2016 (11) TMI 1557 - AT - Income Tax

Entitlement to exemption u/s 10(23C)(iv) - continuity of claim - Held that - Board s circulars are binding on Income Tax authorities. CIT(Appeals) therefore correctly relied upon Board s circular No. 7/2010 for the proposition that once approval u/s 10(23C)(iv) have been granted to the assessee it would be valid until withdrawn. DR could not contribute anything on this issue and no infirmity have been pointed out in the order of the ld. CIT(Appeals). Disallowance of capital expenditure u/s 37(1) - Held that - On perusal of the Income & Expenditure account for year ending 31.03.2012 found that revenue grants on income side have been shown after reducing the amount utilized for capital expenditure. No further expenditure has been debited. These finding of facts recorded by ld. CIT(Appeals) have not been rebutted in any manner. Further the amounts spent by assessee are clearly application of its income in nature which have been spent to achieve the objects of the assessee. Further when assessee has been granted approval under section 10(23C)(iv) of the Income Tax Act and exemption is available to the assessee there is no question of disallowing any amount of this nature. - Decided against revenue

Summary

Issues:
1. Disallowance of exemption claimed under section 10(23)(iv) for assessment year 2012-13.
2. Disallowance of capital expenditure under section 37(1) of the Income Tax Act.

Analysis:
1. The first issue revolved around the disallowance of exemption claimed under section 10(23)(iv) for the assessment year 2012-13. The Assessing Officer rejected the exemption claim as the approval was not available with the assessee, leading to the assessment of income. The assessee argued that its activities were charitable in nature as defined under Section 2(15) of the Income Tax Act. The Hon'ble Punjab & Haryana High Court allowed a fresh order, and the CIT (Exemption) Chandigarh granted exemption under section 10(23)(iv) w.e.f. assessment year 2006-07 to 2011-12. The CIT(Appeals) relied on Board's circular to uphold that once approval is granted, it is valid until withdrawn, thus allowing the exemption for the assessment year 2012-13. The Tribunal dismissed the revenue's appeal, citing the binding nature of Board's circulars on Income Tax authorities.

2. The second issue pertained to the disallowance of capital expenditure claimed by the assessee under section 37(1) of the Income Tax Act. The Assessing Officer disallowed the expenditure as capital expenditure, which the assessee contested by explaining that the grants were shown on the income side after deducting the amount utilized for capital expenditure. The ld. CIT(Appeals) accepted the explanation, noting that no further expenditure was debited, and the amounts spent were towards the object of the assessee. The Tribunal upheld the decision, emphasizing that the expenditure was an application of income to achieve the assessee's objectives, especially when exemption under section 10(23)(iv) was granted. Consequently, the appeal of the revenue was dismissed.