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Judgment
ORDER
Per Renu Jauhri, Accountant Member:
This appeal by the assessee is directed against the order dated 11.02.2026 of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the Assessment Order dated 26.03.2024 passed under section 143(3) r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the Assessment Unit, (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2022-23.
The assessee has raised the following grounds of appeal:
“ 1. Ground No.1: - On the facts and circumstances of the case, the order passed by Ld. CIT(A) is bad both in eyes of law and on facts.
2.Ground No.2: - That the Ld. CIT(A) has erred in law and on facts in confirming the disallowance of repayment of loan of Rs. 3,60,00,000/-, despite all relevant documents, evidences, and submissions having been placed on record.
3.Ground No.3: That the Ld. CIT(A) has erred in law and on facts in not providing a reasonable opportunity of being heard, thereby violating the principles of natural justice.
4.Ground No.4: - That the Ld. CIT(A) has erred in law and on facts in sustaining the penalty proceedings initiated under section 270A of the Act.
5.Ground No.5: - That the appellant reserves the right to add, modify, alter, amend or delete any of the grounds.”
Brief facts ae that the assessee trust filed its income tax return for A.Y. 2022-23 on 28.07.2022 declaring NIL income. The case was selected for scrutiny for verification of repayment large amount of borrowed funds by the assessee. Specifically, the AO held repayment of Rs. 3,60,00,000/- which was claimed as application of income during the year and disallowed the same. Aggrieved, the assessee preferred an appeal before the CIT(A). However, the appeal was dismissed vide order dated 11.02.2026. Further aggrieved, the assessee has filed an appeal before the Tribunal.
Before us, the Ld. AR has submitted that the claim was made in accordance with the relevant provisions of section 11 which is verifiable from the records. In this regard, he has filed copies of reply filed in response to the show cause notice issued by the AO as well as the written submissions made before the CIT(A) explaining that the impugned loans were taken from time to time and mainly in the F.Y. 2013-14 and the same were applied for the purpose of capital expenditure. It was not considered as application in the years of borrowing i.e. A.Y. 2014-15 by the assessee. Repayment of Rs. 3,60,00,000/- was made in F.Y. 2021-22 and the conditions prescribed in Explanation (4) to section 11 are fulfilled, therefore, the same has rightly been claimed as application for charitable purposes in the year under consideration.
Ld. DR, on the other hand, has strongly relied on the orders of the lower authorities and argued that the assessee has not fulfilled the prescribed condition u/s 11 of the Act in respect of the impugned repayment.
We have heard the rival submissions and copies of financial statements of the year of borrowing and the year of repayment have been carefully perused. It is clear from the documents placed on record that the assessee has returned the borrowed funds for acquisition of capital assets and had not claimed it as application in the year of borrowing. Relevant extract of borrowing and repayment are as under:
5.1 Loans taken & Application of funds (F.Y. 2013-14)
5.2 Details of repayment of borrowed funds in F.Y. 2021-22
In support of above, Ld. AR has filed requisite documentary evidences and the extract of ITR for A.Y. 2013-14. Further, Ld. AR has placed reliance on the decision of the Hon’ble Jurisdictional High court in DIT (Exemption) vs. Span Foundation in ITA No. -767/2008 & 789/2008 dated 04.11.2008, wherein it has been held that repayment of funds borrowed for construction of building amounts to application of income for charitable purposes.
In view of the above facts and circumstances, we are of the considered view that the assessee is entitled to claim the repayment of loan of Rs. 3,60,00,000/- as application of income during the year under consideration. Hence, the addition of Rs. 3,60,00,000/- made by the AO and confirmed by CIT(A), is hereby deleted.
In the result, appeal of the assessee is allowed.