2004 (10) TMI 547 - AT - Income Tax

Summary

Issues:
1. Denial of exemption under section 11 to the assessee-society by the Assessing Officer.
2. Treatment of expenditure on agricultural and dairy operations as application of income.

Analysis:

Issue 1: Denial of exemption under section 11
The appeal was filed by the Revenue against the order of the CIT(A) denying exemption under section 11 to the assessee-society. The Assessing Officer disallowed the exemption claim as he found that the major expenditure of the society was related to agricultural and dairy activities, not charitable activities. The CIT(A) disagreed, stating that the use of the society's property by another charitable trust constituted a charitable activity. The Revenue contended that the use of property by other societies did not align with the society's objects and was not a charitable activity. However, the Tribunal noted that the societies shared common aims and objectives, and the use of the property for charitable purposes by other societies was considered a charitable activity. Citing judicial precedents, the Tribunal upheld the CIT(A)'s decision, stating that the use of property by other societies aligned with the charitable nature of the society's objectives, thereby entitling it to exemption under section 11.

Issue 2: Treatment of expenditure on agricultural and dairy operations
The Revenue raised a concern regarding the treatment of expenditure on agricultural and dairy operations as application of income by the CIT(A). While the CIT(A) did not explicitly address this in the order, it was noted that the income derived from these activities exceeded the expenses incurred, as per the income and expenditure account. Since the activities were conducted as separate business activities and income was determined after deducting related expenses, the Tribunal found no merit in the Revenue's argument. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this issue.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to grant exemption under section 11 to the assessee-society. Additionally, the Tribunal found no issue with the treatment of expenditure on agricultural and dairy operations as application of income, as the income derived from these activities covered the related expenses.