DDIT, CHENNAI V. Merit International Education Foundations, CHENNAI

ITA 730/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58104 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 12-03-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 20-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: S SATHIYANAR AYANAN
• Keywords: Charitable institution
• Section: 143(3); 12AA; 147; 11

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI D BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 730/MDS/2011 ASSESSMENT YEAR: 2001-02 THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTION) I, CHENNAI. VS. MERIT INTERNATIONAL EDUCATION FOUNDATIONS, REGUS BUSINESS CENTRE, LEVEL 6, CHENNAI CITI CENTRE, 10/11, DR. RADHAKRISHNAN SALAI, CHENNAI 600 004. [PAN: AAATM1512D] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.E.B. RENGARAJAN, JR. STANDING COUNSEL ASSESSEE BY : SHRI S. SATHIYANARAYANAN, ADVOCATE DATE OF HEARING : 12.03.2012 DATE OF PRONOUNCEMENT : 16.03.2012 ORDER PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE DEPARTMENT AGAINST T HE ORDER OF THE CIT(A) XII, CHENNAI DATED 17.01.2011 IN ITA NO.74/2 008-09 RELEVANT TO THE ASSESSMENT YEAR 2001-02. SHRI K.E.B. RENGARAJAN, JR . STANDING COUNSEL REPRESENTED ON BEHALF OF THE REVENUE AND SHRI S. SA THIYANARAYANAN, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE. 2. THE MAIN GROUND IN THIS APPEAL OF THE REVENUE I S AGAINST THE CIT(A)S ORDER ALLOWING EXEMPTION UNDER SECTION 11 CLAIMED B Y THE ASSESSEE. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.730 730730 730/M/ /M/ /M/ /M/11 1111 11 2 3. THE ASSESSING OFFICER REOPENED THE ASSESSMENT F OR THE ASSESSMENT YEAR 2001-02 UNDER SECTION 147 CONSEQUENT TO THE AS SESSMENT MADE UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 2005-06 DENY ING SUCH EXEMPTION UNDER SECTION 11 IN THE ASSESSMENT YEAR 2005-06 ON THE GROUND THAT THE PROVISIONS OF SECTION 13 ARE VIOLATED. 4. THE FACTS IN THE PRESENT CASE FOR THE ASSESSMEN T YEAR 2001-02 ARE THAT THE ASSESSEE IS A PUBLIC CHARITABLE TRUST, REG ISTERED UNDER SECTION 12AA OF THE INCOME TAX ACT, 1961, RUNNING A HOTEL MANAGE MENT ACADEMY (MERIT INTERNATIONAL INSTITUTE OF TECHNOLOGY, MERITS SWISS ASIAN SCHOOL OF HOTEL MANAGEMENT AND HOSTEL) IN THE LEASED PREMISES OBTAI NED FROM M/S. MERIT RESORTS PVT. LTD., CHENNAI (MRPL IN SHORT), M/S. NILGIRI ENTERPRISES, BANGALORE AND M/S. PRINCE PALACE, OOTY. THE RENTAL ADVANCES ARE PAID YEAR AFTER YEAR. IT WAS NOTICED BY THE ASSESSING OFFICER DURING SCRUTINY PROCEEDINGS THAT THE COMPANY HAD OBTAINED LOAN FROM CANARA BANK BY MORTGAGING THE PROPERTY. THE PROPERTY WAS SUBSEQUEN TLY SOLD BY THE BANK FOR DEFAULT OF BANK LOAN. 5. THE ASSESSING OFFICER, WHILE COMPLETING THE ASS ESSMENT FOR THE ASSESSMENT YEAR 2005-06, DENIED THE CLAIM OF EXEMPT ION UNDER SECTION 11 TREATING THE RENTAL ADVANCES PAID AS INVESTMENT MAD E BY THE ASSESSEE TRUST OUT OF ITS SURPLUS FUND BY INVOKING THE PROVISIONS OF SECTION 11(5) OF THE ACT. CONSEQUENTLY THE ASSESSMENT FOR THE ASSESSMENT YEAR 2001-02 WAS I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.730 730730 730/M/ /M/ /M/ /M/11 1111 11 3 REOPENED AND EXEMPTION UNDER SECTION 11 WAS DENIED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT UNDER SECTI ON 143(3). 6. THE CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE FOLLOWING THIS TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR THE ASS ESSMENT YEAR 2004-05 IN I.T.A. NO.335/MDS/2010 DATED 04.06.2010, WHEREIN TH E TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 7. DURING THE COURSE OF HEARING, BOTH THE PARTIES HAVE AGREED THAT THE ISSUE IN THIS APPEAL IS COVERED BY THE DECISION OF THE CHENNAI D BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2005-06 IN I.T.A. NO. 2271/MDS/2008 DATED 19.04.2011 AND THE T RIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, COPY OF THE ORDER IS PLACED ON RECORD. 8. WE HAVE PERUSED THE MATERIALS AVAILABLE ON RECO RD AND FIND THAT SIMILAR ISSUE HAS BEEN DECIDED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 IN I.T.A. NO. 2271/MDS/ 2008 DATED 19.04.2011, WHEREIN IT WAS HELD THAT THE RENTAL ADV ANCES GIVEN BY THE ASSESSEE-TRUST TO MRPL CANNOT BE TREATED AS INVESTM ENT AND ARE IN THE NATURE OF APPLICATION OF FUND ONLY AND THEREFORE, T HE PROVISIONS OF SECTION 13(1)(D) DO NOT APPLY TO THE FACTS OF THE ASSESSEE S CASE. INSTANTLY, THE TRIBUNAL FOLLOWED ITS EARLIER ORDER IN ASSESSEES O WN CASE FOR THE ASSESSMENT YEAR 2004-05 IN I.T.A. NO. 335/MDS/2010 DATED 04.06.2010 IN I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.730 730730 730/M/ /M/ /M/ /M/11 1111 11 4 COMING TO THE ABOVE CONCLUSION. SINCE THERE IS NO C HANGE OF FACTS IN THE PRESENT ASSESSMENT YEAR, RESPECTFULLY FOLLOWING THE ABOVE ORDERS OF THE TRIBUNAL FOR THE ASSESSMENT YEARS 2004-05 AND 2005- 06, WE UPHOLD THE ORDER OF THE CIT(A) IN ALLOWING THE EXEMPTION UNDER SECTION 11 TO THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.03.2012. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER CHENNAI, DATED, THE 16.03.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.