9911796707
TMI Blog1993 (5) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. against equitable mortgage of immovable property. Loan was given during that very year, on interest at the rate of 12 per cent per annum. The rate of interest was raised to 15 per cent per annum from 1-4-1981. The paid-up capital of that company was Rs. 4 lakhs. Two of the trustees of the trust were also directors of the Fleet Fastners (Pvt.) Ltd. 3. In these cases, initial assessments were completed under section 143(3) read with section 11 of the IT Act, (hereinafter called the Act) determining the income at nil as declared by the assessee. These assessments were set aside under section 263 of the Act, by the CIT. The Assessing Officer was directed to withdraw the benefit given under section 11 of the Act and to determine the corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the assets held by the trust formed part of the corpus of the trust as on 1-6-1973. Therefore, the case of the assessee clearly falls within the ambit of the proviso to section 13(1)(d). 5. The other limb of the argument which Shri Harish, advanced before us was that the loan given to Fleet Fastners Pvt. Ltd. is covered by section 13(2)(a) of the Act. According to Shri Harish, section 13(2)(a) covers only those cases in which investments are made by the assessee-trust in the capital of the concerns to which section 13(3) applies. In the case of lendings by trust, provisions of section 13(2)(a) will apply and not section 13(2)(h). As per the prescription of section 13(2)(a), the trust property can be deemed to have been used or app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of the said company was Rs. 4 lakhs and, therefore, the assessee's investment in this company exceed 5 per cent of the capital of the company within the meaning of section 13(4) of the Act. The two trustees of the assessee-trust are directors of the said private limited company. The case of the assessee, therefore, comes within the ambit of section 13(3). He further relied on the orders of the revenue authorities. Our attention was invited on some precedents also. 8. We have heard the rival submissions in the light of material placed before us and precedents relied upon. We have noted that the assessee received the donation towards corpus in cash. Out of the corpus funds received the assessee-trust advanced loan to the company in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly by the trust or institution or they are acquired by conversion or exchange of the original assets or purchased out of the sale proceeds on transfer of the original assets, as the case may be." In memorandum explaining provisions in Finance Bill, 1992, the amendment is discussed under the tax provisions relating to charitable trusts and other institutions. Relevant portion is reproduced here as under: "Under the existing provisions of section 13(1)(d) of the IT Act, exemption from income-tax provided to a charitable or religious trust institution will be forfeited if any funds of the trust or institution are invested or deposited after 28-2-1983, otherwise than in any one or more of the forms or modes specified in section 11(5) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall not apply in relation to assets held by the trust or institution where such assets form part of the corpus of the trust or institution as on 1-6-1973, irrespective of the fact whether such assets are held originally by the trust or institution or they are acquired by conversion or exchange of the original assets or purchased out of the sale proceeds on transfer of the original assets, as the case may be." 9. It is palpable from the perusal of the memorandum explaining the provisions, that the amendment was made with a view to remove the hard ships. It was, therefore, made possible by virtue of this amendment that such assets being disposed of or converted into permissible investment. The assessee cannot take advantage out of this pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (2) is applied to such lending by way of debentures or loans for adequate security and on adequate interest, that would nullify the provision in clause (a) and render it otiose. Such an interpretation will not be a harmonious interpretation of the provisions in clause (a) and clause (h), and cannot, therefore, be sustained." It transpires from the perusal of the above circular that section 13(2)(h) will cover only those cases in which investments are made by the assessee-trust in the capital of the concerns to which section 13(3) applies. It further indicates that in the case of lendings by trust, the provisions of section 13(2)(a) will apply and not section 13(2)(h) and any contrary interpretation would not be a harmonious interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
