TaxTMI 
TaxTMI 
TaxTMI 
2015 (9) TMI 375
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.... personal benefit of the trustee in view of section 13(2) of the Income Tax Act, 1961? (iii) In the facts and circumstances of the case, whether the case of the assessee falls within the ambit of the provisions of clause (b) of section 13(2) of the Income Tax Act, 1961? (iv) If the answers to the above questions at Sl. No. (i) to (iii) are affirmative, whether the denial of benefits of section 11 be restricted to such income of the trust used or applied directly or indirectly for the benefits of trustee or, in alternative, the total income of the trust is not entitled for the benefit of section 11 of the Act? 2. Broadly the facts are not in dispute. However, the facts necessary for disposal of the above mentioned issues are stated in brief. The assessee trust is engaged in the sole activity of running an educational institution, registered as a trust under section 12A of the Income Tax Act. The trust purchased an 'Octavia' car in the name of Shri Sandeep R. Pachpande, a trustee of the assessee-trust. Though the car was purchased and registered in the name of the said trustee the funds of the assessee were utilised for the purpose of purchase of the car. During the course....
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....n fact allowed to the trust for this year since the payments were made by the trust for purchase of the car. Registration Certificate of the car was also placed before the Bench to submit that though the car was meant for official use it was wrongly registered in the name of the trustee which was rectified at a subsequent date. Reference was also made to the logbook to submit that the car was used for official purpose only and there is nothing on record to suggest that the car was utilised for personal purpose of the trustee. 4. The learned Accountant Member discussed the issue at length and observed that the matter of eligibility to claim exemption under section 11 rests mainly on the interpretation of section 13(2)(b) of the Act; he has not applied/invoked other provisions or sub-clauses and hence it is not necessary to go into the other provisions of the Act. Section 13(2)(b) reads as under: - "(b) if any land, building or other property of the trust or institution is, or continues to be, made available for the use of any person referred to in sub-section (3), for any period during the previous year without charging adequate rent or other compensation" 5. It is not in dispute....
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....uate. 7. With due respects, the order of the learned Judicial Member contains several typographical errors and hence it would be sufficient to take bullet points out of that order. The view of the learned Judicial Member is that the AO ought to have made an investigation as to whether the car is used by a specified person and what should be the actual compensation for such use, if any. The Revenue should also prove that it is exclusively used; use for short duration would not bring the case within the meaning of the expression 'made available', in section 13(2)(b) of the Act. He also observed that the case law relied upon by the learned Accountant Member are distinguishable on facts. In the case of Agappa Child Centre (supra) the trust purchased a refrigerator and kept in the house of the trustee and when the refrigerator was in use the activity of the assessee had not commenced and therefore an inference was drawn by the Hon'ble High Court that it was 'made available for the use of the trustee'. However, in the instant case, the car was actually put to use for the purposes of the trust, as could be noticed from the logbook. 8. Even otherwise, in the opinion o....
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....pplied for the benefit of the person, if adequate rent or compensation is not charged for use, by any person referred to in sub-section (3). The expression 'made available' should be read in this context, in which event unless there is exclusive use by the trustee it cannot be said that it was made available and there is deemed use. He submitted that unless some benefit enures to the trustee, by the use of the car, section 13(2)(b) is not attracted. 11. Though the learned counsel relied upon the letter issued by the Regional Transport Authority, when it was questioned as to whether the RTO is empowered to issue a certificate in 2007, that too vaguely, about the use of the car for the trust, the learned counsel submitted that the AO or the Tribunal ought to have made further investigation, which is lacking in the instant case. He also highlighted that the decision of the Hon'ble Kerala High Court is based on specific finding of the actual use for personal benefit whereas, in the instant case, there is no proof of actual use by the trustee. With regard to adequate rent it was submitted that there was no need for charging any rent because the car was purchased in the name....
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....ge 3 of the assessment order to submit that it is accepted that the car was registered in the name of the trustee for the personal benefit of the trustee also. He finally submitted that section 13(b)(2) not only uses the expression 'directly or indirectly', but the expression 'made available' used therein has to be understood in the spirit in which it was used; i.e. to discourage trusts, whose income is totally exempt from tax, from misusing trust funds for personal benefit of the trustees even partly. In the instant case, even though there may not be recurring or enduring benefit, even if it is utilised once, exemption can be disallowed since the car was earmarked for trustee and hence it can be said to be 'made available' to the trustee. In this regard he referred to pages 7 & 9 of learned Accountant Member's order to submit that it is not for the Revenue to prove that it was utilised by the trustee and it is for the assessee to prove that it was exclusively used for the purposes of the trust; otherwise, based on the surrounding circumstances such as registration in the name of the trustee who has no car of his own, etc., it can be inferred that it was....
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....by prohibited person. With regard to complete denial of exemption he relied upon the decision of the Hon'ble Supreme Court in the case of Bharat Diamond Bourse 259 ITR 280 and also the decision of the ITAT Hyderabad Bench and other High Court decisions. 13. Joining the issue, the learned counsel for the assessee submitted that the assessee denied use of the vehicle for personal purposes in which event the burden automatically shifts on to the Revenue to prove that it was used for personal purposes by the trustee. Drawing adverse inference, without any material on record is not proper. With regard to the decision of Bharat Diamonds Bourse (supra) it was submitted that it was not on the quantum of disallowance. As stated earlier the assessee also relied upon a latter judgment of the Hon'ble Supreme Court - wherein the SLP was dismissed against the order passed by the Hon'ble Karnataka High Court - wherein violation of section 13(1)(c) was subject matter of consideration and the Hon'ble Apex Court observed that violation should not lead to denial of exemption in toto. 14. I have carefully considered the rival submissions and perused the record. As can be noticed from....
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....tion to the AO to give any other interpretation to the words 'made available for use'. 15. In my considered opinion if a car is purchased in the exclusive name of a trustee, who has complete control over the car and had no personal car of his own, in the absence of any resolution passed by the trust in writing, it has to be assumed that it was made available for use of the trustee irrespective of whether it was actually used or not. On a conspectus of the matter, I am of the firm view that there is violation of provisions of section 13(2)(b) r.w.s. 13(3) of the Act. I agree with the view taken by the learned Accountant Member on this issue. 16. However, with regard to the quantum of exemption, it is noticed that the learned Accountant Member relied upon the decision of the Apex Court in the case of Bharat Diamond Bourse (supra) wherein Shri Bharat Shah utilised an amount of Rs. 17 lakhs for his personal purposes for buying properties in breach of section 13(1) of the Act. The Hon'ble Supreme Court observed that Shri Bharat Shah was founder of the assessee institution and substantial amount/money was lent to Shri Bharat Shah without adequate security or interest and he....