TMI Blog2014 (9) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. Regarding receiving unsecured loans from M/s. Vanpic Projects (P) Ltd. and M/s. Vanpic Ports (P) Ltd., it is clear that in respect of the loans also there is no violation of the provisions contained under the trust deed - clause 5 of the trust deed empowers the trustees to obtain loan from banks and financial institutions, it cannot be construed in a manner to suggest that the said clause restricts the trust/ trustees from obtaining loans from private parties - Even raising of loans is not coming under the object clauses of the trust deed - There is nothing brought on record by the DIT(E) to show that funds have not been applied for achieving the objects of the trust - DIT(E) can cancel the registration of a trust or institution if he is satisfied that the activities of the trust are not genuine or not in accordance with the objects of the trust - neither in the order of the DIT(E) nor from any other facts and materials on record, it is established that the activities of the trust are not genuine or are not in accordance with the objects of the trust - The grounds on which the DIT(E) has cancelled the registration are neither germane nor relevant for the purpose of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready gone into the issue of investment made by the assessee in shares and after examining all facts and materials relating to the said investment in shares had granted registration u/s. 12AA of the Act. 4. So far as the second issue of obtaining unsecured loans from two private companies, it was submitted by the assessee trust that the loans were not interest bearing hence not prejudicial to the interests of the trust. It was submitted that clause 5(iia) of the trust deed permits borrowal of funds from banks and other financial institutions for the purpose of the trust with or without security of trust properties. Though the trustees are empowered to borrow from banks, they did not do so since borrowing from banks would lead to payment of huge interest and also giving properties of the trust as collateral surety. Instead, the trustees borrowed the interest free funds thereby saving valuable funds to the trust. Further it was brought to the notice of the DIT(E) that the unsecured loans were closed by transferring the said amount to donation in financial year 2010-11. It was submitted that as the trust in no way was prevented from promoting its objects or was put to any financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire issue again and held that assessee has not violated the provisions of section 11(5) r.w.s. 13(1)(d) of the Act while making investment in shares of M/s. Matrix Laboratories Ltd. and ultimately passed an order on 11.9.2007 granting registration u/s. 12AA of the Act to the assessee. Further, it was submitted, when the AO denied exemption to the assessee u/s. 11 of the Act by referring to the very same issue of investment in shares of M/s. Matrix Laboratories Ltd. and consequent violation of section 11(5) r.w.s. 13(1)(d) of the Act in the assessment order passed for the A.Y. 2007-08, the issue came up for consideration before the ITAT. The ITAT after considering submissions of the parties and examining the facts and materials on record in order dated 28.06.2013, passed in ITA No. 670/Hyd/2012 held that there is no violation of section 11(5) r.w.s. 13(1)(d) of the Act by the assessee while investing in 20 lakh equity shares of M/s. Matrix Laboratories Ltd. 7. Thus, it was submitted by the learned AR that the issue relating to investment in shares having already been examined by the DIT(E) at the time of granting registration u/s. 12AA of the Act and by the ITAT while consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration granted. 10. We have considered submissions of the parties and perused materials on record. As is very much clear from the order of the DIT(E), he has cancelled the registration for the following two reasons: (a) The assessee has invested in purchase of equity shares of M/s. Matrix Laboratories Ltd. which is in violation of objects of trust deed. (b) Assessee has obtained loans from two private companies which is in contravention of the trust deed. 11. So far as the investment in shares of M/s. Matrix Laboratories Ltd. is concerned, as can be seen from the facts and materials on record, the issue was considered at length by the DIT(E) while examining assessee's application for grant of registration u/s. 12AA of the Act. Initially the DIT(E) had rejected the application for registration by holding as under: i. The applicant has not furnished the evidence regarding the expenditure incurred of ₹ 1 Crore which even as per the claim of applicant is merely a commitment. ii. The letter dt. 4/4/2007 of the applicant merely indicates its plans and proposals in so far as its certainty of objects is concerned. iii. The applicant trust has not comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the facts of its case. I agree that proviso (iia) to Sec. 13 (1)(d) does provide clear cut exception to the investments not complying with provisions of Sec, 11(5)) of Act, if such investment in shares is disposed off before the expiry of one year. Since the applicant trust has acquired shares in August, 2006 and disposed them off in January, 2007, the applicant trust is entitled to benefit of proviso (iia) to Sec. 13(1)(d) of Act. The applicant trust has also furnished clarification regarding sources of investment for purchase of shares. Accordingly, the applicant trust has succeeded in rebutting the other points also viz., (iv), (v), (vi) and (vii) mentioned in the order sought to be rectified. In view of the aforesaid discussion, I find merit in the contentions pressed by the applicant trust and I proceed to rectify my order dt. 02-07-2007. The necessary order granting Registration u/s. 12AA of Act and also the order of exemption u/s. 80G(5)(vi) of Act are passed separately for the sake of convenience. 13. In consequence to the aforesaid order, the DIT(E) also passed an order on 11.09.2007 granting registration to the assessee us. 12AA of the Act. Further, the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has deposited in the specified modes under sub-sections (5) of Section 11 of the Act within the prescribed period. The aforesaid factual position also has not been controverted by the department. The decision of the ITAT, Delhi Bench in the case of Sera Foundation vs. ITO (supra) also supports this view. (Emphasis by us.) 14. Therefore, the issue of investment in shares having been crystallised in favour of the assessee by the order of the DIT(E) passed u/s. 154 (supra) of the Act as well as by the Tribunal in ITA No. 670/Hyd/2012 (supra), the present DIT(E) cannot reopen the issue again for the purpose of cancellation of registration, more so, after the order of the ITAT. Though, it appears from the reply to show-cause notice, assessee has not referred to the aforesaid order of the Tribunal, however, on a reference to the said order of ITAT it is clear a copy of the said order was also marked to the learned DIT(E). Therefore, in spite of such order of the ITAT holding that there is no violation by the assessee of the provisions contained in section 11(5) r.w.s. 13(1)(d) of the Act, the action of the DIT(E) in cancelling registration on the issue of investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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