TMI Blog2003 (9) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... t length and wherever necessary the facts for the remaining assessment years could be adverted to, but the decision of the Tribunal in asst. yr. 1990-91 would apply to the remaining assessment years as well. On the basis of these observations, we now proceed to detail relevant facts for asst. yr. 1990-91 as under. 3. The assessee filed return, declaring income at nil and this was initially processed under s. 143(1)(a). Subsequently, notice under s. 148 was issued and in the assessment proceedings pursuant thereto the assessee was asked to give a detailed explanation about the charitable activities undertaken during the relevant previous year as also to show how the activities of the centre were covered under s. 11 of the Act. The assessee was also asked to explain as to how the various organisations which were also to be housed in the premises allotted to the centre by the Government had contributed to the construction of the building/centre and whether these were covered by the provisions of s. 13(1)(d) r/w s. 13(3) of the Act. The assessee was also asked by the AO to show-cause as to why principles laid down by the Tribunal in the judgment reported in Visveswaraya Industrial Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no amount had been received either towards corpus or as donation and the sums defrayed by the other institutions had been utilised in putting up the superstructure. It was explained to the AO that each institution, which had defrayed money to the centre had been given legal ownership by way of special lease of the land and consequentially the space. The further submission was to the effect that charitable activities of general public utility had been carried out during the relevant previous year. 7. Considering the aforesaid facts as also applying thereto the relevant provisions of the Act, the AO proceeded to exempt the income under s. 11 of the Act and assess the same at Rs. Nil. 8. The DI on subsequent perusal of the record opined that the assessment order passed by the AO was erroneous insofar as the same was prejudicial to the interest of Revenue since the benefit of exemption under s. 11 had been wrongly given. He accordingly issued a notice under s. 263(1) and in response thereto the assessees representative attended along with the counsel making the following submissions: (i) The provisions of s. 263 were not applicable to the facts and circumstances of the case sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee during the relevant previous year under consideration as also in some subsequent assessment years had not engaged in a single activity that was habitat related. In relying on the judgment of the Hon ble Delhi High Court in the case of Kirti Chand Tara Wati Charitable Trust vs. Director of IT (Exemption) Ors. (1999) 152 CTR (Del) 322 : (1999) 232 ITR 11 (Del), the CIT opined that one was not to remain confined to the objects of the trust as set out in the deed of declaration and the real purpose of establishment of a trust had to be found out and spelled out. 11. In proceeding further to the order of the CIT under s. 263, we note the following main grounds and reasons for forming the view that the order passed by the AO was erroneous insofar as it was prejudicial to the interest of Revenue and setting aside the same under s. 263: (i) That the assessee had collected huge funds from member organisations towards the proportionate cost of land and the construction cost and in the books of accounts these had been shown as contributions. That such member organisations fell in the category of substantial contributors in terms of s. 13(3) of the Act and since the assessee had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter in an order passed under s. 143(3) and there was, therefore, no justification on the part of the CIT to take a different opinion on the same set of facts. Further, according to the learned counsel, the CIT had not conducted any enquiries nor had he given any specific findings while setting aside the assessment order. 14. With reference to the facts of the case the learned counsel, first of all, referred to the memorandum of association of the centre and a copy of which was placed at pp. 2 to 4 of the paper book. It was emphasised by the learned counsel that there was a distinction to be drawn between the objects of the centre and the powers for achieving the said objects. With reference to pp. 2 and 3 of the paper book, the learned counsel stated that items (a) to (j) were the powers to be exercised for attaining such objects. The next reference by the learned counsel was to pp. 19 to 23 of the paper book and which was a copy of the land allotment letter received from the L DO, Ministry of Urban Development. A specific reference was made to cls. (II) to (IV), (VI) to (XI) and (XVII) (XVIII) to stress on the following: (i) The assessee did not pay a single paisa eith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the buildings under construction in the "campus" of the IHC and nothing more. 17. The learned counsel at this stage referred to certain orders passed by the AO as also the CIT(A) and the Tribunal in the assessee s own case for the years other than those under consideration in the present appeals. The first reference was to the assessment order for asst. yr. 1988-89 placed at pp. 89 and 90 and wherein, according to the learned counsel, the AO had taken the view that the activities of the assessee were not charitable within the meaning of s. 2(15) of the Act since it was engaged only in the construction activities for various institutions. It was emphasised by the learned counsel that on further appeal against the said assessment order the Dy. CIT(A) had taken the view that the assessee was a charitable institution within the meaning of s. 2(15). It was emphasised by the learned counsel that a second appeal was filed by the Department against the order of the Dy. CIT(A) and the Tribunal had been pleased to dismiss the same vide copy of the order placed at pp. 94 and 95. Going further the learned counsel stated that the reference application filed under s. 256(1) against the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e various institutions were made as also the manner in which these institutions depicted in their balance sheets the amounts disbursed to the IHC and these papers thereafter were placed on our record in the form of a supplementary paper book running from pp. 113 to 186. A copy was also provided to the learned Departmental Representative, who was asked to offer his comments/arguments after the assessee s counsel had addressed the Bench. It is, however, emphasised that the pages which were relied upon by the assessee s counsel were from 161 to 186 and it was in fact the submission of the learned counsel that these were not fresh evidence, but had only been placed on record to support the stand already taken vis-a-vis the status of the institutions, who were located in the premises of the centre as also the question of ascertaining the nature of the amounts paid by them to the assessee. 21. With reference to the aforesaid documents, we may mention that pp. 161 to 178 are the copies of the communications addressed by the assessee to various institutions to whom space had been allotted and we, in fact, have discussed similar communications in the earlier part of the present order and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons recorded by the CIT in acting under the said section. On the powers of the CIT to act under s. 263, the learned Departmental Representative placed reliance on Venkata Krishna Rice Co. vs. CIT (1987) 62 CTR (Mad) 152 : (1987) 163 ITR 129 (Mad) and CIT vs. Amritlal Bhogilal Co. (1958) 34 ITR 130 (SC). By referring to p. 60 of the assessee s paper book the stand of the learned Departmental Representative was that land had been allotted to the centre by the Govt., i.e., the centre was the lessee and the other institutions to whom space had been allotted were sub-lessee and by constructing buildings for others the assessee was violating the provisions of ss. 11, 12 and 13(1)(d). Further, according to the learned Departmental Representative, the subsequent activities of the assessee in the years other than those under appeal showed that it had lost the character of a charitable institution and on all the aforesaid grounds it was not entitled to the benefit of ss. 11 and 12. In support of the aforesaid arguments and more so in support of the order of the CIT under s. 263 the learned Departmental Representative placed further reliance on the following decisions: (i) H.H. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, in terms of the allotment letter dt.2nd May, 1988, the centre was required to construct a composite building to provide for space and allot the same to various institutions engaged in "Habitat" concept as well as common areas and facilities to be shared by those institutions. The allotment of space to the institutions was subject to approval from the ministry in accordance with cl. (vii) of the allotment letter. The centre was to provide relevant data along with the recommendations approved by the governing body in respect of allotment of space to those institutions. In terms of allotment, the centre was authorised to recover the proportionate cost of land, building and indivisible share in the common areas and facilities from the allottees. The centre is also required to execute sub-lease with the allottees of space in the form of tripartite agreement. However, so far the agreement of sub-lease has neither been executed nor indeed finalised as yet." 28. We now refer to para 7 of the order of the CIT wherein the following facts are recorded: (i) That the aims and objects as illustrated in the memorandum of association fall within the term "charitable purposes" as defined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us professions and institutions dealing with different facts of habitat and habitat related environmental issues would function and in addition to such activities, the centre was required to construct a building and related facilities on behalf of the members of the centre. In view of the aforesaid, one really cannot appreciate the stand of the Revenue that the amounts received from the allottees represented income/contributions within the meaning of s. 13 since it is quite apparent that the assessee was to construct the building and allot space to various institutions and it could, at the best be treated as a custodian of the funds of the allottees as also the supervisor of the construction activities. In our opinion, therefore, the view expressed by the CIT in para 8 of his order is not the correct one both on facts and in law. No material has been placed on record by the CIT to justify the observation about the space being allotted at a price below the market price and even going by the assumption that it is so, then allotment made under the directions and supervision of the Govt. cannot be treated to be a violation of the provisions of s. 13 since the assessee was bound to comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om space had been allotted are not to be treated as "substantial contributors" in terms of s. 13(3) and insofar as the interest income is concerned, we have already observed that the institutional members are to pay on a proportionate basis for the cost of land and the space and the entire construction is on self-financing basis and the cost of land and the space is subject to Govt. approval. Under these circumstances, we do not find anything adverse in the action of the assessee to allow the benefit of the interest income to the institutional members in working out the cost of space since apparently it is the money of these institutional members which has been placed in deposits till the time it is required and during this intervening period it has earned interest. In other words, there is no violation of provisions of s. 13(1)(c). 33. In para 13 of his order for asst. yr. 1990-91 the CIT has relied upon the judgment of the Hon ble Delhi High Court in 1975 CTR (Del) 61 : (1975) 99 ITR 375 (Del) as also that of the Hon ble Calcutta High Court in (1993) 115 CTR (Cal) 69 : (1995) 214 ITR 583 (Cal) for the proposition that action under s. 263 is warranted in a situation where there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee for allowing transfer of lease hold rights was also treated as business income. On the question whether activity of construction of centres could be held to be for general public utility, the Tribunal took a view against the assessee and in favour of the Revenue. In discussing the matter at length, the Tribunal dealt with the activities carried out in the three buildings, viz., World Trade Centre, Common Centre and IDBI Centre opining in the ultimate analysis that these had no connection to the research and scientific activities which were the avowed objects for which the centre had been set up. The application of income for construction activity was not held to be an application as warranted by s. 11. 35. We really cannot understand as to how the aforesaid judgment of the Mumbai Bench of the Tribunal is applicable to the facts of the assessee s case because the construction of the superstructure by the assessee is an integral part of the objects for which IHC has been created, viz., the promotion of habitat related activities. We have already reproduced para 2 of the order of the CIT for asst. yr. 1990-91 and wherein all relevant facts, which are not in dispute on bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to discuss henceforth. The first is the judgment of the Hon ble Supreme Court in the case of Yogiraj Charity Trust vs. CIT. This judgment does not pertain to the powers of the CIT under s. 263, but deals with the exemption to be allowed to a charitable institution. We reproduce relevant extracts from p. 777 of the report, as follows: "If one of the objects of the trust deed is not a religious or charitable nature and the trust deed confers full discretion on the trustees to spend the trust funds for an object other than of a religious or charitable nature, the exemption from tax under s. 4(3)(i) of the Indian IT Act, 1922, is not available to the assessee. If the primary dominant purpose of a trust is charitable, another object, ???which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the trust from being a valid charity. Where in a trust deed providing for many charitable objects, the trustees were authorised to open and maintain commercial institutions where work at living wages could be provided to the poor and to contribute to commercial, technical or industrial concerns, institutions, associati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1996placed on the paper book at p. 8. In other words, there are two orders under s. 263 for asst. yr. 1991-92 since the one passed on28th March, 2000is presently in appeal. 41. As regards the first point, the matter can be examined in a given year by the Department since the CIT in the years under appeal has not made this as an issue for acting under s. 263. 42. Coming to the first order of the CIT under s. 263 dt.27th March, 1996the learned counsel stated that this had not been appealed against to the Tribunal, but we find from a perusal thereof that the CIT has relied on the assessment order for asst. yr. 1988-89 observing that the facts are the same for asst. yr. 1991-92. It is seen from the paper book itself at pp. 91 to 97 that the Dy. CIT(A) took the view that for asst. yr. 1988-89 the IHC was a charitable institution and this was confirmed by the Tribunal and reference application under s. 256(1) came to be rejected. Further observations in the order under s. 263 only suggest enquiries to be made by the AO on certain lines and which the AO did subsequently leading to a second assessment order and another order under s. 263 (presently in appeal). 43. In the final anal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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