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TMI Blog2016 (6) TMI 1484X X X X Extracts X X X X X X X X Extracts X X X X ..... Nadu Government. The trust has applied for registration under section 12A of the Act on 08.05.2008 before the Commissioner of Income Tax-I, Coimbatore. The application for registration was rejected vide order dated 10.11.2008 by the ld. CIT holding that the trust has no substantial charitable activity. Similarly application for grant of approval under section 80G of the Act filed on 08.05.2008 was also rejected vide order dated 10.11.2008. The assessee trust has again applied for registration under section 12AA of the Act vide application dated 19.05.2009, which was also rejected by the ld. CIT by order dated 23.11.2009. As the trust has not been registered under section 12A of the act, as per the details given above, the trust cannot claim any exemption under section 11 of the act. Therefore, the Assessing Officer opined that the income received during the year by the trust is assessable in the status of AOP. 2.1. The Assessing Officer has further observed that the assessee trust has received Rs.18,19,000/- during the year as corpus fund from 8 different individuals apart from the Managing Trustee's contribution of Rs. 40,000/-. The Assessing Officer has briefly examined all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al before the Tribunal with regard to sustaining the addition of Rs. 18.90 lakhs, unproved donation of Rs. 70.00 lakhs unproved loan credits and alternatively, the assessee has claimed exemption under section 10(23C) of the Act. 5. We have heard both sides, perused the materials on record and gone through the orders of authorities below. In this case, it is an admitted fact that the trust has not been registered under section 12A of the Act and therefore, the assessee cannot claim any exemption under section 11 of the Act. Thus, the income received during the year by the assessee was assessed in the status of AOP. During the course of assessment proceedings, the assessee has furnished copies of ledger accounts of their bank account from Bank of India and Karur Vysya Bank. They also furnished details of corpus fund received during the year and the details of unsecured loan received by the assessee. It was stated that there was no activity of any kind in the trust. The loans and corpus donations received were stated to have been fully utilised towards purchase of land for the trust. As per the details filed, the Assessing Officer has observed that the assessee has received Rs. 18,90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly known to them. Concrete proof for giving these donations was not given by five donors and the sources explained by them are inadequate to support the payment of such donations. The income of a trust would not be exempt unless it has obtained registration under section 12A of the Act. A conjoint reading of sections 11, 12 and 12A of the Act makes it clear that registration under section 12A is a condition precedent for availing benefits under sections 11 and 12 of the Act. Unless and until an institution is registered under section 12A of the Act, it cannot claim the benefit of section 11(1)(a) of the Act. This being the situation, the assessee cannot take shelter of section 12 to claim that what has been received is corpus donation and subject the same to claim of exemption under sections 11 & 12 of the Act. Therefore it is held the credits appearing in the names of above five persons have not been satisfactorily explained as per the provisions of Section 68 of the Act. Accordingly, the donations stated to have been received from the five parties amounting to Rs. 14,40,000/- was rightly treated as income and taxed in the status of AOP. In view of the above, the amount of donatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the managing trustee)stated that the legal notice was sent only to press for recovery of the commission amount promised but not given to them by the trust. He categorically stated that neither himself nor his son have given any loan to the trust. At this point the AR stated that since the parties are now denying the loans given, though the same were genuine, the letter filed by the managing trustee on 25 August 2011 explaining their position may be taken as their explanation on the subject matter. The relevant portions of the letter are reproduced as under:-- "under these circumstances. we would like to inform you that, we have not met in the persons and the loans will arrange two persons known to them. They have issued a legal notice of the trust through their advocate, Shri PK Rajendran, MSc BL on 17.07.2010 demanding the principal and interest due. This clearly shows that the money was lent to us by them. We had explained to them in reply that our bank account was frozen by the DVAC and will be paying the mourns the case before DVAC is over. Further to the both have claimed that the money given to Prahar foundation is shown as assets and they have shown the money paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complaint in this regard with the Chancellor of Anna University, director, Inspector General, Supt. of the police, vigilance and anticorruption. He also claimed to have filed an affidavit with all the details before the honourable High Court, Chennai and filed copies of these documents as evidence. These documents, especially the affidavit filed before the honourable High Court, comprehensively explain as to how the credits have come into being. The sworn statement recorded from the above creditor was also shown to the managing trustee for which no explanation was given. As the creditor has categorically denied the loan and also explained under what circumstances these loans have come into existence, it is clear that the loans shown against the name of Shri S Bala Murugan, are not genuine. As no explanation was offered by the assessee trust with regard to the denial of the credits by the creditor himself, the loan credit of Rs. 15 lakhs appearing in the assessee's books are also not satisfactorily explained. LOAN FROM M/s. POINT RED TELECOM P LTD : An amount of Rs. 25 lakhs, is shown as loan availed from the above creditor, as per the details filed by the assessee trust. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee to prove the same. Inspite of this, the assessee was unable to adduce any evidence to substantiate the claim of existence of the loans. 5.4 The explanation offered for the nature of the sources for these credits are mostly fabricated and not to the satisfaction of the Assessing Officer, within the meaning of section 68 of the Act. Moreover, in this case, the Enquiries made with all the creditors revealed that the assessee Trust/Trustees have used their money and created the loans by using the names/bank accounts of the creditors. Therefore the total unproved loan credits in the above four names amounting to Rs. 70,00,000/- was the income of the trust and assessed under section 68 of the Act by the Assessing Officer was found to be rightly confirmed by the ld. CIT(A). 5.5 With regard to the claim of exemption under section 10(23) of the income tax act, the relevant portions of the letter filed by the assessee is reproduced below in verbatim:-- "with reference to the above subject, I would like to submit the following facts. The institution during the year 2008-09 has carried on no other operations other than buying land (or the college which was approved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s available to "any university or other educational institution existing solely for educational purposes and not for purposes of profit if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipts as may be prescribed". From the details filed it can be seen that the assessee trust has utilised the funds brought in as discussed above only for procurement of lands as admitted by the assessee in its letter dated 20.10.2011. Evidently no other activities were found to have been seen or established. They also have stated that the trust has not commenced any activities. The assessee trust has also filed a copy of the trust deed before the Assessing Officer and on scrutiny of the trust deed, as per Clause 6 of the trust deed there are 42 items listed as objects of the trust and according to the Assessing Officer it is obvious that the trust is certainly not existing solely for the purpose of education, thereby disqualifying itself for the possible claim of exemption under section 10(23C) of the Act. 6. Under the above facts and circumstances, we are unable to agree that the assessee can be termed as an institution existing sol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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