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2019 (10) TMI 348
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....nature, the appeals were heard together and are being disposed of by this common consolidated order for the sake of convenience. 3. ITA Nos. 27 to 31/Coch/2019 : Jose Thomas :AY 2004-05 to 2007-08 ITA Nos. 32 to 35/Coch/2019 :GracyBabu :AY 2004-05 to 2007-08 3.1 The assesses have raised the following common ground of appeals in ITA Nos. 27, 28, 29, 30, 32, 33 & 34/Coch/2019: 1. The Assessing Officer went wrong in assessing the extra fee collected from students as the income of the family head of the trustees instead of equally allocating among the trustees. The CIT(A) had confirmed the finding of the Assessing Officer ignoring the submission of the assessee. 4. The Ld AR has not pressed the following additional ground of appealsin the case of both the assesses for all the assessment years. The Assessing Officer went wrong in assessing the fee collected by the trustees in their official capacity from the students in excess of what is fixed by the Govt. of Kerala in their hands which was not accounted by the Trust as the income of the trust. The learned commissioner of incometax( Appeals) has confirmed the assessment ignoring the submission of the assess....
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....ts by the Trustees in connection with the litigation among the Trustees.Copy of thedecree of the Sub Court,Pathanamthitta in OS No 248/06 etc. (PJP-6). iv. Copies of accounts with the trust -PJP-5, KRS-2, JTP-4 etc. 5.3The Assessments were made under section 143(3) r.w.s 153A for the A Ys 2003- 04 to 2008-09and under section 143(3) for the A Y 2009-10 in the case of persons searched namely Smt. GracyBabu, Sri. Jose Thomas and Sri.P. J. Paulose who were the heads of family comprising of adult members only. No assessments in consequence to the search by invoking provisions of section 153C were made in the cases of family members who were trustees.Based on the above seized documents and records the assessing officer further concluded that the seized materials PJP-5, JTP-4 and KRS -2 contained the details of donations received by the Governing Body members from students, the amount given by the Governing Body Members to the Trust and the amount appropriated by them. The Assessing Officer observed that admission to the management quota seats were done by the three Governing Body Members together during the period from F.Y. 2002-03 to 2006-07. The Assessing Officer found that....
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....ion so collected from students in the management quota was not accounted in the accounts of the college and the trust. It was shared among the governing body members and utilized by them. 5.5 Before the Assessing Officer, the assesseethat the assessee did not personally receive any donations from students for admission to the Management quota; donation if any received was received by the trust and utilized by the Trust and hence, it was assessable in the case of the Trust. The assessee did not receive any allowance or any other amount from the Trust other than what is specifically included in the accounts of the Trust. The transactions as entered in the seized materials PJP-5, JTS-4 and KRS-2 were totally denied by the assessee. According to the assessee, these accounts had no relevance to the actual accounts of the Trust and they were only some noting which had no evidentiary value. With regard to the interest due on AICTE deposit, it was claimed that the interest on the deposit was due on maturity only, i.e. 25.2.2012. It was explained that the correct rental income was computed by the assessee and included in the return filed u/s 153A of the IT Act, 1961. As an explanation fo....
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....ons from students in his individual capacity was contrary to his own statements given consequent to the search. The other trustees, SmtGracyBabu and Sri PJ Poulosehad also admitted that they had received amounts from students in addition to the prescribed fees and that they had invested the amounts so received in their new Trusts/other investment though Shri Jose Thomas and Smt.GracyBabudenied income from donations received from students. Shri. P.J.Poulose had filed returns of income admitting income from donations received from students as per the accounts seized as PJP-5. Shri Jose Thomas in his statement dated 19.3.2009 had stated that he had approximately Rs. 60 lakhs as income from donations received from students. He had expressed his willingness to declare the income and pay tax on the amount. Rejecting the contentions of the assessee, the Assessing Officer took the entire amount collected from students and 1/3rd each was taken as the share of the trustees and added to the income of the trustees. 6. Before the CIT(A), it was submitted that in case it is held to be a case of collection made by Trustees in their individual capacity for specific services provided to the stud....
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....e in the hands of recipient. It may be by way of loan, gift or receipt on behalf of others. It was submitted that the money received by the Trustees was paid by the students who got admission in the college run by the Trust. It was fee collected for the courses conducted in the college in excess of the fees fixed by the Government. It was submitted that in case it cannot be considered as course fee as the fee was already fixed by the government, it would take the character of donation or voluntary contribution only by the students. It was submitted that donation or voluntary contribution did not come under the purview of income chargeable to tax and provisions of section 56(v) will not attract as there was consideration in the form of a seat for the student in the college. In case of absence of adequate consideration, it can be a voluntary contribution. The assessee submitted that voluntary contribution would constitute income within the meaning of section 2(24)(iia) of the Act. But such contribution received by the Trust or any other on behalf of the Trust can be considered as income of the Trust only and not as income of the recipient. 6.4 The CIT(A) directed the Assessing ....
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....eceived was Rs. 2,11,93,500/-. Out of this sum a sum of Rs. 31,12,750/- had been incurred towards expenses. The assessee received only Rs. 62,95,000/- as cash during the year and Smt. Gracy Babu was paid a sum of Rs. 6,00,000/- only. The CIT(A) found that the seized material PJP-5, JTP-4 and KRS-2 contained the details of sharing of donation among the trustees and the share of donation received by the trustees for the AY 2003-04, 2004-05, 2006-07, 2007-08 was found to be the same. The CIT(A) observed that for AY 2005-06, the amount actually shared among the trustees as per the seized record was correctly given by the assessee. For the AY 2009-10, the assessee had taken the actual cash received by the trustees as their share of donation. The assessee submitted that the amount received during the year can only be taxed. From the seized records, the CIT(A) observed that the plea of the assessee was correct for all the years. The actual amount received by the assessee as per this is as follows: Jose Thomas GracyBabu AY 2003-04 Nil Nil AY 2004-05 6,33,677 6,33,677 AY 2005-06 3,50,000 3,00,000 AY 2006-07 2,50,000 2,50,000 AY 2007-08 ....
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.... appeals by the revenue in the case of the above assesses are directed against the order of the CIT(A)-III, Kochi dated 08/10/2018 and pertain to the assessment year 2009-10. 8.2 The assessees have raised the following grounds of appeals: 1. The CIT(A) relied on the narration in pages 13,14 & 15 of the agreement dated 10/03/2009 to arrive at his conclusion, whereas he should have relied on page 16, para to where it was unambiguously stated that the assessee would be paid Rs. 1 crore to clear the debt and liabilities of the trust on the date of execution of the agreement. Hence, the CIT(A) decision is based on inaccurate facts and this sum was not part of the consideration of sale of agricultural land. 2. The CIT(A) disregarded the finding by the Assessing Officer that the amount recorded as given back to the trust in the seized material is also not reflected in the books of accounts as well as the assessee's accounts as detailed by the Assessing Officer in page 13 of the assessment order where he has held that all such donations received from the students is to be considered as having been received by the assessee, Shri Jose Thomas and ShriPoulose P.J. Hence, w....
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....ust by the Assessing Officer and confirmed by the CIT(A). 10.1 The facts of the case are that during the year, the Assessing Officer had made the following additions as consideration received in lieu of relinquishment of trusteeship and taxed under income from other sources. Jose Thomas Gracy Babu Surplus consideration from sale of Rubber Estate @Rs. 10,40,470 per acre 52,02,349 1,57,62,060 Contract payment 34,00,000 34,00,000 Total 86,02,349 1,91,62,060 10.2 The said consideration was treated as receipt in lieu of relinquishment of Trusteeship received in the form of sale consideration of agricultural land and contract payment was assessed under the head income from other sources. According to the Assessing Officer, since the trustees had relinquished the right of Trusteeship in a Trust viz. Carmel Educational Trust and indirectly received consideration in lieu of transfer, such consideration was chargeable in the hands of trustees as income under the head other sources. 11.On appeal, the CIT(A) confirmed the findings of the Assessing Officer. With respect to the excess price received on sale of agriculture land @Rs. 10,40,400....
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....acre was fixed at Rs. 25,40,470/-. Hence, it was submitted that no part of consideration received can be treated as consideration in lieu of relinquishment of trusteeship paid by the purchaser. Moreover, it was submitted that out of the amount Rs. 1,57,62,060/- (15.15 x Rs. 10,40,400) assessed in the hands of Gracy Babu include consideration relating to 6.25 acres and 8.90 acres of rubber estate owned by her late husband, Babu Joseph who expired before the date of supplementary deed of the trust(25/03/2009). Hence, it was submitted that he had not relinquished his right of succession as lifelong trustee on 25/03/2009 as his right of succession as lifelong trustee extinguished on the date of death and nobody will acquire or inherit his such right on the date of his death as the death of the ownerwill put an end to the life of the right as well. It was submitted that Gracy Babu and her two major sons viz Judy Babu & Frudy Babu Thomas were the legal heirs of late Babu Thomas. The Ld. AR submitted that the aforesaid 8.90 acres of rubber estate owned by Late Babu Thomas was transferred for Rs. 2,26,10,197 (Rs. 25,40,470 per acre) on 25/03/2009 by the aforesaid legal heirs to Believers C....
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....sition of the asset transferred was indeterminable or not specified in section 55 of the Act. 11.3 The contention of the Ld. DR is that a person appointed as a trustee in a public charitable trust shall not acquire any legal or actionable right over the property owned by the trust which is solely held for attainment of the objective, charitable purpose. The Ld. DR submitted that the trusteeship in a public charitable trust is not a right of the trustee and a trustee is not entitled to receive any benefits from trust other than reasonable remuneration for the services rendered. Hence, it was submitted that the assessee had no legal right for receipt of compensation in lieu of relinquishment of trusteeship. According to the Ld. DR, in the instant case, there were compensations which was received indirectly even though the assessee did not have a legal right to receive any consideration for his relinquishment. Hence, according to the Ld. DR, the money received by the assessee in the guise of excess price of agricultural land Rs. 10,40,400(25,40,400 - 15,00,000) per Acre for 5 Acres or contract receipt under the head other sources in the hands of the assessee, as this right being....
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.... Church and the assesses ceased to be the trustees of Carmel Educational Trust. According to the CIT(A), the right of trusteeship is not legally enforceable right and it cannot be brought into the ambit of definition of "capital asset" and the consideration received on transfer cannot be treated as 'income from capital gain'. The CIT(A) treated it as "income from other sources" so as to tax the same. This finding of the CIT(A) is not proper. The assesses herein wereholding trusteeship in the Carmel Educational Trust which was relinquished in favour of trustees of Believers Church, and this right is nothing but a capital asset. Had the Carmel Educational Trust survived as it is, then they have the right to continue as a Trustee throughout their life time. Once it has ceased to exist and relinquished the right of trusteeship in favour of the new trustees in Believers Church, the consideration received for such relinquishment is nothing but a capital receipt and gain on such transaction cannot be considered as 'income from other sources'. 11.5 The contention of the Ld. AR is that since there is no cost of acquisition, it is not possible to compute capital gain as section 55(2) of t....
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.... asset, being equity share or share allotted to a shareholder of a recognised stock exchange in India under a scheme for demutilisation or corporatisation approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), shall be the cost of acquisition of his original membership of the exchange: Provided that the cost of a capital asset, being trading or clearing rights of the recognised stock exchange acquired by a shareholder who has been allotted equity share or shares under such scheme of demutualisation or corporatisation, shall be deemed to be nil; (b) in relation to any other capital asset - (i) where the capital asset become the property of the assessee before the 1st day of April, 1981, means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the 1 st day of April, 1981, at the option of the assessee; (ii) where the capital asset became the property of the assessee by any of the modes specified in sub-section (1) of section 49, and the capital asset became the property of the previous owner before the 1stday ....
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.... a sum of 35 lacs. That sum was credited to the reserve and surplus account, which was disallowed by the Assessing Officer, holding that it was income from other sources. The assessee appealed to the Commissioner, who came to the conclusion that the assessee was liable to pay tax on capital gains on the amount of Rs. 35 lacs after deducting an amount of Rs. 7 lacs as cost of acquisition. The Department and assessee challenged the decision before the Tribunal and the Tribunal relied upon the Judgment of the Supreme Court in the case of CIT v. B.C. Srinivasa Shetty[1981] 128 ITR and the amendment to section 55(2) of the Income Tax Act and held that the assesseedid not incur any cost to acquire the leasehold rights and that if at all any cost had been incurred it was incapable of being ascertained. It was therefore held that since the capital gains could not be computed as envisaged in section 48 of the Income Tax Act, therefore, capital gains earned by the assessee, if any, was not exigible to tax. The Department's Appeal to the High Court was dismissed and that is how it approached the Hon'ble Supreme Court. In dealing with the rival contentions, the Hon'ble Supreme Cour....
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.... to meet the situation created by the decision in B.C. Srinivasa Shetty (128 ITR 294) (SC) and the subsequent decisions of the High Court that the Finance Act, 1994, amended section 55(2) to provide that the cost of acquisition of, inter alia, a tenancy right would be taken as nil. By this amendment, the judicial interpretation put on capital assets for the purposes of the provisions relating to capital gains was met. In other words, the cost of acquisition would be taken as determinable but the rate would be nil. (11) The amendment took effect from 1st April, 1995 and accordingly applied, in relation to the assessment year 1995-96 and subsequent years. But till that amendment in 1995, and therefore covering the assessment year in question, the law as perceived by the Department was that if the cost of acquisition of a capital asset could not in fact be determined, the transfer of such capital asset would not attract capital gains. The appellant now says that CIT v. B.C. Srinivasa Shetty's case [1981] 128 ITR 294 (SC) would have no application because a tenancy right cannot be equated with goodwill. As far as goodwill is concerned, it is impossible to specify a date on....
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....t to be excluded from the total income under the Act, only if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. Therefore, if the income is included under any one of the heads, it cannot be brought to tax under the residuary provisions of section 56. (16) There is no dispute that a tenancy right is a capital asset the surrender of which would attract section 45 so that the value received would be a capital receipt and assessable if at all only under item E of section 14. That being so, it cannot be treated as a casual or non-recurring receipt under section 10(3) and be subjected to tax under section 56. The argument of the appellant that even if the income cannot be chargeable under section 45, because of the inapplicability of the computation provided under section 48, it could still impose tax under the residuary head is thus unacceptable. If the income cannot be taxed under section 45, it cannot be taxed at all. (SeeS. G. Mercantile Corporation P. Ltd. v. CIT (1972) 83 1TR 700 (SC). (17) Furthermore, it would be illogical and against the language of section 56 to hold that everything that is exempted from capital g....
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....le trust which was charged under the head "other sources"and also ignoring the expenses incurred. 12.1 The facts of the case are that the agreement dated 10/03/2009 has provided payments in relation to ongoing construction in the college building which is payable on completion, out of Rs. 37.50 crores. A sum of Rs. 34 lakhs each had been paid to GracyBabu and Jose Thomas in March, 2009. According to agreement entered into between Believers Church and seven outgoing trustees belonging to the families of Gracy Babu and Jose Thomas on 01/06/2010, the construction was completed and a further sum of Rs. 4.50 crores each was payable to Gracy Babu and Jose Thomas subject to deduction of tax u/s. 194C of the I.T. Act. On enquiry, the college authorities had stated that no construction work was carried out by the outgoing trustees. Hence, the total amount of Rs. 4.84 crores each received by Gracy Babu and Jose Thomas was treated as consideration received in lieu of relinquishment of trusteeship which is assessable as income from other sources. 12.1.1 A sum of Rs. 16 crores was paid in June 2010 by Believers Church and six associate trusts, St. Thomas Educational Trust in which Gracy B....
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....unt was indicative of only cash withdrawals (including those over Rs. 20,000/-) and there was no cheque payment to any party for any purchase or service and there was no TDS deduction to support any sub contract work. According to the CIT(A), these findings showed that no construction work had actually been undertaken and the payments shown as contractual receipts were nothing but payment received for the easy and voluntary relinquishment of trusteeship in payment in favour of identified individuals. According to the CIT(A), the Carmel Trust had not deducted any TDS on the payments made to the assessee and other old trustees for construction work during the assessment years 2009-10 & 2010-11, when the payment of Rs. 4.84 crores had been received by the assessee, instead the Carmel Trust had deducted TDS for the aforesaid amount during assessment year 2011-12, which was not claimed by the assessee and is a clear case of after thought. According to the CIT(A), the total amount of payment made to the assessee including the TDS amount (unclaimed) does not match in the amount reflected inthe agreement. The CIT(A) found that there was a credit of Rs. 8.68 lakhs in the books of accounts o....
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....he total amount of Rs. 4.84 crores. 12.4 The Ld. AR submitted that construction was carried out by all the seven persons who are parties to the agreement dated 01/06/2010 and a statement to that effect was given as was agreed in clause 6 of that agreement. Tax was also deducted in the F Y 2010-11 u/s 194 C @ 2 percent as the construction was over and the amount had been brought under the fixed asset schedule of the Carmel Educational Society. It was submitted that in addition to the receipt of 9.68 crores, the CIT(A) had directed that the tax deducted on this amounting to Rs. 8.68 lakhs also forms part of the contract receipts to be considered in the assessment for the A.Y.2011-12. The assessee actually incurred loss on this work and by inadvertence had omitted to claim such loss in the return.With regard to the denial of construction by the college authorities (Believers Church) it was evident from their Balance sheet as at 31/03/2010 that they had accounted the entire sum Rs. 9.68 crores in A.Y.2010-11 and shown this amount as advance for work in progress in its balance sheet as on 31.03.2010. On completion of the work this amount was taken by the college in its balance sheet ....
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....cy Babu and her two sons and Jose Thomas and his three family members. The parties to the agreement (7 persons) together had completed the construction in the F.Y. 2010-11 as evidenced by clause 2 of the agreement dated 01/06/2010 for a total amount of Rs. 9.68 crores and vide clause 3 of the said agreement it was agreed to appropriate the contract amount from the amount already paid to the parties. Contrary to this, the Assessing Officer had relied on the unsigned agreement and the agreement dated 10/03/2009, but had ignored the agreement dated 01/06/2010 which confirmed the construction. Clause 5 of the agreement dated 10/03/2009 reads as follows: "5. It is agreed by the first and second parties together that they with the help of their Chartered Accountants shall prepare all the debts and liabilities during the above said period of within six months since from the execution of this agreement in order to clear it by receiving the above said amount of 37.50 crores (Rupees thirty seven Crores and Fifty lakhs only) in different instalments and the first parties agree that they will release such funds without any delay as per the demand of the second parties. It is further a....
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....he income fromconstruction contract amount at 8% for these assessment years. Directed accordingly. Thus the appeals of the assessee in ITA Nos. 208,209, 210 & 211/Coch/2019 are partly allowed. ITA Nos. 210 & 213/Coch/2019 :(AY 2011-12)[Assessee's appeals] 13. Coming to the appeals in ITA Nos. 210 & 213/Coch/2019, there was tax deduction by Believers Church in respect of Rs. 8.68 lakhs relating to assessment year 2011-12. The CIT(A) sustained the addition of Rs. 8.68 lakhs. In our opinion, there is no reason for sustaining the entire addition of TDS amount as income of the assessee in the assessment year 2011-12. We direct the Assessing Officer to consider 8% of Rs. 8.68 lakhs as income of the assessee as discussed earlier in para no. 12.8 of this order for AYs 2009-10 and 2010-11. This ground of appeals of the assesses are partly allowed. In the result, the appeals of the assesses in ITA No. 208 to 213/Coch/2019 are partly allowed. ITA Nos.238/Coch/2019:Revenue Appeal:JoseThomas:AY 2011-12 ITA No. 239/Coch/2019:Revenue Appeal:Gracy Babu :AY 2011-12 14. The Revenue has raised the following common grounds of appeals: 1. The Learned CIT(A) in his order dated 31....
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....primarily because the intention of the trustees were known to the Income tax Department by recovery of the draft agreement dated 23/02/2009 during the search proceedings. 5. The learned CIT(Appeals) had rightly concluded that the excess consideration received by the trustees for the sale of adjacent land vis a vis that received bythe non trustees, payment for clearing nonexistent liabilities of the erstwhile trustreceived by the assessee, contractual payments for nonexistent construction all represented benefits received by the assessee and hence acquired the character of income in the hands of the assessee. The learned CIT(Appeals) had erred in not appreciating the fact that the third way of payment under the guise of inter trust donations from trusts under the control of Believers Church to the trust newly created by the assessee is also part and parcel of the above mentioned consideration for the benefit of the assessee and hence cannot be treated as separate and distinct from the other transfers only because it is disguised as an inter trust transfer. 6. The order of the learned CIT(A) dated 31/01/2019 is erroneous and so maybe quashed and the order of the ass....
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.... deleted by the CIT(A). 14.4 Against this the Revenue is in appeal before us. The Ld. DR relied on the above grounds. 14.5 The Ld. AR submitted that receipt of money by St. Thomas Educational Trust as donation would constitute income in the hands of St. Thomas Educational Trust within the meaning of section2(24)(iia) of the Act. Such donation will not constitute income in the hands of trustees and if it was taken as income of the trustees, such an action would amount to double assessment which is not contemplated in scheme of assessment of income under the IT Act. The Ld. AR submitted that in case the donation received by St. Thomas Educational Trust is treated as consideration received by the assessee for relinquishment of their trusteeship in Carmel Educational Trust in March 2009, the amount received can only be treated as capital receipt which is received or receivable as on the date of relinquishment of trusteeship. This is because the right of succession of lifelong trusteeship can be a capital asset within the meaning of section 2(14) and its exchange or relinquishment or extinguishment of therein amounts to transfer u/s 2(47) of the Act and the transfer took place on ....
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....010-11. 16.1 The assessee has raised the following commongrounds of appeals: 1. The CIT(A) erred in making an addition of Rs. 27,84,000/- to the income of the Trust which was assessed on a protective basis in the hands of the trust and on a substantive basis in the hands of the trustees. 2. The CIT(A) was wrong in upholding the denial of exemption u/s. 11 of the Act which was against law due to following reasons: a) Trust is not responsible for the illegal collection made by the Trustees which were shared by them and never accounted in the books of the trust. Therefore, the addition of such income if at all made could be only in the names of the trustees and not in the hands of the trust. b) The Assessing Officer has not pointed out a single case where any accounted income of the trust has been misutilised or diverted by the Trustees for personal use. 3. There was no violation of section 13 of the I.T. Act by the Trust and the Assessing Officer and CIT(A) were misdirected in considering it's activity of running an Engineering College as running of a business. 4. Trust claimed utilization and set off of carry forward deficit f....
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....er, the issue pertaining to undisclosed compensation received for relinquishment of trusteeship could not be determined in the orders u/s 153A of the IT Act and subsequently when the compensation amount were not disclosed in the return of income of the trustees and the Trust, the cases for the relevant years were assessed u/s 143(3) of the IT Act 1961. 16.4 On the basis of an agreement dated 10.03.2010 the Trustees of the Carmel Educational Trust, handed over the possession of the Carmel Engineering College and all other assets of the Trust to a set of new Trustees who were nominees of the Believers Church. As per the above agreement the Believers Church agreed to pay 37.5 crores to the erstwhile Trustees on handing over of the assets of the Trust and on execution of a supplementary deed of Trust whereby all the existing Trustees were substituted by persons who are nominated by the Believers Church (new Trustees).As per the above agreement the amount handed over to the erstwhile trustees was for meeting the liabilities of the Trust. Out of the above 37.5 crores,Rs. 1 crore each totaling to Rs. 3 crores was given to Smt. Gracy Babu, Sri Jose Thomas and Sri P J Poulose in March 20....
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.... 41,82,731 1,36,73,316 2006-07 64,91,222 1,42,03,803 2007-08 2,40,34,444 1,90,76,299 2008-09 2,99,17,018 2,59,85,137 2009-10 2,64,46,323 1,39,37,615 As per Original Returns filed u/s 139 Income as per Income & Expenditure Statement Amount claimed as utilized for charitable purposes 2003-04 2,41,97,800 2,41,97,800 2004-05 1,91,27,477 1,87,73,094 2005-06 2,57,11,373 2,57,11,373 2006-07 64,91,220 1,52,03,803 2007-08 5,87,81,220 5,87,81,220 2008-09 6,88,77,429 6,88,77,429 2009-10 8,25,96,750 1,39,37,635 The assessment in the case of the assessee Trust was completed u/s 143(3) r.w.s. 153C of the IT Act, 1961, on 31.12.2010 for AY 2003-04 to 2009-10. 16.7 The Assessing Officer found that as per the accounts of the Trust found and seized from the residential premises of Sri PJ Poulose, Smt Gracy Babu and Sri Jose Thomas , they, as governing Body members, had received donations from students for giving admission to the Management quota seats. They were also drawing allowances from the Trust. Further they were frequently drawing money from the trust and partly returning it a....
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....ith him only. 16.8 The seized material PJP-5, KRS-2, contained the details of donations received from students, the amount given by the Governing Body Members to the trust and the amount appropriated by them. It was noticed from the account of the Trust that no amount of donation received from students was accounted in its accounts. Details of the donations received by the Governing Body Members are as under: Assessment Year Donations from students collected Donations handed over to the Trust. Donations Accounted by the Trust. Donations shared by Trustees as per seized material. Percentage of donation shared by the trustees. 2003-04 NIL NIL NIL NIL NIL 2004-05 Rs. 47,31,000 - Commission Rs. 25000 Rs. 47,06,000/- Rs. 27,84,000/- Rs. 19,04,000/- 33.33% 2005-06 Rs. 31, 67,000/- Rs. 20,63,000/- NIL Rs. 11,04,000/- 33.33% 2006-07 Rs. 15,07,300/- Rs. 7,57,300/- NIL Rs. 7,50,000/- 33.33% 2007-08 Rs. 76,92,450/- Rs. 67,94,950/- NIL Rs. 8,97,500/- PJ Poulose Rs. 7,27,500/- Jose Thomas Rs. 1,70,000/- Gracy Babu Rs. 0 2007-08 Lapsed Seat Rs. 17,94,750/- NIL NIL ....
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....nt Addition affixed assets during the year claimed as utilized for charitable purposes 2003-04 15,51,297 (-) 4,21,36,687 2004-05 10,50,980 (-) 1,44,25,959 2005-06 41,82,731 1,36,73,316 2006-07 64,91,222 1,42,03,803 2007-08 2,40,34,444 1,90,76,299 2008-09 2,99,17,018 2,59,85,137 2009-10 2,64,46,323 1,39,37,615 As per Original Returns filed u/s 239 Income as per Income & Expenditure Statement Amount claimed as utilized for charitable purposes 2003-04 2,41,97,800 2,41,97,800 2004-05 1,91,27,477 1,87,73,094 2005-06 2,57,11,373 2,57,11,373 2006-07 64,91,220 1,52,03,803 2007-08 5,87,81,220 5,87,81,220 2008-09 6,88,77,429 6,88,77,429 2009-20 8,25,96,750 1,39,37,635 16.9.3 From the above facts, the Assessing Officer found that the administration and management of the Trust and its College and financial management were not carried out as expected of a Trust The financial transactions were carried out as if the Governing Body Members were earning on their own personal business and the amounts collected from students as donation was kept separately in a ....
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....l before us. The Ld. AR submitted that no search was conducted in the premises of assessee Trust. Based on materials found in the search on erstwhile trustees, assessment u/s. 143(3) r.w.s. 153C made in the hands of trust for A.Ys.2004-05 to 2008-09 and u/s. 143(3) for A.Ys.2009-10 and 2010-11. The Ld. AR submitted that Assessing Officer had denied exemption u/s. 11 for violation of section 13(1)(c)for the reason that unaccounted donations from students were collected by erstwhile Trustees and further erstwhile Trustees were drawing allowances without fully accounting in the Trust, thereby assessing Trust as AOP and protectively added entire donations collected by erstwhile Trustees in the hands of Trust. It was submitted that loose papers and computers prints do not have evidentiary value and assessment made solely based on same is not valid. Reliance was placed on Common Cause v UOI [2017] 77 taxmann.com 245 (SC). It was submitted that illegal donations were submitted by the erstwhile trustees and not the Trust. Therefore, there was no violation of section 13(l)(c). It was submitted that the incriminating materials which were found in the residence of 3 erstwhile Trustees and the....
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....stated that "A trustee may not use or deal with the trust-property for his own profit or for any other purpose unconnected with the trust". Capitation Fees collected, if any, by few of the erstwhile trustees from the candidates/students were illegal and this has nothing to do with the trust which had only lawful objects. Such illegal collection done by few of the Trustees were neither income of the Trust nor part of its receipts. Trust cannot be penalized for the illegal activities performed by the three among the eleven erstwhile trustees. 17.4 The Ld. AR relied on the judgment of the Kerala High Court in the case of Pratheesh V v State of Kerala(Case no. WP(C) No. 33278 of 2016 & W.A. Nos. 71 & 72 of 2017 dated 24 January 2017 that "It is the settled position of law that a registered trust is a legal entity and juristic person entitled to hold property by itself". It was submitted that similar to the trust mentioned in the abovecited case, the assesseeis also a Trust which was given affiliation to run an educational institution and therefore, has to be deemed as a legal entity different from its trustees. It was submitted that the trust was running an engineering college which....
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....017) 77 taxmann.com 245 (SC) 2. BadridasDaga vs. CIT (1958) 34 ITR 10 (SC) 3. CIT vs. Rajasthan and Gujarati Charitable Foundation Poona (2018) 402 ITR 441(SC) 4. CIT vs. Sardarilal& Co. (2001) 251 ITR 864 (Del) (FB) 5. Sanjay Rungta vs. Office of the CIT (2014) 266 CTR 181 (Jhar) 6. M.M. Financiers (P) Ltd. vs. DCIT (2007) 107 TTJ 200 (Chennai) 7. ITO vs. RajkumarBirla in ITA No.943 to 945/Hyd/2012 - Hyderabad Tribunalr 17.7 The Ld. DR relied on the order of the lower authorities. 17.8 We have heard the rival submissions and perused the record. In this case, exemption u/s. 11 of the I.T. Act was denied on the reason that the trustees collected the excess fees from the students and they themselves were managing the financial affairs of the assessee-Trust as their own personal business. Hence, the amounts collected from the students were kept by themselves without disclosing in the books of accounts of the Trust. They were drawing allowances without accounting the same in the books of accounts of the Trust. They used the Trust for their personal benefit and not for the objectives of the Trust. Hence, exemption u/s. 11 of th....
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....rovisions of section 13(1)(c)(ii) of the I.T. Act is applicable. In our opinion, if the Trustees have collected excess fees from the students or parents of the students, the Trust cannot be held responsible for such activities of the trustees and the Trustees are individually liable for collection of excess fees as this was collected by them without authorization from the Trust. The misconduct of the trustees of the assessee-Trust, if any, could not be made to lose benefit of exemption u/s. 11 of the I.T. Act on that count. For the wrong doing of some trustees of the Trust, the assessee cannot be blamed or penalised if the trustees have collected fees unauthorizedly and kept it with them. It cannot be said that there is violation of section 13(1)(c)(ii) of the I.T. Act. If the Trustees themselves collected extra fees from the students for admission and retained it without authority, the Trust has nothing to do with thataction of the Trustees and it cannot be said that the Trustees have been given any benefit or fruits of the Trust. The Trustees have unauthorizedlyused the name of the Trust for the personal benefit of the Trustees and if the Trustees have failed to discharge thei....
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....part of the income and such persons being hereafter in this section referred to as "relevant income", "part of relevant income" and "beneficiaries", respectively, (tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate)" 17.9.1 For this proposition, we rely on the following case laws: 1. Father Mullers Charitable Institutions 363 IT 230 (Kar.) 2. DIT(E) vs. Sheth Mafatlal Gagalbhai Foundation Trust (249 ITR 533) (Bom.) 3. CIT vs. Red Rose School (163 Taxman 19 (All.) 4. DIT(E) vs. Alarippu (224 ITR 358(Delhi) 5. CIT vs. Sarla Devi Sarabai Trust (172 ITR 698 (Guj) Accordingly, that portion of extra fees received by the assessee-Trust is to be taxed at maximum marginal rate. The other income of the Trust is entitled to exemption u/s. 11 of the I.T. Act. And directed accordingly.This ground of appeals of the assessee is partly allowed. Ground No. 2 - Enhancement by CIT(A) : AYs 2004-05 to 2007-08 18. Regarding addition made in the hands of the Trust, the CIT(A) observed that trustees of the assessee trust were collecting capitation fees from the students, part of which they were pocke....
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....ed by erstwhile Trustees which includes the donations purportedly handed over to trust. Hence, it was submitted that enhancement is to be deleted. 18.4 On the substantive sustainment of addition in respect of donation handed over to Trust, that the incriminating materials were found in the residence of 3 erstwhile Trustees and the whole of donations had been assessed substantively in the hands of 3 erstwhile Trustees, proved that the Trust including other erstwhile Trustees were not party to such collections by the 3 erstwhile Trustees. It was submitted that if at all the donation handed over to Trust can only be considered as loan from erstwhile Trustees and would not form part of income of Trust. It was submitted that if the donation handed over to Trust is considered as income, the Trust having applied the entire such amount for its application purpose, no further addition would be warranted in this regard. 18.5 The Ld. AR submitted that it cannot be said that Rs. 1.23 Crs (i.e., that amounts purportedly handed over by the erstwhile trustees to the Trust) should be added as income but the same should be taken as part of gross receipts & thereafter it should be seen if 85% ....
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....ncome of the assessee-Trust, which is to be assessed as AOP. 19.1 Against this, the assessee is in appeal before us. It was submitted that the CIT(A) had enhanced the income of the Trust by amount of Rs. 14,54,59,169/- for the reason that the Trust has paid the amount for the purpose of construction of building to erstwhile trustees but had failed to produce bills and invoices to substantiate the same. It was submitted that the CIT(A) had acted beyond jurisdiction by going into new addition not at all in the realm of the assessment order. The Assessing Officer denied exemption u/s.11 for the reason of violation of section 13(1)(c) and protectively added the amounts purportedly in violation i.e., donations. The issue of amount given for construction was an entirely new issue which was not at all considered by AO and the jurisdiction to deal with the same is only u/s..147 / 148 / 263. Reliance in this connection was placed on the decision of Full Bench of Delhi High Court in CIT v Sardarilal & Co (2011 251 ITR 684 (Del) (FB). 19.2 It was submitted that the building existed and a college was running is testimony of the construction having taken place and the total built-up area ....
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.... in ITA Nos. 238 & 239/Coch/2019 in para 12.7 and 12.8 of this order, wherein it was held that there was construction activity carried out by those two assesses as evidenced by the agreements cited supra and the construction was reflected in the balance sheet of the present assesses which was subjected to TDS. Thus, by any stretch of imagination, it cannot be said that there was no construction activity carried out by the assesses and it cannot be said that payments were not made towards construction of building which was for the establishment of educational institution. Thus, this ground of appeals of the assessee is allowed. Ground No. 4 : Set off of excess application of earlier years 20. With respect to non-consideration of carry forward of deficits of earlier years before computing the income of the Trust as AOP, the CIT(A) observed that once the status of the assessee is changed to that of an AOP, the carry forward of deficit of earlier years cannot be allowed as the same was eligible only for the status in which valid return of income was filed within the prescribed time. Hence, the CIT(A) confirmed the finding of the Assessing Officer. 20.1 The Ld. AR submitted tha....