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Issues involved: Appeal against order for assessment year 2007-08 regarding deduction u/s 24 of the Income Tax Act and computation of income for a charitable trust.
Issue 1: Deduction u/s 24 of the Income Tax Act The Assessing Officer disallowed the deduction claimed by the assessee trust out of rental income, stating that the income of the trust should be computed in a commercial sense without applying the provisions of chapter IV of the Income Tax Act. The AO referred to a Board Circular and denied the claim of deduction u/s 24(a) of the Act. The assessee argued that as per section 24(a), every assessee can claim a standard deduction of 30% of the gross annual value while computing income from house property. The CIT(A) held that the AO was not justified in disallowing the deduction, as section 24 allows a deduction of 30% of rental income after considering a CBDT circular. The Tribunal upheld the CIT(A)'s decision, stating that there is no provision in the Income Tax Act that restricts the availability of deduction u/s 24 for property held for charitable purposes. Issue 2: Computation of income for a charitable trust The Assessing Officer questioned the deduction claimed by the assessee trust and insisted on computing the income in a commercial sense without applying the provisions of the Income Tax Act. The AO denied the deduction u/s 24(a) and referred to a Board Circular. The CIT(A) held that the AO was not justified in disallowing the deduction claimed by the assessee out of rental income, as section 24 allows a deduction of 30% of rental income. The Tribunal agreed with the CIT(A) and upheld the decision, emphasizing that the provisions of Chapter IV-C of the Income Tax Act permit the deduction u/s 24 @ 30% for income from house property. The appeal filed by the department and the cross objection filed by the assessee were both dismissed by the Tribunal, affirming the decision of the CIT(A) to allow the deduction u/s 24 for the charitable trust.
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