Gayatri Educational Society, Kakinada V. ITO, WARD - 2, Kakinada

ITA 312/VIZ/2013

• Counselvise Citation: 31225314 RSA 2013
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Keywords: Charitable institution; Question of law; Revenue expenditure; Reassessment proceedings
• Section: 133A; 12A; 148; 11; 15

Judgement Text

1 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNA M BEFORE S/SHRI D.MANMOHAN (VP) & J.SUDHAKAR REDDY (A M) I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 GAYATRI EDUCATIONAL SOCIETY, D.NO.2-24-4/2, JANMABHOOMI PARK ROAD, SRINAGAR, KAKINADA. VS. ITO, WARD - 2, KAKINADA. PAN/GIR NO. : AAATG 5210 C ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI G.V.N. HARI RESPONDENT BY : SHRI R.K.SINGH DATE OF HEARING : 25/11/2014 DATE OF PRONOUNCEMENT : 03 /12/2014 O R D E R PER J.SUDHAKAR REDDY, AM: ALL THESE APPEALS ARE FILED BY THE ASSESSEE AND ARE DIRECTED AGAINST THE ORDERS OF CIT(A)- 11, VISAKHAPATNAM DATED 28.2.2013 FOR AYS 2005-06 & 2006-07 AND DATED 29.12.2013 FOR AY 2004-05. AS THE ISSUES ARISING OUT OF THESE THREE APPEALS ARE COMMON, THEY WERE CLUBBED AND HEARD TOGETHER AND THEREFORE, WE DISPOSE OF THESE A PPEALS BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 2. FACTS: THE ASSESSEE WAS A SOCIETY ESTABLISHED W ITH THE OBJECT OF PROMOTING EDUCATIONAL INSTITUTIONS AND OTHER CHARITABLE ACTIVITIES. IT W AS GRANTED REGISTRATION UNDER SECTION 12A OF THE ACT BY THE COMMISSIONER OF INCOME TAX, RAJAHMUNDRY. SUBSEQUENTLY, THE ASSESSEE SOCIETY WAS ALSO APPROVED U/S.10(23)(VI) OF THE ACT. ASSES SEE FILED ITS RETURN OF INCOME FOR ALL THE ASSESSMENT YEARS DECLARING NIL INCOME CLAIMING EXEM PTION U/S.11 OF THE ACT. A SURVEY UNDER SECTION 133A WAS CONDUCTED ON THE ASSESSEE SOCIETY ON 17.9.2010. SUBSEQUENT TO THE SURVEY, THE CHIEF COMMISSIONER OF INCOME TAX WITHDREW THE E XEMPTION GRANTED TO THE SOCIETY UNDER SECTION 10(23C) OF THE ACT VIDE HIS ORDER NO.CC/VSP /TECH/10(23C)/40/2010-11 DATED 7.12.2010. IN VIEW OF ABOVE DEVELOPMENT, NOTICE UN DER SECTION 148 WAS ISSUED TO THE ASSESSEE TO REOPEN THE ASSESSMENT FOR ALL THE ABOVE THREE AS SESSMENT YEARS. IN RESPONSE TO THE NOTICE ISSUED, ASSESSEE FILED RETURNS CLAIMING EXEMPTION U /S.11 OF THE INCOME TAX ACT, AS WAS DONE IN THE ORIGINAL RETURNS OF INCOME. THE ASSESSING OFFI CER PASSED ORDERS U/S.143(3)/147 DECLINING EXEMPTION U/S.11 OF THE ACT ON THE GROUND THAT : I) THE ASSESSEE DIVERTED FUNDS OF THE SOCIETY FOR T HE PERSONAL BENEFIT OF THE MEMBERS, THUS, ATTRACTING SECTION 13(2)(G) OF THE A CT; II) THE FUNDS OF THE SOCIETY WAS DIVERTED TO OTHER INSTITUTIONS IN WHICH THE MEMBERS HAVE SUBSTANTIAL INTEREST, THUS , VIOLATING SECTION 13(2)(H) OF THE ACT., & III) CONTRIBUTION WERE MADE TO CHIT FUND IN VIOLATI ON OF SECTION 11(5) OF THE ACT. 3. ON APPEALS, THE FIRST APPELLATE AUTHORITY CONFIR MED THE ORDERS OF THE ASSESSING OFFICER. AGGRIEVED BY THE IMPUGNED ORDERS, THE ASSESSEE HAS FILED THESE APPEALS ON THE FOLLOWING GROUNDS, WHICH ARE COMMON IN ALL THE APPEALS UNDER CONSIDERA TION. GROUND NO.1: APPELLANT SUBMITS THAT THE ORDER OF TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE FACTS AND ALSO THE LAW APPLICABLE TO THE FACTS IN THE CASE OF THE APPELLANT. GROUND NO.2: APPELLANT SUBMITS THAT THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE HELD THAT THE NOTICE ISSUED UNDER THE PROVISIONS OF SECTION 148 OF THE INCOME TAX ACT, 1961 IS INVALID AND CONSEQUENTLY TH E ENTIRE REASSESSMENT PROCEEDINGS ARE VOID-AB-INITIO. GROUND NO.3: APPELLANT SUBMITS THAT LEARNED COMMISS IONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESS ING OFFICER IN DISALLOWING EXEMPTION UNDER THE PROVISIONS OF SECTION 10(23C) OF THE INCO ME TAX ACT, 1961. 3 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 GROUND NO.4: APPELLANT SUBMITS THAT THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE ASS ESSING OFFICER IN DENYING EXEMPTION UNDER THE PROVISIONS OF SECTION 11 OF THE INCOME TA X ACT, 1961 AND IN BRINGING TO TAX THE SURPLUS OF RS.64,33,2557-. GROUND NO.5: APPELLANT SUBMITS THAT THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ALLOWED THE SET OFF OF EXCESS EXPENDI TURE OF PREVIOUS ASSESSMENT YEARS DURING BROUGHT FORWARD TO THE RELEVANT ASSESSMENT Y EAR. GROUND NO.6: APPELLANT SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN HOLDING THAT THE CONT RIBUTION TO CHIT FUND IS IN THE NATURE OF INVESTMENT AND CONSEQUENTLY ERRED IN HOLDING THAT T HE APPELLANT HAS VIOLATED THE PROVISIONS OF SECTION 11(5) OF THE INCOME TAX ACT, 1961. GROUND NO.7: APPELLANT SUBMITS THAT THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN HOLDING THAT THE APPE LLANT HAS VIOLATED THE PROVISIONS OF SECTION 13(2)(G) AND 13(2)(H) OF THE INCOME TAX ACT , 1961. GROUND NO.8: WITHOUT PREJUDICE TO THE ABOVE, APPELLANT SUB MITS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFI ED IN HOLDING THAT THE VIOLATION OF PROVISIONS OF SECTION 13(2)(G), 13(2)(H) AND 11(5) IN THE SUBSEQUENT ASSESSMENT YEARS DISENTITLES THE APPELLANT'S CLAIM OF EXEMPTION UNDE R THE PROVISIONS OF SECTION 11 DURING THE RELEVANT ASSESSMENT YEAR AND ACCORDINGLY, IS NO T JUSTIFIED IN UPHOLDING THE ALLEGED ACTION OF THE ASSESSING OFFICER IN DENYING EXEMPTIO N U/S 11 DURING THE RELEVANT ASSESSMENT YEAR 2005-06. GROUND NO.9: APPELLANT SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS.21,71,500 TOWARDS THE DONATIONS RECE IVED BY THE APPELLANT. 4. AT THE TIME OF HEARING, SHRI G.V.N.HARI, LD COUN SEL FOR THE ASSESSEE SUBMITTED THAT THE ALLEGED VIOLATION FOR WHICH THE AO SOUGHT TO DENY T HE EXEMPTION IN QUESTION HAVE NOT BEEN TAKEN PLACE DURING THE YEARS, AS IS EVIDENT FROM TH E RECORDS AT PAGES 3, 5 & 6 OF THE ASSESSMENT ORDER. IT WAS POINTED OUT THAT ALL THE TRANSACTIONS REFERRED TO, WERE DONE DURING THE FINANCIAL YEARS 2007-08, 2008-09 AND 2009-10 RE LEVANT TO ASSESSMENT YEARS 2008-09, 2009- 10 & 2010-11. THUS, HE SUBMITTED THAT THE ALLEGATI ON THAT THE SOCIETY HAS VIOLATED SECTION 13(2)(G) AND SECTION 13(2)(H) IS ERRONEOUS. ON T HE VIOLATION OF THE PROVISIONS OF SECTION 11(5) OF THE ACT, FOR CONTRIBUTING TO CHIT FUND, LD COUNS EL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT V IZAG BENCH IN THE CASE OF SRI SIVANI EDUCATIONAL SOCIETY VS ITO (ITA NO.175/VIZ/2012 AN D OTHERS AND HENCE, THIS FINDING OF THE LD CIT(A) IS ALSO TO BE VACATED. HE, ACCORDINGLY, PRA YED FOR RELIEF. 5. ON THE OTHER HAND, LD D.R. RELIED ON THE ORDERS OF THE ASSESSING OFFICER AS WELL AS THE FIRST APPELLATE AUTHORITY AND SUBMITTED THAT THE CH IEF COMMISSIONER OF INCOME TAX HAS 4 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 OBSERVED CERTAIN VIOLATIONS MADE BY THE ASSESSEE AN D CONSEQUENTLY WITHDREW THE EXEMPTION GRANTED UNDER SECTION 10(23C) OF THE ACT. BASED ON THIS OBSERVATION, THE AO FOUND THAT THE ASSESSEE HAS VIOLATED SECTION 13(2)(G) AND SECTION 13(2)(H) OF THE ACT. ON THE ISSUE OF CONTRIBUTION TO CHIT FUND AND WHETHER IT VIOLATES S ECTION 11(5) OF THE ACT, LD D.R. ARGUED THAT THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRIYADARSHINI EDUCATIONAL ACADEMY V. DGIT (333 ITR 347), IS IN FAVOUR OF THE REVENUE. 6. IN REPLY, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE HONBLE JURISDICTIONAL HIGH COURTS JUDGEMENT IN THE CASE OF PRIYADARSHINI EDU CATIONAL ACADEMY V. DGIT (333 ITR 347) (AP HIGH COURT), HAS BEEN CONSIDERED AND DISTINGUISHED BY THE TRIBUNAL IN THE CASE OF SRI SIVANI EDUCATIONAL SOCIETY VS ITO (ITA NO.175/VIZ/2012 AND OTHERS ). HE, THEREFORE, URGED THAT THE DECISION OF THE CO-ORDINATE BENCH BE FOLLOWED. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE MATERIALS ON RECORD AND ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAWS CITED BEFORE US, WE HOLD AS FOLLOWS: I) LD CIT(A) HAS CONFIRMED THE ACTION OF THE ASSESS ING OFFICER IN DENYING EXEMPTION CLAIMED BY THE ASSESSEE UNDER THE PROVISI ONS OF SECTION 11 OF THE ACT ON THE GROUND THAT ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 11(5) AS WELL AS PROVISIONS OF SECTIONS 13(2)(G) AND 13(2)(H) OF THE ACT. II) AS FAR AS VIOLATION OF PROVISIONS OF SECTION 11 (5) IS CONCERNED, WE FIND THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL, IN THE CASE OF S RI SIVANI EDUCATIONAL SOCIETY(SUPRA) ON THE VERY SAME ISSUE OF CONTRIBUTION MADE TO CHIEF FUND, HAS HELD AS FOLLOWS: 15. THE FIRST ISSUE THAT ARISES FOR ADJUDICATION, IS WHETHER THE PROVISIONS OF SECTION 13(1)(D) OF THE ACT ARE APPLICABLE TO THE CASE OF T HE ASSESSEES. BEFORE WE CONSIDER THIS ASPECT, WE DISCUSS THE NATURE OF CHIT BUSINESS. THE RE ARE A CATENA OF DECISIONS OF VARIOUS COURTS INCLUDING HONBLE SUPREME COURT ON THIS ISSU E. THE HONBLE DELHI HIGH COURT IN THE CASE OF DELHI CHIT FUNDS ASSOCIATION VS. UOI AND AN OTHER W.P.(C) 4512/2012 AT PARA 6 & 7 OF PAGE 6OF JUDGEMENT DATED 23.4.2013 STATED AS F OLLOWS: 6. IT IS NECESSARY TO GIVE A BRIEF ACCOUNT OF THE OPERATIONS OF A CHIT FUND BUSINESS. SUPPOSING 50 PERSONS COME TOGETHER TO ORGANISE A CH IT. LET US FURTHER SUPPOSE THAT EACH OF THEM UNDERTAKE TO CONTRIBUTE RS.1,000/-. THE TOT AL CHIT AMOUNT WOULD BE RS.50,000/-. LET US FURTHER SUPPOSE THAT THE FUND WOULD OPERATE FOR A PERIOD OF 50 MONTHS. THUS THE MEMBER SUBSCRIBERS AND THE NUMBER OF MONTHS FOR WHI CH THE CHIT WOULD OPERATE WOULD BE THE SAME. IN THIS EXAMPLE AT THE END OF EACH MON TH, AN AMOUNT OF RS.50,000/- 5 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 (RS.1,000/- X 50) WOULD BE AVAILABLE IN THE KITTY O F THE CHIT FUND. THE SAID AMOUNT WOULD BE PUT TO AUCTION AND THOSE SUBSCRIBERS WHO ARE INT ERESTED IN DRAWING THE MONEY EARLY BECAUSE OF THEIR NEEDS MAY PARTICIPATE IN THE AUCTI ON. THE SUCCESSFUL BIDDER WHO IS NORMALLY THE PERSON WHO OFFERS THE HIGHEST DISCOUNT IS GIVEN THE CHIT AMOUNT. FOR 24 EXAMPLE IF THERE ARE THREE BIDDERS OFFERING TO TAKE THE CHIT OF RS.50,000/- FOR RS.40,000/- , RS.37,500/- AND RS.35,000/- RESPECTIVELY, THE CHI T WOULD BE GIVEN TO THAT SUBSCRIBER WHO IS WILLING TO TAKE IT FOR RS.35,000/- SINCE HE HAS OFFERED A DISCOUNT OF `15,000/-. THIS LEAVE A BALANCE OF RS.15,000/- (RS.15,000 RS.50,0 00) IN THE KITTY. THE AMOUNT OF RS.15,000/- WHICH REPRESENTS THE DISCOUNT WHICH THE SUCCESSFUL BIDDER HAS FOREGONE BECOMES THE DIVIDEND WHICH IS TO BE DISTRIBUTED TO ALL THE SUBSCRIBERS AFTER DEDUCTING A FIXED AMOUNT REPRESENTING THE COMMISSION PAYABLE TO THE FOREMAN. A FOREMAN IS NORMALLY A PERSON WHO ORGANISES THE AUCTION AND CON DUCTS THE PROCEEDINGS. IF IN THE EXAMPLE GIVEN ABOVE, THE COMMISSION PAYABLE TO THE FOREMAN IS FIXED AT 5%, THEN AFTER DEDUCTING RS.2,500/- (5% OF RS.50,000/-, THE CHIT A MOUNT) THE BALANCE OF RS.12,500/- WOULD BE DISTRIBUTED AMONG ALL THE 50 SUBSCRIBERS S O THAT EACH WOULD GET RS.250/-. THIS AMOUNT OF RS.250/- CAN BE SET OFF BY THE SUBSCRIBER S AGAINST THE SECOND MONTH'S INSTALLMENT OF RS.1,000/- PAYABLE BY HIM AND HE CAN GIVE ONLY RS.750/-. THE AUCTION WOULD BE REPEATED IN THE SUBSEQUENT MONTHS AND THE SAME PROCEDURE IS FOLLOWED. ANY SUBSCRIBER WHO DELAYS THEBIDDING OR DOES NOT BID AT ALL STANDS TO GAIN THE MAXIMUM DISCOUNT. THE CHIT IS THUS SOMEWHAT LIKE A RECURRIN G DEPOSIT WITH THE BANK. THERE IS NO BAR ON THE FOREMAN OF THE CHIT FUND ALSO PARTICIPAT ING AS A SUBSCRIBER. 7. THE BUSINESS OF CHIT FUNDS IS STRICTLY REGULATED BY THE CHIT FUNDS ACT,1982. IT CONTAINS DETAILED PROVISIONS RELATING TO REGISTRATION OF CHI TS, COMMENCEMENT AND CONDUCT OF CHIT BUSINESS. RIGHTS AND DUTIES OF FOREMAN, RIGHTS AND DUTIES OF THE SUBSCRIBERS, TERMINATION OF CHITS, MEETINGS OF GENERAL BODY OF SUBSCRIBERS, PROVISIONS RELATING TO WINDING UP, DISPUTES AND ARBITRATION AND OTHER MISCELLANEOUS PR OVISIONS. SUFFICE TO NOTE THAT SECTION 11 RECOGNISES THAT A CHIT BUSINESS CAN BE KNOWN BY SEVERAL NAMES SUCH AS CHIT, CHIT FUND, CHITTY, KURI, ETC. DEALING WITH THE CHIT FUND S ACT, THE SUPREME COURT IN SRIRAM CHITS & INVESTMENT (P) LTD. VS. UNION OF INDIA : AIR 1993 SC 2063 HAS LAID DOWN THE FOLLOWING PROPOSITIONS: - 25 (A) THE ACT, IN PITH AND SUBSTANCE, DEALS WITH SPE CIAL CONTRACT AND CONSEQUENTLY FALLS WITHIN ENTRY 7 OF LIST III OF THE 7 THE SCHEDULE TO THE CONSTITUTION OF INDIA; (B) A CHIT FUND TRANSACTION IS NOT A CASE OF BORRO WING, NOR IS IT A LOAN TRANSACTION. IF A SUBSCRIBER ADVANCES ANY AMOUNT, HE DOES SO ONLY TO ONE OF THE MEMBERS; (C) THE FUNDS OF THE CHIT FUND BELONG TO THE ENTIR E LOT OF SUBSCRIBERS; (D) THE AMOUNTS ARE IN DEPOSIT WHICH THE STAKE HOLD ER ONLY HOLDS IN TRUST FOR THE BENEFIT OF THE MEMBERS OF THE FUND; (E) THE FOREMAN ACTS ONLY AS A PERSON TO BRING TOGE THER THE SUBSCRIBERS AND HE IS SUBJECT TO CERTAIN OBLIGATIONS WITH A VIEW TO PROTECTING TH E SUBSCRIBERS FROM ANY MISCHIEF OR FRAUD COMMITTED BY HIM BY USING THE POSITION; 6 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 (F) COMMISSION IS PAYABLE TO THE FOREMAN FOR THE SE RVICE RENDERED BY HIM AS HE DOES NOT LEND MONEY BELONGING TO HIM. 16. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS . BILAHARI INVESTMENTS PVT. LTD. 299 ITR 1 STATED AS FOLLOWS: THE SUPREME COURT NOTED THAT CHIT FUNDS ARE BASICA LLY SAVING SCHEMES IN WHICH A CERTAIN NUMBER OF SUBSCRIBERS JOIN TOGETHER AND E ACH CONTRIBUTES A CERTAIN FIXED SUM EACH MONTH, THE TOTAL NUMBER OF MONTHS BE ING EQUAL TO THE TOTAL NUMBER OF SUBSCRIBERS. THE SUBSCRIPTIONS ARE PAID T O THE MANAGER OF THE FUND BY A CERTAIN PRESCRIBED DATE EACH MONTH AND THE TOTAL SUBSCRIPTIONS TO THE FUND ARE AUCTIONED EACH MONTH AMONGST THE SUBSCRIBERS. AT EA CH AUCTION, THE LOWEST BIDDER IS PAID THE AMOUNT OF HIS BID AND THE BALANC E RECEIVED FROM OUT OF THE TOTAL SUBSCRIPTIONS RECEIVED IS DISTRIBUTED EQUALLY AMONGST OTHER SUBSCRIBERS, AS PREMIUM. THE MANAGER IS PAID A CERTAIN PERCENTAGE O F THE COLLECTIONS EACH MONTH ON ACCOUNT OF EXPENSES AND CHARGES FOR CONDUC TING THE AUCTION. IN THE AUCTION, A MAXIMUM AMOUNT, WHICH THE HIGHEST BIDDER AGREES TO FORGO, IS 26 THE AMOUNT, WHICH IS DISTRIBUTED TO THE OTHER MEMBERS, SUBJECT TO DEDUCTION OF THE MANAGERS COMMISSION. 17. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SAHEB CHITS (DELHI)PVT. LTD. ITA NO.44 OF 2008 JUDGEMENT DATED 24.7.2009 HAS OBSERVED AS FOLL OWS: FURTHER, IT WAS OBSERVED BY THE HONBLE SUPREME CO URT IN SRIRAM CHITS AND INVESTMENTS (P) LTD. (SUPRA) THAT IT WOULD NOT BE CORRECT TO ST ATE THAT EACH SUBSCRIBER LENT MONEY TO THE PERSON WHO GETS CHITS EARLIER. IT CANNOT ALSO B E CONSTRUED THAT THE PERSON WHO GETS CHIT LATER SHOULD BE TREATED AS A MONEY LENDER. THE AGREEMENT BETWEEN THE PARTIES THOSE ENTERED AS PER SECTION 6 OF THE ACT ONLY PROVIDES F OR DISTRIBUTION OF THE CHIT AMOUNT. THE SUPREME COURT HOWEVER RELIED ON THE JUDGEMENT OF TH E KERALA HIGH COURT IN JANARDHANA MALLAN AND OTHERS VS. GANGADHARAN AND OTHERS AIR 19 83 KERALA 178, WHEREIN IT WAS OBSERVED THAT ON ENTERING INTO A CHIT AGREEMENT, A DEBT IS NOT INCURRED BY THE SUBSCRIBER FOR THE AMOUNT OF ALL THE FUTURE INSTALMENTS AND IN RESPECT OF SUCH AMOUNT THERE IS NO DEBTORS-CREDITORS RELATIONSHIP. THE HONBLE DELHI HIGH COURT FURTHER OBSERVED AS FO LLOWS: THIS APPROACH IS FALLACIOUS ON THE FACE OF IT AND PARTICULARLY IN VIEW OF THE PRINCIPLE LAID DOWN IN THE AFORESAID JUDGEMENT OF THE SUPREME COUR T IN SRIRAM CHITS AND INVESTMENT PVT. LTD. (SUPRA), WHEREIN THE APEX COURT OBSERVED THAT THE SUBSCRIPTION RECEIVED FROM THE MEMBERS OF THE CHIT FUND COMPANY IN TERMS OF CO NTRACT ARE NOT TREATED AS DEPOSITS FOR THE PURPOSE OF RESERVE BANK OF INDIA DIRECTION. THE AMOUNT CONTRIBUTED BY THE MEMBERS EVERY MONTH IS GIVEN BACK TO THEM IN THE FO LLOWING MANNER. THE SUCCESSFUL BIDDER TAKES THE ENTIRE AMOUNT (MINUS) THE BID AMOU NT AND THE BID AMOUNT IS DISTRIBUTED EQUALLY AMONG THE MEMBERS. THEREFORE, BY NO STRETCH OF IMAGINATION, THE AFORESAID AMOUNT CONTRIBUTED BY THE 27 MEMBERS CAN BE TREATED AS A DEPOSIT WITH THE COMPANY MUCH LESS MONEY BORROWED BY THE ASSESSEE. 7 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 18. THE HONBLE SUPREME COURT IN THE CASE OF M/S. S RIRAM CHITS AND INVESTMENTS VS. UNION OF INDIA AND OTHERS AIR 1993 (SC)2063 AT PARA 14 HELD AS FOLLOWS: 14. THE QUESTION AS TO THE NATURE OF CHIT AGREEMEN T CAME UP FOR CONSIDERATION BEFORE A FULL BENCH OF FIVE JUDGES OF THE KERALA HIGH COURT IN JANARDHANA MALLAN AND ORS. V. GANGADHARAN AND ORS.. THE FULL BENCH THERE WAS CONC ERNED WITH THE CHIT AGREEMENT UNDER THE KERALA CHITTIES ACT (ACT 23 OF 1975) WHER E THE KERALA HIGH COURT SPEAKING THROUGH POTI, ACTING CHIEF JUSTICE, TOOK THE VIEW T HAT ON ENTERING INTO THE CHITTY AGREEMENT A DEBT IS NOT INCURRED BY THE SUBSCRIBER FOR THE AMOUNT OF ALL THE FUTURE INSTALLMENTS AND IN RESPECT OF SUCH AMOUNT THERE IS NO DEBTOR CREDITOR RELATIONSHIP. THE CHITTY VARIOLA ONLY EMBODIES A PROMISE TO PAY ON FU TURE DATES. THAT IS NOT A PROMISE TO REPAY AN EXISTING DEBT, BUT TO PAY IN DISCHARGE OF A CONTRACTUAL OBLIGATION. FOR SIMILAR REASONS NEITHER THE PRIZING OF THE CHITTY NOR THE E XECUTION OF THE SECURITY BOND WOULD GIVE RISE TO A DEBT, FOR , THE PRIZE AMOUNT IS NOT RECEIVED AS A LOAN, BUT AS OF RIGHT BY VIRTUE OF THE TERMS OF THE CONTRACT BETWEEN THE PAR TIES. THEREFORE, NO DEBT DUE TO THE FOREMAN ARISES BY REASON OF THE RECEIPT OF THE PRIZ E AMOUNT OR OF THE EXECUTION OF THE SECURITY BOND FOR SECURING FUTURE SUBSCRIPTIONS. TH E FULL BENCH IN THIS DECISION OVER-RULED ITS EARLIER DECISION IN THE CASE OF P.K ACHUTAN V. STATE BANK OF TRAVANCORE, CALICUT. WHILE RENDERING THE DECISION IN JANARDHANA MALLAN AND ORS . (SUPRA) THE FULL BENCH OF THE KERALA HIGH COURT CONSIDERED A CATENA OF DECISIONS STARTING FROM 1937 IN THE MATTER OF RAMANATHA LYYAR V. NARAYANASWAMI. THE ANDHRA PRADES H HIGH COURT ALSO, WHILE DEALING WITH THE TRANSACTION OF A CHIT FUND ORGANISATION, I N THE MATTER OF DHOOSA NARSIMLOO V. YELALA RAJANNA AND ANR. I.L.R. (1958) ANDHRA PRADES H 409, WHERE THE 28 PETITIONER HAD FILED A SUIT IN THE COURT OF THE DISTRICT JUDGE AGA INST THE RESPONDENTS ON A PROMISSORY NOTE EXECUTED BY THEM FOR THE AMOUNT THEY DREW IN A POOL FROM A CHIT FUND ORGANISATION AND WHERE THE DISTRICT JUDGE HAD DISMISSED THE SUIT FOR WANT OF A LICENSE UNDER SECTION 9(2) OF THE HYDERABAD MONEY LENDERS ACT (ACT V OF 1 349 F.) AND ON REVISION, THE QUESTION THAT CAME FOR CONSIDERATION WAS WHETHER TH E CHIT FUND ORGANISATION COULD BE REGARDED AS A MONEY LENDER WITHIN THE MEANING OF TH E SAID ACT AND WHETHER ITS TRANSACTION PARTAKE THE NATURE OF A LOAN. SRINIVASA CHARI, J. SPEAKING FOR THE COURT HELD THAT THE AMOUNT DRAWN BY A MEMBER OF A CHIT FUND WH O BID AT THE PERIODICAL AUCTION GIVING THE LARGEST DISCOUNT COULD NOT COME WITHIN T HE DEFINITION OF A LOAN WITHIN THE MEANING OF THE MONEY LENDERS ACT NOR COULD SUCH A T RANSACTION BE REGARDED AS A MONEY LENDING TRANSACTION BE AND IN THE CIRCUMSTANCES SEC TION 9 OF THE HYDERABAD MONEY LENDERS ACT (V OF 1349 F.) COULD HAVE NO APPLICATIO N TO SUCH A CASE. AT PAGE 415 OF THE AFORESAID REPORTIT HAS BEEN OBSERVED 'IN OUR OPINIO N THERE IS NOTHING IN THE CHIT FUND TRANSACTION WHICH COULD BE CALLED THE BUSINESS OF M ONEY LENDING. IT IS IN ESSENCE AN ORGANISATION FOR MUTUAL BENEFIT.' IT APPROVED THE D ECISION OF THE MADRAS HIGH COURT IN RAGHAVAN V. ARMUGHAM: (1934) 38M.L..I. 283. THAT WA S ALSO A CASE OF CHIT FUND TRANSACTION AND THE QUESTION FOR DECISION WAS WHETH ER A PROVISION IN THE BOND FOR PAYMENT OF THE WHOLE AMOUNT IN DEFAULT OF ANY ONE I NSTALMENT WAS IN THE NATURE OF A PENALTY COMING WITHIN SECTION 74, ILLUSTRATION (G) OF THE CONTRACT ACT. THE LEARNED JUDGES RULED THAT A CHIT FUND TRANSACTION WAS NOT A CASE O F BORROWING AT ALL AND IT WAS ENTIRELY DIFFERENT FROM A LOAN TRANSACTION. THE LEARNED JUDG ES FURTHER HELD THAT 'A LOAN ENVISAGES THE RELATIONSHIP OF A CREDITOR AND DEBTOR IN SO TAR AS THE LENDER AND THE BORROWER ARE 8 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 CONCERNED. THERE CANNOT BE THE RELATIONSHIP OF A CR EDITOR AND DEBTOR BETWEEN THE STAKE HOLDER AND A SUBSCRIBER, IN A CHIT FUND TRANSACTION . IF THE STAKE-HOLDER ADVANCES ANY AMOUNT HE ADVANCES ONLY TO ONE OF THE MEMBERS, THE FUNDS OF THE WHOLE BODY OF THE CHIT FUND, AS THE FUNDS BELONG TO THE WHOLE LOT OF SUBSC RIBERS, THE MEMBERS, BORROWER IS AS MUCH A CREDITOR AS A DEBTOR. THE AMOUNTS ARE IN DEP OSIT WITH 29 THE STAKE-HOLDER ONLY AS A TRUSTEE FOR THE BENEFIT OF THE MEMBERS OF THE FUN D.' SRINIVASACHARI, J. NOTICED THE OBSERVATIONS OF SRINIVASA LYENGAR, J. IN TIM-MARSA PAI V. SUBBA RAO : AIR (1928) MADRAS 256 WHERE SRINIVASA LYENGAR, J. REGARDED THE POSITI ON OF THE MANAGER OF A KURI CHIT AS A TRUSTEE FOR ALL THE SUBSCRIBERS OF THE CHIT FUND. 19. ON A CONSPECTUS OF THE ABOVE JUDGEMENT, IT IS C LEAR THAT THE HONBLE SUPREME COURT HAS APPROVED THE OPINION OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF DHOOSA NARASIMLOO VS. YELLALA RAJANNA AND ANOTHER (SUPRA) THAT IT IS IN ESSENCE AN ORGANIZATION FOR MUTUAL BENEFIT. IT IS FURTHER MADE CLEAR THAT CHIT TRANSACTION IS NOT A MONEY LENDING TRANSACTION AND THAT THERE IS NO RELATIONSHIP OF DEBTOR AND CREDITOR. THE ROLE OF TH E FOREMAN IS THAT OF A TRUSTEE. HE CHARGES COMMISSION FOR HIS SERVICE. THE MONEY CONTRIBUTED B Y THE SUBSCRIBERS TO THE CHIT DOES NOT BELONG TO THE FOREMAN. IT BELONGS TO ALL THE STAKE HOLDERS . UNDER THESE CIRCUMSTANCES, IT HAS TO BE CONCLUDED THAT THE CONTRIBUTION TO CHIT FUND IS A M UTUAL ACTIVITY AND THE FUND BELONGS TO ALL THE PARTICIPANTS. THERE IS NO MONEY LENT OR KEPT BY ONE PARTY WITH ANOTHER PARTY AS AN INVESTMENT OR DEPOSIT. 20. HONBLE HARYANA HIGH COURT IN THE CASE OF SODA SILICATE & CHEMICAL WORKS VS. CIT 179 ITR 588 (P&H) HELD AS FOLLOWS: 'IN ORDER TO ANSWER THE QUESTION POSED, REGARD MUST BE HAD TO THE NATURE AND WORKING OF THE CHIT FUND, IN THE CONTEXT OF THE ASSESSEE, WITH PARTICULAR REFERENCE TO THE FACT THAT RUNNING A CHIT FUND OR BEING A MEMBER OF SUCH FUND , WAS NOT THE BUSINESS OF THE ASSESSEE. THE TRANSACTIONS CONCERNED HERE ARE CONTR IBUTIONS MADE TO THE FUND BY THE ASSESSEE AND THE LUMP SUM RECEIVED BY IT, THOUGH AT A DISCOUNT AND THE SUBSEQUENT DISTRIBUTION AND RECEIPT OF AMOUNTS AMONGST THE PAR TICIPANTS AS PREMIA OR DIVIDEND. THERE IS CLEARLY MUTUALITY AMONGST THE CONTRIBUTORS AND THE PARTICIPANTS OF THE CHIT FUND WITH THEIR IDENTITY BEING KNOWN AND ESTABLISHED. WHEN SUCH IS THE CASE, CONTRIBUTIONS MADE TO THE CHIT FUND CANNOT BE TREATED AS REVENUE EXPENDITURE NOR INDEED COULD THE PAYMENT AND RECEIPT O F ANY AMOUNT TO AND FROM THE CHIT FUND BE TREATED TO BE THE BUSINESS ACTIV ITY OF THE ASSESSEE. THE TEST OF MUTUALITY IN THIS BEHALF, AS LAID DOWN IN CIT VS. NATARAJ FINANCE CORPORATION (1988) 69 CTR (AP) 15: (1988)- 169 ITR 7 32 (AP) IS THAT THE ENTITY WOULD BE A MUTUAL BENEFIT ASSOCIATION IF ALL THE PAR TICIPATORS TO THE COMMON FUND ARE ALSO CONTRIBUTORS AND THEIR IDENTITY IS ESTABLISHED. THE CONTRIBUTORS TO THE COMMON FUND AND THE PARTICIPATORS IN THE SURPLUS MUST BE AN IDENTICAL BODY. THE COURT WENT ON TO OBSERVE THAT THIS DOES NOT MEAN THAT EACH MEMBER SHOULD CONTRIBUTE TO THE COMMON FUND OR T HAT EACH MEMBER SHOULD PARTICIPATE IN THE SURPLUS OR GET BACK FROM THE SURPLUS PRECISELY WHAT HE HAS PAID. WHAT IS REQUIRED IS THAT THE MEMBER AS A C LASS SHOULD CONTRIBUTE 9 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 TO THE COMMON FUND AND PARTICIPATORS AS A CLASS MUST BE ABLE TO PARTICIPATE IN THE SURPLUS'. 21. THE SAME JUDGMENT RELIED ON ANOTHER DECISION OF THE MADRAS HIGH COURT IN THE CASE OF BOARD OF REVENUE VS. NORTH MADRAS MUTUAL BENEFIT CO. LIMI TED 1922 I ITC 172 (MADRAS) WHEREIN IT WAS HELD THAT THE OPERATIONS OF CHIT FUND CANNOT BE SAI D TO BRING ANY PROFIT TO ITS SUBSCRIBERS AS A BODY AND THE INCOME REPRESENTED BY PREMIA WAS THUS NOT ASSESSABLE TO INCOME TAX. 22. THE HONBLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF CIT (TDS) VS. SUMAN CHIT FUNDS PRIVATE LIMITED HELD THAT THE DISCOUNT PAID BY THE FOREMAN TO THE SUBSCRIBERS TO A CHIT FUND TRANSACTION DOES NOT PARTAKE THE CHARACTER OF INTER EST WITHIN THE MEANING OF SECTION 2(28A) OF THE INCOME TAX ACT. THIS DECISION WAS RENDERED FOLL OWING THE PRINCIPLES LAID DOWN BY THE HONBLE DELHI HIGH COURT IN SAHIB CHITS (DELHI) (P) LIMITED IN ITA NO.44 OF 2008 AND ALSO THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. BILAHARI INVES TMENT PRIVATE LIMITED. REFERENCE WAS MADE TO A DECISION OF BANGALORE BENCH OF ITAT IN THE CASE O F MARGA SOOCHI PRIVATE LIMITED IN ITA NO.995/BANGALORE/2008. 23. THUS FROM THE ABOVE IT IS CLEAR THAT THE CONTRI BUTION TO A CHIT IS A MUTUAL ACTIVITY AND CANNOT BE HELD AS AN INVESTMENT, AS THERE IS NO QUESTION O F A INDIVIDUAL SUBSCRIBER BEING ENTITLED TO RECEIVE PROFIT OR INCOME UNDER A SCHEME OF CHIT FUN DS. NO MONEY IS LAID OUT WITH A SECOND PARTY THAT TOO WITH AN INTENTION TO EARN PROFIT. THE FORE MAN HOLDS THE MONEY RECEIVED FROM THE CHIT SUBSCRIBERS ONLY AS A TRUSTEE. SECTION 11(5) OF THE ACT ONLY REFERS MONEY THAT IS TO BE INVESTED OR DEPOSITED WITH A PERSON OR ENTITY OR ORGANIZATION O R GOVERNMENT WHICH IS OTHER THAN THE ASSESSEE ITSELF. INVESTMENT HELD BY SELF I. E. WHERE NO SECO ND PARTY IS INVOLVED IS OBVIOUSLY NOT COVERED TO THESE SECTIONS. THUS, WE CAN CONCLUDE THAT CHIT FUN D BUSINESS IS GOVERNED BY THE PRINCIPLES OF MUTUALITY AND CONTRIBUTING TO A CHIT FUND IS CONTRI BUTION TO ONESELF ON THE PRINCIPLE OF MUTUALITY AND HENCE, IT IS NOT AN INVESTMENT AS CONTEMPLATED BY SEC 13(1) (D) R.W.S. 11(5) OF THE ACT. 24. NOW, WE PROCEED TO EXAMINE TO WHAT EXTENT A CHA RITABLE INSTITUTION IS REQUIRED TO INVEST THE FUNDS FOR PURPOSES OF S.13(1)(D). FOR THIS PURPOSE, WE ANALYSE THE FOLLOWING TERMS USED IN SECTION 13(1)(D): I) ANY FUNDS II) INVESTMENT OR DEPOSIT 25. THE TERM ANY FUNDS WHEN READ WITH THE PHRASE ANY INCOME THEREOF, IN OUR OPINION SIGNIFIES INCOME DEFINED U/S 2(24) OF THE ACT. THUS ANY RECEI PT, WHICH FALLS WITHIN THE DEFINITION OF INCOME U/S 2(24) OF THE ACT IS TO BE CONSIDERED. AS RIGHTL Y CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE RESTRICTION ON UTILIZATION OF FUNDS B ELONGING TO A CHARITABLE INSTITUTION HAVE BEEN 10 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 BROUGHT IN TO CURB THE MISUSE OF TAX EXEMPT FUNDS B Y THESE CHARITABLE INSTITUTIONS. THEREFORE, ON A HARMONIOUS CONSTRUCTION OF THE PROVISIONS OF S.13 (1)(D) WE ARE OF THE CONSIDERED VIEW THAT THE TERM ANY FUNDS REFERS TO ONLY THE INCOME OF A CHA RITABLE INSTITUTION. 26. THE TERM ANY FUNDS HAS BEEN EXPLAINED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SHREE SRI RAM FOUNDATION 250 ITR 55 WHEREIN IT IS HELD AS FOLLOWS: A SIMILAR ISSUE HAD COME UP BEFORE VARIOUS HIGH CO URTS AND THERE IS UNANIMITY IN THE VIEW, AS THAT TAKEN BY THE TRIBUNAL. IN CONSTRUING THE 32 PROVISIONS OF SECTION 13(2)(H), THE EXPRESSION 'FUNDS' HAS TO BE UNDERSTO OD IN THE CONTEXT OF THE PROVISION AND NOT ONLY WITH REFERENCE TO DICTIONARIES OR TO C OMMERCIAL PARLANCE OR TO THE PRINCIPLES OF ACCOUNTANCY. IT IS TO BE NOTED THAT T HE EXPRESSION USED IS 'FUNDS' AND NOT 'FUND'. 'FUNDS' MEANS MONEY IN HAND OR CASH ACC ORDING TO SOME DICTIONARIES. THIS, ACCORDING TO US, WOULD BE THE PROPER MEANING TO BE ATTRIBUTED TO THE EXPRESSION 'FUNDS' AS APPEARING IN THE PROVISION. THE FUNDAMEN TAL REQUIREMENT OF SECTION 13(2)(H) IS THAT THERE MUST BE INVESTMENT OF FUNDS OF A TRUST. IF ANY EXPANDED MEANING IS GIVEN TO INCLUDE ASSETS OTHER THAN MONEY IN HAND OR CASH OR CREDIT BALANCE IN A BANK ACCOUNT, IT IS EVIDENT THAT THEY ARE NOT CAPABLE OF BEING INVESTED AS SUCH. OTHER ASSETS OF THE TRUST APART FROM MONEY IN HAND OR CASH OR BALANCE IN BANK WILL HAVE TO BE CONVERTED INTO MONEY OR CASH BEFORE THE SAME CAN BE INVESTED, AS WAS OBSERVED BY THE CALCUTTA HIGH COURT IN CJT V. BIRLA CHARITY TRUST [1988] 170 ITR 150. THE EXPRESSION 'INVEST' CONNOTES A POSITIVE ACT ON THE PART OF THE TRUST WHERE-BY THE FUNDS OF THE TRUST ARE LAID OUT OR COMMITTED IN ANY PARTICULAR PROPERTY OR BUSINESS OR TRANSACTION WITH THE OBJECT OF EARNING A PROFIT OR FINANCIAL ADVANTAGE OR RETURN. WHAT IS CONTEMPLATED IS THAT THE TRUST HAVING ASSETS IN THE FORM OF MONEY OR CASH OR BALANCE IN A BANK OR ANY OTHER FORM CAPABLE OF BEIN G INVESTED OR BY A POSITIVE ACT AND PURSUANT TO A DECISION OF THE TRUST WAS LAID OUT OR COMMITTED IN A CONCERN OF A NATURE SPECIFIED BEFORE IT CAN BE HELD THAT SUCH AN INVEST MENT COMES WITHIN THE MISCHIEF OF SECTION 13(2)(H). THE MEANING OF THE EXPRESSION 'FUNDS' GIVEN IN THE STANDARD DICTIONARIES ARE AS FOLLOWS : 'BLACK'S LAW DICTIONARY, FIFTH EDITION : 'FUND'.. . AN ASSET OR GROUP OF ASSETS SET ASIDE FOR A SPECIFIC PURPOSE . . , A GENERIC TERM AND ALL-EMBRACING AS COMPARED WITH T ERM 'MONEY', ETC., WHICH IS SPECIFIC. A SUM OF MONEY OR OTHER LIQUID ASSETS SET APART FOR A SPECIFIC PURPOSE OR AVAILABLE FOR THE PAYMENT OF DEBTS OR CLAIMS. IN TH E PLURAL, THIS WORD HAS A VARIETY OF SLIGHTLY DIFFERENT MEANINGS, AS FOLLOWS : 'MONEYS' AND MUCH MORE, SUCH AS NOTES, BILLS, CHE QUES, DRAFTS, STOCKS AND BONDS, AND IN BROADER MEANING MAY INCLUDE PROPERTY OF EVER Y KIND . . . MONEY IN HAND, ASSETS, CASH, MONEY AVAILABLE FOR THE PAYMENT OF A DEBT, LEGACY, ETC. CORPORATE STOCKS OR GOVERNMENT SECURITIES ; IN THIS SENSE USUALLY SPOKEN OF AS THE 'FUNDS'. ASSETS, SECURITIES, BONDS OR REVENUE OF A STATE OR GOVERNMENT APPROPRIATED 11 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 FOR THE DISCHARGE OF ITS DEBTS. GENERALLY, WORKING CAPITAL ; SOMETIMES USED TO REFER TO CASH OR TO CASH AND MARKETABLE SECURITIES.' '(B) DICTIONARY FOR ACCOUNTANTS, FOURTH EDITION, BY ERIC L. KOHLER : 1. AN ASSET OR GROUP OF ASSETS WITHIN ANY ORGANISATION, SEPARATED PHYSICALLY OR IN THE ACCOUNTS OR BOTH FROM OTHER ASSETS AND LIMITED TO SPECIFIC USES . EXAMPLES : A PETTY CASH OR WORKING FUND ; A REPLACEMENT AND RENEWAL FUND ; AN ACCIDENT FUND ; A CONTINGENT FUND ; A PENSION FUND. EXAMPLE : A TRUST FUND CREATED BY A WILL ; AN ENDOW MENT FUND ; A SINKING FUND. 4. PL. : CURRENT ASSETS LESS CURRENT LIABILITIES (O N AN ACCRUAL BASIS) ; WORKING CAPITAL ; A TERM USED IN CASH FLOW STATEMEN TS. 5. PL. : CASH (PP. 204-208).' 'CHAMBERS' TWENTIETH CENTURY DICTIONARY, NEW EDITION : FUND : N. A SUM OF MONEY ON WHICH SOME ENTERPRISE I S FOUNDED OR EXPENSE SUPPORTED : A SUPPLY OR SOURCE OF MONEY :' 'THE CONCISE OXFORD DICTIONARY, FIFTH EDITION : FUND N. 1. PERMANENT STOCK OF SOMETHING READY TO BE DRAWN UPON STOCK OF MONEYPECUNIARY RESOURCES.' 'WEBSTER'S SEVENTH NEW COLLEGIATE DICTIONARY-BASED ON WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY (P. 538) : FUND. 1. AN AVAILABLE QUANTITY OR MATERIAL OR INTAN GIBLE RESOURCES ; SUPPLY ; 2. A SUM OF MONEY OR OTHER RESOURCES THE P RINCIPAL OR INTEREST OF WHICH IS SET APART FOR A SPECIFIC OBJECTIVE.' THE EXPRESSION, 'INVEST' IN THE SAID SECTION 13(2)( H) IS USED AS A VERB AND THE MEANING OF THE SAID EXPRESSION IN THE STANDARD DICT IONARIES IS AS FOLLOWS : 'CHAMBER'S TWENTIETH CENTURY DICTIONARY, NEW EDITIO N : . . . TO LAY OUT FOR PROFIT AS BY BUYING PROPERTY, SHARES, ETC.' 'THE CONCISE OXFO RD DICTIONARY, FIFTH EDITION: ... LAY OUT MONEY ON, AS (INVEST) IN A CAR.' 'WEBSTER'S SEVENTH NEW COLLEGIATE DICTIONARY : VB. VT 1: TO COMMIT (MONEY) IN ORDER TO EARN A FINA NCIAL RETURN ; 2 TO MAKE USE OF FOR FUTURE BENEFITS OR ADVANTAGESVT. TO MAKE AN IN VESTMENT.' 'CORPUS JURIS SECUNDUM, VOLUME XXXVII: 12 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 IN GENERAL.THE WORD HAS A VARIETY OF MEANINGS, BUT THE SENSE IN WHICH IT IS EMPLOYED MUST BE GATHERED FROM THE CONTEXT. IT IS N OT A LEGAL TERM WITH A SETTLED MEANING, BUT IT IS A TERM IN COMMON USE, SUGGESTING MONEY, IN COMMON SPEECH, ALTHOUGH TECHNICALLY IT MAY BE EMPLOYED TO COVER OT HER ARTICLES OF VALUE, FOR THE TERM 'FUND' OR 'FUNDS' IS GENERIC AND ALL-EMBRACING AS COMPARED WITH THE TERM 'MONEY', ETC. WHICH IS SPECIFIC . . , IN THE PLURAL , 'CAPITAL : CASH, MONEY, OR MONEYS ; MONEY AND NEGOTIABLE PAPER IMMEDIATELY OR READILY C ONVERTIBLE INTO CASH, AVAILABLE PECUNIARY RESOURCES ; MONEY IN HAND OR AVAILABLE FO R THE PAYMENT OF A DEBT, LEGACY, ETC., SPECIE, OR A STOCK OF CONVERTIBLE WEALTH; AND 'FUNDS' MAY MEAN OR INCLUDE NOT ONLY MONEY, AS THE TERM IS GENERALLY UNDERSTOOD, BU T OTHER CIRCULATING MEDIUM OR INSTRUMENT OR TOKENS IN GENERAL USE IN THE COMMERCI AL WORLD AS THE REPRESENTATIVES OF VALUE, SUCH AS BANK NOTES, BILLS, CHEQUES, DRAFT S, NOTES, STOCKS AND BONDS, DEPOSITS OR CERTIFICATES OF DEPOSIT, EVIDENCES OF M ONEY LENT TO THE GOVERNMENT, CONSTITUTING A NATIONAL DEBT, FOR WHICH INTEREST IS PAID AT PRESCRIBED INTERVALS. ... .' IN R. K. DALMIA V. DELHI ADMINISTRATION [1962] 32 C OMP CAS 699 ; AIR 1962 SC 1821, IT WAS OBSERVED THAT THE WORD 'FUND' MAY MEAN ACTUALCASH RESOURCES OF A PARTICULAR KIND (E.G., MONEY IN A DRAWER OR IN A BA NK OR IT MAYBE A MERE ACCOUNTANCY EXPRESSION USED TO DESCRIBE A PARTICULA R CATEGORY WHICH A PERSON USES IN MAKING UP HIS ACCOUNTS). A SIMILAR VIEW WAS EXPR ESSED IN AHCHM V. COULLKARD [1942] 2 KB 228. THE EXPRESSION 'FUND' OR 'FUNDS' H AS A VARIETY OF MEANINGS BUT THE SENSE IN WHICH IT IS EMPLOYED MUST BE GATHERED FROM THE CONTEXT. IT WOULD NOT BE CORRECT TO ADOPT A STRICTLY LITERAL OR TECHNICAL MEANING OF THIS EXPRESSION WHILE CONSTRUING SECTION 13(2)(H). IN OTHER WORDS WE MUST NOT CONSTRUE THAT PROVISION MECHANICALLY. WE MUST CONSTRUE IT HAVING REGARD TO THE OBJECT WHICH THE LEGISLATURE HAD IN VIEW IN ENACTING IT AND IN THE CONTEXT OF THE SETTING IN WHICH IT OCCURS. THAT, PROVISION CAME TO BE INSERTED IN THE ACT BY THE FINANCE ACT, 1970. ON A PLAIN READING OF THAT PROVISION, IT IS CLEAR T HAT CLAUSE (H) OF SUB-SECTION (2) OF SECTION 15 COVERS INVESTMENT OF THE TRUST FUNDS IN ANY CONCERN IN WHICH ANY OF THE PERSONS SPECIFIED IN SUB-SECTION (3) HAS SUBSTANTIA L INTEREST ('SPECIFIED PERSONS' IN SHORT) AND IF SUCH INVESTMENT OF THE TRUST FUNDS IS MADE AFTER DECEMBER 31,1970, IT WOULD RESULT IN FORFEITURE OF EXEMPTION FROM TAX . HOWEVER, IF THE TRUST FUNDS HAVE ALREADY BEEN INVESTED IN ANY CONCERN AS AFORES AID BEFORE JANUARY 1, 1971, THE EXEMPTION WOULD BE FORFEITED IF THE FUNDS CONTI NUED TO REMAIN SO INVESTED EVEN AFTER DECEMBER 31, 1970. THE OBJECT OF THE ABO VE PROVISION IS TO DISCOURAGE INVESTMENT OF TRUST FUNDS IN THE CONCERNS IN WHICH SPECIFIED PERSONS HAVE SUBSTANTIAL INTEREST AND IF AN INVESTMENT IS ALREAD Y MADE IN SUCH CONCERNS, TO DISCOURAGE CONTINUANCE THEREOF AFTER DECEMBER 31, 1 970. IN ORDER TO ATTRACT THE PROVISIONS OF SECTION 13(2)(H), WHAT IS ESSENTIAL I S THAT THE FUNDS OF THE TRUST ARE INVESTED IN A CONCERN COVERED BY SECTION 13{2)(C) A ND IF SUCH INVESTMENT IS MADE PRIOR TO JANUARY 1, 1971, FUNDS ARE CONTINUED TO BE NOT INVESTED AFTER DECEMBER 31, 1970. IT IS ONLY IF THE FUNDS OF THE TRUST ITSE LF ARE UNDER SECTION 11, THE FUNDS HAVE TO BE SUCH AS ARE CAPABLE OF INVESTMENT. THERE FORE, IN ORDER TO ATTRACT SECTION 13(2)(H}, IT HAS TO BE ESTABLISHED THAT THE FUNDS OF THE TRUST WHICH ARE CAPABLE OF BEING INVESTED HAVE BEEN UTILISED FOR MA KING INVESTMENT AS PROVIDED 13 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 THEREIN. WHEN THE FUNDS OF THE TRUST ARE SO INVESTE D AND SUCH INVESTMENT IS CONTINUED AFTER DECEMBER 31, 1970, THE TRUST WHOSE FUNDS ARE SO INVESTED WILL NOT BE ENTITLED TO CLAIM EXEMPTION UNDER SECTION 11. TH E ABOVE POSITION HAS BEEN ELABORATELY DEALT WITH BY THE GUJARAT HIGH COURT IN CIT V. INSANIYAT TRUST [1988] 173 ITR 248. THE WORD 'INVESTMENT' MEANS TO LAY OUT MONEY IN BU SINESS WITH A VIEW TO OBTAIN INCOME OR PROFIT. IN ORDER TO CONSTITUTE AN INVESTM ENT THE AMOUNT LAID DOWN SHOULD BE CAPABLE OF RESULTING IN AN INCOME OR RETU RN OR PROFIT TO THE INVESTOR AND IN EVERY CASE OF INVESTMENT, THE INTENTION AND POSI TIVE ACT ON THE PART OF THE INVESTOR SHOULD BE TO EARN SUCH INCOME, RETURN OR P ROFIT TO THE INVESTOR. IN ORDER TO CONSTITUTE AN 36 INVESTMENT, THE MONEY SHALL BE LAI D OUT IN SUCH MANNER, AS TO ACQUIRE SOME SPECIES OF PROPERTY WHICH BRINGS IN AN INCOME TO THE INVESTOR. AN INVESTMENT POPULARLY MEANS EVERY APPLICATION OF MON EY WHICH IS INTENDED TO FETCH RETURN BY WAY OF INTEREST INCOME OR PROFIT. THUS ON LY EMPLOYED AS CAPITAL IN A BUSINESS IS MONEY INVESTED IN BUSINESS. (VIDE EDWAR DS ]., IN TAX COMMISSIONER V. AUSTRALIAN MUTUAL PROVIDENT FUND SOCIETY [1902] 22 NZLR 445). IN ARNAJLD V. GRINSTEAD (21 WR ENG 155), IT WAS OBSERVED THAT IN ITS MOST COMPREHENSIVE SENSE IT IS GENERALLY UNDERSTOOD TO SIGNIFY THE LAYING OU T OF MONEY IN SUCH A MANNER THAT IT PRODUCES A REVENUE. AN ILLUMINATING OBSERVATION WAS MADE IN IRC V. DESOUTTER BROS, LTD. [1946] 1 ALL ER 58 (CA) ABOUT WHAT 'INVE STMENT' MEANS. IT WAS OBSERVED THAT THE WORD 'INVESTMENT' IS NOT A WORD O F ART, BUT HAS TO BE INTERPRETED IN A POPULAR SENSE. IT IS NOT CAPABLE O F LEGAL DEFINITION, BUT A WORD OF CURRENT VERNACULAR. THE WORDS 'INVEST' AND 'INVESTM ENT' ARE TO BE TAKEN IN THE BUSINESS SENSE OF LAYING OUT OF MONEY FOR INTEREST OR PROFIT. A PLEA SIMILAR TO THE ONE TAKEN BY LEARNED COUNSEL FOR THE REVENUE WAS RAISED BEFORE THE KERALA HIGH COURT IN CIT V. CHANDRIKA ED UCATIONAL TRUST [1994] 207 ITR 108. THERE ALSO IT WAS PLEADED THAT THE EXPRESSION CONTINUED TO REMAIN QUALIFIES THE EXPRESSION IN ANY CONCERN WHETHER IT WAS AN I NVESTMENT OR NOT. THE PLEA WAS REJECTED BY THE KERALA HIGH COURT. IT WAS OBSER VED THAT IT WOULD BE DOING VIOLENCE TO THE PLAIN LANGUAGE OF THE PROVISION. SE CTION 13(2)(H) REQUIRES THAT THE FUNDS OF THE TRUST ARE, OR CONTINUE TO REMAIN INVES TED IN ANY CONCERN OF THE NATURE MENTIONED THEREIN. (UNDERLINED FOR EMPHASIS). 27. IN THE CASE OF DIT (EXEMPTION) VS. ALARIPPU, 24 4 ITR 358, IT IS HELD AS FOLLOWS: THE EXPRESSIONS USED IN BOTH THE PROVISIONS QUOTED ABOVE, ARE INVESTMENT AND DEPOSIT. THE FORMER EXPRESSION MEANS TO LAY OUT M ONEY IN BUSINESS WITH A VIEW TO OBTAIN AN INCOME OR PROFIT. DEPOSIT, ON THE OTHE R HAND, MEANS THAT WHICH IS PLACED ANYWHERE, AS IN ANY ONES HANDS FOR SAFE-KE EPING, SOMETHING ENTRUSTED TO THE CARE OF ANOTHER. THESE TWO EXPRESSIONS HAVE BEE N USED IN A COGNATE SENSE AND HAVE TO BE UNDERSTOOD AS SUCH. IN ORDER TO CONS TITUTE 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 I NTENTION AND POSITIVE ACT ON THE PART OF THE INVESTOR SHOULD BE TO EARN SUCH INCOME, RETURNS, PROFIT IN ORDER TO 14 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 CONSTITUTE AN INVESTMENT, THE MONIES SHALL BE LAID OUT IN SUCH A MANNER AS TO ACQUIRE SOME SPECIES OF PROPERTY WHICH WOULD BRING IN AN INCOME TO THE INVESTOR. A LOAN, ON THE OTHER HAND, IS GRANTING TEMPORARY D EPOSIT AND LOAN ARE CERTAINLY DIFFERENT. SECTION 11(5) REFERS TO PATTERN OF INVES TMENT BY THE ASSESSEE. SECTION 11(5) WAS INTRODUCED BY THE FINANCE ACT, 1983, WITH EFFECT FROM APRIL 1, 1983, I.E., FOR AND FROM ASSESSMENT YEAR 1983-84. IT PRESCRIBES THE FORMS AND MODES OF INVESTING AND DEPOSITING MONEY REFERRED T IN SECTIO N 11(2)(B). SUBSEQUENTLY, NEW FORMS AND MODES HAVE BEEN ADDED. SECTION 13(1)(D) A S AMENDED BY THE FINANCE ACT, 1983, PROVIDES THAT THE INCOME OF ANY CHARITAB LE OR RELIGIOUS TRUST OR INSTITUTION WILL NOT BE ENTITLED TO EXEMPTION UNDER SECTION 11 AND 12, IF CERTAIN CONDITIONS STIPULATED THEREIN ARE NOT COMPLIED WITH . THE WORD DEPOSIT DOES NOT COVER TRANSACTION OF LOAN WHICH CAN BE MORE APPROPR IATELY 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 F ULFILLMENT OF CERTAIN CONDITIONS. IN THE COMMERCIAL SENSE, THE TERM IS US ED TO INDICATE THE AFORESAID TRANSACTION AS DEPOSIT OF MONEY FOR EMPLOYMENT, IN BUSINESS, DEPOSITS FOR VALUE TO INITIATE SECURITY FOR DEPOSIT OF TITLE DEEDS, SIMIL AR DOCUMENTS AS SECURITY FOR LOAN, DEPOSIT OF MONEY BILLS IN A BANK IN THE ORDINARY CO URSE OF BUSINESS OF CURRENT ACCOUNT AND DEPOSITS OF A SUM AT INTEREST AT A FIXE D DEPOSIT IN A BANK. THE AMOUNT GIVEN TO MAHILA HAAT WAS NEITHER FOR THE PURPOSE OF INVESTMENT NOR FOR DEPOSIT, MORE PARTICULARLY IN THE FACTUAL BACKGROUND AS HIGH LIGHTED ABOVE. THE TRANSACTION WITH WHICH THE PRESENT DISPUTE IS LINKED CANNOT BE TREATED AS AN INVESTMENT OR DEPOSIT AS HAS BEEN FACTUALLY FOUND BY 38 THE TRIBU NAL. THE CONCLUSION BEING ESSENTIALLY FACTUAL, NO QUESTION OF LAW ARISES OUT OF THE ORDER OF THE TRIBUNAL. ACCORDINGLY, THE PETITION IS DISMISSED. 28. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF IN COME TAX OFFICER VS. DR. VIKHE PATEL FOUNDATION (SUPRA) HELD AS FOLLOWS: IT IS WELL SETTLED THAT THE DEPICTION IN BOOKS OF ACCOUNTS IS NOT A DETERMINATIVE TEST BUT THE FACTUAL NATURE OF THE TRANSACTION WHIC H HAS TO BE CONSIDERED FOR THE PURPOSE OF TAXATION. IN THIS CASE, THE INVESTMENT IN THE SHARES OF COOPERATIVE BANK WAS A PRE CONDITION FOR RAISING LOANS AND IT W AS THEREFORE NOT AN INVESTMENT AS NORMALLY UNDERSTOOD. THE TRIBUNAL HAS RECORDED A FINDING OF FACT THAT THE SHARES WAS SUBSCRIBED ONLY FOR PURPOSES OF OBTAININ G THE LOAN AND THE AMOUNTS SO OBTAINED WERE USED FOR FURTHERANCE OF THE OBJECTS O F THE TRUST. THERE IS NO DISPUTE ABOUT THE FACTS THAT LOANS TAKEN FROM THE SAID TWO COOPERATIVE BANKS WERE NOT COMPLETELY REPAID IN THE ASSESSMENT YEAR 2008-09 AN D, THEREFORE, THE ASSESSEE WOULD BE REQUIRED TO HOLD SHARES TO CONTINUE AS MEM BER OF THE COOPERATIVE SOCIETY RUNNING THE BANKING BUSINESS. 29. THE `C BENCH OF THE ITAT DELHI IN THE CASE OF ADIT (EXEMPTION) VS. INDIA FRINGE CENTRE FOR THE PROMOTION OF ADVANCED RESEARCH ITA NO.3065 AND 6164 DELHI 2012 ASSESSMENT YEARS 2008- 09 AND 2009-10 HELD AS FOLLOWS: 15 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 THE EXPRESSION INVESTMENT IMPLIES TO LAY OUT MON EY IN BUSINESS WITH A VIEW TO OBTAIN INCOME ON PROFIT. THE TERM DEPOSIT INDICAT ES THE TRANSACTION AS DEPOSIT OF MONEY FOR EMPLOYMENT IN BUSINESS, DEPOSIT OF TITLE DEEDS SIMILAR DOCUMENT AS SECURITY FOR LOAN, DEPOSIT OF MONEY IN A BANK IN TH E ORDINARY COURSE OF BUSINESS OF CURRENT ACCOUNT AND TO DEPOSIT A SUM OF INTEREST AT A FIXED DEPOSIT IN A BANK. THUS, BOTH INVESTMENT AND DEPOSIT REQUIRE A POS ITIVE ACT ON THE PART OF THE ASSESSEE WITH AN INTENTION TO EARN INCOME/INTEREST. 30. THE MADRAS `C BENCH OF THE TRIBUNAL IN ITA NO. 1445/MADRAS/2012 IN THE CASE OF M/S. SETHU VALLIAMMAL EDUCATIONAL TRUST (SUPRA) ORDER DATED 10 .1.2013 AT PARA 8 AND 9 HELD AS FOLLOWS: 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE THAT ASSESSEE HAD, DURING THE RELEVANT PREV IOUS YEAR, SUBSCRIBED TO TWO CHITS, ONE CONDUCTED BY M/S TERN CREDITS & CHITS PR IVATE LIMITED AND THE OTHER BY M/S K.R. PALANIAPPAN (CHIT). LEARNED D.R. HAS ALSO NOT DISPUTED THE AVERMENT THAT BOTH THESE WERE REGISTERED CHIT FUNDS, RUNNING CHIT S. ASSESSEE HAD PLACED MONEY WITH THESE CHIT COMPANIES BY WAY OF SUBSCRIPTIONS. THE AMOUNTS WERE PAID ON A MONTHLY BASIS TO THE TWO CHIT COMPANIES. THIS IS CL EAR FROM PAPER-BOOK PAGES 14 TO 17, WHICH ARE COPIES OF RELEVANT LEDGER FOLIOS I N THE BOOKS OF THE ASSESSEE. THE TOTAL AMOUNT PLACED BY THE ASSESSEE, DURING THE REL EVANT PREVIOUS YEAR, WITH M/S TERN CREDITS & CHITS PRIVATE LIMITED WAS RS.2,08,45 6/- AND WITH M/S K.R. PALANIAPPAN (CHIT) WAS RS.96,230/-. THE ANNUAL INCO ME OF THE TRUST CAME TO RS.7,35,19,954/- AGAINST WHICH, UTILIZATION FOR CHA RITABLE PURPOSE CAME TO RS. 6,98,07,198/-, WHICH WAS WELL ABOVE THE LIMIT OF 85 % PRESCRIBED UNDER SECTION 11(1)(A) OF THE ACT. AS PER THE ASSESSEE, SUBSCRIPT IONS PAID TO CHIT FUNDS WERE NOT DEPOSITS NOR INVESTMENTS AND IT COULD NOT HAVE BEEN A REASON FOR DENYING IT THE EXEMPTION CLAIMED UNDER SECTION 11 OF THE ACT. SUBS CRIPTION PAID BY A SUBSCRIBER OF A CHIT TO A CHIT COMPANY ACTING AS THE FOREMAN O F THE CHIT, IN OUR OPINION, CANNOT BE CONSIDERED AS AN INVESTMENT. SUBSCRIBING TO A CHIT FUND IS NOT WITH AN INTENTION TO EARN INTEREST OR DIVIDEND. THE ONLY IN TENTION IS TO PRIZE THE CHITS EITHER BY COMPETITIVE BIDDING OR WHEN LOTS ARE DRAWN. IF T HERE WAS NO BIDDING DONE IN A GIVEN MONTH, THERE WILL BE NO INCOME WHATSOEVER DER IVED. THE INCOME THAT CAN BE DERIVED WAS ONLY THE AMOUNT FORGONE BY THE BIDDERS IN AN AUCTION. THUS A CHIT FUND IS PRIMARILY INTENDED TO OPERATE AS A SCHEME F OR ADVANCING LOANS FROM A COMMON FUND CREATED BY THE SUBSCRIBERS, AND THEIR T URN FOR GETTING SUCH LOAN IS DECIDED EITHER BY AUCTION OR BY DRAWING LOTS. THE N ATURE OF CHIT AS AFORESAID HAS BEEN VIVIDLY DESCRIBED IN THE JUDGMENT OF KERALA HI GH COURT IN THE CASE OF KOTTAYAM CO-OPERATIVE BANK LTD. (SUPRA). 9. AMRITSAR BENCH OF THIS TRIBUNAL IN THE CASE OF O NKAR CAPITAL GROWTH (P) LTD. (SUPRA) HAS CLEARLY HELD THAT THE SUBSCRIBERS TO A CHIT FUND WERE ENTITLED ONLY FOR PRIZING THE CHITS AND THE MONEY PLACED BY A SUBSCRI BER TO A CHIT FUND COULD NOT BE EQUATED WITH DEPOSITS. THE FOREMAN OF A CHIT FUND I S ONLY ACTING AS A CONDUIT FOR THE SUBSCRIBERS TO POOL THEIR MONEY EVERY MONTH FOR THE BENEFIT OF ONE OF THEM. CHIT FUNDS ACT, 1982 REQUIRES THE CONCERN RUNNING A CHIT TO A SUBSCRIBER OF THE CHIT ALSO. WE CANNOT SAY THAT PERSONS, WHO ARE SUBSCRIBE RS TO A CHIT, ARE MAKING ANY 16 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 INVESTMENT IN THE CONCERN RUNNING THE CHIT FUND. WE CANNOT SAY THAT SUBSCRIBER TO A CHIT FUND IS PLACING ANY DEPOSIT IN THE CONCERN R UNNING THE CHIT FUND. POOLING OF MONEY BY A GROUP OF PERSONS FOR THE BENEFIT OF ONE OF THEM, THROUGH CHITS, CANNOT BE EQUATED WITH INVESTMENTS OR DEPOSITS. THEREAFTER IT HELD AS FOLLOWS: IT IS CLEAR FROM THE ABOVE CONSEQUENCE THAT THE I NTENTION OF LEGISLATURE IS TO REGULATE THE MANNER OF INVESTMENT OF THE MONEY LEFT WITH THE ASSESSEE TRUST AFTER UTILIZATION FOR CHARITABLE PURPOSE. 11. THEREFORE, IN OUR OPINION, THE LOWER AUTHORITIE S FELL IN ERROR IN CONCLUDING THAT SUCH SUBSCRIPTIONS WERE INVESTMENTS WHICH VIOLATED THE MODES SPECIFIED UNDER SECTION 11(5) OF THE ACT. THE QUESTION OF DENIAL OF EXEMPTION UNDER SECTION 11 WOULD ARISE ONLY IF INVESTMENTS WERE THERE. WE ARE, THEREFORE, OF THE OPINION THAT ASSESSEE COULD NOT HAVE BEEN DENIED EXEMPTION CLAIM ED BY IT UNDER SECTION 11OF THE ACT, FOR A REASON THAT IT HAD SUBSCRIBED TO THE CHIT FUNDS. THERE IS NO CASE FOR THE REVENUE THAT ANY OF THE TRUSTEES, MANAGERS, CON TRIBUTORS OF RELATIVES OF SUCH PERSONS WERE HAVING INTEREST IN THE TWO CHIT COMPAN IES. WE ARE, THEREFORE, OF THE OPINION THAT ASSESSEE WAS ELIGIBLE FOR EXEMPTION UN DER SECTION 11 OF THE ACT AND ITS CLAIM WAS DENIED UNJUSTLY. WE, THEREFORE, SET A SIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE A.O. TO GRANT THE ASSESSEE ITS CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT FOR THE IMPUGNED ASSESSMENT Y EAR. 31. THE KOLKATA HIGH COURT IN THE CASE OF CIT VS. B IRLA CHARITY TRUST (1988) 170 ITR 150, GUJARAT HIGH COURT IN CIT VS. INSANIYAT TRUST (1988 ) 173 ITR 248 AND THE BOMBAY HIGH COURT IN TRUSTEES OF MANGALDAS N. VERMA CHARITABLE TRUST VS. CIT 203 ITR 322 HAVE TAKEN A VIEW THAT THE TERM FUNDS MEANS MONEY OR C ASH AND THE TERM INVEST CONNOTES A POSITIVE ACT ON THE PART OF THE TRUST WHEREBY THE F UNDS OF THE TRUST ARE LAID OUT OR COMMITTED IN ANY PARTICULAR PROPERTY OR BUSINESS OR TRANSACTION WITH A VIEW OF EARNING A PROFIT OR FINANCIAL ADDITION OR RETURN. THE COURTS THEREFORE HELD THAT SECTION 13(2)(H) DID NOT APPLY TO ASSETS RECEIVED AS A DONATION SINCE NO FUNDS WERE INVESTED. IN OUR VIEW THIS PROPOSITION, THOUGH GIVEN IN A CONTEXT OF SECT ION 13(2)(H) WOULD EQUALLY APPLY TO SECTION 13(1)(D) OF THE ACT AS THE LANGUAGE AND PUR POSE OF THE SECTIONS ARE THE SAME. 32. WE NOW CONSIDER THE FACTS OF THIS CASE. A PERUS AL OF THE ORDER OF THE FIRST APPELLATE AUTHORITY REVEALS THAT THERE IS NO DISPUTE ON THE L EGAL PRINCIPLE THAT, IF THE CHIT FUND CONTRIBUTION IN QUESTION IS NOT MADE AS AN INVESTME NT, THEN THE PROVISIONS OF SECTION 13(1)(D) ARE NOT ATTRACTED. IN OTHER WORDS, IT IS A N ACCEPTED POSITION THAT SEC 13(1)(D) IS ATTRACTED ONLY IF, ON THE FACTS AND CIRCUMSTANCES O F THE CASE, THE CONTRIBUTION TO CHIT IS HELD TO BE AN INVESTMENT. THE LEARNED CIT(DR) PLACE D RELIANCE IN THE CASE OF PRIYADARSHINI EDUCATIONAL ACADEMY VS. DGIT (SUPRA) . HONBLE A.P. HIGH COURT IN THAT CASE WAS CONSIDERING, IN A WRIT PETITION, A CASE WH ERE EXEMPTION WAS DENIED U/S 10(23C)(VI) OF THE ACT. THE ARGUMENT OF THE LD. COU NSEL IN THIS CASE ARE AT PARA 4. THESE ARE EXTRACTED FOR READY REFERENCE: 17 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 THE SURPLUS INCOME, IF ANY, AND ALL THEIR FUNDS ST OOD INVESTED IN ACQUISITION OF ASSETS, AND IN THE MODES AND FORMS SPECIFIED IN SEC TION 11(5), FOR THE ASSESSMENT YEAR 2008-09, I.E., THE YEAR FOR WHICH APPROVAL WAS SOUGHT; THE LEGAL INFIRMITY, ON THE BASIS OF WHICH EXEMPTION WAS DENIED TO THE SOCI ETY IN THE PAST ASSESSMENT YEARS, WAS BECAUSE OF ITS CONTRIBUTION TO A CHIT FU ND SCHEME WHICH WAS CONSIDERED BY THE ASSESSING OFFICER AS A CONTRAVENTION OF SECT ION 13(1)(D) OF THE ACT; THE SAID INFIRMITY DID NOT EXIST IN THE ASSESSMENT YEAR 2008 -09 INASMUCH AS THE INSTALLMENT HAD BEEN FULLY PAID IN THE EARLIER YEAR ITSELF; IN THE FINANCIAL YEAR, RELEVANT TO THE ASSESSMENT YEAR 2008-09, ALL THE PETITIONERS FUNDS STOOD INVESTED IN THE FORMS APPROVED UNDER SECTION 11(5) OF THE ACT. 33. THE HONBLE HIGH COURT AT PARA 8 & 9 HELD AS FO LLOWS: 8. THE THIRD PROVISO TO SECTION 10(23C) OF THE ACT REQUIRES THE EDUCATIONAL INSTITUTION, REFERRED TO IN SUB-CLAUSE (VI), NOT TO INVEST OR DEPOSIT ITS FUNDS, FOR ANY PERIOD DURING THE PREVIOUS YEAR, OTHERWISE THAN IN ANY ONE OR MORE OF THE FORMS OR MODES SPECIFIED IN SECTION 11(5) OF THE ACT. SECTIO N 11(5) PRESCRIBES THE FORMS AND MODES OF INVESTING OR DEPOSITING MONEY AS THOSE SPE CIFIED IN CLAUSES (I) TO (XII) THEREUNDER. INVESTMENT/DEPOSIT IN A CHIT FUND IS NO T ONE OF THE MODES OF INVESTMENT OR DEPOSIT OF MONEY REFERRED TO IN CLAUS ES (I) TO (XII) OF SECTION 11(5) OF THE ACT. AS SECTION 10(23C)(VI) OF THE ACT REQUIRES THE INCOME RECEIVED BY ANY PERSON, ON BEHALF OF THE EDUCATIONAL INSTITUTION EX ISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PROFIT, TO BE EXCLUDED WHILE C OMPUTING THE TOTAL INCOME OF THE PREVIOUS YEAR OF SUCH A PERSON, THE THIRD PROVI SO THERETO STIPULATES THAT THE INVESTMENT OR DEPOSIT OF FUNDS OF THE EDUCATIONAL INSTITUTION, OTHERWISE THAN IN ANY ONE OF THE FORMS OR MODES SPECIFIED IN SECTION 11(5), FOR ANY PERIOD DURING THE PREVIOU S YEAR, WOULD RESULT IN DENIAL OF THE BENEFIT OF EXCLUSION OF SUCH INCOME FROM THE TO TAL INCOME OF THE PREVIOUS YEAR OF THE SAID PERSON. EVEN IN CASES WHERE APPROVAL WA S GRANTED EARLIER UNDER SECTION 10(23Q(VI) OF THE ACT, FAILURE OF THE SOCIE TY (EDUCATIONAL AGENCY) TO INVEST IN THE MODES AND FORMS SPECIFIED IN SECTION 11(5) O F THE ACT WOULD DISENTITLE THEM FROM CLAIMING THE BENEFIT OF EXCLUSION OF THE INCOM E, RECEIVED ON BEHALF OF AN EDUCATIONAL INSTITUTION, FROM THEIR TOTAL INCOME FO R THE PREVIOUS YEAR. IN CASES WHERE INITIAL APPROVAL, OR EXTENSION OF THE APPROVA L GRANTED EARLIER, IS SOUGHT, THE PRESCRIBED AUTHORITY WOULD BE ENTITLED TO EXAMINE T HE ANNUAL ACCOUNTS OF THE APPLICANT-SOCIETY FOR THE PREVIOUS THREE YEARS TO A SCERTAIN WHETHER INVESTMENT/DEPOSITS MADE IN ANY OF THE PREVIOUS THR EE YEARS ARE IN THE FORMS AND MODES OTHER THAN THOSE SPECIFIED IN SECTION 1.1(5) OF THE ACT. IT IS ONLY IF THE PRESCRIBED AUTHORITY IS SATISFIED THAT THE APPLICAN T HAS APPLIED ITS INCOME EXCLUSIVELY FOR THE PURPOSE OF EDUCATION, AND HAS A DHERED TO THE MODES SPECIFIED IN SECTION 11(5) OF THE ACT, THAT HE WOULD GRANT AP PROVAL, OR RENEW THE APPROVAL GRANTED EARLIER, UNDER SECTION 10(23C)(VI) OF THE A CT. 18 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 9. ACCEPTING THE SUBMISSION OF THE LEARNED COUNSEL FOR THE PETITIONER THAT, SINCE THE PETITIONER'S INVESTMENT IN A CHIT FUND, (WHICH IS NOT ONE OF THE MODES AND FORMS SPECIFIED IN SECTION 11(5) OF THE ACT), WAS I N THE ASSESSMENT YEAR 2007-08, PRIOR TO THE ASSESSMENT YEAR 2008-09 FOR WHICH APPR OVAL WAS SOUGHT, SUCH INVESTMENT OR DEPOSIT CANNOT RESULT IN DENIAL OF GR ANT OF EXEMPTION, WOULD RENDER THE REQUIREMENT OF FURNISHING THE AUDITED ANNUAL AC COUNTS FOR THE PREVIOUS THREE YEARS, AS STIPULATED IN FORM 56D, WHOLLY UNNECESSAR Y. A LOGICAL COROLLARY OF THE AFORESAID SUBMISSION WOULD BE THAT ONLY THE INCOME OF THE PREVIOUS FINANCIAL YEAR, RELEVANT TO THE ASSESSMENT YEAR IN QUESTION, WOULD BE REQUIRED TO BE EXAMINED BY THE PRESCRIBED AUTHORITY, AND NOT THE TWO PREVIOUS YEARS PRIOR THERETO. 34. ON PERUSAL OF THE ABOVE JUDGMENT, IT IS CLEAR T HAT, THE ISSUE WHETHER THE CONTRIBUTION MADE BY THE ASESSEE TO A CHIT FUND AS AN INDIVIDUAL SUBSCRIBER, EITHER ON THE FACTS OF THE CASE, OR UNDER THE SCHEME OF THE CHIT FUND ACT, CAN BE CONSIDERED AS AN INVESTMENT OR NOT, OR WHETHER SUCH CONTRIBUTION WAS A DEPOSIT OR NOT, WAS NOT THE ISSUE BEFORE THE HONBLE HIGH COURT. THE ISSUE AS TO WHETHER THE CONTRIBUTIO N TO THE CHIT FUND IS AN INVESTMENT/DEPOSIT WAS NOT CONTESTED BY THE PARTIES . HENCE, THIS JUDGEMENT OF THE JURISDICTIONAL HIGH COURT CANNOT BE APPLIED TO THE CASE ON HAND WHERE THE ISSUE IS WHETHER A CONTRIBUTION TO A CHIT BY AN INDIVIDUAL SUBSCRIBE R CAN BE CONSIDERED AN INVESTMENT OR A DEPOSIT AS CONTEMPLATED U/S 13(1)(D) R.W.S. SEC 11( 5) OF THE ACT. THE VARIOUS JUDGMENTS OF THE HONBLE SUPREME COURT AND THE HIGH COURTS AS WELL AS THE TRIBUNAL CLEARLY LAY DOWN THAT CONTRIBUTION TO A CHIT FUND BY AN INDIVIDUAL S UBSCRIBER IS GOVERNED BY THE PRINCIPAL OF MUTUALITY AND HENCE IT IS NEITHER AN INVESTMENT NOR A DEPOSIT. 35. EVEN OTHERWISE, IN THE CASE OF THE ASSESSEE, T HE UNDISPUTED FACT IS THAT ASSESSEE REQUIRES MONEY FOR ITS EXPANSION. THIS FACT IS NOT DISPUTED BY THE LD. CIT(DR). IT IS ALSO CLEAR THAT THE ASSESSEE SOCIETIES HAVE TAKEN HUGE L OANS FROM VARIOUS BANKS, FOR UNDERTAKING EXPANSION AND TO CREATE INFRASTRUCTURE. THESE LOANS WERE TAKEN BY THE SOCIETIES AS THEY DID NOT HAVE SURPLUS FUNDS TO UND ERTAKE EXPANSION AND CREATE INFRASTRUCTURE. ON THE BASIS OF THESE FACTS, WE COM E TO THE CONCLUSION THAT THE CONTRIBUTION MADE BY THE ASSESSEES TO A CHIT, IS NOT A POSITIVE ACT TO LAY OUT MONEY FOR BUSINESS, WITH A VIEW TO OBTAIN AN INCOME OR PROFIT. IT IS NOT AN IN VESTMENT, AS THE AMOUNT LAID OUT IS NOT A POSITIVE ACT ON THE PART OF THE ASSESSEES TO EARN A NY RETURNS, PROFIT OR INCOME. THE MONEY HAS NOT BEEN LAID OUT IN SUCH A MANNER AS TO ACQUIR E SOME SPECIES OF PROPERTY WHICH WOULD YIELD INCOME FOR THE ASSESSEE. 36. IN THIS CASE, CONTRIBUTION TO THE CHIT FUND WA S MADE TO ENABLE THE ASSESSEE SOCIETY TO RAISE FUNDS FOR EXPANSION. THIS IS CLEAR FROM FU NDS FLOW STATEMENT AND THE PROJECTED INVESTMENT REQUIRED BY THE ASSESSEE. WHEN THE ASSES SEE IS PAYING HUGE AMOUNT OF INTEREST TO VARIOUS BANKS, IT IS WRONG TO CONCLUDE THAT ASSESSEE HAS WITH AN INTENTION TO EARN PROFIT OR INCOME MADE A CONTRIBUTION TO THE CH IT FUND. 19 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 37. THE ALLEGATION OF REVENUE THAT THE ASSESSEE HA S NOT WITHDRAWN THE CHIT AMOUNT HAS BEEN ANSWERED BY THE ASSESSEE, BY POINTING OUT THAT, EVERY MONTH THE WINNER OF THE CHIT IS DETERMINED BY DRAW OF LOTS AND ASSESSEE SOC IETY WAS NOT LUCKY TO WIN THE DRAW ON EACH OF THE OCCASION. THE ALLEGATION THAT THE ASSES SEE HAS SURPLUS FUND, KEPT AS DEPOSITS, IS ALSO WRONG, FOR THE REASON THAT THESE FIXED DEPO SITS WERE JOINTLY HELD IN THE NAME OF THE ASSESSEE AND THE GOVERNMENTAL AUTHORITY, AS IS WAS COMPULSORY AS PER RULES, FOR GRANT OF PERMISSION TO RUN EDUCATIONAL INSTITUTION. THUS, FO R ALL THESE REASONS, WE UPHOLD THE CONTENTION OF THE ASSESSEE THAT THE CONTRIBUTION TO CHIT, IN THE CASES ON HAND, IS NOT AN INVESTMENT NOR A DEPOSIT AND HENCE SECTION 13(1)(D) OF THE ACT IS NOT ATTRACTED. 38. THE TERM FUND USED IN SECTION 13(1)(D) OF TH E ACT, IN OUR OPINION, HAS TO BE R.W.S. 11(5) OF THE ACT. UNDER SECTION 11(5), THE W ORDING IS FORMS AND MODES OF INVESTING AND DEPOSITING THE MONEY REFERRED TO IN CLAUSE (B) OF SUB-SECTION (2) IS AS FOLLOWS: SEC.11 (2) (B) READS AS FOLLOWS: THE MONEY SO ACCUMULATED OR SET APART IS INVESTED OR DEPOSITED IN THE FORMS OR MODES SPECIFIED IN SUB-SECTION (5). 39. THUS THE REQUIREMENT OF INVESTING OR DEPOSITIN G, U/S 11(5) OF THE ACT IS CONFINED TO MONEY IN HAND OR CASH. WHEN THE ENTIRE INCOME OF TH E YEAR HAS ALREADY BEEN SPENT TOWARDS THE OBJECTS OF THE SOCIETY, THERE CANNOT BE SAID TO BE ANY FUNDS REMAINING OUT OF THE FUNDS RECEIVED BY WAY OF INCOME. A PERSON CAN I NVEST ONLY THE MONEY WHICH IS IN HIS HANDS. IF THE ENTIRE MONEY IN HAND IS ALREADY SPENT FOR A PARTICULAR PURPOSE THEN THE QUESTION OF SPENDING THE SAME AMOUNT FOR ANOTHER PU RPOSE AS WELL DOES NOT ARISE. THUS THE INTERPRETATION OF THE TERM ANY FUNDS BY THE H ONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SRI SRIRAM FOUNDATION 250 ITR 55, THOUGH MA DE IN THE CONTEXT OF SECTION 13(2)(H), IS ON ALL FOURS APPLICABLE, WHILE INTERPRETING SECT ION 13(1)(D) OF THE ACT. EVEN THE CBDT CIRCULAR NO.335 DT.13.4.1982 EXPLAINS THE SAME POSI TION. THE EXAMPLE GIVEN THEREIN CLEARLY EXPLAINS THAT IN A CASE WHERE THE TRUST DERIVES INC OME OF RS.40,000 IN A YEAR, AS PER S.11(1)(A) IT HAS TO SPEND AT LEAST RS.30,000 ON CH ARITABLE PURPOSE AND THE BALANCE OF RS.10,000 WILL HAVE TO BE INVESTED IN THE FORMS OR MODES PRESCRIBED U/S 13(5)(NOW S.11(5)). THEREFORE, IN A CASE WHERE THE ENTIRE INC OME OF RS.40,000 IS SPENT FOR CHARITABLE PURPOSES EXEMPTION U/S 11(1)(A) HAS TO BE GRANTED A ND THERE IS NO NEED TO FURTHER EXAMINE WHETHER ANY INVESTMENTS WERE MADE IN VIOLAT ION OF S.11(5) OF THE ACT IN AS MUCH AS THE TRUST IS LEFT WITH NO MORE FUNDS OUT OF THE INCOME OF RS.40,000 RECEIVED. IN THE CASE OF BOTH THE ASSESSEES, AS PER THE CHARTS SUBMITTED BY THE ASSESSEES IT IS EVIDENT THAT THEY HAVE INCURRED DEFICIT IN EVERY YEAR AND THUS ENTIRE INCOME OF EACH ASSESSMENT YEAR WAS FULLY SPENT TOWARDS THE CHARITABLE OBJECTS. 40. AS WE HAVE HELD THAT CONTRIBUTION TO CHIT FUND IN THIS CASE, IS NOT AN INVESTMENT, AND MUCH LESS AN INVESTMENT WITH SOMEONE ELSE, AND FURT HER THAT THE PROVISIONS OF S.11(1)(A) HAVE BEEN COMPLIED BY INVESTING THE ENTIRE INCOME O F THE YEAR TOWARDS CHARITABLE 20 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 PURPOSES, WE CONCLUDE THAT THERE IS NO VIOLATION OF SECTION 13(1)(D) R.W.S. 11(5) OF THE ACT. CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINATE B ENCH ON THE ABOVE ISSUE, WE HOLD THAT PARTICIPATION IN CHIT FUND BY THE ASSESSE E DOES NOT VIOLATE SECTION 13(1)(D) R.W.S 11(5) OF THE ACT. HENCE, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. II) AS REGARDS VIOLATION OF PROVISIONS OF SECTION 1 3(2)(G) AND 13(2)(H) OF THE ACT, THE ASSESSING OFFICER AT PAGE 3 NOTED THE ALLEGED VIOLA TION AS FOLLOWS: SRI M .V .HARANADHA BABU DATE DR. CR. 13 - 10 - 2007 5,00,000 19 12 2007 5,00,000 27 - 02 - 2008 10,00,000 . _ _ 10,00,000 10,00,000 SRI P. KRISHNA RAP DATE DR. CR. 18 - 07 - 2007 25,00,000 31 - 07 - 2007 21,00,000 19 - 11 - 2007 46,00,000 46,00,000 46,00,000 BESIDES, THE ABOVE TWO MEMBERS AND ALSO OTHER MEMBE R, SMT. P. MALATHI HAVE ALSO WITHDREW THE FOLLOWING AMOUNTS DURING THE FINANCIAL YEARS 2008-09 AND 2009-10, THE DETAILS OF WHICH ARE GIVEN AS UNDER; SRI M. V. HARANADHA BABU DATE DR. CR. 26 - 05 - 2008 2,00,000 03 - 06 - 2008 17 - 12-2008 22-12- 2008 2,00,000 2,00,000 21 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 30,00,000 30,00,000 32,00,000 32,00,000 SRI P. KRISHNA RAO DATE DR. CR. 23 - 09 - 2008 30,00,000 31 - 03 - 2009 30,00,000 ! 30,00,000 30,00,000 SRI P. KRISHNA RAO DATE DR. CR. 17 - 04 - 2009 10,00,000 ......._ 10,00,000 30 - 05 - 2009 10,00,000 10,00,000 20,00,000 20,00,000 SMT. P. MALATHI DATE DR. CR. 31 - 10 - 2009 10,00,000 15 - 03 - 2010 10,00,000 10,00,000 10,00,000 SIMILARLY, AT PAGES 5 & 6 OF THE ASSESSMENT ORDER, THE ALLEGED VIOLATIONS ARE NOTED AS FOLLOWS: 22 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 DEBIT (RS.) CREDIT(RS.) RS. 20 - DEC - 07 THROUGH CH.NO.21189 40,00,000 - 40,00,000 20 - DEC - 07 THROUGH CH.NO.693053 1,40,00,000 - 1,80,00,000 24 - DEC - 07 THROUGH CH.NO.301063 - 40,00,000 1,40,00,000 24 - DEC - 07 BEING AMOUNT TRD 10,00,000 1,30,00,000 24 - DEC - 07 THROUGH A/C NO.30134205991 10,00,000 - 1,40,00,000 24 - DEC - 07 THROUGH CH.NO.989154 25,00,000 - 1,65,00,000 24 - DEC - 07 THROUGH CH.NO.301054 1,40,00,000 25,00,000 24 - DEC - 07 THROUGH CH.NO.301065 25,00,000 0 3 - MAR - 08 THROUGH CH.NO.693213 50,00,000 - 50,00,000 8 - MAR - 08 THROUGH CH.NO.989155 25,00,000 75,00,000 8 - MAR - 08 THROUGH CH.NO.015123 10,00,000 85,00,000 8 - MAR - 08 THROUGH CH.NO.693116 50,00,000 1,35,00,000 15 - MAR - 08 THROUGH CH.NO.301070 10,00,000 1,25,00,000 15 - MAR - 08 THROUGH CH.NO.301011 25,00,000 1,00,00,000 8. ON PERUSAL OF DATES GIVEN IN THE ABOVE EXTRACTED STATEMENTS DEMONSTRATE THAT NONE OF THE TRANSACTION IN QUESTION PERTAINS TO ASSESSMENT YEARS 2004-05, 2005-06 AND 2006-07. THE EXEMPTION UNDER THE PROVISIONS OF SECTION 11 CANNOT BE DENIED TO THE ASSESSEE FOR CERTAIN ACTS WHICH ARE DONE SUBSEQUENT TO THESE IMPUGNED ASSESSM ENT YEARS. THERE IS NO FINDING THAT THERE IS ANY VIOLATION OF SECTION 13(2)(D) OR SECTION 13( 2)(4) DURING THE YEAR. THUS, WE ARE OF THE CONSIDERED OPINION THAT THE ARGUMENTS OF THE ASSESS EE HAVE TO BE ACCEPTED AND THE APPEALS OF THE ASSESSEE ALLOWED. THE AO IS HEREBY DIRECTED TO GRANT THE EXEMPTION TO THE ASSESSEE U/S.11 OF THE ACT FOR ALL THE IMPUGNED ASSESSMENT YEARS UN DER CONSIDERATION. 9. IN THE RESULT, APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/12/2 014 . SD/- SD/- (D.MANMOHAN ) (J.SUDHAKAR REDDY) VICE PRESIDENT ACCOUNTANT MEMBER VISHAKHAPATNAM DATED 03/ 12/2014 23 I.T.A. NOS. 311& 312/VIZ/2013 ASSESSMENT YEARS:2005-06 & 2006-07 I.T.A. NO.19/VIZ/2014: ASSESSMENT YEAR: 2004-05 PARIDA , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE : GAYATRI EDUCATIONAL SOCIETY, D.NO.2 - 24 - 4/2, JANMABHOOMI PARK ROAD, SRINAGAR, KAKINADA 2. THE RESPONDENT. : ITO, WARD - 2, KAKINADA 3. THE CIT(A) - VISAKHAPATNAM 4. CIT , VISAKHAPATNAM 5. DR, ITAT, VISHAKHAPATNAM 6. GUARD FILE. BY ORDER SR.PS, ITAT, VISHAKHAPATNAM //TRUE COPY//