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2017 (3) TMI 578 - AT - Income TaxExemption u/s 11 - educational activity huge surpluses being earned by the society - Expenditure for the benefit of persons covered u/s 13(3) - Held that:- it is clear that over the period of 11 years, it is no doubt that the assessee society has generated surplus of ₹ 50.76 Crores but at the same time, the whole of the said surplus has been plouged backed and utilised on infrastructure to the tune of ₹ 60.19 Crores (including borrowings). Even for the two years under consideration, there is surplus of ₹ 16.97 Crores and out of that, ₹ 9 crores have already been spent on the infrastructure. - given that the assessee society is generating surplus year after year is not the deciding factor to determine whether it is eligible for exemption under section 11 of the Act. And on this ground alone, the exemption claimed by the assessee society under section 11 can not be denied. - Decision in the case of Queens’s educational society [2015 (3) TMI 619 - SUPREME COURT] Expenditure for the benefit of persons covered u/s 13(3) - financial assistance provided to Jaipur National University (JNU) - Held that:- It is only now that the Finance Bill 2017 has proposed w.e.f 1 April 2018 that where such donations are made with specific directions to form part of corpus of the recipient entity, it will not be considered as application of income in the hands of the donor entity. However, the donations with no specific directions to the recipient entity continue to be eligible as application of income. - In the instant case, Jaipur National University is registered under section 12AA as a charitable entity undertaking educational activity and thus qualify as an eligible entity for receiving contributions from the assessee society. - the contribution so made is not made out of past accumulated profits. Nature of contribution to JNU - Held that:- it is clear that amount advanced by the assessee society to Jaipur National University is in accordance with its objectives of setting up of educational institutions and managing and operating them for promotion of education and spreading of systematic education to students. The contribution so made is also in consonance with the Jaipur University Act which require the assessee society to contribute and support the University in its activities, as a sponsoring body on a regular basis. Further Jaipur National University doesn’t qualify as a specified person u/s 13(3) - Accordingly, the contribution to Jaipur National University will qualify as due application of income in the hands of the assessee society and the same cannot be a basis for denial of exemption under Section 11 to assessee society. Salary paid to person specified u/s 13(3) - excessive salary - Held that:- given the qualification and the experience of these persons and the fact that these persons have managed the affairs of the society since its inception and they are closely and actively involve in management and day to affairs of the assessee society, the salary and allowances paid to them is reasonable vis-a-vis legitimate needs of the assessee society and benefit derived or accruing to the assessee society - the reasonableness has to be seen vis-a-vis legitimate needs of the assessee society and benefit derived or accruing to the assessee society and as determined by the assessee society - Claim allowed. Expenditure on foreign travel - Held that:- in no case, Section13(3) or 13(1)(c) of the Act can be invoked on account of disallowance of foreign travel expenses because even if such travel is considered to be perquisites to the persons at the helm of applicant societies affairs, the same commensurate with the fair value of the services provided by them to the assessee society particularly, keeping into consideration that their dedicated services have led to significant growth and popularity of the educational institutions run by the assessee societysociety - Claim allowed. Depreciation u/s 32 admissibility in respect of the assets on which exemption has been allowed u/s 11 - Held that:- As decided in Krishi Upaj Mandi Samiti, Jaisalmer case [2015 (3) TMI 11 - RAJASTHAN HIGH COURT] the depreciation is held admissible to the assessee society under the provisions of section 32 of the Act in respect of assets on which exemption has been allowed under section 11 of the Act. Benefit of exemption u/s 11 allowed - Decided in favor of assessee.
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