9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (3) TMI 760 - HC - Income TaxEligibility for exemption u/s 11 of the Act Violation of section 13(1)(c)(ii) r.w. section 13(3) of the Act - Whether the assessee was ineligible for the exemption u/s 11 on the ground that there was contravention of the provisions of Section 13(1)(c)(ii) read with Section 13(3) of the Act Held that - It unusual that the assessee would part with 95% of the price of the land without even taking possession of the same and would wait for such a long period without getting the sale registered in its name - it unusual that it was on the last day of the financial year 2004-05 that the assessee claimed to have written to APIL cancelling the deal which was accepted by the letter dated 21.04.2005 - even though APIL agreed on 21.04.2005 to cancel the agreements, the copy of the ledger account of APIL in the books of the assessee did not reveal any corresponding entry made on the date - the entry reflecting the cancellation of the agreement to sell was passed in the accounts only on 31.03.2006 - even after cancellation of the deal two cheques for Rs.80 lakhs and Rs.75 lakhs were given to APIL on 29.11.2005 and 13.12.2005 for which there was no explanation Relying upon Kanahya Lal Punj Charitable Trust Vs. Director of Income Tax (Exemptions) (Delhi) 2007 (5) TMI 166 - HIGH COURT, DELHI - the findings of the Tribunal on this aspect cannot be upheld - in advancing the amount of Rs.8,60,16,000/- to APIL the assessee committed a violation of the provisions of Section 13(1)(c)(ii) read with Section 13(2) and Section 13(3) of the Act - The trust was accordingly not eligible for the exemption under Section 11 of the Act for both the years - Decided in favour of revenue. Advances made to society - Whether the advance made to Charanjiv Educational Society can be said to be in violation of the provisions Held that - The relevant documentary evidence is on record and has been noticed and relied upon by the Tribunal - it is not possible to question the correctness of the view taken by the Tribunal - thus, denial of the exemption u/s 11 on the ground that by advancing monies to Charanjiv Educational Society the assessee committed a violation of Section 13(1)(c)(ii) read with Section 13(2) and Section 13(3) cannot be accepted The order of the Tribunal upheld Decided against Revenue. Applicability of section 68 of the Act Donations received Held that - The Tribunal was of the view that it is not possible to view the transaction with suspicion merely because some other entity, which owes money to Jagjit Singh, had made the donation on behalf of Jagjit Singh in discharge of the debt to Jagjit Singh - the money has actually been given to the trust which has also used it the findings recorded by the Tribunal cannot be said to be perverse - Similarly in respect of the donation received from Piyush Jain, the Tribunal has noticed that the assessee was able to establish the identity of the donor and the source of the payment which was through account payee cheque, and give the PAN number and bank details - These details were not inquired into by the assessing officer and nothing adverse was found thus, the order fo the Tribunal upheld Decided against Revenue. Claim of depreciation Held that - The Tribunal has overlooked that the cost of the assets has already been allowed as a deduction as application of income, as held by the CIT (Appeals) as well as the assessing officer - allowing depreciation in respect of assets, the cost of which was earlier allowed as deduction as application of income of the trust, would actually amount to double deduction Relying upon Escorts Ltd. vs. UOI 1992 (10) TMI 1 - SUPREME Court - where the deduction of the cost of the asset was allowed under Section 35(1) as capital expenditure incurred on scientific research and, therefore, no deduction for depreciation on the very same assets was held allowable under general principles of taxation, as it would amount to double deduction thus, the Tribunal was no justified in directing the allowance of depreciation Decided in favour of Revenue.
Issues Involved:
1. Violation of Section 13(1)(c)(ii) read with Section 13(3) of the Income Tax Act, 1961. 2. Entitlement to depreciation on assets the cost of which has been allowed as a deduction. 3. Deletion of additions under Section 68 of the Income Tax Act, 1961. Detailed Analysis: 1. Violation of Section 13(1)(c)(ii) read with Section 13(3) of the Income Tax Act, 1961: The primary issue was whether the assessee, a charitable trust, violated Section 13(1)(c)(ii) read with Section 13(3) by advancing funds to M/s. APIL and Charanjiv Educational Society without charging interest or taking security. The Tribunal initially held that there was no violation, noting that the advances were made for acquiring plots for the trust's objectives and were not loans. However, the High Court found this conclusion perverse, emphasizing that the assessee should have insisted on the conveyance of the lands within a reasonable time or stipulated for interest or compensation. The High Court observed that the assessee's contradictory statements regarding possession of the land and the lack of formal documentation and minutes of trustee meetings undermined the genuineness of the transactions. Consequently, the High Court upheld the assessing officer's findings that the trust violated the provisions of Section 13(1)(c)(ii) read with Section 13(3), thereby disqualifying it from exemption under Section 11 for both assessment years. 2. Entitlement to Depreciation on Assets: The Tribunal had allowed the assessee's claim for depreciation on assets, the cost of which had already been treated as an application of income. The High Court disagreed, citing the Supreme Court's ruling in Escorts Ltd. vs. UOI, which held that allowing depreciation on assets whose cost had been deducted as an application of income would amount to double deduction. The High Court noted that the Tribunal failed to distinguish between assets whose costs were allowed as deductions and those that were not. Therefore, the High Court held that the Tribunal was incorrect in allowing depreciation on such assets. 3. Deletion of Additions under Section 68: The Tribunal had deleted the additions made under Section 68 concerning donations received from Jagjit Singh and Piyush Jain, stating that the assessee had successfully demonstrated the identity, source of payment, PAN numbers, and confirmation letters of the donors. The High Court upheld the Tribunal's findings, noting that the Tribunal's decision was based on relevant material and was not perverse. Similarly, for the assessment year 2007-08, the Tribunal's deletion of additions related to corpus donations from M/s. Kuber Swamy Ashutosh Consultants Pvt. Ltd. and Sun System Institute of Information Technology Pvt. Ltd. was upheld, as the Tribunal had examined the evidence and found no perversity in its decision. Conclusion: The High Court partly allowed the revenue's appeals, holding that the assessee violated Section 13(1)(c)(ii) read with Section 13(3), thereby disqualifying it from exemption under Section 11 for both assessment years. The Tribunal's decision to allow depreciation on assets was also overturned. However, the High Court upheld the Tribunal's deletion of additions under Section 68, finding no perversity in the Tribunal's conclusions.
|
