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2012 (6) TMI 324 - AT - Income TaxCharitable trust - alleged violation of provisions of Section 13(1)(c) r.w.s. 13(2) - assessee, charitable trust registered u/s 12A, one of the group trust managed by Ansal group, having main objects to promote and encourage educational activities - alleged motivation on the part of Ansal Properties and Infrastructure Ltd. to clandestinely divert Trust Funds for its personal use - agreement to sale of plot by APIL to Trust and its consequent cancellation contended to be colorable device by Revenue - Held that - It is found that there is no change in Trust s objects and agreements to sale of reserved plots of APIL with group educational trust do not carry any element of primary suspicion. On the basis of contemporaneous evidence, it is observed that presumption cannot be drawn that APIL diverted the funds without proper justification for its use. Before the agreements and after the termination of agreements APIL had interest free credit balance with assessee and it has been providing monetary support to trust now and then. Ground of Revenue dismissed. Non collection of rent and interest from APIL - APIL contended that actual payments made were more than rent and interest and proper entries not made in books of trust - Held that - What is due in books from AIPL was not money lent or advanced to APIL. It was caused by unadjusted balances of interest on debts already discharged prior to 2001. In fact as at 31.3.2006, APIL had a credit balance of more than Rs. 80 lakhs - No merit in the ground of Revenue Advance to Charanjiv Educational Society not registered u/s 12A, meant for establishing an educational institution at Chhattisgarh - Held that - Assessee in furtherance of its objects formed this charitable society with same objects and trustees and incurred the expenses which are shown as advance to CEC. In our view, even if the same amount was donated to CEC in place of advance, in that eventuality also it would have been allowed as application to objects. Corpus donations received from HCL & Blue bird - benefit u/s 11(1)(d) - Held that - Since assesse did not violate any provisions of Sec 13, besides it emerges from the record that both the donors confirmed the corpus donations. CIT(A) was right in deleting these additions. Unexplained credit u/s 68 - corpus donation received from S Jagjit Singh, who though first confirmed such donations, later denied some contents - Held that - Such addition cannot be made u/s 68 as unexplained cash credit as it is held that there is no violation of Sec. 13. Besides, the name of creditor and identity is accepted by AO. The transaction is through DLF pay order which was donated to assessee, on behalf of JS, to resolve a land dispute. Therefore genuineness and creditworthiness is proved. Also, donors may retract statement, but it can not take away the original nature of corpus donation, which has been used accordingly by assessee. Thus legally this addition can not be made u/s 68. In respect of other donations, assessee having discharged the primary onus of leading evidence for identity, donor and his creditworthiness, assessee trust can not be saddled with this addition u/s 68 which is deleted. Apropos development fund charges directly credited to balance sheet - Held that - Amount has been rightly held by the lower authorities to be the income of the assessee. Depreciation on assets acquired by the application of trust income - dis-allowance - Held that - In view of decision in case of DIT v Vishwa Jagriti Mission (2012 (4) TMI 289 (HC)), we allow the claim of depreciation on such asset.
Issues Involved:
1. Corpus donation addition under Section 68. 2. Treatment of development fund charges. 3. Denial of depreciation on fixed assets. 4. Alleged violation of Section 13(1)(c) and 13(2) regarding transactions with related parties. 5. Non-collection of rent and interest from related party. 6. Advances to another charitable society. 7. Corpus donations from specific entities and their eligibility under Section 11(1)(d). Detailed Analysis: 1. Corpus Donation Addition under Section 68: - Issue: The addition of Rs. 1.50 crores and Rs. 25 lacs as corpus donations under Section 68. - Judgment: The Tribunal found that the identity and genuineness of the donors were established. The addition under Section 68 was not justified as the donations were made through banking channels and confirmed by the donors. The Tribunal emphasized that the assessee was not given the opportunity to cross-examine the donors, which is a violation of natural justice. The additions were deleted. 2. Treatment of Development Fund Charges: - Issue: Whether the development fund charges of Rs. 59,58,384/- should be treated as corpus of the trust. - Judgment: The Tribunal upheld the addition made by the AO, treating the development fund charges as income of the trust. It was held that since the amount was collected from students as part of the fee, it should have been shown as receipts of the appellant. 3. Denial of Depreciation on Fixed Assets: - Issue: Whether depreciation should be allowed on assets acquired by the application of trust income. - Judgment: The Tribunal allowed the claim for depreciation, following the decision of the Hon'ble Delhi High Court in the case of DIT v. Vishwa Jagriti Mission, which held that depreciation on fixed assets utilized for charitable purposes should be allowed. 4. Alleged Violation of Section 13(1)(c) and 13(2): - Issue: Alleged violation due to transactions with related parties, including a loan or advance to M/s Ansal Properties and Infrastructure Ltd. - Judgment: The Tribunal found that the transactions were genuine and not a colorable device. The agreements to sell plots were supported by contemporaneous records, and the amounts were refunded within a reasonable time. The Tribunal upheld the CIT(A)'s decision that there was no violation of provisions of Section 13(1)(c) and 13(2). 5. Non-Collection of Rent and Interest from Related Party: - Issue: Whether non-collection of rent and interest from M/s Ansal Properties and Infrastructure Ltd. amounted to a violation of Section 13(1)(c). - Judgment: The Tribunal upheld the CIT(A)'s decision that there was no violation, as the amounts due were not loans but unadjusted balances of interest on debts already discharged. 6. Advances to Another Charitable Society: - Issue: Advances made to Charanjiv Educational Society and whether it constituted a violation of Section 13. - Judgment: The Tribunal found that the advances were made in furtherance of the trust's objects and were not for the personal benefit of the trustees. The advances were for establishing an educational institution, and the funds were used for charitable purposes. The Tribunal upheld the CIT(A)'s decision that there was no violation of Section 13. 7. Corpus Donations from Specific Entities: - Issue: Eligibility of corpus donations from M/s HCL Corporation Ltd. and M/s Blue Bird Electrotrading Ltd. under Section 11(1)(d). - Judgment: The Tribunal upheld the CIT(A)'s decision to allow the donations as corpus, as the donors had confirmed the donations, and there was no violation of Section 13. Conclusion: - The Tribunal dismissed the revenue's appeal for A.Y. 2006-07. - The assessee's appeals for A.Y. 2006-07 and A.Y. 2007-08 were partly allowed, with the Tribunal deleting the additions under Section 68 and allowing the claim for depreciation. - The Tribunal upheld the CIT(A)'s findings on the genuineness of transactions with related parties and the proper application of funds for charitable purposes.
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