VIDYA VIKAS ADARSH SANSTHA , NAGPUR V. COMMISSIONER OF INCOME- TAX ( EXEMPTION ) , PUNE

ITA 260/NAG/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5225 (ITAT-NAGPUR)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 27-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U U KASAR
• Keywords: Charitable institution; Opportunity of being heard; Additional evidence
• Section: 12AA

Judgement Text

UKXIQJ , UKXIQJ IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR . , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.260/NAG/2018 VIDYA VIKAS ADARSH SANSTHA, 1, SHAHU GARDEN, MANEWADA ROAD, MAHATMA FULEY NAGAR, NAGPUR440027. PAN : ACCTV0847Q ....... / APPELLANT / V/S. CIT (EXEMPTIONS), PUNE. / RESPONDENT ASSESSEE BY : SHRI NARESH JAKHOTIA, CA REVENUE BY : SHRI U. U. KASAR, DR / DATE OF HEARING : 25.03.2019 / DATE OF PRONOUNCEMENT : 28.03.2019 / ORDER PER D. KARUNAKARA RAO, AM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), PUNE [IN SHORT THE CIT (EXEMPTIONS)] DATED 26.09.2018 PASSED U/S 12AA OF THE ACT, 1961. IN THIS ORDER, THE CIT (EXEMPTIONS), PUNE REJECTED THE REGISTRATION UNDER THE SAID SUBSECTION OF THE ACT. 2 ITA NO.260/NAG/2018 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- 1. THAT THE ORDER PASSED BY THE CIT (EXEMPTION) IS PERVERSE, ILLEGAL & AGAINST THE SETTLED PROVISION OF LAW, MORE PARTICULARLY WHEN THE LEARNED AUTHORITIES HAVE CONSIDERED THE FACTS OF THE CASE & RECOMMENDATION DONE BY LOWER AUTHORITIES. 2. THAT THE CIT (EXEMPTION) FAILED TO IDENTIFY AND DECIDE THE ISSUE INVOLVED IN THE CASE IN ITS TRUE SPIRIT. 3. THAT THE LEARNED CIT (EXEMPTION) FAILED TO APPRECIATE THE FACT THAT THE CONSTRUCTION OF BUILDING IS NECESSARY FOR ACHIEVING THE OBJECT OF THE TRUST (I.E. IMPARTING EDUCATION). 4. THAT THE RESPECTED CIT (EXEMPTION) FAILED TO APPRECIATE THE FACT THAT A] THE BUILDING IS OWNED BY THE TRUST AND THE OWNERSHIP OF IT BELONGS TO THE TRUST B] NO PART OF THE BUILDING IS USED BY THE TRUSTEE FOR THEIR PERSONAL BENEFIT. 5. THAT HAVING ADMITTED THE FACT THAT THE TRUST IS RUNNING 5 SCHOOLS, LEARNED CIT (EXEMPTION) HAS ERRED IN CONCLUDING ABOUT THE GENUINENESS OF THE CHARITABLE ACTIVITIES CARRIED OUT BY THE TRUST. 6. THAT THE LEARNED CIT (EXEMPTION) HAS ERRED IN CONCLUDING THAT THE CONSTRUCTION OF BUILDING FOR THE PURPOSE OF EDUCATION IS I. BENEFIT TO THE TRUSTEE OR II. TRANSFER OF INCOME FOR THE BENEFIT OF THE TRUSTEE. 7. THE ASSESSEE RESERVES ITS RIGHT TO ADD/ MODIFY THE GROUNDS RAISED HEREIN WITH THE PRIOR PERMISSION OF HONBLE TRIBUNAL. 3. BRIEFLY STATED THE RELEVANT FACTS INCLUDE THAT THE ASSESSEE IS A TRUST AND IS ENGAGED IN THE EDUCATIONAL ACTIVITIES. ASSESSEE RUNS THE SCHOOL/JUNIOR COLLEGES IN MANEWADA AND BESA. DURING THE PROCEEDINGS U/S 12AA OF THE ACT, ACTING ON THE APPLICATION OF THE 3 ITA NO.260/NAG/2018 ASSESSEE, THE CIT (EXEMPTIONS) NOTICED THAT THE ASSESSEE UTILIZED THE FUNDS FOR CONSTRUCTING/IMPROVING A BUILDING. BY THE END OF YEAR, THE ASSESSEE SPENT A SUM OF RS.1,05,40,093/ ON THE BUILDING. ON FINDING, THE ASSESSEE UTILIZED THE LAND BELONGING TO SHRI UMESH SHAHU, THE TRUSTEE OF THE ASSESSEE, FOR CONSTRUCTING THE SAID BUILDING, THE CIT (EXEMPTIONS) EXAMINED THIS ISSUE IN DEPTH AND CALLED FOR EXPLANATION OF THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE SAID BUILDING WAS CONSTRUCTED FOR THE PURPOSES OF OBJECTS OF THE TRUST AND PROVIDED INFRASTRUCTURE TO THE STUDENTS. THE ASSESSEE INFORMED THAT THE TRUSTEE NEVER TOOK ANY RENT IN LIEU OF THE SAID LAND PROVIDED TO THE TRUST. IN THIS REGARD, THE ASSESSEE FURNISHED NO OBJECTION CERTIFICATE FOR CONSTRUCTING THE BUILDING ON HIS LAND. AFTER CONSIDERING THE ABOVE SUBMISSION OF THE ASSESSEE, THE CIT (EXEMPTIONS) PROCEEDED TO REJECT THE SAID REQUEST OF THE ASSESSEE FOR REGISTRATION U/S 12AA OF THE ACT BY GIVING THE FOLLOWING REASONS VIDE PARA 5.2 AND 5.3 OF HIS ORDER (SUPRA) : 5.2 IN RESPONSE TO THE EXPLANATION CALLED FOR, THE APPLICANT TRUST VIDE LETTER DATED 21.09.2018 SUBMITTED THAT THE TRUST HAS CONSTRUCTED THE BUILDING ON TRUSTEE PROPERTY BY UTILIZING SURPLUS FUNDS. THE BASIC OBJECTIVE WAS TO PROVIDE GOOD INFRASTRUCTURE FOR THE STUDENTS AND TRUSTEE IS NOT TAKING ANY RENT FOR THE INFRASTRUCTURE AS IT WAS CONSTRUCTED BY THE TRUST AND NOT BY THE TRUSTEE. IT IS FURTHER ADDED THAT IT IS NOT POSSIBLE TO TRANSFER THE LAND IN THE TRUST NAME BECAUSE OF VARIOUS PRACTICAL PROBLEMS AND COST INVOLVED IN IT. 4 ITA NO.260/NAG/2018 5.3 THE EXPLANATION WAS CAREFULLY PERUSED AND CONSIDERED. THE EXPLANATION GIVEN BY THE TRUST IS NOT SATISFACTORY IN RESPECT OF GENUINENESS OF THE CHARITABLE ACTIVITIES CARRIED OUT BY THE TRUST. FURTHER, THE INCOME DERIVED BY THE TRUST IS NOT WHOLLY USED FOR THE CHARITABLE PURPOSE I.E. EDUCATION AS HUGE EXPENDITURE HAS BEEN ON THE BUILDING PREMISES OWNED BY THE TRUSTEE FROM SURPLUS FUNDS OF LAST THREE YEARS. THESE FACTS CLEARLY INDICATE THAT THERE IS TRANSFER OF INCOME DERIVED BY THE TRUST TO THE TRUSTEE BY WAY OF EXPENDITURE ON CONSTRUCTION OF BUILDING ON THE LAND OWNED BY THE TRUSTEE. THUS, SURPLUS FUND IS SPENT ON THE PERSONAL BENEFITS OF THE TRUSTEE. 4. CONSIDERING THE APPROPRIATION OF FUNDS OF THE ASSESSEE ON THE BUILDING CONSTRUCTED ON THE LAND OF THE TRUSTEE, THE CIT (EXEMPTIONS) QUESTIONED THE GENUINENESS OF THE OBJECTS/ACTIVITIES OF THE TRUST. 5. AGGRIEVED WITH THE ABOVE ORDER OF THE CIT (EXEMPTIONS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE ABOVE EXTRACTED GROUNDS. 6. BEFORE US, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE BALANCE SHEET OF THE TRUST AND SUBMITTED THAT THE SAID AMOUNT OF RS.1,05,40,093/ WAS SHOWN IN THE BALANCE SHEET OF THE TRUST UNDER THE SUB HEADING IMMOVABLE ASSET. HE ALSO SUBMITTED THAT THE SAID AMOUNT WAS INCURRED OVER THE PERIOD OF TIME OUT OF THE SURPLUS FUNDS OF THE TRUST. RELYING ON VARIOUS DECISIONS, LD. COUNSEL ARGUED THAT SO LONG AS THE OBJECTS OF THE TRUST ARE GENUINE, THE CIT (EXEMPTIONS) CANNOT DENY THE REQUEST FOR REGISTRATION U/S 12AA OF THE ACT. FURTHER, 5 ITA NO.260/NAG/2018 BRINGING OUR ATTENTION TO PAGES 71 TO 74 OF THE PAPER BOOK (NO OBJECTION CERTIFICATES BY THE OWNER OF THE LAND) AND CERTIFICATES U/S 13(1)(C), LD. COUNSEL SUBMITTED THAT THE MANAGING TRUSTEE, SHRI UMESH SHAHU HAS NO OBJECTION FOR GIVING THE LAND FREE OF COST TO THE TRUST FOR USE FOR THE OBJECTS OF THE TRUST I.E. EDUCATIONAL ACTIVITIES. HOWEVER, HE COULD NOT PROVE THE SAME WITH ANY DOCUMENTARY EVIDENCE THAT THERE IS ANY MOU CREATED BETWEEN THE ASSESSEE AND THE TRUSTEE, SHRI UMESH SHAHU. HE ALSO COULD NOT DEMONSTRATE THAT THE MANAGING TRUSTEE HAS NOT SHOWN AS THE ASSET OF OWNER OF THE LAND IN HIS BOOKS OF ACCOUNT. 7. THE LD. DR FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF THE CIT (EXEMPTIONS). REFERRING TO THE NO OBJECTION CERTIFICATES FURNISHED BY THE ASSESSEE, LD. DR SUBMITTED THAT THERE IS NO CERTIFICATE TO THAT EXTENT TO PROVE THAT THE SAID CERTIFICATES WERE FURNISHED TO THE AUTHORITIES BELOW. FURTHER, IN ABSENCE OF CATEGORICALLY FINDING ABOUT THE OWNERSHIP OF THE BUILDING IN THE BOOKS OF ACCOUNT WERE ALSO DEMONSTRATED. 8. DURING THE REBUTTAL TIME, LD. COUNSEL SUBMITTED THAT THE MATTER IS DEMONSTRATED TO THE FILE OF THE CIT (EXEMPTIONS) AND THE AFFIDAVIT SHALL BE FURNISHED TO DEMONSTRATE THAT THE LAND IS GIVEN BY THE TRUSTEE 6 ITA NO.260/NAG/2018 TO THE ASSESSEE FOR USE TOWARDS THE OBJECT OF THE EDUCATIONAL ACTIVITIES OF THE TRUST. 9. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AND FIND THAT THE CIT (EXEMPTIONS) COULD NOT BE REFUSED THE REGISTRATION WHEN THERE IS NO PROBLEM WITH THE GENUINENESS OF THE ACTIVITIES OF THE TRUST. THE MAIN DISPUTE BETWEEN THE PARTIES RELATES TO ABSENCE OF ANY DOCUMENT BASED BETWEEN THE TRUSTEE AND THE TRUST UNDERSTANDING QUA THE USE OF THE LAND BELONGING TO THE TRUSTEE FOR THE TRUSTS OBJECTS. ALTHOUGH, THERE IS A NO OBJECTION CERTIFICATE FILED IN THE PAPER BOOK BY SHRI UMESH SHAHU, THE OWNER OF THE LAND, THERE IS NO EVIDENCE TO KNOW THAT THE SAID PAPERS WERE FURNISHED TO THE CIT (EXEMPTIONS) AT THE RELEVANT POINT OF TIME. AS SUCH, LD. COUNSEL FOR THE ASSESSEE FILED AFFIDAVITS FOR THE PURPOSES OF EVIDENCING THE GENUINENESS OF THE TRANSACTIONS GIVING RIGHTS ON THE LAND FOR USE OF THE CHARITABLE ACTIVITIES OF THE TRUST. ON HEARING BOTH THE PARTIES AND CONSIDERING THE ABOVE FACTUAL MATRIX, WE ARE OF THE OPINION THAT ONE MORE OPPORTUNITY TO BE GRANTED TO THE ASSESSEE BY THE CIT (EXEMPTIONS) TO EXAMINE THE GENUINENESS OF THE NO OBJECTION CERTIFICATES/AFFIDAVITS WHICH HAVE BEEN PLACED IN THE PAPER BOOK FILED BEFORE US. THERE IS NO EVIDENCE GATHERED FROM THE CIT (EXEMPTIONS) ON THE GENUINENESS OF 7 ITA NO.260/NAG/2018 THE ACTIVITIES OF THE TRUST ONLY HITCH WITH REFERENCE TO THE USE OF THE LAND OF THE TRUSTEE FOR ITS CHARITABLE ACTIVITIES PURPOSES. ALTHOUGH, WE FIND THERE IS NOTHING WRONG IN THE USE OF LAND BY THE TRUST FOR CHARITABLE ACTIVITIES, IN THE ABSENCE OF ANY DOCUMENTATION REGARDING THE TRANSFER OF RIGHTS OVER THE LAND TO THE TRUST CREATES SOME CONFUSION IN OUR MIND, THEREFORE, WE ARE OF THE OPINION THE MATTER SHOULD BE RESTORED THE FILE THE CIT (EXEMPTIONS) WITH THE DIRECTION TO EXAMINE THE CLOSELY USE OF LAND BY THE TRUST FOR EDUCATIONAL ACTIVITIES. SO LONG AS THE ASSESSEE IS SUCCESSFUL IN DEMONSTRATING THE TRANSFER OF RIGHTS ON THE LAND TO THE TRUST WITHOUT GIVING FINANCIAL ADVANTAGES BY THE TRUST, THE ASSESSEE SHOULD BE ENTITLED FOR THE REGISTRATION U/S 12AA OF THE ACT. 10. KEEPING ALL THE ISSUES OPEN, THE MATTER IS REMANDED TO THE FILE OF THE CIT (EXEMPTIONS) FOR DECIDING THE ISSUE AFRESH AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IT IS IN THE INTEREST OF ADMINISTRATIVE OF JUSTICE, THE ASSESSEE SHOULD BE GIVEN A FREEDOM TO FILE ADDITIONAL EVIDENCES, IF ANY, TO PROVE THAT THE LAND IS TRANSFERRED BY THE TRUSTEE TO THE TRUST FOR THE PURPOSE OF EDUCATIONAL ACTIVITIES, THE MAIN OBJECT OF THE TRUST. WITH THESE DIRECTIONS, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8 ITA NO.260/NAG/2018 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 28 TH DAY OF MARCH, 2019. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER UKXIQJ / NAGPUR; / DATED : 28 TH MARCH, 2019. SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (EXEMPTIONS), PUNE. 4 . , , UKXIQJ , UKXIQJ / DR, ITAT, NAGPUR BENCH, NAGPUR. 5. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , UKXIQJ / ITAT, NAGPUR.