Income Tax Appellate Tribunal - Panji
M/S. Sinhagad Technical Education ... vs Deputy Commissioner Of Income-Tax, ... on 10 November, 2017
आयकर अपीऱीय अधिकरण पण
ु े न्यायपीठ "ए" पण
ु े में
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
सुश्री सुषमा चावऱा, न्याययक सदस्य एवं श्री अयिऱ चतुवेदी, ऱेखा सदस्य के समक्ष
BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM
SA Nos.82 to 87/PUN/2017
Arising out of ITA Nos.45 to 50/PUN/2017
Assessment Years : 2009-10 to 2014-15
Sinhgad Technical Education Society,
19/15, Erandwane,
Smt. Khilare Marg,
Off Karve Road,
Pune - 411004 .... Applicant
PAN : AABTS9900Q
Vs.
The Dy. Commissioner of Income Tax,
Central Circle 2(2), Pune .... Respondent
Applicant by : Shri S.N. Doshi
Respondent by : Shri Rajeev Kumar, CIT and
Dr. Vivek Agarwal
सुनवाई की तारीख / घोषणा की तारीख /
Date of Hearing : 27.10.2017 Date of Pronouncement:10.11.2017
आदे श / ORDER
PER SUSHMA CHOWLA, JM:
The bunch of Stay Applications are filed by the applicant against stay of recovery of outstanding demand relating to assessment years 2009-10 to 2014-15.
2. The present Stay Applications are moved by the applicant which is an educational institution to which recognition under section 12A of the Act had been 2 SA Nos.82 to 87/PUN/2017 granted. The applicant is running various educational institutions in and around Pune. It also runs General Hospital and Dental Hospital. The applicant claims that both these hospitals are running on charitable basis, where few services are charged at concessional rates and other services are provided free of cost. The applicant has around 55 units / institutions and around 65,000 students taking education in all the institutions run by the applicant. The applicant claims to have employed more than 7900 personnel in its institutions. All these facts are mentioned in the Stay Applications moved by the applicant.
3. Search and seizure operations were carried out at the premises of applicant on 06.08.2013. In response to notice issued under section 153A of the Act, the applicant furnished return of income and the assessments were completed under section 153A r.w.s. 143(3) of the Act for assessment years 2008-09 to 2013-14. For assessment year 2014-15 i.e. the year of search, assessment was completed under section 143(3) of the Act. After passing of the order of CIT(A), total tax demand which is outstanding is as under:-
Assessment Tax Demand TDS & Balance of 234B Interest Total tax Year Prepaid Tax Tax Demand on balance tax demand 2009-10 71,561,829 41,026,403 30,535,426 57,569,757 88,105,183 2010-11 216,781,320 2,471,107 214,310,213 154,303,353 368,613,566 2011-12 30,321,342 1,806,880 28,514,462 17,108,677 45,623,139 2012-13 115,014,060 1,683,138 113,330,922 54,398,842 167,729,764 2013-14 230,987,199 2,105,930 228,881,269 82,397,256 311,278,525 2014-15 375,251,512 16,337,666 358,913,846 89,619,323 448,533,169 Total 1,039,917,262 65,431,124 974,486,138 455,397,208 1,429,883,346
4. The applicant has moved the present Stay Applications for stay of recovery of above said outstanding demand totaling Rs.142.98 crores.
5. The learned Authorized Representative for the applicant before us has pointed out while looking at the stay of recovery proceedings what has to be 3 SA Nos.82 to 87/PUN/2017 considered is the balance tax demand outstanding excluding interest charged under section 234B of the Act i.e. Rs.97.44 crores. The issue involved in the appeals is against addition made in the hands of applicant on account of accepting capitation fees / donations from the students who were admitted to various courses. Further, the allegation of authorities below is that capitation fees so collected by the Trust had been siphoned by the Trustees for their personal use. In view of the applicant Trust having violated the provisions of section 13(1)(c) of the Act, the Assessing Officer denied the benefit of section 11 of the Act to the assessee Trust. The surplus arising in the hands of applicant from year to year was taxed in the hands of applicant resulting in the demand being created against applicant. The CIT(A) upheld the order of Assessing Officer. It was opined by the CIT(A) that the assessee Trust had indulged into illegally accepting capitation fees and had thus, dishonoured its charitable purpose. The CIT(A) also looked into the aspect the denial of exemption under sections 11 and 12 of the Act to the assessee. The learned Authorized Representative for the applicant in this regard pointed out that there were two items, which as per the Assessing Officer attracted violation of section 13(1)(c) of the Act i.e. (i) amount siphoned off by Mr. M.N. Navale of Rs.24,10,25,983/-, out of the alleged amount of donations collected of Rs.57 crores and (ii) salary paid to Mr. Y.U. Pawar who was working with the concern related to Mr. M.N. Navale of Rs.6,15,888/-. He further submitted that as regards siphoned off amount of Rs.24,10,25,983/-, the said amount was also assessed and taxed in the hands of Mr. M.N. Navale on substantive basis, therefore, the applicant further could not be liable to pay the tax, against which the applicant is in appeal. He stressed that it was only the second item i.e. salary to Mr. Y.U. Pawar of Rs.6,15,888/- which would attract tax. According to him, thus, there would be Nil tax payable against all these demands created in the case of applicant. He 4 SA Nos.82 to 87/PUN/2017 stressed that the entire demand raised by the Assessing Officer should be stayed. The learned Authorized Representative for the applicant has filed written submissions to this effect. He also stressed that despite violation under section 13(1)(c) of the Act, there could not be wholesale denial of exemption under sections 11 and 12 of the Act. The next plea raised by the learned Authorized Representative for the applicant was that even if the donations amount is added, the applicant would be entitled to the benefit of exemption under section 11 of the Act, since the donations were paid towards specific purpose namely securing admission and hence, the donations are exempt under section 11 of the Act. He stressed that the first issue which arises in the case is exemption allowable on the receipts other than which are allegedly governed under section 13(1)(c) of the Act. He referred to the order of CIT(A) at pages 92 to 94 and pointed out that he has failed to look into the submissions made before him and the order passed by him was in full contradiction of the order of the Tribunal in earlier years, wherein it was held that the denial of exemption would be restricted only to the amount attracting violation of section 13(1)(c) of the Act. He further pointed out that out of alleged donation of Rs.57.26 crores, if as per the Assessing Officer, Rs.24.10 crores had been siphoned, then there was no finding about whereabouts or investments or utilization of balance of Rs.32.60 crores. So, there was no question of the said addition to be made in the hands of applicant for the alleged violation under section 13(1)(c) of the Act. He reiterated that as far as sum of Rs.24.10 crores was concerned, if the same had been added on substantive basis in the hands of Mr. M.N. Navle and in view of the conflicting position, the balance of convenience was in favour of applicant vis-à-vis the said amount. He stressed that as per the version of Assessing Officer, if the donation was for the purpose of admission, then the same was receipt entitled to exemption under section 11 of the Act. 5
SA Nos.82 to 87/PUN/2017
6. Before referring to the comments made by the learned Departmental Representative for the Revenue, it was pointed out that on the first date of hearing certain submissions were made by the learned Authorized Representative for the applicant. However, as he was not able to prove its case of financial difficulty, in the absence of any Balance Sheet, the matter was adjourned and on that date of hearing, the CIT-DR did start arguing the case of Revenue and also furnished written submissions which we will refer in the paras hereinafter. But the hearing of the CIT-DR was not closed, since the applicant was asked to prove its case of financial difficulty. However, in second note furnished, the learned Authorized Representative for the applicant has alleged that the submissions made by him were not touched upon by the CIT-DR and a prayer was made to adjudicate them adequately. Another objection was raised that along with learned CIT-DR, the learned Addl.CIT-DR also made certain comments and he was not authorized to argue. He objected to the comments of Addl.CIT-DR in this regard. He also referred to the Writ Petition filed before the Hon'ble High court, wherein the applicant was directed to pay the outstanding amount by installments, which unfortunately could not be paid. The applicant thereafter, again approached the Hon'ble High court, which modified this earlier order and the applicant claims that it complied with the conditions laid down in that regard. He thereafter, pointed out that in view of liabilities of applicant trust and the recovery proceedings from the bank instituted against the trust and also because of outstanding fees receivable, financial position of the applicant was not such that any part of demand could be paid.
7. The learned Departmental Representative for the Revenue on the other hand, also filed written note and pointed out that the demand which is outstanding 6 SA Nos.82 to 87/PUN/2017 against the applicant has been raised as a result of assessments completed consequent upon search action on 06.08.2013. It was further pointed out that on the basis of evidences gathered during search proceedings, it was held in the assessment order that the applicant trust was illegally accepting capitation fees / donations from the students admitted for various courses and the money so collected had been siphoned by the trustees for their personal enrichment. The Assessing Officer also observed that the applicant had violated the provisions of section 13 of the Act. The learned Departmental Representative for the Revenue pointed out that the benefit of section 11 of the Act was denied to the applicant trust and the surplus was assessed in the hands of applicant. He further referred to the order of CIT(A) and pointed out that the view of the Assessing Officer was upheld and it was opined by the CIT(A) that the applicant trust had indulged in illegally accepting capitation fees and thus has dishonoured its charitable purpose. Accordingly, the CIT(A) confirmed the assessments vis-à-vis demands. The learned Departmental Representative for the Revenue in the first instance stressed that the applicant be directed to pay the said demand in entirety. In the second plea, the learned Departmental Representative for the Revenue however, considering the financial constrains of the applicant trust, stressed that in the alternate, he be directed to pay atleast 25% of the total demand of Rs.140 crores. The contention of applicant that there could not be wholesale denial of exemption under section 11 of the Act was held to be incorrect, in view of the observations of the CIT(A) in this regard vis-à-vis taxation of the amount relating to violation under section 13(1)(c) / 13(3) of the Act. It was further pointed out by the learned Departmental Representative for the Revenue that there was no merit in the contention of applicant and reference was made to the detailed working of total tax liability which works to Rs.17.58 crores in the hands of applicant. Vis-à-vis 7 SA Nos.82 to 87/PUN/2017 assessment of Rs.24.10 crores in the hands of Mr. M.N. Navale, it was pointed out by the learned Departmental Representative for the Revenue that he has not paid any part of the demand after assessment in his case. Regarding other issues, the learned Departmental Representative for the Revenue further referred to the issues raised before the Tribunal which were part of grounds of appeal. He also referred to the objections of learned Authorized Representative for the assessee and pointed out that where the applicant trust had not obeyed the directions of the Departmental Authorities and not even the Hon'ble High Court with regard to payment of taxes / installments of earlier occasions, hence, he was referred as habitual offender.
8. Now, coming to the assessability of income of Rs.57.43 crores in the hands of applicant, the learned Departmental Representative for the Revenue pointed out that total tax on the same worked out to Rs.17.23 crores and after interest under section 234B of the Act, the total demand was Rs.24.13 crores. The applicant is entitled to TDS of Rs.1.29 crores and the amount paid of Rs.5.25 crores, against which the balance taxes due from the applicant was Rs.17.58 crores. The learned Departmental Representative for the Revenue thereafter, referred to the financial position as per audited Balance Sheet as at 31.03.2017, as filed by the applicant and pointed out that total receipts were Rs.670 crores, against which the establishment expenses were to the tune of Rs.155 crores. Further, on other objects, sum of Rs.460 crores has been spent. The applicant had claimed expenses on account of depreciation of Rs.61 crores which does not involve cash outflow. However, approximate surplus which is available in the hands of applicant was Rs.37 crores. He pointed out that if the position for assessment years 2009-10 to 2014-15 is considered, the surplus in the respective years is substantial. He 8 SA Nos.82 to 87/PUN/2017 further pointed out that available bank balance in the accounts of applicant are Rs.6.60 crores and there is no merit in the plea of applicant that it does not have sufficient funds. He further referred to the utilization of funds by the applicant trust, wherein advancement to others stand at Rs.263 crores and for other capital expenditure, out of total bank FDR of Rs.10.97 crores, the applicant had utilized for bank guarantee sum of Rs.5.23 crores as listed at pages 34 and 35 of the Paper Book. He thus, pointed out that the balance FDRs were available with the applicant but the applicant was not willing to pay the taxes. He further referred to other discrepancies in the statements filed by the applicant. Another aspect which was pointed out by the learned Departmental Representative for the Revenue was that the applicant had liquid funds of Rs.103 crores which is grant from the State Government. The learned Authorized Representative for the applicant stressed that the same would go for running of institution but what happens to the statutory liability, was the question put up by the learned Departmental Representative for the Revenue.
9. With respect to the merits of case, the learned Departmental Representative for the Revenue pointed out that denial of exemption under section 11 of the Act was on account of two charges i.e. acceptance of capitation fees and also violation of provisions of section 13 of the Act. He further pointed out that capitation fees was harming education and the CIT(A) at pages 85 to 90 has referred to various propositions on this issue and the question which arises was whether the institution was working for charitable purpose. He stressed that the facts of the case were not similar as in earlier years and the applicant was not carrying the activity of charity. In respect of capitation fees, the learned Departmental Representative for the Revenue referred to the evidences found during search and he also referred to 9 SA Nos.82 to 87/PUN/2017 errors in the calculation of capitation fees filed before the CIT(A) by the applicant and it was pointed out that where during the course of search, evidence has been found, then capitation fees are to be taxed in the hands of applicant at maximum marginal rates and there was no question of any exemption under section 11 of the Act. He made reference to the observations of the CIT(A) at pages 86 to 88 in this regard.
10. The learned Authorized Representative for the applicant in rejoinder pointed out that the merits of case are not to be discussed at this juncture and he further pointed out that in any case Rs.24 crores has to be excluded from the total sum of Rs.57 crores. He stressed that the surplus available with the trust was for carrying on his activities i.e. maintenance of huge assets and running of various institutions. He also pointed out that wholesale denial theory could not be accepted.
11. We have heard the rival contentions and perused the record. In the present stay application, issue is in respect of demand created in the case of applicant which is on account of assessments framed under section 153A r.w.s. 143(3) of the Act for assessment years 2009-10 to 2013-14. For assessment year 2014-15, the assessment was completed under section 143(3) of the Act. The applicant trust was running various institutions and has been granted registration under section 12A of the Act. During the course of search, incriminating evidence was found that the assessee in various years has accepted capitation fees against the admissions granted to the students. Various documents have been referred to by both the authorities below in this regard and the case of Revenue is that in view of assessee accepting capitation fees against admission of students, the applicant is not entitled to claim of exemption under sections 11 and 12 of the Act. Hence, the surplus has 10 SA Nos.82 to 87/PUN/2017 been added as income of applicant and hence, the demand as tabulated in the paras hereinabove. The issue which has been raised in the present stay application filed by the applicant is that there is no merit in wholesale denial of exemption under sections 11 and 12 of the Act. It has been pleaded by the learned Authorized Representative for the applicant at stretch that even if capitation fees is accepted but the same is for the purpose of giving education to the students and hence, is part of activity carried on by the applicant trust and there is no merit in the denial of exemption under section 11 of the Act. On the other hand, the case of Revenue is that in view of incriminating documents found, the applicant trust is not entitled to the said exemption under section 11 of the Act. The total income other than violation under section 13 of the Act which is assessed in the hands of applicant for the captioned assessment years is Rs.266.23 crores. Further, the income attracting violation under section 13 of the Act for the respective years totals to Rs.57.43 crores. The same is based on the incriminating documents found during search. The total tax on Rs.57.43 crores is Rs.17.23 crores and including the surcharge and interest, the outstanding demand is Rs.24.13 crores. The applicant claims the benefit of TDS of Rs.1.27 crores and regular payment of Rs.5.25 crores against the same, the Revenue has worked out the balance demand in this regard to Rs.17.58 crores. On the other hand, the total demand created in the case of applicant is Rs.103.99 crores and the balance demand after including interest under section 234B of the Act and after allowing credit for TDS and taxes paid is Rs.142.98 crores. In the facts of the case while granting stay for recovery of outstanding demand what is to be seen is whether the applicant has prima facie case for stay of the outstanding demand and the second aspect is the balance of convenience and the third aspect is the financial position of applicant. In respect of first aspect, we find that vis-à-vis denial of exemption under section 11 of the Act on 11 SA Nos.82 to 87/PUN/2017 regular receipts, the applicant prima facie has case in his favour. However, the issue of claim of exemption under section 11 of the Act on capitation fees received by the applicant is settled against the applicant by the decision of this Bench. The third aspect of the demand is the violation under section 13 of the Act on account of siphoning of funds by Mr.M.N. Navale to the extent of Rs.24 crores. In respect of said sum of Rs.24 crores, the applicant has pointed out that the addition has been made on substantive basis in the hands of Mr.M.N. Navle. Thus, we find that balance of convenience is in favour of applicant where the amount has already been added in the hands of Mr. M.N. Navle. However, in respect of income which is on account of capitation fees totaled Rs.57.43 crores, we find no merit in the claim of applicant for stay of recovery of outstanding demand against the same. The balance demand which is recoverable on account of said addition works out to Rs.17.58 crores as per working given by the learned Departmental Representative for the Revenue, which is as under:-
Tax on Income Tax + Interest + TDS Regular Net Demand
attracting violation Surcharge Payment
u/s 13(1)(c)
21,12,000 23,92,896 30,26,403 3,80,00,000 (-)3,86,33,507
2,40,000 2,47,200 24,71,107 - (-)22,23,907
71,85,000 1,07,56,752 18,06,880 - 89,49,872
1,34,04,278 1,96,25,574 16,83,138 - 1,79,42,436
8,69,51,477 12,10,43,493 21,05,930 - 11,89,37,563
6,24,07,757 8,72,36,865 18,37,666 1,45,00,000 7,08,99,200
17,23,00,512 24,13,02,780 1,29,31,124 5,25,00,000 17,58,71,656
12. The learned Authorized Representative for the applicant has not
controverted the working of the demand on income attracting the violation under section 13 of the Act. It was the case of applicant before us that the said income totaled Rs.57.43 crores, which is mentioned in his written submissions also. However, against the same, he has time and again pleaded that sum of Rs.24.10 crores has been alleged to be siphoned by Mr.M.N. Navale by the authorities below and for the balance amount, there were no equivalent assets. However, we find no 12 SA Nos.82 to 87/PUN/2017 merit in the plea of learned Authorized Representative for the assessee in this regard. The addition has been made in the hands of applicant on the basis of incriminating documents and in any case the merits of case are still open for discussion, since we are only disposing of stay application against recovery of outstanding demand. In view thereof, we are of the opinion that the applicant has not made out any prima facie case against the stay of recovery proceedings against the outstanding demand totaled to Rs.17.58 crores.
13. Before parting, we would like to comment on the financial position of applicant, where the case of applicant was that it has no funds available with it, the perusal of details filed by the applicant reflects the list of advances to the extent of Rs.263 crores made by the applicant to different trusts. Further, he has enlisted list of post-dated cheques up to November, 2017, which cannot take precedent over the statutory outstanding demand. Further, the applicant claims that the bank FDRS are against guarantees given by the applicant to different institutions. However, in this regard, the learned Departmental Representative for the Revenue has pointed out that out of total FDRs of Rs.10.97 crores, the amount utilized for bank guarantee is only Rs.5.23 crores as per details filed by the applicant. Further, the available bank balances are to the tune of Rs.6.60 crores.
14. The next aspect which has to be seen is the liquid funds of Rs.103 crores which is the amount from State Government given to the applicant, which undoubtedly goes for running of institution but also include the payment of taxes, if any. Further, the surplus before depreciation which is available with the applicant from year to year is also available with assessee. Another aspect to be noted from the financial accounts submitted by the applicant is that it has given donation of 13 SA Nos.82 to 87/PUN/2017 Rs.20.02 crores as reflected in Schedule II of Profit and Loss Account ending 31.03.2017, placed at page 76 of the Paper Book.
15. In the totality of the above said facts and circumstances, we are of the view that the applicant has prima facie case and balance of convenience for granting only partial stay of recovery of outstanding demand. We therefore, grant the stay of outstanding tax demand subject to the following conditions:-
a) The applicant is directed to deposit Rs.18 crores in three installments i.e. Rs.6 crores by 30.11.2017; Rs.6 crores by 30.12.2017 and Rs.6 crores by 15.01.2018.
b) The applicant shall furnish the proof of payment of taxes on payment to the Registry;
c) In case he fails to deposit the taxes as stated in (a) above, then the case would come for hearing in normal course and not be considered as stay granted matter.
d) That out of turn hearing is granted on 18.01.2018 subject to payment of Rs.18 crores; no separate notice of hearing would be issued by the Registry;
e) That the applicant shall not seek frivolous adjournments. If Paper Book is desired to be filed by the applicant, then the same should be submitted well in advance as prescribed in ITAT Rules;
f) In case of breach of any of the above conditions, the stay granted shall automatically get vacated and matter would be heard in ordinary course.14
SA Nos.82 to 87/PUN/2017
16. Subject to the fulfillment of the above conditions, the balance outstanding demand is stayed for a period of 180 days from the date of this order or till disposal of the appeal, whichever is earlier.
17. In the result, all the stay applications filed by the applicant are allowed as indicated above.
Order pronounced on this 10th day of November, 2017.
Sd/- Sd/-
(ANIL CHATURVEDI) (SUSHMA CHOWLA)
ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER
ऩण
ु े / Pune; ददनाांक Dated : 10 November, 2017.
th
GCVSR
आदे श की प्रयतलऱपप अग्रेपषत/Copy of the Order is forwarded to :
1. अऩीऱाथी / The Appellant;
2. प्रत्यथी / The Respondent;
3. आयकर आयक् ु त(अऩीऱ) / The CIT(A)-12, Pune;
4. The Pr.CIT, Central, Pune;
5. ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, ऩुणे "ए"
/ DR 'A', ITAT, Pune;
6. गार्ड पाईऱ / Guard file.
आदे शािस ु ार/ BY ORDER, सत्यावऩत प्रतत //True Copy// वररष्ठ तनजी सधिव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩुणे / ITAT, Pune