Abhudaya Shiksha Prasar Nayas, Ghaziabad V. Addl. CIT, Ghaziabad

ITA 2109/DEL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2693 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 18-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEDOBANI
• Keywords: Sale consideration of property below Jantri Value; Charitable institution; Principle of natural justice
• Section: 50C; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI R.K.PANDA, ACCOUNTANT MEMBER ITA NO.2109/DEL/2016 ASSESSMENT YEAR: 2010-11 ABHUDAYA SHIKSHA PRASAR NAYAS KE 81 KAVI NAGAR GHAZIABAD PAN: AABTA 4223 A VS ACIT, RANGE 1 GHAZIABAD (APPELLANT) (RESPONDENT) APPELLANT BY SH. KAPIL GOEL, ADV. RESPONDENT BY MS. BEDOBANI, SR.DR DATE OF HEARING 08 .05.2017 DATE OF PRONOUNCEMENT 31 .0 7 .2017 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 01 ST MARCH, 2016 OF THE LD.CIT(A), GHAZIABAD RELATING TO ASSESSMENT YEAR (A.Y.) 2010-11. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A SOCIETY REGISTERED UNDER SECTION 12AA OF THE I.T. ACT, 1961. IT FILED ITS RETURN OF INCOME ON 30TH SEPTEMBER, 2010 DECLARING ITA NO. 2109/DEL/2016 A.Y. 2010-11 ABHUDAYA SHIKSHA PRASAR NYAS 2 NIL INCOME. DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE A.O. OBSERVED FROM THE INCOME AND EXPENDITURE ACCO UNT OF THE TRUST THAT THERE IS NO INCOME FROM ANY ACTIVITY OF THE TRUST AND THERE IS ONLY EXPENDITURE OF RS.10,07,053/- SHOWN ON ACCOUNT OF DONATION, LEGAL EXPENSES, SCHOLARSHIP AND OTHER MISCELLANEOUS EXPENSES. THUS AN EXPENDITURE OVER INCOME OF RS.10,07,053/- HAS BEEN SHOWN IN THE INCOME AND EXPENDITURE ACCOUNT. SINCE THE TRUST WAS SET UP F OR ESTABLISHING EDUCATIONAL ESTABLISHMENTS PROVIDING T ECHNICAL EDUCATION, VOCATIONAL EDUCATION AND REGULAR COURSES AND THE TRUST HAS NOT CARRIED OUT ANY SUCH ACTIVITIES, THE A.O. HELD THAT THE TRUST IS NOT COVERED UNDER ANY OF THE ABOV E MENTIONED CATEGORY FOR CLAIM OF EXEMPTION. 2.1. HE FURTHER NOTED THAT THE TRUST DURING THE I MPUGNED ASSESSMENT YEAR HAS SOLD PROPERTY OF THE TRUST FOR A CONSIDERATION OF RS.10,00,000/- WHICH WAS PURCHAS ED DURING THE YEAR 2005-06 FOR RS.8,10,600/-. AFTER CONSIDER ING THE COST OF INDEXATION AT RS.10,30,783/- THE PROFIT OF RS.1, 89,400/- HAS BEEN NEUTRALIZED TO NIL. THE SALE PROCEEDS HA VE BEEN ITA NO. 2109/DEL/2016 A.Y. 2010-11 ABHUDAYA SHIKSHA PRASAR NYAS 3 UTILISED FOR PAYMENT OF SCHOLARSHIPS OF RS.4,00,000 /- TO STUDENTS OF ANOTHER SOCIETY. SIMILARLY THE TRUST HAVE PAID DONATION OF RUPEES 5 LAKHS TO M/S GYAN BHARTI SHIK SHA PRASAR NYAS. THE A.O. THEREFORE ASKED THE ASSESS EE TO JUSTIFY THE PAYMENT OF DONATION. 2.2. THE ASSESSEE IN ITS REPLY SUBMITTED AS UNDER. THAT THE TRUST WAS ESTABLISHED ON 19.12.2006 WITH THE MAIN OBJECT OF DOING CHARITABLE WORKS FOR THE BENEF IT OF GENERAL PUBLIC IRRESPECTIVE OF THEIR CASTES, CREED, COLOUR ETC. THE TRUST INTENDS TO WORK IN THE FIELD OF ESTABLISH ING EDUCATIONAL ESTABLISHMENTS FOR PROVIDING TECHNICAL EDUCATION, VOCATIONAL EDUCATIONAL AND OTHER REGULAR COURSES. THE TRUST FACILITATES THE POOR STUDENTS AND PROVIDE SCHOLARSHIP TO POOR AND NEEDY CHILDREN. AS REGARDS THE APPLICATION OF FUNDS ARRIVED FROM TH E SALE OF PROPERTY ASSESSEE HAS GIVEN EXPLANATION THAT THE TR UST HAS APPLIED RS.10,007,053/- AS SHOWN IN INCOME & EXPEND ITURE ACCOUNT, WHICH IS MORE THAN THE AMOUNT SURPLUS RECE IVED ON SALE OF LAND HENCE IT MAKES NO DIFFERENCE WHETHER T RUST HAS SHOWN THE AMOUNT IN TOTAL INCOME OR NOT. ITA NO. 2109/DEL/2016 A.Y. 2010-11 ABHUDAYA SHIKSHA PRASAR NYAS 4 2.3. HOWEVER THE AO WAS NOT SATISFIED WITH THE EX PLANATION GIVEN BY THE ASSESSEE. RELYING ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SORABJI N USSERWANJI PREKH (GUJ.) 201 ITR 939 AND HONBLE KERALA HIGH C OURT IN THE CASE OF CIT VS. SARASWATH POOR STUDENTS FUND (KER) 150 ITR 142 WHEREIN IT WAS HELD THAT IF THE TRUST HAS BEEN ESTABLISHED WITH THE AIM OF IMPARTING EDUCATION BUT THE EDUCATI ONAL INSTITUTION IS NOT ESTABLISHED AND INCOME OF THE TR UST IS SPENT IN PROVIDING SCHOLARSHIPS AND FINANCIAL ASSISTANCE TO STUDENTS THEN THE TRUST IS NOT ENTITLED FOR EXEMPTION UNDER SECTION 10(22) OF THE ACT, THE A.O. DISALLOWED THE DISTR IBUTION OF SCHOLARSHIP AND THE DONATION GIVEN TO M/S GYAN BHAR TI SHIKSHA PRASAR NYAS AS NOT AN ALLOWABLE EXPENDITURE . 3. SO FAR AS THE SALE OF THE PROPERTY IS CONCERNED THE AO OBSERVED THAT THE STAMP VALUE ADOPTED BY THE STAMP AUTHORITIES WAS RS. 24,86,000/-. HE THEREFORE ASKE D THE ASSESSEE TO EXPLAIN AS TO WHY PROVISIONS OF SECTIO N 50C OF THE INCOME TAX ACT, 1961 (THE ACT) SHALL NOT BE APPLICA BLE. REJECTING THE EXPLANATION GIVEN BY THE ASSESSEE AN D APPLYING ITA NO. 2109/DEL/2016 A.Y. 2010-11 ABHUDAYA SHIKSHA PRASAR NYAS 5 THE PROVISIONS OF SECTION 50C OF THE ACT THE A.O B ROUGHT TO TAX RS.14,86,000/- AFTER REDUCING THE AMOUNT TO RS.1,89 ,400/- ALREADY SHOWN BY THE ASSESSEE IN THE INCOME & EXPEN DITURE ACCOUNT. 4. IN APPEAL THE LD.CIT(A) UPHELD THE DISALLOWANCE OF RS.9 LAKHS CLAIMED BY THE ASSESSEE ON ACCOUNT OF DISTRIB UTION OF SCHOLARSHIPS AND DONATION TO CHARITABLE INSTITUTION S ON THE GROUND THAT THE SAME WAS NOT PROVED BY THE ASSESSEE . SO FAR AS ADDITIONAL CAPITAL GAIN IS CONCERNED THE LD.CIT (A) SUSTAINED THE SAME AT RS.12,04,990/- AFTER ALLOWING THE COST OF INDEXATION WHICH WAS NOT ALLOWED BY THE A.O. AND GA VE PARTIAL RELIEF OF RS.2,81,010/-. 5. AGGRIEVED WITH SUCH ORDER OF THE LD.CIT(A) THE A SSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS. 1. THAT THE A.O. AND CIT(A) FOR CONFIRMING THE ADD ITION ARE WRONG, ILLEGAL, INJUDICIOUS AND ERRED IN LAW IN DIS ALLOWING AN AMOUNT OF RS.9,00,000/- BEING THE UTILISATION IN CHARITABLE ACTIVITIES MADE BY ASSESSEE WHO IS A CHA RITABLE ITA NO. 2109/DEL/2016 A.Y. 2010-11 ABHUDAYA SHIKSHA PRASAR NYAS 6 TRUST AND IS ELIGIBLE FOR DEDUCTION UNDER THE PROVI SIONS OF THE INCOME TAX ACT, 1961. 2. THAT THE A.O. AND CIT(A) FOR CONFIRMING THE ADDI TION ARE WRONG, ILLEGAL, INJUDICIOUS AND ERRED IN LAW BY INV OKING THE PROVISIONS OF SECTION 50C OF THE INCOME TAX ACT, 19 61 WHICH ARE NOT APPLICABLE IN CASE OF TRUST AS PER THE PROV ISIONS OF THE INCOME TAX ACT, 1961 AND THUS MAKING AN ADDITIO N OF RS.12,04,990/- IN THE INCOME OF THE ASSESSEE. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIF Y OR CHANGE ANY GROUND OF APPEAL, AT THE TIME OF HEARING IN THE INTEREST OF NATURAL JUSTICE. 6. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY TH E BOTH SIDES, PERUSED THE ORDERS OF THE AO AND LD.CIT(A) A ND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE ME. SO FAR AS GROUND NUMBER 1 IS CONCERNED I FIND THAT THE LD.CIT (A) AFTER DISCUSSING THE ISSUE THOROUGHLY HAD GIVEN A CATEGO RICAL FINDING THAT THE ASSESSEE HAS NOT PROVED THE GENUIN ENESS OF THE DONATION/ SCHOLARSHIP. FROM THE PAPER BOOK FILED BY THE ASSESSEE I FIND VARIOUS DETAILS WERE FILED. THE L D.COUNSEL FOR THE ASSESSEE SUBMITTED THAT GIVEN AN OPPORTUNITY A SSESSEE IS IN A POSITION TO SUBSTANTIATE WITH EVIDENCE TO THE SATISFACTION OF THE REVENUE AUTHORITIES THAT SUCH DONATION AND SCHO LARSHIPS ITA NO. 2109/DEL/2016 A.Y. 2010-11 ABHUDAYA SHIKSHA PRASAR NYAS 7 ARE GENUINE. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE I DEEM IT FIT AND P ROPER TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER (AO) WITH THE DIRECTION TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE TO HIS SATISFACTION REGARDING THE GEN UINENESS OF SUCH EXPENDITURE AND DECIDE THE ISSUE AS PER LAW. I HOLD AND DIRECT ACCORDINGLY. THE FIRST GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 7. SO FAR AS GROUND NUMBER 2 IS CONCERNED, AS MENT IONED EARLIER THE ASSESSEE HAS EARNED A CAPITAL GAIN OF RS.1,89,400/- WHICH HAS BEEN DETERMINED BY THE A.O. AT RS.14,86,0 00/- BY APPLYING PROVISION OF SECTION 50C. THE LD. CIT(A) DETERMINED SUCH CAPITAL GAIN AT RS.12,04,990/- AND GAVE PART R ELIEF TO THE ASSESSEE. THE REVENUE IS NOT IN APPEAL AGAINST THE ORDER OF THE LD. CIT(A). IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE IS WILLING TO PAY TAX ON THE SURPLUS CAPITAL GAIN AFTER DEDUCTING THE EXPENDITURE INCURR ED BY IT. ACCORDING TO HIM THE PROFITS SO EARNED HAVE BEEN UT ILISED FOR ITA NO. 2109/DEL/2016 A.Y. 2010-11 ABHUDAYA SHIKSHA PRASAR NYAS 8 CHARITABLE PURPOSE WHICH SHOULD BE ALLOWED AS DEDUC TION SINCE THE ASSESSEE IS ENJOYING THE BENEFIT OF SECTION 12A . IT IS ALSO HIS ARGUMENT THAT THE PROVISIONS OF SECTION 50C ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HOWEV ER, I FIND THE LD. CIT(A) HAS ALREADY DISTINGUISHED THE LUCKNOW BE NCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. THE UPPER INDIA CH AMBER OF COMMERCE RELIED ON BY LD. COUNSEL FOR THE ASSESSEE BEFORE ME. I FIND SOME FORCE IN THE ARGUMENT OF THE LD. COUNSE L FOR THE ASSESSEE THAT IF THE CAPITAL GAIN ON ACCOUNT OF S ALE OF PROPERTY IS BROUGHT TO TAX AS INCOME OF THE ASSESSEE, THEN G ENUINE EXPENDITURE, IF ANY INCURRED BY THE ASSESSEE HAS TO BE ALLOWED AS DEDUCTION SUBJECT TO SATISFACTION OF THE A.O. RE GARDING GENUINENESS OF SUCH EXPENDITURE APPLIED FOR CHARITA BLE PURPOSES. THE GROUND OF APPEAL NUMBER 1 HAS ALREAD Y BEEN RESTORED TO THE FILE OF THE A.O. WITH THE DIRECTION TO VERIFY THE GENUINENESS OF SUCH EXPENDITURE, I, THEREFORE, REST ORE THIS ISSUE ALSO TO THE FILE OF THE AO WITH THE DIRECTION TO CO NSIDER THE ALLOWABILITY OF THE EXPENDITURE INCURRED FOR CHARIT ABLE PURPOSES. ITA NO. 2109/DEL/2016 A.Y. 2010-11 ABHUDAYA SHIKSHA PRASAR NYAS 9 THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY AL LOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULTS THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 31.07.2017. 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