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2024 (6) TMI 566 - AT - Income TaxIssues Involved: 1. Charitable Purpose and Exemption u/s 11 2. Capital Expenditure Claim 3. Corpus Fund Treatment Summary: Issue 1: Charitable Purpose and Exemption u/s 11 The revenue challenged the CIT(A)'s decision to grant the assessee society exemption u/s 11, arguing that the society was primarily engaged in earning rental income, constituting more than 85% of its receipts, which falls under the proviso to section 2(15) as activities in the nature of trade, commerce, or business. The AO observed that the assessee society's activities were commercial, thus not charitable, and denied the exemption. The CIT(A) found that the society's activities, including providing properties for social, cultural, charitable, and religious activities at nominal charges, did not deviate from its charitable objectives. The CIT(A) noted that the rental income was less than 20% of the total receipts, adhering to the proviso to section 2(15). The ITAT upheld the CIT(A)'s decision, emphasizing that the society's activities were charitable and the rental income was within permissible limits. Issue 2: Capital Expenditure Claim The AO disallowed the assessee's claim of Rs. 5,61,09,633/- as capital expenditure, arguing that the society was not entitled to exemption u/s 11 and thus assessed it as an AOP. The CIT(A) allowed the claim, noting that since the assessee was eligible for exemption u/s 11, the capital expenditure should be allowed. The ITAT agreed with the CIT(A), confirming that the capital expenditure was rightly allowed as the society was eligible for exemption u/s 11. Issue 3: Corpus Fund Treatment The AO treated the corpus donation of Rs. 4,31,35,150/- as general revenue receipts, stating that the assessee failed to produce specific directions from donors, which is mandatory for treating voluntary contributions as corpus donations u/s 11(1)(d). The CIT(A) found that the assessee provided letters and PAN details of donors specifying the corpus nature of donations and directed the AO to treat the amount as corpus donation. The ITAT upheld the CIT(A)'s decision, noting that the donations were received with specific directions and utilized for constructing the bhawan, thus qualifying as corpus donations exempt u/s 11(1)(d). Conclusion: The ITAT dismissed the revenue's appeal, affirming the CIT(A)'s decision to grant the assessee society exemption u/s 11, allow the capital expenditure claim, and treat the corpus donations as exempt under section 11(1)(d).
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