Income Tax Appellate Tribunal - Chandigarh
M/S Shaheed Kartar Singh Sarabha ... vs Dcit, (E), C-1, Chandigarh on 10 November, 2020
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "B", च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCHES 'B', CHANDIGARH
ी एन.के. सैनी, उपा य एवं ी सतबीर %संह गोदारा, याय)क सद*य
BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI SATBEER SINGH
GODARA, JUDICIAL MEMBER
आयकर अपील सं./ ITA No. 174/Chd/2019
नधा रण वष / Assessment Year : 2015-16
M/s Shaheed Kartar Singh Saraba बनाम Deputy Commissioner of
Charitable Trust (Redg.), Income Tax (Exemptions),
VPO Sarabha, Distt. Ludhiana. Circle-1, Chandigarh.
थायी लेखा सं./PAN No: AAATS 4168 H
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by: Shri Ashwani Kumar, Shri Aditya
Kumar & Shri Bhavesh Jindal (CAs)
राज व क ओर से/ Revenue by: Smt. Geetinder Maan (Addl.CIT)
सन
ु वाई क तार$ख/Date of Hearing : 02/11/2020
उदघोषणा क तार$ख/Date of Pronouncement: 10/11/2020
आदे श/ORDER
PER: SATBEER SINGH GODARA, J.M.:
Th is a s se s se e's a ppe a l f or A. Y. 2 0 15 - 1 6 a r is es a ga in st t h e Comm is si on er of I nc om e Tax ( Ap pe a ls )- 4, L ud h ia na ( in s ho r t, t h e CI T( A) ) ord e r dat ed 19 /1 2/ 20 1 8 pas s ed in app e a l No. 13 2/R O T/ IT/ C IT( A) -4/L D H /2 0 1 7 -1 8 i n volv i ng pr o ce e d in g U/s 14 3( 3 ) o f t he I nc o me T a x Act , 1 9 6 1 (i n s h ort , t h e Ac t ).
2. Th e as s es s e e h a s ra is ed fo l low i ng s u bs ta nt iv e g ro un ds i n t he i ns ta n t ca s e:
"1. That order dated 19/12/2018 passed u/s 250(6) of the Income Tax 2 ITA 174/Chd/2019_M/s Shaheed Kartar Singh Sarabha Charitable Trust Vs DCIT(E) Act, 1961 by the Learned Commissioner of Income Tax (Appeals)-4, Ludhiana is against law and facts on the file inasmuch as she was not justified to uphold the action of the Learned Assessing Officer and in enhancing the income of the appellant by denying benefit u/s 11 of the Act by Rs. 11,98,68,227/-.
2. That order dated 19/12/2018 passed u/s 250(6) of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Appeals)-4, Ludhiana is against law and facts on the file inasmuch as she was not justified to treat the amount paid to persons covered u/s 13(3) as excessive by treating the rate of interest of unsecured loan (liabilities) with rate of interest of deposits (assets).
3. That the ld. CIT(A) was not justified and without jurisdiction to enhance the income of the applicant.
4. That order dated 19/12/2018 passed u/s 250(6) of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Appeals)-4, Ludhiana is against law and facts on the file inasmuch as she has enhanced the entire income and has not restricted the addition to the excessive amount paid to persons covered u/s 13(3) of the Act.
5. That order dated 19/12/2018 passed u/s 250(6) of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Appeals)-4, Ludhiana is against law and facts on the file inasmuch as she has not considered the entire set of submissions of the appellant wherein the ground of consistency was pleaded in the submissions made before her."
He a rd bot h t he pa r ti e s . C as e f i le rec o rd s pe r us ed .
3. We adv er t t o t h e b a s ic r el e va n t f ac ts . Th is a s se ss e e is adm it t ed ly a s se s s e d a s a C ha r i ta bl e Tr us t s i nc e e nj oy i ng bo t h Se c t io n 12 A a nd S ec t io n 8 0 G r eg is t r at io n(s ) s i n ce 25/ 02/ 1 9 9 7 a n d 14/ 1 2 /2 0 1 2 re sp ec tiv e ly . T h e As s es s i ng O ff ic er n ot ic ed dur i ng t he co urs e of s cr ut i n y t h at it ha d pa id i n te r es t of R s . 1, 13 , 41, 3 61 / - t o on e of i ts t rus t e e Sh ri H os h i ar S i ng h Gr ewa l q ua net b al a nc e w i t h 3 ITA 174/Chd/2019_M/s Shaheed Kartar Singh Sarabha Charitable Trust Vs DCIT(E) i nt e res t of R s . 12 , 82 , 6 4, 91 4 / - as o n 3 1/ 3 /2 0 15 . H e s oug h t t h e as se s se e's ex pl an a ti o n /j us tif ic at i o n.
4. Th e a s se s se e p l e a de d b e fo re t he as s es s in g a u t ho r i t y th a t th e r e w a s ne i t h er any ap pl ic at i on of i nc om e n or it s p ro pert y us ed for t h e b e nef it o f t h e s pec if i ed pe r s ons U/s 1 3 o f th e Ac t . I t h ig h li g h t ed t h e f a c t t ha t n o s uc h r el a t ed per so n w or k ed in t he hos p it a l no r a ny t ra ns ac t i o n ha d b e e n c a r ri ed o u t wi t h r e la t ed part i es ex ce pt th e imp u g n ed in t ere s t pa id t o S hr i Gr e wa l d ue t o sh ort ag e of f un ds i n t h e Tr us t a nd i n or de r t o r ed u ce t h e t er m lo an c arr y i ng h ig h er ra t e of i nt er e st . A l l th is f a il ed to p re va i l up o n th e As se s si n g O f fic e r who c om p a re d the a ss e ss e e 's int er e s t der i ve d fr om fi x e d d ep os its @ 7 . 5 % t o 7. 75 % w it h t he in t ere s t pa id i n is s ue @ 10 %. H e w en t by fo reg o in g c o mp ar is on t o dis a l low /a dd t he a s s es s ee' s in t e res t pay me nt o f R s . 1, 13, 4 1, 36 1 /-
U/s 11( 1 ) t o 1 3(1 ) (c ) r . w .s 1 3( 3) of t he Ac t.
5. Th e CIT ( A) has e n ha nc ed t h e As s e s s ing O ff ic er' s ac t io n in th e f o l low i ng t er m s :
"7. Gr ound s of app eal no . 1 a nd 2 ar e r egar d ing a dd it io n o f int erest pa id tot aling Rs.1,13, 41,36 1.00 m ade by t he as s es s ing of f icer .
7. 1 I h ave car ef ully co ns ider ed the facts of the c as e a nd s ubm iss io ns of the as s es s ee. As per b alance s heet of t he tr us t as o n 31.03.20 15, th e trus t has tak en uns ecur ed lo an f rom S. Hos hiar Sing h G rewal Rs .12, 59,76, 03 8/ -. As on tha t as s es s ee has cas h in hand of Rs .6,18 ,1 44/- ban k 4 ITA 174/Chd/2019_M/s Shaheed Kartar Singh Sarabha Charitable Trust Vs DCIT(E) balanc e of 1,63,31,717/- and F ix ed D ep os its of Rs.3,05,52 ,5 33/-. The as s es s ee h as tak en uns ecur ed lo an f rom o ne of its trus tees , S.Hos hiar Sing h G rew a l @ 10% , w her eas hug e surp lus o f cas h is ref lected in t he fo rm of cas h and bank b alanc e o f the as ses see tr us t. Acco rd ing ly, a s h ow caus e no t ice fo r enha ncem e nt o f incom e w as iss ued to the as sess ee.
The Ld . Co uns el has exp lained tha t the as s es s ee tr us t has tak en term lo an f rom s tate Bank of P atia la @
14. 75% f or infr as truct ure dev elop m en t. To r ed uc e t he hig her in ter es t cos ts , it w as d ec id ed to se ek help of sh. Ho sh iar Sing h G rew al w ho is o ne of th e p res e nt tr ustees. He was p r ov ided fun ds w itho ut co llat era l s ecurity. Sh. Ho sh iar Sing h G r ew al has i ntr o duced f und s m or e th an Rs.10 Cro r es o ve r the tim e p er io d with w hic h t he as s es s ee tr us t h as paid ba ck the b ank lo an. It was s tated that int ere st b eing p aid to Sh. Hos hiar Singh Gr ewa l w as r eas o nab le.
Fur ther, L d. Co un sel h as expla ined that cas h and ban k funds we re r eq uir ed for d ay to d ay r unning of th e tr us t. As r egards , F DRs kept w it h bank , it w as exp lained that FD RS hav e to b e mainta ined w ith t he b ank to meet t he req uirem e nts o f t he Univer s ity w it h whic h the ins titut ion of t he as s es s ee tr us t ar e af f iliated .
Ho w ev er, the ass ess ee tr us t is mai ntai ning f ollo wing FD Rs wit h S tate bank of Ind ia,
i) Rs. 10 L acs @ 7 5% s inc e 29. 05.20 14
ii) Rs .90 lacs @ 7. 5% s inc e 29. 05.20 14
iii) Rs .8, 96,062 @ 7.75% s inc e 10.02.2015 5 ITA 174/Chd/2019_M/s Shaheed Kartar Singh Sarabha Charitable Trust Vs DCIT(E) Thus , as ses se e has mad e p ay ment of int er es t to t he tr us tee o n uns ecur ed loa n @ 10% wher eas , the s urp lus funds of the tr ust in the f orm of F DRs ar e ear n ing int erest f rom the bank @ 7. 5% to 7.75% only . T hus, pro vis io ns of s ec 13 (1) (c) r ead w ith 13 (2) ( c) and 13( 2) (g) ar e attr acted in the cas e.
7.2 Relia nce is p lac e o n the j ud gm ent of Ho n' b le Hig h Co ur t Delhi in the c as e of Pt. Kana hya L al P unj Char itab le Trus t vs . DI T , I T A No. 16 51 of 200 6, dat ed 14.0 5. 2007, as und er:
2. The assessee is a society registered under the Societies Registration Act as well as under section 12A of the Act. The assessee is having income mainly from the interest on fixed deposits and donations. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee has advanced huge amounts to M/s. Punj Lloyd Limited and as such he raised a query as to why section 13(1)(c) read with section 13(2)(a) of the Act be not invoked as no adequate interest has been charged on such amount, though that company was substantially interested in the trust. From the bank statements, the Assessing Officer found that as on March 31, 1997, a sum of Rs. 75 lakhs was outstanding with M/s. Punj Lloyd Ltd. In response to a query, it was stated that the assessee paid this amount to M/s. Punj Lloyd Ltd. as earnest money for purchase of land for a school project to be set up at Ponta Sahib (near Dehradun), and that interest charged by the bank from the trust was fully reimbursed by M/s. Punj Lloyd Ltd. to the trust and hence there was no loss to the trust. It was also noticed by the Assessing Officer that the trust has not taken adequate security to which the assessee stated that the security was provided in the form of equitable mortgage of commercial space owned by M/s. Punj Lloyd Ltd. The Assessing Officer found that the story of payments being made for purchase of land for a school was nothing but an afterthought, specially as there were no agreements with the vendors of land or corresponding bank transactions and no proof of the same was furnished. Since M/s.
Punj Lloyd Ltd. made contribution in excess of Rs. 50,000 to the trust, and was an interested party, the Assessing Officer denied exemption under sections 11 and 12 of the Act.
3. The assessee preferred an appeal before the Commissioner of Income- tax (Appeals), who confirmed the denial of the exemption and dismissed the appeal filed by the assessee.
4. Thereafter, the assessee challenged the order of the Commissioner of Income-tax (Appeals) before the Tribunal and vide the impugned order, the Tribunal dismissed the appeal filed by the assessee and that is how the assessee is before this Court.
6 ITA 174/Chd/2019_M/s Shaheed Kartar Singh Sarabha Charitable Trust Vs DCIT(E)
5. It has been contended on behalf of the assessee that under section 11 of the Act, income of a trust held wholly for charitable or religious purpose is exempt. The assessee did not lend any amount to M/s. Punj Lloyd Ltd. during the course of commercial transactions and it had deposited the money with M/s. Punj Lloyd Ltd. as earnest money for purchase of land for a school and when the deal did not materialise, M/s. Punj Lloyd Ltd. returned the money and as such the assessee has been wrongly denied the exemption under sections 11 and 12 of the Act.
6. The basic requirement for the availability for exemption under sections 11 and 12 of the Act is that if any money is lent to an interested party as defined in section 13(3) of the Act for "any period" during the previous year, then the trust should charge "adequate interest" and there should be an "adequate security".
7. If the contention of the assessee is accepted that the payments were in the nature of earnest money for purchase of land, and the whole exercise was of a commercial nature, it cannot be explained why interest-free advances should be given. The Act requires very strictly that the trust should use their funds only for the charitable objects for which they have been set up and they cannot be permitted to loan or deposit funds available with them without interest as in the present case. Further, in the present case, not only interest was not charged, even adequate security was also not taken.
8. Section 13(1)(c ) of the Act speaks of "any income" which has been used to benefit "directly or indirectly" any person referred to in section 13(3). The plain reading of this section would show that the Act is intended to eliminate any possibility of the trust's fund being used for the benefit of any interested person. In the present case, it cannot be denied that a benefit has "directly or indirectly" reached the interested person, namely M/s. Punj Lloyd Ltd. and thus, there is a clear violation of sections 13(1)(c) and 13(2)(a) of the Act.
9. The Tribunal in its order has noted that once there is a violation of provision of section 13(3) read with section 13(1)(c), the provisions of sections 11 and 12 of the Act shall not operate so as to exclude the income of the trust from the total income of the previous year. According to sections 11 and 12 of the Act, the voluntary contribution made with specific direction that they shall form part of the corpus of the trust or institution, shall not be included in the total income of the previous year of the trust. But once the exemption under sections 11 and 12 is denied, the assessee would not get any protection from sections 11 and 12 and the voluntary contribution would be treated as income, as per the definition of income given in section 2(24) of the Act, according to which income includes the voluntary contribution receipts by a trust credited wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes meaning thereby once the exemption under sections 11 and 12 of the Act is withdrawn all the receipts of the trust either by voluntary contribution or income derived from its property would be an income of the trust in a normal course and is chargeable to tax.
7 ITA 174/Chd/2019_M/s Shaheed Kartar Singh Sarabha Charitable Trust Vs DCIT(E)
10. There are concurrent findings of the fact by three income-tax authorities and we do not find any reason to disagree with the conclusion arrived at by these authorities.
11. Under these circumstances, we hold that no fault can be found with the view taken by the Tribunal. Thus, the order of the Tribunal does not give rise to a question of law, much less a substantial question of law, to fall within the limited purview of section 260A of the Act, which is confined to entertaining only such appeal against the order which involves a substantial question of law.
12. Accordingly, the appeal is hereby dismissed.
7.3 T he as ses see tr us t has paid excess iv e int er est to the tr us tee of the tr us t w ho is cov er ed u/s 13( 3) of t he Inc om e Tax Act. In the pr es ent c as e , it canno t b e deni ed th at d irect b e nef it h as b een a llow ed to the tr us tee o f th e tr us t Shr i. Ho shiar Sing h G rewa l by g iv ing inter es t on the f unds adv a nc ed by him @ l0 % as agains t int eres t rece iv ed fro m FD Rs am ounting to 1,08, 96, 062/ - k ep t in th e ba nk acco unt of the as ses see @ 7.5% Thus , t here is a c lear v io latio n o f sect io n 13( 1)(c) rea d w ith 13( 2)( c) and 13(2)( g ) of t he Inc om e T ax Act, 1961. Ther ef or e, benef it U/s 11 of the Income Tax Act , 1961 is d is allo w ed to t he as s es s ee.
As p er the de ta ils pr ov id ed by t he as s es s ee, to t al incom e of t he trus t d ur ing the year w as Rs.11,9 8,6 8, 227/ -. The ent ir e rec eip t o f inc ome of t he tr us t w ill b e as ses sed as inc om e as the ex p end itur e is no t inc urr ed b y the trus t for ear ning o f inco m e b ut it is a s ub seq uen t ap p licat io n of inc om e ou t of r ece ip ts o f tr us t. T he inco me of the as s es s ee is acco rd ingly enh anced t o Rs . 11, 98, 68, 227/ - an d as ses sed as AO P and ben ef it o f claim u/s 11 of t he I nco me T ax Act, 19 61 is den ied. Fr om t he abov e f ac ts , I am s atisf ied that t he as s es s ee has f ur ni shed inaccur at e p art iculars o f inco m e. Ther ef ore , p enalt y pro ce ed ings u/ s 271(1) (c) of t he 8 ITA 174/Chd/2019_M/s Shaheed Kartar Singh Sarabha Charitable Trust Vs DCIT(E) Inc om e Tax Act , 1961 f or f ur n ish ing inaccur at e par tic ulars o f the inco m e ar e als o initi ated. "
Th is le av es t h e as s es s ee ag gr i e ved .
5. We hav e g i ve n our th o u gh t f ul c on s i d era ti o n to riv al pl ea di ngs ag a i ns t a nd in s uppo r t of im p ug n e d e n ha nc eme nt .
Suff ic e t o s ay , it i s an ad m it te d f ac t th a t t he a ss e ss ee ha s d e r iv e d i nt e res t o n its f ix e d de p os i ts ma i n t a i n ed w it h ba nk( s ) @ 7. 5 % t o 7.7 5% a nd i n t ur n pa i d i n te r es t t o i ts tru st e e S h r i G re wa l in qu es t i o n @ 1 0% a nd @ 14 .7 5% t o St a t e B a nk o f Pat i ala i n t he ir re le va n t pr ev io us ye ar ( su pra ) . Al l t h is s am e s uf fic i e n cy in di c a t es th a t the As s es s i ng O ff ic er h ad e rre d d ur i ng t he co urs e of as se s sm en t i n c o mpa r in g t h e a ss e s s ee 's fix ed de po s its i n t er e s t der i ve d f rom ba nk s a ga i n st t ha t p a i d f or m in g s ubj ect ma t t er o n th e i ns t a n t lis .
6. Th e R ev e nu e a t th is st a ge s o u g ht to dr a w su p por t f ro m CI T( A)'s ac t i on a d di ng t he t r us t 's t ot a l i n c o me to t he e x t en t of R s .
11, 9 8, 68, 2 27 / - o n t h e g r ou n d t h a t th e r e was no j us tif ic a t i o n t o ava i l t h e i nt er e s t be a r in g f u n ds a t s uc h a n u nre a s on ab le ra t e wi th o u t any r e q u ir e me n t s i n c e it h ad i ts e l f b ee n m a in t a i n i ng FD Rs wi th t h e b a nk s . W e f i n d n o r ea so n t o s u st a i n e it h er o f t he t wi n l imbs o f e x c es s iv e as w e l l as u n ju st if ie d in ter es t o n as pe c t s i n fav our of t h e R ev en u e. P ape r B ook s pag e s 2 8 t o 2 9 s ugg e st t h a t th e a s se ss e e h ad 1 7 f ix ed d e p os i t a cc ou n ts wi th t h e ba nk(s ) ou t of wh ic h t he f irs t on e w as i n t he n at u re of m a rg i n mo n e y se c ur it y
9 ITA 174/Chd/2019_M/s Shaheed Kartar Singh Sarabha Charitable Trust Vs DCIT(E) i n f av o ur o f t he D en ta l Co u nc il o f I n di a w h er e as a cc o u n ts 2 to 1 4 th e r eof a re f u nd s e cu r i ty (i e s) of N urs i ng Co l le ge (s ) i n fa vo ur o f th e B a ba F a ri d U n ive rs ity of H ea l t h Sc i enc e s. M e an ing t he r eb y th a t t h e s a i d f i x ed d ep os it a cc ou n ts ar e d e p os i t s are i n t h e nam e(s ) of af f il ia t i n g/r e g u la t or y bo d ies th a n f ix e d de po s i t i nve st m e nt p e r s e . We ob se rv e t h a t th e s e fa ct s t h at it w as v e r y muc h j us t if ia b l e o n as s es s ee 's p a rt t o ma in t a i n a l l t h e s ai d f ix ed depo s it s fo r t h e pur po se of c ar r y in g o u t t h e tr u st 's me d ic a l ed uc a t io n a c t i v it i e s .
7. We n ex t ad ver t t o al l e g ed e x c es s i ve i nt e re st p ay me nts @ 10% t o i t s t rus t e e S hr i Gr ew a l. It has co m e o n rec o r d t h at t h e dep a rtm e nt has i t s elf ac ce p t e d in te res t p a id to t h e l en der b a nks @ 1 4 .7 5% i n c as e of s ec ur ed l oa n s ar e a ga i ns t u ns e cur e d l o a ns ava i led f rom S hr i G re wa l. T ha t it s elf su gg es t s t h at t he im p ug n ed i nt e res t r a te @ 10 % is not e x c e s s ive so as to a tt r ac t the imp u g n ed d is a l lo w anc e / add i ti o n.
7. Th e R ev e n ue 's las t c on t e n t i on s ee ks t o b ut t re ss t h e CI T( A)'s fin d in g re ly i ng on ho n'b l e De l h i h ig h c o ur t de c is i on (s upr a) dec id i ng t he is s u e i n d ep a rt m e n t's f a vou r . W e f in d t h at t h e s a i d ju d ic i al pr e c e de n t has b e en u n n ec es s ari ly ro p ed i n by th e C IT( A ) i n t h e giv e n fac t s and c ir cu ms t a nc e s of th e c as e s in c e t h e ta x pay er t h e re i n h a d ex t en de d i nt ere s t f re e cr e di t f ac il it y to t h e sp ec ifi e d pe rs o n ( s ) wh er eas w e ar e d e a l i ng w it h thi s a s se s se e pay i ng m ar ke t r at e of i nt ere s t t o t he t r us t e e. We g o by a ll t h is 10 ITA 174/Chd/2019_M/s Shaheed Kartar Singh Sarabha Charitable Trust Vs DCIT(E) el ab ora t e r e as o n in g to c o nc lu de t h a t the as s es s in g a ut hor ity h ad err e d in d is a l lo w i ng a ss e ss e e 's i nt er e s t p a ym en t of R s.
1,1 3, 4 1, 3 6 1/ - fo l lo we d by t he CI T( A) 's en ha nc em e nt ac ti o n u nd e r cha l l e ng e w h ic h is a ls o n ot s us t a in a bl e . T h e s ame s ta nd re v er s ed th e r ef ore .
8. Th is as s es s e e' s a p p ea l is a ll ow e d.
O r der pr on ou n c e d i n t h e o pe n c ou r t on 1 0 t h N ov em b er, 20 2 0 .
Sd/- Sd/-
एन.के. सैनी, सतबीर %संह गोदारा
(N.K. SAINI) (SATBEER SINGH GODARA)
उपा य याय)क सद*य /Judicial Member
)दनांक /Dated: 10/11/2020
*Ranjan
आदे श क त+ल,प अ-े,षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु.त/ CIT
4. आयकर आय.
ु त (अपील)/ The CIT(A)
5. ,वभागीय त न1ध, आयकर अपील$य आ1धकरण, च3डीगढ़/ DR, ITAT,
CHANDIGARH
6. गाड फाईल/ Guard File
आदे शानुसार/ By order,
सहायक पंजीकार/ Assistant Registrar