TaxTMI 
TaxTMI 
2015 (8) TMI 868
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....e submitted that the development expenditure was incurred on the leasehold land. One Mr. Syed Moinullah, civil contractor has been entrusted with the contract of developing the leasehold land belonging to the trustees of Shri A. R. Rahman and Ms. Kareema Begum. The assessee submitted that the trust has not bought the land but the trustees have given permission to the trust to do the development and trustees will settle the land in favour of the trust shortly for building music school on the said land. The Assessing Officer while completing the assessment held that since property is in the name of the trustees and not in the name of the trust, incurring expenditure on the land belonging to the trustees is violation of the provisions of section 13(1)(c)(ii) of the Act as the trustees are benefitted. Therefore the Assessing Officer denied exemption under section 11 of the Act. On appeal, the Commissioner of Income-tax (Appeals) allowed the exemption under section 11 of the Act holding that there is no violation under section 13(1)(c) of the Act in view of the fact that the trustees have settled the property in the name of the trust subsequently as promised by them earlier by way of gi....
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....n arts, amounts to a clear charitable activity for the purpose of section 2(15) of the Act. Hence the assessee is eligible for exemption of its income under section 11 of the Act. For this purpose necessary reliance is also placed on the following judicial pronouncements : (i) The Chennai Bench of the Income-tax Appellate Tribunal in the case of Vempati Chinna Satyam Kuchipudi Art Foundation v. Deputy CIT [2011] 10 ITR (Trib) 201 (Chennai) held that giving training in traditional art forms like Kuchipudi dance amounts to education. The relevant portion of the judgment is (page 203)- '5. We considered this issue very carefully. Before coming to a conclusion whether the assessee-trust is an institution by itself or not, we have to examine the surrounding facts and circumstances in which the activities of the assessee-trust are being carried out. The assessee is engaged in promoting and giving training in traditional art forms like Kuchipudi dance. It is known to everybody that except in certain colleges of fine arts and performing arts, these types of traditional art forms are imparted in "Gurukula system". If we see around the world, what is the ground reality ? Training a....
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.... from the trustees under HIBA (the gift). All the trustees of the assessee-trust are Muslims. The trustees claimed to have gifted the abovementioned lands to the assessee by way of HIBA, in March 2009. HIBA is a oral form of gift recognised under the Mohammedan law or Shariyat. Any gift made by way of HIBA is a legally valid form of transaction. HIBA need not be registered. In the instant case, both the donors as well as the donee have confirmed the HIBA (gift of lands). Hence the same has to be considered as a legally valid and genuine transaction. Further, it is also important to mention here that the possession of the lands has also been given to the assessee-trust. In fact, the asses see, vide its submissions dated February 27, 2013 brought these facts to the notice of the Assessing Officer. The relevant portion of the submissions, as contained in the assessment order are as under : '12. The assessee in its subsequent submission dated February 27, 2013 stated that "the trustees had gifted the land in question in favour of the trust by an unregistered deed" before the development activity was commenced in that land by the trust. It is called a "Hiba" or oral gift and is re....
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....he donor and the donee, are fulfilled in the present case. Thus, when both the donors (trustees) and the donee (assessee-trust) have confirmed the gift of land by way of HIBA and handing over of possession, mere non-registration of the said HIBA cannot alter the character of HIBA or make it invalid. Thus, as long as the donors and donee have confirmed the HIBA, the Assessing Officer is bound to accept the same as genuine and valid. Therefore, I hold that mere non-registration of HIBA (gift) cannot be a reason for rejecting the assessee's claim of gift of lands under HIBA. The next observation of the Assessing Officer is that the balance- sheet of the assessee-trust did not reflect the said lands as on March 31, 2010 indicating that the lands were not passed on to the assessee- trust as on March 31, 2010. It may be true that the lands are not appearing in the balance-sheet of the assessee-trust as on March 31, 2010. But at the same time the amount of expenses of Rs. 49,84,745 incurred by way of developmental expenses on the said lands are shown in the income and expenditure account of the financial year 2009-10. In this regard, the assessee explained that the land was not shown....
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.... conduct of the trustees and the asses see-trust. The lands received under HIBA were finally registered on March 25, 2013 five days after the date of passing the assessment order, but apparently two days prior to the date of receipt of the order by the assessee. As explained by the assessee, it tried to get the lands registered in favour of the trust and prove the genuineness of the gift (HIBA) before the Assessing Officer, but as one of the trustees (Shri A. R. Rahman) who gifted the land, was away from the station for long time due to preoccupation of the music programs etc., the asses see could not do the same before the date of passing the order. Immediately after the availability of Shri A. R. Rahman (the donar- trustee), the lands, which are already under HIBA (gift under Shariyat or Mohammedan law), are registered in favour of the assessee-trust, on March 25, 2013. It is also important to mention here that the above registered deed of the gift on March 25, 2013 clearly contained that the lands were already gifted to the assessee-trust by the trustees on March 15, 2009 by way of HIBA and the possession was also handed .over to the trust. The relevant portion of the said regi....
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....under a Hiba on March 15, 2009 in favour of the donee herein. Whereas however as the said Hiba under the Muslim law need not be registered, the same was not registered and pursuantly the donors are desirous of making a registered gift deed to confirm the above Hiba with regard to the Schedule property in favour of the done herein, which is a trust registered under the Indian Trusts Act and enjoying the exemption under section 80G of the Income-tax Act, 1961, vide order of the Director of the Income-tax (Exemptions) No. DIT(E) No. 2[1146]06-07, dated September 13, 2007 which continues to be valid and subsisting till date as extended by the Income-tax Department. Thus, though the lands are not registered in the name of the trust as on March 31, 2010 the subsequent conduct (act) of the assessee and also its trustees Shri A. R. Rahman and Ms. Kareema Begum, by registering the said HIBBA (gift) on March 25, 2013 clearly proved that the assessee's claim of HIBBA (gift) before the Assessing Officer was genuine and not an afterthought to avoid the legal complications/violations under section 13(1)(c) of the Act. The next observation of the Assessing Officer that the trustees and th....