TMI Blog1984 (2) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... diate purpose of the association shall be the starting of a high school and to conduct and manage it. It shall be called the Devanga High School, Coimbatore. The assessee-trust \was running a proprietary school at Coimbatore. In the returns filed by the assessee for the assessment years 1977-78 to 1980-81, the assessee claimed exemption under section 10(22) of the Income-tax Act, 1961 (' the Act ') in respect of fees received from the primary school. With reference to the other income of the assessee, which was interest income, exemption was claimed under section 11 of the Act. The ITO allowed the exemption claimed under section 10(22) in respect of the school fees, But, with regard to the interest income which arose out of loans given by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,00,350 ---------------------- Essorpe Mills (P.) Ltd. 652 56,000 7,280 Shri P. Muruge- 6,04,752 san (HUF) 3,08,557 (Ind.) ------------- ---------------------- 16,705 9,13,309 ------------- ---------------------- 1979-80 Sivananda Mills Ltd. 636 75,000 11,250 Shri P. Jagathe Sivananda Mills esan (HUF) 4,27,507 Ltd. 637 5,000 750 (S. HUF) 3,07,056 ---------------------- 7,34,563 ---------------------- Essorpe Mills (P.) Ltd. 842 56,000 7,280 Shri P. Muruge San (HUF) 9,65,135 Essorpe Mills 843 7,000 910 (Ind.) 3,01,366 ------------- ---------------------- (P.) Ltd. 20,190 12,66,501 ------------- --------------------- 1980-81 Sivananda Mills Ltd. 636 75,000 11,250 Shri P. Jagathe esan (HUF) 3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person referred to in sub-section (3), for any period during the previous year without either adequate security or adequate interest or both. Section 13(1) states that the exemption provided under section 11 or section 12 of the Act shall not apply where any part of the income of the trust is used or applied directly or indirectly for the benefit of any person referred to in sub-section (3). Section 13(2)(h) also denies the exemption in a case where the funds of the trust or institution are, or continue to remain, invested in any concern in which any persons referred to in sub-section (3) has a substantial interest. 5. The appeal of the revenue is based on the prohibition contained in section 13(2)(h) even though the ITO applied the proh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the normal canon of construction that each item in the section is exclusive of the other items and facts which fall in one item could not also fall in another item. Apart from this general conception, it is also clear that a loan cannot be considered to be an investment. This is because in the case of a loan, there is no transfer of property and the person who gives the loan is only having a right to get back the money given on loan. On the other hand, in the case of an investment, there is conversion of the money invested into a different asset and the money can be recovered back only by liquidating that asset. Apart from this consideration, there is also a decision of the Delhi High Court in the case of CIT v. Eternal Science of Man's So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be recognised for the purpose of exempting the interest income under section 11 if the intention was to limit the meaning of security in that manner. On the other hand, the very phrase ' adequate security ' indicates that the Parliament intended to take in not only mortgages where the question of adequacy would not too large but also other forms of security. It is also significant that the Act itself refers to personal bond as a security in rule 88 of Schedule II which provides for recovery from surety which can be related only to rule 3 which provides for the attachment of the property of the defaulter when he furnishes security to the satisfaction of the TRO. In these circumstances we are satisfied that the word ' security ' in section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come which is admittedly exempt cannot be allowed to be taxed only on the ground that the assessee was not conscious of the exemption and had not claimed it in the return. It was then argued that the facts are to be investigated in each year to find out whether the institution existed for educational purposes and the income was incidental to the purpose of education. In these cases there can be no doubt about the first point when, admittedly, the only object of the trust was education and the institution existed in all the assessment years only for educational purposes. Even with regard to the income, it can be seen from the statement of expenditure and income that there was a sort of deficit financing in the sense that the primary school f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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