TMI Blog2011 (8) TMI 805X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee except the resolution, which cannot be relied and it can be considered an afterthought - in view of clause (c) of Section 13(1) rendering the entire income of Trust or charitable institution on liable to tax even if only part of income is directed to be applied for the benefit of the specified persons - Decided against the assessee - Income Tax Appeal No. 132 of 2006 - - - Dated:- 17-8-2011 - Devi Prasad Singh, Satish Chandra, JJ. D.D. Chopra for the Appellant Neerav Chitravanshi for the Respondent JUDGEMENT Satish Chandra: Present appeal under Section 260-A of the Income Tax Act, 1961 has been filed by the department against the judgment and order dated 16.11.2005 passed by the Income Tax Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty for sanction of loan or sanction letter in this regard. So, the A.O. has made the addition of the interest of Rs.2,137/- accrued on the loan to Sri C.P. Singh. The A.O. also observed that the assessee had followed the provisions of Section 13(1) read with Section 13 (2) (a) of the Income Tax Act and added the net surplus of Rs.60,73,146/- as an income of the assessee-society. The CIT has confirmed the order passed by the A.O. However, in second appeal, the Tribunal has deleted the said additions and allowed the claim of the assessee. Not being satisfied, the department has filed the present appeal. With this background, Sri D. D. Chopra learned counsel for the appellant submits that as per the instruction No.1025 dated 15.11.1976, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of such income or property shall for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in sub-section (3).- Section 13(2)(a):- (a) if any part of the income or property of the trust or institution is, or continues to be, lent to any 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(3):- (3) The persons referred to in clause (c) of sub-section (1) of sub-section (2) are the following namely:- (a) the author of the trust or the founder of the institution; (b) any person who has made a substantial contribution to the trust or institution, [that is to say, any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Charities; 183 ITR 377 (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 on account of accrued interest only on exemption basis and the same may be deleted. On specific query from the Bench, he accepted that the assessee has charged the interest from other employees of educational institution. The assessee had duly accounted accrued interest on FDRs. He also submits that the assessee has wrongly denied the exemption under Section 11 primarily on the ground that it had contravened the provision of Sections 13(2); and Section 13 (1) (c) of the Act. Subclause (ii) of Section 13 (c) of the Act states that any part of income or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncluded that the appellant has given interest free loan to Sri C. P. Singh in violation of the provisions of Section 13 (1)(c) of the Income Tax Act and also giving loan without any adequate surety in violation of Section 13 (2)(a) of the Act. In these circumstances, we are of the view that the A.O. has rightly denied the exemption to the assessee under Section 11 of the I.T. Act. It may be mentioned that in view of clause (c) of Section 13(1) rendering the entire income of Trust or charitable institution on 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) of Section 13, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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