2013 (7) TMI 812 - HC - Income Tax

Deduction u/s 10(23C)(iv) and 11 - Property purchased in name of individual - Tribunal granted deduction as assessee runs school - Held that - The sole objection raised by the Assessing Officer for denying the exemption to the assessee was that the property was purchased in the name of Smt. Bharti madhok, director of the assessee society. The assessee is a society which cannot represent itself before the Registrar for the purpose of registration of the sale deed. Somebody has to represent the assessee society in the sale deed for getting it registered. The director of the assessee society is a competent person to represent the assessee society for getting the sale deed registered - It is not a case of diversion of funds for purchasing the property for the benefit of the director. It is not in dispute that the land and building is used for the purpose of the assessee society for educational purposes. In the assessment year 2003-04 the Additional Commissioner of Income tax issued directions to the Assessing Officer on the same set of facts and directed to grant exemption to the assessee. It was also held that the vehicles are purchased for the benefit of the assessee society. Even the CBSE has granted recognition and approval to the assessee society to run the educational school in the same property. Exemptions under Section 10 (23c) (vi) of the Act can be claimed by the assessee without applying for registration under Section 12A of the Act, as it is not required to fulfill the conditions mentioned under Section 11 of the Act in claiming exemption under Section 10 (23c) (vi) of the Act, as explained by this Court in Commissioner of Income Tax and another vs. M/s Jeevan Deep Charitable Trust 2012 (12) TMI 818 - ALLAHABAD HIGH COURT Decided against Revenue.

Summary

Issues:
- Appeal under Section 260-A of the Income Tax Act arising from an order of the Income Tax Appellate Tribunal, Allahabad Bench, Allahabad dated 24.12.2008 for the assessment year 2004-05.
- Substantial questions of law regarding exemption under Section 11 and Section 10 (23c) (vi) of the Act, violation of conditions, and utilization of funds by the assessee society.
- Disallowance of exemption by the AO due to property purchase in the name of the director, leading to allegations of avoiding tax payment and misuse of profits.
- CIT (A) allowing the appeal by the assessee society based on maintaining accounts, lack of evidence for diversion of funds, and property registration in the name of the director.
- ITAT findings supporting the society's educational purpose, fund sources for property purchase, and correction of sale deed through Civil Court direction.
- Justification of CIT (A) and ITAT decisions in allowing exemptions and confirming no violation of conditions by the society.
- Clarification on exemptions under Section 10 (23c) (vi) without Section 12A registration, as per previous court rulings.

Analysis:
The judgment involves an Income Tax Appeal under Section 260-A of the Income Tax Act concerning the assessment year 2004-05 based on substantial questions of law. The AO disallowed exemption under Section 11 and Section 10 (23c) (vi) to the assessee society, alleging tax avoidance and misuse of profits due to property purchase in the director's name. However, the CIT (A) allowed the appeal, emphasizing the society's educational purpose, proper fund utilization, and property registration details. The ITAT further supported the society's position, highlighting fund sources for property purchase and the correction of sale deed through Civil Court direction.

The ITAT's findings affirmed the society's compliance with educational objectives, fund sources for property acquisition, and the legal rectification of the sale deed. The judgment justified the CIT (A) and ITAT decisions in granting exemptions and confirming no breach of conditions by the society. Moreover, the judgment clarified that exemptions under Section 10 (23c) (vi) can be claimed without Section 12A registration, citing precedent court rulings.

In conclusion, the judgment dismissed the Income Tax Appeal, upholding the decisions in favor of the assessee society. The detailed analysis covered issues related to exemption denial, property purchase concerns, fund utilization, and compliance with legal requirements, providing a comprehensive overview of the case's intricacies and legal implications.