Kapoor Educational Society, Lucknow V. Income Tax Officer-2(2), Lucknow

ITA 813/LKW/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4299 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 10-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

I.T.A. NO.813/LKW/14 ASSESSMENT YEAR:2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI P. K. BANSAL, ACCOUNTANT MEMBER AND SHRI ABY T. VARKEY, JUDICIAL MEMBER ITA NO.813/LKW/2014 ASSESSMENT YEAR:2010-11 KAPOOR EDUCATIONAL SOCIETY, B-10, MANDIR MARG, MAHANAGAR EXTENSION, LUCKNOW. PAN:AAATK4023B VS. INCOME TAX OFFICER - 2(2), LUCKNOW. (APPELLANT) (RESPONDENT) O R D E R PER P. K. BANSAL, A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-I, LUCKNOW DATED 14/07/2014. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES T O DENIAL OF THE BENEFIT TO THE ASSESSEE BY DISALLOWING THE EXCESS LEASE REN T PAYMENT AMOUNTING TO RS.32,50,000/- BY APPLYING THE PROVISION OF SECT ION 13(1)(C) READ WITH SECTION 13(2)(G) OF THE ACT. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE SOCIETY RUNS A SCHOOL IN THE NAME OF MODERN SCHOOL. DURING THE APPELLANT BY SHRI P. K. KAPOOR, C. A. RESPONDENT BY SHRI AMIT NIGAM, D. R. DATE OF HEARING 06 /0 6 /2016 DATE OF PRONOUNCEMENT 27 / 07 /2016 I.T.A. NO.813/LKW/14 ASSESSMENT YEAR:2010-11 2 IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAS SHOWN TO TAL RECEIPT OF RS.4,09,99,072/- AND LOSS OF RS.16,45,609/-. IT WA S NOTED THAT THE PLOT OF LAND ON WHICH THE ASSESSEE IS RUNNING SCHOOL IS OWN ED BY SHRI RAKESH KAPOOR, PRESIDENT OF THE SOCIETY WHILE THE ASSESSEE HAD PAID THE RENT OF RS.32,50,000/- PER ANNUM FOR LETTING OUT THE PLOT T O THE SOCIETY WHILE SHRI RAKESH KAPOOR HAS TAKEN ON LEASE FROM LUCKNOW DEVEL OPMENT AUTHORITY ON 17/06/1985. THE LDA HAD EXECUTED THE LEASE DEED AT A PREMIUM OF RS.5,20,722/- AND ON YEARLY LEASE RENT OF RS.5,207. 22. THE ASSESSING OFFICER THEREFORE, TOOK THE VIEW THAT THE PROVISION OF SECTION 13(1)(C) READ WITH SECTION 13(2)(G) ARE APPLICABLE AND ADDED BACK THE SUM OF RS.32,50,000/- IN THE INCOME OF THE ASSESSEE. 3. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) WH O AFTER PERUSING THE LEASE DEED NOTED THE FOLLOWING FACTS: A. THE LAND IN QUESTION WAS ALLOTTED BY THE LDA TO THE APPELLANT SOCIETY AND THE LEASE AGREEMENT WAS EXECU TED BY THE LDA WITH SHRI RAKESH KAPOOR IN HIS CAPACITY AS FOUNDER/SECRETARY OF THE SCHOOL BEING RUN BY THE APPELLANT SOCIETY. B. THIS FACT ALSO GETS CREDENCE FROM THE FACT THAT THE APPELLANT SOCIETY WAS REGISTERED IN FY 85-86 UNDER THE SOCIETIES REGISTRATION ACT, 1860 VIDE REGISTRATION NO. 390/85-86 AND THE PLOT WAS ALSO ALLOTTED BY THE LDA IN THE SAME FINANCIAL YEAR ON 17.06.1985. C. EVEN IF IT IS PRESUMED THAT THE PLOT OF LAND WAS ALLOTTED BY THE LDA TO SHRI RAKESH KAPOOR IN HIS INDIVIDUAL CAPACITY, IT WAS ALLOTTED TO HIM FOR A VERY NOMINAL RENT FOR THE PURPOSE OF ESTABLISHMENT AND RUNNING OF A SCHOO L AND NOT SUB-LEASING OR LETTING IT OUT TO ANY OTHER PERS ON I.E. THE APPELLANT SOCIETY FOR THE SAME PURPOSE. I.T.A. NO.813/LKW/14 ASSESSMENT YEAR:2010-11 3 D. IT IS ALSO NOTED THAT THE APPELLANT SOCIETY IS R UNNING THE SCHOOL FOR SO MANY YEARS BUT THE LEASE RENT HAS BEE N PAID TO SRI RAKESH KAPOOR FOR THE FIRST TIME IN FI NANCIAL YEAR 2006-07 WITH A VIEW TO DIVERT PART OF THE RECE IPTS OF THE APPELLANT SOCIETY. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, CAREFULLY C ONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED THAT SIMILAR ISSUE HAS ARISEN IN THE CASE OF THE ASSESSEE IN ASS ESSMENT YEAR 2007-08. THIS BENCH OF THE TRIBUNAL IN I.T.A. NO.162/LKW/201 2 IN THE CASE OF THE ASSESSEE VIDE ITS ORDER DATED 28/02/2014 HELD AS UN DER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE O RDERS OF THE AUTHORITIES BELOW. WE FIND THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARA 8 OF HIS ORDER THAT SHRI RAKESH KAP OOR IS PAYING ONLY RS.5,207.22 BEING 1% OF THE CONSIDERATION OF T HE LAND I.E. RS.5,20,722/- WHEREAS THE ASSESSEE HAS CLAIMED TO H AVE PAID RS.25,06,273/-. THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 13(1)(C) READ WITH SECTION 13 (2)(G) OF THE ACT AND MADE DISALLOWANCE OF RS.25,06,273/-. WE HA VE NOTED THAT THE LAND IN QUESTION WAS ALLOTTED BY LDA TO SH RI RAKESH KAPOOR IN HIS CAPACITY AS FOUNDER/SECRETARY OF THE SCHOOL BEING RUN BY THE SOCIETY AND THE ASSESSEE HAS NOT P RODUCED BEFORE US THE APPLICATION FOR ALLOTMENT OF LAND AND THE ALLOTMENT LETTER ISSUED BY LDA TO ESTABLISH THAT TH E LAND WAS ALLOTTED TO SHRI RAKESH KAPOOR AND NOT TO MODERN SC HOOL. HENCE, WE DRAW ADVERSE INFERENCE AND HOLD THAT THE LAND IN QUESTION WAS ALLOTTED BY LDA TO MODERN SCHOOL BEING RUN BY ASSESSEE SOCIETY AND, THEREFORE, NO RENT IS PAYABLE BY THE ASSESSEE SOCIETY TO SHRI RAKESH KAPOOR FOR USE OF T HE LAND FOR RUNNING OF THE SCHOOL. THE ASSESSEE HAS PAID RS.25 ,11,480/- TO SHRI RAKESH KAPOOR FOR THIS LAND AND THE ASSESSI NG OFFICER HAS DISALLOWED THE EXCESS AMOUNT AFTER DEDUCTING LE ASE RENT PAID BY SHRI RAKESH KAPOOR TO LDA OF RS.5,207/-. S INCE LAND IN QUESTION WAS ALLOTTED BY LDA TO MODERN SCHOOL, W E DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LEARNE D CIT (A). REGARDING VARIOUS JUDGMENTS CITED BY LEARNED A.R. O F THE I.T.A. NO.813/LKW/14 ASSESSMENT YEAR:2010-11 4 ASSESSEE, WE FIND THAT THESE JUDGMENTS ARE OF NO HE LP TO THE ASSESSEE IN THE PRESENT CASE. 6.1 THE FIRST JUDGMENT IS THE JUDGMENT OF HON'BLE D ELHI HIGH COURT RENDERED IN THE CASE OF DIT(E) VS. SPAN FOUND ATION (SUPRA) IN WHICH THE ISSUE IN DISPUTE WAS AS TO WHE THER THE RENT RECEIVED FROM THE BUILDING TO REPAY THE BORROW ED FUND, BORROWED FOR CONSTRUCTING THE BUILDING SHOULD BE CO NSIDERED AS APPLICATION OF INCOME. IN THE PRESENT CASE, THE DI SPUTE IS DIFFERENT AND, THEREFORE, THIS JUDGMENT IS NOT REND ERING ANY HELP TO THE ASSESSEE IN THE PRESENT CASE. 6.2 THE SECOND DECISION IS THE DECISION OF I.T.A.T. HYDERABAD BENCH RENDERED IN THE CASE OF DDIT(E)-II VS. ROCK CHURCH MINISTRIES (SUPRA). IN THAT CASE, THE ASSES SEE PAID RENT OF RS.9,500/- PER MONTH TO THE PRESIDENT OF THE TRU ST. THIS IS NOTED BY THE TRIBUNAL IN PARA 11 THAT THIS RENT WAS PAID BY THE ASSESSEE FOR THE PROPERTY HAVING A BUILDING OF 4000 SQ. FT. ON A LAND ADMEASURING 15,000 SQ. FT. THAT TOO IN A PRIME LOCALITY IN THE CITY OF HYDERABAD AND THE MARKET RENT WAS RS.80 ,000/- PER MONTH AS ESTIMATED BY THE GOVERNMENT VALUER. THIS WAS NOT A FACT OF THAT CASE THAT THE PROPERTY IN QUESTION WAS IN FACT BELONGING TO THE ASSESSEE SOCIETY AND NOT TO THE PE RSON TO WHOM THE RENT WAS PAID AS IN THE PRESENT CASE. BEC AUSE OF THESE DIFFERENCES, THIS TRIBUNAL DECISION IS ALSO N OT RENDERING ANY HELP TO THE ASSESSEE. 6.3 THE THIRD JUDGMENT IS THE JUDGMENT OF HON'BLE D ELHI HIGH COURT RENDERED IN THE CASE OF VALVOLINE CUMMIN S LTD. VS. DY.CIT & ORS. (SUPRA). THIS JUDGMENT IS NOT APPLIC ABLE BECAUSE THE DISPUTE WAS REGARDING THE CONCURRENT JU RISDICTION ONLY. 6.4 THE NEXT JUDGMENT CITED BY LEARNED A.R. OF THE ASSESSEE IS THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDER ED IN THE CASE OF INVENTORS INDUSTRIES CORPORATION LTD. VS. C IT & ORS. (SUPRA). IN THIS CASE ALSO, THE DISPUTE WAS REGARDI NG CHALLENGING THE JURISDICTION OF THE INCOME TAX OFFI CER AND THEREFORE, THIS JUDGMENT IS ALSO NOT APPLICABLE. 7. AS PER ABOVE DISCUSSION, WE HAVE SEEN THAT NONE OF THE JUDGMENTS IS RENDERING ANY HELP TO THE ASSESSEE AND THE LAND I.T.A. NO.813/LKW/14 ASSESSMENT YEAR:2010-11 5 IN THE PRESENT CASE WAS BELONGING TO MODERN SCHOOL AND THEREFORE, NO RENT CAN BE CONSIDERED TO BE PAYABLE TO SHRI RAKESH KAPOOR FOR THE USE OF THIS LAND FOR RUNNING OF THE SCHOOL EXCEPT REIMBURSEMENT OF THE LEASE RENT PAID BY SHRI RAKESH KAPOOR TO LDA WHICH IS ALREADY ALLOWED BY TH E ASSESSING OFFICER. THIS ISSUE IS DECIDED IN FAVOUR OF THE REVENUE. AS A RESULT, THE APPEAL OF THE REVENUE IS ALLOWED. 5. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRIBUNAL, WE DISMISS THE GROUND TAKEN BY THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 27/07/2016) SD/. SD/. ( ABY T. VARKEY ) ( P. K . BANSAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:27/07/2016 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR