The term "any sum" in s. 194LA TDS does not cover a case where there is no monetary consideration but Development Right's Certificate (DRC) are issued
The issue that arises for consideration is as to whether provisions of s.194LA of the Act are applicable to a case where (a) there was no compulsory acquisition; (b) there was no payment of any monetary consideration.
(i) The process of surrender of land for public purpose by owners of land and issue of CDRs has no element of "Compulsory Acquisition" which is necessary to attract application of the provisions of s.194LA of the Act. The meaning of the term "compulsory acquisition" is that land should be taken under statutory powers without the agreement of the owner. It is clear from material brought on record that the surrender of land by owners was voluntary and in exercise of option under a notification laying down conditions for grant of TDR in exercise of powers u/s14-B of KTCP. It is also clear that BBMP wherever owners did not respond to offer of CDRs, BBMP has resorted to compulsory acquisition proceedings in accordance with the provisions of the Land Acquisition Act, 1894. In the case of compulsory acquisition there are procedure for objecting to the acquisition on the ground that the proposed acquisition is not for public purpose, requirement of notice, determination of compensation, payment of compensation and thereafter taking possession and ownership. Such elements are absent when land owners surrender their land to BBMP under the scheme of issue of CDRs. It is also clear that there is no process of quantification or determination of value of land acquired when BBMP takes over land under the CDR scheme. Whenever BBMP does compulsory acquisition of land and pays compensation, it duly deducts tax at source as required u/s.194LA of the Act.
(ii) The provisions for deducting tax at source and paying it over to the Government on behalf of the recipient of the payment is in the nature of vicarious liability. The said liability can be easily and without any effort can be discharged when payment of compensation in a sum of money i.e., in the form of monetary compensation. At least in cases where the quantification of the sum of money takes place in terms of money but the payment or discharge of the liability is made by adjustment which is otherwise than by payment of monetary compensation, it can be said that there would still be a liability. But where neither there is quantification of the sum payable in terms of money nor actual payment in monetary terms, it would be unfair to burden a person with the obligation of deducting tax at source and exposing him the consequences of such default. The liability to pay tax is that of a third person and not that of BBMP and the spirit behind the provisions of Sec.190 of the Act has been totally lost sight of by the Revenue in the present case.
(iii) S.194LA of the Act would apply only when there is monetary payment. In this regard we find that provisions of Sec.194LA of the Act applies only when the person making payment should make payment of a "sum of money" which clearly indicates that the provisions of Sec.194LA of the Act are applicable only when payment is made in terms of money. The expression "any sum" used in Sec.194LA of the Act is a clear indication that those provisions are applicable only when payment is of consideration in terms of money. The Hon'ble Supreme Court had to interpret whether the expression "any sums paid by the Assessee in the previous year would also include donations in kind. S.194LA of the Act also uses the expression "any sum" which clearly indicates that it is only when payment is made in monetary terms that those provisions are attracted. The expression in S.194LA, "at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode" means that payment can be in the mode of giving cash, or by issuing cheque or draft or any other mode like telegraphic transfer or mail transfer, via money order or postal order, bill of exchange, promissory note, electronic transfer like RTGS, NEFT etc. DRCs cannot be brought within the meaning of the expression "by any other mode" used in Sec.194LA of the Act. The rule of "Ejusdem Generis" in interpretation of statutes, which lays down that where general words follow enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the same general kind or class as those specifically mentioned is fully applicable to the interpretation of Sec.194LA of the Act. The general word in Sec.194LA of the Act is "payment of such sum" and the mode of payment qualified is cash, issue of cheque or draft or by any other mode. The expression any other mode has therefore to be confined only to payment of "any sum" in a mode other than cash, cheque or draft and not to a case where DRCs are issued. Even on this ground the order u/s.201(1) & 201(1A) of the Act deserves to be quashed and is hereby quashed.
S. 80HHA/ 80-IA: Interest earned on fixed deposits placed out of business compulsion is "derived" from the undertaking
Income earned from fixed deposit placed for business purpose cannot be treated as income from other source but must be seen as part of the assessee's business income. In the present case also the assessee was compelled to park a part of its funds in fixed deposits under the insistence of the financial institutions and therefore the income received thereupon cannot be termed to be income from other sources.
CUTTACK, NOV 19, 2014: THE issue before the Bench is - Whether any interference is required by the High Court when the assessee-trust has been imparting education and the fees approved by the competent authority are being utilised to create educational infrastructure. NO is the HC's answer.
Facts of the case
The assessee is a trust registered u/s 12A. It had filed its return disclosing its total loss at Rs.3,96,54,653/- and claimed exemption u/s 11. However, the AO completed the assessment u/s 143(3) determining the total income at Rs.03,06,53,610/-. The AO had also disallowed exemption u/s 11 on the ground that the assessee was making systematic profit year after year. In addition, the AO also noticed that the assessee had incurred capital expenditure of Rs.51,24,483/- and diverted income to capital funds amounting to Rs.28,75,204/- which as per AO could not be treated as application of income u/s 11(1). Finally, the AO also added depreciation of Rs.95,90,956/- to the income of assessee. On appeal, the CIT(A) deleted all the additions made in the assessment order and directed the AO to allow the benefit of exemption to the assessee u/s 11. On further appeal, the Tribunal upheld the order of the CIT(A).
On appeal before the High Court, the counsel for revenue submitted that the trust deed of the assessee did not mention any condition that the assessee will run the institution and invest the surplus to expand its activity out of the fees collected from the students who were pursuing their course. It was further submitted that assessee's activity of collecting the fees from the students as their course fee for studying in the assessee's institution did not find place in the aims and objectives of the trust deed, neither it was mentioned in the notes submitted to the CIT for the purpose of registration u/s 12AA. Therefore, the registration granted in favour of the assessee by the CIT on the premise of the trust deed, aims and objectives and notes on the activity had no relevance regarding the real activity carried on by the assessee after obtaining the registration. The counsel submitted that the assessee had been generating profit and creating fixed assets out of huge amount of loans availed from banks and claiming financial charges as expenditure out of the student's fees.
However, counsel for assessee contended that the Tribunal was fully justified in granting exemption u/s 11. The counsel contended that the assessee having valid registration u/s 12AA was required to be assessed by applying all the provisions of Section 11 and 13, and the AO having not done so, the order was bad in law. It was further contended that since the registration was not withdrawn on the date of assessment order, the income of the assessee was exempted in entirety. The AO was wrong in holding that the capital expenditure was not applicable for charitable purpose.
Having heard the parties, the High Court held that,
++ the perusal of the assessment order reveals that, for withdrawal of exemption, the AO has assigned various reasons comprising of limitation in the objects of the trust deed, generation of huge profit, application of income in the garb of capital expenses, no application of income for the benefit of persons specified in Section 13(3), collection of fees out of canteen expenses of students and collection from students over and above the prescribed fees, etc. It is seen that the CIT(A) has considered every aspect of the assessment order with reference to the reasons given by the AO for disallowing exemption and relying upon the latest judicial pronouncements expressed in similar facts that are involved in the present case, came to the conclusion that the AO's approach in denying exemption to the assessee was not in accordance with law and held that the assessee's educational institution is entitled to claim exemption u/s 11. The Tribunal, which is the final fact finding authority, after hearing the appeal filed by the Department also did not incline to interfere with the order of the CIT(A) by observing that the fees collected by the assessee from the students for imparting such education having been approved by the AICTE and the assessee is spending the amount for building necessary infrastructure for imparting the education in various fields which is the charitable purpose for which the trust was established. The Tribunal was also of the view that the AO has wrongly presumed that there is any contravention of Section 13. Therefore, there is no infirmity in the order of the CIT(A) requiring any interference;
++ it is a settled position of law that capital expenditure incurred by an educational institution is the basic necessity if such expenditure promotes the object of the trust. The Supreme Court in the case of S.RM. M.CT.M. Tiruppani Trust vs. CIT, and the High Court of Delhi in the case of CIT Vs. Divine Light Mission, have held that capital expenditure incurred by a trust for acquiring capital asset would be application of money and the assessee would be entitled to exemption u/s 11(1). The Madras High Court also in the case of CIT Vs. Kannika Parameswari Devasthanam & Charities, held that as long as the expenditure had to be incurred out of the income earned by the trust, even if such expenditure is for capital purposes on the objects of the trust, the income would be exempt. Moreover, the High Court of Uttarakhand in the case of CIT vs. Jyoti Prabha Society, has held that the educational society which had utilized rental income for the purposes of imparting education by maintaining the buildings and constructing new building for the same purpose, would be entitled to the exemption claimed u/s 11. Accordingly, this court holds that capital expenditure if incurred by an educational institution like assessee for attainment of the object of the Society, it would be entitled to exemption u/s 11.
A.O. is not only an adjudicator but also an investigator
Hon'ble Delhi ITAT while deciding a case involving issue of sec 263 of the Income Tax Act,1961 has held that A.O. is not only an adjudicator but also an investigator.The observation of the Hon'ble bench is as under :-
It is settled law that that frequency and magnitude of transaction are also important factor to decide whether the transaction is business transaction or investment transaction. Now in our considered opinion, the magnitude of share transaction in this case does call for any enquiry on the part of the AO as to whether these are investments transactions or business transactions. A.O. is not only an adjudicator but also an investigator. We find that AO has totally failed to make any enquiry. In these circumstances, we find that the invocation of section 263 by the Ld. CIT is correct and accordingly we hold that the Ld. CIT has rightly asked the AO to examine this aspect.
Krishna Shriram Vs. Commissioner of Income Tax (ITAT Delhi), I.T.A. No. 1649/Del/2011, Date of Pronouncement- 29/1/2014.
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A.O. is not only an adjudicator but also an investigator CA Prarthana Jalan Hon'ble Delhi ITAT while deciding a case involving issue of sec 263 of the Income Tax Act,1961 has held that A.O. is not only an adjudic... | |||||||
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