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2013 (1) TMI 239 - SC - Income TaxExemption under Sections 11 & 12 denied - undue advantage under the provisions of Section 80G - assessee trust treated as an AOP - assessee by way of donation received two post dated cheques from M/s Apollo Tyres Ltd. - Held that - The post dated cheque for Rs.40 lac was given before 31st March, 2002 i.e. during the accounting year 2001-2002 and the cheque was duly honoured in April, 2002 when it was presented before the collecting bank. As the cheque had been honoured and the amount was paid to the assessee trust, the date of payment of cheque should be treated as the date on which the cheque was given. Had the cheque been dishonoured, things would have been different but as the cheque had been duly honoured, as laid down by this court in the case of The Commissioner of Income-Tax, Bombay South, Bombay vs. Messrs. Ogale Glass Works Ltd., Ogale Wadi (1954 (4) TMI 3 - SUPREME COURT) it will have to be presumed that the amount was paid on the date on which the cheque was given to the respondent assessee and, therefore, it cannot be said that any undue favour was done by the respondent-assessee to M/s Apollo Tyres Ltd - thus there was no violation of the provisions of Sections 13(2)(b) or 13(2)(h) - in favour of assessee..
Issues:
1) Delay condoned. 2) Leave granted. 3) Appeal against order passed in ITA No.150 of 2008 by High Court of Delhi. 4) Assessment year 2002-2003 - Trust treated as AOP, exemption under Sections 11 & 12 not continued. 5) Acceptance of post-dated cheque by trust, related to directors of donor company. 6) Dismissal of appeal by Income Tax Commissioner and subsequent appeals. 7) Allegation of undue favor by trust to donor company. 8) Dismissal of appeal against assessment order. 9) Tribunal's decision in favor of assessee trust. 10) Appeal by Revenue against Tribunal's decision. 11) Revenue's argument of breach of Section 13(2)(b) and 13(2)(h). 12) Assessee's defense of no illegality committed, reliance on Tribunal's reasons. 13) Undisputed facts regarding donation receipt and treatment in balance sheet. 14) Court's reliance on precedent regarding conditional payment by negotiable instrument. 15) Court's conclusion of no irregularity or violation by assessee trust. 16) Agreement with Tribunal and High Court's decision, appeal dismissed. Analysis: The case involves an appeal by the Revenue against an order passed by the High Court of Delhi regarding the assessment year 2002-2003. The dispute arose when a trust, treated as an AOP, accepted a post-dated cheque from a donor company, leading to allegations of undue favoritism. The Assessing Officer concluded that the trust had acted improperly to benefit the donor company, resulting in the denial of exemption under Sections 11 & 12 of the Income Tax Act. Subsequent appeals by the trust were successful, with the Tribunal ruling in their favor based on the treatment of the donation amount as receivable and the donor company not availing benefits in the relevant accounting year. The Revenue contended that the trust breached Section 13(2)(b) and 13(2)(h) by accepting the post-dated cheque in the earlier accounting year. In response, the trust argued that no illegality occurred as the cheque was honored in the subsequent year, aligning with legal precedents on conditional payments through negotiable instruments. The court examined undisputed facts, including the treatment of the donation in the trust's records and the donor company's actions, ultimately concluding that no irregularity or violation occurred. Relying on the precedent regarding conditional payments, the court affirmed the Tribunal and High Court's decisions, dismissing the Revenue's appeal. The court emphasized that the relationship between trustees of the trust and directors of the donor company was irrelevant to the case. The judgment underscores the importance of legal principles governing negotiable instruments and conditional payments, ultimately upholding the decisions in favor of the assessee trust and rejecting the Revenue's arguments of impropriety.
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