TMI Blog2019 (1) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... hat:- It is an admitted position that the assessee society is registered trust under Section 12AA of the Income Tax Act, 1961. By adopting the circle rate of property, the Assessing Officer applied Section 56 of the Income Tax Act, 1961 to the assessee trust which is not at all applicable to the trust in the particular scenario when the section 56 (2)(vii) is applicable to individuals and HUF only. Besides section 56 (2)(x) will also be not applicable as the same is w.e.f. 01.04.2017 and the Assessment year before us is A.Y. 2015-16. In fact, Section 56(2)(x) of the Act is not applicable to the educational institutions. Therefore, the Assessing Officer wrongly invoked Section 56 of the Act and wrongly adopted circle rate of property in the present case. Thus, Ground No. 2 of the appeal is allowed. Donation as received in kind i.e. in property - income u/s 2(24)(iia) for the purpose of Section 11 - Held that:- AO has applied the circle rate to the land which is also not as per law and we have allowed Ground No. 2 of the assessee’s appeal. In fact, the revenue’s case was that the assessee received land without any consideration which amounts to donation/gift. AR relied upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry contribution of donation, the full value of property should be treated as application of funds equivalent to the value of property, therefore the application being more than 85% of the said amount, it cannot be subjected to tax. 3. The assessee society is registered u/s 12AA of the Income Tax Act, 1961 by the Commissioner of Income Tax, Dehradun vide order dated 29.09.2006. The society is also registered with the Registrar of the Society vide Registration No. 1104/2003-04 dated 30.01.2004 which was renewed. The return of income declaring Nil income was filed on 27.09.2015. The case was selected for limited scrutiny for examination of issues Transaction of trust with specified persons . Accordingly, notice u/s. 143(2) of the Act was issued on 26.07.2016 which was duly served upon the assessee. In compliance to notices issued, the Chartered Accountant of the assessee attended and submitted replies during the assessment proceedings. The case was discussed with him from time to time. Books of Accounts were produced by the assessee during the assessment proceedings. The Assessing Officer observed that in the Audit Report submitted in Form No. 10B, the auditor mentioned that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. By way of ground No.1, the assessee has disputed the treating of the transaction of purchases of land as voluntary contribution in the form of donation by the Assessing Officer. We find that learned CIT(A) has considered the same and rejected the assessee s claim with the following finding :- 18. I have considered this matter and I am inclined to agree with the findings of the AO. The sale was registered in September, 2014 and cheques dated 14.09.2015 were handed over to the seller. The assessment order has been passed on 26.12.2017 and till that date, the sale consideration was not passed from the hands of the buyer to the seller. Both the buyer and the seller have rendered before the AO wherein they have admitted that their intention was not to enter into sale but sale deed was registered merely because of the manner in which the permission was received from the State Government. Therefore, despite the fact that there is a sale deed on record, the AO and the tax authority are well within their rights to examine the surrounding circumstances and decide as to what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale deed because the permission of the gift was not received from the concerned authorities. 8. We have carefully considered the arguments of both the sides and perused the material placed before us. After considering the facts of the case and submissions of both the sides, we do not find any justification to interfere with the order of learned CIT(A). It is undisputed that the seller initially wanted to gift the said plot of land to the assessee trust. Since permission of gift was not received from the concerned government authorities, the sale deed was executed. The sale consideration is purportedly paid by post-dated cheques which were never presented for encashment. Thereafter, the seller did not claim the outstanding amount of sale consideration. In the balance sheet of the assessee in the relevant year, the amount is not shown as payable to the seller of the land. These facts clearly establish that the transaction of transfer of plot of land is in substance the gift which has been given the form of sale. In view of the above, we uphold the finding of learned CIT(A) that it is in effect the donation of the plot by the alleged seller to the assessee trust. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions. Therefore, the Assessing Officer wrongly invoked Section 56 of the Act and wrongly adopted circle rate of property in the present case. Thus, Ground No. 2 of the appeal is allowed. 12. As regards to Ground No. 3, the Ld. AR submitted that without prejudice, even in case of donation, whatever value of property is taken, it should be held as being applied in the same year. The Ld. AR submitted that the value in kind cannot be applied. The Assessing Officer adopted the value of alleged donation at ₹ 1,11,12,000/- as per circle rate and by holding the non application of donation amount to the extent of 85%, held ₹ 87,55,232/- as taxable, as per calculations in Assessment Order. At the outset, it is not a case of donation but case of purchase of property. For argument sake, even if considered as a case of donation, then it is not cash /chq. but land on which educational institution is to be constructed. Hence under the facts, the value of the land should be deemed as has been applied for the causes of society in the same year and immediately on its receipt. The Ld. AR submitted that the value of the land, being in kind under the facts, cannot be applied for purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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