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TMI Blog2023 (11) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in by deleting the addition of Rs. 21,85,00,000/- which has been received by the assessee from M/s. Trinity Infratech Pvt. Ltd against the business project undertaken for re-development without permission of the Joint Charity Commissioner? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on the technical ground that the amount of income received as proceeds against the redevelopment project had not crystallised only on the basis of the date of approval received from the Joint Charity Commissioner which has not been not received during the year but received subsequently? 4. Whether on the facts of the case and in law the Ld. CIT(A) was justified in deleting the addition made by the AO, ignoring the fact that the object of the trust is not money lending business. Further, these proceeds from the re-development project were the income of the trust received during the year and there was absence valid explanations and requisite permission from the charity commissioner, in view of which, the same had to be taxed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust as could be estimated by the AO should be brought to tax. (v) The learned CITA erred in not giving an opportunity of hearing to the appellant before dismissing the appeal in regard to assessment of notional interest. The appellant craves leave to add, alter, vary, abridge or delete any of the above grounds of appeal." 4. The brief facts of the case, as emanating from the record, are that the assessee is a religious and charity trust and maintains Laxminarayan Mandir at Vile Parle, Mumbai. The assessee is registered under section 12A of the Act. For the year under consideration, the assessee filed its return of income on 17/10/2013 declaring total income at Rs. Nil. The return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) as well as section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, it was observed that the assessee has undertaken the redevelopment of the property of the trust, i.e. Mandir and adjustment chawls. It was further observed that in this connection, the assessee trust has taken advances from certain persons amounting to Rs. 14.30 crore. It was further observed from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment/redevelopment and therefore it cannot be said that the assessee has given any advance to the company for the redevelopment of the property. The AO also held that the assessee does not fall under the exceptions provided in the proviso to section 13(1)(c) of the Act. Accordingly, the AO came to the conclusion that the trustees have taken benefit of the trust property and it is a clear-cut violation of the provisions of section 13(3) read with section 13(1)(c) and section 13(2)(a) of the Act and hence, the assessee is not eligible for exemption under section 11 of the Act. 5. During the assessment proceedings, the AO also observed that the assessee has obtained permission from the learned Charity Commissioner whereby the assessee was allowed to enter into a development agreement with M/s Trinity Infratech Private Limited, and as per the agreement, the developer was to construct the temple costing around Rs. 1 crore and hall admeasuring 400 sq.mt. in addition to the temple costing around Rs. 50 lakh. Further, upon redevelopment the developer shall construct 11 storied building out of which 50% of the constructed area, i.e. 1st to 5th floor and part of the 6th floor, a total admea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the loan to M/s Ramgopal Ganpatrai & Co. Pvt. Ltd. is in the nature of advance for joint development of the property was rejected, the AO proceeded to compute the interest at the rate of 10.5% on the basis of interest income of Rs. 66,62,810 declared in the assessment year 2011-12. Since the advance till 31/03/2013 was at Rs. 15,88,36,661, the AO computed the notional interest income of the assessee at Rs. 1,66,77,849 being 10.50% of the aforesaid advance and added the same to the total income of the assessee. 7. The learned CIT(A), vide impugned order, granted partial relief to the assessee and deleted the addition of Rs. 21.85 crore on the basis that the learned Charity Commissioner has granted the sanction for the sale of 10 flats vide its order dated 31/03/2021 and therefore the transfer/sale of flats constructed by M/s Trinity Infratech Pvt. Ltd. has not taken place in the relevant assessment year. However, the learned CIT(A) upheld the addition of Rs. 1,66,77,849 being the notional interest not charged on the loan given by the assessee to M/s Ramgopal Ganpatrai & Co. Pvt. Ltd. in the year under consideration. Being aggrieved, both assessee and Revenue are in appeal bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, it paid compensation aggregating to Rs. 2,43,00,000 to the three tenants to vacate the chawls occupied by them. In order to raise the required finance, the assessee intended to sell its share of flats to the developers and others against advances and adjust the same against the final consideration upon the actual sale of the said flats after the development was complete. Accordingly, in March 2009, one Mrs. Arundhati Shelgikar chose to buy one flat upon construction and advanced a sum of Rs. 1.61 crore to the assessee. Further, M/s Trinity Securities Pvt. Ltd. agreed to buy eight flats in the new building to be constructed for a total consideration of Rs. 16.50 crore. Similarly, one Mogra family agreed to buy two flats for Rs. 2.75 crore each and they paid the said amount to the trust as an advance on or about 04/12/2013. The development was complete and an occupation certificate was obtained from the municipal authorities on 24/01/2013. 10. As is evident from the record, the AO considered an aggregate amount of Rs. 21.85 crore (comprising Rs. 14.30 crore from the developer, Rs. 1.50 crore as the cost for renovation of the temple and hall, and Rs. 3.85 crore shown as advance a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-21 at a higher consideration than initially agreed amongst the parties. Therefore, 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. 12. 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. In view of the order passed by the learned Charity Commissioner, wherein after taking into consideration the fact that the developer has paid Rs. 16.50 crore, the learned Charity Commissioner directed the developer to pay a total enhanced consideration of Rs. 28,61,05,600, we find no merits in the conclusion reached by the AO in treating Rs. 18 crore as the sale consideration of the eight flats sold by the assessee. Further, as noted above, the amount of Rs. 3.85 crore, which was also considered as the income from the sale of property, was advanced by the Mogra famil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amgopal Ganpatrai & Co. Pvt. Ltd., in which its trustees are directors. Accordingly, the AO held that the assessee is not eligible for exemption under section 11 of the Act. On the other hand, it is the plea of the assessee that M/s Ramgopal Ganpatrai & Co. Pvt. Ltd. proposed to redevelop the property known as "Samudra Gaurav" in Mumbai and the assessee took interest in intending to invest the said amount advanced to the company in redeveloping the property and the said company intended to use the funds on such redevelopment. Accordingly, as per the assessee, its case is not covered under the provisions of section 13 of the Act. We find that the learned CIT(A) has not recorded any specific finding on the conclusion of the AO regarding assessee's eligibility under section 11 of the Act. Since in its appeal, the assessee has not raised any ground challenging the findings of the AO regarding the eligibility under section 11 of the Act, therefore, we are keeping this issue open. 14. During the hearing, the learned Departmental Representative ("learned DR") vehemently argued that exemption under section 11 is applicable to a trust that is wholly charitable or wholly religious. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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