Dy. Commissioner of Income Tax-(Exeption), Lucknow V. M/s Kamla Nehru Memorial Trust, Sultanpur

ITA 533/LKW/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2551 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-10-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 18-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K SINGH
• Keywords: Charitable institution; Source of fund
• Section: 143(3); 10B; 144; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI. N .S. SAINI , ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 533/LKW/2017 ASSESSMENT YEAR: 2009 - 10 DCIT (EXEMPTIONS) LUCKNOW V. M / S KAMLA NEHRU MEMORIAL TRUST LAL DIGGI, CIVIL LINES SULTANPUR T AN /PAN : AAATK8307N (APP ELLA NT) (RESPONDENT) APP ELL ANT BY: SHRI C.K. SINGH, D.R. RESPONDENT BY: SHRI VINOD KUMAR, A.R. DATE OF HEARING: 10 10 201 8 DATE OF PRONOUNCEMENT: 31 10 201 8 O R D E R PER N. S. SAINI , A .M : THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) - 4, LUCKNOW DATED 12/6/2017. GROUNDS NO.1 OF APPEAL READS AS UNDER: - 1. LD. CIT(A) HAS ERRED ON FACTS AND IN LAW BY DIRECTING THE AO TO ALLOW EXEMPTION U/S 11 OF THE ACT AFTER COMPUTING INCOME OF THE APPELLANT AFTER TAKING INTO ACCOUNT THE RECEIPT OF HOSTEL FEES OF RS.81,09,939 / - , FOR WHICH NO EVIDENCE COULD BE PRODUCED DURING ASSESSMENT PROCEEDINGS; 2 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT IN THE INCOME & EXPENDITURE , ASSESSEE HAD SHOWN RECEIPT OF RS.81,09,939/ - AS HOSTEL FEES. HE OBSERVED THAT DURING ASSESSMENT PROCEEDINGS , ASSESSEE DID NOT PRODUCE DOCUMENTARY EVIDENCE TO ESTABLISH GENUINENESS OF THE AMOUNT RECEIVED AS HOSTEL FEES AND , ITA NO.533/LKW/2017 PAGE 2 OF 8 THEREFORE, HE CONCLUDED THAT IT WAS NOT INCOME DERIVED FROM PROPERTY HELD UNDER THE TRUST AND TREATED IT AS IN THE NATURE OF OTHER INCOME INTRODUCED IN THE INCOME & EXPENDITURE ACCOUNT. CONSEQUENTLY HE DID NOT ALLOW EXEMPTION UNDER SECTION 11 OF THE ACT FOR THE SAID AMOUNT OF RS.81,09,939/ - . 3 . ON APPEAL, LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: - 5.4.3 THE UNDERSIGNED HAS GONE THROUGH THE ASSESSMENT ORDER, THE WRITTEN SUBMISSIONS OF THE APPELLANT, THE REMAND REPORT OF THE AOI A ND THE COMMENTS OF THE APPELLANT ON REMAND REPORT OF APPELLANT. 5.4.4 AN IDENTICAL ISSUE HAS BEEN DISCUSSED AND DECIDED BY THE UNDERSIGNED IN APPELLANTS OWN CASE IN A.Y. 2007 - 08 AND AY 2008 - 09 VIDE APPELLATE ORDERS DATED 14.12.2016. THE RELEVANT PORTION O F THE ORDER IS REPRODUCED AS UNDER: - 6.4(11) THE APPELLANT HAS CONTENDED THAT FUNDS RECEIVED BY APPELLANT FROM HOSTEL FEES AND OTHER SOURCES OF INCOME AS SHOWN, IN THE INCOME AND EXPENDITURE ACCOUNT HAS SOLELY BEEN U TILIZED FOR PURPOSE OF CONSTRUCTION OF B UILDING OF THE 'INST ITU TE A ND HAVE W H O LLY AND EXCLUSIVELY BEEN UTILIZED FOR EDUCATION PURPOSE ONLY. THE APPELLANT RELIED UPON THE JUDGEMENT OF HON'BLE HIGH COURT OF UTTARAKHAND, NAINITAL BENCH IN THE CASE OF CIT, HALDWANI VS. JYOTI PRABHA SOCIETY REPORTED IN 177 TAXMAN 429. THE RELEVANT PORTION IS REPRODUCED AS UNDER: - 'THE OBJECTS OF THE ASSESSEE - SOCIETY MADE IT ABUNDANTLY CLEAR THAT THE SOCIETY EXISTED FOR CHARITABLE PURPOSES. THE ACTIVITIES OF THE ASSESSEE - SOCIETY INCLUDED LETTING OUT OF THE PROPERTIES, TO THE EDUCATIONAL INSTITUTIONS. HAD THE RENTAL INCOME EARNED BY THE ASSESSEE NOT BEEN UTILIZED FOR THE EDUCATIONAL PURPOSES, IT COULD HAVE BEEN SAID THAT THE LETTING OUT OF THE PROPERTY ON THE PART OF THE ASSESSEE - SOCIETY HAD LOST THE CHARITABLE PURPOSE. BUT IN THE INSTANT CASE, THERE WAS A CONCURRENT ITA NO.533/LKW/2017 PAGE 3 OF 8 FINDING OF FACT ON THE PART OF THE COMMISSIONER (APPEALS) AND THE TRIBUNAL THAT THE RENTAL INCOME EARNED BY THE ASSESSEE - SOCIETY WAS BEING UTILIZED AGAIN FOR THE PURPOSES OF IMPARTING EDUCATION BY MAINTAININ G THE BUILDINGS AND CONSTRUCTING NEW BUILDING FOR THE SAME PURPOSE. AS SUCH, THE CHARITABLE PURPOSE WAS NOT LOST AND IT COULD NOT BE SAID,THAT THE ASSESSEE WAS NOT ENTITLED TO THE EXEMPTION CLAIMED BY IT UNDER SECTION 11 [PARA 5]. THE COMMISSIONER (APPEALS ) AND THE TRIBUNAL HAD RIGHTLY HELD THAT THE INCOME OF THE ASSESSEE WAS EXEMPT UNDER SECTION 11. [PARA 8] THE ABOVE JUDGEMENT SUPPORTS THE APPELLANTS CASE. THE ACTIVITY OF THE APPELLANT INCLUDED LETTING OUT THE HOSTEL BUILDING TO STUDENTS OF ITS ASSOCIATE CONCERNS WHO TOO ARE WORKING INFIELD OF EDUCATION. THE HOSTEL FEES SO RECEIVED WAS UTILIZED AGAIN BY THE APPELLANT FOR THE PURPOSE OF EDUCATION FOR CONSTRUCTING BUILDING FOR EDUCATION PURPOSE. THUS, THE CHARITABLE PURPOSE WAS NOT LOST. THE SAME HAS TO BE TREATED AS INCOME FROM CHARITABLE ACTIVITY AND SAID INCOME IS ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT TO THIS HOSTEL FEES OF RS. 9,91,000/ - IS HEREBY DELETED. III ) THE AO HAS CONTENDED THAT FORM NO. 10 B WAS NOT FILED WITH THE RETURN OF INCOME. IT WAS HELD THAT APPELLANT HAS CLAIMED ITS INCOME AS EXEMPT, HOWEVER, THE TECHNICAL REQUIREMENT OF FILING FORM 10B ALONGWITH THE RETURN OF INCOME WAS NOT FULFILLED BY THE APPELLANT. THE APPELLANT STATED THAT FORM 10B WAS FILED BEFORE THE AO DURING COURSE OF ASSES SMENT PROCEEDINGS. A COPY OF FORM 10B WAS ALSO FILED BY THE APPELLANT BEFORE THE UNDERSIGNED DURING THE COURSE OF APPELLATE PROCEEDINGS. THIS ISSUE OF FORM 10B HAS BEEN CLARIFIED IN THE JUDGEMENT OF HON'BLE GUJRAT HIGH COURT IN CASE OF CIT VS. MAYUR FOUN DATION REPORTED IN 194 CTR 197 (GUJ.) 2005. THE ONLY, QUESTION WHICHRTHE HON'BLE COURT WAS REQUIRED TO DECIDE WAS, AS TO WHETHER, IN ABSENCE OF AN}/ SPECIFIC TIME LIMIT PRESCRIBED U/S ITA NO.533/LKW/2017 PAGE 4 OF 8 11(2) OF THE ACT . WHETHER T HE TIME LIMIT PRESCRIBED IN RULE 17 FOR SUBM ISSION OF FORM NO. 10B BY THE RULE MAKING AUTHORITY IS VALID. THE HON'BLE COURT HELD THAT IT IS APPARENT THAT THE HON'BLE APEX COURT IN CIT VS. NAGPUR HOTEL OWNERS ASSOCIATION HAS STATED THAT DETAILS HAVE TO BE FURNISHED BEFORE THE COMPLETION OF ASSESSMENT PROCEEDINGS AND ANY INFORMATION SUPPLIED SUBSEQUENT TO COMPLETION OF ASSESSMENT CANNOT BE TAKEN INTO CONSIDERATION. THE QUESTION, THEREFORE, AROSE IS WHEN CAN AN ASSESSMENT BE SAID TO BE COMPLETE OR TILL WHAT POINT OF TIME THE ASSESSMENT PROCEEDINGS CAN B E SAID TO BE ALIVE. ON THIS ISSUE THE HON'BLE COURT HELD AS UNDER: - 13. T HUS, THE PROCEEDINGS BEFORE THE TRIBUNAL ARE MEANT TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. IF THIS BE SO, IT FOLLOWS THAT THE ASSESSMENT PROCEEDINGS CANNOT BE SAID TO BE COMPLETE AND IS PENDING TILL THE APPEAL IS HEARD AND DISPOSED OFF BY THE TRIBUNAL AND THE ORDER OF THE TRIBUNAL IS GIVEN EFFECT TO BY THE ASSESSING AUTHORITY BY COMPUTING THE CORRECT TAX LIABILITY OF AN ASSESSEE. IN OTHER WORDS, WHETHER AN ASSESSEE IS R EQUIRED TO PAY TAX OR BECOMES ENTITLED TO A REFUND, WOULD BE ASCERTAINED BY THE ASSESSING AUTHORITY AFTER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL. IN VIEW OF THE ABOVE MENTIONED DECISION OF HON'BLE GUJARAT HIGH COURT THE ACTION OF THE AO CANNOT BE UPHEL D AS FORM 10B WAS FILED BEFORE THE AO DURING ASSESSMENT PROCEEDINGS AND BEFORE THE UNDERSIGNED DURING THE COURSE OF APPELLATE PROCEEDINGS. THUS, THE FORM 10B WAS DULY SUBMITTED WITHIN THE PRESCRIBED TIME FRAME I.E. BEFORE THE COMPLETION OF ASSESSMENT PROCE EDINGS FOR ACCUMULATION OF PROFIT U/S 11(2) OF THE ACT. THUS, THE ACTION OF THE AO ON THE ISSUE OF FORM 10B IS HEREBY DELETED. IV) ANOTHER FACT TO BE NOTED IS THAT ASSESSMENT OF THE APPELLANT IN IMMEDIATELY PROCEEDING AY I.E. A.Y. 2006 - 07 WAS COMPLETED U /S ITA NO.533/LKW/2017 PAGE 5 OF 8 143(3) OF THE ACT IN WHICH THE INCOME WAS COMPUTED AS PER SECTION 11 OF THE ACT. V) THE AO IN THE REMAND REPORT HAS SUBMITTED AS UNDER: - 'IT APPEARS THAT THE HOSTEL FEE WAS COLLECTED BY KNIMT FROM ITS STUDENTS AND WAS TRANSFERRED TO THE ASSESSEE ON THE SAME DAY AND NO HOSTEL FEE WAS DIRECTLY COLLECTED BY THE AS SESSES FROM THE STUDENTS RESIDING I N THE HOSTEL. HOWEVER THE CASE RELATES TO A. Y. 2007 - 08 AND AFTER LAPSE OF LONG PERIOD, THE PHYSICAL VERIFICATION IN THIS REGARD CANNOT BE DONE.' VI) T H US, THE CONTENTION OF THE APPELLANT THAT IT HAS RECEIVED HOSTEL FEES FROM STUDENTS OF KNIMT BY TRANSFER OF FUNDS FROM KNIMT TO THE APPELLANT ON THE VERY SAME DAY HAS NOT BEEN DISPUTED BY THE AO. THUS, IN VIEW OF THE FACTS DISCUSSION AND JUDGEMENT AS OUTLIN ED IN PARAS 6.4(II) T O 6.4(V) OF TH IS ORDER THE HOSTEL FEES OF RS. 9,91,000/ - RECEIVED BY, APPELLANT FROM STUDENTS STUDYING IN KNIMT (ASSOCIATE INSTITUTION OF APPELLANT) IS TREATED AS INCOME FROM CHARITABLE ACTIVITY AND IS ELIGIBLE FOR EXEMPTION U/S 11 OF T HE ACT. THIS IS MAINLY FOR THE REASON THAT THIS HOSTEL FEES WAS UTILIZED SOLELY FOR PURPOSE OF CONSTRUCTION OF NEW BUILDING WHICH WAS UTILIZED FOR EDUCATION PURPOSE ONLY. ACCORDINGLY, THE AO IS DIRECTED TO COMPUTE THE INCOME OF THE APPELLANT AS PER SECTION 11 OF THE ACT AFTER TAKING INTO ACCOUNT THE HOSTEL FEES RECEIVED OF RS. 9,91,000/ - ALSO. GROUNDS OF APPEAL NO. 2,3,4, AND 5 ARE ALLOWED.' 5.4.5 IN VIEW OF THE FACTS OUTLINED ABOVE, THE HOSTEL FEES OF RS. 81,09,9397 - RECEIVED BY THE APPELLANT FROM STUDEN TS IS ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT FOR THE REASON THAT IT WAS SOLELY UTILIZED FOR CONSTRUCTION OF BUILDING TO BE USED SOLELY FOR EDUCATION PURPOSES ONLY. THE AO IS DIRECTED TO ALLOW EXEMPTION U/S 11 OF THE ACT AFTER COMPUTING INCOME OF THE APPE LLANT AFTER TAKING INTO ACCOUNT THE RECEIPT OF HOSTEL FEES OF RS. 81,09,939/ - . THE GROUND ITA NO.533/LKW/2017 PAGE 6 OF 8 OF APPEAL NO. 6 IS ALLOWED. THE ISSUE IS ALSO DISCUSSED IN PARA 5.5.3 OF THIS ORDER. 4 . THE LD. D.R. MERELY RELIED ON THE ORDER OF THE ASSESSING OFFICER. HE COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ORDER OF THE LD. CIT(A). WE FIND THAT LD. CIT(A) HAS FOLLOWED HIS ORDER DATED 14/12/2016 PASSED IN THE CASE OF THE ASSESSEE ITSELF FOR ASSESSMENT YEAR S 2007 - 08 AND 2008 - 09 WHILE ALLOWING THE APPEAL OF THE ASSESSEE. LD. D.R. COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT ORDER FOR ASSESSMENT YEAR 2007 - 08 AND 2008 - 09 RELIED UPON BY THE LD. CIT(A) WAS VARIED IN APPEAL BY ANY HIGHER FORUM. HENCE FACTS BEING IDENTICAL, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) WHICH IS HEREBY CONFIRMED AND GROUND NO.1 OF THE APPEAL OF THE REVENUE IS DISMISSED. 5 . GROUND NO.2 READS AS UNDER: - 2. LD. CIT(A) HAS ERRED ON FACTS AND IN LAW BY DELETING THE ADDITION OF RS.27,38,051/ - RELYING UPON HIS OWN DECISION IN A.Y. 20 07 - 08 & 2008 - 09 STATING THAT THE AO MADE REFERENCE TO DVO WITHOUT REJECTING THE BOOKS OF ACCOUNTS OF THE APPELLANT, THEREFORE, REFERENCE ITSELF IS INVALID IGNORING THE FACT THAT THE ASSESSEE DID NOT COMPLY WITH THE ASSESSMENT PROCEEDINGS, HENCE ASSESSMENT ORDER WAS PASSE D U/S 144 OF THE I.T. ACT, 1961. 6 . BRIEF FACTS OF THE CASE ARE THAT ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS DECLARED A SUM OF RS .1.41.40,792/ - AS INVESTMENT IN COST OF CONSTRUCTION OF HOSTEL BUILDING AT FAREEDIPUR, SULTANPUR. DVO, KANPUR VIDE LETTER DATED 15/12/2009 HAS ESTIMATED THE COST OF CONSTRUCTION AT RS.1,68,71,850/ - DURING THE YEAR UNDER ASSESSMENT WHEREAS THE ASSESSEE HAS DECLARED THE INVESTMENT IN SUCH CONSTRUCTION AT RS.1,41,40,792/ - . THEREFORE, HE ADDED THE DIFFERENCE AMOUNT OF RS.27,31,058/ - TO THE INCOME OF THE ASSESSEE. ITA NO.533/LKW/2017 PAGE 7 OF 8 7 . ON APPEAL, LD. CIT(A) DELETED THE ADDITION ON THE GROUND THAT IN ASSESSMENT YEAR 2007 - 08 AND 2008 - 09 VIDE HIS ORDER DATED 14/12/2016 HE HAS HELD THAT REFERENCE MADE BY THE ASSESSING OFFICER TO DVO WITHOUT RE JECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE FOR MAKING VALUATION OF PROPERTY WAS INVALID BY RELYING ON THE DECISION OF HON'BLE ALLAHABAD HIGH COURT, LUCKNOW BENCH IN THE CASE OF CIT VS. LUCKNOW PUBLIC EDUCATIONAL SOCIETY, LUCKNOW IN ITA NO. 136 OF 2007 AN D THE DECISION OF HON'BLE APEX COURT IN THE CASE OF SARGAM CINEMA VS. CIT, 328 ITR 513. 8 . THE LD. D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LD. A.R. OF THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A). 9 . WE FIND THAT LD. D.R. COULD NOT PO INT OUT ANY SPECIFIC ERROR IN THE ORDER OF LD. CIT(A). HE COULD NOT BRING ANY MATERIAL ON RECORD TO CONTROVERT THE FINDING OF THE LD. CIT(A) THAT IN THE YEAR UNDER APPEAL , BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT REJECTED BY THE ASSESSING OFFICER BEFORE MAKING REFERENCE TO THE DVO UNDER SECTION 142A OF THE ACT FOR VALUATION OF THE PROPERTY. HENCE, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) WHICH IS CONFIRMED AND GROUND NO.2 OF THE APPEAL OF THE REVENUE IS DISMISSED. 10 . IN THE RESULT, A PPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN ACCORDANCE WITH RULE 34(4) BY PUTTING ON NOTICE BOARD ON 31 ST OCTOBER, 2018. SD/ - SD/ - [PARTHA SARATHI CHAUDHURY] [ N.S. SAINI ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31 ST OCTO BER , 201 8 JJ: 1 010 ITA NO.533/LKW/2017 PAGE 8 OF 8 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR