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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
ORDER Per: Dr. M.L. Meena, AM:
The appeal is filed by the assessee against the order of the ld. Commissioner of Income Tax(Appeals)-1, Ludhiana, [in short the CIT(A)], passed u/s 250 (6) of the Income Tax Act 1961, [in short the ‘Act’] for A.Y. 2015-16.The assessee took the following grounds which are extracted below:
“1. That the impugned order is erroneous in law, prejudicial, arbitrary and not in keeping with the facts on records of the case.
That the learned CIT (Appeals) has made a grave error in confirming addition of Rs. 1,18,000 allegedly on account of interest free advances to related parties.
(i) That provisions of Section 13(l)(c) of the Income Tax Act are not applicable since the two parties namely Prime Public School and Good Shephard Mission School are not related parties of the assessee within the definition of Section 13(3) of the Income Tax Act. These schools are run by missionaries.
(ii) That the amount due from the two alleged related parties was on account of sale of old school busses. No interest free advances were given, Copies of account of the parties were also submitted by the assessee but the learned CIT opted to ignore that evidence.
(iii)That the learned CIT (Appeals) has ignored the written submissions and grounds of appeal in this regard.
3. The appellant craves the leave to add, alter, amend, withdraw, forego or substitute any ground at or before the time of hearing.” 2. Brief fact of the case is that the assessee is a trust and running the school in Srinagar. The assessee sold two school buses to Prime Public School and Good Shephard Mission School amounting to Rs.9,90,000/- and the said amount is credited in the books of the assessee. The said outstanding amount was not paid by the party. The revenue had determined the interest u/s 164 (2) amount of Rs. 1,18,000/- for contravening section 13(1)(c)/ 13(1) (b) of the Act. The assessee argued that the said amount paid to the non-related party. So, there is no question of contravening section 13(1)(c) of the Act. Aggrieved assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) upheld the issue and sustain the order of the ld. AO.
Being aggrieved assessee filed an appeal before us.
The assessee submitted a written submission and requested to decide the case on merit on basis of its submission. None was present on behalf of the assessee. With the consent of the ld. Sr. DR the matter was taken up for hearing.
The ld. Sr. DR has argued that the trust fund was channelled to the other party and this fund was credited without allowing the any interest. So, the assessee is violating the section 164(2) r.w.s. 13(1)(c)/13(3) of the Act. The ld. Sr. DR relied on the order of the appellate authority. The relevant part of the order page no. 22 is reproduced as below:
“14. It may not be out of place to mention here that the Hon'ble
Supreme Court had an occasion to adjudicate on the aforesaid impugned issue in the case of DIT (Exemption) Vs. Bharat Diamond
Bourse [2003] 259 ITR 280 (SC). Elaborately discussing the issue, the Hon'ble Supreme Court held the following in para- 51 therein:
"51. In the result we disagree with the view taken by the High Court [of Bombay] and the Tribunal and affirm the view taken by the Assessing Officer and the Appellate Commissioner of Income Tax (Appeals). We hold that Bharat Shah was a founder of the assessee institution; that during the previous years relevant to the assessment years 1989-90 and 1990-91 a substantial amount of money to the extent of Rs.70 lakhs was lent to Bharat Shah without adequate security or interest.
Consequently, the assessee would lose the benefit under section 11 of the Act by falling within the mischief of section 13 (3) (a) read with 13 (1) (c) (ii) of the Income Tax Act, 1961."
On a careful consideration of the entire matter as stated above,
the appellant Trust can be, decidedly, said to have violated the provisions of section 13 of the Act and, thus, disentitled itself from the benefit of exemption. However, since it has been stated that there was no surplus of income over expenditure during the year under consideration, the AO's action of bringing to tax the deemed interest of Rs.1,18,000/- under the provisions of section 164(2) of the Act is sustained. It is ordered accordingly.”
Heard. After a thoughtful consideration of material fact, we find that the assessee had sold the buses to the related parties where no interest was charged on the outstanding amounts as the fund of the trust is not yet realised from creditors. In our view, the specific funds should be utilized for the benefit of the people as provided in the Act. Thus, we have no doubt in holding that the assessee had siphoned the funds for the non-beneficial / charitable purpose nor an activities in consonance the objects of the trust. The charging of interest on credit amount is foremost duty of the assessee to upheld financial interest of the Trust. In view of the matters, we find no infirmity in the order of the revenue authorities.
Accordingly, the addition made by the ld. AO and confirmed by the ld. CIT(A) is sustained.
In the result, the appeal of the assessee bearing is dismissed.
Order pronounced in the open court on 09.12.2022