The Commissioner Of Income Tax vs Sri Visveswaraya Educational Trust on 24 June, 2009

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Karnataka High Court

The Commissioner Of Income Tax vs Sri Visveswaraya Educational Trust on 24 June, 2009

This Income Tax Appeal istdfiledtt 260A of the Income Tax Act,' _1'9._61 arising out ~d_f«--vsmer dated 31.7.2003 passed in flit».,Ne.769;*Ba'ng/2002 for the assessment year 1997-98 _,'pray.ing t'o-..all,ei~ the appeal and set aside th_£é"'~3rdu3rS_ paseedby the Income Tax - Appellate Tr%bua1_a'l-, "s._Vf':B:§angsalp,re,, in ITA N0.769/Bang/200,2 dated,,'_31-V-?-.2603"cg).r:'ﬁn11ing the order of the Appellate :,Com::nissi~d'aer' and confirm the order passeclby the, Deputy C_ommi'ssi'oner of Income Tax, Trust Circle;-.3("3;}_, ,Baj;ngal_d:_-e"and etc. hearing this clay, GOPALAa,_GQlWDAw3:;-,__del'iv,emcl made the follow§ng:--

1' :«ap_;:3'e.a_l is by the appellant: questioning the order dated 31-7-2003 passed by the Ihco§ne.'Tax Appellate Tribunal, Bangalore, in ITA ' "v~§fl'eA,V76'§})/Ellang/2002 for the assessment year 1997-98, T' .,.ﬂbyv"§raming the folldwing substantial questldns cf law:

\-/ "'12. Whether the Tribunal was correct in holding that the assesses: was entitled to exemption under Section 10(22) of Act ? *

13. Whether the Tribunals in holding that exemption ii;frider*~Sert. _' 1?

1o(22) of the ActV'i'(:e_nnolE=b"e denies-on ; the basis of the pre.»_iisionsV"' 'of: Section 13(25) of th6';::*4£?t if

14.' |.i__1(hethe'r* Qras correct in

-that the misuse of funds was amen :1'in._signiﬁcant and there was exaggeration 'by the Assessing Oﬁicer in that' the payments had been made to

--.__'fa'_rnii'y_ members as there were only minor 1 ~1irreg;£iIarities in accounts and that the ieihuneration and electricity bill being paid " was justified by ignoring the cogent evidence examined by the Assessing Ofﬁeer which clearly disclose that the Chairman, his wife and sons were running the institution as a M -4- family concern not for the sole education but also for profit. " 1'

2. The learned counsel apgpelai-i'ng~:_.:

appellant Mrseshachala, .co.r_3tentisVrthat , ,l"4l"i'iljl;s«ti*.:~.iV _ committed an erroif in nloieiing that the rumuneration paid Vto..V:"the--V: or the managing trtsstee' af::t'h"e- 'electricity bills towards be termed as ground of attack to the impugned be that the Tribunal has conjmfiittee a"n,erro-rs holding that misutilisation of fuaélsi../is very i'hs'i'g'riiﬁcant fraction of the total receipts 'tee:-ft' and that the Assessing Officer has exaggeravteo the payments made to the family ..mer1nioers of the Chairman to soreehow deny Q "'..exe'mption on one pretext er the other and further has Q ' 'lfaiiecl ta report: a ﬁnding in respect of advance amount \\~x/ .. 5 ..

of Rs.S,00,000/--- paid by the Chairman of the Trust out of the funds of the Trust to purchase the preperty in his name. Therefore, the learned requested to answer question »AA»Vl\.1_os.I.494'''V''4i'neteed'_:get.' 14 V' question Nos.I2 8: 13 in favouriof further contended by the '--.5ifr§t)unAéil v._ha1s'j'vrei;:orded a l' ' erroneous finding stating"'"'th.etufexerription; under Section 10(2) of the emcee cannot be denied on th1e"i§_a;lsis of :provi'ei:on"-oféection 13(2B)of the Act.' is'c;onten'Ged that the Tribunal has failed to.a:p.preciVate~ that the Managing Trustee and his e{'nd.'.sonsVi'a}ere running the Institution as 'V""'tneinr:'personel business in order to make proﬁt to VAi*thernseives therefore the assessee was not entitlecij the exemption claimed under Section ' .'.,.'_:1A.0.{22)'*of' the Act. Therefore, he requested to answer the eferesaid question in favour of the Revenue. .... 3 _ Supreme Court has held that whenever a valid Trust is created, the properties concerned vest in the and income accruing from those propert.iefs"'is;jt_he._._f', income of the Trust and not 1;he,__propertie's.iotithe-V:

beneficiaries.

4. with regard vto..thep.sa*éti"t_;ei5oye contentions we have carefully examinaeo"thef"sart§eA. answer the aforesaid sut;staijt~iai questiensaren, in favour of appeiiarittbtttithieh rieajsoriis:

1)V"rWe. ha\fe:..":;a1ref_§Jit':yieﬁtamined the assessment order' passetf theiéssessing Officer. He has passed '' V'"t.h'e"'~--1éssess:*nent 'oti'er on the basés pf the survey covneiopctedipp on 9-3-1998. The Assessing Oﬁicer _ atA'thetv___v'ti:9i?ae has noticed that certain important VVLp'(:io<:u.mients were impounded and statements on oath of_hSri: Rsadasivan, Chairman~cum---Managing Trustee T was recorded. Thereafter, as per the procedure

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contempiated under Section 143(1)& (2) of notices were issued to the assessees various details from them. The survey' on the basis of the authorisationeﬁbtelinedhelm' Commissioner of Income--Tex';vr:"The has verified the declarecl,ineoﬁi3é.j'g_tVV"'the rm: filed on 31-10»-1997 in which stated to be Rs.4,61,73:_$;";*:%;s:;nci_ithe_ regarding the statement; 'baiance(cash and bank), of. Income over Expenditure and bank balance are extr;-.u5;ted.. The details regarding the same is "._al;s;o».Vciearly«fnentioned and excess of income over ex;§en'as:u}e, iéevoeipts taken directly to the interest is vi=.'_444'V._'also it mentioned by showing the corpus donation

5.'c1iirV:el<"';'i;:_ly to the balance sheet without excluding the seime from the Income & Expenditure Account. » Thereafter misappropriations of the Trust: Fund and \\M

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unexplained withdrawals in detail at Item No.)(_I. clearly mentioned. The said payments we made to the Chairman and Mana_g.ing ,the= "' V Legal Advisor of the Trust and the purchase dental equipmeni§e_v:VL:'er_id Tteiearcigjjeiettrieity charges of Chairmanfs further, the undisputed fact of appo'inf;n'ie.nt;'V:ot:te@§.lvy~_.__members to the important, posts payment of remuneration extracted. The payment income of the assessee; ef sale and the sale deed and peyrnents"'n1'ad':e Tare in the name of Sri Chairn'ia'n~cum-Managing Trustee of the i'e.etV~:the name of the Trust. Therefore, the 'eaidli._':firrdings of the Assessing Officer are in art misapproprietien and misutilisation of the "of the Trust. The unexplained withdrawals are J "f:n*éentio:1ed in the order of the Assessing Officer. On \«\~/ ".11- the basis of the disputed facts and the material evidence on record, the documents were from the office of the assessee,....,Therefo're1;'_';Vth'e ieaid: " 2 ﬁndings are based on proper apiprefjc:ieVtion_ 1ef:"?ineteri"sii.j. evidence on record. The seiidvﬁneings by * L' the appellate "Fri bu naii,._The_.i-'i'iii'tiune_|_ xaiithoet eppiying its mind to the fectsH'an_ci evidence on record, are assessing authority, of fact stating that the thé"'i;rust amounts to profit making; is to avail the benefit under Sectiehiof the$Inceme~Tax Act. Further, the «'V:'a~rh:oi.int'i:'g the W'i'rust is being misutiiised and in the name of the Managing Trustee M iv .V ano"i""Ch'airrnan and aiso the famiiy members of him K""ﬂ»,end.4_.the' expenditure is incurred towards the house of "Managing Director and Chaiwnan-cum-Managing "trustee and huge ameunts have been spent in -12- name of the family members of the Managing Trustee. The purchase of dental equipments for the Coigiegefaire not supported by the valid receipts and Further, the properties are Sadashivan the Managing Trtsste4e--,_:"}The saiiii. the Assessing Officer based'Fon materiaii-hvevileence is set aside by the Tribune:.'_"without.:nadvertingiv to each one of the items indeperi'djen'tiyiV.§£>$3"Ei'i3§'F5iiying its mind to the undis'pu~teci§f _ Z: the' V' ifiateriai evidence avaiiaioie eF»:'_the assessing Officer and the documen.ts,vw'iiwi£iiii:.'A'aife---«._:igh'ipounded from the office of the_jiru.stee assigning vaiid and proper jvjiitirther, the documentary evidence would icleariy"g'b_e»v.teV~','show that the receipts which are in the

--V narufie. the Trust and donation coilected amounts to 'igprofit tnaking motive and it cannot be the object or H purpose of running a charitable Educationai /institution for which t utow beneﬁt under ".13..

Section 10(22) of the Act is claimed. Thereforefthe substantial questions of law 13 8: 14 would;.~«~certa_ie:n.iy"

arise in this appeal and we answer the samvfe"Vvinif:a\:ou'r i of the revenue.

5. Further, the decision.l:Vot_the_ in the case of soczm v.

ADDITIONAL, L224 rm 310 would notthe case of the asses§see;' of fact by the Asseseino by the 15' Appellate Autmrity aon._:Vthe"~ basiellof the documentary evidence 9yn'*"teéoi'd}' whichvlliiiieite found and seized at the time of eeafgtct{'j"eouifdyti'eted by the assessing officer and the material record which is not disputed by the *a:a.ees$ee. Therefore, the said decision and other ll'-de"¢ision of Rajasthan High Court and Andhra Pradesh "High Court in reiation to the property in the name of \~/

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the Managing Trustee and Chairman Sri Sadashivan is the property which is registered under the Socvieties Registration Act, cannot be accepted and decisions have no application tothe.factsdi:s;iti3ati'on;-_ ii"

Various details referred to in thetaesessmentiarciereiﬁyip the assessing officer is Vsufpported.bi,t_§i;o'i~§,iEi1ii1'ous " ' documentary evidenceand*"adrif:iti:ed facts and the amount in the Bank of the Trust is being misu't§;i,i:Sed::A._ in oj1tneri'jiiname:it ' of the family members"of.'.it33e.':Fiiana'g,i'ng The ﬁnding of fact has ,.-Tribune! without adverting to the finding V_offe-ct"rec'orded by the originai authority ' "wiith-~ {reference to"the material evidence. Therefore, reasons recorded on the contentions prints .._by.u?'the Joumel are erroneous. Hence, .Vi,.'soh$tanti:ai questions of iaw Nos.12, 13 8: 14 wouici .' a.rise-'in this appeal. We answer the same in favour of T "the revenue by setting aside the impugned Judgment \»\/

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dated 31 -7-2003 passed by the Incorne Tax Appeilate 'rrnznénas, Bangalore, in rm No.769/Bang/2002. ' 6. Accordingiy, the appeai is iv " u Iudge Rsk/-

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Karnataka High Court