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II. Direct Tax Case laws:
1. Delhi State Aids Control Vs. ITO, ITA No. 2906/Del/2010, Date of Decision: 5.7.2013, ITAT- Delhi
Section 12A of the Income Tax Act, 1961
Whether the
advances made by one trust to another trust registred u/s 12A of the
Act and used by that trust for charitable purpose would qualify for
exemption u/s 11 of the Act by the first trust irrespective of
accounting treatment followed?
Held - Yes
The assessee
is a registered society u/s 12A of the Act and it is a Govt.
organization under the Govt. of Delhi. During the year under
consideration, Assessee had received grants from various sources. Out of
total grants, a part of grant was given, for charitable purposes, by
the assessee to the peripheral units who itself were registered
charitable institutions and the same was directly taken to balance sheet
instead of Income & Expenditure Account. The AO held that grants
directly credited in the balance sheet were not used for charitable
purposes and hence the total use for charitable purposes was less than
85% of total income.
The assessee
has followed the Instruction No.1132 dated 5.1.1978 issued by CBDT
stating that the payment of sum by one charitable trust to another for
utilization by the donee trust towards its charitable object was proper
application of income for charitable purposes in the hands of donee
trust and donor trust will not loose exemption u/s 11 of the IT Act
merely because the donee trust did not spend the donation during the
year of receipt itself.
Held that the
accounting practice followed by the assessee cannot come in the way of
entitlement of exemption to the assessee as the sums were actually
distributed to the charitable organizations and in view of CBDT
Instruction No. 1132, these payments shown by assessee as advances are
in fact a proper utilization of funds of the assessee for charitable
purposes.
(Please click here for judgment)
2. M/s. Mascon Technical Services Limited Vs. The
Commissioner of Income Tax, TC (Appeal) No. 2699 of 2006, Dated:
23.07.2013, Madras High Court
Whether
expenditure incurred to meet out the need for working funds in which
expansion of share capital was undertaken, is capital expenditure even
when the purpose for which expenditure was incurred did not result in
creation of an asset or benefit due to intervention by an external
agency.
Held - Yes
The assessee
claimed deduction under the caption 'share issue expenses paid during
the year deferred in books'. The expenditure was claimed as revenue as
the same was expended to augment its working capital. The assessee went
for public issue and after incurring expenditure, just before the public
issue, by reason of the orders from the SEBI, the assessee could not
achieve the purpose.
It is an
accepted fact, as evident from various judicial pronouncements, that
fees paid to the Registrar of Companies for expansion of the capital
base of a company is directly related to the capital expenditure
incurred by the company and although incidentally that would certainly
help in the business of the company and may also help in profit making,
it still retains the character of a capital expenditure since the
expenditure is directly related to the expansion of the capital base of
the company.
Held that on
account of the abortive efforts, the expenditure incurred would not lose
its character as capital expenditure as the assessee had admittedly
took steps to go for public issue and after incurring expenditure, just
before the public issue, by reason of the orders from the SEBI, the
assessee could not go in for public issue.
(Please click here for judgment)
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