TMI Blog2018 (8) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the ays. Thus, when the assessee is not entitled for the benefit u/s 11, all its other claims u/s 11 are not allowable and hence they become academic and hence not dealt with . - I.T.A. Nos. 2092 & 2093/Chny/2016 And I.T.A. Nos. 2244 & 2245/Chny/2016 - - - Dated:- 22-6-2018 - SHRI DUVVURU RL REDDY, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER For The Assessee : Shri. Saroj Kumar Parida, Advocate For The Revenue : Shri. Guru Bhashyam, Addl. CIT ORDER PER S. JAYARAMAN, ACCOUNTANT MEMBER: The assessee as well as the Revenue filed these appeals against the orders of the Commissioner of Income Tax (Appeals)- 17 ,Chennai, in ITA Nos. 134 153/15-16 /CIT(A)- 17 dated 30.03.2016 for the AYs 2011-12 2012-13, respectively. 2. M/s. The Indian Institute of Engineering and Technology , the assessee , runs two colleges, namely, Meenakshi Sundararajan Engineering College, which is affiliated to Anna University and Meenakshi Sundararajan School of Management, which is affiliated to Madras University. 3. While making the assessments for ays 2011-12 2012-13, the AO denied the claim of exemptions u/s 10(23) ( C ) (vi) , refused to allow t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 451 35% 31.03.2012 11,75,96,825 4,88,55,229 41.5% 31.03.2013 11,68,84,064 3,37,58,156 28.88% The CCIT further cited Karnataka High Court s decision in the case of Viswesvarayya Technological University v. ACIT (2014) 42 Taxmann.com 237 has laid down that institutions generating surplus of over 15-20% cannot be said to exist not for profit purpose. This was in the case of a government institution. In the case presented here, when the surplus is as high about 42% obviously the ratio of the decision of Karnataka High Court in the case of Viswesvarayya Technological University (supra) shall be applicable . 5.1 The relevant portion of the order of the Ld.CIT(A) is extracted as under : I am not in agreement with the aforesaid contentions of the A.R praying for allowing exemption u/s 1O(23C)(vi) for the simple reason that for the instant years in appeal, the CCIT has not granted approval to the appellent s application for exemption u/s 10(23C)(vi) and just as no deemed registration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, their orders may be sustained. 7. We heard the rival submissions and gone through relevant material. It is clear that the assessee has sought grant of exemptions u/s 10(23C)(vi) before the prescribed authority , viz the Chief Commissioner of Income Tax- III, Chennai , which had been denied , inter alia, for the reason that the assessee is having a substantial percentage of surplus ranging from around 30% to 42% which prima facie points to the fact that the assessee is running a profitable venture. Thereafter, the A O denied exemptions relying on the same order and its ratio. The assessee challenged the same before the Ld. CIT(A) who confirmed denial of exemptions u/s 10(23C) (vi) , inter alia, for the reason that the assessee does not enjoy exemption for u/s 10(23C) (vi) for lack of registration . The assessee has not placed any material to say that the order passed by the prescribed authority ie the Chief Commissioner of Income Tax-III, Chennai is no more a good order and the orders of the Lower authorities are contrary to the facts and law on which they relied on their orders. Therefore, the corresponding grounds of the assessee are dismissed for both the ays. The Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly assessed the assessee s income. 8.2 Before the Ld. CIT(A), the assessee submitted that the appellant had paid an excess amount of ₹ 70,25,780/-, which was recoverable from Meenakshi College for Women as it was given to the other charitable institution for educational purpose to enable them to construct building as part of the college and therefore, cannot be considered as an investment and therefore, the provisions of Section 11, 12 13 were not violated. Further, Meenakshi College for Women cannot be considered as related person for the purpose of Section 11(1)(c) and 11(1)(d) rws 13(3). The loan given to another charitable Trusthavingsimilar objects for carrying out objects of such Trust could not be considered to have violated the provisions of Section 11(1)(c) and 11(1)(d) r.w.s 11(5), as contended by the A.O. The relevant portion of the order of the Ld. CIT (A) is extracted as under : 10.2. I have gone through the submissions made by the appellant on this issue along with the case laws relied on both by the A.O and by A.R and I find no substance in the submissions made by the A.R. It is quite clear that / the amount received as advance was repaid bac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes are considered as existing for purposes of profit , its claim u/s 11 that it is existing for charitable purposes within the scope of section 2 (15) of the Act also fails both the ays . Thus, when the assessee is not entitled for the benefit u/s 11, all its other claims u/s 11 are not allowable and hence they become academic and hence not dealt with . I.T.A. Nos. 2244 2245/Chny/2016 Assessment Years : 2011-12 2012-13 Now, Let us examine the Revenue s appeals : 11. The Revenue filed these appeals with a delay of 3 days and sought condonation of delay. We heard the rival parties and on due consideration of the petition, condone the delay. 12. The Common grounds of the Revenue is extracted as under : 1. The order of the learned CIT (A) is contrary to the law and facts of the case. 2.1 The Id. CIT (A) erred in holding that there is no violation u/s. 13 (1) (c) of the l.T.Act. 2.2 The Id. CIT (A) failed to appreciate that as per Clause 40 of the Memorandum of Association only the outstanding amount payable to the Founder Trustee could have been paid to his wife Ms. Meenakshi Sundararajan. 2.3 The Id. CIT (A) failed to no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub- sec. (3), if such use or appilcation is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution. 9. In the present case, the assessee trust has been created on 1.2.1961. This is before the commencement of the Income-tax Act, 1961. As per Clauses 36 to 41 of the Memorandum of Association of the assessee trust, Ms.Meenakshi Sundararajan is entitled for honorarium in rendering services to the benefits of the assessee society. Therefore, as rightly argued by the learned counsel, the payment made to Ms.Meenakshi Sundararajan is covered by the said exemption. Therefore, we hold that the lower authorities have grossly erred in holding that theassesse is not entitled for exemption under sec. 11 of the Act. 15.1 The facts being almost identical and recurring for these assessment years too, following the ratio of the above ruling, payment of honorarium exgratia and medical expenses to the wife of the founder of the Trust, Smt. Meenakshi Sundararajan is held to be allowable . However, a question arises as to whether this expenditure is allowable when the exemption is denied u/s 11. We have considered. On denial of exemption, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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