TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 599
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.... (3) The Ld. CIT(A) has erred in law and facts in deleting the addition of Rs. 3,53,07,414/- in respect of royalty as the expenditure is not charitable within the meaning of section 13(3) of the I.T. Act. (4) The Ld. CIT(A) has erred in law and facts in deleting the addition of Rs. 1,23,90,343/- in respect of depreciation on branding as the provision of section 13(1)(c) & 13(3) of I.T. Act are applicable. (5) The Ld. CIT(A) has erred in law and facts in deleting the addition of Rs. 29,73,567/- in respect of curriculum development charges as the provision of section 13(1)(c) & 13(3) of I.T. Act are applicable. (6) The Ld. CIT(A) has erred inlaw and facts in deleting the addition of Rs. 2,69,69,137/- in respect of disallowance was made on specific expenses as the payment made to the persons is in violation of provisions of section 13(1)(c) of the I.T. Act. (7) The Ld.CIT(A) has erred in law and facts in deleting the addition of Rs. 4,19,47,464/- in respect of hostel activities as this activity is found to be commercial in nature. (8) The order of Ld. CIT(A) be cancelled and the order of the AO be restored." 2. Brief facts are t....
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....duced before the AO, which were not seen by him. The amount has been charged to receipts and payments account and rebate and concession on fees to those students having poor financial background. Details of which were furnished before AO during the assessment. The Ld.CIT(A) after considering the submission of assessee recorded that he perused the reply of the assessee and other details furnished during assessment before AO. The ld. CIT(A) recorded that for allowability of expenditure, it should have been incurred wholly and exclusively for the purpose of assessee-trust. The assessee has given donation in furtherance of their object. Since there is no evidence on record that donation/alleged rebate was not given in furtherance of object, it was allowable. On the basis of such finding such the Ld. CIT(A) allowed full relief to the assessee. Hence, revenue is appeal. 6. The Ld. CIT-DR for the revenue submits that assessee has not provided required details. The Ld. CIT(A) allowed relief to the assessee on the basis of submission of assessee.The Ld. CIT DR prayed for restoring the addition made by the AO. 7. On the other hand, the Ld. AR of the assessee submits that before making ....
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....he reply and details which were furnished to AO. There is categorical finding of Ld. CIT(A) that the donations were given by assessee trust in furtherance of their object. The AO made addition in arbitrary way without appreciation of fact. 9. We have considered the rival submission of both the parties and have gone through the orders of lower authorities carefully. We find that AO disallow the claim of donation simply by taking view that assessee has not explained or justification of donation. Assessing Officer has not recorded that any reply or books of account was furnished or not. We find that Ld. CIT(A) while allowing the relief to the assessee clearly held that assessee has given donation in accordance with its object. We further find that claim of assessee is actually based on rebate given to the student having poor financial background. Thus, we do not find any reason to interfere with the order of the CIT(A). On independent appreciation of facts, we do not find any reason to interfere with the order of ld. CIT(A).No contrary facts or law have been brought to our notice to take other view. In the result, ground no. 1 of the appeal is dismissed. 10. Ground no.2 relates ....
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....d for and thereby disallowed Rs. 13.29 Crores being in violation of provision of section 13(c) & 13(3) of the Act. 11. On appeal before Ld. CIT(A) the assessee filed detailed written submission. The assessee stated that their written submissions were not considered by AO. The observation of AO while making disallowance is not correct. The provision of section 13(1)(c) is violated only if amount paid is not reasonable for the services rendered by the persons as provided u/s 13(2) of the Act. The additions were made simply on the ground that amount paid to company in which Shailendra Bhaduria is one of the Director. No reference has been made or obtained from market price of the services rendered or the expenditure claimed. The AO has not made any effort whether expenditure incurred on advertisement is on higher side in comparison to price prevailing in the market. No comparison has been made for the price paid for the comparison of prevailing price in the market, how one can make the judgment that expenditure paid is excessive or unreasonable. There must be some basis or parameters to check the un-reasonability so that it can be said to be high, excessive, and arbitrary. The AO w....
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....e been maintained by tax authorities. The assessee also relied on case law of Delhi High Court in CIT vs. Escorts Ltd. (338 ITR 435). The assessee also submitted that MIPS is taxed at maximum marginal rate i.e. @33.33%. MIPS has declared taxable income for same assessment year at Rs. 37.64 crores and paid tax of Rs. 12.21 crores. The ITR of MIPS was also furnished. The AO failed to establish that payment made to MIPS is more than the fair market value as per section 40A(2)(b) of the Act. The ld. CIT(A) on considering the submission of the assessee recorded that AO has accepted the genuineness of expenditure but question the reasonableness. To appreciate the stand of AO it is important to know the position of law on the subject. The CIT(A) recorded that it is settled law that transaction with a specified person alone will not attract the provision of section 13(1)(c) of the Act, unless the undue benefit derived by interested persons and adequacy of the amount being paid, are two very important questions of relevance. To support such view, the Ld. CIT(A) relied on decision of jurisdictional High Court in DIT vs. Parivar Sewa Sansthan (118 taxman 587). The Ld. CIT(A) also recorded tha....
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....the evidences. The assessee substantiated the fact that MIPS is expert in advertisement and marketing. The services availed from MIPS is not disputed by AO. The reasonableness of expenses is also not doubted. The assessee furnished complete details of the payments made against the services rendered by MIPS. The AO was very well aware that at the time of passing assessment order the assessee was having valid registration under section 12AA which was restored by Tribunal. The related party is paying tax at maximum marginal rate. The MIPS has shown taxable income of Rs. 37.64 crore and paid a tax of Rs. 12.21 crores. There is no loss to Revenue. The assessee being a charitable Institution is exempted from taxation. Once this genuineness of the services or expenditure is not doubted, questioning reasonableness is is without basis. To substantiate the reasonableness the assessee furnished the report of independent person namely 'Grant Thornton' who carried out detailed analysis. Such report was obtained in order to justify the requirement of arm's length price. In order to requirement of specified domestic transaction no comparable instances were examined by AO. The AO simply held that ....
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.... Vs Shri Ramdoot Prasad Sewan Samiti Trust (2023) 450 ITR 288 (Raj) held that where rates of purchases by the assessee trust from related party were same as with unrelated party, provisions of section 13(2)(g) were not attracted. Further Hon'ble Jurisdictional High Court in CIT Vs IILM Foundation (2025) 174 taxmann.com 605 (Delhi) also held that where the salary paid to its Chairperson as per her qualification, experience and active involvement and contribution in activities, it could be said payment was reasonable and it did not violate provisions of section 13(1)(c) and exemption under section 11 and 12 could not be denied. Thus, we do not find any merit in the grounds of appeal raised by Revenue. No contrary facts or law is brought to our notice to take other view.In the result, this ground of appeal raised by the Revenue is dismissed. 16. Ground no.3 relates to deleting the addition of Rs. 3.53 Crores on account of addition of Royalty. Brief facts of the case leading to addition are that assessee debited Royalty expenses of Rs. 3.53 Crores. Such royalty payments were made to Maharana Infrastructure & Professional Services Ltd. Such payment was made pursuant to agreement. No ....
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....ike trade mark whose value is purely on the basis of goodwill accumulated by the person owning the brand. Value of such transaction for the acquisition of brand in lieu of royalty, commercial prudence of only of the person who entered into such contract is a material fact. The AO cannot sit on the chair of assessee and to decide unreasonableness or reasonableness of the payment made unless there is a cogent material with AO and deleted the entire addition. Aggrieved by the action of the Ld. CIT(A) the Revenue is in appeal. 17. The Ld. CIT DR for the Revenue supported the order of the AO. The Ld. CIT- DR submits that the word "Maharana Pratap" were already in the name of the society from 1995 and the assessee could not explain the reason as to why the society is paying royalty on its own name and reason for entering into Trademark Agreement with the founder member Shailendra Bhaduria. MSA and Trademark Agreement were signed by Dr. Om Prakash on behalf of the assessee after its establishment in 1995, however, it is not clear who authorized him to sign those agreements on behalf of society. Thus, Shailendra Bhaduria is direct beneficiaries of deed of assignment & indirect beneficia....
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....2011 and became operational in financial year under consideration. Due to new entry at a new geographical location and for emerging challenges trade and education sector Maharana Pratap Education Centre make a significant expenditure on account of branding to make its global presence. Benefit of huge promotional expenditure on account of branding was accepted to be derived over coming financial year. Thus, instead of charging entire amount income and expenditure account in a single financial year, the amount has been spread over for coming financial years to match the Revenue of corresponding cost. Such practice was adopted by following principle of matching cost. The AO was of the view that assessee has not furnished service agreement under which huge expenditure has been claimed. The AO thereby disallowed 50% out of the claim of depreciation as claimed by the assessee. During the first appeal before ldCIT(A), the assessee stated that AO is not correct by disallowing depreciation on branding without considering the fact and without referring the prevailing market rates. There is no material on record to justify such ad-hoc disallowances. The assessee incurred expenditure on brandi....
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....g by assessee. The AO made an addition only for the purpose of making an addition. There is no basis for ad hoc disallowance of depreciation. 23. We have considered the rival submission of both the parties and gone through the order of lower authorities. We find that the AO made addition just for the sake of addition, he was not sure as to why this addition is being made. The provision of section 13(1)(c) and 13(3) are not applicable. The disallowances made on ad hoc basis there is no reasonableness. Thus, we affirm the order of ld. CIT(A). No contrary facts of law are brought to our notice to take other view. In the result, this ground of appeal is also dismissed. 24. Ground no.5 relates to deleting the addition of curriculum development charges. Facts relating to the disallowance of curriculum charges are that AO during the assessment disallowed Rs. 2.973 lakhs on account of curriculum development charges by taking view that in the depreciation chart the assessee has claimed development charges of asset at Rs. 4.87 Crores and claimed depreciation on account of development of curriculum charges at Pratap University Jaipur. On show cause notice the assessee explained the fact....
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....take other view. Hence, we affirmed the order of ldCIT(A). In the result, this ground of appeal is also dismissed. 28. Ground no. 6 relates to deleting ad hock disallowance of 20% of various expenses. Facts leading to the additions are that assessee has debited various expenditures consisting of accommodation facilities of rupees more than one lakh, charges for admission process, HR facility, Mess outdoor catering and Mess and canteen expenses aggregating of Rs. 13.48 crores. Such expenses were incurred by way of Master Service Agreement between assessee and MIPS Pvt. Ltd. The AO disallowed 20% of such expenses by taking view that payments were made in violation of provision of section 13(1)(c). Aggrieved by the additions/disallowances, the assessee filed appeal before CIT(A). Before CIT(A) the assessee stated that the ad hoc disallowance was not justified to an expenditure were incurred not disputed. There is no violation of provision of section 13(1)(c). AO made addition without any material on record. The assessee was having agreement with MIPS for rendering various services. Services rendered are not in dispute. The expenses were incurred for the purpose of object of the soc....
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....rought on record, there was no justification of making such disallowance. Thus, we affirm the order of CIT(A). In the result, ground no.6 of the appeal is dismissed. 32. Ground no.7 relates to deleting addition of Rs. 4.19 crores of hostel activities. The facts related to leading this addition is that assessee has received hostel fees of Rs. 6.02 crores. The AO was of the view that assessee is not doing charitable activities and activities of hostel are in the nature of trade and business. The assessee is required to maintain separate books of account. The AO also recorded that complete details were not furnished. The AO recorded following detail and out of certain receipt disallow 20% and added Rs. 4.19 crore in the income of assessee in the following manner: Hostel fees received 60232680 Less - Expenses Hostel rent 6000000 Hostel Mess expenses 1000962 Security charges (20% of 5571139) 1114228 Newspaper expenses (20% of 181797) 36350 Electricity (20% of 5501517) 1100303 Generator running maintenance (20% of 2576946) 515389 Housekeeping (20....
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....e Ld. CIT(A) on considering the submission of assessee held that a bare reading of assessment order on this addition shows that AO was not clear, what he wanted to do and from where he did get the figures from. As per the submission of assessee the actual receipt of Rs. 29.06 crore as per audited financial statement, whereas the AO has taken a figure of Rs. 6.02 crore. The basis of AO is itself wrong. The AO has not given any reason for 20% disallowance of various expenses. Action of AO is arbitrary and uncalled for. In fact, without hostel facility, it is not possible to run a medical college. Imparting education is one of the charitable activities of the assessee. As the AO has not given any reasoning thus, the addition is not correct and was deleted by Ld. CIT(A). 35. The Ld. CIT DR for the Revenue supported the order of AO. 36. On the other hand, the Ld. AR of the assessee supported the order of Ld. CIT(A). The Ld. AR of the assessee submitted that running of educational institution including medical and engineering college are object of the assessee. Hostel is an integral part of medical college. The AO made addition on arbitrary manner. The Ld.CIT(A) appreciated t....