MASINA HOSPITAL TRUST,MUMBAI V. COMMISSIONER OF INCOME TAX (EXEMPITONS), MUMBAI

ITA 5366/MUM/2024

AI Insights

The case involves the Masina Hospital Trust, which appealed against the decision of the Commissioner of Income-tax (Exemptions) rejecting their application for approval under section 80G of the Income-tax Act, 1961. The rejection was primarily based on the trust taking loans from a related party, M/s Shapoorji Pallonji & Company Pvt. Ltd., which were used to pay rent and were seen as benefiting the related party. The tribunal, after considering additional evidence and the financial context of the trust, decided to remand the case for a fresh evaluation, acknowledging that the loans were taken to fulfill charitable commitments rather than to benefit the related party directly.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 32095 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: misc
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NISCHAL B.
• Assessee Lawyers: NIHAR JAMBUSARIA
• Keywords: Additional evidence; TDS; Charitable institution
• Section: 80G; 13(2)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER) ITA No. 5366/MUM/2024 Assessment Year: 2024-25 Masina Hospital Trust, 1 Masina Hospital, Sant Satva Marg, Byculla, Mumbai-400027. Vs. CIT(Exemptions), Room No. 601, 6th floor, Cumballa Hill MTNL TE Building, Peddar Road, Dr. Gopalrao Deshmukh Marg, Mumballa Hill, Mumbai-400026. PAN NO. AAATM 0786 D Appellant Respondent Assessee by : Mr. Nihar Jambusaria Revenue by : Mr. Nischal B., CIT-DR Date of Hearing : 10/12/2024 Date of pronouncement : 18/02/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 30.09.2024 passed by the Ld. Commissioner of Income-tax (Exemptions), Mumbai [in short ‘the Ld. CIT(E)’] rejecting the application of the assessee seeking approval u/s 80G of the Income- tax Act, 1961 (in short ‘the Act’). 2. Briefly stated, facts of the case are that the application of the assessee seeking approval prescribed Form No. 10AB of the Income ‘the Rules’) but rejected by the following reasons : (i) The loan of Rs.14,45,00,000/ bearing interest @ 11.5% taken for the purpose of paying rent of Rs.10.42,09,62 was actually deployment of the excess fund by the related party i.e. M/s Shapoorji Pallonji & Company Pvt. Ltd. earn interest income, t provision of section 13(2)(a) of the (ii) The assessee trust was having services to a particular 3. The detailed finding of the Ld. CIT(E) is reproduced as under: “7.In its submission, the assessee has submitted that the loan was taken from Company Pvt. Ltd. for the purpose of payments of the Land Lease Rental Payments of Plot no. 549, 552 amounting to. Rs. 10,42,08,629/ response to orders dated Mumbai. The assessee has also submitted the details of total interest paid by it in its submission dated 25.09.2024 which is reproduced below: Interest on loan from M/s Shapoorji Pallonji & Comp FY 2018-19 ITA No. 5366/MUM/2024 , facts of the case are that the application of the approval u/s 80G(5)(iii) of the Act prescribed Form No. 10AB of the Income-tax Rules, 1962 (in short rejected by Ld. CIT(E) by way of impugned order the following reasons : Rs.14,45,00,000/- including loan of Rs.7,95,00,000/ bearing interest @ 11.5% from specified persons claimed to have the purpose of paying rent of Rs.10.42,09,62 deployment of the excess fund by the related party i.e. M/s Shapoorji Pallonji & Company Pvt. Ltd. trust with intention to n interest income, therefore, the transaction was provision of section 13(2)(a) of the Act. assessee trust was having one of the object for providing particular community only. he detailed finding of the Ld. CIT(E) is reproduced as under: 7.In its submission, the assessee has submitted that the loan was taken from its related party i.e. M/s. Shapoorji Pallonji and Company Pvt. Ltd. for the purpose of payments of the Land Lease Rental Payments of Plot no. 549, 552 amounting to. Rs. 10,42,08,629/- (Rs. 1,59,80,849 + 8,82,27,780) respectivelyin response to orders dated 18.01.2022 of the Collector's office, Mumbai. The assessee has also submitted the details of total interest paid by it in its submission dated 25.09.2024 which is below: Masina Hospital Trust Interest on loan from M/s Shapoorji Pallonji & Comp Particular Interest Amount (in Rs.) Interest on loan 44,64,185 Masina Hospital Trust 2 ITA No. 5366/MUM/2024 , facts of the case are that the application of the u/s 80G(5)(iii) of the Act was filed in tax Rules, 1962 (in short by way of impugned order for including loan of Rs.7,95,00,000/- claimed to have the purpose of paying rent of Rs.10.42,09,629/- liability, deployment of the excess fund by the related party i.e. trust with intention to was in violation of object for providing he detailed finding of the Ld. CIT(E) is reproduced as under: 7.In its submission, the assessee has submitted that the loan its related party i.e. M/s. Shapoorji Pallonji and Company Pvt. Ltd. for the purpose of payments of the Land Lease Rental Payments of Plot no. 549, 552 amounting to. Rs. (Rs. 1,59,80,849 + 8,82,27,780) respectivelyin 18.01.2022 of the Collector's office, Mumbai. The assessee has also submitted the details of total interest paid by it in its submission dated 25.09.2024 which is Interest on loan from M/s Shapoorji Pallonji & Company Pvt. Ltd. Interest Amount (in TDS 44,64,185 2,91,849 2019-20 2020-21 2021-22 2022-23 2023-24 From the above table, it can be seen that the assessee has been paying interest to M/s. since FY 2018 4,53,91,500/ regarding payment of rent was issued on 18.01.2022. The assessee took the loan from its related party way back in FY 2018-19 whereas the need to pay th 18.01.2022 as stated by the assessee itself in its submission made on 19.09.2024. There does not appear any rational behind taking such a huge amount of loan in FY 2018 purpose which would arise only after 3 18.01.2022 and which kept incurring a hefty amount of interest for the assessee trust. cannot be justified to make expenses in the form of interest payment on loans which is to be used for rent pa course of time whereas the same money could be utilized on charitable purpose.It is noticeable that total loan taken by the assessee trust for the purpose of paying rent is Rs. 14,45,00,000/ (Rs. 7,95,00,000/ 6,50,00,000/ the assessee is Rs. 10,42,08,629/ dated 23.09.2024 summarised at para no. 4.It is again beyond logic to understand why the assessee would undertake loan amount more than the amount of outstanding rent to be paid, if its purpose was only for payment of outstanding rent. The assessee kept paying interest on the said loan (part of the loan which was interest bearing) whose purpose was to pay the outstanding rent in due period. It is also pertinent to mention that this loan is repayable on demand i.e. without any time bound return provision.It proves that the related party i.eM/s. Shapoorji Pallonji and Company Pvt. Ltd. Has deployed its excess funds in the Trust with an intention to earn interest income. 8. It is evident from the above the intention of the trust behind taking the loan was not to pay the rent liability but to apply the funds of the trust for the benefits of its related party in the form of payment of interes Even if it is agreed that the actua purpose of the loan taken from the related party is to pay the outstanding rents as per the above mentioned table no. 1 and 2, there is no apparent rationality ITA No. 5366/MUM/2024 Interest on loan 43,56,904 Interest on loan 91,42,500 Interest on loan 91,42,500 Interest on loan 91,42,500 Interest on loan 91,42,500 Total 4,53,91,089 From the above table, it can be seen that the assessee has been paying interest to M/s. Shapoorji Pallonji and Company Pvt. Ltd. since FY 2018-19 and total interest paid till FY 2023 4,53,91,500/-. However, the order from the Collector's office regarding payment of rent was issued on 18.01.2022. The assessee took the loan from its related party way back in FY 19 whereas the need to pay the rent arose only from 18.01.2022 as stated by the assessee itself in its submission made on 19.09.2024. There does not appear any rational behind taking such a huge amount of loan in FY 2018-19 or before for a purpose which would arise only after 3-4 year 18.01.2022 and which kept incurring a hefty amount of interest for the assessee trust. For a charitable entity like the assessee's, it cannot be justified to make expenses in the form of interest payment on loans which is to be used for rent payment in future course of time whereas the same money could be utilized on charitable purpose.It is noticeable that total loan taken by the assessee trust for the purpose of paying rent is Rs. 14,45,00,000/ (Rs. 7,95,00,000/- interest bearing at 11.5% and 6,50,00,000/- interest free) whereas the total rent to be paid by the assessee is Rs. 10,42,08,629/-as per assessee's response dated 23.09.2024 summarised at para no. 4.It is again beyond logic to understand why the assessee would undertake loan t more than the amount of outstanding rent to be paid, if its purpose was only for payment of outstanding rent. The assessee kept paying interest on the said loan (part of the loan which was interest bearing) whose purpose was to pay the outstanding rent n due period. It is also pertinent to mention that this loan is repayable on demand i.e. without any time bound return provision.It proves that the related party i.eM/s. Shapoorji Pallonji and Company Pvt. Ltd. Has deployed its excess funds in the Trust th an intention to earn interest income. It is evident from the above-mentioned facts and discussion that the intention of the trust behind taking the loan was not to pay the rent liability but to apply the funds of the trust for the benefits of its related party in the form of payment of interest on the loan. Even if it is agreed that the actua purpose of the loan taken from the related party is to pay the outstanding rents as per the above mentioned table no. 1 and 2, there is no apparent rationality Masina Hospital Trust 3 ITA No. 5366/MUM/2024 43,56,904 1,96,680 91,42,500 5,27,961 91,42,500 8,18,191 91,42,500 9,14,250 91,42,500 4,49,258 4,53,91,089 31,97,189 From the above table, it can be seen that the assessee has been Shapoorji Pallonji and Company Pvt. Ltd. total interest paid till FY 2023-24 is Rs. . However, the order from the Collector's office regarding payment of rent was issued on 18.01.2022. The assessee took the loan from its related party way back in FY e rent arose only from 18.01.2022 as stated by the assessee itself in its submission made on 19.09.2024. There does not appear any rational behind 19 or before for a 4 years i.e. from 18.01.2022 and which kept incurring a hefty amount of interest for For a charitable entity like the assessee's, it cannot be justified to make expenses in the form of interest yment in future course of time whereas the same money could be utilized on charitable purpose.It is noticeable that total loan taken by the assessee trust for the purpose of paying rent is Rs. 14,45,00,000/- interest bearing at 11.5% and Rs. interest free) whereas the total rent to be paid by as per assessee's response dated 23.09.2024 summarised at para no. 4.It is again beyond logic to understand why the assessee would undertake loan t more than the amount of outstanding rent to be paid, if its purpose was only for payment of outstanding rent. The assessee kept paying interest on the said loan (part of the loan which was interest bearing) whose purpose was to pay the outstanding rent n due period. It is also pertinent to mention that this loan is repayable on demand i.e. without any time bound return provision.It proves that the related party i.eM/s. Shapoorji Pallonji and Company Pvt. Ltd. Has deployed its excess funds in the Trust mentioned facts and discussion that the intention of the trust behind taking the loan was not to pay the rent liability but to apply the funds of the trust for the benefits of t on the loan. Even if it is agreed that the actua purpose of the loan taken from the related party is to pay the outstanding rents as per the above- mentioned table no. 1 and 2, there is no apparent rationality behind taking the said loan 3 year and paying huge interest from its fund when the purpose of the assessee trust is to do charitable activities and the money used for paying interest could have been used for charitable purposes. 3. We have heard rival submissions the relevant materials on record regarding the violation of section 1 that where any property benefit of the related party, t registration including 80G of the Act. is found that the assessee trust obtained loan of Rs.7,95,00,000/ bearing interest @ 11.5% from Pvt. Ltd. and loan of Rs.6,50,00,000/ The contention of the assessee that there was a deficit in the financial of the assessee since 2018 were taken to comply the making rent payment of Rs.10,42,08,629/ period. There was no option with the assessee otherwise then to take a loan and since it was a loan from a company under the provisions of the section 186(7) of the Companies Act, 2013 could not have been given interest free to the trust therefore, interest was charged at the market rate. The funds were obtained for the charitable need of the trust and there was no intention of taking loans for the purpose of benefiting to its related party. The assessee provided a detailed financial position of the deficit since assessment year 2018 ITA No. 5366/MUM/2024 behind taking the said loan 3-4 years prior to the actual payment year and paying huge interest from its fund when the purpose of the assessee trust is to do charitable activities and the money used for paying interest could have been used for purposes.” We have heard rival submissions of the parties and perused the relevant materials on record. The first issue in dispute is regarding the violation of section 13(2) of the Act which prescribe where any property or income of the trust is applied for t benefit of the related party, the assessee is not entitled for benefit of registration including 80G of the Act. On verification of the facts it is found that the assessee trust obtained loan of Rs.7,95,00,000/ bearing interest @ 11.5% from M/s Shapoorji Pallonji & Company nd loan of Rs.6,50,00,000/- from individual Mr. Pal The contention of the assessee that there was a deficit in the financial of the assessee since 2018-19 and therefore, such loan comply the the order of the District Collector for g rent payment of Rs.10,42,08,629/- within stipulated period. There was no option with the assessee otherwise then to take a loan and since it was a loan from a company under the provisions of the section 186(7) of the Companies Act, 2013 e been given interest free to the trust therefore, interest was charged at the market rate. The funds were obtained for the charitable need of the trust and there was no intention of taking loans for the purpose of benefiting to its related party. The ssee provided a detailed financial position of the deficit since assessment year 2018-19. Masina Hospital Trust 4 ITA No. 5366/MUM/2024 o the actual payment year and paying huge interest from its fund when the purpose of the assessee trust is to do charitable activities and the money used for paying interest could have been used for of the parties and perused . The first issue in dispute is 3(2) of the Act which prescribe income of the trust is applied for the he assessee is not entitled for benefit of On verification of the facts it is found that the assessee trust obtained loan of Rs.7,95,00,000/- M/s Shapoorji Pallonji & Company from individual Mr. Pallonji. The contention of the assessee that there was a deficit in the 19 and therefore, such loan the order of the District Collector for within stipulated period. There was no option with the assessee otherwise then to take a loan and since it was a loan from a company under the provisions of the section 186(7) of the Companies Act, 2013, it e been given interest free to the trust therefore, interest was charged at the market rate. The funds were obtained for the charitable need of the trust and there was no intention of taking loans for the purpose of benefiting to its related party. The ssee provided a detailed financial position of the deficit since Regarding the second issue of providing community, the assessee filed a detailed chart of the percentage of the ‘Parsi’ Community relevant chart is reproduced as under: Year Total Admission 2019-20 2020-21 2021-22 2022-23 2023-24 3.1 In view of the above chart, the Ld. counsel for the assessee submitted that ratio of the medical relief provided to the Parsi Community is negligible. Before us, the Ld. counsel for the assessee filed a bank statement reflecting application for the object of the Trust which are available on Pape Book page 24 to 50. A summary of the loan transaction with their application and copy of the general ledger showing the application of the loan on expenses incurred object of the t first time before us as additional evidence. In the case, the Ld. CIT(E) has pointed out that liability of the payment of the rent arose in the year under consideration whereas loans have been taken from AY 2018-19 onwards but the asses loan had been availed for meeting in view of deficit in revenue. Since, the above crucial and important the loans for incurring expe we admit the documents as additional evidence and restore the ITA No. 5366/MUM/2024 Regarding the second issue of providing benefit to a particular ommunity, the assessee filed a detailed chart of the percentage of Community benefited since year 2019-2020 relevant chart is reproduced as under: Total Admission Parsi Patients Admissions 6973 245 4786 279 5751 244 8087 309 7864 177 In view of the above chart, the Ld. counsel for the assessee submitted that ratio of the medical relief provided to the Parsi Community is negligible. Before us, the Ld. counsel for the assessee a bank statement reflecting the receipt of the loan and application for the object of the Trust which are available on Pape Book page 24 to 50. A summary of the loan transaction with their application and copy of the general ledger showing the application of the loan on expenses incurred object of the trust has been filed first time before us as additional evidence. In the case, the Ld. CIT(E) has pointed out that liability of the payment of the rent arose in the year under consideration whereas loans have been taken onwards but the assessee has contended that been availed for meeting charitable expenses of the trust in view of deficit in revenue. Since, the above documents filed are crucial and important for examining this issue of the application of the loans for incurring expenses on charitable purposes. Therefore, we admit the documents as additional evidence and restore the Masina Hospital Trust 5 ITA No. 5366/MUM/2024 benefit to a particular ommunity, the assessee filed a detailed chart of the percentage of 2020 onward. The % 4% 6% 4% 4% 2% In view of the above chart, the Ld. counsel for the assessee submitted that ratio of the medical relief provided to the Parsi Community is negligible. Before us, the Ld. counsel for the assessee the receipt of the loan and their application for the object of the Trust which are available on Paper Book page 24 to 50. A summary of the loan transaction with their application and copy of the general ledger showing the application rust has been filed first time before us as additional evidence. In the case, the Ld. CIT(E) has pointed out that liability of the payment of the rent arose in the year under consideration whereas loans have been taken see has contended that expenses of the trust documents filed are for examining this issue of the application of nses on charitable purposes. Therefore, we admit the documents as additional evidence and restore the matter back to the file of the Ld. CIT(E) for deciding the matter afresh. As far as second issue is concerned, the Ld. CIT(E) may also verify the percentage of the persons of Parsi Community benefited from the charitable activity of the assessee and decide the issue in accordance with law. 4. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court Sd/ (SANDEEP SINGH KARHAIL JUDICIAL MEMBER Mumbai; Dated: 18/02/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// ITA No. 5366/MUM/2024 matter back to the file of the Ld. CIT(E) for deciding the matter afresh. As far as second issue is concerned, the Ld. CIT(E) may also ge of the persons of Parsi Community benefited from the charitable activity of the assessee and decide the issue in accordance with law. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 18/02/2025. Sd/- Sd/ SANDEEP SINGH KARHAIL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Masina Hospital Trust 6 ITA No. 5366/MUM/2024 matter back to the file of the Ld. CIT(E) for deciding the matter afresh. As far as second issue is concerned, the Ld. CIT(E) may also ge of the persons of Parsi Community benefited from the charitable activity of the assessee and decide the issue in In the result, the appeal of the assessee is allowed for /02/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai "