Parisar Trust, Baroda V. The Income tax Officer, Ward-5(1), Baroda

ITA 422/AHD/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0158 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 15-10-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 20-02-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C
• Assessee Lawyers: S N SOPARKAR
• Keywords: Charitable institution; Maximum Marginal Rate; Source of fund; Valuation report
• Section: 2(22)(e); 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING:27.10.09 DRAFTED ON: 27.10.09 ITA NO.422/AHD/2006, ITA NO.4095/AHD/2008 & ITA NO.4096/AHD/2008 ASSESSMENT YEAR : 2002-2003, 2003-2004, 2005- 2006 PARISAR TRUST STHAPATYA KENDRA KIRTI MANDIR TILAK ROAD, VARODARA. VS. COMMISSIONER OF INCOME TAX (APPEALS)-V, VADODARA. PAN/GIR NO. : AAATP1637L (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI S.N.SOPARKAR, A.R. RESPONDENT BY: SHRI M.C.PANDIT SR. D.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THESE ARE THE APPEALS FILED BY ASSESSEE AGAINST TH E SEPARATE ORDERS OF THE LD.CIT(APPEALS)-V, BARODA, DATED 02.12.2005 AND 7.10.2008. ITA NO.422/AHD/2006 2. GROUND NOS.1.0 AND 1.1 OF THE APPEAL ARE AS FOLL OWS: 1.0. THE LEARNED COMMISSIONER OF INCOME TAX(APPEAL S) ERRED IN LAW AND ON FACTS HAS CONFIRMED THE ADDITIONS OF RS.35,9 7,066/- MADE BY THE LEARNED ASSESSING OFFICER BY INVOKING THE PROVI SIONS UNDER SECTION 13(2)(A) OF THE INCOME TAX ACT, 1961 AND FO RFEITING THE EXEMPTIONS CLAIMED UNDER SECTION 11/12 OF THE INCOM E TAX ACT, 1961 ON THE GROUND THAT THE APPELLANT TRUST HAS GI VEN ADVANCES TO THE PERSONS SPECIFIED UNDER SECTION 13(3) OF THE AC T WITHOUT ADEQUATE SECURITY OR INTEREST AND THEREBY ASSESSING THE TRUST AT THE MAXIMUM MARGINAL RATE BY TREATING IT AS AN AOP. ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 2 - 1.1. THE ADVANCE GIVEN TO MR. SIDDHARTH PATEL, WHO IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF LAND & BUILDING, WAS AGAINST A BANAKHAT, WHICH IS A LEGALLY BINDING AG REEMENT GIVING THE TRUST THE RIGHT TO ACQUIRE THE LAND ON FULFILLM ENT OF THE CONDITIONS PRESCRIBED IN THE AGREEMENT. THE COPY OF THE BANAKHAT WAS FILED WITH THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS), HOWEVER, THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) DECLINED TO CONSIDER IT AS AN ADEQUATE SECURITY FOR THE ADVANCE GIVEN AT THE TIME OF PASSING THE ORDER. ITA NO.4095/AHD/2008 3 GROUND NOS.1.0 AND 1.1 OF THE APPEAL ARE AS FOLLO WS: 1.0. THE LEARNED COMMISSIONER OF INCOME TAX(APPEAL S) ERRED IN LAW AND ON FACTS HAS CONFIRMED THE ADDITIONS MADE BY TH E LEARNED ASSESSING OFFICER BY PARTLY ALLOWING THE APPELLANT CLAIM OF RS.3,33,600/- ON ACCOUNT NOTIONAL RENT FROM OWN INS TITUTE AND RS.3,07,000 ON ACCOUNT OF REPAYMENT OF DEPOSITS AND CONFIRMED THE ADDITION OF RS.14,43,820/- BY INVOKING THE PROVISI ONS UNDER SECTION 13(2)(A) OF THE INCOME TAX ACT, 1961 AND FORFEITING THE EXEMPTIONS CLAIMED UNDER SECTION 11/12 OF THE INCOME TAX ACT, 1961 ON THE GROUND THAT THE APPELLANT TRUST HAS GIVEN ADVANCES TO THE PERSONS SPECIFIED UNDER SECTION 13(3) OF THE ACT WITHOUT AD EQUATE SECURITY OR INTEREST AND THEREBY ASSESSING THE TRUST AT THE MAXIMUM MARGINAL RATE BY TREATING IT AS AN AOP. 1.1. THE ADVANCE GIVEN TO MR. SIDDHARTH PATEL, WHO IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF LAND & BUILDING, WAS AGAINST A BANAKHAT, WHICH IS A LEGALLY BINDING AG REEMENT GIVING THE TRUST THE RIGHT TO ACQUIRE THE LAND ON FULFILLM ENT OF THE CONDITIONS PRESCRIBED IN THE AGREEMENT. THE COPY OF THE BANAKHAT WAS FILED WITH THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS), HOWEVER, THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) DECLINED TO CONSIDER IT AS AN ADEQUATE SECURITY FOR THE ADVANCE GIVEN AT THE TIME OF PASSING THE ORDER. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS FOLLOWED THE DECISION OF EARLIER CIT(A) IN THE A.Y.2002-2003 WHICH WAS THE YEAR OF ADVANCE AND DID NOT APPRECIATE THE FACT THAT WAS MERELY AN OPENING BALA NCE IN THE YEAR UNDER CONSIDERATION ITA NO.4096/AHD/2008 4. GROUND NOS.1.0 AND 1.1 OF THE APPEAL ARE AS FOLL OWS: ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 3 - 1.0. THE LEARNED COMMISSIONER OF INCOME TAX(APPEAL S) ERRED IN LAW AND ON FACTS HAS CONFIRMED THE ADDITIONS MADE BY TH E LEARNED ASSESSING OFFICER BY PARTLY ALLOWING THE APPELLANT CLAIM OF RS.11, 80,986/- ON ACCOUNT NOTIONAL RENT FROM OWN INSTITUT E, LOSS FOR THE YEAR OF RS.5,60,473/- AND RS.3,69,000/- ON ACCOUNT OF REPAYMENT OF DEPOSITS AND CONFIRMED THE ADDITION OF RS.27,29,891 /- BY INVOKING THE PROVISIONS UNDER SECTION 13(2)(A) OF THE INCOME TAX ACT, 1961 AND FORFEITING THE EXEMPTIONS CLAIMED UNDER SECTION 11/12 OF THE INCOME TAX ACT, 1961 ON THE GROUND THAT THE APPELLA NT TRUST HAS GIVEN ADVANCES TO THE PERSONS SPECIFIED UNDER SECTI ON 13(3) OF THE ACT WITHOUT ADEQUATE SECURITY OR INTEREST AND THERE BY ASSESSING THE TRUST AT THE MAXIMUM MARGINAL RATE BY TREATING IT A S AN AOP. 1.1. THE ADVANCE GIVEN TO MR. SIDDHARTH PATEL, WHO IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF LAND & BUILDING, WAS AGAINST A BANAKHAT, WHICH IS A LEGALLY BINDING AG REEMENT GIVING THE TRUST THE RIGHT TO ACQUIRE THE LAND ON FULFILLM ENT OF THE CONDITIONS PRESCRIBED IN THE AGREEMENT. THE COPY OF THE BANAKHAT WAS FILED WITH THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS), HOWEVER, THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) DECLINED TO CONSIDER IT AS AN ADEQUATE SECURITY FOR THE ADVANCE GIVEN AT THE TIME OF PASSING THE ORDER. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS FOLLOWED THE DECISION OF EARLIER CIT(A) IN THE A.Y.2002-2003 WHICH WAS THE YEAR OF ADVANCE AND DID NOT APPRECIATE THE FACT THAT WAS MERELY AN OPENING BALA NCE IN THE YEAR UNDER CONSIDERATION . 5. SINCE THE FACTS AND ISSUE INVOLVED IN ALL THE AB OVE GROUNDS OF APPEALS ARE COMMON, THEY ARE BEING CONSIDERED AND D ECIDED AS UNDER. 6. THE FACTS OF THE CASE SO FAR AS THEY IRRELEVANT TO THE ABOVE GROUNDS OF APPEAL ARE AS UNDER: 7. THE ISSUE INVOLVED IN THIS APPEAL IS REGARDING D ISALLOWING THE APPELLANT'S CLAIM OF DEDUCTION UNDER SECTION 11/12 OF THE I T ACT, 1961 AND ASSESSING THE TRUST AT THE MAXIMUM MARGINAL RATE BY TREATING IT AS AN AOP. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE A.Y .2002-03 ON 30.10.2002 ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 4 - DECLARING NIL INCOME. THE ASSESSEE IS A PUBLIC CHAR ITABLE TRUST AND ITS PREDOMINANT OBJECTS ARE: (I) TO SETUP, ESTABLISH AND RUN IN THE CITY OF BARODA, A SCHOOL, COLLEGE OR INSTITUTION TO IMPART EDUCATION FOR ENVIRONMENTA L DESIGN AND/OR ANY OTHER ARCHITECTURAL SUBJECT DEALING WITH THE ENVIRO NMENT AND OTHER ASPECTS OF LIVING AND WORKING CONDITIONS FOR HUMAN BEING. (II) TO UNDERTAKE FOR EDUCATION, RESEARCH, TR AINING AND/OR ACTION, ANY PROGRAMME RELATED TO THE IMPROVEMENT OF THE ENVIRON MENT IN WHICH PEOPLE LIVE AND WORK. (III) TO ESTABLISH NECESSARY INSTITUTIONS TO I MPART KNOWLEDGE, TRAINING AND EDUCATION THROUGH SHORT TERM AND LONG TERM COUR SES. ITS MAIN SOURCES OF INCOME ARE INTEREST FROM DEPOSI TS WITH COMPANIES AND BANKS, DONATION, FEE INCOME ETC. DURING THE YEAR, T HE ASSESSEE HAS SHOWN GROSS TOTAL INCOME OF RS.10364539 OUT OF WHICH IT C LAIMED EXPENSES OF RS.7227473 AND THE BALANCE AMOUNT OF RS.3127066 WAS CLAIMED AS DEDUCTION U/S.11 (L) AND (2) OF THE I T ACT, 1961 A ND ARRIVING AT NIL INCOME. DURING THE YEAR, THE ASSESSEE WAS RUNNING A SCHOOL OF INTERIOR DESIGN, DC PATEL SCHOOL OF ARCHITECTURE AND BHAIKAK A CENTRE FOR HUMAN SETTLEMENT ALL AT VALLABH VIDYANAGAR. IT WAS FOUND BY THE ASSESSING OFFICER THAT DURING THE YEAR, THE ASSESSEE HAD ADVA NCED AN AMOUNT OF RS.14,00,000 TO ONE SHRI SIDDHARTH S PATEL. SHRI SI DDHARTH S PATEL IS THE ELDER SON OF ONE OF THE SIGNATORIES TO THE MEMORAND UM OF ASSOCIATION OF THE ASSESSEE AND ALSO THE SETTLER OF THE TRUST. IN THIS REGARD, BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAD SUBMITTED AS UN DER:- 'THE ADVANCE WAS PAID TO SHRI SIDDHARTH S PATEL FOR PURCHASE AND DEVELOPMENT OF THE LAND AND FOR THIS PURPOSE AN AGR EEMENT DATED 23.01.2002 WAS ENTERED INTO BETWEEN SHRI SIDDHARTH S PATEL AND THE ASSESSEE TRUST. ASSESSEE ALSO FILED A COPY OF THE A GREEMENT AND FURTHER STATED THAT SHRI SIDDHARTH S PATEL IS ENGAGED IN TH E BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF LANDS AND BUILDING AND HENCE, THE TRUST HAD ASSIGNED THE ENTIRE PROJECT OF DEVELOPMENT OF L AND AND CONSTRUCTION OF ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 5 - SCHOOL TO SHRI SIDDHARTH S PATEL AT THE COST OF RS. 81 LACS AND PAID RS.14 LACS AS ADVANCE TOWARDS THE SAID COST, BUT DUE TO B AD FINANCIAL POSITION THE TRUST CANCELLED THE SAID PROJECT AND HAS ASKED FOR REFUND OF THE SAID ADVANCE.' ON PERUSAL OF THE AGREEMENT, IT WAS FOUND BY THE AS SESSING OFFICER THAT THE SAID AGREEMENT WAS IN THE NATURE OF A BANAKHAT WHIC H WAS ENTERED INTO BETWEEN SHRI SIDDHARTH S PATEL AND THE TRUST. AS PE R THIS AGREEMENT, RS.10,00,000 WAS GIVEN TO SHRI SIDDHARTH S PATEL WH ICH IS CLAIMED TO BE AGAINST THE PROJECT COST OF RS.81,00,000 FOR DEVELO PMENT OF LAND WHICH WAS-OWNED BY SHRI SIDDHARTH S PATEL AT HIS VILLAGE AMPAD. THE ADVANCE PAID WAS TO BE ADJUSTED AGAINST SALE CONSIDERATION OF LAND PAYABLE TO SHRI SIDDHARTH S PATEL @ RS.1.10 LACS PER BIGHA FOR A TO TAL OF 10 BIGHAS OF LAND. FROM THE CORRESPONDENCE MADE REGARDING THE CANCELLA TION OF THE PROJECT, IT WAS NOTED BY THE ASSESSING OFFICER THAT ON 03.09.20 03, THE TRUST INFORMED SHRI SIDDHARTH S PATEL THAT DUE TO WEAK FINANCIAL P OSITION ON ACCOUNT OF FALL OF CHAROTAR NAGRIK SAHAKARI BANK AND VARIOUS OTHER FACTORS, THEY WERE NOT KEEN TO INCREASE THE STRENGTH OF THE SCHOOL HENCE, THE PROJECT FOR DEVELOPMENT OF LAND HAD BEEN CANCELLED AND ASKED SH RI SIDDHARTH S PATEL TO REFUND THE AMOUNT GIVEN AS ADVANCE TO HIM. IT WA S HOWEVER, FOUND BY THE ASSESSING OFFICER THAT THE SAID ADVANCE GIVEN T O SHRI SIDDHARTH S. PATEL HAD NOT BEEN REFUNDED TILL FEBRUARY, 2005. IN VIEW OF THE ABOVE FACTS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY IT SHOULD NOT BE HELD THAT SHRI SIDDHARTH PATEL WAS A PERSON BELONGING TO THE PROHIBITORY CATEGORY WITHIN THE MEANING OF SECTION 13(2)(A) AND SINCE INCOME OR PROPERTY OF THE INSTITUTION HAD BEEN LENT TO SUCH A PERSON DURING THE PREVIOUS YEAR WITHOUT ADEQUATE SECURITY AND ADE QUATE INTEREST, THE LEGAL FICTION IN SUB-SECTION (2) OF SECTION 13 WOULD COME INTO PLAY AND THE INCOME OF PROPERTY OF THE INSTITUTION SHALL FOR THE PURPOSE OF CLAUSE (D) OF SUB-SECTION (1) OF SECTION 13 BE DEEMED TO HAVE BEE N APPLIED FOR THE BENEFIT OF THE PROHIBITORY CATEGORY OF PERSONS UNDE R SUB-SECTION (3), ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 6 - CONSEQUENTLY TO EXPLAIN AS TO WHY THE A SSESSEE'S CLAIM OF THE BENEFIT OF SECTION 11 SHOULD NOT BE REJECTED. IN R ESPONSE, THE ASSESSEE REITERATED ITS EARLIER SUBMISSION AND STATED THAT D UE TO BAD FINANCIAL POSITION, IT WAS CONSIDERING THE CANCELLATION OF TH E SAID PROJECT AND HAD ASKED FOR THE REFUND OF THE ADVANCE. ON ACCOUNT O F PERSISTENT REQUEST OF THE TRUST, SHRI SIDDHARTH PATEL HAD AGREED TO REPAY THE ADVANCE AND THE TRUST HAS ALREADY RECEIVED BACK THE AMOUNT IN THE CURRENT YEAR. IT WAS STATED THAT SECTION 13(2)(A) OF THE I T ACT, 1961 PROVIDES FOR FORFEITURE OF EXEMPTION CLAIMED U/S11 IF ANY PROPERTY OR P ART OF INCOME OF THE TRUST IS GIVEN TO THE SPECIFIED PERSONS WITHOUT ADEQUATE SECURITY AND INTEREST. IN THIS CASE, THE TRUST HAS ENTERED INTO A CONTRACT FOR THE DEVELOPMENT OF LAND AS A MEASURE OF EXPANSION OF TRUST ACTIVITIES. THERE WAS A VALID CONSIDERATION FOR SUCH CONTRACT/AGREEMENT. THEREFOR E, THE PROVISIONS OF SECTION 13(2)(A) CANNOT BE APPLIED TO THE TRUST. IT HAS BEEN OBSERVED BY THE ASSESSING OFFICER THAT THE SUM OF RS.14 LACS WHICH WAS ADVANCED TO SHRI SIDDHARTH S PATEL DURING THE YEAR UNDER CONSIDERATI ON BUT HAS REMAINED TO BE REFUNDED AND RECEIVED BACK BY THE ASSESSEE TRUST EVEN AFTER THE CANCELLATION OF THE PROJECT UNDER WHICH PRETEXT THE SUM WAS ADVANCED. THE MONEY WAS OUTSTANDING EVEN IN THE MONTH OF FEBRUARY , 2005 AS REVEALED FROM THE CORRESPONDENCE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ONE SUCH LETTER CLAIMED TO HAVE BEEN G IVEN BY SHRI SIDDHARTH S. PATEL ON 14.02.2005 STATES THAT 'WE REQUEST YOU NOT TO DEPOSIT THE SAID CHEQUES AND RETURN THE SAME BACK TO US'. IT HAS BEE N STATED BY THE ASSESSING OFFICER THAT SHRI SIDDHARTH PATEL IS THE ELDER SON OF SHRI SURYAKANT PATEL WHO IS ONE OF THE SIGNATORIES TO TH E MEMORANDUM OF ASSOCIATION OF THE ASSESSEE AND ALSO THE SETTLER. S ECTION 13(3)(A) SPEAKS OF THE 'AUTHOR OF THE TRUST' OR THE 'FOUNDER OF THE IN STITUTION'. AFTER CONSIDERING THE DICTIONARY MEANING, IT HAS BEEN OBS ERVED BY THE ASSESSING OFFICER THAT A FOUNDER MUST BE SOMEONE WHO HAS SUBS TANTIALLY CONTRIBUTED ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 7 - FINANCIALLY OR BY PHYSICAL EFFORTS TO SET UP AN INS TITUTION OR MUST BE A LEADING PERSON WHO PLAYS AN IMPORTANT ROLE IN THE F UNCTIONING OF THE INSTITUTION; HE MUST BE A ORIGINATOR OF THE INSTITU TION. IN THE CASE OF THE ASSESSEE SHRI SURYAKANT L. PATEL ALONG WITH SEVERAL OTHERS FOUNDED THE TRUST AS HE WAS ONE OF THE SUBSCRIBERS TO ITS MEMOR ANDUM OF ASSOCIATION. IT IS BY THIS ACT ITSELF THAT THE TRUST CAME INTO EXIS TENCE. FURTHER, SHRI SURYAKANT PATEL CONTRIBUTED RS.500 BY SETTLING THE SAID AMOUNT UPON THE TRUST. IT HAS THEREFORE BEEN OBSERVED BY THE ASSESSING OFFICER TH AT THESE FACTS MATCHES THE DESCRIPTION OF THE 'AUTHOR OF THE TRUST' AND 'FOUNDER OF AN INSTITUTION' USED IN SECTION 13(3)(A) OF THE I T AC T, 1961. THEREFORE, SHRI SIDDHARTH S. PATEL, SON OF THE FOUNDER AND THE AUTH OR OF THE TRUST SQUARELY FALLS WITHIN THE DEFINITION OF INTERESTED PARTIES A S DEFINED IN THE PROVISIONS OF SECTION 13(3)(D) OF THE I. T. ACT READ WITH EXPL ANATION 1 TO SECTION 13 OF THE I. T. ACT, 1961. IT HAS BEEN OBSERVED BY THE AS SESSING OFFICER THAT AS PER THE ASSESSEE THE AMOUNT OF RS.14 LACS PAID TO S HRI SIDDHARTH S PATEL WAS NOT LENT TO HIM BUT WAS GIVEN AS A DEPOSIT FOR DEVELOPMENT OF LAND AND CONSTRUCTION OF THE PREMISES FOR THE ASSESSEE'S SCH OOL. HOWEVER IT IS DIFFICULT TO BELIEVE THAT THE ASSESSEE, A TRUST DEC IDED TO HAND OVER A SUM OF RS.14 LACS TO ANYONE WITHOUT FOLLOWING PROPER PROCE DURE. THERE IS NO RESOLUTION WHEREBY IT WAS DECIDED TO DEVELOP A PROJ ECT OF THIS SCALE AND INVOLVING SUCH SUBSTANTIAL SUM OF MONEY AND THAT AL SO ON A LAND WHICH WAS OWNED BY THE SON OF THE FOUNDER. THERE WAS NO COMPE TITIVE BIDDING CARRIED OUT BY THE ASSESSEE FOR THE SELECTION OF THE BEST B IDDER BEFORE HANDING OVER THE PROJECT. IT HAS BEEN STATED BY THE ASSESSING OF FICER THAT ON 23.01.2002 AN AGREEMENT WAS ENTERED (WHICH WAS IN THE NATURE O F A BANAKHAT) BETWEEN SHRI SIDDHARTH S. PATEL AND SHRI SURYAKANT L. PATEL AS MANAGING TRUSTEE OF THE TRUST WHEREIN, IT HAS BEEN STATED THAT AN ADVAN CE OF RS.10 LACS WAS ALREADY GIVEN TO SHRI SIDDHARTH S. PATEL WHICH WAS TO BE ADJUSTED AGAINST THE COST (INCLUSIVE OF THE SALE CONSIDERATION OF LA ND PAYABLE TO SHRI ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 8 - SIDDHARTH S. PATEL @ RS.1.10 LACS PER BIGHA FOR A T OTAL OF 10 BIGHAS OF LAND) FOR DEVELOPMENT OF LAND AND CONSTRUCTION OF THE SCH OOL. ON 03.09.2003, SHRI SIDDHARTH S. PATEL WAS INFORMED REGARDING THE TRUST'S DECISION TO CANCEL THE PROJECT AND WAS REQUESTED TO REFUND THE AMOUNT GIVEN TOWARDS PURCHASE/DEVELOPMENT OF LAND. VIDE LETTER DATED 05. 09.2003, SHRI SIDDHARTH S. PATEL INFORMED THE TRUSTEES THAT TILL DATE THEY HAD SPENT NEARLY RS.3 TO RS.4 LACS AND CANCELLATION OF PROJECT WOULD BE AN ADDITIONAL COST TO THE TRUST AND THAT HE WAS NOT AGREEABLE TO CANCELLI NG THE SAID PROJECT UNDER ANY CIRCUMSTANCES AT THIS STAGE AND REQUESTED TO RE CONSIDER THE DECISION. IT HAS BEEN STATED BY THE ASSESSING OFFICER THAT ON PR ETEXT OR THE OTHER, THE AMOUNT GIVEN AS ADVANCE HAS NOT BEEN REPAID TO THE TRUST TILL DATE. THEREFORE, THE AMOUNT OF RS.14 LACS WHICH WAS PAID TO SHRI SIDDHARTH S. PATEL WAS CLEARLY INTENDED FOR BUYING THE LAND OWNE D BY SHRI SIDDHARTH S. PATEL ON WHICH A SCHOOL PROJECT WAS CLAIMED TO HAVE BEEN PLANNED. IT HAS BEEN STATED BY THE ASSESSING OFFICER THAT THE FACT OF THE MATTER IS THAT WHEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE WAS ASKED TO EXPLAIN THE NATURE OF MONEY WHICH WAS STILL OUTSTAN DING ON THE DATE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE REALIZED THAT THE AMOUNT PAID TO SIDDHARTH S. PATEL WAS LIKELY TO BE TREATED AS AN A MOUNT LENT WITHOUT ADEQUATE SECURITY OR INTEREST AND HENCE, IT TRIED T O SHOW THAT THE MONEY WAS BEING REIMBURSED TO IT. HOWEVER, THE MONEY FAILED T O RETURN TO THE ASSESSEE TRUST. IT HAS BEEN OBSERVED BY THE ASSESSING OFFICE R THAT THE AMOUNT PAID TO SIDDHARTH S. PATEL IS NOT IN THE NATURE OF ADVANCE FOR THE PROJECT BUT WAS MERELY INTENDED TO ENABLE HIM TO SELL THE PROPERTY WHICH WAS LYING IN HIS NAME AND DEVELOP A PROJECT THE TERMS OF WHICH WERE INDEFINITE. THEREFORE IT WAS A COLOURABLE TRANSACTION. IT HAS BEEN STATED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD MADE AVAILABLE TO THE SIDDHAR TH S. PATEL A SUM OF RS.14 LACS AND PERMITTED HIM TO UTILIZE IT FOR A SU BSTANTIAL PERIOD WITHOUT ANY ADEQUATE SECURITY AND ADEQUATE INTEREST AND THE REFORE THERE WAS A ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 9 - BREACH OF SECTION 13(1). IN THIS REGARD, THE ASSESS ING OFFICER HAS PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT I N THE CASE OF DIT VS. BHARAT DIAMOND BOURSE 259 ITR 280 AND CIT VS. MUTHO OTTU CHARITABLE TRUST 227 ITR 203 WHERE THE MATTER HAS BEEN DECIDED IN FAVOUR OF THE REVENUE BY HOLDING THAT THE AMOUNTS WHICH CONTINUED TO REMAIN WITH THE PERSON SPECIFIED U/S.13(3) OF THE ACT, NOT ONLY DUR ING THE ASSESSMENT YEARS UNDER CONSIDERATION BUT ALSO THEREAFTER AND HENCE T HE BENEFIT WITH REGARD TO THE AMOUNT LYING WITH THE SAID PERSON IS LITERALLY AND WHOLLY FOR THE BENEFIT OF THE SAID PERSON AND HENCE HAS NO CONNECTION WHAT SOEVER WITH THE CONCEPT OF CHARITY AND HENCE THE APPLICATION OF SEC TION 13(L)(C) R.W.S.13(2)(H) WAS CLEARLY ATTRACTED. IN VIEW OF TH E ABOVE, IT HAS BEEN HELD BY THE ASSESSING OFFICER THAT THE ENTIRE INCOME OF THE ASSESSEE TRUST IS NOT ELIGIBLE FOR EXEMPTION U/S.11OR 12 OF THE I T ACT, 1961 AND THE TRUST'S INCOME FROM THE FOLLOWING SOURCES IS CHARGEABLE TO TAX AS INCOME OF AN AOP. (I) INCOME FROM THE PROPERTY HELD UNDER THE TRUST WHOLLY FOR THE CHARITABLE OR RELIGIOUS PURPOSES. (II) VOLUNTARY CONTRIBUTIONS WITHOUT ANY DIRECTION THAT THEY SHALL FORM PART OF CORPUS OF THE TRUST AND; (III) INCOME OF TRUST BEING PROFIT AND GAINS OF BU SINESS WHICH IS INCIDENTAL TO ATTAINMENT OF THE OBJECTIVES OF TRUST AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED. IT HAS BEEN STATED BY THE ASSESSING OFFICER THAT DU RING THE YEAR, THE ASSESSEE HAS EARNED INTEREST INCOME OF RS.6,09,658, MISCELLANEOUS INCOME OF RS. 1,57,073 FROM THE PROPERTY HELD UNDER TRUST AND RECEIVED DONATION AMOUNTING TO RS.6,58,000 WHICH HAS BEEN SHOWN AS VO LUNTARY CONTRIBUTION. THE ASSESSEE HAS EARNED EXCESS OF INCOME OVER EXPEN DITURE AMOUNTING TO RS.17,12,335 FORM RUNNING OF EDUCATIONAL INSTITUTIO N WHICH IS ONE OF THE OBJECTS OF THE TRUST. SINCE THE ASSESSEE'S CLAIM OF EXEMPTION U/S.11 HAD ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 10 - BEEN FORFEITED, THESE INCOME AMOUNTING TO RS.31,37, 066 HAS BEEN HELD TO BE ASSESSEE'S TOTAL INCOME CHARGEABLE TO TAX AT THE MAXIMUM MARGINAL RATE. 8. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX( APPEALS), THE ASSESSEE SUBMITTED THAT SINCE THE ENTIRE INCOME OF THE TRUST HAS BEEN UTILIZED FOR THE OBJECTS OF THE TRUST, THE SAME HAS BEEN CLAIMED EXEMPT BY VIRTUE OF PROVISIONS OF SECTION 11 OF THE I. T. ACT , 1961. IT HAS BEEN STATED THAT SHRI SIDDHARTH S. PATEL IS ENGAGED IN THE BUSI NESS OF DEVELOPMENT AND CONSTRUCTION OF LAND AND BUILDING. THE TRUST HAD AS SIGNED THE ENTIRE PROJECT OF DEVELOPMENT OF LAND SITUATED AT VILLAGE AMPAD, D IST.VADODARA FOR CONSTRUCTION OF SCHOOL/INSTITUTION BUILDING TO SIDD HARTH S. PATEL AT A TOTAL COST OF RS.81 LACS AND HAD PAID RS.14 LACS AS ADVAN CE TOWARDS THE SAID COST. FOR THIS PURPOSE, AN AGREEMENT DATED 23.01.20 02 WAS ENTERED INTO BETWEEN THE TRUST AND SHRI SIDDHARTH S. PATEL. IT H AS BEEN STATED THAT THE SAID AGREEMENT WAS IN THE NATURE OF BANAKHAT, WHICH IS A LEGALLY BINDING CONTRACT, GIVING THE TRUST THE RIGHT TO ACQUIRE THE LAND ON COMPLETION OF THE PROJECT. THE LAND WAS PURCHASED @ RS.1.10 LACS PER BIGHA I.E 25000 SQ.FT. AND THE COST PER SQ.FT. COMES TO RS.4.40 WHICH IS V ERY LESS CONSIDERING THEN GOING LAND PRICES. THE TOTAL COST OF ENTIRE PLOT OF LAND WAS RS.11 L ACS. IT HAS BEEN STATED THAT AS PER VALUATION DONE BY THE A PPROVED VALUER, SHRI N. H. BAROT, THE VALUE OF LAND ON THE DATE OF BANAKHAT WAS RS.23.15 LACS. THE APPELLANT TRUST COULD GET SUCH A GOOD BARGAIN D UE TO THE RELATIONSHIP OF THE FOUNDER AND AUTHOR OF THE TRUST SHRI SURYAKANT PATEL WITH SHRI SIDDHARTH S. PATEL. IT HAS BEEN SUBMITTED THAT EVEN THE REGISTRATION AUTHORITY WOULD HAVE DEMANDED MUCH HIGHER VALUE FOR THE PURPOSE OF STAMP DUTY. THE WORK FOR THE SAID PROJECT HAD ALREA DY STARTED AND DEVELOPMENTAL ACTIVITIES LIKE GETTING THE DRAWING P LANS FROM ARCHITECTS, SOIL TESTING FOR EXCAVATION OF PLINTH FOUNDATION ETC WAS IN PROGRESS. THE CONTRACTOR HAD ALREADY INCURRED CONSIDERABLE EXPEND ITURE ON THE AFORESAID ACTIVITIES. IN THE MEANWHILE THE FINANCIAL POSITION OF THE TRUST WAS ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 11 - ADVERSELY AFFECTED BY THE FAILURE/BANKRUPTCY OF CHA ROTAR NAGRIK SAHAKARI BANK ON 30.07.03 WHERE THE TRUST WAS HOLDING MOST O F ITS FIXED DEPOSITS. CONSEQUENTLY, THE TRUST HAD TO CANCEL THE SCHOOL/IN STITUTION BUILDING CONTRACT WITH SIDDHARTH S. PATEL. AS A RESULT, OUT OF THE TOTAL ADVANCE OF RS.14 LACS SHRI SIDDHARTH S. PATEL REFUNDED RS.4 LA CS IN SEPTEMBER 2004 WITH A COMMITMENT TO REFUND THE BALANCE AMOUNT IN J ANUARY-FEBRUARY'05. THE BALANCE AMOUNT WAS ALSO RECOVERED BEFORE FEBRUA RY, 2005. IT HAS BEEN STATED THAT THE ENTIRE ADVANCE WAS RECOVERED FROM T HE CONTRACTOR WITHOUT ANY DEDUCTION. IT HAS BEEN STATED THAT THE ENTIRE C ONTRACT ENTERED INTO WITH SHRI SIDDHARTH S. PATEL WAS PROPERLY DOCUMENTED AND THE ADVANCE WAS GIVEN AS PER THE TERMS OF THE CONTRACT. IT HAS BEEN STATED THAT PROPER RESOLUTIONS WERE PASSED BY THE TRUST FOR SETTING UP A VOCATIONAL INSTITUTE AT AMPAD VADODARA. IT HAS BEEN STATED THAT THE TRUST W AS GETTING THE LAND AT A CHEAPER RATE CONSIDERING THE ONGOING LAND PRICES IN THE DISTRICT, THEREFORE THERE WAS NO REASON TO CALL FOR OTHER BIDS. IN VIEW OF THE ABOVE, IT HAS BEEN ADDITION. 9. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS MADE BY THE ASSE SSEE HELD AS UNDER:- 3.2 I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSE SSING OFFICER AND THE CONTENTIONS OF THE APPELLANT. IT HAS BEEN CLAIMED BY THE APPELLANT'S REPRESENTATIVE THAT THE ENTIRE INCOME O F THE TRUST HAS BEEN UTILIZED FOR THE OBJECTS OF THE TRUST. THEREFO RE THE ENTIRE INCOME HAS BEEN CLAIMED AS EXEMPT BY VIRTUE OF PROVISIONS OF SECTION 11 OF THE I T ACT, 1961. THE ASSESSING OFFICER BY INVOKIN G THE PROVISIONS OF SECTION 13(2)(A) OF THE I T ACT, 1961 HAS FORFEI TED THE EXEMPTION UNDER SECTION 11 AND 12 OF THE I T ACT, 1961 AND HA S ASSESSED THE TOTAL INCOME AT RS.3597066. IT HAS BEEN HELD BY THE ASSESSING OFFICE THAT THE SAME IS CHARGEABLE TO TAX AT THE MAXIMUM M ARGINAL RATE. THE FACTS OF THE CASE HAVE BEEN DISCUSSED ABOVE. DU RING THE YEAR UNDER CONSIDERATION, THE TRUST HAD PAID AN ADVANCE OF RS.14 LACS TO SHRI SIDDHARTH S PATEL, WHO IS THE SON OF SHRI SURY AKANT L PATEL, ONE OF THE SIGNATORIES TO THE MEMORANDUM OF ASSOCIA TION OF THE ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 12 - TRUST AND ALSO THE SETTLOR. IT HAS BEEN CLAIMED BY THE APPELLANT'S REPRESENTATIVE THAT THE SAID ADVANCE WAS PAID FOR T HE PURCHASE AND DEVELOPMENT OF LAND SITUATED AT VILLAGE AMPAD, DIST .BARODA. FOR THIS PURPOSE, AN AGREEMENT DATED 23.01.2002 WAS ENT ERED INTO BETWEEN SHRI SIDDHARTH S PATEL AND THE TRUST. IT HA S BEEN STATED THAT SHRI SIDDHARTH S PATEL IS ENGAGED IN THE BUSINESS O F DEVELOPMENT AND CONSTRUCTION OF LAND AND BUILDING. THE TRUST HA D ASSIGNED THE ENTIRE PROJECT OF DEVELOPMENT OF LAND FOR CONSTRUCT ION OF SCHOOL/INSTITUTION TO SHRI SIDDHARTH S PATEL AT A T OTAL COST OF RS.81 LACS AND HAD PAID RS.14 LACS AS ADVANCE TOWARDS THE SAID COST. IT WAS FOUND BY THE ASSESSING OFFICER THAT THE SAID AG REEMENT WAS IN THE NATURE OF BANAKHAT. ON PERUSAL OF THE SAME, IT WAS FOUND THAT THE ADVANCE OF RS.10 LACS WHICH WAS ALREADY GIVEN W AS TO BE ADJUSTED AGAINST THE COST INCLUDING THE SALE CONSID ERATION OF THE LANE PAYABLE TO SHRI SIDDHARTH S PATEL @ RS.1.10 LA CS PER BIGHA FOR A TOTAL O 10 BIGHAS OF LAND. IT WAS FOUND BY THE AS SESSING OFFICER THAT OR 03.09.2003 THE TRUST INFORMED SHRI SIDDHART H S PATEL THAT DUE TO WEAL-FINANCIAL POSITION ON ACCOUNT OF FALL O F CHAROTAR NAGRIK SAHAKARI BANK AND VARIOUS OTHER FACTORS, THEY WERE NOT KEEN TO INCREASE THE STRENGTH IF OF THE SCHOOL. HENCE THE P ROJECT FOR DEVELOPMENT OF LAND HAD BEEN CANCELLED. THE TRUST ASKED SHRI SIDDHARTH S PATEL TO REFUND THE AMOUNT GIVEN AS ADV ANCE TO HIM. IT WAS HOWEVER, NOTED BY THE ASSESSING OFFICER THAT THE SAID ADVANCE WAS NOT REFUNDED TO THE APPELLANT TILL FEBR UARY, 2005. SHRI SIDDHARTH S PATEL VIDE HIS LETTER DATED 14.02.2005 INFORMED THE TRUST TO NOT DEPOSIT THE CHEQUES GIVEN AND TO RETURN THE SAME BACK TO HIM. IT HAS THEREFORE BEEN HELD BY THE ASSESSING OFFICER THAT THE AMOUNT OF RS.14 LACS WHICH WAS PAID TO SHRI SIDDHARTH S PA TEL WAS INTENDED FOR BUYING THE LAND OWNED BY SHRI PATEL ON WHICH A SCHOOL PROJECT WAS CLAIMED TO HAVE BEEN PLANNED. THE AMOUNT PAID T O SHRI SIDDHARTH S. PATEL WAS THEREFORE NOT IN THE NATURE OF TRANSACTION IN THE NATURE OF ADVANCE FOR A PROJECT AS CLAIMED BY THE A PPELLANT BUT MERELY INTENDING HIM TO ENABLE HIM TO SELL A PROPER TY WHICH WAS LYING IN HIS NAME AND TO DEVELOP A PROJECT, THE TER MS OF WHICH WERE INDEFINITE. THEREFORE, I AGREE WITH THE ASSESSING O FFICER THAT IT WAS A COLOURABLE TRANSACTION. THE APPELLANT HAD MADE AVAI LABLE A SUM OF RS.14 LACS TO SHRI SIDDHARTH S PATEL TO UTILISE IT FOR A SUBSTANTIAL PERIOD WITHOUT ANY ADEQUATE SECURITY. AS MENTIONED BY THE ASSESSING OFFICER, THE ADVANCE OF RS.14 LACS WAS GI VEN TO SHRI SIDDHARTH S. PATEL WITHOUT ANY PROPER PROCEDURE. TH ERE IS NO RESOLUTION WHEREBY IT WAS DECIDED TO DEVELOP ANY PR OJECT OF THIS TYPE. FURTHER THERE WAS NO COMPETITIVE BIDDING CARR IED OUT BY THE APPELLANT FOR SELECTION OF THE BEST BIDDER. THE APP ELLANT'S ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 13 - REPRESENTATIVE HAS FAILED TO SUBMIT ANY EVIDENCE RE GARDING THE SPECIFIC RESOLUTION PASSED RELATING TO DEVELOPMENT OF THE AFORESAID PROJECT. IT HAS BEEN STATED THAT A RESOLUTION WAS P ASSED BY THE TRUST FOR SETTING UP A VOCATIONAL INSTITUTE AT TALUKA AMP AD, VADODARA. HOWEVER, THERE IS NO RESOLUTION WHERE THERE IS A ME NTION OF THE ABOVE BANAKHAT AND THE TERMS AND CONDITIONS FOR DEV ELOPMENT OF THE PROJECT. FURTHER NO COMPETITIVE BIDDING WAS CAR RIED OUT BY THE APPELLANT TRUST FOR SELECTION OF THE BEST BIDDER. IT HAS BEEN CLAIMED BY THE APPELLANT'S REPRESENTATIVE THAT AS PER THE C ONTRACT, THE TRUST WAS GETTING THE LAND AT A CHEAPER RATE OF RS.4.40 P ER SQ. FT. AND THEREFORE THERE WAS NO REASON TO CALL FOR OTHER BID S. THIS EXPLANATION IS NOT ACCEPTABLE. BY A COMPETITIVE BID DING, THE APPELLANT COULD HAVE GOT AN EVEN BETTER PRICE THAN THE ABOVE PRICE. THE PROVISIONS OF SECTION 13(L)(C) AND 13(L)(D)(I), 13(2)(A) AND 13(2)(H) OF THE I T ACT, 1961 ARE AS UNDER:- '13 (1) - NOTHING CONTAINED IN SECTION 11 OR SECTIO N 12 SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF THE PREVI OUS YEAR OF THE PERSON IN RECEIPT THEREOF . .. (C) IN THE CASE OF A TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITUTION, ANY INCOME THE REOF (I) IF SUCH TRUST OR INSTITUTION HAS BEEN CREA TED OR ESTABLISHED AFTER THE COMMENCEMENT OF THIS ACT AND UNDER THE TE RMS 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 PRO PERTY OF THE TRUST OR THE INSTITUTION (WHENEVER CREATED OR ESTABL ISHED) IS DURING THE PREVIOUS YEAR USED OR APPLIED, DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSO N REFERRED TO IN SUB- SECTION (3). . .. (D) IN THE CASE OF A TRUST FOR CHARITABLE OR RELIGI OUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITUTION, ANY INCOME THE REOF, IF FOR ANY PERIOD DURING THE PREVIOUS YEAR - (I) ANY FUNDS OF THE TRUST OR INSTITUTION ARE INVES TED OR DEPOSITED AFTER THE 28 TH DAY OF FEBRUARY, 1983 OTHERWISE THAN IN ANY ONE OR MORE OF THE FORMS OR MODES SPECIFIED IN SUB-SECTION (5) OF SECTION 11; OR (II) ............... (III) ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 14 - 13(2) - WITHOUT PREJUDICE TO THE GENERALITY OF THE PROVISIONS OF CLAUSE (C) AND CLAUSE (D) OF SUB-SECTION (1), THE I NCOME OR THE PROPERTY OF THE TRUST OR INSTITUTION OR ANY PART OF SUCH INCOME OR PROPERTY SHALL, FOR THE PURPOSES OF THAT CLAUSE, BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF A PERSON RE FERRED TO IN SUB - SECT ION (3), - (A) IF ANY PART OF THE INCOME OR PROPERTY OF THE TR UST OR INSTITUTION IS, OR CONTINUES, TO BE LENT TO ANY PERSON REFERRED TO IN SUB-SECTION (3) FOR ANY PERIOD DURING THE PREVIOUS YEAR WITHOUT EIT HER ADEQUATE SECURITY OR ADEQUATE INTEREST OR BOTH; (B)................................. (C) ....................................... (H) IF ANY FUNDS OF THE TRUST OR INSTITUTION ARE, O R CONTINUE TO REMAIN, INVESTED FOR ANY PERIOD DURING THE PREVIOUS YEAR (N OT BEING A PERIOD' BEFORE THE 1 ST -DAY OF JANUARY, 1971), IN ANY CONCERN IN WHICH ANY PERSON REFERRED TO IN SUB-SECTION (3) HAS A SUBSTANTIAL INTEREST. ' AS PER SUB SECTION (3) OF SECTION 13 OF THE I T ACT , 1961, THE PERSONS REFERRED TO IN CLAUSE (C) OF SUB-SECTION (1) AND SU B-SECTION (2) ARE THE FOLLOWING, NAMELY: (A) THE AUTHOR OF THE TRUST OR THE FOUNDER OF THE INSTI TUTION; (B) ANY PERSON WHO HAS MADE A SUBSTANTIAL CONTRIBUTION TO THE TRUST OR INSTITUTION, THAT IS TO SAY, ANY PERSON WHOSE TO TAL CONTRIBUTION UPTO THE END OF THE RELEVANT PREVIOUS YEAR EXCEEDS FIFTY THOUSAND RUPEES; (C) WHERE SUCH AUTHOR, FOUNDER OR PERSON IS A HINDU UNDIVIDED FAMILY, A MEMBER OF THE FAMILY; (CC) ANY TRUSTEE OF THE TRUST OR MANAGER (BY WHATEV ER NAME CALLED) OF THE INSTITUTION; (D) ANY RELATIVE OF ANY SUCH AUTHOR, FOUNDER, PERSON, MEMBER, TRUSTEE OR MANAGER AS AFORESAID; (E) ANY CONCERN IN WHICH ANY OF THE PERSONS R EFERRED TO IN CLAUSES (A), (B), (C), (CC) AND (D) HAS A SUBSTANTI AL INTEREST. IT HAS BEEN STATED BY THE APPELLANT'S REPRESENTATIV E THAT LATE SHRI SURYAKANT L PATEL (EXPIRED ON 16 TH JUNE, 2005) WAS THE FOUNDER AND AUTHOR OF THE TRUST. THEREFORE, SHRI SIDDHARTH S PA TEL, SON OF LATE SHRI SURYAKANT PATEL IS A SPECIFIED PERSON COVERED BY CLAUSE (D) OF SECTION 13(3) OF THE I T ACT, 1961. SINCE THE AMOUN T OF RS.14 LACS WAS LENT TO SHRI SIDDHARTH S PATEL WITHOUT ADEQUATE SECURITY OR ADEQUATE INTEREST, THEREFORE, AS PER THE PROVISIONS OF SUB-SECTION (2) OF SECTION 13 OF THE I T ACT, 1961, THE INCOME OR T HE PROPERTY OF THE TRUST/INSTITUTION SHALL BE DEEMED TO HAVE BEEN USED OR APPLIED FOR ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 15 - THE BENEFIT OF A PERSON REFERRED TO IN SUB-SECTION (3) OF SECTION 13. IN VIEW OF THE ABOVE, THE PROVISIONS OF SECTION 13 (L) - OF THE I T ACT, 1961 ARE CLEARLY APPLICABLE. THEREFORE, THE ENTIRE INCOME OF THE TRUST IS NOT ELIGIBLE FOR EXEMPTION U/S.LL OR 12 OF THE I T ACT, 1961. ACCORDINGLY, THE ASSESSING OFFICER WAS JUSTIFIED IN FORFEITING THE EXEMPTION CLAIMED U/S.LL OF THE I T ACT, 1961 AND H OLDING THAT THE INCOME SHOWN AMOUNTING TO RS.3137066 IS APPELLANT'S INCOME CHARGEABLE TO TAX AT THE MAXIMUM MARGINAL RATE. ACC ORDINGLY, THE ADDITION MADE OF RS.31,37,066 TO THE TOTAL INCOME I S CONFIRMED. 10. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE SUBMITTED BEFORE US IT WILL BE OBSERVED FROM PAGE 47 OF THE P APER BOOK THAT A MEETING OF THE TRUSTEES OF PARISAR TRUST, VADODARA WAS HELD ON 16 TH JULY 2001 TO DISCUSS THE PURCHASE OF LAND FOR VOCATIONAL INSTITU TE TO BE ESTABLISHED UNDER THE TRUST. AT THIS MEETING, THE MANAGING TRUSTEE, S HRI SURYAKANT PATEL INFORMED THE OTHER TRUSTEES ABOUT THE PROPOSAL OF E STABLISHING A VOCATIONAL INSTITUTE AT VADODARA UNDER THE AUSPICES OF PARISAR TRUST. THE MATTER RELATING TO THE SETTING UP OF THE INSTITUTE AND THE ACTIVITIES PROPOSED TO BE UNDERTAKEN AT SUCH INSTITUTE WERE DISCUSSED AND THE MANAGING TRUSTEE PROPOSED TO INVEST ABOUT RS.120 LACS IN THE PROJECT AND TO PURCHASE ABOUT 32 ACRES OF LAND FOR THE SAID INSTITUTE. THE OTHER TRUSTEES OBJECTED TO THE INVESTMENT IN THE PROJECT ON SUCH A LARGE SCALE AND CONSIDERING THE PRESENT ECONOMIC CONDITION SUGGESTED THAT SETTING UP OF THE INSTITUTE WITHIN A LAND AREA OF APPROXIMATE 6.5 ACRES WILL SUFFICE THE PURP OSE. AFTER DUE DELIBERATION, IT WAS UNANIMOUSLY AGREED UPON TO PUR CHASE ABOUT 6.5 ACRES LAND. CONSEQUENTLY, THE MANAGING TRUSTEE SUGGESTED ABOUT THE AVAILABILITY OF THE LAND AT VILLAGE AMPAD, NEAR VADODARA AT A VE RY REASONABLE COST. IT WAS INFORMED THAT THE LAND BELONGS TO SHRI SHIDDHAR TH PATEL WHO INTENDS TO SELL THE LAND. THEREAFTER, A RESOLUTION WAS PASSED APPROVING THE PURCHASE OF THE LAND. HE FURTHER SUBMITTED THAT PURSUANT TO TH IS AGREEMENT, AN MOU WAS EXECUTED ON 23.01.2002. HE ALSO SUBMITTED THAT THE COST OF THE LAND WAS RS.11,00,000/- AND THAT THE COST OF CONSTRUCTIO N WAS APPROXIMATELY ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 16 - RS.70 LACS. HE ALSO REFERRED TO PAGES 41 TO 46 OF T HE PAPER BOOK AND SUBMITTED THAT AT THE SAID PAGES VALUATION REPORT O F THE REGISTERED VALUER IS PLACED WHO VALUED THE LAND AT RS.23.15 LACS. THUS, THE LAND WAS OFFERED AT APPROXIMATELY 45% OF ITS ACTUAL VALUE. HE THEN REFE RRED TO PAGE 32 OF THE PAPER BOOK WHEREIN LETTER DATED 27.10.2005 WRITTEN TO LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-V, BARODA, IS F ILED. BY REFERRING TO THIS LETTER, HE POINTED OUT THAT DURING THE YEAR U NDER CONSIDERATION THE TRUST HAD PAID AN ADVANCE OF RS.14 LACS TO SHRI SIDDHARTH S. PATEL FOR PURCHASE AND DEVELOPMENT OF LAND SITUATED AT VILLAGE AMPAD, DIST. VADODARA, FOR WHICH AN AGREEMENT DATED 23.01.2002 WAS ENTERED INT O BETWEEN SHRI SIDDHARTH S. PATEL AND TRUST. HE FURTHER STATED THA T IN THE SAID LETTER TO THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE AS SESSEE STATED THAT IN THE MEANWHILE DUE TO ADVERSE FINANCIAL POSITION OF THE TRUST AFFECTED BY THE FAILURE/BANKRUPTCY OF CHAROTAR NAGRIK SAHAKARI BANK ON 30 TH JULY 2003 WHERE THE TRUST WAS HOLDING MOST OF ITS FIXED DEPOS IT, THE TRUST WAS COMPELLED TO CANCEL THE SCHOOL/INSTITUTE BUILDING C ONTRACT WITH MR. SIDDHARTH PATEL. HE THEN REFERRED TO THE LEDGE ACC OUNT OF SIDDHARTH S. PATEL FILED AT PAGE 62 OF THE PAPER BOOK AND SUBMI TTED THAT THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES DRAWN ON UNION B ANK OF INDIA, RS.5 LACS ON 31.12.2001, RS.5 LACS ON 29.01.2002 AND RS. 4 LACS ON 13.03.2002 AND THE SAME WERE RETURNED BACK BY CHEQUE DRAWN ON UNION BANK OF INDIA, RS. 4 LACS ON 25.09.2004, RS.5 LACS ON 12.02 .2005 AND RS.5 LACS ON 29.03.2005. 11. IT WAS FURTHER SUBMITTED THAT THE CONTENTION OF THE REVENUE IS THAT SHRI SIDDHARTH PATEL WAS A PERSON BELONGING TO THE PROHIBITORY CATEGORY WITHIN THE MEANING OF SECTION 13(2)(A) AND SINCE INCOME OR PROPERTY OF THE INSTITUTION HAD BEEN LENT TO SUCH A PERSON DURING THE PREVIOUS YEAR WITHOUT ADEQUATE SECURITY AND ADEQUATE INTEREST, THE ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 17 - LEGAL FICTION IN SUB-SECTION (2) OF SECTION 13 WOUL D COME INTO PLAY AND THE INCOME OF PROPERTY OF THE INSTITUTION SHALL FOR THE PURPOSE OF CLAUSE (D) OF SUB-SECTION (1) OF SECTION 13 BE DEEMED TO HAVE BEE N APPLIED FOR THE BENEFIT OF THE PROHIBITORY CATEGORY OF PERSONS UNDE R SUB-SECTION (3). HE SUBMITTED THAT SECTION 13(2)(A) PROVIDES THAT THE I NCOME OR THE PROPERTY OF THE TRUST OR INSTITUTION OR ANY PART OF SUCH INCOME OR PROPERTY SHALL FOR THE PURPOSES OF CLAUSE-(C) AND CLAUSE (D) OF SUB SECTIO N (1) OF SECTION 13 BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF A PERSON REFERRED TO IN SUB SECTION (3) IF ANY PART OF THE INCOME OR PRO PERTY OR THE TRUST OR INSTITUTION IS, OR CONTINUES TO BE, LENT TO ANY PER SON REFERRED TO IN SUB SECTION (3) FOR ANY PERIOD DURING THE PREVIOUS YEAR WITHOUT EITHER ADEQUATE SECURITY OR ADEQUATE INTEREST OR BOTH. THUS, THE S ECTION REFERS TO LENDING OF INCOME OR PROPERTY OF THE INSTITUTION TO A PERSON B ELONGING TO PROHIBITED CATEGORY UNDER SUB-SECTION (3) 0F SECTION 13 FOR A PERIOD DURING THE PREVIOUS YEAR WITHOUT EITHER ADEQUATE SECURITY OR A DEQUATE INTEREST OR BOTH AND NOT WHERE A SUM WAS ADVANCED FOR A CONSIDERATIO N. IN THE PRESENT CASE, THE ASSESSEE TRUST HAS ENTERED INTO A CONTRACT FOR DEVELOPMENT AND PURCHASE OF A LAND AS A MEASURE OF EXPANSION OF THE TRUST AC TIVITIES FOR WHICH THE MONEY WAS GIVEN AS AN ADVANCE. HE THEN REFERRED TO SECTION 2(22)(E) AND SUBMITTED THAT IN THE SAID SECTION, IT HAS BEEN SPE CIFICALLY PROVIDED THAT ANY SUM BY WAY OF ADVANCE OR LOAN GIVEN TO A SHARE HOLD ER. THUS, WHERE THE INTENTION OF THE LEGISLATURE WAS TO DEBAR GIVING OF ANY ADVANCE TO ANY PERSON, IT WOULD HAVE SPECIFICALLY PROVIDED FOR THE SAME. HE ALSO REFERRED TO SECTION 269SS OF THE ACT AND SUBMITTED THAT IN T HE SAID SECTION ALSO THE WORD LOAN AND DEPOSITS HAVE BEEN USED AND THE WORD ADVANCE WAS NOT THERE. THEREFORE, HE SUBMITTED THAT BY ADVANCING MO NEY FOR PURCHASE AND DEVELOPMENT OF LAND, THE ASSESSEE DID NOT VIOLATE T HE PROVISIONS OF SECTION 13(3) OF THE ACT AND THEREFORE, THE LEARNED ASSESSI NG OFFICER WAS NOT ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 18 - JUSTIFIED IN NOT GRANTING THE EXEMPTION AVAILABLE U NDER SECTION 11 AND 12 OF THE ACT TO THE ASSESSEE. 12. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE FURTHER SUBMITTED THAT RELIANCE PLACED BY THE CIT(A) ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF DIRECTOR OF INCOME TAX VS. BHARAT DIAMOND BOURSE 259 ITR 280(SC) WAS NOT CORRECT AS BECAUSE T HE FACTS OF THE ASSESSEE S CASE ARE ENTIRELY DIFFERENT FROM THE FA CTS OF THE CASE THAT WERE BEFORE THE HON'BLE SUPREME COURT IN THAT CASE. HE S UBMITTED THAT IN THAT CASE THERE WAS NO WRITTEN AGREEMENT, MONEY PAID WAS NEITHER INTENDED AS DEPOSIT FOR LEASE NOR WAS IT INTENDED AS DEPOSIT TO BE PAID TO THE BUILDER, MATERIAL ON RECORD CLEARLY SUGGESTED THAT THE AMOUN T DID NOT CARRY THE STAMP OF DEPOSIT BUT WAS MERELY INTENDED TO ENABLE THE PAYEE TO PURCHASE THE PROPERTY IN HIS OWN NAME, AND THE PAYEE WAS NOT IN THE BUSINESS OF DEVELOPMENT OF REAL ESTATE. IN THE INSTANT CASE IT IS NOT IN DISPUTE THAT THE PAYEE IS IN THE BUSINESS OF DEVELOPMENT OF REAL EST ATE, THERE WAS A WRITTEN AGREEMENT WITH PAYEE FOR PURCHASE AND DEVELOPMENT O F LAND AND THAT THE PROJECT WAS ABANDONED BECAUSE OF FINANCIAL DIFFICUL TIES DUE TO SUPERVENING IMPOSSIBILITIES FOR FAILURE OF THE CHAROTAR NAGRIK SAHAKARI BANK WHERE ASSESSEE WAS MAINTAINING SUBSTANTIAL DEPOSITS. 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND VEHEMENTLY ARGUED AND SUPPORTED THE ORDER OF THE LE ARNED COMMISSIONER OF INCOME TAX(APPEALS). 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE, THE ASSESSEE IS A CHARITABLE TRUST REGISTERED UNDER SECTION 12A OF THE ACT AND IS ENTITLED FOR DEDUCTION UNDER SECTION 11 OF T HE ACT BUT FOR THE PROVISIONS OF SECTION 13(2) OF THE ACT, THE EXEMPTI ON CLAIMED UNDER ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 19 - SECTION 11 WAS DENIED TO THE ASSESSEE FOR THE ASSES SMENT YEARS 2002-2003, 2003-04 AND 2005-06. THE RELEVANT FACTS ARE THAT TH E ASSESSEE PAID RS.14 LACS TO ONE SHRI SIDDHARTH S. PATEL WHO IS SON OF S HRI SURYAKANT L. PATEL SETTLER OF THE TRUST RS.5 LACS ON 31.12.2001, RS.5 LACS ON 29.01.2002 AND RS.4 LACS ON 13.03.2002, WHICH WAS RETURNED TO THE TRUST RS.4 LACS ON 25.09.2004, RS.5 LACS ON 12.02.2005 AND RS.5 LACS O N 29.03.2005. THE CLAIM OF THE ASSESSEE IS THAT THE MONEY WAS GIVEN T O SAID SHRI SIDDHARTH S. PATEL FOR ACQUIRING OF LAND FROM HIM AND FOR THE DE VELOPMENT THAT LAND. IN SUPPORT OF THE ABOVE CLAIM, THE ASSESSEE FILED BEFO RE THE LOWER AUTHORITIES AND AGREEMENT DATED 23.01.2002. HOWEVER, ACCORDING TO THE LEARNED ASSESSING OFFICER THE SAID AGREEMENT WAS ONLY TO CA MOUFLAGE THE TRANSACTION AND ACTUALLY MONEY WAS GIVEN AS A LOAN FOR THE BENEFIT OF SAID SHRI SIDDHARTH S. PATEL AND THEREFORE, IN VIEW OF T HE PROVISIONS OF SECTION 13(2) OF THE ACT, THE ASSESSEE TRUST WAS NOT ENTIT LED FOR THE BENEFIT OF DEDUCTION UNDER SECTION 11 AND 12 AND IS LIABLE TO PAY TAX AT THE MAXIMUM MARGINAL RATE. THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS) ON APPEAL CONFIRMED THE ABOVE ACTION OF THE LEARNED AS SESSING OFFICER. BEFORE US, THE CONTENTION OF THE ASSESSEE IS SAME A ND THE ASSESSEE ALSO POINTED OUT THAT SUM OF RS.14 LACS WAS ADVANCED IN PURSUANCE TO A WRITTEN AGREEMENT WITH SHRI SIDDHARTH S. PATEL. IT WAS EXPL AINED THAT THE ASSESSEE TRUST WAS FORMED WITH THE OBJECT OF IMPARTING OF ED UCATION FOR ENVIRONMENTAL DESIGN AND/OR ANY OTHER ARCHITECTURAL SUBJECT DEALING WITH THE ENVIRONMENT AND OTHER ASPECTS OF LIVING AND WOR KING CONDITIONS OF HUMAN BEING AND THE ASSESSEE WAS ALREADY RUNNING AN EDUCATIONAL INSTITUTION. TO FURTHER PROMOTE THIS OBJECT, THE AS SESSEE DECIDED TO OPEN AN ARCHITECTURAL INSTITUTION AND FOR THAT PURPOSE, IT WAS IN NEED OF A LAND. SHRI SIDDHARTH S. PATEL AGREED TO PROVIDE APPROXIMATELY 6.5 ACRES OF LAND TO THE TRUST AT A CONCESSIONAL RATE OF RS.11 LACS. AS SHRI SIDDHARTH S. PATEL WAS ALSO ENGAGED IN DEVELOPMENT OF REAL ESTATE, THE ASS ESSEE TRUST ENTERED INTO ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 20 - AN AGREEMENT WITH HIM FOR THE DEVELOPMENT OF THE SA ID LAND AT A TOTAL CONSIDERATION OF RS.70 LACS. IN PURSUANCE TO THE AB OVE AGREEMENT WHEREBY THE ASSESSEE TRUST WAS LIABLE TO PAY RS.81 LACS TO SAID SHRI SIDDHARTH S. PATEL, THE TRUST PAID RS.14 LACS TO HIM AS AN ADVAN CE FOR THE SAID PURPOSES. HOWEVER, AS CHAROTAR NAGRIK SAHAKARI BANK WITH WHOM THE ASSESSEE WAS MAINTAINING DEPOSITS BECAME BANKRUPT THE ASSESSEES FINANCIAL POSITION SUFFERED A BLOW AND THE ASSESSEE WAS NOT IN A POSIT ION TO MAKE PAYMENT OF THE BALANCE AMOUNT AND FURTHER MONEY REQUIRED FOR T HE NEW PROJECT AND THEREFORE, THE ASSESSEE CANCELLED THE PLAN OF START ING OF NEW SCHOOL. IN THE ABOVE CIRCUMSTANCES, SAID SHRI SIDDHARTH S. PATEL R ETURNED THE FULL AMOUNT OF ADVANCE TO THE ASSESSEE TRUST. THE LEARNED AUTHO RISED REPRESENTATIVE OF THE ASSESSEE CLAIMED THAT THE PROJECT FOR ESTABLISH ING OF NEW SCHOOL WAS IN FACT COMMENCED AND NOT ONLY BHUMI PUJAN FOR THE SAI D PURPOSE WAS DONE BUT ALSO DRAWINGS AND PLANS WERE GOT APPROVED. WE T HUS, FIND THAT THE ISSUE TO BE ADJUDICATED BY US IS WHETHER MONEY OF RS.14 L ACS PAID BY THE ASSESSEE TO SAID SHRI SIDDHARTH S. PATEL WAS IN THE NATURE OF ADVANCE FOR ACQUIRING OF SOME PROPERTY BY THE TRUST AND BY WAS NOT A MONEY ADVANCED BY THE TRUST FOR THE BENEFIT OF SAID SHRI SIDDHARTH PATEL OR WHETHER MONEY WAS ADVANCED FOR THE PURPOSE OF BENEFIT OF SHRI SID DHARTH S. PATEL. WE FIND THAT THE CLAIM OF THE ASSESSEE WAS THAT IT PLANNED TO OPEN AN ARCHITECT SCHOOL AND FOR THAT PURPOSE FOR ACQUIRING THE LAND FOR RS.11 LACS AND FOR GETTING THAT LAND A DEVELOPED FOR RS.70 LACS, IT AD VANCED RS.14 LACS TO SHRI SIDDHARTH S. PATEL WHO IS A PERSON COVERED BY THE P ROVISIONS OF SECTION 13(3) OF THE ACT. WE FIND THAT NO MATERIAL WAS BROU GHT BEFORE US OR BEFORE ANY LOWER AUTHORITIES TO SHOW THAT THE ASSESSEE TRU ST ENTERED INTO ANY UNDERSTANDING WITH ANY UNIVERSITY OR AUTHORITY FOR THE PURPOSE OF OPENING OF ARCHITECT INSTITUTION. FURTHER, THE ASSESSEE CLA IMED THAT ON THE LAND IN QUESTION, BHUMI PUJAN WAS DONE BUT EVIDENCE IN RESP ECT OF THE SAME ALSO WAS NOT FILED. THE ASSESSEE CLAIMED THAT DRAWING AN D PLAN OF SCHOOL TO BE ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 21 - CONSTRUCTED ON THE SAID LAND WAS APPROVED IS ALSO N OT SUBSTANTIATED BY BRINGING ANY MATERIAL ON RECORD. FURTHER, WHEN CONS IDERATION OF LAND WAS FULLY PAID BY THE ASSESSEE TO THE SAID SHRI SIDDHAR TH S. PATEL IT COULD NOT BE APPRECIATED WHY THE LAND WAS NOT REGISTERED IN THE NAME OF THE ASSESSEE TRUST. THE ASSESSEE TRUST HAS FILED A VALUATION REP ORT WHICH SHOWS THAT THE VALUE OF THE LAND AS ON 23.01.2002 WAS RS.23.15 LAC S. IN THE ABOVE CIRCUMSTANCES, THE ASSESSEE AFTER PAYING FULL AMOUN T OF AGREED CONSIDERATION OF RS.11 LACS COULD HAVE REALIZED MOR E THAN RS.23 LACS BY SELLING THE LAND IN THE MARKET, THEN WHY IT RETURNE D THE LAND TO SAID SHRI SIDDHARTH S. PATEL FOR THE AMOUNT PAID BY IT TO HIM ONLY. THE SUBMISSION OF THE ASSESSEE THAT RS.2.50 LACS TO RS.3 LACS WAS SPE NT BY SHRI SIDDHARTH S. PATEL ON DEVELOPMENT OF THE SAID LAND IS ALSO NOT S UPPORTED BY ANY MATERIAL BROUGHT ON RECORD. EVEN AFTER MAKING PAYMENT OF THE AFORESAID AMOUNT TO SHRI SIDDHARTH S. PATEL, THE ASSESSEE WOULD HAVE RE ALIZED MUCH MORE AMOUNT IF THE ASSESSEE WOULD HAVE SOLD THE LAND AT THE MARKET PRICE. KEEPING IN VIEW, THE FULL FACTS AND CIRCUMSTANCES O F THE CASE, IN MIND IN OUR CONSIDERED OPINION, THE EXPLANATION FURNISHED B Y THE ASSESSEE IS NOT CONVINCING. THE ASSESSEE HAS NOT BROUGHT ON RECORD THE EXACT AMOUNT, IT LOST DUE TO BANKRUPTCY OF CHAROTAR NAGRIK SAHAKARI BANK AND HOW THAT AMOUNT HAD AFFECTED THE PLAN OF THE ASSESSEE. THE A SSESSEE ALSO COULD NOT EXPLAIN WHY IF NOT THE FULL AMOUNT THEN A SUBSTANTI AL PORTION OF RS.14 LACS RECEIVED BY SHRI SIDDHARTH S. PATEL FROM ASSESSEE W AS NOT UTILISED FOR THE DEVELOPMENT OF THE LAND AND WHY ONLY RS.2.5 LACS TO RS.3 LAC WAS ONLY UTILISED FOR THE ACTUAL DEVELOPMENT OF LAND. FURTH ER, WHEN THE DEAL WAS REVOKED IN SEPTEMBER 2003, WHY THE AMOUNT WAS REFUN DED ONLY IN MARCH 2005 AND WHY NO INTEREST WAS CHARGED FOR THE PERIOD . IN VIEW OF THE ABOVE, WE FIND GOOD REASON TO INTERFERE WITH THE FINDINGS OF THE LOWER AUTHORITIES THAT THE AMOUNT ADVANCED BY THE ASSESSEE TO SAID SH RI SIDDHARTH S. PATEL WAS IN THE NATURE OF LOAN WITHOUT INTEREST. THUS, I N OUR CONSIDERED OPINION, ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 22 - THE LOWER AUTHORITIES WERE JUSTIFIED IN DENYING DED UCTION UNDER SECTIONS 11 AND 12 OF THE ACT TO THE ASSESSEE FOR THE ASSESSMEN T YEAR UNDER APPEAL. THUS, THE GROUND OF APPEAL OF THE ASSESSEE IS DISMI SSED FOR ALL THE YEARS UNDER APPEAL. 15. GROUND NO.2.0 AND 2.1 OF THE APPEAL READS AS UN DER:- 2.0 THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS ) ERRED N LAW AND ON FACTS HAS CONFIRMED THE ADDITIONS OF RS.4,60 ,000/- OUT OF CAUTION MONEY DEPOSIT RECEIVED DURING THE YEAR FROM THE STUDENTS ON THE GROUND THAT SUCH DEPOSITS ARE RECEIVED DURIN G THE YEAR FROM THE STUDENTS ON THE GROUND THAT SUCH DEPOSITS ARE V OLUNTARY CONTRIBUTIONS WITHIN THE MEANING OF SECTION 2(24)(I IA) OF THE INCOME TAX ACT, 1961. 2.1 THE APPELLANT TRUST IS COLLECTING REFUNDABLE DE POSITS FROM THE NEW STUDENTS IN THE FORM OF USING VARIOUS EQUIPMENTS, L IBRARY FACILITIES AND OTHER PROPERTIES OF THE VARIOUS SCHOOLS AND THE SAME ARE REFUNDED TO THE STUDENTS WHEN THEY LEAVE THE SCHOOL S. ACCORDINGLY, THE AMOUNT OF RS.4,60,000/- HAVE BEEN RECEIVED BY T HE APPELLANT DURING THE YEAR FROM THE NEWLY ADMITTED STUDENTS WH ICH ARE REFUNDABLE AFTER 3 TO 4 YEARS WHEN THE STUDENTS COM PLETE THEIR COURSES AND LEAVE THE SCHOOLS RUN BY THE TRUST. 16. THESE GROUNDS OF APPEAL ARE REGARDING TREATING OF CAUTION MONEY DEPOSITS OF RS.4,60,000 RECEIVED FROM STUDENTS AS I NCOME. IN THE BALANCE SHEET, THE ASSESSEE HAS SHOWN LIABILITY OF RS.30368 95 FOR RENT AND OTHER DEPOSITS. THE SAME CONSISTS OF MAINLY CAUTION MONEY DEPOSITS OF RS.1572500, STUDENT DRAWING DEPOSITS OF RS.231656, STUDENT DEPOSIT RS. 1197000 AND CANTEEN DEPOSIT RS.32545. DURING THE YE AR, THE ASSESSEE HAD RECEIVED A SUM OF RS.460000 WHICH IT CLAIMED TO BE CAUTION MONEY DEPOSITS. BEFORE THE ASSESSING OFFICER, IT WAS STAT ED BY THE ASSESSEE THAT THE SAID DEPOSITS ARE REFUNDABLE DEPOSITS AND UNDER NO CIRCUMSTANCES, THE SAME CAN BE WRITTEN OFF BECAUSE THE STUDENTS CAN AP PROACH THE TRUST AT ANY TIME FOR THE REFUND OF THE SAID DEPOSIT. THE TRUST IS REPAYING/REFUNDING SOME OLD DEPOSITS EVERY YEAR. IT WAS CONTENDED BY T HE ASSESSEE THAT THE ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 23 - SAID DEPOSITS ARE IN THE FORM OF SECURITY FOR USING VARIOUS EQUIPMENTS AND OTHER PROPERTIES OF THE TRUST/SCHOOL AND SOME OF TH E DEPOSITS STANDING IN THE BOOKS TILL DATE ALSO INCLUDE VARIOUS PENALTIES CHAR GEABLE BY THE TRUST FOR CERTAIN DEFAULTS BY THE STUDENTS WHICH WAS NEVER AC COUNTED FOR DUE TO THE FACT THAT STUDENTS DEPOSITS ARE ALSO OUTSTANDING IN THE BOOKS OF THE TRUST. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE AMOUNT RECEIV ED FROM THE STUDENTS SHOULD NOT BE TREATED AS VOLUNTARY CONTRIBUTION IN VIEW OF THE FACT THAT ALTHOUGH ASSESSEE CLAIMED THESE TO BE REFUNDABLE, H ARDLY ANY SUM WAS REFUNDED TO THE STUDENTS. IN RESPONSE IT WAS SUBMIT TED BY THE ASSESSEE THAT SINCE THE AMOUNTS WERE RECEIVED AS SECURITY AGAINST USE OF VARIOUS EQUIPMENTS AND WERE REFUNDABLE, THE SAME COULD NOT BE TREATED AS VOLUNTARY CONTRIBUTION WITHIN THE MEANING OF SECTIO N 2(24)(IIA) OF THE I T ACT, 1961. IT HAS BEEN OBSERVED BY THE ASSESSING OF FICER THAT DURING THE YEAR, THE ASSESSEE HAS COLLECTED A SUM OF RS.460000 IN THE NAME OF DEPOSITS OUT OF WHICH, THE SUM OF RS.355000 HAS NOT BEEN REFUNDED TO THE STUDENTS TILL DATE. THE ASSESSEE HAD COLLECTED HUGE SUMS OF MONEY FROM THE STUDENTS IN THE NAME OF VARIOUS DEPOSITS OUT OF WHI CH, RS.33.87 LACS IS STILL LYING WITH THE ASSESSEE AS UNCLAIMED OVER A PERIOD OF MORE THAN 20 YEARS. IT HAS BEEN STATED BY THE ASSESSING OFFICER THAT IF THE SAID AMOUNT WAS IN THE NATURE OF DEPOSIT, THE SAME SHOULD HAVE BEEN EI THER ADJUSTED AGAINST THE SO CALLED LIABILITIES AGAINST STUDENTS WHICH WERE CHARGEABLE FOR CERTAIN DEFAULTS OR AGAINST THE ACQUISITION OF ASSETS FOR W HICH, THESE AMOUNTS WERE ACCEPTED. SINCE NO SUCH ADJUSTMENTS HAD TAKEN PLA CE OVER THE YEARS, IT IS CLEAR THAT THE ASSESSEE'S CONTENTION THAT THE SAME WAS IN THE NATURE OF REFUNDABLE DEPOSITS IS NOT SUPPORTED BY FACTS. I T HAS BEEN STATED BY THE ASSESSING OFFICER THAT THE AMOUNTS LYING UNCLAIMED WITH THE ASSESSEE OVER THE YEARS ARE NOW NOT LIKELY TO BE CLAIMED BY THE S TUDENTS SINCE THE STUDENTS HAVE ALREADY OPTED FOR NOT CLAIMING SUCH A MOUNTS AT THE TIME OF ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 24 - COMPLETION OF THEIR COURSES. IT HAS BEEN STATED B Y THE ASSESSING OFFICER THAT THE ASSESSEE'S CONTENTION THAT IT HAD BEEN REF UNDING SOME OF THE OLD DEPOSITS EVERY YEAR IS ALSO NOT SUPPORTED BY ANY DO CUMENTARY EVIDENCE. IT HAS BEEN OBSERVED BY THE ASSESSING OFFICER THAT SEC TION 2(24)(II)(A) DEFINES 'INCOME' AS INCLUDING VOLUNTARY CONTRIBUTION RECEIV ED BY A TRUST CREATED WHOLLY OR PARTLY FOR CHARITABLE OR RELIGIOUS PURPOS ES. IT HAS BEEN STATED THAT AS PER THE ABOVE DEFINITION, EVEN THE CORPUS DONATIONS BECOME ASSESSABLE AS INCOME BY VIRTUE OF PROVISIONS OF SEC TION 2(24)(II)(A) AND THE BURDEN OF PROVING THE AMOUNT RECEIVED BY THE ASSESS EE FROM STUDENTS AS CORPUS DONATIONS OR IN THE NATURE OF ANYTHING BUT V OLUNTARY CONTRIBUTION IS ON THE ASSESSEE WHICH IT FAILED TO DO. IT HAS THERE FORE BEEN HELD BY THE ASSESSING OFFICER THAT THE SAID SUM OF R S.4,60,000 IS VOLUNTARY CONTRIBUTION RECEIVED BY THE ASSESSEE FROM ITS STUD ENTS AND FALLS WITHIN THE PROVISIONS OF SECTION 2(24)(II) OF THE I T ACT, 196 1. THIS AMOUNT HAS ALSO NOT BEEN APPLIED TO OR ACCUMULATED FOR CHARITABLE P URPOSES IN INDIA AND HAS BEEN EMPLOYED BY THE ASSESSEE TO ESCAPE THE CONDITI ONS LAID DOWN FOR ACCUMULATION OF INCOME. SINCE THE EXEMPTION U/S.LL HAD BEEN DENIED TO THE ASSESSEE THE AMOUNT OF RS.460000 WAS TREATED AS ASSESSEE'S INCOME FOR THE YEAR UNDER CONSIDERATION. 17. IN APPEAL BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS), IT HAS BEEN SUBMITTED BY THE APPEL LANT'S REPRESENTATIVE THAT THE CAUTION MONEY DEPOSITS ARE REFUNDABLE DEPO SITS. THE TRUST IS COLLECTING THIS DEPOSIT IN THE FORM OF SECURITY FOR USING VARIOUS EQUIPMENTS, LIBRARY FACILITIES AND OTHER PROPERTIES OF THE TRUS T/SCHOOL. IT HAS BEEN STATED THAT THE COLLECTION OF SUCH DEPOSIT IS A NORMAL PRA CTICE IN MOST OF THE SCHOOLS/COLLEGES AND CANNOT BE TREATED AS INCOME. I T HAS BEEN STATED THAT THE SAID DEPOSIT OF RS.460000 HAS BEEN RECEIVED DUR ING THE YEAR AND DOES NOT REPRESENT OLD DEPOSITS. THE SAME HAS BEEN RECEI VED FROM STUDENTS ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 25 - JOINING THE SCHOOL/INSTITUTION AND A VALID DEPOSIT RECEIPT HAS BEEN GIVEN TO THEM. THE TRUST HAS TO REPAY/REFUND THE SAID DEPOSI T ON COMPLETION OF THE COURSES ON THE BASIS OF CLAIMS RECEIVED FROM THE ST UDENTS. IT HAS BEEN STATED THAT THE TRUST HAS REPAID SUCH DEPOSITS YEAR AFTER YEAR. IT HAS BEEN STATED THAT MANY TIMES SOME STUDENTS DO NOT COLLECT SUCH DEPOSI TS AT THE TIME OF LEAVING THE SCHOOL/INSTITUTION HOWEVER THEY COME TO COLLECT SUCH DEPOSITS LATER ON. THEREFORE, SUCH DEPOSITS CANNOT BE WRITTE N OFF. IN VIEW OF THE ABOVE, IT HAS BEEN -SUBMITTED THAT THE CAUTION MONE Y DEPOSITS CANNOT BE TREATED AS VOLUNTARY CONTRIBUTION U/S.2(24)(IIA) AN D SHOULD BE REDUCED FROM THE INCOME OF THE TRUST. 18. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HELD AS UNDER: 4.2 I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSE SSING OFFICER AND THE CONTENTIONS OF THE APPELLANT. AS MENTIONED BY THE ASSESSING OFFICER, THE APPELLANT HAS SHOWN A LIABILITY OF RS. 3036895 FOR RENT AND OTHER DEPOSITS IN THE BALANCE SHEET. THE SAME C ONSISTS OF MAINLY CAUTION MONEY DEPOSITS OF RS. 1572500, STUDE NT DRAWING DEPOSITS RS.231656, STUDENT DEPOSIT OF RS.1197000 A ND CANTEEN DEPOSITS OF RS.32545. DURING THE YEAR, THE APPELLAN T HAD RECEIVED CAUTION MONEY DEPOSITS OF RS.460000. IT WAS FOUND B Y THE ASSESSING OFFICER THAT ALTHOUGH THE ASSESSEE CLAIMED THESE DE POSITS TO BE REFUNDABLE, HARDLY ANY SUM WAS REFUNDED TO STUDENTS . IT HAS BEEN CLAIMED BY THE APPELLANT'S REPRESENTATIVE THAT THE DEPOSITS WERE RECEIVED AS SECURITY AGAINST USE OF VARIOUS EQUIPME NTS AND WERE REFUNDABLE. HOWEVER, IT WAS FOUND BY THE ASSESSING OFFICER THAT OUT OF THE AMOUNT OF RS.460000 COLLECTED FROM THE STUDE NTS, THE APPELLANT HAD NOT REFUNDED RS.355000 TILL DATE. THE TOTAL DEPOSITS WITH THE APPELLANT AMOUNTED TO RS.33.87 LACS AND WE RE STILL LYING UNCLAIMED OVER A PERIOD OF MORE THAN 20 YEARS. THE APPELLANT HAS NOT BEEN ABLE TO SUBMIT ANY EVIDENCE THAT IT IS REF UNDING SOME OF THE OLD DEPOSITS EVERY YEAR. THEREFORE, THE ASSESSING O FFICER WAS JUSTIFIED IN HOLDING THAT THE SUM OF RS.460000 IS V OLUNTARY CONTRIBUTION RECEIVED BY THE APPELLANT FROM ITS STU DENTS FALLING WITHIN THE PURVIEW OF SECTION 2(24)(IIA) OF THE I T ACT, 1961. AS PER THE PROVISIONS OF SECTION 2(24)(IIA) INCOME INCLUDE S VOLUNTARY CONTRIBUTIONS RECEIVED BY A TRUST CREATED WHOLLY OR PARTLY FOR ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 26 - CHARITABLE OR RELIGIOUS PURPOSES OR BY AN INSTITUTI ON ESTABLISHED WHOLLY OR PARTLY FOR SUCH PURPOSES. CONSIDERING THE FACT THAT THE EXEMPTION U/S.LL HAS BEEN DENIED TO THE APPELLANT, THE ASSESSING OFFICER WAS JUSTIFIED IN TREATING THE AMOUNT OF RS. 460000 AS APPELLANT'S INCOME FOR THE YEAR UNDER CONSIDERATION . THEREFORE, THE ADDITION MADE OF RS.4,60,000 TO THE TOTAL INCOME IS CONFIRMED. 19. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE SUBMITTED THAT IT IS THE CASE OF THE REVENUE THAT CAUTION MON EY WAS NOT REFUNDED TO THE STUDENTS AFTER THEY LEFT THE INSTITUTION, THEREFORE , IT WAS THE INCOME OF THE ASSESSEE. HE SUBMITTED THAT EVEN IF, THE ARGUMENT O F THE REVENUE IS ACCEPTED THEN THE CAUTION MONEY SHOULD BE TAXED IN THE YEAR WHEN THE STUDENTS LEFT THE INSTITUTION AND NOT IN THE YEAR O F RECEIPT OF THE CAUTION MONEY. 20. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 21. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. THE LEARNED ASSESSING OFFICER ADDED AMOUNT OF CAUTION MONEY OF RS.4,60,000/- TO THE INCOME OF THE ASSESSEE ON THE GROUND THAT CAUTION M ONEY TAKEN BY THE ASSESSEE WAS NOT RETURNED TO THE STUDENTS WHEN THEY LEFT THE INSTITUTION. THE ONLY SUBMISSION OF THE ASSESSEE IS THAT THE CAUTION MONEY IS UTILISED FOR THE PURPOSE FOR WHICH THE SAME IS TAKEN AND IN CASE ANY CAUTION MONEY IS NOT REFUNDED TO THE STUDENTS IN THE YEAR IN WHICH THEY LEAVE THE INSTITUTION THEN ONLY THE SAME CAN BE TREATED AS INCOME OF THE ASSES SEE TRUST. HE THEREFORE, CONTENDED THAT THE LOWER AUTHORITIES WERE NOT JUSTI FIED IN TREATING THE ENTIRE CAUTION MONEY AS INCOME OF THE ASSESSEE TRUST FOR T HE YEAR UNDER CONSIDERATION. WE FIND FORCE IN THE ABOVE ARGUMENT OF THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE. IN OUR C ONSIDERED OPINION, CAUTION MONEY RECEIVED BY THE ASSESSEE TRUST CAN BE TREATED AS INCOME OF ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 27 - THE ASSESSEE TRUST IF THE SAME IS NOT REFUNDED BACK IN THE YEAR IN WHICH THE STUDENTS LEAVE THE INSTITUTION. WE THEREFORE, SET A SIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE AND RESTORE THE MAT TER BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR VERIFYING THE AMOUNT WHICH RELATES TO THE STUDENTS LEFT THE INSTITUTION DURING THE YEAR UNDER CONSIDERATION AND THE AMOUNT OF CAUTION MONEY NOT REFUNDED TO SUCH STUDEN TS ONLY BE TREATED AS INCOME OF THE ASSESSEE TRUST. NEEDLESS TO SAY THAT SUFFICIENT OPPORTUNITY OF HEARING SHALL BE ALLOWED TO THE ASSESSEE BEFORE DEC IDING THE ISSUE AFRESH. THUS, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTI CAL PURPOSES. 22. GROUND NO.3.0 READS AS FOLLOWS:- 3.0 THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND FACT BY NO ALLOWING EXEMPTION UNDER SECTION 10(23C) OF THE INCOME TAX ACT, 1961 ON THE GROUND THAT THE APPELLA NT HAS NOT TAKEN APPROVAL UNDER THE SAME SECTION. 23. AT THE TIME OF THE HEARING, THE LEARNED AUTHORI SED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT AS THE GROSS RECEIPT S OF THE ASSESSEE ARE RS.101 LACS, HE IS NOT PRESSING THIS GROUND OF APP EAL AS REGISTRATION IS REQUIRED WHERE THE RECEIPTS ARE MORE THAN RS.1 CROR E. HENCE, THIS GROUND OF APPEAL IS DISMISSED AS NOT PRESSED. 24. THE COMMON GROUNDS OF APPEAL TAKEN AS GROUNDS N OS.4.0 AND 5.0 OF THE APPEAL IN THE ASSESSMENT YEAR 2002-03 AND AS G ROUNDS NOS. 2.0 AND 3.0 IN THE ASSESSMENT YEAR 2003-04 AND 2005-06 READ S AS UNDER: 4.0 THE COPIES OF THE SUBMISSIONS MADE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ARE ENCLOSED HE REWITH. 5.0 THE APPELLANT CRAVES LEAVES TO ADD TO, ALTER, DELETE OR MODIFY ANY OF THE GROUND OF APPEAL EITHER BEFORE OR AT THE TIME O F HEARING OF THIS APPEAL. ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 28 - 25. THESE GROUNDS OF APPEAL ARE GENERAL IN NATURE A ND HENCE REQUIRES NO ADJUDICATION BY US. 26. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR A SSESSMENT YEAR 2002- 2003 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THAT FOR THE ASSESSMENT YEARS 2003-04 AND 2005-06 ARE DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 30/10/2009. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 30/10/2009 PREPARED AND COMPARED BY: PARAS ITA NO.422/AHD/2006, 4095/AHD/2008 & 4096/AHD/2008 M/S.PARISAR TRUST ASST.YEAR -2002-2003 - 29 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-V, BARODA. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD