2009 (11) TMI 951 - AT - Income Tax

Tribunal upholds society's tax exemption under sections 11 & 12, reverses disallowances.

A.C.I.T. 1 (1), Bhopal Versus M/s. R.K.D.F. Education Society

A.C.I.T. 1 (1), Bhopal Versus M/s. R.K.D.F. Education Society - TMI Issues involved:The judgment involves issues related to the eligibility of exemption u/s 10(23C)(vi) and u/s 11/12 of the Income Tax Act, 1961, cancellation of registration u/s 12A, disallowances/additions made by the Assessing Officer, and various grounds raised by the Revenue in two appeals.I.T.A. No. 426/Ind/2007 for assessment year 2003-04:The appellant, a registered society, had its registration u/s 12-A cancelled subsequent to denial of exemption u/s 10(23- C)(vi). The Assessing Officer (A.O.) disallowed exemption u/s 11/12 due to excess payment to an individual, unexplained cash credit, sale of building, donations, and interest on loans. The Ld. CIT(A) deleted all additions/disallowances, considering the restoration of registration u/s 12-A by the Tribunal. The Revenue appealed, challenging the deletions.Grounds raised by the Revenue:1. Excess of income over expenditure: The A.O. made an addition due to ineligibility for exemption u/s 10(23C)(vi) and u/s 12A, which was later restored. The Tribunal dismissed this ground.2. Excess payment made to an individual: The Tribunal found no unusual benefit received by the individual, hence dismissed the addition.3. Unexplained cash credit: The Ld. CIT(A) rightly deleted the addition as the advance was returned directly to the society.4. Sale of building: The sale consideration was rightly reduced from the opening W.D.V. for depreciation calculation.5. Donation: Donations related to trust objects were rightly allowed by the Ld. CIT(A).6. Preliminary expenses: Write-off of preliminary expenses was allowed as they were necessary for the society's objects.7. Interest disallowed: Loans given without interest to educational and charitable societies were found in line with the society's objects, hence no disallowance was warranted.8. Benefit of interest passed on: No disallowance of interest paid or notional interest was justified, and the society's income was held exempt u/s 11 & 12.I.T.A.No.439/Ind/2007:The issues raised in this appeal were similar to those in I.T.A. No. 426/Ind/2007, and the Tribunal dismissed the grounds raised by the Revenue in this appeal as well.In conclusion, both appeals of the Revenue were dismissed by the Tribunal on 26th November, 2009.