October 2010
Charitable purpose : Exemption u/s.11 : S. 11, S. 12A and S. 13(1)(d) of Income-tax Act, 1961 : A.Y. 2005-06 : Interest-free loan by assessee-society to another society : Loan neither ‘investment’, nor ‘deposit’ : Both societies having similar objects, re
By K. B. Bhujle | Advocate
New Page 2
2 Charitable purpose :
Exemption u/s.11 : S. 11, S. 12A and S. 13(1)(d) of Income-tax Act, 1961 : A.Y.
2005-06 : Interest-free loan by assessee-society to another society : Loan
neither ‘investment’, nor ‘deposit’ : Both societies having similar objects,
registered u/s.12A and approved u/s.80G : Loan later repaid : Assessee entitled
to exemption u/s.11.
[DIT (Exemption) v. Acme
Educational Society, (Del.)]
For the A.Y. 2005-06, the
Assessing Officer disallowed the claim of the assessee-society for exemption
u/s.11 of the Income-tax Act, 1961 on the ground that the assessee-society had
given a loan of Rs.90,50,000 to another educational society, whose president was
the brother of the president of the assessee-society. The Assessing Officer held
that there was a violation of S. 13(1)(d) read with S. 11(5) of the Act. The
Commissioner (Appeals) allowed the assessee’s claim and held that there was no
violation of S. 13(1)(d) read with S. 11(5) of the Act, as both societies had
similar objects and that the Assessing Officer had not brought anything on
record to show that the advance of Rs.90,50,000 was a ‘deposit’ or ‘investment’.
The Tribunal upheld the decision of the Commissioner (Appeals).
In appeal by the Revenue,
the Delhi High Court upheld the decision of the Tribunal and held as under :
“(i) The interest-free
loan of Rs.90,50,000 given by the assessee-society to another society did
not violate S. 13(1)(d) read with S. 11(5) of the Act, as the loan was
neither an ‘investment’, nor a ‘deposit’. Moreover both societies had
similar objects and were registered u/s.12A of the Act and had approvals
u/s.80G.
(ii) The fact that the
loan was interest-free and had been subsequently returned was also
significant.”
