Asst.C.I.T., Mangalore V. Vishwachetan Foundation, Hubli

ITA 1040/BANG/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9499 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 07-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: H N KHINCHA
• Keywords: Capital asset; Depreciation; Charitable institution; Cost of acquisition
• Section: 32; 12; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE S HRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO , ACCOUNTANT MEMBER I.T . A. NO. 1040 /BANG/20 15 (ASSESSMENT YEAR : 20 10 - 11 ) THE ASST. COMMISSIONER OF INCOME TAX (EXEMPTIONS) , CIRCLE 1, MANGALURU . . APPELLANT. VS. VISHWACHETAN FOUNDATION, IBMR, 1 ST MAIN, JAYANAGAR, OPP. KIMS, VIDYANAGAR, HUBBALI. .. R ESPONDENT. PAN AAATV 9145M APPELLANT BY : SHRI SUNIL KUMAR AGARWAL, JCIT (D.R) R E SPONDENT BY : SHRI H. N. KHINCHA, C.A. DATE OF H EARING : 13.07.2016. DATE OF P RONOUNCEMENT : 11 .8 .201 6 . O R D E R PER SHRI VIJAY P AL RAO, J .M . : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DT.27.2.2015 OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2010 - 11. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 2 IT A NO. 1040 /BANG/201 5 I (I) WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE HO N 'BLE C IT (A) WAS CORRECT IN NOT FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN T HE CASE OF ESCORTS LIMITED & ANOTHER VS. UNION OF INDIA 199 ITR 43 WHEREIN THE HON'BLE SUPREME COURT HAS CATEGORICALLY HELD WHEN DEDUCTION U / S.35(2)(IV) IS ALLOWED IN RESPECT OF CAPITAL EXPE NDITURE ON SCIENTIFIC RESEARCH NO DEPRECIATION IS ALLOWABLE U / S 32 ON THE SAME ASSET AND IN THE ABSENCE OF CLEAR STATUTORY INDICATION TO THE CONTRARY, THE STATUTE SHOULD NOT BE READ AS TO PERMIT AN ASSESSEE TWO DEDUCTIONS? (II) WHETHER THE HON BLE CLT(A) WAS CORRECT IN NOT FOLLOWING THE DECISION OF KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS VS CIT, KOCHI IN ITA NO.42 OF 2011 WHEREIN THE OTHER JUDICIAL PRONOUNCEMENTS BY VARIOUS HIGH COURTS WERE HELD TO BE NOT APPLICABLE HOLDING THAT THE ISSUE OF DOUBLE DEDUCTION WAS NOT BEFORE THEM? III) WHETHER T HE !TAT WAS RIGHT IN NOT APPRECIATING THE INTENTION OF LEGISLATURE NOT TO ALLOW DOUBLE DEDUCTION AT ANY POINT OF TIME AND THEREFORE, FOR BRINGING CLARITY ON THE ISSUE, THE LAW HAS BEEN AMENDE D W.E.F. AY 201516. IV) WHETHER THE HON'BLE CIT(A) WAS CORRECT IN HOLDING THAT DEPRECIATION IS ALLOWABLE IN CASES OF TRUST ON NORMAL COMMERCIAL PRINCIPLES, WHERE THE ASSESSMENT OF TRUSTS ARE COVERED U/S 11, 12 AND 13 OF THE I T ACT, 1961 AND THE PROVISIONS OF SECTION 28 TO 44 OF THE ACT ARE NOT APPLICABLE TO CHARITABLE TRUST AS ONLY APPLICATION OF INCOME DURING THE YEAR IS ALLOWABLE U/S 11 OF TH E ACT AND DEPRECIATION BEING A NOTIONAL EXPENDITURE IS NOT ALLOWABLE. V) WHETHER THE HON'BLE CIT(AI WAS CORRECT IN HOLDING THAT THE COMMERCIAL PRINCIPLES ARE APPLICABLE AND DEPRECIATION IS ALLOWABLE TO CHARI TABLE TRUST, WHEN IN CASES OF TRUST WHICH ARE COVERED BY PROVISIONS OF SECTION 11,12, AND 13, ONLY APPLICATION OF INCOME DURING THE YEAR IS ALLOWABLE U/S 11 OF THE ACT AND DEPRECIATION BEING A NOTIONAL EXPENDITU RE IS NOT ALLOWABLE. 3 IT A NO. 1040 /BANG/201 5 VI) WHETHER THE HON'BLE CIT(A) WAS CORRECT IN ALLOWING THE GROUND OF THE ASSESSEE AND DISMISSING THE DISALLOWANCE MADE BY THE AO IN RESPECT OF THE INTEREST FREE LOANS MADE BY THE TRUST TO ANOTHER TRUST HAVING COMMO N TRUSTEES, WHICH IS IN VIOLATION OF SEC. 13( 1 )(E) OF THE I T ACT, 1961. VII) WHETHER THE CIT(A) WAS CORRECT IN DELETING THE ADDITION W.R.T. DISALLOWANCE OF LOAN TREATING THE SAME AS DONATIONS, WHEN THE AO HAD ALREADY ALLOWED THE DONATION CLAIM OF RS.69 LAKHS AND ONLY ADDED RS.3S,3B,144/ - WHICH IS THE LOAN PAID TO VIDYABHARATI FOUNDATION WITHOUT CHARGING ANY INTEREST, WHICH IS IN VIOLATION OF SEC. 13(2)(A) OF THE I T ACT. VIII) THE APPELLANT CRAVES LEAVE TO AD D, ALTER OR AMEND ALL OR ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 3. GROUND NOS.1 TO 3 ARE REGARDING DISALLOWANCE OF DEPRECIATION. 4. WE HAVE HEARD THE LEARNED AUTHORISED REPRESENTATIVE AS WELL AS LEARNE D DEPARTMENTAL REPRESENTATIVE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE IS A CHARITABLE TRUST AND RUNNING EDUCATIONAL INSTITUTIONS. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED DEPRECIATIO N OF RS.45,36,382. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE INVESTMENT IN THE ASSET ON WHICH THE DEPRECIATION HAS BEEN CLAIMED IS ALLOWED AS DEDUCTION BEING APPLICATION OF INCOME TOWARDS THE OBJECTIVES OF THE TRUST . THEREFORE THE CLAIM OF THE DEPRECIATION WOULD BE DOUBLE DEDUCTION WHICH IS NOT ADMISSIBLE. ON APPEAL, THE CIT (APPEALS) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY 4 IT A NO. 1040 /BANG/201 5 FOLLOWING THE VARIOUS DECISIONS INCLUDING THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTIONS 264 ITR 110 (BOM) AS WELL AS THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SOCIETY OF THE SISTERS OF ST. ANNE 146 ITR 28. WE FIND THAT THIS ISSUE IS NOW SETTLED IN FAVO UR OF THE ASSESSEE BY A SERIES OF DECISIONS BY THE HIGH COURT S AS WELL AS THIS TRIBUNAL. IN A RECENT DECISION IN THE CASE OF M/S. MOOGAMBIGAI CHARITABLE AND EDUCATIONAL TRUST VS. ADDL. DIT (EXEMPTIONS) IN ITA NO.1224/BANG/2015 DT.1 3 .7.2016 THE TRIBUNAL HELD IN PARA 11 AS UNDER : 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT THIS ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL IN A SERIES OF DECISIONS. IN THE CASE OF M/S. CMR JANARD HANA TRUST (SUPRA), THE TRIBUNAL HAS AGAIN CONSIDERED AND DECIDED THIS ISSUE IN PARAS 15 TO 17 AS UNDER : 15. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WHO RELIED ON THE ORDER OF CIT(A) AND THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF DIT(E) VS. CHARANJIV CHARITABLE TRUST (2014) 43 TAXMANN.COM 300 (DELHI). WE HAVE CONSIDERED THE ORDER OF THE CIT(A). IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE ITAT BANGALORE BENCH IN THE CASE OF DDIT(E) V. CUTCHI MEMON UNION (2013) 60 SOT 260 BANGA LORE ITAT, WHEREIN SIMILAR ISSUE HAS BEEN DEALT WITH BY THIS TRIBUNAL. IN THE AFORESAID CASE, THE ASSESSEE CLAIMED DEPRECIATION AND THE AO DENIED DEPRECIATION ON THE GROUND THAT AT THE TIME OF ACQUIRING THE RELEVANT CAPITAL ASSET, COST OF ACQUISITION WAS C ONSIDERED AS APPLICATION OF INCOME IN THE YEAR OF ITS ACQUISITION. THE AO TOOK THE VIEW THAT ALLOWING DEPRECIATION WOULD AMOUNT TO ALLOWING DOUBLE DEDUCTION AND PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN ESCORTS LTD. (SUPRA). THE CIT(A), H OWEVER, ALLOWED THE CLAIM OF ASSESSEE. ON FURTHER APPEAL BY THE REVENUE, THE TRIBUNAL HELD AS FOLLOWS: - 5 IT A NO. 1040 /BANG/201 5 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IF DEPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTION FOR COMPUTING INCOME OF CHARITABLE INSTITUITIONS , THEN THERE IS NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERIVING THE INCOME AS IT IS NOTHING BUT A DECREASE IN THE VALUE OF PROPERTY THROUGH WEAR, DETERIORATION, OR OBSOLESCENCE. SINCE INCOME FOR THE PURPOSES OF SECTION 11(1) HAS TO BE COMPUTED IN N ORMAL COMMERCIAL MANNER, THE AMOUNT OF DEPRECIATION DEBITED IN THE BOOKS IS DEDUCTIBLE WHILE COMPUTING SUCH INCOME. IT WAS SO HELD BY THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SOCIETY OF SISTERS OF ST. ANNE 146 ITR 28 (KAR). IT WAS HELD IN C IT VS. TINY TOTS EDUCATION SOCIETY (2011) 330 ITR 21 (P&H) , FOLLOWING CIT VS. MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P&H) : (2011) 238 CTR (P&H) 103 THAT DEPRECIATION CAN BE CLAIMED BY A CHARITABLE INSTITUTION IN DETERMINING PERCENTAGE OF FUNDS APPLIE D FOR THE PURPOSE OF CHARITABLE OBJECTS. CLAIM FOR DEPRECIATION WILL NOT AMOUNT TO DOUBLE BENEFIT. THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. 199 ITR 43 (SC) HAVE BEEN REFERRED TO AND DISTINGUISHED BY THE HON BLE COURT IN THE AFO RESAID DECISIONS. 21. THE ISSUE RAISED BY THE REVENUE IN THE GROUND OF APPEAL IS THUS NO LONGER RES INTEGRA AND HAS BEEN DECIDED BY THE HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. MARKET COMMITTEE, PIPLI, 330 ITR 16 (P&H). THE HON BLE PUNJAB & HARYANA HIGH COURT AFTER CONSIDERING SEVERAL DECISIONS ON THAT ISSUE AND ALSO THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA), CAME TO THE CONCLUSION THAT DEPRECIATION IS ALLOWABLE ON CAPITAL ASSETS ON THE INCOME OF THE CHA RITABLE TRUST FOR DETERMINING THE QUANTUM OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSE OF TRUSTS IN TERMS OF SECTION 11 OF THE ACT. THE HON BLE PUNJAB & HARYANA HIGH COURT MADE A REFERENCE TO THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF ES CORTS LTD. (SUPRA) AND OBSERVED THAT THE HON BLE SUPREME COURT WAS DEALING WITH A CASE OF TWO DEDUCTIONS UNDER DIFFERENT PROVISIONS OF THE ACT, ONE U/S. 32 FOR DEPRECIATION AND THE OTHER ON ACCOUNT OF EXPENDITURE OF A CAPITAL NATURE INCURRED ON SCIENTIFIC RESEARCH U/S. 35(1)(IV) OF THE ACT. THE HON BLE COURT THEREAFTER HELD THAT A TRUST CLAIMING DEPRECIATION CANNOT BE EQUATED WITH A CLAIM FOR DOUBLE DEDUCTION. THE HON BLE PUNJAB & HARYANA HIGH COURT HAS ALSO MADE A REFERENCE TO THE DECISION OF THE HON'BLE K ARNATAKA HIGH COURT IN THE CASE OF CIT V. SOCIETY OF SISTERS OF ANNE, 146 ITR 28 (KAR), WHEREIN IT WAS HELD THAT U/S. 11(1) OF THE ACT, INCOME HAS TO BE COMPUTED IN NORMAL COMMERCIAL MANNER AND THE AMOUNT OF DEPRECIATION DEBITED IN THE BOOKS IS DEDUCTIBLE WHILE COMPUTING SUCH INCOME. IN VIEW OF THE AFORESAID DECISION ON THE ISSUE, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) ON THE ABOVE ISSUE DOES NOT CALL FOR ANY INTERFERENCE. 22. CONSEQUENTLY, GROUND NO.5 RAISED BY THE REVENUE IS DISMISSED. 16. IT IS NO DOUBT TRUE THAT THE HON BLE DELHI HIGH COURT IN THE CASE OF CHARANJIV CHARITABLE TRUST (SUPRA) HAS TAKEN A CONTRARY VIEW BUT THEN WHEN TWO VIEWS ARE POSSIBLE ON AN ISSUE, THE VIEW FAVOURABLE TO THE ASSESSEE HAS TO BE FOLLOWED. THE DECISION OF THE HON BLE PUNJAB & HARYANA HIGH COURT IS IN FAVOUR OF THE ASSESSEE AND HAS FOLLOWED THE DECISION OF THE HON BLE 6 IT A NO. 1040 /BANG/201 5 KARNATAKA HIGH COURT IN THE CASE OF SOCIETY OF SISTERS OF ANNE (SUPRA). THE INTERPRETATION TO THE CONTRARY GIVEN BY THE CIT(A) ON THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF SOCIETY OF SISTERS OF ANNE (SUPRA) CANNOT THEREFORE BE ACCEPTED. WE MAY ALSO ADD THAT THE LEGAL POSITION HAS SINCE BEEN AMENDED BY A PROSPECTIVE AMENDMENT BY THE FINANCE (NO.2) ACT, 2014 W.E.F. 1.4.2015 BY INSER TION OF SUBSECTION (6) TO SECTION 11 OF THE ACT, WHICH READS AS UNDER: - (6) IN THIS SECTION WHERE ANY INCOME IS REQUIRED TO BE APPLIED OR ACCUMULATED OR SET APART FOR APPLICATION, THEN, FOR SUCH PURPOSES THE INCOME SHALL BE DETERMINED WITHOUT ANY DEDUCTIO N OR ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RESPECT OF ANY ASSET, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF INCOME UNDER THIS SECTION IN THE SAME OR ANY OTHER PREVIOUS YEAR. 17. AS ALREADY STATED, THE AFORESAID AMENDMENT IS PRO SPECTIVE AND WILL APPLY ONLY FROM A.Y. 2015 - 16. IN VIEW OF THE ABOVE LEGAL POSITION, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) HAS TO BE REVERSED. CONSEQUENTLY GROUNDS NO.4 & 5 RAISED BY THE ASSESSEE ARE ALLOWED. THERE IS NO DISPUTE THAT THE AMENDM ENT OF SECTION 11(6) OF THE ACT BY THE FINANCE ACT, 2014 IS PROSPECTIVE W.E.F. 1.4.2015 AND THEREFORE THE SAID AMENDED PROVISION IS NOT APPLICABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. FOLLOWING THE EARLIER DECISIONS OF THIS TRIBUNAL, WE DECIDE T HIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN VIEW OF THE ABOVE DECISION, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT (APPEALS). 5. GROUND NOS.4 TO 7 ARE REGARDING INTEREST FREE LOANS GIVEN TO THE CHARITABLE TRUST. THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS MADE A DONATION OF RS.35,38,144 TO VIDYA BHARTI FOUNDATION WHEREIN ONE OF THE TRUSTEE NAMELY B.N.MAHENDRAKAL OF THE ASSESSEE IS ALSO A TRUSTEE AND ONE OF THE TRUSTEE OF VIDYA BHARATI FOUNDATION IS ALSO A UTHOR OF ASSESSEE - TRUST. THUS THE LD. ASSESSING OFFICER HAS CONCLUDED THAT THE INTEREST FREE LOAN GIVEN TO THE VIDYA BHARATI FOUNDATION AMOUNTS TO 7 IT A NO. 1040 /BANG/201 5 INDIRECT BENEFIT TO THE TRUSTEE OF THE ASSESSEE WHO IS ALSO TRUSTEE IN THE VIDYA BHARATI FOUNDATIO N AS WELL AS THE TRUSTEE WHO IS AN AUTHOR OF THE ASSESSEE - TRUST. ACCORDINGLY, THE ASSESSING OFFICER APPLIED THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT AND ASSESSED THE SAID AMOUNT TO TAX AT MAXIMUM RATE PROVIDED UNDER THE ACT. ON APPEAL, THE CIT (APPE ALS) HAS HELD THAT GIVING DONATION OR CONTRIBUTION TO OTHER EDUCATION TRUST OR PUBLIC CHARITABLE INSTITUTION WHICH ARE RUN ON NON - PROFIT BUSINESS AND ACHIEVE THE OBJECTIVE OF THE TRUST SIMILAR TO OR CONSISTENT WITH THE ASSESSEE'S TRUST FOR FULFILLING THE OBJECTIVES OF THE ASSESSEE - TRUST AND THEREFORE NO ADDITION CAN BE MADE IN RESPECT OF THE AMOUNT ADVANCED TO THE VIDYA BHARATI FOUNDATION WITHOUT CHARGING INTEREST. 6. WE HAVE HEARD THE LEARNED AUTHORISED REPRESENTATIVE AS WELL AS LEARNED DEPARTMENTAL R EPRESENTATIVE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS PLACED RELIANCE ON THE PROVISIONS OF SECTION 13(1)(C) AND 13(3) OF THE ACT WHEREIN THE PERSONS SPECIFIED AS DIRECTLY OR INDIRECTLY BENEFITTED BY US E OR APPLIED OF THE INCOME OR ANY PROPERTY OF THE TRUST OR INSTITUTION. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THERE IS NO 8 IT A NO. 1040 /BANG/201 5 DISPUTE THAT ONE OF THE TRUSTEE OF BOTH THE TRUSTS IS COMMON AND FURTHER THE TRUSTEE OF THE VIDYA BHARATI FOUNDAT ION IS THE AUTHOR OF THE ASSESSEE TRUST THEREFORE THE AMOUNT GIVEN TO THE VIDYA BHARATI FOUNDATION WITHOUT CHARGING INTEREST AMOUNTS TO APPLICATION OF THE INCOME OR PROPERTY OF THE TRUST DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF THE TRUSTEE OF THE ASSESSEE . HE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 7. ON THE OTHER HAND, THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT THIS AMOUNT WAS GIVEN TO ANOTHER TRUST WHICH IS UNDISPUTEDLY IS RUNNING EDUCATIONAL INSTITUTIONS THEREFORE THE A SSESSEE TRUST AS WELL AS VIDYA BHARATI FOUNDATION ARE SIMILAR AND THEREFORE THIS AMOUNT IS APPLIED BY THE ASSESSEE TOWARDS THE OBJECTIVE OF THE ASSESSEE TRUST. HE HAS FURTHER SUBMITTED THAT EVEN OTHERWISE IT CANNOT BE REGARDED AS A DIRECT OR INDIRECT BE NEFIT TO THE PERSONS AS SPECIFIED UNDER SECTION 13(3) OF THE ACT AS THERE IS NO BENEFIT TO THE TRUSTEE DIRECTLY OR INDIRECTLY BECAUSE OF THIS AMOUNT GIVEN TO ANOTHER TRUST. HE HAS RELIED UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF DIT VS. AC M E EDUCATION SOCIETY 326 ITR 146. 9 IT A NO. 1040 /BANG/201 5 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE LOAN WAS GIVEN BY THE ASSESSEE TRUST TO ANOTHER TRUST RUNNING AND ENGAGED IN THE SIMILAR ACTIVITY OF EDUCATIONAL INSTITUTION. IT IS ALSO NOT DISPUTED THAT NONE OF THE TRUSTEES OF THESE TWO TRUSTS IS GETTING ANY BENEFIT FROM THE AFFAIRS OF THE TRUST. THEREFORE PROVIDING THE INTEREST FREE LOAN/ADVANCE TO ANOTHER TRUST CANNOT BE REGARDED AS APP LYING THE INCOME OR ASSET OR PROPERTY OF THE TRUST FOR DIRECT OR INDIRECT BENEFIT OF THESE TRUSTEES AS ALLEGED BY THE ASSESSING OFFICER. AS PER THE PROVISIONS OF SECTION 13(1)(C)(II) BENEFIT OF SECTION 11 IS NOT AVAILABLE IN RESPECT OF AN INCOME OR ANY PR OPERTY OF THE TRUST/INSTITUTION WHICH IS USED OR APPLIED DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSON REFERRED TO SUB - SECTION (3) OF SECTION 13 OF THE ACT. FOR READY REFERENCE, WE QUOTE SUB - SECTION (3) OF SECTION 13 AS UNDER : 13(3) : THE PE RSONS REFERRED TO IN CLAUSE ( C ) OF SUB - SECTION (1) AND SUB - SECTION (2) ARE THE FOLLOWING, NAMELY : ( A ) THE AUTHOR OF THE TRUST OR THE FOUNDER OF THE INSTITUTION; ( B ) ANY PERSON WHO HAS MADE A SUBSTANTIAL CONTRIBUTION TO THE TRUST OR INSTITUTION, THAT IS TO SAY, ANY PERSON WHOSE TOTAL CONTRIBUTION UP TO THE END OF THE RELEVANT PREVIOUS YEAR EXCEEDS FIFTY THOUSAND RUPEES; ( C ) WHERE SUCH AUTHOR, FOUNDER OR PERSON IS A HINDU UNDIVIDED FAMILY, A MEMBER OF THE FAMILY; ( CC ) ANY TRUSTEE OF THE TRUST OR MANAGER (BY WHATEVER NAME CALLED) OF THE INSTITUTION; ( D ) ANY RELATIVE OF ANY SUCH AUTHOR, FOUNDER, PERSON, MEMBER, TRUSTEE OR MANAGER AS AFORESAID; 10 IT A NO. 1040 /BANG/201 5 ( E ) ANY CONCERN IN WHICH ANY OF THE PERSONS REFERRED TO IN CLAUSES ( A ), ( B ), ( C ), ( CC ) AND ( D ) HAS A SUBSTANTIAL INTEREST. THUS FOR ATTRACTING THE PROVISIONS OF SECTION 13(1)(C)(II) , THE BENEFI CIARY OF INCOME OR PROPERTY HAS TO BE THE AUTHOR TRUST, ANY PERSON WHO HAS MADE SUBSTANTIAL CONTRIBUTION TO THE TRUST IN CASE HUF IS THE AUTHO R OF THE TRUST, A MEMBER OF THE FAMILY OR ANY TRUSTEE OF THE TRUST OR MANAGER , ANY RELATIVE OF ANY SUCH AUTHOR , FOUNDER TRUSTEE OR MANAGER. ANY CONCERN IN WHICH ANY OF THE PERSON S REFERRED IN CLAUSE (A) TO (D) HAS A SUBSTANTIAL INTEREST. THUS IN THE CASE OF THE ASSESSEE, THE INTEREST FREE LOAN WAS GIVEN TO ANOTHER TRUST AND THE COMMON TRUSTEE HAVE NO SUBSTANTIAL INTEREST IN ANY OF THE TRUST. THEREFORE IN THE ABSENCE OF ANY DIRECT OR INDIRECT BENEFIT TO THE TRUSTEES OR AUTHO R OF ASSESSEE TRUST OR TO THE TRUSTEES OF THE RESIDENT TRUS T THE PROVISIONS OF SECTION 13(1)(C) CANNOT BE ATTRACTED. THE HON'BLE DELHI HIGH COURT WHILE DEALING WITH AN IDENTICAL ISSUE IN CASE OF DIT VS. ACNE EDUCATION SOCIETY (SUPRA) IN PARA 13 HELD AS UNDER : 13. IN BAIDYA NATH PLASTIC INDUSTRIES (P) LTD. & O RS. VS. K.L. ANAND, ITO (1998) 146 CTR (DEL) 421 : (1998) 230 ITR 522 (DEL) A LEARNED SINGLE JUDGE OF THIS COURT POINTED OUT THAT THE DISTINCTION BETWEEN 'LOAN' AND 'DEPOSIT' IS THAT IN THE CASE OF THE FORMER IT IS ORDINARILY THE DUTY OF THE DEBTOR TO SEEK OUT THE CREDITOR AND TO REPAY THE MONEY ACCORDING TO THE AGREEMENT, WHILE IN THE CASE OF THE 11 IT A NO. 1040 /BANG/201 5 LATTER IT IS GENERALLY THE DUTY OF THE DEPOSITOR TO GO TO THE BANKER OR TO THE DEPOSITEE, AS THE CASE MAY BE, AND MAKE A DEMAND FOR IT. IN VIEW OF THE ABOVE FACT S AND CIRCUMSTANCES OF THE CASE AS WELL AS THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF ACNE EDUCATION SOCIETY (SUPRA), WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT (APPEALS) ON THIS ISSUE. 9. IN THE RESULT, THE APPEAL O F REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11TH DAY OF AUG., 2 01 6 . SD/ - ( INTURI RAMA RAO ) ACCOUNTANT MEMBER SD/ - ( VIJAY PAL RAO ) JUDICIAL MEMBER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE