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2015 (11) TMI 288 - ITAT CHENNAI

2015 (11) TMI 288 - ITAT CHENNAI - TMI - Exemption under Section 11 denied - as per AO diversion of fund to the private limited companies for construction of a meditation hall by two private companies would amount to diversion of fund other than the object of the trusts - Held that:- The moment Shri V. Vijaykumar relinquished his trusteeship, it cannot be said that Shri V. Vijaykumarís son and daughter-in-law are interested persons in the trusts. Therefore, this Tribunal is of the considered opi .....

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re used for construction of meditation hall, this Tribunal is of the considered opinion that the entire income has to be held as application of income. Therefore, the CIT(Appeals) has rightly allowed the claim of the assessee.

The fact that the meditation hall was handed over to the assessee-trusts is not in dispute. The property tax assessment by local body also stands in the name of two assessee-trusts. Therefore, this Tribunal is of the considered opinion that when the two companie .....

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on the funds advanced by the assessee-trusts. After construction, the building was handed over to the assessee-trusts. Therefore, there was transfer of property within the meaning of Section 2(47) of the Act. Under the common law, registration of document is required when the property value exceeds more than ₹ 100/-. However, under Section 2(47) of the Act, registration of the document is not mandatory. When the physical possession of the building is handed over to the assessee-trusts and .....

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ax Act would prevail over the treatment of the assessee in the accounts. Therefore, this Tribunal is of the considered opinion that there is no violation of any of the provisions of Sections 11, 12 & 13 of the Act. - Decided in favour of assessee. - ITA Nos. 2063, 2064, 2065, 2066 & 2067/Mds/2014, ITA No.2173/Mds/2012 , ITA Nos.2068, 2069, 2070 & 2071/Mds/2014 - Dated:- 1-10-2015 - Shri N. R. S. Ganesan, Judicial Member And Shri A. Mohan Alankamony, Accountant Member For the Appellant : Shri S. .....

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together and disposing of the same by this common order. 2. There was a delay of 23 days in filing these appeals by the Revenue. The Revenue has filed a petition for condonation of delay. We have heard the Ld. Departmental Representative and the Ld. representative for the assessee. We find that there was sufficient cause for not filing the appeals before the stipulated time. Therefore, we condone the delay and admit the appeals. 3. Shri S. Bharath, the Ld. Departmental Representative, submitted .....

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ks of account of both the assessees. The Ld. D.R. further submitted that the assessees have not furnished the complete details of the donors from whom the corpus donation was claimed to have been received. Therefore, the Assessing Officer treated the entire so-called corpus donation said to be received by the assessees as income of the assessees. According to the Ld. D.R., the assessees have also not filed any evidence for application of their fund for charitable purpose. Referring to the assess .....

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d by two private companies continue as asset in their books of account. Moreover, two of the Directors of the above said two companies are close relatives of the trustee of both the trustees. Therefore, the Assessing Officer found that there was a clear violation of Section 13(1)(d) of the Act. Referring to Section 11 of the Act, the Ld. D.R. pointed out that what was excluded as income is corpus fund received by the assessees with a specific direction. In this case, according to the Ld. D.R., t .....

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t the assessees claimed the diversion of fund to two private companies as infrastructural development expenses. However, the asset created did not form part of the asset of the trusts. According to the Ld. D.R., the money transferred to two companies for construction of a meditation hall cannot be construed as infrastructural development expenses. The funds were given to the companies for the benefit of said companies. Referring to the lease agreement, the Ld. D.R. pointed out that the lease agr .....

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N.K.V. Krishna, is a founder trustee of the assessees. Similarly, the said Shri N.K.V. Krishna and his wife Smt. K. Preethi are the major shareholders of M/s Prajit Foundation Pvt. Ltd. 5. The Ld. D.R. further pointed out that M/s Anirjita Properties was the owner of the land on which the meditation hall was constructed. There was an agreement between Anirjita Properties and M/s Golden Shelters Pvt. Ltd. However, the company claimed in the later stage that there was a lease agreement for a perio .....

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rightly found that there was a violation of Section 13(1)(c) and 13(1)(d) of the Act. Therefore, the assessees are not entitled for exemption under Sections 11 and 12 of the Act. According to the Ld. D.R., the CIT(Appeals) misconstrued himself and allowed the claim of the assessees under Section 11 of the Act. 6. On the contrary, Ms. S. Deepa, the Ld. representative for the assessee, submitted that admittedly, both the trusts are registered as charitable trusts under Section 12AA of the Act. In .....

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n the funds advanced by the assessee-trusts. After completing the construction, the entire meditation hall was handed over to the assessees. Referring to the order of the CIT(Appeals) for the assessment year 2004-05, the Ld. representative submitted that the CIT(Appeals) after referring to the object of the trusts, found that the assessees are conducting classes for teaching ideology of Buddha and J. Krishnamurthy. The meditation hall constructed by the assessees is open to general public, not o .....

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ts in the assessment years under consideration. Therefore, merely because the Directors of the two companies, which constructed the meditation hall, are related to the above said extrustee Shri V. Vijaykumar, it cannot be construed as violation of Section 13(1)(c) and 13(1)(d) of the Act. According to the Ld. representative, in the assessment years under consideration, there is no violation of any provisions of Section 13 of the Act. Referring to the orders of the CIT(Appeals), the Ld. represent .....

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on of construction, the companies admittedly handed over the building to the trusts. The property tax assessment stands in the name of assessee-trusts. Therefore, according to the Ld. representative, the property belongs to the trusts and not to the companies. The moment the construction was completed, the physical possession of the property was handed over to the assessees. Therefore, at any stretch of imagination, the Revenue cannot claim that the property belongs to two companies. The Ld. rep .....

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bmitted that the meditation hall was constructed in furtherance of the object of the trusts. Therefore, the expenditure has to be treated as application of funds under Section 11 of the Act. 9. Referring to the receipt of corpus donation, the Ld. representative submitted that in fact the assessees have received corpus donation from various people with specific direction to use the same for construction of meditation hall. The details of the donors were furnished before the lower authorities. How .....

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The entire receipt was used for construction of meditation hall at Varadalapalam Mandal. Therefore, according to the Ld. representative, the CIT(Appeals) has rightly allowed the claim of the assessees. 10. We have considered the rival submissions on either side and perused the relevant material on record. Admittedly, both the assessee-trusts are registered under Section 12AA of the Act. Both the assessees claim exemption under Section 11 of the Act. However, the Assessing Officer denied the sam .....

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sh. One Shri N.K.V. Krishna and his wife Smt. K. Preethi own the entire shares in M/s Prajit Foundation Pvt. Ltd. and M/s Golden Shelters Pvt. Ltd. Shri N.K.V. Krishna is none other than the son of Shri V. Vijaykumar, who was the trustee of both the trusts. However, the said Shri V. Vijaykumar relinquished his strusteeship on and from 08.06.1991. Therefore, for the assessment years under consideration, the said Shri V. Vijaykumar has no relationship with the trusts. The question arises for consi .....

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al is of the considered opinion that there is no violation of Section 13(1)(d) of the Act. 11. Now coming to corpus donation, the assessees claim that all the details were furnished before the lower authorities. From the material available on record, it appears that all the details were not furnished. Though certain details were furnished, it is a fact that complete details were not furnished before the lower authorities. Therefore, part of the so-called corpus donation has to be treated as inco .....

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hall, this Tribunal is of the considered opinion that the entire income has to be held as application of income. Therefore, the CIT(Appeals) has rightly allowed the claim of the assessee. 12. Now coming to construction of meditation hall by two companies, the contention of the Ld. D.R. appears to be that the meditation hall forms part of the asset of the two companies. Therefore, it cannot be created as infrastructure of the assesseetrusts. The fact that the meditation hall was handed over to th .....

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nd the building can be owned by other person. In the case before us, the land in which the meditation hall was constructed belongs to a different person, but the building was constructed by the two companies on the funds advanced by the assessee-trusts. After construction, the building was handed over to the assessee-trusts. Therefore, there was transfer of property within the meaning of Section 2(47) of the Act. Under the common law, registration of document is required when the property value .....

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