIRECTORS) WITHOUT INT EREST. BUT THE ASSESSEE PAID 1,00,56,422/- AS INTEREST ON THE TERM LOAN OF 14,28,80,463/- OBTAINED FROM ICICI BANK. THIS IS V IOLATIVE OF SEC.13(2)(A) OF THE ACT. THEREFORE, THE AO CALCUL ATED THE INTEREST FOREGONE BY THE ASSESSEE TRUST AND QUANTIF IED AT 1,58,97,473/- AND ADDED THE SAME TO TAXATION. THE AO RELIED ON THE DECISION OF THE RAJASTHAN HIGH COURT IN THE CASE OF SHREE POONGALIA JAIN SWETEMBER MANDIR VS. CIT (1987), 168 ITR 516. ACCORDING TO THE AO, SINCE THE ASSESSEE WAS IN RECE IPT OF 2,25,01,001/- BEING THE CORPUS DONATION DURING THE AY IN APPEAL AND THE ASSESSEE BECOMES INELIGIBLE FOR EXEM PTION, THE CORPUS FUND BECOMES TAXABLE AND THE SAME WAS BROUGH T TO TAX. ACCORDINGLY, THE AO DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT 14,53,26,850/- AND RAISED A TAX DEMAND OF 6,27,33,679/-. AGAINST THIS, THE ASSESSEE WENT IN APPEAL BEFORE TH E CIT(APPEALS). - - ITA 1548/15 8 3. ON APPEAL, THE CIT (APPEALS) OBSERVED THAT DURIN G THE AY 2010-11, A SUM OF 15,76,00,000/- WAS PAID TO DR. ISARI K. GANESH, MANAGING TRUSTEE AND THE SUM REMAINED OUTST ANDING AS ON 31.3.2011. A FURTHER SUM OF 1,15,00,000/- WAS PAID TO HIM AS LAND ADVANCE DURING THE AY 2011-12 AND THE S AME ALSO REMAINS OUTSTANDING AS ON 31.3.2011. A SUM OF 1,44,60,000/- WAS PAID TO MRS. ARTHI GANESH, TRUSTEE OF THE ASSES SEE DURING THE AY 2011-12 AND REMAINS OUTSTANDING AS ON 31.3.2 011. 3.1 THE CIT(APPEALS) OBSERVED THAT ACCORDING TO SEC .13(1)(C) OF THE ACT, SECTIONS 11 AND 12 OF THE ACT ARE NOT A PPLICABLE IF ANY PART OF INCOME ENURES, USED OR APPLIED DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SUB-SECTIO N(3) OF SEC.13 OF THE ACT. ACCORDING TO THE DEED OF AMENDMENT O F THE ASSESSEE TRUST, DR. ISARI K. GANESH IS THE FOUNDER AND MANAGING TRUSTEE AND HENCE, COVERED BY CLAUSE(A) OF SUB-SEC. (3) OF SEC.13 OF THE ACT. MRS. ARTHI GANESH, TRUSTEE OF T HE ASSESSEE IS COVERED BY CLAUSE(CC) OF SUB-SEC.(3) OF SEC.13 OF T HE ACT. HENCE, HE OBSERVED THAT SEC.13(3) OF THE ACT IS CLE ARLY ATTRACTED IN THIS CASE. WITH REGARD TO SEC.13(1)(C) OF THE ACT IS ATTRACTED - - ITA 1548/15 9 OR NOT, THE CIT(APPEALS) OBSERVED THAT A SUM OF 16,91,00,000/- ( 15,76,00,000 DURING AY 2010-11 + 1,15,00,000/- DURING AY 2011-12) WAS PAID TO DR. IS ARI K. GANESH AS LAND ADVANCE TO PURCHASE LANDS FROM HIM. SIMILARLY 1,44,60,000/- WAS PAID TO MRS. ARTHI GANESH AS LAN D ADVANCE TO PURCHASE LANDS FROM HER. THE CIT(APPEALS) OBSER VED THAT THE AO ESTABLISHED IN THE ASSESSMENT ORDER THAT THE LAN DS BELONGING TO THE MANAGING TRUSTEE IS NOT THE WORTH FOR THE CO NSIDERATION FIXED I.E. 20 CRORES BY AGREEMENT OF SALE DATED 1.7.2009. SIMILAR IS THE CASE WITH THE TRANSACTION WITH MRS. ARTHI GANESH, TRUSTEE REGARDING ADVANCE GIVEN TO HER FOR PURCHASE OF LAND. THESE TRANSACTIONS PROVED BEYOND DOUBT THAT INCOME ENURES OR IS USED OR APPLIED DIRECTLY OR INDIRECTLY TO THE MA NAGING TRUSTEE AND TRUSTEE THEREBY SEC.13(1)(C) IS ATTRACTED. REG ARDING APPLICABILITY OF SEC.13(2) OF THE ACT,, HE OBSERVED THAT IN THIS CASE, CLAUSE (A) AND CLAUSE (G) OF SUB-SEC.(2) OF S EC.13 ARE CLEARLY ATTRACTED. A SUM OF 20 CRORES WAS AGREED TO BE GIVEN TO THE MANAGING TRUSTEE OF THE ASSESSEE TO PURCHASE HIS LAND WHICH IS WORTH 5.18 CRORES (THE HIGHEST VALUED FIXED BY THE AO WHICH IS PROHIBITIVE AT ANY STANDARD IN THAT AREA D URING THE - - ITA 1548/15 10 RELEVANT PERIOD) AND 16.91 CRORES WERE PAID DURING AY 2010-11 AND 2011-12. A SUM OF 1.44 CRORES WAS PAID TO MRS. ARTHI GANESH, TRUSTEE FOR SIMILAR LAND TRANSACTION. THE CIT(APPEALS) OBSERVED THAT THE INCOME OF THE ASSESSEE IS OR CONT INUES TO BE LENT TO PERSONS REFERRED TO IN SEC .13(3) OF THE AC T WITHOUT ADEQUATE SECURITY OR INTEREST IN THE GARB OF LAND A DVANCE AND IT IS A CASE OF DIVERSION OF INCOME OF THE TRUST IN FAVOU R OF PERSON REFERRED TO IN SEC.13(3) OF THE ACT. HENCE, ACCORD ING TO THE CIT(A), IT IS A CASE OF VIOLATION OF SEC.13(2) OF T HE ACT. REGARDING WHETHER THE TRANSACTION ATTRACTS SEC.13(1)(D) OF TH E ACT, THE CIT(APPEALS) OBSERVED THAT THE AO MADE A FINDING TH AT THE AMOUNTS PAID TO THE MANAGING TRUSTEE AND TRUSTEE AR E NOT IN ACCORDANCE WITH SEC.11(5) OF THE ACT AND SEC.13(3)( D) IS ATTRACTED AND EXEMPTION U/S.11 AND 12 OF THE ACT AR E NOT AVAILABLE TO THE ASSESSEE. 3.2 FURTHER, HE OBSERVED THAT THERE IS A DIVERSIO N OF 16.19 CRORES TO THE MANAGING TRUST AND 1.44 CRORES TO THE TRUSTEE FROM THE TRUST AND SUBSEQUENT COMPENSATION RECEIVED BY THESE PERSONS ARE NOT RELEVANT FOR ISSUE UNDER CONSIDERAT ION. - - ITA 1548/15 11 ACCORDINGLY, HE OBSERVED THAT THERE IS VIOLATION OF SEC.13(1)(C) R.W.S.13(2) AND 13(3) OF THE ACT, AND THUS, THE N ON-GRANTING OF EXEMPTION U/S.11 OF THE ACT BY THE AO IS CONFIRMED BY CIT(A). FURTHER HE OBSERVED THAT RECEIPT OF CORPUS DONATION OF 2.25 CRORES CHARGEABLE TO TAX IN VIEW OF VIOLATION OF SE C.13(3) R.W.S.13(1)(C) OF THE ACT. AGAINST THIS, THE ASSESS EE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. SIMILAR ISSUES CAME FOR CONSIDERATION B EFORE THIS TRIBUNAL FOR THE AY 2010-11 IN ITA NO.1759/MDS/2013 AND CO 15/MDS/2014. THE TRIBUNAL VIDE ITS ORDER DATED 28. 10.2015 HELD AS FOLLOWS : 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE-TRUST IS REGISTERED UNDER SECTION 12AA OF THE ACT. IT IS ALSO NOT IN DISPUTE THAT THERE WAS AN AGREEMENT FOR SALE OF THE LAND BELONGING TO THE MANAGING TRUS TEE TO THE ASSESSEE-TRUST. THE ONLY OBJECTION OF THE REVENUE APPEARS TO BE THAT THE SALE OF THE LAND IS NOT ON PAR WITH THE MARKET VALUE. FROM THE ORDER OF THE ASSESSING OFFICER IT APPEARS THAT THE MARKET VALUE OF THE LAND IS VERY LESS THAN WHAT WAS AGREE TO BE SOLD TO THE ASSESSEE-TRUST. THE FACT REMAINS THAT THERE WAS AN AGREEMENT FOR SALE OF THE PROPERTY AND THE ASSESSEE -TRUST - - ITA 1548/15 12 ADVANCED THE FUNDS. THERE IS NO FIXED PRICE FOR SA LE OF LAND. THE PRICE OF A LAND IS FLEXIBLE, DEPENDING UPON VAR IOUS FACTORS. THE URGENCY OF THE VENDOR TO SELL THE PROPERTY, THE NECESSITY OF THE PURCHASER TO PURCHASE THE PROPERTY, THE LOCATIO N OF THE LAND, THE AREA OF THE LAND, INFRASTRUCTURES AVAILAB LE NEARER TO THE LAND AND FUTURE PROSPERITY FOR DEVELOPMENT OF T HE LAND, ETC. NEED TO BE CONSIDERED WHILE DETERMINING THE MARKET VALUE OF A LAND. APART FROM THAT, IT IS WELL SETTLED PRINCIPL ES OF LAW THAT MARKET VALUE IS NOTHING BUT A PRICE AGREED BETWEEN THE WILLING SELLER AND WILLING PURCHASER. THEREFORE, WE CANNOT SAY THAT A PARTICULAR LAND HAS TO BE SOLD BY A PARTICULAR PERS ON FOR A PARTICULAR RATE. IF TWO WILLING PERSONS AGREED TO SELL AND PURCHASE THE PROPERTY FOR A PARTICULAR PRICE, THEN THE ASSESSING OFFICER MAY NOT HAVE ANY ROLE TO DISMISS THE AGREED PRICE UNLESS THERE ARE SOME EVIDENCES FOUND THAT THE AGRE ED PRICE DISCLOSED IS NOT ACTUALLY THE AGREED PRICE. IN THE CASE BEFORE US, IT IS NOBODYS CASE THAT THE PRICE AGREED BETWE EN THE MANAGING TRUSTEE AND THE TRUST IS NOT ACTUALLY THE AGREED PRICE. THEREFORE, THE OBSERVATION OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE VALUE OF THE LAND IS MUCH LESS THAN WHAT WAS AGREED BETWEEN THE PARTIES CANNOT STA ND IN THE EYE OF LAW. WHEN THE ASSESSEE-TRUST INTENDED TO ES TABLISH A MEDICAL COLLEGE FOR WHICH IT REQUIRES MINIMUM 25 AC RES OF LAND AND THE MANAGING TRUSTEE HAS SUCH VAST AREA OF LAND , NOTHING WRONG IN PURCHASING THE LAND FROM THE MANAGING TRUS TEE BY PAYING THE MARKET VALUE. SUBSEQUENTLY, THE ASSESSE E-TRUST COULD NOT ESTABLISH MEDICAL COLLEGE. THEREFORE, TH E AGREEMENT WAS CANCELLED. IN FACT, THE MANAGING TRUSTEE REPAI D THE PART AMOUNT ALONG WITH INTEREST. IT IS NOT THE CASE OF THE REVENUE THAT THE INTEREST PAID BY THE MANAGING TRUSTEE IS N OT IN MARKET RATE. - - ITA 1548/15 13 8. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 13 OF THE ACT. SECTION 13(1)(A) SAYS THAT IF ANY PART OF THE PROPERTY OR INCOME OF THE TRUST IS GIVEN TO THE INTERESTED PERSON WITHOUT EITHER ADEQUATE SECURITY OR ADEQUATE INTEREST, FOR THE BENEFIT OF THE PERSON INTERESTED, THEN THER E SHALL BE A DIVERSION OF FUNDS FOR THE INTERESTED PERSON. SECT ION 13(1)(C) SAYS THAT IF THE AMOUNT PAID IS EXCESS OF WHAT WAS REASONABLY PAID FOR THE SERVICE RENDERED HAS TO BE CONSIDERED AS USED OR APPLIED FOR THE BENEFIT OF PERSON INTERESTED. IN T HE CASE BEFORE US, THE MANAGING TRUSTEE HAS NOT RENDERED ANY SERVI CE. IN FACT, THERE WAS AN AGREEMENT FOR PURCHASE OF PROPER TY. THEREFORE, THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE MONEY ADVANCED BY THE ASSESSEE TO THE EXTENT OF ` 15,76,00,000/- IS WITHOUT ADEQUATE SECURITY AND AFT ER CANCELLING THE AGREEMENT, WHETHER THE ASSESSEE HAS RECEIVED THE ADEQUATE INTEREST FROM THE MANAGING TRUSTEE. W E HAVE CAREFULLY GONE THROUGH THE ORDER OF THE CIT(APPEALS ). FROM THE ORDER OF THE CIT(APPEALS) IT APPEARS THAT THE ASSES SEE HAS RECEIVED ` 4,06,92,078/- BEING THE INTEREST FROM THE MANAGING TRUSTEE, IN ADDITION TO THE PRINCIPAL AMOUNT AFTER CANCELLATION OF AGREEMENT. THEREFORE, THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY FOUND THA T AFTER CANCELLATION OF AGREEMENT, THE ASSESSEE-TRUST WAS R ETURNED AND COMPENSATED BY WAY OF INTEREST. THEREFORE, THE TRANSACTION BETWEEN THE ASSESSEE-TRUST AND THE MANA GING TRUSTEE CANNOT BE CONSTRUED AS WITHOUT ANY ADEQUATE SECURITY OR WITHOUT ANY ADEQUATE INTEREST. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MONEY WAS IN FACT A DVANCED IN PURSUANCE OF THE AGREEMENT FOR SALE. AFTER CANCELL ATION OF AGREEMENT, THE MONEY WAS RETURNED IN ITS ENTIRETY. SINCE THERE WAS DELAY IN REPAYMENT OF MONEY RECEIVED AS ADVANCE FOR SALE - - ITA 1548/15 14 OF THE LAND, THE MANAGING TRUSTEE HAS ALSO PAID INT EREST TO THE EXTENT OF ` 4,06,92,078/-. THEREFORE, AT ANY STRETCH OF IMAGINATION, IT CANNOT BE SAID THAT THE MONEY WAS D IVERTED FOR INTEREST OF THE MANAGING TRUSTEE. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE IS NO VIOLATION O F SECTION 13 OF THE ACT. 9. NOW COMING TO THE RECEIPT OF DONATION FROM SRI B ALAJI CHARITABLE AND EDUCATIONAL TRUST, WHAT WAS RECEIVED BY THE ASSESSEE IS CAPITAL ASSET BY WAY OF THREE INSTITUTI ONS AND ITS INFRASTRUCTURES. IT IS NOBODYS CASE THAT THE ASSES SEES FUNDS WERE DIVERTED TO ANY OTHER TRUST. WHEN THE ASSESSE E RECEIVED THREE INSTITUTIONS FOR CARRYING OUT ITS CHARITABLE ACTIVITY, IT CANNOT BE SAID THAT THERE WAS A VIOLATION OF ANY OTHER PRO VISIONS OF INCOME-TAX ACT. IN FACT, THE ASSESSING OFFICER HIM SELF DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE MONEY WAS ADVANCED TO THE MANAGING TRUSTEE. SINCE THIS TRIBUNAL FOUND THAT THERE WAS NO VIOLATION OF SECTI ON 13(1)(C) OF THE ACT IN RESPECT OF THE AGREEMENT ENTERED BETWEEN THE ASSESSEE-TRUST AND THE MANAGING TRUSTEE FOR PURCHAS E OF PROPERTY AND IT IS NOT IN DISPUTE THAT THE MANAGING TRUSTEE RETURNED ENTIRE AMOUNT WITH INTEREST OF ` 4,06,92,078/-, THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 11 OF THE ACT. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(APPEALS) AND ACCORDINGLY, CONFIRMED. 5. SINCE THE ISSUE RELATING TO THE MONEY ADVANCED T O MR. ISARI K. GANESH AND OTHER PARTIES WAS SUBJECT MATTE R OF APPEAL BEFORE THIS TRIBUNAL FOR ASSESSMENT YEAR 2010-11 VI DE ORDER DATED 28.10.2015 TAKING THE CONSISTENT VIEW ON THE FACTS OF THE CASE AND BY PLACING RELIANCE ON THE JUDGEMENT OF JU RISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. L. G. RAMAMURTHI IN [1977] 110 ITR 453 (MAD) WHEREIN HELD THAT TRIBUNAL IS NOT RIGHT IN - - ITA 1548/15 15 TAKING ALTOGETHER DIFFERENT VIEW IN LATER YEAR ON S AME SET OF FACTS, WHEN THERE IS NO FRESH MATERIAL BROUGHT BEFORE IT, WE ARE INCLINED TO DECIDE THE ISSUE IN FAVOUR OF ASSESSEE BY HOLDIN G THAT THERE IS NO VIOLATION OF PROVISIONS OF THE SECTION 13(1)(C) READ WITH SECTION 13(3) OF THE ACT AND THE ASSESSEE CANNOT BE DENIED EXEMPTION U/S.11 OF THE ACT ON THIS COUNT. 6. 1 REGARDING TREATMENT OF CONTRIBUTIONS MADE WIT H THE SPECIFIC DIRECTION TO THE ASSESSEE AS INCOME OF ASS ESSEE IN TERMS OF SEC.12 OF THE ACT, THE LD.CIT(A) OBSERVED THAT ONCE THERE IS A VIOLATION OF PROVISIONS OF THE SECTION 1 3(3) R.W.S.13(1)(C), THE PROVISIONS OF THE SECTION 11 & 12 SHALL NOT OPERATE SO AS TO EXCLUDE THE INCOME OF THE TRUST FR OM THE TOTAL INCOME OF THE PREVIOUS YEAR. ACCORDING TO SECTIONS 11 & 12 OF THE ACT, THE VOLUNTARY CONTRIBUTION MADE WITH SPECI FIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUS T OR INSTITUTION, SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PR EVIOUS YEAR OF THE TRUST. BUT ONCE, THE EXEMPTION U/S.11 AND 12 I S DENIED, THE ASSESSEE WOULD NOT GET ANY PROTECTION FROM SEC.11 & 12 AND THE VOLUNTARY CONTRIBUTION WOULD BE TREATED AS INCOME, AS PER THE DEFINITION OF INCOME GIVEN IN SEC.2(24)(IIA) OF THE ACT, ACCORDING - - ITA 1548/15 16 TO WHICH INCOME INCLUDES THE VOLUNTARY CONTRIBUTION RECEIPTS BY A TRUST THEREBY ONCE THE EXEMPTION U/S.11 & 12 OF THE ACT IS WITHDRAWN ALL THE RECEIPTS OF THE TRUST EITHER BY V OLUNTARY CONTRIBUTION OR INCOME DERIVED FROM THE PROPERTY WO ULD BE INCOME OF THE TRUST IN A NORMAL COURSE AND IS CHARG EABLE TO TAX. ACCORDINGLY, THE LD.CIT(A) HELD THAT THE CORPUS DON ATION IS CHARGEABLE TO TAX. NOW, AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ACCORDING TO THE AUTHORISED REPRESENTATI VE THESE FUNDS ARE CONTRIBUTED TO THE TRUST FOR THE SPECIFIC PURPOSE AND IT BEING A CAPITAL RECEIPT, IT CANNOT BE TAXED AND THI S IS NOT COLLECTED FROM STUDENTS SO AS TO TREAT THE SAME AS INCOME OF ASSESSEE U/S.2(24)(IIA) OF THE ACT IN VIEW OF THE AMENDMENT TO THIS SECTION WITH EFFECT FROM 01.04.1989. ACCORDING TO THE AR THESE FUNDS ARE CONTRIBUTED TO THE TRUST FOR SPECIF IC PURPOSE AND IT BEING CAPITAL RECEIPT IT CANNOT BE TAXED AND THIS I S NOT COLLECTED FROM THE STUDENTS SO AS TO TREAT THE SAME AS INCOME OF THE ASSESSEE U/S 2(24)(IIA) OF THE ACT IN VIEW OF THE A MENDMENT TO THIS SECTION W.E.F. 1.4.1989. THE ASSESSEE CONTENDE D THAT THIS - - ITA 1548/15 17 AMOUNT WAS COLLECTED TOWARDS CORPUS FUND WITH A S PECIFIC DIRECTION FOR CAPITAL EXPENDITURE AND THE AMOUNT SO RECEIVED WAS SPENT FOR SPECIFIC PURPOSE FOR WHICH IT WAS COLLECT ED. ACCORDING TO THE AR IT CANNOT BE TREATED AS INCOME OF THE ASS ESSEE AS IT IS A SPECIFIC GRANT. ACCORDING TO THE AR THE ENTIRE RE CEIPTS RECEIVED TOWARDS SPECIFIC PURPOSE CANNOT BE TAXED. 7.1 THE ISSUE FOR OUR CONSIDERATION IS WHETHER THE AMOUNTS RECEIVED BY THE ASSESSEE WERE IN THE NATURE OF VOLU NTARY DONATIONS RECEIVED FOR SPECIFIC PURPOSE. IF YES, WH ETHER THE SAME COULD BE CONSIDERED TOWARDS CORPUS OF THE TRUST. AL TERNATIVELY, IF THE DONATIONS ARE NOT VOLUNTARILY MADE, THEN WHETHE R SUCH DONATIONS COULD BE CONSIDERED AS INCOME CHARGEABLE TO TAX. THE ASSESSEE HAS TAKEN A PLEA BEFORE US THAT THESE DONA TIONS ARE RECEIVED FOR A SPECIFIC PURPOSE, IT IS A TIED UP GR ANT. SECTIONS 11, 12 AND 2(24)(IIA) OF THE ACT SPEAK OF VOLUNTARY CON TRIBUTIONS. THEREFORE, FIRSTLY, IT HAS TO BE SEEN WHETHER SUCH DONATIONS ARE VOLUNTARY OR NOT. ACCORDING TO THE DICTIONARY MEANI NG, AN ACT CAN BE SAID TO BE VOLUNTARY IF IT IS DONE BY FREE CHOIC E OF ONCE OWN ACCORD, WITHOUT COMPULSION OR OBLIGATION, WITHOUT V ALUABLE CONSIDERATION, GRATUITOUS, ETC. THERE IS NO MATERIA L ON RECORD TO - - ITA 1548/15 18 SUGGEST THAT SUCH DONATIONS ARE GIVEN AGAINST THE W ILL OF THE DONORS OR BY ANY COMPULSION OR UNDER ANY OBLIGATION . IN THAT SENSE, IT CAN BE SAID THAT THE DONATIONS ARE VOLUNT ARY. IF THE DONATIONS ARE NOT VOLUNTARILY MADE, THE SAME FALL O UTSIDE THE AMBIT OF SECTIONS 11, 12 AND 2(24)(IIA) OF THE ACT. CONSEQUENTLY, GENERAL PROVISIONS OF INCOME-TAX ACT WOULD BECOME A PPLICABLE. ACCORDING TO THE GENERAL PROVISIONS OF THE ACT, ALL RECEIPTS ARE NOT INCOME. DONATIONS RECEIVED FOR SPECIFIC OBJECT ARE TO BE CONSIDERED AS TIED UP FUND AND IT IS CAPITAL RECEIP T. IF THE DONATIONS ARE MADE VOLUNTARILY FOR SPECIFIC PURPOSE , THE SAME CANNOT BE HELD AS INCOME OF THE ASSESSEE, SINCE THE DONATIONS WERE, IN OUR OPINION, GIVEN FOR SPECIFIC PURPOSE AS TIED UP GRANT AND IT CANNOT BE TAXED AS INCOME. 7.2 AS FAR AS SECTION 2(24)(IIA) IS CONCERNED, THI S SECTION HAS TO BE READ IN THE CONTEXT OF INTRODUCTION OF SECTIO N 12. IT IS SIGNIFICANT THAT SECTION 2(24)(IIA) WAS INSERTED WI TH EFFECT FROM 1.4.1973 SIMULTANEOUSLY WITH THE PRESENT SECTION 12 , BOTH OF WHICH WERE INTRODUCED FROM THE SAID DATE BY FINANCE ACT, 1972. - - ITA 1548/15 19 SECTION 12 MAKES IT CLEAR BY THE WORDS APPEARING IN PARENTHESIS THAT CONTRIBUTIONS MADE WITH A SPECIFIC DIRECTION T HAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTION SHALL NOT BE CONSIDERED AS INCOME OF THE TRUST. THE BOARD CIRCUL AR NO. 108 DATED 20.3.1973 IS EXTRACTED AT PAGE 1754 OF VOLUME -I OF SAMPATH IYENGAR LAW OF INCOME-TAX (10TH EDITION), I N WHICH THE INTERRELATION BETWEEN SECTIONS 12 AND 2(24) HAS BEE N BROUGHT OUT. GIFTS MADE WITH CLEAR DIRECTION THAT THEY SHAL L FORM PART OF THE CORPUS OF THE RELIGIOUS ENDOWMENT CAN NEVER BE CONSIDERED AS INCOME. IN THE CASE OF R.B. SHREERAM RELIGIOUS A ND CHARITABLE TRUST V. CIT (172 ITR 373) (BOM) THE HON BLE HIGH COURT HELD THAT EVEN IGNORING THE AMENDMENT TO SECT ION 12, WHICH MEANS THAT EVEN BEFORE THE WORDS APPEARING IN PARENTHESIS IN THE PRESENT SECTION 12, IT CANNOT BE HELD THAT VOLUNTARY CONTRIBUTIONS SPECIFICALLY RECEIVED TOWAR DS CORPUS OF THE TRUST MAY BE BROUGHT TO TAX. THE AFORESAID DECI SION WAS FOLLOWED BY THE BOMBAY HIGH COURT IN THE CASE OF CI T VS. TRUSTEES OF KASTURBAI SCINDIA COMMISSION TRUST (189 ITR 5) (BORN). IN THE PRESENT CASE DONATIONS BEING RECEIVE D FOR SPECIFIC - - ITA 1548/15 20 PURPOSE, TOWARDS CORPUS OF THE TRUST, CANNOT BE ASS ESSED AS INCOME OF THE ASSESSEE. 7 .3 BEING SO, AS SEEN FROM THE ABOVE JUDGMENT, THE AMOUNT RECEIVED BY THE ASSESSEE FOR SPECIFIC PURPOSE WOULD ONLY MEAN THAT THE ASSESSEE AGREED TO ACT AS A TRUSTEE OF A S PECIAL FUND RECEIVED BY ASSESSEE FROM VARIOUS PERSONS. AS A RES ULT, IT NEED NOT BE POOLED OR INTEGRATED WITH THE ASSESSEES NOR MAL INCOME. THE ASSESSEE IS ACTING AS AN INDEPENDENT TRUSTEE FO R THAT AMOUNT RECEIVED FROM VARIOUS PERSONS JUST AS SOME TRUSTEE CAN ACT AS A TRUST FOR MORE THAN ONE TRUST. TIED UP OR SPECIFIC GRANT NEED NOT, THEREFORE, BE TREATED AS AMOUNTS WHICH AR E REQUIRED TO BE CONSIDERED FOR ASSESSMENT. IN OTHER WORDS, TIED UP GRANT RECEIVED FROM DONORS FOR A SPECIFIC PURPOSE CANNOT FORM PART OF ASSESSEES INCOME. IN VIEW OF THE ABOVE DISCUSSION, VOLUNTARY CONTRIBUTIONS IN THE NATURE OF CORPUS FUND RECEIVED BY THE ASSESSEE CANNOT BE BROUGHT TO TAX. THE TIED UP GRAN T OR CORPUS FUND RECEIVED BY THE ASSESSEE SHOULD NOT BE TAXABLE AS INCOME OF THE ASSESSEE, IF IT IS USED FOR SPECIFIC PURPOSE FOR WHICH IT HAS - - ITA 1548/15 21 BEEN GIVEN AND IT CANNOT BE CONSIDERED AS REVENUE R ECEIPTS SO AS TO TAX THE SAME. 7.4 IN VIEW OF THE ABOVE, WE ARE INCLINED TO HOLD CORPUS DONATION RECEIVED BY THE ASSESSEE FOR THE SPECIFIC PURPOSE CANNOT BE TREATED AS REVENUE RECEIPT AND SAME BE CO NSIDERED AS CAPITAL RECEIPT AND NOT LIABLE TO BE TAXED. ACCO RDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON 19 TH DECEMBER, 2016 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 19 TH DECEMBER, 2016. K S SUNDARAM ;D EFGF / COPY TO: 1 . / APPELLANT 4. H / CIT 2. / RESPONDENT 5. FIJ K / DR 3. H3 / CIT(A) 6. JLM / GF