TMI Blog2012 (6) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... and interest from APIL - APIL contended that actual payments made were more than rent and interest and proper entries not made in books of trust - Held that:- What is due in books from AIPL was not money lent or advanced to APIL. It was caused by unadjusted balances of interest on debts already discharged prior to 2001. In fact as at 31.3.2006, APIL had a credit balance of more than Rs. 80 lakhs - No merit in the ground of Revenue Advance to Charanjiv Educational Society not registered u/s 12A, meant for establishing an educational institution at Chhattisgarh - Held that:- Assessee in furtherance of its objects formed this charitable society with same objects and trustees and incurred the expenses which are shown as advance to CEC. In our view, even if the same amount was donated to CEC in place of advance, in that eventuality also it would have been allowed as application to objects. Corpus donations received from HCL & Blue bird - benefit u/s 11(1)(d) - Held that:- Since assesse did not violate any provisions of Sec 13, besides it emerges from the record that both the donors confirmed the corpus donations. CIT(A) was right in deleting these additions. Unexplained credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciate that without allowing the requested opportunity to the appellant to cross examine the party, the said evidence could not be used as evidence in law. 1.2. Without prejudice, even otherwise, the alleged assertion of the party in the statement denying the fact of making the donation stood vitiated by other evidence on record, the party himself not disputing the donation to the appellant Trust of his own funds and under his own direction. 2. That on the law, facts and in the circumstances of the case, the learned CIT(Appeals) has erred in sustaining the addition of Rs. 25 lacs as corpus donation received by means of account payee cheque from Shri Piyush Jain in utter disregard to the confirmatory letter dated 24-02-2006 forwarding the donation containing details of payment of cheque and details of bank account number and branch as also the appellant s request for summoning the party and the requisite information from his bank account. 3. That on the law, facts and in the circumstances of the case, the learned CIT(Appeals) has erred in treating the development fund charges of Rs. 59,58,384/- recovered during the year and directly credited to the development fund i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on the facts in the circumstances of the case, the ld. CIT(A) was correct in holding that advances made by the assessee to Charanjiv Educational Society were meant for establishing an educational institution at Chhattisgarh particularly when Charanjiv Educational Society was not registered u/s 12A of the Act. 5. Whether on the facts in the circumstances of the case, the ld. CIT(A) was correct in holding that there was no violation of the provisions of Section 13(1)(c) read with section 13(2) of the Income-tax Act, 1961, particularly when an amount of more than Rs. 2 crores was continued to be lent to Charanjiv Educational Society during the relevant accounting period and a sum of Rs. 16,55,448/- remained payable on 31- 03-06. 6. Whether on the facts in the circumstances of the case, the ld. CIT(A) was correct in holding that corpus donation received by the assessee from M/s HCL Corporation Ltd. and M/s Blue Bird Electrotrading Ltd. amounting respectively to Rs. 15,00,000/- and Rs. 13,00,000/- are eligible for benefit u/s 11(1)(d) of the Income Tax Act, 1961. 7. The Appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned CIT(A) has erred in confirming the addition of Rs. 59,06,750/- recovered by the Appellant Trust towards development fund charges directly crediting the same to the development fund in the Balance Sheet as corpus of the trust in utter disregard to the fact that the receipts were embedded at source with the obligation to apply the same solely for development activities and welfare of the students. 4. That on the law, facts and in the circumstances of the case, the learned CIT(A) has erred in confirming the addition of Rs. 25,00,000/-u/s 68 received as donation from M/s Kuberswamy Ashutosh Consultants (P) Limited. He, inter alia, failed to consider and appreciate the fact that in response to summons u/s 131, the party had duly appeared through his representative and not only confirmed the donation and also filed copy of its bank account in support. 5. That on the law, facts and in the circumstances of the case, the learned CIT(A) has erred in confirming the addition of Rs. 9,06,000/-u/s 68 received as donation from M/s Sun Systems Institute of Information Technology (P) Limited by not properly and judiciously appreciating the evidence adduced before him. 6. That the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist of fixed assets and in the books of APIL as advances received. The books are duly audited in time and all relevant statements of accounts were filed along with returns of income of both the concerns for A.Y. 2005-06. 2.3. In April 2005 the assessee cancelled the sale agreement and the moneys paid to APIL by way of sale consideration were returned to APIL by assessee in instalments as per the copy of a/c placed on record. It may be pertinent to mention that cancellation charges @ 10% were not levied by APIL from the assessee and the entire amount of Rs. 8,60,16,000/- was thereby returned to the assessee as per the copy of a/c on record. 2.4. During the course of assessment proceedings AO doubted the genuineness of the transaction of agreement to sell by various observations which are summarized as under: i) The agreements to sell were not registered. ii) No registered sale deed was executed for more than one year after the agreements of sale and if the transactions were genuinely ale transactions, there was no explanation why the ale deeds are not executed for such a long duration. iii) No evidence for taking possession of land ha been furnished. iv) APIL has submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1.5 crore was made directly by DLF Universal Ltd. to assessee by way of this pay order. He further stated that there was no specific direction about its being corpus donation. AO made this addition of Rs.1.5 crore as income of the assessee trust from undisclosed sources u/s 68 of the I.T. Act. 3.2. AO further found that assessee has claimed a further corpus donation of Rs. 25 lacs received from one Shri Piyush Jain by a/c payee cheque. On assessee s request summons u/s 131 were issued on him who did not appear. Assessee thereafter vide letter dated 26-12-2008 submitted that Piyush Jain was abroad and therefore he could not be produced. AO, however, held that the donation was unexplained and accorded added this amount also u/s 68 of the Act. 3.3. Assessee further received corpus donation of Rs. 15,00,000/- from HCL Corporation Ltd. The same was also added in the hands of assessee by observing that since benefits of secs. 11 12 were denied on account of violation of sec. 13 of the Act, the assessee could not be given the benefit of sec. 11(1)(d) of the Act. 3.4. The other corpus donation of Rs. 13 lacs was received by assessee from Blue Bird Electro trading Ltd. and on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corpn. RS. 15 lacs and Blue bird electro Corpn Rs 13 lacs. 3.9. Aggrieved against the order of AO, assessee preferred 1st appeal before CIT(A). Detailed submission along with evidence were filed which are on the paper book. 4. CIT(A), after considering the assessee s explanation available on record, held that there was no violation of provisions of sec. 13(1)(c) read with sec. 13(2) and that the judgment of Hon ble Delhi High Court in the case of Kanahya Lal Punj Charitable Trust (supra) was not applicable to assessee s case by following observations: 5. I have perused and considered the assessment order, the submissions of the appellant as also the relevant evidenced adduced. The facts that cannot be denied are:- That the plots purchased were earmarked in the sanctioned development plants for high school and primary school and for dispensary etc. The appellant was already engaged in running an educational institution and in the absence of any cogent evidence to the contrary, the intention of purchasing the plots cannot be doubted. Further, there were simultaneous sale agreements executed between the trust and the APIL setting out the detailed clauses restricting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . An objection has also been taken that agreement to sell was cancelled in April 2005, the final adjustment regarding the cancellation was made by the appellant in its books on 31-3-2006 i.e. within the same financial year. It was explained by the appellant that it is only at the time of closing of books of account when all accounts are scrutinized and finalized and the balance lying in fixed assets account representing the cost of the plots and amounts lying in Land Refund Due Account and Land Amount payable Account were consolidated and squared up by transfer thereof to the current account of APIL It is further submitted that these consolidating entries having been passed during the same accounting year giving full narration of cancellation particulars etc. could not give rise to any adverse inference about the genuineness of the transaction and these adjustments are much before the impugned assessment was taken up. The appellant further stated that there were further scores of adjustment entries which have been finally adjusted at the time of closing of books of account. 5.2. In the light of the totality of the circumstances and evidence available the fat that adjustment ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of charging any interest or security in respect of this transaction does not arise. I, therefore, hold that there is no violation of provisions of section 13(1)(c). This ground is decided in favour of the appellant. 5. Apropos ground 2, raised before CIT(A) about interest and rent receivable from APIL amounting to Rs 51,59,370/- assessee submitted that: i) The amount did not represent any loan and the interest pertains prior to 2001. ii) Assessee had running account with APIL and their interest free credit balance far exceeded the above outstanding. iii) APIL as a good well gesture had waived the right of enforcing 10% plot cancellation charges iv Reliance was placed on ITAT judgment in the case of Kishore Trust v ADI 59 ITD 137 and CIT v Nachimuthu Indl. Orgn. 138 ITR 588 (Mad.) , holding that non collection of rent or interest can not be termed as a benefit. 5.1. CIT(A) after considering the facts and circumstances acceded to assessees plea and deleted the addition. 6. Apropos assesses ground 3 about debit balance of Rs. 16,55,448/- in the name of Chiranjiv educational society, Chhatisgarh ( CES ). Assessee stated the facts as: a) The appellant trust decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hest of the appellant trust was to be made good to the Society and was in fact made good by the appellant trust on closure of operations by Chiranjiv Educational Society in 2008. Thus this was not a loan or advance but finances provided by way of assistance for the sole purpose of establishment of educational institution. These were in the nature of trust funds provided to the society for educational purposes for which the accounts were to be rendered. As stated earlier, these fund were provided not for any personal benefit by the appellant trust or its trustees. These funds were used by the appellant trust for effectuating its objects through the medium of Chiranjiv Educational Society. There was no personal benefits derived by the society or the trust. The objects of the appellant trust and the society being charitable, it was open under the law for the appellant trust even to make the donations of the above amounts to the society which would be regarded as application of income of the trust. This has been so held in various decisions. As a matter of fat, there is no prohibition under the Act in this behalf. There is also no requirement that the other charitable trust should be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed thereon by the AO. It was submitted that principle of double deduction would not apply to the additions of fixed assets. As regard the technical objection of the AO that the claim should have been made through revised return and not through a letter, my attention has been drawn to the provisions of Explanation 5 to Section 32(1) inserted w.e.f. 1-2-2002 which provides that the depreciation shall be allowed under the provisions of sub-section, whether or not the assessee has claimed the deduction in computing, its total income. Therefore, irrespective of whether claim was made in the return or later on through a letter, the AO was statutorily bound to allow the depreciation. I find force in the arguments in the case of the appellant trust. Therefore, if withdrawal of exemption u/s 11 is upheld, the AO would be bound to allow depreciation. Sine however the withdrawal of exemption u/s 11 is not being upheld by me as per my decision on the earlier grounds as also the later grounds, the appellant s claim for deduction of the whole cost as application of income would be allowable and the AO is directed accordingly. 8. Apropos ground 5 about development charges of Rs. 59,58,384 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement however later he changed his stand and did not deny his signature on confirmation. iv) Assessee again requested for copies of relevant documents and cross examination of S Jagjiy Singh which was not provided. Asessee relied on following case laws : - (1980) 125 ITR 713 (SC) - (2007) 106 TTJ (Del.) - (1981) 127 ITR 815 - (2006) 98 ITD 242. v) Assessee as an alternative contention pleaded that without prejudice, even if for a moment the above legal submissions are ignored, there is no occasion for making the addition u/s 68 of the Income-tax Act inasmuch as the identity of the party as also the name of the party stand established. The fact that he confirmed that the payment was made under his direction fully satisfied the ingredients of section 68. The appellant trust was not a party to any agreement or arrangement between the donor and DLF Universal Limited nor there was any evidence that the trust exerted any pressure on the donor. As such the addition is wholly unwarranted and deserves to be deleted. vi) Assessee in fine argued before the CIT(A) that it had filed a confirmation from the party confirming the payment of Rs. 1.5 crores towards corpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the party s statement was furnished to the appellant. Clause 3 and 4 whereof were not at all considered by the learned AO. Clause 4 of the sale deed which was executed between S. Jagjist Singh others in favour of DLF Universal Limited refers as under: A sum of Rs. 1.5 crores which has been paid as per direction of the vendors to M/s Chiranjiv Charitable Trust at New Delhi vide pay order no. 922790 dated 28-5-2005 drawn on Citi Bank. 9.1. The registered sale deed therefore itself states that this payment was made to Chiranjiv Charitable Trust as per the direction of the party. In the sale deed, apart from mention of payment of other amounts aggregating to over Rs. 13 crores there is a mention of this payment of Rs. 1.5 crores having been paid to Chiranjiv Charitable Trust as per direction of the party. 9.2. Ld. counsel submitted that despite specific requests, no right of cross examination was allowed by the AO to the appellant. Further the facts that a letter was obtained by Addl. Director of Income-tax, Ludhiana from the party were never informed or confronted to the appellant. It was, therefore, vehemently contended that there was complete violation of the principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount has been rightly added back u/s 68 of the IT Act by the AO and his action is upheld. The appellant fails on this ground. 10. Apropos ground 7 of the assessee before CIT(A) in respect of corpus donation of Rs 25/- from Piyush Jain, following facts and arguments were submitted: The appellant trust received a donation of Rs. 25 lacs as corpus donation by way of account payee cheuqe from one Shri Piyush Jain was duly filed. Copy of account payee cheque signed by Shri Piyush Jain confirmation drawn on Standard Chartered Grindlays Bank was also filed by the appellant. The learned AO, however, required the appellant to produce Shri Piyush Jain to verify the genuineness of the transaction. Summons were issued to him u/s 131 and Mr. Piyush Jain failed to appear in reply to the summons. The AO asked the assessee in case Shri Piyush Jain was not produced to confirm the genuineness of the transaction, this amount of Rs. 25 lacs shall be treated as income of the appellant. The appellant, however, informed the AO vide letter dated 26-12-2008 that Shri Piyush Jain was abroad and could not be produced before him. Mr. Piyush Jainwas now abroad and his father was living at the same addr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the year. Therefore, the addition made by the AO on this count is also confirmed. 11. Apropos ground no. 8 i.e. corpus donation of RS. 15 lacs and 13 lacs from HCL Corpn and Blue Bird electro Trading. AO summoned these parties who conformed and verified these corpus donations. Despite there confirmation AO proceeded to make these additions on the ground that benefit u/s 11(1)(d) was denied. 11.1. CIT(A) deleted the additions by following observations: 12.1. I have considered the facts of the case and submissions of the appellant. The AO is correct in holding that if exemption u/s 11 is denied then this donation cannot be excluded u/s 11(1)(d). Denial of exemption is not being upheld by me, this addition would as a consequence stand deleted. 12. Apropos assesses ground no 9, about depreciation, CIT(A) decided the in alternative terms by following observations: 13. Ground no. 9 being the submission of the appellant that even assuming that the benefit of exemption denied to the appellant, the AO has erred in determining the taxable income of Rs. 4,96,58,406/-. He should have computed the income under different heads as per normal provisions of the Incometax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its business operations. Both the entities operate from the same address. To utilize the idle funds of trust they devised a scheme to divert the trust funds by way of interest free advances to APIL. The explanation about there being agreement to purchase plots is only an afterthought. It is evident from the ambivalent explanations of the assessee on the issue of possession of land. By letter date. 26-11-2008 to AO, assessee contended that possession of land was not taken whereas by letter dated 18-12-08 it was submitted that possession of land was taken which was surrendered on cancellation of the deal. Both the entities have relationship as specified by sec. 13(1)(c) as they have common trustees and directors. AO by various observations in page 4 5 of his order, has held the alleged transaction of sale of land as an afterthought and held that an amount of more than 8 crores has been advanced by assessee trust without any security and interest to APIL, which amounts to clear violation of provisions of sec. 13(1)(c) 13(2). It is further pleaded that AO has rightly applied the ratio of Delhi High Court judgment in the case of Kanhaiyalal Punj charitable trust Vs. DIT(E), Delhi 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in this behalf. (ix) Management and auditors of both the entities are practically same, in such a case the accounting entries of both should have matched. Surprisingly assessee reflects this entry as acquisition of asset and APIL as advances for sale of plots. (x) If deal was cancelled the moneys advanced by assessee should have been returned on the contrary instead after cancellation two more cheques of Rs. 80 lacs Rs 75 lacs were advanced by assessee. (xi) Thus there was no transaction as such deal for purchase of plots, possession and cancellation of plots. The advances were for the benefit of group business entity namely APIL ex gratia, it is in clear violation of provisions of sec 13. AO was right in invoking the same, his order on the issue deserves to be upheld. (xii) The theory and transactions as proposed by assessee are colourable devise, it is imperative that while deciding the issues in income tax substance shall take precedence over the form. (xiii) Reliance is placed on: - Delhi High Court in the case of Kanahya Lal Punj Charitable Trust (297 ITR 66); - Mcdowells Co. 154 ITR 148 (SC); - Supreme Court in Bharat Diamonds Bourse (259 ITR 280) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Ansal Vihar for the objects of the trust, incorporated in a/cs of relevant years. ii) Ansal Properties and Infrastructure Limited is a concern covered u/s 13(3)(e) of the I.T. Act. ii) This is admitted position. iii) Payment supposedly made for purchase of land. iii) The payment was in fact made for purchase of land. The use of the expression supposedly is without any basis. iv) The agreements to sell were entered into between the assessee and Ansal Properties and Infrastructure Limited on 18.3.2004 and 24.3.2004. iv) Facts stated are correct. There are part of record of the Assessing Officer and are placed at Pg. 25-106/PB. v) The total amount to be paid by the assessee to Ansal Properties and Infrastructure Limited as per the agreement to sell was Rs. 8,60,16,000 out of which 95% i.e. Rs. 8,17,15,200 was claimed to have been paid by 31.3.2004. v) The payment of this amount was actually made by cheques and it is duly reflected in the contemporary account for the F. Y. 2003-04, both in the books of Trust as well as AIPL. vi) The agreement to sell was not registered. vi) This is correct. The agreements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2008. (pgs. 135- 153/PB). Note 6 of schedule 17 at Pg. 151 makes it clear that AIPL recognized its income only on execution of sale deeds. AIPL s Explanation is at P.137/PB. This is ignored by the AO, but CIT(A) takes note of it. ix) The amount of more than Rs. 8 crore continued to be with Ansal Properties and Infrastructure Limited for the whole of the financial year 2004-05 without any further progress in transaction. ix) The assessee had cancelled the sale agreements unilaterally for its own reasons as given in its letter dt. 31.3.2005. The acceptance letter from AIPL dt. 11.4.2005 clearly states that the money shall be refunded in due course. There is no requirement for immediate refund of price paid by vendee on cancellation of contract by the letter. On the other hand, the contract provides forfeit of 10% of the price in such a contingency. This aspect required to be sorted out between the two parties. (Clause 20 at 36/PB). The refund was fully paid and settled before the close of the Financial Year 2003-04. In fact there was credit balance in favour of AIPL at the end of the year. x) No sale deed was signed for more than one year after the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfused loan with debt . No money was advanced by the assessee to AIPL. No loan was given by the assessee and no amount was borrowed by AIPL from the assessee. It was payment for purchase of plots of land from AIPL. Due to cancellation of the agreements a debt had come into existence in favour of the assessee which was collected before the end of the Financial Year. As money was not lent by the assessee, the transaction is not covered by section 13(2)(a). Please see Calcutta Tribunal decision in Kishore Trust (59 ITD 137) Shree Ram Mills Ltd. (23 ITR 120 SC) and CIT Vs. Nachimuthu Industrial Association 138 ITR 585 (Mad.) . xvi) Even after the cancellation of the deal, two cheques of Rs. 80,00,000/- and Rs. 75,00,000/- were given to Ansal Properties and Infrastructure on 29.11.2005 and 13.12.2005 for which no explanation has been furnished. xvi) These passing observations are made by the AO unilaterally without giving the assessee any opportunity. However, detailed explanation was furnished to the CIT(A) who has discussed it in para 5.2 of his order and has accepted the explanation. The findings of fact by the CIT(A) has not been questioned by the revenue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the assessee paid purchase money, and not advance of earnest money, being 95 percent of the agreed consideration, under duly signed sale agreements duly signed. 14.7. The assessee filed its return in time for the A.Y. 2004-05 on 18.10.2004 together with audited copy of balance sheet and the statement of income clearly disclosing the acquisition of impugned plots of land and some other fixed assets amounting to Rs. 9,31,81,364/- The schedule of Fixed Assets clearly shows that the assessee had acquired lands worth Rs. 8,66,78,466/- during F.Y. 2003-04. The statement of income filed along with the return also disclosed addition of Rs. 93,181,364 to fixed assets , which figures includes Rs. 8,66,78,466/-. Considering this statutory and contemporaneous evidence which became part of the records with the Assessing Officer, much before the date of cancellation of the contracts, how the AO has held the explanation as afterthought is beyond comprehension. Hence, the allegation that the whole transaction was a colorable one or that it was a story or it was an afterthought is baseless. The land was acquired in March 2004 which was duly disclosed in the audited balance sheet and the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TP Act ld counsel contends that the contentions of the Ld. CIT(DR) are not tenable for the following reasons:- i) S. 49 of the Registration Act reads as under:- Effect of non-registration of documents required to be registered- No document "required by Sec. 17 (or by any provision of the Transfer of Property Act, 1882 (IV of 1882) to be registered shall- (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power. Unless it has been registered: [Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (IV of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (1 of 1877) (***) or as evidence of any collateral transaction not required to be effected by registered instrument. In view of the proviso to that section, the courts have always held that an unregistered document which is required to be registered under Sec. 20 of the Registration Act, it can be admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t treat the vendee being in address possession, the courts will have to accept the dominion of the vendee. It may repeated again that the vendor; namely, AIPL clearly admitted this position in its letter dt. 26.12.2008 addressed to the A.O. (Pl. see Pgs. 135-146 of the Paper Book). The assessee postponed the payment of stamp duty for considering the relationship between the two parties, the assessee did not have to apprehend hostility from AIPL. vii) It is trite law that the tax authorities as also the Appellate Tribunal are not fettered by technical rules of evidence. viii) What was paid by the assessee trust to AIPL is purchase money and not advance by way of earnest money. On cancellation of the contract in April 2005, the amount payable by AIPL is not a loan from the assessee trust. But it is a trade debt. (Pl. see 23 ITR 120 SC , infra). In the relevant previous year the AIPL had credit opening balance of Rs. 4.4 crores in the current account in the books of the Trust. AIPL fully settled before the end of the relevant Financial Year ending 31.3.2006 (Ref Pg. 132-134/ PB). In fact, it had closing credit balance of Rs. 88 lakhs in the books of the trust. It must be borne in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts being due. For instance, rent of FY.96-97 was already paid to the trust, but it still shown as receivable in the books of the trust. Similarly, there other cheques amounting to Rs. 20 lakhs which remained unadjusted. Thus the mistaken posting of entries by accounting staff, which are duly reconciled by assessee cannot be so treated to hold the entire transaction as colorable devise. 15.4. CIT(A) held that S.13(1)(c) read with S.13(2) (a) are not applicable to the facts of this case as what is due from AIPL is not money lent or advanced to AIPL, but unadjusted balances of interest on debts already discharged prior to 2001. Hence, the proposition applicable to the amounts receivable on account of cancellation of sale agreements by the assessee is also applicable to the amount of interest receivable and not yet received. Further, at the beginning of the relevant financial year, AIPL had a credit balance of more than Rs. 4 crores. Even at the end of the year, i.e., 31.3.2006, AIPL had a credit balance of more than Rs. 80 lakhs. 15.5. As regard rent receivable , the A.O. has without any reason ignored the explanation that the payment of interest was wrongly credited to dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich any person referred to in sub-clause (3) has a substantial interest. The conditions referred to in clause (h) are cumulative, all of which have to be satisfied before the deeming provision in sub-section (2) could be attracted, and the assessee held to have used or applied the income of the trust for the benefit of a person referred to in sub-section (3). The expression "invest" in section 13(2)(h) connotes a positive act on the part of the trust whereby the funds of the trust are laid out or committed in any particular property or business or transaction with the object of earning a profit or financial advantage or return. The retention of profits of a trust in a firm in which the trust is a partner or delayed withdrawal of profits from the firm would not constitute investment. It is not a case where the retained amount of outstanding interest, if any, was the amount lent by the Trust so as to attract section 13(2)(a). As explained by the Supreme Court in Shree Ram Mills Ltd. case (supra): The next question is about the managing agency commission. Under the Articles of Agreement entered into between the assessee and its managing agents the agents were to be paid a ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in section 13(3)(e) of the Act. According to Concise Oxford Dictionary concern as a noun means: 1) worry, anxiety. 2 a matter of interest or importance, 3. A business According to Webster Encyclopedia Dictionary, concern contextually means: a commercial or manufacturing company or establishment. The objects of Chhattisgarh Society and its Rules make it clear that its activities do not constitute business as there is total absence of profit motive. Please see Third Member Special Bench in Bhartiya Janata Party (258 ITR 257, AT) vii) The meaning of the word concern in S. 13(3)(e) has been explained by the legislature itself in the Explanation 3 to Section 13. The said Explanation deems a person to have a substantial interest in a concern if he is entitled to twenty percents profits of the such concern . The section read as a whole makes it clear that only such a business undertaking which is set up with a view to earn profits would mean concern for the purpose of S.13 (3) (e). viii) A bare perusal of the memorandum and rules of Chhattisgarh Society make it clear that all the trustees of that Society put together are not entitled to even a single penny, let al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to Sec. 13(3)(b) read with section 13(2)(h) of the Act., A loan (which is recoverable and which is returned) can never he said to be contribution . c) Bombay High court had no occasion to consider the applicability of Explanation 3 to section 13. indeed, it was not even referred. This decision therefore is not applicable to the facts of the present case. 16.1 There is no dispute that the amount was advanced out of exempt income brought forward from earlier years available with the assessee trust. There is also no dispute that the assessee trust has never set apart funds and claimed exemption thereon u/s.11(a) read with section 11(2) of the Act. Therefore provisions of section 11(3) are also not applicable. In such a case the advance is also covered by the special treatment granted under CBDT Instruction no.1132 dt.5-1-1978 extracted in CIT v. Sarladevi Sarabhai Trust (No.2) (172 ITR 698 Guj.) at 709 of the Report. The said instruction clearly states where the payment by one charitable to another for utilization by the donee trust towards its charitable objects is proper application of income for charitable purpose . In the fact that the Chattisgarh Trust spent th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which no interest is charged. Therefore one has to dispassionately ascertain the facts about the impugned advances of about 8 crores for purchase of plots ; the alleged agreements for sale of plots; cancellation thereof and as a consequence violation of provisions of sec. 13(1)(c) and 13 (2) as contemplated by AO, if any.. 19.2. The following facts clearly emerge from the record: (i) Assessee is a charitable trust registered u/s 12A since 28-5-76. It has been regularly filing it s returns of income on the basis of duly audited accounts. It is already running reputed educational institutions and in furtherance of its objects, it is endeavoring to open more educational institutions. This is clear from the fact that it attempted to open a university at Raipur, Chhatisgarh. Therefore it s effort to look for an opportunity in opening school at Delhi cannot be doubted in ordinary course. (ii) APIL is a group concern owning reserved plots of land for educational institutions at Palam Vihar, New Delhi. It has been of continuous financial help to assessee which is evident from the fact that by and large had interest free credit balance with the assessee in past several years. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no change in it s objects. It carried on educational institutions and intended to further its objects by opening new schools and a university. (b) APIL owned reserved educational plots and it s agreements to sale of such reserved plots with group educational trust do not carry any element of primary suspicion. (c) The agreements are being held as colorable devise as they are not registered and therefore, cannot be considered evidence. Assuming even that agreements cannot be produced as evidence; the contemporaneous records for AY 2004-05; 2005-2006; bank accounts and other relevant evidence does support the explanation of the assessee. Besides its trite law that an evidence which may not be admissible in court of law can be admissible for income tax purposes. This is so as in income-tax proceedings there is no lis or adversarial proceedings between assessee and department. Income tax proceedings are not fettered by technical rules of evidence and evidence which has bearing on the subject matter and is primarily relied can be considered in income tax proceedings. The agreements and other record is complimentary to each other, corroborative to each other. In our considered view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foregoings we see no reason to interfere with the finding of ld. CIT(A) which have been arrived at after due consideration of evidence, record, explanations and case laws mentioned above. Revenues reliance on the case of Kanhaya Lal Punj Trust (supra) has been rightly distinguished and held to be not applicable to the assesses case in view of the contemporaneous evidence. 19.4. This ground of the revenue is dismissed. 20. Coming to the revenue ground about alleged non collection of rent and interest from APIL. The principal amounts of advances were already re paid by APIL to the assessee prior to 31.3.2001. only interest receivable has been carried forward in the books of the trust. AIPL in response to summons u/s. 131 of the Act, explained the AO by letter 26.12.2008 that due to mistake of erstwhile accountants proper entries were not made, actually payments made were more than rent and interest. For instance, rent of FY.96-97 was already paid to the trust, but it was shown as receivable in the books of the trust. Similarly three other cheques amounting to Rs. 20 lakhs remained unadjusted. These mistaken posting were duly reconciled by assessee. 20.1. In our considered view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment copy of his original confirmation accepting corpus donation was not confronted by 24.2. In our considered view in the first place such addition cannot be made u/s 68 as unexplained cash credit a we have held that there is no violation of Sec. 13. Besides, the name of creditor and identity is accepted by AO. The transaction is through DLF pay order which was donated to assessee, on behalf of JS, to resolve a land dispute. Therefore genuineness and creditworthiness is proved. Thus legally this addition can not be made u/s 68. 24.3. That leaves questions- whether it is a donation, if so voluntary and for corpus. If some parties resolve a dispute with a desire to donate the part of such amount for charity; in our view it is acceptable and natural; it cannot be viewed adversely. SJS first accepted having given the corpus donation, in some proceedings which he was not offered to be cross-examined to the subsequent , assessee any different version given by SJS will not bind the assessee. Besides assessee treated consequently it as corpus donation, used it accordingly on which no question has been raised. Even donors may develop some bad feelings about the trust they donated but i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is dismissed. We may add that the assessee claims that it s application of trust income to the objects of the trust to be more than 85% of it s income including this development fund. This aspect is to be borne in mind while giving effect to this order. 26. Apropos non-allowance of depreciation on assets acquired by the application of trust income. This controversy is now set at rest by recent judgment of Hon ble Delhi High Court in the case of DIT v VISHWA JAGRITI MISSION; ITA No. 140/2012 Dtd. 29-3-2012 , upholding the ITAT order allowing such depreciation it has been held that: 11. The revenue is in appeal against the aforesaid order of the Tribunal. We are not inclined to admit the appeal and frame any substantial question of law since none arises from the order of the Tribunal. There is no dispute that the assessee has been granted registration under Section 12AA vide order dated 11th September, 2009 and, therefore, it was entitled to exemption of its income under Section 11. The only question is whether the income of the assessee should be computed on commercial principles and in doing so whether depreciation on fixed assets utilised for the charitable purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax. v. Nizam's Suppl. Religious Endowment Trust (1981) 127 ITR 378 and by the Madras High Court in Commissioner Of Income-Tax vs Rao Bahadur Calavala Cunnan Chetty Charities (1982) 135 ITR 485. The Madhya Pradesh High Court in CIT vs. Raipur Pallottine Society (supra) has held, following the judgment of the Karnataka High court cited above, that in computing the income of a charitable institution/trust, depreciation of assets owned by the trust/institution is a necessary deduction on commercial principles. The Gujarat High Court, after referring to the judgments of the Karnataka, Maharashtra and Madhya Pradesh High Courts cited above, also came to the same conclusion and held that the amount of depreciation debited to the accounts of the charitable institution has to be deducted to arrive at the income available for application to charitable and religious purposes. 13. The judgment of the Supreme Court in Escorts Limited Vs. Union of India (supra) has been rightly held to be inapplicable to the present case. There are two reasons as to why the judgment cannot be applied to the present case. Firstly, the Supreme Court was not concerned with the case of a charitable trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d issue about non inclusion of development fund in trust income by credit in the balance sheet has been decided against the assessee in AY 2006-07, following the same this ground of the assessee in AY 2007 is also dismissed. The direction about 85% application of income shall accordingly be applicable. 27.2. The remaining two issue pertain to addition of donations u/s 68: M/s Kuberswamy Ashutosh Consultants P Ltd Rs. 25.0 lacs M/s Sun system Inst. Of I Technology Rs. 09.06 lacs 27.3. AO made these additions u/s 68 on the reason that as the benefits of assessee u/s 11 12 have been withdrawn due to violation of provisions of sec 13, therefore, the assessee has to comply with the rigor of sec 68 as these donations represent cash credits in the books of accounts. 27.4 During the course of assessment proceedings M/s Kuberswamy Ltd appeared in pursuance to notice u/s 131through its representative, confirmed the donation and filed copy of bank statement in support thereof. 27.5. In respect of Sun System donation, assessee filed confirmation, bearing address, PAN no and balance sheet of the donor. The balance sheet reflected that the company h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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