Shivani Educational & Charitable Trust, Cuttack V. CIT, Cuttack

ITA 579/CTK/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81469 (ITAT-CUTTACK)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-10-2014
• Assessment Year: misc
• Appeal Filed On: 27-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K AJAY KUM
• Assessee Lawyers: SASWAT ACHARYA
• Keywords: Charitable institution
• Section: 12AA

Judgement Text

I.T.A. NO. 579 / CTK ./20 1 3 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI S .V. MEHROTRA (ACCOUNTANT MEMBER) , AND SHRI GEORGE MATHAN (JUDICIAL MEMBER) I.T.A. NO. 579 / CTK / 20 1 3 SHIVANI EDUCATIONAL & CHARITABLE TRUST, ............... .. .APP ELL ANT MAHANADI ROAD, TULSIPUR, CUTTACK - 753 008 [PAN : A AETS 4561 N ] - VS. - COMMISSIONER OF INCOME TAX, ............................ RESPONDENT SHELTER CHHAK, TULSIPUR, CUTTACK - 753 008 APPEARANCES BY: SHRI SASWAT ACHARYA , A.R., FOR THE ASSESSEE SHRI K. AJAY KUM AR, CIT, D.R, FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : OCTOBER 20 , 2 01 4 DATE OF PRONOUNCING THE ORDER : OCTOBER 22 , 201 4 O R D E R PER GEORGE MATHAN : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF IN COME TAX , CUTTACK RANGE, CUTTACK PASSED UNDER SECTION 12AA(3) OF THE ACT WHEREBY THE REGISTRATION GRANTED TO THE ASSESSEE - TRUST UNDER SECTION 12AA HAD BEEN CANCELLED VIDE AN ORDER DATED 30.10.2013. 2 . SHRI SASWAT ACHARYA , A DVOCATE , REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI K. AJAY KUMAR, CIT, D.R, REPRESENTED ON BEHALF OF THE REVENUE . 3. AT THE TIME OF HEARING IT WAS SUBMITTED BY THE LD. AR THAT THE REGISTRATION UNDER SECTION 12AA OF THE ASSESSEE - TRUST WHICH WAS RUNNING TWO EDUCATIONAL INSTITUTIONS UNDER THE NAME AND STYLE OF SYNERGY INSTITUTE OF ENGINEERING AND TECHNOLOGY HAD BEEN I.T.A. NO. 579 / CTK ./20 1 3 PAGE 2 OF 4 CANCELLED ON ACCOUNT OF TWO REASONS, THE FIRST ONE WAS THAT THE ASSESSEE - TRUST HAD GIVEN INTEREST - FREE UNSECURED LOAN OF RS.19,00,000/ - TO ANOTHER TRUST NAMELY ANNAPURNA MEMORIAL CHARITABLE TRUST IN VIOLATION OF THE PROVISIONS OF SECTION 11(5) OF THE ACT. LD. A.R. PLACED BEFORE US A COPY OF REGISTRATION UNDER SECTION 12AA OF M/S. ANNAPURNA MEMORIAL CHARITABLE TRUST FOR MEDICAL SCIENCE AND SPIRITUAL DEVELOPMENT. IT WAS THE SUBMISSION THAT THE SAID TRUST WAS REGISTERED UNDER SECTION 12AA W.E.F. 01.04.2006 BY AN ORDER DATED 26.09.2007. IT WAS THE SUBMISSION THAT ANNAPURNA MEMORIAL CHARITABLE TRUST BEING THE TRUST REGISTERED UNDER SECTION 12AA, THE INTEREST - FREE UNSECURED LOAN TO THE SAID TRUST WAS NOT A VIOLATION UNDER SECTION 11(5) OF THE ACT. IT WAS THE SUBMISSION THAT CONSEQUENTLY THIS REASON WOULD NOT DISENTITLE THE ASSESSEE OF ITS REGISTRATION UNDER SECTION 12AA. 4 . IN REPLY, LD. CIT( DR ) SUBMITTED THAT THIS ISSUE COULD BE RESTORED TO THE FILE OF THE LD. CIT FOR VERIFICATION. 5 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. T HE ISSUE AS TO WHETHER M/S. ANNAPURNA MEMORIAL CHARITABLE TRUST IS REGISTERED UNDER SECTION 12AA IS RESTORED TO THE FILE OF THE LD. CIT FOR VERIFICATION. IF THE SAID TRUST IS REGISTERED AS A CHARITABLE TRUST UNDER SECTION 12AA, THEN OBVIOUSLY THE SAME COULD NOT BE TREATED AS VIOLATION UNDER SECTION 11(5) OF THE ACT. THIS IS BECAUSE THE INTEREST - FREE UNSECURED LOAN WOULD NOT BE AN INVESTMENT OF THE ASSESSEE IN ANNAPURNA MEMORIAL CHARITABLE TRUST. 6 . IT WAS THE FURTHER SUBMISSION BY THE LD. AR THAT THE SECOND ISSUE WAS THAT THE ASSESSEE HAD DURING THE ASSESSMENT YEAR 2010 - 11 GIVEN AN ADVANCE OF RS.80,06,821/ - TO A PRIVATE LIMITED COMPANY, NAMELY SHI V ANI EDUCARE PVT. LTD., WHERE THREE OF THE TRUSTEES ARE DIRECTORS AND WERE ALSO SUBSTANTIAL SHAREHOLDERS. IT WAS THE SUBMISSION THAT SHI V ANI EDUCARE PVT. LTD. HAD PUT UP HOSTEL FACILITIES FOR THE STUDENTS WHO WERE STUDYING IN THE EDUCATIONAL INSTITUTION RUN BY THE ASSE SSEE - TRUST. LD. AR DREW OUR ATTENTION TO THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2010 - 11 PASSED ON 15.03.2013 WHEREIN THE ASSESSING OFFICER HAD SPECIFICALLY MENTIONED IN PARA 3.6 OF HIS ORDER THAT SHI V ANI EDUCARE PVT. LTD. IS A PRIVATE LIMITED COMPANY THAT OWNS KAPILAS H BOYS HOSTEL IN THE CAMPUS OF SYNERGY INSTITUTE OF ENGINEERING & TECHNOLOGY AT DHENKANAL DISTRICT AND THAT THE ASSESSEE HAS CHARGED INTEREST AT THE MARKET RATE OF INTEREST ON THE LOAN AMOUNT ONLY FROM 17.11.2009 AND CONSEQUENTLY THERE WA S A I.T.A. NO. 579 / CTK ./20 1 3 PAGE 3 OF 4 VIOLATION OF SECTION 13(1) OF THE ACT. IT WAS THE SUBMISSION BY THE LD. AR THAT THE SAID SHI V ANI EDUCARE PVT. LTD. HAD CONSTRUCTED THE HOSTEL COMPLEX WHERE THE STUDENTS OF THE ASSESSEES EDUCATIONAL INSTITUTION WERE STAYING. IT WAS THE SUBMISSION THAT HE HAD NO OBJECTION IF THIS WAS VERIFIED BY THE LD. CIT. IT WAS THE SUBMISSION THAT THERE WAS NO VIOLATION OF THE PROVISIONS OF SECTION 13(1)(D) IN SO FAR AS THE ASSESSEE - TRUST COULD NOT INVEST IN THE CONSTRUCTION OF THE HOSTEL FACILITY AND CONSEQUENTLY SH I V ANI EDUCARE PVT. LTD. HAD PUT UP THE CONSTRUCTION AND THE HOSTEL FACILITY WAS PROVIDED AT A SUBSIDISED RATE TO THE ASSESSEE FOR THE USE AS HOSTEL FACILITY FOR THE STUDENTS OF THE ASSESSEES EDUCATIONAL I NSTITUTION. 7 . IN REPLY, LD. CIT( D . R .) SUBMITTED TH AT THIS ISSUE ALSO BE RESTORED TO THE FILE OF THE LD. CIT FOR VERIFICATION AND RE - ADJUDICATION. 8 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE ARE OF THE VIEW THAT THIS ISSUE MUST ALSO BE RESTORED TO THE FILE OF THE LD. CIT FOR VERIFICATION. LD. CIT SHALL VERIFY OR GET VERIFIED AS TO WHETHER M/S. SHI V ANI EDUCARE PVT. LTD. HAS USED THE FUNDS PROVIDED BY THE ASSESSEE FOR PUTTING UP H OSTEL FOR THE STUDENTS STUDYING IN THE EDUCATIONAL INSTITUTION RUN BY THE ASSESSEE - TRUST. IF IT IS FOUND TO BE RUNNING HOSTEL, THEN HE SHALL NEXT VERIFY AS TO WHETHER THE H OSTEL FACILITY IS BEING PROVIDED TO THE ASSESSEE OR THE STUDENTS OF THE ASSESSEES EDUCATIONAL INSTITUTION AT LESS THAN THE MARKET RATE FOR SUCH H OSTEL FACILITY. IF THIS IS FOUND TO BE CORRECT THEN OBVIOUSLY FUN DS HAVE BEEN PROVIDED TO M/S. SHI V ANI EDUCARE PVT. LTD. FOR THE PURPOSE OF ATTAINING THE OBJECTS OF THE ASSESSEE - TRUST AND CONSEQUENTLY COULD NOT BE HELD TO BE VIOLATION OF THE PROVISIONS OF SECTION 13(1)(D) OR 11(5) OF THE ACT. FURTHER WE MAY MENTION HERE THAT PRIMA FACIE THE LD. CIT HAS NOT FOUND NOR DEMONSTRATED THAT THE ASSESSEE - TRUST IS NOT GENUINE NOR IS THERE ANY FINDING THAT THE ACTIVITIES OF THE ASSESSEE - TRUST ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. IN THESE CIRCUMSTA NCES, WE ARE OF THE VIEW THAT EVEN IF THERE IS A VIOLATION AS MENTIONED BY THE LD. CIT THEN IT IS ONLY THE INCOME IN RELATION TO THE VIOLATIONS IF ANY THAT COULD BE TAXED IN VIEW OF THE PROVISIONS OF SECTION 13. THOSE VIOLATIONS IN ANY CASE WOULD NOT AFFEC T THE GENUINENESS OF THE TRUST NOR LEAD TO A CONCLUSION THAT THE TRUST IS VIOLATING ITS OBJECTS. IN THESE CIRCUMSTANCES, THE CANCELLATION OF THE REGISTRATION AS DONE BY THE LD. CIT IS ANNULLED AND THE REGISTRATION UNDER SECTION 12AA STANDS RESTORED. I.T.A. NO. 579 / CTK ./20 1 3 PAGE 4 OF 4 OUR D IRECTION IN RESTORING THE TWO ISSUES TO THE LD. CIT WOULD BE FOR VERIFICATION OF THE VIOLATIONS UNDER SECTION 11(5) AND 13(1)(D) OF THE ACT. 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRO NOUNCED IN THE OPEN COU RT ON 22 ND OCTOBER , 2014. SD/ - SD/ - S .V. MEHROTRA GEORGE MATHAN ( ACCOUNTANT MEMBER) ( JUDICIAL MEMBER) KOLKATA, THE 22 ND D AY OF OCTO BER , 201 4 COPIES TO : (1) THE ASSESSEE (2) THE DEPARTMENT (3) CO MMISSIONER OF INCOME - TAX (APPEALS) (4) COMMISSIONER OF INCOME TAX ( 5 ) THE DEPARTMENTAL REPRESENTATIVE ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPEL LATE TRIBUNAL CUTTACK B ENCH, CUTTACK LAHA/SR. P.S.