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Income Tax Appellate Tribunal, BANGALORE BENCHES “ C ” BENCH: BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI CHANDRA POOJARIShri S. Krishnaswamy, C.A. Smt. R. Premi, CIT (D.R)
O R D E R
PER SHRI CHANDRA POOJARI, AM :
This appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-14, Bangalore dt.18.09.2019 for the Assessment Year 2013-14.
The assessee has raised the following grounds of appeal :
1. The learned ITO and CIT (Appeals) erred in not allowing the investment in the acquisition of the land for Rs.70,00,000 on the ground that the land in question is in the name of a Trustee Sri M. Rakesh.
2. The learned ITO and CIT (Appeals) ought to have appreciated that the land in question has been treated as an asset of the Trust and developed for the purpose of carrying on activities of the Trust’s educational institutions. The trustees have accepted this as Trust property. 3. The land was already meant for the Trust only and funds are drawn from the Trust.”
There was a delay of 6 days in filing before the Tribunal. The assessee filed a petition for condonation of delay and submitted that the delay was due to ill- health condition of assessee and prayed that the delay may be condoned and admit for adjudication. The ld. DR objected to the condonation of delay.
We have heard both the parties and perused the material on record. There is a delay of 6 days in filing the appeal before the Tribunal. We found there is a good and sufficient reasonable cause in filing the appeal belatedly and condone the delay and appeal is admitted for adjudication.
The facts of the case are that the assessee purchased vacant land for a consideration of Rs.70 lakhs and claimed as capital expenditure. The said land was purchased in the name of Trustee Shri M. Rakesh Muniraju who is a member and Secretary of the society. Though the said property was registered in the sale deed
Shri M. Rakesh Muniraju and nothing is mentioned in the sale deed supporting the ownership of the assessee-trust. It was found that the said land was purchased in the name of the trustee due to some legal problem but the funds have flown out of the trust accounts. The assessee claimed purchase of land as application of money by trust. This claim of the assessee was denied by the Assessing Officer. On appeal, the learned CIT (Appeals) confirmed the action of the Assessing Officer. Aggrieved by the assessee, the assessee is in appeal before us.
The learned Authorised Representative submitted that due to certain legal problem, the said land was purchased by the assessee trust in the name of Secretary for which Resolution has been passed by the assessee-trust and the said land was reflected in the assessee's Books of Accounts in the relevant period. There was also Resolution by the Trust to purchase the said property in the name of Shri M. Rakesh Muniraju and funds from the trust was used to purchase the said property. Being so, it should be considered as application of trust money and used for the purpose of carrying out trust education activities. On the other hand, the ld. DR submitted that the property was to be registered in the name of assessee-trust though the assessee stated that due to legal problem the said property was registered in the name of the Member of the Trust, it was not explained by supporting evidence. Further she submitted that no evidence was furnished
supporting that the trust funds have been utilized for purchase of property. Being so, it cannot be considered as application of money for the purchase of property, mere inclusion of asset in the books of account of assessee will not entitle it the legal right, title or authority over the property, whatsoever be the mutual understanding between them.
We have heard both the parties and perused the material on record. In this case, it is observed by the lower authorities that the property was registered in the name of Trustee Shri M. Rakesh Muniraju. However, the said property was shown in the Balance Sheet of assessee-trust. The contention of the assessee is that assessee's own fund has been used by the Trust for acquiring the said property, however registration was made in the name of Shri M. Rakesh Muniraju due to certain legal problem. The assessee has not placed any Minutes of the Trust to show that the property shall be registered in the name of Shri M. Rakesh Muniraju on behalf of the trust. There is no Resolution placed on record to show that the said Shri M. Rakesh Muniraju shall not be transferred the property without knowledge of the trust. Hence these evidences required to be produced by the assessee so as to examine by the lower authorities. It is also not explained before the lower authorities how this property has been used by the assessee trust. Further if the assessee trust used its own funds, then only it can be considered as application of money by the assessee trust. If the assessee used the borrowed funds Shri M. Rakesh Muniraju then it cannot be considered as application of money in assessee's hands. In other words, the repayment of borrowed funds only be considered as application of money and not on the acquisition of said property by borrowed fund. It is to be noted that usage of borrowed fund cannot be equated with the usage of income of the trust and same cannot be allowed as application of money. The repayment of borrowed fund would be treated as application of income. With these above observations, we remit the entire disputed issues to the file of Assessing Officer to examine whether there is a Resolution for acquiring the property in the name of member Shri M. Rakesh Muniraju by the Trust and whether any evidence to show that own fund has been used to acquire the same and whether there is a restriction of alienation of property by the trustee on Shri M. Rakesh Muniraju. With the above observations, the Assessing Officer has to re- examine the entire issue and decide the case as per law.
In the result, appeal of the assessee is allowed for statistical purposes. Pronounced in the open court on the date mentioned on the caption page. Sd/- Sd/- (N.V. VASUDEVAN) (CHANDRA POOJARI) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 28.01.2021. *Reddy GP