9911796707
TMI Blog2024 (10) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... found to be in violation of Rs. 3.35 crores then assessee trust is charged to tax at maximum marginal rate at Rs. 3.35 crores and not only on 12% of such income. Therefore, also we do not find any infirmity in the order of CIT(A) in deleting the addition. Assessee has paid a security deposit - For the purpose of deciding the benefit one has to compare the Apple with the Apple and not oranges with the Apple. Against this the learned assessing officer has categorically cited a comparable instance of the property having four times more value than the impugned property at substantially lower and without deposit. AO on submission of such details by the assessee of comparable instance, then decide the issue afresh whether there is any benefit to the trustees or not. If, no benefit is found to be accruing to the trustees on comparable of similar instance, the denial of exemption to the assessee is not permissible. If, benefit accrued to the trustee by giving such a huge deposit in the form of security deposit, then on the amount of security deposit, the tax at the maximum marginal rate is required to be charged - Thus restore this issue back to the file of the learned assessing officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) Whether order passed by the Ld. CIT(A) is justified, ignoring the facts and circumstances of the present case and without applying the correct preposition of law . (b) Whether the Id. CIT(A) was justified in holding that there is no violation of section 13, while facts of the case shows clear violation by various means like making loans advances to related parties, thus, applying income and assets of assessee trust for benefit of trustees. (c) Whether Id. CIT(A) was justified in holding non applicability of section 13 of Income-Tax Act for loans/advances given another trust while both the trust has common trustees? (d) Whether ld. CIT(A) is justified in allowing exemption u/s 11 of the Income-tax Act while assessee trust violated provision of section 13(1)(c) of the Income-tax Act by giving interest free loans, advances and security deposits to persons covered u/s 13(3) of the Income- tax Act . (e) Whether ld. CIT(A) is justified in allowing exemption u/s 11 of the Income-tax Act while assessee trust violated provision of section 13(1)(d) of the Income-tax Act by diverting the funds of the trust which otherwise to be kept under the specified the modes of investment as laid dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the explanation of the assessee that advance is given to the Trust which is also having the object of the education executing the Memorandum of Understanding. The Assessing Officer noted that there are common trustees and therefore provisions of section 13 (3) (cc) are also covered in the definition of and, therefore, there is violation of Provisions of Section 13(1)(c) and 13(1)(d) of the Act, He further held that even the provisions of Section 13(3)(e) is also violated.it was the claim of the learned assessing officer that in the trust to whom the loans are given, the trustees of the assessee trust are also the trustees of that trust. Therefore, according to the provisions of section 13 (1)(c)(ii) if part of such income or any property of the trust or institution is used or applied directly or indirectly for the benefit of any person referred to in subsection 3, then the trust loses exemptions to that extent. ii. It was also found that the assessee has made security deposit of Rs. 3.35 crores to the trustee, namely, Smt. Asha Vyas and Mr. Manish Vyas for obtaining property on rent wherein the annual lease rent payable by the assessee was Rs. 18.00 lacs. According to him, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. 14. The Learned A.R. filed a paper book containing 218 pages and also submitted a written note. The contention of the learned A.R. is that. i. in ITA No. 255/Jodh/2019 dated 26.05.2020 at Page Nos. 99 to 122 of the paper book wherein the exemption and registration granted to the assessee u/s. 10(23C)(vi) of the Act was challenged and by that order the Coordinate Bench agreed that the assessee has not violated the third proviso and 14th proviso u/s. 10(23C)(vi) of the Act. ii. He further referred to Paragraph 17 of that order wherein the issue of security deposit paid to the trustee of Rs. 3,05,00,000/- was held to be neither unreasonable nor excessive nor in violation of third and 14th proviso to Section 10(23C) of the Act. iii. With respect to the advance given to M/s Samarth Vivdhlaxi Seva Trust, the assessee submitted that it is also an educational trust registered u/s. 12AA of the Act, the advances were given as per terms and condition of Memorandum of Understanding and further though Mr. Manish Vyas and Smt. Asha Vyas are common trustees, there is no violation of the provisions of Section 13 of the Act. He submits that by giving advance to the trust there is no benefit to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inate bench. 18. We find that for assessment year 2016 17 the order of the assessment was passed on 22/8/2019 for assessment year 2016 17 and on 23/12/2019 for assessment year 2017 18 wherein the order of the coordinate bench in restoring the registration under section 12 AA of the act was passed on 3/1/2020 and the order of the coordinate bench in granting recognition under section 10 (23C) was passed on 26/05/2020 and therefore, these orders of the coordinate benches were not available before the assessing officer at the time of passing the assessment order. The order of the learned CIT A was passed on 15/12/2023 and therefore the learned CIT A had the benefit of these two appellate orders passed by the coordinate bench. 19. In view of above facts, the issues before us are required to the decided. 20. The first issue i.e., required to be decided is whether the advance given to M/s Samarth Vivdhlaxi Seva Trust of Rs. 3.35 crores is in violation of provisions of Sections 11 to 13 of the Act or not. The facts shows that trust is educational trust registered u/s. 12AA of the Act since 04.04.2008 . The assessee entered into Memorandum of Understanding (MoU) on 12.03.2014 that the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are also trustee and, therefore, the provisions of Section 13(3)(e) of the Act are impacted. According to Section 13(3)(e) will apply only if there is right to 20% of the profit of such concerned. As both the trusts are existing or not for profit, even the provisions of Section 13(3)(e), 13 (3) (cc) of the Act are not hit and, therefore, for this reason also it cannot be said that by giving the advance to that trust there is a direct or indirect benefit to the trustee of assessee trust. Accordingly, we do not find that the provisions of the income tax act are violated when the assessee has given an advance to another trust having the common object and also registered under section 12 AA of the act though having the common trustees. Even otherwise, if there is a violation of section 13 of the trust if the loan is given to another trust, an addition of Rs. 40,20,000/- on account of notional interest @ 12 % per annum only Rs. 3.35 crores advance to the above trust, could not have been made. In fact, if assessee is found to be in violation of Rs. 3.35 crores then assessee trust is charged to tax at maximum marginal rate at Rs. 3.35 crores and not only on 12% of such income. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me at a severe Saab both the trustees the value of the land is per the valuation report submitted by the assessee is ₹ 26.23 crores. It was also stated that this assessee trust has not given any security deposit on such a huge value of land given to another trust or nominal rent. Therefore, the claim of the assessing officer is that when the comparable property is taken on rent, the amount of security deposit given by the assessee to the trustees is diverse and of course-in of the funds of the trust for the benefit of the trustees. 25. Findings of the Coordinate Bench bind us judicially unless the facts are found to be different. 26. However, in this case we found that the facts with the coordinate bench was not available about the comparable rate stated by the assessing officer which are pertaining to the assessee only. The comparable case stated by the assessee at page number 18 of the paper book shows that the assessee trust itself has given its own land situated at Jhalamand, Jodhpur, on a nominal rent of only ₹ 1 80,000 per annum/ to Rajasthan because company in which Mr.Manish Vyas and his wife are the trustees. The assessee himself has not taken any security depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid, and rent is comparable. For the purpose of deciding the benefit one has to compare the Apple with the Apple and not oranges with the Apple. Against this the learned assessing officer has categorically cited a comparable instance of the property having four times more value than the impugned property at substantially lower and without deposit. The learned assessing officer, on submission of such details by the assessee of comparable instance, then decide the issue afresh whether there is any benefit to the trustees or not. If, no benefit is found to be accruing to the trustees on comparable of similar instance, the denial of exemption to the assessee is not permissible. If, benefit accrued to the trustee by giving such a huge deposit in the form of security deposit, then on the amount of security deposit, the tax at the maximum marginal rate is required to be charged. 30. Similar is the fact of deposit which has been decide by the Coordinate bench in paragraph 19 of that order wherein it is mentioned that Smt. Asha Vyas owned residential plot No. 45, Pal Road, Jodhpur admeasuring 200 sq. yard acquired by her on 05.09.2011 and has constructed 297 sq. ft. which was given on ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon by the assessee does not apply. We proceed to give over reasons in subsequent paragraphs. 34. On careful consideration of the decision of the coordinate bench we find that assessee has placed before us at page number 94 98 of the paper books the Ledger account of ceremonies from the books of the assessee. This Ledger account is extracted as under:- 35. On careful perusal of the Ledger account, it is apparent that the credit to the account of Mr. Manish we is of rent as well as transfer of balances from other branches. For the assessment year ending on 31/3/2016 the total debit to the account of the trustee is 1,73,04,000 and credit is only 78,08,939 leaving the debit balance of ₹ 9,495,061.53. For financial year 2016 17 the total debit to the account of the trustees is ₹ 15,358,896 whereas the credit is only ₹ 3,922,710 resulting into debit balance of ₹ 14,036,186/ . From 1/4/ 2017 to 31/3/2018 the total debit to the account of the trustees ₹ 18,730,108 and whereas the credit is only 36,25,617 leaving the debit balance as on 31/3/2018 is ₹ 15,104,438/ for financial year 2018 19 the total debit to the account of the trustees 2,09,52,123 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t next month and, therefore, it is not the case of the diversion of the fund. We find the fact of this advance is identical, and also requires similar tax treatment as in case of advance by the trust to Mr. Manish Vyas. 42. In view of the above facts, we restore this issue back to the file of the learned assessing officer to consider that amount paid by the assessee as a loan to Mr. Manish Vyas and Mrs.Asha Vyas is a direct benefit to the trustees of the trust which is in clear-cut violation of the provisions of section 13 (1) (c) of the act. However as only opening and closing balances are considered by the assessing officer, the peak amount of loan for each year is required to be considered for the purpose of taxation at the maximum marginal rate in the hence of the assessee trust, assessee is directed to place before the learned assessing officer complete Ledger account with balances traced out after each accounting entry in that Ledger for working out the peak. Because of the reason that the assessee has not given us the Ledger with balances, this issue needs to be restored back. The learned assessing officer after examination decide the issue in accordance with the above direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned assessing officer has not acted in accordance with the provisions of the income tax act. We also like to note that when the assessment of the assessee trust is made at the total taxable income of ₹ 115,707,997/ how the taxes computed applying the maximum marginal rate at ₹ 8,764,447/ . This clearly shows that the learned assessing officer has failed to understand the provisions applicable to the trust. 50. Ground number 1 (g) is with respect to allowing the capital expenditure of ₹ 62,140,304 to the assessee. We find that the learned assessing officer is not correct in not granting benefit of this capital expenditure to the assessee because if the capital expenditure is utilized for the object of the trust, the assessee trust is entitled to such deduction. Accordingly, this ground of appeal is dismissed. 51. In the result appeal of the learned assessing officer for assessment year 2016 17 is partly allowed. 52. The appeal of the learned assessing officer for assessment year 2017 18 is on identical grounds, therefore, we hold that the decision rendered for assessment year 2016 17 applies to the appeal of assessment year 2017 18. Accordingly appeal of the le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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