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2015 (12) TMI 1901 - HC - Income TaxExemption u/s 10(23C)(vi) - claim rejected as society was diverting its income to the members of the society and, therefore, the society was not acting as a non-profitable institution - Commissioner rejected the application holding that the purpose/objects of the society as per the memorandum of association does not indicate that the institution is running solely for educational purpose HELD THAT:- As perusal of the impugned order that based on a survey, a show cause notice was given and, thereafter, a finding has been given that the profits of the institution are being diverted to the members of the society in the garb of payment of interest on the unsecured loans given by them. The genuineness of this transaction has been doubted. A specific finding has been given that at the time when the members gave the loan, no rate of interest was payable by the institution but subsequently, for the subsequent assessment years, the rate of interest of 12% was charged to obviate the profit by way of interest and divert the money to its members in the garb of payment of interest on the loan given. For the assessment year 2005-06, the rate of interest was increased from 12% to 18% and in 2006-07 the rate of interest was increased to 21%. This increase in rate of interest was to ensure that the income of the society was diverted to its members in the garb of payment of interest. The increase in the rate of interest could be seen on account of the increase in the income of the society. There is also a specific finding that the bye-laws had no provision for taking loan on interest, though, subsequently, the amendment was made in its bye-laws during the financial year 2006-07, which will have no effect in so far as the present application of the petitioner is concerned. Thus an irresistible inference can be drawn that the petitioner's society, even if it was running an educational institution solely for education purposes, yet it was with the intention of earning a profit and it was not for a non-profit purpose. On this short ground, we are of the opinion that the order of the Commissioner does not require any interference. Decided against petitioner/society registered.
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