TaxTMI 
TaxTMI 
TaxTMI 
2011 (5) TMI 972
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....) of the Act. (1.1) The appellant says and submits that no violation has been made by the trust in giving advances for rent of school building and bus rent etc. to Adharshila Associates for commercial expediency and no benefits either directly or indirectly has been provided to the relatives of the trustee of the trust therefore there is no violation of section 13(1)(C)9ii) of the Act. (2) CIT(A) erred on facts confirming the addition of ₹ 21,03,468/- in respect of amount set apart u/s 11(1)(a) of the Act since the amount is not considered while allowing the deduction same cannot be added back. The AO has taken income as per income & expenditure a/c ₹ 15,23,510/- instead of net loss ₹ 5,30,456/- as per statement of computation of income. Otherwise it amounts to duplication. (3) The CIT(A) erred in law in not considering ground No.7 of the appeal before CIT(A) in respect of initiation of penalty proceedings u/s 271(1)(c) of the Act, 1961. 3. Thus the issue is whether assessee can be denied exemption under section 11 & 13 on the ground that it has paid advances to M/s Adharshila Associates which is a concern where some partners are the trustees of the present....
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.... Thereafter, vide 8 transactions from 19/5/04 to 5/7/04 a sum of ₹ 41,55,000/- is advanced to M/s Adharshila Associates. The amount of cheques ranges from ₹ 25,000/- to ₹ 17,00,000/-. (iii) There upon from 11/9/04 to 8/11/04 the appellant vide 9 cheques received a sum of ₹ 13,00,000/- cheques vary from ₹ 13,000/- to ₹ 3,30,000/-. (iv) From 16/12/04 to 30/12/04 the appellant has made another payment of ₹ 33,00,000/- by five cheques so that as on 31/12/04 there was a debit balance of ₹ 52,20,360/- in the account of M/s Adharshila Associates in the books of accounts of the appellant. (v) The amounts of building rent, bus rent and other expenses have been adjusted only via journal entries dated 31/3/05 and amounted to ₹ 33,47,760/-. and on the above basis he came to the conclusion that assessee has provided benefits to Adharshila Associates and it cannot be related to services rendered. 7. Before us, the ld. AR for the assessee submitted that amount shown as advance against Adharshila Associates is the amount against school building rent and bus rent for the next period which was payable to M/s Adharshila Associates. Tempora....
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....the decision of Hon. ITAT , Delhi Bench in the case of DCIT vs. Help Age India 123 ITD 371 for the proposition that if there is a technical infringement then benefit available to the assessee should not be withdrawn. He also referred to the decision of Hon. Delhi High Court in DIT (Exemption) vs. Alarippu 244 ITR 358(Del) for the proposition that advances given for commercial expediency cannot be treated as loan within the meaning of section 13(1)(ii). He referred to the decision of Hon. Supreme Court in Shree Ram Mills Ltd. vs. CEPT (1953) 23 ITR 120 (SC) for the proposition that there has to be a positive act of relationship of lender and borrower. It could not ordinarily come out by mere inference. 8. Against this, ld. DR relied on the orders of authorities below and submitted that undue benefit has been given to M/s Adharshila Sssociates. Money more than what is required for rent has been paid which they could have acquired from the market on interest. Thus fund of the trust are diverted to the benefit of M/s Adharshila Associates free of interest and, therefore, it is a benefit given to them and therefore, the case is hit by section 13. 9. We have considered the rival submis....
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.... over and above the rental liability. Money is apparently lent by assessee without adequate security or adequate interest. It is not disputed that M/s Adharshila Associates is a concern covered u/s 13(3). No evidence as to the effect that money was advanced for facilitating M/s Adhashila Associates to construct a building for being further given on rent to assessee trust for running educational activities, has been filed. Prima facie excessive money over and above rental liability given to M/s Adharshila Associate remained advanced without adequate security or adequate interest. The trust ought to have charged interest on such excess money and shown such interest as its income. 11. Though where money is given for commercial expediency or against services rendered there will not be any relationship of borrower or lender but where under the cover of such commercial relationship more than required amount is transferred then it would be equal to conferring benefit and it would be hit by section 13(1)(c)(ii) and 13(2). There is no dispute that the proposition laid down by the Tribunal or the Court on which assessee has relied on but the case of the assessee is that benefit to sister co....
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....led by the assessee is partly allowed but for statistical purposes. 17. The Revenue has raised the following grounds :- (1) The ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 27,03,931/- made on account of disallowance of depreciation claimed on assets purchased out of the funds claimed as exempted. (2) On the facts and in the circumstances of the case the CIT(A) ought to have upheld the order of the AO. 18. The issue is whether assessee can claim depreciation in addition to exemption as being application of funds. The assessee claimed depreciation of ₹ 24,60,882/- on the assets purchased out of exempted funds. In reply it was explained that depreciation is allowable on the basis of ownership and use of the assets and not on the basis of source of funds. The AO, however, did not agree and held that where an expenditure in respect of capital asset is allowed, as in section 35(2)(iv), then depreciation thereon cannot be allowed u/s 32. He referred to the decision of Hon. Supreme Court in Escorts Ltd. vs. Union of India (1933) 199 ITR 43 (SC). 19. The ld. CIT(A) allowed the claim by holding that once assessee is not entitled of benefit of sect....