THE CONTRACTOR FOUNDATION, MUMBAI V. ITO (E) 1(1), MUMBAI

ITA 5199/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8771 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 04-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Assessee Lawyers: FIROZE B ANDHYAURJHA
• Keywords: Capital asset; Charitable institution; Opportunity of being heard; Principle of natural justice
• Section: 143(3); 142(1); 12A

Judgement Text

C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 5199 / MUM/2015 ( / ASSESSMENT YEAR : 2010 - 11 ) THE CONTRACTOR FOUNDATION 59, 2 ND FLOOR, BURTHANI MAHAL MARWAN MANSION NAPEAN SEA ROAD MUMBAI - 400 006 / V. INCOME TAX OFFICER(E) - 1(1) PIRAMAL CHAMBERS LALBAUG PAREL , MUMBAI - 400012 ./ PAN : AAATT3798C ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: SHRI. FIROZE B ANDHYAURJHA REVENUE BY : SH RAJAT MITTAL / DATE OF HEARING : 03 - 08 - 2017 / DATE OF PRONOUNCEMENT : 31 - 10 - 2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE , BEING ITA NO. 5199 /MUM/201 5 FOR ASSESSMENT YEAR 2010 - 11 , IS DIRECTED AGAINST THE APPELLATE ORDER DATED 29 - 09 - 2015 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 1 , MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2010 - 11 , APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM THE ASSESSMENT ORDER DATED 28 - 03 - 201 3 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A TRUST REGISTERED AS CHARITABLE ORGANISATION WITH DIT(E), MUMBAI U/S 12A AND THE TRUST H AS CLAIMED IT TO BE ENGAGED IN THE FIELD OF EDUCATION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 143(2) , IT WAS OBSERVED BY THE AO I.T.A. NO. 5199/ MUM/2015 2 THAT THE ASSESSEE HAS RECEIVED DONATION OF 100 SHARES OF M/S WARDEN POLYCLINIC PRIVATE LIMITED ATTACHED TO FLAT NO. 6 AT BEN NEVIS WARDEN ROAD FROM THE ESTATE OF LATE DR. HILLA BANAJI ON 01 - 09 - 2009 . THE SAID SHARES WERE CLAIMED TO HAVE BEEN SOLD ON 04 - 09 - 2009 FOR RS. 2,00,00,000/ - WHICH WAS CLAIMED TO BE INVESTED IN FLAT NO. 802 B AT ORCHID TOWERS , MUMBAI A ND THUS CONSIDERATION OF RS. 2,00,00,000/ - ON ACCOUNT OF SALE OF 100 SHARES OF WARDEN POLYCLINIC WAS CLAIMED CLAIMED TO BE EXEMPT U/S 11(1A). THE AO ISSUED NOTICE U/S 142(1) GIVING W.R.T. ABOVE TRANSACTION AND ASK ED ASSESSEE TO FURNISH COPY OF DECLARATION WITH SPECIFIC DIRECTION THAT THE DONATION OF 100 SHARES OF SAID COMPANY IS FOR THE PURPOSES OF CORPUS OF THE ASSESSEE TRUST AND THE ASSESSEE WAS ASKED TO FURNISH DOCUMENTS IN SUPPORT OF ITS CLAIM OF EXEMPTION. THE ASSESSEE SUBMITTED FOLLOWING DOCUMENTS WHI CH FOUND MENTIONED IN THE AO ORDER AT PAGE 3: A) COPY OF DECLARATION DATED 1 - 9 - 2009 WITH SPECIFIC DIRECTION THAT THE DONATION OF 100 SHARES OF WARDEN ROAD POLYCLINIC PVT. LTD. IS FOR THE PURPOSES OF CORPUS OF THE ASSESSEE TRUST IS ATTACHED. B) COPY OF THE WILL OF LATE DR. (MRS.) HILL BANAJI IS ATTACHED. C) THE COPY OF THE TRUST DEED OF CONTRACTOR FOUNDATION IS ALREADY SUBMITTED ON RECORD VIDE OUR LETTER DATED 14 - 8 - 2012. D) THERE IS NO DOCUMENT AVAILABLE IN SUPPORT OF THE VALUATION OF SHARES. THESE ARE SHARES OF PRIVATE LTD. COMPANY NOT QUOTED ON STOCK EXCHANGE. THE VALUE OF THE SHARES IS ONE WHICH IS OFFERED BY THE BUYER ANOTHER SAME IS DETERMINED ON THE BASIS OF AGREEMENT BETWEEN BUYERS AND SELLERS. THESE SHARES OF THE SAID POLYCLINIC CAN BE BOUGHT ONLY BY A PRACTISING MEDICAL DOCTOR AND THE SAME TO BE APPROVED BY THE POLYCLINIC MANAGEMENT. SO THERE ARE RESTRICTION ON THOSE SHARES. E) THE AGREEMENT OF SALE OF SHARES HAS ALREADY BEEN SUBMITTED ON RECORD ON 13 TH AUGUST 2012. F) NO APPROVAL IS R EQUIRED FROM THE CHARITY COMMISSIONER IN RESPECT OF SALES OF SHARES. THE PROPERTY BEING FLAT NO. 6 AT BEN NEVIS AT WARDEN ROAD DOES NOT BELONG TO THE ASSESSEE BUT BELONGS TO THE WARDEN ROAD POLYCLINIC PRIVATE LTD. BY VIRTUE OF THE DECEASED HOLDING SHARES I N THE SAID POLYCLINIC SHE HAS A RIG H T TO USE THE SAID FLAT FOR THE PURPOSE OF PROFESSION. G) THE BOOKS OF ACCOUNTS WERE PRODUCED BEFORE YOU DURING THE LAST ASSESSMENT PROCEEDINGS. HOWEVER THE SAME IS BEING PRODUCED YOU AGAIN. H) COPIES OF ACKNOWLEDGEMENT OF RETURNS OF INCOME OF THE TRUST FOR THE YEAR 2006 - 07 TO 2009 - 10 ARE ATTACHED. ALL THE RETURNS ARE FILED IN YOUR CHARGE AND YOU CAN CALL FOR THE RESPECTIVE FILES FOR FURTHER INFORMATION. I.T.A. NO. 5199/ MUM/2015 3 WE TRUST THE ABOVE INFORMATION WILL MEET YOUR REQUIREMENTS. THE A O OBSERVED THAT IT IS NOT PERMISSIBLE FOR THE TRUST TO HOLD SHARES U/S 13(1)(D) . THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED DONATION OF 100 SHARES OF M/S WARDEN POLYCLINIC PRIVATE LIMITED ATTACHED TO THE FLAT NO 6 AT BEN NEVIS WARDEN RO AD FROM THE ESTATE OF LAT E DR. HILLA BANAJI ON 01 - 09 - 2009 . THE SAID SHA RES HAVE BEEN SOLD ON 04 - 09 - 2009 FOR RS. 2,00,00,000/ - . THE AO OBSERVED THAT THE SAID AMOUNT OF RS.2,00,00,000/ - HAS BEEN CLAIMED TO BE INVESTED IN FLAT NO. 802 B AT ORCHID TOWERS , M UMBAI AND EXEMPTION U/S 11(1A) HAS BEEN CLAIMED. THE AO OBSERVED THAT IT IS UNDISPUTED THAT THE TRUST WAS HOLDING EQUITY SHARES FOR THE PERIOD 01 - 09 - 2009 FROM 04 - 09 - 2009 WHICH IS HIT BY A BAR U/S 13(1)(D) AND THEREFORE THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S 11 ON THE SAID AMOUNT OF RS.2,00,00,000/ - WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE BY THE AO , VIDE ASSESSMENT ORDER DATED 28 - 03 - 2013 PASSED BY THE AO U/S 143(3) . 3. AGGRIEVED BY THE ASSESSMENT ORDER DATED 28 - 03 - 2013 PASSED BY THE AO U/S 143(3), THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) WHEREIN LEARNED CIT(A) REJECTED THE CONTENTIONS OF THE ASSESSEE BY HOLDING THAT PROVISIONS OF SECTION 13(1)(D) ARE APPLICABLE WHICH STIPULATES THAT THE SECTION SPEAKS OF HOLDING OF SHARES AND DO NOT SPEAK OF INVESTMENT OUT OF FUNDS OF THE SHARES AND CONTENTION OF THE ASSESSEE THAT IT RECEIVED CORPUS DONATION OF 100 SHARES OF WARDEN ROAD POLYCLINIC PRIVATE LIMITED, WITH A RIGHT TO OCCUPY FLAT NO 6 AT BEN NEVIS , WARDEN ROAD, MUMBAI AND HENCE SECTION 13(1)(D) IS NOT APPLICABLE IS NOT ACCEPTABLE. IT WAS CLAIMED BY THE ASSESSEE THAT THE SAID SHARES WERE RECEIVED AS CORPUS DONATION ON 01 - 09 - 2009 WHICH WE RE SOLD ON 04 - 09 - 2009 AND SALES PROCEEDS WERE INVESTED ON 24 - 09 - 2009 IN THE RESIDENTIAL FLAT NO 802 B WING , ORCHID TOWERS AT MUMBAI CENTRAL , MUMBAI - 400008. THE ASSESSEE HAS CLAIMED EXEMPTION U/S 11(1A)(A) OF THE ACT FOR AY 2010 - 11 . THE LEARNED CIT(A) HE LD THAT SECTION 13(1)(D) WERE VIOLATED BECAUSE SHARES WERE HELD FOR 4 DAYS FROM 01 - 09 - 2009 TO 04 - 09 - 2009 , WHICH IS HIT BY A BAR U/S 13(1)(D)(III) AND HENCE THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S 11 OF THE 1961 ACT, VIDE APPELLATE ORDER DATED 29 - 09 - 2015 PASSED BY LEARNED CIT(A) . 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO HAS DENIED EXEMPTION U/S. I.T.A. NO. 5199/ MUM/2015 4 11 AND LEARNED CIT(A) HAS UPHELD THE ORDER OF THE AO. IT WAS SUBMITTED THAT I T WAS HELD BY THE AUTHORITIES BELOW THAT CONDITIONS U/S 13(1)(D) WERE NOT FULFILLED. IT WAS SUBMITTED THAT THE ASSESSEE IS REGISTERED U/S 12A. OUR ATTENTION WAS DRAWN TO PARA 5 OF THE AO ORDER AND TO THE APPELLATE ORDER OF LEARNED CIT(A) AT PAGE 2 AND ALSO PARA 5.2 OF LEARNED CIT(A) ORDER. IT WAS EXPLAINED BEFORE THE TRIBUNAL THAT THE WILL WAS EXECUTED BY DONOR DR. HILLA BANAJI ON 06 - 09 - 1995 IN FAVOUR OF THE ASSESSEE AND SHE DIED ON 02 - 08 - 1996. IT WAS SUBMITTED THAT PROBATE OF WILL WAS OBTAINED ON 27 - 12 - 199 6 IN FAVOUR OF THE ASSESSEE . IT WAS SUBMITTED THAT SECTION 12A REGISTRATION WAS OBTAINED BY THE ASSESSEE ON 05 - 04 - 1997. IT WAS SUBMITTED THAT PROVISO (IIA) TO SECTION 13 (1)D) PROVIDES FOR PERIOD OF HOLDING OF ONE YEAR. IT WAS SUBMITTED THAT THE SHARES WER E HELD IN THE NAME OF THE ASSESSEE TRUST FROM 01 - 09 - 2009 TO 04 - 09 - 2009 WHILE PROBATE OF WILL WAS OBTAINED AS BACK AS IN 27 - 12 - 1996 FROM THE COURT IN FAVOUR OF THE ASSESSEE . THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON DECISION OF THE ITAT, DELHI IN THE C ASE OF ITO(E) V. DR. BHAI MOHAN SINGH FOUNDATION REPORTED IN 2017(1) TMI 954 - ITAT DELHI IN ITA NO. 2803/MUM/2013 DATED 11 - 1 - 2017. HE WOULD RELY ON SECTION 11(5) AND 13(1) ( D) . THE LEARNED COUNSEL OF THE ASSESSEE WOULD RELY ON THE DECISION OF HONBLE GUJARA T HIGH COURT IN THE CASE OF CIT V. SAHITYA TRUST (1993) 203 ITR 349(GUJ.HC) AND DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. BIRLA CHARITY TRUST , 170 ITR 150(CAL. HC). IT WAS SUBMITTED THAT THROUGH HOLDING OF SHARES, THE ASSESSEE HELD CON TROL IN FLAT AND THAT WAS THE ONLY REASONS FOR HOLDING SHARES. OUR ATTENTION WAS DRAWN TO SECTION 2(47)(VI) WHEREBY TRANSFER OF SHARES IN CO - OPERATIVE SOCIETY OR COMPANY HAS AN EFFECT OF TRANSFERRING IMMOVABLE PROPERTY AND HENCE IT WAS CLAIMED THAT SHARES ARE NOTHING BUT IMMOVABLE PROPERTY. IT WAS SUBMITTED THAT SHARES WERE PROBATED IN THE YEAR 1996 BUT TRANSFER OF SHARES IN FAVOUR OF THE ASSESSEE WERE EFFECTED IN 2009 I.E. AFTER 14 YEARS BUT IN THE INTERIM THERE WAS NO LITIGATION . OUR ATTENTION WAS ALSO D RAWN TO SECTION 11(5)(X) WHEREIN INVESTMENT IN IMMOVABLE PROPERTY IS CONSIDERED AS ONE OF THE APPROVED FORMS AND MODES OF INVESTMENTS APPROVED U/S 11(5). IT WAS SUBMITTED THAT THE ASSESSEE HAS REINVESTED THE ENTIRE AMOUNT IN IMMOVABLE PROPERTIES AS CONTEM PLATED U/S 11(1A) AS NEW CAPITAL ASSET IS ACQUIRED. THE LEARNED DR ON THE OTHER HAND WOULD RELY ON THE ORDER OF LEARNED CIT(A) . IT WAS SUBMITTED THAT THE NEW ARGUMENTS /PROPOSITIONS HAS BEEN TAKEN BY I.T.A. NO. 5199/ MUM/2015 5 LEARNED COUNSEL FOR THE ASSESSEE WHICH WERE NOT TAKEN BEFORE THE AUTHORITIES BELOW AND WHICH ARE FACTUAL IN NATURE REQUIRING INVESTIGATION OF FACTS AND THE MATTER CAN BE SET ASIDE AND RESTORED BACK TO THE AO FOR NECESSARY VERIFICATION, ENQUIRY AND INVESTIGATION OF THE FACTS. IT WAS SUBMITTED THAT THE AUTHORIT IES BELOW HAVE NOT EXAMINED THE OWNERSHIP PATTERN OF THE ASSESSEE TRUST AS WELL PROBATE OF THE WILL WAS NOT INVESTIGATED. IT WAS SUBMITTED THAT EVEN THE PERIOD OF 14 YEARS OF HOLDING THE SHARE TRANSFER IN ABEYANCE WAS NOT INVESTIGATED BY THE AUTHOR I TIES BE LOW. IT WAS SUBMITTED THAT SECTION 13 CONTAINS AN NON OBSTANTE CLAUSE AND SHALL OVER - RIDE PROVISIONS OF SECTION 11 . 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORDS INCLUDING ORDERS OF THE AUTHORITIES BELOW AND RELIED UPON CASE LAWS. T HE ASSESSEE IS A TRUST REGISTERED AS CHARITABLE ORGANISATION WITH DIT(E), MUMBAI U/S 12A AND THE TRUST HAS CLAIMED TO BE ENGAGED IN THE FIELD OF EDUCATION. THE ASSESSEE HAS CLAIMED THAT IT HAS GOT DONATION OF 100 SHARES OF M/S WARDEN POLYCLINIC PRI VATE LIMITED ATTACHED TO FLAT NO. 6 AT BEN NEVIS WARD EN ROAD,MUMBAI FROM THE ESTATE OF LATE DR. HILLA BANAJI WHICH WAS TRANSFERRED IN ITS NAME ON 01 - 09 - 2009. IT IS CLAIMED THAT THE WILL WAS EXECUTED BY DONOR DR. HILLA BANAJI ON 06 - 09 - 1995 IN FAVOUR OF THE ASSESSEE AND SHE DIED ON 02 - 08 - 1996. IT WAS SUBMITTED THAT PROBATE OF WILL WAS OBTAINED ON 27 - 12 - 1996 IN FAVOUR OF THE ASSESSEE FROM THE COURT . IT WAS SUBMITTED THAT SECTION 12A REGISTRATION WAS OBTAINED BY THE ASSESSEE ON 05 - 04 - 1997. THE SAID SHARES WERE TRANSFERRED IN FAVOUR OF THE ASSESSEE BY THE COMPANY M/S WARDEN POLYCLINIC PRIVATE LIMITED ONLY ON 01 - 09 - 2009. IT IS CLAIMED THAT THERE WAS NO LITIGATION W.R.T. THESE SHARES SINCE 1996 WHEN WILL OF DR HILLA BANAJI WAS PROBATED BY COURT IN ITS FAVOUR TIL L THE SHARES WERE TRANSFER RED IN ASSESSEES FAVOUR IN 2009 I.E. FOR INTER - SE 14 YEARS. THE SAID SHARES WERE CLAIMED TO HAVE BEEN SOLD ON 04 - 09 - 2009 FOR RS. 2,00,00,000/ - WHICH WAS CLAIMED TO BE INVESTED IN FLAT NO. 802 B AT ORCHID TOWERS , MUMBAI AND THUS CONSIDERATION OF RS. 2,00,00,000/ - ON ACCOUNT OF SALE OF 100 SHARES OF WARDEN POLYCLINIC WAS CLAIMED TO BE EXEMPT U/S 11(1A). THUS IT IS CLAIMED THAT THE ASSESSEE HAS IN - FACT HELD AND TRANSFERRED IMMOVABLE PROPERTY ATTACHED WITH THESE SHARES SITUATED AT F LAT NO. 6 AT BEN NEVIS WARDEN ROAD, MUMBAI. REFERENCE WAS MADE TO SECTION 11 (5)(X) ,SECTION 2(47)(VI) AND PROVISO (IIA) TO SECTION 13(1)(D). THE ASSESSEE HAS HOWEVER NOT FILED ANY PAPER BOOK TO SUPPORT ITS CONTENTIONS AND NEW PROPOSITIONS ARE RAISED FOR TH E FIRST I.T.A. NO. 5199/ MUM/2015 6 TIME BEFORE THE TRIBUNAL WHICH REQUIRES INVESTIGATION OF FACTS BY THE AUTHORITIES BELOW. FROM PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW , IT IS NOT EMANATING AS TO WHEN THE WILL WAS PROBATED. IT IS ALSO NOT EMERGING FROM THE FACTS ON RECORD AS TO WHAT WAS THE SHARE OWNERSHIP PATTERN OF THE SAID COMPANY M/S WARDEN POLYCLINIC PRIVATE LIMITED FROM THE DAY WILL WAS EXECUTED IN FAVOUR OF THE ASSESSEE TILL THE SHARES WERE TRANSFERRED IN ASSESSEES NAME IN COMPANYS RECORD AND ITS FINAL SALE BY THE ASSESSEE. IT IS ALSO NOT EMANATING FROM RECORDS AS TO THE REASO NS FOR NOT TRANSFERRING OF SHARES IN FAVOUR OF THE ASSESSEE FOR LAST 14 YEARS AND WHETHER ANY LITIGATION WAS GOING ON W.R.T. THESE SHARES. IT IS ALSO NOT EMANATING FROM RECORDS AS TO THE CONTROL EXERCISED BY THE ASSESSEE OVER THE IMMOVABLE PROPERTY BEING F LAT NO. 6 AT BEN NEVIS WARDEN ROAD , MUMBAI THROUGH HOLDING OF 100 SHARES OF THE SAID COMPANY M/S WARDEN POLYCLINIC PRIVATE LIMITED . THESE PROPOSITIONS ARE NO DOUBT RELEVANT PROPOSITION FOR ADJUDICATING THE DISPUTE BETWEEN RIVAL PARTIES AND FASTENING OF TA X LIABILITY ON THE ASSESSEE. THUS, KEEPING IN VIEW FACTUAL MATRIX OF THE CASE AND IN THE INTEREST OF JUSTICE, WE ARE INCLINED TO SET ASIDE AND RESTORE THIS MATTER BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION OF THE DISPUTE BETWEEN RIVAL PARTIES ON MER ITS IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT THE AO SHALL GRANT PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW. THE ASSESSEE SHALL BE ALLOWED BY THE AO TO FILE ALL NECESSARY EVIDENCES / EXPLANATION IN ITS DEFENCE IN SET ASIDE DENOVO PROCEEDINGS . WE ORDER ACCORDINGLY. 6 . IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO. 5199 / MUM/201 5 FOR ASSESSMENT YEAR 2 010 - 11 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 .10.2017 31 .10.2017 SD/ - SD/ - ( SAKTIJIT DEY ) ( RA MIT KOCHAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 31 .10.2017 COPY TO I.T.A. NO. 5199/ MUM/2015 7 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, E 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI