TMI Blog2011 (9) TMI 1133X X X X Extracts X X X X X X X X Extracts X X X X ..... any document. In the instant case, the assessee was liable to show this interest as income in the books of account as per mercantile system of accounting. Thus, the A.O. has rightly concluded that the appellant has given interest free loan to treasurer is in violation of the provisions of Section 13(1)(c) and also giving loan without any adequate surety in violation of Section 13(2)(a). In the present case, A.O. has denied exemption u/s 11 in view of the provision of Section 13(1)(c) 13(2)(a). Respectfully following the decision made in aforementioned case, we, therefore, restore the order passed by the A.O. - Decision against Assessee. - Income Tax Appeal No. 142 of 2007 - - - Dated:- 13-9-2011 - D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the relevant assessment year. Finally, the A.O. added the surplus to the total income of assessee Society. However, in First Appeal, the CIT (A) has deleted the addition. The Tribunal by the impugned order upholds the order of First Appellate Authority by relying upon the ratio laid down in the case of Vijeta Educational Society in I.T.A.No.425/Luc/05 dated 16.11.2005, wherein it was observed by the Tribunal that the terms, on which the loan was given, were exactly identical as they are in the present case. The relevant observation of the Tribunal is reproduced as under:- 5. We have duly considered the rival contentions and the material on record. The assessee is denied exemption under section 11 primarily on the ground that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... security in the form of surety who has deposited the original title deed of the properties belonging to him. Thus, it is improper to say that the Treasurer was given the loan without interest and security. When such is the case, it cannot be said that income of the trust is deemed to have been applied for the benefit of the Treasurer. We need no detain ourselves for long on this issue as identical issue had come up before the Tribunal in the case of Vijeta Educational Society in I.T.A.No.425/Luc/05 dated 16.11.2005, wherein the Lucknow Bench of the Tribunal held that the terms on which the loan was given did not contravene the provisions of section 13(1)(c) of the Act. In that case also, the terms on which the loan was given were exactly i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of clause (c) of Section 13(1) rendering the entire income of Trust or charitable institution on liable to tax even if only part of income is directed to be applied for the benefit of the specified persons. The legislature, however, also creates a fiction and enumerates in clauses (a) to (h) of sub-section (2) of Section 13, a list of circumstances in which the income shall be deemed to have been used or applied for the benefit of the specified persons. These clauses comprehend various types of benefits such as by way of interest free loans, loans without security, permission or licence to use land or other property without charging adequate recompense, excessive payment for service, sale of property for inadequate consideration and invest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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