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TMI Blog2018 (6) TMI 1376X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment for services came to ₹ 36,30,000/-. This was only about 6.6% of the total construction cost. There is nothing on record to show how the Revenue came to a conclusion that such payments were excessive viz-a-viz services rendered by them. - Decided against revenue - I.T.A. No.1192/CHNY/2017 - - - Dated:- 3-5-2018 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER For The Appellant : Shri. AR.V. Sreenivasan, IRS, JCIT For The Respondent : Mrs. S. Vidya, C.A. ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER In this appeal filed by the Revenue, it assails an order dated 17.02.2017 of ld. Commissioner of Income Tax (Appeals)-2, Madurai, in which it was held that there was no violation by the assessee, within the meaning of Section 13(1) (c) of the Income Tax Act, 1961 (in short the Act ) and assessee was eligible for claiming exemption u/s.11 of the Act. 2. Facts apropos are that assessee a charitable trust registered u/s.12A (a) of the Act, had filed its return for the impugned assessment year declaring Nil income after claiming exemption u/s. 11 of the Act. During the course of assessment procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The details of repair work carried out by M/s, Amali Builders have not been furnished. The payments made during the year Rs. 40,78,668/- appear to be in excess of the services rendered. In these circumstances, the payment of ₹ 40,78,668/- made to M/s. Amali Builders Private Limited is considered as violation u/s 13(l)(c) of the IT Act . Ld. Assessing Officer took a view that that there was violation as contemplated u/s.13(1) (c) of the Act and denied the exemption claimed by the assessee trust u/s.11 of the Act. 4. Aggrieved, assessee moved in appeal before ld. Commissioner of Income Tax (Appeals). Ld. Commissioner of Income Tax (Appeals) noted that there was no excessive payments to M/s. Amali Builders Private Limited. According to him, the payments effected were only about 8% of the total construction cost. What was observed by the ld. Commissioner of Income Tax (Appeals) at paras 4.2 and 4.3 are reproduced hereunder:- 4.2. I have considered the submissions of the representative and carefully considered the points raised by the Assessing Officer. The Assessing Of1icer himself stated in the concluding para of the assessment order that the services provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption. 5. Now before us, ld. Departmental Representative strongly assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that the key personnel of M/s. Amali Builders Private Limited were trustees of the assessee trust. According to him, Section 13(1) (c) of the Act was attracted since a part of the income of the assessee s trust was applied in a manner which was directly beneficial to a concern in which the trustees were having substantial interest. Further, according to him, there was a clear finding by the ld. Assessing Officer that services provided by M/s. Amali Builders Private Limited were of vague nature and assessee could not give the basis how the services charged were calculated. As per the ld. Departmental Representative these was violation of Section 13 of the Act. According to him, Ld. Commissioner of Income Tax (Appeals) fell in error in holding that there was no such violation. Reliance was placed on the judgment of Hon ble Kerala High Court in the case of Agappa Child Centre vs. CIT, (1997) 226 ITR 221 and decision of Delhi Bench of this Tribunal in the case of Parivar Sewa Sanstha vs. Deputy Director of Income Tax, (2005) 1 SOT 71. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber 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. Thus for applying Section 13(1) (c) of the Act, it is necessary to establish that the concern to which payments were made by an assessee trust is one where the trustees or manager, or founder or their relatives have substantial interest. Circumstances under which a person can be deemed to have substantial interest is set out in Explanation 3 to Section 13(1) (9) of the Act which is reproduced hereunder:- Explanation 3.- For the purposes of this section, a person shall be deemed to have a substantial interest in a concern,- ( i) in a case where the concern is a company, if its shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than twenty per cent. of the voting power are, at any time during the previous year, owned benefici ..... X X X X Extracts X X X X X X X X Extracts X X X X
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