I.T.O.-5(1), Firozabad V. M/s Chaudhary Hardayal Singh Shiksha Samiti, Firozabad

ITA 179/AGR/2013

• Counselvise Citation: 17920314 RSA 2013
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 31-10-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 03-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: WASEEM ARSHAD
• Assessee Lawyers: RAVINDRA KUMAR AGARWAL
• Keywords: Charitable institution
• Section: 11; 143(3)

Judgement Text

I.T.A. NO.: 179/AGRA/2013 ASSESSMENT YEAR: 2009-10 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA [ CORAM : BHAVNESH SAINI, JM, AND PRAMOD KUMAR, AM] I.T.A. NO.: 179/AGRA/2013 ASSESSMENT YEAR: 2009-10 INCOME TAX OFFICER WARD 5 (1), FIROZABAD .......APPELLA NT VS. CHAUDHARY HARDAYAL SINGH SHIKSHA SAMITI RESPON DENT VILLAGE : PENDHAT, POST EKA, TEHSIL JASRANA DISTRICT FIROZABAD [ PAN : AABTC0381M] APPEARANCES BY: WASEEM ARSHAD, FOR THE APPELLANT RAVINDRA KUMAR AGARWAL, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : NOVEMBER 28,2013 DATE OF PRONOUNCING THE ORDER : DECEMBER 20, 2013 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE APPELLANT ASSESSING O FFICER HAS CALLED INTO QUESTION CORRECTNESS OF THE ORDER DATED 15 TH MARCH 2013, PASSED BY THE COMMISSIONER (APPEALS) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) FOR THE ASSESSMENT YEAR 2009-10. 2. IN THE FIRST TWO GROUNDS OF APPEAL, WHICH ARE IN TERCONNECTED AND WHICH WE WILL TAKE UP TOGETHER, THE ASSESSING OFFICER HAS RAISED THE FOLLOWING GRIEVANCES: 1. THAT THE LD. CIT(A)-I1, AGRA HAS ERRED IN LAW AND O N FACTS IN HOLDING THAT THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 10(2 3C)(IIIAD) AND IN DELETING THE ADDITION OF RS 37,24,193 I.T.A. NO.: 179/AGRA/2013 ASSESSMENT YEAR: 2009-10 PAGE 2 OF 5 2. THAT THE LD. CIT(A)-I1, AGRA HAS ERRED IN LAW AND O N FACTS IN HOLDING THAT THE LOAN OF RS 10,00,000 GIVEN TO M/S HARDAYAL MILK PRODUCTS PVT LTD, WITHOUT INTEREST, CANNOT BE FOR PROFIT DESPITE THE FACT THAT FOUR MEMBERS OF THE MANAGERIAL COMMITTEE ARE ALSO DIRECT ORS OF THE SAID COMPANY, AND PRESIDENT AND VICE PRESIDENT OF THE SO CIETY ARE ALSO RELATIVES OF THE DIRECTOR OF THE COMPANY. 3. TO ADJUDICATE UPON THESE GRIEVANCES, ONLY A VERY FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. DURING THE COURSE OF THE ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT AS THE ASSESSEE HAS GIVEN AN INTEREST FREE LOAN OF RS 10,00,000 TO A COMMERCIAL ORGANIZATION IN WHICH MEMBERS OF THE MANAGERIAL COMMITTEE ARE THE DIRECTORS, IT IS CLEARLY ESTABLIS HED THAT THE SOCIETY DOES NOT EXIST SOLELY FOR EDUCATIONAL PURPOSES. ACCORDINGLY, DEDUCTION UNDER SECTION 10(23C)(IIIAD) WAS DECLINED. AGGRIEVED, ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE CIT(A). LEARNED CIT(A) HELD THAT THE MER E FACT THAT THE ASSESSEE HAD ADVANCED AN INTEREST FREE LOAN OF RS 10,00,000 FOR A SHORT PERIOD DOES NOT OBLITERATE THE FACT THAT THE ASSESSEE WAS EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NO OTHER ACTIVITIES WERE CARRIED OUT. HE ALSO NOTED THAT THE CONDITIONS LAID DOWN UNDER SECTION 10(23C) WERE DULY SATISFIED AND AS SUCH THE EXEMPTION UNDER THE SAID SECTION COULD NOT BE DECLINED. THE SHORT GRIEVANCE OF THE ASSESSING OFFICER IS AGAINST THE CIT(A)S GRANTING EXEMPTION UNDER SECTION 10(23C) EVEN THOUGH, AS THE GROUNDS OF APPEAL, VEHE MENTLY EMPHASIZE , THE ASSESSEE TRUST WAS NOT EXISTING SOLELY FOR EDUCAT IONAL PURPOSES, AND THIS STAND IS SUPPORTED BY THE UNDISPUTED FINDING THAT A NON I NTEREST BEARING ADVANCE WAS GIVEN TO A CONCERN IN WHICH MEMBERS OF THE MANAGERI AL COMMITTEE HAD INTEREST. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE IN THE L IGHT OF APPLICABLE LEGAL POSITION. 5. WE FIND THAT IT IS AN UNDISPUTED POSITION THAT THE ASSESSEE DID GIVE AN INTEREST FREE LOAN OF RS 10,00,000 TO A COMMERCIAL CONCERN, IN WHICH MEMBERS OF THE MANAGING COMMITTEE WERE INTERESTED, BUT THAT LO AN WAS FOR A VERY SHORT PERIOD. EVEN AS WE NOTE THIS POSITION, WE FIND THAT THE REQUIREMENT OF SECTION I.T.A. NO.: 179/AGRA/2013 ASSESSMENT YEAR: 2009-10 PAGE 3 OF 5 10(23C) IS THAT THE INSTITUTION MUST EXIST SOLELY FOR EDUCATIONAL PURPOSES AND THAT THE LEARNED CIT(A) HAS HELD THAT THIS SHORT TE RM LOAN DOES NOT ALTER OR CHANGE THE PURPOSES FOR WHICH THE INSTITUTION EXIST S. A TRANSACTION OF THIS NATURE DOES NOT OBLITERATE OR DILUTE THE OBJECTS OF THE AS SESSEE INSTITUTION. IT IS ALSO IMPORTANT TO BEAR IN MIND THAT THE PRESENT IS QUITE DISTINCT FROM A SITUATION ENVISAGED IN SECTION 13 WHICH DEALS WITH THE SITUAT IONS IN WHICH BENEFITS OF SECTION 11 CAN BE DECLINED. THERE ARE NO SUCH CORRE SPONDING DISABLING PROVISIONS SO FAR AS BENEFITS OF SECTION 10(23C) AR E CONCERNED. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF TH E CASE, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 6. GROUND NO. 1 AND 2 ARE THUS DISMISSED. 7. IN GROUND NO. 3, THE APPELLANT HAS RAISED THE FO LLOWING GRIEVANCE: THAT THE LD. CIT(A)-I1, AGRA HAS ERRED IN LAW AND O N FACTS IN DELETING THE ADDITION OF RS 12,65,060 HOLDING THAT THAT THE AO H AS NOT GIVEN ANY REASONS FOR NOT ACCEPTING AGRICULTURE INCOME EVEN THOUGH AO HAS MENTIONED REASONS IN HIS ASSESSMENT ORDER 8. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THIS I SSUE IS COVERED, IN FAVOUR OF THE ASSESSEE, BY OUR DECISION DATED 18 TH OCTOBER 2013 IN ASSESSEES GROUP CASE, WHEREIN, DEALING WITH MATERIALLY IDENTICAL SI TUATION, WE HAD HELD AS FOLLOWS: 10. IN GROUND NO 3, THE ASSESSING OFFICER IS AGGRIE VED OF THE CIT(A) DELETING THE ADDITION OF RS 21,76,100 IN RESPECT OF AGRICULTURAL INCOME. 11. AS FAR AS THIS ADDITION IS CONCERNED, THE RELEV ANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF THE ASSESSMENT PROC EEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD DECLARED AN AGR ICULTURAL INCOME OF RS 25,23,230 AGAINST WHICH EXPENDITURE OF ONLY RS 43,5 00 IS SHOWN. THE ASSESSING OFFICER WAS OF THE VIEW THAT THIS EXPENSE IS QUITE AT VARIANCE WITH THE TREND SHOWN IN EARLIER YEARS IN WHICH THE INCOME WAS 7.98 TIMES THE EXPENSES SHOWN ON AGRICULTURE. BASED ON THIS WO RKING HE RECOMPUTED THE ESTIMATED AGRICULTURAL INCOME AND TO THE EXTENT AGRICULTURAL INCOME DECLARED EXCEEDED THE AMOUNT SO COMPUTED ON HYPOTHE TICAL BASIS, THE ADDITION WAS MADE AS INCOME FROM OTHER SOURCES. IN APPEAL, LEARNED CIT(A) NOTED THAT ALL THE INCOME AND EXPENSES ARE DULY SUPPORTED BY I.T.A. NO.: 179/AGRA/2013 ASSESSMENT YEAR: 2009-10 PAGE 4 OF 5 BOOKS OF ACCOUNTS AND MANDI RECEIPTS AND VOUCHERS E TC, AND, AS SUCH, THERE WAS NO OCCASION FOR ESTIMATION OF INCOME BY THE ASS ESSING OFFICER. ACCORDINGLY, THE ADDITION WAS DELETED. THE ASSESSIN G OFFICER IS NOT SATISFIED AND IS IN APPEAL BEFORE US. 12. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE SEE NO NEED TO INTERFERE IN THE WELL REASONED CONCLUSIONS ARRIVED AT BY THE CIT(A). ONCE THE DETAILS FURNISHE D BY THE ASSESSEE, AND EVIDENCES SIGHTED BY THE ASSESSEE, ARE NOT PROVED I NCORRECT, THERE CANNOT BE ANY OCCASION TO RESORT TO ESTIMATION OF INCOME O N THE BASIS OF THE TRENDS FOR LAST YEARS. SUCH DEVIATIONS CAN AT BEST BE STARTING POINT FOR INQUIRES BUT CANNOT BE, BY ITSELF, REASONS ENOUGH F OR ADDITIONS BEING MADE- AS HAS BEEN DONE IN THIS CASE. LEARNED CIT(A) WAS, THEREFORE, QUITE JUSTIFIED IN DELETING THE IMPUGNED ADDITION. WE APP ROVE HIS ACTION AND DECLINE TO INTERFERE IN THE MATTER. 13. GROUND NO. 3 IS ALSO DISMISSED. 9. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY US. RESPECTFULLY FOLLOWING THE SAID DECISI ON, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AS WELL. NO INTERFERENCE. 10. GROUNDS OF APPEAL NO. 3 IS THUS DISMISSED. 11. IN GROUND NO. 4, GRIEVANCE RAISED IS AS FOLLOWS : THAT THE LD. CIT(A)-I1, AGRA HAS ERRED IN LAW AND O N FACTS IN DELETING THE ADDITION OF RS 15,00,000 WHICH WAS GIVEN AS DONATIO N BY THE ASSESSEE TO HARDAYAL CHARITABLE & EDUCATION TRUST, IGNORING THA T BY DOING SO THE ASSESSEE HAS INDIRECTLY APPLIED ITS FUND FOR PURPOS ES OTHER THAN EDUCATIONAL PURPOSES AS OBJECTS OF OF HARDAYAL CHAR ITABLE AND EDUCATIONAL TRUST INCLUDED OBJECTS WHICH ARE NOT SO LELY FOR EDUCATIONAL PURPOSES AND DOES NOT QUALIFY FOR EXEMPTION UNDER S ECTION 10(23C)(VI). 12. SO FAR AS THIS GRIEVANCE OF THE REVENUE IS CONC ERNED, IT IS SUFFICIENT TO TAKE NOTE OF THE FACT THAT LEARNED CIT(A) HAS GIVEN A FI NDING , WHICH IS CLEAR ALSO FROM A PERUSAL OF LETTER DATED 30 TH MARCH 2009 COPY OF WHICH IS PLACED BEFORE US AT PAGE 41 OF THE PAPER BOOK, THAT THE AMOUNT SO DONAT ED WILL BE EXCLUSIVELY UTILIZED FOR EDUCATIONAL AND CONSTRUCTION OF CAMPUS BUILDING ONLY. IN THE ASSESSMENT PROCEEDINGS, THIS AMOUNT WAS DISALLOWED. THE DISALLOWANCE WAS REVERSED BY THE CIT(A) ON HAVING NOTED THAT THE AMO UNT WAS USED FOR I.T.A. NO.: 179/AGRA/2013 ASSESSMENT YEAR: 2009-10 PAGE 5 OF 5 PERMISSIBLE PURPOSES ONLY. NOW THE ASSESSING OFFICE R CONTENTS THAT THIS APPLICATION OF FUNDS ESTABLISHES THE FACT THAT INST ITUTION DID NOT EXIST SOLELY FOR EDUCATIONAL PURPOSES. 13. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE IN THE L IGHT OF APPLICABLE LEGAL POSITION. 14. WE ARE UNABLE TO SEE LEGALLY SUSTAINABLE MERITS IN THE GRIEVANCE OF THE ASSESSING OFFICER. ONCE IT IS AN UNDISPUTED POSITIO N, AS IS THE POSITION ON THE FACTS OF THIS CASE, THAT THE MONIES SO GIVEN ARE TO BE USED ONLY FOR EDUCATIONAL PURPOSES, IT CANNOT BE SAID THAT MERELY BECAUSE MON IES WERE USED THROUGH ANOTHER CHARITABLE INSTITUTION, ONE COULD CONCLUDE THAT THE INSTITUTION DID NOT EXIST SOLELY FOR EDUCATIONAL PURPOSES. WE, THEREFOR E, REJECT THE GRIEVANCE OF THE AO AND CONFIRM THE ACTION OF THE CIT(A) ON THIS POI NT AS WELL. 15. GROUND NO. 4 IS ALSO DISMISSED. 16. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUN CED IN THE OPEN COURT TODAY ON 20 TH DAY OF DECEMBER, 2013. SD/- SD/- BHAVNESH SAINI PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT ME MBER) AGRA, THE 20 TH DAY OF DECEMBER, 2013 COPIES TO : (1) THE APPELLANT (2)THE RESPONDENT (3) THE CIT (4) THE CIT(A) (4) DR (5) GUARD FILE BY ORDER ETC INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA