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2014 (9) TMI 1167 - AT - Income TaxCharitable activities - eligible for exemption u/s 11(1) - unreasonable benefit having been given to persons referred to in S.13(3) - Held that - There was no adverse inference on this issue and only a reference has been made to these salary payments. There is no allegation of unreasonable benefit having been given to persons referred to in S.13(3) by the Assessing Officer. Hence there is no violation which can lead to denial of exemption u/s 11. The assessee is definitely entitled to claim deduction u/s 11 of the Act as registration u/s 12AA is in force. Filing a defective form no.10 - Held that - There was a typographical error and the Ld.CIT(Appeals) held that, when form no.10 is read with the accompanied resolution, the question of anti dating does not arise. We agree with the Ld.Commissioner of Income Tax (Appeals) that this error in Form No.10 is a typographical error and that substance over form has to be the basis of decision. Hence we uphold these findings of the Ld.CIT(A) and dismiss this ground. Accepting audit report in Form no.10B - assessee had, instead of filing Form No.10B, filed an audit report in form no.10BB, before the Assessing Officer - Held that - Case of CIT vs. Trehan Enterprises 1999 (8) TMI 8 - JAMMU AND KASHMIR HIGH COURT held that the requirement in question was merely directory and not mandatory. In any event all the details and audit report in some other form were already before the AO. We uphold this finding of the Ld.Commissioner of Income Tax (Appeals) that he has the power to admit audit report in form no.10B as in this case the Ld.AO has failed to bring to the notice of the assessee that there was a difficulty in the audit report filed in Form 10BB before him.- decided against revenue Computation of taxable income of the appellant - short fall in the application of 85% of the income - Held that - CIT (A) is right in holding that the society is entitled to exemption u/s 11(1) in respect of the capital gains arising from the sale of Dhorka land. In fact this land was purchased for educational activities. This is evident from the various evidences filed by the assessee in the form of a paper book. Hence the submissions of the revenue that this land was not held for educational purposes is factually incorrect. It was due to certain circumstances that the land was sold and the sale proceeds invested in another piece of land, with the sole purpose of using it for educational purposes. On the computation of exemption u/s11 we uphold the contentions of the assesses that only capital gain on sale of land, which is income, has to be taken for the purpose of calculating the application of income as per the provisions of Sec.11(1)(A). There is no short fall in the application of 85% of the income as required by the provisions of Sec.11. In any case the assesses has utilized the entire sale consideration arising out of sale of land, for the purchase of lands in another area as noted by the ld.CIT (A) in his order. - Decided in favour of assessee.
Issues Involved:
1. Status of the assessee as a charitable society and eligibility for exemption under Section 11(1) of the Income Tax Act. 2. Acceptance of a defective Form No. 10 for claiming exemption. 3. Acceptance of Form No. 10B at the appellate stage. 4. Treatment of land held by the society at Dhorka (Gurgaon) for charitable purposes under Section 11(1A) and Section 11(2) of the Income Tax Act. 5. Computation of taxable income and gross receipts of the assessee society. Detailed Analysis: 1. Status of the Assessee as a Charitable Society and Eligibility for Exemption Under Section 11(1): The Assessing Officer (AO) denied the exemption under Section 11(1) on several grounds, including benefits extended to persons under Section 13(3), non-application of income to the extent of 85% for charitable purposes, and ineligibility for exemption under Section 11(1A) due to investments in land. The Ld. CIT(A) held that the society was registered under Section 12AA, making it a charitable society, and thus eligible for exemption under Section 11(1). The society had previously enjoyed exemption under Section 10(23C)(vi) but faced rejection for the Assessment Year 2007-08 due to non-utilization of land solely for educational purposes. The Ld. CIT(A) found no unreasonable benefit extended to persons under Section 13(3) and considered defects in filing the audit report curable. The Tribunal upheld these findings, confirming the assessee's entitlement to claim deduction under Section 11 of the Act. 2. Acceptance of a Defective Form No. 10 for Claiming Exemption: The AO rejected the assessee's claim due to a typographical error in Form No. 10. The Ld. CIT(A) held that the error was typographical and, when read with the accompanying resolution, did not constitute anti-dating. The Tribunal agreed, emphasizing substance over form, and upheld the Ld. CIT(A)'s findings, dismissing the ground. 3. Acceptance of Form No. 10B at the Appellate Stage: The AO received an audit report in Form No. 10BB instead of Form No. 10B. The Ld. CIT(A) admitted Form No. 10B at the appellate stage, relying on several judicial precedents that considered such requirements as directory rather than mandatory. The Tribunal upheld this decision, noting that the AO failed to inform the assessee about the issue with the audit report. The Tribunal cited relevant case laws to support this conclusion and dismissed the related grounds of the revenue. 4. Treatment of Land Held by the Society at Dhorka (Gurgaon) for Charitable Purposes: The AO denied the benefit of Section 11(1A) on the grounds that the land was not used for charitable purposes. The Ld. CIT(A) found that the land was purchased for educational activities and sold due to specific circumstances, with the proceeds reinvested in another land for educational use. The Tribunal upheld the Ld. CIT(A)'s findings, confirming that the society was entitled to exemption under Section 11(1) for capital gains from the sale of Dhorka land. The Tribunal also agreed with the assessee's computation of exempt income, considering only the capital gain for calculating the application of income under Section 11(1)(A). 5. Computation of Taxable Income and Gross Receipts of the Assessee Society: The Ld. CIT(A) included the sale consideration of the land in the gross receipts, leading to a higher figure for mandatory application of income. The assessee contended that only the net profit from the sale should be included. The Tribunal found no infirmity in the assessee's computation, which aligned with the provisions of Section 11(1)(A). The Tribunal noted that the assessee had utilized the entire sale consideration for purchasing another land, thus meeting the requirement of applying 85% of the income for charitable purposes. Consequently, the Tribunal allowed the assessee's appeal and dismissed the related grounds of the revenue. Conclusion: The Tribunal dismissed the revenue's appeal and allowed the assessee's appeal, confirming the assessee's status as a charitable society eligible for exemption under Section 11(1) and upholding the Ld. CIT(A)'s findings on various grounds, including the treatment of defective forms and the computation of taxable income. The order was pronounced in the Open Court on 24th September 2014.
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