Asst. Director of Income-tax,(Exemption)- I, Hyderabad V. Sri Venkateswara Educational Trust, Hyderabad

ITA 438/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66537 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 16-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: PAUL D J RATNAM
• Keywords: Capital asset; Charitable institution; Reassessment proceedings
• Section: 143(3); 12A; 147; 148; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.438/HYD/ 201 2 ASSTT. YEAR: 2007-08 ADIT(EXEMPTIONS)-I, HYDERABAD. .... APPELLANT VS. SRI VENKATESWARA EDUCATIONAL TRUST, HYDERABAD. PAN:AACTS 3949L RESPONDENT APPELLANT BY : SMT. AMISHA S. GUPT (DR) RESPONDENT BY : SRI PAUL D.J. RATNAM (AR) DATE OF HEARING : 10-10-2012 DATE OF PRONOUNCEMENT: 27-11- 2012 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 19-12-2011 PASSED IN APPEAL NO.281/ADIT (E)-I /CIT(A)-IV/10-11 AND IT PERTAINS TO THE ASSESSMENT YEAR 2003-04. 2. THE ONLY ISSUE ARISING OUT OF THE GROUNDS RAIS ED BY THE REVENUE IS WITH REGARD TO THE ALLOWANCE OF ASSESSEES CLAIM OF EXEM PTION OF CAPITAL GAINS AMOUNTING TO RS.40,79,472/- U/S 10(23C)(IIIAD) AS W ELL AS SECTION 11 OF THE ACT. 3. BRIEFLY THE FACTS ARE THE ASSESSEE CLAIMING IT SELF TO BE AN EDUCATIONAL TRUST WAS ESTABLISHED UNDER A TRUST DEED IN THE YEA R 1979. THE ASSESSEE WAS RUNNING A SCHOOL FOR THE PURPOSE OF IMPARTING EDUCA TION IN THE NAME AND STYLE OF OM VIDYALAYA. DURING THE RELEVANT FINANCIAL YEAR, THE ASSESSEE HAD SOLD LAND 2 ITA NO.438 OF 2012 SRI VENKATESWARA EDUCATIONAL TRUST, HYD. AND RECEIVED AN AMOUNT OF RS.67,46,000/-. THE ASSE SSEE HOWEVER FILED A RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 31-3- 2004 ADMITTING NIL INCOME WHICH WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUEN TLY, ASSESSMENT WAS ALSO COMPLETED U/S 143(3) OF THE ACT ON 29-3-2006. HOWE VER, ON THE BASIS OF INFORMATION AVAILABLE ON RECORD THAT INCOME HAS ESC APED ASSESSMENT, ACTION U/S 147 WAS INITIATED BY ISSUING A NOTICE U/S 148 OF TH E ACT ON 12-11-2009. IN COURSE OF THE REASSESSMENT PROCEEDINGS, THE AO RAISE D A QUERY WITH REGARD TO THE NON DISCLOSURE OF CAPITAL GAINS ON ACCOUNT OF S ALE OF LAND. THE ASSESSEE CONTENDED THAT THE INCOME IS EXEMPT U/S 11(1) OF TH E ACT SINCE THE SALE PROCEEDS HAVE BEEN DEPOSITED IN THE STATE BANK OF I NDIA AS PER THE PROVISIONS CONTAINED U/S 11(1) OF THE ACT. THE AO HOWEVER DID NOT ACCEPT THE CLAIM OF THE ASSESSEE ON THE GROUND THAT AS PER SECTION 11(1A), C APITAL GAINS ARE REQUIRED TO BE INVESTED IN ANOTHER CAPITAL ASSET TO AVOID CAPI TAL GAIN TAX. THE DEPOSITS MADE IN SBI WILL NOT ENTITLE THE ASSESSEE TO CLAIM EXEMPT ION U/S 11(1). THE AO FURTHER OBSERVED THAT THE ASSESSEE ALSO FAILED TO PRODUCE C ERTIFICATE U/S 12A OF THE ACT. ON THE AFORESAID REASONING, THE AO COMPUTED THE CAP ITAL GAINS AT RS.40,79,472/- WHICH WAS BROUGHT TO TAX WHILE COMPL ETING THE ASSESSMENT U/S 143(3) READ WITH SECTION 147 OF THE ACT. THE ASSES SEE BEING AGGRIEVED OF THE ASSESSMENT ORDER FILED AN APPEAL BEFORE THE CIT (A). 4. IN COURSE OF HEARING BEFORE THE CIT (A), THE ASS ESSEE CONTENDED THAT IT BEING AN EDUCATIONAL INSTITUTION AND EXISTING SOLEL Y FOR THE PURPOSE OF IMPARTING EDUCATION WITH NON PROFIT MOTIVE AND ITS ANNUAL RE CEIPTS BEING LESS THAN RS.1 CRORE, ITS INCOME IS EXEMPT U/S 10(23C)(IIIAD) OF T HE ACT. IN SUPPORT OF ITS CONTENTION, THE ASSESSEE ALSO RELIED UPON CIRCULAR NO.772 DATED 23-12-1998 AND CIRCULAR NO.712 DATED 25-7-1995 OF CBDT HAD FU RTHER SUBMITTED THAT AS PER THE AFORESAID CIRCULAR, NO RESTRICTION IS IMPOSED ON EDUCATIONAL INSTITUTIONS COVERED U/S 10(22) AND 10(23C) (IIIAD) REGARDING I NVESTMENT OF THEIR FUNDS AS PER SECTION 11(5) OF THE ACT. THE ASSESSEE FURTHE R SUBMITTED THAT DURING THE YEAR THE ASSESSEE HAD DEPOSITED RS.8.30 CRORES AS ON 1-4-2002 AND AT THE END OF THE YEAR I.E., 31-3-2003 THE DEPOSITS STOOD AT R S.84,45,718/-. THUS, THERE WAS INCREASE OF RS.76,15,718/- WHICH WAS ON ACCOUN T OF CONSIDERATION RECEIVED FROM SALE OF LAND AND RECEIPTS TOWARDS CORPUS FUND DURING THE YEAR. THE 3 ITA NO.438 OF 2012 SRI VENKATESWARA EDUCATIONAL TRUST, HYD. ASSESSEE SUBMITTED THAT THERE IS NO UNEXPLAINED INV ESTMENT MADE BY THE ASSESSEE DURING THE YEAR. THE CIT (A) AFTER CONSIDE RING THE CONTENTIONS RAISED BY THE ASSESSEE ACCEPTED THE FACT THAT THE ASSESSEE IS AN EDUCATIONAL INSTITUTION WHOSE RECEIPTS DO NOT EXCEED RS. 1 CRORE. THE CIT (A) FURTHER ACCEPTED THE FACT THAT THE ASSESSEE IS AN EDUCATIONAL TRUST EXISTING SOLELY FOR THE PURPOSE OF IMPARTING EDUCATION WITH A NON PROFIT MOTIVE. THE CIT (A) OBSERVING THAT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW TH AT THE ASSESSEE TRUST WAS NOT EXISTING FOR IMPARTING EDUCATION WITH NON PROFI T MOTIVE AND WHEN NO IRREGULARITY WAS FOUND IN THE ACCOUNTS OF THE TRUST , HELD THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 10(23C) (IIIAD) OF THE AC T. THE CIT (A) ALSO NOTED THE FACT THAT NOT ONLY IN THE IMPUGNED ASSESSMENT YEAR BUT IN THE SUBSEQUENT YEARS ALSO THE ASSESSEE HAS CLAIMED EXEMPTION U/S 10(23C) OF THE ACT. THE CIT (A) FURTHER HELD THAT ONCE THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT, NO FURTHER REQUIREMENT OF OBTAINING REGISTR ATION U/S 12A OF THE ACT FOR ENABLING IT TO GET EXEMPTION. THE CIT (A) APART FR OM HOLDING THAT THE ASSESSEE IS EXEMPT U/S 10(23C)(IIIAD) OF THE ACT, HE FURTHER HELD THAT SINCE THE ASSESSEE HAS DEPOSITED THE SALE PROCEEDS RECEIVED FROM SALE OF LAND IN FDS OF SBI, IT ALSO SATISFIES THE REQUIREMENT OF SECTION 11 AND THE ASS ESSEE IS ENTITLED FOR EXEMPTION SINCE THE CAPITAL GAIN HAS BEEN INVESTED IN A CAPITAL ASSET. FOR THIS PROPOSITION, THE CIT (A) RELIED UPON A DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN WELFARE TRUST (206 IT R 138). 5. THE LEARNED DR SUBMITTED BEFORE US THAT THE ASSE SSEE TRUST IS NOT EXISTING SOLELY FOR THE PURPOSE OF IMPARTING EDUCATION AS HA S BEEN HELD BY THE CIT (A). REFERRING TO THE TRUST DEED, THE LEARNED DR SUBMITT ED THAT APART FROM EDUCATION, THE ASSESSEE IS ENGAGED IN OTHER ACTIVITIES ALSO. THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE SOLELY EXISTS FOR THE PURPOSE OF EDUCA TION. THEREFORE, ITS INCOME CANNOT BE EXEMPT U/S 10(23C)(IIIAD) OF THE ACT. TH E LEARNED DR FURTHER SUBMITTED THAT THE ASSESSEE HAS ALSO FAILED TO BRI NG ANY MATERIAL ON RECORD TO SHOW THAT THE LAND SOLD BELONGED TO THE EDUCATIONAL INSTITUTION IN WHICH EVENT THE ASSESSEES CLAIM OF EXEMPTION U/S 10(23C)(IIIAD ) OF THE ACT COULD HAVE BEEN ACCEPTED. THE LEARNED DR SUBMITTED THAT IN THE ABS ENCE OF ANY MATERIAL PRODUCED BY THE ASSESSEE TO THIS EFFECT, THE FINDIN G OF THE CIT (A) THAT THE ASSESSEE IS EXEMPT U/S 10(23C)(IIIAD) IN SO FAR AS THE INCOME FROM CAPITAL GAINS 4 ITA NO.438 OF 2012 SRI VENKATESWARA EDUCATIONAL TRUST, HYD. IS CONCERNED, IS NOT SUSTAINABLE. THE LEARNED DR SUBMITTED THAT THE CIT (A) WAS NOT CORRECT IN HOLDING THAT THE ASSESSEE IS EXE MPT BOTH U/S 10(23C) (IIIAD) AS WELL AS U/S 11 OF THE ACT WHEN THE ASSESSEE HAS NOT APPLIED ANY PART OF THE CAPITAL GAINS FOR CHARITABLE PURPOSE NOR THE ASSES SEE HAS PRODUCED THE CERTIFICATE U/S 12A OF THE ACT. 6. THE LEARNED AR, ON THE OTHER HAND, REITERATING IT S CONTENTIONS TAKEN BEFORE THE CIT (A) SUBMITTED THAT THE ASSESSEE BEING AN EDUCATIONAL TRUST SOLELY EXISTING FOR THE PURPOSE OF IMPARTING EDUCATION WIT HOUT ANY PROFIT MOTIVE, ITS INCOME IS EXEMPT U/S 10(23C)(IIIAD) OF THE ACT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS APPARENT FROM THE ORDER OF THE CIT (A) THAT THE CIT (A) HAS ACCEPTED THE CLAIM OF THE ASSESSEE THAT IT IS A N EDUCATIONAL INSTITUTION SOLELY EXISTING FOR THE PURPOSE OF IMPARTING EDUCATION FOR NON PROFIT MOTIVE, SINCE IT IS RUNNING A SCHOOL IN THE NAME AND STYLE OF OM VIDYA LAYA. THE TRUST WAS CREATED BY VIRTUE OF A TRUST DEED MADE ON 21-12-19 79. A COPY OF WHICH IS SUBMITTED BEFORE US BY THE LEARNED DR. THE TRUST W AS CREATED WITH THE FOLLOWING OBJECTIVES:- 1. TO ESTABLISH A FUND FOR THE PURPOSE OF EDUCATIO NAL, MEDICAL SOCIAL AND CULTURAL NEEDS AND ALSO ENDOWING SCHOLARSHIPS T O DESERVING PERSONS FOR INDUSTRIAL AND TECHNICAL EDUCATIONS AND TO HOLD SUCH PEOPLE AS ARE AFFECTED BY HIS MAJOR IN ANY PART OF INDIA. 2. TO ESTABLISH SCHOOLS AND COLLEGES, HOSPITALS, DI SPENSARIES, MATERNITY HOMES, NURSING HOMES AND TO CONDUCT THE SAME. 3. TO ESTABLISH ART AND CULTURAL CENTRES FOR THE PR ESERVATION OF PROMOTION OF INDIAN CULTURE. 4. TO PROVIDE SCHOLARSHIP TO ANY PERSONS IN ORDER T O ASSIST THEM IN FURTHER OR HIGHER EDUCATION OR FOR RESEARCH IN ANY SUBJECT AND SUCH SCHOLARSHIPS MAY BE GIVEN TO ANY PERSON IN INDIA, W HETHER SUCH TRAINING RESEARCH OR OTHER STUDY OR WORK IS DONE IN INDIA OR ABROAD. 5. TO ESTABLISH AND CONDUCT LIBRARIES AND READING R OOMS. 5 ITA NO.438 OF 2012 SRI VENKATESWARA EDUCATIONAL TRUST, HYD. 6. TO PROMOTE THE RELIEF OF THE POOR, ADVANCEMENT O F EDUCATION, MEDICAL RELIEF, POOR FEEDING CULTURAL ADVANCEMENT A ND OTHER OBJECTS OF GENERAL OR PUBLIC WHICH THE TRUSTEES IN THEIR DI SCRETIONS DETERMINE FROM TIME TO TIME. 7. TO EDIT, PRINT AND PUBLISH ANY MAGAZINE BOOKS OR OTHER PERIODICALS OR PAMPHLETS FOR THE ADVANCEMENT FOR THE PROPAGATIO N OF ANY OF THE OBJECTS OF THE TRUST AS MAY BE CONSIDERED USEFUL BY THE TRUSTEES. 8. AS CAN BE SEEN FROM THESE OBJECTS OF THE TRUST, I T ALSO GOT MANY OTHER ACTIVITIES APART FROM EDUCATIONAL ACTIVITIES. SO FAR AS EDUCATIONAL ACTIVITY IS CONCERNED, THE ASSESSEE IS RUNNING A SCHOOL IN THE NAME AND STYLE OF OM VIDYALAYA. IT IS A FACT ON RECORD THAT DURING THE I MPUGNED ASSESSMENT YEAR, THE ASSESSEE HAS SOLD LAND AVAILABLE WITH IT FOR A TOTA L CONSIDERATION OF RS.67,46,000/- WHICH WAS CLAIMED AS EXEMPT FROM TAX U/S 10(23C)(IIIAD) OF THE ACT. HOWEVER, AS CAN BE SEEN FROM THE RECORD, THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO SHOW THAT THE LAND SOLD BELONGED TO THE EDUCATIONAL INSTITUTION OM VIDYALAYA. A SPECIFIC QUERY WAS MADE FROM THE B ENCH TO THE LEARNED AR TO DEMONSTRATE THAT THE LAND SOLD WAS THE SURPLUS LAND AVAILABLE WITH THE EDUCATIONAL INSTITUTION OM VIDYALAYA, THE LEARNED AR PRODUCED THE BALANCE- SHEETS AS WELL AS LISTS OF FIXED ASSETS AS ON 31-3- 2000, 31-3-2001, 31-3-2002, AND AS COULD BE SEEN FROM THE LIST OF FIXED ASSETS FOR THE YEAR ENDED ON 31-3- 2000 AND 31-3-2001 THOUGH THE LAND WAS THERE BUT IN THE YEAR ENDED 31-3- 2002, THERE IS NO LAND IN THE LIST OF FIXED ASSETS THOUGH THE SCHOOL IS STILL EXISTING. THIS IS SUGGESTIVE OF THE FACT THAT THE L AND SOLD BY THE ASSESSEE DID NOT BELONG TO THE SCHOOL BUT WAS SURPLUS LAND AVAILABLE WITH THE TRUST. THE LEARNED AR ALSO FAILED TO DEMONSTRATE BEFORE US THAT THE LAN D BELONGED TO THE EDUCATIONAL INSTITUTION OM VIDYALAYA. BESIDES, EVEN ASSUMING SO, HOW CAN IT CLAIM TO BE AN EXISTING EDUCATIONAL INSTITUTION AFT AER THE SALE OF THE ONLY LAND AVAILABLE, THE BUILDING A/C BEING ADMITTEDLY SAME L AND? THEREFORE, IT HAS TO BE HELD THAT THE LAND DID NOT BELONG TO THE EDUCATIONA L INSTITUTION IN WHICH EVENT, THE SALE PROCEEDS COULD NOT HAVE BEEN TREATED AS EX EMPT U/S 10(23C)(IIIAD) OF THE ACT. SINCE THE ASSESSEE TRUST IS NOT EXISTING SOLELY FOR THE PURPOSE OF 6 ITA NO.438 OF 2012 SRI VENKATESWARA EDUCATIONAL TRUST, HYD. EDUCATION WITH NON PROFIT MOTIVE AS IT HAS VARIOUS OTHER OBJECTS, EDUCATION BEING ONE OF THEM. IN THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSEE TRUST IS AN EDUCATIONAL TRUST SOLELY EXISTING FOR THE PURPOS E OF IMPARTING EDUCATION WITH A NON PROFIT MOTIVE. IN THE AFORESAID CIRCUMSTANCES, SINCE THE LAND SOLD BELONGED TO THE TRUST AND NOT THE EDUCATIONAL INSTITUTION, I T CANNOT BE HELD TO BE EXEMPT U/S 10(23C) (IIIAD) OF THE ACT. HOWEVER, SO FAR A S THE CLAIM OF EXEMPTION U/S 11(1) IS CONCERNED, IT IS SEEN THAT THE ASSESSEE BE FORE THE AO HAS CONTENDED THAT SINCE THE CONSIDERATION RECEIVED ON SALE OF LA ND WAS DEPOSITED WITH SBI, IT IS EXEMPT U/S 11(1) OF THE ACT. THE CIT (A) ALSO RELY ING UPON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF HINDUSTA N WELFARE TRUST (SUPRA) HAS HELD THAT SINCE THE ASSESSEE HAS INVESTED THE PROCE EDS FROM SALE OF LAND IN FDRS WITH SBI WHICH IS SCHEDULED BANK, THEREFORE IT IS E XEMPT U/S 11(1) OF THE ACT. IN THE AFORESAID DECISION OF CALCUTTA HIGH COURT (SUPR A) IT HAS BEEN HELD THAT INVESTMENT MADE BY THE ASSESSEE IN FDRS IN A SCHEDU LED BANK WILL ASSUME THE CHARACTER OF CAPITAL ASSET IRRESPECTIVE OF THE PERI OD FOR WHICH THE DEPOSIT IS MADE. SECTION 11(5) OF THE ACT PROVIDES THAT DEPOSIT IN ANY ACCOUNT WITH A SCHEDULED BANK IS ALSO ONE OF THE MODES OF INVESTIN G OR DEPOSITING THE MONEY. THEREFORE, IN VIEW OF THE PROVISION OF THE ACT, IN THE CONTEXT OF THE RATIO DECIDED BY THE HONBLE CALCUTTA HIGH COURT WE ARE OF THE VI EW THAT THE ISSUE NEEDS TO BE VERIFIED BY THE AO AS TO WHETHER THE SALE PROCEEDS HAVE BEEN DEPOSITED IN FDRS OF A SCHEDULED BANK, IF ON VERIFICATION IT IS FOUND THAT IT HAS BEEN DEPOSITED IN THE FDRS WITH A SCHEDULED BANK THEN EXEMPTION U/S 11 O F THE ACT CAN BE GRANTED TO THE ASSESSEE IN ACCORDANCE WITH THE PROVISIONS OF T HE ACT AND SUBJECT TO THE CONDITION THAT THE ASSESSEE IS REGISTERED AS A CHAR ITABLE TRUST U/S 12A OF THE ACT. 9. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 27-11-2012. SD/- (SANJAY ARORA) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 27 TH NOVEMBER, 2012. 7 ITA NO.438 OF 2012 SRI VENKATESWARA EDUCATIONAL TRUST, HYD. COPY TO:- 1) ASSTT. DIRECTOR OF INCOME-TAX (EXEMPTIONS)-I, HY DERABAD. 2)SRI VENKATESWARA EDUCATIONAL TRUST, 3-4-1008/3, BARKATPURA, HYDERABAD. 3) THE CIT (A)-IV, HYDERABAD. 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR*