ITO (EXEMPTIONS), WARD-3, CHENNAI V. THAI MANN TRUST, CHENNAI

ITA 3450/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8177 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 19-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HOMI RAJVANSH
• Assessee Lawyers: D ANAND
• Keywords: Charitable institution; Set aside

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . . . , ., # BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI S.JAYARAMAN, ACCOUNTANT MEMBER / I.T.A. NOS.3449 & 3450/CHNY/2018 ' ' /ASSESSMENT YEAR : 2011-12 & 2012-13 THE INCOME TAX OFFICER (EXEMPTIONS) WARD-3, CHENNAI. VS M/S.THAI MANN TRUST, R-62, TNHB COLONY, II AVENUE, VELACHERY, CHENNAI-600 042. PAN: AAATT5003C ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. HOMI RAJVANSH, CIT /RESPONDENT BY : MR. D.ANAND, ADVOCATE /DATE OF HEARING : 08.04.2019 /DATE OF PRONOUNCEMENT : 11.04.2019 / O R D E R PER S.JAYARAMAN, AM: THESE APPEALS ARE FILED BY THE REVENUE AGAINST TH E COMMON ORDERS OF THE CIT(A)-17, CHENNAI, IN ITA NO.157/14- 15 & 73/15-16 DATED 15.10.2018 FOR ASSESSMENT YEARS 2011-12 & 2012-13 W ITH THE FOLLOWING COMMON GROUND:- THE ID. CIT(A) ERRED IN HOLDING THAT THERE IS NO V IOLATION U/S.13(1)(C) OF THE INCOME TAX ACT,1961 WITHOUT REALIZING THE FACT THAT NO RENTAL INCOME WAS REFLECTED IN THE INCOME AND EXPENDITURE STATEME NT FOR THE ASSESSMENT YEARS 2011-12 & 2012-13 BY WAY OF RENT R ECEIPTS FROM M/S VCK PARTY FOR RENTING THE ASSESSEE TRUST PREMISES E VEN THOUGH M/S VCK PARTY IS A SUBSTANTIAL CONTRIBUTOR IN TERMS OF SEC. 13(3) (B) OF THE INCOME TAX ACT,1961. 2. THE LD. DR SUBMITTED THAT THE ASSESSEE, THAI MANN TRUST, IS A PUBLIC CHARITABLE TRUST REGISTERED U/S.12AA. WHILE MAKING ASSESSMENTS 2 ITA NO .3449 & 3450/CHNY/2018 FOR THE IMPUGNED ASSESSMENT YEARS, THE A O HAS REF USED THE EXEMPTION U/S.11 INVOKING THE PROVISIONS OF SECTION 13(1)(C) AND HELD THAT THE PROPERTY OF THE TRUST HAS BEEN OCCUPIED BY THE PRIN CIPAL DONOR WITHOUT ADEQUATE COMPENSATION OR RENT. AT THE TIME OF APP EAL, THE LD. CIT (A) SOUGHT A REMAND REPORT FROM THE AO, CONSIDERED THEM AND ALLOWED THE APPEALS. THEREFORE, LD. DR SUBMITTED THAT THE L D. CIT(A) ERRED ON THE LINES OF GROUNDS OF APPEALS, SUPRA AND HEN CE THE ORDERS OF THE LD. CIT(A) BE SET ASIDE AND ORDERS OF THE AO BE R ESTORED. 3. PER CONTRA, LD. AR SUBMITTED THAT THE ASSESSE E TRUST HAD ENTERED INTO A RENTAL AGREEMENT WITH M/S.VIDUTH ALAI CHIRUTHAIGAL KATCHI (VCK) ON 28.02.2011, WHICH WAS SUBSEQUEN TLY AMENDED ON 07.03.2011 FOR AN ANNUAL RENT OF 5,00,000/-. SINCE THE ASSESSEE DISPUTED THE FINDINGS OF THE A O AT THE TIME O F APPEAL PROCEEDINGS, THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM THE AO AND AFTER APPRECIATING THE REMAND REPORTS, THE LD. CIT(A) AL LOWED THE APPEAL. THE LD. AR INVITED OUR ATTENTION TO THE FOLLOWING PO RTION OF THE REMAND REPORT RELATED TO ASSESSMENT YEAR 2001-12, IN THE ORDER OF THE LD CIT(A) :- 2.4. IT MAY BE SEEN FROM THE ABOVE BREAK-UP THAT T HE ASSESSEE HAS NOT SHOWN ANY RENTAL INCOME. THE ASSESSEE SUBMITTED AN UNREGISTERED LEASE AGREEMENT EXECUTED BETWEEN THE ASSESSEE TRUST AND V CK ON 28.02.2011 THE RECITALS IN THE LEASE AGREEMENT STAT ED THAT THE LEASE SHOULD COMMENCE FROM 01.03.2011 AND SHOULD BE FOR A PERIOD OF ONE YEAR AND M/S VCK SHALL PAY RS. 5,00,000/- PER MONTH AS RENT TO THE 3 ITA NO .3449 & 3450/CHNY/2018 ASSESSEE TRUST, WHICH WAS AMENDED AS RS. 5 LAKHS PE R ANNUM VIDE AGREEMENT DATED 28.02.20 1 1 TOWARDS LETTING OUT OF 1250 SQ FT IN THE WESTERN SIDE OF THE FIRST FLOOR AT R-62, SECOND AVE NUE, TNHB COLONY. VE(ACHERY-600042. THOUGH, THE LEASE DEED WAS FOR A PERIOD OF ONE YEAR, IT HAD NOT BEEN REGISTERED. THE PORTION OF RE NTAL INCOME ATTRIBUTABLE TO THE FY 2010- 11 I.E FOR THE PERIOD OF MARCH 2011 HAS NOT BEEN REFLECTED IN THE BREAK-UP GIVEN. AND SUBMITTED THAT SINCE THE PERIOD OF TENANCY COMM ENCED FROM 01.03.2011, THE RENT FOR MARCH 2011 WAS TO BE AC COUNTED IN APRIL 2011, IE DURING THE PERIOD RELEVANT TO ASSESSMENT Y EAR 2012-13. THEREFORE, THE ASSESSEE HAS NOT SHOWN ANY INCOME FROM THE PROPERTY IN THE RETURN FILED FOR ASSESSMENT YEAR 2011-12. HO WEVER, IN THE ASSESSMENT YEAR 2012-13, IT HAS SHOWN THE RENT RE CEIPT OF 5.00 LAKHS. THEREAFTER, THE LD AR INVITED OUR ATTENTION TO THE FOLLOWING PORTION OF THE ORDER OF CIT (A), WHICH IS EXTRACTED AS UNDER:- 3.3 A LETTER WAS SENT TO THE ASSESSEE PROVIDING A N OPPORTUNITY TO SUBMIT THE DETAILS BEFORE THE ASSESSING OFFICER. TH E ASSESSEES AR SHRI VT. RAJINKANTH APPEARED ON09.07.2018 AND SUBMITTED THE BREAK-UP OF THE HEAD DONATIONS AS UNDER: BREAK UP OF DONATIONS DURING THE A.Y.2012-13 (IN RS.) DONATIONS FROM VIDUTHALAI CHIRUTHAIGAL KATCHI 2,38,05,000 DONATIONS FROM OTHERS 29,93,265 RENT RECEIVED ON 04.10.2011 5,00,000 INCOME FROM MARUTHAM TEACHERS TRAINING INSTITUTE (GOVERNMENT GRANT) 3,31 065 TOTAL 2,76,29,330 3.4 THE ASSESSEE SUBMITTED AN UNREGISTERED EASE AGREEMENT EXECUTED BETWEEN THE ASSESSEE TRUST AND VCK ON 28.02.2011. T HE RECITALS IN THE LEASE AGREEMENT STATED THAT THE LEASE SHOULD COMMEN CE FROM 01.03.2011 AND SHOULD BE FOR A PERIOD OF ONE YEAR AND M/S. VCK SHALL PAY RS.5,00,000/- PER MONTH AS RENT TO THE ASSESSEE TRU ST, WHICH WAS AMENDED S RS.5 LAKHS PER ANNUM VIDE AGREEMENT DATED 28.02.2011 4 ITA NO .3449 & 3450/CHNY/2018 TOWARDS LETTING OUT OF 1250 Q FT IN THE WESTERN SI DE OF THE FIRST FLOOR AT R-62, SECOND AVENUE, TNHB COLONY, VELACHERY-600042 . THE LEASE AGREEMENT WAS RENEWED ON 05.03.2012. THE PORTION OF RENTAL IN COME ATTRIBUTABLE TO THE FY 2011-12 (A.Y.12-13) OF RS. 5 LAKH HAS BEEN R ECEIVED BY THE TRUST ON 4.10.2011 THROUGH ANDHRA BANK, ASHOK NAGAR BRANC H. 4.1 IT IS SEEN FROM THE SUBMISSIONS MADE BY THE ASSESSEE THAT DURING THE FY 2010-11 RELEVANT TO THE AY 2011-12, THE ASSE SSEE HAS NOT OFFERED ANY RENTAL INCOME RECEIPT THOUGH THE VIDUTHALAI CHI RUTHAIGAL KATCHI OCCUPIED THE PREMISES IN THE MONTH OF MARCH 2011. 4.2 IN RESPECT OF AY 201 2-13, THE BREAKUP OF THE RECEIPTS INCLUDES THE RENTAL INCOME RECEIVED OF RS. 5 AKHS FOR THE FY 201 1-12 RELEVANT TO THE AY 2012-1 3. LT IS SEEN THAT THE ASSESSEE HAD RECEIVED THE RENTAL INCOME FOR ITS PREMISES OCCUPIED BY VIDUTHALAI CIRUTHAIGAI KAT CHI, WHICH IS HAVING SUBSTANTIAL INTEREST IN THE ASSESSEE TRUST IN VIEW OF DONATIONS GIVEN TO THE ASSESSEE TRUST. AND SUBMITTED THAT ON APPRECIATION OF REMAND REPO RT, THE LD. CIT(A) RECORDED HIS FINDINGS IN HIS ORDERS AS UNDER:- 4.4. THE FACT THAT THE LEASE AGREEMENT, ALTHOUGH UN REGISTERED, EXISTED FROM THE BEGINNING IS UNDISPUTED. THE MAIN OBJECTIO N ON THE PART OF THE ASSESSING OFFICER APPEARS TO BE THAT THE LEASE AGRE EMENT WAS NOT REGISTERED AND THAT NO RENTAL INCOME WAS SEPARATELY SHOWN FOR THE PREVIOUS YEAR RELEVANT TO THE AY 2011-12. THE ASSES SING OFFICER ACKNOWLEDGES THE FACT THAT AS PER THE RECITALS IN T HE LEASE AGREEMENT, THE LEASE COMMENCED FROM 01.03.2011 FOR A PERIOD OF ONE YEAR AND THAT VCK WAS TO PAY RS.5,00,000/- PER MONTH AS RENT TO THE A PPELLANT-TRUST, WHICH WAS LATER CORRECTED AS RS.5 LAKHS PER ANNUM VIDE AG REEMENT DATED 28.02.2011. IT IS ALSO FURTHER ACKNOWLEDGED THAT TH E LEASE AGREEMENT WAS RENEWED ON 05.03.20 12 AND THE PORTION OF RENTAL IN COME ATTRIBUTABLE TO THE FY 201 1-12(A.Y. 12-13) OF RS.5 LAKH WAS RECEIV ED BY THE APPELLANT ON 04.10.2011 THROUGH BANKING CHANNELS. 4.4.1. SECONDLY, THE ASSESSING OFFICER STATES THE F ACT THAT THE RENTAL INCOME OF RS.5 LAKHS APART FROM THE GOVERNMENT GR ANTS OF RS.3,31,065 RECEIVED FOR MARUTHARN TEACHERS TRAINING INSTITUTE - WAS TREATED AS PART OF THE TOTAL RECEIPTS AT RS. 2,76,29,330 FOR THE AY 20 12-13. IN OTHER WORDS, THE ASSESSING OFFICER AGREES WITH THE CONTENTION OF THE APPELLANT THAT RENTAL INCOME WAS ERRONEOUSLY TREATED AS PART OF TO TAL RECEIPTS OF THE APPELLANT. 4.4.2. LAST BUT NOT LEAST, WHILE COMPLETING THE ASS ESSMENT FOR THE AY 2013-14 THE ASSESSING OFFICER OBSERVED AS FOLLOWS: 5 ITA NO .3449 & 3450/CHNY/2018 IT HAS BEEN NOTICED THAT UNLIKE THE EARLIER ASSESSM ENT YEARS IN THE PREVIOUS YEAR RELEVANT TO THIS ASSESSMENT YEAR, THE ASSESSEE HAS CHARGED RENT OF RS.5,00,000/- FOR LETTING OUT ITS PREMISES TO VCK A MAJOR DONOR. THE ASSESSEE ALSO PRODUCED A LEASE AGREEMENT DATED 05.03.2012 IN RESPECT OF THE LEASE OF PROPERTY WHEREFROM RENT W AS RECEIVED BY THE ASSESSEE. HENCE, THERE WAS NO OCCASION IN THIS ASSE SSMENT YEAR FOR INVOKING SEC.13(1)(C) R.W.S 13(2)(B) R.W.S 13(3)(B) . THEREBY, THE ASSESSING OFFICER RECOGNIZES THE FACT THAT THE APPELLANT WAS ELIGIBLE FOR THE BENEFIT OF SEC. 11 AND 12 BUT FOR THE SMALL MISTAKE COMMITTED WHILE ACCOUNTING FOR THE GROSS RECEIPTS F OR THE AYS 2011-12 AND 2012-13. SECONDLY, THE ASSESSING OFFICERS OBSERVAT ION THAT THE LEASE AGREEMENT IS NOT REGISTERED IS OF LITTLE CONSEQUENC E, SINCE THERE IS NO DOUBT WHATSOEVER AS TO THE FACT THAT THE PROPERTY W AS ACTUALLY LET OUT TO VCK. 4.5. IN VIEW OF THE ABOVE, I TOTALLY ACCEPT THE CON CLUSION OF THE ASSESSING OFFICER - WHILE SUBMITTING THE REMAND REPORT - THAT THE APPELLANT HAD RECEIVED THE RENTAL INCOME FOR ITS PREMISES OCCUPIE D BY VCK - WHICH HAS MADE A SUBSTANTIAL CONTRIBUTION TO THE APPELLANT-TR UST. IN OTHER WORDS, THERE IS NO EVIDENCE TO PROVE THE FACT THAT THE PROPERTY OF THE APPELLANT WAS MADE AVAILABLE, DURING THE PREVIOUS YEARS RELEVANT TO THE ASSESSMENT YEARS UNDER CONSIDERATION, TO A PERSON WHO HAS MADE SUBSTANTIAL CONTRIBUTION TO THE TRUST WITHOUT CHARGING ADEQUATE RENT. THEREFORE, I HOLD THAT THE ASSESSING OFFICER ERRED IN DENYING THE BEN EFIT OF SEC. 11 AND 12 TO THE APPELLANT-TRUST. THE ASSESSING OFFICER IS DIREC TED TO EXTEND THE BENEFIT OF SEC. 11 AND 12 TO THE APPELLANT FOR THE ASSESSME NT YEARS UNDER CONSIDERATION. THE APPELLANT SUCCEEDS ON THIS GROUN D. RELYING ON THE ABOVE, THE LD AR PLEADED THAT THER E IS NO MERIT IN THE REVENUES APPEALS AND HENCE THE ORDERS OF THE LD. CIT(A) BE UPHELD. 5. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH RELEVANT MATERIAL. THE FACTS REMAIN THAT THE ASSESSEE TRUST BY AN AGREEMENT, LEASED ITS PROPERTY FROM 01.03.2011 FOR A PERIOD OF ONE YEAR TO M/S.VKC FOR 5,00,000/- PER ANNUM, AS PER THE AMENDED AGREEMENT. THE RENTAL INCOME WAS RECEIVED BY THE ASSESSEE ON 04.10.2011 6 ITA NO .3449 & 3450/CHNY/2018 THROUGH BANKING CHANNEL AND ACCOUNTED IT IN THE A SSESSMENT YEAR 2012-13. THE AREA OF THE PROPERTY WAS 1250 SQ. FT AND ITS LOCATION IS WESTERN SIDE OF THE FIRST FLOOR AT R-62, SECOND AV ENUE, TNHB COLONY, VELACHERY, CHENNAI-600 042. THE REVENUE PLEADED THAT THERE IS VIOLATION OF PROVISIONS OF SECTION 13(1) (C) OF THE ACT AND HENCE THE ASSESSEE IS NOT ELIGIBLE FOR THE EXEMPTION CLAIM FOR THE IMPUGNED ASSESSMENT YEARS. IN ORDER TO APPRECIATE THE REVENU ES PLEA, THE RELEVANT PROVISIONS ARE EXTRACTED AS UNDER:- 13. (1) NOTHING CONTAINED IN SECTION 11 OR SECTION 12 SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT THEREOF (A) . (B).. (C) IN THE CASE OF A TRUST FOR CHARITABLE OR RELIG IOUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITUTION, ANY INCOME THEREOF (I) IF SUCH TRUST OR INSTITUTION HAS BEEN CREATED OR ESTABLISHED AFTER THE COMMENCEMENT OF THIS ACT AND UNDER THE TERMS OF THE TRUST OR THE RULES GOVERNING THE INSTITUTION, ANY PART OF SUCH INCOME ENURES, OR (II) IF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR THE INSTITUTION (WHENEVER CREATED OR ESTABLISHED) IS DURING THE PRE VIOUS YEAR USED OR APPLIED, DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSO N REFERRED TO IN SUB-SECTION (3) : .. --------------------------------------------------- ------------------------------------------- 13(2) WITHOUT PREJUDICE TO THE GENERALITY OF THE PR OVISIONS OF CLAUSE (C) AND CLAUSE (D) OF SUB-SECTION (1), THE INCOME OR THE PROPERTY OF THE TRUST OR INSTITUTION OR ANY PART OF INCOME OR PROPERTY SHA LL, FOR THE PURPOSE OF THAT CLAUSE, BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF A PERSON REFERRED TO SUB-SECTION(3) (A) 7 ITA NO .3449 & 3450/CHNY/2018 (B) IF ANY LAND, BUILDING OR THE PROPERTY OF THE T RUST OR INSTITUTION IS OR CONTINUES TO BE MADE AVAILABLE FOR THE USE OF ANY P ERSON REFERRED TO IN SUB- SECTION(3) FOR ANY PERIOD DURING THE PREVIOUS YEAR WITHOUT CHARGING ADEQUATE RENT OR OTHER COMPENSATION. .. .. 13(3) THE PERSONS REFERRED TO IN CLAUSE (C) OF SUB- SECTION (1) AND SUB-SECTION (2) ARE THE FOLLOWING, NAMELY : (A) .. (B) ANY PERSON WHO HAS MADE A SUBSTANTIAL CONTRIB UTION TO THE TRUST OR INSTITUTION, THAT IS TO SAY, ANY PERSON WHOSE TOTAL CONTRIBUTION UP TO THE END OF THE RELEVANT PREVIOUS YEAR EXCEEDS FIFTY THOUSAND R UPEES; 5.1 FROM THE ABOVE, IT IS CLEAR THAT IF ANY LAN D, BUILDING, OR OTHER PROPERTY OF THE TRUST IS MADE AVAILABLE FOR THE U SE OF ANY PERSON WHO HAS MADE SUBSTANTIAL CONTRIBUTION TO THE TRUST FOR ANY PERIOD DURING THE PREVIOUS YEAR WITHOUT CHARGING ADEQUATE RENT OR O THER COMPENSATION THEN NOTHING CONTAINED IN SECTION 11 OR SECTION 12 SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT THEREOF. IN THIS CASE, THE ASSESSEE HAS RE CEIVED RENT OF 5,00,000/- PER ANNUM I.E APPROXIMATELY 41,667/- PER MONTH FROM M/S. VKC FOR THE PROPERTY OF 1250 SQ.FT., WHICH I S IN THE WESTERN SIDE OF THE FIRST FLOOR AT R-62, SECOND AVENUE, TNHB COLON Y, VELACHERY, CHENNAI-600 042 FOR THE PERIOD MARCH 2011 TO FEB 20 12. IN OUR VIEW, THE RENT RECEIVED FOR THE ABOVE PROPERTY FOR THE A BOVE PERIOD APPEARS TO BE AN ADEQUATE RENT OR COMPENSATION AND HENCE, WE FIND THAT THE 8 ITA NO .3449 & 3450/CHNY/2018 ASSESSSEE HAS NOT VIOLATED THE PROVISIONS OF SEC TION 13 (1)(C) R.W.S 13(2)(B) R.W.S 13(3)(B). THUS, THE REVENUE HAS N OT MADE OUT A CASE U/S.13 (1)(C) R.W.S 13(2)(B) R.W.S 13(3)(B) OF THE ACT. WE ALSO ACCEPT THE ASSESSEES PLEA THAT SINCE THE LEASE COMMEN CED FROM MARCH, 2011, RENTAL INCOME RELATED TO MARCH, 2011 WAS PAID IN THE SUBSEQUENT ASSESSMENT YEAR I.E. 2012-13, THEREFORE, THE ASSES SEE HAS NOT ADMITTED ANY INCOME FOR THE ASSESSMENT YEAR 2011-12 ON THIS COUNT AND HENCE THERE WAS NO ERROR IN THE RETURN OF INCOME RELATIN G TO ASSESSMENT YEAR 2011-12. THEREFORE, WE DO NOT FIND ANY MERIT IN THE GROUNDS RAISED BY THE REVENUE AND THUS BOTH THESE REVENUES APPEA LS ARE DISMISSED. 6. IN THE RESULT, THE REVENUES APPEALS ARE DISMISS ED. ORDER PRONOUNCED ON 11 TH APRIL, 2019 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( S.JAYARAMAN) ( ! / JUDICIAL MEMBER) ( ! / ACCOUNTANT MEMBER) /CHENNAI, $ /DATED 11 TH APRIL, 2019 SOMU () *) /COPY TO: 1. APPELLANT 2. RESPONDENT 3. + () /CIT(A) 4. + /CIT 5. ) / /DR 6. 2 /GF