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2017 (3) TMI 205 - CALCUTTA HIGH COURT

2017 (3) TMI 205 - CALCUTTA HIGH COURT - [2017] 392 ITR 178 - Application of the income for charitable purpose under section 11 - repayment of loan - Held that:- In this case the appreciation of facts is based only on the evidence furnished by the assessee. It is not a case where the assessee did not disclose the identities of the persons who had given the loan and had received the repayments as claimed. The fact that the books and bank account of the assessee stood seized in the relevant period .....

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material and evidence taking into account that principles of preponderance of probabilities applies. He did not discharge his role of investigator by relying upon any material or evidence to support his adverse finding. We, therefore, answer the first question in the negative, in favour of the assessee. - Accumulated deficit shown - Held that:- We think it proper to also remand this claim to the Assessing Officer for adjudication. In that view of the matter the question need not be answered .....

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d the learned advocate for the appellant and are satisfied that the case involves the following substantial questions of law of those suggested by the appellant/assessee. i) Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in reversing the order of the CIT(A) and thereby restoring the conclusion of the assessing officer that repayment of loan amounting to ₹ 4,54,11,300/- will not amount to an application of the income for charitable purpose under .....

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26,519/- was the accumulated deficit of earlier years? The undisputed facts are that the assessee is a trust duly registered under the Income Tax Act, 1961 whose objects are charitable in nature. For the assessment year under consideration the assessee filed return of income showing total income at nil. The trust did not file any return up to the assessment year 2002-03 since in June, 1980 search and seizure were conducted by the income tax authorities. In the month of June, 2003 they returned a .....

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ments of loan. Merely because the grantor of the loan was a trustee and the repayments made to her heirs, on the basis of surmise and conjecture the Assessing Officer had held that trust funds were being transferred to them and disallowed the same by invoking section 13(1)(c). Mr. Chatterjee, learned advocate appeared on behalf of the Revenue and submitted, the Assessing Officer was correct in his findings on facts which findings stood confirmed by the Tribunal. He submitted, therefore, the ques .....

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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. The assessee gave the following information in response:- 1. Repayment of Loan & Evidences. During the year the trust had paid a sum of ₹ 4,54,11,300/- towards repayment of loan which was given to the trust to continue with the benevolent activities of the trust for the needy people of Labhpur and the surrounding areas in the district of Birbhu .....

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dy been filed during the course of assessment. 2……….. 3. Loans & Advances : During the course of assessment we have already filed the detailed list of advances amounting to ₹ 8,69,47,275.97 along with the confirmation from each of the loan creditor whom the trust had procured. Late 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 D .....

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ts could be produced for the current financial year or earlier years. According to him this was nothing but transfer of trust funds to the trustees or their relatives in the pretext of repayments of loan in violation of the provisions contained in section 13(1)(c). On the assessee s appeal the CIT(A)found, inter alia, as follows:- ……………It is evident from the records submitted to this office that the assessee trust paid loan of ₹ 4,54,11,300/- by cheque. T .....

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payment of loan originally taken to fulfill one of the objects of the trust would be treated as application of income. The Revenue appealed to the Tribunal. The Tribunal held, inter alia, as follows:- 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: (c) balance sheet for last eight years; (d) Bank statements; (e) list of repayment of loan, (f) write-up on purpose for acquiring loans. .....

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estore the order of the AO in this regard. The Tribunal concurred with the Assessing Officer on the disallowance made based on the inability of the assessee to furnish evidence to prove borrowing. According to them the assessee had merely asserted. On the other hand, the CIT(A) found the assessee to have proved its case considering that the assessee s books and bank account stood seized from the year 1980 to 2003. It appears the CIT(A)was satisfied that the assessee had furnished evidence in sup .....

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ot be lost sight of in adjudicating whether the assessee had prima facie proved its claims. The Assessing Officer, however, had come to a finding that this was really transfer of trust funds to the trustees or their relatives, for their benefit, and hit by the mischief of section 13(1)(c). This was an adverse finding against the assessee. The Assessing Officer being an investigator and adjudicator, when coming to an adverse finding against the assessee, was required to record such finding adequa .....

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concerned, the Assessing Officer had mentioned in the assessment order that the assessee had shown accumulated deficit of ₹ 8,54,26,519/-. The assessee had sought to adjust the surplus against such accumulated deficit which was disallowed by the Assessing Officer. We could not find any adjudication on such claim of accumulated deficit in the assessment order. The CIT(A) held as under:- I have carefully gone through the submissions made by the ld. A/R of the appellant and the order passed .....

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., the A.O. had called for specifically for the purpose of assessment. However it is a matter of record that the appellant had provided all the necessary High Court orders (page no.85,128,147) details of expenses along with evidence (page no.95), loan confirmation (page no.173), balance sheet for last eight years (page no.103), bank statements (page no.190) list of repayment of loan (page no.186), write up on purpose for acquiring loans (page no.170) etc., A.O. has not gone through the details a .....

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ar in which the income is adjusted to meet the expenses incurred for charitable or religious purposes. In other words, even if the expenses for charity have been incurred in the earlier year and the said expenses are adjusted 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 .....

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uch claim for accumulated deficit had not been determined in any assessment proceeding and therefore the claim was wrongly allowed by the CIT(A). Mr. Banerjee submitted that deficit incurred by a trust could not be treated in the same way as that of a loss sustained by an assessee under the head profits and gains of business or profession for such deficit to be furnished in a return and verified. The same was to be allowed to be set off against surplus on application of accounting principles. He .....

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