TaxTMI 
TaxTMI 
TaxTMI 
2015 (3) TMI 601
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....ment year 2008-09 3. The Revenue has taken following effective ground : "1. The learned Commissioner of Income-tax (Appeals) has erred in law and on facts in directing to grant the deduction under section 11 of Rs. 10,19,39,409 of the Income-tax Act." 4. Brief facts of the case are that the assessee-trust runs a school for which it had taken loan of Rs. 9 crores for acquiring a plot of land from Ahmedabad Urban Development Authority which costed Rs. 6,88,24,676. The contract for construction of the school building was given to Niche Realty Pvt. Ltd. The assessee-trust is having only two trustees which are as under : (i) Shri Ashish J. Desai, managing trustee is a paediatric doctor by profession who adventured into the field of education. (ii) Shri Narendra Koringa, a retired teacher of Government school who is based at Rajkot. 5. During the assessment proceedings, the Assessing Officer found that the assessee-trust has made payment of Rs. 3,28,51,483 to M/s. Niche Realty Pvt. Ltd. In Niche Realty....
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.... element of profit. (4) The payment of Rs. 1,90,86,700 made for labour work carried out by M/s. Niche Reality is a payment against the services rendered. The said services given by M/s. Niche Reality were the construction of the trust building. (5) The construction work carried out is at the rate of Rs. 95.50 per sq. feet. This rate is a very reasonable one. At that point of time the construction labour work charged by outside labour contractors varied from Rs. 150 to Rs. 250 per sq. feet whereas the Niche Reality has done the work at a nominal rate of Rs. 95.50 per sq. feet only. (6) The assessee has been the beneficiary and there is no question of any income of the trust or the property of the assessee-trust being diverted to any other entity. (7) Mere payment towards expenses incurred on our behalf and bill value equivalent payment/reimbursement by the assessee-trust does not constitute diversion of income or property to Niche Reality. (8) Again you will observe that the said firm has also given interest free deposit for 10 years where by our trust has gained a large benefit." 5.1. The assessee was further asked to furnish copy of the resolution passed by the board for awa....
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....art the first academic session with effect from June 2008." 6. After taking into consideration the submission of the assessee, claim of deduction under section 11 of the Act of Rs. 10,19,39,409 was disallowed by the Assessing Officer and added to the income of the assessee by observing as under : "2.5 On critical examination of the resolution passed by the trust, it is seen that the rate at which contract has been awarded is not specified. It is very ambiguous. It is mentioned in the resolution that the contract is given at the market rate and a reasonable rate on cost plus basis not exceeding Rs. 100 per sq. ft. but it is not specified as to what was the market rate or reasonable rate. The rate for the construction materials are also not specified. The resolution clearly states that the contract is awarded to M/s. Niche Reality P. Ltd. on such terms and conditions which may be decided by the trustees and directors of the company. The trust is having only two trustees and company too is having only two directors which are as under- Trust Niche Realty P. Ltd. Ashish J. Desai Ashish J. Desai Narendr....
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....of education with a motive to earn profits and earn a living out of it. The main beneficiaries of the trust are managing trustee Shri Ashish Desai and Shri Narendra Koringa. As mentioned above, the assessee is not eligible for deduction under section 11 of the Act. The assessee has violated the provisions of section 13(2)(g) of the Act by giving the construction of the school building in favour of M/s. Niche Reality Pvt. Ltd. in which the managing trustee Shri Ashish Desai is the director. The assessee has further compounded this violation by not disclosing the true facts in Form 10B filed with the return of the income. Thus the claim of deduction under section 11 of the Act of Rs. 10,19,39,409 is disallowed and added to the income of the assessee and the excess of income over expenditure of Rs. 1,02,85,413 as shown in the income and expenditure account is brought to tax. In view of the above facts the total income is computed as under : (Rs.) Total income as per return : (-) 9,16,53,996 Add : Disallowance of deduction under section 11 of the Act as discussed above 10,19,39,409 Assessed income 1,02,85,413" 7. In appeal the learned Commissioner of I....
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....ment proceedings to the learned Assessing Officer but he has not taken the said fact into consideration while passing the order. 9.2 It is also to be noted that the observation of payment of salary to trustees in subsequent assessment year cannot be base for disallow ance of claim under section 11 as during the year under assessment the salary has not been paid and every year is separate year as per decisions given by various courts. The learned authorised representative's contention for purchase of land from Ahmedabad Urban Development Authority, a local authority through auction and purchase of furniture from non-related parties is also not taken into consideration while passing the assessment order by the learned Assessing Officer is also verified and considered while passing this order. 10. In view of the above observations and taking into consideration the submissions made by the authorised representative of the assessee- trust, the addition made by the learned Assessing Officer by way of disallowance of claim of deduction under section 11 for Rs. 10,19,39,409 is delet....
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....ny evidence to the effect that this was before the Assessing Officer was found in the paper book of the assessee. Though later on photocopy of annual report with the Registrar of Companies was submitted but no evidence in respect of this document being filed before the Assessing Officer was filed. We further find that in its submission before the Assessing Officer it was claimed by the assessee-trust that Sri Ashish J. Desai was not having substantial interest in M/s. Niche Realty Pvt. Ltd. but even in these submissions of the assessee which have been reproduced by the Assessing Officer in his order there is any mention about the copy of annual report with the Registrar of Companies being filed, though in the submission before the learned Commissioner of Income-tax (Appeals), it was mentioned by the assessee-trust that copy of annual report with Registrar of Companies was being filed. In view of these undisputed facts of this case, we are inclined to agree with the contention of the learned Departmental representative that the learned Commissioner of Income-tax (Appeals) has given relief to the assessee by admitting and relying on the additional evidence which was not before the As....