M/s. Koundinya Educational Society, Rajahmundry V. The ACIT, Rajahmundry

CO 35/VIZ/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9579 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 6 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-12-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 02-06-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K SONOWAL
• Keywords: Charitable institution; Question of law; Benefit of exemption; Reassessment proceedings
• Section: 147; 27; 148; 10; 143(3); 12A; 143(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO S . 99 - 1 0 4 /VIZ/ 201 7 ( / A . Y S : 20 0 4 - 0 5 TO 200 7 - 08 AND 2009 - 10 AND 2010 - 11 RESPECTIVELY ) ASST.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, RAJAHMUNDRY VS. SRI KOUNDINYA EDUCATIONAL SOCIETY NH - 5, CHAITANYA NAGAR GIET CAMPUS, RAJAHMUNDRY [PAN :AA AAK 1442R ] ( / APPELLANT) ( / RESPONDENT) CROSS OBJECTION NOS.34 - 39/VIZ/2017 (ARISING OUT OF I.T.A NOS. 99 - 104 /VIZ/201 7 RESPECTIVELY ) ( / A . Y S : 2004 - 05 TO 2007 - 08 AND 2009 - 10 AND 2010 - 11 RESPECTIVELY ) SRI KOUNDINYA EDUCATIONAL SOCIETY NH - 5, CHAITANYA NAGAR GIET CAMPUS, RAJAHMUNDRY [PAN :AA AAK 1442R ] ASST.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, RAJAHMUNDRY ( / APPELLANT) ( / RESPONDENT) / REVENUE BY : SHRI D.K.SONOWAL, CIT DR / ASSESSEE BY : SHRI C.SUBRAHMANYAM, AR / DATE OF HEARING : 11 . 12. 2018 / DATE OF PRONOUNCEMENT : 20 . 12 .2018 2 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY / O R D E R P E R BENCH : TH E S E APPEAL S ARE FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX ( APPEALS ) [CIT(A)] - 3, VISAKHAPATNAM FOR THE A SSESSMENT Y EAR S (A.YS) 20 0 4 - 0 5 TO 200 7 - 08 AND 2009 - 10 TO 2010 - 11 . S INCE THE FACTS INVOLVED IN ALL THESE APPEALS ARE IDENTICAL, THE APPEALS ARE CLUBBED, HEARD TOGETHER AND A COMMON ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND THE FACTS ARE EXTRACTED FROM THE APPEAL FOR THE A.Y.2004 - 05 WHICH ARE IDENTICAL FOR ALL THE ASSESSMENT YEARS INVOLVED . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 AND ALSO GOT REG ISTERED U/S 12A OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS ACT). THE ASSESSEE IS CARRYING ON EDUCATIONAL ACTIVITY AND RUNNING TECHNICAL AND DEGREE COLLEGES AFFILIATED TO JNTU AND ANDHRA UNIVERSITY. FOR THE A.Y. 2004 - 05, THE ASSESSEE FILED THE RETURN OF INCOME ON 01.11.2004 ADMITTING TOTAL INCOME OF RS.95,81,560/ - AND CLAIMED THE EXEMPTION OF THE ENTIRE INCOME U/S 10(23C) OF THE ACT. THE SAID ASSESSMENT WAS TAKEN UP FOR SCRUTINY AND AFTER 3 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY EXAMINING THE BOOKS OF ACCOUNTS AND THE DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSMENT WAS COMPLETED U/S 143(3) ACCEPTING THE INCOME RETURNED . H OWEVER, THE ASSESSING OFFICER (AO) DENIED THE EXEMPTION CLAIMED U/S 10(23C) OF THE ACT , SINCE THE APPROVAL U/S 10 ( 23 C ) WAS NOT RECEIVED BY THE ASSESSEE FROM THE CCIT BEFORE COMPLETION OF ASSESSMENT. S UBSEQUENTLY, ON RECEIPT OF APPROVAL FROM THE PRESCRIBED AUTHORITY, THE AO PASSED THE MODIFICA TION ORDER U/S 154, GRANTING EXEMPTION U/S 10(23C) OF THE ACT . THE ASSESSMENTS WERE COMPLETED U/S 143(3) F OR THE A.Y S . 2006 - 07 A ND 2007 - 08 AND THE AO GRANTED EXEMPTION U/S 10(23C) OF THE ACT. FOR THE REMAINING ASSESSMENT YEARS, THE ASSESSMENTS WERE COMPLETED ACCEPT ING THE INCOME RETURNED U/S 143(1) AFTER PROCESSING THE RETURNS. SUBSEQUENTLY, THE CHIEF COMMISSIONER OF INCOME TAX ( CCIT), VISAKHAPATNAM FOUND FROM THE OBJECTS OF THE SOCIETY THAT THE ASSESSEE SOCIETY IS ENGAGED NOT ONLY IN EDUCATIONAL ACTIVITY, BUT ALSO OTHER OBJECTS WHICH ARE ENLISTED IN THE MEMORANDUM OF ASSOCIATION (MOA) AS UNDER : (C) HELP THE POOR AND DISTRESSED AND TO CREATE AWARENESS AMONG WRETCHED. (D) TO UNDERTAKE PROJECTS RELATED TO RELIEF, REHABILITATION, HEALTH AND EDUCATION AND TO DEFUSE USEFUL KNOWLEDGE. (G). TO PROPAGATE THE PRINCIPLES OF WELFARE PROGRAMMES AND ACTIVITIES OF THE GOVERNMENT 4 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY 2.1 THE L D .CCIT FELT THAT INCLUSION OF OTHER OBJECTS IN THE M OA INDICATES THAT THE SOCIETY IS NOT SOLELY EXISTING FOR THE PURPOSE OF EDUCATION AND THEREFORE DOES NOT SATISFY THE BASIC CONDITION FOR BEING ELIGIBLE FOR EXEMPTION U/S 10(23C) (VI) OF THE ACT. THE LD.CCIT CALLED FOR THE EXPLANATION OF THE ASSESSEE AND I N RESPONSE, THE ASSESSEE FILED EXPLANATION STATING THAT ALL THE OTHER THREE OBJECTS MENTIONED ABOVE ARE THE ACTIVITIES DIRECTLY OR INDIRECTLY INCIDENTAL TO THE EDUCATION AL ACTIVITIES AND AMOUNTS TO EDUCATION ACTIVITY. THE LD.AR FURTHER SUBMITTED BEFORE THE LD.CCIT THAT THOUGH THE SAID OBJECTS ARE INCLUDED IN THE MOA, THE SOCIETY HAS NOT TAKEN UP THE ABOVE OBJECTS FROM THE INCEPTION OF THE SOCIETY AND IT IS BEING RUN SOLELY FOR EDUCATIO NAL PURPOSES WITHOUT ANY PROFIT MOTIVE. THEREFORE, CONTENDED THAT IT HAS SATISFIED THE CONDITIONS AND THE REQUIREMENTS FOR QUALIFYING THE EXEMPTION U/S 10(23C)(VI) OF THE ACT AND REQUESTED THE LD.CCIT NOT TO CANCEL THE REGISTRATION. 2.2 . NOT BEING CONVINCED WITH THE EXPLANATION OF THE ASSESSEE, THE LD.CCIT RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LOKA SIKSHANA TRUST VS. CIT [101 ITR 234] AND HONBLE RAJASTHAN HIGH COURT IN THE CASE OF MAHARAJA SAWAI MANSINGHJI MUSEUM TRUST [169 I TR 379], WHEREIN IT WAS HELD I N THE CONTEXT OF SECT I ON 10(22 ) THAT EDUCATION 5 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY CONNOTES THE PROCESS OF TRAINING AND DEVELOPING THE KNOWLEDGE OF STUDENTS BY NORMAL SCHOOLING. THE LD.CCIT ALSO T A KEN THE SUPPORT OF T HE DECISION OF RELIANCE MOTOR CO. PVT. LTD [ 213 ITR 733 ] AND THE CBDT INSTRUCTION NO.1112 DATED 29.10.1977 AND HELD THAT THE PRESENCE OF SEVERAL NON - EDUCATIONAL OBJECTS IN THE MOA SHOWS THAT THE SOCIETY IS HAVING DISCRETION TO DIVERT FUNDS OF THE EDUCATIONAL INSTITUTION TOWARDS NON - EDUCATIONAL PUR POSES. THEREFORE, CANNOT BE SAID TO BE EXISTED ONLY FOR EDUCATIONAL PURPOSES AND ACCORDINGLY REJECTED THE CONTENTION OF THE ASSESSEE FOR GRATING EXEMPTION U/S 10(23C)(VI) OF THE ACT. 2.3 . THE LD. CCIT FURTHER OBSERVED FROM THE B ALANCE S HEET OF THE ASSE SSEE THAT IT HAD ADVANCED A SUM OF RS.6 LAKHS TO SRI P.V.KRISHNAM RAJU WHO HAPPENS TO BE THE JOINT SECRETARY OF THE SOCIETY. O N AN ENQUIRY , THE ASSESSE E SUBMITTED THAT THE SOCIETY HAS NOT GIVEN ANY ADVANCE AND THE TRANSACTION WAS ENTERED IN THE NORMAL COURSE OF SOCIETY ACTIVITIES. SINCE THE BALANCE SHEET SHOWS THAT THE AMOUNTS WERE ADVANCED TO SRI P.V.KRISHNAM RAJU, THE LD.CCIT DID NOT BELIEVE THE ASSESSEES CONTENTION AND TAKEN ADVERSE INFERENCE FOR VIOLATION OF SECTION 12(23C) OF THE ACT. THE LD.CCIT ALSO OBSERVED FROM THE BALANCE SHEET THAT THE ASSESSEE ADVANCED THE AMOUNTS TO VARIOUS INSTITUTIONS / INDIVIDUALS AND ARE OUTSTANDING AS FOLLOWS: 6 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY NAME OF THE SOCIETY / INDIVIDUAL AMOUNT OUTSTANDING AS ON 31.03.2009 (RS.) GSL EDUCATIONAL SOCIETY 10,00,000 KOUNDINYA EDUCATIONAL SOCIETY 87,62,299 MANIKANTA EDUCATIONAL SOCIETY 6,81,391 MOTHER THERESSA EDUCATIONAL SOCIETY 1,52,12,564 P.JAGANADHA RAJU 3,50,000 SRI CHAITANYA EDUCATIONAL SOCIETY 1,93,78,979 2.4 . THE LD.CCIT OBSERVED THAT T HE PROMOTERS AND THE MANAGING COMMITTEE MEMBERS OF THE ASSESSEE SOCIETY ARE ALSO HAPPENS TO BE THE MEMB ERS OF OTHER EDUCATIONAL SOCIETIES MENTIONED ABOVE AND SOME OF THE MANAGING COMMITTEE MEMBERS ARE ALSO MEMBERS OF CHITANYA EDUCAITONAL SOCIETY. SRI.K.V.V.S ATYANARAYANA RA JU, SECRETARY AND CORRESPON D ENT OF THE ASSESSEE SOCIETY HAPPENS TO BE THE PRESIDENT OF KOUNDINYA EDUCATIONAL SOCIETY. THE LD.CCIT VIEWED THAT TH E FACT THAT THE ASSESSEE HAD ADVANCED SUMS TO EDUCATIONAL INSTITUTIONS WITHIN THE SAME GROUP CON CERNS ATTRACTS T HE PROVISIONS OF SECTION 13(2)(A ), 13(2)(G) AND 13(2)(H) OF THE ACT, HENCE OBSERVED THAT THE ASSESSEE HAS NOT ONLY VIOLATED THE THIRD PROVISO TO SECTION 10(23 C ) OF THE ACT, BUT ALSO VIOLATED THE PROVISIONS OF SECTION 11(5) OF THE ACT. 7 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY 2.5 . THE LD.CCIT ALSO MADE AN OBSERVATION THAT THE ASSESSEE IS OWNING BMW AND VOLKS W AGEN CARS AND FAILED TO PRODUCE THE LOG BOOKS , THUS , DID NOT BELIEVE THAT THE CARS WERE USED FOR THE PURPOSE OF PERFORMANCE OF DUTIES OF THE PRINCIPAL AND THE DEAN. 2.6 . THE LD.CCIT OBSERVED FROM THE BILLS AND VOUCHERS RAISED IN THE NAME OF M/S GODAVARI INSTITUTE OF ENGINEER ING , ONE OF THE COLLEGES IN SOCIETY THAT SOME BILLS ARE INTER ALIA RELATED TO THE LIQUOR AND CIGARETTES . THEREFORE, VIEWED THAT THE EXPENDITURE INCU RRED FOR LIQUOR, TOBACCO PRODUCTS AND OTHER TYPES OF GENERAL ENTERTAINMENT CAN BY NO STRETCH OF IMAGINATION BE CONSTRUED AS EXPENDITURE INCURRED FOR FURTHERANCE OF THE OBJECTS OF THE SOCIETY . H ENCE, THE LD.CCIT CANCELLED THE APPROVAL GRANTED TO THE SOCIETY U/S 10(23C) OF THE ACT VIDE F.NO. CC/VSP/TECH/ 10(23C)/45/2010 - 11 DATED 10.12.2010. 3. ON CANCELLATION OF THE APPROVAL GRATED TO THE SOCIETY U/S 10(23C) OF THE ACT, THE AO REOPENED THE ASSESSMEN T BY ISSUE OF NOTICE U/S 148 TO VERIFY THE VIOLATIONS OF SECTION 11 AND THE CYCLIC FLOW OF FUNDS OF THE ASSESSEE SOCIETY. THE ASSESSEE OBJECTED FOR REOPENING OF THE ASSESSMENT WHICH WAS REJECTED BY THE AO , PLACING RELIANCE ON THE DECISION OF HONBLE 8 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY SUPREME COURT IN THE CASE OF ACIT VS. RAJES H JHAVERI STOCK BROKERS PVT. LTD. [291 ITR 500] . 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE CLAIMED EXEMPTION U/S 11 ALTERNATELY AO VIEWED THAT THE CLAIMS U/S 10(23C) AND 11 ARE PARI MATERIA AND HENCE HELD THAT THE ASSESSEE ENTITLED FOR EXEMPTION U/S 10(23C ) WOULD BE DIS ENTITLED FOR EXEMPTION OF INCOME U/S 11 OF THE ACT. THE AO FURTHER OBSERVED CERTAIN VIOLATIONS AND DIVERSION OF FUNDS FOR THE PERSONAL BENEFIT OF AUTHORS, PROMOTERS OF THE SOCIETY AND ACCORDINGLY REJECTED THE EXEMPTION CL AIMED BY THE ASSESSEE U/S 11 OF THE ACT. THE AO DISCUSSED THE VIOLATION S OF SECTION 13(1)(C), 13(2)(A), 13(2)(G), 13(2)(D) AND 13(2)(H) IN DETAIL IN PARA NO.3.3 TO 3.4 OF THE ASSESSMENT ORDER WHICH IS REPRODUCED AS UNDER : 3.3. DURING THE YEAR, IT IS OBSERVED THAT THE ASSESSEE, WHILE CONTINUING THE LOANS STANDING IN THE NAMES OF M/S PRIYADARSHINI ENTERPRISES, SRI M.PADMANABHAM, SRI A.S.R.BALASUBRUHMANYAM, M/S CHAITANYA ENGINEERING COLLEG E , GODAVARI DEGREE COLLEGE AND M/S SYSTRONICS, IT OBTAINED FRESH LOANS FROM M/S KAUNDINYA EDUCATIONAL SOCIETY AT RS.25,70,000 WHICH WAS ROUTED THROUGH BANK ACCOUNT, THE ASSESSEE DID NOT PAY ANY INTEREST TO THE SAID EDUCATIONAL SOCIETY WHEREFROM THE LOANS WERE OBTAINED. IN KOUNDNYA EDUCATIO NAL SOCIETY, M/S CHAITANYA ENGNNEERING COLLEGE AND IN M/S GODAVARI DEGREE COLLEGE, THE AUTHOR OF THE SOCIETY IS HAVING SUBSTANTIAL INTEREST. SIMILARLY, THE ASSESSEE HAS ADVANCED AMOUNTS TO M/S MOTHER THERASA EDUCATIONAL SOCIETY, M/S CHAITANYA EDUCATIONAL S OCIETY, GSL EDUCATIONAL SOCIETY, CHAITANYA ITC, CHAITANYA JUNIOR COLLEGE, SRI G ANNI KRISHNA, SRI BOMMANA RAJKUMAR, SRI VADDI VEERABHDRA RAO. NO INTEREST IS BEING CHARGED FROM THESE PERSONS/CONCERNS TO WHOM THE ADVANCES WERE MODE FROM OUT OF THE FUNDS AVAIL ABLE WITH THE SOCIETY. IN THE SAID SISTER CONCERNS, THE AUTHOR OF THE ASSESSEE - SOCIETY AND HIS FAMILY MEMBERS ARE HAVING SUBSTANTIAL INTEREST. IT IS NECESSARY TO DISCUSS HERE THAT SECTION 2(32) DEFINES A PERSON, WHO HAS SUBSTANTIAL INTEREST IN THE COMPANY , IN RELATION TO A COMPANY, TO MEAN A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES, NOT BEING SHARES ENTITLED TO A FIXED RATE OF 9 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS, CARRYING NOT LESS THAN TWENTY PER CENT OF THE VOTING POWER . A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INTEREST IN A CONCERN OTHER THAN COMPANIES, I F SUCH PERSON IS ENTITLED, OR SUCH PERSON AND ONE OR MORE OF THE OTHER PERSONS REFERRED TO IN SUB SECTION(3) I.E., THE AUTHOR OF THE TRUST ARE ENTITLED IN THE AGGREGATE IN THE KEY AFFAIRS OF THE OTHER SOCIETY. EVERY SIGNATORY TO THE MEMORANDUM OF ASSOCIATION HAS TO BE TREATED AS A FOUNDER AND THEREFORE AN INTERESTED PERSON. IT WAS SO HELD BY THE APEX COURT IN THE CASE OF DIRECTOR OF INCOME - TA X VS. BHARAT DIAMOND BOURSE(2003) 259 ITR 280(5C). BY DRAWING THE SAME ANALOGY, WHERE THE SAME PERSON IS A TRUSTEE FOR TWO DIFFERENT TRUSTS, SUCH TRUSTEE BECOMES AN INTERESTED PERSON, MERELY BECAUSE OF THE DEFINITION OF INTERESTED PERSON. IN VIEW OF THIS, THE AUTHOR OF THE SOCIETY CAN BE SAID TO HAVE SUBSTANTIAL INTEREST IN THE AFFAIRS OF THE SISTER CONCERNS AND ADVANCING SUCH AMOUNTS TO THEM WITHOUT ADEQUATE SECURITY AND ADEQUATE INTEREST WOULD DEFINITELY A VIOLATION U/S 13 OF THE ACT, (B) IT IS ALS O NOTICED FROM THE DEED AS IT STOOD THEN THAT SRI GANNI KRISHNA, SRI VADDI VEERBHADRA RAO, SRI BOMMANA ROJKUMAR WERE THE FOUNDER MEMBERS OF THE SOCIETY. IT CAN BE INFERRED THAT THE FUNDS OF THE SOCIETY WERE DIVERTED TO SISTER - CONCERNS WITHOUT ANY SPECIFIC PURPOSE, WITHOUT ANY ADEQUATE SECURITY AND WITHOUT CHARGING ANY INTEREST THEREFROM, IT IS THE INHERENT INTENTION OF THE SOCIETY TO BENEFIT THE MEMBERS IN THE GARB OF LOA N/ADVANCE. RELIANCE CAN ALSO BE PLACED ON THE DECISION OF CIT VS. CHARAT RAM FOUNDATION 250 ITR 64 (DELHI)(2001) TO HAVE A BETTER UNDERSTANDING OF THE INTERPRETATION OF FOUNDER MEMBER' TO THE EFFECT THAT THE PERSONS WHO SUBSCRIBED TO THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE SOCIETY COULD BE DESCRIBED AS FOUNDERS OF THE ASSESSEE SOCIE TY FOR THE PURPOSE OF 13(3)(C) OF THE ACT. THE DECISION OF ITAT - CALCUTTA BENCH IN THE CASE OF ITO VS. CHAGUNLA L LAIJ I VA L IA CHARITABLE TRUST 32 TTJ IS R E LIED UPON HERE TO HOLD THAT WHERE A LOAN HAS BEEN GIVEN WITHOUT ADEQUATE SECURITY BY THE ASSESSEE TRUST TO A PROHIBITED PERSON ENUMERATED IN S ECTION 13(3) OF T HE ACT, THE FACT THAT LOAN WAS REPLACED AFTER THREE MONTHS W A S OF NO CONSEQUENCE. ACCORDING TO SECTION 13(2)(A) ALSO, NO PART OF INCOME SHOULD BE T R EAT ED EITHER WITHOUT ADEQUATE SECURITY OR WITHOUT ADEQUATE INTEREST OR B O TH. SECTION 13( 1 )(H) OF THE ACT, HOWEVER, PROVIDES THAT NO SOCIETY SHOULD CONTINUE TO REMAIN INVESTED FOR ANY PERIOD DURING THE PREVIOUS YEAR IN CONNECTION WITH SUCH INTERESTED PERSONS HAVE SUBSTANTIAL INTEREST, THIS ANALOGY CLEARLY APPLIES IN THE ASSESSEE S CASE PARTICULARLY WITH REFERENCE TO ITS KEEPING THE FUNDS WITH THE SISTER CONCERNS AND OTHER EX - MEMBERS WITHOUT ANY INTEREST AND SECURITY. (C) THE AUTHORIZED REPRESENTATIVE EXPLAINED THAT IT IS THE CONSISTENCY OF THE ASSE SSEE THAT INTEREST IS NOT BEING PAID ON AMOUNTS ADVANCED NOR INTEREST CHARGED ON AMOUNTS TAKEN. THE COMMON PURPOSE OF ALL THESE SOCIETIES IS IMPARTING EDUCATION AND SUCH ADVANCES WERE MADE ONLY FOR CONDUCTING THE ACTIVITIES OF OTHER SOCIETIES. THE SUBMISSI ONS MADE BY THE AR ARE WITHOUT ANY MERIT. THE ADVANCES MODE TO OTHERS INDICATE THAT THESE WERE MADE TO EDUCATIONAL SOCIETIES WITHIN THE SOME GROUP WHICH WOULD ATTRACT THE PROVISIONS OF SECTION 13(2)(A) 13(2)( G ) AND 13(2)(H) OF THE I. T. ACT. IN VIEW OF THIS, THERE OCCURRED A VIOLATION OF SE CTION 13(2) OF THE ACT WHICH DISENTI TLES 10 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY THE SOCIETY TO CLAIM EXEMPTION U/S 11 OR 12 . IT IS ALSO REQUIRED TO BE NOTED TH A T SUCH ADVANCES MADE TO OTHERS OUT OF THE FUNDS OF THE SOCIETY WOULD AMOUNT TO VIOLATION OF THE P ROVISIONS OF SECTION 11(5) OF THE I.T . ACT WHICH W OULD DISENTIT L E THE SOCIETY TO CLAIM EXEMPTION U/S 11 OF THE ACT . RELIANCE ON THIS ISSUE IS PLACED ON THE DECISION OF HON BLE HIGH COURT OF MADRAS IN THE CASE OF R A MALINGAM CHARITIES VS CIT SALEM IN APPEAL NO 809 TO 813 OF 2010, VIDE THE ORDER OF THE HON BLE H C DATED 11 - 03 - 2011 . 3.4 AN UPSHOT OF THE ABOVE DISCUSSION CLEARLY INDICATES THAT THE ACTIVITIES OF THE SOCIETY ARE NOT FOR THE PURPOSE OF CHARITY OR FOR THAT MATTER FOR IMPARTING EDUCATION AND AS SUCH THESE ACTIVITIES ARE CLEARLY IN VIOLATIONS OF PROVISIONS OF SEC .13( 1 )(C), 13( 1) (D) R . W . S 11(5) OF THE I.T. ACT, 1961, WHICH RENDERS THE A SSESSEE INELIGIBLE TO CLAIM ANY EXEMPTION U/S 11 OF THE ACT. ACCORD IN G LY, THE CLAIM OF THE ASSESSEE U/S 11 IS DENIED. RESULTANTLY, THE EXCESS OF INCOME OVER EXPENDITURE IS TREATED AS INCOME OF THE SOCIETY IN THE STATUS OF A O P AND TAXED ACCORDINGLY. THE AO DENIED THE EXEM PTION CLAIMED BY THE ASSESSEE U/S 11 OF THE A CT FOR THE VIOLATIONS MENTIONED ABOVE. 5. AGAINST THE ORDER OF THE AO, THE ASSESSEE W ENT ON APPEAL BEFORE THE CIT(A). B EFORE THE LD. CIT(A), THE ASSESSEE CHALLENGED THE ORDER OF THE AO WITH REGARD TO THE VALIDITY OF NOTICE U/S 147 AS WELL AS ITS CLAIM U/S 11 AND ON FINDINGS OF THE AO REGARDING THE VIOLATIONS OF SECTION 13(1)(C), 13(2)(A), 13(2)(G), 13(2)(D) AND 13(2)(H) OF THE A CT BY FILING WRITTEN SUBMISSIONS AND ARGUED THAT THE ASSESSEE HAS NOT VIOLATED ANY OF THE PROVISIONS OF THE A CT AND CANNOT BE MA DE DISENTITLED FOR THE EXEMPTION U/S 11 OF THE A CT. THE CIT(A) CALLED FOR THE REMAND REPORT FROM THE AO ON THE WRITTEN SUBMISSIONS MADE BY THE ASSESSEE AND IN THE REMAND REPORT, THE AO SUPPORTED HIS ACTION IN REJECTING THE CLAIM OF THE ASSESSEE U/S 11 AND THE 11 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY COMPUTATION OF INCOME UNDER THE HEAD BUSINESS AND THE DISALLOWANCES MADE IN THE ASSESSMENT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, REMAND REPORT AND THE REJOINDER SUBMITTED BY THE ASSESSEE TO THE REMAND REPORT, THE LD.CIT(A) UPHELD THE VALIDITY OF ISSUE OF NOTICE U/S 147 . 5.1 . THE CIT(A) WITH REGARD TO ALTERNATE PLEA FOR EXEMPTION U/S 11 HELD THAT BOTH THE SECTIONS ARE NOT PARI MATERIA AND OPERATE INDEPENDENTLY. IF THE ASSESSEE IS GRANTED REGISTRATION U/S 12A OF THE ACT , THE ASSESSEE WOULD BE ENTITLED FOR EXEMPTION U/S 11 SUBJECT TO SATISFACTION OF THE CONDITIONS UNDER SECTION 12A AND 11 . THE LD.CIT(A) FURTHER HELD THAT T HERE IS NO RESTRICTION AT LEAST UPTO A.Y.2014 - 15 ON ANY OF THESE TWO PROVISIONS. THE LD.CIT(A) FURTHER HE LD THAT T HE ASSESSEE WOULD BE ENTITLED FOR EXEMPTION U/S 1 1 EVEN WHEN CONDITIONS U/S 10(23C) ARE NOT FULFILLED. THE LD.CIT(A) FURTHER HELD THAT EXEMPTION U/S 11 IS NOT AUTOMATIC AND IT IS SUBJECT TO FULFILLMENT OF CERTAIN CONDITIONS MENTIONED IN THE PROVISIONS . ACCORDINGLY, THE LD.CIT(A) HELD THAT IF THERE ARE NO VIOLATIONS U/S 11 OF THE ACT, EVEN IF THE ASSESSEE DENIED EXEMPTION U/S 10(23C), STILL IT WOULD BE ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT. 5.2 . THE LD.CIT(A) ALSO EXAMINED THE MERITS O F THE CASE AND ALLOWED THE APPEAL OF THE ASSESSEE AND GIVEN A FINDING THAT THERE ARE NO VIOLATIONS AS 12 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY OBSERVED BY THE AO IN RESPECT OF ADVANCES GIVEN TO SISTER CONCERNS , INSTITUTIONS AND INDIVIDUALS. THE LD.CIT(A) HAS EXAMINED EACH ADVANCE INDEPENDENTLY IN DETAIL WITH THE NATURE OF ADVANCE, NATURE OF INSTITUTION TO WHICH IT WAS GIVEN , THE PURPOSE AND OBSERVED THAT THERE WERE NO VIOLATIONS U/S 13(1 )(C), 13(2)(A), 13(2)(G), 13(2)(D) AND 13(2)(H) AS OBSERVED BY THE AO AND HELD THAT THE ASSESSEE HAS SATISF IED ALL THE CONDITIONS FOR ALLOWING THE EXEMPTION OF INCOME UNDER SECTION 11 OF THE ACT. 5.3 . FURTHER THE LD.CIT(A) ALSO EXAMINED THE ISSUE WITH REGARD TO THE LODGING AND BOARDING EXPENSES, USAGE OF LUXURY CARS AND HELD THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF SOCIETY AND THERE WAS NO FINDING OF THE AO INDICATING THAT THE LUXURY CARS WERE USED FOR THE PURPOSE OF PERSONAL GAINS. ACCORDINGLY, REJECTED THE OB SERVATION OF THE AO THAT THE USAGE OF BMW, VOLKS W AGEN CARS WOULD DISENTITLE THE EXEMPTION CLAIMED U/S 11 AS LONG AS SUCH ASSETS ARE USED FOR THE PURPOSE OF ACHIEVING THE OBJECTS OF THE SOCIETY. 5.4. IN RESPECT OF EXPENSES OF LIQUOR AND CIGARETTES THE LD.CIT(A) OBSERVED THAT THE ASSESSEE HAS RECOVERED THE SAID EXPENSES AND DEBITED ONLY THE NET EXPENDITURE, THUS THERE IS NO VIOLATION AND NO EXPENDITURE RELATING TO LIQUOR AND CIGARETTES WAS CLAIMED AND ACCOUNTED IN THE BOOKS. 13 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY 6. AGAINST THE ORDER OF THE LD.CIT(A), THE REVENUE FILED APPEAL BEFORE THIS TRIBUNAL ON VIOLATIONS U/S 13(1) (C), 13(2)(A), 13(2)(G), 13(2)(D) AND 13(2)(H) AND THE ASSESSEE FILED CROSS OBJECTIONS SUPPORTING THE ORDER OF THE LD. CIT(A) AS WELL AS CHALLENGING THE VALIDITY OF REASSESSMENT PROCEEDINGS. THE REVENUE HAS FILED APPEAL RAISING SIX COMMON GROUNDS IDENT ICAL TO ALL THE APPEALS FOR THE A.Y. 2004 - 05 TO 2007 - 08 AND 2009 - 10 TO 2010 - 11 AS UNDER : 1. THE LD.CIT(APPEALS) ERRED IN SIMPLY RELYING ON THE SUBMISSIONS OF THE ASSESSEE THAT THE AUTHORS/DIRECTORS/TRUSTEES/INTERESTED PARTIES OF THE INSTITUTIONS HAVE NO INTEREST IN THE SOCIETY. 2. THE LD.CIT(APPEALS). IN NOT CORRECT IN ACCEPTING THE ASSESSEE'S PLEA THAT THERE ARE NO VIOLATIONS OF DIVERSION OF FUNDS TO THE AUTHOR/FOUNDER MEMBERS OF THE SOCIETY IN SPITE OF THE CATEGORICAL ASSERTION BY THE ASSESSEE THAT IT HAD NOT CHARGED INTEREST ON THOSE LOANS. 3. THE LD.CIT(APPEALS) IS NOT CORRECT IN CONCLUDING THAT THERE ARE NO VIOLATIONS U/S 13(1)(C) WHEREAS THE SPECIFIC VIOLATIONS / FINDINGS BY THE DEPARTMENT ARE AS PER THE PROVISIONS OF SECTION 13(2)(A), 13(2)(G) AN D 13(2)(H) OF THE I.T.ACT. 4. THE LD.CIT(APPEALS) ERRED IN ACCEPTING THE ASSESSEE'S SUBMISSIONS AND CONCLUDING THAT THE EXPENDITURE FOR MAINTAINING LUXURY CARS LIKE BMW AND VOLKS WAG E N IS FOR THE PURPOSE OF CHARITY. 5. THE LD.CIT(APPEALS) ERRED IN ACCEPTING THE ASSESSEE'S PLEA THAT THE EXPENDITURE MADE ON LIQUOR AND TOBACCO PRODUCTS AND ON OTHER TYPES OF GENERAL ENTERTAINMENT CAN BE CONSTRUED AS EXPENDITURE INCURRED IN FURTHERANCE OF THE OBJECTIVES OF THE SOCIETY AS THE SAME WAS RECOVERED AND CREDIT ED BACK INTO THE SOCIETY'S ACCOUNT. 6. ANY OTHER GROUND(S) THAT MAY BE URGED AT THE TIME OF HEARING. 14 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY 7. GROUND NO S . 1 TO 3 ARE COMMON FOR ALL THE APPEALS. GROUND NO 4 IS RELATED TO THE USE OF MAINTENAN CE OF LUXURY CARS VIZ. BMW AND V OLKSW AG E N AND G ROUN D NO.5 IS RELATED TO THE EXPENDITURE INCURRED ON LIQUOR AND TOBACCO PRODUCTS. THOUGH THE REVE NUE HAS RAISED THE ABOVE GROUND NO.4 AND 5 FOR ALL THE A.Y S . , THE ABOVE ISSUES ARE NOT INVOLVED FOR THE A.YS 2004 - 05 TO 2007 - 08. THE REVENUE DID NOT PLACE ANY MATERIAL BEFORE US TO SHOW THAT THE ABOVE ISSUES ARE INVOLVED FOR THE A.Y 2004 - 05 TO 2007 - 08. THEREFORE, GROUND NOS. 4 AND 5 ARE DISMISSED AS INFRUCTU OUS FOR THE A.Y. 2004 - 05 TO 2007 - 08 . 8. GROUND NO.6 IS GENERAL IN NATURE WHICH DOES NOT REQUIRE SPECIFIC ADJUDICATION. 9. GROUND NOS.1 TO 3 ARE RELATED TO THE FINDING OF THE AO THAT THE ASSESSEE HAS MADE THE ADVANCES TO INTERESTED PARTIES SPECIFIED IN SECTION 13(1)(C ) OF THE A CT, I.E AUTHORS, DIRECTORS, TRUSTEES HAVING SUBSTANTIAL INTEREST IN THE SOCIETY. THE AO IN THE ASSESSMENT ORDER PARA NO.3.3 TO 3.4 ( EXTRACTED ABOVE ) CONTENDED THAT THE LOANS STANDING IN THE NAME OF M/S PRIYADARSHINI ENTERPRISES, SRI M. PADMANABHAM, SRI A.S.R. BALASUBRAHMANYAM, M/S C HAITANYA ENGINEERING COLLEGE, M/S GODAVARI DEGREE COLLEGE, M/S SYSTRONICS ARE GIVEN TO THE INTERESTED PARTIES WITHIN 15 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY THE MEANING OF SECTION 13(3) OF THE A CT WITHOUT SECURITY AND CHARGING INTEREST , THEREBY VI OLATED THE PROVISIONS OF SECTION 13(1)(C), 13(2)(A), 13(2)(G), 13(2)(D) AND 13(2)(H) A CT. T HE AO FURTHER OBSERVED THAT THE ASSESSEE HAS OBTAINED THE LOAN FROM M/S KOUNDINYA EDUCATIONAL SOCIETY FOR RS.25,70,000/ - ROUTED THROUGH BANK AND DID NOT PAY INTERE ST TO THE SAID EDUCATIONAL SOCIETY . IT WAS FURTHER OBSERVED THAT THE AUTHORS/PROMOTERS OF THE SOCIETY ARE HAVING SUBSTANTIAL INTEREST I N M/S KOUNDINYA EDUCATIONAL SOCIETY, M/S CHAITANYA ENGINEERING COLLEGE AND IN M/S GODAVARI DEGREE COLLEGE AND SYSTRONICS . SIMILARLY, THE AO OBSERVED THAT THE ASSESSEE HAS ADVANCED AMOUNTS TO MOTHER THERASA EDUCATIONAL SOCIETY, M/S CHAITANYA EDUCATIONAL SOCIETY, GSL EDUCATIONAL SOCIETY, CHAITANYA ITC, CHAITANYA JUNIOR COLLEGE , SRI GANNI KRISHNA, SRI BOMMANA RAJKUMAR AND SRI VADDI VEERABHADRA RAO SPECIFIED PERSONS AS PROVIDED IN SECTION 13(1)(C ) OF THE A CT AND N O INTEREST WAS CHARGED FROM THESE PERSONS / SOCIETIES TO WHOM THE ADVANCES WERE MADE OUT OF THE FUNDS AVAILABLE TO THE SOCIETY. THE AO HAS TAKEN SUPPORT O F SECTION 2(32) OF THE I NCOME T AX A CT WHICH DEALS WITH THE INTERESTED PERSON IN RESPECT OF THE COMPANY AND HELD THAT THE PERSON SHALL BE DEEMED TO HAVE S UBSTANTIAL INTEREST IN A CONCERN WHO IS BENEFICIAL OWNER OF SHARES OF THE COMPANY AND IN RESPECT OF OTHER THAN A COMPANY AO VIEWED THAT THE AUTHOR OF THE TRUST WHO MANAGES THE KEY AFFAIRS OF THE 16 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY OTHER SOCIETY ARE INTERESTED PERSONS . THE AO FURTHER VIEWED THAT EVERY SIGNATORY TO THE MOA HAS TO BE TREATE D AS A FOUNDER AND THEREFORE AN INTERESTED PERSON. THE AO RELIED ON THE DECISION OF DIRECTOR OF INCOME TAX VS. BHARAT DIAMOND BOURSE [259 ITR 280 (SC)] AND HELD THAT WHERE THE SAME PERSON IS A TRUSTEE FOR TWO DIFFERENT TRUSTS, SUCH TRUSTEE BECOMES A N INTE RESTED PERSON, MERELY BECAUSE OF THE DEFINITION OF INTEREST ED PERSON. THE AO FURTHER OBSERVED THAT SHRI GANNI KRISHNA, SHRI VADDI BEERABHADRA RAO, SHRI BOMMANA RAJKUMAR WERE FOUNDER MEMBERS OF THE SOCIETY AND THE ASSESSEE SOCIETY HAVE PROVIDED THE FUNDS T O ITS SISTER CONCERNS AND THE ABOVE INDIVIDUALS WITHOUT ANY SPECIFIC PURPOSE, ADEQUATE SECURITY AND WITHOUT CHARGING ANY INTEREST THEREFROM. THEREFORE, HELD THAT THE PERSONS WHO SUBSCRIBED TO THE MOA OF THE ASSESSEE SOCIETY COULD BE DESCRIBED AS FOUNDER S OF SUCH SOCIETY FOR THE PURPOSE OF SECTION 13(3) OF THE ACT. ACCORDINGLY AO HELD THAT THE ASSESSEE HAD VIOLATED THE PROVISIONS OF SECTION 13(2)(A), 13(1)(D) R.W.S.11(5) OF THE A CT AND THERE IS NO APPLICATION OF SECTION 11 OF TH E A CT FOR THE INCOME DERIVED BY THE SOCIETY . ON APPEAL THE LD. CIT(A) OBSERVED THAT THERE ARE NO VIOLATIONS OF SECTION 13(1)(C) , 13(2)(A), 13(2)(G), 13(2)(D) AND 13(2)(H) OF THE ACT IN ADVANCES GIVEN TO THE INSTITUTIONS, INDIVIDUALS SINCE THE ADVANCES WERE PROVIDED TO THE SOCI E TIES HAVING THE SAME OBJECTS AND FOR PROVIDING SERVICES TO THE 17 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY SOCIETY FOR CARRYING ON THE REGULAR ACTIVITY OF THE SOCIETY AND TO ACHIEVE THE OBJECTS . LD.CIT(A) ACCORDINGLY HELD THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION U/ S 11 AND DIRECTED THE AO TO COMPUTE THE INCOME AS APPLICABLE FOR TRUST AND DELETED THE ADDITIONS MADE BY THE AO . 10. DURING THE APPEAL HEARING, THE LD.DR ARGUED THAT FOUNDER ME MBERS/ MANAGING COMMITTEE MEMBERS OF THE ASSESSEE SOCIETY ARE ALSO HAPPENS TO BE THE M EMBERS OF THE OTHER EDUCATIONAL INSTITUTIONS TO WHOM MONIES WERE LENT BY THE ASSESSEE SOCIETY AND HAD BORROWED THE FUNDS FROM OTHER INSTITUTIONS AND INDIVIDUALS. THE ASSESSEE SOCIETY DID NOT CHARGE ANY INTEREST OR DID NOT TAKE ANY SECURITY FOR THE AMOUNTS ADVANCED , THUS T HE SOCIETY HAS VIOLATED THE PROVISIONS OF SECTION 13(1)(C), 13(2)(A), 13(2)(G) AND 13(2)(H) OF THE ACT BY ADVANCING THE AMOUNTS TO INTERESTED PERSONS AND ACCORDINGLY ARGUED THAT AO HAS RIGHTLY DENIED THE EXEMPTION U/S 11 OF THE A CT. THE DR FURTHER SUBMITTED THAT THERE ARE CLEAR VIOLATIONS AND DIVERSION OF FUNDS TO THE AUTHORS AND FOUNDER MEMBERS OF THE SOCIETY AND THERE WAS A CATEGORICAL FINDING GIVEN BY THE AO IN RESPECT OF VIOLATIONS AND ACCORDINGLY ARGUED THAT THE ORDER OF THE LD.C IT(A) IS TO BE SET ASIDE AND TO RESTORE THE A O S ORDER. ON THE OTHER HAND THE LD.AR SUPPORTED THE ORDERS OF THE LD.CIT(A) AND ARGUED THAT NO INTERFERENCE IS CALLED FOR . 18 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THE CO NTENTION OF THE REVENUE I S THAT THE ASSESSEE HAD ADVANCED THE SUMS TO OTHER EDUCATIONAL INSTITUTIONS, INDIVIDUALS AND BORROWED FUNDS FROM INDIVIDUALS AND INSTITUTIONS THEREBY VIOLATED THE PROVISIONS OF 13(1) (C) AND SECTION 11(5) OF THE A CT , HENCE INELIGIBLE FOR EXEMPTION OF ITS INCOME U/S 11 OF THE A CT. THE ASSESSEES CONTENTION IS THAT THE ADVANCES WERE MADE TO THE SOCIETIES CARRYING ON SIMILAR OBJECTS AND OTHER OUT STANDINGS ARE INCURRED IN THE REGULAR ACTIVITY OF THE ASSESSEES OBJECTS A ND THUS NO VIOLATIONS OF SECTION 13(1)( C) ,13(2)(A), 13(2)(G) AND 13(2)(H) OF THE A CT AND ITS INCOME IS ELIGIBLE FOR EXEM P TION U/S 11 OF THE A CT. AS PER SECTION 13(1)(C) OF THE ACT, ANY INCOME OF THE TRUST OR PART OF THE INCOME OF THE TRUST IS DIVERTED FOR THE PURPOSE OF PERSONAL BENEFIT OF ANY OF THE PERSONS REFERRED TO IN SUB - SECTION 3 OF SECTION 13 , IN SUCH CASE, SECTION 11 IS NOT TO BE APPLIED. 11.1. IN THE INSTANT CASE, AS OBSERVED FROM THE ASSESSMENT ORDER AND THE DETAILS FURNISHED , THE ASSESSE E HAS ADVANCED SUMS TO OTHER INSTITUTIONS WHICH ARE HAVING REGISTRATION U/S 12A AND CARRYING ON THE SIMILAR OBJECTS AS UNDER : 19 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY SL. NO. NAME OF THE SOCIETY PURPOSE A.Y. (A) MOTHER THERESA EDUCATIONAL SOCIETY FOR CONSTRUCTION OF BUILDING AND EQUIPMENT FOR RUNNING HOSPITAL 2004 - 05 TO 2010 - 11 (B) BADARILAKSHMI EDUCATIONAL SOCIETY FOR INITIATION OF ITS OPERATION 2009 - 10 & 2010 - 11 (C) GSL EDUCATIONAL SOCIETY LOAN GIVEN WITHOUT INTEREST 2004 - 05 TO 2009 - 10 T HE ABOVE SOCIETIES ARE REGISTERED U/S 12A OF THE A CT AND CARRYING ON THE SIMILAR OBJECTS OF THE SOCIETY. 11.2. SIMILAR L Y, THE ASSESSEE MADE THE PAYMENTS FOR THE SPECIFIED PURPOSE TO THE FOLLOWING ENTERPRISES : NAME OF THE SOCIETY PURPOSE A.Y. (A) M/S PRIYADARSHINI ENTERPRISES FOR PURCHASE OF COMPUTERS 2004 - 05 TO 200 5 - 0 6 (B) M/S SYSTRONICS FOR PURCHASE OF LABORATORY EQUIPMENT 2004 - 05 TO 2010 - 11 11.3. APART FROM THE ABOVE , ASSESSEE SOCIETY MADE THE ADVANCES TO THE FOLLOWING INDIVIDUALS FOR A SPECIFIC PURPOSE OF THE SOCI E TY: SL. NO. NAME OF THE INDIVIDUAL AMOUNT PURPOSE A.Y. (A) GANNI KRISHNA 9,05,000 FOR CONSTRUCTION OF COLLEGE BUILDING 2004 - 05 TO 2010 - 11 (B) VADDI VEERABADRARAO 1,23,163/ - EXPENDITURE INCURRED FOR REPAIRS 2004 - 05 TO 2010 - 11 20 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY (C) BOMMANA RAJ KUMAR FOR PURCHASE OF PROPERTY 2004 - 05 TO 2010 - 11 11.4. THE ASSESSEE SOCIETY BORROWED FUNDS FROM THE FOLLOWING INDIVIDUALS AND INSTITUTIONS FOR ITS FINANCIAL REQUIREMENTS . SL. NO. NAME OF THE INDIVIDUAL / INSTITUTION A.Y. (A) M.PADMANABHAM 2004 - 05 TO 20 10 - 11 (B) ASR BALASUBRAHMANYAM 2004 - 05 TO 20 10 - 11 (C) M/S CHAITANYA ENGINEERING COLLEGE 2004 - 05 TO 2010 - 11 (D) GODAVARI DEGREE COLLEGE 2004 - 05 TO 200 6 - 0 7 (E) P.V.KRISHNA RAJU 2007 - 08 TO 2010 - 11 (F) K.S.RAJU & V.K.RAJU EDUCATIONAL SOCIETY 2009 - 10 TO 2010 - 11 12. THE LD.CIT(A) HAS EXAMINED EACH ADVANCE AND THE BORROWAL AND GIVEN A FINDING THAT THERE WAS NO VIOLATION AS OBSERVED BY THE AO AND HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. FOR THE SAKE OF CONVENIENCE WE EXTRACT THE RELEVANT PART OF THE ORDER OF THE L D.CIT(A) WHICH IS MADE AVAILABLE IN HIS ORDER PARA NO.10.7 TO 11.7 FOR THE A.Y. 2004 - 05 WHICH READS AS UNDER: 10.7) IN THE CASE OF MOTHER THERESSA EDUCATIONAL SOCIETY, I HAVE EXAMINED THE MEMORANDUM OF AIMS & OBJECTS AND FOUND THAT THE SAID INSTITUTION IS ESTABLISHED WITHOUT PROFIT MOTIVE AND NO ONE HAS ANY INTEREST IN THE SAID INSTITUTION LEAVE ALONE PROFIT SHARING RATIO. AS FAR AS MOTHER THERESSA EDUCATIONAL SOCIETY IS CONCERNED, THERE IS NO ELEMENT OF PROFI T AND THERE IS NO DISTRIBUTION OF PROFIT AMONG THE MEMBERS AND NONE OF THE MEMBERS DERIVE PROFIT FROM THE SAID SOCIETY. THEREFORE, I AM OF THE VIEW THAT THE INSTITUTION CANNOT BE CONSIDERED AS THE PERSON MENTIONED IN SUB SECTION (3) OF SECTION 13 OF THE AC T. A SIMILAR ISSUE HAS COME BEFORE THE HON'BLE TRIBUNAL OF VISAKHAPATNAM IN APPELLANT'S OWN CASE FOR THE ASST. YEAR 2008 - 09 WHEREIN THE HON'BLE MEMBERS HELD THAT ADVANCES TO SOCIETY HAVING SIMILAR OBJECTS WHETHER OR NOT REGISTERED U/S.12A OF THE ACT IS NOT A VIOLATION OF SECTION 13 OF 21 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY THE ACT. IN THE CASE OF MOTHER THERESSA EDUCATIONAL SOCIETY FOR THE ASST. YEAR 2009 - 10 AND IN THE CASE OF BADIRILAKSHMI EDUCATIONAL SOCIETY, TWO DIFFERENT SOCIETIES RUNNING EDUCATIONAL INSTITUTIONS FOR THE ASST. YEAR 2009 - 10, MY PREDECESSOR HAVE HELD THAT THE INCOME OF THESE SOCIETIES TO BE EXEMPTED U/S 11 OF THE ACT, FOLLOWING THE JUDGEMENT OF HONBLE TRIBUNAL MUMBAI IN THE CASE OF MAHATMA GANDHI SEVA MANDIR VS. DDIT (EXEM) 52 SOT 26. THE DECISION OF KARNATAKA HIGH COURT IN TH E CASE OF SHAMNUR SAVITRAMMA KALLAPPA PUBLIC TRUST REPORTED IN 53 DTR 117 WHEREIN IT WAS HELD THAT WHEN THE OBJECTS PERMIT TO EXTEND SERVICES TO OTHER CHARITABLE INSTITUTIONS AND FINANCIAL ASSISTANCE IS PROVIDED TO SUCH INSTITUTIONS CARRYING ON THE CHARITA BLE ACTIVITIES EXEMPTION ULS.11 CANNOT BE DENIED. THE MADRAS HIGH COURT IN THE CASE OF M.C.T. MUTHAIAH CHETTLAR FAMILY TRUST REPORTED IN 245 ITR 400 WHEREIN THEIR LORDSHIPS HELD THAT AMOUNT HANDED OVER TO ANOTHER TRUST HAVING SIMILAR OBJECT WOULD AMOUNT TO APPLICATION OF ITS INCOME. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS AND ON THE FACTS OF THE CASE, I AM OF THE OPINION THAT THE AMOUNTS PAID TO THE SAID SOCIETY BY THE APPELLANT IS WITHIN THE OBJECTS OF THE SOCIETY AND IN FULFILLMENT OF IT OBJECTS AND TH E PAYEE IS NOT A PERSON DEFINED IN SECTION 13(3) OF THE ACT. THEREFORE, THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT HAS NO APPLICATION. 10.8) GSL EDUCATIONAL SOCIETY : - REGARDING THE PAYMENTS MADE TO GSL EDUCATIONAL SOCIETY, CHAITANAYA ITC AND CHAITANYA JUNIOR COLLEGE ARE CONCERNED, THEY ARE EDUCATIONAL INSTITUTIONS AND ARE ALSO RUNNING WITHOUT ANY PROFIT MOTIVE. IT IS SEEN THAT NO PROFIT WAS DISTRIBUTED AMONG ITS MEMBERS AND THEY ARE CHARITABLE INSTITUTIONS. IN SO FAR AS IMPARTING EDUCATION IS CONCERNED , THE MEMBERS HAVE NO INTEREST IN THE SOCIETY AND THERE IS NO PROFIT SHARING RATIO. FOR SIMILAR REASONS MENTIONED IN THE CASE OF MOTHER THERESSA EDUCATIONAL SOCIETY, THESE INSTITUTIONS DO NOT COME WITHIN THE AMBIT OF SECTION 13(1)(C) OF THE ACT. THIS VIEW IS SUPPORTED BY THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR VS. SHAMNUR SAVITHRAMMA KALLAPPA PUBLIC TRUST REPORTED IN 53 DTR 117 AND DECISION OF MADRAS HIGH COURT IN THE CASE OF CIT VS. M.C.T. MUTHAIAH CHETTIAR FAMILY TRUST REPORTED IN 24 5 ITR 400 AND ALSO KANPUR SUBHASH SIKSHA SAMITHI (2003) REPORTED IN DT 2655 (ALL.). IN VIEW OF THE FACTS AND LEGAL POSITION, I, THEREFORE, HOLD THAT PROVIDING FUNDS TO OTHER CHARITABLE INSTITUTIONS HAVING SIMILAR OBJECTS AS THAT OF APPELLANT CANNOT BE A VI OLATION U/S.13(1) OF THE ACT. IT IS NOTICED THAT IN APPELLANT'S OWN CASE FOR THE ASST. YEAR 2008 - 09, THE AR HAS BROUGHT TO MY NOTICE THAT ON THE ISSUE OF INSTITUTIONS HAVING SIMILAR OBJECTS, THE HON'BLE TRIBUNAL, VISAKHAPATNAM HELD THAT THE ADVANCES MADE B Y THE APPELLANT TO THE OTHER INSTITUTIONS OF SIMILAR OBJECTS IS NOT IN VIOLATION OF SECTION 13(1)(C) AND 13(3)OF THE ACT, I CONCUR WITH THE SUBMISSIONS MADE BY THE AR OF THE APPELLANT. 11) ADVANCES GIVEN TO INSTITUTIONS AND INDIVIDUALS : AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WRITTEN SUBMISSIONS MADE BY THE AR OF THE 22 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY APPELLANT AND ALSO THE REMAND REPORT OF THE ASSESSING OFFICER, I HAVE DECIDED TO ADJUDICATE THE ISSUE OF LOANS AND ADVANCES TO THE INSTITUTIONS AND INDIVIDUALS I NDEPENDENTLY. I WOULD DISCUSS EACH INSTANCE ALONG WITH ARGUMENTS OF THE APPELLANT AND THE FINDINGS OF THE ASSESSING OFFICER AS UNDER : 11.1) M/S PRIYADARSHINI ENTERPRISES : THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, HAS HELD THAT THE APPELLANT IS CONT INUING THE LOANS STANDING IN THE NAME OF M/S PRIYADARSHINI ENTERPRISES WITHOUT INTEREST AND AUTHOR OF THE SOCIETY IS HAVING SUBSTANTIAL INTEREST IN OTHER INSTITUTIONS. THUS, THE ASSESSING OFFICER HELD THAT THE LOANS ARE IN VIOLATION OF SECTION 13(3) OF THE ACT. THE AR OF THE APPELLANT ON THE OTHER HAND HELD THAT THE AMOUNT OF RS.21,00,000/ - IS AN OUTSTANDING AMOUNT AS ON 31.03.2004 AGAINST THE PURCHASE OF COMPUTERS. THE AMOUNT PAYABLE WAS PAID IN THE FINANCIAL YEAR 2004 - 05. THERE IS NO VIOLATION OF PROVISI ONS OF SECTION 13 IN THIS TRANSACTION AS THE APPELLANT PURCHASED COMPUTERS FROM THE SAID CONCERN AND DID NOT PROVIDE ANY BENEFIT TO ANY OTHER MEMBERS OR PERSONS MENTIONED IN THE SECTION 13(3) OF THE ACT. I HAVE PERUSED THE BALANCE SHEET AS ON 31.03.2004 A ND FOUND THAT THE SAID AMOUNT OF RS. 21,00,000/ - IS OUTSTANDING AS ON 31.03.2004 AGAINST THE PURCHASE OF COMPUTERS. IT IS ALSO SEEN THAT THE REPAYMENT WAS MADE DURING THE FINANCIAL YEAR 2004 - 05. THEREFORE, NO BENEFIT APPEARS TO HAVE CONFERRED TO ANY OF THE PERSONS MENTIONED U/S.13(3) OF THE ACT. FURTHER, I HAVE NOTICED THAT THE APPELLANT HAD NO RELATION WITH M/S. PRIYADARSHINI ENTERPRISES AND THE FINDING OF THE ASSESSING OFFICER THAT THE PAYMENT WAS MADE WITHOUT SPECIFIC PURPOSE IS NOT CORRECT. ACCORDINGLY, NO VIOLATION IS FOUND IN THIS CASE. 11.2) SRI M. PADMANABHAM : - THE ASSESSING OFFICER, IN THE ASSESSMENT ORDER, HAS HELD THAT THE APPELLANT IS CONTINUING THE LOANS STANDING IN THE NAME OF SRI M. PADMNABHAM WITHOUT INTEREST AND AUTHOR OF THE SOCIETY IS H AVING SUBSTANTIAL INTEREST IN OTHER INSTITUTIONS. THUS, THE ASSESSING OFFICER HELD THAT THE LOANS ARE IN VIOLATION OF SECTION 13(3) OF THE ACT. THE AR OF THE APPELLANT HAD ARGUED THAT THE APPELLANT HAS OBTAINED A LOAN OF RS.13,00,000/ - VIDE CHEQUE NO.530 02 DATED 29.07.2002 FOR RS. 4,00,000/ - AND DRAFT NO.592249 DATED 14.06.2002 FOR A SUM OF RS.9 LAKHS. THE SAID AMOUNT WAS OUTSTANDING AT THE END OF THE YEAR. THE APPELLANT DID NOT MAKE ANY PAYMENT OF INTEREST AND, THEREFORE, THERE IS NO VIOLATION UNDER ANY OF THE PROVISIONS OF THE I.T. ACT. I HAVE EXAMINED THE FINANCIAL STATEMENTS AND FOUND THAT RS. 13,00,000/ - IS OUTSTANDING AS ON 31.03.2004. IT IS ALSO SEEN THAT THE APPELLANT HAD NOT MADE ANY PAYMENTS OF INTEREST. THEREFORE, NO VIOLATIONS ARE FOUND IN THIS CASE U/S.13(3) OF THE ACT AS THERE WAS NO BENEFIT CONFERRED TO EITHER OF THE 23 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY PARTIES. 11.3) SRI A.S.R. BATASUBRAMANYAM : - THE ASSESSING OFFICER, IN THE ASSESSMENT ORDER, HAS HELD THAT THE APPELLANT IS CONTINUING THE LOANS STANDING IN THE NAME OF SRI A.S.R. BALASUBRAMANYAM WITHOUT INTEREST AND AUTHOR OF THE SOCIETY IS HAVING SUBSTANTIAL INTEREST IN OTHER INSTITUTIONS. THUS, THE ASSESSING OFFICER HELD THAT THE LOANS ARE IN VIOLATION OF SECTION 13(3) OF THE ACT. THE AR ARGUED THAT THE APPELLANT OBTAINED A LOAN OF RS.1,00,000/ - AND INTEREST T HEREON OF RS.15,000/ - WAS PAYABLE FOR THE IMMEDIATELY PRECEDING YEAR. THE INTEREST PROVIDED AS PAYABLE IS REASONABLE. THERE IS NO RELATIONSHIP WITH SRI A.S.R. BALASUBRAMANYAM TO ANY OF THE MEMBERS OF THE APPELLANT SOCIETY. THEREFORE, THERE IS NO VIOLATION ON THIS TRANSACTION. I HAVE EXAMINED THE CASE AND FOUND THAT THERE IS NO RELATIONSHIP WITH SRI A.S.R. BATASUBRAMANYAM TO THE APPELLANT SOCIETY OR WITH ANY MEMBER OF THE SOCIETY. THE RATE OF INTEREST PROVIDED APPEARS TO BE REASONABLE AND PAULTRY. ACCORDING LY, NO VIOLATIONS CAN BE ATTRIBUTABLE IN THIS CASE. 11.4) M/S. CHAITANYA ENGINEERING COLLEGE : THE ASSESSING OFFICER, IN THE ASSESSMENT ORDER, HAS HELD THAT THE APPELLANT IS CONTINUING THE LOANS STANDING IN THE NAME OF M/S. CHAITANYA ENGINEERING COLLEGE WITHOUT INTEREST AND AUTHOR OF THE SOCIETY IS HAVING SUBSTANTIAL INTEREST IN OTHER INSTITUTIONS. THUS, THE ASSESSING OFFICER HELD THAT THE LOANS ARE IN VIOLATION OF SECTION 13(3) OF THE ACT. THE AR OF THE APPELLANT HELD THAT THE APPELLANT RECEIVED AN AMO UNT OF RS.32,36,495/ - FROM THE SAID INSTITUTION. THE SAID INSTITUTION IS ALSO A SOCIETY WITH OBJECTS OF PROVIDING EDUCATION. THERE IS NO VIOLATION OF ANY OF THE PROVISIONS OF SECTION 13 OF THE ACT IN THE SAID TRANSACTION. I HAVE PERUSED THE ACCOUNT COPY AN D THE RECORDS AS WELL, I FOUND THAT THE SAID INSTITUTION IS ALSO A SOCIETY WITH SIMILAR OBJECTS OF PROVIDING EDUCATION. THE HONBLE JURISDICTIONAL ITAT, VISAKHAPATNAM IN APPELLANT'S OWN CASE FOR THE ASST. YEAR 2008 - 09 HELD THAT THERE IS NO VIOLATION IN AD VANCING LOANS TO THE INSTITUTIONS HAVING SIMILAR OBJECTS. MY DECISION IN THE CASES OF M/S. PRIYADARSHINI ENTERPRISES AND MOTHER THERESSA EDUCATIONAL SOCIETY HOLDS GOOD. RESPECTFULLY FOLLOWING THE DECISIONS MENTIONED IN THOSE INSTANCES, I FIND NO VIOLATION IN THIS CASE ALSO. 11.5) GODAVARI DEGREE COLLEGE : - THE ASSESSING OFFICER, IN THE ASSESSMENT ORDER, HAS HELD THAT THE APPELLANT IS CONTINUING THE LOANS STANDING IN THE NAME OF GODAVARI DEGREE COLLEGE WITHOUT INTEREST AND AUTHOR OF THE SOCIETY IS HAVING SU BSTANTIAL INTEREST IN OTTER INSTITUTIONS. THUS, THE ASSESSING OFFICER HELD THAT THE LOANS ARE IN VIOLATION OF SECTION 13(3) OF THE ACT. 24 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY THE AR OF THE APPELLANT HELD THAT THE APPELLANT HAS RECEIVED AN AMOUNT OF RS.85,848/ - . THIS INSTITUTION IS RUN BY THE A PPELLANT SOCIETY. IT IS A DEGREE COLLEGE UNDER THE MANAGEMENT OF THE APPELLANT SOCIETY. THE AMOUNT RECEIVED FROM THE SAID COLLEGE IS SHOWN SEPARATELY AS IT IS A SEPARATE UNIT OF THE APPELLANT. THERE IS NO VIOLATION OF THE PROVISIONS OF SECTION 13 OF THE I. T. ACT AS THE SAID INSTITUTION IS ALSO ESTABLISHED FOR THE PURPOSE OF PROVIDING EDUCATION. I HAVE SEEN THAT THIS INSTITUTION IS RUN BY THE APPELLANT. IT IS OBSERVED FROM THE ACCOUNTS THAT THIS IS A SEPARATE AND INDEPENDENT UNIT OF THE APPELLANT SOCIETY ESTABLISHED FOR THE PURPOSE OF PROVIDING EDUCATION. THE OBJECTS BEING SIMILAR IN NATURE AS IN THE CASE OF MOTHER THERESSA EDUCATIONAL SOCIETY, I HOLD THAT THERE IS NO VIOLATION IS FOUND IN THIS CASE AS THAT OF OTHER INSTITUTIONS 1L6) M/S. SYSTRONICS : - T HE ASSESSING OFFICER, IN THE ASSESSMENT ORDER, HAS HELD THAT THE APPELLANT IS CONTINUING THE LOANS STANDING IN THE NAME OF SYSTRONICS WITHOUT INTEREST AND AUTHOR OF THE SOCIETY IS HAVING SUBSTANTIAL INTEREST IN OTHER INSTITUTIONS. THUS, THE ASSESSING OFFICER HELD THAT THE LOANS ARE IN VIOLATION OF SECTION 13 (3) OF THE ACT. THE AR HAS SUBMITTED THAT THE APPELLANT PURCHASED LABORATORY EQUIPMENT FROM THE SAID CONCERN AND THE AMOUNT REMAINED PAYABLE. I HAVE EXAMINED COPY OF THE ACCOUNTS AND FOUND THAT THE APPELLANT SOCIETY HAS PURCHASED LABORATORY EQUIPMENT AND THE APPELLANT HAD NO RELATION WITH THIS ENTERPRISE. THEREFORE, NO VIOLATION IS FOUND IN THIS CASE. THE CREDIT BALANCE AROSE AS THE APPELLANT PURCHASED LABORATORY EQUIPMENT AND OTHER MATERIAL WHIC H IS EVIDENT FROM THE COPY OF ACCOUNTS SUBMITTED DURING THE APPELLATE PROCEEDINGS. THE ASSESSING OFFICER'S OBSERVATION THAT PAYMENTS WERE MADE WITHOUT ANY SPECIFIC PURPOSE IS NOT CORRECT. 11.7) THE NEXT QUESTION TO BE ADDRESSED IS WHETHER THE PAYMENTS MAD E TO INDIVIDUALS WOULD AMOUNT TO VIOLATION OF PROVISIONS OF SECTION 13(1)(C) OF THE ACT? ACCORDING TO THE ASSESSING OFFICER, THE AMOUNTS ARE DUE FROM ONE SRI GANNI KRISHNA, SRI VADDI VEERABHADRA RAO AND SRI BOMMANA RAJKUMAR. THE ASSESSING OFFICER IS OF THE OPINION THAT THE SOCIETY WOULD HAVE CONFERRED SOME BENEFIT TO THESE INDIVIDUALS AS THEY ARE FOUNDING MEMBERS OF THE SOCIETY WHICH IS IN VIOLATION OF SECTION 13(L)C) OF THE ACT. I HAVE VERIFIED THE ACCOUNT COPIES OF EACH INDIVIDUAL AND FOUND THAT IN THE C ASE OF SRI VADDI VEERABHADRA RAO, IT IS THE PAYMENT OF ADVANCE TOWARDS EXPENDITURE FOR REPAIRS. IN THE CASE OF SRI GANNI KRISHNA, THE AMOUNT OF RS.9,05,000/ - REMAINED AS A CLOSING BALANCE AS ON 31.03.2004. IN FACT, THIS AMOUNT WAS PAID TO HIM ON 12.06.200 1 FOR THE PURPOSE OF CONSTRUCTION OF COLLEGE BUILDING, IN THE CASE OF SRI BOMMANA RAJAKUMAR, THE AMOUNT WAS PAID 25 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY AS AN ADVANCE FOR PURCHASE OF PROPERTY MEANT FOR EDUCATIONAL INSTITUTION. SINCE THE DEAL WAS NOT MATERIALIZED DUE TO THE ACQUISITION OF PROPERT Y BY THE GOVERNMENT, THE AMOUNT IS REMAINED IN THE BOOKS OF THE APPELLANT AS ADVANCE, IN ALL THE THREE CASES, I FIND THAT THE AMOUNTS WERE PAID WITH SPECIFIC PURPOSE, IT IS EXPLAINED BY THE AR OF THE APPELLANT THAT AT THE TIME OF MAKING PAYMENTS TO OTHER P ERSONS, THE FOUNDER MEMBER, SRI KV.V. SATYANARAYANA RAJU HAS GIVEN AN UNDERTAKING TO THE SOCIETY THAT HE WOULD MAKE THE REPAYMENT IN CASE OF NECESSITY OUT OF HIS CREDIT BALANCE OF RS.21 LAKHS L YING IN HIS ACCOUNT AS ON 31.03.2002. SUCH A GUARANTEE TO INDEM NIFY ANY LOSS TO THE APPELLANT IS TO BE CONSIDERED AS ADEQUATE SECURITY. THEREFORE, THE FINDING OF THE ASSESSING OFFICER THAT THERE IS NO ADEQUATE SECURITY IS CONTRARY TO THE FACTS OF THE CASE. IN VIEW OF THE MATTER, I AM NOT IN AGREEMENT WITH THE ASSESSIN G OFFICER THAT THE PAYMENTS WERE MADE BY THE APPELLANT SOCIETY TO CERTAIN INDIVIDUALS WITHOUT SPECIFIC PURPOSE. THE ASSESSING OFFICER IN HIS REMAND REPORT REGARDING THE ADVANCES TO THESE THREE PERSONS EXPRESSED THAT THESE ADVANCES WERE MADE WITH SPECIFIC P URPOSE AND IN VIEW OF THIS, THE ADVANCES MADE TO THE ABOVE INDIVIDUALS ARE HELD TO BE NOT IN VIOLATION TO PROVISIONS OF SECTION 13(1)(C) AND DOES NOT COME IN THE WAY OF EXEMPTION U/S 11 OF THE ACT. 13. IN THIS CASE, NO PAYMENT WAS MADE TO THE PERSONS S PECIFIED UNDER SECTION 13(1)(C) OF THE A CT AS OBSERVED FROM THE DETAILS OF PAYMENTS AND THEY WERE MADE TO THE INSTITUTIONS CARRYING ON THE SAME ACTIVITY AND OTHER PAYMENTS WERE MADE BY THE ASSESSEE IN THE REGULAR COURSE OF BUSINESS OR FOR THE SPECIFIC PURPOSE FOR THE EXPENDITURE TO BE INCURRED IN RESPECT OF THE ACTIVITY OR THE WORKS RELATING TO THE ASSESSEE. IN RESPECT OF THE ADVANCES TO MOTHER THERAS S A EDUCATIONAL SOCIETY, M/S, GSL EDUCATIONAL SOCIETY AND BADARI LAKSHMI EDUCATIONA L S OCIETY THE AMOUNTS WERE ADVANCED FOR CARRYING ON THEIR ACTIVITY WHICH IS SIMILAR TO THAT OF THE ASSESSEE AND THE SAID SOCIETIES ARE HAVING REGISTRATION U/S 12A OF THE A CT. THE SOCIETY ALSO HAS CHARGED THE INTEREST ON THE SAID LOANS THUS THERE IS NO VIOL ATION OF 26 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY SECTION 13(1)(C ) OR SECTION13(1)(D) OF THE A CT. I N THE CASE OF ADVANCES TO M/S PRIYADARSHINI ENTERPRISES WAS F OR PURCHASE OF COMPUTERS AND TO M/S SYSTRONICS IS FOR PURCHASE OF LABORATORY E QUIPMENT WHICH IS NO T A VIOLATION OF THE PROVISIONS OF SEC TION 13(1)(C) AND THE LD.CIT(A) HAS GIVEN A FINDING THAT BOTH ARE NOT RELATED TO THE ASSESSEE . ADVANCES IN RESPECT OF GANNI KRISHNA,VADDI VEERABADRARAO AND BOMMANA RAJ KUMAR ARE FOR THE PURPOSES OF REPAIRS, CONSTRUCTION OF THE BUILDING AND FOR PURCHASE OF SOCIETYS PROPERTY WHICH IS AGAIN FOR THE BENEFIT OF SOCIETY AND NO PERSONAL BENEFIT IS INVO LVED TO ANY OF THE ABOVE PERSONS . THE BORROWALS ARE NOT COVERED BY THE PROVISIONS OF SECTION 13(1) (C) OF THE A CT SINCE THE SOCI E TY BORROWED FUNDS FROM VARIOUS PERSONS FOR THE BENEFIT OF THE SOCIETY AND AS PER THE FINANCIAL REQUIREMENT S OF THE SOCIETY. THE REVENUE DID NOT MAKE OUT A CASE FOR PAYMENT OF EXCESS INTEREST TO ANY OF THE INTERESTED PERSONS TO HOLD VIOLATIONS. THE ASSESSEE HAS FURNISHED THE DETAILS OF AMOUNTS LENT WITH THE PURPOSE AND THE REPAYMENT OF LOANS ETC.. AS UNDER: (A) DETAILS OF AMOUNTS L ENT TO SOCIETIES S.NO. NAME OF THE SOCIETY A.Y. TRANSACTION MADE WITH THE SOCIETY 1. MOTHER THERESA EDUCATIONAL SOCIETY 2004 - 05 TO 2010 - 11 FOR CONSTRUCTION OF BUILDING AND PROCUREMENT OF EQUIPMENT FOR RUNNING HOSPITAL ATTACHED TO THE MEDICAL COLLEGE 2. BADARILAKSHMI EDUCATIONAL SOCIETY 2009 - 10 TO 2010 - 11 FOR FUNDING THE ESTABLISHMENT. 3. GSL EDUCATIONAL SOCIETY 2004 - 05 TO 2009 - 10 GIVEN LOAN TO THE SOCIETY REGISTERED U/S 12A 27 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY (B) DETAILS OF AMOUNTS LENT TO ENTERPRISES S.NO. NAME OF THE ENTERPRISE A.Y. TRANSACTION MADE WITH THE ENTERPRISE 1. M/S PRIYADARSHINI ENTERPRISES 2004 - 05 TO 2007 - 08 ASSESSEE SOCIETY HAS PURCHASED COMPUTERS FROM M/S PRIYADARSHINI ENTERPRISES. THERE IS AN OUTSTANDING BALANCE OF RS.21 LAKHS AS ON 31.03.2004 WHICH WAS REPAID IN THE A.Y.2007 - 08. 2. M/S SYSTRONICS 2004 - 05 TO 2007 - 08 ASSESSEE SOCIETY HAS PURCHASED LABORATORY EQUIPMENT FROM M/S SYSTRONICS. THE AMOUNT REMAINED PAYABLE. REPAID IN A.Y.2008 - 09. (C) DETAILS OF AMOUNTS LENT TO INDIVIDUALS S.NO. NAME OF THE IND IVIDUAL A.Y. TRANSACTION MADE WITH THE INDIVIDUAL 1. GANNI KRISHNA (MEMBER TRUSTEE) 2004 - 05 TO 2007 - 08 AND 2009 - 10 TO 2010 - 11 ASSESSEE SOCIETY PAID AN AMOUNT OF RS.9,05,000/ - TO GANNI KRISHNA RAO TOWARDS CONSTRUCTION OF COLLEGE BUILDING ON DT.12.06.2011 2. VADDIVEERABADRARAO 2004 - 05 TO 2007 - 08 AND 2009 - 10 TO 2010 - 11 ASSESSEE SOCIETY MADE PAYMENT OF RS.1,23,163/ - WHICH IS AN ADVANCE GIVEN TOWARDS EXPENDITURE TO BE INCURRED FOR REPAIRS. 3. BOMMANA RAJ KUMAR (MEMBER TRUSTEE) 2004 - 05 TO 2007 - 08 AND 2010 - 11 ASSESSEE SOCIETY PAID AN ADVANCE FOR PURCHASE OF PROPERTY FOR EDUCATIONAL PURPOSE. EVEN THOUGH THE TRANSACTION IS NOT MATERIALISED, THE AMOUNT REMAINED AS ADVANCE. 13.1 . FROM THE ABOVE DETAILS WE DO NOT FIND ANY VIOLATIONS OF SECTION 13(1) (C) AND THE REVE NUE DID NOT PLACE ANY EVIDENCE OR THE MATERIAL TO HOLD THAT THE ASSESSEE HAD VIOLATED T HE PROVISIONS OF SECTION 13(1)(C) OR SECTION 11(5) OF THE A CT. IN THIS CASE, THE ASSESSMENTS WERE COMPLETED FOR THE A.Y. 2004 - 05, 2007 - 08 AND 2008 - 09 U/S 143(3) AND THE AO COMPLETED 28 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY THE ASSESSMENT WITHOUT MAKING ANY ADDITIONS. FOR THE REMAINING YEARS THE ASSESSMENTS WE RE COMPLETED U/S 143(1) OF THE A CT. AS OBSERVED FROM THE ORIGINAL A SSESSMENT ORDERS, THE AO EXAMINED THE DETAILS , VERIFIED THE BOOKS OF ACCOUNTS AND COMPLETED THE ASSESSMENT AND NO VIOLATIONS WERE FOUND AND BROUGHT ON RECORD. THE LD. CCIT WHILE CANCELLING THE APPROVAL GRANTED U /S 10(23 C ) OF THE ACT HAD OBSERVED CERTAIN VIOLATIONS FROM THE BALANCE SHEET AND THE IN FORMATION FILED BY THE ASSESSEE, WHICH WAS THE IMMEDIATE PROVOCATION TO THE AO TO HO LD THAT THERE WERE VIOLATIONS IN RESPECT OF 13(1)(C), 13 (1)(D) AND 13(2)(H) OF THE ACT. THE AO DID NOT MAKE A NY INDEPENDENT INQUIRY IN RESPECT OF THE VIOLATIONS MENTIONED IN PARA NO.3.3 TO 3.4 OF THE ASSESSMENT ORDER. DURING T HE APPEAL HEARING ALSO, THE LD.D R DID NOT BRING A N Y SUCH VIOLATIONS REFERRED TO IN THE ASSESSMENT ORDER WITH THE TANGIBLE EVIDENCE. THE R EVENUE DID NOT PROVE THAT THE PURPOSE FOR WHICH THE ADVANCE WAS GIVEN WAS BOGUS AND IT WAS FOR PERSONAL GAIN. THE ASSESSEE IN HIS SUBMISSION SUBMITTED THAT THE PAYMENTS WERE MADE TO THE INDIVIDUAL PERSONS FOR THE PURPOSE OF SOCIETYS ACTIVITY AND THE ADV ANCES WERE COLLECTED WITH INTEREST AND DUE SECURITY WAS TAKEN FOR THE ADVANCES SUCH AS PERSONAL GUARANTEES OF FOUNDER DIRECTOR . THE LD. CIT(A) ALSO OBSERVED THAT THERE W ERE NO VIOLATIONS WHICH ATTRACTS SECTION 13(1)(C) OF THE ACT. IN FACT, IN THE REMAND REP ORT, THE LD.AO SUBMITTED THAT THE 29 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY RECIPIENTS ARE NOT MEMBERS OF THE SOCIETY AND AMOUNTS WERE ADVANCED WITH SPECIFIC PURPOSE. THE DEPARTMENT COULD NOT MAKE OUT A CASE THAT THE ADVANCES WERE GIVEN TO INTERESTED PERSONS FOR THEIR PERSONAL BENEFIT . THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A). 14. T HE ASSESSEE HAS BORROWED THE FUNDS FROM THE FOLLOWING PERSONS: S.NO. NAME OF THE SOCIETY A.Y. TRANSACTION MADE WITH THE SOCIETY 1. M.PADMANABHAM 2004 - 05 TO 2007 - 08 ASSESSEE SOCIETY HAS OBTAINED A LOAN OF RS.13 LAKHS DURING THE A.Y.2003 - 04 WHICH WAS OUTSTANDING FOR THE YEAR ENDED 31.03.2004. NO INTEREST WAS PAID FOR THE SAME. 2. ASR BALA SUBRAHMANYAM 2004 - 05 TO 2007 - 08 ASSESSEE SOCIETY OBTAINED LOAN OF RS.1,00,000/ - AND INT EREST PAYABLE OF RS.15,000/ - WAS SHOWN IN THE BOOKS OF ACCOUNTS 3. M/S CHAITANYA ENGINEERING COLLEGE 2004 - 05 TO 2007 - 08 AND 2009 - 10 TO 2010 - 11 ASSESSEE RECEIVED LOAN FROM M/S CHAITANYA ENGINEERING COLLEGE OF RS.32,36,495/ - 4. GODAVARI DEGREE COLLEGE 2004 - 05 TO 2007 - 08 ASSESSEE RECEIVED LOAN FROM GODAVARI DEGREE COLLEGE OF RS.85,848/ - 5. P.V.KRISHNA RAJU 2007 - 08 2009 - 10 2010 - 11 ASSESSEE SOCIETY UTILIZED P.V.KRISHNA RAJU OVERDRAFT FACILITY OF RS.70 LAKHS AND THE SAME WAS REPAID. 6. K.S.RAJU&V.K.RAJU EDUCATIONAL SOCIETY 2009 - 10 2010 - 11 ASSESSEE SOCIETY OBTAINED A LOAN OF RS.42,69,884/ - FROM K.S.RAJU&V.K.RAJU EDUCATIONAL SOCIETY AND PAID INTEREST OF RS.1,61,884/ - DURING THE A.Y. 2009 - 10 T HE ASSESSEE REPAID THE ABOVE AMOUNTS COMPLETELY TO SHRI PADMANABHAM IN THE A.Y. 2013 - 14. IN THE CASE OF ASR BALASUBRAHMANYAM, THE AMOUNT WAS REPAID IN THE A.Y. 2013 - 14 AND GODAVARI DEGREE COLLEGE, THE AMOUNT WAS REPAID IN THE A.Y. 2006 - 07. 30 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY SIMILARLY IN THE CASE OF P.V.KRISHNA RAJU, T HE AMOUNT WAS REPAID IN THE A.Y. 2007 - 08 AND FOR K.S.RAJU AND V.K.RAJU EDUCATIONAL SOCIETY, THE AMOUNTS WERE REPAID ALONG WITH INTEREST. THE AO HELD THAT THE AMOUNTS WERE CONTINUED TO BE OUTSTANDING IN THE CASE OF PADMANABHAM AND ASR BALASUBRAHMANYAM. IN THE CASE OF P.V.KRISHNAM RAJU ALSO, THE SOCIETY HAS ADVANCED THE LOANS. IN THIS CASE, THE ASSESSEE HAS BORROWED THE FUNDS BUT NOT ADVANCED THE SUMS TO THE CREDITORS . AS PER SECTION 13 (1)(C) , T HERE ARE RESTRICTIONS ON ADVANCING THE AMOUNTS TO INTEREST ED PERSONS, BUT THERE ARE NO RESTRICTIONS TO BORROW THE FUNDS AT TIMES OF REQUIREMENT . THE REVENUE ALSO DID NOT MAKE OUT A CASE THAT THE ASSE SSEE HAS PAID MORE INTEREST THAN THE MARKET RATE OF INTEREST. SIN CE THERE ARE NO RESTRICTIONS ON BORROWAL OF FUNDS, THE FINDING OF THE AO THAT THE ASSESSEE HAS ADVANCED THE SUMS TO THE INTERESTED PARTIES IS INCORRECT AND THERE IS NO CASE FOR VIOLATIONS U/S 13(1)(C) OF THE ACT. THE ASSESSEE HAS FILED PAPER BOOK ENCLOSING THE ACCOUNT S OF DEBTORS AND CREDITORS DI SCUSSED IN THE ASSESSMENT ORDER FOR THE A.Y. 2004 - 05 TO 2010 - 11. AS PER THE ACCOUNT COPIES AS STATED IN THE TABLE GIVEN ABOVE, THE ACCOUNTS WERE CLOSED IN RESPECT OF M/S PRIYADARSHINI ENTERPRISES, M/S SYSTRONICS, M.PADMANABHAM AND P.V. KRISHNAM RAJU. 31 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY 1 5. THE AO BORROWED THE OBSERVATION OF THE CCIT WHILE CANCELLING THE REGISTRATION U/S 10(23C) W ITH REGARD TO VIOLATIONS U/S 13(1)(C) , 13(2) AND 13(3) AND CAME TO CONCLUSION THAT THE RE WERE VIOLATIONS AND DIVERSION OF FUNDS. IN FACT, NOT A SINGLE VIOLATION WAS BROUGHT ON RECORD BY THE REVENUE CONDUCTING NECESSARY ENQUIRIES IN THIS CASE. IN FACT AS STATED EARLIER THE AO HAS ACCEPTED IN REMAND REPORT THAT THE INDIVIDUALS ARE NOT INTERESTED PARTIES AND THE ADVANCES WERE MADE WITH A SPECIFIC PURPOSE. THE OBSER VATION OF AO IN REMAND REPORT SUPPORTS THAT THE AO DID NOT MAKE ANY ENQUIRY AT THE TIME OF REASSESSMENT PROCEEDINGS. IT IS NECESSARY TO CONDUCT INDEPENDENT ENQUIRIES BEFORE COMING TO A CONCLUSION THAT THERE WE RE VIOLATIONS AND DIVERSION OF FUNDS. MERELY BECAUSE OF THE COMMON PROMOTERS ARE INVOLVED, IT CANNOT BE HELD THAT THE FUNDS WE RE UTILIZED FOR THE PE RSONAL BENEFIT OF THE DIRECTORS AND AUTHORS OF THE SOCIETY. THE INDIVIDUALS ARE PERMITTED TO BE DIRECTORS, AUTHORS, TRUSTEES OF VARIOUS SOCIETIES. THE AO RELIED ON THE DECISION OF BHARAT DIAMOND BOURSE OF HONBLE APEX COURT AND FACTS OF THE CASE ARE COMPLETELY DIFFERENT AND NOT APPLICABLE IN THE ASSESSEES CASE. SIMILARLY THE DEFINITION GIVEN IN SECTION 2(32) CANNOT BE MADE APPLICABLE IN ASSESSEES CASE SINCE THE SAME IS RELATED TO THE COMPANY BUT NOT TO THE TRUST S . IN THE INSTANT CASE, THE ASSESSEE IS NOT CARRYING ON ANY COMMERCIAL OR BUSINESS ACTIVITY, BUT 32 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY CARRYING ON THE ACTIVITY OF IMPARTING EDUCATION WIT HOUT ANY PROFIT MOTIVE AND EXCEPT SUBSCRIBING TO THE TRUST DEED AND MANAGING THE INS TITUTION, THERE IS NO PERSONAL INTEREST OR THE PERSONAL GAINS OF THE INDIVIDUAL MEMBERS WAS ESTABLISHED . IN THE INSTANT CASE, ORIGINAL ASSESSMENTS WERE COMPLETED U/S 143 (3) FOR THE A.Y. 2004 - 05, 2006 - 07, 2007 - 08 AND 2008 - 09 . NO T SINGLE INSTANCE OF VIOLATION OR DIVERSIONS WAS BROUGHT ON RECORD BY THE AO . HOWEVER, IN THE REASSESSMENT PROCEEDINGS, THE AO HELD THAT THERE ARE VIOLATIONS U/S 13(1)(C), 13(2), 13(G) AND 13(H) O F THE ACT ON BASIS OF THE OBSERVATIONS MADE BY THE CCIT WITHOUT BRINGING ANY EVIDENCE. THEREFORE, WE ARE UNABLE TO ACCEPT THE CONTENTIONS OF THE AO THAT THERE ARE VIOLATIONS GIVING RISE FOR DENYING EXEMPTION U/S 11 OF THE ACT. SIMILAR ISSUE HAS COME UP B EFORE THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 2008 - 09 AND THE ITAT HELD THAT THE AO HAS ERRED IN DENYING THE EXEMPTION AND ACCORDINGLY DIRECTED THE AO TO ALLOW EXEMPTION U/S 11 OF THE ACT. FOR READY REFERENCE, WE EXTRACT PARA NO.10 TO 15 OF THE ORDER OF THIS TRIBUNAL IN I.T.A. NO. 162/VIZ/2012 DATED 17.06.2016. 10. THE A.O. DENIED THE BENEFIT OF EXEMPTION FOR THE SOLE REASON THAT THE ASSESSEE SOCIETY HAS DIVERTED ITS FUNDS TO OTHER SOCIETIES AND VIOLATED THE PROVISIONS OF SECTION 13(1)(D) OF THE ACT. ACCORDING TO THE A.O., ADVANCEMENT OF LOANS TO OTHER SOCIETIES WHETHER OR NOT REGISTERED UNDER THE PROVISIONS OF SECTION 12A OF THE ACT IS A VIOLATION OF SECTION 13(1)(D) OF THE ACT, CONSEQUENTLY THE SOCIETY IS NOT ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT. THE QUESTION BEFORE US IS WHETHER LOANS ADVANCED TO OTHER SOCI ETIES UNDER THE SAME MANAGEMENT HAVING SIMILAR OBJECTS AND ALSO REGISTERED 33 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY UNDER THE PROVISIONS OF SECTION 12A OF THE ACT IS A VIOLATIVE OF SECTION 13(1)(D) OF THE ACT, WHICH RENDER THE ASSESSEE INELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT. THE HON'BLE DELHI HIGH COURT, IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) VS. ACME EDUCATIONAL SOCIETY (SUPRA), HELD THAT ADVANCING INTEREST FREE TEMPORARY LOAN BY ASSESSEE SOCIETY TO ANOTHER SOCIETY HAVING SIMILAR OBJECTS IS NOT AN INVESTMENT OR A DEPOSIT, HENCE THE RE IS NO VIOLATION OF THE PROVISIONS OF SECTION 13(1)(D) R.W.S. 11(5) OF THE ACT TO RENDER WITHDRAWAL OF EXEMPTION U/S 11 OF THE ACT. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE DOCUMENTS AVAILABLE ON RECORD, WE FIND THAT THE ASSESSEE HAS ADVANCED LOANS TO OTHER SOCIETIES UNDER THE SAME MANAGEMENT HAVING SIMILAR OBJECTS AND ALSO REGISTERED UNDER THE PROVISIONS OF SECTION 12A OF THE ACT AND CHARGED INTEREST. THE ASSESSEE ALSO PROVED THAT IT HAS ADVANCED LOANS OUT OF THE FUNDS BORROWED FROM FOUNDER MEMBERS OF THE SOCIETY. WHEN THE LOANS ARE GIVEN OUT OF THE FUNDS BORROWED FROM THE SOCIETY, THE A.O. WAS NOT CORRECT IN HOLDING THAT THE ASSESSEE HAS DIVERTED THE FUNDS IN VIOLATION OF THE PROVISIONS OF SECTION 13(1)(D) OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT ADVANCING LOANS TO OTHER SOCIETIES HAVING SIMILAR OBJECT WHETHER OR NOT REGISTERED U/S 12A OF THE ACT, IS NOT A VIOLATION OF THE PROVISION OF SECTION 13(1)(D) OF THE ACT. 11. COMING TO THE OTHER OBSERVATIONS OF THE ASSESSING OFFICER. THE A.O. OBSERVED THAT THE SOCIETY'S ACTIVITIES ARE NOT IN ACCORDANCE WITH THE OBJECTS OF THE SOCIETY. THE SOCIETY IS EXISTED FOR THE PURPOSE OF IMPARTING EDUCATION, HOWEVER, INVOLVED IN THE ACTIVITY OF LET OUT OF PROPERTIES ON COMMERCIAL LINES TO TELECOM COMPANIES AND ALS O RUNNING HOSTELS ON COMMERCIAL LINES. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE SOCIETY IS MAINTAINING LUXURY CARS LIKE BMW AND VOLKS WAGON, HOWEVER FAILED TO PROVE THE PURPOSE OF MAINTAINING LUXURY CARS FOR THE OBJECTS OF THE SOCIETY. WE DO NOT SEE ANY MERITS IN THE FINDINGS OF THE A.O. FOR THE REASON THAT THE A.O. HAS BORROWED THE FINDINGS OF THE CHIEF COMMISSIONER OF INCOME TAX, VISAKHAPATNAM WHILE WITHDRAWING THE EXEMPTION GRANTED U/S 10(23C)(VI) OF THE ACT. WE FURTHER OBSERVED THAT THE A.O. HAS NOT MADE OUT ANY SPECIFIC OBSERVATIONS WITH REGARD TO THE GENUINENESS OF THE ACTIVITIES OF THE SOCIETY FOR THE PERIOD UNDER CONSIDERATION. THE ASSESSMENT OF ANY TRUST/SOCIETY CLAIMING EXEMPTION UNDER SEC. 11 IS TO BE EXAMINED IN EACH YEAR, SO AS TO COME TO THE CONCLUSION THAT THE ENTITY HAS COMMITTED ANY VIOLATIONS REFERRED TO IN ANY OF THE PROVISIONS OF SEC. 13 OF THE ACT TO DENY THE EXEMPTION. THEREFORE, WE ARE OF THE OPINION THAT WITHOUT POINTING OUT ANY SPECIFIC VIOLATIONS REFERRED TO IN SECTION 13 OF THE A CT, THE A.O. WAS NOT CORRECT IN HOLDING THAT THE ASSESSEE OBJECTS ARE NOT CHARITABLE IN NATURE AND THE ACTIVITY CARRIED OUT BY THE ASSESSEE ARE NOT IN ACCORDANCE WITH MAIN OBJECTS OF THE SOCIETY. IN OUR CONSIDERED OPINION, THE A.O. CANNOT BORROW THE FINDIN GS OF THE CHIEF COMMISSIONER OF INCOME TAX IN THE ORDER CANCELLING THE REGISTRATION U/S 10(23C) OF THE ACT TO DENY THE BENEFIT OF EXEMPTION U/S 11 OF THE ACT, UNLESS HE HAD SPECIFICALLY POINTS OUT THE ACTIVITIES CARRIED 34 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY OUT BY THE ASSESSEE ARE NOT IN ACCOR DANCE WITH THE OBJECTS OF THE TRUST. AS FAR AS THE OBSERVATION OF A.O. WITH REGARD TO LETTING OUT OF PROPERTIES ON COMMERCIAL LINES IS CONCERNED, WE NOTICED THAT THE ASSESSEE HAS LET OUT ITS PLACE TO TELECOM COMPANIES FOR ERECTION OF TELECOM TOWER AND USED THE PROCEEDS FOR THE OBJECTS OF THE SOCIETY. SIMILARLY, THE ASSESSEE SOCIETY HAS MAINTAINING A HOSTEL FOR THE BENEFIT OF THE STUDENTS. MAINTAINING HOSTELS FOR THE BENEFIT OF THE STUDENTS AND LETTING OUT PROPERTIES CANNOT BE CONSIDERED HAS INGENUINE ACTIVI TY TO DENY THE BENEFIT OF EXEMPTION U/S 11 OF THE ACT. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE FACTS, WE NOTICED THAT THE A.O. WITHOUT POINTING OUT ANY SPECIFIC VIOLATIONS REFERRED TO IN SECTION 13(1)(C) OR 13(1)(D) OF THE ACT, SIMPLY REJECTED BENEF IT OF EXEMPTION. 12. IT IS PERTINENT TO DISCUSS HERE THE CASE LAWS RELIED UPON BY THE ASSESSEE. THE ASSESSEE RELIED UPON THE DECISION OF HON'BLE HIGH COURT OF DELHI, IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) VS. ACME EDUCATION SOCIETY (2010) 326 IT R 146. THE HON'BLE DELHI HIGH COURT, UNDER SIMILAR CIRCUMSTANCES HELD THAT ADVANCING INTEREST FREE TEMPORARY LOAN BY ASSESSEE SOCIETY TO ANOTHER SOCIETY HAVING SIMILAR OBJECTS IS NOT AN INVESTMENT OR A DEPOSIT, HENCE THERE WAS NO VIOLATION OF PROVISIONS OF SECTION 13(1)(D) OF THE ACT. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUNDER: 'ADVANCING OF INTEREST - FREE TEMPORARY LOAN BY ASSESSEE SOCIETY TO ANOTHER SOCIETY HAVING SIMILAR OBJECTS IS NOT AN 'INVESTMENT' OR A 'DEPOSIT',' HENCE THERE WAS NO VIOLATION OF PROVISION S. 13(1)(D) R.W.S. 11(5) TO RENDER WITHDRAWAL OF EXEMPTION UNDER S. 11' 13. THE ASSESSEE RELIED UPON THE DECISION OF HIGH COURT OF DELHI, IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) VS. ALARIPPU (2000) 244 ITR 358. THE HON'BL E DELHI HIGH COURT, UNDER SIMILAR CIRCUMSTANCES HELD THAT ADVANCING TEMPORARY LOAN TO ANOTHER SIMILAR SOCIETY WAS NEITHER AN INVESTMENT NOR DEPOSIT. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUNDER: THE EXPRESSIONS USED IN BOTH THE PROVISIONS I. E. SS. 11(5) AND 13(1)(D) ARE 'INVESTMENT' AND 'DEPOSIT'. FORMER EXPRESSION MEANS TO LAY OUT MONEY IN BUSINESS WITH A VIEW TO OBTAIN INCOME ON PROFIT. DEPOSIT, ON THE OTHER HAND, MEANS THAT WHICH IS PLACED ANYWHERE, AS IN ANY ONE HANDS FOR SAFE - KEEPING, SO METHING ENTRUSTED TO THE CARE OF ANOTHER. THESE TWO EXPRESSIONS HAVE BEEN USED IN COGNATE SENSE AND HAVE TO BE UNDERSTOOD AS SUCH. IN ORDER TO CONSTITUTE AN INVESTMENT THE AMOUNT LAID DOWN SHOULD BE CAPABLE OF AND RESULT IN ANY INCOME, RETURN OR PROFIT TO THE INVESTOR AND IN EVERY CASE OF INVESTMENT THE INTENTION AND POSITIVE ACT ON THE PART OF THE INVESTOR SHOULD BE TO EARN SUCH INCOME, RETURNS, PROFIT. IN ORDER TO CONSTITUTE AN INVESTMENT THE MONIES SHALL BE LAID OUT IN SUCH A MANNER AS TO ACQUIRE SOME SP ECIES OF 35 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY PROPERTY WHICH WOULD BRING IN AN INCOME TO THE INVESTOR. LOAN, ON THE OTHER HAND, IS GRANTING TEMPORARY USE OF MONEY, OR TEMPORARY ACCOMMODATION. THE WORDS 'INVESTMENT' 'DEPOSIT' AND 'LOAN' ARE CERTAINLY DIFFERENT. THE WORD 'DEPOSIT' DOES NOT COVE R TRANSACTION OF LOAN WHICH CAN BE MORE APPROPRIATELY DESCRIBED AS DIRECT BAILMENT. THE ESSENCE OF DEPOSIT IS THAT THERE MUST BE A LIABILITY TO RETURN IT TO THE PARTY BY WHOM OR ON WHOSE BEHALF HAS BEEN MADE ON FULFILMENT OF CERTAIN CONDITIONS. IN THE COMM ERCIAL SENSE THE TERM IS USED TO INDICATE THE AFORESAID TRANSACTION AS DEPOSIT OF MONEY FOR EMPLOYMENT IN BUSINESS, DEPOSITS FOR VALUE TO INITIATE SECURITY FOR, DEPOSIT OF TITLE DEEDS, SIMILAR DOCUMENTS AS SECURITY FOR LOAN, DEPOSIT OF MONEY BILLS IN A BAN K IN THE ORDINARY COURSE OF BUSINESS OF CURRENT ACCOUNT AND DEPOSITS A SUM AT INTEREST AT A FIXED DEPOSIT IN A BANK. AMOUNT GIVEN TO M WAS NEITHER FOR THE PURPOSE OF INVESTMENT NOR FOR DEPOSIT MORE PARTICULARLY IN THE FACTUAL BACKGROUND. THE TRANSACTION WI TH WHICH THE PRESENT DISPUTE IS LINKED CANNOT BE TREATED AS INVESTMENT OR DEPOSIT AS HAS BEEN FACTUALLY FOUND BY THE TRIBUNAL. THE CONCLUSION BEING ESSENTIALLY FACTUAL, NO QUESTION OF LAW ARISES OUT OF THE ORDER OF THE TRIBUNAL. 14. THE ASSESSEE RELIED UPON THE DECISION OF HON'BLE HIGH COURT OF ALLAHABAD, IN THE CASE OF CIT VS. M/S. KANPUR SUBHASH SHIKSHA SAMITI IN (2013) TAX PUB (DT) 2655 (ALL HC). THE HON'BLE HIGH COURT, WHILE DECIDING THE ISSUE HELD THAT WHEN LOAN GIVEN FROM OUT OF 15% OF INCOME, SECTION 1 3(1)(D) OF THE ACT CANNOT BE APPLIED. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUNDER: 'IN THE PRESENT CASE WE FIND THAT EXCESS OF INCOME OVER EXPENDITURE IN THE RELEVANT YEAR WAS LESS THAN 15% OF THE GROSS RECEIPTS. THE LOAN WAS NOT GIVEN IN THE PERIOD RELEVANT TO ASSESSMENT YEAR. IT WAS GIVEN BETWEEN 20F FEB. TO 24TH FEB. 2003 AND WAS REPA ID IN THE YEAR 2009 AND FURTHER THE AMOUNT WAS GIVEN BY WAY OF LOAN TO A SOCIETY, WHICH WAS LATER ON REGISTERED UNDER SECTION 12A W. E. F 1.4.2004 TO 25.5.2005, WITH THE SAME OBJECTS AND PURPOSE AS THAT OF THE ASSESSEE. 15. CONSIDERING THE FACTS AND CIRCUMSTAN CES OF THIS CASE AND ALSO FOLLOWING THE JUDICIAL PRECEDENTS, WE ARE OF THE OPINION THAT THE A.O. WAS ERRED IN DENYING EXEMPTION U/S 11 OF THE ACT. THE CIT(A) WITHOUT APPRECIATING THE FACTS HAS CONFIRMED THE ORDER PASSED BY THE A.O. THEREFORE, WE SET ASIDE THE ORDER PASSED BY THE CIT(A) AND DIRECT THE A.O. TO ALLOW THE EXEMPTION U/S 11 OF THE ACT. 36 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY 16. ON THE SIMILAR ISSUE, ITAT DELHI BENCH IN THE CASE OF PURANCHAND DHARMATH TRUST VS. ITO, WD - 1, GURGAON HELD THAT WHERE THE ASSESSEE TRUST ADVANCED MONEY AS A LOAN TO ANOTHER TRUST FOR WHICH THE ASSESSEE HAD NOT RECEIVED ANY INTEREST AND THE SAID SUM WAS RETURNED BY THE TRUST, THE AMOUNT ADVANCED NOT BEING INVESTMENT COULD NOT BE HELD TO BE IN VIOLATION OF SECTION 13(1)(D), 11(5) OF THE ACT. 17. THEREFORE, RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THIS TRIBUNAL IN THE ASSESSEES OWN CASE, AND AS PER OUR FINDINGS, WE HOLD THAT THERE ARE NO VIOLATIONS AND THE REVENUE DID NO T MAKE OUT ANY CASE TO SUBSTANTIATE THE VIOLATIONS IN RESPECT OF 13(1)(C), 1 3(2)(A), 13(2)(G) AND 13(2)(H) OF THE ACT. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) AND THE SAME IS UPHELD. THE APPEALS OF THE REVENUE FOR THE A.Y. 2004 - 05 TO 2010 - 11 ON THIS GROUND ARE DISMISSED. 18 . GROUND NO.4 IS RELATED TO THE USE OF BMW AND VOLKSWAGEN CARS IN THE A.Y. 2009 - 10 AND 2010 - 11. THE AO HELD THAT OWNING OF LUXURY CARS AND NON MAINT E NA N CE OF LOG SHEETS WOULD DISENTITLE THE ASSESSEE FOR EXEMPTION U/S 11 OF THE ACT. THE LD. CIT(A) DURING THE APPEAL HEA RING OBSERVED THAT THE CARS ARE USED FOR THE PURPOSE OF THE ACTIVITY OF THE ASSESSEE. FOR READY 37 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY REFERENCE WE EXTRACT THE FINDING OF THE LD.CIT(A) IN PARA NO.13.2 WHICH READS AS UNDER: 13.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE AR AND ALSO THE ASS ESSMENT ORDER OF THE ASSESSING OFFICER. THERE IS NO FINDING OF THE ASSESSING OFFICER WITH REFERENCE TO THE VEHICLES THAT THEY HAVE BEEN USED FOR THE PERSONAL GAINS OF THE MEMBERS OF THE SOCIETY. NO FINDING OF THE ASSESSING OFFICER THAT THE USE OF THE VEH ICLE IS RUNNING CONTRARY TO THE OBJECTS OF THE SOCIETY. I FIND THAT THERE IS NO RESTRICTION IN THE INCOME - TAX ACT ABOUT THE USE OF THE LUXURY CARS IN THE PROCESS OF ACHIEVING OBJECTS OF THE SOCIETY. IT IS ALWAYS THE WISDOM OF THE MEMBERS OF THE SOCIETY TO CHOOSE THE WAY IN WHICH THEY ADMINISTER THE SOCIETY AND THE INSTITUTIONS RUN BY IT IN ACCORDANCE W ITH THE AIMS AND OBJECTS OF THE SOCIETY. THERE IS NO FINDING BY THE ASSESSING OFFICER THAT THE CARS ARE USED FOR OTHER THAN PURPOSE OF PROVIDING SAFETY AND COMFORT TO THE EMINENT PROFESSORS. THEREFORE, I AM OF THE CONSIDERED VIEW THAT PURCHASE OF BMW AND V OTKSWAGEN CARS WOULD NOT AFFECT THE EXEMPTION U/S.11 AS TONG AS SUCH ASSETS ARE USED FOR THE PURPOSE OF ACHIEVING THE OBJECTS OF THE SOCIETY . 19 . WE HAVE HEARD BOTH THE PARTIES AND FIND THAT THE CARS ARE USED FOR THE PURPOSE OF THE ASSESSEES REGULAR ACTIVITY AND THE DEPARTMENT DID NOT PLACE ANY MATERIAL TO ESTABLISH THAT THE CARS WERE USED FOR THE PERSONAL BENEFIT OF DIRECTORS/ AUTHORS/ PROMOTERS OF THE SOCIETY. DURING THE APPEAL HEARING THE REVENUE DID NOT PLACE ANY MATERIAL TO CONTROVERT THE FINDING OF THE LD.CIT(A). THEREFORE WE UPHOLD THE ORDER OF THE LD.CIT(A) AND DISMISS THE APPEAL OF THE REVENUE ON THIS GROUND. 2 0 . GROUND NO.5 IS RELATED TO THE EXPENSES RELATED TO THE LIQUOR AND TOBACCO PRODUCTS AND OTHER ENTERTAINMENT EXPENSES. THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS INCURRED CERTAIN EXPENDITURE ON CIGARETTES, IN THE NAME OF GODAVARI INSTITUTE OF ENGINEERING 38 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY WHICH IS RUN BY THE SOCIETY. SINCE THE EXPENDITURE WAS NOT INCURRED FOR FURTHERANCE OF THE OBJECTS OF THE SOCIETY, THE AO DISALLOWED THE SAID EXPENDITURE HOLDING THAT IT IS GROSS VIOLATION OF THE OBJECTS OF THE SOCIETY. THE LD.C IT(A) EXAMINED THE ACCOUNT OF BOARDING AND LODGING AND OBSERVED THAT A SUM OF RS.24,035/ - RELATING TO THE EXPENSES INCURRED FOR LIQUOR AND CIGARETTES WAS RECOVERED AND CREDITED TO THE ACCOUNT. ULTIMATELY, NO EXPENDITURE WAS CLAIMED RELATING TO LIQUOR AND CIGARETTES ETC. THEREFORE, ALLOWED THE APPEAL OF THE ASSESSEE AND HELD THAT THERE ARE NO VIOLATION S FOR GRANTING OF EXEMPTION U/S 11 OF THE ACT. DURING THE APPEAL HEARING, THE REVENUE COULD NOT CONTROVERT THE FINDING OF THE LD. CIT (A) WITH TANGIBLE MATER IAL. THEREFORE, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE ON THIS GROUND. IN THE RESULT, APPEAL S OF THE REVENUE 2004 - 05 TO 2007 - 08 AND A.YS 2009 - 10 TO 2010 - 11 ARE DISMISSED. 2 1 . THE ASSESSEE FILED CROSS OBJECTIONS FOR T HE A.Y. 2004 - 05 AND 2005 - 06 STATING THAT NO NOTICE U/S 148 COULD BE ISSUED FROM THE END OF FOUR YEARS FROM THE RELEVANT ASSESSMENT YEAR AS PER THE PROVISO TO SECTION 147 OF THE ACT. AS PER THE PROVISO TO SECTION 147 OF THE ACT, NO NOTICE U/S 148 COULD BE ISSUED UNLESS, THERE IS FAILURE ON THE PART OF THE ASSESSEE THAT INCOME 39 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. IN THIS CASE, THE ASSESSEE FILED THE RETURN OF INCOME CLAIMING E XEMPTION U/S 10(23C) OF THE ACT AND T HERE WAS NO CLAIM MADE BY THE ASSESSEE U/S 11. ONLY ON CANCELLATION OF THE APPROVAL GRANTED U/S 10(23C) AND ON RECEIPT OF OBSERVATIONS FROM THE CCIT REGARDING VIOLATIONS AND DIVERSION OF FUNDS, IT HAS COME TO THE KNOWLEDGE OF THE AO THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 13( 1)(C), 13(2)(A), 13(2)(G) AND 13(2)(H) OF THE ACT THUS THERE IS NO OCCASION TO THE AO TO EXAMINE THE VIOLATIONS U/S 13 OF THE ACT. THE ASSESSEE DID NOT FURNISH INFORMATION WITH REGARD TO ITS CLAIM U/S 11 OF THE ACT , IN THE ORIGINAL ASSESSMENT. IN VIEW OF THE FINDINGS OF THE LD.CCIT WITH REGARD TO THE VIOLATIONS U/S 13(1)( C) AND SECTION 11(5) THE AO REOPENED THE ASSESSMENT. T HERE WAS NO CLAIM U/S 11 AND NO INFORMATION WAS FURNISHED WITH REGARD TO SATISFACTION OF THE CONDITIONS FOR GRANTING EXEMP TION OF INCOME UNDER SECTION 11 OF THE ACT BY THE ASSESSEE. THUS THERE WAS A FAILURE ON THE PART OF THE ASSESSEE AND THE AO HAS RIGHTLY REOPENED THE ASSESSMENT U/S 148 OF THE A CT. ACCORDINGLY WE UP HOLD THE ORDER OF THE LD.CIT(A) AND DISMISS THE CROSS OBJE CTIONS FILED BY THE ASSESSEE. 2 2 . FOR THE A.YS 2006 - 07 TO 2007 - 08 ALSO THE ASSESSEE CHALLENGED THE VALIDITY OF ISSUE OF NOTICE U/S 148 OF THE ACT. IN THIS CASE ALSO THE FACTS ARE 40 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY IDENTICAL TO THE A.Y 2004 - 05 TO 2005 - 06. FOR THE SAME REASONS WE HOLD THAT THE LD.CIT(A) HAS RIGHTLY UPHELD THE VALIDITY OF NOTICE U/S 148. ACCORDINGLY, THE CROSS OBJECTIONS OF THE ASSESSEE IN RESPECT OF VALIDITY OF ISSUE OF NOTICE U/S 148 FOR THE A.YS 2005 - 06 TO 2006 - 07 ARE DISMISSED. 2 3 . FOR THE A.YS. THE ASSESSEE FILED CROSS OBJECTION STATING THAT THE ORDER PASSED U/S 143(3) IS CONTRARY TO THE FACTS BUT NO ARGUMENT WAS ADVANCED. HENCE CROSS OBJECTION FILED BY T HE ASSESSEE ARE DISMISSED AS NO T PRESSED. 2 4 . IN THE RESULT, THE APPEALS OF THE REVENUE AND THE CROSS OBJECTIO NS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER , 9 2018 . S D/ - S D/ - ( . . ) ( . ) ( D.S. SUNDER SINGH ) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER /VISAKHAPATNAM /DATED : 20 .12.2018 L.RAMA, SPS 41 I.T.A. NOS. 99 - 1 0 4 /VIZ/2017 AND CO NOS.34 - 39/VIZ/2017 M/S SRI KOUNDINYA EDUCATIONAL SOCIETY, RAJAHMUNDRY / COPY OF THE ORDER FORWARDED TO: - 1. / THE ASSESSEE SRI KOUNDINYA EDUCATIONAL SOCIETY, NH - 5, CHAITANYA NAGAR, GIET CAMPUS, RAJAHMUNDRY 2 . / THE REVENUE ASST.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, RAJAHMUNDRY 3. THE PR. COMMISSIONER OF INCOME TAX (CENTRAL), VISAKHAPATNAM 4. THE COMMISSIONER OF INCOME TAX (APPEALS) - 3 , VISAKHAPATNAM 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM