TaxTMI 
TaxTMI 
2024 (4) TMI 458
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....dated 30.09.2019 of the Income Tax Appellate Tribunal [hereinafter referred to as the 'Tribunal'], Cochin Bench, they are taken up for consideration together and disposed by this common judgment. For the sake of convenience, the details of the various appeals with reference to the assessee and the assessment year concerned, as also co-relating it to the appeals that were filed before the Tribunal, are provided in tabular form below:- Sl. No. ITA No. Assessee Assessment Year Appeal before the Income Tax Appellate Tribunal 1 I.T.A. No. 48/2020 Smt. Gracy Babu 2009-10 I.T.A. No. 208/2019 2 I.T.A. No. 46/2020 Sri. Jose Thomas 2009-10 I.T.A. No. 211/2019 3 I.T.A. No. 47/2020 Smt. Reena Jose 2009-10 I.T.A. No. 207/2019 4 I.T.A. No. 49/2020 Smt. Gracy Babu 2010-11 I.T.A. No. 209/2019 5 I.T.A. No. 51/2020 Sri. Jose Thomas 2010-11 I.T.A. No. 212/2019 6 I.T.A. No. 54/2020 Smt. Gracy Babu 2011-12 I.T.A. No. 239/2019 7 I.T.A. No. 55/2020 Smt. Gracy Babu 2011-12 I.T.A. No. 210/2019 8 I.T.A. No. 56/2020 Sri. Jose Thomas 2011-12 I.T.A. No. 213/2019 9 I.T.A. No. 68/2020 Sri. Jose Thomas 2011-12 I.T.A. No. 238/2019 10 I.T.A. No .6....
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....ched, namely, Gracy Babu, Jose Thomas and P.J. Paulose, who were the heads of the respective trustee families. No assessments in consequence to search were made in relation to other family members who were trustees by invoking provisions of Section 153C of the I.T. Act. Placing reliance on the seized documents, the Assessing Authority found that the erstwhile trustees had in fact received approximately Rs. 37.5 crores towards consideration for relinquishing their trusteeship but they had camouflaged these receipts under different heads by showing the receipt of Rs. 14.55 crores towards reimbursement of amounts paid by assessees for clearing outstanding debts and liabilities of the Trust as on the date of the agreement, and also for completing certain ongoing constructions that had been undertaken by them. An amount of Rs. 12.5 crores was shown as received by way of consideration for sale of approximately 56 acres of rubber plantation to the Believers Church. Re: I.T.A. Nos. 46/2020, 47/2020, 48/2020, 49/2020, 51/2020: 5. In I.T.A. Nos. 46/2020, 48/2020, 49/2020 and 51/2020, the following substantial questions of law have been raised: (i) Whether the trustees of a public charita....
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.... Babu and Reena Jose for the assessment years 2009-10 [for all three] and 2010-11 [for Jose Thomas and Gracy Babu]. While the Assessing Authority and the First Appellate Authority had found that the excess sale consideration received by the said assessees was in fact amounts towards consideration paid by the Believers Church for their relinquishment of their trusteeship in the Carmel Educational Trust and was liable to be assessed in their hands, the Tribunal, in the order impugned in these appeals, found otherwise. The reasoning of the Tribunal is found in paragraphs 11.4 to 11.8, which read as follows: "11.4 We have heard the rival submissions and perused the record. In the present case, there was unsigned Agreement dated 23/02/2009 wherein the sale consideration was shown at Rs. 6.5 crores for sale of rubber plantation. Later as per registered agreement, royal deed, it was changed to Rs. 12.5 crores. In other words, in draft the sales consideration was at Rs. 15 lakhs per acre. However, in the deed the sales consideration was shown at Rs 25,40,400/- per acre. Thus there was different of amount of Rs. 15 lakhs per acre. This difference cannot be considered as a receipt for sale....
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....ble to compute capital gain as section 55(2) of the I.T. Act does not include this kind of asset as capital asset. For better understanding, we will examine the provisions of section 55(2) of the I.T. Act. S. 55 (2) For the purposes of sections 48 and 49, "cost of acquisition",- (a) in relation to a capital asset, being goodwill of a business or a trade mark or brand name associated with a business or a right to manufacture, produce or process any article or thing or right to carry on any business, tenancy rights, stage carnage permits or loom hours - (i) in the case of acquisition of such asset by the assessee by purchase from a previous owner, means the amount of the purchase price: and in any other case not being a case falling under sub-clauses (i) to (iv) of sub-section (1) of section 49shall be taken to be nil; (aa) in a case where, by virtue of holding a capital asset, being a share or any other security, within the meaning of clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) (hereafter in this clause referred to as the financial asset), the assessee- (A) becomes entitled to subscribe to any additional financial asset; or (B)....
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....ner or the fair market value of the asset on the 1 day of April, 1981, at the option of the assessee; (iii) where the capital asset became the property of the assessee on the distribution of the capital asset of a company on its liquidation and the assessee has been assessed to income tax under the head "Capital gains" in respect of that asset under section 46, means the fair market value of the asset on the date of distribution; (v) where the capital asset, being a share or a stock of a company, became the property of the assessee on - (a) the consolidation and division of all or any of the share capital of the company into shares of larger amount** ** **" 11.6 A bare reading thereof would indicate how the legislature contemplates that come chargeable under head "capital gains" has to be computed. The mode of computation is laid down by section 48, whereas by section 49, the cost with reference to certain modes of acquisition has been set out. For the purposes of both sections, the legislature has devised the scheme in section 55 and sub-section (2) thereof clarifies that for the purposes of sections 48 and 49. "cost of acquisition" in on to a capital asset, being goodwill....
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....294; (1981) 2 SCC 460 held that all transactions encompassed by section 45 must fall within the computation provisions of section 48. If the computation as provided under section 48 could not be applied to a particular transaction, it must be regarded as "never intended by section 45 to be the subject of the charge". In that case, the court was considering whether a firm was liable to pay capital gains on the sale of its goodwill to another firm. The court found that the consideration received for the sale of goodwill could not be subjected to capital gains because the cost of its acquisition was inherently incapable of being determined. Pathak J. as his Lordship then was, speaking for the court said (page 300) "what is contemplated is an asset in the acquisition of which it is possible to envisage a cost. The intent goes to the nature and character of the asset, that it is an asset which possess the inherent quality of being available on the expenditure of money to a person seeking to acquire it. It is immaterial that although the asset belongs to such a class it may, on the facts of a certain case, be acquired without the payment of money" (9) In other words, an asset which i....
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....y terms may go into the building of the goodwill, some tangible some intangible. It is contended that a tenancy right is not a capital asset of such a nature that the actual cost on acquisition could not be ascertained as a natural legal corollary. (12) In A. R. Krishnamurthy v. CIT (1989) 176 ITR 417 this court held that it cannot be said conceptually that there is no cost of acquisition of grant of the lease. It held that the cost of acquisition of leasehold rights can be determined. In the present case, however, the Department's stand before the High Court was that the cost of acquisition of the tenancy was incapable of being ascertained. In view of the stand taken by the Department before the High Court, we uphold the decision of the High Court. (13) In United Commercial Bank Ltd. v. CIT (1957) 32 ITR 688 (SC), it was held that the heads of income provided for in the sections of the Indian Income Tax Act, 1922 are mutually exclusive and where any item of income falls specifically under one head, it has to be charged under that head and no other. In other words, income derived from different sources falling under a specific head has to be computed for the purposes of tax....
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....1966) 61 ITR 428 (SC)". 11.8 Thus, the conclusion of the Supreme Court is that an asset which is capable of acquisition at a cost would be included within the provisions pertaining to the head "Capital gains" as opposed to assets in the acquisition of which no cost at all can be conceived. There was no cost of acquisition, which was determined and on the basis of which the Assessing Officer could have proceeded to levy and assess the gains derived as capital gains. Sub-section (2) of section 55 clause (a) having been amended, there is no stipulation with regard, to relinquishment of trusteeship. However, even in the case of tenancy right, the view taken by the Supreme Court, after the provision was substituted w.e.f. 1st April, 1995, is as above, which is squarely applicable to the assessee's case also. The further argument of the Ld. AR is that the relinquishment of trusteeship cannot be brought within the tax net though it was capable of being transferred. The Supreme Court held that it must be capable of being acquired at a cost or that has to be ascertainable, then only transfer of capital asset is subject to tax. A specific insertion would therefore be necessary so as to asc....
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....against renunciation of the trust by a trustee and against delegation of his functions by a trustee are embodied, in respect of trusts to which the Indian Trusts Act applies, in S. 46 and 47 of that Act. These sections run thus:- "46. A trustee who has accepted the trust cannot afterwards renounce it except (a) with the permission of a principal Civil Court of Original Jurisdiction, or (b) if the beneficiary is competent to contract, with his consent, or (c) by virtue of a special power in the instrument of trust. 47. A trustee cannot delegate his office or-any of his duties either to a co-trustee or to a stranger, unless (a) the instrument of trust so provides, or(b) the delegation is in the regular course of business, or (c) the delegation is necessary, or (d) the beneficiary, being competent to contract, consents to the delegation." (17) It is true that S. 1 of the Indian Trusts Act makes provisions of the Act inapplicable to public or private religious or charitable endowments; and so, these sections may not in terms apply to the trust now in question. These sections however embody nothing more or less than the principles which have been applied to all trusts in all count....
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.... of Islam. (Shariat)." (20) The provision for the appointment of new trustees cannot by any stretch of imagination be held to mean the substitution of the old body of trustees by a new body. That provision only permits the old trustees to add to their number. Nor does the power to frame rules and regulations for the benefit and efficient running of the school authorise the trustees to give up the management of the school themselves or to divest themselves of the properties entrusted to them by the trust deed and vest them in other persons. We are satisfied therefore that Cl. 5 of the trust deed does not in any manner authorise the trustees appointed by deed to abdicate in favour of another body of persons or to constitute that body as trustees in their own place. (emphasis supplied) (21) There is no question here also of the beneficiary, i.e., the school consenting to such abdication. There is therefore no escape from the conclusion that the act of the trustees, who were appointed by the trust deed, in handing over the management of the school to the Hakimia Society and the properties of the school to the members of the governing body of the Hakima Society was illegal and vo....
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....ntive addition of Rs. 34 lakhs and Rs. 4.50 crores for the assessment years 2009-10 and 2010-11 respectively in the case of both the assessees. 11. The findings of the Tribunal on the above issue are in paragraphs 12.7 and 12.8 of the impugned order and read as follows: "12.7 We have heard the rival submissions and perused the record. The amounts of Rs. 34,00,000/- in AY 2009-10 and Rs. 4.50 crores in AY 2010-11 each received by Gracy Babu and Jose Thomas from which is said to be towards the on-going construction work as mentioned in clause 5 of the agreement dated 10/03/2009 and pages 4 & 5 of the deed of agreement dated 01/06/2010 entered into between Believers Church and Gracy Baby 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 10/03/2....
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....5 of the Deed dated 10.03.2009, incurring a cost of Rs. 9.68 Crores for which the statement will be filed by the said parties 1 to 3 and 8 to 10 to the first party in the agreement dt. 10.03.2009 within one month from today." 12.8 The Believers Church had disclosed this construction in its Balance Sheet as on 31/03/2010 and 31/03/2011. Being so, there was construction activity and the Believers Church paid the contract amount to these two assessees. By any stretch of imagination, it cannot be considered as an amount paid towards relinquishment of trusteeship in Carmel Educational Society. In our opinion, it is appropriate to estimate the income from construction 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." 12. Although the learned counsel for the revenue strenuously argued that the Tribunal erred in not finding that the consideration received by the assessees was in fact a part of the remuneration for the relinquishment of their trusteeship in the Carmel Educational Trust, we find no evidence to support such a contention. As the Tribunal has relied on the au....
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.... was stated that a payment of Rs. 14,54,59,169/- was old trustees as per agreement and repeated request from them stating that they have constructed the building and supporting vouchers and bills shall be submitted to the trust for the construction made. It was submitted that the payment was made and remitted the TDS portion u/s 194C also on the payment towards expenses incurred by them for constructing the building. It was submitted that the advance given was not shown as utilization in the computation of income of the Trust and a journal entry only was made in the books of accounts of the Trust transferring the advance amount to the building account without claiming it as utilization. Rejecting the contentions of the assessee the CIT(A) added the amount of Rs. 14,54,59,169/- to the income 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 sa....
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.... up area of 236.999.78 Square feet would not be less than Rs. 33.18 Crores against the balance sheet value as on 31.03.2018 is only Rs. 24,38,23,931.5 and this will offset the difference. It was submitted that the assessee had given construction contract to erstwhile Trustees who carried out the same and since the assessee did not undertake construction it was not in possession of bills and invoices. It was submitted that if at all only the income over expenditure for the A.Y. 2010-11 amounting to Rs. 2,31,78,710/- can be taxed subject to set off of excess application of earlier years. 19.4 The Ld. DR relied on the order of the lower authorities. 19.5 We have heard the rival submissions and perused the record. As discussed in case of Jose Thomas and Gracy Babu 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 ....