9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (11) TMI 930 - AT - Income TaxExemption u/s 11 - Assessment of trust - income of the assessee from sale of property during the year under consideration - assessee taken advances from certain specified persons - amount taken from the assessee as a loan was converted into advance on the basis of the MOU and the said fund has been further advanced to other companies wherein the trustees and the relative are directors - as alleged funds of the trust were diverted and used for the benefit of specified person as covered within the provision of section 13(1)(c)(ii) section 13(2)(a) r.w.s. 13(3)(cc) - appellant was chargeable to tax on notional income held as chargeable income HELD THAT - As learned Charity Commissioner directed the purchasers to pay enhanced consideration considering the rates of the property as per the Ready Reckoner published for the year 2021 by the Government of Maharashtra. Thus, from the above, it is evident that the sale of flats to Mrs. Arundhati Shelgikar, Mogra family, and the developer were approved by the learned Charity Commissioner in the financial years 2019-20 and 2020-21 at a higher consideration than initially agreed amongst the parties. Thus in view of the provisions of the Bombay Public Trust Act, 1950, we do not find any merits in the findings of the AO that even prior to the aforesaid orders passed by the learned Charity Commissioner the flats were sold by the assessee in the year under consideration and the advance received can be added in the hands of the assessee as income from the sale of property. Further, the agreed cost of renovation of the Mandir and hall of Rs. 1 crore and Rs. 50 lakhs was also treated as the sale consideration by the AO without any basis. We are of the considered view that the AO not only considered the incorrect amount of sale consideration in respect of the flats sold by the assessee but also erred in taxing the advance in the year under consideration, particularly when the sale can only be considered to be valid after the sanction by the learned Charity Commissioner in view of the provisions of Bombay Public Trust Act, 1950, which in the present case was granted in the financial years 2019-20 and 2020-21. Since the flats were not sold by the assessee in the year under consideration, therefore, no addition can be made in this year. No infirmity in the impugned order passed by the learned CIT(A) in deleting the addition made by the AO. However, it will be open to the AO to consider the issue of taxability of the sale consideration, as per law, in the year in which the sale transaction was concluded pursuant to the order passed by the learned Charity Commissioner. Accordingly, the impugned order passed by the learned CIT(A) on this issue is upheld and the appeal by the Revenue is dismissed. Loan given by the assessee to Specified persons/M/s Ramgopal Ganpatrai Co. Pvt. Ltd - We find that no information has been brought on record to dispute the findings of the AO that the trustees of the assessee were having shareholding of 12.92% and 12.97% (conjointly more than 20%) in the said company. As per the AO, since the trustees of the assessee had more than 20% shareholding in M/s Ramgopal Ganpatrai Co. Pvt. Ltd., the grant of loan to the said company has violated the provisions of section 13(1)(c). Exemption u/s 11 is applicable to a trust that is wholly charitable or wholly religious and since the assessee is partially charitable and partially religious trust, the benefit of section 11 is not available to the assessee - It is evident from the record that the submission now made by the learned DR before us was not the basis of the AO for the denial of exemption under section 11 of the Act to the assessee in the present case. As decided in Mahindra and Mahindra Ltd 2009 (4) TMI 207 - ITAT BOMBAY-H AO has no jurisdiction to go beyond the order passed by the Assessing Officer. He cannot raise any point different from that considered by the Assessing Officer or CIT(A). His scope of arguments is confined to supporting or defending the impugned order. He cannot set up an altogether different case. As only consequence of the case which falls within the four corners of section 13 is the denial of exemption under section 11 of the Act. Section 13(2)(a) of the Act also does not authorise the Revenue to compute the notional interest, in case no such interest is charged by the trust. Thus, in a case when no real interest was accrued or received nor the same was recorded by the assessee in its books of accounts, we find no merits in the findings of the learned CIT(A) in upholding the addition made by the AO by computing the notional interest and adding the same to the total income of the assessee. Accordingly, AO is directed to delete the addition - Assessee appeal allowed.
Issues Involved:
1. Contravention of provisions of Section 13 of the Income Tax Act. 2. Addition of Rs. 21.85 crore received from M/s. Trinity Infratech Pvt. Ltd. 3. Deletion of addition based on the date of approval from the Joint Charity Commissioner. 4. Nature of trust's activities and their classification under Section 2(15) of the Income Tax Act. 5. Taxability of notional interest on loans given by the trust. Summary: Issue 1: Contravention of Provisions of Section 13 of the Income Tax Act The Revenue contended that the funds of the trust were diverted for the benefit of specified persons, violating Section 13(1)(c)(ii) and Section 13(2)(a) read with Section 13(3)(cc) of the Act. The AO found that the trust had given loans to M/s Ramgopal Ganpatrai & Co. Pvt. Ltd., where trustees had significant shareholdings, thus violating Section 13. The CIT(A) did not record specific findings on this issue, and the Tribunal kept this issue open since the assessee did not challenge the AO's findings regarding eligibility under Section 11 of the Act. Issue 2: Addition of Rs. 21.85 Crore Received from M/s. Trinity Infratech Pvt. Ltd. The AO added Rs. 21.85 crore to the income of the assessee, considering it as income from the sale of property. However, the CIT(A) deleted this addition, noting that the learned Charity Commissioner had granted sanction for the sale of flats only on 31/03/2021, and thus the transaction did not crystallize in the relevant assessment year. The Tribunal upheld the CIT(A)'s order, stating that the sale could only be considered valid after the Charity Commissioner's approval, which was granted in the financial years 2019-20 and 2020-21. Issue 3: Deletion of Addition Based on the Date of Approval from the Joint Charity Commissioner The Tribunal agreed with the CIT(A) that the sale of flats and the corresponding income could not be recognized in the year under consideration as the approval from the Charity Commissioner was received later. The Tribunal found no merit in the AO's conclusion that the transaction was complete in the relevant assessment year. Issue 4: Nature of Trust's Activities and Their Classification under Section 2(15) of the Income Tax Act The Revenue argued that the trust's involvement in redevelopment activities amounted to a commercial venture, thus falling under trade, commerce, or business as per Section 2(15) of the Act. The Tribunal did not find merit in this argument, as the primary object of the trust was religious and charitable activities, and the redevelopment was to enhance revenue sources for these activities. Issue 5: Taxability of Notional Interest on Loans Given by the Trust The AO computed notional interest on the loan given by the trust to M/s Ramgopal Ganpatrai & Co. Pvt. Ltd. at 10.5%, adding Rs. 1,66,77,849 to the income. The CIT(A) upheld this addition. However, the Tribunal found no merit in this, stating that Section 13(2)(a) does not authorize the computation of notional interest. Since no real interest was accrued or received, the Tribunal directed the AO to delete the addition of Rs. 1,66,77,849 on account of notional interest income. Conclusion: The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, directing the deletion of the addition of notional interest income and upholding the CIT(A)'s deletion of the Rs. 21.85 crore addition. The Tribunal emphasized the requirement of Charity Commissioner's approval for the validity of the sale transaction and found no basis for the computation of notional interest.
|
