The Income Tax Appellate Tribunal (ITAT), Chandigarh bench consisting of N.K. Saini, Vice President, and Sudhanshu Srivastava, Judicial Member held that repayment of loan taken for construction of the building by assessee Trust considered as income if for charitable purposes.
The assessee society, M/s. Ram Asra Goyal Education & Research Society was registered under the Societies Registration Act and also registered u/s. 12AA of the Income-tax Act, 1961. 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 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 Assessment Year (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/-.
The Tribunal relied on the judgment in CIT vs. Maharana Mewar Charitable Foundation and held that the anomaly which has arisen that if the Trust takes a loan for the purposes of incurring expenditure for charitable and religious purposes in a particular year and the said loan is repaid out of the income of the subsequent year, the said repayment would be entitled to the exemption from tax u/s. 11(1).
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