DDIT, CHENNAI v. Sethu Valliammal Educational Trust, CHENNAI

ITA 1135/CHNY/2013 | 2009-2010
Pronouncement Date: 29-10-2013 | Result: Dismissed

Appeal Details

RSA Number 113521714 RSA 2013
Assessee PAN AAATS0126K
Bench Chennai
Appeal Number ITA 1135/CHNY/2013
Duration Of Justice 5 month(s) 5 day(s)
Appellant DDIT, CHENNAI
Respondent Sethu Valliammal Educational Trust, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 29-10-2013
Date Of Final Hearing 29-10-2013
Next Hearing Date 29-10-2013
Assessment Year 2009-2010
Appeal Filed On 24-05-2013
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. 1135(MDS)/2013 ASSESSMENT YEAR : 2009-10 THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS)-III CHENNAI - 600 034. V. M/S SETHU VALLIAMMAL EDUCATIONAL TRUST NO.59 VALLIAMMAL STREET RED HILLS MAIN ROAD AMBATTUR CHENNAI-600034. PAN : AAATS 0126 K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P . JACOB IRS ADDL.CIT RESPONDENT BY : SHRI G. BASKAR ADVOCATE DATE OF HEARING : 29 TH OCTOBER 2013 DATE OF PRONOUNCEMENT : 29 TH OCTOBER 2013 O R D E R PER DR.O.K.NARAYANAN VICE-PRESIDENT THIS APPEAL FILED BY THE REVENUE RELATES TO ASSES SMENT YEAR 2009-10. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-XII AT CHENNAI DATED 2 I.T.A. NO. 1135/MDS/13 12.3.2013 AND ARISES OUT OF THE ASSESSMENT COMPLETE D UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961. 2. THE ASSESSEE HAS FILED ITS RETURN FOR THE IMPUGN ED ASSESSMENT YEAR CLAIMING THE RELIEF AVAILABLE UNDE R SECTION 11 OF INCOME-TAX ACT 1961. THIS IS BECAUSE THE ASSESSEE IS REGISTERED AS A CHARITABLE INSTITUTION. IN THE COURSE OF ASSE SSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE A SSESSEE HAD INVESTED CERTAIN AMOUNTS IN M/S TERN CREDITS & CHIT S PRIVATE LIMITED WHICH IS IN VIOLATION OF SECTION 13(1)(D). ACCORDINGLY SHE DISALLOWED THE RELIEF CLAIMED BY THE ASSESSEE UNDER SECTION 11. 2. IN FIRST APPEAL THE COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT THE SAME ISSUE WAS CONSIDERED BY ITAT C HENNAI BENCH IN ASSESSEE'S OWN CASE FOR EARLIER ASSESSMENT YEAR 2008-09 AND HELD THAT SUBSCRIBING TO CHIT FUNDS IS NOT AN INVES TMENT AND THEREFORE THE ASSESSEE IS NOT HIT BY THE RESTRICTI ON PUT IN BY SECTION 13(1)(D) OF INCOME-TAX ACT 1961. ACCORDINGLY THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE GROUNDS RAISED BY THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO GIVE THE ASSE SSEE THE RELIEF AVAILABLE TO IT UNDER SECTION 11 OF INCOME-TAX ACT 1961. IT IS AGAINST THE ABOVE THE REVENUE HAS COME IN APPEAL. 3 I.T.A. NO. 1135/MDS/13 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS T HAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN H OLDING THAT THE CHIT CONTRIBUTION SHOULD NOT BE TREATED AS AN I NVESTMENT AND THEREFORE THE ASSESSEE CANNOT BE HELD TO HAVE VIOL ATED THE PROVISIONS OF LAW STATED IN SECTION 13(1)(D) OF INC OME-TAX ACT 1961. 4. WE HEARD SHRI SHAJI P. JACOB THE LEARNED ADDL. COMMISSIONER OF INCOME TAX APPEARING FOR THE REVEN UE AND SHRI G. BASKAR THE LEARNED COUNSEL APPEARING FOR THE R ESPONDENT- ASSESSEE. 5. AS RIGHTLY POINTED OUT BY THE COMMISSIONER OF IN COME TAX (APPEALS) THE TRIBUNAL HAS CONSIDERED THIS ISSUE I N ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2008-09 IN I.T.A. NO. 1445 /MDS/2012 DATED 10.1.2013 AND HELD THAT SUBSCRIPTIONS TO THE CHIT FUNDS WERE NOT IN THE NATURE OF INVESTMENTS AND THEREFORE DEN IAL OF EXEMPTION UNDER SECTION 11 WAS NOT JUSTIFIED. THE CIT(APPEAL S) HAS RIGHTFULLY FOLLOWED THE SAID ORDER OF THE TRIBUNAL WHICH IS B INDING ON HIM. THE DECISION OF HONBLE HIGH COURT OF ORISSA IN RABINDR ANATH EDUCATIONAL TRUST V. UNION OF INDIA (191TAXMAN 379) RELIED ON BY THE REVENUE WAS IN FACT CONSIDERED BY THE TRIBUNAL IN ITS ORDER FOR ASSESSMENT YEAR 2008-09 AND HAS HELD THAT THE DECIS ION WAS NOT APPLICABLE TO THE ISSUE IN HAND. THE TRIBUNAL HAS RELIED ON THE 4 I.T.A. NO. 1135/MDS/13 JUDGMENT OF HONBLE KERALA HIGH COURT RENDERED IN T HE CASE OF CIT V. KOTTAYAM CO-OPERATIVE BANK LTD. (96 ITR 181) WH EREIN THE COURT HELD THAT THE DOMINANT MOTIVE WHICH PROMPTED PEOPLE TO JOIN CHIT FUND SCHEMES IS TO AVAIL THEMSELVES OF THE FACILITY OF BIDDING THE KURIS WHEN THEY ARE IN URGENT NEED OF FINANCE. THE COURT HELD THAT CHIT AMOUNT RECEIVED ON PRIZING COULD ONLY BE TREAT ED AS A LOAN WITH THE FACILITY OF REPAYING IT IN MONTHLY INSTALMENTS. THE TRIBUNAL ALSO RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. NACHIMUTHU INDUSTRIAL ASSOCIATION (138 ITR 5 85) TO COME TO THIS CONCLUSION. 6. IT IS THEREFORE VERY CLEAR THAT SUBSCRIBING TO A CHIT FUND IS NOT AN INVESTMENT. AS IT IS NOT AN INVESTMENT THE QUE STION OF APPLYING SECTION 13(1)(D) DOES NOT ARISE. THE CHIT FUND IS ONLY A MEANS OF RAISING FINANCE FOR THE ACTIVITY CARRIED ON BY AN A SSESSEE. THERE IS NO SUBSTANCE IN THE ARGUMENT THAT CHIT FUND SUBSCRI PTION IS AN INVESTMENT. 7. SUBSCRIPTION TO A CHIT FUND SCHEME IS A MODE OF RAISING FINANCE. IF AN ASSESSEE AFTER RAISING FINANCE BY BIDDING THE CHIT FUND INVESTED THE PRIZE AMOUNT IN A BANK DEPOSIT O R IN SIMILAR INSTITUTION OR IN SHARES IT IS A CASE OF INVESTMEN T. THERE ARE TWO SEGMENTS IN THIS CASE. THE ASSESSEE HAS RAISED FIN ANCE BY BIDDING 5 I.T.A. NO. 1135/MDS/13 THE CHIT FUND AND WINNING THE PRIZE. THIS IS THE F IRST SEGMENT. IN THE FIRST SEGMENT ASSESSEE RAISES FINANCE. IF THEREA FTER THE SAID FINANCE IS UTILIZED IN THE ACTIVITIES CARRIED ON BY THE ASSESSEE THERE IS NO QUESTION OF ANY INVESTMENT. IF ON THE OTHER HAND THE CHIT AMOUNT RECEIVED BY THE ASSESSEE IS INVESTED IN ANY PARTICULAR INSTITUTION THEN IT BECOMES A CASE OF INVESTMENT. THEREFORE THE SECOND SEGMENT DOES NOT IPSO FACTO CONTRIBUTE TO ACQUISITION OF INVESTMENT. IT DEPENDS UPON THE APPROPRIATION OF T HE FUND MADE BY THE ASSESSEE ACCORDING TO ITS BEST OF JUDGMENT. IF THE CHIT FINANCE IS USED FOR THE ACTIVITIES CARRIED ON BY IT SUCH CHIT FINANCE TAKES THE CHARACTER OF WORKING CAPITAL AND IT CANNOT BE CALLE D AN INVESTMENT. IF THE CHIT FUND SO RAISEN IS INVESTED ANYWHERE TH EN IT BECOMES A CASE OF INVESTMENT. SECTION 13(1)(D) WILL APPLY ON LY IN A LATER CASE. IN THE PRESENT CASE THE ASSESSEE HAS UTILIZED THE CHIT AMOUNT FOR ITS DAY-TO-DAY ACTIVITIES. THEREFORE IT IS IN THE NATU RE OF WORKING CAPITAL FINANCE. IT CANNOT BE TREATED AS AN INVESTMENT. 8. IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE F IND THAT THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IS IN ACCORDANCE WITH LAW. 9. IN THE RESULT APPEAL FILED BY THE REVENUE IS DI SMISSED. 6 I.T.A. NO. 1135/MDS/13 ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON TUESDAY THE 29 TH OF OCTOBER 2013 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (DR. O .K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI DATED THE 29 TH OCTOBER 2013. KRI. COPY TO: 1. APPELLANT 2. RESPONDENT 3. DIT (EXEMP TIONS) CHENNAI 4. CIT(A)-XII CHENNAI-34 5. DR 6. GF.