ITAT directs to Verify Real Intention of Trust  regarding Purchase of Land for Construction of School Building [Read Order]

The two member bench of Bangalore Income Tax Appellate Tribunal ( ITAT ) directed to verify the real intention of trust regarding the purchase of land for the construction of a school building.

The Assessee Samaja Seva Mandali is a charitable trust imparting education to the society at large. After filing the return of income,  the  assessee case was selected for scrutiny.

The return of income of the assessee was selected for scrutiny assessment to examine the expenditure incurred by the assessee, accumulation of income and investments made in the immovable property. Accordingly the AO after examining the documents denying the application of income amounting to Rs.3,10,29,555 under the provisions of section 11(1) of the Income Tax Act.

Aggrieved, the assessee filed an appeal before the CIT(A) who dismissed the appeal.  Accordingly the assessee filed an appeal before the tribunal.

During the adjudication Shreeshkumar Eshwar Hegde, the counsel for assessee  submitted that in the year under consideration, the Assessee has entered into an agreement to sell with Mr. B. K. Raghuveer and M/S. Heramba Enterprise to purchase the land for the proposed construction of the new school building forming part of the object of the Assessee. Further the Assessee has taken all steps to take complete ownership of the property from the sellers of the immovable property.

Therefore the  assessee is entitled for exemption under Section 11(1) of the  Income Tax Act and the same to be granted on the basis of above agreements.

Yamuna C, Counsel for Revenue submitted that the above sale agreements are not registered and it was only registered after a lapse of a long period which is on 23.6.2021. As such, it cannot be considered valid agreements, so as to consider as application of income under Section  11(1) of the Income Tax  Act

The tribunal observed that t authorities always have the freedom to “go behind” documents to find out the real intention of the parties as always been recognized

Further the bench viewed that “The department/court must normally proceed on the basis of professed intention, but if that is under doubt, or is disputed or challenged, then it has a power to find out the real intention of the parties by ignoring the same and the department have the freedom to go behind by removing the façade to expose the real intention of the parties cleverly cloaked and if that intention is discovered to be the evasion of taxes, it cannot be given effect to merely because all the steps taken as component parts of arrangement are legally correct and valid.”

After reviewing the facts the ITAT bench of Chandra Poojari, (Judicial Member) and Beena Pillai,(Accountant Member)  directed to verify the real intention of trust regarding the purchase of land for the construction of a school building.

To Read the full text of the Order CLICK HERE

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