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2023 (9) TMI 1534 - AT - Income TaxDenial of exemption u/s 11 - assessment of trust - disallowance of expenses incurred on account of chairperson s birthday - CIT(A) deleted the addition by taking a view that the assessee has incurred such expenses for the birthday celebration of the chairperson who has already expired and incurring such small expenses in his memory by the staff and students of the institutions - HELD THAT - The institution/assessee is incurring large amount of expenses and incurring of such small expenses in commemoration of the founder who had devoted for setting up of institution cannot be treated as infringement of provisions of Section 13 of the Act. CIT(A) also held that there is no element of benefit taken by interested person under Section 13(3) of the Act. We fully concur with the finding of ld. CIT(A) that incurring such a negligible amount which were disclosure of which was made honestly, require disallowance. Thus, we do not find any merit in the grounds of appeal raised by the Revenue and dismiss the same.
Issues Involved:
1. Deletion of addition of Rs. 7,786/- made by the Assessing Officer for chairperson's birthday celebration expenses. 2. Deletion of disallowance of application of income under Section 11 and 13 of the Income Tax Act amounting to Rs. 30,52,808/-. Issue 1: Deletion of Addition of Rs. 7,786/- for Chairperson's Birthday Celebration Expenses Facts: The assessee, an educational trust, filed its return of income for AY 2014-15 declaring NIL income after claiming application under Sections 11 and 13 of the Income Tax Act. During scrutiny, the Assessing Officer (AO) noted an expense of Rs. 7,786/- for the chairperson's birthday celebration and deemed it personal expenditure, not for the trust's objects. The AO issued a show-cause notice, and despite the assessee's explanation that the expense was for the benefit of school staff and students, the AO disallowed the expense. CIT(A) Decision: The CIT(A) held that incurring such small expenses in memory of the founder, who had devotedly set up the institution, could not be treated as an infringement of Sections 13(1)(c) and 13(3) of the Act. Therefore, the CIT(A) allowed the expenses. Tribunal Decision: The Tribunal noted that the tax effect of Rs. 2,920/- was below the limit for filing an appeal before the Tribunal. Despite this, the AO filed the appeal citing an exception clause in CBDT Circular No. 03/2018. The Tribunal found no reference to any audit objection in the assessment order. On merits, the Tribunal agreed with the CIT(A) that the small expense incurred in memory of the chairperson did not benefit any trustee personally and was for the institution's benefit. Therefore, the Tribunal dismissed the revenue's appeal. Issue 2: Deletion of Disallowance of Application of Income under Sections 11 and 13 amounting to Rs. 30,52,808/- Facts: The AO disallowed the application of income under Sections 11 and 13, amounting to Rs. 30,52,808/-, on the grounds that the trust had benefited persons specified under Section 13(3) by incurring Rs. 7,786/- on the chairperson's birthday celebration. The AO reopened the case under Section 147 and issued a notice under Section 148. During reassessment, the AO found that the assessee did not furnish adequate documentary evidence and thus disallowed the application of income. CIT(A) Decision: The CIT(A) noted that the AO's basis for denying exemption under Section 11 was the personal nature of the birthday celebration expense. However, the CIT(A) had already allowed the expense in a separate appeal, stating there was no benefit to any interested person under Section 13(3). Consequently, the CIT(A) held that the AO was unjustified in denying the exemption under Section 11 and allowed the statutory accumulation of 15% of the receipts. Tribunal Decision: The Tribunal observed that the tax effect in the appeal was below the monetary limit specified by CBDT Circular No. 17/2019. The Tribunal found no evidence of any audit objection that could justify reopening under the exception clause of the CBDT Circular. On merits, the Tribunal agreed with the CIT(A) that the trust did not benefit any trustee personally and that the expense was for the institution's benefit. Therefore, the Tribunal dismissed the revenue's appeal. Conclusion: Both appeals by the revenue were dismissed. The Tribunal upheld the CIT(A)'s decisions, finding no personal benefit to trustees from the chairperson's birthday celebration expenses and confirming the trust's eligibility for exemption under Sections 11 and 13.
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