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TMI Blog2012 (12) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... provides the payment of salary and other allowance to the persons referred to in sub-section (3) of section 13 out of the resources of the institution for services rendered by that person to the institution provided the amount paid is not in excess of what may be reasonably paid for such services. The payment of DA for the purpose of travelling for the work of the institution is not at all excessive and the payment of such expenditure is not for the personal benefit of office bearers and, therefore, there is no violation of section 13 of the Act. Application of income in respect of acquisition of fixed assets – Held that:- Assets have been acquired for the purpose of advancement of the objects of the society and, therefore, such investment should be treated as an application of income in terms of the provisions of section 11 of the Act - there is no violation of section 13 and as such the Assessing Officer was not justified in declining the deduction for application of income u/s 11(1)(a) of the Act – in favor of assessee Inclusion of corpus donation – Held that:- Section 11(1)(d) provides that the income the form of corpus donation shall not be included in the total income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption u/s.11 12 of the I.T. Act. Such findings of the learned lower authorities be quashed and it be held that the expenditure on telephone travelling were for the purpose and the benefits of the society and there is no personal benefits of the members of the society is involved in such expenses. Thus it be held that there is no violation of section 13 and the assessee is fully eligible for exemption u/s.11 12 of the I.T. Act. 4. That, on the facts in the circumstances of the case and in law, the disallowance of Rs. 6143 out of telephone expenses is wholly unjustified and unlawful and, therefore, be deleted. 5. That, on the facts in the circumstances of the case and in law, the disallowance of Rs. 498050 out of travelling expenses is wholly unjustified and unlawful and, therefore, be deleted. 6. That, on the facts in the circumstances of the case and in law, the learned lower authorities erred and not justified in not allowing the deduction for the application of income on acquisition of fixed assets at Rs. 20,35,92,757/-. Such deduction be kindly allowed as an application of income. 7. That, on the facts in the circumstances of the case and in law, the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r than the status shown in the return is void ab initio. Accordingly, it was prayed that the assessment made by the Assessing Officer and confirmed by CIT(A) should be cancelled. He also placed on record orders of the coordinate Bench in the case of Chandravadani Mahila Shiksha Samiti, order dated 8.2.2012 wherein exactly similar issue was decided. 5. We have considered the rival submissions of the parties, gone through the orders of the authorities below and find from record that the assessee is a registered society with the Registrar of Societies. After verifying the genuineness of the activities of the society and satisfying about its objects, the registration was granted u/s 12AA(1)(b)(i) with effect from 1.4.2002. The return was also filed in the status of AJP. However, without giving any notice or any reason much less a cogent reason, the Assessing Officer has assessed the same as AOP. We do not find any justification in the action of the Assessing Officer which was confirmed by the Commissioner of Income Tax (Appeals). Under identical facts, the I.T.A.T., coordinate Bench in the case of Chandravadani Mahila Shiksha Samiti; Income-tax Act, 1961, Nos. 141 to 143 and 281/Ind/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the room in budget hotel is available in the range of Rs. 2000-3000 per day normally plus meal and other expenses per day comes to nearly Rs. 500 and therefore, there is no benefit provided to Chairman as alleged. The other expenditure relates only to cost of air ticket and local conveyance. At many times to attend the meeting in time, expenditure on air ticket becomes necessary and therefore, the same were incurred. The payments of expenses are, therefore, for the services rendered by the persons for the purpose of the works of the institution. The payment of DA of Rs. 2500/- per day considering the cost of hotel and the food in city like Delhi could not be considered as unreasonable and, therefore, the assessee society has not provided any benefit without any service to the persons mentioned u/s 13 of the Act. 9. Similarly, travelling to Indore and Jabalpur was undertaken for getting necessary building approvals, which was under construction stage. The Chairman/Secretary and other persons were, therefore, required to visit frequently for the supervision of works, holding interviews and meetings with the contractors, site supervisors/engineers and also the concerned Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and circumstances discussed by the Tribunal in the aforementioned order, respectfully following the same and for the reasons given hereinabove, we do not find any justification on the part of the lower authorities for making any part disallowance out of telephone and traveling expenses in both the years and thereby declining the claim of exemption u/ss 11 and 12 of the Act. 12. On the plea that the assessee has violated the provisions of section 13(2) and 13(1), the Assessing Officer declined the claim of the assessee for exemption u/ss 11 12 of the Act. Consequently, the application of income for acquisition of assets at Rs. 20,35,92,757/- was also declined by the Assessing Officer and confirmed by the CIT(A). The assessee is in further appeal before us. 13. We have considered the rival submissions of the parties, gone through the orders of the authorities below and find from record that the Assessing Officer has denied the benefit of sections 11 and 12 of the Act on the plea of violation of section 13(1) and 13 (2). Accordingly, the Assessing Officer held that deduction in respect of acquisition of capital asset cannot be allowed. 14. As we have observed hereinabove th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 11(1)(d) of the Act. Similar issue has been considered by the coordinate Bench in the case of Vichar Bharti Education Society; ITA Nos. 540 to 542/Ind/007 order dated 13.7.2010. As the facts and circumstances are in para materia, respectfully following the order of the coordinate Bench and for the reasons discussed hereinabove, we reverse the action of the lower authorities in declining the claim of corpus donation u/s 11(1)(d) of the Act. 18. Ground no. 9 with regard to not allowing TDS credit, was not pressed during the course of hearing. The same is, therefore, dismissed in limine as not pressed. 19. In the assessment year 2008-09 identical ground has been taken by the assessee with regard to assessment made in different status, disallowance of telephone and travelling expenses. We have already discussed these issues while disposing of relevant ground in the assessment year 2007-08. For the reasons stated therein, all these grounds are allowed in favour of the assessee. 20. In the assessment year 2008-09, the assessee is aggrieved for addition on account of accrued interest and cessation of liability in respect of loan to K.L.Thakral. 21. Rival contentions have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of Rs.108420/- for the notional interest on the ground that the assessee has provided interest free loan to K.L. Thakral. He has also made an addition of Rs. 1126928 for the cessation of liability of K.L. Thakral. The finding of the Assessing Officer in para 5.3 are that the assessee society has given interest free loan of Rs. 903502 to K.L. Thakral and on this loan he made an addition of Rs. 108420/- for the notional interest. The Assessing Officer also held that since the interest free loan has provided, therefore, there is a violation of section 13(1)(d)(i) and hence the benefit of sections 11 12 will not be allowed. Further in para 7 of the order, the Assessing Officer says that on going through the balance sheet and details of sundry creditors it is observed that in case of Alka Industries, Rs. 1076928 and in the name of K.L. Thakral Rs. 50000 are outstanding. The two amounts aggregate to Rs. 1126928 (1076928 + 50000). The Assessing Officer further observed that these two amounts are outstanding and the assessee did not provide the details and the ledger account shows transactions in the last three years, therefore, the Assessing Officer treated the said amount as cess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer s action for declining the claim of claim of application of income for the acquisition of fixed assets. As already discussed hereinabove while disposing of appeal for the assessment year 2007-08, we reverse the conclusion of the lower authorities in declining the deduction on account of cost of acquisition of fixed assets. 26. Similarly, the Assessing Officer s denial of statutory deduction u/s 11(1)(a) of the Act amounting to Rs.2,62,13,965/- on the ground of violation of section 13 was not justified in view of the observations made hereinabove in the assessment year 2007-08. As there was no violation of section 13, the assessee is eligible for deduction on account of application of income. 27. The issue with regard to decline of claim of depreciation is already covered in favour of the assessee by the decision of the jurisdictional High Court in the case of Gujarati Samaj and reported at 64 DTR 76. Similar disallowance was made in assessee s case in the assessment years 20904-05 and 2005-06 which was allowed by the Commissioner of Income Tax (Appeals) vide order dated 15.7.2009 and the said order has also been confirmed by the Tribunal vide its order dated 5.8.2010. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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