TaxTMI 
TaxTMI 
2017 (9) TMI 965
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....law and on facts in not treating the addition to the corpus fund of the assessee amounting to Rs. 94,60,000/- as income of the Trust. 5. The learned CIT(Appeals) has erred in law and on facts in not treating the addition to Development Fund amounting to Rs. 32,69,000/- as income of the Trust. 6. The learned CIT(Appeals) has erred in law and on facts in considering the expenditure on donation of Rs. 48,73,831/- to Delhi Public School as part of expenditure. 7. The learned CIT(Appeals) has erred in law and on facts in considering the investment in fixed assets amounting to Rs. 13,51,02,167/- as applied to Charitable purpose and allowed as deduction from the amount of income. 8. The CIT(A) has erred in law and on facts in allowing the depreciation of Rs. 13360206/- on fixed assets claimed as deduction u/s.11 of the Act, ignoring that benefit of deduction has already been given in the very first year by way of application of income." 3. Learned Departmental Representative refers to Revenue's first substantive ground that this assessee / trust is not registered u/s.12AA of the Act. We find no merit in the instant plea as page 31 of the paper book sufficiently indicates that the DIT....
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....nvestment in properties in land and building by the trustees to whom the payment of rent is excessive. On perusal of the balance sheet in the case of Smt. Manjula Goenka, it is seen that the value of land is shown Rs. 15,13,894/- and in case of Ramesh Prasad Goenka HUF the value of the land is Rs. 14,00,000/-. As per Lease Agreement the area of the land is 36,355 sq.mts. of N.A. land plus 1,00,000 sq. mts. of another land in the case of Ramesh Prasad Goenka HUF. During the course of appellate proceedings, the appellant has submitted that the total area of the land itself, the investment made by the land owners is not relevant for the purpose of determining the reasonableness of the rent by the appellant Trust because what has been leased as the entire land, includes both N.A. as well as non-N.A. land along with construction. N.A. land has been utilized for the purpose of construction, whereas non-N.A. land has been utilized for the purpose of play-area, garden, etc. which are also part of the school activities. Further, the appellant has submitted that in the case of Smt. Manjula Goenka, the amount which has been spent on construction of the school building is Rs. 1,10,67,812/- ....
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....n comparing the same with the market rate of the land, amount spent on the construction of the school building, lock-in-period of 30 years of the lease agreement on the basis of the book value. The A.O. has not made any efforts to work out what is the average rent paid for the building or land and he has simply looked at the amount of the rent compared with book value of land and held that substantial rent is being paid and therefore, the same is considered as excessive. The rent cannot be excessive or otherwise, without comparing with; what is the rent paid without considering the prevailing rent and other circumstantial conditions such as lease period, type of use, period of lease, etc. It is also seen that in the earlier years the rent paid as per agreement has been allowed to the appellant as deduction to the appellant on the basis of same agreement and book value. The AO has not discussed about the lease agreement in his order. The appellant has also submitted that both the persons are assessed to tax on maximum marginal rate and regularly filing return of income. Therefore, I am of the view that there is no diversion of income also, as contended by the A.O. The appellant ....
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....section 11 of the Act, and, hence, the exception has to be stated and established by the person who seeks to invoke and apply the exception". Further, reliance is also placed on the judgment of Delhi High Court in the case of Pariwar Sewa Sansthan (supra) wherein the issue relating to the payment of house rent was discussed. From the point of view of reasonableness and considering the location of the house and the fact that no material has been brought on record indicating that the same is excessive, rent paid to the persons covered u/s. 13(3) has been held to be reasonable and accordingly, cancellation of registration by the A.O. has been held to be improper. During the course of appellate proceedings, the appellant has also drawn my attention to the judgment of Hon'ble ITAT, Ahmedabad in the case of Adharshila Education & ... Vs Department of Income Tax vide FTA No. 2221/Ahd/2008 dated 30/11/2010, wherein the similar issue has been decided as under: "Regarding disallowance out of claim of building rent and bus rent belonging to Adharshila Associates we are of the view that reasonableness of payments in respect of such assets cannot be decided on the basis of rate of intere....
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....as excessive ones. It has further come on record that the assessee had been paying similar rents in preceding assessment years as well. It places on record assessment order(s) pertaining to earlier assessment years not showing any such disallowance. The Revenue fails to rebut all these findings with the help of any cogent evidence on record. We therefore affirm the CIT(A)'s findings under challenge. The Revenue's second and third substantive grounds are accordingly rejected. 7. Next comes Revenue's fourth substantive ground that the CIT(A) has erred in law and on facts in deleting corpus fund addition of Rs. 94,60,000/- made in assessee's income. Learned Authorized Representative points out that there is no specific discussion in assessment order dated 22.01.2013. He then states that the corresponding computation in page 8 of the above assessment order added the impugned corpus fund amount as assessee's income. The CIT(A) on the other hand holds in para 8.2 that such a corpus is not assessable as taxable income as per case law DIT(E) vs. N. H. Kapadia Education Trust (2012) 20 taxmann.com 702 (Ahd) and ITO vs. Sardar Vallabhbhai Education Society (2012) 26 taxmann.com 174 (Ahd.). ....
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....eable as income. We therefore find no reason to upset CIT(A)'s above extracted conclusion. This fifth substantive ground is accordingly rejected. 10. The Revenue's six substantive ground pleads that the CIT(A) has erred in law and on facts in considering expenditure on donation of Rs. 48,73,831/- to Delhi Public School as part of expenditure. There is again no discussion in assessment order. The Assessing Officer has added the impugned sum in page 8 tabulation. The CIT(A)'s order accepts assessee's arguments as follows: "11.2 I have considered the facts of the case, assessment order and the submissions made by the appellant. Ground No. 6 is related to disallowance of Donation of Rs. 48,73,831/- given by the Appellant. The A.O. has not discussed in his Assessment Order the reason why he has disallowed the same but it appears that he has disallowed the same treating the Appellant as AOP. As per provisions of sec. ll(l)(a) of the Act, the Trust has to apply its income for the purpose of charitable purposes and there is no bar on a Trust not to donate to another Trust. Donation given to another Trust is tantamount to application of income. The appellant has relied upon the decision ....
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....t v. CIT [1998] 230 ITR 636 and CIT v. Tiny tots Education Society 330 ITR 21 (P&H) as well as the decision of the Gujarat High Court in the case of Satya Vijay Patel Hindu Dharmashala Trust v. CIT 86 ITR 683 wherein it has been "Held that the amount spent by the trustee in the construction of the new dharamshala was an application of income towards the charitable purposes of the trust". In all the judgments it has been held by the higher authorities that the amount utilized for Requiring Fixed assets is allowable as application of income as per sec. 11(1)(a) of the Act. There are two separate issues one is pertaining to application of income and other is computation of income. In application of income of trust, amount applied for acquiring fixed assets is considered as eligible, therefore this ground of appeal is allowed and AO is directed to allow amount of investment in the fixed assets as part of application of income as per sec. 11(1)(a)." 13. Heard both the sides. Learned Departmental Representative quotes case law Lissie Medical Institutions vs. CIT 348 ITR 344 (Kerla) to contend that the CIT(A) had rightly made the impugned disallowance. He however fails to dispute that th....