ASPAN ACADEMY NOIDA,NEW DELHI V. ACIT CENTRAL CIRCLE- 20, NEW DELHI

ITA 329/DEL/2021

AI Insights

The case involves M/s. ASPAM Academy Noida, which appealed against the orders of the Commissioner of Income Tax (Appeals)-31, New Delhi, for the Assessment Years 2013-14 and 2014-15. The primary issue was the rejection of the claim for exemption under section 11 of the Income Tax Act, 1961, based on the grounds that the cash transactions during the transfer of shares involved benefits to specified persons, which is not permissible under sections 13(2) and 13(3) of the Act. The Tribunal examined the legality of these transactions and their compliance with the statutory provisions, ultimately finding that the transactions did not meet the requirements for exemption under section 11.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396500 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAVED AKHTAR
• Assessee Lawyers: RANO JAIN
• Keywords: Business income; Depreciation; Unexplained investment; Sale consideration of property below Jantri Value; Fair market value; Document seized; Documents seized; Capital Gains; Search and seizure; Charitable institution; Share purchase agreement; Benefit of exemption; Maximum Marginal Rate
• Section: 11; 132; 56(2); 12A; 12; 28

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’ NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No. 329/Del/2021, A.Y.2013-14 ITA No. 330/Del/2021, A.Y.2014-15 M/s. ASPAM Academy Noida, Resham House, Farm No.9/1, Amaltas Avenue, Westend Green Farm Society, Shamlaka, New Delhi 110037 Vs. Assistant Commissioner of Income Tax, Central Circle-20, ARA Tower, Jhandewala, New Delhi PAN: AADCM1107C (Appellant) (Respondent) Assessee by Ms. Rano Jain, Advocate, Ms. Mansi Jain, CA, Ms. Sakshi Rustogi, Advocate Revenue by Mr. Javed Akhtar, CIT (DR) Date of Hearing 03/03/2025 Date of Pronouncement 30/05/2025 ORDER PER AVDHESH KUMAR MISHRA, AM Common grounds and facts arise in the above captioned appeals of the assessee; therefore, these appeals were heard together and are being disposed off by this common order. 2. These appeals for Assessment Years (AY) 2013-14 and 2014-15 filed by the assessee are directed against orders dated 09.02.2021 of the Commissioner of Income Tax (Appeals)-31 New Delhi [CIT(A)]. ITA No.329 & 330/Del/2021 Aspam Academy Noida 2 3. The only issue before us in challenge in both years is ground Nos. 7 to 9 only. Ground Nos. 1 to 6 were not pressed; hence, these grounds stand dismissed. Ground No. 10, being general, does not call for specific finding. 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 of any benefit directly or indirectly to specified persons for rejection of claim of exemption. (c) The cash transaction has allowed substantial excessive consideration which is more than adequate in the hands of substantial shareholders/ promoters of the company ignoring that such cash transaction was between two independent persons, who were merely shareholder (present and succeeding) of the appellant. 8. On the facts and circumstances of the case, the Ld. CIT(A) has erred, both on the facts and in law, in confirming rejection of the claim of exemption u/s 11 of the Income Tax Act by AO on the basis of surmises and conjectures. ITA No.329 & 330/Del/2021 Aspam Academy Noida 3 9. On the facts and circumstances of the case, the Ld. CIT(A) has erred, both on the facts and in law, in adjudicating the Ground no. 8 solely on the issue that appellant cannot be taxed at maximum marginal rate. Ld. CIT(A) has completely ignored the contention of appellant that Ld. AO ought to have computed the income of the appellant as \"Business Income\" as he has held the appellant to be engaged into and not under normal commercial principle. The Ld. CIT(A) ought to have also considered the contention of appellant that such business income be dealt with in accordance with provisions of section 11(4) of the Income Tax Act, 1961 only.” 4. The relevant facts giving rise to this appeal are that the assessee, a Company registered under section 8 of the Companiies Act. The assessee runs a school in Noida (UP). It filed its Income Tax Return (ITR) of the relevant years declaring NIL income which was processed under section 143(1) of the Act. The promotors trustee group, Alchemist Group was searched under section 132 of the Act by the Income Tax Department on 20.06.2014. Various incriminating material were seized from Alchemist Group. On the basis of seized incriminating material, the Assessing Officer (AO) initiated proceeding under section 153C of the Act in these cases. The assessee also got registered under section 12A of the Act in the name of MAF Academy Pvt. Ltd. The assessee (formerly known as MAF Academy Pvt. Ltd. controlled and managed by Mohd. Abul Fazal Farooqi & Associates) was taken over by the Alchemist Group (controlled and managed by Shri K D Singh & Associates) in AY 2013-14. 4.1 As per seized document scanned on Page No. 3 of the assessment order of AY 2013-14, it is evident that entire shareholding of the assessee ITA No.329 & 330/Del/2021 Aspam Academy Noida 4 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 Fazal Mohd. Abul Dr. Gurinder Singh 11. 10 03.06.2013 Farooqi Fazal Mohd. Abul Pawan Kumar Verma 12. 10 03.06.2013 Dr. Gurinder Singh K.D.S. Corporation Pvt. Ltd. 4.2 The AO made inquiries from the Registrar of Companies (ROC). As per the ROC, entire 2,60,480 shares of MAF Academy Pvt. Ltd./ASPAM Academy, Noida were transferred to K.D.S. Corporation Pvt. Ltd. @ Rs.100/- per share, aggregating to Rs.20,57,39,700/-, as under: - ITA No.329 & 330/Del/2021 Aspam Academy Noida 5 S. No. Name of the person to whom payment made No. of Shares Share price Amount (in Rs.) Month/Yea r 1. Asad Farooqi 65100 597.98 3,89,29,000 June, 2013 2. Ayesha Farooqi 32550 597.98 1,94,64,500 June, 2013 3. Jafri Farooqi 32550 597.98 1,94,64,500 June, 2013 4. Mohd. Abul Fazal Farooqi 65130 597.98 3,14,52,700 June, 2013 5. Naila Raza 32550 597.98 1,94,64,500 June, 2013 6. Zeenat Azmu 32550 597.98 1,94,64,500 June, 2013 7. Aspam Academy Noida 75,00,000 June, 2013 8. IND Vyasa Bank Ltd. 5,00,00,000 June, 2013 Total 20,57,39,700/- 4.3 The above-mentioned transfer of shares shown at Rs.100/- per share before the ROC has actually taken place @ Rs. 597.98 per share as sown by the K.D.S. Corporation Pvt. Ltd. per share. In the details given in the ‘Receipt Document’, share purchase agreement was entered between two parties on 28.11.2012 for agreed price of Rs.45,50,00,000/- as against the disclosed consideration of Rs.20,57,39,700/-. The AO therefore, held that the sum of Rs.24,92,60,300/- (Rs.45,50,00,000/- minus Rs.20,57,39,700/- ) was paid in cash by the promotors of Alchemist Group to the promotors of ITA No.329 & 330/Del/2021 Aspam Academy Noida 6 MAF Academy Pvt. Ltd. during 28.11.2012 to 30.06.2013. Consequentially, the AO held that the provisions of sections 13(2) and 13(3) were attracted and thus, he withdrew the exemption and taxed the surplus of Rs.2,23,72,620/- and Rs.27,20,170/- in AY 2013-14 and AY 2014-15 respectively. Aggrieved, the assessee filed appeal before the CIT(A), who dismissed the appeal as under: 6.3 Ground No. 2 to 5 are directed against the assumption of jurisdiction by the AO u/s 153C. Vide Ground No. 2 the appellant has challenged the initiation of proceedings u/s 153C without recording the satisfaction 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 Academy Noida is one of the 66 group companies/entities of Alchemist group which is being controlled by Shri K.D. Singh and his close associates. Most of the directors are employees or friends of K.D. Singh, Chairman Emeritus of Alchemist Group. Annexure- A-4, A-5, A- 24 and A-44 (Party SS-17) is also pertains to M/s Aspam Academy Noida. ITA No.329 & 330/Del/2021 Aspam Academy Noida 7 On the page No. 19 to 26 of Annexure A-15 seized from office situated at 23, Nehru Place, New Delhi, complete details related to 66 group companies are found being maintained. On these pages, various details of the companies like Name of the company, Date of Incorporation, Registered Address of the company, share capital of the company, type of the company, No. of shares of the company, name of the Directors along with DIN No., Date of appointment of the Director, Date of Birth of the Director, Address of the Director, Details of shareholders of the Director, Name of the auditor of the Company etc. are given. These companies have been divided into 5 groups by the promoters and column No. 3 gives the No. of the group to which this company belongs. Similarly, on page No. 21 to 39 of Annexure A-18 seized from 23, Nehru Place, New Delhi, details of above 66 group companies are given. On these pages also, details of these companies into different groups are given. From the backup of the data taken during the search from the computers located in 23, Nehru Place, New Delhi various additional details like e-mail IDs of the company along with the passwords are being found maintained. These evidences prove that these 66 companies belong to Alchemist group. The residence of Shri Sandeep Sethi, Shri Ashok Sethi, H. No.97, Sector-21A, Chandigarh (Party: 55-5) was covered u/s 132(1) on the same day. During the search action Incriminating documents were found and seized as Annexure A-1 part of which belongs to M/s Aspam Academy Noida. The details of the documents/information pertain to M/s Aspam Academy Noida (Formerly known as M/s M.A.F. Academy Pvt. Ltd.) are as follows: - Sl. No. Annexure Pages Explanation 1 A-1 (Party SS-5) 1-38 General Information of M/s M.A.F. Academy Pvt. Ltd. A-43, Sector-62, Noida. The above Information/ documents pertains to M/s MAF. Academy Pvt. Ltd. was found and seized from the residence situated at H. No.97, Sector 21A, Chandigarh. office premise situated at 23, Alchemist House Nehru Place, New Delhi 110019. ITA No.329 & 330/Del/2021 Aspam Academy Noida 8 It proves that M/s Technology Parks Ltd. is one such company of the Alchemist Group. 2 A-4 (Party SS-17) A-5 (Party SS-17) A-25 (Party SS-17) A-44 (Party SS-17) 11-13 65 115- 124 98 Acknowledgement and bank deposit slip in respect of M/s M.A.F. Academy Pvt. Ltd. and letter regarding change in director/shareholder. 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. 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 pertain to M/s Aspam Academy Noida (Formerly known as M/s M.A.F. Academy Pvt. Ltd.) and therefore it is a fit case for the initiation of proceeding of assessment u/s 153C/143(3) of the 1.T. Act, 1961, Issue Notice u/s 153C of the 1.T. Act, 1961. Sd/- Asstt. Commissioner of Income Tax, Central Circle-20, New Delhi, Dated: 09.08.2016 ITA No.329 & 330/Del/2021 Aspam Academy Noida 9 From the satisfaction note it is apparent that the AO has noted that the seized documents pertain to the appellant and the AO has recorded his satisfaction on the same. The AO has also noted his satisfaction that the case is fit for initiation of proceedings u/s 153C on the basis of seized documents. Among the seized documents the AO has specifically noted the seizure of annexure A5, page-65 which records the investment in shares of MAF Academy Pre. Led per ledger account in the books of KDS Corporations Pvt. Ltd. for the period 01.04.2013 to 20.06.2014. As stated earlier, the consideration recorded in the books of M/s KDS Corporation Pvt. Ltd was only Rs. 20,57,39,700/- as against the agreed consideration of Rs. 45,50,00,000/-, as per the seized “receipt” which gives rise to the inference that the balance amount was paid in cash to the Farooqui family members who were erstwhile shareholders of the appellant company. In the satisfaction note there is no doubt that the AO has not recorded the details of the share purchase transaction and has not quantified the excess amount paid in cash. However, at the stage of recording of satisfaction u/s 153C the AO is not required to elaborate on or quantify the undisclosed income of the appellant. The AO is only required to conclude that the assets/documents handed over to him by the AO of the searched person represent or indicate any undisclosed income of the assessee under his jurisdiction. In this regard, Hon'ble Delhi High Court in the case of M/s RRJ Securities [2015] 62 taxmann.com 391 (Delhi) has held that \"Whilst it is not necessary for AO to be satisfied that the assets/documents seized during search of another person reflect undisclosed income of an assessee before commencing an enquiry u/s 153C, it would be impermissible for him to commence such enquiry if it is apparent that the documents/assets in question have no bearing on the income of the assessee for the relevant assessment years [Para 36]\" Therefore, in this regard the 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 ITA No.329 & 330/Del/2021 Aspam Academy Noida 10 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 ITA No.329 & 330/Del/2021 Aspam Academy Noida 11 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 being part consideration for sale of 100% equity shares held by all of the promoters of MAF/ the appellant company. The receipt further refers to a share purchase agreement dated 28.011.2012 vide which the consideration for share transfer was agreed for an amount of Rs. 45.50 Cr. This receipt has been signed by Mr. Farooqui on behalf of the promoters of the appellant company as well as the appellant company itself as is evident from the noting at the end of the receipt which states \"on behalf of MAF Promoters and Company.\" The said part consideration of Rs. 1,00,00,000/- which was received in cash is not reflected in the seized ledger account in the books of KDS Corporation Pvt. Ltd (Annexuer-A5, Page-65 as mentioned in the satisfaction note) which shows that unaccounted consideration was indeed being paid to the shareholders of appellant company. The said part consideration of Rs. 1,00,00,000/- has been paid in cash on 08.02.2013 and is relevant for A.Y. 2013-14. Further, the share transfer has been effected in June, 2013, relevant to A.Y. 2014-15, which gives rise to the inference that the balance amount of cash was paid in A.Y. 2014-15. Thus, the seized documents are relevant for both A.Y. 2013-14 and 2014-15. The only question which remains is whether the seized documents have a bearing on the determination of the total income of the appellant for the said years. As stated earlier, the appellant company and its directors are party to the transaction of shares transfer of the appellant company. Through the said share transfer 100% of the property of the trust is being indirectly transferred to the new shareholders. In this background it would be relevant to consider whether the provisions of section 13(1)(c) and 13(2) are attracted so as to deny exemption u/s 11 to the assessee. In this regard, section 13(1)(c) contains the general provisions, the violation of which would lead to disallowance of exemption u/s 11. Further, section 13(2), which is without prejudice to the generality of provision of section 13(1)(c), contains certain specific instances wherein it would be deemed that property of the institution has been applied for the benefit of a person refer to in section 13(3). The relevant provisions of section 13(1)(c) are reproduced below for ready reference: - ITA No.329 & 330/Del/2021 Aspam Academy Noida 12 \"Section 13(1) (1) Nothing contained in section 11 or section 12) shall operate 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 property of the Institution. Since the said property has been indirectly transferred due to transfer of the 100% of the shares, such benefit can be said to be an indirect benefit, which is also covered by the general provisions of section 13(1)(c). The appellant company cannot wash its hands off the transaction since it is clearly a party to the said use, or rather misuse, of the property of the institution, since the entire transaction has been done on behalf of the promoters of appellant company as well as the appellant company itself, which is evident from the seized receipt. Therefore, the said transaction attracts the provisions of section 13 leading to denial of exemption of u/s 11. It is thus held that the seized documents indeed have a bearing of the determination of total income of the appellant for A.Ys. 2013-14 and 2014-15, which is implicit in the recording of satisfaction note by the AO, where he records his satisfaction that the case is fit for initiation of proceedings u/s 153C. Ground No. 2 is accordingly is dismissed.” ITA No.329 & 330/Del/2021 Aspam Academy Noida 13 5. The Ld. Counsel, referring to page 151 of the PB, submitted that it was evident from the letter of the Ld. CIT(A) [DIN: ITBA/APL/F/17/2019- 20/1024770980(1)] that the AO, vide his remand report, had admitted that no addition on account of cash payment/receipt of Rs.24,92,60,300/- (Rs.45,50,00,000/- minus Rs.20,57,39,700/-) for purchasing/selling shares had been made either in the hands of KDS Corporation Pvt. Ltd. or share transferees belonging to the Farooqi Group in relevant years. Therefore, prima-facie, it could not be held that the violations of provisions of section 13(1), 13(2) and 13(3) of the Act had taken place. Accordingly, the withdrawal of exemption under section 11 of the Act was not justified in the present cases. 5.1 The Ld. Counsel, emphasizing on the finding of the Ld. CIT(A), submitted that the Ld. CIT(A) had invoked provisions of section 13(1)(c)(ii), 13(2)(e), 13(2)(f), 13(2)(g) and 13(3) of the Act for upholding the AO’s order. However, the assessee had not transferred either any income or any property to any of the specified persons under section 13(3) of the Act as the shares of the appellant company was not the property of the appellant company; therefore, its transfer would never result any income in its hands. At most, the assessable income derived on transfer of shares of the appellant 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 ITA No.329 & 330/Del/2021 Aspam Academy Noida 14 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 contended that the AO had wrongly applied maximum marginal tax rate while taxing the surplus of the appellant company as the normal surplus shown in the ITR was without claim of depreciation as per the Act (allowable depreciation: Rs.47,17,382/- as against the claimed depreciation of Rs.28,69,548/-) and set off of brought forward loss of Rs.12,65,427/-. She prayed for allowance of exemption under section 11 of the Act and in case the same did not get favour then ITA No.329 & 330/Del/2021 Aspam Academy Noida 15 the income had to be worked out in accordance with the provisions of section 28 to 44DB of the Act. 6. On the other hand, the Ld. CIT-DR, placing reliance on various paras of orders of the lower authorities, submitted that the appellant company, a holy cow had become a cash cow as evident from the seized material referred above. He thus, prayed for dismissal of the appeal. 7. We have heard both parties and perused the material available on the records. The exemption provided under Sections 11 and 12 of the Act is subject to certain restrictions provided under section 13 of the Act. The following incomes are not taxable, upon fulfillment of certain conditions, under sections 11 and 12 of the Act: 1. any income derived from property held under trust wholly for charitable or religious purposes to the extent to which such income is applied to such purposes in India. 2. any income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution. 8. Section 13 of the Act puts bar on the exemption provided under Sections 11 and 12 of the Act. The bar in section 13(1) of the Act is that the income or property of the trust should not be used directly or indirectly for the benefit specified persons. As per section 13(2) of the Act, without prejudice to the generality of the provisions of section 13(1)(c) and section ITA No.329 & 330/Del/2021 Aspam Academy Noida 16 13(1)(d), the income or the property of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of persons referred to in section 13(3), in situations listed under clauses (a) to (h) thereof. Applied for the benefit of a person referred to in section 13(3) Section 13 (2) provides the conditions when an income or property or any part of such income or property of the trust or institution is deemed 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 ITA No.329 & 330/Del/2021 Aspam Academy Noida 17 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 or other property was sold to such 'interested person' for consideration which is less than adequate; (vii) If any income or property is diverted during the previous year in favour of such 'interested person' provided the amount exceeds Rs. 1,000; and (viii) If any funds of the trust or institution are invested in any concern in which the 'interested person' has substantial interest. 9. There is no dispute on transfer of shares amongst erstwhile shareholders of Farooqi Group and present shareholders of K D Singh/ Alchemist Group. No material was brought on the record by the Ld. Counsel to demonstrate that the above-mentioned cash transactions evident from the seized material scanned above have been denied either by the transferors or transferees of shares of the appellant company. Further, the letter of the Ld. CIT(A) relied upon by the Ld. Counsel also does help the appellant company as there was not even a single comment on the assessments of transferors or transferees shareholders [transferors (capital gains/income under section 50CA of the Act & unexplained receipt, if any) and transferees [unexplained investment plus income under section 56(2)(x) of the income, if any]. Further. The letter of the Ld. CIT(A) relied upon by ITA No.329 & 330/Del/2021 Aspam Academy Noida 18 the Ld. Counsel talk about the taxability of income in the hands of KDS Corporation Pvt. Ltd. which is not the buyer of shares. 10. Otherwise also, for the sake of discussion, if we accept that the transfer of shares even happened without cash though it’s not a case here, then also it cannot be ruled out that the benefit has not been 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 the transfer of shares have not taken place @ fair market value keeping in view the net worth of the appellant company. Thus, such transfer of shares is inferred having taken place in contravention to Rule 11 UA of the Income Tax Rules. 11. The Hon’ble Delhi High Court in the case of Span Foundation [order dated 4.11.2008 in ITA Nos. 767 and 789 of 2008] has opined that with regard to the benefit being derived by interested persons, adequacy is the only question of relevance. Here, the above referred cash transactions do not confine to the independent financial transactions between two different persons but such 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 ITA No.329 & 330/Del/2021 Aspam Academy Noida 19 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 lower authorities clearly demonstrate that the benefit has been derived by the specified persons referred to in section 13(3) of the Act. The AO have proved to the hilt, on the basis of positive evidence brought on record, that there is violation of the provisions of section 13 of the Act. 12. In view of the foregoing discussion/observation, we are of the considered opinion that the benefit has been derived by the specified persons referred to in section 13(3) of the Act on transfer of shares along with the control & management of the appellant company. Thus, we hold that the AO is justified in denying the benefit of exemption under section 11 of the Act to the appellant company. Ground nos. 7 and 8 thus, fail. ITA No.329 & 330/Del/2021 Aspam Academy Noida 20 13. Now the next issue is the taxability at the maximum marginal rate. Section 164 of the Act provides that where ‘the whole or any part of the relevant income’ is not exempt under Section 11 or 12 of the Act, tax shall be charged on the relevant income at the maximum marginal rate. The use of the expression ‘whole or any part of the relevant income’ in Section 164 of the Act, lends a meaning that denial of entire exemption is not contemplated in Section 13 of the Act and that is why the amendment to section 13(1)(c)/(d) of the Act was brought wef 01 April 2023, 2023-24. Here, the benefit passed on to the persons referred to in section 13(3) of the Act on transfer of shares along with the control & management of the appellant company is manyfold than the surplus of the appellant company. Therefore, we are of the considered view that the Ao has rightly denied the exemption on all income of the appellant assessee. The appellant assessee has also requested for working out the income in accordance with the provisions of section 28 to 44DB of the Act. But we are not convinced with the said argument on simple reasoning of consistency as it will have cascading effect on income in preceding years also. In view of the proviso to section 164(2) and Circular No.387, dt.06.07.1984, issued by the CBDT, we are of the considered view that the AO is justified in taxing the income at maximum marginal rate. Reliance is placed on the decisions in cases of Charanjiv Charitable Trust (2014) 43 taxmann.com 300 (Delhi) and ITA No.329 & 330/Del/2021 Aspam Academy Noida 21 Audyogik Shikshan Mandal [2019] 101 taxmann.com 247 (Bombay). Ground no. 9 also fails accordingly. 14. In the result, both appeals of the assessee are dismissed as above. Order pronounced in open Court on 30th May, 2025 Sd/- Sd/- (VIKAS AWASTHY) (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:30/05/2025 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT/CIT 4. CIT(Appeals) 5. CIT-DR ASSISTANT REGISTRAR ITAT, NEW DELHI "