2012 (5) TMI 717 - AT - Income Tax

Summary

Issues Involved:
1. Eligibility for benefits u/s 11 & 12 of the Income-tax Act, 1961.
2. Applicability of Section 13(2)(a) and Section 13(2)(h).
3. Deletion of addition on account of disallowance of donation.
4. Deduction claimed as an application of income u/s 11 and 12 for acquisition of fixed assets.
5. Deletion of addition on account of telephone and travelling expenses.
6. Eligibility for deduction u/s 11(1)(a).

Summary:

1. Eligibility for benefits u/s 11 & 12 of the Income-tax Act, 1961:
The CIT(A) held that the assessee is eligible for the benefits u/s 11 & 12 and that the provisions of Section 13 are not applicable. This decision was based on a previous Tribunal decision in the assessee's own case, which found that the provisions of Section 13(2)(h) read with Section 13(2)(a) and Section 13(1)(b)(1) are not applicable.

2. Applicability of Section 13(2)(a) and Section 13(2)(h):
The A.O. inferred a violation of clause (h) of Section 13(2) due to an interest-free loan to a related concern. However, the CIT(A) and the Tribunal found that none of the persons of the assessee society had substantial interest in the related concern, thus Section 13 provisions were not applicable.

3. Deletion of addition on account of disallowance of donation:
The A.O. disallowed a donation of Rs. 5,05,00,000 to Devi Shakuntala Thakral Charitable Foundation, citing a violation of Section 13(1)(c)(ii). The CIT(A) directed the A.O. to allow the exemption u/s 11, stating that the donation was made out of the current year's income and that the provisions of Section 13 were not attracted.

4. Deduction claimed as an application of income u/s 11 and 12 for acquisition of fixed assets:
The A.O. denied the deduction on the grounds that the benefits of Section 11 & 12 were not allowed. The CIT(A) allowed the deduction, stating that the assets were acquired for the purpose of advancing the society's objects, and thus should be treated as an application of income in terms of Section 11.

5. Deletion of addition on account of telephone and travelling expenses:
The A.O. disallowed Rs. 1,27,144/- for telephone expenses and Rs. 1,39,644/- for travelling expenses, citing personal use by society members. The CIT(A) deleted these disallowances, noting that the expenses were reasonable and incurred for the society's purposes, not for personal benefit.

6. Eligibility for deduction u/s 11(1)(a):
The A.O. denied a deduction of Rs. 1,65,22,945/- due to an alleged violation of Section 13. The CIT(A) held that the assessee was eligible for the deduction u/s 11(1)(a), as there was no violation of Section 13.

Conclusion:
The Tribunal upheld the CIT(A)'s decisions on all grounds, confirming that the assessee was entitled to the benefits and deductions claimed u/s 11 & 12 of the Income-tax Act, 1961, and that the provisions of Section 13 were not applicable. The appeal of the Revenue was dismissed.