MMTIS EDUCATION AND RESEARCH TRUST,MUMBAI vs. ITO (E) 2(1), MUMBAI

PER OM PRAKASH KANT, AM PER OM PRAKASH KANT, AM

These appeals by the assessee are directed against separate These appeals by the assessee are directed against separate These appeals by the assessee are directed against separate orders dated 21.10.2015 ; 18.01.2017 and 26.11.2018 by the Ld. orders dated 21.10.2015 ; 18.01.2017 and 26.11.2018 by the Ld. orders dated 21.10.2015 ; 18.01.2017 and 26.11.2018 by the Ld. Commissioner of Income Commissioner of Income-tax (Appeals)-1, Mumbai [in short ‘the Ld. 1, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2011 CIT(A)’] for assessment year 2011-12, 2012-13 and 2013 13 and 2013-14 respectively. As identical grounds have been raised in these appeals ely. As identical grounds have been raised in these appeals ely. As identical grounds have been raised in these appeals arising from same set of facts and circumstances ,therefore same arising from same set of facts and circumstances arising from same set of facts and circumstances were heard together and disposed off by way of this consolidated were heard together and disposed off by way of this consolidated were heard together and disposed off by way of this consolidated order for convenience and avoid repetition of facts. order for convenience and avoid repetition of facts.

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objects of the appellant and same were fair and reasonable objects of the appellant and same were fair and reasonable objects of the appellant and same were fair and reasonable and not in excess of what may be reasonably paid for such and not in excess of what may be reasonably paid for such and not in excess of what may be reasonably paid for such services. 1.2 directing the AO to disallow those exp directing the AO to disallow those expenses out of total enses out of total expenses of Rs. 42.64,392/ expenses of Rs. 42.64,392/-incurred by the appellant, as incurred by the appellant, as not having been incurred for earning of income without not having been incurred for earning of income without not having been incurred for earning of income without appreciating the fact that said expenses were incurred for appreciating the fact that said expenses were incurred for appreciating the fact that said expenses were incurred for the purpose of the objects of the appellant and hence, the purpose of the objects of the appellant and hence, the purpose of the objects of the appellant and hence, allowable as deduction in their entirety. s deduction in their entirety. 2. It is humbly prayed that the reliefs as prayed for here It is humbly prayed that the reliefs as prayed for here It is humbly prayed that the reliefs as prayed for here-in- above and/ or such other reliefs as may be justified by the above and/ or such other reliefs as may be justified by the above and/ or such other reliefs as may be justified by the facts and circumstances of the case and as may meet the facts and circumstances of the case and as may meet the facts and circumstances of the case and as may meet the ends of justice should be granted. ends of justice should be granted. 3. The assessee has also raised additional ground vide letter see has also raised additional ground vide letter see has also raised additional ground vide letter dated 22.01.2019 and submitted that same might be admitted in dated 22.01.2019 and submitted that same might be admitted in dated 22.01.2019 and submitted that same might be admitted in view of the decision of the Hon’ble Supreme Court in the case of view of the decision of the Hon’ble Supreme Court in the case of view of the decision of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. v. CIT 229 ITR 383 (SC). The National Thermal Power Company Ltd. v. CIT 229 ITR 383 (SC). The National Thermal Power Company Ltd. v. CIT 229 ITR 383 (SC). The l ground raised by the assessee is reproduced as said additional ground raised by the assessee is reproduced as l ground raised by the assessee is reproduced as under:

On the facts and circumstances of the case and in law, the On the facts and circumstances of the case and in law, the On the facts and circumstances of the case and in law, the Ld. CIT(A) ought to have held that the appellant is eligible Ld. CIT(A) ought to have held that the appellant is eligible Ld. CIT(A) ought to have held that the appellant is eligible for exemption U/s. 11 of the Act and consequently eligible for exemption U/s. 11 of the Act and consequently eligible for exemption U/s. 11 of the Act and consequently eligible for statutory deducti for statutory deduction of 15% of gross income Us. 11(1)(a) on of 15% of gross income Us. 11(1)(a) and eligible for carry forward of deficit for the year, if any, and eligible for carry forward of deficit for the year, if any, and eligible for carry forward of deficit for the year, if any, to subsequent year(s) for future set to subsequent year(s) for future set-off. 4. We have heard rival submission of the parties on the issue of We have heard rival submission of the parties on the issue of We have heard rival submission of the parties on the issue of admissibility of the additional ground. Since, admissibility of the additional ground. Since, the ground raised is the ground raised is being legal in nature and no investigation of the fresh facts is being legal in nature and no investigation of the fresh facts is being legal in nature and no investigation of the fresh facts is required , therefore, same is admitted for adjudication in view of the therefore, same is admitted for adjudication in view of the therefore, same is admitted for adjudication in view of the

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decision of the Apex Court in the case of National Thermal Power decision of the Apex Court in the case of National Thermal Power decision of the Apex Court in the case of National Thermal Power Company Ltd. (supra). Company Ltd. (supra).

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assessee under the head ‘income from other sources’ but also assessee under the head ‘income from other sources’ but also assessee under the head ‘income from other sources’ but also disallowed claim of certain expenses disallowed claim of certain expenses of Rs.42,64,392/ of Rs.42,64,392/-. In this manner, the Assessing Officer computed the total income of the manner, the Assessing Officer computed the total income of the manner, the Assessing Officer computed the total income of the assessee at Rs.68,57,820/ assessee at Rs.68,57,820/- as under:

“5. Subject to the discussion as above, the total income of the Subject to the discussion as above, the total income of the Subject to the discussion as above, the total income of the assessee is computed as under: assessee is computed as under: Amount (Rs.) Amount (Rs.) Amount (Rs.) Income from other sources Income from other sources Gross Gross Receipts Receipts from from the the various various 3,14,55,417 Educational Course Educational Course Less: Allowable expenditure incurred to earn Allowable expenditure incurred to earn 2,88,61,990 income Less: Expenses disallowed as per Less: Expenses disallowed as per 42,64,392 para 4.13 Total Income Total Income ……… 68,57,819 Rounded off u/s 288A off u/s 288A ……… 68,57,820” 6. On further appeal, the Ld. CIT(A) allowed part relief to the On further appeal, the Ld. CIT(A) allowed part relief to the On further appeal, the Ld. CIT(A) allowed part relief to the assessee. The Ld. CIT(A) upheld the disallowance of exemption u/s assessee. The Ld. CIT(A) upheld the disallowance of exemption u/s assessee. The Ld. CIT(A) upheld the disallowance of exemption u/s 11 of the Act in view of the violation of the provisions of section 13 11 of the Act in view of the violation of the provisions of section 13 11 of the Act in view of the violation of the provisions of section 13 of the Act, however, on th of the Act, however, on the issue of the disallowance of e issue of the disallowance of Rs.42,64,392/- of various expenses, the Ld. CIT(A) directed the of various expenses, the Ld. CIT(A) directed the of various expenses, the Ld. CIT(A) directed the Assessing Officer to verify the nature of the expenses and Assessing Officer to verify the nature of the expenses and Assessing Officer to verify the nature of the expenses and disallowed only those expenses which were not incurred for earning disallowed only those expenses which were not incurred for earning disallowed only those expenses which were not incurred for earning of the income. Aggrieved of the income. Aggrieved, the assessee is in appeal before the the assessee is in appeal before the Tribunal by way of raising grounds reproduced above. Tribunal by way of raising grounds reproduced above. Tribunal by way of raising grounds reproduced above.

6.1 As regards, the ground No. 1.2 As regards, the ground No. 1.2 of the appeal, the Ld. Counsel the Ld. Counsel of the assessee submitted that the Assessing Officer has after of the assessee submitted that the Assessing Officer has after of the assessee submitted that the Assessing Officer has after verification in the effect giving o verification in the effect giving order has already allowed relief to the rder has already allowed relief to the

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assessee and therefore that ground was not pressed before the assessee and therefore that ground was not pressed before the assessee and therefore that ground was not pressed before the Tribunal. Accordingly, the ground No. 1.2 of the appeal of the Tribunal. Accordingly, the ground No. 1.2 of the appeal of the Tribunal. Accordingly, the ground No. 1.2 of the appeal of the assessee is dismissed as infructuous. assessee is dismissed as infructuous.

7.1 The facts qua the issue in dispute are that The facts qua the issue in dispute are that during during the year under consideration, the assessee trust made payment of under consideration, the assessee trust made payment of under consideration, the assessee trust made payment of consultancy fee at Rs.6,00,000/ consultancy fee at Rs.6,00,000/- per annum each to the three per annum each to the three trustees namely Shri namely Shri Capt. C.L. Dubey, Capt.; Sh O. P. Capt.; Sh O. P. Yadav and Shri Capt. M.V. Naik Capt. M.V. Naik, totaling to Rs.18 lakhs. Further, the . Further, the three trustees also rented out building of training institute to the trust also rented out building of training institute to the trust also rented out building of training institute to the trust alongwith land appurtenant to the building. The office building , alongwith land appurtenant to the building. The office building , alongwith land appurtenant to the building. The office building , workshop , swimming pool and Playground etc facilities were built workshop , swimming pool and Playground etc facilities were built workshop , swimming pool and Playground etc facilities were built on 2.5 acre land and balance on 2.5 acre land and balance 7.5 acre was barren land 7.5 acre was barren land . The assessee has paid rent for the building assessee has paid rent for the building at the rate of Rs at the rate of Rs.18 lakhs per annum to each each of the three trustees, totaling to Rs.54 lakhs. totaling to Rs.54 lakhs. Further, the trust paid rent for workshop building amounting to paid rent for workshop building amounting to paid rent for workshop building amounting to Rs.6 lakhs per annum to each Rs.6 lakhs per annum to each of trustees totaling to trustees totaling to Rs.18 lakhs. Further, trust paid rent for use of the paid rent for use of the playground playground for training @ Rs.2.4 lakhs to each Rs.2.4 lakhs to each of trustees totaling to Rs.7.20 lakhs and rent trustees totaling to Rs.7.20 lakhs and rent for swimming pool @ 4.2 lakhs @ 4.2 lakhs per annum to each each of trustees

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totaling to Rs.12.60 lakhs per annum. Further, the Assessing totaling to Rs.12.60 lakhs per annum. Further, totaling to Rs.12.60 lakhs per annum. Further, Officer observed that payment Officer observed that payment for‘modular course fees modular course fees’ of Rs.40.96 lakhs perannum, Bus Bus rent of Rs.1.15 lakhs and rent for office rent of Rs.1.15 lakhs and rent for office premises at Andheri of Rs.13.75 lakhs premises at Andheri of Rs.13.75 lakhs, totaling to Rs.55.86 lakhs totaling to Rs.55.86 lakhs was paid to another trust namely another trust namely ‘Tara Meera Meera Education and research trust, in which two of the trustees of the assessee trust n which two of the trustees of the assessee trust n which two of the trustees of the assessee trust namelysh CL Dubey and Sh OP Yadav were sh CL Dubey and Sh OP Yadav were representing as representing astrustees.

7.2 Regarding the consultancy charges paid to the Regarding the consultancy charges paid to the Regarding the consultancy charges paid to the trustees, the Assessing Officer observed that Assessing Officer observed that same constitute 32.72% of the total 32.72% of the total consultancy charges paid. Further, the Assessing Officer observed . Further, the Assessing Officer observed that payments made to trustees for consultancy charges were fixed that payments made to trustees for consultancy charges were fixed that payments made to trustees for consultancy charges were fixed irrespective irrespective irrespective of of of their their their performance performance performance in in in the the the trust trust trust and and and were were were unreasonably high when compared to other consult high when compared to other consult high when compared to other consultants whose payments were not fixed and dependent upon their performance. payments were not fixed and dependent upon their performance. payments were not fixed and dependent upon their performance. The Assessing Officer The Assessing Officer also computed per hour cost of consultancy also computed per hour cost of consultancy paid to trustees. He paid to trustees. He observed that trustee M/s M.V. observed that trustee M/s M.V. Naik was not appearing in the list of the faculty appearing in the list of the faculty members ,therefo therefore in his cse number of hours of of hours of consultancy was Nil, whereas in the case of whereas in the case of Capt C L Dubey cost of consultancy cost of consultancy was Rs, 21, 428/ was Rs, 21, 428/- per hour and in the case of Sh OP Yadav cost of consultancy was Rs. 16,666/- in the case of Sh OP Yadav cost of consultancy was Rs. 16,666/ in the case of Sh OP Yadav cost of consultancy was Rs. 16,666/ per hour. Accordingly, he held that the consultan Accordingly, he held that the consultancy fees paid to Accordingly, he held that the consultan trustee was unreasonable and excessive. trustee was unreasonable and excessive.

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7.3 Regarding the rent for building, workshop and play ground, Regarding the rent for building, workshop and play ground, Regarding the rent for building, workshop and play ground, the Ld. Assessing Officer rejected the contention of the assessee the Ld. Assessing Officer rejected the contention of the assessee the Ld. Assessing Officer rejected the contention of the assessee that the rent per sq. ft the rent per sq. ft was of only Rs. 1.80 per month and observed 1.80 per month and observed that rent for the area admeasuring to 2. that rent for the area admeasuring to 2.5 acre comes to Rs.84.29 acre comes to Rs.84.29 per sq. ft. per month which is per sq. ft. per month which is unreasonable, high and unwarranted and unwarranted and therefore it was a it was a diversion of the fund to specified persons. the fund to specified persons.

7.4 Regarding the modular fees, the Assessing Officer rej Regarding the modular fees, the Assessing Officer rej Regarding the modular fees, the Assessing Officer rejected the contention of the assessee that said payment is not covered u/s contention of the assessee that said payment is not covered u/s contention of the assessee that said payment is not covered u/s 13(3) of the Act and held that Shri 13(3) of the Act and held that Shri Capt CL Dubey and Capt OP Capt CL Dubey and Capt OP Yadav were trustees of Yadav were trustees of Tara Meera Education Trust and they were Trust and they were conducting modular conducting modular courses, therefore, this being divers therefore, this being diversion of the fund of trust to the specified persons. fund of trust to the specified persons.

7.5 Before the Ld. CIT(A), the assessee contended that all the three Before the Ld. CIT(A), the assessee contended that all the three Before the Ld. CIT(A), the assessee contended that all the three trustees are highly experience trustees are highly experience retired captains of maritime retired captains of maritime ships and they alongwith teach and they alongwith teaching at the training institute at the training institute, also looked after the entire management activity of the trust. It was further ter the entire management activity of the trust. It was further ter the entire management activity of the trust. It was further submitted that if each of th submitted that if each of those three trustees happened happened to take up the job outside as consultant consultant in maritime, each could have could have earned minimum income by way of consultancy to the tune of Rs.3.5 Lakhs minimum income by way of consultancy to the tune of Rs.3.5 Lakhs minimum income by way of consultancy to the tune of Rs.3.5 Lakhs to Rs. 4 lakhs per month, month, however the assessee trust the assessee trust has only paid consultancy of Rs.6 lakhs consultancy of Rs.6 lakhs per annum or Rs.50,000/ Rs.50,000/- per month, which is far below considering their teaching expertis considering their teaching expertis considering their teaching expertise, competence, knowledge, experience and experience and multiple services rendered by them. It services rendered by them. It

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was further submitted that assessee trust has paid consultancy fee was further submitted that assessee trust has paid consultancy fee was further submitted that assessee trust has paid consultancy fee to three nonrelated qualified professors during the year and to three nonrelated qualified professors during the year and to three nonrelated qualified professors during the year and payment made to them was more than the payment made to three payment made to them was more than the payment payment made to them was more than the payment trustees. It was submitted that experience trustees. It was submitted that experience, competence competence and knowledge of the knowledge of the trustees, was being far more than those r more than those professors, therefore. t , therefore. the payment of Rs.6 lakhs per annum per annum made to each trustee was justified. was justified.

7.6 It It was was further further submitted submitted before efore the the ld ld CIT(A) CIT(A) that that reasonableness of the payment made to three trustees was accepted reasonableness of the payment made to three trustees reasonableness of the payment made to three trustees by the Assessing Officer in assessment year 2010 by the Assessing Officer in assessment year 2010-11 11, therefore, in view of Rule of the consistency view of Rule of the consistency the Assessing Officer is now not the Assessing Officer is now not justified in changing his opinion justified in changing his opinion without there being any change in without there being any change in the facts and circumstances as compared to assessment year 2010- the facts and circumstances as compared to assessment year 2010 the facts and circumstances as compared to assessment year 2010 11.

7.7 It was further submitted It was further submitted before the ld CIT(A) that that the payment for rent to trustees was justified in view of the huge infrastructure for rent to trustees was justified in view of the huge infrastructure for rent to trustees was justified in view of the huge infrastructure and campus provided to enable the trust to carry on its educational ded to enable the trust to carry on its educational ded to enable the trust to carry on its educational activity. Further, the payment for modular course fees to Tara activity. Further, the payment for modular course fees to Tara activity. Further, the payment for modular course fees to Tara Meera education and Research and Research trust was also justified in view of trust was also justified in view of quantum of payments quantum of payments fixed by DG Shipping, which is DG Shipping, which is the Central Government Regulatory Authority gulatory Authority.

7.8 The contentions s of the assessee however, were rejected by the of the assessee however, were rejected by the Ld. CIT(A) observing as under: Ld. CIT(A) observing as under:

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“5.2. I have considered the facts and circumstances of the 5.2. I have considered the facts and circumstances of the 5.2. I have considered the facts and circumstances of the case, gone through the assessment order of the A.O and the case, gone through the assessment order of the A.O and the case, gone through the assessment order of the A.O and the submissions of the a submissions of the appellant and also discussed the case ppellant and also discussed the case with the AR of the appellant. The contentions and submissions with the AR of the appellant. The contentions and submissions with the AR of the appellant. The contentions and submissions of the appellant are being discussed and decided here in of the appellant are being discussed and decided here in of the appellant are being discussed and decided here in under: i. With regard to Ground No. 1, 2 & 3 i.e. denial of exemption i. With regard to Ground No. 1, 2 & 3 i.e. denial of exemption i. With regard to Ground No. 1, 2 & 3 i.e. denial of exemption u/s. 11, appellant has stated u/s. 11, appellant has stated that the rates of payments that the rates of payments made are reasonable and hence it is not hit by the provisions made are reasonable and hence it is not hit by the provisions made are reasonable and hence it is not hit by the provisions of section 13(1)(c) and 13(2)(c) and 13(3). In this regard it is of section 13(1)(c) and 13(2)(c) and 13(3). In this regard it is of section 13(1)(c) and 13(2)(c) and 13(3). In this regard it is mentioned that in the show cause notice as quoted above, the mentioned that in the show cause notice as quoted above, the mentioned that in the show cause notice as quoted above, the assessing officer has invoked the provisi assessing officer has invoked the provisions of section 13(1)(c) ons of section 13(1)(c) where "reasonableness" of any payment is not required to be where "reasonableness" of any payment is not required to be where "reasonableness" of any payment is not required to be considered since this word does not find mention therein.Also, considered since this word does not find mention therein.Also, considered since this word does not find mention therein.Also, in the said provision it is mentioned that where the income of in the said provision it is mentioned that where the income of in the said provision it is mentioned that where the income of the Trust is applied 'directly or indirectly' the Trust is applied 'directly or indirectly' for the persons for the persons referred to in section 13(3), exemption u/s. 11 would not be referred to in section 13(3), exemption u/s. 11 would not be referred to in section 13(3), exemption u/s. 11 would not be allowable. Accordingly, this contention of the appellant is not allowable. Accordingly, this contention of the appellant is not allowable. Accordingly, this contention of the appellant is not acceptable. ii. In the submissions it was mentioned that the recipients of In the submissions it was mentioned that the recipients of In the submissions it was mentioned that the recipients of consultation fee (Trustees) could earn m consultation fee (Trustees) could earn more than Rs. 38 to 40 ore than Rs. 38 to 40 lakhs if they take a job outside. However this fact is not lakhs if they take a job outside. However this fact is not lakhs if they take a job outside. However this fact is not supported by any documentary evidence hence no cognizance supported by any documentary evidence hence no cognizance supported by any documentary evidence hence no cognizance of the same can be taken. Further it is noted that as of the same can be taken. Further it is noted that as of the same can be taken. Further it is noted that as mentioned by AO in the order, out of the total consultancy fee, mentioned by AO in the order, out of the total consultancy fee, mentioned by AO in the order, out of the total consultancy fee, 33% is paid to the trustees which by no stretch of imagination 33% is paid to the trustees which by no stretch of imagination 33% is paid to the trustees which by no stretch of imagination can be said to be reasonable. can be said to be reasonable. iii. The appellant contended that in A.Y. 2010 . The appellant contended that in A.Y. 2010-11 no such . The appellant contended that in A.Y. 2010- issue was raised by the AO and same has been accepted. In issue was raised by the AO and same has been accepted. In issue was raised by the AO and same has been accepted. In this regard it is mentioned that the legal pos this regard it is mentioned that the legal position is settled ition is settled and clear that 'Rule of Consistency' / res and clear that 'Rule of Consistency' / res-judicata is not judicata is not applicable and each assessment year is a separate applicable and each assessment year is a separate applicable and each assessment year is a separate proceedings, as also affirmed in the decision of the Apex Court proceedings, as also affirmed in the decision of the Apex Court proceedings, as also affirmed in the decision of the Apex Court in Bharat Sanchar Nigam Ltd. vs Union of India (S.C) 282 IT. in Bharat Sanchar Nigam Ltd. vs Union of India (S.C) 282 IT. in Bharat Sanchar Nigam Ltd. vs Union of India (S.C) 282 IT. In another case of CIT Vs Seshasayee Industries Ld. (Mad) other case of CIT Vs Seshasayee Industries Ld. (Mad) other case of CIT Vs Seshasayee Industries Ld. (Mad) 242 ITR 691, it was further held that 'the fact that its claim 242 ITR 691, it was further held that 'the fact that its claim 242 ITR 691, it was further held that 'the fact that its claim was not questioned in earlier years does not entitle the was not questioned in earlier years does not entitle the was not questioned in earlier years does not entitle the assessee to contend that the law should not be applied during assessee to contend that the law should not be applied during assessee to contend that the law should not be applied during the current A.Y. Furt the current A.Y. Further in the case of Ace Investments (P) Ltd her in the case of Ace Investments (P) Ltd Vs. CIT (Mad) 244 IT 166 it was held that facts can be Vs. CIT (Mad) 244 IT 166 it was held that facts can be Vs. CIT (Mad) 244 IT 166 it was held that facts can be

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reconsidered in later year and record different finding reconsidered in later year and record different finding reconsidered in later year and record different finding- Finding for earlier year not conclusive.' .Also the legal position is for earlier year not conclusive.' .Also the legal position is for earlier year not conclusive.' .Also the legal position is settled that 'each assessment y settled that 'each assessment year is a separate unit' ear is a separate unit' (KikabhaiPremchand Vs. CIT 24 IT (SC) and the income of the (KikabhaiPremchand Vs. CIT 24 IT (SC) and the income of the (KikabhaiPremchand Vs. CIT 24 IT (SC) and the income of the assessee is to be determined and computed for the purpose of assessee is to be determined and computed for the purpose of assessee is to be determined and computed for the purpose of taxation under the Income Tax Law as per the provisions and taxation under the Income Tax Law as per the provisions and taxation under the Income Tax Law as per the provisions and Law applicable for the particular year (Karim Thanv Law applicable for the particular year (Karim Thanv Law applicable for the particular year (Karim Thanvi Tea Estate Ltd. 60 IT (SC). Hence the contention is not acceptable. Estate Ltd. 60 IT (SC). Hence the contention is not acceptable. Estate Ltd. 60 IT (SC). Hence the contention is not acceptable. iv.It was stated that Tara Meera Education Trust is not iv.It was stated that Tara Meera Education Trust is not iv.It was stated that Tara Meera Education Trust is not covered by the definition of specified persons as given in covered by the definition of specified persons as given in covered by the definition of specified persons as given in section 13(1)(c). In this regard it is mentioned that the section 13(1)(c). In this regard it is mentioned that the section 13(1)(c). In this regard it is mentioned that the assessing off assessing officer has clearly mentioned in his order that the icer has clearly mentioned in his order that the modular courses are conducted by Mr. C L Dubey and modular courses are conducted by Mr. C L Dubey and modular courses are conducted by Mr. C L Dubey and Mr.O.P.Yadav in Tara Meera Education Trust and they are Mr.O.P.Yadav in Tara Meera Education Trust and they are Mr.O.P.Yadav in Tara Meera Education Trust and they are also the trustees in the said trust who are common in both also the trustees in the said trust who are common in both also the trustees in the said trust who are common in both trusts. This fact has not been denied by trusts. This fact has not been denied by the appellant even in the appellant even in the submissions during appellant proceedings. Accordingly the the submissions during appellant proceedings. Accordingly the the submissions during appellant proceedings. Accordingly the payment is covered by the provisions of section 13(3). payment is covered by the provisions of section 13(3). payment is covered by the provisions of section 13(3). Contention of the appellant, being factually incorrect, is not Contention of the appellant, being factually incorrect, is not Contention of the appellant, being factually incorrect, is not acceptable. v. The appellant argued that the provision v. The appellant argued that the provisions of section 40A(2)(b) s of section 40A(2)(b) are at par the provisions of section 13(1)(c) and hence are at par the provisions of section 13(1)(c) and hence are at par the provisions of section 13(1)(c) and hence exemption cannot be denied. In this regard it is mentioned exemption cannot be denied. In this regard it is mentioned exemption cannot be denied. In this regard it is mentioned that in the provisions of section 40A(2)(b) it is mentioned that that in the provisions of section 40A(2)(b) it is mentioned that that in the provisions of section 40A(2)(b) it is mentioned that disallowance is to be made where payment is made to t disallowance is to be made where payment is made to t disallowance is to be made where payment is made to the relative party if such expenditure is excessive or unreasonable relative party if such expenditure is excessive or unreasonable relative party if such expenditure is excessive or unreasonable "having regard to the fair market value of the goods, service or "having regard to the fair market value of the goods, service or "having regard to the fair market value of the goods, service or facilities". As against this, no such words are appearing in the facilities". As against this, no such words are appearing in the facilities". As against this, no such words are appearing in the provisions of section 13(1)(c), invoked by the assessing of provisions of section 13(1)(c), invoked by the assessing of provisions of section 13(1)(c), invoked by the assessing officer and hence the argument of the appellant is misplaced. and hence the argument of the appellant is misplaced. and hence the argument of the appellant is misplaced. Accordingly, in view of the discussion as above, Ground Nos. Accordingly, in view of the discussion as above, Ground Nos. Accordingly, in view of the discussion as above, Ground Nos. 1, 2 & 3 of appeal are dismissed. 1, 2 & 3 of appeal are dismissed. vi. With regard to Grounds No. 4, 5 & 6, appellant submitted vi. With regard to Grounds No. 4, 5 & 6, appellant submitted vi. With regard to Grounds No. 4, 5 & 6, appellant submitted that the A0 has disallowed the expenses that the A0 has disallowed the expenses without issuing any without issuing any show cause on the same and without any discussion with show cause on the same and without any discussion with show cause on the same and without any discussion with material finding to justify the disallowance. It was stated that material finding to justify the disallowance. It was stated that material finding to justify the disallowance. It was stated that the disallowance is arbitrary being 100% of the expenses. the disallowance is arbitrary being 100% of the expenses. the disallowance is arbitrary being 100% of the expenses. This contention of the appellant is correct since in the This contention of the appellant is correct since in the This contention of the appellant is correct since in the assessment order the AO has simply mentioned that these ssessment order the AO has simply mentioned that these ssessment order the AO has simply mentioned that these expenses are not incurred for earning of income, therefore, expenses are not incurred for earning of income, therefore, expenses are not incurred for earning of income, therefore,

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same are disallowed.No further reasons have been recorded same are disallowed.No further reasons have been recorded same are disallowed.No further reasons have been recorded by the AO.Accordingly, AO is directed to verify the nature of by the AO.Accordingly, AO is directed to verify the nature of by the AO.Accordingly, AO is directed to verify the nature of these expenses item these expenses item-wise and after recording a finding, ise and after recording a finding, disallow only those expenses which are not incurred for disallow only those expenses which are not incurred for disallow only those expenses which are not incurred for earning of income. These grounds of appeal are, therefore, earning of income. These grounds of appeal are, therefore, earning of income. These grounds of appeal are, therefore, partly allowed. partly allowed.” 8. Before us, the Ld. Counsel of the Before us, the Ld. Counsel of the assessee file filed a Paper Book containing pages 1 to 12 containing pages 1 to 123 and submitted that certain documents as 3 and submitted that certain documents as under have been filed as additional evidence as same could not be under have been filed as additional evidence as same could not be under have been filed as additional evidence as same could not be submitted before the lower authorities: the lower authorities:

8.2 He further submitted that for invoking section 13(1)(c) of the He further submitted that for invoking section 13(1)(c) of the He further submitted that for invoking section 13(1)(c) of the Act theLd AO is required is required to justify the reasonable to justify the reasonableness of the payment made to specif to specified persons. The section 13(1)© is . The section 13(1)© is peri materia with section 1 materia with section 140A(2)(b) of the Act and therefore, he was 0A(2)(b) of the Act and therefore, he was required to ascertain whether the payments made were exceeding required to ascertain whether the payments made were exceeding required to ascertain whether the payments made were exceeding the fair market value of the services rendered. The Ld. Counsel the fair market value of the services rendered. The Ld. Counsel the fair market value of the services rendered. The Ld. Counsel

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further referred to page 16 and 17 of the Paper Book and submitted ed to page 16 and 17 of the Paper Book and submitted ed to page 16 and 17 of the Paper Book and submitted that the Assessing Officer and Ld. CIT(A) has merely compared that the Assessing Officer and Ld. CIT(A) has merely compared that the Assessing Officer and Ld. CIT(A) has merely compared consultancy fees paid to trustees with the total fees paid for the paid to trustees with the total fees paid for the paid to trustees with the total fees paid for the year and they have not given due year and they have not given due weightage to the qualification the qualification experience, duties and responsibilities of the trustees vis and responsibilities of the trustees vis and responsibilities of the trustees vis-à-vis other consultants employed by the assessee. He submitted that other employed by the assessee. He submitted that other employed by the assessee. He submitted that other consultants employed by the assessee were consultants employed by the assessee were not only involved in only involved in teaching, while trustees while trustees were not only engaged in teaching but were were not only engaged in teaching but were responsible for management esponsible for management and administration activities of the administration activities of the trust for attainment of its pages. The Ld. Counsel referred that Mr. trust for attainment of its pages. The Ld. Counsel referred that Mr. trust for attainment of its pages. The Ld. Counsel referred that Mr. M X Correra and Mr. Mr. Dayanand Shirsathwere visiting facult were visiting faculty, to whom fees were paid only paid only for part of the year and hence compa part of the year and hence comparison of the fees paid to them and fees paid to the trustees was not of the fees paid to them and fees paid to the trustees of the fees paid to them and fees paid to the trustees relevant. The Ld. Counsel further submitted that identical amount The Ld. Counsel further submitted that identical amount The Ld. Counsel further submitted that identical amount of salary paid for assessment year 2010 of salary paid for assessment year 2010-11 has been allowed by the 11 has been allowed by the Assessing Officer. The Ld. Counsel further submitted that the Assessing Officer. The Ld. Counsel further submitted t Assessing Officer. The Ld. Counsel further submitted t Assessing Assessing Officer Officer cannot sit in armchair chair of of a a businessmen/institution for deciding the amount of expenditure. In businessmen/institution for deciding the amount of expenditure businessmen/institution for deciding the amount of expenditure support of his contention support of his contention, he relied on the decision of Hon’ble he relied on the decision of Hon’ble Karnataka Karnataka Karnataka High High High Court Court Court in in in the the the case case case of of of CIT(Exemption) CIT(Exemption) CIT(Exemption) v. v. v. KrupannidhiEducation Trust in 441 ITR 154. ion Trust in 441 ITR 154.

8.3 Regarding reasonableness of rent paid to trustees for the Regarding reasonableness of rent paid to trustees for the Regarding reasonableness of rent paid to trustees for the building, workshop,playground ,playground of the institute, the Ld. Counsel the Ld. Counsel referred to page 14 of the Paper Book and submitted that old referred to page 14 of the Paper Book and submitted that referred to page 14 of the Paper Book and submitted that

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premises of the institute ha premises of the institute have been shifted to the current current premises owned by trustees located owned by trustees located atvillage Kalote, Taluka Taluka Khalapur, District, Raigarh, after due approval after due approval /confirmation from the confirmation from the Ministry of Shipping Ministry of Shipping Transport and Highways, Mumbai. He further Transport and Highways, Mumbai. He further referred to page 36 of the Paper referred to page 36 of the Paper Book and submitted that the rent Book and submitted that the rent paid to trustees for the paid to trustees for the current premises of the institute premises of the institute was much lower than the rent which was paid to the earlier landlord namely lower than the rent which was paid to the earlier landlord namely lower than the rent which was paid to the earlier landlord namely M/s Mountview Club and Resort Pvt. Ltd. He submitted that rent M/s Mountview Club and Resort Pvt. Ltd. He submitted that rent M/s Mountview Club and Resort Pvt. Ltd. He submitted that rent paid per annum for use of per annum for use of the building of M/s Mountview Club and Mountview Club and Resort Pvt. Ltd. was Resort Pvt. Ltd. was Rs. 42.66 per squ. feet, whereas rent per whereas rent per annum for use of the existing building is only annum for use of the existing building is only Rs. Rs. 8.18 per sq. ft. The Ld. Counsel accordingly submitted that comparison of rent The Ld. Counsel accordingly submitted that comparison of rent The Ld. Counsel accordingly submitted that comparison of rent computed by the Assessi computed by the Assessing Officer is without any basis or ng Officer is without any basis or comparative instances. According to the Ld. Counsel, rent paid to comparative instances. According to the Ld. Counsel, rent paid to comparative instances. According to the Ld. Counsel, rent paid to trustees of the assessee trustees of the assessee was lower than rend paid to unrelated lower than rend paid to unrelated party. Further Regarding rent paid to M/s Tara party. Further Regarding rent paid to M/s Tara Meera Meera Education Trust for office premises ( Trust for office premises (Rs. 13,75, 000/-) the Ld. Counsel ) the Ld. Counsel submitted that rent paid by the assessee to Tara submitted that rent paid by the assessee to Tara Meera Meera Education Trust was lower as compared to the rent paid by M/s Tara Meera Trust was lower as compared to the rent paid by M/s Tara Trust was lower as compared to the rent paid by M/s Tara Education Trust to unrelated party. He submitted that the Education Trust to unrelated party. He submitted that the Education Trust to unrelated party. He submitted that the Assessing Officer has not brought on r Assessing Officer has not brought on record any comparative ecord any comparative instance to demonstrate that payment to M/s Tara Meera instance to demonstrate that payment to M/s Tara instance to demonstrate that payment to M/s Tara Education Trust is unreasonable. Regarding the Modular Course Education Trust is unreasonable. Regarding the Modular Course Education Trust is unreasonable. Regarding the Modular Course fees paid to M/s Tara M/s Tara Meera Education Trust of Rs.40,90,000/ Education Trust of Rs.40,90,000/-,the

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Ld. CIT(A) referred to the invoices raised by Tara Ld. CIT(A) referred to the invoices raised by Tara Meera Meera Education Trust on the assessee Trust on the assessee , which are available on page 110 and 111 of available on page 110 and 111 of the Paper Book and submitted that rate charged by the Tara Meera the Paper Book and submitted that rate charged by the Tara the Paper Book and submitted that rate charged by the Tara Education Trust was was lower as compared to rate charged to the compared to rate charged to the outsider. Regarding the bus rent paid to M/s Ta outsider. Regarding the bus rent paid to M/s Tara Meera Meera Education Trust of Rs.1,15,000/ Trust of Rs.1,15,000/-, the assessee referred to ledger account of the assessee referred to ledger account of the bus hire charges in the books of the assessee charges in the books of the assessee, which has been filed as additional evidence additional evidence before us (Paper Book page 114). The before us (Paper Book page 114). The Ld. Counsel submitted that bus rent paid to M/s Tara Meera Ld. Counsel submitted that bus rent paid to M/s Tara Ld. Counsel submitted that bus rent paid to M/s Tara Education Trust was was lower as compared bus rent paid to unrelated lower as compared bus rent paid to unrelated party. He further submitted that the Assessing Officer has not party. He further submitted that the Assessing Officer has not party. He further submitted that the Assessing Officer has not brought on record any comparati brought on record any comparative instance to demonstrate that ve instance to demonstrate that payment of bus rent to M/s Tara payment of bus rent to M/s Tara Meera Education Trust was Education Trust was unreasonable. In view of the above arguments, the Ld. Counsel of unreasonable. In view of the above arguments, the Ld. Counsel of unreasonable. In view of the above arguments, the Ld. Counsel of the assessee submitted that there is no violation on the part of the the assessee submitted that there is no violation on the part of the the assessee submitted that there is no violation on the part of the trust for satisfying the conditi the conditions specified u/s 13 of the Act and ons specified u/s 13 of the Act and the order of the Ld. CIT(A) on the issue in dispute might be set aside order of the Ld. CIT(A) on the issue in dispute might be set aside order of the Ld. CIT(A) on the issue in dispute might be set aside and exemption u/s 11 of the Act should be restored to the assessee. and exemption u/s 11 of the Act should be restored to the assessee. and exemption u/s 11 of the Act should be restored to the assessee. Regarding additional ground raised the Ld. Counsel of the assessee Regarding additional ground raised the Ld. Counsel of the assessee Regarding additional ground raised the Ld. Counsel of the assessee submitted that the same are being consequent upon granting relief the same are being consequent upon granting relief the same are being consequent upon granting relief in Ground No. 1.1 of the appeal. Ground No. 1.1 of the appeal.

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payments made or the consul payments made or the consultancy fee / rent paid rent paid is in excess of what could have reasonably what could have reasonably been paid for such services. paid for such services.

10.1 Regarding the ‘consultation fee consultation fee’ paid to trustees paid to trustees, the Assessing Officer has worked out per hour fee paid to the trustees but similar Officer has worked out per hour fee paid to the trustees but similar Officer has worked out per hour fee paid to the trustees but similar analysis of payment made per hour to visiting faculties was not analysis of payment made per hour to visiting faculties analysis of payment made per hour to visiting faculties been made out before the Ld CIT(A) before the Ld CIT(A). Before us the assessee has Before us the assessee has submitted such an analysis for first time. Re submitted such an analysis for first time. Relevant analysis is levant analysis is reproduced as under: reproduced as under:

10.2 We find that this analysis is not supported by any We find that this analysis is not supported by any We find that this analysis is not supported by any documentary evidence and thus it need verification at the end of the documentary evidence and thus it need verification at the end of the documentary evidence and thus it need verification at the end of the

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Assessing Officer. Further, t Assessing Officer. Further, though the Ld. Counsel of the assessee hough the Ld. Counsel of the assessee has submitted that the trustees has submitted that the trustees have rendered services of rendered services of management and administration also management and administration also but no such evidences have no such evidences have been brought in record. been brought in record. In our opinion, the Assessing Officer has In our opinion, the Assessing Officer has not carried out sufficientexerci sufficientexercise for finding out arm’s length price for finding out arm’s length price of consultancy services properly. The Assessing Officer services properly. The Assessing Officer services properly. The Assessing Officer was required to examine and ascertain services rendered by the three trustees in ascertain services rendered by the three trustees in ascertain services rendered by the three trustees in the light of the documentary evidence submitted by the assessee the light of the documentary evidence submitted by the assessee the light of the documentary evidence submitted by the assessee and then decide the arm’s length price of the consultancy fees he arm’s length price of the consultancy fees he arm’s length price of the consultancy fees paidto trustees of the assessee. trustees of the assessee.

10.3. Regarding Regarding Regarding the the the rent rent rent paid paid paid to to to the the the trustees trustees trustees for for for building/workshop/playground etc. also the Assessing Officer has building/workshop/playground etc. also the Assessing Officer has building/workshop/playground etc. also the Assessing Officer has made comparison with with that of old premises only. The compariso The comparison of rent can be made with similar property in same area only and rent can be made with similar property in same area only and rent can be made with similar property in same area only and services of expert should have been utilised. services of expert should have been utilised. In our opinion, the Ld. In our opinion, the Ld. Assessing Officer should have referred the matter Assessing Officer should have referred the matter to the valuation to the valuation officer for ascertaining ing reasonableness or fair mark reasonableness or fair market value of the rent. Similarly, rent paid for office for M/s Tara rent. Similarly, rent paid for office for M/s Tara Meera Meera Education Trust also should have been referred to a valuation officer. Trust also should have been referred to a valuation officer. Trust also should have been referred to a valuation officer. Regarding the bus rent, the assessee has furnished additional Regarding the bus rent, the assessee has furnished additional Regarding the bus rent, the assessee has furnished additional evidence ledger account of M/s Tara ledger account of M/s Tara Meera Education Trust Education Trust wherein it is claimed that M/s Tara wherein it is claimed that M/s Tara Meera Education Trust has Education Trust has paid lower amount for bus rent. The Ld. Counsel of the assessee paid lower amount for bus rent. The Ld. Counsel of the assessee paid lower amount for bus rent. The Ld. Counsel of the assessee was asked to furnish invoices issued by the relevant party. was asked to furnish invoices issued by the relevant party. was asked to furnish invoices issued by the relevant party.

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However, same were were not readily available with available with ld Counsel. Regarding the modular course fee also the Assessing Officer was Regarding the modular course fee also the Assessing Officer Regarding the modular course fee also the Assessing Officer required to analyze and ascertain the reasonableness of additional required to analyze and ascertain the reasonableness of additional required to analyze and ascertain the reasonableness of additional evidence submitted by the assessee and the Assessing Officer was evidence submitted by the assessee and the Assessing Officer was evidence submitted by the assessee and the Assessing Officer was required to carry out required to carry out exercise for determining arm’s le arm’s length price for comparison of office office rent, modular fee, bus rent bus rent etc., and then decide the issue of violation of section 13(1)(c ) and 13(2) of the Act. decide the issue of violation of section 13(1)(c ) and 13(2) of the Act. decide the issue of violation of section 13(1)(c ) and 13(2) of the Act.

10.4 In the facts and circumstances and discussion above, we In the facts and circumstances and discussion above, we In the facts and circumstances and discussion above, we feel it appropriate to restore this issue it appropriate to restore this issue back to the file of the Ld. back to the file of the Ld. Assessing Officer for deciding afresh. Assessing Officer for deciding afresh. The assessee shall be at shall be atliberty to file all the necessary documentary evidence in support of its to file all the necessary documentary evidence in support of its to file all the necessary documentary evidence in support of its claim that payments made are at arm’s length price i.ea transaction claim that payments made are at arm’s length price claim that payments made are at arm’s length price between independent part between independent parties. After examination of the documentary ies. After examination of the documentary evidence submitted by the assessee if the Assessing Officer is of the evidence submitted by the assessee if the Assessing Officer is of the evidence submitted by the assessee if the Assessing Officer is of the opinion that further inquiries are required then he may carry out opinion that further inquiries are required then he opinion that further inquiries are required then he inquiries as deemed fit in the facts and circumstances of the case. as deemed fit in the facts and circumstances of the case. as deemed fit in the facts and circumstances of the case. The ground No. 1.1 of the appeal of the assessee is accordingly No. 1.1 of the appeal of the assessee is accordingly No. 1.1 of the appeal of the assessee is accordingly allowed for statistical purposes. Since, the additional ground is allowed for statistical purposes. Since, the additional ground is allowed for statistical purposes. Since, the additional ground is consequential, therefore consequential, therefore, same is also allowed for statistical , same is also allowed for statistical purposes.

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raised in assessment year 2012 raised in assessment year 2012-13 and 2013-14 are decided 14 are decided mutatis mutandis.

Order pronounced in the open Court on nounced in the open Court on 23/06/2023. /06/2023. Sd/- Sd/ Sd/- Sd/ (VIKAS AWASTHY VIKAS AWASTHY) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 23/06/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai