M/s Shiva Educational Trust, Moga V. DCIT, C-1 (Exemptions), Chandigarh

CO 5/CHANDI/2019

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0232 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-03-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 18-03-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH; ASSESSEES SISTER CONCERN. SO ASSESSEE CLAIM OF EXEMPTION IS DENIED US
• Assessee Lawyers: INVOKING PROVISIONS OF
• Keywords: Charitable institution
• Section: 6; 11; 12A; 12AA; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH B, CHANDIGARH BEFORE SHRI N.K. SAINI, VICE PRESIDENT AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO. 1432/CHANDI/2018 (ASSESSMENT YEAR : 2015-16) DCIT, C-1 (EXEMPTIONS) CR BUILDING CHANDIGARH VS. M/S SHIVA EDUCATIONAL TRUST FAUJI MARKET MOGA- PUNJAB PAN NO. AAETS7524B APPELLANT RESPONDENT CROSS OBJECTION NO. 5/CHANDI/2019 (IN ITA NO. 1432/CHANDI/2018) (ASSESSMENT YEAR : 2015-16) M/S SHIVA EDUCATIONAL TRUST FAUJI MARKET MOGA- PUNJAB PAN NO. AAETS7524B VS. DCIT, C-1 (EXEMPTIONS) CR BUILDING CHANDIGARH APPELLANT RESPONDENT DEPARTMENT BY : SHRI. MANJIT SINGH, CIT(DR) ASSESSEE BY : NONE DATE OF HEARING :25/03/2019 DATE OF PRONOUNCEMENT :28/03/2019 O R D E R PER N.K. SAINI, VICE PRESIDENT : THIS APPEAL BY THE DEPARTMENT AND THE CROSS OBJECT ION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 2 1.08.2018 OF THE LD. CIT(A)- 4, LUDHIANA. (2) DURING THE COURSE OF HEARING NOBODY WAS PRESENT ON BEHALF OF THE ASSESSEE, NEITHER ANY ADJOURNMENT WAS SOUGHT. WE THEREFORE, PROCEEDED EX-PARTE QUA THE ASSESSEE AND THE CASE IS DECIDED ON MERIT AFTER HEARING THE LD. CIT(DR). (3) IN THE APPEAL OF THE DEPARTMENT, FOLLOWING GROU NDS HAVE BEEN RAISED: PAGE 2 OF 10 I. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS E RRED IN LAW IN ALLOWING THE BENEFIT UNDER SECTION 11 OF THE ACT WITHOUT APPRECIATING THAT THERE WAS A CLEAR VIOLATION OF SECTION 13 OF THE INCOME- TAX ACT, 1961. II. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN NOT CONSIDERING THE PROVISIONS OF SECTION 13(1)(C) OF THE I.T. ACT, 1961, ACCORDING TO WHICH, ANY INCOME OF THE TRUST D IRECTLY OR INDIRECTLY APPLIED FOR THE BENEFIT OF ANY PERSON REFERRED TO I N SECTION 13(3) OF THE ACT SHALL NOT BE EXCLUDED FROM THE TOTAL INCOME AND PROVISIONS OF SECTION 11 SHALL NOT APPLY TO THE SAME. III. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN ALLOWING EXEMPTION UNDER SECTION 11 OF THE I.T. ACT WITHOUT CONSIDERING THE MODUS OPERANDI OF THE ASSES SEE FOR DIVERSION OF FUNDS BEYOND THE SCOPE OF THE OBJECTS OF THE ASSESSEE. IV. THAT THE APPELLANT CRAVES TO LEAVE, ADD OR AMEND TH E GROUNDS OF APPEAL ON OR BEFORE THE APPEAL HEARD AND DISPOSED OFF. (4) FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E IS REGISTERED UNDER SOCIETIES REGISTRATION ACT, 1860 AND ALSO REGISTERED U/S 12A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WITH THE CIT(A)- 4, LUDHIANA. THE ASSESSEE FILED THE RETURN OF INCOME ON 26.09.2015 DECLARING NIL INCOME. LATER ON THE CASE WAS SELECTED FOR SCRUTINY. (5) THE AO, DURING THE COURSE OF ASSESSMENT PROCEED INGS NOTICED THAT THE ASSESSEE HAD GIVEN INTEREST FREE LOANS WITHOUT ANY CONSIDERATION OR SECURITY TO M/S BABA AMARNATH EDUCATIONAL SOCIETY AMOUNTING TO RS. 35,00,000/- WHICH WAS COVERED U/S 13(1)(C) AND 13(1)(D) OF THE ACT. THE A SSESSEE FURNISHED THE WRITTEN SUBMISSION WHICH HAS BEEN INCORPORATED BY THE AO IN PARA 4 OF THE ASSESSMENT ORDER DATED 27.12.2017, FOR THE COST OF REPETITION THE SAME IS NOT REPRODUCED HEREIN. THE AO FURTHER, DID NOT FIND MERIT IN THE S UBMISSIONS OF THE ASSESSEE FOR THE FOLLOWING REASONS: I. ASSESSEE HAS GIVEN UNSECURED LOAN TO ITS SISTER CON CERN COVERED U/S 13(3) WITHOUT ANY CONSIDERATION. ASSESSEE IS NOT TAKING A NY INTEREST FROM THESE SISTER CONCERNS NEITHER HAVING ANY SECURITY AGAINST THIS, WHICH SHOWS THAT ASSESSEE IS PROVIDING, UNDUE BENEFIT TO ITS SISTER CONCERNS. II. THAT THE TRUSTEES AND GROUP SOCIETIES HAVE MODUS OP ERANDI TO PROVIDE THE LOANS TO GROUP CONCERNS AND INVESTED THE SAME IN FI XED ASSETS. (5.1) THE AO DENIED THE EXEMPTION CLAIMED BY THE AS SESSEE U/S 11 OF THE ACT AND ASSESSED THE INCOME AT RS. 1,56,70,649/- BY OBS ERVING IN PARA 6-8 OF THE ASSESSMENT ORDER DATED 27.12.2017, AS UNDER: 6. REPLY OF ASSESSEE THAT THE LOAN/ADVANCE GIVEN BY ASSESSEE TO ITS SISTER CONCERNS ARE NOT COVERED UNDER INVESTMENTS OR DEPOS ITS UNDER SECTION 11(5) OF I.T. ACT, 1961, SO THESE TRANSACTIONS ARE NOT VIOLATION OF SECTION 13(1)(D) R.W. 11(5). ASSESSEE HAS ALSO REFERRED VAR IOUS CASE LAWS IN FAVOUR OF ASSESSEE. THE REPLY OF ASSESSEE AND CASE LAWS AR E DULY CONSIDERED. THE PAGE 3 OF 10 REPLY OF ASSESSEE IS NOT ACCEPTED BECAUSE THE FACTS OF THE CASE ARE DIFFERENT FROM THE MENTIONED CASE LAWS, BECAUSE IN THE CASE OF ASSESSEE THIS IS TREND TO TAKE THE UNSECURED LOAN FROM TRUST EES & GROUP SOCIETIES & THEN SAME DIVERT TO GROUP SOCIETIES AS UNSECURE LOA N & INVEST THE SAME IN FIXED ASSETS. THIS MODUS OPERANDI HAS BEEN FOLLOWED BY THE ASSESSEE IN THE GROUP. ASSESSEE HAS GIVEN THIS LOAN TO ITS SISTER CONCERN AND SHOWING THE SAME INTO THE BOOKS AS LOAN/ADVANCES RECOVERABLE. THIS A MOUNT IS FUND OF ASSESSEE, WHICH SHOULD BE PART OF CORPUS/CAPITAL AN D DEPOSITED IN MODES U/S 11(5). ASSESSEE HAS SHOWN THIS AS ADVANCE & THI S IS NOT DEPOSITED UNDER THE MODES MENTIONED U/S 11(5). THIS ACT OF AS SESSEE ATTRACT VIOLATION OF PROVISION OF SECTION 13(1)(D) OF I.T. ACT, 191, WHICH IS AS UNDER:- (I) NOTHING CONTAINED IN SECTION 11 [OR SECTION 12] SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT THEREOF- (D) IN THE CASE OF A TRUST FOR CHARITABLE OR RELIGI OUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITUTION, ANY INCOME THE REOF, IF FOR ANY PERIOD DURING THE PREVIOUS YEAR (I) ANY FUNDS OF THE TRUST OR INSTITUTION ARE INVES TED OR DEPOSITED AFTER THE 28 TH DAY OF FEBRUARY, 1983 OTHERWISE THAN IN ANY ONE OR MORE OF THE FORMS OR MODES SPECIFIED IN SUB-SECTION (5) OF SECT ION 11; OR (II) ANY FUNDS OF THE TRUST OR INSTITUTION INVESTED OR DEPOSITED BEFORE THE 1 ST DAY OF MARCH, 1983 OTHERWISE THAN IN ANY ONE OR MO RE OF THE FORMS OR MODES SPECIFIED IN SUB-SECTION (5) OF SECTION 11 CONTINUE TO REMAIN SO INVESTED OR DEPOSITED AFTER THE 30 TH DAY OF NOVEMBER, 1983 IT IS A FACT THAT ASSESSEE IS PROVIDING UNSECURED L OAN TO ITS SISTER CONCERN WITHOUT ANY INTEREST OR SECURITY, WHICH IS NOT REASONABLE & UNDUE BENEFI T FOR ASSESSEE'S SISTER CONCERN. SO ASSESSEE CLAIM OF EXEMPTION IS DENIED U/S 13(1)(C) AND U/S 13(1)(D) OF I.T. ACT, 1961. THERE IS CASE LAW REGARDING THIS WHERE HON'BLE MADRAS HIGH COURT IN CASE OF CIT VS V .G.P. FOUNDATION 183 CTR MAD 330, 2003/262 ITQ 187 HAS HELD THAT 'IT CAN NOT 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 RETAI NED THE MONEY WITH IT FOR THE WHOLE OF THE YEAR, IT IS NOT POSSIBLE TO GI VE THE ASSESSEE THE BENEFIT REGARDING THE AMOUNT AS HAVING BEEN APPLIED FOR A C HARITABLE 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 AM OUNT THROUGHOUT THE YEAR. THE ASSESSEE DID NOT REALISE ANY INTEREST ON THAT AMOUNT NOR DID IT HAVE ANY SECURITY FOR THE AMOUNT SO MADE AVAILAB LE TO THE SISTER COMPANY. THE QUESTIONS REFERRED TO US ARE THEREFORE ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE.' THE ABOVE FACTS SHOW THAT THE UNSECURED LOAN OR ADV ANCES GIVEN BY ASSESSEE TO GROUP SOCIETIES ARE MODE OF INVESTMENTS ONLY, BECAUSE THE TREATMENT OF THESE LOANS ARE TO INVESTED THE SAME I NTO FIXED ASSETS. PAGE 4 OF 10 7. ASSESSEE HAS MENTIONED IN ITS REPLY THAT IT IS A PPLICATION OF INCOME AND SAME HAS BEEN CLAIMED BY THE ASSESSEE IN ITS BOOKS UNDER CIRCULAR NO 100/1973 OF CBDT AND ALSO BOOKED THE INCOME WHEN IT RECOVERED FROM ITS SISTER CONCERN. THE REPLY OF ASSESSEE IN THIS REGAR D DULY CONSIDERED BUT NOT ACCEPTED BECAUSE THERE IS NO WHERE MENTIONED IN THE CIRCULAR REGARDING THE APPLICATION OF INCOME OF LOAN/ADVANCES GIVEN, C IRCULAR TALKS ABOUT THE REPAYMENTS OF LOAN ONLY. THE CIRCULAR IS REPRODUCED AS UNDER- 'REPAYMENT OF DEBT INCURRED FOR PURPOSES OF TRUST/L OANS ADVANCED BY EDUCATIONAL TRUSTS TO STUDENTS FOR HIGHER STUDIES - WHETHER AMOUNTS TO APPLICATION OF INCOME 1. SECTION 11 REQUIRES 100 PER CENT OF THE INCOME OF A CHARITABLE AND RELIGIOUS TRUST TO BE APPLIED FOR RELIGIOUS AND CHA RITABLE PURPOSES TO BE ENTITLED TO THE EXEMPTION UNDER THE SAID SECTION. T WO QUESTIONS HAVE BEEN CONSIDERED REGARDING THE APPLICATION OF INCOME : 1. WHERE A TRUST INCURS A DEBT FOR THE PURPOSES OF THE TRUST, WHETHER THE REPAYMENT OF THE DEBT WOULD AMOUNT TO AN APPLICATIO N OF THE INCOME FOR THE PURPOSES OF THE TRUST; AND 2. WHETHER LOANS ADVANCED BY AN EDUCATIONAL TRUST TO S TUDENTS FOR HIGHER STUDIES WOULD BE TREATED AS APPLICATION OF INCOME F OR CHARITABLE PURPOSES. 2. THE BOARD HAS DECIDED THAT REPAYMENT OF THE LOAN OR IGINALLY TAKEN TO FULFIL ONE OF THE OBJECTS OF THE TRUST WILL AMOUNT TO AN APPLICATION OF THE INCOME FOR CHARITABLE AND RELIGIOUS PURPOSES. AS RE GARDS THE LOANS ADVANCED FOR HIGHER STUDIES, IF THE ONLY OBJECT OF THE TRUST IS TO GIVE INTEREST-BEARING LOANS FOR HIGHER STUDIES, IT WILL AMOUNT TO CARRYING ON OF MONEY-LENDING BUSINESS. IF, HOWEVER, THE OBJECT OF THE TRUST IS ADVANCEMENT OF EDUCATION AND GRANTING OF SCHOLARSHI P LOANS AS ONLY ONE OF THE ACTIVITIES CARRIED ON FOR THE FULFILMENT OF THE OBJECTIVES OF THE TRUST, GRANTING OF LOANS, EVEN IF INTEREST-BEARING, WILL A MOUNT TO THE APPLICATION OF INCOME FOR CHARITABLE PURPOSES. AS AND WHEN THE LOAN IS RETURNED TO THE TRUST, IT WILL BE TREATED AS INCOME OF THAT YEAR.' PLAIN READING OF THIS CIRCULAR SAYS THAT REPAYMENTS OF LOAN IS ALLOWABLE AS APPLICATION OF INCOME. IN CASE OF ASSESSEE IS PROVI DING INTEREST FREE LOANS FOR HIGHER STUDIES THEN ASSESSEE CAN CLAIM THIS AMO UNT AS APPLICATION OF INCOME AND WHEN IT WILL RETURN BACK THEN ASSESSEE C AN CLAIM THE SAME AS INCOME. ASSESSEE IS NOT COVERED UNDER THIS CLAUSE. THIS CIRCULAR IS APPLICABLE TO THE ASSESSEE LIMITED TO REPAYMENT OF LOAN, WHICH IS NOT THE CASE WITH THE ASSESSEE. SO REPLY OF ASSESSEE IS NOT ACCEPTED. IT IS ALSO NOT CLEAR THAT IS M/S BABA AMAMATH EDUCATIONAL SOCIETY HAS SHOWN THIS LOAN/ADVANCE AS INCOME AND APPLICATION OF INCOME WH EN REPAID OR NOT. 8. VIOLATION OF SECTION 11(1) OF INCOME TAX ACT, 1961 THE EARLIER MENTIONED DISCUSSION IN VARIOUS PARAS S HOWS THAT ASSESSEE'S MAIN OBJECT IS EDUCATION NOT INVOLVEMENT OF LOAN/AD VANCE BUSINESS. THE BALANCE SHEET OF THESE GROUP TRUST/SOCIETIES SHOW T HAT ALL THE CONCERNS ARE INVOLVED INTO FINANCIAL TRANSACTION BETWEEN GRO UP TRUST/SOCIETIES, GROUP COMPANIES & THEIR TRUSTEES OR MEMBERS. THIS S HOWS THAT THE MAIN OBJECTS IS NOT EDUCATION, THE MAIN OBJECT IS TO CRE ATE CAPITAL BY TAKING & GIVING UNSECURED LOAN OR ADVANCES. THIS IS VIOLATIO N OF SECTION 11, BECAUSE ASSESSEE OBJECT IS EDUCATION NOT PROVIDE THE LOAN T O OTHERS. ASSESSEE HAS FILED ITS REPLY REGARDING THIS, WHICH IS NOT ACCEPT ED BECAUSE ASSESSEE'S GROUP HAS THIS MODUS OPERANDI TO INVOLVED INTO FINA NCIAL TRANSACTION WITH EACH OTHERS AND CREATE CAPITAL. SO, LOANS TO ANOTHE R GROUP SOCIETIES IS NOT AN APPLICATION OF INCOME, BECAUSE PROVIDE A LOAN TO ANOTHER CONCERNS IS PAGE 5 OF 10 NOT A OBJECTS OF THE ASSESSEE, ASSESSEE IS DOING AC TIVITIES OUTSIDE THE AMBIT OF THE OBJECTS, SO EXEMPTION U/S 11 IS NOT AL LOWABLE TO ASSESSEE.' SO, ACCORDINGLY THE ABOVE FACTS AND DISCUSSION, ASS ESSEE CLAIM OF EXEMPTION U/S 11 IS NOT ACCEPTED & DENIED & SURPLUS OF RS. 1,56,70,649/- (RS. 2,10,44,382/- - LOSS AS PER INCOME & EXPENDITU RE ACCOUNT RS. 53,73,733/-) ACCORDINGLY TAXED AS AOP U/S 13(1)(C), 13(1)(D) R.W. 13(3) OF I.T. ACT. COMPUTATION OF INCOME IS AS UNDER:- RETURNED INCOME- NIL ADDITION OF SURPLUS AS DISCUSSED AS ABOVE- RS. 1,56 ,70,649/- TOTAL TAXABLE INCOME- RS . 1,56,70,649/ (6) BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R TO THE LD. CIT(A) AND FURNISHED THE WRITTEN SUBMISSION WHICH HAS BEEN INC ORPORATED IN PARA 4 OF THE IMPUGNED ORDER, WHICH READ AS UNDER: 1. THE APPELLANT - ACE EDUCATIONAL & CHARITABLE SOCIET Y IS AN EDUCATIONAL SOCIETY REGISTERED U/S 12AA OF THE INCO ME TAX ACT, 1961. (REFER PAGE NO. 1 OF PAPER BOOK). THEY ARE RUNNING AN ENGINEERING COLLEGEAND VARIOUS OTHER INSTITUTES SINCE 2009-10.T HERE MAIN OBJECTS ARE TO 'TO ESTABLISH AND PROMOTE ESTABLISHMENTS OF OR T O RENDER AID TO SCHOOL, COLLEGE, EDUCATIONAL INSTITUTION, TECHNICAL EDUCATI ONAL INSTITUTION, TRAINING INSTITUTION IN ONE OR ALL FIELDS OF ENGINEERING, RE SEARCH, MEDICAL, COMMERCE, ARTS OR ANY OTHER SYSTEM OF EDUCATION. ' (REFER MOA AT PAGE NO. 2 OF PAPER BOOK). THE SOCIETY IS CLAIMING EXEMP TION U/S 11 AND ASSESSED AS SUCH IN THE PRECEDING ASSESSMENT YEARS. THE ACTIVITIES OF THE SOCIETY ARE EDUCATIONAL AND NEVER BEING QUESTIONED IN ANY ASSESSMENT YEAR. 2. THAT DURING THE YEAR AY 2015-16THE SOCIETY FILED IT R-7 CLAIMING EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961. DURIN G THE AY 2015-16 THE SOCIETY APPLIED 90.45% OF THE INCOME FOR THE OBJECT S OF THE SOCIETY U/S LL(L)(A) OF THE ACT. A COPY OF ITR-7 ALONGWITH COMP UTATION OF INCOME IS ENCLOSED IN PAPER BOOK ( PAGE NO. 5-6 ). 3. THAT DURING THE ASSESSMENT PROCEEDINGS LD. AO FOUND A SUM OF RS. 900000.00 WAS SHOWN IN THE NAME OF DAVINDER KAUR ED UCATION SOCIETY UNDER CURRENTS ASSETS ON THE ASSETS SIDE OF THE BAL ANCE SHEET AS ON 31.03.2015. ON ENQUIRY IT HAS BEEN EXPLAINED BY THE ASSESSEE SOCIETY THAT THE AMOUNT PERTAINING TO THE AY 2012-13 GIVEN TO DA VINDER KAUR EDUCATIONAL SOCIETY AS A INTEREST FREE LOAN. DAVIND ER KAUR EDUCATIONAL SOCIETYIS ALSO AN EDUCATIONAL SOCIETY REGISTERED U/ S 12AA OF THE ACT AND HAVING SAME OBJECTS THAT OF THE ASSESSEE SOCIETY AN D AMOUNT GIVEN BY A CHARITABLE SOCIETY TO ANOTHER CHARITABLE SOCIETY HA VING SIMILAR OBJECTS IS AN APPLICATION OF INCOME U/S LL(L)(A) OF THE ACT. T HE COPY OF BALANCE SHEET OF ACE EDUCATIONAL & CHARITABLE SOCIETY AND DAVINDE R KAUR EDUCATIONAL SOCIETY ENCLOSED IN PAPER BOOK (PAGE NO. 7-8 ). THE MOA & 12AA OF DAVINDER KAUR EDUCATIONAL SOCIETY IS ALSO GIVEN IN PAPER BOOK (PAGE NO. 9-13 ) 4. THAT SINCE THERE WAS SOME COMMON MEMBER IN THESE TW O SOCIETIES THE LD. AO EXAMINED THE CASE IN TERMS OF PROVISION OF SECTION 13(3) TO INVOKE SECTION 13(1)(C) AND 13(1)(D) OF THE ACT. A DETAILED REPLY IN THIS REGARD SUBMITTED BEFORE THE LD. AO WHERE IN THE PRO VISION OF SECTION PAGE 6 OF 10 13(1)(C) AND 13(1)(D) RWS 13(3) OF THE INCOME TAX A CT 1961, DISCUSSED IN DETAILS AND IN THE LIGHT OF THE PROVISION OF THESE SECTION AND RELIANCE WAS ALSO PLACED ON VARIOUS LEADING JUDGMENTS OF IT AT A ND HIGH COURT ON THE SUBJECT BUT THE LD. AO ADAMANTLY REJECTED THE CONTE NTION OF THE ASSESSEE . 5. THAT THE ASSESSMENT ORDER IS FULL OF ERRORS. WRONG AND BASELESS FACTS HAVE BEEN PRESENTED TO PROVE AN IMAGINARY NEX US OF SOME GROUP SOCIETIES, GROUP COMPANIES, GROUP TRUSTEES INVOLVED IN ENTRY SCAM DISREGARDING THE ACTUAL FACTS, NATURE OF TRANSACTIO NS AMONG SOCIETIES AND THEIR MAIN ACTIVITIES AT LARGE. THESE ERRORS AND TR ANSACTIONS ON THE BASIS OF WHICH THE EXEMPTION U/S 11 DENIED BY THE LD AO, WER E ALSO THE BASE OF DENIAL OF EXEMPTION FOR THE AY 2013-14 AND AY 2014- 15 ALSO. AN APPEAL AGAINST THE ORDER OF THE AO FOR THE AY 2013-14 AND AY 2014-15 WAS FILED IN YOUR GOOD OFFICE AND IT WAS ALREADY DECIDED IN T HE FAVOUR OF THE ASSESSEE AS PER THE ORDER DATED 23.08.2016 AND 15.0 6.2017 RESPECTIVELY OF YOUR GOOD OFFICE. THE WHOLE FACTS AND MATTER/ LA W POINT IS SAME THAT OF THE AY 2013-14 AND AY 2014-15, HOWEVER THE FACTS AR E AGAIN REPRESENTED HEREUNDER: IN FACT THERE ARE FIVESOCIETIES IE. ACE EDUCATIONAL & CHARITABLE SOCIETY (ASSESSEE SOCIETY ) ,SHRI GURU GOBIND SINGH FOUNDAT ION, SACHDEVA EDUCATIONAL SOCIETY, VIKAS EDUCATIONAL SOCIETY AND DAVINDER KAUR MEMORIAL EDUCATIONAL SOCIETY IN WHICH THERE ARE SOM E COMMON MEMBER . ALL OF THESE SOCIETIES ARE HAVING SIMILAR OBJECTIVE S AND ARE REGISTERED U/S 12A OF THE INCOME TAX ACT. OUT OF THESE FIVE SOCIET IES SHRI GURU GOBIND SINGH FOUNDATION, VIKAS EDUCATIONAL SOCIETY AND SAC HDEVA EDUCATIONAL SOCIETY WAS ESTABLISHED IN 2002-03 AND HAVE GOOD FI NANCIAL POSITION. DURING THE PERIOD FROM AY 2010-11 TO AY 2012-13SHRI GURU GOBIND SINGH FOUNDATION, SACHDEVA EDUCATIONAL SOCIETY AND VIKAS EDUCATIONAL SOCIETYGAVE FINANCIAL AID, IN THE SHAPE OF CORPUS D ONATIONS AND INTEREST FREE LOANS TO ACE EDUCATIONAL & CHARITABLE SOCIETY AND DAVINDER KAUR EDUCATIONAL SOCIETY TO HELP THEM ESTABLISH, AND THE RE BY PURSUED THEIR OBJECTIVE OF EDUCATION. SINCE ALL THESE SOCIETIES A RE HAVING SIMILAR OBJECTS AND REGISTERED U/S 12A THE FINANCIAL AID GIVEN BY O NE SOCIETY TO ANOTHER INCLUDING ASSESSEE SOCIETY TREATED AS APPLICATION O F INCOME U/S 11(1) OF THE INCOME TAX ACT.( REFER MO A OF SOCIETIES AT PAG E NO. 2 & 9 OF PAPER BOOK ). ALMOST ALL THE MEMBERS OF DAVINDER KAUR MEM ORIAL EDUCATIONAL SOCIETY INCLUDING COMMON MEMBERS AS REFERRED ABOVE, ALSO GAVE INTEREST FREE UNSECURED LOANS TO DAVINDER KAUR EDUCATIONAL S OCIETY IN THE AY 2012- 13. DAVINDER KAUR EDUCATIONAL SOCIETY APPLIED ALL T HE FUNDS INCLUDING THESE CORPUS DONATIONS AND LOANS FOR THE PURPOSE OF PURSUING ITS OBJECTIVES OF EDUCATION BY CREATING INFRASTRUCTURAL FACILITIES FOR THE ESTABLISHMENT OF A POLYTECHNIC COLLEGE. BESIDES THE SE FINANCIAL AID FROM THESE SOCIETIES AND MEMBERS, DAVINDER KAUR EDUCATIO NAL SOCIETY HAVE TO BORROWED LOANS FROM BANKS. ( REFER PAGE NO. 8 OF PA PER BOOK) THOUGH HAVING SOME COMMON MEMBER IN THESE SOCIETIES MAY TECHNICALLY BE CALLED SISTER CONCERNS. NO TRUSTEES OR MEMBER OR RELATIVE OF ANY MEMBER OR ANY CONCERN OR COMPANY IN WHICH ANY O F THE MEMBERS OR TRUSTEES OF THESE FOUR SOCIETIES HAVE ANY FINANCIAL INTEREST HAS ENTERED IN ANY TRANSACTION WITH THESE SOCIETIES/TRUST DURING A Y 2014-15 OR ANY OF THE PRECEDING ASSESSMENT YEAR. THERE IS NOTHING ON RECO RD 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. THE WORTHY AO HAS PRESENTED SOME CHARTS IN THE ASSESSME NT ORDER TO SHOW THE UNSECURED LOANS( TERMED AS INVESTMENT IN ORDER) GIVEN BY COMMON TO PAGE 7 OF 10 THESE THREE SOCIETIES, UNSECURED LOANS TAKEN AND GI VEN BY ACE EDUCATIONAL SOCIETY DURING LAST THREE ASSESSMENT YEARS AND UNSE CURED LOANS STANDING IN THE BALANCE SHEET OF DAVINDER KAUR EDUCATIONAL S OCIETY AS ON 31.03.2015. THESE CHARTS SHOWN IN THE ASSESSMENT OR DER ARE WRONGLY PRESENTED AND INTERPRETED. FIRST CHART SHOWN ON PAG E 2 OF THE ASSESSMENT ORDER RELATES TO INTEREST FREE UNSECURED LOANS GIVE N BY COMMON MEMBERS TO THE SOCIETIES IN WHICH THEY ARE MEMBERS. THEY HA VE GIVEN THESE LOANS OUT OF THEIR OWN SOURCE OF INCOME AND THEY HAVE NEV ER TAKEN ANY BENEFIT DIRECTLY OR INDIRECTLY FROM THESE SOCIETIES (TERMED AS GROUP SOCIETIES OR SISTER SOCIETIES). THERE IS NOTHING ON THE RECORD T O SHOW THAT ANY MEMBER OR ANY CONCERN IN WHICH THESE MEMBERS ARE PARTNERS OR DIRECTORS HAS EVER ENTERED IN ANY TRANSACTION TO INVOKE THE PROVISIONS OF SECTION 13(1)(C) OF THE INCOME TAX ACT. THERE IS NOTHING ON THE RECORD TO SHOW ANY DIVERSION OF MONEY FROM TRUST/SOCIETIES TO ANY OF ITS MEMBER OR THEIR RELATIVE OR TO ANY CONCERN IN WHICH ANY MEMBER HAVE ANY FINANCIAL INTEREST. SECOND & THIRD CHART ON PAGE 9 AND 10 ARE ALSO SHOWING INTER EST FREE UNSECURED LOANS GIVEN BY MEMBERS OF THE SOCIETIES AND OTHER S OCIETIES HAVING COMMON MEMBERS (TERMED AS GROUP SOCIETIES). THERE I S NOTHING IN THESE TRANSACTIONS TO SHOW ANY VIOLATION U/S 13(1)( C) OR 13(1)(D) RWS 13(3). THESE TRANSACTION ARE FINANCIAL AIDS FROM MEMBERS T O SOCIETIES AND SOCIETIES TO OTHER SOCIETIES TO PURSUE THE COMMON O BJECTIVE OF ALL THE SOCIETIES AND MEMBER IE EDUCATION. THE INVESTMENT I N FIXED ASSETS AS MENTIONED IN THE ORDER PERTAIN TO THE CAPITAL EXPEN DITURE NEED TO BE DONE BY THESE SOCIETY TO ESTABLISH REQUIRED INFRASTRUCTU RAL FACILITIES VIZ COLLEGE BUILDING, FURNITURE, VARIOUS LAB EQUIPMENTS & MACHI NERY , TRANSPORTATION AND OTHER FACILITIES AS PER THE NORMS OF TECHNICAL AND AFFILIATING BODIES. SINCE THESE SOCIETIES ARE CHARITABLE CONCERNS AND A LL THEIR ACTIVITIES ARE FOR EDUCATION (CHARITABLE NATURE U/S 2(15) OF INCOME TA X ACT). ANY KIND OF FINANCIAL AID TO THESE SOCIETIES IN THE SHAPE OF CO RPUS DONATION OR INTEREST FREE LOAN CANNOT BE TERMED AS INVESTMENT FOR PROFIT AS THE ACTIVITIES OF THESE SOCIETIES ARE CHARITABLE IN NATURE AND NOT FO R PROFIT. THESE CHARTS ARE EVIDENT OF THE FACT THAT ACE EDUCATIONAL SOCIETY AN D DAVINDER KAUR EDUCATIONAL SOCIETY, WHICH WAS FACING FINANCIAL STA GNANCIES IN THE INITIAL STAGE OF ITS ESTABLISHMENT RECEIVED LOAN FROM OTHER SOCIETIES AND MEMBERS AND THERE IS NOTHING ON RECORD TO PROVE INT ER TRUSTEE/MEMBERS, INTER SOCIETIES OR OTHER TRANSACTIONS OR DISTRIBUTI ON OF FUNDS AMONG THEM AS CLAIMED BY LD AO IN THE ASSESSMENT ORDER. IN FACT THE TRANSACTIONS OF LOANS WHICH ARE REFERRE D IN THE ORDER ARE SIMPLE CASE OF GIVING LOAN FROM FOUR SISTER SOCIETI ES TO ANOTHER SISTER SOCIETIES WHERE ALL THESE SISTER SOCIETIES ARE HAVI NG SIMILAR OBJECTIVES AND ACTIVITIES AND ALL ARE REGISTERED U/S 12A. THE TRAN SACTIONS OF GIVING SUCH INTEREST FREE LOAN FROM THREE SISTER SOCIETIES INCL UDING ASSESSEE SOCIETY IS APPLICATION OF INCOME U/S 11(1) OF THE ACT. THE LD. AO ALSO RELIED ON THE CASE OF V.G.P FOUNDAT ION 183 CTR MAD 330, WHICH HAS NO RELEVANCE IN THE PRESENT CASE .IN CASE OF CIT VS. VGP FOUNDATION (2003) 262 ITR187, ADVANCE WAS GIVEN TO A COMPANY IN WHICH TRUSTEES OF THE SOCIETY WERE DIRECTORS AND IT WAS I NTERESTED PARTY. IN THE SAID CASE APPLICATION FOR ADVANCE WAS DENIED DUE TO ADVANCE TO INTERESTED PARTY, NOT ON ACCOUNT OF NORMAL ADVANCE. WHERE AS IN THE PRESENT CASE, LOAN WAS GIVEN BY ONE SOCIETY TO ANOT HER SOCIETY HAVING SIMILAR OBJECT AND BOTH THE SOCIETIES HAVE BEEN REG ISTERED U/S 12A OF THE INCOME TAX ACT. PAGE 8 OF 10 (7) THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE ALLOWED THE CLAIM OF THE ASSESSEE AND DELETED THE ADDITION MADE BY THE AO BY OBSERVING IN PARA 5 IN THE IMPUGNED ORDER AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF THE APPELLANT THE ASSESSEE TRUST IS REGISTERED U/S 12A OF THE INCOME TAX ACT, 1961 WITH CRR , LUDHIANA ON 22.05.2003. DURING FINANCIAL YEAR 2010- 11 TO 2015-16, THE ASSESSEE HAS GIVEN A SUM OF RS.5.94 CR. TO SOME COM MON MEMBERS THE SOCIETIES NAMELY ACE EDU. & CHARITABLE SOCIETY, DAVINDER KAUR MEMORIAL EDUCATIONAL SOCIETY, MALWA EDUCATIONAL SOCIETY, BHARTI EDUCATIO NAL SOCIETY, GLOBAL EDUCATIONAL SOCIETY, SACHDEVA EDUCATIONAL SOCIETY A S A LOAN. EDUCATIONAL SOCIETY IS REGISTERED U/S 12AA OF THE INCOME TAX ACT, 1961. TH E AO HAS DENIED EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961 TO THE ASSESSEE BY INVOKING PROVISIONS OF SECTION 13(1)(C) & 13(1)(D) R.W.S 13(3) OF THE INCO ME TAX ACT, 1961. THE AO HELD THAT THE ASSESSEE HAS GIVEN UNSECURED LOANS TO ITS SISTER CONCERNS WITHOUT ANY CONSIDERATION. IT WAS HELD THAT THERE ARE COMMO N MEMBERS HAVING INTEREST IN ALL SISTER CONCERNS AND SUBSTANTIAL CON TRIBUTION OF UNSECURED LOAN AND MEMBERS FEES. THE ASSESSEE HAS PROVIDED UN SECURED LOANS TO ITS SISTER CONCERNS WITHOUT ANY INTEREST OR SECURITY, W HICH WAS NOT REASONABLE AND RESULTED IN UNDUE BENEFIT TO ASSESSEE'S SISTER CONCERNS. THEREFORE THE AO DENIED CLAIM OF EXEMPTION U/S 11 READ WITH SECTI ON 13(1)(C) AND 13(1)(D) OF THE INCOME TAX ACT, 1961. FURTHER THE A O HELD THAT THE MAIN OBJECT OF THE ASSESSEE IS NOT EDUCATION, BUT THE MA IN OBJECT WAS TO CREATE CAPITAL BY TAKING AND GIVING UNSECURED LOAN OR ADVA NCES IN VIOLATION SECTION 11. THUS, THE INCOME OF THE ASSESSEE WAS AS SESSED AT RS. NIL/- AS AOP. IT IS OBSERVED THAT ON THE SAME ISSUE THE AO HAD MA DE DISALLOWANCE OF EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961 R.W.S 13(1)(C)& 13(1)(D)OF THE INCOME TAX ACT AND ALSO BY INVOKING SECTION 11(5) OF THE INCOME TAX ACT, 1961 FOR ASSESSMENT YE AR 2013-14 . HON'BLE ITAT CHANDIGARH, IN ITA NO. 1230/CHD/20T6, FOR ASSESSMENT YEAR 2013-14 IN THE DCIT,CIRCLE-L, (EXEMPTION) CHANDIGAR H VS. SH. GURU GOBIND SINGH FOUNDATIONS, MOGA HAS DECIDED AS UNDER- 13. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D ALSO THE ORDER OF THE ITAT IN THE CASE OF AMRITSAR INTERNATIONAL (SUPRA). ADMITTEDLY THE FACTS IN THE PRESENT CASES ARE IDENTICAL TO THAT IN THE CASE OF AMRITSAR INTERNATIONAL (SUPRA). NO DISTINGUISHING FACTS WERE BROUGHT TO OUR NOTICE BY THE LD. DR. THE DECISION RENDERED IN THE CASE OF WE THEREFORE SEE NO REASON TO INTERFERE IN THE ORDER OF AMRITSAR INTERN ATIONAL (SUPRA) WOULD THEREFORE SQUARELY APPLY IN THE PRESENT APPEALS ALS O. FOLLOWING THE SAME WE HOLD THAT THE LD. CIT(A) HAS RIGHTLY HELD THAT T HE PROVISIONS OF SECTION J3(I)(C) ARE NOT ATTRACTED SINCE THE AO HAS FAILED TO POINT OUT HOW PERSONS SPECIFIED AS PER SECTION 13(3) OF THE ACT. WE ALSO AGREE WITH THE LD. CIT(A) THAT THE LOAN GIVEN TO THE RESPECTIVE EDUCATIONAL S OCIETY DO NOT QUALIFY AS A DEPOSIT/INVESTMENT FOR THE PURPOSES OF SECTION 11 (5) OF THE ACT, AND THEREFORE THE ASSESSEE CANNOT BE SAID TO HAVE VIOLA TED THE PROVISIONS OF SECTION 11(5) SO AS TO BE DENIED EXEMPTION U/S 11, AS PER SECTION 13(1)(D) OF THE ACT. MOREOVER SINCE THE IMPUGNED LOANS/ADVAN CES WERE MADE IN EARLIER YEARS, THE PROVISIONS OF SECTION 13(1)(C)/( D) COULD IN ANY CASE NOT HAVE BEEN INVOKED IN THE IMPUGNED YEAR, WE THEREFOR E UPHOLD THE ORDER OF THE ID. CIT(APPEALS) AND DISMISS THE APPEAL FILE D BY THE REVENUE. RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE ITAT, CHANDIGARH IN THE CASE OF ASSESSEE AS ABOVE, AS THE IMPUGNED LOANS/ ADVANCES WERE MADE IN EARLIER YEARS AND THE HON'BLE ITAT, CHANDIGARH PAGE 9 OF 10 HAS DECIDED THE ISSUE OF EXEMPTION U/S 11 IN FAVOUR OF THE ASSESSEE, THEREFORE, THE APPEAL OF THE ASSESSEE IS ALLOWED. G ROUNDS OF APPEAL NO. 1 TO 8 ARE THUS ALLOWED. (8) NOW, THE ASSESSEE IS IN APPEAL. (9) THE LD. CIT(DR) ALTHOUGH SUPPORTED THE ORDER OF THE AO BUT COULD NOT CONTROVERT THE FINDINGS GIVEN BY THE LD. CIT(A). (10) WE HAVE CONSIDERED THE SUBMISSION OF THE LD. C IT(DR) AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE, IT IS NOTICED THAT THE LD. CIT(A) DELETED THE IMPUGNED ADDITION AND ALLOWED TH E CLAIM OF THE ASSESSEE BY FOLLOWING THE EARLIER ORDER OF ITAT, CHANDIGARH BEN CH IN ITA NO. 1229/CHANDI/2016 AND 1314/CHANDI/2017 FOR THE AYS 2 013-14 AND 2014-15 RESPECTIVELY IN ASSESSEES OWN CASE. DURING THE COU RSE OF HEARING NOTHING WAS BROUGHT ON RECORD TO SUBSTANTIATE THAT THE SAID DEC ISIONS OF THE ITAT DATED 28.03.2016 AND 15.06.2017 FOR THE AYS 2013-14 AND 2 014-15 RESPECTIVELY FOLLOWED BY THE LD. CIT(A) IN ASSESSEES OWN CASE HAD BEEN R EVERSED BY THE HIGHER FORUM. IN THAT VIEW OF THE MATTER WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS GIVEN BY THE LD. CIT(A). ACCORDINGLY, WE D O NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. (11) IN ITS CROSS OBJECTION, THE ASSESSEE HAD RAISE D FOLLOWING GROUNDS: 1. THAT THE ISSUE RAISED BY WORTHY AO IN APPEAL FOR TH E AY 2015-16 IS THE SAME AS IN AY 2013-14 AND 2014-15 AND THERE IS NO N EW FINDINGS. IN BOTH THE CASES WORTHY AO ARBITRARILY DENIED EXEMPTION US / 11 AND ASSESSED THE SOCIETY AS AOP. THE APPEAL OF THE ASSESSEE SOCIETY IN ALL THE THREE AY 2013-14, 2014-15 AND AY 2015-16 WAS ALLOWED BY WORT HY CIT(A)-IV LUDHIANA. THE APPEAL OF THE DEPARTMENT IN AY 2013-1 4 (ITA 1229/CHD/2016) AND AY 2015-16 (ITA 1314/CHD/2017 ) WITH H'ABLE ITAT CHANDIGARH ALREADY STAND DISMISSED VIDE ORDER DATED 26.07.2018 AND THE DEPARTMENT ACCEPTED THE SAME HAS NOT YET PREFERRED APPEAL WITH H'ABLE HIGH COURT OF PUNJAB & HARYANA. 2. THAT THE PRESENT APPEAL FILED BY THE DEPARTMENT IS BASED ON THE SAME FACTS AND FINDINGS AND THE ISSUE INVOLVED IS ALSO T HE SAME AS IN AY 2013-14 (ITA 1229/CHD/2016)ANDAY 2015-16 (ITA 1314/CHD/2017 ). SINCE THE SUBJECT MATTER OF THE APPEAL FILED BY THE DEPARTMEN T IS SAME WHICH HAS ALREADY BEEN HEARD AND REJECTED BY SAME BENCH OF H' ABLE ITAT CHANDIGARH, THE PRESENT APPEAL LIABLE TO BE REJECTE D. (12) FROM THE ABOVE GROUNDS IT IS CLEAR THAT THESE ARE IN SUPPORT OF THE ORDER PASSED BY THE LD. CIT(A) AND NO SPECIFIC RELIEF APA RT FROM THAT WHICH HAD BEEN GIVEN BY THE LD. CIT(A) HAD BEEN SOUGHT. SINCE WE H AVE DISMISSED THE APPEAL PAGE 10 OF 10 OF THE DEPARTMENT IN THE FORMER PART OF THIS ORDER, THEREFORE THE CROSS OBJECTION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS. (13) IN THE RESULT APPEAL OF THE DEPARTMENT AS WELL AS CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 28/03/2019). SD/- SD/- (SANJAY GARG) (N.K. SAINI) JUDICIAL MEMBER VICE PRESIDE NT DATED : 28/03/2019 BCG COPY TO: 1.THE APPELLANT, 2. THE RESPONDENT, 3. THE CIT(A), 4. THE CIT, 5. THE DR