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TMI Blog2017 (11) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... reason for not filing the appeal within the time limit, before the ITAT. Therefore, we condone the delay and admit the appeal for hearing. 3. The Grounds of appeal raised by the assessee are as under: "1.That on the facts and circumstances of the case, the ld. Director of Income Tax(Exemption), Kolkata erred in rejecting the Application for Renewal of Exemption u/s 80G(5)(vi) of the I.T. Act, 1961 on the ground that the loan given to Mrs. ShrutiMohta, wife of one of the Trustees, Shri RaghvendraMohta was in violation of provision of section 11(5) of the I.T. Act, 1961. 2.That on the facts and circumstances of the case, the ld. Director of Income Tax(Exemption), Kolkata should have considered that the loan given to the wife of one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961, Director of Income Tax(Exemption) held that the assessee trust was not eligible for granting exemption u/s 80G(5)(vi) of the Income Tax Act, 1961 because the assessee had not made investment as per provisions of section 11(5) of the I.T. Act 1961 as the assessee-trust had provided a loan to the wife of one of the trustees which is in violation of section 11(5) of the Act, therefore, exemption had been denied u/s 80G(5)(vi) of the Income Tax Act, 1961. 5.Aggrieved by the order of the Director of Income Tax (Exemption), the assessee is in appeal before us. The ld. Counsel for the assessee has stated that no doubt, the loan given to the wife of one of the trustees of the assessee trust, was not in accordance with the provisions of sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust has allowed the loan to the wife of one of the Trustees,the assessee trust should not be denied for exemption u/s 80G(5)(vi) of the Income Tax Act, 1961 because the loan was fully secured and bearing interest rate of 12% which is more than the prevailing rate in the market. In addition to this, the Counsel for the assessee has relied onjudgment of Hon'ble High Court of Allahabad in the case of J. K. Charitable Trust 196 ITR 31 wherein it was held with reference to cl. (a) of sub-s. (2) of s. 13 that the interest/rent charged by the assessee-trust on loans advanced and buildings leased out to certain concerns were hit by the said provisions on the ground that the interest/rent charged was adequate. The trust gave advanced to three compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as regards determination of the adequacy of the interest paid on money lent by the trust. The rate of interest is dependent on various factors. The rate of interest is less where loan is with security and more where it is without security. The rate of interest for the purpose of deposit differs from the rate for the purpose of borrowing. For the purpose of judging the adequacy of the rate of interest in the present case, what is relevant to be considered is the rate prevalent in the market for the purpose of depositing money and the rate of interest for the purpose of borrowing money cannot be made the criterion for judging the adequacy of the rate of interest.The assessee-trust deriving interest on money deposited in a firm where the trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Act, 1961 should not be denied. Therefore, in the instant case, the assessee trust is deriving interest on loan given to wife of one of the trustees and the loan is secured by the gold ornaments. Therefore, it cannot be said that loan had been given by the assessee-trust with inadequate security or free of interest, therefore, exemption u/s 80G(5)(vi) of the Income Tax Act, 1961 should not be denied. Therefore, considering the factual position explained above, we are of the view that there is no violation of the provisions of section 11(5) of the Act, because the loan against the adequate security and bearing interest @12% per annum which is more than the prevailing market rate and therefore, we direct the Director of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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