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TMI Blog2013 (6) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant conveyance would show that the assessee had any right to re-assume power over the transferred properties. There was neither any transfer effected by the assessee during the relevant previous year, much less any transfer which was revocable. So, not only had the AO taken a lawful view after considering the issues relating to holding of the property, but the view with which the DIT (Exemptions) was trying to substitute was a patently unlawful one. Both the assessee as well as M/s. India Financial Association were entitled to claim exemption under section 11 and hence there could never have been any prejudice caused to the Revenue, this way or that way. There was nothing in the assessment order which could be considered as erroneous and/or prejudicial to the interests of the Revenue. The order of the Director of Income-tax (Exemptions) passed under section 263 stands quashed In favour of assessee. - - - - - Dated:- 22-7-2011 - Order The order of the Bench was delivered by Abraham P. George (Accountant Member).-Through this appeal, the assessee assails the order of the Director of Income-tax (Exemptions), Chennai, holding that the assessment made for the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le deeds evidenced the consideration as Rs. 25,49,72,937. A reconciliation statement in this regard was also filed by the assessee. The Assessing Officer thereafter concluded the assessment giving the assessee benefit of exemption under sections 11 and 12 of the Act and there being excess of application over income, total income was determined at "nil". To complete the factual scenario, it needs to be mentioned that the assessee had along with the revised return filed a Form No. 10 for accumulation of its income. Since such Form No. 10 was beyond the due date of filing the return, the assessee had filed an application for condonation of delay before the Director of Income-tax (Exemptions) on December 5, 2008 and Director of Income-tax (Exemptions) vide his order dated December 30, 2008 had condoned such delay. Nevertheless, this Form No. 10 was not considered in the assessment since the Assessing Officer had not taken cognizance of the revised return at all. Later, on March 16, 2011, Director of Income-tax (Exemptions) issued a show-cause notice to the assessee under section 263 of the Act. As per the Director of Income-tax (Exemptions), the details filed along with return did sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 11 of the Act. The assessee conceptualised two situations-one when the organisation itself was formed by a revocable transfer and another where the properties of an organisation were transferred to another through a revocable transfer. As per the assessee, even if it was presumed that the latter situation applied, the only implication was that the income arising to the beneficiary could be considered in the hands of transferor, but, it would not result in denial of exemption under section 11 of the Act. Therefore, as per the assessee, there was no error in the order of the assessment passed by the Assessing Officer much less any error which was prejudicial to the interests of the Revenue. However, the Director of Income-tax (Exemptions) was not impressed. According to him, at the time of purchasing immovable property registration was made in the name of M/s. India Financial Association though the payments were made by the assessee. Hence, as per the learned Director of Income-tax (Exemptions), the transfer which was effected through book entries were genuine and since on the sale of such property, money was returned to the assessee the result was a revocable transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dexation benefit to the assessee it is long-term capital asset and tax the same under the head 'Capital gains' without giving exemption under section 11 which amounts to enhancement of income under section 263." Now before us the learned authorised representative, strongly assailing the order of the learned Director of Income-tax (Exemptions), submitted that the revised return of the assessee filed on March 12, 2008 though not taken cognizance was carefully considered by the Assessing Officer while framing the original assessments, vis-a-vis the transactions shown therein. Further, according to him, the revision of return had become necessary since the assessee could obtain details of transfers effected by India Financial Association only later to the date of filing of the original return and once such transfers were taken into consideration, there resulted an excess of income over utilisation, necessitating filing of Form No. 10 for accumulation. The learned authorised representative pointed out that the application before the learned Director of Income-tax (Exemptions) for condonation of delay was filed on December 4, 2008 and in such application, all the details regarding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and all such properties all along were held under the name of M/s. India Financial Association. In none of the earlier years, there was any denial of exemption though similar transactions were there. The learned authorised representative also brought to our attention decision of the co-ordinate Bench of this Tribunal in I. T. A. No. 1514 to 1518/Mds/85 dated July 7, 1987 placed at paper book pages 87 to 88, wherein it was held that M/s. India Financial Association was eligible for exemption under sections 11 and 12 of the Act. The learned authorised representative pointed out that the jurisdictional High Court in Tax Cases No. 28 to 32 of 1996 (paper book pages 89 and 90) had upheld this decision of the Tribunal through a speaking order. Hence, according to him, not only the Assessing Officer had taken a lawful view, but even if such view was considered erroneous it would not cause any prejudice to the Revenue. According to him, the learned Director of Income-tax (Exemptions) was wrong in interpreting section 60 to 63 to hold that there was revocable transfer when there was no transfer whatsoever in the relevant previous year done by the assessee. Per contra, the learned Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anathan Co. appeared and the case was discussed. The details furnished by the assessee were verified. 4. The immovable properties of the following four trusts get transferred to India Financial Association (IFA) : (i) Services association of Seventh Day Adventist P. Ltd. (SERVSDA). (ii) The council of Seventh Day Adventist Educational Institutions (CSDA). (iii) The Medical Trust of Seventh Day Adventist (MSDA). (iv) Educational Trust of Seventh Day Adventist (ESDA). 5. During the assessment proceedings for the assessment year 2006-07, it was noted that immovable properties worth Rs.16,92,30,947 were transferred from the assessee-trust to India Financial Association of SDA (IFA). On perusal of the return of income filed by the India Financial Association, it was noticed that only immovable properties worth Rs. 3,36,11,598 were reflected in the balance-sheet. The assessee was asked to clarify the difference of Rs.13,56,19,349. 6. In response to the query, the assessee vide its letter dated December 4, 2008, had taken the stand that no property was transferred but it was only handed over for holding in trust, while possession continues to be with the assessee. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack during the years 1965 to 1969 and 1988. So, the position is a continuing one and method of accounting followed by the assessee whereby its immovable properties were held by the India Financial Association, permeated over a large number of years. Nothing unlawful has been found by any assessing authority or higher forums in this regard. In fact, this Tribunal with regard to the Revenue's appeal in the case of M/s. India Financial Association and vide its order dated July 7, 1987 in I. T. A. No. 1514 to 1518/Mds/85 (paper book pages 87 to 88), clearly held as under : "We must, therefore, disregard all those clauses which state merely the powers of the assessee and confine ourselves to the specific clauses that relate to the objects of the association. The primary object is contained in clause (a) and is elucidated by clauses (e) and (f). These clauses show that the primary object of the assessee is to manage the affairs of other charitable institutions of the Seventh Day Adventist denomination. Clearly this primary object is a charitable object inasmuch as admittedly the objects of the trusts which are managed by the assessee are themselves charitable in nature. The second obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be such that the transferor has a right to resume power over the transferred assets. In our opinion, both these conditions were not satisfied. When M/s. India Financial Association transferred the properties to the ultimate purchaser, there was no provision for any re-transfer. There was no agreement between the assessee and the India Financial Association, for any re-transfer of properties or any income to the assessee. Just becausethe India Financial Association had sold the properties and given themoney to the assessee, that would not be sufficient to hold that there was an agreement in the nature of a revocable transfer between them. None of the relevant conveyance (paper book pages 90 to 107 and 108 to 145) would show that the assessee had any right to re-assume power over the transferred properties. In our opinion, there was neither any transfer effected by the assessee during the relevant previous year, much less any transfer which was revocable. So, not only had the Assessing Officer taken a lawful view after considering the issues relating to holding of the property, but the view with which the Director of Income-tax (Exemptions) was trying to substitute was a patently unl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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