T.Thomas Educational Trust, CHENNAI V. ITO, CHENNAI

ITA 175/CHNY/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58134 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 13-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 16-02-2009
• Court: TRIBUNAL
• Department Lawyers: DR YOGESH KAMATH
• Assessee Lawyers: G BASKAR
• Keywords: Maximum Marginal Rate
• Section: 80G; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 175/MDS/2009 (ASSESSMENT YEAR : 2005-06) M/S T. THOMAS EDUCATIONAL TRUST, 16. ST. MARYS ROAD, SEMBIUM, CHENNAI - 600 011. PAN : AAATT3517D (APPELLANT) V. THE INCOME TAX OFFICER, EXEMPTIONS III, CHENNAI - 600 034 . (RESPONDENT) APPELLANT BY : SHRI G. BASKAR RESPONDENT BY : DR. YOGES H KAMATH DATE OF HEARING : 13.03.2012 DATE OF PRONOUNCEMENT : 23.03.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, DIRECTED AG AINST AN ORDER DATED 29.10.2008 OF COMMISSIONER OF INCOME TAX (APP EALS)-XII, CHENNAI, IT ASSAILS DENIAL OF EXEMPTION UNDER SECTI ON 11 OF INCOME- TAX ACT, 1961 (IN SHORT 'THE ACT'). I.T.A. NO. 175/MDS/09 2 2. SHORT FACTS APROPOS ARE THAT ASSESSEE, A TRUST R EGISTERED UNDER SECTION 12A(A) OF THE ACT, HAD FILED ITS RETURN FOR THE IMPUGNED ASSESSMENT YEAR CLAIMING EXEMPTION UNDER SECTION 11 OF THE ACT IN RESPECT OF ITS RECEIPTS OF ` 6,27,59,555/-. OUT OF SUCH RECEIPTS, ASSESSEE HAD INCURRED EXPENDITURE OF ` 6,09,00,174/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O. NOTED THAT T HERE WERE SOME PAYMENTS MADE BY THE ASSESSEE TO ONE M/S GUARDIAN C HIT FUNDS AND SUCH PAYMENTS, AS PER THE A.O., RESULTED IN AN INVESTMENT OF ` 1,48,763/-. ASSESSEE WAS CALLED UPON TO EXPLAIN WH Y SUCH INVESTMENTS SHOULD NOT BE CONSIDERED AS HIT BY SECT ION 13(1)(D) OF THE ACT. THOUGH THE ASSESSEE EXPLAINED THAT THESE WERE NOT INVESTMENTS, BUT ONLY REMITTANCES MADE TO THE SAID CHIT FUNDS AS PER THE DIRECTIONS OF HONBLE JURISDICTIONAL HIGH C OURT, THIS WAS NOT ACCEPTED BY THE ASSESSING OFFICER. A.O. WAS OF THE OPINION THAT THERE WAS A VIOLATION SPECIFIED IN SECTION 13(1)(D) OF TH E ACT SINCE ASSESSEE HAD NOT INVESTED ITS MONEY IN THE MODES ME NTIONED UNDER SECTION 11(5) OF THE ACT. HE, THEREFORE, HELD THAT ASSESSEE HAD LOST ITS RIGHT TO CLAIM EXEMPTION UNDER SECTIONS 11 & 12 OF THE ACT AND PROCEEDED TO ASSESS IT IN STATUS OF AOP AND TAXED IT AT MAXIMUM MARGINAL RATE. TOTAL INCOME ARRIVED BY THE A.O. IN CLUDED THE ALLEGED INVESTMENT MADE BY THE ASSESSEE IN M/S GUARDIAN CHI T FUNDS. A.O. I.T.A. NO. 175/MDS/09 3 ALSO NOTED THAT ASSESSEES APPLICATION FOR APPROVAL UNDER SECTION 80G OF THE ACT WAS DENIED BY DIT(EXEMPTION), CHENNA I, FOR THE SAME REASON. 2. ASSESSEE MOVED IN APPEAL BEFORE LD. CIT(APPEALS) . ARGUMENT OF THE ASSESSEE WAS THAT IT WAS AN EDUCATIONAL TRUS T WHICH WAS ENJOYING EXEMPTION UNDER SECTION 10(22) OF THE ACT IN THE EARLIER YEARS. AS PER THE ASSESSEE, INVESTMENTS MADE BY TH E ASSESSEE IN M/S GUARDIAN CHIT FUNDS WAS DURING THE TIME WHEN IT WAS HAVING EXEMPTION UNDER SECTION 10(22) OF THE ACT. ASSESSE E BROUGHT TO THE NOTICE OF LD. CIT(APPEALS) THAT A NEW TEAM OF TRUST EES WERE RUNNING THE ADMINISTRATION SINCE 2003 AND THE PAYMENTS MADE TO M/S GUARDIAN CHIT FUNDS, DURING THE RELEVANT PREVIOUS Y EAR, WERE AS PER THE DIRECTIONS OF THE OFFICIAL LIQUIDATOR OF HONBL E MADRAS HIGH COURT. ORDERS OF HONBLE HIGH COURT AS ALSO LETTERS ADDRES SED BY THE OFFICIAL LIQUIDATOR WERE ALSO FILED. LD. CIT(APPEALS), AFTE R GOING THROUGH THE SUBMISSIONS AND RECORDS, CAME TO THE FOLLOWING CONC LUSIONS:- (I) ASSESSEE HAD INVESTED A SUM OF ` 92,375/- PRIOR TO 1998 IN M/S GUARDIAN CHIT FUNDS. (II) ASSESSEE HAD MADE A FURTHER PAYMENT OF ` 35,055/- TO M/S GUARDIAN CHIT FUNDS ON 12.6.2003. (III) ASSESSEE HAD MADE FURTHER PAYMENT OF ` 21,333/- TO M/S GUARDIAN CHIT FUNDS BY WAY OF TWO DDS ONE FOR ` 20,161/- I.T.A. NO. 175/MDS/09 4 DTD 24.6.2004 AND THE OTHER FOR ` 1,172/- DTD 6.7.2004 TOWARDS DECRETAL DUES. AS PER LD. CIT(APPEALS), IT WAS CLEAR THAT THE TRUS T WAS HIT BY THE PROVISIONS OF SECTION 13(1)(D) OF THE ACT. ACCORDI NG TO HER, EVEN IF THE CONTENTION OF THE ASSESSEE THAT INVESTMENT MADE IN M/S GUARDIAN CHIT FUNDS WAS DURING THE PERIOD WHEN IT WAS ENJOYI NG EXEMPTION UNDER SECTION 10(22) OF THE ACT WAS CORRECT, STILL, IT COULD NOT BE TAKEN AS A DEFENCE SINCE THE SAID SECTION WAS DELETED FRO M THE STATUTE BOOK AND THEREAFTER THE INCOME OF THE TRUST HAD TO BE COMPUTED IN ACCORDANCE WITH SECTIONS 11 AND 12 OF THE ACT. THE REFORE, AS PER LD. CIT(APPEALS), RIGOURS OF SECTION 13(1)(D) WAS ATTRA CTED. AGAIN AS PER LD. CIT(APPEALS), ASSESSEE OUGHT HAVE DIVESTED THE FUNDS WHEN SECTION 10(22) WAS REMOVED FROM STATUTE AND MADE IN VESTMENT IN ACCORDANCE WITH SECTION 11(5) OF THE ACT. SHE, THE REFORE, HELD THAT ASSESSING OFFICERS VIEW WAS CORRECT AND ASSESSEE W AS NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. 3. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDERS OF AUTHORITIES BELOW, SUBMITTED THAT THERE WAS NO VIOL ATION OF SECTION 11(5) OF THE ACT. TAKING US THROUGH PAPER-BOOK PAG ES 35-43, LEARNED A.R. POINTED OUT THAT THE INVESTMENT MADE BY THE AS SESSEE IN M/S GUARDIAN CHIT FUNDS STARTED FROM 10 TH JUNE, 1986 AND RAN UPTO 31 ST I.T.A. NO. 175/MDS/09 5 MARCH, 1998. ACCORDING TO HIM, THEREAFTER, ONLY TH E BALANCE WAS CARRIED FORWARD FROM YEAR TO YEAR. AGAINST SUCH CH IT INSTALMENTS PAID, ASSESSEE HAD RECEIVED A SUM OF ` 77,000/- ON 16 TH APRIL, 1988 (PAPER-BOOK PAGE 37), ` 25,000/- ON 30 TH NOVEMBER, 1988 (PAPER- BOOK PAGE 38) AND ` 80,000/- ON 20 TH MARCH, 1989 (PAPER-BOOK PAGE 43). LEARNED A.R. SUBMITTED THAT AGAINST CHIT INST ALMENTS PAID, ASSESSEE HAD RECEIVED THE ABOVE SUMS AND THE BALANC E AS PER BOOKS DUE TO THE ASSESSEE AFTER SETTING OF THE RECE IPTS CAME TO ` 92,375/-. FROM LEDGER PAGE OF M/S GUARDIAN CHIT FU NDS IN ITS BOOKS, PLACED AT PAPER-BOOK PAGES 39 TO 42, LEARNED A.R. S UBMITTED THAT FROM 1.4.1990 ONWARDS, THE SAME BALANCE WAS BEING C ARRIED FORWARD. LEARNED A.R. POINTED OUT THAT SECTION 10(22) WAS OM ITTED BY FINANCE (NO.2) ACT, 1998 WITH EFFECT FROM 1.4.1999 AND EXEM PTION GIVEN UNDER SECTION 10(22) OF THE ACT, WHEN IT WAS AVAILABLE TO THE ASSESSEE, DID NOT HAVE ANY ATTACHED CONDITIONS WITH REGARD TO THE MODE OF INVESTMENT OF SURPLUS. THEREFORE, ACCORDING TO HIM , THERE WAS NO VIOLATION AT ALL DURING ALL THE YEARS PRIOR TO 1.4. 99 SINCE EXEMPTION CLAIMED PRIOR TO THAT DATE WAS UNDER SECTION 10(22) OF THE ACT ONLY. ONCE THE ASSESSEE STARTED CLAIMING EXEMPTION UNDER SECTIONS 11 AND 12 OF THE ACT, THERE WERE NO PAYMENTS WHATSOEVE R MADE BY THE ASSESSEE TO THE SAID CHIT FUNDS. ACCORDING TO HIM, BALANCE OF ` I.T.A. NO. 175/MDS/09 6 93,375/- SHOWN IN THE BOOKS OF THE ASSESSEE AS DUE FROM M/S GUARDIAN CHIT FUNDS WAS NOT CORRECT. THE FACT OF T HE MATTER WAS THAT ASSESSEE WAS A CREDITOR AND WAS LIABLE TO PAY MONEY TO M/S GUARDIAN CHIT FUNDS AND THIS, ACCORDING TO HIM, WAS CLEAR FROM DECREE DATED 3.10.2002 OF HONBLE JURISDICTIONAL HI GH COURT IN THE CASE FILED BY M/S GUARDIAN CHIT FUNDS P. LTD. PLAC ING RELIANCE ON PAPER-BOOK PAGE 21, LEARNED A.R. POINTED OUT THAT T HERE WAS A DEMAND OF ` 35,055/- VIDE LETTER DATED 4 TH APRIL, 2003 OF OFFICIAL LIQUIDATOR OF MADRAS HIGH COURT. ASSESSEE HAD PAID THE SAID SUM UNDER COVER OF ITS LETTER DATED 13.6.2003 (PAPER-BO OK PAGE 23). LEARNED A.R. POINTED OUT THAT A FURTHER AMOUNT OF ` 20,000/- ALONG WITH INTEREST AT THE RATE OF 12% PER ANNUM FROM 30. 11.95 WAS ALSO PAYABLE AS PER LETTER DATED 18 TH JUNE, 2004 OF OFFICIAL LIQUIDATOR OF HONBLE JURISDICTIONAL HIGH COURT (PAPER-BOOK PAGE 25). ACCORDING TO HIM, SUCH PAYMENTS WERE EFFECTED BY THE ASSESSEE BY WAY OF DD OF ` 20,161/- ON 24.6.2004 AND ` 1,172/- BY A DD DATED 6.7.2004 BOTH DRAWN ON SBI. THEREFORE, ACCORDING TO LEARNED A.R. , THE PAYMENTS EFFECTED ON 13.6.2003, 24.6.2004 AND 6.7.2004 WERE ALL AS PER THE DIRECTIONS OF HONBLE JURISDICTIONAL HIGH COURT AND WERE NOT ANY INVESTMENTS. SECTION 13(1)(D) OF THE ACT HAD NO AP PLICATION SINCE I.T.A. NO. 175/MDS/09 7 ASSESSEE WAS ONLY LIQUIDATING THE LIABILITY DUE FRO M IT TO M/S GUARDIAN CHIT FUNDS. 4. PER CONTRA, LEARNED D.R. SUBMITTED THAT THE BOOK S OF THE ASSESSEE ITSELF PROVED THAT A SUM OF ` 92,375/- WAS DUE FROM M/S GUARDIAN CHIT FUNDS. ASSESSEE HAD NOT LIQUIDATED S UCH INVESTMENTS DESPITE SECTION 10(22) OF THE ACT BEING OMITTED. A SSESSEE WAS DUTY BOUND TO DIVEST SUCH INVESTMENTS AND COMPLY WITH TH E MODE OF INVESTMENT SPECIFIED UNDER SECTION 11(5) OF THE ACT . HAVING NOT DONE SO, ASSESSEE CANNOT SAY THAT IT WAS ELIGIBLE FOR EX EMPTION UNDER SECTIONS 11 AND 12 OF THE ACT. AS PER THE LEARNED D.R., ASSESSEE INVITED THE RIGOUR OF SECTION 13(1)(D) OF THE ACT T O IT. TO TOP THIS, LEARNED D.R. SUBMITTED, ASSESSEE MADE FURTHER INVES TMENTS ON 13.6.2003, 24.6.2004 AND 6.7.2004 AND ATLEAST A PAR T THEREOF FELL IN THE RELEVANT PREVIOUS YEAR. HENCE, HE ARGUED THAT THE EXEMPTION WAS RIGHTLY DENIED TO THE ASSESSEE. 5. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. BOOKS OF THE ASSESSEE, NO DOUBT, SHOW A SUM OF ` 92,375/- AS DUE FROM M/S GUARDIAN CHIT FUNDS AND SUCH AMOUNT APPEAR S IN ITS BOOKS FROM 1.4.1990 ONWARDS CONTINUOUSLY. RELEVANT PAPER S PLACED AT PAPER-BOOK PAGES 35-43 ALSO SHOW THAT THERE WERE NO TRANSACTIONS I.T.A. NO. 175/MDS/09 8 WITH GUARDIAN CHIT FUNDS FROM 1.4.1990 TILL 31.3.20 02. THE TRANSACTIONS THEREAFTER WERE PAYMENTS EFFECTED BY T HE ASSESSEE ON 13.6.2003, 24.6.2004 AND 6.7.2004 OF ` 35,055/-, ` 20,161/- AND ` 1,172/- ALL THROUGH DEMAND DRAFTS. AS PER THE ASSE SSEE, THE BALANCE OF ` 92,375/- SHOWN IN ITS BOOKS AS DUE FROM M/S GUARDIA N CHIT FUNDS, WAS INCORRECT. THE AMOUNTS WERE ACTUALLY DU E FROM THE ASSESSEE TO SAID M/S GUARDIAN CHIT FUNDS. IN SUPPO RT THEREOF, ASSESSEE IS RELYING ON ORDER OF JURISDICTIONAL HIGH COURT IN COMP. APPLICATION NO.578 OF 1997 AND COMP. PETITION NO.8 OF 1990 DATED 3 RD OCTOBER, 2002. A COPY OF THE SAID ORDER OF HONBL E JURISDICTIONAL HIGH COURT ARE PLACED AT PAPER-BOOK PAGES 27 AND 28 . THE SAID ORDER CONTAINS THE FOLLOWING DIRECTION:- 1. THAT THE RESPONDENT HEREIN DO PAY TO THE APPLICA NT HEREIN THE SUM OF ` 36,053/- (RUPEES THIRTY-SIX THOUSAND FIFTY THREE ONLY) WITH SUBSEQUENT INTEREST AT 12% PER ANN UM ON ` 20,000/- FROM 30.11.93 TILL THE DATE OF REALIZATION ; 2. THAT THE RESPONDENT BE AND IS HEREBY DIRECTED TO PAY THE COST OF THIS APPLICATION ` 2/-. WE ARE OF THE OPINION THAT WHEN THE HONBLE JURISDI CTIONAL HIGH COURT HAS ORDERED PAYMENTS TO BE EFFECTED BY THE ASSESSEE TO M/S GUARDIAN CHIT FUNDS, IT CLEARLY SHOW THAT THE AMOUN TS WERE DUE FROM THE ASSESSEE TO THE SAID CHIT FUNDS AND NOT VICE VE RSA. ASSESSEES I.T.A. NO. 175/MDS/09 9 BOOKS MIGHT HAVE SHOWN A SUM OF ` 92,375/- AS DUE FROM M/S GUARDIAN CHIT FUNDS. IT IS NOT IN DISPUTE THAT ALL PAYMENTS BY THE ASSESSEE TO M/S GUARDIAN CHIT FUNDS, PRIOR TO THE P AYMENTS EFFECTED BY IT ON THE DIRECTIONS OF HONBLE JURISDICTIONAL H IGH COURT, WERE MADE DURING THE PERIOD WHEN IT WAS ENJOYING EXEMPTION UN DER SECTION 10(22) OF THE ACT. IN THE CONTEXT OF SECTION 10(22 ) OF THE ACT, THERE WAS NO NECESSITY THAT INVESTMENTS OF SURPLUS HAD TO BE MADE IN ANY OF THE MODES PRESCRIBED UNDER SECTION 11(5) OF THE ACT. HENCE, ASSESSEES INVESTMENT IN M/S GUARDIAN CHIT FUNDS, D URING THE PERIOD WHEN IT WAS ENJOYING EXEMPTION UNDER SECTION 10(22) OF THE ACT, WAS NOT IN VIOLATION OF THE REQUIREMENT OF THAT SECTION . AS FOR THE QUESTION OF CONVERTING THE DUES AS PER THE BOOKS OF THE ASSE SSEE, TO ONE OF THE MODES PRESCRIBED UNDER SECTION 11(5) OF THE ACT , ONCE ASSESSEE STARTED CLAIMING EXEMPTION UNDER SECTIONS 11 AND 12 OF THE ACT, WE ARE OF THE OPINION THAT THIS REQUIREMENT COULD NEVE R HAVE BEEN FASTENED ON THE ASSESSEE. THIS IS FOR THE SIMPLE R EASON THAT WHATEVER THE BOOKS OF ACCOUNTS HAD MENTIONED, THERE WAS NO AMOUNT DUE FROM M/S GUARDIAN CHIT FUNDS TO THE ASSESSEE, B UT, ON THE OTHER HAND, THE AMOUNTS WERE DUE FROM THE ASSESSEE TO THE SAID CHIT FUNDS. ASSESSEE HAD EFFECTED THE PAYMENTS OF ` 35,055/- AS PER THE DIRECTION OF HONBLE JURISDICTIONAL HIGH COURT AND FURTHER PAYMENT OF I.T.A. NO. 175/MDS/09 10 INTEREST AND THE PAYMENTS, AGAIN AS PER THE DIRECTI ONS OF OFFICIAL LIQUIDATOR OF THE HONBLE HIGH COURT. THESE PAYMEN TS WERE CONSIDERED DONE IN VIOLATION OF SECTION 11(5) OF TH E ACT BY THE ASSESSING OFFICER, ERRONEOUSLY. PAYMENTS EFFECTED UNDER COMPULSION OF LAW CANNOT BE CONSIDERED AS INVESTMENT. SUCH PA YMENTS WERE MADE ONLY TO SATISFY THE REQUIREMENT OF THE DECREE OF HONBLE HIGH COURT AND NO DECREE WILL EVER BE PASSED COMPELLING A PERSON TO MAKE AN INVESTMENT BUT, DECREES ARE GENERALLY PASSE D FOR ENSURING PAYMENT OF LIABILITIES. IN SUCH A SITUATION, WE AR E OF THE OPINION THAT AUTHORITIES BELOW FELL IN ERROR IN CONSIDERING THE PAYMENTS EFFECTED, IN OBEDIENCE OF THE DIRECTION OF OFFICIAL LIQUIDATOR T O BE INVESTMENT MADE BY THE ASSESSEE. THE QUESTION OF APPLICATION OF SECTION 11(5) OF THE ACT WOULD ARISE ONLY IF THERE WERE ANY INVES TMENTS BY THE ASSESSEE. AS ALREADY NOTED BY US, EARLIER PAYMENTS MADE BY THE ASSESSEE WHEN IT WAS ENJOYING EXEMPTION UNDER SECTI ON 10(22) OF THE ACT COULD NOT HAVE RESULTED IN ANY DUES TO THE ASSESSEE FROM THE SAID M/S GUARDIAN CHIT FUNDS BUT IT WAS THE OTHER W AY ROUND, NO MATTER WHAT THE BOOKS MENTIONED. OTHERWISE, THE SA ID CHIT FUNDS WOULD NOT HAVE SOUGHT AN ORDER FROM HONBLE JURISDI CTIONAL HIGH COURT FOR GETTING PAYMENTS FROM THE ASSESSEE. IN THE CON TEXT OF THE EXEMPTION UNDER SECTION 10(22) OF THE ACT, ENJOYED BY THE ASSESSEE I.T.A. NO. 175/MDS/09 11 IN EARLIER YEARS, THE PAYMENT MADE TO M/S GUARDIAN CHIT FUNDS WAS NOT RELEVANT SINCE THE SAID SECTION DID NOT PROVIDE ANY COMPULSIVE METHOD OF INVESTMENTS, AS STIPULATED UNDER SECTION 11(5) OF THE ACT. WE ARE OF THE OPINION THAT LD. CIT(APPEALS) AS WELL AS A.O. FELL IN ERROR IN CONSIDERING ASSESSEE TO HAVE VIOLATED THE MODE OF INVESTMENT MENTIONED IN SECTION 11(5) OF THE ACT AN D HOLDING THAT RIGOURS OF SECTION 13(1)(D) OF THE ACT WERE ATTRACT ED. THERE WAS NO SUCH VIOLATION. ASSESSEE WAS ELIGIBLE FOR EXEMPTIO N UNDER SECTIONS 11 AND 12 OF THE ACT. ORDERED ACCORDINGLY. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 23 RD MARCH, 2012. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 23 RD MARCH, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-XII, CHENNAI (4) CIT, PONDICHERRY (5) D.R. (6) GUARD FILE