2010 (10) TMI 65 - HC - Income Tax

Society registered under the Societies Registration Act, 1860 - income applied during the assessment year under the head Purchase of Land , but in the schedule for fixed assets, there was no addition to land - Held that - amount paid by the assessee to Mr. Manjeet Singh was towards acquisition of a capital asset in accordance with Section 11 of the Act as on receipt of money, Mr. Manjeet Singh had not only handed over peaceful and vacant possession of the property to the assessee but had also executed an irrevocable General Power of Attorney in assessee s favour - Appeal is dismissed

Summary

Issues:
Challenge to ITAT order under Section 260A of Income Tax Act for Assessment Year 2006-2007.

Analysis:
1. The respondent, a registered society under the Societies Registration Act and Section 12A of the Income Tax Act, filed a Nil income return for the Assessment Year 2006-2007, later selected for scrutiny by the Assessing Officer (AO).
2. The AO noted an amount of Rs. 20,00,000 shown as income applied under "Purchase of Land" without corresponding addition to fixed assets, questioning compliance with Section 11 of the Act regarding charitable purpose.
3. The AO assessed income at Rs. 13,876, citing a judgment from the Madras High Court for reference.
4. The Commissioner of Income Tax (Appeals) dismissed the appeal, but the Tribunal overturned this decision, emphasizing the execution of an irrevocable General Power of Attorney by the seller in favor of the respondent.
5. The Tribunal found the advance payment for land acquisition as an application of funds for charitable purposes, contrary to the AO's view, and directed the AO to allow the deduction accordingly.
6. The High Court concurred with the Tribunal, distinguishing the case from the Madras High Court judgment and aligning it with a Supreme Court decision regarding application of funds for a hospital building.
7. The High Court dismissed the appeal, affirming that the payment towards land acquisition was compliant with Section 11 of the Act, supported by possession transfer and execution of a Power of Attorney.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the case and the reasoning behind the decisions made by the authorities and the High Court.