TMI Blog2020 (1) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... ulam Chit and Finance Co. Ltd. Undisputedly, investment in chit is not one of the prescribed mode of investments. Therefore we need to examine the transaction from point of view of the activities of the assessee trust. The explanation of the assessee that subscription to the chits was made in order to mobilize the resource to meet repayment of loans availed from same party, has no bearing on the issue. The transaction of subscription to the chits is independent of the earlier transaction of loans borrowed and there is nothing on record to show that the both transactions are interconnected. Subscription to the chits is nothing but the investment which is not one of the prescribed mode of investment u/s.11(5). Therefore it is a clear case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated herein. 4. The Assessee raised the following grounds of appeal: Ground No.1 The order of the learned CIT(A) is contrary to the law and facts of the case; Ground No.2: Contribution to Chit Funds is not violation u/s.13(1)(d) of the act 2.1 The Ld CIT(A) erred in holding that contribution to chit funds not be treated as an investment and there is no violation u/s.13(1)(d) for making investment in modes other than those prescribed under Sec.11(5) of the Act. 2.2 The Ld CIT(A) ought to have appreciated the fact that the funds of the trust were employed in a mode other than what were specified u/s.11(5)of the Act and there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitutes investment; In the instant case, the assessee did not bid the prize money and it stands as investment in the balance sheet; 2.7 The Ld CIT(A) ought to have appreciated the fact that if the contribution towards chit fund is to be adjusted against loan, then the assessee need not seek recourse through chit fund, it could be directly adjusted against the said loan, whereas the assessee had chosen to invest in chits to earn the dividend and to receive the chit amount at a future date i.e., at the fag end of the chit period; since the provisions of Sec.11(5) does not permit investment in chit as an approved mode, the assessee has violated the provisions of Sec.13(1)(d) of the Act; 2.8 It is submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleted by the Assistant Director of Income Tax, Exemptions-III, Chennai (hereinafter called ''Assessing Officer'') vide order dated 30.12.2011 passed u/s. 143(3) of the Act at total income of ₹ 1,60,36,357/-. While doing so, the AO denied exemption u/s. 11 of the Act on the ground that assessee had violated the provisions of Section 11(5) of the Act as it invested surplus funds other than in the mode prescribed under the Act as assessee had subscribed to chits with M/s. Gokulam Chit and Finance Co. (P) Ltd, and paid ₹ 83,47,500/- and also transferred the fund to a private trust namely M/s. Poorna Educational and Charitable Trust. Accordingly, the Assessing Officer held that assessee had violated the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an 385/333 ITR 347 (AP), Hon'ble Delhi High Court in the case of Kanahya Lal Punj Charitable Trust v. DIT (Exemption) [2008] 171 Taxman 134/297 ITR 66 (Delhi) and Hon'ble Orissa High Court it the case of Rabindranath Educational Trust v. Union of India [2010] 191 Taxman 379 (Ori). 8. On the other hand, the ld. Authorised Representative submitted that transaction of subscription of chits is in connection with earlier borrowed and subscription of chit was made with an intention to mobile resources for repayment of loans which was availed from the same party. The ld. Authorised Representative submitted that there is no violation of provisions of Section 11(5) of the Act and without prejudice, he submitted that only tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the transaction from point of view of the activities of the assessee trust. The explanation of the assessee that subscription to the chits was made in order to mobilize the resource to meet repayment of loans availed from same party, has no bearing on the issue. The transaction of subscription to the chits is independent of the earlier transaction of loans borrowed and there is nothing on record to show that the both transactions are interconnected. Subscription to the chits is nothing but the investment which is not one of the prescribed mode of investment u/s.11(5) of the Act. Therefore it is a clear case of violation of provisions of Section 11(5) of the Act, hence assessee trust is not entitled for exemption u/s.11 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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