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TMI Blog2023 (10) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... f, the assessee is a Trust registered under section 12A of the Income Tax Act, 1961 (the "Act"). It e-filed its return for AY 2016-17 on 15.10.2016 disclosing income at 'nil' after claiming its entire income as except under section 11 ad 12 of the Act. The case was selected for scrutiny. Statutory notice(s) were issued and served upon the assessee. In response thereto the assessee made submissions vide reply dated 13.12.2018, 18.12.2018 and 21.12.2018 to the query raised by the Ld. Assessing Officer ("AO") about residential accommodation provided to trustees and their family members. The Ld. AO did not find the replies tenable mainly for the reason that leasing out of the two properties of the trust, namely the property at 25 Kautilya Marg, New Delhi and 13 Rajdoot Marg, New Delhi for use by the trustees and their family at the consolidated lease rent of Rs. 90,000/- per month attracted the provisions of section 13(2)(b) of the Act and therefore, the assessee was not entitled to avail exemption under section 11 and 12 of the Act. He, therefore taxed the assessee as AOP and computed the taxable income of the assessee at Rs. 1,93,93,48,991/- including therein addition of Rs. 31,20,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs, both the AO and appellant reiterated their claims. Here first question before me is that whether the assessee is allowed to raise plea /argument that its case may be examined with the provisions of section 10(23C)(IV), particularly when no such claim was made in the return of income. In this regard, it is noted that as per landmark decision of the Hon'ble Supreme Court in Goetze India any claim made otherwise than by filing of revised return cannot be entertained by the AO during the course of assessment proceeding, however, the said case does not apply to claims made before the Appellate Authorities otherwise than by Revised Return of Income, I find that there is plethora of decisions, ratio of which held that a fresh claim can be raised before the Appellate Authorities, even if it has not been raised before the Assessing Officer nor claimed in the Return of Income, the Appellate Authorities have wide powers to entertain it. Few of the case are being referred as under:- In the case of CIT V/s Mithesh Impex 270 CTR (Guj) 66, the Head note and conclusion are reproduced as below:- "Appeal-Fresh claim - Allowability - Assessee raised fresh claim u/s 801B before CIT(A) but ..... 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Similarly, the Head-note in the case of CIT V/S Rajasthan Fasteners (P) Ltd 266 CTR (Raj.) 401 is reproduced as below:- "Exemption u/s 10B-Newly established hundred per cent export oriented undertakings Claim of exemption disallowed it was contended by assessee that inadvertently and on account of mistake by office of Chartered Accountant, instead of exemption having been claimed u/s 108 in return, it was wrongly typed as 801B, hence, mistake was not attributable on part of assessee and thereafter alternative letter which was send as clarification note should have been treated as revised return and accordingly claim should have been allowed-CIT(A) reversed order of AO which was upheld by ITAT-Held, assessee is 100% export oriented unit and had been claiming exemption night from assessment year 2004-05 u/s 108-It may be that claim is to be allowed on year to year basis but when facts and circumstances reveal that assessee. was eligible even this year for exemption u/s 108 and it has been found to be in order except that instead of mentioning exemption u/s 108, while e-filing return of income tax. it was wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jasthan High Court in para 17 of the order has discussed the powers of the CIT (A) viz-a-viz the Assessing Officer while disposing of an appeal- the para 17 is reproduced as below for the sake of clarity. 17. We may also observe that the CIT(A) had plenary power in disposing of an appeal. The scope of his power was co-terminus with that of the Income Tax Officer. He could do what the Income Tax Officer could do and also direct him to do what he had failed to do. It has been held by authorities of the Hon'ble Apex Court (supra) that above observations are squarely applicable and the interpretation of Section 251(1)(a) of the Act. The declaration of law was clear that the power of the Appellate Assistant Commissioner [CIT (Appeals)] was co- terminus with that of the Income Tax Officer and if that is so, there appears to be no reason as to why the appellate authority could not modify the assessment order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise, an appellate authority, while hearing an appeal against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l precedents cited and reproduced above make it amply clear that if an assessee is otherwise eligible for a particular deduction/exemption then the same cannot be denied to him or it simply on the ground that this claim was not made by the assessee in his return of income. In the instant case, at the outset, the appellant has been claiming that it is duly eligible for exemption as per provisions of section 10(23C)(IV) of the Act. In the remand report, the AO has also not commented that the appellant trust is not eligible for exemption u/s. 10(23C)(iv) of the Act. The AO simply emphasized that this claim was made in the return of income. At this juncture, it imperative to reproduce the provisions of sec. 10(23C)(iv), which reads as under- "10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- [ ) 23C any income received by any person on behalf of- ) 16 any other fund or institution established for charitable purposes 17[which may be approved by the prescribed 15[(iv) authority18], having regard to the objects of the fund or institution and its importance throughout India or throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on June 6, 1904 with the same chantable objects as given in the Trust Deed of Hamdard Laboratories India. Thus HIL is a business held under charitable trust and HNF is a special purpose vehicle set up for the sole purpose of effectuating the charitable intent of HLL. With the income generated from manufacture and sale of Unani Medicines, following education and medical institutions have been established and are being run: 1. Jamia Hamdard University, Hamdard Nagar, New Delhi 2. Hamdard Institute of Medical Sciences & Research (Medical College). Hamdard Nagar, New Delhi alongwith two sate of art modern hospitals with 600 bed capacity. 3. Majeedia Hospital of Unani Medicines 4. Hamdard Public School, Talimabad, New Delhi 5. Hamdard Primary School, Okhla, New Delhi 6. Rabea Girls Public School, Old Delhi 7. Hamdard Study Circle providing free coaching to poor and needy aspirants of Indian Administrative Services 8. Hamdard Coaching Centre providing free coaching to poor and needy students preparing for all India Medical & Engineering competitions. In the instant case, there is no dispute that HIL exists solely for charitable purposes and not for purposes of profit, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. It would be appropriate to refer to the provisions of section 13(1) of the Act which deals with the trusts not eligible for exemption. As per section 13(1), the following trusts are not eligible for exemption under Sections 11 and 12: a. trust for private religious purposes, which enures no public benefit: [Sec. 13(1)(a)] b. charitable trust created or established on or after 1-4-1962 for the benefit of any particular religious community or caste [Sec. 13(1)(b)] (other than scheduled castes/tribes, back ward classes or women and children). (Explanation 2) c. A trust or institution for charitable or religious purposes, if any part of its income or property is used or applied, or enures. directly or indirectly to the benefit of a person specified u/s 13(3) of the Act, viz., (1) the author or founder of the trust. (1) a substantial contributor whose total contributions to the trust upto the end of the relevant previous year exceed Rs. 50,000; (iii) where the author or contributor is an HUF, a member of the family; (iv) the trustee or manger of the trust; (v) any relative of such author. founder, contributor, member, trustee or manager, and (vi) any concern in which any of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oot Marg, the appellant submitted that it is not owned by HLI but by another independent trust namely Hamdard National Foundation which has leased it to HLI since 2007 and a part of it is occupied by Mr. Abdul Majeed since 2010-11 as per the terms of his employment with HLI since 1995. Considering the facts of the case and appellant's submissions, I am inclined to agree with the appellant's claim that it did not violate the provisions of sec. 13(2)/13(3) of the Act. On consideration of the entire material before me, I am the view that the law requires the AO to bring on record cogent evidence to justify the invocation of section 13 of the Act and the material collected by the AO from the Internet as well as otherwise cannot be termed as the collaborative piece of evidence. The appellant has satisfactorily established that the property let out by the trust and properties quoted by the AO were not similar, merely because these are properties are located in same area, their rental value cannot be equated. Besides, the AO failed to provide details of these properties to present its case in a fair way. It is the consistent opinion of judiciary that material collected behind the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out to the company. Under section 13(1)(c)(i) the benefit of exemption under section 11 is denied to an assessee who has used' or 'applied any part of the income or property of the trust for the benefit of any person referred to in sub-section (3). The connotation 'used' or 'applied' should be understood as a positive act of use or application of the income of the trust or the property of the trust. In the instant case the rent, having been held to be reasonable with reference to the area of premises out, it could not be said that there was any benefit passed on directly or indirectly to the person referred to in subsection 13(3). In fact, by not making efforts to collect the outstanding rent, the assessee could not be said to have used or applied the income or property of the trust as there was no positive act on the part of the assessee in that regard. Therefore, the provisions of section 13(1)(c)(i) were not violated by the assessee-trust. Section 13(2)(a), which had been applied by the assessing Officer, was also not applicable to the facts of the case, inasmuch as, under the said provision, the income or property of the trust would be deemed to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Control Act and the standard rent of this property was below Rs. 4,000 per month which was the rent being paid by the company. In view of the principles laid down by the Supreme Court in the cases of Dewan Daulat Rai Kapoor v NDMC [1980] 122 ITR 700, Mrs Sheila Kaushish v CIT [1981] 131 ITR 435, and Amolak Ram Khosla v. CIT [1981] 131 ITR 589 since in the instant case the rent payable by the company to the assessee was considered to be more than the standard rent assessable under the Delhi Rent Control Act it was not permissible to say that the rent charged by the assessee was inadequate and was intended to confer any benefit on the settlors or their relatives The assessee was, therefore, entitled to exemption under section 11 and the addition made by the ITO to the rental income was not justified" 1. Lastly, but not the least in the case of CIT vs. Bholaram Educational Society [2019] 101 taxmann.com 193 (SC), the Hon'ble Apex Court dismissed the SLP filed against the order of High Court, holding that rent paid by assessee-trust to a trustee for using land and building was not excessive and, thus, exemption could not be denied to assessee under section 11 by invoking provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed." 5. Dissatisfied, the Revenue is in appeal before the Tribunal and both the grounds relate thereto. 6 Drawing our attention to the order of the Ld. AO it is submitted by the Ld. CIT (DR) that the assessee has offered substantial concession in rent to persons specified under section 13(3) which violates the provision of section 13(2)(b) of the Act. The Ld. CIT(DR) pointed out that in order to quantify the concession allowed in respect of property at 25 Kautilya Marg, the Ld. AO relied on the data available at makaan.com for semi furnished accommodation for area of 3300 sq. ft.. The Ld. CIT(DR) frankly admitted that the Deptt. did not obtain valuation report from the statutory authority. He objected to the direction given by the Ld. CIT(A) to allow exemption under section 10(23C)(iv) and/or under section 11 and 12 of the Act. 7. The Ld. AR gave a brief background of the case in synopsis of submissions placed before us. It is stated that the assessee is trust constituted by and under its own Trust Deed dated 28.09.1948 ("Deed") whereby the partners of a business known as "Hamdard Dawakhana" dedicated the said business to charity. The said partnership was engaged in the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghlighted by the AO in the screen shots was not valid for invoking the Provisions of Section 13(2)/13(3) of the Act. 6. That the property at Kautilya Marg had been purchased in 1972 for a sum of Rs. 7 Lakhs and had not undergone a change since then. In other words it was a dilapidated property. 7. That the AO had further erred in comparing the rent of the premises partly occupied by the name trustee for the last do years with the alleged rate for a fresh tenancy of a fully occupied property which is furnished or semi-furnished. 8. That the AO further erred in invoking the said provisions with reference to the family members of the erstwhile Chief Mutawalli, Late Abdul Muced Sahib, who occupied a part of the premises at 25 Kautilya Marg entirely on compassionate grounds and that also without ascertaining whether these were specified persons within the meaning of Section 13(3). 9. That since the Provisions in question applied only to property owned by an assessee, the property at Rajdoot Marg owned by HNF could not be reckoned. 10. The onus to invoke the Provisions of Section 13(2)/13(3) lay on the AO and which has not been discharged. 11. A position which has remained un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2)(b), the burden of showing that the rent charged by the assessee was not adequate was on the revenue. Unless the price/rent was such as to shock the conscience of the Court and to hold that it could not be the reasonable consideration at all, it would not be possible to hold that the transaction was otherwise bereft of adequate consideration. In the instant case, the revenue had failed to bring on record any cogent evidence to show that the rent received by the assessee, was inadequate. The material collected from the internet as well as the estate agents could not be termed as a corroborative piece of evidence in this regard. Further, the rent received by the assessee exceeded the valuation adopted by the municipal corporation of Delhi for the purpose of levying house tax. It was not shown that the Assessing Officer made any independent inquiry on the age and condition of the building of the assessee. In fact, as contended by the assessee and taken note of by the Tribunal and not denied by the revenue, the property was not even ready during assessment year 2008-09 and was lying vacant. In the absence of any such inquiry by the Assessing Officer, the invocation of section 13(2)(b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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