THE ACIT,(E) CIRCLE-1, AHMEDABAD vs. RAI UNIVERSITY, AHMEDABAD

The Assessing Officer also noted that Shri Vinay Rai was father of Shri Vinod Rai – one of the trustees in the assessee-trust. He, therefore, required the assessee to explain as to how the foreign trips undertaken by Shri Vinay Rai were towards the advancement of its objects. In reply, the assessee inter alia furnished the brochure of a conference organized by MIT which revealed that Shri Vinay Rai was one of the confirmed speakers in the status of “Chairman, ASSOCHAM National Council on Education, Employability and Social Justice and Founder of Rai Foundation”. The claim of the assessee that Shri Vinay Rai, during his US trips, had visited several universities to discuss the Student Exchange Programme, was also not supported by any evidence as found by the Assessing Officer. The Assessing Officer, therefore, held that the foreign trips undertaken by Shri Vinay Rai were more for his personal benefits and not for the benefits of assessee-trust.

Rai University, Antra (Dot) Being C/o 15 Nos. Momento 34,425/- BII/ 1, MCIE Com of Rs.1700/- + 12.50% Tax Mathura Road, purchased for Assocham New Delhi-44 Ladies League event at Hyderabad 5, M/s Rai Foundation Antraa (Dot) Being /o 05 Nos. of Mementos 10,688/- A-41, MCIE, Com purchased @ 1900 + 12.506s Mathura Road, tax for distribution to Guests New Delhi-44 against convocation program held at Shangri La- Eros Hotel 6. ASSOCHAM Shangri La's Being C/o Hotel Charges & 2,48,039/- Ms Babita Eros Hotel Snacks charges against Pandita, Rai convocation University, Space program City, B2/1, MCIE, Mathura Road, New Delhi 110044 7. Rai Foundation Specs Being C/o LCD Data 30,700/- B-II/ 1, MCIE, Projector, Laptop, Bose Mathur Road, Near Sound System, Kramer Badarpur Metro Switcher, Digital Video Station, New Delhi- camera A B Masking etc 11 0044 hiring charges against convocation program 8, Rai Foundation ANTRAA(DOT) Being C/o 06 nos. of momentos 11,475/- A-4, MCIE, Com purchase @ 1700/- for Mathura Road, distribution at assocham ladies New Delhi-44. league function at hotel Imperial as per bill no. 0084 dt. 19/07/13 attached. 9. Rai Foundation A-4, Chhaya Photo Being amount of photography and 5,800/- MCIE, Mathura Centre video coverage for function at Road, New Delhi-44. hotel imperial blue on dated 2 3rd July, 20 13 for assocham ladies league as per bill No. 1506 dated 23/07/2013 10. Assocham The Imperial Being C/o. Hotel charges for 20,3 16/- New Dehli booking of hotel for assocham ladies league function on dt.23/07/2013 as per bill no. 2S5245/- 23/07/2013 attached. 11. Mr. Vinay The Oberoi, Being C/o. snacks charges 12,127/- (ND-172) New Delhi for meeting with staff members on Rai University dt. 13/08/2013 as per bill No. 10369108 dt. 13/08/20 13 attached. 12. Vinay Rai AEPC Card No. Being C/o. snacks for staff 96,295/- 3769-161139- meeting & hotel stay charges for Mr. Vinay Rai as per credit card statement dt. 23/11/2013 enclosed. & 553/Ahd/2019 Assessee : Rai University : AY : 2014-15 5 13 Vinay Rai AEPC Card No. Being C/o. purchased 03 No. 4,32,551/- 3769-161139- Handset, snacks, hotel 51001 stay charges, for Mr. Vinay Rai towards staff meeting & foreign Travelling as per credit -card statement dt. 28.10.2013 enclosed. 14. Assocham Shangri La’s Being C/o. hotel charges & snacks 2,48,039/- Ms Babta Pandita, Hotel charges against convocatikon program as per bill No.208948 Rs.208953 dt. 20.11.13 enclosed 15. Madam Richie PIONEERS Being amount of VVIP Gowns 7,675/- Gupta hiring charges towards Incahrge Gowns convocation program as per bill Rai Foundation no.5274 dt. 20.11.2013 enclosed. 16. Mr. Vinay The Oberoi, Being snacks charges for meeting 9,455/- (ND-172) New Delhi with staff members on dt. Rai University 09.12.2013 as per bill no. 10378415 dtd. 09.12.13 enclsoed 17. Babita Pandita, Mukesh Kukreja Being amt of expenses incurred by 18,288/- (Babita.Pandita@ babita Pandita towards assocham raifoundation.org.) ladies league Mumbai women at the decade achievers award event as per detailed enclosed. 18. Babita Pandita, Rai Hotel Sharanam Stay in hotel Sharanam two 2,136/- University person dated 31/02/2013 to 04/01/2014 purpose of assocham ladies league Mumbai event (Ms. Babita & Ms. Riche) 19. Rai University Lincia Jewel Event- Assocham ladies 11,000/- Rasario. Mahila league women of the decade Vikas Mandal achiever award ( bill for month of January/02/20H) 20. Rai University ANTRAA DOT Being C/o, 15 Nos. Memento of 32,063/- Corn Rs. 1700/- + 12.50% tax 2 Nos. Momento of Rs. 1500 + 12.50% Tax purchased for Assocham ladies league event of Mumbai as per bill no.0305 & 0307. Respectively dt 1 and 6th jan, 2014. 21. Mr. Vinay Rai AEPC Card Being Hotel Stay charges for Mr. 49,014/- No. 3769- Vinay Rai & Dr. Arora & 161 139-51001. other snacks charges for meeting as per credit card statement dt. 28/01/2014 attached. 22. Rai University ANTRAA DOT Being C/o. 18 nos. of momentos of 34,425/- Com Rs. 1700+ 12.50% Tax each purchased for Assocham functions at Hydrabad as per bill No. 0329 dt. 27/01/2014 enclosed. & 553/Ahd/2019 Assessee : Rai University : AY : 2014-15 6

Vinay Rai AEPC Card Being amt of hotel stay charges 95,074/- No. 3769- for Ms. J. Panda & Mrs. Usha 161139-51001. Aggrawal during visit of Hydrabad against Assocham function and snacks charge as per credit card statement dt 28/02/2014 24. Mr. Moninder Singh AEBC Credit Delhi- Ahmedabad- Delhi 14,423/- Card No. on 14/02/2014 to 15/02/2014 3769-453730- guest for women award function 82009 25. Ms. Nandita Das, AEBC Credit Mumbai- Delhi-Mum bai 47,100/- Ms. Maria Dias, Card No. on 05/03/2014 to 10/03/2014 CHD Vihan dass 3769-453730- film actress Guest for Women 82009 Award at Tukish Ambessy. 26. Gift giving to MIT Mr. Vinay Rai Gift given to MiT of $ 250 (Shri Vinay Rai happens to be an MIT Alumni) 27. Dr. A Sankara Tour Bills Travelling from Ahmadabad 15,645/- Ready to Mumbai for Special Award Function, 28. Rai University Dr. Tour Bills Meetup CM to all functions 11,764/- A. S. Reddy 29. Rai University Dr. Tour Bills . For Women Achievement Awards 12,092/- A. S. Reddy –All at Hyderabad 30. Babita Pandita Gold Corporate Ms. Sadhana Rai air Tockets, 22,483/- Card No. 3769- seats and Extra Luggage. 453730-82009 31. Babita Pandita Gold Corporate Ms. K Venkata MahaShani 1 7,861 /- Card No. Travelling from Delhi- 3769-453730- Hydrabad-Delhi 82009 32. Babita Pandita Gold Corporate Ms. Sankara Reddy Travelling to 19,733/- Card No. 3769- Delhi to Hyradabad and 453730-82009 Hydrabad to Delhi 21,39,354/-

As noted by the learned Assessing Officer, all the events mentioned above were organized for ASSOCHAM and All Ladies League of which Ms. Harbeen Arora, the Chancellor of the University, was the Global Chairperson. He also noted that Ms. Harbeen Arora, wife of Shri Vinay Rai, was one of the specified persons as defined in Section 13(3) of the Act. The details of expenses furnished by the assessee also revealed that the said expenses were incurred on payment of bills of banquet facilities at posh hotels, bills for purchase of memento distributed to guests at the events, & 553/Ahd/2019 Assessee : Rai University : AY : 2014-15 7 bills for arrangement of light and sound systems. In this regard, the explanation offered by the assessee that this expenditure was incurred towards Beti Bachao – Beti Padhao policy was not found acceptable by the Assessing Officer as the said policy, according to him, was not even in existence in the F.Y. 2013-14. The case of the assessee that less privileged girl students were awarded scholarships during this programme was also found not supported by any evidence by the Assessing Officer. He accordingly arrived at a conclusion that the assessee had incurred huge expenditure under the head “Advertisement and Promotion” and “Travelling and Conveyance” for the benefit of specified persons under Section 13(3) of the Act in violation of provisions of Section 13(1)(c) of the Act and consequently the benefit of Sections 11 and 12 of the Act was not available to the assessee-trust. He accordingly denied the claim of the assessee for exemption of Rs.15,89,27,308/- under Section 11 of the Act and also made a further addition of Rs.4,36,79,779/- on account of “addition to fixed asset” on the ground that the assessee could not furnish any documentary evidence to establish that the said assets acquired by utilizing the trust’s fund were for the advancement of its objects. Accordingly, the total income of the assessee was determined by the Assessing Officer at Rs.16,20,62,280/- in the assessment completed under Section 143(3) of the Act vide order dated 29.12.2016.

Against the order passed by the Assessing Officer under Section 143(3) of the Act, an appeal was preferred by the assessee before the learned CIT(A). During the course of appellate proceedings before the learned CIT(A), an alternative claim was made on behalf of the assessee for exemption under Section 10(23C)(vi) of the Act. In this regard, it was submitted on behalf of the assessee that, even though the assessment was finalized by the Assessing Officer disallowing its claim for exemption under Section 11 of the Act, an application for approval of exemption under ITA Nos. 386/Ahd/2019 & 553/Ahd/2019 Assessee : Rai University : AY : 2014-15 8 Section 10(23C)(vi) for AY 2014-15 onwards had already been filed by the assessee on 21.11.2013. It was submitted that, although the said application was initially rejected by an order dated 20.10.2014, a direction was given by the Hon’ble Gujarat High Court by an order dated 27.07.2015 to consider the same afresh. It was submitted that, again by order dated 16.10.2015 passed as per the direction of the Hon’ble Gujarat High Court, approval for exemption under Section 10(23C)(vi) was rejected by the CIT(Exemptions). An appeal was filed by the assessee against the said order before the ITAT and the ITAT vide order dated 23.03.2018 directed the learned CIT(Exemptions) to grant approval to the assessee-trust under Section 10(23C)(vi) of the Act. It was brought to the notice of the learned CIT(A) by the assessee that the approval for exemption under Section 10(23C)(vi) of the Act was accordingly granted by the learned CIT(Exemptions), Ahmedabad on 18.06.2018 for AY 2014-15 and onwards; and consequently it became entitled legally to get such exemption even for the year under consideration, i.e. AY 2014-15. It was contended on behalf of the assessee before the learned CIT(A) that its income for the year under consideration thus was required to be determined as per the provisions of Section 10(23C)(vi) of the Act and the assessment made by the Assessing Officer by applying the provisions of Sections 11 & 12 of the Act could not be sustained. Keeping in view this new claim alternatively made by the assessee for exemption under Section 10(23C)(vi) of the Act before him, the learned CIT(A) sought remand report from the Assessing Officer seeking his comments and contentions on the new claim made by the assessee. Accordingly, remand report was submitted by the Assessing Officer to the learned CIT(A); and, when the same was confronted by the learned CIT(A) to the assessee, the latter submitted its rejoinder thereon. After taking into consideration the submissions of the assessee, the remand report submitted by the Assessing Officer as well as the case-laws relied upon on by the assessee in support and the relevant record available before him, the & 553/Ahd/2019 Assessee : Rai University : AY : 2014-15 9 learned CIT(A) rendered his decision vide paragraph No.7 (including paras 7.1 to 7.3) which read as under:- 7. DECISION : I have carefully considered the assessment order and submission of appellant. Assessment has been finalized by AO under the provisions of sections 11 to 13, even though AO was fully aware that approval u/s.10(23C)(vi) for Asst. Year 2014-15 was pending at that point in time before the Hon'ble ITAT after the Hon'ble CIT(Exemptions) has again rejected the approval even after directions by Hon'ble High Court of Gujarat for fresh consideration. The AO has, accordingly, finalized the assessment and concluded that the expenditure amounting to Rs.16,06,935/- and Rs.21,39,354/- in relation to traveling by Shri Vinay Rai and Ms. Harbin Arora respectively, was definitely not for the benefit of the Appellant University and such expenditure is in nature of their personal benefit, and therefore, provisions of section 13(1)(c)(ii) are applicable in the case of the Appellant. Therefore, as per assessment order, Appellant was not entitled to benefit of deductions u/s.11 and deductions claimed by the Appellant of Rs.15,89,27,308/- for donations in nature of corpus and of Rs.4,36,79,779/- for addition in assets, were disallowed by the AO.

The learned CIT(A) thus allowed the claim of the assessee for exemption of its income under Section 10(23C)(vi) of the Act, except to the extent of Rs.37,46,289/-, being the expenditure incurred by the assessee under the head “Advertisement and Promotion Expenses” and “Travelling and Conveyance Expenses”, which according to the learned CIT(A) was not allowable being not incurred for the purpose of educational activity of the assessee. Aggrieved by the order of the learned CIT(A), the Revenue and assessee - both are in appeal before the Tribunal on the following grounds:-

The ld. CIT (A) has erred in law and on facts in holding that assesses was eligible for claim of exemptions under section 10(23C)(vi) of the Income tax Act, though the same claim was not part of the original adjudication before the Assessing Officer.

We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that even though the assessment under Section 143(3) of the Act was completed by the Assessing Officer with reference to Sections 11 to 13 of the Act, disallowing the claim of the assessee for exemption under Section 10(23C)(vi) in violation of Section 13 of the Act, the application filed by the assessee for grant of approval under Section 10(23C)(vi) was pending at the relevant time inasmuch as the appeal filed by the assessee before the ITAT against the rejection of such approval by the CIT(A) vide order dated 16.10.2015 was pending and the same came to be disposed of by the ITAT only on 23.03.2018, i.e. after the passing of order by the Assessing Officer under Section 143(3) of the Act on 28.12.2016. As per the order of the ITAT dated 23.03.2018, the concerned CIT(Exemptions), Ahmedabad also passed an order on 18.06.2018 granting approval to the assessee under Section 10(23C)(vi) of the Act for the year under consideration, i.e. AY 2014-15, as well as the subsequent years. Relying on this development, the assessee made an alternative claim of exemption under Section 10(23C)(vi) of the Act during the course of appellate proceedings before the learned CIT(A) and the same was entertained by the learned CIT(A) and quite rightly so by relying on certain judicial pronouncements referred to and relied upon by & 553/Ahd/2019 Assessee : Rai University : AY : 2014-15 14 him in the impugned order. He also sought comments from the Assessing Officer on this new alternative claim made by the assessee for exemption Section 10(23C)(vi) of the Act and after taking into consideration the comments of the Assessing Officer, submissions of the assessee and the entire material available on record, including the approval granted by the learned CIT(Exemptions), Ahmedabad to the assessee under Section 10(23C)(vi) of the Act, the learned CIT(A) allowed the alternative claim of the assessee for exemption under Section 10(23C)(vi) of the Act by passing a well discussed and well reasoned order; the relevant portion of which is already extracted hereinabove. We, therefore, find no infirmity in the order of the learned CIT(A) allowing the alternative claim of the assessee for exemption under Section 10(23C)(vi) of the Act and even the learned DR has not raised any material contention to rebut or controvert this position. The impugned order of the learned CIT(A) on this issue is, therefore, upheld and the appeal of the Revenue is dismissed.

In the assessee’s appeal, the solitary issue involved relates to the disallowance of Rs.37,46,289/- as confirmed by the learned CIT(A) out of expenses incurred by the assessee under the head “Advertisement and Promotion Expenses” and “Travelling and Conveyance Expenses”. In this regard, the learned Counsel for the assessee has submitted that this expenditure was considered by the Assessing Officer from the angle of Section 13(1)(c) of the Act and as the same was allegedly found by him as incurred for the benefit of persons specified in Section 13(3) of the Act, the claim of the assessee for exemption under Section 11 of the Act was disallowed by him. The learned Counsel for the assessee has contended that since the assessment made by the Assessing Officer with reference to Section 11 r.w.s. 13 is found to be unsustainable and the income of the assessee is finally assessed with reference to Section 10(23C)(vi) of the Act, Section 13 is no more relevant and the learned CIT(A) was not justified in & 553/Ahd/2019 Assessee : Rai University : AY : 2014-15 15 confirming the disallowance of expenditure which was made by the Assessing Officer with reference to Section 13 of the Act. She has contended that what is relevant for Section 10(23C)(vi) of the Act is that the income should be applied fully and exclusively by the assessee-trust to the objects for which it is established. She has contended that the assessee is in a position to support and substantiate its case on evidence and the matter may be restored to the file of the Assessing Officer for allowing the assessee an opportunity to do so. Although the learned DR has contended that the expenditure in question was disallowed by the learned CIT(A) vide his impugned order after having found that the same was not incurred for the purpose of educational activity of the assessee, we find that no opportunity was specifically given to the assessee to establish its case on evidence as per clause (a) of third proviso to Section 10(23C)(vi) of the Act that the expenditure in question was incurred wholly and exclusively for the objects for which it is established in order to avail the benefit of exemption provided in Section 10(23C)(vi) of the Act. We, therefore, consider it fair and proper, and in the interest of justice, to restore this issue to the file of the Assessing Officer for deciding the same in accordance with law after giving the assessee an opportunity of being heard.

In the result, the appeal of the Revenue is dismissed; whereas the appeal of the assessee is treated as allowed for statistical purposes.