2018 (6) TMI 1316 - AT - Income Tax

Benefit of Section 11 & 12 - scope of the activities of the trust within the purview of section 2(15) - violation of provision of Section 13 (1) (c) by providing the financial benefit to the persons specified u/s 13(3) - Held that - The society is an educational institution. It has made payment through credit card of only ₹ 16,19,243/-. AO has considered the entire training expenses of ₹ 99,21,943/- and disallowed 60% of the same as being personal in nature. The society had submitted details of the same before the AO and AO has not been able to point out any particular item of the expenditure which can be considered to be personal in nature. A survey was conducted. Nothing adverse to the assessee emerged during survey on this account. The assessee has given an explanation that the expenses incurred through credit card were meant for the society. It organized various seminars and conferences, through which an eminent faculty was invited. Thus, the assumption of the AO that the expenditure incurred through credit card was personal, is not correct. The CIT(A) has correctly held that the facility of the credit card is a facility like that of a bank. The credit card has been used to incur expenses for and on behalf of the assessee society. We are in agreement with the CIT(A) 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 - the assessee is eligible for exemption under Section 11 - decided in favour of assessee.

Issues Involved:

1. Eligibility for benefits under Sections 11 and 12 of the Income Tax Act.
2. Alleged violation of Section 13(1)(c) of the Income Tax Act.
3. Claim of depreciation and its potential for double deduction.
4. Addition on account of personal use of car.

Detailed Analysis:

1. Eligibility for Benefits under Sections 11 and 12:

The revenue challenged the CIT(A)'s decision to allow benefits under Sections 11 and 12, arguing that the trust's activities did not fall within the purview of Section 2(15) of the Income Tax Act. The assessee countered that this issue had already been resolved in their favor for the assessment year 2009-10 by the Tribunal, and this decision was upheld by the High Court and Supreme Court. The Tribunal confirmed that the assessee's activities, which included running educational institutions, qualified as "charitable purposes" under Section 2(15). The Tribunal found no new evidence or reason to deviate from its previous ruling, thus upholding the CIT(A)'s decision to grant the exemption under Section 11.

2. Alleged Violation of Section 13(1)(c):

The AO denied the exemption under Section 11, citing violations of Section 13(1)(c), which deals with providing financial benefits to specified persons. The Tribunal reviewed the CIT(A)'s detailed analysis, which found no evidence of such violations. The CIT(A) had addressed various allegations, including the misuse of society's resources and the governance issues, concluding that these did not affect the charitable nature of the society's activities. The Tribunal agreed with this assessment, noting that the AO's allegations lacked substantiation and were based on assumptions rather than evidence.

3. Claim of Depreciation:

The revenue argued that allowing depreciation on assets, for which the cost had already been claimed as an application of income, would result in double deduction. The CIT(A) had followed the Tribunal's previous decision for the assessment year 2009-10, which allowed such a claim. The Tribunal upheld this decision, referencing the binding precedence and noting that the revenue's appeal against the earlier Tribunal order had been dismissed by the High Court.

4. Addition on Account of Personal Use of Car:

The AO had made an addition for the personal use of cars by the society's office bearers, staff, and faculty, arguing that no logbooks or documentary evidence were provided. The CIT(A) found that the vehicles were used for the society's purposes, as clarified during a survey, and that the AO's allegations were unsubstantiated. The Tribunal agreed with the CIT(A)'s findings, noting that the AO had failed to provide any material evidence to support the claim of personal use.

Conclusion:

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decisions on all counts. It confirmed that the assessee was eligible for exemptions under Section 11, that there was no violation of Section 13(1)(c), that the claim for depreciation was valid, and that the addition for personal use of cars was unjustified. The Tribunal's decision was based on detailed analysis and previous binding precedents, ensuring that the assessee's activities were recognized as charitable and compliant with the relevant provisions of the Income Tax Act.

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