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M/s Clara Swain Hospital Versus Income Tax Officer, Ward-1 (1) , Bareilly

2015 (6) TMI 672 - ITAT LUCKNOW

Addition on capital gain - invocation of provisions of section 50C - Held that:- From a careful perusal of the joint venture agreement, we find that it is abundantly clear from this agreement that there is no absolute transfer of land by the first party i.e. Methodist Church in India in favour of M/s Ritam Charitable & Education Society. Basically, it is joint venture agreement executed between the Methodist Church in India and M/s Ritam Charitable & Education Society to expand the hospital faci .....

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if any capital gain is to be accrued, it would be accrued only in the hands of Methodist Church in India. The assessee is nowhere a party to the joint venture agreement. It was simply a hospital managing the affairs of the hospital only. It did not own the property of the hospital including the land therein as per its constitution as it was owned by Methodist Church in India. Therefore, from any angle, if the joint venture agreement and constitution of Clara Swain Hospital is seen, it would be .....

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in the hands of the assessee. Whatever capital gain has arisen, it is only in the hands of Methodist Church in India and not in the hands of the assessee.

Therefore, we are of the view that the Revenue has wrongly assessed the capital gain in the hands of the assessee on transfer of any right in movable or immovable property or land in favour of the M/s Ritam Charitable & Education Society. So far issue of invocation of section 50C is concerned, we find that since the capital gain ca .....

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: This appeal is preferred by the assessee against the order of CIT(A), inter alia, on various grounds but they all relate to the confirmation of addition made on account of capital gain made by the Assessing Officer after treating the assessee to be the owner of the land. 2. During the course of hearing, the assessee has moved an application for admission of additional ground with regard to the invocation of provisions of section 50C of the Act. Since the Assessing Officer has invoked the provi .....

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he succession of Methodist Churches of United States and of India. In 1940, this hospital was expanded into a general hospital. As per the constitution of Clara Swain Hospital executed on 24th August, 1989, the movable and immovable property in Clara Swain Hospital is the property of Methodist Church in India held in trust by the executive Board of Methodist Church in India, registered under the Societies Registration Act 1860, bearing No. 1155 of 1942-43 at Bombay, successor in interest of Meth .....

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entire field of medicine. As per the joint venture agreement, the second party i.e. M/s Ritam Charitable & Education Society has paid a sum of ₹ 10 crore to the Methodist Church in India through DD issued in favour of the Executive Board of Methodist Church in India. This agreement was examined by the Assessing Officer and formed a view that through this joint venture agreement, the assessee Clara Swain Hospital has given the possession of the land to M/s Ritam Charitable & Educati .....

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the assessee at ₹ 8,86,12,637/-. While dealing with the issue, the Assessing Officer has also observed that the assessee is a charitable society registered u/s 12A of the Act and was also having an independent PAN. The Assessing Officer has also noticed that the assessee has filed the return of income for the impugned assessment year but has not disclosed the capital gain accrued on this transfer of land. 4.1 This addition is challenged before the CIT(A) on behalf of the assessee with the .....

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dy managing the functioning of the hospital. A joint venture agreement was executed between Methodist Church in India and M/s Ritam Charitable & Education Society through which Methodist Church in India has handed over the possession of the land in Clara Swain Hospital to M/s Ritam Charitable & Education Society against the receipt of ₹ 10 crore in order to expand the hospital facilities and also to open a medical college for imparting education in the entire field of medicine. Thr .....

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he receipt of ₹ 10 crore. If any capital gain is accrued, it is accrued in the hands of Methodist Church in India and not in the hands of the assessee. Therefore, the Revenue has wrongly assessed the capital gain in the hands of the assessee. The CIT(A) reexamined the issue in the light of the evidence placed before him but was not convinced with it and confirmed the assessment order. 5. Aggrieved, the assessee has preferred an appeal before the Tribunal. During the course of hearing, the .....

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hodist Church in India. The learned counsel for the assessee further invited our attention to the constitution of Clara Swain Hospital, which is available at page No. 21 to 43 of the compilation of the assessee filed along with the stay application with the submission that as per Article I(3), Clara Swain Hospital belongs to Methodist Church in India, successor in interest of the Methodist Church in Southern Asia within the jurisdiction of North India Regional Conference and as per Article-II, ( .....

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ntenance of the hospital. The learned counsel for the assessee further invited our attention to the joint venture agreement executed between the Executive Board of Methodist Church in India and M/s Ritam Charitable & Education Society available at page No. 19 to 20 of the compilation of the assessee filed along with the stay application. In this joint venture agreement, it has been categorically stated that the first party owns and running a hospital at Bareilly under the name and style of C .....

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run by the first party and the second party jointly as a joint venture to provide holistic health care and also to construct a Clara Swain Methodist Medical College and Research Institute for imparting education in all the branches of medical science. It was further agreed that the aforesaid institute shall be managed by the second party i.e. M/s Ritam Charitable & Education Society with the overall supervision of the Board and the Board shall be known as Clara Swain Board. 5.1 The composit .....

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ospital. The first party has handed over the possession of the land in Clara Swain Hospital to M/s Ritam Charitable & Education Society against receipt of ₹ 10 crore with certain understanding. Therefore, whatever transaction has been done, it was between the Methodist Church in India and M/s Ritam Charitable & Education Society and if any capital gain is accrued on account of transfer of land by virtue of section 2(47)(v) of the Act, it is in the hands of Methodist Church in India .....

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d the return of income and also got the exemption u/s 12A of the Act. The hospital was managed by the assessee and also owns the land. Since the land was handed over to M/s Ritam Charitable & Education Society against receipt of ₹ 10 crore, the capital gain has accrued in the hands of the assessee. Besides, learned D. R. has placed reliance upon the order of CIT(A). 7. Having carefully examined the orders of the lower authorities in the light of the rival submissions and the documents .....

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e Board of Governors of Clara Swain Hospital are required to manage and maintain the property. Through this constitution of Clara Swain Hospital, the Clara Swain Hospital was only empowered to manage and maintain the movable and immovable property in Clara Swain Hospital. We have also carefully perused the joint venture agreement and we find that this joint venture agreement was executed between the Executive Board of Methodist Church in India and M/s Ritam Charitable & Education Society. In .....

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ecessary finance, management and other inputs on the basis of their experience, which may be required to implement the project. As per joint venture agreement, the name of the hospital and medical college would be Clara Swain Methodist Medical College and Research Institute and this hospital will be run by both the parties to provide holistic health care. It was also agreed upon between the parties that the aforesaid institute shall be managed by the second party with overall supervision of the .....

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e parties. The relevant clause, necessary to adjudicate the nature of issue of transfer, are extracted hereunder for the sake of reference: This agreement is made on this 11th day of August 2009 between the Executive Board of the Methodist Church in India (formerly known as the Executive Board of the Methodist Church in Southern Asia and successor in the interest of the American Mission, Methodist Episcopal Church of United States of America, Methodist Episcopal Church South) having its office a .....

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. P. Mukharjee S/o Mr. T.K. Mukherjee Medical Superintendent and Director of Clara Swain Hospital, Bareilly R/o Director House Clara Swain Hospital, Bareilly, Dr. Ashish K. Massey S/o Late Mr. Admond Massey Treasurer NIRC R/o Nave Institute, Lodhipur, Shanjahanpur and Manoj Masih S/o Late Mr. Mukandi Lal, Chairman Property and Building Committee NIRC R/o Christ Methodist Church, Lotanpur, Badaun (hereinafter referred to as the First Party) duly authorized by the resolution passed in the meeting .....

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ospital" for the last about 139 years. The Hospital is Presently having 150 Nos. of Beds, and owns vast area of land measuring approx.30.2Acres. AND WHEREAS, the First Party is desirous of expanding the Hospital facilities to at least 300 Beds and at the same time open Medical College also for imparting the education in the entire field of Medicine. However, due to paucity of funds, and other reasons, the First Party is not in a position to start its ambitious project. AND WHEREAS, the Seco .....

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Swain Methodist Medical College & Research Institute. 2. The Clara Swain Methodist Hospital will be run by the First Party and the Second Party jointly as a Joint- Venture to provide holistic health care, and establish, manage, run and construct 'Clara Swain Methodist Medical Colleges and Research Institute' for imparting education in all the branches of medical sciences (Allopathic, Ayurvedic, Homeopathic, Naturopathy) and to act as consultants and advisors and provide technical kno .....

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en (11) members. And Eleven (1) other members of the Second Party. The other details of the 'Board' will be as per Clauses -33- 51. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 6. The Second Party will provide the funds for the aforesaid in accordance with the needs of the project and the First Party will provide use of land and available infrastructure movable and immovable in consultation with the 'Board'. The land approx. 30.2 Acres and properties situated within Khata no. 25 & 26 Plo .....

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to pay one time payment of ₹ 10,00,00,000/- (Rs. Ten Crores only) vide D.D. no. 463149 for ₹ 4,25,00,000/-, No. 463148 for ₹ 4,50,00,000/- Dated 08.08.2009 of ICICI Bank Bareilly in Favour of Executive Board of Methodist Church in India and D.D. No. 023304 for ₹ 1,20,00,000/- dated 08.08.2009 of Punjab National Bank, Bareilly in favour of Executive Board of Methodist Church in India to the First Party to discharge the existing liability up to the date of signing this agre .....

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he said property will always vest with the First Party. It is understood that during the tenure of this joint venture Agreement, the First Party will not sell/ lease/alinate the said Property/land building including new super structure. The Second Party shall be solely responsible for any violation due to non-performance on the part of the Second Party such as unsettled liabilities, creditors, vendors, lenders etc. The property of the First Party shall at no point of time be attached for settlem .....

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xxxxxxxxxxxxx 14. The first party has agreed to permit uses of the land and building including 150 bedded existing hospital more particularly described hereunder the annexed map to the second party for a period of 30 (thirty) years. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 17. As and when the medical college is set up, it is agreed that both parties will equally share the management seats (50% - 50% as provided in clause No. 28). Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 20. The second party shall provide c .....

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l perusal of this joint venture agreement, we find that it is abundantly clear from this agreement that there is no absolute transfer of land by the first party i.e. Methodist Church in India in favour of M/s Ritam Charitable & Education Society. Basically, it is joint venture agreement executed between the Methodist Church in India and M/s Ritam Charitable & Education Society to expand the hospital facilities and also to set up a medical college in the field of medicine. Since the first .....

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