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2021 (6) TMI 401 - AT - Income TaxExemption u/s.10(23C)(vi) - exemption denied as Appellant did not solely exist for education purposes because there were several objects of non-education nature and was making huge surplus - Appellant had contravened the provisions of S.13(1)(c) in as much as it had paid lease rent to two of trustees of the Appellant - HELD THAT:- We find that assessee trust had derived income only from educational activity and not otherwise. Hence, even the financial statements of the assessee support the contention of the ld. AR that the trust is existing solely for the purpose of education only and not of any other purpose. Even otherwise during the year under consideration, i.e. F.Y.2018-19 relevant to A.Y.2019-20, for which claim of 10(23C)(vi) is sought by the assessee trust, the assessee trust had carried all activities only with respect to education and not otherwise at all. Other incidental objects provided in the Memorandum of Association for smooth attainment and fulfilment of the main objects, was not even carried out by the assessee during the year under consideration. Hence, the objection of the ld CIT(E) that the objects contain other irrelevant activities (though factually it is not) deserve to be dismissed in limine Assessee trust had derived surplus in its income and expenditure account - What is to be seen is the computation of income which are applicable to charitable trusts which works completely on a different principle wherein even the amounts invested in fixed assets are allowed as application of income. This has been conveniently ignored by the ld. CIT(E) while arriving at the conclusion that assessee has earned surplus. If the said investment made in fixed assets are considered as an application of income excluding depreciation thereon, we find that for the A.Y.2019-20, the assessee had only incurred a deficit . Hence the observation of the ld CIT(E) that the assessee trust had made surplus during the A.Y. 2019-20 and thereby existing for profit, is factually incorrect. Hence there is no question of any surplus earned by the assessee, as per the computation of income asper the provisions applicable to charitable trusts for the A.Y.2019-20. Even otherwise, we find that the surplus in the income and expenditure account has not been distributed by the assessee to any trustees or their relatives as profits or as dividend. The said surplus has been re-deployed regularly for the educational objects of the trust. Hence, it could be safely concluded that the assessee trust is existing solely for the purpose of education and not for the purpose of profit. Hence the second objection raised by the ld. CIT(E) for rejecting the claim of exemption u/s. 10(23C)(vi) of the Act is hereby dismissed as baseless. Assessee trust has paid lease rent to trustees of the trust for lease of the land on which assessee’s school is functioning - We find that the ld. CIT(E) had stated that this payment of lease rent is in violation of provisions of Section 13 (1)(c) of the Act. It is pertinent to note that assessee trust had only sought claim of exemption u/s. 10(23C)(vi) of the Act for which the provisions of Section 13(1)(c) need not be looked into as it is only applicable if exemption is claimed u/s.11/12 Reliance placed on the provisions of Section 13(1)(c) of the Act by the ld. CIT(E) is not applicable to the issue under consideration. Even assuming the provisions u/s.13(1)(c) of the Act are to be brought into operation in the instant case, then the ld. CIT(E) ought to have brought evidence on record by bringing comparative quotations to prove the fact that the lease rent paid in the sum of ₹ 2 lakhs per month to the trustees is excessive or unreasonable and beyond the fair market value thereon. On the contrary, we find that the ld. AR placed on record that market value of the land is ₹ 13,03,76,400/- as per the registered lease deed and the payment of lease rent of ₹ 24 lakhs works out to hardly 1.86% thereon. Hence, it could be safely concluded that the rent paid by the assessee trust to the trustees is not excessive or unreasonable. Thus third objection raised by the ld. CIT(E) for exemption u/s. 10(23C)(vi) of the Act is hereby dismissed. Accordingly, the grounds raised by the assessee are allowed
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