DCIT., (Exemptions), Hyderabad, Hyderabad V. Balajee Arun Educational Society, Secunderabad

ITA 1919/HYD/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2632 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 23-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: S RAMA RAO
• Keywords: Charitable institution; Onus to prove; Capital expenditure
• Section: 142(1); 133A; 12A; 11

Judgement Text

ITA NO 1919 OF 2014 BALAJEE ARUN EDUCATIONA L SOCIETY SECUNDERABAD. PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1919/HYD/2014 (ASSESSMENT YEAR: 2008-09) DY. COMMISSIONER OF INCOME TAX (EXEMPTIONS) HYDERABAD CIRCLE, HYDERABAD VS BALAJEE ARUN EDUCATIONAL SOCIETY SECUNDERABAD PAN: AAEFB 8808 R (APPELLANT) (RESPONDENT) FOR REVENUE : SMT. N. SWAPNA, DR FOR ASSESSEE : SHRI S. RAMA RAO O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS REVENUES APPEAL FOR THE A.Y 2008-09 AGAINS T THE ORDER OF THE CIT (A), GUNTUR, DATED 10.10.2014. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LD. CIT (APPEALS), IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LD. CIT (APPEALS), ERRED IN LAW IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S.11, WHEN THERE WAS CLEAR VIOLATION OF PROVISIONS OF SEC.13(1)(C) OF THE ACT ON THE PART OF THE ASSESSEE , AS ESTABLISHED BY THE AO IN THE ASSESSMENT ORDER. 3. THE LD. CIT (A) WAS NOT JUSTIFIED IN ACCEPTING THAT CONSTRUCTION AGREEMENT DT.15.03.2008 REFERRED TO BY THE ASSESSEE, IN THE FACE OF DATE OF HEARING: 07.11.2017 DATE OF PRONOUNCEMENT: 24.01.2018 ITA NO 1919 OF 2014 BALAJEE ARUN EDUCATIONA L SOCIETY SECUNDERABAD. PAGE 2 OF 12 DETAILED FACTUAL DISCUSSIONS MADE BY THE AO IN THE ASSESSMENT, ESTABLISHING UNRELIABILITY OF THE SAID DOCUMENT AND FOR NON-ACCEPTANCE OF THE SAID DOCUMENT. 4. THE LD. CIT (A) OUGHT TO HAVE APPRECIATED THAT IN FACE OF FULL FACTUAL DISCUSSIONS MADE BY THE AO IN THE ASSESSMENT, THERE WAS CLEAR VIOLATION OF SEC. 13(1)(C) OF THE ACT ON THE PART OF THE ASSESSE E THEREBY MAKING INELIGIBLE FOR EXEMPTION U/S 11, FOLLOWING THE SAID ADVANCE OF RS.1,50,00,000/- GIVEN BY THE ASSESSEE TO YASHASWI INFRASTRUCTURES PVT. LIMITED, A CONCERN COVERED U/S.13(3) OF THE ACT. 5. THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCES MADE BY THE AO U/S 40 (A)(IA) OF THE ACT AND FOR THE CAPITAL EXPENDITURE IN THE ASSESSMENT, WHEN THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 11 OF THE ACT. 6. THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNDER REPORTING OF TUITION FEE IN THE ASSESSMENT, WHEN THE ADDITION WAS MADE ON THE BASIS OF THE NUMBER OF STUDENTS IN THE CASE OF THE SOCIETY AND THE FEE BEING CHARGED FROM EACH STUDENT AND THE INCOME REPORTED UNDER THAT HEAD BY THE ASSESSEE SOCIETY. 7. THE LD. CIT(A) ERRED IN HOLDING THAT THERE IS NO VIOLATION OF SEC. 13(1)(C) AND THE PAYMENTS MADE TO SRI T.V.PRANAY KUMAR, TREASURER OF THE SOCIETY, IS NOT EXCESSIVE FOR THE SERVICES RENDERED BY HIM, WITHOUT APPRECIATING THE FACT THAT THE AO HAS MADE ELABORATIVE DISCUSSION IN THAT REGARD, ESTABLISHING AS TO HOW PROVISION OF SEC. 13(1)(C) I S ATTRACTED IN THE CASE FROM SUCH PAYMENT MADE TO THAT PERSON. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SOCIETY REGISTERED U/S 12A OF THE ACT. IT IS RUNNING A SCHO OL UNDER THE NAME DELHI PUBLIC SCHOOL. IT FILED ITS RETURN OF INCOME FOR THE A.Y ITA NO 1919 OF 2014 BALAJEE ARUN EDUCATIONA L SOCIETY SECUNDERABAD. PAGE 3 OF 12 2008-09 ON 25.09.2008 DECLARING NIL INCOME AFTER CLAIMING EXEMPTION U/S 11 OF THE ACT. THE RETURN WAS INITIAL LY ACCEPTED U/S 143(1) OF THE ACT AND SUBSEQUENTLY SELECTED FOR SCR UTINY BY ISSUANCE OF NOTICES U/S 143(2) AND 142(1) OF THE AC T. IN RESPONSE TO THE SAID NOTICES, THE AR OF THE ASSESSEE APPEARE D FROM TIME TO TIME AND FURNISHED THE DETAILS CALLED FOR. . 3. MEANWHILE, A SURVEY U/S 133A WAS CONDUCTED IN TH E ASSESSEES PREMISES ON 25.10.2010 AND IT WAS FOUND THAT THE ASSESSEE IS NOT MAINTAINING PROPER BOOKS OF ACCOUNT AND THEREFORE, ITS BOOKS DO NOT REFLECT THE TRUE AND CO RRECT PICTURE OF ITS TRANSACTIONS. THEREFORE, AFTER OBTAINING THE AP PROVAL OF THE DIRECTOR OF INCOME TAX (EXEMPTIONS), THE BOOKS WERE REFERRED FOR AUDIT U/S 142(2A) OF THE ACT ON 23.12.2010. THE AUD IT REPORT DATED 19.4.2011, WAS SUBMITTED TO THE DEPARTMENT ON 20.04.2011. A COPY OF THE AUDIT REPORT WAS FORWARDE D TO THE ASSESSEE CALLING FOR ITS EXPLANATION ON VARIOUS ISS UES RAISED IN THE AUDIT REPORT. THE ASSESSEE FURNISHED ITS EXPLANATIO N AND THEREAFTER, THE ASSESSMENT WAS COMPLETED BY THE AO. 4. THE AO FOUND THAT DURING THE FINANCIAL YEAR 2007 -08, THE ASSESSEE HAD GIVEN INTEREST FREE ADVANCE OF RS. 1,50,00,000 TO M/S. YASHASWI INFRASTRUCTURE PVT. LTD (A CONTRACTOR ), A COMPANY IN WHICH SHRI M. KOMARAIAH IS HOLDING 64.55% AND HI S WIFE SMT. M. PALLAVI IS HOLDING 13.99%, TOGETHER HOLDING 78.5 4% OF THE VOTING POWER/SHARE CAPITAL. HE OBSERVED THAT MR. M. KOMARAIAH AND HIS WIFE SMT. M. PALLAVI ARE ALSO THE MEMBERS O F THE ASSESSEE SOCIETY. BEFORE THE AO, THE ASSESSEE CLAIMED THAT T HIS INTEREST FREE ADVANCE WAS GIVEN IN PURSUANCE OF A CONSTRUCTION AG REEMENT ITA NO 1919 OF 2014 BALAJEE ARUN EDUCATIONA L SOCIETY SECUNDERABAD. PAGE 4 OF 12 EXECUTED ON 15.3.2008 FOR DEVELOPMENT OF LAND AND C ONSTRUCTION OF A SCHOOL BUILDING AT A TOTAL COST OF RS.514.69 L AKHS. THE ASSESSEE CLAIMED THAT IT WAS A NORMAL BUSINESS TRAN SACTION AND WAS NOT FOR THE BENEFIT OF M/S. YASHASWI INFRASTRUC TURE PVT. LTD AND THEREFORE, THE PROVISIONS OF SECTION 13(1)(C)(I I) OF THE ACT WAS NOT ATTRACTED. 5. THE AO DID NOT ACCEPT THE ABOVE CONTENTIONS OF T HE ASSESSEE FOR THE FOLLOWING REASONS: I) THE CONSTRUCTION AGREEMENT WAS NOT FOUND DURING THE COURSE OF SURVEY NOR WAS IT PRODUCED DURING THE ASS ESSMENT PROCEEDINGS AND THEREFORE, AGREEMENT IS NOT GENUINE . IT WAS ONLY PRODUCED FOR THE FIRST TIME BEFORE THE SPECIAL AUDI TOR, AND THEREFORE, THIS CASTS A DOUBT ABOUT THE AUTHENTICIT Y OF THE DATE OF EXECUTION OF THE DOCUMENT. II) THE STAMP PAPER ON WHICH THE CONSTRUCTION AGREE MENT WAS WRITTEN WAS PURCHASED ON 26.09.2005, WHILE THE AGREEMENT WAS EXECUTED AT A MUCH LATER DATE I.E. 15.03.2008. III) THE AGREEMENT IS NOTARIZED WITHOUT ANY DATE AN D HENCE THERE IS NO EVIDENCE TO INDICATE THAT THE AGR EEMENT WAS EXECUTED ON 15.03.2008. IV) THE TERMS OF THE AGREEMENT ARE TOTALLY IN FAVOU R OF THE CONTRACTOR AND DOES NOT GIVE ANY DETAILS ABOUT THE NUMBER OF FLOORS, THE QUALITY OF MATERIAL TO BE USED FOR INTE RIOR WORKS OF THE SCHOOL TO BE CONSTRUCTED AND THERE WAS NO MENTION O F THE DATE BEFORE WHICH THE CONSTRUCTION SHOULD BE COMPLETED. V) THE ASSESSEE SOCIETY DID NOT HAVE ANY PERMISSION FROM THE MUNICIPAL AUTHORITIES FOR CONSTRUCTION OF THE S CHOOL BUILDING. EVEN FOR THE FORMATION OF THE APPROACH ROAD TO THE BUILDING, THERE ARE NO SPECIFICATIONS AS TO THE LENGTH & WIDTH OF T HE ROAD, QUALITY OF THE MATERIAL TO BE USED ETC. VI) THE TERMINATION CLAUSES ARE ALSO IN FAVOUR OF T HE CONTRACTOR AND THE ASSESSEE HAS NOT INVOKED ANY OF THESE CLAUSES ITA NO 1919 OF 2014 BALAJEE ARUN EDUCATIONA L SOCIETY SECUNDERABAD. PAGE 5 OF 12 TO CANCEL THE AGREEMENT, EVEN THOUGH THE CONTRACTOR DID NOT FULFIL ANY OF THE CONDITIONS OF THE CONTRACT. 6. THE ASSESSEE HAS CLAIMED THAT IT HAS RECEIVED BA CK THE ADVANCE OF RS.1.50 CRORES FROM THE CONTRACTOR IN TH E SUBSEQUENT YEARS BUT DID NOT OFFER ANY EXPLANATION/REASON FOR THE CONTRACTOR RETURNING THE AMOUNT AFTER A LAPSE OF TWO YEARS. TH E ASSESSEE, BY ITSELF, WAS CARRYING ON THE WORK OF CONSTRUCTION AN D THEREFORE, IT WAS WITHIN ITS KNOWLEDGE THAT ITS SISTER CONCERN WA S NOT CARRYING ON ANY ACTIVITY OF THE CONSTRUCTION FOR THE TRUST A ND THEY CHOSE TO ARRANGE THE AFFAIRS BETWEEN THEM IN SUCH A MANNER U NMINDFUL OF THE FACT THAT SUCH AN ADVANCE HAS CAUSED DETRIMENT TO THE TRUST AND THE SAME CANNOT BE HELD AS AN APPLICATION OF IT S INCOME U/S 11 OF THE ACT NOR AN INVESTMENT U/S 11(5) OF THE AC T. THUS, THE AGREEMENT OF CONSTRUCTION IS ONLY A SELF-SERVING DO CUMENT, ONLY TO JUSTIFY INTEREST FREE ADVANCE OF RS.1.50 CRORES TO THE CONTRACTOR AND CLAIMED IT TO BE A BUSINESS TRANSACTION. 7. FOR THESE REASONS, THE AO HELD THAT THE ASSESSEE TRUST HAS ADVANCED THE FUNDS TO A PERSON FOR THE BENEFIT OF A PERSON REFERRED TO IN SUB-SECTION 3 OF SECTION 13 OF THE A CT AND HENCE THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S 11 OF THE ACT. 8. THE AO ALSO PROCEEDED TO CONSIDER THE ALLOWABILI TY OF THE EXPENSES CLAIMED BY THE ASSESSEE. HE FOUND THAT THE ASSESSEE HAS CLAIMED TO HAVE PAID SALARY OF RS.3.30 LAKHS TO ONE SHRI T.V. PRANAY KUMAR FOR 11 MONTHS FROM 2.6.2007 TO 31.3.20 08. WHEN CONFRONTED, THE ASSESSEES EXPLANATION WAS THAT SHR I T.V. PRANAY KUMAR IS AN ADVOCATE BY PROFESSION AND THAT HE PROV IDED LEGAL ITA NO 1919 OF 2014 BALAJEE ARUN EDUCATIONA L SOCIETY SECUNDERABAD. PAGE 6 OF 12 SERVICES TO THE SOCIETY FOR WHICH THE PAYMENT WAS M ADE. THE AO OBSERVED THAT THE ASSESSEE DID NOT PROVE ITS CLAIM WITH ANY DOCUMENTARY EVIDENCE. HE ALSO OBSERVED THAT SHRI T. V. PRANAY KUMAR IS NOT A FULL-FLEDGED ADVOCATE AND IS ONLY WO RKING AS A JUNIOR/ASSISTANT TO A SENIOR ADVOCATE AND THEREFORE , HIS SERVICES CANNOT BE CONSIDERED AS LEGAL PROFESSIONAL SERVICES . HE ALSO OBSERVED THAT IN ADDITION TO THE ABOVE, THE ASSESSE E FURTHER LISTED OUT THE LEGAL & PROFESSIONAL CHARGES TOTALING TO RS.2,20,999 AND THEREFORE, HELD THAT IF THE PAYMENT MADE TO SHRI T. V. PRANAY KUMAR IS TOWARDS FEES FOR LEGAL ADVICE/PROFESSIONAL CHARGES, THESE PAYMENTS WERE NOT REFLECTED IN SCHEDULE 10. SINCE S HRI T.V. PRANAY KUMAR WAS THE TREASURER AND MEMBER OF THE AS SESSEE SOCIETY, THE AO WAS OF THE OPINION THAT THIS PAYMEN T ATTRACTS THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT. IN VIEW OF THIS VIOLATION, THE AO HELD THAT THE ASSESSEE IS NOT ENTITLED TO TH E EXEMPTION U/S 11 OF THE ACT. 9. THEREAFTER, THE AO PROCEEDED TO CONSIDER THE ALLOWABILITY OF OTHER EXPENSES CLAIMED BY THE ASSES SEE AND FOUND VARIOUS EXPENSES TO BE NOT ALLOWABLE. ONE SUCH EXPE NDITURE IS THE PAYMENT MADE TO VARIOUS PARTIES WITHOUT MAKING TDS. HE THEREFORE, MADE THE DISALLOWANCE U/S 40(A)(IA) AND THE CONSEQUENTIAL ADDITION OF RS.7,03,645 UNDER THIS HE AD. 10. FURTHER, AS PER THE INCOME AND EXPENDITURE A/C ENDING ON 31.03.2008, HE OBSERVED THAT THE ASSESSEE DECLARED TERM TUITION FEE TO THE TUNE OF RS.3,99,68,660. H OWEVER, HE FOUND THAT THERE WAS A SHORTFALL OF RS.15.00 LAKHS, FOUND FROM THE ANALYSIS OF INVOICES, CASH BANK BALANCES AND FEE AC COUNT. HE ITA NO 1919 OF 2014 BALAJEE ARUN EDUCATIONA L SOCIETY SECUNDERABAD. PAGE 7 OF 12 ACCORDINGLY MADE THE DISALLOWANCE AND THE CONSEQUEN TIAL ADDITION. 11. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL TO THE CIT (A), WHO DELETED THE ADDITIONS AND ALSO HELD THAT T HE ASSESSEE IS ENTITLED TO EXEMPTION U/S 11 OF THE ACT. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT (A), THE REVENUE IS IN APPEAL BE FORE US. 12. THE LEARNED DR, STRONGLY SUPPORTED THE ORDERS O F THE AO AND SUBMITTED THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF EXEMPTION BY MAKING INTEREST FREE ADVANCES TO ITS R ELATED CONCERN WHICH HAS BENEFITTED THE SAID CONCERN AND HENCE IS SUFFICIENT CAUSE TO DENY THE EXEMPTION U/S 11 OF THE ACT. 13. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE AU THORITIES BELOW AND FURTHER SUBMITTED THAT THE INTEREST FREE AMOUNT WAS ADVANCED TO M/S. YASHASWI INFRASTRUCTURE PVT. LTD O NLY FOR BUSINESS PURPOSES AND THAT TOO ON 31.03.2008 AND TH EREFORE, EVEN IF IT IS PRESUMED TO BE NOT FOR BUSINESS PURPO SES, NO BENEFIT HAS ENURED TO THE CONTRACTOR DURING THE RELEVANT PR EVIOUS YEAR AND THEREFORE, THE ASSESSEE CANNOT BE DENIED THE EX EMPTION U/S 11 OF THE ACT FOR THE SAID YEAR. 14. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE REASONS FOR DISALLOWANC E OF EXEMPTION U/S 11 OF THE ACT ARE THAT (I) THE ASSESSEE HAD ADV ANCED INTEREST FREE ADVANCE TO M/S. YASHASWI INFRASTRUCTURE PVT. L TD, A RELATED ITA NO 1919 OF 2014 BALAJEE ARUN EDUCATIONA L SOCIETY SECUNDERABAD. PAGE 8 OF 12 CONCERN FOR ITS BENEFIT AND THEREFORE, TRANSACTION FALLS UNDER CLAUSE (C) OF SUB-SECTION(1) OF SECTION 13 OF THE I .T. ACT AND; (II) THE TREASURER OF THE SOCIETY HAS BEEN PAID SALARY OF RS .3,30,000 AND HENCE THE PROVISION OF SECTION 13(1)(C) ARE ATTRACT ED. THE UNDISPUTED FACTS WHICH NEEDS CONSIDERATION ARE, THA T (A) THE ASSESSEE IS A REGISTERED SOCIETY U/S 12A OF THE ACT ; (B) IT IS CARRYING ON CHARITABLE ACTIVITY OF RUNNING AN EDUCA TIONAL INSTITUTION; (C) IT HAS FILED ITS RETURN OF INCOME ON 25.09.2008; (D) THE ADVANCE WAS GIVEN TO THE RELATED PARTY ON 31.03 .2008 AND (E) THE SAID AMOUNT WAS RETURNED WITHIN A PERIOD OF TWO YEARS THEREAFTER. THERE IS ALSO NO DISPUTE THAT M/S. YASH ASWI INFRASTRUCTURE PVT. LTD, IS A CONCERN IN WHICH THE TRUSTEES, HAVE A SUBSTANTIAL INTEREST. THEREFORE, THE QUESTION TO BE CONSIDERED IS WHETHER THIS ADVANCE IS FOR THE BENEFIT OF SUCH A C ONCERN OR IS IT A NORMAL BUSINESS TRANSACTION. 15. THE ASSESSEE HAS CLAIMED IT TO BE A NORMAL BUSI NESS TRANSACTION I.E. FOR CONSTRUCTION OF A SCHOOL BUILD ING. THE COPY OF THE AGREEMENT IS FILED IN THE PAPER BOOK FILED BEFO RE US AND AS RIGHTLY POINTED OUT BY THE AO, THE AGREEMENT DOES N OT SPEAK OF THE APPROVED PLAN OR THE NUMBER OF FLOORS OR AREA T O BE CONSTRUCTED OR THE QUALITY OF MATERIAL TO BE USED E TC. THEREFORE, IT APPEARS TO BE AN AGREEMENT ENTERED INTO TO EXPLAIN THE PURPOSE OF THE ADVANCE OF RS.1,50,00,000. THE CIT (A) HAS ACCE PTED THE ASSESSEES CONTENTION THAT THE AMOUNT HAS BEEN RETU RNED SUBSEQUENTLY AND ALSO THAT M/S. YASHASWI INFRASTRUC TURE PVT. LTD, HAS CARRIED OUT THE PRELIMINARY ACTIVITIES OF LEVEL LING THE LAND, REMOVAL OF THE BOULDERS, ETC. AND THAT THE SAID COM PANY HAS INCURRED CERTAIN EXPENDITURE WHICH HAS NOT BEEN RET URNED TO THE ITA NO 1919 OF 2014 BALAJEE ARUN EDUCATIONA L SOCIETY SECUNDERABAD. PAGE 9 OF 12 ASSESSEE. BUT, IN OUR OPINION, THE CIT (A) HAS FAIL ED TO CONSIDER THAT THE ASSESSEE HAS CONSTRUCTED THE BUILDING BY I TSELF DURING THE RELEVANT PREVIOUS YEAR AND ALSO IN THE SUBSEQUENT Y EARS. THEREFORE, WE ARE IN AGREEMENT WITH THE FINDINGS OF THE AO THAT THE ASSESSEE HAS NOT INVOKED THE CLAUSES OF THE AGR EEMENT TO CANCEL THE CONTRACT, EVEN THOUGH IT HAD THE KNOWLED GE THAT M/S. YASHASWI INFRASTRUCTURE PVT. LTD WAS NOT FULFILLING THE CONDITIONS OF THE CONTRACT NOR WAS GOING TO EXECUTE THE CONTRA CT. HOWEVER, WE FIND STRENGTH IN THE ARGUMENT OF THE LEARNED COUNSE L FOR THE ASSESSEE THAT THE ADVANCE WAS GIVEN ON THE LAST DAY OF THE RELEVANT FINANCIAL YEAR I.E. 31.03.2008 AND THEREFO RE, NO BENEFIT HAS ACCRUED TO THE SAID COMPANY FOR THE RELEVANT FI NANCIAL YEAR AND HENCE THE PROVISIONS OF SECTION 13(1)(C) ARE NO T ATTRACTED. THE REGISTRATION U/S 12A ALLOW THE ASSESSEE TO MAKE THE CLAIM OF EXEMPTION U/S 11 OF THE ACT WHILE THE ALLOWABILITY OF CLAIM IS TO BE CONSIDERED BY THE AO YEAR TO YEAR. THEREFORE, THE F IRST AND FOREMOST CONDITION TO INVOKE SECTION 13(1)(C) IS TH AT THE ASSESSEE SHOULD HAVE USED OR APPLIED THE INCOME OF THE ASSES SEE DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSON REFERRED T O IN SECTION 13(3) OF THE ACT. THERE IS NO DISPUTE THAT M/S. YASHSWI I NFRASTRUCTURE PVT. LTD IS A PERSON REFERRED TO IN SECTION 13(3) O F THE ACT AND THE INCOME OF THE ASSESSEE HAS BEEN ADVANCED TO IT. THE BENEFIT IS THE ADVANCE BEING INTEREST FREE. THE NEXT CONDITION IS THAT SUCH PERSON SHOULD HAVE DERIVED THE BENEFIT DURING THE R ELEVANT A.Y. IF IT IS A BUSINESS TRANSACTION, THERE CANNOT BE ANY P RESUMPTION OF THE BENEFIT REFERRED TO U/S 13(1) (C) OF THE ACT. T HE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. KAMALA TOWN TRUST REPORTED IN (2005) 279 ITR 89 (ALL.) HAS HELD THAT THE BURDEN TO PROVE THAT SECTION 13 HAS BEEN VIOLATED WAS ON THE REVENUE. THE ITA NO 1919 OF 2014 BALAJEE ARUN EDUCATIONA L SOCIETY SECUNDERABAD. PAGE 10 OF 12 TRIBUNAL AT AGRA IN THE CASE OF SHRI AMOL CHAND VAR SHNEY SEWA SANSTHAN REPORTED IN (2013) 25 ITR (TRIB.) 211 (AGR A) HELD THAT THE EXEMPTION U/S 11 CANNOT BE DENIED ON MERE PRESU MPTION. IN THE CASE ON HAND ALSO, THE AO HAS NOT BROUGHT OUT O N RECORD THAT THE RELATED CONCERN HAS BENEFITED DURING THE RELEVA NT FINANCIAL YEAR. ANOTHER FACTOR WHICH NEEDS CONSIDERATION IS T HAT THE CONSTRUCTION AGREEMENT IS ALLEGED TO HAVE BEEN EXEC UTED ON 15.03.2008 AND THE ADVANCE HAS BEEN GIVEN ON 31.03. 2008 AND THE SAID ADVANCE HAS BEEN RETURNED OVER A PERIOD OF TWO YEARS THEREAFTER AND NO DISALLOWANCE OR AN ADDITION HAS B EEN MADE IN THE SUBSEQUENT A.YS TOWARDS THE INTEREST FREE ADVAN CE. ALL THESE TRANSACTIONS HAVE BEEN CARRIED OUT BEFORE THE DATE OF SURVEY I.E. ON 25.10.2008. THEREFORE, IT CANNOT BE SAID THAT TH IS CONTENTION OF THE ASSESSEE IS AN AFTERTHOUGHT. IN VIEW OF THESE R EASONS, WE AGREE WITH THE FINDINGS OF THE CIT (A) THAT THE ASSESSEE CANNOT BE DENIED THE EXEMPTION U/S 11 OF THE ACT FOR THE RELEVANT A. Y. THE REVENUES GROUNDS OF APPEAL NOS. 2, 3 & 4 ARE THERE FORE, REJECTED. 16. THE OTHER GROUND ON THE BASIS OF WHICH THE EXEM PTION U/S 11 HAS BEEN DENIED IS THE PAYMENT OF SALARY TO SHRI T.V. PRANAY KUMAR. WE FIND THAT BEFORE THE CIT (A), THE ASSESSEE HAD FILED THE PROOF THAT MR. T.V. PRANAY KUMAR IS REGIS TERED AS AN ADVOCATE AND THAT HE HAS RENDERED SERVICES TO THE S OCIETY IN LEGAL PROCEEDINGS BEFORE THE HON'BLE HIGH COURT OF ANDHRA PRADESH AND BEFORE THE CIVIL COURTS AT SECUNDERABAD. WE FIND TH AT THE CIT (A) HAS ALSO OBSERVED THAT THE AO HAS NOT DISPUTED THE REASONABLENESS OF THE PAYMENT TO MR.T.V. PRANAY KUM AR OR THAT IT WAS IN PURSUANCE OF THE OBJECTS OF THE SOCIETY TRUS T. IN THE ABSENCE OF ANY EVIDENCE TO THE CONTRARY, WE DO NOT SEE ANY REASON ITA NO 1919 OF 2014 BALAJEE ARUN EDUCATIONA L SOCIETY SECUNDERABAD. PAGE 11 OF 12 TO INTERFERE WITH THE ORDER OF THE CIT (A). GROUND NO.7 IS ACCORDINGLY REJECTED. IN THIS VIEW OF THE MATTER, W E HOLD THAT THE ASSESSEE CANNOT BE DENIED THE EXEMPTION U/S 11 OF T HE ACT FOR THE RELEVANT A.Y. 17. AS REGARDS GROUND NO.5, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE CIT (A) THAT THE ASSESSEE HAS N OT CLAIMED SUCH EXPENDITURE IN ITS BOOKS OF ACCOUNT BUT IN FAC T HAS CAPITALIZED THE SAME. FURTHER, IT IS ALSO SUBMITTED THAT WHEN THE ASSESSEES INCOME IS BEING COMPUTED U/S 11 OF THE A CT, THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CANNOT B E INVOKED. THE CIT (A) HAS ACCEPTED THE CONTENTION OF THE ASSESSEE WITHOUT ANY VERIFICATION AS TO WHETHER THE SAID EXPENDITURE HAS BEEN CLAIMED BY THE ASSESSEE IN THE INCOME AND EXPENDITURE A/C. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE AND ALSO HELD BY THE CIT (A), WHEN THE ASSESSEE IS BEING ASSESSED AS A CHARITABLE INSTITUTION, THE PROVISIONS OF SECTION 4 0(A)(IA) OF THE ACT ARE NOT APPLICABLE. IN VIEW OF OUR FINDING ABOVE, T HAT THE ASSESSEE IS ENTITLED TO THE EXEMPTION U/S 11 OF THE ACT, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) O N THIS ISSUE. 18. AS REGARDS GROUND NO.6, THE AO HAS ESTIMATED TH E TUITION FEE RECEIVED BY THE ASSESSEE ON THE BASIS O F NUMBER OF STUDENTS STUDYING IN THE SCHOOL OF THE ASSESSEE. TH E CIT(A) HAS DELETED THE ADDITION BY OBSERVING THAT THE SPECIAL AUDITOR HAS NOT POINTED OUT ANY DISCREPANCY IN FEE RECEIPTS AND ALS O THAT THE AO HAS NOT ACCOUNTED FOR CONCESSION FEE IN RESPECT OF CHILDREN OF TEACHING AND NON-TEACHING STAFF. ITA NO 1919 OF 2014 BALAJEE ARUN EDUCATIONA L SOCIETY SECUNDERABAD. PAGE 12 OF 12 19. THE LEARNED DR HAS NOT BEEN ABLE TO REBUT THE F INDINGS OF THE CIT (A) WITH ANY EVIDENCE TO THE CONTRARY. I N VIEW OF THE SAME, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) ON THIS ISSUE. ACCORDINGLY, GROUND NO.6 IS REJECTED . 20. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JANUARY, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 24 TH JANUARY 2018. VINODAN/SPS COPY TO: 1 DCIT (EXEMPTIONS), 3 RD FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500004 2 BALAJEE ARUN EDUCATIONAL SOCIETY, PLOT NOS. 170 & 171, DHANALAKSHI COLONY, MAHENDRA HILLS, SECUNDERABAD 3 CIT (A)-GUNTUR 4 5 DIRECTOR OF INCOME TAX (EXEMPTIONS), HYDERABAD ADDL. DIRECTOR OF INCOME TAX (EXEMPTIONS), HYDERABA D 6 THE DR, ITAT HYDERABAD 7 GUARD FILE BY ORDER