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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2013-14. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-1, Mumbai and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’). 2. The 1st and 2nd ground of appeal by the assessee are considered together for adjudication, as they address a common issue. The 1st ground raised by the assessee in this appeal is that the Ld. CIT(A) erred in confirming the order of the Assessing Officer (AO) holding that there is contravention of section 13 by the assessee and consequently, it is not entitled to exemption u/s 11. The 2nd ground is that the Ld. CIT(A) erred in confirming the order of the AO treating the entire income of the assessee trust as ‘income from other sources’ without appreciating that income not covered by contravention of section 13 has to be computed u/s 11 of the Act.
3. Briefly stated, the facts of the case are that the assessee is a trust registered under the Bombay Public Trust Act, 1950 and u/s 12A of the Income Tax Act. It is running a school at Kandivali by the name Swami Vivekanand International School and Junior College. On 2nd April 2009 (AY 2010-11), the assessee-trust entered into an agreement with Spring Bird Education Pvt. Ltd. (SBEPL) whereby the latter was given the first floor admeasuring approx. 7,280 sq. ft. along with table, chairs, blackboard, fans, charts, etc. for running pre-primary school. SBEPL was to pay 15% of gross receipt or Rs.1,00,000/- per month whichever is higher to the trust. On 23.04.2011 (AY 2011-12), similar agreement was entered by the assessee trust with SBEPL, whereby the latter was to pay 20% of gross receipt or Rs.2,00,000/- per month whichever is higher to the trust. The assessee vide letter dated 22.09.2015 submitted before the AO that it had received Rs.38,36,520/- from SBEPL.
3.1 The AO arrived at the following findings: (i) that the trustees of the assessee trust and the directors and shareholders of SBEPL are same or are relatives, (ii) that the compensation received of Rs.38,36,520/- is less than adequate for the infrastructure and services provided and not even in conformity with the agreement, (iii) that the benefits due to utilization of the property of the trust has enured to the trustees and relatives by way of profits in the company and other direct and indirect benefit like remuneration/interest and loans given to concerns in which the directors/family members are major shareholders, (iv) that the bus fees from its students could have enured to the benefit of the trust with a nominal investment which presently flowed to the company. In view of the above, the AO concluded that the assessee-trust contravened the provisions of section 13 of the Act. Therefore, he denied exemption u/s 11 and computed the income as per the normal provisions of the Act. Accordingly, the AO held that (i) the claim by the assessee-trust of donation of Rs.1,05,00,000/- and scholarship of Rs.27,63,268/- cannot be considered as expenses related to the receipts of the year, (ii) the claim of exemption u/s 11(1)(a) at 15% and accumulation u/s 11(2) cannot be allowed, (iii) the claim of expenses by the assessee-trust of Rs.63,51,611/- is not borne from the details filed. In view of the above, the AO arrived at a taxable income of Rs.3,31,25,420/- u/s 143(3) vide order dated 12.01.2016.
Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that the Ld. CIT(A) agreed with the reasons given by the AO in the assessment order and dismissed the appeal filed by the assessee.
Before us, the Ld. counsel of the assessee submits that the assessee has not contravened the provisions of section 13 as it has charged adequate rent/compensation for allowing use of properties of the trust by the related concern SBEPL. It is stated by him that a statement was filed before the AO showing working of compensation payable by SBEPL to the assessee for use of premises belonging to and owned by the assessee-trust. As per the said working compensation was to be calculated as per percentage of admission fees, tuition fees and term fees received by SBEPL from students studying in its Kandivali School. The Ld. counsel further submits that the AO has wrongly calculated compensation as a percentage of total fees receive by SBEPL from all schools run by it and also the bus fees received. The Ld. counsel files an application under Rule 29 of the Income Tax Rules 1962 to admit additional evidence in the shape of valuation report dated 01.07.2016 given by Shah & Shah, Consulting Engineers and Government approved valuers. It is stated that the same report could not be filed either before the AO or the Ld. CIT(A), as the assessee has received it after passing of the order by the Ld. CIT(A). It is also stated that the above evidence, which is being produced as additional evidence has got a direct bearing on the issues involved in the present appeal and therefore, the same may be admitted. In this regard, reliance is placed by him on the judgment of the Hon’ble Bombay High Court in Smt. Prabhavati Shah v. CIT 231 ITR 1 (Bom) and the order of the Tribunal in Abhay Kumar 63 ITD 144 (Pat.) (TM).
Per contra, the Ld. DR relies on the order of the Ld. CIT(A). It is stated by him that as per the working given by the AO on page 7 of the assessment order, the assessee has not received the amount @ 20% of gross receipts and hence consideration being inadequate, the provisions of section 13 are clearly attracted. Further the AO has referred to the decision of the Consumer Court on page 8 of the assessment order which further proves that the trustees and the family members are the total beneficiaries of SBEPL. Thus the Ld. DR supports the order passed by the Ld. CIT(A). The Ld. DR opposes the application filed by the assessee for admission of additional evidence on the ground that same could have been filed before the AO or the Ld. CIT(A), whereas the assessee failed to do so. It is also submitted by him that the assessee failed to file documentary evidence before the Ld. CIT(A) as mentioned on page 18 of the order dated 11.11.2016 passed by the Ld. CIT(A). Thus it is submitted by him that the assessee should not be allowed to file additional evidence for the first time before the Tribunal.
We have heard the rival submissions and perused the relevant materials on record. We find that the AO has concluded that the compensation of Rs.38,36,520/- charged by the assessee from SBEPL is less than the adequate consideration. The Ld. counsel by filing the additional evidence submits that as per the valuation report, the consideration/rent of Rs.38,36,520/- charged by the assessee from SBEPL is adequate consideration/rent. We are of the considered view that the examination by the AO of the valuation report filed by the assessee before us would resolve the contentious issue regarding the consideration/rent of Rs.38,36,520/- being adequate or inadequate. In Tek Ram (Dead) Through LRS v. CIT (2013) 357 ITR 133 (SC), the additional evidences were first time produced before the Supreme Court, which were admitted by it stating that the additional documents are of some relevance on the issue. The matter was set aside to the High Court to decide afresh. In the instant case, we find that the valuation report filed by the assessee is quite relevant for the purpose of deciding the issue arising out of the 1st and 2nd ground of appeal. Therefore, we admit the additional evidence filed by the assessee. In CIT v. Jaipur Udyog Ltd. (1997) 227 ITR 345, 349 (Raj.), in a similar case, it has been held that the only proper course for the Tribunal was to send the case back to the Income-tax authorities for taking evidence on record and pass order in accordance with law. In view of the above position of law, we set aside the order of the Ld. CIT(A) on the above issue and restore the matter to the file of the AO to pass a de novo order after examining the valuation report, the valuer