Tika Ram Bhonwal Educational Society, Lucknow V. Income TAx Officer (V) (I), Lucknow

ITA 614/LKW/2011

• Counselvise Citation: 61423714 RSA 2011
• Duration Of Justice: 2 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-07-2014
• Assessment Year: misc
• Appeal Filed On: 12-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ROHIT BHALLA
• Keywords: Gift; Charitable institution; Principle of natural justice; Maximum Marginal Rate; Benefit of exemption
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO. 614/LKW/2011 ASSESSMENT YEAR: 2004 - 05 TIKA RAM BHONWAL EDUCATIONAL SOCIETY LUCKNOW V. INCOME TAX OFFICER RANGE V(1) LUCKNOW PAN: AABCT6781B (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. ROHIT BHALLA, FCA RESPONDENT BY: SHRI. AMIT NIGAM, D.R. DATE OF HEARING: 23 0 7 2014 DATE OF PRONOUNCEMENT: 05 0 9 2014 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON VARIOUS GROUNDS, WHICH ARE AS UNDER: - 1. BECAUSE DIE LD. LOWER AUTHORITIES HAVE ERRED ON FACTS AND IN LAW IN DENYING THE BENEFIT U/S. 11 OF THE INCOME TA X ACT. 1961 2. BECAUSE THE LD. LOWER AUTHORITIES HAVE ERRED ON FACTS AND IN LAW IN COMING TO AN ADVERSE FINDING THAT THE APPELLANT SOCIETY WAS NOT EXISTING FOR CHARITABLE PURPOSES. 3. THAT THE LD. LOWER AUTHORITIES HAVE ERRED IN WRONGLY INVOKING THE PROV ISIONS OF SEC. 13(3) AS NO PERSONAL BENEFIT COULD BE PROVED BY THE LD. A.O. 4. THAT CHARGING OF MAXIMUM MARGINAL RATE WAS UNWARRANTED. 5. THAT THE LD. A.O. ERRED ON FACTS AND IN LAW IN NOT ALLOWING THE APPELLANT PROPER AND SUFFICIENT OPPORTUNITY TO HA VE ITS SAY OR MAKE NECESSARY COMPLIANCE OF THE REASONS RELIED BY HIM IN MAKING VARIOUS ADDITIONS TO THE APPELLANT'S INCOME IN THE PRESENT CASE. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 2 - : 6. THE INCOME ASSESSED AND INTEREST CHARGED ARE HIGHLY EXCESSIVE AND CONTRARY TO THE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE AND FAIR PLAY. 2 . THOUGH VARIOUS GROUNDS ARE RAISED, BUT THEY ALL RELATE TO DENIAL OF BENEFIT OF EXEMPTION UNDER SECTION 11 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT') ON THE GROUND THAT THE ASSESSEE - SOCIETY WAS NOT EXISTING FOR CHARITABLE PURPOSES. 3 . THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE IS A SOCIETY FORMED ON 28.5.2001 UNDER THE REGISTRATION FROM REGISTRAR OF SOCIETIES, UTTAR PRADESH. SHRI. RAJENDRA BHONWAL AND SMT. MONIKA BHONWAL ARE PR ESIDENT AND SECRETARY OF THE SOCIETY RESPECTIVELY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT INSPITE OF TOTAL RECEIPT OF RS.12,23,393/ - DURING THE YEAR, NO AMOUNT WHATSOEVER WAS SPENT ON CHARITABLE ACTIVITIES OF THE S OCIETY. CONSIDERING THESE FACTS, A SHOW CAUSE NOTICE WAS ISSUED AS TO WHY EXEMPTION CLAIMED UNDER SECTION 11 OF THE ACT MAY NOT BE DENIED. IN RESPONSE THERETO , IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT THE SOCIETY WAS FORMED TO CARRY OUT EDUCATIONA L ACTIVITIES AND FOR THAT PURPOSE IT WAS DECIDED TO CONSTRUCT A SCHOOL BUILDING. A SUM OF RS.1,58,975/ - WAS SPENT UPTO 31.3.2004 FOR CONSTRUCTION OF BOUNDARY WALL, ETC. THE DETAILS OF THE EXPENDITURE WERE FURNISHED. A SUM OF RS.8,65,000/ - WAS ACCUMULATE D AND CARRIED FORWARD FOR THE CHARITABLE ACTIVITIES OF THE SOCIETY AND THE SAME WAS REFLECTED IN FORM NO.10 ALONG WITH THE RESOLUTION PASSED IN THIS REGARD. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE AND DENIED BENEFIT O F EXEMPTION UNDER SECTION 11 OF THE ACT , HAVING OBSERVED THAT THE ASSESSEE - SOCIETY HAS TAKEN THE LAND ON LEASE FROM SMT. MONICA BHONWAL FOR A PARTICULAR PERIOD AND THEREFORE THE LAND WAS REQUIRED TO BE RETURNED BACK TO THE LESSER. HE HAS ALSO OBSERVED THA T THERE IS NO STIPULATION WITH REGARD TO THE CONSTRUCTION OF SCHOOL BUILDING ON THE SAID LAND IN THE LEASE DEED. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 3 - : 4 . AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) BUT DID NOT FIND FAVOUR WITH HIM. 5 . NOW THE ASSESSEE IS BEFORE THE TRIBUNAL WIT H THE SUBMISSION THAT THE ASSESSEE - SOCIETY WAS FORMED TO CARRY OUT EDUCATIONAL ACTIVITIES AND FOR THAT PURPOSE IT TOOK A LAND ON LEASE FROM ONE OF THE MEMBERS OF THE SOCIETY AND CONSTRUCTED A BUILDING THEREON AND THE LAND WAS FINALLY GIFTED TO THE SOCIETY AND THE SOCIETY IS SUCCESSFULLY RUNNING A SCHOOL THEREON. IN SUPPORT OF THESE CONTENTIONS, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE AUDITED BALANCE SHEET S OF THE ASSESSEE - SOCIETY ENDING ON THE FINANCIAL YEARS 2002 TO 2013 IN ORDER TO ESTABLISH THAT CONTINUOUSLY THE COLLECTION BY WAY OF DONATIONS OR FEE W AS UTILIZED FOR CONSTRUCTION OF BUILDING AND CARRYING ON EDUCATIONAL ACTIVITIES. OUR ATTENTION WAS ALSO INVITED TO THE LEASE DEED AND GIFT DEED THROUGH WHICH THE SAID LAND WAS GIFT ED TO THE SOCIETY AND FINALLY ASSESSEE - SOCIETY BECAME THE ABSOLUTE OWNER OF THE SCHOOL BUILDING ALONG WITH LAND. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO PLACED RELIANCE UPON THE JUDGMENT OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. SHRI NA THJI EDUCATION & CULT U RAL TRUST [2013] 38 TAXMANN.COM 377 IN WHICH UNDER SIMILAR CIRCUMSTANCES , THEIR LORDSHIPS OF THE JURISDICTIONAL HIGH COURT HELD THAT IN THE REGISTERED LEASE DEED, THERE IS NO STIPULATION THAT CONSTRUCTION MADE ON LEASED LAND WOULD BEC OME PROPERTY OF LESSOR AFTER EXPIRY OF TERM OF PERIOD OF LEASE. AFTER EXPIRY OF LEASE PERIOD, IT IS ALWAYS OPEN TO THE ASSESSEE TO REMOVE CONSTRUCTION AND THEREFORE NO BENEFIT WOULD DIRECTLY BE ENJOY ED BY THE TRUSTEES OF THE SOCIETY . IN THAT CASE , THE LA ND WAS OBTAINED ON LEASE FOR A PERIOD OF 29 YEARS ON MONTHLY RENT OF RS.1,000/ - AND THEREAFTER THE ASSESSEE - SOCIETY CONSTRUCTED A BUILDING AND CLAIMED BENEFIT OF EXEMPTION UNDER SECTION 11 OF THE ACT WHICH WAS DENIED FOR THE REASON THAT TH E LAND WAS OBTAI NED ON LEASE FOR A LIMITED PERIOD. BUT IN THE PRESENT CASE, THE FACTS ARE BETTER THAN THE CASE OF CIT VS. SHRI NATHJI EDUCATION & CULTURAL TRUST (SUPRA). IN THE INSTANT CASE, THE LAND WAS FINALLY GIFTED TO THE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 4 - : ASSESSEE - SOCIETY, THEREFORE, THERE IS NO IOT A OF DOUBT THAT THE MEMBERS OF THE SOCIETY WOULD BE BENEFITED AT THE END OF THE TERM OF THE LEASE DEED. 6 . THE LD. D.R., ON THE OTHER HAND, HAS PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A). 7 . HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT UNDISPUTEDLY THE LAND WAS OBTAINED ON LEASE FROM ONE OF THE MEMBERS I.E. SECRETARY OF THE SOCIETY. UNDISPUTEDLY THE PRESIDENT AND SECRETARY OF THE SOCIETY ARE HUSBAND AND WIFE AND THE SOCIETY ACQUIRED THE LAND FOR CONSTRUCTION OF SCHOOL BUILDING ON LEASE FOR 30 YEARS. THOUGH THERE WAS A STIPULATION IN THE LEASE DEED THAT THE VACANT LAND WOULD BE RETURNED AFTER EXPIRY OF LEASE PERIOD, BUT IN FACT THE LAND WAS FINALLY GIFTED TO THE SOCIETY BY THE SECRETARY I .E. S MT. MONIKA BHONWAL. THEREFORE, THERE IS NO POSSIBILITY OF ANY BENEFIT ENDURING TO THE MEMBERS OF THE SOCIETY. WE HAVE ALSO CAREFULLY EXAMINED THE AUDITED BALANCE SHEET S FOR THE FINANCIAL YEAR S FROM 2002 TO 2013 AND WE FIND THAT CAPITAL FUND WAS INCR EASED BUT THAT WAS SPENT ON CONSTRUCTION OF THE SCHOOL BUILDING AND ALSO FOR RUNNING THE EDUCATIONAL INSTITUTION. UNDER THESE CIRCUMSTANCES, IT CANNOT BE HELD THAT THE ASSESSEE - SOCIETY WAS NOT SET UP FOR CHARITABLE PURPOSES. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO RE - COMPUTE THE INCOME OF THE ASSESSEE AS PER LAW AFTER GRANTING BENEFIT OF EXEMPTION UNDER SECTION 11 OF THE ACT. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENT I ONED ON THE CAPTION PAGE. SD/ - SD/ - [ A. K. GARODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 5 TH SEPTEMBER , 2014 JJ: 2908 PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 5 - : COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CI T 5 . DR ASSISTANT REGISTRAR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ )