Repayment of Debt is Application of Income If Such Debt Was Taken as Part of Receipts of Charitable Trust: ITAT [Read Order]

The Income Tax Appellate Tribunal ITAT) recently held that repayment of debt is application of income if such debt was taken as part of receipts of charitable trust.

Assessee , Spiritual Regeneration Movement Foundation of India is a   society engaged in teaching of Transcendental Meditation

 through its centers situated in various cities in the country. The assessee society raised loans of Rs.1.25 crores and Rs. 3.99 crores in Assessment year 2009-10 and 2010-11 which were utilized in its objects including acquisition of fixed assets in furtherance of its charitable objectives. Out of which loans of Rs.4.75 crores were repaid and such repayment of loans was claimed as application of income. The said claim of repayment of loan was rejected by the assessing officer. Against this order assesee filed an appeal before ITAT.

Akarsh Garg, counsel for the assessee contended that ” it is a liability and hence cannot be shown as income in its year of rising explains that an income which has not been offered in its income and expenditure account cannot be claimed as application. The assessee further claims that the assessee is required to repay the loan and hence is claimed as application is not tenable as per the provisions of the Act.“

 Maninder Kaur counsel for revenue contented that it is clear from the circular no. 100 of 24.01.1973 of Central Board of Direct Tax that the repayment of loan taken to fulfil the objectives of the trust will amount to application of income.

After considering the contentions of the both parties the division bench of ITAT comprising N. K. Billaiya, (Accountant) and. Kul Bharat, (Judicial Member) dismiss the appeal filed by the assessee and observed that circular has not made clear about whether the loan at the time of being taken should be treated as income but unless such debt is taken as part of receipts by the charitable trust only then the repayment of such debt would be accepted as application of income.

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