ADIT (Exemptions -II), CHENNAI V. M/s. Society of Daughters of Mary Immaculate, CHENNAI

ITA 963/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61264 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 30-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G NANTHAKUMAR
• Assessee Lawyers: G BASKAR
• Keywords: Benefit of exemption
• Section: 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CHENNAI BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AN D SHRI V. DURGA RAO, JUDICIAL MEMBER .. ITA NO.963/MDS/2012 ASSESSMENT YEAR: 2008-09 THE ASSISTANT DIRECTOR OF INCOME-TAX (EXEMPTIONS)-II, CHENNAI V. M/S. SOCIETY OF DAUGHTERS OF MARY IMMACULATE & COLLABORATORS, AMALA BHAVAN, RUDRA ROAD, ST. THOMAS MOUNT, CHENNAI-600 016. PAN : AAATT61 08Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G. NANTHAKUMAR, JCIT RESPONDENT BY : SHRI G. BASKAR, ADVOCATE DATE OF HEARING : 04.07.2012 DATE OF PRONOUNCEMENT : 13. 07.2012 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE FOR THE ASSESSMENT YEA R 2008-09 IS AGAINST THE ORDER PASSED BY THE LEARNED CIT(APPEALS )-XII, CHENNAI DATED 10-01-2012. 2. BRIEF FACTS ARE THAT THE ASSESSEE IS AN EDUCATIO NAL ORGANIZATION AND REGISTERED UNDER SECTION 12AA OF THE INCOME TAX ACT , 1961 (THE ACT FOR SHORT). THE ASSESSEE HAD FILED A RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING AN INCOME AT NIL AFTER CLAI MING DEDUCTION U/S 11 OF THE ACT. DURING THE COURSE OF THE ASSESSMENT PR OCEEDINGS, THE AO ITA.963 /MDS/2012 2 ASKED THE ASSESSEE THAT IN VIEW OF THE LOANS/DEPOSI TS TO SISTER CONCERN THERE IS VIOLATION OF SECTION 13(1)(D) AND 11(5) O F THE ACT WHY EXEMPTION U/S 11 SHOULD NOT BE DENIED AND CALLED FOR THE EXPL ANATION OF THE ASSESSEE. IN RESPONSE TO THE ABOVE THE ASSESSEE HA S EXPLAINED THAT ALL THE LOANS ARE INTEREST-FREE LOANS AND ARE GIVEN TO EDUCATIONAL INSTITUTIONS RUN BY THE SOCIETY/TRUST BELONGING TO ITS GROUP. T HE PURPOSE OF THE LOAN WAS PURELY FOR PUTTING UP BUILDING/INFRASTRUCTURE F OR EDUCATIONAL INSTITUTIONS. IT WAS NEITHER A DEPOSIT NOR AN INVE STMENT AND THEREFORE THERE WAS NO INFRINGEMENT AS CONTAINED IN SECTION 1 3(1)(D) READ WITH SECTION 11(5) OF THE ACT. THE AO AFTER CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSEE AND BY APPLYING THE DEC ISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. V.G .P. FOUNDATION (262 ITR 187) (MAD) AND VARIOUS OTHER DECISIONS CAME TO THE CONCLUSION THAT THE ASSESSEE VIOLATED SECTION 13(1)(D) READ WITH SECTIO N 11(5) AND ACCORDINGLY DENIED EXEMPTION U/S 11 OF THE ACT. 3. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MAT TER BEFORE THE LEARNED CIT(A). THE ASSESSEE HAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT ALL THE SOCIETIES TO WHOM THE ASSESSEE GAVE IN TEREST-FREE LOANS ARE REGISTERED U/S 12A OF THE ACT AND THE ASSESSEE BEIN G AN ORGANIZATION LISTED UNDER SEC. 12A ADVANCING INTEREST-FREE LOANS TO OTHER SISTER CONCERNS WHICH HAVE ALREADY BEEN GRANTED REGISTRATI ON U/S 12A NOT AMOUNTED TO VIOLATION OF SECTION 13(1)(D) AS WELL A S SECTION11(5) OF THE ACT AND THE ASSESSEE RELIED ON THE DECISION IN THE CASE OF DIRECTOR OF INCOME-TAX (EXEMPTION) V. ACME EDUCATIONAL SOCIETY (326 ITR 146) AND ITA.963 /MDS/2012 3 SUBMITTED THAT THE DECISION OF THE DELHI HIGH COURT CLEARLY APPLIES TO THE FACTS OF THE CASE. THE LEARNED CIT(A) AFTER CONSID ERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO VARIOUS CASE LAWS RELIED O N BY THE ASSESSEE HAS OBSERVED THAT THE ASSESSEE HAS GIVEN INTEREST-FREE LOANS TO SISTER CONCERNS (M/S. BROTHERHOOD TRUST, M/S. THE DAUGHTER S OF MARY IMMACULATE & COLLABORATORS TRUST AND M/S. SOCIETY F OR EDUCATION FOR LIFE) AND WOULD NOT BE HIT BY THE PROVISIONS OF SECTION 1 3(1)(D) READ WITH SECTION 11(5) OF THE ACT. FURTHER AS THE ORGANIZA TIONS ARE ALSO CHARITABLE ORGANIZATIONS REGISTERED U/S 12A OF THE ACT, THE SA ID INTEREST-FREE LOANS WILL NOT AMOUNT TO THE BENEFIT OF ANY PERSON SPECIF IED UNDER SECTION 13(3) EITHER DIRECTLY OR INDIRECTLY. HENCE THE SAI D LOANS WERE TOTALLY OUTSIDE THE PURVIEW AND SCOPE OF SECTION 13(1)(C) A S WELL AS 13(1)(D) OF THE ACT AND HELD THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. 4. ON BEING AGGRIEVED, THE REVENUE HAS CARRIED THE MATTER BEFORE THE TRIBUNAL. THE LEARNED DR HAS SUBMITTED THAT AS THE ASSESSEE IS HIT BY SECTION 13(1)(D) READ WITH SECTION 11(5), IT IS NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. THE ASSESS EE HAS ADVANCED THE LOAN NOT AS DONATION AND THEREFORE FAIRLY IS HIT BY SECTION 13(1)(D) AND THEREFORE NOT ELIGIBLE FOR THE EXEMPTION. 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE ASSESSEE NEITHER INVESTED NOR DEPOSITED TH E AMOUNT. IT IS ONLY AN INTEREST-FREE LOAN AND THEREFORE SECTION 13(1)(D ) AND SECTION 11(5) ITA.963 /MDS/2012 4 HAVE NO APPLICATION. HE STRONGLY RELIED UPON THE D ECISION IN THE CASE OF ACME EDUCATIONAL SOCIETY, SUPRA. 6. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE I SSUE INVOLVED IN THIS APPEAL IS WHETHER THE ASSESSEE IS ELIGIBLE FOR EXEM PTION UNDER SECTION 11 OR NOT. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE , I.E. M/S. SOCIETY OF DAUGHTERS OF MARY IMMACULATE & COLLABORATORS WAS GR ANTED REGISTRATION UNDER SECTION 12A OF THE ACT DATED 9-1-1989. THE O THER SISTER CONCERNS/ TRUSTS NAMELY, M/S. BROTHERHOOD TRUST, M/S. THE DAU GHTERS OF MARY IMMACULATE & COLLABORATORS TRUST AND M/S. SOCIETY F OR EDUCATION FOR LIFE HAVE BEEN GRANTED REGISTRATION U/S 12A ON 10-12-199 3, 5-9-1995 AND 20- 4-11996 RESPECTIVELY. THE ABOVE FACTS ARE UNDISPUT ED. THE ASSESSEE, M/S. SOCIETY OF DAUGHTERS OF MARY IMMACULATE & COLL ABORATORS GRANTED INTEREST-FREE LOANS TO THE THREE OTHER SISTER CONCE RNS/TRUSTS WHICH ARE ALSO REGISTERED U/S 12A. THE SAID SISTER CONCERNS/ORGAN IZATIONS ARE ALSO CHARITABLE ORGANIZATIONS CARRYING ON SIMILAR FUNCTI ONS AS CARRIED ON BY THE ASSESSEE. ACCORDING TO THE AO THE ASSESSEE HAS VIO LATED SECTION 13(1)(D) READ WITH SECTION11(5) FOR THE REASON THAT THE ASSESSEE HAS TO INVEST ONLY AS PER LAW WHICH IS PERMITTED UNDER SEC TION 11(5) OF THE ACT. THE ASSESSEE ADVANCED INTEREST-FREE LOANS TO THE SI STER CONCERNS. IN OUR VIEW IT IS NOT HIT BY THE PROVISIONS OF SECTION 11( 5) READ WITH SECTION 13(1)(D). SECTION 13(1)(D)(I) DEALS WITH ANY FUNDS OF TRUST OR INSTITUTION ARE INVESTED OR DEPOSITED. SECTION 11(5) DEALS WIT H THE FORMS AND MODES OF INVESTING AND DEPOSITING MONEY. IN THE PRESENT C ASE THE ASSESSEE HAS ITA.963 /MDS/2012 5 ADVANCED LOANS TO THE SISTER CONCERNS. IN OUR CONS IDERED OPINION IT IS NEITHER HIT BY SECTION 13(1)(D) NOR SECTION 11(5). THERE IS NO OTHER MATERIAL WHICH IS PLACED BEFORE US WHICH ATTRACTS S ECTION 11(5) OR SECTION 13(1)(D) OF THE ACT NOR ANY JUDISCTIONAL HIGH COURT DECISION WAS PLACED BEFORE US. WE, THEREFORE, FOLLOWING THE DECISION I N THE CASE OF ACME EDUCATIONAL SOCIETY, SUPRA, WHEREIN THE HONBLE DEL HI HIGH COURT HAS HELD THAT THE ASSESSEE SOCIETY HAD GIVEN LOAN TO AN OTHER EDUCATIONAL SOCIETY WHOSE PRESIDENT WAS THE BROTHER OF THE ASSE SSEE-SOCIETYS PRESIDENT. THE AO INVOKING THE PROVISIONS OF SECTI ON 13(1)(D) READ WITH SECTION 11(5) DENIED THE BENEFIT OF EXEMPTION TO T HE ASSESSEE SOCIETY. ON THESE FACTS THE HONBLE DELHI HIGH COURT HAS HEL D THAT THE INTEREST- FREE LOAN GIVEN BY THE ASSESSEE SOCIETY TO OTHER SO CIETY HAVING SIMILAR OBJECTS AND REGISTERED U/S 12A DOES NOT VIOLATE SEC . 13(1)(D) READ WITH SECTION 11(5) AS THE SAID LOAN WAS NEITHER AN INVES TMENT NOR A DEPOSIT. THE ABOVE CASE RELIED ON BY THE ASSESSEE SQUARELY A PPLIES TO THE FACTS OF THE PRESENT CASE. THE AO DENIED THE EXEMPTION U/S 11 BY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT V. V.G.P. FOUNDATION, SUPRA. IN THAT CASE THE ASSESSEE TRUST ADVANCED A SUM OF RS 53,950/- TO ITS SISTER CONCERN, A PRIVATE LIMITED C OMPANY OF WHICH THE TRUSTEES OF THE ASSESSEE WERE ALSO DIRECTORS. THIS CASE HAS NO APPLICATION TO THE FACTS OF THE CASE. IN THE PRESE NT CASE THE ASSESSEE AS WELL AS THE SISTER CONCERNS ARE GRANTED SECTION 12A REGISTRATION. THE OTHER DECISIONS RELIED ON BY THE AO ARE NOT APPLICA BLE TO THE FACTS OF THE PRESENT CASE AS THE FACTS ARE DIFFERENT. IN VIEW O F THE ABOVE, WE FIND NO ITA.963 /MDS/2012 6 INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(A) . IN THE CIRCUMSTANCES, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL IS DISMISSED. 8. THE ORDER WAS PRONOUNCED IN THE COURT ON 13-07- 2012. SD/- SD/- (ABRAHAM P. GEORGE) ( V.DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 13 TH JULY, 2012. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE