Unreported Decisions – May 2021
By Ajay R. Singh, Advocate and CA Rohit Shah
1. S. 12A: Rejection of Application for Registration u/s 12AA of the Act
The process of registration is not an occasion for deciding the issue of exemption of donation u/s. 11 of the Act and other aspects. Only thing to be verified is that Trust is Charitable in Nature and Activities of the Trust are genuine.
The assessee, a charitable trust registered under Bombay Public Trust Act, 1950 made an application seeking registration u/s. 12AA of the Act. The CIT(Exemption) rejected the application seeking registration on the ground of non-payment of taxes on surplus fund and treated the activities of the assessee as non-genuine. Further, he held that the assessee collected various fees and also kept funds idle in FD‟s without utilizing them for the objects of the trust.
The CIT(Exemption) neither objected on the activities carried out by the assessee and nor did he show a single rupee of the FD is utilized for any object other than object of the trust.
While allowing Assessee’s appeal against rejection of application us 12AA, Hon’ble ITAT held that it is a settled principle that the grant of registration and the issue of assessment or exemption u/s. 11 of the Act are separate and distinct. The process of registration is not an occasion for deciding the issue of exemption of donation u/s. 11 of the Act. The issue of exemption cannot be examined during the process of registration. Therefore, the order of CIT(Exemption) in denying the registration u/s. 12AA of the Act was set aside.
Gujrathi Shikshan Sanstha vs. CIT (Exemptions), Pune [ITA No. 10/Pun/2021, Bench. “A”, DOH:16/03/2021 (Pun)(Trib)]
2. S. 56(2)(vii)(b) read with section 50C: Addition u/s 56(2) (vii)(b) cannot be made in the hands of buyer unless reference is made to DVO as per proviso to section 50C(2).
The assessee is an employee of a Engineering College. The Assessing Officer noted that during the year under consideration, the assessee had purchased immovable property, wherein the market value was ₹ 1,60,00,000/-. However, valuation adopted by the stamp valuation authority was ₹ 1,80,74,000/-.The assessee stressed that price paid by assessee was the prevalent market price in the area and various other flats were also sold at the same rate. AO did not accept the same and added the difference between consideration and FMV u/s 56(2)(vii)(b) of the Act . Similar arguments were made before CIT(A). The CIT(A) upheld the order of Assessing Officer and thus, additions were sustained.
It was submitted before Hon’ble ITAT that under the said provisions of section 56(2)(vii)(b) of the Act, incomes are enlisted which are chargeable to Income-tax under the head ‘Income from other sources. Said section refers to an immovable property, wherein
(i) it has been received without consideration and where stamp duty value of the said property exceeds ₹ 50,000/- and
(ii) for consideration which is less than stamp duty value of property by an amount exceeding ₹ 50,000/-,
Then the difference between stamp duty value of property and the consideration is to be added in the hands of assessee. The proviso under section 56(2)(vii)(c) of the Act lays down that where the stamp duty value of immovable property as referred to in sub-clause (b), is disputed by the assessee on the ground as mentioned in section 50C(2) of the Act, then the Assessing Officer may refer the valuation of such property to the Valuation Officer and the provisions of section 50C of the Act and 155 of the Act shall apply as far as may be, in relation to the stamp duty value of such property for the purpose of sub-clause (b), as it applies for valuation of capital asset under those sections.
Also, the word ‘may’ used in the statute is not discretionary as section 50C being a deeming provision. Thus, AO should refer the matter to DVO for determining FMV of the property wherever the Valuation has been disputed by the assessee.
In the instant case, it was held that the assessee before the Assessing Officer and also before the CIT(A) has pleaded that the value adopted for stamp duty purposes exceeded the fair market value of property as on the date of purchase and had submitted not only the evidence of circular rate at the relevant time but also valuation report by the registered valuer, which was filed before the Assessing Officer and CIT(A), then in such circumstances, it was incumbent upon the Assessing Officer to refer the matter to the District Valuation Officer in order to determine the fair market value of the property as on the date of purchase.
Mrs. Harmeet Kaur Khanuja v/s. ITO Ward 13(2), Pune [ITA NO.: 1573/PUN/2018, A.Y. 2015-16, Bench. “SMC”, Date: 14/03/2019 (Pune)(Trib)]