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TMI Blog2014 (9) TMI 957X X X X Extracts X X X X X X X X Extracts X X X X ..... ecially were no proper books are maintained the Act recognises normal profit margins at 8 per cent. Whereas, the firm M/s. Sri Vekkaliamman Builders has earned a profit of 5.8 per cent. which is very reasonable. We are of the considered opinion that since, the contract was awarded on competitive basis and the profit earned is reasonable, the provisions of section 13(2)(c) are not violated. - Decided in favour of assessee. Advances made to M/s. SAMS Pvt. Ltd. in violation of the provision of section 13(1)(c) - Held that:- he assessee has not given any reason as to why the amount advanced to M/s. SAMS Pvt. Ltd., has not been so for appropriated towards charges for using infrastructure facilities. As per the contentions of the Revenue, ₹ 1.94 crores are outstanding as on March 31, 2011 towards fee for services. The findings of the Commissioner of Income-tax (Appeals) on the issue are sketchy. We do not agree with the observations of the Commissioner of Income-tax (Appeals) that the company is not benefitted by the trust. The assessee has not given the details of charges to be paid/adjusted for using infrastructure facilities provided by M/s. SAMS Pvt. Ltd. The said payments m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation on assets purchased by the assessee-trust. The stand of the Revenue is that the assessee is not entitled for depreciation on assets purchased, as the cost of assets was considered as application of income. Allowing depreciation will tantamount to grant of double benefit to the assessee. In ground No. 3, the Revenue has challenged the findings of the Commissioner of Income-tax (Appeals) in allowing the payment made for contract work to a firm owned by one of the managing trustees of the assessee. The assessee had allotted certain civil work to M/s. Vekkaliamman Builders and Promoters. Payment of ₹ 5.02 crores was made to the said firm. The Revenue has alleged that there is violation of the provisions of section 13(2)(c) of the Act. In the fourth ground of appeal, the Revenue has assailed the findings of the Commissioner of Income-tax (Appeals) with regard to advances made to M/s. Southern Academy of Maritime Studies Pvt. Ltd., (in short M/s. SAMS Pvt. Ltd.) in violation of the provision of section 13(1)(c) of the Act. In order to support his submissions, the learned Departmental representative has placed reliance on the decision of the hon'ble Supreme Court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oins of various denominations for distributing them as awards and prizes to meritorious students. The assessee had purchased 1500 gms. of gold out of which 500 gms., of gold was utilised for distribution of prizes. Thereafter, the scheme was withdrawn and in the next year, the entire balance amount of gold i.e., 1,000 gms., was sold. The purchase of gold coins was made not for investment purposes but only for distribution of prizes and awards to the students. Purchase of gold was application of funds and not investment of funds. 5. We have heard the submissions made by representatives of both sides. We have also perused the orders of the authorities below and the decisions on which both sides have placed reliance. The Revenue in its appeal has primarily raised four issues. The first issue relates to the assessee's claim of depreciation on assets purchased. The stand of the Revenue is, the cost of assets was considered as application of income, the assessee being a trust cannot claim the benefit of depreciation on same assets. Depreciation is a notional expenditure, and the same cannot be excluded from the receipts even for the purpose of computation of application of funds. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 (3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following, namely :- (a) the author of the trust or the founder of the institution ; (b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees ; (c) where such author, founder or person is a Hindu undivided family, a member of the family ; (cc) any trustee of the trust or manager (by whatever name called) of the institution ; (d) any relative of any such author, founder, person, member, trustee or manager as aforesaid ; (e) any concern in which any of the persons referred to in clauses (a), (b), (c), (cc) and (d) has a substantial interest.' A reading of clause (cc) of sub-section (3) would show that it includes any trustee of the trust or manager. The Assessing Officer declined to grant benefit of section 11, as in the present case construction of building has been carried out by the firm of a man aging trustee and thus, derived direct benefit from the assessee-trust. A further perusal of clause (c) of sub-section (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s. SAMS Pvt. Ltd., for providing maritime courses to its students. The assessee is using infrastructure facilities without payment of any charges. The advance paid is to be adjusted against the charges for using facilities. The assessee has not given any reason as to why the amount advanced to M/s. SAMS Pvt. Ltd., has not been so for appropriated towards charges for using infrastructure facilities. As per the contentions of the Revenue, ₹ 1.94 crores are outstanding as on March 31, 2011 towards fee for services. The findings of the Commissioner of Income-tax (Appeals) on the issue are sketchy. We do not agree with the observations of the Commissioner of Income-tax (Appeals) that the company is not benefitted by the trust. The assessee has not given the details of charges to be paid/adjusted for using infrastructure facilities provided by M/s. SAMS Pvt. Ltd. The said payments may not fall within the mischief of section 13(3)(a) read with section 13(1)(c) of the Act, but the reasonableness of the charges has to be ascertained to ensure compliance of the provisions of section 13(2)(c) of the Act. In our considered opinion, the issue needs a revisit to the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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