TMI Blog2015 (11) TMI 857X X X X Extracts X X X X X X X X Extracts X X X X ..... reement, the money was returned in its entirety. Since there was delay in repayment of money received as advance for sale of the land, the Managing Trustee has also paid interest to the extent of ₹ 4,06,92,078/-. Therefore, at any stretch of imagination, it cannot be said that the money was diverted for interest of the Managing Trustee. Therefore, this Tribunal is of the considered opinion that there is no violation of Section 13 of the Act. Coming to the receipt of donation from Sri Balaji Charitable and Educational Trust, what was received by the assessee is capital asset by way of three institutions and its infrastructures. It is nobody’s case that the assessee’s funds were diverted to any other Trust. When the assessee received three institutions for carrying out its charitable activity, it cannot be said that there was a violation of any other provisions of Income-tax Act. In fact, the Assessing Officer himself disallowed the claim of the assessee on the ground that the money was advanced to the Managing Trustee. Since this Tribunal found that there was no violation of Section 13(1)(c) of the Act in respect of the agreement entered between the assessee-Trust and the Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer on verification of balance sheet, found that the said amount was paid to Dr. Ishari K. Ganesh, the founder and Managing Trustee of the assessee-Trust. Therefore, the Assessing Officer found that the transaction of loan was in violation of Section 13(1)(c) r.w.s. 13(3) of the Act. Referring to assessment order, the Ld. D.R. submitted that the Assessing Officer brought out the entire transaction at pages 2 and 3 of his order. The assessee claimed before the Assessing Officer that the transaction being a loan transaction, the money was received in pursuance of agreement for sale. According to the Ld. D.R., the assessee claimed before the Assessing Officer that it intended to establish a medical college. Therefore, the assessee entered into an agreement for purchase of land with the Managing Trustee. However, after considering the material available on record, the Assessing Officer found that out of the total consideration of ₹ 20 Crores, the Managing Trustee received an advance of ₹ 16,91,00,000/-. Therefore, the Assessing Officer found that even if the transaction of purchase of property was considered to be genuine, the payment of advance to the trustee, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts Commission prescribes certain guidelines, including infrastructure facilities. During the financial year 2009-10, the assessee-Trust planned to start a medical college as part of its charitable activity. As per the guidelines prescribed by Medical Council of India, the minimum land required is 25 acres. Therefore, the assessee-Trust proposed to purchase the land belonging to the Managing Trustee Dr. Ishari K. Ganesh to the extent of 28.93 acres of land. In that process, the assessee-Trust has paid ₹ 15,76,00,000/- on 31.03.2010. An agreement was also entered into between the assessee-Trust and the Managing Trustee for purchase of land. The Ld.counsel further submitted that the assessee-Trust has also taken loan from the Managing Trustee and the related persons. In fact, the CIT(Appeals) extracted the interest-free loan received by the assessee-Trust from the related persons and Managing Trustee. 5. According to the Ld.counsel for the assessee, Section 13 of Act is not prohibiting any transaction by the Trust with interested persons. What is prohibited by Section 13 of the Act is advancing of money without adequate security or adequate interest. In the case before us, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was an agreement for sale of the property and the assessee-Trust advanced the funds. There is no fixed price for sale of land. The price of a land is flexible, depending upon various factors. The urgency of the vendor to sell the property, the necessity of the purchaser to purchase the property, the location of the land, the area of the land, infrastructures available nearer to the land and future prosperity for development of the land, etc. need to be considered while determining the market value of a land. Apart from that, it is well settled principles of law that market value is nothing but a price agreed between the willing seller and willing purchaser. Therefore, we cannot say that a particular land has to be sold by a particular person for a particular rate. If two willing persons agreed to sell and purchase the property for a particular price, then the Assessing Officer may not have any role to dismiss the agreed price unless there are some evidences found that the agreed price disclosed is not actually the agreed price. In the case before us, it is nobody s case that the price agreed between the Managing Trustee and the Trust is not actually the agreed price. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact advanced in pursuance of the agreement for sale. After cancellation of agreement, the money was returned in its entirety. Since there was delay in repayment of money received as advance for sale of the land, the Managing Trustee has also paid interest to the extent of ₹ 4,06,92,078/-. Therefore, at any stretch of imagination, it cannot be said that the money was diverted for interest of the Managing Trustee. Therefore, this Tribunal is of the considered opinion that there is no violation of Section 13 of the Act. 9. Now coming to the receipt of donation from Sri Balaji Charitable and Educational Trust, what was received by the assessee is capital asset by way of three institutions and its infrastructures. It is nobody s case that the assessee s funds were diverted to any other Trust. When the assessee received three institutions for carrying out its charitable activity, it cannot be said that there was a violation of any other provisions of Income-tax Act. In fact, the Assessing Officer himself disallowed the claim of the assessee on the ground that the money was advanced to the Managing Trustee. Since this Tribunal found that there was no violation of Section 13(1)(c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction shall be allowed under this clause in respect of--(a) any motor car manufactured outside India, where such motor car is acqired by the assessee after the 28th day of February, 1975 5but before the 1st day of April, 2001, unless it is used--(i) in a business of running it on hire for tourists; or(ii) outside India in his business or profession in another country ; and(b) any machinery or plant if the actual cost thereof is allowed as a deduction in one or more years under an agreement entered into by the Central Government under section 42: Provided further that where any asset referred to in clause (i) 6or clause (ii) or clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this subsection in respect of such asset shall be restricted to fifty per cent. of the amount calculated at the percentage prescribed for an asset under clause (i) 6or clause (ii) or clause (iia), as the case may be: Provided also that where an asset being commercial vehicle is acquired by the assessee on or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny and the resulting company, as the case may be, in the ratio of the number of days for which the assets were used by them. Explanation - 1. Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work, in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee. Explanation - 2. For the purposes of this sub-section written down value of the block of assets shall have the same meaning as in clause (c) of sub-section (6) of section 43; Explanation - 3. For the purposes of this sub-section, 10the expressions assets shall mean-- (a) tangible assets, being buildings, machinery, plant or furniture ; (b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compensation moneys payable in respect thereof ; (b) where the building, machinery, plant or furniture is sold, the price for which it is sold, so, however, that where the actual cost of a motor car is, in accordance with the proviso to clause (1) of section 43, taken to be twenty-five thousand rupees, the moneys payable in respect of such motor car shall be taken to be a sum which bears to the amount for which the motor car is sold or, as the case may be, the amount of any insurance, salvage or compensation moneys payable in respect thereof (including the amount of scrap value, if any) the same proportion as the amount of twenty-five thousand rupees bears to the actual cost of the motor car to the assessee as it would have been computed before applying the said proviso ; (2) sold includes a transfer by way of exchange or a compulsory acquisition under any law for the time being in force but does not include a transfer, in a scheme of amalgamation, of any asset by the amalgamating company to the amalgamated company where the amalgamated company is 8an Indian company or in a scheme of amalgamation of a banking company, as referred to in clause (c) of section 5 of the Banking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2 We find this issue is elaborately discussed in the case of Lissie Medical Institution Vs. CIT reported in [2012] 348 ITR 344(Ker.) and held the issue against the assessee. While doing so, the Hon ble Kerala High Court had considered the Circular No.5P(LLX-6) dated 19.06.1968 which has not been considered by the other decisions. The Circular No. 5P(LLX-6) is reproduced herein below for reference:- 1. Circular No. 5-P (LXX-6) of 1968, dated 19-6-1968. Subject : Section 11-Charitable trusts-Income required to be applied for charitable purpose-Instructions regarding. In Board's Circular No. 2-P(LXX-5) of 1963, dated the 15th May, 1963, it was explained that a religious or charitable trust claiming exemption under section 11(1) of the Income- tax Act, 1961, must spend at least 75 per cent of its total income, for religious or charitable purposes. In other words, it was not permitted to accumulate more than 25 per cent of its total income. The question has been reconsidered by the Board and the correct legal position is explained below. 2. Section 11(1) provides that subject to the provisions of sections 60 to 63 the following income shall not be included in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will become taxable under section 11(1). After considering the Circular, the Hon ble Kerala High Court held as follows:- Held, that after writing off the full value of the capital expenditure on acquisition of assets as application of income for charitable purposes and when the assessee again claimed the same amount in the form of depreciation, such notional claim became a cash surplus available with the assessee, which was outside the books of account of the trust unless it was written back which was not done by the assessee. It was not permissible for a charitable institution to generate income outside the books in this fashion and there would be violation of section 11(1)(a). It was for the assessee to write back the depreciation and if that was done, the Assessing Officer would modify the assessment determining higher income and allow recomputed income with the depreciation written back by the assessee to be carried forward for subsequent years for application for charitable purposes. Further Hon ble Calcutta High Court has held in the case DCIT VS. Girdharilal Shewnarain Tantia Trust reported in [1993] 199 ITR 15(Cal.) that The income contemplated by the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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