TaxTMI 
TaxTMI 
2017 (3) TMI 578
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....1 even though provisions of section 13 are attracted. (2) allowing the benefit of section 11(1) of the IT Act without considering the huge surpluses being earned by the society and expenses were incurred for the benefit of persons covered u/s13(3) of the IT Act. (3) allowing salary expenses to the extent of the following amounts - Rs. 90,450/- (Mrs. Mohini Bakshi), Rs. 24,750/- (Mr. M.S. Bakshi), Rs. 29,025/- (Mr. Sandeep Bakshi) and Rs. 25,125/- (Ms. Preeti Bakshi) which is higher than reasonable. (4) deleting addition made on account of foreign travelling expenses despite the fact that the assessee society failed to prove that these expenses were incurred for the objects of the society. (5) allowing contribution made to Jaipur National University during the year under consideration as application of income u/s 11 of the Act despite the fact that the assistance provided to JNU is the violation of byelaws of society as well as the violation of provision of section 13(1)(c) and 13(2)(a) of the IT Act, 1961." In ITA No. 30/JP/16(Assessee): "Under the facts and circumstances of the case and in law, the ld. AO has erred in holding that depreciation under section 32 of....
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.... which includes relief of the poor, education and medical relief and is limited is the last limb "the advancement of any other object of general public utility. 6. The objectives of the assessee society, on perusal of its Bye-laws, are as follows:- 7. On perusal of the above objectives of the assessee society, it is clear that the main objects of the society are setting up of educational institutions and operating them for the promotion of education and there are other stipulated objectives which are related to promotion and spreading of systematic education. During the year under consideration, in pursuance of its objectives, the assessee society is operating two educational institutions namely, Seedling Public School, Jawahar Nagar, Jaipur and Seedling Modern High School, Mahaveer Nagar, Jaipur.The society has also established a University in name of "Jaipur National University" and is the sponsoring body of the said University. The Jaipur National University has been set up by the society mainly for the promotion of technical and other higher education. It is therefore not a matter of dispute that the society is imparting "education" through various educational institution....
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....gious purposes in India falls short of eighty-five per cent of the income derived during that year from property held under trust, or, as the case may be, held under trust in part, by any amount- (i) for the reason that the whole or any part of the income has not been received during that year, or (ii) for any other reason, then - (a) in the case referred to in sub-clause (i), so much of the income applied to such purposes in India during the previous year in which the income is received or during the previous year immediately following as does not exceed the said amount, and (b) in the case referred to in sub-clause (ii), so much of the income applied to such purposes in India during the previous year immediately following the previous year in which the income was derived as does not exceed the said amount, may, at the option of the person in receipt of the income such option to be exercised in writing before the expiry of the time allowed under subsection (1) of section 139 for furnishing the return of income be deemed to be income applied to such purposes during the previous year in which the income was derived; and the income so deemed to have been applied shall not....
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....of acquisition (as ascertained for the purposes of sections 48 and 49) of the capital asset which is the subject of the transfer and the cost of any improvement thereto within the meaning assigned to that expression in sub-clause (b) of clause (1) of section 55; (iii) "net consideration" means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.] (1B) Where any income in respect of which an option is exercised under clause (2) of the Explanation to sub-section (1) is not applied to charitable or religious purposes in India during the period referred to in sub-clause (a) or, as the case may be, sub-clause (b), of the said clause, then, such income shall be deemed to be the income of the person in receipt thereof- (a) in the case referred to in sub-clause (i) of the said clause, of the previous year immediately following the previous year in which the income was received; or (b) in the case referred to in sub-clause (ii) of the said clause, of the previous year immediately following the previous year in which the income was d....
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....et apart for application thereto, or (b) ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5), or (c) is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section or in the year immediately following the expiry thereof, (d) is credited or paid to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or subclause (via) of clause (23C) of section 10, shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or credited or paid or, as the case may be, of the previous year immediately following the expiry of the period aforesaid. (3A) Notwithstanding anything contained in sub-section (3), where due to circumstances beyond the control of the person in receipt of the income, any income invested or deposited in accordance with th....
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.... certificates as defined in clause (c) of section 2 of the Government Savings Certificates Act, 1959 (46 of 1959), and any other securities or certificates issued by the Central Government under the Small Savings Schemes of that Government; (ii) deposit in any account with the Post Office Savings Bank; (iii) deposit in any account with a scheduled bank or a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank). Explanation.-In this clause, "scheduled bank" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934); (iv) investment in units of the Unit Trust of India established u....
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...., roads, bridges and flyovers or urban transport;] (x) investment in immovable property. Explanation.-"Immovable property" does not include any machinery or plant (other than machinery or plant installed in a building for the convenient occupation of the building) even though attached to, or permanently fastened to, anything attached to the earth;] (xi) deposits with the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964);] [(xii) any other form or mode of investment or deposit as may be prescribed. (6) In this section where any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year. (7) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) of section 12AA or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance ....
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....it is so applied for ceases to be accumulated or set apart or ceases to remain so invested or deposited or credited or paid or as the case may be, of the previous year immediately following the expiry of the aforesaid period. 10. The scheme of granting fiscal incentive by way of exemption u/s 11 of the Income Tax Act, 1961 to the charitable institutions is thus devised by the legislature in such a manner that the institutions who earn from charitable work are not liable to tax if they either apply such earnings during the year or accumulate such earnings for further achieving the "charitable purposes" and do not withdraw such income for utilization for any purposes other than "charitable purposes". In other words, the charitable institutions may earn income and enjoy tax exemptions so long as they re-circulate such earnings for charitable objectives and thereby further promote the charitable purpose. The conditions which are required to be fulfilled are as follows: a. Income should be derived from property held under trust by the person claiming exemption. b. Such Property from which income is derived should be held wholly for charitable or religious purposes. c. Income....
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....other proceeding shall be brought or from the society , and in the latter case, shall have process against the property of the said society in the manner above described. "Section 14. Upon dissolution no member to receive surplus property:- If upon dissolution of any society registered under this Act there shall remain after the satisfaction of all its debts and liabilities any property whatsoever, the same shall not be paid to or distributed among the members of the said society or any of them, but shall be given to some other society, whether registered under this Act or not, to be determined by the votes of not less than two-thirds of the members present personally or by proxy at the time of the dissolution or, in default thereof, by such court as aforesaid: Provided that the section shall not apply to any society which have been founded or established by the contributions of share-holders in the nature of a joint-stock company. Provided further that noting in this section shall be deemed to affect any provision contained in any instrument for the payment or distribution of the property of a society dissolved under section 13" "Section 14-A. Surplus property may b....
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.... 11 on the basis of, and to the extent of the income so applied only. 13. It was further submitted that all the objectives of the society relate to the promotion of education and activities incidental thereto and fall within the ambit of the term "charitable purpose" as defined under section 2(15) of the Income Tax Act, 1961. Thus, the society not only exists solely for "charitable purpose" but also there is no object of the society which is beyond the scope of "charitable purpose". Whatever income is generated by the society is from the "property held under trust" for charitable purpose and the income earned by the society can be used and is actually used only for the "charitable purpose" as defined u/s 2(15) of the Act. 14. On perusal of the assessment order, it is noted that the prime reason for denial of exemption under section 11 of the Act by the Assessing officer is systematic generation of surplus year after year under various heads of income by the assessee society. As per Assessing officer, the systematic generation of surplus year after year establishes that various educational institutions are being run by assessee society with profit motive and not for any charit....
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....ican Hotel & lodging Assn. Educational Institute (301 ITR 86) and laid down the following principles in law as set out in paragraph 11 of its decision which reads as under: "11..the law common to section 10(23C)(iiadi) and (vi) may be summed up as follows: (1) Where an educational institution carries on the activity of education primarily for educating persons, the fact that it makes a surplus does not lead to the conclusion that it ceases to exist solely for education purposes and becomes an institution for the purpose of making profit. (2) The predominant object test must be applied - the purpose of education should not be submerged by a profit making motive. (3) A distinction must be drawn between the making of a surplus and an institution being carried on "for profit". No inference arises that merely because imparting education results in making a profit, it becomes an activity for profit. (4) If after meeting expenditure, a surplus arises incidentally from the activity carried on by the educational institution, it will not be cease to be one existing solely for educational purposes (5) The ultimate test is whether on an overall view of the matter in the conce....
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....ng profit beyond 15% and its investment wholly for educational purposes may be expressly stipulated as per the statutory requirement. Thereafter the Assessing Authority may ensure compliance of those conditions. The cases where exemption has been granted earlier and the assessment are complete with the finding that there is no contravention of the statutory provisions, need not be reopened. However, after grant of approval if it comes to the notice of the prescribed authority that the conditions on which approval was given, have been violated or the circumstances mentioned in 13th proviso exists, then by following the procedure envisaged in 13th proviso, the prescribed authority can withdraw the approval. (3) The capital expenditure wholly and exclusively to the objects of education is entitled to exemption and would not constitute part of the total income. (4) The educational institutions which are registered as a society would continue to retain their character as such and would be eligible to apply for exemption under section 10(23C)(vi) of the Act. (5) Where more than 15% of income of an educational institution is accumulated on or after 1st April, 2002, the period of ....
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....ion has to be responsive to a rapidly evolving society. The provisions of Section 10(23C) cannot be interpreted regressively to deny exemptions. So long as the institution exists solely for educational purposes and not for profit, the test is met." (Emphasis supplied) 18. Though the above referred decision of the Hon'ble Supreme Court in case of Queen's educational society has been rendered in the context of section 10(23C)(iiiad) where the legislature has used the words "income received by any person on behalf of educational institution existing solely for education purposes and not for the purposes of profit", in our view, the proposition in law is equally relevant and applicable in context of section 11 of the Act where the legislature has used the words "income derived from property held under trust wholly for charitable purposes" and wherein similar provisions exist in terms of accumulation and plough back of surplus for educational purposes as the intent behind both the provisions is essentially the same. The said analogy also becomes clear from the fact that the Hon'ble Supreme Court in case of Queen Education Society has itself referred to and approved its earlier decisi....
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....tion 10(23C) is to ignore the language of the section and to ignore the tests laid down in Surat Art Silk Cloth case (CIT vs. Surat Art Silk Cloth Manufacturer's Association (1980) 2 SCC 31) Aditanar case (Aditanar Educational Institution vs. CIT (1997) 3 SCC 346) and American Hotel & Lodging Association, Educational Institute vs. CBDT(2008) 10 SCC 509). It is clear that when a surplus is ploughed back for educational purposes, the educational institution exists solely for educational purposes and not for purposes of profit." In that case, the facts of the case before the Hon'ble Supreme Court were that the University had generated huge surplus of about Rs. 500 crores from the year 1999 to 2010 by realising fees under different heads in consonance with the power vested in the University. The difference between the fees collected and actual expenditure was significant and represents only a minuscule part of the fees collected. No remission, rebate or concession in the amount of fees charged under the different heads were granted to the students. At the same time, it was noted that University has grown, number of private engineering colleges affiliated to it has increased from abo....
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....075.33 8,75,24,252.00 Total 67,73,60,833.24 69,21,70,776.00 On perusal of above figures, it is clear that over the period of 11 years, it is no doubt that the assessee society has generated surplus of Rs. 50.76 Crores but at the same time, the whole of the said surplus has been plouged backed and utilised on infrastructure to the tune of Rs. 60.19 Crores (including borrowings) . Even for the two years under consideration, there is surplus of Rs. 16.97 Crores and out of that, Rs. 9 crores have already been spent on the infrastructure. 21. The CBDT has also come out with a clarification vide its circular No. 14/2015 dated 17th August, 2015, wherein, the guidance to the Field Officers has been provided precisely on the issue under consideration on generation of surplus out of gross receipt, the relevant para is reproduced as follows:- "3. Generation of surplus out of gross receipts: A doubt has been raised whether generation of surplus out of gross receipts would necessarily 'breach' the threshold condition that the educational institution should exist 'solely for educational purpose and not for the purpose of profit'. Perusal of prescribed provisions....
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.... of above discussions, in the instant case, we are of the considered view that given that the assessee society is generating surplus year after year is not the deciding factor to determine whether it is eligible for exemption under section 11 of the Act. And on this ground alone, the exemption claimed by the assessee society under section 11 can not be denied. 25. What is relevant to examine is whether the surplus so generated is ploughed back in furthance of its educational objectives and related activities or not. As we have discussed above, there is no dispute that in the earlier years, the surplus has been ploughed back and utilised for the purposes of promotion of education through setting up educational institutions, operating them and also upgrading them from time to time for further benefits to the students at large. For the year under consideration, the assessee society has disclosed a surplus of Rs. 8,37,63,255. In terms of application of such surplus, it has shown addition to Fixed Assets amounting to Rs. 27,48,064, contribution to Jaipur National University amounting to Rs. 3,86,84,912 and amount set apart u/s 11(2) amounting to Rs. 50,00,00,00. In this regard, the A....
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....defined in section 13(3)(b) of the Act and lending of money to a related person without adequate security or adequate interest is violation of section 13(2)(a) read with section 13(2)(g) of the Act 28. The ld CIT(A) relied upon the order of the Coordinate Bench in the case of assessee society for AY 2009-10 wherein it was held that JNU is not a specified Person within the meaning of section 13(3) of the Income Tax Act and contribution made is well within the object of the assessee society and contribution made is eligible to be treated as application. The relevant findings of the Coordinate Bench are contained at para 2.8 of its order which reads as under: "2.8. We have heard and considered the arguments advanced by the parties in light of the material on record. The scheme of statutory exemption as contained in sections 11, 12, 12A, 12AA read with the provisions of Section13 is devised by the legislature in such a manner that the institutions who earn from charitable work are not liable to tax if they plough-back such earnings for further achieving the 'charitable purpose' and do not withdraw such income for utilization for any purposes other than 'charitable purposes'. The ....
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.... year existing fixed assets were also transferred whereas, in the year under consideration there is no such fixed assets were transferred to Jaipur National University and only financial assistance was provided. And therefore, the decision of the Coordinate Bench will apply equally for the year under consideration. 30. The ld AR further submitted that the main objects of the society are setting up of educational institutions and operating them for the promotion of education and there are other stipulated objectives, most of which are related to promotion and spreading of systematic education to the students. It was submitted that in terms of objectives mentioned at serial No. 3 and 7 of its bye-laws which provides for establishment and promotion of various educational institutions including schools, colleges and universities, the assessee society sponsored a university in the name of Jaipur National University (referred to as 'the University' or 'JNU'). JNU has been established and incorporated in Rajasthan as a private University under the Jaipur National University Act, 2008 (Act No. 5 of 2008) (referred to as 'the JNU Act') with the objective to undertake research and studies....
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....ncome Tax Act,1961. C) Thirdly, in substance, since on dissolution, all the assets of the University have to become assets of the Assessee, it is as good as direct investment by the assessee societyfor educational purposes. 33. It was further submitted that contributing or providing financial assistance to the institutions having similar objectives has been considered to have been applied for its own objectives by the Contributor in various judicial pronouncements. 34. In view of the above, it was submitted that the amount advanced by the Society to JNU was in accordance with the objectives of the Society and is, therefore, deserves to be treated as application of income under section 11(1)(a) of the Act. The application of the income of a trust can be for revenue or capital purpose or even assistance (temporary or permanent), loan or any other form of utilization of funds towards the objectives of the Institution. 35. Further to above, under Section 11 of the Act, the exemption from Income Tax is granted only in respect of the income applied for charitable purposes during the previous years. However, the word 'applied' need not necessarily be equated with the word 'spe....
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.... for any confusion. Not only the trust carries on charitable purpose, but it also extends assistance to such institutions carrying on these charitable purposes. assessee charitable trust formed with the object of imparting general, professional and technical knowledge and authorized to extend assistance to other institutions carrying on similar charitable activities, having made donations to other charitable trusts which are approved under s. 80G, exemption under s. 11 could not be denied to the assessee trust on the ground that the donations given by it were not utilized for the objects enumerated in the trust deed. 38. Further, on facts, it was submitted that Ld. Assessing Officer denied exemption under section 11 of the Act by alleging that the assessee society has lent an amount of Rs. 3,86,84,912/- to the persons covered u/s 13(3), without adequate security and interest and has thus, violated provisions of section 13(2)(a) of the Act and that on account of the same, the assessee society has violated the provisions of Section 13(1)(c) and 13(2)(a) of the Act.In this regard, it was submitted that Ld. Assessing Officer failed to appreciate that JNU to whom the contribution was....
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....i) covers only companies, (i) In a case where the concern is a company, if its shares(not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than twenty percent of the voting power are at the time during the previous year, owned beneficially by such person or partly by such person and partly by one or more of the other persons referred to in sub section (3); Whereas, clause (ii) covers only those concerns where a person is entitled to profits of the concern. In charitable institutions, no person is entitled to any profits. Therefore, it cannot be said that any 'specified person' has interest in the assessee societysociety. Therefore, cannot fall under section 13(3)(e). (ii) In the case of any other concern, if such person is entitled, or such person and one or more of the other persons referred to in sub section (3) are entitled in the aggregate at any time during the previous year, to not less than twenty percent of the profits of such concern." 39. It was further submitted that the assessee society has never received any contribution from JNU, therefore, the case of....
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....s Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of fifteen per cent of the income from such property; (c) income derived from property held under trust- (i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and (ii) for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to which such income is applied to such purposes outside India: Provided that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income; [(d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution.] [Explanation.-For the purposes of clauses (a) and (b),- (1) in computing the fifteen p....
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....tions are complied with, namely:- '(a) such person specifies, by notice in writing given to the Assessing Officer in the prescribed manner, the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed ten years; (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5) : Provided that in computing the period of ten years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded: Provided further that in respect of any income accumulated or set apart on or after the 1st day of April, 2001, the provisions of this sub-section shall have effect as if for the words "ten years" at both the places where they occur, the words "five years" had been substituted. [Explanation.-Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated ....
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....lanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or subclause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, either during the period of accumulation or thereafter, shall not be treated as application of income for charitable or religious purposes. Thus, payment to other trusts and institutions out of income from property held under trust in the year of receipt will continue to be treated as application of income. However, any such payment out of the accumulated income shall not be treated as application of income and will be taxed accordingly. (Emphasis supplied) It is also proposed to insert a new clause (d) in sub-section (3) of section 11 so as to provide that if any income referred to in sub-section (2) of the said section, is paid or credited to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution ....
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....er sub-clause (iv) or subclause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 to any trust or institution registered under section 12AA, except those made out of accumulated income, is also considered as application of income for the purposes of its objects. However, donation given by these exempt entities to another exempt entity, with specific direction that it shall form part of corpus, is though considered application of income in the hands of donor trust but is not considered as income of the recipient trust. Trusts, thus, engage in giving corpus donations without actual applications. Therefore, it is proposed to insert a new Explanation to section 11 of the Act to provide that any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1) of section 11, being contributions with specific direction that they shall form part of the corpus of the trust or institution, shall not be treated as application of income. It is also proposed to insert a proviso in clause (23C) of section 10 so as to provide similar restriction as above on the entities exempt under subclauses (iv), (v), (vi) or (via) of said clause in re....
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....re in consonance with the objectives of the assessee society, even the CBDT has clarified vide its circular 100 dated 24 January 1973 that the same will qualify as application of income. Clause 3 and 7 of the objectives of the assessee society as contained in its Bye-laws provide for establishment, management and control of educational institutions including Universities. The establishment, management and control include the whole gamut of activities in terms of arranging the necessary infrastructure, land and building for establishing the university and related financial activities including arranging for the financial resources from banks/financial institutions as well as contribution from the sponsoring body and donations/grant from the general public at large. As a sponsoring body of the Jaipur National University, it was the responsibility of the assessee society to provide the necessary physical and financial resources for the set up of the University. The same is manifestly clear from perusal of the Preamble to the Jaipur National university Act, 2008 and other related provisions relating to Endowment Fund and General Fund. 50. The Preamble to Jaipur National University r....
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....rastructure is utilized in incorporation as a University and the said Mahima Shiksha Samiti, Jaipur is allowed to run the University, it would contribute in the academic development of the people of the State. Now, therefore, be it enacted by the Rajasthan State Legislature in the Fiftyninth Year of the Republic of India ." 51. The clauses relating to Endowment Fund and General Fund reads as follows: "(8) Endowment Fund (1): There shall be established an Endowment of Fund as soon as may be after coming into force of this Act with an amount of rupees two crores which have been deposited by the Sponsoring Body with the State Government. (2) The Endowment Fund shall be used as security deposit to ensure that the University complies with the provisions of this Act and functions as per provisions of this Act, Statutes and Ordinances. The State Government shall have the powers to forfeit in the prescribed manner, a part or whole of the Endowment Fund in case the University or the Sponsoring Body contravenes any of the provisions of this Act or Statutes, Ordinances, Regulations or rules made thereunder. (3) Income from the Endowment Fund may be utilised for deve....
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....hat contribution to Jaipur National University during the year under consideration is in due compliance with the provisions of section 11 read with section 12 and 13 of the Act. Accordingly, the contribution to Jaipur National University will qualify as due application of income in the hands of the assessee society and the same cannot be a basis for denial of exemption under Section 11 to assessee society. 55. We now come to Revenue's Ground of Appeal No. 3 where the Revenue has challenged the action of ld CIT(A) in allowing salary expenses to the extent of the following amounts:- 90,450/- (Mrs. Mohini Bakshi), 24,750/- (Mr. M S Bakshi), 29,025/- (Mr. Sandeep Bakshi) and 25,125/- (Mrs. Preeti Bakshi) which is higher than reasonableto persons covered under section 13(3) of the Act and also one of the reasons for denial of exemption under section 11 of the Act. 56. As per the Assessing officer, the salary paid to the members of Bakshi family who are persons referred in section 13(3) of the Act has been increased sharply in comparison to the salary paid during the preceding year and is much higher than those paid to the head of the institutions.The Government allows upgradation ....
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.... to increase in activities. Ld AO failed to appreciate the service rendered by concerned persons as required by the law and rather compared with unsubstantiated rate of increment of other organization. Thus, the increase in salary cannot be said to be unreasonable. 60. It was further submitted that as the Society is expanding, the work load is also multiplying. The same is evident from the fact that, during the year under consideration total receipts of the assessee society increased by 23.22% in comparison to immediate preceding year. The work load on each and every responsible person of the Samiti has increased very much. The details of work responsibilities of the persons belonging to Bakshi family whose part of salaries is disallowed are placed at APB 150-156. Thus, the members to whom salary is paid do not fall under the purview of section 13(2)(c) of the Income Tax Act, 1961. 61. It was further submitted that all the members of Bakshi family who are entitled to salary are the key persons for the management of all the activities of the assessee society. Therefore, all these expenses are under the commercial expediency of the assessee society and are incurred wholly and e....
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....rk, the increase in salary over and above 3% has been considered as unreasonable and added to the total income of the assessee society. While doing so, the AO has invoked the provisions of section 13(1)(c)(ii) of the Act, which provides that "in the case of firm, trust for charitable purposes or a charitable institutions any income thereof , if any part of such income or any property is during the previous year used or applied directly or indirectly for the benefit of any person referred to in sub-section (3)". Further, Section 13(2) provides that "without prejudice to the generality of the provisionscontained in clause 13(1)(c), the income or property of the trust or institutions or any part of such income or property shall for the purposes of clause 13(1)(c) be deemed to have been used or applied for the benefit of a person referred to in section 13(2) of the Act if any amount is paid by way of salary , allowance or otherwise during the previous year to any person referred to in sub-section (3) out of the resources of the trust or institutions for services rendered by that person to such trust or institutions and the amount so paid is in excess of what may be reasonably paid for ....
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.... with maximum efficiency. e. Evaluating the results of the students and suggesting the changes in the direction of improving performance. f. Travelling extensively with the country and to other countries to select and expose the staff members to the latest educational technologies and to provide the best opportunities for in service training. The collaborate with universities and schools abroad for academic and cultural exchange programmes to provide global exposure to students. 4. Interacting with the staff members at the human and social level to solve their problems and enhance their quality of life. 5. Co-ordinating with the Samiti a Keeping the executive informed regarding the working of institutions under the group and their progress in meeting objective of the Samiti. b. To introduce and forward motions for the development and expansion of the group for example by establishing Jaipur National University. 6. General Administration a. To make certain that the day-to- day running of the institutions under the group is efficient through a study of all academic records. b. counselling of students in order to develop g....
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....sks associated with the establishment and running of the Jaipur National University. 6. Overseeing the day-to-day administration of the institutions under the group Seedling Public School, Seedling Modern High School and Jaipur National University. a. Facilitating recruitment of quality personnel at various level including administrative, clerical teaching faculty & security staff. b. Monitoring maintenance of buildings and essential facilities. Coordinating and keeping check on new construction as and where required. c. Dealing with matters related to tax payments. d. Handling and legal matters of the group. e. Finalization of accounts and Balance Sheets including day to day running expenses, fee collection, salaries & infrastructural expenses. f. Monitoring the efficient handling of the transport requirements of both staff & students. 7. Interacting with the media & organizing the medial campaign for the institutions of the group to show case the Brad and enhance brand value. 69. Dr. Preeti Bakshi who is a member of the assessee society is a practicing MBBS Doctor. Her area of work responsibility are as under: 1. Ensuring t....
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....lop good moral values and overall personality development. 7. Undertaking any other work delegated by the Samiti. 8. A qualified doctor, Dr. Preeti Bakshi looks after the day to day counselling of the students in the various institutions of the group. She also looks after the medical programme being run by the institution for the medical and dental check up of students 70. Similarly Mr. M.S. Bakshi who is a member of the assessee society holds a Bachelor degree in Engineering and his area of work responsibility are as under: 1. Ensuring that the institutions run by the group are progressing towards the objectives laid down by the Mahima Shiksha Samiti. 2. To oversee the efficient management of the transport system in the institutions of the Group including fitness of vehicles as per norms, transport arrangement, fees, etc. 3. To undertake tours to study of the institutions of the group. 4. Conducting Bank transactions of the group. 5. Monitoring fee accounts. 71. Now if we look at the remuneration which has been paid to the members of the Bakshi family over the last three years, the figures are as under: Year 2007-2008 2008-2009 2....
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....e scaleand size and having similar strength of student and infrastructure wherein keep managerial person having been paid lesser salary. Further the Courts have held from time to time that the reasonableness of the expenditure is to be adjudged from the point of view of an business man and not of the Revenue. In other words, the reasonableness has to be seen vis-a-vis legitimate needs of the assessee society and benefit derived or accruing to the assessee society and as determined by the assessee society. It is also noted that in the past consistently over the years, the matter relating to reasonableness of the salary paid to the members of the Bakshi family have been raised by the Revenue and the Coordinate Benches have consistently held in favour of the assessee society and have not seen any justifiable basis for such action on the part of the revenue. For one of the years i.e. A.Y. 2009- 10, the Revenue has accepted the order of the Ld. CIT(A) upholding the salary paid to these persons. In the entirety of the facts and circumstances of the case, we are of the view that the salary paid to the members of Bakshi family are commensurate with qualifications and experience as well as ....
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....xpenditure was incurred for activities incidental to or for furtherance of the object of the society. 77. It was submitted that the expenditure related to the foreign travel and incurred on account of purchase of air ticket, foreign currency and hotel bookings and these payments have been made to the tour operator through account payee cheque, hence, available for verification. The copy of the Ledger Account for the foreign travel as well as the tour operator containing the details of the payment through bank is placed at APB 158-179. 78. It was submitted that as far as tour of Mrs. Mohini Bakshi and M.S. Bakshi is concerned, Ld. A.O. himself at Page 27 of his order held that the tour of these people are incidental to the objective of the society, therefore, proportionate disallowance with respect to the tour of these persons amounting to Rs. 4,46,073/- is contrary to his own findings. 79. It was submitted that as far as tour of Mrs. Preeti Bakshi is concerned, it was held by AO that amount of foreign currency purchase is not subject to verification. However, in light of the enclosed Ledger Account and the fact that the payment has been made through the banking channel, th....
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....ties provided. Moreover, the visits to such old, renowned and well-established educational institutions gave valuable insights to the member of assessee societysamiti about how to turn an educational institution in the best possible manner and how to manage the affairs of a large educational institution in an efficient manner. During visits to these educational institutions, talks were held with the management of some of these institutions for a possible future tie-up, student/teachers exchange program and also took/ learned valuable insights/ideas or running the new University i.e. Jaipur National University of which the assessee societySamiti is the sponsoring body. The detailed tour reports alongwith invitation received from Beden-Wurttemberg, Germany and e-mail exchanged are placed at Paper Book Page # 180-191. 84. It was submitted that the office bearers who are at the helm of the affairs of such a large and multi-disciplinary educational institutional set up, such visits are required for the following reasons:- - Office bearers and other persons at the helm of a modern educational institutions ought to be well equipped and advanced in terms of all round knowledge and in....
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....m Assessee's institutions. These visits helped the assessee society in conclusion of certain understandings with foreign educational institutions regarding teachers and students exchange programmes, cultural exchange programmes etc. The evidence and reference appears relating to the same are placed at Paper Book Page # 180-191. 86. It was submited that these documents show that the foreign travel visits of the persons who are at the helm of assessee society affairs have substantially benefited the assessee society in respect of its objectives of imparting all round education and producing globally competitive students. Further, such associations with the foreign educational institutions have also helped in increasing the popularity and revenues of the assessee society. Thus, the foreign travel expenditure is justified and reasonable. Since, such details are available during the year under consideration, therefore, the decision of the Tribunal for AY 2003-04, 2004-05, 2006-07, 2007-08, 2008-09 and 2009-10 would be applicable and the decisions of AY 2001-02, 2002-03 and 2005-06 would not be applicable. 87. It was submitted that the expenditure incurred on foreign tours are in c....
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....schools for near future. Further there is an official invitation to visit Germany as part of the student exchange programme from 25th May to 28th June 2009. 91. In respect of the visit by Mrs. Preeti Bakshi whose job responsibilities include to collaborate with Universities and Schools overseas for academic purposes, and to provide global exposure to students as well as to explore areas for students and teacher exchange programme with other schools and universities based overseas, she has visited China and Hongkong. As per the tour report which is available on record and not disputed by the Revenue, she visited China during the period 1 -12 June 2009 to exploreareas of collaboration and potential of English teachers from India being send to China to teach in various schools and colleges. As part of her visit, she visited British International School Beijing, Beijing City International School, and Shaghai American School of Guangzhou. In terms of visit to Hong Kong during 27th December to 2nd January, 2010, she visited Hong Kong as part of the team working actively towards implementation of the International Baccalaureate Programme at the seedling Group of Institutions and as par....
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....of depreciation. 96. The ld AR drawn our attention to the amendment in the statute whereby sub section (6) was inserted to section 11 by the Finance (No. 2) Act, 2014, which is reproduced as follows:- "(6) In this section where any income is required to be applied or accumulated or set apart for application, then, for such purpose the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year." 97. The applicability of subsection 6 to section 11 has been discussed in the memorandum explaining Finance Bill 2014, wherein it is stated that "The said amendment will take effect from 1st April, 2015 and will accordingly, apply in relation to the assessment year 2015-16 and subsequent years." Thus, with the insertion of said sub-section (6), it was submitted that the controversy has been settled and upto A.Y. 2014-15, income can be determined after deduction or allowance of deprecation in respect of assets, acquisitions of which has been claimed as an application of income. Thus, the disallowanc....
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....ption in respect of income derived from property held under trust, such income should be applied for the charitable purposes in India, and where such income cannot be so applied during the previous year, it has to be accumulated in the prescribed modes. It is proposed to insert sub-sections (6) and (7) in the said section so as to provide that- (i) where any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined without, any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in any previous year, and (ii) where a trust or an institution has been granted registration under clause (b) of sub-section (1) of section 12AA or has obtained registration at any time under section 12A [as it stood before is amendment by the Finance (No.2) Act, 1996] and the said registration is in force for any previous year, then, nothing contained in section 10 [other than clause (1) and clause (23C) thereof] shall operate to exclude any income derived from the property held under trust from the total income....
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....ature, was applied in the case of Vijay v. State of Maharashtra. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are confronted with any such situation here. 34. In such cases, retrospectively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors". 25. The Apex Court in the said jud....
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.... deductions from its gross income. In computing the income of a charitable institution/trust depreciation of assets owned by such institution is a necessary deduction on commercials, hence, the amount of depreciation has to be deducted to arrive at the income available. (6) In view of the discussions made above, we find ourselves in agreement with the view taken by the Bombay High Court in DIT (Exemptions) vs. Framjee Cawasjee Institute (supra) and the Cit vs. Institute of Banking (supra). The substantial question framed in the instant matter , thus is answered in the terms that the Income Tax appellate Tribunal rightly allowed depreciation claimed by the assessee society on capital assets for which capital expenditure was already given in the year under consideration." 101. The ld DR submitted that the Revenue has not accepted the said above decision of the Hon'ble Rajasthan High Court and a prayer for special leave petition against the said order has since been admitted by the Hon'ble Supreme Court. In his rejoinder, the ld AR submitted that the admitting of an SLP against the order of Hon'ble Rajastahn High Court is no bar for the Tribunal and any of the lower authorities ....
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....à¥à¤¥à¤¾à¤“ं की सà¥à¤¥à¤¾à¤ªà¤¨à¤¾ करना à¤à¤µà¤‚ उनका संचालन व नियंतà¥à¤°à¤£ करना । शिकà¥à¤·à¤¾ के अधिकाधिक पà¥à¤°à¤¸à¤¾à¤° हेतॠराजà¥à¤¯ सरकार / केनà¥à¤¦à¥à¤°à¥€à¤¯ सरकार / अनà¥à¤¯ संसà¥à¤¥à¤¾à¤¨à¥‹à¤‚, कमà¥à¤ªà¤¨à¤¿à¤¯à¥‹à¤‚ से जानकारी à¤à¤µà¤‚ सहयोग पà¥à¤°à¤¾à¤ªà¥à¤¤ कर उनका कà¥à¤°à¤¿à¤¯à¤¾à¤¨à¥à¤µà¤¯à¤¨ करना। समिति के अनà¥à¤¤à¤°à¥à¤—त पà¥à¤°à¤¾à¤¥à¤®à....
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....निà¤à¤¾à¤¨à¤¾ । विà¤à¤¿à¤¨à¥à¤¨ पà¥à¤°à¤•à¤¾à¤° के चिकितà¥à¤¸à¥€à¤¯ शिकà¥à¤·à¤£, पà¥à¤°à¤¶à¤¿à¤•à¥à¤·à¤£ संसà¥à¤¥à¤¾à¤¨à¥‹à¤‚, नरà¥à¤¸à¤¿à¤‚ग à¤à¤µà¤‚ अनà¥à¤¯ की सà¥à¤¥à¤¾à¤ªà¤¨à¤¾ करना, शिकà¥à¤·à¤£ व पà¥à¤°à¤¶à¤¿à¤•à¥à¤·à¤£ संसà¥à¤¥à¤¾à¤¨à¥‹à¤‚ का संचालन व नियनà¥à¤¤à¥à¤°à¤£ करना। विà¤à¤¿à¤¨à¥à¤¨ तकनीकी, अà¤à¤¿à¤¯à¤¾à¤‚तà¥à¤°à¤¿à¤•à¥€, पà¥à¤°à¤¬à¤¨à¥à¤§à¤•à¥€à¤¯, वैजà¥à¤žà¤¾à¤¨à¤¿à¤•, शैकà¥à¤·à¤¿à¤• संसà¥à¤....
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....•à¤¿à¤¤à¥à¤¸à¤¾ पदà¥à¤§à¤¤à¤¿à¤¯à¥‹à¤‚ से संबंधित असà¥à¤ªà¤¤à¤¾à¤² बनाना, रिसरà¥à¤š सेनà¥à¤Ÿà¤°, सà¥à¤ªà¥‡à¤¶à¤²à¤¾à¤ˆà¤œà¥‡à¤¶à¤¨ à¤à¤µà¤‚ रिहेबिलिटेशन सेनà¥à¤Ÿà¤°, ओलà¥à¤¡ à¤à¤œ होम की सà¥à¤¥à¤¾à¤ªà¤¨à¤¾, संचालन व नियंतà¥à¤°à¤£ करना । विदà¥à¤¯à¤¾à¤²à¤¯à¥‹à¤‚, कॉलेजों, संसà¥à¤¥à¤¾à¤¨à¥‹à¤‚ के संचालन à¤à¤µà¤‚ उनकी सà¥à¤¥à¤¾à¤ªà¤¨à¤¾ हेतॠराजकीय / अराजकीय सà....