9911796707
TMI Blog2017 (11) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is maintaining luxury cars like Toyoto Camry, Hyundai Sonata and Honda Accord and has claimed expenses of 14,18,836/-. No log book was maintained, which establish that the said cars were being used by the trustees for their own benefit, hence, 50% of such expenditure was rightly upheld by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the same and reject the ground raised by the assessee. Disallowing scholarship expenses paid to Ms. Aarti Rai - Held that:- We find that this expenditure cannot be regarded as an expenditure incurred to run the business nor can the same be allowed as discussed in preceding paras in the case of Trust, hence, the addition of 13,35,905/- was rightly upheld by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the same and accordingly, reject the ground raised by the assessee. Affirming disallowance on account of donation paid - Held that:- We find that since the assessee has already been disallowed the benefit of section 11 and the income has to be computed as business income therefore the donation of 37,900/- cannot be regarded as business expenditure and the action of the Ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n facts and in law in upholding the action of the assessing officer in treating the scholarship given to Ms. Aarti Rai, asbeing in violation of provisions of Sec. 13(1)( c) of the Act. 3.1 That the Commissioner of Income Tax (Appeals) erred on facts and in law in alleging that the appellant had not mentioned the name of persons who had been extended similar scholarship facilities. 3.2 That the Commissioner of Income Tax (Appeals) erred on facts and in law in holding that the scholarship amount incurred by Ms. Aarti Rai in UK, was in violation of section 11 (1)( a) of the Act on the ground that exemption is allowed only for charitable purposes in India. 4. The Commissioner of Income Tax (Appeals) erred on facts and in law in upholding the finding of the assessing officer that the appellant exists for the sole purpose of profit making and not for the purpose of charity. 4.1 The Commissioner of Income Tax (Appeals) erred on facts and in law in not appreciating that the appellant had applied 92.83% of its income for charitable purposes, including acquisition of fixed assets for charitable purposes. 4.2 That the Commissioner of Income Tax(Appeals) erred on facts and in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the Commissioner of Income Tax (Appeals) erred on facts and in law in confirming imposition of interest under section 234B and 234C of the Act. The appellant craves leave to add, alter, amend, or vary the above grounds of appeal at or before the time of hearing." 3. The grounds raised in Revenue's Appeal (AY 2007-08) read as under:- "1. In the facts and in the circumstances of the case, the Ld. CIT(A) erred in granting relief to the assessee trust in r/o the payment of ₹ 2.72 crores for purchase of land for Ram Krishan & Sons Charitable Trust (RKSCT) and advancing of interest free loan of ₹ 2.19 crores to RKSCT while the fact is that the said fund has clearly been diverted to another family Trust & therefore is violation u/s. 13(3) of the I.T. Act. 2. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing." 4. The grounds raised in Revenue's Appeal for the assessment year 2008-09 read as under:- "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing violation of provisions of section 13(1)(b) of the Act and thereby availing the benefit of exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment order. 4. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing." ASSESSEE & REVENUE APPEALS (A.Y. 2007-08) 6. The brief facts of the case are that return for the assessment year 2007-08 was filed on 31.10.2007 disclosing NIL income. The case was selected for scrutiny as per norms and notice u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred as the Act) was issued on 30.7.2008 and in response to the same and subsequent notices including notice u/s. 142(1) of the Act, the AR of the assessee society appeared from time to time and submitted details and particulars as requisitioned and also certain explanation and produced books of a/cs for examination. After examination of the records, the AO held that the assessee is not a charitable institution on account of infringement of provisions of section 13(1)(b) of the I.T. Act, 1961; the assessee violated provisions of section 13(1)(c) r.w.s. 13(3) of the I.T. Act, 1961; the assessee diverted fund within the meaning of section 13(2)(g) r.w.s. 13(3) of the I.T. Act, 1961; the institutions were operated by the assessee with a clear profit motive, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year under consideration, theappellant was running the following educational institutions: (1) Banyan Tree World Schoolat Gurgaon: - (2) IILM Under Graduate Business School at Lodhi Road. (3) IILM Early College at Lodhi Road. Apart from the aforesaid, the appellant was also contemplating setting up institute under the name and style of "IILM Academy of Higher Learning" at New Town, Kolkata and also 'IILM Institute of Higher Education at Lodhi Road, New Delhi'. For the previous year relevant to the assessment year 2007-08, the year under consideration, the appellant filed return of income declaring Nil income on 3151 October, 2007 after claiming exemption under sections 11112 of the Income Tax Act, 1961 ("the Act"). • Assessment has, however, been completed vide order dated 16th November, 2009 under section 143(3) of the Act, assessing the income of the appellant at ₹ 5,96,90,549. In the assessment order, the appellant has primarily been denied exemption claimed under sections 11112 of the Act and assessed the income treating the appellant as a business entity, after making various additions/ disallowance to the income (before claiming exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditional evidences in support of grounds of appeal Nos. 2 to 2.2. It is respectfully submitted that for reasons elaborately set out in the said application; the additional evidences now being filed before-the Hon'ble bench may kindly be admitted and taken into consideration in terms of Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963. Emphatic reliance in this regard is placed on the decision of the jurisdictional Delhi High Court in the case of CIT vs. Text Hundred India Pvt. Ltd.: 239 CTR263. In that case, their Lordships held that Rule 29 of ITAT Rules, enables the Tribunal to admit any additional evidence which would be necessary to do substantial justice in the matter. Their Lordships further observed that the various procedures, including that relating to filing of additional evidence, is handmade for justice and justice should not be allowed to be choked only because of some inadvertent error or omission on the part of one of the parties to lead; evidence. The relevant observations of the Court are reproduced hereunder: "13. The aforesaid case law clearly lays down a neat principle of law that discretion lies with the Tribunal to admit additional evidence i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport the plea and it was in these circumstances, the additional evidence was submitted before the CIT (A). It cannot, be said not is It the case of the Revenue that additional evidence is not permissible at all before the first appellate authority. On the contrary, Rule 46A of the Act permits the CIT (!\.) to admit additional evidence if he finds that the same is crucial for disposal of the appeal. In the facts of this case, therefore, we are of the opinion' that on this aspect, no substantial question of law arises." [Emphasis supplied] • It has similarly been held in the following decisions: CIT vs. Hewlett Packard India: 314 ITR 55 (Del) CIT vs. Chandra Kant Sahu Bhai: 202 Taxman 262 (Del) CIT vs. Betterways Finance: ITA 995 of 2009 (Del) CIT vs. Chittosoh Motors: 11 taxmann.com 81 (P&H) Atlas Cycle Industries Ltd vs. CIT : 133 ITR 231 (P&H) Jatia Investment Co vs. CIT: 206 ITR 718 (Cal) Electra (Jaipur) Ltd vs. lAC: 26 ITD 236 (Del Tri.) Y. W. C. A: of India vs. lAC: 29 ITD 620 (Del Tri.) • In the light of the aforesaid, it is respectfully prayed that in terms of Rule 29 of the ITAT Rules, the aforesaid additional evidences may kind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing officer has been perused. It is seen that Mrs. Malvika Rai is related to the trustee' and is being given a hefty salary of ₹ 16.20,000 p.m. despite the fact that she is just a graduate and the appellant had not furnished any details as to how the educational qualification of Mrs. Malvika Rai is commensurate with the salary which she is drawing. Thus the assessing officer was correct in invoking the provision of section 13 and denying the benefit of exemption under section 11 and 12. This ground is decided against the appellant." The aforesaid observations ofthe CIT(A) are without judicious appreciation of the facts of the case and position in law for the reasons stated hereunder: • It is, at the outset, submitted that the CIT(A) inadvertently decided the above issue by considering the salary amount of ₹ 16,20,000 on per month basis, whereas the fact was that the said amount represented salary paid to Mrs. Malvika Rai annually and not monthly. • Further, the CIT(A) upheld the above disallowance primarily oil the ground that he appellant has not furnished any details as to how the educational qualification of Mrs. Malvika Rai is commensurate wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e persons) specified in section 13 of the Act but-also the requisite experience. The CIT(A), it appears, was influenced by the fact that Mrs. Malvika Rai was only a graduate. But that fact, by itself, it is respectfully submitted, cannot be the basis to hold that services were not rendered by Mrs. Malvika Rai to the appellant and / or such services were not commensurate with the salary paid, if the same is received against the experience of over two decades of Mrs. Rai in the educational field. • To further. buttress the aforesaid contentions, the appellant has placed on record the following additional evidences under Rule 29 of the ITA T Rules, to demonstrate actual rendering of services by Mrs. Malvika Rai :- - Copies of extracts from the brochure of IILM -UBS (refer page Nos. 1-4 @ 2); - Compilation of various editions of quarterly journal of the applicant Institute, namely" J 'The Edge' (page Nos. 5-193); Documentary evidences of various events of the applicant being organized under the guidance of Mrs. Malvika Rai (page Nos.l94-229 @208, 210,212,213,215,216,217, 218,219) It is submitted that under section 13(1)(c) read with sectionI3(2)(c) there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . These reasons were payment of salary, rent, etc., to Mrs. Sudha Tewari, Chief Executive Officer and Project Coordinator, rent of the house to Mr. G.K. Tewari, husband of Mrs. Sudha Tewari, loan to Tyagi Foundation and expenditure incurred on conferences and clinics. The ld. CIT(A) has discussed all the items in his impugned appellate order at length and held that salary, rent, etc., paid to Mrs. Sudha Tewari was reasonable and for valuable services rendered by her as Chief Executive Officer and Project Coordinator and that the rent of the house paid to Mr. G.K. Tewari was also reasonable considering the location of the house in Green Park, New Delhi. No material has been brought before us to rebut the factual findings of the ld. CIT(A). On consideration of the materials on the file, the past record of the society, the year to year services rendered by Mrs. Sudha Tewari from its inception, we are satisfied that the salary, rent, etc., paid to her was reasonable and was not excessive and the ld. CIT(A) was justified in rejecting these as not valid grounds for rejecting the claim of exemption under section 11 of the Act. ……….. …….. 3. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat since remuneration paid to Ms. Malvika Rai was commensurate with the services rendered by her, there was no violation of provisions of section 13(1)(c) of the Act. As regards the contention of the Ld. DR that clause No. 28 of the Trust Deed (refer page 9 of the Paper Book) prohibits payment of remuneration, it is submitted that the said clause only prohibits any payment in the capacity of Trustee; simpliciter. There is, in fact, no payment of remuneration! salary for services rendered to the trustees in the capacity as such. On the contrary, payment has been made to Ms. Malvika Rai for rendering services in various capacities mentioned supra. It is reiterated that so long as such payment is commensurate with the services rendered, there is no violation of section 13 of the Act. In view of the aforesaid, it is submitted that the assessing officer/ CITCA) erred in holding that the appellant violated the provision of section 13(1)Cc) on account of payment of remuneration to Ms. Malvika Rai. Re: Grounds of Appeal Nos. 3 to 3.2 • The appellant, during the year under consideration, paid salary ofRs.2,57,000 to Ms. Aarti Rai, in respect of the services rendered by her to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer, the CIT(AJ held that the appellant failed to mention the name of persons who has been extended similar scholarship and also, that since the scholarship amount was incurred by Ms. Aarti Rai in UK, the same was, therefore, in violation of section 11(1)(a) of the Act • In this regard, it is respectfully submitted as under: - As regards name of other persons who has been accorded similar scholarship, the CIT(A) lost sight of the following submissions made before him (refer page- 89 of the paper book): "It is further respectfully submitted that, during the year under consideration, the appellant had also extended similar sponsorships to various other faculties like Ms. Meena Bhatia and Ms. Sangeeta Yadav, who are not persons specified under section 13(3) of the Act, for upgrading their educational skills, which further supports the contention of the appellant that scholarship is given to aspiring faculty members." On perusal of the aforesaid, it will kindly be appreciated' that there is no violation of section 13(1)(c) of the Act on account of payment of remuneration and scholarship to Ms. Aarti Rai. • As regards allegation of the CIT(A)/ Ld. DR that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 127,253,851 82.69 The assessing officer/ CIT(A), it is submitted, failed to consider acquisition of fixed assets and other capital expenditure, which were shown in the statement of utilization of income filed alongwith the return of income, as application of income for charitable purposes, contrary to the settled legal position that amount spent towards capital expenditure also tantamount to application of income for charitable purposes, as has been held in the following decisions: S. RM M.CT.M Tiruppani Trust vs. CIT: 230 ITR 637 (SC) [refer pg. 240-243 of case law PB] St. Lawrence Educational Society (Regd). V. ClT: 197 Taxman 504 (Del) [refer pg. 244-247 of case law PB]"J Pinegrove International Charitable Trust vs. VOl: 327 ITR 73 (P&H) DIT (Exemption) vs. Lilavati Kirtilal Mehta Medical Trust: Income Tax Appeal (L) No. 2990 of2009 (Born. HC) CIT vs. St. George Forana Church: 170 ITR 62 (Ker) CIT vs. Kannika Parameswari Devasthanam and Charities: 133 ITR 779 (Mad.) Satya Vijay Patel Hindu Dharamshala Trust vs. CIT: 86 ITR 68J (Guj.) In view of the aforesaid, the conclusion drawn by the AO/ CIT(A) on the basis of the profits, without taking into cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Queen Educational Society: [2009] 177 Taxman 326 (Uttarakhand). In the said decision, their Lordships also considered the profits of the assessee, without taking into consideration the capital expenditure incurred by the assessee for charitable purposes. • The aforesaid decision has been reversed by the Hon'ble Supreme Court in the case reported as Queen's Educational Society v. CIT: 372 ITR 699 [refer pg. 251-266 @258- 260, 265 of case law PB] The Supreme Court: (a) held that where an educational institution carries on the activity of education primarily for educating persons, the fact that it makes 'surplus does not lead to the conclusion that it ceases to exist solely for educational purposes and becomes an institution for the purpose of making profit [refer para 11 on page 258]; (b) elaborately dealt with the decision of the Uttarakhand HC and specifically reversed the said decision [refer para 19 & 20 on. page 260]; (c) concurred with the decisions of the Delhi He in the case of Lawrence Educational Society (Reg d.) V. CIT 53 ITR 320 (Del) which followed the decision of the Hon'ble Apex Court in the case of Surat Art Silk Cloth Mfrs. Association ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (d) of sub-section (1) of section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate. (3) In a case where the relevant income is derived from property held under trust in part only for charitable or religious purposes or is of the nature referred to in sub-clause (iia) of clause {24) of section 2 or is of the nature referred to in sub-section (4A) of section 11, and either the relevant income applicable to purposes other than charitable or religious purposes (or any part thereof) is not specifically receivable on behalf or for the benefit of anyone person or the individual shares of the beneficiaries in the income so applicable are indeterminate or unknown, the tax chargeable on the relevant income shall be the aggregate of- (a) the tax which would be chargeable on that part of the relevant income which is applicable to charitable or religious purposes (as reduced by the income, if any, which is exempt under section 1 J)as if such part (or such part as so reduced) were the total income of an association of persons; and (b) the tax on that part of the relevant income which is applicable to purposes other than charitab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a whole or in part has forfeited exemption. In this regard, it is further submitted that the word "such" used in the section 13(l)(c)(ii) is important and refers to only that part of income which goes to the benefit of specified persons. Further, similar treatment should be given in respect of cases covered under clause (d ) of section 13(2) providing for disallowance in respect of services of the trust given to specified persons. Your Honour's kind attention 10 this regard is invited to Circular No. 387 dated] 06.07.1984 [(1985) 152 ITR (Sat.) 1 at 20) which clarifies the aforesaid position:. The relevant extracts of the said circular has been reproduced as under: "28. 6. It may- be, noted that new sub-section (l A) inserted in section 161 of the Income-tax Act, which provides for taxation of the entire income received by trusts at the maximum marginal rate is applicable only in the case of private trusts having profits and gains of business. So far as the public charitable and religious trusts are concerned, their business profits are not exempt from tax, except in the cases falling under clause (a) or clause (b) of section 11(4A) of the Incometax Act. As the maxim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d decision of the Tribunal has been dismissed by the Delhi High Court in the case reported as DIT V. Span Foundation: 178 Taxman 436 [refer pages 121- 122 of Case Laws PB]. • You Honour's kind attention, in this regard, is also invited to the decision of the Calcutta High Court in the case of Birla Vidhya Vihar: 136 ITR 445 wherein the Court held that solitary fact of diverting! application of income from the school for non-educational purposes was not very material for completely denying exemption under section 10(22) of the Act. The Hon'ble Karnataka High Court in the case of CIT vs. FR Muliers Charitable Institutions: 363ITR 230 (Karn.) [refer Pages 110-115 @ 114 of Case law paper book] similarly held that for violation under section 13( 1)( d) entire exemption under section 11 of the Act cannot be withdrawn. Pertinently, SLP filed by the Revenue against the aforesaid judgment of the High Court has been dismissed by the Hon'ble Supreme Court in SLP No. 22223 of 2015 (Refer page 116 of case laws paper book). • Similarly, the Hon'ble Madras High Court in the case of CIT vs. Working Women's Forum: 365 ITR 353 (Mad) (refer pages 117-119 @ 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax shall apply only to that part of the income which is exempt. It is trite law that circulars issued by the Board are binding on the Revenue authorities [refer Navnit Lal C. Javeri v. KK. Sen, AAC: 56 ITR 198) Ellerman Lines Ltd vs. CIT: 82 ITR 913 (SC), UCO Bank V CIT: 231 ITR 889 (SC)]. e) Fifthly, the Hon'ble Karnataka High Court and Hon'ble Madras High Court after taking into consideration circular issued by the Board held that the entire exemption cannot be withdrawn on account of violation under section 13 of the Act and against the said decisions SLP filed by the Revenue stands dismissed by the Hon'ble Supreme Court [referred supra]. For the aforesaid cumulative reasons, it is submitted that reliance placed by the Ld. DR on the decision of the Hon'ble Delhi High Court in the case of Charanjiv Charitable Trust (supra), more particularly in view of the series of judicial precedents referred (supra) and also the circular issued by the CBDT, which is binding on the Revenue. • It is, thus, respectfully submitted that the assessing officer/CIT(A) failed to appreciate that on account of alleged violation of the section 13, entire exemption under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial principles. • The aforesaid observations of the CIT(A) are contradictory and without judicious appreciation of the facts of the case inasmuch it has not been appreciated that appellant was under an obligation to refund the security deposit as and when necessary claim is made by the students and completing the formalities. The CIT(A) further failed to appreciate that no instance has been brought on record to suggest that claim made by the students, if any, regarding refund of security deposit has actually not been honored. • In, view of the aforesaid, addition of ₹ 34,41 ,987 made by the assessing officer call for being deleted in toto. Re: Ground of Appeal No.7 In this ground, the appellant has challenged ad-hoc disallowance ₹ 7,09,468, being 50% of the maintenance and fuel expenses on cars amounting to ₹ 14,18,936, on the ground that log books were not maintained by the appellant. • It is submitted that the aforesaid expenses were incurred in respect of the three cars, being Honda Accord, Camry and Sonata owned by the appellant, which were utilized by officials of the appellant in order to discharge various official duties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, no separate log book is being maintained by the appellant. In view of the aforesaid, the action of the AO in disallowing 50% of repair and car maintenance expenses on conjectures and surmises is erroneous and is liable to be set aside. Re: Ground of Appeal No.8 • The assessing officer, in view of findings given in the context of payment of salary to Mrs. Malvika Rai and also scholarship expenses of Ms. Aarti Rai, proceeded to disallow the same while computing the income of the appellant- holding that such expenses were attributable to the members of the Rai family. • The aforesaid action of the assessing officer, as upheld by the CIT(A), is erroneous and legally unsustainable and is liable to be reversed in view of our detailed submissions made above with respect to grounds of appeal Nos. 2 to 3. Re: Ground of Appeal No.9 The assessing officer, purely on conjectures and surmises, held that donation ofRs.37,900 by the appellant was nothing but payment of certain expenditure of some other institutions and proceeded to disallow the same. Re: Ground of Appeal No.10: This ground is consequential in nature." 6.1 We are also reproducing the Synopsis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for thepurpose of setting up institute in the name of IILM Academy of Higher Learning" at New Town, Kolkata the assessee purchased land from WBHIDCO and paid ₹ 2.72 crores; the said amount was not at all paid - on behalf of RKSCT. • The aforesaid contention is supported-by the following: (a) Lease deed dated 22.09.2010 executed by the assessee and-WBHIDCO [refer pages 111-125 @ 1120fthe paper book] (b) In the audited financial statements for the year ended 31st March, 2007, the year under consideration, the above land -has been shown as addition to fixed assets III the 'schedule of fixed assets' [refer Schedule B @page 47 of the paper book]; (c) The amount due to WBHIDCO was shown as liability [refer Schedule A @ pages 48 of the paper book]. • It will thus, kindly be appreciated that payment of ₹ 2. 72 crares for purchase of land to WBHIDCO, was, in fact, made for acquisition of land by the assessee itself and was not made on behalf of RKSCT, as incorrectly inferred by the assessing officer. • The contention of the assessing officer that the assessee had utilized funds for acquiring assets on behalf of another trust is, thus, fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes: - CIT vs. Thanthi Trust: 239 ITR 502 (SC), - CIT vs. Hindustan Charity Trust: 139 ITR.913 (Cal.) - CIT vs. Shri Ram Memorial Foundation : 269 ITR 35 (Dei.) '.' - DIT (E) vs. Bagri Foundation: 233 CTR 538 (Del.) - CIT vs. Nirmala Bakubhai Foundation: 226 ITR 394 (Guj.) - CIT V. HPS Social Welfare Foundation: 235 CTR 330 (Del.) - ITO vs. RKKR Foundation: ITA No. 253/Luc./09(Luck.) • Moreover, it is further respectfully, submitted that even otherwise RKSCT, being a charitable trust, could not be regarded as a person falling within the definition of specified person as given in section 13(3) of the Act since in case of a charitable trust, beneficiaries is public at large and not any individual person! entity. Pertinently, finding of the CIT(A) - in para 8.21 page 6 that RKSCT, being a charitable trust, cannot be regarded as person specified in seciton 13(3) of the Act, has not been challenged by the Revenue. Even otherwise, under the provisions of the Act there is no bar in giving loan / donation to another trust/ institution, which are run by the same trustees (refer Sarladevi Sharabahai Trust vs. CIT 172 ITR 698 (Mad.) As regards the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... London School of economics and stay charges at London(UK).It is evident from the following: i) As per P&L alc, these expenses are booked under heading as 'Other Expenses' (Schedule- N)(ref. page # 46 PB). The Schedule-N puts it under sub-head 'Scholarship Expense' (ref. page # 50 PB). However, as per the 'broad submissions' before CIT(A) (ref. page # 57 onwards-specific page # 88 of PB), Ms Aarti Rai was a faculty and for these expenses should have reflected under the specific head 'personnel expenses' -Schedule-K. ii) As per Report in form lOB, there are specific columns (nos. 3,4 and 8)(ref. page # 43/44 of PB) for reporting expenditure to or for benefit of persons specified uls 13(3). However, negative answer has been mentioned therein to show that no such expenditure is made. iii) Last para on page # 12 of the assessment order shows that only minimum information was provided in this respect and only name 'Aarti' was disclosed and no further information was provided. In fact AO had to guess that she could be 'Aarti Rai' and a member of Rai Family. 3.1 Regarding loan advanced to another trust, it is submitted that certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r creation and filing of the said post is produced. The trust has chairman and other trustees to look after the affairs of the trust. As per the trust deed their services or supposed to be without any remuneration. (ref: clause 28 of the trust deed- page #9 of PB). 9. Provision of income tax act as well as proprietary demands transparency, 'arms length approach' is to be adopted in dealing with persons covered u/s 13(3) and the establishment connected to such person. However, here the case is reverse." 7. We have heard both the parties and perused the records, especially the written submissions filed by both the parties and the impugned order. The Assessee and Revenue has contested their respective additions before us. 7.1 We first adjudicate the grounds taken by the Assessee. As regards the ground no. 1 raised in the Assessee's appeal is concerned, which is relating to violation of natural justice is concerned, we find that this ground is general in nature and therefore needs no adjudication. 7.2 Apropos ground no. 2 to 2.2 raised in Assessee's appeal is concerned, we find that Mrs. Malvika Rai is related to the Trustee and is being given a hefty salary of ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso hit by the provision of Section 13(1)(c). In view of the above, we are of the considered view that action of the Ld. CIT(A) in upholding the action of the AO in treating the scholarship given to Ms. Aarti Rai, as being in violation of provisions of section 13(1)© of the Act is correct one and the same does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) and reject the ground raised by the assessee. 7.4 Apropos ground no. 4 to 4.2 raised in Assessee's appeal is concerned, which is relating to upholding the finding of the AO that the assessee exists for the sole purpose of profit making and not for the purpose of charity, we find that after the profit and loss A/c is prepared according to normal business practice it is observed that the profit margin of the assessee is 44.6% for the asstt. year 06-07 and 48.43% for the asstt. year. 07-08. Such high rate of profit clearly goes to establish that the appellant is existing for the purpose of profit and not for the purpose of charity. We further note that the Hon'ble Supreme Court of India delivered its decision on August 12, 2005 in the case of P A Inamdar Vs State of Maharashtra AIR 2005 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o refund the money does not cease and it is obligatory on the part of the assessee to return the money which is lying with it in the form of security deposit, hence, the same cannot be regarded as income of the assessee. But the fact remains that this attitude of the assessee in not returning the security deposit of former students goes to show that it is running the school/ institute on commercial principles. As a charitable institution the assessee should return the money suo-moto after adjusting the dues, but the assessee is not carrying out this exercise and retaining the fund over and above the fees which is due from the students. This again goes to show that the assessee is running the institute from a commercial angle, hence, it is also a ground for rejecting the benefit of section 11 of the Act. In view of the above, we uphold the action of Ld. CIT(A) in affirming the addition of ₹ 34,41,987/- out of refundable security deposit of the students and reject the ground raised by the assessee. 7.7 Apropos ground no. 7, relating to affirming of action of AO in making adhoc addition of 50% of repairs and car maintenance expenses amounting to ₹ 7,09,468/-, on the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2.72 crores for allotment of land at New Town Kolkatta allotted by West Bengal Housing Infrastructure Development Ltd. (WBHIDCO). However, the allotment letter was not in the name. of the appellant. It was further seen that IILM Academy of Higher Learning was the actual beneficiary of this loan advanced to WBHIDCO and that this institute was owned by Ram Krishan and Sons Charitable Trust. Since the assessee had advanced money to another trust controlled by the same family therefore the assessing officer was of the opinion that it violated the provisions of section 11 (5) as well as section 13(1)( c )(ii). However, the assessee on the other hand has stated that the Ld. AO mixed up two separate and independent transactions and that the assessing officer incorrectly held that the assessee had made payment of ₹ 2.72 crores to WBHIDCO Kolkata for acquisition of land in the name of IILM Academy of Higher Learning being run by another trust RKSCT whereas in fact the said sum was advanced to WBHIDCO, Kolkata for acquisition of land by the assessee itself and not for any other trust. As regards advancing of interest free loan of ₹ 2.l9 crores to RKSCT the assessee had st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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