COMMISSIONER OF INCOME TAX (EXEMPTION), NEW DELHI vs. H.C. GUPTA EDUCATIONAL SOCIETY

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ITA/347/2018HC DelhiDLHC01000766201823 March 2018Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE A. K. CHAWLA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arose for consideration. It reasoned that the advance given by the assessee to another charitable trust, in fact, furthered its charitable objectives. Therefore, the mere fact that one or some trustees were common did not result in the application of Section 13(1)(d) of the Act. The Court found the CIT(A)'s decision to set aside the addition to be correct. The appeal filed by the Revenue was dismissed.

What were the facts?

The Revenue, Commissioner of Income Tax (Exemption), New Delhi, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT). The ITAT had upheld the decision of the CIT(A) to cancel an addition of Rs. 37,30,000 made by the Assessing Officer (AO). The AO had added this amount on account of alleged violation of Section 13(1)(d) of the Act. The addition was based on notional interest calculated on an interest-free loan provided by the assessee, H.C. Gupta Educational Society, to another Trust. The AO's rationale was that the recipient Trust had the same trustees as the assessee, thus attracting Section 13(1)(d). The CIT(A) had set aside the addition, finding the loan to be genuine and that the common trustees did not attract Section 13(1)(d) given the objectives of both societies.

What were the issues?

1. Whether the High Court, in an appeal under Section 260A of the Income Tax Act, 1961, can interfere with the findings of the Income Tax Appellate Tribunal regarding the application of Section 13(1)(d) of the Act, when no substantial question of law arises. Assessee's Contention: The assessee argued that the advance given to another charitable trust furthered its own charitable objectives. The mere fact that one or some trustees were common did not lead to the application of Section 13(1)(d) of the Act. Revenue's Contention: The Revenue contended that the AO's addition of Rs. 37,30,000 on account of notional interest on an interest-free loan to another trust, which had common trustees, was erroneous and attracted Section 13(1)(d) of the Act.

Which sections of the Income-tax Act were involved?

Section 260A,Section 13(1)(d)

AI-generated summary — verify with the full judgment below

$~15 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 347/2018 and CM APPL. 11637/2018 & 11682/2018

COMMISSIONER OF INCOME TAX (EXEMPTION), NEW DELHI

..... Appellant

Through: Mr. Ajit Sharma and Mr. Asheesh Jain, Advocates.

versus

H.C. GUPTA EDUCATIONAL SOCIETY ..... Respondent

Through: Mr. P. Roy Chaudhari, Advocate.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A. K. CHAWLA

O R D E R %

23.03.2018

The Revenue in its appeal before this Court under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) complains that the cancellation of Rs.37,30,000/- added by the Assessing Officer (‘AO’) on account of the alleged violation of Section 13(1)(d) of the Act is erroneous.

The AO brought to tax the notional interest calculated by him for an interest free loan, which the assessee gave to another Trust on the ground that the recipient Trust also comprised of the same trustees, and therefore, the transactions attracted Section 13(1)(d) of the Act.

The CIT(A) set aside the addition holding that the interest free loan was genuine, and that having regard to the objective of both

societies, the mere detail that a common trustee was found to function for both of them did not attract application of Section 13(1)(d) of the Act; the Income Tax Appellate Tribunal (‘ITAT’) conferred with this. This Court has considered the submissions of the Revenue. The advance given by the assessee to another charitable trust, in fact, furthered its charitable objectives. In these circumstances, the mere fact that one or some trustees were common, did not result in the application of Section 13(1)(d) of the Act. No substantial question of law arises for consideration. The appeal is dismissed along with the pending application.

S. RAVINDRA BHAT, J

A. K. CHAWLA, J MARCH 23, 2018 nn

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