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TMI Blog2012 (11) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... hat refund of money cannot be considered as a benefit given to these persons - The fact whether defaulting office bearers are the founder members of the assessee trust or not has to examined. Regarding allowability of exemption u/s. 10(23C)(iiiad)/(vi) there is no allegation that the assessee is not imparting education. Firstly, there is no evidence that such benefit has been given to the founder member of the trust. Secondly, even if it is so, such instances would only hit the case of the assessee within the meaning of sections 11 to 13 and cannot be imported to deny exemption u/s. 10(23C)(iiiad) provided a clear finding on the basis of material on record is given that the assessee trust is not solely for the purpose of imparting educa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the A.Y. 2003-04, the Assessing Officer noticed that an amount of Rs. 1.80 lakhs had been paid to Shri V. Srinivas Reddy, a founder member, out of the corpus fund. Similarly, Shri P.V. Ranganath, son of another founder member was also paid Rs. 1,57,217 from out of the corpus fund. The Assessing Officer observed that this constituted a clear violation on the part of the assessee society and attracted the consequences of section 13(1)(c)(ii) of the Act read with section 13(3). He found that the assessee had no explanation to offer in this regard. Accordingly, the Assessing Officer proceeded to compute the income of the Assessee-society by applying the provisions of section 13(1)(c) and denying the exemption u/s. 11. He also opined that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Similarly for the A.Y. 2004-05, there is a transfer of Rs. 12,42,515 out of corpus fund to three members of the society through journal entry and paid to Sri V. Srinivas Reddy through their individual ledger account. The assessee taken same plea before the lower authorities that it is a clerical error. However, the CIT(A) has not agreed with the assessee and exemption u/s. 11 was rejected for the A.Y. 2004-05 also. Against this the assessee is in appeal before us. 5. The learned AR submitted that in the assessment order the Assessing Officer mentioned that the assessee repaid the corpus fund of Rs. 1,80,000 to Sri V. Srinivasa Reddy and Rs. 1,57,217 to Sri P.V. Ramana during the A.Y. 2003-04. Copies of the accounts of the unsecured loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he introduced Rs. 2,78,497 - and only an amount of Rs. 98,497 is credited to the corpus fund out of this amount and the balance amount was not credited to the corpus fund. The only place where repayment was noted is in the details submitted before the Assessing Officer, a copy of which is placed on record. Therefore, it is not correct for the Assessing officer to mention that the amount deposited towards corpus fund is withdrawn by the members of the society. Therefore, the Assessing Officer is not justified in rejecting the claim for exemption u/s 11 of the Act or claim u/s. 10(23C)(vi) of the Act. 7. The DR relied on the orders of the lower authorities. 8. We have heard both the parties and perused the material on record. The main co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the defaulting officer bearers on good and sufficient reason it cannot be said that there is a violation of provisions of section 13(1)(c) of the Act. 9. The person referred to in sub-section (2) of section 13 is the founder member of the trust. The condition mentioned in section 13(1)(c)(ii) of the Act is that the income of the trust should not be used or applied directly or indirectly for the benefit of any person falling in the prohibited category. Benefit here would mean any payment without any contribution by such person to the trust. If a person in the prohibited category renders services, in view of such services a payment is made, then that case cannot fall in clause (ii) section 13(1)(c) of the Income-tax Act. The expenditure in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.V. Ramana and that refund of money cannot be considered as a benefit given to these persons and rather benefit to the society itself and it resulted in perpetual existence of assessee society. Being so, the Assessing Officer is directed to examine the practical situation which warranted the assessee to make payments and decide the issue in accordance with law. 10. Regarding allowability of exemption u/s. 10(23C)(iiiad)/(vi), we are of the opinion that there is no allegation that the assessee is not imparting education. The argument of the Department is that some benefit given to the founder member of the trust disables the trust from getting exemption u/s. 10(23C)(iiiad)/(vi). In our opinion, this cannot be done. Firstly, there is no ev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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