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TMI Blog1996 (3) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... -trust. As Sri S. Chatterjee, Director in that company, happens to be the son of the trustee Sri P. C. Chatterjee, the Assessing Officer has examined the facts with reference to the provisions of sec. 13(1)(c) of the IT Act. The Assessing Officer found that though the amount towards rent is not paid by the company M/s. New Jatinga Valley Tea Estate Ltd., the assessee-trust has not taken any steps for realisation of the said rent and hence the non-realisation thereof amounts to violation of the provisions of sec. 13(1)(c)/13(3) of the Act. The Assessing Officer has also held that the assessee has not taken any adequate security from the persons referred to in sub-section (3) of sec. 13 in spite of the said trust---amount held with the said c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee-trust whereby the sum was paid for the purpose of construction of the building subject to the condition of letting out a part of the building to the company by the trust. He thus held that the advance so given was a normal advance in terms of the agreement and hence no special favour is done by the company to the trust. Consequently, he held that the trust need not be obliged by showing any extra-consideration to the company by not collecting the rental income and since the assessee has not made any attempt to collect the same, the trust has violated the provisions of section 13(1)(c)/13(3) of the Act. In so holding he has also observed that there is no evidence produced by the assessee to show that the rent charged from the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application of the rental income, inasmuch as, it only amounts to non-collection of the outstanding rent. Thus it is the case of the ld. counsel for the assessee that the provisions of sec. 13(1)(c) are not applicable to the facts and circumstances of the case and in this regard he has relied on the decisions in CIT v. Nachimuthu Industrial Association [1982] 138 ITR 585/[1983] 14 Taxman 224 (Mad.) and CIT v. Birla Charity Trust [1988] 170 ITR 150/[1987] 34 Taxman 504 (Cal.). With regard to the provisions of sec. 13(2)(a) of the Act, the ld. counsel of the assessee contended that the advance given by the said company to the assessee of Rs. 2 lakhs is available with the assessee and hence the non-collection of a sum of Rs. 1,36,212 cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged from the company so as to prove that it is at par with other tenants. He further submitted that it is not the case of the Assessing Officer that the assessee has not been charging adequate rent and hence the CIT(A) without any valid basis, is not right in making adverse observation without any proof in support thereof. He has also submitted that it is neither the case of the Assessing Officer nor the case of the CIT(A) that the assessee has violated the provisions of sec. 13(2)(b) of the Act. Such being the case, and more particularly, in the absence of any material to show that the assessee has been charging lesser rent, the provisions of sec. 13(2)(b) is not applicable. He thus contended that the Assessing Officer is not correct in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub section (3). (2) Without prejudice to the generality of the provisions of clause (c) and clause (a) of sub-section (1), the income or the property of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in sub-section (3) --- (a) if any part of the income or property of the trust or institution is, or continues to be, lent to any person referred to in sub section (3) for any period during the previous year without either adequate security or adequate in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is low compared to the rent chargeable under similar circumstances. We therefore accept the plea of the assessee that the rent charged is adequate rent which is chargeable for the premises let out to the company. In other words, the assessee can be said to have been adequately compensated in the form of rent for the premises let out to the company. Under the provisions of section 13(1)(c)(ii) the benefit of exemption under section 11 is denied to an assessee who has 'used' or 'applied' any part of the income or property of the trust for the benefit of any person referred to in sub-clause (3). We are, therefore, of the opinion that the connotation 'used' or 'applied' should be understood as a positive act of user or application of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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