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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI B. R. BASKARAN
Date of hearing : 17.11.2021 Date of Pronouncement : 22.11.2021 O R D E R
Per N.V. Vasudevan, Vice President
This is an appeal by the assessee against the order dated 29.12.2016 of CIT(A)-14, relating to Assessment Year 2010-11.
The assessee is a charitable trust. In the assessment proceedings under section 143(3) of the Income Tax Act, 1961 (hereinafter called ‘the Act’), for Assessment Year 2010-11, the AO noticed that the assessee had claimed Rs.1,44,00,000/- as advance paid for purchase of land and the same was claimed as application of income for charitable purpose and exemption under section 11 of the Act was claimed on the same by the assessee. Since the assessee did not file details of the advance payment to substantiate the claim, the claim of the assessee was not allowed by the AO treating it as not application of income.
Page 2 of 6 3. Before the CIT(A), the assessee submitted before CIT(A) that there was another trust by name Dhyanapeeta Charitable Trust which entered into agreement dated 31.03.2009 for purchase of property in Mysore with C.R.Hanumanth and C.R.Jairam. The assessee had contributed amounts for the same with an understanding that the assessee would join as a purchaser when the land is finally purchased under sale deed. The Assessee and Dhyanapeeta Charitable Trust would share area of land in proportion to the funds that they contribute. In this regard the Assessee paid a sum of Rs.84,00,000 to C.R.Hanumanth by Cheque on 6.11.2009 and a sum of Rs.60,00,000 to C.R.Jairam through RTGS dated 23.12.2009. According to the assessee, the aforesaid agreement to purchase property at Mysore was cancelled as there were certain problems with the land in Mysore and therefore the attempt to purchase land at Mysore was given up. However it was desired that lands would be purchased in Bidadi village from the very same persons C.R.Hanumanth and C.R.Jairam.
The assessee filed copies of 8 sale deeds in respect of different properties. 5 sale deeds were in the name of C.R.Jairam and 3 sale deeds were in the name of C. R. Hanumanth. The total extent of land covered by these sale deeds was 15 Acres and 14 Guntas. Two Agreements for sale dated 6.8.2010 were entered into between Dhynapeeta Charitable Trust and C.R.Hanumanth and C.R.Jairam respectively, agreeing to purchase different extent of land owned by the aforesaid two individuals. These Agreements were registered. The consideration payable to C.R.Hanumanth was Rs.1.42 Crores and that payable to C.R.Jairam was a sum of Rs.1.70 Crores. Dhanapeeta Charitable Trust also holds a registered power of attorney from the two individuals for alienation of the respective properties owned by the aforesaid two individuals. It was further contended that even while entering into Agreement for sale dated 6.8.2010 it was felt that the agreements should
Page 3 of 6 continue to be in the name of Dhyanapeeta Charitable Trust, though the understanding was that the Assessee and Dhyanapeeta Charitable Trust would share of the extent of land that was subject matter of agreement of sale in proportion to the funds contributed by them. It was further stated before CIT(A) that the ultimate sale deed is yet to be registered as there was difficulties in obtaining permission for sale under Section 109 of the Karnataka Land Reforms Act.
The assessee filed an affidavit dated 29.01.2014 of one Nithyananda Brahma Swaroopananda, a trustee of Dhyanapeeta Charitable Trust affirming facts as stated in paragraph 3 and 4 above. In the affidavit it has also been stated that there are letters confirming the above arrangement between the Assessee and Dhynapeeta Charitable Trust to the effect that Dhynapeeta Charitable Trust would register the land in the name of the Assessee in the proportion of contribution of the Assessee towards cost of acquiring the land of an extent of 15 Acres and 14 Guntus. The Assessee thus claimed that the funds in question were to be regarded as advance paid for acquisition of properties for the purpose of trust and therefore should be regarded as application of income.
The CIT(A), on examination of the affidavit, firstly observed that in the last page of the affidavit, the person identifying the deponent is not given. This is not relevant in our opinion. The affidavit has been attested by a notary and signed by the trustee of Dhynapeeta Charitable Trust, Shri.Nithya Brahamaswarupananda. The CIT(A) rejected the plea of the Assessee by holding that the payment of Rs.84 lacs and Rs.60 lacs respectively to C.R.Hanumanth and C.R.Jairam is not reflected in the Agreement for sale dated 6.8.2010 between Dhynapeeta Charitable Trust
Page 4 of 6 and C.R.Hanumanth and C.R.Jairam. In both the registered Agreement of sale dated 6.8.2010, it is mentioned that the entire consideration amount (which had earlier been advanced through the agreements dt. 31.08.2009, later cancelled) has been received only from the purchaser i.e. Dhayanapeeta Charitable Trust. He therefore held that the Assessee was unable to establish that its payment of Rs.I.44 crore to Sri C.R. Hanumanth and CR. Jairam was for acquisition of a capital asset for itself as claimed. He also observed that the agreement for sale of land was entered into by C.R.Hanumanth and C.R.Jairam with Dhyanapeeta Charitable Trust and not with the Assessee and that the power of attorney executed by these two land owners on 06.08.2010 was also in favour of Dhyanapeeta Charitable Trust and not the Assessee. According to the CIT(A), the fact that there were common trustee members between the two organizations is not evidence enough of the intent of the Assessee's transaction or an assurance that the land in question would be finally registered in its name even when the sale agreement did not include its name as intended purchaser and its claimed contribution towards the purchase consideration did not find any mention in the sale agreement. The CIT(A) also held that the payments by C.R. Hanumanth and C.R.Jairam to the agriculturist land sellers reflected in the documents produced also cannot be correlated with the amount advanced by the Assessee. In this regard he cited instances where in 3 sale deeds through which C.R. Hanumanth has purchased lands from multiple sellers weree dt. 03.09.2009, 10.09.2009 and 03.02.2010 and the advance paid by the Assessee was after the first two sale deeds had been registered. He also found that in the third sale deed of 03.02.2010 the sale consideration was of only Rs.65,45,000 which has been paid by C.R. Hanumanth through a demand draft dt. 01.02.2010. The CIT(A) therefore held that from the sequence of dates the Assessee’s payment and the claimed purpose cannot be directly linked. Similar discrepancies were also cited by the CIT(A) from Page 5 of 6 the 5 sale deeds through which C.R. Jairam purchased agricultural land from multiple sellers. Of these, 4 sale deeds are dt 03.09.2009 and 1 sale deed dt. 04.02.2010. The Assessee's RTGS payment has been made on 23.12.2009 i.e. after the first 4 sales were concluded. The CIT(A)’s final conclusion on the issue was as follows:
“10. In conclusion, therefore, it appears from the available evidences discussed above that the appellants claimed advances are not for purposes related to land acquisition or any other charitable purpose and the affidavit Dhyanapeeta Charitable Trust is rejected as an imperfect and inadequate evidence to support the appellant's claims. I, therefore. find no reason to disagree with the AO's conclusions.”
The CIT(A) accordingly dismissed the appeal of the assessee.
Before the Tribunal, learned AR reiterated plea put forth before CIT(A) and submitted that the Assessee has made out a case of application of income for charitable purpose. Alternatively, the learned Counsel for the assessee submitted that though there are certain deficiencies point out by the CIT(A) in the impugned order that would not be sufficient to disbelieve the plea of the assessee and that the issue should be examined afresh by examining the parties concerned. The learned DR relied on the order of the CIT(A).
We have considered the rival submissions. In our view that fact that the Agreements of sale dated 6.8.2010 does not mention the fact that part of the consideration is paid by the Assessee and that it does not contain the name of the Assessee as purchaser is of no consequence. So also the existence of a correlation between the amount paid by the Assessee to the Vendors and the payment by the Vendors to the persons from whom the Vendors purchased the property, is not relevant. There is no requirement for agreement for sale to be only in writing. If it is in writing, there is a Page 6 of 6 requirement that the same should be registered and not otherwise. We are of the view that it would be just and proper to remand the issue to the AO for fresh consideration to examine the parties with a view to find out the existence of an understanding between the Assessee and Dhynapeetam Charitable Trust as pleaded by the Assessee and Dhynapeetam Charitable Trust in the affidavit of the Trustee. The Assessee can also explain the deficiencies pointed out by the CIT(A) in the impugned order. With these observations, we set aside the order of the CIT(A) and remand the issue to the AO for fresh consideration on the lines indicated above.
In the result, appeal by the assessee is treated as allowed for statistical purpose.