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2013 (2) TMI 579 - AT - Income TaxProhibition u/s.13 (1)(d)(iii) - Deposit of ₹ 55 lakhs with Bharati Vidyapeeth and there is investment of ₹ 5 lakhs in shares which is strictly prohibited u/s.13 (1)(d)(iii) - assessee was established through a deed of trust - Held that - As decided in the case of Alarippu 2000 (5) TMI 30 - DELHI HIGH COURT that a loan given by one charitable trust to another with similar object cannot be treated as an investment but an application of income. The words investment , deposit , and loan have different meanings. Also see Sarladevi Sarabhai Trust 1988 (3) TMI 53 - GUJARAT HIGH COURT wherein held that if the trust makes an investment in the course of attaining its objectives, that investment is an application of income and it cannot be considered to be violative of section 11(5). As per the settled legal position, which has been laid down in numerous decisions, it is clear that any amount which is laid out by the charitable trust or institution for achieving its charitable object constitutes an application of income to charitable purposes irrespective of whether the amount in question has been laid out irretrievably or whether the amount continued to belong to the charitable trust or the institution or it is recoverable by it. Since in the instant case the assessee trust had advanced loan of ₹ 55 lakhs to Bharati Vidyapeeth, another charitable trust also engaged in educational activity, therefore, in view of the decisions cited above, granting of such loan by the assessee trust to another trust is neither a deposit nor an investment and therefore there is no violation of provisions of section 13(1)(d) of the I.T. Act - against revenue. Denial of exemption u/s.11 on account of belated filing of Form No.10 by the assessee trust - Held that - The assessee could not envisaged that application for registration under s.10(23C)(vi) would be delayed. Thus, the assessee was required to make alternate claim under ss.11 and 12 of the Act. As held in the case of Mayur Foundation (2004 (12) TMI 48 - GUJARAT HIGH COURT), assessment proceedings are complete when appeal against order of assessment is decided by the Tribunal. Various courts have time and again held that though filing of Form No.10 is mandatory to claim exemption under ss. 11 and 12 the same can be filed at any time during the pendency of assessment proceedings. If so filed the benefit of accumulation of income for charitable purpose cannot be denied. Do not agree with the findings of the CIT(A) that the assessee was not permitted to file Form No.10 in the reassessment proceedings and that the decision of Nagpur Hotel Owner s Association 2000 (12) TMI 99 - SUPREME COURT is not applicable in the facts of the present case wherein held that the assessee by filing Form No.10 along with revised return and before completion of assessment has duly complied with requirements of section 11(2) and was therefore entitled to benefit of section 11 - in favour of assessee. Purchase of shares of 2 cooperative societies - violation of provisions of section 13(1)(d) r.w.s.11(5) and therefore the assessee trust is not entitled to exemption u/s.11 - Held that - Since in the instant case the assessee, on being pointed out by the AO that there is violation of provisions of section 11(5), has liquidated the shares, therefore, respectfully following the decision of the Hon ble Delhi High Court in the case of Agrim Charan Foundation (2001 (8) TMI 78 - DELHI HIGH COURT) wherein the assessee had kept deposits with two concerns in violation of section 11(5) however, the same were withdrawn when the A.O. had pointed out the default committed by the assessee & H.C. held that the assessee was entitled to exemption u/s.11 and upheld the order of Tribunal - the benefit of exemption u/s.11 cannot be denied to the assessee in the present case - in favour of assessee. Violation of provisions of section 11(5) on account of loan given to Sonhira Sakhar Karkhana Ltd., a cooperative society - Held that - As loan is neither an investment nor a deposit in the nature of an investment as held above therefore there is no violation of provisions of section 11(5) r.w.s.13(1)(d). Treating the donations received through issue of coupons as income u/s.68 as against towards corpus of the trust as claimed by the assessee - Held that - Since the coupon donation receipts do not contain the complete address of the donors, the name of the recipient on behalf of the Trust and there is no written direction by the donor to treat the donation towards corpus of the Trust, therefore, we are of the considered opinion that such donations cannot be considered as corpus donations. However, the alternate submission of the the assessee that the same should be considered as revenue receipts is acceptable. Since there is no violation of provisions of section 11(5) r.w.s. 13(1)(d) and also held that exemption u/s.11 cannot be denied for late filing of Form No.10, therefore, since the donations are treated as revenue receipts, it does not make any difference. Exemption u/s.11 is allowable on such donations. The grounds by the assessee are decided accordingly.
Issues Involved:
1. Genuineness and classification of donations received through coupons. 2. Filing and validity of Form No.10 for accumulation of income under Section 11(2). 3. Violation of provisions under Section 13(1)(d) due to certain investments. 4. Treatment of loans given to other charitable trusts. 5. Application of income and exemption under Section 11. Detailed Analysis: 1. Genuineness and Classification of Donations Received Through Coupons: The AO questioned the genuineness of donations received through coupons, noting that they lacked donor details and signatures. The AO concluded that these were not genuine donations and could not be considered corpus donations under Section 11(1)(d). The CIT(A) upheld this view, stating that donations without specific directions from donors could not be treated as corpus donations. The Tribunal agreed that these donations could not be considered corpus donations due to the lack of specific directions and donor details. However, the Tribunal accepted the alternate submission that these should be treated as revenue receipts and allowed exemption under Section 11. 2. Filing and Validity of Form No.10 for Accumulation of Income Under Section 11(2): The AO rejected the Form No.10 filed by the assessee for late submission and not being filed along with the return of income. The CIT(A) upheld this decision, emphasizing that the resolution for accumulation should have been passed before the due date for filing the return. The Tribunal, however, held that Form No.10 could be filed at any time before the completion of the assessment, citing the Supreme Court's decision in Nagpur Hotel Owners Association and other judicial precedents. The Tribunal concluded that the assessee was entitled to the benefit of Section 11 as Form No.10 was filed before the assessment was completed. 3. Violation of Provisions Under Section 13(1)(d) Due to Certain Investments: The AO and CIT(A) held that the assessee violated Section 13(1)(d) by investing in shares of cooperative societies and deposits with Bharati Vidyapeeth and Sonhira Sakhar Karkhana. The Tribunal noted that loans given to another charitable trust with similar objects do not constitute investments or deposits and do not violate Section 13(1)(d). The Tribunal upheld the CIT(A)'s decision that the loan to Bharati Vidyapeeth was not an investment or deposit and thus did not violate Section 13(1)(d). Similarly, the Tribunal held that the loan to Sonhira Sakhar Karkhana was not an investment or deposit and did not violate Section 13(1)(d). 4. Treatment of Loans Given to Other Charitable Trusts: The AO considered the loan to Bharati Vidyapeeth as an investment violating Section 13(1)(d). The Tribunal, following judicial precedents, held that loans given by one charitable trust to another with similar objects are neither investments nor deposits and thus do not violate Section 13(1)(d). The Tribunal upheld the CIT(A)'s decision that the loan to Bharati Vidyapeeth was an application of income and did not attract the provisions of Section 13(1)(d). 5. Application of Income and Exemption Under Section 11: The AO denied the exemption under Section 11, citing non-genuine donations and violations of Section 13(1)(d). The Tribunal, however, held that the donations, even if not considered corpus, should be treated as revenue receipts and allowed exemption under Section 11. The Tribunal also held that the assessee was entitled to exemption under Section 11 for the accumulated income as Form No.10 was filed before the completion of the assessment. Conclusion: The Tribunal allowed the appeal partly in favor of the assessee, granting exemption under Section 11 for the donations treated as revenue receipts and the accumulated income. The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision that loans to another charitable trust with similar objects do not violate Section 13(1)(d). The Tribunal's decision emphasized the importance of timely filing of Form No.10 and the distinction between loans and investments for charitable trusts.
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