ITO, CHENNAI V. Holy Family Charitable Trust, CHENNAI

ITA 2883/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96289 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 14-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 24-11-2014
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: G BASKAR
• Keywords: Charitable institution
• Section: 143(3); 142(1); 12A; 12AA; 147

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 2883/MDS/2014 / ASSESSMENT YEAR :2010 - 11 THE INCOME TAX OFFICER (EXEMPTIONS), WARD 2, AYAKAR BHAVAN, ANNEXE BUILDING III FLOOR , 121, M.G. ROAD, NUNGAMBAKKAM, CHENNAI 600 034. VS. M/S. HOLY FAMI LY CHARITABLE TRUST, GANDHI NAGAR, KEELKATTALAI, CHENNAI 600 117. [PAN: AA ATH0273J ] ( APPELLANT ) ( R ESPONDENT ) / APPELLANT BY : SHRI A. V. SREEKANTH , JCIT / RESPONDENT BY : SHRI G. BASKAR , ADVOCATE / DATE OF HEARING : 1 4 . 0 9 .201 5 / DATE OF P RONOUNCEMENT : 29 . 1 0 .201 5 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH I S APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) VI I , C HENNAI , DATED 13 . 0 8 .201 4 RELEVANT TO THE ASSESSMENT YEAR 20 10 - 11 . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PUBLIC CHARITABLE TRUST CONSTITUTED BY A TRUST DEED DATED 28.06.1989. IT WAS REGISTERED UNDER SECTION 12AA OF T HE INCOME TAX ACT, 1961 [ ACT IN SHORT]. THE ASSESSEE TRUST FILED ITS RETURN DECLARING NIL INCOME. THE RETURN WAS PROCESSED UNDER SECTION I.T.A. NO . 2883 /M/ 1 4 2 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WA S ISSUED. NOTICE UNDER SECTION 142(1) OF THE ACT WAS ALSO ISSUED. AFTER DUE PROCESS, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT BY DETERMINING THE TOTAL INCOME AT .1,44,40,660/ - . 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASS ESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS DEBITED .25,00,000/ - AND .20,00,000/ - AS SPORTS FUND AND BUILDING FUND RESPECTIVELY AND CLAIMED THEM AS EXPENDITURE. WHEN THE ASSESSEE WAS INFORMED THAT THE ABOVE SUMS WERE NOT ENTITLED TO EXEMPTION UNDER SECTION 11 OF THE ACT, THE AR OF THE ASSESSEE FILED A REVISED COMPUTATION EXCLUDING THE ABOVE SUM OF .45,00,000/ - , BUT MADE AN ALTERNATIVE CLAIM OF .75,00,000/ - BEING ADVANCE PAID FOR PURCHASE OF LAND AS APPLICATION. THE ASSESSING OFFICER HAS OBSERVED T HAT THOUGH THE CLAIM OF THE ASSESSEE IS ACCEPTABLE, HE WAS OF THE OPINION THAT THE QUANTUM OF CLAIM NEEDS TO UNDERGO A CHANGE. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE UNUTILIZED SURPLUS OF ASSESSMENT YEAR 2009 - 10 AMOUNTING TO .39,15,417/ - IS TO BE INCLUDED AS INCOME OF ASSESSMENT YEAR 2010 - 11 UNDER EXPLANATION 2 TO SECTION 11(1) OF THE ACT. FURTHER, THE ASSESSING OFFICER HAS FOUND THAT THE ASSESSEE HAS INVESTED IN CHITS NAMED SOCIAL FORUM CHIT AND HAS BEEN REGULARLY UNDERTAKING TRANSACTION IN K URIES. THE INVESTMENT MADE VIOLATES THE PROVISION OF SECTION 11(5) READ WITH SECTION 13(1)(D) OF THE ACT. I.T.A. NO . 2883 /M/ 1 4 3 FURTHER, THE ASSESSING OFFICER HAS ALSO FOUND THAT A LOAN OF .40,00,000/ - WAS GIVEN TO PAVANATMA PROVISIONAL HOUSE, KALLETTUMKARA, KERALA WHO IS THE FOUNDER OF THE ASSESSEE TRUST. SINCE THE OBJECTS OF BOTH THE TRUSTS ARE NO SYMMETRIC, THE GIVER BEING CHARITABLE AND THE RECIPIENT BEING RELIGIOUS, THE ASSESSING OFFIC ER HAS HELD THAT THE PROVISIONS OF SECTION 13(1)(D) OF THE ACT ARE ATTRACTED. HE HAS ALSO OBSERVED THAT THE LOAN WAS GIVEN WITHOUT ADEQUATE SECURITY AND IS INTEREST FREE. ACCORDINGLY, THE ASSESSING OFFICER DENIED EXEMPTION UNDER SECTION 11 OF THE ACT AND C OMPUTED THE INCOME AT .1,44,40,661/ - UNDER SECTION 143(3) OF THE ACT. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE DETAILED WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND ALSO CONSIDERING THE FACTS OF THE CASE, THE LD. CIT(A) ALLO WED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND THE L D. DR STRONGLY RELIED ON THE ORDER PASSED BY THE ASSESSING OFFICER. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS DENIED EXEMPTION UNDER SECTION 11 OF THE ACT FOR THE I.T.A. NO . 2883 /M/ 1 4 4 INVEST MENT IN CHITS ON THE GROUND THAT IT IS IN VIOLATION OF SECTION 11(5) R.W.S. 13(1)(D) OF THE ACT. THE LD. CIT(A), AFTER CONSIDERING THE WRITTEN SUBMISSIONS AND CONSIDERING THE ISSUE AT LENGTH, HAS OBSERVED AS UNDER: 4.1. REGARDING THE INVESTMENT IN CHITS, THE EXEMPTION U/S 11 WAS DENIED TO THE ASSESSEE FOR THE AY 2010 - 11 IN THE ASSESSMENT ORDER DATED 18.03.2013. BECAUSE OF THIS FINDING, THE ASSESSMENTS FOR AYS 2006 - 07 AND 2007 - 08 WERE RE - OPENED SPECIFICALLY TO CONSIDER THIS ASPECT. BUT THE ORDERS WERE PASS ED U/S 143(3) READ WITH SEC. 147 OF THE ACT ON 27.03.2014 FOR BOTH THE YEARS ACCEPTING THE NIL INCOME RETURNED. THIS SHOWS THAT THE TRANSACTIONS IN THE KURIS WERE CONSIDERED AS NOT VIOLATIVE OF SEC. 11(5) READ WITH SEC. 13(1)(D) OF THE ACT. FOR THE AY 2010 - 11 ALSO, IT WAS FOUND THAT REPAYMENTS WERE MADE TO THE SOCIAL FORUM KURIS AND THERE IS NO INVESTMENT IN THE CHITS. PERUSAL OF BALANCE SHEET AS ON 31.03.2010 REVEALS THAT THE ASSESSEE IS LIABLE FOR .1,30,724/ - TO THE SOCIAL FORUM KURIS AND THERE IS NO INVESTMENT ON THE ASSET SIDE OF THE BALANCE SHEET AS ON 31.03.2010. PERUSAL OF RECEIPTS AND PAYMENTS A/C AS ON 31.03.2010 REVEALS THAT PAYMENTS WERE MADE TO SOCIAL FORM CHIT A/C WHICH ARE NOTHING BUT R EPAYMENTS. HENCE, I AM OF THE CONSIDERED VIEW THAT THERE IS NO INVESTMENT IN VIOLATION OF SEC. 11(5) READ WITH SEC. 11(1)(D) OF THE ACT. 8. AFTER CONSIDERING THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND CAREFULLY CONSIDERING THE BALANCE SHEETS, THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSEE IS LIABLE FOR .1,30,724/ - TO THE SOCIAL FORUM KURIS AND THERE IS NO INVESTMENT ON THE ASSET SIDE OF THE BALANCE SHEET AS ON 31.03.2010. FURTHER IN THE RECEIPTS AND PAYMENTS ACCOUNT AS ON 31.03 . 2010 ALSO THE PAYMENTS WERE MADE TO SOCIAL FORM CHIT ACCOUNT WHICH IS NOTHI NG BUT REPAYMENTS. THEREFORE, THE LD. CIT(A) HAS HELD THAT THE ASSESSEE HAS NOT MADE ANY INVESTMENT IN VIOLATION OF SECTION 11(5) R.W.S. SECTION 13(1)(D) OF THE ACT. THE LD. DR COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE LD. CIT(A). I.T.A. NO . 2883 /M/ 1 4 5 ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND DISMISS THE GROUND RAISED BY THE REVENUE. 9. WITH REGARD TO LOAN OF .40,00,000/ - GIVEN TO PAVANATMA PROVINCIAL HOUSE, KERALA, THE ASSESSING OFFICER HAS HELD THAT IT IS IN VIOLATION OF SECTION 13(1)(D) OF THE ACT. THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT THE RECIPIENT OF THE LOAN IS AN INTERESTED PERSON AS PER SECTI ON 13(3) OF THE ACT, IT ALSO VIOLATES SECTION 13(1)(C) OF THE ACT. THE LD. CIT(A) HAS OBSERVED THAT THE RECIPIENT OF THE LOAN OF .40,00,000/ - M/S. PAVANATMA PROVINCIAL HOUSE WAS A CHARITABLE ORGANIZATION REGISTERED UNDER SECTION 12A(A) OF THE ACT . THE LO AN OF 40 LAKHS WAS GIVEN TO M/S. PAVANATMA PROVINCIAL HOUSE AND RECEIVED BACK BY THE ASSESSEE AS THE PURPOSE FOR WHICH THE LOAN TAKEN WAS NOT SERVED. THE BALANCE SHEET OF PAVAN A TMA PROVINCIAL HOUSE REFLECT S THE TRANSACTION AS A LIABILITY DUE TO THE ASSESS EE AS ON 31.03.2010. THEREFORE, THE LD. CIT(A), BY FOLLOWING THE DECISION OF THE LUC K NOW BENCH OF THE ITAT IN THE CASE OF KANPUR SUBASH SHIKSHA SAMITI V. DCIT IN ITA NO. 456 (LUCK)/2010 FOR THE ASSESSMENT YEAR 2006 - 07 DATED 28.02.2011, HAS OBSERVED THAT TH E LOAN WAS NEITHER AN INVESTMENT NOR A DEPOSIT AND AS SUCH THE PROVISIONS OF SECTION 13(1)(D) WERE NOT APPLICABLE AND THE ASSESSEE HAS NOT VIOLATED SECTION 13(1)(D) OF THE ACT. FURTHER, BY CONSIDERING THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. FR. MALLERS CHARITABLE INSTITUTIONS (2014) 44 TAXMANN.COM 275 ALSO , THE LD. CIT(A) HAS I.T.A. NO . 2883 /M/ 1 4 6 HELD THAT THERE IS NO VIOLATION OF SECTION 13(1)(D) READ WITH SECTION 13(1)(C) AND 13(3) OF THE ACT AS THE AMOUNT ADVANCED IS ONLY A TEMPORARY LOAN TRANS ACTION BETWEEN THE CHARITABLE ORGANIZATIONS REGISTERED UNDER SECTION 12A(A) OF THE ACT AS NO BENEFIT WAS ACCRUED TO ANY OF THE INTERESTED PERSONS IN THE TRANSACTION DONE. 10. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS STRONGLY CONTENDED ON THE FINDI NGS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AT PARA 4.2 THAT THE OBJECTS OF THE GIVER AND RECEIVER ARE NOT SYMMETRIC IS NOT CORRECT. IN THIS CONNECTION, HE REFERR ED TO PAPER BOOK PAGE NO. 57 , WHEREIN, A LETTER DATED 20.10.2009 OF PAVANATMA PROVINC IAL HOUSE HAS BEEN ADDRESSED TO THE ASSESSEE SEEKING LOAN OF .40 LAKHS FROM THE ASSESSEE TRUST IS ONLY FOR THE PURPOSE OF RECONSTRUCTION WORK OF ST. DON BOSCO GIRLS HIGH SCHOOL, KODAKARA. IT CLEARLY INDICATES EXISTENCE OF SCHOOL RUN BY PAVANATMA PROVINCIA L HOUSE AS ONE OF ITS OBJECTS AND THE ASSESSEE IS ALSO HAVING SIMILAR OBJECTS AND SUBMITTED THAT THE HON BLE DELHI HIGH COURT DECISION IN THE CASE OF DIT(E) V. ACME EDUCATIONAL SOCIETY 326 ITR 146 IS SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE. HE FU RTHER SUBMITTED THAT ALL THE PARTICULARS AS FILED BEFORE THE TRIBUNAL IN THE PAPER BOOK WERE DULY FURNISHED BEFORE THE AUTHORITIES BELOW. WE FIND FORCE IN THE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE. INITIALLY, M/S. PAVANATMA PROVINCIAL HOUSE HAS OBT AINED THE ABOVE INTEREST FREE LOAN OF .40 LAKHS FROM THE ASSESSEE FOR I.T.A. NO . 2883 /M/ 1 4 7 RECONSTRUCTION WORK OF ST. DON BOSCO GIRLS HIGH SCHOOL AND SINCE THE ABOVE PURPOSE WAS NOT MATERIALIZED, THE SAID AMOUNT WAS SUBSEQUENTLY RETURNED BACK TO THE ASSESSEE, WHICH CLEARLY IN DICATES THAT M/S. PAVANATMA PROVINCIAL HOUSE WAS RUNNING A SCHOOL AS ONE OF ITS OBJECTS . IT IS NOT THE CASE OF THE DEPARTMENT THAT BOTH THE ASSESSEE AND M/S. PAVANATMA PROVINCIAL HOUSE ARE NOT REGISTERED TRUST AS PER INCOME TAX ACT. ON PERUSAL OF THE PAPER BOOK AT PAGE NO. 57 AS WELL AS PAGE NO. 60, IT CLEARLY INDICATES EXISTENCE OF SCHOOL RUN BY PAVANATMA PROVINCIAL HOUSE AS ONE OF ITS OBJECTS AND THE ASSESSEE IS ALSO HAVING SIMILAR OBJECTS. THEREFORE, THE ASSESSING OFFICER CANNOT HOLD THAT THE ASSESSEE AN D M/S. PAVANATMA PROVINCIAL HOUSE ARE NOT HAVING SIMILAR OBJECTS. 11. FURTHER, W E FIND THAT THE COORDINATE BENCH OF THE TRIBUNAL O N SIMILAR FACTS AN D IDENTICAL ISSUE IN THE CASE OF ADIT(E) V. M/S. SOCIETY OF DAUGHTERS OF MARY IMMACULATE & COLLABORATORS I N I.T.A. NO. 963/MDS/2012 FOR THE ASSESSMENT YEAR 2008 - 09 VIDE ORDER DATED 13.07.2012, WHEREIN THE TRIBUNAL, BY FOLLOWING THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF DIT(E) V. ACME EDUCATIONAL SOCIETY 326 ITR 146, DISMISSED THE APPEAL FILED BY THE REVENUE. THE HON BLE DELHI HIGH COURT IN THE ABOVE CASE HAS HELD THAT THE INTEREST FREE LOAN GIVEN BY THE ASSESSEE SOCIETY TO OTHER SOCIETY HAVING SIMILAR OBJECTS AND REGISTERED UNDER SECTION 12A OF THE ACT DOES NOT VIOLATE SECTION 13(1)(D) READ WI TH SECTION 11(5) OF THE ACT AS THE I.T.A. NO . 2883 /M/ 1 4 8 SAID LOAN WAS NEITHER AN INVESTMENT NOR A DEPOSIT . ACCORDINGLY, THE RATIO LAY DOWN BY THE HON BLE DELHI HIGH COURT IN THE CASE OF DIT(E) V. ACME EDUCATIONAL SOCIETY (SUPRA) SQUARELY APPLIES TO THE FACTS OF THE PRESENT CAS E SINCE GIVER AND RECEIVER ARE HAVING SIMILAR OBJECTS AND BOTH ARE REGISTERED TRUST. UNDER THESE FACTS AND CIRCUMSTANCES, WE CONFIRM THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND DISMISS THE GROUND RAISED BY THE REVENUE . 1 2 . IN THE RESULT, THE AP PEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 29 TH OCTOBER , 2015 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 29. 1 0 .201 5 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.