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TMI Blog2013 (8) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, namely, Shri P. Subramani was an interested party:- (1) M/s Apollo Computer Education Rs. 1,61,03,553/- (2) M/s Apollo Computer Education Ltd. Rs. 1,40,95,053/- Assessee was called to explain why Section 13 was not attracted, since its Managing Trustee was the proprietor of one of the concerns and was also a Director holding more than 50% shares in other concern. Reply given by the assessee was not found satisfactory by the Assessing Officer. According to her, exemption under Section 11 could not be given where there were any violation of nature mentioned under Section 13 of the Act. Assessing Officer noted that once income of the trust was used directly or indirectly for benefit of any person referred to in Section 13(3) of the Act, it forfeited its right for claiming exemption under Section 11 of the Act. As per the A.O., even if any income or property of the trust was lent or continued to be lent to any such person, claim of exemption under Section 11 of the Act could not be allowed. A.O. noted that by application of clause (e) of Section 13(3) of the Act, lending of money to a concern in which the author of the trust or any trustee of the trust had substantial interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - due from the assessee to M/s AIHMC&FT, though an amount of Rs. 1,74,08,000/- was paid during the relevant previous year, out of the latter amount, a sum of Rs. 1,21,04,162/- was reimbursements for the construction work done through M/s AIHMC&FT. If this was excluded, the closing credit balance due to M/s AIHMC&FT came to Rs. 2,82,74,697/- and not the sum of Rs. 1,61,70,535/- shown in the books. When compared with such amount, the payments effected to M/s Apollo Computer Education and M/s Apollo Computer Education Ltd., were less. Though a sum of Rs. 5,28,20,234/- was paid to M/s Apollo Computer Education Ltd. during the relevant previous year, out of this, Rs. 51 lakhs was for meeting training expenses of the students studying in the institute of the assessee. Such training was given by M/s Apollo Computer Education Ltd. based on a Memorandum of Understanding. Thus effectively, as per assessee, the closing balance due to M/s Apollo Computer Education and M/s Apollo Computer Education Ltd., as on 31.3.2009, were Rs. 1,61,03,553/- and Rs. 89,95,053/- respectively. When set off against the dues of 2,82,74,697/- to M/s AIHMC&FT, it could be seen that there was no loan whatsoever give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different from that of preceding assessment year. In the impugned assessment year, even if the dues from assessee to M/s AIHMC&FT were set off, the books of the assessee itself showed that there was debit balance of Rs. 1,41,05,523/-. The closing credit balance due from assessee to M/s AIHMC&FT was Rs. 1,61,70,535/-. Against this, closing debit balance due to the assessee from M/s Apollo Computer Education was 1,61,03,553/- and from M/s Apollo Computer Education Ltd. was Rs. 1,40,95,053/-. As per learned D.R., in the preceding assessment year, such a set off resulted in a net credit balance only and it was due to such reason that assessee was held to be eligible for exemption under Section 11 by the CIT(Appeals). In the impugned assessment year, according to him, this was not the case and therefore, reliance placed on the order for the preceding year was incorrect. 7. Per contra, learned A.R. submitted that the matter in the preceding year travelled upto this Tribunal in Revenue's appeal in I.T.A. No. 667(Mds)/2012. Placing a copy of order dated 5th September, 2012, learned A.R. submitted that all the three concerns, namely, M/s Apollo Computer Education, M/s Apollo Computer Educa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stees were also directors, there was contravention of Section 13(1)(d) of the Act. 9. We have perused the orders and heard the rival submissions. There is no doubt that in the preceding assessment year also assessee had transactions with three concerns, namely, M/s AIHMC&FT, M/s Apollo Computer Education and M/s Apollo Computer Education Ltd. There is also no dispute that M/s AIHMC&FT and M/s Apollo Computer Education were the proprietorship concerns of Shri P. Subramani, whereas, M/s Apollo Computer Education Ltd. was a company in which the said Shri P. Subramani was Managing Director and had substantial interest. In the preceding year, the CIT(Appeals) had held that all the three concerns had to be considered together for finding out whether there was any violation of the nature mentioned in Section 13(1) of the Act. This view was upheld by the Tribunal in its order dated 5th September, 2012 in I.T.A. No. 667(Mds)/2012. Hence, all the three concerns had to be considered together for finding out whether there was any violation of Section 13(1) of the Act. No doubt, the question whether a limited company could be considered on par with a proprietorship concern and whether set off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerns were considered together. 10. Now the claim of the assessee is that out of the sum of Rs. 1,74,08,000/- paid to M/s AIHMC&FT, Rs. 1,21,04,162/- was for the service rendered by it with regard to construction of compound wall, sewage and water treatment plant. Hence, as per assessee, out of payments of Rs. 1,74,08,000/- effected to M/s AIHMC&FT, during the relevant previous year, Rs. 1,21,04,162/- had to be excluded and if so excluded, the closing balance would be Rs. 2,82,74,697/-. We are unable to accept this contention of the assessee for two reasons. First is that if the assessee wanted to construct a building or compound wall or water treatment plant, there was no necessity for it to route the payments to M/s Murali Builders, the party who eventually constructed these items through M/s AIHMC&FT. Admittedly, M/s AIHMC&FT was an institute running hotel management, catering and fashion technology course and had nothing to do with building construction. Nothing was shown by the assessee as to why and for what purpose the payments to M/s Murali Builders, if at all made for any construction, had to be done through M/s AIHMC&FT and not by itself. What expertise M/s AIHMC&FT ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese were nothing but self- servicing documents, and not sufficient to dislodge the nature of the transaction recorded by the assessee in its books. Thus, for the impugned assessment year, what we find is that as at the end of the relevant year, even if the three concerns were considered together, a sum of Rs. 1,41,05,523/- was due to the assessee. 13. A look at Section 13(2)(a) of the Act is necessary at this juncture. "(a) if any part of the income or property of the trust or institution is, or continues to be, lent to any person referred to in sub-section (3) for any period during the previous year without either adequate security or adequate interest or both....." Assessee has no case that any interest was received from such parties to which money was lent. There was no security whatsoever given to the assessee. Thus, in our opinion, there was an indirect benefit to Shri P. Subramani, Managing Trustee of the assessee- Trust and this fell clearly within the scope of Section 13(1)(c) of the Act read with Section 13(2)(a) of the Act. Such violation did warrant denial of exemption claimed under Section 11 of the Act. We are, therefore, of the opinion that CIT(Appeals) fell in err ..... X X X X Extracts X X X X X X X X Extracts X X X X
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