TaxTMI 
TaxTMI 
2017 (12) TMI 1682
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....ng 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) read with section 13(3) of the Act were not applicable since ....
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....s 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 the Act. The Ld. DR further relied upon the decision of the Hon'ble Madras High Court in the cas....
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....ngg. & 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/advances. The above facts show that the group societies, group companies & their trustees & directors/shareholder have nexus between all of them for diversion of money from one hand to another hand under the umbrella of group concerns. This fact is also clea....
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....h 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, CENTRAL CIRCLE-2, (2), PUNE - 2013(2) TMI 579 -ITAT PUNE DIRECTOR OF INCOME TAX (EXEMPTION) vs. ACME EDUCATIONL SOCIETY 326 ITR 146(Delhi) Income Tax Appellate Tribunal - Chennai - Society Of Daughters Of Mary Immaculate & Collaborators ... Vs. Department of Income Tax on 4 July, 2012 ITA No.963/Mds....
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....an (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 relates to Amritsar International Foundation Trust, in which Rs. 3000000 shown given to Baba Amarnath Educational Society in the AY 2011-12 and shown as it is in the AY 201213 and 2013-14, where as other figures in the name of Amrtisar International Foundation is misreported. (Refer Page No. 67 of the paper book for Balance Sheet of Amritsar Int....
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....uch 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) rws 11(5) of the Act at all. 17. Further, we find that the assessee had demonstrated by way of a detailed chart listing all relationships covered u/s 13(3), that M/s Baba Amarnath Educational Society is not a specified person as per the provisions of section 13(3) of the Act and the Revenue has not controverted the same. Ld.DR has ....
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....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 fact that the loan was interestfree and had been subsequently returned is also significant. In view of the order passed by the CIT(A) in the case of Nav Bharati Educational Society, Ms. Bansal's allegation with regard to "entry scam" also does not survive. Consequently, there is no substantial question of law involved in the present appeal and accordingly, appeal is dismissed but with no order as ....