TMI Blog2013 (2) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... lication of income to charitable purposes irrespective of whether the amount in question has been laid out irretrievably or whether the amount continued to belong to the charitable trust or the institution or it is recoverable by it. Since in the instant case the assessee trust had advanced loan of ₹ 55 lakhs to Bharati Vidyapeeth, another charitable trust also engaged in educational activity, therefore, in view of the decisions cited above, granting of such loan by the assessee trust to another trust is neither a deposit nor an investment and therefore there is no violation of provisions of section 13(1)(d) of the I.T. Act - against revenue. Denial of exemption u/s.11 on account of belated filing of Form No.10 by the assessee trust - Held that:- The assessee could not envisaged that application for registration under s.10(23C)(vi) would be delayed. Thus, the assessee was required to make alternate claim under ss.11 and 12 of the Act. As held in the case of Mayur Foundation (2004 (12) TMI 48 - GUJARAT HIGH COURT), assessment proceedings are complete when appeal against order of assessment is decided by the Tribunal. Various courts have time and again held that though f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that such donations cannot be considered as corpus donations. However, the alternate submission of the the assessee that the same should be considered as revenue receipts is acceptable. Since there is no violation of provisions of section 11(5) r.w.s. 13(1)(d) and also held that exemption u/s.11 cannot be denied for late filing of Form No.10, therefore, since the donations are treated as revenue receipts, it does not make any difference. Exemption u/s.11 is allowable on such donations. The grounds by the assessee are decided accordingly. - ITA No.289/PN/2011 & ITA No.312/PN/2011 - - - Dated:- 31-12-2012 - Shailendra Kumar Yadav and R.K. Panda, JJ. Appellant Rep by: Sri Sunil Pathak Respondent Rep by: Sri S.K. Singh ORDER Per: Bench: The above cross appeals are directed against the order dated 01-12-2010 of the CIT(A) Central, Pune relating to Assessment Year 2006-07. For the sake of convenience, these were heard together and are being disposed of by this common order. 2. Facts of the case, in brief, are that the assessee, M/s. Patangrao Kadam Pratisthan (in short PKP ) was established through a deed of trust dated 15-01-1981 by Dr. Patangrao Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pus donation and has not routed the same through income and expenditure account. The balance amount of ₹ 24,45,537/- is shown as interest. On being questioned by the AO about such donations it was submitted that the assessee trust has received coupon donations ranging from ₹ 5/- to ₹ 1000/- through various volunteers. A sample copy was also enclosed. However, it was specially admitted by the assessee that being a small amount on each coupon, no separate receipt was issued to the donors. Hence, the name and address of the donors are not available. The assessee filed confirmation from some of the donors and volunteers who have made collection of the coupons. However, the AO noted that the coupons did not carry their signature. Since the assessee was all along insisting of collection of funds through issuance of coupons and was claiming the same as corpus donation not forming the part of regular income to be routed through the profit and loss account the AO proceeded this issue from the following angles : (1) Whether the donations claimed by the assessee are genuine donations. (2) Whether the said donations can be termed as voluntary donations. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 753/- being 85% of the receipts as per the provisions of section 11(1)(a) on the object of the trust and the balance amount of ₹ 5,84,428/- to have been accumulated. Thus, he came to the conclusion that there is short application of fund by the assessee trust to the extent of ₹ 26,61,728/-. 4.3 The AO also noted that the assessee Trust has not filed Form No.10 along with the return of income for the fund accumulated by them during the year and it has been filed for the first time along with the return of income filed in response to notice u/s.153A. Even no application for condonation of delay along with the reasons was also filed. The Form No.10 was filed late by 1 year 4 months and 23 days. He noted that along with Form No.10, the assessee has filed a resolution of the Board of Trustees which is dated 03-05-2007. According to the AO the resolution itself has been passed more than one year after the last date of previous year. Relying on a couple of decisions the AO held that the Form No. 10 filed before him without obtaining condonation from the CIT cannot be entertained by him since the assessee trust has not filed the Form No.10 along with return before the due da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract. So far as the investment in shares was concerned it was submitted that the same was for helping the cooperative section and not for any profit earning. 4.5 However, the AO was not satisfied with the explanation given by the assessee. He noted that since these amounts are appearing in the asset side of the balance sheet, therefore, undoubtedly it forms part of investments of the assessee and it is not necessary that every investment yields return in the form of dividend or interest. He was of the opinion that almost all the trusts of the assessee group have made investment in the spinning mill and SSK with the clear intention to garner the control over the organisations. Though the trust is not engaged in agricultural activities, almost all the trustees are agriculturists and indirect benefit is enjoyed by them by making this contribution. According to the AO if it was the intention of the trust to help the poor village women as argued by them nothing has stopped them from making any direct donation to the welfare body of the spinning mill workers. Instead the trust has chosen to make hefty contribution to the mill itself for obvious reasons. The AO analysed the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Net profit income as per computation Rs.26,06,809/- Add : Donations credited to the development fund Rs.25,80,000/- Total Rs.51,86,809/- 5. In appeal the learned CIT(A) upheld the action of the AO in treating the donations received through coupons as revenue receipt. While doing so, he noted that the statement of Sri Ramachandra Dada Shinde was recorded during the course of search u/s.132(4) wherein he has stated that the funds collected have also been utilised for depositing money in various fund accounts of the group. Therefore, deposits appearing in the development fund account have to be considered from sources other than the genuine donors. He further noted that the coupon donations are from donors whose identities are not known even to the assessee and such receipts are in cash against the issue of coupons of fixed denominations printed with the word corpus donation . According to him the statements of the volunteers, who collected donations, are only self serving documents and cannot be relied upon. According to him even donations covered by written docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.11 of the I.T. Act, strict parameters have to be applied in respect of these deemed income u/s.11 of I.T. Act. By no stretch of imagination income from unexplained sources added to the income of the assessee u/s.68 of the I.T. Act can be considered as voluntary contribution and deemed income derived from property held under trust wholly for charitable or religious purpose u/s.11 of the I.T. Act. He accordingly held that the AO was justified in disallowing the deduction on account of accumulation of income u/s.11(2) r.w.s. 11(5) of the I.T. Act. In view of the above, he further held that the grounds taken by the assessee regarding delay in the submission of the application in Form No. 10, reason for delay in filing Form No.10 and nature of resolutions passed for the purpose of section 11(2) r.w.s.11(5) become redundant and therefore they need not be adjudicated. He observed that exact nature of income is known to the person earning it. Therefore, the plea that it did not have any occasion to give application in Form No.10 before the AO, who objected to its treatment of donations as corpus donations, does not have any merit. 6.1 He further noted that to claim exemption u/s.11(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 13(1)(d) were clearly attracted. He further held that the provisions of section 13(1)(d) demanded strict interpretation and liberal interpretation of the same was not justified. Further the said investments could not be treated as an application of funds as the loan is given to an entity other than the trust and he accordingly held that the assessee had violated the provisions of section 13(1)(d). The Ld. CIT(A) also upheld the action of the AO in not allowing the application of income of ₹ 6,65,386/- as expenditure on the objects of the Trust and did not grant benefit of 15% of the income which according to the assessee is allowable as per law to be set apart. 8. Aggrieved with such order of the CIT(A) the assessee as well as the revenue are in appeal before us with the following grounds : Grounds by Assessee (ITA No.289/PN/2011): 1. The learned CIT(A) failed to appreciate that the assessee trust was duly registered u/s.12A and therefore, it was duly entitled to the exemption u/s.11. 2. The learned CIT(A) erred in confirming the addition in respect of donation received through issue of coupons by taxing it as income of the appellant u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to reject the same and deny the exemption u/s.11 to the reassessment trust. (c) At the time of filing the original return, the income of the appellant trust was NIL and hence, there was no question of any accumulation of income and accordingly, a resolution for accumulation of the income could not have been passed before filing of the original return. (d) There was no such prohibition that the assessee trust could not submit Form No.10 in reassessment proceedings u/s.147 or 153C and hence, the reasoning given by the learned CIT(A) for rejecting the Form No.10 was totally incorrect. 3.5 The learned CIT(A) erred in holding that the Form No.10 was not valid since the resolution passed by the trustees did not mention specific purpose for which the amounts were accumulated. 3.6 The learned CIT(A) failed to appreciate that the resolution passed by the trustees was perfectly valid and the amounts were accumulated for achieving the objects of the trust and hence, the reasoning given by the learned CIT(A) for rejecting the Form No.10 was not valid in law. 4. The learned CIT(A) erred in holding that the appellant trust was not entitled to the exemption u/s.11 as it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been allowed to the assessee. 6. The learned CIT(A) erred in not granting benefit of 15% of the income which is allowable as per law to be set apart and accordingly, the income computed should have been reduced by 15%. 7. The learned CIT(A) erred in not allowing the application of income of ₹ 6,65,388/- being expenditure on the object of the trust while computing the income of the assessee trust. 8. The learned CIT(A) erred in not granting the basic exemption limit as well as the various slab rates prescribed by the statute while computing the tax on the total income. 9. The learned CIT(A) erred in not appreciating that no interest was chargeable u/s.234B as per law. 10. The appellant craves leave to add, alter, amend, or delete any of the above grounds of appeal . Grounds by Revenue (ITA No.312/PN/2011) : 1. In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the amount of ₹ 55,00,000/- given by the assessee to Bharati Vidyapeeth was a loan and was not an investment or a deposit and it did not, therefore, violate the provisions of section 13(1)(d) of the I.T. Act. 2. The Ld. CIT(A) fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly submitted that the order of the AO being in accordance with law should be upheld and the order of the CIT(A) on this issue should be reversed. He also strongly objected to the order of the CIT(A) in holding that a loan given by one charitable trust to another with similar objects is an application of income and therefore will not attract the provisions of section 13(1)(d). 9.4 The learned counsel for the assessee on other hand heavily relied on the order of the CIT(A). He submitted that Bharati Vidyapeeth is also a charitable organisation engaged in Educational activities. He submitted that loan given by the assessee trust to Bharati Vidyapeeth is neither an investment nor a deposit and therefore granting of such loan is outside the purview of section 11(5). Relying on a couple of decisions he submitted that there is no violation of provisions of section 13(1)(d) of the I.T. Act. He further submitted that during the course of appeal proceedings it was categorically stated that the assessee has received interest on the deposit with Bharati Vidyapeeth and therefore provisions of section 13 do not attract. Further, the loan given by the assessee trust during 1993-94 is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso the submission of the learned counsel for the assessee that such advance was neither a deposit nor an investment and therefore granting of such loan is outside the purview of section 11(5). 9.7 We find the learned CIT(A) while allowing the claim of the assessee has stated that the amount of ₹ 55 lakhs given by the assessee to Bharati Vidyapeeth was a loan and was not an investment or a deposit and therefore there is no violation of provisions of section 13(1)(d) of the I.T. Act. He further held that a loan given by one charitable trust to another with similar object is an application of income and it will not attract the provisions of section 13(1)(d). The relevant observations of the learned CIT(A) given in assessment year 99-00 which has followed in A.Y. 2005-06 and for the impugned assessment year reads as under : 6.4 In this year, the violation u/s 11(5) r.w.s 13(1)(d) is only on account of loan given by the appellant to Bharati Vidyapeeth of ₹ 55 lakhs. The appellant has submitted that the loan was given in order to help Bharati Vidyapeeth and therefore, it was not an investment. The appellant has submitted that the loan advanced was in furtherance of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions stipulated therein are not complied with. The word deposit does not cover transaction of loan which can be more appropriately described as directed bailment. The essence of deposit is that there must be a liability to return it to the . party by whom or on whose behalf has been made on fulfillment of certain conditions. In the commercial sense, the term is used to indicate the aforesaid transaction as deposit of money for employment, in business, deposits for value to initiate security for deposit of title deeds, similar documents as security for loan, deposit of money bills in a bank in the ordinary course of business of current account and deposits of a sum at interest at a fixed deposit in a bank. 6.5.1 in Baidya Nath Plastic Industries (P) Ltd. Ors. vs. K.L. Anand, ITO (1998) 146 CTR (Del) 421 : (1998) 230 ITR 522 (Del) it was pointed out that the distinction between loan and deposit is that in the case of the former it is ordinarily the duty of the debtor to seek out the creditor and-to repay the money according to the agreement, while in the case of the latter it is generally the duty of the depositor to go to the banker or to the depositee, as the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under s. 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under s. 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934); (iv) investment in units of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963); (v) investment in any security for money created and issued by the Central Government or a State Government; (vi) investment in debentures issued by, or on behalf of, any company or corporation both the principle whereof and the interest whereon are fully and unconditionally guaranteed by the Central Government or by a State Government; (vii) investment or deposit in any (public sector company) : Provided that where an investment or deposit in any public sector company has been made and such public sector company ceases to be a public sector company,- (A) such investment made in the shares of such company shall be deemed to be an investment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that the words investment , deposit , and loan have different meanings. The relevant observations in the said judgment are reproduced hereinbelow : The expressions used in both the provisions quoted above, are investment and deposit . The former expression means to layout money in business with a view to obtain an income or profit. Deposit, on the other hand, means that which is placed anywhere, as in any one's hands for safe-keeping, something entrusted to the care of another. These two expressions have been used in a cognate sense and have to be under-stood as such. In order to constitute an investment the amount laid down should be capable of any result of any income, return or profit to the investor and in every case of investment, the intention and positive act on the part of the investor should be to earn such income, returns, profit in order to constitute an investment, the monies shall be laid out in such a manner as to acquire some species of property which would bring in an income to the investor. A loan, on the other hand, is granting temporary use of money, or temporary accommodation. The words investment , deposit and loan are certainly differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment 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 interest-free 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 to costs. 9.9 We find the Pune Bench of the Tribunal in the case of National Engg. Coordination Committee vs. ACIT reported in 43 ITD 612 has observed as under : 61. We shall now deal with the issue regarding the forms and modes of investing or depositing the money as per s. 11(5) r/w s. 13(1)(d) of the Act. At the outset, we make it clear that this issue cannot arise in asst. yrs. 1984-85 and 1985-86. In giving effect to the order of the CIT which did not give any finding or direction regarding this issue, the Asstt. CIT could not have travelled beyond the mandate given by the CIT. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld still constitute application of income in the year in which the advances are made. We have now to see whether the amount which has been advanced by NECC to ACIL achieved the charitable purpose of NECC. We have to see the memorandum of association of ACIL and we find that its objects are harmonious and supplemental to the basic object of NECC. The activities of ACIL are also confined to operation and transaction for the benefit of poultry industry as a whole. The ACIL has been promoted by NEC for the purpose of carrying out the market operations in eggs with object of ensuring that there should not be disparity of supply and demand in different areas. 63. It was emphasised on behalf of the assessee that NECC s basic object of protecting the interest of poultry farmers would never be fully achieved unless and until it was possible to carry out such market operations in eggs on large scale. The shareholders of NECC are exclusively the poultry farmers as explained to us by Shri Ganesh. The main reason why ACIL was promoted is because the assessee could not undertake the activity of stabilising the market process which would have required large scale operations of purchase and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investment, risk is undertaken for the purpose of getting return such as interest, profit, capital gains etc. In the present case, there was no such object involved. For this reason also, we are of the opinion that such advances made by the NECC to ACIL did not constitute any investment. 65. The word deposit is used in association with the word invest and following the principles of noscitur a sociis . The word deposit has to be understood in the cognate sense with the word invest . Thus the word deposit considered with reference to the return thereof and the wider meaning of deposit, i.e., repaying money for safe keeping or by way of security performer s obligation cannot be considered to be relevant. It can only be considered that the advancing of money is not for the purpose of earning interest. In the context of s. 11(5) this would appear to be a proper and correct interpretation. If we apply this meaning to deposit then also the advances to ACIL cannot be considered to be deposit because no monetary interest was accepted therefrom. We therefore, hold that the advances to ACIL cannot be a deposit either. We are supported in this finding by the Finance Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust had advanced ₹ 50,000/- as a temporary loan to another similar society on the direction of the donor. The AO denied the exemption u/s. 11 to the assessee holding that there was infringement of provision of section 13(1)(d) r.w.s.11(5). On appeal, the Tribunal held that the advance was neither a deposit nor an investment and there was no infringement of provisions of section 13(1)(d). On further appeal, the Hon ble High Court dismissed the appeal filed by the Revenue on the ground that no question of law arises out of the order of the Tribunal since the conclusion was essentially factual. The Hon ble Delhi High Court in the above case has also upheld the decision of the Tribunal that loan given by one trust to another trust with similar objects was an application of income and was not an investment or a deposit. 9.12 We find the Hon ble Delhi High Court in the case of DIT Vs. Pariwar Sewa Sanstha reported in 254 ITR 260 has held that no question of law arises from the order of the Tribunal holding that there was no violation of provisions of section 13(1)(d) of the I.T. Act, 1961 where loan was given by one society to another society having similar objects. 9.13 We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is placed at Paper Book Page Nos. 57 to 73) he submitted that the Tribunal in the said decision has held that whether the Form No.10 was within time or belatedly filed before the AO during the assessment proceedings has no significance because of the reason that the same can otherwise be admitted at the appellant stage in the garb of propagating substantial justice to the appellant. He submitted that the Tribunal while holding this view has relied upon the decision of Hon ble Gujarat High Court in the case of CIT Vs. Mayur Foundation reported in 274 ITR 562 (Gujarat). 11.3 Referring to the decision in the case of Mayur Foundation (Supra) he submitted that the Hon ble High Court in the said decision has held that proceedings before the Tribunal are meant to correctly assess the tax liability of an assessee. If this be so, it follows that the assessment proceeding cannot be said to be complete and is pending till the appeal is heard and disposed of by the Tribunal and the order of the Tribunal is given effect to by the assessing authority by computing the correct tax liability of an assessee. Accordingly, it was held that the Tribunal was justified in holding that in absenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions he upheld the action of the AO. It is the submission of the learned counsel for the assessee that the assessee had filed the return of income claiming the coupons donation as corpus donation not chargeable to tax. It was only when the AO during assessment proceedings opined that such donation will be treated as revenue receipt, the assessee filed Form No.10 during the assessment proceedings. It is also the submission of the learned counsel for the assessee that Form No.10 filed before the completion of assessment is valid and should be accepted. 12.1 We find the Hon ble Supreme Court in the case of CIT Vs. Nagpur Hotel Owners Association reported in 247 ITR 201 (SC) has observed as under : It is abundantly clear from the wording of sub-section (2) of section 11 that it is mandatory for the person claiming the benefit of section 11 to intimate to the assessing authority the particulars required, under rule 17 in Form No. 10 of the Rules. If during the assessment proceedings, the Assessing Officer does not have the necessary information, question of excluding such income from assessment does not arise at all. As a matter of fact, this benefit of excluding this particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in agreement with the submissions of learned counsel for assessee. The assessee could not envisaged that application for registration under s.10(23C)(vi) would be delayed. Thus, the assessee was required to make alternate claim under ss.11 and 12 of the Act. As held by Hon ble Gujarat High Court in the case of Mayur Foundation (Supra), assessment proceedings are complete when appeal against order of assessment is decided by the Tribunal. Various courts have time and again held that though filing of Form No.10 is mandatory to claim exemption under ss. 11 and 12 of the Act, the same can be filed at any time during the pendency of assessment proceedings. If so filed the benefit of accumulation of income for charitable purpose cannot be denied. We accordingly direct the AO to compute the income after allowing exemption under ss. 11 and 12 of the Act and also considering the application in Form No.10 regarding accumulation of surplus income for the purpose of objects of the trust . 12.3 In view of the above decisions we are of the considered opinion that the assessee can file Form No.10 at any time before completion of the assessment. We, therefore, do not agree with the findings o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment. In the absence of any such information, it will not be possible for the assessing authority to give the assessee the benefit of such exclusion and once the assessment is so completed, in our opinion, it would be futile to find fault with the assessing authority for having included such income in the assessable income of the assessee. Therefore, even assuming that there is no valid limitation prescribed under the Act and the Rules even then, in our opinion, it is reasonable to presume that the intimation required under Section 11 has to be furnished before the assessing authority completes the assessment concerned because such requirement is mandatory and without the particulars of this income the assessing authority cannot entertain the claim of the assessee under Section 11 of the Act, therefore, compliance with the requirement of the Act will have to be any time before the assessment proceedings. Further, any claim for giving the benefit of Section 11 on the basis of information supplied subsequent to the completion of assessment would mean that the assessment order will have to be reopened. In our opinion, the Act does not contemplate such reopening of the assessment. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is any legal infirmity in the impugned order of the Tribunal in holding that rule 17 of the Rules is directory in nature and in holding that the assessee had duly complied with the requirements of sub-section (2) of section 11 of the Act. 12.4 In the light of the above discussion we are of the considered opinion that since the Form No.10 was filed prior to completion of assessment, therefore, the assessee is entitled to benefit of section 11 of the I.T. Act. We therefore set aside the order of the CIT(A) on this issue and the grounds raised by the assessee are allowed. 13. In Grounds of appeal No. 4 to 4.4 the assessee has challenged the order of the learned CIT(A) in confirming the order of the AO in holding that assessee has violated the provisions of section 13(1)(d) r.w.s.11(5) on account of investment in shares of cooperative societies namely Krishna Verala Sahakari Soot Girni Ltd. Sagareshwar Sahakari Soot Girni Ltd. 13.1 The learned counsel for the assessee submitted that the AO denied the exemption u/s.11 on account of purchase of shares in the above two cooperative societies on the ground that there is violation of provisions of section 13(1)(d) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heet as recoverables/investments the same will not disentitle the amount as an application of income. He submitted that in the light of the above decision even the amount of loan/deposit/investment, membership fees given as per the charitable object of the trust is also an application of income. 13.3 Referring to the submissions made before the learned CIT(A) he drew the attention of the Bench to the following : It may further be noted that till these assts., the dept. never objected to these shares being purchased by the charitable trusts. This is clear from the fact that in some other cases of the charitable trusts, the investments in the shares of the cooperative societies have been made in the past years for which the exemption u/s.11 was claimed and no objection was raised any time in the past in any of these cases. This indicates that there is rethinking on this issue by the dept. and apparently, the objection of the dept. is not justified. In this context, we are enclosing herewith asst. order Bharati Vidyapeeth Medical Foundation for A.Y. 2002-03 wherein no objection has been raised regarding the investment in cooperative societies even though, the fact that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of section 11(5) should be strictly complied with to avail of the benefits given to a trust. Since the assessee trust in contravention to provisions of section 11(5) has invested in shares of the two cooperative societies, therefore, there is violation of provisions of section 13(1)(d). For this proposition he relied on the decision of the jurisdictional High Court in the case of DIT (Exemption) Vs. Sharadaben Bhagubhai Mafatlal Public Charitable Trust No.8 and others reported in 247 ITR 1 (Bombay). The submission of the learned counsel for the assessee that they have subsequently liquidated the shares is of no use since the assessee has already violated the provisions. He accordingly submitted that the order of the CIT(A) should be upheld. 13.6 The learned counsel for the assessee in his rejoinder submitted that the decision of Hon ble Bombay High Court relied on by learned DR is distinguishable and not applicable to the facts of the present case. 14. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Unitech Limited were included. These two were not public undertakings, and, therefore, according to the Assessing Officer, the deposits were made in violation of the provisions contained in section 11(5) of the Act and therefore the benefit under sections 11 and 12 read with section 13(1)(d) of the Act was denied. The petitioner filed an appeal before the Commissioner of Income-tax (Appeals) (in short the CIT(A) ). The same was dismissed ex parte holding that there was no compliance on the date fixed and there was nothing wrong with the order of the Assessing Officer. The assessee preferred an appeal before the ITAT, Delhi Bench B , Delhi (in short the Tribunal ). 3. The factual position that was highlighted before the Tribunal was that after incorporation of the trust and its registration, charitable work was being undertaken. The donations for the corpus of the trust were obtained by account payee cheques. Such corpus funds have been invested as fixed deposits with public sector undertakings, viz., UTI, SAIL, NTPC, etc. During the year under consideration, the two concerns, viz., Unitech Ltd. and S.M. Finance Ltd., gave forms to the appellant inviting deposits. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aritable Trust (Supra) is concerned, the same in our opinion is not applicable to the facts of the present case. In that case the assessee Trust was holding shares in non-government companies after 30th November 1983 and did not dispose of or convert the shares into permissible investment by 31-03-1993. Accordingly it was held that there was contravention of section 13(1)(d) r.w. proviso (iia) in Asst. Year 1993-94 and accordingly benefits of section 11 was denied. However, in the instant case the facts are completely different. There was no objection by the Revenue in the past on this issue and the assessee has promptly liquidated the shares on being objected to by the Revenue. Therefore, the decision relied on by learned DR is distinguishable and not applicable to the facts of the present case. We accordingly set-aside the order of the learned CIT(A) on this issue and the grounds raised by the assessee are allowed. 15. In Grounds of appeal Nos. 5 to 5.2 the assessee has challenged the order of the CIT(A) in holding that there is violation of provisions of section 11(5) on account of loan amounting to ₹ 1,25,00,000/- given to Sonhira Sakhar Karkhana Ltd., a cooperative so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uous and clear and since the assessee has violated the provisions in investing the funds of the assessee trust in the modes prescribed other than section 11(5), therefore, there is violation of provisions of section 13(1)(d) and therefore the assessee trust is not entitled to the benefit of section 11. 16. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the assessee trust has given a loan of ₹ 1,25,00,000/- to Sonhira Sahakari Sakhar Karkhana and has shown the same in the Balance sheet as Deposit-Sonhira Sahakari Sakhar Karkhana Ltd under the head investment . There is also no dispute to the fact that the assessee during the course of assessment proceedings has stated before the AO that they have received interest on the deposit and therefore provisions of section 13 do not attract. It was also stated before the AO that the same is to help the co-operative societies and not for any profit earning. It is the case of the revenue that by making deposits with the co- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the volunteers had collected the donations on behalf of the assessee trust. Therefore, there is no reason to hold that the assessee has not collected such donations. He accordingly submitted that there is no reason to treat such donations as revenue receipts and the same should be treated as capital receipts u/s.11(1)(d). 17.2 Without prejudice to the above the learned counsel for the assessee submitted that assuming but without admitting that such coupon donations are revenue receipts, still exemption u/s.11 should be allowed on these receipts since the same are applied for the objects of the trust or accumulated as per section 11(2). He submitted that once the exemption u/s.11 is allowed, even if such donations are treated as revenue receipts, it does not make any difference. He accordingly submitted that exemption u/s.11 should be allowed on these donations received through issue of coupons. 18. The learned DR on the other hand heavily relied on the order of the AO and the CIT(A). He submitted that the coupon donation receipts do not bear the name and address of the donors, the name of the recipient on behalf of the trust and any letter from the donor to substantiate th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
