TaxTMI 
TaxTMI 
2025 (7) TMI 507
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....inding. Vide ground Nos. 7-9, the assessee has challenged the rejection of claim of exemption under section 11 of the Income Tax Act, 1961 (Act), which read as under: "7. On the facts and circumstances of the case, the Ld. CIT(A) has erred, both on the facts and in law, in upholding the rejecting the claim of exemption u/s 11 of the Income Tax Act by Ld. AO on the incorrect understanding of accounting principles and provisions of section 13 of the Income Tax Act, 1961. The Ld. AO erred in holding and CIT(A) erred in confirming that (a) This cash transfer, which was not from the appellant, is clearly attracted by the disqualification enumerated in provision of section 13(2) and 13(3), (b) The institution/ school's actual earning capacity/ strength is much higher than what is reflected in their books of account, due to which the erstwhile promoters/substantial contributors have received/ reaped substantial benefit in terms of cash which inures to them for their personal benefit and not for the benefit of the company or for charitable purpose for which exemption u/s 11 read with section 12 and 13 is allowed ignoring that the section stipulates provision ....
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....shareholding of the assessee company has been transferred from Mohd. Abul Fazal Farooqi group to K.D.S. Corporation Pvt. Ltd vide receipt dated 08.02.2013. As per this document, 100% shares of MAF Academy Pvt. Ltd. were transferred to Promotors of M/s K.D.S. Corporation Pvt. Ltd. and some of its associates. The details of share transfers are as under: - S. No. No. of Shares Date of transfer of Shares Transferor's name Transferee's name 1. 65100 03.06.2013 Farooqi Asad K.D.S. Corporation Pvt. Ltd. 2. 65130 03.06.2013 Farooqi Fazal Mohd. Abul K.D.S. Corporation Pvt. Ltd. 3. 32550 03.06.2013 Farooqi Jafri K.D.S. Corporation Pvt. Ltd. 4. 32550 03.06.2013 FArooqi Ayesha K.D.S. Corporation Pvt. Ltd. 5. 32550 03.06.2013 Azmi Zeenat K.D.S. Corporation Pvt. Ltd. 6. 32550 03.06.2013 Raza Nalia K.D.S. Corporation Pvt. Ltd. 7. 10 03.06.2013 Farooqi Fazal Mohd. Abul K.D.S. Corporation Pvt. Ltd. 8. 10 03.06.2013 Farooqi Fazal Mohd. Abul Anil Oberoi 9. 10 03.06.2013 Farooqi Fazal Mohd. Abul Satish Mehta 10. 10 03.06.2013 Farooqi ....
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....atisfaction that the books of accounts or documents or assets seized have a bearing on the determination of total income of such other person as per provisions of section 153C(1) for assuming jurisdiction under that section. In this regard, it is pertinent to refer to the satisfaction recorded by the AO. For ready reference the same is reproduced below: - Satisfaction Note for taking up the case of M/s Aspam Academy Noida u/s 153C of IT Act, 1961 (Formerly known as M/s M.A.F. Academy Pvt. Ltd.) PAN: AADCM1107C A search and seizure action u/s 132(1) of the I.T. Act, 1961 was conducted on 20.06.2014 in the case of M/s Alchemist Ltd., M/s Alchemist Infra Reality Ltd. M/s Alchemist Holdings ltd and other companies at office address 23, Alchemist House, Nehru Place, New Delhi-110019 (Party SS-17) was covered under the above action. During the search action on Alchemist group, various incriminating documents were found and seized. Documents pertained to companies owned, controlled and managed by Alchemist group were found and seized as part of Annexure A-15 and A-18 from the office premise situated at 23, Nehru Place, New Delhi (SS-17). It shows that M/s Aspam Academ....
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....chemist House Nehru Place, New Delhi 110019. It proves that M/s Technology Parks Ltd. is one such company of the Alchemist Group. 2 A-4 (Party SS-17) 11-13 Acknowledgement and bank deposit slip in respect of M/s M.A.F. Academy Pvt. Ltd. and letter regarding change in director/ shareholder. A-5 (Party SS-17 65 Acknowledgement and bank deposit slip in respect of M/s M.A.F. Academy Pvt. Ltd. and letter regarding change in director/ shareholder. A-25 (Party SS-17) 115-124 Investment in shares of M/s M.A.F. Academy Pvt. Ltd., Ledger Account in the books of KD Corporation Pvt. Ltd. for the period 01-04-13 to 20-06-14. A-44 (Party SS-17) 98 Consolidated Balance Sheet, P&L Account along with its schedules of M/s M.A.F. Academy Pvt. Ltd. Blank letter head of M/s M.A.F. Academy Pvt. Ltd. The above information/documents pertains to M/s M.A.F. Academy Pvt. Ltd. was found and seized from the office premise situated at 23, Alchemist House, Nehru Place, New Delhi 110019. It proves that M/s M.A.F. Academy Pvt. Ltd. is one such company of the Alchemist Group. In view of the above, I am satisfied that the above-mentioned documents/Information per....
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....only question left is whether the document seized in the form of "receipt" would have a bearing on the computation of income of the assessee for the assessment years under consideration which is A.Ys. 2013-14 and 2014-15. In order to determine the said question, it would be appropriate to consider the receipt document seized as page No. 3 of Annexure-A-60 from the office premises of the Alchemist Group at 23, Nehru Place, New Delhi. Search party SS-17 had covered the said premises and the AO has mentioned in the satisfaction note that several incriminating documents were seized from the said premises. The seized receipt in question is reproduced below for a better understanding of the transaction in question: - The above receipt dated 08.02.2013 has been signed by Mr. Mohammad Abdul Fazal Farooqui who is stated in the receipt to be representing all the directors and shareholders of MAF Academy Pvt. Ltd viz the assessee company. The receipt further states that Mr. Farooqui has been authorized by all the directors and shareholders of the appellant company to receive money on behalf of all of them and to sign and issue this receipt for receipt of Rs. 1,00,00,000/- in cash bei....
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....te so as to exclude from the total income of the previous year of the person in receipt thereof: - (a) .................... (b) .................. (c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof (ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3)" In this regard, members of Farooqui family who are shareholders of the appellant company, are specified persons u/s 13(3). Now, the question which remains is whether the property of the institution is directly or indirectly used for the benefit of any person referred to in section 13(3). In my considered opinion since 100% of the property of the institution is indirectly being transferred and, in such transfer, the specified persons u/s 13(3) are obtaining a huge benefit of Rs. 24.92 Cr. in cash, which is not disclosed in the accounts, such specified persons u/s 13(3) are indirectly, if not directly, deriving a benefit by using the....
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....company could be assessed in the hands of both (i) transferors (capital gains/income under section 50CA of the Act & unexplained receipt, if any) and (ii) transferees [unexplained investment plus income under section 56(2)(x) of the income, if any]. Further, it was also submitted that the alleged cash transactions had not taken place where the appellant company could be held as payer or recipient of the said money. The alleged cash transactions had taken place between erstwhile and present shareholders, which had nothing to do with the appellant company. Further, there was neither decrease in value of any asset of the appellant company nor any direct/indirect benefit derived/flown by/from the specified persons/appellant company. The Ld. Counsel also contended that the alleged said cash transactions could not thus be accounted for in the books of accounts of the appellant assessee because the appreciation in the value of shares had no impact on financials of the appellant company. Therefore, there was no violation of any provisions of section 13 of the Act. Thus, the Ld. CIT(A) had erred in upholding the denial of exemption under section 11 of the Act. 5.2 The Ld. Counsel further....
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....d to have been used or applied for the benefit of a person (specified persons includes the author of the trust, the founder of the trust, any person who has made a substantial contribution to the trust or institution, etc.) referred to in section 13(3) of the Act in the following cases: (i) Where any part of the income or property of the trust or institution is lent to any 'interested person' during the previous year without either adequate security or adequate interest or both; (ii) Any land, building or other property of the trust or institution is made available to the 'interested person' without charging adequate rent or other compensation; (iii) Any amount paid by way of salary or allowance or otherwise to the interested person which is in excess of what may be reasonably paid for such services; (iv) If the services of the trust or institution are made available to such 'interested person' without adequate remuneration or other compensation; (v) If any share, security or other property was purchased from such 'interested person' for consideration which is more than adequate; (vi) If any share, security o....
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.... cash transactions have happened in accordance with the share purchase agreement as mentioned in orders of lower authorities and the transfer shares and consequential properties along with the control & management of the appellant company. Thus, the benefit derived by both transferors and transferees of shares of the appellant company in accordance with the provisions of sections 50CA and 56(2) of the Act as discussed above including the benefit from transfer of control & management of the appellant company is exclusively due to the net worth and intangible asset of the appellant assessee. The Tribunal in the case of Chandarkala Somani Charitable Trust (30 ITD 70) has observed that the word 'benefit' has to be interpreted as an advantage, profit, fruit or privilege and, in the context in which it is used in the present section, it has to be treated as an advantage of a pecuniary nature. Referring to the decision of Madras High Court in the case of Manickvasagam Chettiar (53 ITR 292) the Tribunal observed that the characteristic of a benefit is that it is real and not notional, concrete and not abstract, certain and not conjectural. Here, the seized material referred in orders of lo....