M/s,. Mohammed Sathak Trust, CHENNAI v. ADIT, CHENNAI

CO 10/CHNY/2013 | 2008-2009
Pronouncement Date: 30-10-2013 | Result: Allowed

Appeal Details

RSA Number 1021723 RSA 2013
Assessee PAN AAATM0652J
Bench Chennai
Appeal Number CO 10/CHNY/2013
Duration Of Justice 9 month(s) 19 day(s)
Appellant M/s,. Mohammed Sathak Trust, CHENNAI
Respondent ADIT, CHENNAI
Appeal Type Cross Objection
Pronouncement Date 30-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 30-10-2013
Date Of Final Hearing 29-10-2013
Next Hearing Date 29-10-2013
Assessment Year 2008-2009
Appeal Filed On 11-01-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CHENNAI BEFORE DR. O.K.NARAYANAN VICE-PRESIDENTAND SHRI VIKAS AWASTHY JUDICIAL MEMBER ITA NO. 1436(MDS)/2012 ASSESSMENT YEAR : 2008-09 & ITA NO. 2159(MDS)/2012 ASSESSMENT YEAR : 2009-10 AND C.O. NOS. 10 & 11(MDS)/2013 (IN ITA NO. 1436(MDS)/2012 & ITA NO. 2159(MDS)/2012) THE ASSISTANT DIRECTOR OF INCOME TAX (EXEMPTIONS)-IV CHENNAI - 600 034. V. M/S MOHAMED SATHAK TRUST SATHAK CENTRE ANNEXE FIRST FLOOR 144/1 MAHATMA GANDHI ROAD NUNGAMBAKKAM CHENNAI - 600 034. PAN : AAATM 0652 J (APPELLANT) (RESPONDENT & CROSS-OBJECTOR) APPELLANT BY : SHRI SHAJI P . JACOB IRS ADDL.CIT RESPONDENT BY : SHRI B. RAMAKRIS HNAN CA DATE OF HEARING : 29 TH OCTOBER 2013 DATE OF PRONOUNCEMENT : 30 TH OCTOBER 2013 O R D E R PER DR.O.K.NARAYANAN VICE-PRESIDENT THE APPEALS ARE FILED BY THE REVENUE AND CROSS-OB JECTIONS ARE FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEARS ARE 2008-09 AND 2009-10. THE APPEALS AND CROSS-OBJECTI ONS ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME- 2 I.T.A. NOS. 1436 & 2159/MDS/12 C.O. NOS. 10 & 11/MDS/13 TAX(APPEALS)-XII AT CHENNAI DATED 19.3.2012 AND 6. 8.2012 RESPECTIVELY. THEY ARISE OUT OF THE ASSESSMENTS CO MPLETED UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961. 2. THE ASSESSEE IS A CHARITABLE INSTITUTION ENGAGE D IN THE ACTIVITIES OF RUNNING EDUCATIONAL INSTITUTIONS. TH E ASSESSEE IS GRANTED REGISTRATION UNDER SECTION 12A. BEING A CH ARITABLE INSTITUTION THE ASSESSEE CLAIMED RELIEF UNDER SECT ION 11 IN THE RETURN FILED FOR THE IMPUGNED ASSESSMENT YEARS. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 13( 1)(C) OF THE INCOME-TAX ACT 1961. THE CONCLUSION OF THE ASSESS ING OFFICER REGARDING VIOLATION OF SECTION 13(1)(C) WAS ARRIVED AT ON THE BASIS OF HER FINDING THAT THE FUNDS OF THE ASSESSEE-INSTITUT ION HAD BEEN GIVEN TO THE TRUSTEES OF THE INSTITUTION AND AS SUCH BEN EFITS HAVE ARISEN TO THE INTERESTED PARTIES WHO ARE CONCERNED WITH THE ACTIVITIES OF THE ASSESSEE-INSTITUTION. 3. FOR THAT MATTER THE ASSESSING OFFICER CITED THE CLOSING BALANCE OF ` 11 93 385/- STANDING TO THE CREDIT OF M/S GENERAL COMMERCIAL AGENCIES. BY LOOKING INTO ALL SUCH TRAN SACTIONS THE ASSESSING OFFICER HELD THAT IT IS THE CASE WHERE IN COME OF THE ASSESSEE-INSTITUTION HAS BEEN USED FOR THE BENEFIT OF ANY PERSON 3 I.T.A. NOS. 1436 & 2159/MDS/12 C.O. NOS. 10 & 11/MDS/13 DIRECTLY OR INDIRECTLY REFERRED TO IN SECTION 13(3) LIKE M/S GENERAL COMMERCIAL AGENCIES AND OTHER CONCERNS IN WHICH THE TRUSTEES HAVE SUBSTANTIAL INTEREST. ACCORDINGLY THE ASSESS ING OFFICER DENIED THE BENEFIT OF SECTION 11. FOR THE ASSESSMENT YEAR 2009-10 ALSO THE ISSUES ARE SIMILAR. BUT ONE SPECIFIC THING IS THAT THE ASSESSEE HAD GIVEN AN ADVANCE OF ` 34 50 000/- TO ONE SHRI S.M. KABEER WHO IS A TRUSTEE. EVEN THOUGH THE MONEY PAID TO SH RI KABEER WAS STATED TO BE AN ADVANCE GIVEN FOR PURCHASE OF LAND THE ASSESSING OFFICER HELD THAT PURCHASE OF PROPERTY WAS NOT MADE AND AS SUCH IT WAS A CLEAR CASE OF ADVANCING OF MONEY TO HIM. 4. IN FIRST APPEALS THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE GROUNDS RAISED BY THE ASSESSEE IN A VERY DETAILED MANNER. IN ASSESSMENT YEAR 2009-10 THE CIT(APPEAL S) EXAMINED THE LEDGER ACCOUNTS OF ALL THE CONCERNED PARTIES IN A VERY DETAILED MANNER. HE EXAMINED THE PERSONAL ACCOUNTS OF THE T RUSTEES AND OTHER RELATED PARTIES REFLECTED IN THE ACCOUNTS OF THE INSTITUTION GOING THROUGH OPENING BALANCE CREDITS AND DEBITS D URING THE CONCERNED YEARS AND THE CLOSING BALANCE. THE COMMI SSIONER OF INCOME TAX (APPEALS) FOUND THAT THE ASSESSEES WAY OF ACCOUNTING THE TRANSACTIONS TO RECEIVE THE FUNDS AND PAY BACK THE FUNDS TO THE SPECIFIED PERSONS WITHOUT NETTING OF OR SQUARING U P WAS ONLY TO FACILITATE A BETTER UNDERSTANDING AND TO KEEP A TRA CK OF TRANSACTIONS 4 I.T.A. NOS. 1436 & 2159/MDS/12 C.O. NOS. 10 & 11/MDS/13 IN A BETTER MANNER. HE ULTIMATELY HELD THAT THE AC COUNTING OF RECEIPTS AND PAYMENTS SEPARATELY IN THE ACCOUNTS OF EACH OF THE PERSONS SPECIFIED IN SECTION 13(3) OF INCOME-TAX AC T 1961 WITHOUT SQUARING UP OR NETTING OF AND CONSIDERING ONLY THE NET BALANCE AT THE END OF THE PREVIOUS YEAR COULD NOT BE TREATED AS A VIOLATION UNDER SECTION 13(1)(C). 5. THE COMMISSIONER OF INCOME TAX (APPEALS) ALSO CO NSIDERED ADVANCING OF ` 34 50 000/- TO ONE OF THE TRUSTEES SHRI S.M. KABE ER FOR THE ASSESSMENT YEAR 2009-10. AFTER EXAMINING T HE FACTS OF THE CASE HE FOUND THAT IT WAS AN ADVANCE GIVEN TO SHRI S.M. KABEER AS HE HAS OFFERED HIS PROPERTY TO SELL TO THE ASSESSEE -TRUST FOR ITS OWN ACTIVITIES. SUBSEQUENTLY SHRI S.M. KABEER PASSED AWAY AND NOW THE PURCHASE OF THE PROPERTY COULD BE MADE ONLY AFT ER HIS LEGAL HEIRS HAVE JOINTLY EXECUTED A DEED WHICH WOULD TAKE SOME TIME. OTHERWISE INTENTION OF PURCHASE OF LAND HAS BEEN MA DE VERY CLEAR. 6. WE HEARD BOTH SIDES IN DETAIL ON THESE CONTENTIO US ISSUES. WHAT WE FIND ON A METICULOUS ANALYSIS OF THE FACTS OF THE CASE IS THAT THE ASSESSEE-TRUST HAD BEEN ACCEPTING EMERGENC Y FINANCE FROM THE TRUSTEES FROM TIME TO TIME DEPENDING UPON THE EXIGENCIES. IT WAS NECESSARY FOR THE ASSESSEE-TRUST TO MEET IMM EDIATE EXPENDITURES FOR WHICH WHEN FUNDS WERE NOT AVAILAB LE THE 5 I.T.A. NOS. 1436 & 2159/MDS/12 C.O. NOS. 10 & 11/MDS/13 ASSESSEE-TRUST HAD TO DEPEND UPON THE TRUSTEES. ON CE FUNDS WERE AVAILABLE WITH ASSESSEE THOSE FUNDS WERE PAID BACK TO THE TRUSTEES. SOMETIMES INSTEAD OF PAYING BACK THE MONEY TO THE TRUSTEE A WHO HAD IN FACT GIVEN MONEY TO THE ASSESSEE-TRUST THE REPAYMENT WAS MADE TO THE TRUSTEE B ON THE DIRECTION OF THE TRUSTEE A. THIS ADJUSTMENT MADE BY THE ASSESSEE HAS BEEN TREATED AS THE MOST SERIOUS OBJECTION BY THE REVENUE. BUT THE FACT I S THAT EVERY RECEIPT AND PAYMENT OF MONEY HAD BEEN PROPERLY EXPLAINED. IT IS SEEN THAT THE ASSESSEE-TRUST RECEIVED MONEY AS AND WHEN THERE WAS NO CASH AVAILABLE WITH IT. ACTUALLY THE TRUSTEES WERE HEL PING THE ASSESSEE TO CARRY ON ITS ACTIVITIES WHEN THERE WAS A SHORTAGE OF FUNDS. SO WHETHER THE BALANCE IN THE NAME OF A PARTICULAR TRU STEE IS TO BE CONSIDERED AS THE NET FIGURE FOR ALL THE TRANSACTIO NS ENTERED IN THE NAME OF DIFFERENT TRUSTEES OR HAVE TO BE TREATED AS SEVERAL TRANSACTIONS IS NOT AT A RELEVANT ISSUE HERE. IN FACT THE ASSESSEE RECEIVED MONEY FROM THE TRUSTEES FOR CARRYING ON OF ITS ACTIVITIES AND THOSE MONIES HAD BEEN REPAID TO THEM OR TO THEIR NO MINEES AS AND WHEN FUNDS WERE AVAILABLE WITH ASSESSEE-TRUST. REP AYMENT OF AMOUNTS TO THE NOMINEES OF CREDITORS IS NOTHING UNL AWFUL. 7. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS CON SIDERED THE CASE IN A VERY DETAILED MANNER AND THEREFORE W E ARE NOT INCLINED TO REPEAT THE FACTS OF THE CASE. IT IS SU FFICIENT TO SAY THAT 6 I.T.A. NOS. 1436 & 2159/MDS/12 C.O. NOS. 10 & 11/MDS/13 THERE IS NO VIOLATION OF SECTION 13(1)(C) IN THESE CASES. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS APPRECIATE D THE FACTS OF THE CASE IN A LAWFUL MANNER AND HE HAS COME TO A JU ST AND FAIR CONCLUSION THAT THERE WAS NO VIOLATION UNDER SECTIO N 13(1)(C). THEREFORE WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) IS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO GIVE BENEFIT OF SECTION 11 TO THE ASSESSEE. 8. THEREFORE THE APPEALS FILED BY THE REVENUE ARE LIABLE TO BE DISMISSED. 9. AS FAR AS CROSS-OBJECTIONS FILED BY THE ASSESSEE ARE CONCERNED THE ONLY CASE IS THAT COMMISSIONER OF IN COME TAX (APPEALS) HAS ERRED IN NOT ALLOWING THE CLAIM OF DE PRECIATION WHILE COMPUTING APPLICATION OF 85% OF INCOME UNDER SECTIO N 11 OF INCOME-TAX ACT 1961. 10. THE LAW PRESCRIBES THAT THE INCOME SHALL BE COM PUTED AS PER THE PROVISIONS OF INCOME-TAX ACT 1961. IN COMPUTI NG OF OPERATIONAL INCOME OF AN ASSESSEE IT IS NECESSARY TO PROVIDE F OR DEPRECIATION. THEREFORE THE INCOME OF THE ASSESSEE-TRUST IS COMP UTED AT THE FIRST INSTANCE BY APPLYING NORMAL ACCOUNTANCY PRINCIPLES WHERE DEPRECIATION HAS TO BE ALLOWED. IT IS AFTER PROVID ING THE DEPRECIATION THE INCOME OF THE ASSESSEE IS ARRIVED AT. WHEN THE ASSESSEE HAS 7 I.T.A. NOS. 1436 & 2159/MDS/12 C.O. NOS. 10 & 11/MDS/13 EXPLAINED THE APPLICATION OF FUNDS FOR CHARITABLE P URPOSES THE AMOUNT SPENT BY THE ASSESSEE TO ACQUIRE THE FIXED A SSET IS TO BE TREATED AS APPLICATION OF FUNDS FOR CHARITABLE PURP OSES. 11. IN THE ABOVE CIRCUMSTANCES THERE IS A MISCONCE PTION THAT AN ASSESSEE WHICH IS A CHARITABLE INSTITUTION ENJOYIN G BENEFITS UNDER SECTION 11 IS AVAILING DOUBLE BENEFITS; ONE IN THE FORM OF DEPRECIATION AND THE OTHER IN THE FORM OF APPLICATI ON FOR THE CHARITABLE PURPOSES. 12. BUT THE ABOVE PROPOSITION IS UNFOUNDED. COMPU TING OF INCOME FOR ARRIVING AT NORMAL INCOME OF THE ASSESSE E AND EXAMINING THE APPLICATION OF FUNDS FOR CHARITABLE P URPOSES ARE TWO DIFFERENT SEGMENTS. DEPRECIATION IS ALLOWED IN THE FIRST SEGMENT WHILE COMPUTING THE INCOME OF THE ASSESSEE AS SIMIL AR TO ANY OTHER ASSESSEES. IT IS FROM THAT INCOME THE ASSESSEE IS SUPPOSED TO APPLY FUNDS FOR CHARITABLE PURPOSES. THE EXAMINATI ON OF THIS ASPECT IS THE SECOND SEGMENT. IN THE SECOND SEGMENT MONE Y SPENT FOR ACQUIRING AN ASSET IS TREATED AS APPLICATION OF FUN DS FOR CHARITABLE PURPOSES. IN FACT THE QUESTION OF APPLICATION CONS IDERED IN THE SECOND SEGMENT IS ENTIRELY DIFFERENT. IN FACT THE RE IS NO QUESTION OF DOUBLE BENEFIT. AN ASSESSEE IS GETTING THE BENEFIT OF APPLICATION OF FUNDS FOR CHARITABLE PURPOSES FROM THE INCOME COMPU TED ACCORDING 8 I.T.A. NOS. 1436 & 2159/MDS/12 C.O. NOS. 10 & 11/MDS/13 TO NORMAL ACCOUNTING PRACTICES. ACCORDINGLY IT IS TO BE SEEN THAT THERE IS NO CLASH BETWEEN PROVIDING DEPRECIATION AL LOWANCE AND RECOGNISING THE APPLICATION OF FUNDS FOR CHARITABLE PURPOSES. 13. IN THESE CIRCUMSTANCES WE FIND THAT THE LOWER AUTHORITIES HAVE ERRED IN DECIDING THE ISSUE. THE ASSESSING OF FICER IS DIRECTED TO COMPUTE INCOME OF THE ASSESSEE AFTER PROVIDING F OR DEPRECIATION AND FROM THE RESULTANT INCOME TREAT THE MONEY SPEN T IN ACQUISITION OF ASSET AS APPLICATION OF FUNDS. 14. THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED. 15. IN THE RESULT APPEALS FILED BY THE REVENUE ARE DISMISSED AND CROSS-OBJECTIONS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON WEDNESDAY THE 30 TH OF OCTOBER 2013 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (DR. O .K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI DATED THE 30 TH OCTOBER 2013. KRI. COPY TO: APPELLANT/RESPONDENT/DIT (EXEMPTIONS) C HENNAI/ CIT(A)-XII CHENNAI-34/DR/GF