TMI Blog2012 (9) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... t' - Section 40A(9) was inserted as a measure for combating tax avoidance - In the present case how the ITAT and the High Court have come to the conclusion that these payments made by the assessee constituted reimbursement. As for the AY 1985-1986, the AO records that an amount of Rs. 11,40,641/- has been incurred by payments to other educational institutions and not by way of payments made to school or the society promoted by the assessee. For each assessment year, therefore, the ITAT will have to record a separate finding as to whether the claim for deduction is being made for payments to the school promoted by the assessee or to some other educational institutions/schools and thereafter apply Section 40A(9) which has not been done in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was under Section 37(1) of the Income Tax Act, 1961 ['Act', for short]. The assessee claimed that it had spent a sum of Rs. 11,40,641/- as welfare expenses towards providing education to its employees' children. During the course of discussion with the Assessing Officer, the Company stated that it had made payments to other educational institutions where the children of its employees were studying. At this stage, it is important to note that assessee has established Sandur Residential School and Sandur Education Society for imparting education to students in that area. 5. Before us, it has been argued on behalf of the assessee that these payments were made by way of reimbursement to cover the deficit which the school incurred during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstances have come to notice where certain employers have created irrevocable trusts, ostensibly for the welfare of employees, and transferred to such trusts substantial amounts by way of contribution. Some of these trusts have been set up as discretionary trusts with absolute discretion to the trustees to utilise the trust property in such manner as they may think fit for the benefit of the employees, without any scheme or safeguards for the proper disbursement of these funds. Investment of trust funds has also been left to the complete discretion of the trustees. Such trusts are, therefore, intended to be used as a vehicle for tax avoidance by claiming deduction in respect of such contributions, which may even flow back to the employer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by payments to other educational institutions and not by way of payments made to school or the society promoted by the assessee. For each assessment year, therefore, the ITAT will have to record a separate finding as to whether the claim for deduction is being made for payments to the school promoted by the assessee or to some other educational institutions/schools and thereafter apply Section 40A(9) of the Act which has not been done in the present case. 8. We, therefore, set aside the impugned judgments of the High Court as well as of the ITAT and we direct the ITAT to consider the matter de novo for each of the above assessment years by giving a clear bifurcation between payments made by the assessee to Sandur Residential School and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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