Assistant Director Of Income Tax (Exemption), Trivandrum V. M/s George Educational Medicial And Charitable Society, Trivandrum

ITA 671/COCH/2006

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58281 (ITAT-COCHIN)
• Duration Of Justice: 5 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-02-2012
• Assessment Year: 1997-1998
• Appeal Filed On: 12-12-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Assessee Lawyers: PREETHA S NAIR
• Keywords: Set aside
• Section: 131; 11

Judgement Text

1 ITA NO.971/COCH/2004 ITA NO.671/COCH/2006 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T.A NO. 971/COCH/2004 - A.Y. 1997-98 I.T.A NO. 671/COCH/2006 - A.Y. 1997-98 DCIT(E), RANGE-I VS M/S GEORGE EDUCATIONAL MEDICA L TRIVANDRUM & CHARITABLE SOCIETY, PO BOX NO.1076, TC 3/2778, PATTOM TRIVANDRUM PAN : NOT AVAILABLE (APPELLANT) (RESPONDENT) APPELLANT BY : SMT VIJAYAPRABHA RESPONDENT BY : SMT. PREETHA S NAIR DATE OF HEARING : 13-02-2012 DATE OF PRONOUNCEMENT : 17-02-2012 O R D E R PER N.R.S. GANESAN (JM) BOTH THE APPEALS OF THE REVENUE ARE DIRECTED AGAIN ST THE TWO INDEPENDENT ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, TRIVANDRUM. ONE APPEAL IS AGAINST THE ORIGINAL ORDER OF COMMISSIONER OF INCOM E-TAX(A) AND THE OTHER APPEAL IS AGAINST THE ORDER GIVING EFFECT TO COMMISSIONER OF INCOME-TAX(A). SINCE COMMON ISSUES ARISE IN BOTH THE APPEALS, WE HEARD T HEM TOGETHER AND DISPOSE OF THE SAME BY THIS COMMON ORDER. 2 ITA NO.971/COCH/2004 ITA NO.671/COCH/2006 2. LET US FIRST TAKE ITA NO.971/COCH/2004. THE FIRS T ISSUE ARISES FOR CONSIDERATION IS DISALLOWANCE OF EXPENSES INCURRED FOR PROVIDING SECURITY SERVICES AT THE MANAGING DIRECTORS RESIDENCE. 3. WE HEARD SMT. VIJAYAPRABHA, THE LD.DR AND SMT. P REETA S NAIR, THE LD.COUNSEL FOR THE ASSESSEE. 4. IT IS NOT IN DISPUTE THAT THE BILLS WERE PAID TO SECURITY AGENCIES FOR PROVIDING SERVICES IN THE MANAGING DIRECTORS RESID ENCE. ON IDENTICAL CIRCUMSTANCES, THE JURISDICTIONAL HIGH COURT IN THE CASE OF AGAPPA CHILD CENTRE VS COMMISSIONER OF INCOME-TAX (1997) 226 ITR 211 (KER) H AD AN OCCASION TO CONSIDER SIMILAR ISSUE. IN THE CASE BEFORE THE HIG H COURT, THE REFRIGERATOR PURCHASED BY THE TRUST WAS PLACED IN THE RESIDENCE OF THE MANAGING TRUSTEE TILL THE TRUST BUILDING WAS READY. EVEN THE TEMPORARY P LACING OF THE REFRIGERATOR IN THE RESIDENCE OF THE MANAGING DIRECTOR WAS FOUND TO BE NOT ELIGIBLE FOR EXEMPTION U/S 11 OF THE I.T. ACT. IN THE CASE ON H AND, THE ENTIRE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF PROVIDING SECURITY SERV ICES AT THE RESIDENCE OF MANAGING DIRECTOR. IN VIEW OF THE JURISDICTIONAL H IGH COURT, THIS TRIBUNAL IS OF THE OPINION THAT THE ASSESSEE IS NOT ENTITLED FOR EXEMP TION U/S 11 FOR PROVIDING SECURITY SERVICES AT THE RESIDENCE OF THE MANAGING DIRECTOR. ACCORDINGLY, THE ORDERS OF THE COMMISSIONER OF INCOME-TAX(A) IS SET A SIDE AND THE ORDER OF THE ASSESSING OFFICER IS RESTORED. 5. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DEPOS IT MADE BY THE ASSESSEE WITH M/S INTEGRATED FINANCE CO LTD. WE HEARD SMT. VIJAYAPRABHA, THE LD.DR AND SMT. PREETHA S NAIR, THE LD.COUNSEL FOR THE ASSESSE E. THE LD.COUNSEL FOR THE 3 ITA NO.971/COCH/2004 ITA NO.671/COCH/2006 ASSESSEE VERY FAIRLY CONCEDED THAT THE ISSUE WAS CO NSIDERED IN ASSESSEES OWN CASE BY THE JURISDICTIONAL HIGH COURT IN ITA NO.07/ COCH/2005 JUDGMENT DATED 02- 01-2004 FOR THE ASSESSMENT YEAR 1996-97. THE LD.COUN SEL FOR THE ASSESSEE HAS FILED COPY OF THE UNREPORTED JUDGMENT OF THE HIGH C OURT. THE HIGH COURT FOUND THAT A SIMILAR DEPOSIT MADE WITH INTEGRATED FINANCE CO WAS NOT ELIGIBLE FOR DEDUCTION U/S 11 OF THE INCOME-TAX ACT, 1961. IN VI EW OF THE ABOVE JUDGMENT OF THE JURISDICTIONAL HIGH COURT AND FOR THE REASONS S TATED THEREIN, THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A) IS REVERSED AND THE OR DER OF ASSESSING OFFICER IS RESTORED. 6. THE NEXT ISSUE ARISES FOR CONSIDERATION IS EXPEN SES INCURRED BY THE ASSESSEE ON THE INAUGURATION OF COMMISSIONER P.E. GEORGE HALL. WE HEARD SMT. VIJAYAPRABHA, THE LD.DR AND SMT. PREETHA S NAIR, TH E LD.COUNSEL FOR THE ASSESSEE. THE ONLY CONTENTION BY REVENUE IS THAT THE ADVERTIS EMENT WAS MADE TO PROPAGATE THE NAME AND GLORY OF THE CHAIRMAN OF THE ASSESSEE SOCIETY. THEREFORE, IT CANNOT BE ALLOWED. THE FACT REMAINS IS THAT THE EXPENDITURE WAS INCURRED IN GIVING ADVERTISEMENT IN CONNECTION WITH INAUGURATION OF COMMISSIONER P.E. GEORGE HALL. THE ELEMENT OF PRO PAGATING THE NAME AND GLORY OF THE CHAIRMAN MAY BE INCIDENTAL TO THE ADVERTISEM ENT GIVEN BY THE ASSESSEE SOCIETY. BUT THE MAIN OBJECT OF ADVERTISEMENT IS T O INAUGURATE THE COMMISSIONER P.E. GEORGE HALL. THEREFORE, THE ADVERTISEMENT IS INTENDED FOR THE INAUGURATION OF COMMISSIONER P.E. GEORGE HALL. IT IS NOT IN DI SPUTE THAT THE COMMISSIONER P.E. GEORGE HALL IS USED BY THE ASSESSEE SOCIETY. WHEN THE ASSESSEE SOCIETY USED THE HALL AND THE INAUGURATION WAS MADE BY GIVING AN ADVERTISEMENT IN THE NEWSPAPER, THE EXPENDITURE HAS TO BE NECESSARILY IN CURRED BY THE SOCIETY. THEREFORE, MERELY BECAUSE THERE WAS AN ELEMENT OF P ROPAGATING THE NAME AND 4 ITA NO.971/COCH/2004 ITA NO.671/COCH/2006 GLORY OF THE CHAIRMAN, IT CANNOT BE SAID THAT THE E XPENDITURE WAS PERSONAL IN NATURE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 7. THE NEXT ISSUE ARISES FOR CONSIDERATION IS EXPEN DITURE BY THE ASSESSEE FOR OBITUARY REFERENCE IN THE NEWSPAPER ON THE DEMISE O F SECRETARY-CUM-TREASURER OF THE SOCIETY. WE HEARD SMT. VIJAYAPRABHA, THE LD .DR AND SMT. PREETHA S NAIR, THE LD.COUNSEL FOR THE ASSESSEE. ADMITTEDLY, THE E XPENDITURE WAS INCURRED ON THE DEATH OF THE SECRETARY-CUM-TREASURER OF THE SOCIETY F OR AN OBITUARY REFERENCE IN THE NEWSPAPER. NO DOUBT, THE EXPENDITURE IS NOT DI RECTLY RELATABLE TO THE OBJECT OF THE TRUST BUT WHEN THE SECRETARY-CUM-TREASURER OF THE SOCIETY, WHO DEVOTED HIS SERVICES TO THE DEVELOPMENT OF THE SOCIETY EXPI RED, IT IS THE DUTY OF THE ASSESSEE SOCIETY TO MAKE A REFERENCE ABOUT HIS SERVI CES. THEREFORE, GIVING AN ADVERTISEMENT IN THE FORM OF OBITUARY REFERENCE IN THE NEWS PAPER IS THE OBLIGATION OF THE SOCIETY. AS SUCH, THIS EXPENDITU RE CANNOT BE IN ANY WAY BE TREATED AS NON CHARITABLE. THIS TRIBUNAL IS OF THE OPINION THAT THE EXPENDITURE IS INCURRED FOR THE PURPOSE OF CARRYING OUT THE OBJECT OF THE SOCIETY EVEN THOUGH IT MAY NOT BE DIRECTLY RELATABLE TO CHARITABLE ACTIVIT Y IN THE FORM OF RECOGNISING THE SERVICES RENDERED BY THE SECRETARY-CUM-TREASURER TO T HE SOCIETY. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 8. NOW COMING TO ITA NO.671/COCH/2006, THE FIRST IS SUE ARISES FOR CONSIDERATION IS DISALLOWANCE OF RS. 1,50,000 ON AC COUNT OF FEE PAID FOR ARCHITECTURAL SERVICES TO SRI S IYER. 5 ITA NO.971/COCH/2004 ITA NO.671/COCH/2006 9. WE HEARD SMT. VIJAYAPRABHA, THE LD.DR AND SMT. P REETHA S NAIR, THE LD.COUNSEL FOR THE ASSESSEE. WHILE GIVING EFFECT T O THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A), THE ASSESSING OFFICER NOTED THAT H E WAS NOT SATISFIED WITH THE GENUINENESS OF THE PAYMENT TO SRI S IYER TO THE EXT ENT OF RS.1,50,000. HOWEVER, THE COMMISSIONER OF INCOME-TAX(A) FOUND THAT THE ASS ESSING OFFICER HAS NOT ADDUCED ANY PROPER EVIDENCE TO COME TO THE FINDING THAT THE PAYMENT MADE TO SRI S IYER IS NOT GENUINE. ACCORDINGLY, HE DIRECTE D THE ASSESSING OFFICER TO ALLOW CLAIM OF EXPENDITURE OF RS.1,50,000 PAID TO SRI S I YER TOWARDS ARCHITECTURAL SERVICES. ON GOING THROUGH THE ORDER OF THE ASSESS ING OFFICER IT APPEARS THAT THE ASSESSEE HAS NOT PRODUCED THE ORIGINAL RECEIPT EVEN THOUGH THE ASSESSING OFFICER HAS SPECIFICALLY CALLED FOR THE SAME BY ISSUING SUM MONS TO SRI S IYER IN EXERCISE OF HIS POWERS U/S 131 OF THE INCOME-TAX ACT. HOWEVER, DUPLICATE COPY OF THE RECEIPT WAS PRODUCED. THE ASSESSING OFFICER, ON EXAMINING THE DUPLICATE COPY OF THE RECEIPT FOUND THAT THE RECEIPTS HAVE BEEN ISSUED TO GEMS FOUNDATION AND IT WAS ALSO FOUND THAT SRI S IYER DID NOT RECEIVE EVEN A S INGLE PIE FROM ANY PERSON OTHER THAN GEMS FOUNDATION. THEREFORE, THE ASSESSING OFFI CER FOUND THAT HE WAS NOT SATISFIED WITH THE GENUINENESS OF THE PAYMENT. THE COMMISSIONER OF INCOME- TAX(A), HOWEVER, FOUND THAT THE ASSESSING OFFICER H AS NOT ADDUCED ANY PROPER EVIDENCE. WHEN THE ASSESSEE CLAIMED THAT THE PAYME NT WAS MADE TO SRI S IYER IT WAS FOR THE ASSESSEE TO PROVE THE GENUINENESS OF TH E PAYMENT. THE RECEIPT PRODUCED BY SRI S IYER CLEARLY SHOWS THAT NO MONEY WAS RECEIVED FROM THE ASSESSEE. THEREFORE, IN THE ABSENCE OF MATERIAL TO ESTABLISH PAYMENT TO SRI S IYER THIS TRIBUNAL IS OF THE OPINION THAT THE PAYMENT MA DE TO SRI S IYER CANNOT BE ALLOWED. THEREFORE, WE ARE UNABLE TO UPHOLD THE OR DER OF THE COMMISSIONER OF INCOME-TAX(A). THEREFORE, THE ORDER OF COMMISSIONER OF INCOME-TAX(A) IS SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER IS RES TORED. 6 ITA NO.971/COCH/2004 ITA NO.671/COCH/2006 10. THE NEXT ISSUE ARISES FOR CONSIDERATION IS FIXE D DEPOSIT WITH INTEGRATED FINANCE CO LTD. THIS ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL IN THE EARLIER PART OF THIS ORDER BY FOLLOWING THE JUDGMENT OF THE JURI SDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE. IT WAS FOUND THAT THE DEPOSIT MADE BY THE ASSESSEE WITH INTEGRATED FINANCE CO LTD IS IN VIOLATION OF THE ST ATUTORY PROVISIONS. THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 11 O F THE INCOME-TAX ACT. BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE JURISDIC TIONAL HIGH COURT AND THE DECISION THEREIN, WE SET ASIDE THE ORDER OF THE COM MISSIONER OF INCOME-TAX(A) AND RESTORE THE ORDER OF THE ASSESSING OFFICER. 11. THE NEXT ISSUE ARISES FOR CONSIDERATION IS EXPE NDITURE INCURRED IN CONNECTION WITH INAUGURATION OF COMMISSIONER P.E. GEORGE HALL. THIS ISSUE HAS ALSO ELABORATELY CONSIDERED AND WE FOUND THAT THE COMMISSIONER P.E. GEORGE HALL WAS USED BY THE ASSESSEE SOCIETY. THEREFORE, EVEN THOUGH THERE WAS ELEMENT OF PROPAGATING NAME AND GLORY OF THE CHAIRM AN OF THE SOCIETY, THE OBJECT OF ISSUING ADVERTISEMENT IS ONLY TO INAUGURA TE THE HALL. THEREFORE, THE EXPENDITURE CANNOT BE DISALLOWED. THEREFORE, THIS TRIBUNAL FIND NO INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY AS FAR AS THIS ISS UE IS CONCERNED. 12. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF FEBRUARY, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 17 TH FEBRUARY, 2012 PK/- 7 ITA NO.971/COCH/2004 ITA NO.671/COCH/2006 COPY TO: 1. ADIT(EXEMPTION), RANGE-I, KOWDIAR, TRIVANDRUM-695 003 2. GEORGE EDUCATIONAL MEDICAL & CHARITABLE SOCIETY, PO BOX NO.1076, TC.3/2778, PATTOM, TRIVANDRUM 3. THE C.I.T(A), TRIVANDRUM 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH 8 ITA NO.971/COCH/2004 ITA NO.671/COCH/2006 1. DATE OF DICTATION : 13-02-2012 2. DATE OF PLACING THE DRAFT ORDER BEFORE THE MEMBER : 14-02-2012 3. DATE OF PLACING THE PROPOSED ORDER BEFORE THE OTHER MEMBER: 4. DATE OF RETURN OF THE ORDER TO PS AFTER APPROVAL : 5. DATE OF PRONOUNCEMENT : 6. DATE ON WHICH THE FILE ALONG WITH THE ORDER SENT TO BC :