2013 (6) TMI 49 - HC - Income Tax

Exemption u/s. 11 - ITAT allowed the claim though assessee failed to get the permission of the Charity Commissioner to raise loans for the trust - Held that - There is no bar in the Trust Deed to take unsecured loans. Moreover, it is not in dispuse that the unsecured loans taken in earlier years were duly reflected in the books maintained by the assessee and though prior approval was not obtained, the assessee had, in fact, subsequently applied for approval from the Charity Commissioner and the Charity Commissioner has neither granted approval nor initiated any proceedings under the Trust Act for the alleged violation of obtaining unsecured loan without prior permission - no reason to entertain question proposed by the revenue. Depreciation on the assets & repayment of loan disallowed as the cost of which has already been allowed as a deduction on account of application of income - Held that - Issue arising herein are covered by the decision of CIT v. Institute of Banking Personnel Selection (IBPS) 2003 (7) TMI 52 - BOMBAY High Court - in favour of the assessee.

Summary

Issues:
1. Exemption under section 11 of the Income-tax Act for a charitable trust without permission from the Charity Commissioner.
2. Allowance of depreciation on assets already deducted as application of income.
3. Repayment of loan as application of income leading to double deduction.

Analysis:
1. The first issue revolves around the denial of exemption under section 11 of the Income-tax Act due to the failure of a charitable trust to obtain permission from the Charity Commissioner for raising loans. The Tribunal allowed the claim of the assessee for exemption under section 11, stating that once registration is granted under section 12AA, the exemption cannot be withdrawn unless there is a violation of section 13 or cancellation of registration. The Tribunal distinguished a previous case where a trust engaged in profit-making activities without authorization, which is not the case here. The trust had reflected unsecured loans in its books, applied for approval from the Charity Commissioner, and faced no action for the alleged violation. Thus, the court found no reason to entertain this issue raised by the revenue.

2. The second and third issues deal with the allowance of depreciation on assets and the repayment of a loan as application of income, potentially resulting in double deduction. Both issues were found to be covered by a previous decision in the case of CIT v. Institute of Banking Personnel Selection (IBPS), favoring the assessee and going against the revenue. As a result, the court decided not to entertain these questions. The judgment emphasized consistency with previous decisions and the lack of grounds to reconsider the matters at hand.

In conclusion, the appeal was dismissed, and no costs were ordered. The judgment focused on the specific legal aspects of exemption under section 11, depreciation allowance, and loan repayment as application of income, aligning with established legal precedents and interpretations to reach a decision in favor of the assessee.