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2020 (12) TMI 17 - AT - Income TaxExemption u/s 11 - Addition towards surplus income - HELD THAT:- Assessee furnished the details and the CIT(A) called for the remand report. During the remand proceedings, the assessee furnished complete details, i.e.ledger accounts and expenses which were examined by the AO and discussed by the Ld.CIT(A) head-wise in his appeal order. The AO at no point of time, made any adverse comments with regard to the exemption claimed by the assessee. CIT(A) granted exemption u/s 11 on the basis of the remand report submitted by the AO. The Ld.CIT(A) directed the AO to grant exemption u/s 11 and observed that the AO did not make any adverse observation against Manager of the Trustee or Society in the remand report with regard to misappropriation of the funds of the Society. Further, we find from the order of the Ld.CIT(A) that no violation u/s 13(1)(c) was brought on record by the AO in the remand report. Therefore, we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. Ground of the department is dismissed. Disallowance to 50% of the expenditure incurred on boarding and lodging expenses - HELD THAT:- As stated that the assessee could not furnish some of the details, such as names of persons, their identity and purpose of visit etc., which created suspicion to hold that the expenditure was not completely verifiable. Since the assesse has furnished the information merely because of the failure of the assessee to furnish some of the details such as names of persons, purpose of visit etc., disallowance of the entire expenditure unjustified. The assessee is engaged in running the educational institutions and it is needless to say that it has to engage the faculty from outside for which the expenditure required to be incurred. AO did not doubt the genuineness of expenditure. Therefore, we hold that restricting the expenditure to the extent of 50% is reasonable and no interference is called for in the order of the Ld.CIT(A). Therefore, appeal of the revenue on this ground is dismissed. Interest payment to interested persons @18% - AO disallowed the entire interest because of non response from the assesse to the notices issued - HELD THAT:- The assessee has paid the interest @18% to the interested persons and explained that interest payment was on par with the market rate and there was no pressure from the lenders for immediate payment of the principle. CIT(A) viewed that there is no bar on payment of interest @18% and the same is on par with the market rate. The department did not bring any material to show that the funds are available in the market for interest lesser than 18%. Since the CIT(A) has given a finding that the interest payment @18%, is on par with the market rate and the department failed to bring any material to controvert the finding given by the Ld.CIT(A) we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. The appeal of the Revenue on this ground is dismissed. Addition on building rent - CIT-A deleted addition - HELD THAT:- AO did not dispute the genuineness of rent payments as observed from the remand report as well as the order of the Ld.CIT(A) in the earlier years as per the said agreement. AO also did not suspect the genuineness of the rent payment to Smt.M.Sucharitha in the impugned assessment year. Before the Ld.CIT(A), the assessee furnished the rent agreement which was verified by the Ld.CIT(A) and allowed the expenditure. The assessee filed paper book wherein the assessee has furnished the copies of rental agreement, wherein, the property was let out to the assessee for a monthly rent of ₹ 1,00,000/- per month and the same was used for hostel building by the society. Therefore, we do not see any reason to interfere with the order of the Ld.CIT(A). Addition for vehicle rents - CIT(A) deleted the addition towards the car rent and confirmed the addition towards tractor - HELD THAT:-.CIT(A) found that the AO did not make proper enquiry to enable the assessee to produce the details and accordingly confirmed the addition of ₹ 3,60,000/- towards tractor rent and deleted the balance. From the order of the lower authorities, we observe that the department did not make out case that the expenditure was not incurred by the assessee. We also observe from the paper book page No.20 to 23 that there was written agreement dated 10.04.2009 from M.Sucharitha for letting out the cars to the assessee. Since the assessee has produced ledger accounts and rental agreements in respect of cars and no material was brought on record by the AO to controvert the finding of the Ld.CIT(A) with regard to non utilisation of cars by the Trust, we are unable to disagree with the Ld.CIT(A), accordingly, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue.
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