High Court Of Kerala
CIT vs. Shree P. Subramoniam Religious Trust
Section 11, 13(1)(d)
Asst. Year 1993-94, 1994-95
C.N. Ramachandran Nair & Harun-Ul-Rashid, JJ.
IT Appeal No. 59 of 2007
16th December, 2008
Counsel appeared :
P.K.R. Menon & Jose Joseph, for the Appellant : T.M. Sreedharan & V.P. Narayanan, for the Respondent
JUDGMENT
c.n. Ramachandran Nair, J. :
The common question raised in the two appeals filed by the Department for the asst. yrs. 1993-94 and 1994-95 is whether the Tribunal was justified in granting exemption on the expenditure incurred by the assessee by way of advance made to a cement trader for purchase of cement for construction purposes for the trust. We have heard standing counsel appearing for the appellant and counsel appearing for the assessee.
2. Assessee is a charitable institution which enjoys registration under s. 12A of the IT Act. During the asst. yrs. 1993-94 and 1994-95, assessee claims to have spent an amount of Rs. 1,50,000 and Rs. 1 lakh respectively towards charitable purposes as contemplated under s. 11(1)(a) of the Act. However, on enquiry, the officer noticed that these amounts were just advanced to a cement trader for purchase of cement for construction of a pilgrim centre at Sabarimala. According to the assessee, construction requires permission and approval from concerned authorities and therefore, advance for purchase of cement is in the form of application of funds for charitable purpose. On the other hand Departmental Representative referred to the findings of the AO and of the first appellate authority and contended that even at the time of hearing the appeal in 2000, the assessee could not adduce any evidence for concrete steps taken for construction of pilgrim centre. We find from the order of the CIT(A) that even during 2000, the assessee did not have any evidence of actual utilisation of funds advanced to the cement trader for charitable purpose. Eligibility for exemption under s. 11(1) is on the actual application of funds for charitable purposes. If any part of it is to be allowed as a deduction over the expenditure, it has to be carried forward strictly in accordance with the procedure contemplated under s. 11(2) of the Act. The assessee has no case that the amount advanced to cement trader is set apart for future use in terms of the provisions of the Act. On the other hand, assessee’s case is that the advance paid for purchase of cement should be treated as actual application of funds for religious purposes.
3. We are unable to uphold the order of the Tribunal because Tribunal allowed the claim just based on an affidavit filed by the trustee that the funds advanced will be utilised for the purchase of cement later. There is nothing wrong in advancing funds for purchase of cement, if the cement is to be utilised for construction purpose for the trust. However, in this case except payment made to a trader, there is nothing to indicate as to the terms or the time for purchase of cement. The trader has no doubt confirmed receipt of advance for supply of cement. However, there is nothing to indicate that any approval or permission is granted or is expected within a reasonable time for construction to justify the advance made to the trader. We are of the view that this advance is only siphoning off funds of the trust and there is no immediate requirement of cement as no concrete proposal was there for construction of pilgrim centre. Even at the time of hearing appeals by the CIT(A) which is after 5-6 years of expiry of the assessment year, the assessee has no case that the funds advanced were in fact utilised for the purpose for which it was advanced. At the maximum it is in the form of an investment or deposit which does not qualify for deduction under s. 13(1)(d) of the Act. We, therefore, allow the appeals reversing the orders of the Tribunal and restoring the assessment confirmed by the CIT(A)’s order.
[Citation : 326 ITR 393]
