TMI Blog2013 (1) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee is an educational institution providing hotel management education and diploma course, registered under sec.12AA of the I.T. Act. The assessee filed return of income on 31.3.2004 admitting gross receipts of =.8,89,55,437/- and Nil income after claiming exemption under sec.11 of the Act. The return was processed under sec.143(1) of the Act accepting the income returned. Later, the assessment was reopened under sec.147 of the Act and completed re-assessment on 21.12.2010, determining total income at =.2,73,95,670/- by denying exemption claimed under sec.11 of the Act. The Assessing Officer re-opened the assessment based on the assessment made for the Asst. Year 2005-06 wherein the then Assessing Officer was of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and has held that the assessee trust is not entitled to exemption u/s 11 of the IT Act. 7.5 On enquiry with the Canara Bank, Teynampet, Chennai, it reveals that the Canara Bank has auction sold the property to M/s Lakshmi Ammal Educational Trust, Chennai, and appropriated the proceeds towards the loan obtained by M/s Merit Resorts Pvt. Ltd, by the directors. It is also gathered that the purchaser has won in litigation and taken possession of the property sold by the Bank. Therefore, the submissions of the assessee are not tenable. 8. For the detailed reasons stated in the order for the assessment year 2005-06 and for the reasons stated in the preceding paragraphs, it is held that there is violation u/s 11 and 13 of the IT Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served as under :- 11. To cut the long story short, the trust was registered u/s 12AA of the Act and is providing Hotel Management Education. For the purpose of running the educational institution, the trust has taken on lease and occupied the premises owned by M/s MRPL; M/s Nilgiris Enterprises; and M/s Prince Palace. The assessee-trust has entered into lease agreements with the above parties as per law. The fact that the assessee had paid lease rental advance of =. 9.40 crores to MRPL, in view of the terms of lease agreement and MoU entered into between them, over a period of time. The Assessing Officer has held that the assessee has violated the provisions of section 13(2) and section 13(3) of the Act and hence, is not eligible for e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the judicial precedents can guide us to arrive at a correct conclusion. The ld.AR placed reliance on the decision of Hon'ble Supreme Court rendered in the case of H.E.H Nizam s Religious Endowment Trust vs CIT, 59 ITR 582, in which it has been held that the words applied and accumulated therefore, meant applied or finally set apart . It has been held that applied means that the income is actually applied for the said purposes in the taxable territories for the purposes for which the trust had been created. In the light of the above decision of Apex Court it was argued that this case directly applies to the facts of the given case. Reliance was also placed on the decision of the Hon'ble Kerala High Court rendered in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex Court as well as various High Courts, we can safely hold that the lease rental advances in question are in the nature of application of funds for the purpose of pursuing the objects of the trust and not an investment as has been held by the Department. The application of funds becomes eligible for deduction u/s 11 Act. We are in agreement with the submission of the ld.AR in this regard and clearly hold that the trust has been benefited by this agreement and that too for the purpose of pursuing its main charitable objects. The company or to say, the trustees have not been at all benefited by these agreements. While deciding the appeal for assessment year 2004-05, in appeal No.335/Mds/2010, this Bench under similar facts and circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Hon'ble Allahabad High Court rendered in the case of CIT vs Kamla Town Trust, 279 ITR 89. As stated above, it is only the trust, which has been benefited by taking the property on lease by utilizing the property belonging to the company and without paying any lease rental. We do not find any reason, whatsoever, to deny the benefit of section 11 to the assessee- trust. Concomitantly, we do not find any violation by the trust of any provisions of section 11 and/or of section 13 of the Act. We, therefore, hold that the assessee is entitled to exemption as provided u/s 11 of the Act. Having held so, interest levied u/s 234A and 234B will also not survive. We, therefore, set aside the order of the ld. CIT(A) and allow the appeal of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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