ITO, Pune V. D.Y. Patil International Academy, Pune

ITA 141/PUN/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9515 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-05-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 15-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Assessee Lawyers: ARVIND SHONDE
• Keywords: Reopening of assessment; Depreciation; Charitable institution; Principle of natural justice; Additional evidence; Question of law; Benefit of exemption
• Section: 12A; 147; 12; 11

Judgement Text

INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 1 41 /PN/2013 (ASSESSMENT YEAR: 20 08 - 09 ) ITO, WARD - 1(4), PUNE .. APPELLANT VS. DR. D.Y. PATIL INTERNATIONAL ACADEMY, 501, BLUE HILLS CO - OP HOUSING SOCIETY, PUNE NAGAR ROAD, YERAWADA, PUNE 411006 PAN NO. AAATD9542N .. RESPONDENT ASSESSEE BY : SHRI ARVIND SHONDE DEPARTMENT BY : SHRI P.S. NAIK ORDER PER R. S. PADVEKAR, JM : TH IS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) - I, PUNE DATED 31 - 08 - 2012 FOR THE A.Y. 2008 - 09 . 2. T HE REVENUE HAS TAKEN THE FOLLOWING GROUNDS IN THE APPEAL: 1 . THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN HOLDING THAT THE PAYMENTS MADE BY THE ASSESSEE TO MRS. POOJA PATIL AND DR. D.Y. PATIL EDUCATIONAL ENTERPRISES (PVT . ) LTD. DID NOT INVOLVE ANY VIOLATION OF THE PROVISIONS OF SEC. 13(1)(C) OF THE INCOME - TAX ACT, 1961, AND THAT THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY EVIDENCE OR ADEQUATE MATERIAL ON RECORDS AS WOULD ESTABLISH SUCH VIOLATION. 3. THE LEARNED COM MISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN HOLDING AS ABOVE AND ALSO IN HOLDING THAT THE ASSESSING OFFICER CONSIDERED THE PAYMENTS TO BE EXCESSIVE AND UNREASONABLE MERELY ON THE BASIS OF ASSUMPTIONS, PRESUMPTIONS AND SURMISES WHEREAS THE FACTS AND EVIDENCES BROUGHT OUT/ADDUCED IN THE ASSESSMENT ORDER AS WELL AS IN THE REMAND REPORTS WOULD AMPLY ESTABLISH THAT THE PAYMENTS WERE INDEED EXCESSIVE, UNREASONABLE, 2 INDEFENSIBLE, HENCE CLEARLY HIT BY THE PROVISIONS OF SEC. 13(1)(C) OF THE INCOME - TAX ACT, 19 61. 4. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN RELYING ON THE MERE GENERALISED SUBMISSIONS MADE BY THE ASSESSEE WITH REGARD TO THE CAPACITY AND EXPERIENCE OF MRS. POOJA PATIL WITHOUT APPRECIATING THAT THE ASSESSEE HAD NOT ADDUCED ANY EVIDENCE WHATSOEVER IN SUPPORT OF THE CONTRIBUTIONS MADE BY HER IN THE FIELD OF HUMAN RESOURCE, LET ALONE THE TEACHING IMPARTED BY HER, AND ALSO WITHOUT APPRECIATING THAT IN THE SOLE ' COMPARABLE' EXAMPLE CITED BY THE ASSESSEE, THE EXPATRIATE WAS A PERSON OF RICH EXPERIENCE. 5. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN ATTACHING UNDUE IMPORTANCE TO MRS. POOJA PATIL'S SCHOOLING/EDUCATION IN THE U.S.A. AND TO HER BEING A WIDEL Y TRAVELLED PERSON, AS ALSO TO THE SUBSEQUENT SETTING UP OF BRANCHES ELSEWHERE, WITHOUT APPRECIATING THAT THESE ARE IN ANY MANNER NOT GERMANE TO THE ISSUE AT HAND WHICH OUGHT TO HAVE BEEN DECIDED ON FACTS AND EVIDENCES ALONE. 6. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT NOT ONLY THAT MRS. POOJA PATIL HAPPENS TO BE THE WIFE OF SHRI AJINKYA D PATIL, ONE OF THE SETTLORS, WHO ALSO CHAIRED THE MEETING WHICH DECIDED ON THE REMUNERATION TO BE PAID TO HER, SHE HAD ALSO ONLY RECENTLY GRADUATED, WITHOUT ANY WORTH - WHILE EXPERIENCE, WHEN SHE WAS RECRUITED BY THE ASSESSEE TRUST. 7. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN TREATING THE PAYMENT MADE BY THE ASSESSEE TO DR. D.Y. PATIL EDUCATIONAL ENT ERPRISES (PVT . ) LTD AS NOT UNREASONABLE OR EXCESSIVE MERELY ON THE BASIS OF THE SO - CALLED NOTIONAL COST INCURRED BY THE LATTER IN SETTING UP THE INFRASTRUCTURE, WHEREAS FOR THE PURPOSE OF DECIDING ON REASONABLENESS OR OTHERWISE WITHIN THE MEANING OF SEC.13( 1)(C), THE CRITERION IS MARKET VALUE OF THE RENT OF THE PREMISES AND NOT THE NOTIONAL COST INCURRED BY THE LESSOR. 8. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT SECTIONS 11, 12 & 13 DO NOT ENVISAGE NOR COUN TENANCE A SITUATION WHERE THE LESSOR MUST RECOVER FROM THE TRUST THE ENTIRE COST OF INFRASTRUCTURE OVER A CERTAIN PERIOD OF TIME, AND THIS IN ANY CASE IS AN IRRELEVANT CONSIDERATION. 9. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN FAIL ING TO APPRECIATE THAT THE DEPRECIATION OF THE ASSETS LEASED OUT TO A TRUST CAN BY NO MEANS BE TAKEN AS ONE OF THE CRITERIA FOR DETERMINING THE REASONABLENESS OF THE RENT CHARGED ON/ PAID BY THE TRUST IN RESPECT OF SUCH ASSETS OR THE USE THEREOF. 10. T HE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN DECIDING THE APPEAL IN THE MATTER OF VIOLATION OF SEC. 13(1)(C) BY HOLDING THAT THE ASSESSING OFFICER FAILED TO DISCHARGE THE ONUS CAST UPON HER TO PROVE SUCH VIOLATION WHEREAS AS THE FACTS AND EVIDENCES BROUGHT OUT IN THE ASSESSMENT ORDER WOULD CLEARLY SHOW THE ASSESSING OFFICER HAD DISCHARGED HER ONUS TO THE HILT. 11. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN OBSERVING THAT HE GAVE OPPORTUNITIES TO THE ASSESSING OFFICER DURING THE REMAND STAGE IN THE MATTER OF PAYMENTS MADE TO DR. D.Y. PATIL EDUCATIONAL ENTERPRISES (PVT . ) LTD WHEREAS NO SUCH OPPORTUNITY HAD BEEN GIVEN. 12. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE LEAR NED COMMISSIONER OF INCOME - TAX (APPEALS) MAY BE VACATED AND THAT OF THE A.O. BE RESTORED. 3 13. THE APPELLANT CRAVE LEAVE TO ADD, ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL. 3. THE ISSUE INVOLVED IN THIS APPEAL IS WHETHER THE ASSESSEE TRUST HAS VIOLA TED THE PROVISIONS OF SECTION 13(1)(C) R.W.S. 13(3)(A) AND 13(3)(E) OF THE I.T. ACT. 3.1 THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER . THE ASSESSEE IS A TRUST FORMED ON 07 - 03 - 2005 BY DR. AJINKYA D. PATIL AND DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. IT IS STATED THAT DR. AJINKYA D. PATIL, MR. VIJAY PATIL AND MS. PUSHPLATA D. PATIL ARE THE DIRECTORS OF DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. THE ASSESSEE TRUST HAS BEEN REGISTERED U/S 12A W.E.F. 28/11/2006 VIDE ORDER DAT ED 30 - 05 - 2007 AND ITS TRUSTEES ARE DR. AJINKYA D. PATIL ( TRUSTEE AND PRESIDENT), DR. (MRS.) PRIYADARSHINI RASHMIN CHOLERA , SHRI PRADEEP ANANT PALSHETKAR, DR. NANDITA P. PALSHETKAR AND MRS. POOJA AJINKYA PATIL. DURING THE YEAR UNDER CONSIDERATION, THE ASSE SSEE TRUST WAS FOUND TO HAVE RUN 'SHARAD PAWAR INTERNATIONAL SCHOOL' AT LOHEGAON, PUNE. THE ASSESSEE TRUST HA S SHOWN GROSS RECEIPTS OF RS.7,20,78,328/ - WITH AN OVERALL NET DEFICIT IN THE INCOME AND EXPENDITURE ACCOUNT FILED ALONG WITH THE RETURN. THE AO AFTER DESCRIBING THE DETAILS AVAILABLE IN THE TRUST DEED IN RESPECT OF 'ACCUMULATION OF INCOME', 'DISPOSAL OF CORPUS' AND 'INVESTMENT' HAS COMMENTED ON THE AFFAIRS OF THE TRUST TO HOLD THAT ( I ) THE REMUNERATION OF $ 12,500 PER MONTH PAID TO MRS . POOJA PAT IL, ONE OF THE TRUSTEE AS WELL AS THE WIFE OF THE MANAGING TRUSTEE FOR THE SERVICES RENDERED BY HER WERE EXCESSIVE, RESULTING INTO VIOLATION OF SEC.13(1)(C), ( II ) COMPENSATION TO DR. D.Y. PATIL ENTERPRISES PVT. LTD., ONE OF THE SETTLER OF THE TRUST AND THU S A PERSON COVERED U/S 13 (3) OF THE IT ACT, AS OPERATING CHARGES AND PREMISE RENT, WERE ALSO EXCESSIVE AND UNREASONABLE LEADING TO THE VIOLATION OF SEC. 13(1 )(C) 4 R.W.S. 13(3)(A) & 13(3)(E), AND ( III ) THE UTILIZATION OF THE FUNDS INCLUDING THE CORPUS WAS I N VIOLATION OF SEC. 11(5). IN ADDITION TO THE SAME, THE AO APPARENTLY ALSO CAME TO THE CONCLUSION THAT THE PART OF THE DEPRECIATION CLAIMED WAS IN RESPECT OF ASSETS BELONGING TO DR. D.Y. PATIL ENTERPRISES PVT. LTD., WHICH IS NOT ALLOWABLE IN THE ACT . ON REGARDING ABOVE REASONS AND FINDINGS , THE AO COMPUTED THE INCOME AT RS.3,56,80,350/ - AFTER DENYING THE EXEMPTION U/S.11 IN THE FOLLOWING MANNER : GROSS RECEIPTS RS.7,20,28,328/ - ADD: DONATIONS RS.9,34,87,500/ - --------------------- RS.16,55,15,828/ - LESS: EXPENDITURE I) AUDIT FESS RS.1,46,068/ - II) EDUCATIONAL OBJECTS RS.12,96,89,410/ - ----------------------- RS.12,98,35,478/ - ----------------------- TOTAL INCOME RS.3 ,56,80,350/ - ----------------------- THE ASSESSING OFFICER COMPLETED THE ASSESSMENT OF THE ASSESSEE IN THE STATUS OF AN AOP AND DECLINED TO GIVE THE BENEFIT OF SECTION 11 AND 12 OF THE I.T. ACT AND DETERMINED THE INCOME OF THE ASSESSEE AT RS.3,56,80,350/ - . 4. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT(A) AND THE LD. CIT(A) PARTLY ALLOWED THE ASSESSEES APPEAL. THE OPERATIVE PART OF THE REASONS AND FINDINGS OF THE LD. CIT(A) ARE AS UNDER : 13. I HAVE CAREFULLY CO NSIDERED THE FACTS OF THE CASE AND LAW AS ARE APPARENT FROM THE RECORD IN RESPECT OF ISSUES INVOLVED IN GROUND NO. 1 TO 5 OF THE APPELLANT UNDER CONSIDERATION. FROM THE PERUSAL OF THE AFORESAID GROUNDS RAISED BY THE APPELLANT IT CAN BE SEEN THAT GROUND NO. 1 IS GENERAL IN NATURE MAINLY FOR DENYING THE EXEM P TION U/S 11. GROUNDS NO.2 3 ARE IN RESPECT OF VIOLATION OF SEC.13(1)(C) FOR THE PAYMENTS MADE TO SMT. POOJA PATIL, A PERSON COVERED U/S 13(3) AND THEREFORE THE PAYMENTS MADE TO HER WERE HELD BY THE AO TO BE EXCESSIVE AND UNREASONABLE. GROUNDS NO.4 & 5 ARE ALSO FOR VIOLATION OF. SEC.13(1)(C) FOR THE PAYMENTS OF OPERATING CHARGES OF RS.4.5 CRORES AND RENT OF RS.2.5 CRORES TO DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD , 5 WHICH IS ALSO A PERSON COVERED U/S 13(3). THEREFORE IT CAN BE SEEN THAT THE ISSUES INVOLVED BASICALLY RELATE TO THE FINDINGS GIVEN BY THE AO FOR THE PAYMENTS MADE TO AFORESAID TWO PERSONS AS EXCESSIVE AND UNREASONABLE FOR DENYING THE BENEFIT OF EXEMPTION OTHERWISE AVAILABLE U/S 11 OF THE IT ACT. THERE IS NO DISPUTE TO THE FACT THAT THE APPELLANT TRUST/FORMED ON 7/3/2005 BY DR. AJINKYA D. PATIL AND DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. WAS ENGAGED IN THE ACTIVITY OF EDUCATION FALLING UNDER THE DEFINITION OF CHARITABLE PURPOSES AVAILABLE IN SEC.2(15) OF THE IT ACT. THE SAID TRUST ALSO IS REGISTERED U/S 12A VIDE ORDER DTD. 30/5/2007 W.E.F. 2 8/11/2006. THIS TRUST WAS FOUND TO BE RUNNING AN INTERNATIONAL SCHOOL CALLED 'SHARAD PAWAR INTERNATIONAL SCHOOL' AT LOHEGAON, PUNE, AND EXEMPTION HAS BEEN GRANTED IN EARLIER ASSESSMENT YEARS. 14. AS THE DENIAL OF THE EXEMPTION IN THIS ASSESSMENT YEAR IS BA SICALLY FOR THE VIOLATION OF SEC. 13 RELATING TO PAYMENTS MADE TO TWO PERSONS OF PROHIBITED CATEGORY I.E. MRS. POOJA A. PATIL AND M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD., TREATING THE SAME TO BE UNREASONABLE AND EXCESSIVE FOR GRANTING BENEFIT TO THESE PERSONS, IT IS IMPORTANT TO FIRST OF ALL EXAMINE THE FACTS RELATING TO THESE PAYMENTS AS WELL AS THE LAW FOR DENIAL OF EXEMPTION ON VIOLATION OF SEC. 13. OTHER ISSUES RAISED BY THE AO RELATING TO VIOLATION OF SEC. 11 (5) AND USE OF CORPUS FOR PAYM ENT TO RELATED PERSONS ETC. HAVE ALSO BEEN OBJECTED BY THE APPELLANT IN THEIR SUBMISSIONS AND WILL BE CONSIDERED SEPARATELY. COMING TO THE MATTER RELATING TO THE PAYMENTS TO MRS. POOJA A. PATIL, WHICH HAS BEEN HELD BY THE AO AS VIOLATIVE OF SEC. 13(1)(C), IT IS SEEN THAT THE AO HAS DEALT THIS ISSUE IN PARA 4 OF THE ASSESSMENT ORDER WHICH HAS ALREADY BEEN QUOTED ABOVE. IT IS APPARENT FROM THE SAME THAT THE AO FOUND THAT MRS. POOJA A. PATIL WAS PAID A MONTHLY REMUNERATION OF $ 12,500, WHICH FOR THE PERIOD OC TOBER, 2007 TO MARCH, 2008, IN INDIAN CURRENCY WAS COMPUTED AT RS.28,72,500/ - . AFTER MAKING THE TDS, THE NET AMOUNT OF RS.20,80,749/ - WAS - PAID. THE AO HAS EXAMINED THIS PAYMENT AND THE EXPLANATION GIVEN BY THE APPELLANT IN RESPECT OF HER DUTIES AND RESPON SIBILITIES AND HAS EVEN QUOTED IT IN THE ASSESSMENT ORDER. THE SUBMISSION MADE BEFORE THE AO THAT MRS. POOJA A. PATIL, IS A US CITIZEN AND HAS BEEN PAID FOR HER EXPERIENCE AND QUALIFICATION AS WELL AS THE ADVANTAGE SHE WAS HAVING OF KNOWING THE INTERNATION AL CURRICULUM AS WELL AS THE INDIAN CURRICULUM AND ITS RELEVANCE TO THE INTERNATIONAL SCHOOLS WHICH THE TRUST WAS RUNNING, WAS NOT FOUND TO BE SUFFICIENT AND ACCEPTABLE TO THE AO. THEREFORE THE AO CONCLUDED THAT THE SALARY PAID TO MRS. POOJA A. PATIL, AS C OMPARED TO THE INDIAN STANDARD IN INDIAN SCHOOLS ARE EXORBITANT , UNREASONABLE AND UNJUSTIFIED. THE AO THEREAFTER HAS PLACED RELIANCE ON DIFFERENT JUDGMENTS WHICH SUPPORT THE VIEW THAT EXEMPTION CAN BE DENIED IN FACTS WHERE PERSONS OF PROHIBITED CATEGORY AR E PAID UNREASONABLY OR EXORBITANTLY . SIMILAR OBJECTIONS HAVE BEEN RAISED BY THE AO IN RESPECT OF PAYMENTS MADE TO M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. IT IS NOTED IN RESPECT OF THE ABOVE THAT THE AO FOUND THAT THE ABOVE REFERRED COMPANY WAS THE SETTLER AS WELL AS THE TRUSTEE OF THE APPELLANT TRUST AND THEREFORE WAS FALLING IN THE PROHIBITED CATEGORY OF SEC. 13(3). IT WAS ALSO NOTED THAT AN AMOUNT OF RS.4.5 CRORES AS 'OPERATING CHARGES' AND RS.2.5 CRORES AS 'PREMISES RENT' WERE DEBITED IN INC OME AND EXPENDITURE ACCOUNT. THE AUDITORS HAVE ALSO INDICATED THESE PAYMENTS IN THE AUDIT REPORT TO THE PERSONS COVERED U/S 13(3) ALONG WITH OTHER PAYMENTS. THE AO THEREAFTER DECIDED TO EXAMINE THESE PAYMENTS AND CALLED FOR DETAILS. IT WAS 6 CONTENDED BEF ORE THE AO THAT THE ENTIRE PROPERTY AT LOHEGAON PREMISE BELONGS TO M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. WHICH IS ON A PLOT OF LAND OF 25 ACRES HAVING BUILDINGS AND DIFFERENT INFRASTRUCTURES IN MORE THAN 2 LAKH SQ. FTS. IT WAS CLAIMED THAT T HE AFORESAID COMPANY HAS UNDERTAKEN TO PROVIDE ENTIRE FACILITIES INCLUDING BUILDING, FURNITURE, FITTINGS, ETC. AS MENTIONED IN THE AGREEMENT AND PARTLY QUOTED BY THE AO IN THE ASSESSMENT ORDER AND ITS MAINTENANCE IN A REGULAR BASIS AND FOR THIS IT WAS EXPL AINED TO THE AO, THAT THE APPELLANT HAS INVESTED APPROXIMATELY RS.44 CRORES. THE COST TO THE APPELLANT COMPANY FOR PROVIDING THE AFORESAID FACILITY WAS WORKED OUT AT RS. 9. 90 CRORES, COMPRISED OF INTEREST COST @12% OF 44 CRORES AT RS.5.28 CRORES, DEPRECIA TION AS PER THE IT PROVISIONS AT RS.4.12 CRORES AND OTHER EXPENSES OF RS.0.5 CRORES. IN THIS MANNER THE APPELLANT CONTENDED THAT THE NOTIONAL COST TO THE COMPANY WHICH PROVIDED THE FACILITY FOR A YEAR WAS COMING TO RS.9.90 CRORES. AGAINST THIS THE APPEL LANT WAS CLAIMED TO BE PAYING ONLY RS.6 CRORES AS PER AN AGREEMENT DTD. 21/3/2007, COMPRISED OF RS.4.5 CRORES AS 'OPERATIONAL EXPENSES' AND 'RENT @ RS.12.5 LAKHS P.M. IN RESPECT OF THE DEBIT OF RS.2.5 CRORES AS RENT, IT WAS EXPLAINED THAT THE SAME WAS FOR 20 MONTHS STARTING FROM AUGUST 2006 TO MARCH 2008. THEREFORE IT WAS EXPLAINED TO THE AO THAT THE PAYMENT OF RENT OF RS.2.5 CRORES WAS FOR TWO PREVIOUS YEARS. ON THIS BASIS THE APPELLANT CLAIMED THAT THE YEARLY PAYMENT DECIDED IN THE AGREEMENT WAS OF RS.6 CRORES ONLY TOGETHER WHICH WAS MUCH LESS THAN THE NOTIONAL COST COMING TO THE M/S. DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD., AND THEREFORE IT CANNOT BE HELD THAT SEC.13(1)(C) HAS BEEN VIOLATED. IT WAS THE ARGUMENT OF THE APPELLANT THAT ONLY BECAU SE THE PAYMENTS HAVE BEEN MADE TO PERSONS COVERED U/S 13(3), IT CANNOT BE HOLD THAT THE SAME ARE IN VIOLATION OF SEC. 13(1)(C). AS PER THE APPELLANT SEC. 13(2) PROVIDES FOR A REASONABLE PAYMENT TO THE SETTLER OR RELATED PERSONS FOR THE SERVICES OR FACILITI ES PROVIDED AND THEREFORE ON THAT BASIS IT WAS ARGUED THAT THE VIOLATION OF SEC. 13(1)(C) CANNOT BE INVOKED. FOR DETAILS OF THE ARGUMENT MADE BY THE APPELLANT BEFORE THE AO, THE ASSESSMENT ORDER REFERRED TO ABOVE CAN BE SEEN. THE AO AFTER CONSIDERING THE SUBMISSIONS MADE BEFORE HER HAS GIVEN THE DETAILS IN RESPECT OF VARIOUS ASSETS AND ITS VALUES WHICH WAS THE. SUBJECT MATTER OF PAYMENT AS WELL AS THE CLAUSE 4 OF THE AGREEMENT,, WHICH ALSO HAD THE PROVISION FOR RENT ENHANCEMENT FROM 1/4/2008 AND THEREAFTER HAS GIVEN THE FINDING THAT THE M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. IS NOT ENGAGED IN CHARITABLE ACTIVITY AND HAS EXTRACTED THE INCOME INCLUDING THE CORPUS DONATIONS OF THE APPELLANT TRUST. THE AO HAS ALSO MENTIONED ABOUT A DEBIT OF RS. 18,06,060/ - FOR DEPRECIATION. THE COMMENT RELATING TO AFFAIRS OF M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. WAS REALLY NOT RELEVANT AS THE AO WAS MAINLY REQUIRED TO EXAMINE AND DECIDE THE AFFAIRS OF THE APPELLANT COMPANY. ONLY THOSE ASPECTS WHI CH HAS A BEARING ON THE FINDING REQUIRED RELATING TO THE ASSESSEE WAS RELEVANT. IN RESPECT OF DEPRECIATION OF RS.18,06,060/ - IT IS NOTED THAT THE APPELLANT HAS RAISED A SEPARATE GROUND AND THEREFORE THE SAME IS ALSO NOT EXAMINED HERE. IT IS NOTED FROM T HE ASSESSMENT ORDER FURTHER THAT THE AO THEREAFTER, AFTER DESCRIBING THE VARIOUS PAYMENTS HAS CONCLUDED THAT THE EXPENDITURE IN RESPECT OF THE EARLIER YEARS, MOST PROBABLY SHE WAS REFERRING TO THE RENT EXPENSES OF EARLIER PREVIOUS YEAR OVER AND ABOVE RS.1. 5 CRORES OF THE PREVIOUS YEAR, WILL NOT BE ALLOWABLE IN THIS ASSESSMENT YEAR. THERE IS NO GROUND RELATING TO THIS FINDING OF THE AO RELATING TO DISALLOWANCE OF RENT OF EARLIER YEAR AND THEREFORE IT HAS TO BE PRESUMED THAT THE APPELLANT HAS NO GRIEVANCE IN RESPECT OF THIS FINDING, OTHERWISE ALSO, IT IS A TRITE LAW THAT UNDER THE INCOME TAX PROVISION, EACH ASSESSMENT YEAR IS SEPARATE FOR THE PURPOSE OF COMPUTATION OF INCOME AND PAYMENT 7 OF TAXES AND THEREFORE THE INCOME OR THE EXPENDITURE OF THE RELEVANT PRE VIOUS YEAR CAN ONLY BE CONSIDERED FOR THIS PURPOSE. THE FINDING OF THE AO APPEARS CORRECT IN COMING TO THE CONCLUSION THAT THE RENTAL EXPENSES OF EARLIER YEAR CANNOT BE ALLOWED IN THIS YEAR. HOWEVER, THE OTHER FINDING GIVEN BY THE AO THAT ALL THE FACTS RELATING TO THE PAYMENTS MADE TO M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. LEADS TO THE CONCLUSION THAT THERE IS A CLEAR ARRANGEMENT BETWEEN THE SETTLER AND THE TRUST TO MAKE HUGE PAYMENTS AS 'RENT AND OPERATIONAL CHARGES' AND THEREFORE THE SAME IS IN VIOLATION OF SEC. 13(1)(C) R.W.S. 13(3)(A) AND 13(3)(E), IS WITHOUT MUCH ARGUMENTS AND DISCUSSIONS. IF THE LAW, AS HAS BEEN CLAIMED BY THE APPELLANT TO HAVE BEEN INTERPRETED BY THE SUPERIOR COURTS, THAT THE ONUS IS ON THE AO TO ESTABLISH THAT THE PA YMENTS MADE TO SPECIFIED PERSONS ARE UNREASONABLE AND EXCESSIVE FOR INVOKING SEC.13(1)(C), THEN IT CAN BE SEEN THAT THE AO HAD NOT BROUGHT ADEQUATE MATERIALS ON RECORD. NO DOUBT THE PAYMENTS HAVE BEEN MADE TO THE PERSON FALLING IN THE SPECIFIED CATEGORY AND ARE ALSO SUBSTANTIAL, THEREBY RAISING DOUBT BUT THE AO HAD THE RESPONSIBILITY OR THE ONUS TO ESTABLISH THAT THE PAYMENTS ARE UNREASONABLE AND EXCESSIVE. THE SALARY PAID TO MRS. POOJA A. PATIL AND THE ANNUAL PAYMENTS MADE AS PER THE AGREEMENT AT RS.6 C RORES PER YEAR IN THIS ASSESSMENT YEAR, EVEN IF APPEAR BIG, CANNOT BE HELD TO BE EXCESSIVE OR UNREASONABLE WITHOUT BRINGING ADEQUATE MATERIAL ON RECORD TO SUBSTANTIATE THE SAME. IT IS - ALSO APPARENT THAT THE ARGUMENTS MADE BY THE APPELLANT BEFORE THE AO TH AT THE PAYMENT TO MRS. POOJA A. PATIL WAS FOR AN INTERNATIONAL SCHOOL AS AN OVERALL INCHARGE INCLUDING THAT OF HRD, TEACHER, ETC, WHERE PAYMENTS ARE GENERALLY HIGHER AND SIMILARLY THE TRUST HAD TO BEAR THE COST OF RS.9.9 CRORES FOR THE FACILITIES AND SERVI CES PROVIDED, AGAINST WHICH THE PAYMENT WAS OF RS.6 CRORES ONLY, ALSO WERE NEITHER CONTROVERTED NOR EXAMINED BEFORE GIVING THE FINDING OF VIOLATION OF SEC.13(1)(C). THEREFORE, IT WAS NOTED THAT THE APPELLANT RAISED SPECIFIC GROUNDS UNDERGROUND NO.2 TO 5 AND IN THE SUBMISSIONS MADE DURING APPEAL, WHICH HAS ALREADY BEEN DISCUSSED AND DESCRIBED ABOVE IN THIS ORDER, IT HAS BEEN STATED THAT THE ARGUMENTS MADE BEFORE THE AO FOR THE JUSTIFICATION OF PAYMENTS WERE NOT PROPERLY CONSIDERED AND THAT THE AO CAME TO T HE FINDING WITHOUT CONSIDERING THE SAME. IT HAS BEEN STATED THAT THE AO HAS NOT EVEN CONSIDERED ANY OTHER COMPARABLE CASE FOR DERIVING HER INFERENCE. IT HAS BEEN CLAIMED THAT THE AO HAS NOT POINTED OUT ANY INACCURACY IN THE FACTS AND SUBMISSIONS MADE BEFO RE HER ON THIS ISSUE. IN THE SUBMISSIONS MADE DURING APPEAL IN SUPPORT OF THE GROUNDS RAISED BY THE APPELLANT VIDE THEIR LETTER DTD. 12/3/2012 AND 29/3/2012, BOTH OF WHICH HAVE ALREADY BEEN QUOTED ABOVE, IT CAN BE SEEN THAT THE APPELLANT HAS FIRST OF ALL REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND THEREAFTER HAS FURTHER MADE ARGUMENTS IN RESPECT OF BOTH THE IMPUGNED PAYMENTS. IT HAS BEEN STATED IN RESPECT OF MADE TO MRS. POOJA A. PATIL THAT FULL DETAILS WERE GIVEN TO THE AO INCLUDING THE DETAILS O F DUTIES AND RESPONSIBILITIES, WHICH HAS ALSO BEEN QUOTED BY THE AO IN THE ASSESSMENT ORDER BUT DESPITE THAT THE EXPLANATIONS GIVEN BY THE APPELLANT IN RESPECT OF PAYMENT FOR A PERSON RESPONSIBLE FOR RUNNING THE INTERNATIONAL SCHOOL WAS HELD TO BE UNREAS ONABLE AND EXCESSIVE ON ASSUMPTION, PRESUMPTION AND SURMISES. SIMILAR ARGUMENTS HAVE BEEN MADE IN RESPECT OF PAYMENTS MADE TO M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD., IN RESPECT OF WHICH ALSO AFTER REITERATING THE SUBMISSIONS MADE BEFORE THE AO THE APPELLANT HAS FURTHER STATED THAT THE TOTAL PAYMENT OF RS.6 CRORES ON MONTHLY BASIS COMES TO RS,50 LAKHS P.M., WHICH IN TERMS OF PER SQ. FT. FOR A PROPERTY OF MORE THAN 2 LAKHS SQ. FT. SPREAD OVER A LAND OF 25 ACRES ALONG WITH GARDENS AND AMENITIES COMES TO RS.25 PER SQ. FT. WHICH CANNOT BE SAID TO BE EXCESSIVE OR 8 UNREASONABLE IN PUNE. IT HAS BEEN FURTHER CLAIMED THAT THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL FOR ARRIVING AT HER FINDING AND THEREFORE IT WAS AGAIN CLAIMED THAT THE FINDIN G WAS BASED ON ASSUMPTIONS OR PRESUMPTIONS. THE APPELLANT HAS FURTHER STATED THAT THE AO FAILED TO APPRECIATE THAT THE APPELLANT TRUST HAD NO RESOURCE FOR CREATING THE INFRASTRUCTURE WHICH WAS REQUIRED FOR STARTING AND RUNNING AN INTERNATIONAL SCHOOL AND T HEREFORE IT COULD NOT HAVE RUN THE INSTITUTION WITHOUT THE ARRANGEMENT AND SUPPORT MADE BY THE M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. THE APPELLANT THEREAFTER HAS ALSO CLAIMED THAT THE ONUS LIES ON THE PERSON WHO ALLEGES NON - COMPLIANCE OR V IOLATION OF A PROVISION AND THEREFORE IT WAS THE RESPONSIBILITY OF THE AO TO BRING ON RECORD MATERIALS AND IN THE ABSENCE OF THE SAME THE FINDING OF THE AO CANNOT BE UPHELD. THE APPELLANT ALSO PLACED RELIANCE ON THE DIFFERENT JUDGMENTS WHICH ARE AVAILABLE ON THE SUBMISSIONS QUOTED ABOVE. FOR CLAIMING THAT THE PAYMENTS MADE TO BOTH THE PERSONS WERE REASONABLE, THE APPELLANT ALSO SOUGHT TO RELY ON THE DECISION OF THE SUPREME COURT GIVEN IN THE CASE OF GLAXO SMITHKLI M E ASIA PVT. LTD. QUOTED SUPRA, WHEREIN IT WAS CLAIMED THAT THE HON'BLE COURT WHILE DECIDING THE ISSUE RELATING TO PAYMENT U/S.40A(2) HAD DRAWN CERTAIN GUIDELINES. AS PER THE APPELLANT THESE GUIDELINES GIVES AN INSIGHT TO SUCH ISSUE AND AS PER THIS VIOLATION CAN BE ACCEPTED ONLY WHERE SUCH ACTI ONS OR TRANSACTIONS BETWEEN RELATED PARTIES CAN BE SEEN TO BE TAX ADVANTAGEOUS TO THE GROUP AS A WHOLE. IT HAS BEEN CLAIMED BY THE APPELLANT IN THIS RESPECT THAT THE PAYMENTS MADE TO BOTH THE IMPUGNED PERSONS ARE LIABLE TO TAX AT MAXIMUM RATES WHEREAS IN THE HANDS OF THE TRUST THERE IS NO TAX. ON THIS BASIS THE APPELLANT HAD TRIED TO ARGUE THAT THE PAYMENTS WERE NOT INTENDED TO AVOID TAX INCIDENCE. IN LETTER DTD. 29/3/2012 THE APPELLANT HAD MADE FURTHER SUBMISSIONS IN RESPECT OF SALARY PAID TO MRS. POOJA A. PATIL TO STATE THAT NOT ONLY WAS SHE INVOLVED IN THE VARIOUS IMPORTANT ACTIVITIES OF THE SCHOOL AS AN OVERALL INCHARGE AS A RESULT OF WHICH SHE WAS FULLY AND WHOLLY DEVOTED TO THE ACTIVITIES OF THE SCHOOL BUT FROM THE DETAILED NOTE ENCLOSED FOR HER EXPE RIENCE IT CAN BE SEEN THAT SHE HAD ADEQUATE EXPERIENCE IN THE FIELD OF EDUCATION IN INDIA ALSO. IT WAS CLAIMED THAT SHE WAS INSTRUMENTAL IN GUIDING THE TEACHERS TO DRAW A BALANCE BETWEEN THE INDIAN SYSTEM AND THE INTERNATIONAL SYSTEM TO MAKE THE LEARNING OF THE STUDENTS EFFECTIVE. AS PER THE SUBMISSIONS MADE THEREIN, IT HAS BEEN CLAIMED THAT SHE HAD ' WIDELY TRAVELLED TO USA, DUBAI AND AUSTRALIA, ETC. FOR THE ABOVE PURPOSE AND USING HER EXPERTISE AND EXPERIENCE IN THE DEVELOPMENT OF INTERNATIONAL SCHOOL IN INDIA FOR THE APPELLANT TRUST. THE APPELLANT ALSO ENCLOSED A CHART GIVING THE DETAILS OF SALARIES PAYABLE TO OTHER MEMBER OF THE SCHOOL TO CLAIM THAT THE PAYMENTS MADE TO HER ARE REASONABLE. THE APPELLANT ALSO ENCLOSED A LIST OF EXPATRIATE TEACHERS WORK ING IN THE APPELLANT'S SCHOOL TO WHOM SALARY OF $80000, ADDITIONAL ALLOWANCE OF $15000 AND OTHER FACILITIES LIKE RENT FREE PARTIALLY FURNISHED ACCOMMODATION, FUEL, ELECTRICITY, TRAVEL TO THE NATIVE PLACE, ETC. ARE PAID TO CLAIM THAT THE PAYMENT TO THEM ARE ALSO AT THE SAME LEVEL. LIST OF PRINCIPALS/HEAD OF THE SCHOOLS OF OTHER SIMILAR INTERNATIONAL SCHOOLS WERE ALSO ENCLOSED TO SHOW THAT IN THOSE SCHOOLS ALSO THE PAYMENTS HAVE BEEN MADE RANGING FROM $ 100000 TO MORE THAN $ 150000. IN THESE MANNER THE .APPELLANT HAS TRIED TO SUBSTANTIA THAT THE PAYMENTS MADE TO MRS. POOJA A. PATIL WAS ALSO REASONABLE AND THE FINDING OF THE AO WAS NOT CORRECT, AS IT WAS NOTED THAT THE AO HAS NOT BROUGHT ON RECORD THE RELEVANT MATERIALS FOR DENYING THE EXEMPTION, AN ORDE R U/S 250(4) R.W.R. 46A WAS PASSED ON - .15/5/2012. THE REPORT DTD. 7/6/2012 SUBMITTED BY THE AO WAS GIVEN TO THE APPELLANT FOR REBUTTAL AND THE REPLY DTD. 18/6/2012 OF THE APPELLANT WAS CONSIDERED. AS THE AO WAS FOUND TO HAVE NOT CARRIED OUT THE 9 DIRECTI ONS GIVEN U/S 250(4) PROPERLY, ANOTHER ORDER U/S 250(4) WAS PASSED ON 24/7/2012 , WHEREIN THE OBJECTIONS RAISED BY THE A O U/R 46A WERE FOUND TO BE INCORRECT AND THE ADDITIONAL EVIDENCES FILED WERE FOUND TO BE ADMISSIBLE. THESE DETAILS ARE AVAILABLE IN THIS ORDER IN THE EARLIER PARAGRAPHS AND CAN BE SEEN FOR DETAILS. IN THE SUBSEQUENT REPORT SUBMITTED BY THE AO ON 14/8/2012 (REFER TO PARA 11 OF THIS ORDER), THE AO CARRIED OUT CERTAIN INVESTIGATIONS AFTER CALLING FOR CERTAIN DETAILS FROM THE APPELLANT. THE A O ON THE BASIS OF VERIFICATION CARRIED OUT BY HIM CONFIRMED THAT THE DETAILS OF PAYMENTS SHOWN MADE TO OTHER EXPATRIATE TEACHERS OF THE APPELLANT SCHOOL AND TO THE PRINCIPLES/HEAD OF INSTITUTION OF OTHER INTERNATIONAL SCHOOLS WERE CORRECT, BUT IT WAS ARGUE D THAT THE PAYMENT TO MRS. POOJA A. PATIL WAS EXCESSIVE. THIS WAS CONCLUDED BY THE AO ON THE BASIS OF ARGUMENTS MADE THAT THE APPELLANT TRUST COULD HAVE MANAGED THE SAME AFFAIRS WITH A NON - EXPATRIATE PERSON AND ALSO ON THE GROUND THAT THE APPELLANT HAD NO T PRODUCED ADEQUATE MATERIAL TO SUBSTANTIATE THAT MRS. POOJA A. PATIL HAS RENDERED SIMILAR SERVICES OR WAS HAVING SIMILAR CAPACITY AND CAPABILITY. THE AO HAS ALSO STATED THAT THE MEETING IN WHICH THE APPOINTMENT WAS FINALIZED WAS CHAIRED BY HER HUSBAND. T HE APPELLANT HAS MADE A DETAILED REJOINDER ON THE SAME WHICH IS QUOTED IN PARA 12 OF THIS ORDER AND FROM THE PERUSAL OF THE SAME IT CAN BE SEEN THAT APPELLANT HAS CONTRADICTED AND OBJECTED TO EACH OF THE ARGUMENTS OF THE AO AS NOT TENABLE. IT HAS BEEN CLAI MED THAT MRS. POOJA A. PATIL HAS ENOUGH QUALIFICATION, EXPERIENCE AND EXPERTISE AND THE SAME IS EVIDENT FROM THE EXPANSION THE APPELLANT TRUST HAS MADE UNDER HER GUIDANCE BY OPENING MANY NEW INTERNATIONAL SCHOOLS AT MUMBAI, NAGPUR, ETC. ALL THESE FACTS RE LATING TO THE ISSUES IN DISPUTE HAVE BEEN ELABORATELY DISCUSSED IN THE PROCEEDING PARAGRAPHS OF THIS ORDER AND CAN BE REFERRED TO FOR DETAILS. 15. THOUGH THERE IS NO DISPUTE ON THE ISSUE THAT THE ACTIVITIES OF THE APPELLANT TRUST IS NOT OF A CHARITABLE NAT URE, BUT IT MAY BE RELEVANT TO SEE THAT SECTION 2(15) OF THE IT. ACT, WHICH GIVES AN INCLUSIVE DEFINITION TO THE 'CHARITABLE PURPOSES' SAYS ''CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY.' THE ABOVE QUOTED DEFINITION IS RELEVANT FOR A.Y. 2008 - 09. IT MAY BE IMPORTANT TO POINT OUT THAT THE WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT', EARLIER AVAILABLE IN THE PROVISION AFTER THE WORDS 'ANY OTHER OBJECT OF GENERAL PUBLIC UTI LITY' WERE OMITTED BY THE FINANCE ACT, 1983 W.E.F. 1.4.1984. THEREFORE, IT IS APPARENT THAT THE WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT' WERE NOT AVAILABLE IN THE DEFINITION OF 'CHARITABLE PURPOSES' UPTO A.Y. 2008 - 09. WITH EFFECT FR OM 1.4.2009 SUB SEC. 2(15) HAS BEEN FURTHER SUBSTITUTED BY A NEW DEFINITION WHICH SAYS 'CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY; PROVIDED THAT THE ADVANCE MENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY OTHER ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMM ERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY;' 10 IT IS CLEAR FROM THE ABOVE, AND ON ITS COMPARISON WITH THE PROVISIONS SO EXISTING IN A.Y. 200 8 - 09, THAT THE ONLY DIFFERENCE LIES IN INTRODUCTION OF THE PROVISO TO THE SAID SUB - SECTION, WHICH CAN BE SEEN TO BE EXEMPLIFYING THE WORDS EARLIER EXISTING PRIOR TO 1.4.1984. THOUGH THE ABOVE PROVISO SEEM TO BE QUALIFYING ONLY THE 'ANY OTHER OBJECT OF G ENERAL PUBLIC UTILITY', BUT EVEN THIS CAN BE SEEN TO BE NON - EXISTENT IN THIS ASSESSMENT YEAR. IT CAN ALSO BE SEEN THAT THERE ARE FURTHER AMENDMENTS THEREAFTER TO THE AFORESAID PROVISIONS BY INCLUDING WORDS LIKE 'PRESERVATION OF ENVIRONMENT (INCLUDING WATE RSHEDS, FOREST AND WILD LIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST' BEFORE THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY BUT THE FACTS REMAIN THAT THE DEFINITION OF CHARITABLE' PURPOSES AVAILAB LE FOR A.Y. 2008 - 09 IS DEVOID OF ANY PROVISO OR OTHER WORDS WHICH WILL COME INTO EFFECT FROM A.Y. 2009 - 10 OR ANY OTHER QUALIFYING WORDS OF THE NATURE AVAILABLE PRIOR TO 1.4.1984. THE DEFINITION OF 'CHARITABLE PURPOSES' AVAILABLE IN THIS SECTION IS OF GREAT IMPORTANCE AS IT IS LINKED TO SEC. 11 TO 13A WHICH DEAL WITH ONE OF THE MOST IMPORTANT CATEGORIES OF INCOME EXEMPT FROM TAX. THE HON'BLE SUPREME COURT IN THE CASE OF CIT (ADDL) VS. SURAT ART SILK CLOTH MANUFACTURER ASSOCIATION (1980) 121 ITR 1 (SC), HAS S UCCINCTLY AND PITHILY SUMMARIZED THE LEGISLATIVE HISTORY OF THIS EXPRESSION BY TRACING AND COMPARING ITS ORIGIN FROM THE ENGLISH LAW. IT WAS DESCRIBED IN THIS JUDGMENT THAT THE CONCEPT OF CHARITY HAS GROWN IN THE ENGLISH LAW, 'AROUND THE PREAMBLE OF STAT UTE OF ELIZABETH, WHICH CONTAINS A LIST OF PURPOSES. IT WAS FOUND IN THE SAID JUDGMENT THAT THE DEFINITION OF CHARITABLE PURPOSE IN THE INDIAN LAW GOES MUCH FURTHER THAN THE DEFINITION OF 'CHARITY' AVAILABLE IN THE ENGLISH (AW, BECAUSE IT SPECIFICALLY INCL UDES MEDICAL RELIEF AND EMBRACES ALL OBJECTS OF GENERAL PUBLIC UTILITY IN ITS FOLD. THEREFORE, UNDER THE INCOME TAX LAWS, EDUCATION AND MEDICAL RELIEF HAS BEEN RECOGNIZED AS A 'CHARITABLE PURPOSE' RIGHT FROM THE BEGINNING AND HAS CONTINUED TO REMAIN SO ALL THROUGH THE YEARS WITHOUT ANY CHANGE OR QUALIFICATION. IT IS DISTINCT FROM OTHER IDENTIFIED ACTIVITIES LIKE 'RELIEF OF THE POOR' AND THE GENERAL OMNIBUS CATEGORY OF 'THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY'. THEREFORE, WHAT IS REQ UIRED TO BE SEEN FOR ALLOWING EXEMPTION, IS WHETHER THE ACTIVITY IS THAT OF EDUCATION OR MEDICAL RELIEF OR NOT AND IF YES, THEN THE OTHER CONDITIONS SPECIFIED IN SEC. 11 TO 13A ARE FULFILLED OR NOT, IN FACT IF THE AFORESAID ACTIVITIES RESULTS IN SURPLUS, EVEN THAN IN THE AVAILABLE DEFINITION THE EXEMPTION HAS BEEN ALLOWED BY THE SUPERIOR COURTS SO LONG AS THE ISSUE OF PRIVATE PROFIT OR BENEFIT TO THE PROHIBITED PERSONS IS NOT BROUGHT, ON RECORD. TRUST DEEDS HAVING THE PURPOSES FOR ITS EXISTENCE ARE REQUI RED TO BE REGISTERED U/S 12A AND THEREFORE ONCE THE ACTIVITIES PROFESSED IN THE DEED ARE RECOGNIZED U/S 12A, THE AO WHILE MAKING THE ASSESSMENT IS ONLY REQUIRED TO EXAMINE WHETHER THE TRUST HAS CARRIED OUT THE ACTIVITIES TO ACHIEVE THE PURPOSES OR NOT AND IF THERE IS ANY INSTANCE FOUND FOR ANY RECOGNIZED ACTIVITY TO BE NOT OF 'CHARITABLE PURPOSE', THE AO CAN ONLY BRING THIS MATTER TO THE NOTICE OF THE COMMISSIONER, HAVING THE JURISDICTION OVER THE TRUST FOR THE WITHDRAWAL OR CANCELLATION OF THE REGISTRATION . IN THE PRESENT CASE NO SUCH MATTER EXISTS. THEREFORE ONLY THE LAW RELATING TO DENIAL OF EXEMPTION FOR THE VIOLATION OF SECTION 11 TO 13A ARE REQUIRED TO BE EXAMINED. FROM THE PERUSAL OF THE ASSESSMENT ORDER AND THE GROUNDS RAISED BY THE APPELLANT IT IS EVIDENT THAT THE CONTROVERSY IS MAINLY RELATING TO THE FINDING GIVEN FOR VIOLATION OF SEC.13(1)(C) FOR THE PAYMENTS MADE TO M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. AND MRS. POOJA A. PATIL. ON CAREFUL CONSIDERATION OF THE MATERIALS AVAILABLE ON RECORD ON THE OBJECTIONS RAISED BY THE ASSESSING OFFICER FOR DENIAL OF EXEMPTION U/S 11 OF THE IT. ACT FOR VIOLATION OF SEC. 13(1)(C), IT IS NOTED THAT THE LAW IS CLEAR ON THE ABOVE 11 ISSUE THAT IF ANY PAYMENTS ARE MADE TO PERSONS SPECIFIED IN SUB SEC.(3 ) OF SEC. 13, THEN NOTHING CONTAINED IN SEC. 11 OR 12 WILL OPERATE, PROVIDED SPECIFIED CONDITIONS ARE FULFILLED. IN RESPECT OF AMOUNT PAID TO PERSONS COVERED U/S 13(3) BY WAY OF SALARY, ALLOWANCE OR OTHERWISE, CLAUSE (C) OF SUB SEC. (2) OF SEC. 13 PROVIDES THAT SUCH PAYMENT SHOULD NOT BE IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES. THEREFORE, THE VIEW OF THE APPELLANT THAT FOR DENYING DEDUCTION U/S 11 R.W.S. 13(1)(C) THE ASSESSING OFFICER IS REQUIRED TO ESTABLISH THAT THE PAYMENT IS WITHOUT A NY SERVICES OR IS UNREASONABLE HAS TO BE ESTABLISHED, IS CORRECT. THE ENTIRE SCHEME OF ASSESSMENT OF CHARITABLE INSTITUTIONS LAID DOWN IN SEC. 11, 12 AND 13 OPERATE AS AN INTEGRATED CODE AND THEREFORE, HAS TO BE CONSIDERED TOGETHER ALONG WITH SEC. 2(15) OF THE IT. ACT. THE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. KAMALA TOWN TRUST (2005) 279 ITR 89 HAS HELD THAT THE BURDEN IS ON THE REVENUE TO PROVE THAT SEC. 13 APPLIES. IN THIS CASE THE TRIBUNAL CAME TO THE CONCLUSION THAT THIS BURDEN HAS NOT BEEN DISCH ARGED BY THE REVENUE AND THEREFORE, THE DENIAL OF EXEMPTION U/S 11 WAS NOT UPHELD BY THE HON'BLE HIGH COURT. HOWEVER, IN THE SAID CASE THE ISSUE WAS ABOUT THE FINDING OF THE BENEFICIARIES WHICH WERE NOT SPECIFICALLY IDENTIFIED BY THE REVENUE, TO BE COVERED U/S 13(3). SIMILARLY, IN ANANDMARG PRACHARAK SANGH VS. CIT (1996) 218 ITR 254 (CAL) IT HAS BEEN HELD THAT THE QUESTION WHETHER THE PROVISION OF SEC. 13(1)(C) HAVE BEEN PROPERLY APPLIED IN THE CIRCUMSTANCES OF THE CASE OR NOT IS A QUESTION OF LAW. HOWEVER, IN THIS CASE, THE ISSUE WAS WHETHER THE APPELLANT TRUST BY MAKING PAYMENTS OF LEGAL EXPENDITURE ON THE CASES INVOLVING TRUSTEES HAD VIOLATED SEC. 13(1)(C) OR NOT. THE HON'BLE COURT IN THAT CASE WENT INTO THE DISCHARGE OF DUTIES AS A TRUSTEE FOR DETERMININ G WHETHER THE LEGAL ISSUE RELATING TO THE EXPENDITURE WAS AS TRUSTEE, FOR GIVING THE FINDING OF VIOLATION U/S 13(1 )(C). IN SUART CITY GYMKHANA VS. DCIT (2002) 254 ITR 733 (GUJ), THE ISSUE WAS REOPENING OF ASSESSMENT U/S 147 FOR VIOLATION OF SEC. 13(1)(C) AND THE COURT HELD THAT IT IS THE PERSON WHO AVERS APPLICABILITY OF PROVISION OF SEC.13(1)(C), TO DISCHARGE THE ONUS OF VIOLATION. THE COURT IN THIS CASE HELD AS UNDER: 'ON A PLAIN READING OF THE REASONS RECORDED FOLLOWING FACTS EMERGED; LIST OF PROHIBITED CATEGORY OF PERSONS WAS AVAILABLE ON RECORD WITH THE AO, LIABILITY TO TAX WITH REFERENCE TO SEC. 11 R.W.S 13(1)(C) IS EVIDENT FROM THE RETURN OF INCOME FILED AS PER HIS OWN SAKE, AND INCOME HAS ESCAPED ASSESSMENT IN VIEW OF THE LAW EMERGED FROM THE ORDER OF THE TRIBUNAL. HAVING REGARD TO THE FACT THAT REASONS RECORDED THEMSELVES BRING OUT CONTRADICTION IN TERMS IT CANNOT BE STATED THAT ANY FAILURE OR OMISSION CAN BE ASCRIBED TO THE PETITIONER. THUS IT IS NOT POSSIBLE TO STATE THAT THERE IS ANY FAILURE ON THE PART OF THE PETITIONER - TRUST IN MAKING FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT OF THE ASSESSMENT YEAR IN QUESTION. IT IS THE RESPONDENT WHO AVERS APPLICABILITY OF PROVISION OF SEC. 13(1)(C) AND HENCE THE ONUS IS ON HIM TO ESTABLISH THE FAILURE, IF ANY. FROM THE REASONS APPARENT THAT HE IS OF THE OPINION THAT THE TRIBUNAL HAS SPECIFICALLY DIRECTED THE RESPONDENT TO INITIATE ACTION AS THERE IS FAILURE OF THE PRESCRIBED CONDITION OR THAT SOME PORTION OF THE PROPERTY OR INCOME OF THE PETITIONER TRUST ENURES FOR THE BENEFIT OF THE PROHIBITED CATEGORY OF PERSONS OR SOME PORTION OF THE PROPERTY OR INCOME IS APPLIED OR USED FOR THE BENEFIT OF THE PROHIBITED CATEGORY OF PERSONS PRESCRIBED IN SEC. 13(3). THE LAW IS WELL SETTLE D, A PERSON WHO MAKES A POSITIVE AVERMENT IS REQUIRED TO ESTABLISH THE SAME. IT IS NOT FOR THE PERSON AGAINST WHOM THE AVERMENT IS MADE TO ESTABLISH NEGATIVELY THAT THE STATE OF AFFAIRS AVERRED BY THE OTHER PERSON DO NOT EXIST. FURTHERMORE, THE TRIBUNAL NO WHERE STATES THAT 12 PROVISION OF SEC. 13 ARE APPLICABLE. ALL THAT IS STATED IS TO GRANT EXEMPTION U/S 11 SUBJECT TO OTHER' CONDITIONS BEING FULFILLED. EVEN OTHERWISE, AS STATED, PROVISION OF SEC. 13 CARVES OUT AN EXCEPTION TO THE APPLICABILITY OF SEC. 11 AND HENCE, THE EXCEPTION HAS TO BE STATED AND ESTABLISHED BY THE PERSON WHO SEEKS TO INVOKE AND APPLY THE EXCEPTION. THE PETITIONER IN THE PRESENT CASE HAS PRIMA FACIE ESTABLISHED AS CAN BE SEEN FROM THE ORDER OF TRIBUNAL, APART FROM THE FACT THAT THE PETITIO NER HAS ALSO BEEN GRANTED AN EXEMPTION FOR A. YS. 1984 - 85 TO 1987 - 88, (AND THE SAME IS NOT DISTURBED), THAT IT IS ENTITLED TO EXEMPTION U/S 11 AND HENCE IT WILL BE THE RESPONDENT WHO WILL HAVE TO ESTABLISH THAT THE PETITIONER IS NOT SO ENTITLED.' IF WE EXAMINE CASES WHEREIN THE VIOLATION OF SEC. 13(1) HAS BEEN UPHELD, IT CAN BEEN SEEN IN THE CASE OF AGAPPA CHILD CENTER VS. CIT 226 ITR 211 (KER), THAT THE HON'BLE KERALA HIGH COURT, IN THIS CASE UPHELD THE DENIAL OF EXEMPTION U/S 13(1)(C) ON THE FIND ING THAT THE REFRIGERATOR PURCHASED BY THE TRUST WAS USED BY THE TRUSTEE AT HIS RESIDENCE WITHOUT ANY RENT OR COMPENSATION. THEREFORE IT CAN BE SEEN THAT IN THIS CASE THE MATERIALS AVAILABLE CLEARLY ESTABLISHED THAT THE REFRIGERATOR WAS PURCHASED WHEN THE BUILDING WHERE THE SAME WAS GOING TO BE INSTALLED AND USED WAS NOT READY AND THE SAME WAS ACTUALLY USED BY THE TRUSTEE WITHOUT ANY COMPENSATION OR RENT TO THE TRUST. ANOTHER SUCH CASE RELATES TO SHRI NARAYAN CHANDRIKA TRUST VS. (1997) 224 ITR 464 (KER) WHE REIN ALSO IT WAS ESTABLISHED THAT THE FUNDS OF THE TRUST WERE UTILIZED BY A FIRM WITHOUT ANY COMPENSATION TO THE TRUST WHERE THE TRUSTEES AND ITS RELATIVES HAD SUBSTANTIAL INTEREST. THEREFORE, IT IS APPARENT THAT THE COURTS HAVE UPHELD THE INFRINGEMENT OF SEC. 13(1)(C) WHERE THE MATERIALS CLEARLY ESTABLISHES THE VIOLATION OF BENEFIT WITHOUT ANY INADEQUATE COMPENSATION OR BENEFIT TO THE TRUST. THE AO HAS PLACED RELIANCE ON THE DECISION OF THE BOMBAY HIGH COURT GIVEN IN THE CASE OF CHAMPA CHARITABLE TRUST (19 95) 81 TAXMAN 58 (BOM) FOR THE ABOVE FINDING. HOWEVER IT IS NOTED THAT IN THIS CASE THE ISSUE WAS RELATING TO RECEIPT OF DONATION FROM ANOTHER TRUST AND PAYMENT OF DONATION TO THE SAME TRUST. THERE WAS NO ISSUE OF PAYMENT FOR ANY SERVICES AND THEREFORE THE CLAIM OF THE AR THAT THIS JUDGMENT IS NOT RELEVANT IN THE FACTS OF THIS CASE APPEARS CORRECT. THE APPELLANT HAS ALSO PLACED RELIANCE ON CERTAIN DECISIONS AS COULD BE SEEN FROM THEIR SUBMISSIONS MADE IN PARA 6.1 OF THIS ORDER. THE RELIANCE HAS BEEN PLACED BY THE APPELLANT ON THE DECISION OF KAMALA TOWN TRUST, ALREADY DISCUSSED ABOVE. OTHER CASES RELIED BY THE APPELLANT DO NOT SEEM TO BE RELEVANT TO THE FACTS OF THIS CASE. SIMILARLY, IN THE OTHER CASE OF ADIT VS. MANAV BHARATI CHILD INSTITUTE AND CHILD PSYCH OLOGY 20 SOT 517 (DEL), RELIED BY THE APPELLANT BEFORE THE AO, IT IS NOTED THAT THE HON'BLE F BENCH OF DELHI TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSING OFFICER FAILED TO BRING ON RECORD ADEQUATE MATERIALS TO ESTABLISH THAT PAYMENTS TO PERSONS COVER ED U/S 13(3) HAS BEEN MADE IN UNDUE OR UNREASONABLE MANNER. IN DAWOODI BOHARA JAMAT VS. CIT, UJJAIN, (2010) 123 ITD 452 (INDORE), THE HON'BLE ITAT INDORE BENCH HAS STATED IN RESPECT OF VIOLATION OF SEC. 13(1)(C) THAT THERE IS NO FINDING AS TO WHETHER THE S ALARY GIVEN WAS UNREASONABLE WITH REGARD TO SERVICES RENDERED AND THEREFORE, IN THE ABSENCE OF ANY SPECIFIC FINDING IN THE IMPUGNED ORDER THE TRIBUNAL FOUND NO JUSTIFICATION FOR INVOKING SEC. 13(1)(C). IT WAS HELD THAT A REVENUE HAS TO PROVE WHILE INVOKING SEC.13(1)(C) THAT THE INCOME WAS DIRECTLY OR INDIRECTLY INCURRED FOR THE BENEFIT OF THE PERSON REFERRED TO IN SUB SEC. (3) OF SEC. 13. IN CIT VS. SAHITYA TRUST (1993) 203 ITR 349 (GUJ), THE HON'BLE COURT HAS HELD THAT THE BURDEN LAY ON THE REVENUE THAT TH E PROVISION OF SEC. 13(1)(C) IS APPLICABLE TO THE FACTS OF THE CASE. SIMILAR VIEW HAS ALSO BEEN EXPRESSED IN THE CASE OF KAMALA TOWN TRUST REFERRED TO ABOVE AND GEORGE 13 EDUCATIONAL MEDICAL & CHARITABLE SOCIETY VS. ASSTT. DIT (EXEMPTION) (2002) 80 ITD 619 ( COCHIN). THEREFORE FROM THE PERUSAL OF ORDERS AVAILABLE ON THIS SUBJECT, IT CAN BE SEEN THAT SO FAR AS THE LAW RELATING TO APPLICATION OF SEC. 13(1)(C) FOR DENYING EXEMPTION U/S 11 IS CONCERNED, IT IS CLEAR THAT TWO CONDITIONS ARE TO BE SATISFIED I.E. (A) PAYMENTS/ BENEFITS ARE MADE AVAILABLE TO PERSONS SPECIFIED IN SEC. 13(3) AND (B) THE SAME ARE EXCESSIVE OR UNREASONABLE TO THE SERVICES RENDERED/ BENEFITS AVAILED TO/BY THE TRUST. BOTH THESE CONDITIONS ARE TO BE COMPLIED FOR DENYING THE EXEMPT/ON U/S 11. P AYMENTS MADE TO PERSONS SPECIFIED IN SEC. 13(3) ONLY GIVES THE BASIS TO THE ASSESSING OFFICER IN RESPECT OF WHICH THE MATTER FOR VIOLATION OF SEC. 13 IS TO BE EXAMINED. FOR THIS REASON ONLY, THE CONSENSUS VIEW OF THE COURTS ARE THAT EVEN IF THE PAYMENTS A RE MADE TO PERSONS COVERED U/S 13(3), IT HAS TO BE FOUND OUT THAT THE SAME HAS BEEN GIVEN WITHOUT ADEQUATE CONSIDERATION OR IN AN UNREASONABLE AND UNJUSTIFIED MANNER TO BENEFIT SUCH PERSONS. MERE PAYMENT / BENEFIT TO SUCH PERSONS WILL NOT VIOLATE THE ABOVE PROVISION TO DENY EXEMPTION U/S 11. THE ONUS HAS ALSO BEEN CAST ON THE REVENUE FOR ESTABLISHING THE SAME AS IT HAS BEEN HELD THAT THE PROVISION CONTAINED U/S 13 IS AN EXCEPTION TO APPLICABILITY OF SEC. 11. 16. IF THE FACTS OF THIS CASE ARE ANALYZED IN TH E LAW AS HAS BEEN HELD BY THE SUPERIOR COURT TO BE APPLICABLE FOR DETERMINING THE VIOLATION OF SEC 13(C) TO DENY EXEMPTION U/S 11, IT CAN BE SEEN FROM THE MATERIALS AVAILABLE ON RECORDS THAT EVEN THOUGH THE AO FOUND FROM THE MATERIALS AVAILABLE BEFORE HER DURING SCRUTINY ASSESSMENTS THAT SUBSTANTIAL PAYMENTS HAVE BEEN MADE TO PERSONS COVERED U/S 13(3) AS SALARY AND COMPENSATION FOR USE OF BUILDING AND INFRASTRUCTURE ETC., SHE WAS UNABLE TO CONTRADICT THE ARGUMENTS MADE BEFORE HER FOR JUSTIFICATIONS GIVEN IN RESPECT OF IMPUGNED PAYMENTS. THIS NECESSITATED THE MATTER TO BE REMANDED TO THE AO U/S 250(4) OF THE L.T. ACT. FROM THE FIRST REPORT OF THE AO SUBMITTED IN COMPLIANCE TO THE ORDER U/S 250(4), IT CAN BE SEEN THAT THE AO FAILED TO MEET THE ISSUES RAISED IN THE SUBMISSIONS FILED DURING APPEAL ALONG WITH THE PAPER BOOK. THE AO INSTEAD HARPED MAINLY ON INADMISSIBILITY OF CERTAIN DOCUMENTS FILED DURING APPEAL U/R 46A. EVEN THIS OBJECTION COULD NOT BE SUSTAINED AS IT WAS FOUND THAT THE OBJECTION MADE FOR INADMIS SIBILITY OF INFORMATION GIVEN FOR COMPARABLE CASES OF SALARY PAYMENT COULD NOT BE UPHOLD AS THE AO HERSELF ADMITTED THAT NO FINAL OPPORTUNITY WAS GRANTED BEFORE DENYING THE EXEMPTION. IN ANY CASE AS THE RESPONSIBILITY TO ESTABLISH THE SALARY OR OTHER PAYM ENT AS EXCESSIVE WAS ON THE AO, AS PER THE DISCUSSIONS MADE ABOVE, THE AO CANNOT ARGUE FOR INADMISSION OF AN INFORMATION OR EVIDENCE WHICH IS IN DEFENCE OF AN AVERMENT MADE BY HER IN THE ASSESSMENT ORDER AGAINST THE ASSESSEE. THIS WILL BE AGAINST THE PRINC IPLE OF NATURAL JUSTICE. FOR' THESE REASONS AS WELL AS FOR THE REASON THAT THE ISSUE WAS FUNDAMENTAL AND GOING TO THE ROOT OF THE DISPUTE, THE OBJECTION OF THE AO COULD NOT BE SUSTAINED. THEREFORE THE AO WAS AGAIN GIVEN AN OPPORTUNITY TO VERIFY THE INFORMA TION GIVEN BY THE APPELLANT MAINLY IN RESPECT OF PAYMENT OF SALARY AND THE AO WAS ALSO DIRECTED TO CARRY OUT THE EXERCISE BY USING THE POWERS AVAILABLE UNDER THE IT ACT EVEN IF SUCH INFORMATION ARE NOT AVAILABLE IN THE PUBLIC DOMAIN. IN THE SECOND REMAND R EPORT, THOUGH THE I AO HAS CONTINUED TO ADHERE TO HIS OBJECTION REGARDING THE EXCESSIVENESS OF THE PAYMENT (SALARY) BUT HAS CONFIRMED THAT THE FACTS STATED BY THE APPELLANT REGARDING THE QUANTUM OF PAYMENTS MADE TO EXPATRIATE EMPLOYEES BY THE APPELLANT TRU ST AND OTHER INTERNATIONAL SCHOOLS WERE CORRECT. LF WE EXAMINE THE FACTS RELATING TO THE PAYMENTS MADE TO M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD., THE UNDISPUTED FACTS ARE THAT THE AFORESAID PERSON BELONGS TO THE PROHIBITED CATEGORY AND THE Y EARLY PAYMENT MADE IN THE 14 ASSESSMENT YEAR UNDER REFERENCE HAS BEEN RS.6 CRORES. PAYMENT OF RS.1 CRORE MADE FOR THE EARLIER FINANCIAL YEAR HAS ALREADY BEEN FOUND TO BE NOT ALLOWABLE IN THIS YEAR AND THE APPELLANT ALSO SEEM TO BE ACCEPTING THIS FINDING OF TH E AO. THE APPELLANT HAD EXPLAINED BEFORE THE AO DURING THE ASSESSMENT ALSO THAT THE ENTIRE PROPERTY ON WHICH THE SCHOOL IS BEING RUN BELONGS M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD., FOR WHICH THE SAID COMPANY HAS INVESTED APPROX. RS.44 CRORES . THE APPELLANT TRUST WAS INTERESTS IN CARRYING OUT THE ACTIVITY OF EDUCATION IN THE FIELD OF INTERNATIONAL EDUCATION AND IT WOULD NOT HAVE BEEN POSSIBLE FOR IT TO CREATE THIS FACILITY OUT OF ITS OWN RESOURCES. THE CLAIM WAS MADE BY THE APPELLANT BEFORE THE AO THAT THE NOTIONAL COST TO THE M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. WAS IN THE VICINITY OF RS . 9.9 CRORES IN THIS YEAR AND THEREFORE IT WAS NOT CORRECT TO CONTEND THAT ANY UNDUE OR EXCESSIVE BENEFIT HAS BEEN GIVEN TO THE SAID COMPANY BY PAYING ONLY RS.6 CRORE AS COMPENSATION. IT HAS ALSO BEEN ARGUED DURING APPEAL THAT THE PAYMENT OF RS.6 CRORES IN TERMS OF MONTHLY RENT PER SQ. FT. COMES TO RS.25 PER SQ. FT. PER MONTH. IT HAS BEEN CLAIMED THAT THIS PAYMENT IS VERY VERY NOMINAL AND LES S CONSIDERING THE PREVAILING RATES IN PUNE. THE AO HAS NOT BEEN ABLE TO DENY THESE FACTS EITHER DURING THE ASSESSMENT OR EVEN DURING THE REMAND PROCEEDINGS. FURTHERMORE NOTHING IS OTHERWISE ALSO AVAILABLE WITH THE AO EXCEPT FOR SAYING THAT THE PAYMENT OF RS.6 CRORES IS HIGH AND EXCESSIVE, FOR INVOKING SEC.13(1)(C). THEREFORE, ON THE BASIS OF THE MATERIALS AVAILABLE ON RECORD INCLUDING THE SUBMISSIONS MADE BY THE AO IN THE REMAND PROCEEDINGS, I DO NOT FIND ANY BASIS FOR UPHOLDING THE FINDING OF THE AO FOR THE AFORESAID PAYMENT AS VIOLATIVE OF SEC. 1361 )(C). ON THE OTHER HAND THE ARGUMENTS MADE BY THE APPELLANT, ATLEAST FOR THIS ASSESSMENT YEAR CAN BE HELD TO BE CORRECT AND REASONABLE. COMING TO THE PAYMENT OF SALARY, IT CAN BE SEEN THAT THE AO IN THE ASSESSMENT ORDER HAS NOT BROUGHT ANY MATERIAL ON RECORD FOR THE CONCLUSION OF EXCESSIVENESS DRAWN BY HER. THE ARGUMENTS MADE BY THE APPELLANT BEFORE THE AO CAN BE SEEN TO HAVE REMAINED UNCONTROVERTED. AS DISCUSSED IN THE CASE OF PAYMENTS TO M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD., OPPORTUNITY FOR THIS PAYMENT WAS ALSO GIVEN TO THE AO IN THE REMAND PROCEEDINGS TWICE AND THE SUBMISSIONS MADE HAVE BEEN CONSIDERED. IT CAN BE SEEN THAT THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL WHICH CAN SUSTAIN ITS FINDING. ALL THE EVIDENCES AND ARGUMENTS MADE BY THE APPELLANT IN SUPPORT OF THEIR CLAIM HAVE EITHER BEEN ACCEPTED TO BE TRUE OR HAS REMAINED UNCONTROVERTED. IT CAN BE SEEN THAT THE OBJECTION OF THE APPELLANT WAS TWOFOLD. THE FIRST OBJECTION WAS ABOUT THE CAPABILITY AND THE QUALIFICATION OF MRS. POOJA A. PATIL VIS - A - VIS OTHER PERSONS WHOM SIMILAR PAYMENTS WERE FOUND T O HAVE BEEN MADE AND THE OTHER WAS ABOUT THE SERVICES RENDERED. IN RESPECT OF CAPACITY AND QUALIFICATION, IT IS NOTED THAT THE APPELLANT HAS BEEN ABL E TO DEMONSTRATE THAT MRS. POOJ A A. PATIL IS A US CITIZEN HAVING EDUCATION UNDER THE US AS WELL AS THE IN DIAN SYSTEM AND HAS WORKED IN THE FIELD OF EDUCATION SINCE THE YEAR 2000. SHE HAS TRAVELLED WIDELY TO DIFFERENT PLACES TO STUDY THE INTERNATIONAL SCHOOLS AND HAS BEEN ABLE TO NOT ONY ESTABLISH THE 'SHARAD PAWAR INTERNATIONAL SCHOOL IN PUNE PROPERLY AS HE AD OF THIS ORGANIZATION BUT HAS ALSO BEEN ABLE TO EXPAND THIS ACTIVITY IN THE SUBSEQUENT YEARS AT MUMBAI, NAGPUR, ETC. THESE SUBMISSIONS OF THE APPELLANT HAVE NOT BEEN CONTROVERTED OR FOUND INCORRECT BY THE AO, DURING THE REMAND PROCEEDINGS. THEREFORE IT C ANNOT BE ACCEPTED TO BE UNTRUE. THEREFORE THE CLAIM OF THE APPELLANT THAT THE AFORESAID DEVELOPMENT ESTABLISHES THE CREDIBILITY AND THE CAPACITY OF THE PERSON TO WHOM THE SALARY HAS BEEN PAID LOOKS CORRECT. THERE IS NOT DISPUTE TO THE FACT THAT OTHER EXPA TRIATE EMPLOYEES OF THE APPELLANT TRUST HAS BEEN PAID ALMOST IN THE 15 SAME FASHION AND OTHER INTERNATIONAL SCHOOLS HAVE P AID ITS HEADS IN THE SAME MANNER OR MORE AND THEREFORE THE CLAIM C THE APPELLANT THAT THE PAYMENT WAS AS PER THE NORMS, ATLEAST FOR THIS ASSESSMENT YEAR CAN BE FOUND TO BE ACCEPTABLE. THOUGH THE ARGUMENT OF THE APPELLANT THAT THE IMPUGNED PAYMENTS ARE REVENUE FAVOURABLE, ARE NOT DIRECTLY RELEVANT TO THE ISSUE IN HAND BUT CAN BE SEEN TO BE LENDING A HELPING HAND TO THE OVERALL ARGUMENTS MADE BY THE APPELLANT. FOR THE AFORESAID REASONS I DO NOT FIND ANY MERIT IN THE ARGUMENTS OF THE AO THAT THE IMPUGNED PAYMENTS ARE IN VIOLATION OF SEC. 13(1)(C). THEREFORE GROUNDS NO.1 TO 5 ARE ALLOWED. 16. REGARDING THE OTHER ISSUES RAISED BY THE AO AND OBJEC TED BY THE APPELLANT RELATING TO VIOLATION OF SEC. 11 (5) AND USE OF CORPUS FOR THE PURPOSE OF PAYMENT TO DIFFERENT PERSONS INCLUDING THE PERSONS OF PROHIBITED CATEGORY, IT CAN BEEN SEEN THAT APPARENTLY THE AO HAS PRIMARILY USED THESE ARGUMENTS FOR STRENGT HENING HER FINDING OF VIOLATION OF SEC. 13(1)(C) IN PARA 5 OF THE ASSESSMENT ORDER. IT HAS BEEN STATED THAT FROM THE AFFAIRS OF THE TRUST IT COULD BE SEEN THAT THE CORPUS HAS BEEN EXPENDED FOR DAY TO DAY ACTIVITIES AND NOT FOR THE ACQUISITION OF CAPITAL AS SETS OR IN THE INVESTMENTS PRESCRIBED IN SEC.11(5). THE APPELLANT HAS MADE DETAILED SUBMISSIONS IN RESPECT OF THE ABOVE OBSERVATION IN THEIR SUBMISSION DTD. 12/3/2012 WHICH HAS BEEN QUOTED IN PARA 6.1 OF THIS ORDER. FROM THE PERUSAL OF THE SAME IT CAN BE S EEN THAT THE APPELLANT HAS MADE A DETAILED SUBMISSION IN RESPECT OF ABOVE TWO OBSERVATIONS AND HAS CONTENDED THAT THESE ARE NOT RELEVANT IN THE FACTS OF THIS CASE FOR DENIAL OF EXEMPTION U/S.11. IT HAS BEEN CLAIMED THAT THE TRUST DEED MANDATES THE APPELLA NT TO USE THE CORPUS IN ANY MANNER AND THEREFORE THE SAME IS NOT IN VIOLATION OF THE SAME. EVEN IN THE IT ACT IT HAS BEEN CLAIMED THAT NO PROVISION EXISTS WHICH CAN BE SEEN TO PROHIBIT THE USE OF CORPUS FUND FOR ANY OTHER PURPOSE. IT HAS BEEN STATED THAT T HE CORPUS HAS BEEN PROPERLY ACCOUNTED FOR IN THE BOOKS AND THE SURPLUS AVAILABLE HAS BEEN INVESTED IN THE SPECIFIED SECURITIES. THE APPELLANT HAS MADE MANY ALTERNATE ARGUMENTS ALSO TO STATE THAT THE OBSERVATION OF THE AO WAS NOT RELEVANT. ON CAREFUL CONSID ERATION OF THE SAME I FOUND THE ARGUMENTS OF THE APPELLANT TO BE ACCEPTABLE. NOTHING ADVERSE COULD BE FOUND INFERABLE FROM THE OBSERVATIONS OF THE AO AFTER CONSIDERING THE SUBMISSIONS OF THE APPELLANT. 17. GROUND NO.6: GRANT OF DEPRECIATION OF RS. 18 ,06,060/ - : 17.1 IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE AO HAS DISCUSSED THIS ISSUE WHILE EXAMINING THE PAYMENTS OF RS.6 CRORES MADE TO M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. SHE HAS STATED IN PARA 5 OF THE ASSESSMENT ORDER THAT 'FURTHER IT IS ALSO NOTICED FROM THE INCOME & EXPENDITURE ACCOUNT THAT AN AMOUNT OF RS. 18,06,060.62 HAS BEEN SHOWN. THE TRUST HAS TAKEN THE PREMISES WITH FURNITURE AS ABOVE ON RENT AND DEPRECIATION CAN ONLY BE CLAIMED IN THE COMPANY'S CASE AS THE OWNERSHIP OF THESE ITEMS IS THE SETTLER(COMPANY).' THEREFORE IT COULD BE SEEN THAT THE AO HAS TOUCHED THIS SUBJECT IN A CRYPTIC MANNER AND SHE WAS APPARENTLY OF THE VIEW THAT THE AFORESAID DEPRECIATION HAS BEEN INCORRECTLY CLAIMED AS THE ENTIRE ASSETS HAVE BEEN CLAIMED TO BE BELONGING TO M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. 17.2 THE APPELLANT IN THEIR LETTER DTD. 12/3/2012 HAS SUBMITTED IN SUPPORT OF GROUND NO.6 THAT THE AO HAS ERRONEOUSLY ASSUMED THAT ALL THE FURNITURE AND FIXTURE AS PER SCHEDULE 'C' ARE OWNED BY THE SETTLER COMPANY WITHOUT EVEN VERIFYING THE BALANCE SHEET OF THE TRUST ALONG WITH THE RETURN WHICH SHOWS THAT THE ASSESSEE TRUST HAD B/F FURNITURE A ND FIXTURE OF ITS OWN AT RS.76,66,764/ - , TO 16 WHICH FURTHER ADDITIONS OF RS.46,48,751/ - HAS BEEN MADE IN THIS YEAR. IN SUCH VIEW OF THE MATTER IT HAS BEEN CLAIMED THAT THE DEPRECIATION CLAIMED ARE CORRECT AND ARE REQUIRED TO BE ALLOWED. 17.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND FIND THAT THIS ISSUE HAS NEITHER BEEN EXAMINED BY THE AO PROPERLY NOR EXPLAINED WITH EVIDENCES DURING APPEAL. THE SUSPICION OF THE AO IS GENUINE AS IN RESPECT OF THE PAYMENTS MADE TO M/S DR. D.Y. PATIL EDUCATIONAL ENTE RPRISES PVT. LTD., IT HAS ALL ALONG BEEN ARGUED THAT THE ENTIRE INFRASTRUCTURE BELONGS TO THE SAID COMPANY. THE AO ALSO CONTRADICTS HER FINDING BY QUOTING A TABLE FROM THE AGREEMENT FOR THE ASSETS OF M/S DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. USE D BY TRUST. THEREFORE THE SUBMISSIONS MADE DURING APPEAL, AS STATED ABOVE THOUGH DEMANDS VERIFICATION CANNOT BE ALLOWED AS SUCH. THEREFORE THE AO IS DIRECTED TO VERIFY THE AFORESAID CLAIM OF THE APPELLANT FROM THE BALANCE SHEET AND THE DETAILS AVAILABLE IN RECORD AND ALLOW THE SAME IF THE SAME IS SATISFACTORILY EXPLAINED. GROUND NO.6 CAN BE CONSIDERED AS PARTLY ALLOWED SUBJECT TO THE ABOVE REMARKS. NOW THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED T HE RECORD. THE OBJECTION OF THE ASSESSING OFFICER CAN BE SUMMARISED AS UNDER: I. THE TRUST HAS SHOWN AN AMOUNT OF RS.12,96,89,410/ - AS APPLICATION OF INCOME. AMONGST THE EXPENDITURE, THE TRUST HAS SHOWN RS.4.5 CRORE AS OPERATING CHARGES AND RS.2.5 CRORE (1 CRORE OF THE PREVIOUS PERIOD) AS RENT WHICH WERE PAID TO THE TRUSTEES/SETTLOR. II. THE CORPUS HAS BEEN DEPLETED TO THE EXTENT OF 9.35 CRORES AS REPAYMENT OF EARLIER YEARS LIABILITY (CURRENT YEARS RENT AS WELL AS EARLIER YEARS RENT). III. EXPENDITURE IN RESPECT OF EARLIER YEAR CANNOT BE HELD AS APPLICATION OF INCOME FOR THE CURRENT YEAR. IV. THE TRUST HAS PAID AN AMOUNT OF RS.4.5 CRORE TO THE SETTLER AS OPERATIONAL CHARGES. V. ALL THE ABOVE FACTS LEADS TO THE CONCLUSION THAT THERE IS A CLEAR ARRANGEMENT BETWEEN THE SETTLER OF THE TRUST AND THE TRUST. 5.1 THE FIRST OBJECTION IS IN RESPECT OF THE PAYMENT OF RS.4.50 CRORES TOWARDS OPERATING CHARGES AND RS.2.50 CRORES TOWARDS RENT WHICH WAS PAID BY THE AS SESSEE TRUST TO DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. 17 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE TRUST IS RUNNING SHARAD PAWAR INTERNATIONAL SCHOOL . THE ENTIRE INFRASTRUCTURE REQUIRED FOR THE SCHOOL WAS CONSTRUCTED A ND DEVELOPED BY DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. THE INFRASTRUCTURAL FACILITIES ARE DEVELOPED ON THE LAND AREA OF ABOUT 25 ACRES OF LAND HAVING TOTAL BUILT UP AREA OF ABOUT MORE THAN 2 LAKH SQ. FT. AND THE SAID BUILDING CONSISTS OF MAIN SCHOOL BUILDING , HOSTEL, STAFF QUARTERS, CANTEEN, LABS ETC. THE SAID COMPANY PROVIDED THE ENTIRE INFRASTRUCTURE TO THE ASSESSEE TRUST FOR CARRYING OUT ITS EDUCATIONAL ACTIVITIES. THE TOTAL COSTS INCURRED BY THE SAID COMPANY FOR DEVELOPMENT OF THE INFRASTRU CTURE FACILITY WERE AROUND RS.44 CRORE S. LD. AR POINTED OUT THAT AMOUNT OF RS.44 CR ORE S ALSO INCLUDES SUBSTANTIAL EXPENDITURE ON FURNITURE, COMPUTERS, LABORATORY EQUIPMENTS, ETC. ETC. THEREAFTER, THE ASSESSEE TRUST ENTERED INTO AN AGREEMENT WITH THE SAID COMPANY AS PER WHICH IT WAS AGREED THAT THE ASSESSEE TRUST WOULD PAY RS.1.5 CR ORE S (RS.12.5 LAKHS PER MONTH) AS RENT AND RS.4.5 CR ORE S PER YEAR AS OPERATIONAL EXPENSES TO THE SAID COMPANY. ACCORDINGLY, THE TRUST HAS PAID THE SAID AMOUNT TO THE SAID COMPANY . LD. COUNSEL SUBMITS THAT DR. D.Y. PALIL EDUCATIONAL ENTERPRISES PVT. LTD. IS WHOLLY RESPONSIBLE IN MAINTAINING ALL INFRASTRUCTURE FACILITIES WHICH HAVE BEEN RENTED OUT. THE RENT ''DEBITED TO ACCOUNTS OF FINANCIAL YEAR 2007 - 08 IS RS.2.5 CRORES. THIS AMO UNTS TO RENT FOR THE PERIOD FROM AUGUST, 2006 TO MARCH, 2008 WHICH COMES TO 20 MONTHS RENT AT RATE OF RS.12.50 LAKHS PER MONTH (RS.12.5 LAKHS X 20 MONTHS = RS.2.5 CRORES). LD. COUNSEL FURTHER SUBMITS THAT ASSESSEE HAS PAID IN TOTALITY RS.6 CRS. (RS.1.5 CR ORE + RS. 4/5 CRORES) TO THE SAID COMPANY IN THIS ASSESSMENT YEAR. I T IS STATED THAT THE SAID COMPANY HAS CONSTRUCTED/DEVELOPED THE ENTIRE INFRASTRUCTURE BY TAKING LOAN OF ABOUT RS.44 CRORES. IT HAS TO PAY INTEREST @ 12% ON THE SAID LOANS TAKEN FROM THE FINANCIAL INSTITUTIONS. SECONDLY, IT IS ALSO RESPONSIBLE 18 FOR MAINTAINING THE ENTIRE INFRASTRUCTURE FACILITY AND IN THIS YEAR, IT HAS INCURRED EXPENDITURE TO THE TUNE OFRS.50 LAKHS IN ONE YEAR. IT IS ARGUED THAT IT HAS ALSO TO TAKE CARE OF THE REPAIRS OF T HE BUILDINGS, EQUIPMENTS ELC.ETC. FOR THAT PURPOSE, CONSIDERING THE DEPRECIATION RATE PRESCRIBED AS PER THE INCOME - TAX ACT, AN AMOUNT OFRS.4.12 CRORES WOULD BE REQUIRED TO BE SET ASIDE. ACCORDINGLY, THE SAID COMPANY WOULD BE REQUIRED TO INCUR THE FOLLOWING EXPENSES: A. INTEREST COST ON THE ASSET RS.44 CRORES @ 12% RS. 5.28 CR B. DEPRECIATION ALLOWED AS PER THE INCOME TAX ACT RS. 4.12 CR C. OTHER EXPENSES RS. 0.50 CR TOTAL COST RS. 9. 90 CR 6.1 HE ARGUE S THAT THE OPERATING CHARGES AND RENT PAID TO DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD IS TOTALLY REASONABLE AND JUSTIFIED AND ASSESSING OFFICER HAS ERRONEOUSLY HELD THAT THERE IS VIOLATION OF SECTION 13(1)(C) OF THE I.T. ACT. HE SUBMITS THAT IF THE ASSESSEE TRUST WOULD HAVE BORROWED THE LOANS AS WELL AS ENGAGED THE STAFF FOR MAINTENAN CE, THEN THE EXPENDITURE WOULD BE MUCH MORE. HE SUBMITS THAT WE HAVE TO UNDERSTAND THE REASONABLENESS IN THE CONTEXT OF PREVAILING MARKET CONDITIONS. LD. COUNSEL SUPPORTED THE ORDER OF THE CIT(A) ON THIS ISSUE. IN RESPECT OF THE ALLEGED UNREASONABLE SAL ARY PAYMENT TO MRS. POOJA PATIL WHO IS WIFE OF THE MANAGING TRUSTEE , SHRI AJINKYA D. PATIL , HE SUBMITTED THAT SHE IS A US CITIZEN AND SHE IS OVERALL INCHARGE OF THE ADMISSION S , MANAGEMENT AND ALSO SHE IS A TEACHING FACULTY. 6.2 THE LD. COUNSEL FOR THE A SSESSEE REFERRED TO THE ASSESSMENT ORDER AND SUBMITS THAT THE ASSESSING OFFICER HA S A PREJUDICE APPROACH MERELY BECAUSE MRS. POOJA PATIL IS THE ONE OF THE TRUSTEE WITHOUT 19 UNDERSTANDING HER ACADEMIC BACKGROUND , NATURE OF HER RESPONSIBILITIES AND WORK. HE S UBMITS THAT THE DETAILED REPLY IS FILED BEFORE THE ASSESSING OFFICER EXPLAINING THE DUTIES AND RESPONSIBILITIES OF MRS. POOJA PATIL AS A DIRECTOR, WHICH IS REPRODUCED ON PAGE 4 OF THE ASSESSMENT ORDER AS ANNEXURE - A AND ANNEXURE - B AND IT IS VERY CLEAR THAT THE REMUNERATION PAID TO HER IS TO TOTALLY A REASONABLE ONE. HE SUBMITS THAT SHE WAS PAID RS.28,72,500/ - (I.E. 12,500 US$ PER MONTH) FOR THE PERIOD OCTOBER 2007 TO MARCH 2008. HE REFERRED TO THE ORDER OF THE LD.CIT(A) AND SUBMITS THAT THE LD.CIT(A) HAS AP PRECIATED THAT THE REMUNERATION PAID TO MRS. POOJA PATIL IS TOTALLY REASONABLE. 7. ON THE PERUSAL OF THE IMPUGNED ORDER, IT APPEARS THAT THE LD. CIT(A) PASSED THE REMAND ORDER U/S.250(4) OF THE ACT AND AS PER THE ORDER OF THE LD.CIT(A) THE ASSESSING OFFICER FILED HIS REPORT WHICH IS REPRODUCED IN THE IMPUGNED ORDER. THE OBVIOUS REASON IS THAT THE ASSESSEE RAISED CERTAIN FUNDAMENTAL ISSUES RELATING TO THE ONUS AND LACK OF MATERIALS BEFORE THE ASSESSING OFFICER FOR THE CONCLUSION DRAWN BY HER AND IT WA S CLAIMED THAT THE ASSESSING OFFICER HAS NOT GIVEN PROPER OPPORTUNITY TO THE ASSESSEE. IT ALSO APPEARS THAT ASSESSEE FILED SOME ADDITIONAL INFORMATION BEFORE THE LD. CIT(A) AND LD. CIT(A) THOUGH IT PROPER TO GET THE REPORT OF THE ASSESSING OFFICER ON THE CONTENTIONS RAISED BY THE ASSESSEE. THE ASSESSING OFFICER HAS DEALT ON THE POINTS REFERRED TO HER WHICH ARE ALREADY CONSIDERED BY THE LD. CIT(A). OBVIOUSLY, THE ASSESSING OFFICER HAS OBJECTED FOR THE JUSTIFICATION OF THE ASSESSEE IN RESPECT OF THE ALLEGE D EXCESS PAYMENT OF THE REMUNERATION PAID TO MRS. POOJA PATIL AS WELL AS THE PAYMENT OF OPERATING CHARGES AND THE RENT TO DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. IT ALSO APPEARS THAT ASSESSEE ALSO FILED THE COMPARATIVE DATA IN RESPECT OF REMUNERA TION PAID TO DIFFERENT 20 EXPATIATE PERSONS WORKING WITH THE ASSESSEE SCHOOL. THE ASSESSEE ALSO VERIFIED THE SAME BY COLLECTING THE INFORMATION FROM THE ANOTHER SCHOOL. 7.1 THERE IS NO DISPUTE ON THE FACT THAT MRS. POOJA PATIL IS A PERSON COVERED U/S. 13( 3) BUT THE QUESTION IS WHETHER THE PAYMENT MADE TO MRS. POOJA PATIL IS EXCESSIVE AND UNREASONABLE. IT IS NOT DISPUTED BY THE ASSESSING OFFICER THAT SHE WAS WORKING IN THE CAPACITY AS HR D HEAD IN THE ASSESSEES INSTITUTIONS AS WELL AS TEACHING FACULTY . MO REOVER, AS PER THE FACTS NOTED BY THE LD. CIT(A) , WE ALSO FIND THAT THE ASSESSING OFFICER HAS ASKED THE JUSTIFICATION ON THE PAYMENT MADE TO DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. AND THE DETAILS OF DUTIES AND RESPONSIBILITIES OF MRS. POOJA PATIL BOTH AS A DIRECTOR (HUMAN RECOURSE) AND TEACHING FACULTY AND THE ASSESSEE HAS FILED DETAIL REPLY. WE ALSO FAIL TO UNDERSTAND WHAT PARAMETERS ARE USED BY THE ASSESSING OFFICER TO SAY THAT THE PAYMENT OF REMUNERATION TO MRS. POOJA PATIL IS EXCESS AND UNREASONABLE WHEN S HE IS NOT DISPUTING HER QUALIFICATIONS AS WELL AS HER WORK IN THE INST ITUTION RUN BY THE ASSESSEE TRUST. IN OUR OPINION, THE CONCLUSION DRAWN BY THE ASSESSING OFFICER THAT THERE IS VIOLATION OF SECTION 13(1)(C) R.W.S. 13(2)(C) IN RESPEC T OF THE REMUNERATION PAID TO MRS. POOJA PATIL IS TOTALLY ERRONEOUS. SEC. 13(1)(C) AND SEC. 13(2)(C) CAST BURDEN ON THE ASSESSING OFFICER TO DEMONSTRATE THAT ANY DIRECT OR INDIRECT BENEFITS ARE ENJOYED BY THE TRUSTEE AND CONCLUSION SHOULD BE BASED ON PROP ER EVIDENCE. 8. THE NEXT ISSUE WE HAVE TO CONSIDER IS IN RESPECT OF PAYMENT OF OPERATING CHARGES RS.4.50 CRORES AND RENT RS.2.50 CRORES TO DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. AS PER THE FACTS ON RECORD, IT IS SEEN THAT THE ENTIRE INFRASTRUCTURE IS PROVIDED BY DR. D.Y. PATIL 21 EDUCATIONAL ENTERPRISES PVT. LTD. , INCLUDING BUILDING, FURNITURE AND FITTINGS ETC. THERE IS NO DISPUTE ABOUT THE FACT THAT THE SAID INFRASTRUCTURE IS OF DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. WHICH I S A PRIVATE COMPANY IN WHICH SHRI AJINKYA D. PATIL IS A DIRECTOR. DUE AGREEMENT WAS EXECUTED. AS PER THE AGREEMENT, THE BREAKUP OF THE COST AND THE FACILITIES ARE AS UNDER: SR.NO. PARTICULARS GROSS VALUE RS. (AS ON MARCH 07) 1 LAND SITUATED AT SHARAD P AWAR INTERNATIONAL SCHOOL, NEAR DHANORI HILL, CHAROLI BK, PUNE 6,33,11,856 2 BUILDING 33,44,68,910 3 FURNITURE FIXTURES 1,74,53,467 4 AIR CONDITIONERS 3,51,236 5 COMPUTERS 35,21,651 6 CONFERENCE EQUIPMENTS 5,87,160 7 ELECTRICAL EQUIPMENTS 2,14,38,057 8 OTHER EQUIPMENTS 35,31,631 9 INVERTERS 35,550 10 SECURITY CAMERAS 60,282 11 SPORTS EQUIPMENTS 3,29,347 8.1 WHILE EXAMINING THE CASE OF THE ASSESSEE, THE ASSESSING OFFICER HAS MADE OBSERVATIONS ON THE DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. WHO IS ONE OF THE TRUSTEE IN PROVIDING THE INFRASTRUCTURE TO THE ASSESSEE TRUST. IN OUR UNDERSTANDING EVERY TRANSACTION OR CONTRACT WITH PERSON OR PARTY REFERRED TO IN SEC. 13(3) IS NOT HIT BY PROVISIONS OF SEC. 13(1)(C) BUT ISSUE IS TO BE EXAMINED ON COMMERCIAL PRINCIPLES. THE ANOTHER OBJECTION OF THE ASSESSING OFFICER IS THAT THE ASSESSEE TRUST HAS UTILISED THE CORPUS DONATION TOWARDS PAYMENT OF THE EARLIER LIABILITY WHICH WAS IN RESPECT OF THE PAYMENT OF OUTSTANDING PREMISES RENT AND OPERATIONAL CHARGES TO DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. THE ASSESSING OFFICER HAS CHARGED THE ASSESSEE TRUST ON THE ABOVE ISSUE FOR THE VIOLATION OF PROVISIONS OF SECTION 11(5). WE FAIL TO UNDERSTAND HOW SECTION 11(5) IS APPLICABLE AS SAID PROVISI ON IS IN RESPECT OF THE MONEY ACCUMULATED OUT OF THE INCOME OF THE TRUST WHICH HAS TO BE DE POSITED IN THE MODES PROVIDED 22 U/S.11(5). THE REFERENCE OF THE ASSESSING OFFICER TO SECTION 11(5) IS TOTALLY MISPLACED. 8.2 WE FIND THAT THE LD. CIT(A) HAS ALSO CON SIDERED THE AMENDMENT TO SECTION 2 ( 15 ) OF THE I.T. ACT WHICH IS APPLICABLE FROM THE A.Y. 2009 - 10. AFTER GIVING OUR ANXIOUS CONSIDERATION TO REASONED ORDER OF THE LD. CIT(A) , WE CONCUR WITH HIS FINDINGS THAT TO THE EXTENT OF PAYMENT OF REMUNERATION TO MRS. POOJA PATIL AND PAYMENT OF OPERATING CHARGES AND RENT CHARGES TO DR. D.Y. PATIL EDUCATIONAL ENTERPRISES PVT. LTD. TRUST AND THERE IS NO VIOLATION OF PROVISIONS OF SECTION 13(1)(C) AND SEC. 13(2)(C) OF THE ACT . IN RESPECT OF THE CLAIM OF DEPRECIAT ION LD. CIT(A) HAS REMITTED ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION. ON THE TOTALITY OF THE FACTS OF THIS CASE, WE ARE OF THE OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD. CIT(A). WE ACCORDINGLY CONFIRM THE S AME. GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 06/02/2015. SD/ - SD/ - ( G.S.PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED: 06 TH FEBRUARY, 201 5 S ATISH COPY OF THE ORDER FORWARDED TO: 1. ASSESSEE 2. DEPARTMENT 3. CIT (A) - I, PUNE 4. CIT - I, PUNE 5 . THE D.R, B PUNE BENCH 6 . GUARD FILE //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE