TaxTMI 
TaxTMI 
2015 (8) TMI 405
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....m, is a society registered under the Societies Act. It has been granted registration u/s 12A of the Income Tax Act, 1961 by the CIT-II, Visakhapatnam vide proceeding no.CIT-2/trusts/62/2005-06 dated 29.9.2006. The assessee is an educational institution, running Engineering and Pharmacy colleges. During the assessment year, the assessee filed its return of income on 30.9.2009 declaring nil income, after claiming excess of income over expenditure, amounting to Rs. 84,32,548/-. It claimed exemption u/s 11 r.w.s. 12A of the Act. The return of income was scrutinized under section 143(3) of the act. Assessing Officer's findings: 3. During the course of scrutiny assessment proceedings, the AO noticed that the assessee has been contributing to M/s. Margadarshi Chit Funds. The chit value is Rs. 15 lakhs and each installment is Rs. 30,000/- and the total installments are 50. During the year under consideration, the assessee society has contributed Rs. 2,65,300/- and received Rs. 1,24,700/- as dividend from the said chit fund company. The assessing officer on the ground that the assessee has not invested or deposited its funds in the mode of form specified u/s 11(5) of the Act held ....
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....ire and immediate need of funds (b) it is not disputed that the assessee would need more money for his expansion plan (c) however, for assessment year 2007-08, 2008-09 & 2009- 10, the assessee is having excess funds even after investing the funds in the fixed assets. (d) it is clear from the balance sheet that the assessee has taken secured loans from the banks and hence it cannot be said that the assessee is not having recourse to approved methods of funding and thus had to go in for chit borrowals (e) assessee at the time of investing in the chits is not expecting that it would require funds in May, 2009 and hence would use this as a method of borrowal. (f) when the assessee started contributing to chits, it is with an intention to park its extra funds and earn dividend on the same. (g) it is only investing of money in chits and got categorized as investment. (h) on the reliance placed by the assessee on the decision of the Visakhapatnam bench of the ITAT in the case of Gurajada Educational Society v. CIT [IT Appeal No.471 (Vizag.) of 2004], the Ld. CIT(A) held that the facts are different as in that case, the assessee has bid the chit first and repaid the money so borrowed. He r....
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....e contribution was in respect of two chits of Rs. 5 lakhs each and the monthly subscription amount was Rs. 10,000/- each. Further, on verification of the balance sheet of the assessee under the head schedule-E "details of investments and deposits" Rs. 60,000/- has been shown towards investment in chits as at 31st March, 2003. Subsequently, contributions were made to another chit by name M/s.Srinivasa Chit Funds Private Limited and the total amount mentioned in the balance sheet at the end of 31st March of 2004, 2005 and 2006 respectively was Rs. 4,00,000; Rs. 7,80,000 and Rs. 6,91,540. The assessee had declared chit dividend income and also debited chit loss. The assessing officer reopened assessments for the all the four years and in the reassessment he held that the assessee has violated section 13(1)(d) of the Act by not making investments in the mode specified u/s 11(5) of the Act and denied exemption u/s 11 and brought to tax the entire surplus for all the four years. 10. Aggrieved, the assessee carried the matter in appeal. Before the first appellate authority, the assessee challenged reopening as well as on merits. The Ld. CIT(A) in his exhaustive order upheld the finding....
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....iety registered u/s 12A of the Income-tax Act 1961 engaged only in imparting Education, is liable to levy of income tax at the maximum marginal rate under the provisions of section 164(2) of the Income Tax Act, 1961, only on account of subscription to a Chit Fund made by the appellant for the purpose of raising financial resources, whereas appellant most respectfully prays that at the most, it is only the amount of income derived from such contribution to Chit Fund which ought to have been held as income liable to levy of income tax at the maximum marginal rate under the provisions of section 164 of the Income Tax Act but not the entire income of appellant. 2.b Appellant most respectfully submits that the reliance placed by the CIT(A) on the decision of the hon'ble Hyderabad bench of Income Tax Appellate Tribunal in the case of National Academy of Construction is not correct and justified, when particularly the said judgement is contrary to the judicial principle laid down by the hon'ble High Court of Bombay in the case of DIT (Exemptions) v. S.M.F.B.B. Foundation Trust 259 ITR 533 (Bom.). Ground no.3: Without prejudice to Ground nos.1 and 2, appe....
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....Educational Society the chart is prepared by following the law laid down by various high courts that the deficit which is carried forward from the previous year, is also to be considered for the current year while arriving at the net deficit. For this proposition he relied on the following case laws: CIT Vs. Raghuvanshi Charitable Trust & Ors. (2010) 44 DTR (Del) 223 Govindu Naicker Estate Vs. ADIT (2001) 248 ITR 368 (Mad) CIT Vs. Shri Plot Swetamber Murti Pujak Kain Mandal (1995) 211 ITR 293 CIT Vs. Shri Gujrati Samaj (regd) (2011) 64 DTR (MP) 76 (b) The assessee has complied with the conditions prescribed u/s 11(1) of the Act which confers exemption from the income derived from property held under the trust in two ways (i) amount actually applied for such purposes during the year (ii) amount not exceeding 15% of the income though not actually spent during the year. He submitted that the restriction contained in section 13(1)(d) of the Act is relatable only to the second limb of section 11(1)(a) of the Act i.e. amount not exceeding 15% of the total income, not actually spent during the year. He submitted that if the consequences of viol....
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....cumulated u/s 11(1) of the Act shall not be used for the benefit of the specified persons and it was later that voluntary contributions were brought into the purview of the restrictive conditions. A little later, a positive condition was imposed even with regard to, utilization of funds accumulated u/s 11(1) of the Act. However, the choice of investment available to a charitable institution in respect of accumulation u/s 11(1) was a little wider than the choice available with regard to the accumulation u/s 11(2) of the Act and that ultimately the additional leverage available to funds accumulated u/s 11(1) of the Act was withdrawn and that both the accumulations u/s 11(1) and 11(2) of the Act have been brought at par. (f) That the Hon'ble High Court of Andhra Pradesh in the case of M/s. Priyadarshini Educational Academy Vs. DGIT (Inv.) (2011) 333 ITR 347 (AP), has held that what is required to be invested is only the income of the educational institutions. (g) For the meaning of the term "fund", he relied on the decision of the Hon'ble Delhi High Court in the case of CIT v. Sir Shri Ram Foundation [2001] 250 ITR 55 (delhi) and submitted that "fund" means w....
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....or between the person managing the chit funds and the person who contribute to the chit fund that there is no legal right, to claim refund of the amount, contributed by the person joining the scheme. For this proposition, he relied on the following case laws: (1) Shriram Chits & Investment (P.) Ltd. v. Union of India AIR 1993 SC 2063 (2) Dhoosa Narasimloo v. Yelala Rajanna [1958] ILR AP 409 (j) It was submitted that certain decisions were not brought to the notice of Hon'ble AP High Court in the case of Priyadarshini Educational Academy (supra) and that the issue whether contribution to a chit fund, constitutes investment or not, was not a question before the Hon'ble High Court and hence it cannot be said that it is a binding precedent. He relied on the decision of Hon'ble Andhra Pradesh High court in the case of CIT v. Suman Chit Funds in ITTA No.120 of 2013 dated 27.6.2013, wherein it is held that in respect of dividend paid by the foreman, to the subscriber of the chit, provisions of section 194A are not applicable. (k) The Ld. Counsel relied upon the decision of the apex court in the case of Shriram Chits & Investment (P.) Ltd. (supra) and the judgement ....
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.... the assessee to the chit funds is very marginal and negligible, when compared to the scale of operation of the assessee. Thus he contends that taking away the entire exemption u/s 11 of the Act would be highly disproportionate consequence to the marginal error on the part of the assessee while acting in a bonafide manner. He relied on the decision of Hon'ble Delhi High court in the case of DIT v. Agrim Charan Foundation [2002] 253 ITR 593. (n) Alternatively he submitted that the entire surplus cannot be brought to tax even if it is treated as a violation of section 13(1)(d) r.w.s. 11(5) of the Act and for this proposition he relied on the following case laws: 1. Gurudayal Charitable trust Vs. ITP (1990) 34 ITD (Bom) 489 2. DIT (Exemption) Vs. Sheth Mafatlal Galalbhai Foundation Trust (2001) 249 ITR 533 (Mum). (o) He submitted that income cannot be taxed at maximum marginal rate as the assessee is a non-profit organization and its bye laws prohibited explicitly distribution of surplus and hence the society's income has to be taxed as in the case of an ordinary AOP at progressive rate of taxation. Reliance was placed on the decision in the case of Samakar....
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....a plain reading would lead to conclusion that the intention of the legislature was to remove the benefit of section 11, if any funds out of any income of the assessee, is invested other than the mode specified in section 11(5) of the Act. He submitted that any other interpretation would defeat the purpose of legislation itself and hence it should be avoided. He relied on the circular no.229 dated 9.8.1977 brought in by the Finance Act (no.2 of 1977) as well as the CBDT circular no.335 dated 13.4.1982 and submitted that it has clearly stated that both the requirements of applying 85% of the income to charitable purposes and investing the remaining income in the mode specified u/s 11(5) of the act is mandatory for claiming exemption u/s 11 of the Act. e) On the argument of the assessee that the entire income has been spent, he submitted that there is a basic flaw in the argument as the assessee is taking only revenue receipts as income for the purpose of calculations. He gave an example and submitted that word "any fund" used in the Act applies to both capital receipts and revenue receipts and the unspent capital receipt has to be invested in the mode specified u/s 11(5) of ....
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....n a different context and are distinguishable. i) On the argument that the assessee had no intention of making an investment and that it acted in a bona fide manner, he relied again on the decision of the High Court in the case of Priyadarshini Educational Academy (supra). j) On the assessee's argument that the entire surplus cannot be brought to tax, he submitted that there are catena of decisions in favour of the revenue and that these are brought out by the AO as well as the CIT in their order. He pointed out that the decisions in the case of Gurudayal Charitable trust (supra) and Sheth Mafatlal Gagalbhai Foundation Trust (supra) have been rightly distinguished by the AO. Ld. CIT(DR) in view of the above factual and legal position argued that, the orders of the lower authorities have to be sustained and the assessee's appeal be dismissed. Our Findings: 14. Rival contentions were heard. On a careful consideration of the facts and circumstances of the case and on perusal of the papers on record and the orders of the authorities below, as well as the case laws cited, we hold as follows: The relevant sections that come u....
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....uring that year from property held under trust, or, as the case may be, held under trust in part, by any amount- (i) for the reason that the whole or any part of the income has not been received during that year, or (ii) for any other reason, then- (a) in the case referred to in sub-clause (i), so much of the income applied to such purposes in India during the previous year in which the income is received or during the previous year immediately following as does not exceed the said amount, and (b) in the case referred to in sub-clause (ii), so much of the income applied to such purposes in India during the previous year immediately following the previous year in which the income was derived as does not exceed the said amount, may, at the option of the person in receipt of the income (such option to be exercised in writing before the expiry of the time allowed under sub-section (1) of section 139 for furnishing the return of income) be deemed to be income applied to such purposes during the previous year in which the income was derived; and the income so deemed to have been applied shall not be taken into account in calculating the amount of incom....
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....- (A) such investment made in the shares of such company shall be deemed to be an investment made under this clause for a period of three years from the date on which such public sector company ceases to be a public sector company; (B) such other investment or deposit shall be deemed to be an investment or deposit made under this clause for the period upto the date on which such investment or deposit becomes repayable by such company; (viii) deposits with or investment in any bonds issued by a financial corporation which is engaged in providing long term finance for industrial development in India and which is eligible for deduction under clause (viii) of sub-section (1) of section 36; (ix) deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long term finance for construction or purchase of houses in India for residential purposes and which is eligible for deduction under clause (viii) of sub-section (1) of section 36; (ixa) deposits with or investment in any bonds issued by a public company formed and registered in India wi....
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....held by the trust or institution after the 30th day of November, 1983: Provided that nothing in this clause shall apply in relation to- (i) any assets held by the trust or institution where such assets form part of the corpus of the trust or institution as on the 1st day of June, 1973; (ia) any accretion to the shares, forming part of the corpus mentioned in clause (i), by way of bonus shares allotted to the the trust or institution; (ii) any assets (being debentures issued by, or on behalf of, any company or corporation) acquired by the trust or institution before the 1st day of March, 1983; (iia) any asset, not being an investment or deposit in any of the forms or modes specified in sub-section (5) of section 11, where such asset is not held by the trust or institution, otherwise than in any of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1993 whichever is later; (iii) any funds representing the profits and gains of business, being profits and gains of any previous year relevant to the asse....
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..... 35,000/- respectively, the chit would be given to that subscriber who is willing to take it for Rs. 35,000/- since he has offered a discount of `15,000/-. This leave a balance of Rs. 15,000/- (Rs.15,000 - Rs. 50,000) in the kitty. The amount of Rs. 15,000/- which represents the discount which the successful bidder has foregone becomes the dividend which is to be distributed to all the subscribers after deducting a fixed amount representing the commission payable to the "foreman". A foreman is normally a person who organises the auction and conducts the proceedings. If in the example given above, the commission payable to the foreman is fixed at 5%, then after deducting Rs. 2,500/- (5% of Rs. 50,000/-, the chit amount) the balance of Rs. 12,500/- would be distributed among all the 50 subscribers so that each would get Rs. 250/-. This amount of Rs. 250/- can be set off by the subscribers against the second month's installment of Rs. 1,000/- payable by him and he can give only Rs. 750/-. The auction would be repeated in the subsequent months and the same procedure is followed. Any subscriber who delays the bidding or does not bid at all stands to gain the maximum discount. The c....
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....nt of his bid and the balance received from out of the total subscriptions received is distributed equally amongst other subscribers, as premium. The manager is paid a certain percentage of the collections each month on account of expenses and charges for conducting the auction. In the auction, a maximum amount, which the highest bidder agrees to forgo, is the amount, which is distributed to the other members, subject to deduction of the manager's commission." 17. The Hon'ble Delhi High court in the case of CIT Vs. Saheb Chits (Delhi) Pvt. Ltd. ITA No.44 of 2008 judgement dated 24.7.2009 has observed as follows: "Further, it was observed by the Hon'ble Supreme court in Sriram Chits and Investments (P) Ltd. (supra) that it would not be correct to state that each subscriber lent money to the person who gets chits earlier. It cannot also be construed that the person who gets chit later should be treated as a money lender. The agreement between the parties those entered as per section 6 of the Act only provides for distribution of the chit amount. The Supreme court however relied on the judgement of the Kerala High court in Janardhana Mallan and Others vs. Gangadharan an....
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....he execution of the security bond for securing future subscriptions. The Full Bench in this decision over-ruled its earlier decision in the case of P.K Achutan v. State Bank of Travancore, Calicut. While rendering the decision in Janardhana Mallan and Ors. (supra) the Full Bench of the Kerala High Court considered a catena of decisions starting from 1937 in the matter of Ramanatha lyyar v. Narayanaswami. The Andhra Pradesh High Court also, while dealing with the transaction of a chit fund organisation, in the matter of Dhoosa Narsimloo v. Yelala Rajanna and Anr. I.L.R. (1958) Andhra Pradesh 409, where the petitioner had filed a suit in the Court of the District Judge against the respondents on a promissory note executed by them for the amount they drew in a pool from a chit fund organisation and where the District Judge had dismissed the suit for want of a license under Section 9(2) of the Hyderabad Money Lenders Act (Act V of 1349 F.) and on revision, the question that came for consideration was whether the chit fund organisation could be regarded as a money lender within the meaning of the said Act and whether its transaction partake the nature of a loan. Srinivasachari, J. speak....
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....oney lending transaction and that there is no relationship of debtor and creditor. The role of the foreman is that of a trustee. He charges commission for his service. The money contributed by the subscribers to the chit does not belong to the foreman. It belongs to all the stake holders. Under these circumstances, it has to be concluded that the contribution to chit fund is a mutual activity and the fund belongs to all the participants. There is no money lent or kept by one party with another party as an investment or deposit. 20. Hon'ble Haryana High Court in the case of Soda Silicate & Chemical Works Vs. CIT 179 ITR 588 (P&H) held as follows: "in order to answer the question posed, regard must be had to the nature and working of the chit fund, in the context of the assessee, with particular reference to the fact that running a chit fund or being a member of such fund, was not the business of the assessee. The transactions concerned here are contributions made to the fund by the assessee and the lump sum received by it, though at a discount and the subsequent distribution and receipt of amounts amongst the participants as premia or dividend. There is clearly mutual....
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....nder a scheme of chit funds. No money is laid out with a second party that too with an intention to earn profit. The foreman holds the money received from the chit subscribers only as a trustee. Section 11(5) of the Act only refers money that is to be invested or deposited with a person or entity or organization or Government which is other than the assessee itself. Investment held by self i. e. where no second party is involved is obviously not covered to these sections. Thus, we can conclude that chit fund business is governed by the principles of mutuality and contributing to a chit fund is contribution to oneself on the principle of mutuality and hence, it is not an investment as contemplated by Sec 13(1) (d) r.w.s. 11(5) of the act. 24. Now, we proceed to examine to what extent a charitable institution is required to invest the funds for purposes of S.13(1)(d). For this purpose, we analyse the following terms used in section 13(1)(d): i) Any funds ii) Investment or deposit 25. The term "any funds" when read with the phrase 'any income thereof', in our opinion signifies income defined u/s 2(24) of the Act. Thus any receipt, which falls within the definition of in....
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....ection 13(2)(h). The meaning of the expression "funds" given in the standard dictionaries are as follows : "Black's Law dictionary, fifth edition : 'Fund'. . . An asset or group of assets set aside for a specific purpose . . , A generic term and all-embracing as compared with term 'money', etc., which is specific. A sum of money or other liquid assets set apart for a specific purpose or available for the payment of debts or claims. In the plural, this word has a variety of slightly different meanings, as follows : 'moneys' and much more, such as notes, bills, cheques, drafts, stocks and bonds, and in broader meaning may include property of every kind . . . Money in hand, assets, cash, money available for the payment of a debt, legacy, etc. Corporate stocks or government securities ; in this sense usually spoken of as the 'funds'. Assets, securities, bonds or revenue of a State or Government appropriated for the discharge of its debts. Generally, working capital ; sometimes used to refer to cash or to cash and marketable securities." "(b) Dictionary for Accountants, fourth edition, by Eric L. Kohler : 1. An asset or group of assets wit....
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....for the payment of a debt, legacy, etc., specie, or a stock of convertible wealth; and 'funds' may mean or include not only money, as the term is generally understood, but other circulating medium or instrument or tokens in general use in the commercial world as the representatives of value, such as bank notes, bills, cheques, drafts, notes, stocks and bonds, deposits or certificates of deposit, evidences of money lent to the Government, constituting a national debt, for which interest is paid at prescribed intervals. ... ." In R. K. Dalmia v. Delhi Administration [1962] 32 Comp Cas 699 ; AIR 1962 SC 1821, it was observed that the word "fund" may mean actual cash resources of a particular kind (e.g., money in a drawer or in a bank or it maybe a mere accountancy expression used to describe a particular category which a person uses in making up his accounts). A similar view was expressed in AHchm v. Coullkard [1942] 2 KB 228. The expression "fund" or "funds" has a variety of meanings but the sense in which it is employed must be gathered from the context. It would not be correct to adopt a strictly literal or technical meaning of this expression while construing section 13....
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.... of the investor should be to earn such income, return or profit to the investor. In order to constitute an investment, the money shall be laid out in such manner, as to acquire some species of property which brings in an income to the investor. An investment popularly means every application of money which is intended to fetch return by way of interest income or profit. Thus only employed as capital in a business is money invested in business. (Vide Edwards ]., in Tax Commissioner v. Australian Mutual Provident Fund Society [1902] 22 NZLR 445). In ArnaJld v. Grinstead (21 WR Eng 155), it was observed that in its most comprehensive sense it is generally understood to signify the laying out of money in such a manner that it produces a revenue. An illuminating observation was made in IRC v. Desoutter Bros, Ltd. [1946] 1 All ER 58 (CA) about what "investment" means. It was observed that the word "investment" is not a word of art, but has to be interpreted in a popular sense. It is not capable of legal definition, but a word of current vernacular. The words "invest" and "investment" are to be taken in the business sense of laying out of money for interest or profit. A plea similar t....
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....t is that there must be a liability to return it to the party by whom or on whose behalf has been made on fulfillment of certain conditions. In the commercial sense, the term is used to indicate the aforesaid transaction as deposit of money for employment, in business, deposits for value to initiate security for deposit of title deeds, similar documents as security for loan, deposit of money bills in a bank in the ordinary course of business of current account and deposits of a sum at interest at a fixed deposit in a bank. The amount given to Mahila Haat was neither for the purpose of investment nor for deposit, more particularly in the factual background as highlighted above. The transaction with which the present dispute is linked cannot be treated as an investment or deposit as has been factually found by the Tribunal. The conclusion being essentially factual, no question of law arises out of the order of the Tribunal. Accordingly, the petition is dismissed." 28. The Hon'ble Bombay High court in the case of Income Tax Officer vs. Dr. Vikhe Patel Foundation (supra) held as follows: "It is well settled that the depiction in books of accounts is not a determinative test....
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....ount placed by the assessee, during the relevant previous year, with M/s Tern Credits & Chits Private Limited was Rs. 2,08,456/- and with M/s K.R. Palaniappan (Chit) was Rs. 96,230/-. The annual income of the Trust came to Rs. 7,35,19,954/- against which, utilization for charitable purpose came to Rs. 6,98,07,198/-, which was well above the limit of 85% prescribed under Section 11(1)(a) of the Act. As per the assessee, subscriptions paid to chit funds were not deposits nor investments and it could not have been a reason for denying it the exemption claimed under Section 11 of the Act. Subscription paid by a subscriber of a chit to a chit company acting as the foreman of the chit, in our opinion, cannot be considered as an investment. Subscribing to a chit fund is not with an intention to earn interest or dividend. The only intention is to prize the chits either by competitive bidding or when lots are drawn. If there was no bidding done in a given month, there will be no income whatsoever derived. The income that can be derived was only the amount forgone by the bidders in an auction. Thus a chit fund is primarily intended to operate as a scheme for advancing loans from a common fun....
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....h Court in the case of CIT Vs. Birla Charity Trust (1988) 170 ITR 150, Gujarat High Court in CIT Vs. Insaniyat Trust (1988) 173 ITR 248 and the Bombay High Court in Trustees of Mangaldas N. Verma Charitable Trust Vs. CIT 203 ITR 322 have taken a view that the term "funds" means money or cash and the term invest connotes a positive act on the part of the trust whereby the funds of the trust are laid out or committed in any particular property or business or transaction with a view of earning a profit or financial addition or return. The courts therefore held that section 13(2)(h) did not apply to assets received as a donation since no "funds" were "invested". In our view this proposition, though given in a context of section 13(2)(h) would equally apply to section 13(1)(d) of the Act as the language and purpose of the sections are the same. 32. We now consider the facts of this case. A perusal of the order of the first appellate authority reveals that there is no dispute on the legal principle that, if the chit fund contribution in question is not made as an investment, then the provisions of section 13(1)(d) are not attracted. In other words, it is an accepted position that Sec ....
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....ious year, would result in denial of the benefit of exclusion of such income from the total income of the previous year of the said person. Even in cases where approval was granted earlier under section 10(23Q(vi) of the Act, failure of the society (educational agency) to invest in the modes and forms specified in section 11(5) of the Act would disentitle them from claiming the benefit of exclusion of the income, received on behalf of an educational institution, from their total income for the previous year. In cases where initial approval, or extension of the approval granted earlier, is sought, the prescribed authority would be entitled to examine the annual accounts of the applicant-society for the previous three years to ascertain whether investment/deposits made in any of the previous three years are in the forms and modes other than those specified in section 1.1(5) of the Act. It is only if the prescribed authority is satisfied that the applicant has applied its income exclusively for the purpose of education, and has adhered to the modes specified in section 11(5) of the Act, that he would grant approval, or renew the approval granted earlier, under section 10(23C)(vi) of t....
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...., is not a positive act to lay out money for business, with a view to obtain an income or profit. It is not an investment, as the amount laid out is not a positive act on the part of the assessees to earn any returns, profit or income. The money has not been laid out in such a manner as to acquire some species of property which would yield income for the assessee. 36. In this case, contribution to the chit fund was made to enable the assessee society to raise funds for expansion. This is clear from funds flow statement and the projected investment required by the assessee. When the assessee is paying huge amount of interest to various banks, it is wrong to conclude that assessee has with an intention to earn profit or income made a contribution to the chit fund. 37. The allegation of revenue that the assessee has not withdrawn the chit amount has been answered by the assessee, by pointing out that, every month the winner of the chit is determined by draw of lots and assessee society was not lucky to win the draw on each of the occasion. The allegation that the assessee has surplus fund, kept as deposits, is also wrong, for the reason that these fixed deposits were jointly hel....
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.... in every year and thus entire income of each assessment year was fully spent towards the charitable objects. 40. As we have held that contribution to chit fund in this case, is not an investment, and much less an investment with someone else, and further that the provisions of S.11(1)(a) have been complied by investing the entire income of the year towards charitable purposes, we conclude that there is no violation of section 13(1)(d) r.w.s. 11(5) of the Act. 41. As we have upheld the contention of the assessee, in this aspect, we do not express any opinion on the other arguments raised by both parties, as it would be an academic exercise. 42. In the result, all the appeals of the assessees are allowed. Revenue Appeal: (ITA No.447/v/2012): 43. This appeal of the revenue is directed against the order of the CIT(A) dt.29th September, 2012 in the case of Lokabandu Educational Society. Grounds raised in the appeal are as under: 1. "The Ld. CIT(A) has erred in holding that the re-assessment proceedings for the assessment year 2005-06 as invalid. 2. The Ld. CIT(A) has erred in holding that the assessment is reopened merely on change of opinion. 3. ....
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.... no regular assessment was made in those years. Therefore, I uphold the action of issue of notice u/s 148 for those three assessment years. As far as assessment year 2005-06 is concerned AO assessed the income originally u/s 143(3). The issue of violation of provisions of S.11(5) was duly considered in the original assessment and it was held by AO that the income which would attract denial of exemption is only the cumulative contribution of Rs. 7,80,000 made in chit funds. AO having examined this issue and formed an opinion though erroneous is not entitled to revise his opinion and reopen the assessment on the same issue and take a different stand in the reassessment. Thus, as far as A.Y.2005-06 is concerned, assessee's reliance on the decisions of Kelvinator India Limited 320 ITR 561 and Eicher Limited 294 ITR 310 is well founded. Therefore, I hold that the assessment for assessment year 2005-06 is reopened merely on change of opinion and hence I have no hesitation in holding that reassessment proceedings as far as assessment year 2005-06 are concerned are not valid and therefore the assessment made for A.Y.2005-06 is quashed. As already stated reopening of assessments for assessm....