TMI Blog2011 (8) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... ritable institution liable to tax even if only part of income is directed to be applied for the benefit of the specified persons. The Legislature, however, also creates a fiction and enumerates in clauses (a) to (h) of sub-section (2) a list of circumstances in which the income shall be deemed to have been used or applied for the benefit of the specified persons - in this case beneficiary is not covered by the list of persons mentioned in section 13 (3) of the Act - Decided in favour of Revenue. - ITA NO. 206 OF 2006 - - - Dated:- 17-8-2011 - DEVI PRASAD SINGH AND SATISH CHANDRA, JJ. D.D. Chopra for the Appellant. Neerav Chitravanshi for the Respondent. JUDGEMENT Dr. Satish Chandra, J. Present appeal under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is following the mercantile system of accounting but no accrued interest on the loan had been accounted for the assessment year 1999-2000; 2000-2001. Thus, the A.O. concluded that the funds of society were diverted for personal benefits of the Treasurer and, consequently, exemption claimed under section 11 was denied to the assessee-society in view of the provisions contained in section 13(1)(c) and 13 (2) (a). The assessee filed an appeal before the First Appellate Authority who has confirmed the order of the A.O. Being aggrieved, the assessee has filed an appeal before the Tribunal who has allowed the claim of the assessee. Not being satisfied, the department has filed the present appeal. 3. With this background, Sri D. D. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the A.O. that in the instant case, interest @10% is to be charged after recovery of principal amount. It has also been provided that under no circumstances, the liability of interest shall be waived. Accordingly, the loan of Rs. 2,50,000/- was sanctioned to Sri Virendra Singh. It is wrong to conclude that loan was given interest free. He relied on the ratio laid down in the case of CIT v. Polisetty Somasundaram Charities [1990] 183 ITR 377/53 Taxman 459 (A.P.). He further submits that the payment of loan cannot be held to be hit by section 13 regarding the claim of exemption. The A.O. has wrongly made the addition of Rs. 29,250/- on account of accrued interest only on exemption basis and the same may be deleted. 4. On specific quer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of the person referred to in Section 13(3) were mentioned. The relevant provisions in the Income-tax Act are as under: Section 13(1)(c):- "(c) In the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof- (i) If such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income ensures, or (ii) If any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied." Section 13(2):- "(2) Without prejudice to the generality of the provisions of clause (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of accounts of the assessee as well as in the audit report but the same was not reflected in any document even subsequent document filed by the assessee except the resolution, which cannot be relied and it can be considered an afterthought. In the instant case, the assessee was liable to show this interest as income in the books of account as per mercantile system of accounting. 7. The assessee has also claimed that a sale deed of the property in the name of Sri Ram Karan Verma was deposited as security. So, the provision of section 13(1)(2)(a) is not attracted. However, the assessee has failed to explain that why security, as claimed, was provided that of Sri Ram Karan Verma instead of Sri Virendra Singh himself when he was having asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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