SUSHRUT HOSPITAL AND RESEARCH CENTRE, Nagpur V. ACIT,CENTRAL CIRCLE-1(2), Nagpur

ITA 147/NAG/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1589 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 16-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Keywords: Depreciation; Loose papers; Document seized; Charitable institution; Benefit of exemption; Documents seized; Capital expenditure
• Section: 143(3); 142(1); 153A; 234B; 80G; 12A; 132; 28; 11

Judgement Text

1 ITA NO. 147/NAG/2013 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 14 7 /NAG/2013 ASSESSMENT YEAR : 200 5 - 06 SUSHRUT HOSPITAL AND RESEARCH CENTRE, ASSTT. COMMISSIONER OF , NAGPUR. VS. INCOME - TAX, CENTRAL CIR.1(2) PAN AAATS 5281K NAGPUR APPELLANT. RESPONDENT. APPELLANT BY : SHRI K.P. DEWANI. RESPONDENT BY : SHRI NARENDRA KANE. DATE OF HEARING : 04 - 09 - 2015. DATE OF PRONO UNCEMENT : 24 TH NOV., 2015. O R D E R PER SHRI SHAMIN YAHYA, A.M . THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - 16, MUMBAI (CAMP OFFICE NAGPUR) DATED 24 - 01 - 2013 AND PERTAINS TO ASSESSMENT YEAR 2005 - 06. 2. GROUNDS OF APPEAL READ AS UNDER : 1. THE ORDER PASSED BY AO U/S 153A R.W.S. 143(3) OF I.T. ACT, 1961 IS ILLEGAL, INVALID AND BAD IN A LAW. 2. THE LEARNED A.O. ERRED IN HOLDING THAT ASSESSEE IS NOT ELIGIBLE FOR BENEFIT OF INCOME BEING EXEMPT U/S 11 OF I. T. ACT, 1961. 3. THE LEARNED A.O. ERRED IN HOLDING THAT IN THE CASE OF ASSESSEE TRUST THERE IS VIOLATION OF SECTION 13(1)(C) OF I.T. ACT, 1961 AND THEREFORE ASSESSEE IS NOT ELIGIBLE FOR BENEFIT OF INCOME BEING EXEMPT U/S 11 OF I.T. ACT, 1961. 4. THE LEARN ED CIT(A) ERRED IN UPHOLDING THE ACTION OF A.O. IN NOT GRANTING EXEMPTION U/S 11 OF I.T. ACT, 1961 AND UPHOLDING THE ACTION OF A.O. THAT THERE IS VIOLATION OF PROVISIONS OF SECTION 13(1)(C) OF I.T. ACT, 1961. 2 ITA NO. 147/NAG/2013 5. THE ADDITION SUSTAINED OUT OF TRAVELLING AND CONVEYANCE EXPENSES BY HONBLE CIT(A) IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 6. THE ADDITION SUSTAINED OUT OF PROMOTIONAL AND INAUGURAL EXPENSES BY HONBLE CIT(A) IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 7. THE ADDITION SUSTAINED OUT OF DEPRECIATION ON CARS BY HONBLE CIT(A) AT RS.1, 24,913/ - IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 8. THE ADDITION SUSTAINED BY CIT(A) AT RS.10,000/ - ON ACCOUNT OF SALARY IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 9. THE LEARNED A.O. AS WELL AS HONBLE CIT(A) ERRED I N HOLDING THAT EXPENSES INCURRED ON REPAIRS AND UP KEEPING OF BUILDING IS IN THE NATURE OF CAPITAL EXPENDITURE AND ADDITION MADE BY AUTHORITIES IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 10. THE LEARNED A.O. AND HONBLE CIT(A) ERRED IN UPHOLDING THE ADDIT ION MADE AT RS.3,16,342/ - OUT OF EDUCATIONAL EXPENSES. 11. THE ASSESSEE DENIES LIABILITY TO BE ASSESSED TO INTEREST U/S 234B OF I.T. ACT, 1961. WITHOUT PREJUDICE, THE LEVY OF INTEREST U/S 234B OF I.T. ACT, 1961 IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 3 . IN THIS CASE A SEARCH U/S 132 OF THE I.T. ACT WAS CARRIED OUT AT THE HOSPITAL OF THE ASSESSEE AS WELL AS THE RESIDENCE OF DR. SUDHIR BABHULKAR AND DR. SUSHRUT BABHULKAR WHO ALSO HAPPENS TO BE THE TRUSTEES OF THE ASSESSEE TRUST. THE SEARCH WAS CONDUCTED ON 10 - 04 - 2008. DURING THE COURSE OF SEARCH, A CASH OF RS.2,00,000/ - AND JEWELLERY OF RS.5,90,000/ WAS SEIZED FROM THE RESIDENCE OF DR. SUDHIR BABHULKAR. PURSUANT TO THE SEARCH, NOTICE U/S 153A WAS ISSUED TO THE ASSESSEE. DURING THE COURSE OF ASSESSMENT TH E AO REFERRED TO THE PROVISIONS OF SECTION 13(1)(C) OF THE I.T. ACT AND OBSERVED THAT IN THE CASE OF THE ASSESSEE FOLLOWING PERSONS FALL WITHIN THE DEFINITION OF SECTION 13(3) READ WITH SECTION 13(1)(C) : A DR. SUDHIR BABHULKAR FOUNDER TRUSTGEE B DR. ARUNA BABHULKAR TRUSTEE C DR. SUSHRUT BABHULKAR TRUSTEE D DR. NANDANI BABHULKAR RELATIVE OF TRUSTEE E DAUGHTER OF DR. SUSHRUT BABHULKAR F DR. SONALI PANDE TRUSTEE G DR. KETAN PANDE TRUSTEE. 3 ITA NO. 147/NAG/2013 4. AO FORMED AN OPINION THAT IN VIEW OF PROVISION OF SECTION 13(1)(C) ASSESSEE WAS NOT ENTITLED TO EXEMPTION U/S 11. FOR THIS HE MADE FOLLOWING SUBMISSIONS, EXAMINATION AND OBSERVATIONS. STATUS OF THE VEHICLES OWNED BY THE TRUST. HE NOTED THAT THREE VEHICLES OF THE ASSESSEE TRUST WERE BEING USED BY DR. SUD HIR BABHULKAR AND DR. SURHSUT BABHULKAR. THE AO REFERRED TO THE EXTRACT FROM THE STATEMENT OF DR. SUDHIR BABHULKAR THAT NO LOG BOOK WAS MAINTAINED. THAT THE VEHICLES WERE PARTLY USED FOR PERSONAL PURPOSES. THAT DR. SUDHIR BABHULKAR ALSO OWNS A MERCEDEZE BENZ CAR. THAT THERE WAS NO WRITTEN AGREEMENT BETWEEN THE TRUST AND SHRI SUDHIR BABHULKAR. THE AO FURTHER REFERRED TO THE REGISTRATION BOOK OF THESE VEHICLES AND NOTED THAT THESE WERE OWNED BY THE TRUSTEES IN THEIR INDIVIDUAL NAMES. FROM THE ABOVE THE AO CONCLUDED THAT THE VEHICLES OF THE TRUST WERE USED BY THE TRUSTEES FOR THEIR PERSONAL USE. HENCE THE AO HELD THAT IN VIEW OF PROVISION OF SECTION 13(1)(C) THE TRUST WOULD NOT BE ELIGIBLE FOR EXEMPTION U/S 11. 5. RENOVATION OF HOSPITAL BUILDING OWNED BY DR . SUDHIR BABHULKAR. IN THIS REGARD THE AO NOTED THAT THE ASSESSEE TRUST CARRIED OUT MAJOR REPAIR AND RENOVATION OF RS.35,86,995/ - DURING THE FINANCIAL YEAR 2006 - 07. TOTAL EXPENDITURE OF SUCH MAJOR REPAIR WAS RS.61,43,599/ - DURING THE PERIOD RELEVANT TO ASSESSMENT YEARS 2005 - 06 TO 2008 - 09. IN THIS REGARD THE AO REFERRED TO A STATEMENT OBTAINED FROM DR. SUDHIR BABHULKAR. THE AO OBSERVED THAT FROM THE STATEMENT IT IS CLEAR THAT THE ASSESSEE TRUST CARRIED OUT MAJOR CAPITAL EXPENDITURE IN THE FORM OF CHANGE OF THE FLOURING OF THE ENTIRE BUILDING AND PATIENT ROOM, ELECTRIFICATION AND PAINTING OF THE BUILDING. THERE WAS ALSO FRONT ELEVATION OF THE HOSPITAL. THE AO HELD THAT THESE WERE CAPITAL EXPENSES AND NOT REPAIR AND WERE MEANT TO GIVE BENEFIT TO ITS FOUNDE R TRUSTEE DR. SUDHIR BABHULKAR. ON THIS 4 ITA NO. 147/NAG/2013 ACCOUNT ALSO THE AO HELD THAT FOUNDER TRUSTEE GOT DIRECT BENEFIT AND, THEREFORE, THE ASSESSEE WOULD NOT BE ENTITLED TO EXEMPTION U/S 11 OF THE I.T. ACT. 6. PRIVATE PRACTICE OF DR. MRS. NANDANI SUSHRUT BABHULKAR. IN THIS REGARD THE AO OBSERVED THAT DR. NANDANI S. BABHULKAR WHO IS WIFE OF DR. SUSHRUT BABHULKAR, ONE OF THE TRUSTEES, IS ENGAGED IN HER PRACTICE FROM HOSPITAL PREMISES. SHE HAS BEEN PROVIDED WITH HER ONE INDEPENDENT CABIN AND USES THE FACILITIES OF THE HO SPITAL LIKE STAFF OF THE HOSPITAL, ELECTRICITY, WATER, STATIONERY, NURSING STAFF ETC. HOWEVER, SHE DID NOT SHARE HER PROFESSIONAL RECEIPT WITH THE ASSESSEE TRUST. HENCE THE AO HELD THAT THE ACTION OF THE ASSESSEE TRUST RESULTED IN DIRECT BENEFIT TO DR. MRS . NANDANI S. BABHULKAR WHO HAPPENS TO BE THE WIFE OF TRUSTEE AND THE PROVISIONS OF SECTION 13(1)(C) ARE APPLICABLE. HENCE EXEMPTION U/S 11 TO THE ASSESSEE WAS DENIED. 7. PERSONAL USE OF STAFF OF HOSPITAL BY THE TRUSTEES. IN THIS REGARD THE AO REFERRED TO THE EXTRACT OF A STATEMENT FROM AN ACCOUNTANT MR. ANIL MOHALE. FROM HIS STATEMENT WHEREIN THE SAID ACCOUNTANT HAS MENTIONED THAT HE MAINTAINED IN TALLY PACKAGE DATA OF THE FAMILY MEMBERS, THE AO DEDUCED THAT THE TRUSTEES HAVE BEEN USING THE SERVICE OF T RUST EMPLOYEES TO MAINTAIN ACCOUNTS OF THE TRUSTEES AND THE RELATIVES. HENCE THE AO HELD THAT THIS AMOUNTS TO DIRECT BENEFIT TO THE TRUSTEES WITHIN THE MEANING OF SECTION 13(1)(C) OF THE I.T. ACT. HENCE THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION U/S 11 OF I.T. ACT. 8. COMMISSION PAID TO MRS. ARUNA BABHULKAR/MRS. NANDANI BABHULKAR. IN THIS REGARD THE AO OBSERVED THAT ON GOING THROUGH RETURN OF INCOME OF MRS. ARUNA BABHULKAR/MRS. NANDANI BABHULKAR IT WAS SEEN THAT THEY HAVE RECEIVED COMMISSION ON SALE OF DRUG FROM ASSESSMENT YEARS 2006 - 07 ONWARDS. THE AO OBSERVED THAT THE COMMISSION WAS PAID BY THE MEDICAL STORE THAT RUNS FROM THE HOSPITAL. THAT THE MEDICAL STORE DOES NOT PAY ANY RENT TO THE ASSESSEE 5 ITA NO. 147/NAG/2013 TRUST. THE AO HELD THAT THIS WAS AN INDIRECT BENEFIT TO THE TRUSTEE AND WIFE OF ONE OF THE TRUSTEE WHICH FELL WITHIN THE MEANING OF SECTION 13(1)(C) OF THE I.T. ACT. HENCE THE ASSESSEE WOULD NOT BE ELIGIBLE FOR EXEMPTION U/S 11 OF I.T. ACT. 9. EXPENSES DEBITED ON ACCOUNT OF TRAVELLING EXPENSES. IN THIS REGA RD THE AO OBSERVED THAT THE ASSESSEE HAS INCURRED TRAVELLING EXPENSES FROM ASSESSMENT YEAR 2003 - 04 TO ASSESSMENT YEAR 2009 - 10. THE ASSESSEE WAS ASKED TO SUBMIT THE NATURE OF EXPENSES AND HOW IT WAS FOR THE PURPOSE OF BUSINESS. HOWEVER, THE AO OBSERVED THAT THE ASSESSEE DID NOT SUBMIT ANY EXPLANATION. HENCE THE AO HELD THAT THE ASSESSEE TRUST DEBITED PERSONAL EXPENSES OF THE TRUSTEE. IN THIS REGARD THE AO REFERRED TO CERTAIN LOOSE PAPERS WHICH WERE MEANT FOR TICKET OF MRS. ARUNA BABHULKAR, SUDHIR BABHULKAR , NANDANI BABHULKAR, MS SANSKRITI BABHULKAR AND MS SIDDHI BABHULKAR. REFERRING TO THIS THE AO HELD THAT IT WAS AMPLY CLEAR THAT EXPENSES ARE IN THE NATURE OF EXPENSES INCURRED ON PERSONAL PURPOSE OF BOTH THE TRUSTEE AND THE RELATIVE. THE AO ALSO NOTED THA T IN THE STATEMENT OF DR. SUDHIR BABHULKAR REGARDING THE PROFESSIONAL ACTIVITY OF MRS. ARUNA BABHULKAR, HE HAD EXPLAINED THAT |MRS. ARUNA BABHULKAR IS ENGAGED IN THE BUSINESS OF GARDEN LAYOUT AND MAINTENANCE OF GARDEN. HENCE THE AO HELD THAT THE VISIT OF M RS. ARUNA BABHULKAR TO FOREIGN COUNTRY IS A DIRECT BENEFIT TO THE ASSESSEE WITHIN THE MEANING OF SECTION 13(1)(C). IN ABSENCE OF EXPLANATION REGARDING THE NATURE OF TRAVELLING EXPENSES AND ITS PURPOSE, THE AO HELD THAT THE ASSESSEE WAS NOT ELIGIBLE FOR E XEMPTION U/S 11 OF THE I.T. ACT. 10. PERSONAL EXPENSES OF TRUSTEES. IN THIS REGARD THE AO REFERRED TO A BILL OF GONDWANA CLUP FOR RS.1100/ - IN THE NAME OF DR. SUDHIR BABHULKAR. THE AO HELD THAT IN ABSENCE OF ANY EXPLANATION THIS WAS A DIRECT BENEFIT TO T HE TRUSTEE. THE AO FURTHER REFERRED TO A BILL OF EUREKA FORBES OF DR. MRS. NANDANI BABHULKAR PAID BY THE ASSESSEE TRUST. THE AO FOUND THIS ANOTHER EXAMPLE OF PERSONAL EXPENSES OF TRUSTEE/THEIR 6 ITA NO. 147/NAG/2013 RELATIVE INCURRED BY THE ASSESSEE. THE AO FURTHER NOTED THAT D R. SUDHIR BABHULKAR OFFERED THE PROFESSIONAL FEE RECEIVED FROM THE ASSESSEE TRUST UNDER THE HEAD BUSINESS/PROFESSIONAL INCOME AND CLAIMED EXPENSES MAINLY AS SALARY. THE SALARY WAS PAID TO MBBS DOCTORS WHO WERE PURSUING THEIR POST GRADUATION AT M/S SUSH RUT HOSPITAL AND RESEARCH CENTRE AND WERE ASSISTING HIM WHILE PERFORMING OPERATION ETC. THESE MBBS DOCTORS WERE RESIDING AT M/S SUSHRUT HOSPITAL AND RESEARCH CENTRE AND THEIR EXPENSES WERE BORNE BY M/S SUSHRUT HOSPITAL AND RESEARCH CENTRE. IN THESE CIR CUMSTANCES THE AO WAS OF THE OPINION THAT IT WAS THE DUTY OF THE ASSESSEE TRUST TO PAY SALARY/STIPEND TO THEM. HOWEVER, THE AO HELD THAT BY MAKING THE PAYMENT OF SALARY BY SHRI SUDHIR BABHULKAR AND DR. SUSHRT SUDHIR BABHULKAR IN THEIR INDIVIDUAL CAPACI TY. THE ASSESSEE TRFUST BENEFITED THEIR TRUSTEE IN EVADING TAX ALSO. THE AO HELD THAT SUCH AN ACT OF THE ASSESSEE TRUST AMOUNTS DIRECT BENEFIT TO THE TRUSTEES. 11. THE AO FURTHER OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2003 - 04 IN THE CASE OF DR. SUDHIR BABHULKAR IT WAS SEEN THAT HE ALONG WITH HIS SPOUSE AND CHILDREN WERE STAYING ON TOP OF THE HOSPITAL PREMISES. THE AO HELD THAT THIS WAS A BENEFIT TO THE TRUSTEE WITHIN THE MEANING OF SECTION 13(1)(C) OF THE ACT. 12. THE AO FURTHER HELD THAT THE ASSESSEE WAS NOT A CHARITABLE TRUST. HE HELD THAT MERE FACT THAT SOME OF THE PATIENTS WERE TREATED EITHER FREE OF COST OR ON DISCOUNTED RATE DOES NOT CHANGE THE COMMERCIAL NATURE OF THE ASSESSEE TRUST. THE AO ALSO FOUND THAT TH E ASSESSEE WAS PAYING RENT TO DR. SUDHIR BABHULKAR WHICH WAS A DIVERSION OF FUNDS. 13. THE AO FURTHER OBSERVED THAT THE ASSESSEE MAY ARGUE THAT THERE WAS NO SPECIFIC EVIDENCE TO ATTRACT THE PROVISION OF SECTION 13(1)(C) IN EVERY ASSESSMENT YEAR. IN THIS CONNECTION AO OPINED THAT IT CANNOT BE EXPECTED THAT THE ASSESSEE WOULD RETAIN DOCUMENTS REGARDING THE PERSONAL BENEFIT ALLOWED TO THE TRUSTEES 7 ITA NO. 147/NAG/2013 AND THEIR RELATIVE. IF DOCUMENTS FOR EACH AND EVERY ASSESSMENT YEAR ARE INSISTED TO BE SEARCHED, PRACTICALLY TH E PROVISION FOR SEARCH ASSESSMENT WOULD BE DEFEATED. THIS CAN NOT BE INTENTION OF THE LEGISLATURE. THE AO STATED THAT HE CANNOT SHUT HIS EYES TO THE LEGISLATIVE INTENT. HENCE THE AO HELD THAT IT WAS JUST AND APPROPRIATE TO PRESUME THAT THERE WAS UNIFORM PRACTICE IN ALL THE ASSESSMENT YEARS DURING THE SEARCH PERIOD. AO PROCEEDED TO MAKE THE ASSESSMENT AT RS. 25,99,917/ - 14. AGAINST THE ABOVE ORDER, ASSESSEE APPEALED BEFORE THE LEARNED CIT(APPEALS). THE LEARNED CIT(APPEALS) CONSIDERED THE VARIOUS SUBMISSIO NS OF THE ASSESSEE. HE ALSO OBTAINED THE REMAND REPORT FROM THE AO. THE LEARNED CIT(APPEALS) PROCEEDED TO PRINCIPALLY AFFIRM THE FINDING OF THE AO AND HELD THAT THE AO HAS RIGHTLY DENIED THE EXEMPTION U/S 11 OF THE I.T. ACT. LEARNED CIT(APPEALS) GRANTED SO ME RELIEF ON ADDITION. 15. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 16. GROUND NO. 1 HAS NOT BEEN PRESSED. 17. GROUND NO. 2 4: THE ISSUE PERTAINING TO DENIAL OF REGISTRATION U/S 11 OF THE I.T. ACT HAS ALREADY BEEN DEALT BY US IN ITA NO. 146/NAG/2013 FOR ASSESSMENT YEAR 2003 - 04. THE FACTS AND ARGUMENTS ARE SAME. OUR ADJUDICATION ON THE SAME READS AS UNDER: 21. NOW WE CONSIDER THE MERITS OF AOS ASSESSMENT WHEREBY HE HAS HELD THAT IN VIEW OF PROVISIONS OF SECTION 13(1)(C) THE TRUST WILL NOT BE ELIGIBLE FOR EXEMPTION U/S 11. THE FIRST OBSERVATION OF THE AO IS THAT THREE VEHICLES OF THE ASSESSEE TRUST WERE BEING USED BY THE TRUSTEES DR. SUDHIR BABHULKAR AND DR. SUSHSRUT BABHULKAR. THIS OBSERVATION OF THE AO HAS NOT BEEN MADE ON THE B ASIS OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH. THE AO HAS NO EVIDENCE IN HIS POSSESSION THAT THE TRUSTEES HAVE USED THE VEHICLES FOR THEIR PRIVATE PURPOSES. THE SOLE BASIS IS A STATEMENT OBTAINED FROM DR. SUDHIR BABHULKAR WHERE HE HAS ACCEPTED T HAT THE VEHICLES ALSO USED FOR PRIVATE PURPOSES. THE AO HAS ALSO DRAWN ADVERSE INFERENCE FOR LACK OF MAINTENANCE OF LOG BOOK OF THE FACTS. IN THIS REGARD 8 ITA NO. 147/NAG/2013 THE AO HAS DISREGARDED THE SUBMISSIONS OF DR. SUDHIR BABHULKAR THAT HE ALSO OWNS A PERSONAL MERCED EZE BENZ CAR. WE FIND THAT THE AO HAD COME TO THE CONCLUSION THAT THE VEHICLES OF THE TRUST ARE BEING USED BY THE TRUSTEES PERSONALLY IS NOT BASED UPON ANY COGENT EVIDENCE. LACK OF MAINTENANCE OF LOG BOOK CANNOT LEAD TO AN INFERENCE THAT THERE WAS PERSO NAL USE OF VEHICLES BY THE TRUSTEES. SIMILARLY THE FACT THAT THE TRUSTEES WERE ALSO HAVING THEIR PERSONAL CARS HAS TO BE TAKEN INTO ACCOUNT AND IT CANNOT BE PRESUMED THAT THE TRUSTEES WERE KEEPING THEIR PERSONAL CARS IDLE AND USING THE TRUST VEHICLES FOR PERSONAL PURPOSES. SIMILARLY A STATEMENT OF ONE OF THE TRUSTEES THAT SOMETIMES THE CARS ARE USED FOR PRIVATE PURPOSES ALSO CANNOT BE TAKEN AS MISUSE OF THE TRUST VEHICLES FOR PERSONAL PURPOSES. BOTH THE TRUSTEES WERE USING THE VEHICLES ARE ALSO SENIOR A ND QUALIFIED DOCTORS AND PROVIDING SERVICES TO THE TRUST. HENCE THEIR USE OF VEHICLES CANNOT BE SAID TO BE FOR PRIVATE PURPOSES ONLY ON THE BASIS OF SURMISES AND CONJECTURES. FROM THE ABOVE IT IS EVIDENT THAT THE OBSERVATIONS OF THE AO THAT THERE IS MISUSE OF VEHICLES OF THE TRUST FOR PERSONAL PURPOSES OF THE TRUSTEES AND HENCE THE PROVISIONS OF SECTION 13(1)(C) ARE ATTRACTED IS TOTALLY BASED ON SURMISES AND CONJECTURE AND THE SAME IS NOT AT ALL SUSTAINABLE. 22. THE SECOND OBSERVATION OF THE AO IS THAT THERE HAS BEEN RENOVATION IN THE HOSPITAL BUILDING WHICH HAS BEEN DONE TO BENEFIT FOR THE TRUSTEES WHO IS OWNER OF THE BUILDING. IN THIS REGARD THE AO HAS OBSERVED THAT THERE HAS BEEN MAJOR CAPITAL EXPENDITURE WHICH IS IN THE FORM OF CHANGE OF THE FLOORING , ELECTRIFICATION, PAINTING AND FRONT ELEVATION. THE AO HAS HELD THAT THESE ARE NOT REPAIR AND RENOVATION AND WERE MEANT TO BE GIVEN BENEFIT TO ITS FOUNDER TRUSTEE. ABOVE OBSERVATION OF THE AO CLEARLY IS IN THE NATURE OF A SWEEPING GENERALISATION AND COMME NT. THE TOTAL AREA OF THE BUILDING IS 18306 SQ.FT. AND THE TOTAL EXPENDITURE UNDER THE BLOCK PERIOD IS 6143699. IN THIS REGARD ASSESSEES CONTENTION IS THAT RENT PAID FOR SUCH PROPERTY IS RS.2.75 PER SQ.FT. AND THE ASKING RENT FOR SIMILARLY LOCATED PRO PERTY IS AROUND 901 TO 100/ - PER SQ.FT.S THE TRUST IS OCCUPYING THE PROPERTY SINCE 1992 AND HAD TO REPLACE FLOORING DUE TO EXTENSIVE FOOT FALL BEING A PUBLIC HOSPITAL. THAT THE PROPERTY SHALL BE USED FOR A FURTHER PERIOD OF 15 YEARS BY THE TRUST. CONSIDE RING FROM THIS ANGLE, THE QUANTUM OF EXPENDITURE ON REPAIR AND RENOVATION AND THE NATURE THEREOF IT CANNOT BE HELD THAT EXPENDITURE WAS NOT MEANT FOR THE PURPOSES OF THE TRUST BUT IT WAS MEANT TO GIVE UNDUE BENEFIT TO THE OWNER TRUSTEE. HENCE IN OUR CONSID ERED OPINION THIS PLANK OF AOS DRAWING ADVERSE INFERENCE IS ALSO DEVOID OF COGENCY. 23. ANOTHER PLANK OF AOS ARGUMENT THAT DR. NANDANI BABHULKAR WHO IS WIFE OF DR. SUSHRUT BABHULKAR, ONE OF THE TRUSTEES, IS ENGAGED IN HER PERSONAL PRACTICE FROM HOSPITAL PREMISES. IN THIS REGARD ASSESSEES 9 ITA NO. 147/NAG/2013 SUBMISSION IS THAT NANDANI BABHULKAR IS RENDERING SERVICES TO THE HOSPITAL TRUST WITHOUT ANY REMUNERATION AND IN LIEU OF THIS SHE IS OCCUPYING THE LUNCH ROOM OF HOSPITAL BUILDING FOR FEW HOURS. IN THIS REGARD SHE IS OFF ERING INCOME IN THE RANGE OF RS.25,000/ - TO RS.30,000/ - PER YEAR FROM HER PRIVATE PRACTICE WHICH IS BEING ACCEPTED BY THE REVENUE. HENCE IT IS A PLEA OF THE ASSESSEE THAT THE FACILITY PROVIDING 180 SQ.FT. OF AREA OF A SPACE CANNOT BE HELD ADVERSELY FOR THE PURPOSE OF SECTION 13(1)(C) OF THE I.T. ACT. 24. WE FIND CONSIDERABLE COGENCY IN THIS SUBMISSION THAT NANDANI BABHULKAR IS ALSO PROVIDING SERVICES TO THE TRUST AND IN LIEU THEREOF SHE IS USING THEIR SMALL SPACE FOR PRIVATE PRACTICE CANNOT BE HELD TO BE PROVIDING UNDUE BENEFIT AS IS ENVISAGED U/S 13(1)(C) OF THE I.T. ACT FOR THE TRUSTEES. HENCE THIS PLANK OF AOS ACTION IS FOUND TO BE DEVOID OF COGENCY. 25. ANOTHER PLANK OF AOS OBSERVATION IS THAT IN A STATEMENT OBTAINED FROM ONE ACCOUNTANT WHO HAD STATED THAT HE WAS ALSO MAINTAINING ON TALLY PACKAGE DATA OF FAMILY MEMBERS. IN OUR CONSIDERED OPINION, MAKING A GENERALISED OBSERVATION FROM THE ABOVE STATEMENT THAT THERE IS PERSONAL USE OF STAFF BY THE HOSPITAL TRUSTEES IS A FAR FETCHED ANALYSIS BY THE AO. ASSESSEES COUNSEL HAS SUBMITTED THAT THE SAID ACCOUNTANT MR. ANIL MOHALE IS A PART TIME EMPLOYEE OF THE TRUST AS ALSO AND SALARY HAS BEEN PAID TO THE SAID EMPLOYEE BY THE TRUSTEES WHICH HAS ALSO BEEN SHOWN IN THE ACCOUNTS AS DOCTORS. THE PERSON AL ACCOUNTS OF DOCTORS/TRUSTEES HAVE BEEN ACCEPTED IN THE ASSESSMENT FRAMED U/S 143(3)/153A OF THE I.T. ACT. CONSIDERED IN THIS VIEW, IN OUR CONSIDERED OPINION, THE SAID STATEMENT OF THE ACCOUNTANT CAN BE NO STRETCH OF IMAGINATION BE TAKEN TO DRAW INFEREN CE THAT THERE IS PERSONAL USE OF STAFF OF THE HOSPITAL BY THE TRUSTEES WITHIN THE MEANING OF SECTION 13(1)(C) OF THE I.T. ACT. 26. ANOTHER OBSERVATION OF THE AO IS THAT DR. ARUNA BABHULKAR AND DR. NANDANI BABHULKAR HAVE RECEIVED COMMISSION ON SALE OF DR UGS. THIS COMMISSION HAS BEEN PAID BY A MEDICAL STORE THAT RUNS FROM HOSPITAL. SINCE THE MEDICAL STORE DOES NOT PAY ANY RENT TO THE ASSESSEE TRUST, THIS WAS AN INDIRECT BENEFIT TO THE TRUSTEE AND WIFE OF ONE OF THE TRUSTEES. IN THIS REGARD WE FIND THAT IT IS THE SUBMISSION OF THE ASSESSEE THAT SHRI GUPTA, OWNER OF THE MEDICAL STORE IN THE PREMISES OF THE TRUST, HAS MADE PAYMENT FOR SERVICES PROVIDED BY THE CONCERNED PERSONS ON INDIVIDUAL PERSONAL CAPACITY AND IT HAS NO NEXUS WITH THE ACTIVITY OF THE TRUS T OR ANY PROFIT OF THE TRUST. HENCE THE PAYMENT OF COMMISSION BY THE MEDICAL STORE CANNOT BE SAID TO BE AN INDIRECT BENEFIT TO THE TRUSTEES. 27. ANOTHER OBSERVATION OF THE AO IS THAT THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE NATURE OF THE TRAVELLING E XPENSES AND HOW IT WAS DONE 10 ITA NO. 147/NAG/2013 FOR THE PURPOSE OF THE BUSINESS. IN THIS REGARD IT IS THE ASSESSEES SUBMISSION THAT TRAVELLING EXPENDITURE HAS BEEN INCURRED IN THE COURSE OF DAY TO DAY ACTIVITY OF RUNNING OF HOSPITAL. GENUINENESS OF THIS EXPENDITURE HAS NO T BEEN DOUBTED. NECESSITY AND NEXUS OF EXPENDITURE HAS BEEN SAID TO BE DEMONSTRATED BY THE FACT THAT THEY WERE MADE FOR MEDICAL CONSULTATION, RESEARCH ACTIVITY AND ATTENDING CONFERENCES. IN THIS REGARD CERTIFICATE OF ATTENDANCE OF VARIOUS FIRMS OUT OF INDIA HAS ALSO BEEN PLACED IN PAPER BOOK. THUS WE FIND THAT THE AO HAS ALSO MADE THIS OBSERVATION OF MIS - USE OF TRAVELLING EXPENDITURE ALSO ON THE BASIS OF HIS SURMISES AND CONJECTURE. HENCE THERE IS NO BASIS ON WHICH IT CAN BE HELD THAT THERE IS ANY UNDUE BENEFIT TO THE TRUSTEES WITHIN THE MEANING OF SECTION 13(1)(C) OF I.T. ACT BY WAY OF PERSONAL TRAVELLING EXPENDITURE. 28. ANOTHER OBSERVATION OF THE AO IS THAT THE ASSESSEE TRUST HAS ALLOWED DR. SUDHIR BABHULKAR TO PAY SALARY TO MBBS DOCTORS WHO ARE PURSU ING THEIR POST GRADUATION AT SUSHRUT HOSPITAL. AOS OBSERVATION IS THAT THE HOSPITAL SHOULD HAVE PAID THE SALARY. BY LETTING DOCTOR SUSHRUT BABHULKAR TO PAY THEIR SALARY IN HIS INDIVIDUAL ACCOUNT, THE ASSESSEE TRUST HAS BENEFITED THE TRUSTEE IN EVADING T AX. WE FIND THAT THIS IS ALSO A VERY FAR FETCHED OBSERVATION AND IT IS THE AOS SURMISES AND CONJECTURE. HOW PAYMENT OF SALARY BY SUSHRUT BABHULKAR CAN RESULT IN BENEFIT TO HIMSELF IS BEYOND OUR COMPREHENSION. IN OUR CONSIDERED OPINION, THIS PLANK OF AOS OBSERVATION IS ALSO DEVOID OF COGENCY. 29. ANOTHER PLANK OF AOS ARGUMENT IS THAT FOR ASSESSMENT YEAR 2003 - 04 DR. SUDHIR BABHULKAR WAS OCCUPYING THE TOP OF THE HOSPITAL PREMISES IN HIS PERSONAL CAPACITY. IN THIS REGARD IT IS THE SUBMISSION OF THE ASSESSEE THAT DR. SUDHIR BABHULKAR WAS ALSO ENGAGED AS CONSULTING DOCTOR TO THE HOSPITAL. HIS STAY AT HOSPITAL PREMISES WAS NECESSARY FOR THE INTEREST OF PATIENTS OF THE HOSPITAL. HENCE PROVIDING HIM ACCOMMODATION CANNOT BE TREATED AS ANY UNDUE BENEFIT WITHIN THE MEANING OF SECTION 13(1)(C) OF THE I.T. ACT. WE FIND THAT IT IS CERTAINLY TRUE THAT HOSPITALS PROVIDE THEIR DOCTORS RESIDENTIAL ACCOMMODATION IN THE HOSPITAL PREMISES SO THAT THEY CAN BE AVAILABLE TO ATTEND THEIR PATIENTS. THIS CANNOT BE SAID TO BE AN U NDUE ADVANTAGE IN THE NATURE OF PERSONAL BENEFIT TO THE TRUSTEES. MOREOVER, THIS ASPECT IS ONLY RELEVANT FOR ASSESSMENT YEAR 2003 - 04. WE HAD ALREADY HELD IN THE INITIAL PART OF OUR ADJUDICATION THAT ASSESSMENT FOR THE ASSESSMENT YEAR 2003 - 04 U/S 153A WAS WITHOUT JURISDICTION. 30. WE FIND THAT THE AO WAS HIMSELF AWARE OF HIS OBSERVATION IN ASSESSMENT BEING IN THE NATURE OF SURMISES AND CONJECTURE. THE AO HAS OBSERVED THAT IT CANNOT BE EXPECTED THAT THE ASSESSEE WOULD RETAIN DOCUMENTS REGARDING THE PERSONAL BENEFIT ALLOWED TO THE TRUSTEES AND THE RELATIVES. THAT IF THE DOCUMENTS FOR EACH AND EVERY ASSESSMENT YEAR ARE 11 ITA NO. 147/NAG/2013 INSISTED TO BE SEARCHED PRACTICALLY THE PROVISION FOR SUCH ASSESSMENT WOULD BE DEFEATED. THAT THIS CANNOT BE AN INTENTION OF THE LEGISLATURE T HAT THE AO CANNOT SHUT HIS EYES TO THE LEGISLATIVE INTENT. THAT IT WAS JUST AND APPROPRIATE TO ASSUME THAT THERE WAS UNIFORM PRACTICE IN ALL ASSESSMENT DURING SEARCH PERIOD. THE ABOVE OBSERVATION OF THE AO CLEARLY AMPLIFY THAT THE AO HAS PICKED UP AND MAGNIFIED SOME STATEMENTS OBTAINED AND HAS MADE SWEEPING GENERALISATION WHICH IS NOT SUSTAINABLE IN LAW. BY NO STRETCH OF IMAGINATION IT CAN BE SAID THAT IT IS A LEGISLATIVE INTENT THAT THE AOS INTENTION AND FEELINGS SHOULD BE THE BASIS OF ASSESSMENT. THE AOS OBSERVATION THAT THE ASSESSEE TRUST IS NOT DOING ANY CHARITABLE ACTIVITY IS ALSO DEVOID OF ANY COGENCY. THE ASSESSEE TRUST WAS CONSTITUTED ON 30 - 03 - 1991 AND THE MAIN OBJECT OF THE TRUST WAS TO PROVIDE MEDICAL RELIEF AND PROMOTE EDUCATION IN TH E FIELD OF MEDICINE. THE TRUST IS REGISTERED U/S 12A OF THE I.T. ACT AND A CERTIFICATE HAS BEEN ISSUED U/S 12A ON 13 - 03 - 1992. IT IS HOLDING VALID REGISTRATION EVEN ON DATE. THE ASSESSEE TRUST IS HOLDING THE APPROVAL U/S 80G OF THE I.T. ACT FROM ITS INCEPTI ON. THE APPROVAL OF SECTION 80G IS VALID EVEN TODAY. ALL ALONG IN THE PAST UPTO ASSESSMENT YEAR 2003 - 04 THE TRUST HAS BEEN GRANTED BENEFIT OF EXEMPTION U/S 11. THERE WAS AN ACTION U/S 132A ON 21 - 03 - 1995 UPON THE ASSESSEE AND BENEFIT U/S 11 WAS GRANTED WITHOUT INVITING ANY ADVERSE OBSERVATION. WE ALSO NOTE THE FOLLOWING SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE WHICH HAS NOT BEEN DISPUTED BY THE REVENUE : P) THE ASSESSEE TRUST IS HAVING FACILITY OF PROVIDING 10 BEDS AVAILABLE TO PATIENTS FREE O F CHARGE WHICH IS ABOUT 18% O F THE TOTAL 56 BEDS AVAILABLE IN HOSPITAL . THE AFORESAID FREE FACILITY PROVIDED TO VARIOUS PATIENTS HAS BEEN REPORTED TO JOINT CHARITY COMMISSIONER IN TERMS OF PROVISIONS OF BOMBAY PUBLIC TRUST ACT 1951 . THE EVIDENCE OF REPORT PLACED BEFORE THE AUTHORITY IS AT PAGE 32 TO 45 IN THE PAPER BOOK [VOL . - 11] . THE EVIDENCE SUBMITTED FOR CHARITABLE ACTIVITY WAS VERIFIED BY THE AUTHORITY AND NO FAULT/MISTAKE HAS BEEN FOUND WITH THE SAME . Q) THE VARIOUS CAMPS CONDUCTED AT TRIBAL AREAS TO PROVIDE MEDICAL RELIEF TO POOR IS DEMONSTRATED BY PLACING LEGAL EVIDENCE ON RECORD I . E . PHOTOGRAPHS, PUBLICATIONS & ADVERTISEMENT . Q. THE ASSESSEE TRUST HAS BEEN HOLDING ACCREDITATION OF NATIONAL BOARD OF EXAMINATIONS AND COLLEGE OF PHYSICIANS AND SURGEONS OPERATING UNDER THE MINISTRY OF HEALTH AND FAMILY WELFARE, GOVT . OF INDIA. THE AFORESAID ACCREDITION IS PROVIDED TO CHARITABLE TRUST AS PER RULES FRAMED BY 12 ITA NO. 147/NAG/2013 GOVERNMENT OF INDIA. THIS AMPLY DEMONSTRATES THAT ONE ARM OF THE GOVERNMENT OF INDIA HAS DULY RECOGNIZED THE ASSESSEE TRUST AS CHARITABLE INSTITUTION AND SAME IS DISPUTED BY REVENUE AUTHORITIES BEING ANOTHER ARM OF GOVERNMENT OF INDIA. 31. FROM THE ABOVE DISCUSSION IT IS AMPLY CLEAR THAT THERE IS NO DIVERSION IN THE ACTIVITY OF THE TRUST WHICH CAN SHOW THAT THE ASSESSEE HAS DEVIATED FROM ITS MAIN OBJECT WHICH IS TO PROVIDE MEDICAL RELIEF AND PROMOTE MEDICAL EDUCATION IN THE FIELD OF MEDICINE. AOS OBSERVATION THAT THE ASSESSEE TRUST IS NOT DOING ANY CHARITABLE ACTIVITY IS NOT AT ALL BASED UPON ANY COGENT MATERIAL. AOS OBSERVATION THAT THERE HAS BEEN USE OF ASSESSEES TRUST PROPERTY FOR THE BENEFIT OF TRUSTEES HAS ALSO BEEN FOUND BY US TO BE NOT BASED UPON ANY COGENT EVIDENCES BUT BASED UPON SURMISE S AND CONJECTURE OF THE AO. HENCE IN OUR CONSIDERED OPINION, THERE IS NO BASIS FOR THE AO TO HOLD THAT THE ASSESSEE SHOULD BE DENIED BENEFIT U/S 11 OF THE I.T. ACT. 18. SINCE THE FACTS ARE IDENTICAL, FOLLOWING THE ABOVE, WE HOLD THAT THERE IS NO BASIS F OR THE AO TO HOLD THAT THE ASSESSEE SHOULD BE DENIED BENEFIT OF SECTION 11. HENCE WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. 19. APROPOS GROUND NO.5 : ADDITION OUT OF TRAVELLING & CONVEYANCE EXPENSES. ON THIS ISSUE THE AO NOTED THAT THE ASSESSEE HAS DEBITED RS. 6,07,217 - ON TRAVELLING EXPENSES. THAT THE ASSESSEE DID NOT FURNISH ANY DETAIL AND EXPLAIN HOW THE EXPENSES WERE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE AO ALSO ME NTIONED THAT THE SEIZED DOCUMENTS REFLECT THAT THE PERSONAL TRAVELLING EXPENSES OF TRUSTEES ARE DEBITED IN THE BOOKS OF ACCOUNT OF THE TRUST. HOWEVER, FOR THIS PROPOSITION THE AO DID NOT REFER TO ANY SEIZED DOCUMENT WHATSOEVER. THE AO PROCEEDED TO DISALLOW 50% OF THE TRAVELLING EXPENSES CLAIMED. 20. BEFORE THE LEARNED CIT(APPEALS) THE ASSESSEE SUBMITTED FURTHER DETAILS. LEARNED CIT(APPEALS) OBTAINED A REMAND REPORT FROM THE AO. IN THE REMAND 13 ITA NO. 147/NAG/2013 REPORT THE AO OPINED THAT IN THE LOCAL CONVEYANCE CLAIMED BY DOC TORS AND STAFF AMOUNTING TO RS.2,13,755/ - THERE WERE CERTAIN DEBITS OF MORE THAN RS.5000/ - WHICH IN THE AOS OPINION WERE HIGHLY EXCESSIVE. FOR THIS PURPOSE THE AO DID NOT MENTION ANY REASON WHATSOEVER AND AS TO HOW THEY WERE FOUND EXCESSIVE. THE AO ALSO N OTED THAT THE ASSESSEES CLAIM OF TRAVELLING EXPENSES OF RS.40,379/ - IN LEDGER ACCOUNTS REFLECTED EXPENSES OF RS.45,104/ - ON 07 - 04 - 2008, RS.50,340/ - ON 02 - 09 - 2008 AND RS.52,122/ - ON 24 - 12 - 2008. THE AO NOTED THAT FOR THIS THE DETAILS OF PLACES OF TRAVELLIN G, NAMES OF PERSONS WHO TRAVELLED AND THE PURPOSE OF TRAVELLING WAS NOT NOTED ON COPY OF LEDGER ACCOUNTS AND NO SUPPORTIVE DOCUMENTS WERE PROVIDED. THE AO FURTHER REFERRED TO HIS EXAMINATION OF SHRI SUDHIR BABHULKAR WHEREBY HE HAS ACCEPTED THAT SOME TIMES THE VEHICLES WERE USED FOR SOCIAL CAUSE. 21. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE SUBMISSIONS OF THE ASSESSEE, LEARNED CIT(APPEALS) HELD THAT THE DISALLOWANCE OF LOCAL CONVEYANCE WAS JUSTIFIED. AS REGARDS THE TRAVELLING EXPENSES, LEARNED CIT(APPEALS) OBSERVED THAT THERE IS NO JUSTIFICATION SHOWN FOR TRAVELLING EXPENSES BOOKED FOR TRAVEL BY SPOUSE AND FAMILY MEMBERS OF TRUSTEE DOCTORS. HE DIRECTED THE AO TO VERIFY THE DETAILS AND ALLOW THE COST OF AIR TICKETS FOR THE TWO SAID DIRECT ORS. THAT COST OF AIR TICKETS FOR FAMILY MEMBERS WERE TO BE ENTIRELY DISALLOWED. THAT OTHER EXPENSES BOOKED, SAY OF BOARD, LOADING ETC. IF FOUND TO BE COMPOSITE FOR THE TWO DOCTORS AND FAMILY, 20% OUT OF THE SAME TO BE DISALLOWED. THAT IF THE EXPENSES CAN BE SUPPORTED FOR TWO MENTIONED DOCTORS, THE SAME BE ALLOWED AND THE REMAINING BE DISALLOWED. 22. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 23. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT AS REGARDS LOCAL TRAV ELLING EXPENSES HAVING BEEN FOUND EXCESSIVE, NO REASON HAS BEEN GIVEN BY THE AO OR THE LEARNED CIT(APPEALS) EXCEPT THE FACT THAT THEY FEEL 14 ITA NO. 147/NAG/2013 THAT IT IS EXCESSIVE. IN OUR CONSIDERED OPINION, NO DISALLOWANCE CAN BE MADE ON THE BASIS OF CONJECTURE AND SURMISES WITHOUT BRINGING ANY COGENT MATERIAL ON RECORD. AS REGARDS THE DEBITS OF TRAVELLING EXPENSES REFERRED BY THE AO WHICH WERE SAID TO BE HAVING NO SUPPORTING RELATED TO FINANCIAL YEAR 2008 AND HAVE NO RELATIONSHIP WHATSOEVER FOR THE PRESENT ASSESSMENT YEAR . IN THESE CIRCUMSTANCES, NO ANALOGY CAN BE DRAWN FROM THE ABSENCE OF THOSE VOUCHERS IN THE ASSESSMENT YEAR UNDER APPEAL. THE AOS OBSERVATION REGARDING PERSONAL USE OF VEHICLES HAS ALSO BEEN FOUND BY US WHILE ADJUDICATING THE ISSUE OF DENIAL OF EXEMPTION U/S 11 THAT THE SAME IS BASED UPON AOS SURMISES AND IS ONLY BASED UPON INTERPRETATION OF A STATEMENT OBTAINED BY THE AO FROM THE TRUSTEE WITHOUT ANY COGENT MATERIAL WHATSOEVER. WE HAVE ALREADY FOUND THIS PLANK OF AOS ARGUMENTS AS UNSUSTAINABLE. AS REG ARDS LEARNED CIT(APPEALS) DIRECTION THAT THE AO MAY VERIFY THE TRAVELLING EXPENSES ONCE AGAIN AND DISALLOW EXPENSES FOR TICKETS AND TRAVELLING CLAIM FOR PERSONS OTHER THAN THE TWO TRUSTEE DIRECTORS, IT IS ALSO A SWEEPING DIRECTION WITHOUT ANY COGENT MATE RIAL. THE AO HAS NOT EVEN BOTHERED TO REFER TO ANY VOUCHER OF TRAVELLING EXPENSES OF THE CURRENT ASSESSMENT YEAR WHICH HE IS CONSIDERING FOR DISALLOWANCE. IN THESE CIRCUMSTANCES, GIVING THE AO ANOTHER CHANCE TO MAKE A REASSESSMENT IS NOT SUSTAINABLE IN LAW. HENCE WE HOLD THAT THE SUSTENANCE OF DISALLOWANCE BY THE LEARNED CIT(APPEALS) ON THIS ISSUE CAN NOT BE UPHELD BY US. ACCORDINGLY WE DELETE THE SAID ADDITION. 24. APROPOS GROUND NO. 6: ADDITION OUT OF PROMOTIONAL & INAUGURAL EXPENSES. ON THIS ISSUE THE ASSESSEE DEBITED PROMOTIONAL / INAUGURAL EXPENSES OF RS. 1,58,410 / - . AO NOTED THAT THE ASSESSEE FAILED TO SUBSTANTIATE AS TO HOW THESE EXPENSES WERE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THAT CONSIDERING THE FACT THAT THE ASSESSEE HAD BE EN DEBITED PERSONAL EXPENSES OF TRUSTEES AS DISCUSSED IN THE ASSESSMENT ORDER, IN THEIR PROFIT AND LOSS ACCOUNT, IT 15 ITA NO. 147/NAG/2013 WAS ESSENTIAL TO SCRUTINIZE THE SAME IN DETAILS. THAT HOWEVER THE ASSESSEE DID NOT SUBMIT ANY SPECIFIC EXPLANATION FOR THE SAME. THAT THE O NUS WAS ON THE ASSESSEE TO EXPLAIN THE CORRECTNESS OF THE EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT. HENCE IN THE ABSENCE OF ANY SPECIFIC DETAILS, THE AO DISALLOWED 50% THEREOF.. THE DISALLOWANCE ON THIS ACCOUNT COMES TO RS.79,205/ - . 25. BEFORE THE LEARNED CIT(APPEALS) IT WAS FOR THE APPELLANT THAT THESE EXPENSES WERE FOR PUBLISHING ADVERTISEMENTS IN NEWSPAPERS, HOTELS AND OTHERS. THERE IS NO PERSONAL ELEMENT INVOLVED. COPY OF THE LEDGER ACCOUNT WITH DETAILS WAS FURNISHED TO THE AO, AND RELEVANT VOUC HERS FROM PART OF SEIZED RECORDS. 26. CONSIDERING THE ABOVE, LEARNED CIT(APPEALS) OBSERVED THAT IN VIEW OF THE EXPLANATION FILED, THE AO IS DIRECTED TO VERIFY THE PAYMENTS MADE FOR ADVERTISEMENTS TO NEWSPAPERS, AS CLAIMED, AND IF PAYMENTS ARE FOUND MADE AS CLAIMED, THE EXPENSES ON THIS COUNT BE ALLOWED. THE REMAINING EXPENSES ARE NOT JUSTIFIED ADEQUATELY AS TO HOW THEY WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF RUNNING THE HOSPITAL. ACCORDINGLY OTHER THAN THE HOSPITAL EXPENSES, THE AOS DISALLO WANCE @ 50% OF THE EXPENSES CLAIMED IS CONFIRMED. 27. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. 28. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT ON THE ABOVE ISSUE ALSO THE AO HAS MADE THE DISALLOWANCE WITHOUT BRI NGING ANY COGENT MATERIAL ON RECORD. LEARNED CIT(APPEALS) HAS GIVEN THE AO A SECOND INNING FOR REASSESSMENT BY DIRECTING THAT HE SHOULD VERIFY THE EXPENSES ONCE AGAIN. AS HELD BY US IN THE ABOVE WHILE DEALING WITH THE DISALLOWANCE ON TRAVELLING EXPENSES, WE FIND THAT DEHORSE ANY COGENT MATERIAL BROUGHT ON RECORD, DISALLOWANCE CANNOT BE MADE WHEN RELEVANT VOUCHERS WERE PART OF THE SEIZED RECORDS.FAILURE OF THE AOTO EXAMINE THOSE VOUCHERS CANNOT BE IGNORED. THE 16 ITA NO. 147/NAG/2013 AO CANNOT BE GIVEN A SECOND INNING FOR REASSESSMENT WITHOUT ANY COGENT MATERIAL. ACCORDINGLY WE DELETE THIS DISALLOWANCE. 29. APROPOS GROUND NO. 7: DEPRECIATION ON CARS. THE ISSUE OF AOS DECISION THAT THE VEHICLES OF THE TRUST WERE USED FOR PRIVATE PURPOSES OF THE TRUSTEES HAS ALREADY BEEN FO UND BY US TO BE DEVOID OF ANY COGENT MATERIAL AND THE SAME HAS BEEN FOUND BY US TO BE BASED ON SURMISES AND CONJECTURE. IT WAS SO HELD BY US WHEN WE WERE DISCUSSING THE DENIAL OF EXEMPTION U/S 11 BY THE AUTHORITIES BELOW HEREINABOVE IN PARA 21. ON THE SAME REASONING WE FIND THAT THERE IS NO DECISION FOR DISALLOWANCE OF 50% OF THE DEPRECIATION AS HELD BY THE AUTHORITIES BELOW.. 30.. APROPOS GROUND NO. 8 - DISALLOWANCE OF RS.10,000/ - ON ACCOUNT OF SALARY. ON HIS ISSUE THE AO REFERRED TO A STATEMENT OBTAINED FROM A PART - TIME ACCOUNTANT THAT HE WAS MAINTAINING ON TALLY SOFTWARE PERSONAL ACCOUNTS OF THE TRUSTEES APART FROM THAT OF THE TRUST. THE ASSESSEE IN THIS REGARD SUBMITTED THAT THE SAID PERSON WAS A PART TIME ACCOUNTANT AND THE TRUSTEES WERE ALSO PAYING HIM FOR THE SERVICES RENDERED TOTALING RS.6000/ - FROM THE PERSONAL ACCOUNTS. HOWEVER, THIS WAS DISREGARDED BY THE AUTHORITIES BELOW AND THE DISALLOWANCE OF RS. 10,000/ - WAS SUSTAINED FOR PERSONAL USE OF EMPLOYEES OF THE TRUST. 31. AGAINST THE ABOVE ORDER , ASSESSEE IS IN APPEAL BEFORE US. 32. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE HAVE ALREADY DEALT WITH THIS ISSUE WHILE DEALING WITH THE DISALLOWANCE OF EXEMPTION U/S 11 IN THE EARLIER PART OF THIS ORDER IN PARA 25 ABOVE. WE HAVE FOUN D THAT DISALLOWANCE IS NOT BASED UPON ANY COGENT MATERIAL EXCEPT A STATEMENT FROM A PART TIME ACCOUNTANT THAT HE WAS ALSO MAINTAINING THE ACCOUNTS OF TRUSTEES. THE FACT THAT THE SAID PART TIME ACCOUNTANT WAS ALSO PAID BY THE TRUSTEES SEPARATELY HAS TOTAL LY BEEN IGNORED BY THE AUTHORITIES BELOW. IN OUR CONSIDERED OPINION, THIS 17 ITA NO. 147/NAG/2013 ADDITION IS ALSO BASED ON SURMISES AND CONJECTURES. ACCORDINGLY WE DELETE THE SAME. 33. APROPOS GROUND NO.9 PERTAINING TO DISALLOWANCE OF EXPENDITURE ON REPAIR AND UPKEEP OF BUILDI NG. ON THIS ISSUE THE AO MADE A DISALLOWANCE OF RS. 10,61,157 / - INCURRED ON REPAIR AND UPKEEP OF BUILDING. THE AO WAS OF THE OPINION THAT SINCE THE BUILDING BELONGED TO THE TRUSTEE, EXCESSIVE EXPENDITURE WAS DONE WHICH WAS CAPITAL EXPENDITURE FOR THE PERS ONAL BENEFIT OF THE TRUSTEES. IN REMAND REPORT THE AO OBSERVED THAT THE EXPENSES CLAIMED BY ASSESSEE ON ACCOUNT OF REPAIR & UPKEEP TO BUILDING AMOUNTING TO RS.4,82,035/ - ARE CALLED FOR DURING THE COURSE OF ASSESSMENT PROCEEDING WHICH INDICATE THAT SUCH EXPENSES INCLUDE THE EXPENSES WHICH ENHANCE THE VALUE OF STRUCTURE AND ARE IN CAPITAL NATURE HENCE BEING THE EXPENDITURE INCURRED IS NOT REVENUE EXPENSES BY NATURE THE SAME IS DISALLOWED BY AO AND THE DEPRECIATION THEREON IS DULY DISALLOWED, THE ASSESSEES CONTENTION IN THIS RESPECT IS NOT ACCEPTABLE AND DESERVES TO BE REJECTED. ON THE ABOVE BASIS, LEARNED CIT(APPEALS) HAS SUSTAINED THE ADDITION. 34. WE HAVE ALREADY DEALT WITH THIS ISSUE WHILE DEALING WITH THE DISALLOWANCE OF EXEMPTION U/S 11 HEREIN AB OVE IN PARA 22 OF OUR ABOVE SAID ORDER. WE FIND THAT NO DETAIL OR COGENT MATERIAL WHATSOEVER HAS BEEN MENTIONED BY THE AO AS TO WHAT IS HIS BASIS FOR HIS FEELING THAT THE EXPENSES INCLUDE THE EXPENSES WHICH ENHANCED THE VALUE OF A STRUCTURE. EXCEPT US ING THIS PHRASE THE AO HAS NOT BOTHERED TO BRING ON RECORD ANY DETAIL WHATSOEVER. IN OUR CONSIDERED OPINION THIS ADDITION IS ALSO BASED UPON SURMISES AND CONJECTURE AND HENCE NOT SUSTAINABLE. ACCORDINGLY WE DELETE THE SAME. 35. APROPOS GROUND NO. 10 - ADD ITION OUT OF EDUCATIONAL EXPENSES. ON THIS ISSUE THE AO HAS MADE THE DISALLOWANCE HOLDING A S UNDER : 18 ITA NO. 147/NAG/2013 THE ASSESSEE DEBITED EDUCATIONAL EXPENSES OF RS.632685/ - . HOWEVER THE ASSESSEE DID NOT SUBMIT ANY DEGTAILS INCLUDING INSTITUTE FEE PAID INCLUDED THEREIN. THE ONUS WAS ON THE ASSESSEE TO EXPLAIN THE CORRECTNESS OF THE EXPENSES AND TO EXPLAIN THAT THE EXPENSES HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. HOWEVER THE ASSESSEE DID NOT SUBMIT ANY EXPLANATION. CONSIDERING THE FACT THAT THE ASSESSEE IS RUNNING A POST GRADUATE INSTITUTE ALSO WHOSE EXPENSES ARE DEBI8TED IN THE PROFIT AND LOSS A/C OF THE HOSPITAL ONLY, I DISALLOW ONLY 50% OF THESE EXPENSES. THE DISALLOWANCE COME TO RS. 316342 / - WHICH IS ADDED TO ITS TOTAL INCOME. 36. BEFORE THE LEARNED CIT(APPEALS), ASSESSEE MADE SUBMISSIONS AND THE LEARNED CIT(APPEALS) OBTAINED A REMAND REPORT OF THE AO AS UNDER : THE ASSESSEE MAINLY CONTENDS THAT ASSESSEE HAS CLAIMED A SUM OF RS.8,75,040/ - AS RESEARCH & EDUCATION EXPENSES AN D IT CONSIST OF PAYMENT TOWARDS PAYMENT OF STIPEND TO STUDENTS UNDERGOING POSTGRADUATE COURSES, PURCHASE OF MEDICINE AND RESEARCH WORK AND ARE WHOLLY TOWARD OBJECT OF TRUST. DURING THE COURSE OF ASSESSMENT PROCEEDING, IT IS OBSERVED FROM PROFIT & LOSS AC COUNT THAT AN AMOUNT OF RS.8,75,040/ - IS DEBITED ON ACCOUNT OF EDUCATIONAL EXPENSES AND NOT AS RESEARCH & EDUCATION EXPENSES AS CLAIMED BY ASSESSEE NOW. THE ASSESSING OFFICER VIDE NOTICE U/S 142(1) DT. 12 - 10 - 2010 HAS CALLED FOR THE DETAILS THEREOF, H OWEVER, EXCEPT THE COPY OF LEDGER ACCOUNT. ASSESSEE NEITHER JUSTIFY ITS CLAIM NOR SUBMIT ANY DOCUMENTARY EVIDENCE TO DEMONSTRATE THAT SUCH EXPENSES ARE GENUINELY INCURRED FOR THE OBJECT OF TRUSTEES. IN THIS RESPECT CERTAIN OBSERVATGION MADE DURING THE CO URSE OF SEARCH AND THE FACTS ARE DISCUSSED IN DETAIL BY ASSESSING OFFICER IN ITS SORDER AT PARA 13A HAS PROVED THAT AS TO HOW THE ASSESSEES CLAIM OF EXPENSES UNDER THE HEAD IS NOT WHOLLY FOR THE PURPOSE OF OBJECTS OF TRUST, CONSIDERING THIS FACT AND IN AB SENCE OF DOCUMENTARY EVIDENCE AND JUSTIFICATION IN RESPECT OF ASSESSEES CLAIM OF EXPENSES, BEING ONUS LIES ON ASSESSEE. THE ASSESSING OFFICE HAS CORRECTLY DISALLOWED 50% ASSESSEES CLAIM. THE ASSESSEES CONTENTION THEREFORE DESERVE TO BE REJECTED. IN RE BUTTAL OF THE REMAND REPORT THE APPELLANT TRUST SUBMITTED THAT PAYMENT OF EDUCATIONAL AND RESEARCH EXPENSES IS BEUOND DOUBT. IN EARLIER YEARS SUCH EXPENSES WERE ACCEPTED AS CLAIMED. PAYMENTS ARE THROUGH 19 ITA NO. 147/NAG/2013 BANKING CHANNEL; AND ARE REASONABLE CONSIDERING THE E XTENT OF OPERATION OF THE ASSESSEE TRUST. 37. CONSIDERING THE ABOVE, LEARNED CIT(APPEALS HELD AS UNDER: IN THE ABSENCE OF SUPPORTING DOCUMENTARY EVIDENCE TO DEMONSTRATE THAT SUCH EXPENSES ARE GENUINELY INCURRED FOR THE OBJECT OF TRUST, THE DISALLO WANCE MADE BY THE ASSESSING OFFICER IS IN ORDER AND IS CONFIRMED. THE APPELLANT IS REQUIRED TO SUPPORT ITS CLAIM FOR ANY EXPENSES BY WAY OF DOCUMENTARY EVIDENCE, AND THIS ONUS REMAINS UNDISCHARGED. THE DISALLOWANCE IS ACCORDINGLY UPHELD. 38. AGAINST T HE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. 39. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT FIRST OBJECTION OF THE AO IS THAT THE EXPENSES WERE DEBITED IN ACCOUNT OF EDUCATIONAL EXPENSES AND NOT AS RESEARCH AND EDUCATION EXPENSES. IN OUR CONSIDERED OPINION, THIS IS NO BASIS FOR DRAWING ANY ADVERSE INFERENCE. AO HAS REFERRED TO PARA 13A OF THE AOS ORDER WHICH PURPORTEDLY SHOWED THAT THE ASSESSEES CLAIM OF EXPENSES UNDER THIS HEAD IS NOT WHOLLY FOR THE PURPOSE OF OBJECT OF THE TRUST. THIS HAS BEEN FOUND BY US IN OUR ADJUDICAT ION ON DENIAL OF EXEMPTION U/S 11 IN PARA 28 ABOVE TO BE TOTALLY INAPPLICABLE. IN THE SAID PARAGRAPH 13A THE AO HAS DRAWN ADVERSE INFERENCE THAT BY ALLOWING PAYMENT OF STIPEND TO MBBS DOCTORS PURSUING THEIR POST GRADUATION, BY THE TRUSTEES, PERSONALLY THE TRUST HAS ENABLED THEM TO EVADE THE TAX. WE HAVE ALREADY FOUND THIS FINDING INCOMPREHENDIBLE. THIS, IN OUR OPINION, CANNOT BE ANY BASIS FOR MAKING DISALLOWANCE OF THE EXPENSES CLAIMED UNDER THIS HEAD. HENCE WE DELETE THE DISALLOWANCE ON THIS ACCOUN T. 20 ITA NO. 147/NAG/2013 4 0 . IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF NOV., 2015. SD/ - SD / - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 24 TH NOV., 2015. COPY FORWARDED TO : 1. SUSHRUT HOSPITAL AND RESEARCH CENTRE, 30 - A, CENTRAL BAZAR ROAD, RAMDASPETH, NAGPUR - 440 010. 2. ACIT, CENTRAL CIRCLE - 1(2), NAGPUR. 3. C.I.T., CONCERNED 4. CIT(APPEALS) - 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE.