2014 (4) TMI 749 - HC - Income Tax

Violation of section 11(4) and 11(4A) of the Act Entitlement for exemption Held that - There is no reason to interfere with the findings of the Tribunal in the order so far as the question of entitlement to the benefit of exemption u/s 11 is concerned also, there is no error in the findings with respect to violation of Section 11 (4) and 11 (4A) of the Act. Deduction for legitimate expenses and depreciation Held that - No findings were recorded by the CIT(A) with respect to the permissible heads of expenditure including depreciation - The Tribunal merely set aside the order of the CIT (A) having regard to the findings of the Court in the previous years thus, the matter is required to be remitted back to the AO for examination of the aspect of granting allowability of expenditure and depreciation Decided partly in favour of Assessee.

Summary

Issues:
1. Entitlement to exemption under Section 11
2. Violation of Section 11 (4) and 11 (4A)
3. Taxation of gross receipts without deductions for expenditure and depreciation

Entitlement to exemption under Section 11:
The High Court examined the case where the assessee was aggrieved by an ITAT order which held that the assessee violated Section 11 (4) and 11 (4A), thus disentitling them from claiming exemption. The Court, after considering the reasoning in previous appeals, upheld the ITAT's findings regarding the entitlement to the benefit of exemption under Section 11. It was concluded that there was no reason to interfere with the Tribunal's decision on this matter.

Violation of Section 11 (4) and 11 (4A):
The Court acknowledged the assessee's grievance that despite being ruled disentitled to exemption as a charitable trust, the entire gross receipts were being taxed without allowing deductions for legitimate expenditure and depreciation. The CIT (A) had initially allowed the assessee's contention for exemption under Section 11, but failed to address the issue of permissible heads of expenditure including depreciation. The Tribunal, following the Court's previous rulings, set aside the CIT (A)'s order. Consequently, the Court directed the matter to be sent back to the Assessing Officer for a thorough examination of the allowability of expenditure and depreciation, if admissible, in accordance with the law.

Taxation of gross receipts without deductions for expenditure and depreciation:
In response to the appeal, the Court partially allowed it by directing the Assessing Officer to reevaluate the aspect of granting deductions for legitimate expenditure and depreciation. The Court emphasized that the matter should be reviewed in compliance with the law, indicating a need for a detailed examination of the expenditure and depreciation allowances.