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Income Tax Appellate Tribunal, RANCHI BENCH, RANCHI
Before: Shri S. S. Godara, J.M. & Dr.A.L.Saini, A.M.)
IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI BENCH, RANCHI (Before Shri S. S. Godara, J.M. & Dr.A.L.Saini, A.M.)
ITA No. 144/Ran/16 : Asstt. Year : 2005-06
I.T.O (Exemption), Ward-JSR Vs Jyoti Punj Educational & Welfare Society PAN: AAATJ3766G (APPELLANT) (RESPONDENT) Appellant/department by : Shri P.K. Mondal, JCIT, ld. Sr.DR Respondent/assessee by : None appeared
Date of Hearing : 10-01-2019 Date of Pronouncement: 22 -02-2019 ORDER PER BENCH: The captioned appeal filed by the revenue, pertaining to assessment year 2005- 06, is directed against the order passed by the Commissioner of Income-tax (Appeals), Jamshedpur in Appeal No. 30/JSR/2013-14, dated 26-02-2016, which in turn arises out of assessment order dated 28-03-2013 passed by the Assessing Officer u/s. 147 of the Income-Tax Act, 1961 (in short, the Act). 2. At the time of hearing none appeared on behalf of assessee in spite of issuance of notice for hearing more than one occasions. The learned Departmental Representative ( ld.DR) was present for the appellant revenue. In the absence of any appearance of the assessee, the appeal is being dispose of ex parte qua the assessee after hearing the ld. DR for the revenue on merits in terms of Rule 24 of ITAT Rules, Page1 1963. 1 ITA No. 144//Ran/16 M/s. Jyoti Punj Eduational & W.F Society
The grievances raised by the revenue are as follows:- 1) Whether the ld. CIT(A) is right in allowing the assessee relief in respect of addition made on account of out of books investment in Land of Rs. 22,66,800/- and building fund of Rs. 78,41,370/- 2) The ld. CIT(A), Jamshedpur is not justified in deleting the addition of Rs. 17,64,867/- which the assessing officer disallowed on the ground of deposit made in undisclosed bank a/c. 3) The appellant craves leave to amend, alter or modify an or all grounds of appeal.
Ground no. 1 relates to allowance of relief of Rs. 22,66,800/- investment in land out of books and building fund of Rs. 78,41,370/- by the ld. CIT(A).
The brief facts qua the issue are that the assessee, Jyoti Punj Educational & Welfare Society is registered with IG, Registration Jharkhand, Ranchi vide Registration No. 220 of 2005-2006 dated 30.01.2006. The society’s old registration number was 740/95-96 registered by IG Registration, Bihar, Patna. The society is also registered u/s. 12AA of the I.T Act, 1961 vide order No. CIT/JSR/Tech/VIII- 44/02-03/6070-73 dated 31.03.2003 of the CIT, Jamshedpur.
It is a registered society engaged in the activities of imparting educations and running educational institutions vig. Central Public School, Adityapur and DAV Public School, Patel Nagar, Jamshedpur. The society maintains consolidated accounts or each constituent. The return of income has been accompanied with audited consolidated accounts. During the Financial Year 2004-05 the society has received total income of Rs.98,93,763/- including Tuition fees of Rs.96,52,145/-, misc. fee of Rs. 2,41,180/- and interest from Bank for Rs. 438/-. From the above income, the assessee society has made expenditure at Rs. 75,80,158/- out of which Page2 Rs. 22,71,161/- was spent on salary, Rs. 8,72,326/- towards Repair & Maintenance,
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Rs. 10,60,101/- towards Bus-up-keep expense, Rs. 5,27,610/- towards social welfare expenses, Rs. 3,84,360/- towards poor relief, Rs.2,52,594/- towards provident fund and Rs. 6,49,083/- towards depreciation were made. Ultimately the assessee claimed excess of income over expenditure of Rs. 23,13,604/-. The expenditure which have been incurred in connection with the running and maintenance of schools, establishment and administration have been examined an d are found to have been incurred in the pursuit of the general activities of the society, which are its main objects
The AR of the assesse was asked during the proceedings, vide, show cause letter dated 19.03.2013 as per para-2 to 2.3, but the AR of the assessee did not produce any specific reply in connection with investment in land at Aditya of Rs.22,66,800/- as well as investment made under the head School Building of Central Public School at Rs. 53,84,870/- before Sept 2004 but on the basis of impounded documents ID Marks CIT-37 Page No.40 containing balance sheet of Central Public School for the period 01.04.2008 to 31.03.2009, it reflected that the assessee had made investment in building material in building fund as labour charges for construction of building for Rs.35,0000/- and purchase of building materials of Rs. 17,99,047/- aggregating to Rs. 18,34,047/- out of fixed assets of Rs. 32,66,726/- for this school and further, as per impounded documents ID Marks CT- 37 page No. 46 also contains balance sheet of Central Public School for the period 01.04.2008 to 31.03.2009 where it has been shown that the assessee had made investment under building head as labour charges for construction of building at Rs.35,000/- and purchase building materials at Rs. 20,58,887/- aggregating to Rs.20,93,387/- out of total fixed assets shown at Rs. 35,77,105/-. However, as per Page3 impounded documents vide ID Marks CT-37 page No. 32 containing the balance 3 ITA No. 144//Ran/16 M/s. Jyoti Punj Eduational & W.F Society
sheet of Central Public School for the period 01.04.2004 to 31.03.2005, it has shown fixed assets to the tune of Rs.11,400/- under the head furniture and fixtures only.
Therefore, from the impounded books as mentioned above, it was clear that in both the years no investment of Rs. 22,66,800/- in land and investment in building fund for Rs.78,41,370/- (Rs.78,52,770/- - Rs. 11,400 for furniture 85 fixtures) are reflected. Thus, the contention of the AR that the investment of land is incorporated in building account is also not substantiated from the verification of the impounded books. The AR of the assesse furnished submission that though the possession certificate was handed over to the asssessee on 21.12.2004 by the JSHB, the informal possession was taken on 20.08.2004, the day when first payment was made to the JSHB. The contention of the AR of the assessee is not legally valid as well as no evidence furnished before the department that when the plan of the Central Public School was finalized. So, the contention of the assesse is completely baseless and is rejected.
Further, AO noted that it was also understood from the impounded documents vide page No. 36 and 40, that the assessee prepared balance sheet as per its choice. It is reflected from the balance sheet for the period 01.04.2008 to 31.03.2009 that the assessee maintains two balance sheets for the same financial year which shows Rs. 32,66,726/- under fixed assets as per Page No. 40 and as per page No.36 this amount stands at Rs. 35,77,105/- vide impounded documents ID marked as CT-37 of Chandra Awas Pvt. Ltd.
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Therefore, from the above facts and circumstances, it was noted by AO that the assessee has made investment of Rs. 22,66,800/- in land and investment of Rs.78,41,370/- in building fund are out of books and the same were disallowed.
Aggrieved by such action of the AO, the assessee carried the matter in appeal before the ld. CIT(A), who deleted the addition made by the AO, observing the followings: “ 4.3 I have gone through the order of the learned AO as well as the remand report and the written submission made by the appellant. The moot question that is to be decided relates to justification of AO’s observation for addition of Rs.22,66,000/- and Rs.78,41,370/-. So far addition in building of Rs.78,41,370/- is concerned, this has been duly reflected under the schedule of fixed asset as well as in the balance sheet of the assesse turst. However the purchase of land has been made through bank account which has not been included in the balance sheet. The only issue is whether the expenditure incurred in purchase of land will constitute application of income. In the case of CIT vs. Kannika Parmeshwari Dewasthanam & charity (1982) 133 ITR 779 (Madras) it has been held that application of amount can be for revenue or capital purpose. So long as the expenditure is incurred out of inome earned by the trust, even if such expenditure is for capital purpose, on objects of the trust, the income would be exempt. Based on above, the expenditure incurred for purchasing land which is capital asset, the expenditure incurred will be termed as application of income and will be eligible for deduction. The Delhi High Court in the case of Escorts Cardiac Disease Hospital Society vs. DIT (2012) 50 SOT 48 (Del) has held single view also. Based on above the addition made for investment in property to the tune of Rs. 22,66,000/- is hereby deleted. 10. Aggrieved by the order of the ld. CIT(Appeals), the revenue is in appeal before us. 11. Shri P.K. Mondal, JCIT, ld.Sr.DR has primarily reiterated his stand as taken by the AO. He relied on the order of the AO. He also submitted before us that the ld. Page5 CIT(A) has erred in allowing/deleting the impugned addition. 5 ITA No. 144//Ran/16 M/s. Jyoti Punj Eduational & W.F Society
We have heard the ld. DR and perused the material available on record. We note that so far addition in building of Rs.78,41,370/- is concerned, this has been duly reflected under the schedule of fixed asset as well as in the balance sheet of the assesse trust. However the purchase of land has been made through bank account which has not been included in the balance sheet. The only issue is whether the expenditure incurred in purchase of land will constitute application of income. We note that application of amount can be for revenue or capital purpose. For that, we rely on the judgment in the case of CIT vs. Kannika Parmeshwari Dewasthanam & charity (1982) 133 ITR 779 (Madras), wherein it was held that application of amount can be for revenue or capital purpose. So long as the expenditure is incurred out of income earned by the trust, even if such expenditure is for capital purpose, on objects of the trust, the income would be exempt. Based on above, the expenditure incurred for purchasing land which is capital asset, the expenditure incurred will be termed as application of income and will be eligible for deduction. Therefore, we do not find any infirmity in the impugned order of the ld. CIT(A). His order on this issue is hereby upheld. Ground no. 1 in respect of Rs. 22,66,000/- raised by the revenue is dismissed.
The second issue of ground no.1 relates to deletion of addition of Rs.78,41,370/-, which relates to addition in building for the reason of construction starting prior to handing over of the land to the assesse trust.
The Findings of ld. CIT(A) is given below:- “The AO in his remand report has stated that the possession of the said land is w.e.f 21.12.2014 is not correct. Perhaps the AO when written 21.12.2014 in place of 21.12.2004 which is the actual date on which possession was handed Page6 over to the assesse trust. But it is also a fact that the assessee has made payment to JSHB on 20.08.2004. Section 2(47) defines transfer in relation to 6 ITA No. 144//Ran/16 M/s. Jyoti Punj Eduational & W.F Society
capital asset includes sale, exchange, relinquishment of the asset or the extinguishment of any right therein or compulsory acquisition thereof under any law. The Hon’ble Supreme Court in the case of Sunil Sidharth Bhai vs. CIT (1985) 156 ITR 509 (SC) has held that transfer u/s. 2(47) is merely inclusive and not exhaustive other kinds of transfer. Section 2(47) (v) states that transfer includes giving possession of immovable property under part performance of a contract. Therefore, any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of transfer of property Act 1882 amounts to transfer from the A.Y 1988-89 onwards. Possession need not necessarily be sole and exclusive possession. So long as the transferee is, by virtue of the possession given enabled to exercise general control over the property and to make use of it for the intended purpose, the mere fact that the owner has also the right to enter the property to overseas the development work or to ensure performance of the term does not introduce any incompatibility-Jasvir Singh Sarkariya (2007) 164 Taxmann 108 (AAAR-New Delhi). Based on above decision and facts of the case, the construction made on or after 20.08.2004 is concerned as genuinely made by the asessee over the land. Hence, disallowance of Rs.78,41,370/- is hereby deleted “. 15. Aggrieved by the order of the ld. CIT(A), the revenue is in appeal before us. 16. Shri P.K. Mondal, JCIT, ld.Sr.DR has primarily reiterated his stand as taken by the AO. He relied on the order of the AO. He also submitted before us that the ld. CIT(A) has erred in deleting the impugned addition.
We have heard the ld. DR and perused the material available on record. We note that this issue is no longer res integra. Section 2(47) states that transfer/giving possession of immovable property under part performance of a contract, “therefore, any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of transfer of property Act 1882 amounts to transfer from the A.Y 1998- Page7 89 onwards. Possession need not necessarily be sole and exclusive possession. So 7 ITA No. 144//Ran/16 M/s. Jyoti Punj Eduational & W.F Society
long as the transferee is, by virtue of the possession given enabled to exercise general control over the property and to make use of it for the intended purpose. Therefore, the construction made on or after 20-08-2004 is considered as genuinely made by the assesse over the land. Therefore, the ld. CIT(A) has rightly deleted the disallowance of Rs.78,41,370/-. That being so, we decline to interfere in the order of the ld. CIT(A). His order on this issue is hereby upheld. This ground of Rs. 78,41,370/- of revenue’s appeal is dismissed.
Ground no. 2 relates to deletion of addition of Rs.17,64,867/- on account of deposit made in undisclosed bank account.
Brief facts qua the issue are that AO note that account number 302 maintained at Jamshedpur Urban Cooperative Bank Ltd, Sakchi, Jamshedpur was not shown in the balance sheet of assessee . The fact was come into light after issue of a letter u/s. 133(6) of the 1. T. Act, 1961 dated 07.12.2012, which was issued to Jamshedpur Urban Cooperative Bank Ltd. from which the statement of this account has been received. But on perusal of the assessee's books of accounts, the assessee has shown only two accounts as per its balance sheet i.e. A/c No. 208 and A/c No. 447 which are also maintained in Jamshedpur Urban Cooperative Bank Ltd., Sakchi, Jamshedpur. When asked about the left out account No. 302 from the books of accounts, the AR submitted in its show cause reply dated 01.03.2013 before the AO that the bank accounts are correctly reflected in the balance sheet. The AO noted that I was clear, that the assessee has no reply for this office query about the reflection of A/ c No. 302 in the books of accounts. On further query, the AR again stated vide his letter dated 22.03.2013 that the bank a/c No. 302 is old a/ c and all Page8 entries in banks are recorded in books of accounts. Again, it is clear that the AR of 8 ITA No. 144//Ran/16 M/s. Jyoti Punj Eduational & W.F Society
the assessee is not submitting the facts and the reply submitted by him does not relate to the factual position of the books. Therefore, the total deposits during the year made through this accounts i.e. Rs 18,79,380/- was added to the total income. 20. On appeal, the ld. CIT(A) deleted the addition observing the followings:- 5.3. I have gone through the order of the learned AO as well as the remand report and the written submission made by the appellant. The AO in his remand report has only asserted that addition has made correctly by the AO, discussing the entire fact. The assessee in his submission stated that all the deposits and withdrawal have been taken into account and balance of Rs. 1,14,513/- has been clubbed under loans, advances and deposits Rs. 2,57,540/- appearing in balance sheet. The auditor’s report has not specifically reported as such, I do not find any 'schedule' or 'note' of loan, advances and deposits where from it can be inferred that the amount of balance in bank account no. 302 is excluded under the head. As the other amount of withdrawal has been passed through the account, expenses incurred of Rs. 18,79,380- Rs. 1, 14,513 = Rs. 17,64,867/- is considered expenses allowable u/s 11 ( 1) of the IT Act and accordingly there . is deletion of Rs. 17,64,867/-, so far rest of the amount of Rs. 1,14,513/- which is allegedly stated to have been included under loan, advance and deposits, AO is directed to verify the correctness before allowing the same if any. Accordingly this ground of appeal is partly allowed “.
Aggrieved by the order of the ld. CIT(A), the revenue is in appeal before us.
Shri P.K. Mondal, JCIT, ld.Sr.DR has primarily reiterated his stand as taken by the AO. He relied on the order of the AO. He also submitted before us that the ld. CIT(A) has erred in deleting the impugned addition.
We have heard the ld. DR and perused the material available on record. We do not find any infirmity in the order passed by the ld. CIT(A). His order on this Page9 issue is hereby upheld and grounds of appeal raised by Revenue is dismissed 9 ITA No. 144//Ran/16 M/s. Jyoti Punj Eduational & W.F Society
In the result, the appeal filed by the revenue is dismissed. Order Pronounced in the Open Court on 22 -02-2019
Sd/- Sd/- (S. S. Godara) (Dr. A.L.Saini) Judicial Member Accountant Member Dated:22 -02-2019 *PRADIP (Sr.PS) Copy of the order forwarded to: 1. The Appellant/Department: Income Tax Officer (Exemption), Ward- Jamshedhpur. 2 The Respondent/Assessee: M/s. Jyoti Punj Educational& Welfare Society, Slag Road, Patel Nagar, Bhuiyadih, Agrico. Jamshedpur- 831009. 3. The CIT-, 4. The CIT(A)-, 5. DR, Ranchi Benches, Ranchi True Copy, By order, Senior P.S ITAT, Ranchi Benches
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