SCHOLARS EDUCATION TRUST OF INDIA,JAIPUR vs. CIT(EXEMPTIONS), JAIPUR

Per contra, the ld AR submitted that the reasons given by the ld CIT(E) for alleging that undue benefit is provided to the trustees or that investment is not in the mode specified u/s 11(5) is only on surmises and conjectures and as per his subjective satisfaction without appreciating the explanation given by the assessee as to how the same is for the object of the trust. On each of the issues raised by the CIT(E), the ld AR submitted as under:- Rent payment in respect of property 219/5, Sardarpura, Udaipur:- This premise is owned by trustees Shri Sangam Mishra and Smt. Lily Mishra. The left portion of this plot belongs to Smt. Lily Mishra and right portion of this plot belongs to Shri Sangam Mishra. On the left half of this plot, a building is constructed comprising of basement, ground floor, first floor and second floor. This property is adjacent to Sardarpura School, Udaipur having common boundary wall with opening to the school.

13 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

This property was taken on rent by the assessee society long back. As per lease deed dated 26.03.-2009, the monthly rent of this property w.e.f. 01.04.2008 was fixed at Rs.25,000/- each to Shri Sangam Mishra and Smt. Lily Mishra for a period of five year with a condition to increase the rent at the rate of 10% per year. Accordingly, the rent was paid to both the trustees from financial year 2008-09 and onward.

During the year, assessee society got determined the fair rent of the premises from the registered valuer. The registered valuer has determined the fair rent of the left part of this plot at Rs. 6.53 lakhs per annum and the right part of this plot at Rs. 2.61 lakhs per annum aggregating to Rs. 9.14 lakhs against which assessee has paid rent of Rs. 4.80 lakhs to Smt. Lily Mishra and Rs .2.28 lakhs to Shri Sangam Mishra aggregating to Rs. 7.08 lakhs. Thus, the rent paid of this premises is reasonable.

The above property is taken by the society on rent for carrying out its object. As stated above, this property is situated just adjacent to its school at Sardarpura, Udaipur. The basement of this premise is used by the society for running computer lab and library of the school and this fact is also verified by the inspector of the department. The ground floor is provided to Shri Sangam Mishra as rent free accommodation. The perquisite value of rent free accommodation has been considered while deducting tax at source on salary of Shri Sangam Mishra as per Form 16 (Salary Certificate) showing valuation of rent free accommodation. Shri Sangam Mishra is managing the entire affairs of

14 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

the society and therefore he has been provided rent free accommodation by the society which is reasonable. The first floor of the premises is used for holding meetings and stay of principals/ staff member of various schools who are required to visit Udaipur from time to time for the work of society. The second floor of the premises is used as storage of the school records, trophies, important document and other items. The observation of the Inspector that the first and second floor is only used for residence of Shri Sangam Mishra and his family is incorrect. A request was made to the CIT(E) to get these facts verified but still no action is taken.

The Ld. CIT(E) has incorrectly observed that only basement is used by the assessee society as computer lab and the remaining whole property is used for the residence of the trustee. He ignored the fact that only ground floor is used for residence. The first floor is used for holding meetings and accommodation of principal/staff of various schools who visit Udaipur from time to time for the work of the trust and the second floor is used as storage for school records, trophies, important documents, etc. Though the Ld. CIT(E) accepts that on the second floor, files and other documents of the trust are kept but still without any enquiry as requested by the assessee, he concluded that arguments of the assessee is only an eye wash and it cannot be said that the complete floor has been used by the trust exclusively. Further, the adjacent open space is used for parking of the car/buses of the society and therefore, without any enquiry, his observation that assessee is silent about use of first floor and garden/parking area is misconceived.

15 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

The Ld. CIT(E) has further observed that though Sh. Sangam Mishra has included Rs.1,85,398/- in his return of income on account of rent free accommodation provided by the trust but he incorrectly assumed that he is utilising 2/3rd part of the premises and therefore, Rs. 4,72,000/- should has been taxed in his hands. These observations are superfluous as the valuation of rent free accommodation is required to be done as per section 17 as per Rule 3(1) of Income tax Rules. In any case, once it is accepted that assessee has provided rent free accommodation to the trustees and the salary paid to him is accepted, the perquisite value is to be determined as per Rules and not in the manner in which it is projected by the Ld. CIT(E).

From the above discussion, it is established that assessee society has paid rent to the trustee in lieu of the premise being used for its activity, the rent paid is reasonable and therefore no undue benefit is passed on to the trustee. Here it is pertinent to mention that in earlier years, the rent so paid has been accepted as reasonable in the assessment framed u/s 143(3) of the Act.

Rent payment of Rs. 3,99,600/- in respect of property 12/493, Indira Nagar, Sector 9, Lucknow:

This premise is owned by Ms. Priyakanksha Mishra, daughter of Shri Sangam Mishra, trustee. The plot area of this property is 288 sq. mtr i.e. 3099 sq. ft. 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 society. This

16 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

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.

This property was taken on rent by the assessee society w.e.f. 01.04.2009 at a 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. 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.

The Ld. CIT(E) has doubted the rent agreement for the reason that it is not notarised or witnessed and not furnished during the assessment proceedings upto 31.03.2016. The premise is not in front of the school as contended by the assessee, the valuation report is undated and no supporting evidence for utilization of the said property for the object of the trust has been furnished.

In this connection it is submitted that only because the lease deed is not notarised/witnessed cannot be viewed adversely more particularly when it is on a stamp paper dated 19.10.2012 and the rent paid in earlier years have been accepted. Further, this premise is on front of the school of the assessee as is evident from the certificate and the

17 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

map being produced before the Hon’ble Bench. Non dating the valuation report has no effect when the valuer has specified in the report that the property was inspected by him on 06.03.2012 to assess the rental value as on 10.04.2012. The user of the property for the activity of the society mentioned. In fact the Ld. CIT(E) has not raised any query about his doubts in the present proceedings, otherwise the same would have been clarified then and there and therefore, the objection raised by him in this regard is on surmises and conjectures.

From the above discussion, it is established that assessee society has paid rent to Ms. Priyakanksha Mishra, daughter of trustee in lieu of the premise being used for its activity, the rent paid is reasonable and therefore no undue benefit is passed on to the trustee. Here it is pertinent to mention that in earlier years, the rent so paid has been accepted as reasonable in the assessment framed u/s 143(3) of the Act.

3.2 Travelling Expenses:

Findings of ld CIT(E):

The findings of ld CIT(E) which are under challenge before us are as under:

During the course of assessment proceedings, supporting documents in respect of travelling expenses claimed were called for and it has been observed that the payment made to M/s Blue Chip Services are related to travel performed by Sh. Sangam Mishra and his family members. Perusal of details produced of travelling expenses, it has also been gathered that

18 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

family members of Sh. Sangam Mishra, Ms. Priyakanksha Mishra and Mr. Aryan Mishra had also performed travel by Air for various places during the financial year 2012-13 for which expenditure was incurred by the trust. Some of them are as under for ready reference:

SI. Date Bill No. Sector Passenger Flight Flt Dt. Net No, No. Amount 1 07.02.2013 4011387 Priyakanksha 9W0707 13.02.13 6351 DEL- UDR 2 07.02.2013 4011391 Priyakanksha A10812 12.02.13 5155 LKO- DEL 3 12.02.2013 4011601 A1812 12.02.13 12761 LKO- Aryan DEL Mishra 4 12.02.2013 4011612 DEL-JAI Aryan 9W0725 13.02.13 5668 Mishra 5 14.12.2012 4009237 BOM- LKO Priyakanksha A10625 15.12.12 8419

6 17.12.2012 4009352 LKO- Priyakanksha 6E 309 17.12.12 4838 DEL 7 03.11.2012 4007893 JFK-DEL Priyakanksha A10102 14.11.12 49773 8 30.11.2012 4008676 Priyakanksha A10471 01.12.12 5383 DEL- UDR 9 06.12.2012 4008907 UDR- BOM Priyakanksha 9W2074 10.12.12 5519

The trust has not furnished any justification in respect of journey performed by Ms. Priyakanksha Mishra and Mr. Aryan Mishra who are the family member of Sh. Sangam Mishra to the USA ( mentioned at Sl. No. 7-JfK-DEL) and Mumbai ( mentioned at Sl. No. 5 and 9), the trust has not furnished detailed reasons of journey, supporting documents of journey etc. and further could not justify that in what capacity Ms. Priyakanksha Mishra and Mr. Aryan Mishra had performed journeys, expenses for which were paid by the assessee trust. It shows that they went to USA and various places for their personal purposes in their

19 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

personal capacity and not for the trust purposes and they have debited their personal expenses in trust’s accounts in various names like travelling expenses, social welfare expenses etc.

From the above discussion, it appears that the trust funds are utilized for trustees and their family to cater to their luxurious life. A/R was asked to show cause in this regard. In response, reply vide letter dated 28.09.2016 was submitted but not found tenable in view of the discussion made as under:-

The claim of the trust is that the a course in dramatic in NYFA ( New York Film Academy) is for skill development of a particular employee [here this employee is no one but daughter of chairman of trust, therefore covered u/s 13(3)] so that the skills development by her can be used for organizing various social & cultural programmes in the schools run by the trust. The contention that her skill development will help to promote education and will help the schools in various ways is also not acceptable. As many other activities like travelling is itself an education because as a result of travelling you acquire fresh knowledge, likewise if you see pictures, visit art galleries you thereby add to your knowledge, if you visit a night club, you get acquainted with and add to your knowledge. But all these above activities cannot be tantamount to education as defined in section 2(15) of the I.T, Act, 1961. The reliance in this regard has been placed on the judgment of Hon’ble Rajasthan High Court in the case of CIT Vs Maharaja Sawai man Singh Ji Meseum Trust (1988) 169 ITR 379 (Raj.) wherein it was held that “the word “education” has not been used in that wide and extended sense

20 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

according to which, acquisition of further knowledge constitute education”

Finding support of the above judgment, expenditure incurred in relation to a course in dramatic in NYFA ( New York film Academy) for personal skill development of a particular employee cannot be treated as expenditure for educational purposes. Similarly, with regard to Bombay visit of Ms. Priyakanksha Mishra, A/R has just submitted that her travel to Mumbai is to get an insight to latest development in the field of education so that same can be implemented in the various schools run by trust, but not supported its submission with any documentary evidences. Without any documentary evidences, the submission remained an afterthought only which serves no purpose in support. As evident that Ms. Priyakanksha Mishra went to USA and Mumbai for her personal purposes in her personal capacity and not for the trust purposes and assessee trust debited her personal expenses in trust’s accounts in the name of skill development and updating the employees regarding latest development in the field of education for betterment of school’ programmes etc. Similarly, with regard to the journey made by Mr. Aaryan Mishra, the assessee trust has failed to substantiate its claim with any documentary evidence that he was sent to Lucknow for participation in cultural programme of the Indira Nagar School, Lucknow. The trust has not furnished detailed reasons of journey, supporting documents of journey etc. From the above discussion, it appears that the trust funds are utilized for trustees and their family to cater their luxurious life.

21 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

In view of above, it is established that this violation attracts proviso 13 of section 10(23C)(vi) r.w. sub-clause (a) of 3rd proviso of section 10(23C)(vi) of the I.T. Act, 1961. Assessee’s contentions:

Per contra, the ld AR submitted that Ms. Priyakanksha Mishra is Post Graduate in Mass Communication & working as administrator of the society since July, 2005 and is paid salary since then. In financial year 2012-13, she was paid salary of Rs. 4,28,572/-. Salary paid to her in earlier year has been accepted by the department. She travels to the various schools of the society for managing the administration, literary, cultural, sports & games activities and therefore her travel is for the purpose of society.

Her travel to Mumbai is to get an insight to latest development in the field of education so that same can be implemented in the various schools run by society. In this travel she visited many schools like JB Pant High School for girls, Jamna Bai Nursery School, Seven Square Academy, etc. to get an exposure towards the evolving methods of education so that the same can be implemented in the schools run by the assessee society. So far as her travel on 03-11-2012 from JKF–Delhi is concerned, the society has sent her to USA to undergo a course in dramatic in NYFA (New York Film Academy) so that the skills developed by her can be used for organizing various social & cultural programmes in the school run by the society. Only fare was reimbursed by the society. Therefore, travelling expenses incurred by the society on travel

22 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

of Priakansha Mishra cannot be held to be the personal expenses of the trustee.

So far as travelling expenses of Aryan Mishra is concerned, he is grandson of the uncle of Dr. Sangam Mishra. He does not fall in the definition of relative u/s 2(41) & 13(3) of the Act. He was sent to Lucknow for participation in cultural programme of the Indira Nagar School, Lucknow. Hence, the travel expenses are for the purpose of the society and not for the personal purpose as specified person u/s 2(41)/ 13(3) of the Act.

The Ld. CIT(E) has presumed that such travel by Priyakanksha Mishra is for her personal purpose and no documentary evidence that Mr. Aryan Mishra was sent to Lucknow for participation in cultural programme of the Indira Nagar School at Lucknow was furnished. These observations are on surmises and conjectures. It is not in dispute that Priyakanksha Mishra is working as administrator of the society since July, 2005 and salary paid to her is accepted. Therefore, travel made by her to various places like Udaipur, Delhi, Lucknow, Jaipur, Mumbai cannot be said to be for personal purpose. In respect of his visit to USA, the observation made by Ld. CIT(E) is only theoretical. Mr. Aryan Mishra is not a person covered u/s 13(3). In view of above, the finding of CIT(E) that the funds of the trust are utilized for the trustee and their family members to cater their luxurious life is misconceived and on this account it cannot be held that any undue benefit has been provided to the trustee or their family members.

23 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

3.3 Funds are not kept in the Form or Modes specified in Sub- section (5) of Section 11 of the Income Tax Act, 1961

Findings of ld CIT(E): A perusal of ledger accounts of M/s Saluja Construction in respect of various schools of the trust produced during the course of assessment proceedings, it is revealed that there were opening balances shown in these accounts and the trust has also given advances to this company during the year under consideration. The details are as under:-

Sr. Name of Opening Advances Advances Date of Amount of No. balance given given in Transfer School transfer during the F.Y. 13-14 F.Y. 2012- the entry 13 in the

name of

Scholars Education 1. Central 40,00,000 30,00,000 - 31.03.2014 70,00,000 Academy, Hiran Magri 2. - Central 10,00,000 20,00,000 31.03.2014 30,00,000 Academy, Chittorgarh 3. Central 15,00,000 - 20,00,000 31.03.2014 35,00,000 Academy, Bapu Nagar, Bhilwara. 5. Central 15,00,000 50,00,000 - 31.03.2014 65,00,000 Academy, Sardaroura 6. Central 1,05,00,000 49,80,000 - - 1,54,80,000 Academy, Indira Nagar

24 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

Similar observation was made in respect of other parties also. The details are as under:-

Sr. Name of Opening Advances Advanc Date of transf Amount of Name of No. balance given es given er the entry in Transfer party School during in the name of Scholars the F.Y. F.Y. 13- Education 14 Trust of India 2012-13

The trust has not furnished any valid reasons in respect of advance given to above mentioned parties. However, the trust has credited the same amount in the ledger of M/s Saluja Construction and in the ledger of other parties by transfer the entry on 31.03.2014 in every account. It is further noticed that against these advances given, the trust has not received any reciprocal benefit. The trust has not furnished any

25 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

justification in respect of interest free advances made to M/s Saluja Construction Pvt. Ltd. and other parties mentioned above.

The assessee had made advances to these parties without any justification. The aforementioned accounts have not yet been settled. As the funds of the trust have been misused this has caused loss of interest to the trust on the funds diverted. Vide show cause dated 01.09.2016, A/R was asked to justify the same. In response reply vide reply dated 28.09.2016 and 07.10.2016 submitted as under:-

Advance to of M/s Saluja constriction- The various schools of the trust have given advance to Saluja Constriction Pvt. Ltd., New Delhi in earlier years and also in FY 13-14 aggregating to Rs. 3,54,80,000/-. The trust has purchased a flat at Safdarjung Enclave, New Delhi from Saluja Construction Pvt. Ltd. for which a sale deed is executed on 20.11.2013. Copy of sale deed is enclosed.Accordingly, the amount given by various schools was transferred to the account of the trust where it is capitalized as fixed assets.

Regarding use of flat at New Delhi, it is submitted that this fiat is used as a guest house for the trust. Various staff members and trustees stay in the flat whenever they visit Delhi for CBSE work, training programme, conferences& other allied work Besides this two of staff members for certain regulatoty work are sitting at this office,

The above reply of AR is not acceptable as from the sale deed agreement it has been noticed that the flat is situated in very posh area of Delhi i.e. Safdarjung, Delhi and the flat is actually a 3BHK with

26 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

attached Toilets, one Kitchen, one Drawing Dining, Entrance Lobby, Family Lounge, Front & Rear Balconies and also Entire Terrace over and above the Entire Third Floor of the said property, One Servant Quarter with Toilet on the same floor, 25% share in the Stilt Area with right of parking One Car therein. These specifications of the flat indicates that the flat has been purchased for personal use of trustee 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. Further the assessee has not furnished any documentary evidences regarding seminar/meetings/ visit of staff in Delhi for which the flat has been purchased, as claimed.

Advance to M/s Salasar Overseas Pvt. Ltd - Advance of Rs. 35 lacs was given to Salasar overseas Pvt. Ltd., Jaipur in the year 2005 for the purchase of 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, copy enclosed.

The above reply is not convincing as assessee has only furnished a provisional allotment letter dated 26.03.2011 but in provisional letter there is reference of confirmation letter dated 26.03.2011 wherein terms and condition of agreement were mentioned, however assessee has not provided copy of said letter. In absence of the same it cannot be verified that the said investment was made for the object of the trust.

27 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

The AR was asked, vide order sheet entry dt. 30.10.2014 to update the present status of the above said land in support of its claim that land was purchased for the purpose of trust. In response, AR submitted that

"Regarding present status of the aforesaid plot of land, it is submitted that the scheme is under development by the developer and certain formalities relating to JDA are going on. All these activities are required to be done by developer. After completion of bask development, trust is under planning to commence the school at this location. The trust has applied the aforesaid land for school purpose. Copy of application form and correspondence with land developer is enclosed. From the correspondence, it is apparent that trust has applied for allotment of land for the purpose of school,"

This reply also is not convincing as from details of land at Narayan Vihar, it is evident that the scheme was originally niji khatedari scheme of agricultural land and without converting the status of plot so purchased from agricultural to institutional, the property cannot used for the object of trust, therefore, AR was asked to furnished details of further corresponding regarding conversion of plot/land with JDA or any other respective authority but assessee has failed to submit single document in this regard. On the name of corresponsing details made with 2nd party whatever furnished by AR is all the receipt of payment made on various date and nothing else. Even upto 31st March, 2016, after passing almost 5 years, no efforts/corresponding has been made by the assessee with regard to said plot, which shows that the said investment was never intended to be used for object of trust.

28 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

Further, as evident from the letter dt. 26-03-2011 that provisional allotment was made by the 2nd Party to the trust but still trust has continued to show the advance to Shri Salasar Overseas Pvt. Ltd. Of amounting 35 lacs upto 314 March, 2013 even. Specific query was made to assessee vide order sheet entry dt. 30-10-2013. In response AR submitted that :-

“Regarding query that Plot No. 61-1001 & 61-1002 Narayan Vihar, Ajmer Road, Jaipur have been handed over to trust in 2011 itself than why advance is appearing in March 2013 Balance Sheet, it is submitted that provisional allotment letter relating to aforesaid plot has been issued to assessee trust in 2011 itself, however due to oversight accounting entries relating to capitalization have been passed on 31-03-2014. Copy of ledger account of FY 2013-14 showing transfer of advance amount to Fixed assets account is e. enclosed” The above said reply itself shows that the said investment was not made for the object of trust therefore, even after allotment letter, the said property has not been accounted for in the respective year ended Balance Sheet and the excuse made by AR i.e. "due to oversight accounting entries" is nothing but an afterthought only.

Advance to of M/s Shalu Construction- The assessee also made Advance of Rs. 30 lacs to M/s shalu Construction. In reply to query the assessee submitted-

"The assessee also made Advance of Rs, 30 lacs to M/s Shalu Construction, New Delhi in the year 2009- 2010 towards purchase of flat at New Delhi. However, because of delay, the builder did not give the flat in time and therefore the trust purchased the flat from M/s Saluja Construction Pvt. Ltd. as stated above. Trust is negotiating with the builder for a refund of amount."

29 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

The submission of AR is not acceptable as assessee has not furnished single documentary evidences either with respect to original agreement or with regard to cancellation of deed. Further, as claimed by the AR that Trust is negotiating with the builder for a refund of amount. No details of corresponding made with Shalu Construction has been furnished on record. All these facts suggest that the advance was given for the personal investment of the trustee and not for object of the trust, and in this manner funds of the trust was siphoned for the benefit of trustees.

The assessee has not furnished any valid reasons in respect of these advance given. It is further noticed that against the advances given, the assessee trust has not received any reciprocal benefit. The assessee has not furnished any justification in respect of interest free advances made to these parties. The assessee had made advances to these parties without any justification for achieving the objects of the trust. The aforementioned accounts have not yet been settled.

From all the above facts, it is clear that all the submission made the assessee in respect of this advance is nothing but an afterthought only. It is actually siphoning of the funds of the trust for personal benefit of the trustees and the funds of the trust have been misused. As this advance was made not as per the objects of the trust and further remained unverifiable therefore, it is held that these are the investments which are not in the prescribed modes as per section 11(5) and it attracts proviso 13 of section 10(23C) (vi) r.w. sub- clause (b) of 3rd proviso of section 10(23C) (vi) of the I.T. Act, 1961.

30 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

Assessee’s contentions:

Per contra, on each of the three matters, the ld AR has submitted as under: Advance to Saluja Construction Pvt. Ltd: The various school of the society have given advance to Saluja Construction Pvt Ltd., New Delhi in earlier years and also in FY 13-14 aggregating to Rs. 3,54,80,000/-. The society has purchased a flat at Safdarjung Enclave, New Delhi from Saluja Construction Pvt. Ltd. for which a sale deed is executed on 20.11.2013. Accordingly, the amount given by various schools was transferred to the account of the society where it is capitalized as fixed assets. This flat is used as guest house of the society. 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.

The Ld. CIT(E) observed that specification of the flat in the sale deed indicates that the flat has been purchased for personal use of trustee and not for the use of staff as no trust will invest such high amount for flat with such luxury facilities for the staff purpose only. Further, the assessee has not furnished any documentary evidences regarding seminar/meetings/visit of staff in Delhi for which the flat has been purchased.

In this connection it is submitted that there is no dispute that the flat at Safdarjung Enclave is the property of the assessee society. Investment

31 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

in immovable property is one of the modes prescribed by section 11(5)(x). Therefore, only on assumptions and presumptions, it cannot be said that the flat has been purchased for personal use of the trustees without bringing any material on record that the trustees resides there. Hence, the investment in the flat made by the trustee is as per the mode specified u/s 11(5) and not for the benefit of the trustees.

Advance of Rs.35 lakhs to Salasar Overseas Pvt. Ltd., Jaipur- Assessee gave advance of Rs.35 lakhs to Salasar Overseas Pvt. Ltd. in the year 2005 towards purchase of 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. 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.

The Ld. CIT(E) has observed that assessee has not furnished the confirmation letter wherein the terms and conditions are mentioned, assessee has not furnished confirmation regarding conversion of plot with JDA even after 5 years and in the books of accounts the advance was capitalised only on 31.03.2014 and therefore , this investment is not for the object of the trust.

32 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

It is submitted that all the above observations made by Ld. CIT(E) is superfluous. The object of the assessee is to run schools. If for future expansion, land is purchased, only because it took time to construct the building on the said land, it cannot be held that it is not for the object of the trust particularly when investment in immovable property is one of the modes of investment u/s 11(5). The terms and condition of the allotment is already mentioned on the back of the provisional allotment letter. The scheme under which the plot is provisionally allotted to the assessee, is already approved by the Jaipur Development Authorities but since the JDLC (Camp) for issue of patta is still pending, the construction activities could not be yet started. Further, passing the accounting entry by transferring this advance to land account on 31.03.2014 does not make any difference so far as such investment is concerned and therefore, for this reason no adverse view can be taken so as to presume that the investment is not for the object of the trust.

Advance of Rs. 30 lakhs was given to Shalu Construction, New Delhi- Advance has been given in the year 2009-2010 towards purchase of flat at New Delhi. However because of delay, the builder did not give the flat in time and therefore, the society purchased the flat from M/s Saluja Construction Pvt. Ltd. as stated above. Society is negotiating with the builder for refund of amount.

The Ld. CIT(E) has observed that assessee has not furnished any correspondence that it is negotiating with the builder for refund of amount and therefore, he presumed that it is the personal investment

33 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

of the trustee and it is only siphoning of the funds of the trust for the personal benefit of the trustees.

It is submitted that the above observation of the Ld. CIT(E) is superfluous. No material is brought on record that advance is given for the personal benefit of the trustees. The advance was given in the year 2009-10 and thereafter the Ld. CIT(E) issued notification to the assessee u/s 10(23C)(vi) on 27.12.2010. It is not that advance is given during in AY 2013-14 from which the notification is being withdrawn. Therefore, this cannot be a reason to presume that any benefit is extended to the trustees.

34 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

Rs 6,00,000 from financial year 2008-09, and during the year, there is an increase in annual rent from Rs 6,00,000 to Rs 7,08,000 which is based on registered valuer report. It was submitted that the said property is used for residence of the Shri Sangam Mishra (and his family) who is managing the entire affairs of the assessee society, for running computer lab and library for use by the school students, and for holding meetings and providing stay facility to principals/staff members of various schools run by the assessee society. It was accordingly submitted that the property has been taken and used for the objects of the assessee society, rent paid is reasonable and no undue benefit is provided to the trustees.

4.1 In our view, in respect of this property at Sardarpura, there are two transactions which are under consideration before us. First is the transaction relating to the subject property taken on rent by the assessee society from the trustees. The question is whether there is any bar in the law which prohibits such transactions at first place saying that there cannot be any transactions between the assessee society and the trustees. In our mind, there is no such bar. At the same time, given that such transactions are with the persons who are themselves managing the affairs of the assessee society, there should be an element of reasonableness and fairness in such transactions. Since ld CIT(E) has invoked the provisions of section 13 to refer to the trustees as interested persons, it would equally be relevant to refer to various situations and the related transactions which have been envisaged in section 13(2) to define the transactions entered into with related persons and how the same would be construed as providing benefit to

35 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

the interested persons. Clause (b) of section 13(2) envisages a situation where any land, building or other property of the trust or institution is made available for the use of the interested person without charging adequate rent or other compensation. The emphasis is therefore on charging of adequate rent or compensation and so long as the same is adequate, the transaction would be in compliance with the said provisions. The reverse of such a transaction are the facts in the instant case. The building of the trustees are provided to the assessee trust for an annual rent of Rs 7,08,000. What therefore has to be examined is whether the rent of Rs 7,08,000 paid by the assessee society is reasonable or not. The test of reasonableness has been tried to be satisfied by the assessee society with help of report of a registered valuer determining the fair rental value of the property. There is no finding given by ld CIT(E) regarding reliability of such valuation report and whether the same is acceptable or not and the basis for deviation, if any. In any case, even 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 Valuation officers which has not happened in the instant case. In the interest of justice and fairness, we therefore deem it fit to set-aside the matter to the file of the ld CIT(E) to examine the valuation report submitted by the assessee society and to carry out independent valuation through its valuation officer with an appropriate opportunity to the assessee society.

4.2 Now coming to second and related transaction. It relates to provision of rent free accommodation of the same property by the

36 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

assessee society to its trustee Shri Sangam Misra. All the law requires is that the activities of the assessee society and the income from carrying on such activities should be applied wholly and exclusively to the objects for which it is established and approved. So, as part of carrying out its activities, where the assessee society deem it fit to take certain premises on rent and provide it by way of rent free accommodation to its trustee Shri Sangam Mishra who is managing the whole of the affairs of the assessee society running 12 schools at various places with student strength of over 22000, in our view, the assessee society is well within its rights to provide such an accommodation to the said trustee for smooth and efficient discharge of his official functions as well as to provide residential accommodation. In this regard, we again refer to clause (c) of section 13(2) of the Act which provides that if any amount is paid by way of salary, allowance or otherwise during the previous year out of the resources of the trust or institution for services rendered by an interested person to such trust or institution and the amount so paid is not in excess of what may be reasonably paid for such services, the same shall be held in compliance with the said provisions. The emphasis, therefore, is on provision of services by the interested person to the trust and the salary and allowances/perks should be paid/provided which is commensurate to provisions of such services. In the instant case, there is no dispute that Shri Sangam Mishra is managing the affairs of the assessee society and where the assessee society has decided to provide him a rent free accommodation in lieu of such services, no fault can be found in such a decision which is anyway best left to the assessee society.

37 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

4.3 Now, coming to a related issue regarding extent of such property which has been provided as rent free accommodation to the trustee Shri Sangam Mishra and to what extent, it has been utilised by the school for its activities, there are claims and counter-claims, which we have noted above and are not reproduced for sake of brevity, regarding the floors and open/parking area which are occupied for residence purposes and for school purposes. The ld CIT(E) has based his findings on report of an inspector of ACIT(E) who has conducted the spot enquiry. During the course of hearing, the Bench specifically asked both the parties to produce such report for verification but the same was not available on record and hence, couldn’t be produced for our verification. In such circumstances, we are constrained to remand the matter to the file of the ld CIT(E) to examine the matter a fresh and also to consider the contentions of the assessee society regarding the actual usage of the said property and the attached open area.

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 when they visit Lucknow for monitoring the activities of

38 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

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).

4.5 The next issue is regarding travel expenses borne by the assessee society of Priyakansha Mishra and Aryan Mishra as to whether the said expenses have been incurred for the purposes of object of the trust or personal benefit of these two persons who are related to the trustees of the assessee society. In our view, what is relevant to note is that Ms. Priyakanksha Mishra, besides being the daughter of one of

39 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

the trustees of the assessee society, is a post graduate in Mass Communication and holds a responsible position of an administrator of the assessee society which is running around 12 schools with student capacity of over 22,000 students. If as part of her job, she travels to various schools to oversee the school activities and the assessee society incurs the travel expenditure, the expenditure is incurred for the purposes of the objects of the assessee society. Further, there are visits to other educational institutes and interaction with their faculty and administrators in the evolving field of education, the expenditure so incurred is again for the purposes of the objects of the assessee society. From the details of her travel as listed down in the ld CIT(E) order, it is observed that she has travelled to Udaipur, lucknow and Bombay, all these travel expenditure is thus for the purposes of the objects of the assessee society. Now coming to her visit to USA to pursue course in dramatic in NYFA, the case of the Revenue is that such course is for personal skill development of a particular employee and any expenditure incurred by the assessee society cannot be treated as expenditure for educational purposes. Per contra, the case of the assessee society is that the society has sent her to USA to undergo a course in dramatic in NYFA so that the skills developed by her can be used for organizing various social & cultural programmes in the school run by the society. In our view, any course which is pursued by an individual do doubt leads to enhancement in the personal skills of that individual and where such skill so acquired is used in discharging the role and responsibility which such individual holds in an organisation, it aid and support the activities and ultimate objectives of such an organisation as well. There is thus always a benefit which is derived by

40 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

an individual pursuing such a course as well as by the organisation. However, merely because an individual derives a benefit by way of skill enhancement, it cannot be held that expenditure incurred for pursuing such course is not towards the objectives of the organisation. Conducting regular training and pursuing professional courses are part of every organisation’s human resource development policies these days and especially, in the field of education, one cannot deny the requirement for such regular training and courses. Further, whether a particular skill is beneficial to an organisation is a question which to be decided by that organisation itself as it is best suited to determine the same. In this background, in the present case, what is to be seen is that whether a course in dramatics will aid and support the successful discharge of the functions and role and responsibilities entrusted to Priyakanksha Mishra and in the overall activities of the assessee society. Besides academics, there is greater emphasis these days on extra- curricular activities in the school for overall development of a student and as part of that, the students attend to regular classes in the field of dance, music, dramatics, and participate in various programmes throughout their academic year. These activities help in overall development of students. Therefore, being an administrator of the assessee society and having an additional skill in dramatics will surely help her in overseeing and supervising such activities more effectively being undertaken by teachers across various schools being run by the assessee society. In any case, the course fee has not been borne by the assessee society and it is only the travel expenditure which has been borne by the assessee society. So, even if the arguments of the Revenue are accepted, even on principle of parity, she has picked up a

41 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

reasonable amount of expenditure and only a part of the expenditure has been borne by the assessee society and given that the assessee society will be benefited by such course, the travel expenditure cannot be held to have been incurred for personal purposes. In light of above, we donot see there is any justification in holding that where only travel expenditure has been incurred by the assessee society towards travel of Priyakansha Mishra to pursue such course in dramatics, it is for her personal benefit and not for the objects of the assessee society.

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 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.

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

42 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

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,

43 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

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 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

44 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

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 niji khatedari 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

45 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

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.

4.10. In light of above discussions, we find that there is not sufficient material that is brought on record to take a definitive view in the matter on withdrawal of approval granted to the assessee u/s 10(23C)(vi) of the Act. 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 after providing reasonable opportunity to the assessee society.

In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 29/05/2017

46 ITA No. 152/JP/2017 Scholars Education Trust of India Vs. CIT (E),Jaipur

Sd/- Sd/- ¼ fnok flag ½ ¼foØe flag ;kno½ (Diva Singh) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- /05/2017. *Santosh. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- M/s Scholars Education Trust of India, Bani Park, Jaipur. 2. izR;FkhZ@ The Respondent- The Commissioner of Income-tax (Exemption), Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 152/JP/2017} vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत