TaxTMI 
TaxTMI 
2017 (7) TMI 696
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....uch assessment, he issued the impugned notice which, as can be seen, was done within a period of four years from the end of the relevant assessment year. To issue the notice, the Assessing Officer had recorded the following reasons: "During the course of the assessment proceedings of A.Y. 2011-12, the the assessee had entered in to business transfer agreement with Ananya Finance for Inclusive Growth Pvt Ltd., (AIFG) to transfer on slump sale basis its assets and liabilities pertaining of the business for a consideration of Rs. 45 Crores. The assessee had valued its assets including intangibles Rs. 14.68 Crores and Rs. 30.32 Crores respectively. This valuation of intangibles is based on the valuation report filed by the assessee. The assessee has claimed to have given Rs. 45 Crores as corpus donation to a Trust, IFIG (Indian Foundation For Inclusive Growth). This Trust is registered under the Documents & Registration Act, 1908. This Trust does not have registration u/s 12AA/12A of the I.A. Act, 1961. The Trust, IFIG has in turn invested Rs. 45 Crores received as a corpus donation from the assessee (FWWB) as share capital in AFIG, a private limited company. The AFIG had allo....
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....of "relief of poor", but the fact remains that the assessee trust has been borrowing money from leading financial institutions like NABARD, SIDBI etc on interest and thereafter lends the same to various other NGOs & Trusts by charging interest on the amounts lent. These NGO's/Trusts further lends it to poor women who are in need of such funds. The assessee trust by doing so, acts as a link/channel between the financial institutions on the one hand and the beneficiaries on the other. Hence, this activity of the assessee clearly gets covered under "Advancement of General Public Utility" and not under "relief of poor" as defined in Sec.2(15) of the I.T. Act, because the assessee is not directly reaching out to the poor women but is acting as a mediator or a link between the two i.e. the beneficiaries and the lending institutions. Scrutiny of the assessee's records for A.Y. 2009-10 revealed that the assessee during the period from 01/04/2008 to 31/03/2009 had earned profits out of such activity to the tune of Rs. 6,06,44,661/-. The dominant object/activity of the trust was profit making through micro financing. The assessee had received loans from various financial institution....
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....e U/s.35(1)(i) & 35(1)(ii) / 10(23C) of the Act, if any. 10. Kindly justify your stand with regard to tax liability u/s.11 in the light of the amended definition of charitable purposes in the provisions of section 2(15) of the I.T. Act." 4. The petitioner replied to such queries under communication dated 26.07.2011, relevant portion of which reads as under: "5.1 With regard to Corpus Donations please find herewith as Annexure 7-Nil 10. FWWB is providing relief to poverty i.e. poor women and eligible for exemption u/s.11 We are not in advancement of any other object of general public utility and therefore, proviso to section 2(15) is not applicable to us." 5. It was after such scrutiny that the Assessing Officer passed the order of assessment on 28.11.2011. In such order, the Assessing Officer recorded as under: "The assessee trust is an organization established to advance and promote direct participation of poor women in the economy through access to national and international institutions working for the development of women in India. The Trust is registered u/s. 12A(a) of the I.T.Act vide order no. HQ-III/32(F.7)/81-82/IV/dated 2/7/1982. ....
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....charitable purpose. This question, therefore, was scrutinized. The fact that the Assessing Officer made no adjudication or disallowance in the year of assessment would show that he accepted the assessee's stand. The further fact that the Assessing Officer did not record any reasons for such conclusion, the order of assessment would be of no consequence. 10. With this background in mind, we may peruse the reasons recorded by the Assessing Officer more minutely. These reasons are in two parts. First part refers to complex transactions of sale of the assessee's business of micro financing in brief. The revenue seeks to point out that from the assessment proceedings of the year 2011-12, it was noticed that the assessee had entered into an agreement for sale of its business to AFIG for a consideration of Rs. 45 crores which included tangible and intangible assets. On the other hand, the assessee had given a corpus donation of Rs. 45 crores to a trust - Indian Foundation for Inclusive Growth (IFIG). The said trust in turn had received such sum of Rs. 45 crores as share capital in AFIG for which AFIG had allotted 1.5 crores shares. It was also noticed that AFIG had not actually paid th....
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....d has therefore no direct bearing on the assessment year 2009-10 which is sought to be reopened. Whatever be the legality or the effect of such transactions on the assessment of the assessee for the relevant period, the same can have no relation to the assessee's tax liability for the assessment year 2009-10. The Assessing Officer only cited such transactions to come to the conclusion that the assessee had treated its activity as a business, assessed its market value and transferred the same to a company for stated consideration. These conclusions he linked with the assessee's activity during the period relevant to the assessment year 2009-10. He tried to demonstrate that the assessee was receiving funds from financial institutions and advancing loans to women and in the process making profit. According to him, therefore, the activity of the trust was not 'relief of the poor' but 'advancement of general public utility'. According to him, therefore, in terms of the amended Section 2(15) of the Act, the activity of the assessee cannot be treated as "charitable purpose". 13. For two reasons we cannot allow the Assessing Officer to examine this issue. Firstly, independently of the a....