2024 (8) TMI 746 - AT - Income Tax

Denial of exemption u/s 11 - value of car purchased in the name of trustee - HELD THAT - The submissions made by the assessee are not acceptable in registering the vehicle in managing trustee s name by utilizing the funds of the assessee, in order to save road/life tax and insurance charges which are meant for charitable purposes. We note that the ld. CIT(A) rightly confirmed the view of the Assessing Officer in denying exemption under sections 11 and 12 of the Act to the extent of value of that car. CIT(A) asked the assessee to furnish the details therein, but, however, no details filed before the first appellate authority and even before us. When we asked for the log book for verification to find out as to whether the said vehicle was used for purpose of assessee s activities, the ld. AR could not produce anything in support of his argument to show that the said vehicle was utilized for the purpose of charitable activities. The submission of the AR that the log book of the vehicle was filed before the AO/CIT(A) is not acceptable, because, a mere statement cannot be taken into consideration without there being any corroborative evidence. Thus, the ground raised by the assessee fails.

Summary

Issues Involved:
- Denial of exemption under section 11 of the Income Tax Act for the value of a car purchased in the name of a trustee by a charitable trust.

Detailed Analysis:

1. Background and Assessing Officer's Findings:
The appeal before the Appellate Tribunal ITAT Chennai concerns the denial of exemption under section 11 of the Income Tax Act for a car purchased in the name of a managing trustee by a charitable trust. The trust, engaged in charitable activities like education and relief to the poor, purchased a luxury car, "Jaguar XF 3.0 L Premium Luxury," in the name of the managing trustee. The Assessing Officer found this purchase to be a violation under section 13(1)(c) of the Act, leading to the denial of exemption to the extent of the car's value.

2. Proceedings before the CIT(A):
The trust appealed the Assessing Officer's decision before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld the Assessing Officer's order, emphasizing that the trust failed to provide satisfactory explanations or documentation regarding the car purchase. The CIT(A) highlighted that the trust's actions were not in line with the charitable objectives and that the luxury purchase in the trustee's name was a misuse of funds collected for charitable purposes.

3. Tribunal's Examination and Decision:
Upon further appeal to the Tribunal, the trust reiterated its arguments regarding the car purchase, citing reasons such as lower road tax and insurance charges. However, the Tribunal, after considering the submissions and legal precedents, including the decision in Biharilal Jaiswal v. CIT, found the trust's justifications insufficient. The Tribunal concurred with the CIT(A)'s decision, emphasizing the lack of evidence showing the car's use for charitable activities. The Tribunal noted the absence of supporting documentation, such as a logbook, to substantiate the trust's claims.

4. Final Decision and Dismissal of Appeal:
Ultimately, the Tribunal dismissed the trust's appeal, agreeing with the CIT(A)'s reasoning and decision to deny exemption under sections 11 and 12 of the Act for the car's value. The Tribunal highlighted the importance of aligning trust activities with charitable objectives and the proper utilization of funds. The trust's failure to provide adequate evidence regarding the car's usage for charitable purposes led to the dismissal of the appeal.

In conclusion, the Tribunal affirmed the denial of exemption for the luxury car purchase in the trustee's name, emphasizing the need for charitable trusts to adhere to the statutory provisions and ensure funds are utilized for legitimate charitable activities.