2018 (12) TMI 885 - HC - Income Tax

Charitable activity - Benefit of exemption u/s 11 - violation of the provisions of Section 13 - Held that - From a reading of the assessment order, the CIT s order and Tribunal s order it appears that the AO while exercising its power under Section 13 (1)(c) has deleted the amount for which there was a clear violation and a finding that the bus had not been used by the trust but rather had been used by the trustee for his own family business. The Tribunal has upheld the order of AO and the CIT and has deleted the exemption in respect of the amount sought towards the bus expenses. No other amount has been added or deleted. The Hon ble Apex Court in a recent judgement in the case of Alexander George vs. Commissioner of Income-Tax 2015 (8) TMI 519 - SUPREME COURT has also held that where the amount is very small normally an appeal should not be entertained. No question of law.

Summary

Issues:
1. Denial of exemption under Section 11 of the Income Tax Act due to alleged violation of Section 13.
2. Authority of Assessing Officer to exercise powers under Section 12AA(3) exclusively vested in Commissioner of Income Tax (Exemption).
3. Determination of appellant's status as an AOP in contradiction to a charitable entity.

Analysis:
1. The appeal was filed against an order for the Assessment Year 2011-12 under Section 260-A of the Income Tax Act, 1961. The primary issue raised was whether an entity registered under Section 12AA could be denied exemption under Section 11 due to a violation of Section 13. The Assessing Officer noted a violation where a bus owned by the trust was used by an organization run by the family members of the trustees, contrary to the provisions of Section 13(1)(c) read with Section 13(3) of the Act.

2. The second issue addressed was regarding the authority of the Assessing Authority to exercise powers under Section 12AA(3) of the Income Tax Act, which are typically within the domain of the Commissioner of Income Tax (Exemption). The CIT upheld the denial of exemption under Section 11 based on the violation of Section 13, and the Tribunal confirmed this decision. The AO's exercise of power under Section 13(1)(c) to deny the exemption was found to be justified.

3. Lastly, the determination of the appellant's status as an AOP rather than a charitable entity was also challenged. The CIT confirmed the AO's decision to deny the exemption claimed under Section 11, considering the violation of Section 13. The Tribunal upheld this decision, specifically noting the misuse of the bus owned by the trust for personal family business, leading to the denial of exemption for the bus expenses claimed.

In conclusion, the Tribunal upheld the decisions of the AO and the CIT, denying the exemption claimed under Section 11 for the bus expenses due to the violation of Section 13. The judgment highlighted that no other amount was added or deleted, and based on the principles laid down by the Hon'ble Apex Court, the appeal was dismissed as having no merit.