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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 ..... d that the immovable properties of the assessee along with that of three other assessees were held by another organisation called India Financial Association (IFA). In the books of the assessee, immovable properties worth Rs. 16,92,30,947 were shown as transferred to M/s. India Financial Association. The Assessing Officer noted that what was reflected in the balance-sheet of India Financial Association, which incidentally was also registered under section 12A(a) of the Act, was Rs. 3,36,11,598 only. The assessee was required to reconcile the difference. The assessee filed a reconciliation which showed that over a period of four years, the properties acquired by the assessee but, held in the name of M/s. India Financial Association was property reconciled and accounted by M/s. India Financial Association. The Assessing Officer noted that the entire capital expenditure incurred for acquisition of the properties were treated as application of income by the assessee in two parts one under the head "Transfer to India Financial Association" and another under the head "Difference between closing WIP and opening WIP". However, the Assessing Officer refused to take cognizance of the revised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and why the provisions of sections 60 to 63 should not be applied. As per the learned Director of Income-tax (Exemptions), the total income arising out of such revocable transfer could not be given exemption under section 11 of the Act, since section 11 started with the words "subject to the provisions of sections 60 to 63". The assessee in its reply dated March 25, 2011 submitted that there was no transfer whatsoever within the meaning of sections 60 to 63 of the Act. As per the assessee, M/s. India Financial Association, which was also an organisation registered under section 12A(a) of the Act, was holding the properties for the benefit of the assessee only. The assessee brought to the notice of the Director of Income-tax (Exemptions) that the issue regarding holding of assets of the assessee by India Financial Association was raised frequently by various Assessing Officers over various earlier assessments spanning more than 25 years and the details were also submitted to their satisfaction. As per the assessee, when the properties were handed over to India Financial Association, there was no transfer of ownership and India Financial Association was only holding the propertie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferor, i.e., the assessee. In the present case, since the income is accruing on the transfer of capital asset provisions of capital gain is applicable on all the three properties namely: Spicer College, Lawry Memorial College and Kolar Land. In view of the above, it is concluded that the assessment order in question is erroneous and prejudicial to the interest of the Revenue as the assessment order has not been framed in accordance with the provisions of the Income-tax Act and prejudicial to the interests of the Revenue as tax due to such error has not been made payable by the assessee. Hence, present case is squarely covered within the provisions of section 263 of the Income-tax Act. The capital gain as worked out from the table at paragraph 6 is given below : Property name Capital gain as per table in paragraph 6 (Rs.) Spicer College 14,93,35,436 Lawry Memorial College 10,18,93,367 Kolar Land 9,06,692 Thus, he reached an opinion that the assessment order was erroneous and prejudicial to the interests of the Revenue. The directions given to the Assessing Officer by the learned Director of Income-tax (Exemptions) were as under : 7.2 The Assessing Officer is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Financial Association nor from the India Financial Association to the assessee and hence, there was no question of there being any revocable transfer. Continuing his arguments, the learned authorised representative submitted that even if a revocable transfer was presumed, there would be no prejudice caused to the Revenue since both organisations were enjoying exemption under section 11 of the Act and whether it was the assessee or the India Financial Association, the income would remain exempt. The learned authorised representative specifically pointing out the original assessment order placed at paper book pages 45 to 49, argued that the learned Assessing Officer had considered all aspects of the transfers and even required the assessee to reconcile the difference in the amounts appearing in the balance-sheet of the India Financial Association and as shown by the assessee in the revised return. Therefore, according to him, the Assessing Officer had allowed the assessee exemption under sections 11 and 12 of the Act only after proper application of mind. The Director of Income-tax (Exemptions) was trying to substitute his view to the lawful view taken by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and heard the rival contentions. For application of section 263 of the Act, two conditions that are to be satisfied are that the order of the Assessing Officer should be erroneous and at the same time prejudicial to the interests of the Revenue. It has been often held by the hon'ble apex court that when the Assessing Officer has taken a lawful view where two views were possible, such an order cannot be considered erroneous. Here, the question is whether the Assessing Officer had applied her mind regarding the issue of holding of the property by India Financial Association, when money for purchase of the property was paid by the assessee. A look at the assessment order for the impugned assessment year placed at paper book pages 45 to 48 would clearly answer this question. Paragraphs 2 to 7 of the assessment order are reproduced hereunder : "2. The assessee filed its return of income for the assessment year 2006-07 on February 12, 2007 admitting income of Rs. 59,07,96,658. The return of income was processed under section 143(1) of the Income-tax Act, 1961 on January 28, 2008. The case was taken up for scrutiny as per the Board's norms and notice under section 143(2) of the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been admitted. However, as per the sale deeds, the gross sale consideration received was Rs. 25,49,72,937. A reconciliation of the same was called for and the assessee vide its letter dated December 19, 2008, stated that Rs. 1,79,49,892 was already admitted in the original return. The assessee's representative was informed that the difference of Rs.48,06,961 which had not been explained would also be treated as income." Thus, the Assessing Officer was well aware that the immovable properties of the assessee were held by India Financial Association. The Assessing Officer was also aware of the difference in figures between India Financial Association and the assessee with regard to consideration received. Assessing Officer had also sought reconciliation and made an addition for the difference. Both assessee and India Financial Association are organisations which have been enjoying exemption under sections 11 and 12 of the Act for a long period. India Financial Association has been existing since 1908 as evident from its memorandum of association placed at paper book pages 82 to 85, whereas, the assessee has been in existence since 1895. Both assessee as well as India Financial Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he properties of other trusts and there is no income derived for managing properties which is claimed to be exempted. Since all these objections of the Revenue are untenable as against the accepted history of the assessments in this case of exemption for about eight decades, we fail to see any reason for interfering with the order of the Commissioner of Income-tax (Appeals) granting exemption. His order is confirmed." In our opinion, a question whether there was a revocable transfer did not arise, since the assessee had not indulged in any transfers during the relevant previous year. As per the Revenue itself the properties sold were held in the name of M/s. India Financial Association. Even otherwise, if we have look at section 63 of the Act defining what is "transfer" and what is "revocable transfer", it reads as under : "63. For the purposes of sections 60, 61 and 62 and of this section, (a) a transfer shall be deemed to be revocable if, (i) it contains any provision for the re-transfer directly or indirectly of the whole or any part of the income or assets to the transferor, or (ii) it, in any way, gives the transferor a right to reassume power directly or indirectly over ..... X X X X Extracts X X X X X X X X Extracts X X X X
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