TaxTMI 
TaxTMI 
TaxTMI 
2011 (9) TMI 1133
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....on of law:- "Whether the Income Tax Appellate Tribunal has erred in not deciding the issue as raised by the appellant before it regarding the addition made by the Assessing Officer to the income of the assessee Society on account of interest accrued on loan given to its Treasurer without making any provision for accrued interest thereon in its books of accounts in violation of Section 13(3) of the Income Tax Act. The brief facts of the case are that the A.O. has denied exemption under section 11 of the Income Tax Act, 1961 for the original assessment made under section 143 (3) in view of the provision of Section 13(1) (c) & 13(2)(a) of the Income Tax Act, as the assessee Society gave interest free loan of Rs. 2,37,500/- to Sri Virendra S....
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.... shall be deemed to have been used or applied for the benefit of the person referred to in section 13(3). Section 13(3) lists the persons to whom these provisions apply. The fact that the Treasurer to whom loan was given by the assessee falls within the specified category of persons is not disputed. The only thing which is required to be seen is whether the loan given to him can be said to be for his benefit within the terms of section 13(2) (a) of the Act. As per the said provision, the income can be deemed to have been applied for the benefit of the specified person only if the loan is given free of interest or without security or both. Coming to the facts of the present case, the resolution of the trustees clearly states that the Treasur....
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.... instant case, the interest was charged @10%, as alleged by the assessee, it should have been reflected in the books of accounts of the assessee as well as in the audit report but the same was not reflected in any document even subsequent document filed by the assessee except the resolution, which cannot be relied and it can be considered an afterthought. In the instant case, the assessee was liable to show this interest as income in the books of account as per mercantile system of accounting. Thus, the A.O. has rightly concluded that the appellant has given interest free loan to Sri C. P. Singh in violation of the provisions of Section 13 (1)(c) of the Income Tax Act and also giving loan without any adequate surety in violation of Section ....