TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 1663
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....t case. 3. We have heard the rival submissions and perused the materials available on record. The assessee is a Trust engaged in providing vocational training to trainees to make them employable in the Electronics / Electrical Industries. The return of income for the Asst Year 2018-19 was filed by the assessee trust on 26.10.2018 declaring Nil income after claiming exemption u/s 11 of the Act as the trust is registered u/s 12AA of the Act. The assessment was completed u/s 143(3) read with section 144B of the Act on 2.6.2021 determining total income of the assessee trust at Nil by ld NaFAC (Faceless Assessing Officer). This assessment was sought to be revised by the ld. CIT(E) Delhi u/s 263 of the Act on the ground that the order of the ld. NaFAC is erroneous in as much as it is prejudicial to the interest of the revenue. A show cause notice stood issued u/s 263 of the Act by the ld. CIT(E) on 28.2.2024 stating that the assessee had paid stipend to its trainees and claimed the same as application of income, whereas the trainees are actually utilized for the work in the business entity in which settler and trustees have interest. Moreover, the said company had also claimed expenses ....
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....ectrical industries. Normally students who have completed their 10th/12th Class education and do not have resources to take further education are enrolled by the Trust and Training is provided to them to enable them to become employable in electrical / electronics industry. Copies of Trusts Brochures, Advertisements and some sample copies of certificates issued is attached. (iii) For imparting the vocational Training the assesse trust was required to provide on-site training facility so that the students/trainees could get the benefit of actual working in an electronics industry. Accordingly, the assessee Trust has tied-up with Calcom Vision Limited which is a manufacturer of electrical and electronics appliance who allow the For Calcom Institute of Management 1. The instant case is not a fit case for passing an Order u/s 263 of the Income Tax Act, 1961 as the Assessment Order No. ITBA/AST/S/143(3)/2021-22/1033247140(1) passed u/s 143(3) of the Act on 02.06.2021 is neither erroneous nor prejudicial to the interest of the revenue (2). The facts of the instant case are as under: (i) The Assessee Trust was formed on 22nd Day of March, 1988 with the main objects mentioned as un....
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....y are interested don't have any benefit directly or indirectly by this arrangement. Rather it is for the sole benefit of the trainees who normally are from weaker sections of the society from public at large. The trainees get a chance to have hands on work experience and on-site training in an actual manufacturing unit which otherwise would not be available to them in any other training institute or educational institute. Further the stipend payable by the trust to the trainees during the period of training is also recovered from the company Calcom Vision Limited. Copy of the agreement with the company is attached. It will thus be evident that no benefit is derived by the trustees or the company Calcom Vision Ltd. The arrangement is only for the sole benefit of trainees as per the objects of the assesse trust. (iv) During the Instant year the assessment trust has imparted training to 218 Numbers of persons. List of such trainees are enclosed with details of stipend paid to them during the course of training. (v) To augment its resources and to make the model workable and financially sustainable and to enable the assessee Trust to pay the stipend to the trainees, the assesse....
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....n by the assessee. (ii) The company Calcom Vision Ltd is a public listed company where the Trustees are shareholders. However, no payment whatsoever has been paid by the Trust to the company Calcom Vision Ltd and therefore it is not justifiable to say that any benefits has been provided by the Trust to the Trustees or to the Company Calcom Vision Ltd. (iii) The outstanding amount of stipend receivable is an inherent feature of mercantile accounting and no benefit can be said to have been derived by the company or the Trustees this account. More so when such amount stands fully received in the subsequent period. (iv) Without prejudice it is further submitted that there is no tax benefit for the company Calcom Vision Ltd on this account as it had a brought forward loss of Rs.8,46,41,866/- and even at the end of the year it had a carried forward loss of Rs.5,86,057,26/-Accordingly there was no tax benefit to the Company Calcom Vision Ltd on account of such Stipend outstanding of Rs.68,54,094/- This is tax neutral for Calcom Vision Ltd. 7. It is further submitted that there is no violation of the provision of section 13(1)(c) read with section 13(2) and 13(3) of the IT Act for ....
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.... previous year without adequate remuneration or other compensation; The Services of the Trust are not made available to any person referred to in sub- section (3) without adequate remuneration or compensation. (e) if any share, security, or other property is purchased by or on behalf of the trust or institution from any person referred to in sub-section (3) during the previous year for consideration which is more than adequate; No share, security or other property is purchased by the Trust from any person referred to in sub-section (3) (f) f any share, security, or other property is sold by or on behalf of the trust or institution to any person referred to in sub-section (3) during the previous year for consideration which is less than adequate; No share, security or other property is sold by Trust to any person referred to in Sub-Section (3) (g) if any income or property of the N trust or institution is diverted d during the previous year in favour of any person referred to in sub- section (3): Provided that this clause shall not apply where the income, or the value of the property or, as the case may be, the aggregate of the income and the value of the property, so div....
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....cations and therefore it is submitted that the assessment Order dated 02.06.2021 is neither erroneous nor prejudicial to the Interests of revenue. In view of above submissions, it is prayed that the instant proceedings u/s 263 of the Act should be dropped." 5. The ld. CIT(E) however did not heed to the contentions of the assessee and proceeded to treat the order as erroneous and prejudicial to the interest of the revenue and passed revision order by invoking his revision jurisdiction u/s 263 of the Act by observing as under :- "6. The reply and submission of the assessee has been considered. Before going into the merits of the submissions made, it would be pertinent to mention the facts of the case: 1. On perusal of records, it was noticed that the assessee trust has shown an amount of Rs. 13,59,830/- as liability under the head 'stipend payable' in its Balance Sheet as on 31.03.2018. Further, the loan and advances shown on the asset side included Rs. 68,54,094/- as amount receivable from M/s Calcom Vision Limited. From the details submitted, it is revealed that the activities of the assessee trust are connected with the activities of the Company M/s Calcom Vision Pr....
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....as loan Vision Limited. or advance to M/s Calcom Vision Ltd. Thus the assessee trust paid Rs 54,94,264/- (being difference of Rs. 68,54,094/- and Rs.13,59,830/-) on behalf of M/s Calcom Vision Limited during the previous year under consideration. Now since M/s Calcom Vision Limited is a concern where the trustees and settlors of the assessee trust are substantially interested, the payment of Rs.54,94,264/- paid by the assessee trustee on behalf of the company is in violation of provisions of section 13(1)(c) read with sections 13(2) and 13(3) of the I.T. Act, 1961. Further, M/s Calcom Vision Limited has also claimed the amount payable to the assessee trust as expenses in its Profit and Loss Account and thereby benefited in reduction of tax liabilities for expenses actually paid for by the assessee trust on behalf of the company. Thus, the funds/income of the trust have been directly used for the benefit of the specified person and hence are in violations of section 13(1)(c) rws 13(2) and 13(3) of the Income Tax Act, 1961. The assessing officer has clearly overlooked these facts while completing the assessment. 9. In view of the above, the assessment completed by AO allowing....
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....f the assessee or any other person. ]" The assessee's case is clearly covered by clause (a) and (b) of above Explanation (2) to section 263 of the I.T. Act. 10. In the light of the discussion in the preceding paragraphs, I am convinced that the assessment order dated 02.06.2021 passed under section 143(3) r.w.s. 144B of the Income Tax Act, 1961 by the Assessing Officer, National e-Assessment Centre (NeAC) for the assessment year 2018-19 is erroneous in so far as it is prejudicial to the interests of the Revenue as per provisions of section 263 of Income Tax Act, 1961. Therefore, order is set aside to the file of Assessing Officer with the direction for making a de-novo assessment after proper examination of the issues discussed above and due investigation wherever required. Needless to say that the matter may be decided after affording reasonable opportunity of being heard to the assessee and pass a speaking and well-reasoned order." 6. We find that at the outset, the trust has not paid any monies to its sister concern and instead received the training fees from its sister concerns. Hence no part of the income of the trust has been diverted to any interested persons referr....
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.... This is the fundamental principle of accounting transactions on accrual basis under mercantile system of accounting, which has not been appreciated by the ld. CIT(E) in the instant case. Either way, there was no grievance raised by any of the trainees that they had not been paid any stipend by the assessee trust. No evidence to buttress this fact has been brought on record by the ld. CIT(E). In any event, we find that detailed enquiries were indeed made by the ld. NaFAC on the stipend expenditure to trainees and its recovery from Calcom Vision Limited by raising specific queries in this regard during the course of assessment proceedings, which stood properly replied by the assessee also. Hence this cannot be stated to be a case of 'lack of enquiry' by the Id. NaFAC. We also find that assessee trust has been making payment of stipend to trainees in similar way and recovering over and above the payments from its sister concern in similar fashion way back from Asst Year 2010-11 onwards. The assessee trust even placed on record the complete details of the same from Asst Years 2010-11 to 2023-24. This issue was never disputed by the department either in earlier years or in subs....