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TMI Blog2019 (4) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessee. - ITA No. 1432/Chandi/2018 , Cross Objection No. 5/Chandi/2019 - - - Dated:- 28-3-2019 - Shri N.K. Saini, Vice President And Shri Sanjay Garg, Judicial Member For the Assessee : None Fro the Department : Shri. Manjit Singh, CIT(DR) ORDER PER N.K. SAINI, VICE PRESIDENT : This appeal by the Department and the cross objection by the assessee are directed against the order dated 21.08.2018 of the Ld. CIT(A)- 4, Ludhiana. (2) During the course of hearing nobody was present on behalf of the assessee, neither any adjournment was sought. We therefore, proceeded ex-parte qua the assessee and the case is decided on merit after hearing the Ld. CIT(DR). (3) In the appeal of the Department, following grounds have been raised: i. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in allowing the benefit under section 11 of the Act without appreciating that there was a clear violation of Section 13 of the IncomeTax Act, 1961. ii. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in not considering the provisions of section 13(1)(c) of the I.T. Act, 1961, according to which, any inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olation of section 13(1)(d) r.w. 11(5). Assessee has also referred various case laws in favour of assessee. The reply of assessee and case laws are duly considered. The reply of assessee is not accepted because the facts of the case are different from the mentioned case laws, because in the case of assessee this is trend to take the unsecured loan from trustees group societies then same divert to group societies as unsecure loan invest the same in fixed assets. This modus operandi has been followed by the assessee in the group. Assessee has given this loan to its sister concern and showing the same into the books as loan/advances recoverable. This amount is fund of assessee, which should be part of corpus/capital and deposited in modes u/s 11(5). Assessee has shown this as advance this is not deposited under the modes mentioned u/s 11(5). This act of assessee attract violation of provision of section 13(1)(d) of I.T. Act, 191, which is as under:- (i) Nothing contained in section 11 [or section 12] shall operate so as to exclude from the total income of the previous year of the person in receipt thereof- (d) In the case of a trust for charitable or religious p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7. Assessee has mentioned in its reply that it is application of income and same has been claimed by the assessee in its books under circular no 100/1973 of CBDT and also booked the income when it recovered from its sister concern. The reply of assessee in this regard duly considered but not accepted because there is no where mentioned in the circular regarding the application of income of loan/advances given, circular talks about the repayments of loan only. The circular is reproduced as under- Repayment of debt incurred for purposes of trust/loans advanced by educational trusts to students for higher studies - Whether amounts to application of income 1. Section 11 requires 100 per cent of the income of a charitable and religious trust to be applied for religious and charitable purposes to be entitled to the exemption under the said section. Two questions have been considered regarding the application of income : 1. Where a trust incurs a debt for the purposes of the trust, whether the repayment of the debt would amount to an application of the income for the purposes of the trust; and 2. Whether loans advanced by an educational trust to students for hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an application of Income, because provide a loan to another concerns is not a objects of the assessee, assessee is doing activities outside the ambit of the objects, so exemption u/s 11 is not allowable to assessee.' So, accordingly the above facts and discussion, assessee claim of exemption u/s 11 is not accepted denied surplus of ₹ 1,56,70,649/- (Rs. 2,10,44,382/- - loss as per income expenditure account ₹ 53,73,733/-) accordingly taxed as AOP u/s 13(1)(c), 13(1)(d) r.w. 13(3) of I.T. Act. Computation of Income is as under:- Returned Income- NIL Addition of surplus as discussed as above- ₹ 1,56,70,649/- Total taxable income- ₹ 1,56,70,649/ (6) Being aggrieved, the assessee carried the matter to the Ld. CIT(A) and furnished the written submission which has been incorporated in para 4 of the impugned order, which read as under: 1. The Appellant - Ace Educational Charitable Society is an Educational society registered u/s 12AA of the Income Tax Act, 1961. (refer Page No. 1 of paper book). They ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly rejected the contention of the assessee. 5. That the Assessment order is full of errors. Wrong and baseless facts have been presented to prove an imaginary nexus of some group societies, group companies, group trustees involved in entry scam disregarding the actual facts, nature of transactions among societies and their main activities at large. These errors and transactions on the basis of which the Exemption u/s 11 denied by the Ld AO, were also the base of denial of exemption for the AY 2013-14 and AY 2014-15 also. An appeal against the order of the AO for the Ay 2013-14 and AY 2014-15 was filed in your good office and it was already decided in the favour of the assessee as per the order DATED 23.08.2016 and 15.06.2017 respectively of your good office. The whole facts and matter/ law point is same that of the AY 2013-14 and AY 2014-15, however the facts are again represented hereunder: In fact there are FiveSocieties ie. Ace Educational Charitable Society (Assessee Society ) ,Shri Guru Gobind Singh Foundation, Sachdeva Educational Society, Vikas Educational Society and Davinder Kaur Memorial Educational Society in which there are some common member. All of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the balance sheet of Davinder Kaur Educational Society as on 31.03.2015. These charts shown in the assessment order are wrongly presented and interpreted. First chart shown on page 2 of the assessment order relates to interest free unsecured loans given by common members to the societies in which they are members. They have given these loans out of their own source of income and they have never taken any benefit directly or indirectly from these societies (termed as group societies or sister societies). There is nothing on the record to show that any member or any concern in which these members are partners or directors has ever entered in any transaction to invoke the provisions of section 13(1)(c) of the Income Tax Act. There is nothing on the record to show any diversion of money from trust/societies to any of its member or their relative or to any concern in which any member have any financial Interest. Second third chart on page 9 and 10 are also showing Interest free Unsecured Loans given by members of the societies and other societies having common members (termed as group societies). There is nothing in these transactions to show any violation u/s 13(1)( c) or 13(1)(d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee and deleted the addition made by the AO by observing in para 5 in the impugned order as under: 5. I have carefully considered the facts of the case and submissions of the appellant The assessee trust is registered u/s 12A of the Income Tax Act, 1961 with Crr, Ludhiana on 22.05.2003. During financial year 2010-11 to 2015-16, the assessee has given a sum of ₹ 5.94 Cr. to some common members the societies namely ACE Edu. Charitable Society, Davinder Kaur Memorial Educational Society, Malwa Educational Society, Bharti Educational Society, Global Educational Society, Sachdeva Educational Society as a loan. Educational Society is registered u/s 12AA of the Income Tax Act, 1961. The AO has denied exemption u/s 11 of the Income Tax Act, 1961 to the assessee by invoking provisions of section 13(1)(c) 13(1)(d) r.w.s 13(3) of the Income Tax Act, 1961. The AO held that the assessee has given unsecured loans to its sister concerns without any consideration. It was held that there are common members having interest in all sister concerns and substantial contribution of unsecured loan and members fees. The assessee has provided unsecured loans to its sister concerns witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chandigarh in the case of assessee as above, as the impugned loans/ advances were made in earlier years and the Hon'ble ITAT, Chandigarh has decided the issue of exemption u/s 11 in favour of the assessee, therefore, the appeal of the assessee is allowed. Grounds of appeal no. 1 to 8 are thus allowed. (8) Now, the assessee is in appeal. (9) The Ld. CIT(DR) although supported the order of the AO but could not controvert the findings given by the Ld. CIT(A). (10) We have considered the submission of the Ld. CIT(DR) and perused the material available on the record. In the present case, it is noticed that the Ld. CIT(A) deleted the impugned addition and allowed the claim of the assessee by following the earlier order of ITAT, Chandigarh Bench in ITA No. 1229/Chandi/2016 and 1314/Chandi/2017 for the AYs 2013-14 and 2014-15 respectively in assessee s own case. During the course of hearing nothing was brought on record to substantiate that the said decisions of the ITAT dated 28.03.2016 and 15.06.2017 for the AYs 2013-14 and 2014-15 respectively followed by the Ld. CIT(A) in assessee s own case had been reversed by the higher forum. In that view of the matter we do not se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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