Sahodaya Educational Society, Badoli Houj, Depalpur, Indore V. Commissioner of Income-tax A (II), Indore

ITA 700/Ind/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0504 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 20-08-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 13-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VINEET A D UB E
• Assessee Lawyers: PRAMOD GUPTA; PULAK GUPTA CA S
• Keywords: Opportunity of being heard; Principle of natural justice; Set aside
• Section: 143(3); 142(1); 143(2)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.700/IND/2017 ASSESSMENT YEAR: 2010-11 SAHODAYA EDUCATIONAL SOCIETY, BADOLI HOUJ, DEPALPUR, INDORE / VS. CIT-II INDORE ( APPELLANT ) ( RE VENUE ) PAN: AABAS5735Q APPELLANT BY SHRI PRAMOD GUPTA & PULAK GUPTA, CA S RE VENUE BY SMT. VINEETA DUBE, SR. DR DATE OF HEARING: 20.08.2019 DATE OF PRONOUNCEMENT: .08.2019 / O R D E R PER MANISH BORAD, A.M: THIS APPEAL AT THE INSTANCE OF ASSESSEE PERTAINING TO A.Y. 2010-11 IS DIRECTED AGAINST THE ORDER OF LD. COMMIS SIONER OF INCOME TAX(APPEALS)-II, INDORE, (IN SHORT CIT(A)) , DATED 02.06.2017 WHICH IS ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(HEREINAFTER CALLED AS THE ACT) FRAMED ON 01. 03.2013 BY ITO- 2(1), INDORE. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: SAHODAYA EDUCATION SOCIETY, ITANO.700/IND/2017 2 1. THE ASSESSMENT ORDER PASSED BY THE LD CIT APPEALS I S BAD IN LAW, WRONG ON FACTS, ILL CONCEIVED, AGAINST THE LAW OF NATURAL JUSTICE. 2. THE LD. CIT (A) ERRED TO CONFIRM ADDITION FOR RS. 5 24274/- AS TAXABLE INCOME OF THE SOCIETY (AOP) WITHOUT CONS IDERING ANY MERITS AS LAID BY ASSESSE SOCIETY IN RESPECT TO SUCH EXPENSES WHICH WERE SHOWN UNDER THE HEAD INCOME AND EXPENDITURE ACCOUNT OF THE ASSESSEE. 3. THE LD. CIT (A) ERRED TO CONFIRM ADDITIONAL INCOME OF RS. 524274/- WITHOUT CONSIDERING THE FACT THAT THE ASSE SSEE AOP INCOME IS EXEMPT U/S 10(23C) (IIIAD)/LL OF THE I.T. ACT. 4. THAT THE LD. CIT (A) ERRED TO CONFIRM ADDITION OF R S. 524274/- WITHOUT GIVING ANY BASIS. 5. THAT LD. CIT (A) ERRED TO CONFIRM ADDITION OF RS. 2 26000/- AS RENT PAID ON BUILDING WITHOUT CONSIDERING ANY ME RITS AS LAID BY ASSESSE SOCIETY IN RESPECT TO SUCH EXPENSES . 6. THAT LD. CIT (A) ERRED TO CONFIRM ADDITION OF BOTH THE AMOUNTS ON WRONG INFERENCES, PRESUMPTION, SURMISES, AND IGNORING THE FACT THAT THE APPELLANT SCHOOL IS USIN G THE BUILDING CONSTRUCTED BY THE LANDLORD AND RENT PAID TOWARDS THE BUILDING WHILE THE LEASE DEED WAS RELATED TO TH E LAND. THUS, THE ADDITION IS UNWARRANTED. 7. THAT THE APPELLANT RESERVES ITS RIGHT TO ADD, GROUN D ON OR BEFORE HEARING OF APPEAL. 3. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS AN EDUCATION SOCIETY ENJOYING EXEMPTION U/S 10(23C)(VI) OF THE ACT VIDE ORDER OF OFFICE OF THE CHIEF COMMISSIONER OF INCOME TAX, INDORE, DATED 28.08.2012. THE RETURN OF INCOME FOR A.Y. 2010-11 FILED ON 08.10.2010 DECLARING NIL IN COME. CASE SELECTED FOR SCRUTINY ASSESSMENT AS PER CASS, FOLLO WED BY SERVING OF NOTICES U/S 143(2) & 142(1) OF THE ACT. WHILE EXAMI NING THE FINANCIAL STATEMENT AND AUDIT REPORT, LEARNED ASSES SING OFFICER (IN SHORT LD. AO) OBSERVED THAT UNREASONABLE RENT HAS B EEN PAID TO THE SAHODAYA EDUCATION SOCIETY, ITANO.700/IND/2017 3 LEASE PROVIDERS WHO ARE ON THE BOARD OF THE SOCIETY . IT WAS SUBMITTED BY THE ASSESSEE THAT THE LAND ON ANNUAL L EASE OF RS.5000/- WAS TAKEN FOR 30 YEARS WHICH WAS TO BE US ED FOR CONSTRUCTING THE BUILDING. THEREAFTER, THE BUILDING WAS ALSO CONSTRUCTED BY DIRECTORS FROM THEIR OWN FUNDS AND REASONABLE AMOUNT OF RENT HAS BEEN PAID FOR THE BUILDING. BUT LD. AO WAS NOT CONVINCED AS HE WAS OF THE VIEW THAT THE ASSESSEE H AS VIOLATED THE PROVISIONS OF SECTION 13(1)(C)(II) OF THE ACT AS IT HAS PAID UNREASONABLE AMOUNT OF LEASE. EXEMPTION U/S 10(23)( C)(VI) OF THE ACT WAS DENIED, EXCESS LEASE RENT OF RS.2,26,000/- WAS DISALLOWED AND INCOME DETERMINED AT RS.7,50,274/-. 4. AGAINST THE FINDING OF LD. AO ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) BUT FAILED TO SUCCEED. 5. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L. 6. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO E XCESSIVE RENT HAS BEEN PAID. THE RENT IS APPROXIMATELY AT RS.800/ - PER ROOM FOR THE 24 ROOMS USED FOR RUNNING EDUCATIONAL ACTIVITIE S. HE ALSO REFERRED TO VARIOUS LEASE DEEDS IN SUPPORT OF THE R ENT PAID. HE ALSO SUBMITTED THAT NO OBJECTION HAS BEEN RAISED BY THE REVENUE AUTHORITIES ON EDUCATIONAL ACTIVITIES CARRIED OUT B Y THE ASSESSEE. 7. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE (DR) VEHEMENTLY ARGUED SUPPORTING THE ORDER OF THE BOTH LOWER AUTHO RITIES. SAHODAYA EDUCATION SOCIETY, ITANO.700/IND/2017 4 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THOUGH THE ASSESSEE HAS RAISED 7 GROUNDS OF APPEAL, GROUND NO.1 TO 4 ARE AGAINST THE FINDING OF LD. CIT (A) CONFIRMING THE ACTION OF THE LD. AO DENYING THE BENEFIT OF EXEMPTI ON U/S 10(23)C)(VI) OF THE ACT AND ADDING THE SURPLUS OF I NCOME DURING THE YEAR TO TAX. GROUND NO.5 CHALLENGES THE ADDITION FO R DISALLOWANCE OF RENT PAID OF RS.2,26,000/-. 9. AS FOR AS GROUND NO.1 TO 4 ARE CONCERNED WE FIND THAT THE LD. AO HAS NOT RAISED ANY DOUBT ON THE REGULAR ACTIVITIES OF THE EDUCATIONAL INSTITUTIONS. THE OBJECTS OF THE SOCIETY HAVE BEEN DULY ADHERED. THE ASSESSEE ENJOYS THE EXEMPTION ON THE BASIS OF CERTI FICATES ISSUED BY CCIT, INDORE DATED 28.08.2012. PERUSAL OF THE FINAN CIAL STATEMENT SHOWS THAT THE ONLY SOURCE OF EARNING OF THE SOCIET Y IS EDUCATION FEES AND ADMISSION FEES FROM THE SCHOOL STUDENTS. N ATURE OF INVESTMENT IS MAINLY IN THE FIXED ASSET WHICH COMPR ISES THE ASSETS USED IN THE SCHOOL. 10. IN THESE GIVEN FACTS WHERE THE BASIC PURPOSE OF RUNNING THE SCHOOL HAS BEEN SUCCESSFULLY ACHIEVED AND ASSESSEE HAS NOT VIOLATED THE CONDITION AS PROVIDED IN PROVISIONS OF SECTION 10(23C)(VI) OF THE ACT, WE DO NOT FIND ANY JUSTIFIC ATION IN THE FINDING OF THE LD. AO DENYING THE EXEMPTION U/S 10(23C)(VI) OF THE ACT IN TOTO. WE, THEREFORE, SET ASIDE THE FINDING OF LD. C IT(A) AND DELETE THE ADDITION OF RS.5,24,274/- BEING SURPLUS OF GROSS RE CEIPT OVER SAHODAYA EDUCATION SOCIETY, ITANO.700/IND/2017 5 EXPENDITURE. ACCORDINGLY, GROUND NOS.1 TO 4 OF THE ASSESSEES APPEAL ARE ALLOWED. 11. APROPOS TO GROUND NO.5 RELATING TO DISALLOWANCE OF RENT PAID AT RS.2,26000/-, WE OBSERVE THAT THE ASSESSEE ENTERED INTO A LEASE AGREEMENT ON 10.01.2007 FOR TAKING LAND ON LEASE FO R 30 YEARS @ 5000/- PER YEAR. THEREAFTER, ON 01.05.2009 ANOTHER LEASE DEED WAS ENTERED FOR TAKING LAND AND BUILDING. COPIES OF MAP OF SCHOOL BUILDING, DULY SANCTIONED BY GRAM PANCHAYAT, BADOLI HOUJ DEPALPUR AND NO OBJECTION CERTIFICATE (NOC) FROM GRAM PANCHA YAT BADOLIHOUJ, DEPALPUR ALLOWING PERMISSION FOR BUILDI NG OF SCHOOL ON 10000 SQ. FEET AREA, IS ALSO PLACED IN THE PAPER BO OK. THE SERIES OF DOCUMENTS FAIRLY MAKES THE CASE OF THE ASSESSEE THA T FIRSTLY, LAND WAS TAKEN ON LEASE, THEREAFTER DUE TO NON-AVAILABIL ITY OF FUNDS BUILDING WAS CONSTRUCTED WITH THE FUNDS GIVEN BY TH E DIRECTORS AND AFTER GETTING NECESSARY PERMISSION. THE AMOUNT OF R ENT IF APPORTIONED ON 24 ROOMS IN THE BUILDING THE SAME WI LL BE APPROX RS.800 PER ROOM WHICH PRIMARILY DOES NOT SEEM TO BE EXCESSIVE OR UNREASONABLE. 12. HOWEVER, SINCE SOME OF THE DETAILS RELATING TO NOC AND THE ADDITIONAL LEASE DEEDS WERE NOT PLACED FOR PERUSAL BEFORE THE LD. AO AND ALSO SINCE THE LD. AO HAS NOT BROUGHT ON RECORD ANY OTHER COMPARATIVE INSTANCES TO PROVE THAT THE ASSESSEE SO CIETY HAD PAID EXCESSIVE RENT TO ITS DIRECTORS WE BEING FAIR TO BO TH THE PARTIES DEEM IT PROPER TO SET ASIDE THIS ISSUE TO THE FILE OF LD . AO FOR AFRESH ADJUDICATION, IN THE LIGHT OF OUR OBSERVATION MADE HEREINABOVE AND SAHODAYA EDUCATION SOCIETY, ITANO.700/IND/2017 6 THE DOCUMENTS PLACED BEFORE US IN PAPER BOOK. NEEDL ESS TO MENTION THAT PROPER OPPORTUNITY OF BEING HEARD TO BE PROVID ED TO THE ASSESSEE. ACCORDINGLY GROUND NO.5 IS ALLOWED FOR ST ATISTICAL PURPOSES. 13. GROUND NOS. 6 & 7 ARE GENERAL IN NATURE, WHICH NEEDS NO ADJUDICATION. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 13.09.20 19. SD/- (KUL BHARAT) SD/- (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER INDORE; DATED : 13/09/2019 CTX? P.S/. . . COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR