9911796707
TMI Blog2024 (10) TMI 1557X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of such assets in the income earned or not. Accordingly the Appellant trust should be given the benefit as per the provisions of section 11 - As further directed that the AO while doing this check and verification of the records would also grant reasonable opportunity of hearing to the Appellant before taking any decision. Accordingly this ground No. 1 raised by the appellant stands allowed for statistical purposes. Payment of Specified person - There is no provision under the Act which provides that if advance is given to the specified person it would be added to the income. Reliance in this connection is placed on the decision of Vels Institute of Science, Technology Advanced Studies [ 2015 (11) TMI 857 - ITAT CHENNAI] - In this case assessee, a charitable educational institution, was registered u/s 12AA. It intended to establish a medical college. It entered into an agreement with managing trustee for purchase of his land and paid certain amount to him in advance. Subsequently said agreement was cancelled and managing trustee returned principal amount along with interest. Assessee claimed exemption u/s 11. AO denied exemption holding that payment of advance to managing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ld. CIT(A) dated 25-01-2024, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2015-16 raising therein following grounds of appeal. 1. The Ld. CIT(A), NFAC has erred on facts and in law in directing the AO to check and verify as to whether assets on which depreciation of Rs. 53,40,017/- has been claimed has been allowed as application of income in the previous year or not ignoring that he has no power to set aside an issue u/s 251 of the Act. 2. The Ld. CIT(A), NFAC has erred on facts and in law in holding that Rs. 5,16,000/- given to Santosh Yadav and Rs. 10,00,000/- given to Nitish Yadav being specified person is not for the purpose of core activities of institution and thereby confirming the addition for the same. 3.The Ld. CIT(A), NFAC has erred on facts and in law in confirming the addition of Rs. 8,64,110/- on account of interest free advances given to various persons ignoring that such advances were given in course of carrying out educational activity and there is no provision under the Act to tax notional income on interest free advances given. 2.1 Through Ground No.1, the Appellant has challenged the action of ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts for the financial year for financial year 2009-10 to 2011-12 are neither having signature of auditors nor chairman/accountant of the appellant trust. Therefore, the documents in the case of the Appellant furnished before ld. CIT(A),NFAC were not found to be reliable. The ld. CIT(A), NFAC after evaluating the documents had furnished a finding that this issue requires verification and checking and therefore necessary directions were given to the AO for verification. However, now before the Bench, ld. AR has raised a plea that as per section 251 of the Income Tax Act, the ld. CIT(A) has no power to set aside the issue as he enjoys coterminous powers with the AO. Hence, the ld. AR wants a direction to the AO to allow depreciation as application of income. After analysing the entire facts and circumstances and particular facts of the present case more particularly taking into consideration the documents in the shape of balance sheet, income and expenditure account and depreciation chart, it was found that the huge amount has been spent by the Appellant trust in previous year with effect from financial year 2009-10 to 2011-12, but these documents were neither having signatures of audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014 and the balance amount was returned back on 31.03.2016 as the material could not be supplied due to non availability of required quantity. The AO at Pg 8, Para c of the order held it to be violation of section 11(5) of the Act so as to attract section 13(1)(c)(ii) r.w.s. 13(2)(g) 13(2)(h) of the Act. Accordingly addition of Rs. 10 lacs was made by holding that assessee advanced Rs. 10 lacs during the year under consideration. 4. The Ld. CIT(A), NFAC at Para 5.4, Pg 14 of the order observed that the advance so given is not for the purpose of core activities of the institution. By granting such advances a possibility has been created for diversion of funds to the specified person. Accordingly the addition made by AO is confirmed. 5. It is submitted that both the lower authorities have incorrectly invoked section 11(5) of the Act. Section 11(5) prescribes the modes of investing or depositing the money referred to in clause (b) of section 11(2). Section 11(2) provides that where 85% of the income is not applied to charitable purpose but is accumulated or set apart, the income so accumulated or set apart shall not be included in the total income if it is invested or deposited in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for interest of managing trustee. Therefore, there was no violation of section 13(1)(c). Hence addition made by AO and confirmed by Ld. CIT(A) is not as per the provisions of the Act and the same be directed to be deleted. 3.3 On the other hand ld. DR appearing on behalf of the revenue relied upon the orders passed by the revenue authorities 3.4 I have heard the counsels for both the parties and perused the material placed on record, judgements cited before the Bench and the orders passed by the revenue authorities. After evaluating the entire records, I found that the additions were sustained by the revenue authorities in the case of Santosh Yadav and Nitish Yadav by holding that the amount given by the trust to these respective persons were in violation of section 11(5) of the Act. However in my view, both the lower authorities have incorrectly invoked Section 11(5) of the Act. Section 11(5) prescribes the modes of investing or depositing the money referred to in clause (b) of section 11(2). Section 11(2) provides that where 85% of the income is not applied to charitable purpose but is accumulated or set apart, the income so accumulated or set apart shall not be included in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returned, it could not be said that money was diverted for interest of managing trustee. Therefore, there was no violation of section 13(1)(c). Hence, in this view of the matter, the Ground No. 2 raised by the assessee stands allowed. 4.1 Now coming to Ground No. 3 wherein the appellant has challenged the order of ld. CIT(A),NFAC wherein additions on account of interest free advances given to the various persons were confirmed. 4.2 During the course of hearing, the ld. AR relied upon the written submissions and the relevant portion is reproduced here in below. 1. The AO at Pg 11-12 of its order observed that assessee has given advance to specified person and therefore on such advances he computed interest @ 12% and made addition of Rs. 8,64,110/- as per table provided at Pg 12 of the assessment order. 2. The Ld. CIT(A), NFAC confirmed the addition made by the AO as per the finding given at Para 6.3, Pg 15 of the order. 3. It is submitted that advances were given in course of carrying out the charitable activity. The purpose for which the advances are given is tabulated as under:- Name of person Amount advanced Purpose of advance Ashok Kumar Bohra Rs.2,50,000/- He was advanced Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not supply the same due to non availability of the required quantity. Accordingly he returned back Rs. 10 lacs on 28.11.2014 and Rs. 10 lacs on 30.03.2016. The confirmation and ledger account is at PB 53-55. Thus the advance is given for the activities of the assessee. From the above it can be noted that the amount was advanced in course of carrying out the charitable activity. Therefore, the notional interest added by AO is not as per law. For this purpose reliance is placed on the following cases:- B and A Plantations and Industries Ltd. Vs. CIT242 ITR 22 (Gauhati) (HC) When there is no finding that assessee had in fact received interest on advance made to a sister concern or the debtor paid the interest to assessee; notional interest cannot be charged to tax CIT Vs. Shoorji Vallabhdas And Co. (1962) 46 ITR 144 (SC) It was held that Income tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income, if income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hyp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to specified persons and therefore on such advances he computed interest at the rate of 12% and accordingly made additions where as it was specifically argued by ld. AR that the advances were given in the course of carrying out the charitable activities and in this regard the purpose for which the advances were given has also been tabulated in the chart placed on record. After analysing the purposes contained in the said chart, it can safely be concluded that the amount was advanced in the course of carrying out the charitable activities therefore the notional interest in my view could not have been added by the AO as per law. For this legal preposition I rely upon the decisions in the case of B and A Plantations and Industries Ltd. Vs. CIT242 ITR 22 (Gauhati) (HC) wherein it has been held that when there is no finding that assessee had in fact received interest on advance made to a sister concern or the debtor paid the interest to assessee; notional interest cannot be charged to tax and also in the case of CIT Vs. Shoorji Vallabhdas And Co. (1962) 46 ITR 144 (SC) wherein it was held that Income tax is a levy on income. No doubt, the Income-tax Act takes into account two points of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
