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2021 (11) TMI 382 - KARNATAKA HIGH COURTDenying exemption u/s 11 - violation of Section 13(1)(c) of the Act has been alleged is based mainly on the salary/remuneration paid to two trustees of the assessee – trust, not in proportionate to service rendered by them but a device designed to divert the income of the assessee - HELD THAT:- It is well settled that the revenue cannot sit in the armchair of an assessee and decide the pattern of working, methodology to be adopted for whole administration of the educational trust including the payment structure of salary/remuneration to be paid to the professors/administrative staffs - department cannot manage or control the managerial affairs of the educational trust. These aspects would not come within the purview of the authorities to decide the income tax liability merely on suspicion that the assessee is claiming huge expenditures to get the corresponding benefits of allowable deductions. No grounds are raised by the revenue relating to the deletion of the additions made by the CIT (Appeals) before the Tribunal, whereas reference was made to the provisions of Section 13(1)(c) of the Act only to draw support for denying exemption under Section 11 of the Act. The Tribunal has rightly rejected the plea of the revenue as bereft of merit. The alleged breach of Section 13(1)(c) of the Act based on these factors is baseless, wholly untenable. Whether collection of capitation fees in the name of voluntary contribution and general of huge surplus would tantamount to commercialization of education by the assessee and, therefore, the assessee – institution was rightly not considered by the Assessing Officer as existing solely for educational purposes within the meaning of Section 2(15) or Section 10(23)(c) ? - It is not in dispute that the assessee is imparting education, as such proviso to Section 2(15) of the Act introduced by the Finance Act, 2008 would not be applicable. At this juncture, it would be profitable to refer to the Circular No.11/2008 dated 19.12.2008 issued by CBDT. Having regard to the proviso inserted to Section 2(15) amended vide Finance Act, 2008 wherein, it has been clarified that the newly inserted proviso to Section 2(15) will not apply in respect of the first three limbs of Section 2(15) i.e., relief of the poor, education and medical relief. Consequently, where the object of trust or institution is, relief to the poor, education or medical relief, it will constitute ‘charitable purpose’ even if it incidentally involves in carrying of commercial activities. The breach of Section 13(1)(c) of the Act as alleged by the department is based on the remuneration paid to the two trustees namely, Sri. Suresh Nagpal and Smt. Geetha Nagpal treating that the amounts were diverted by the assessee – trust to the said trustees in the guise of commission and professional income of the trustees. Similarly, the assessing officer has regarded the income of the trust being diverted and the cash deposits in the bank accounts of the trustees namely, Sri. Suresh Nagpal and Smt. Geetha Nagpal have remained unexplained which has been deleted by the CIT (Appeals) relating to the assessment years in question which was the subject-matter of the appeals before the Tribunal filed by the Revenue. Tribunal has confirmed the finding of the CIT (Appeals) that the two trustees namely, Sri. Suresh Nagpal and Smt. Geetha Nagpal have filed the returns of income reflecting their salary etc., paid to them by the trusts and the same is in accordance with the pay-scale of a Professor and Administrative Officer respectively. As regards the cash deposits found in account of the two trustees, CIT(Appeals) has rightly held that no explanation could be expected from the assessee - trust to explain the source of its deposits and in case of Smt. Geetha Nagpal, it was satisfactorily explained. Merely to deny the exemption under Section 11 of the Act, reference made to Section 13(1)(c) of the Act by the Revenue is held to be unjustifiable. These factual aspects being considered by the CIT (Appeals) and the Tribunal, we are not inclined to sit in re-appreciation of factual aspects which is impermissible while exercising the power under Section 260A of the Act. We do not find any infirmity or irregularity in the order passed by the Tribunal. Assessee appeal allowed.
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