Cambrian Hall Educational Trust v. Barin Ghosh, C. J. (Oral

IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Income Tax Appeal No. 45 of 2009 Cambrian Hall Educational Trust ………Appellant. Versus Commissioner of Income Tax, Dehradun. .…Respondent Mr. Salil Kapoor, Mr. Yogesh Pacholia and Mr. Vikash Jain, Advocates for the appellant. Mr. H.M. Bhatia, Advocate for the respondent. Coram : Hon’ble Barin Ghosh, C. J.Hon’ble Servesh Kumar Gupta, J. Barin Ghosh, C. J. (Oral) During the assessment year 1996-97, appellant assessee wanted the benefit of Section 10(22) of the Income Tax Act. Section 10(22) of the Income Tax Act is as follows: “In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- any income of a university or other educational institution, existing solely for educational purpose and not for purpose of profit.” 2. It is not in dispute that during the assessment year 1996-97, a payment of ` 10 lacs was made by the appellant assessee to Smt. Chandra Raj Laxmi. It was contended that such payment was made to siphon away the funds of the appellant assessee and the said state of affairs clearly indicates that the appellant assessee is not existing solely for educational purpose but also for purpose of profit. It has been the contention of the appellant assessee that the appellant assessee entered into a Memorandum of Understanding with Smt. Chandra Raj Laxmi. While entering into the said Memorandum of Understanding, Smt. Chandra Raj Laxmi represented to be the Managing Director of M/s Bhanu & Sons Pvt. Ltd. and further represented that she has been authorized by a resolution of the Board of Directors of M/s Bhanu & Sons Pvt. Ltd. dated 16[th] August, 1988 to enter into the said Memorandum of Understanding. Memorandum of Understanding stated that M/s Bhanu & Sons Pvt. Ltd. owns properties, as mentioned in the said Memorandum of Understanding. It was stated that one of those properties will be acquired by the appellant assessee for a sum not exceeding ` 1 crore, but at the half price of the market value of the said property. It is the contention of the appellant assessee that in connection with the said Memorandum of Understanding, the payment of ` 10 lacs was made. The Memorandum of Understanding suggests that the payments, to be made thereunder, are to be made to Smt. Chandra Raj Laxmi. It appears to be the contention of the appellant assessee that subsequent to payment of the said sum of ` 10 lacs during the assessment year 1996-97, the property, which was agreed to be acquired by the appellant assessee under the said Memorandum of Understanding, was acquired by the State and, accordingly, it was understood that one of the other properties, mentioned in the said Memorandum of Understanding belonging to M/s Bhanu & Sons Pvt. Ltd. would be acquired by the appellant assessee at a consideration not less than `65 lacs and, accordingly, the said property was acquired ultimately on 6[th] February, 2002. It appears to be the contention of the appellant assessee that the said acquisition has been accepted by the Department in the orders pertaining to the subsequent assessment years. It is the contention of the appellant assessee that materials pertaining thereto should have been permitted to be placed before the Assessing Officer during the relevant assessment. The Assessing Officer has not accepted the Memorandum of Understanding and has felt that the same had been created subsequently as an eyewash. Before coming to the said conclusion, the Assessing Officer did not call upon the appellant assessee to produce Smt. Chandra Raj Laxmi before the Assessing Officer. The Assessing Officer did not take note of, how the sum of `10 lacs paid by the appellant assessee to Smt. Chandra Raj Laxmi during the assessment year 1996-97 was adjusted by her in her returns. It does not appear, therefore, that the finding that the Memorandum of Understanding was an eyewash is founded on legal basis. 3. We, accordingly, interfere and remit back the matter for reconsideration by the Assessing Officer. Accordingly, the orders of the Assessing Authority, Appellate Authority and the Tribunal stand set aside. 4. It is made clear that whatever argument the appellant assessee wants to make before the Assessing Officer, in addition to what has been pointed out above, can be made by the appellant assessee, except user of power under Section 148 of the Income Tax Act, since the said issue is now res integra. 5. The Appeal stands disposed of. (Servesh Kumar Gupta, J.) (Barin Ghosh, C.J.) 30.08.2013 30.08.2013 Rathour