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TMI Blog2013 (12) TMI 1538X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act. The assessee's reply has been reproduced at pages 2 to 3 of Assessment Order. In its reply the assessee referred to the notification of CBDT vide order F. No. 180/06/2009-ITA-1(Pt.) dated 12.10.2010 and pointed out that vide said order CBDT had exempted the income of the society u/s 11(1)(c). Accordingly, it was submitted that there was no question of applicability of section 11(5) and the maintenance of the bank account in France or expenditure incurred in France will not adversely affect the exemption explicitly extended by the CBDT. It was further pointed out that in A.Y. 2008-09 there was no accumulated income as provided u/s 11(2) of the Income Tax Act and, therefore, the applicability of section 11(5) was not required to be considered. As regards the applicability of provisions of section 13(1)(d) it was submitted as under: a) Sub-section(2) of section 11 applies only when 85% of total income referred to a clause (a) or clause (b) of sub-section (1), is not applied for charitable or religious purpose during the previous year. b) In our case during the assessment year under consideration, more than 85% of the total income has been applied for the charitable pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t only under the head "Investment". 2. The investment was earning interest which was reflected on the income side of income and expenditure account. 3. Exemption given u/s 11(1)(c) by board was limited to the extent of income applied outside India. Certificate by board u/s 11(1)(c) did not give immunity from violation of section 13 of Income Tax Act which is specific and leads to forfeiture of tax exemption. 4. The AO also pointed out that assessee's contention that in the year under consideration there was no accumulated income u/s 11(12) and, therefore, applicability of section 11(5) was not required, was misplaced. In this regard he preferred to section 13(1)(d) and pointed out that the said section referred to' any income' for any period. He was of the opinion that 'any accumulation' has to remain invested as per the provisions of section 11(5) else it would be hit by the provisions of sec. 13(1)(d). He, therefore, made an addition of Rs. 18,44,50,256/- which was claimed as expenditure by assessee and thus, determined the deficit at Rs. 81,99,955/-. The interest earned from Credit Industrial et Commercial Paris was taxed at maximum marginal rate u/s 164(2) of the Act. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olation of the provisions of section 11(5). In order to appreciate the controversy it is necessary to refer to the facts of the case as submitted before ld. CIT(A). The same are reproduced hereunder: 1.1 "Indo - French Centre for Promotion of Advanced Research was formed in India under the Ministry of Science & Technology for promotion of advanced research under a joint collaborative programme. The centre was formed jointly by the Governments of India and France, based on the principle of reciprocity and parity. It was registered as a Society under the Societies Registration Act, 1860, on 16.04.1986. The society has also been recognized as Scientific and Industrial Research Organization by the Department of Scientific & Industrial Research (DSIR). 1.2 The government of India has entered into a bilateral arrangement with the Government of France and formed the Institution as a registered society under the Society Registration Act, 1980 and all decisions of the society are subject to scrutiny by both the Governments. 1.3 The Government of India has proposed exemption of the institution from payment of Taxes through a letter No. PAR/E&T/326(2)/84-II dated 08.06.1985 from the the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an investment or as a deposit. The funds representing the grant from the Government of France was directly deposited in this account for utilization by the centre for the mandated purposes. The assessee in its submission had also pointed out that assessee had not shown the balance with Credit Industrial et Commercial Bank, Paris under the head "Investment" but under the head "current assets". The expression 'investment' implies to lay out money in business with a view to obtain income or profit. The term 'deposit' indicates the transaction as deposit of money for employment in business, deposit of title deeds, similar documents as security for loan, deposits of money in a bank in the ordinary course of business of current account and to deposit a sum at interest at a fixed deposit in a bank. Thus, both 'investments' and 'deposits' require a positive act on the part of assessee with an intention to earn income/ interest. However, in the present case, the funds remained lying with the Credit Industrial et Commercial Bank, Paris, France at the end of the year, after meeting expenditure for the mandated purposes, on which the centre had earned nominal interest as per the policy of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and in the circumstances of the case and in law, the ld. CIT(A) has erred in allowing benefits of section 11 & 12 of the Income Tax Act, 1961 to the assessee whereas the assessee has violated the provisions of section 13(1)(d) of the Act; 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in adjudicating that there is no violation of section 13(1)(d) of the Act in respect of interest of Rs. 9,37,722/- earned on investment made with Credit Industrial et Commercial Paris, France, by the assessee ignoring that investment was not made in conformity with section 11(5) of the Act and there was violation of provisions of section 13(1)(d) of the Act and the assessee itself had shown this under the head investment in Balance Sheet; 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in allowing the deficit of Rs. 81,99,955/- of assessment year 2008-09 as there is no provisions for set off of losses u/s 11 & 12 of the Income Tax Act, 1961; 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in holding that maximum marginal rate is not applicable on the income on a/c of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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