2023 (2) TMI 856 - AT - Income Tax

Assessment u/s 153A - Disallowance of exemption u/s 11 - HELD THAT - It is not in dispute that the Coordinate Bench of the Tribunal 2018 (3) TMI 1079 - ITAT DELHI has granted the benefit of Section 11 of the Act to the assessee trust. Therefore, the action of the CIT(A) in relying on the order of the assessee and deleting the disallowance of exemption u/s 11 of the Act requires no interference. Therefore, we do not find merit in the grounds of appeal of the Revenue.

Issues Involved:
1. Deletion of addition by denying exemption under Section 11.
2. Requirement to maintain separate books of accounts for hostel/transport facilities.
3. Disallowance of expenses due to non-verifiability.
4. Conclusiveness of the AO's finding on non-utilization of receipts for trust's objects.

Issue-Wise Detailed Analysis:

1. Deletion of Addition by Denying Exemption under Section 11:
The Revenue contended that the CIT(A) erred in deleting the addition made under Section 153A by denying exemption under Section 11 to the extent of Rs. 1,72,07,968/- without examining the merits and merely relying on an earlier ITAT order dated 19.03.2018. The Tribunal noted that the CIT(A) allowed the appeal based on the ITAT's previous decision, which granted the benefit of Section 11 to the appellant Trust. It was emphasized that the Coordinate Bench had already decided in favor of the assessee trust, granting the benefit of Section 11 for the relevant assessment years.

2. Requirement to Maintain Separate Books of Accounts for Hostel/Transport Facilities:
The Revenue argued that even if maintaining hostel/transport facilities was incidental to the educational objectives, separate books of accounts were required under Section 11(4A) to claim exemption. The Tribunal referred to its earlier decision, which held that providing hostel and transport facilities to students and staff was incidental to the educational objectives and not a separate business activity. Therefore, the provisions of Section 11(4A) did not apply, and maintaining separate books of accounts was unnecessary.

3. Disallowance of Expenses Due to Non-Verifiability:
The Revenue highlighted that the AO disallowed expenses amounting to Rs. 1,76,31,774/- out of the total expenses of Rs. 3,47,63,455/- on the grounds of non-verifiability due to the absence of separate books and vouchers. The Tribunal reiterated that the ITAT's previous decision had addressed the issue, concluding that the hostel and transport activities were incidental to the main educational objectives. Consequently, the disallowance of expenses was not justified, and the CIT(A)'s reliance on the ITAT order was appropriate.

4. Conclusiveness of the AO's Finding on Non-Utilization of Receipts for Trust's Objects:
The Revenue contended that the AO's finding that part of the receipts from hostel/transport activities were not utilized for the trust's objects had become conclusive, thereby denying exemption under Section 11(1). The Tribunal found that the CIT(A) had correctly relied on the ITAT's previous decision, which had already addressed the issue and granted exemption under Section 11. The Tribunal upheld the CIT(A)'s decision, stating that the AO's findings were not conclusive in light of the ITAT's earlier ruling.

Conclusion:
The Tribunal concluded that the CIT(A) had rightly relied on the ITAT's previous decision to grant the benefit of Section 11 to the assessee trust. The deletion of the disallowance of Rs. 2,72,79,769/- under Section 11 was upheld, and the appeal of the Department was dismissed. The Tribunal emphasized that the hostel and transport activities were incidental to the educational objectives and did not constitute separate business activities requiring separate books of accounts under Section 11(4A). The decision was pronounced in the open court on 21/02/2023.

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