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2016 (5) TMI 253 - AT - Income Tax


Issues:
1. Denial of exemption under sec. 11 and computation of income under the head "income from business."
2. Applicability of provisions of sec. 40(a)(ia) and 43B when income is computed under sec. 11 of the Act.

Detailed Analysis:
1. The appeal was filed by the Revenue against the order of Commissioner of Income Tax (Appeals) concerning the assessment for the Asst. Year 2009-10. The assessee, a Society registered under Andhra Pradesh Societies Registration Act and sec. 12A of the Income Tax Act, declared nil total income under sec. 11. The Assessing Officer (A.O.) observed an increase in receipts over four years and assessed the income under "income from business," disallowing certain expenditures. The CIT(A) deleted the additions, holding sec. 40(a)(ia) and 43B inapplicable when income is computed under sec. 11.

2. The dispute revolved around whether sec. 40(a)(ia) and 43B are applicable when income is computed under sec. 11. The Revenue argued for sustaining the additions, while the assessee contended that these provisions are not relevant for trusts/societies claiming exemption under sec. 11. The Tribunal noted that sec. 40(a)(ia) and 43B fall under the computation of profits and gains from business or profession, whereas sec. 11 deals with income not forming part of total income. The Tribunal emphasized that the real income concept applies to sec. 11, ensuring that income is available for application for charitable purposes.

3. The Tribunal analyzed the judgment of ITAT, Mumbai Bench in a similar case, which held that sec. 40(a) is not applicable when income is computed under sec. 11. Applying this precedent and considering the facts of the case, the Tribunal upheld the CIT(A)'s decision to delete the additions, concluding that sec. 40(a)(ia) and 43B do not apply when income is assessed under sec. 11. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order.

In conclusion, the Tribunal ruled in favor of the assessee, holding that the provisions of sec. 40(a)(ia) and 43B are not applicable when income is computed under sec. 11 of the Income Tax Act. The judgment emphasized the distinction between income from business or profession and income exempt under sec. 11 for trusts and societies, ensuring that the real income concept is applied for charitable purposes.

 

 

 

 

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