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2021 (9) TMI 1472 - ITAT CHANDIGARHExemption u/s 11 - dummy face for diverting of receipts - huge fees collected under non educational heads - assessee was doing commercial activities by collecting huge amounts from students under various heads some of which were not incidental to its objectives and was earning huge profits which were ploughed back to create assets in the form of capital investments - huge fees collected under non educational heads, CIT(A) has found the heads to be incidental to the purpose for which the trust existed - HELD THAT:- Vis-à-vis the issue of huge fees collected under non educational heads, CIT(A) has found the heads to be incidental to the purpose for which the trust existed. On considering the facts relating to the issue, as out lined in the order of the AO in the table where various amounts collected by the assessee are tabulated, we see no reason to disagree with the CIT(A). We find that the heads listed therein, which form major part of the fee collection, are by way of admission fees, art & crafts expenses, educom charges, transport charges, printing & stationary charges, etc. They are no doubt related to the educational activities of the assessee. Remaining collections in the form of discount & rebate, penal ty charges, insurance claim refunds, etc. are very minor collections and in any case are normal collections incidental to the carrying of the activity of imparting education. DR was also unable to point out how the heads under which the amounts were collected were not related or incidental to the activities of imparting education carried on by the assessee. Therefore, we do not find any infirmity in the findings of the Ld.CIT(A) vis-a-vis this aspect. For the reasonableness of the amount collected CIT(A) has stated that to be beyond the ambit of taxation and drawn support from decisions in the case of St Peters Education Society [2016 (6) TMI 536 - SUPREME COURT] CBDT Circular No.14/2015 and the decision of the Jurisdictional High Court in the case of Pinegrove International Charitable Trust Vs. Union of India & Others, [2010 (1) TMI 49 - HIGH COURT OF PUNJAB AND HARYANA AT], all to the effect that mere generation of surplus would not lead to the conclusion that the assessee does not exist solely for educational purpose. Ld.DR was unable to controvert the same before us .we therefore do not find any infirmity in the findings of the Ld.CIT(A) in this regard also. Payment of royalty - Perusal of the MOU signed by the assessee with M/s G.D. Goenka Pvt . Ltd reveals that as per the said agreement M/s G.D. Goenka Pvt . Ltd. was to only provide guidance to establish, manage and develop the school by way of providing preopening guidance & support, providing guidelines for documentation of records, supporting in marketing and advertisement of the school, providing manual for operations in alignment with the core standards, support in recruitment of Principal & staff, training & support for staff development and providing continuous support in all areas. These services, we find, are merely support services so as to ensure that the education being imparted in the assessee’s school is in consonance with the standard established by the brand M/s G.D. Goenka Pvt . Ltd as per the agreement entered into with them. The Ld.DR was unable to show as to how these services could be read as M/s G.D Goenka having control over the day- to-day activities of the running of assessee’s school. No infirmity in the findings of the CIT(A) that there being no relationship between the assessee and M/s G.D. Goenka Pvt. Ltd. and the services being provided to maintain the brand name of M/s G.D. Goenka Pvt . Ltd. it cannot be said that the royalty paid by the assessee to M/s G.D. Goenka Pvt . Ltd. tantamounted to diversion of its profits. As for the aspects of accumulation of profits the findings of the Ld.CIT(A) are to the effect that the assessee has complied with the provisions of law in this regard. DR was unable to controvert the same before us. We do not find any reason to interfere in the order of the Ld.CIT(A) allowing assessee’s claim of exemption u/s 11 of the Act . Disallowance of rent paid to one Smt .Suman Bansal - The factual findings of the CIT(A) that the ownership of Smt .Suman Bansal of the land leased to the assessee was established by documentary evidences, has not been controverted before us. Therefore, the findings of the AO that there was no evidence of ownership of land by Smt .Suman Bansal , meri ts no consideration. The findings of the CIT(A) to the effect that the land had been leased by the assessee consistently for educational purpose and the rental payments were consistent with the past history of the assessee had also remained uncontroverted before us. He has also stated that the rental payment , in his view, was reasonable payment for such a huge chunk of land in a capital city like Jammu. The assessee had justified the same by stating the market value of the land as assessed by the Revenue Authorities and, therefore, the rent paid was much less considering its huge market value. The Revenue has been unable to controvert this factual finding of the Ld.CIT(A).
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