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Income Tax Appellate Tribunal, “H”, BENCH
Before: SHRI MAHAVIR SINGH, JM & SHRI M.BALAGANESH, AM Dr.
आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in A.Y.2013-14 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-3, Mumbai in appeal No.CIT(A)-3/ACIT-(Exem)-1(1)/IT-10534/2017-18 dated 01/03/2018 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 31/03/2013 by the ld. Asst. Commissioner of Income Tax (Exem)- 1(1), Mumbai (hereinafter referred to as ld. AO).
His Holiness Dr. Sayedna Taher Saifuddin Memorial Foundation 2. The following grounds have been raised by the Revenue before us:-
Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the assessee 's claim of advancement of interest free loan without appreciating the fact that the advancement of loan, by virtue of being accounted for in the Balance sheet, does not fall within the meaning of expenditure.
Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in not following the decision of his predecessor wherein advancement of interest free loan was not allowed as application of income.
3. The appellant prays that the order of the Commissioner of Income Tax (Appeals)-3, Mumbai be set aside and that of the Assessing Officer be restored.
4. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary."
We have heard rival submissions. We find that assessee is a religious trust and had advanced interest free loan to another trust namely Shaite Ali Qardan Hasana Trust of Rs.1,02,00,000/- (closing balance of Rs.2,02,00,000/- - Rs.1,00,00,000) and to Badri Qardan Hasana & Marfiq Trust (Rajkot) of Rs.50,00,000/-. The ld. AO by placing reliance on the findings of A.Y.2011-12 held that the loan given to another trust is not covered under Circle 100 dated 24/01/1973 and accordingly, the said sum of Rs.1,52,00,000/- given during the year under consideration cannot be considered as application made for the year by the assessee trust. The ld. CIT(A) observed from the trust deeds of both the trusts, the objects of the assessee trust as well as the objects of the recipient trusts are similar and therefore, by following the decision of Hon’ble Delhi High Court in the case of CIT vs. National Art Theatre Trust treated the loans given by the assessee to two trusts as application of income in the sum of Rs. 1,52,00,000/- and allowed the appeal of the assessee.
His Holiness Dr. Sayedna Taher Saifuddin Memorial Foundation
Aggrieved, the revenue is in appeal before us vide the above mentioned ground.
We have heard rival submissions. We find that the entire issue in dispute had already been addressed by the Co-ordinate Bench of this Tribunal in assessee’s own case in for A.Y.2011- 12 dated 28/06/2018 wherein the entire facts and the decision rendered thereon are as under:-
“3. Brief facts relating to the issue in dispute are, the assessee a charitable trust is registered under Bombay Public Trust Act, 1950. The assessee trust is also registered with the Charity Commissioner. The Director of Income-tax (Exemp.), Mumbai, has also granted registration under section 12A of the Act to the assessee. For the assessment year under consideration, the assessee filed its return of income on 27th September 2011, claiming exemption under section 11 of the Act. During the assessment proceedings, the Assessing Officer on verifying the details called for found that as per the income and expenditure account, the assessee has debited an amount of Rs. 2 crore towards interest free loan given to another trust. He, therefore, called upon the assessee to justify the deduction claimed. In response to the query raised by the Assessing Officer, the assessee vide letter dated 3rd March 2014, justified its claim on the plea that the interest free loan was advanced to another trust having similar object. In this context, the assessee also relied upon CBDT circular no.100 dated 24th January 1973. The Assessing Officer, however, did not find merit in the submissions of the assessee. The Assessing Officer was of the view that the advancing of interest free loan to another trust cannot be accepted as application of income, rather, it has to be treated as investment of funds as provided under section 11(5) and section 13(1)(d)(ii). He also observed, the assessee has not actually made the expenditure but it is a loan given to another trust which is recoverable in future. Thus, on the aforesaid reasoning, the Assessing Officer ultimately disallowed the deduction claimed of Rs. 2 crore. Of course, the Assessing Officer also disallowed depreciation claimed of Rs. 1,91,17,469. However, since the claim of depreciation is not an issue in dispute in the present appeal, there is no need to deal with the same. Be that as it may, the assessee challenged the His Holiness Dr. Sayedna Taher Saifuddin Memorial Foundation disallowance made by the Assessing Officer by preferring an appeal before the first appellate authority.
4. So far as the issue of disallowance of Rs. 2 crore is concerned, the learned Commissioner (Appeals) rejected assessee's claim basically for the reasons objects of both the trusts are not similar, and further, the interest free loan advanced by the assessee to another trust was not for the purpose of utilization in educational purpose. Hence, he held that as per CBDT circular no.100 of 1973, the advancing of interest free loan to another trust will not amount to application of income for charitable purpose. Secondly, he observed, the object of the other trust is religious.
After examining the objects of that particular trust Hon'ble Apex Court found that while some of the objects provide for activities completely religious in nature and restricted to specific community, however, some other objects like providing food to the public on religious days of the community, establishment of Madarsas and organization for dissemination of religious education and rendering assistance to the needy and poor for religious activity reflect the essence of charity. The Hon'ble Court observed, Niyaz on religious occasions and auspicious days of Dawoodi Bohra Community qualifies as a charitable purpose which would entail general public utility. Thus, as could be seen from the aforesaid observations of the Hon'ble Supreme Court, though, a particular trust may appear to be of religious nature, however, the objects of the trust may exhibit the dual tenor of religious and charitable purposes and activities. Thus, the trust can be considered to be having both religious and charitable objects. Thus, keeping in view the ratio laid down by the Hon'ble Supreme Court in the aforesaid decision, it has to be examined whether the objects of the assessee and recipient trust are similar in nature or not. It is evident, the objects of the recipient trust speaks of providing certain benefits / services to Dawoodi Bohra Community in particular and mankind at large. However, some other object clauses do not expressly provide restricting the benefit to a particular community. Further, it needs to be factually verified from the activities of the assessee whether even the charitable objects are for the benefit of a particular community or people at large. These facts have not been verified by the Departmental Authorities. One more vital aspect which requires consideration is, in the course of hearing, it was submitted before us by the learned Counsel for the assessee that the interest free loan of ` 2 crore advanced to the other trust in the impugned year was received back by the assessee in the assessment year 2012-13 and the assessee has offered it as income in the said assessment year. In this context, the learned Counsel for the assessee had referred to the computation of income filed with the return of income for the assessment year 2012-13. Notably, though, the aforesaid issue was raised before the His Holiness Dr. Sayedna Taher Saifuddin Memorial Foundation learned Commissioner (Appeals), however, he has not recorded any finding on this aspect of the issue. If the assessee, as claimed, has offered the interest free loan of Rs.2 crore after receiving back in assessment year 2012-13, then it will amount to double taxation of the same income if it is again assessed in the impugned assessment year. Thus, if ultimately it is held that advancement of interest free loan to another trust cannot be treated as application of fund and, therefore, has to be taxed in the impugned assessment year, then, it cannot again be taxed in assessment year 2012- 13. Therefore, the Assessing Officer is directed to verify the claim of the assessee and if it is found to be correct then the said amount has to be excluded from the income offered in assessment year 2012-13. With the aforesaid observations, issues are remitted back to the Assessing Officer for de novo adjudication/assessment after reasonable opportunity of being heard to the assessee. The Assessing Officer must properly examine the objects of both the trusts and make necessary enquiry to find out whether the objects of both the trusts are similar in nature. Further, while deciding the issue the Assessing Officer must keep in view the ratio laid down in the decisions referred to in this order and any other decision which may be cited before him.
In the result, assessee's appeal is allowed for statistical purposes.”
5.1. For A.Y.2011-12, this Tribunal had restored this issue to the file of the ld. AO for denovo adjudication with a direction to properly examine the objects of both the recipient trusts and make enquiries whether the objects of the recipient trusts and the objects of the assessee trust are similar. However, for the year under consideration, we find that the ld. CIT(A) had recorded a categorical finding that the objects of the assessee trust are similar to the objects of the recipient trusts and hence, there is no need to make any verification on this fact. We find that this finding of the ld. CIT(A) had not been controverted by the ld. DR. Accordingly, we find no infirmity in the order of the ld. CIT(A) in granting relief to the assessee. Accordingly, the grounds raised by the revenue are dismissed.
His Holiness Dr. Sayedna Taher Saifuddin Memorial Foundation 6. In the result, appeal of the revenue is dismissed.