The Income-tax Officer, Srinagar V. M/s. The Society for Promotion of Culture and, Kashmir ( J&K)

ITA 428/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0744 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 31-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 30-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO.428(ASR)/2014 ASSESSMENT YEAR:2010-11 PAN: AAFFT-2485F INCOME TAX OFFICER, VS. M/S. THE SOCIETY FOR PRO MOTION OF CULTURE WARD 3(3), AND EDUCATION TRUST, HUMHAMA BUDGAM, SRINAGAR. KASHMIR ( J & K ). (APPELLANT) (RESPONDENT) APPELLANT BY: SH. UMESH TAKYAR, DR RESPONDENT BY: SH. A.M. ZARGAR, CA DATE OF HEARING: 31/05/2016 DATE OF PRONOUNCEMENT: 01/06/2016 ORDER PER A.D. JAIN, JM: THIS IS THE DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 2010-11, AGAINST THE ORDER, DATED 25.04.2014, PASSED BY THE LD. CIT(A), JAMMU. THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER THE LD. CIT(A) WAS RIGHT IN LAW IN NOT CONSIDERING THAT THE DEED OF RELINQUISHMENT IN RESPECT OF THE L AND TRANSFERRED BY THE FOUNDER TRUSTEE TO THE TRUST IS NOT REGISTERED BEFORE THE DESIGNATED REGISTERING AUTHOR ITY, I.E. SUB-REGISTRAR INSTEAD THE SAME IS NOTARIZED THROUG H NOTARY PUBLIC AND THIS FACT WAS DULY BROUGHT TO THE NOTICE OF THE LD. CIT(A) THROUGH THE REMAND REPORT HOWEVER THE SAME H AS NOT BEEN TAKEN INTO ACCOUNT. ITA NO. 428(ASR)/2014 ASSESSMENT YEAR: 2010-11 2 2. WHETHER THE LD. CIT(A) WAS RIGHT IN LAW IN NOT C ONSIDERING THAT AS PER THE RCS OF THE VEHICLES THE SAME ARE R EGISTERED IN THE NAME OF THE FOUNDER TRUSTEE, I.E. MRS. MUMTAZ-U N-NISHA SOZ AND THE OWNERSHIP OF THESE VEHICLES WAS NOT TRA NSFERRED TO THE TRUST DURING THE YEAR UNDER ASSESSEE. 3. WHETHER THE LD. CIT(A) WAS RIGHT IN LAW IN NOT C ONSIDERING THAT AS PER CLAUSE 39 OF THE TRUST DEED BY VIRTUE O F WHICH THE TRUST HAS COME INTO EXISTENCE AND WHICH READS A S THE TRUST WILL EB LIABLE TO PAY RENT OF 15% OF THE PROC EEDS IN THE GIVEN YEAR FOR THE LAND/PROPERTY THAT THE FURTHER T RUSTEE OR OTHER TRUSTEES WILL OFFER TO THE TRUST FOR RUNNING SCHOOL COLLEGES ETC. AND WHICH A RENT WILL BE OFFERED THRO UGH A LEASE. THE FOUNDER TRUSTEE HAS EVERY REASON TO CLA IM BENEFIT FROM THE TRUST AGAINST THE LAND AND THE VE HICLES REGISTERED IN HER NAME. THIS FACT WAS DULY REPORTED IN THE REMAND REPORT SUBMITTED BEFORE THE LD. CIT(A), JAMM U. 2. THE FACTS AS PER THE RECORD ARE THAT THE ASSESSE E, THE SOCIETY FOR PROMOTION OF CULTURE & EDUCATION TRUST, HUMHAMA BUD GAM, KASHMIR, IS A REGISTERED CHARITABLE TRUST WHICH RUNS AN EDUCATI ONAL INSTITUTION IN BUDGAM DISTRICT J & K UNDER THE NAME STYLE OF DELHI PUBLIC SCHOOL BUDGAM. THE TRUST IS REGISTERED U/S 11/12 OF THE IN COME TAX ACT, 1961 AND ENJOYS EXEMPTION OF TAX ON ITS INCOME UNDER THE SAID PROVISIONS. DURING THE ASSESSMENT YEAR UNDER APPEAL, THE AO HAS DENIED EXEMPTION TO THE TRUST ON THE GROUND THAT THE ASSETS OF THE T RUST LIKE LAND & BUSES ARE IN THE NAME OF TRUSTEE INSTEAD OF THE TRUST ITS ELF. IN HIS VIEW THIS AMOUNTED TO THE TRUSTEE DERIVING PERSONAL BENEFIT F ROM THE TRUST PROPERTY, THUS, VIOLATING SECTION 13(1)(C)(II) & 13 (D)(I) AND HENCE, DENIAL OF EXEMPTION U/S 11 OF THE ACT. THE ASSESSEE STATED BE FORE THE LD. CIT(A) AS UNDER: ITA NO. 428(ASR)/2014 ASSESSMENT YEAR: 2010-11 3 A) THAT ALL THE ASSETS HAD BEEN PURCHASED OUT OF THE T RUST FUNDS AND DID APPEAR ON THE BALANCE SHEET OF THE TR UST SINCE A.Y. 2007-08. B) THAT THE LAND, THOUGH IN THE NAME OF THE TRUSTEE WA S RELINQUISHED BY HER IN FAVOUR OF THE TRUST IN 2009 VIDE RELINQUISHMENT DEED DATED 12 TH AUGUST, 2009 AND MUTATED IN FAVOUR OF THE RESPONDENT TRUST IN THE YEAR 2012. C) THAT THE PERMISSION BY CONCERNED AUTHORITIES TO CON STRUCT THE SCHOOL BUILDING ON THE SAID LAND WAS IN THE NAM E & FAVOUR OF THE ASSESSEE THUS MAKING IT ABUNDANTLY CL EAR THAT THE WHOLE ASSET BELONGED TO TRUST. D) THAT THE OWNERSHIP OF BUSES CLEARLY INDICATED THAT THESE WERE TRUST PROPERTY. THE BUSES WERE FULLY PAINTED I N YELLOW IN ACCORDANCE WITH THE GENERAL DIRECTIONS OF THE HONB LE SUPREME COURT AND CONSPICUOUSLY DISPLAYED THE NAME & OTHER DETAILS OF THE SCHOOL ON THEIR BODIES. E) THAT EVEN IF FOR ARGUMENT SAKE IT IS CONCEDED THAT ASSETS STAND IN THE NAME OF THE TRUSTEE, IT IPSO-FACTO DOE S NOT AMOUNT TO TRUSTEE DERIVING ANY BENEFIT FROM THE TRU ST PROPERTY. 3. THE LD. CIT(A) CALLED FOR AND RECEIVED A REMAND REPORT. IN THE REMAND REPORT DATED 22.01.2014, THE AO REPORTED THA T THE LAND ORIGINALLY IN THE NAME OF THE TRUSTEE, WAS TRANSFERRED TO THE ASSESSEE-TRUST VIDE RELINQUISHMENT DEED DATED 12.08.2009 AND MUTATED I N FAVOUR OF THE TRUST IN THE YEAR 2012. IT WAS ALSO REPORTED THAT T HE RECEIPTS FROM THE SCHOOL BUSES WERE DULY ACCOUNTED FOR IN THE BOOKS O F ACCOUNT OF THE ASSESSEE-TRUST AND THAT NO BENEFIT WHATSOEVER WAS D ERIVED BY THE ASSESSEE FROM PLYING SCHOOL BUSES. 4. THE LD. CIT(A), WHILE GRANTING EXEMPTION U/S 11 OF THE ACT HELD AS FOLLOWS: ITA NO. 428(ASR)/2014 ASSESSMENT YEAR: 2010-11 4 THE SAID CLAUSE 39 OF THE TRUST DEED EMPOWERS THE TRUST TO PAY LEASE-RENT TO TRUSTEES AT A SPECIFIED PERCENTAGE IN CASE THEY OFFER ANY OF THEIR PERSONAL PROPERTIES TO TRUST ON LEASE. THIS IS PERFECTLY A REASONABLE CLAUSE WHICH HAS PASSED BOTH THE TESTS O F LEGALITY AS WELL AS VALIDITY BEFORE THE ITO & CIT AT THE TIME O F GRANT OF REGISTRATION TO TRUST U/S 12AA. HAVING SAID THAT, IT MAY BE STATED HERE THAT DURING THE YEAR UNDER APPEAL, NEITHER HAVE TRUSTEES OFFERED ANY PERSONAL PROPERTY TO TRUST ON LEASE NOR HAS THE TRUST HAS PAID ANY LEASE MONEY PURSUANT TO ABOVE CLAUSE. .. AFTER VERIFYING THE DOCUMENTS, THE AO REPORTED THAT THERE IS A RELINQUISHMENT DEED IN FAVOUR OF THE TRUST DATED 1 2 TH AUGUST, 2009 NOTARIZED THROUGH NOTARY PUBLIC AND THE REVENUE AUT HORITIES AS PER THE MUTATION RECORDS HAS TAKEN COGNIZANCE OF THE SA ID DOCUMENTS AND MUTATION WAS DONE IN YEAR 2012 IN FAVOUR OF TRU ST BEFORE PASSING OF ASSESSMENT ORDER ON 13.03.2014. FURTHER , THE AO HAS VERIFIED THE ORIGINAL COPIES OF RCS OF THE VEHICLE AND REPORTED THAT THE RCS OF THE VEHICLES HAS BEEN REGISTERED IN THE NAME OF MUMTAZ UN NISSA SOZ FOUNDER TRUSTEE DELHI PUBLIC SCHOOL. B UDGAM AND ALSO REPORTED THAT ALL THE FEES COLLECTED FROM STUD ENTS INCLUDING BUS FEE HAVE BEEN DULY ACCOUNTED FOR IN THE BOOKS OF TR UST AND THE SETTLER HAS TAKEN NO BENEFIT FROM PLYING OF SCHOOL BUSES. I HAVE GONE THROUGH THE SUBMISSION OF THE APPELLANT , ASSESSMENT ORDER AND REMAND REPORT, IT IS NOTICED THAT LAND, B UILDING AND VEHICLES ARE DULY REGISTERED IN THE NAME OF TRUST A ND FURTHER, THERE IS NOTHING ON RECORD TO SHOW THAT THE TRUSTEE HAS TAKE N ANY BENEFIT FROM THE TRUST. THEREFORE, THE ACTION OF AO IN DENY ING THE EXEMPTION U/S 11 OF THE ACT TO THE APPELLANT TRUST IS NOT SU STAINABLE. THESE GROUNDS OF APPEAL ARE ACCORDINGLY ALLOWED AND A REL IEF OF RS.62,33,246/- IS ALLOWED. 5. BEFORE US, THE LD. DR HAS CONTENDED THAT THE LD. CIT(A) WAS NOT RIGHT IN NOT CONSIDERING THAT THE DEED OF RELINQUIS HMENT IN RESPECT OF THE LAND TRANSFERRED BY THE FOUNDER TRUSTEE TO THE TRUS T IS NOT REGISTERED BEFORE THE DESIGNATED REGISTERING AUTHORITY, I.E., SUB-REGISTRAR AND INSTEAD, THE SAME IS NOTARIZED THROUGH NOTARY PUBLI C AND THIS FACT WAS DULY BROUGHT TO THE NOTICE OF THE LD. CIT(A) THROUG H THE REMAND REPORT, ITA NO. 428(ASR)/2014 ASSESSMENT YEAR: 2010-11 5 HOWEVER, THE SAME HAS NOT BEEN TAKEN INTO ACCOUNT. HE FURTHER SUBMITTED THAT THE LD. CIT(A) ERRED IN LAW IN CONS IDERING THAT AS PER THE RCS OF THE VEHICLES, THE SAME WERE REGISTERED IN TH E NAME OF THE FOUNDER TRUSTEE, I.E., MRS. MUMTAZ-UN-NISHA SOZ AND THE OWN ERSHIP OF THESE VEHICLES WAS NOT TRANSFERRED TO THE TRUST DURING TH E YEAR UNDER ASSESSEE. THE LD. DR FURTHER SUBMITTED THAT THE LD. CIT(A) WA S ALSO NOT RIGHT IN LAW IN CONSIDERING THAT AS PER CLAUSE 39 OF THE TRUST DEED BY VIRTUE OF WHICH THE TRUST HAS COME INTO EXISTENCE AND WHICH READS A S THE TRUST WILL BE LIABLE TO PAY RENT OF 15% OF THE PROCEEDS IN THE GI VEN YEAR FOR THE LAND/PROPERTY THAT THE FURTHER TRUSTEE OR OTHER TRU STEES WILL OFFER TO THE TRUST FOR RUNNING SCHOOL COLLEGES ETC. AND WHICH A RENT WILL BE OFFERED THROUGH A LEASE, THE FOUNDER TRUSTEE HAS EVERY REA SON TO CLAIM BENEFIT FROM THE TRUST AGAINST THE LAND AND THE VEHICLES R EGISTERED IN HER NAME. THIS FACT WAS DULY REPORTED IN THE REMAND REPORT SU BMITTED BEFORE THE LD. CIT(A), JAMMU. 6. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE STRONGLY RELIED ON THE IMPUGNED ORDER. 7. APROPOS THE LAND, IT IS SEEN THAT IT WAS MUTATE D IN FAVOUR OF THE ASSESSEE TRUST IN THE YEAR 2012, BEFORE PASSING OF THE ASSESSMENT ORDER DATED 13.03.2013. THE REVENUE AUTHORITIES, WHILE MU TATING THE LAND IN FAVOUR OF THE ASSESSEE, HAVE DULY TAKEN INTO COGNIZ ANCE OF DEED OF ITA NO. 428(ASR)/2014 ASSESSMENT YEAR: 2010-11 6 RELINQUISHMENT DATED 12.08.2009 EXECUTED BY THE ORI GINAL OWNER OF THE LAND IN FAVOUR OF THE ASSESSEE-TRUST. THEREFORE, TH E LAND HAVING BEEN MUTATED IN THE YEAR 2012, NOTHING OF BENEFIT TO TH E DEPARTMENT TURNS ON THE FACTUM OF THE SAID DEED BEING NOTARIZED THROUGH A NOTARY PUBLIC AND NOT BEING REGISTERED BEFORE THE SUB-REGISTRAR. AS SUCH, GROUND NO.1 IS REJECTED. 8. REGARDING THE ISSUE OF THE REGISTRATION OF THE S CHOOL BUSES BEING IN THE NAME OF THE TRUSTEE, SINCE THE BUS FEE COLLECT ED STANDS UNDISPUTEDLY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE TRUST, SUCH REGISTRATION OF THE BUSES IN THE NAME OF THE TRUSTEE RATHER THAN IN THE NAME OF THE ASSESSEE TRUST ALSO DOES NOT FURTHER THE CAUSE OF T HE DEPARTMENT. ACCORDINGLY, GROUND NO.2 IS ALSO REJECTED. 9. CONCERNING THE DEPARTMENTS OBJECTION THAT THE L D. CIT(A) DID NOT CONSIDER CLAUSE 39 OF THE TRUST DEED, AS PER WHICH, THE TRUST WILL BE LIABLE TO PAY RENT OF 15% OF THE PROCEEDS IN THE GI VEN YEAR FOR THE LAND/PROPERTY THAT THE FOUNDER TRUSTEE OR OTHER TRU STEES WILL OFFER TO THE TRUST FOR RUNNING SCHOOLS AND COLLEGES, ETC., THE L D. CIT(A) HAS CATEGORICALLY OBSERVED THAT DURING THE YEAR NEITHER HAVE THE TRUSTEES OFFERED ANY PERSONAL PROPERTY TO THE ON LEASE, NOR HAS THE TRUST PAID ANY LEASE MONEY PURSUANT TO THE SAID CLAUSE 39 OF THE T RUST DEED. BEFORE US, IT HAS NOT BEEN SHOWN BY THE DEPARTMENT TO BE OTHER WISE. SO, THE MERE ITA NO. 428(ASR)/2014 ASSESSMENT YEAR: 2010-11 7 EXISTENCE OF THE CLAUSE IN THE TRUST DEED, SANS ANY ACTION IN PURSUANCE THEREOF, CAN CAUSE NO DETRIMENT TO THE ASSESSEE, PA RTICULARLY WHEN IT PASSED MUSTER AT THE TIME OF GRANT OF REGISTRATION TO THE ASSESSEE. 10. IN VIEW OF THE ABOVE, FINDING NO ERROR WHATSOEV ER THEREIN, THE WELL REASONED ORDER PASSED BY THE LD. CIT(A) IS HEREBY C ONFIRMED. 11. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/06/ 2016. SD/- SD/- (T.S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER /SKR/ DATED: 01/06/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:THE SOCIETY FOR PROMOTION OF CULTURE A ND EDUCATION TRUST HUMHAMA BUDGAM SRINAGAR. 2. THE WARD 3(3), SRINAGAR. 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER