SILVER POINT EDUCATION TRUST,KOLKATA vs. I.T.O.(EXEMPTION),WARD-1(3), KOLKATA

This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax (Appeals)-25, Kolkata [‘CIT(A)’ for short] dated 30.05.2019 u/s 250 of the Income Tax Act, 1961 (‘the Act’ for short) for AY 2014-15.

The assessee is an educational Trust which is registered u/s 12A of the Act on 12.05.2000 by the Director of Income Tax (Exemption). The assessee Trust is engaged in running a school in the locality of Kasba, Kolkata in the name and style of Silver Point Education Trust. The Trust filed its return of income for the AY 2014-15 on 19.12.2016 declaring nil income. The AO in his assessment order dated 19.12.2016 observed that the Head Mistress of the school is the daughter-in-law of one of the trustees and hence, a specified person u/s 13(3) of the Act. He further observed that the Head Mistress is drawing salary from the school and that the salary so drawn is reasonable. 3. The ld. AO found that the school authority had purchased a car for ₹10,50,000/-. On a query, the assessee submitted that the car was used by the Head Mistress and other staff for official purposes. The AO records that on verification and enquiry, he has found that the car is actually used by the Head Mistress for going to school and also for Assessment Year: 2014-15 Silver Point Education Trust. personal use. The expenditure of ₹10,50,000/- incurred on purchase of the car was claimed as application of income.

In view of the above factual findings, the AO came to a conclusion that the assessee violated Section 13(1)(c) of the Act r.w.s. 13(2) & 13(3) of the Act and hence expemtion u/s 11 r.w.s. 12 is not available on the amount of ₹10,50,000/-. He completed the assessment by determining the total income of the school at ₹10,97,293/-.

Aggrieved, the assessee carried the matter in appeal. The first appellate authority granted part relief. Further aggrieved, the assessee is before me.

After hearing rival contentions, I find that the AO records that on enquiry he found that the car is used by the Head Mistress for commuting between her house and the school. He further records that she used it for personal purposes. There is no evidence gathered by the AO in support of his findings that the car was used for personal purposes. Conveyance facility, when given by the school, to the Head Mistress, in my considered opinion is reasonable and commensurate with the services rendered by the Head Mistress and cannot be considered as violation u/s 13(1)(c) of the Act. When the AO has given a factual finding that the salary drawn by the Head Mistress is reasonable and commensurate with the services rendered by her and not a violation of Section 13(1)(c) of the Act, the conveyance facility provided by the school to her also, cannot be considered as a violation of Section 13(1)(c) of the Act. Thus, I delete the disallowance of ₹10,50,000/- u/s 11 & 12 of the Act and direct the AO to consider the amount incurred for purchase of car as application of income, specifically when the expenditure incurred for running of the car is not disallowed by the AO on the ground that, there is personal use.

In the result, this appeal of the assessee is allowed. Kolkata, the 13th March, 2020.