M/s. Jeppiar Educational Trust, CHENNAI V. ACIT, CHENNAI

MA 142/CHNY/2011

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 6863 (ITAT-CHENNAI)
• Duration Of Justice: 22 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 04-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T BANUSEKAR
• Keywords: Diversion of income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER M.A.NOS. 141 TO 143/MDS/2011 (IN I.T.A.NOS. 1593 TO 1595/MDS/2010) ASSESSMENT YEARS : 2005-06 TO 2007-08 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-I(3), CHENNAI-34. VS. M/S. JEPPIAAR EDUCATIONAL TRUST, NO.29-A, GANAPATHY STREET, ROYAPETTAH, CHENNAI-14. PAN AAATJ 0562 E (APPELLANT) (RESPONDENT) APPLICANT BY : SHRI T.BANUSEKAR, CA RESPONDENT BY : SHRI SHAJI P. JACOB, SR. DR DATE OF HEARING : 26 TH AUGUST, 2011 DATE OF PRONOUNCEMENT : 29 TH AUGUST, 2011 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THESE THREE MISCELLANEOUS PETITIONS ARE FILED BY TH E ASSESSEE. THE PETITIONS ARE IN FACT RECTIFICATION APPLICATIONS. THE MA 141 TO 143/11 :- 2 -: PETITIONS RELATE TO THE ASSESSMENT YEARS 2005-06, 2 006-07 AND 2007-08. 2. THE ASSESSEE, M/S. JEPPIAR EDUCATIONAL TRUST WAS A PARTY IN THE APPEALS FILED BY THE REVENUE FOR THE ASSESSM ENT YEARS 2001-02 TO 2007-08 IN ITA NOS.1333, 1334, 1591 TO 1595/MDS/2010. THOSE APPEALS ALONG WITH THE CROSS OBJECTIONS WERE DISPOSED OF BY THE TRIBUNAL THROUGH THEIR COMM ON ORDER DATED 15.6.2011. THESE MISCELLANEOUS PETITIONS ARI SE IN THE ABOVE CONTEXT. IT IS THE CASE OF THE ASSESSEE-PETI TIONER THAT IN RESPECT OF THE ASSESSMENT YEARS 2005-06, 2006-07 AN D 2007-08, THE TRIBUNAL HAS COMMITTED MISTAKES IN ITS ORDER IN AS MUCH AS IT HAS NOT CONSIDERED THE NATURE OF PAYMENTS AND THE A DVANCES MADE BY THE ASSESSEE-TRUST TO M/S. JET ASSOCIATES A ND M/S. JET STEEL ADVANCE IN WHICH THE TRUSTEES OF THE ASSESSEE -TRUST ARE DIRECTORS. 3. THE PETITIONER HAS FILED EXHAUSTIVE PETITIONS BE FORE THE TRIBUNAL FOR ALL THE THREE ASSESSMENT YEARS 2005-06 , 2006-07 AND 2007-08. MA 141 TO 143/11 :- 3 -: 4. WE HEARD SHRI T. BANUSEKAR, THE LEARNED COUNSEL APPEARING FOR THE PETITIONER AND SHRI SHAJI P. JACO B, THE LEARNED COMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENU E. 5. IN THE COURSE OF CARRYING ON OF ITS ACTIVITIES, PARTICULARLY IN RESPECT OF THE IMPUGNED THREE ASSESSMENT YEARS 2005 -06, 2006- 07 AND 2007-08, THE ASSESSEE-TRUST HAD MADE PAYMENT S AND ADVANCES TO PARTIES LIKE HOLY SATELLITE TOWN LTD., JET ASSOCIATES AND JET STEEL ADVANCE. THE ASSESSING OFFICER HELD THAT THESE PAYMENTS MADE TO INTERESTED PARTIES WERE DIVERSION OF THE INCOME OF THE ASSESSEE-TRUST AND ACCORDINGLY INVOKED THE P ROVISIONS OF SEC.13(1)(C) AND NEGATIVED THE CLAIM OF EXEMPTION M ADE BY THE ASSESSEE UNDER SEC.11 OF THE INCOME-TAX ACT, 1961. 6. THE COMMISSIONER OF INCOME-TAX (APPEALS) IN HIS ORDER HELD THAT THESE PAYMENTS AND ADVANCES DO NOT VIOLATE THE LAW STATED IN SEC.13(1)(C) BUT THEY HAVE VIOLATED THE LAW STATED IN 13(1)(D), SO THAT THE RESPECTIVE AMOUNTS ALONE SHALL BE TREATED AS INCOME. THIS MODIFIED VERSION OF THE ISSUE AS HELD BY THE C OMMISSIONER OF INCOME-TAX (APPEALS) WAS ALSO ONE OF THE GROUNDS RA ISED BY THE ASSESSEE IN ITS CROSS OBJECTIONS FILED BEFORE THE T RIBUNAL. MA 141 TO 143/11 :- 4 -: 7. WHILE CONSIDERING THE APPEALS, THE TRIBUNAL CONS IDERED THE PAYMENTS MADE TO M/S. HOLY SATELLITE TOWN LTD. AND HELD THAT THOSE PAYMENTS ARE IN NO WAY PAYMENTS EITHER IN THE NATURE OF DIVERSION OF INCOME OR IN THE NATURE OF PAYMENTS MA DE TO THE INTERESTED PARTIES FOR DOUBTFUL CONSIDERATION. THE TRIBUNAL, ON THE OTHER HAND HELD THAT THE PAYMENTS WERE MADE TO M/S. HOLY SATELLITE TOWN LTD. AGAINST SUPPLY OF READY MIX CON CRETE NECESSARY FOR CONSTRUCTION OF THE COLLEGE BUILDINGS OF THE ASSESSEE-TRUST. ACCORDINGLY, THE TRIBUNAL HAS HELD THAT THE PAYMENTS MADE TO HOLY SATELLITE TOWN LTD. ARE NOT H IT BY SEC.13(1)(D) AND RELIEF WAS GIVEN TO THE ASSESSEE-T RUST. 8. BUT, AT THE SAME TIME, THE TRIBUNAL OMITTED TO C ONSIDER SIMILAR PAYMENTS AND ADVANCES MADE TO M/S. JET ASSO CIATES AND M/S. JET STEEL ADVANCE. IT IS ALREADY AVAILABLE ON RECORD SPECIALLY IN THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (AP PEALS) THAT THE PAYMENTS TO THE ABOVE PARTIES WERE MADE BY THE ASSESSEE- TRUST AGAINST SUPPLY OF STEEL AGAIN FOR USING IN TH E CONSTRUCTION OF THE COLLEGE BUILDINGS AND ALSO AGAINST SUPPLY OF WA TER AND MILK IN THE CANTEEN AND HOSTELS RUN BY THE ASSESSEE-TRUST. EVEN THOUGH, ALL THESE MATERIALS VERY MUCH AVAILABLE BEFORE THE TRIBUNAL, JUST MA 141 TO 143/11 :- 5 -: ACCIDENTALLY THE TRIBUNAL OMITTED TO CONSIDER THE P AYMENTS MADE SPECIFICALLY TO M/S JET ASSOCIATES AND M/S. JET STE EL ADVANCE. THIS OMISSION IS THE MISTAKE APPARENT IN THE ORDER OF THE TRIBUNAL. 9. AS SEEN FROM THE ORDER OF THE TRIBUNAL, WE HAVE NOT ADJUDICATED THE NATURE OF THE PAYMENTS MADE TO JET ASSOCIATES AND JET STEEL ADVANCE. IN THAT WAY, THE ORDER OF T HE TRIBUNAL HAS NECESSARILY TO BE RECTIFIED AND THE MISCELLANEOUS P ETITIONS FILED BY THE ASSESSEE ARE IN ORDER. NOW, CONSIDERING THE ME RITS OF THE PETITIONS, WE FIND THAT THERE IS NO NEED OF ELABORA TE DISCUSSION TO COME TO A FINDING THAT THE PAYMENTS MADE TO JET ASS OCIATES AND JET STEEL ADVANCE WERE FOR THE PURPOSE OF CARRYING ON THE ACTIVITIES OF THE ASSESSEE-TRUST. THE PAYMENTS WER E MADE AGAINST SUPPLY OF STEEL. THE ASSESSEE-TRUST WAS CO NSTRUCTING VARIOUS BUILDINGS FOR EDUCATIONAL INSTITUTIONS. TH EREFORE, REGULAR SUPPLY OF STEEL IS VERY MUCH NECESSARY. IT IS FOR THAT PURPOSE THAT THE ASSESSEE HAS MADE A LARGE PART OF THE PAYMENTS TO JET ASSOCIATES AND JET STEEL ADVANCE. LIKEWISE, PAYMEN TS ALSO WERE MADE AGAINST SUPPLY OF WATER AND MILK IN THE CANTEE N AND HOSTELS RUN BY THE ASSESSEE-TRUST. OBVIOUSLY, ALL THE ABOV E PAYMENTS ARE MADE AGAINST SERVICES RENDERED WHICH ARE VERY ESSEN TIAL FOR MA 141 TO 143/11 :- 6 -: CARRYING ON THE ACTIVITIES OF THE ASSESSEE-TRUST. THE ASSESSING AUTHORITY HAS NO CASE THAT THE RATE OF PAYMENTS MAD E TO JET ASSOCIATES AND JET STEEL ADVANCE ARE IN ANY WAY EXO RBITANT THAN THE NORMAL MARKET RATE. WHEN THE ASSESSEE-TRUST HAS MADE PAYMENTS AT PAR WITH PREVAILING MARKET RATE, IT DOE S NOT MAKE ANY DIFFERENCE THAT THE PAYMENTS WERE MADE TO THE INSTI TUTIONS IN WHICH THE TRUSTEES OF THE ASSESSEE-TRUST ARE DIRECT ORS OR STRANGERS. PAYMENTS MADE TO THE ABOVE CONCERNS AGA INST SUPPLY OF GOODS HAVE NOT PREJUDICED INTERESTS OF THE ASSES SEE-TRUST IN ANY MANNER. ON THE OTHER HAND, REGULAR AND TIMELY SUPPLY OF ESSENTIAL MATERIALS ARE ENSURED. 10. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, WE HOLD THAT AS IN THE CASE OF HOLY SATELLITE TOWN LTD . , THE PAYMENTS AND ADVANCES MADE BY THE ASSESSEE-TRUST TO M/S. JET ASSOCIATES AND M/S. JET STEEL ADVANCE ALSO DO NOT COME UNDER T HE PURVIEW OF SEC.13(1)(D) OF THE INCOME-TAX ACT, 1961. THERE FORE, THE DISALLOWANCE MADE BY THE COMMISSIONER OF INCOME-TAX (APPEALS) CONFINED TO THE PARTICULAR AMOUNTS IS NOT CALLED FO R AND IT IS DELETED. MA 141 TO 143/11 :- 7 -: 11. TO THE ABOVE EXTENT, THE COMMON ORDER PASSED BY THE TRIBUNAL ON 15.6.2011 STANDS AMENDED. 12. IN RESULT, THE MISCELLANEOUS PETITIONS FILED BY THE ASSESSEE ARE ALLOWED. ORDERS PRONOUNCED ON MONDAY, THE 29 TH OF AUGUST, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 29 TH AUGUST, 2011 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR