9911796707
TMI Blog2024 (9) TMI 1310X X X X Extracts X X X X X X X X Extracts X X X X ..... ndoned accordingly. 3. The Revenue has raised several elaborate and argumentative grounds in this appeal; however, the cruxes of the issues are that:- "2.4. The Ld CIT(A) failed to appreciate that the amount of Rs. 1,11,900/- paid to Ms Meenakshi Sundararajan is in violation of sec 13(1)c). 2.5. The Ld CIT(A) ought to have appreciated that the amount was paid by way of honorarium without any services having been rendered. 31. The Ld CIT(A) erred in holding that the excess payment of Rs. 70,25,780/- made by assessee to sister trust without adequate security did not violate provisions of section 13(1)c) of the Act." 4. Facts of the case: The assessee is a registered public charitable trust, registered u/s. 12AA of the Act, vide DIT(E) No.2(41)/91-92 dated 29/06/1993. The assessee trust is created to establish institutions for studies and research for the advancement of knowledge, skill, training and education for every kind including technology, engineering and professional studies and to construct and acquire building, structures, equipments, implements whatsoever necessary for the purpose. Towards achieving the above objectives the above society runs the following colleges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable income (Rounded off) 6,45,49,660 Tax thereon 1,93,64,898 Add: Education Cess 5,80,947 Add: Interest u/s. 234B 71,80,488 Add: Interest u/s. 234B 7,37,997 Total tax payable 2,78,64,330 7. Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A) - 17, Chennai. 8. The Ld.CIT(A), after examining the Assessment order, Grounds of appeal and written submissions made by the assessee confirming the action of the AO, passed an order dated 30/03/2016 holding as under: Rejection of Exemption u/s. 10(23C)(vi) "I am not in agreement with the aforesaid contentions of the A.R praying for allowing exemption u/s 10(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 can be granted u/s 12AA(2) as held in Anjuman-e-Khyrkhah-e-Aam 200 Taxmann 27 there is no provision for deemed registration u/s 10(23C) either, in the absence of express approval by the CCIT as it is in this case, which would mean that the appellant did not enjoy the exemption u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with a trust or a mandatory rule governing the mandatory term of the institution. 9. In the present case, the assessee trust has been createdon 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 the assessee is not entitled for exemption under sec. 11 of the Act." 7.2 The facts being almost identical and recurring for the instant assessment year too, respectfully following the ratio of the above ruling, payment of honorarium ex-gratia and medical expenses to the wife of the founder of the Trust, Smt Meenakshi Sundarrajan is held to be allowable and therefore the disallowance and addition of the same to the income of the appellant is held to be legally untenable and therefore directed to be deleted. This ground is allowed for both years in appeal. Dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Of Income-Tax and others in224 ITR 310 (SC) heldinter alia, that "the availability of the exemption should be evaluated each year to find out whether the institution existed during the relevant year solely for educational purposes and not for purposes of profit". A five member bench of the Hon'ble SC in the case of Islamic Academy of Education and another vs. State of Karnataka and others decided on 14 August, 2003 in the context of the determination of the reasonable fees to be charged by private educational bodies held, inter alia, that a surplus of 6 to 15 % could be held as reasonable or permissible limit. The Jurisdictional High Court in the case of Madras Hotels Association vs Commissioner Of Income-Tax, Madras in 111 ITR 241, held, inter alia, that the best evidence to find out whether the purpose of the activity is to earn income or profit, is the very accounts of the association ie the person. In the light of these ratios and in the absence of any material to the contrary from the assessee, on the above facts ie when the assessee makes huge profits year after year, the findings recorded by the lower authorities that the assessee is running a profitable venture, during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n its order in TCA No.668 of 2019 dated 10/12/2020 held that the depreciation claim of the assessee was allowed and another issue with regard to amount receivable from another trust of Rs. 70,25,780/- has been remanded to the AO by holding as under: 10. So far as the second substantial question of law framed is concerned with regard to disallowance of depreciation, it is not disputed by the learned Senior Standing Counsel for the Revenue that the issue is clearly covered in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of CIT Vs. Rajasthan and Guajrati Charitable Foundation [reported in (2018) 402 ITR 441] wherein it was held that normal depreciation could be considered as a legitimate deduction in computing the real income of the assessee on general principles or under Section 11(1)(a) of the Act. Thus, applying the said decision, substantial question of law No.2 is answered in favour of the assessee. 11. With regard to substantial question of law Nos.1, 3 and 4, all relate to the same fact situation namely the amount, which was given to another trust, was stated to be for the purpose of putting up the construction. 12. Before us, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as no violation of the provisions of Section 13(1)(d) read with Section 11(5) of the Act to render withdrawal of exemption under Section 11 of the Act. 16. The learned Senior Standing Counsel appearing for the Revenue has sought to sustain the impugned order by contending that the core issue was as to whether Section 13(1)(c) read with Section 13(3)(e) would stand attracted. 17. However, there are several factual aspects, which have been missed out by the Assessing Officer to be taken into consideration and we cannot be called upon to take a decision in the abstract without examining the foundation facts for their correctness. Considering all the aspects, we deem it appropriate that the matter should be remanded to the Assessing Officer for a fresh consideration. 18. For all the above reasons, the tax case appeal filed by the assessee is allowed, the impugned order passed by the Tribunal and the orders passed by both the Assessing Officer and the CIT(A) are set aside so far as substantial questions of law 1, 3 and 4 are concerned and the matter is remanded to the Assessing Officer for a fresh consideration after affording an opportunity to the assessee. Substantial question o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Educational Trust. The assessee also stated that even if it were to be treated loan, it has to be treated as application as the loan was given to another trust with similar objects. The assessee trust relied on the Delhi High court judgment in the case of DIT(E) Vs ACME Educational society (2010) (326 ITR 0146) for treating it as application towards carrying out the objects of the trust. The assessee was asked to produce details like construction agreement, Plan approvals, project cost, date of commencement of Project, completion certificate etc. regarding the construction work carried out by M/s L &T in respect of M/s Ganapathy Educational Trust for which the loan repayments were made. The assessee produced bills/vouchers pertaining to the construction of M/s Meenakshi Sundarajan Engineering College by the M/s L & T raised in the name of Meenakshi College for women a unit of M/s Ganapathi Educational trust. The amounts have been directly paid by M/s Ganapathy Educational Trust to M/s Larson & Turbo for construction of Meenakshi Sundarajan Engg. College, a college run by the assessee trust. The assessee trust has not furnished any proof of its payments claimed to have made directl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of honorarium made to Ms. Meenakshi Sundarajan, wife of the founder of the trust is treated as violation of section 13(1) (c) of the IT Act, 1961 and exemptions u/s 11 are denied accordingly in this case. 6. In view of the above, the assessment is completed as under: +/- Excess of income over expenditure 4,88,55,229 Add Honararium paid 11,190 Funds paid in excess to sister trust 70,25,780 Assessed income 5,59,92,909 Add Tax thereon 1,66,49,873 Add Education cess 4,99,496 Add Interest u/s. 234B 10,28,962 Add Interest u/s. 234C 7,37,997 Total tax payable 1,89,16,328 12. Again, aggrieved by the order of the AO, the assessee preferred an appeal before the Ld.CIT(A), NFAC, Delhi on 29/04/2022. The Ld.CIT(A), NFAC, has allowed the appeal of the assessee by deleting the additions made by the AO by holding as under : 6. I have gone through the assessment order, the grounds of appeal and statement of facts. The appellant is a charitable trust and is running educational institutions. The appellant had given certain amounts to another charitable trust M/s. Ganapati Educational Trust basically for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of loan was received by the appellant in the impugned AY. The appellant has submitted that the said amount has not been claimed as an application of appellant's income in any of the earlier assessment years. However, the AO treated the said amount as not applied for charitable purposes and denied the claim of exemption u/s. 11 of the Act. In fact, GET was formed by the appellant in 1961 in capacity of a parent establishment. 9.2 The impugned order has been passed by the AO giving effect to the order of Hon'ble High Court. In the said order, Hon'ble High Court has held that the amount given by the appellant to the other Trust with similar objects for carrying out the objects of the other trust could not be considered as investment or parking of funds of the trusts and should be considered as application for carrying out the objects of the appellant trust. The further direction of the Hon'ble High Court was that the appellant had not placed sufficient material before the AO or CIT(A) that the amounts were directly paid to the contractor who constructed the building for the college. So this aspect had to be examined by the AO. The appellant has produced all the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablishing this educational institution and was an employee of the institution until the time of his death. The payment of Rs. 1,11,900/- should be viewed in the context of the financial status of the recipient, who does not have any other source of income, the desperate medical help need at that ripe age, the selfless service rendered by her spouse rather than the relationship she enjoys with the Trust. The said payment made represented retirement benefits for his invaluable service to the assessee institution. The said payment was governed by the registered mandate of the assessee society registered prior to the commencement of the Income Tax Act. The Ld.AR also mentioned that the said payments are outside the purview of Section 13 of the Act. Therefore, the Ld.AR prayed that the decision of the Ld.CIT(A) should not be interfered in respect of this issue. 16. With regard to loan receivable from the sister concern M/s.Ganapathy Educational Trust, the Ld.AR stated that the outstanding amount of Rs. 70,25,780/- has been received back during the A Y 2012-13. It is pertinent to note that the said amount has never been claimed as application of Income of the trust in any of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3 in the affirmative, that is, against the Revenue and in favour of the assessee. 2. DIT(E) Vs.ACME Education Society - 326 ITR 146 (Del) Loan given by a society to another educational society does not violate S.13(1)(d) r.w.s. 11(5) at Para 15, the Hon'ble High Court held as under: "15. Keeping in view the aforesaid exposition of law, we are of the opinion that interest-free loan of Rs. 90,50,000 given by the assessee-society to Nav Bharti Educational Society does not violate s. 13(1) (d) r/w s. 11(5) of Act, 1961 as the said loan was neither an "investment" nor a "deposit". This is more so as both the societies had similar objects and were registered under s. 12A of Act, 1961 and had approvals under s. 80G of the Act, 1961. The fact that the loan was interest-free and had been subsequently returned is also significant. In view of the order passed by the CIT(A) in the case of Nav Bharati Educational Society, Ms. Bansal's allegation with regard to "entry scam" also does not survive. Consequently, there is no substantial question of law involved in the present appeal and accordingly, appeal is dismissed but with no order as to costs." 3. DIT Vs.Pariwar Seva Sansthan - 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) Meenakshi Sundararajan School of management, which is affiliated to Madras university 21. The assessee's case is before us as a second round of litigation for the Assessment year 2012-13 by the revenue against the order of the Ld.CIT(A), NFAC, wherein the Ld.CIT(A) has allowed the grounds of appeal of the assessee of the following two issues, thereby allowing exemption u/s. 11 of the Act: a) Disallowance of honorarium paid to Ms. Meenakshi Sundarajan of Rs. 1,11,900/- b) Relating to addition of Rs. 70,25,780/- as funds paid in excess to sister concern as not applied for charitable purposes. 22. Firstly, we take up the issue of honorarium paid to Ms.Meenakshi Sundarajan of Rs. 1,11,900/-. It is noted that the Trust has been formed on 01.02.1961 which is before the commencement of the Income Tax Act, 1961. As per clause 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. According to the Ld. AR the payment of Rs. 1,11,900/- paid was towards medical expenses of the spouse of the Trustee, who was also employee of the organization until his death. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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