The ACIT,GNR Circle, Gandhinagar V. Adharshila Education & Charitable Trust, Gandhinagar

ITA 2768/AHD/2011

• Counselvise Citation: 276820514 RSA 2011
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B T THAKKAR
• Keywords: Charitable institution
• Section: 143(3); 80G; 12AA; 12

Judgement Text

, , . . , . ! ! ! ! ! ! ! ! , ' ' ' ' # # # # IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD BEFORE HONBLE SHRI D.K.TYAGI, J.M. & HONBLE SHRI A.MOHAN ALANKAMONY, A.M.) . ITA NO. 2768/AHD./2011 : ! $% - 2008-2009 ACIT, GANDHINAGAR CIRCLE-VS-ADHARSHILA EDUCATION A ND CHARITABLE TRUST (PAN : AABTA 2713R) ( &' /APPELLANT) ( (&' /RESPONDENT ) (# (# (# (# C.O. NO. 266/AHD./2011 : ! $% - 2008-2009 (ARISING OUT OF ITA NO.2768/AHD/2008) ADHARSHILA EDUCATION AND CHARITABLE TRUST-VS-ACIT, GANDHINAGAR CIRCLE ( CROSS OBJECTOR) ( (&' /RESPONDENT ) ) * + / APPELLANT BY : SHRI VINOD TANWANI, SR.D.R. ! ,- * + / RESPONDENT BY: SHRI B.T.THAKKAR, A.R. .!/ * -' / DATE OF HEARING : 09/01/2012 0 $ * -' / DATE OF PRONOUNCEMENT : 13/01/2012 1 1 1 1 / ORDER PER SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJE CTION FILED BY THE ASSESSEE ARE ARISING OUT OF THE ORDER OF THE LD . CIT(A), GANDHINAGAR IN APPEAL NO. CIT(A) GNR/91/2010-11 DATED 23.8.2011 FOR THE ASSESSMENT YEAR 2008-2009 PASSED UNDER SECTION 250 R.W.S. 143(3) OF THE I.T. ACT . 2. THE REVENUE HAS RAISED FOUR GROUNDS IN ITS APPEA L, WHEREIN GROUND NOS. 3 AND 4 ARE GENERAL IN NATURE AND DO NO T SURVIVE FOR ADJUDICATION. GROUND NOS. 1 AND 2 ARE REPRODUCED HE REINBELOW: 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO ALLOW EXEMPTION U/S 11 & 12 OF THE I T ACT EVEN THOUGH ITA NO.2768-AHD-2011 & C.O. NO.266-AHD-2011 2 THE ASSESSEE TRUST HAS VIOLATED PROVISIONS OF SECTI ON 13(1)(C) OF THE I T ACT. 2. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO TREAT AMOUNT OF RS.5,00,000/- AS ADVAN CE FOR RENT AND TO CHARGE INTEREST ON REMAINING LOAN OF RS.5,00,000 /- AT THIS STAGE OF THE PROCEEDINGS ALTHOUGH THE SAID LOAN OF RS.10 LACS WAS MADE IN VIOLATION OF PROVISIONS OF SECTION 13(1)(C) OF T HE I T ACT. 2.1 IN THE CROSS OBJECTION PREFERRED BY THE ASSESSE E, IT HAS RAISED THE SOLITARY GROUND, WHICH IS REPRODUCED HEREINBELOW: 1. THE LEARNED CIT(APPEALS) ERRED IN LAW AND ON FA CTS IN DIRECTING TO CHARGE INTEREST ON AMOUNT OF RS.500000/- BEING P ART OF SECURITY DEPOSIT FOR RENT OF SCHOOL BUILDING PROPERTY OF RS. 1000000/- MADE BY THE APPELLANT TO M/S ADHARSHILA ASSOCIATES, A CO NCERN COVERED U/S 13(3) OF THE ACT, WHICH CONSIDERED EXCESS, THOU GH THE SECURITY DEPOSIT IS NEITHER LOAN NOR ADVANCE. 3. THE ASSESSEE IS A PUBLIC CHARITABLE TRUST WITH T HE SOLE OBJECT TO CARRY ON EDUCATIONAL ACTIVITIES. THE TRUST HAS BEEN GRANTED REGISTRATION UNDER SECTION 12AA OF THE I.T. ACT AND RECOGNITION UNDER SECTION 80G OF THE ACT. THE MAIN ACTIVITY OF THE TRUST IS OF RUNNI NG SCHOOL FROM PRIMARY LEVEL TO HIGHER SECONDARY LEVEL A VILLAGE VALAD, GA NDHINAGAR. THE SCHOOL IS FUNCTIONING FROM THE LEASED PREMISES OBTAINED FR OM M/S. ADHARSHILA ASSOCIATES FOR AN ANNUAL RENT OF RS.30 LAKHS. THE T RUST HAS GRANTED M/S. ADHARSHILA ASSOCIATES ON 05.04.2006 SECURITY DEPOSI T OF RS.10 LAKHS FOR LEASED PREMISES. THUS, THE TRUST HAS PAID FOUR MONT HS RENT AS THE SECURITY DEPOSIT. THE AO DID NOT ACCEPT THE CONCEPT OF SECURITY DEPOSIT AND INFERRED THAT THE ASSESSEE HAS APPLIED ITS INCO ME DIRECTLY FOR THE BENEFIT OF THE FIRM M/S. ADHARSHILA ASSOCIATES, WHI CH IS A PERSON REFERRED TO IN SECTION 13(3) OF THE I.T. ACT. THE LD. AO THE REBY INFERRED THAT THERE IS A VIOLATION OF THE PROVISIONS OF SECTION 13(1)(C) O F THE ACT BY THE ASSESSEE AND ADDITION ACCORDINGLY WAS MADE. ITA NO.2768-AHD-2011 & C.O. NO.266-AHD-2011 3 4. THE LD. CIT(A), HOWEVER PLACED RELIANCE ON THE D ECISION OF THE HONBLE ITAT, AHMEDABAD BENCH C IN ITA NO.1443/AH D/2008 AND ITA NO.810.AHD/2009 FOR THE ASSESSMENT YEAR 2005-06 AND 2006-07 RESPECTIVELY IN THE CASE OF THE APPELLANT TRUST ITS ELF AND GRANTED RELIEF TO THE ASSESSEE TO THE EXTENT OF RS.5 LAKHS DECIDING I T TO BE CONSIDERED AS RENTAL DEPOSIT. THE LD. CIT(A) CAME TO THIS CONCLUS ION AFTER SUMMARIZING THE ITAT ORDER ( SUPRA ) AS FOLLOWS: A) INTEREST HAS TO BE CHARGED WHERE EXCESSIVE MONEY OVER AND ABOVE WHAT IS NORMALLY LIABLE TO BE GIVEN IS ADVANC ED WITHOUT ADEQUATE SECURITY OR ADEQUATE INTEREST. THE TRUST O UGHT TO HAVE CHARGED INTEREST ON SUCH EXCESS MONEY AND SHOWN SUC H INTEREST AS ITS INCOME. B) HOWEVER, THE HONBLE ITAT DID NOT CONSIDER IT AP PROPRIATE TO DENY EXEMPTION TO THE ASSESSEE ON THIS GROUND BUT D IRECTED THAT THE ASSESSEE TRUST SHOULD CHARGE INTEREST ON THE EX CESS AMOUNT ADVANCED. 5. AGAINST THIS ORDER OF THE LD. CIT(A), BOTH THE R EVENUE AND THE ASSESSEE ARE IN APPEAL BEFORE THE TRIBUNAL. 6. THE LD. D.R. AGREED THAT THE ASSESSEES CASE IS COVERED BY THE DECISION OF THE HONBLE ITAT, AHMEDABAD C BENCH B UT STRONGLY OBJECTED FOR THE GRANT OF RENTAL DEPOSIT OF RS.10 L AKHS PAID BY THE TRUST TO M/S. ADHARSHILA ASSOCIATES CLAIMING IT TO BE IN EXC ESS AND THEREFORE VIOLATING THE PROVISIONS OF THE ACT. HE SUBMITTED T HAT THE ASSESSEE HAS DIVERTED THIS AMOUNT RATHER THAN SPENDING IT FOR CH ARITABLE PURPOSES AS PROVIDED UNDER THE ACT. 7. THE LD. A.R. STRONGLY ARGUED STATING THAT IT IS A NORMAL PRACTICE TO PROVIDE SECURITY DEPOSIT FOR LEASEHOLD PREMISES TAK EN ON RENT. CONSIDERING THE MARKET SCENARIO THE RENTAL ADVANCE OF FOUR MONTHS RENT IS QUITE NOMINAL AND JUSTIFIABLE. HE, THEREFORE, PR AYED THAT THE ADDITION ITA NO.2768-AHD-2011 & C.O. NO.266-AHD-2011 4 MADE FOR THIS REASONS IS NOT SUSTAINABLE AND THEREF ORE THE SAME MAY BE DELETED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED CAREFULLY THE MATERIALS AVAILABLE ON RECORD BEFORE US. THE ONLY M OOT QUESTION WHICH ARISES IN THIS CASE IS THAT WHETHER THE SECURITY DE POSIT PAID BY THE APPELLANT TO M/S. ADHARSHILA ASSOCIATES OF FOUR MON THS RENT IS JUSTIFIABLE. IF IT IS FOUND THAT SUCH AMOUNT OF RENTAL DEPOSIT P AID IS JUSTIFIABLE, THE QUESTION OF DIVERSION OF FUND FOR PURPOSES OTHER TH AN CHARITABLE WILL NOT ARISE AND THE ADDITION MADE ON ACCOUNT OF THE SAME CAN NOT BE SUSTAINED. ON TAKING INTO ACCOUNT OF THE PRESENT MA RKET SCENARIO, WE ARE OF THE OPINION THAT IT IS A NORMAL PRACTICE FOR ANY LANDLORD TO SECURE HIMSELF WITH SECURITY DEPOSIT AND THE AMOUNT MAY VA RY FROM THREE MONTHS TO TEN MONTHS RENT. CONSIDERING THE FACTS AN D CIRCUMSTANCES OF THE CASE, WE HAVE NO HESITATION TO HOLD THAT FOUR M ONTHS SECURITY DEPOSIT IS QUITE REASONABLE. THEREFORE, THE CLAIM OF THE RE VENUE IS NOT JUSTIFIABLE AND WE HEREBY GRANT RELIEF TO THE APPELLANT BY DELE TING THE ADDITION MADE BY THE LD. AO AND A PORTION OF THE SAME SUSTAINED B Y THE LD. CIT(A). RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED WHEREAS THE ASSESSEES CROSS OBJECTION IS ALLOWED. 2 1 * 0 $ 3!% 13 / 01 /201 2 4 * / SD/- SD/- (D.K.TYAGI) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT M EMBER DATED : 13/01/2012 ITA NO.2768-AHD-2011 & C.O. NO.266-AHD-2011 5 1 1 1 1 * ** * (-5 (-5 (-5 (-5 65$-% 65$-% 65$-% 65$-% - 1. &' 2. (&' 3. - .7 4. .7 - - 5. 58 (-! , , 9 6. :2 1 , ; / ) , TALUKDAR/ SR. P.S . 9