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TMI Blog2016 (2) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances. The ld CIT DR contended that in view of the purchase of land and extending loan by trustee shows that the trust and family members of the trust are acting as one entity is not convincing. In India, generally, the families keep the affairs of the trust with them so that they can advance the purpose of charitable nature for which the trust is established. But, if the family or any trustee abuse his power and authority and take undue and unlawful advantage from the trust, in that circumstances, it may be called as a colourable device, but in the facts of the case till the stage there is nothing, which could constitute a colorable transaction. A colourable transaction is a transaction, which is apparently a valid transaction but really unlawful and illusory. We don’t find any such circumstances in the present case. Thus, in our opinion, the transactions carried out by the assessee are not colourable transactions and the activities of the trust are genuine till the relevant period of time. Further, the learned Commissioner of Income Tax has not given any finding as regard to the fact that the objects of the assessee were not charitable in nature. - Decided in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence order is perverse. It is, therefore, prayed that the learned Commissioner of Income Tax may kindly be directed to granted the registration u/s 80G of the Income Tax Act, 1961. 4. The facts in brief are that the assessee trust was incorporated on 02.09.2011 and applied for registration under Section 12AA of the Income-tax Act, 1961 (for short the Act ) before the Commissioner of Income Tax, Ghaziabad, on 22.03.2013. The Commissioner of Income Tax called for a report from his subordinates authorities in respect of the trust. The learned Commissioner of Income Tax himself also examined the activities of the trust. He noted that the Managing Trustee of the trust was also settler of the trust and in financial years 2012-13, the trust had purchased a land having area approximately four hectares for consideration of ₹ 16.54 crores. He further observed that the trust was not having own source to finance the above purchase of land. The Commissioner of Income Tax further observed that the assessee trust could not pay a major part of the loan liability even upto the date of last hearing before him. 5. The assessee submitted before the Commissioner of Income Tax that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , transfer of property to the trust was a colorable transaction. The learned CIT (DR) also filed submission before us. In the written submission has submitted that the assessee trust was having meager financial capacity and purchased land worth ₹ 16.54 crores without any plan arrangement of funds and thus the deal of purchase appeared colourable to the Commissioner of Income Tax. Further, he submitted that seller Sh. Rahul Venkatesh Prasad was close relative to Managing Trustee and funds of ₹ 15 lakhs paid to the seller and ₹ 1.1 crore for stamp duty at the time of registration were provided by the Managing Trustee as unsecured loan. He further submitted that the Managing Trustee provided further loan of ₹ 3.25 crores under colour of unsecured loan and the balance amount of ₹ 11.55 crores was outstanding till 12.09.2013. He further submitted that in view of the transactions, the trust was separated from the family only on the paper and not in conduct of its affairs. In his submission, he further noticed that the settler of the trust was the Chairman-cum-Managing Trustee of the Trust. He thus submitted that settler by principle of proprietary should not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased land for commencing of its activity of education. We don t find anything wrong in buying land by the trust from one of the relative of the trustee unless some undue advantage has been passed on to the seller or the trust is adversely affected by the transaction. Further, we find nothing wrong in extending loan to the trust by the trustees. In the case in hand, the trustees or their relatives have extended loan and transferred land at arm s length price as trustees and their families to fulfill the desire of charitable activity have extended loans or transferred the property to the trust. By these actions of the trustees or their relatives, the trust is not at disadvantage or the transactions are not prejudicial to the interests of the trust. Thus, we find that the finding of the ld CIT that trust has not maintained its affairs in transparent and logical manner and transaction made by the trust for purchase of land were highly disproportionate to the known funds available with the trust are completely devoid of merit and deserve to be rejected. Further, interpretation of the fact and circumstances of the assessee as a colorable transaction by the ld CIT DR, is also withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en for the assessee to effect such sale during the same year when he also chooses to dispose of certain profit making shares. In the present case, of course, there is a further angle of the shares in question being pledged to IDBI and therefore it would not be possible for the assessee to deliver the original share certificates to its purchaser along with the duly signed transfer forms. As already noted, such special angle may have repercussion insofar as the legal relation between the assessee and the IDBI is concerned and insofar as the purchaser's right to have shares transferred in its name is concerned. This, however, by itself would not establish that the sale of shares was only a paper transaction and a device contrived by the assessee to claim loss which it did not suffer and thereby seek set off against the capital gain received by it during the year under consideration. 18. In the case of Commissioner of Income Tax v. Sakarlal Balabhai, 69 ITR 186, a Division Bench of this Court observed that avoidance of tax cannot include every case of reduction of tax liability of an assessee. The assessee may enter into a transaction which has the effect of diminishing his i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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