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2014 (3) TMI 298 - HC - Income TaxGenuineness of expenses incurred on supports event - Revenue challenged the order of CIT(A) on the ground that CIT(A) has not given the benefit of exemption under Section 11 to the assessee but has allowed the expenses incurred on sports activity considering their genuineness. - Held that - Though prima facie it would appear that the phraseology employed in Section 57(iii) is different from Section 37(1), it has been held by the Supreme Court in CIT vs. Rajendra Prasad Moody, 1978 (10) TMI 133 - SUPREME Court that Section 57(iii) must be construed broadly and the somewhat wider language of Section 37(i) should not affect the interpretation of Section 57(iii). The assessee in the present case was created in 1979 with the object of promoting sports; there was no other object and all its constituents were giving grants/ funds only for that purpose. In truth and reality the assessee was merely acting as a custodian or conduit to the constituents for the purpose of promoting sports activity inside and outside the country. The expenditure incurred by the assessee is only for the purpose of promoting the sports events and activities and in this respect there is no challenge to the finding of fact recorded by the Tribunal. If such expenditure is not allowed, it may amount to taxing the gross receipts of the assessee and not the income, which is not permissible - Decided against the revenue.
Issues:
- Appeals filed by revenue under Section 260A of the Income Tax Act, 1961 against the consolidated order passed by the Income Tax Appellate Tribunal for the assessment years 2003-04, 2004-05, and 2005-06. - Challenge to the jurisdiction of the assessing officer to reopen the assessment under Section 148 of the Act. - Disallowance of expenses claimed by the assessee for the promotion of sports activities. - Application of the principle of mutuality in taxing the income of the assessee. - Exemption under Section 11 and allowance of expenses incurred on sports activities. - Interpretation of Section 57(iii) in relation to the allowance of expenditure. Analysis: 1. The appeals were filed by the revenue challenging the order of the Income Tax Appellate Tribunal for the assessment years 2003-04, 2004-05, and 2005-06. The Tribunal found that the assessing officer did not provide adverse material to disprove the expenditure claimed by the assessee for sports activities, and the CIT (Appeals) allowed the expenses considering their genuineness. 2. The CIT (Appeals) initially restricted the allowance of expenses to Rs.1,20,000 for all three years. However, the assessee contended that the entire expenditure should be deductible as it was incurred for the promotion of sports. The Tribunal upheld the decision of the CIT (Appeals) in allowing the expenses incurred by the assessee for sports activities. 3. The assessee raised an additional ground related to the principle of mutuality, arguing that its income should not be taxed under the Income Tax Act. The CIT (Appeals) admitted this ground as a pure legal issue but did not find merit in applying the principle of mutuality to the assessee. 4. The Tribunal rejected the revenue's appeals based on the findings that the assessing officer did not provide evidence against the genuineness of the expenses, and the CIT (Appeals) allowed the expenses considering their relevance to sports activities. 5. The High Court upheld the Tribunal's decision, stating that the CIT (Appeals) did not grant exemption under Section 11 but allowed the expenses incurred on sports activities. The Court emphasized that even if the income was assessed under a residual head, Section 57(iii) allows for the deduction of expenses incurred for earning income. 6. The Court concluded that the assessee, formed for promoting sports, was eligible for the exemption under Section 11 and the expenses incurred for sports activities were genuine. The Court dismissed the revenue's appeals, finding no error in the Tribunal's decision and no substantial question of law to consider. This detailed analysis covers the key issues raised in the legal judgment, providing a comprehensive understanding of the decision and its implications.
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