Madras High Court
Commissioner Of Income-Tax vs V.G.P. Foundation on 8 October, 2002
Equivalent citations: (2003)183CTR(MAD)330, [2003]262ITR187(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu, K. Raviraja Pandian
JUDGMENT R. Jayasimha Babu , J.
1. The question referred to us at the instance of the Revenue is :
"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the amount of Rs. 53,950 was utilised for charitable purposes when there is no application for accumulation of income or option exercised by the assessee ?
(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the amount utilised for construction of hospital building after the close of the accounting year can be treated as application of income in the previous year relevant to the assessment year 1987-88 ?
(3) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the amount lying as advance with a sister concern of the assessee can be treated as not violating the provisions of Section 13(1)(d) read with Section 11(5) of the Act ?"
2. The assessment year is 1987-88. The assessee is a trust. It had advanced a sum of Rs. 53,950 to its sister concern, a private limited company of which the trustees of the assessee were also directors. The company was shown as a sundry debtor of the assessee in the books of account for this year. The company in turn had shown the assessee as one of its sundry creditors. The assessee's claim that the monies so given were meant to be used to meet the cost of construction of a hospital and, therefore, should be regarded as having been applied for charitable purposes in this year was rejected by the Assessing Officer but was upheld by the Commissioner and the Tribunal. Neither the Commissioner nor the Tribunal adverted to the fact that the trustees are also the directors of the company and that the money had remained with the company for the whole of the year without being spent.
3. It cannot be said on the facts of this case that the money had been applied by the assessee for charitable purpose in this year. The fact that the money, instead of lying with the assessee had laid with the sister company would not result in that amount being regarded as application of funds for a charitable purpose. Had the money remained with the assessee, it certainly could not have been regarded as having been utilised for charitable purposes. By giving it to a sister company which merely retained the money with it for the whole of the year, it is not possible to give the assessee the benefit regarding the amount as having been applied for a charitable purpose. There has also been contravention of Section 13(1)(d) read with Section 11(5) of the Act inasmuch as the trustees are also directors of the company and that company had the benefit of this amount throughout the year. The assessee did not realise any interest on that amount nor did it have any security for the amount so made available to the sister company.
4. The questions referred to us are therefore answered in favour of the Revenue and against the assessee.