ITO (E), New Delhi V. Manav Bharti Institute of Child Education & Child Psychology, New Delhi

ITA 4014/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0060 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 17-03-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 30-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH SONKAR
• Keywords: Fair market value
• Section: 12A; 12; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A NO. 4014/DEL/10 ASSTT. YEAR 2007-08 INCOME TAX OFFICER (EXEMPTIONS), TRUST WARD-IV, DELHI. VS. MANAV BHARTI INSTITUTE OF CHILD EDUCATION & CHILD PSYCHOLOGY PANCHSHEEL PARK, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI PEEYUSH SONKAR, SR. DR RESPONDENT BY: NONE ORDER PER RAJPAL YADAV, JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT(A) DATED 29 TH JUNE, 2010 PASSED FOR ASSTT. YEAR 2007-08. THE REV ENUE HAS PLEADED THAT LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO ALLOW THE BENEFIT OF SECTION 11 AND 12, EVEN WHEN ASSESSEE HAS VIOLAT ED THE PROVISIONS OF SECTION 13 OF THE ACT. THE REVENUE FURTHER PLEADED THAT LD. CIT(A) HAS ERRED IN DIRECTING TO ALLOW BENEFIT U/S 11 (2) OF T HE ACT IN THE ABSENCE OF ANY SPECIFIC PURPOSE FOR WHICH THE FUNDS HAVE BEEN ACCUMULATED. THE ITA NO. 4014/DEL/10 ASSTT. YEAR 2007-08 2 PRESENT APPEAL WAS LISTED FOR HEARING ON 15 TH MARCH, 2011. SHRI SANJEEV KAPOOR, CHARTERED ACCOUNTANT APPEARED ON BEHALF OF THE ASSESSEE. HE FILED THE PAPER BOOK CONTAINING ORDERS OF THE ITAT PASSED IN ASSTT. YEARS 2003-04, 2005-06, 2006-07 AND CONTENDED THAT ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. THE COP Y OF THE PAPER BOOK WAS HANDED OVER TO THE LD. DR. LD. DR SOUGHT TIME T O GO THROUGH THE PAPER BOOK. WE HAVE ADJOURNED THE HEARING FOR 17 TH MARCH 2011 AND OBSERVED IN THE COURT THAT IN CASE ISSUES ARE NOT F OUND TO BE COVERED THEN WE WILL ISSUE THE NOTICE TO THE ASSESSEE. ON 1 7 TH MARCH, 2011 LD. DR CONCEDED THAT ISSUES IN DISPUTE ARE SQUARELY COV ERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF THE TRIBUNAL. 2. THE BRIEF FACTS NOTICED BY THE AO ARE THAT ASSES SEE HAS FILED ITS RETURN OF INCOME ON 24.10.2007 DECLARING INCOME AT NIL. IT EMERGES OUT FROM THE RECORD THAT ASSESSEE IS A REGISTERED SOCIE TY. IT ENJOYS THE REGISTRATION U/S 12A OF THE INCOME TAX ACT. THE RE GISTRATION WAS GRANTED ON 31.8.1978. ITS AIMS AND OBJECTS ARE TO ESTABLISH EDUCATIONAL CENTERS FOR THE TRAINING OF TEACHERS. IT REVEALS FROM THE R ECORD THAT ASSESEES SOCIETY WAS FOUNDED IN 1941 AND THE FOUNDATION OF T HE SCHOOL IN THE PREMISES AT PANCHSHEEL PARK WAS MADE IN 1972. IT HA S BEEN GETTING ITA NO. 4014/DEL/10 ASSTT. YEAR 2007-08 3 EXEMPTION U/S 10(22) OF THE ACT CONTINUOUSLY. THERE IS NO DISTINCTION IN THE NATURE AND THE ACTIVITIES OF THE ASSESSEE DURIN G THESE YEARS. THIS YEAR AN EXEMPTION WAS CLAIMED U/S 10 (23C) (VI) OF THE ACT BUT APPROVAL UNDER THIS SECTION WAS NOT GRANTED BY THE PRESCRIBE D AUTHORITY WHICH HAS BEEN GRANTED FOR ASSTT. YEAR 2008-09. THE CASE OF T HE ASSESSEE WAS EXAMINED U/S 11,12 AND 13 OF THE ACT. LD. AO WHILE EXAMINING THIS CLAIM HAS OBSERVED THAT ASSESSEE HAS MADE A PAYMENT TO THE SPECIFIED PERSONS U/S 13 (1)(C) OF THE ACT. HE NOTICED THE D ETAILS OF PERSONS AND THE PAYMENT ON PAGE 2 OF THE ASSTT. ORDER WHICH REA D AS UNDER :- . ON PERUSAL OF DETAILS FILED DURING THE COURSE OF ASSTT. PROCEEDING IT IS FOUND THAT THE INSTITUTE HAS MADE PAYMENTS TOS THE FOLLOWING SPECIFIED PERSONS AS UNDER :- NAME OF PERSON DESIGNATION 31.3.2005 31.3.2006 31.3.2007 BHARTI PANDEY PRINCIPAL 4,39,603 4,38,126 5,62,669 PRASHANT PANDEY BURSAR 2,24,379 2,45,178 2,63,196 NIKHIL PANT COUNSELOR 1,60,338 1,71,471 1,85,865 3. IN THE UNDERSTANDING OF THE AO, ASSESSEE HAS EXT ENDED FINANCIAL BENEFIT TO THE SPECIFIED PERSONS WHICH IS NOT IN CO NSUMERATE WITH THEIR QUALIFICATION. HENCE, IN HIS OPINION, IT IS UNDUE B ENEFIT AND ASSESSEE HAS VIOLATED SECTION 13(1)(C) OF THE ACT. SIMILARLY, HE NOTICED THAT ASSESSEE HAS SUBMITTED FORM NO. 10 AND CLAIMED ACCUMULATION OF RS. 94 LACS U/S ITA NO. 4014/DEL/10 ASSTT. YEAR 2007-08 4 11(2)OF THE ACT. HE NOTICED THE PURPOSE OF ACCUMULA TION AT PAGE 3 OF THE ASSTT. ORDER WHICH READ AS UNDER :- (1) CONSTRUCTION OF SECOND FLOOR OF MAIN BUILDING O F SCHOOL (2) CONSTRUCTION OF AUDITORIUM BLOCK OF THE SCHOOL (3) CONSTRUCTION OF HOSTEL BLOCK OF THE SCHOOL (4) CONSTRUCTION OF NURSERY AND PREPARATORY BLOCK O F THE SCHOOL (5) CONSTRUCTION /UP GRADATION OF BASIS INFRASTRUCT URE OF THE SCHOOL (6) ACHIEVEMENT OF ANY OTHER OBJECT AS SPECIFIED IN THE MEMORANDUM OF ASSOCIATION. 4. IN THE OPINION OF AO, THERE IS NO SPECIFIC PURP OSE FOR WHICH FUNDS HAVE BEEN ACCUMULATED. THEREFORE, ASSESSEE IS NOT E NTITLED FOR THE BENEFIT U/S 11(2) OF THE ACT. HE DETERMINED THE TOT AL TAXABLE INCOME OF ASSESSEE AT RS. 1,52,19,410/-. THE COMPUTATION MADE BY THE AO READ AS UNDER :- EXCESS OF INCOME OVER EXPENDITURE RS. 58,19,407/- ADD:- BUILDING FUND SET APART FUND RS. 94,00,000 /- (AS DISCUSSED ABOVE) TOTAL INCOME RS. 1,52,19,407/- ROUNDED OFF RS. 1,52,19,410/- ITA NO. 4014/DEL/10 ASSTT. YEAR 2007-08 5 5. ON APPEAL LD. CIT(A) DELETED THE ADDITION / DISA LLOWANCES MADE BY THE AO AND HAS OBSERVED THAT ASSESSEE IS ENTITLE D TO BENEFIT U/S 11 AND 12 AS WELL AS U/S 11(2) OF THE ACT. 6. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF ITAT PASSED IN ASSTT.YEAR 2006- 07. THE PAYMENTS MADE TO SMT. BHARTI PANDEY, SHRI P RASHANT PANDEY AND SHRI NIKHIL PANT NOTICED BY US WAS DULY NOTICE D BY THE TRIBUNAL FOR THE PERIOD ENDING ON 31 ST MARCH, 2004, 31 ST MARCH, 2005 AND 31 ST MARCH, 2006. IN THIS YEAR, IN THE DETAILS THE ADDITION IS OF 31 ST MARCH, 2007 AND EXCLUSION IS OF 31 ST MARCH, 2004. THE DISCUSSION MADE BY THE TRIBUNAL ON THIS ISSUE READ AS UNDER :- 4. IT MAY BE MENTIONED HERE THAT WHILE MAKING DISA LLOWANCE THE ASSESSING OFFICER HAS NOT MADE ANY DISALLOWANCE WIT H RESPECT TO SALARY PAID TO SHRI NIKHIL PANT WHICH WAS ALSO SUBJ ECT MATTER FOR DISALLOWANCE IN IMMEDIATE PRECEDING ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2005-06. ON SIMILAR FACTS AND CIRCUMSTANCES, T HE TRIBUNAL AFTER CONSIDERING THE SUBMISSION OF BOTH THE PARTIES HAS OBSERVED THAT FROM THE FACTS OF THE CASE IT CANNOT BE SAID THAT ANY BE NEFIT WAS EXTENDED TO THESE PERSONS U/S 13(1)(C) OF THE ACT, THEREFORE, T HESE SALARIES WERE LIABLE TO BE DEDUCTED U/S 11(1)(A). THE FINDINGS O F THE TRIBUNAL FOR ASSESSMENT YEAR 2005-06 AS CONTAINED IN PARA 5 TO 5 .3 BEING RELEVANT ARE REPRODUCED BELOW :- 5. GROUND NO.1 IS REGARDING DENIAL OF DEDUCTION U /S 11 ON ACCOUNT OF THE FACT THAT BENEFIT WAS GIVEN TO PROHIBITED PE RSONS. AS SEEN FROM THE ORDERS OF AUTHORITIES BELOW, THREE PERSONS HAVE BEEN LISTED FOR THIS PURPOSE. MRS. BHARTI PANDEY WAS THE PRINCIPAL OF TH E INSTITUTION AND ITA NO. 4014/DEL/10 ASSTT. YEAR 2007-08 6 SHE WAS ALSO LOOKING AFTER THE BOARDING SCHOOL. SHE WAS PAID SALARY AND SHE WAS ALSO PROVIDED RESIDENTIAL ACCOMMODATION AND ATTENDANT FACILITIES, WHICH INCLUDED THE FACILITY OF A CAR AN D TELEPHONE. THE LD. CIT (APPEALS) MENTIONED THAT THESE PAYMENTS AND FACILIT IES WERE MADE AND PROVIDED IN EARLIER YEARS ALSO. THE AO BROUGHT NOTH ING ON RECORD TO SHOW THAT EITHER OF THE FACILITIES PROVIDED TO HER WAS USED FOR PERSON PURPOSES. THE FACILITIES WERE THE BASIC FACILITIES NECESSARY FOR MANAGEMENT AND ADMINISTRATION OF THE INSTITUTION AS PRINCIPAL AND THE CHAIRMAN. FURTHER, THE AO HAS BROUGHT NOTHING ON RE CORD TO SHOW THAT THE EXPENDITURE ON SALARY OR FACILITIES PROVIDED TO HER WAS EXCESSIVE HAVING REGARD TO FAIR MARKET VALUE OF SERVICES PROV IDED BY HER. ON THE OTHER HAND, THE ASSESSEE SHOWED THAT SHE OWNED A CA R OF HER OWN AND MOBILE TELEPHONE FOR PERSONAL USE AND, THUS, THERE WAS NO PERSONAL USE OF THE CAR AND TELEPHONE PROVIDED TO HER. BEFOR E US ALSO, THE LD. DR HAS NOT BEEN ABLE TO BRING ANY EVIDENCE OR ARGUM ENT TO REBUT THE AFORESAID FINDINGS GIVEN BY THE LD. CIT (APPEALS). THUS, THE FACT ON RECORD IS THAT SHE WAS PAID SALARY AND PROVIDED FAC ILITIES WHICH WERE REASONABLE WHEN COMPARED WITH SERVICES RENDERED BY HER. IN VIEW THEREOF, WE DO NTO FIND ANY MERIT IN INVOKING SECTI ON 13(1)(C) AS PAYMENT AND PROVISION OF FACILITIES DID NOT CONSTIT UTE ANY BENEFIT PROVIDED TO HER. 5.1 IN REGARD TO MR. PRASHANT PANDEY, IT WAS MENTIO NED BY THE LD. CIT(APPEALS) THAT HE IS A QUALIFIED ARCHITECT AND W AS APPOINTED AS BURSAR TO LOOK AFTER GENERAL ADMINISTRATION, BUI LDING MAINTENANCE AND CONSTRUCTION OF A NEW BLOCK. HE WAS PAID GROSS SALARY OF RS. 2,24,379/-. THE AO BROUGHT NOTH ING ON RECORD TO SHOW THAT THE SALARY WAS EXCESSIVE HAVING REGARD TO SERVICES PROVIDED BY HIM. THEREFORE, IT WAS HELD TH AT NO BENEFIT WAS PROVIDED TO HIM ALSO SO AS TO LEAD TO INFRINGE MENT OF PROVISION CONTAINED IN SECTION 13(1)(C). IN THIS CA SE ALSO, THE LD. DR HAS NOT BEEN ABLE TO BRING ANY EVIDENCE OR ARGUM ENT THAT THE SALARY PAID WAS EXCESSIVE HAVING REGARD TO THE SERVICES PROVIDED BY HIM. THEREFORE, AS IN THE CASE OF MRS. BHARTI PANDEY, WE HAVE NO REASON TO INTERFERE WITH THE FIN DINGS OF THE LD. CIT(APPEALS) IN THIS MATTER. 5.2 IN REGARD TO MR. NIKHIL PANT, IT WAS MENTIONED THAT HE IS CIVIL ENGINEER FROM NATIONAL INSTITUTE OF TECHNOLOGY, ALL AHABAD. HE HAS RENDERED SERVICES AT VARIOUS PLACES WITH WHICH HE GAINED SUFFICIENT EXPERIENCE. HE WAS APPOINTED AS COUNSELL OR IN THE INSTITUTION AND THE SALARY PAID TO HIM WAS RS. 1,60 ,338/-. THERE WAS NO EVIDENCE ON RECORD THAT THIS SALARY WAS EXCE SSIVE. BEFORE US ALSO, THE LD. DR WAS NOT ABLE TO BRING AN Y EVIDENCE ON RECORD THAT THE PAYMENT WAS EXCESSIVE HAVING RE GARD TO SERVICES RENDERED BY HIM. CONSEQUENTLY, WE DO NOT F IND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CI T(APPEALS) IN THIS MATTER ALSO. ITA NO. 4014/DEL/10 ASSTT. YEAR 2007-08 7 5.3 THE RESULT OF AFORESAID DISCUSSION IS THAT GROUND N O. 1 IS DISMISSED. 7. AS FAR AS GRANT OF BENEFIT U/S 11(2) OF THE ACT IS CONCERNED , WE FIND THAT OBJECTS POINTED OUT BY THE ASSESSEE FOR CONSTR UCTION OF DIFFERENT WINGS IN ITSELF IS SUFFICIENT. LD. CIT(A) HAS CONSI DERED THIS ASPECT AND PERMITTED THE ASSESSEE. AFTER TAKING INTO CONSIDERA TION THE FINDING OF LD. CIT(A) RECORDED IN PARAGRAPH 9.4, WE DO NOT FIND AN Y ERROR IN IT. IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL OF THE REVENUE IS DEVOID OF ANY MERIT. HENCE IT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH MARCH, 2011. SD/- [B.C. MEENA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25.3.2011 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT