2019 (2) TMI 171 - AT - Income Tax

Exemption u/s 11 & 12 - property purchased in the name of chairman - Held that - In the instant case, AO in order to deny the exemption u/s 11 (2) of the Act misstated the fact that the property in question has been purchased in the name of Fr. Shaji Mathews, Chairman of the Society, whereas it is not the case, rather the property was purchased in the name of the society but through its Chairman. In order to carry out the charitable activities, the Chairman of the assessee society needs accommodation otherwise he would have to put in rented accommodation. Assessee brought on record evidence, available to prove the fact that the property in question has not only been used for residential purpose of the Chairman of the Society but has been extensibly used for conducting workshop by the faculty members, for conducting Hindi workshop, to convene meetings of the academy s core committee etc., and these facts go to prove that the property in question was also being used in order to carry out the charitable activities by the society. So, we are of the considered view that the CIT (A) has rightly deleted the addition of ₹ 80,00,000/- by holding that the assessee society is eligible for benefit of sections 11 & 12. Addition being the amount accumulated in earlier years u/s 11(2) - since exemption under sections 11 and 12 of the Act treating the assessee as AOP has been declined accumulated income has been treated as surplus for assessment year 2010-11 - Held that - CIT(A) after thrashing the issue in detail and by relying on the various decisions rendered by the co-ordinate Bench of the Tribunal on the issue in question reached the conclusion that when the assessee is held to be eligible for benefit of sections 11 and 12, the assessee society cannot be treated as AOP. So, in these circumstances, since the assessee is held to be eligible for getting benefit under sections 11 and 12 of the Act, the time is available with it for use of accumulated fund of earlier years, hence ld. CIT (A) has rightly deleted the addition. So, Ground No.2 is determined against the Revenue. Disallowance of claim of the assessee qua accumulation of surplus under section 11(2) - since the benefits of sections 11 and 12 are not available to the assessee society, the same is treated as AOP - Held that - Again we are of the considered view that when the assessee is held to be eligible for exemption under sections 11 and 12 of the Act as per our findings on Ground No.1 and has applied under section 11(2) of the Act for accumulation of funds vide letter dated 07.07.2010 in the prescribed Form No.10 addressed to concerned Additional CIT, the addition is not sustainable. So, the ld. CIT(A) has rightly deleted the addition. Addition on account of negative cash balance in the month of December and February - Held that - Assessee has furnished details of the cash credit which were not shown in the cash book by mistake, which have been extracted by ld. CIT (A) on page 25 of the impugned order, and finding the same correct on factual verification from the bank statement as well as ledger account, found that no negative cash balance and the impugned cash expenditure were out of withdrawals from the bank accounts and other cash receipts. So, in these circumstances, there is no scope to interfere in the findings returned by the ld. CIT(A) deleting the addition made by the AO on account of negative cash balance in the months of December and February. So Ground determined against the revenue.

Summary

Issues Involved:
1. Addition of income for purchase of residential house violating Section 13(1)(c) of the Act.
2. Disallowance of carry forward accumulation under various heads.
3. Deletion of addition made on account of surplus.
4. Addition on account of unexplained negative cash balance.

Issue 1:
The appellant sought to set aside the order deleting the addition of income used to purchase a residential house for the Chairman of the society, alleging violation of Section 13(1)(c) of the Act. The Tribunal found that the property was purchased in the name of the society through its Chairman, which was deemed necessary for carrying out charitable activities. The property was extensively used for workshops and meetings related to charitable activities. Thus, the Tribunal upheld the deletion of the addition, ruling in favor of the assessee.

Issue 2:
The Assessing Officer disallowed the carry forward of accumulated funds under various heads due to denial of exemption under sections 11 and 12 of the Act. However, the Tribunal held that since the assessee was eligible for benefits under sections 11 and 12, the accumulated funds could be utilized, and thus, the addition was deleted by the CIT(A). The Tribunal ruled against the Revenue on this issue.

Issue 3:
The AO disallowed a claim of the assessee regarding the accumulation of surplus under section 11(2) due to the denial of benefits under sections 11 and 12. The Tribunal, after finding the assessee eligible for exemption under sections 11 and 12, upheld the deletion of the addition made by the CIT(A). Therefore, the Tribunal ruled against the Revenue on this issue as well.

Issue 4:
The AO made an addition on account of a negative cash balance in the cash book for certain months. The Tribunal noted that the confusion arose due to a misprint in the cash book, and the cash withdrawals from the bank were verifiable from the bank statement. The CIT(A) deleted the addition after verifying the details of cash credits, leading to the Tribunal ruling against the Revenue on this ground.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the decisions made by the CIT(A) in favor of the assessee on all the issues raised in the appeal.