Where firm of managing
trustee won construction bids on competitive basis and sum was advanced to said
firm, neither section 13(2)(c), nor section 13(1)(d) was violated.
The Tribunal held as in
favour of assessee as under:
1) The Assessing Officer (‘AO’) declined to grant
benefit of section 11, as in the present case construction of building had been
carried out by the firm of a managing trustee and, thus, derived direct benefit
from the assessee-trust;
2) A perusal of section 13(2)(c) would show that the
income or property of the trust or any part of it had be deemed to have been
used or applied for the benefit of the person referred to in sub-section (3),
if any amount was paid by way of salary, allowance or otherwise to any person
referred to in sub-section (3) out of the resources of the trust for services
rendered and the amount so paid was in excess of what might be reasonably be paid
for such services;
3) In the instant case, the AO had outrightly held
that the assessee was not entitled to the benefit of section 11 without
ascertaining the reasonableness of the amount paid for the services rendered;
4) The construction contract had been awarded to the
firm on the basis of open bid. Since the firm quoted lowest rates, the contract
was awarded to the firm. Since the contract was awarded on competitive basis
and the profit earned was reasonable, the provisions of section 13(2)(c) were
not violated;
5) The CIT (A) had given a well reasoned finding
that the sum advanced by the assessee to the firm was business advance. The
amounts were advanced for the on-going construction work in the normal course
of business activity. The order of CIT(A) was to be confirmed and the appeal of
the revenue was to be dismissed – Dy. DIT(Exemptions)
v. Sri Vekkaliamman
Educational & Charitable Trust [2013] 40 taxmann.com 478 (Chennai - Trib.)
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