TMI Blog2010 (6) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... the membership of the said club which club is incorporated to provide the gymkhana and recreational facilities to its members. (3)On the facts and in the circumstances of the case although the CIT(A) has not disputed the fact that the advance of Rs. 30 lakhs was made to Baramati Club towards the object of the institution, the CIT(A) has rejected the claim of exemption made under section 11 by assigning irrelevant reasons. (4)On the facts and in the circumstances of the case the CIT(A) has erred in not dealing with ground No. 12 wherein appellant has objected to the levy of interest under section 234B of Income-tax Act, 1961 on the ground that there is no specific direction for charging the interest anywhere in the assessment order." 3. The assessee claims to exist purely for imparting education. The assessee is an educational institution registered under Bombay Public Trust Act, 1950, Societies Registration Act, 1860 and under section 12A of the Income-tax Act, 1961 which was recognized under section 80G of the Income-tax Act all along in the past and renewed upto 31-3-2002. It also claimed exemption under section 10(22) of the Income-tax Act upto assessment year 1999-2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed unanimously." 5. Baramati Club, Baramati has acknowledged the receipt of the said amount as under : "Certified that Rs. 30 lakhs are received from Vidya Pratishthan, Baramati towards the membership fees. The said amount is to be utilized for construction of gymkhana and other buildings. These donations/membership fees of Rs. 30 lakhs are accepted in consonance with the resolution passed in the meeting of the club held on 25th May, 1996, the construction work of gymkhana building is substantially completed and remaining construction work could be over soon and thereafter students and staff of Vidya Pratishthan, Baramati collectively would be granted in the membership as a result of which they would get the benefit of gymkhana and modern equipment of physical exercises. Sd R.R. Mohata (Trustee)" In this background it was submitted that the amount was advanced towards membership fees. 6. Baramati Club was incorporated on 28-11-1991 with the object of providing gymkhana and recreational facilities to its members and the same was registered under Bombay Public Trust Act under section 12A of Income-tax Act and recognized under section 80G upto 31-3-1999. Relevant d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not a prohibited person as specified in section 13(3). The Baramati Club is not ( a )the author of the trust or the founder of the institution; ( b )any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution upto the end of the relevant previous year exceeds Rs. 50,000; ( c )where such author, founder or person is an HUF, a member of the family; ( cc )any trustee of the trust or manager (by whatever name called) of the institution; ( d )any relative of any such author, founder, person (member, trustee or manager) as aforesaid; ( e )any concern in which any of the persons referred to in clause ( a ), ( b ), ( c ), ( cc ) and ( d ) has substantial interest. Explanation 3. For the purposes of this section, a person shall be deemed to have a substantial interest in a concern ( i )in a case where the concern is a company, if its shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in- profits) carrying not less than 20 per cent of the voting power are, at any time during the previous year owned beneficially by such person or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Revenue, and, therefore, they are binding upon this Court in reference proceedings : The Department has to be specific about the name of the beneficiary and thereafter, has to place facts on record to establish that such a person falls in the category of prohibited persons. No such attempt has been made by the Departmental authorities. One has not even cared to find out the number of shares of M/s J.K. Synthetics which might be held by the trustees or settler or both of them combined together and whether the said holding would bring M/s J.K. Synthetics within the provisions of section 13(3) ." 11.1 In this background the Assessing Officer was not justified in denying the exemption claimed under section 11 by invoking the provisions of section 13. The lower authorities have erred in invoking the provision of section 13(1)( d ) of the Act. As per the provisions of section 13(1)( d ) of the Act if any funds of the trust or institution are invested or deposited after 28-2-1983, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11, the membership fee advance was neither the deposit nor the investment. In fact it is an applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ari, chief executive officer and project co-ordinator, rent of the house to Mr. G.K. Tewari, husband of Mrs. Sudha Tewari, loan to Tyagi Foundation and expenditure incurred on conferences and clinics. The learned CIT(A) has discussed all the items in his impugned appellate order at length and held that salary, rent, etc. paid to Mrs. Sudha Tewari was reasonable and for valuable services rendered by her as chief executive officer and project co-ordinator and that the rent of the house paid to Mr. G.K. Tiwari was also reasonable considering the location of the house of Green Park, New Delhi. No material has been brought before us to rebut the factual findings of the learned CIT(A). On consideration of the materials on the file, the past record of the society and the year to year services rendered by Mrs. Sudha Tewari from its inception, we are satisfied that the salary, rent, etc. paid to her was reasonable and was not excessive and the learned CIT(A) was justified in rejecting these as not valid grounds for rejecting the claim of exemption under section 11 of the Act. Again we have carefully gone through the orders of the Assessing Officer and the learned CIT(A) for the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insubstantial. We are therefore, not inclined to interfere with this part of the order of the Tribunal. We accordingly answer question No. 3 in the affirmative, that is, against the revenue and in favour of the assessee." (3)The Murilbai C Bench of the Tribunal in the case of St. Thomas Education Society v. Asstt. DIT [2007] 11 SOT 340 vide para 11 SOT 340 vide para 11 of its order observed as under : "Before parting with this order, we would like to mention that decision of the Tribunal in the case of St. Xavier Educational Trust cannot be applied to the present case since facts in both the cases are different. In that case, it was found ( i ) that trustees were using property of the trust for their residence free of rent; ( ii ) that unaccounted donations were received by the parties, which were possibly being used by the trustees for their personal gains, and ( iii ) there were substantial unaccounted payments to - builders and other parties. However in the present case, none of such facts exists. We have already held that neither there is evidence of unaccounted donations nor any evidence of personal gain to the trustees of the assessee, hence, the case of St. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business or profession ? 2. Whether the learned CIT(A)-III, Pune is justified in law and facts of the case in deciding the issue in contradiction of its own decision that confirming denial of exemption to the trust under section 11(5) of the Act where all the receipts and income of the trust are naturally falling under the head profit from business or profession, otherwise no other provisions are applicable to the assessee ?" 17. The Assessing Officer made disallowance of payment of interest of Rs. 58,00,469 for assessment year 2005-06 and Rs. 43,98,091 for assessment year 2006-07 paid to Dewan Housing Finance Ltd. by invoking the provisions of section 40( a )( ia ) of the Act. In appeal, CIT(A) granted relief to the assessee on the ground that the income earned by the assessee is not chargeable under the head "Profits and gains of business or profession". Therefore, the provisions of section 40( a )( ia ) are not applicable. Accordingly, the Assessing Officer was not justified in disallowing interest of Rs. 58,00,469 by invoking the provisions of section 40( a )( ia ) of the Act. Similar issue arose in assessment year 2006-07. Facts being similar, so we uphold the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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