SCHOLARS EDUCATION TRUST OF INDIA,JAIPUR vs. CIT EXEMPTION, JAIPUR , JAIPUR

(i) (b) Rent paid for property 12/492-493, Indira Nagar, Lucknow Directions of the ITAT in first round: The operative part of discussion on this issue has been dealt in para 4.4 of the ITAT order dated 29.05.2017, which has been reproduced as under: “4.4 The next issue is regarding rent payment in respect of property at 12/493, Indira Nagar, Sector 9, lucknow, the assessee society has paid rent of Rs. 3,99,600/- to Ms. Priyakanksha Mishra, daughter of Sh. Sangam Mishra, who is the trustee of the assessee trust. The question for consideration is whether the property has been taken on rent for the purposes of the assessee trust and secondly, whether rent payment is commensurate with the rent prevailing in the market for the similar property. In this regard, the ld AR has submitted that this premise is used for providing residence facility to one office staff Mr. Vinay Pathak and used for stay of trustees/ principals and other senior staff members Scholars Education Trust of India, jaipur when they visit Lucknow for monitoring the activities of the school, thus, saving the cost that would have been incurred had they stayed in the hotel. Per contra, as per ld CIT(E), no supporting documentary evidence has been furnished for the use of the said property for the purposes of objects of the assessee society. In respect of quantum of rent paid, the ld AR has submitted that a lease deed dated 19.10.2012 was executed whereby the fair rental value of the premises was determined from the registered valuer at Rs. 38,500/- per month against which assessee has paid rent at the rate of Rs. 33,300/- per month in the financial year 2012-13. As per ld CIT(E), the valuation report is not reliable as the same is undated. In our view, where the Revenue has some prima facie concern regarding the reliability of the valuation report, it can get the rent valuation carried out through its own valuation officers which has not happened in the instant case. In absence of sufficient material on record, we deem it fit to set-aside the matter to the file of the ld CIT(E) to examine the same a fresh taking into consideration the valuation report submitted by the assessee society and to carry out independent valuation through its valuation officers with an appropriate opportunity to the assessee society. The assessee shall be at liberty, to support its contentions by bringing appropriate evidence on record, to the satisfaction of the ld CIT(E).”

Findings of Ld. CIT(E): This property is a bungalow on the two plots 12/492 & 12/493 actually 21. situated in Sector 12, Indira Nagar, Lucknow and is opposite to the Central Academy School which falls in Sector-9, Indira Nagar, Lucknow. The assessee society has paid rent of Rs. 3,99,600/- to Ms. Priyankansha Mishra D/o Sh. Sangam Mishra for this property. The assessee trust has not furnished the requisite evidence/documents to substantiate it’s contention. Further, assessee has claimed that the property was provided as rent free accommodation to few staff members from whom affidavits were obtained.

Based on physical verification/report of Inspector, it is noted that the 22.

Scholars Education Trust of India, jaipur property12/493 & 12/492, Indira Nagar, Sector 12, Lucknow is actually one premise (both are one premise, not separate) in which two plots are merged and made into one and constructed a two-storey lavish bungalow on the said plots. Further, it is also observed that the premise is not being used for rent purpose. It was neither given as Rent free accommodation to Vinay Pathak, Sh. Ghanshyam Mishra & his family or Dhirendra Nath Tripathi & his family or any other staff member nor it is being used as guest house. Thus, the contention of the assessee regarding the use of the property is found not to be true. On the contrary, it is observed that the property shown in the name of Miss Priyankansha Mishra whereas the said property is actually used by Sh. Sangam Mishra, the trustee of M/s Scholar Education Trust of India for personal purpose. Thus, the rent is paid to the daughter of the trustee and the benefit in form of the use of the property is given to the trustee Sangam Mishra without charging any fees/rent from him. Thus, the fund of the assessee trust is being misused and this expense on rent cannot be treated as for the sole purpose of education. Based on above, it is evident that the activity of the assessee is not being carried out in accordance with certain conditions subject to which the approval wasgiven to the assessee u/s 10(23C)(vi).

Assessee’s contentions:

Scholars Education Trust of India, jaipur This premise is owned by Ms. Priyakansha Mishra, daughter of Shri 23. Sangam Mishra, trustee. On this plot, a building is constructed comprising of ground floor and first floor having constructed area of 1754 sq. ft. This property is in front of Indira Nagar, Lucknow school of the assessee (as also recorded by the Inspector’s 2nd report dated 05.08.2025). This premise is used for providing residence facility to one office staff Mr. Vinay Pathak and used for stay of trustees/ principals and other senior staff members when they visit Lucknow for monitoring the activities of the school, thus saving the cost that would have been incurred had they stayed in the hotel. Thereafter two staff namely Ghanshyam Mishra & Dhirendra Nath Tripathi started residing in the premises. Affidavit of Shri Ghanshyam Mishra and Dhirendra Nath Tripathi declaring that both are employees of the school run by the assessee trust and that assessee trust has provided first floor of premise situated at 12/493, Indira Nagar as rent free accommodation to them since last 8 years. This affidavit is filed in course of assessment proceeding for AY 2018-19. No addition in respect of this property was made in any previous and subsequent assessment years.

This property was taken on rent by the assessee w.e.f. 01.04.2009 at a 24. monthly rent of Rs. 25,000/- with increase of rent at the rate of 10% per year. Accordingly, the rent was paid to her from financial year 2009-10 and onward.

Scholars Education Trust of India, jaipur Thereafter, a lease deed dated 19.10.2012 was executed to be effective from 01.04.2012 whereby the fair rental value of the premises was determined from the registered valuer at Rs.38,500/- per month against which assessee has paid rent at the rate of Rs.33,300/- per month in the financial year 2012-13. In the withdrawal order it was observed that the Valuation report is undated, which is ex facie incorrect. In the valuation report dated 10/04/2012,Shri Ajay Kumar Srivastava i.e. registered valuer has specifically mentioned that the property was inspected by him on 06.03.2012 to assess the rental value as on 10.04.2012.

From the above, it is clear that rent paid to Priyakansha Mishra, daughter 25. of trustee for their property is also used for activity of the trust and in pursuit of its objects is reasonable and therefore no undue benefit is passed on to the trustee. It is further submitted that the assessee has not claimed any lodging or boarding expenses of trustees with regard to their visits in Lucknow to further establish the bona fides of the assessee.

(ii) Travelling Expenses to Aryan Mishra Directions of the ITAT in first round: The operative part of discussion on this issue has been dealt in para 4.6 of the ITAT order dated 29.05.2017, which has been reproduced as under: “4.6 Regarding travel expenditure of Aaryan Mishra, the assessee society has contended that he is grandson of the uncle of Dr. Sangam Mishra and he does not fall in the Scholars Education Trust of India, jaipur definition of relative u/s 2(41) & 13(3) of the Act. It was further contended that he was sent to Lucknow for participation in cultural programme of the Indira Nagar School, Lucknow. Per contra, the ld CIT(E) has observed that he is son of Shri Sangam Mishra and the assessee society has not furnished any documentary evidence to substantiate its claim and detailed reasons of journey, supporting documents of journey etc. In view of such counter- claims and in absence of sufficient material on record, the matter is set- aside to the file to ld CIT(E) to examine the same a fresh after providing reasonable opportunity to the assessee.”

Findings of Ld. CIT(E): Next issue is for the travel expenses borne by the assessee society of Mr.

The assessee claiming to be working for charitable purpose and not for the 27. purpose of profit making must justify any expense small or big with documentary evidences as to how, the expense was prudent and necessary for the work of the assessee society. Thus, this expense on Aryan Mishra is established to be not for the charitable purpose and is for the benefit of the family member of Assessee’s contentions: The reimbursement of Rs.18,429/- as travel expenses incurred by Mr.

Pertinently, Mr. Aaryan Mishra is ex-facie not a relative (asdefined under 29. Section 2(41) of the Act) of any trustee of the Assessee Society as it is undisputed that he is not the husband, wife, brother, sister, or lineal ascendant/ descendant of any trustee of the Assessee-Society. It is clarified that he is the grandson of the uncle of the trustee and not the trustee, as incorrectly referred to by the Ld. CIT(E). Accordingly, the subject expenses incurred are not only bonafide but also do not contravene the provisions of Section 13(3)(d)of the Act. Thus, the above facts abundantly make it clear that the said person-Aryan Mishra is not related to the trustee as per Section 2(41) of the Act and hence there is no violation of Section 13(3) of the Act.

(iii) Funds not kept in the form or modes specified in Section 11(5) of the Act Directions of the ITAT in first round: The operative part of discussion on this issue has been dealt in para 4.7 to 4.9 of the ITAT order dated 29.05.2017, which has been reproduced as under:-

Scholars Education Trust of India, jaipur “4.7 Regarding advance of Rs 3,54,80,000 made to Saluja Construction Pvt Ltd, it is not disputed that the said advance was towards purchase of a flat at Safdarjung Enclave, New Delhi and a sale deed has since been executed in the name of the assessee trust on 20.11.2013. The investment of Rs 3,54,80,000 is thus made in the purchase of said flat during the year under consideration. The ld AR submitted that investment in an immovable property is one of the prescribed modes of investment of funds in compliance with the 3rd proviso of section 10(23C)(vi) read with section 11(5)(x) of the Act and the subject investment in purchase of a flat at Safdarjung Enclave, New Delhi is thus in compliance with the said provisions. We have no hesitation in agreeing to the said contention of the ld AR. However, the question that remains is whether the said investment in purchase of a flat at Safdarjung Enclave, New Delhi was for the purposes of objects of the trust for imparting education or for the personal use/benefit of the trustees. There should be a reasonable nexus between the objects of the imparting education and the said investment as well as its ultimate utilisation. Where the investment in immovable property is envisaged initially for the purposes of the assessee trust and later on, it is found that the immovable property is made available and utilised for personal use/benefit of the trustees without charging adequate rent and other related compensation, it would still be a case where the property of the assessee trust is used and applied for benefit of the trustees. As per the ld CIT(E), going by the specifications of the flat, it indicates that the flat has been purchased for personal use of trustees and not for the use of staff as no trust will invest such a high amount of Rs. 3,80,00,000/- for a flat with such luxury facilities for the staff purpose only. Per contra, the ld AR contended that this flat is used as guest house of the society and various staff members & trustee whenever visit Delhi for CBSE work, training programme, conferences & other allied work stay in the flat. Besides this, two staff members for certain regulatory work are sitting at this office. During the course of hearing the ld CIT(DR) drawn our reference to the balance sheet of the assessee trust as on 31.3.2014 available as APB 108 and submitted that the assessee trust already has an existing flat (No. 4/149) at the same location ie, at Safdarjung Enclave and assessee trust has not demonstrated the necessity of buying another flat (No. 4/150) adjacent to the said flat. It is thus a fact that there are two adjacent flats in the name of the assessee trust in the same locality in New Delhi. There are claims and counter-claims regarding the purpose and utilisation of the said flats. However, what we find that these are mere contentions without any demonstrable evidence on record to support the case of either of the parties. In absence of sufficient material, we deem it fit to remand this matter to the file of the ld CIT(E) to examine the same a fresh in light of above discussions and by bringing on record appropriate evidence. The assessee shall be at liberty, to support its contentions by bringing appropriate evidence on record, to the satisfaction of the ld CIT(E). 4.8 Regarding advance of Rs 35,00,000 given to Salasar Overseas Pvt Ltd, the assessee trust has submitted that the said advance was given in the year 2005 towards purchase of Scholars Education Trust of India, jaipur 5044 sq. yd. land at Narayan Vihar, Ajmer Road, Jaipur to set up a school at Jaipur. Provisional allotment letter was issued on 26.03.2011 having Plot No. GH-1 & GH- 2 in the name of assessee trust. This advance is transferred to the land account in the Balance Sheet for year ending 31.03.2014. At present the scheme is under development by the developer and after completion of the same, the assessee in planning to bring a school at this place. Per contra, the Ld. CIT(E) has observed that from the provisional allotment letter dated 26.03.2011, it is not verifiable that the said investment was made for the objects of the trust. Further, the ld CIT(E) observed that the scheme under which subject land falls was originally nijikhatedari scheme of agricultural land and without converting the status of plot so purchased from agricultural to institutional, the property cannot be used for the objects of the trust. In our view, these are valid observations which have been raised by the ld CIT(E) and the same should be looked into. From perusal of the provisional allotment letters dated 26.03.2011 in respect of Plot No. GH- 1 & GH-2 and the provisional site plan available at APB 75-91, it is not clear that the said plots are for the purpose of setting up any education school/institution and earmarked for such purposes. The ld AR has submitted that scheme under which the subject plots have been provisionally allotted to the assessee trust is already approved by JDA. The said approval granted by the JDA will actually help determine whether such plots are earmarked for education purposes but the said approval is not on record. The matter therefore need further examination and the same is also set-aside to the file of the ld CIT(E) to examine the same a fresh in light of above discussions and by bringing on record appropriate evidence. The assessee shall be at liberty, to support its contentions by bringing the approval granted by the JDA to the scheme under which the plots have been provisionally allotted and other appropriate evidence on record, to the satisfaction of the ld CIT(E). 4.9 Now coming to matter relating to advance of Rs 30 lacs given to Shalu Constructions in the year 2009-2010 towards purchase of flat at New Delhi. It was submitted by ld AR that because of delay, the builder did not give the flat in time and therefore, the society purchased the flat from another firm M/s Saluja Construction Pvt. Ltd and the society is negotiating with the builder for refund of amount. The ld CIT(E) has observed that the assessee has not furnished any evidence regarding original agreement with the said firm for purchase of the flat or with regard to the cancellation of the said agreement and recovery of the said advance. In our view, these are relevant observations of the ld CIT(E) to determine the purpose for which the advance was originally given. Since we have set- aside the other matters as discussed above, the assessee is granted one more opportunity to bring on record relevant evidence in support of its contentions. The matter is accordingly set-aside to the file of the ld CIT(E) to examine the same a fresh in light of above discussions.”

Findings of the Ld. CIT(E):

Scholars Education Trust of India, jaipur Advance to M/s. Saluja Construction Pvt. Ltd - Advance of 3,54,80,000/- was made to M/s Saluja Construction Pvt. Ltd. 30. towards purchase of flat at Safdarjung Enclave, New Delhi and a sale deed has since been executed in the name of the assessee trust on 20.11.2013.The assessee referred that these are investments made u/s11(5). However, section 11(5) becomes applicable when the accumulated money referred in section 11(2)(b) is set aside for the purpose of investments/deposits. The contention of the assessee that the investments have been made as per the objects of the assessee society is factually incorrect and misleading. As regards, the investment for the flats in Safdarjung Enclave, New Delhi, it is established that the same is not for the sole educational purpose of the assessee and cannot be construed as charitable purpose as the same property has been used by the trustee Shri Sangam Mishra for his personal benefit.

The investment in this property and the use of this property is not as per 31. the objects of the society and are not at all related to educational purpose of the society. The contention of the assessee that the investment in the property is in the name of assessee trust and are part of the expansion activities of the society. It is established that the property at Safdarjung Enclave was used for personal benefit of Shri Sangam Mishra & Family. The assessee failed to establish with Scholars Education Trust of India, jaipur documentary evidence that it was to be used as a Guest House. On the contrary, the on spot enquiry revealed that the earlier property/ Residential Flat B-4/150-1, Safdarjung Enclave, New Delhi has been interconnected with the new property B- 4/149 in the same building without obtaining required approvals. The property was never rented out nor ever used as guest house.

Based on above, it is not established that the assessee trust is operating its 32. activities solely for the educational purposes and not for purposes of profit.

Investment of Rs. 35, 00,000/- to Salasar Overseas Pvt. Ltd. - As regards the investment of 35 lacs with Salasar Overseas, the CIT(E) in 33. his order dated 03.01.2017 has observed that from the provisional allotment letter dated26.03.2011, it is not verifiable that the said investment was made for the objects of the trust. From perusal of the provisional allotment letters dated 26.03.2011 in respect of Plot No. GH-1 & GH-2 and the provisional site plan available at APB 75-91, it is not clear that the said plots are for the purpose of setting up any education school/institution and earmarked for such purposes.

The assessee has failed to produce the approval of JDA for the 34. commercial/institutional use of the property even during the set aside proceedings. Therefore, assessee failed to produce Attested copies of minutes for purchase of above-said land, Jaipur Development Authority approval regarding the use of said Scholars Education Trust of India, jaipur land where it had been earmarked for institutional purposes and transaction entries in bank account specifying the payments made for the purchase of plot. It is therefore, it is not established that the assessee trust acted solely for the educational purposes and not for purposes of profit. Thus, this application cannot be held to the for the charitable purpose.

Advance of Rs. 30 lakhs to Shalu Constructions – Assessee claims it as an advance for land and has not provided copy of 35. agreements for purchase of land and subsequent agreements for cancellation of the deal thereof. Providing of loans to3rd parties with or without interest is beyond the objects of the assessee trust and in no way can be treated as invested for the sole purpose of education which is essential condition for the grant of approval u/s 10(23C)(vi) of the Act.

The judgment relied by the assessee in the case of St. Peters Education 36. Society Vs. PCIT reported in 225 DTR (Chd. Trib.) 185 is distinguishable on facts. In that case, there was no proposal received from the Assessing Officer for rescinding of the approval under 10(23C)(vi). In the present case under consideration assessing officer during the assessment proceedings has noted gross violations by the society for thepersonal benefit of the trustee and his family thus had requested for the withdrawal of approval to the CIT(E).It is therefore, it is not Scholars Education Trust of India, jaipur established that the assessee trust acted solely for the educational purposes and not for purposes of profit. Thus, this a prefect case for the withdrawal of approval u/s 10(23C)(vi) of the IT Act, 1961.

Assessee’s contentions: Investments are made in pursuance to the charitable objects of the 37. Assessee-trust. The said investments are done as valid application of income within the frame work of Section 11(l) of the Act towards the objects of the Assessee-trust. Furthermore, no doubt is raised on the documentary evidences provided which establish that the said investments are owned in the name of the Assessee-trust and are part and parcel of the necessary expansion activity to provide better education to the masses as per its charitable and educational goals.

In this respect, reliance is placed on Managing Committee, Arya High 38. School CIT (Exemptions) (2018) 97 taxmann.com 656 (P&H HC); [SLP dismissed (2019)261 Taxman 450 (SC)] wherein it has been held that Purchase of land/buildings for expansion of school treated as proper application and that department cannot doubt such investments when they further educational purposes and no profit diversion is shown. Further reliance is placed on a recent decision of the Hon’ble Jurisdictional Rajasthan High Court in Chandigarh Manav Vikas trust C/o Chandigarh Hospital v.Chief Commissioner of Income Tax, Scholars Education Trust of India, jaipur Ayakr Bhawan [Neutral Citation: 2024: RJJD:10456-DB], wherein it has been held that mere generation and application of surplus cannot be considered as ground to deny the exemptions u/s 10(23C)(vi) of the Act.

That therefore, without considering the overall activities of the Assessee 39. trust, the Department cannot cherry pick expenses/investments incurred in due course of charitable activities and proceed to cancel the registration of the Assessee on said basis under Section 10(23C)(vi) of the Act; it stands established that the Assessee has not provided any benefit to the trustee nor the funds of the Assessee, been diverted for personal benefit or trustees or any third person and all investments made by the Assessee satisfy the modes specified u/s. 11(5) or the Act. It is an admitted fact not disputed by Ld. CIT(E), that these properties are owned by Trust and the investment is in permissible mode as defined in Section11(5). Inspector's report on Page 12 categorically states that these properties remain vacant and there are 2 caretakers who maintain the property on behalf of the trust, and the property is used by the Trustees whenever they visit Delhi because it is not in doubt that the Trust is having schools in Delhi and the entire NCR. There is no provision in law which prohibits a trust in buying a property out of trust funds and use it for the purposes of visits of the trustees and who are full time trustees of the Assessee and have no source of income Scholars Education Trust of India, jaipur whatsoever. When this is not in doubt that the trust runs around 12 schools and the Trustees are full time monitoring the activities and have no other income apart from salary for Trust, how it can be assumed that the Assessee is in violation of conditions of Section 10(23C)(vi) of the Act.

It would not be out of place to mention that there is no finding in any 40. proceedings that the Trust is not imparting education and that the Department has conveniently ignored that more than 85% of the gross receipts are being used for educational purposes which is not in doubt nor there is any iota of evidence to the contrary.

Findings: We have given a careful consideration to the above factual matrix, the 41. contentions raised by both the parties and pursued the material available on record. Firstly, regarding rent payment in respect of property 219/5, Sardarpura Udaipur we find that this bench in the first round of proceedings has already considered the aspect of rent free accommodation provided by assessee society to trustees to be not barred by the statute, provided that the transaction satisfies the test of reasonableness. We also observe that the Ld. CIT(E) has in the impugned order admitted that the excessiveness in terms of FMV was never the case of the Department, rather the utilisation of property taken on rent by assessee society Even on the issue of utilization of said property, we find that this bench 42. has given a finding in favor of the assessee as reproduced above, taking into consideration the fact that Mr. Sangam Mishra and Ms. Lily Mishra are on a full- time basis involved in managing the overall affairs of the assessee society in running multiple branches spread across various states and that such rent free accommodation is being provided to Mr. Sangam Mishra and Ms. Lily Mishra in the capacity of managing trustee and trustee respectively, in lieu of such services which cannot be faulted with and that the decision is at best left to the assessee society.

As regards the issue of extent of utilization remanded by this bench in the 43. first round, we find that the Delhi High Court in case of CIT(E) v. Hamdard Laboratories (India): [2025] 178 taxmann.com 420on similar facts held that no undue benefits were passed to specified persons u/s 13(3) of the Act, when properties were given to trustees as part of their employment with the assessee society, as under:-

“48. The CIT(A) found merit in respondent/assessee's claim that its case is not covered under Section 13(2) read with Section 13(3) of the IT Act as no undue benefits were passed on to the specified persons under Section 13(3) of the IT Act. CIT(A) stated Scholars Education Trust of India, jaipur that the facts as mentioned, make it clear that the trust is not providing any benefit to the trustees and there is no violation of Section 13(2) of the IT Act, in this regard. It noted the submission of the respondent/assessee that trustees are functioning in a dual capacity, i.e. as trustees and also as employees and their educational, technical qualifications and experience help the respondent/assessee in achieving a good turnover over a period of time. The respondent/assessee also submitted that the properties shown by the appellant in the screenshot were furnished or semi-furnished and were either independent houses or independent floors with covered area much larger than the covered area of the property at 25 Kautilya Marg and the comparison was not justified.

Even if the case of the Revenue is qua violation in terms of Section 13(1) 45. rws 13(3) of the Act, the same cannot form basis for withdrawal of exemption/ approval granted to a charitable trust/ society. Reliance in this regard is placed on the decision of the Chandigarh Bench of the Tribunal in case of ACIT (E) v. K.C.

9. We have duly considered the rival contentions and gone through the record carefully. The basic issue is, whether surplus funds of a charitable institution can be used for the purpose of other than objectives of the Trust. We are of the view that surplus funds of a charitable Institution who enjoys benefit of Section 11 and12, are not akin to surplus funds of a business house because for a business entity, after payment of taxes onits own income, it is its discretion where to use that funds. It can donate, it can gift, it can give loan withoutcharging interest, because Income Tax Department can never persuade any assessee to earn income or anotional income out of those surplus funds, but this principle is not applicable on the funds of a charitableInstitution. The Trust is not enjoying those funds as its own funds. It is being held in a fiduciary capicity. Inother words, in a representative capacity of charitable Institution. Thus, funds can never be used for any otherpurpose except for charitable activity. If it is surplus, accumulated after achieving the objects of the Society,then it is to be accumulated under Section 11(5) in a prescribed mode and if not applied in future years, it hasto suffer tax. There is no concept of surplus fund with a charitable Institution because charitable Institutionenjoys exemption on all those incomes which are applied for its objectives. Therefore, it is an incorrect standof the assessee. However, we find that a careful perusal of Section 13(1)(d), 13(1)(c), 13(2) and 13(3), it will reveal that the status of the Institution cannot be changed from 'charitable' to 'non charitable' Institution if a minor violation is there. Sub-clause (3) of Section 13 would provide that if undue benefit is being provided to any Institution or individual because of its proximity with the Management, then that undue benefit is to be brought to tax but Section 11 and 12 would not be denied to the overall Society/Institution. Therefore, the ld. CIT(A) has erred in not analytically examining the issue and the AO has erred in denying the exemption as a whole to the assessee. He ought to have examined more analytically what is the objective of making advance to any related person and then he ought to have worked out for any interest income can be allocated/assumed on such investment. It is also pertinent to note that AO cannot make addition of surplus over expenditure inthe Society. He has to grant benefit under Section 11 and 12. The only exception is disallowance of anyamount which was unduly extended by the assessee to the persons mentioned in clause 13(3).Therefore, wedeem it appropriate to set aside both the orders and relegate both the issues to the file of AO for freshadjudication. The observations made by us will not impair or injure the case of the AO. They will not causeany prejudice to the defence/explanation of the Scholars Education Trust of India, jaipur assessee. The observations are only with regard to bring thepointed issue at home. The AO will be at liberty to decide afresh in accordance with law.

The aforesaid view has also been upheld by coordinate benches of the 46. Tribunal in the following cases:

• ITO vs. Rajasthan Vikas Sansthan, [2024] 168 taxmann.com 157 (Jodhpur -ITAT); • Maharashtra Academy of Engineering & Educational Research vs. DCIT, Central Circle-1(1), Pune [2017] 88 taxmann.com 864 (Pune – ITAT)

• M/s. AudyogikShikshan Mandal vs. IT- Ward 8(1), Pune, [ITA No. 1712/PN/2007)(Pune - ITAT)

To the above effect, we hold in respect of issues regarding rent payment to 47. Ms. Priyakansha Mishra (daughter of trustee) in respect of property at 12/493 Indira Nagar, Lucknow and travelling expenses of Mr. Aryan Mishra, the denial of exemption if any, was to be limited to the extent of amounts diverted towards violation u/s 13(1) of the Act for the personal benefit of trustee/ family member of trustee and shall not result in the overall withdrawal of approval granted to the assessee u/s 10(23C) of the Act.

As regards rent payment to Ms. Priyakansha Mishra, we also observe that 48. the CIT(E) is not disputing the reasonableness of expenditure which is in accordance with the valuation report provided by the assessee and is forming part of records. With respect to the aforesaid expenditure incurred in furtherance of society objects, we concur with the submissions of the assessee that the said Scholars Education Trust of India, jaipur premises being opposite to the Lucknow branch of the school serves a crucial purpose of being a transit office, accommodation facility to staff members guest house etc., which is a common practice followed by schools having multiple branches. Further we find that the argument of the assessee is supported by affidavits of staff members who have been residing at the said premises which is unrebutted by the CIT(E) by conducting further inquiries therefrom. Even the pictures shared in the inspectors field inquiry report support the case of the assessee, whereby we find that the name plate bears ‘ACADEMY HOUSE’ above the same of the trustee which would have to be inferred to be in the capacity of the trustee of the assessee society. On the contrary, we find no evidence placed on record by the CIT(E) establishing the utilization of the said property in the personal capacity of Mr. Sangam Mishra as alleged, refuting the cogent material placed on record by the assessee.

Regarding the travel expense of Mr. Aryan Mishra, we find that this bench 49. has taken note of the fact that he is the grandson of the uncle of Mr. Sangam Mishra and hence does not qualify to be a relative in terms of Section 2(41) read with Section 13(3) of the Act. We find that the assessee society which is having educational objects is well within its rights to bear the cost of lodging/ boarding of meritorious children to participate in cultural events for the overall skill Scholars Education Trust of India, jaipur development of the children, which is in furtherance of the objects of the assessee society. We fail to concur with the view of the CIT(E) in withdrawing exemption for such reason. Accordingly, the impugned order passed by the CIT(E), Jaipur in respect of the above findings is perverse and contrary to the applicable provisions of the Act.

In this regard, the Ld. AR points out that the alleged violations seen 50. collectively are much less than 15% of the gross receipts allowed to be accumulated in terms of 3rd proviso to Section 10(23C)(vi) of the Act. The Ld. AR submits that the said accumulation is unfettered and not subject to any restrictions under the provisions governing exemption available to a charitable trust/ society u/s 10 and 11 of the Act.

The Ld. AR places reliance on the decision of the coordinate bench in case 51. of Jaipur Stock Exchange Ltd v. ITO: 6 SOT 811 (Jaipur), wherein it is held that there is no requirement under the Act for investment of accumulation of income in specified modes to the extent of 25 per cent of such income under section 11(1)(a) of the Act :

“5.We heard the rival submissions and perused the materials available onrecord. The ld. AR argued that 25 per cent of income under section 11(1)(a)is not required to be invested in the forms or modes specified insub-section 5 of section 11 of the Act. The ld. AR has relied upon variousjudgments.We are of the view that as per section 11(2) it is only 75 percent of the income referred to section 11(1)(a)or section 11(1)(b)

Scholars Education Trust of India, jaipur readwithExplanationto that sub-sectionis not applied or is not deemed to havebeen applied tocharitableor religious purposes in India during theprevious year but isaccumulated or set apart subject to the compliance ofconditions as referred in section 11(2)(a)and section 11(2)(b) ofthe Act. Inour opinion,therefore, there is no requirement under the Act forinvestment of accumulation of income in specified modes to the extent of25 per cent of suchincome under section 11(1)(a)of the Act. This viewfinds support in the decision ofS.RM.M.CT.M. TiruppaniTrustv.CIT (Inv.)[1998]230 ITR6361(SC) and the relevant para of this decision at page 642reads as under : "In the case ofAddl.CITv.ALNRaoCharitableTrust[1995]216 ITR 697,this Court considered the provisions of section 11(1)(a)in thelight ofsection 11(2) and held that section 11(2) does not in any manner restrictthe operation of section 11(1). The accumulated income which isexemptunder section 11(1)(a)need not be invested in Government securities. It isonly in respect of any additional accumulated income beyond25 per centthat if the assessee wants exemption of this additional accumulatedincome also, the assessee is required to invest the additionalaccumulatedincome in the manner laid down in section 11(2) after following theprocedure laid down therein.In the present case, the assessee is not claimingany benefit under section11(2) as it cannot; because in respect of this assessment year, theassesseehas not complied with the conditions laid down in section 11(2). Theassessee, however, is entitled to claim the benefit of section 11(1)(a).In thepresent case, the assessee has applied Rs. 8 lakhs forcharitablepurposes inIndia by purchasing a building which is to be utilized as ahospital. Thisincome, therefore, is entitled to an exemption under section 11(1). Inaddition, under section 11(1)(a),the assessee can accumulate25 per centof its total income pertaining to the relevant assessment year and claimexemption in respect thereof. Section 11(1)(a)does notrequire investmentof this limited accumulation in Government securities. The balanceincome of Rs. 1,64,210.03 constitutes less than 25 percent of the income ofthe assessment year 1970-71. Therefore, the assessee is entitled toaccumulate this income and claim exemption fromincome tax undersection 11(1)(a)." 6.In our view, the matter hasto be decided by the Assessing Officer inlight of the decisions of the Hon’ble Supreme Court in the case ofS.RM.M.CT.M. TiruppaniTrust(supra). Therefore, thematter is restored tothe file of the Assessing Officer to compute the taxable income as perdirection given above by providing reasonable opportunity to the assessee.” The Ld. AR further places reliance on the decision of the Rajkot Bench of 52. the Tribunal in case of Kandla Dock Labour Board v. ITO:

15. Thus, it is clear that income earned by the trust during the previous year are given exemption from income-tax to the extent of that part of the income which is actually spent for charitable or religious purposes plus accumulated income not exceeding 25% of the income. Clause (a) of Section 11(1) of the Act permits automatic accumulation of income up to 25% without any pre-condition set. Once the operation of Sec.11(1)(a) exhausted, then follows sub-section (2) of Section 11 of the Act, which deals with the question of investment of the balance of accumulated income over and above 25% accumulated income which has still not qualified for exemption under clause (a) of sub-section 11(1) of the Act. That balance accumulated income can also qualify for exemption fromincome-tax meaning thereby the ceiling or the limit of exemption of accumulatedincome from income-tax as imposed by clause (a) of sub-section (1) of section11 would get lifted if the additional accumulated income beyond 25% as the casemay be, is invested as laid down by section 11(2) after following the procedurelaid down therein. Therefore, sub-section (2) will operate for the entire balance ofthe previous year which has not got the benefit of tax exemption under clause (a)of sub- section (1) of section-11 of the Act. It has to be kept in view that out of the accumulated income of the previous year, 25% of the total income is given exemption from income-tax by clause (a) of sub section (1) of section 11 itself. That exemption is unfettered and not subject to any conditions. Section 11(2)does not operate to whittle down or to cut across the exemption provisioncontained in section 11(1)(a) so far as such accumulated income does notexceed 25% of the income accumulated in the previous year. It has also to beappreciated that sub-section (2) of section 11 does not contain any non obstanteclause like “notwithstanding the provisions of sub-section (1)

. Consequently itmust be held that after section11(1)(a) has had its full force and if still anyaccumulated income of the previous year is left to be dealt with and to beconsidered for the purpose of income-tax exemption, sub-section (2) of section11 can be pressed into service and if it is complied with, then such additionalaccumulated income beyond 25% will also be eligible for exemption fromincome-tax on compliance with the conditions laid down by sub-section (2) ofsection-11 of the Act. The relevant portion of the calculation of A.O. isreproduced at para 3 of this order.

We observe the underlying principle emanating from the judicial 53. precedents above that an absolute and unconditional exemption has been granted to trusts for accumulation of funds upto 15% of income u/s 11(1)(a) of the Act vis-a-vis satisfaction of special conditions provided u/s 11(2) of the Act to claim exemption of trust funds (up to 85%). The conditions applicable towards claiming benefit of exemption of trust funds u/s 11(2) of the Act cannot be stretched and applied with respect to application of funds automatically/ absolutely allowed exemption by virtue of ad-hoc exemption u/s 11(1)(a) of the Act.

The Ld. CIT(E) erred to correctly apply the legal position elucidated above 54. to the facts of the assessee while withdrawing approval u/s 10(23C)(vi) of the Act, where alleged mis application of trust funds was much lesser that 15% of gross receipts for AY 2013-14, application of which was otherwise unconditionally/ absolutely allowed to the assessee.

Regarding the issue of investments made in M/s. Saluja Construction (Rs. 55. 3,54,80,000/-), M/s. Salasar Overseas (P) Ltd. (Rs. 35,00,000/-) and the advances to M/s. Shalu Construction (Rs. 30,00,000/-), we find that the coordinate bench in first round of proceedings has accepted the same to be within the prescribed Scholars Education Trust of India, jaipur modes of investment as per Section 11(5) of the Act. As regards the aforesaid being in furtherance to the charitable objects of the assessee, the Ld. AR submits that above said investments in real estate transactions were made by the assessee as part and parcel of its valid application of income within Section 11(1) of the Act, towards its charitable and educational purposes and hence cannot be doubted to be as a valid mode of investment as per Section 11(5)(x) of the Act.

Per Contra, the Ld. CIT DR submitted that the Ld. CIT(E) was justified in 56. observing that Society is purchasing luxurious flat for the benefit of the trustee and giving advances without any reciprocal benefit hence, resulting in violation of clause (b) of 3rd proviso of Section 10(23) of Act as the fund are not invested into prescribed modes.

Scholars Education Trust of India, jaipur (i) Assessee society is running multiple school, branches spread across states within the country and affiliated to governing authorities such as the CBSE, presupposing frequent work related travel by senior staff personnel; (ii) Operational functions of the assessee society such as managing trustee, trustee/ treasurer administrator etc., are undoubtedly carried out by skilled and qualified personnel, who merely happen to be related to one another; (iii) Assessee society is a renowned educational institution reporting a surplus on ayear-on- year basis with a consolidated gross receipt of over Rs. 40 crores with surplus of over Rs. 2.5 crores for AY 2013-14 itself; (iv) Assessee society as a matter of practice parks the surplus funds generated during course of rendering charitable activities towards acquiring of fixed assets on a prudent basis as per the financial records. On giving a thoughtful consideration to the factual position emerging from 59. the above, we find that the sole premise of drawing adverse finding qua investment in residential flat being located in a posh society of Delhi, to have been utilized only for the personal purposes of the trustee and his family is short sighted and lacks merit.

We hold that the assessee society as a matter of practice invests its surplus 60. towards acquisition of fixed assets which is as per the prescribed modes of investment. Further to carry out the objects of the assessee society in a smooth and efficient manner, the assessee society has also invested in residential properties out of the above.

The word "immovable property" by natural reading, will include any type 61.

Scholars Education Trust of India, jaipur of land, residential or commercial property or any other form of property, which can be termed as immovable property as defined in the Transfer of Property Act. Thus, the society/ management is allowed to invest its surplus in immovable property, including residential property. Thus, there cannot be a bar on management of Society to invest its surplus funds in acquisition of a residential property as the law does not mandate any extra bar.

Regarding the advance to Salasar Overseas we observe on perusal of the 62. application form and provisional allotment letter that the same has been made in furtherance towards the payment for school land by the assessee society. Furthermore, regarding the nature of scheme, we find that the project is towards development of a township comprising of Niji Khatedari Scheme, residential scheme, commercial complex in Narayan Vihar, and not merely a residential complex as alleged by the CIT(E).

Regarding the advance to Shalu Construction, we find that the same stands 63. being refunded to the assessee society, thereby not warranting any further discussion regarding the nature of investment of the same.

In totality of the above discussion, we find ourselves unable to agree with 64. the version put forth by the Ld. CIT DR. There is ample evidence to establish, and a clear lack of any contrary material on record, that the assessee is a public Scholars Education Trust of India, jaipur charitable trust set up towards fulfilment of the objects of the trust/ society. That the activities of the assessee Society in furtherance of educational purposes is not in dispute/ accepted by the CIT(E) vide the impugned order also.

Accordingly, once an asset (movable/ immovable) becomes the property 65. of the assessee society, it continues to remain its property the benefit wherefrom does not pass/ revoked by the trustee(s) and continues to remain with the society. The trust property is separate from the trustee property and cannot interchangeably stated to be the same. It is seen from the order of the Ld. CIT(E) that adverse inference is drawn solely on the basis that factum of ownership of the flat at Safdarjung Enclave is not proved. However, the same appears to be baseless insofar as the Deed dated 20.11.2013 is placed on record that shows to the contrary, and no rebuttal is forthcoming regarding the same.

In this regard, the Ld. AR places reliance on the case of ADIT (E) v. Abul 66. Kalam Azad Islamic Awakening- [2013] 33 taxmann.com 364 (Delhi), whereby it has been held that it is the Assessee society that would decide the preferred mode of investment and that the Department may not dictate said choice by putting itself in the chair of the assessee:-

“2. The entire case of the revenue was that since the assessee, in the assessment year 2005-2006, had invested in commercial property at Bangalore and it was not for a charitable purpose and further that in the said property no educational activity was Scholars Education Trust of India, jaipur carried out which was the object of the assessee. The respondent/assessee had contended that it was permissible for it to invest in immovable property in terms of section 11(5) of the said Act. It was also contended that though the investment was in commercial property, the income generated from it was applied for charitable purposes. Therefore, the registration under section 12A of the said Act could not have been cancelled. The Tribunal accepted the pleas raised by the assessee and allowed its appeal. The Tribunal observed as under:- "7. We have heard rival contentions and gone through the relevant material available on record. Relevant provisions of Section 11, read as under : "Income from property held for charitable or religious purpose. 11 (2) Where eighty-five per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely: (a) Such person specifies, by notice in writing given to the Assessing Officer in the prescribed manner, the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed ten years;

(b) The money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5).

** ** ** (5) The forms and modes of investing or depositing the money referred to in clause (b) of sub-section (2) shall be the following, namely :- ** ** ** (x) Investment in immovable property.

Scholars Education Trust of India, jaipur 7.1. Plain reading of provisions of sec. 11 (2)(b) lay down that 85% of the income is to be applied to charitable purposes or set apart and the moneys accumulated or set apart can be invested or deposited in the forms or modes specified in sub-sec.(5). 7.2. Clause (x) of Sub sec. (5) to sec. 11 prescribes one of the modes of investment as "investment in immovable property". Thus, the surplus income can be applied to investment in immovable property. The charitable purposes will include the educational activities and acquiring the income yielding assets to promote the educational objects of the Society. Consequently, combined reading of these provisions make it clear that the assessee can set apart or invest its income in an "immovable property". The word "immovable property" by natural reading, will include any type of land, residential or commercial property or any other form of property, which can be termed as immovable property as defined in the Transfer of Property Act. Thus, the society/ management is allowed to invest its surplus in immovable property, including commercial property. Thus, there cannot be a bar on management of Society to invest its surplus funds in acquisition of a commercial property as the law does not mandate any extra bar. 7.3. Coming to the other aspect that because the assessee is not carrying out any educational activity in this commercial property, therefore, the investment becomes for non-charitable purposes and the assessee has endeavored to enter into business operations. In our view the assessee's charitable objects include spreading education and opening of schools; investment even in commercial property assets remains charitable purposes so long as the income generated by it is applied to charitable objects. It has not been demonstrated that the assessee applied rent received from these properties to any non- charitable purposes. Besides, it has not been demonstrated that the assessee's intention was to enter in business of purchase and sale of commercial property inasmuch as we are in year 2012, the property was purchased in FY 2004-05 and the Trust still retains this property. In these circumstances, we are unable to hold that the assessee's investment can be held non-charitable in nature." (underlining added) 3. We are of the view that the Tribunal had correctly appreciated the law and has come to the conclusion that the respondent assessee was entitled under Section 11(5)(x) to invest in immovable property out of the funds which were surplus with it. The Tribunal has also concluded that there was no evidence on the part of the department that the assessee had applied the rent received from the commercial property for non-charitable purpose. That being the case, the registration under Section 12 A could not have been cancelled. We do not find any substantial question of law which arises for our consideration.”

We may refer to a decision of this Tribunal in the case of St. Wilfred 67. Educational Society v. PCIT (Central), Rajasthan, [2019] 104 taxmann.com 387 (Jaipur - ITAT) whereby this bench has observed:-

“57. Further, we note that the Id Pr.CIT has raised an apprehension at the time of issuance of show-cause that the payment to Rajasthan Housing Board on behalf of Adarsh Gyan Vidyalya Society is neither a loan nor a donation but appears to be an investment not allowable u/s 11(5) of the Act and thereafter, towards the end of his order while giving his concluding findings has held that the payment made is in contravention of section 11(5) r/w section 13(1)(c) of the Act. However, how the payment is in contravention of section 11(5) has not been spelt out in his order. If we look at the provisions of section 11(5), in clause (x), it provides for investment in immoveable property as one of the permissible mode of investment of amount of income which is accumulated or set-apart for being not included in the total income of the person in receipt of income. In the instant case, the assessee society having entered into an agreement to sell with Adarsh Gyan Vidyalya Society and having paid a substantial amount in consideration for purchase of land and in possession of the said land has clearly made an investment in an immoveable property though the same is subject to approval of Rajasthan Housing Board and signing of the final conveyance deed. Accordingly, in light of above discussions and in the entirety of facts and circumstances of the case, the payment to Rajasthan Housing Board is not in contravention of section 11(5) r/w section 13(1)(c) of the Act. Therefore, the findings of the Id Pr CIT cannot be sustained and cannot be made a basis to hold that the assessee society is not carrying out its activities as per its objects and the exemption granted under section 12AA should be withdrawn. (Emphasis Supplied) Furthermore, we may gainfully refer to the judgment in DCIT v.

“21. Ground no.4, relates to denial of exemption under section 11 of the Act. We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. The facts of the case reveal that the assessee trust had advanced certain amount to related concern of M/s. Vedsiddha Products Pvt Ltd, for purchase of land for further development of the assessee trust. However, the Scholars Education Trust of India, jaipur assessee trust was not able to purchase the property due to encroachment. We have already opined that the impugned document in the absence of any corroborative evidence is not worthy of making an addition. However, even otherwise there is no there is no violation of provisions of section 13(1)(c) and section 13(1)(d) of the Act, as the said provisions are attracted in relation to trustees of the trust. The aforesaid property transaction is with the third party. The fact that M/s. Harmony Homes, have given a property advance is apparent from the balance sheet of the assessee trust, therefore it is also not in violation of any provisions of section 11(5). The opinion of the Assessing Officer is that the trust has invested in the modes other than the one provided under section 11(5) is not tenable as the assessee trust have invested in the purchase of property, wherein the assessee trust has advanced the said amount for purchase of property. The assessee also submitted agreement to sale before authorities below. The said investment in immovable property is allowable as per section 11(5)(x) of the Act. Even otherwise also, if the view of the Assessing Officer is considered that the trust has given loan to the M/s. Harmony Homes (third party) and has received interest on same. Question of investment does not arise when loan has been provided which has been admitted by Department also and hence there is no breach of provisions of investment under section 11(5) of the Act.

Having already adjudicated upon the factual aspects and merits of the case, 70.

Scholars Education Trust of India, jaipur we refrain from dealing with the legal issues as raised in the present case and accordingly said grounds are not commented upon and left open.

In light of the above discussion, we hereby set aside the impugned order 71. dated 02.09.2025 passed by the Ld. CIT(Exemptions), Jaipur withdrawing approval granted to the assessee in terms of Section 10(23C)(vi) of the Act and direct restoration of registration with effect from AY 2013-14 and onwards.

In the result, appeal of the assessee is allowed. Order pronounced in the open court on 12/11/2025. Sd/- Sd/- ¼ xxu xks;y ½ ¼ MkWa-,l-lhrky{eh ½ (Dr. S. Seethalakshmi) (Gagan Goyal) U;kf;d lnL; @ Judicial Member ys[kk lnL;@ Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 12/11/2025 *Santosh आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू The Appellant- Scholars Education Trust of India, Jaipur. 1. 2. izR;FkhZ@ The Respondent- CIT(E), Jaipur. 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr@ The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZQkbZy@ Guard File By order,

सहायक पंजीकार@Aेेजज. त्महपेजतंत