CALCOM INSTITUTE OF MANAGEMENT DEVELOPMENT AND TRAINING,NEW DELHI vs. CIT(EXEMPTION), NEW DELHI

4. The assessee filed a detailed reply explaining the entire facts vide submissions dated 8.3.24 which are enclosed in Pages 103 to 157 of the Paper Book. For the sake of convenience, the reply of the assessee containing detailed explanation about its activities and its tie up with Calcom Vision Limited for imparting vocational training to trainees to make them employable in Electronics / Electricals Industries is reproduced below:- “(2. The facts of the instant case are as under: (i) The Assessee Trust was formed on 22nd Day of March, 1988 with the main objects mentioned as under: "(a) To Provide career guidance to the students belonging to weaker sections of society and also to run vocational courses which can provide employment to them. (b) To prepare students for management courses in the field of electronics, electrical and mechanicals engineering, business management and to send such deserving and brilliant students for training abroad. (c) To establish, manage and run institutes for fulfilment of the above objectives and to recruit staff therefore.

Calcom Institute of Management Development and Training (d) To stablish research Centers for promotion of above objects. (e) For developing the skill and efficiency of the workers. ." (a copy of the Trust Deed is attached). (ii) The Assessee Trust has been carrying out its charitable activities by providing vocational training to trainees from weaker sections of society from general public by training them both off-site and on-site to make them employable in the electronics/electrical industries. Normally students who have completed their 10th/12th Class education and do not have resources to take further education are enrolled by the Trust and Training is provided to them to enable them to become employable in electrical / electronics industry. Copies of Trusts Brochures, Advertisements and some sample copies of certificates issued is attached. (iii) For imparting the vocational Training the assesse trust was required to provide on-site training facility so that the students/trainees could get the benefit of actual working in an electronics industry. Accordingly, the assessee Trust has tied-up with Calcom Vision Limited which is a manufacturer of electrical and electronics appliance who allow the For Calcom Institute of Management

1. The instant case is not a fit case for passing an Order u/s 263 of the Income Tax Act, 1961 as the Assessment Order No. ITBA/AST/S/143(3)/2021-22/1033247140(1) passed u/s 143(3) of the Act on 02.06.2021 is neither erroneous nor prejudicial to the interest of the revenue (2. The facts of the instant case are as under: (i) The Assessee Trust was formed on 22nd Day of March, 1988 with the main objects mentioned as under: "(a) To Provide career guidance to the students belonging to weaker sections of society and also to run vocational courses which can provide employment to them. (b) To prepare students for management courses in the field of electronics, electrical and mechanicals engineering, business Calcom Institute of Management Development and Training management and to send such deserving and brilliant students for training abroad. (c) To establish, manage and run institutes for fulfilment of the above objectives and to recruit staff therefore. (d) To stablish research Centers for promotion of above objects. (e) For developing the skill and efficiency of the workers. ." (a copy of the Trust Deed is attached). (ii) The Assessee Trust has been carrying out its charitable activities by providing vocational training to trainees from weaker sections of society from general public by training them both off-site and on-site to make them employable in the electronics/electrical industries. Normally students who have completed their 10th/12th Class education and do not have resources to take further education are enrolled by the Trust and Training is provided to them to enable them to become employable in electrical / electronics industry. Copies of Trusts Brochures, Advertisements and some sample copies of certificates issued is attached. (iii) For imparting the vocational Training the assesse trust was required to provide on-site training facility so that the students/trainees could get the benefit of actual working in an electronics industry. Accordingly, the assessee Trust has tied-up with Calcom Vision Limited which is a manufacturer of electrical and electronics appliance who allow the For Calcom Institute of Management Trainees to learn, work and train in their factory so that they have on-site training and hands-On work experience. This process and tie-up is wholly for the benefit of the trainees from weaker sections of society from general public, who even without formal education in electric/electronic engineering gain hands on experience in the electric/electronic Industry and after their training is completed become ready to be employable in any electric/electronic appliance manufactures. This is the main object of the Trust and the assessee Trust has been successfully carrying out this activity for the welfare of general public at large. It is thus submitted that the trustees or the company where they are interested don't have any benefit directly or indirectly by this arrangement. Rather it is for the sole benefit of the trainees who normally are from weaker sections of the society from public at large. The trainees get a chance to have hands on work experience and on-site training in an actual Page | 5 Calcom Institute of Management Development and Training manufacturing unit which otherwise would not be available to them in any other training institute or educational institute. Further the stipend payable by the trust to the trainees during the period of training is also recovered from the company Calcom Vision Limited. Copy of the agreement with the company is attached. It will thus be evident that no benefit is derived by the trustees or the company Calcom Vision Ltd. The arrangement is only for the sole benefit of trainees as per the objects of the assesse trust.

(iv) During the Instant year the assessment trust has imparted training to 218 Numbers of persons. List of such trainees are enclosed with details of stipend paid to them during the course of training. (v) To augment its resources and to make the model workable and financially sustainable and to enable the assessee Trust to pay the stipend to the trainees, the assessee trust has entered into an agreement with Calcom Vision Ltd, who impart the on-site training to the trainees in the factory premises of Calcom Vision Ltd. This company trains the trainees in their factory and also reimburses the stipend payable to such trainees. Copy of agreement with the company is attached. (vi) Total amount of Stipend paid to the trainees during the year by the Trust is Rs.1,25,02,311/-and against this an amount of Rs.1,26,26,988/- has been recovered from Calcom Vision Limited. The Assessee Trust after meeting all its expenses had a surplus of only Rs.1,82,821/- during the instant year. Therefore also no benefit has been derived by the trustees or the company Calcom Vision Ltd.

3. In view of above facts, it will be evident that all activities of the trust are for sole benefit of the trainees from weaker sections of the general public who get stipend during the period of their learning and training. After the Training is over, such trainees become fully employable by any electrical/electronic appliance manufacturer. This is the main object of the Trust.

Calcom Institute of Management Development and Training

6. As regards your observation that Trustees are significantly benefitted by this arrangement, it is submitted that there is no benefit directly or indirectly derived by the Trustees from such arrangement for the following reasons: - (i) The Trustees or the company Calcom Vision Ltd have not been paid any amount whatsoever by the assessee trust. No amount has been paid to either of them and claimed as utilization by the assessee. (ii) The company Calcom Vision Ltd is a public listed company where the Trustees are shareholders. However, no payment whatsoever has been paid by the Trust to the company Calcom Vision Ltd and therefore it is not justifiable to say that any benefits has been provided by the Trust to the Trustees or to the Company Calcom Vision Ltd. (iii) The outstanding amount of stipend receivable is an inherent feature of mercantile accounting and no benefit can be said to have been derived by the company or the Trustees this account. More so when such amount stands fully received in the subsequent period. (iv) Without prejudice it is further submitted that there is no tax benefit for the company Calcom Vision Ltd on this account as it had a brought forward loss of Rs.8,46,41,866/- and even at the end of the year it had a carried forward loss of Rs.5,86,057,26/-Accordingly there was no tax benefit to the Company Calcom Vision Ltd on account of such Stipend outstanding of Rs.68,54,094/- This is tax neutral for Calcom Vision Ltd. Calcom Institute of Management Development and Training

7. It is further submitted that there is no violation of the provision of section 13(1)(c) read with section 13(2) and 13(3) of the IT Act for the following reasons: (i) No part of the Income or any property of the Trust has been used or applied directly or Indirectly for the benefit of any person referred to in sub-section (3) of section 13 of Income Tax Act. It may be evident that the assessee Trust has not paid any part of its income or Property to any of the Trustee or to the company Calcom Vision Limited and therefore it cannot be said that it has made any violation in terms of Section 13(1)(c) of the Income Tax Act (ii) As regards, the provisions of section 13(2) of the Act, it is submitted that no income or property of the Trust or part of any income or property of the trust can be said to have been used or applied for the benefit of a person referred to Sub-Section (3) as would be evident from the following chart: (a) if any part of the income or No Part of Income or Property of property of the trust or the Trust is Lent to any person institution is, or continues to be, referred in Section 13(3) of the lent to any person referred to in IT Act. In this case the Assessee sub- section (3) for any period Trust has not lent any money during the previous year without without either adequate security either adequate security or or adequate interest or both to adequate interest or both; any Trustee or to Calcom Vision Ltd. The amount outstanding on account of Stipend is a normal and inherent feature of Mercantile accounting system followed by the Trust and it is not a case of lending. (b) if any land, building or other No Land, Building or other property of the trust or Property of the Trust is made institution is, or continues to be, available for use by any person made available for the use of any referred to in sub-section (3) person referred to in sub-section (3), for any period during the previous year without charging adequate rent or other compensation; Calcom Institute of Management Development and Training (c) if any amount is paid by way No Salary, allowance is paid to of salary, allowance or otherwise any person referred to in sub- during the previous year to any section (3) person referred to in sub-section (3) out of the resources of the trust or institution for services rendered by that person to such trust or institution and the amount so paid is in excess of what may be reasonably paid for such services; (d) if the services of the trust or The Services of the Trust are not institution are made available to made available to any person any person referred to in sub- referred to in sub- section (3) section (3) during the previous without adequate remuneration year without adequate or compensation. remuneration or other compensation; (e) if any share, security, or No share, security or other other property is purchased by property is purchased by the or on behalf of the trust or Trust from any person referred institution from any person to in sub-section (3) referred to in sub-section (3) during the previous year for consideration which is more than adequate; (f) f any share, security, or other No share, security or other property is sold by or on behalf property is sold by Trust to any of the trust or institution to any person referred to in Sub-Section person referred to in sub-section (3) (3) during the previous year for consideration which is less than adequate; (g) if any income or property of No Income or Property of the the N trust or institution is Trust is diverted in favour of any diverted d during the previous person referred -to in sub- year in favour t of any person section (3). referred to in sub- section (3): Provided that this clause shall not apply where the income, or the value of the property or, as the case may be, the aggregate Page | 9 Calcom Institute of Management Development and Training of the income and the value of the property, so diverted does not exceed one thousand rupees; (h) if any funds of the trust or The Assessee Trust has not institution are, or continue to made any Investment in any remain, invested for any period concern in which any person during the previous year (not referred to in sub-section (3) has being a period before the 1st day substantial Interest. The amount of January, 1971), in any of Stipend recoverable is not concern in which any person Investment by the Trust but is a referred to in sub-section (3) has normal and inherent part of a substantial interest. accounting for Stipend recoverable on Mercantile basis, which has been received in regular course in the succeeding year. In view of above it will be evident that in this case there is no violation of the provision of section 13(1)(c) read with section 13(2) and 13(3) of the IT Act, 1961. It is accordingly prayed that there is no justification for denying the benefit of Section 11 and section 12 of the Income Tax Act, 1961 to the Assessee trust.

8. The copies of Notice dated 22.09.2019, 15.12.2020, 23.03.2021 and 28.04.2021 issued to the assessee during the course of assessment proceedings are attached. It will be evident that the A.O. during the course of assessment proceedings was fully conscious of the fact that the assessee Trust had Stipend recoverable amounting to Rs.68,54,094/- as on 31st March, 2018, which was received by it in the succeeding year. The copy of Bank statements as well as the copy of account of Calcom Vision Limited in the books of the Assessee were also submitted before him to explain that the amount of Rs.68,54,094/- was recoverable in the regular course of the activities of The Trust, which stood recovered in the succeeding year. The copies of explanations filled before the A.O. are also attached. It may be evident that the assessment Order dated 02.06.2021 was passed after duly considering such explanations and documentary evidences filed by the assessee in response to the queries raised by the A.O. in the faceless assessment proceedings. It is thus submitted that all necessary inquiries and verification were duly made by the A.O. during the course of assessment proceedings and assessment Order Calcom Institute of Management Development and Training was passed in the instant case after making all the necessary inquires and verifications and therefore it is submitted that the assessment Order dated 02.06.2021 is neither erroneous nor prejudicial to the Interests of revenue. In view of above submissions, it is prayed that the instant proceedings u/s 263 of the Act should be dropped.”

5. The ld. CIT(E) however did not heed to the contentions of the assessee and proceeded to treat the order as erroneous and prejudicial to the interest of the revenue and passed revision order by invoking his revision jurisdiction u/s 263 of the Act by observing as under:-

“6. The reply and submission of the assessee has been considered. Before going into the merits of the submissions made, it would be pertinent to mention the facts of the case:

1.

2. Further, on perusal of the financial statements of M/s Calcom Vision Private Limited, it is seen that the said company claimed stipend paid as expense in its Profit and Loss Account for the year ended on 31/03/2018. As such, it is understood that, while the company claims the stipend expense to reduce its taxable profits, major portion of the stipend payment are not actually made during the year by M/s Calcom Vision Limited to the assessee trust. The assessee trust shows the stipend receivable as its receipts and pays the stipend to Calcom Institute of Management Development and Training trainees out of its own funds and claims the same as application of income.

3. The trust has signed agreement only with the related entity, M/s Calcom Vision Limited, for on-site training of the trainees. The trust has not signed any agreement with other players in the industry for on-site training. Thus, the trust nominates the eligible trainees only to its related company, M/s Calcom Vision Limited, for practical exposure in functional areas of electronic industry as per the claim of the assessee trust.

Calcom Institute of Management Development and Training Further, M/s Calcom Vision Limited has also claimed the amount payable to the assessee trust as expenses in its Profit and Loss Account and thereby benefited in reduction of tax liabilities for expenses actually paid for by the assessee trust on behalf of the company. Thus, the funds/income of the trust have been directly used for the benefit of the specified person and hence are in violations of section 13(1)(c) rws 13(2) and 13(3) of the Income Tax Act, 1961. The assessing officer has clearly overlooked these facts while completing the assessment.

Calcom Institute of Management Development and Training It is evident from the above, the assessee has violated the provisions of section 13(1)(c) read with sections 13(2) and 13(3) of the Income Tax Act, 1961, and therefore the benefit of section 11 and 12 of Income Tax Act, 1961 are not allowable to the assessee for the subject year. Explanation (2) to Section 263 of the I.T. Act, inserted by Finance Bill 2015, states as under: "[Explanation 2. - For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, (a) made; the order is passed without making inquiries or verification which should have been (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicialto the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. ]" The assessee's case is clearly covered by clause (a) and (b) of above Explanation (2) to section 263 of the I.T. Act.

10. In the light of the discussion in the preceding paragraphs, I am convinced that the assessment order dated 02.06.2021 passed under section 143(3) r.w.s. 144B of the Income Tax Act, 1961 by the Assessing Officer, National e-Assessment Centre (NeAC) for the assessment year 2018-19 is erroneous in so far as it is prejudicial to the interests of the Revenue as per provisions of section 263 of Income Tax Act, 1961. Therefore, order is set aside to the file of Assessing Officer with the direction for making a de-novo assessment after proper examination of the issues discussed above and due investigation wherever required. Needless to say that the matter may Calcom Institute of Management Development and Training be decided after affording reasonable opportunity of being heard to the assessee and pass a speaking and well-reasoned order.”

CALCOM INSTITUTE OF MANAGEMENT DEVELOPMENT AND TRAINING (PAN:-AAATC0685K Assessment Total Stipend Total Stipend Stipend Payable Stipend Income Return of Whether Exemption Expenditure Income Income Filed allowed u/s 118.12 Outstanding at Receivable at the Year the Year End Year End 2010-11 2689054 3097752 184843 767787 Yes Allowed u/s 143(3) 2011-12 3169462 3169462 276255 464643 Yes Yes 2012-13 3135272 3135272 175035 579536 Yes Yes 2013-14 1955896 2076842 165442 12813715 Yes Yes 2014-15 2211497 2269817 161580 0 Yes Yes 2015-16 7204637 7244387 548398 0 Yes Yes 2016-17 12129807 12226584 2576291 406454 Yes Yes 2017-18 5909138 5956072 471061 689067 Yes Yes Allowed u/s 143(3), 2018-19 12502311 12626988 1359830 6854094 Yes however set aside u/s 263 2019-20 24244750 24288092 1965918 5609749 Yes Yes 2020-21 27731956 27939562 858958 6190177 Yes Yes 2021-22 38349920 38571350 3653596 5956734 Yes Yes 2022-23 57212683 57323964 2631065 6342018 Yes Yes 2023-24 84079803 84081305 7400174 9629430 .Yes Yes

7. We find that given the aforesaid income tax behavior of the assessee, there could be no reason for the ld. AO to take a divergent stand during the year under consideration. Hence his order cannot be termed as erroneous at all by any stretch of imagination.

9. In view of the aforesaid factual observations and respectfully following the judicial precedent relied upon hereinabove, we have no hesitation to quash the revision order passed u/s 263 of the Act by the ld. CIT(E) Delhi. Accordingly, the grounds raised by the assessee are allowed.

Order pronounced in the open court on 09/07/2024.