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2017 (12) TMI 1682
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....)(c) of the Act, for the purpose of claiming exemption. The AO also denied the exemption since he found that the said advance was in violation of the prescribed modes of investments of funds of trusts claiming exemption u/s 10(23C) of the Act, as prescribed u/s 13(1)(d) rws 11(5) of the Act. The Assessing Officer also held that the assessee was ineligible for exemption since he found that the main object of the assessee was not education but giving loan and advance and building capital. The surplus earned by the assessee amounting to Rs. 3,64,60,383/- therefore was subjected to tax. 3. Before the Ld.CIT(Appeals), detailed submissions were filed in writing by the assessee reproduced in the order from pages 4 to 17. Briefly stated, the assessee assailed the order of the Assessing Officer stating that; i) The advance given to M/s Baba Amarnath Educational Society was not given in the impugned year but in assessment year 2011-12 and thus had no relevance to the impugned year. ii) The advance was authorized by its objects and hence was to be treated as application of income of the assessee. iii) The provisions of section 13(1)(c)/13(1)(d) rea....
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....d have interest in other sister concerns also and have been providing loan to group concerns which shows that all trustees have substantial interest in each society. Ld. DR also pointed out that the Assessing Officer had established nexus between all the group society companies and their trustees by way of demonstrating a transaction between Shiva Educational Trust, which was a society belonging to a group and Sachdeva Building Contractors Pvt. Ltd. which was a group company, where agreement between both were shown to have been made on random figure without thinking that there was any requirement of maintaining of building or not. 9. The Ld. DR also drew our attention to the findings of the Assessing Officer with regard to the applicability of provisions of section 11(5) of the Act to the said advance stating that it is the modus operandi of the assessee to take unsecured loans from trusts in the group society and then divert them to group societies as unsecured loan and invest the same in fixed assets. Ld.DR stated that the impugned advance being the fund of the assessee, the assessee ought to have deposited it in the modes specified u/s 11(5) of t....
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....nbath Edu.Trust 3000000 Amritsar Int. Found. Trust 70523720 Details of Unsecured Loan (taken and given) in the books of M/s Bana Amarnath Hira Lal Sharma 5,00,000.00 Amritisar College of Engg. & Tech. 30,00,000.00 Shiva Educational Trust 35,00,000.00 Baba Bhola Nath Edu Society 6,47,800.00 In the above facts, reply of assessee that the sister trusts are not covered under 13(3) GBP specified persons, is not acceptable because there are common members, which are having interest in the all sister concerns. The details of the unsecured loans in the books of each society show that all the societies are having loan or advances from their trustees & sister societies & same distributed among the sister concerns societies & invested into capital as fixed assets. The above facts show that all the trustees are having substantial interest into each sister society. It is also a fact that from the perusal of their individual balance sheet of trustees, it is seen that they have sources of Income from salary and interest from group societies or group companies, the same then invested into group societies as loan/ad....
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.... the provisions of section 13(1)(c) by way of giving loan to M/s Baba Amarnath Educational Society. 14. The Ld. counsel for assessee further stated that the assessee had also not violated the provisions of section 11(5) of the Act which specifies the modes in which the funds of the trust are to be invested, since the loan had been given in pursuance of its object of advancement of education, as M/s Baba Amarnath Educational Society was also a registered society u/s 12A of the Act having similar objectives as the assessee society. The Ld. counsel for assessee relied upon the following case laws in support of its above contention: Joint Commissioner of Income Tax (OSD)(Exemptions)-II, Chennai Versus M/s. Bhaktavatsalam Memorial Trust - 2015 (3) TMI 929 - ITAT Chennai Kanpur Subhash Shiksha Samiti Versus Deputy Commissioner of Income Tax-1, Kanpur - 2012 (8) TMI 728 - ITAT LUCKNOW M/s Vairams Kindergarten Society, Rajagopalapuram Versus The Commissioner of Income Tax (Appeals), Tiruchirapalli. - 2015(6) TMI 856 - ITAT CHENNAI PATANGRAO KADAM PRATISTHAN BHARATI VIDYAPEETH BHAWAN Versus ASST/Deputy COMMIISSIONER OF INCOME TAX, CEN....
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....y in the AY 2011-12. Baba Amarnath Educational Society applied all the funds including these Corpus Donations and loans for the purpose of pursuing its objectives of education by creating infrastructural facilities for the establishment of an Engineering and Management College. Besides these financial aid from these societies and Chairman (Hira Lai Sharma). Baba Amarnath Educational Society have to borrowed loans from banks. ( Refer Page No. 37 & 41 of paper book) Though having one common member in these Societies! trust may technically be called sister concerns. No trustees or member or relative of any member or any concern or company in which any of the members or trustees of these four societies have any financial interest has entered in any transaction with these societies/Trust during AY 2013-14 or any of the preceding assessment year. There is nothing on record which indicate any nexus of group members/trustees, group societies or group companies involved in entry scam as claimed by Ld. AO in the assessment order. Out of the two chart showing details of unsecured loans are wrongly presented and interpreted. First chart shown on page 6 of the assessment order re....
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....o the returned income. (Refer page 10 of the order ). In fact the transactions of Loans which are referred in the order are simple case of giving loan from three sister societies to another sister societies where all these sister societies are having similar objectives and activities and all are registered u/s 12A. The transactions of giving such interest free loan from three sister societies including assessee society is application of income u/s 11(1))/10(23C)(vi) of the Act." 16. We have heard both the parties ,gone through the orders of the authority below and also the documents referred to before us. We find no infirmity in the order of the Ld.CIT(Appeals). Clearly the only reason for finding the assessee ineligible for exemption u/s 10(23C)(vi) is on account of the interest free loan given by it to M/s Baba Amarnath charitable trust. The fact that the impugned loan/advance pertained to A.Y 2011-12 and not to the year in appeal before us has remained uncontroverted, so in any case, there cannot be said to be any violation in the impugned year by the assessee either of the provisions of section 13(1)(c) read with section 13(3) or even section 13(1)(d)....
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....u/s 11(5) of the Act. The assessee, we hold therefore cannot be said to have violated the provisions of section 13(1)(d) r.w.s 11(5) of the Act. The reliance placed by Ld.counsel for the assessee on the decision of the Hon'ble Delhi High Court in the case of Director of Income Tax (Exemption) vs ACME Educational Society 326 ITR 146 is apt, wherein after discussing the issue at length it was held that interest free loan given by one charitable society to another charitable society having similar objects was neither a deposit or investment in violation of section 13(1)(d) r.w.s. 11(5) of the Act. The relevant findings of the Hon'ble High Court at para 15 of its order are as under: "15. Keeping in view the aforesaid exposition of law, we are of the opinion that interest-free loan of Rs. 90,50,000 given by the assessee-society to Nav Bharti Educational Society does not violate s. 13(1)(d) r/w s. 11(5) of Act, 1961 as the said loan was neither an "investment" nor a "deposit". This is more so as both the societies had similar objects and were registered under s. 12A of Act, 1961 and had approvals under s. 80G of the Act, 1961. The ....