Deputy Commissioner of Income-tax,(Exemptions) Circle , Pune V. Mukund Bhavan Trust, Pune

ITA 2439/PUN/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5878 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-09-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 17-10-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASIF A KARMAL
• Assessee Lawyers: V L JAIN
• Keywords: Charitable institution; Maximum Marginal Rate; Benefit of exemption; Set aside
• Section: 143(3); 48; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER . / ITA NO.2439/PUN/2017 / ASSESSMENT YEAR : 2013-14 DCIT (EXEMPTIONS) CIRCLE, PUNE. .. /APPLICANT / V/S. MUKUND BHAVAN TRUST, MUKUND BHAVAN, 1105, RAVIWAR PETH, PUNE-411002. PAN: AAATS5170R .. / RESPONDENT REVENUE BY : SHRI ASIF A. KARMAL ASSESSEE BY : SHRI V. L. JAIN / DATE OF HEARING : 03.09.2020 / DATE OF PRONOUNCEMENT : 16.09.2020 / ORDER PER P.M. JAGTAP, VP: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)- 10, PUNE DATED 08.08.2017 ON THE FOLLOWING GROUNDS :- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) GROSSLY ERRED IN ALLOWING THE EXEMPTION UNDER SECTION 11 TO THE TUNE OF RS.8,64,73,871/- AND THE ORDER OF THE LD., CIT (A) IS NOT AS PER THE SECOND PROVISO TO SECTION 13(1)(C)(II). 3. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT AFTER THE AMENDMENT OF THE ACT, BY FINANCE ACT, 1970, AS PER SECTION 13(1)(C)(II) IF ANY PART OF THE INCOME OR ANY PROPERTY OF THE TRUST OR THE INSTITUTION DURING THE PREVIOUS YEAR USED OR APPLIED BY THE TRUSTEES, BEING THE PERSON COVERED UNDER SECTION 13(1)(C) READ WITH 13(2)(B) EXEMPTION UNDER SECTION 11 IS TO BE DENIED TO THE ASSESSEE. 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE SECOND PROVISO TO SECTION 13(1)(C)(II) DENIES THE BENEFIT OF EXEMPTION UNDER SECTION 11 IF THE TRUSTEES ENJOYS THE BENEFITS EVEN IF IT IS AS PER THE MANDATORY TERMS OF THE TRUST DEED BEYOND 1ST JUNE, 1970. 5. THE LEARNED CIT(A) IGNORED THE PROVISIONS OF SECTION 13(1)(C)(II) SECOND PROVISO AND THE INTENTION OF THE LAW TO DENY THE EXEMPTION AFTER 1970 WHEN THE APPEAL IS RELATING TO A.Y.2013-14 AND HAS COME TO WRONG CONCLUSION AND SET ASIDE THE ORDER OF THE AO. 2 ITA NO.2439/PUN/2017 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL. 2. THE ASSESSEE IN THE PRESENT CASE IS AN EDUCATIONAL TRUST WHICH FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 29.09.2013 DECLARING TOTAL INCOME AT NIL AFTER CLAIMING EXEMPTION U/S 11 AND 12 OF THE INCOME TAX ACT, 1961. IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 28.03.2016, BENEFIT OF EXEMPTION CLAIMED BY THE ASSESSEE U/S 11 AND 12 WAS DISALLOWED BY THE ASSESSING OFFICER FOLLOWING THE ASSESSMENTS MADE IN THE ASSESSEES OWN CASE FOR THE EARLIER YEARS WHEREIN THE EXEMPTION CLAIMED BY THE ASSESSEE U/S 11 AND 12 WAS DISALLOWED FOR ALLEGEDLY VIOLATING THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT. ON APPEAL, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 11 BY FOLLOWING THE ORDER OF HIS PREDECESSOR DATED 15.05.2015 IN ASSESSEES OWN CASE FOR A.Y. 2011-12 WHEREIN A SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THIS TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT A SIMILAR ISSUE WAS INVOLVED IN ASSESSEES OWN CASE FOR A.Y. 2010-11 AND A.Y. 2011-12 AND THE TRIBUNAL VIDE ITS COMMON ORDER DATED 28.06.2017 PASSED IN ITA NO.223/PUN/2014 AND ITA NO.1180/PUN/2015 DECIDED THE SAME VIDE PARAGRAPHS NO.6 TO 10 AS UNDER :- 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY DISPUTE IN THE PRESENT SET OF APPEALS IS; WHETHER THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 13(1)(C)(II) OF THE ACT. BEFORE PROCEEDINGS FURTHER IT WOULD BE RELEVANT TO FIRST SEE THE PROVISIONS OF AFORESAID SECTION. THE RELEVANT EXTRACT OF THE PROVISIONS OF SECTION 13(1)(C)(II) ARE REPRODUCED HEREIN-BELOW : [SECTION 11 NOT TO APPLY IN CERTAIN CASES.] 13.(1) NOTHING CONTAINED IN SECTION 11 [OR SECTION 12] SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT THEREOF (A).. 3 ITA NO.2439/PUN/2017 (B).. (C) IN THE CASE OF A TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITUTION, ANY INCOME THEREOF- (I).. (II) IF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR THE INSTITUTION (WHENEVER CREATED OR ESTABLISHED) IS DURING THE PREVIOUS YEAR USED OR APPLIED, DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SUB- SECTION (3): PROVIDED THAT IN THE CASE OF A TRUST OR INSTITUTION CREATED OR ESTABLISHED BEFORE THE COMMENCEMENT OF THIS ACT, THE PROVISIONS OF SUB- CLAUSE (II) SHALL NOT APPLY TO ANY USE OR APPLICATION, WHETHER DIRECTLY OR INDIRECTLY, OF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR INSTITUTION FOR THE BENEFIT OF ANY PERSON REFER- RED TO IN SUB- SECTION (3), IF SUCH USE OR APPLICATION IS BY WAY OF COMPLIANCE WITH A MANDATORY TERM OF THE TRUST OR A MANDATORY RULE GOVERNING THE INSTITUTION: PROVIDED FURTHER THAT IN THE CASE OF A TRUST FOR RELIGIOUS PURPOSES OR A RELIGIOUS INSTITUTION (WHENEVER CREATED OR ESTABLISHED) OR A TRUST FOR CHARITABLE PURPOSES OR A CHARITABLE INSTITUTION CREATED OR ESTABLISHED BEFORE THE COMMENCEMENT OF THIS ACT, THE PROVISIONS OF SUB- CLAUSE (II) SHALL NOT APPLY TO ANY USE OR APPLICATION, WHETHER DIRECTLY OR INDIRECTLY, OF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR INSTITUTION FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SUB- SECTION (3) IN SO FAR AS SUCH USE OR APPLICATION RELATES TO ANY PERIOD BEFORE THE 1ST DAY OF JUNE, 1970 ; A BARE PERUSAL OF THE ABOVE PROVISIONS OF SECTION 13(1)(C)(II) SHOW THAT IN CASE ANY INCOME OR PROPERTY OF THE TRUST IS USED EITHER DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF TRUSTEE OR ANY PERSON REFERRED TO SUB-SECTION (3) OF SECTION 13, THE BENEFITS GRANTED TO THE TRUST U/S. 11 SHALL BE FORFEITED. HOWEVER, THE FIRST PROVISO TO SECTION 13(1)(C) PROVIDES AN EXCEPTION. ACCORDING TO FIRST PROVISO BENEFIT DERIVED BY THE TRUSTEE OR THE PERSON MENTIONED IN SUB-SECTION (3) SHALL NOT DEBAR THE TRUST FROM AVAILING THE BENEFIT OF SECTION 11 AND 12, IF : (I) THE TRUST IS CREATED OR ESTABLISHED PRIOR TO THE COMMENCEMENT OF THE ACT; AND (II) THE BENEFIT EXTENDED TO THE TRUSTEE OR THE PERSON REFERRED TO IN SUB-SECTION (3) IS IN COMPLIANCE WITH THE MANDATORY TERMS OF THE TRUST. 7. IN THE PRESENT CASE, THE ASSESSEE HAS PLACED ON RECORD A COPY OF THE TRUST DEED AT PAGES 40 TO 48 OF THE PAPER BOOK. THE TRUST DEED IS IN MARATHI LANGUAGE. THE ENGLISH TRANSLATION OF THE TRUST DEED IS AT PAGES 49 TO 53 OF THE PAPER BOOK. A PERUSAL OF THE TRUST DEED SHOWS THAT THE TRUST WAS CREATED IN THE YEAR 1930 I.E. MUCH PRIOR TO THE ENACTMENT OF INCOME TAX ACT, 1962. THUS, THE FIRST CONDITION TO FALL WITHIN THE SCOPE OF PROVISO TO SECTION 13(1)(C)(II) OF THE ACT IS SATISFIED. 8. AS REGARDS SECOND CONDITION I.E. THE BENEFIT TO BE GRANTED TO THE ASSESSEE OR THE PERSON REFERRED TO IN SUB-SECTION (3) IN APPLICATION OR USES OF THE PROPERTY OR INCOME OF TRUST IS CONCERNED, THE USE OR APPLICATION OF THE PROPERTY SHOULD BE IN COMPLIANCE OF THE MANDATORY TERMS OF THE TRUST. FROM PERUSAL OF ENGLISH TRANSLATION OF THE TRUST DEED IT APPEARS THAT THE TRUSTEES WERE IN POSSESSION OF THE RESIDENTIAL PART OF THE PROPERTY ON SECOND FLOOR. AS PER THE ASSERTIONS OF LD. AR, THE LEGAL HEIRS OF THE AUTHOR OF THE TRUST WERE IN POSSESSION OF PART OF PROPERTY ON GROUND FLOOR AS WELL. ADMITTEDLY, THERE IS A CLEAR MANDATE IN THE TRUST DEED THAT PART OF THE PROPERTY WHICH IS IN POSSESSION OF AUTHOR OF THE TRUST SHALL BE FOR THE SOLE PURPOSE OF OCCUPANCY BY THE AUTHOR OF THE TRUST OR HIS LEGAL HEIRS. THE PART OF THE PROPERTY WHICH IS SUBJECT MATTER OF DISPUTE ARE 3 SHOPS ON GROUND FLOOR OF THE BUILDING. FROM THE PERUSAL OF ENGLISH TRANSLATION OF TRUST DEED THE DETAILS OF THE PROPERTY IN POSSESSION OF THE AUTHOR OF THE TRUST AT THE TIME OF EXECUTION OF TRUST DEED IS NOT DISCERNIBLE. UNDER SUCH CIRCUMSTANCES, WE ARE OF CONSIDERED OPINION THAT THIS ISSUE NEEDS A RE-VISIT TO THE ASSESSING OFFICER. REPRESENTATIVE OF BOTH THE SIDES CONCUR ON THE POINT THAT THE PART OF PROPERTY REFERRED TO IN THE TRUST DEED HAS TO BE CLEARLY IDENTIFIED. THE ASSESSING OFFICER IS DIRECTED TO ASCERTAIN THE PART OF PROPERTY WHICH WAS IN THE POSSESSION OF AUTHOR OF THE TRUST AT THE TIME OF EXECUTION OF THE TRUST IN THE YEAR 1930, QUA WHICH MANDATE HAS BEEN GIVEN FOR THE EXCLUSIVE USE BY THE AUTHOR OF THE TRUST AND HIS LEGAL HEIRS. 4 ITA NO.2439/PUN/2017 9. IN CASE THE SHOPS UNDER QUESTION ARE PART OF THE PROPERTY WHICH WAS IN POSSESSION OF THE AUTHOR OF THE TRUST DEED AT THE TIME OF EXECUTION, THEN THE ASSESSEE CLEARLY FALLS WITHIN THE EXCEPTION AS MENTIONED IN PROVISO TO SECTION 13(1)(C)(II) OF THE ACT. 10. THE ASSESSEE HAS RAISED AN ALTERNATE PLEA BY WAY OF ADDITIONAL GROUND TO RESTRICT THE ADDITION TO THE EXTENT OF VIOLATION MADE U/S. 13(1)(C)(II) AND 13(2)(B) OF THE ACT. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SINHGAD TECHNICAL EDUCATION SOCIETY VS. ACIT IN ITA NO. 320/PUN/2010 FOR ASSESSMENT YEAR 2006- 07 DECIDED ON 14-12-2016 HAS HELD THAT THERE CANNOT BE DENIAL OF EXEMPTION IN TOTO U/S. 11 OF THE ACT. THE BENEFIT OF EXEMPTION SHALL NOT BE AVAILABLE TO THE EXTENT THERE IS VIOLATION OF PROVISIONS OF SECTION 13(1)(C) AND THE SAME BE BROUGHT TO TAX AT THE MAXIMUM MARGINAL RATE. IN CASE THE ASSESSING OFFICER COMES TO THE CONCLUSION THAT SHOPS ARE NOT PART OF THE PROPERTY AS MANDATED IN THE TRUST DEED, THE ADDITION HAS TO BE MADE TO THE EXTENT OF VIOLATION OF PROVISION OF SECTION 13(1)(C)(II) AND 13(2)(B) OF THE ACT. THE ASSESSING OFFICER BEFORE DECIDING THIS ISSUE AFRESH IN ACCORDANCE WITH OUR DIRECTIONS SHALL GRANT OPPORTUNITY OF HEARING TO THE ASSESSEE, IN ACCORDANCE WITH LAW. 4. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDERATION AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO A.Y. 2010-11 AND A.Y. 2011-12, WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FOR A.Y. 2010-11 AND A.Y. 2011- 12 AND RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AS PER THE SAME DIRECTION AS GIVEN BY THE TRIBUNAL VIDE ITS ORDER DATED 28.06.2017 FOR A.Y. 2010-11 AND A.Y. 2011-12. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 16 TH DAY OF SEPTEMBER, 2020. SD/- SD/- ( S. S. VISWANETHRA RAVI ) ( P.M. JAGTAP ) JUDICIAL MEMBER VICE PRESIDENT / PUNE; / DATED : 16 TH SEPTEMBER, 2020 SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-10, PUNE. 4. THE PR. CCIT, PUNE. 5 . , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.