DY.CIT (E) -2(1) , MUMBAI V. MUMBAI EDUCATIONAL TRUST, MUMBAI

ITA 1828/MUM/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9529 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 14-07-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Charitable institution; Principle of natural justice; Maximum Marginal Rate; Benefit of exemption; Reassessment proceedings; Set aside
• Section: 147; 148; 263; 10; 11; 143(3); 12AA; 10B; 250; 64; 113; 43; 48; 73; 72; 13(2); 13; 119; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI RAHUL CHAUDHARY, JM ITA No. 1828 to 1831/MUM/2022 (Assessment Years 2008-09 to 2011-12) D Y.CIT (E)-2(1 ) Room No. 608, 6 th Floo r, MT NL Exchan ge Bld g, Cu m balla H il l, Pedder Rd, Mum ba i-400 026 Vs. Mumbai Education Trust General Arun Kumar Vaidya Chowk, Bandra Reclamation, Bandra (W), Mumbai-400 050 (Appellant) (Respondent) PAN No.AAATM0985G Assessee by : Sh. Rajesh Dharap, Revenue by : Ms. Achal Sharma CIT DR Date of hearing: 22.09.2022 Date of pronouncement : 30.09.2022 O R D E R PER BENCH :- 01. These are four appeals filed by the Dy. Commissioner of Income-tax (Exemption), 2(1)(1), Mumbai, (the learned Assessing Officer) against the order passed by the National Faceless Appeal Centre, Delhi, wherein the appeal of the assessee filed against the assessment order passed under Section 143(3) read with section 147 of the Act dated 31 st March, 2016, were partly allowed. Page | 2 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 02. Facts related to all other three appeals for A.Y. 2009-10 to 2011-12 are identical. 03. Facts for A.Y. 2008-09 shows that assessee filed its return of income declaring a deficit of ₹15,36,50,493/- on 30 th September, 2008. The assessment under Section 143(3) of the Act was completed on 29 th December, 2020 at ₹nil. 04. Subsequently, notice was issued under Section 148 of the Act on 15 th Mach, 2015 for violation of the provision of Section 13 of the Act and therefore, the action under Section 147 of the Act was taken. 05. It was found during the F.Y. 2009-10 i.e. A.Y. 2010-11 that properties of the assessee were used by the specified persons. It was found that i. M/s Ideen Furniture Pvt. Ltd had occupied 8 th floor of the assessee‟s trust building at Bandra Reclamation without any payment. The above Pvt. Ltd. company is a related concern of Mr. Samir Bhujbal and Mr. Pankaj Bhujbal for the reason that Mrs. Vishaka Pankaj Bhujbal and Mrs. Samir Bujwal are the trustees of the trust. ii. Similarly, 10 th floor of Mumbai Education Trust campus Bandra which was stated to be a Guest House is utilized as Palacial palace of Bhujbal family and being utilized as their private residence without any compensation. Page | 3 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 06. During the course of assessment proceedings, it was noticed that there is a violation of the provision of Sections 13 of the Act and therefore, the provision of Section 11 and 12 of the Act are not applicable to the assessee and whole of the income is to be taxed. During the course of assessment proceedings, assessee raised several contentions but ultimately admitted that the market value of the compensation not charged by the assessee to the specified person i.e. Ideen Furniture Pvt Ltd is ₹31,18,800/- for F.Y. 2007-08, ₹ 34,15,080/- for F.Y. 2008-09, ₹37,48,176/- for F.Y. 2009-10 and ₹41,12,424/- for F.Y. 2010-11 and therefore, even otherwise, the exemption could be withdrawn only to that extent. 07. After considering the explanation of the assessee, the learned Assessing Officer determine the total income of the assessee at ₹15,87,76,567/- holding that exemption under Section 11 of the Act is denied to the assessee on the whole of the income. 08. Assessee preferred the appeal before the learned CIT (A). The learned CIT (A) held that benefit of exemption can be denied only to the extent of violation of section 13 of the Act. He held that i. with respect to use of Bunglow, the learned Assessing Officer has not been able to make out a cash by collecting the evidences that same is used for the purposes of the residence of Bhujbal family and therefore, relying on the finding of the learned Joint Charity Page | 4 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 Commissioner , he held that there is no violation of the provision of Section 13 of the Act. ii. With respect to the premises provided to Ideen Furniture Pvt. Ltd. without any charge, he affirmed that there is a violation of the provision of Section 13 of the Act. iii. He further held that despite the above violation, the exemption of the Section 11 of the Act cannot be withdrawn on the total income. Therefore, he held that assessee is entitled to exemption under Section 11 and 12 of the Act. However, with respect to fare, rent and expenses of the property used by the above company is required to be taxed at the maximum marginal rate. He therefore, partly allowed the claim of the assessee. 09. It was also found that for AY 2010-11 , trust has received dividend income of ₹5,000/-. This dividend income was not treated as exempt income under Section 10(33) of the Act. The claim of the learned Assessing Officer is that when the income of the learned Assessing Officer computed under Section 11,12 and 13 of the Act, the provision of Section 10 do not apply. The learned CIT (A) following the various judicial precedents held that dividend income of ₹5,000/- is exempt under Section 10(34) of the Act despite assessee having its income exempt under Section 11 and 12 of the Act. Page | 5 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 010. The learned Assessing Officer is aggrieved with the order of the learned CIT (A) is in appeal before us. 011. The learned Departmental Representative vehemently supported the order of the learned Assessing Officer. The assessee at the time of hearing was represented by Mr. Rajesh Dharap. 012. We have carefully considered the orders of the lower authorities. The only issue in this appeal is that while there is a violation of provision of Section 13(1)(c) and 13 (1)(d) of the Act whether the trust looses exemption „on whole of its income‟ or only that part of the amount covered under the violation. 013. The learned CIT (A) has dealt with this as under:- ―5. Ground of appeal 3 is against the action of the A.O. withdrawing the exemption under section 11 of the Income Tax Act, 1961. The appellant stated that AO erred in withdrawing the exemption U/s 11 of Act as property held under trust was given to interested party as defined in section 13(3) of the Act. The appellant further submitted in this ground of appeal without prejudice to the above ground to allow the benefit of the exemption U/s 11 of the Act to the extent of the acts resulting into non violation of section 13 of the Act. 5.1 The Assessing officer in the assessment order u/s 143(3) rws 148 dated 31.03.2016 for AY 2010-11 observed as under: Page | 6 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 4. The assessment was re-opened by issue of notice under section 143 and reasons for re- Opening recorded are provided to assessee as per its request and re-produced hereunder; "The return of income was filed on I5,10.2010 by declaring total income at Rs. NIL. The assessment was completed u/s, 143(3) on 30.03,2012 by determining total income at Rs.Nil and exemption u/s 11 of the IT of the IT. Act, was allowed to the assessee. Thereafter, the information and evidence has been received in the form of various documents like sub-metered bill, telephone bill, copy of return of income for A.Y. 2009-10 and A.Y. 2010-11 of M/s Ideen furniture Pvt. Ltd., etc. which shows that M/s . Ideen furniture Pvt Ltd. had occupied the 8* floor of Mumbai Education Trust at Bandra Reclamation, • 'It is farther noticed ihat.th& Mumbai Education Trust had not received any payment, whatsoever in. the form of rent, lease rent, or compensation from M/s. Ideen Furniture Pvt Ltd. It is also noticed thai M/s. Ideen Furniture Put. Ltd. is a related concern of Shri Samir Bhnjbal and Shri Pankoj Bhujbal i.e. Smt. Vishako. Pankaj Bhujbal (Wife of Shri Pankgj Bhujbal) and. Smt. Vishaka Pankaj Bhujbal (wife of Shri Pankaj Bhujbal) and smt. Shefali samir Bhujbal (wife of Shri Samir Bhujbal) who are the trustees of Mumbai Education Trust. From the evidences, it is Page | 7 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 further noticed that M/s. Ideen Furniture Pvt. Ltd. was very much there and occupied the 8 th floor of he Mumbai Education Trust building at Bandra Reclamation during the F.Y. 2009-10 related to A.Y. 2010-11. 3. The provision of section 11 of IT. Act, 1961 are as under: (Here whole of section is reproduced as it is and for the sake of brevity we have not reiterated here). ...... .... .... 4. The Provision of section 13ofI.T. Act, 1961 are as under: (Here whole of section is reproduced as it is and for the sake of brevity we have not reiterated it here). 5. In view of the provisions of section 13 of the IT Act, 1961, it is clear that exemption u/s 11 of the IT Act, 1961 cannot be applied in certain conditions as laid down in the provisions of section 13 of the IT Act. It is pertinent to mention here that if any part of the property of the trust is used by the related persons/concerns as defined in section 139) of the IT Act, 1961 without adequate Page | 8 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 consideration or NIL consideration, then the exemption u/s 11 of the IT Act cannot be allowed to the concerned trust. It is noticed that the M/s. Ideen Furniture Pvt. Ltd. which is a related concern as defined u/s.13(3) of the IT Act, occupied / used the property of Mumbai Education Trust without any consideration during the F.Y.2009-10 i.e. A.Y 2010-11, therefore, the provisions of section 11 of the IT Act cannot be applicable to the Mumbai Education Trust during the year under consideration. It is also noticed that at least Rs.9,09,48,642/- was exempted u/s 11 of the IT Act in the assessment order dated 30.12.2011 for A.Y.2009-10. In view of the above, it is clearly established that as the assessee trust has violated provisions of section 13 of the IT Act, therefore, the provisions of section 11 of the LT. Act cannot be allowed to the assessee." The assessee filed a reply objecting re-opening of assessment vide letter dated: 16/12/2015. The assessee mainly objected on the ground that assessee has furnished full disclosure during the course of assessment while order is passed under section 143(3). The contention of assessee was rejected vide speaking letter dated 18/01/2016.The contention of assessee is considered and found grossly incorrect. The information available indicates that the property of the trust was used "Free of Cost" by specified Page | 9 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 persons defined in section 13 of the Act. The assessee itself accepted that the fair Rent / value of the usage of property is Rs 37,48,176/- for the financial year 2009-10. Further there is no mention of use of Trust Property by the trustee in Form 10B (i..e. Audit Report) dated 18/07/2009 filed before the assessing officer. The auditor M/s Thakur Naik & Co. Chartered Accountants were specifically required to report on use of Trust Property by specified persons in Form 10B Part II Point 1 to 8. The auditor has reported "Nil" as response to all eight question auditor was to answer. These questions are not answered correctly by the auditors. Therefore contention of the assessee that they have disclosed all material facts truly and correctly before AO during the course of assessment is not correci.lt is also pertinent to mention that the procedure of supplying reasons of re-opening is strictly followed by the department. The assessee further submitted vide its letter dated: 15/03/2016 as follows; With regard to your honour's show cause as to why provision of section 13(3) and 13(2) should not be invoked in assessee's case as property of the trust is used by related party M/s. Ideen Furniture Pvt. Ltd and violated provisions U/s 13 of the Act, Page | 10 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 1. In this regard: life would like to reproduce the provisions of section 13(2)(b) of Income Tax Act, 1961 as under: (2) Without prejudice to the generality of the provisions of clause (c) 10 and clause (d) of sub-section: (1), the income, or the property of the trust or institution or any part of such income: or property shall, for the purposes of that clause, be deemed to have, been used or applied for the benefit of a person referred to in sub-section (3)," (a)..... (b) if any land, building or other property*1 of the trust Or institution is, or continues to be, made available, for the use of any person referred to in sub- section (3), for any period during, the previous year without charging adequate rent or other compensation; Further we would like to reproduce the provision of section of Section 13(3) which is as under: (3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following namely: (a) the author of the trust or the founder of the institution; Page | 11 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 (b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees; (c) where such author, founder or person is a Hindu undivided family, a member of the family; (cc) any trustee of the trust or manager (by whatever name called) of the institution; (d) any relative of any such author, founder, person, member, trustee or manager as aforesaid; (e) any concern in which any of the persons referred to in clauses (a),(b),(c),(cc) and (d) has a substantial interest. 2. In this regard it is submitted that the applicability of section 13(2)(b) arises when any property of the trust is made available to specified persons exclusively. If the property is made available to every one irrespective of whether they are specified persons or not, then provisions of section 13(2)(b) of the Income Tax Act, 1961 do not apply. It is submitted that your assessee has given the premised on rent ot other persons other than M/s Ideen Page | 12 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 Furniture Pvt. Ltd as well. In view of the same it is submitted that the provisions Section 13(2) are not applicable to the assessee. In this regard reliance is place on the following case law: George Educational, Medical and Charitable Society Vs. Asst. Director of Income Tax (2002) 80 ITD 619 (Coch) Charitable Trust-Exemption under s. 11- Bar of s. 13(1)(c)- Assessee society and using the residential house of its chairman as a guest- house for accommodating the chairman and governing council members whenever they visited Madras and also to her guests-It was not used as exclusive residence of the chairman after it was acquired on lease by the assessee- Provisions of s. 13(1) © and s. 13(2) were not attracted-Property in question was not made available of the use of any person referred to in sub-s.(3) of s. 13 within the meaning of s. 13(2) even if no rent or compensation was charged-Installation of various equipments in the guest house had also not benefited- Equipments were not installed at the personal residence of the specified persons-Assessee entitled for exception under s. 11-A.O. was not justified in adopting a segmented approach and allowing exemption to income from activities in Kerala and denying the exemption for the activities in Tamil nadu Page | 13 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 India Habitat Centre Vs. Join Director of Income Tax (2004) 87 TTJ(Del) 76. Main activity of assessee was to construct a building to provide space to various institutions engaged in the ‘Habitat’ concept which was subject to approval of Government and A.O. having held that assessee was entitled to exemption under s. 11 after detailed enquiry. CIT was not justified in the facts and circumstances of the case to exercise revisionary jurisdiction on the ground that provisions of s. 13 were violated. 3. Further without prejudice we would like to state that even if it is presumed that in the case of trust, trustee has used the property of the trust than in such case, without giving up the right of the trust to dispute on facts, trust would be made liable from Income for the relevant years where there has been alleged usage of the property as per the provisions of the Act. Charitable Trusts-Exemptions-Income of approved staff welfare funds- allowability Validity of Assessee filed return of income for assessment year 200-01 declaring total income as Nil by claiming exemption u/s 11 and 12/10(23AAA)- on scrutiny of Income and Expenditure Statement and Balance sheet, it was notice that assessee had made deposits with financial institutions-A.O. held that, as deposits of amount was not made as specified u/s 11(5), assessee was not entitled to benefit under said provision- Appellate Page | 14 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 Authority held, that violation of s 11(5) is due to mistaken impression of Secretary of fund- appellate Authority restricted denial of exemption denial of exemption u/s 10(23AAA) to amount of income generated out of Appellate Authority was justified in denying exemption to extent of income generated on investment made in violation of s 11(5) and not to entire income of Trust-held a reading of aforesaid provisions makes it clear that where any income received by any person on behalf of fund established for such purpose, for welfare of employees or their dependents and which fulfills that conditions that the fund applies its income or accumulates it for application, wholly and exclusively to objects for which it is established and invests the funds and contributions and other sums received by it in the forms or modes specified in sub S(5) of s 11 and the fund is approved by the Commissioner in accordance with Rules made in this behalf, the same would be exempted from payment of income tax as the said income does not form part of total income. In this case, both the financial institutions do not fall within s 11(5)-Therefore, in view of s10(23AAA), assessee would not be entitled to benefit of said provision in so far as income received by any person on behalf of fund established order passed by Appellate authorities cannot found fault with. Commissioner of Income Tax Vs. Fr. Mullers Charitable Institutions(2014) 363 ITR 0230: 28 Taxman 0319 (Karn) Page | 15 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 Revision-Revision by commissioner orders prejudicial to revenue-Assessee charitable Trust running large number of Institutions claimed exemption u/s 11- For A.Y. 2000-01 and 2001-02, assessee filed ‘Nil’ return of income on 31-10-2001 claiming exemption of income-A.O. held that amount given to M/s ‘A’ Ltd. as advance infringes provision of section 11(5) and hence, said amount was liable to be taxed-During pendency of appeal before CIT(A), Commissioner in exercise of his suo-motu power u/s 263 held that in view of violation of Section 11(5) entire income of assessee Trust, ought to have been assessed and they are not entitled for any exemption u/s 11 and 12 Tribunal set aside order passed by Commission-Held, Commissioner cannot invoke his revisional power to correct each and every mistakes committed by A.O.- Income, from investment or deposit made in violation of Section 11(5) is liable to be taxed- violation u/s 13(1)(d) does not tantamount to denial of exemption u/s 11 on total income of assessee. Commissioner of Income Tax Vs. Orpat Charitable Trust (2015) 230 TAXMAN 0066(Gujarat) Charitable Trusts-Income From Property Held for Charitable or Religious Purposes-Denial of Exemption- Assessee filed it return of income of different assessment years-AOs examined case of Assessee and denied exemption to Assessee on respective amount in connection with deposits made by it in contravention of S. 11(5) read with S. 13(1)-CIT(A) directed A.O. to restrict disallowance of exemption Page | 16 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 u/s.11 in respect of deposits in contravention of S. 11(5) read with S. 13(l)(d) as against denial of exemption on entire income by AO—ITAT upheld Order of CJT(A) and held that exemption could be denied only to extent of investment contravening "provisions of S. 11 and not entire amount—Held, CIT(A) very Clearly observed that provisions Section 11 (1)(a) are very clear and provide that income derived from property held under trust should not be included in income to extent it was applied for charitable or religious purposes (expenses incurred during the year) or accumulated/set apart to-be applied for that purpose in future out of 75% to which restriction u/s. 11(5) applied—ITAT had relied upon its own decision on similar issue rendered in ITA No. 644 to 646/Rjt/2003 dated 22.12.2003—HIGH COURT in complete agreement with reasoning adopted by CIT(A) as well as Tribunal— In case of Fr. Mutters Charitable Institutions (supra) Karnataka High Court, held that S. 13(l)(d) clears that it was only the income from such-investment, or deposit which had been made in violation of S. 11(5) that was liable to be taxed and -violation u/s 13(l)(d) does not result in denial of exemption u/s 11 to total income of Assessee— Where whole or part of relevant income was not exempted u/s 11 by virtue of violation of S. 13(1) Id) , tax should be levied on relevant income or part of relevant income at maximum marginal rate— Revenue's Appeal dismissed-. Page | 17 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 • Director O/Income Tax (Exemptions) Vs. Sheth Mafatlal Gagalbhal foundation Trust (2001) 249 ITR 0533 Liability in special cases- Assessment of trust- maximum marginal rate under s. 164(2), Proviso –As per proviso to s. 154(2) where whole or any part of relevant income of the trust is not exempt under s. 11 or s. 12 because of contravention of s. 13(1)(d), tax is chargeable on such income or part thereof at the maximum marginal rate-only the non-exempt portion of income would fall in the net of tax as if it was the income of an AOP- said proviso categorically refers only to that part of income which has forfeited exemption and not the entire income- This is also clarified by Circular No. 387, dt. 6 th July, 1984- Assessee trust was required to dispose of the shares held by it in a company by 31 st March, 1993 in view of s. 13(1)(d)(iii)- same not done- Maximum marginal rate will apply only to dividend income and not to entire income. Commissioner Of Income-Tax Vs. Working Women's Forum (2014) Charitable Trust-Procedure for registration – Assessee was a trust registered under Section 12 AA and was providing employment to poor women, assisting weaker section of the society for personal development, maintaining destitute homes, rehabilitation of victim of national calamities, etc- Assessee had invested a sum of Rs.20,000 in the share of MIOT Hospital Ltd- AO had passed an order Page | 18 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 denying the exemption u/s 11 and 12 on ground that since section 13(1)(d) recognizes investment only in specified assets, failure to invest in such specified business would disentitle the assessee for exemption- CIT(A) had allowed the assessee’s appeals that the entirely of the income of the assessee could not be denied of exemption-on appeal referring to the decision of the Bombay High Court in DIT (Exemptions) V. Sheth Mafatalal Gagalbhai Foundation Trust, the Tribunal had rejected the Revenue’s appeals- Held in (Exemptions) V. Sheth Mafatlal Gagalbhai Foundation Trust, It was held by Bombay High Court that Violation of section 1 1(5), read with section 13(1)(d) by the assessee would result in the maximum marginal rate of tax only on the dividend income on shares, which was not the recognized mode of investment and that the assessee would not be vested with marginal rate of tax on the entire income-therefore, the income other than dividend income had to be taxed only to the extent to which the violation was found by the AO-Respectfully following the said decision, High Court had confirmed the order of the Tribunal- Revenue’s appeal dismissed. 7. Further without prejudice we would like to state that even if it is presumed that in the case of trust, trustee has used the Property of the trust than in such case, without giving up the right of the trust to dispute on facts, trust would be made liable for Income for the relevant years where there has been Page | 19 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 alleged usage of the property as per the provisions of the Act, We would like to state that some portion of the premises was intermittently used for some period and for such usage without prejudice to our contention on the facts, disputes in various judicial forums and our stand therein, Market value of Compensation not charged (inclusive of Rent, Electricity and Water Charges) is worked out as under: F.Y. 2007-2008 Rs. 31,18,800/- PA F.Y. 2008-2009 Rs. 34,15,080/- PA F.Y. 2009-2010 Rs. 37,48,176/- PA F.Y. 2010-2011 Rs. 41,12,424/- PA It is submitted that the same should be taxed in the relevant years. 8. Further with regard to usage of 10 th floor of MET campus at Bandra by private residence by Bhujbai family and no compensation was paid MET, in this regard it is submitted that we are enclosing the sample copies of requisition form for occupancy of Guest Room which shows that the said guest house was used for the purpose of Trust- activities only. It is further submitted that rip such evidence was found regarding the usage of this guest house by the trustees and allegation were made 'only on the basis of .conjectures and surmises. Page | 20 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 In view of the above facts and clarification, it is prayed that since trust is carrying out the activities as per the Objects of the trust and therefore, proposal of your honour to deny the exemption U/s 11 of the Income Tax Act, 1961 is not according the basic principle of Law and against natural justice. Forfeiture of Exemption for use of property by specified persons: The reply of the assessee is considered and it is concluded that the assessee trust property was used by specified persons defined in Section 13. of the Act. It is also evident from the reply that assessee trust has admitted the fact that the property was used by the specified persons or the concern wherein specified persons are directors. Under the circumstances, Market value of Compensation not charged (inclusive of Rent, Electricity and Water Charges be included in the income of the trust for the year. Further in view of provisions of section 13, exemption availed earlier and available under section 11 is denied for the year under consideration. Therefore as a consequence accumulation under section 11 (l) and,(2) is also not available to the assessee. 5.2. The appellant vide its submission dated 09.02.2022 for AY 2010-11 submitted as under: "4.2 With regard to the above ground of appeal we would like to brief certain facts which are as under+  Your appellant has is engaged in providing the education in form of various courses and has Page | 21 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 building at Bandra Reclamation with the name MET Building where the education is imparted.  Further your appellant has rented few areas of its building located at Bandra Reclamation to outside parties from whom Rent and License fees are accounted in the books of accounts and which have been duly offered to tax. The copy of return of income, computation of total income and the copy of Annual accounts are enclosed as Annexure A  For the year under consideration it was alleged that 8th floor of the said appellant building was occupied by a company namely Ideen Furniture Pvt. Ltd without any consideration.  Further it was also alleged that 10th Floor of the appellant building was allegedly utilized for the family members of the Trustees.  With regard to facts of the case, it is submitted that at the outset, appellant trust prima facie does not accept that entire 8th floor has been used by M/s. Ideen Furniture Pvt. Ltd. We would like to state that M/s. Ideen Furniture Pvt. Ltd. was incorporated on 22.5.2006. We state that both the directors of M/s. Ideen Furniture Pvt. Ltd. i.e. Mrs. Shephali S Bhujbal as well as Mrs. Vishakha P Bhujbal were rendering honorary services to Mumbai Page | 22 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 Education Trust in their Administrative as well as conducting Cultural and Social programs being integral part of Academics of the overall Educational Program students of Mumbai Education Trust. In view of above, for Administrative convenience purpose, Telephone Charges of the same were paid by M/s. Ideen Furniture Pvt. Ltd.  It is pointed out that Income tax returns of Ideen Furniture Pvt. Ltd. for A.Y. 2009-2010 to A.Y. 2011-12 has been filed with address of 8th Floor, MET Building. In such case, it is to clarify that copy of return of Income filed for A.Y. 2008-2009 as well as for A.Y. 2012-13 till A.Y. 2014-2015 are enclosed for your ready perusal. It reflects the address other than MET address and therefore, for said assessment year, it can be inferred that the said M/s. Ideen Furniture Pvt. Ltd. was not occupying the said premises for A.Y. 20092010. Pls refer the Annexure B  It is submitted that Sales Tax Registration Certificate as well as Service Tax Registration Certificate also reflects the reflects registered office as 5th Floor, Militia Apartments, M. P. Road, Mazgaon Mumbai - 400 010 and not of MET address (copies enclosed). Annexure C  Further it is submitted that balance sheet of the Ideen Furniture Pvt Ltd also mentions the address other than MET (Appellant Trust). It is further submitted that books of accounts were Page | 23 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 also maintained at registered office. It is to state that bank statements (sample copy enclosed) also shows the address of registered office and not of MET. It is also to state that Tax audit report of A.Y. 2008-09 also reflects that the address of Militia Apartment as to the premises where books of accounts are maintained. Annexure D  It is submitted that as explained above that M/s. Ideen Furniture Pvt. Ltd. has not occupied 8th Floor for all the above mentioned years. It is submitted that all of the above details we filed before the Ld. AO vide submission dated 15.03.2016 which is enclosed at Annexure E  Further we would like to state that MET (Appellant Trust) as such is created for granting of education and which is the main activities / objects of the trust. It is submitted that no where it can be held that letting out of property concern where trustees are beneficiaries are not in accordance of the objects of the trust. It is submitted that without prejudice, even assuming that there is utilization of the trust property than in such cases, trust can be made liable for taxation of the such sum which has not been taken from trustees. However, the same cannot be considered as base to held that activities of the trust are neither genuine not carried out as per object of the trust and therefore it cannot be said that appellant trust Page | 24 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 has violated provisions, of section 13 of the Income Tax Act,1961 and therefore, the provisions of section 11 of the Income Tax Act,1961 cannot be denied to your genuine appellant.  It is submitted that the Ld. AO in the assessment order has merely stated that Appellant’s Trust Property was used by specified persons defined in section 13 of the Act without going in to the facts of the case. It is submitted that the appellant had duly made the submissions discussing the provisions of section 13 of the Act during the course of assessment proceedings and the same were not referred by the Ld. AO while passing the assessment order. Ld AO had abruptly mentioned that trust property was used by specified persons as defined in section 13 of the Income Tax Act, 1961. 4.3 In this regard we would like to reproduce the provisions of section 13(2)(b) of Income Tax Act, 1961 as under: "(2) Without prejudice to the generality of the provisions of clause (c) inland clause (d)] of sub- section (1), the income or the property 11 of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in sub-section (3)," Page | 25 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 1. 2. if any land, building or other property 11 of the trust or institution is, or continues to be, made available for the use of any person referred to in sub-section (3), for any period during the previous year without charging adequate rent or other compensation;" Further we would like to reproduce the provision of section of Section 13 (3) which is as under: (3) The persons referred to in clause (c) of sub- section (1) and sub-section (2) are the following, namely: 1. the author of the trust or the founder of the institution; 2. any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees; 3. where such author, founder or person is a Hindu undivided family, a member of the family; (cc) any trustee of the trust or manager (by whatever name called) of the institution; 1. any relative of any such author, founder, person, member, trustee or manager as aforesaid; Page | 26 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 2. any concern in which any of the persons referred to in clauses (a), (b), (c), (cc) and (d) has a substantial interest. 4.4 In this regard it is submitted that the applicability of section 13(2)(b) arises when any property of the trust is made available to specified persons exclusively. If the property is made available to everyone irrespective of whether they are specified persons or not, then provisions of section 13(2)(b) of the Income Tax Act, 1961 do not apply. It is submitted that your Appellant has given the premises on rent to other persons other than M/s Ideen Furniture’s Pvt. Ltd as well. In view of the same it is submitted that the provisions of section 13(2)(b) are not applicable to the appellant. In this regard reliance is place on the following case law: • George Educational, Medical and Charitable Society Vs. Asst. Director of Income Tax (2002) 80ITD 619 (Coch) Charitable trust-Exemption under s. 11'-Bar of s. 13(1)(c)-Assessee-society using the residential house of its chairman as a guest-house for accommodating the chairman and governing council members whenever they visited Madras and also other guests- it was not used as exclusive residence of the chairman after it was acquired on lease by the assessee-Provisions of s. 13(1)(c) and s. 13(2) were Page | 27 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 not attracted- property in question was not made available for the use of any person referred to in sub- s (3) of s. 13, within the meaning of s. 13(2) even if no rent or compensation was charged installation or the governing council members, directly or indirectly- equipments were not installed at the personal residence of the specified persons-Assessee entitled for exemption under s.11-AO was not justified in adopting a segmented approach and allowing exemption to income from activities in Kerala and denying the exemption for the activities in Tamil Nadu. • India Habitat Centre Vs. Joint Director of Income Tax (2004) 87 TTJ (Del) 76. Main activity of assesses was to construct a building to provide space to various institutions engaged in the 'Habitat' concept which was subject to approval of Government and AO having held that assessee was entitled to exemption under s. 11 after detailed enquiry, CIT was not justified in the facts and circumstances of the case to exercise revisionary jurisdiction on the ground that provisions of s. 13 were violated. 4.5 Further without prejudice we would like to state that even if it is presumed that in the case of appellant trust, trustee has used the Property of the trust then in such case, without giving up the right of the trust to dispute on facts, trust would be made liable for Income for the relevant years where there Page | 28 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 has been alleged usage of the property as per the provisions of the Act. 4.6 We would like to state that some portion of the premises was intermittently used for some period and for such usage without prejudice to our contention on the facts, disputes in various judicial forums and our stand therein, Market value of Compensation not charged (inclusive of Rent, Electricity and Water Charges) is worked out as under: F.Y. 2007-2008 Rs.31,18,800/- PA F.Y. 2008-2009 Rs.34,15,080/- PA F.Y. 2009-2010 Rs.37,48,176/- PA F.Y. 2010-2011 Rs.41,12,424/- PA It is submitted that the same was taxed in the relevant years in the relevant assessment orders. The working of the same were submitted during the course of assessment proceedings. Annexure F 4.7 In this regard we would like to state that your appellant does not accept that entire 8 th floor has been used by M/s. Ideen Furniture Pvt. Ltd. We would like to state that M/s. Ideen Furniture Pvt. Ltd. is incorporated on 22.5.2006. We state that both the directors of M/s. Ideen Furniture Pvt. Ltd. i.e. Mrs. Shephali S Bhujbal as well as Mrs. Vishakha P Bhujbal were rendering honorary services to Mumbai Education Trust in their Administrative as well as conducting Cultural and Social programs being integral part of Academics of the overall Educational Page | 29 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 Program students of Mumbai Education Trust. In view of above, for Administrative convenience purpose, Telephone Charges of the same were paid by M/ s. Ideen Furniture Pvt. Ltd. In this regard it is submitted that your Appellant has not violated that provisions of the Income Tax Act, 1961. 4.8 Further with regard to the usage of 10 th floor of MET campus at Bandra by private residence by Bhujbal family and no compensation was paid MET, in this regard it is submitted that we are enclosing the sample copies of requisition from for occupancy of Guest Room which shows that the said guest house was used for the purpose of Trust activities only Annexure G. It is further submitted that no such evidence was found regarding the usage of the guest house by the trustees and allegation were made only on the basis of conjectures and surmises. The above details were submitted to the Ld. AO vide submission dated 15.03.2016. 4.9 It is submitted that without prejudice even if the Appellant has violated the provisions of section 13(2) or 13(3), then the Ld. AO should have tax the defaulted amount at maximum marginal rate without denying the benefit of exemption U/s 11 of the Income Tax Act, 1961. It is submitted that to the extent of violation, the exemption shall be denied and in this regard we are relying on the following case laws: Director Of Income Tax Vs. Agrim Charan Foundation (2002) 253ITR 0593 Page | 30 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 Charitable trust-Exemption under s. 11-Contravention of s. 11(5)-Tribunal found that although the assessee-trust had made deposits with two concerns relying on their misrepresentation that the concerns were authorised to accept deposits from charitable trusts, there were no mala fides and the assessee- trust immediately withdrew the deposits on becoming aware of the fact that the said concerns were not permitted to receive deposits - Therefore, there is no infirmity in the order of the Tribunal allowing assessee's claim for exemption under s. 11 requiring any Interference Commissioner Of Income Tax Vs. Ksrtc Employees Death -Cumretirement Benefit Fund (2014) 98 DTP 0133 (Karn) : (2014) 225 TAXMAN 113 (Karnataka) Charitable Trusts-Exemptions-Income of approved staff welfare funds- Allowability-Validity of-Assessee filed return of income for assessment year 200001 declaring total income as Nil by claiming exemption u/s 11 and 12/10(23AAA)- On scrutiny of Income and Expenditure Statement and Balance Sheet, it was noticed that assesses had made deposits with financial institutions-AO was of view that, said Institutions did not purview of s 11(5)-AO held that, as deposits of amount was not made as u/s 11(5), assessee was not entitled to benefit under said provision-Authority held that, violation of s 11(5) is due to mistaken impression of Secretary of Fund- Appellate Authority restricted denial of exemption u/s Page | 31 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 10(23AAA) to amount of income generated out of Investment of Rs. 1,40,00,000 in violation of s 11(5)- Tribunal held that, Lower Appellate Authority was justified in denying exemption to extent of income generated on Investment made in violation of s 11 (5) and not to entire income of Trust-Held, a reading of aforesaid provisions makes it clear that where any income received by any person on behalf of a fund established for such purpose, for welfare of employees or their dependents and which fulfills the conditions that the fund applies its income or accumulates it for application, wholly and exclusively to objects for which it is established and invests the funds and contributions and other sums received by it in the forms or modes specified in sub-s (5) of s 11 and the fund is approved by the Commissioner in accordance with Rules made in this behalf, the same would be exempted from payment of income tax as the said income does not form part of total income-ln this case, both the financial institutions do not fall within s 11 (S)-Therefore, in view of s 10(23AAA), assessee would not be entitled to benefit of said provision insofar as income received by any person on behalf of fund established-Order passed by Appellate Authorities cannot be found fault with. Commissioner Of Income Tax Vs. Fr. Mullers Charitable Institutions (2014) 363 ITR 0230 : (2015) 28 TAXMAN 0319 (Karn) Revision - Revision by commissioner of orders prejudicial to revenue - Assessee Charitable Trust Page | 32 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 running large number of Institutions claimed exemption u/s. 11- For A.Y. 2000-01 and 2001-02, assessee filed 'Nil' return of income on 31-10-2001 claiming exemption of income-AO held that amount given to M/s. "A" Ltd. as advance infringes provision of section 11(5) and hence, said amount was liable to be taxed-During pendency of appeal before CIT(A), Commissioner in exercise of his suo-motu power u/s. 263 held that, in view of violation of section 11(5), entire income of assesee Trust ought to have been assessed and they are not entitled for any exemption u/s. 11 and 12 - Tribunal set aside order passed by Commissioner - Held, Commissioner cannot invoke his revisional power to correct each and every mistakes committed by AO - Income, from investment or deposit made in violation of Section 11(5), is liable to be taxed - Violation u/s. 13(l)(d) does not tantamount to denial of exemption u/s. 11 on total income of assessee. Commissioner Of Income Tax Vs. Orpat Charitable Trust (2015) 230 TAXMAN 0066 (Gujarat) Charitable Trusts-Income From Property Held For Charitable Or Religious Purposes-Denial of Exemption-Assessee filed it return of income for different assessment years-AOs examined case of Assessee and denied exemption to Assessee on respective amounts in connection with deposits made by it in contravention of S. 11 (5) read with S. 13(1)-CIT(A) directed AO to restrict disallowance of exemption Page | 33 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 u/s.11 in respect of deposits in contravention of S. 11(5) read with S. 13(1)(d) as against denial of exemption on entire income by AO - ITAT upheld Order of CIT(A) and held that exemption could be denied only to extent of investment contravening provisions of S. 11(5)and not entire amount-Held, CIT(A) very clearly observed that provisions of Section 11(1)(a) are very clear and provide that income derived from property held under trust should not be included in income to extent it was applied for charitable or religious purposes (expenses incurred during the year) or accumulated/set apart to be applied for that purpose in future out of 75% to which restriction u/s. 11(5) applied-ITAT had relied upon its own decision on similar issue rendered in ITA No. 644 to 646/Rjt/2003 dated 22.12.2003-HIGH COURT in complete agreement with reasoning adopted by CIT(A) as well as Tribunal- In case of Fr. Mullers Charitable Institutions (supra) Karnataka High Court held that S. 13(1)(d) clears that it was only the income from such investment or deposit which had been made in violation of S. 11(5) that was liable to be taxed and violation u/s 13(1)(d) does not result in denial of exemption u/s 11 to total income of Assessee- Where whole or part of relevant income was not exempted u/s 11 by virtue of violation of S. 13(1) (d), tax should be levied on relevant income or part of relevant income at maximum marginal rate- Revenue's Appeal dismissed. Director Of Income Tax (Exemptions) Vs. Sheth Mafatlal Gagalbhai Foundation Trust (2001) 249 ITR Page | 34 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 0533 Liability in special cases-Assessment of trust- Maximum marginal rate under s. 164 (2), proviso-As per proviso to s. 164(2) where whole or any part of relevant income of the trust is not exempt under s. 11 or s. 12 because of contravention of s. 13(1)(d), tax is chargeable on such income or part thereof at the maximum marginal rate — Only the non-exempt portion of income would fall in the net of tax as if it was the income of an AOP—Said proviso categorically refers only to that part of income which has forfeited exemption and not the entire income—This is also clarified by Circular No. 387, dt. 6th July, 1984 — Assessee-trust was required to dispose of the shares held by it in a company by 31st March, 1993, in view of s. 13(1)(d)(iii) — Same not done — Maximum marginal rate will apply only to dividend income and not to entire income. Director Of Income Tax (Exemptions) Vs. Sheth Mafatlal Gagalbhai Foundation Trust (2001) 249 ITR 0533 Liability in special cases—Assessment of trust— Maximum marginal rate under s. 164 (2), proviso—As per proviso to s. 164(2) where whole or any part of relevant income of the trust is not exempt under s. 11 or s. 12 because of contravention of s. 13(1)(d), tax is chargeable on such income or part thereof at the maximum marginal rate—Only the non-exempt portion of income would fall in the net of tax as if it was the income of an AOP—Said proviso categorically refers only to that part of income which has forfeited Page | 35 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 exemption and not the entire income—This is also clarified by Circular No. i My, 1984—Assessee-trust was required to dispose of the shares held by i company by 31st March, 1993, in view of s. 13(1)(d)(iii)— Same not done— i marginal rate will apply only to dividend income and not to entire income Commissioner Of Income-Tax Vs. Working Women's Forum (2014) 365 ITR 0353 (Madras) Charitable Trust —Procedure for Registration— Assessee was a trust registered under section 12AA and was providing employment to poor women, assisting weaker sections of the society for personal development, maintaining destitute homes, rehabilitation of victim of national calamities, etc — Assessee had invested a sum of Rs.20,000 in the share of MIOT Hospitals Ltd — AO had passed an order denying the exemption u/s 11 and 12 on ground that Since section 13(1)(d) recognizes investment only in specified assets, Failure to invest in such specified business would disentitle the assessee for exemption— CIT(A) had allowed the assessee's appeals that the entirety of the income of the assessee could not be denied of exemption — On appeal Referring to the decision of the Bombay High Court in DIT (Exemptions) v. Sheth Mafatlal Gagalbhai Foundation Trust ,the Tribunal had rejected the Revenue's appeals — Held, in (Exemptions) v. Sheth Mafatlal Gagalbhai Foundation Trust ,it was held by Bombay High Court that violation of section Page | 36 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 11(5), read with section 13(1)(d) by the assessee would result in the maximum marginal rate of tax only on the dividend income on shares, which was not the recognised mode of investment and that the assessee would not be vested with marginal rate of tax on the entire income—Therefore, the income other than dividend income had to be taxed only to the extent to which the violation was found by the AO — Respectfully following the said decision, High Court had confirmed the order of the Tribunal — Revenue's appeal dismissed. 4.10 Further it is submitted that during the course of inspection ordered by the Hon'ble Charity Commissioner at the appellant trust premises. It was found out that the 8th and 10th floor is vacant and not occupied by anyone and same has been specifically mentioned in the inspection report issued by the Hon'ble Charity Commissioner dated 11.04.2012. Annexure H. The said inspection report is in Marathi Language and the same is translated in English for better understanding enclosed at Annexure I. It is submitted that in such report of Hon'ble Charity Commissioner has stated that the 8 th floor and 10 th Floors were not occupied by anyone. 4.11 It is submitted that the appellant trust has been continuously working towards achieving the objectives of trust and not to provide individual benefit to the specified persons or a particular section Page | 37 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 of the society. Further we would like to reproduce the definitions of Charitable purpose which states that:- "charitablepurpose" includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce 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, unless— 1. such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and 2. the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year; 4.12 From the above definitions and discussions it can substantiated that the objects of the Trust are the charitable object as the assesse trust is engaged Page | 38 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 in imparting education activities which is covered under the definitions of charitable objects. It is submitted that there is no observation of the Ld. AO regarding any irregularities relating to the functioning and objects of the Appellant Trust. It is therefore submitted that the appellant shall ne be deprived of the benefits of provisions of section 11 of the Act merely due to violation of provisions of section 13 of the Act. 4.13 We further place reliance in the case of IILM Foundation Vs Asst. Director of Income Tax (Exemption) (ITAT Delhi) (ITA No.1142/DEU2011 Date of order 24/12/2020) where it was held that where there was violation o f the provision o f section 13, the entire exemption under section 11 would not be denied instead expenditure which could not be treated as application of income and in violation under section 13, same should alone be disallowed. 4.14 Also in case of Span Foundation vs. ITO Delhi HC 178 Taxman 436 held that in case of alleged violation u/s. 13, benefit under section 11 would not be available only to this extent of application of income of property for the benefit of person referred to in section 13(3) 4.15 Conclusion In view of the above facts, case laws and clarifications, it is prayed that since trust is carrying out the activities as per the Objects of the trust and Page | 39 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 therefore, the action of the LD. AO to deny the exemption U/s 11 of the income Tax Act, 1961 is not according to the basic princpfes of Law and against natural justice to the appellant trust. Therefore it is requested before your honour to delete the addition made by the Ld. AO and the same should be allowed to the appellant trust." 5.2.1 The appellant vide its submission dated 04.05.2022 for AY 2010-11 submitted as under: "With reference to the above, we would like to submit additional submission w.r.t submission dated 09/02/2022 under Ground No. 3, as under: Before the assessee is charged and held liable on the ground of utilising the trust property for the persons specified in section 13(3) of Income Tax Act and further holding the same as its violation and withdrawing the exemption under section 11 – It is pertinent to note that Mr. Sun// Karve ,£x Trustee of the Mumbai Educational Trust (hereinafter referred to as the "said trust" for the sake of brevity) who had been ceased to be a trustee on 27.02.2012, had filed a bogus, baseless, vexatious and false case in the year 2012 against the said trust and other trustees of the said trust before the Hon'ble Charity Commissioner, Maharashtra State at Mumbai, thereby alleging misuse of trust property premises situate at 8th floor of said trust building by the trustees for the purpose and for the benefit of M/s Ideen Furniture and have further alleged that the same has resulted Page | 40 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 in the losses to the trust and further the said trust could not expand its objects. The present and then trustees of the said trust have objected and defended the said trust and have produced all the material evidences and proofs to substantiate and justify their case before Charity Commissioner, Mumbai. It is necessary to consider that 8th Floor premises of the said trust building was absolutely vacant and unused till 2007, rather the same could not have been used or let out for commercial purpose. The said ex trustee was in day to day management and in charge of affairs and administration of trust and its properties, who himself suggested and encouraged the other trustees to use the said 8th floor premises temporarily for M/s Ideen Furniture as Godown till it is put in use for educational purpose. Relying upon and having a full faith in said ex trustee, the said trust allowed M/s Ideen to use the said 8th floor premises. Accordingly, at some portion few material was stored and some employees were using the said premises. M/s Ideen was using some portion of one wing of 8th floor which was unused by the said trust. For some period M/s Ideen had occupied the said premises and as soon as M/s Ideen had come to know that the said trust required the said premises for its educational purpose, the said M/s Ideen had vacated the said 8th floor premises prior to February, 2012. The said ex trustee keeping and having grudge in mind towards other trustees and to usurp the said trust and its properties had filed a false case against the said trust before Charity Commissioner, Page | 41 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 Maharashtra state, Mumbai, who is custodian of trust and its properties as well as statutory authority to take cognizance of all matters pertaining to the misuse of trusts properties under the provisions of the Bombay Public Trust Act. The said trust while defending the said cases filed by ex-trustee have candidly and honestly made submission before Charity Commissioner, Mumbai, as to use of some portion of 8th floor premises for some period by M/s Ideen furniture and have further submitted all evidences and proofs to substantiate and justify that the act to permit M/s Ideen was never intentional and or deliberate to cause any losses to the said trust and or to make any personal gains or benefit. The said trust has also represented that said trust did not yield any kind of income or rent nor any trustees of the said trust made any personal gains our of such use. In fact at relevant period said trust was not allowed and permitted to let out the said 8th floor premises to any one and could not charge any rent from it and therefore, question of causing any losses to trust or making personal income which could not be accounted for objects of trust does not arises at all. The said trust has also represent that M/s Ideen was always ready to compensate the said trust, if at all the said trust was losing its income but the said trust was not in a position to let out the same and yield any income therefrom which can be utilized for the objects of the said trust. The said trust has also Page | 42 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 represented that the act on the part of the said trust and trustees was never deliberate or wilful actuated by dishonest or corrupt motives and intentions to misuse trust property for personal gains and causing losses to the said trust. Further the trust has also represented that the said trust has never breached any of the provisions of law. It is to be noted that that while defending the said cases filed against the trust before the Charity Commissioner, Mumbai, the said trust has candidly and honestly made admissions and submissions as to use of 8th floor premises by M/s Ideen since the said trust and its trustees had never any ill motive and or intention to appropriate the same for personal gains and or benefits and the said 8th floor was vacated immediately on the requirement of the said trust to utilise the same for educational purpose. During the inquiry of the said cases against trust and trustees, in the month of April, 2012, the Charity Commissioner had also make inspection of the said 8th floor through its appointed officer, upon which the said officer found that the 8th floor had already been put to use by said trust for educational purpose and the construction of class room was in progress at the relevant time. It is pertinent to note that after long battle of 10 years the said cases filed against the said trust have been concluded and decided by Order dated 30.03.2022 passed by the Hon'ble Charity Commissioner, Mumbai, by which the issues of Page | 43 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 alleged misuse of said 8th floor premises of trust property by M/s Ideen and further causing loss to trust and making personal gains by trustees have been decided and determined. While passing the said order the Ld. Charity Commissioner, Mumbai, has disapproved the allegation of misuse of 8th floor premises and further held in order that the same was not malafide and ill motive. The Ld. Charity Commissioner, Mumbai, have also disapproved the allegation that the trustees have improperly dealt with the trust properties causing loss to the said trust and thereby benefiting gain to themselves and their family members. The Ld. Charity Commissioner, Mumbai, have also disapproved the allegation that the said 8th floor premises and the said trust could have yield and or achieve rent by letting out for same for commercial use on rent. In the light of observations, inferences and conclusions drawn by the Ld. Charity Mumbai, while deciding the issues related to misuse of 8th floor premises of baking t is proved and established that at no point of time the said trust could any rent from the said premises which could have been utilised for the said tartherproved and established that the act of the said trust permitting M/s Ideen to occupy the 8th floor premises for some period and to some extent was not dishonest and coupled with ill motive to derive personal gains. Page | 44 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 It view of the said order passed by the Ld. Charity Commissioner, Mumbai, issue pertaining to 8 th floor premises of the said trust and its use by M/s Ideen is resolved and settled with legal binding conclusion which establishes and demonstrates that the said trust could not be and cannot be held liable and or accounted for any assessment and or charge on the count of commercial use of the said premises by the said trust for the benefit of interested persons and further any concessions and exemptions granted to said trust shall not be withdrawn on the pretext of non disclosure of any income to trust and or trustees by letting the said premises to family members of the trustees of the said trust, rather it would be disregard of order passed by Charity Commissioner, Mumbai, which is binding on said trust and its trustees. The assess is aware that various representations have been made before this authority (IT authority) on behalf of the said trust wherein the said trust has consistently taken up stand that 8th Floor premises was occupied by M/s Ideen for some period and to some extent, however, the stand maintained by the assess was in line with the candid and honest disclosure by the assess before the Ld. Charity Commissioner, Mumbai, as to incidences which had taken places in respect of the said trust which were non deliberate on the part of the said trust and in view of the said stand and admissions the Assess has been charged with levy by computing the notional rent in respect of 8th floor premises of the said trust, which is assumed that it could have been yield by the Page | 45 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 said trust and further the assess is also charged with violation of section 13 of income tax act and liable for withdrawal of exemption, but for now, the Hon'ble Charity Commissioner, Mumbai, after appreciation and consideration of all material, proofs and evidences submitted by the said trust, having detail inquiry as to facts and circumstances, has settled the said issue and the said trust's act allowing M/s Ideen to occupy 8th floor premises of the said trust is decided and declared as non-deliberate act and further held that the said trust has not improperly dealt with the said premises by allowing M/s Ideen, which consist of family members of trustees of the said trust and therefore, even for the purpose of the present assessment it cannot be held that there is any kind of breach and or violation by the said trust of any of the provisions of the income tax act and further the said trust cannot be made liable for withdrawal of exemption on the pretext that the trust property was given to any interested person as defined in section 13 of the income tax act." Further the appellant has also submitted the copy of order of Joint Charity Commissioner, Greater Mumbai, Region, Mumbai dated 30.03.2022 (Page 1 to 193) 5.3 The reassessment order, submissions made by the appellant and various judicial pronouncements relied upon by the appellant and the assessing officer in the assessment order have been carefully considered. The A.O. has given a finding that the concern wherein specified persons are directors i.e. Page | 46 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 M/s Ideen Furniture Pvt. Ltd had occupied the 8 th floor of MET at Bandra Reclamation, Mumbai was based on evidence and the assesseee trust has admitted to this fact. As per the AO the appellant had not received any payment whatsoever in the form of rent, lease rent or compensation from M/s. Ideen Furniture Pvt. Ltd. the AO has alleged that the 10 th Floor of MET Campus at Bandra which was sanctioned as a guest house by the MCGM was been utilized as the private residence of the family of the Trustees for which no compensation of whatsoever nature has been paid to the appellant trust. 5.3.1 The appellant has made various contentions vide submissions dated 09.02.2022 and 04.05.2022. The submissions of the appellant can be categorized into following contentions. 1) The appellant prima facie does not accept that entire 8 th floor has been used by M/s. Ideen Furniture Pvt. Ltd. Both the directors of M/s. Ideen Furniture Pvt. Ltd. Mrs. Vishaka P. Bhujbal and Mrs. Shefali S. Bhujbal were rendering honorary services to the M.E.T in its administrative work as well as they were conducting cultural & social programs for the students of M.E.T. 2) The returns of income of M/s Ideen Furniture Pvt. Ltd. for AY 2008-09 as well as for AY 2012-13 till AY 2014-15 have been filed with the address other than MET address. Further Sales Tax Registration Certificate as well as Service Tax Registration Certificate of M/s. Ideen Furniture Pvt. Ltd. reflect the Page | 47 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 address as 5 th Floor, Militia Apartments, M.P. Road, Mazgaon, Mumbai and not of M.E.T. The books of accounts of M/s. Ideen Furniture Pvt. Ltd. were maintained at Mazgaon premises. 3) With regard to the usage of 10 th Floor of M.E.T. Campus at Bandra by family of the Trustee and no compensation was paid to MET. The same was used as guest house for faculty and sample copies of requisition slips were submitted before the A.O. during the course of reassessment proceedings. 4) The applicability of Section 13(2)(b) arises when any property of the trust is made available to specified persons exclusively. If the property is made available to everyone irrespective of whether they are specified persons or not, then provisions of Section 13(2)(b) of the Act do not apply. It has given the premises on rent to other other than M/s Ideen Furnitures Pvt Ltd as well, in view of the same the provisions of section 13(2)(b) are not applicable to the appellant. In this regard appellant has placed reliance on two case laws:- (i) George Educational, Medical and Charitable society vs DIT(2002) 80 ITD 619(Cochin) (ii) India Habitat Centre vs Joint Director of I.T.(2004)87 TTJ76(Delhi) 5) The Ld. A.O. in the assessment order has merely stated that the Trust property was used by the specified persons defined in Section 13 of the Act without going in to the facts of the case. The AO had abruptly Page | 48 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 mentioned that the trust property was used by specified persons as defined in Section 13 of the Income-tax Act without dealing the submissions/contentions of the appellant. 5.3.2 The appellant vide submission dated 04.05.2022 made additional submission which gives the background of the legal cases of M.E.T. which were filed before the Hon'ble Charity Commissioner, Maharashtra State at Mumbai in the year 2012 by the ex-trustee of the MET Shri Sunil Karve. The applicant Sh. Sunil Karve alleged before the Charity Commissioner that misuse of the Trust property by the four trustees resulting in the losses to the trust. The respondent Trust and its four trustees have defended the charges before the Joint Charity Commissioner, Mumbai. The appellant has also submitted the copy of the order of Joint Charity Commissioner dated 30.03.2022. The appellant has made further contention which is as under :- "the Hon'ble Charity Commissioner, Mumbai, after appreciation and consideration of all material, proofs and evidences submitted by the said trust, having detail inquiry as to facts and circumstances, has settled the said issue and the said trust's act allowing M/s Ideen to occupy 8th floor premises of the said trust is decided and declared as non-deliberate act and further held that the said trust has not improperly dealt with the said premises by allowing M/s Ideen, which consist of family members of trustees of the said trust and therefore, even for the purpose of the present Page | 49 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 assessment it cannot be held that there is any kind of breach and or violation by the said trust of any of the provisions of the income tax act and further the said trust cannot be made liable for withdrawal of exemption on the pretext that the trust property was given to any interested person as defined in section 13 of the income tax act." 5.3.3 Without prejudice to the above contentions, even if the appellant has violated the provisions of Section 13(2) or 13(3), then the A.O. should have taxed the defaulted amount at the maximum marginal rate without denying the benefit of exemption u/s. 11 of the Act. The appellant has relied on the following case laws in this regard: (i) Director of Income Tax Vs. Agrim Charan Foundation (2002) 253 ITR 0593 (ii) Commissioner Of Income Tax Vs. Ksrtc Employees Death –Cum retirement Benefit Fund (2014) 98 DTR 0133 (Karn): (2014) 225 TAXMAN 113 (Karnataka) (iii) Commissioner of Income Tax Vs. Fr. Mullers Charitable Institutions (2014) 363 ITR 0230 : (2015) 28 TAXMAN 0319 (Karn) (iv) Commissioner of Income Tax Vs. Orpat Charitable Trust (2015) 230 TAXMAN 0066 (Gujarat) Page | 50 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 (v) Director of Income Tax (Exemptions) Vs. Sheth Mafatlal Gagalbhai Foundation Trust (2001) 249 ITR 0533 (vi) Commissioner of Income-Tax Vs. Working Women's Forum (2014) 365 ITR 0353 (Madras) (vii) IILM Foundation Vs Asst. Director of Income Tax (Exemption) (ITAT Delhi) (ITA No. 1142/DEL/2011 Date of order 24/12/2020) (viii) Span Foundation vs. ITO Delhi HC 178 Taxman 436 5.3.4 Before proceeding further the admissibility of additional submission/evidence dated 04.05.2022 requires to be adjudicated. The additional submission points to the fact that The ex-trustee Shri Sunil Karve filed various draft charges along with evidences in the proceeding No.4 of 2012 under section 41D of the Maharashtra Public Trust Act, 1950 before the Charity Commissioner, Maharashtra. The information and evidence received by the A.O. in the form of various documents like sub-metered bill, telephone bill, copy of return of income for AY 2009-10 and AY 2010-11 of M/s. Ideen Furniture Pvt. Ltd. is identical to the documents/evidences furnished before the Hon'ble Charity Commissioner, Maharashtra. This fact makes it abundantly clear that the reasons for reopening of assessments for AY 2008-09 to AY 2011-12 originate from the evidences furnished before the Charity Commissioner, Maharashtra. After a long legal battle of 10 years the said cases filed against the trust have been concluded and decided by the Joint Charity Commissioner, Greater Mumbai Region, Mumbai vide Page | 51 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 order dated 30.03.2022. The order of Joint Charity Commissioner has been delivered on 30.03.2022 therefore it was not possible for the appellant to produce the same before the assessing officer. The admissibility of the additional submission/evidence by the appellant is being looked into after discussing relevant Judicial pronouncements. 5.3.4.1 The Hon'ble Supreme Court in the case of Jute Corporation of India Ltd. Vs. CIT I87 ITR 688 (S.C) has observed and held as under: "The Act does not contain any express provision debarring an assessee from raising an additional ground in appeal and there is no provision in the Act placing restriction on the power of the appellate authority in entertaining an additional ground in appeal. In the absence of any statutory provision, the general principle relating to the amplitude of appellate authority's power being co-terminus with that of the initial authority should normally be applicable. If the tax liability of the assessee is admitted and if the ITO is afforded opportunity of hearing by the appellate authority in allowing the assessee's claim for deduction on the settled view of law, there appears to be no good reason to curtail the powers of the appellate authority under section 251(1) (a). Even otherwise an appellate authority while hearing appeal against the order of subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence Page | 52 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 of any statutory provision the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There appeared to be no good reason to justify curtailment of the power of the AAC in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the ITO. There may be several factors justifying raising of such new plea in appeal, and each case has to be considered on its own facts. If the AAC is satisfied he would be acting within his jurisdiction in considering the question so raised in all its aspects. Of course, while permitting the assessee to raise an additional ground, the AAC should exercise his discretion in accordance with law and reason. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The satisfaction of the AAC depends upon the facts and circumstances of each case and no rigid principles or any hard and fast rule can be laid down for this purpose" 5.3.4.2 Hon'ble Karnataka High Court in the case of Shri Shankar Khandasari Sugar Mills vs. CIT 193 ITR 669(Karnataka) has observed as under: "The revenue must act fairly in the matter of assessment as much as it is interested in collecting the tax. In the absence of any prejudice to the revenue, and since the basis of tax under the Act is to levy tax, as far as possible, on the real income, the approach should be to be liberal in applying the Page | 53 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 procedural provisions of the Act. An appeal is but continuation of the original proceeding and what the ITO could have done, the appellate authority also could do." 5.3.4.3 Hon'ble Bombay High Court in the case of Smt. Prabhavati S. Shah vs. CIT 231 ITR 1 (Bombay) has observed as under: "On a plain reading of rule 46A, it is clear that the same is intended to put fetters on the right of the appellant to produce before the AAC any evidence, whether oral or documentary, other than the evidence produced by him during the course of the proceedings before the 1 TO except in the circumstances set out therein. It does not deal with the powers of the AAC to make further enquiry and to report the result of the same to him. This position has been made clear by sub-rule (4) which specifically provides that the restrictions placed on the production of additional evidence by the appellant would not affect the powers of the AAC to call for the production of any document or the examination of any witness to enable him to dispose of the appeal. Further, under sub-section (4) of section 250 of the Act, the AAC is empowered to make such further inquiry as he thinks fit or to direct the ITO to make further inquiry and to report the matter to him. It is, thus, clear that the powers of the AAC are much wider than the powers of an ordinary court of appeal. The scope of his powers is coterminous with that of Page | 54 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 the ITO. He can do what the ITO can do. He can also direct the ITO to do what he failed to do. The power conferred on the AAC under the said sub-section being quasi-judicial power, it is incumbent on him to exercise the same if the facts and circumstances justify. If the AAC fails to exercise his discretion judicially and arbitrarily refuses to make enquiry in a case where the facts and circumstances so demand, his action would be open for correction by a higher authority" In other words, the message from Bombay High Court is that if prima facie an information/evidence is necessary to be examine the claim of the assessee, the CIT(A) should consider the necessary evidence in exercise of power u/s 250(4). It is pertinent to note here that in the present case the appellant has not raised any additional ground but has only submitted additional submission/evidence in form of the order of Joint Charity Commissioner, Mumbai dated 30.03.2022. The said order is very recent and passed after the completion of reassessment proceedings therefore it was not possible for the appellant to produce the same before the A.O. In such circumstances and as per the ratio laid down at 187 ITR 688 (SC) in the case of Jute Corporation of India Ltd. the additional evidence in the form of order of Joint Charity Commissioner Mumbai dated 30.03.2022 is hereby admitted in exercise of power u/s 250(4). Page | 55 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 5.3.4.4. As the additional evidence which is order of the Joint Charity Commissioner, Greater Mumbai Region, Mumbai has been admitted as discussed supra it becomes important to discuss the contents and the findings of the said order. The draft charges were filed in application no.4 of 2012 by the appellant Shri Sunil Gangadhar Karve against the four trustees i.e. Shri Chhagan Bhujbal, Smt. Meena Bhujbal, Shri Pankaj Bhujbal and Shri Samir Bhujbal and Mumbai Educational Trust as respondents. Shri Sunil Karve was one of founder trustees of M.E.T. and has served as trustee from the year 1989 till 23.02.2012 and he was looking after the day to day administration of the trust. The Hon'ble Joint Charity Commissioner has dealt with all the nineteen draft charges emanating from the complaint of the applicant on pages 36 to 42 of the order u/s 41D of the Maharashtra Public Trusts Act, 1950. Draft Charges 1, 2 and 3 deal with the use of 8 th floor of the Trust premises by M/s. Ideen Furniture Pvt. Ltd. which is a company owned and controlled by the respondent trustee's family. The draft charges 9, 10 and 11 deal with the use of 10 th floor of the Trust premises by the family of respondent trustees as their private residence. These draft charges and the findings of Hon'ble Joint Charity Commissioner are relevant to the facts of the present case. The draft charges 1, 2 & 3 are as under: - Page | 56 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 The findings of the Joint Charity Commissioner on charge 1 are as under: "Thus from the documents and submissions of the applicant it has proved that Ideen Furniture Pvt. Ltd. was occupying the 8th floor of the Trust premises, which has also admitted by the respondent trustees. However, the exact period of the occupation could not be established as the applicant has submitted his application at Exh. 1 para No. 18 that in 2006 the 8 th floor was occupied by the Ideen Furniture. The applicant relied upon the statements of the staff of Ideen Furniture given to ACB where they have stated that the commercial unit was occupying 8th floor since 2005. Thereafter in his correspondence he has shown that till 2012 he was demanding the 8th floor be vacated. The applicant submitted that the telephone numbers 2226440030 & 2226440032 were used by Ideen Furniture at 8th floor. He has also relied on MTNL Bills at page No. 163, 165 & 167. He has also relied on photo copy of picture taken of Google page which is filed at page No. 169 to 174. However, on perusal of MTNL Bill it shows the address of Ideen Furniture Pvt. Ltd. 8th floor dated 1/2/2012, Points 1. Whether the applicant succeeded in establishing the proposed charge that the respondents used of 8th floor of the Trust premises admeasuring 15000 sq. ft. situated at Bandra, Mumbai and the same was with malafide and illmotive?. 2. Whether the applicant succeeded in establishing the proposed charge that the respondents used 8th floor of the Trust premises at Bandra, Mumbai was without his knowledge and permission of the Corporation? 3. Whether the applicant succeeded in establishing the proposed charge that the use of electricity was not compensated by the respondents with illmotive while using the 8th floor of the Trust premises at Bandra, Mumbai admeasuring 15000 sq.ft. ? Page | 57 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 amount due Rs.184/-, At page 163 Call charges including STD, ISD dated 1/2/2012 to 24/2/2014 Rs.14/-. At page 165 Call charges including STD, ISD dated 1/2/2012 to 24/2/2014 Rs.O/-, At page 167 Call charges including STD, ISD dated 1/2/2012 to 24/2/2014 Rs.43/- for the phone No. 26440031, From the nominal charges of the MTNL phone it reveals that the phone was not working in 2012. Now coming to the report submitted by ACC Deshpande on 11/4/2012 for the visit he conducted on 7/4/2012 did not reflect the presence of the said commercial unit on the 8th floor neither his report supported the submissions / allegations of the applicant that the 8th floor of Trust premises, Bandra, Mumbai was occupied by Ideen Furniture and for what period. Therefore, though the admission of the respondents of use of Ideen furniture, the period could not be established by the applicant. The videos could not establish that the commercial unit was running when the application under Section 41D was filed. The CD filed by the applicant showing news of IBM Lokmat and other channels showed that the tempo was loaded with some items, however, could not be located as to which items. While argument one Video was shown to this authority where one wide glass having the name Ideen Furniture Ltd. However no video or photograph was shown that actually the showroom was working and till what date. While going through the record this authority also came across one letter dated 18/10/2011 issued by the applicant to the Respondent No.3 wherein it is stated that Ideen Furniture was using one wing of the 8th Page | 58 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 floor and that the Chairman Respondent No. 1 showed his willingness to shift the commercial unit for the use of Trust of the wing of the 8th floor. Secondly, from the submissions of the either parties it has established that applicant was well aware when exactly the commercial unit occupied the trust premises on 8th floor, it was within his knowledge. The applicant has submitted time and again that he was the whole and sole in the administration of the Trust. He was taking all the decisions. He could not establish that he resisted the very use of the 8th floor of the Trust premises by the respondents. Therefore, his consent reflects. Also the applicant's submissions in his application that as a matter of facts the respondent No. 1 who was the founder trustee and chairman along with the applicant had taken upon himself the total responsibility of arranging all the funds for the development as he could not have contributed in other area of the Trust like academic, administration etc. and the applicant was to take care of the total academic and overall development of the Trust and its various institutes. The applicant also submitted that the respondent No. 1 being full time involved in politics and respondents No. 2 to 4 lacked the required qualification as well as experience, it was decided that the day to day academic development of the said trust be left with the applicant who was experienced, practicing CA having additional qualification as Law graduate and Company Sectary to lead the said trust in the area of academic and overall development of the said Trust. Therefore, though it is admitted by the respondents that the 8th Page | 59 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 floor of trust premises was occupied by the commercial unit run by the family members of the respondents without compensating the trust. However, the ill- motive of the respondents for grabbing the trust property or putting the trust in the financial loss could not be established. From the facts laid down it reveals that the respondents were walking on the path shown by the applicant without even having knowledge of the consequences. The very admission of the use of the 8th floor and willingness to compensate the trust in the event of any loss itself vitiated the allegation of negligence, breach of trust, malfeasance, misfeasance, dealt improperly with the properties of the trust, accepted position inconsistent with the trustees position etc. In this case the negligence on the part of the trustee towards its duty be understood from Halsbury's Laws of England, Second Edition, Vol.33, Para 402, Page 220 "A trustee must not in any way make use of the Trust property or his position as trustee for his own interest or private advantage, nor may he enter into engagements in which he has or can have a personal interest which conflicts or possibly may conflict with the interest of those whom he is bound to protect." It means that the act was done deliberately and intentionally and not by accident or inadvertence so that the mind of the person who does the act goes with it. As far as breach of trust is concerned retention of property entrusted would amount to the offence under section 405 I PC only if from the fact of retention of property, the second ingredient of the offence namely dishonesty, misappropriation or Page | 60 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 conversion etc. can be correctly inferred. Coming to malfeasance, as per IPC the word malfeasance mean evil doing, ill-conduct the commission of some act which is positively unlawful, the doing of an act which is wholly wrongful and unlawful which a person ought not to do at all or the unjust performance of some act which the party has no right or which he had contracted not to do so. Misfeasance constitutes breach of trust. It is more than mere negligence, which consists in the omission to do something which a reasonable man would do, or the doing something which a reasonable man would not do. Negligence depends upon the public duty which is incumbent upon everyone to exercise due care in his daily life; but a breach of trust depends upon the neglect of some special duty undertaken in regard to some specified person or body of persons. Misappropriation means improperly setting apart for one's use to the exclusion of the owner. Thus misappropriation is the wrongful setting apart, or assigning of, a sum of money to the purpose or use to which it should not be lawfully assigned or set apart. Mere retention of money entrusted to a person without any misappropriation or conversion even though he was directed by the person to pay it to so and so or to deal with the money in a particular way is not a misappropriation unless there is some actual user by him. Temporary retention of money would not by itself amount to criminal breach of trust, unless dishonesty, misappropriation or conversion can be correctly inferred. The mere failure to deposit the money would not, therefore, prove dishonesty. The Page | 61 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 false explanations are sufficient to prove the element of dishonesty. The test which must be applied are, whether the acts or omissions complained of, were brought about deliberately or wilfully, and whether the trustees were actuated by dishonest or corrupt motives or not. There may be cases where the trustees would have erred on account of utter lack of competence, errors of judgment or miscarriage of discretion, but if they are not the result or want of fidelity, they cannot be made the basis of inference regarding misconduct or breach of trust. As far as position inconsistent as a trustee is concerned it has always been the policy of Courts of Equity to prevent trustees from having an interest in conflict with their duty. Trustee is bound to deal with the trust property as carefully as man of ordinary prudence would deal with such property if it were his own, and responsible for the loss, destruction, or deterioration of the trust property. The applicant has used the terms viz. negligence of duties by the respondents, guilty of committing breach of trust, malfeasance, misfeasance, improperly dealt with the property of trust, accepted the position inconsistent with the trustees position etc. alleging thereby the use of 8th floor or the trust property. The plain reading of the proposed charges supra reflects while acting as a trustee of the trust there was no ill-motive neither of the term Negligence, breach of trust etc. attracts their acts. Mere default cannot attract these charges. It is also held in Mallikarjuanappa, Sidramappa Bidve V/s. Joint Charity Commissioner, Maharashtra State, Mumbai; 2007 DgLaw(Bom) Page | 62 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 779 wherein it is held that "The legal position, which may be kept at back of the mind, is that removal of a trustee is a drastic action. The charge of malfeasance and/or misfeasance is serious one. The proceedings are of quasi civil and quasi criminal nature. Though the proceedings under Section 41 D is not criminal proceeding as such, yet, proof required to sustain the charges is of high standard. The standard of proof in such proceedings is somewhat more than normally required in cases governed by preponderance of probabilities and somewhat less than required in trials of criminal cases. The degree of proof required in criminal case is such that would prove criminal charge beyond a reasonable realm of doubt. The imputation reflecting on integrity of trustees have to be fortified by proof of high degree which would be somewhere in between standard of proof required in civil proceedings like suit and criminal proceedings like a trial for offence of criminal breach of trust, or that of cheating. Thus, unless the lapse on part of the trustee is proved to be actuated by dishonesty or active connivance with other trustees, who are guilty of misfeasance or malfeasance, the drastic action under section 41D of the BPT Act, may not be warranted." Shri. Mukund Waman Thatte Vs. Shri. Sudhir Parshuram Chitale & Ors.; 2012(3)ALL MR 604 "The scope of the enquiry under Section 41D will have to be considered, for taking drastic action of removal, suspension and dismissal from the posts of the trustees, a very high degree of proof is required and the person seeking removal has to prove that the irregularities within the scope of Section 41 -D (i) are Page | 63 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 proved without any manner of doubt. In the case of Mallikarjuanappa S/o. Sidramappa Bidve & Others V/s. Joint Charity Commissioner and Others decided by the learned Single Judge Coram: V.R. Kingaonkar J.), it is observed in paragraphs 18 and 19 as under "The legal position, which may be kept at back of the mind, is that removal of a trustee is a drastic action. The charge of malfeasance and/or misfeasance is serious one. The proceedings are of quasi civil and quasi criminal nature. Though the proceedings under Section 41-D is not criminal proceeding as such, yet, proof required to sustain the charges is of high standard. The standard of proof in such proceedings is somewhat more than normally required in cases governed by preponderance of probabilities and somewhat less than required in trials of criminal cases. The degree of proof required in criminal case is such that would prove criminal charge beyond a reasonable realm of doubt. The imputation reflecting on integrity of trustees have to be fortified by proof of high degree which would be somewhere in between standard of proof required in civil proceedings like a suit and criminal proceedings like a trial for offence of criminal breach of trust, or that of cheating. Thus, unless the lapse on part f the trustee is proved to be actuated by dishonestly or active connivance with other trustees, who are guilty of misfeasance or malfeasance, the drastic action under Section 41-D of the BPT Act may not be warranted. It is thus clear that imputation reflecting on the integrity of the trustees have to be fortified by proof of high degree which will have to be higher than the Page | 64 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 standard of proof required in the civil proceedings. Unless and until the lapse on the part of the trustee is proved to be actuated by dishonesty, a drastic action under Section 41-D is not warranted. In my opinion, the Charity Commissioner has considered the entire evidence available on record and has, thereafter, reached an appropriate decision that the case for drastic action for removal of the trustees had not been made out. No fault can be found with the reasoning of the Charity Commissioner in the impugned order. I entirely agree with the view expressed b the Charity Commissioner that the errors committed by the trustees were not so severe so as to warrant their removal. There is no merit in the Writ Petition and the same will have to be dismissed." Thus, this being the position as far as taking action against the trustees under Section 41D of The MPT Act. However the doctrine of proportionality is a principle in law, which gives direction to a thought of a judge while imposing penalty. It is based on the idea of justice and objectivity. The penalty imposed on a person should be commensurate with the wrong done by him. Therefore, it is always a matter of fact depending on each case and the evidence tendered by the parties. When statute prescribes certain punishment and if charges are framed accordingly, then, the Court after weighing the wrong done by a person, can imposed a penalty, even though it is harsh, which is not the case before this authority. Section 41-D (1) of the Bombay Public Trusts Act confers a power upon the Charity Commissioner to suspend, remove or dismiss any Trustee/Trustees of Page | 65 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 the Public Trust if he/they are found guilty of the act/acts, which is/are mentioned in any of the Clauses (a) to (f) therein. In order to consider the question as to whether the Trustee or the Trustees, who is or are found guilty of any of the charges mentioned in Clauses (a) to (f) to sub-section (1) of section 41-D of the said Act, should be suspended, removed or dismissed, there has to be an application of mind to the aspect of proportionality of punishment on the basis of the charges held to be proved. The punishment of either suspension, removal of dismissal, as the case may be, has to be proportionate to the gravity of the charge/charges held to be proved. It is not the every lapse or every act of misconduct, which invites the punishment of dismissal. The Charity Commissioner is, therefore, bound to record reasons for imposing a particular punishment. For taking a drastic action of removal, suspension and dismissal of a person from the post of trustee, a very high degree of proof is required and the person seeking removal has to prove that the irregularities within the scope of section 41D(1) of the Bombay Public Trusts Act are beyond any manner of doubt. In the present case the default / deviation by the trustees as admitted by the respondent trustees is used of 8th floor of the Trust premises at Bandra, Mumbai without compensating the trust for the same. The very admission and willingness to compensate the Trust dilutes the possibility of ill-motive. In fact accommodating the respondent trustees on the 8th floor of the trust premises is within the knowledge and with the consent of the applicant, as there are Page | 66 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 records shown by the applicant that he demanded compensation for the trust and also vacant possession of the 8th floor of the trust premises from the respondents. However, there is no record to show his resistance to accommodate the respondents at the 8th floor of the trust premises. Therefore, being applicant is equally responsible for the loss of the Trust. The applicant has relied on the letters and correspondence from 2007. This itself shows that the applicant who was administering the trust has intentionally allowed the respondent trustees to accommodate the 8th floor of the trust premises for utilizing for the commercial unit of the family members of the respondents and thereafter created documents against the respondents whom the applicant submit that have no knowledge of running the trust and lack appropriate education for administering the trust. Therefore, the applicant has failed to establish the ill motive of the respondent trustees which is the prime requirement of Section 41D. This authority also relied upon the Circular No. 217 of the Hon'ble Charity Commissioner, M.S., Mumbai which reads "If the Regional Officers on enquiry find defaults committed by the trustees, it should be seen whether the acts or omissions found by the Inspector or the Regional Officer were deliberately or wilfully actuated by dishonest or corrupt motives. It should be generally seen whether there is member in such commission or omissions. If the acts and omission are such which could be rectified by other actions an attempt should be first made to resort to the same. Only when the trustees Page | 67 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 persist in acts against the interest of the trust despite directions under Section 41 to put the trust in or action under section 41 (D) may be recommended." Thus it is incumbent on the officer so appointed under The MPT Act 1950 to see whether the acts or omission were deliberated or wilfully actuated by dishonest or corrupt motives. Secondly it is also incumbent to see that whether such acts and omission could be rectified and attempt should be first made to resort to the same. Thus from the provisions of the MPT Act, from various guidelines given in the case laws referred hereinabove, circular of the Hon'ble Charity Commissioner it is clear the act or omission on the part of the trustees should be with dishonest intention and if the same could be rectified such opportunity be given to the trustees. Every lapse or every act of misconduct shall not invite punishment or dismissal. Therefore charge No. 1 stands disapproved." The draft charges 9, 10 and 11 are as under:- 9. Whether the applicant succeeded in establishing the proposed charge that the opponent trustees used/misused an area admeasuring 11000 sq.ft. with garden admeasuring 7000 sq.ft. on the 10th floor of the Trust building at Bandra, Mumbai for residential purpose? 10 Whether the applicant succeeded in establishing the proposed charge that by using the 10th floor of the Trust premises at Bandra, Mumbai, the respondent trustees improperly dealt with the Trust property accepted the position consistent with the Trust, neglected their duties, committed breach of Trust etc. ? 11 Whether the applicant succeeded in establishing the proposed charge th> the respondent trustees by occupying the Trust premises on 10th floor Bandra, Mumbai making the same unavailable to the Trust for furthering it objects causing inconvenience for the accommodation of the visiting teachers, professors, lecturers, tutors? Page | 68 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 The findings of the Joint Charity Commissioner on these charges are as under: "In order to deal with the present charges this authority perused page No. 309 of the compilation referred and relied by the applicant in his submission that the 10 th floor was used by the respondents for their residence purpose. The document at page No. 309 is a voucher. The signature could not be located. However, from the voucher at Part 1, Exh.34 to 39, Page 309 that vouchers signature is certainly not of the respondents. The voucher particular states that "being amount paid to Nikita for purchase fabric 10 th floor sopha and chairs Sixteen Thousands Sixty only". The amount is also stated in figure as 16060/-. Nowhere the voucher reveals that it is for residence purpose of the respondents neither the same is signed by the respondents. The particulars also cannot be assume/presume to be for residential purpose only. The voucher at page A/o.340 as stated hereinabove reads "Samirbhaucha pentla bakkal lavale Rs.20". The entire voucher do not reflects any residence or Trust or any institute. The signature is of M. R. Gurav and one more signature which could not be tress out. However, this voucher cannot be said to be related to the respondents only. Mere the name written Sameer does not related to the respondent No.4 only. The voucher referring 10th floor cannot be said as trust premises only. Voucher at page No. 316 is from the chemist or medical store. Patient name is written Chhagan Bhujbal, Dr. name H. O. Lilavati. No signature on the voucher could be tress out, name of Page | 69 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 signatory not mentioned. Neither it is shown that the same was paid by the Trust as patient. The address on the voucher is written as MET College. However, it does not reflect that the respondent 1 was residing on the 10th floor of the Trust premises when this voucher was issued by the medical store. The voucher at page No. 317 is of Lucky Cleaning Centre in the name of Trust MET. The item could not be tress out what is written. The voucher cannot be said of the respondents only and for the 10th floor. Similar cases with vouchers at page 318, 319, 320, 345, 360 & 361. Therefore the submissions made by the Ld. Advocate for the respondents that vouchers cannot be considered as the same do not prove the use of 10th floor by the respondents for residence. The 10th floor was used for Guest House for faculty members. The vouchers might be of the guest members. Therefore, respondents denied of misuse of any trust property siphoning of funds and therefore none of their act fall upon or attract Section 41D of The MPT Act. Similarly the applicant do not prove the use of 10th floor by the respondents for residential purposes, therefore it cannot be said that the trustees have improperly dealt with the trust property or accepted the position inconsistent with the Trust position or committed breach of Trust. Similarly, since the 10th floor was not used for residential purposes by the respondents causing inconvenience for the accommodation of the visiting teachers, professors, lecturers, tutors. There is no any supporting document to show that the inconvenience was caused to the faculty members with regard to Page | 70 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 their accommodation due to non-availability of 10th floor. The applicant has submitted that the respondents holdup birthday party of their nephew at the trust premises, therefore it could be said that the trust premises was used for residential purpose. He also relied upon the invitation card where the address of the trust premises is written. In that case the hoarding with the applicant name and birthday wish can be said that applicant was residing in trust premises. Since, the respondents are trustees might have accommodated their guest for a small party just like a party held by applicant; However, there is no authentic document to show that the 10th floor was used for residence by the respondents. Therefore, charge Nos. 9, 10 & 11 could not be proved beyond doubt. This authority also relied on Case Law reported in Mallikarjuanappa, Sidramappa Bidve V/s. Joint Charity Commissioner, Maharashtra State, Mumbai; 2007 DgLaw(Bom) 779 wherein it is held that "The legal position, which may be kept at back of the mind, is that removal of a trustee is a drastic action. The charge of malfeasance and/or misfeasance is serious one. The proceedings are of quasi civil and quasi criminal nature. Though the proceedings under Section 41 d is not criminal proceeding as such, yet, proof required to sustain the charges is of high standard. The standard of proof in such proceedings is somewhat more than normally required in cases governed by preponderance of probabilities and somewhat less than required in trials of criminal cases. The degree of proof required in criminal case is such that would prove criminal charge beyond a Page | 71 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 reasonable realm of doubt. The imputation reflecting on integrity of trustees have to be fortified by proof of high degree which would be somewhere in between standard of proof required in civil proceedings like suit and criminal proceedings like a trial for offence of criminal breach of trust, or that of cheating. Thus, unless the lapse on part of the trustee is proved to be actuated by dishonesty or active connivance with other trustees, who are guilty of misfeasance or malfeasance, the drastic action under section 41D of the BPT Act, may not be warranted. "Therefore, the present charges cannot be established beyond doubt. Hence, Charges No.9, 10 & 11 are disapproved." 5.3.5 Now the various contentions of the appellant as enumerated in para 5.3.1 and para 5.3.2 above are being taken-up for discussion and deliberations in the subsequent paras. 5.3.5.1 The first contention of the appellant is that the entire 8 th floor has not been used by M/s. Ideen Furniture Pvt. Ltd. and both the directors of M/s. Ideen Furniture Pvt. Ltd. i.e. Mrs. Vishakha P. Bhujbal and Mrs. Shefali S. Bhujbal were rendering honorary services to the Mumbai Educational Trust in its administrative work as well as conducting Cultural and Social programs for the students of Mumbai Educational Trust. In this contention the appellant is trying to indicate that the thrust was receiving honorary services from both the directors of M/s. Ideen Furniture Pvt. Ltd. and in lieu of their services the MET had allowed the portion of 8 th floor to be Page | 72 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 utilized by M/s. Ideen Furniture Pvt. Ltd. without charging any compensation whatsoever. Even though the directors of M/s. Ideen Furniture Pvt. Ltd. rendered services to the MET that does not justify the trust giving huge benefit by not charging any compensation from M/s. Ideen Furniture Pvt. Ltd. which is an organization of a category of specified person as per Section 13(3)(e). For rendering of services for any institution or school affiliated to the appellant Trust as person is compensated by the salary/remuneration and not by forgoing the lease rental/compensation for the use of Trust property by the specified person. There is no prohibition for the trust to take services of the persons specified u/s. 13(3) but the only restriction is that the payment should not be more than market value of such services. The appellant has also not been able to submit any similar case in which the Trust has not charged lease rental in lieu of services rendered. Thus this contention does not help the cause of the appellant. 5.3.5.2 The second contention of the appellant is that the returns of income of M/s Ideen Furniture Pvt. Ltd. for AY 2008-09 as well as for AY 2012-13 till AY 2014-15 have been filed with the address other than MET address. Further the Sales Tax Registration Certificate and Service Tax Registration Certificate of M/s Ideen Furniture Pvt. Ltd. reflects the address as 5 th floor, Militia Apartments, M.P. Road, Mazgaon, Mumbai and not MET. Furthermore the books of a/c of M/s Ideen Furniture Pvt. Ltd. were maintained at Page | 73 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 Mazgaon premises. This contention of the appellant gets negated in the assessment order wherein the AO has relied upon the evidences in form of various documents like sub-metered bills, telephone bills and ROI of M/s Ideen Furniture Pvt. Ltd. for AY 2009-10 to AY 2011-12. All these documents especially the returns of income for AY 2009-10 to AY 2011-12 of M/s Ideen Furniture Pvt. Ltd. reflect the address as 8 th floor, M.E.T. Building, A.K. Vaidya Chowk, Mumbai-50. During the course of appellate proceedings the appellant has submitted the copy of returns from AY 2008-09 to AY 2014-15 vide submission dated 09.02.2022. The perusal of the acknowledgements of ITRs shows that for AY 2009-10 to AY 2011-12 the address of M/s Ideen Furniture Pvt. Ltd. is 8 th Floor, MET Building, A.K. Vaidya chowk, Bandra. Further the order of Jt. Charity Commissioner, Mumbai dated 30.03.2022(supra) gives a finding that the company M/s Ideen Furniture Pvt. Ltd. was occupying the 8 th Floor(one wing) from either 2005 or 2006 upto Feb,2012 based on evidences discussed elaborately. In view of these facts this contention of the appellant fails. 5.3.5.3. The third contention of the appellant is with regard to the usage of 10th floor of MET campus at Bandra by the family of the Trustees as their private residence without paying any compensation to the trust. The appellant submitted that the 10th floor of MET building was used as guest house for the faculty and sample copies of requisition slips were furnished during the course of re-assessment proceedings. Page | 74 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 From the perusal of orders of reassessment for AYs 2008-09 to 2011-12 it has been noticed that the AO has not been able to make out a case by collecting evidences which could prove that the 10th floor of MET building was used by the family of trustees as their private residence. Further the AO has not discussed the issue of use of 10th floor of MET building in the findings and has mainly focused on the use of 8th floor by M/s. Ideen Furniture Pvt. Ltd., a specified person as per section 13(3)(e). This aspect has also been dealt with by the Joint Charity Commissioner, Mumbai in draft charges 9,10 & 11 of the order dated 30.03.2022 wherein he has given a categorical finding that the applicant has not been able to prove the allegation of misuse of 10th floor of MET building by the family of trustees with cogent evidences. The detailed findings of the Hon'ble Joint Charity Commissioner has been reproduced supra. In view of the above discussion and the facts and circumstances, this contention of the appellant is found to be correct. 5.3.5.4 The fourth contention of the appellant is that the applicability of section 13(2)(b) arises when any property of the trust is made available to specified persons exclusively. If the property is made available to everyone irrespective of whether they are specified persons or not, then provisions of section 13(2)(b) of the act do not apply. The appellant further submitted that it has given the premises on rent to other persons other than M/s Ideen Furnitures Pvt Ltd as well, in view of the same the provisions of section Page | 75 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 13(2)(b) are not applicable to the appellant. In this regard appellant has placed reliance on two case laws:- (i) George Educational, Medical and Charitable society vs DIT(2002) 80 ITD 619(Cochin) (ii) India Habitat Centre vs Joint Director of I.T.(2004)87 TTJ76(Delhi) This contention of the appellant has been considered carefully and found to be not acceptable due to the peculiar facts of the case. In this case the specified person M/s Ideen Furniture Pvt. Ltd. falling under Section 13(3)(e) has occupied the Trust property on 8th Floor, MET Building without paying adequate rent or other compensation. The appellant Trust has given the premises on other floors of MET Building for which the Trust is charging monthly lease rental whereas the Trust is not charging any rent or compensation from the specified person M/s Ideen Furnitures Pvt Ltd. In view of the fact that the Trust is not charging any rent from the specified person the provisions of section 13(2)(b) get attracted in this case. The reliance on the case laws i.e. George Educational, Medical and Charitable society vs DIT(2002) 80 ITD 619(Cochin) and India Habitat Centre vs Joint Director of I.T.(2004)87 TTJ76(Delhi) is misplaced as the facts of the present case are distinguishable from the facts of the cases relied upon by the appellant. In view of the above discussion, this contention of the appellant is not acceptable. Page | 76 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 5.3.5.5 The fifth contention of the appellant is that the AO in the assessment order has abruptly come to the conclusion that the trust property has been used by the specified person as defined in section 13 of the Act, without dealing with the submissions/contentions of the appellant. This contention of the appellant is partly correct as the A.O. has taken into account the information and evidences in which possession as well as the submission of the appellant that one portion of 8th floor of the MET building was intermittently used for some period by M/s Ideen Furnitures Pvt Ltd. for which the market value of compensation not charged has also been submitted. But the AO failed to appreciate that the submission with regard to the market value of compensation not charged pertained to the alternative claim (without prejudice) of the appellant. It is pertinent hereto mention that the appellate proceedings are in continuation of the assessment proceedings wherein all the contentions of the assessee are being discussed in detail. 5.3.5.6 The next contention of the appellant is that the Hon'ble Charity Commissioner, Mumbai, after appreciation and consideration of all material, proofs and evidences submitted by the said trust, having detailed inquiry as to the facts and circumstances, has settled the said issue and the said trust's act allowing M/s Ideen Furniture Pvt. Ltd. to occupy 8th floor premises of the said trust is decided and declared as non-deliberate act and further held that the said trust has not improperly dealt with the said premises by allowing M/s Ideen Furniture Pvt. Ltd., Page | 77 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 which consist of family members of trustees of the said trust and therefore, even for the purpose of the present assessment it cannot be held that there is any kind of breach and/or violation by the said trust of any of the provisions of the Income Tax Act and further the said trust cannot be made liable for withdrawal of exemption on the pretext that the trust property was given to any interested person as defined in Section 13 of the Act. The order of Hon'ble Jt. Charity Commissioner dtd. 30.03.2022 has been perused and it has been observed that the order has been passed with respect to Section 41D of The Maharashtra Public Trusts Act, 1950. Section 41D(1) of this Act confers a power upon the Charity Commissioner to suspend, remove or dismiss any Trustee/Trustees of the Public Trust if he/they are found guilty of the act/acts, which is/are mentioned in any of the Clauses (a) to (f) therein. The Hon'ble Jt. Charity Commissioner has given his findings with respect to the draft charge pertaining to the use of 8th floor of MET building by M/s. Ideen Furniture Pvt.Ltd. the relevant portions of the said judgement are as under:- "Therefore, though it is admitted by the respondents that the 8th floor of trust premises was occupied by the commercial unit run by the family members of the respondents without compensating the trust. However, the ill- motive of the respondents for grabbing the trust property or putting the trust in the financial loss could not be established. From the Page | 78 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 facts laid down it reveals that the respondents were walking on the path shown by the applicant without even having knowledge of the consequences. The very admission of the use of the 8th floor and willingness to compensate the trust in the event of any loss itself vitiated the allegation of negligence, breach of trust, malfeasance, misfeasance, dealt improperly with the properties of the trust, accepted position inconsistent with the trustees position etc." ............... "The punishment of either suspension, removal of dismissal, as the case may be, has to be proportionate to the gravity of the charge/charges held to be proved. It is not the every lapse or every act of misconduct, which invites the punishment of dismissal. The Charity Commissioner is, therefore, bound to record reasons for imposing a particular punishment. For taking a drastic action of removal, suspension and dismissal of a person from the post of trustee, a very high degree of proof is required and the person seeking removal has to prove that the irregularities within the scope of section 41D(1) of the Bombay Public Trusts Act are beyond any manner of doubt. In the present case the default / deviation by the trustees as admitted by the respondent trustees is used of 8th floor of the Trust premises at Page | 79 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 Bandra, Mumbai without compensating the trust for the same. The very admission and willingness to compensate the Trust dilutes the possibility of ill-motive. In fact accommodating the respondent trustees on the 8th floor of the trust premises is within the knowledge and with the consent of the applicant, as there are records shown by the applicant that he demanded compensation for the trust and also vacant possession of the 8th floor of the trust premises from the respondents." ........... "Secondly it is also incumbent to see that whether such acts and omission could be rectified and attempt should be first made to resort to the same. Thus from the provisions of the MPT Act, from various guidelines given in the case laws referred hereinabove, circular of the Hon'ble Charity Commissioner it is clear the act or omission on the part of the trustees should be with dishonest intention and if the same could be rectified such opportunity be given to the trustees. Every lapse or every act of misconduct shall not invite punishment or dismissal. Therefore charge No. 1 stands disapproved." From the above findings of the Jt. Charity Commissioner it becomes crystal clear that M/s. Ideen Furniture Pvt. Ltd. was using one wing of 8th floor of the trust premises without compensating the Page | 80 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 trust and the same has been admitted by the trustees before the Jt. Charity Commissioner. The charges have been held to be disapproved as the trustees have admitted to their default, of using 8th floor of trust premises by the commercial unit run by the family members without compensating the trust, and have shown willingness to compensate the trust. The verdict of Jt. Charity Commissioner strengthens the stand of the assessing officer that the portion of 8th floor has been used by the specified person M/s. Ideen Furniture Pvt. Ltd. without paying any compensation. The charges have been disapproved in the proceedings before the Charity Commissioner as the trustees of MET have admitted the default and have shown willingness to compensate the Trust by paying the lease rental for the use of 8th floor for commercial purpose by the family concern M/s. Ideen Furniture Pvt. Ltd. This act of admission of misuse of the trust property attracts the provisions u/s. 13(1)(c) as the specified person u/s. 13(3)(e) i.e. M/s. Ideen Furniture Pvt. Ltd. has used the 8th Floor of MET Building from the year 2006 till the beginning of year 2012. It is pertinent to mention here that the proof of payment of any compensation by the specified person to the appellant Trust has not been furnished either before the Charity Commissioner or before the Assessing Officer. Even during the course of appellate proceedings the appellant has failed to submit any proof of the receipt of compensation from M/s. Ideen Furniture Pvt. Ltd. Page | 81 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 In view of the above facts, it becomes clear that the order of Hon'ble Jt. Charity Commissioner dated 30/03/2022 absolves the Trustees u/s. 41D of Maharashtra Public Trust Act, 1950 but the order strengthens the finding of the Assessing Officer that M/s. Ideen Furniture Pvt. Ltd. which is a person specified u/s. 13(3)(e) has used the 8th floor of MET Building without paying any compensation whatsoever to the appellant Trust. Therefore, this contention of the appellant also fails and the same is not acceptable as per the facts of the case. 5.3.5.7 In view of the above discussion and deliberations with regard to the main contentions of the appellant, it is held that the appellant Trust has not charged any compensation from the commercial unit, run by the family members of the trustees, which occupied one wing of 8th floor of MET Building. Therefore, the assessing officer's finding regarding inclusion of market value of compensation not charged (inclusive of rent, electricity and water charges) is held to be correct as per the facts of the case. The commercial unit M/s. Ideen Furniture Pvt. Ltd. is a person specified u/s. 13(3)(e) which has not paid any lease rental or compensation for use of the portion of trust property which tantamounts to violation of the provisions of Section 13(1)(c)of the l.T. Act, 1961. 5.3.6 Without prejudice to the main contentions made above, the appellant has alternatively submitted that even assuming there was a violation of Section 13(2) or 13(3) then entire exemption under Section 11 and Page | 82 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 12 cannot be forfeited and the exemption should have been denied only to this extent of expenditure/ income amount of alleged violation under Section 13. Further the appellant contends that the A.O. should have taxed the defaulted amount at the maximum marginal rate without denying the benefit of exemption u/s. 11 of the Act. The appellant has also relied on the following case laws in this regard: (i) Director of Income Tax Vs. Agrim Charan Foundation (2002) 253 ITR 0593 (ii) Commissioner Of Income Tax Vs. Ksrtc Employees Death –Cum retirement Benefit Fund (2014) 98 DTR 0133 (Karn): (2014) 225 TAXMAN 113 (Karnataka) (iii) Commissioner of Income Tax Vs. Fr. Mullers Charitable Institutions (2014) 363 ITR 0230 : (2015) 28 TAXMAN 0319 (Karn) (iv) Commissioner of Income Tax Vs. Orpat Charitable Trust (2015) 230 TAXMAN 0066 (Gujarat) (v) Director of Income Tax (Exemptions) Vs. Sheth Mafatlal Gagalbhai Foundation Trust (2001) 249 ITR 0533 (vi) Commissioner of Income-Tax Vs. Working Women's Forum (2014) 365 ITR 0353 (Madras) (vii) IILM Foundation Vs Asst. Director of Income Tax (Exemption) (ITAT Delhi) (ITA N0.1142/DEL/2011 Date of order 24/12/2020) Page | 83 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 (viii) Span Foundation vs. ITO Delhi HC 178 Taxman 436 5.3.6.1 The alternative contention of the appellant that even if the provisions of section 13 have been violated by the appellant, the assessing officer should have taxed the defaulted amount at Maximum Marginal Rate without denying the benefit of exemption u/s. 11 of the Act, has been considered and various aspects are discussed in the subsequent paras. 5.3.6.2 Section 13 spells out certain circumstances in which the exemption provided under section 11/ 12 is not applicable. Further, Section 164(2) and 164(3) which reads as under:- "[(2) In the case of relevant income which is derived from property held under trust wholly for charitable or religious purposes, or which is of the nature referred to in sub-clause (iia) of clause (24) of section 2, or which is of the nature referred to in sub-section (4A) of section 11, tax shall be charged on so much of the relevant income as is not exempt under section 11 or section 12, as if the relevant income not so exempt were the income of an association of persons: Provided that In a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) Page | 84 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 of sub-section (1) of section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate. (3) In a case where the relevant income is derived from property held under trust in part only for charitable or religious purposes or is of the nature referred to in sub-clause (iia) of clause (24) of section 2 or is of the nature referred to in sub-section (4A) of section 11, and either the relevant income applicable to purposes other than charitable or religious purposes (or any part thereof) is not specifically receivable on behalf or for the benefit of any one person or the individual shares of the beneficiaries in the income so applicable are indeterminate or unknown, the tax chargeable on the relevant income shall be the aggregate of— (a) the tax which would be chargeable on that part of the relevant income which is applicable to charitable or religious purposes (as reduced by the income, if any, which is exempt under section 11) as if such part (or such part as so reduced) were the total income of an association of persons; and (b) the tax on that part of the relevant income which is applicable to purposes other than charitable or religious purposes, and which is Page | 85 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 either not specifically receivable on behalf or for the benefit of any one person or in respect of which the shares of the beneficiaries are indeterminate or unknown, at the maximum marginal rate ........................" 5.3.6.3 The aforesaid sections provide that income of trust will be taxable at 'maximum marginal rate of tax' on following event: i. If any fund of the organization has been invested or deposited, for any part of the year, as per section 13(1 )(d) read with section 11 (5) of the Act; ii. If any part of income has been applied directly or indirectly for the benefit of any of the excluded persons under section 13(1)(c) r.w.s. 13(3) of the Act. However, the section categorically provides that tax shall be charged on the 'relevant income' or 'part of relevant income' which has forfeited exemption at the maximum marginal rate. 5.3.6.4 Thus, on a conjoint reading of section 13(1) and section 164 of the Act, it can be seen that taxability of the income of an organization forfeiting exemption under section 13(1)(c) or 13(1)(d), shall be charged at maximum marginal rates of tax only on that part of income which has forfeited exemption. Thus, where the trust contravenes the provisions of section 13(1)(c) or (d) of the Act, the maximum marginal rate will apply only to that part of the income which has forfeited exemption. Page | 86 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 5.3.6.5 Further, the language of section 13(1)(c) and (d) also supports this view which provides to exclude from the total income, 'any income thereof which as a whole or in part has forfeited exemption. The word "such" used in the section 13(1)(c)(ii) is important and refers to only that part of income which goes to the benefit of specified persons. Further, similar treatment should be given in respect of cases covered under clause (d) of section 13(2) providing for disallowance in respect of services of the trust given to specified persons. 5.3.6.6 The appellant has relied upon catena of judicial pronouncements where in the courts have upheld the proposition that in case of any alleged violation u/s. 13, the benefit of Section 11 would not be available to the extent of quantum of undue benefit to the specified person as per Section 13(3) and the entire exemption cannot be forfeited/denied. 5.3.6.7 Recently Hon'ble ITAT Jaipur Bench has dealt the issue in detail in the case of Deputy Commissioner of Income-tax (Exemptions) Circle Jaipur v. Central Academy Jodhpur Education Society [2020] 119 taxmann.com 355 (Jaipur - Trib.) dated 09.09.2020. The relevant portion of the decision is reproduced below:- "Now the question before us for consideration is that if there is a violation u/s 13 of the Act then the entire surplus is to be charged to tax or only a part of income which is not exempt u/s 11 by virtue of Page | 87 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 Section13(1)(c) or 13(1)(d) of the Act shall be charged to tax at MMR. 2.12 In order to decide this controversy, considering the facts of the present case, it is relevant to consider section 164 of the Act which deals with charge of tax and where the share of beneficiary is unknown. Section 164(2) of the Act deals with the charge of tax on the income of the trust which is derived by it from the property held wholly for charitable or religious purposes. The proviso to this section which is relevant for deciding the present case reads as under- provided that in a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub-section (1) of section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate". From the plain reading of this proviso, it is evident that where the whole or any part of the relevant income is not exempt u/s 11 or 12 because of the provisions of the section 13(1)(c) or 13(1)(d), tax is chargeable on the relevant income or part of the relevant income at the maximum marginal rate (MMR). Therefore, in case there is violation of sec. 13 of the Act then the entire income of the trust is not liable to tax at MMR, but only the relevant part of the income which violates sec. 13 attracts the MMR. In Page | 88 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 the present case, even if it is held that there is violation of sec. 13, then only the amount of benefit given to the persons specified u/s 13(3) out of the income of the trust is chargeable to tax at MMR. Hence, the action of AO in taxing the surplus at maximum marginal rate without considering the provisions of section 11 & 12 is bad in law. For reaching the above conclusion, we also draw the strength from the following decisions. (1) DCIT v. Working Women's Forum [2015] 235 Taxman 516 (SC) :~Assessee was a trust registered under section 12AA and was providing employment to poor women, assisting weaker sections of the society for personal development, maintaining destitute homes, rehabilitation of victim of national calamities, etc. It invested a sum of Rs. 20,000 in the share of MIOT Hospitals Ltd. AO denied the exemption u/s 11 and 12 on ground that since section 13(1)(d) recognizes investment only in specified assets, failure to invest in such specified business would disentitle the assessee for exemption. CIT(A) allowed the assessee's appeals that the entirety of the income of the assessee could not be denied of exemption. On appeal, referring to the decision of the Bombay High Court in DIT (Exemptions) v. Sheth Mafatlal Gagalbhai Foundation Trust, the Tribunal rejected the Revenue's appeals. High Court held that in DIT (Exemptions) v. Sheth Mafatlal GagalbhaiFoundation Trust, it was held Page | 89 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 by Bombay High Court that violation of section 11(5), read with section 13(1)(d) by the assessee would result in the maximum marginal rate of tax only on the dividend income on shares, which was not the recognized mode of investment and that the assessee would not be vested with marginal rate of tax on the entire income. Therefore, the income other than dividend income had to be taxed only to the extent to which the violation was found by the AO. Respectfully following the said decision, High Court confirmed the order of the Tribunal and dismissed the revenue's appeal. Special leave petition filed against impugned order was dismissed. (2) CIT v. Fr. Mullers Charitable Institutions [2014] 227 Taxman 369 (SC) :-High Court by impugned order held that in case of charitable trust, it is only income from investment or deposit which had been made in violation of section 11(5) that was liable to be taxed and that violation u/s 13(1)(d) does not tantamount to denial of exemption u/s 11 on total income of assessee trust. Special leave petition filed against impugned order was to be dismissed (3) CIT v. Fr. Mullers Charitable Institutions [2014] 363 ITR 230 (Kar.) (HC). In this case the facts as narrated in para 8 of the order reads as under- Page | 90 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 "The records clearly disclose that the respondent- assessee is administering number of institutions and it had obtained exemption under section 11 and 12 of the Act. The assessee filed Nil return of income for the aforesaid assessment years. On the basis of the tax evasion petition, an enquiry was conducted and during the course of assessment proceedings, the Assessing Officer noticed that the respondent-trust advanced a sum of Rs. 30,00,000/-during the assessment year 2000- 01 and advanced another sum of Rs. 50,00,000/-during the assessment year 2001- 02 to M/s. Janamadhyama Prakashana Limited, which was running a Kannada daily known as "Janavahini. In the balance sheet of the respondent-trust, the said amounts were mentioned under the head known as "loans and advances". The Charitable Institution, advancing loan amount to M/s Janamadhyama Prakashana Limited and obtaining exemption in payment of income tax is in violation of Section 11(5) of the Act. As per Section 13(1)(a), income of the trust shall not be entitled for exemption under sections Hand 12 of the Act. Accordingly, the Assessing Officer assessed the advance made to M/s. Janamadhyama Prakashana Limited for tax. Being aggrieved by the said assessment order, the respondent assessee preferred an appeal before the Commissioner of Income Tax. The Commissioner of Income Tax, after verification Page | 91 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 of the records of the Assessing Officer found that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue. Accordingly, he initiated the proceedings under section 263 of the Act. The Commissioner was of the opinion that in view of violation of Section 11(5), the entire income of the respondent-trust ought to have been assessed and they are not entitled for any exemption under sections 11 and 12 of the Act and revised the order passed by the Assessing Officer. The said order was questioned before the Tribunal. The Tribunal allowed the appeals and set aside the order passed by the Commissioner of Income-tax under section 263 of the Act. Being aggrieved by the said order, the revenue preferred these two appeals". On these facts the Hon'ble High Court in para 11 held as under- "With regard to second and third substantial questions of law are concerned, reading of section 13(l)(d) of the Act makes it clear that it is only the income from such investment or deposit which has been made in violation of Section 11 (5) of the Act that is liable to be taxed and that violation under section 13(l)(d) does not tantamount to denial of exemption under section 11 on the total income of the assessee. An identical question came before the Bombay High Court in the case reported in Page | 92 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 [2001] 249 ITR 533 (Bom.) (supra). The question before the Bombay High Court is "Whether violation of Section 11(5) r/w Section 13(l)(d) by the assessee-trust attracts maximum marginal rate of tax on the entire income of the Trust? The Bombay High Court held that in case of contravention of Section 13(l)(d), maximum marginal rate of tax under section 164(2), proviso is applicable only to that part of income of the trust which has forfeited exemption and not the entire income. Relevant paragraph reads as under: Sec. 164(2) refers to the relevant income which is derived from property held under trust wholly for charitable or religious purposes. If such income consists of severable portions, exempt as well as taxable, the portion which is exempt is to be left out and the portion which is not exempt is charged to tax as if it is the income of an AOP. Therefore, a proviso was inserted by the Finance Act, 1984 w.e.f 1st April 1985, under which in cases where the whole or any part of the relevant income is not exempt under s. 11 or s. 12 because of the contravention of s.13 (l)(d), the tax shall be charged on such income or part thereof, as the case may be, at the maximum marginal rate. In other words, only the non-exempt income portion would fail in the net of tax as if it was the income of an AOP. The phrase 'relevant income or part of the relevant income' in the proviso is required to be Page | 93 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 read in contradistinction to the phrase 'whole income' under s.161(1A). This is only by way of comparison. Under s. 161(1 A), which begins with a non obstante clause, it is provided that where any income in respect of which a person is liable as a representative assesses consists of profits of business, the tax shall be charged on the whole of the income in respect of which such person is so liable at the maximum marginal rate. Therefore, reading the above two phrases shows that the legislature has clearly indicated its mind in the proviso to s. 164(2) when it categorically refers to forfeiture of exemption for breach of s,13(l)(d), resulting in levy of maximum marginal rate of tax only to that part of the income which has for forfeited exemption. It does not refer to the entire income being subjected to maximum marginal rate of tax. This interpretation is also supported by Circular No. 387, dt 6th July, 1984. Vide the said Circular, it has been laid down in para 28,6 that where a trust contravenes s,13(l)(d), the maximum marginal rate of income-tax will apply only to that part of the income which has forfeited exemption under the said provision and not to the entire income. There is a vital difference between eligibility for exemption and withdrawal of exemption/forfeiture of exemption for contravention of the provisions of law. These two concepts are different. They have different consequences. In the circumstances, there is merit in the contention Page | 94 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 of the assessee that in the present case the maximum marginal rate of tax will apply only to the divided income from shares held in contravention of s. 13(1)(a) and not to the entire income. Therefore, income other than dividend income shall be taxed at normal rate of taxation under the Act. A similar view has been taken by the Delhi High Court in a judgment reported in [2002] 253 ITR 593 (supra).Reading of the proviso to Section 142 is very clear that the legislature has clearly contemplated that in a case, where the whole or part of the relevant income is not exempted under section 11 by virtue of violation of Section 13(1)(d) of the Act, tax shall be levied on the relevant income or a part of the relevant income at the maximum marginal rate. The said analogy is applicable to the facts of the present case". (4) CIT v. Orpat Charitable Trust [2015] 230 Taxman 66 (Guj.) (HC) :-Assessee filed it return of income for different assessment years. AOs examined the case of assessee and denied exemption to assessee on respective amounts in connection with deposits made by it in contravention of sec.11(5) read with sec.13(1). CIT(A) directed AO to restrict disallowance of exemption u/s11 in respect of deposits in contravention of sec. 11 (5) r.w.s. 13(1)(d) as against denial of exemption on entire income by AO. ITAT upheld the order of Page | 95 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 CIT(A) and held that exemption could be denied only to extent of investment contravening provisions of sec. 11(5)and not entire amount. Held, CIT(A) very clearly observed that provisions of section 11(1)(a) are very clear and provide that income derived from property held under trust should not be included in income to extent it was applied for charitable or religious purposes(expenses incurred during the year) or accumulated/set apart to be applied for that purpose in future out of 75% to which restriction u/s. 11(5) applied. ITAT had relied upon its own decision on similar issue rendered in ITA No. 644 to646/Rjt/2003 dated 22-12- 2003. High Court in complete agreement with reasoning adopted by CIT(A) as well as Tribunal. In case of Fr. Mullers Charitable Institutions, Karnataka High Court held that sec. 13(1)(d) clears that it was only the income from such investment or deposit which had been made in violation of sec. 11 (5) that was liable to be taxed and violation u/s 13(1)(d) does not result in denial of exemption u/s 11 to total income of assessee. Where whole or part of relevant income was not exempted u/s 11 by virtue of violation of sec.13(1)(d),tax should be levied on relevant income or part of relevant income at maximum marginal rate. Revenue's appeal dismissed. (5) DIT(E) v. Sheth Mafatlal Gagalbhai Foundation Trust 249 ITR 533 (Bom.) (HC) :-ln Page | 96 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 this case at para 6 of the order it was held as under:- "Sec. 164 does not create a charge on the income of a discretionary trust. The word 'charge' in s. 164 means 'levy'. Sec. 164(2) refers to the relevant income which is derived from property held under trust wholly for charitable or religious purposes If such income consists of severable portions, exempt as well as taxable, the portion which is exempt is to be left out and the portion which is not exempt is charged to tax as if it is the income of an AOP. Therefore, a proviso was inserted by the Finance Act, 1984 w.e.f. 1st April, 1985, under which in cases where the whole or any part of the relevant income is not exempt under s. 11 or s. 12 because of the contravention of s. 13(1)(d), then the tax shall be charged on such income or part thereof, as the case may be, at the maximum marginal rate. In other words, only the non exempt income portion would fall in the net of tax as if it was the income of an AOP. Sec. 11(5) lays down various modes or forms in which a trust is required to deploy its funds. Sec. 13(1) lays down cases in which s. 11 shall not apply. Under s. 13(1)(d)(iii), it has been laid down that any share in a company, not being a Government company, held by the trust after 30th Nov., 1983, shall result in forfeiture of exemption. By virtue of the proviso (Ha) it has been laid down that any asset which Page | 97 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 does not form part of permissible investment under s. 11(5) shall be disposed of within one year from the end of the previous year in which such asset is acquired or by 31st March, 1993, whichever is later. In the present case, the assessee was required to dispose of the shares under the said proviso by 31st March, 1993, see the judgment of this Court in [IT Appeal No. 81 of 1999, dt, 14th Sept., 2000] [reported as Director of IT (Exemptions) v. Shardaben Bhagubhai Mafatlal Public Charitable Trust [2000] 164 CTR (Bom.) 97]. The shares have not been disposed of even during the assessment year in question. Now, under s. 164(2), it is, inter alia, laid down that in the case of relevant income which is derived from property held under trust for charitable purposes, which is of the nature referred to in s. 11(4A), tax shall be charged on so much of the relevant income as is not exempt under s. 11. Sec. 164(2) was reintroduced by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1st April, 1989. Earlier it was omitted by the Direct Tax Laws (Amendment) Act, 1987. However, the legislature inserted a proviso by the Finance Act, 1984, w.e.f. 1st April, 1985. By the said proviso, it is, inter alia, laid down that where whole or part of the relevant income is not exempt by virtue of s. 13(1)(d), tax shall be charged on the relevant income or part of the relevant income at the maximum marginal rate. The phrase 'relevant income or part of the Page | 98 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 relevant income' is required to be read in contradistinction to the phrase 'whole income' under s. 161(1 A). This is only by way of comparison. Under s. 161(1 A), which begins which a non obstante clause, it is provided that where any income in respect of which a person is liable as a representative assessee consists of profits of business, the tax shall be charged on the whole of the income in respect of which such person is so liable at the maximum marginal rate. Therefore, reading the above is so liable at the maximum marginal rate. Therefore, reading the above two phrases shows that the legislature has clearly indicated its mind in the proviso to s 164(2) when it categorically refers to forfeiture of exemption for breach of s 13(1)(0), resulting in levy of maximum marginal rate of tax only to that part of the income which has forfeited exemption. It does not refer to the entire income being subjected to maximum marginal rate of tax. This interpretation of ours is also supported by Circular No. 387 dt. 6th July, 1984. Vide the said circular has been laid down in para 28.6 that where a trust contravenes s 13(1)(a) of the Act, the maximum marginal rate of income- tax will apply only to that part of the income which has forfeited exemption under the said provision and not to the entire income. We may also add that in law there is a vital difference between eligibility for exemption and withdrawal of exemption/forfeiture of Page | 99 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 exemption for contravention of the provisions of law. These two concepts are different. They have different consequences. It is interesting to note that although the legislature withdrew s. 164(2) by the Direct Tax Laws (Amendment) Act, 1987, which provision was reintroduced by the Direct Tax Laws (Amendment) Act, 1989, the legislature did not touch the proviso to s. 164(2) which has been on the statute book right from 1st April 1985. The said proviso was inserted by the Finance Act, 1984. The proviso specifically refers to violation of s. 13(1)(d) and its consequences. In the circumstances, we find merit in the contention of the assessee that in the present case the maximum marginal rate of tax will apply only to the dividend income from shares in Mafatlal Industries Ltd. and not to the entire income. Therefore, income other than dividend income shall be taxed at normal rate of taxation under the Act." (6) DCIT v. Mahatma Gandhi Charitable Society for Education & Research [ITA No. 359/JP/19 dt. 23-1-2020] (Jaipur) (Trib.) -Hon'ble ITAT in Para 3.4.1 held as under 3.4.1 Similarly, we are also of the view that the even if it is held that assessee has violated the provisions of section 13 of the Act, even then the exemption u/s 11 or 12 of the Act cannot be denied nor the surplus as such can be charged to tax at Maximum Marginal Rate. Even Page | 100 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 otherwise, the provision of Section 164 specifically deals with the charge of tax where the shares of the beneficiary is unknown. Section 164(2) deals with charge of tax on the income of the trust which is derived by it from the property held wholly for charitable or religious purposes. From the plain reading of this proviso, it is evident that where the whole or any part of the relevant income is not exempt u/s 11 or 12 because of the provisions of the Section 13(1)(c) or 13(1)(d) then tax is chargeable on the relevant income or part of the relevant income at the maximum marginal rate (MMR). Thus in that eventuality, even in case there is violation of Sec 13, the entire income of the trust is not liable to be taxed at MMR but only the relevant part of the income which violates sec. 13 attracts the MMR. We also found support from the decision in the case of DCIT v. Working Women's Form [2015] 235 Taxman 516 and CIT v. Fr. Mullers Charitable Institutions (2014) 227 Taxman 369 (SC). No new facts or circumstances have been brought before us in order to controvert or rebut the findings so recorded by the Id. CIT(A). Therefore, we find no reason to interfere in the order of the Ld CIT(A). Hence, the ground Nos. 1 and 2 of the Revenue are dismissed." (7) Global Institute of Technology Society v DCIT(E) [ITA No. 1066/JP/2018order dt. 5-11- 2018] (Jaipur) (Trib.) :-The Hon'ble ITAT held Page | 101 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 that even if any part of the income or property which is found to be used or applied for the benefit of the persons specified to in sub section (3) of section 13 of the Act, the benefit of Sections 11 and 12 is not available only to that extent and the claim of the assessee cannot be denied in toto. Accordingly, it is held that the denial of exemption to the assessee u/s 11 and 12 of the Act is not justified except to the extent where the specific part of the income or property is found to be used or applied for the benefit of specified persons. (8) Rajkala Charitable Trust v. ACIT [ITA No. 140/JP/15 dt. 28-4-2016] (Jaipur) (Trib.) In this case it was held that where there is violation of section 13, the entire income of the trust is not chargeable to tax at maximum marginal rate and it is only that income which has violated section 13 which shall suffer maximum marginal rate as per proviso to section 164(2) of the Act. Further, the appellant has submitted that the amount of Rs. 20,00,000/- with interest of Rs. 2,16,000/- ie. Rs. 22,16,000/- was received back by the trust and the interest income of Rs. 2,16,000/- was offered in the return for AY 2012-13 and there is no income generated on amount of Rs. 20 lacs advanced to M/s Rajakala Industries Limited during the year. There is nothing on record to controvert the said submissions of the appellant. Thus, there is no income during the Page | 102 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 year which can be brought to tax at maximum marginal rate in the hands of the trust in a scenario where it is held that there is violation of provisions of section 13. In view of the same, we don't think it would be relevant to examine whether the appellant trust has violated the provisions of section 13 of the Act as the same has become infructious in the facts and circumstances of the present case. The AO is accordingly, directed to allow exemption to the appellant trust u/s 11 and the addition made by the AO and confirmed by CIT(A) is hereby deleted. " 5.3.6.8 More recently Hon'ble ITAT Chennai Bench has dealt the issue in detail in the of Jaya Educational Trust v. Deputy Commissioner of Income-tax, Central e-1(2), Chennai [2021] 130 taxmann.com 225 (Chennai - Trib.) dated 16.07.2021. The relevant issue has been adjudicated in para 14 of the decision which is reproduced below: "14. The provisions of section 13(1)(c) imposed certain restriction on utilization of income of the trust which claims exemption u/s 11 of the Act. As per clause (c) of sub.sec (1) of section 13, if any part of income or any property of the trust or the institution, is used or applied directly or indirectly for the benefit of any person referred in sub. Section (3), then the trust is not entitled to exemption u/s 11 of the Income-tax Act, 1961. The specified persons has been referred to u/s 13(3) of the Act, and as per said Page | 103 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 section the persons specified are the 'author' or 'founder' of the trust, their relatives, any trustee of the trust or manager by whatever name called. The provisions of sec. 164(2) of the Act, states that in a case, where the whole or any part of the relevant income is not exempt u/s 11 or sec. 12 by virtue of the provisions contained in clause (c) or clause (d) of sub.sec. (1) of section 13 of the Act, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate. Therefore, if the trust allows any benefit to interested persons, then only that part of the income which is in violation of section 13(1)(c) is chargeable to tax at the maximum marginal rate of tax; but not whole income of the trust. This proposition is supported by the decision of the Hon'ble Bombay High Court in the case of DIT (Exemption) v. Sheth Mafatlal Gagalbai Foundation Trust [2001] 114 Taxman 19/249 ITR 533 and also the decision of the Hon'ble Kamataka High Court in the case of Fr. Mullers Charitable Institutions (supra). We further observe that the Hon'ble Supreme Court has dismissed the Special Leave Petition filed by the revenue against the order of the Hon'ble Karnataka High Court, in the case of CIT v. Fr. Mullers Charitable Institutions [2014] 51 taxmann.com 378/227 Taxman 369 (SC). In view of the clear provisions of the Act, and also the decision of the Hon'ble Supreme Court in the case, cited supra, it is clear that in case there is violation referred to under section 13(1)(c), then tax can be charged on such income which violates the provisions of section 13(1)(c); but not whole income of the Page | 104 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 Trust. This position is further strengthened by the decision of Hon'ble Jurisdictional High Court of Madras in the case of Working Women's Forum (supra), where it was held that denial of exemption u/s. 11 should be restricted to the extent of income, which is in violation of section 13(1)(c) & 13(1)(d) of the Act. The Hon'ble Supreme Court had dismissed the SLP filed by the Revenue and affirmed the findings of the Hon'ble Jurisdictional High Court of Madras. In this case, the AO has levied tax on total income of the Trust at maximum marginal rate, contrary to settled position of law. We, therefore, are of the considered view that the AO as well as the Id. CIT (A) were erred in rejecting exemption claimed u/s 11 to total income of the trust." 5.3.6.9 In view of the legal precedents relied upon by the appellant and the judicial pronouncements in the cases of Central Academy Jodhpur Education Society (supra) and Jaya Educational Trust (supra) it becomes abundantly clear that the courts/tribunals have upheld the proposition that in case of any alleged violation u/s. 13, the benefit of Section 11/12 would not be available to the extent of quantum of benefit to the specified person as per section 13(3) and the entire exemption cannot be forfeited/denied. Thus it is held that in the event of any violation of provisions of Section 13, the entire exemption u/s. 11 cannot be denied and would be restricted to the extent of benefit given to the specified persons by the appellant Trust. Therefore. the assessing officer was not justified in completely denying the exemption u/s. Page | 105 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 11 of the I.T. Act, 1961. The alternative ground of the appellant is hereby allowed. 5.3.6.10 Importantly, the Assessing Officer in none of the subsequent years i.e. AY 2013-14 to AY 2017-18, has denied the entire exemption claimed u/s 11 by the appellant. In fact, in the subsequent years, the Assessing Officer has added the Notional House Property Income and has allowed the exemption u/s 11. The relevant portion of assessment order of AY 2014-15 is reproduced below: "In this regard, vide order sheet noting dated 06/12/2016, assessee was asked to submit the details regarding space used by Ideen Furniture and the rent details. Assessee vide letter dated 15/12/2016 has submitted a two line reply, has stated that Mumbai Education Trust has not given any space on lease/rent to M/s. Ideen Furniture during the FY 2013-14, A. Y. 2014-15. Assessee's two line reply is considered but cannot be accepted because of the fact that has been established in assessment orders of A. Y. 2009-10, 2010-11 and 2011-12. Assessee has not produced anything to the contrary of this fact. Income is computed accordingly. F.Y. 2007-08 ₹31,18,800/- F.Y. 2008-09 ₹34,15,080/- F.Y. 2009-10 ₹37,48,176/- F.Y. 2010-11 ₹41,12,424/- F.Y. 2011-12 ₹45,23,666/- F.Y. 2012-13 ₹49,76,032/- F.Y. 2013-14 ₹54,73,635/- Page | 106 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 6. The expenditure incurred for the objects of the trust as detailed in the income and expenditure account has been examined. The assessee has claimed exemption under Section 11 of the I.T. Act, which has been examined. 7. Subject to the above remarks and discussion and after verification of details furnished, total income of the assessee is being worked as under: Mumbai Education Trust Computation of Income Income from other sources 823207434 Income from Notional House Property 5473635 Add: Dividend income as discussed above in para 2. 5000 828686069 Less: Application of income amount applied to the object 709568514 Less: ii) Depreciation as discussed above in para 1 86332719 623235795 25450274 Accumulation under Section 11(1)(a) @ 15% of ₹828686069/- i.e. ₹124302910/- Total Income 81147364 Round off 81147370 From the above it becomes abundantly clear that the Assessing Officer have applied different yardsticks in the subsequent assessment years with regards to the claim of exemption under Section 11. The principle of consistency has not been followed by the AOs. The allowing of exemption under Section 11 and making addition to the gross receipts of the trust by way of Notional House Property Income also supports the alternative contention of the appellant that in the event of any violation of provisions of Section 13, the Page | 107 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 entire exemption under Section 11 cannot be denied and would be restricted to the extent of benefit given to the specified persons by the appellant Trust. 014. As the issue is squarely covered by the decision of various courts at least on the principle that the assessee trust looses the exemption only to the extent of violation of Section 13 and not on the whole of the income, The order of the learned CIT (A) cannot be found to be fault with and therefore, upheld to that extent. 015. We also note that there is an amendment to the provisions by the finance act 2022 within for from 1-4-2023 which provides that a part of income is applied directly indirectly for the benefit of specified persons then only such part of income shall be excluded from the operations of provisions of Section 11 and 12 of the act and consequently it should be included in the total income of the trust. This 016. However, it needs to be ascertained that on what portion of income assessee trust loses its exemption. The assessee has without prejudice submitted before the learned Assessing Officer which is also reproduced at page no.9 of the order of the learned CIT (A). It shows that the assessee submitted before the learned Assessing Officer that even if it is presumed that the trustees have used property then trust would be made liable for the income for relevant years to the extent of income that would be chargeable to tax would be ₹31,18,800/- for A.Y. 2008- 09, ₹34,15,080/- for A.Y. 2009-10 and ₹ 37,48,176/- for A.Y. 2010-11 and ₹41,12,424/- for A.Y. 2011-12. The Page | 108 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 assessee submitted that some portion of the premises was intermittently used by the Private Limited Company. Assessee has also stated that market value of compensation not charged is the above amounts. The learned CIT (A) in paragraph no. 5.3.5.2 has categorically confirmed that M/s Ideen Furniture Pvt. Ltd. was occupying the 8 th floor of the building of assessee‟s trust. Therefore, naturally the Provision of Section 13(1)(c) of the Act applies to this property. 017. The second issue was that 10 th Floor of the building was utilised by the Bujwal family as its Bunglow. The learned CIT (A) in paragraph no. 5.3.5.3 has accepted the contention that the learned Assessing Officer has not been able to make out by collecting any evidence and further, the Jt. cum Charity Commissioner vide order dated 30 th March, 2022 decided that applicant (the complainant before the charity commissioner) has not proved the allegation of misuse of 10 th floor of Mumbai Education Trust building by the family of trustees with the cogent evidence. Admittedly, the learned Assessing Officer also perused only the copy of the complaint before the Jt. Commissioner. The Jt. Commissioner has held that complainant could not prove before him that 10 th Floor is used as a residence by the Bujwal family “beyond reasonable doubt”. In the income tax proceedings the “beyond reasonable doubt” concept is unknown. Further the proceedings before the joint Charity Commissioner Page | 109 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 were altogether Under different provisions of the Bombay public trust act for the removal of the trustees. For the purpose of provisions of Section 11, 12 and 13 it needs to be verified whether the property has been used directly or indirectly for the benefit of the specified persons or not. Therefore the issue needs to be looked at from the perspective of the income tax act. Therefore, the learned AO should make necessary enquiries. In view of this fact, the learned Assessing Officer should make an independent enquiry in accordance with the law that whether the 10 th floor has been utilized by the trustees for their direct or indirect benefit. If, on enquiry the learned assessing officer finds that the property is used for the director indirect benefit of the specified persons, naturally on this property also the provisions of Section 13 (1) (C) will apply. 018. Provisions of Section 13(1)(c) (ii) of the Act clearly says that if any part of such income or property of the trust during the previous year used or applied directly or indirectly for the benefit of the specified persons then such part of income cannot be said to be applied for the charitable purposes. In the present case, the property at 8 th floor and 10 th floor(subject to the outcome of the enquiries of the learned assessing officer) of the building of the assessee trust are applied for the benefit of the specified persons. Therefore, the learned Assessing Officer is also direct to determine the part of such income or property of the trust on which it loses the exemption. The Page | 110 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 learned Assessing Officer may do so after giving proper opportunity of hearing to the assessee. 019. The learned assessing officer is further directed to examine Whether such income is also chargeable to tax in the hands of such specified persons with respect to the provisions of Section 56 (2) (vii) of the act which was operating from 1 October 2009 till 31 March 2017 or Under Section 28 (iv) of the act. 020. Accordingly, grounds no.1 to 5 of the appeal of the learned Assessing Officer are dismissed subject to above direction. 021. Therefore, ground number 1 – 5 for assessment year 2008 – 09, ground number 1 – 5 for assessment year 2009 – 10, ground number 1 – 5 for assessment year 2010 – 11 and ground number 1 – 5 for assessment year 2011 – 12 are dismissed. 022. In assessment year 2009 – 10, 2010 – 11 and 2011 – 12 ground no. 6 are that whether the dividend income is also eligible for the treatment under Section 11 of the Act, the learned CIT (A) has correctly followed the decision of the co-ordinate Bench as referred to paragraph no. 6.3. Therefore, respectfully following the decision of the coordinate bench, we also dismiss ground no.6 of those appeals. 023. Accordingly, the appeals filed by the learned Assessing Officer for A.Y. 2008-09, 2009-10, 2010-11 and 2011-12 are dismissed but for the computation of income u/s 13 Page | 111 ITA Nos. 1828 to 1831/Mum/2022 Mumbai Education Trust; A.Y. 08-09 to 11-12 (1) (c) the matters are restored to the file of the learned AO. Order pronounced in the open court on 30.09.2022. Sd/- Sd/- (RAHUL CHAUDHARY) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 30. 09.2022 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai