DDIT, CHENNAI V. A.R.Rahman Foundation, CHENNAI

ITA 1753/CHNY/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86281 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-01-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 12-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: D ANAND
• Keywords: Gift; Charitable institution; Valuation report; Benefit of exemption
• Section: 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 1753/MDS/2013 ( / ASSESSMENT YEAR: 2010-11) DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS)-III, AAYAKAR BHAVAN, ANNEX BUILDING, 3 RD FLOOR, CHENNAI - 600 034. VS M/S. A.R.RAHMAN FOUNDATION NO.15, OLD NO.5, 4 TH STREET DR.SUBBARAYA NAGAR, KODAMBAKKAM, CHENNAI - 600 024. PAN:AABTA8984A ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. S. DAS GUPTA, JCIT /RESPONDENT BY : MR. D.ANAND, ADVOCATE /DATE OF HEARING : 13 TH JANUARY, 2015 /DATE OF PRONOUNCEMENT : 30 TH JANUARY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VII, CHENN AI DATED 05.06.2013 FOR THE ASSESSMENT YEAR 2010-11. T HE ONLY GRIEVANCE OF THE REVENUE IN ITS APPEAL IS THAT COMM ISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE T RUST HAS NOT VIOLATED PROVISIONS OF SECTION 13(1)(C) OF THE ACT BY INCURRING DEVELOPMENT EXPENSES ON THE LAND BELONGIN G TO THE TRUSTEES. 2 ITA NO.1753/MDS/2013 2. THE ASSESSING OFFICER WHILE COMPLETING THE ASSES SMENT NOTICED THAT ASSESSEE TRUST INCURRED EXPENDITURE OF ` 49.84 LAKHS TOWARDS DEVELOPMENT EXPENSES. THE ASSESSEE WAS ASKED TO FURNISH COMPLETE BREAK UP AND DETAILS IN RESPECT OF THE SAID DEVELOPMENT EXPENSES. THE ASSESSEE SUBMITT ED THAT DEVELOPMENT EXPENDITURE WAS INCURRED ON LEASEH OLD LAND. ONE MR. SYED MOINULLAH, CIVIL CONTRACTOR HAS BEEN ENTRUSTED WITH THE CONTRACT OF DEVELOPING THE LEASE HOLD LAND BELONGING TO THE TRUSTEES SHRI A.R.RAHMAN AND MS. K AREEMA BEGUM. THE ASSESSEE SUBMITTED THAT TRUST HAS NOT BR OUGHT THE LAND BUT THE TRUSTEES HAVE GIVEN PERMISSION TO THE TRUST TO DO THE DEVELOPMENT AND TRUSTEES WILL SETTLE THE L AND IN FAVOUR OF THE TRUST SHORTLY FOR BUILDING MUSIC SCH OOL ON THE SAID LAND. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT HELD THAT SINCE PROPERTY IS IN THE NAME OF THE TRUSTEES AND NOT IN THE NAME OF TRUST, INCURRING EX PENDITURE ON THE LAND BELONGING TO THE TRUSTEES IS VIOLATION OF PROVISIONS OF SECTION 13(1)(C)(II) OF THE ACT AS THE TRUSTEES AR E BENEFITTED. THEREFORE ASSESSING OFFICER DENIED EXEMPTION UNDER SECTION 11 OF THE ACT. ON APPEAL, COMMISSIONER OF INCOME TA X (APPEALS) ALLOWED EXEMPTION UNDER SECTION 11 OF THE ACT 3 ITA NO.1753/MDS/2013 HOLDING THAT THERE IS NO VIOLATION UNDER SECTION 13 (1)(C) OF THE ACT IN VIEW OF THE FACT THAT TRUSTEES HAVE SETTLED THE PROPERTY IN THE NAME OF THE TRUST SUBSEQUENTLY AS PROMISED B Y THEM EARLIER BY WAY OF GIFT DEED. THE REVENUE IS IN APPE AL BEFORE US. 3. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER IN DENYING EXEMPTION UNDER SECTION 11 OF THE ACT TO THE ASSESSEE. DEPARTMENTA L REPRESENTATIVE SUBMITS THAT THERE IS VIOLATION OF PROVISIONS OF SECTION 13(1)(C) OF THE ACT, THEREFORE ASSESSING OF FICER HAS RIGHTLY DENIED EXEMPTION UNDER SECTION 11 OF THE AC T. 4. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTS THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWIN G EXEMPTION UNDER SECTION 11 OF THE ACT IN HOLDING TH AT THERE IS NO VIOLATION OF PROVISIONS OF SECTION 13(1)(C) OF T HE ACT. REFERRING TO THE VALUATION REPORT OF THE DVO, COUNS EL SUBMITS THAT DURING THE ASSESSMENT YEAR 2010-11 THE LAND NE VER BELONGED TO THE TRUSTEES. THE TRUSTEES HAVE PURCHAS ED THE LANDS VIDE SALE DEED DOCUMENT NO.1704 OF 2011 DATED 28.4.2011. THEREFORE, HE SUBMITS THAT TRUSTEES PURC HASED THE 4 ITA NO.1753/MDS/2013 LANDS ONLY IN THE ASSESSMENT YEAR 2011-12. IN SUCH CIRCUMSTANCES, THERE IS NO VIOLATION OF SECTION 13( 1)(C) OF THE ACT AS THE TRUSTEES ARE NOT THE OWNERS OF THE LAND. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS LAND WAS PURCHAS ED BY THE TRUSTEES ON 28.4.2011 AND SUBSEQUENTLY BY GIFT DEE D DATED 23.5.2013 THE LAND WAS REGISTERED IN THE NAME OF THE ASSESSEE TRUST AS PROMISED BY THEM AND THEREFORE, THERE IS NO VIOLATION OF PROVISIONS OF SECTION 13(1)(C) OF T HE ACT. 5. HEARD BOTH SIDES. PERUSED THE ORDERS OF LOWER AUTHORITIES. THE ISSUE HAS BEEN ELABORATELY CONSIDE RED WITH REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND TH E FINDINGS OF THE ASSESSING OFFICER BY THE COMMISSION ER OF INCOME TAX (APPEALS) AND HELD THAT THERE IS NO VIOL ATION UNDER SECTION 13(1)(C) OF THE ACT OBSERVING AS UNDE R:- I HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE. AS COULD BE SEEN FROM THE ASSESSMENT ORDER AND THE SUBMISSIONS BEFORE THE UNDERSIGNED, THE ASSESSEE IS ENGAGED IN TEACHING AND TRAINING THE STUDENTS IN THE FLIED OF MUSIC AND OTHER INDIAN ARTS. ANY ACTIVITY WHICH IS AIMED AT PROTECTING, PRESERVING AND SPREADING OF ARTS, CULTURE, AND OTHER TRADITIONS' ETC ARE TO BE REGARDED AS CHARITABLE ACTIVITY. THE ASSESSEE'S MAIN ACTIVITIES / OBJECTS ARE CONDUCTING REGULAR CLASSES TO ITS STUDENTS IN THE 5 ITA NO.1753/MDS/2013 FIELD OF MUSIC AND OTHER INDIAN ARTS. THUS, THE ASSESSEE'S ACTIVITY OF TEACHING AND TRAINING THE STUDENTS IN THE FIELD OF MUSIC AND OTHER LNDIAN ARTS, AMOUNTS TO A CLEAR CHARITABLE ACTIVITY FOR TH E PURPOSE SECTION 2( 15) OF THE ACT. HENCE THE ASSESSEE IS ELIGIBLE FOR EXEMPTION OF ITS INCOME U /S.11 OF THE ACT. FAR THIS PURPOSE NECESSARY RELIANCE IS ALSO . PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: I) THE CHENNAI BENCH OF ITAT. IN THE CASE OF VEMPATI CHINNA SATYAM KUCHIPUDI ART FOUNDATION V. DCIT (10 ITR (TRLB)201) (CHENNAI) HELD THAT GIVING TRAINING IN TRADITIONAL ART FORMS LIKE KUCHIPUDI DANCE AMOUNTS EDUCATION . THE RELEVANT PORTION OF THE JUDGMENT IS - '5. WE CONSIDERED THIS ISSUE VERY CAREFULLY. BEFORE COMING TO A CONCLUSION WHETHER THE ASSESSEE-TRUST IS AN INSTITUTION BY ITSELF OR NOT, WE HAVE TO EXAMINE THE SURROUNDING FACTS AND CIRCUMSTANCES IN WHICH THE ACTIVITIES OF THE ASSESSEE-TRUST ARE BEING CARRIED OUT. THE ASSESSEE IS ENGAGED IN PROMOTING AND GIVING TRAINING IN TRADITIONAL ART FORMS LIKE KUCHIPUDI DANCE, IT IS KNOWN TO EVERYBODY THAT EXCEPT IN CERTAIN COLLEGES OF FINE ARTS AND PERFORMING ARTS, THESE TYPES OF TRADITIONAL ART FORMS ARE IMPARTED IN 'GUNLKULA SYSTEM'. IF WE SEE AROUND THE WORLD, WHAT IS THE GROUND REALITY ? TRAINING AND EDUCATION IN PERFORMING ARTS LIKE DANCE AND MUSIC ARE TRADITIONALLY GIVEN BY TEACHERS TO . SMALL GROUPS OF STUDENTS IN AN INFORMAL ATMOSPHERE. TRAINING IN THE ABOVE FIELD IS USUALLY NOT GIVEN IN SCHOOLS, COLLEGES AND INSTITUTIONS HAVING A FORMAL FRAME. THEREFORE THE ATTIRE AND CHOREOGRAPHY OF THE PLACE OF INSTRUCTION IS NOT THE PRIME THING TO BE LOOKED INTO BY THE ASSESSING AUTHORITY. DESPITE THE FORM OR THE ABSENCE OF FORM, WHAT IS TO BE LOOKED INTO IS WHETHER THE ASSESSEE-TRUST IS IN FACT IMPARTING TRAINING IN PERFORMING ARTS LIKE VARIOUS DANCE FORMS INCLUDING TRADITIONAL KUCHIPUDI. SO FAR THIS CRUCIAL QUESTION, WHICH IS THE SOUL OF THE ISSUE, IS CONCERNED, NO ADVERSE FINDINQS . HAVE BEEN MADE BY THE ASSESSING AUTHORITY'. ( PARA 5) THEREFORE, THE ASSESSEE'S ACTIVITIES OF TEACHING AND TRAINING THE STUDENTS IN THE FIELD OF MUSIC AND OTHER INDIAN ARTS IS A CHARITABLE ACTIVITY FOR PURPOSE OF SEC.2(15) OF THE ACT. IN FACT, THE 6 ITA NO.1753/MDS/2013 REVENUE, BASED ON THE OBJECTS MENTIONED IN THE TRUST DEED, GRANTED THE REGISTRATION UJS.12AA OF THE ACT, THEREBY APPROVING THE SAID OBJECTS AS CHARITABLE. THEREFORE, THE TRUST'S ACTIVITIES ARE CHARITABLE IN NATURE AND THE ASSESSEE IS ELIGIBLE FOR EXEMPTION OF ITS INCOME U/ S.11 OF THE ACT. THE ASSESSING OFFICER IN HIS ORDER OBSERVED THAT THE TRUST VIOLATED THE PROVISIONS OF SEC. 13(1)(C) J (D) OF THE ACT, BY DIVERTING ITS FUNDS FOR THE BENE FIT OF THE TRUSTEES THEIR FAMILY MEMBERS. THESE OBSERVATIONS OF THE ASSESSING OFFICER ARE NOT CORRECT. THE ASSESSEE'S EXPLANATIONS MIGHT NOT HAVE BEEN SUPPORTED BY ANY TANGIBLE EVIDENCES AT THE PARTICULAR MOMENT. BUT, WHAT IS TO BE SEEN IS THE REAL INTENTIONS OF THE ASSESSEE (OR THE PARTIES CONCERNED) BEHIND TRANSACTION AND THEIR SUBSEQUENT CONDUCT. IF THE EXPLANATIONS AND CONTENTIONS OF THE ASSESSEE ARE BACKED BY SUBSEQUENT CONDUCT OF THE ASSESSEE, THE SAME CANNOT BE IGNORED; AND HAVE TO BE CONSIDERED AS GENUINE EXPLANATIONS AND NOT AN AFTERTHOUGHT.. IN THE INSTANT CASE, THE ASSESSING OFFICER REJECTED THE ASSESSEE'S .CLAIM OF GIFT OF LANDS FOR THREE BASIC REASONS, I.E. (I) THE REQUISITE CONDITIONS OF HIBBA ARE NOT FULFILLED, (II) THE LANDS ARE NOT REGISTERED IN THE' NAME OF THE TRUST AS ON 31.03.2010 AND (III) THE BALANCE SHEET OF THE ASSESSEE DID NOT REFLECT THE LAND AS ON 31.03.2010. THE ASSESSEE'S CLAIM IS THAT IT RECEIVED THE LANDS FROM THE TRUSTEES UNDER HIBBA (THE GIFT). ALL THE TRUSTEES OF THE ASSESSEE TRUST ARE MUSLIMS. THE TRUSTEES CLAIMED TO HAVE GIFTED THE ABOVE MENTIONED LANDS ~O THE ASSESSEE BY WAY OF HIBBA, IN MARCH 2009. HIBBA IS A ORAL FORM OF GIFT RECOGNIZED UNDER MAHAMEDAN LAW OR SHARIYAT. ANY GIFT MADE BY WAY OF HIBBA IS A LEGALLY VALID FORM OF TRANSACTION. HIBBA NEED NOT BE REGISTERED. IN THE INSTANT CASE, BOTH THE DONORS AS WELL AS THE DONEE HAVE CONFIRMED THE HIBBA (GIFT OF LANDS). HENCE THE SAME HAS TO BE CONSIDERED AS A LEGALLY VALID AND GENUINE TRANSACTION. FURTHER, IT IS ALSO IMPORTANT TO MENTION HERE THAT THE POSSESSION OF THE LANDS HAS ALSO BEEN GIVEN TO THE ASSESSEE TRUST. IN FACT, THE ASSESSEE, VIDE ITS 7 ITA NO.1753/MDS/2013 SUBMISSIONS DATED. 27.02.2013, BROUGHT THESE FACTS TO THE NOTICE OF. THE ASSESSING . OFFICER. THE RELEVANT PORTION OF THE SUBMISSIONS, AS CONTAINED IN THE ASSESSMENT ORDER ARE AS UNDER: 12. THE ASSESSEE IN ITS SUBSEQUENT SUBMISSION DATED 27/02/2013 STATED THAT 'THE TRUSTEES HAD GIFTED THE LAND IN QUESTION IN FAVOUR OF THE TRUST BY AN UNREGISTERED DEED WELL 'BEFORE THE DEVELOPMENT ACTIVITY WAS COMMENCED IN THAT LAND BY THE TRUST. IT IS CALLED A 'HIBBA' OR ORAL GIFT AND IS RECOGNIZED AS A TRANSFER OF PROPERTY UNDER MOHMEDAN LAW. ACCORDINGLY, POSSESSION WAS ALSO HANDED OVER AND THE TRUST HAD ACCEPTED THE GIFT AND THEN ONLY STARTED .THE DEVELOPMENT ACTIVITIES. THE TRUSTEES HAD PROMISED .TO EXECUTE A SETTLEMENT DEED AND DULY REGISTER 'THE SAME IN FAVOUR OF THE TRUST IN DUE COURSE OF TIME TO ENABLE THE TRUST TO BUILD A SCHOOL THERE. FURTHER THE I.T ACT RECOGNIZES SUCH TRANSFER EVEN THOUGH REGISTRATION WAS NOT DONE AS THE TRUST HAD ACCEPTED THE GIFT AND TOOK POSSESSION OF .THE SAME FOR THE DEVELOPMENT ACTIVITIES. THE LAND IS THE PROPERTY OF THE TRUST. THE TRUSTEES HAD PROMISED EXECUTION OF SETTLEMENT , DEED, AS IT MAY BE REQUIRED TO APPLY FOR THE PERMISSION TO RUN THE MUSIC SCHOOL. HENCE WE SUBMIT THAT NO BENEFIT ENSURES TO THE TRUSTEES AS THEY HAVE WHOLE HEARTEDLY GIFTED AWAY THE LAND FOR A GOOD CAUSE. THE MANAGING TRUSTEE, MR. A.R. RAHMNAN WANTED TO GIVE BACK TO THE. SOCIETY WHAT MUSIC HAD GIVEN TO HIM AND CONSIDERING THE STATURE AND NOBLE THOUGHT OF THAT PERSON DENYING THE EXEMPTION U/S.11 OF THE I.T ACT WILL ONLY RENDER INJUSTICE. ' THE ASSESSING OFFICER'S CONTENTIONS ARE MAINLY THAT THE CONDITIONS LIKE DECLARATION OF GIFT BY THE DONO R, RELINQUISHMENT OF OWNERSHIP IN THE PROPERTY BY THE DONOR, ACCEPTANCE OF THE GIFT BY THE DONEE AND THE DELIVER Y OF POSSESSION OF THE SUBJECT OF GIFT, ARE NOT FULFILLE D. THESE OBSERVATIONS OF THE ASSESSING OFFICER ARE NOT TRUE. ON MAKING THE GIFT BY HIBBA,. THE TRUSTEES HAVE HANDED OVER THE POSSESSION OF THE LANDS TO THE ASSESSEE TRUST A ND THEREAFTER THE ASSESSEE STARTED THE DEVELOPMENTAL A CTIVITIES IN THE SAID LANDS. THIS FACT CLEARLY .SHOWS THAT TH E POSSESSION WAS HANDED OVER THE ASSESSEE. FURTHER, S INCE THE HIBBA IS A ORAL FORM OF GIFT RECOGNIZED UNDER 8 ITA NO.1753/MDS/2013 MAHAMEDAN LAW, DOCUMENTATION IS NOT MANDATORY. WHEN THE DONOR AND THE DONE CONFIRMS HIBBA THE SAME IS T O BE TREATED AS GENUINE AND COMPLETE. THUS, THE DECLARAT ION, ACCEPTANCE OF THE GIFT (BY WAY OF HIBBA) ARE DEEMED TO HAVE BEEN FULFILLED. ONCE THE HIBBA IS ACCEPTED BY THE DONEE (WITH OR WITHOUT POSSESSION) THE OWNERSHIP OF THE PROPERTY IS ALSO DEEMED TO HAVE BEEN RELINQUISHED B Y THE DONORS. FURTHER, SINCE IT WAS A HIBBA, A ORAL FORM OF GIFT UNDER MAHAMEDAN LAW, THE SAID GIFT NEED NOT BE REGI STERED OR DECLARED BEFORE ANY AUTHORITY. THEREFORE, ALL THE ABOVE MENTIONED FOUR CONDITIONS, WHICH ARE TOTALLY BETWEE N THE DONOR AND THE DONEE, ARE FULFILLED IN THE PRESENT C ASE. THUS, WHEN BOTH THE DONORS (TRUSTEES) AND THE DONEE (ASSE SSEE TRUST) HAVE CONFIRMED THE GIFT OF LAND BY WAY HIBBA AND HANDING OVER OF POSSESSION, MERE NON-REGISTRATION O F THE SAID HIBBA CANNOT ALTER THE 'CHARACTER OF HIBBA OR MAKE IT INVALID. THUS, AS LONG AS THE DONORS AND DONEE HAVE CONFIRMED THE HIBBA, THE ASSESSING OFFICER IS BOUND TO ACCEPT THE SAME AS GENUINE AND VALID. THEREFORE, I HOLD THAT MERE NON-REGISTRATION OF HIBBA (GIFT) CANNOT B E A REASON FOR REJECTING THE ASSESSEE'S CLAIM OF GIFT O F LANDS UNDER HIBBA. THE NEXT OBSERVATION OF THE ASSESSING OFFICER IS TH AT THE BALANCE SHEET OF THE ASSESSEE TRUST DID NOT REF LECT THE SAID LANDS AS ON 31.03.2010, INDICATING THAT THE LA NDS WERE NOT PASSED ON TO THE ASSESSEE TRUST AS ON 31.03.201 0. IT MAY BE TRUE THAT THE LANDS ARE NOT APPEARING IN THE BALANCE, SHEET OF THE ASSESSEE TRUST AS ON 31.03.2010. BUT A T THE SAME TIME THE AMOUNT OF EXPENSES OF ` 49,84,745/- INCURRED BY WAY OF DEVELOPMENTAL EXPENSES ON THE SAID LANDS. ARE SHOWN IN. THE INCOME & EXPENDITURE ACCOUNT OF THE F .Y. 2009-10.IN THIS REGARD, THE ASSESSEE EXPLAINED THAT THE LAND WAS NOT SHOWN ON THE ASSETS SIDE OF THE BALANCE SHE ET, AS ON 31.03.2010, FOR THE REASONS THAT SINCE IT WAS R ECEIVED BY GIFT, THERE WAS .NO COST OF THE ASSET (LAND) IN THE HANDS OF THE TRUST, THE TRUST WAS NOT ABLE TO DETERMINE THE QUANTUM OF VALUE OF THE LAND RECEIVED AND HENCE THE LAND WAS N OT SPECIFICALLY SHOWN: J REFLECTED IN THE BALANCE SHEET AS ON 31.03:2010. HOWEVER, THE EXPENSES OF RS.49,84,745- INCURRED ARE SHOWN IN THE INCOME & EXPENDITURE ACCOUNT OF FINANCIAL YEAR 2009-10, BY WAY OF DEVELOPMENTAL EXP ENSES. UNDER THESE CIRCUMSTANCES, NON- REFLECTION OF THE LANDS RECEIVED UNDER HIBBA IN THE BALANCE SHEET AS ON 31.03.2010, CANNOT BE TAKEN AS A CONCLUSIVE PROOF A GAINST THE ASSESSEE. THE NEXT OBSERVATION OF THE ASSESSING. OFFICER IS T HAT THE SAID LANDS ARE NOT REGISTERED IN FAVOUR OF THE ASSESSEE 9 ITA NO.1753/MDS/2013 TRUST AS ON 31.03.2010 AND ALSO EVEN AS ON THE DATE OF COMPLETING THE ASSESSMENT U/S.143(3) OF THE ACT.. AS MENTIONED ABOVE, REGISTRATION OF HIBBA IS NOT MANDA TORY. HENCE NO ADVERSE INFERENCE CAN BE DRAWN IN THIS REGARD. FURTHER, EVEN THE INCOME TAX ACT RECOGNIZES THE TRA NSFER OF PROPERTY, WHEN THE PROPERTY IS REGISTERED. IN FAVOUR OF THE RECI PIENT, OR . THE PROPERTY IS HANDED OVER TO THE RECIPIENT FOR HIS EXPLOITATION AND USE, OR THE SUBSTANTIAL PORTION 'OF THE CONSIDERATION IS PAID, WHICHEVER IS EARLIER. NO DOUBT, THE. REGISTRATION I S A LEGAL FORMALITY AND CULMINATION POINT IN THE TRANSFER OF PROPERTY. AT THE SAME TIME, HANDING OVER THE POSSESSION BY THE OWNER TO THE RECIPIENT (BUYER OR DONEE AS THE CASE MAY BE) FOR THE USE AND EXPLOITATION THE LATTER, THE SAME HAS TO BE TREATED AS TRANSFER OF PROPERTY. IN FACT, BASED ON THESE FACTS AND POSITION, THE CAPITAL GAINS UNDER THE INC OME TAX ACT ARE ALSO COMPUTED. THEREFORE, THE HIBBA' (A ORA L GIFT) FOLLOWED BY HANDING OVER OF THE POSSESSION OF THE L ANDS IS A CLEAR TRANSFER OF PROPERTY. MERE DELAY IN REGISTRAT ION OF THE GIFT (HIBBA) CANNOT ALTER THE CHARACTER OF THE TRAN SACTION. THUS, THE GIFT OF LAND (BY WAY OF HIBBA) WHICH WAS CONFIRMED BY THE DONORS .AS- WELL AS THE 'DONEE, IS TO BE TREATED AS GENUINE GIFT. IN ANY, CASE, THE SUBSEQUE NT ACT OF THE TRUSTEES (DONORS OF THE LAND) AND THE ASSESSEE TRUST (DONEE) ALSO CONFIRMS THE GIFT OF LA NDS BY HIBBA ON 15.03.2009. IN ADDITION TO THE ABOVE, THE GENUINENESS OF THE HIBBA CAN FURTHER BE PROVED BY THE SUBSEQUENT CONDU CT OF THE TRUSTEES AND THE ASSESSEE TRUST. THE LANDS RECE IVED UNDER HIBBA WERE FINALLY REGISTERED ON 25.03.2013, FIVE DAYS AFTER THE DATE OF PASSING THE ASSESSMENT ORDER , BUT APPARENTLY TWO DAYS PRIOR TO THE DATE RECEIPT OF TH E ORDER BY THE ASSESSEE.,AS EXPLAINED BY THE ASSESSEE, IT TRIE D TO GET THE LANDS REGISTERED IN FAVOUR OF THE TRUST AND PRO VE THE GENUINENESS OF THE GIFT (HIBBA) BEFORE THE ASSESSIN G OFFICER, BUT AS ONE OF THE TRUSTEES(SHRI AR RAHMAN) WHO GIFT ED THE LAND, WAS AWAY FROM THE STATION FOR LONG TIME DUE T O PRE- OCCUPATION OF THE MUSIC PROGRAMS ETC, THE ASSESSEE COULD NOT DO THE SAME BEFORE THE DATE OF PASSING THE ORD ER. IMMEDIATELY AFTER THE AVAILABILITY OF SHR AR RAHMAN (THE DONAR TRUSTEE), THE LANDS, WHICH ARE ALREADY UNDER HIBBA (GIFT UNDER SHARIYAT OR MOHAMEDAN LAW), ARE REGISTERED IN FAVOUR OF THE ASSESSEE TRUST, ON 25.0 3.2013. 10 ITA NO.1753/MDS/2013 IT IS ALSO IMPORTANT TO MENTION HERE THAT THE ABOVE REGISTERED DEED OF THE GIFT ON 25.03.2013 CLEARLY C ONTAINED THAT THE LANDS WERE ALREADY GIFTED TO THE ASSESSEE TRUST BY THE TRUSTEES ON 15.03.2009, BY WAY OF HIBBA AND THE POS SESSION WAS ALSO HANDED .OVER TO THE TRUST. THE RELEVANT PO RTION OF THE SAID REGISTERED 'DEED OF GIFT' DATED 25.03.2013, IS REPRODUCED AS UNDER: ' DEED OF GIFT THIS DEED OF GIFT EXECUTED AT GUMMIDIPOONDI ON THIS THE 25TH DAY OF MARCH 2013 BY: (1) MR. AR.RAHMAN, SON OF LATE R.K.SEKAR, AGED ABOUT 46 YEARS, HAVING INCOME TAX P.ANO.ADMPR- 0060-J AND (2) MRS.KAREEMA BEGUM, WIFE OF LATE R.K.SEKAR, AGED ABOUT 65 YEARS, HAVING INCOME TAX P.ANO.AGFPK-7521-B, BOTH RESIDING AT NEW NO. 15, OLD NO.5, DR.SUBBARAYAN NAGAR, 4TH STREET, KODAMBAKKAM, CHENNAI-600 024, HEREINAFTER CALLED THE DONORS, WHICH TERM SHALL MEAN AND INCLUDE THEMSELVES, THEIR RESPECTIVE HEIRS, EXECUTORS, ~DMINISTRATORS AND ASSIGNS. TO AND IN FA VOUR OF AR.RAHMAN FOUNDATION, A TRUST REGISTERED UNDER THE INDIAN TRUSTS ACT, HAVING INCOME TAX P.A.NO.AABTA-8984-A, HAVING IT'S REQISTERED OFFICE AT NEW NO. 15, OLD NO.5, DR.SUBBARAYAN NAGAR, ATH: STREET, KODAMBAKKAM, CHENNAI-600 024, REPRESENTED BY IT'S MANAGING TRUSTEE, MR.A.R.RAHMAN, SON OF LATE R.K.SEKAR, AGED ABOUT 46 YEARS~ HEREINAFTER CALLED THE DONEE, WHICH TERM SHALL MEAN AND INCLUDE ITSELF, ITS SUCCESSORS-IN-INTEREST, EXECUTORS, ADMINISTRATORS AND ASSIGNS WITNESSETH: WHEREAS THE DONORS HEREIN ATE THE ABSOLUTE OWNERS OF ALL THAT PIECE AND PARCEL OF AGRICULTURAL PUNJA LAND COMPRISED IN THE FOLLOWING SURVEY NUMBERS- SI.NO . SURVEY NUMBERS EXTENT IN ACRES 1. 474/1 1.02 2. 475/1 1.12 3. 475/2 A.18 TOTAL 3.32 11 ITA NO.1753/MDS/2013 IN ALL TOTALLY MEASURING AN EXTENT OF 3 ACRES AND 3 2 CENTS OR THEREABOUTS, IN KETNAMALEE VILLAGE, GUMMIDIPOONDI T ALUK, THIRUVALLUR DISTRICT, ORIGINALLY KETNAMALLEE MADURA IYER KANDIGAI VILLAGE }, WITHIN THE LIMITS OF GUMMIDIPOONDI UNION AND KETNAMALLEE VILLAGE PANCHAUAT, MORE FULLY DESCRIBED IN' THE SCHEDULE ANNEXED HEREUNDER, THEY HAVING JOINTLY PURCHASED TH E SAID SCHEDULE PROPERTY ALONG. WITH OTHER EXTENTS OF LAND FROM MR.S.P.MUTTUSAMY REDDIAR, SON OF MR.S.PERUMAL REDDIAR, VIDE SALE DEED DATED 28/11/1996, REGISTERED AS DOC.NO.2311/ 1996, IN THE OFFICE OF THE SUB-REQISTRAR, GUMMIDIPOONDI. WHEREAS EVER SINCE THE AFOREMENTIONED DATES OF ACQUISITION OF THE SCHEDULE PROPERTY IN THE MANNER AFORESAID, T HE DONORS HAVE BEEN IN ABSOLUTE OWNERSHIP, POSSESSION, ENTITLEMENT AND .ENJOYMENT OF THE SAID SCHEDULE PROPERTY, PAYING IN THEIR OWN' RIGHT, TAXES AND ALL OTHER PUB LIC CHARGES PERTAINING TO THE SAID SCHEDULED PROPERTY. WHEREAS THE DONORS HAD ALREADY MADE A GIFT OF THE SCHEDULE PROPERTY UNDER A HIBBA ON 15/03/2009 IN FAVOUR OF THE DONEE HEREIN. WHEREAS HOWEVER AS THE SAID HIBA UNDER THE MUSLIM LAW NEED NOT BE REGISTERED, THE SAME WAS NOT REGISTERED. AND PURSUANTLY THE DONORS ARE DESIROUS 0' MAKING A REGISTERED GIFT DEED TO CONFIRM THE ABOVE HIBA WITH REGARD TO THE SCHEDULE PROPERTY IN FAVOUR OF THE DONEE HEREIN, WHICH IS A TRUST: REGISTERED UNDER THE INDIAN TRUSTS ACT AND ENJOYING THE EXEMPTION UNDER SECTION 80(G) OF THE INCOME TAX ACT,1961, VIDE ORDER OF THE DIRECTOR OF THE INCOME TAX [EXEMPTIONS] NO.DIT[E] NO.2[1146]06-07, DATED 13/09/2007, WHICH CONTINUES TO BE VALID AND SUBSISTING TILL DATE AS EXTENDED BY THE INCOME TAX DEPARTMENT. THUS, THOUGH THE LANDS ARE. NOT REGISTERED IN THE NAME OF THE TRUST AS ON 31.03.2010, THE SUBSEQUENT CONDUCT (ACT) OF THE ASSESSEE AND ALSO ITS TRUSTEES SHRI AR RAHMAN AND MS. KAREEM BEGUM, BY REGISTERING THE SAID HIBBA (GIFT) ON 25.03.2013, CLEARLY PROVED THAT THE ASSESSEE'S CLAIM OF HIBBA (GIFT) BEFORE THE ASSESSING OFFICER WAS GENUINE AND NOT AN AFTERTHOUGHT TO AVOID THE LEGAL COMPLICATION S /VIOLATIONS U/ S.13(1)(C) OF THE ACT. THE NEXT OBSERVATION OF THE ASSESSING OFFICER THAT THE TRUSTEES AND THEIR FAMILY MEMBERS ARE USIN G THE GUEST HOUSE PRESENT IN THE SAID LANDS CLAIMED HAVE BEEN DONATED TO THE TRUST. HENCE THIS AMOUNTS 12 ITA NO.1753/MDS/2013 A PERSONAL BENEFIT TO THE TRUSTEES. THIS OBSERVATIO N IS NOT 'CORRECT. THE TOTAL EXTENT OF THE LANDS OWNED B Y THE TRUSTEES IS ABOUT 5 ACRES (ACTUALLY4.69 ACRES). OUT OF THIS LAND, ONLY 3,12 ACRES HAVE BEEN GIFTED BY THE TRUSTEES TO THE ASSESSEE TRUST. THE BALANCE OF THE LAND IS STILL WITH THE TRUSTEES. THE TRUSTEES ARE U SING THIS PART OF THE LAND FOR THEIR PERSONAL USE. HENCE NO ADVERSE INFERENCE CAN BE DRAWN IN THIS REGARD. THUS, FROM THE ABOVE CONDUCT OF THE ASSESSEE AS WELL AS THE TRUSTEES, IT IS CLEAR THAT THERE WAS GIFT OF LAND BY THE TRUSTEES TO THE ASSESSEE TRUST BY WA Y OF HIBBA. THEREFORE, THE ABOVE DEVELOPMENTAL EXPENSES OF RS.49,84,745/-, ON THE LANDS RECEIVED FROM THE TRUSTEES BY WAY OF HIBBA (GIFT),' REPRESEN TS THE ASSESSEE'S OWN EXPENSES. THE TRUSTEES, EITHER I N THE F.Y. 2009-10 OR IN THE SUBSEQUENT YEARS HAVE NO T DERIVED ANY BENEFIT FROM THE SAID DEVELOPMENTAL EXPENSES INCURRED BY THE ASSESSEE TRUST, EITHER DIRECTLY OR INDIRECTLY. HENCE THE ABOVE MENTIONED DEVELOPMENTAL EXPENSES OF RS.49,84,745/- ARE TOTALL Y OUTSIDE THE PURVIEW OF THE PROVISIONS OF SEC. 13(1) (C) R.W.S. 13(3) OF THE ACT. THE CASE LAWS RELIED ON BY THE ASSESSING OFFICER ARE, DISTINGUISHABLE ON FACTS. IN THE CASES OF DIT V. BHARAT DIAMOND HOUSE (126 TAXMAN 365)(SC); CIT V. VGP FOUNDATION (262 ITR 187)(MAD); AND KANAHYALAL CHARITABLE TRUST V. DIT(E ) (197 ITR 66)(DEL), THE, TRUSTS HAVE ADVANCES INTERE ST FREE LOANS TO THE TRUSTEES / THEIR CONCERNS. IN THE CASE OF ACTION FOR WELFARE AND AWAKENING IN RURAL ENVIRONMENT (AWARE) V . DCIT, THE TRUST PLEDGED ITS FDS AS SECURITY FOR THE LOANS OBTAINED BY THE TRUST EES. HENCE THE COURTS HAVE HELD THAT SUCH INTEREST FREE LOANS OR PLEDGING OF THE TRUST PROPERTY ARE IN VIOL ATION OF PROVISIONS OF SEC. 13(1)(C) OF THE ACT. WHEREAS, IN THE INSTANT CASE, THE ISSUE IS THE DEVELOPMENT EXPENSES ON THE LANDS RECEIVED UNDER GIFT (HIBBA) FROM THE TRUSTEES. HENCE THE SAID CASE LAWS ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN VIEW OF THE ABOVE, IT IS NOT POSSIBLE TO CONSIDER OR PRESUME THAT THE ABOVE MENTIONED DEVELOPMENTAL EXPENSES OF' 'RS,49,84,745/- AMOUNTS TO DIVERSION / UTILIZATION OF THE TRUST FUNDS FOR T HE PERSONAL BENEFIT OF TRUSTEES/RELATIVES, EITHER DIRE CTLY OR INDIRECTLY, AND HENCE THE PROVISIONS OF SEC. 13(1)( C) OR SEC. 13(1)(D) OF THE ACT CANNOT BE INVOKED IN TH E. 13 ITA NO.1753/MDS/2013 INSTANT CASE. THEREFORE, THE ASSESSING OFFICER'S AC TION OF INVOKING PROVISIONS OF SEC. 13(1)(C)/(D) OF THE ACT AND DENYING THE EXEMPTION OF INCOME U/S.11 OF THE ACT, IS NOT JUSTIFIED. THE ASSESSING OFFICER IS DIRECTED TO GRANT THE BENEFIT OF EXEMPTION OF INCOME U/S.11 OF THE ACT TO THE ASSESSEE. THE ASSESSEE SUCCEEDS IN ITS APPEALS IN THIS REGARD. 6. AS COULD BE SEEN FROM THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) THAT THE TRUST EES HAVE INITIALLY GIFTED THE LAND TO THE ASSESSEE TRUS T BY HIBBA AND WHICH WAS SUBSEQUENTLY TRANSFERRED TO THE ASSES SEE TRUST BY WAY OF GIFT DEED DATED 25.03.2013. AS THE LAND WAS TRANSFERRED TO THE ASSESSEE TRUST WHICH WAS ORALLY GIFTED EARLIER, THE TRUSTEES ARE NOT BENEFITTED IN ANY WAY . THEREFORE, WE ARE OF THE VIEW THAT THERE IS NO VIOLATION UNDER SECTION 13(1)(C) OF THE ACT. WE ALSO FIND FROM THE VALUATIO N REPORT THAT CERTAIN EXTENT OF LAND WAS NOT EVEN IN THE NAME OF THE TRUSTEES. THE TRUSTEES HAVE PURCHASED THIS LAND ON 28.04.2011 WHICH FALL UNDER ASSESSMENT YEAR 2011-12 AND THIS WAS ALSO GIFTED TO THE TRUST ON 25.03.2013. T HE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) HAVE NO T BEEN REBUTTED BY THE REVENUE WITH EVIDENCES. IN THE CIRCUMSTANCES, WE UPHOLD THE ORDER OF THE COMMISSIO NER OF INCOME TAX (APPEALS) HOLDING THAT THERE IS NO VIOL ATION OF THE 14 ITA NO.1753/MDS/2013 PROVISIONS OF SECTION 13(1)(C) OF THE ACT AND CONSE QUENTLY EXEMPTION UNDER SECTION 11 CANNOT BE DENIED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 30 TH DAY OF JANUARY, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 30 TH JANUARY, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .