2016 (7) TMI 246 - AT - Income Tax

Deduction under section 11(5) r.w.s. 13(1)(d) - investment made by charitable institution in the shares of Bharati Sahakari Bank Ltd. - Held that - The assessee had made investments in shares of Bharati Sahakari Bank Ltd. in earlier years which are being held by the assessee in the years under consideration also. The said investment was made by the assessee for availing the loan from said bank. However, since the loan was repaid by the assessee, but was still continues to hold the shares in Bharati Sahakari Bank Ltd., the Assessing Officer was of the view that the assessee had violated the provisions of section 13(1)(d) r.w.s. 11(5) of the Act. Further, the Tribunal noted the contention of assessee relating to assessment year 2006-07 and allowed the claim of assessee after considering the issue at length, since the assessee was still enjoying the overdraft facilities from the bank. The learned Authorized Representative for the assessee pointed out that for the year under consideration also, the assessee was availing overdraft facilities from the bank. In view thereof and following the order of Tribunal in assessment year 2006-07, we uphold the order of CIT(A) in allowing the claim of assessee and holding that there is no violation of provisions of section 11(5) r.w.s. 13(1)(d) of the Act on account of holding shares of cooperative bank, from which the assessee had raised overdraft facilities. - Decided against revenue

Summary

Issues Involved:
Appeals against consolidated order of CIT(A)-12 regarding deduction claim under section 11(5) r.w.s. 13(1)(d) of the Income Tax Act, 1961 for assessment years 2007-08 and 2008-09.

Analysis:

1. Issue of Claim of Deduction under Section 11(5) r.w.s. 13(1)(d) of the Act:
The appeals filed by the Revenue challenged the CIT(A)'s order regarding the investment made by the assessee in shares of a cooperative bank. The Revenue contended that the investment was in violation of section 11(5) of the Act. The Assessing Officer disallowed the exemption claimed under sections 11 and 12 due to this investment. However, the CIT(A) noted that the investment was made to obtain a loan for the trust's activities and should be treated as an application of money, not an investment. The CIT(A) referred to a previous Tribunal decision in favor of the assessee for a similar issue in a prior assessment year. The Tribunal upheld the CIT(A)'s decision, stating that there was no violation of provisions of section 11(5) r.w.s. 13(1)(d) of the Act as the assessee was still benefiting from the overdraft facilities provided by the bank. Therefore, the claim of the assessee was allowed, and the grounds of appeal raised by the Revenue were dismissed.

2. Compliance with Tribunal's Previous Decision:
The issue in the present case was found to be identical to a previous case before the Tribunal for assessment year 2006-07. The Tribunal had allowed the claim of the assessee in that case as well, based on similar circumstances where the assessee continued to hold shares of the cooperative bank while availing overdraft facilities. The Tribunal's decision in the previous case was crucial in determining the outcome of the current appeals. The assessee's compliance with the conditions set by the Tribunal in the earlier case played a significant role in the decision-making process.

3. Interpretation of Provisions of Section 11(5) and 13(1)(d) of the Act:
The interpretation of the provisions of section 11(5) and 13(1)(d) of the Income Tax Act was central to the dispute in the appeals. The Revenue argued that the investment in shares of the cooperative bank violated these provisions, leading to the disallowance of the deduction claimed by the assessee. On the other hand, the assessee justified the investment as a means to secure a loan for the trust's activities, emphasizing that it should be considered an application of funds, not a prohibited investment. The CIT(A) and the Tribunal analyzed these provisions in light of the specific circumstances of the case and the previous Tribunal decision, ultimately ruling in favor of the assessee based on the interpretation of the law and the practical implications of the investment in question.

In conclusion, the appeals before the Appellate Tribunal ITAT Pune involved a detailed analysis of the claim of deduction under section 11(5) r.w.s. 13(1)(d) of the Income Tax Act for assessment years 2007-08 and 2008-09. The Tribunal's decision hinged on the interpretation of relevant provisions, compliance with previous judgments, and the specific circumstances of the case, ultimately leading to the dismissal of the Revenue's appeals and the allowance of the assessee's claim.