ST. FRANCIS EDUCATIONAL TRUST, CHENNAI V. ITO, EXEMPTION WARD-2, CHENNAI

ITA 3395/CHNY/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8123 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 18-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASSESSEETRUST. IT IS ALSO CLAIM
• Assessee Lawyers: C.S
• Keywords: Capital asset; Gift; Depreciation; Charitable institution; Opportunity of being heard; Principle of natural justice; Maximum Marginal Rate; Source of fund; Additional evidence; Benefit of exemption; Capital expenditure; Set aside
• Section: 12; 11; 143(3); 12AA; 201; 143(2); 73; 13(2); 13; 22; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI , # $ .. & , ( ) BEFORE SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER AND SHRI DUVVURU R.L.REDDY , JUDICIAL MEMBER HEARD THROUGH VIDEO CONFERENCING ITA NO.3395/CHNY/2019 (* * /ASSESSMENT YEAR: 2016-17 ST. FRANCIS EDUCATIONAL TRUST, NO.79, ANNA MAIN ROAD, KOLAPAKKAM, CHENNAI-600 122. V . THE INCOME TAX OFFICER, EXEMPTION WARD-2, AAYAKAR BHAWAN- ANNEXE BUILDING, NO.121, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI-600 034. [PAN: AAGTS 7818 E ] ( - /APPELLANT) ( ./- /RESPONDENT) - 0 / APPELLANT BY : MR.L.SHIBI, C.S. ./- 0 /RESPONDENT BY : MR.AR.V.SREENIVASAN, JCIT 0 /DATE OF HEARING : 20.07.2020 0 /DATE OF PRONOUNCEMENT : 24.08.2020 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER : THIS APPEAL FILED BY ASSESSEE IS DIRECTED AGAINST APPELLATE ORDER DATED 01.04.2019 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-17, CHENNAI (HEREINAFTER CALLED THE CIT( A)), IN ITA NO.275/CIT(A)-17/2018-19 FOR ASSESSMENT YEAR (AY) 2 016-17, THE APPELLATE PROCEEDINGS BEFORE LEARNED CIT(A) HAD ARI SEN FROM ASSESSMENT ITA NO.3395/CHNY/2019 :- 2 -: ORDER DATED 14/12/2018 PASSED BY LEARNED ASSESSIN G OFFICER (HEREINAFTER CALLED THE AO) U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). THE APPELLATE PROCEEDINGS ARE CO NDUCTED BY INCOME-TAX APPELLATE TRIBUNAL, CHENNAI BENCH A, CHENNAI THRO UGH VIRTUAL COURT VIA VIDEOCONFERENCING USING WEBEX PLATFORM. 2. THE GROUNDS OF APPEAL RAISED BY ASSESSEE IN MEM O OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, CHENNAI (HE REINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS FAILED TO CONSIDER THAT THE PROPERTY WHICH WAS ACQUIRED BY UTILISING THE LOAN A VAILED FROM THE BANK BY THE APPELLANT BEING TRUST PROPERTY, IS THE PROPERTY OF THE APPELL ANT TRUST AND HENCE THE QUESTION OF ANY BENEFIT ARISING TO TRUSTEE BY VIRTUE OF SECTION 13( 1)(C) AND THE CONSEQUENT REJECTION OF EXEMPTION UNDER SECTION 11 DOES NOT ARISE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS FAILED TO CONSIDER THE FACTUAL SUBMISSION MADE BY THE APPELLANT THAT 'THE LAND HAV ING BEEN ACQUIRED TOTALLY OUT OF FUNDS OF THE TRUST, IT IS TRUST PROPERTY ONLY ALTHOUGH RE GISTERED IN THE NAME OF THE TRUSTEE'. WHILE THE LEARNED CIT HAS CONSIDERED THE ACQUISITION OF L AND OUT OF THE TRUST FUNDS, BUT HAS OMITTED TO CONSIDER THE SUBMISSION MADE THAT THE PR OPERTY CONTINUES TO BE TRUST PROPERTY. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAVING FAILED TO NOTE THAT THE DECLARATION OF TRUST BY THE REGISTERED OWNER OF THE PROPERTY RESULTS IN THE PROPERTY BECOMING A TRUST PROPERTY AND NO FURTHER ACTION IS NEEDED AS THE TRUST IS AN OBLIGATION ATTACHED TO THE OWNERSHIP OF THE PROPERTY AND IN TH IS CASE THE LAND ACQUIRED IS OBLIGED TO BE USED FOR CHARITABLE PURPOSES AND THAT IN FACT, IT H AS BEEN USED FOR THE SAID PURPOSE AND THIS FAILURE HAS LED TO A WRONG CONCLUSION THAT THE LAND BELONGS TO THE MANAGING TRUSTEE IN HER INDIVIDUAL CAPACITY AND THIS WRONG CONCLUSION HAS L ED TO THE PASSING OF THE IMPUGNED ORDER, WHICH THEREFORE DESERVED TO BE SET ASIDE. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN DISALLOWING THE INTEREST PAID TO THE FINANCIAL INSTITUTION FOR THE LOAN AVAILED TO PURCHASE THE PROPERTY FOR THE APPELLANT BY INVOKING SECTION 13(2), WITHOUT CONSID ERING THE FACT AND CIRCUMSTANCES UNDER WHICH THE PROPERTY OF THE APPELLANT WAS REGISTERED IN THE NAME OF THE TRUSTEE, WHICH RESULTED IN DOUBLE TAXATION. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN DISALLOWING THE DEPRECIATION WHICH WAS NEVER CLAIMED BY THE APPELLA NT. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) BY ITS IMPUGNED ORDER DENYING THE EXEMPTION UNDER SECTION 11 HAS RESULTED IN DENIAL O F ALLOWANCE AVAILABLE TO CHARITABLE TRUSTS FOR APPLICATION TOWARDS THE OBJECTS OF THE T RUST RESULTING IN MISCARRIAGE OF JUSTICE. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN HOLDING THAT SCHOLARSHIP TO STUDENTS AND FLOOD RELIEF WORK WERE NOT INCURRED FOR EARNING THE INCOME WITHOUT GIVING AN OPPORTUNITY TO THE APPELLANT WHIC H IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE. 8. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUND AT THE TIME OF HEARING. ITA NO.3395/CHNY/2019 :- 3 -: 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PUBLIC CHARITABLE TRUST REGISTERED UNDER INDIAN TRUST ACT, 1882 ESTAB LISHED ON 25 TH JUNE 2007 WITH ONE OF ITS OBJECT TO PROVIDE EDUCATION. T HE ASSESSE-TRUST WAS REGISTERED U/S.12AA OF THE INCOME TAX ACT, 1961. IT FILED ITS RETURN OF INCOME FOR AY: 2016-17 ON 31.03.2017 ADMITTING TOTA L INCOME OF RS. NIL. THE SAID RETURN OF INCOME WAS REVISED ON 30.03.2018 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS CONDUCTED BY AO U/S.143(3 ) R.W.S. 143(2) OF THE 1961 ACT, THE AO OBSERVED THAT THE ASSESSEE-TRU ST HAS CLAIMED AN INTEREST OF RS. 24,95,992/- PAID ON BUILDING LOAN. THE AO OBSERVED THAT UNDER THE LIABILITY SIDE OF THE BALANCE SHEET UND ER THE HEADING SECURED LOAN , AN AMOUNT OF RS. 4 CRORES WAS SHOWN AS BANK LOAN UBI AND ON THE ASSET SIDE AN AMOUNT OF RS. 4 CRORES WAS SHOWN AS LEASEHOLD LAND. THE ASSESSEE SUBMITTED BEFORE THE AO DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE-TRUST AVAILED A LOAN OF RS. 4 CRORES FROM UNION BANK OF INDIA, SME BRANCH, GUINDY, CHENNAI AN D GIVEN THE SAID AMOUNT TOWARDS LEASEHOLD OF THE LAND. THE AO OBSE RVED FROM THE DOCUMENTS FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAS OBTAINED LOAN OF RS. 4 CRORES FROM UNION BANK OF INDIA IN SEPTEMBER, 2015 WHICH WAS TRANSFERRED TO SMT. MERCY LATHA, MANAGING TRUSTEE OF THE ASSESSEE IN THE FIRST WEEK OF OCTOB ER, 2015. THE AO OBSERVED THAT LEASE DEED WAS EXECUTED BY MRS. MERC Y LATHA, MANAGING TRUSTEE IN FAVOUR OF THE ASSESSEE ON 22.12.2015 WH EREIN THE LAND SITUATED AT 52, THAIYUR A VILLAGE (THAIYUR B VILLAG E), CHENGLEPATTU TALUK WAS GIVEN ON LEASE FOR A PERIOD OF THREE YEARS TO A SSESSEE-TRUST, FREE OF ITA NO.3395/CHNY/2019 :- 4 -: RENT. THE AO OBSERVED THAT SMT. MERCY LATHA, MANAG ING TRUSTEE, PURCHASED THE SAID PROPERTY UTILIZING THE FUNDS TRA NSFERRED BY ASSSESSEE- TRUST. THE AO OBSERVED THAT AS ON THE DATE OF TRANS FER OF FUNDS BY ASSESSEE-TRUST TO MRS. MERCY LATHA, MANAGING TRUSTE E, THE MRS. MERCY LATHA WAS NOT HAVING POSSESSION OF THE SAID IMMOVAB LE PROPERTY . THE AO OBSERVED THAT SAID IMMOVABLE PROPERTY WAS ACQUIRED BY MRS. MERCY LATHA, MANAGING TRUSTEE IN THE LAST WEEK OF OCTOBER, 2015 AND LEASED OUT TO ASSESSEE-TRUST IN THE MONTH OF DECEMBER, 2015, WHIC H AS PER AO CLEARLY EVIDENCES THAT THE SAID LEASED OUR IMMOVABLE PROPER TY WAS PURCHASED BY MRS. MERCY LATHA, MANAGING TRUSTEE USING THE FUNDS TRANSFERRED BY ASSESSEE-TRUST. A FLOW CHART OF PAYMENT CHART HAS BEEN REPRODUCED AS UNDER: 29-09-2015 LOAN AMOUNT CREDITED INTO THE TRUST ACCO UNT MAINTAINED WITH UNION BANK OF INDIA 4,00,00,000 29-09-2015 LOAN AMOUNT TRANSFERRED TO ANOTHER ACCOU NT OF THE TRUST ACCOUNT MAINTAINED WITH UNION BANK OF INDIA 4,00,00,000 05-10-2015 AMOUNT TRANSFERRED FROM UNION BANK OF IN DIA ACCOUNT ( ASSESSEE TRUST) TO THE CORPORATION BANK A/C., MAINTAINED BY ASSESSEE TRUST (006316) 1,00,00,000 07-10-2015 AMOUNT TRANSFERRED FROM UNION BANK OF IN DIA TO CORPORATION BANK ACCOUNT (000479) MAINTAINED BY ASSESSEE TRUST. 75,00,000 08-10-2015 AMOUNT HAS BEEN TRANSFERRED FROM CORPORA TION BANK A/C., (0006316) OF THE ASSESSEE TRUST TO KVB ACCOUNT MAINTAINED BY SMT. MERCY LATHA - MANAGING TRUSTEE 85,00,000 08-10-2015 AMOUNT HAS BEEN TRANSFERRED FROM KVB A/C. , (000476) OF THE ASSESSEE TRUST TO KVB ACCOUNT OF SMT. MERCY LATHA 75,00,000 20-10-2015 AMOUNT TRANSFERRED FROM KVB ACCOUNT OF T HE ASSESSEE TRUST TO KVB ACCOUNT OF SMT. MERCY LATHA - MANAGING TRUSTEE 1,65,00,000 3.2 THE MRS. MERCY LATHA, MANAGING TRUSTEE AFTER P URCHASING AFORESAID IMMOVABLE PROPERTY IN OCTOBER, 2015 , LEASED THE SA ME TO ASSESSEE-TRUST FOR A PERIOD OF THREE YEARS VIDE LEASE DEED DATED 2 2.12.2015, FREE OF RENT. ITA NO.3395/CHNY/2019 :- 5 -: THE AO OBSERVED THAT ENTRY MADE IN THE BALANCE SHEE T OF ASSESSEE-TRUST THAT AN AMOUNT OF RS. 4 CRORES WAS GIVEN TOWARDS L EASEHOLD OF LAND IS NOT CORRECT AND NOT ACCEPTABLE AS THE IMMOVABLE PRO PERTY WAS REGISTERED IN THE NAME OF MANAGING TRUSTEE, MRS MERCY LATHA AN D NOT REGISTERED IN THE NAME THE ASSESSEE-TRUST. THE AO FURTHER OBSERVE D THAT THE ASSESSEE IS PAYING INTEREST AND PRINCIPAL LOAN ACCOUNT TO TH E BANK. THUS, THE AO OBSERVED THAT IT IS MIS-UTILIZATION OF THE TRUST FU NDS BY THE TRUSTEE FOR PURCHASE OF IMMOVABLE PROPERTY IN HER NAME. SINCE, THE FUNDS OF THE ASSESSEE-TRUST WERE DIVERTED TO MANAGING TRUSTEE FO R PURCHASE OF IMMOVABLE PROPERTY IN THE NAME OF MANAGING TRUSTEE , THE AO INVOKED PROVISIONS OF SEC.13(1)(C) R.W.S.13(2) OF THE 1961 ACT AND HELD THAT THE FUNDS OF TRUST HAS BEEN DIVERTED AND UTILIZED BY SM T. MERCY LATHA, MANAGING TRUSTEE FOR PURCHASE OF IMMOVABLE PROPERTY IN HER NAME, AND HENCE IT IS CLEAR INFRINGEMENT OF SECTION 13(1)(C) READ WITH SECTION 13(2) OF THE 1961 ACT, THUS THE AO OBSERVED THAT THE ASS ESSEE HAS BECOME INELIGIBLE FOR CLAIMING EXEMPTION UNDER SECTION 11 & 12 OF THE 1961 ACT. THE ASSESSEE ON ITS PART SUBMITTED BEFORE THE AO TH AT NO BENEFIT/ADVANTAGE WAS DERIVED BY MANAGING TRUSTEE F ROM THE SAID LAND AS IT DID NOT YIELDED ANY INCOME NOR SAID IMMOVABLE PR OPERTY IS CAPABLE OF YIELDING ANY INCOME . THE ASSESSEE IN ITS REPLY SU BMITTED BEFORE THE AO AS UNDER: '.....THE LAND HAVING BEEN ACQUIRED TOTALLY OUT OF THE FUNDS OF THE TRUST, IT IS TRUST PROPERTY ONLY ALTHOUGH REGISTERED IN THE NAME OF THE TRUSTEE , IT WAS FORMALLY LEASED OUT VIDE LEASE DEED DATED 22ND DECEMBER, 2015 BY THE TRUSTEE TO TH E TRUST FREE OF ANY RENT. YOU WOULD FIND THAT THIS IS MORE IN THE NATURE OF A FORMALITY TO PROCESS THE BUILDING PLAN APPROVAL AND RECLASSTFICATION OF THE LAND. ITA NO.3395/CHNY/2019 :- 6 -: '......IN THIS CONNECTION, WE WISH TO SUBMIT THAT T HE TRUST DEED EMPOWERS THE TRUSTEES TO PURCHASE THE LAND VIDE CLAUSE 13 OF THE TRUST DEED WHICH IS EXTRACTED HEREIN BELOW FOR THE SAKE OF REFERENCE. 13(1): THE TRUSTEES SHALL HAVE POWER TO ACQUIRE LAND S, BUILDINGS OR OTHER MOVABLE OR IMMOVABLE PROPERTIES BY PURCHASE, LEASE, GIFT, SETT LEMENT ETC. FOR TRUST. WITH THE POWERS VESTED BY THE TRUST DEED, THE MANAGING TRUSTEE HAS PURCHASED THE PROPERTY AND IS HOLDING IT FOR AND ON BEHALF OF THE TRUST ONLY. IN FACT, IN THE AFORESAID CLAUSE 13, IT HAS BEEN SPECIFICALLY STATED...., 'ALL PROPERTY OF THE TRUST, MOVABLE OR IMMOVABLE O R ANY OTHER KIND SHALL VEST IN TRUST. THE TRUSTEE SHALL MANAGE THE WHOLE PROPERTY...... MERELY BECAUSE THE PROPERTY HAS BEEN ACQUIRED IN TH E NAME OF THE MANAGING TRUSTEE, YOU COULD NOT CONCLUDE THAT THERE IS DIVERSION OF THE F UNDS OF THE TRUST TO THE MANAGING TRUSTEE....' 3.3 THE AO REJECTED CONTENTION OF THE ASSESSEE AS M ANAGING TRUSTEE OF THE ASSESSEE-TRUST HAS PURCHASED THE SAID LAND IN H ER NAME, OUT OF THE FUNDS OF ASSESSEE-TRUST. THE AO OBSERVED THAT CLAU SE 13 OF THE TRUST DEED EMPOWERS THE TRUSTEES TO ACQUIRE LAND , BORROW FUNDS ETC. , ONLY IN THE NAME OF THE TRUST OR ON BEHALF OF THE TRUST, BU T NOT EITHER IN THE NAME OF THE TRUSTEE OR TO AVAIL THE BENEFIT OF THE SAME BY THE TRUSTEES. THUS, THE CONTENTION OF THE ASSESSEE THAT EVEN THOUGH MAN AGING TRUSTEE HAS PURCHASED PROPERTY OUT OF THE FUNDS OF THE TRUST, I T SHOULD NOT BE CONCLUDED THAT THERE IS A DIVERSION OF FUNDS OF THE TRUST BY THE TRUSTEE WHICH DOES NOT VIOLATE PROVISIONS OF SECTION 13(1)( C) OF THE 1961 ACT, WAS NOT ACCEPTED BY THE AO. FURTHER, THE CONTENTION OF THE ASSESSEE BEFORE THE AO THAT THE SAID PROPERTY IS DULY REFLECTED IN THE BALANCE SHEET OF THE TRUST AS ON 31.03.2016 ONWARDS WAS ALSO REJECTED BY AO AS THE SAID PROPERTY IS INCORPORATED IN THE BOOKS OF ACCOUNTS O F THE ASSESSEE-TRUST AS LEASEHOLD LAND AND NOT AS AN IMMOVABLE PROPERTY B Y WAY OF ADDITIONS TO FIXED ASSETS. THE AO OBSERVED THAT ASSESSEE HAS NO T INCORPORATED THE SAID LAND IN ITS BOOKS OF ACCOUNTS AS FIXED ASSETS AND ASSESSEE CANNOT ITA NO.3395/CHNY/2019 :- 7 -: CLAIM OWNERSHIP OF THE SAID PROPERTY. THUS, THE AO REJECTED CONTENTIONS OF THE ASSESSEE. THE AO RELIED UPON DECISION OF CO-OR DINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DDIT (E)-III, CHENNAI V. P ARAMASIVA NAIDU MUTHUVEL RAJ EDUCATIONAL TRUST , WHEREIN TRIBUNAL U PHELD ORDER PASSED BY AO DENYING ASSESSEE EXEMPTION U/S 11 OWING TO VIOLA TION OF SECTION 13(1)(C) AND 13(1)(D) OF THE 1961 ACT. THE AO ALSO RELIED UPON DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. DAWOODI BOHRA JAMAT REPORTED IN 364 ITR 31(SC) WHEREIN EXEMPTION U/S 11 AND 12 OF THE 1961 ACT WAS DENIED TO THE ASESSEE DUE TO VIOLATION OF S ECTION 13(1)(C) OF THE ACT. THE ASSESSEE WAS ASSESSED TO TAX BY AO WITH S TATUS OF AOP AND ASSESEES INCOME WAS BROUGHT TO TAX AT MAXIMUM MARG INAL RATE AS PER PROVISO TO SEC.164(2) OF THE 1961 ACT, VIDE ASSESSM ENT ORDER DATED 14.12.2018 PASSED BY AO U/S 143(3) OF THE 1961 ACT. 4. THE ASSESSEE BEING AGGRIEVED BY AN ASSESSMENT OR DER DATED 14.12.2018 PASSED BY AO U/S 143(3) OF THE 1961 ACT FILED FIRST APPEAL BEFORE LEARNED CIT(A) AND MADE DETAILED CONTENTIONS WHICH ARE REPRODUCED BY LD.CIT(A) IN ITS APPELLATE ORDER 01 ST APRIL 2019. THE LD.CIT(A) REJECTED CONTENTIONS OF THE ASSESSEE , VI DE APPELLATE ORDER DATED 01 ST APRIL 2019, BY HOLDING AS UNDER: 5. I HEARD CONTENTIONS OF THE AR OF THE APPELLANT AND PERUSED THE GROUNDS OF APPEAL, ASSESSMENT ORDER, AR'S SUBMISSION AND MATERIAL AVAI LABLE ON RECORD. MY OBSERVATIONS IN RESPECT OF THE GROUNDS RAISED BY THE APPELLANT ARE AS FOLLOWS: 6. DISALLOWANCE OF EXEMPTION U/S 11 FOR VIOLATION U /S 13(L)(C): ITA NO.3395/CHNY/2019 :- 8 -: 6.1 THE ASSESSEE CLAIMED RS.24,95,992/- TOWARDS IN TEREST PAID ON BUILDING LOAN. IN THE BALANCE SHEET THE ASSESSEE HAD SHOWN BANK LOAN OF R S.4,00,00,000/- AS LIABILITY AND ON THE ASSET SIDE ASSESSEE HAD SHOWN RS.4,00,00,000/- AS ' LEASEHOLD LAND'. ON VERIFICATION THE ASSESSING OFFICER NOTICED THAT - (I) THE ASSESSEE TRUST RECEIVED BANK LOAN OF RS 4,00,00,000/- ON 29/9/2015 (II) THE T RUST TRANSFERRED RS 4,00,00,000/- TO SMT MERCY LATHA THE MANAGING TRUSTEE IN THE LAST WE EK OF OCTOBER 2015. (III) SMT MERCY LATHA PURCHASED THE LAND (SITUATED AT 52, THAIYUR A VILLAGE AND/OR THAIYUR B VILLAGE, CHENGLEPUT DISTRICT) ON 28/10/2015 AFTER RECEIVING RS 4,00,00,0007- FROM TRUST FOR A SALE CONSIDERATION OF RS.3,50,00,000/- VIDE SALE DEED DO CUMENT NO.13536/2015 AND (IV) LEASED OUT THE SAID PROPERTY TO THE TRUST FOR 3 YEA RS COMMENCING FROM 22/12/2015 VIDE LEASE DEED DT 22/12/2015. BASED ON THE ABOVE FACTS THE ASSESSING OFFICER CONCL UDED THAT THE MANAGING TRUSTEE OF THE TRUST HAD UTILIZED THE FUNDS OF THE TRUST FOR PURCH ASE OF THE IMMOVABLE PROPERTY IN HER NAME OUT OF THE LOAN AMOUNT OF RS.4.00 CRORES AVAIL ED BY THE TRUST FROM THE UNION BANK OF INDIA AND HENCE CONCLUDED THAT SECTION 13(L)(C) WAS A TTRACTED AND DISALLOWED EXEMPTION CLAIMED U/S 11. 6.2 IN THE GROUNDS OF APPEAL, THE APPELLANT CONTE STED AS UNDER: 2.1 THE LEARNED AO OUGHT TO HAVE APPRECIATED THE EN TIRE FACTUAL SCENARIO CONSIDERING THE FUTURE EXPANSION PLANS OF THE TRUST. 2.2 THE LEARNED AO HAS GROSSLY ERRED ON THE FACTS AN D CIRCUMSTANCES OF THE CASE IN TREATING THE PURCHASE OF LAND IN THE NAME OF THE MANAGING TR USTEE AS MISAPPROPRIATION OF FUNDS AND DISALLOWED THE EXEMPTION CLAIMED UNDER SECTION 11 O F THE ACT. 2.3 THE LEARNED AO HAS ERRED IN INVOKING THE PROVISI ONS OF SECTION 13(1)(C) OF THE ACT WITHOUT A HOLISTIC UNDERSTANDING OF THE FACTS OF TH E CASE. 6.3 IN THE WRITTEN SUBMISSION, THE APPELLANT CON TESTED THAT THE TRUST HAD OBTAINED TERM LOAN BASED ON THE COLLATERAL SECURITY AND THE PERSONAL GUARANTEE PROVIDED BY THE MANAGING TRUSTEE IN HER PERSONAL CAPACITY AND HENCE THE SOURCE OF FUNDS TRANSFERRED TO THE MANAGING TRUSTEE WAS NEITHER THE INCOME OF THE TRUS T NOR UTILISING THE PROPERTY OF THE TRUST AND HENCE SECTION 13(L)(C) IS NOT APPLICABLE. 6.4 AS PER CIRCULAR NO, 100 DATED 24TH JANUARY, 197 3 OF CBDT - REPAYMENT OF THE LOAN ORIGINALLY TAKEN TO FULFILL ONE OF THE OBJECTS OF T HE TRUST WILL AMOUNT TO AN APPLICATION OF THE INCOME FOR CHARITABLE AND RELIGIOUS PURPOSES. DURING THE YEAR, ASSESSEE REPAID PART OF THE LOAN A ND IN FACT CLAIMED RS.24,95,992/- TOWARDS INTEREST PAID ON THE LOAN. HENCE THE ARGUMENT OF THE ASSESSEE THAT GIVING LOAN FUNDS TO THE MANAGING TRUSTEE DOES NOT ATTRACT SECTION 13(1)(C) IS DISMISSED. 6.5.1 THE ASSESSEE DID NOT DISPUTE THE FOLLOWING FACTS: (I) THE ASSESSEE TRUST RECEIVED BANK LOAN OF RS .4,00,00,000/- ON 29/9/2015 (II) THE TRUST TRANSFERRED RS 4,00,00,000/- TO SMT MERCY LAT HA THE MANAGING TRUSTEE IN THE LAST WEEK OF OCTOBER 2015. (III) SMT MERCY LATHA PURCHASED THE LAND (SITUATED AT 52, THAIYUR A VILLAGE AND/OR THAIYUR B VILLAGE, CHENGLEPUT DISTRIC T) ON 28/10/2015 AFTER RECEIVING RS.4,00,00,000/- FROM TRUST FOR A SALE CONSIDERA TION OF RS.3,50,00,000/- VIDE SALE DEED DOCUMENT NO. 13536/2015 AND (IV) LEASED OUT THE SAID PROPERTY TO THE TRUST FOR 3 YEARS COMMENCING FROM 22/12/2015 VIDE LEASE DEED DT 2 2/12/2015. 6.5.2 DURING THE COURSE OF THE HEARING OF THE APPEA L, THE APPELLANT CONTESTED THAT MANAGING TRUSTEE GAVE PERSONAL GUARANTEE FOR THE LOAN TAKEN BY THE TRUST. BUT THE FACT REMAINS THAT LOAN WAS SANCTIONED IN THE NAME OF THE ASSESSEE TRU ST AND THE LOAN WAS REPAID BY THE TRUST AND NOT BY THE MANAGING TRUSTEE. ITA NO.3395/CHNY/2019 :- 9 -: THE APPELLANT FURTHER CONTESTED THAT THE MANAGING T RUSTEE LEASED OUT THE LAND PURCHASED TO THE TRUST FREE OF RENT FOR 3 YEARS. BUT THE FACT REMAINS THAT THE MANAGING TRUSTEE PURC HASED THE PROPERTY IN HER NAME WITH THE FUNDS OF THE TRUST AND THE MANAGING TRUSTEE DID NOT REPAY RS.4,00,00,000/- TO THE TRUST AND DID NOT PAY ANY INTEREST ON THE SAME TO THE TRU ST. BUT THE TRUST REPAID THE LOAN TAKEN TO THE BANK ALONG WITH INTEREST. HENCE SECTION 13(L)(C) READ WITH SECTION 13(2)(A) IS AT TRACTED. 6.6.1 IN [2011] 15 TAXMANN.COM 235 (ALLAHABAD) COMMIS SIONER OF INCOME-TAX-II, LUCKNOW VS AUDH EDUCATIONAL SOCIETY - THE ASSESSEE, A SOCIE TY REGISTERED UNDER SECTION 12A, WAS RUNNING AN EDUCATIONAL INSTITUTION. DURING THE ASSE SSMENT YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER NOTICED THAT NO INTEREST HAD BEEN CHARGED ON A LOAN OUTSTANDING AGAINST THE NAME OF THE TREASURER OF THE SOCIETY, NOR ANY P ROVISION FOR ACCRUED INTEREST WAS MADE. HE CONCLUDED THAT THE FUNDS OF SOCIETY WERE DIVERTE D FOR PERSONAL BENEFITS OF THE TREASURER. CONSEQUENTLY, HE DENIED EXEMPTION CLAIMED UNDER SEC TION 11 TO THE ASSESSEE-SOCIETY IN VIEW OF PROVISIONS CONTAINED IN SECTION 13(1)(C) AND 13(2)(A). THE HON'BLE HIGH COURT OF ALLAHABAD HELD - THE ASSE SSING OFFICER HAS RIGHTLY CONCLUDED THAT THE APPELLANT HAS GIVEN INTEREST FREE LOAN TO V I N VIOLATION OF THE PROVISIONS OF SECTION 13(1)(C) AND WITHOUT ANY ADEQUATE SURETY IN VIOLATION OF SECTION 13(2)(A). THE ASSESSING OFFICER HAS RIGHTLY DENIED THE EXEMPTION TO THE ASSE SSEE UNDER SECTION 11. 6.6.2 IN [2008] 171 TAXMAN 134 (DELHI) KANAHYA LAL PU NJ CHARITABLE TRUST VS DIRECTOR OF INCOME-TAX (EXEMPTION) - ASSESSEE-TRUST HAD ADVANCED HUGE AMOUNTS TO A COMPANY 'P, WHICH HAD SUBSTANTIAL INTEREST IN TRUST, WITHOUT AN Y SECURITY AND ADEQUATE INTEREST. THE HON'BLE HIGH COURT OF DELHI HELD - 'ACT IS INTE NDED TO ELIMINATE ANY POSSIBILITY OF TRUST'S FUNDS BEING USED FOR BENEFIT OF ANY INTERESTED PART Y AND SINCE IN INSTANT CASE, A BENEFIT HAD DIRECTLY OR INDIRECTLY REACHED INTERESTED PERSON NA MELY, 'P, THERE WAS A CLEAR VIOLATION OF SECTIONS 13(1)(C) AND 13(2)(A). THEREFORE, PROVISIONS OF SECTIONS 11 AND 12 WOULD N OT OPERATE SO AS TO EXCLUDE INCOME OF TRUST FROM TOTAL INCOME OF PREVIOUS YEAR AND, CONSE QUENTLY, ALL RECEIPTS OF TRUST EITHER BY VOLUNTARY CONTRIBUTION OR FROM INCOME DERIVED FROM ITS PROPERTY WOULD BE AN INCOME OF TRUST, CHARGEABLE TO TAX. 6.6.3 IN [2016] 69 TAXMANN.COM 71 (CHENNAI - TRIB.) D EPUTY DIRECTOR OF INCOME-TAX (EXEMPTIONS)-III VS MAHALAKSHMI KUNJITHA PATHAM EDU CATIONAL & CHARITABLE TRUST, THE HON'BLE ITAT CHENNAI BENCH 'A HELD - WHERE FUNDS O F ASSESSEE-TRUST WERE TRANSFERRED TO TRUSTEE FOR HIS BENEFIT, EXEMPTION UNDER SECTION 1 1 WAS RIGHTLY DISALLOWED. 6.7 RESPECTFULLY FOLLOWING THE ABOVE STATED CASE -LAWS, THE DISALLOWANCE OF EXEMPTION CLAIMED UNDER SECTION 11 IN VIEW OF SECTION 13(1)(C) READ WITH SECTION 13(2)(A), IS UPHELD. 6.8 ALTERNATE PLEA: IN THE WRITTEN SUBMISSION, THE APPELLANT MADE ALTER NATE PLEA THAT THE EXEMPTION UNDER SECTION 11 COULD BE DENIED ONLY TO THE EXTENT OF CO NDITIONS VIOLATED AS PER SECTION 13(1)(C) OF THE ACT AND RELIED ON THE DECISION OF THE HON'BI E HIGH COURT OF MADRAS IN [2015] 53 TAXMANN.COM 85 (MADRAS) COMMISSIONER OF INCOME-TAX VS WORKING WOMEN'S FORUM. 6.8.1 IN [2015] 53 TAXMANN.COM 85 (MADRAS) COMMISSI ONER OF INCOME-TAX WORKING WOMEN'S FORUM, THE HONBLE HIGH COURT OF MADRAS HEL D -IN CASE OF A TRUST REGISTERED UNDER SECTION 12AA, ONLY SUCH PART OF INCOME WHICH IS VIO LATIVE OF SECTION 13(1)(D) CAN BE BROUGHT TO TAX AT MAXIMUM MARGINAL RATE AND ENTIRET Y OF INCOME CANNOT BE DENIED EXEMPTION UNDER SECTION 11. THUS THE CASE-LAW RELIED ON BY THE ASSESSEE IS IN C ONNECTION WITH THE VIOLATION U/S 13(1)(D) AND THE SAME CANNOT BE APPLIED TO ASSESSEE'S CASE W HICH IS VIOLATION U/S.13(1)(C). MOREOVER, THE CASE LAWS STATED ABOVE AT PARA NO.6.6 .1, 6.6.2 AND 6.6.3 CLEARLY STATE THAT EXEMPTION U/S.11 WILL NOT BE AVAILABLE IF SECTION 1 3(1)(C) IS VIOLATED. HENCE THE ALTERNATE ITA NO.3395/CHNY/2019 :- 10 -: PLEA OF THE ASSESSEE TO RESTRICT THE DISALLOWANCE T O EXTENT OF THE INCOME THAT VIOLATED SECTION 13(1)(C) IS DISMISSED. 7. DISALLOWANCE OF INTEREST ON BANK LOAN: 7.1 IN THE GROUNDS OF APPEAL, THE APPELLANT CONTEST ED AS UNDER: 3.1 THE LEARNED AO HAS GROSSLY ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DISALLOWING THE INTEREST PAID ON LOAN WITH THE NET RECEIPTS OF THE TRUST BY INVOKING THE PROVISIONS OF THE SECTION 13(3) AND SECTION 13( 1)(C) OF THE ACT.' 7.2 AS STATED ABOVE, THE ASSESSEE TRUST TRANSFERR ED THE LOAN TAKEN FROM THE BANK TO THE MANAGING TRUSTY WHO UTILIZED THE SAID AMOUNT TO PUR CHASE THE IN HER NAME. THUS THE TRUST DID NOT UTILIZE THE BANK LOAN FOR TH E PURPOSES OF THE TRUST. THUS THE INTEREST ON THE BANK LOAN WAS NOT UTILIZED WHOLLY AND EX CLUSIVELY FOR THE PURPOSE OF EARNING THE INCOME OF THE TRUST. HENCE THE DISALLOWANCE OF INTEREST ON BANK LOAN IS UPHELD. 4.2 SINCE THE ASSESSEE WAS ASSESSED AS AOP, THE AO ALLOWED DEPRECIATION ON THE CAPITAL ASSETS WHICH WERE PURCHASED DURING T HE YEAR AS IN EARLIER YEARS AS PER AO, THE ASSESSEE HAD ALREADY CLAIMED E NTIRE AMOUNT OF CAPITAL EXPENDITURE AS DEDUCTION WHILE COMPUTING IN COME OF THE ASSESSEE. THE ASSESSEE BEING AGGRIEVED SUBMITTED BEFORE LD.CI T(A) THAT ASSESSEE HAS NOT CLAIMED ANY DEPRECIATION ON CAPITAL ASSETS DURING THE YEAR UNDER CONSIDERATION. THE LD.CIT(A) REJECTED CONTENTION O F THE ASSESSEE AND UPHELD ASSESSMENT ORDER PASSED BY THE AO AND ALLOWE D DEPRECIATION ON THE CAPITAL ASSET ACQUIRED DURING PREVIOUS YEAR REL EVANT TO AY: 2016-17. FURTHER, ASSESSEE WAS AGGRIEVED BY BRINGING INTO TA X , EXPENSES WHICH WERE HELD TO BE NOT CONNECTED TO EARNING OF AN INCO ME AND SINCE EXEMPTION U/S 11 WAS DENIED, THE FOLLOWING EXPENSES STOOD DISALLOWED BY BOTH AO AS WELL LEARNED CIT(A) WHO UPHELD ASSESSMEN T ORDER PASSED BY AO. THE EXPENSES WHICH STOOD DISALLOWED BY BOTH AO AS WELL LEARNED CIT(A), ARE AS UNDER: ITA NO.3395/CHNY/2019 :- 11 -: PARTICULARS AMOUNT IN INR SCHOLARSHIP TO STUDENTS 9,99,050 FLOOD RELIEF WORK 57,319 SALARY PAYABLE 8,65,937 P.F. PAYABLE 75,277 RENT PAYABLE 3,00,000 TOTAL 22,97,583 5. AGGRIEVED BY AN APPELLATE ORDER PASSED BY LEARNE D CIT(A), THE ASSESSEE HAS FILED AN APPEAL BEFORE TRIBUNAL. THE A PPEAL WAS HEARD THROUGH VIDEO CONFERENCING. IT IS A STAY GRANTED MA TTER WHEREIN TRIBUNAL VIDE ITS ORDER DATED 13.03.2020 IN SP NO. 112/CHNY/ 2020 WAS PLEASED TO GRANT MONTHLY INSTALLMENT SCHEME OF RS. 2,00,000/- PER MONTH. ON BEING ASKED BY THE BENCH, THE LD.COUNSEL FOR THE ASSESSEE MADE STATEMENT BEFORE THE BENCH THAT THE ASSESSEE-TRUST IS REGULAR LY DEPOSITING MONTHLY INSTALLMENT OF RS. 2,00,000/- AS DIRECTED BY HONB LE TRIBUNAL , VIDE ORDER IN SP NO.112/CHNY/2020 DATED 13/03/2020. IT WAS ST ATED BEFORE THE BENCH BY LEARNED COUNSEL FOR THE ASSESSEE THAT ALL MONTHLY INSTALLMENTS FALLING DUE UPTO-DATE TILL THE MONTH OF JUNE 2020 H AD BEEN DULY DEPOSITED TO THE CREDIT OF CENTRAL GOVERNMENT AND THE ASSESSE E UNDERTAKES TO PRODUCE NECESSARY PAID CHALLANS BEFORE THE DEPARTME NT. THE LD.DR SUBMITTED THAT INSTRUCTIONS WILL BE ISSUED TO AO TO COLLECT ALL PAID CHALLANS TOWARDS PAYMENT OF MONTHLY INSTALLMENTS PAID BY ASS ESSEE FROM MARCH 2020 TO JUNE 2020 SO THAT SAME CAN BE BROUGHT ON RE CORD. ON MERITS, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSE SSEE IS A PUBLIC CHARITABLE TRUST RUNNING SCHOOLS. THE ASSESSEE IS R EGISTERED U/S 12AA OF THE 1961 ACT AND WAS ELIGIBLE FOR DEDUCTION U/S 11 AND 12 OF THE 1961 ACT. THE ASSESSEE-TRUST OBTAINED LOAN OF RS. 4,00,00,000 /- FROM UNION BANK OF ITA NO.3395/CHNY/2019 :- 12 -: INDIA IN SEPTEMBER 2015 WHICH WAS FURTHER ADVANCED/ TRANSFERRED TO MRS. MERCY LATHA, MANAGING TRUSTEE OF THE ASSESSEE FOR P URCHASING OF LAND IN HER NAME. IT WAS SUBMITTED THAT THE SAID LAND WAS R EGISTERED IN THE NAME OF MRS. MERCY LATHA IN THE MONTH OF OCTOBER 2015 AN D THE SAID LAND WAS GIVEN ON LEASE TO ASSESSEE-TRUST FOR A PERIOD OF 3 YEARS IN DECEMBER 2015, FREE OF RENT. IT WAS FURTHER SUBMITTED THAT AFTER E XPIRY OF AFORESAID LEASE, A FRESH LEASE DEED WAS EXECUTED AND REGISTERED BY MRS . MERCY LATHA , MANAGING TRUSTEE IN MARCH 2020 IN FAVOUR OF THE ASS ESSEE-TRUST FOR A PERIOD OF 33 YEARS ON A NOMINAL RENT OF RS. 1500 PE R MONTH, EFFECTIVE FROM 27 TH JANUARY 2020. THUS, IT WAS SUBMITTED THAT MRS. MER CY LATHA, MANAGING TRUSTEE DID NOT OBTAIN OR DERIVED ANY BENE FIT FROM THE SAID LAND. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT BANKERS WERE INSISTING AS A CONDITION FOR GRANT OF LOAN THAT THE SAID LAND BE ACQUIRED AND REGISTERED IN THE NAME OF MRS. MERCY LATHA, MANAGIN G TRUSTEE AND NOT IN THE NAME OF THE TRUST AS IT IS DIFFICULT TO CREATE ENCUMBRANCE OF THE TRUST PROPERTY AND PROPERTY REGISTERED IN THE NAME OF THE TRUST IS DIFFICULT TO BE ENFORCED IN THE EVENT OF LOAN DEFAULT. IT WAS SUBM ITTED THAT MRS. MERCY LATHA, MANAGING TRUSTEE OF THE ASSESSEE-TRUST IS A HIGH NET WORTH INDIVIDUAL AND HAD STOOD AS GUARANTOR FOR THE SAID LOAN . IT WAS SUBMITTED BY LEARNED COUNSEL FOR THE ASSESSEE THAT SHE HAD G IVEN PERSONAL GUARANTEES FOR LOAN GRANTED BY UBI IN FAVOUR OF THE ASSESSEE-TRUST. IT WAS SUBMITTED BY LEARNED COUNSEL FOR THE ASSESSEE THAT MRS. MERCY LATHA, MANAGING TRUSTEE HELD THE SAID PROPERTY IN FIDUCIAR Y CAPACITY FOR THE BENEFIT OF THE TRUST AND SHE HAS NOT DERIVED ANY BE NEFIT FROM SAID ITA NO.3395/CHNY/2019 :- 13 -: PROPERTY. IT WAS SUBMITTED BY LEARNED COUNSEL FOR T HE ASSESSEE THAT AS PER SECTION 31 OF TAMIL NADU RECOGNITION OF PRIVATE SCH OOLS REGULATION ACT, 1973, IT IS VERY DIFFICULT AND CUMBERSOME PROCEDURE TO GET PROPERTY REGISTERED IN THE NAME OF TRUST AS PERMISSIONS ARE REQUIRED FROM COMPETENT AUTHORITIES WHICH ARE VERY DIFFICULT TO O BTAIN . IT WAS SUBMITTED THAT THE SAID PROPERTY WAS DULY INCORPORATED IN THE ASSET SIDE OF BALANCE SHEET OF THE ASSESSEE-TRUST AS LEASEHOLD LAND -RS . 4,00,00,000/- . OUR ATTENTION WAS DRAWN TO APPELLATE ORDER PASSED BY LD .CIT(A) , PARA 4, PLACED AT PAGE NO.61 OF THE PAPER BOOK AND IT WAS S UBMITTED THAT MRS. MERCY LATHA, MANAGING TRUSTEE STOOD PERSONAL GUARA NTOR FOR LOAN BEEN GRANTED BY UBI IN FAVOUR OF THE ASSESSEE-TRUST. IT WAS ALSO SUBMITTED THAT COLLATERAL SECURITIES WERE OFFERED BY MRS. MERCY LA THA BY WAY OF HER PERSONAL PROPERTIES IN FAVOUR OF UBI TO SECURE THE LOAN GRANTED BY UBI IN FAVOUR OF ASSESSEE-TRUST. OUR ATTENTION WAS ALSO DR AWN TO PAGE NO.70 OF THE PAPER BOOK, PARA NO.6.1 OF LEARNED CIT(A) APPEL LATE ORDER TO SUBMIT THAT THE AFORESAID ASSET BEING LAND WAS DULY DISCLO SED IN THE BALANCE SHEET AS LEASEHOLD LAND-RS. 4,00,00,000/-. OUR A TTENTION WAS ALSO DRAWN TO PARA 6.3 OF LEARNED CIT(A) ORDER TO SUBMIT THAT MRS. MERCY LATHA, MANAGING TRUSTEE OFFERED HER PERSONAL PROPER TIES AS COLLATERAL SECURITIES AND ALSO STOOD PERSONAL GUARANTEE FOR TH E LOAN BEEN GRANTED TO THE ASSESSEE-TRUST BY UBI. IT WAS ALSO SUBMITTED BY LEARNED COUNSEL FOR THE ASSESSEE THAT FRESH LEASE DEED WAS REGISTERED I N THE MONTH OF MARCH 2020 FOR A PERIOD OF 33 YEARS ON A NOMINAL RENT OF RS. 1500 PER MONTH BY MRS. MERCY LATHA, MANAGING TRUSTEE IN FAVOUR OF THE ASSESSEE-TRUST FOR ITA NO.3395/CHNY/2019 :- 14 -: LEASING THE AFORESAID PROPERTY, AFTER EXPIRY OF FIR ST LEASE ENTERED INTO IN THE MONTH OF DECEMBER 2015 FOR A PERIOD OF THREE YE ARS, FREE OF RENT. THE ASSESSEE ALSO DREW OUR ATTENTION TO MINUTES DATED 0 3/09/2015 OF THE MEETING HELD BY ASSESSEE-TRUST OF THE BOARD OF TRUS TEES , WHEREIN IT WAS DECIDED IN THE MEETING TO ACQUIRE THE PROPERTY ADME ASURING TO THE EXTENT OF 2 ACRES SITUATED AT 52, THAYIUR VILALGE FOR THE EXCLUSIVE USE OF THE SCHOOL AND FOR PURPOSES OF CONSTRUCTION OF SCHOOL B UILDING. IT WAS FURTHER DECIDED IN THE SAID MEETING THAT THE PROPERTY SHALL BE REGISTERED IN THE NAME OF MRS. MERCY LATHA, MANAGING TRUSTEE AS REQUI RED BY UBI. IT WAS ALSO SUBMITTED THAT IT WAS DECIDED IN THE MEETING T HAT PROPERTY OF THE TRUST SHALL NOT BE TRANSFERRED BY THE MANAGING TRUS TEE IN THE ANY MANNER WHATSOEVER. THE COPY OF MINUTES DATED 03.09.2015 AN D FRESH LEASE DEED OF MARCH 2020 ARE ADDITIONAL EVIDENCES PRODUCED BY ASSESSEE FOR THE FIRST TIME BEFORE THE TRIBUNAL. THE SAID DOCUMENTS ARE P LACED IN THE FILE. THE LD.DR SUBMITTED THAT THESE TWO DOCUMENTS WERE NEVER PRODUCED BEFORE LEARNED AO/CIT(A) AND SINCE THEY ARE PRODUCED FOR THE FIRST TIME BEFORE TRIBUNAL , HENCE THESE ARE ADDITIONAL EVIDENCES WH ICH REQUIRES VERIFICATION BY AO. THE LEARNED DR SUBMITTED THAT IF THESE DOCUM ENTS ARE TO BE ADMITTED AND CONSIDERED WHILE ADJUDICATING THIS APP EAL , THEN THE MATTER MAY BE RESTORED TO THE FILE OF AO FOR FRESH ADJUDIC ATION. THE LD.COUNSEL FOR ASSESSEE SUBMITTED THAT MANAGING TRUSTEE HAS NOT DR AWN ANY BENEFIT FROM SAID PROPERTY AND THE SAID PARCEL OF LAND SO ACQUIR ED WAS SIMPLY TRANSFERRED TO ASSESSEE TRUST ON LEASE BASIS, FIRST LY FOR A PERIOD OF THREE YEARS AND THEN FOR A PERIOD OF 33 YEARS. IT WAS AL SO SUBMITTED THAT NO ITA NO.3395/CHNY/2019 :- 15 -: BENEFIT WHATSOEVER WAS DERIVED BY MANAGING TRUSTEE AND SHE WAS HOLDING THE PROPERTY IN FIDUCIARY CAPACITY FOR BENEFIT OF A SSESSEE-TRUST. IT WAS SUBMITTED THAT THERE IS NO FINDING BY LEARNED AO/CI T(A) THAT MRS. MERCY LATHA, MANAGING TRUSTEE HAS DRAWN ANY BENEFIT OUT O F THE TRUST-PROPERTY AND HENCE IT WAS PRAYED THAT THERE IS NO VIOLATION OF SEC.13(1)(C), SEC.13(1)(D) & SEC.13(2) OF THE 1961 ACT AND DEPART MENT ERRED IN ASSESSING THE ASSESSEE-TRUST AS AOP AND IN DENYING BENEFIT OF EXEMPTION UNDER SECTION 11 & 12 OF THE 1961 ACT. THE LEARNED COUNSEL FOR ASSESSEE RELIED UPON DECISION OF JAIPUR BENCH OF ITAT IN THE CASE OF KENDRIYA ACADEMY VIDHYALAYA SHIKSHA SAMITI V. ACIT, CIRCLE-1 , KOTA , REPORTED IN (2016) 73 TAXMANN.COM 391(JP.TRIB.) AND PRAYERS WER E MADE BY LEARNED COUNSEL FOR THE ASSESSEE FOR SETTING ASIDE MATTER T O THE FILE OF AO FOR FRESH ADJUDICATION AND IT WAS SUBMITTED THAT THERE WAS A FIDUCIARY CAPACITY IN WHICH MANAGING TRUSTEE OF THE ASSESSEE-TRUST NAMELY MRS. MERCY LATHA WAS HOLDING THE AFORESAID PROPERTY. FURTHER, LEARN ED COUNSEL FOR THE ASSESSEE RELIED UPON DECISION OF BANGALORE BENCH O F ITAT IN THE CASE OF BTM EDUCATION TRUST V. ACIT REPORTED IN (2006) 6 SO T 716 (BANG.-TRIB.) AND IT WAS SUBMITTED THAT NO BENEFIT WAS OBTAINED B Y THE TRUSTEE IN THE INSTANT CASE AND HENCE BENEFIT OF SECTION 11 AND 12 OF THE 1961 ACT CANNOT BE DENIED TO THE ASSESSEE. THE LD. DR. ON T HE OTHER HAND, DREW OUR ATTENTION TO PAGE NO.73 OF THE PAPER BOOK, PARA 6.6.1 OF APPELLATE ORDER OF LD.CIT(A) AND DREW OUR ATTENTION TO JUDGME NT OF HONBLE ALLAHABAD HIGH COURT , WHEREIN HONBLE HIGH COURT HAS HELD THAT PROVISIONS OF SECTION 13(1)(C) AND 13(2)(A) OF THE 1961 ACT STOOD VIOLATED ITA NO.3395/CHNY/2019 :- 16 -: IF INTEREST FREE LOANS ARE GIVEN TO TRUSTEES WITHOU T ANY SECURITY AND HENCE SECTION 11 EXEMPTION CANNOT BE ALLOWED. THE LD.COUN SEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE-TRUST IS NOT PAYING ANY LEASE RENT DURING THE YEAR UNDER CONSIDERATION. IT WAS REITERATED BY LE ARNED COUNSEL FOR THE ASSESSEE THAT LEASE DEED WAS RENEWED IN THE MONTH O F MARCH 2020 EFFECTIVE FROM 27 TH JANUARY 2020 VIDE REGISTERED DEED , FOR A PERIOD OF 33 YEARS WITH LEASE RENT OF RS. 1500 PER MONTH, AFTER EXPIRY OF FIRST LEASE DEED DATED 22 ND DECEMBER 2015 WHICH WAS FOR A PERIOD OF 3 YEARS. IT WAS REITERATED THAT THE SAID PROPERTY WAS HELD BY M RS. MERCY LATHA, MANAGING TRUSTEE IN FIDUCIARY CAPACITY FOR BENEFIT OF TRUST. THE LD.COUNSEL FOR THE ASSESSEE PRAYED THAT THE MATTER BE SET-ASID E TO THE FILE OF AO FOR FRESH CONSIDERATION. THE LD.DR ALSO SUBMITTED THAT KEEPING IN VIEW THAT ADDITIONAL EVIDENCES ARE FILED BY ASSESSEE FOR THE FIRST TIME BEFORE THE TRIBUNAL WHICH REQUIRED VERIFICATION BY THE AO, THE MATTER NEEDS TO BE RESTORED TO THE FILE OF THE AO FOR FRESH EXAMINATIO N. 6. WE HAVE HEARD BOTH THE PARTIES THROUGH VIDEO CONFER ENCING AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASSESSEE IS A PUBLIC CHARITABLE TRUST REGISTERED UNDER INDIAN TRU ST ACT, 1882 , WITH AN OBJECT OF PROVIDING EDUCATION AS ITS ONE OF THE MAIN OBJEC TS. THE ASSESSEE WAS HOLDING REGISTRATION U/S 12AA OF THE 1961 ACT. THE ASSESSEE TRUST AVAILED BANK LOAN OF RS. 4,00,00,000/- FROM UNION BANK OF INDIA, GUINDY BRANCH, CHENNAI IN THE MONTH OF SEPTEMBER 2015. THE SAID AMOUNT OF LOA N AMOUNT TO THE TUNE OF RS. 4,00,00,000/- WHICH WAS CREDITED BY UNION BANK OF INDIA(UBI) TO ITA NO.3395/CHNY/2019 :- 17 -: ASSESSEES BANK ACCOUNT WAS TRANSFERRED BY ASSESSEE -TRUST TO THE BANK ACCOUNTS OF MRS. MERCY LATHA, MANAGING TRUSTEE OF T HE ASSESSEE-TRUST IN THE FIRST WEEK OF OCTOBER 2015, AGGREGATING TO RS. 4,00 ,00,000/- . MRS. MERCY LATHA , MANAGING TRUSTEE OF THE ASSESSEE-TRUST ACQU IRED AND GOT REGISTERED A LAND ADMEASURING 2 ACRES SITUATED AT 52, THAIYUR A VILLAGE (THAIYUR B VILLAGE), CHENGLEPATTU TALUK , KANCHEEPURAM DISTRIC T, TAMIL NADU IN HER NAME FOR RS. 3,50,00,000/- , AS PER REGISTERED SALE DEED DATED 28 TH OCTOBER 2015 . THUS, THE AFORESAID LAND WAS REGISTE RED IN THE NAME OF MRS. MERCY LATHA WHO IS DESCRIBED AS AN ABSOLUTE OW NER OF THE SAID LAND AS PER AFORESAID SALE DEED DATED 28.10.2015 FOR AN AGGREGATE CONSIDERATION OF RS. 3,50,00,000/- , AND REGISTRATI ON OF SAID LAND WAS NOT DONE IN FAVOUR OF ASSESSEE-TRUST . THUS, THE LAND WAS ACQUIRED OUT OF THE FUNDS TRANSFERRED BY ASSESSEE-TRUST, EXCEPT AN AMOU NT OF RS. 30 LACS WHICH WAS PAID BY MRS. MERCY LATHA TO SELLER OF THE LAND ON 28.11.2014(ALMOST ONE YEAR BACK), AS PER DETAILS RE CORDED IN THE SALE DEED. THE AGREEMENT TO SELL ENTERED INTO BY MRS. ME RCY LATHA WITH SELLERS OF LAND WHILE ADVANCING RS. 30 LACS IN NOVEMBER 201 4 IS NOT BROUGHT ON RECORD. THE SAID LAND AS PER SALE DEED DATED 28.10. 2015 IS DESCRIBED AS AN AGRICULTURAL LAND. THE SAID SALE DEED DATED 28.1 0.2015 IS PLACED IN PAPER BOOK FILED BY ASSESSEE WITH THE TRIBUNAL AT P AGE 10-23. MRS. MERCY LATHA, MANAGING TRUSTEE EXECUTED LEASE DEED WITH RE SPECT TO SAID LAND IN FAVOUR OF THE ASSESSEE TRUST FOR A PERIOD OF THREE YEARS ON 22 ND DECEMBER 2015, FREE OF RENT. THE SAID LEASE DEED IS PLACED I N PAPER BOOK FILED BY ITA NO.3395/CHNY/2019 :- 18 -: ASSESSEE WITH TRIBUNAL AT PAGE 24-28. THE ASSESSEE HAS NOW PLACED BEFORE THE TRIBUNAL FOR THE FIRST TIME, MINUTES OF THE ME ETING OF THE BOARD OF TRUSTEES DATED 03.09.2005 WHICH STIPULATES THAT AUT HORIZATION/APPROVAL WAS GRANTED BY BOARD OF TRUSTEES TO MRS. MERCY LATH A, MANAGING TRUSTEE TO ACQUIRE AFORESAID PROPERTY EXCLUSIVELY FOR THE U SE OF SCHOOL AND FOR PURPOSES OF CONSTRUCTION OF SCHOOL BUILDING. AS PER MINUTES DATED 03.09.2015 OF TRUSTEES ( PLACED IN FILE), IT WAS FU RTHER DECIDED IN THE SAID MEETING THAT THE PROPERTY SHALL BE REGISTERED IN TH E NAME OF MRS. MERCY LATHA, MANAGING TRUSTEE AS REQUIRED BY UBI. IT IS A LSO STIPULATED IN THE SAID MINUTES DATED 03.09.2015 THAT PROPERTY OF THE TRUST SHALL NOT BE TRANSFERRED BY THE MANAGING TRUSTEE IN THE ANY MANN ER WHATSOEVER. THE COPY OF MINUTES DATED 03.09.2015 ARE PLACED IN FILE . THESE MINUTES DATED 03.09.2015 ARE PRODUCED FOR THE FIRST TIME BEFORE T HE BENCH DURING THE HEARING ON 20.07.2020 AND ARE IN THE NATURE OF ADDI TIONAL EVIDENCES WHICH WERE NEVER PRODUCED BEFORE LEARNED AO/CIT(A), AND H ENCE THESE ADDITIONAL EVIDENCES HAD NOT STOOD THE SCRUTINY/VER IFICATION BY LOWER AUTHORITIES. IT IS ALSO NOT EXPLAINED WHETHER THESE MINUTES WERE REGISTERED BY ASSESSEE-TRUST WITH COMPETENT AUTHORITIES AS REQ UIRED UNDER INDIAN TRUST ACT, 1882. THE ASSESSEE HAS ALSO PRODUCED LEA SE DEED OF MARCH 2020 WHEREIN MRS. MERCY LATHA HAS EXECUTED AND REGI STERED LEASE DEED WITH RESPECT TO SAID PROPERTY IN FAVOUR OF ASSESSEE TRUST FOR A PERIOD OF THIRTY THREE MONTHS, EFFECTIVE FROM 27.01.2020 . TH E FIRST LEASE WAS EXECUTED ON 22.12.2015 BY MRS. MERCY LATHA WITH RES PECT TO SAID PROPERTY FOR A PERIOD OF THREE YEARS , FREE OF RENT. IN THI S FRESH LEASE DEED OF MARCH ITA NO.3395/CHNY/2019 :- 19 -: 2020 EFFECTIVE FROM 27.01.2020, IT IS STIPULATED T HAT SHE IS HOLDING THE SAID PROPERTY IN HER NAME FOR THE SOLE BENEFIT OF T HE ASSESSEE-TRUST AND CONSEQUENTLY HOLDING THE SAID PROPERTY IN FIDUCIARY TO ASSESSEE-TRUST. SHE HAS HOWEVER CHARGED AND COLLECTED ADVANCE RENT OF R S.5,94,000/- FOR A PERIOD OF THIRTY THREE YEARS FROM ASSESSEE WITH RES PECT TO SAID PROPERTY. THE FRESH LEASE DEED OF MARCH 2020 IS ALSO PLACED I N FILE . THIS IS AGAIN AN ADDITIONAL EVIDENCE FILED BY ASSESSEE FOR THE FIRST TIME BEFORE TRIBUNAL AND IT HAS NOT STOOD THE TEST OF VERIFICATION/SCRUTINY BY LOWER AUTHORITIES. IT IS THE CLAIM OF THE ASSESSEE-TRUST THAT ALTHOUGH THE P ROPERTY WAS TECHNICALLY REGISTERED IN THE NAME OF MANAGING TRUSTEE, MRS. ME RCY LATHA BUT IT WAS ALWAYS HELD BY HER IN FIDUCIARY CAPACITY FOR ASSESS EE-TRUST. IT IS ALSO CLAIM OF THE ASSESSEE THAT NO BENEFIT WHATSOEVER WAS OBTA INED BY MRS. MERCY LATHA FROM THE SAID PROPERTY AND IMMEDIATELY AFTER ACQUISITION , THE SAID PROPERTY WAS HANDED OVER TO ASSESSEE-TRUST FOR CONS TRUCTION OF SCHOOL FOR WHICH THREE YEARS LEASE WAS INITIALLY ENTERED INTO , FREE OF RENT AND LATER FRESH LONG TERM REGISTERED LEASE WAS ENTERED INTO FOR A PERIOD OF 33 YEARS IN FAVOUR OF ASSESSEE ON A NOMINAL RENT OF RS. 1500 PER MONTH. THUS, CLAIM IS MADE THAT NO BENEFIT WHATSOEVER IS DERIVED BY MRS. MERCY LATHA OUT OF SAID PROPERTY WHICH TECHNICALLY WAS REGISTER ED IN THE NAME OF MRS. MERCY LATHA ALTHOUGH IT WAS FUNDED BY ASSESSEE OUT OF LOAN BORROWED FROM UBI. IT IS ALSO TO BE SEEN WHETHER THIS RENT A LBEIT NOMINAL HAS BREACHED THE CONDITIONS AS ARE STIPULATED U/S 13(1) (C) AND 13(1)(D) OF THE 1961 ACT AND WILL IT TANTAMOUNT TO MANAGING TRUSTEE DERIVING BENEFIT FROM THE SAID PROPERTY WHICH WAS FUNDED BY ASSESSEE AND MORE SO OWNERSHIP OF ITA NO.3395/CHNY/2019 :- 20 -: THE PROPERTY TECHNICALLY STOOD IN FAVOUR OF MRS. ME RCY LATHA. IT IS ALSO CLAIMED THAT AN ASSET IN THE FORM OF LEASEHOLD LAND TO THE TUNE OF RS. 4,00,00,000/- IS SHOWN IN THE BALANCE SHEET OF THE ASSESSEE-TRUST. THUS, IT IS CLAIMED THAT SINCE ASSET WAS HELD IN FIDUCIAR Y CAPACITY BY MRS. MERCY LATHA , MANAGING TRUSTEE FOR BENEFIT OF ASSESSEE-TR UST, IT COULD NOT BE SAID THAT SHE HAS DERIVED ANY BENEFIT FROM THE SAID PROP ERTY. THE EXPLANATION MADE BEFORE THE BENCH IS THAT THE BANKERS INSISTED FOR ACQUIRING THE PROPERTY IN HER PERSONAL NAME INSTEAD OF IN THE NAM E OF ASSESSEE-TRUST AS IT IS DIFFICULT TO CREATE ENCUMBRANCE ON TRUST PROP ERTY AND DIFFICULT TO ENFORCE SECURITY. ON BEING ASKED BY THE BENCH, IT W AS SUBMITTED THAT NO SUCH CONDITION WAS HOWEVER PLACED BY BANKERS IN THE SANCTION LETTER ISSUED BY UBI SANCTIONING LOAN OF RS. 4,00,00,000/- BUT IT WAS AN ORAL UNDERSTANDING WITH THE BANKER. IT IS ALSO EXPLAINED THAT AS PER PROVISIONS OF SECTION 17 OF TAMIL NADU RECOGNITION OF PRIVATE SCHOOLS REGULATION ACT, 1973,IT IS VERY DIFFICULT TO REGISTER THE PROPERTY IN THE NAME OF TRUST, WHICH COMPELLED ASSESSEE TO GET THE PROPERTY REGISTERED I N THE NAME OF MRS. MERCY LATHA. THUS, IT IS MADE OUT THAT NO INFRINGEM ENT OF SECTION 13(1)(C) , 13(1)(D) AND SECTION 13(2) OF THE 1961 ACT HAS TA KEN PLACE AND ASSESSEE IS ENTITLED FOR DEDUCTION U/S 11 AND 12 OF THE 1961 ACT. IT IS ALSO THE SAY OF LEARNED COUNSEL FOR THE ASSESSEE THAT NO W SCHOOL IS BEING CONSTRUCTED ON THE SAID LAND BY ASSESSEE-TRUST AFTE R OBTAINING REQUISITE APPROVALS FROM COMPETENT AUTHORITIES AND SUBSTANTIA L AMOUNT IS ALREADY SPENT BY ASSESSEE ON BUILDING SCHOOL ON THE SAID LA ND. IT IS EXPLAINED THAT ALL PERMISSIONS FROM COMPETENT AUTHORITIES WERE OBT AINED IN THE NAME OF ITA NO.3395/CHNY/2019 :- 21 -: ASSESSEE-TRUST FOR CONSTRUCTING SCHOOL BUILDING ON SAID LAND. THESE FACTS REQUIRES VERIFICATION BY THE AO. THE ASSESSEE HAS A LSO PLACED CERTAIN ADDITIONAL EVIDENCES WHICH GOES TO ROOT OF THE MATT ER AND IN OUR CONSIDERED VIEW, THE MATTER NEEDS TO BE RESTORED TO THE FILE OF THE AO WHO SHALL ENQUIRE INTO ENTIRE FACTUAL MATRIX SURROUNDIN G THE ACQUISITION OF THE PROPERTY BY MRS. MERCY LATHA IN HER PERSONAL NAME , DESPITE FUNDS BEEN PROVIDED BY ASSESSE-TRUST FOR ACQUISITION OF SAID P ROPERTY OUT OF BORROWINGS BY ASSESSEE MADE FROM UBI . THE ASSESSEE IS PAYING INTEREST ON SAID LOANS AND ALSO REPAYING PRINCIPAL AMOUNT OU T OF ITS OWN FUNDS. THE FACTUM OF MRS. MERCY LATHA STANDING PERSONAL GUARAN TOR TO THE SAID LOAN AS WELL OFFERING OF PERSONAL PROPERTIES AS COLLATER AL SECURITIES TO SECURE SAID LOAN SHALL ALSO BE CONSIDERED BY AO IN DENOVO ASSESSMENT TO ARRIVE AT DECISION WHETHER THE ASSESSEE HAS INFRINGED PROVISI ONS OF SECTION 13(1)(C), 13(1)(D) AND 13(2) OF THE 1961 ACT. THE P OST ACQUISITION ACTIVITIES SUCH AS LONG TERM LEASE GRANTED, UTILIZA TION OF SAID LAND, APPROVALS OBTAINED FROM COMPETENT AUTHORITIES IN TH E NAME OF ASSESSEE- TRUST AS WELL STATUS OF CONSTRUCTION OF SCHOOL BUIL DING AND AMOUNT SPENT BY ASSESSEE FOR CONSTRUCTION OF SCHOOL BUILDING SHALL ALSO BE CONSIDERED BY AO IN DENOVO ASSESSMENT, BEFORE COMING TO CONCLUSION W HETHER ANY BENEFIT WAS DERIVED BY MANAGING TRUSTEE OUT OF SAID LAND. W E HAVE ALSO OBSERVED THAT THE SAID LAND IS INCORPORATED IN THE BALANCE S HEET ON ASSET SIDE AS LEASEHOLD LAND-RS. 4,00,00,000/- AND AN AMOUNT OF RS. 4,00,00,000/- WAS BORROWED BY ASSESEE FROM UBI IN SEPTEMBER, 2015 , WHICH WAS LATER TRANSFERRED TO BANK ACCOUNT OF MRS. MERCY LATHA IN THE FIRST WEEK OF ITA NO.3395/CHNY/2019 :- 22 -: OCTOBER 2015. HOWEVER, AS PER SALE DEED DATED 28.10 .2015, THE LAND WAS ACQUIRED FOR RS. 3,50,00,000/- BY MRS. MERCY LATHA , WHILE MRS. MERCY LATHA HAS GOT TRANSFERRED RS. 4,00,00,000/- FROM AS SESSEE-TRUST AND THE SAID LAND IS CAPITALIZED AT RS. 4,00,00,000/- IN TH E BOOKS OF ACCOUNTS OF ASSESSEE-TRUST. THE DIFFERENTIAL OF RS. 50,00,000/- RETAINED BY MRS. MERCY LATHA WAS NOT EXPLAINED BY THE ASSESSEE-TRUST NEITH ER THE SAME WAS ENQUIRED BY AUTHORITIES BELOW IN FIRST ROUND OF LIT IGATION AND WHETHER THE SAID DIFFERENTIAL LEADS TO BENEFIT OF RS. 50 LACS D ERIVED BY MRS. MERCY LATHA AS THE SAID AMOUNT WAS NOT REFUNDED BY MRS. MERCY L ATHA TO THE ASSESSEE-TRUST, AS IS EMERGING FROM RECORDS. THIS A SPECT ALSO NEED TO BE CAREFULLY ENQUIRED BY THE AO AND ASSESSEE IS DIREC TED TO PLACE ON RECORD BEFORE THE AO, COMPLETE EXPLANATION OF DIFFERENTIAL AMOUNT OF RS. 50 LACS RETAINED BY MRS. MERCY LATHA . IF NO PROPER EXPLANA TION IS FORTHCOMING, THEN MRS. MERCY LATHA HAS OBTAINED A BENEFIT OF RS. 50 LACS INFRINGING SECTION 13(1)(C) AND 13(1)(D) OF THE 1961 ACT AND C ONSEQUENCES WILL FOLLOW. THE ASSESSEE IS DIRECTED TO EXPLAIN THIS DI FFERENTIAL OF RS. 50 LACS BEFORE THE AO IN SET ASIDE DENOVO ASSESSMENT PROCEE DINGS. IT IS ALSO MADE OUT THAT THE BANKERS WERE INSISTING ON THE REG ISTRATION OF PROPERTY IN THE NAME OF MRS. MERCY LATHA AND HENCE LAND WAS REG ISTERED IN HER NAME , BUT PERUSAL OF SALE DEED SHOWS THAT MRS. MERCY LA THA MADE FIRST PAYMENT FOR ACQUIRING THE AFORESAID LAND WAY BACK I N 28.11.2014 WHEN TWO CHEQUES, FIRSTLY OF RS. 25 LACS AND SECONDLY OF RS. 5 LACS WAS GIVEN TO THE SELLER OF LAND BY MRS. MERCY LATHA. THE AGREEME NT TO SALE ENTERED INTO AT THE TIME OF ADVANCING OF RS. 30 LACS IS NOT BROU GHT ON RECORD. THE ITA NO.3395/CHNY/2019 :- 23 -: ASSESSEE IS DIRECTED TO PROVIDE EXPLANATION TO THAT EFFECT BEFORE THE AO IN SET ASIDE PROCEEDINGS. THIS ASPECT IS ALSO TO BE LO OKED INTO BY AO BEFORE FRAMING DENOVO ASSESSMENT. THE LEARNED COUNSEL FOR THE ASSESSEE HAS REFERRED TO PROVISIONS OF SECTION 31 OF TAMIL NADU RECOGNISED PRIVATE SCHOOLS (REGULATION) ACT, 1973 AND STATED THAT THE PROCEDURE FOR GETTING PERMISSION FOR PURCHASE OF PROPERTY IS VERY CUMBERS OME . IN OUR CONSIDERED VIEW, DIFFICULTY IN COMPLYING WITH PROCE DURE IS NO EXCUSE UNLESS ASSESSEE IS ABLE TO DEMONSTRATE IMPOSSIBILITY OF PE RFORMING AN ACT AND THAT TOO UNDER THESE CIRCUMSTANCES ALSO, EXECUTION IN DEVIATION WITH PROVISIONS OF STATUTE HAS TO BE WITHIN THE REALM OF LEGALITY AS ILLEGALITY CANNOT BE PERPETUATED. THE ASSESSEE IS DIRECTED TO SUBMIT DETAILED EXPLANATION TO THAT EFFECT BEFORE THE AO IN DENOVO ASSESSMENT PROCEEDINGS. THUS KEEPING IN THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO IN VIEW OF ADDITIONAL EVIDENCES F ILED BY ASSESSEE FOR THE FIRST TIME BEFORE THE TRIBUNAL, WE ARE INCLINED TO RESTORE THE MATTER BACK TO THE FILE OF AO FOR FRAMING DENOVO ASSESSMENT. WE CL ARIFY THAT THE AO IS FREE TO MAKE SUCH ENQUIRIES AS MAY DEEM FIT TO DECI DE THE ISSUE DENOVO IN SET ASIDE PROCEEDINGS. THE AO WILL ALLOW ASSESSEE T O FILE NECESSARY EVIDENCES IN ITS DEFENSE IN SUPPORT OF ITS CONTENTI ONS. NEEDLESS TO SAY THAT PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD SHAL L BE GRANTED BY AO IN DENOVO ASSESSMENT PROCEEDINGS. THE OTHER TWO ISSUES CONCERNING DISALLOWANCE OF DEPRECIATION AND EXPENSES ARE CONSE QUENTIAL IN NATURE TO DECISION ARRIVED AT OF THE FIRST ISSUE BY THE AO IN SET ASIDE DENOVO ASSESSMENT PROCEEDINGS , AND WE ARE INCLINED TO RES TORE THESE TWO ISSUES ITA NO.3395/CHNY/2019 :- 24 -: ALSO TO THE FILE OF THE AO FOR DENOVO DETERMINATION OF THESE TWO ISSUES ALSO IN SET ASIDE PROCEEDINGS. THE APPEAL OF THE ASSESSE E IS ALLOWED FOR STATISTICAL PURPOSES. WE ORDER ACCORDINGLY. 7.IN THE RESULT, THE APPEAL FILED BY ASSESSEE IN IT A NO.3395/CHNY/2019 FOR AY: 2016-17 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 24 TH DAY OF AUGUST, 2020 IN CHENNAI. SD/- SD/- ( # $ . . & ) ( DUVVURU R.L.REDDY ) ( /JUDICIAL MEMBER ( ) ( RAMIT KOCHAR ) /ACCOUNTANT MEMBER /CHENNAI, 4 /DATED: 24 TH AUGUST, 2020. TLN 0 .(5 65 /COPY TO: 1. - /APPELLANT 4. 7 /CIT 2. ./- /RESPONDENT 5. 5 .(( /DR 3. 7 ( ) /CIT(A) 6. * /GF