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DEPUTY DIRECTOR OF INCOME-TAX (EXEMPTIONS) -III Versus MAHALAKSHMI KUNJITHA PATHAM EDUCATIONAL AND CHARITABLE TRUST

2015 (11) TMI 982 - ITAT CHENNAI

Exemption under section 11 denied - According to the Assessing Officer, the assessee had committed an act in violation of section 13(1)(c) - Held that:- In this case, the funds have been transferred from the assessee-trust to the accounts of Mahalakshmi Garments Exports, wherein Shri S. Kunjithapatham is the proprietor. The peak debit balance in the books of account of the trust as on October 8, 2009 was at ₹ 20,98,480. According to the learned authorised representative, the outstanding ba .....

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arments Exports. In our opinion, the expression "person" used in section 13(1)(c)(ii) includes a person, who is the trustee. Thus, the amounts are transferred to Shri S. Kunjithapatham for his benefit and the outstanding balance in the name of Smt. Mahalakshmi Kunjithapatham cannot be clubbed together with funds outstanding from another trustee and each one is a person in terms of section 2(31) of the Act. That being so, the assessee-trust having transferred the income or the property to the ben .....

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ojari (Accountant Member).-This appeal by the Revenue is directed against the order of the Commissioner of Income-tax (Appeals) dated September 2, 2013. 2. The facts of the case are that the Assessing Officer observed that a part of the income of the trust had been used for the benefit of M/s. Mahalakshmi Garments Exports of which the trustee, Shri S. Kunjithapatham was the proprietor. This observation was made by the Assessing Officer on the basis of peak debit balance of ₹ 20,98,480 in t .....

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ed that the Assessing Officer while observing the peak debit balance as on October 8, 2009 against the trustee, Shri S. Kunjithapatham's proprietorship concern, had failed to appreciate the steady and long standing credit balance of ₹ 20,30,000 in the name of Shri S. Kunjithapatham in the books of account of the trust. Apart from the above credit, wife of Shri S. Kunjithapatham was also having a credit balance of ₹ 2,22,74,985 in the trust. Therefore, the funds of the trust has n .....

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hri S. Kunjithapatham, (ii) Mahalakshmi Garment Exports (Prop. Shri S. Kunjithapatham), and (iii) Mahalakshmi Garment Exports in the books of Mahalakshmi Women's College of Arts and Science and arrived at the opening credit balance of ₹ 18,26,520. However, the same consolidated account shows a debit balance for a long period of 9 months from May, 2009 to February, 2010, meaning thereby that the managing trustee had utilised the trusts' fund for personal benefit and thereby violatin .....

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khs without appreciating the fact that the peak debit balance was worked out based on the above opening balance and the same credit balance of ₹ 20.30 lakhs had already been considered by the Assessing Officer. Further he submitted that the Commissioner of Income-tax (Appeals) has erred in holding that Smt. Mahalakshmi, wife of Shri S. Kunjithapatham has also funded ₹ 2 crores to the trust. Hence, if the funds are consolidated, there is no violation under section 13(1)(c) of the Act. .....

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t the Commissioner of Income-tax (Appeals) failed to appreciate that there is no rule as to family members of the trust are to be considered together while invoking the provisions of section 13(1)(c) of the Act. Therefore, netting of the credit balance of Smt. Mahalakshmi, with the debit balance of her husband, Shri S. Kunjithapatham has been erroneously resorted to by the Commissioner of Income-tax (Appeals). According to the learned Departmental representative, as long as funds of the trust ar .....

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nterest-free loans to the assessee for starting arts college in the name of Mahalakshmi Women's College of Arts and Science and these funds were transferred from Mahalakshmi Garments Exports. In view of the above, the learned authorised representative submitted that there is no violation of section13(1)(c) of the Act. 6. We have heard both sides and perused the material on record. In this case, the funds have been transferred from the assessee-trust to the accounts of Mahalakshmi Garments Ex .....

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