Dilip B. Bhosale, J.@mdashThese income tax appeals are directed against the order dated 22nd September 2006 rendered by Income Tax Appellate Tribunal (for short the "Tribunal") in ITA Nos. 2952, 2954, 2973 and 2974 of 2004 pertaining to the assessment years 1997-98 to 2000-2001, whereby, the Tribunal dismissed all the appeals filed by the revenue. The appeals before the Tribunal were arising from the orders, all dated 24th June 2004, passed by the Commissioner of Income Tax (Appeals) (for short, CIT (A)) whereby the CIT (A) partly allowed the appeals filed by the respondent-assessee against the order of assessing officer dated 26th March, 2002.
2. Though the revenue has framed three substantial questions of law in the memorandum of appeals, we have retrained the questions, with the assistance of the learned counsel for the parties. The questions on which we have heard learned counsel for the parties, and have dealt with, read as follows:
(i) whether the assessee is entitled to exemption u/s 11(1)(a) of the Act in respect of the income derived from sale of residential and commercial units?
(ii) whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in granting exemption u/s 11 of the Act, holding that an amount of Rs. 1,61,23,950/-, which had been accepted by the respondent-assessee as additional income, never reached the trust ?
3. The respondent-assessee is a charitable trust. The respondent, as they are permitted under their Memorandum of Association, constructed a commercial-cum-residential complex on a part of its land called "Shalom Apartments cum Commercial Complex" (for short "the said complex"). At the relevant time, one Marcel Saldanha was the Manager of the respondent-assessee. The assessee sold the apartments/commercial premises to various persons by agreements to sale and then sale deeds. It has come on record that the amount shown in each of the agreements to sale was more than the amount in the sale deed. It is not clear how much was the exact difference. But it is admitted by the learned counsel for the parties that the total difference between these two amounts in all the agreements together was Rs. 1,61,23,950/-. It has come on record that the Manager misappropriated certain amount in construction of the said project for which an enquiry committee was constituted by the respondent-assessee. We are informed, by learned counsel for the respondent-assessee, that the respondent-assessee initiated criminal as well as civil action against the said Manager. We are, however, not concern with the same for deciding the present appeals.
3.1. The respondent-assessee had filed original return of income on 16-3-1998 assessing total income of Rs. 31,480/-. The return filed by the assessee was processed u/s 143(1)(a) of the Act. Thereafter, a survey was conducted u/s 133A of the Act on the assessee''s business premises. In the survey, it appears, some incriminating documents were recovered on the basis of which a notice u/s 148 of the Act was issued on 11-10-1999. In response to the said notice, the assessee filed revised return on 19-01-2000. The case of the assessee was then taken up for scrutiny by issue of a notice u/s 143(2). The Assessing Officer after considering the entire materials placed before him, in particular, the Memorandum of Association, the show cause notice, and the note of the assessee on revised final accounts, ultimately held that Rs. 55,84,075/- was the added income from the business for the assessment year 1997-98; Rs. 57,80,925/- for the assessment year 1998-99; Rs. 25,77,000/- for the assessment year 1999-2000 and Rs. 21,81,950/- for the assessment year 2000-2001.
3.2.. The CIT (A) partly allowed the appeals. It would be relevant to reproduce the following observations from the order of the CIT (A), made for the assessment year 1997-98:
Thereafter, the appellant had filed the revised returns/original returns of income, as the case may be, for the above assessment years, wherein it has offered the additional income of Rs. 1,61,23,950/-. The appellant had claimed exemption u/s. 11(2) of the Act to the extent of 25% of the assessed income. It has also contended that the amount invested in the construction of the commercial complex should be treated as application of income for the purpose of attaining the objects of the Trust. For the reasons given in the assessment order (which have already been discussed above), the Assessing Officer has rejected the above claims of the appellant.
3.3. Feeling aggrieved and dissatisfied with the part of the order passed by the CIT (A), the revenue filed four appeals before the Tribunal. The Tribunal dismissed the appeals filed by the revenue holding that the amount of Rs. 1,61,23,950/- never reached the assessee, as had been misappropriated by the said manager, and hence it has to be treated as an application of income. This finding of the Tribunal, was contrary to the admission given by the assessee in the revised return for all the four assessment years. As indicated above, the assessee itself, for all the four assessment years, together had offered Rs. 1,61,23,950/- as additional income. There is no material on record to show that this amount and the misappropriated amount is one and the same. That, perhaps, appears to be the reason why the CIT (A) observed that the assessee had claimed exemption u/s 11(2) of the Act to the extent of 25% of the assessee''s income. This position of law, in the backdrop of the facts mentioned above, has not been disputed by learned counsel for the assessee before this Court and in all fairness he has agreed for non-inclusion of 25% of the amount of Rs. 1,61,23,950/- as contemplated by sub-section (1)(a) of Section 11 of the Act. In other words, he submitted that the respondent-assessee would be entitled for deduction to the extent of 25% on the amount of Rs. 1,61,23,950/- only, i.e., the amounts added, to the income declared by them in their returns. The amounts added to the income in all the four assessment years are Rs. 55,84,075/-, 57,80,925/-, 25,77,000/- and 21,81,950/- respectively.
4. It is in this backdrop, the appeals insofar as the second question of law is concerned, are partly allowed and the order of the Tribunal as well as the order of the CIT (A) to that extent are set-aside. The question accordingly, stands answered in favour of the revenue and against the assessee. Insofar as the first question is concerned, we answer the said question in favour of the assessee in view of clause (2) and clause (3)(c) of the Memorandum of Association. Clause (2) of the Memorandum of Association speaks about the objects for which the Society is formed and sub clause (c) of clause 3 confers power on the respondent-assessee to improve, manage, cultivate, develop, exchange, grant on lease, mortgage, charge, sell, dispose off, grant rights and privileges in or otherwise dealing with all any part of the property, movable or immovable, patents or copyrights held by or belonging to the assessee or donated to it. Thus, the construction of the said complex, in our opinion, would fall within the scope of the objects enumerated in the memorandum of association. In the circumstances, the first question is answered in favour of the assessee and against the revenue. It is needless to mention that remaining two questions, that were formulated by the revenue in the memorandum of appeal, rendered academic and hence, by consent, not addressed.
The appeals are accordingly disposed of. However, there shall be no order as to costs.
