IT: Where interest-free loans provided by assessee-societies to its associate societies did not violate provisions of section 13(3), exemption under section 11 could not be denied to assessee
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[2013] 38 taxmann.com 193 (Madhya Pradesh)
HIGH COURT OF MADHYA PRADESH
Commissioner of Income-tax, Bhopal
v.
Maa Vaishnav Education Society*
KRISHN KUMAR LAHOTI, ACTG. CJ.
AND M.A. SIDDIQUI, J.
AND M.A. SIDDIQUI, J.
IT APPEAL NOS. 169 & 171 OF 2012†
JUNE 19, 2013
Section 13, read with section 11, of the Income-tax Act, 1961 - Charitable or religious trust - Denial of exemption [Interest-free loan to associate societies] - Assessment year 2006-07 - Whether where assessee-society provided interest-free loans to its associate societies, which were registered under section 12AA, providing of such loan did not violate provisions of section 13(3), and, thus, exemption under section 11 could not be denied to assessee - Held, yes [Para 8] [In favour of assessee]
Sanjay Lal for the Appellant. Mukesh Agrawal for the Respondent.
ORDER
Krishn Kumar Lahoti, Actg. CJ. - As both the appeals are preferred on similar grounds before this Court, both the appeals are being decided by this common order. For the convenience, we have taken facts from I.T.A. No.169/2012.
2. This appeal is directed against an order dated 09.05.2012 by the Income Tax Appellate Tribunal, Indore Bench, Indore in I.T.A. No.73/Ind/2011 by which an appeal preferred by the assessee against the order of the Commissioner of Income Tax (Appeals) in Appeal No.CIT(A)-I/BPL/IT-244/08-09 was allowed and the order of the assessing officer, modified by the Commissioner of Income Tax (Appeals), was set aside and it was held that the interest free loans lent by the respondents to three societies was exempted as the assessee was registered under Section 12AA of the Income Tax Act, 1961 (hereinafter referred to as 'the Act") and there was no violation of section 13 of the Act.
3. Learned counsel for the appellant submitted that this appeal involves substantial questions of law as are framed in the memo of appeal and this appeal may be admitted on the aforesaid substantial questions of law.
4. To appreciate the aforesaid contention, it would be appropriate if the factual position in the case may be looked into.
5. This matter relates to Assessment Year 2006-2007 for which the assessee had filed its return of total income declaring income as nil on 30.10.2006. The respondent runs a College namely Sri Satya Sai Institute of Science and Technology. The case of the respondent was selected for scrutiny and a notice under Section 143(2) of the Act was issued to it on 18.06.2007. During the assessment proceedings, the assessing officer had found that the assessee was a registered society, registered with the Registrar of Firms and Societies, Bhopal. The by laws of the Society were placed on record. The assessing officer had found that the assessee had claimed exemption under section 10(23C)(vi) of the Act on the ground that the object of the Society was to provide education. The exemption was claimed under sections 11 and 12 of the Act. The assessing officer after examining the claim of the assessee had found that the CIT, Bhopal vide order dated 29.10.2007 had rejected the application of the assessee seeking approval for exemption under Section 10(23C)(vi) of the Act, therefore, the assessee's case was to be examined under Section 13 of the Act and the Trust was required to be registered under Section 12A of the Act. The assessing officer had found that section 13(1) was applicable and sections 11 and 12 were not applicable and the assessee was liable to be assessed accordingly. The assessing officer further directed for initiating penalty proceedings under Section 271(1)(c) of the Act and computed total income of Rs.3,07,41,430/- by an order dated 17.12.2008.
6. Aggrieved by the order of Assessing Officer, the respondent had preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) had allowed the appeal in part, however, confirmed the finding of Assessing Officer on the ground that respondent had violated the provisions of Section 13(2) of the Act and, therefore, the assessee was not entitled for exemption under Sections 11 and 12 of the Act.
7. Aggrieved by the order passed by the Commissioner of Income Tax (Appeals), the respondent had preferred an appeal before the Income Tax Appellate Tribunal. The Tribunal considered the matter and have found that the matter of the assessee for assessment year 2004-2005 was examined by the Tribunal vide order dated 27.11.2009 and recorded findings that the assessee was imparting education by running Colleges. The assessing officer had declined deductions under sections 11 and 12 of the Act on the ground that there was infringement of the provisions of Section 13 of the Act on account of interest free loans given to three associates namely Pyramid Education Society, Shefali Education Society and RKDF Education Society. The Tribunal had found that the Shefali Education Society and RKDF Education Society were registered under Section 12AA of the Act of which registration certificates were placed before the assessing officer. These were charitable societies engaged in providing education. The similar loans were given by the assessee society in the year 2004-2005 and the same issue was raised before the Tribunal and the Tribunal vide order dated 27.11.2009 had decided the same in favour of the assessee. The Tribunal have further found that M/s Pyramid Education Society was not registered under Section 12AA of the Act but was a charitable society registered with the Registrar of Societies under the M.P. Societies Registration Act, 1973 with the same object of education. The amount of loan lent to the Society was Rs.69,370/-. The Commissioner of Income Tax (Appeals) had applied the provisions of section 13(3) read with section 13(2)(a) of the Act. For application of the aforesaid provision, share in profit was required to be 20% but there was no such profit in the society. On the aforesaid ground, the Tribunal have found that there was no infringement of the provisions as contained in Section 13(3) of the Act for lending amount of Rs.69,370/- to M/s Pyramid Education Society. On the aforesaid ground, the appeal was allowed and the order of Assessing Officer was set aside. This order is under challenge in this appeal.
8. We have considered the contention of the appellant and find that merely the respondent society had given interest free loan to another society, so the loan was neither investment nor deposit. The provisions as contained in Section 13(3) of the Act were not applicable. The aforesaid is a finding of fact recorded by Tribunal in which we do not find any error or substantial question of law. Apart from this, the question was already decided by the Tribunal for the assessment year 2004-2005, against which no appeal was preferred.
9. In view of the aforesaid factual position involved in these cases, we find that the present appeals do not involve any substantial questions of law for our consideration. Apart from this, Delhi High Court in DIT (Exemption) v. Acme Educational Society [2010] 326 ITR 146 have examined the similar issue and decided the matter in favour of the assessee.
10. In the light of the aforesaid discussion, we find that these appeals do not involve any substantial question of law for our consideration and are dismissed at admission stage, with no order as to costs.
Regards
Prarthana Jalan
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