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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 ..... flats to Mrs. Arundhati Shelgikar, Mogra family, and the developer were approved by the learned Charity Commissioner in the financial years 2019-20 and 2020-21 at a higher consideration than initially agreed amongst the parties. Thus 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. 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. We are of the considered view that the AO not only considered the incorrect amount of sale consideration in respect of the flats sold by the assessee but also erred in taxing the advance in the year under consideration, particularly when the sale can only be considered to be valid after the sanction by the learned Charity Commissioner in view of the provisions of Bombay Public Trust Act, 1950, which in the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounts, we find no merits in the findings of the learned CIT(A) in upholding the addition made by the AO by computing the notional interest and adding the same to the total income of the assessee. Accordingly, AO is directed to delete the addition - Assessee appeal allowed. - Shri B.R. Baskaran, Accountant Member And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri B.N. Rao For the Revenue : Smt. Shailja Rai ORDER PER SANDEEP SINGH KARHAIL, J.M. The present cross appeals have been filed challenging the impugned order dated 02/11/2022, passed under section 250 of the Income Tax Act, 1961 ( the Act ) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [ learned CIT(A) ], for the assessment year 2013 14. 2. In its appeal, the Revenue has raised the following grounds: 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that there was no contravention of provision of Section 13 ignoring the fact that funds of the trust were diverted and used for the benefit of specified person as covered within the provision of section 13(1)(c)(ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the receipt of sanction and/or the date of approval given by the Joint Charity Commissioner in respect of the activity for re-development? 3. While, the assessee has raised the following grounds in its appeal: On facts an in the circumstances of the case, the learned CIT(Appeals): (i) The learned CITA erred in holding that the appellant was chargeable to tax on notional income held as chargeable income by the Assessing Officer. (ii) The learned CITA ought to have appreciated that it was not the claim of the AO that the Trust had received any such income or was due under any contract and therefore such interest could not have brought to charge: (iii) The learned CITA ought to have appreciated that it was not under the Scheme of Income tax law that any income which is not received nor accrued could be charged to tax: (iv) The learned CITA ought to have appreciated for violation of Section 13 of the IT Act, there could be any punishment meted out to the Trustees under various laws, including recovery of such loss to the Trust from Trustees, but the IT Act has no provision to punished the Trust except that the Trust loses exemption of income to tax u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see as a loan from them and interest has been paid to the assessee. It was further submitted that for the financial year ending 31/03/2011, interest of Rs. 66,62,810 has been paid to the assessee. From the perusal of aforesaid submissions, the Assessing Officer ( AO ) vide order dated 31/03/2016 passed under section 143(3) of the Act came to the conclusion that the assessee has given loan to M/s Ramgopal Ganpatrai Co. Pvt. Ltd. in the year 2011, which is related party under section 13(3) of the Act and the assessee has also violated section 11(5) of the Act. The AO further found that the amount taken from the assessee as a loan was converted into advance on the basis of the MOU and the said fund has been further advanced to other companies wherein the trustees and the relative are directors. The AO also found that till date no registered agreement has been entered between the assessee and M/s Ramgopal Ganpatrai Co. Pvt. Ltd. Further, the AO disagreed with the submission of the assessee that the amount of Rs. 15,88,36,661 was given to M/s Ramgopal Ganpatrai Co. Pvt. Ltd. as advance and accordingly treated the same as loan to the company. It was also held that M/s Ramgopal Ganp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the flats for a total consideration of Rs 16.50 crore, and accordingly, the receipt of Rs. 14.30 crore is a part of the consideration to be paid to the assessee for purchase of the property. The AO further held that the transaction with M/s Trinity Infratech Private Ltd is complete as the assessee has received the entire consideration from the sale of property except a small amount of around Rs. 1.70 crore. Accordingly, the AO held that the assessee should have offered the income from the said transaction in the year under consideration, which was merely shown as advance by the assessee in its balance sheet. By considering the cost of construction of the temple of Rs. 1 crore and hall of Rs. 50 lakh, the AO came to the conclusion that the total consideration received from the sale of the property to M/s Trinity Infratech Private Ltd is Rs. 18 crore. Further, on the basis that the assessee could not explain the nature of the amount of Rs. 3.85 crore shown in the balance sheet as advance, the said amount was also treated as being related to the sale of the property at Vile Parle. Accordingly, an amount of Rs. 21.85 crore was considered as income from the sale of the property a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to allow acceptable developers to develop the land on a sharing-of-space basis. Since M/s Trinity Infratech Pvt. Ltd. showed interest in developing the property at its cost and gave the proposal to the trust, the assessee made an application to the Charity Commissioner for appointing M/s Trinity Infratech Pvt. Ltd. as developer and to grant approval for development of the property of the trust as per the provisions of Bombay Public Trust Act, 1950. The learned Charity Commissioner vide its order dated 15/11/2008 permitted the trustees of the assessee to transfer development rights of the trust property in favour of M/s Trinity Infratech Pvt. Ltd. on the condition that M/s Trinity Infratech Pvt. Ltd. shall re-develop/renovate the Mandir and hall at its own cost up to the tune of Rs. 1 crore. Further, upon redevelopment of the chawl structure, M/s Trinity Infratech Pvt. Ltd. shall give 50% of the constructed area from the newly constructed building, i.e. from the 1st to 5th floor and part of 6th floor to the assessee. It was also directed that M/s Trinity Securities Pvt. Ltd. shall bear all the costs of construction/redevelopment. Further, the security deposit amount shall be deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee filed an application seeking permission to sell out the trust property which was rejected vide order dated 27/01/2021. Thereafter, the assessee filed a review application before the learned Charity Commissioner, which was disposed off vide aforesaid order dated 31/03/2021. We find that the learned Charity Commissioner, vide aforesaid order, granted sanction to sell two flats of the trust to Mogra family for an enhanced consideration of Rs. 3,57,63,200 each. Further, the learned Charity Commissioner granted sanction to sell the eight flats to the developer for a total enhanced consideration of Rs. 28,61,05,600. The learned Charity Commissioner noted that the sale of the flat to Mrs. Arundhati Shelgikar was already approved by its predecessor vide order dated 20/06/2019 for a total enhanced consideration of Rs. 2,61,00,000. It is pertinent to note that the learned Charity Commissioner directed the purchasers to pay enhanced consideration considering the rates of the property as per the Ready Reckoner published for the year 2021 by the Government of Maharashtra. Thus, from the above, it is evident that the sale of flats to Mrs. Arundhati Shelgikar, Mogra family, and the deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e year in which the sale transaction was concluded pursuant to the order passed by the learned Charity Commissioner. Accordingly, the impugned order passed by the learned CIT(A) on this issue is upheld and the appeal by the Revenue is dismissed. 13. As regards the loan of Rs. 15,88,36,661 given by the assessee to M/s Ramgopal Ganpatrai Co. Pvt. Ltd., we find that no information has been brought on record to dispute the findings of the AO that the trustees of the assessee were having shareholding of 12.92% and 12.97% (conjointly more than 20%) in the said company. As per the AO, since the trustees of the assessee had more than 20% shareholding in M/s Ramgopal Ganpatrai Co. Pvt. Ltd., the grant of loan to the said company has violated the provisions of section 13(1)(c) of the Act. Further, as per the AO, the loan of Rs. 15,88,36,661 given by the assessee to M/s Ramgopal Ganpatrai Co. Pvt. Ltd. was subsequently moved in the accounts to advance and the assessee did not charge any interest thereon, despite the fact that in the assessment year 2011-12 the assessee received an interest at 10.5% on the same. Therefore, it was alleged that the assessee has violated the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 263. We, therefore, do not permit the learned D.R. to transgress the boundaries of his arguments. 15. Therefore, on this preliminary basis only, as noted by the Special Bench of the Tribunal in the aforesaid decision, the contention of the learned DR is rejected. 16. Since no interest was charged by the assessee on the amount advanced to M/s Ramgopal Ganpatrai Co. Pvt. Ltd., the AO proceeded to compute the interest @10.5% by applying the rate at which interest was paid in the assessment year 2011-12 and made an addition of Rs. 1,66,77,849. It is pertinent to note that the only consequence of the case which falls within the four corners of section 13 is the denial of exemption under section 11 of the Act. Section 13(2)(a) of the Act also does not authorise the Revenue to compute the notional interest, in case no such interest is charged by the trust. Thus, in a case when no real interest was accrued or received nor the same was recorded by the assessee in its books of accounts, we find no merits in the findings of the learned CIT(A) in upholding the addition made by the AO by computing the notional interest and adding the same to the total income of the assessee. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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