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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 ..... o 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, 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) in respect of civil contract awarded to Vekkaliamman Builders and Promoters by the appellant trust and for this reason, the benefit of exemption u/s. 11 cannot be denied, and thus, we are inclined to uphold the findings of the CIT(A) and reject ground taken by the Revenue. 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. We find that civil contract has been included in the definition of services as per GST laws and also as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that the appellant trust has awarded civil contract to the related party without following due procedure. Further M/s. Vekkaliamman Builders and Promoters has earned substantial profit from contract receipts received from appellant trust. Therefore, the AO opined that the trustee of the trust got benefit directly by diversion of trust funds, through civil contract and thus, it amounts to violation u/s. 13(1)(c) of the Act. Hence, rejected exemption claimed u/s. 11 of the Act and computed income from property held under trust as a normal business. The assessee carried the matter in appeal before Ld. CIT(A) and challenged rejection of exemption u/s. 11 of the Act on the issue of violation referred to u/s. 13(1)(c) of the Act, towards civil contract awarded to a firm, where managing trustee is proprietor. The ld. CIT(A), after considering relevant submissions held that the appellant did not violate the provisions of section 13(1)(c) of the Act and thus, is entitled to exemption u/s. 11 of the Act. Aggrieved by the Ld. CIT(A) order, the Revenue is in appeal before the Tribunal. 3. The Ld. DR, submitted that the Ld. CIT(A) has erred in holding that there is no violation as refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther civil contract awarded is tantamount to service as referred to u/s. 13(2) of the Act, he submitted that civil contract has been defined 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 the issue of payment made to a firm in which managing trustee was proprietor, in light of provisions of section 13(1)(c) of the Act, and held that the transactions between the appellant trust and the firm does not violate provisions of section 13(1)(c) of the Act. The Revenue challenged the findings of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction between appellant trust and firm is violation of section 13(1)(c) of the Act, because the appellant trust did not follow due procedure while awarding tender and further the firm has earned substantial profit which amounts to direct benefit to the interested persons. 7. As regards the first observation of the AO on not following due procedure while awarding tender, we find that the co-ordinate bench of ITAT had considered an identical issue for assessment year 2009-10 in ITA No. 1420/Chny/2013 in their order dated 27.09.2013 and held that the construction contract has been awarded to the firm M/s. Vekkaliamman Builders and Promoters on the basis of open bid. Since, the firm quoted lowest rates, the contract was awarded to the firm. Based on said findings, the Tribunal has held in the impugned assessment year that the appellant trust has followed due procedure while awarding tender. From the above, it is very clear that the observations of the Assessing Officer that the trust has not followed due procedure is devoid of merits. As regards, second observation of the AO with regard to profit earned by Shri. Vekkaliamman Builders and Promoters, the Tribunal has recorded a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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