ITO (EXEMPTIONS), TRICHY vs. MAM SUBRAMANIAM CHETTIAR EDUCATIONAL SOCIETY, TRICHY

2. The ld CIT(A) erred in holding that the on money payments made over and above the registered value of the property is to be allowed as application of income without realizing the fact that non-payment of 2 - stamp duty on such on money payments amount to violation of Stamp Duty Act and such payments also cannot be considered as investments in terms of Section 11(5) of the Income Tax Act, 1961.

The Ld. Sr. Dr advanced arguments and submitted that the relief has been granted without properly appreciating / verifying the facts of the case. The Ld. AR, on the other hand, supported the findings rendered by Ld. CIT(A). Having heard rival submissions and after perusal of case records, the appeal is disposed-off as under.

During assessment proceedings, it transpired that the assessee trust purchased immoveable property admeasuring 87.12 acres in Neivasal Village, Thirumayam Taluk, Pudukkottai District. Though the assessee reflected payment of Rs.210.14 Lacs in the receipts and payments account, however, the sale deed was executed for Rs.50 Lacs with stamp duty payment of Rs.4.78 Lacs. For the balance payment of Rs.155.35 Lacs, the assessee could not furnish any documentary evidences. The assessee claimed that the land owners were paid a sum of Rs.150 Lacs through banking channels over and above the document value. In support, the assessee could only furnish its own bank statement and affidavit of the recipients. Therefore, Ld. AO held that the payment of Rs.150 Lacs could not be considered as an application of income since the assessee connived in evading payment of stamp duty and capital gain taxes which was opposed to public policy.

As a further consequence, Ld. AO proceeded to deny the exemption u/s 11 r.w.s. 13(1)(d)(i) for violation of Sec.11(5). Further, 3 - net cash available for investment was Rs.51.66 Lacs whereas the assessee made investment of Rs.210.14 Lacs which would mean that the money was drawn out of accumulated income of earlier years. The assessee claimed misc. expenses of Rs.108.59 Lacs which were held to be not incurred wholly and exclusively for earning the income. Lastly the depreciation of Rs.1.81 Lacs was also disallowed and total income was assessed at Rs.313.37 Lacs.

During appellate proceedings, the assessee made a submission that the payments were made for protecting the title of the land. Concurring with the same, Ld. CIT(A) held that the related payments made by cheque to identified persons was to be considered proper. Further, out of payment of Rs.108.59 Lacs, an amount of Rs.100 Lacs was given to another registered charitable Society and therefore, the same was to be allowed and the balance addition was to be sustained. Accordingly, the appeal was partly allowed against which the assessee is in further appeal before us.

Upon perusal of impugned order, it could be seen that before Ld. AO, the assessee could only produce Bank statement and affidavit in support of the plea that the additional amount of Rs.150 Lacs was paid to procure the land. However, during appellate proceedings, the assessee maintained that the payment was made to family members of sellers to enjoy peaceful possession of the property. The Ld. CIT(A), without rendering any concrete finding on the observations made by Ld. AO that the aforesaid payment was opposed to public policy, granted relief to the assessee. Therefore, as rightly pointed out by Ld. Sr. DR, the impugned order has to be set aside and it is a fit case for remand back to Ld. CIT(A) for denovo adjudication with a direction to 4 - the assessee to substantiate its case. The issue of application of sum of Rs.100 Lacs to another charitable trust is consequential in nature and the same may accordingly be re-adjudicated in the light of view taken by Ld. CIT(A) on main ground of the assessee.

In the result, the appeal stands allowed for statistical purposes. Order pronounced on 6th January, 2023 Sd/- Sd/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा01 /VICE PRESIDENT लेखा सद9 / ACCOUNTANT MEMBER चे5ई / Chennai; िदनांक / Dated : 06-01-2023 DS आदेश की Vितिलिप अ6ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु�/CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF