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Income Tax Appellate Tribunal, MUMBAI BENCHES “J”, MUMBAI
Before: Shri Joginder Singh, & Shri N.K. Pradhan
04/07/2018 सुनवाई क" तार"ख / Date of Hearing : 04/07/2018 आदेश क" तार"ख /Date of Order:
2 Shree Raj Foundation आदेश / O R D E R Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 25/11/2016 of the Ld. First Appellate Authority, Mumbai, allowing exemption under section 11 of the Income Tax Act, 1961 (hereinafter the Act) ignoring the fact that there is clear cut violation of section 11(1) of the Act.
During hearing, the ld. counsel for the assessee, at the outset, claimed that the impugned issue is covered in favour of the assessee by the decision dated 14/09/2016 (ITA No.1242/Mum/2014) for Assessment Year 2010-11 and even the Department accepted the claim of the assessee, identically for Assessment Year 2011-12. On the other hand, the Ld. DR, Ms. Aarju Garodia, though defended the addition but did not controvert the factual matrix that the issue in hand is covered by the decision of the Tribunal dated 14/09/2016. 2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the 3 Shree Raj Foundation aforesaid order of the Tribunal dated 14/09/2016 for ready reference and analysis:-
This is an appeal filed by the revenue challenging the order of the ld.CIT(A) dated 27.12.2013 for the assessment year 2010-11. 2. Following grounds of appeal have been raised by the revenue:
“1. "That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to allow the exemption, ignoring the fact that there is clear cut violation of Section 11(1) of the IT Act; “2. "That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in stating that the granting educational loans to other charitable trusts with similar objects is application of income of the assessee trust u/s 11(1) of the IT Act”
The facts in brief are that the assessee trust filed its return of income on 27.9.2010 by accompanying the revision income expenditure and expenditure balance-sheet audit report in form no. 10B declaring total income at NIL The trust is a charitable trust registered as a charitable organization with DIT(E), Mumbai under section 12A vide registration No. TR/38831 and with Charity commissioner, Mumbai vide No.E-4857 (Mumbai) The assessee claimed exemption u/s 11 of the Act. During the course of assessment proceedings the AO found that it was observed by the AO that the assessee has granted interest free loan amounting to Rs.9,10,000,00/- for Liberal and Management Education Society which was claimed as application of its income. Out of the said loan Rs. 6,00,00,000/- was given by forwarding from earlier year and Rs.3,10,00,000/- was shown as 4 Shree Raj Foundation opening balance. Thus Rs.6 crores were given during the year as educational loan which was authorized by the object of the assessee and hence claimed the same as application of income. The AO not convinced with the explanation of the assessee for advancement of the loan to other charitable trusts with similar objects and hence issued show cause notice to the assessee dated 18.2.2013 by citing circular no.100/1973 stating that disbursement of loan was to be considered as application only if the loans were advanced by educational trust to the institution or higher studies if the object of the trust provided the same and consequently offered as income as time of repayment and therefore called the assessee to show cause as to why the activity of the trust should not be considered as not in accordance with the object within the meaning of section 12AA(3) of the Act and exemption u/s 11 should not be denied which was discounted by the assessee and detailed reply which is incorporated in the assessment order. Finally, the AO rejected the submissions of the assessee and held that the assessee was never indulged in the activity of the education trust which was not authorized by the object and consequently denied exemption u/s 11 as claimed by the Act and finally the income of the assessee determined at Rs.5,55,13,071/- vide order dated 25.3.2013 passed under section 143(3) of the Act. Aggrieved by the order of the AO, the assessee has filed appeal before the ld.CIT(A) who allowed the appeal of the assessee by observing and holding as under :
“ 4.9 I have considered the facts and circumstances lf the case, submissions of the appellant and the assessment order. It is noticed that the A.O. had treated loan of Rs.6,OO,OO,OOO/- as 5 Shree Raj Foundation amount not allowable as 'application of income' within the meaning section 11 of the IT.Act mainly for the reason that giving loan is not authorized by the objects of the trust and that the loan advanced is not liable to be considered as 'application of income'. The. appellant has furnished in detail, the objects as are on record for this purpose particularly reproduced above from the submissions of the appellant, forming part of the Trust Deed shows that under the wider ambits of objects, advance or extending loan is covered within such objectives and also under the last clause (12) of the objectives which reads as under: - "Generally to do all such other deeds and things as may be deemed incidental or conducive to the attainment and fulfillment of all or any of the objects mentioned herein". In any case, the money spent/utilized for charitable purpose (for the purpose of education in the case of the appellant) is sufficient to hold that the application has been made within the objective clauses of the Trust Deed. Therefore, from the facts on record, it is derived that there is no violation of either technical nature of breach of objects of the trust by carrying out activities beyond the .purview of the, objects of the trust or in substance" that any .other activity for extraneous purpose has been carried out. On the other hand, it is also seen 'that the' amount given as loan is to 'charitable institutions, holding valid Registration u/s.12A and particularly existing and carrying out the activity of imparting education. Hence on facts. the conclusion derived by A.O. is erroneous that appellant. has carried out activities in breach of objects of the trust, thereby wrongly concluding for denial of application of income of lending for this reason 4.9 The issue as to whether advancing loan is application of income or no well appreciated in terms of the decision in the case of CIT vs. Indian National Theatre Trust (2008) 305 ITR (Del.) where it was held that - "The Tribunal was correct in its conclusion that Rs.50,OOO/- deposited with the Centre for Art and culture should be treated as an application of the income of the trust. The word application has to be given a wider Interpretation keeping in view the purpose for which the provision has been introduced”. Thus, repayment of loan is decided as application of income within the meaning of section 11 of-the IT Act. Further, the learned AR has relied on the case of National Engineering Coordination Committee vs. ACIT 6 Shree Raj Foundation (1992), which has" further been approved. In the order of Dr. D.Y. Patll Pratishtan vs. Department of Income" Tax, in the relevant part of which is reproduced as under:
62. As per the settled legal position, which has been laid down in numerous decision, it is clear that any amount which is laid out by the charitable trust or institution for achieving its charitable object constitutes an application of income to charitable purposes irrespective of whether the amount in question has been laid out irretrievably or whether the amount continued to belong to the charitable trust or. the institution or it is recoverable by it. Consequently if the charitable trust lends and advances money for the purposes which are connected with its basic charitable object then such advances even though recoverable by the charitable trust from the persons to whom the same has been paid would still constitute application of income in the year in which the advances are made.
4.10 The above noted decision has also been followed by Hon'ble ITAT, Pune Bench 'B' in- the-case of Dr. D.Y. Patil Pratishtan vs. Department of Income Tax in , observing that "64. We also find that the NECC is the division of ACIL for the purpose of carrying on its activities. There is no allegation or suggestions made even by the Department that the advances which are made by the NECC were for ulterior motive. We therefore, hold that the amounts advanced to ACIL constituted monies applied by the NECC to its charitable object and activities. "
4.11 In view of the above decisions of the higher judicial authorities on the issue, which are applicable to the facts and circumstances of the case, it is held that the advance made to other charities, holding Registration ujs.12A, carrying out similar activities' of imparting education, without any ulterior view motive and falling within the objects of the trust-as in the case of appellant, same is liable to be considered as 'application of income' during the year for the purpose of computation of 7 Shree Raj Foundation income of the appellant u/s 11 of the IT Act. Accordingly, Ground No.2 of appeal is allowed.”
We have considered the rival submissions and perused the material on record. We find that the sum of Rs.9,10,000,00/- was shown advances for Liberal and Management Education Society out of which a sum of Rs.3 crores was opening and Rs.6,00,00,000/- was advanced during the year. The said trust to whom the loan was advanced was having same objective as the assessee has and advancing of loan to the trust with similar object was one of the objective of the assessee trust. We also find that the ld. CIT(A) has passed very reasoned and detailed order after considering the issue in great detailed by relying on the decision in the case of Indian National Theatre Trust (supra) and the decision in the case of Dr. D.Y. Patil Pratishtan(supra). Wherein a similar issue has been decided in favour of the assessee. In view of the above ratio laid down in the above cases, we find that the case of the assessee squarely covers by the decisions mentioned above and accordingly, we uphold the order of ld.CIT(A) by dismissing the appeal of the revenue.
In the result, the appeal of the Revenue is dismissed.”
2.2. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order/Tribunal order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find that on 8 Shree Raj Foundation identical issue that too in the case of the assessee for Assessment Year 2010-11, the Tribunal after considering the observation of the Ld. Commissioner of Income Tax (Appeal) and following the decision in the case of Indian National Theater Trust and also the case of Dr. D. Y. Patil Pratishthan (ITA No.1592/Pn/2011) upheld the order of the Ld. Commissioner of Income Tax (Appeal), therefore, we find no infirmity in the order of the Ld. Commissioner of Income Tax (Appeal), resultantly, the appeal of the Revenue is dismissed.
Finally, the appeal of the Revenue is dismissed.