ADIT (E) -II (1), MUMBAI V. GHARDA FOUNDAITON, MUMBAI

ITA 5287/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9510 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 10-12-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 12-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C P PATNAIK
• Assessee Lawyers: ARVIND DALAL
• Keywords: Wholly owned subsidiary
• Section: 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G , MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 5287/MUM/2011 ASSESSMENT YEAR : 2008-09 ADIT (E)-II(1) ROOM NO.507, PIRAMAL CHAMBERS, LALBAUG, PAREL MUMBAI-400 012. VS. GHARDA FOUNDATION 5/6, JER MANSION W.P. VARDE MARG, BANDRA (W) MUMBAI-50 PAN NO.AAATG 0260 C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.C.P. PATNAIK RESPONDENT BY : SHRI ARVIND DALAL DATE OF HEARING : 10.12.2012 DATE OF PRONOUNCEMENT : 10.12.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDE R DATED 6.4.2011 OF CIT(A) FOR THE ASSESSMENT YEAR 2008-09. THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING ALLOWABILITY OF EXE MPTION UNDER SECTION 11 OF THE INCOME TAX ACT. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE TRUST WHICH HAD BEE N REGISTERED UNDER SECTION 12A OF THE ACT HAD CLAIMED EX EMPTION OF ITS INCOME UNDER SECTION 11 OF THE ACT. THE AO DURING ASSESSME NT ITA NO.5287/M/11 A.Y. 08-09 2 PROCEEDINGS NOTED THAT THE ASSESSEE TRUST HAD ADVANCED A SUM OF RS.3,57,808/- INTEREST FREE TO GUJARAT INSECTICIDES LTD. (GIL) IN WHICH ONE OF THE TRUSTEES HAD SUBSTANTIAL INTEREST. GIL WAS 100% SUBSIDIARY OF GHARDA CHEMICALS LTD. (GCL) IN WHICH DR. K.H. GHARDA WAS HOLDING SUBSTANTIAL INTEREST. THE AO, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY CLAIM OF EXEMPTION UNDER SECTION 11 SHOULD NOT BE DENIED AS DONE IN ASSESSMENT YEAR 2007-08 FOR VIOLATION OF PROVISI ONS OF SECTION 13(1)(C) AND 13(2)(A) R.W.S. 13(3)(A). THE ASSESSEE SUBMIT TED THAT AMOUNT HAD BEEN ADVANCED FOR THE PURPOSE OF PROJECT RE LATED WORK AND WAS THEREFORE FOR THE ACTIVITIES OF THE TRUST. THE AO HOWEVER OBSERVED THAT THERE WERE NO DOCUMENTARY EVIDENCES TO SUP PORT THE CLAIM. IT WAS HELD BY HIM THAT THE ADVANCE HAD NO REL ATION TO THE FULFILLMENT OF THE OBJECTIVES OF THE TRUST OR FOR INCU RRING EXPENDITURE ON BEHALF OF THE ASSESSEE TRUST. THE AO THEREFORE DENIED CL AIM OF EXEMPTION. 2.1 THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED BEFORE CIT(A) THAT THE TRUSTEE DR. K.H. GHARDA WAS NOT HAVING ANY SUBSTANTIAL INTEREST IN GIL WHICH WAS SUBSIDIARY OF GCL. THUS IT WAS GCL WHICH WAS HAVING SUBSTANTIAL INTEREST IN THE TRUST A ND NOT DR.K.H. GHARDA. IT WAS ALSO SUBMITTED THAT GIL WAS ACTUALLY FACI LITATOR AND WAS PROVIDING INFRASTRUCTURE IN MANY WAYS FOR IMPLEMENT ATION OF DIFFERENT CHARITABLE PROGRAMMES. THEREFORE, THE ADVA NCE WAS IN ITA NO.5287/M/11 A.Y. 08-09 3 CONNECTION WITH THE ACTIVITIES OF THE TRUST. CIT(A) FO LLOWING THE DECISION TAKEN IN ASSESSMENT YEAR 2007-08 HELD THAT THERE WAS NO VIOLATION OF ANY PROVISIONS AND ASSESSEE WAS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. HE ACCORDINGLY DIRECTED THE AO TO ALLOW THE CLAIM AGGRIEVED BY WHICH REVENUE IS IN APPEAL. 3. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDI NG ALLOWABILITY OF EXEMPTION UNDER SECTION 11 OF THE INCOME TAX ACT. T HE EXEMPTION HAD BEEN DENIAL ON THE GROUND THAT ASSESSEE TRUST HAD PR OVIDED INTEREST FREE ADVANCES TO GIL IN WHICH TRUSTEES WERE IN TERESTED AND THUS THERE WAS VIOLATION OF THE PROVISIONS OF SECTION 13 (1)(C) AND 13(2)(A) R.W.S. 13(3)(E). THE CASE OF THE ASSESSEE IS THAT THERE WAS NO VIOLATION OF ANY PROVISIONS AS THE ADVANCE HAD BEEN GIVEN IN CONNECTION WITH THE ACTIVITIES OF THE TRUST AS THE ASSESSEE T RUST WAS USING INFRASTRUCTURE OF GIL FOR CARRYING OUT VARIOUS CHA RITABLE PROGRAMMES FOR WHICH NO PAYMENTS WERE MADE. WE FIND T HAT IN ASSESSMENT YEAR 2007-08 DISALLOWANCE HAD BEEN MADE BY AO ON THE SAME GROUND OF PROVIDING INTEREST FREE ADVANCES TO GIL. IN APPEAL CIT(A) HAD ALLOWED THE CLAIM. IN FURTHER APPEAL, TH E TRIBUNAL AFTER DETAILED EXAMINATION AGREED WITH THE FINDING OF THE CIT(A) THAT INTEREST FREE ADVANCES HAD BEEN GIVEN IN THE COURSE OF CA RRYING OUT OF ITS CHARITABLE ACTIVITIES AS THE TRUST WAS USING INFRASTRU CTURE OF GIL FOR ITA NO.5287/M/11 A.Y. 08-09 4 CARRYING OUT THESE VARIOUS ACTIVITIES WITHOUT ANY PAYM ENT. THE TRIBUNAL, THEREFORE, CONFIRMED THE ORDER OF CIT(A). FACTS THIS YEAR ARE IDENTICAL. WE, THEREFORE, RESPECTFULLY FOLLOWING THE D ECISION OF THE TRIBUNAL DATED 23/12/2011 IN ITA NO.5768/MUM/2010 FOR ASSESSMENT YEAR 2007-08 IN ASSESSEES OWN CASE, CONFIRM THE ORDER OF CIT(A) ALLOWING THE CLAIM OF EXEMPTION. 4. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.12.2012. SD/- SD/- (VIVEK VARMA ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 10.12.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.