Appeal partially allowed on interpretation of tax law; Revenue's ground dismissed as infructuous

The appeal by the Revenue against the order passed by the Commissioner of income-tax (Central), Pune regarding interpretation of section 13(1)(c) of the Act for the assessment year 2007-08 was partly allowed. The Tribunal found that as no specific addition was made by the Assessing Officer regarding the contravention of section 13(1)(c) in relation to advances made to other trusts, the issue did not necessitate adjudication. Consequently, the Revenue's ground was dismissed as infructuous, leading to the partial allowance of the appeal.

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Issues involved:
The appeal by the Revenue against the order passed by the Commissioner of income-tax (Central), Pune on 31-10-2014 in relation to the assessment year 2007-08 regarding Ground No.6.

Issue 1: Interpretation of section 13(1)(c) of the Act

The case involved the advancing of loans by the assessee trust to other trusts where the trustees were also interested, potentially contravening the provisions of section 13(1)(c) of the Act. The Assessing Officer (AO) observed that trustees of the assessee trust were trustees in two of the recipient trusts, leading to a violation of the said provision. The ld. CIT(A) allowed the appeal ground, citing a previous decision in favor of the assessee for a different assessment year. The Tribunal initially decided against the Revenue, referencing certain paras of the ld. CIT(A) order. However, upon a Miscellaneous Application by the Department, the Tribunal recalled its decision for fresh adjudication.

Decision:

After hearing the submissions and reviewing the material on record, it was noted that although the AO discussed the issue of contravention of section 13(1)(c) regarding the advances made to other trusts, no specific addition was made on that basis. The ld. AR argued that since no addition was made by the AO, there was no valid reason for the issue to be raised before the ld. CIT(A) or for an order to be passed on it. The ld. DR also acknowledged that no addition was made towards the advances to the three trusts. Therefore, as the AO did not make any addition on this matter, it was deemed that the ground taken by the assessee and subsequently by the Revenue did not necessitate adjudication. Consequently, the Revenue's ground was dismissed as infructuous, and the appeal was partly allowed. The order was pronounced in the Open Court on 07th September 2023.

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