TaxTMI 
TaxTMI 
2025 (5) TMI 2131
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....nd in the circumstances of the case and in law, the Id. CIT(A) for the AY 2017-18 has erred in deleting the addition of Rs. 3,30,82,692/- (25% of Rs. 11,90,73,294/-+ Rs. 1,32,57,474/-) on account of payment made to related parties by treating the payments was made as per fair market value. The Ld. CIT(A) has not take into consideration that the payments have been made by the assessee company to its Holding Company without following any qualitative screening process to select the most suitable vendor, which could provide the assessee company, the same quality services and that too at extremely competitive rates. Therefore, the payment of amounts paid to specified person of the assessee company cannot be treated as reasonable and hence the provision of section 13(1)(c) are clearly attracted in the case of the assessee. 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) for the AY 2017-18 has erred in deleting the addition of Rs. 21,79,000/- by stating that Due to the violation of Section 13, the assessee cannot be denied the benefit of Sections 11 and 12. Since the benefit u/s 11, 12 and 13 of the Act has been denied the contribution rece....
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.... of various schools and institutions run by the said Trust. The assessee was accorded registration u/s 12A of the Act on 30.05.2006. During the year under consideration, the assessee was running nine schools in Gujarat and Rajasthan. The AO has made an addition of Rs. 3,30,82,692/- for the reason that alleged benefit has been provided to persons specified in section 13(3) of the Act. The AO has taken into consideration the payment of Rs. 11,90,73,294/- made to Altus Learning Pvt. Ltd. on account of 'management fees' and 'other expenses' and a payment of Rs. 1,32,57,474/- made to YALI Education Company Pvt. Ltd. on account of 'other expenses.' The AO held that the expenses were unreasonable and the relevant findings of the AO in this context are as follows:- "4.15 Based on above it is implicit that the financial condition of the Holding Company is not strong enough to support and provide necessary infrastructure and support for all the services, for which purported payments have been made by the assessee company to its Holding Company. It is also a fact that the activity of running and operating schools do require certain types of services. It is noted that the payments to ....
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....ing the business profits of the Holding Company. In the light of above, around 25% of amount paid to the Holding Company in respect of management fees is being disallowed and added to the income of the assessee company. Addition of Rs. 3,30,82,692/- (25% of Rs. 11,90,73,294 /- + Rs. 1,32,57,474/-) is being made on this account. (Addition of Rs. 3,30,82,692/-)" 4. The ld.CIT(A) has deleted this addition with the following relevant findings:- "Ground No. 1:- The ground of appeal has been raised against an addition of Rs. 3,30,82,692/- made by Ld. A.O. on account of benefit provided to persons specified in section 13(3) of the Act. The appellant Calorx Education and Research Foundation (CERF) is a not for profit company incorporated on 24.03.2005 within the meaning section 8 of Company Act. During the course of assessment proceedings, the Ld. AO observed that a payment of Rs. 11,90,73,294/- has been made to M/s Altus Learning Pvt. Ltd.(ALPL) for management fees and other expenses and a further sum of Rs. 1,32,57,474/- has been paid to M/s Yali Education Company Pvt. Ltd (YECPL) for other expenses. The Ld. AO treated payments to the extent of 25% made to t....
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....ent of Rs. 1,54,45,950/- was made for provision for buses by ALPL to various schools of the Appellant. To provide school bus facility to the Delhi Public School, Bhopal and Delhi Public School, East Ahmedabad, and also in other schools the Appellant availed the services of buses of ALPL. The quotation for bus usage charges from independent bus operator has also been provided. c. Further, the appellant has also submitted the justification for payments for infrastructure uses of Rs. 1,79,48,681/- as per the table below:- Sr. No. Location Agreement Dated Type of Property Cost of Assets at Altus Learning Pvt. Ltd. Area (Sq. Ft.) Per Sq.ft. Amt. Basic Rent Amount Total Amount with services tax 1 Delhi Public School, Bopal, Ahmedabad 01.08.20216 Land and Building 55232084 18500 18 3996000 (No increase since 2014) 4592070 2 Delhi Public School East, Ahmedabad 01.08.2016 Building 31799408 22200 16 4262400 (no increase since 2014) 4898200 3 Calorx Public School MundraSpecial Economic Zone (SEZ) 07.12.2012 Building 73390885 53896 6.5 4200000 (no increase since 2012) 4826500 ....
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....assessment proceedings, the copies of which have also been provided during the appellate proceedings. These agreements include those dated 31.03.2016, 21.05.2016 and another agreement dated 21.05.2016. The appellant has also provided ledger accounts of YECPL in its books of accounts. Sample invoices of third party contractors have also been placed on record wherein the service charges range between 7.5% to 8%. The appellant has also provided the basis of payments and justification of the expenditure as well through calculations. From the forgoing, in respect of all the payments made to ALPL and YECPL, it is evident that the Ld. AO had not raised any objection on the genuineness of the expenses. No discrepancy in the books of account of the appellant have been brought on record by the Ld. AO which could have warranted the rejection of books of accounts. The Ld. AO has not brought out any reason or comparison to show that inflated expenses have been booked by the appellant. The Ld. AO has also not given a reason or produced any documentary evidence to substantiate his decision for bench marking 25% of the expenses as excessive while during the earlier A.Y.'s the submissions ....
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.... the same could have been on the basis of substantive evidence establishing that these expenses were not bona fide, which is not done. The findings arrived by the CIT(A) are on the basis of appreciation of facts which have been left out of consideration of the AO and we find no reason to interfere in the same. 6. The next addition in dispute is of Rs. 21,79,000/- for corpus donation which the AO has disallowed consequent to withdrawal of benefit u/s 11 and 12 of the Act for the alleged violation of section 13 of the Act. There is no dispute with regard to the genuineness or identity of the donors and in the aforesaid discussion with regard to the addition amounting to Rs. 3,30,82,692/-, we have examined the issue including that the AO was unable to make out a case of benefit being provided to persons specified in section 13(1)(c) of the Act. Thus, this ground is rightly determined by the CIT(A) in favour of the assessee and we sustain the same. 7. The next ground arises out of addition of Rs. 40,80,000/- made on account of payment of royalty to specified persons u/s 13(3) of the Act. The assessee is paying royalty to holding company/ALPL for using 'Calorx' word, the AO has ob....
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.... parties. 4.9 In view of the above, the amount of trademark charges/royalty allegedly paid by the assessee company to its Holding Company is hereby disallowed. (Addition: Royalty Payment of Rs. 40,80,000/- )" 8. The CIT(A) has intervened in these findings and has held as follows:- "Ground No. 3:- The ground of appeal has been raised against addition of Rs. 40,80,000/- on account of royalty payments by the assessee company to its holding company (ALPL). During the course of assessment proceeding, the Ld. AO has stated that the assessee company is paying royalty to its holding company even though it was in existence before the holding company. Hence, the brand name/ trade name for which assessee company is paying royalty to its holding company could be developed only through the efforts of the assessee. During the course of appellate proceedings, it has been stated by the appellant that Yali Trade Mark is owned by ALPL since 03.10.2008 and this trademark is also registered in the trade mark book in the name of M/s Calorx Education Company Pvt. Ltd. (Earlier named ALPL). So this trade name is legally registered in the name of the ALPL and in orde....