2014 (8) TMI 944 - AT - Income Tax

Exemption under section 11 - Revenue contends that Commissioner of Income-tax (Appeals) failed to appreciate that the benefit has been extended to interested persons as defined under section 13(3) of the Act as the transactions were held to be in violation of section 13(1)(c) of the Act and exemption under section 11 was denied. - Held that - The Assessing Officer in the course of assessment proceedings noticed that the assessee- society has given benefits to the executive members and their relatives by way of granting medical aid, marriage aid, old age pension, letting out property, etc. The Assessing Officer did not give any details, i.e., who are the beneficiaries relating to the executive members and who are the executive members getting benefits from the assessee-society. No other details have been furnished by the Assessing Officer in the assessment order except for stating that the assessee-society is giving benefit to the executive members of the society which is a bald statement without any details. The assessee also submits that relatives of executive members are paying market rent to the assessee-society for the use of let out property. Taking the totality of the facts and circumstances of the case into consideration, we are of the considered view that this issue has to be examined afresh in detail by the Assessing Officer before denying deduction under section 11 of the Act. Thus, we restore the matter to the file of the Assessing Officer with a direction to examine the whole issue in detail and decide in accordance with law after providing adequate opportunity to the assessee. - Decided in favour of Revenue.

Summary

Issues:
- Eligibility for exemption under section 11 of the Act
- Violation of sections 13(1)(c) and 13(3) of the Act
- Occupancy of trust properties by executive members and relatives
- Preferential benefits to society members
- Denial of exemption under section 11 of the Act

Eligibility for Exemption under Section 11:
The case involved an appeal by the Revenue against the order of the Commissioner of Income-tax (Appeals) concerning the eligibility of the assessee for exemption under section 11 of the Act for the assessment year 2009-10. The Revenue contended that the Commissioner erred in granting the exemption, arguing that the benefit extended to interested persons, as defined under section 13(3) of the Act, resulting in a violation of section 13(1)(c) and subsequently denying the exemption under section 11. The Assessing Officer claimed that the trust properties were occupied by executive members and their relatives, and preferential benefits were granted to society members instead of the general public. However, the Commissioner held that the Revenue failed to provide sufficient evidence to prove the violations of sections 11 to 13 of the Act.

Violation of Sections 13(1)(c) and 13(3) of the Act:
The Departmental representative argued that the occupancy of society's property by executive members and their relatives constituted a violation of section 13(1)(c) of the Act, as they were benefiting from the trust properties. Referring to a previous case, the representative highlighted that the High Court upheld the denial of exemption under section 11 due to benefits granted to interested persons as defined under section 13(3) of the Act.

Occupancy of Trust Properties and Preferential Benefits:
The Assessing Officer discovered during assessment proceedings that the trust properties were being utilized by executive members and their relatives, leading to the conclusion that benefits were primarily enjoyed by society members rather than the general public. The Revenue argued that the resolution granting preferential benefits to society members was a deliberate act, while the assessee contended that it was a mistake rectified by a subsequent resolution. The assessee emphasized that most benefits were for the general public, with only a few relatives of executive members as tenants paying market rent.

Denial of Exemption under Section 11:
After considering the arguments from both sides and reviewing the lower authorities' orders, the Tribunal found that the Assessing Officer's assessment lacked detailed information regarding the beneficiaries and the nature of benefits provided to executive members. As a result, the Tribunal directed the Assessing Officer to reexamine the issue thoroughly and make a decision in accordance with the law, emphasizing the need for detailed scrutiny before denying the exemption under section 11.

In conclusion, the appeal of the Revenue was allowed for statistical purposes, and the matter was remanded to the Assessing Officer for a detailed reevaluation of the eligibility for exemption under section 11 of the Act.