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2022 (6) TMI 663 - AT - Income TaxExemption u/s 11 - Exemption denied as assessee has not filed its return of income before the date prescribed under Section 139(1) - none attended on behalf of the assessee - HELD THAT - CIT(A) has observed that the assessee has not filed its return of income before the date prescribed under Section 139(1) and therefore in view of Section 139(4A), the effect of Sections 11 and 12 cannot be given in the case of Assessee herein. It was further noticed that the surplus of income over expenditure exceeds 15%. In other words 85% of the income derived from charitable activity has not been allegedly applied for charitable objects and thus the assessee is not entitled to relief available under Sections 11 and 12 of the Act. In the absence of any rebuttal of such allegations, no interference with the findings of the CIT(A) is called for. The CIT(A) has given findings on merits which are self explanatory and in the absence of relevant facts to dislodge the factual finding, we are not inclined to interfere with such findings in ex-parte proceedings. Consequently, we decline to interfere with the order of the CIT(A). Appeal of the assessee is dismissed ex-parte.
Issues:
1. Denial of exemption under Section 11 of the Income Tax Act, 1961. 2. Addition of accrued interest on fixed deposit receipts as income from other sources. 3. Disallowance of depreciation on fixed assets. 4. Failure to allow the benefit of basic exemption while computing tax on total income. Analysis: 1. Denial of exemption under Section 11: The appellant, a society engaged in educational activities, filed its return of income for AY 2009-10 claiming exemption under Sections 11 and 12 of the Act. The Assessing Officer denied the exemption, citing that the surplus of income over expenditure exceeded 15%, making the appellant ineligible for exemption under Section 11. The CIT(A) upheld the AO's decision, emphasizing that the appellant did not file its return before the due date under Section 139(1), rendering it ineligible for exemption under Section 11. The CIT(A) dismissed the appeal, stating that the appellant failed to provide sufficient evidence to challenge the denial of exemption. 2. Addition of accrued interest on fixed deposit receipts: The AO added Rs. 24,61,996 as income from accrued interest on fixed deposit receipts, which the appellant had not declared. The AR argued that the appellant maintained its accounts on a cash basis and interest income should be recognized when the FDRs mature, not when accrued. However, the ITAT held that interest income must be accounted for on an accrual basis, even if the books are maintained on a cash basis. Consequently, the ITAT upheld the AO's decision to add the interest amount to the appellant's total income. 3. Disallowance of depreciation on fixed assets: The AO disallowed depreciation of Rs. 18,79,013 on fixed assets, claiming that since the appellant had claimed exemptions in previous years, depreciation should be disallowed. The AR argued that depreciation should be allowed as the assets were used for business purposes. The ITAT found the AO's stance contradictory, as he assessed the appellant's income as business income under Section 28. The ITAT concluded that the appellant was entitled to depreciation on fixed assets used for business purposes, overturning the AO's disallowance. 4. Failure to allow basic exemption while computing tax: The appellant contended that the AO did not allow the benefit of basic exemption while computing tax on total income. The ITAT directed the AO to consider the appellant's claim as per relevant law provisions and prescribed tax rates for the AY. The ITAT allowed this ground for statistical purposes, ensuring the appellant's claim for basic exemption was duly considered. In conclusion, the ITAT dismissed the appellant's appeal ex-parte, upholding the CIT(A)'s decision regarding the denial of exemption under Section 11 and the addition of accrued interest. However, the ITAT allowed the appellant's claim for depreciation on fixed assets and directed the AO to consider the basic exemption claim appropriately.
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