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TMI Blog2024 (9) TMI 1310X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Ld.CIT(A) and hence the ground of the Revenue is dismissed. Payment of loan to M/s.Ganapathy Educational Trust(GET) - As noted that the recipient Trust is also into charitable and education Trust. According the ld.AR the payment of loan of Rs. 70,25,780/- has not been claimed by the assessee as application of fund of the income of the society. Assessee Trust has paid this loan amount for the purpose of construction of the college building by the sister concern which is also carrying on the similar objects. As noted that loan amount has been paid by the assessee Trust during the Financial years 2003 2005 towards construction of the college building. It is pertinent to note that the sister concern had given loan to the assessee Trust to the tune of Rs. 3.12 crores as on 31/03/2004 and later on the assessee trust repaid the same along with excess amount which has been shown as loan receivable in the audited financials of the Trust. The assessee Trust has furnished all the details invoices, payments particulars for amounts paid to the contractors M/s.L T, who built the college building of the sister concern M/s.GET, before the AO for verification, in pursuance of the directions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sundararajan School of management, which is affiliated to Madras university 5. The assessee trust filed its return of Income for the A.Y.2012-13 on 29/09/2012 admitting Rs. NIL income. The case was selected for scrutiny and assessment proceedings was carried out by issuing statutory notices to the assessee and the AO concluded the assessment by passing an order u/s. 143(3) of the Act dated 20/03/2015 by denying the exemption u/s. 10(23C)(vi) of the Act, for the reason that the trust is having a substantial percentage of surplus ranging from 30% to 42% which would prima facie point to the assessee running a profitable venture by citing the decision of Hon ble Karnataka High court s decision in the case of Viswesvarayya Technological University Vs.ACIT (2014) 423 Taxmann.com 237 . Further, the AO raised main issues of trust violation of provisions u/s. 13(1)(c) 13(1)(d) of the Act and also claiming the depreciation on assets which have already been claimed application of fund during the year of acquisition. 6. According to the AO firstly the assessee had paid an amount of Rs. 1,11,900/- to M/s. Meenakshi Soundarajan in the form of honorarium to the relative of the founder of the Tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed for both the Asst. Years in appeal, i.e. 2011-12 2012-13. Disallowance of Depreciation 6.3 Viewed against and decided as well against the appellant on the basis of the ratio of the uncontroverted decisions of authorities relied on by the A.0 cited supra and notwithstanding and even with prejudice to the clarificatory and therefore the retrospective effect of the amendment by way of section 11(6), the action of the AO in disallowing the depreciation claimed by the appellant on assets earlier claimed as application for the A.Ys 2011-12 2012-13 of Rs. 1,11,63,823 and Rs. 97,90,886/- respectively and adding it to the income of the assessee is hereby confirmed. This ground of appeal is therefore dismissed for both the AYs in appeal i.e. 2011-12 and 2012-13. Disallowance of payments made to Ms.Meenakashi Soundararajan u/s. 11 of the Act as violation of Section 13(1)( c) Per contra, the A.R submitted that, on identical issue the ITAT, Chennai in the case of instant appellant itself has ruled in its favour on the issue for the Asst. Year 2010-11, in ITA No.318/Mds/2014 dated 27.5.14, relevant parts of which is reproduced hereunder:- 7. First, let us consider, whether the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons made by the A.R. It is quite clear that the amount received as advance was repaid back by a higher amount of Rs. 4,53,10,202/-, indicating that the differential excess amount of Rs. 70,25,780/- was loaned to the sister trust, Ganapathy Educational Trust without adequate security or adequate interest or both and therefore, it had clearly violated the provisions of Section 13(1) (c) r.w.s.11(5) and [13(2) (a)] and therefore, the action of the A.O in making the addition of the difference between the amount received and paid back to the sister concern is upheld and the addition confirmed. This ground is, therefore, dismissed. 9. Aggrieved by the order of the AO, the assessee preferred an appeal before this Tribunal. The tribunal in its order in ITA Nos.2092 2093/Chny/2016 dated 22/06/2018 held as under: 1. Denial of exemption u/s. 10(23C)(vi) of the Act: 7. We heard the rival submissions and gone through relevant material. It is clear that the assessee has sought grant of exemptions u/s 10(23C)(vi) before the prescribed authority, viz the Chief Commissioner of Income Tax-III, Chennai, which had been denied, inter alia, for the reason that the assessee is having a substantial percen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g before. The assessee has received the excess amount after a long gap. Though, the rationale is questioned at assessment stage itself, it has not laid any contemporaneous material in support of its contentions, viz Minutes book, the facts and circumstances on which the alleged transactions happened, who and when took the alleged decisions etc, before the lower authorities and hence they have rejected assessee s claim of exemption. Before us also, the assessee has not laid any material to assail the findings recorded by them. Therefore, the corresponding grounds of the assessee are dismissed for this ay. 3. Denial of Exemption u/s. 11 of the Act. 10. We have considered all other claims of the assessee. The AO has denied the claim of exemption in ay 2012-13, observing as under : 7.2 The taxation of income is not confined to the income derived from the units which operate like a business entity. Section 13(8) prohibits applicability of section 11 12 in respect of any income of the Trust and is not restricted to the business activity of the Trust. Therefore, the surplus derived by the Trust is entirely brought to taxation. In view of the findings recorded, supra, that the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the institution existed solely for education purpose, approval was accorded for exemption under Section 10(23C)(vi) of the Act for the assessment year 2014-15. 13. We are conscious of the fact that the assessment year under consideration is 2012-13. Nevertheless, in the first paragraph of the order of the Chief Commissioner of Income Tax-3, Chennai dated 30.9.2015, there is a reference to the fact that several documents placed by the assessee were taken note of including the audited statement of accounts and reports for the years ending 31.3.2012, 31.3.2013 and 31.3.2014. In fact, the Assessing Officer was never called upon to decide or test the activities of the trust and as to whether they being charitable of not. 14. Admittedly, the registration granted under Section 12AA of the Act continued to remain valid. Therefore, in our considered view, the Assessing Officer treaded into the territory, which was not required to be done. Partly, the assessee also should be blamed for not placing sufficient material before the Assessing Officer to substantiate its claim, which is now raised before us as well as before the CIT(A) that the amounts were directly paid to the contractor, who c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was asked to furnish relevant details on 07/03/2022 and 27/03/2022 and the assessee filed submissions vide letter dated 21.03.2022 and 29.03.2022. On the basis of the materials available on record and after careful consideration of the reply furnished by the assessee, the assessment u/s 143(3) r.w.s 260A of the Act is completed as under: As the registration u/s 12AA of the Act continued to exist in the case of assessee, the benefits of the sec 11 are extended to the assessee trust. 5.1 Depreciation: The issue of depreciation was decided in favour of the assessee trust relying on the decision of the Hon'ble SC in the case of CIT Vs Rajasthan and Gujarati Charitable foundation reported in 2018(102 ITR 441). As the issue is settled, the depreciation claim of the assessee trust is allowed. 5.2. Amounts given to M/s Ganapathy Educational Trust: On the issue of parking of funds with sister concern, during the assessment proceedings for the A.Y 2012-13, the assessee has stated that it has received a sum of Rs. 3,82,84,422/- from M/s Ganapathy Educational Trust as loan between the F.Ys 2002-03 and 2004-05 for construction work of IIET Society and Subsequently an amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction work. The amounts received by the assessee trust from M/s Ganapathi Educational Trust has been accounted as interest free loan received, in the books of the assessee trust. The repayment has not been claimed as application by the trust. As per the CBDT circular No:100 dt: 24.01,1973, the repayment of loan taken for the purposes of achieving the objects of the trust can be claimed as application. The assessee trust has not furnished any proof of its direct payment to the contractor and other documents evidencing the construction. Even if it is considered, funds belonging to the trust whether it is from capital or revenue cannot be parted/ given to a vendor who is carrying out a construction for another trust but can be considered only if it is directly given to the trust. In light of the above, the amount can only be treated as loan repayment and not charity given to another trust. The assessee has paid in excess and the excess amount has moved away from the trust and was not available to the trust for charitable purposes till the period of its recovery. Even if the loan was subsequently recovered, the interest it would have fetched in market is a loss to the trust. This act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for charitable purposes. The second addition made by the AO is the addition of honorarium paid to Ms. Meenakshi Sundarajan, wife of the founder of the Trust amounting to Rs. 1,11,900/-. Aggrieved by the said additions, the appellant is in appeal and has raised 11 grounds which are adjudicated as under:- 7. Ground no. 1 11 are general in nature and hence, not adjudicated. 8. Ground no. 2 to 4 are relating to disallowance of honorarium paid to Ms. Meenakshi Sundarajan of Rs. 1,11,900/-. The AO herself has mentioned in the assessment order that this issue has been decided by the Hon'ble ITAT in favour of the appellant. Accordingly. The AO is directed to allow the honorarium paid to Ms. Meenakshi Sundarajan u/s. 11 of the Act. Ground no.2 to 4 are treated to have been allowed. 9. Ground no.5 to 10 are relating to addition of Rs. 70,25,780/- as funds paid in excess to sister concern as not applied for charitable purposes. The facts of the case are that the appellant had given certain amounts to another charitable trust M/s. Ganapathy Educational Trust, basically as advance for construction work of building in the earlier years. The excess amount paid to the said trust was returned t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an given by the appellant to the other charitable institution (GET) with the identical objects for pursuing their object of building colleges would not violate provisions of section 13(1) (c) of the Act as it is not for individual benefit of any person or entity or for commercial reason. Hence, the addition made by the AO of Rs. 70,25,780/- stands deleted. Ground 5 to 10 are treated to have been allowed. 10. In the result, the appeal is allowed. The order of the Ld.CIT(A), NFAC, is now challenged by the Revenue before us: 13. The Ld. DR vehemently argued that the Ld.CIT(A), NFAC, has erred in allowing the appeal of the assessee, even though the assessee has violated the provisions of Section 13(1)(c) by paying honorarium to Ms.Meenakshi Soundarajan, relative of the founder Trustee. Apart from that, the AO s observation with regard to amount parked in another Trust (sister concern) to the tune of Rs. 70,25,780/-, the Ld. DR assailed that, the Ld.CIT(A) has erred in passing the order by directing the AO to allow exemption u/s. 11, without appreciating the fact that the trust has violated the provisions of section 13(1) (d) of the Act and hence, the order of the AO please be confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok us through the paper book page No.5, the certificate issued by the L T Limited, Chennai, showing that the assessee has made payments during the year 2005-06 2006-07 on behalf of M/s.Ganapathy Educational Trust, towards construction of college building. Further, Loan amount of Rs. 70,25,780/- receivable upto 31.03.2011 ( Paper Book Page No.3) and Rs. Nil balance as on 31.03.2012 ( Paper Book Page No.4) under the head Advances deposits in the balance sheet. 17. The Ld.AR also demonstrated by showing the balance sheet of the assessee as on 31.03.2004 (Paper book Page No.1), wherein the assessee had borrowed an amount of Rs. 3.12 Crores for the purpose of construction of College building. Therefore the loan amount receivable from M/s. Ganapathy Educational Trust, cannot be treated as violation of Section 13(1)(d) and prayed for upholding the order of the Ld.CIT(A). 18. In support of the same, the Ld.AR relied on the following decisions of the various courts: 1. CIT Vs. Indian National Theatre 305 ITR 149 (Del) Loan or deposit with another trust / concern amounts to application of income at para 11, the Hon ble High Court held as under: 11. As far as the third question is concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he loan to Tyagi Foundation. The ld. CIT(A) found that Tyagi Foundation was a separate registered society engaged in similar charitable activities and the allegation of the AO of this society being controlled by Mrs. Sudha Tevwari and others was wrong and irrelevant. No material was brought to show that Tyagi Foundation was not a genuine registered society engaged in similar charitable activities. The loan given by the assessee to Tyagi Foundation was out of the object of the assessee-society to promote its charitable activities. It was not a case that Tyagi Foundation had misused the amount of loan and utilised it for non-charitable purposes. No material was placed to show that the purchase of the property and utilisation of the property by Tyagi Foundation was for purposes other then its charitable purposes. Moreover, the loan given was fully secured by mortgage deed and in fact, in the subsequent year on non-payment of the loan the property was reverted to the assessee-society. No material was placed to show that there were any non-charitable activities connected with the property in question. On the facts and in the circumstances of the case, therefore, we hold that the ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is noted that the recipient Trust is also into charitable and education Trust. According the ld.AR the payment of loan of Rs. 70,25,780/- has not been claimed by the assessee as application of fund of the income of the society. Further, the assessee Trust has paid this loan amount for the purpose of construction of the college building by the sister concern which is also carrying on the similar objects. Further it is noted that loan amount has been paid by the assessee Trust during the Financial years 2003 2005 towards construction of the college building. It is pertinent to note that the sister concern had given loan to the assessee Trust to the tune of Rs. 3.12 crores as on 31/03/2004 and later on the assessee trust repaid the same along with excess amount of Rs. 70,25,870/-, which has been shown as loan receivable in the audited financials of the Trust. The assessee Trust has furnished all the details invoices, payments particulars for amounts paid to the contractors M/s.L T, who built the college building of the sister concern M/s.GET, before the AO for verification, in pursuance of the directions of the Honourable High Court of Madras. Therefore, the Ld.CIT(A) held that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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