DCIT Vs Ram Asra Goyal Education & Research Society (ITAT Chandigarh)
Facts- The assessee society was registered under the Societies Registration Act and also registered u/s. 12AA of the Income-tax Act, 1961. The assessee filed its ROI on 03-09-2014 declaring Nil income. Later on, the case was selected for scrutiny. During the course of assessment proceedings, the Assessing Officer (AO) issued the notice to the assessee to show cause as to why the donation was paid to M/s. Ashoka Educational Trust may not be disallowed. The AO after considering the above submissions of the assessee observed that the assessee failed to justify the payments made to M/s. Ashoka Educational Trust, which is registered u/s. 12AA of the Income Tax Act for the AY 2015-16. The AO observed that during the inquiry u/s. 133(6) of the Act, it was found that in its reply M/s. Ashoka Educational Trust stated that no amount had been received by it. The AO also observed that for the AY 2014-15 there was no activity seen related to the charity or education by M/s. Ashoka Educational Trust for the A.Y 2014-15 and the investments were made in the fixed assets and therefore, disallowed a sum of Rs. 9,50,000/-.
Being aggrieved the assessee carried the matter to the Ld. CIT(A). CIT(A) deleted the disallowance. Accordingly, the department preferred the present appeal. Another grievance of the department was allowing repayment of loan as application of income.
Conclusion- We have considered the rival submissions of both the parties and perused the material available on record. In the present case it appears that the assessee had paid a sum of Rs.9,50,000/- to M/s. Ashoka Educational Trust as corpus fund. The assessee society paid the said amount through banking channel and at every step claimed the said amount was paid as donation. Even the recipient, M/s. Ashoka Educational Trust also confirmed the same before the AO as well as before the Ld. CIT(A) that the amount in question was received by them as a donation to be utilised for the purpose of charitable activities of M/s. Ashoka Educational Trust. We, therefore, considering the totality of the facts are of the view that the Ld. CIT(A) was fully justified in deleting the addition made by the AO. Ground no. (i) raised by the department is dismissed.
With regard to repayment of loan it was held that in the case of CIT Vs. Janmabhumi Press Trust, Hon’ble Karnataka High Court has held that the repayment of debt incurred by the trust for construction of the building should be treated as application of the income of the trust for charitable purpose. In the present case also the assessee utilized the loans to create the fixed assets and the loan was taken and shown as receipt while on repayment, it was considered as application of income. Therefore, following the ratio laid down by the Hon’ble Karnataka High Court the Ld. CIT(A) was fully justified in allowing the claim of the assessee.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
These two appeals by the department are directed against the separate orders dt. 04/09/2018 and 14/03/2019 of the CIT(Appeal), Patiala for the assessment years 2014-15 and 2016-17 respectively.
2. Since the issues involved are common in these appeals which were heard together, therefore, these are being disposed off by this common order for the sake of convenience and brevity
3. At the first instance we will deal with appeal for the A.Y 2014-15 in ITA No. 1578/Chd/2018.
4. Following grounds have been raised in this appeal:
i. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law and facts in deleting the addition of Rs. 9,50,000/- on account of payment made by the assessee to M/s. Ashoka Educational Trust by relying upon the additional evidence under Rule 46A of the Income Tax Rules filed by the assessee during the appellate proceedings.
ii. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law and facts in allowing the repayment of loan as application of income. This was rightly disallowed by the assessing officer by holding that since the assessee has not shown loans taken as income hence they cannot be allowed as application of income at time of repayment.
iii. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law and facts in deleting the addition of Rs. 2,31,30,585/- under section 68 r.w.s 115BBE of the Act on account of unsecured loans by relying upon the additional evidence under Rule 46A of the Income Tax Rules filed by the assessee during the appellate proceedings. The addition was rightly done as the assessee had failed to file relevant evidences during the assessment proceedings.
iv. That the appellate craved to add, delete or and any grounds of appeal on or before the date it is heard and disposed off.
5. Vide ground no. (i) the grievance of the department relates to the deletion of addition of Rs. 9,50,000/- made by the Assessing Officer ( in short, the AO) on account of payment made by the assessee society to M/s. Ashoka Educational Trust.
6. Facts related to this issue in brief are that the assessee society was registered under the Societies Registration Act (XXI of 1860) vide registration No.46 of 2008-09 dt. 14-05-2008 and also registered u/s. 12AA of the Income-tax Act, 1961 (hereinafter referred to as ‘ the Act’ ) with the Ld. CIT, Patiala vide Order No.CIT/PTA/TECH/12-A/11/2008-09/7608 dt. 02/01/2009. The assessee filed its return of income on 03-09-2014 declaring Nil income. Later on the case was selected for scrutiny. During the course of assessment proceedings the AO issued the notice to the assessee to show cause as to why the donation paid to M/s. Ashoka Educational Trust may not be disallowed by observing as under:-
“On perusal of the income and expenditure account and details filed by you, it is seen that you have paid amount of Rs.9,50,000/- to M/s. Ashoka Educational Trust as donation. On perusal of your reply it is seen that M/s. Ashoka Educational Trust is not registered u/s. 12AA for AY 2014-15. During the inquiry u/s. 133(6) of I.T Act it is also found that M/s. Ashoka Educational Trust has filed in its reply that no amount has been received by M/s. Ashoka Educational Trust and it is also verified from the balance sheet and income & expenditure account of M/s. Ashoka Educational Trust that you have not paid any amount to M/s. Ashoka Educational Trust. In these facts when M/s. Ashoka Educational Trust has not received any donation from you and not registered u/s. 12AA and not spent on educational purpose, then this amount of Rs.9,50,000/- is not allowable as application of income. This expense is disallowed and will be added into surplus. “
6.1. In response, the assessee vide reply dt. 26-12-2016 submitted as under;
