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TMI Blog2016 (11) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... case of other assessment years involved. In the assessment years from 1992-93 to assessment year 1998-99, the depreciation provided in the books of accounts has been reduced from the expenditure claimed towards application of income, which means the depreciation has not been claimed as application of income. From the assessment year 1999-2000 onwards till the assessment year under consideration also the depreciation has not been claimed towards application of the income. In view of above observations, it is clear that the assessee has not shown the loans received as its income or receipt, in the year in which such loan was received by the assessee and, therefore, the repayment also cannot be allowed as an expenditure or application of income. Further, we find that loan money obtained has been shown as application on acquisition of fixed assets and, therefore, the assessee has already claimed loan as deduction or application of income and therefore, in our opinion, allowing application of repayment of loan will amount to double deduction. Thus as assessee has already been allowed cost of addition to asset acquired out of the loans as application of income in relevant years an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TIFIC RESEARCH ASSOCIATION CLAIMED EXEMPT U/S 11/10(21) OF THE ACT-Y.E. MARCH 31. 2008 INCOME DERIVED GROSS - Interest income 3,19,12,073 - Dividend Income 69,44,640 - Rental Income 3,94,388 - Receipts from Sponsored and Analytical Research work 28,99,35,779 - Capital Subsidy received during the year 6,45,450 - Profit on sale of Securities/bonds 7,56,280 - Adjustment on account of employee benefits in general fund 65,27,451 - Other Incomes 58,54,490 Total Income 34,29,70,551 Less :- Income accumulated u/s 11(1) of the Act upto 15% of income derived 5,14,45,583 Balance income to be applied 29,15,24,968 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k), International Development Association (IDA) and the Government of India and final disbursement received by the assessee in March 1996. The final amount disbursed was ₹ 125 millions due to increase in exchange rate of dollar. The repayment made during the year under consideration of ₹ 170 lakhs was toward this loan. The said loan was interest-free in nature and amount was paid towards the principal amount. It was observed by the Assessing Officer that: (i) the assets purchased out of the loan amount were already treated as application of income (ii) that the repayment of loan, which is interest free is again being claimed by the assessee showing the same as application of income (iii) that the said loan has not been considered as income and accordingly not included in the total income of the previous year in which the loan was received. 6. The assessee relied on the circular No. 100(F.No. 195/1/72-IT (A-I) dated 24.01.1973 of the Central Board of Direct Taxes (CBDT). However, the Assessing Officer was of the opinion that Circular was not of help to the assessee as the benefit of the circular could be availed by the assessee who had shown debt in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t been allowed in the consideration of justice and equity. So, AO has relied on the ratio of the above mentioned two judgments of the Hon'ble Supreme Court so as to make an addition of ₹ 1,70,00,000/-. In this regard before me Id. AR of the appellant relied on the judgment of the Hon ble Delhi High Court in the case of D1T (Exemption) vs. Span Foundation reported at 178 Taxman 436 (Mad.). I have gone through the facts of the case and in my considered opinion reliance on the case of Span Foundation is distinguishable on facts due to following reasons:- 1) In case of the appellant, loan has been found to be interest free whereas there is no mention about the interest in the case of Span Foundation. 2) The case of appellant is that appellant has taken loan from World Bank for strengthening activities of Material Science and Analytical Chemistry, Environmental Protection etc., whereas, case of Span Foundation pertains to repayment of borrowed fund for construction of building. 3) In the case of Span Foundation, there is mention of standard rent computed in accordance with the Delhi Rent Control Act, which is not present in the appellant s case . 3.4 So, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rental income, it would apply the same for charitable purposes set out in the trust deed and that it is at that juncture that the Assessing Officer could insist that the application of the income be for the purposes mentioned in the trust deed. The Tribunal concluded that the repayment of the funds borrowed for construction of the building was to be treated as application of income for charitable purposes and held ITA Nos.767/08 789/08 Page No.4 of 5 that the assessee was entitled to the benefits under Section 11 and 12 of the said Act. 4. As regards the benefit being derived by interested persons, the only question that was of relevance was whether the rents paid by the so-called interested persons were adequate or not? In this regard, the Tribunal remanded the matter to the Assessing Officer to decide the question of adequacy in accordance with law, after affording the assessee an opportunity of being heard. However, while doing so, the Tribunal noted its earlier decision in the case of Rabhubir Saran Charitable Trust v. Income Tax Officer where the view was taken that if the rent charged by an assessee was higher than the standard rent, as computed under the rent con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963. We also find that the learned Departmental Representative was allowed sufficient time to go through those evidences, however, she did not raise any objections in respect of reliability of those evidences. 14. From the facts of the case, we find that loan under reference was sanctioned in the year 1990 and final amount of disbursement of the loan was received by the assessee company in March, 1996. On perusal of the statement of income filed for the assessment years 1992-93 to 1999-2000 during which the loan was received by the assessee, we find that apparently the loan under reference received from World Bank has not been shown as income in any of the year concerned. Further, we find from the statement of total income that the cost of fixed assets acquired during the relevant years has been claimed as application of income. In the note appended to depreciation chart for the assessment year 1992-93 enclosed along with the balance sheet and profit and loss account, it is mentioned that additions include assets amounting to ₹ 91,31,124/- (previous year ₹ 75,50,597/-) purchased under the Industrial Credit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulated, it can only be with the object of application of the amount for charitable purposes. The relief granted by s. 11(1)(a) is limited only to cases where accumulation has been made of only 25 per cent of the income of a particular year. The mere fact that the assessee had applied its accumulated income of the earlier years for the purpose of charity will not absolve the assessee of its duty to apply its income for the purpose of charity in the current year nor will it enlarge the limit of the amount which is permitted to be accumulated by s. 11(1)(a). An assessee may borrow money and spend it for charitable object. The circular merely recognises that in such a case, application of income for repayment of a loan taken for charitable purpose will amount to application of income for charitable purpose. The circular, however, does not permit an assessee to accumulate more than 25 per cent of its income or ₹ 10,000, whichever is higher (for the purpose of charity). The wording of s. 11 is clear and unambiguous. The relief is limited to the amount of income of a charitable trust actually applied for charitable purpose. Accumulation of income is permitted only to the extent and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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