TaxTMI 
TaxTMI 
2023 (5) TMI 1051
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....rges a sum of Rs.2,27,12,206/- made by the learned Assessing Officer on the facts and circumstances of the case. 3. The learned Commissioner of Income-tax (Appeals) failed to appreciate that the appellant is entitled to claim the financial charges a sum of Rs.2,27,12,206/- incurred in respect of the amount borrowed for the object of the society as application of income on the facts and circumstances of the case. 4. The learned Commissioner of Income-tax (Appeals) failed to appreciate that out of financial charges a sum of Rs.2,27,12,206/- (Rs.1,87,098/- is Bank charges, Rs.74,47,570/- interest paid on term loan to State Bank of India, Rs.1,48,90,558/- interest on loan, Rs.4,710/- loan processing charges and Rs.1,82,270/- interest on vehicle loan) and the same is allowable as expenditure in the hands of the appellant on the facts and circumstances of the case. 5. Without prejudice the learned Commissioner of Income-tac (Appeals) failed '-to appreciate that the learned Assessing Officer in the assessment order observed that financial charges, remuneration to the Secretary to the extent of 50 percent are not to be considered as application of income in c....
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....at the time of hearing of appeal, the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity." 2. The brief facts of the case are that the assessee filed return of income on 14.10.2010 declaring taxable income at Nil after claiming exemption u/s 11 of the Income-tax Act,1961 ['the Act' for short]. The return was selected for scrutiny under CASS. Accordingly, notice u/s 143(2) of the Act was issued to the assessee on 16.9.2011 and other statutory notices were also issued to the assessee. The assessee submitted its reply on different dates. The AO also issued notice u/s 133(6) to the depositors who also replied. 2.1. On perusal of the replies received in response to letters issued u/s 133(6) of the Act from various persons, the AO observed that most of the persons have stated that the amount was given for earning interest at a higher rate and there is no other specific purpose. Many of the deposits made are still lying with the assessee society since three to four years and the society has been paying interest regularly at the rate of interest of 1.5 to 3% per month. Some of the persons have invested their entire re....
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....tary concern of Sri. B. Venkatesh, Son of Sri. N. Balakrishna. The approximate amount of payment made to M/s. Global Paper Agency itself is around Rs. 1.95 Crores as per the entries found in the Bank account in Oriental Bank of Commerce. It is evident from the entries of all big amounts that if an amount is deposited by one person of the family, subsequently the amount will be withdrawn by another person of the family. Likewise, so many entries are there in the Bank account statement. These entries clearly indicate that the family members are using the Bank account of the institution as conduit for their personal business and without any purpose are withdrawing the amount and remitting the amount. 2.4. The main objectives of the assessee society as per the Memorandum of Association are: i. To conduct Nursery, Primary and Middle school, High school. ii. To conduct technical institutions, like as typewriting, shorthand, etc., iii. To conduct Teachers training school iv. To conduct adult education v. To conduct blind and deaf schools. 2.5. From the above object clause of the assessee society the AO observed that the present activities....
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....s amounting to Rs.24 lakhs. In this regard, the assessee submitted that the Secretary is involved in the day to day activities of the institution and he is a senior most official/faculty of the institution. The institution is a Charitable institution and claiming exemption u/s 11 of the Act. As per the opinion of the AO, the amount paid to the Secretary towards remuneration is covered u/s 13(3) of the Act, which is not reasonable amount looking to the services rendered by him. Accordingly, he allowed 50% of the remuneration paid to the Secretary. Accordingly, the AO completed the assessment as under:- 3. Aggrieved from the above order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed detailed written submissions which were examined by the ld. CIT(A) and he observed that the assessee had taken loan from the banks as well as from others and the amount of the loan is increasing year to year. After considering the detailed submissions, the ld. CIT(A) partly allowed the appeal of the assessee. Aggrieved from the above order, the assessee has filed appeal before this Tribunal. 4. The ld. A.R. reiterated the submissions made before the lower....
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....he ld. A.R. further submitted that in respect of remuneration paid to the Secretary Shri T. Bala Krishnan, he was discharging day to day activity of the society as well as the institutions in the capacity of principal and he is also a Secretary of the society and having lot of work load of the institution/society. He further submitted that the genuineness of the payments have not been doubted by the AO. He has only concluded that the assessee is involved in business activity also. He further referred to paper book pages 31 to 32 which is a computation of income of Shri T. Bala Krishnan in which he offered salary and other income and paid tax thereon. Therefore, there is no loss to the revenue. The Secretary's taxable income is Rs.55,82,921/- and he is coming under the tax bracket of 30%. Since the AO has accepted 50% of the salary paid to the Secretary, therefore, he requested that this amount should not be added into the hands of the assessee. 4.3. The ld. A.R. in regard to ground No.10 submitted that the repayment of loan has not been granted by the lower authorities as application of income while computing the income u/s 11 and 12 of the Act based on wrong facts since the loa....
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....he depositors after issuing notice u/s 133(6) of the Act and statements have been recorded and they have clearly accepted that for earning more money they have invested in the assessee society. It clearly shows that the society is involved in the financing activities also. Further in respect of remuneration paid to the Secretary, he submitted that both lower authorities have rightly examined the issue and found excess amount as per their activities done in the society, which is very unreasonable and excessive. He also submitted that assessee was not able to bring any case of charitable society where the remuneration is equivalent to the assessee society for the same activities. He also submitted that the remuneration is excessive, therefore, the tax should be charged in the hands of the right person and further submitted that the arguments advanced by the ld. A.R. that there is no loss to the revenue is incorrect. 5.1. Further, in respect of application of income the ld. D.R. relied on the order of the lower authorities and he drew our attention to the assessment orders for AYs 2003-04 to 2010-11 before the lower authorities, where for the AY 2010-11 there is a loss of Rs.1,31,3....
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....he objective of the society and if so, we direct the AO to restrict interest @ 9.25% p.a., which is equal to the interest rate of loan taken from State Bank of India. The assessee is directed to provide necessary documents for substantiating its case that the loans were utilized for the charitable purpose as set out in the object clause of the assessee and avoid unnecessary adjournments. Accordingly, this ground of appeal is partly allowed for statistical purpose. 8. In ground Nos. 7 to 9 regarding disallowance of Rs.12,00,000 of remuneration paid to the Secretary, the ld. AR submitted that the nature of duties performed by the Secretary cum Principal was furnished before the lower authorities and Rs.24.00/- lakhs paid to the Secretary-cum-Principal was justified who was carrying out various business activities of the trust. The ld. DR submitted that the AO has rightly noted that the Secretary was engaged in personal activities and remuneration is very high which is 4 times the salary paid to other senior faculty. Further, from the details of activities of the Secretary furnished by the assessee before the AO, it was evident that the duties of the Secretary were normal duties an....
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....he above table, we note that the assessee has suffered loss in all the years. During the course of hearing, the learned DR has pointed out that the assessee has repaid the loans from raising fresh borrowings, therefore, it does not constitute application of income. If the loan taken by the assessee has not been considered as source of income then it cannot be considered as application of income also. The learned DR has relied on the judgment of the Madras ITAT Bench of the Tribunal in ITA No.2090 & 2172/Mds/2012, order dated 21.02.2013. On perusal of computation filed for the earlier two years, we do not find anywhere that the loan has been offered as source of income. Therefore Circular No.100 of CBDT relied on by the assessee will not support the case of the assessee. The ld. AR of the assessee has relied on judgment of the Co-ordinate Bench of the Tribunal in ITA No.1281/Bang/2016, order dated 01.11.2021 relied by the ld. AR is on a different footing. 9.1. We also note that from the facts available before us, it is not clear whether the loans taken were utilized for the application of income in the past years as well as in current year for the purpose of the objective of the ....