https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=760323 https://www.taxtmi.com/caselaws?id=760323 Exemption u/s 11 - Violation of Section 13 regarding loans and advances to related parties - assessee has diverted the funds of the trust and thereby violated third and 14th proviso to Section 10(23C)(vi) - funds are diverted for the benefit of the trustees and the associates concerns of the trustee - whether the advance given to M/s Samarth Vivdhlaxi Seva Trust is in violation of provisions of Sections 11 to 13 of the Act or not? - HELD THAT:- We do not find that the provisions of the income tax act are violated when the assessee has given an advance to another trust having the common object and also registered u/s 12AA of the act though having the common trustees. Even otherwise, if there is a violation of section 13 of the trust if the loan is given to another trust, an addition of Rs. 40,20,000/- on account of notional interest @ 12 % per annum only Rs. 3.35 crores advance to the above trust, could not have been made. In fact, if assessee is found to be in violation of Rs. 3.35 crores then assessee trust is charged to tax at maximum marginal rate at Rs. 3.35 crores and not only on 12% of such income. Therefore, also we do not find any infirmity in the order of CIT(A) in deleting the addition. Assessee has paid a security deposit - For the purpose of deciding the benefit one has to compare the Apple with the Apple and not oranges with the Apple. Against this the learned assessing officer has categorically cited a comparable instance of the property having four times more value than the impugned property at substantially lower and without deposit. AO on submission of such details by the assessee of comparable instance, then decide the issue afresh whether there is any benefit to the trustees or not. If, no benefit is found to be accruing to the trustees on comparable of similar instance, the denial of exemption to the assessee is not permissible. If, benefit accrued to the trustee by giving such a huge deposit in the form of security deposit, then on the amount of security deposit, the tax at the maximum marginal rate is required to be charged - Thus restore this issue back to the file of the learned assessing officer. Advance given by the assessee trust to Mr. Manish Vyas and Mrs.Asha Vyas - AO held that amount of advance given is clear cut violation of Section 13(1)(c) and, therefore, he imputed 12% thereon charged with interest income to the maximum marginal rate - We restore this issue back to the file of AO to consider that amount paid by the assessee as a loan to Mr. Manish Vyas and Mrs.Asha Vyas is a direct benefit to the trustees of the trust which is in clear-cut violation of the provisions of section 13 (1) (c) of the act. However as only opening and closing balances are considered by the assessing officer, the peak amount of loan for each year is required to be considered for the purpose of taxation at the maximum marginal rate. Because of the reason that the assessee has not given us the Ledger with balances, this issue needs to be restored back. AO after examination decide the issue in accordance with the above directions. Allowing the capital expenditure to the assessee - We find that the learned assessing officer is not correct in not granting benefit of this capital expenditure to the assessee because if the capital expenditure is utilized for the object of the trust, the assessee trust is entitled to such deduction. Accordingly, this ground of appeal is dismissed. Case-Laws Income Tax Thu, 26 Sep 2024 00:00:00 +0530