AI Drafter 
TaxTMI 
TaxTMI 
2023 (7) TMI 504
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....ling the approval granted u/s. 10(23C)(vi) of the Act vide order dated 02/12/2019. 2(i). That on the facts and in the circumstances of the case and in law, the Commissioner of Income Tax (Exemption) failed to prove that the condition mentioned in 15th proviso to Section 10(23C)(vi) are satisfied so as to cancel the approval granted under the said section. 2(ii). That on the facts and in the circumstances of the case and in law, the Commissioner of Income Tax (Exemption) failed to prove that the income of the society is applied in contravention to clause (a) of the third proviso to section 10(23C)(vi) of the Act. 2(iii).That on the facts and in the circumstances of the case and in law, the Commissioner of Income Tax (Exemption) failed to prove that funds of the society are invested or deposited in contravention to clause (b) of the third proviso to section 10(23C)(vi) of the Act. 2(iv). That on the facts and in the circumstances of the case and in law, the Commissioner of Income Tax (Exemption) failed to prove that the activities of the society are not genuine or not carried out in accordance with all or any of the conditions subject to which it w....
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....d to the assessee society from Registrar of Firms and Societies M.P. Bhopal it is found that in the said letter it is clearly mentioned that land or piece of land will be used only for those work, for which it is taking on lease. 3. It is necessary to mention here that the said property was owned by the Rajkumar College Society on which educational institution is running, is the leased property. This leased property is the Nazul land which was provided by the then M.P. Govt. to the assessee society only for educational purposes. It is clearly mentioned in the renewal of lease agreement dated 16th July 1996 that the land will be used only for educational purposes. The term used in the renewal of lease agreement is "Kewal Shikshan Sanstha Hetu". 4. It is also necessary to mention here that the said property was sub-leased by the assessee society which is bad in law for the reason that the said property is not the personal property of the assessee society. There is no right of the assessee society to sub-lease the same. In this regard, only right was of the then M. P. Govt. to lease the said property (Nazul land) to M/s Avinash Builders. As such, the Nazul land sub-l....
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....vinash builders was the dispute land. - As far as violation of conditions as specified u/s. 10(23C)(vi) of the Income Tax Act, 1961 is concerned, none of the condition was violated by the assessee in this situation. (b) The assessee had also written to the Tehsildar Nazul Raipur, that 'lessee' i.e. M/s Avinash Builders, was not using sub leased land, as per the prescribed lease conditions of government; therefore illegal construction on land may be demolished and leased land be repossessed. (iii) The old management had taken an inappropriate decision of sub leasing the land of the 80,000 sq. Ft. Due to this, case was filed in the court by the assessee and decree was granted by the court to the assessee under which the possession of approximately 2/3 of the sub leased land was given to the assessee i.e. Rajkumar college Society, and now which is being utilized for educational purpose as per section 10(23C)(vi). Only 1/3 portion of the sub leased land at present is with M/s Avinash Builders, and such portion is still in dispute and we are in process to recover that land portion also. Further, even this situation does not warrant cancellation of regi....
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.... to Rajkumar College Society for the purpose of educational purpose only. However, it is found that assessee, this leased property is the Nazul land which was provided by the then M.P. Govt. to the assessee society only for educational purposes. It is clearly mentioned in the renewal of lease agreement dated 16th July 1996 that the land will be used only for educational purposes. The term used in the renewal of lease agreement is "Kewal Shikshan Sanstha Hetu". Assessee transferred the land on lease to 3rd party without seeking approval from State Government. This is a clear case of violation of the law of then State Government for which the said land was leased. (B) As per sub-lease deed furnished by the assessee, the assessee society has sub-leased leasehold nazul land comprised in Block No.27 Plot No.8, Block No.30 Plot No.2 & Block No.31 Plot No.2 admeasuring 40 ft. X 2080 ft. equivalent to 83,200 Sq. ff. which is referred to as "the demised premises" to M/s Avinash Builders, Raipur on 09.09.1999 for premium of Rs. 24,00,000/- and annual rent of Rs. 12,00,000/- for the period 27 yrs. 02 months. However the society has not shown any such income in the year under consider....
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.... subsequently given to M/s. Avinash Builders. It is a fact that the society has unauthorizedly changed the land use of the said leased property in violation of the land use mentioned in the lease agreement with the then State Govt. Furthermore, as per submission it is argued that old management had done such irregular transactions and after noticing the same then management have taken immediate action to take back the sub leased land to M/s Avinash Builders. However, it is seen that there was a change in management in the year 2004 but the notice for cancellation of the said sub-Lease agreement is stated to have issued in 2008 only. This shows that the action -of the new management of the society was also not prompt to nullify such illegal agreements. As per the report of the AO the commercial complex i.e. "Maruti Business Bank" on the said leased land is still existing and is not in the possession of the society nor Government and not being used for the purpose of education as mandated by the then State Government in the lease grant. The Society has also not brought this fact before the Authority at the time of approval given to it u/s. 10(23C)(vi) of the Act, hence it amounts to ....
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....the basis of his aforesaid deliberations withdrew the registration that was granted to the assessee society vide his order dated 02.12.2019 u/s. 10(23C)(vi) of the Act - "15th proviso" w.e.f. A.Y. 2016-17. 6. The assessee being aggrieved with the order of the CIT(Exemption) u/s. 10(23C)(vi) of the Act dated 02.12.2019 has carried the matter in appeal before us. 7. We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. 8. As withdrawing of assessee's registration u/s. 10(23C)(vi) of the Act is based on multi-facet reasons, therefore, we shall deal with the same in chronological manner, as under: A). Re: Assessee society had no right to sub-lease the Nazul land which was provided to it on lease by the Government of Madhya Pradesh 9. As is discernible from the order passed by the CIT(Exemption), Bhopal u/s. 10(23C)(vi) of the Act dated 02.12.2019, it transpires that it was observed by him that the property sub-leased by the assessee societ....
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....strip of land facing G.E. Road, Raipur and 50 ft. wide open area on the Eastern side of the lease hold area contained in Block No.27, Plot No.8, Block No.30, Plot No.2 and Block No.31, Plot No.2 for commercial & residential purposes and after grant of such permission to explore the possibility of disposing off the aforesaid two strips of land either by sale or by lease or aby any other suitable arrangements at the prevailing market rates. It was further resolved that the Managing Committee shall be fully empowered to invite offers from the prospective transferees for the disposal of the aforesaid two strips of land comprised in the lease hold area; to negotiate with the prospective transferees and after getting formal approval regarding terms & condition of the bargain from the President & the Vice President of the Rajkumar College Society, Raipur (M.P) to enter into final agreement/agreements with the prospective transferees." Further, we find that the Registrar, Firms & Society, Madhya Pradesh vide its letter dated 22.02.1995 addressed to the Chairman of the assessee society, Page 4-5 of APB, had categorically stated that the permission for granting the land situated ....
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....iable to be struck down. B). Re : that as the State Government as per the lease agreement (renewal) dated 16.07.1996 had leased the land to the assessee society for "Kewal Shikshan Sanstha Hetu" ( for educational purpose only), therefore, sub-leasing of the said land by the latter without seeking approval from the State Government to M/s. Avinash Builders, Raipur was clear case of violation of law. 12. Although as observed by the CIT(Exemption), Bhopal and, rightly so, as per the lease deed dated 16.07.1996 the land in question was leased by the State Government of Madhya Pradesh to the assessee society for "Kewal Shikshan Sanstha Hetu" (for educational purpose only), Page 1 to 2B of APB. However, we are of the considered view that the scope for which, the aforesaid land had been leased to the assessee society had wrongly been construed by the CIT(Exemption). Our aforesaid observation is fortified by the fact, that as per the terms of the aforesaid lease deed, the lessee i.e. the assessee society was vested with the rights, though subject to previous permission of the Collector, to carry on or permit to be carried on, on the premises any trade, business or activity for the re....
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....environment, the best features of a Public School such as its discipline, esprit de crops, the building up of character, team work, physical development and spirit of chivalry, fairplay and straight dealing. (b) to control and administer the property, movable or immovable belongs to the said college, to raise funds and acquire property movable or immovable, hereinabove and to hold all in trust for the said college and (c) to do all acts which are incidental and conducive to the attainment of the above objects of the society." On a conjoint perusal of the aforesaid clauses r.w. lease deed dated 16.07.1996, it can safely be gathered that the exploitation of the land in question by the assessee society i.e. lessee by either carrying on; or granting permission to carry on, on the same any trade, business or activity subject to conditions therein provided, as long as the said acts were incidental and conducive of its primary objects, i.e. maintaining and managing of the institution, viz. Rajkumar College, a Public School at Raipur, which would involve raising of funds for controlling and administering the said property as well as attainment of its objects, would thu....
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....stage, it would be pertinent to point out that as the sublessee i.e. M/s. Avinash Builders had failed to fulfil the terms and conditions of the registered lease executed with the society, therefore, the latter vide its resolution dated 08.11.2004 had unanimously resolved to issue legal notice for termination of the sub-lease deed. For the sake of clarity, the minutes of the ordinary meeting of the General Council of the assessee society held on 08.11.2004 is culled out as under: Thereafter, the assessee society had issued legal notice dated 19.03.2008 to M/s. Avinash Builders and others, wherein the latter was called upon to vacate the premises as the lease was determined w.e.f. 30.04.2008 for two fold reasons, viz. (i) that the sub-lessee had contravened the terms of sublease and had encroached upon the land of the assessee society; and (ii) that the sub-lessee had failed to pay premium and rent. Also, we find that the assessee society in reply to the letter received from Court of Tahsildar, Nazul, Raipur (C.G.), dated 20.10.2016 had vide its letter dated 04.11.2016, Page 72-73 of APB brought to his notice that it had vide its legal notice dated 19.03.2008, inter alia, on learn....
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....crore had not been accounted for by the assessee society during the year under consideration i.e. F.Y.2007-08 and earlier years. Also, it was observed by the CIT(Exemption) that subsequent to FY 2007-08, the assessee society, except for receiving the old rent that was receivable from sub-lessee i.e. out of Rs. 65.40 lacs as was receivable on 31.03.2016 had not shown any further rental income. 17. On a perusal of the records, it transpires that it is the claim of the assessee society that the total amount of Rs. 61 lacs was received from the sub-lessee, viz. M/s. Avinash Builders up to April, 2008 and amount of Rs. 5.90 lacs was reflected as outstanding/pending. It is the claim of the assessee society that last payment of lease rent for March, 2008 was credited in its account on 30.04.2009. It is further stated by the assessee society that since March, 2008 it had no financial dealing with the aforesaid sub-lessee. It was also submitted by the assessee society that in its on-going case before the Court of Tahsildar, Nazul, Raipur it had clearly stated that it had no objection if the structure as constructed by the sublessee of 20,000 sq. ft. may be removed and demolished in case ....
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....intimated about the aforesaid short accounting of the amount of accrued interest on its bank deposits, which it had gathered only after going through its Form 26AS, therefore, for the said reason, there was shortfall in accounting of the balance amount of interest income while filing its return of income. At the same time, it was stated by the assessee that it had no objection if the balance amount of interest income be treated as part of its income, and the same would not have any bearing on its tax liability for the year under consideration. 22. We have given a thoughtful consideration to the aforesaid short accounting of the accrued interest on the bank deposits by the assessee society, and find substance in its claim, that the same had occasioned for the reason that the requisite details were not provided by its bank at the stage of filing of the return of income. We, say so, for the reason, that as stated by the assessee society and, rightly so, its bonafides can safely be gathered from the fact that the said interest income would have no bearing on its tax liability for the year under consideration. Considering the facts pertaining to the aforesaid issue, we are of a stron....
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....ct was brought to our notice in the course of hearing of the appeal by the Ld. DR. On the basis of the aforesaid facts, we are unable to persuade ourselves to subscribe to the allegation of the CIT(Exemption) that the assessee society had obtained the approval u/s. 10(23C)(vi) of the Act vide order passed by the Chief Commissioner of Income-tax in F. No. CCIT/Tech /10(23C)(vi)/41/07-08 dated 29.02.2008 on the basis of any fraud or misrepresentation of facts before him. 25. On the basis of our aforesaid deliberations, we are unable to persuade ourselves to subscribe to the multi-facet reasons accorded by the CIT(Exemption), Bhopal for withdrawing the registration that was granted to the assessee society u/s. 10(23C)(vi) of the Act vide F. No. CCIT/Tech /10(23C)(vi)/41/07-08 dated 29.02.2008. 26. Be that as it may, we may herein observe that the assessee society had after withdrawal of its registration u/s. 10(23C)(vi) of the Act by the CIT(Exemption), Bhopal vide latter's order dated 02.12.2009, had thereafter filed an application for registration u/s. 10(23C)(vi) of the Act in Form 10AB on 26.09.2022 under the new provision of Income Tax Act, 1961, which was granted by the CI....
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....Avinash Builders, had called upon the assessee society to file a copy of the agreement with the said sub-lessee a/w. details as regards the present status of the said lease. Also, the assessee society was queried about the amount of Rs. 5.90 lacs that was reflected against the aforesaid sub-lessee i.e. M/s. Avinash Builders and was also called upon to furnish complete details of transaction which it had entered into with the latter during the last five years. For the sake of clarity, the relevant extract of the aforesaid query raised by the CIT(Exemption), Bhopal vide his letter dated 01.02.2023 is culled out as under: "2. The registration granted u/s. 10(23C)(vi) of the Act before 01/04/2021 was cancelled vide order dated 02.12.2019, however, you are still claiming exemption in ITR 7. Kindly explain the same." In reply, the assessee society had vide its letter dated 16.02.2023, inter alia, filed before the CIT(Exemption) a copy of the sub-lease agreement with M/s. Avinash Builders. It was stated by the assessee society that though the sub-lease agreement was operative and valid till 31.03.2022, but it had terminated the same on 19.03.2008 on the basis of legal notice o....
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....ease agreement with Avinash Builders neither' the assessee society has entered into any transaction with Avinash Builders during last 5 years. The assessee society has duly accounted for lease rent upto March, 2008 in its books of account i.e. Rs. 65,40,000/- against which the assessee society has received sum of Rs. 59,50,000/-, hence, recovery of Rs. 5,90,000/- is still pending, which has been duly recorded by the assessee society and stated in the debit side of the balance sheet. It is important to mention here that the premise that the assessee society has illegally granted sub lease to Avinash Builder of a land which was leased by the Government of then united Madhya Pradesh only for the purpose of "Kewal Sikshan Sansthan Hetu" meaning only for "Educational Institution Purposes" is itself incorrect. In this regard, it is submitted that it was the Government of Madhya Pradesh being the owner of land who changed the land use in relation to 20,000 square feet from educational to commercial, vehicle parking etc, and also the competent authorities approved the development plan of Avinash Builders to construct a commercial building on the said site. The only right of th....
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....n court on 10th day of July, 2023. ============= Document 1 EXTRACT OF MINUTES OF THE ORDINARY MEETING OF THE GENERAL COUNCIL RAJKUMAR COLLEGE SOCIETY, RAIPUR (CG) HELD ON 08TH NOVEMBER 2004- 11. It was unanimously resolved that since M/s Avinash Builders have not fulfilled the terms and conditions of the registered lease due with the japa Society, legal notice for termination of the said lease deed. Further resolved that the legality of the registered lease deed be examined in the light of the decision of the Chhattisgarh Government to cancel the order of the erstwhile M.P. Government changing use of land on the northern boundary of the College premises. It is further resolved that Rajkumar College Society acting through its Principal cum Jt. Secretary to disengage itself as a party contesting any and all court cases having common interest with M/s Avinash Builders. Document 2 RAJKUMAR COLLEGE, RAIPUR, [C.G.] YEAR WISE LEGER DETAILS OF M/S AVINASH BUILDERS, RAIPUR F. YEAR 1994-95 Date 29.12.1994 07.02.1995 DEBIT By Cheque ° By Cheque о CREDIT 100000 100000 BALANCE 1,00,000.00 ....