TaxTMI 
TaxTMI 
2021 (1) TMI 46
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.... income of the appellant by denying benefit u/s 11 of the Act by Rs. 11,98,68,227/-. 2. That order dated 19/12/2018 passed u/s 250(6) of the Income Tax Act,1961 by the Learned Commissioner of Income Tax (Appeals)-4, Ludhiana is against law and facts on the file inasmuch as she was not justified to treat the amount paid to persons covered u/s 13(3) as excessive by treating the rate of interest of unsecured loan (liabilities) with rate of interest of deposits (assets). 3. That the ld. CIT(A) was not justified and without jurisdiction to enhance the income of the applicant. 4. That order dated 19/12/2018 passed u/s 250(6) of the Income Tax Act,1961 by the Learned Commissioner of Income Tax (Appeals)-4, Ludhiana is against law and facts on the file inasmuch as she has enhanced the entire income and has not restricted the addition to the excessive amount paid to persons covered u/s 13(3) of the Act. 5. That order dated 19/12/2018 passed u/s 250(6) of the Income Tax Act,1961 by the Learned Commissioner of Income Tax (Appeals)-4, Ludhiana is against law and facts on the file inasmuch as she has not considered the entire set of submissions of the appellant wherein the ground of con....
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....ucture development. To reduce the higher interest costs, it was decided to seek help of sh. Hoshiar Singh Grewal who is one of the present trustees. He was provided funds without collateral security. Sh. Hoshiar Singh Grewal has introduced funds more than Rs. 10 Crores over the time period with which the assessee trust has paid back the bank loan. It was stated that interest being paid to Sh. Hoshiar Singh Grewal was reasonable. Further, Ld. Counsel has explained that cash and bank funds were required for day to day running of the trust. As regards, FDRs kept with bank, it was explained that FDRS have to be maintained with the bank to meet the requirements of the University with which the institution of the assessee trust are affiliated. However, the assessee trust is maintaining following FDRs with State bank of India, i) Rs. 10 Lacs @ 7 5% s ince 29. 05. 2014 ii) Rs. 90 lacs @ 7. 5% s ince 29. 05. 2014 iii) Rs. 8,96,062 @ 7. 75 % s ince 10. 02. 2015 Thus, assessee has made payment of interest to the trustee on unsecured loan @ 10% whereas, the surplus funds of the trust in the form of FDRs are earning interest from the bank @ 7. 5% to 7. 75% only. Thus, provisions of ....
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....al filed by the assessee and that is how the assessee is before this Court. 5. It has been contended on behalf of the assessee that under section 11 of the Act, income of a trust held wholly for charitable or religious purpose is exempt. The 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 materialise, M/s. Punj Lloyd Ltd. returned the money and as such the assessee has been wrongly denied the exemption under sections 11 and 12 of the Act. 6. The basic requirement for the availability for exemption under sections 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 accepted that the payments were in the nature of earnest money for purchase of land, and the whole exercise was of a commercial nature, it cannot be explained why interest-free advances should be give....
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....e found with the view taken by the Tribunal. Thus, the order of the Tribunal does not give rise to a question of law, much less a substantial question of law, to fall within the limited purview of section 260A of the Act, which is confined to entertaining only such appeal against the order which involves a substantial question of law. 12. Accordingly, the appeal is hereby dismissed. 7.3 3 The assessee trust has paid excessive interest to the trustee of the trust who is covered u/s 13(3) of the Income Tax Act. In the present case, it cannot be denied that direct benefit has been allowed to the trustee of the trust Shri. Hoshiar Singh Grewal by giving interest on the funds advanced by him @ l0 % as against interest received from FDRs amounting to 1,08,96,062/- kept in the bank account of the assessee @ 7. 5% Thus, there is a clear violation of section 13 (1)(c) read with 13(2)(c) and 13 (2)(g) of the Income Tax Act,1961. Therefore, benefit U/s 11 of the Income Tax Act,1961 is disallowed to the assessee. As per the details provided by the assessee, total income of the trust during the year was Rs. 11,98,68,227/-. The entire receipt of income of the trust will be assessed as inco....