TMI Blog2021 (9) TMI 1472X X X X Extracts X X X X X X X X Extracts X X X X ..... us amounts collected by the assessee are tabulated, we see no reason to disagree with the CIT(A). We find that the heads listed therein, which form major part of the fee collection, are by way of admission fees, art crafts expenses, educom charges, transport charges, printing stationary charges, etc. They are no doubt related to the educational activities of the assessee. Remaining collections in the form of discount rebate, penal ty charges, insurance claim refunds, etc. are very minor collections and in any case are normal collections incidental to the carrying of the activity of imparting education. DR was also unable to point out how the heads under which the amounts were collected were not related or incidental to the activities of imparting education carried on by the assessee. Therefore, we do not find any infirmity in the findings of the Ld.CIT(A) vis-a-vis this aspect. For the reasonableness of the amount collected CIT(A) has stated that to be beyond the ambit of taxation and drawn support from decisions in the case of St Peters Education Society [ 2016 (6) TMI 536 - SUPREME COURT] CBDT Circular No.14/2015 and the decision of the Jurisdictional High Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us. Therefore, the findings of the AO that there was no evidence of ownership of land by Smt .Suman Bansal , meri ts no consideration. The findings of the CIT(A) to the effect that the land had been leased by the assessee consistently for educational purpose and the rental payments were consistent with the past history of the assessee had also remained uncontroverted before us. He has also stated that the rental payment , in his view, was reasonable payment for such a huge chunk of land in a capital city like Jammu. The assessee had justified the same by stating the market value of the land as assessed by the Revenue Authorities and, therefore, the rent paid was much less considering its huge market value. The Revenue has been unable to controvert this factual finding of the Ld.CIT(A). - ITA No.339 /Chd/2020, C.O. No.3/Chd/2021 In ITA No.339/Chd/2020, ITA No.340 /Chd/2020 C.O. No.4/Chd/2021 In ITA No.340/Chd/2020 - - - Dated:- 20-9-2021 - SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI R.L. NEGI, JUDICIAL MEMBER For the Assessee : Shri P.N. Arora, Adv. For the Revenue : Shri Ashok Khanna, Addl. CIT ORDER Per Annapurna Gupta, Accountant Member: The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowing the assesses appeal against the order passed by the Assessing Officer (AO) on two issues as under ; i) denying exemption u/s 11 of the Act to the assessee holding that the activities carried out by it as not being charitable in nature but on the contrary being commercial; (ground no ii, iii, vi) ii) making addition of rent paid to one of the members of the society on the ground that i t was not genuine and also for the reason that it was paid to a related person and was not at arms length in accordance to the provisions of sect ion 13(1) (c) read with section 13(3) of the Act . (ground no iv,v) 3. Taking first the issue raised in ground no ii , iii vi , the facts are that the AO denied exempt ion u/s 11 of the Act , claimed by the assessee on its income allegedly earned from property held for charitable purposes, for the reason that he found that the assessee was doing commercial activities by collecting huge amounts from students under various heads some of which were not incidental to its objectives and was earning huge profits which were ploughed back to create assets in the form of capital investments. He also noted that the assessee had entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves mainly education. The assessee has entered into a profit sharing agreement (MoU) with M/s G.D. Goenka Pvt. Ltd. on the basis of which huge royalty payments are made to the latter. The conditions of the said agreement are business in nature. As per the agreement, the assessee is paying 10% of its receipts each year and also paid Rs.25 lakhs to M/s G.D. Goenka Pvt. Ltd. Further, M/s G.D. Goenka Pvt. Ltd. is having full control over the day to day working of the school including fixing of fees, nature of the same, selection of teachers, training of teachers etc. thereby making the assessee only a dummy face. The greater the profits made from the school, the greater the diversion of the said profits to M/s G.D. Goenka Pvt. Ltd. The assessee has used section 11(2) of the Act to set apart Rs.1,66,22,187/- to just bring surplus just under 15% of total revenue receipts. If the set apart would have been made for some specific purpose then the amount would have been definitely in round figure. Further, the purpose for which the funds have been set apart u/s 11(2) of the Act mentioned in Form 10 of the assessee is not specific. In view of the above observations, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of prescribed provisions clearly reveal that mere generation of surplus cannot be a basis for rejection of application u/s 10(23C){vi) on the ground that it amounts to an activity of the nature of profit making, tn fact, the third Proviso to the said clause clearly provides that accumulation of income is permissible subject to the manner prescribed therein provided such accumulation is to be applied wholly and exclusively to the objects for which it is established . Hence, it is clarified that mere generation of surplus by educational institution from year to year cannot be a basis for rejection of application u/s 10(23C)(vi) if it is used for educational purposes unless the accumulation is contrary to the manner prescribed under law/' (iii) Decision of Punjab Haryana High Court in the case of Pinegrove International Charitable Trust vs. Union of India and Others reported in 230 CTR 477 (Punj Haryana) wherein it has been clearly held that merely because there is some surplus with the assessee it should not be the ground for denying the exemption. The decision of the Punjab and Haryana High Court has been followed by the Delhi High Court in St. Lawrence Educational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of teachers etc., thereby, making the assessee only a dummy face, does not hold good in my considered opinion in view of the following submission of the appellant there is nothing to show that the assessee trust had any direct or indirect relation with M/s G.D, Goenka (P) Ltd. and both the entities are at armed length and the fees is being paid to them as their brand name being used, thus it cannot be said that merely because the amount of royalty varies from year to year it would not be constitute as royalty, tt was also clarified that no member of the trust or its relative is member of Private Limited Company or having any interest directly or indirectly in the company. The AO has tried to give colour to an entry of royalty as business proposition which is baseless and the same should have been accepted. (page no. 10 and 11 of the paperbook). 3.4 Regarding the third observation, the undersigned opines that it is the prerogative of only the appellant to set apart an amount which is in round figure or otherwise and the A.O. has no say over the same. The amount of Rs.1,66,22,187/- set apart u/s 11(2) of the Act by the appellant in the assessment year under consideration d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xhaustively dealt with all adverse findings of the AO for the purposes of denying exempt ion u/s 11 to the assessee and has given factual findings while doing so. Vis- -vis the issue of huge fees collected under non educational heads, the Ld.CIT(A) has found the heads to be incidental to the purpose for which the trust existed. On considering the facts relating to the issue, as out lined in the order of the AO in the table at para 5 where various amounts collected by the assessee are tabulated, we see no reason to disagree with the Ld.CIT(A) We find that the heads listed therein, which form major part of the fee collection, are by way of admission fees, art crafts expenses, educom charges, transport charges, printing stationary charges, etc. They are no doubt related to the educational activities of the assessee. Remaining collections in the form of discount rebate, penal ty charges, insurance claim refunds, etc. are very minor collections and in any case are normal collections incidental to the carrying of the activity of imparting education. The Ld. DR was also unable to point out how the heads under which the amounts were collected were not related or incidental to the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to how these services could be read as M/s G.D Goenka having control over the day- to-day activities of the running of assessee s school . Therefore, we do not find any infirmity in the findings of the Ld.CIT(A) that , there being no relationship between the assessee and M/s G.D. Goenka Pvt. Ltd. and the services being provided to maintain the brand name of M/s G.D. Goenka Pvt . Ltd. , it cannot be said that the royalty paid by the assessee to M/s G.D. Goenka Pvt . Ltd. tantamounted to diversion of its profits. 10. As for the aspects of accumulation of profits the findings of the Ld.CIT(A) are to the effect that the assessee has complied with the provisions of law in this regard. The Ld.DR was unable to controvert the same before us. 10.1 In view of the above, therefore, we do not find any reason to interfere in the order of the Ld.CIT(A) allowing assessee s claim of exemption u/s 11 of the Act . Ground of appeal No. ii,iii vi are accordingly allowed 11. Ground No. iv v relate to the issue of disallowance of rent paid to one Smt .Suman Bansal . which was allowed by the Ld.CIT(A) . 12. The facts relating to the issue are that the assessee had paid lease rent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd measuring 77.07 kanals in favour of the said old trust M/s Om Parkash Bansal Charitable Trust on which rent of Rs.12,35,271/- was paid. Copy of lease deed is submitted as Page No.102 to 105 of the paper-book. 3.7. The appellant further contended that the department should not have objected to the payment of lease rent to Smt. Suman Bansal which is quite reasonable and consistent with the past history of the case. The following details of lease rent were submitted by the appellant which is at page no. 68 of the paperbook:- S.No. Assessment Year Lease Rent 1. 2017-18 14.94.875.00 2. 2016-17 SUMAN BANSAL13,58,977.00 3. 2015-16 12,35,434.00 4. 2014-15 11,23,122.00 5. 2013-14 10,21,020.00 DEWAN CHAND 3,05,415.00 RAHUL BANSAL 54,60,350.00 SUMAN BANSAL 2,55,255.00 6. 2012-13 9,15,240.00 DEWAN CHAND 3,62,040. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 36,355 sq. mtrs of NA land and further 1 lac sq. mtrs of agriculture land for the purpose of running the school. NA land also carried construction carried out at a cost of Rs. 1.10 crores and 3.56 crores totaling to Rs. 4.67 crores. Such land and building were leased to the trust for a period of 30 years. The assessee had also produced a valuation report obtained from the government approved valuer. As per this report, the valuation of the NA land was Rs. 9.10 crores and the value of construction would come to Rs. 13.08 crores. Thus, a total amount of valuation of land and building came to Rs. 25.66 crores. It was pointed out that the current fair market value of the property would come to Rs. 3G.28,crores and the rent had been valued as per the prevailing rate fixed for the purpose of stamp duty. The assessee also pointed out that if 10% fair return on the investment was considered, the rent would come to Rs. 3.60 crores per annum as against which, rent of Rs. 1.98 crores was paid. The CIT (Appeals) was also influenced by the fact that the lease had a locking period of 30 years. Primarily on such grounds, the CIT (Appeal) was prompted to reverse the view of the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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