2023 (5) TMI 1051 - AT - Income Tax

Exemption u/s 11 - Assessment of trust - assessee has paid interest to three financial institutions - AO has disallowed the on the premise that the interest rate is very high& the loan taken has been utilized for the payment of earlier loans leading to unnecessary/excess interest & running in loss - HELD THAT:- The funds of the assessee is not utilized for the objectives of the institution, but utilized for repayment of earlier loan and interest. On perusal of details it is noticed that the SBI has sanctioned loan to the assessee at 9.25% p.a. on monthly basis. The bank has granted loan for the specific purpose i.e. land development expenses, Building & amenities & computer etc. for Rs. 10.80 Crores - Assessee has shown application of income under the capital expenditure, it shows that the bank loans were utilized for the designated purpose. In view of this, interest paid to the bank is allowed.

Assessee has paid interest to HDFC Bank Ltd. and Tata Motors Ltd. for the vehicle loan and the use of the vehicles have not been doubted by any of the lower authorities, therefore, this interest is also to be allowed.

For the balance of the interest paid to others lenders/depositors, the AO is directed to examine whether the loans were utilized for the 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.

Disallowance of remuneration paid to the Secretary - Whether nature of duties performed by the Secretary cum Principal was justified who was carrying out various business activities of the trust? - HELD THAT:- CIT(A) has rightly observed that the nature of work undertaken by the Secretary-cum-Principal are common in other institutions also & it is routine work. CIT(A) while deciding the issue verified through online information that the average pay is Rs.10.98 lakhs per year as of 2020, whereas the case of the assessee relates to AY 2010-11 i.e., 10 years back, where the remuneration must be much lower.

Assessee’s contention is that the recipient has paid due taxes on the entire amount of Rs.24 lakhs and produced computation of income along with the copy of acknowledgment of return and submitted that there is no loss to the revenue.This aspect has not been examined by the lower authorities. Therefore, we remit this issue to the AO for the purpose of verification as to whether there is any loss to the Revenue or not and decide the issue as per law. This ground is allowed for statistical purposes.

Application of income for repayment of loan - HELD THAT:- As 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 institution. This issue has not been examined by the AO as well as CIT(A) in the light of the judgement relied by the ld. DR. For this limited purpose of verification, we remit this issue to the AO to examine the same and decide this issue as per law. AO is directed not to grant double benefit to the assessee. This ground is allowed for statistical purposes.