TaxTMI 
TaxTMI 
2015 (8) TMI 1152
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....claim exemption u/s 11 of the I.T. Act. 4. The assessee also raised additional ground by filing a petition for admission of additional ground of appeal on 01.09.2014 which reads as follows. "The Assessing Officer and the learned CIT(A) ought to have held that the appellant is entitled for depreciation on the assets used in the process of deriving income when exemption u/s 11 of the I.T.Act is denied." 5. The assessee has made an alternate ground by filing additional ground on the issue of allowability of depreciation when the income is computed under normal provisions of the Act, the same is admitted, being legal in nature. 6. The facts of the case, briefly are that the assessee is a Society registered u/s 12AA of the I.T.Act and running a cancer hospital. The assessee has filed its return of income for the assessment year 2007-08 on 14.05.2007 admitting NIL income after availing exemption u/s.11 of the I.T. Act. The Assessing Officer, during the course of assessment u/s 143(3) is of the view that the total receipts from the property held under trust is more than 1 crore and, therefore, it ought have obtained the approval u/s 10(23) of the I.T.Act. The Assessing Officer also fo....
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....osit was made in joint name of Society and the Government. Therefore, urged to confirm the order of CIT(A) order. 9. We have heard the rival contentions and perused the materials on record and also considered the case laws cited by the parties. The factual matrix of the case is that, the assessee is Society registered u/s 12AA of the I.T. Act, have made contributions to Kapil Chit Fund Company. The Assessing Officer denied the benefit of exemption u/s 11, by holding that there was violation of section 11(5), as the Chit Fund subscription is not investment or deposit as specified u/s 11(5) of the Act. The CIT(A), however, held that the assessee is eligible for exemption u/s.11, even though it has not obtained registration u/s 10(23C), but observed that there was violation of section 11(5), such exemption cannot be given for the year under consideration. The authorized representative submitted that, there was no violation of section 11(5), because Chit Fund contributions are not made as investment u/s 11(1), but, it is a normal deposit for better management of the funds. 10. Now we have to look into the provisions of section 11(2) and 11(5). For the sake of convenience, the relevan....
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.... year was at Rs. 1,40,56,424.22 and the amount applied for the objects was at Rs. 1,63,58,553.88. Thus, there was excess application of income of Rs. 23,02,129.66 which is 16.38% of the gross income of the assessee. Under the circumstances, it is not correct on the part of the Revenue to argue that there was surplus. 12. It is clear that Chit fund contribution works under mutuality concept. In the chit fund subscription there is no question of any individual subscriber entitled to receive any profit or income. The money is not 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) refers to only money that needs to be invested as stipulated in section 11(2) in investments or deposits. Thus, it could be concluded that Chit Fund contribution is governed by the principles of mutuality and contributing to a Chit Fund is contribution to oneself on the principles of mutuality and hence, it is not an investment as contemplated by section 11(5). The Coordinate Bench at Vishakhapatnam in the case of Sri Sivani Educational Society vs. ITO, (2015) 153 ITD 121, elaborately discusse....
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....various banks, for undertaking expansion and to create infrastructure. These loans were taken by the societies as they did not have surplus funds to undertake expansion and create infrastructure. On the basis of these facts, we come to the conclusion that the contribution made by the assessees to a chit, is not a positive act to layout 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 asses sees 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. [Para 35] 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. [Para 36] The allegation of revenue that the assessee has not withdrawn the chit amount has been answered by the as....