TaxTMI 
TaxTMI 
2020 (11) TMI 559
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....s of the case are that the assessee trust is a charitable society registered u/ s 12 A and 10 (23 C)(vi) of the Act. During the impugned year the AO noted that the assessee had made payment of rent to the secretary of the assessee society amounting to Rs. 69 lacs. On making enquiries he found that the said rent was on the higher side as compared to the market rate. Accordingly, he held that the assessee had provided benefit to the secretary/ trustee and, therefore, invoking the provisions of section 13 (1) (c) read with section 13 (3) of the Act, he denied exemption u/ s 11 of the Act to the extent of rent so paid. 4. The matter was carried in appeal before the CIT(A) who upheld the f indings of the AO. 5. Aggrieved by the same, the assessee has come up in appeal before us, raising the following grounds: "1. The orders of The Ld CIT (Appeals)-II confirming the orders of the learned Deputy Commissioner of Income Tax (Exemptions) are against the law and facts of the case as the orders have been passed in mechanical manner with general remarks of huge payments to trustee on account of payment of rent of Rs. 69,00,000/- for renting out 54600 Sq Ft of area to the society ....
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....wing our attention to the facts relating to the payment of the rent as outlined in his submissions made before the Ld. CIT(A) and reproduced at page 7 of the order, the Ld. Counsel for the assessee contended that the lessor Capt. Amarjyot Singh Gyani was the absolute owner of the land and buildings in the property comprised in Village Mangoti, Teshil Kasauli distt Solan HP, measuring about 18 Bighas on the main road, which was on rent with the assessee "Lessee" i.e Pinegrove International Charitable Trust (Regd) since 1991. These rented buildings were situated on the main Kasauli Road, PO Dharampur-173209, in Distt. Solan HP, in which the trust was running a fully residential Senior Secondary School (Affiliated with CBSE). The trust was utilizing these buildings for Academic Classes, Laboratories, Dining Hall, Kitchen, Stores, parking speces, Hospital, Doctor's and Nurses's residences, Staff rooms, blocks of Staff Quarters, Play-fields, Two Basketball Courts, Guest Houses and the main Academic and Administrative Offce Blocks etc. Total covered area of these buildings was approximately 54600 sq.ft for which a rent of Rs. 69,00,000/- had been paid which came to Rs. 10.53 per ....
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....the assessee drew our attention to the decision of the Hon' ble Apex Court in the case of CIT(Exemptions) Vs. Bola Ram Education Society (2019) 101 Taxmann. com 193 pointing out therefrom that the issue regarding the payment of reasonable rent to an interested person having regard to the fair market value of the property was decided in favour of the assessee. The Ld. Counsel for the assessee further emphasized that the AO had treated the rent paid as unreasonable without any corroborative evidence and cogent material on record and without contradicting comparable cases and past history of the assessee provided by the assessee. The Ld. Counsel for the assessee drew our attention to the assessment order wherein the findings of the AO regarding the unreasonableness of the rent were recorded at page No. 4 as under: "Assessee has paid rent of Rs. 69, 00, 000 /- to Capt. Amarjot Singh Gyani, which is on higher side and the rent paid is not genuine and reasonable. The lease amount is higher side because assessee is paying Rs. 69, 00, 000 for 54, 600 sq. f t. (as per reply of assessee), which comes Rs. 126. 37 per sq.ft. per annum, which is higher side compared to market rate. In ....
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....erty that vests in the trust for charitable purposes. Lease deeds by their very nature can be rescinded. (iv) Since, this is the case of a public body dealing in public money, the off quoted principle, that the AO can not step into the shoes of a businessman, would not be relevant in the case. Here, the beneficiaries, the society at large and equal stakeholders in the transparent functioning of bodies wear altruism as their motive on their collars. (v) It is relevant to mention that the CBSE for granting affiliation to an institution upto 1000 students (the school in contention has only 600 students) requires only 1 acre of land as a necessary conditionality to be met. (vi) Institutions/ entities claiming to be altruistic and getting exemptions can' t be seen to be indulging in aggrandizement of assets even through not required for optimal facilities in the premises. In light of all of the above it is held that the rent being paid to the trustee is entirely unnecessary and is aimed at indirectly benefitting the trustee who comes within the realm of person envisaged in section 13 of the Act. The entire payment is held to be unreasonable in ter....
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....nefit being given by the assessee society to the specified person. 15. Considering the entire facts of the case we are not in agreement with the Revenue on this account. The assesse, we find, had duly demonstrated the reasonableness of the rent paid comparing the per sq. ft. rent paid per month in the present case which came to Rs. 10. 53, with other comparable cases which varied from Rs. 28. 84 on premises leased to Punjab National Bank to Rs. 62 on premises leased to ING Vysya Bank in the same vicinity. No infirmity in the aforesaid facts has been pointed out by the Revenue before us, nor has, we find the AO done so during assessment proceedings when the same was brought to his notice, or the Ld. CIT(A) who did not consider it necessary to comment on the same. Moreover the rent paid to Sh. Amarjyot Singh, we find was found reasonable by the I TAT in A. Y 2003 - 04 & 2004 - 05, when identically exemption was denied by the AO. The Ld. DR has not brought to our notice any distinguishing facts vis a vis those years. Further in subsequent assessment years, i. e from A. Y 2010 - 11 TO A. Y 2014 - 15, the Revenue made no such addition to the income of the assessee society in scrutiny....