2014 (3) TMI 760 - DELHI HIGH COURT

Eligibility for exemption u/s 11 of the Act – Violation of section 13(1)(c)(ii) r.w. section 13(3) of the Act - Whether the assessee was ineligible for the exemption u/s 11 on the ground that there was contravention of the provisions of Section 13(1)(c)(ii) read with Section 13(3) of the Act – Held that:- It unusual that the assessee would part with 95% of the price of the land without even taking possession of the same and would wait for such a long period without getting the sale registered in its name - it unusual that it was on the last day of the financial year 2004-05 that the assessee claimed to have written to APIL cancelling the deal which was accepted by the letter dated 21.04.2005 - even though APIL agreed on 21.04.2005 to cancel the agreements, the copy of the ledger account of APIL in the books of the assessee did not reveal any corresponding entry made on the date - the entry reflecting the cancellation of the agreement to sell was passed in the accounts only on 31.03.2006 - even after cancellation of the deal two cheques for Rs.80 lakhs and Rs.75 lakhs were given to APIL on 29.11.2005 and 13.12.2005 for which there was no explanation – Relying upon Kanahya Lal Punj Charitable Trust Vs. Director of Income Tax (Exemptions) (Delhi) [2007 (5) TMI 166 - HIGH COURT, DELHI] - the findings of the Tribunal on this aspect cannot be upheld - in advancing the amount of Rs.8,60,16,000/- to APIL the assessee committed a violation of the provisions of Section 13(1)(c)(ii) read with Section 13(2) and Section 13(3) of the Act - The trust was accordingly not eligible for the exemption under Section 11 of the Act for both the years - Decided in favour of revenue.

Advances made to society - Whether the advance made to Charanjiv Educational Society can be said to be in violation of the provisions – Held that:- The relevant documentary evidence is on record and has been noticed and relied upon by the Tribunal - it is not possible to question the correctness of the view taken by the Tribunal - thus, denial of the exemption u/s 11 on the ground that by advancing monies to Charanjiv Educational Society the assessee committed a violation of Section 13(1)(c)(ii) read with Section 13(2) and Section 13(3) cannot be accepted – The order of the Tribunal upheld – Decided against Revenue.

Applicability of section 68 of the Act – Donations received – Held that:- The Tribunal was of the view that it is not possible to view the transaction with suspicion merely because some other entity, which owes money to Jagjit Singh, had made the donation on behalf of Jagjit Singh in discharge of the debt to Jagjit Singh - the money has actually been given to the trust which has also used it – the findings recorded by the Tribunal cannot be said to be perverse - Similarly in respect of the donation received from Piyush Jain, the Tribunal has noticed that the assessee was able to establish the identity of the donor and the source of the payment which was through account payee cheque, and give the PAN number and bank details - These details were not inquired into by the assessing officer and nothing adverse was found – thus, the order fo the Tribunal upheld – Decided against Revenue.

Claim of depreciation – Held that:- The Tribunal has overlooked that the cost of the assets has already been allowed as a deduction as application of income, as held by the CIT (Appeals) as well as the assessing officer - allowing depreciation in respect of assets, the cost of which was earlier allowed as deduction as application of income of the trust, would actually amount to double deduction – Relying upon Escorts Ltd. vs. UOI [1992 (10) TMI 1 - SUPREME Court] - where the deduction of the cost of the asset was allowed under Section 35(1) as capital expenditure incurred on scientific research and, therefore, no deduction for depreciation on the very same assets was held allowable under general principles of taxation, as it would amount to double deduction – thus, the Tribunal was no justified in directing the allowance of depreciation – Decided in favour of Revenue.