ACIT, Coimbatore V. M.Palanisamy, Coimbatore

ITA 1986/CHNY/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8546 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 14-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: S SRIDHAR
• Keywords: Charitable institution
• Section: 143(3); 12AA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! ' . # , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICI AL MEMBER ./ I.T.A.NO.1986/MDS/2015 ( / ASSESSMENT YEAR: 2010-11) ASSISTANT COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-2, COIMBATORE. VS MR. M.PALANISAMY, 107A, SENGUPTHA STREET, RAMNAGAR, COIMBATORE-641 009. PAN:AFRPP5948J ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.SHIVA SRINIVAS, JCIT /RESPONDENT BY : MR. S.SRIDHAR, ADVOCATE /DATE OF HEARING : 13 TH JULY, 2016 /DATE OF PRONOUNCEMENT : 9 TH SEPTEMBER, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- 1, COIMBATORE DATED 12.06.2015 IN ITA NO.38A/13-14 PASSED UNDER SECTION 143(3) R.W.S. 250(6) OF THE ACT. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEAL, HOWEVER, THE CRUX OF THE ISSUE IS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN D ELETING THE ADDITION OF ` 53,11,383/-MADE BY THE LEARNED ASSESSING OFFICER TOWARDS EXPENDITURE INCURRED ON LEASE RENT. 2 ITA NO.1986/MDS/2015 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL FILED HIS RETURN OF INCOME ON 09.10.2010 FOR THE ASSESSMENT YEAR 2010-11 ADMITTING INCOME OF ` 90,43,040/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE LEARNED ASSESSING OFFICER THAT ASSESSEE HAD CLAIMED DEDUCTION OF ` 19,68,91,399/- AS LEASE RENT. IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE LEARNED ASSESSING OFFICE R THAT M/S.SHREE VIJAYALAKSHMI CHARITABLE TRUST HAD REGIST ERED A LEASE AGREEMENT ON 11.02.2010 WITH RESPECT TO THE L AND AT PALATHURAI VILLAGE, MADUKKARAI WHEREIN THE TRUST H AD OBTAINED THE LAND ON LEASE FOR YEARLY PAYMENT OF RS .22,680/-. THEREAFTER, THE ASSESSEE HAD ENTERED INTO AN AGREEM ENT DATED 21.01.2010 WHEREIN HE OBTAINED THE SAME LAND ON LEASE FROM THE TRUST IN ORDER TO EXPLOIT THE MINERA LS IN THE LAND AGAINST THE PAYMENT OF 75% OF HIS RECEIPTS FROM SUC H OPERATIONS TO THE TRUST. THE LEARNED ASSESSING OFFI CER OPINED THAT THE AFORESAID PAYMENT OF 75% OF THE ASSESSEES TURNOVER AS LEASE RENT TO THE TRUST IS EXCESSIVE AND IT WAS A COLOURABLE DEVICE TO REDUCE THE PROFIT OF THE ASSESSEE BECAUSE THE ENTIRE EXPENSES INCURRED FOR EXPLOITING THE MINERALS WAS B ORNE BY 3 ITA NO.1986/MDS/2015 THE ASSESSEE. THEREFORE, THE LEARNED ASSESSING OFFI CER DISALLOWED 75% OF THE EXPENDITURE INCURRED BY THE A SSESSEE BY STATING THAT IT IS EXCESSIVE AND ACCORDINGLY DIS ALLOWED RS.53,11,383/-. 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) DELETED THE ADDITION BY OBSERVING AS UNDE R:- 6. I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO THE ORDER OF THE ASSESSING OFFIC ER. AS MENTIONED ABOVE, THE ASSESSING OFFICER HAS WITHOUT BRINGING ANY EVIDENCE ON RECORD STATED THAT THE CONTRACT IS GUIDED BY NON-BUSINESS MOTIVES. THE ASSESSING OFFICER HAS NOT EXAMINED THE TOTAL SALE PROCEEDS OF THE SILICA SAND AND BLUE METALS EXTRACTED BY THE APPELLANT NOR WAS IN THE P OSSESSION OF INFORMATION REGARDING THE AMOUNT WHICH ACCRUED T O THE APPELLANT ON ACCOUNT OF 25% OF THE SALE PROCEEDS OF SILICA SAND AND BLUE METALS. WITHOUT EXAMINING ANY FACTS, THE ASSESSING OFFICER CAME TO A CONCLUSION THAT THE INC OME OF THE ASSESSEE WAS REDUCED AND DISALLOWED 75% OF THE EXT ENT CONSIDERED NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. AS SEEN FROM THE DETAILS FURNISHED BY THE APPELLANT THE TOTAL SALE RECEIPTS OF SILICA SAND AN D BLUE METALS EXTRACTED WAS TO THE TUNE OF RS.25 CRORES FOR THE A SSESSMENT YEAR UNDER CONSIDERATION. THE APPELLANT CLAIMED LEA SE RENT OF RS.19,68,91,399/-. THE BALANCE OF SALE PROCEEDS OF RS.25 CRORES REFLECTED BY THE ASSESSEE IN HIS PROFIT AND LOSS ACCOUNT. THE EXPENDITURE DISALLOWED BY THE ASSESSIN G OFFICER AMOUNTING TO 75% OF THE EXPENDITURE IS RS.53,11,383 /-. CONSIDERING THE SALE PROCEEDS, IT CANNOT BE ASSUMED THAT THE CONTRACT IS GUIDED BY NON-BUSINESS MOTIVES. 5. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE ARGUED IN SUPPORT OF THE ORDER OF THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) WHILE AS THE LEARNED DEPART MENTAL 4 ITA NO.1986/MDS/2015 REPRESENTATIVE RELIED ON THE ORDER OF THE LEARNED A SSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FACTS OF THE CASE, IT IS APPARENT THAT THE ASSESSEE HAS PASS ED OVER HIS SUBSTANTIAL REVENUE TO M/S.SHREE VIJAYALAKSHMI CHARITABLE TRUST AND RETAINED ONLY A SMALL PORTION. THE LEARNED AUTHORIZED REPRESENTATIVE HAD EXPLAINED BEF ORE US THAT THE ASSESSEE HAD DONE SO ONLY FOR THE BENEFIT OF THE CHARITABLE TRUST TO CARRY OUT ITS CHARITABLE OBJECT S. IN THIS SITUATION, WE ARE OF THE VIEW THAT ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE BECAUSE THE ENTIRE AMOUNT WAS HANDED OVER BY THE ASSESSEE TO THE CHARITABLE TRUST AND RETAINED ONLY A MINIMUM AMOUNT FOR HIMSELF. WHEN GE NUINELY THE ASSESSEE HAD NOT ENJOYED THE GAIN, HE CANNOT BE MADE LIABLE TO PAY TAX. HOWEVER, THE AMOUNT RECEIVED BY M/S. SHREE VIJAYALAKSHMI CHARITABLE TRUST WILL BE LIABLE TO TAX IN ITS HANDS EVEN THOUGH IT ENJOYS THE BENEFIT OF REGI STRATION UNDER SECTION 12A(A)/ 12AA OF THE ACT BY VIRTUE OF THE PROVISO 5 ITA NO.1986/MDS/2015 TO SECTION 2(15) OF THE ACT BECAUSE BY SUB-LEASING THE LAND THE TRUST HAS VENTURED INTO A COMMERCIAL TRANSACTIO N WHICH IS DISTINCT FROM ITS CHARITABLE ACTIVITIES. THEREFORE, THE REVENUE IS NOT AT LOSS. HENCE WE HEREBY UPHOLD THE DECISION OF THE LD.CIT(A). 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 9 TH SEPTEMBER , 2016 SD/- SD/- ( ! ' . # ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 9 TH SEPTEMBER, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF