9911796707
TMI Blog2016 (5) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... and also registered under sec. 12A of the Income Tax Act, 1961. The Society has filed its return of income for the A.Y. 2009-10, declaring nil total income by claiming exemption under sec. 11 of the Income tax Act, 1961. The Case has been selected for scrutiny assessment and accordingly, notice under sec. 143(2) and 142(1) of the Income Tax Act, 1961 were issued. In response to notices, the authorised representative of the assessee appeared from time to time and furnished books of accounts. During the course of assessment proceedings, the A.O. noticed that the assessee deriving income from various sources, such as fees from students, income from hospital, income from pharmacy, rent from premises and interest income from bank deposits, agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made observations about the genuineness of the activities of the society. The only point on which, the A.O. came to the conclusion that the activity of society is akin to any commercial activity, is increase in receipts of society. It was further submitted that unless, prove the objects are not genuine and the activities are not in accordance with the objects of the trust, exemption cannot be denied. The A.O. without pointing out any violations referred to in section 13(1) (c) or 13(1)(d), simply assessed the income under the head income from business and disallowed the expenditures, by invoking sec. 40(a)(ia) and 43B, which is not correct. In support of its arguments, relied upon the judgment of ITAT, Mumbai Bench decision in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits and gains from business or profession. The profits and gains from business or profession are computed under sec. 28. Section 29 provides for manner of computation of income under the head profits and gains of business or profession, which states that the income referred to in sec. 28 shall be computed in accordance with the provisions of sec. 28 to 43D. Therefore, the provisions of sec. 40(a)(ia) and 43B are relevant, if income is computed under the head profits and gains of business or profession. The A.O. has not doubted the genuineness of the activities of the trust and without pointing out any violations referred to in section 13(1)( c) or 13(1)(d), simply assessed the income under the head income from business and disallowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. 7. The A.O. computed the income under the normal provisions of profits and gains of business and profession. The A.O. gave his own reasons for not applying the provisions of sec. 11, 12 & 13 of the Act. On perusal of reasons, the reasons given by the A.O. for denying the exemptions, appears to be quite contrary to the law. Admittedly, The Society is registered under sec. 12A of the Act and it is imparting education. It is not a case of A.O. that the objects are not charitable in nature and the activities of the assessee are not genuine. The A.O., one side admitted that the objects of the society are not under debate, nor any case is being made out for reconsideration of exemption allowable to assessee, but on the other hand, den ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of sec. 40(a)(ia) and 43B are relevant, if income is computed under the head profits and gains of business or profession. In the present case on hand, the income of the assessee is eligible for exemption under sec. 11 of the Act by virtue of registration under sec. 12A. The income of any trust/society, enjoying exemption u/s 11, is exempt from tax, subject to certain conditions. If, such conditions are fulfilled, the whole income of such trust is exempt from tax. The concept of computation of income under section 11 is real income concept, which is computed on the principles of real income generated from property held under trust and not notional income like under other provisions of the Act. Section 11(1)(a) provides for applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The relevant portion is reproduced hereinunder. "Section 40 is applicable only when deductions under Sections 30 to 38 are being made in computing the income chargeable under the head "profits and gains of business or profession" under section 28. The exception in Section 40 is carved out, only for the purpose of Section 28 and not for computing the exemption of income of a charitable trust under Section 11. The disallowance made under Section 40(a) will only go to enhance the business profit of an assessee whose income is assessable under section 28 and not otherwise. Hence, provisions of section 40(a) are not applicable in case of charitable trust or institution where income and expenditure is computed in terms of section 11." 10. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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