Income Tax Appellate Tribunal - Chandigarh
Dcit, Chandigarh vs Amritsar International Foundation ... on 8 December, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH 'A', CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.310/Chd/2017
(Assessment Year : 2013-14)
The D.C.I.T., Vs. Amritsar International
Circle-1(Exemptions), Foundation(Trust),
Chandigarh. Amritsar Jalandhar G.T.Road,
Near Manwala P.O. Meharban,
Amritsar.
P A N : AAB TA0422D
(Appellant) (Respondent)
Appellant by : Dr.Gulshan Rai, CIT, DR
Respondent by : Shri Sudhir Sehgal
Date of hearing : 12.09.2017
Date of Pronouncement : 08.12.2017
ORDER
PER ANNAPURNA GUPTA, A.M.:
Th i s a p p e a l h a s b e e n p r e f e r re d by t h e R e v e n u e a ga i n s t t h e o r d e r o f L d . C o m m i s s i o n er o f I n co m e Ta x ( A p p e a l s ) - 2, A m r i t s a r [ h e r e i na f t e r r e f er r e d to a s ' CI T( A p p e al s ) ' ] d a t ed 2 6 . 1 0 . 2 0 16 r e l ati n g t o a ss e s s m ent y e a r 2 01 3 - 1 4 .
2. Th e only i s s ue in the p r e sen t a p p e al r e l a te s to exemption cl a i m e d by the as s e s s e e as an i n s t i t u t i on e s t a b l i s he d w h ol l y for the p ur p o s e of e d u c at i o n u/s 1 0 ( 2 3 C ) ( vi ) o f the I n c o m e Ta x A ct , 1 9 6 1 ( i n s h o r t ' t h e A c t ') , w h i c h w a s d e n i ed b y t h e A s s e s s i n g O f f i c e r s i nc e h e f o u n d t h a t t h e a ss e s s ee h a d a d v a nc e d i n t e r e s t fr e e l o an o f R s . 30 l a c s t o o n e M / s B a b a A m a r n a th E d u c a t i o na l S o c i e t y , w h i ch a s p e r t h e A s s es s i n g Of f i c e r, wa s a s p e c i fi e d pe r s o n u/s 2 13(3) of the Ac t with whom such t r a n s ac t i o n s w e re p r o h i b i t ed b y s ec t i o n 1 3 ( 1 ) © o f th e A c t , f or t h e p u r p o s e of c l a i m i n g e x e m p t i o n . Th e A O a l s o d e n i e d t h e e x e mp t i o n s i n ce h e f o u n d th a t th e s a i d a dv a n ce w a s i n vi o l a t i o n o f t he p r e s c r i b ed m o d es o f i n v e s t m en t s o f f u n d s o f t r u st s c l a i m i n g exemption u/s 10(23C) of t he Act, as p r e sc r i b e d u /s 1 3 ( 1 ) ( d ) r w s 1 1( 5) o f t h e A c t . Th e A s s e s s i n g O f f i ce r a l s o h e l d t h a t t h e a s se s se e w a s i n e l i g i b l e f o r e x e m p ti o n s i n c e h e found that th e main object of the a s s e ss e e was not education but giving loan an d a d v a n ce a nd building c a p i t a l . Th e s u rp l u s e a r n ed b y t h e a s s e s se e a mo u n t i n g t o R s . 3 , 6 4 , 60 , 3 8 3 /- t h e r e f o re w a s su b j e c t e d t o t a x.
3. B e f o r e t h e L d . CI T( A p p e a l s ) , d e t ai l e d s u b m i ss i o n s w e r e f i l e d i n w r i ti n g b y t h e a s s e s see r e p r o d uc e d i n t h e o r de r from pages 4 to 17. B r i e f l y s t at e d , t h e a s s e s s ee a s s a i l e d t h e o r d e r o f t he A s s e s s i n g O f f i ce r s t a t i n g t h a t ;
i) Th e advance gi v e n to M/s Baba A ma r n a t h
E d u c a t i o na l S oc i e t y was not given in the
i m p u g n e d y e ar b u t i n a s s e s s m en t y e a r 2 0 1 1 - 1 2 a n d t h u s h a d n o r e l e v a n c e t o t he i m p u g n e d y e a r .
ii) Th e a d v a n c e w a s a u t h o r i z e d b y i t s o b j e c t s a n d h e n c e w a s t o be t r e a t e d a s ap p l i c a t i o n o f i nc o m e o f t h e a ss e s s e e.
iii) Th e p r o v i s i o n s o f s e c ti o n 1 3( 1 ) ( c ) / 1 3 ( 1 ) ( d ) r e a d with section 13(3) of the Act were not applicable s i n c e th e a ss e s se e h a d c l a i me d e x e m p t i o n u/ s 1 0 ( 2 3 C ) ( vi ) o f th e A c t a nd t h e s a i d p ro v i s i ons a p p l i e d t o e x e mp t i o n cl a i m e d u/ s 1 1 o f th e Act only.
3
iv) Even otherwise the assessee had not violated the p r o v i s i o ns o f sec t i o n 1 3 ( 1 ) ( c ) r ea d w i t h se c t i o n 13(3) since M /s Baba Am a r na t h E d u c at i o n a l S o c i e t y w as n o t a s p e c i f i e d p e r s on a s p e r s e ct i o n 1 3 ( 3 ) o f t h e A ct .
v) Th e a s s e s s e e h ad n o t v i o l a t e d th e p r o v i si o n s o f s e c t i o n 13 ( 1 ) ( d) r. w . s 1 1 ( 5) a l s o s i n c e t h e a dv a n c e w a s g i v e n f o r f u l f i l l m e n t o f i ts o bj e c t .
vi) Th e r e was no merit in the co n t e n t i o n of t he A s s e s s i n g O ff i c er t h a t t h e a s s e ss e e w a s i n d u l g i ng o n l y i n g i v i n g l o a n s a n d a d v anc e s a n d b u i l di ng capital si n c e th e a d v a n ce h ad been given in p u r s u a n c e o f i ts o b j e c t s .
4. Th e L d . C I T( A p pe a l s ) a ft e r c on s i d e r i n g a s s e ss e e 's s u b m i s s i on s allowed the a s s ess e e ' s a pp e a l d el e t i n g the e n t i r e a dd i t i o n m a d e .
5. A g g r i e v e d b y t he s a m e , t h e R e v en u e h a s n o w f i l ed t h e p r e s e n t ap p e a l be f o r e u s , r a i si n g t h e f o l l o w i n g g r ou n d s :
"1. Whether on the facts and in the circumstances of the case the Ld. CIT( A) has erred in law while allowing exemption under section 10(23C)(vi) of the l.T.Act. 1961 without appreciating that there was a clear violation of sub clause(a) of un-numbered proviso 3 to section 10(23C) which strictly provides that application of income shall be wholly and exclusively to the objects for which it is established. The assessee was precluded from applying its income other than on its objects which was solely for education purposes.
2. Whether on the facts and in the circumstances of the case the Ld.CIT(A) has erred in law in not taking into account that the advancement of loan is not an application of income for the purpose of section 10(23C)(vi).
3. Whether on the facts and in the circumstances of the case the Ld. CIT(A) has erred in law while not considering sub clause (b) of un-numberedproviso3tosection10(23C) which prohibits investment of funds other than in any mode or forms specified in section 11(5).4.4
4. Whether on the facts and in the circumstances of the case the Ld. C1T(A) has erred in law while allowing benefit under section 10(23C)(vi) of the l.T.Act.1961 without appreciating that there was a clear violation of section 13 of the Income Tax Act.
5. Whether on the facts and in the circumstances of the case the Ld. CIT(A) is right in law as the findings recorded are perverse and contrary to the evidence/material available on record and duly considered by the AO.
6. The Appellant craves leave to add or amend the grounds of appeal on or before the date it is heard and disposed off."
6. W e h a v e h e a r d t h e c o n t e n ti o n s o f b o t h t h e p ar t i e s, g o n e t h r o ug h t he o r d e r s o f t h e a u t h o r i t i e s b e l o w a n d a l so c a r e f u l l y p e r u sed t h e d oc u m e n t s t o w h i ch o u r a t te n t i o n wa s d r a w n d u ri n g t he c o u r s e o f h e ar i n g b e f o r e u s .
7. Th e f a c t s r e l a t i ng t o t h e c a s e w hi c h a r e n o t di s pu t e d , i s t h a t t h e a s s es s e e t r u s t i s r eg i s t e r e d a s a n i n s t i t u t i on e s t a b l i s he d w ho l l y f o r e d u c a ti o n al p u r p o se s u /s 10 ( 2 3 C ) ( vi ) o f t h e I n c om e Ta x A c t , 1 9 61 a n d d u ri n g th e i m p u g ne d a s s e s s m e nt y e ar h a d c l a i m e d e x em p t i o n of i ts i n co m e u n d er t h e s a i d s e c ti o n . I t i s a l so n o t d i s p u t e d t h a t i nt e r e s t f r e e l o a n o f R s . 30 l ac s w a s g i v e n t o o n e M/ s B ab a A m a r n a th E d u c a t i o na l S o ci e t y .
8. Th e c o n t e n t i o n of t h e R e v e n u e i s t h a t t h e s a i d l oa n i s i n v i o l a t i o n o f th e p r o vi s i o n s o f s e c t i on 1 3( 1 ) ( c ) r e a d w i th s e c t i o n 1 3 ( 3 ) o f t h e A c t a n d he n c e t he a ss e s se e i s n ot e l i g i b l e to c l a i m e x e m p t i o n u/ s 1 0 ( 2 3 C ) ( vi ) o f t he A c t . Th e Ld. DR, r e l y i ng u p o n t h e o r d er o f t h e A s s e s s i n g O f f i c e r stated t h at M /s Baba A m a r nat h Educational Society is c o v e r e d u / s 13 ( 3 ) b e c a us e b ot h t h e as s e s s e e an d t h e s a i d t r u s t h a v e c omm o n m e m b e r s an d h a v e i n t e re st i n o t h e r 5 s i s t e r co n c e r n s a l s o a n d h a v e b ee n p r o v i di n g l o an t o g r ou p c o n c e r n s w h i c h s h o w s t h a t a l l t r u s t ee s h av e s u b s t a n t i al i n t e r e s t i n ea c h s o c i e t y . Ld . DR a l s o p o i n t ed ou t t h a t t he A s s e s s i n g O f f i c er h a d e st a b l i she d n e x u s b e t w ee n a l l t h e group s o c i et y co m p a n i e s a nd th e i r t r u s t ee s by way of d e m o n s t r at i n g a transaction b et w e e n Shiva E du c a t i o n a l Tr u s t , which was a society be l o n g i n g to a group and S a c h d e v a B u i l di n g C o n t ra c t o r s Pv t . L t d. w h i c h wa s a g ro u p c o m p a n y , w h e r e a g r e e m e nt b e t w e e n b o t h w e r e s h o w n to h a v e b e e n m a d e o n r a n d o m f i gu r e w i t h o u t t hi n k i n g t h a t t h e r e w a s a n y re q u i r e m e nt o f m a i n t a i n i n g o f b u i l d i n g or not.
9. Th e L d . D R a l s o d r e w o u r at t e n ti o n t o t h e f i n d i ng s of t h e A s s es s i n g Of f i c e r w i t h r e g ar d t o th e a pp l i c a b i l i t y o f p r o v i s i o ns o f s ec t i o n 11 ( 5 ) o f th e A c t t o th e sa i d a d va n ce s t a t i n g t ha t i t i s t h e m o d u s o pe ra n d i o f t h e a s s e ss e e t o t a k e u n s e c u r e d l o a ns f r o m t r u s t s i n th e g ro u p so c i e t y a n d t h e n d i v e r t t h e m t o g ro u p s o c i e t i es a s u n s e c u r e d l oa n a n d i n v e st t h e s a m e i n f i x ed a s s e t s . Ld.DR stated that the impugned a d v a n c e b e i n g t he f u n d o f t h e a s s e s s e e , t h e a s s es s e e o u g ht t o h a v e d e p os i t ed i t i n t h e m o des s p e c i f i ed u / s 11 ( 5 ) o f t h e Act. Th e L d . DR f u r t h e r re l i e d u p o n t h e d e ci si o n o f t h e H o n ' b l e M a d ra s H i g h C o u r t i n th e c a s e o f CI T V s . V . G . P . F o u n d a t i on , 1 8 3 C TR ( M a d ) 3 3 0 i n s u p p o r t o f i t s c o n t e n t i on that the b en e f i t of exemption should be d en i e d to the a s s e s s e e s i n ce i t h a d v i o l a t e d t h e p r o v i si o n s o f se c t i o n 1 3 ( 1 ) ( c ) /1 3 ( 1 ) ( d ) o f t h e A ct .
6
10. Th e L d . D R h a s a l s o c o n t e n de d t ha t t h e m a i n o b j ec t o f t h e a s s e s s e e i s n o t e d u c a t i on b u t c r e a t i n g c a p i ta l b y g i v i n g loans and a d v an c e s to group societies an d co m p a n i e s . Ld.DR drew our attention to the findings of the Assessing Officer a t p a r a ( i ) , ( i i ) & ( i i i ) p a ge 5 a nd 6 o f th e o r d e r a s under:
"(i)Assessee has given unsecured loan to its sister concern without any consideration. Assessee is not taking any interest from these sister concerns, neither having any security against this, which shows that assessee is providing undue benefit to its sister concern
(ii) Assessee has given unsecured loan to its sister concern for capital investments only, on perusal of Balance Sheet of Baba Amarnath, it is clear that this society has taken unsecured loan of Amount of Rs.80 lakh/- for A.Y. 2013-14 & investing the same in capital investments of Rs.8 Crore.
Capital Investments cannot be counted as educational purpose. This shows that assessee intention is only create the capital not the education.
(iii) The below mentioned chart shows that the trustees & group societies have modus operandi to provide the loans to group concerns & invested the same in fixed assets. Details of Unsecured Loan (taken and given) in the books of Assessee A.Y. 2011-12 Unsecured Amount in lacs Advance/Unsecured Amount in Loans as a Loan as recoverable lacs liability (taken) (given) Baba Amarnath 3000000 Educational Society Amritsar Interest. 45141722 Found Trust A.Y. 2012-13 Unsecured Amount in lacs Advance/Unsecured Amount in Loans as a Loan as recoverable lacs liability (taken) (given) Amritsar 17052435 International Foundation Baba Amarnbath 3000000 Edu.Trust 7 A.Y. 2013-14 Unsecured Amount in lacs Advance/Unsecured Amount in Loans as a Loan as recoverable lacs liability (taken) (given) Baba Amarnbath 3000000 Edu.Trust Amritsar Int. Found. 70523720 Trust Details of Unsecured Loan (taken and given) in the books of M/s Bana Amarnath Hira Lal Sharma 5,00,000.00 Amritisar College of Engg. & 30,00,000.00 Tech.
Shiva Educational Trust 35,00,000.00
Baba Bhola Nath Edu Society 6,47,800.00
In the above facts, reply of assessee that the sister trusts are not covered under 13(3) £ specified persons, is not acceptable because there are common members, which are having interest in the all sister concerns. The details of the unsecured loans in the books of each society show that all the societies are having loan or advances from their trustees & sister societies & same distributed among the sister concerns societies & invested into capital as fixed assets. The above facts show that all the trustees are having substantial interest into each sister society. It is also a fact that from the perusal of their individual balance sheet of trustees, it is seen that they have sources of Income from salary and interest from group societies or group companies, the same then invested into group societies as loan/advances.
The above facts show that the group societies, group companies & their trustees & directors/shareholder have nexus between all of them for diversion of money from one hand to another hand under the umbrella of group concerns. This fact is also clear from the transaction between Shiva Educational Trust and Sachdeva Building Contractors Private Limited. In this the group society. Shiva Educational Trust has paid 33 lacs to its sister concern and group company- M/s Sachdeva Building Contractors Private Limited without adequate service. The agreement between both has made on a random figure, without thinking that is there any requirement of maintenance of building or not?"
11. P e r c o n t r a L d . co u n s e l f o r a s s e ss e e d r e w ou r a t te n t i on to the s u b m i s si o n s made by the assessee be f o r e t he L d . CI T( A p p e a l s ) a n d p o i nt e d o ut t h e r e f r om t h a t i n t h e f i rs t 8 p l a c e t h e s a i d ad v a n c e w as n o t g i v e n i n t h e i m pu g n e d y e ar a t a l l bu t i n f ac t p e r t ai n e d to a s s e s s m e nt y e a r 2 0 1 1 - 1 2 . Th e L d . c o u n s e l f o r a s s e ss e e s ta te d t h a t th i s f ac t i s p r o v ed b y a ch a r t g i v i n g d e t a i l s o f u n s e cu r e d l o an s t ak e n a n d gi v en i n t h e bo o k s of th e a s s e s se e , re pr o d u c e d i n t h e as s e s s m e n t o r d e r a t p a g e 6 w h i c h c l e a r l y m en t i o n t he a f or e s ai d a d v a nc e a s p e r t a i n i n g t o a s s e s s m e n t ye ar 2 0 1 1 - 1 2 a n d w h i c h h a d b e e n a c c e p te d by t h e A s s e s s i ng O f f i c e r . F u r the r t h e L d . c o u n s e l f or a s se s s e e s t a te d t ha t t h i s f ac t h as n o t b e e n c o n t r o v e rt e d b y t h e R e ve n u e a t an y s t a ge w he n po i n t e d o ut t o i t i . e . e i t he r by t h e A s s e s s i ng O f f i c e r o r t he CI T( A p p e a l s ) . Th e L d . c o u n se l f o r as s e s s e e s ta t e d t h at f o r t hi s r e a s on a l o n e , t h e a ss es s e e c a n n o t be s a i d t o h a v e vi o l a t e d t h e p r o v i s i o ns of se c t i o n 1 3 ( 1) ( c ) /1 3 ( 1 ) ( d ) r ea d wi t h section 1 3 ( 3 ) o f th e A c t, i n t h e i mp u g n ed y e a r a n d th e e x e m p t i o n , t h e r e f o r e, u / s 10 ( 2 3 C ) ( vi ) c o u l d n o t h a v e be e n d en i e d t o t he assessee.
12. Th e n e x t c o n t en t i o n r a i se d b y t h e L d . c ou n se l for a s s e s s e e w as t h at t h e p r o v i s i on s o f s e c t i o n 1 3 ( 1 ) ( c ) / ( d ) r e a d w i t h s ec t i o n 1 3 ( 3 ) di d no t ap p l y t o e x e m p t i o n s cl a i m e d u / s 1 0 ( 2 3 C ) ( vi ) .
13. W i t h o u t p r e j u d i c e t o t h e a b o v e, t h e L d . c o u n se l f o r assessee s t a te d that M/s B ab a A m a rn a t h E d u c a t i o na l S o c i e t y w a s n ot a s p e c i fi e d pe r s on a s p er t h e p r ov i s i o n s o f section 13(3) of the A ct as d e m o n s t r at e d be f o r e t he C I T( A p p e al s ) a l so b y w a y of a t ab l e r e p r od u c e d a t p a g e s 8 a n d 9 of t h e o rd e r a n d , t h e re f or e , t h e a s s e ss e e c a n n o t b e 9 s a i d t o ha v e v i ol a t e d t h e p r o v i s i o n s o f s ec t i o n 13 ( 1 ) ( c ) b y way of giving loan to M/s Bab a A m a r n a th Ed u c a t i o n al Society.
14. Th e L d . c o u n s e l f o r a s s e ss e e f ur t h e r s t at e d t h at t he a s s e s s e e ha d a l s o n o t v i o l a t e d t h e p r o v i si o n s o f s e c t i o n 11(5) of the Act which specifies the modes in which the f u n d s o f t h e t r us t a r e t o b e i n ve s t e d , s i n c e t he l o a n h a d b e e n g i v en i n pu r s u a n c e o f i t s o b j e c t of a d v an c e m e n t of e d u c a t i o n, a s M/ s B a b a A m a rn at h E d u ca t i o n a l So c i e t y w a s a l s o a r e g i s t e re d s o c i e t y u / s 1 2 A o f t h e A c t h a v i n g s i m i l a r o b j e c t i v es a s the a s s e s s ee s o c i e t y . Th e L d . co u n s e l f or a s s e s s e e r e l i e d u p o n t h e fo l l o w i n g c a s e l a w s i n s u p p o r t of i t s a b o v e c o n t en ti o n :
J o in t C o mmi s s io n e r of In c o me T ax
( O S D ) ( E xe mp t i o n s ) - II, C h e n n ai Versus M/ s .
B h ak tav a ts al a m M e mo r i al T r us t - 2 0 1 5 ( 3 ) T M I 9 2 9
- IT AT C he n n ai K an p u r S u b h as h S h ik s h a S a mi t i V e r s u s D e p u ty C o mmi s s i o n e r o f In c o me T ax - 1 , K an p u r - 2 0 1 2 ( 8) T M I 7 2 8 - IT AT LU C K N O W M/s V ai r a ms K in d e r g ar te n S o c ie ty, R ajag o p al ap u r a m V e r s u s T h e C o mmi s s i o n e r o f In c o me T ax ( A p p e al s ) , T ir u c h ir ap al l i. - 2 0 1 5 ( 6 ) T M I 8 5 6 - IT AT C H E NN A I P AT A N G R A O KA D A M P R AT IST H AN B H A R AT I V ID Y A P E ET H BH A W A N V e rs u s A S ST / D e pu ty C O M M IIS S IO N E R OF IN C O M E T AX , C E NT RA L C IR C L E - 2 , ( 2 ) , P U N E - 20 1 3 ( 2 ) T M I 5 7 9 - IT AT PUNE D IR E CT O R O F IN C O M E T A X ( E X EM PT IO N ) v s . A C ME E D U C AT IO N L S OC IET Y 3 2 6 IT R 14 6 ( D e l h i) In c o me T ax A p p e l l ate T r ib u n al - C h e n n ai - S o c ie ty O f D au g h te r s O f M ar y I mmac u l ate & C o l l ab o r ato r s ... Vs . D e p ar t me n t o f In c o me T ax o n 4 J u l y, 2 0 12 IT A N o . 9 63 / M d s /2 0 1 2 10
15. L d . C o u n s el f o r t h e a s s e s s ee f ur t h e r s t a t ed t h at t h e a b o v e c o nt e n t i on s o f t h e L d . D R w a s e r r on e o u s a s p o i n t ed o u t b y t h e as s es s e e t o t h e L d . CI T( A ) a l so a t p a ra 5 o f h i s s u b m i s s i on s m ad e b e f o r e h i m an d r e p r o d uc e d at p a g e 5 o f t h e CI T( A ) o r d er a s u n d e r :
"5.That the assessment order is full of errors.Wrong and baseless facts have been presented to prove an imaginary nexus of some group societies,group companies,group trustees involved in entry scam disregarding the actual facts,nature of transactions among societies and their main activities at large.
In fact there are four societies/Trusts ie. Amrtisar International Foundation Trust ( Assessee Trust ), Shiva Educational Trust, Baba Bhola Nath Educational Society and Baba Amarnath Educational society in which Sh. Hira Lai Sharma was a common member. All of these societies/trusts are having similar objectives and are registered u/s 12A of the Income Tax Act. During the period from AY 2009-10 to AY 2011-12 Shiva Educational Trust ,Amritsar International Foundation, and Baba Bhola Nath Educational Society gave financial aid, in the shape of Corpus donations and Interest free loans to Baba Amarnath Educational society. Since all these societies/trust except Baba Amarnath Educational Society were established more than 10 years back, have adequate funds to support this newly established Baba Amarnath Educational Society, they render financial aid in the shape of corpus donations and temporary loans and their by pursuing their objective of education. Since all these societies are having similar objects and registered u/s 12A the financial aid given to Baba Amarnath Educational Societies by other societies including assesssee society treated as application of income u/s ll(l)/10(23C)(vi) of the income tax Act. (Refer MO A and Bylaws of Amrtisar International Foundation and Baba Bhola Nath Educational Society at Page No. 56 of paper book). Sh. Hira Lai Sharma has also given a temporary loan to Baba Amarnath Educational Society in the AY 2011-12. Baba Amarnath Educational Society applied all the funds including these Corpus Donations and loans for the purpose of pursuing its objectives of education by creating infrastructural facilities for the establishment of an Engineering and Management College. Besides these financial aid from these societies and Chairman (Hira Lai Sharma). Baba Amarnath Educational Society have to borrowed loans from banks. ( Refer Page No. 37 & 41 of paper book) 11 Though having one common member in these Societies! trust may technically be called sister concerns. No trustees or member or relative of any member or any concern or company in which any of the members or trustees of these four societies have any financial interest has entered in any transaction with these societies/Trust during AY 2013-14 or any of the preceding assessment year. There is nothing on record which indicate any nexus of group members/trustees, group societies or group companies involved in entry scam as claimed by Ld. AO in the assessment order. Out of the two chart showing details of unsecured loans are wrongly presented and interpreted. First chart shown on page 6 of the assessment order relates to Amritsar International Foundation Trust, in which Rs.3000000 shown given to Baba Amarnath Educational Society in the AY 2011-12 and shown as it is in the AY 2012-
13 and 2013-14, where as other figures in the name of Amrtisar International Foundation is misreported. (Refer Page No. 67 of the paper book for Balance Sheet of Amritsar International Foundation Trust). Second chart relates to Baba Amarnath Educational Society is showing the details of loans taken by them from other three societies including assessee society and the common member Sh. Hira Lai Sharma. This chart is evident of the fact that only Baba Amarnath Educational Society, which was facing financial stagnancies in the initial stage of its establishment received loan from other societies trust and members and there is nothing on record to prove inter trustee members, inter societies or other transactions or distribution of funds among them as claimed by Ld AO in the assessment order. Further, during the assessment proceedings no ITR or Balance sheet of the members of the assessee trust or group society/trust called for to establish that the trustees are drawing salary and interest from group societies or group companies and same invested into group societies as loan advance, as mentioned in the assessment order. Even the reference of a transaction of Rs.33 Lacs between Shiva Educational Trust and Sachdeva Building Contractors Pvt. Ltd. given in last paragraph of page 6 of the assessment order is wrong and full of errors. In fact the transaction relates to Amritsar International Trust. Even the company Sachdeva Building Contractors Pvt Ltd is not concerned with either of the members/trustees or group of four societies/trusts referred above. (Refer ROC details of company at page No. 55 of paper book). In these circumstances, the agreement between Amritsar International Foundation Trust and Sachdeva Building contracts Pvt. Ltd., as reproduced on page 7 to 9 of the order is irrelevant. All the details regarding transactions between these two along with work undertaken by Sachdeva Building contracts Pvt. Ltd, duly furnished during assessment proceedings to the satisfaction of worthy AO and it has been accepted as such. This is evident of the fact that while denying exemption u/s 10(23C)(vi) only the amount of surplus shown in the Income and Expenditure account of the trust was added back to the returned income. (Refer page 10 of the order ). In fact the transactions of Loans which are referred in the order are simple case of giving loan from three sister societies to another sister societies where all these sister societies are 12 having similar objectives and activities and all are registered u/s 12A. The transactions of giving such interest free loan from three sister societies including assessee society is application of income u/s 11(1))/10(23C)(vi) of the Act."
16. W e h a v e he a r d b o t h t h e p a r t i e s , g o n e t h r o u gh t he orders of the authority be l o w and also the d o c u m e n ts r e f e r r e d t o b e f o re u s . W e f i nd no i n f i r m i t y i n t he o r d e r of t h e L d .CI T( A p p ea l s ) . Cl e a r l y t h e o n l y r ea s o n f o r fi n d i n g t h e assessee ineligible for e x e mp t i o n u/s 1 0 ( 2 3C ) ( v i ) is on a c c o u n t o f t h e i n t e r e s t f r ee l o an g i v e n b y i t t o M / s B a b a Amarnath ch a r i t a b l e t r us t . Th e fact t h at the i m p u g n ed l o a n / a d v an c e pe r t a i n e d t o A. Y 20 1 1 - 1 2 a n d n o t to t h e y e a r i n a p p e a l b e f or e u s h a s re m a i n e d u n c o n t r ov e r t e d, s o i n an y case, t h e re c a nn o t be said to be any violation in the i m p u g n e d ye a r b y t h e a s s es s e e e i t h e r o f t h e pr o v i s i o n s o f s e c t i o n 1 3 ( 1 ) ( c ) r e a d w i t h s e c t i on 1 3 ( 3 ) or even section 1 3 ( 1 ) ( d ) r w s 1 1( 5) o f t h e A c t at a l l .
17. Further, w e fi nd t h a t t h e a s s ess e e h a d d e m o ns tr a t e d b y w a y o f a d e ta i l e d c h ar t l i st i n g a l l r el a t i o ns hi p s c o v e re d u / s 1 3 ( 3) , t h at M / s B a b a A m a rn a t h E d u ca t i o n al S o c i e t y i s n o t a s p e ci f i e d pe r s o n a s pe r t h e p r o v i s i o ns o f s ect i o n 1 3 ( 3) o f t h e A c t a nd th e R e v e n u e ha s n o t c o n t r ov e r t e d t h e s a m e . L d . D R h a s m e r el y r e i t e ra t e d th e g e n e r a l an d c a sua l r e m a rk s o f t h e As s e s s i ng O f f i c e r o f e st a bl i s h i n g n e x u s bet w e e n t he a s s e s s e e a n d M/ s B a b a A m a r n at h E d u c a t i o na l S o c i e t y by w a y o f h a v i n g on e c o m m o n m e mb e r o n l y o r o n a c c o u n t o f i n d u l g i n g i n t ra n s a c t i o n of g i v i n g l o a n t o on e a n o t h e r . C l e a r l y , t h e L d. D R h a s n o t p o i n te d o u t a s t o h o w t h e a b o v e s i t u a t i o ns a r e co v e r e d u / s 1 3 ( 3) t o e s t a b l i sh M / s B a b a 13 A m a r n a t h E d uc at i o n a l S o c i et y a s a s p e c i f i e d p e r so n , w h i c h i s a n e x h a us t i v e l i s t , l i s t i ng o nl y t h e f o l l o w i n g a s " s p e c i f i e d persons":
a ) a u t h or o f t h e t r u s t o r f o u n d er o f t h e i n s t i t ut i o n
b) p e r so n s w h o h a v e m a d e s u b s ta n t i a l c on t r i b ut i o n t o t h e t r u s t o r i ns t i t u t i o n i . e e x c ee di n g R s . 5 0, 0 0 0 / -
c) w h e r e th e au t h o r , f o un d e r o r p e r s o n i s a H U F , m e m b e r o f t h e HU F d ) t r u st e e o f t h e t r u s t or m a n a ger o f t h e i n s t i t u t i o n e ) a n y r e l a t i v e of t h e a fo r e s a i d pe r s o n s
f) any c o n c er n in which a f or e s a i d p e rs o n s have s u b s t a n t i a l i n te re s t .
18. C l e a r l y h a v i n g a c o m m o n m e mb e r o r i n d u l g i ng i n a number of t r an s a c t i o n s of l oa n and a d v a n ce s is not e n v i s a g e d a s e s ta b l i s h i n g a s p e ci f i e d p e r s o n u / s 1 3 ( 3 ) of t h e A c t. H av i n g s a i d s o, n o q u est i o n a ri s e s o f t he a s s e ss e e i n d u l g i n g i n t ran s a c t i o n s p r o h i bi t e d b y se c t i o n 1 3 ( 1 ) ( c ) o f t h e A c t , w h i c h l i s t s t r a n s a c ti o n s w i t h p e r s o n s s pec i f i e d u / s 13(3) of the Act. Th e r e f o re , we concur with the L d . CI T( A p p e a l s ) t h a t t h e p r o v i s i on s o f s e c t i o n 1 3( 1 ) ( c ) r e a d w i t h s e ct i o n 1 3( 3) a r e n o t a p p l i c ab l e i n t he p r e se nt c a s e .
19. W e a l s o f i n d t ha t t h e a s s e s s e e h a d s t a t e d o n re c o r d t h a t M / s B a ba A m a r n a t h E du c at i o n a l S o ci e t y wa s a l s o a c h a r i t a b l e s o c i e t y r e g i s te r e d u/ s 1 2 A o f t h e A ct, f o r t he p u r p o s e o f i m p a rt i n g e du c a t i on an d l o a n w a s a d va n c e d to i t t o a s s i s t i n c ar r y i n g o ut i ts o bj ec t i v e s w h i c h w a s i d e n t i c a l to that for which the assessee society was also set up. 14 Th e s e f a c t s h a v e n o t b e e n c o n t r o v e r t e d b y t h e R e v e n u e. Th e s a i d l o an / a dv a n c e t h e r ef o r e q u a l i f i e d a s a p p l i c a t i o n o f income by the assessee a n d w a s n o t a n i n ve s t m e n t o r d e p o s i t co v e r e d u / s 1 1 ( 5 ) o f t h e A c t . Th e a s s e s s ee , w e h o l d t h e r e f o r e c a n no t b e s a i d t o h ave v i o l at e d th e p ro v i s i o n s o f s e c t i o n 1 3 ( 1 ) ( d ) r . w . s 1 1 ( 5 ) o f t he A c t . Th e r e l i an c e p l ac e d by L d . c o u ns e l fo r the a s se s s e e on the d e ci s i o n of t he Hon'ble D el h i H i g h C o u r t i n t he c a s e o f D i r e c t or o f I n c o m e Ta x ( E x e m p t i o n ) v s A C M E E d uc a ti o n a l S o c i e t y 3 26 I TR 1 46 is apt, wherein a f t e r d i s c u s si n g t h e i s s u e a t l e n gt h i t w a s h e l d t h a t i n t e r est f r e e l o a n g i v e n b y o n e c h a r i t a bl e s o c i e t y to another c h ar i t a b l e s o ci e t y ha v i n g s i m i l a r o bj e c t s w as neither a d e p o si t or i n v e s t m e nt in violation of s e c t i on 1 3 ( 1 ) ( d ) r. w . s . 11 ( 5 ) o f t h e Ac t . Th e r e l e v a n t f i nd i n g s o f t h e H o n ' b l e Hi g h C ou r t a t p a r a 1 5 of i t s o rd e r a re a s u n d e r :
"15. Keeping in view the aforesaid exposition of law, we are of the opinion that interest-free loan of Rs. 90,50,000 given by the assessee-society to Nav Bharti Educational Society does not violate s. 13(1)(d) r/w s. 11(5) of Act, 1961 as the said loan was neither an "investment" nor a "deposit". This is more so as both the societies had similar objects and were registered under s. 12A of Act, 1961 and had approvals under s. 80G of the Act, 1961. The fact that the loan was interest- free and had been subsequently returned is also significant. In view of the order passed by the CIT(A) in the case of Nav Bharati Educational Society, Ms. Bansal's allegation with regard to "entry scam" also does not survive. Consequently, there is no substantial question of law involved in the present appeal and accordingly, appeal is dismissed but with no order as to costs."
20. Th e said p r o p os i t i o n h as b e en r e i t e ra t e d by t he H o n ' b l e D e l hi H i g h C o u r t i n t he c a s e o f C I T v s I n di a n N a t i o n a l Th e a t r e Tr u s t ( 2 0 0 8 ) 3 0 5 I TR 1 4 9 . L d . C o u n s e l f or t h e a s s es s e e has a l s o dr a w n our a t t e n ti o n t o a n u m b e r of o t h e r d e ci s i o n s w h e r e i n i t h a s be e n h e l d th a t g i v i n g l o a ns 15 t o o t h e r c h a r i t ab l e i n s t i t u ti o n s r e g i s t e r ed u / s 1 2 A h a v i ng s i m i l a r o b j ec t s a r e n o t i n v i o l a t i o n o f t h e p ro v i s i o n s o f s e c t i o n 1 3 ( 1 ) ( d ) r e a d w i t h se c t i on 1 1 ( 5 ) o f t h e Ac t . L d . DR h a s n o t d i s t i n gu i s h e d t h e c a s e l a w s r e l i e d u po n b y t h e a s s e s s e e . On t h e c o n t r a r y , t he r el i a n c e p l a ce d b y t h e L d . D R on the decision of the Hon,ble Madras High Court in the c a s e o f C I T v s V . G . P . F o u n d at i o n , w e f i n d i s b a s e d o n d i f f e r e n t se t o f f a c t s , s i n ce i n th a t c a s e t h e a dv a n c e w a s g i v e n to s i s t e r c o n c e r n w i t h n o f i n d i ng t h at i t w a s a l so a c h a r i t a b l e s o c i e t y r e g i s t e r e d wi th t h e s a m e o b j ec t s a s t h e d o n o r , w h i l e i n th e p r e s e n t c a s e t h e l o a n h a s b e en g i v e n b y o n e s o c i e t y to a n o t h e r h a vi n g s i m i l a r o b je c t s a n d b o t h s o c i e t i e s a r e r e gi s t e r e d u /s 1 2 A . Th e r e f o r e , w e ag r e e w i th t h e L d .CI T( A p p ea l s ) t ha t th e i m p u g n e d a d v a nc e d i d n ot v i o l a t e t h e pr o v i s i o n s o f s e c ti o n 1 3 ( 1 ) ( d ) r . w .s . 11 ( 5 ) o f t he Act also.
21. In view of th e above, we concur with the L d . CI T( A p p e a l s ) that the a s s es s e e by g i vi n g advance of R s . 3 0 l a c s to M/ s B a b a A m a rn at h E d u c at i o n a l S o c i e t y h a d n o t v i o l at e d t h e p r o v i s i on s o f s e c t i o n 13 ( 1 ) ( c) r e a d w i t h s e c t i o n 1 3 ( 3 ) o r s e c t i o n 1 3 ( 1 ) ( d ) r . w . s . 1 1 ( 5 ) o f t he A c t a n d , t h e r e f o r e, t h er e w a s n o re a s o n to d e n y e x e m p t i on c l a i m ed b y t h e a ss e s s e e u / s 1 0 ( 2 3C ) ( v i ) of t h e A c t.
22. W e a r e a l s o i n a g r e e m e n t w i t h t h e L d . C o u ns e l o f t h e a s s e s s e e th a t no t h i n g h a s be e n b r o u g h t o n re co r d b y t h e R e v e n u e t o p r ov e t h a t t h e m ai n o b j e ct o f t he a s s e s se e actually was giving loans and not p r o v i di n g e d u c a t i o n. 16 E x c e p t f or t h e fa c t o f gi v i n g l oa n o f R s. 3 0 l acs t o B a ba A m a r n a t h E d u ca t i o n a l Tr u s t no o t h e r l o a n g i v e n b y t he a s s e s s e e h as b ee n s h o w n t o u s . Th e s a i d l o a n h a s a l r e a dy b e e n h e l d b y u s a s a p p l i c a ti o n o f i t s i n c o m e f o r th e p u r p o se of a d v an c i n g i ts o b j e ct of p ro v i d i n g e d u c at i o n , a b ov e . Th e r e f o r e , t h e r e i s n o m e r i t i n t he c o n t e n t i on o f th e L d . D R t h a t t h e a s s es s ee i s i nd u l g i ng i n t h e a ct i v i t y o f gi v i n g l oa n s a n d a d v a n c e s . E v e n t h e i d e n t i ca l a l l e g a t i o n o f t h e L d . D R v i s - a - v i s t h e e n ti r e g r o u p w e fi nd r e m a i n s u n pro v e d since the table relied upon by the Ld.DR in s u p po r t of its c o n t e n t i on r e f l e ct s o n l y t h e l o a n g i v e n b y t h e a s se s s e e a n d t w o o t h e r t r u s t s o f t h e g r o u p t o M / s B a b a A m a r na t h Tr u s t . Th e s a m e h a s a l r e a d y b e e n e x p l ai n e d b y t h e L d . Co u n s e l f o r t h e a s s e s se e a s h a v i n g b e en g i v en t o l e n d f i n a n c i a l s u p p o r t t o t h e s a i d Tr u s t i n t h e i n i t i a l y e a r s o f i t s s e t t i n g u p , w h i c h fact has not be e n c o n tr o v e r t ed by the R e v en u e . E v en o t h e r w i s e i t f ai l s t o b r i n g t o l i g h t h o w t h e e n t i r e g r o u p w a s i n v o l v e d i n c re a ti n g c a p i t a l o nl y . E v e n t h e r ef e r en c e t o th e t r a n s a c t i o n b et we e n S h i va E d u cat i o n a l Tr u s t a n d S a c h d e va Building C o n t r ac t o r s P v t. Ltd. has no r e l e v an c e to the i s s u e , s i n c e a s r i g h t l y p o i n t ed o u t b y t h e L d . C o u n se l f o r t h e assessee no d i s a l l o w a n ce / a d d i ti o n has been made on a c c o u n t o f t h e sa m e . Th e c o n t e n t i o n o f t h e L d . DR , w e h o l d , t h e r e f o r e, h a s n o l e g s t o s t a n d o n a n d i s t h u s d i sm i s s e d I n vi e w o f t he ab o v e , w e h o l d t ha t t h e r e w a s no b a s i s a t a l l f o r d e n y i n g e x e m p t i o n t o t h e a s s e s s e e so c i e t y u /s 1 0 ( 2 3 C ) ( v i ) of th e A c t . We t h e r efo r e u p h o l d t h e or d e r o f th e 17 L d . CI T( A ) d e l e t i ng t h e a d d i t i o n o f R s . 3 , 6 4 , 6 0 ,3 8 3/ - . A l l t he g r o u n d s ra i s e d by t h e r e ve n u e are d i s m i s se d .
24. I n t h e r es u l t , t h e a p p e a l of t h e R ev e n u e i s d i s m i sse d .
O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated 8 t h December, 2017
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR
Assistant Registrar,
ITAT, Chandigarh