Exemption to Trust U/s. 11 of Income Tax Act can not be denied if Payment made to concerns covered U/s. 13(3) not excessive

DDIT(E)- II Vs. M/s. Rock Church Ministries (ITAT Hyderabad)

The purpose of section 13(1)(c) is to deprive a religious or charitable trust from exemption if it is found that its income is used or applied, directly or indirectly, for the benefit of the specified persons. Section 13(1)(c) carves out a general exception wherein the provisions of sections 11 and 12 will not operate on account of user or application of any income of the trust for any direct or indirect benefit of the any specified persons. It is an undisputed fact that the rent paid of Rs. 9,500 is not excessive even as per the old provisions of municipal. The assessee paid the rent as per the old municipal taxes. The present rental value would be much more than the rent paid by the assessee for the property having a building of 4000 sq. Ft. on a land admeasuring 15,000 sq. ft. that too in a prime locality in the city of Hyderabad. The market rent i.e., Rs. 80,000 per month as estimated by the Government Valuer is much more to the rent paid by the assessee. The Assessing Officer could not establish that the rent paid by the assessee is excessive and the rental value estimated by the Government valuer is incorrect. The contention of the Revenue that there is variation in the name in the municipal records and I.T. records is also baseless as the name in the municipal records is in abbreviated form.

 We have also gone through the order of this Tribunal in the case of Oasis Educational Society (supra) wherein a similar issue was decided in favour of the assessee. In this case the assessee was an educational institution entitled for exemption u/s. 10(23C)(iiiad) of the I.T. Act, 1961. The Assessing Officer denied exemption on the ground that the land of the school building was not owned by the assessee society and the principal paid was paid a salary of Rs. 10,000 per month and thus he was given pecuniary benefit contrary to the provisions of section 13 of the Act. The Tribunal held that charging of a small amount ranging from Rs. 1,000 to Rs. 2,500 could not be termed as capitation fee. The Tribunal distinguished the decision of this Tribunal in the case of Vasavi Academy of Education, in ITA No. 1794/Hyd/2008 dated 4.2.2010, Hyderabad which was relied on the learned DR, and allowed the case of the assessee.

 The CIT(A) has passed a detailed and speaking order on this issue. In the absence of any evidence in support of the contention of the Assessing Officer, We do not find any infirmity in the order the CIT(A) and the same is confirmed. In view of the detailed order of the CIT(A) and the Tribunal order in the case of Vasavi Academy (supra), the grounds raised by the Revenue do not find any merit. Accordingly the grounds raised by the Revenue are dismissed.

INCOME TAX APPELLATE TRIBUNAL, HYDERABAD

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