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Income Tax Appellate Tribunal, ‘A’ BENCH, PUNE
IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, PUNE SHRI PARTHA SARATHI CHAUDHURY, JM AND DR. DIPAK P. RIPOTE, AM ITA No. 2438/PUN/2017 Assessment Year : 2013-14
The Dy. C.I.T. (Exemption) Circle, Pune. Appellant Vs. Shri Balaji Society, Plot No. 9, Cluster No. 2, Kumar City, Kalyani Nagar, Pune-411 014 PAN; AAFTS1707B Respondent
Appellant by : Shri S.P. Walimbe Respondent by : Shri Kishor Phadke
Date of Hearing : 16-03-2022 Date of Pronouncement : 21-03-2022
ORDER PER PARTHA SARATHI CHAUDHURY, JM : This appeal preferred by the Revenue emanates from the order of the ld. Commissioner of Income Tax (Appeals)-10, Pune dated 04-08-2017 for the Assessment Year 2013-14 as per the following grounds of appeal on record. 1. Whether ld. CIT(A) is correct in holding that the expenditure on advertisement was legitimate expenditure incurred for the purpose the objects of the society. 2. Whether ld. CIT(A) is correct in holding that the funds of the society are not applied or used or diverted for the benefit of the person referred to sec. 13(3) in violation of condition laid down u/s 13(1)(c) & 13(2)(c).”
The relevant facts are that the assessee is registered under the Societies Registration Act, 1860 on 5-3-1998 and under the Bombay Public Trust Act, 1950 on 21-4-1998. The assessee is also registered u/s 12A of the Income-tax Act, 1961 (hereinafter referred to as “the Act”). The main objects and the activities of the society are to spread and promote education. The assessee runs various management institutions and colleges.
The assessee filed its return of income for the year under consideration on 30-09-2013 declaring total income at NIL. The assessee has claimed
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exemption u/s 11 of the Act. Thereafter, the case was selected for scrutiny. In the course of scrutiny assessment, the ld. A.O examined the details of expenditure incurred by the assessee on advertisement. The assessee has claimed the expenditure of Rs. 10,38,27,113/- out of it an amount of Rs. 9,82,33,653/- are to be paid to M/s. Sri Balaji Creativities (hereinafter referred to as “M/s. SBC”), which is a partnership firm carrying on the business of advertisement agencies. The partners of the said firm M/s. Balaji Creativities are also happen to be the trustees of the assessee herein. The ld. A.O relying upon the assessment orders for the A.Y 2008-09 to 2010-11 held that said M/s. SBC has been granting discount @ 10% or more to its other customers while the discount granted to assessee was uniform rate of 5%. On being questioned by the ld. A.O the assessee filed a detailed chart showing the date- wise advertisements published, card rates, rates charged by SBC and the amount of saving earned by the assessee. It was also proved by the assessee that it availed the discount of 78% on the gross billing of advertisements through electronic media. On examination of various facts, it was proved by the assessee that said SBC had passed the discount of more than 10% granted to other customers. According to the assessee, there was no contravention of sec. 13(1)(c) r.w.s. 13(2)(c) of the Act. However, the ld. A.O did not agree with the submission made by the assessee and made an addition u/s 40A(2) of the Act holding that the assessee has contravened the provisions of sec. 13(1)c) r.w.s. 13(2)(c) of the Act, and therefore, the assessee was not entitled to exemption u/s 11 of the Act.
Being aggrieved, the assessee went in appeal before the ld. CIT(A) making a grievance in respect of denial of exemption u/s 11 of the Act on the ground that there was no violation of provisions of sec. 13(1)(c) of the Act in respect of payments to M/s. SBC, where the trustees of the assessee are the partners. After taking into consideration the detailed arguments made by the
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assessee, the ld. CIT(A) found that an identical issue had arisen for the A.Y. 2008-09, 2009-10, 2010-11, 2011-12 and 2012-13, where the ld. A.O was directed to grant exemption u/s 11 of the Act. The facts and circumstances of the case for the year under consideration being similar to those for A.Ys 2008- 09, 2009-10, 2010-11, 2011-12 and 2012-13, the ld. CIT(A) directed the ld. A.O to grant exemption u/s 11 of the Act for the year under consideration as well. Being aggrieved, the Revenue is in appeal before us.
At the time of hearing, the ld. A.R of the assessee referring to both the grounds of appeal submitted that this issue has been consistently decided in favour of the assessee in assessee‟s own case for A.Y. 2008-09 and 2009-10 in ITA No. 1679/PN/2012 and 1204/PN/2013, dated 18-2-2015. Copies of relevant orders have been filed in the paper book before us. The ld. A.R submitted that the Hon‟ble Bombay High Court in assessee‟s own case for A.Y. 2008-09 and 2009-10 in Income-tax Appeal No. 762 of 2016 with Income-tax Appeal No. 782 of 2016 has Ruled in favour of the assessee. The ld. D.R fairly conceded to this submission made by the ld. .A.R of the assessee.
We have perused the case records and heard the submissions of the parties. We have also analysed judicial decisions placed on record. The issue for adjudication is (i) whether the ld. CIT(A) was correct in holding that the expenditure on advertisement was a legitimate expenditure incurred for the purpose of object of the society; (ii) whether the ld. CIT(A) was correct in holding that the funds of the society were not applied or used or diverted for the benefit of the persons referred to section 13(3) of the Act in violation of condition laid down u/s 13(1)(c) and 13(2)(c) of the Act. We find that similar issue came up for consideration in assessee‟s own case in ITA No. 710 and 711/PUN/2015 for A.Y. 2010-11 and 2011-12, vide order dated 29-6-2017,
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wherein the revenue had raised similar ground in the appeal before the Tribunal. The relevant portion is extracted as under:
“1. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in holding that the expenditure on advertisement was a legitimate expenditure incurred for the purpose of pursuing the objects of the society. 2. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in holding that the funds of the society are not applied or used or diverted for the benefit of the persons referred to section 13(3) in violation of condition laid down u/s 131)(c) and 1`3(2)(c).” 7. The Tribunal observed and held as follows: “6. Before us. Ld.DR. took us through the various observations of AO and supported the order of AO. Ld.A.R. on the other hand, reiterated the submissions made before lower authorities and further submitted that identical issue arose in assessee’s own case in Revenue appeal for A.Y. 2008-09 and the issue was decided by the Tribunal by dismissing the appeal of Revenue. He therefore submitted that following the same reasoning, the appeal of the Revenue be dismissed more so when there are no changes in the facts of the case in the year under consideration. 7. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to denial of exemption by invoking the provisions of Sec.13(1)(c) of the Act. We find that Ld.CIT(A) while deciding the issue in favour of the assessee had relied on the decision of the Co-ordinate Bench of the Tribunal in assessee’s own case for A.Y. 2008-09. Before us, Revenue has not placed any material on record to demonstrate that the facts in the year under appeal are distinguishable to that of earlier years. In view of the aforesaid facts and following the same reasoning of the Tribunal in assessee’s own case for A.Y. 2008-09, we find no reason to interfere with the order of Ld.CIT(A). Thus, the grounds of Revenue are dismissed. 8. In the result, the appeal of the Revenue for A.Y. 2010-11 is dismissed. 9. As far as appeal for A.Y. 2011-12 is concerned, since both the parties before us have submitted that the facts of the case for the assessment year 2010-11 are identical to the facts of the case for A.Y. 2011-12. We, therefore, for similar reasons stated herein while disposing of the appeal for A.Y. 2010-11 and for similar reasons, dismiss the appeal of Revenue for A.Y. 2011-12 also. 10. In the result, both the appeals of Revenue are dismissed.” 8. Similarly, for A.Y. 2012-13 in ITA No. 2178/PUN/2016 , dated 24-10- 2018 in assessee‟s own case on exactly similar issue, the Tribunal considered the decision in assessee‟s own case for A.Y. 2010-11 and 2011-12 in ITA No. 710 and 711/PUN/2015 and provided relief to the assessee. For the sake of completeness the operative portion of the Tribunal observation is extracted as follows: 7. We heard both the parties on this issue of denial of exemption u/s.11 r.w.s. 13(1)(c) of the Act and find that similar issue was adjudicated in favour of the assessee by the Tribunal in the assessee’s own case for the A.Yrs. 2010-11 and 2011-12. For the sake of completeness, we proceed to extract the operational para of the order of the Tribunal here as under :
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“7. We have heard the rival submissions and perused the material on record. issue in the present case is with respect to denial of exemption by invoking the provisions of sec.13(1)(c) of the Act. We find that Ld.CIT(A) while deciding the issue in favour of the assessee had relied on the decision of the Co-ordinate Bench of the Tribunal in assessee’s own case for A.Y. 2008-09. Before us, Revenue has not placed any material on record to demonstrate that the facts in the year under appeal are distinguishable to that of earlier years. In view of the aforesaid facts and following the same reasoning of the Tribunal in assessee’s own case for A.Y. 2008-09, we find no reason to interfere with the order of Ld. CIT(A). Thus, the grounds of Revenue are dismissed.
From the above, it is evident that the Tribunal granted gave relief to the assessee on the similar issue of applicability of provisions of section 11 r.w.s. 13(1)(c) of the Act. It is undisputed fact that the Advertisement expenditure were always paid by the assessee to the said SBC. In the process, the Tribunal relied on its own order in the assessee’s own case for the A.Y. 2008-09 as extracted in Para No.5 of the order of Tribunal. ITA No.2178/PUN/2016 Sri Balaji Society 4 Considering the settled nature of the issue, we are of the opinion that the order of the CIT(A) is fair and reasonable and it does not call for any interference. Accordingly, the grounds raised by the Revenue are dismissed.
In the result, the appeal of the Revenue is dismissed”
We also find that Hon‟ble Jurisdictional High court in Income-tax Appeal No. 762 of 2016 and 782 of 2016 in the case of C.I.T. Vs. Shri Balaji Society considered the following questions: “i) Whether the Tribunal was correct in law by holding that the provision of section 13(1)(c) and 13(2)(c) of the I.T. Act were not attracted in this case despite the fact that payments were made on account of advertisement to prohibited persons? (ii) Whether the Tribunal was right in holding that the assessee was allowed to claim exemption u/s 11 of the act despite the fact that the payments were made to prohibited persons as defined u/s 13(1)(c) and 13(2)(c) of the I.T. Act<” 10. The Hon‟ble High Court observed and held as follows:
“3. The respondent assessee is a charitable trust and enjoys the registration under Section 12AA of the Income Tax Act, 1961 ("the Act" for short). During the Assessment Years 2008-09 and 2009-10, the Assessing Officer noticed that the assessee had incurred expenditure, some of which was paid to one M/s. Sri Balaji Creativites ("SBC" for short) towards advertisements in various magazines and souvenirs. The Assessing Officer noticed that said SBC was a partnership firm consisting of three partners who happened to be trustees of the respondent assessee trust. The Assessing Officer was of the opinion that the firm i.e. SBC was a firm covered under Section 13(3)(e) of the Act visa-a-vis Trust. The Assessing Officer thereafter carried out the analysis of the expenditure in connection with the advertisements with a special focus on the payments made to the said SBC. He denied the benefit under Section 11 of the Act relying upon the provisions of Section 13(2)(c) of the Act. 4. The assessee carried the matter in appeals. The CIT(A) examined the material on record at length and came to the conclusion that the Assessing Officer had
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incorrectly invoked the said provision in making the dis-allowance. He was of the opinion that the payments were not made in excess of what may be reasonably paid for the services in question. The Revenue challenged the decision of the CIT(A) before the Tribunal. Tribunal by the impugned judgment dismissed the Revenue's appeal upon which the present appeals have been filed. 5. We have heard learned Counsel for the parties and perused the material on record. Clause (c) of sub-section 2 of Section 13 of the Act can be invoked, if any amount is paid by way of salary, allowance or otherwise to any person referred to in sub-section 3 out of resources of the Trust for services rendered to the Trust and the amount so paid is in excess of what may be reasonably paid for such services. Thus, essential requirement for invoking the said provision is that the amount paid was in excess of what may be reasonably paid for the services. In the present case, the CIT(A) and the Tribunal have elaborately examined the accounts of the assessee, the payments made to the SBC, the payments made to other agencies for similar work, 3 of 4 Uday S. Jagtap 762-16-ITXA-3-C==.doc comparative rates of payments and came to the conclusion that no excess payment was made to the related person. Essentially, this is a pure question of fact. Two authorities concurrently held in favour of the assessee. No question of law arises. 6. The tax appeals are dismissed.” 11. Respectfully following the judgment of the Hon‟ble Bombay High Court (supra) we uphold the findings of the ld. CIT(A) and the relief provided to the assessee is sustained.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open Court on this 21st day of March 2022
Sd/- sd/- (DR. DIPAK P. RIPOTE) (PARTHA SARATHI CHAUDHURY) ACCOUNTANT MEMBER JUDICIAL MEMBER Pune; Dated, the 21st March 2022 Ankam Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The CIT (Exemption), Pune 4. The CIT(A)-10, Pune 5. D.R. ITAT „A‟ Bench 5. Guard File BY ORDER,
Sr. Private Secretary ITAT, Pune.
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Date 1 Draft dictated on 16-03-2022 Sr.PS 2 Draft placed before author 17-03-2022 Sr.PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr. 22-03-2022 Sr.PS PS/PS 6 Kept for pronouncement on 21-03-2022 Sr.PS 7 Date of uploading of order 22-3-2022 Sr.PS 8 File sent to Bench Clerk Sr.PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order