2014 (6) TMI 1068 - AT - Income Tax

Exemption u/s 11 - whether interest free loan given to M/s. SPK MAC Charitable Trust is in violation of section 11(5) or 13(1)(d) or 13(1)(c) and held that there is no such violation and sustained the order of Commissioner of Income Tax (Appeals) in allowing the claim of the assessee u/s 11 ? - HELD THAT - Perused orders of lower authorities and the decision of this Tribunal relied on and find that the issue in appeal has been decided in favour of the assessee in assessee s own case for the assessment year 2008-09 2013 (8) TMI 1166 - ITAT CHENNAI by order wherein the co-ordinate Bench of this Tribunal sustained the order of the CIT (Appeals) in allowing the claim of exemption under section 11. We direct the AO to allow exemption claimed by the assessee under section 11 - Appeal of the assessee is allowed.

Summary

Issues:
1. Eligibility for exemption under section 11 of the Income Tax Act.
2. Interpretation of transactions involving interest-free loans to a charitable trust.
3. Application of sections 11, 13(1)(d), and 13(1)(c) of the Income Tax Act.

Analysis:
1. The appeal was filed against the Commissioner of Income Tax (Appeals)'s order for the assessment year 2010-11, challenging the denial of exemption under section 11 of the Income Tax Act. The Assessing Officer observed deposits made by the assessee to a charitable trust, which he deemed a violation of section 13 of the Act. The assessee contended that the transactions were interest-free loans and not in violation of the specified sections. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's decision.

2. The counsel for the assessee referred to a previous Tribunal decision related to the assessment year 2008-09, where a similar issue was addressed, and exemption under section 11 was allowed. The Tribunal in the earlier case distinguished the current scenario from a case involving donations between trusts, emphasizing that the loans in question were for educational purposes and not investments or deposits. The Tribunal found no violation of section 13(1)(d) and directed the Assessing Officer to grant the exemption under section 11.

3. The Tribunal, after considering the previous decision and the arguments presented, concluded that the transactions in question did not breach the provisions of the Income Tax Act. Citing precedents and legal interpretations, the Tribunal directed the Assessing Officer to allow the exemption claimed by the assessee under section 11 of the Act. The appeal was consequently allowed, and the order was pronounced in favor of the assessee.

This judgment highlights the importance of correctly interpreting transactions involving charitable trusts and the significance of distinguishing between different types of financial dealings to determine compliance with relevant sections of the Income Tax Act.