TaxTMI 
TaxTMI 
2016 (3) TMI 746
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....on and running Poddar International College. The assessee respondent society has filed its return of income for the A.Y. 2009-10 declaring total income at NIL on 29.09.2009 after claiming exemption under section 11 of the IT Act. In the return of income filed by the assessee, the assessee society has shown to have extended loan of Rs. 42,69,615/- to another educational institution, namely PMTI (a unit of Poddar Trust). The said loan was alleged to have been advanced to help the said PMTI for the purpose of running educational institutions and imparting education viz. B.Ed., MBA and other Diploma courses and also some other courses recognized by National Open School. The said, Poddar Trust running PMTI is also registered under section 12A and is having the same objectives as that of the assessee society. 3. The AO while passing the assessment order for the A.Y. 2009-10 has mentioned that the governing persons of both the Trusts are more or less the same. It was further mentioned that it was a family affair as both the Trusts are controlled by Poddar family. It was mentioned that in one trust, wife is the key person and in another trust the husband is the key person. It was also m....
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....23C) after making necessary enquiries and, therefore, there is no violation of section 13 of the Act. The ld. A/R further relied upon the judgment passed in the cases of CIT vs. Kamla Town Trust, 279 ITR 89 (All.), Director of Income tax vs. Acme Educational Society, 326 ITR 146 (Delhi), Kanpur Subhash Shiksha Samiti vs. DCIT (Lucknow) 11 ITR (Trib.) 23 (Lucknow), Director of Income Tax (Exemption) vs. Pariwar Sewa Sansthan, 254 ITR 268 (Delhi) and Champa Charitable Trust vs. CIT, 214 ITR 764 (Bom.). Lastly, the ld. A/R contended that giving interest free loan by the respondent society to Poddar Trust is not violative of section 13 and the exemption under section 11 could not be denied. For that purpose he relied upon the judgment passed in the matter of Maa Vaishnav Education Society, 38 Taxmann.com 193 (M.P) to the following effect :- " We have considered the contention of the appellant and find that merely the respondent society had given interest free loan to another society, so the loan was neither investment nor deposit. The provisions as contained in Section 13(3) of the Act were not applicable. The aforesaid is a finding of fact recorded by Tribunal in which we do ....
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.... part of such income enures, or (ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3) : Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution : Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of t....
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....s held to be not available to the assessee, for the purpose of convenience, we are hereby reproducing the finding of the Hon'ble Delhi High Court in the above said matter :- "25. Counsel for the assessee would, however, contend that the chart set out in the order of the Tribunal would show that the account between the assessee and the APIL is a running account and if the entries are taken as a whole it would be seen that it is APIL which is funding the assessee and not the other way round. It was again submitted that in the 12 month period ended on 31.03.2006, no monies flowed out from the assessee to any prohibited person. This latter submission has already been dealt with by us supra. As to the contention that it is only a running account between the assessee and the APIL, we are unable to give effect to the submission since Section 13(1)(c)(ii) read with Section 13(2) does not appear to make any distinction between a running account where there is inter-flow of funds and a case of pure advance. Section 13(2) makes it clear that the instances listed in its clauses (a) to (h) are only illustrative and without prejudice to the generality of the provisions of Section 13(1)(....
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.... of human conduct and probabilities. A little probing or scratching of the surface was all that was required on the part of the Tribunal to find out the truth about the claim of the assessee. The Tribunal has chosen, erroneously - this we say with respect - to ignore the normal course of human conduct and probabilities of the case and has preferred to be led simply by the documentation presented by the assessee. Each and every objection taken by the assessing officer has been attempted to be explained away by the assessee and the Tribunal overlooked that the facts have to be looked at cumulatively and as a whole; it failed to realise that and the real transaction between the assessee and APIL is not just an aggregate of the several component parts thereof; the authenticity of the transaction has to be examined by keeping in view the conspectus of the facts without missing the woods for the trees. 27. In the aforesaid view of the matter, we hold that the findings of the Tribunal on this aspect cannot be upheld. We uphold the findings of the assessing officer and hold that in advancing the amount of Rs. 8,60,16,000/- to APIL the assessee committed a violation of the provisio....
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...., provides that the income of any charitable or religious trust or institution will not be entitled to exemption under sections 11 and 12, if certain conditions stipulated therein are not complied with. The word 'deposit' does not cover transaction of loan which can be more appropriately described as direct bailment. The essence of deposit is that there must be a liability to return it to the party by whom or on whose behalf has been made on fulfilment 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." 13. In Baidya Nath Plastic Industries (P) Ltd. v. K.L Anand, ITO [1998] 230 ITR 522 (Delhi) a learned single judge of this court pointed out that the distinction between "loan" and "deposit" is that in the case of the former it is ordinarily the duty of the debtor to seek out the creditor and to repay the money a....