Advance payments for land purchase cannot be considered under section 13(1)(d) provisions, loan repayment for charitable purposes constitutes valid income application

ITAT Raipur allowed the assessee's appeal regarding exemption u/s 11. The tribunal held that advance payments for land purchase cannot be considered under section 13(1)(d) provisions, following the consistency principle as Revenue had accepted such advances in earlier years. The CIT(A)'s income enhancement was set aside, ruling that loan repayment for charitable purposes constitutes valid application of income per CBDT Circular No. 100/1973, and no double claim existed as the assessee hadn't claimed land purchase from loans as income application.

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Issues involved:
The judgment involves issues related to the assessment of income of a charitable institution under section 12A of the Income-tax Act, 1961 for the assessment year 2014-15, including the treatment of advance payment for land purchase and the enhancement of income due to a purported double claim of exemption u/s 11(1)(a) of the Act.

Issue 1 - Advance Payment for Land Purchase:
The assessee, a charitable institution, had made an advance payment of Rs. 1,09,00,000 for the purchase of land. The Assessing Officer treated this payment as covered u/s. 13(1)(d)(i) of the Act, bringing it to tax. The CIT(A) upheld this decision, citing discrepancies in the details provided by the assessee regarding the land purchase transaction. However, the ITAT held that since the revenue had accepted similar advance payments in earlier and subsequent years, invoking section 13(1)(d) was not justified. The ITAT allowed the grounds raised by the assessee in this regard.

Issue 2 - Enhancement of Income:
The CIT(A) disallowed a claim of Rs. 1,13,65,809 towards repayment of a Term Loan, considering it a double claim as the assets acquired from the loan were already allowed as application of income. The ITAT, after considering the submissions made by the assessee and the revenue, found that the repayment of the Term Loan was not a double claim as the assets were not considered as application of income. Referring to relevant decisions and a CBDT circular, the ITAT set aside the CIT(A)'s order on this ground, allowing the appeal of the assessee.

In conclusion, the ITAT allowed the appeal of the assessee, setting aside the CIT(A)'s decision regarding the treatment of the advance payment for land purchase and the enhancement of income.

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