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2022 (3) TMI 1328 - AT - Income Tax


Issues Involved:
1. Addition of interest income on tax-free government bonds.
2. Disallowance of donation expenses.
3. Denial of the benefit of mutuality in respect of income earned from members.

Detailed Analysis:

1. Addition of Interest Income on Tax-Free Government Bonds:
- Facts: The assessee, a trust registered under Section 12A, received tax-free interest income from government bonds. The Assessing Officer (A.O.) added the interest income, arguing it did not pertain to the financial year (F.Y.) 2014-15.
- CIT(A) Findings: The Commissioner of Income Tax (Appeals) [CIT(A)] allowed exemption under Section 10(15)(iv) for part of the interest income but upheld the addition of ?1,22,81,315 as it was deemed not to pertain to F.Y. 2014-15.
- Tribunal's Decision: The Tribunal found that the interest income indeed pertained to F.Y. 2014-15 but due to a technical error in the software, the dates were interchanged. The Tribunal directed the A.O. to delete the addition and allow the exemption under Section 10(15)(iv).

2. Disallowance of Donation Expenses:
- Facts: The assessee debited donation expenses of ?18,01,500 in its income and expenditure account but did not claim these as deductions while computing total income.
- CIT(A) Findings: The CIT(A) dismissed the assessee's claim for deduction under Section 80G, as it was not claimed in the return of income.
- Tribunal's Decision: The Tribunal noted that the assessee had not claimed the donation as a deduction in its total income computation. Thus, the Tribunal directed the A.O. to delete the addition, allowing the appeal in favor of the assessee.

3. Denial of Benefit of Mutuality in Respect of Income Earned from Members:
- Facts: For A.Y. 2014-15, the A.O. reopened the assessment under Section 147, denying the benefit of mutuality and assessing a total income of ?23,97,12,960. The A.O. allowed expenses incurred on members' activities but taxed other income.
- CIT(A) Findings: The CIT(A) partly confirmed the A.O.'s order, excluding tax-free interest income but upheld the denial of mutuality for other incomes.
- Tribunal's Decision: The Tribunal observed that the assessee had been granted the benefit of mutuality in earlier and subsequent years. Given the disputes among trustees and committee members and the pending litigation, the Tribunal remanded the matter back to the A.O. for fresh consideration, directing the A.O. to verify the tax-free interest and other details provided by the assessee.

Conclusion:
The Tribunal allowed the appeal for A.Y. 2015-16, directing the deletion of the addition of tax-free interest and donation expenses. For A.Y. 2014-15, the Tribunal remanded the matter back to the A.O. for fresh assessment, emphasizing the need for a fair opportunity for the assessee to present its case.

 

 

 

 

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