2025 (5) TMI 10

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....facts of the case are that the application of the assessee seeking approval u/s 80G(5)(iii) of the Act was filed in prescribed Form No. 10AB of the Income-tax Rules, 1962 (in short 'the Rules') but rejected by Ld. CIT(E) by way of impugned order for the following reasons : (i) The loan of Rs. 14,45,00,000/- including loan of Rs. 7,95,00,000/- bearing interest @ 11.5% from specified persons claimed to have taken for the purpose of paying rent of Rs. 10.42,09,629/- liability, was actually deployment of the excess fund by the related party i.e. M/s Shapoorji Pallonji & Company Pvt. Ltd. trust with intention to earn interest income, therefore, the transaction was in violation of provision of section 13(2)(a) of the Act. (ii) T....

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....e regarding payment of rent was issued on 18.01.2022. The assessee took the loan from its related party way back in FY 2018-19 whereas the need to pay the rent arose only from 18.01.2022 as stated by the assessee itself in its submission made on 19.09.2024. There does not appear any rational behind taking such a huge amount of loan in FY 2018-19 or before for a purpose which would arise only after 3-4 years i.e. from 18.01.2022 and which kept incurring a hefty amount of interest for the assessee trust. For a charitable entity like the assessee's, it cannot be justified to make expenses in the form of interest payment on loans which is to be used for rent payment in future course of time whereas the same money could be utilized on charit....

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....4 years prior to the actual payment year and paying huge interest from its fund when the purpose of the assessee trust is to do charitable activities and the money used for paying interest could have been used for charitable purposes." 3. We have heard rival submissions of the parties and perused the relevant materials on record. The first issue in dispute is regarding the violation of section 13(2) of the Act which prescribe that where any property or income of the trust is applied for the benefit of the related party, the assessee is not entitled for benefit of registration including 80G of the Act. On verification of the facts it is found that the assessee trust obtained loan of Rs. 7,95,00,000/- bearing interest @ 11.5% from M/s Shap....