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2022 (2) TMI 1143 - AT - Income TaxExemption u/s 11 - disallowing the claim of the assessee for exemption u/s 10(23C)(vi) in violation of Section 13 - HELD THAT - As per the order of the ITAT concerned CIT(Exemptions) Ahmedabad also passed an order on 18.06.2018 granting approval to the assessee under Section 10(23C)(vi) for the year under consideration i.e. AY 2014-15 as well as the subsequent years. Relying on this development the assessee made an alternative claim of exemption under Section 10(23C)(vi) of the Act during the course of appellate proceedings before the learned CIT(A) and the same was entertained by the CIT(A) and quite rightly so by relying on certain judicial pronouncements referred to and relied upon by him in the impugned order. He also sought comments from the AO on this new alternative claim made by the assessee for exemption Section 10(23C)(vi) of the Act and after taking into consideration the comments of the AO submissions of the assessee and the entire material available on record including the approval granted by the learned CIT(Exemptions) Ahmedabad to the assessee under Section 10(23C)(vi) CIT(A) allowed the alternative claim of the assessee for exemption under Section 10(23C)(vi) by passing a well discussed and well reasoned order; the relevant portion of which is already extracted hereinabove. We therefore find no infirmity in the order of the learned CIT(A) allowing the alternative claim of the assessee for exemption under Section 10(23C)(vi) of the Act and even the learned DR has not raised any material contention to rebut or controvert this position. The impugned order of the learned CIT(A) on this issue is therefore upheld and the appeal of the Revenue is dismissed. Disallowance of expenses incurred by the assessee under the head Advertisement and Promotion Expenses and Travelling and Conveyance Expenses - HELD THAT - Although the learned DR has contended that the expenditure in question was disallowed by the learned CIT(A) vide his impugned order after having found that the same was not incurred for the purpose of educational activity of the assessee we find that no opportunity was specifically given to the assessee to establish its case on evidence as per clause (a) of third proviso to Section 10(23C)(vi) of the Act that the expenditure in question was incurred wholly and exclusively for the objects for which it is established in order to avail the benefit of exemption provided in Section 10(23C)(vi) of the Act. We therefore consider it fair and proper and in the interest of justice to restore this issue to the file of the Assessing Officer for deciding the same in accordance with law after giving the assessee an opportunity of being heard. Appeal of the assessee is treated as allowed for statistical purposes.
Issues Involved:
1. Disallowance of expenses on foreign travel and promotion. 2. Denial of exemption under Section 11 of the Income-tax Act. 3. Eligibility for exemption under Section 10(23C)(vi) of the Income-tax Act. 4. Violation of provisions under Section 13(1)(c) of the Income-tax Act. Issue-wise Detailed Analysis: 1. Disallowance of Expenses on Foreign Travel and Promotion: The Assessing Officer (AO) disallowed expenses of ?16,06,935/- on foreign travel and ?21,39,354/- on advertisement and promotion, incurred by the assessee-trust. The AO noted that these expenses were for the personal benefit of specified persons under Section 13(3) of the Act, including Shri Vinay Rai and Ms. Harbeen Arora. The AO held that the foreign trips and promotional events were not for the advancement of the trust's objects but for personal benefits, thus violating Section 13(1)(c) of the Act. 2. Denial of Exemption under Section 11 of the Income-tax Act: The AO denied the assessee's claim for exemption of ?15,89,27,308/- under Section 11 of the Act. This decision was based on the finding that the trust had incurred expenses for the personal benefit of specified persons, thus violating Section 13(1)(c). Additionally, an addition of ?4,36,79,779/- was made on account of "addition to fixed assets" as the assessee failed to provide documentary evidence to establish that the assets were used for the advancement of its objects. 3. Eligibility for Exemption under Section 10(23C)(vi) of the Income-tax Act: During the appellate proceedings before the CIT(A), the assessee made an alternative claim for exemption under Section 10(23C)(vi). The CIT(A) considered this claim, noting that the approval for exemption under Section 10(23C)(vi) was granted by the CIT(Exemptions) for AY 2014-15 onwards, following directions from the ITAT and the Gujarat High Court. The CIT(A) concluded that the assessee was entitled to exemption under Section 10(23C)(vi), except for the disallowed expenses of ?37,46,289/- (?16,06,935 + ?21,39,354) which were not incurred for educational purposes. 4. Violation of Provisions under Section 13(1)(c) of the Income-tax Act: The AO held that the assessee violated Section 13(1)(c) by incurring expenses for the personal benefit of specified persons, thereby denying the exemption under Section 11. However, the CIT(A) found that with the approval under Section 10(23C)(vi), Section 13 was not applicable. The CIT(A) upheld the disallowance of ?37,46,289/- as these expenses were not for educational activities, thus not allowable under Section 10(23C)(vi). Tribunal's Decision: The Tribunal upheld the CIT(A)'s decision to allow the alternative claim for exemption under Section 10(23C)(vi), noting that the approval was granted for AY 2014-15 onwards. The Tribunal dismissed the Revenue's appeal, finding no infirmity in the CIT(A)'s order. Regarding the assessee's appeal on the disallowance of ?37,46,289/-, the Tribunal noted that the CIT(A) disallowed these expenses without giving the assessee an opportunity to substantiate their claim that the expenses were incurred for educational purposes. The Tribunal restored this issue to the AO's file for reconsideration, allowing the assessee an opportunity to provide evidence. Conclusion: The Revenue's appeal was dismissed, and the assessee's appeal was treated as allowed for statistical purposes. The Tribunal directed the AO to re-examine the disallowed expenses and provide the assessee an opportunity to substantiate their claim.
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