I.T.O(E)-II, Kolkata, Kolkata v. Smt. Ichhagouri Charitable Trust, Kolkata

ITA 203/KOL/2010 | 2003-2004
Pronouncement Date: 31-03-2010

Appeal Details

RSA Number 20323514 RSA 2010
Assessee PAN AABTS5916N
Bench Kolkata
Appeal Number ITA 203/KOL/2010
Duration Of Justice 1 month(s) 28 day(s)
Appellant I.T.O(E)-II, Kolkata, Kolkata
Respondent Smt. Ichhagouri Charitable Trust, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2010
Appeal Filed By Department
Bench Allotted B
Tribunal Order Date 31-03-2010
Assessment Year 2003-2004
Appeal Filed On 02-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : KOLKATA [BEFORE HONBLE SMT. DIVA SINGH JM & SHRI C.D.RAO AM] I.T. A. NOS. 203 & 204/KOL/2010 ASSESSMENT YEARS 2003-04 & 2004-05 I.T.O. (E)-11 -VS- SMT.ICHHAGOURI CHARITABLE T RUST KOLKATA KOLKATA PAN:AABTS 5916 N (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JYOTI KUMARI RESPONDENT BY : SHRI M.P.THARD & J.P.THARD O R D E R PER SMT. DIVA SINGH JM BOTH THESE APPEALS HAVE BEEN FILED BY THE REVENUE A GAINST THE SEPARATE ORDERS OF THE CIT(A)-XXXIII KOLKATA DATED 30.10.2009 PERT AINING TO A.YRS.2003-04 AND 2004-05 RESPECTIVELY. AS IDENTICAL GROUND HAS BEEN RAISED BY THE REVENUE IN BOTH THE YEARS AND THE SUBMISSIONS OF THE PARTIES BEFORE THE BENCH ARE IDENTICAL IN THE YEARS AS SUCH FOR THE SAKE OF CONVENIENCE BOTH THESE APPEALS ARE BEING DECIDED BY A COMMON ORDER. 2. THE GROUND RAISED IN ITA NO.203/KOL/2010 IS REPR ODUCED HEREUNDER FOR READY REFERENCE :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) ERRED IN DECIDING THE CASE ON THE GROUNDS WHICH WERE NOT PRESENTED AT THE ASSESSMENT STAGE BY THE ASSESSEE AND ALLOWING THE EXEMPTION U/S 11 OF THE I T ACT CONSIDERING THAT THERE WAS NO VIOLATION U/S 13(1)(C)(II) OF THE I.T.ACT. 3. IN THE CONTEXT OF THE DEPARTMENTAL GROUND THE LD . DR SMT. JYOTI KUMARI INVITING ATTENTION TO THE ASSESSMENT ORDER SUBMITTED THAT TH E FACTS TAKEN INTO CONSIDERATION BY THE CIT(A) ARE NOT FOUND DISCUSSED IN THE ASSESSMEN T ORDER. REFERRING TO THE IMPUGNED ORDER IT WAS SUBMITTED BY HER THAT THE CIT(A) HAS C ONSIDERED AND DECIDED THE ISSUE IGNORING THE FACT THAT THOSE FACTS WERE NOT PRESENT ED BY THE ASSESSEE AT THE ASSESSMENT 2 STAGE. IN THE CIRCUMSTANCES IT WAS HER PRAYER THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE AO WHO MAY DECIDED THE SAME AFTER DUE VERIFI CATION OF FACTS/ 4. THE LD. AR MR.THARD ON THE OTHER HAND SUBMITT ED THAT ALTHOUGH HE HAS NO OBJECTION IF THE ISSUE IS RESTORED TO THE FILE OF T HE AO HOWEVER IT WAS STRONGLY CONTENDED THAT ALL FACTS WERE BEFORE THE AO. IT WAS HIS SUBMISSION THAT IN THE FACTS OF THE PRESENT CASE THE AO HAS PASSED THE ASSESSMENT O RDER TAKING NOTE OF THE POSITION OF SMIFS CAPITAL MARKETS LTD. INSTEAD OF SMIFS SECU RITIES LTD. THE TWO CONCERNS WERE ENTIRELY DIFFERENT. IN THE FACTS OF THE CASE T HE AO HAS NOT ONLY REFERRED TO WRONG FACTS HE HAS ALSO TAKEN NOTE OF WRONG FIGURES. IT WAS HIS SUBMISSION THAT IN THE BALANCE SHEET THE LIST OF DIRECTORS ETC. WERE ALONG WITH AL L THE NECESSARY DETAILS AVAILABLE BEFORE THE AO AND IF WRONG FACTS HAVE BEEN NOTED AND ONCE THIS WAS POINTED OUT BEFORE THE CIT(A) AS WILL BE BORNE OUT FROM THE IMPUGNED ORDER AND THE COPY OF THE WRITTEN SUBMISSION FILED THE CIT(A) WAS FULLY JUSTIFIED IN TAKING NOTE OF THE CORRECT FACTS AND DECIDING THE ISSUE. IT WAS ALSO HIS SUBMISSION THAT EVEN TODAY IN THE DEPARTMENTAL ARGUMENTS THERE IS NO CASE BEING MADE OUT THAT THE FACTS TAKES NOTE OF BY THE CIT(A) ARE NOT CORRECT OR FOR THAT MATTER THAT THE DECISIO N IN HOLDING THAT SECTION 13(1)(C)(II) DOES NOT APPLY AS THE ONLY ARGUMENT IS THAT THESE F ACTS WERE NOT REPRESENTED AT THE ASSESSMENT STAGE. IT WAS HIS SUBMISSION THAT THE AR GUMENT OF THE DEPARTMENT IS NOT CORRECT. IT WAS ALSO HIS SUBMISSION THAT MAY BE THE CIT(A) COULD HAVE CALLED FORTH FOR A REMAND REPORT FROM THE AO BUT IF THAT HAS NOT BEE N DONE THEN FOR THIS LIMITED PURPOSE IT MAY BE RESTORED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. A PERUSAL OF THE SAME SHOWS THAT BEFORE THE CIT(A) IT WAS AGITATED BY THE ASSESSEE THAT INCORRECT FACTS HAVE BEEN TAKEN INTO CONSIDERATION BY THE AO. THESE FACTS ARE BORNE OUT FROM PARA 4.1. OF THE IMPUGNED ORDER WHEREIN TH E WRITTEN SUBMISSIONS HAVE BEEN REPRODUCED BY THE LD. CIT(A). IN THE CIRCUMSTANCES THE CIT(A) WAS REQUIRED AS PER LAW TO CONFRONT THE AO WITH THE INCORRECT FACTS. AF TER AFFORDING AN OPPORTUNITY TO THE AO TO ADDRESS THE FACTS BY WAY OF OBTAINING A REMAN D REPORT ETC. THE ISSUE SHOULD 3 HAVE BEEN DISPOSED. IT IS SEEN THAT THIS PROCEDURE WAS NOT FOLLOWED. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT IN PARA 4 THE CIT(A) SETS OUT THE CASE OF THE AO AND IN PARA 4.1 THE SUBMISSIONS OF THE ASSESSEE AND THEREA FTER IN PARA 4.2. GOES ON TO GIVE HIS FINDING. FOR READY REFERENCE WE REPRODUCE THE SAME HEREUNDER :- 4. GROUND NO.2 3 AND 4 RELATE TO ASSESSING OFFICE R APPLYING PROVISIONS OF SEC.13(1)(C)(II) READ WITH SEC.13(3) AND DENYING EX EMPTION ADMISSIBLE TO THE TRUST U/S 11 AND THEREBY DETERMINING TAXABLE INCOME OF THE TRUST AT RS.4 71 080/-. WHILE MAKING THE SAID ADDITION THE A SSESSING OFFICER HAS MENTIONED THAT RENT WAS RECEIVABLE FROM M/S. SMIFS CAPITAL MARKET LTD AMOUNTING TO RS.4 03 260/- OUT OF WHICH THE AMOUNT OF RS.3 83 191/- I.E. ALMOST 95% HAS BEEN KEPT OUTSTANDING. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE THAT AN AMOUNT OF R S.8.07 LAKH HAD BEEN RECEIVED FROM THE TENANT IN THE CURRENT YEAR AGAINS T OUTSTANDING ARREAR OF RS.7.87 LAKH AND CURRENT YEAR RENTAL OF RS.4.03 LAK H. 4.1. DURING THE COURSE OF APPEAL PROCEEDINGS IT WA S SUBMITTED BY THE A/R THAT FACTS MENTIONED BY THE ASSESSING OFFICER ARE N OT CORRECT. IT WAS SUBMITTED THAT THE TRUST HAD GIVEN ON RENT ITS PROPERTY AT VAIBHA V 4 LEE ROAD KOLKATA- 700020 TO SMIFS CAPITAL MARKETS LTD. A COMPANY IN WHICH SRI UTSAV PAREK A TRUSTEE WAS A DIRECTOR. THE AMOUNT DUE FORM THIS CO MPANY ON ACCOUNT OF RENT AND MAINTENANCE CHARGES AT THE CLOSE OF THE YEAR WA S RS.3 18 575/-. THE TOTAL AMOUNT APPEARING IN THE BALANCE SHEET AS DUE FOR RE NT AND MAINTENANCE CHARGES AS ON 31.03.2003 IS RS.4 03 260/-. THIS INC LUDES A SUM OF RS.64 616/- BROUGHT FORWARD FROM EARLIER YEARS. THE SAID SUM OF RS.64 616/- WAS NOT DUE FROM THE TENANT- M/S. SMIFS CAPITAL MARKET LTD. BU T WAS DUE FROM ANOTHER COMPANY IN WHICH NONE OF THE TRUSTEES WAS EITHER A DIRECTOR OR A SHAREHOLDER. THE SAID SUM OF RS.64 616/- DUE FROM SMIFS SECURIT IES LTD. IS BROUGHT FORWARD AS DUE FOR LAST SEVERAL YEAR AND REMAINS DU E EVEN TODAY ON ACCOUNT OF SOME DISPUTE. AS AGAINST THE SUM OF RS.3 18 575/- D UE FROM THE TENANT ON ACCOUNT OF RENT AND MAINTENANCE CHARGES THE APPELLA NT HAD A INTEREST FREE DEPOSIT FROM THE TENANT OF RS.3 02 542/50. THE INTE REST OF THE TRUST WAS THEREFORE NOT JEOPARDIZED IN ANY MANNER. THE AFORES AID SUM OF RS.3 18 575/- DUE FROM THE TENANT WAS ALSO REALIZED FULLY IN THE SUCCEEDING YEAR ITSELF. THE AMOUNT REMAINING OUTSTANDING ON ACCOUNT OF RENT AND MAINTENANCE CHARGES IS A NORMAL FEATURE IN RESPECT OF PAYMENT OF RENT BY TEN ANTS. THE PROVISIONS OF SEC.13(1)(C)(II) ARE NOT ATTRACTED ALSO FOR THE REA SON THAT THE AMOUNT DUE ON ACCOUNT OF RENT AND MAINTENANCE CHARGES FROM THE TE NANT WAS NOT AN INVESTMENT BY THE TRUST BUT WAS AN AMOUNT DUE ON ACCOUNT OF I NCOME RECEIVABLE BY THE TRUST WHICH WAS PARTLY RECEIVED IN THIS YEAR AND WA S FULLY RECEIVED IN THE 4 SUCCEEDING YEAR ITSELF. FURTHER AS STATED ABOVE TH E TRUST WAS HAVING INTEREST FREE DEPOSIT OF RS.3 02 542/50 ALSO FROM THE TENANT WHICH IT CONTINUED TO HOLD EVEN AFTER COMPLETE REALIZATION OF THE OUTSTANDING RENT. THE PROVISIONS OF SEC.13(1)(C)(II) HAVE THEREFORE NO APPLICATION IN T HE FACTS OF THE APPELLANTS CASE. WITHOUT PREJUDICE TO THE FACTS STATED ABOVE THE PR OVISIONS OF SEC.13(1)(C)(II) ARE ALSO NOT ATTRACTED FOR THE FUNDAMENTAL REASON T HAT THE TENANT SMIFS CAPITAL MARKETS LTD. DID NOT FALL IN THE CATEGORY OF PERSO NS DEFINED IN SECT.13(3) OF THE ACT BECAUSE THE SHAREHOLDING OF THE DIRECTOR SRI UT SAV PAREKYH AND HIS WIFE SMT. NILANGI PAREKH IN THE COMPANY -: SMIFS CAPITA L MARKETS LTD. WAS OF 149100 SHARES ONLY (93600 SHARES BY SRI UTSAV PAREK H AND 55500 SHARES BY SMT. NILANGI PAREKH WHICH WAS EVEN LESS THAN 3% OF THE TOTAL PAID UP SHARE CAPITAL OF THE COMPANY (5585000 SHARES). THEREFORE IN ANY CASE THE PROVISIONS OF SEC. 13(1)(C)(II) HAD NO APPLICATION IN THE APPE LLANTS CASE. 4.2. I HAVE GONE THROUGH THE FACTS OF THE CASE. RE NT REMAINING OUTSTANDING AT THE END OF THE YEAR IS A COMMON FEATURE WHEN PROPER TY IS GIVEN OUT ON RENT. IT IS NOT A CASE WHERE THE RENT HAS NOT BEEN REALIZED AT ALL OR ALLOWED TO REMAIN OUTSTANDING FOR LONG PERIOD OR ABANDONED IN FAVOUR OF ANY PERSON. FURTHER THE TOTAL CAPITAL OF M/S. SMIFS CAPITAL MARKET LTD. IS RS.5 58 50 000/- RESERVES AND RS.53 34 39 203/- AND CURRENT LIABILITY ARE RS.28 1 9 84 067/- AND THEREFORE THE OBSERVATION OF THE ASSESSING OFFICER THAT UNDUE BEN EFIT HAS BEEN ALLOWED TO THE COMPANY BY THE ASSESSEE TRUST BY ALLOWING IT TO USE ITS FUND (IN THE NATURE OF OUTSTANDING RENTALS OF RS.3 18 575/-) AS RUNNING CA PITAL IS UNACCEPTABLE. FURTHER THE TRUSTEE ALONG WITH WIFE HELD LESS THAN 3 PERCEN T OF THE TOTAL PAID UP SHARE CAPITAL OF THE TENANT COMPANY AND THEREFORE DID NOT HOLD SUBSTANTIAL INTEREST IN THE CONCERN ALLEGED TO HAVE BEEN ALLOWED UNDUE BENE FIT. THE TENANT AND THEREFORE DID FALL WITHIN THE PERSONS DEFINITE IN S EC.13(3). THEREFORE EVEN IF IT IS ASSUMED THAT THERE WAS ANY BENEFIT INTENDED WHETHER DIRECT OF INDIRECT SEC.13(1)(C)(II) DOES NOT COME INTO OPERATION. THER EFORE IN MY VIEW THE ACTION OF THE ASSESSING OFFICER IN DENYING EXEMPTION U/S 1 1 TO THE ASSESSEE IS NOT CORRECT. THE ASSESSING OFFICER IS DIRECTED TO ALLOW EXEMPTION U/S 11 TO THE ASSESSING OFFICER. THIS GROUND OF THE ASSESSEE SUCC EEDS. 5.1. WE HAVE TAKEN NOTE OF THE FACT THAT THE FINDIN GS OF THE CIT(A) HAVE NOT BEEN ASSAILED BY THE REVENUE AND ONLY A PROCEDURAL DEFEC T HAS BEEN AGITATED. THE DECISION ON FACTS SHOULD BE CORRECT BUT BEFORE THE CORRECTNE SS OF THE DECISION CAN BE COMMENTED UPON THE DECISION MAKING PROCESS AND THE PROCEDURES TO BE FOLLOWED SHOULD NOT BE TREATED LIGHTLY AND MUST NECESSARILY ADHERED TO. IN THE AFORE MENTIONED FACTS AND CIRCUMSTANCES WE RESTORE THE ISSUE BACK T O THE FILE OF THE CIT(A) WITH THE 5 DIRECTION TO OBTAIN A REMAND REPORT FROM THE AO AND SET OUT THE CORRECT FACTS. THE SAID REPORT SHALL BE CONFRONTED TO THE ASSESSEE AND A SPEAKING ORDER THEREAFTER SHALL BE PASSED AFTER GIVING THE ASSESSEE A REASONABLE OPPOR TUNITY OF BEING HEARD. 6. IN THE RESULT THE APPEAL OF THE DEPARTMENT IS AL LOWED FOR STATISTICAL PURPOSES. 7. IN ITA NO.204/KOL/2010 THE DEPARTMENT IS BEFORE THE TRIBUNAL ON IDENTICAL GROUND. THE SUBMISSION ON THE PART OF THE PARTIES B EFORE THE BENCH ARE IDENTICAL. 8. THE FACTS SET OUT IN PARA 4 OF THE IMPUGNED ORDE R ARE AS UNDER :- 4. GROUND NO.2 IS AGAINST ACTION OF THE ASSESSING OFFICER IN HOLDING THAT NON RECEIPT OF SUM OF RS.7 80 000/- DURING THE YEAR IN RESPECT OF EO.3 IS AGAINST THE ASSESSING OFFICER HOLDING THE APPELLANT WAS HIT BY THE PROVISION OF SEC.13(1) AS UNDUE FACILITY/ADVANTAGE WAS ALLOWED IN RESPECT OF USER OF THE PROPERTY OF THE TRUST TO THE PERSONS COVERED U/S 13(3). GROUND NO.4 IS WITH REGARD TO THE ASSESSING OFFICER HOLDING UNDUE BENEFITS WAS ALLOWE D TO PERSONS COVERED U/S 13(3) AS RENT RECEIVABLE REMAINED OUTSTANDING. THES E THREE GROUNDS ARE INTERLINKED AND TAKEN UP FOR ADJUDICATION TOGETHER FOR THE SAKE OF CONVENIENCE ALONG WITH GROUND NO.5 WHICH IS WITH REGARD TO DENY ING EXEMPTION U/S 11 BY HOLDING THAT BENEFIT HAS BEEN ALLOWED TO PERSONS CO VERED U/S 13(3). 4.1. ACCORDING TO THE ASSESSING OFFICER RENT IN RE SPECT OF THE TRUST REMAINING OUTSTANDING AT THE END OF THE YEAR AND SINCE THE TE NANT WAS A COMPANY COVERED U/S 13(3) THE AO WAS OF THE OPINION THAT UNDUE ADVA NTAGE HAD BEEN ALLOWED. IT IS ALSO MENTIONED BY THE ASSESSING OFFICER THAT DUR ING THE YEAR THE ASSESSEE TRUST UNDERTOOK MUTUAL EXCHANGE OF ITS PROPERTY AT 4 LEE ROAD KOLKATA WITH PROPERTY AT 9B WOOD STREET KOLKATA WITHOUT MAKIN G ANY VALUATION AND THE AMOUNT TO BE RECEIVED BY THE TRUST (RS.7 8 000/-) R EMAINED OUTSTANDING AT THE END OF THE YEAR. SINCE ACCORDING TO THE AO THIS EXC HANGE WAS CARRIED OUT WITH PERSONS COVERED U/S 13(3) HE WAS OF THE OPINION THA T UNDUE ADVANTAGE WAS ALLOWED AND HE CONCLUDED THAT THE ASSESSEE WAS CAUG HT WITHIN THE MISCHIEF OF SEC.13(1)(C)(II). HE THEREFORE HELD THAT THE ASSESS EE TRUST WAS NOT ENTITLED TO EXEMPTION U/S 11. 4.2. DURING THE COURSE OF APPELLATE PROCEEDINGS IT WAS SUBMITTED BY THE A/R THAT : GR.NO.3 THIS GROUND IS AGAINST THE A.O.S FINDING THAT THE TRUST WAS HIT BY THE PROVISIONS OF SEC.13(1) OF THE ACT BY HOLDING T HAT UNDUE FACILITY OR ADVANTAGE WAS ALLOWED IN RESPECT OF USER OF THE PRO PERTY OF THE TRUST TO PERSONS COVERED U/S 13(3) OF THE IT ACT. SUCH FINDING OF T HE AO IS WHOLLY ERRONEOUS AS 6 IT WAS BASED ON INCORRECT & WRONG APPRECIATION AND ASSUMPTION OF FACTS. THE OBSERVATION OF THE LD. AO IN THE ASSESSMENT ORDER A T PAGES 2 & 3 IN THIS RESPECT WHICH HAS LED TO INCORRECT FINDING ARE SET OUT HERE UNDER FOR A PROPER UNDERSTANDING OF THE FACTS. (1) IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A /R OF THE ASSESSEE TRUST FILED THE DETAILS ASKED FOR. ON GOING THROUGH THE DETAILS IT IS EVIDENT THAT THE TENANT COMPANY IS A COMPANY COVERE D U/S 13(3) WOULD NOT BE CONSIDERED FOR MAKING THE ASSESSMENT. (2) ON GOING THROUGH THE RECORDS IT HAS EVIDENTLY COMP REHENDED THAT THE TENANT COMPANY IS A COMPANY COVERED U/S 13(3) AND A CCORDINGLY THE ASSESSEE WAS ASKED TO EXPLAIN WHY SUCH UNDUE FACIL ITY OFFERED TO AN ENTITY COVERED U/S 13(3) WOULD NOT BE CONSIDERED AD VERSELY WHILE MAKING THE ASSESSMENT. FURTHER THE VALUATION OF THE PROPER TIES AT 9B WOOD STREET AND 4 LEE ROAD HAVE BEEN MADE EXCHANGED MUT UALLY BETWEEN THE TWO PARTIES AND NOT DOING THE VALUATION OF ANY OF T HE PROPERTIES AT 4 LEE ROAD AND 9B WOOD STREET BY ANY AUTHENTIC VALUER IS NOT JUSTIFIABLE. THE A/R OF THE ASSESSEE SUBMITTED THAT THE VALUATION OF BOTH THE PROPERTIES WAS MADE MUTUALLY BUT AS PER THE PREVALENT MARKET R ATE AT THAT TIME. THE A/R ALSO STATED THAT THE PROPERTY WAS ALSO EXCHANGE D IN THE INTEREST OF THE TRUST. BT SUCH PLEA OF THE A/R HAS GOT NO BASIS BECAUSE THE PRINCIPLE ARGUMENT THEREIN WAS THAT THE RENT EARNED FROM THE PROPERTY INCREASED DUE TO SUCH EXCHANGE. THE INCREASE IN RENT WAS VER Y NATURAL AND THE SAME WAS THE OUTCOME OF LETTING OUT THE PROPERTY PR EVIOUSLY TO THE COMPANY INTERESTED U/S 13(3) WITHOUT ADEQUATE CONSI DERATION. (3) MOREOVER THE DIFFERENCE MONEY ARRIVED AT BY SUCH M UTUAL UNDERSTANDING BETWEEN THE ASSESSEE TRUST AND THE COMPANY HAVING O NE OF THE TRUSTEES OF THE ASSESSEE SOCIETY AS ITS DIRECTOR TO THE EXTENT OF RS.7 80 000/- WAS ENTIRELY KEPT OUTSTANDING. SINCE THE BUSINESS OF TH E COMPANY IS RELATABLE TO TRANSACTIONS OF SHARES IN CAPITAL MARKET SUCH O UTSTANDING AMOUNT LAID AN IMPORTANT PART TO INCREASE THE RUNNING CAPITAL O F THE BUSINESS OF THE COMPANY. THEREFORE UNDOUBTEDLY THE COMPANY HAS BEE N DIRECTLY BENEFITED FROM SUCH ACT OF THE TRUST AND THE INCOME OF THE TRUST IS HIT BY SUB CLAUSE (II) OF THE CLAUSE (C) OF SUB-SECTION (1 ) OF SEC. 13. THE OBSERVATION IN THE FIRST PARAGRAPH QUOTED ABOVE STATING THE THE APPELLANT COMPANY IS A COMPANY COVERED U/S 13(3) IS FACTUALL Y WRONG AND INCORRECT. THE TENANT COMPANY IS M/S. SMIFS SECURITIES LIMITED WHI CH IS NOT A PERSON COVERED U/S 13(3). NONE OF THE TRUSTEES OF THIS TRUST ARE E ITHER SHAREHOLDERS OR DIRECTORS IN THE SAID COMPANY M/S. SMIFS SECURITIES LIMITED . THE OBSERVATIONS IN THE SAID PARAGRAPH ARE THEREFORE ERRONEOUS AND HAVE LED TO THE ERRONEOUS FINDING. THE OBSERVATION IN THE IIND AND IIIRD PARAGRAPHS QU OTED ABOVE RELATE TO THE SUM OF RS.7 80 000/- WHICH WAS RECEIVABLE FROM M/S. SMIFS CAPITAL MARKET LIMITED IN RESPECT OF EXCHANGE OF PROPERTY WHICH IS BEING TREATED AS ALLOWING 7 UNDUE BENEFIT TO A PERSON COVERED U/S 13(3) IS AGAI N ERRONEOUS AND MISCONCEIVED FOR THE FOLLOWING REASONS. :- (I) AS SUBMITTED IN CONNECTION WITH GR.NO.2 HEREINA BOVE M/S. SMIFS CAPITAL MARKET LIMITED IS NOT A PERSON COVERED U/S 13(3) OF THE ACT BECAUSE THE DIRECTOR SRI UTSAV PAREKH AND HIS WIFE SMT. NILANGI PAREKH TAKEN TOGETHER HELD LESS THAN REQUIRED 20% OF THE TOTAL SHARES OF THE S AID COMPANY. MOREOVER THE AMOUNT DUE FROM THEM WAS ALSO REALIZED LATER AS STA TED ABOVE. (II) THE OBSERVATION THAT THE VALUATION OF THE PRO PERTY FOR EXCHANGE BY MUTUAL NEGOTIATION BETWEEN THE TWO PARTIES AND NOT THROUGH A REGISTERED VALUER IS WHOLLY IRRELEVANT. THE VALUATION ON WHICH THE TRANS ACTIONS WERE ACCOMPLISHED AND THE VALUATION MADE BY THE DEPARTMENTAL VALUATIO N OFFICER ARE AS UNDER :- VALUE AS PER D.V.O . VALUE AGREED BY MUTUAL NEGOTIATION 4 LEE ROAD KOLKATA 1 37 87 000/- 1 29 45 000/- 9B WOOD STREET KOLKATA 1 29 70 000/- 1 21 65 000 /- THUS EVEN AFTER MAKING A REFERENCE IT HAS BEEN FO UND THAT THE VALUATION OF THE PROPERTY GIVEN IN EXCHANGE (4 LEE ROAD KOLK ATA) AS MADE BY THE DVO WAS ONLY ABOUT 6.5 % HIGHER THAN THAT AGREED BY MUT UAL NEGOTIATION WHICH IS NEGLIGIBLE. SIMILARLY THE VALUATION OF THE PROPERTY RECEIVED BY THE APPELLANT IN EXCHANGE (9B WOOD STREET KOLKATA) IS ALSO ABOUT 6. 5% HIGHER THAN THAT AGREED BETWEEN THE TWO PARTIES AND THEREFORE TWO DIFFERENC ES NULLIFY EACH OTHER AND DO NOT HAVE ANY MATERIAL EFFECT WHATSOEVER ON THE ACTU AL TRANSACTION. FURTHER VALUATION DETERMINES ONLY THE APPROX VALUATION AND THE ACTUAL TRANSACTION CAN NEVER BE IDENTICAL AS PER VALUATION BY THE VALUATIO N OFFICER. THE FACTS SHOW THAT THE PRICE FIXED FOR EXCHANGE OF THE TWO PROPERTIES WAS ABSOLUTE FAIR AND REASONABLE AND THE AO WAS NOT CORRECT IN HOLDING TH AT FOR MAKING THE EXCHANGE THE VALUATION BY A REGISTERED VALUER WAS NECESSARY. FURTHER THE EXCHANGE HAS OTHERWISE ALSO BEEN BENEFICIAL IN THE INTEREST OF T HE TRUST BECAUSE IN ADDITION TO RECEIVING THE EXTRA AMOUNT OF RS.7 80 000/- INCOME FROM RENT ALSO INCREASED BECAUSE OF THE EXCHANGE. GROUND NO.4 THIS GROUND IS AGAINST THE FINDING TH AT THE RENT OUTSTANDING IN RESPECT OF PROPERTIES LET OUT RS.85 106/- WAS OUTST ANDING FROM THE TENANT COMPANY IN WHICH THE TRUSTEES WERE DIRECTORS AND SU CH ALLOWANCE AMOUNTED TO ALLOWING UNDUE FACILITY AND ADVANTAGE IN RESPECT OF THE USER OF THE PROPERTY OF THE TRUST TO PERSONS COVERS U/S 13(3) OF THE ACT. T HE SAID FINDING IS AGAIN MISTAKEN AND BASED ON WRONG ASSUMPTION OF FACTS. TH E SUM OF RS.85 106/- WAS OUTSTANDING FROM THE TENANT M/S. SMIFS SECURITIES L IMITED WHICH IS NOT A PERSON COVERED U/S 13(3) OF THE ACT AND THEREFORE THE FIND ING OF THE AO IS BASICALLY ERRONEOUS AND MISCONCEIVED. AS SUBMITTED IN RESPECT OF GROUND NO.3 ABOVE IS BASICALLY ERRONEOUS. GROUND NO.5 THIS GROUND IS AGAINST DENYING EXEMPT ION U/S 11 OF THE ACT IN RESPECT OF THE INCOME OF THE TRUST. THE AO HAS DENI ED EXEMPTION TO THE INCOME OF THE TRUST BY HOLDING THAT THE INCOME AND PROPERT Y OF THE TRUST WAS USED OR 8 APPLIED FOR THE BENEFIT OF A PERSON REFERRED TO IN SEC. 13(3) OF THE ACT. AS EXPLAINED ABOVE NO PART OF THE INCOME OR PROPERTY O F THE TRUST WAS USED OR APPLIED FOR THE BENEFIT OF ANY PERSON REFERRED IN S EC. 13(3) OF THE ACT. IN THE CIRCUMSTANCES THE APPELLANT-TRUST IS NOT HIT BY THE MISCHIEF OF SEC. 13(1)(C)(II) OF THE ACT AND THE INCOME OF THE TRUST IS ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT. THE APPELLANT REITERATES THAT THERE WAS NO VIOLATIO N OF THE PROVISIONS OF SEC. 13(1)(C)(II) BY THE APPELLANT-TRUST AS ALLEGED BY T HE AO. 4.3. I HAVE GONE THROUGH THE OBSERVATIONS OF THE AS SESSING OFFICER AND SUBMISSION OF THE ASSESSEE. THE ASSESSING OFFICER H AS HELD THAT ADVANTAGE WAS ALLOWED TO PERSONS COVERED U/S 13(3) BECAUSE I) AMOUNT OF RENT RECEIVABLE REMAINED OUTSTANDING II) AMOUNT RECEIVABLE ON ACCOUNT OF EXCHANGE OF PRO PERTY WAS TO BE RECEIVED BY THE ASSESSEE. III) THESE AMOUNT WERE RECEIVABLE FROM PERSONS COVE RED U/S 13(3). IT HAS BEEN SHOWN BY THE ASSESSEE THAT NEITHER THE TENANT NOR THE PERSONS FROM WHOM AMOUNT RECEIVABLE ON EXCHANGE OF PROPERTY WERE COVERED U/S 13(3). THE TRUSTEE DID NOT HAVE ANY SHARES IN AND WERE NOT DIR ECTOR OF THE TENANT COMPANY. M/S. SMIFS SECURITY (P) LTD. THE AMOUNT RECEIVABLE ON EXCHANGE OF PROPERTY WAS FROM M/S. SMIFS CAPITAL MARKET (P) LTD. AND THE TRUSTEE ALONG WITH HIS WIFE HELD ONLY 3 PER CENT OF THE SHARES WHICH WAS LESS THAN THE REQUIRED AMOUNT OF 20%. IT IS ALSO SEE THAT THE EXCHANGE OF PROPERTY AHS NOT RESULTED INTO ANY ADVANTAGE TO THE OTHER PARTY AS THE TRUSTEE HAS RECEIVED THE AMOUNT OF RS.7 80 000/- IN ADDITION TO THE EXCHANGE OF PROPER TY AND THERE HAS ALSO BEEN AN INCREASE IN THE RENTAL. THE OBJECTION OF THE ASSESS ING OFFICER THAT VALUATIONS WERE NOT DONE IS NOT MATERIAL AS LONG AS VALUATION DONE BY THE PARTIES TO THE TRANSACTION IS AT MARKET VALUE. IT IS SEEN THAT THE DIFFERENCE BETWEEN THE MUTUALLY AGREED VALUE AND THE VALUATION OF THE DVO IS ONLY 6.5% AND THIS IS IN RESPECT OF BOTH THE PROPERTIES AND THEREFORE THE AM OUNT RECEIVABLE REMAINS MORE OR LESS THE SAME EVEN IF VALUE AS DETERMINED BY THE DVO IS CONSIDERED. THEREFORE IN MY OPINION NO ADVANTAGE HAS BEEN ALLOW ED TO ANY PERSONS AND IN ANY CASE NOT TO PERSON COVERED U/S 13(3) AND THEREF ORE PROVISION OF SEC.13(1)(C)(II) ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESSEE IS THEREFORE HELD TO BE ELIGIBLE FOR EXEMPTION U/S 11. THE ASSESSING OFFICER IS DIRECTED TO ALLOW EXEMPTION U/S 11 TO THE ASSESSEE. THIS GROUND OF THE ASSESSEE ALSO SUCCEEDS. 9. HEREIN ALSO THERE IS A CONTROVERSY IN THE FACTS AS SET OUT IN THE ASSESSMENT ORDER AND THE IMPUGNED ORDER. ACCORDINGLY IN LINE WITH TH E CONCLUSION ARRIVED AT IN THE EARLIER ORDER THE SAID ISSUE IS ALSO RESTORED BACK TO THE FILE OF THE CIT(A) WITH THE 9 DIRECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WI TH LAW AFTER OBTAINING A REMAND REPORT FROM THE AO AND CONFRONTING THE SAME TO THE ASSESSEE. 10. IN THE RESULT ITA NO.204/KOL./2010 IS ALLOWED F OR STATISTICAL PURPOSES. 11. IN THE RESULT ITA NOS. 203 & 204/KOL/2010 ARE A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 31.03.2010. SD/- SD/- (C.D.RAO) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED : 31.03.2010. COPY OF THE ORDER IS FORWARDED TO :- 1) SMT. ICHHAGOURI CHARITABLE TRUST 2/3 SARAT BOSE R OAD KOLKATA-700020. 2) I.T.I.(E)-II KOLKATA 3) CIT (A)-XXXIII KOLKATA (4) CIT - KOL KATA. 5) D. R. I.T.A.T. KOLKATA. (TRUE COPY) BY ORDER ASSISTANT REGISTRAR (RG) I.T.A.T. KOLKATA.