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TMI Blog2015 (12) TMI 1116X X X X Extracts X X X X X X X X Extracts X X X X ..... e-25 of the paper book and it shows that the Assessee had declared gross income of the Trust at Rs. 5,10,22,844. Sec.11 of the Act provides as follows: "Sec.11: Income from property held for charitable or religious purposes. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property ;" 85% of the income of the Trust has to be applied for charitable purpose. 15% of the income can be accumulated for application for charitable purpose in future as laid down in explanation to Sec.11(1) of the Act. After reducing 15% towards accumulation which is permitted under Explanation to Sec.11(1) of the Act, viz., a sum of Rs. 76,53,427 and after reducing sums spent for charity an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had to be treated as application of income for charitable purposes. CBDT in Circular No.100 dated 24.1.1973 had accepted this position, as given below: "where a trust incurs a debt for the purpose of the trust whether the repayment of the debt would amount to an application of income for the purposes of the trust ...... Board has decided that repayment of the loan originally taken to fulfil one of the objects of the trust will amount to an application of the income for charitable and religious purposes." 7. The AO called upon the Assessee to furnish the following details with regard to the claim of the Assessee that a sum of Rs. 4,54,11,300/- was to be regarded as application of income for charitable purpose. A letter was issued to the trustee vide F.No.ADIT(E)-I/Scrutiny/06-07/220 dated 19.02.2007, which was duly serviced on 02.03.2007 calling for the following details : (a) A list of the persons with addresses from whom advances/loans have been taken year-wise (b) Loan confirmation from all the loan creditors showing the PAN and IT Jurisdictions. (c) Purposes of the loans taken . (d) Details of year-wise utilizations of the loans. (e) Nexus of the loans with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipt of the loans. The reply of the Assessee was that the loans were received during the period from 1956 to 1993, which according to the AO was vaguereply. He therefore held that the assessee has failed to fulfill its primary onus to file confirmation showing the details of loans. The AO held that to allow repayment loans as application of the year, out of the income from the property held under the trust, it is required to mention along with evidences when the loans were taken, in which particular Years those were utilized and how the repayments were' made. The AO also found that the Assessee did not file any returns of income before 2002-03, and. no account showing the utilization could be furnished by. the assessee. No books of accounts could be produced for the current financial year or earlier years. The AO also concluding that the Assessee has transferred trust fund to the trustees or their relatives in the pretext of repayment of loan and doing so was clearly a violation of the provision contained in 13(1)(c). He therefore refused to accept the plea of the Assessee to treat repayment of loan as application of income for charitable purpose. 10. Relating to the charity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 4,78,81,9781- under the head accumulated deficit, The A.O. has stated in his order that the appellant has failed to submit details and books of accounts. The assessment record for the relevant assessment year was requisitioned. It is evident from the assessment record that the appellant submitted all the relevant documents in this aspect. It is not clear what were the books evidences, details etc., the A.O. had called for specifically for the purpose of assessment. However it is a matter of record that the appellant had provided all the necessary High Court orders (page No. 85, 128, 147) details of expenses along with evidence (page No.95), loan confirmation (page No.I73) , balance sheet for last eight years (page No.103),bank statements (page No.190), list of repayment of loan (pager No.186), write-up on purpose for acquiring loans (page No.170) etc., which were good enough for substantiating the claim of the appellant. Probably the A.O. has not gone through the details and evidences filed by the appellant before him. The Id. A/R of the appellant relied upon the case law of Mewar Charitable Foundation vs. CIT. The Hon'ble Rajasthan High Court has held that Mewar Charitab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y enquiry to prove the genuineness of creditworthiness. He had not brought any thing on record nor he has gone through the details/evidences filed by the appellant during the course of assessment proceedings in support of his contention. Loan is neither treated as income nor repayment of loan as expenditure. These are in fulfilment of objects of the trust which have been accepted as charitable. The CBDT has clarified in Circular No.100 dated 24th January 1973 that repayment of loan originally taken to fulfil one of the objects of the trust would be treated as application of income. Regarding disallowances of charity & donation Rs. 31,01,525/- and administrative expenses of Rs. 39,340/- the appellant submitted all the bills & voucher during the course of assessment proceedings before him and also before me at the time of appeal proceedings. The A.O. has not gone through the bills vouchers produced before him by the appellant to disprove it. The appellant relied upon the Hon'ble Calcutta High Court Judgment in the case of CIT v. Birla Janahit Trust 15-(1998)-230 ITR 636 (SC) where it has been held that expenses incurred for running a trust should be considered to have been applied fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting evidence and details of administrative expenses. 19. We have given a very careful consideration to the rival submissions. In so far as Gr.No.1 raised by the revenue is concerned, it is a fact that the Assessee did not file return of income before AY 2002-03. It is not the case of the Assessee that the accumulated deficit was determined in assessments completed after AY 2002-03 when from the Assessee started filing return of income. The accumulated deficit is claimed on the basis of Balance Sheet as on 31.3.1996 in which loans and advances received in cash or kind is shown at Rs. 9,29,50,000/-. As to what is the opening balance as on 1.4.1995 is also not found in this Balance Sheet. The accumulated deficit as per this balance sheet is shown at Rs. 8,63,10,133/-. The accumulated deficit is thereafter carried forward from AY 96-97 to AY 2004-05 and stands reduced to Rs. 8,54,16,519 as on 31.3.2005 which is sought to be set off against the income of AY 2005-06. It is also pertinent to note that the aforesaid claim was not made in the return of income filed by the Assessee nor in the proceedings before the AO. The claim was made for the first time before CIT(A). The CIT(A)'s findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these charitable activities for a long period as the records are weeded out every 10 years for paucity of space to preserve the same. At page-26 to 29 is the ledger account of Advance/Loans Received from 1.4.2004 to 31.3.2005. Perusal of the same shows that the opening credit balance was Rs. 8,69,47,276 and the Assessee has repaid loans to the extent of Rs. 4,54,11,300 to the following persons during the previous year: 1. K.N.Banerjee Rs.1,29,69,500 2. D.Banerjee Rs.1,12,87,000 3. S.Banerjee Rs.1,06,04,800 4. M.Mukherjee Rs.1,05,50,000 Rs. 4,54,11,300 The balances in all these confirmations are opening balance. These do not prove how and when the loan in question was availed. More importantly the manner in which the amounts borrowed were used for charitable purpose. The loans were stated to be availed between the year 1980 to June, 2003 when the Assessee did not have funds to carry out charitable activities. In the year in which the loans were availed, there was no scrutiny assessment. In fact the Assessee has started filing returns of income only after AY 2002-03. Therefore the factum of borrowing and the utilization of the funds borrowed were never ..... X X X X Extracts X X X X X X X X Extracts X X X X
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