M/s. Make The Future of Country Educational Society, Rohtak V. ITO (E), Rohtak

ITA 3401/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6916 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 3
• Next Hearing Date: 24-11-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 09-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PIYUSH K KAMAL
• Keywords: Gift; Charitable institution; Maximum Marginal Rate; Question of law; Capital receipt; Benefit of exemption
• Section: 143(3); 142(1); 234B; 80G; 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-3, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 3401/DEL/2016 A.Y. : 2012-13 M/S MAKE THE FUTURE OF COUNTRY EDUCATIONAL SOCIETY, 933/32, NEAR BHARTI KANYA SCHOOOL, SHIVAJI COLONY, ROHTAK-124001 (PAN:AAAAI1874M) VS. ITO(EXEMPTION), ROHTAK (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. GAUTAM JAIN, ADV. & SH. PIYUSH K. KAMAL, ADV. DEPARTMENT BY : SH. ANIL SHARMA, SR. DR ORDER PER H.S. SIDHU : JM ASSESSEE HAS FILED THIS APPEAL AGAINST THE IMPUGNED ORDER DATED 4.4.2016 PASSED BY THE LD. CIT(A), ROHTAK RELE VANT TO ASSESSMENT YEAR 2012-13 ON THE FOLLOWING GROUNDS:- THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS ERRED BOTH IN LAW AND ON FACTS IN SUSTAINING THE DENI AL OF EXEMPTION ULS 11 AND 12 OF THE ACT. 1.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS FAILED TO APPRECIATE THAT SECTION 13(1)(D) OF THE ACT HAS NO 2 APPLICATION TO THE FACTS OF THE CASE OF THE APPELLANT SOCIETY AND AS SUCH THE CONCLUSION THAT ADVANCE OF PURCHASE OF LAND COULD NEITHER IN LAW AND NOR IN FACTS BE MADE A BASIS TO UPH OLD THE DENIAL OF EXEMPTION U/S 11 OF THE ACT. 2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS ALSO ERRED BOTH IN LAW AND ON FACTS IN UPHOLDIN G THE ADDITION OF RS. 62,781/- BEING THE SURPLUS WHICH AS A SUM ELIGIBLE FOR EXEMPTIONS ULS 11 OF THE ACT. 3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS ALSO ERRED BOTH IN LAW AND FACTS IN CONFIRMING A N ADDITION OF RS. 3,08,761/- REPRESENTING CORPUS DONATION RECEI VED BY THE APPELLANT AND NOT TAXABLE AS SUCH. 4 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE LEVY OF INTEREST OF RS. 4,01,800/- UNDER SECTION 234B OF THE ACT AND, OF RS. 4,247/- UNDER SECTION 234C OF THE ACT WHICH AR E NOT LEVIABLE ON THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT. IT IS THEREFORE PRAYED THAT IT BE HELD THAT APPELLANT IS ENTITLED TO EXEMPTION U/S 11 AND 12 OF THE ACT AND ADDI TION 3 MADE AND SUSTAINED ALONGWITH INTEREST LEVIED MAY KINDLY BE DELETED AND APPEAL OF THE APPELLANT BE ALLOWED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED ITS RETURN OF INCOME ON 30.9.2012 DECLARING INCOME NIL AND THE SAME WAS PROCESSED U/S. 143(1) OF THE ACT. LATER ON, THE CASE WAS PICKED UP FOR SCRUTINY. NOTICE U/S. 143(2) OF THE I.T. ACT, 19 61 DATED 6.8.2013 WAS ISSUED. FURTHER, STATUTORY NOTICE U/S. 142(1) OF THE I.T.ACT ALONGWITH NOTICE 143(2) OF THE ACT WERE ISSUE D. IN RESPONSE TO THE SAME, ASSESEES AR ATTENDED THE PROCEEDINGS AND FURNISHED THE REQUISITE DETAILS/ INFORMATION AS CALLED FROM TIME T O TIME AS PER THE QUESTIONNAIRE. BOOKS OF ACCOUNTS WERE PRODUCED A ND EXAMINED ON TEST CHECK BASIS BY THE AO. THEREAFTER, THE AO OBS ERVED THAT THE ASSESSEE HAS NOT DEPOSITED ITS EXCESS FUND AS PER T HE MODES SPECIFIED IN SUB-SECTION (5) OF SECTION 11 BUT IT HA S BEEN KEPT WITH SH. MULAKH RAJ DHAMIJA. AS PER THE AO THE ASSESSE E HAS VIOLATED THE PROVISIONS OF SECTION 13(1)(D) OF THE I.T. ACT, 19 61, HENCE, THE ASSESSEE IS NOT ENTITLED FOR THE EXEMPTION U/S. 11 OF THE I.T. ACT, 1961 FOR THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THE SURPLUS SHOWN BY THE ASSESSEE OF RS. 62,781/- WAS BROUGHT TO THE TAX AT MAXIMUM MARGINAL RATE TREATING THE SAME AS INCOME OF AOP. AO FURTHER OBSERVED THAT ON PERUSAL OF THE BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION IT REVEALS THAT AN AMOUNT OF RS. 3, 08,761/- OF 4 DONATION HAS BEEN DIRECTLY CREDITED TO THE BALANCE SHE ET IN THE SHAPE OF CURRENT YEAR LAND DONATION. AS STATED ABOVE , SINCE THE ASSESSEE IS NOT ENTITLED FOR THE EXEMPTION U/S. 11 O F THE I.T. ACT, 1961, HENCE, THE AMOUNT OF RS. 3,08,761/- WAS ADDED T O THE INCOME OF THE ASSESSEE VIDE AOS ASSESSMENT ORDER DA TED 24.2.2015 BY ASSESSING THE INCOME OF THE ASSESSEE A T RS. 3,71,520/- PASSED U/S. 143(3) OF THE I.T. ACT, 1 961. 3. AGAINST THE ORDER OF THE LD. AO, ASSESSEE APPEAL ED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 4.4.2 016 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), AS SESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. LD. A.R. OF THE ASSESSEE WITH REGARD TO GROUND NO. 1 TO 1.1 HAS STATED THAT LD. CIT(A) HAS FAILED TO APPRECIATE THAT SECTION 13(1)(D) OF THE ACT HAS NO APPLICATION TO THE FACTS OF THE CASE OF THE ASSESSEE SOCIETY AND AS ADVANCE OF PURCHASE. HE FURT HER STATED THAT BOTH THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE TH AT ADANCE IS NEITHER AN INVESTMENT NOR A DEPOSIT THEREFORE, SE CTION 13(1)(D) OF THE ACT IS NOT ATTRACTED. TO SUPPORT THIS CONTENTION, H E RELIED UPON THE FOLLOWING CASES:- - ALARIPPU VS. ITO 60 ITD 478 (DEL) 5 - DIT VS. ACME EDUCATIONAL SOCIETY 326 ITR 146 (DEL) - KANPUR SUBHASH SHIKSHA SAMITI VS. DCIT 133 ITD 182 (LUCK) - SRI KOUNDIYA EDUCATION SOCIETY VS. ACIT 47 ITD 625 (VIZAK) 5.1 LD. COUNSEL OF THE ASSESSEE WITH REGARD TO GROUND NO. 2 HAS STATED THAT SINCE THE ASSESSEE SOCIETY IS ELIGIBLE FO R EXEMPTION U/S. 11 OF THE I.T. ACT, 1961, THE ADDITION OF RS. 62,781/- BEING THE SURPLUS WHICH WAS A SUM ELIGIBLE FOR EXEMPTIONS U/S. 11 OF THE ACT IS ALLOWABLE AND ADDITION IN THIS REGARD MAY BE DELE TED. 5.2 LD. COUNSEL OF THE ASSESSEE WITH REGARD TO GROUN D NO. 3 HAS STATED THAT THE ADDITION OF RS. 3,08,761/- REPRESENTIN G CORPUS DONATION RECEIVED BY THE ASSESSEE SOCIETY AND NOT TAX ABLE AS SUCH. IN THIS REGARD, HE STATED THAT THE DONATION RECEIVED OF RS.3,08,761/- ON 09.1.2013 IS A CORPUS DONATION R ECEIVED FOR A SPECIFIC PURPOSE I.E. PURCHASE OF LAND, WHICH IS C APITAL RECEIPT AND CAPITAL RECEIPT CANNOT BE TAKEN AS REVENUE INCOME AND IS NOT CHARGEABLE TO TAX. TO SUPPORT THIS CONTENTION, HE RELI ED UPON THE FOLLOWING CASES:- 6 - APPOLLO HOSPITAL RESEARCH FOUNDATION VS. ADIT 241 ITR 26 (AT) - CIT VS. SATHANAKVASI VARDHMAN VANIK JAIN SINGH 260 ITR (GUJ) - DIT VS. JAIPUR GOLDEN CHARITABLE CLINICAL LABORAT ORU RUST 311 ITR 365 (DEL.) - DIT VS. BASANTI DEVI AND SHRI CHAKHAN LAL GARG EDUCATION TRUST (ITA NO. 927/2009 (DEL) DATED 23.9.2009. - ITO(E) VS. SMT. BASANTI DEVI & SHRI CHAKHAN LAL GARG EDUCATION TRUST (ITA NO. 5082/D/2010 AY 2002-03 DATED 19.1.2011) - ITO VS. GAUDIYA GRANTHA ANUVED TRUST 60 SOT 137. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE CASE LAWS RELIED UPON, LD. COUNSEL OF TH E ASSESSEE REQUESTED THAT THE GROUNDS OF APPEAL RAISED BY THE A SSESSEE MAY BE ALLOWED AND ADDITIONS IN DISPUTE MAY BE DELETED AC CORDINGLY. 6. ON THE OTHER HAND, LD. SR. DR RELIED UPON THE ORDE RS OF THE AUTHORITIES BELOW. 7 7. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECOR DS AVAILABLE WITH ME. 7.1 WITH REGARD TO GROUND NO. 1 TO 1.1 & 2 ARE CON CERNED, I FIND THAT THESE GROUNDS ARE RELATING TO DENIAL OF EXEMPTION U/S. 11 & 12 OF THE I.T. ACT, 1961 WITHOUT APPRECIATING THAT SECTION 13(1)(D) OF THE I.T. ACT HAS NO APPLICATION TO THE FACTS OF THE CA SE OF THE ASSESSEE SOCIETY AND AS ADVANCE OF PURCHASE OF LAND COULD NEITHER IN LAW AND NOR IN FACTS BE MADE A BASIS TO HOLD THAT THE RE IS VIOLATION OF SECTION 13(1)(D) OF THE I.T. ACT, 1961. 7.2 I FIND CONSIDERABLE COGENCY IN THE CONTENTION OF THE LD. COUNSEL THAT THE AUTHORITIES BELOW HAVE FAILED TO APPR ECIATE THAT ADVANCE IS NEITHER AN INVESTMENT NOR A DEPOSIT THER EFORE, SECTION 13(1)(D) OF THE ACT IS NOT ATTRACTED. IN THIS CASE A SSESSEE SOCIETY ADVANCED A SUM OF RS. 5,31,000/- TO PROPERTY DEALERS FOR PURCHASE (ONE BIGHA LAND (961 SQ. YARDS) THROUGH MEDIATOR, SH . MULAKH RAJ DHAMIJA AND THE SAID DEALER HAD SOLD A PIECE OF LAND MEASURING 500 SQ.YDS. TO SOMEONE ELSE OUT OF 961 SQ.YDS AREA, WITH M UTUAL CONSENT BETWEEN THE DEALERS AND THE ASSESSEE REMAINI NG PIECE OF 461 SQ. YARDS OF LAND WAS GIVEN AS DONATION/ GIFT T O THE ASSESSEE AND THE ADVANCE PAID TO TUNE OF RS. 5,31,000/- WAS FU LLY REPAID. THIS FACT CLEARLY ESTABLISHES ON PERUSING THE PAGE N O. 38 TO 75 OF 8 THE PAPER BOOK. I NOTE THAT THE AO HOWEVER, HELD THAT ADV ANCE TO DEALER CONSTITUTE INFRACTION OF SECTION 13(1)(D) OF THE I.T. ACT, 1961 AND AS SUCH ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S. 11 & 12 OF THE ACT AND HE ACCORDINGLY MADE ADDITION OF RS. 3,08, 761/- AND RS. 62,781/- AND BOTH THE ADDITIONS WERE CONFIRMED BY T HE LD. CIT(A). IN MY CONSIDERED VIEW THE ACTION OF THE LOWER AUTHO RITIES IS NOT TENABLE IN TERMS OF THE FOLLOWING JUDICIAL DECISIONS: - A) 60 ITD 478 (DEL) ALARIPPU V. ITO '3. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE FACTS ARE ADMITTED. SEC. 11 OF THE ACT DEALS WITH THE INCOME FROM PROPERTY HELD UNDER TRUST, FOR CHARITABLE OR RELIGIOU S PURPOSES. AS PER SUB-SO (2) OF S. 11, THE ASSESSEE IS ALLOWED TO A CCUMULATE INCOME AND ALLOWED TO SET IT APART UNDER CERTAIN CIRC UMSTANCES. CLAUSE (B) OF SUB-SO (2) OF S. 11 LAYS DOWN THAT THE MONEY SO ACCUMULATED OR SET APART IS TO BE INVESTED OR DEPOSIT ED IN THE FIRMS OR MODES SPECIFIED IN SUB-SO (5) OF S. 11 OF THE AC T. SUB-SO (5) OF S. 11 IN TURN PRESCRIBES THE MODES OF INVESTMENT OR DEP OSITS FOR THE MONEY. THE AMOUNT GIVEN TO MAHILA HAAT IS UNDISPUTEDLY NOT COVERED UNDER THE MODES AS SPECIFIED. AS PER S.13(I )(D), IN CASE THE TRUST OR INSTITUTION DOES NOT INVEST OR DEPOSIT THE MONE Y IN ANYONE OF THE MODES AS PRESCRIBED, THE AFORESAID AMOUNT IS NOT TO BE 9 EXCLUDED FROM THE TOTAL INCOME OF THE ASSESSEE. THE E XPRESSIONS USED IN THESE SECTIONS ARE 'INVESTMENT OR DEPOSITS'. T HE EXPRESSION 'INVESTMENT' AS PER WEBSTERS NEW INTERNATIONAL DICTI ONARY (SECOND EDITION UNABRIDGED) MEANS 'TO FAY OUT (MONEY OR CAPI TAL) IN BUSINESS WITH THE VIEW OF OBTAINING AN INCOME OR PROFI T.' DEPOSIT ON THE OTHER HAND MEANS, THAT WHICH IS PLACED ANYWHERE, AS IN ANY ONES HANDS FOR SAFE KEEPING, SOMETHING ENTRUSTED TO THE CARE OF ANOTHER, THESE TWO EXPRESSIONS HAVE BEEN USED IN COG NATE SENSE AND HAVE TO BE UNDERSTOOD AS SUCH. IN THIS CONTEXT, WE FIND THAT THE EXPRESSIONS 'INVESTMENT AND DEPOSIT' HAVE BEEN CONSIDE RED BY THE TRIBUNAL IN THE CASE OF NATIONAL ENGG. CO-ORDINATIO N COMMITTEE (SUPRA). THE TRIBUNAL AFTER CONSIDERING THE DICTIONA RY MEANING OF 'INVESTMENT' AS ALSO THE JUDICIAL DECISIONS EXPLAININ G THE SAID WORD HAVE HELD THAT, 'THE AMOUNT LAID DOWN FOR THIS PURPOS E SHOULD BE CAPABLE OF AND RESULT IN ANY INCOME, RETURN, PROFIT T O 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 INCOM E, RETURNS, PROFIT. THE WORD 'DEPOSIT' ON THE OTHER HAND HAVING BEEN USED IN CONJUNCTION WITH THE WORD INVESTMENT AND IN UNDERSTAN DING ITS MEANING, THE PRINCIPLES OF 'NOSCITUR A SOCIIS' APPLI ED AND THE EXPRESSION HAD TO BE UNDERSTOOD IN A COGNATE SENSE OF THE WORD INVESTMENT. 'IN S. 11(5) THE EXPRESSIONS REFER TO PATTE RN OF 10 INVESTMENT TO BE COMPLIED WITH BY THE TRUST. IN THE CASE OF THE ASSESSEE THE AMOUNT HAS BEEN GIVEN TO MAHILA HAAT NEIT HER FOR THE PURPOSE OF INVESTMENT NOR FOR THE DEPOSITIN THE CIRCUMS TANCES AS EXPLAINED BY THE ASSESSEE. THE AMOUNT WAS GIVEN AT THE BEHEST OF OXFAM AND THAT TOO IN CASE THE FUNDS RELEASED DID N OT REACH THEM IN TIME AND FOR UTILISATION FOR ORGANISING A SEMINAR CUM WORKSHOP. THE FUNDS WERE RECOVERED BACK IN THE SUCCEEDING ASSESSM ENT YEAR AS CONTENDED. THUS THESE NEITHER ACQUIRED THE FORM OF IN VESTMENT OR THAT OF DEPOSIT. COMING TO THE APPLICATION OF INCOME, THE EXPRESSION APPLICATION HAS BEEN INTERPRETED BY THE VARIOUS COURTS . IN CASE OF SARLADEVI SARABHAI TRUST (SUPRA) AFTER CONSIDERING TH E DICTIONARY MEANING OF THE TERM APPLY AS TO PUT TO USE', IT HAS BE EN HELD BY THEIR LORDSHIP OF GUJARAT HIGH COURT THAT WHEN THE CHAR ITABLE TRUST DONATES ITS INCOME TO ANOTHER CHARITABLE TRUST THE PRO VISIONS OF S. 11(1)(A) CAN BE SAID TO HAVE BEEN MET BY SUCH DONOR TRUST AND THE DONOR TRUST CAN BE SAID TO HAVE APPLIED ITS INCOME FO R THE PURPOSES. TO SIMILAR EFFECT A DECISION WAS TAKEN IN THE CASE OF INDIAN NATIONAL THEATRE TRUST (SUPRA). ON THE FACTS, IT HAS BEEN HELD THAT IN CASE THE OBJECTS OF BOTH THE DONOR AND THE DONEE ARE THE SAME, THE LOAN ADVANCED TO THE DONEE TRUST COULD NOT BUT BE SAID TO BE A PPLICATION OF INCOME IN FURTHERANCE OF OBJECTS OF THE ASSESSEE. NO CONTRARY DECISION HAS BEEN CITED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE 11 ON THIS PROPOSITION. IT HAS ALSO NOT BEEN DENIED THAT THE OBJECTS OF BOTH THE DONOR AND THE DONEE ARE NOT SIMILAR. APPLYIN G THE RATIO IN THE CASE OF INDIAN NATIONAL THEATRE TRUST (SUPRA) IT C OULD NOT BE SAID THAT THE AMOUNT GIVEN TO MAHILA HAAT DID NOT CONSTITUTE T HE APPLICATION OF INCOME. THUS ON THE FACTS OF THE CASE IT IS HELD THAT THERE IS NO VIOLATION OF S. 13(1)( D) OF THE ACT AND TH E AMOUNT AS GIVEN TO MAHILA HAAT WOULD CONSTITUTE APPLICATION OF THE INCOME. THUS THE ASSESSEE'S APPEAL IS ALLOWED ON BOTH THE GRO UNDS.' B) 326 ITR 146 (DEL) DIT V. ACME EDUCATIONAL SOCIET Y 15. KEEPING IN VIEW THE AFORESAID EXPOSITION OF LAW , WE ARE OF THE OPINION THAT INTEREST-FREE LOAN OF RS. 90,50,000 GIVE N BY THE ASSESSEE-SOCIETY TO NAV BHARTI EDUCATIONAL SOCIETY DO ES NOT VIOLATE S. 13(I)(D) R/W S. 11(5) OF ACT, 1961 AS THE SAID LO AN WAS NEITHER AN 'INVESTMENT' NOR A 'DEPOSIT'. THIS IS MORE SO AS BOTH THE SOCIETIES HAD SIMILAR OBJECTS AND WERE REGISTERED UNDER S. 12A OF ACT, 1961 AND HAD APPROVALS UNDER S. 80G OF THE ACT, 1961. THE FACT THAT THE LOAN WAS INTEREST-FREE AND HAD BEEN SUBSEQUENTLY RETUR NED IS ALSO SIGNIFICANT.IN VIEW OF THE. ORDER PASSED BY THE CIT(A ) IN THE CASE OF NAV BHARATI EDUCATIONAL SOCIETY, MS. BANSAL'S ALLEG ATION WITH REGARD TO 'ENTRY SCAM' ALSO DOES NOT SURVIVE. CONSEQUENTLY, THE RE IS NO 12 SUBSTANTIAL QUESTION OF LAW INVOLVED IN THE PRESENT AP PEAL AND ACCORDINGLY, APPEAL IS DISMISSED BUT WITH NO ORDER A S TO COSTS. C) 133 ITD 182 (LUCK) KANPUR SUBHASH SHIKSHA SAMITI V. DCIT '14. IT WAS HELD IN MANSA RAM & SONS V. JANKI DASS O M PRAKASH & ORS., AIR 1984 ALL. 267 THAT THE TERM LOAN AND DEPOSI T ARE NOT MUTUALLY EXCLUSIVE. THE TEST IS WHETHER ON THE ADMITTE D FACTS OF THE CASE THERE WAS AN ALLEGATION ON THE DEBTOR TO SEEK OUT TH E CREDITOR AND REPAY HIM OR WHETHER HE WAS TO KEEP THE MONEY TIL L THE CREDITOR ASKS FOR THE SAME. THE CASE OF DEPOSIT IS SOMETHING M ORE THAN A MERE LOAN OF MONEY. IT DEPENDS ON THE FACTS OF THE EA CH CASE WHETHER THE TRANSACTION IS CLOTHED WITH THE CHARACTER OF DEPOSIT OF MONEY. 15. WE ARE IN AGREEMENT WITH THE REASONING GIVEN BY TH E DELHI HIGH COURT IN DIRECTOR OF INCOME TAX (EXEMPTION) V. ACME EDUCATIONAL SOCIETY (SUPRA) HOLDING THAT A LOAN IS NEITHER INVESTM ENT NOR DEPOSIT. WHERE BOTH THE SOCIETIES HAVE SIMILAR OBJECTS AND ARE REGISTERED UNDER SECTION 12A AND HAVE APPROVALS UND ER SECTION 80G, INTEREST FREE LOAN CANNOT BE TREATED AS DEPOSIT O R INVESTMENT SO AS TO ATTRACT SECTION 11 (5) OF THE ACT.' 13 D) 47 ITD 625 (VISHAKAPATNAM) SRI KOUNDIYA EDUCTION SOCIETY VS ACIT 10. THE A.O. DENIED THE BENEFIT OF EXEMPTION FOR THE SOLE REASON THAT THE ASSESSEE SOCIETY HAS DIVERTED ITS F UNDS TO OTHER SOCIETIES AND VIOLATED THE PROVISIONS OF SECTION 13(1)(D) OF THE ACT. ACCORDING TO THE A.O., ADVANCEMENT OF LOA NS TO OTHER SOCIETIES WHETHER OR NOT REGISTERED UNDER THE PR OVISIONS OF SECTION 12A OF THE ACT IS A VIOLATION OF SECTION 13(1 )(D) OF THE ACT, CONSEQUENTLY THE SOCIETY IS NOT ELIGIBLE FO R EXEMPTION U/S 11 OF THE ACT. THE QUESTION BEFORE US IS WHETHER L OANS ADVANCED TO OTHER SOCIETIES UNDER THE SAME MANAGEMENT HAVING SIMILAR OBJECTS AND ALSO REGISTERED UNDER THE P ROVISIONS OF SECTION 12A OF THE ACT IS A VIOLATIVE OF SECTION 13(L)(D) OF THE ACT, WHICH RENDER THE ASSESSEE INELIGIBLE FOR EXEMPTI ON U/S 11 OF THE ACT. THE HON'BLE DELHI HIGH COURT, IN THE CASE OF ACME EDUCATIONAL SOCIETY (SUPRA), HELD THAT ADVANCING INTER EST FREE TEMPORARY LOAN BY ASSESSEE SOCIETY TO ANOTHER SOCIE TY HAVING SIMILAR OBJECTS IS NOT AN INVESTMENT OR A DEPOSIT, H ENCE THERE IS NO VIOLATION OF THE PROVISIONS OF SECTION 13(1)(D) R.W.S. 11(5) OF THE ACT TO RENDER WITHDRAWAL OF EXEMPTION U/ S 11 OF THE ACT. IN THE PRESENT CASE ON HAND, ON PERUSAL OF T HE DOCUMENTS AVAILABLE ON RECORD, WE FIND THAT THE ASSESS EE HAS 14 ADVANCED, LOANS TO OTHER SOCIETIES UNDER THE SAME MANAGEMENT HAVING SIMILAR OBJECTS AND ALSO REGISTERED UNDER THE PROVISIONS OF SECTION 12A OF THE ACT AND CHARGED INTEREST. THE ASSESSEE ALSO PROVED THAT IT HAS ADVANCED LOANS OUT OF THE FUNDS BORROWED FROM FOUNDER MEMBERS OF THE SOCIETY. W HEN THE LOANS ARE GIVEN OUT OF THE FUNDS BORROWED FROM THE SOCIETY, THE A.O. WAS NOT CORRECT IN HOLDING THAT THE A SSESSEE HAS DIVERTED THE FUNDS IN VIOLATION OF THE PROVISION S OF SECTION 13(1)( D) OF THE ACT. THEREFORE, WE ARE OF THE VIEW THA T ADVANCING LOANS TO OTHER SOCIETIES HAVING SIMILAR OBJ ECT WHETHER OR NOT REGISTERED ULS 12A OF THE ACT, IS NOT A VIOLATION OF THE PROVISION OF SECTION 13(1)(D) OF THE ACT. 7.3 RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS, I AM OF THE CONSIDERED VIEW THAT THERE IS NO VIOLATION OF SECTION 13(1)(D) OF THE ACT AND THUS, DENIAL OF EXEMPTION UNDER SECTION 11 OF THE ACT IS CONTRARY TO THE PROVISIONS OF LAW AND HENCE NOT TENAB LE AND ACCORDINGLY THE SAME IS ALLOWED. THEREFORE, ADDITIO N OF RS. 62,781/- MADE ON ACCOUNT OF SURPLUS TREATING ASSESSEE AS AN AO P IS DELETED. ACCORDINGLY, THE GROUND NO. 1 TO 2 ARE ALLOWED. 7.4 WITH REGARD TO GROUND NO. 3 RELATING TO ADDITION O F RS. 3,08,761/- ON ACCOUNT OF CORPUS DONATION BY HOL DING THAT 15 ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S. 11 OF THE I.T. ACT, 1961. AS I HAVE ALREADY HELD VIDE PARA NO. 7.3 HEREINABOV E THAT THERE IS NO VIOLATION OF SECTION 13(1)(D) OF THE ACT AND THUS, DENIAL OF EXEMPTION UNDER SECTION 11 OF THE ACT IS CONTRARY TO THE PROVISIONS OF LAW AND HENCE NOT TENABLE, THEREFORE, THE ADDITION OF RS. 3,08,761 IS NOT SUSTAINABLE IN THE EYES OF LAW. MORE OVER, I FIND THAT THE ADDITION OF RS. 3,08,761/- REPRESENTING CORPUS DO NATION RECEIVED BY THE ASSESSEE AND NOT TAXABLE AS SUCH, BECAUSE THE CORPUS DONATION OF RS. 3,08,761/- WAS RECEIVED ON 9.1.2013 FOR A SPECIFIC PURPOSE I.E. PURCHASE OF LAND, WHICH IS CAPITAL RECE IPT AND CAPITAL RECEIPT CANNOT BE TAKEN AS REVENUE INCOME AND HENCE, IS NOT CHARGEABLE TO TAX. IN VIEW OF THE ABOVE, THE ADDITIO N IN DISPUTE IS DELETED AND GROUND NO. 3 IS ALLOWED ACCORDINGLY. M Y AFORESAID VIEW IS FORTIFIED BY THE FOLLOWING DECISION:- 260 ITR 366 (GUJ) CIT VS. SATHANAKVASI VARDHMAN VAN IK JAIN SINGH THE ISSUE INVOLVED IN THE PRESENT REFERENCE IS QUIT E DIFFERENT AS IN THE PRESENT REFERENCE THE ASSESSEE IS CLAIMING T HE BENEFIT OF SECTION 11 ON THE GROUND THAT THE CONTRIBUTION RECEIVED BY THE ASSESSEE-TRUST WAS TOWARDS A SPECIFIC PURPOSE FOR CONSTRUCTION OF WADI AND HENCE, IT WOULD NOT BE TREATED AS THE INCOME OF THE TRUST. IN THE ABOVE VIEW OF THE MATTER, WE ARE OF T HE VIEW THAT THE TRIBUNAL HAS NOT COMMITTED ANY ERROR IN HOLDING THAT THE DON ATION RECEIVED BY THE ASSESSEE-TRUST OF RS. 1,85,064 WHICH WAS NOT UTILIS ED FOR THE OBJECT OF THE TRUST WAS NOT INCOME OF THE TRUST. WE, THEREFORE, A NSWER THE QUESTION 16 REFERRED TO US IN THE AFFIRMATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/01/2017. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE 20/01/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT ASSISTANT REGISTRAR, ITAT, DELHI BENCHES