TaxTMI 
TaxTMI 
2015 (11) TMI 1636
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....e learned CIT(A) erred in upholding the action of A.O. in not granting exemption u/s 11 of I.T. Act, 1961 and upholding the action of A.O. that there is violation of provisions of section 13(1)(c) of I.T. Act, 1961. 5. The addition sustained out of travelling and conveyance expenses by Hon'ble CIT(A) is unjustified, unwarranted and excessive. 6. The addition sustained out of promotional and inaugural expenses by Hon'ble CIT(A) is unjustified, unwarranted and excessive. 7. The addition sustained out of depreciation on cars by Hon'ble CIT(A) at Rs. 1,94,129 is unjustified, unwarranted and excessive. 8. The addition sustained by CIT(A) at Rs. 10,000/- on account of salary is unjustified, unwarranted and excessive. 9. The addition sustained out of expenses by CIT(A) at Rs. 75,000/- is unjustified, unwarranted and excessive. 10. The assessee denies liability to be assessed to interest u/s 234B of I.T. Act, 1961 is unjustified, unwarranted and excessive. 3. In this case a search u/s 132 of the I.T. Act was carried out at the hospital of the assessee as well as the residence of Dr. Sudhir Babhulkar and Dr. Sushrut Babhulkar who also....
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....ital expenditure in the form of change of the flouring of the entire building and patient room, electrification and painting of the building. There was also front elevation of the hospital. The AO held that these were capital expenses and not repair and were meant to give benefit to its founder trustee Dr. Sudhir Babhulkar. On this account also the AO held that founder trustee got direct benefit and, therefore, the assessee would not be entitled to exemption u/s 11 of the I.T. Act. 6. Private practice of Dr. Mrs. Nandani Sushrut Babhulkar. In this regard the AO observed that Dr. Nandani S. Babhulkar who is wife of Dr. Sushrut Babhulkar, one of the trustees, is engaged in her practice from hospital premises. She has been provided with her one independent cabin and uses the facilities of the hospital like staff of the hospital, electricity, water, stationery, nursing staff etc. However, she did not share her professional receipt with the assessee trust. Hence the AO held that the action of the assessee trust resulted in direct benefit to Dr. Mrs. Nandani S. Babhulkar who happens to be the wife of trustee and the provisions of section 13(1)(c) are applicable. Hence exemption u/s....
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....the AO held that the visit of Mrs. Aruna Babhulkar to foreign country is a direct benefit to the assessee within the meaning of section 13(1)(c). In absence of explanation regarding the nature of travelling expenses and its purpose, the AO held that the assessee was not eligible for exemption u/s 11 of the I.T. Act. 10. Personal expenses of trustees. In this regard the AO referred to a bill of Gondwana Clup for Rs. 1100/- in the name of Dr. Sudhir Babhulkar. The AO held that in absence of any explanation this was a direct benefit to the trustee. The AO further referred to a bill of Eureka Forbes of Dr. Mrs. Nandani Babhulkar paid by the assessee trust. The AO found this another example of personal expenses of trustee/their relative incurred by the assessee. The AO further noted that Dr. Sudhir Babhulkar offered the professional fee received from the assessee trust under the head "business/professional income" and claimed expenses mainly as salary. The salary was paid to MBBS Doctors who were pursuing their post graduation at M/s Sushrut Hospital and Research Centre and were assisting him while performing operation etc. These MBBS Doctors were residing at M/s Sushrut Hospital ....
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....granted some relief on addition. 15. Against the above order, the assessee is in appeal before us. At the threshold learned counsel of the assessee submitted that in the first year i.e. assessment year 2003-04 the assessee had filed its return of income on 3110-2003. The assessment was completed when the search was conducted on 1004-2008. He submitted that the assessment has not been made on the basis of any material found during the search. Hence placing reliance upon Hon'ble jurisdictional High Court decision in the case of CIT vs. All Cargo Global Logistics Ltd. in Income Tax Appeal No. 1969 of 2013 vide order dated 21st April, 2015, learned counsel of the assessee submitted that since the assessment was complete and it is a non abated assessment, the addition made dehorse any incriminating material found during the search the assessment is bad in law. 16. We have heard both the counsel and perused the records. Learned counsel of the assessee Shri K.P. Dewani summarised his submissions in this regard as under : A) The assessee trust is constituted on 30/3/1991 and main object of the trust is to provide medical relief and promoting education in the field of medi....
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.... of the trust and are also trustees. For rendering services for day to day activity, a reasonable compensation is being paid to trustees in the form of sharing of fees and other reasonable facilities/perquisites. Value of compensation paid even after considering disallowance made by AO. is computed at Pages 20 to 34.. I) The assessments of two doctors were also completed under section 153A r.w.s. 143(3) of LT. Act 1961 and income shown by them in the return being amount paid by assessee trust has been accepted by the same A.O. without inviting any adverse observation with regard to income earned or assets held by them. J) The A.O. in the case of two doctors has disallowed salary paid to doctors for assisting them being the expenditure of trust and not of individual. The observation of AO. nullifies the adverse observation made in the case of Trust that unreasonable benefit is being given by trust to the two doctors. K) The AO has made disallowance in the assessment framed by observing that the payment made is towards personal use or is in the nature of personal use of trustees. - assessee has submitted chart wherein payments made to trustees for rendering....
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....h and family welfare, Govt. of India. The aforesaid accredition is provided to charitable trust as per rules framed by Government of India. This amply demonstrates that one arm of the Government of India has duly recognized the assessee trust as charitable institution and same is disputed by revenue authorities being another arm of Government of India. R) There is evidence on record that one Mercedez Benz ca owned by Dr. Sushrut Babulkar. The AO. in assessment framed u/s 153A/143(3) made part disallowance for personal use of car out of depreciation and expenses. This takes reasonable care for personal use of vehicle. The cars owned by trust are used for the purpose of objects of trust. The expense claimed by trust on car in no manner of consideration can be said to be excessive or unreasonable warranting invocation of provisions of sec. 13(1)(c) of I.T. Act 1961. S) The repairs and renovation of building is reasonable expenditure. The total area of building is 18300 sq. ft. Even as per AO. total expenditure claimed in block period is Rs. 61,43,599/- which also includes replacing the old flooring. The total expenditure by no standards can be considered as excessive....
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....case of M/s. Idicula Trust Society vide order dated 11/04/2014 vii) ITAT order in ITA NO.5503/De1/2012 in the case of Institute for Human Development vide order dated 10/10/2014. viii) ITAT order in ITA NO.2745/De1/2011 in the case of Nutrition Foundation of India vide order dated 7/2/2014 ix) (2009) 17 DTR (Del.) 283 Director of Income Tax (Exemption) vs. Span Foundation x) (2014) 41 CCH 0119/Ahd. (Trib.) PNR Society FIR Relief and Rehabilitation of the Disabled Trust vs. DOlT (Exemptions) xi) (2013) 354 ITR 605 (AP) Chirec Education Society vs. Assistant Director of Income Tax 17. Per contra learned D.R. relied upon the orders of the authorities below. 18. We have carefully considered the submissions. First we deal with the preliminary issue of jurisdiction for assessment year 2003-04. Assessment in this case has been framed u/s 153A read with section 143(3) of I.T. Act. The assessee has filed the original return in this case for assessment year 2003-04 on 31-10-2003. The assessment was complete and the search was conducted on 10-04-2008. This assessment has been framed pursuant to the said search u/s 153A of the I.T. Act. Hence ....
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....ecord of the AO. b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search." 20. From the above it is evident that in respect of non-abated assessments, the assessment u/s 153A has to be made on the basis of books of accounts or other documents not produced in the course of original assessment but found in the course of search and undisclosed income or undisclosed property is covered in the course of search. When the above exposition is viewed and the basis of AO's assessment as above is considered, we do not have any hesitation in holding that since the assessment year 2003-04 is a case of non-abated assessment, the AO's jurisdiction to make assessment u/s 153A without any reference to books of accounts or other documents etc. not produced in the course of original assessment but found in the course of search is not sustainable and is liable to be quashed and the same is quashed as such. 21. Now we consider the merits of AO's assessment whe....
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....elevation. The AO has held that these are not repair and renovation and were meant to be given benefit to its founder trustee. Above observation of the AO clearly is in the nature of a sweeping generalisation and comment. The total area of the building is 18306 sq.ft. and the total expenditure under the block period is 6143699. In this regard assessee's contention is that rent paid for such property is Rs. 2.75 per sq.ft. and the asking rent for similarly located property is around 901 to 100/- per sq.ft.s The trust is occupying the property since 1992 and had to replace flooring due to extensive foot fall being a public hospital. That the property shall be used for a further period of 15 years by the trust. Considering from this angle, the quantum of expenditure on repair and renovation and the nature thereof it cannot be held that expenditure was not meant for the purposes of the trust but it was meant to give undue benefit to the owner trustee. Hence in our considered opinion this plank of AO's drawing adverse inference is also devoid of cogency. 23. Another plank of AO's argument that Dr. Nandani Babhulkar who is wife of Dr. Sushrut Babhulkar, one of the trustees, is engaged....
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....medical store in the premises of the trust, has made payment for services provided by the concerned persons on individual personal capacity and it has no nexus with the activity of the trust or any profit of the trust. Hence the payment of commission by the medical store cannot be said to be an indirect benefit to the trustees. 27. Another observation of the AO is that the assessee has not been able to explain the nature of the travelling expenses and how it was done for the purpose of the business. In this regard it is the assessee's submission that travelling expenditure has been incurred in the course of day to day activity of running of hospital. Genuineness of this expenditure has not been doubted. Necessity and nexus of expenditure has been said to be demonstrated by the fact that they were made for medical consultation, research activity and attending conferences. In this regard certificate of attendance of various firms out of India has also been placed in paper book. Thus we find that the AO has also made this observation of mis-use of travelling expenditure also on the basis of his surmises and conjecture. Hence there is no basis on which it can be held that there is a....
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....ate to assume that there was uniform practice in all assessment during search period. The above observation of the AO clearly amplify that the AO has picked up and magnified some statements obtained and has made sweeping generalisation which is not sustainable in law. By no stretch of imagination it can be said that it is a legislative intent that the AO's intention and feelings should be the basis of assessment. The AO's observation that the assessee trust is not doing any charitable activity is also devoid of any cogency. The assessee trust was constituted on 30-03-1991 and the main object of the trust was to provide medical relief and promote education in the field of medicine. The Trust is registered u/s 12A of the I.T. Act and a certificate has been issued u/s 12A on 13-03-1992. It is holding valid registration even on date. The assessee trust is holding the approval u/s 80G of the I.T. Act from its inception. The approval of section 80G is valid even today. All along in the past upto assessment year 2003-04 the trust has been granted benefit of exemption u/s 11. There was an action u/s 132A on 21-03-1995 upon the assessee and benefit u/s 11 was granted without inviting any ad....