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2014 (6) TMI 361 - AT - Income TaxEntitlement for exemption u/s 11 of the Act No approval u/s 10(23C)(vi) of the Act Requirement for registration u/s 12A of the Act Held that - To avail exemption u/s 11 of the Act, the only requirement is that the assessee should have obtained registration u/s 12A of the Act and there is no necessity to obtain approval u/s 10(23C) of the Act - the assessee duly granted registration u/s 12A of the IT Act and claimed exemption u/s 11 of the Act - AO cannot deny exemption on the reason that the assessee s case is not covered u/s 10(23C) of the IT Act and cannot thrust upon the assessee for particular deduction - assessee is having registration u/s 12A of the Act, it is entitled for exemption u/s 11, if the conditions required under this section is complied with Relying upon CIT Vs. Bar Council of Maharastra, 1981 (4) TMI 8 - SUPREME Court thus, the order of the CIT(A) is upheld Decided against Revenue. Denial of exemption u/s 11 of the Act - Benefit extended to specified persons as defined u/s 13(3) of the Act Held that - When the income of the assessee is applied for charitable purposes or religious purposes, the same is entitled for exemption u/s 11 of the Act provided that the money accumulated or set apart is invested or deposited in the forms or modes specified u/s 11(5) of the Act - Concession given the above persons falls foul of section 13(1)(c) of the Act - When the assessee has violated the provisions of section 11 and 13 of the Act by giving concession to the above persons, who are specified persons u/s 13(3) of the Act, being so, the assessee cannot be granted exemption u/s 11 of the Act - CIT(A) was not justified in bringing only the benefit given to the specified persons as income liable to tax - Relying upon T. Bapanaiah Vidyadharma Trust Vs. CIT, 1987 (1) TMI 52 - ANDHRA PRADESH High Court - the only remedy is to disentitle the assessee in getting exemption u/s 11 of the Act thus, the order of the CIT(A) is set aside and the AO is directed not to grant exemption u/s 11 of the Act to the assessee Decided in favour of Revenue. Disallowance of depreciation Held that - Following Income-tax (Exemption) Versus M/s. Exhibition Society, Hyderabad 2014 (6) TMI 357 - ITAT HYDERABAD its claim under S.32(1) is eligible only in respect of business assets and where entire cost of the asset stands allowed by way of application of income under S.11(1), the depreciation claimed by the assessee under S.32(1) is not allowable as the trust is not undertaking any business activity. thus, the AO is directed to verify in respect of each asset on which depreciation claimed, whether the value of such asset was in fact allowed u/s 11, and if it was so allowed, the depreciation would not be allowed in respect of such asset thus, the matter is remitted back to the AO for adjudication Decided in favour of Revenue.
Issues Involved:
1. Entitlement for exemption under Section 11 of the IT Act, 1961. 2. Violation of Section 13(1)(c) regarding fee concessions to specified persons. 3. Disallowance of depreciation. Issue-wise Detailed Analysis: 1. Entitlement for Exemption under Section 11: The revenue challenged the CIT(A)'s decision that the assessee is entitled to exemption under Section 11 of the IT Act, 1961, despite the absence of approval under sub-clause (vi) to Section 10(23C). The Tribunal consistently held that to avail exemption under Section 11, the only requirement is registration under Section 12A, and there is no necessity to obtain approval under Section 10(23C). The assessee, having obtained registration under Section 12A, is entitled to exemption under Section 11 if the conditions under this section are met. The Tribunal upheld the CIT(A)'s order, dismissing the revenue's grounds on this issue. 2. Violation of Section 13(1)(c) Regarding Fee Concessions: The revenue contended that the assessee violated Section 13(1)(c) by providing fee concessions to persons specified under Section 13(3), thus disqualifying it from exemption under Section 11. The CIT(A) observed that providing fee concessions to teachers and staff does not violate the Act, as it ensures commitment and continued employment, aiding the assessee in achieving its objectives. However, fee concessions to persons specified under Section 13(3) must be read in consonance with Sections 13(6) and 12(2). The CIT(A) directed that the value of such concessions (Rs. 4,08,500) should be deemed as the income of the trust. The Tribunal, however, concluded that the assessee violated Sections 11 and 13 by giving concessions to specified persons, thus disentitling it from exemption under Section 11. The Tribunal set aside the CIT(A)'s order and directed the AO not to grant exemption under Section 11, citing judgments from the Jurisdictional High Court. 3. Disallowance of Depreciation: The revenue appealed against the CIT(A)'s decision to delete the disallowance of depreciation. The CIT(A) noted that the assessee did not claim depreciation as a deduction in its income computation. The Tribunal found that the issue was covered by a decision of the coordinate bench, which held that depreciation on assets, where the cost was allowed as application of income under Section 11, is not allowable. The Tribunal directed the AO to verify if the asset's value was allowed under Section 11 and, if so, disallow depreciation. If not, the AO should allow depreciation as per applicable rates. The Tribunal remitted the issue to the AO for fresh consideration, allowing the ground for statistical purposes. Conclusion: The appeal of the revenue was partly allowed for statistical purposes, with specific directives for the AO to re-evaluate the depreciation claim in light of the Tribunal's observations. The Tribunal upheld the CIT(A)'s decision on the exemption under Section 11 but reversed the CIT(A)'s ruling on fee concessions to specified persons, denying the exemption under Section 11.
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