ACIT, Palakkad V. Markaz Sadathil Daraini Al Islamiya, Palakkad

ITA 176/COCH/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0893 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 23-11-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 03-04-2009
• Court: TRIBUNAL
• Department Lawyers: T J VINCENT
• Assessee Lawyers: DR K B MOHAMMED KUTTY SR ADV
• Keywords: Valuation report; Benefit of exemption
• Section: 12A; 11

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH, COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJAY AR ORA, AM I.T.A. NO. 176/COCH/2009 ASSESSMENT YEAR : 2003-04 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, PALAKKAD. VS. MARKAZ SADATHIL DARAINI AL ISLAMIYYA, MSI BANATH YATHEEM KHANA, AGATHI MANDIRAM, VELLADIKKUNNU, NELLIKKATTIRI, (PO), PALAKKAD-679 533. [PAN: AAAAM 4388M] (REVENUE -APPELLANT) (ASSESSEE- RESPONDENT) REVENUE BY SHRI T.J.VINCENT, DR ASSESSEE BY DR. K.B. MOHAMMED KUTTY, SR. ADV.-AR O R D E R PER SANJAY ARORA, AM: THIS APPEAL BY THE REVENUE IS IN RESPECT OF THE OR DER BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, KOCHI (CIT(A) FOR SHORT) DATED 29.12.2008, ALLOWING THE ASSESSEES APPEAL AGAINST ITS ASSESSMENT U/S. 143(3 ) OF THE INCOME-TAX ACT, 1961 ('THE ACT' HEREINAFTER) FOR ASSESSMENT YEAR (A.Y.) 2003-04 VI DE ORDER DATED 27.1.2006. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A SO CIETY UNDER THE SOCIETIES REGISTRATION ACT, 1860, REGISTERED U/S. 12A OF THE ACT. IT IS RU NNING AN ORPHANAGE FOR GIRLS IN A RENTED BUILDING. DURING THE COURSE OF THE ASSESSMENT PROC EEDINGS, THE ASSESSING OFFICER (AO) OBSERVED THE ASSESSEE TO HAVE MADE PAYMENTS AGGREGA TING TO ` 4.90 LAKHS DURING THE RELEVANT PREVIOUS YEAR (I.E., FROM 21.5.2002 TO 24. 2.2003) TO ONE SHRI MOIDUNNY, THE TREASURER OF THE ASSESSEE-SOCIETY. THE PAYMENTS WER E REFLECTED UNDER THE HEAD OF ACCOUNT BUILDING RENT/ADVANCES. THE ASSESSEE EXPLAINED T HE SAME TO BE TOWARD PURCHASE OF ITS RENTED PREMISES, OWNED BY THE TREASURER, AND FOR WH ICH A PURCHASE AGREEMENT DATED 16.12.2002 FOR ` 17.50 LAKHS WAS PRODUCED. THE AO FOUND THE SAME UN CONVINCING, AS THE ITA.NO. 176/COCH/2009 2 PAYMENTS WERE BEING MADE MUCH PRIOR TO 16.12.2002. THE ASSESSEE HAD, IN ANY CASE, BENEFITED THE TREASURER, A SPECIFIED PERSON U/S. 1 3(3) OF THE ACT, WITH INTEREST-FREE DEPOSIT, AND WAS, THUS, NOT LIABLE FOR EXEMPTION UN DER SECTION 11 IN TERMS OF SECTION 13(1)(C)(II) OF THE ACT. IN APPEAL, THE LD. CIT(A) CALLED FOR A REMAND REPORT AND ON EXAMINATION OF THE ASSESSEE CASE, INCLUDING THE EX PLANATIONS FURNISHED, FOUND MERIT THEREIN. THE GENUINENESS OF THE PURCHASE AGREEMENT, WHICH WAS FOR A DATE PRIOR TO THE COMMENCEMENT OF THE ASSESSMENT PROCEEDINGS (VIDE NO TICE U/S. 143(2)/14.10.2004) WAS NOT IN DOUBT. THE SAME HAD, IN FACT, BEEN CARRIED OUT AND THE PROPERTY PURCHASED FOR ` 14.70 LAKHS PER SALE DEED REGISTERED VIDE DOC NO. 3 927/05 DATED 22/11/2005 AT SRO, THRITHALA. THE SALE PRICE HAD BEEN REDUCED BY THE L ANDLORD/SELLER IN VIEW OF THE ASSESSEE BEING UNABLE TO RAISE THE NECESSARY FUNDS. THE ADVA NCE PAYMENTS UNDER REFERENCE STOOD ADJUSTED AGAINST THE PURCHASE CONSIDERATION DUE. I N FACT, THE MARKET VALUE OF THE PROPERTY, BEING LAND (1 ACRE) AND THE ORPHANAGE BUILDING THER EON, FROM WHERE THE ASSESSEE-SOCIETY WAS FUNCTIONING, WAS MUCH MORE, THE ASSESSEE BRINGI NG ON RECORD THE VALUATION REPORT FROM A REGISTERED VALUER (SUPERINTENDENT ENGINEER, PWD) VALUING THE LAND AND BUILDING AT ` 12.50 LAKHS AND ` 8.66 LAKHS RESPECTIVELY, I.E., AT A TOTAL OF ` 21.16 LAKHS. NO CORRESPONDING REPORT FROM THE DVO HAD BEEN CALLED F OR BY THE AO. UNDER THE CIRCUMSTANCES, NO BENEFIT COULD BE SAID TO HAVE BEE N EXTENDED BY THE ASSESSEE-SOCIETY TO A SPECIFIED PERSON, SO AS TO DENY IT THE BENEFIT OF EXEMPTION U/S. 11. 2. BEFORE US, LIKE SUBMISSIONS STOOD RAISED BY EITH ER SIDE. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE PRIMARY FACTS ARE NOT IN DISPUTE, SO THAT WHAT IS REQUIRED IS A D ECISION QUA THE APPLICATION OF LAW, IN THE LIGHT OF THE OBTAINING FACTS. THE REVENUES CASE, I N PRINCIPLE, IS THAT THE INCOME/PROPERTY OF THE ASSESSEE-SOCIETY WAS USED/APPLIED, DIRECTLY OR INDIRECTLY, FOR THE BENEFIT OF A PERSON SPECIFIED U/S. 13(3), SO AS TO BE HIT BY SECTION 13 (1)(C) AND, THUS, IT IS NOT ENTITLED TO EXEMPTION U/S. 11. SECTION 13(2)(A) PROVIDES FOR L ENDING OF ANY MONEY WITHOUT ANY SECURITY OR INTEREST OR BOTH, AS BEING IN SATISFACT ION OF THE PROSCRIPTIVE MANDATE OF S. 13(1)(C). THE QUESTION, THEREFORE, IS WHETHER THE L ENDING OF MONEY CAN, UNDER THE CIRCUMSTANCES, BE CONSIDERED AS WITHOUT ADEQUATE SE CURITY/INTEREST. WE THINK NOT. THE ITA.NO. 176/COCH/2009 3 LAND AND THE BUILDING WAS AND CONTINUES TO BE IN TH E POSSESSION OF THE ASSESSEE-SOCIETY, WHICH WAS USING IT AS ITS PREMISES, PAYING A MONTHL Y RENTAL OF ` 1500/-. THOUGH A SUBSTANTIAL PART ( ` 4.50 LAKHS) OF THE IMPUGNED PAYMENT STOOD ADVANCED PRIOR TO 16.12.2002, THE DATE OF THE PURCHASE AGREEMENT, THE VERY FACT THAT THE SAME WAS REFLECTED AS `BUILDING RENT/ADVANCE SHOWS THAT THE PURCHASE OF THE BUILDING WAS IN CONTEMPLATION. THIS IS AS THE PAYMENT OF AN ADVANCE IN LAKHS AGAIN ST AN ANNUAL RENTAL LIABILITY OF ` 0.18 LAKHS MAKE NO SENSE, SO THAT THE WORD `ADVANCE IN THE TITLE `BUILDING RENT/ADVANCE REFERS TO ADVANCE AGAINST PURCHASE. THE GENUINENESS OF TH E ARRANGEMENT IS PROVED BY THE SUBSEQUENT PURCHASE, PERMANENTLY SECURING THE EXIST ING PREMISES HAVING ALREADY FOUND SUITABLE FOR ITS PURPOSES - FOR THE SOCIETY. THE V ALUATIONS ARE NOT IN DISPUTE, EVEN AS THE CONSIDERATION STANDS FURTHER SCALED DOWN. THE ASSES SEE HAS EFFECTIVELY REBUTTED THE INSPECTORS REPORT HOLDING THAT THE BUILDING IS OF MUDDY WALLS, BY STATING THAT IT HAS A FIRST FLOOR, AND THAT NO FIRST FLOOR BUILDING COULD BE BU ILT ON A MUDDY WALL STRUCTURE. IN FACT, IRRESPECTIVE OF THE QUALITY OF CONSTRUCTION, THE FA CT IS THAT THE SOCIETY IS OPERATING THERE- FROM, AND THERE IS NO INFLATION IN CONSIDERATION; R ATHER, APPARENTLY, HAS BEEN PURCHASED AT A LOWER COST. AS OBSERVED BY THE LD. CIT(A), THE C OURSE AVAILABLE FOR THE REVENUE, IF A CHALLENGE TO THE VALUATION WAS TO BE MADE, WAS TO O BTAIN A REPORT FROM THE DVO. EVEN OTHERWISE, THE BULK OF THE COST IS TOWARD LAND (1 A CRE), WHICH IS LOCATED WITHIN 8 KMS. OF PATTAMBI MUNICIPALITY TOWN. UNDER THESE CIRCUMSTAN CES, FIRSTLY, THE ADVANCE OF MONEY, IN VIEW OF THE CONTINUED POSSESSION; THE MARGINAL R ENT; AND THE CONTEMPLATED PURCHASE, CANNOT BE SAID TO BE WITHOUT SECURITY. ALSO, THE SA ME SHALL NOT BEAR THE CHARACTER OF PURE LENDING, BUT ONLY OF AN ADVANCE GIVEN ON A CONSIDER ATION, SO THAT THE CHARGE OF NON-LEVY OF INTEREST IS NOT ATTRACTED. THE GENUINENESS OF TH E ARRANGEMENT, WE MAY EMPHASIZE, IS NOT UNDER CHALLENGE, AND ACCEPTED. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE IMPUGNED ORDER, AND UPHOLD THE SAME. 4. IN THE RESULT, THE REVENUES APPEAL IS DISMI SSED. SD/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 21ST JANUARY, 2011 ITA.NO. 176/COCH/2009 4 GJ COPY TO: 1. MARKAZ SADATHIL DARAINI AL ISLAMIYYA, MSI BANATH YATHEEM KHANA, AGATHI MANDIRAM, VELLADIKKUNNU, NELLIKKATTIRI, (PO), P ALAKKAD-679 533. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -1,PALAKKAD. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, KOCH I 4. THE COMMISSIONER OF INCOME-TAX, TRICHUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (A SSISTANT REGISTRAR)