Asst. CIT, Circle-6, Pune V. Sri Balaji Society, Pune

ITA 1204/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88947 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S NAIK SHRI S N DOSHI
• Assessee Lawyers: PASS PUNE PAN NO AAFTSB
• Keywords: Charitable institution; Benefit of exemption
• Section: 12A; 12AA; 32; 27; 6; 11; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO . 1 679 /PN/20 1 2 ASSESSMENT YEAR: 200 8 - 09 THE ASSISTANT COMMISSIONER OF INCOM E TAX, CIRCLE - 6, PUNE, PMT BUILDING, SWARGATE, PUNE VS. SRI BALAJI SOCIETY, PLOT NO. 9, CLUSTER NO. - 2, KUMAR CITY, KALYANI NAGAR, PUNE - 411014 (APPELLANT) (RESPONDENT) PAN NO. AAFTS1707B ITA NO . 1204 /PN/201 3 ASSESSMENT YEAR: 200 9 - 10 THE ASSIST ANT COMMISSIONER OF INCOME TAX, CIRCLE - 6, PUNE, PMT BUILDING, SWARGATE, PUNE VS. SRI BALAJI SOCIETY, S. NO. 55/2 - 7, TATHAWADE, OPP. WAKAD POLICE STATION, OFF MUMBAI - BANGALORE BYPASS, PUNE - 411033 (APPELLANT) (RESPONDENT) PAN NO. AAFTS1707B REVE NUE BY: SHRI P.S. NAIK ASSESSEE BY: SHRI S.N. DOSHI DATE OF HEARING : 03 - 1 2 - 2014 DATE OF PRONOUNCEMENT : 18 - 0 2 - 2015 ORDER PER R.S . PADVEKAR , JM : - TH ESE TWO APPEALS ARE FILED BY THE REVENUE CHALLENGING THE RESPECTIVE IMPUGNED ORDER S OF TH E LD. CIT(A) - III, PUNE FOR THE A. YRS. 2008 - 09 AND 2009 - 10. IN BOTH THESE APPEALS , THE REVENUE HAS FILED THE REVISED/CONCISE GROUNDS WHICH ARE TAKEN ON RECORD. 2. WE FIRST TAKE THE APPEAL FOR THE A.Y. 2008 - 09. THE REVENUE HAS TAKEN THE FOLLOWING REVISED /CONCISE GROUNDS IN THE APPEAL: 2 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE 1. THE LD. CIT(A) ERRED ON THE FACTS AND ON CIRCUMSTANCES OF THE CASE AND IN LAW, IN HOLDING THAT THE EXPENDITURE ON ADVERTISEMENT WAS A LEGITIMATE EXPENDITURE INCURRED FOR THE PURPOSE OF PURSUING THE OBJECTS OF THE SOCIETY. 2. T HE LD. CIT(A) ERRED ON THE FACTS AND ON CIRCUMSTANCES OF THE CASE AND IN LAW, IN HOLDING THAT THE FUNDS OF THE SOCIETY ARE NOT APPLIED OR USED OR DIVERTED FOR THE BENEFIT OF THE PERSON REFERRED TO SECTION 13(3) IN VIOLATI ON OF CONDITION LAID DOWN U/S 13(1) (C) & 13(2)(C). 3. FOR THIS AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE ID. CIT(A), PUNE MAY BE VACATED AND THAT OF THE AO BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD., AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE THE HON'BLE BOMBAY HIGH COURT. 3. THE ISSUE WHICH ARISES FOR OUR CONSIDERATION IS WHETHER THE ASSESSEE TRUST HAS VIOLATED THE CONDITION OF SEC. 13(1)(C) R.W.S. 13(2)(C) OF THE INCOME - TAX ACT AND HENCE, N O T ELIGIBLE TO THE BENEFIT OF EXEMPTION OF SEC. 11 & 1 2 OF THE INCOME - TAX ACT. WE MAY PREFER HERE TO CU LL OUT THE FACTS FROM THE ORDER OF THE LD. CIT(A) FOR THE A.Y. 2008 - 09. THE FACTS WHICH REVEALED FROM THE RECORD ARE AS UNDER. THE ASSESSE E IS STATED TO BE A SOCIETY REGISTERED BOTH UNDER THE BOMBAY PUBLIC TRUST ACT 1860 AND ALSO WITH THE CHARITY COMMISSIONER OF PUNE. BESIDES, THE TRUST HAS ALSO BEEN GRANTED REGISTRATION U/S. 12AA OF THE INCOME - TAX ACT BY THE CIT - II, PUNE. THE SOCIETY RUNS V ARIOUS EDUCATIONAL INSTITUTIONS UNDER ITS AEGIS. THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR THE A.Y. 2008 - 09 DECLAR ING NIL INCOME AFTER CLAIMING EXEMPTION U/S. 11 OF THE ACT. IT WAS NOTICED BY THE ASSESSING OFFICER THAT ONE OF THE MAJOR ITEMS OF EXPE NDITURE CLAIMED BY THE ASSESSEE PERTAINED TO ADVERTISEMENT WHICH WAS CLAIMED AT RS.3,78,38,469/ - . ANALYSIS OF THE EXPENDITURE SHOWED THAT OUT OF THE TOTAL AMOUNT OF RS.3,78,38,469/ - , MAJOR PORTION OF THE EXPENDITURE AMOUNTING TO RS.3,76,37,138/ - WAS PAID T O M/S. SRI BALAJI 3 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE CREATIVITIES (IN SHORT SBC) ON ACCOUNT OF RELEASE OF ADVERTISEMENTS IN VARIOUS MAGAZINES AND SOUVENIRS. IT WAS FURTHER NOTICED BY THE ASSESSING OFFICER T HAT M/S. SHI BALAJI CREATIVITIES THROUGH WHOM MAJOR PORTION OF THE ADVERTISEMENT EXP ENDITURE WAS FOUND TO HAVE BEEN MADE, IS A PARTNERSHIP FIRM CONSTITUTED BY FOLLOWING THREE PARTNERS WHO HAPPENED TO BE TRUSTEES OF THE ASSESSEE SOCIETY : SL. NO. NAME OF THE PARTNER SHARE RATIO 1 SHRI B. PARAMANANDHAN 40% 2 SHRI B. PARANDHAMAN 50% 3 SMT . THILANGAVATHY 10% 3.1 THE ASSESSING OFFICER HAS OBSERVED THAT THE ABOVE THREE TRUSTEES OF THE ASSESSEE SOCIETY ARE HAVING SUBSTANTIAL INTEREST IN THE FIRM, M/S. SRI BALAJI CREATIVITIES (SBC). I T WAS HELD BY THE ASSESSING OFFICER THAT THE SAID PARTNE RS AND THEIR FIRM, M/S. SRI BALAJI CREATIVITIES HAVE BECOME PERSONS COVERED U/S . 1 3(3)(E) OF THE INCOME - TAX ACT VIS - A - VIS THE ASSESSEE SOCIETY. HAVING HELD SO, THE ASSESSING OFFICER CARRIED OUT AN ANALYSIS OF THE TURNOVER OF THE SAID FIRM, M/S. SRI BALAJI CREATIVITIES AND THE CONTRIBUTION OF THE ASSESSEE SOCIETY TO THE SAID FIRM FOR THE CURRENT & PRECEDING ASSESSMENT YEARS, WHICH RE VEALED FOLLOWING FACTS AND FIGURES: A.Y. GROSS TURNOVER ASSESSEES CONTRIBUTION % OF GROSS TURNOVER 2008 - 09 5,48,79,593 3,83, 93,848 70% 2007 - 08 5,20,00,020 3,48,87,310 67.09% 3. 2 ARMED WITH THE ABOVE ANALYSIS, THE ASSESSING OFFICER THEREAFTER, EXAMINED THE VARIOUS BILLS ISSUED BY SBC TO THE ASSESSEE SOCIETY AND ALSO A COMPARATIVE ANALYSIS WITH BILLS ISSUED BY THE SAID FIRM TO ITS OTHER CLIENTS IN RESPECT OF ADVERTISEMENTS PLACED IN VARIOUS N EWSPAPERS ON BEHALF OF THEM. ANALYSIS OF ONE OF THE BILLS ISSUED BY M/S. SBC TO THE ASSESSEE IN RESPECT OF ADVERTISEMENTS PLACED IN TIMES OF INDIA, 4 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE ECONOMIC TIMES, HINDUSTAN TIMES, HIND USTAN & MINT ON 03 - 01 - 2008, COPY OF WHICH IS ATTACHED TO THE ASSESSMENT ORDER AS ATTACHMENT - I, SHOWED THAT THE SAID BILL DOES NOT CONTAIN DETAILS SUCH AS THE NUMBER OF PAGE OF THE N EWSPAPER ON WHICH THE ADVERTISEMENT SHOULD APPEAR, SEPARATE CHARGES FOR DRA FTING, DESIGNING AND ANY KIND OF ART WORK IN RESPECT OF THE N EWSPAPERS BUT IT DIRECTLY SHOWED THE AREA THAT WAS SUPPOSED TO BE OCCUPIED BY T HE SAID N EWS IN THE PARTICULAR N EWSPAPER. THE BILL THEN SHOWED THE RATE ADOPTED FOR THE PARTICULAR N EWSPAPER AND DIS COUNT ON THE GROSS TOTAL BILL GR ANTED BY M/S. SBC TO THE ASSESSEE WHICH IS UNIFORMLY GRANTED AT 2% OF THE GROSS AMOUNT. ON THE CONTRARY, ANALYSIS OF THE BILLS ISSUED BY SBC TO ITS OTHER CLIENTS SHOWED THAT WHILE OTHER DETAILS WERE SIMILARLY PLACED, THE DIS COUNTS IN THEIR CASES HAVE B E EN GRANTED RANGING FROM 10% TO 13%. ONE OF SUCH BILLS OBTAINED BY THE ASSESSING OFFICER PERTAINING TO SADHANA CENTRE FOR MANAGEMENT AND LEADERSHIP DEVELOPMENT IS MADE PART OF THE ASSESSMENT ORDER BY THE ASSESSING OFFICER AS ATT ACHMENT - II. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ABOVE ANALYSIS CLEARLY SHOWED THAT WHILE THERE WAS NO DIFFERENCE BETWEEN THE BILLS ISSUED TO M/S. SBC TO THE APPELLANT SOCIETY AND OTHER CLIENTS WITH REGARD TO THE CHARGES AND SERVICES RENDERED, THE VARIATION WAS ONLY WITH RESPECT TO THE QUANTUM OF DISCOUNT GRANTED WHICH WAS 2% IN CASE OF ASSESSEE SOCIETY WHEREAS IT STOOD AT 10% IN THE ABOVE CASE. 3.3 ACCORDINGLY, THE ASSESSEE WAS CALLED UPON BY THE ASSESSING OFFICER TO EXPLAIN AS TO WHY THE PRO VISIONS OF SEC. 13(L)(C) OF THE ACT SHOULD NOT BE INVOKED IN ITS CASE IN THE FACE OF THE FACT THAT M/S. SBC IS A PERSON COVERED UNDER S EC.13(3) OF THE ACT AND THE ASSESSEE HAS BEEN AWARDED LESS AMOUNT OF DISCOUNT THAN OTHERS DESPITE THE FACT THAT THE ASSES SEE S OCIETY CONTRIBUTED TO ALMOST 70% OF THE TOTAL TURNOVER OF THE SBC. IN RESPONSE, THE ASSESSEE SOUGHT TO JUSTIFY THE QUANTUM OF DISCOUNT GRANTED BY SBC VIS - A - VIS ITS OTHER CLIENTS BY STATING THAT THE DISCOUNT 5 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE WAS GRANTED IN ITS CASE ON THE GROSS ADVERTI SEMENT BILLS IN N EWSPAPERS AS COMPARED TO THE CARD RATES OF THE N EWSPAPERS. THE ASSESSEE HAS FURNISHED A CHART WHERE IT IS SHOWN THAT IT HAS RECEIVED A BENEFIT OF RS.43,17,143/ - ON THE TOTAL ADVERTISING CHARGES, WHICH IF BILLED ACCORDING TO THE CARD RATES OF RS.4,17,45,910/ - , WOULD CONVERT TO A DISCOUNT @ OF 10.34%. THUS, IT WAS STRONGLY ARGUED BY THE ASSESSEE THERE WAS NO UNDUE BENEFIT PASSED ON TO SBC BY WAY OF HIGHER CHARGES AND THEREFORE, PROVISIONS OF SEC. 13(1)(C) HAD NO APPLICATION IN THE CASE. IN THE CONTEXT, RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ADITANAR EDUCATIONAL INSTITUTION VS. ACIT 224 ITR 310 (SC) . 3.4 HOWEVER, THE ASSESSING OFFICER DID NOT FIND MUCH MERIT IN THE CONTENTIONS OF THE ASSESSEE . WH ILE ASSERTING THAT IT IS NOT DISPUTED BY THE ASSESSEE THAT M/S. SBC IS A PERSON COVERED BY THE PROVISIONS OF S EC. 13(3) AND THAT IT HAS BEEN GRANTED A DISCOUNT OF ONLY 2% ON THE BILLS FURNISHED DURING THE ASSESSMENT PROCEEDINGS WHILE MAJORITY OF THE TRANSA CTIONS OF M/S. SBC WERE WITH THE ASSESSEE SOCIETY, THE ASSESSING OFFICER H AS HELD THE JUSTIFICATION GIVEN BY THE ASSESSEE IS AN, AFTERTHOUGHT. JUSTIFYING HIS CONCLUSION, THE ASSESSING OFFICER SOUGHT TO HIGHLIGHT THAT THE ASSESSEE SOCIETY AND INSTITUTIONS R UN BY IT HAD GIVEN TOTAL ADVERTISEMENTS IN DIFFERENT N EWSPAPERS ON 101 OCCASIONS, WHILE THE ASSESSEE GOT REDUCED RATES ON THE RATE CARDS ONLY ON 28 OCCASIONS THAT TOO IN SPECIFIED N EWSPAPERS ONLY. THE ASSESSING OFFICER HAS NOT ED THAT IF M/S. SBC HAD NEGOTI ATED FOR REDUCED RATES FOR THE ASSESSEE , IT COULD HAVE DONE THE SAME WITH OTHER N EWSPAPERS TOO IN WHICH THE ADVERTISEMENTS WERE PLACED. IT IS EMPHASIZED BY THE ASSESSING OFFICER THAT IF THE FACTS ARE LIKE THAT PRESENTED BY THE ASSESSEE , M/S. SBC COULD HAVE REDUCED THE DISCOUNT IN RESPECT OF ADVERTISEMENTS WHERE REBATE ON CARD RATES WERE RECEIVED AND COULD HAVE GRANTED DISCOUNT @ 10% AND ABOVE IN RESPECT OF ADVERTISEMENT COSTS IN OTHER N EWSPAPERS. NOTING THAT THE POSITION IS NOT LIKE THAT, THE ASSESSING OFFI CER SOUGHT TO EMPHASIZE 6 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE THAT THE CONTENTION OF THE ASSESSEE WAS CLEARLY AN AFTERTHOUGHT AND NOT SUPPORTED BY EVIDENCES. ON THE CARD RATES, THE ASSESSING OFFICER MENTIONED THAT SUCH RATES ARE NOT FIXED AND ARE SUBJECT TO VARIATIONS AND IT IS ALWAYS NOT THAT THE CUSTOMERS HAVE TO PAY ACCORDING TO THE CARD RATES ONLY. HOWEVER, ACCORDING TO THE ASSESSING OFFICER, CHARGES HAVE BEEN PAID ACCORDING TO CARD RATES IN MOST OF THE INSTANCES IN THE ASSESSEES CASE. 3 . 5 THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT A S REVEALED FROM A LETTER ADDRESSED TO THE ASSESSEE BY ANAND BAZAR PATRIKA (ABP LTD.), MUMBAI, COPY OF WHICH WAS FURNISHED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS, THE SAID PARTY HAD CONVEYED THE THEN EXISTING RATES TO THE ASSESSEE . I T WAS NOTICED BY THE ASSESSING OFFICER THAT SAID COMMUNICATION INDICATED THAT THE SAID PARTY WAS DIRECTLY DEALING WITH THE ASSESSEE WITHOUT THE HELP OF ANY INTERMEDIARY AND EVEN IF IT WAS THAT THE ASSESSEE WAS RECEIVING REDUCED RATES THAN AS PER RATE CARDS , IT WOULD F O LLOW THAT SUCH BENEFITS WERE BEING GIVEN TO THE ASSESSEE DIRECTLY AND M/S. SBC DID NOT HAVE ANY ROLE TO PLAY. DIFFERENTIATING, THE ASSESSING OFFICER EMPHASIZED THAT M/S. SBC HAD GRANTED DISCOUNTS TO OTHER CUSTOMERS ON GROSS BILLING WHICH INCLU DE THE SERVICES RENDERED BY M/S. SBC AS AN AD VERTISING AGENCY. IT WAS FURTHER OBSERVED BY THE ASSESSING OFFICER THAT THE PLEA NOW TAKEN BY THE ASSESSEE WAS AN AFTERTHOUGHT. THE ASSESSING OFFICER, ACCORDINGLY, CAME TO THE CONCLUSION THAT THERE WAS CONTRAV ENTION OF THE PROVISIONS OF SEC. 13(1)(C) OF THE ACT INASMUCH AS THE ASSESSEE HAD PASSED OUT UNDUE BENEFIT TO M/S. SBC WHO WAS A PERSON AS DEFINED IN SEC. 13(3), BY MAKING PAYMENT FOR SERVICES RENDERED BY THE SAID CONCERN IN EXCESS OF WHAT MAY REASONABLY H AVE BEEN PAID FOR SUCH SERVICES. THE QUANTUM OF SUCH EXCESS BENEFIT HELD TO BE GIVEN TO M/S. SBC WAS WORKED OUT BY THE ASSESSING OFFICER AT RS.30,14,735/ - . CITING THE VIOLATION OF SEC. 13(1)(C) AS ABOVE, THE ASSESSEE WAS HELD TO BE NOT ELIGIBLE FOR THE BEN EFIT OF 7 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE EXEMPTION U/S . 11 OF THE ACT AND THE TOTAL INCOME OF THE ASSESSEE WAS COMPUTED ACCORDINGLY. WHILE DOING SO, THE ASSESSING OFFICER ALSO MADE DISALLOWANCE OF THE EXCESS BENEFIT FOUND TO HAVE BEEN GRANTE D IN THE CASE OF M/S. SBC OF RS.30,14 ,735/ - U/S. 40A(2)(B) OF THE INCOME - TAX ACT. 4. THE ASSESSEE CHALLENGED THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER BEFORE LD. CIT(A). THE LD. CIT(A) ACCEPTED THE PLEA OF THE ASSESSEE THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN COMING TO THE CONCLUSION THAT THE FUNDS OF THE ASSESSEE ARE APPLIED OR USED OR DIVERTED FOR THE BENEFIT OF THE PERSON REFERRED TO SEC. 13(3) WHICH AMOUNTED TO VIOLATION OF CONDITION LAID DOWN U/S . 13(1)(C) AND 13(2)(C) AND THEREBY DENYING THE EXEMPTION TO THE ASSESSEE . THE OPERATIVE P ART OF THE REASONS AND FINDINGS OF THE LD. CIT(A) ARE AS UNDER: 5. THE ARGUMENTS ADVANCED BY THE LD. COUNSELS FOR THE APPELLANT ARE CAREFULLY EXAMINED WITH REFERENCE TO THE FACTUAL MATRIX OF THE CASE, LEGAL POSITION AS APPLICABLE TO THE YEAR UNDER CONSIDE RATION AND THE FINDINGS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE FACTS IN BRIEF ARE THAT THE APPELLANT SOCIETY WAS REGISTERED UNDER SEC. 12A OF THE I.T. ACT VIDE ORDER OF THE CIT - II, PUNE DATED 23/12/1998. THE MAIN OBJECT OF THE SOCIETY IS SPR EADING AND PROMOTING EDUCATION AND THE SOCIETY RUNS EIGHT EDUCATIONA L INSTITUTIONS. THE SOCIETY RELEASES ADVERTISEMENTS FOR PUBLISHING IN THE PRINT MEDIA THROUGH M/S SRI BALAJI CREATIVITIES (SBC) FOR ALL THE INSTITUTIONS RUN BY THE SOCIETY. OUT OF THE TOTA L ADVERTISEMENT EXPENDITURE OF RS.3,78,38,4699/ - INCURRED BY THE APPELLANT DURING THE YEAR, AN AMOUNT OF RS.3,76,37,138/ - WAS PAID TO SBC FOR THE ADS RELEASED THROUGH SBC. DURING THE YEAR, 101 ADVERTISEMENTS WERE RELEASED THROUGH SBC ON DIFFERENT OCCASIONS LIKE ADMISSIONS, CALLING APPLICATIONS FOR FACULTY POSITIONS, SAID TO BE MANDATORY UNDER BOTH AICTE & UGC RULES, HIGHLIGHTING ACHIEVEMENTS OF THE INSTITUTIONS ON SPECIAL OCCASIONS. THE TWIN OBJECTIVES BEHIND RELEASING ADVERTISEMENT ARE STATED TO BE (A) TO GET QUALITY STUDENTS FROM DIFFERENT PARTS OF THE COUNTRY AND (B) TO CREATE SRI BALAJI BRAND SO AS TO ATTRACT THE BEST RECRUITERS FOR CAMPUS PLACEMENTS. THE CASE OF THE ASSESSING OFFICER IS THAT THE AMOUNT PAID BY THE APPELLANT BY WAY OF ADVERTISING CHARGE S TO SBC DURING THE PREVIOUS YEAR, WHICH IS A PERSON REFERRED TO IN SECTION 13(3), IS IN EXCESS OF WHAT MAY BE 8 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE REASONABLY PAID FOR SUCH SERVICES AND THEREBY THE FUNDS OF THE APPELLANT ARE DIVERTED TO INTERESTED PERSON. THE AO HAS DRAWN THIS INFERENCE ON TH E GROUND THAT LOWER AMOUNT OF DISCOUNT AT 2% WAS OFFERED TO THE APPELLANT ON THE ADVERTISING CHARGES AS COMPARED TO DISCOUNT OF 10% OFFERED TO OTHER CUSTOMERS OF SBC, EVEN THOUGH THE BULK OF THE BUSINESS OF SBC WAS ON ACCOUNT OF ADVERTISING FROM THE APPELL ANT. ON THE OTHER HAND, THE CONTENTION OF THE APPELLANT IS THAT THE EXPENDITURE INCURRED IS REASONABLE OR COMMENSURATE WITH THE SERVICES RENDERED BY SBC AND THEREFORE THE FUNDS OF THE APPELLANT ARE NOT USED OR APPLIED OR DIVERTED FOR THE BENEFIT OF THE INT ERESTED PERSONS AND THE PROVISIONS OF SEC. 13(L)(C) HAVE NOT BEEN VIOLATED BY THE APPELLANT AT ALL. THEREFORE, THE CRUCIAL POINT FOR DETERMINATION IN THE PRESENT CASE IS WHETHER THE ADVERTISING CHARGES PAID BY THE APPELLANT TO SBC ARE REASONABLE OR COMMENS URATE WITH THE SERVICES RENDERED BY SBC TO THE APPELLANT - SOCIETY DURING YEAR. TO DECIDE THE ISSUE, IN THE FIRST PLACE, IT IS NECESSARY TO REFER TO THE RELEVANT PROVISIONS OF SEC. 13 AS APPLICABLE TO THE YEAR UNDER CONSIDERATION, WHICH READ AS UNDER: '13(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) ANY PART OF THE INCOME FROM THE PROPERTY HELD UNDER A TRUST FOR PRIVATE RELIGIOUS PURPOSES WH ICH DOES NOT ENURE FOR THE BENEFIT OF THE PUBLIC; (B) IN THE CASE OF A TRUST FOR CHARITABLE PURPOSES OR A CHARITABLE INSTITUTION CREATED OR ESTABLISHED AFTER THE COMMENCEMENT OF THIS ACT, ANY INCOME THEREOF IF THE TRUST OR INSTITUTION IS CREATED OR ESTABL ISHED FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE; (C) IN THE CASE OF A TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITUTION, ANY INCOME THEREOF (I) IF SUCH TRUST OR INSTITUTION HAS BEEN CREATED OR ESTA BLISHED AFTER THE COMMENCEMENT OF' THIS ACT AND UNDER THE TERMS OF THE TRUST OR THE RULES GOVERNING THE INSTITUTION, ANY PART OF SUCH INCOME ENURES; OR (II) IF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OF THE INSTITUTION (WHENEVER CREATED OR ES TABLISHED) IS DURING THE 9 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE PREVIOUS YEAR USED OR APPLIED, DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SUB - SECTION (3) : (2) WITHOUT PREJUDICE TO THE GENERALITY OF THE PROVISIONS OF CLAUSE (C) AND CLAUSE (D) OF SUB - SECTION (1), THE IN COME 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 A PERSON REFERRED TO IN SUB - SECTION. (C) IF ANY AMOUNT IS PAID BY WAY OF SALARY, ALLOWANCE' OR OTHERWISE DURING THE PREVIOUS YEAR TO ANY PERSON REFERRED TO IN SUB - SECTION (3) OUT OF THE RESOURCES OF THE TRUST OR INSTITUTION FOR SERVICES RENDERED BY THAT PERSON TO SUCH TRUST OR INSTITUTION AND THE AMOUNT SO PAID IS IN EXC ESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES;. (G) IF ANY INCOME OR PROPERTY OF THE TRUST OR INSTITUTION IS DIVERTED DURING THE PREVIOUS YEAR IN FAVOUR OF ANY PERSON REFERRED TO IN SUB - SECTION (3): PROVIDED THAT THIS CLAUSE SHALL NOT APPLY WHE RE 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 DIVERTED DOES NOT EXCEED ONE THOUSAND RUPEES;] 13(3) THE PERSONS REFERRED TO IN CLAUSE (C) OF SUB - SECTION (1) AND SUB - SECTION (2) ARE THE FOLLOWING, NAMELY, (A) THE AUTHOR OF (THE TRUST OR THE FOUNDER OF THE INSTITUTION; (B) ANY PERSON WHO .HAS MADE A SUBSTANTIAL CONTRIBUTION TO THE TRUST OR INSTITUTION, THAT IS TO SAY, ANY PERSON WHOSE TOTAL CONTRIBUTION UP TO THE END OF THE RELEVANT I PREVIOUS YEAR EXCEEDS FIFTY THOUSAND RUPEES; (C) WHERE SUCH AUTHOR, FOUNDER OR PERSON IS A HINDU UNDIVIDED FAMILY, A MEMBER OF THE FAMILY; (CC) ANY TRUSTEE OF THE TRUST OR MANAGER (BY WHATEVER NAME CALLED) OF THE INSTITUTION; (D) ANY REL ATIVE OF ANY SUCH AUTHOR, FOUNDER, PERSON, MEMBER, TRUSTEE OR MANAGER AS AFORESAID; 10 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE (E) ANY CONCERN IN WHICH ANY OF THE PERSONS REFERRED TO IN CLAUSE (A), (B }, (C), (CC ) AND (D) HAS A SUBSTANTIAL INTEREST.' 5.1 THUS, SECTION 13(1) (A) PROVIDES THAT ANY INCOME OF A TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES WILL NOT GET THE BENEFIT OF EXEMPTION UNDER SECTION 11 IF SUCH INCOME IS USED OR APPLIED DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSON REFERRED TO UNDER SECTION 13(3). SECTION 13(3) SPECIFIES S UCH INTERESTED PERSONS, SECTION 13(2) INTRODUCES SOME DEEMING SITUATIONS AND PROVIDES THAT SUCH INCOME OR PROPERTY IS DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF A PERSON SPECIFIED IN SECTION 1 13(3). SECTION 13(2)(C); PROVIDES ONE SUCH ILLUSTRAT IVE SITUATION THAT IF ANY AMOUNT IS PAID BY WAY OF SALARY, ALLOWANCE OR OTHERWISE DURING THE PREVIOUS YEAR TO ANY PERSON REFERRED TO IN SECTION 13(3) OUT OF THE RESOURCES OF THE TRUST OR INSTITUTION FOR SERVICES RENDERED BY THAT PERSON TO SUCH TRUST OR INS TITUTION AND THE AMOUNT SO PAID IS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES. THEREFORE, THE BENEFIT OF SECTION 11 WOULD NOT BE AVAILABLE TO A SITUATION WHERE CHARGES PAID BY THE TRUST OR INSTITUTION DURING THE YEAR TO ANY CONCERN, IN WHIC H ANY PERSON REFERRED TO IN SECTION 13(3) HAS A SUBSTANTIAL INTEREST, ARE NOT REASONABLE OR COMMENSURATE WITH THE SERVICES RENDERED BY THE SAID PERSON. 5.2 TO UNDERSTAND THE ISSUE IN PROPER PERSPECTIVE, IT IS ALSO IMPORTANT TO REFER AND UNDERSTAND CERTAIN EXPRESSIONS COMMONLY USED IN ADVERTISING BUSINESS AND PRINT MEDIA AND WHICH ARE RELEVANT TO THE ISSUE ON HAND. (I) RATE CARD : A RATE CARD IS A DOCUMENT PROVIDED BY A NEWSPAPER OR OTHER PRINT PUBLICATION FEATURING THE PUBLISHER'S RATE FOR ADVERTISING. IT MAY ALSO DETAIL ANY DEADLINES, DEMOGRAPHICS, POLICIES, ADDITIONAL FEES : AND ARTWORK REQUIREMENTS. RATE CARDS HELP THE ADVERTISER UNDERSTAND WHAT TYPES OF AD SIZES, DISCOUNTS AND OTHER ADVERTISING THE; PUBLICATION HAS TO OFFER. (II) REMA INDER ADVERTISING : REMAINDER ADVERTISING (ALSO KNOWN AS REMNANT OR LAST MINUTE ADVERTISING) REFERS TO THE ADVERTISING SPACE THAT A MEDIA 11 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE COMPANY IS NOT ABLE TO SELL. DEPENDING ON THE MEDIUM, IT COULD BE AD SPACE OR TIME. OFTEN IT CAN BE BOUGHT AT A STEEP DISCOUNT. ADVERTISING TIME AND SPACE IS A PERISHABLE COMMODITY ARID IF IT IS NOT SOLD, IT IS LOST HOWEVER, INSTEAD OF TAKING A LOSS FOR UNSOLD AD SPACE, MEDIA OUTLETS WILL OFTEN TAKE FAR LESS THAN THEIR USUAL CHARGES TO UNLOAD THEIR REMNANT SPACE. IN SUCH SITUATIONS, ADVERTISERS CAN BUY EXPENSIVE MEDIA FOR LESS CHARGE THAN NORMAL. (III) RUN OF PAPER (ROP): ROP USUALLY MEANS ADVERTISEMENT CAN APPEAR IN ANY LOCATION WITHIN THE NEWSPAPER AND THE POSITION OF AN ADVERTISEMENT IS DETERMINED AT THE PUBLISHER'S D ISCRETION. 5.2 THE FACTS OF THE PRESENT CASE ARE NOW EXAMINED VIS - A - VIS THE PROVISIONS OF SEC. 13 OF THE I T ACT AS EXTRACTED ABOVE AND ALSO KEEPING IN MIND THE NATURE OF ADVERTISING BUSINESS. THE PROVISIONS OF SEC. 13(L)(C) READ WITH SEC. 13(2)(C) ARE APP LICABLE IF THE PAYMENT MADE TO SBC FOR THE SERVICES IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO REASONABLE PAYMENT FOR SUCH SERVICES, A PAYMENT FOR CERTAIN SERVICES RENDERED BECOMES UNREASONABLE IF THE SAME IS IN ANY WAY IN EXCESS OF PAYMENT FOR SIMILAR SERVICES THAT CAN BE AVAILED IN THE OPEN MARKET AND IN THAT SENSE, THE PAYMENT MADE TO SBC WILL BE UNREASONABLE IF SOME OTHER ADVERTISEMENT AGENCY WOULD HAVE TENDERED THE SAME SERVICES AT RATE THAN WHAT WAS PAID BY THE APPELLANT TO SBC FOR SUCH SERVICES. I N THE FIELD OF ADVERTISEMENT, AS A FIRST STEP, THE' ADVERTISER APPROACHES THE ADVERTING AGENCY FOR RELEASE OF ADVERTISEMENT IN SELECTED NEWSPAPERS AND MAGAZINES. THE ADVERTISING AGENCY THEN ISSUES A 'RELEASE ORDER' (RO) TO THE NEWSPAPER/MAGAZINE CONCERNED INDICATING THE DATE, PAGE, SIZE, POSITION ETC. OF THE ADVERTISEMENT TO BE INSERTED AND MENTIONS THE CARD RATE OR THE NEGOTIATED RATE AT WHICH THE AGENCY WOULD PAY THE PUBLISHERS. AFTER THE ADVERTISEMENT IS INSERTED AS PER THE RO, THE NEWSPAPER RAISES A FOR MAL BILL AT THE CARD RATES OR AT THE RATES AGREED UPON ON THE AGENCY QUOTING THE RELEVANT RO NUMBER. THE ADVERTISING AGENCY IN TURN RAISES ITS BILL ON THE CLIENT AND COLLECTS THE CHARGES AND PAYS THE NEWSPAPER AS PER THEIR BILL. TO ILLUSTRATE, AS PER BILL NO. 902 DATED 14.12.2007 RAISED BY SBC ON DINA INSTITUTE OF HOTEL MANAGEMENT, THE AMOUNT CHARGED FOR ADVERTISEMENT IS AS FOLLOWS: 12 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE ITEM NO. 1 AND 2. 3. DAINIK BHASKAR (INDORE) ON 26.12.2007 SIZE 120 SQ.CM 4. DAINIK BHASKAR (RAIPUR) ON 18.12.2007 SIZE 80 SQ.CM 1. THE CORRESPONDING RO NO (INDORE) 1583 2. THE CORRESPONDING RO NO (RAIPUR) 1584 3. RATES ON RO AND CHARGED BY THE PAPER (INDORE) RS.248/ - PSC 4. RATES ON RO AND CHARGED BY THE PAPER (RAIPUR) RS.176 - PSC 1. RATE CHARGED BY SBC TO THE CLIENT ( INDORE) RS.347/ - PSC 2. RATE CHARGED BY SBC TO THE CLIENT ( RAIPUR) RS. 212/ - PSC THE ADVERTISING CHARGES ARE NORMALLY FIXED AS PER THE CARD RATES PROVIDED BY THE PUBLISHERS FROM TIME TO TIME FOR INSERTION OF ADS IN DIFFERENT PAGES. HOWEVER, THE PUBLISHERS AS WELL ADVERTISING AGENCIES ALLOW REBATE ON CARD RATES DEPENDING ON THE DEMAND FOR ADS ON A PARTICULAR PAGE, IN A PARTICULAR EDITION AND ON A PARTICULAR DAY. IN THE COURSE OF THE PRESENT PROCEEDINGS, THE APPELLANT FURNISHED COPIES OF THE B ILLS RAISED BY PUBLISHERS ON SBC FOR INSERTION OF ADVERTISEMENT ON BEHALF OF THE APPELLANT, RELEVANT CARD RATES, COPIES OF BILLS RAISED BY M/S SBC ON THE APPELLANT, DISCOUNT ON GROSS BILLING ALLOWED BY SBC, WHICH ARE ANNEXED TO THE ORDER AS ANNEXURE 'A'. A S COULD BE SEEN FROM THE ANNEXURE, AS AGAINST THE TOTAL CARD RATES OF RS.4,45,27,496/ - FOR ADVERTISEMENTS INSERTED ON BEHALF OF APPELLANT, M/S SBC CHARGED THE APPELLANT RS.3,75,58,331/ - FOR THE SERVICES RENDERED TO THE APPELLANT, WHICH EFFECTIVELY WORKS OU T TO 15.65 % DISCOUNT ON THE CARD RATES. THESE DETAILS IN ANNEXURE 'A' WERE ALSO FURNISHED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. IT IS TRUE THAT IN SOME CASES, GROSS BILLING IS THE SAME AS CARD RATES AND EVEN IN SUCH CASES, SBC ALLOWED ONLY 2% DISCO UNT ON THE CARD RATES, WHICH POSSIBLY PROMPTED THE AO TO HOLD THAT AMOUNT PAID BY THE APPELLANT BY WAY OF ADVERTISING CHARGES TO SBC DURING THE YEAR WAS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES. BUT, AS MENTIONED EARLIER, SPACES MADE AVAI LABLE BY THE MEDIA ARE IN THE NATURE OF 'PERISHABLE' COMMODITIES AND REBATES ON CARD RATES OFFERED BY PUBLISHERS DEPEND ON SEVERAL FACTORS LIKE DEMAND AND SUPPLY ON A PARTICULAR DAY, THE NUMBER, SIZE, PAGE OF ADVERTISEMENTS AND THE ADVERTISING AGENCIES SUC CEED IN GETTING DISCOUNT FOR THEIR ADVERTISEMENTS ON SOME DAYS AND NO DISCOUNT AT ALL ON OTHER DAYS. SIMILARLY, THE 13 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE DISCOUNTS OFFERED BY' ADVERTISING AGENCIES TO THEIR CLIENTS ALSO DEPEND ON SEVERAL FACTORS LIKE NATURE OF SERVICES PROVIDED TO EACH CLIENT A ND NOT JUST THE VOLUME OF ADVERTISEMENTS. MERELY BECAUSE PAYMENTS MADE BY THE APPELLANT CONSTITUTE 70% OF THE TURNOVER OF SBC, IT CANNOT BE SAID THAT THE APPELLANT SHOULD GET DISCOUNT OR REBATE AT THE SAME RATE IN ALL THE CASES OF ADVERTISEMENTS RELEASED T HROUGH SBC AS A MATTER OF RIGHT., THE DISCOUNTS OFFERED ON PUBLICATION OF ADVERTISEMENTS IN MEDIA DEPEND ON VARIOUS FACTORS AND CANNOT BE UNIFORM FOR ALL CLIENTS AND ON ALL THE DAYS. IN THIS BACKGROUND, THE OBSERVATION OF THE ASSESSING OFFICER THAT SBC COU LD HAVE GOT DISCOUNT ON CARD RATES FROM THE NEWS PAPERS ON ALL THE 101 ADVERTISEMENTS RELEASED DURING THE YEAR AS AGAINST ONLY 28 INSTANCES AND SUBSEQUENTLY SBC COULD HAVE PASSED ON THE DISCOUNT TO THE APPELLANT WHERE REBATE ON CARD RATES HAS BEEN RECEIVED AND COULD HAVE GRANTED DISCOUNT @ 10% AND ABOVE IN ALL THE CASES IS ONLY PRESUMPTION WITHOUT APPRECIATING THE NATURE AND DYNAMICS OF ADVERTISING BUSINESS. AS ALREADY MENTIONED, SBC HAS EFFECTIVELY GRANTED TO THE APPELLANT SOCIETY DISCOUNT OF RS.69,69,041/ - ON THE CARD RATES IN 28 CASES DURING THE YEAR. IN THIS CONTEXT, IT MAY BE RELEVANT TO REFER TO THE FOLLOWING INSTANCES WHERE SUBSTANTIAL BENEFITS WERE PASSED ON TO THE APPELLANT: EXAMPLE 1. I. BILL NO. 823 DATED 1.9.2007. OUTLOOK MAGAZINE - 4 FULL PAGE ADVER TISEMENTS. II. CARD RATES: RS.4,50,000/ - PER FULL PAGE RS.1,50,000/ - FOR STRIP (HORIZONTAL) III. CORRESPONDING R.O. 1432. IV. THUS, COST FOR 4 PAGES + STRIP AD. RS.19,50,000/ - ACTUAL GROSS CHARGED IN THE BILL RS.6,80,000/ - REBATE ON CARD RATES RS.12,70,000/ - EX AMPLE 2. II. BILL NO. 971 DATED 18.2.2008. ECONOMIC TIMES (ALL EDITIONS) FULL PAGE ON PAGE NO. 5 (448 SQ. CM.) II. CARD RATES: BASIC RS.3,340/ - PER SQ. CM PREMIUM FOR PG 5 RS.235/ - - DO - TOTAL RS.3575/ - - DO - 14 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE III. CORRESPONDING R.O. 1752 III. THUS , COST FOR 448 SQ. CM. RS.16,01,600/ - ACTUAL GROSS CHARGED IN THE BILL RS.4,43,520/ - REBATE ON CARD RATES RS.11,58,080/ - (COPIES OF RELEVANT BILL NO. 823 & 971 ARE ENCLOSED TO THE APPELLATE ORDER AS ANNEXURE B - 1 & B - 2) AS AGAINST THE TOTAL DISCOUNT OF RS.69,69,041/ - AVAILED BY THE APPELLANT ON THE CARD RATES DURING THE YEAR, THE A.O. HAS OBSERVED THAT THE SOCIETY HAS PAID RS.30,14,735/ - EXCESS TO SBC BASED ON HIS ARITHMETICAL CALCULATIONS OF DIFFERENCE BETWEEN 2% AND 10%. IF PAYMENTS MADE TO SBC ARE MORE THAN THE CARD RATES OF THE NEWSPAPERS/PUBLISHERS OR SBC HAS NOT GRANTED REBATE AT ALL ON THE CARD RATES IN CASE OF ALL ADS PUBLISHED DURING THE YEAR FOR THE APPELLANT, THEN POSSIBLY ONE CAN DRAW THE INFERENCE THAT THE PAYMENT IS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES. BUT, IN NONE OF THE CASES, THE AMOUNT CHARGED BY SBC EXCEEDS THE CARD RATES AND ON THE CONTRARY SBC GRATED OVERALL REBATE OF MORE THAN 15% ON CARD RATES TO THE APPELLANT DURING THE YEAR. 5.3 IT IS ALSO NOTICED FROM TH E DETAILS FURNISHED BY THE APPELLANT THAT SBC HAS NOT GRANTED DISCOUNTS UNIFORMLY RANGING FROM 10% TO 13% TO ALL ITS CLIENTS AND THERE ARE CLIENTS WHO HAVE BEEN GRANTED DISCOUNTS AT 5% OR 8%. FOR INSTANCE, IN THE CASE OF TRINITY AUTO COMPONENTS, DISCOUNT I S GRANTED AT 7.50% IN SOME BILLS AND IN CASE OF ITS CLIENTS, SANDVIK ASIA AND DELCOM SOFTWARE INDIA PVT. LTD, NO DISCOUNT IS GRANTED ON AD CHARGES (COPIES OF RELEVANT' {BILL NO. 728, 738 & 883 ARE ATTACHED TO THE ORDER AS ANNEXURE C - 1 TO C - 3). THUS, DIFFER ENT PERCENTAGES OF DISCOUNTS ARE GRANTED BY M/S. SBC TO ITS VARIOUS CLIENTS DEPENDING ON THE DEMAND AND SUPPLY POSITION, REMAINDER ADVERTISING AND RUN OF PAPER ON A PARTICULAR DAY. THE ASSESSING OFFICER, WITHOUT APPRECIATING THE DYNAMICS OF THE MEDIA AND A DVERTISING BUSINESS AND WHY DIFFERENT PERCENTAGES OF DISCOUNT ARE GIVEN TO ITS CLIENTS, SIMPLY CALCULATED THE DIFFERENCE BETWEEN 2% AND 10% AND ARRIVED AT THE CONCLUSION THAT UNDUE BENEFIT WAS PASSED ON TO THE INTERESTED PERSON BY THE SOCIETY. IT IS IMPORT ANT TO NOTE HERE THAT THE AO HAS NOT QUESTIONED THE GENUINENESS OF THE EXPENDITURE INCURRED BY THE APPELLANT ON ADVERTISEMENT OR ITS NECESSITY OR RELEVANCE FOR ATTAINMENT OF THE OBJECTS OF THE SOCIETY. 15 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE 5.4 ONE OF THE OBSERVATIONS MADE BY THE ASSESSING OFFI CER, REFERRING TO THE LETTER DATED 24.12.2010 OF ANAND BAZAR PATRIKA LTD. (ABP) ISSUED DIRECTLY TO THE APPELLANT INSTEAD OF THROUGH SBC, IS THAT THE APPELLANT WAS DEALING WITH ABP AND OTHER PUBLISHERS DIRECTLY WITHOUT ANY INTERMEDIARY LIKE SBC IN THE MATTE RS OF ADVERTISEMENT IN NEWSPAPERS AND MAGAZINES. ACCORDING TO THE ASSESSING OFFICER, EVEN IF THE APPELLANT WAS PAYING LOWER RATES THAN THE RATES LISTED IN RATE CARDS FOR ADVERTISEMENTS, SUCH BENEFITS WERE BEING GIVEN TO THE APPELLANT DIRECTLY AND M/S. SBC DID NOT HAVE ANY ROLE TO PLAY IN THE MATTER, BUT, IT IS COMMON KNOWLEDGE THAT THE NEWSPAPERS DO NOT ACCEPT ADVERTISEMENTS DIRECTLY FROM THE ADVERTISERS EXCEPT UNDER EXCEPTIONAL CIRCUMSTANCES LIKE GREETINGS, OBITUARY AND TENDER NOTICES/LEGAL NOTICES TAKEN O UT BY GOVERNMENT BODIES. IN MANY CASES, EVEN THE GOVERNMENT DEPARTMENTS RELEASE ADVERTISEMENTS ONLY THROUGH AN APPROVED OR AUTHORIZED ADVERTISEMENT AGENCY. FROM THE ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD, IT WOULD APPEAR THAT AS THE TIME AVAILA BLE FOR SUBMITTING THE INFORMATION TO THE AO WAS SHORT AND SINCE GETTING THE SAME THROUGH SBC WOULD HAVE DELAYED THE ASSESSMENT PROCEEDINGS, THE APPELLANT APPROACHED ABP ASKING TOR CLARIFICATIONS OH THE' PREMIUM CHARGED BY THEM ON CERTAIN CATEGORY OF ADVER TISEMENTS IN 2007 - 08 AS THE DATA WAS NOT READILY AVAILABLE WITH THE APPELLANT. BASED ON THIS SOLITARY INSTANCE OF GETTING THE DETAILS DIRECTLY FROM ONE PUBLISHER SO AS TO EXPEDITE THE TIME BARRING ASSESSMENT PROCEEDINGS, ONE CANNOT DRAW GENERAL INFERENCE T HAT THE APPELLANT WAS DEALING DIRECTLY WITH ABP AND OTHER PUBLISHERS FOR INSERTION OF ADVERTISEMENTS. IN FACT, THE VOLUMINOUS DATA FILED BY THE APPELLANT IN THE FORM RELEASE ORDERS, BILLS RAISED BY PUBLISHERS ON SBC FOR ADVERTISEMENTS RELEASED ON BEHALF OF THE APPELLANT DURING THE YEAR CLEARLY INDICATE THAT THE APPELLANT WAS RELEASING ITS ADVERTISEMENTS THROUGH SBC AND NOT DEALING WITH THE PUBLISHERS DIRECTLY. 5.5 THE ASSESSING OFFICER ALSO OBSERVED THAT THE SUBMISSIONS OF THE APPELLANT FILED DURING THE ASS ESSMENT PROCEEDINGS ARE SILENT ON THE STRICTLY COMPARABLE BILLS, WHICH ARE APPENDED TO THE ASSESSMENT ORDER, WHERE THERE WAS NO DIFFERENCE AMONG THE GROSS RATES CHARGED TO THE APPELLANT SOCIETY AND TO OTHER CUSTOMERS BY SBC AND THE DIFFERENCE IS ONLY IN RE SPECT OF DISCOUNT ALLOWED BY SBC. BUT, THE APPELLANT NOW EXPLAINED THAT THE CLARIFICATIONS THEREON WERE MISSED OUT IN THE SUBMISSIONS MADE ON 24.12.2010 THROUGH AN OVERSIGHT AND IN A HURRY TO MEET THE DEADLINE OF TIME BARRING ASSESSMENT. IN 16 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE THE PRESENT PRO CEEDING, THE APPELLANT FURNISHED COPY OF RELEVANT NEWSPAPER CLIPPING, CARD RATES, RELEASE ORDERS FOR ADS, BILLS RAISED BY PUBLISHERS ON SBC AND BILLS IN TURN RAISED BY SBC ON THE APPELLANT AND THE OTHER PARTY. ON PERUSAL OF THESE DETAILS, IT IS NOTICED THA T IN THE CASE OF BILL NO. 949 DATED 2.2.08 RAISED ON THE APPELLANT, THE GROSS RATE CHARGED WAS RS.6085/ - PER SQ.CM FOR RELEASE OF ADVERTISEMENT IN TIMES OF INDIA (ALL EDITIONS). THE SIZE OF THE ADVERTISEMENT WAS 448 SQ. CMS INSERTED MOSTLY ON PAGE 3 OF THE NEWSPAPER (TEN INSERTIONS ON PAGE 3 AND FOUR ON OTHER PAGES OUT OF SIXTEEN INSERTIONS), WHICH ATTRACTS PREMIUM ON BASIC RATES. THE BASIC RATE WAS RS. 5055/ - FOR ADVT. SIZE BETWEEN 240 TO 600 SQ. CMS AND PAGE 3 PREMIUM WAS RS. 1030/ - MAKING TOTAL CHARGES O F RS. 6085/ - . SBC RAISED BILL ON THE APPELLANT AT GROSS RATE OF RS. 6085/ - PSC. AND ALLOWED DISCOUNT OF 2% ON THE GROSS BILL AMOUNT (CARD RATE). WHEREAS, THE BASE RATE IN THE CASE OF SADHANA WAS RS. 5150/ - FOR THE SIZE UP TO 239 SQ. CMS AND THEIR ADVERTISE MENT WAS PLACED MOSTLY ON OTHER PAGES (TWELVE INSERTIONS ON OTHER PAGES AND FOUR INSERTIONS ON PAGE 3 OUT OF 16 INSERTIONS) THAT DOES NOT ATTRACT ANY PREMIUM. SBC RAISED THE BILL ON SADHANA AT CARD RATE OF RS. 5150/ - AND ALLOWED DISCOUNT OF 10% ON THE CARD AMOUNT. A COPY OF THE BILL RAISED BY TIMES OF INDIA ON SBC FOR BOTH THE ADVERTISEMENTS IS APPENDED TO THE ORDER AS ANNEXURE 'D - L' AND ANNEXURE 'D - 2'. AS COULD BE SEEN FROM BILLS RAISED BY TIMES OF INDIA, THE ADVERTISEMENT IN CASE OF THE APPELLANT WAS MOST LY 'ON PREMIUM PAGE 3 OF THE EDITIONS AND IN THE CASE OF SADHANA, IT WAS MOSTLY ON OTHER PAGES I.E. ON PAGE 7, 11, 13 OF THE EDITIONS. THUS, THE SAID BILLS RAISED BY SBC ON THE APPELLANT AND SADHANA ARE NOT FOR IDENTICAL INSERTION OF ADVERTISEMENT IN TIMES OF INDIA AND, THERE WAS DIFFERENCE IN DATE, SIZE, PAGE AND POSITION OF THE ADVERTISEMENT RELEASED. EVEN OTHERWISE, AS MENTIONED HEREINABOVE, THE DISCOUNT DEPENDS ON VARIOUS FACTORS LIKE DEMAND AND SUPPLY ON A PARTICULAR DAY AND FOR A PARTICULAR SPACE/PAGE AND EDITION AND IT IS NOT A CONTROLLABLE FACTOR OF THE SOCIETY NOR CAN IT BE UNIFORM FOR ALL THE CLIENTS OF SBC. WHAT IS IMPORTANT TO BE SEEN IS WHETHER THE AMOUNT CHARGED IN CASE OF APPELLANT EXCEEDS THE CARD RATES OF TIMES OF INDIA. IN THE CASE OF THE A PPELLANT, IN NONE OF THE CASES, THE AMOUNT CHARGED BY SBC EXCEEDS THE CARD RATES. ON THE CONTRARY, IF THE OVERALL POSITION OF THE AMOUNT CHARGED BY SBC FOR ADS FOR THE WHOLE YEAR IS CONSIDERED, THE DISCOUNT ALLOWED ON CARD RATES WORKS OUT TO MORE THAN 15% OF THE GROSS BILL AMOUNT. 17 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE 5.6 FURTHER, THE MATERIAL PLACED ON RECORD ALSO INDICATES THAT THE SBC HAS RENDERED VARIOUS OTHER SERVICES IN ADDITION TO PUBLICATION OF ADVERTISEMENTS IN NEWSPAPERS/MAGAZINES. IN THE INITIAL YEARS, SBC WAS ONLY CONCEPTUALIZING, W RITING THE CONTENTS AND CREATING THE ARTWORK FOR THE ADVERTISEMENTS BEING RELEASED BY THE APPELLANT AS IS EVIDENT FROM BILLS OF M/S. SEAD ADVERTISING PVT. LTD, COPY OF WHICH IS ENCLOSED TO THE ORDER AS ANNEXURE 'E', WHERE THE AGENCY HAS CLEARLY MENTIONED I N THEIR INVOICES THAT SEPARATE BILLS FOR CERTAIN AMOUNT: WOULD BE RAISED BY SBC FOR CREATIVE WORK. IT WOULD APPEAR THAT IN 2003, SBC REGISTERED ITSELF WITH THE LEADING NEWSPAPERS AND THUS BECAME ELIGIBLE TO RELEASE ADVERTISEMENTS DIRECTLY TO THE PUBLISHERS AND THE APPELLANTS STARTED RELEASING THEIR ADVERTISEMENTS THROUGH SBC, EFFECTIVELY SINCE JANUARY 2004. SINCE THEN, SBC DOES NOT CHARGE THE APPELLANT FOR THE OTHER SERVICES PROVIDED IN THE FORM OF CONCEPTUALIZATION, COPY - WRITING, DESIGNING THE ART WORK AND ALL THAT GOES INTO AN EFFECTIVE ADVERTISEMENT, MEDIA PUBLICITY SERVICES ETC. HOWEVER, SBC CHARGES OTHERS FOR THE ARTWORK AND COPYWRITING SERVICES IAS IS EVIDENT FROM REPRESENTATIVE COPIES OF THE BILLS FURNISHED VIDE ANNEXURE 'VI' TO THE WRITTEN SUBMISSION S, COPY OF A FEW BILLS IS ENCLOSED TO THE ORDER AS ANNEXURE T'. IF THE OVERALL DISCOUNT OFFERED BY SBC TO THE APPELLANT AT MORE THAN 15% OF CARD RATES AND THE OTHER SERVICES RENDERED BY SBC TO THE APPELLANT ARE CONSIDERED, IT IS DIFFICULT TO HOLD THAT PAYM ENTS MADE BY THE APPELLANT TO SBC ARE NOT COMMENSURATE OR REASONABLE WITH THE SERVICES RENDERED BY SBC TO THE APPELLANT. TO SUM UP WHILE HOLDING THAT THE FUNDS OF THE APPELLANT ARE DIVERTED TO INTERESTED PERSON, THE ASSESSING OFFICER HAS NOT TAKEN INTO CON SIDERATION THE REBATE OF RS.62,02,668/ - THAT WAS PASSED ON TO THE APPELLANT BY SBC AGAINST CARD RATES OF ADVERTISEMENT, WHICH WORKS OUT TO DISCOUNT OF 13.93% ON THE CARD RATES. THE AO CONSIDERED ONLY THE DISCOUNT OF 2% AGAINST THE REDUCED AMOUNT OF RS.3,83 ,24,828/ - AND OBSERVED THAT THE FUNDS OF THE APPELLANT SOCIETY ARE USED OR APPLIED FOR THE BENEFIT OF INTERESTED PERSON OR DIVERTED TO THE INTERESTED PERSON. THERE IS NO EVIDENCE BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT THE PAYMENTS MADE BY THE APPELLANT ARE 18 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE IN EXCESS OF PAYMENTS FOR SIMILAR SERVICES THAT CAN BE AVAILED IN THE OPEN MARKET OR SOME OTHER ADVERTISEMENT AGENCY WOULD HAVE RENDERED THE SAME SERVICES AT LOWER RATE THAN WHAT WAS PAID BY THE APPELLANT FOR SUCH SERVICES OR AT A DISCOUN T OF 10% ON THE REDUCED CARD RATES. THE PAYMENTS MADE BY THE APPELLANT TO SBC BY WAY OF ADVERTISEMENT CHARGES DID NOT EXCEED THE CARD RATES OF DIFFERENT NEWSPAPERS/MAGAZINES. THE PAYMENTS VIEWED FROM THE OVERALL PERSPECTIVE CANNOT BE SAID TO BE UNREASONABL E OR EXCESSIVE HAVING REGARD TO THE OVERALL DISCOUNT OF 15.65% ALLOWED ON CARD RATES AND OTHER SERVICES RENDERED BY SBC TO THE APPELLANT, THE FACTS OF THE CASE DO NOT INDICATE THAT UNDUE BENEFIT WAS PASSED ON BY THE APPELLANT TO THE SBC DURING THE YEAR. TH E EXPENDITURE ON ADVERTISEMENT WAS A LEGITIMATE EXPENDITURE INCURRED BY THE APPELLANT FOR THE PURPOSE OF PURSUING THE OBJECTS OF THE SOCIETY. 5.7 FOR THE FOREGOING REASONS AND CONSIDERING THE ENTIRE CONSPECTUS OF THE CASE, I AM OF THE CONSIDERED OPINI ON THAT AMOUNT PAID BY THE APPELLANT TO SBC BY WAY OF ADVERTISEMENT CHARGES DURING THE YEAR CANNOT BE SAID TO BE IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES. IN SUCH A SITUATION, THE ASSESSING OFFICER IS NOT JUSTIFIED IN HOLDING THAT THE FU NDS OF THE SOCIETY ARE APPLIED OR USED OR DIVERTED FOR THE BENEFIT OF THE PERSON REFERRED TO SECTION 13(3) IN VIOLATION OF CONDITION LAID DOWN UNDER SEC. 13(L)(C) AND SEC. 13(2)(C) AND WITHDRAWING THE EXEMPTION CLAIMED UNDER SEC. 11. ACCORDINGLY, THE ASSES SING OFFICER IS DIRECTED TO GRANT THE BENEFIT OF EXEMPTION UNDER SEC. 11 TO THE APPELLANT IN RESPECT OF ITS SURPLUS INCOME GENERATED DURING THE YEAR. NOW, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PE RUSED THE RECORD. THE MAIN PLANK OF THE ARGUMENT OF THE LD. DR IS THAT M/S. SRI BALAJI CREATIVITIES (SBC) IS THE CHILD OF THE TRUSTEES OF THE ASSESSEE TRUST AND THE ADVERTISEMENT EXPENDITURE WHICH IS THE MAJOR PART OF TOTAL EXPENDITURE HAS BEEN DIVERTED T O THE M/S. SBC AND THEREBY THE TRUSTEES 19 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE HAVE DIVERTED THE PROFIT OF THE ASSESSEE TRUST FOR THEIR PERSONAL BENEFITS. HE REFERRED TO SEC. 13(1)(C) OF THE ACT AND SUBMITS THAT IT IS NOT NECESSARY THAT THE BENEFIT SHOULD BE DIRECTLY DIVERTED BUT IT CAN BE BY IMPLICATION OR BY IN DIRECT WAY. HE REFERRED TO ASSESSMENT ORDER AND SUBMITS THAT THE ASSESSING OFFICER HAS BROUGHT ON RECORD THE DATA IN RESPECT OF CARD RATES OF THE ADVERTISEMENT AND HAS ESTABLISHED THAT EVEN IF THE M/S. SBC HAS GIVEN THE MORE DISCOUNT TO OTHER PARTIES BUT SO FAR AS THE ASSESSEE IS CONCERNED LESS BENEFIT ARE PASSED. HE SUBMITS THAT THERE WAS NO REASONS FOR THE ASSESSEE TRUST TO ROOT THE ADVERTISEMENT EXPENDITURE THROUGH THE M/S. SBC AND THE ASSESSEE TRUST COULD HAVE DIRECTLY GIVEN THE A DVERTISEMENT TO THE RESPECTIVE NEWSPAPERS AND COULD HAVE OBTAINED THE BETTER BENEFITS. THE LD. DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND PLEADED FOR REVERSING THE ORDER OF THE LD. CIT(A). 6. PER CONTRA, THE LD. AR FOR THE ASSESSEE VEHEMENTLY AR GUES THAT EVEN IF M/S. SBC IS A PARTNERSHIP FIRM CONSISTING OF THREE PARTNERS WHO ARE IN TURN THE TRUSTEES OF THE ASSESSEE TRUST BUT MERELY BECAUSE SOME BUSINESS IS DONE WITH THE FIRM OR CONCERNED IN WHICH THE TRUSTEES OR THE PROMOTER OF THE TRUST ARE THE BENEFICIARIES OR PARTNERS THAT WOULD NOT SUO - MOTO PUT THE ASSESSEE SOCIETY INTO THE CLUTCHES OF SEC. 13(1)(C) OF THE ACT. THE LD. COUNSEL RELIED ON THE DECISION OF THE HON'BLE HIGH COURT OF A LLAHABAD IN THE CASE OF CIT VS. KAMLA TOWN TRUST 279 ITR 89 (ALL .) AND SUBMITS THAT BURDEN IS ON THE ASSESSING OFFICER TO ESTABLISH THAT THE CONDITION OF SEC. 13(1)(C) IS FULFILL ED AND THERE IS NO PRESUMPTION IN SEC. 13(1)(C) OR OTHERWISE THAT IF THE TRANSACTIONS ARE DONE WITH PARTIES COVERED U/S. 13(3) THEN THOSE TRAN SACTIONS ARE AUTOMATICALLY COVERED UNDER THE PROVISIO NS OF SEC. 13(1)(C) OF THE ACT. 6.1 HE SUBMITS THAT THE ASSESSEE TRUST IS BENEFITED BY ENGAGING TO M/S. SBC FOR LOOKING AFTER THE ADVERTISEMENT WORK OF THE ASSESSEE TRUST. HE SUBMITS THAT THOUGH IT IS TRUE THAT IN THE TOTAL TURNOVER OF M/S. SBC 20 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE THE CONTRIBUTION OF THE ASSESSEE TRUST IS TO THE EXTENT OF 70% BUT THE OBSERVATION OF THE ASSESSING OFFICER IS THAT M/S. SBC HAS GRANTED 2% DISCOUNT ON THEIR BILL OF THE ASSESSEE AS COMPARED TO THE 10% DISCOUNT T O THE OTHER CLIENT IS TOTALLY ERRONEOUS AND AGAINST THE EVIDENCE BEFORE HIM. HE ARGUES THAT THE INTENTION BEHIND GIVING THE WORK TO M/S. SBC IS TO GET THE ADVERTISEMENT PUBLISHED AS M/S. SBC IS A PROFESSIONAL ADVERTISING AGENCY WHICH IS NOT DISPUTED. HE ARGUES THAT THE ASSESSEE TRUST WAS GIVEN THE MORE BENEFIT BY WAY OF DISCOUNT AND NOT AT 2% AS MISUNDERSTOOD BY THE ASSESSING OFFICER. HE SUBMITS THAT THE OBSERVATION OF THE ASSESSING OFFICER IS THAT THE M/S. SBC GRANTED DISCOUNT BETWEEN 7.4% AND 12% TO AL L ITS CLIENT IS FACTUALLY WRONG. HE POINTED OUT THAT IN SOME CORPORATE CLIENTS LIKE M/S. SANDVIK ASIA, DINA INSTITUTE OF HOTEL MANAGEMENT DISCOUNT TO THE EXTENT OF 10% OF THE BILLS WAS GRANTED BUT AT SAME TIME TO MANY OTHER CLIENTS M/S. SBC HAS NOT GRANTE D THE DISCOUNT AT ALL. HE SUBMITS THAT EVEN FOR THE SAKE OF ARGUMENT IF WE LOOK INTO THE MATTER THAT THE ASSESSEE TRUST HAS DIVERTED ITS PROFIT FOR THE BENEFIT OF THE TRUSTEES BUT THE FACT REMAIN S THAT THE ASSESSEE TRUST IS ENJOYING THE REGISTRATION U/S. 12AA OF THE ACT AND OTHERWISE ALSO ITS INCOME IS EXEMPT U/S. 11 & 12 OF THE INCOME - TAX ACT WHERE AS THE PROFIT EARNED BY M/S. SBC IS TAXABLE. HE SUBMITS THAT M/S. SBC HAS ACTUALLY CHARGED MUCH LESS THAN THE CARD RATES BY OBTAINING REBATES FROM THE NEWSPAP ERS. HE PLEADED FOR CONFIRMING THE ORDER OF THE LD. CIT(A). 7. DURING THE COURSE OF HEARING THE BENCH HAS GIVEN THE DIRECTIONS TO THE ASSESSEE TO FILE THE SAMPLE BILLS OF THE N EWSPAPER PUBLICATION S RAISED ON M/S. SBC IN RESPECT OF ADVERTISEMENT S OF THE R ELATED PARTIES I.E. THE ASSESSEE TRUST AND NON - RELATED PARTIES TO DEMONSTRATE THAT THE DIFFERENCE IN THE CARD RATE OF ADVERTISEMENT AS CLAIMED IN THE CHART FILED IN THE COMPILATION AT PAGE NO. 9 OF THE P/B. IN COMPLIANCE WITH THE DIRECTION OF THE BENCH , T HE ASSESSEE TRUST HAS FILED SAMPLE BILLS WHICH ARE PLACED ON 21 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE RECORD. NOW, THE ISSUE FOR CONSIDERATION IS WHETHER BY GIVING THE ADVERTISEMENT WORK TO M/S. SBC WHICH IS A PARTNERSHIP FIRM ENGAGED IN THE ADVERTISEMENT WORK , T HE ASSESSEE TRUST HAS VIOLATED TH E PROVISIONS OF SEC. 13(1)(C) OF THE ACT. BEFORE US THE LD. AR FOR THE ASSESSEE ARGUED THAT IN THE CASE OF MANY OTHER CLIENTS, M/S. SBC HAS NOT GIVEN ANY DISCOUNT AND IN THE CASE OF SOME OF THE CLIENTS , M/S. SBC HAS GIVEN THE DISCOUNT WHICH IS LESS THAN T HE AVERAGE DISCOUNT GIVEN TO THE ASSESSEE. IT IS TRUE THAT OUT OF TOTAL TURNOVER OF M/S. SBC THE MAJOR CONTRIBUTION IS OF THE ASSESSEE TRUST. THE BENCH ALSO PUT THE QUERY TO LD. AR TO EXPLAIN WHY ADVERTISEMENT WORK WAS NOT DIRECTLY GIVEN TO THE RESPECTIV E PUBLI SHERS OF THE NE WSPAPERS WHEREBY THE ASSESSEE TRUST COULD HAVE GOT THE BETTER DISCOUNT. THE LD. AR EXPLAINED WITH THE CHART THAT AS PER THE CARD RATES OF THE DIFFERENT NEWSPAPERS WHICH ARE PLACED ON RECORD , T HE ASSESSEE IS MORE BENEFITED BY GIVING T HE WORK TO M/S. SBC . HE SUBMITS THAT THE ENTIRE DESIGNING AND ART WORK REQUIRED FOR THE ADVERTISEMENT WAS COM P ILED AND PREPARED BY M/S. SBC AND NO SEPARATE PAYMENT IS MADE. THE ASSESSEE HAS FILED THE COMPAR ATIVE CHART SHOWING THE BENEFIT RECEIVED BY THE ASSESSEE SOCIETY VIS - - VIS OTHER CLIENT. THE ASSESSEE HAS ALSO FILED THE COPIES OF THE I NVOICES AND THE Z EROX COPY OF THE RESPECTIVE NEWSPAPERS LIKE SAKAL ETC. THE ASSESSEE HAS ALSO FILED THE SAMPLE BILLS FOR THE OTHER AGENCIES ON WHICH M/S. SBC HAS NOT GIVEN ANY DISCOUNT AT ALL. THE ASSESSEE HAS ALSO FILED SAMPLE BILLS OF M/S. SBC RAISED ON THE ASSESSEE TRUST I.E. B ILL N O. 823 DATED 01 - 09 - 2007 ON WHICH THE CARD RATE CHARGES ARE LESS THAN THE N EWSPAPER RATE AS PER COMPARATIVE CHART FILED BY THE ASSESSEE . THE ASSESSEE HAS SUBSEQUENTLY DEMONSTRATED BEFORE US THAT IF THE AVERAGE RATE OF DISCOUNT IS WORKED OUT GIVEN TO THE ASSESSEE AS COMPARE TO CARD RATE WHICH IS ALMOST 10%. WE ALSO FIND THAT M/S. SBC HAS ALSO DONE THE WORK FOR OTHER CLIENTS I.E. NON - RELAT ED PARTIES TO WHOM NO DISCOUNT OR REDUCTION IN THE CARD RATES ARE GIVEN. CONSIDERING THE TOTALITY OF THE EVIDENCE BEFORE US, WE CONCUR WITH THE FINDING OF THE LD. 22 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE CIT(A) THAT BY GIVING THE ADVERTISEMENT WORK TO M/S. SBC , T HE ASSESSEE TRUST HAS NOT VIOLATE D THE CONDITIONS OF SEC. 13(1)(C) TO DEPRIVE TO GET THE BENEFIT OF EXEMPTION U/S. 11 & 12 OF THE ACT. WE, ACCORDINGLY, CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THE GROUNDS TAKEN BY THE REVENUE. 8. NOW, WE TAKE UP THE APPEAL FOR THE A.Y. 2009 - 10. THE REVENUE HAS FILED THE FOLLOWING REVISED/CONCISE GROUNDS WHICH ARE VERBATIM AS TAKEN IN THE A.Y. 2008 - 09. 1. THE LD. CIT(A) ERRED ON THE FACTS AND ON CIRCUMSTANCES OF THE CASE AND IN LAW, IN HOLDING THAT THE EXPENDITURE ON ADVERTISEMENT WAS A LEGITIMATE EX PENDITURE INCURRED FOR THE PURPOSE OF PURSUING THE OBJECTS OF THE SOCIETY. 2. THE LD. CIT(A) ERRED ON THE FACTS AND ON CIRCUMSTANCES OF THE CASE AND IN LAW, IN HOLDING THAT THE FUNDS OF THE SOCIETY ARE NOT APPLIED OR USED OR DIVERTED FOR THE BENEFIT OF THE P ERSON REFERRED TO SECTION 13(3) IN VIOLATI ON OF CONDITION LAID DOWN U/S 13(1)(C) & 13(2)(C). 3. FOR THIS AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE ID. CIT(A), PUNE MAY BE VACATED AND THAT OF THE AO BE RESTORED. 4. THE AP PELLANT CRAVES LEAVE TO ADD., AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE THE HON'BLE BOMBAY HIGH COURT. 9. IN THIS YEAR THE ISSUE ARISING FOR ADJUDICATION IS IDENTICAL AS IN THE A.Y. 2008 - 09. THE IMPUGNED ORDER OF THE LD. CIT(A) IS ALMOST VERBATIM AS IN THE CASE OF A.Y. 2008 - 09 EXCEPT THERE IS A CHANGE IN THE FIGURES OF THE PAYMENTS MADE TO M/S. SBC . IN THIS YEAR AGAIN THE ISSUE IS WHETHER THE ASSESSEE HAS VIOLATED THE CONDITIONS OF SEC. 13(1)(C) OF THE ACT FOR DENYING BENEFIT OF EXEMPTION U/S. 11 OF THE ACT . IN THIS YEAR ALSO THE ASSESSING OFFICER HAS DENIED THE BENEFIT OF EXEMPTION TO THE ASSESSEE FOR 23 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE THE ALLEGED VIOLATION OF CONDITION OF SEC. 13(1)(C) OF THE INCOME - TAX ACT. THE ASSES SING OFFICER OBSERVED THAT THE ASSESSEE TRUST HAS SPENT RS.8,54,02,576/ - ON ADVERTISEMENT AND PUBLICITY AS COMPARED TO RS. 3,78,38,469/ - IN THE PREVIOUS YEAR I.E. A.Y. 2008 - 09. THE ASSESSEE IS RUNNING THE DIFFERENT EDUCATIONAL INSTITUTIONS WHICH DETAILS AR E GIVEN IN PARA NO. 4.1. AS NOTED BY THE ASSESSING OFFICER , THE ASSESSEE HAS PAID RS.7,38,40,074/ - TO M/S. SRI BALAJI CREATIVITIES (SBC) TOWARDS THE ADVERTISEMENT IN THE DIFFERENT NEWSPAPERS AND RS.1,15,62,502/ - HAS B EEN PAID TO DIFFERENT PARTIES. THE AS SESSING OFFICER ASKED FOR THE DETAILS OF THE BILLS AS ISSUED BY M/S. SBC AND ALL DETAILS WERE FILED BY THE ASSESSEE SOCIETY. THE ASSESSING OFFICER HAS GIVEN SOME EXAMPLES IN RESPECT OF THE CARD RATES OF THE HINDUSTAN TIMES AND DAILY BHASKAR. THE ASSESSIN G OFFICER HAS OBSERVED THAT M/S. SBC ALSO HAS TRANSACTIONED BUSINESS WITH OTHER CONCERNED ALSO . M/S. SBC HAS GIVEN DISCOUNT OF 2% TO THE ASSESSEE SOCIETY BUT IN RESPECT OF THE OTHER NO - RELATED PARTIES THE DISCOUNT IS GIVEN TO THE EXTENT OF 7.4% TO 12% ON THEIR BILLING . THE MAIN RESERVATION OF THE ASSESSING OFFICER IS IN RESPECT OF THE AMOUNT OF DISCOUNT WHICH WAS GIVEN TO THE ASSESSEE SOCIETY AND OTHER PARTIES BY M/S. SBC . THERE ARE REPETITI ONS OF THE FACTS IN THE ASSESSMENT ORDER AND MOREOVER ALL THE FA CTS ARE ALMOST VERBATIM AS MENTIONED IN A.Y. 2008 - 09 BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS FINALLY CONCLUDED AS UNDER: I. M/S SRI BALAJI CREATIVITIES IS A FIRM IN WHICH THREE OF THE TRUSTEES OF ASSESSEE SOCIETY ARE HAVING SUBSTANTIAL INTEREST A ND THE FIRM IS WHOLLY OWNED BY THREE OF THEM. THUS THE FIRM IS A PERSON AS DEFINED IN SECTION 13(3) (E) OF THE ACT. II. THE ASSESSEE TRUST HAS SPENT AN AMOUNT OF RS.8,54,02,576/ - FOR THE PURPOSES OF ADVERTISEMENT OUT OF WHICH AN AMOUNT OF RS.7,38,40,074/ - WAS GIVEN TO THE SAID FIRM. THE SAID FIRM WAS FORMED ON 28.12.2002 I.E. FOUR YEARS AFTER THE TRUST WAS FORMED. III. PAYMENTS BY THE TRUST TO THE SAID FIRM M/S SRI BALAJI CREATIVITIES FORM MORE THAN 80% OF THE TURNOVER OF THE SAID FIRM. 24 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE IV. M/S SRI BALAJI CREATIVITIES H AS GRANTED DISCOUNT AT THE RATE OF 7.4 TO 12% TO ITS OTHER CUSTOMERS AND THE DISCOUNT GRANTED TO THE ASSESSEE FIRM IS ONLY AT THE RATE OF 2% EVEN THOUGH THE PAYMENTS BY ASSESSEE CONSTITUTE MORE THAN 80% OF THE TURNOVER OF M/S SRI BALAJI CREATIVITIES. V. THE C ONTENTION OF ASSESSEE THAT IT HAS PAID ADVERTISEMENT CHARGES TO THE NEWSPAPERS LESSER THAN THE CARD RATES IS MISPLACED AS THE FACTS BROUGHT ON RECORD INDICATE OTHERWISE. VI. THUS ASSESSEE HAS PAID THE AMOUNTS OUT OF RESOURCES OF TRUST FOR SERVICES RENDERED BY M/S SRI BALAJI CREATIVITIES IN EXCESS OF WHAT MAY REASONABLY HAVE BEEN PAID FOR SUCH SERVICES. THE AMOUNTS PAID IN EXCESS IN SUCH A WAY ARE WORKED OUT AT RS.40, 61,204/ - . 10. THE ASSESSING OFFICER, ACCORDINGLY, DECLINED TO GIVEN THE BENEFIT OF EXEMPTION TO THE ASSESSEE U/S. 11 & 12 OF THE INCOME - TAX ACT AND COMPLETED THE ASSESSMENT TREATING THE ASSESSEE ON AOP. THE ASSESSING OFFICER ALSO REFERRED TO SEC. 40A(2) OF THE ACT AND OBSERVED THAT THE ASSESSEE SOCIETY HAS MADE PAYMENT TO M/S. SBC WHICH ARE UNREASO NABLE AND EXCESSIVE HAVING REGARD TO THE MARKET RATE OF SUCH SERVICES. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER FRAMED BY THE ASSESSING OFFICER BEFORE THE LD. CIT(A) AND LD. CIT(A) GAVE THE RELIEF TO THE ASSESSEE BY HOLDING THAT AS PER THE FACTS AND E VIDENCE ON RECORD THE ASSESSEE HAS NOT VIOLATED THE PROVISIONS OF SEC. 13(1)(C) AND 13(2)(C) OF THE INCOME - TAX ACT. THE OPERATIVE PART OF THE FINDING OF THE LD. CIT(A) IS AS UNDER: 5.2 THE FACTS OF THE PRESENT CASE ARE NOW EXAMINED VIS - A - VIS THE PROVISI ONS OF SEC. 13 OF THE I T ACT AS EXTRACTED ABOVE AND ALSO KEEPING IN MIND THE NATURE OF ADVERTISING BUSINESS. THE PROVISIONS OF SEC. 13(L)(C) READ WITH SEC. 13(2)(C) ARE APPLICABLE IF THE PAYMENT MADE TO SBC FOR THE SERVICES IS EXCESSIVE OR UNREASONABLE HA VING REGARD TO REASONABLE PAYMENT FOR SUCH SERVICES, A PAYMENT FOR CERTAIN SERVICES RENDERED BECOMES UNREASONABLE IF THE SAME IS IN ANY WAY IN EXCESS OF PAYMENT FOR SIMILAR SERVICES THAT CAN BE AVAILED IN THE OPEN MARKET AND IN THAT SENSE, THE PAYMENT MADE TO 25 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE SBC WILL BE UNREASONABLE IF SOME OTHER ADVERTISEMENT AGENCY WOULD HAVE TENDERED THE SAME SERVICES AT RATE THAN WHAT WAS PAID BY THE APPELLANT TO SBC FOR SUCH SERVICES. IN THE FIELD OF ADVERTISEMENT, AS A FIRST STEP, THE' ADVERTISER APPROACHES THE ADVER TING AGENCY FOR RELEASE OF ADVERTISEMENT IN SELECTED NEWSPAPERS AND MAGAZINES. THE ADVERTISING AGENCY THEN ISSUES A 'RELEASE ORDER' (RO) TO THE NEWSPAPER/MAGAZINE CONCERNED INDICATING THE DATE, PAGE, SIZE, POSITION ETC. OF THE ADVERTISEMENT TO BE INSERTED AND MENTIONS THE CARD RATE OR THE NEGOTIATED RATE AT WHICH THE AGENCY WOULD PAY THE PUBLISHERS. AFTER THE ADVERTISEMENT IS INSERTED AS PER THE RO, THE NEWSPAPER RAISES A FORMAL BILL AT THE CARD RATES OR AT THE RATES AGREED UPON ON THE AGENCY QUOTING THE RE LEVANT RO NUMBER. THE ADVERTISING AGENCY IN TURN RAISES ITS BILL ON THE CLIENT AND COLLECTS THE CHARGES AND PAYS THE NEWSPAPER AS PER THEIR BILL. TO ILLUSTRATE, AS PER BILL NO. 902 DATED 14.12.2007 RAISED BY SBC ON DINA INSTITUTE OF HOTEL MANAGEMENT, THE A MOUNT CHARGED FOR ADVERTISEMENT IS AS FOLLOWS: ITEM NO. 1 AND 2. 3. DAINIK BHASKAR (INDORE) ON 26.12.2007 SIZE 120 SQ.CM 4. DAINIK BHASKAR (RAIPUR) ON 18.12.2007 SIZE 80 SQ.CM 1. THE CORRESPONDING RO NO (INDORE) 1583 2. THE CORRESPONDING RO NO (RAIPUR) 1584 3. RATES ON RO AND CHARGED BY THE PAPER (INDORE) RS.248/ - PSC 4. RATES ON RO AND CHARGED BY THE PAPER (RAIPUR) RS.176 - PSC 1. RATE CHARGED BY SBC TO THE CLIENT (INDORE) RS.347/ - PSC 2. RATE CHARGED BY SBC TO THE CLIENT (RAIPUR) RS. 212/ - PSC THE ADVERTISING CHARGES ARE NORMALLY FIXED AS PER THE CARD RATES PROVIDED BY THE PUBLISHERS FROM TIME TO TIME FOR INSERTION OF ADS IN DIFFERENT PAGES. HOWEVER, THE PUBLISHERS AS WELL ADVERTISING AGENCIES ALLOW REBATE ON CARD RATES DEPENDING O N THE DEMAND FOR ADS ON A PARTICULAR PAGE, IN A PARTICULAR EDITION AND ON A PARTICULAR DAY. 26 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE 6.2 IN THE COURSE OF THE PRESENT PROCEEDINGS, THE APPELLANT FURNISHED COPIES OF THE BILLS RAISED BY PUBLISHERS ON SBC FOR INSERTION OF ADVERTISEMENT ON BEHALF OF TH E APPELLANT, RELEVANT CARD RATES, COPIES OF BILLS RAISED BY M/S SBC ON THE APPELLANT, DISCOUNT ON GROSS BILLING ALLOWED BY SBC, WHICH ARE ANNEXED TO THE ORDER AS ANNEXURE 'A'. AS COULD BE SEEN FROM THE ANNEXURE, AS AGAINST THE TOTAL CARD RATES OF RS. 1 4, 8 5, 55 , 701/ - FOR ADVERTISEMENTS INSERTED ON BEHALF OF APPELLANT, M/S SBC CHARGED THE APPELLANT RS. 6,98,48,962/ - FOR THE SERVICES RENDERED TO THE APPELLANT, WHICH EFFECTIVELY WORKS OUT TO 52.98% DISCOUNT ON THE CARD RATES. THESE DETAILS IN ANNEXURE 'A' WERE ALS O FURNISHED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. IT IS TRUE THAT IN SOME CASES, GROSS BILLING IS THE SAME AS CARD RATES AND EVEN IN SUCH CASES, SBC ALLOWED ONLY 2% DISCOUNT ON THE CARD RATES, WHICH POSSIBLY PROMPTED THE AO TO HOLD THAT AMOUNT PAID BY THE APPELLANT BY WAY OF ADVERTISING CHARGES TO SBC DURING THE YEAR WAS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES. BUT, AS MENTIONED EARLIER, SPACES MADE AVAILABLE BY THE MEDIA ARE IN THE NATURE OF 'PERISHABLE' COMMODITIES AND REBATES ON CARD RATES OFFERED BY PUBLISHERS DEPEND ON SEVERAL FACTORS LIKE DEMAND AND SUPPLY ON A PARTICULAR DAY, THE NUMBER, SIZE, PAGE OF ADVERTISEMENTS AND THE ADVERTISING AGENCIES SUCCEED IN GETTING DISCOUNT FOR THEIR ADVERTISEMENTS ON SOME DAYS AND NO DISCOUNT AT ALL ON OTHER DAYS. SIMILARLY, THE DISCOUNTS OFFERED BY' ADVERTISING AGENCIES TO THEIR CLIENTS ALSO DEPEND ON SEVERAL FACTORS LIKE NATURE OF SERVICES PROVIDED TO EACH CLIENT AND NOT JUST THE VOLUME OF ADVERTISEMENTS. MERELY BECAUSE PAYMENTS MADE BY THE A PPELLANT CONSTITUTE 8 0% OF THE TURNOVER OF SBC, IT CANNOT BE SAID THAT THE APPELLANT SHOULD GET DISCOUNT OR REBATE AT THE SAME RATE IN ALL THE CASES OF ADVERTISEMENTS RELEASED THROUGH SBC AS A MATTER OF RIGHT., THE DISCOUNTS OFFERED ON PUBLICATION OF ADVER TISEMENTS IN MEDIA DEPEND ON VARIOUS FACTORS AND CANNOT BE UNIFORM FOR ALL CLIENTS AND ON ALL THE DAYS. IN THIS BACKGROUND, THE OBSERVATION OF THE ASSESSING OFFICER THAT SBC COULD HAVE GOT DISCOUNT ON CARD RATES FROM THE NEWS PAPERS ON ALL THE 43 ADVERTISE MENTS RELEASED DURING THE YEAR AND SUBSEQUENTLY SBC COULD HAVE PASSED ON THE DISCOUNT TO THE APPELLANT WHERE REBATE ON CARD RATES HAS BEEN RECEIVED AND COULD HAVE GRANTED DISCOUNT @ 10% AND ABOVE IN ALL THE CASES IS ONLY PRESUMPTION WITHOUT APPRECIATING TH E NATURE AND DYNAMICS OF ADVERTISING BUSINESS. AS COULD BE SEEN FROM THE ANNEXURE A ATTACHED, SBC HAS EFFECTIVELY 27 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE GRANTED TO THE APPELLANT SOCIETY DISCOUNT OF RS. 7,72,81,250/ - ON THE CARD RATES IN 2 5 CASES DURING THE YEAR. IN THIS CONTEXT, IT MAY BE RELE VANT TO REFER TO THE FOLLOWING INSTANCES (ITEMS 34 TO 37 OF ANNEXURE A), WHERE SUBSTANTIAL BENEFITS WERE PASSED ON TO THE APPELLANT ON PREMIUM PAGE INSERTIONS (FOR FOUR DIFFERENT INSTITUTES OF THE APPELLANT) IN ALL INDIA EDITIONS OF TIMES OF INDIA, FULL PA GE (1727 SQ. CM), IN COLOUR ON 4 TH , 8 TH , 17 TH AND 19 TH JANUARY, 2009, ALL ON PAGE 5. I. CARD RATES: RS. 8,940/ - BASIC FOR 2 - 5 INSERTIONS RS.1, 020/ - PREMIUM FOR PAGE 5 TOTAL RS.9,960/ - II. THUS, COST OF EACH ADVERTISEMENT (INSERTION) RS.19,50,000/ - COST OF FOUR INSERTIONS RS.6,88,03,680/ - GROSS AMOUNT CHARGED BY TOI ON SBC RS.1,62,77,682/ - III. GROSS BILLINGS BY SBC ON THE SOCIETY (RS.41,25,803/ - X 4) RS.1,65,03,212/ - IV. TOTAL REBATE PASSED ON BY SBC RS.5,23,00, 468/ - (COPIES OF RELEVANT BILL NO. 1144, 1145, 1146 & 1147 ARE ENCLOSED TO THE APPELLATE ORDER AS ANNEXURE B - 1 & B - 4 ) SIMILARLY, REFERENCE MAY ALSO BE DRAWN TO THE OTHER INSTANCES (AS DETAILED IN ANNEXURE A APPENDED TO THE ORDER), WHERE SUBSTANTIAL B ENEFIT HAS BEEN PASSED ON TO THE APPELLANT BY SBC ON CARD RATES: S. NO. BILL NO. BILL DATE P UBLICATION DETAILS PAGE NO. SIZE (SQ. CM) TOTAL RATE CARD GROSS BILLING SBC GROSS BILLING SAVINGS TO SBS 1 1107 08/11/08 TOI (P) 7 1727 1,230 21,24,210 2,41,780 18 ,82,430 2 1108 08/11/08 TOI (P) 7 1727 1,230 21,24,210 2,41,780 18,82,430 3 1139 02/01/09 HT (ALL) 5 1726 5,600 96,65,600 31,93,100 64,72,500 4 1148 03/01/09 DECCAN CHRONOCILE 5 1693.2 3,325 56,29,890 21,68,989 34,60,901 AS AGAINST THE TOTAL DISCOUNT O F RS. 7,72,81,250/ - AVAILED BY THE APPELLANT ON THE CARD RATES DURING THE YEAR, THE A.O. HAS OBSERVED THAT THE SOCIETY HAS PAID RS. 40,61,204/ - EXCESS TO SBC BASED ON HIS ARITHMETICAL CALCULATIONS OF DIFFERENCE BETWEEN 2% AND 10%. IF PAYMENTS MADE TO SBC AR E MORE THAN THE CARD RATES OF THE NEWSPAPERS/PUBLISHERS OR SBC HAS NOT GRANTED REBATE AT ALL ON THE CARD RATES IN CASE OF ALL ADS /INSERTIONS PUBLISHED DURING THE YEAR 28 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE FOR THE APPELLANT, THEN POSSIBLY ONE CAN DRAW THE INFERENCE THAT THE PAYMENT IS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES. BUT, IN NONE OF THE CASES, THE AMOUNT CHARGED BY SBC EXCEEDS THE CARD RATES AND ON THE CONTRARY SBC GRATED OVERALL REBATE OF MORE THAN 52% ON CARD RATES TO THE APPELLANT DURING THE YEAR. 6 .3 IT IS ALSO NOT ICED FROM THE DETAILS FURNISHED BY THE APPELLANT THAT IN MANY CASES, THE SBC HAS NOT PASSED ON THE ENTIRE BENEFIT OR REBATED CARD RATES TO OTHER CLIENTS AND ONLY THE DISCOUNTS OF 10% ON CARD RATES WAS PASSED ON TO OTHER CLIENTS. IN THIS REGARD, IT MAY BE RELEVANT TO REFER TO THE FOLLOWING BILLS FOR ADVERTISEMENT RELEASED IN TIMES OF INDIA (ALL INDIA EDITIONS) IN CASE OF OTHER CLIENT AND APPELLANT, WITHIN A GAP OF A MONTH: I. NICMAR: BILL NO. 1081 ADVERTISEMENT ON 28.9.2008, SIZE 272 SQ. CM. CARD RATE R S.8,435/ - PER SQ. CM. HENCE, FOR 272 SQ. CM. RS.22,94,320/ - ACTUAL CHARGED BY TOI ON SBC RS.20,64,888/ - ACTUAL CHARGED BY SBC TO CLIENT RS.22,94,320/ - REBATE PASSED ON TO THE CLIENT RS. NIL DISCOUNT ALLOWED AT 10% ON THE CARD RATE OF RS.22,94,320/ - II. BALAJI INSTITUTE OF MODERN MANAGEMENT: BILL NO. 1100 ADVERTISEMENT ON 28.10.2008, SIZE 480 SQ. CM. CARD RATE: BASIC RS.8,435/ - PER SQ. CM. PREMIUM FOR PAGE 3 RS.1,830/ - - DO - TOTAL RS.10,265/ - - DO - HENCE, FOR 480 SQ. CM. RS.49,27,200 / - ACTUAL CHARGED BY TOI ON SBC RS.35,78,480/ - ACTUAL CHARGED BY SBC TO CLIENT RS.37,99,200/ - 29 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE REBATE PASSED ON TO THE CLIENT RS.11,28,000/ - DISCOUNT ALLOWED AT 2% ON THE REBATED CARD RATE OF RS.37,99,200 / - SIMILARLY, IT IS ALSO WORTH REFERRING TO THE ADVERTISEMENTS RELEASED IN DECCAN CHRONICLE (ALL EDITIONS) IN A SPAN OF A MONTHS TIME: I. SCMLD BILL NO. 1081 ADVERTISEMENT ON 25.02.2009, SIZE 128 SQ. CM. CARD RATE RS.2,135/ - PER SQ. CM. HENCE, FOR 128 SQ. CM. RS.2,73,280/ - ACTUAL CHARGED BY DC O N SBC RS.2,18,624/ - ACTUAL CHARGED BY SBC TO CLIENT RS.2,73,280/ - REBATE PASSED ON TO THE CLIENT RS. NIL DISCOUNT ALLOWED AT 10% ON THE CARD RATE OF RS.2,73,280/ - II. BALAJI INSTITUTE OF MODERN MANAGEMENT: BILL NO. 1148 ADVERTISEMENT ON 04.01.2009, SIZE 1693 SQ. CM. (FULL PAGE) CARD RATE: BASIC RS.2,135/ - PER SQ. CM. PREMIUM FOR PAGE 5 RS.1,190/ - - DO - TOTAL RS.3,325/ - - DO - HENCE, FOR 1693 SQ. CM. RS.56,29,890/ - ACTUAL CHARGED BY DC ON SBC RS.19,99,718/ - ACTUAL CHARGED BY SBC TO C LIENT RS.21,68,989/ - REBATE PASSED ON TO THE CLIENT RS.34,60,901/ - DISCOUNT ALLOWED AT 2% ON THE REBATED CARD RATE OF RS. 21,68,989 / - (COPIES OF RELEVANT BILL NO. 1081, 1100, 1168 & 1148 ARE ATTACHED TO THE ORDER AS ANNEXURE C - 1 TO C - 4). 30 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE SIMILARLY, THE OBSERVATION OF THE ASSESSING OFFICER THAT SBC GAVE DISCOUNT UNIFORMLY RANGING FROM 7.4 % TO 1 2 % TO ALL ITS CLIENTS IS CONTRARY TO FACTS AS COULD BE SEEN FROM THE MATERIAL PLACED ON RECORD, AS THERE ARE ALSO CLIENTS TO WHOM NO DISCOUNT WAS PASSED ON AT ALL B Y SBC. FOR INSTANCE, IN THE CASE OF SANDVIK ASIA LTD. (BILL NO. 1125, 1176), NO DISCOUNT IS GIVEN ON THE GROSS BILLING AMOUNT. SIMILARLY IN THE CASE OF DINA INSTITUTE OF HOTEL MANAGEMENT, WHILE AT SOME INSTANCES DISCOUNT OF 10% WAS GRANTED, AT OTHER INST ANCES NO DISCOUNT WAS GRANTED (BILL NO. 1127, 1166). (COPIES OF RELEVANT BILLS ARE ATTACHED AS ANNEXURE D - 1 TO D - 4 ). THUS, DIFFERENT PERCENTAGES OF DISCOUNTS ARE GRANTED BY M/S. SBC TO ITS VARIOUS CLIENTS DEPENDING ON THE DEMAND AND SUPPLY POSITION, REMAI NDER ADVERTISING AND RUN OF PAPER ON A PARTICULAR DAY. THE ASSESSING OFFICER, WITHOUT APPRECIATING THE DYNAMICS OF THE MEDIA AND ADVERTISING BUSINESS AND WHY DIFFERENT PERCENTAGES OF DISCOUNT ARE GIVEN TO ITS CLIENTS, SIMPLY CALCULATED THE DIFFERENCE BETWE EN 2% AND 10% AND ARRIVED AT THE CONCLUSION THAT UNDUE BENEFIT WAS PASSED ON TO THE INTERESTED PERSON BY THE SOCIETY. IT IS IMPORTANT TO NOTE HERE THAT THE AO HAS NOT QUESTIONED THE GENUINENESS OF THE EXPENDITURE INCURRED BY THE APPELLANT ON ADVERTISEMENT OR ITS NECESSITY OR RELEVANCE FOR ATTAINMENT OF THE OBJECTS OF THE SOCIETY. 6 .4 . THE ASSESSING OFFICER FURTHER, OBSERVING THAT IN NONE OF THE OTHER CASES, SBC HAS OFFERED DISCOUNT BELOW 7% AGAINST 2% DISCOUNT GRANTED TO THE APPELLANT AND TO SUPPORT HER VIE W, BROUGHT OUT AT PAGE NO.6 OF THE ASSESSMENT ORDER, A COMPARATIVE ANALYSIS OF BILLS RAISED BY SBC IN THE CASE OF SADHANA CENTRE FOR MANAGEMENT AND LEADERSHIP DEVELOPMENT AND BILLING MADE IN THE CASE OF THE APPELLANT. BY THE SAID ANALYSIS, THE ASSESSING OF FICER HAS SOUGHT TO EMPHASIZE THAT WHILE HIGHER DISCOUNT RATE WAS BEING PASSED ON TO OTHER CLIENTS, THERE WAS NO DIFFERENCE BETWEEN THE CHARGES AND SERVICES RENDERED BY SBC TO THE APPELLANT AND THE OTHER CLIENTS. IN THIS CONTEXT, AS ALREADY MENTIONED HEREI NBEFORE, IT HAS BEEN BROUGHT TO THE NOTICE OF THIS OFFICE BY THE APPELLANT DURING THE APPELLATE PROCEEDINGS THAT THERE WERE FACTUAL INACCURACIES IN THE ANALYSIS CARRIED OUT BY THE ASSESSING OFFICER INASMUCH AS IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER , WHILE MAKING COMPARISON OF THE BILLS (PAGE 6), HAS STATED THAT THE RATE CHARGED TO THE APPELLANT SOCIETY BY SBC WAS RS.5,600/ - AS AGAINST THE ACTUAL AMOUNT CHARGED OF RS.3,500/ - FOR INSERTION OF ADVERTISEMENT IN HINDUSTHAN TIMES. SIMILARLY, IT IS STATED THAT IN CASE OF INSERTION OF ADVT. IN DAINIK 31 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE BHASKAR, THE AMOUNT SHOWN IN CASE OF THE APPELLANT SOCIETY WAS RS.3,098/ - AS AGAINST THE ACTUAL AMOUNT CHARGED OF RS.2,729/ - . COPIES OF THE RELEVANT COMPARABLE BILLS WERE ALSO PRODUCED FOR VERIFICATION. FROM A P ERUSAL OF THE COPY OF THESE BILLS FURNISHED BY THE APPELLANT (ATTACHED AS ANNEXURE E), IT IS NOTED THAT THE APPELLANT HAS RELEASED THE ADVERTISEMENT IN HINDUSTAN TIMES (ALL) ON PAGE 3 (PREMIUM PAGE) FOR WHICH THE APPLICABLE CARD RATES ARE RS. 5,600/ - (RS. 3500+ PREMIUM @ 60%). THE BILLING DONE BY SBC IS AT THE BASIC RATE OF RS. 3,500/ - . THE A.O. HAS HOWEVER MENTIONED THE CARD RATES APPLICABLE IN THE ANALYSIS AND NOT THE ACTUAL AMOUNTS CHARGED BY SBC. SADHANA CENTER FOR MANAGEMENT AND LEADERSHIP DEVELOPMENT HAS BEEN CHARGED THE TOTAL OF CARD RATES APPLICABLE FOR 'ANY' PAGE IN DIFFERENT EDITIONS AND RELEASED ON DIFFERENT DATES, WHICH IS RS. 4,725/ - (ATTACHMENT - II TO THE ASSESSMENT ORDER). THE SAME HAS BEEN CHARGED BY SBC IN THE BILL. SIMILARLY, FOR ADVERTISEME NTS RELEASED IN DAINIK BHASKAR (MP & RAJASTHAN), THE APPLICABLE CARD RATES ARE RS.3,098/ - AS SEEN AND ACCEPTED BY THE A.O. HOWEVER, THE BILLING DONE BY SBC IS RS. 2,729/ - (GROSS). THE A.O. HAS AGAIN MENTIONED THE CARD RATE IN THE ANALYSIS AND NOT THE ACTUA L AMOUNT CHARGED BY SBC. ON THE OTHER HAND, SADHANA CENTER FOR MANAGEMENT AND LEADERSHIP DEVELOPMENT IS FOUND TO HAVE RELEASED ADVERTISEMENT IN INDORE (NOT WHOLE OF M.P.), RAIPUR (CHHATTISGARH) AND RAJASTHAN. AND, THEY HAVE BEEN CHARGED THE ACTUAL CARD RAT E OF RS. 2,275/ - FOR 'ANY' PAGE. THIS POSITION IS ACCEPTED BY THE ASSESSING OFFICER IN HIS REPORT DATED 13/03/2013, RELEVANT PORTION OF WHICH IS EXTRACTED HEREINABOVE. THE CONCLUSION WAS DRAWN BY THE ASSESSING OFFICER BY TAKING INTO CONSIDERATION THE PREMI UM INDICATED IN THE CARD RATES, WHEREAS THE ACTUAL AMOUNT CHARGED IN THE BILL RAISED BY SBC ON THE APPELLANT IS ONLY THE BASIC RATE WITHOUT PREMIUM. THUS, IT CAN BE SEEN THAT THE ANALYSIS DRAWN BY THE ASSESSING OFFICER TO ARRIVE AT HER CONCLUSION THAT THE APPELLANT WAS BEING CHARGED EXCESSIVELY AS COMPARED TO OTHER CLIENTS WHILE THE CHARGES AND NATURE OF SERVICES OFFERED TO THE APPELLANT AND OTHER CLIENTS WERE THE SAME, IS NOT IN CONSONANCE WITH THE FACTUAL POSITION. 6.5. FURTHER, THE MATERIAL PLACED ON RE CORD ALSO INDICATES THAT THE SBC HAS RENDERED VARIOUS OTHER SERVICES IN ADDITION TO PUBLICATION OF ADVERTISEMENTS IN NEWSPAPERS/MAGAZINES. IN THE INITIAL YEARS, SBC WAS ONLY CONCEPTUALIZING, WRITING THE CONTENTS AND CREATING THE ARTWORK FOR THE ADVERTISEME NTS BEING RELEASED BY THE APPELLANT AS IS EVIDENT FROM BILLS OF M/S. SEAD ADVERTISING PVT. LTD, COPY OF WHICH IS 3 2 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE ENCLOSED TO THE APPELLATE ORDER FOR THE PRECEDING YEAR I.E. A.Y. 2008 - 09, WHERE THE AGENCY HAS CLEARLY MENTIONED IN THEIR INVOICES THAT SEPARAT E BILLS FOR CERTAIN AMOUNT: WOULD BE RAISED BY SBC FOR CREATIVE WORK. IT WOULD APPEAR THAT IN 2003, SBC REGISTERED ITSELF WITH THE LEADING NEWSPAPERS AND THUS BECAME ELIGIBLE TO RELEASE ADVERTISEMENTS DIRECTLY TO THE PUBLISHERS AND THE APPELLANTS STARTED R ELEASING THEIR ADVERTISEMENTS THROUGH SBC, EFFECTIVELY SINCE JANUARY 2004. SINCE THEN, SBC DOES NOT CHARGE THE APPELLANT FOR THE OTHER SERVICES PROVIDED IN THE FORM OF CONCEPTUALIZATION, COPY - WRITING, DESIGNING THE ART WORK AND ALL THAT GOES INTO AN EFFECT IVE ADVERTISEMENT, MEDIA PUBLICITY SERVICES ETC. HOWEVER, SBC CHARGES OTHERS FOR THE ARTWORK AND COPYWRITING SERVICES AS IS EVIDENT FROM REPRESENTATIVE COPIES OF THE BILLS FURNISHED BY THE APPELLANT, COPY OF ONE BILL IS ENCLOSED TO THE ORDER AS ANNEXURE F . IF THE OVERALL DISCOUNT OFFERED BY SBC TO THE APPELLANT AT MORE THAN 52% OF CARD RATES AND THE OTHER SERVICES RENDERED BY SBC TO THE APPELLANT ARE CONSIDERED, IT IS DIFFICULT TO HOLD THAT PAYMENTS MADE BY THE APPELLANT TO SBC ARE NOT COMMENSURATE OR RE ASONABLE WITH THE SERVICES RENDERED BY SBC TO THE APPELLANT. TO SUM UP WHILE HOLDING THAT THE FUNDS OF THE APPELLANT ARE DIVERTED TO INTERESTED PERSON, THE ASSESSING OFFICER HAS NOT TAKEN INTO CONSIDERATION THE REBATE OF RS. 7,72,81,250/ - THAT WAS PASSED ON TO THE APPELLANT BY SBC AGAINST CARD RATES OF ADVERTISEMENT, WHICH WORKS OUT TO DISCOUNT OF 52.02 % ON THE CARD RATES. THE AO CONSIDERED ONLY THE DISCOUNT OF 2% AGAINST THE REDUCED AMOUNT OF RS. 7,12,74,451 / - AND OBSERVED THAT THE FUNDS OF THE APPELLANT SOC IETY ARE USED OR APPLIED FOR THE BENEFIT OF INTERESTED PERSON OR DIVERTED TO THE INTERESTED PERSON. THERE IS NO EVIDENCE BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT THE PAYMENTS MADE BY THE APPELLANT ARE IN EXCESS OF PAYMENTS FOR SIMILAR SERVIC ES THAT CAN BE AVAILED IN THE OPEN MARKET OR SOME OTHER ADVERTISEMENT AGENCY WOULD HAVE RENDERED THE SAME SERVICES AT LOWER RATE THAN WHAT WAS PAID BY THE APPELLANT FOR SUCH SERVICES OR AT A DISCOUNT OF 10% ON THE REDUCED CARD RATES. 33 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE THE PAYMENTS MADE BY T HE APPELLANT TO SBC BY WAY OF ADVERTISEMENT CHARGES DID NOT EXCEED THE CARD RATES OF DIFFERENT NEWSPAPERS/MAGAZINES. THE PAYMENTS VIEWED FROM THE OVERALL PERSPECTIVE CANNOT BE SAID TO BE UNREASONABLE OR EXCESSIVE HAVING REGARD TO THE OVERALL DISCOUNT OF 52 .98 % ALLOWED ON CARD RATES AND OTHER SERVICES RENDERED BY SBC TO THE APPELLANT, THE FACTS OF THE CASE DO NOT INDICATE THAT UNDUE BENEFIT WAS PASSED ON BY THE APPELLANT TO THE SBC DURING THE YEAR. THE EXPENDITURE ON ADVERTISEMENT WAS A LEGITIMATE EXPENDITUR E INCURRED BY THE APPELLANT FOR THE PURPOSE OF PURSUING THE OBJECTS OF THE SOCIETY. 6.6 FOR THE FOREGOING REASONS AND CONSIDERING THE ENTIRE CONSPECTUS OF THE CASE, I AM OF THE CONSIDERED OPINION THAT AMOUNT PAID BY THE APPELLANT TO SBC BY WAY OF ADVERT ISEMENT CHARGES DURING THE YEAR CANNOT BE SAID TO BE IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES. IN SUCH A SITUATION, THE ASSESSING OFFICER IS NOT JUSTIFIED IN HOLDING THAT THE FUNDS OF THE SOCIETY ARE APPLIED OR USED OR DIVERTED FOR THE BE NEFIT OF THE PERSON REFERRED TO SECTION 13(3) IN VIOLATION OF CONDITION LAID DOWN UNDER SEC. 13( 1 )(C) AND SEC. 13(2)(C) AND WITHDRAWING THE EXEMPTION CLAIMED UNDER SEC. 11. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO GRANT THE BENEFIT OF EXEMPTION UN DER SEC. 11 TO THE APPELLANT IN RESPECT OF ITS SURPLUS INCOME GENERATED DURING THE YEAR. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE REASONS GIVEN BY THE ASSESSING OFFICER FOR DENYING THE EXEMPTION TO THE ASSESSEE I N THIS YEAR ARE VERBATIM AS IN THE A.Y. 2008 - 09. MOREOVER, THE CORE ISSUE IS THE PAYMENT MADE TO M/S. SBC IN WHICH THE TRUSTEES OF THE ASSESSEE SOCIETY ARE THE PARTNERS. WE HAVE ALREADY ADJUDICATED AND IDENTICAL ISSUE IN THE A.Y. 2008 - 09 AND TO AVOID TH E REPETITION , WE FOLLOW THE REASONING IN THE SAID YEAR AND UPHOLD THE ORDER OF THE LD. CIT(A). 12. SO FAR AS DISALLOWANCE U/S. 40A(2) IS CONCERNED THE SAID ISSUE BECOME S REDUNDANT AS THE ASSESSEES ASSESSMENT HAS TO BE COMPLETED IN 34 ITA NO S. 1679/PN/2012 & 1204/PN/2013, SRI BALAJ I SOCIETY, PUNE COMPLIANCE WITH SEC. 1 1 & 12 OF THE INCOME - TAX ACT GIVING BENEFIT OF EXEMPTION TO THE ASSESSEE SOCIETY . ACCORDINGLY, GROUNDS TAKEN BY THE REVENUE ARE DISMISSED. 13. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 18 - 0 2 - 201 5 SD/ - SD/ - ( R . K . PAN DA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED : 18 TH FEBRUARY, 2015 RK/PS COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - III, PUNE 4 THE CIT - III, PUNE 5 6 THE DR , ITAT, B BENCH, PUNE. GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR , INCOME TAX APPELLATE TRIBUNAL , PUNE