A.Kalyanasundharam, - (1.) THE assessee has claimed the benefit of Section 11 and Section 2(75) of the Income-tax Act and this claim has been refused to it on the ground that, the funds of the appellant trust have been utilized in such a manner to benefit the children of the settlor of this trust.
(2.) The appellant trust's Balance Sheet as on 31-3-1985 showed a payment under the account 'Advance Rent' of Rs. 2,38,500. This was enquired by the assessing officer. The assessee had submitted that, the trust had taken on long lease a building from M/s. Atul Trust, by means of a lease deed dt. 16-3-1983. The lease deed stated the monthly rental to be Rs. 1,200 and the amount of deposit was Rs. 2,60,000 adjustable monthly of Rs. 1,000 against the rental. The lease of the building was also stated to be for running of a school. The trust finding it difficult to run the school, gave the premises free of any rent to Cambridge School of Society which actually was running a school. The assessing officer's objections are that, (a) M/s Atul Trust was a family trust created for the benefit of the children of Mr. Chaidur Rahman, Mr Abdul Qadir and Mr Nool Alam; (b) the assessee trust was created on 21-1-1983 vide a trust deed by Mr. Abdul Qadir with the aim and objects of advancement, promotion of education and all other allied charitable objects as are defined under the I.T. Act; (c) the Cambridge School was being run by the Trustees of Atul Trust directly through their relations who are nominated to the management of the school; (d) the appellant trust was left with a very meagre amount after the advance of the rent deposit of Rs. 2,60,000 for carrying on of the objects of the Trust; (e) the transaction was colourable because the funds of the appellant trust was made available to the private family trust,, the enjoyment of which was with the beneficiaries; and (f) applying Section 13(3) of the Act, the appellant trust was denied the exemption under Section 11.
(3.) IN appeal before Dy. CIT(A), the appellant had placed his reliance on the recognition and registration was granted by the Commissioner of INcome-tax under Section 12A(e) of the Act as also the exemption under Section 80G of the Act. The Dy. CIT(A) had observed as under while rejecting the claim of the assessee: I have heard the appellant's counsel. On going through the details filed and on perusal of the ITO's order, I find that the action of the ITO is correct. The ITO has discussed at length the reasons for disallowing the expenditure. Action of the ITO is confirmed and the appeal is dismissed.;