TaxTMI 
TaxTMI 
2007 (5) TMI 166
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee is having income mainly from the interest on fixed deposits and donations. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee has advanced huge amount to M/s Punj Lloyd Limited and as such he raised a query as to why Section 13(1)(c) read with Section 13(2)(a) of the Act be not invoked as no adequate interest has been charged on such amount, though that company was substantially interested in the trust. From the bank statements, the Assessing Officer found that as on 31st March, 1997 a sum of Rs.75 lacs was outstanding with M/s Punj Lloyd Ltd. In response to a query, it was stated that the assessee paid this amount to M/s Punj Lloyd Ltd. as interest money for purchase of land fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee did not lend any amount to M/s. Punj Lloyd Ltd. during the course of commercial transactions and it had deposited the money with M/s. Punj Lloyd Ltd. as earnest money for purchase of land for a school and when the deal did not materalise, M/s. Punj Lloyd Ltd. returned the money and as such the assessee has been wrongly denied exemption under Section 11 and 12 of the Act. 6. The basic requirement for the availability for exemption under Section 11 and 12 of the Act is that if any money is lent to an interested party as defined in Section 13(3) of the Act for "any period" during the previous year, then the trust should charge "adequate interest" and there should be an "adequate security". 7. If the contention of the assessee is a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y shall form part of the corpus of the trust or institution, shall not be included in the total income of the previous year of the trust. But once the exemption under Section 11 and 12 is denied, the assessee would not get any protection from Section 11 and 12 and the voluntary contribution would be treated as income, as per definition of income give in Section 2(24) of the Act, according to which income includes the voluntary contribution receipts by a trust credited wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes meaning thereby once the exemption under Section 11 and 12 of the Act is withdrawn all the receipts of the trust either by voluntary contribution or income....