M/s.K.P.Issac & Sons Charitable Trust, Cochin V. The Jt Director of Incometax(Exemption), Cochin

ITA 291/COCH/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96811 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 16-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 24-06-2014
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: R KRISHNA IYER
• Keywords: Charitable institution; Benefit of exemption
• Section: 12AA; 10B; 148; 6; 12; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH C OCHIN BEFORE S/SHRI B.P. JAIN, AM AND GEORGE GEOR GE K., JM I.T.A. NOS.291-294/COCH/ 2014 ASSESSMENT YEARS : 2005-06, 2007-08, 2008-09 & 2010 -11) M/S. K.P. ISSAC & SONS CHARITABLE TRUST, 41/4118, KUREETHADAM BLDGS., ST. ALBERTS COLLEGE ROAD, KOCHI-682 018. [PAN :AAATK 6752H] VS. THE JOINT DIRECTOR OF INCOME-TAX, (EXEMPTION) OSD, RANGE-4, KOCHI. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI R. KRISHNA IYER, CA REVENUE BY SHRI K.P. GOPAKUMAR, SR. DR DATE OF HEARING 16/11/2015 DATE OF PRONOUNCEMENT 09/12/2015 O R D E R PER B.P.JAIN, ACCOUNTANT MEMBER: THESE FOUR APPEALS OF THE ASSESSEE FOR THE A SSESSMENT YEARS 2005-06, 2007-08, 2008-09 AND 2010-11 ARISE FROM FOUR DIFFER ENT ORDERS OF THE LD. CIT(A)-II, KOCHI EACH DATED 28-03-2014. 2. SINCE THE ISSUES IN ALL THE APPEALS ARE IDENT ICAL AND THEREFORE, ALL THESE APPEALS ARE BEING TAKEN UP BY THIS CONSOLIDATED ORD ER. I.T.A. NOS./291-294COCH/2014 2 3. THE ASSESSEE IS A PUBLIC CHARITABLE TRUST RE GISTERED U/S. 12AA OF THE ACT. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06 WAS FILED BY THE ASSESSEE ON 04/01/2007 DECLARING INCOME OF RS. NIL. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD ADVANCED MON EY TO PERSONS SPECIFIED U/S. 13(3) OF THE ACT AND CONSEQUENTLY, I SSUED NOTICE U/S. 148 OF THE ACT ON 30-09-2010. THE ISSUE INVOLVED IN ALL T HE APPEALS, AS MENTIONED HEREINABOVE, IS IDENTICAL AND FOR THE SAKE OF CONVE NIENCE, WE SHALL BE TAKING UP THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YE AR 2005-06 IN I.T.A. NO. 291/COCH/2014 AS THE BASE YEAR AND OUR ORDER HEREIN BELOW IN I.T.A. NO. 291/COCH/2014 SHALL BE IDENTICALLY APPLICABLE TO TH E ASSESSEE IN ALL THE OTHER APPEALS I.E., FOR THE ASSESSMENT YEARS 2007-08, 200 8-09 AND 2010-11 AS MENTIONED HEREINABOVE. 4. DURING THE RELEVANT YEAR, I.E., 2005-06, IT WAS OBSERVED THAT THE ASSESSEE HAD ENTERED INTO A LEASE AGREEMENT WITH TH E FIRM M/S. K.P. ISSAC & SONS TO TAKE ON LEASE THREE THEATRES IN THE NAME OF SARITHA, SAVITHA AND SANGEETHA. AS PER THE TRUST DEED, THE EXECUTIVE TRU STEE ON BEHALF OF THE TRUST HAD THE POWER TO EXECUTE AGREEMENTS TO ACQUIR E ON LEASE OR OTHERWISE BUILDINGS INCLUDING CINEMA HALLS AND RUN ANY BUSINESS AS MAY BE CONSIDERED APPROPRIATE AND USE OF INCOME THEREFROM FOR THE OBJECTS OF THE TRUST AND MAINTAIN SEPARATE ACCOUNTS IN RESPECT OF SUCH BUSINESS AS REQUIRED BY LAW. I.T.A. NOS./291-294COCH/2014 3 5. THE ASSESSING OFFICER OBSERVED THAT BY ENTER ING INTO THE AFORESAID LEASE AGREEMENTS, THE ASSESSEE HAD NOT ACQUIRED ANY ASSET THAT GENERATED INCOME OR CAN BE USED TO GENERATE INCOME. SHE FURT HER OBSERVED THAT FOR AVAILING BENEFIT U/S. 11(1) (A) OF THE ACT, THE INC OME SHOULD BE DERIVED FROM THE PROPERTY HELD UNDER THE TRUST AND AS THE ASSE SSEE DID NOT OWN THE THEATRES THAT GENERATED INCOME, THE ASSESSEE WAS NO T ENTITLED TO THE BENEFIT OF EXEMPTION CONFERRED BY SECTION 11(1)(A) OF THE ACT. 6. THE SECOND ISSUE THAT ARISES FOR CONSIDERAT ION IS WHETHER THE ASSESSEE HAD ADVANCED HUGE SUMS OF MONEY WITHOUT IN TEREST TO A FIRM IN WHICH THE TRUSTEES ARE INTERESTED AND WHETHER THE P ROVISIONS OF SECTION 13(1)(C) R.W.S. 13(3) ARE ATTRACTED. THE ASSESSING OFFICER OBSERVED THAT OUT OF THE CORPUS OF THE TRUST OF RS.32,05,855.61/- AS ON 31-03-2005, SUNDRY DEBTORS INCLUDED A SUM OF RS.16,42,892.91/- DUE FRO M THE FIRM M/S. K.P. ISSAC AND SONS IN WHICH THE TRUSTEES ARE THE PARTNE RS. THE ASSESSING OFFICER HELD THAT THE AFORESAID OUTSTANDING AMOUNT WAS IN T HE NATURE OF INTEREST FREE ADVANCE TO A PERSON SPECIFIED U/S. 13(3) OF TH E ACT AND THEREFORE, SECTION 11 WILL NOT APPLY IN A CASE, WHERE ANY PART OF THE INCOME IS APPLIED DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSO N REFERRED TO IN SECTION 13(3) OF THE ACT. IN VIEW OF THE AFORESAID FINDING S, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD FORFEITED ITS EXEMPTION IN RESPECT OF THE INCOME I.T.A. NOS./291-294COCH/2014 4 DERIVED FROM BUSINESS AND CONSEQUENTLY, DISALLOWED THE EXPENSES OF DONATION AND CHARITY OF RS.19,83,310/- TO THE TOTAL INCOME OF THE ASSESSEE. 7. THE LD. CIT(A) VIDE HER IMPUGNED ORDER DATE D 28/03/2014 DISMISSED THE APPEAL OF THE ASSESSEE. THE ASSESSEE IS IN APP EAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDERS OF THE LEARNED AUTHORITIES BELOW AR E AGAINST THE LAW AND FACTS AND HENCE UNSUSTAINABLE. 2) THE LEARNED AUTHORITIES BELOW HAVE NOT CONSIDER ED THE EXPLANATIONS/SUBMISSIONS IN A JUDICIOUS MANNER. 3) THE LEARNED AUTHORITIES BELOW OUGHT TO HAVE FO UND THAT THE APPELLANT HAS COMPLIED WITH THE PROVISIONS OF SECT ION 11 AND 12 AND ENTITLED FOR EXEMPTION. 4) THE APPELLANT IS A PUBLIC CHARITABLE TRUST REG ISTERED WITH THE COMMISSIONER OF INCOME TAX U/S. 12AA OF THE INCOME TAX ACT. THE LEARNED COMMISSIONER HAS GRANTED REGISTRATION VIDE ORDER DT. 28.11.2003. BEING A CHARITABLE INSTITUTION, SURPL US INCOME IS NOT TAXABLE WHICH IS CLEAR FROM THE FORM 10B REPORT FI LED ALONG WITH THE RETURN. ISSUES IN THE APPEAL. (1) THE APPELLANT DOES NOT HOLD ANY MOVABLE, IMMOV ABLE OR INTANGIBLE ASSETS FROM WHICH INCOME IS DERIVED FRO M PROPERTY HELD UNDER TRUST, AND IS THEREFORE NOT ENTITLED TO THE BENEFIT OF EXEMPTION U/S. 11(1)A). (2) THE APPELLANT HAS ADVANCED HUGE SUMS OF MONEY W ITHOUT INTEREST TO A FIRM IN WHICH THE TRUSTEEES ARE INTER ESTED, PROVISION U/S. 13(1)(C) RWS 13(3) ARE ATTRACTED. DECISION IN FAVOUR REVENUE REPORTED IN 297 ITR 66 IS RELIED ON. (3) DISALLOWANCE OF EXPENSES RELATING TO DONATION AND CHARITY RS.19,83,310. I.T.A. NOS./291-294COCH/2014 5 8. GROUND NOS. 1 AND 2 ARE GENERAL IN NATURE AN D DO NOT REQUIRE ADJUDICATION. 9. WE SHALL TAKE UP GROUND NOS. 3 AND 4 RAI SED BY THE ASSESSEE. THE ASSESSEE HAS SUBMITTED THAT BEING A CHARITABLE INST ITUTION, SURPLUS INCOME IS NOT TAXABLE AND THE SAME IS EVIDENT FROM FORM NO. 1 0B ATTACHED ALONGWITH THE RETURN. WITH RESPECT TO THE FINDING THAT THE A SSESSEE DID NOT HOLD ANY ASSET FROM WHICH INCOME COULD HAVE BEEN DERIVED, TH E ASSESSEE SUBMITTED THAT IT HAD EXECUTED A LEASE DEED WITH M/S. K.P. IS SAC AND SONS BY WHICH THE ASSESSEE WAS GRANTED THE RIGHTS TO EXPLOIT THE PROPERTY CONSISTING OF THREE CINEMA THEATRES. THE ASSESSEE WAS PAYING ANN UAL RENT OF RS.1.10 CRORES TO LESSOR AS LEASE RENT FOR EXPLOITING THE P ROPERTY. THE ASSESSEE FURTHER CONTENDED THAT THE TERM PROPERTY USED IN SECTION 11 IS A WORD OF WIDE IMPORT AND SUCH RESTRICTED MEANING AS GIVEN BY THE ASSESSING OFFICER AND THE LD. CIT(A) IS NOT CONTEMPLATED UNDER THE AC T. 10. THE LD. DR ON THE OTHER HAND RELIED UPON THE OR DER OF THE LD. CIT(A) TO SUPPORT HIS SUBMISSIONS. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS THE CASE OF THE REVENUE THAT FOR CLAIMING THE I.T.A. NOS./291-294COCH/2014 6 BENEFIT U/S. 11 OF THE ACT, THE PROPERTY MUST BE OW NED BY THE TRUST AND ONLY THEN INCOME DERIVED THEREFROM WOULD FALL WITHI N THE EXPRESSION PROPERTY HELD UNDER TRUST. WE ARE UNABLE TO ACCE PT THE REASONING OF THE REVENUE THAT THE TERM PROPERTY SHOULD BE GIVEN SU CH A NARROW MEANING SO AS TO EXCLUDE EVERY INCOME FROM THE PROPERTY OF WHICH THE TRUST IS NOT THE OWNER. THE SAID EXPRESSION IS OF A WIDE IMPORT . THE ASSESSEE IN THE PRESENT CASE HAD THE RIGHT TO EXPLOIT THE PROPERTY ON LEASE. THE INCOME DERIVED FROM THE PROPERTY, OF WHICH THE RIGHT TO EX PLOIT IS WITH THE ASSESSEE, FALLS WITHIN THE PURVIEW OF SECTION 11 OF THE ACT. OUR VIEW THAT THE EXPRESSION PROPERTY HELD UNDER TRUST A TERM OF W IDE IMPORT IS SUPPORTED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN TH E CASE OF J.K. TRUST, BOMBAY VS. CIT 1958 SCR 65, WHEREIN THE HONBLE COU RT HAS HELD AS UNDER:- 8. THEN THE QUESTION IS WHETHER THAT BUSINESS C AN BE HELD TO BE PROPERTY WITHIN S. 4(3)(I) OF THE ACT. NOW PROPERT Y IS A TERM OF THE WIDEST IMPORT, AND SUBJECT TO ANY LIMITATION OR QUA LIFICATION WHICH THE CONTEXT MIGHT REQUIRE, IT SIGNIFIES EVERY POSSI BLE INTEREST WHICH A PERSON CAN ACQUIRE, HOLD AND ENJOY. BUSINESS WOU LD UNDOUBTEDLY BE PROPERTY, UNLESS THERE IS SOMETHING TO THE CONTR ARY IN THE ENACTMENT. SECTION 4(3)(I) OF THE ACT UNDER WHICH EXEMPTION IS CLAIMED RUNS AS FOLLOWS: 4(3) ANY INCOME, PROFITS OR GAINS FALLING WITHIN T HE FOLLOWING CLASSES SHALL NOT BE INCLUDED IN THE TOTAL INCOME O F THE PERSON RECEIVING THEM- (I) ANY INCOME DERIVED FROM PROPERTY HELD UNDER TRU ST OR OTHER LEGAL OBLIGATION WHOLLY FOR RELIGIOUS OR CHARITABLE PURPO SE, AND IN THE CASE OF PROPERTY SO HELD IN PART ONLY FOR SUCH PURPOSES, THE INCOME APPLIED, OR FINALLY SET APART FOR APPLICATION THERE TO. I.T.A. NOS./291-294COCH/2014 7 NOW, CONFINING OURSELVES SOLELY TO THE LANGUAGE OF S.4(3)(I), THERE IS NOTHING IN IT WHICH RESTRICTS IN ANY MANNER THE NORMAL AND ACCEPTED MEANING OF THE WORD PROPERTY, AND EXCLUDE S BUSINESS FROM ITS CONNOTATION. THERE IS ALSO AUTHORITY IN S UPPORT OF THE VIEW THAT BUSINESS IS PROPERTY WITHIN THE INTENDMENT OF S. 4(3)(I). IN RE THE TRIBUNE (1), THE QUESTION WAS WHETHER A TRUST CREATED OVER THE TRIBUNE PRESS AND NEWSPAPER WAS FOR A CHARITABLE PU RPOSE AS DEFINED IN S.4(3)(I) OF THE ACT. THE MAJORITY OF T HE LEARNED JUDGES OF THE HIGH COURT TOOK THE VIEW THAT THE OBJECT OF THE TRUST WAS NOT WHOLLY RELIGIOUS OR CHARITABLE, AND THAT ACCORDINGL Y THE EXEMPTION UNDER THAT SECTION COULD NOT BE CLAIMED, THE DECIS ION WAS TAKEN IN APPEAL TO THE PRIVY COUNCIL, WHICH HELD REVERSING T HE JUDGMENT OF THE HIGH COURT THAT THE OBJECT OF THE TRUST WAS IN ITS ENTIRETY CHARITABLE AND THAT IT CAME WITHIN THE EXEMPTION EN ACTED IN S.4(3)(I). VIDE IN RE THE TRUSTEES OF THE TRIBUNE (2), THAT IS A QUESTION WITH WHICH WE ARE NOT CONCERNED IN THIS AP PEAL, AND THE ACTUAL DECISION OF THE PRIVY COUNCIL DOES NOT BEAR ON THE PRESENT CONTROVERSY. WHAT IS RELEVANT TO OUR PURPOSES IS T HAT BEFORE THE HIGH COURT, A CONTENTION WAS RAISED THAT THE WORD PROPERTY MUST BEAR THE SAME MEANING BOTH IN SS. 9 AND 4(3)(I), TH AT IN S.9 IT WAS USED IN CONTRADISTINCTION TO BUSINESS WHICH WAS DEA LT WITH UNDER S.10, AND THAT THEREFORE PROPERTY IN S. 4(3)(I) C OULD NOT BE CONTROLLED BY THE CONNOTATION OF THAT WORD IN S.9. VIDE IN RE THE TRIBUNE (1). BEFORE THE PRIVY COUNCIL, HOWEVER, THE QUESTION WHETHER BUSINESS OF THE TRIBUNE PRESS AND NEWSPAPER WAS PROPERTY WAS NOT RAISED, THE BOARD MERELY OBSERVING THAT IN THE LETTER OF REFERENCE THERE WAS NO SUGGESTION THAT T HE INCOME UNDER ASSESSMENT IS NOT DERIVED FROM PROPERTY HELD UNDER TRUST DECLARED IN THE 20 TH AND 21 ST PARAGRAPHS OF THE WILL. THE POINT, HOWEVER, AROSE DIRECTLY FOR DECISION IN ALL INDIA SPINNERS ASSOCIATION VS. COMMISSIONER OF INCOME-TAX, BOMBAY (2). THERE, THE ASSESSEE WAS AN UNREGISTERED ASSOCIATION CALLED THE ALL INDIA SPINNERS ASSOCIATION, AND IT WAS FORMED FOR THE PU RPOSE OF DEVELOPMENT OF THE VILLAGE INDUSTRIES OF HANDSPINNI NG AND HANDWEAVING. THE ASSOCIATION COLLECTED SUBSCRIPTION S FROM ITS MEMBERS AND ALSO DONATIONS AND INVESTED THEM IN THE PURCHASE OF RAW COTTON WHICH WAS SUPPLIED TO POOR LABOURERS FOR BEING SPUN INTO YARN, THE YARN BEING THEN SUPPLIED TO THEM FOR BEING WOVEN INTO CLOTH, WHICH WAS THEN SOLD AND THE SALE PROCEE DS APPROPRIATED TO THE FUNDS OF THE ASSOCIATION FOR THE PURPOSES AF ORESAID. THE ASSESSEE CLAIMED EXEMPTION UNDER S.4(3)(I) ON THE G ROUND THAT ITS INCOME WAS DERIVED FROM PROPERTY HELD UNDER TRUST. THE HIGH COURT I.T.A. NOS./291-294COCH/2014 8 WAS OF THE OPINION THAT THE YARN AND THE CLOTH THE SALE OF WHICH YIELDED THE INCOME, COULD NOT BE REGARDED AS PROPER TY HELD IN TRUST, AND THAT, IN CONSEQUENCE, S.4(3)(I) DID NOT APPLY. IN REVERSING THIS JUDGMENT, THE PRIVY COUNCIL HELD THAT THE PROPERTY CONSISTED OF THE ORGANISATION AND THE UNDERTAKING AS WELL AS IN THE FLUCTUATING STOCK OF YARN AND CLOTH, AND THAT THE EXEMPTION IN S.4(3 )(I) APPLIED. THIS IS DIRECT AUTHORITY IN SUPPORT OF THE CONTENTI ON OF THE APPELLANT. AS AGAINST THESE AUTHORITIES, THE RESPONDENT RELIED ON THE DECISION IN EGGAR V. COMMISSIONER OF INCOME TAX (1). THERE, A CERTAIN PROFESSOR AGREED TO HAND OVER THE REMUNERATION WHIC H WOULD BE PAYABLE TO HIM BY THE UNIVERSITY FOR LECTURES TO BE DELIVERED BY HIM, FOR CERTAIN CHARITABLE PURPOSE, BUT, IN FACT, NO DEED OF TRUST WAS EXECUTED. THE QUESTION WAS WHETHER THE AMOUNTS ACTUALLY PAID TO HIM BY THE UNIVERSITY WERE EXEMPT FROM TAXA TION, AND IT WAS HELD THAT THEY WERE NOT, AND THAT THE INCOME IN QUESTION WAS AT THE TIME OF THE RECEIPT THE PRIVATE PROPERTY OF THE ASSESSEE BEING REMUNERATION FOR SERVICES RENDERED BY HIM. THERE C OULD BE NO QUESTION IN THIS CASE OF ANY SOURCE OF INCOME BEING DEDICATED TO TRUST, AND THE DECISION ACCORDINGLY HAS NO BEARING ON THE POINT, WHICH FAILS TO BE DECIDED HERE. THE WEIGHT OF AUTH ORITY IS THEREFORE CLEARLY IN FAVOUR OF THE VIEW THAT BUSINESS WOULD B E PROPERTY FOR PURPOSES OF S.4(3)(I) OF THE ACT. IN THE CASE OF A.J. PATEL VS. CIT (1974) 97 ITR 683 , HONBLE BOMBAY HIGH COURT HAS HELD AS UNDER: 11. THE QUESTION ARISES WHETHER ON THESE FACTS A C ASE IS MADE OUT FOR CLAIMING EXEMPTION UNDER THE PROVISIONS OF CLAU SE (I) OF SECTION 4(3) OF THE ACT. THE ARGUMENT ON BEHALF OF THE REV ENUE IS THAT IT IS THE NET INCOME DERIVED FROM ADVERTISEMENTS BY THE A SSESSEE THAT HAS BEEN MADE SUBJECT TO THE TRUST. IN OTHER WORDS, THE CONTENTION ON BEHALF OF THE REVENUE IS THAT WHEN THE ADVERTISE MENT INCOME IS REALIZED IT IS A PART OF INCOME OF THE ASSESSEE AND IT IS THEREAFTER IMPRESSED WITH THE CHARACTER OF A TRUST. IN OUR OP INION, IF REGARD BE HAD TO THE REVISED MEMORANDUM OF THE TERMS AND C ONDITIONS THAT WERE AGREED UPON BETWEEN THE ASSESSEE AND THE COMMISSIONER, THERE IS NO DOUBT THAT WHAT IS IMPRES SED WITH THE CHARACTER OF TRUST IS THE RIGHT TO EXPLOIT EITHER S IDE OF THE OVERBRIDGE AS ADVERTISING SPACE SO AS TO YIELD INCOME. THE FA CT THAT THIS WAS SO IS MADE AMPLY CLEAR WHEN ULTIMATELY A DECLARATIO N OF TRUST WAS I.T.A. NOS./291-294COCH/2014 9 PREPARED, BECAUSE SCHEDULE A IN THIS DECLARATION OF TRUST CONTAINS EVERY RELEVANT TERM WHICH WAS CONTAINED IN THE REVI SED MEMORANDUM OF TERMS AND CONDITIONS. IN THIS CONTEX T IS SHOULD NOT BE OVERLOOKED THAT THE WORD PROPERTY IS A TER M OF THE WIDEST IMPORT AND SUBJECT TO ANY LIMITATION OR QUALIFICATI ON WHICH THE CONTEXT MIGHT REQUIRE, IT SIGNIFIES EVERY POSSIBLE INTEREST WHICH A PERSON CAN ACQUIRE, HOLD AND ENJOY. IT IS NOT AS I F THAT THE INCOME IS TO BE DERIVED BY THE ASSESSEE AND THEREAFTER IT IS TO BE IMPRESSED WITH THE CHARACTER OF TRUST. IN FACT UNDER AN AGRE EMENT ARRIVED AT BETWEEN THE ASSESSEE AND THE MUNICIPAL COMMISSIONER THE RIGHT TO EXPLOIT THE ADVERTISEMENTS WAS VESTED IN THE TRUSTE ES AS SUCH AND THAT WAS NOT TO BE DONE BY THE ASSESSEE IN HIS PERS ONAL CAPACITY. THE TRUSTEES WERE AUTHORIZED TO SETTLE ALL MATTERS IN REGARD TO ADVERTISEMENTS INCLUDING THE RATES AND EVERYTHING. THIS TERM, THEREFORE, CLEARLY SHOWS THAT THE PROPERTY WHICH WA S IMPRESSED WITH THE TRUST WAS THE RIGHT TO EXPLOIT EITHER SIDE OF THE OVERBRIDGE AS ADVERTISING SPACE SO AS TO YIELD INCOME. 12. IT WAS URGED ON BEHALF OF THE REVENUE THAT IN THE ABSENCE OF A PROPER DEED OF TRUST THE PROPERTY CANNOT BE REGARDE D AS HELD UNDER TRUST OR OTHER LEGAL OBLIGATION. IT IS WELL-SETTLE D THAT IN ORDER THAT A PROPERTY MAY BE IMPRESSED WITH TRUST OR LEGAL OBLIG ATION AS CONTEMPLATED U/S. 4(3) (I), A FORMAL DOCUMENT IS UN NECESSARY. THE FORWARDING OF THE REVISED TERMS AND CONDITIONS WHIC H WERE AGREED UPON AS A RESULT OF THE DISCUSSION BETWEEN THE ASSE SSEE AND THE MUNICIPAL COMMISSIONER ITSELF IS SUFFICIENT TO SHOW THAT THE PROPERTY, NAMELY, THE RIGHT TO EXPLOIT EITHER SIDE OF THE OVERBRIDGE AS ADVERTISING SPACE SO AS TO YIELD INCOME, WAS HEL D UNDER TRUST OR LEGAL OBLIGATION FOR THE PURPOSE WHICH IS MENTIONED IN CONDITION NO. 9 HEREINBEFORE REFERRED TO. 12. IN VIEW THEREOF, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. IT IS PERTINENT TO NOTE THAT THE EXECUTIVE TRUSTEE HAD THE POWER, AS OBSERVED BY THE ASSESSING OFFICER, TO ENTER INTO LEASE AGREE MENTS FOR THE PURPOSE OF RUNNING THEATRES. I.T.A. NOS./291-294COCH/2014 10 13. THE SECOND ISSUE THAT ARISES FOR CONSIDERATION IS W HETHER THE PROVISIONS OF SECTION 13(1)(C) R.W.S. 13(3) OF THE ACT WERE RIGHTLY INVOKED BY THE ASSESSING OFFICER AND THE LD. CIT(A). 14. THE ASSESSEE CONTENDS THAT THE COLLECTION S FROM THE CINEMA THEATRES MADE BY THE ASSESSEE TRUST WERE REGULARLY TRANSFERRED TO THE ACCOUNT OF THE LESSOR, M/S. K.P. ISSAC & SONS. THE ASSESSEE WAS BOUND TO PAY AN ANNUAL RENT OF RS.1.10 CRORES TO THE LESSOR. THE SAID RENT WAS APPROPRIATED BY THE LESSOR FROM THE DAILY COLLECTIO NS HANDED OVER BY THE ASSESSEE/LESSEE TO THE LESSOR, M/S. K.P. ISSAC & SO NS. HE FURTHER CONTENDED THAT THE LESSOR IS PAYING ELECTRICITY, WATER AND OT HER STATUTORY CHARGES TO THE CONCERNED AUTHORITIES FOR AND ON BEHALF OF THE ASSE SSEE TRUST. HE ARGUED THAT THE LESSOR HAD NOT TAKEN ANY SECURITY FOR EXEC UTION OF THE LEASE DEED AND EVEN IF SIX MONTHS RENT IS TAKEN INTO ACCOUNT A S SECURITY DEPOSIT, THE SAME WOULD BE RS. 40 LAKHS. ALSO THE BALANCE AMOUN T OF RS.16 LAKHS (APPROX.) WAS DUE FROM THE LESSOR AFTER REMISSION O F DAILY COLLECTIONS AND DEDUCTION OF THE RENT OF RS.1.10 CRORES FROM THE DAILY COLLECTIONS. ACCORDING TO THE ASSESSEE, THE AMOUNT WAS THEREFORE IN THE NATURE OF A RUNNING ACCOUNT. 15. THE LD. DR ON THE OTHER HAND RELIED UPON THE OR DER OF THE LD. CIT(A) IN SUPPORT OF HIS SUBMISSIONS. I.T.A. NOS./291-294COCH/2014 11 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS UNDISPUTED THAT RENT PA ID BY THE ASSESSEE/LESSEE TO THE LESSOR, M/S. K.P. ISSAC & SONS WAS NOT HIGH ER THAN THE MARKET RENT. THEREFORE, THERE IS NO QUESTION OF DIVERSION OF INC OME BY THE ASSESSEE TRUST TO THE LESSOR FIRM. SECTION 13(2)(A) OF THE ACT PR OVIDES THAT ANY BENEFIT IS DEEMED TO BE GIVEN TO THE INTERESTED PERSON IF ANY PART OF THE INCOME OR PROPERTY OF THE TRUST OR INSTITUTION IS OR CONTINUE S TO BE LENT TO ANY PERSON REFERRED TO IN SUB-SECTION (3) FOR ANY PERIOD DURIN G THE PREVIOUS YEAR WITHOUT ANY ADEQUATE SECURITY OR ADEQUATE INTEREST OR BOTH. THE EXPRESSION LENT IS OF PRIMARY IMPORTANCE FOR DECIDING THE PR ESENT ISSUE. THE ASSESSEE TRUST REMITTED ITS DAILY COLLECTIONS FROM THE THEAT RES TO THE LESSOR AND THE LESSOR APPROPRIATED THE LEASE RENT OF RS.1.10 CRORE S FROM THE DAILY COLLECTIONS RECEIVED BY THE LESSEE. THE AMOUNT OF R S.16,42,892/;- WAS OUTSTANDING IN THE ACCOUNT OF THE LESSOR WHICH WAS ADMITTEDLY PAYABLE TO THE ASSESSEE. THE AFORESAID TRANSACTION DOES NOT F ALL UNDER THE EXPRESSION LENT USED IN SECTION 13(2)(A) OF THE ACT. THERE I S NO POSITIVE ACT OF LENDING ON THE PART OF THE ASSESSEE TO THE LESSEE. THERE I S NOTHING ON RECORD TO SHOW THAT A RELATIONSHIP OF BORROWER AND LENDER EXI STED BETWEEN THE ASSESSEE AND THE LESSOR. THERE IS NEITHER ANY PHYSI CAL ACT OF LENDING ON THE PART OF THE ASSESSEE NOR ANY TIME PERIOD HAS BEEN S PECIFIED AS TO WHEN THE SAID AMOUNT SHALL BE RETURNED TO THE ASSESSEE BY TH E LESSOR. THE NATURE OF I.T.A. NOS./291-294COCH/2014 12 THE TRANSACTION IS NOT THAT OF LENDING AND THEREFOR E, INVOCATION OF SECTION 13(3) R.W.S. 13(1)(C) CANNOT BE THERE. 17. THE EXPRESSION LENDING HAS BEEN THE SUBJECT M ATTER OF JUDICIAL PRONOUNCEMENTS IN VARIOUS JUDGMENTS. THE HONBLE MA DRAS HIGH COURT IN THE CASE OF CIT VS. NACHIMUTHU INDUSTRIAL ASSOCIATI ON (1982) 138 ITR 585 HAS HELD THAT THERE MUST BE A POSITIVE ACT OF LENDI NG SO AS TO INVOKE THE PROVISIONS OF SECTION 13 OF THE ACT. THE AFORESAID JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. NACHIMUTHU INDUST RIAL ASSOCIATION (SUPRA) WAS FOLLOWED BY ITAT, COCHIN BENCH IN THE CASE OF MUTHOOTTU CHARITABLE TRUST VS. ITO (1987) 23 ITD 234 WHEREIN IT WAS HELD AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THE AMOUNT OF RS.1,10,187 AND RS.19,510 WERE GIVEN BY M MCF TO THE ASSESSEE-TRUST ONLY ON 25-04-1984, I.E. LONG AFTER THE END OF THE ACCOUNTING YEARS RELEVANT TO THE ASSESSMENT YEARS U NDER APPEAL. SECTION 13(2)(H) SPEAKS OF FUNDS WHICH ARE INVESTE D OR CONTINUE TO REMAIN INVESTED IN ANY CONCERN IN WHICH ANY PERS ON REFERRED TO IN SUB-SECTION (3) HAS A SUBSTANTIAL INTEREST NOW WE HAVE TO SEE WHETHER IT CAN BE SAID THAT THE FUNDS OF THE TRUST ARE INVESTED OR CONTINUED TO REMAIN INVESTED IN THE RELEVANT PREVI OUS YEARS. THE MADRAS HIGH COURT IN THE CASE OF CIT V. NACHIMUTHU INDUSTRIAL ASSOCIATION (1982) 138 ITR 585 HELD THAT IN ORDER T O CONSTITUTE AN INVESTMENT, THE MONEYS MUST BE LAID OUT IN SUCH A M ANNER AS TO ACQUIRE SOME SPECIES OF PROPERTIES WHICH WOULD BRIN G AN INCOME TO THE INVESTOR. SINCE THE AMOUNTS REFERRED TO ABOVE HAVE NOT BEEN RECEIVED BY THE ASSESSEE IN THE RELEVANT ACCOUNTING YEARS, THE QUESTION OF THE ASSESSEE INVESTING THEM IN THE FIRM , MMCF, DOES NOT ARISE. IT CANNOT BE SAID THAT THE SAID AMOUNTS HAD BEEN INVESTED BY THE ASSESSEE TRUST IN THE FIRM MMCF OR CONTINUED TO REMAIN INVESTED THERE, AS UNDERSTOOD IN BUSINESS PA RLANCE WITH A VIEW TO OBTAINING ANY PROFIT. SO, THE APPLICATION OF SECTION 13(1)(C) I.T.A. NOS./291-294COCH/2014 13 READ WITH SECTION 13(2)(H) TO THE FACTS OF THE CASE HAS TO BE RULED OUT. SECTION 13(2)(A) SPEAKS OF THE INCOME OR PROP ERTY OF THE TRUST WHICH IS LENT OR CONTINUED TO BE LENT TO ANY PE RSON REFERRED TO IN SUB-SECTION (3) FOR ANY PERIOD DURING THE PREVIOUS YEAR WITHOUT EITHER ADEQUATE SECURITY OR ADEQUATE INTEREST OR BO TH. HERE ALSO WE HAVE TO SEE WHETHER IT CAN BE SAID THAT THE INCOME OF PROPERTY OF THE TRUST IS LENT OR CONTINUED TO BE LENT. IN THE AFORESAID DECISION IT WAS ALSO HELD THAT FOR AN AMOUNT TO FALL WITHIN THE MISCHIEF OF SECTION 13(2)(A) OF THE IT ACT, 1961, THERE MUST BE A LOAN AND TO CONSTITUTE A LOAN THERE MUST BE A POSITIVE ACT OF L ENDING, COUPLED WITH AN ACCEPTANCE BY THE OTHER SIDE OF THE MONEY A S A LOAN AND THAT THE RELATIONSHIP OF BORROWER AND LENDER MUST C OME INTO EXISTENCE BY THE ACT OF THE PARTIES. AS ALREADY STA TED ABOVE THE AMOUNTS UNDER CONSIDERATION WERE RECEIVED BY THE AS SESSEE TRUST ONLY ON 25-4-1984. THE REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE TRUST HAD PHYSICAL LY LENT THE MONEY TO MMCF AND THAT MMCF HAS ACCEPTED THE AMOUNT AS A LOAN AND THAT THE RELATIONSHIP OF LENDER AND BORROWER EX ISTED THERE. THE ONLY MATERIAL RELIED ON BY THE DEPARTMENTAL REPRESE NTATIVE WAS THE BALANCE-SHEETS OF THE ASSESSEE TRUST AS ON 31-3-198 0 AND 31-3- 1981 WHEREIN THE NAME OF MMCF WAS SHOWN ON THE ASSE TS SIDE OF THE BALANCE-SHEETS. ACCORDING TO THE DEPARTMENTAL REPRESENTATIVE, MMCF IS A SUNDRY DEBTOR TO THE ASSESSEE TRUST AND S O IT SHOULD BE TREATED AS A DEBTOR FOR MONEYS LENT. IN THE ABSENC E OF ANY EVIDENCE TO SHOW THAT THERE WAS AN ACT OF LENDING M ONEY BY THE TRUST TO THE MMCF AND THE ACCEPTANCE BY MMCF OF THE SAID MONEY AS LOAN, WE ARE UNABLE TO AGREE WITH THE SUBMISSION S MADE BY THE DEPARTMENTAL REPRESENTATIVE THAT THE INCOME OR PROP ERTY OF THE TRUST WAS LENT OR CONTINUED TO REMAIN LENT TO MMC. SO THE APPLICATION OF SECTION 13(1)(C) READ WITH SECTION 1 3(2)(A) TO THE FACTS OF THE CASE HAS TO BE RULED OUT. SECTION 13( 2)(B) REFERS TO ANY IMMOVABLE PROPERTY OF THE TRUST WHICH IS, OR CO NTINUES TO BE, MADE AVAILABLE FOR THE USE OF ANY PERSON REFERRED T O IN SUB-SECTION (3) WITHOUT CHARGING ADEQUATE RENT OR OTHER COMPENS ATION. NO MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE TO SH OW THAT ANY IMMOVABLE PROPERTY OF THE ASSESSEE TRUST WAS MADE A VAILABLE OR CONTINUED TO BE MADE AVAILABLE TO MMCF WITHOUT RECE IPT OF ADEQUATE RENT OR OTHER COMPENSATION. SO THE APPLIC ATION OF SECTION 13(1)(C READ WITH SECTION 13(2)(B) TO THE FACTS OF THE CASE HAS ALSO TO BE RULED OUT. SECTION 13(3)(B) SPEAKS OF USER O F APPLICATION OF INCOME OR PROPERTY OF THE TRUST FOR THE BENEFIT OF ANY PERSON WHO HAS MADE A SUBSTANTIAL CONTRIBUTION TO THE TRUST, I .E. CONTRIBUTION EXCEEDING RS.5,000. ACCORDING TO THE DEPARTMENTAL REPRESENTATIVE THE ABOVE SAID AMOUNTS OF RS.1,10,187 AND RS.19,510 WERE WHOLLY I.T.A. NOS./291-294COCH/2014 14 CONTRIBUTED BY MMCF. AS ALREADY HOLD ABOVE, NO PAR T OF THE INCOME OR PROPERTY OF THE TRUST, NO IMMOVABLE PROPE RTY OF THE TRUST, NO FUNDS OF THE TRUST WERE LENT, MADE AVAILA BLE OR INVESTED WITH MMCF. THUS, THE APPLICATION OF SECTION 13(1)( C) READ WITH SECTION 13(3)(B) TO THE FACTS OF THE CASE ALSO HAS TO BE RULED OUT. 18. IN VIEW THEREOF, THE SAID ISSUE IS HELD IN FAVOUR OF THE ASSESSEE AND THE INVOCATION OF SECTION 13 OF THE ACT BY THE REVE NUE IS HELD TO BE BAD IN LAW. 19. AS WE HAVE ALREADY HELD THAT THE ASSESSEE IS EN TITLED TO THE BENEFIT OF SECTION 11(1)(A) OF THE ACT AND INVOCATION OF SE CTION 13 WAS BAD IN LAW, THE ADDITION OF EXPENSES RELATING TO DONATION AND C HARITY OF RS.19,83,310/- IS DIRECTED TO BE DELETED AS THE SAME ARE INCURRED AS PER THE OBJECTS OF THE TRUST. GROUND NOS. 3 & 4/ISSUES RAISED BY THE ASSE SSEE ARE ALLOWED. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IN I.T.A. N O. 291/COCH/2014 IS ALLOWED. 20. SINCE THE ISSUES IN I.T.A. NOS. 292 TO 294/COCH /2014 ARE IDENTICAL, AND THEREFORE, OUR ORDER IN I.T.A. NO. 291/COCH/201 4 FOR THE ASSESSMENT YEAR 2005-06 HEREINABOVE SHALL BE IDENTICALLY APPLI CABLE TO THE OTHER APPEALS IN I.T.A. NOS. 292 TO 294/COCH/2014 FOR THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2010-11. ACCORDINGLY, ALL THE GROUNDS RAISED BY THE ASSESSEE IN ALL THE APPEALS ARE ALLOWED. I.T.A. NOS./291-294COCH/2014 15 21. IN THE RESULT, THE APPEALS OF THE ASSESSEE I N I.T.A. NOS. 291 TO 294/COCH/2014 ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 09-12-2015. SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 09TH DECEMBER, 2015 GJ COPY TO: 1. M/S. K.P. ISSAC & SONS CHARITABLE TRUST, 41/4118 , KUREETHADAM BLDGS., ST. ALBERTS COLLEGE ROAD, KOCHI-682 018. 2. THE JOINT DIRECTOR OF INCOME-TAX (EXEMPTION) OSD, RANGE-4, KOCHI. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T.,COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN I.T.A. NOS./291-294COCH/2014 16