M/S Clara Swain Hospital, Bareilly vs Assessee

M/s Clara Swain Hospital, Vs. Income Tax Officer, Mission Compound, Ward-1(1), Bareilly. Bareilly. PAN:AAAAC1970G (Appellant) (Respondent)

Appellant by Shri K. R. Rastogi, C. A. Respondent by Shri Vivek Mishra, C.I.T., D. R. Date of hearing 03/03/2015 Date of pronouncement 03/03/2015

ORDER PER A. K. GARODIA, A.M.

This Stay Petition is filed by the assessee requesting for stay of outstanding demand of Rs.12,50,41,290/-/-.

2. It was submitted by Learned A.R. of the assessee that brief facts till the stage of raising of demand by the Assessing Officer against the present assessee and the assessee's brief submissions in this regard are available on pages 1 to 5 of the Stay Petition and also in the order of CIT (A). He also submitted that constitution of the assessee i.e. Clara Swain Hospital, Bareilly is available on record and from article-II of the said constitution, it can be seen that it was specified that the movable and immovable property in Clara Swain Hospital is the property of Methodist Church in India and it was specified that the said property shall be managed, maintained and protected by the Board of Governors of Clara Swain Hospital i.e. the assessee. He also 2

submitted that this fact is further strengthened by the joint venture agreement which is between the Executive Board of the Methodist Church in India and M/s Ritam Charitable and Education Society and consideration was also paid to Methodist Church in India and not to the assessee. He submitted that when the capital asset in question is not owned by the assessee and no consideration has been received by the assessee then how the capital gain can be assessed in the hands of the present assessee. He submitted that although the appeal of the assessee is fixed for hearing on 30/03/2015 but in the facts of the present case, the demand raised against the assessee is not proper and therefore not enforceable and hence, at least stay should be granted till the appeal of the assessee is decided.

3. As against this, Learned D.R. of the Revenue submitted that it is noted by the CIT (A) on page No. 18 of his order that for the last almost 22 years, the property in question, though may not be registered in the name of Clara Swain Hospital but is under the possession and full control of the said hospital for all practical purposes and is being run and enjoyed by the said trust i.e. Clara Swain Hospital. It is also pointed out that it is noted by CIT (A) on page No. 18 of his order that separate returns of income have been filed by the said Clara Swain Hospital and a separate PAN was also obtained and used by the said hospital since assessment year 2003-04 and registration u/s 12A of the Income Tax Act was also applied for and granted to the hospital by the CIT, Bareilly in the year 2007. He submitted that under these facts, it has to be accepted that the capital asset in question was owned by the assessee for the reason that it was under the possession and full use of the assessee and therefore, the demand raised by the Revenue is very much valid and therefore, stay should not be granted to the assessee and even if stay is granted, the stay should be granted after directing the assessee to deposit at least 50% of the outstanding demand.

3 4. We have considered the rival submissions. At the present stage, we are not supposed to decide the merit of the addition made by the Assessing Officer. We are only required to decide whether the assessee deserves granting of stay or not. On the examination of the constitution of the assessee i.e. Clara Swain Hospital and from the perusal of the joint venture agreement between Methodist Church in India and M/s Ritam Charitable and Education Society, it comes out that the assessee has been able to make out a prima facie case that the property in question may not be owned by the assessee and therefore, no capital gain tax is chargeable on the assessee on account of transfer of said capital asset. It was also submitted that even as per this joint Venture Agreement, the assets were not sold but were given for use only. Be that as it may because we do not want to examine and decide these issues at present and we do not want to make any comment on these aspects. At present, we are concerned with this much only as to whether granting of stay of demand in the facts of the present case is warranted or not. Since the appeal of the assessee is already fixed for hearing on 30/03/2015 and Learned A.R. of the assessee has given undertaking that the assessee will not seek any undue adjournment and will co-operate in early disposal of the appeal, we are of the considered opinion that granting stay of outstanding demand for a brief period of 6 months or till the disposal of the appeal whichever is earlier will not cause any prejudice to Revenue but if no stay is granted, prejudice may be caused to the assessee because the assessee may be put to undue hardship even in a situation where a prima facie case has been made out by the assessee. We have noted that the case of department is this that the assessee is using the assets for last 22+ years and has obtained PAN, registration u/s 12A & 80G and was filing return of income since A.Y. 2003 - 04. These facts may be relevant if the dispute is for taxing of income of the hospital but the dispute is about capital gain on alleged transfer of assets by alleging that the assets are owned by the 4

assessee although it is undisputed that the assessee is not even a party to Joint Venture Agreement and no consideration is received by the assessee. Hence, prima facie, it appears that capital gain tax is not chargeable in the hands of the assessee. But these observations are for limited purpose of deciding the stay petition and should have no bearing while deciding the appeal of the assessee.

5. As per above discussion, we are inclined to grant stay of outstanding demand to the assessee for a period of six months from the date of this order or till the disposal of the appeal, whichever is earlier. We want to make it clear that if the assessee seeks any adjournment during the hearing of the appeal without any justifiable reason then the stay granted by this order should get vacated automatically. With these observations, we grant stay to the assessee of the outstanding demand for a period of six months from the date of this order or till the disposal of the appeal, whichever is earlier.

5. In the result, the Stay Petition of the assessee stands allowed.

(Order was pronounced in the open court on the date mentioned on the caption page)

Sd/. Sd/.

(SUNIL KUMAR YADAV) (A. K. GARODIA) Judicial Member Accountant Member

Dated:03/03/2015 *C.L.Singh

Copy of the order forwarded to: 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Lucknow Asstt. Registrar