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TMI Blog2023 (2) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... stered public charitable trust and is running educational institution. The appellant trust is registered u/s. 12A of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and claimed exemption u/s. 11 of the Act, towards income derived from property held under the 'Trust'. The appellant has filed its return of income for assessment year 2010-11 on 18.10.2010, declaring Nil total income after claiming exemption u/s. 11 of the Act. The case was taken up for scrutiny and during the course of assessment proceedings, the AO noticed that there is a violation referred to u/s. 13(1)(c) of the Act, in so far as, civil contract awarded to Shri Vekkaliamman Builders and Promoters, in which the managing trustee of the trust is proprietor. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that how to interpret sub-section (2) of section 13, which is a deeming provision and also to test as to whether construction contract which has been granted to the firm in which the managing trustee was a partner would tantamount to service as contemplated u/s. 13(2)(c) of the Act. The Ld. DR, further referring to para 13 of the Hon'ble High Court of Madras order, submitted that the Hon'ble High Court has given clear finding on violation committed by the trust u/s. 13(1)(c) r.w.s. 13(2) and section 13(3) of the Act, in respect of building contract awarded to a firm in which managing trustee was a partner and the firm having earned profit, whether the assessee is entitled to exemption u/s. 11 of the Act or not. In this case, the AO has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to include in any services as per GST laws and Erstwhile Service Tax laws. Therefore, civil contract awarded to a firm in which the managing trustee is a partner was tantamount to service as contemplated u/s. 13(2)(c) of the Act. Since, the payment made to the firm after following due procedure does not give raise to any undue benefit to the Managing trustee, same cannot be considered as violation referred to u/s. 13(1)(c) of the Act to deny benefit of exemption u/s. 11 of the Act. 5. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. This case has a checkered history. In the first round of litigation before the Tribunal, the Tribunal has allowed relief to the assessee on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm in which managing trustee of the trust was proprietor, has derived direct benefit by way of payment which violates provisions of section 13(1)(c) of the Act. According to the AO, due procedure was not followed while awarding tender and also the firm has earned substantial profit which tantamount to direct benefit as contemplated u/s. 13(1)(c) of the Act and thus, rejected exemption claimed u/s. 11 of the Act. 6. We have given out thoughtful consideration to the reasons given by the AO, in light of various arguments advanced by the Ld. Counsel for the assessee. We have also carefully gone through orders of the Tribunal in earlier round of litigation and also for earlier assessment years in assessee's own case. We have also carefully ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merits. As regards, second observation of the AO with regard to profit earned by Shri. Vekkaliamman Builders and Promoters, the Tribunal has recorded a categorical finding in their order that the firm has earned net profit of Rs. 21.51 Lakhs and the profit earned by the firm is 4.28% of total turnover, which is quite reasonable. Therefore, from the above it is very clear that the observations of the AO, that the firm has made substantial profit which amounts to direct benefit to interested persons as referred to u/s. 13(1)(c) of the Act is also fails. Therefore, we are of the considered view that there is no error in the reasons given by the ld. CIT(A) to hold that there is no violation of provisions of section 13(1)(c) of the Act, in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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