Educate India Society Vs DCIT (ITAT Delhi)
ITAT Delhi held that denial of exemption u/s. 11 & 12 of the Income Tax Act not justified as loans are borrowed at higher rate solely for the benefit of the society and under the circumstances which are beyond the control of the assessee-society.
Facts- Assessee society is registered in 1995 under the Society Registration Act, 1860. The Assessee is running educational institutions. The assessee is registered u/s 12A of the Act in terms of the registration granted vide orders dated 01.07.1996 and further registered u/s 80G(5)(vi) vide order dated 26.09.2007.
During the course of assessment proceedings, it was noticed by the AO that assessee had paid interest at comparatively higher rate than from the rates paid to bank, to the persons specified u/s 13(3) of the Act. AO thus, hold that the interest paid to specified persons being excess of prevailing market rate on which the assessee has taken loan from the bank denied the benefit of exemption u/s 11 & 12 of the Act.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that assessee under the circumstances beyond its control had obtained loans at a higher rate solely for the benefit of society thus it cannot be held that it had violated the provisions of section 13(1)(c) and 13(2) read with Section 13(3) of the Act with the sole intention to transfer any direct or indirect benefit to them. Accordingly, we set aside the orders of the AO and CIT(A) withdrawing the exemption available to the assessee u/s 11 & 12 which is hereby restored.
