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2015 (12) TMI 1116 - ITAT KOLKATA

2015 (12) TMI 1116 - ITAT KOLKATA - TMI - Disallowance of accumulated deficit - assessee failed to furnish the year-wise accumulation of deposit and no return was filed before A.Y. 2002-03 - CIT(A) delted the addition - Held that:- It is a fact that the Assessee did not file return of income before AY 2002-03. It is not the case of the Assessee that the accumulated deficit was determined in assessments completed after AY 2002-03 when from the Assessee started filing return of income. The accumul .....

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ff against the income of AY 2005-06. It is also pertinent to note that the aforesaid claim was not made in the return of income filed by the Assessee nor in the proceedings before the AO. The claim was made for the first time before CIT(A). The CIT(A)’s findings on this aspect have already been given in the earlier part of this order. The evidence referred to in the findings of CIT(A) are relevant only with regard to the claim of the Assessee that ₹ 4,54,11,300/- was repayment of loans whi .....

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that:- The loans were stated to be availed between the year 1980 to June, 2003 when the Assessee did not have funds to carry out charitable activities. In the year in which the loans were availed, there was no scrutiny assessment. In fact the Assessee has started filing returns of income only after AY 2002-03. Therefore the factum of borrowing and the utilization of the funds borrowed were never subjected to scrutiny in the past. There is no evidence filed by the Assessee in this regard. The CI .....

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those charitable activities. The mere assertion of the Assessee in this regard without evidence cannot be the basis to uphold the claim of the Assessee in this regard. We therefore do not agree with the conclusions of the CIT(A) in this regard. We therefore reverse the order of the CIT(A) and restore the order of the AO in this regard.- Decided against assessee

Disallowance of charity and donation and administrative expenses - neither books of accounts nor the bills & vouchers were pr .....

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ns and the supporting vouchers are at page 75 to 91 of Assessee’s paper book. The details of administrative expenses are placed at page-92 of the paper book and the payments in question were made by cheques. The expenditure in question is reasonable and deserves to be accepted. We are of the view that the CIT(A) rightly deleted the addition made by the AO - Decided in favour of assessee. - ITA Nos. 137/Kol/2009 - Dated:- 16-12-2015 - Hon'ble Shri N. V. Vasudevan, JM And Shri Waseem Ahmed, AM .....

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f the trust were charitable in nature. The trust was accorded registration u/s 12AA of the Income tax Act, 1961 (Act) vide Registration No.DIT(E)/T/548D dated 06.12.1980. 3. For A.Y.2005-06, the assessee filed return of income showing Nil income. During the previous year the assessee received interest income on FDRs in a sum of ₹ 5,10,22,844/-. 4. The computation of total income of the Assessee is at page-25 of the paper book and it shows that the Assessee had declared gross income of the .....

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such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property ; 85% of the income of the Trust has to be applied for charitable purpose. 15% of the income can be accumulated for application for charitable purpose in future as laid down in explanation to Sec.11(1) of the Act. After reducing 15% towards accumulation which is permitted under Explan .....

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eligious trusts or institutions, the auditors have certified that out of income of the previous year, a sum of ₹ 4,85,52,165 was applied by the Assessee for charitable purposes in India during the previous year. The Income and Expenditure Account for the year ended 31.3.2005 shows receipt of bank interest of ₹ 5,10,22,844 as income and after claiming deduction of an amount of ₹ 31,01,525 as spent for charitable purpose and ₹ 39,340 as administrative expenses a surplus of .....

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d for set off in the later assessment years as accumulated deficit. There is therefore a contradiction between the way books of accounts were maintained by the Assessee and certified by its auditors and the computation of total income filed by the Assessee along with the return of income filed for AY 2005-06. 6. The AO started the computation of total income as per the return of income filed by the Assessee. As we have already seen, the Assessee had claimed that it had, during the previous year, .....

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that repayment of loan taken for charitable purposes had to be treated as application of income for charitable purposes. CBDT in Circular No.100 dated 24.1.1973 had accepted this position, as given below: where a trust incurs a debt for the purpose of the trust whether the repayment of the debt would amount to an application of income for the purposes of the trust …… Board has decided that repayment of the loan originally taken to fulfil one of the objects of the trust will amount .....

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m advances/loans have been taken year-wise (b) Loan confirmation from all the loan creditors showing the PAN and IT Jurisdictions. (c) Purposes of the loans taken . (d) Details of year-wise utilizations of the loans. (e) Nexus of the loans with the objects of the Trust. (f) Details of charity and donation made during the year along with the bills and vouchers. (g) Details of repayment of the loans amounting to ₹ 4,45,11,300/- made during the relevant year. 8. The Assessee gave the followin .....

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as made to four parties as absolute natural and legal heirs of late Smt. Anita Banerjee namely (i) K.N.Banerjee (Rs.1,29,69,500/-) (ii) Debashis banerjee (Rs.1,12,87,000/-) (iii) Subhashis Banerjee alias Bandyopadhyay (Rs.1,06,04,800/-) and Ms. Maitrayee Mukherjee (Rs.1,12,87,000/-). The entire amount was paid by cheque which is evident from the bank statement which has already been filed during the course of assessment. 2. Chairty & Donation : A list of charity & donation expenses has a .....

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te Mrs. Anita Banerjee was one of the main loan creditors in the period between 1956 and 1993. It is worthwhile to mention here that after search & seizure conducted by the Income Tax Department in 1980 practically the entire activities of the trust became loan dependent only. 9. The AO however did not accept the claim of the Assessee. The AO firstly held that the Assessee had given only details of repayment of loan but did not give details of when and how the loans were availed. The AO held .....

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tion of the year, out of the income from the property held under the trust, it is required to mention along with evidences when the loans were taken, in which particular Years those were utilized and how the repayments were' made. The AO also found that the Assessee did not file any returns of income before 2002-03, and. no account showing the utilization could be furnished by. the assessee. No books of accounts could be produced for the current financial year or earlier years. The AO also c .....

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ouchers nor any books of accounts showing the actual expenditures could be furnished. The AO therefore, held that the deduction on account of charity and donation as an application of income for charitable purpose during the relevant previous year, cannot be accepted. The AO accordingly computed income of the Assessee as given below :- Income from Other Sources :- . Bank Interest : ₹ 5,10,22,843/- TOTAL TAXABLE INCOME : ₹ 5,10,22,843/- Rounded off to : ₹ 5,10,22,840/- 11. Befor .....

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a stand that the AO was not justified in not allowing adjustment of current years income (excess of income after application for charitable purpose and administrative expenses) of ₹ 4,78,81,676/- against accumulated deficit of ₹ 8,54,16,519/-. In making the aforesaid submission the Assessee relies on the audited books of accounts and the certificate of auditor in Form No.10B which we have already set out in the earlier part of this order. This was not the computation of total income .....

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essee. 14. The CIT(A) s findings on the above claim of the Assessee was as follows: I have carefully gone through the submissions made by the Id. A/R of the appellant and the order passed by the A.O. The A.O. has not brought my concrete evidence in support of his disallowance of ₹ 4,78,81,9781- under the head accumulated deficit, The A.O. has stated in his order that the appellant has failed to submit details and books of accounts. The assessment record for the relevant assessment year was .....

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years (page No.103),bank statements (page No.190), list of repayment of loan (pager No.186), write-up on purpose for acquiring loans (page No.170) etc., which were good enough for substantiating the claim of the appellant. Probably the A.O. has not gone through the details and evidences filed by the appellant before him. The Id. A/R of the appellant relied upon the case law of Mewar Charitable Foundation vs. CIT. The Hon'ble Rajasthan High Court has held that Mewar Charitable Foundation suff .....

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ted against the income of a subsequent year, the income of that year can be said to have been applied for charitable and religious purposes in the year in which the expenses incurred for charitable and religious purposes had been adjusted. Similar view was taken in CIT vs. Shri Pol Swetambar Murtipujak Jain Mandir. Following the above facts and circumstances of the case as elaborately discussed, I am of the considered opinion that the action of the A.O. is not justified. Hence the disallowance o .....

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e and therefore the benefit of deduction u/s.11(1)(a) of the Act had to be allowed to the Assessee. The Assessee also challenged the disallowance of administrative expenses and donations and charity given during the previous year. 16. On the above submission the learned CIT(A) held as follows: I have carefully gone through the submissions made by the ld. A/R of the appellant and the contention of the A.O. The A.O. has made disallowances of ₹ 4,85,52,165/- under the head i.e. loan repayment .....

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r he has gone through the details/evidences filed by the appellant during the course of assessment proceedings in support of his contention. Loan is neither treated as income nor repayment of loan as expenditure. These are in fulfilment of objects of the trust which have been accepted as charitable. The CBDT has clarified in Circular No.100 dated 24th January 1973 that repayment of loan originally taken to fulfil one of the objects of the trust would be treated as application of income. Regardin .....

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636 (SC) where it has been held that expenses incurred for running a trust should be considered to have been applied for the objects of the trust. The expenditure on salaries and miscellaneous expenses for the purpose of carrying out the objects and purposes of the trust be considered as application for charitable purposes. Following the above cited decision, I am of the considered view that the A.O. is not justified in making disallowances under this head. Hence disallowance of ₹ 4,85,52, .....

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facts and circumstances of the case, Ld. CIT(A) was not justified in accepting the repayments of loans as genuine though no details of receiving the loans were filed. 3. On the facts and circumstances of the case, Ld. CIT(A) was not justified in directing to allow the repayment of loan as expenditure though failed to justify that the loan was taken for fulfilment of the object of the trust. 4. On the facts and circumstances of the case, Ld. CIT(A) was not justified in accepting that loans were t .....

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oks of accounts nor the bills & vouchers were produced. 18. The learned DR reiterated the stand of the revenue as reflected in the grounds of appeal raised before the Tribunal. The learned counsel for the Assessee reiterated stand of the Assessee as put forth before the CIT(A). Our attention was drawn to the paper book filed before us, wherein the confirmation of the persons who advanced loans to the Assessee are placed. Our attention was also drawn to the details of charity and donations al .....

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sis of Balance Sheet as on 31.3.1996 in which loans and advances received in cash or kind is shown at ₹ 9,29,50,000/-. As to what is the opening balance as on 1.4.1995 is also not found in this Balance Sheet. The accumulated deficit as per this balance sheet is shown at ₹ 8,63,10,133/-. The accumulated deficit is thereafter carried forward from AY 96-97 to AY 2004-05 and stands reduced to ₹ 8,54,16,519 as on 31.3.2005 which is sought to be set off against the income of AY 2005- .....

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in the earlier AYs and used for charitable purpose and repaid during the PY. There is no material on record to substantiate the claim of the Assessee that a sum of ₹ 8,54,26,519/- was accumulated deficit. Admittedly such accumulated deficit has not been determined in any assessment proceedings and therefore the claim of the Assessee in this regard was wrongly allowed by the CIT(A). Gr.No.1 raised by the revenue is accordingly allowed. 20. As regards grounds No.2 to 5 raised by the revenue .....

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ught to be allowed to the Assessee to the extent of repayment of loans. There is no dispute that repayment of loan taken for charitable purposes had to be treated as application of income for charitable purposes. The evidence on record indicates that there are loan confirmations by the following persons for the following amounts: 1. Jadavlal Trust Estate Rs.96,00,000 2. Devi Lachmi Debottar Estate Rs.14,00,000 3. Smt.Anita Banerjee (decd) Rs.4,80,00,000 4. Sri Keshab Narayan Banerjee Rs.1,66,00, .....

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d it was not possible to preserve the documentary records for these charitable activities for a long period as the records are weeded out every 10 years for paucity of space to preserve the same. At page-26 to 29 is the ledger account of Advance/Loans Received from 1.4.2004 to 31.3.2005. Perusal of the same shows that the opening credit balance was ₹ 8,69,47,276 and the Assessee has repaid loans to the extent of ₹ 4,54,11,300 to the following persons during the previous year: 1. K.N. .....

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he year in which the loans were availed, there was no scrutiny assessment. In fact the Assessee has started filing returns of income only after AY 2002-03. Therefore the factum of borrowing and the utilization of the funds borrowed were never subjected to scrutiny in the past. There is no evidence filed by the Assessee in this regard. The CIT(A) has referred to the following evidence in upholding the claim of the Assessee viz., (a) details of expenses along with evidence; (b) Loan confirmation; .....

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