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TMI Blog2015 (6) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... s) in confirming the addition of Rs. 47.71 lakhs made by the Assessing Officer. 2. The facts relating to the issue are stated in brief. The assessee is a society and it is running an educational institution under the name and style of "Vairams Kindergarten Society" in Pudukottai. The school is conducting classes for LKG and UKG standards. The society filed its return of income for the year under consideration by declaring 'Nil' income. The assessee had claimed exemption of its entire income under Section 10(23C)(iiiad) of the Income-tax Act, 1961 (in short 'the Act'). The return of income was taken up for scrutiny by the Assessing Officer. The A.O. noticed that the assessee has obtained PAN - AAGFV 4771 P which normally relates to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iverted Rs. 47.71 lakhs for non-charitable purposes. 3. The A.O. also noticed that both the societies are having common members / relatives of members in their respective Management Committee. Thus, by placing reliance on the decision of Hon'ble Madras High Court in the case of CIT v. VGP Foundation (262 ITR 187), the A.O. held that the amount of Rs. 47.71 lakhs (referred above) is to be treated as income of the assessee and accordingly he assessed the same in the hands of the assessee. 4. The Ld. CIT(Appeals) also confirmed the same with the following observation:- "9. The assessee is a charitable institution registered under Society's Registration Act of Tamil Nadu running an education institution by name Vairams Kindergarten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other trust does not amount to application of funds for the objectives of the society. Further, it cannot be considered as an approved investment in terms of provisions of section 13 of the IT Act. Over and above the Assessee's Society has neither registered u/s 12A or under the section 10(23)(c). Thus the A.O. has denied the exemption claimed u/s 10(23)(c) and treated the entire advance as income of the Assessee. Since the Assessee himself has accepted that the Society is not registered u/s 12AA of the I.T. Act as well as 10(23)(c) of the I.T. Act no exemption can be allowed in respect of the advances diverted to another society. Therefore the addition made by the Assessing Officer on account of diversion of funds treating the same as inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educational society cannot be considered as violation of provisions of Section 13(1)(d) read with Section 11(5) of the Act, since the interest-free loan given by the assessee-society was neither an investment nor a deposit. The Ld A.R submitted that the assessee herein has also given only advance to another educational society and hence the same cannot be considered as "Investment" or "Deposit". 6. The Ld. A.R. submitted that the objectives of the assesseesociety, inter alia, includes "to aid and assist in the establishment, etc. of educational institutions". The assessee has given impugned advance to another educational society for the purpose of construction of the building and the same would amount to "aiding and assisting" in the esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the assessee took a different stand and stated that the advance was given for making use of the building belonging to the other society. Accordingly, the Ld. D.R. submitted that the assessee is giving explanations which are contradictory to each other. The ld D.R placed reliance on the decision rendered by Hon'ble Punjab & Haryana High Court in the case of St. Francis Convent School Vs. CBDT (2012)(67 DTR (P&H) 251) and also the decision rendered by Hon'ble Madras High Court in the case of VGP Foundation (supra). 9. In the rejoinder, the Ld A.R submitted that the decision was rendered by Hon'ble Madras High Court in the case of VGP Foundation (supra) in the context of funds given to a sister concern, which was a private limited company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount due from another society, which happened to be managed by same group of people. We have already noticed that the assessing officer has assessed the above said amount as income of the assessee on three grounds. The Assessing Officer has taken the view that the amount advanced by the assessee was not approved mode of investment. However, a perusal of the provisions of sec. 10(23C), more particularly the third proviso, would show that the restriction placed u/s 11(5) of the Act with regard to the form or mode of investment is not applicable to the educational institution claiming exemption u/s 10(23C)(iiiad) of the Act. Hence, the observation of the tax authorities that the impugned advance is not an approved investment is not in accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X
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