M/s Clara Swain Hospital, Bareilly V. The Income Tax Office, Bareilly

ITA 347/LKW/2014

• Counselvise Citation: 34723714 RSA 2014
• Duration Of Justice: 1 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 05-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Application of stay
• Section: 50C; 12A; 10

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.347/LKW/2014 ASSESSMENT YEAR:2010 - 11 M/S CLARA SWAIN HOSPITAL, MISSION COMPOUND, BAREILLY. PAN:AAAAC1970G VS. INCOME TAX OFFICER, WARD - 1(1), BAREILLY. (APPELLANT) (RESPONDENT) O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), INTER ALIA, ON VARIOUS GROUNDS BUT THEY ALL RELATE TO THE CONFIRMATION OF ADDITION MADE ON ACCOUNT OF CAPITAL GAIN MADE BY THE ASSESSING OFFICER AFTER TREATING THE ASSESSEE TO BE THE OWN ER OF THE LAND. 2. DURING THE COURSE OF HEARING, THE ASSESSEE HAS MOVED AN APPLICATION FOR ADMISSION OF ADDITIONAL GROUND WITH REGARD TO THE INVOCATION OF PROVISIONS OF SECTION 50C OF THE ACT. SINCE THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 50C WHILE COMPUTING THE CAPITAL GAIN IN THE HANDS OF THE ASSESSEE AND THIS ASPECT WAS ALSO EXAMINED BY THE CIT(A), THIS ADDITIONAL GROUND, RAISED BEFORE US, DESERVES TO BE ADMITTED AND WE ACCORDINGLY ADMIT THE SAME AND WOULD BE DISPOSED OF IN DUE C OURSE. APPELLANT BY SHRI K. R. RASTOGI, F.C.A. RESPONDENT BY SHRI VIVEK MISHRA, C.I.T., D. R. DATE OF HEARING 21/04/2015 DATE OF PRONOUNCEMENT 1 1 / 0 6 /2015 2 3. THE FACTS, BORNE OUT FROM THE RECORD, ARE THAT THE ASSESSEE I.E. CLARA SWAIN HOSPITAL WAS ESTABLISHED IN 1870 IN BAREILLY TO PROVIDE TREATMENT TO THE SOCIETY WITHOUT ANY DISTINCTION. THIS HOSPITAL HAS BEEN AN INSTITUTION OF THE SUCCESSION OF METHODIST CHURCHES OF UNITED STATES AND OF INDIA . I N 1940 , T HIS HOSPITAL WAS EXPANDED INTO A GENERAL HOSPITAL. AS PER THE CONSTITUTION OF CLARA SWAIN HOSPITAL EXECUTED ON 24 TH AUGUST, 1989 , THE MOVABLE AND IMMOVABLE PROPERTY IN CLARA SWAIN HOSPITAL IS TH E PROPERTY OF METHODIST CHURCH IN INDIA HELD IN TRUST BY THE EXECUTIVE BOARD OF METHODIST CHURCH IN INDIA, REGISTERED UNDER THE SOCIETIES REGISTRATION ACT 1860 , BEARING NO. 1155 OF 1942 - 43 AT BOMBAY, SUCCESSOR IN INTEREST OF METHODIST CHURCH IN SOUTHERN AS IA. AS PER THE CONSTITUTION, THE SAID PROPERTY SHALL BE MANAGED, MAINTAINED AND PROTECTED BY THE BOARD OF GOVERNORS OF CLARA SWAIN HOSPITAL. 4. A JOINT VENTURE AGREEMENT WAS EXECUTED BETWEEN EXECUTIVE BOARD OF METHODIST CHURCH IN INDIA AND M/S RITAM CH ARITABLE & EDUCATION SOCIETY. AS PER THIS AGREEMENT, A JOINT VENTURE WAS FORMED TO EXPAND THE HOSPITAL FACILITIES TO AT LEAST 300 BEDS AND AT THE SAME TIME OPEN MEDICAL COLLEGE ALSO FOR IMPARTING THE EDUCATION IN THE ENTIRE FIELD OF MEDICINE. AS PER THE JOINT VENTURE AGREEMENT , THE SECOND PARTY I.E. M/S RITAM CHARITABLE & EDUCATION SOCIETY HAS PAID A SUM OF RS.10 CRORE TO THE METHODIST CHURCH IN INDIA THROUGH DD ISSUED IN FAVOUR OF THE EXECUTIVE BOARD OF METHODIST CHURCH IN INDIA. THIS AGREEMENT WAS EXAMINED BY THE ASSESSING OFFICER AND FORMED A VIEW THAT THROUGH THIS JOINT VENTURE AGREEMENT, THE ASSESSEE CLARA SWAIN HOSPITAL HAS GIVEN THE POSSESSION OF THE LAND TO M/S RITAM CHARITABLE & EDUCATION SOCIETY AGAINST RECEIPT OF RS.10 CRORE THEREFORE, THER E IS TRANSFER OF LAND IN FAVOUR OF THE SECOND PARTY I.E. M/S RITAM CHARITABLE & EDUCATION SOCIETY. SINCE THIS IS A TRANSFER OF A CAPITAL ASSET AS PER THE PROVISIONS OF SECTION 2 ( 47 ) ( V ) OF THE ACT, THE ASSESSING OFFICER HAS COMPUTED THE CAPITAL G AIN IN THE HANDS OF 3 THE ASSESSEE. HE ACCORDINGLY, WHILE CALCULATING THE CAPITAL GAIN HAVING INVOKED THE PROVISIONS OF SECTION 50C OF THE ACT AND CALCULATED THE CAPITAL GAIN IN THE HANDS OF THE ASSESSEE AT RS.8,86,12,637/ - . WHILE DEALING WITH THE ISSUE, THE ASSESSI NG OFFICER HAS ALSO OBSERVED THAT THE ASSESSEE IS A CHARITABLE SOCIETY REGISTERED U/S 12A OF THE ACT AND WAS ALSO HAVING AN INDEPENDENT PAN. THE ASSESSING OFFICER HAS ALSO NOTICED THAT THE ASSESSEE HAS FIL E D THE RETURN OF INCOME FOR THE IMPUGNED ASSESSMEN T YEAR BUT HAS NOT DISCLOSED THE CAPITAL GAIN ACCRUED ON THIS TRANSFER OF LAND. 4.1 THIS ADDITION IS CHALLENGED BEFORE THE CIT(A) ON BEHALF OF THE ASSESSEE WITH THE SUBMISSION THAT CLARA SWAIN HOSPITAL IS NOT THE OWNER OF THE LAND OF WHICH POSSESSION WA S GIVEN TO M/S RITAM CHARITABLE & EDUCATION SOCIETY. HE HAS PLACED RELIANCE UPON THE CONSTITUTION OF CLARA SWAIN HOSPITAL IN SUPPORT OF HIS CONTENTION THAT CLARA SWAIN HOSPITAL IS OWNED BY METHODIST CHURCH IN INDIA AND THE MOVABLE AND IMMOVABLE PROPERTY IN THE HOSPITAL IS THE PROPERTY OF METHODIST CHURCH IN INDIA AND CLARA SWAIN HOSPITAL IS NOT AT ALL OWNER OF THE LAND AND THE PROPERTY. IT WAS SIMPLY A BODY MANAGING THE FUNCTIONING OF THE HOSPITAL. A JOINT VENTURE AGREEMENT WAS EXECUTED BETWEEN METHODIS T CHURCH IN INDIA AND M/S RITAM CHARITABLE & EDUCATION SOCIETY THROUGH WHICH METHODIST CHURCH IN INDIA HAS HANDED OVER THE POSSESSION OF THE LAND IN CLARA SWAIN HOSPITAL TO M/S RITAM CHARITABLE & EDUCATION SOCIETY AGAINST THE RECEIPT OF RS.10 CRORE IN ORDE R TO EXPAND THE HOSPITAL FACILITIES AND ALSO TO OPEN A MEDICAL COLLEGE FOR IMPARTING EDUCATION IN THE ENTIRE FIELD OF MEDICINE. THROUGH THIS JOINT VENTURE AGREEMENT THEY HAVE DECIDED TO NAME THE MEDICAL COLLEGE AS CLARA SWAIN METHODIST MEDICAL COLLEGE & RESEARCH INSTITU TE. THEREFORE, WHATEVER TRANSACTION WAS UNDERTAKEN OR EXCHANGED, IT WAS BETWEEN THE METHODIST CHURCH IN INDIA AND M/S RITAM CHARITABLE & EDUCATION SOCIETY . T HOUGH THE ASSESSEE HAS FILED ITS RETURN OF INCOME IN INDIVIDUAL STATUS BUT HAS NO CONCERN WITH THE HANDING OVER THE POSSESSION 4 OF THE LAND TO M/S RITAM CHARITABLE & EDUCATION SOCIETY AGAINST THE RECEIPT OF RS.10 CRORE. IF ANY CAPITAL GAIN IS ACCRUED, IT IS ACCRUED IN THE HANDS OF METHODIST CHURCH IN INDIA AND NOT IN THE HANDS OF THE A SSESSEE. THEREFORE, THE REVENUE HAS WRONGLY ASSESSED THE CAPITAL GAIN IN THE HANDS OF THE ASSESSEE. THE CIT(A) REEXAMINED THE ISSUE IN THE LIGHT OF THE EVIDENCE PLACED BEFORE HIM BUT WAS NOT CONVINCED WITH IT AND CONFIRMED THE ASSESSMENT ORDER. 5. AGGRI EVED, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO THE ORDER OF CIT(A) WITH THE SUBMISSION THAT THOUGH THE CIT(A) HAS RECORDED CERTAIN CLAUSES OF THE JOINT VENTURE AGREEMENT BUT HAS FINALLY CONCLUDED THAT THE CAPITAL GAIN HAS ACCRUED IN THE HANDS OF THE ASSESSEE HAVING OVERLOOKED THE FACT THAT THE AGREEMENT WAS EXECUTED BETWEEN THE METHODIST CHURCH IN INDIA AND M/S RITAM CHARITABLE & EDUCATION SOCIETY A ND THE CONSIDERATION OF RS.10 CRORE WAS RECEIVED BY THE EXECUTIVE BOARD OF METHODIST CHURCH IN INDIA. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER INVITED OUR ATTENTION TO THE CONSTITUTION OF CLARA SWAIN HOSPITAL, WHICH IS AVAILABLE AT PAGE NO. 21 TO 43 O F THE COMPILATION OF THE ASSESSEE FILED ALONG WITH THE STAY APPLICATION WITH THE SUBMISSION THAT AS PER ARTICLE I(3), CLARA SWAIN HOSPITAL BELONGS TO METHODIST CHURCH IN INDIA, SUCCESSOR IN INTEREST OF THE METHODIST CHURCH IN SOUTHERN ASIA WITHIN THE JURIS DICTION OF NORTH INDIA REGIONAL CONFERENCE AND AS PER ARTICLE - II, (A) THE MOVABLE AND IMMOVABLE PROPERTY IN CLARA SWAIN HOSPITAL IS THE PROPERTY OF METHODIST CHURCH IN INDIA HELD IN TRUST BY THE EXECUTIVE BOARD OF METHODIST CHURCH IN INDIA, REGISTERED UNDE R SOCIETIES ACT. AS PER ARTICLE - II (B), THE SAID PROPERTY SHALL BE MANAGED, MAINTAINED AND PROTECTED BY THE BOARD OF GOVERNORS OF CLARA SWAIN HOSPITAL. THEREFORE, IN THE LIGHT OF THIS CONSTITUTION OF CLARA SWAIN HOSPITAL, BOARD OF GOVERNORS OF CLARA SWAI N HOSPITAL IS ONLY RESPONSIBLE FOR 5 THE MANAGEMENT AND MAINTENANCE OF THE HOSPITAL. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER INVITED OUR ATTENTION TO THE JOINT VENTURE AGREEMENT EXECUTED BETWEEN THE EXECUTIVE BOARD OF METHODIST CHURCH IN INDIA AND M/ S RITAM CHARITABLE & EDUCATION SOCIETY AVAILABLE AT PAGE NO. 19 TO 20 OF THE COMPILATION OF THE ASSESSEE FILED ALONG WITH THE STAY APPLICATION. I N THIS JOINT VENTURE AGREEMENT, IT HAS BEEN CATEGORICALLY STATED THAT THE FIRST PARTY OWNS AND RUNNING A HOSPITAL AT BAREILLY UNDER THE NAME AND STYLE OF CLARA SWAIN HOSPITAL FOR THE LAST 139 YEARS AND THE FIRST PARTY IS DESIROUS OF EXPANDING THE HOSPITAL FACILITIES AND ALSO TO OPEN A MEDICAL COLLEGE FOR WHICH THEY APPROACHED THE SECOND PARTY I.E. M/S RITAM C HARITABLE & EDUCATION SOCIETY WHO HAS AGREED TO PROVIDE NECESSARY FINANCES, MANAGEMENT AND OTHER INPUTS ON THE BASIS OF THEIR EXPERIENCE WHICH MAY BE REQUIRED TO IMPLEMENT THE SAID PROJECT OF THE FIRST PARTY. AS PER THE JOINT VENTURE AGREEMENT CLAUSE NO. 2, THE CLARA SWAIN HOSPITAL WILL BE RUN BY THE FIRST PARTY AND THE SECOND PARTY JOINTLY AS A JOINT VENTURE TO PROVIDE HOLISTIC HEALTH CARE AND ALSO TO CONSTRUCT A CLARA SWAIN METHODIST MEDICAL COLLEGE AND RESEARCH INSTITUTE FOR IMPARTING EDUCATION IN ALL T HE BRANCHES OF MEDICAL SCIENCE. IT WAS FURTHER AGREED THAT THE AFORESAID INSTITUTE SHALL BE MANAGED BY THE SECOND PARTY I.E. M/S RITAM CHARITABLE & EDUCATION SOCIETY WITH THE OVERALL SUPERVISION OF THE BOARD AND THE BOARD SHALL BE KNOWN AS CLARA SWAIN BOA RD . 5.1 THE COMPOSITION OF BOARD HAS ALSO BEEN SPECIFIED IN THIS AGREEMENT. AS PER THIS AGREEMENT, THE FIRST PARTY WOULD HAND OVER THE POSSESSION OF THE LAND IN CLARA SWAIN HOSPITAL TO SECOND PARTY FOR CONSTRUCTION AND DEVELOPMENT. IT WAS ALSO AGREED THAT THE MANAGEMENT SEATS IN THE MEDICAL COLLEGE WOULD BE SHARED EQUALLY BETWEEN BOTH THE PARTIES. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT IT IS ABUNDANTLY CLEAR FROM THIS JOINT VENTURE AGREEMENT THAT METHODIST CHURCH IN INDIA OWNS THE CLARA SWAIN HOSPITAL . THE FIRST PARTY HAS HANDED OVER THE 6 POSSESSION OF THE LAND IN CLARA SWAIN HOSPITAL TO M/S RITAM CHARITABLE & EDUCATION SOCIETY AGAINST RECEIPT OF RS.10 CRORE WITH CERTAIN UNDERSTANDING. THEREFORE, WHATEVER TRANSACTION HAS BEEN DONE , IT WAS BETWEEN THE METHODIST CHURCH IN INDIA AND M/S RITAM CHARITABLE & EDUCATION SOCIETY AND IF ANY CAPITAL GAIN IS ACCRUED ON ACCOUNT OF TRANSFER OF LAND BY VIRTUE OF SECTION 2 ( 47 ) ( V ) OF THE ACT , IT IS IN THE HANDS OF METHODIST CHURCH IN INDIA. THE ASSESSEE WAS SIMPLY A HOSPITAL WHICH WAS BEING MANAGED AND CONTROLLED BY THE METHODIST CHURCH IN INDIA AND IT DOES NOT OWN ANY LAND THEREIN. IT WAS SIMPLY AN ENTITY WHICH IS RUNNING A HOSPITAL . T HOUGH THE RETURN HAS BEEN FILED BY THE ASSESSEE IN INDIVIDU AL CAPACITY BUT IT DOES NOT MEAN THAT IT OWNED THE LAND AND THE PROPERTY IN THE HOSPITAL. THEREFORE, NO CAPITAL GAIN HAS ACCRUED IN THE HANDS OF THE ASSESSEE. 6. THE LEARNED D. R., ON THE OTHER HAND, HAS SUBMITTED THAT THE ASSESSEE HAS FILED THE RETURN OF INCOME AND ALSO GOT THE EXEMPTION U/S 12A OF THE ACT. THE HOSPITAL WAS MANAGED BY THE ASSESSEE AND ALSO OWNS THE LAND. SINCE THE LAND WAS HANDED OVER TO M/S RITAM CHARITABLE & EDUCATION SOCIETY AGAINST RECEIPT OF RS.10 CRORE, THE CAPITAL GAIN HAS ACCR UED IN THE HANDS OF THE ASSESSEE. BESIDES, LEARNED D. R. HAS PLACED RELIANCE UPON THE ORDER OF CIT(A). 7. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS AND THE DOCUMENTS PLACED BEFORE US, WE FIND FROM THE CONSTITUTION OF CLARA SWAIN HOSPITAL THAT THE CLARA SWAIN HOSPITAL BELONGS TO METHODIST CHURCH IN INDIA, SUCCESSOR IN INTEREST OF THE METHODIST CHURCH IN SOUTHERN ASIA WITHIN THE JURISDICTION OF NORTH INDIA REGIONAL CONFERENCE AS PER ARTICLE I(3). A S PER ARTICLE II(A) OF THE CONSTITUTION OF THE CLARA SWAIN HOSPITAL, THE MOVABLE AND IMMOVABLE PROPERTY IN THE CLARA SWAIN HOSPITAL IS THE PROPERTY OF METHODIST CHURCH IN INDIA HELD IN TRUST AND AS PER CLAUSE (B), THE BOARD OF GOVERNORS OF CLARA 7 SWAIN HOSP ITAL ARE REQUIRED TO MANAGE AND MAINTAIN THE PROPERTY. THROUGH THIS CONSTITUTION OF CLARA SWAIN HOSPITAL, THE CLARA SWAIN HOSPITAL WAS ONLY EMPOWERED TO MANAGE AND MAINTAIN THE MOVABLE AND IMMOVABLE PROPERTY IN CLARA SWAIN HOSPITAL. WE HAVE ALSO CAREFULL Y PERUSED THE JOINT VENTURE AGREEMENT AND WE FIND THAT THIS JOINT VENTURE AGREEMENT WAS EXECUTED BETWEEN THE EXECUTIVE BOARD OF METHODIST CHURCH IN INDIA AND M/S RITAM CHARITABLE & EDUCATION SOCIETY. IN THIS JOINT VENTURE AGREEMENT, IT IS SPECIFICALLY MEN TIONED THAT THE FIRST PARTY I.E. METHODIST CHURCH IN INDIA OWNS AND RUNNING A HOSPITAL AT BAREILLY UNDER THE NAME AND STYLE OF CLARA SWAIN HOSPITAL POPULARLY KNOWN AS MISSION HOSPITAL. SINCE THE FIRST PARTY DESIRED TO EXPAND THE HOSPITAL FACILITIES AND AL SO TO OPEN MEDICAL COLLEGE FOR IMPARTING EDUCATION IN THE ENTIRE FIELD OF MEDICINE, IT APPROACHED THE SECOND PARTY I.E. M/S RITAM CHARITABLE & EDUCATION SOCIETY WHO HAS AGREED TO PROVIDE NECESSARY FINANCE, MANAGEMENT AND OTHER INPUTS ON THE BASIS OF THEIR EXPERIENCE, WHICH MAY BE REQUIRED TO IMPLEMENT THE PROJECT. AS PER JOINT VENTURE AGREEMENT, THE NAME OF THE HOSPITAL AND MEDICAL COLLEGE WOULD BE CLARA SWAIN METHODIST MEDICAL COLLEGE AND RESEARCH INSTITUTE AND THIS HOSPITAL WILL BE RUN BY BOTH THE PARTI ES TO PROVIDE HOLISTIC HEALTH CARE. IT WAS ALSO AGREED UPON BETWEEN THE PARTIES THAT THE AFORESAID INSTITUTE SHALL BE MANAGED BY THE SECOND PARTY WITH OVERALL SUPERVISION OF THE BOARD AND THE NAME OF THE BOARD SHALL BE CLARA SWAIN BOARD TO BE FORMED BY THE MEMBERS OF BOTH THE PARTIES. THE FIRST PARTY WILL PROVIDE USE OF LAND AND AVAILABLE INFRASTRUCTURE, MOVABLE AND IMMOVABLE PROPERTY WITH THE CONSENT OF THE BOARD TO THE SECOND PARTY FOR JOINT VENTURE PROJECT AND IN LIE U THEREOF, THE SECOND PARTY HAS AGREED TO PAY RS.10 CRORE TO THE FIRST PARTY. IT IS ALSO CLARIFIED IN THIS AGREEMENT THAT THE MANAGEMENT SEATS IN THE MEDICAL COLLEGE WILL BE SHARED EQUALLY BY BOTH THE PARTIES. THE RELEVANT CLAUSE, NECESSARY TO ADJUDICATE THE NATURE OF ISSUE OF TRANSFER, ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: 8 THIS AGREEMENT IS MADE ON THIS 11 TH DAY OF AUGUST 2009 BETWEEN THE EXECUTIVE BOARD OF THE METHODIST CHURCH IN INDIA (FORMERLY KNOWN AS THE EXECUTIVE BOARD OF THE METHODIS T CHURCH IN SOUTHERN ASIA AND SUCCESSOR IN THE INTEREST OF THE AMERICAN MISSION, METHODIST EPISCOPAL CHURCH OF UNITED STATES OF AMERICA, METHODIST EPISCOPAL CHURCH SOUTH) HAVING ITS OFFICE AT 21, YMCA ROAD, MUMBAI) REPRESENTED BY ITS SECRETARY AND CONSTIT UTED ATTORNEY REV. SUBODH C. MONDAL S/O LATE MR. GURUCHARAN MODAL, R/O METHODIST CENTRE, 21, YMCA ROAD, MUMBAI CENTRAL, MUMBAI - 400 008, AND THROUGH HIS REPRESENTATI V ES (APPOINTED BY THE JOINT SPECIAL POWER OF ATTORNEY EXECUTED ON 06.08.09 REG. IN BOOK IV CD VOL. NO. 5 ON PAGE FROM 637 TO 6048 BEING NO. 03734 FOR THE YEAR 2009 IN THE OFFICE OF ADDITIONAL REGISTRAR OF ASSURANCE - III OFFICE OF THE A.R.A. - III KOLKATA, WEST BENGAL) DR. P. MUKH A RJEE S/O MR. T.K. MUKHERJEE MEDICAL SUPERINTENDENT AND DIRECTOR OF CLARA SWAIN HOSPITAL, BAREILLY R/O DIRECTOR HOUSE CLARA SWAIN HOSPITAL, BAREILLY, DR. ASHISH K. MASSEY S/O LATE MR. ADMOND MASSEY TREASURER NIRC R/O NAVE INSTITUTE, LODHIPUR , S HANJAHANPUR AND MANOJ MASIH S/O LATE MR. MUKANDI LAL, CHAIRMAN PROPERTY AND BUIL DING COMMITTEE NIRC R/O CHRIST METHODIST CHURCH, LOTANPUR, BADAUN (HEREINAFTER REFERRED TO AS THE FIRST PARTY ) DULY AUTHORIZED BY THE RESOLUTION PASSED IN THE MEETING ON 22 ND JULY 2009. M/S RITAM CHARITABLE & EDUCATION SOCIETY (REGD.), HAVING ITS OFFICE AT B - 186 CIVIL LINES, BAREILLY THROUGH ITS PRESIDENT MR. UMESH GAUTAM S/O MR. K.K. GAUTAM R/O B - 186, CIVIL LINES BARERILLY (HEREINAFTER REFERRED TO AS THE SECOND PARTY) DULY AUTHORIZED BY THE RESOLUTION PASSED IN THE MEETING OB 8 LH AUGUST 2009. WHEREAS, THE FIRST PARTY OWNS AND IS RUNNING A HOSPITAL AT BAREILLY UNDER THE NAME AND STYLE OF 'CLARA SWAIN HOSPITAL' POPULARLY KNOWN AS 'MISSION HOSPITAL' FOR THE LAST ABOUT 139 YEARS. THE HOSPITAL IS PRESENTLY HAVING 150 NOS. OF BEDS, AND OWNS VAST AREA OF LAND MEASURING APPROX.30.2ACRES. AND WHEREAS, THE FIRST PARTY IS DESIROUS OF EXPANDING THE HOSPITAL FACILITIES TO AT LEAST 300 BEDS AND AT THE SAME TIME OPEN MEDICAL COLLEGE ALSO FOR IMPARTING THE EDUCATION IN THE ENTIRE FIELD OF MEDICINE. HOWEVER, DU E TO PAUCITY OF FUNDS, AND OT HER REA SONS, THE FIRST PARTY IS NOT IN A POSITION TO START ITS AMBITIOUS PROJECT. 9 AND WHEREAS, THE SECOND PARTY HAS AGREED TO PROVIDE NECESSARY FINANCES, MANAGEMENT AND OTHER INPUTS ON THE BASIS O F THEIR EXPERIENCE WHICH MAY BE REQUIRED TO IMPLEMENT THE SAID PROJECT OF THE FIRST PARTY . XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX NOW THIS AGREEMENT WITNESSESS AS UNDER: 1. THE AGREEMENT BETWEEN PARTIES HEREUNDER IS FOR RUNNING OF AFORESAID HOSPITAL AND STARTING AND RUNNING OF THE MEDICA L COLLEGE IN THE NAME AND STYLE OF 'CLARA SWAIN METHODIST 'HOSPITAL' A ND CLARA SWAIN SCHOOL OF NURSING AND CLARA SWAIN METHODIST MEDICAL COLLEGE & RESEARCH INSTITUTE. 2. THE CLARA SWAIN METHODIST HOSPITAL WILL BE RUN BY THE FIRST PARTY AND THE SECOND PARTY JOINTLY AS A JOINT - VENTURE TO PROVIDE HOLISTIC HEALTH CARE, AND ESTABLISH, MANAGE, RUN AND CONSTRUCT 'CLARA SWAIN METHODIST MEDICAL COLLEGES AND RESEARCH INSTITUTE' FOR IMPARTING EDUCATION IN ALL THE BRANCHE S OF MEDICAL SCIENCES (ALLOPATHIC, AYURVED IC, HOMEOPATHIC, NATUROPATHY) AND TO ACT AS CONSULTANTS AND ADVISORS AND PROVIDE TECHNICAL KNOW - HOW FOR THE ESTABLISHMENT, OPERATION AND IMPROVEMENT OF HOSPITALS SCHOOL OF NURSING, MEDICAL CENTERS, MEDICAL COLLEGES, RESEARCH INSTITUTE AND LABORATORIES I N INDIA AND ABROAD. XXXXXXXXXXXXXXXXXXXXXXXXXXXX 4. THE AFORESAID INSTITUTIONS SHALL BE MANAGED BY THE SECOND PARTY WITH THE OVERALL SUPERVISION BY THE 'BOARD'. THE 'BOARD' SHALL BE KNOWN AS 'CLARA SWAIN BOARD'. THE COMPOSITION OF THE 'BOARD' SHALL BE AS FOLLOWS: METHODIST CHURCH IN INDIA SHALL HAVE ELEVEN (11) MEMBERS. AND ELEVEN ( 1 ) OTHER MEMBERS OF THE SECOND PARTY. THE OTHER DETAILS OF THE 'BOARD' WILL BE AS PER CLAUSES - 33 - 51 . XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 10 6. THE SECOND PARTY WILL PROVIDE THE FUNDS FOR THE AFORESAID IN ACCORDANCE WITH THE NEEDS OF THE PROJECT AND THE FIRST PARTY WILL PROVIDE USE OF LAND AND AVAILABLE INFRASTRUCTURE MOVABLE AND IMMOVABLE IN CONSULTATION WITH THE 'BOARD'. THE L AND APPROX. 30.2 ACRES AND PROPERTIES SITUATED WITHIN KHATA NO . 25 & 26 PLOT NO. 86 & 103 OF GRAM MAKRANDPUR SARKAR NZA (NOW CIVIL LINES) , TEHSIL AND DISTRICT BAREILLY, U.P. EXCLUDING BABY FOLD AND MISSION GIRLS SCHOOL ARE GIVEN BY TH E FIRST PARTY 'AS IS WHERE IS' BASIS FOR THE JOINT VENTURE PROJECT OF THE CLARA SWAIN METHODIST HOSPITAL, CLARA SWAINE METHODIST COLLEGE OF NURSING AND CLARA SWAIN METHODIST MEDICAL COLLEGE AND RESEARCH INSTITUTE. A MAP OF THE SAID PROPERTIES / CAMPUS IS A TTACHED. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 8. THE SECOND PARTY HAS AGREED TO PAY ONE TIME PAYMENT OF RS.10,00,00,000/ - (RS. TEN CRORES ONLY) VIDE D.D. NO. 463149 FOR RS. 4,25,00,000/ - , NO. 463148 FOR RS.4,50,00,000/ - DATED 08.08.2009 OF ICICI BANK BAREILLY IN FAVOUR OF EXECUTIVE BOARD OF METHODIST CHURCH IN INDIA AND D.D. NO. 023304 FOR RS.1,20,00,000/ - DATED 08.08.2009 OF PUNJAB NATIONAL BANK, BAREILLY IN FAVOUR OF EXECUTIVE BOARD OF METHODIST CHURCH IN INDIA TO THE FIRST PARTY TO DISCHARGE THE EXI STING LIABILITY UP TO THE DATE OF SIGNING THIS AGREEMENT AS MENTIONED IN CLAUSE 60 BY DEMAND DRAFT FAVOURING 'EXECUTIVE BOARD OF THE METHODIST CHURCH IN INDIA' PAYABLE AT MUMBAI, AT THE TIME OF SIGNING OF THIS AGREEMENT. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X 10. THE FIRST PARTY SHALL PROVIDE IN THE JOINT VENTURE, USE OF LAND AND AVAILABLE INFRASTRUCTURES, MOVABLE/IMMOVABLE EXISTING STRUCTURE, THE FIRST PARTY SHALL REMAIN ABSOLUTE OWNER OF THE SAID LAND BUILDING AND INFRASTRUCTURES (EXISTING AS WELL AS FUTUR E ADDITIONS) AND THE OWNERSHIP OF THE SAID PROPERTY WILL ALWAYS VEST WITH THE FIRST PARTY. IT IS UNDERSTOOD THAT DURING THE TENURE OF THIS JOINT VENTURE AGREEMENT, THE FIRST PARTY WILL NOT SELL/ LEASE/ALINATE THE SAID PROPERTY/LAND BUILDING INCLUDING NEW S UPER STRUCTURE. 11 THE SECOND PARTY SHALL BE SOLELY RESPONSIBLE FOR ANY VIOLATION DUE TO NON - PERFORMANCE ON THE PART OF THE SECOND PARTY SUCH AS UNSETTLED LIABILITIES, CREDITORS, VENDORS, LENDERS ETC. THE PROPERTY OF THE FIRST PARTY SHALL AT NO POINT OF TIME BE ATTACHED FOR SETTLEMENT OF DUES OF ANY THIRD PARTY (CREDITOR, VENDORS, LENDERS ETC) OR SUCH DUES EVOLVING OUT OF SUCH NON - PERFORMANCE/ UNSETTLED DUES. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 12. THE FIRST PARTY SHALL PROVIDE IN THE JOINT VENTURE PLANT & MACHINERY, EQUIPMENTS, VEHICLES AND OTHER ASSETS RELATED TO THE HOSPITAL TO THE SECOND PARTY AND THEY CAN BE USED/ALTERED FOR THE HOSPITAL, SCHOOL OF NURSING AND MEDICAL COLLEGE AND RESEARCH INSTITUTE PURPOSES ONLY IN CONSULTATION WITH THE BOARD. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 14. THE FIRST PARTY HAS AGREED TO PERMIT USES OF THE LAND AND BUILDING INCLUDING 150 BEDDED EXISTING HOSPITAL MORE PARTICULARLY DESCRIBED HEREUNDER THE ANNEXED MAP TO THE SECOND PARTY FOR A PERIOD OF 30 (THIRTY) YEARS. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 17. AS AND WHEN THE MEDICAL COLLEGE IS SET UP, IT IS AGREED THAT BOTH PARTIES WILL EQUALLY SHARE THE MANAGEMENT SEATS (50% - 50% AS PROVIDED IN CLAUSE NO. 28). XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXX 20. THE SECOND PARTY SHALL PROVIDE CO - SPONSORSHIP MANAGEMENT EXPERTISE, MANPOWER AND MANAGE THE FUNCTIONING OF THE MEDICAL COLLEGE AND RESEARCH INSTITUTE AND SHALL RUN THE COLLEGE IN ASSOCIATION WITH THE FIRST PARTY. THE SECOND PARTY SHALL MOBILIZE MANPOWER AND ALSO REQUIRED FINANCIAL RESOURCES AND PROVIDE NECESSARY MANAGEMENT EXPERTISE TO RUN AND WILL RUN AND BUILD ALL REQUIRED INFRASTRUCTURE IN FULL FOR THE ESTABLISHMENT AND RUNNING THE MEDICAL COLLEGE AND RESEARCH INSTITUTE IN ASSOCIATION WITH THE FIRST PARTY. 12 7.1 FROM A CAREFUL PERUSAL OF THIS JOINT VENTURE AGREEMENT, WE FIND THAT IT IS ABUNDANTLY CLEAR FROM THIS AGREEMENT THAT THERE IS NO ABSOLUTE TRANSFER OF LAND BY THE FIRST PARTY I.E. METHODIST CHURCH IN INDIA IN FAVOUR OF M/S RITAM CHARITABLE & EDUCATION SOCIE TY. BASICALLY , IT IS JOINT VENTURE AGREEMENT EXECUTED BETWEEN THE METHODIST CHURCH IN INDIA AND M/S RITAM CHARITABLE & EDUCATION SOCIETY TO EXPAND THE HOSPITAL FACILITIES AND ALSO TO SET UP A MEDICAL COLLEGE IN THE FIELD OF MEDICINE. SINCE THE FIRST PART Y HAS PROVIDED THE LAND AND IMMOVABLE PROPERTY OWNED BY IT TO THE SECOND PARTY FOR THE DEVELOPMENT OF THE PROJECT, ONE TIME PAYMENT OF RS.10 CRORE WAS MADE TO SECOND PARTY. THIS ONE TIME PAYMENT WILL BE CALLED TO BE THE CONSIDERATION FOR SURRENDERING CE RTAIN RIGHTS IN THE IMMOVABLE PROPERTY BY THE FIRST PARTY I.E. METHODIST CHURCH IN INDIA IN FAVOUR OF M/S RITAM CHARITABLE & EDUCATION SOCIETY FOR WHICH IF ANY CAPITAL GAIN IS TO BE ACCRUED , IT WOULD BE ACCRUED ONLY IN THE HANDS OF METHODIST CHURCH IN IND IA. THE ASSESSEE IS NOWHERE A PARTY TO THE JOINT VENTURE AGREEMENT. IT WAS SIMPLY A HOSPITAL MANAGING THE AFFAIRS OF THE HOSPITAL ONLY. IT DID NOT OWN THE PROPERTY OF THE HOSPITAL INCLUDING THE LAND THEREIN AS PER ITS CONSTITUTION AS IT WAS OWNED BY M ETHODIST CHURCH IN INDIA. THEREFORE, FROM ANY ANGLE, IF THE JOINT VENTURE AGREEMENT AND CONSTITUTION OF CLARA SWAIN HOSPITAL IS SEEN, IT WOULD BE ABUNDANTLY CLEAR THAT ASSESSEE HAS NOT TRANSFERRED ANY LAND OR ANY RIGHT IN THE CAPITAL ASSET IN FAVOUR OF M/ S RITAM CHARITABLE & EDUCATION SOCIETY. 7.2 MOREOVER, ONETIME PAYMENT OF RS.10 CRORE WAS ALSO NOT MADE TO THE ASSESSEE. THE PAYMENT WAS MADE TO METHODIST CHURCH IN INDIA THROUGH DD ISSUED IN FAVOUR OF EXECUTIVE BOARD OF METHODIST CHURCH IN INDIA. SINC E THE ASSESSEE HAS NOT RECEIVED ANY CONSIDERATION IN LIEU OF ANY TRANSFER OF THE CAPITAL ASSET, THERE IS NO QUESTION OF ANY CAPITAL GAIN IN THE HANDS OF THE ASSESSEE. WHATEVER CAPITAL GAIN HAS ARISEN, IT IS ONLY IN THE HANDS OF METHODIST CHURCH IN INDIA A ND NOT IN THE HANDS OF THE ASSESSEE. 13 THEREFORE, WE ARE OF THE VIEW THAT THE REVENUE HAS WRONGLY ASSESSED THE CAPITAL GAIN IN THE HANDS OF THE ASSESSEE ON TRANSFER OF ANY RIGHT IN MOVABLE OR IMMOVABLE PROPERTY OR LAND IN FAVOUR OF THE M/S RITAM CHARITABLE & EDUCATION SOCIETY. SO FAR ISSUE OF INVOCATION OF SECTION 50C IS CONCERNED, WE FIND THAT SINCE THE CAPITAL GAIN CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE, THE ISSUE REMAINS ACADEMIC ONLY AND WE THEREFORE, DECLINE TO ADJUDICATE THE SAME. ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITIONS OF CAPITAL GAIN MADE IN THE HANDS OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON 1 1 / 0 6 /201 5 ) SD/. SD/. ( A. K. GARODIA ) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 1 / 0 6 /201 5 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR