9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (3) TMI 24 - AT - Income TaxAllowability of Exemption u/s 11 of the Act Violation of provision of section 13(1)(b) of the Act - Held that - The AO has not appreciated the functioning of the society and the requirement of the law in the right perspective - There is no provision, either under the Societies Registration Act, or under the Income Tax Act prohibiting persons related through blood to be functionaries of the society - this cannot be a ground for denying exemption under Section 11 of the Act - There is no prohibition or condition prescribed under Section 12A or under Section 11 regarding operation of the bank account - so long as its objects come within the meaning of charitable purpose under Section 2 (15), and the income has been applied to such purposes thus, the observation of the CIT(A) is upheld that exemption under Section 11 is available on compliance of the conditions as prescribed in Sections 11 and Section 12 of the Act. The functioning of the institution cannot be considered to be undemocratic, if two relatives are occupying the position in the management - Section 13 itself provides for payment of salary, and allowance to the persons in the management, in case such payment does not exceed what may be reasonably paid for such services - there is no such restriction in Section 13 regarding relatives holding position in the charitable society or institution. Misuse of facilities of society Held that - The vehicles are being used for the purposes of the society - during the course of the survey nothing adverse on this account has been found - In the absence of any evidence the allegation of the AO cannot be sustained - Floor of the premises of the society being occupied by its Executive President does not violate the provisions of Section 13 Allowing occupation of the premises to Executive President cannot be considered to be unreasonable - The AO has just made the allegation and has not even bothered to examine the same in the context of section 13(2)(c) of the Act - Revenue could not point out any error or defect in the finding given by the CIT(A) the findings of the CIT(A) is upheld that the objects of the assessee Society are educational in nature and hence, they fall within the meaning of charitable purpose under Section 2(15) of the Act - The assessee is a Society registered under Section 12A of the Act thus, the assessee is eligible for exemption under Section 11 of the Act Decided against Revenue. Allowability of depreciation Revenue was of the view that the society has already claimed the same as deduction of income at the time of addition to the fixed assets Held that - The assessee having purchased the fixed assets and the same having been utilized in carrying out its activities, the income arising from the activities is to be computed by applying the normal principle of computation of income, which will include a charge on account of depreciation in respect of the fixed assets used for carrying out such activities - depreciation is allowed while computing income of the year under consideration - It cannot be said that the fixed assets acquired had already been claimed as deduction - Depreciation is a normal expenditure incurred in the course of the activities and hence, the same need to be deducted while computing the income- This Decision in Director of Income Tax vs. Vishwa Jagriti Mission 2012 (4) TMI 289 - DELHI HIGH COURT followed the order of the CIT(A) upheld Decided against Revenue. Allowability of expenditure - Purchase of 260 laptops Held that - The CIT(A) has clearly held that in case it is to be considered as expenditure, it will be an application of income, and if, the same is to be considered as fixed assets, it will still be an application of income and either way, the society is eligible to claim the amount as application of its income - Revenue could not substantiate their allegation the findings of the CIT(A) upheld Decided against Revenue. Allowability of deduction on expenses Held that - There is no material or evidence that the society has any link directly or indirect with any of these enterprises - the AO is not correct in making an allegation that the appellant- society is not eligible for exemption under section 11 of the Income Tax Act Revenue could not successfully contradict the above findings of the CIT(A) - The assessee has actually purchased these items, or has in fact taken services from these suppliers/service providers - The payments have been made by account payee cheques - nothing adverse was found during the course of the survey- the expenses are routine expenditure for repair and maintenance the assessee had submitted complete details during the course of the assessment proceedings there is no reason to interfere in the findings of the CIT(A) Decided against Revenue.
Issues Involved:
1. Eligibility for exemption under Section 11 of the Income Tax Act. 2. Allowance of depreciation as application of income. 3. Alleged misuse of society's facilities and violation of Section 13(3). 4. Alleged use of bogus bills for purchasing laptops. 5. Alleged use of forged documents for claiming exemptions. 6. Allowance of deduction for certain expenditures. Detailed Analysis: 1. Eligibility for Exemption under Section 11 of the Income Tax Act: The CIT(A) examined the allegations of the AO regarding the violation of AICTE guidelines and found that these issues were related to the governance of the society and did not affect its charitable activities. The CIT(A) concluded that the society's activities fell within the definition of 'charitable purposes' under Section 2(15) of the Act, and the society had complied with the conditions prescribed under Section 12A. The CIT(A) held that the AO was not justified in denying the exemption under Section 11 based on these allegations. 2. Allowance of Depreciation as Application of Income: The CIT(A) allowed the depreciation claimed by the society, following the judgment of the Hon'ble Delhi High Court in the case of 'Director of Income Tax vs. Vishwa Jagriti Mission'. The CIT(A) noted that depreciation is a normal expenditure incurred in the course of the activities and should be deducted while computing the income. This view was supported by other judgments, such as 'CIT vs. Tiny Tots Educational Society' and 'CIT vs. Market Committee, Pipli'. 3. Alleged Misuse of Society's Facilities and Violation of Section 13(3): The CIT(A) addressed the AO's allegations regarding the misuse of society's facilities, such as cars and premises, by its office bearers. The CIT(A) found that these facilities were used for the purposes of the society, as clarified during the survey. The CIT(A) also addressed the issue of relatives holding positions in the society, stating that there is no provision in the Income Tax Act prohibiting such arrangements. The CIT(A) concluded that the AO's allegations were not substantiated and did not justify denying the exemption under Section 11. 4. Alleged Use of Bogus Bills for Purchasing Laptops: The CIT(A) examined the AO's allegation that 260 laptops were wrongly claimed as fixed assets and found it untenable. The CIT(A) clarified that whether the laptops were considered as expenditure or fixed assets, the society was eligible to claim the amount as an application of its income. The CIT(A) found no merit in the AO's allegation. 5. Alleged Use of Forged Documents for Claiming Exemptions: The CIT(A) addressed the AO's allegations regarding the use of forged documents and found that the society had complied with the conditions prescribed under Section 12A. The CIT(A) concluded that the AO's allegations were not substantiated and did not justify denying the exemption under Section 11. 6. Allowance of Deduction for Certain Expenditures: The CIT(A) examined the AO's disallowance of certain expenditures, such as payments to suppliers and service providers, and found that these payments were made by account payee cheques. The CIT(A) noted that the AO had not brought any material evidence to substantiate the allegations. The CIT(A) concluded that the society was eligible for the deduction of these expenditures. Conclusion: The CIT(A) upheld the eligibility of the society for exemption under Section 11 of the Income Tax Act, allowed the depreciation claimed by the society, and rejected the AO's allegations regarding the misuse of facilities, use of bogus bills, and forged documents. The CIT(A) also allowed the deduction for certain expenditures, finding no merit in the AO's allegations. The Tribunal agreed with the CIT(A)'s findings and rejected the Department's grounds of appeal.
|
