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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGH & SHRI MANJUNATHA.G
आदेश आदेश /O R D E R आदेश आदेश
PER MAHAVIR SINGH, VICE PRESIDENT: This appeal by the Revenue is arising out of the order of the Commissioner of Income Tax (Appeals)-1, Trichy in dated 07.02.2019. The assessment was framed by the Income Tax Officer, Exemptions Ward, Trichy for
2012-13 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 25.03.2015.
At the outset, it is noticed that this appeal by Revenue is barred by limitation by 04 days. The Revenue received the impugned appellate order on 05.03.2019 and appeal was to be filed on or before 04.05.2019 but actually it was filed on 08.05.2019 thereby there was a delay of 4 days. The Revenue has filed condonation petition stating the reason that the appeal papers were mixed up with other files and it was traced only after exhaustive search and thereafter immediately appeal was filed, thereby there is a delay of 4 days. When this was confronted to ld. counsel for the assessee, he has not objected for condonation of delay. Hence, we condone the delay and admit the appeal.
There are two interconnected issues in this appeal of Revenue is as regards to allowance of exemption u/s. 11 of the Act and also not referring the asset sold by the assessee in term of the transactions u/s. 50C(2) of the Act. For this, the Revenue has raised following grounds of appeal:
“2.1 The Ld cIT (A) erred, in law and on facts, that capital gain is to be computed as per Section 11(1A) of the Income Tax Act, 1961 without considering the fact that when the predominant activity is of trade or business', the provisions of Sec. 11 including Sec. 11(1A) are not applicable and the capital gain ought to be brought to tax in terms of Sec. 50C of the Income Tax Act, 1961.
2.2 The ld CIT(A) erred in holding that the Trust is eligible for exemption u/s. 11 of the Income Tax Act and the Trust is not hit by the amended provisions of Sec.2(15) of the Act under the object of "General Public Utility".
2.3 The Ld.CIT(A) erred in not upholding the denial of exemption u/s 11 of the Income Tax Act, 1961 on clear cut violations made by the assessee trust in sale of trust properties to specified persons u/s 13(3) of the Income Tax act, 1961 for inadequate consideration, thereby benefitting such specified persons as per the provisions of sec. 13(1)(c) of the Income Tax Act, 1961.
2.4 The Ld CIT(A) allowed the exemption u/s 11 of the I.T.Act, 1961 without realizing the fact that Sec. 13(1) clearly states that nothing contained in Sec.11 or 12 shall operate so as to exclude from total income if violations as mentioned is those clauses are attracted.
2.5 The ld. CIT (A) ought to have appreciated that when exemption u/s 11 is denied to the assessee, the corpus donations received has to be brought to tax as income, since the provisions of Section 11(1)(d) of the Act becomes inoperative.
2.6 The Ld.CIT(A) failed to place reliance on the decision of Delhi High Court in the case of Pt.Kanahya Lal Punj Charitable Trust vs.DIT(E) 297 ITR 66 wherein it is held that once the exemption under Section 11 and 12 of the Act is withdrawn all the receipts of the trust either by voluntary contribution or income derived by its property would be an income of the trust in a normal course and is chargeable to tax.
The brief facts of the case are that the assessee trust M/s.
Temple of Consciousness Thanjai Nagara Manavalakkali Mandram Trust is created by trust deed dated 08.02.2006. The assessee trust granted registration u/s. 12AA of the Act vide order of the CIT-II, Trichy in C.No.7162(E)110/06-07/CIT-II/TRY dated 30.07.2007.
The trust deed reveals the following objects: a. Simple Yoga Exercises b. Kundalini Yoga Meditation c. Personality development courses d. Self-realilsation courses e. Kayakalpha Training (2) To start and maintain meditation centers, Research centers, orphanages, old age homes, Homes for blind, deaf and dumb.
(3) To start educational institutions in Arts, Science, Medicine, Engineering and set up libraries, reading rooms. (4) To spread the ideals of Arulthanthai Yogiraj Vethathri Maharishi propagated by the World Community Service Centre, Chennai and materialise his vision for the welfare of the society.”
The A.O during the course of assessment proceedings has disallowed the claim of exemption u/s. 11 of the Act for the reasons that there is diversion of funds attracting the provisions of Section 13(1)(c)(iii) of the Act, and the claim of mutuality is not acceptable and also the denial of claim of corpus donation u/s. 11(1)(d) of the Act. The A.O also computed LTCG on the basis of value fixed by stamp valuation authority as per guideline value.
The Ld. counsel for the assessee drew our attention to para 10 of assessment order, wherein the matter was referred to DVO but without waiting for DVO’s report, valuation was completed and the A.O recorded in para 10 as under:
10. The subject property has already been referred to valuation cell to ascertain the market value as requested by the assessee's A.R relying on the decision of the Calcutta HCin the case of Sunil Kumar Agarwal v. CIT[Judgment dated 13.3.2014 in GA No.3686 of 2013] during the courseof hearing on 09.03.2015. The valuation report is awaited. However, in order to save the limitation the assessment is completed adopting the guideline value adopted in the sale deeds. And any difference between the market value fixed by the valuation cell and the guideline value adopted in the sale deeds will be suitably addressed as and when the valuation report is received for the limited purposes of computing capital gains and deemed benefit extended to members.
We have heard the rival contentions, and gone through the facts and circumstance of the case. We noted that the CIT(A)
without deliberating anything on the issues allowed the appeal. We noted from the AO’s order that he has not given any independent finding on issues and hence, we feel that the matter has to go back.
For this proposition, the Ld. counsel for the assessee as well as Ld. Sr. D.R agreed that the matter has to go back denovo assessment order as well as order of CIT(A) has to be set aside and the matter be remanded back to A.O for re-framing the assessment afresh.
After hearing both the sides and going through the facts and circumstances of the case, we set aside the order of CIT(A) and that of the A.O and remand the matter back to the file of the A.O in denovo. Hence, we direct the A.O to re-frame the assessment as per law.
In the result, the appeal filed by the Revenue is allowed for statistical purposes.
Order pronounced in the open court on 7th September, 2023 at Chennai.