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TMI Blog2024 (10) TMI 1557X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition for the same. 3.The Ld. CIT(A), NFAC has erred on facts and in law in confirming the addition of Rs. 8,64,110/- on account of interest free advances given to various persons ignoring that such advances were given in course of carrying out educational activity and there is no provision under the Act to tax notional income on interest free advances given. 2.1 Through Ground No.1, the Appellant has challenged the action of ld. CIT(A), NFAC in directing the AO to check and verify as to whether Assets on which depreciation has been claimed has been allowed as application of income in the previous year or not. 2.2 In this regard it has been pointed out by ld AR that CIT(A), NFAC has no power to set aside an issue under section 251 of the Income Tax Act. The appellant has also relied upon his written submissions. The relevant portion is reproduced here in below:- ''4. It is submitted that as per section 251 of the Act, the Ld. CIT(A) has power to confirm, reduce, enhance or annul the assessment. He has no power to set aside. The direction given by Ld. CIT(A) amounts to setting aside the issue. The CIT(A) has coterminous power with the AO and where the assessee has specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of income. After analysing the entire facts and circumstances and particular facts of the present case more particularly taking into consideration the documents in the shape of balance sheet, income and expenditure account and depreciation chart, it was found that the huge amount has been spent by the Appellant trust in previous year with effect from financial year 2009-10 to 2011-12, but these documents were neither having signatures of auditors nor chairman or Accountant of appellant trust. Since the issue of claim of depreciation is a factual issue and requires verification and checking of the records which are filed and available with the AO, therefore in the fitness of things, it is appropriate to restore this issue to the file of AO with a direction to verify from the records as to whether such assets have been taken into account while determining the application of such assets in the income earned or not. Accordingly the Appellant trust should be given the benefit as per the provisions of section 11 of the Act. It is further directed that the AO while doing this check and verification of the records would also grant reasonable opportunity of hearing to the Appellant bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmed. 5. It is submitted that both the lower authorities have incorrectly invoked section 11(5) of the Act. Section 11(5) prescribes the modes of investing or depositing the money referred to in clause (b) of section 11(2). Section 11(2) provides that where 85% of the income is not applied to charitable purpose but is accumulated or set apart, the income so accumulated or set apart shall not be included in the total income if it is invested or deposited in the modes specified in section 11(5). Thus for applicability of section 11(5), there has to be an application in Form No.10 for accumulation of income. In the present case assessee has not filed any application for accumulation of income and therefore section 11(5) is not attracted. So far as section 13(1)(c)(ii) is concerned, the same applies where any income or property of the trust during the PY is used or applied directly or indirectly for the benefit of specified person. In the present case, amount was given to Smt. Santosh Yadav and Sh. Nitesh Yadav during the year under consideration for the activities of the trust. The same is either subsequently adjusted against the services provided or returned back as the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to these respective persons were in violation of section 11(5) of the Act. However in my view, both the lower authorities have incorrectly invoked Section 11(5) of the Act. Section 11(5) prescribes the modes of investing or depositing the money referred to in clause (b) of section 11(2). Section 11(2) provides that where 85% of the income is not applied to charitable purpose but is accumulated or set apart, the income so accumulated or set apart shall not be included in the total income if it is invested or deposited in the modes specified in section 11(5). Thus for applicability of section 11(5), there has to be an application in Form No.10 for accumulation of income. In the present case assessee has not filed any application for accumulation of income and therefore section 11(5) is not attracted. So far as section 13(1)(c)(ii) is concerned, the same applies where any income or property of the trust during the PY is used or applied directly or indirectly for the benefit of specified person. In the present case, amount was given to Smt. Santosh Yadav and Sh. Nitesh Yadav during the year under consideration for the activities of the trust. The same is either subsequently adjusted ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... @ 12% and made addition of Rs. 8,64,110/- as per table provided at Pg 12 of the assessment order. 2. The Ld. CIT(A), NFAC confirmed the addition made by the AO as per the finding given at Para 6.3, Pg 15 of the order. 3. It is submitted that advances were given in course of carrying out the charitable activity. The purpose for which the advances are given is tabulated as under:- Name of person Amount advanced Purpose of advance Ashok Kumar Bohra Rs.2,50,000/- He was advanced Rs. 2,50,000/- on 26.03.2015 against supply of stone but since he could not supply the required quantity due to non availability, he return back the same on 08.04.2015. Thus amount remained with him only for 13 days. His confirmation and the ledger account is at PB 22-24. Hence it is incorrect to hold that advance was not given for the activities of the assessee. Chanchal Sales Agencies Rs.15,00,000/- Advance was given to it on 19.03.2013 against which cement was supplied by it during FY 2016-17. Copy of confirmation, ledger account and the bills of supply is at PB 25-31. Thus the advance was given for the activities of the assessee. Priyanka Yadav Rs.3,00,000/- She is employee of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er concern or the debtor paid the interest to assessee; notional interest cannot be charged to tax CIT Vs. Shoorji Vallabhdas And Co. (1962) 46 ITR 144 (SC) It was held that Income tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income, if income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a "hypothetical income " which does not materialize. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that, effect might,, incineration circumstances, have been made in the books of, account. The agreements within the previous year replaced the earlier agreements, and altered the rate in such a way as to make the income different from what had been entered in the books of account A mere b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not have been added by the AO as per law. For this legal preposition I rely upon the decisions in the case of B and A Plantations and Industries Ltd. Vs. CIT242 ITR 22 (Gauhati) (HC) wherein it has been held that when there is no finding that assessee had in fact received interest on advance made to a sister concern or the debtor paid the interest to assessee; notional interest cannot be charged to tax and also in the case of CIT Vs. Shoorji Vallabhdas And Co. (1962) 46 ITR 144 (SC) wherein it was held that Income tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income, if income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a "hypothetical income " which does not materialize. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual ..... X X X X Extracts X X X X X X X X Extracts X X X X
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