ITO, Chandigarh V. M/s Dev Samaj, Chandigarh

ITA 305/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60845 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A K SOOD
• Keywords: Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI H.L. KARWA, V.P. AND SHRI T.R. SOOD, AM ITA NO. 305/CHD/2012 ASSESSMENT YEAR: 2007-08 I.T.O. WARD 4(3) V. DEV SAMAJ CHANDIGARH DEV SAMAJ BHAWAN SECTOR 36-C, CHANDIGARH PAN: AAATT 7578 A (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AKHILESH GUPTA RESPONDENT BY: SHRI A.K. SOOD DATE OF HEARING: 08.05.2012 DATE OF PRONOUNCEMENT: 17.5.2012 ORDER PER T.R. SOOD, A.M IN THIS APPEAL THE REVENUE HAS RAISED FOLLOWING GR OUNDS. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSE SSEE HOLDING THAT THE CASE IS NOT COVERED U/S 13(2)(A) OF THE INCOME-TAX ACT, 1961. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE BY HOLDING THAT MEAGER FACILITIES TO THE MEMBERS OF MANAGING COUNCIL CAN NOT BE COVER ED U/S 13(2)(A) OF THE INCOME-TAX ACT, 1961. 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS ON PERUSAL OF ANNEXURE TO AUDIT REPORT, IT WAS FOUND THAT THE ASSESSEE WAS GIVING CERTAIN FREE FACILITIES TO ITS MEMBERS. ON A QUERY OF THE SAME, IT WAS SUBMITTED THAT SOME OF THE TRUSTEES WE RE ALLOWED FREE STAY IN DEV SAMAJ BHAWAN, SECTOR 36 TO CARRY OUT THE WORK EFFEC TIVELY. THE DETAILS IN RESPECT OF THOSE MEMBERS WAS FURNISHED AS UNDER: 1. SHRI KAILASH CHANDER JI, SECRETARY HE IS ABOUT 80 YEARS OLD AND A RESIDENT OF ENGLAND, WHENEVER HE VISITS INDIA FOR THE WORK OF THE SOCIETY HE IS BEIN G ALLOWED TO STAY IN DEV SAMAJ BHAWAN, SECTOR 36, CHANDIGARH AND GIVEN A SIN GLE ROOM. HE STAYS IN INDIA ON AN AVERAGE SIX MONTHS IN A YEAR F OR THE WORK OF THE 2 SOCIETY. THE PERQUISITE VALUE OF WHICH IS NOT MORE THAN RS. 3,000 TO 4,000/- PER MONTH FOR A PERIOD OF SIX MONTHS, WHICH DOES NOT AMOUNT OF BENEFIT TO AN INTERESTED PERSON U/S 13 OF THE INCOM E-TAX ACT, 1961. 2. SHRIMAN VIKAS DEV JI, MEMBER HE IS A BACHELOR AND ABOUT 90 YEARS OLD. HE IS BE ING GIVEN A MEAGER SUM OF RS. 1500/- PER MONTH AS HONORARIUM FO R CARRYING OUT THE DAY TO DAY WORK OF THE SOCIETY AND HE A PREACHER. HE IS BEING ALLOWED TO STAY IN DEV SAMAJ BHAWAN, SECTOR 36, CHANDIGARH AND GIVEN A SINGLE ROOM FOR CARRYING ON THE WORK OF THE SOCIETY. THE PERQUISITE VALUE OF WHICH IS NOT MORE THAN RS. 3,000 TO 4,000/- PER MON TH WHICH DOES NOT AMOUNT TO BENEFIT TO AN INTERESTED PERSON U/S 13 OF THE INCOME-TAX ACT, 1961. 3. SHRIMAN GIRWAR JI SHARMA, MEMBER HE IS ABOUT 91 YEARS OLD AND IS A PREACHER. HE IS BEING ALLOWED TO STAY IN DEV SAMAJ BHAWAN, SECTOR 36, CHANDIGARH AND GIVEN AN SINGLE ROOM FOR CARRYING ON THE WORK OF THE SOCIETY. THE PERQUISITE VALUE OF WHICH IS NOT MORE THAN RS. 3,000 TO 4,000/- PER MON TH WHICH DOES NOT AMOUNT TO BENEFIT TO AN INTERESTED PERSON U/S 13 OF THE INCOME-TAX ACT, 1961. 4. SMT. SWADESH JI SHARMA, MEMBER SHE IS ABOUT 76 YEARS OLD AND IS A PREACHER OF DEV SAMAJ. SHE IS BEING ALLOWED TO STAY IN DEV SAMAJ BHAWAN, SECTOR 3 6, CHANDIGARH AND GIVEN A SINGLE ROOM FOR CARRYING ON THE WORK OF THE SOCIETY. THE PERQUISITE VALUE OF WHICH IS NOT MORE THAN RS. 3,00 0/- TO RS. 4,000/- PER MONTH WHICH DOES NOT AMOUNT TO BENEFIT TO AN INTERE STED PERSON U/S 13 OF THE INCOME-TAX ACT, 1961. 5. KUMARI SATYAWATI JI SHE IS A SPINSTER ABOUT 76 YEARS OLD AND IS A PREA CHER OF DEV SAMAJ. SHE IS BEING ALLOWED TO STAY IN DEV SAMAJ B HAWAN, SECTOR 36, CHANDIGARH AND GIVEN A SINGLE ROOM FOR CARRYING ON THE WORK OF THE SOCIETY. THE PERQUISITE VALUE OF WHICH IS NOT MORE THAN RS. 3,000 TO RS. 4,000/- PER MONTH WHICH DOES NOT AMOUNT TO BENEFIT TO AN INTERESTED PERSON U/S 13 OF THE INCOME-TAX ACT, 1961. 6. SMT. GIANWATI JI 3 SHE IS ABOUT 78 YEARS OLD AND IS A PREACHER OF DEV SAMAJ. SHE IS RESIDING AT BHATINDA. SHE IS BEING ALLOWED TO STAY IN DEV SAMAJ BHAWAN, BHATINDA FOR CARRYING ON THE WORK OF THE SO CIETY. THE PERQUISITE VALUE OF WHICH IS NOT MORE THAN RS. 3,000 TO RS. 4, 000/- PER MONTH WHICH DOES NOT AMOUNT TO BENEFIT TO AN INTERESTED PERSON U/S 13 OF THE INCOME- TAX ACT, 1961. THE ASSESSING OFFICER DID NOT AGREE WITH THE SUBMIS SIONS AND WAS OF THE VIEW THAT IN ACCORDANCE WITH SECTION 13(2)(A), 13(2)(B), THE FACILITIES PROVIDED TO ITS MEMBERS CAN BE TREATED AS APPLICATION OF INCOME FOR THE OBJECTS OF THE SOCIETY. ACCORDINGLY HE WORKED OUT THE BENEFIT PROVIDED TO V ARIOUS MEMBERS AS UNDER: FREE RESIDENCE RS. 15000/- PM FREE TELEPHONE RS. 1000/- PM FREE ELECTRICITY RS. 1000/- PM FREE WATER RS. 200/- PM TOTAL RS. 17,200/- PM TOTAL ANNUAL COST FOR ONE PERSON RS. 17,200 X 12 = 2,06,400/- TOTAL ANNUAL COST FOR 7 PERSONS RS. 2,06,400 X 7 = 14,44,800/- THE ABOVE AMOUNT WAS ADDED TO THE TAXABLE INCOME O F THE SOCIETY. 3. BEFORE THE LD. CIT(A), IT WAS MAINLY SUBMITTED T HAT NO BENEFIT WAS PROVIDED TO THE PERSONS DEFINED IN SECTION 13 OF TH E INCOME-TAX ACT, 1961. THE MEMBERS OF THE MANAGING COMMITTEE WERE GIVEN SOME F ACILITIES ONLY TO FACILITATE SMOOTH FUNCTIONING OF THE SOCIETY. THE FACILITIES WERE AT MINIMUM LEVEL. THE MEMBERS ARE THEREFORE, LITERALLY PERSON S WHO HAVE DEDICATED THEIR LIVES FOR THE DEV SAMAJ AND SUCH FACILITIES WILL NO T AMOUNT TO BENEFIT FOR INTERESTED PERSONS. 4. THE LD. CIT(A) FOUND FORCE IN THE SAME AND DECID ED THE ISSUE IN FAVOUR OF THE ASSESSEE VIDE PARA 2.3 WHICH IS AS UNDER: 2.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. C OUNSEL FOR THE APPELLANT. THE MEMBERS OF THE MANAGING COUNCIL HAD BEEN GIVEN CERTAIN FACILITIES TO CARRY OUT VARIOUS FUNCTIONS A S MEMBERS OF THE MANAGING COUNCIL. THE ADDITIONS ARE BASED ON THE P ROVISIONS OF SECTIONS 13(2)(A) AND 13(2)(B) OF THE ACT. THE CAS E OF APPELLANT IS NOT COVERED BY SECTION 13(2)(A) OF THE ACT. SO FAR AS APPLICABILITY OF SECTION 13(2)(B) IS CONCERNED, IT IS SEEN THAT MEAGER FACIL ITIES TO THE MEMBERS OF MANAGING COUNCIL HAVE BEEN PROVIDED, WHICH ARE IN T HE NATURE OF 4 COMPENSATION FOR THE WORK DONE AND SERVICES RENDERE D BY THEM TO THE APPELLANT SOCIETY AND SO THESE CANNOT BE COVERED BY SECTION 13(2)(B) ALSO. THE ASSESSING OFFICER HAS CALCULATED THE FAI R MARKET VALUE OF THE FACILITIES PROVIDED TO THE MEMBERS, BUT HAS IGNORED THE FACT THAT FACILITIES HAD BEEN PROVIDED TO THE MEMBERS SO THAT THEY COULD CARRY OUT THE DAY TO DAY FUNCTIONS OF THE APPELLANT SOCIETY. FURTHER , THE ASSESSING OFFICER HAS NOT POINTED OUT AS TO HOW THE BENEFIT TO THESE PERSONS ON ACCOUNT OF SERVICES RENDERED IS IN EXCESS OF WHAT MAY BE REASO NABLY PAID FOR SUCH SERVICES. IN VIEW OF THIS DISCUSSION, IT IS HELD T HAT THE ASSESSING OFFICER WAS NOT RIGHT IN HOLDING THAT THE FREE FACILITIES O F FAIR MARKET VALUE OF RS. 14,44,800/- PROVIDED TO THE MEMBERS OF THE MANAGING COUNCIL WAS NOT INCOME APPLIED FOR THE OBJECTS OF THE SOCIETY. THE ADDITION MADE BY THE ASSESSING OFFICER IS ACCORDINGLY DELETED. ALL THE GROUNDS TAKEN BY THE APPELLANT ARE ALLOWED. 5. BEFORE US, THE LD. DR FOR THE REVENUE SUBMITTED THAT THE ASSESSEE HAS PROVIDED FREE ACCOMMODATION WHICH WAS NOTICED BY TH E ASSESSING OFFICER FROM THE AUDIT REPORT OF THE TRUST. THE ASSESSING OFFIC ER HAS VALUED THE BENEFIT AT RS. 15,000/- PER MONTH FOR FREE RESIDENT AND RS. 10 00 FOR FREE TELEPHONE, RS. 1000/- FOR FREE ELECTRICITY, RS. 200/- FOR WATER. THIS WOULD REALLY CONSTITUTE THE BENEFIT U/S 13(2)(A) OR 13(2)(B) OF THE ACT. ACCOR DINGLY THE ADDITION WAS JUSTIFIED. 6. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE REFERRED TO THE REPLY GIVEN BEFORE THE ASSESSING OFFICER AND POINTED OUT THAT ALL THE TRUSTEES WERE ELDERLY PEOPLE AND WERE ALLOWED SINGLE ROOM ACCOMMO DATION IN DEV SAMAJ BHAWAN FOR THE PURPOSE OF CARRYING OUT THE ACTIVITI ES OF THE SOCIETY. THEREFORE, THE SAME CANNOT BE CONSTRUED AS BENEFIT. HE PLEADE D THAT CLAUSE (A) OF SUB- SECTION (2) OF SECTION 13 IS NOT APPLICABLE AND AT BEST CLAUSE (B) OR CLAUSE (C) COULD HAVE BEEN INVOKED. HE POINTED OUT THAT FOR E XAMPLE SHRI KAILASH CHANDER WHO LIVES IN ENGLAND COMES SPECIFICALLY FOR THE WORK OF THE SOCIETY IN INDIA. HE IS 80 YEARS OLD PERSON AND DEVOTES TIME WHILE IN INDIA FOR THE WORK OF SOCIETY. DURING HIS STAY, HE IS GIVEN ONE ROOM. S IMILARLY IS THE CASE OF OTHER TRUSTEES WHO WERE MORE THAN 75 YEARS OLD AND HAVE DEVOTED THEIR LIVES FOR THE WORK OF THE SOCIETY. ONLY SHRI VIKAS DEV IS GIVEN A MEAGER SUM OF HONORARIUM FOR CARRYING OUT THE DAY TO DAY WORK AND OTHER MEMB ERS OF THE GOVERNING COUNCIL HAVE NOT BEEN PAID ANYTHING. IT WAS POINTE D OUT THAT DURING THE NEXT YEAR THE ASSESSING OFFICER HIMSELF VISITED THE SOCI ETY AND WAS SATISFIED THAT THE 5 PROVISIONS OF THE ACCOMMODATION COULD NOT BE CONSTR UED AS AMENITY AND NO SUCH ADDITION WAS MADE IN THE NEXT YEAR. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AND FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE. WE HAVE ALREADY EXTRACTED THE FINDINGS OF THE ASSESSING OFFICER REGARDING LIVES O F THE MEMBERS. ALL THE MEMBERS ARE MORE THAN 75 YEARS OF AGE AND HAVE BEEN ALLOWED TO STAY IN SINGLE ROOM FOR THE PURPOSE OF CARRYING OUT THE WOR K OF THE SOCIETY. SHRI KAILASH CHANDER WHO LIVES IN ENGLAND COMES ONLY FOR THE WORK IN INDIA. ALL THESE FACTS CLEARLY SHOW THAT THE ROOM ALLOWED TO THE ABOVE SAID PERSONS, HAVE BEEN USED FOR THE WORK OF SOCIETY AS WELL AS THE RE SIDENCE, THEREFORE, THE SAME CANNOT BE CALLED A BENEFIT U/S 13(2)(B) BECAUSE THI S IS A MEAGER BENEFIT AND NO EXPENSES ON ACCOMMODATION HAS BEEN ALLOWED TO BE US ED BY THE MEMBERS OF GOVERNING COUNCIL. THEREFORE, IN OUR OPINION, THE LD. CIT(A) HAS RIGHTLY ADJUDICATED THE ISSUE AND NO INTERFERENCE IS CALLED FOR IN HIS ORDER. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED ON 17.5. .2012 SD/- SD/- (H.L. KARWA) (T.R. SOOD) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 17.5.2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/ THE DR 6