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2015 (9) TMI 711 - ITAT CHENNAI

2015 (9) TMI 711 - ITAT CHENNAI - TMI - Disallowance of exemption claimed by the assessee u/s 11 - CIT(A) confirmed the disallowance made by the AsO denying exemption u/s 11 as if there was a violation of sec. 13(1)(C) r.w.s 13(3) - Held that:- This Tribunal is of the considered opinion that if the funds were misappropriated and legal actions were initiated to recover the amount from Shri G. George and criminal prosecution is also initiated, then it cannot be said that the assessee-trust incurre .....

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of the lower authorities are set aside and the entire issue of claim of exemption u/s 11 of the Act is remitted back to the file of the Assessing Officer to examine the material available on record and find out whether it is an expenditure incurred by the assessee on Shri G. George or the funds were misappropriated by Shri G. George as contended by the assessee before this Tribunal. Decided in favour of assessee for statistical purposes. - I.T.A. No.1421/Mds/2015 - Dated:- 21-8-2015 - SHRI N.R.S .....

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shya Sitaraman, ld. Senior Counsel for the assessee submitted that the assessee is a charitable institution registered u/s 12AA of the Act. During the year under consideration, the assessee filed return of income disclosing income of ₹ 9,23,17,011/- and claimed exemption u/s 11 of the Act. The Assessing Officer, however, disallowed the claim of the assessee on the ground that the assessee-trust incurred expenditure on one Shri G. George, General Secretary of the trust who is managing the a .....

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placing reliance on the judgment of the Rajasthan High Court in DCIT vs Cosmo Metropolitan Education Society, 244 ITR 494, and the judgment of the Bombay High Court in DIT(E) vs Sheth Mafatlal Gagalbhai Foundation Trust, 249 ITR 533, found that the assessee incurred expenditure on the General Secretary, therefore, not eligible for exemption u/s 11 of the Act. 5. The ld. Senior Counsel submitted that Shri G. George, the former General Secretary of the assessee-trust misappropriated the funds, th .....

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m. Action has also been initiated to recover the amount misappropriated by him from the trust. According to the ld. Senior Counsel, it is not an expenditure incurred by the trust on Shri G. George, but it was funds misappropriated by Shri George. Referring to the order of the Madras High Court in O.A No.740 of 2010 dated 18.8.2010, the ld. Senior Counsel submitted that, in fact, the above said Shri G.George has disturbed the functioning of the trust alongwith others, therefore, the assessee was .....

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secution is also pending investigation. 6. The ld. Senior Counsel placed her reliance on the judgment of the Rajasthan High Court in DCIT vs Cosmopolitan Education Society(supra). The High Court found that if there was any misutilization or mismanagement, action could be taken against the members of the society, but from the records and facts, it is not possible to say that any amount of funds of the society was not utilized for educational purposes. Placing reliance on the decision of Cuttack B .....

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Court in CIT vs Working Women s Forum, 365 ITR 353, submitted that if at all there was any violation u/s 13(1) of the Act, exemption could be denied only to the extent of income which was violative of sec. 13(1)and not the entire claim of exemption u/s 11 of the Act. Referring to the Circular No.387 dated 6.7.1984 issued by the CBDT explaining the provisions of the Finance Act, 1984, the Senior Counsel pointed out that so far as the public and religious trusts are concerned, the business profit .....

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anth, ld. Departmental Representative submitted that the assessee incurred expenditure on Shri G. George, the former General Secretary, who is managing the affairs of the assessee-trust, therefore, the CIT(A) found that there was clear violation of sec. 13(1)© r.w. sec. 13(3)of the Act. The ld. DR submitted that he is placing reliance on the observations made by the Assessing Officer and the CIT(A). 8. We have considered the rival submissions on either side and also perused the material ava .....

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olation of sec. 13(1) r.w.s 13(3) of the Act. The CIT(A) has also not brought on record the nature of expenditure incurred by the assessee on Shri G. George. From the copy of the complaint to the Commissioner of Police dated 10.8.2011, it appears that Shri G. George and Smt. Annamma George involved in fraudulent transactions by making personal payments, personal loans from banks, purchasing assets, vehicle etc by utilizing the funds of the assessee-trust. Now the assessee contended before this T .....

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ment by filing documentary evidence that Shri G.George, was a Secretary, but continued as General Secretary by fraudulent means and involved himself in misappropriation of funds in a dubious manner, these factual situations were not considered by any of the authorities below. The authorities below proceeded as if the assessee-trust incurred expenditure on Shri G. George. This Tribunal is of the considered opinion that when the assessee-trust makes a claim that the Secretary, Shri G. George misap .....

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