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TMI Blog2019 (2) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... l is of the considered opinion that it cannot be said that there was any violation of Section 13(1)(c) or 13(2)(b) of the Act. Therefore, when the assessee advanced money for acquisition of property in connection with charitable object carried on by the assessee, this Tribunal is of the considered opinion that it has to be construed as application of income. Therefore, there is no question of violation of any provisions of the Act. Advance paid to employees of charitable trust - Held that:- When the assessee advanced money to the employees of the trust, it cannot be construed as violation of any of the provisions of Section 13 of the Act. The advance made to employees of the trust, in fact, enables the assessee-trust to carry on the charitable object effectively and efficiently. Unless the employees of the trust were motivated by advancing interest-free-funds, this Tribunal is of the considered opinion that the assessee may not be able to carry out the charitable object as expected by the trustees. Therefore, there is no violation of Section 13(1) of the Act. Advance made to other societies, who are having similar object, it is not in dispute that the advance made from the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entative, submitted that the assessee-trust is registered under Section 12AA of the Act as a charitable institution. According to the Ld. D.R., the Assessing Officer found that the assessee shown an amount of ₹ 4,41,92,756/- as loan and advance to M/s Futura Construction Pvt. Ltd. as on 31.03.2011. The assessee claimed before the Assessing Officer that that the said advance was given to M/s Futura Construction Pvt. Ltd. for purchase of land for the purpose of constructing a building for a school. According to the Ld. D.R., the Memorandum of Understanding said to be executed with M/s Futura Construction Pvt. Ltd. was an unregistered one and the land does not belong to M/s Futura Construction Pvt. Ltd. According to the Ld. D.R., in fact, the land belongs to one M/s Nischa Deep Enterprises Pvt. Ltd. On a query from the Bench, whether M/s Nischa Deep Enterprises Pvt. Ltd. ultimately received money advanced by the assessee? The Ld. D.R. very fairly submitted that M/s Nischa Deep Enterprises Pvt. Ltd. ultimately received the amount advanced by the assessee. Therefore, according to the Ld. D.R., it is a clear case of violation of Section 13(1)(c) and 13(1)(d) of the Act, hence th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s NIL. Hence, there cannot be any depreciation on the very same assets. 11. On the contrary, Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that admittedly the assessee advanced money to M/s Futura Construction Pvt. Ltd. and entered into a Memorandum of Understanding for purchase of land and construction of school building. According to the Ld. counsel, M/s Futura Construction Pvt. Ltd. has to acquire a land on behalf of the assessee and construct a school building as per the Memorandum of Understanding dated 06.04.2006. A copy of Memorandum of Understanding dated 06.04.2006 is available at page 1 of the paper-book. As per this Memorandum, according to the Ld. counsel, it is obvious that the society intended to start a CBSE school at Perungudi at a minimum of one acre of land. M/s Futura Construction Pvt. Ltd. was owning plot No.117A at Developed Plot Estate, Peungudi. M/s Futura Construction Pvt. Ltd. has also undertaken additional land as required for construction of CBSE school. Therefore, according to the Ld. counsel, as per the Memorandum, an advance was made to M/s Futura Construction Pvt. Ltd. M/s Futura Construction Pvt. Ltd. made an attempt to purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of funds from the accumulated income of the earlier year. In this case, according to the Ld. counsel, what was transferred is only current income, therefore, the CIT(Appeals) has rightly allowed the claim of the assessee. 15. The next issue with regard to depreciation of the asset, the Ld.counsel submitted that the CIT(Appeals) found that the assessee is eligible for depreciation even though the cost of asset was allowed as application of income. Placing reliance on the judgment of Apex Court in CIT v. Rajasthan And Gujarati Charitable Foundation Poona in Civil Appeal No.7186 of 2014, the Ld.counsel submitted that the assessee is eligible for depreciation under Section 32 of the Act even though the cost of asset was allowed as application of income. 16. We have considered the rival submissions on either side and perused the relevant material available on record. The first issue is with regard to advance made by the assessee to M/s Futura Construction Pvt. Ltd. on 31.03.2011. The Memorandum of Understanding dated 06.04.2006, a copy of which is available at page 1 of the paper-book, clearly indicates that the assessee advanced money for the purpose of acquiring land and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee advanced money to similar societies who are carrying on similar object of charitable institution like assessee, there is no violation of Section 13(1) of the Act. 20. Now coming to the investment of ₹ 2000 in M/s VGP Golden Beach Resorts Pvt. Ltd., the CIT(Appeals) has restricted the disallowance to the extent of the investment made in VGP Golden Beach Resorts Pvt. Ltd. Of course, the investment in VGP Golden Beach Resorts Pvt. Ltd. is in violation of Section 11(5) of the Act. Therefore, as rightly found by the CIT(Appeals), the disallowance has to be restricted only to the extent of investment made. 21. Now coming to the claim of depreciation, it is not in dispute that the assessee claimed the cost of the asset as application of income under Section 11 of the Act. The Apex Court in Rajasthan And Gujarati Charitable Foundation Poona (supra), found that the assessee is eligible for depreciation under Section 32 of the Act even though the cost of asset was allowed as application of income. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 22. In the result, both the appeals f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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