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2016 (11) TMI 527 - ITAT DELHI

2016 (11) TMI 527 - ITAT DELHI - TMI - Exemption u/s 11 - Application of income towards loan repayment to the bank - depreciation claim - whether the loan money was shown to have been utilized for acquisition of the asset? - Held that:- On perusal of the statement of income filed for the assessment years 1992-93 to 1999-2000 during which the loan was received by the assessee, we find that apparently the loan under reference received from World Bank has not been shown as income in any of the year .....

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ia Ltd. (Technology Service Revolving Fund) Scheme. Similar notes have been provided in case of other assessment years involved. - In the assessment years from 1992-93 to assessment year 1998-99, the depreciation provided in the books of accounts has been reduced from the expenditure claimed towards application of income, which means the depreciation has not been claimed as application of income. From the assessment year 1999-2000 onwards till the assessment year under consideration also th .....

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aimed loan as deduction or application of income and therefore, in our opinion, allowing application of repayment of loan will amount to double deduction. Thus as assessee has already been allowed cost of addition to asset acquired out of the loans as application of income in relevant years and therefore assessee cannot be allowed the repayment of loan as application of the income - Decided against assessee - ITA No. 920/Del/2012 - Dated:- 30-9-2016 - SH. I.C. SUDHIR, JUDICIAL MEMBER AND SH. O.P .....

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whether the application of money was shown to have been for the acquisition of asset with the loans obtained is a matter of fact. There is no specific finding. In these circumstances, the matter is remitted for reconsideration by the Tribunal which shall also taken into account the material brought on record by the assessee that are not already on record under Rule 29 to facilitate a fuller appreciation and recording of facts in this regard. The appellant is also at liberty to place reliance on .....

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y the assessee are that the assessee is a society registered under the Societies Registration Act vide registration dated 05/10/1940. The assessee was engaged in carrying out the scientific and industrial research in applied sciences. The return of income was filed declaring nil income on 30/09/2008. The Assessing Officer noted that assessee has shown income derived of ₹ 34,29,70,551/- and application of income thereof and thus claimed the taxable income as nil. 4. The statement of computa .....

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ent on account of employee benefits in general fund 65,27,451 - Other Incomes 58,54,490 Total Income 34,29,70,551 Less :- Income accumulated u/s 11(1) of the Act upto 15% of income derived 5,14,45,583 Balance income to be applied 29,15,24,968 Less : - Income Applied - Research & other Expenses 17,59,09,531 - Interest paid 3,07,523 - Repayment of loan to World Bank 1,70,00,000 - Loss on redemption of Securities 53,650 - Provision for pay arrears 3,24,80,000 - Addition to fixed assets [net of .....

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to the bank amounting to ₹ 1,70,00,000/- and this claim was not made in the audited income/expenditure account appended with the return of income but the claim has been made separately by way of the statement furnished alongwith the return of income. On being asked by the Assessing Officer to clarify the nature of said loan, the assessee submitted that the financial assistance for an amount of ₹ 62.2 million (US dollar 3.57 million) was originally sanctioned by the World Bank in 1990 .....

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for Reconstruction and Development (World Bank), International Development Association (IDA) and the Government of India and final disbursement received by the assessee in March 1996. The final amount disbursed was ₹ 125 millions due to increase in exchange rate of dollar. The repayment made during the year under consideration of ₹ 170 lakhs was toward this loan. The said loan was interest-free in nature and amount was paid towards the principal amount. It was observed by the Assess .....

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the Central Board of Direct Taxes (CBDT). However, the Assessing Officer was of the opinion that Circular was not of help to the assessee as the benefit of the circular could be availed by the assessee who had shown debt in the nature of income at the time of receiving such debt. The Assessing Officer relied on the decision of the Hon ble Apex Court in the case of Escorts Ltd. Vs. UOI, 199 ITR 43 and Hon ble Apex Court decision in the case of Lakshmipat Singhania Vs. CIT 71 ITR 291. Considering .....

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held the action of the Assessing Officer with following observation: 3.2 I have gone through the finding of the AO in the assessment order and written submission of the Id. AR. Further, Id. AO also relied on various case laws which were perused by me and Id. AR has also produced the copy of Form No.3CD for assessment years 2006-07 and 2007-08, wherein, repayment of the loan has been shown as under:- Rs.1,80,00,000/- for the assessment year 2006-07 Rs.1,70,00,000/- for the assessment year 2007-08 .....

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say for instance, an assessee receives a loan of ₹ 100/-. The same is not reflected as an income. However, as against this, the assessee claims ₹ 100 towards application [purchase of assets] and again ₹ 100[repayment of loan]. In other words, against a receipt of the out-go is to the tune of ₹ 200/-. 3.3 In the relevant paragraph No. 6.3 and 6.4, AO has relied on the decision of Hon ble Supreme Court in the case of Escorts Ltd. vs. Union of India, 199 ITR 43 and in the c .....

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through the facts of the case and in my considered opinion reliance on the case of Span Foundation is distinguishable on facts due to following reasons:- 1) In case of the appellant, loan has been found to be interest free whereas there is no mention about the interest in the case of Span Foundation. 2) The case of appellant is that appellant has taken loan from World Bank for strengthening activities of Material Science and Analytical Chemistry, Environmental Protection etc., whereas, case of S .....

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e assessment order, wherein, AO has relied on the judgment in the case of C1T vs. Ramchandra Poddar Charitable Trust [1987] 164 ITR 666 (Cal.). So, in my considered opinion, I am in agreement with the finding of the AO in this regard that Circular No. 100 does not favour the case of the appellant. Furthermore, reliance on various case laws by the Id. AR of the appellant is found to be distinguished on the facts and in my considered opinion action of the AO making addition of ₹ 1,70,00,000/ .....

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gh Court of Delhi. The Hon ble High Court after taking into consideration the submission of the parties, remitted the matter for reconsideration by the Tribunal with the following observations: 3. The Tribunal noted that the case of the assessee was that it wanted to let out the building and derive rent therefrom and use the rents for the charitable purposes set out in the trust deed. As noted above, the assessee had borrowed funds for the purposes of constructing the building. The rent that was .....

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the lease of the property for charitable purposes. The Tribunal noted that as and when the loans are discharged and the assessee becomes free to utilize the rental income, it would apply the same for charitable purposes set out in the trust deed and that it is at that juncture that the Assessing Officer could insist that the application of the income be for the purposes mentioned in the trust deed. The Tribunal concluded that the repayment of the funds borrowed for construction of the building w .....

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cy in accordance with law, after affording the assessee an opportunity of being heard. However, while doing so, the Tribunal noted its earlier decision in the case of Rabhubir Saran Charitable Trust v. Income Tax Officer where the view was taken that if the rent charged by an assessee was higher than the standard rent, as computed under the rent control legislation, then the rent charged by the assessee should be considered as adequate. We note that the Tribunal s decision in Rabhubir Saran Char .....

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n of the Hon ble High Court for admitting detailed chart of total receipts as per audited accounts and expenditure claimed appended with the income tax return for the period from assessment year 1992-93 to assessment year 2000-01. The details of addition to assets was also filed alongwith the statement of total income for each of the aforesaid assessment years. 10. Further, the learned Authorized Representative of the assessee claimed that depreciation was never been claimed as an expenditure or .....

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before us, the details of receipts and expenditure as well as statement of income for the assessment year from 2001-02 to 2008-09 were made available by the assessee for admission as additional evidence under Rule 29 of the ITAT Rules. 12. The learned Commissioner of Income Tax (Departmental Representative), relied on the findings of the lower authorities and reiterated the submission made before the Hon ble High Court by the Department. 13. We have heard the rival submissions and perused the ma .....

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. From the facts of the case, we find that loan under reference was sanctioned in the year 1990 and final amount of disbursement of the loan was received by the assessee company in March, 1996. On perusal of the statement of income filed for the assessment years 1992-93 to 1999-2000 during which the loan was received by the assessee, we find that apparently the loan under reference received from World Bank has not been shown as income in any of the year concerned. Further, we find from the state .....

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Scheme. Similar notes have been provided in case of other assessment years involved. The assessment year wise deduction claimed for cost of fixed asset is as under Sl. No. assessment year cost of fixed asset claimed as deduction (in Rs.) 1. 1992-93 1,73,58,448/- 2. 1993-94 1,08,17,964/- 3. 1994-95 1,10,97,687/- 4. 1995-96 1,86,70,264/- 5. 1996-97 3,30,21,268/- 6. 1997-98 2,01,21,185/- 7. 1998-99 2,72,73,985/- 15. Further, on perusal of the statement of computation of income, we find that in the .....

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t shown the loans received as its income or receipt, in the year in which such loan was received by the assessee and, therefore, the repayment also cannot be allowed as an expenditure or application of income. Further, we find that loan money obtained has been shown as application on acquisition of fixed assets and, therefore, the assessee has already claimed loan as deduction or application of income and therefore, in our opinion, allowing application of repayment of loan will amount to double .....

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