TMI Blog2003 (3) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... section 260A of the Income tax Act, 1961 ("the Act" for short), aggrieved by the order dated May 17, 2000, in I. T. A. No. 743/Hyd of 2000 of the Income-tax Appellate Tribunal, Hyderabad Bench "A". The assessee-AWARE (Action for Welfare and Awakening in Rural Environment) is the appellant. It is a society registered under the provisions of the Societies Registration Act, 1860. The society is also registered under section 12A of the Act and thus the exemption contemplated under section 11 of the Act is applicable. The society was assessed in the status of an association of persons (trust) filed its return for the assessment year 1993-94 on November 1, 1993, declaring "nil" income. The return was processed under section 143(1)(a) of the Act on August 31, 1994. Thereafter, the Assessing Officer issued a notice under section 148 of the Act on January 8, 1998, and the assessment was reopened. After a perusal of the evidence produced by the assessee and also hearing it, the assessment was completed on March 29, 2000, for total income of Rs. 10,44,82,246. After reopening, the major addition of Rs. 9,99,62,664 was the total receipts of the trust, which was brought to tax on the ground t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /gain. The Assessing Officer after detailed consideration of the oral as well as documentary evidence available on record held that for the assessment year 1993-94 on two occasions, the provisions of the Act as mentioned supra were violated and as such, the total receipts of the trust could be treated as income as per sections 11 and 12 of the Act, i.e., to the tune of Rs. 9,99,62,664. On appeal, this addition was confirmed by the Commissioner of Income-tax (Appeals) and, hence, the assessee filed I.T.A. No. 743/Hyd of 2000 before the Income-tax Appellate Tribunal, Hyderabad Bench "A". The Tribunal after elaborate consideration of the oral and written submissions made on behalf of the assessee as well as the Revenue affirmed the order passed by the Commissioner of Income-tax (Appeals). Aggrieved by the said order of the Tribunal dated May 17, 2002, the present I.T.T.A. is filed. Counsel for the appellant mainly pleaded the following questions as substantial questions of law in this appeal: "1. Whether, on the facts and in the circumstances of the case, section 13(1)(c)(ii) read with sections 13(2)(b) and 13(3)(d) of the Act are attracted So as to deny to the assessee the operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3).. (2) Without prejudice to the generality of the provisions of clause (c) and clause (d) of sub-section (1), the income or the property of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in sub-section (3),-.. (b) if any land, building or other property of the trust or institution is, or continues to be, made available for the use of any person referred to in sub section (3), for any period during the previous year without charging adequate rent or other compensation (3) The persons referred to in clause (c) of sub-section (1) and subsection (2) are the following, namely: (a) the author of the trust or the founder of the institution (b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees; (c) where such author, founder or person is a Hindu undivided family, a member of the family; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and consideration, thus misutilising the funds of the trust. The Department never proceeded on the footing that Smt. Rama Anantram was a relative. It is argued by the Revenue that the exemption under section 11 of the Act is applicable to a trust, which deals itself with all fairness. If any unfairness is detected in the return submitted by the assessee, section 13 of the Act takes away the benefit conferred under section 11 of the Act to a trust. It is noticed that the fixed deposit receipts of AWARE worth Rs. 16 lakhs were obtained by the chairman and given to Smt. Rama Anantram and the statements on oath were recorded from Smt. Rama Anantram and the chief accounts officer, Babu Reddy. Smt. Rama Anantram claimed that she was never a member of AWARE and she accepted the receipt of the loan of Rs. 12 lakhs. She claimed that the loan was arranged by K. Babu Reddy and she was not in the knowledge that the loan was taken against pledge of FDRs of AWARE, while Babu Reddy stated that the said loan was arranged at the instance of the chairman, AWARE. The assessee denied its role in arranging the loan. The assessee produced the membership register and membership subscription receipt t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without adequate security and consideration for the ultimate recipient of the money, thus misutilising the funds of the trust and as such, the provisions of section 13(1)(c)(ii) read with section 13(2)(b) and 13(3)(d) of the Act were violated. It is also noticed by the Assessing Officer that for the purchase of land, AWARE routed the entire transaction through an association of persons in which all the members were directors and employees of AWARE. Two identical properties were purchased at Visakhapatnam, one in the name of Madhavan in his personal capacity for Rs. 20 lakhs and the other in the name of AWARE for Rs. 20 lakhs. The payment for the property purchased by AWARE (Rs. 19 lakhs) was from Account No. SB 1870 with the Bank of Baroda, which belonged to the association of persons, which was formed to purchase cancer hospital land, For the consideration paid by Madhavan (Rs. 7 lakhs), the explanation was that Rs. 2 lakhs was by demand draft from the account-SB 1870-and Rs. 5 lakhs by cash from personal savings of Madhavan. As per the extract of S.B. No. 1870, on October 22, 1992 an amount of Rs. 5 lakhs was withdrawn from the said account. The amount of DD for Rs. 2 lakhs was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by all the authorities that she was a member of AWARE and the loan was advanced to the member of AWARE by its chairman. In this view of unaltered jurisdictional facts as confessed by counsel for the Revenue that though section 13(3)(d) of the Act is not applicable, section 13(3)(cc) is very much applicable and it does not alter the situation in anyway. Thus, the misutilisation of the funds being a question of fact need not be gone into in this appeal. He further argued that, in fact, no substantial question of law is raised in this appeal and thus it does not call for interference of this court. It is also argued on behalf of the appellant that Smt. Rama Anantram took loan without any security does not itself attract section 13 of the Act since the trust property has been pledged by way of FDRs. Further, these monies were all received by way of donations for a specific purpose of utilisation of the same for the welfare schemes adopted by it, thus this court should, in the alternative, limit the amount, which could be brought to tax for the assessment year 1993-94 only to Rs. 16 lakhs, which would be reasonable and proportionate to that of the violations alleged against the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sought to be misutilised. This argument cannot hold good for the reason that for the purpose of the Act, every assessment year is a separate cause of action and neither the earlier nor the subsequent conduct of the assessee can be taken into consideration. The interpretation that requires to be given is strictly in the teeth of the provisions of the Act. In this case, the misutilisation is glaring and it cannot escape the clutches of law, nor any sympathy or equities can be extended particularly for an Organisation, which receives donations purely for the welfare of the under privileged and needy class of the society. Further it is noticed that the entire transaction was conducted by Babu Reddy behind the back of the assessee and the assessee or Madhavan were aware of the transactions. This was not believed by the authorities below. On the other hand, it was found that the top management of AWARE was well not aware of the transactions from the very beginning. It is also noticed by the authorities below that the assessee came to know of the irregularities in the matter on March 24, 1994. It is surprising to note that Babu Reddy was continued in service up to May, 1995, i.e., one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his, all the questions raised are not substantial questions of law as contemplated under section 260A of the Act, They are mere questions of fact and the authorities below have taken one plausible view and as such, it is not for this court to interfere with such findings of fact. In so far as the finding that for the purchase of land AWARE routed the entire transaction through the association of persons in which all the members were directors and employees of AWARE is concerned, some amounts were paid directly to the land owner by AWARE, but an amount of Rs. 49,24,343 was paid to the association of persons for the purchase of a property by K. Madhavan (in his personal capacity) an amount of Rs. 2 lakhs was advanced by AWARE to the association of persons; thus, utilising the trust money for personal gain. This is a pure question of fact and this court cannot interfere with the same under section 260A of the Act. For all these reasons, the appeal fails and neither there is any perverse of finding of facts nor error apparent on the face of the record. The order passed by the appellate authority is perfectly valid and justified in the circumstances of the case. Thus, the appeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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