These assessees two appeals for assessment years 2011-12 and 2012-13 arise against the Commissioner of Income Tax (Appeals)-15, Kolkatas separate orders dated 16.11.2015 & 09.12.2015 passed in case Nos.158, 157/CIT(A)/14-15/JCIT R- 51/Kol involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short the. Heard both the parties. Case file(s) perused.

2. It transpires during the course of hearing that the Assessing Officer as well as CIT(A) have invoked sec. 40A(2)(a) of the whilst invoking the impugned disallowance(s) of assessees payments made to M/s IndiSmart Global Ltd. (IGL) & M/s International Institute of Information Technology (IIIT) in like various services rendered from the two payees side. Both the lower authorities have disallowed theA No.155-156/Kol/2016 Assessment Yeasr 11-12 & 12-13 M/s Salt Lake Society for Hotel Management Vs ITO Wd-43(2), Kol. Page 2 impugned payments made to two specified parties to the tune of 60,95,786/- in former whereas the CIT(A) has partly accepted the assessees contention in restricting the said disallowance of 100,74,663/- made in the course of assessment to the extent of 9,74,913/- only in latter assessment year. The CIT(A)s detailed discussion in former assessment year followed in latter assessment year reads as under:- 4. Decision: I have gone through the assessment order passed u/s. 1 43(3) for A.Y 2011-12 and the submission made by the assessee during the appellate proceedings. The AO has held that the payments made to M/s Indismart Global Ltd. (henceforth mentioned as IGL for sake of brevity) and M/s International Institute of Information Technology (henceforth mentioned as IIIT for the sake of brevity) as unreasonable and excessive as they are the related persons of the assessee. The AO has reached to this conclusion on the basis of the statements recorded u/s. 131 by her on 24.03.2014 of Sri Rabindra Pratap Singh of IGL (who had attended in response to summons issued by the AO to the Principal Officer of IGL) and of Sri Suourabh Sarkar of IIIT (who had attended in response to summons issued by the AO to the Principal Officer of IIIT). The AO had further given a categorical finding that but for the copy of the MoUs entered into between these parties, no evidence whatsoever were produced before her to substantiate the genuineness of the transactions. In order to understand the issue further, it would be imperative to go through the P&L A/c of the assessee for AY 201112 and earlier years. A. Y Professional/business receipt Other income Total expenses Profit 2009-10 10,30,30,802 1,05,46,989 9,49,77,113 86,00,677 2010-11 10,70,33,276 1,06,15,828 9,89,17,006 87,32,097 2011-12 10,15,78,940 1,17,56,965 9,68,63,191 1,64,72,714 2012-13 9,94,47,805 1,87,62,595 10,96,82,596 85,27,804 Further, the break-up of Other income as appearing in Sch. 10 of the P&L account is tabulated below for these assessment years. Items AY: 2009-10 AY 2010-11 AY: 2011-12 Commission 3, 56,400 5,26,050 26,08,750 Hostel fee fine 30,889 40,585 32,650 Interest from loan 32,26,740 53,90,519 45,19,174 Interest on FDR 66,74,521 42,98,729 36,54,963 Interest on savings a/c 24,107 34,803 1,04,778 Misc. receipt 86,932 24,073 14,000 Sale of prospectus 1,47,400 96,425 1 ,02,050 Debenture interest -- 1,29,644 5,20,000 Repeatation charges -- 75,000 1,24,500 Referral fees -- -- 76,100 Course fee fine -- --- --- Total 1,05,46,989 1,06,15,828 1,17,56,965 ITA No.155-156/Kol/2016 Assessment Yeasr 11-12 & 12-13 M/s Salt Lake Society for Hotel Management Vs ITO Wd-43(2), Kol. Page 3 The above table clearly shows that substantial part of the Other income comes from, interest income or commissions income for which there are very little corresponding costs debited by the assessee in its P&L a/c. Thus, it can be safely presumed that to earn this Other income, the assessee would not have incurred more than 10% of the expenditure debited in the P&L account. Hence, the natural corollary would be that 90% of the expenditure debited in the P&L a/c of the assessee pertains to the professional and business receipt for running the Hotel Management Institute. Hence, the table-1 is recast as under: A.Y Professional/business receipt A Total expenses B 90% of total expenses in P&L a/c C Ratio of A to C in terms of % 09-10 10,30,30,802 9,49,77,113 8,54,79,402 82.96 10-11 10,70,33,276 9,89,17,006 8,90,25,305 83.18 11-12 10,15,78,940 9,68,63,191 8,71,76,872 85.82 The above table shows that the expenses debited in the P&L a/c of the assessee for AY 2011-12 was definitely very high as compared to the AYs 2009-10 and 2010-11. Hence, it was the duty of the assessee to prove before the AO that all its expenses were wholly and exclusively incurred for business purposes. When the AO asked the assessee to justify the allowability of the payments made to the related parties M/s IGL and M/s IIIT, it only produced a copy of MoU entered into by the assessee with these related parties. This is not sufficient compliance of the requirement of Section 40A(2)(a). The assessee could not produce the necessary documentary evidence either before the AO or before the undersigned during the appellate proceedings to prove that commensurate services were rendered by these two parties. The AR of the assessee simply stated that the payments are reasonable and genuine. This claim cannot be accepted without supporting evidence. If we analyse the P&L a/c of M/s IGL for AY 2011-12 which was submitted by the AR during the appellate proceedings, then following facts emerge out. Items A.Y 2011-12 Service charges 1,60,00,000 Tuition fees -- Hostel fees -- Rental income 54,00,000 Other income 438 Total receipt 2,14,00,438 Out of the above payments received by M/s IG from the related parties as reported by the auditor in TAR are as under: Items AY: 2011-12 Rent received 54 lacs Services charges received 160 lacs Total 214 lacs So we see that entire receipt of M/s IGL i.e. Rs214 lacs in AY 2011-12 is from related parties ITA No.155-156/Kol/2016 Assessment Yeasr 11-12 & 12-13 M/s Salt Lake Society for Hotel Management Vs ITO Wd-43(2), Kol. Page 4 The expenditure claimed by M/s IGL in AY 2011-12 are reproduced below: EMPLOYEE BENEFIT EXPENSES ITEMS For the year ended 31.03.2011 (a) Salary, wages and bonus 1,748,951 (b) Workmen & staff welfare expenses -- 1,748,951 FINANCE COSTS Items For the year ended 31.03.2011 Interest on others (debenture) 2,340,000 2,340,000 DEPRECIATION & AMMORTISATIN EXPENSES Item For the year ended 31.03.2011 Depreciation for the year 621,093 Less: Transfer to Revaluation revenue --- -- --- -- OTHESR EXPENSES ITEMS For the year ended 31.03.2011 Advertisement & publicity -- Books & Journals -- Freight, carriage & transport -- Power & fuel -- University fees -- Rent 3,780,000 Counselling expenses -- Food fest expenses -- Hostel food cost -- Insurance -- Fees & remuneration 360,000 Internet charges -- Uniform expenses -- Legal and professional charges 461,000 Membership fee -- Student welfare expenses -- Student practical expenses -- University registration charges -- Repair maintenance & renovation -- Building -- Electrical -- Furniture -- Other 1,713,397 Hostel maintenance -- ITA No.155-156/Kol/2016 Assessment Yeasr 11-12 & 12-13 M/s Salt Lake Society for Hotel Management Vs ITO Wd-43(2), Kol. Page 5 Guest house maintenance -- Computer maintenance -- 1,713,397 Hire charges -- Auditors remuneration Audit fees 19,485 Tax audit fees 5,515 House keeping expenses -- Telephone charges 89,237 Tour & travelling exp. -- Bank charges 842 Water charges -- Miscellaneous expenses (A) 3,851,268 10,280,744 (A) Miscellaneous expenses Items For the year ended 31.03.2011 Cable TV charges -- Car hire charges -- Business promotion expenses -- News paper & magazine -- Printing & stationery 7,721 Motor car expenses -- Miscellaneous expenses -- Consultancy fees` 3,398,500 Conveyance charges -- Filing fees 530 Income tax paid -- Office expenses 2,417 Penalty for delay payment -- Postage & courier charges -- Professional & consultancy charges -- Registration charges 91,700 Professional tax (company & Director) -- Seminar & function -- Excess of income over expenditure transferred to accumulated fund 3,930,376.70 9,236,851.00 Out of Rs.76,38,258/- shown as other Income above, Rs25 lacs have been received as consultancy charges and Rs.50 lacs have been received as student training programme from, our assessee. But to earn such a huge income, the assessee has spent Rs.1,96,840/- only as salary and allowance to its professional. Thus, it can be anybodys guess as to what sort of consultancy or training can be imparted by this trust whose employee cost for the whole year is Rs.1,96,840/- Employee wise payment is as under:

1. SHAUN KENWORTHY Rs.50,000(p.a.) ITA No.155-156/Kol/2016 Assessment Yeasr 11-12 & 12-13 M/s Salt Lake Society for Hotel Management Vs ITO Wd-43(2), Kol. Page 6

2. SMT. PRIYANKA GHOSHAL Rs.20,0000(p.a)

3. BISWANATH DAS Rs.35,000(p.a)

4. KAUSHIK CHANDRA Rs.25,000(p.a.)

5. AMARNATHA PAUL Rs.20,000(p.a.)

6. GOURAV DEY Rs.46,000(p.a) Certainly such employee cannot be professional and technically competent to impart genuine training and consultancy to anybody to earn a huge income of Rs.75 lacs. Hence, this trust is only being used as a faade to divert taxable income by the related companies. Further the Operational Cost of Rs.35,05,807/- debited in the Income & Expenditure account consists mainly of following items House rent Rs.12,72,000/- Office rent Rs.12,78,000/- Rs.25,50,000/- Various other major expenses under this head are Telephone Rs.2,85,418/- Security Rs.1,04,022/- Repair & Maintenance Rs.1,46,014/- Audit fees Rs. 49,530/- Annual maintenance charges Rs. 39,378/- Rs.6,24,362/- Hence, the closer look of the income & expenditure account and its various schedules prove that this trust is not at all in the position of rendering any professional or consultancy service to anybody. Further, the assessee miserably failed to prove with any documentary evidence the genuineness the service rendered by this trust. The AR of the assessee has raised a plea that all the payments haves been made by cheque and TDS has been deducted, thus the payments should be considered as genuine and commensurate. This plea of the AR is without any basis. Any payment by cheque or deduction of TDs cannot make a transactions genuine or commensurate especially between the two related parties if the nature end basis of payment cannot be justified & proved with valid documentary evidence. Thus, this plea of the assessee is rejected.

3. We have given our thoughtful consideration to rival contentions. There can hardly be any dispute about the fact that the assessee as well as its two payee(s) (supra) are related parties covered u/s 40A(2)(a) of the. Both the lower authorities have disallowed the impugned sum(s) penal in furtherance to availing of various services rendered by two payee(s) as excessive and unreasonable. Learned Senior Departmental Representative vehemently contends during the course of hearing that the impugned identical disallowance in both assessment year(s) is liable to be upheld ITA No.155-156/Kol/2016 Assessment Yeasr 11-12 & 12-13 M/s Salt Lake Society for Hotel Management Vs ITO Wd-43(2), Kol. Page 7 as the CIT(A) has clearly proved the same to be both excessive and unreasonable. The assessees case on the other hand is that the purpose of impugned statutory provision enshrined in sec. 40A(2) is to avoid any attempt of tax evasion taken recourse to by the specified parties. He invites our attention to the CBDTs Circular No.6-P dated

06.07.1968 making necessary clarification to this effect as considered in honble Bombay high courts decision in CIT vs. Indo Saudi Services (Travel) (P) Ltd (2009) 310 ITR 306 (Bom), V.S Dempo & Co. (D) Ltd. vs. CIT 336 ITR 209 (Bom) and CIT vs. Siya Rans Garg (2011) 237 CTR 321 (P&H). He then refers to the two payee income tax returns acknowledgements indicating both of them to have declared respective taxable income(s) of 70,30,744/- and 38,07,614/- in former assessment year 2011-12. The same sufficiently indicates that the two payee(s) are assessed as maximum rate of tax. The factual position is no different in latter assessment year 2012-13 as well. We conclude in these facts and circumstances that the impugned disallowance(s) u/s 40A(2) are not to be sustained on this count alone. We direct the Assessing Officer to delete the same in both assessment year(s).

4. These assessees appeals are allowed. Order pronounced in open court on 15/03/2019 Sd/- Sd/- ( !) () !) (J.Sudhakar Reddy) (S.S.Godara) Accountant Member Judicial Member *Dkp-Sr.PS *- 15/03/2019 / Kolkata    / Copy of Order Forwarded to:-

1. /Assessee-M/s Salt Lake Society for Hotel Management, X-1, 8/3, Block-EP, Sector-V, Electronics Complex, Salt Lake, Kolkata-91

2. ! /Revenue-ITO Ward43(2), Uttarapan Market, Ultadanga, Manicktala Civic Centre, Kolkata-54

3. - . / Concerned CIT

4. .- / CIT (A)

5. / ))-, - /DR, ITAT, Kolkata

6. 3 / Guard file. By order/ , /True Copy/ / -,