2009 (11) TMI 61 - HC - Income Tax

Exemption u/s 11(1)(a) / ii(1)(d) CIT(A) and ITAT hold that assessee is entitled to benefits of exemption of income under section 11(1)(a) of the Income Tax Act ITAT deleted the of Rs.37, 89, 983/- concluding that interest income is not income from other sources and therefore part & parcel of accumulated funds held that similar issue has already has been ansered against the revenue ITA No.566 of 2008 titled Commissioner of Income Tax-I Chandigarh vs. M/s Simla Chandigarh Diocese Society Catholic Church Sector 19-A Chandigarh and ITA No.939 of 2008 titled Commissioner of Income Tax-II Chandigarh vs. M/s Sarvhitkari Educational Society Sector 21-B and now Sector 42 Chandigarh. decided in favor of assessee

Summary

Issues:
1. Interpretation of sections 11(1)(a) and 11(1)(d) of the Income Tax Act for exemption of income.
2. Treatment of interest income as 'income from other sources' and its application.
3. Taxability of miscellaneous income, registration fee, and building fund under Section 11(1)(d) of the Income Tax Act.
4. Deletion of addition on account of rent received.

Analysis:
1. The first issue revolves around the interpretation of sections 11(1)(a) and 11(1)(d) of the Income Tax Act concerning the exemption of income. The tribunal had to determine whether the assessee was entitled to the benefits of exemption under section 11(1)(a) as opposed to section 11(1)(d) as computed by the Assessing Officer. The Hon'ble Tribunal, in line with previous judgments, upheld the order of the ld.CIT (A) in favor of the assessee, dismissing the appeal.

2. The second issue pertains to the treatment of interest income and its classification as 'income from other sources.' The tribunal had to decide whether interest income, not applied for fund purposes but for profit on funds until utilization, should be considered part of accumulated funds. Despite the Revenue's arguments, the tribunal, in alignment with past decisions, deleted the addition of Rs.37,89,983/-, emphasizing that interest income is not 'income from other sources' when utilized for profit on funds.

3. The third issue addresses the taxability of miscellaneous income, registration fee, and building fund under Section 11(1)(d) of the Income Tax Act. The tribunal had to determine whether these amounts, falling outside the ambit of Section 11(1)(d) as they were neither donations nor voluntary contributions, should be taxed as 'income from other sources.' Following the precedent set in prior cases, the tribunal upheld the order of the ld.CIT (A) and ruled in favor of the assessee.

4. The final issue involves the deletion of the addition on account of rent received. The tribunal had to assess whether the addition of Rs.29,43,990/- made on account of rent received was justified. In line with previous judgments, the tribunal sustained the order of the ld.CIT (A) and ruled against the Revenue, resulting in the deletion of the said addition.

In conclusion, the High Court dismissed the appeal based on the alignment of the present case with past judgments, highlighting consistent interpretations and applications of relevant provisions of the Income Tax Act.