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TMI Blog2015 (9) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... atter, there is violation of provisions of section 13(2)(b) r.w.s. 13(3) of the Act. Denial of exemption under section 11 should be limited to the amount which was diverted (in the instant case the car was purchased in the name of the prohibited person) in violation of section 13(2)(b) of the Act. With this observation the points of difference are answered as under: - (i) The car can be held as made available for the use of the trustee. (ii) 'Made available' for use include 'deemed use/applied for the benefit of the trustee', with or without actual use for personal benefit of the trustee. (iii) The act of the assessee falls within the ambit of section 13(2)(b) of the act. (iv) Denial of benefits of section 11 deserves to be restricted to such income of the trust which is used/applied directly or indirectly; in the instance case the car was purchased in the name of a prohibited person by applying the funds of the trust. - IT APPEAL NO.1712 (PN) OF 2007 - - - Dated:- 2-2-2015 - D.MANMOHAN, J. For The Appellant : Kishor Phadke For The Respondent : Smt. M.S. Verma THIRD MEMBER ORDER 1. On account of difference of opinion between the Hon'ble A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit of exemption under section 11 for the year under consideration. On an appeal, the learned CIT(A) observed that provisions of section 13 are clearly attracted in the case of the assessee, in view of the findings of the AO that the assessee trust purchased the car worth ₹ 11,38,954/- in the name of one of the Trustees who happened to be a person referred to in section 13(3) of the Act, and the fact of application of trust's income, directly or indirectly for the benefit of a person referred to in section 13(3), is enough to invoke provisions of section 13 and to deny exemption under section 11 of the I.T. Act. He thus affirmed the order of the AO. 3. Before the Tribunal the assessee contended that though the car was purchased in the name of the trustee, a person specified under section 13(3) of the Act, it was meant for official use of the trust; an affidavit of the trustee was also available to show that it was originally registered in the name of the trustee but subsequently necessary steps were taken to ensure that the vehicle is registered in the name of the trust and in fact it was meant for the use of the trust and hence the car cannot be said to be made avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what is the extent of use so as to invoke provisions of section 13(2)(b) of the Act. He accordingly concluded that in the absence of any agreement or MOU preventing the trustee from using the car for self and also in the absence of collection of any rent from the trustee there is a clear violation of provisions of section 13(2)(b) of the Act in which event the assessee is not entitled to the benefit of exemption under section 11 r.w.s. 13. In this regard he relied upon the decision of the Hon'ble Supreme Court in the case of DIT v. Bharat Diamond Bourse [2003] 259 ITR 280 which was in the context of section 13(3)(a) r.w.s. 13(1)(c)(ii)/13(2)(a). He thus concluded that continuous use of the car for personal purposes is not necessary and it is sufficient if it is made available for use of any person referred to in sub-section (3), even for a short duration, without any adequate surety or remuneration. 6. The learned Judicial Member was of the opinion that the view taken by the learned Accountant Member is inconsistent with the plain language of the section. In his opinion the assessee is entitled to register the car in the name of the trustee despite the provision under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. He also distinguished the decision of the Advance Ruling Authority in Intertek Testing Services India (P.) Ltd., In re [2008] 307 ITR 418. 9. In view of the difference of opinion, the above mentioned points of difference were placed before the Hon'ble President to be resolved by Third Member, to be nominated by the Hon'ble President. Since I was nominated as Third Member in this case, the matter was listed for hearing. I have heard the learned CIT (DR) and the learned counsel for the assessee and carefully perused the record. 10. The learned counsel for the assessee reiterated the facts of the case. He submitted that the AO applied section 13(3) of the Act whereas the CIT(A) applied the provisions of section 13(1)(c). He also submitted that the ownership of the asset by the trust is not in dispute. As could be noticed from page 8 of the paper book the car was transferred in the name of the trust w.e.f. 08.03.2007 and for AY 2006-07 the AO granted benefit of exemption in the proceedings under section 143(3) of the Act. The learned counsel also referred to provisions of section 13(2)(b) to highlight that there is no taboo with regard to the use of the car by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had already furnished the logbook to prove that the car was used only for official purposes. He also filed brief written submissions to support the stand taken by the learned Judicial Member and also to submit that in the subsequent years, i.e. for AY 2006-07 exemption under section 11 was granted in 143(3) proceedings. After conclusion of the hearing the learned counsel appears to have noticed a recent judgment of the Hon'ble Supreme Court in the case of CIT v. Fr. Mullers Charitable Institution (Supreme Court of India, SPECIAL LEAVE TO APPEAL (CIVIL) NOS. 22223 OF 2014, Dated:- 19-09-2014) to submit that under identical circumstances the Apex Court affirmed the order passed by the Hon'ble Karnataka High Court by observing that even if there is violation of provisions of section 13(c) of the Act exemption on balance income of the assessee trust cannot be denied. 12. On the other hand, the learned D.R. submitted that the trustee has no personal vehicle and the car was purchased in the name of the trustee but no rent or compensation was paid to the trust when the car was in the name of the trustee; it has to be deemed/assumed that the car was for exclusive us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision in the subsequent assessment year, i.e. 2006-07 has no relevance to the case in hand because what has to be looked into is the factum of availability of car in this year for the use of the trustee without any adequate compensation. As regards the affidavit and logbook it was submitted that they were merely self-serving documents which do not carry any evidentiary value and in fact the logbook does not specify the trips made. In fact the logbook was written for 5 to 6 days at a time and petrol expenses were noted in decimals which cast a shadow on the maintenance of proper logbook. The learned D.R. also filed a paper book and written submissions wherein it was highlighted as under:- (i) Shri S.R. Pachpande is a prohibited person within the meaning of section 13(3)(cc) of the Act and all the documents of the vehicle are in the name of Shri Pachpande. (ii) Shri Pachpande does not have any other car for personal use. (iii) There is no compensation, by whatsoever name called, paid to the trust by the prohibited person. (iv) Logbook of the car mentions that the car is meant for exclusive use of the Director which proves that the car is indeed 'made available' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e trustee and the logbook is not properly maintained date-wise and number of kilometres from place to place. The trustee has no personal car and hence it cannot be assumed that he has not used the car for his personal purposes. Section 13(2)(b) nowhere specifies that there should be exclusive use and there should be enduring benefit to the prohibited person; if it is made available for use that in itself would attract provisions of section 13(2)(b) of the Act and in the instant case it is made available by the factum of purchase of the car in his individual name. The Regional Transport Authority is not competent to issue any certificate with regard to use of the car. In fact the certificate is undated and it does not specify the date on which the car was certified to have been used. The Bench is concerned herein with the previous year relevant to AY 2004-05. The letter issued by the Regional Transport Officer is very general in nature and as already stated he is incompetent to issue such certificate and hence it cannot be taken into consideration. Similarly, in the absence of any Resolution passed by the Trust Board to purchase the car in the name of the trustee mere affidavit file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by affirming the view taken by the Hon'ble Karnataka High Court wherein it was said that in the event of violation of section 13(1)(d) it was only the income or investment or deposit which has been made in violation of section 11(5) that will be liable to tax. This being a latter judgment of the Apex Court, by respectfully following the same, I agree with the view taken by the learned Judicial Member and hold that the denial of exemption under section 11 should be limited to the amount which was diverted (in the instant case the car was purchased in the name of the prohibited person) in violation of section 13(2)(b) of the Act. With this observation the points of difference are answered as under: - (i) The car can be held as made available for the use of the trustee. (ii) 'Made available' for use include 'deemed use/applied for the benefit of the trustee', with or without actual use for personal benefit of the trustee. (iii) The act of the assessee falls within the ambit of section 13(2)(b) of the act. (iv) Denial of benefits of section 11 deserves to be restricted to such income of the trust which is used/applied directly or indirectly; in the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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