TMI Blog2012 (2) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose and the benefits of the society and there is no personal benefits of the members of the society is involved in such expenses and there is no violation of section 13 and the assessee is fully eligible for exemption u/s 11 12 of the IT Act. 3. Deleting the addition of ₹ 6,464/- (A.Y. 2004- 05), ₹ 12,637/- (A.Y. 2005-06), ₹ 3,793/- (A.Y. 2006-07), Rs. made by the A.O. on account of disallowance of telephone expenses is wholly unjustified and unlawful. 4. Holding that the provisions of section 13(1)(d)(i) and 13(1)(c)(ii) are not attracted and directing the A.O. to allow the benefit of section 11 12 of the IT Act, 1961. 5. Deleting the addition of ₹ 349417 (A.Y. 2004-05), ₹ 2,59,417/- (A.Y. 2005-06), ₹ 2,59,417/- (A.Y. 2006-07), made by the A.O. on account of benefit of interest passed on to other society. 6. Holding that the assessee is eligible for the deduction u/s 11(1)(a) of the I.T. Act, 1961. 7. Holding that the assessee is fully eligible for deduction claimed at ₹ 2,34,93,995/- (A.Y. 2004-05), ₹ 2,76,78,826/- (A.Y. 2005-06), ₹ 2,82,09,507/- (A.Y. 2006-07), as an application of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment was upheld. The decision of the Hon'ble jurisdictional High Court in the case of CIT vs. Shardaprasad Motilal and others; 191 CTR (MP) 487 wherein it was held that in the absence of any conclusive evidence assuming the existence of AOP, the assessment is bad in law, there is an uncontroverted finding in the impugned order that the assessee declared the status as Artificial Juridical Person, in its return, therefore, the change of status by the Assessing Officer is not permissible that too without giving a notice to the assessee. The assessee had been continuously assessed as Artificial Juridical Person in earlier years, therefore, there was no justification in changing the status by the Assessing Officer, consequently, we affirm the stand of learned Commissioner of Income Tax (Appeals). 3. So far as ground nos. 2 and 3 raised by the Revenue are concerned, the crux of arguments on behalf of the revenue is in support to the disallowance of telephone expenses, whereas the learned counsel for the assessee defended the impugned order. 3.1 We have considered the rival submissions and perused the material available on file. Before coming to any conclusion, we are reprodu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l contributor, trustees of the trust or manager or the institution, any relative of such persons or concern in which they are interested. This has often led Revenue to wrongly infer benefit even where there is none as was done in Director of Income-tax (Exemption) v. Pariwar Sewa Sansthan (2002) 254 ITR 268 (Del), where it was held that no question of law would arise merely because the chief executive officer was given salary and rent free accommodation of a house rented from her husband and loan to a foundation in which she was a partner. The Tribunal had held that the lady was rendering valuable service and the remuneration given was reasonable. So were the other expenses incurred and loan given in the course of carrying out the objective of providing service in the field of family planning, etc. The payment, it was found, did not violate the mandate of section 13(5) of the Act. Further, in the case of ACIT vs. South Point Montessori School (2007) 294 ITR (AT) 149(Gau) it was found that the mere fact that the interested persons were given salaries for service or rent for the premises made available cannot be treated as a benefit to them, when the reward is reasonable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other society for the development and promotion of education, the same should not be construed as a violation of section 13 of the IT Act. Even otherwise, Rewa Shiksha Samiti is also not a concern in which the members/Trustee of the assessee institution have any substantial interest and, therefore, it is not a concern under sub-section 13(3)(e). By giving this loan, no personal benefit has been passed to the members of Rewa Shiksha Samiti because it is given to a charitable society for the promotion of educational facilities and development of infrastructure the fact which has not been disputed by the A.O. The A.O. is also not justified in his findings that Rewa Shiksha Samiti is a person falling u/s 13(3)(e) because in view of explanation 3 to subsection 13(3) defines substantial interest in a concern. The A.O. has not proved as to how Rewa Shiksha Samiti falls within the two subclauses, because sub-clause (i) applies to companies, which have share capital. The sub-clause becomes applicable in a situation where the persons referred to in clauses (a), (b),(c), (cc) and (d) have share holding of 20% and above in the said company, which is not a case here. Further, sub-clause (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 of the IT Act. Interest So far as the addition of ₹ 3,49,417/- being interest @ 12% attributable to the loan given by the assessee to Rewa Shiksha Samiti is concerned, I find that the said addition is not justified because the assistance was given to the other society for a noble and charitable cause as both the societies exists for the purpose of promotion and development of education. Though the A.O. has proceeded to make addition of interest income of ₹ 3,49,417/- the income was neither received nor accrued to the assessee. There is no concept in the income tax regarding taxing of notional income. The learned counsel of the appellant has rightly placed reliance in the case of CIT vs. Choorji Vallabhdas Co. (1962) 46 ITR 144(SC), wherein it has been held that income tax is a levy on income. If come does not result at all, there cannot be a tax. Further, as is evident from the chart submitted by the appellant for the loan given that for the same loan, no addition were made for the alleged notional interest income prior to A.Y. 2004-05 and thus this is the first year when interest income has been brought to tax. I, therefore, do not see any j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the impugned order that both the societies were having similar object of imparting and promoting education. There is a further finding that the trustees of the assessee institution were not having any substantial interest in Rewa Shiksha Samiti and no personal benefit was passed to its Members. We further find that the learned Assessing Officer has not conclusively substantiated with evidence in reaching to a particular conclusion, consequently, in view of the clear provisions of the Act as contained in section 13(3)(e) along with Explanation 3, we find no infirmity in the stand of learned Commissioner of Income Tax (Appeals) and confirm the same. Identical is the situation for the addition of interest @ 12% as assistance was given to the society for a noble cause and even otherwise, it is consequential in nature. 5. So far as ground no. 6, which pertains to eligibility for deduction u/s 11(1)(a) of the Act raised by the Revenue is concerned, the crux of arguments on behalf of the revenue is in support to the assessment order, whereas the learned counsel for the assessee defended the impugned order. 5.1 We have considered the rival submissions and perused the material avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant. On similar issue the appellate Tribunal, Indore in the case of Vichar Bharti Education Society vide order dated 13.07.2010 (ITA Nos. 540 to 542/Ind/2007, 317 318/Ind/2006 and 256/Ind/2007) has held that the assessee is eligible for such deduction of income since there was no violation of section The findings of Hon'ble I.T.A.T. in above referred case is as under :- 27. As regard to issue of application of income in respect of acquisition of fixed assets, we find that it is not in dispute that such assets have been acquired for the purpose of advancement of the objects of the society and, therefore, such investment should be treated as an application of income in terms of the provisions of section 11 of the Act. Thus, these grounds of the Revenue are without any merit, hence, dismissed in all the years. I find that this issue is covered by the aforesaid decision of the jurisdictional Tribunal. Accordingly, I decide the issue in favour of the assessee and hold that the assessee is fully eligible for deduction claimed at ₹ 2,34,93,995/- as an application of income u/s 11 and 12 for the acquisition of fixed assets. This ground is, therefore, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order. 8. So far as ground nos. 1, 2, 4 and 5 are concerned, the same are covered by our aforesaid order, therefore, following the reasonings contained above, we dismiss these ground. 9. The only Ground remains for our consideration is ground no. 3 which pertains to claim of depreciation at ₹ 2,30,98,929/-. The stand of the Revenue is that when the society had been claiming the cost of assets to be fully allowable as application of income year after year, therefore, depreciation cannot be allowed, whereas learned counsel for the assessee defended the conclusion drawn in the impugned order. 9.1 We have considered the rival submissions and perused the material available on file. Before coming to any conclusion, we are reproducing hereunder the concluding portion of the impugned order :- I have considered the appellant s submission and also gone through the assessment order. In view of the judicial decisions cited including that of Hon'ble judicial Indore Tribunal in the case of Madhya Pradesh Madhyam for A.Y. 2005-06 (ITA No. 458/Ind/08), I direct the A.O. to allow the claim of depreciation of ₹ 2,30,98,929/- and thus this ground is decided in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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