Income Tax Appellate Tribunal - Indore
H. K. Kalchuri Trust, vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH : INDORE
BEFORE SHRI JOGINDER SINGH,JM AND SHRI R.C.SHARMA,AM
PAN NO. : AAATH3738-E
I.T.A.Nos. 533 to 535/Ind/2007 & 334/Ind/2008
A.Ys. : 2002-03 to 2005-06
ACIT, H.K.Kalchuri Trust,
2(1), Bhopal.
Bhopal
Appellant Respondent
Appellant by : Shri Keshave Saxena,
CIT DR
Respondent by : S/Shri M. C.Mehta and
Hitesh Chimnani, CAs
ORDER
PER BENCH These are appeals filed by the Revenue against the order of CIT(A) for the assessment year 2002-03, 2003-04, 2004-05 sand 2005-06.
2. Common grounds have been taken by the Revenue in all the years. We are reproducing herewith grounds taken by the Revenue in the assessment year 2002-03 :-
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On the facts and in the circumstances of the case , the ld. CIT(A) has erred in -
1. deleting the disallowance of Rs.
5,40,182/- made by the Assessing Officer on account of lab and practical equipments/consumable.
2. deleting the disallowance of Rs.
1,37,842/- made by the Assessing Officer on account of personal expenses of the trustee.
3. deleting the addition and Rs.
1,92,93,896/- made by the Assessing Officer and allowing the exemptions u/s 11 & 12 of the Income-tax Act, to the assessee though it was not entitled for the same as discussed in the body of the assessment order.
3. Rival contentions have been heard and records perused. The assessee trust was incorporated on 8.5.1998. It was registered under the M.P. Public Trust Act, 1951, on 2
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13.1.1999. The assessee trust had earlier been granted registration u/s 12A of the Income-tax Act, 1961, as per order of CIT dated 17.11.2004 , w.e.f. 1.4.2003. Against the order of CIT granting registration u/s 12A w.e.f. 1.4.2003, in place of the date of inception of the Trust, the assessee filed appeal before the Tribunal. The Tribunal vide its order dated 12.3.2007 granted registration to the assessee trust w.e.f. 13.1.1999 i.e. form the date of its creation. During the assessment year 2002-03, the assessee trust was running a following educational institution :-
Laxmi Narayan College of technology, Bhopal. C.L.C. Memorial Homeopathic Medical College, Bilaspur, and Chouksey Engineering College, Bilaspur.
The main objectives of the trust as per its objects are to open and run technical education colleges i.e. engineering colleges, colleges of M. C. A., Business Management College, Homeo Medical College etc. Besides this, there are other charitable objects also 3
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4. During the course of assessment for assessment year 2002-03, the AO observed that the survey u/s 133A was conducted on 3.7.2001 at assessee's premises situated at 31, Shamla Hills, Bhopal. Accordingly, the case of the assessee was selected for scrutiny. Thereafter, books of the assessee were referred for special audit u/s 142(2A). During the course of scrutiny assessment, the AO observed that the assessee H.K.Kalchuri Education Trust, Bhopal, was incorporated on 8.5.1998 and registered with the Registrar Public Trust, Bhopal, vide Registration No.3/98 as per the Registration certificate dated 13.1.1999. It took over all the assets of Haihaya Kshatriya Education Society, Bhopal, by executing a trust deed on stamp paper of Rs. 500/-. It owns and runs the following educational institutions :-
i) Laxmi Narayan College of Technology,
Bhopal.
ii) C.L.C. Memorial Homeopathic Medical
College, Bilaspur.
iii) Chouksey Engg. College, Bilaspur.
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5. The AO also observed that in view of the order of the CIT, Bhopal, dated 17.11.2004, the assessee trust was granted registration u/s 12A w.e.f. 1.4.2003. Accordingly, it was held that exemption u/s 11 was not available to the assessee trust in the year under consideration i.e. assessment year 2002-03. The AO further observed that the assessee trust was also not approved u/s 10(23C)(vi), although its receipts were in excess of Rs. 1 crore during the year under consideration. The AO further noted that in connection with the survey proceedings u/s 133A summons u/s 131 was served on Smt. Poonam Chouksey ( W/o Shri Jainarayan Chouksey, Managing Trustee ) and her statement was recorded on oath on 3.7.2001. The AO further stated that as per the observation made in the audit report u/s 142(2A), the fee received in the form of Development Fund is revenue income of the trust. The assessee-trust has received consolidated development fund during the financial year 2001-02 for Rs. 1,31,77,000/- .Considering the revenue nature of this amount of Rs. 1,31,77,000/-, the same was included in calculation of total income for assessment year 2002-03.
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6. The AO further stated that as per audit report u/142(2A), the expenses charged towards purchase of lab equipments were not verifiable in many cases in absence of proper supporting vouchers. By observing that the assessee however could not make necessary verification of such expenses or furnish bifurcation between expenses on purchase of fresh equipments and expenses on consumables etc. AO disallowed a part of expenses. As per schedule 'B' the assessee has written off 33.33 % of the gross value of Rs. 76,42,376.48 as on 31.3.2002. The total purchases during the year have been shown at Rs. 36,01,217/- under the head Lab and Practical Equipments/Consumables. The AO stated that purchases lack verifiability in the absence of proper supporting vouchers and bifurcation between expenses on fresh equipments and fresh consumables, accordingly expenditure in respect of purchases during the year was disallowed on estimate basis. Accordingly, such disallowance was worked out at Rs. 5,40,182/-.
7. By observing that supporting voucher on construction of building was not available, the AO also disallowed deprecation to the extent of 5 % of the cost of expenditure. 6
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8. By referring to the statement of Smt. Poonam Chouksey W/o Shri Jai Narayan Chouksey, Managing Trustee, AO disallowed expenses on account of salary paid to driver, watchman, peon and mali to the extent of 50 %. Similarly, out of petrol and diesel expenses, 20 % was disallowed. Corresponding disallowance was also made under the head "Depreciation Claim" in respect of these vehicles. Finally by alleging that personal benefit was taken by the trustee entire income of the trust was brought to tax net by declining claim of exemption u/s 11.
9. Before the CIT(A), contention of the assessee was that development fund fee received by the assessee was capital receipt not liable to tax. It was submitted that as per the guidelines issued by AICTE, all the Colleges are required to collect development fund fee from students, which is part of corpus of the College. The amount in the development fund is to be utilized for development and infrastructure facility of the College and not for any revenue expenditure nor for any other purpose. Therefore, development fund fee are contributions received from students by the college to form part of the 7
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corpus of the College. The same is not revenue income. It was also submitted that the AO erred in holding that the educational institutions run by the trust was similar to business entity, thus not entitled to exemption of its income. He submitted that the AO failed to appreciate that the educational institutions run by the assessee trust are recognized by AICTE, a body of Ministry of Human Resources and Development, Government of India.
10. By the impugned order, the ld. CIT(A) held that income of the assessee trust was exempt u/s 11. Following was the precise observation of the CIT(A) :-
"I have considered the detailed submissions of the ld. Authorized Representative. I have also considered the findings of the AO mentioned in the assessment order. After due consideration of the facts, I hold that the AO was not justified in holding that the educational institutions run by the assessee trust were similar to business entity not entitled to exemption of its income. I have already held that the assessee trust is 8
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entitled to exemption u/s 11 of the Income-tax Act for the current assessment year. The AO has nowhere contradicted that the assessee trust is not running educational institutions. The AO has nowhere held that the receipts/income of the assessee trust are not generated from the educational institutions run by it.
The fact stands that the assessee trust has been granted registration u/s 12A of the Income-tax Act, by verifying its objects and activities of educational institutions w.e.f. 13.1.1999 onwards. Accordingly, I hold that the AO was not justified in holding that the assessee trust is a business entity. As regards, development fund fees, after due consideration of the facts, I hold that the AO was justified in holding that receipt of fees under the development Fund Account during the current assessment year of Rs. 1,31,77,000/- is revenue income. Even if the assessee trust has 9
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directly credited the above receipt in the said account in the Balance Sheet and not shown in the Income & expenditure Account, the revenue nature of the fee receipts would not change. I also negate the contention of the ld. Authorized Representative that fee receipt under Development Funds form part of the corpus of the college as these fees under the Development Fund is being received every year. Since during the current assessment year, I have held that the income of the assessee trust is exempt u/s
11 of the Act, the AO is directed to include the fee for Development Fund as revenue income and allow exemption u/s 11 of the Act. Thus, Ground no. 4 is decided accordingly.
11. Disallowance on lab equipment and practical equipment expenses amounting to Rs. 5,40,182/- was deleted by the ld. CIT(A) after having the following observations :- 10
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"I have considered the submissions of the ld. Authorized Representative. I have also considered the AO's observations mentioned in the assessment order. After due consideration of the facts, I hold that the AO was not justified in making disallowance of Rs. 5,40,182/- out of Lab and Practical equipment/consumables on estimate and not by specific finding in the respect of particular items of expense/purchase as non genuine in the assessee trust's case. Accordingly, the disallowance of Rs.
5,40,182/- out of Lab and Practical Equipment/Consumables is deleted. The Ground no.5 is decided in favour of the assessee. Thus, the appeal on this ground is allowed."
12. With regard to disallowance of part of administrative expenses, contention of the assessee before the CIT(A) was that the AO was not justified in making the disallowance on the basis of the report of the Inspector without giving adequate time to the assessee to rebut the same.
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13. In respect of Electricity bills/ Telephone bills, salary given to driver, Watchman, Peon and Mali, the ld. Authorized Representative submitted that the Trust's corporate office run from 31, Shyamla Hills, Bhopal. That the Trust occupies most of the premises as its office. Besides one portion of 31, Shyamla Hills, Bhopal being used by the Trustees as their Residence. The office of the Trust consists of Two rooms for accounts & administrative staffs, one meeting room besides Trustees' chambers. It is submitted that since the educational Institution College is at the out skirts of Bhopal at Raisen Road, the Trust Office at Shyamla Hills, Bhopal, serves as the only local office within Bhopal city.
14. It was further submitted that the Trustees are charging no rent from the Trust or college against the use of the premises for the office space. The expenses of this office situated at 31, Shyamla Hills belonging to the assessee trust are being met by the LNCT College.
15. The ld. Authorized Representative submitted that since the trust's office runs from the portion of the residence of the trustees, telephone expenses and electricity charges in 12
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connection with the office use are debited in the college books as the same pertain to expenses incurred for trust's use and not for personal use of the trustees. The Telephone, in the name of the trustee is also used for official work of the trust. He submitted that since the college is located away from the main city and there is need for having a city office wherefrom banking transactions, meeting various officials and other compliance work is required to be carried out. Likewise, there are vehicles of the trust and college, which commute between the trust office at 31, Shyamala Hills and its college situated at Raisen Road. The Inspector on seeing the Driver at the trust office at 31, Shyamala Hills came to a conclusion that this driver's services are being used for personal purposes by the trustees. Likewise, the Inspector failed to report that besides the trustee's residence, there is full fledged office of the trust being run from the said address. The peon and other servants engaged in providing services at the trust office are only being debited in the LNCT college books.
16. Before the ld. CIT(A), the allegation of the AO that the driver, peon & mali's found to be working in the premises at 13
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31, Shyamla Hills, Bhopal, are for personal use of the trustees, is strongly rebutted by the ld. Authorized Representative He submitted that all these persons are employees of the Trust and working exclusively for the Trust. The Peon is for doing office work entertaining of staff/guests of the Trust. Similarly, the driver duty is to commute between Bhopal office at Shyamla Hills and LNCT College at Raisen Road, Bhopal. Thus, in no case these employees of the trust can be said to be of personal use of the trustees. The trustees as it is having separate maid/servant for their residential premises and pay separately to them from their drawings. Likewise, the trust also uses electricity of the premises it occupies at 31, Shyamla Hills for official work. There is no personal element of the trustees therein. The ld. Authorized Representative submitted that no disallowances are called for under these heads. The ld. Authorized Representative submitted that there is no such observation by the Special Auditor in his audit report about the use of assets of the trust by the trustees within the meaning of Section 13(1)(C) of the Income-tax Act, 1961. Therefore, disallowances for such personal benefits from use of 14
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assets of the Trust is not required as the assets of the trust are not being used by the trustees as the trustees use their own vehicles. The AO observed from the consolidated balance sheet as at 31.3.2002 enclosed with auditor's report u/s 142(2A) that the assessee-trust has made investment/advance in the associate society namely Rishi Raj Singh Mem. Wel. Society, Bhopal and the debit balance against it is Rs. 10,00,000/- as on 31.3.2002. He held that as such, in the instant case, the assessee trust is found otherwise also not eligible for grant of exemption of its income during the year. The ld. Authorized Representative submitted that the loan was given to the aforesaid society at the time when the said society needed funds for meeting expenses of running its college. He submitted that the aforesaid society is purely educational and charitable society and registered u/s 12AA of the Income-tax Act. The object of the assessee trust covers granting such advances to other societies engaged in providing education to the needy people and to provide higher and technical education to the students. The object of the assessee trust and the said society to whom loan was given is same and 15
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temporary advance was given with the object of upliftment of the education. The temporary advance was since interest free with the understanding that as soon as the surplus fund comes in the society, it will repay the advance. The ld. Authorized Representative submitted that the assessee trust is purely an educational in nature and not a business concern where provision of interest was made for each and every advance. The purpose of advance was also for the promotion of education and hence interest was not charged. The ld. Authorized Representative placed reliance on the decision in the case of Fifth Generation Education, 185 ITR 634, Allahabad High Court wherein it was held that CIT was to examine the issue of application of trust income. He has merely required to see whether the procedure has been followed and whether the object is charitable.
17. By the impugned order, the ld. CIT(A) deleted the addition of Rs. 1,37,842/- after having the following observations :-
"I have considered the detailed submissions of the ld. Authorized Representative. I have also considered 16
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the AO's observations and findings mentioned in the assessment order. After due consideration of the facts, I hold that the AO was not justified in making addition of Rs. 1,37,842/- out of expenses in the nature of salary, vehicle maintenance and depreciation, electricity and telephone on estimate. The AO's reliance on the finding of the Inspector's report cannot be approved. Further, there is neither any adverse remark in the audited financial statements by the auditor nor by the special auditor in his audit report of the assessee trust for the current assessment year about personal expenses of the trustees being debited by the trust/college in its books. I find force in the ld. Authorized Representative's submission that since trust's office was running from 31, Shyamla Hills, Bhopal, besides the trustees residence, the AO had wrongly concluded that the above expenses of Rs. 1,37,842/- are of persona nature for the benefit of trustees. The addition of Rs.1,37,842/- made by the Assessing 17
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Officer is to be deleted. I also rely on the judgement of the Hon'ble Jurisdicitonal High Court in the case of Deo Radha Madhwa Lalji Genda Trust vs. Proper Tax Officer, 251 ITR 531, wherein it was held that maintenance of the trust property, payment to employees and other expenses which are incidental to and connected with the objects of the charitable trust are allowable. Accordingly, Ground Nos. 7 & 8 are decided in favour of the assessee. Thus, these grounds of appeal are allowed."
18. Aggrieved by the above order of ld. CIT(A), the Revenue is in further appeal before us.
19. We have considered the rival contentions, carefully gone through the orders of the authorities below and found that the assessment for assessment year 2002-03 was passed by the AO on 16.11.2005. At that time, the certificate of registration available with the AO was w.e.f. 1.4.2003 dated 17.11.2004. Accordingly, the AO made additions by treating the assessee as not registered during the relevant assessment year under consideration. However, pursuant to the order of the Tribunal 18
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dated 12.3.2007, the registration was granted to the assessee trust w.e.f. 13.1.1999 i.e. the date on which it was registered with the Registrar of Public Trust. With the grant of registration w.e.f. 13.1.1999, the income of the Institution was exempt from tax. The CIT(A) has thoroughly considered the submissions made before him, allowed the expenditure and treated the income as exempt in view of the assessee trust having benefit of exemption available u/s 11. From the record, we found that before the CIT(A), the assessee has submitted list of cases in which various issues regarding assessment of public trust was dealt with in addition to it a statement giving details, how the income of the trust is to be calculated based on the decisions of various High Courts and Supreme courts, which has been discussed by the CIT(A) in his order. In the result, the ld. CIT(A) deleted the addition of Rs.1,92,93,896/- due to non allowance of exemption u/s 11 & 12 of the Income- tax Act, 1961. The ld. CIT(A) has also dealt in detail the issue with regard to disallowance out of lab and practical equipments/consumables and the expenses, which were disallowed on the plea of personal expenses of trustees, in the 19
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assessment year 2004-05. The ld. CIT(A) has examined the facts of the case and buy applying the legal proposition as discussed in the order allowed relief to the assessee. The findings recorded by the ld. CIT(A) has not been controverted by the Department, we, therefore, do not find any infirmity in his order for allowing exemption in respect of income for the assessment year 2002-03.
20. In the assessment year 2003-04, the AO has observed that the assessee trust has been granted registration u/s 12A w.e.f. 1.4.2003, the benefit of said certificate was held to be not allowable to the assessee for the assessment year 2003-04. In the result, he held that certificate u/s 12A issued w.e.f. 1.4.2003 would not entitle the assessee to claim exemption u/s 11 for the assessment year 2003-04 under consideration. He assessed the income of trust under regular provisions of the Income-tax Act, 1961, i.e. Section 28 to 44. As discussed hereinabove, the Tribunal has allowed the registration to the assessee trust with the date of its inception and the Chief CIT has issued fresh certificate u/s 12A on 12.3.2007 granting registration to the trust w.e.f. 13.1.1999, the date when the 20
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trust was formed. Taking into consideration the fresh registration granting w.e.f. 13.1.1999, the ld. CIT(A) after considering all the facts and circumstances of the case, allowed the exemption to the assessee's income u/s 11 to 13. Thus, the addition of Rs. 1,55,01,050/-due to non allowance of exemption u/s 11 & 12 was deleted by the ld. CIT(A). The ld. CIT(A) has elaborately discussed the submissions made before him and also the observation of the AO. Similarly, the disallowance out of lab and practical equipments/consumables, and in respect of expenses of the trustees, the ld. CIT(A) has dealt in detail in the appellate order for assessment year 2004-05 and after proper examination of the facts of the case and legal position, granted due relief to the assessee.
21. In the assessment year 2004-05, the AO has not granted exemption u/s 12A on the plea that mere granting of registration u/s 12A by the CIT does not automatically entitle the assessee for exemption u/s 11 to 12. The AO also observed that there were un-vouched expenses as pointed out by the special auditor u/s 142(2A), therefore, the institution was run 21
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for profit. The AO also stated that the assessee trust has diverted its fund for benefit of trustees by meeting certain personal expenses of them and other institutions under the same management by giving advances. The assessee has furnished full reply to meet all the objections of the AO, however, the AO did not agree and decline benefit of Section 12A. However, the ld. CIT(A) has discussed each objection of the AO and reply filed by the assessee with the documentary evidence and observed that ,no doubt, the granting of registration does not automatically lead to exemption of income of the trust. However, the since the assessee trust has not contravened any of the provisions of Section 11 to 13, the assessee trust is entitled to exemption of its income. It was further observed by the ld. CIT(A) that audit of accounts of all the three educational institutions were completed earlier to the filing of the income tax return of the trust on 26.10.2004. However, due to ignorance of the counsel, the same were not enclosed with the return of income. It was categorically observed that all these requirements were complied before the completion of assessment and the same have been considered 22
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by the Assessing Officer in his assessment order. The ld. CIT(A) also observed that denial of exemption u/s 10(23C) and Section 80G does not affect the granting of registration to the income of the assessee trust, when the same is otherwise exempt u/s 11 to 13. It was observed that all the vouchers were produced before the auditor who did the statutory audit, however, by the time special auditor was appointed, the original staff was changed and the new staff could not trace all the relevant facts and the files at the time of special audit. After examination of the facts and observation of the AO, the CIT(A) found that no personal advantage was given to the Trustees of the Trust and that advances given to the associate institutions were temporary advancers given to the educational institution for the purpose of objects of the Trust, being objects no.12 on page 52 of the compilation filed before him with regard to disallowance of Rs. 3,02,965/- with respect to expenditure on lab and practical equipments/consumables, we found that LNCT College had spent Rs. 20.19 lakhs on account of lab and practical equipments/consumables. The AO has disallowed 15 % of purchases on the plea that audit 23
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report u/s 142(2A) mentioned regarding non-verifiability of some of the expenses and that no bifurcation was available as to the expenses on purchases of equipments vis-à-vis purchase of consumables. The ld. CIT(A) has recorded a categorical finding to the effect that all these expenses were duly recorded in the regular books of account maintained by the assessee and the same was fully vouched and produced before the auditor at the time of regular audit. As discussed above, due to change in the staff, different files in which these vouchers were placed could not be located. Accordingly, it was held that estimated disallowance was wrong and uncalled for. Similarly, addition of Rs. 3,01,000/- was made on the plea of personal expenses of the trustees. In this regard, we found that the residence of the Managing Trustee was situated at Shyamla Hills, which is in the heart of the city, whereas the Colleges are situated at Raisen Road, which is about 10-12 kms. away from the city. The Trustee has given three rooms and lodging of his residence, free of rent to the society for handling its banking and other administrative work. We also found that Managing Trustee owns his own car and telephone 24
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and was also employing personal servants for his house hold work. Similarly, trust was also using electricity of the premises, it occupied for official work. In view of these findings by CIT(A) the AO was not correct in alleging that personal benefit has been derived by the Trustees when, in fact, the Trustee is not charging any rent for the sizeable portion of the property let out to the trust. It was also found that no personal expenses of the trustee were derived by the Trust. Reliance placed on the statement of the wife of the Managing Trustee was misplaced without considering totality of the facts. After recording detailed findings, the ld. CIT(A) has deleted the addition alleged to be towards personal expenses of the trustee, which has not been controverted, we, therefore, do not find any reason to interfere in the order of the CIT(A) for such deletion.
22. Addition of Rs. 2.26 crores was made by the Assessing Officer towards net income of the assessee, the calculation of the AO was as under :-
Income as per audited accounts Rs. 94,12,964 subject to adjustment of depreciation, interest and items 25
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disallowed by AO towards
unvouched expenses, personal
expenses etc.
Add: Fee received in the form of Rs. 1,38,83,870
development fund
Rs. 2,32,96,834
Less: Addition towards Lab Rs. 3,02,965
Equipments ( Gr. 1)
Less: Addition towards Personal 3,01,593
Expenses (Gr. 2) Rs. 2,26,92,276
23. By applying the decision of the Hon'ble High Court and Supreme Court, the correct computation of income works out to be as under :-
Gross receipts of the trust & 3 colleges 8,54,99,371 Less: 15 % allowed for accumulation 1,28,24,906 7,26,74,465 Less: Expenses actually incurred 5,44,39,890 1,82,34,575 Less: Depreciation debited below the 99,57,272 line in books (allowed by AO at Rs.
1,45,07,536/-)(page 24 of compilation) 82,77,303 Less: Interest (not considered in total 85,43,019 expenses) (Page 24 of compilation) Excess application of income (-)2,65,716 Subject to other notes/claims for calculating accumulation of income as per statement enclosed.
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24. In view of the above, we do not find any infirmity in the order of the CIT(A) for deleting the addition of Rs. 2.26 crores made by the Assessing Officer.
25. In the assessment year 2004-05, the Revenue has raised similar issue with regard to allowing exemption u/s 11, deletion of addition on account of lab and equipment consumables, depreciation on lab and equipment and also deleting of expenses alleged to be on personal account of the trustee. By observing that the assessee trust was running for educational colleges, the income of the assessee trust having derived solely from these educational institutions and its activities were not for profit, the CIT(A) allowed exemption u/s
11. The CIT(A) also recorded a categorical finding that the assessee trust has been granted registration u/s 12A by verifying its object and activities of educational colleges, run by it. These findings have not been controverted and the same are as per materials placed on record, no interference is required therein.
26. With regard to the treatment of amount received towards development fund as revenue income, the CIT(A) upheld the 27
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decision of the AO. However, in view of the fact that the entire income of the assessee trust was exempt u/s 11, he held that treatment of such receipt and revenue would not affect the assessee trust since its income is subject to exemption u/s 11 granted on the income of the assessee trust.
27. Disallowance of Rs. 6,86,716/- on account of purchases of lab equipment and consumables, was deleted by the ld.
CIT(A) after observing that no disallowance on estimate basis was warranted without recording specific finding with respect to particular items of expenses/vouchers as non-genuine. After having a detailed observation as given in the earlier assessment years, the CIT(A) deleted the disallowances. Nothing was brought on record to controvert the finding of CIT(A), we, therefore, do not find any reason to interfere in the deletion of addition of Rs. 6.86 lakhs on account of purchase of lab equipments and consumables.
28. With regard to the disallowance of expenses incurred on construction of different colleges, the CIT(A) observed that in the course of assessment proceedings, all the relevant vouchers were made available before the AO and the AO has 28
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misplaced its reliance on the findings given in the special audit report of the earlier assessment years and applied the same in the current assessment years. In view of our discussions made in earlier years with regard to such disallowance, we confirm the action of the CIT(A) for deleting the same. Similarly, disallowance made on account of depreciation on lab equipments and building, on the very same reasoning and analogy, we delete the disallowance so made. Similarly, disallowance made on account of salary to employees, vehicle expenses, electricity expenses and telephone expenses, by following the same reasoning as given in earlier years, we confirm the action of the CIT(A) for deleting these disallowances.
29. During the course of hearing, the ld. CIT DR relied on decision of Hon'ble Kerala High Court reported at 226 ITR 211, wherein exemption u/s 11 was denied on the basis of finding of personal benefit to the trustee. We had gone through this decision and found that exemption u/s 11 was declined to the assessee trust for the benefit given to the trustee within the meaning of Section 13(3). However, in the instant case before 29
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us, we found that no personal benefit was given to the trustee, thus, the conclusion drawn in the case cited by the ld. CIT DR is not applicable to the facts of the instant case.
30. The ld. CIT DR also relied on the decision of Hon'ble Madras High Court reported at 246 ITR 164. In this case, the AO invoked provisions of Section 13(1)(c) in regard to the payments made to its office bearer and the exemption claimed u/s 11 was declined. However, in the instant case before us, as observed above, no personal benefit was given to the office bearer, therefore, this case is of no help to the Revenue.
31. Reliance was also placed by the ld. CIT DR on the decision of Hon'ble Supreme Court reported at 82 ITR 540, wherein reference was declined in view of the finding of fact arrived at by the Tribunal. It was observed by Hon'ble Supreme Court that it is within the province of the Tribunal to accept recitals in the trust deed unless the conclusion is shown to be perverse or based on irrelevant materials. It was held that High Court cannot interfere with the finding of the Tribunal, thus, no question of law arose out of the order of the Tribunal. However, in the instant case before us, the finding of 30
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the CIT(A) is as per material placed on record and as per our discussion made hereinabove, such finding is upheld. Accordingly, this case is of no help to the Revenue.
32. Reliance was also placed on the judgment of Hon'ble Rajasthan High Court reported at 258 ITR 725, wherein exemption u/s 11 was declined on the finding that property of the trust was given at a meager rent to the firm in which one of the trustees was partner. However, the facts of the instant case are quite distinguishable wherein property of the trustees were given free of rent for the purpose of trust, thus, there was no contravention of provisions of Section 13(2)(b). Thus, this decision is not applicable to the facts of the instant case.
33. In view of the discussion made hereinabove and the findings recorded by the ld. CIT(A), which is as per material on record with respect to assessment years 2002-03 to 2005-06, we do not find any reason to interfere in these findings.
34. In the result, all the appeals of the Revenue are dismissed.
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This order has been pronounced in the open court on 24th May, 2011.
Sd/- Sd/-
( R.C.SHARMA) (JOGINDER SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 24th May, 2011.
CPU*
435235
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