TaxTMI 
TaxTMI 
2018 (4) TMI 1056
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....ers on loan from M/s Hewlett Packard Financial Services (India) Pvt. Ltd. for the use of educational institutions. In fact, a lease agreement was also entered into. According to the Ld. representative, the payment of lease was claimed as revenue expenditure. The agreement of lease was made through M/s A- Team Computers. According to the Ld. representative, the assessee paid the lease charges which is not in dispute. The computers taken on lease is also very much available in the institutions. 4. The Ld. representative for the assessee further submitted that during the course of survey, the Revenue authorities found that certain amounts were paid to interested persons under Section 13(3) of the Act. Referring to copies of the rental and financial agreement, which are available at pages 2 to 5, the Ld. representative submitted that the existence of rental agreement is not disputed by the Revenue. Referring to page 6 of the paper-book, the Ld. representative submitted that this is the document which evidences the purchase of computers by the assessee from M/s A-Team Computers. The acceptance certificate is available at page 7 of the paper-book. According to the Ld. representative, th....
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....in Director of Income Tax (Exemptions) v. Sheth Mafatlal Gagalbhai Foundation Trust (2001) 249 ITR 533. Therefore, according to the Ld. representative, there was no violation of Section 13 of the Act, hence, the CIT(Appeals) is not justified in confirming the addition made by the Assessing Officer. 6. On the contrary, Shri B. Sahadevan, the Ld. Departmental Representative, submitted that the assessee is a charitable institution which established several educational institutions. One M. Kandasamy, S/o Muthusamy Gounder and Smt. K. Malarvizhi, wife of the above said Shri M. Kandasamy are the trustees of the assessee-trust. The said Shri Kandasamy is also engaged in the business in the name of M/s Nycil / N tex Group of companies which manufactures and exports hosiery garments. According to the Ld. D.R., there was inspection by TDS Wing of the Department which found certain incriminating material in the premises of the assessee-trust. One of the incriminating material was a ledger folio in the books of M/s A-Team Computers which shows that the amount received by M/s A-Team Computers to the extent of Z1,96,16,500/- was redistributed to some of the creditors of the trust. Since there w....
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....or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution : Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), in so far as such use or application relates to any period before the 1st day of June, 1970 ; 1(d) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof, if for any period during the previous year- (i) any funds of the trust or institution are invested or deposited after the 28th day of February, 1983, otherwise than....
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....as such use or application relates to any period before the 1st day of July, 1972, no regard shall be had to the amendments made to this section by section other than sub-clause (ii) of clause (a) thereof of the Finance Act, 1972. (2) Without prejudice to the generality of the provisions of clause (c) 4and clause (d) 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 interest or both ; (b) if any land, building or other property of the trust or institution is, or continues to be, made available for the use of any person referred to in sub- section (3) for any period during the previous year without charging adequate rent or other compensation ; (c) if any amount is paid by way of salary, allowance or otherwise during the previous year to any person ....
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....ithout prejudice to the provisions contained in clause (d) of that sub-section, in a case where the aggregate of the funds of the trust or institution invested in a concern in which any person referred to in sub-section (3) has a substantial interest, does not exceed five per cent. of the capital of that concern, the exemption under section 11 or section 12 shall not be denied in relation to any income other than the income arising to the trust or the institution from such investment, by reason only that the funds of the trust or the institution have been invested in a concern in which such person has a substantial interest. (5) Notwithstanding anything contained in clause (d) of sub-section (1), where any assets (being debentures issued by, or on behalf of, any company or corporation) are acquired by the trust or institution after the 28th day of February, 1983, but before the 25th day of July, 1991, the exemption under section 11 or section 12 shall not be denied in relation to any income other than the income arising to the trust or the institution from such assets, by reason only that the funds of the trust or the institution have been invested in such assets if such funds do....
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....nty per cent. of the voting power are, at any 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) ; (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 per cent. of the profits of such concern." 8. For the purpose of violation of Section 13 of the Act, any part of income of the trust has to be used or applied directly or indirectly for the benefit of persons referred to in sub-section (3) of Section 13 of the Act. Under sub-section (3) of Section 13 of the Act, the persons referred are as follows:- (i) the author of the trust or founder of the institution; (ii) any person who has made a substantial contribution to the trust; (iii) in case the author or founder is a member of HUF, a member of the family, any trustee or the manager of institution or relative of such author / founder, person, etc. 9. In this case, the payment was said to be made to Ms.Savitha, Ms.Swathika, ....