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of <h1>Tribunal rules in favor of society, exempts from Income-tax Act.</h1> <h3>RKDF Education Society Versus ACIT, 1(1), Bhopal</h3> RKDF Education Society Versus ACIT, 1(1), Bhopal - TMI Issues Involved:1. Denial of exemption under Section 11 & 12 of the Income-tax Act, 1961.2. Addition on account of interest-free advances to other societies.3. Addition on account of interest-free advances to Total Diagnosis Private Limited.4. Disallowance of traveling expenses.5. Charging of interest under Section 234D.Issue-wise Detailed Analysis:1. Denial of Exemption under Section 11 & 12:The Assessing Officer (AO) denied the exemption under Section 11 & 12, citing that the assessee society had violated Section 13 by using its income/property for the benefit of closely connected persons. The CIT(A) upheld this denial, observing that the assessee had infringed the provisions of Section 13. However, the Tribunal found that the society was registered under Section 12AA and carried out charitable activities, qualifying for exemption under Sections 11 & 12. The Tribunal concluded that there was no violation of Section 13, as the advances to other societies were interest-free and in consonance with the object of the assessee society.2. Addition on Account of Interest-free Advances to Other Societies:The AO added notional interest on interest-free advances given to other societies, arguing that these advances violated Section 13. The CIT(A) deleted this addition, and the Tribunal upheld this decision, noting that the advances were to societies registered under Section 12A and were in line with the charitable objectives of the assessee. The Tribunal referenced its previous decisions in the assessee's own case for earlier assessment years, confirming that no disallowance was warranted, and the income was exempt under Sections 11 & 12.3. Addition on Account of Interest-free Advances to Total Diagnosis Private Limited:The AO treated the advance given to Total Diagnosis Private Limited as a loan and added notional interest, asserting a violation of Section 13(2)(a). The CIT(A) deleted the addition, recognizing the advance as a commercial transaction for purchasing office space, not a loan. The Tribunal confirmed this, noting that the advance was used immediately for purchasing land, and the agreement was genuine. The Tribunal found no violation of Section 13, as the transaction was commercial, with interest paid back to the assessee when the building could not be handed over.4. Disallowance of Traveling Expenses:The AO disallowed Rs. 13,283/- in traveling expenses, claiming it benefited persons mentioned in Section 13(3). The CIT(A) confirmed the disallowance of Rs. 11,575/-. The Tribunal found the travel was for society work, and the minor daughter of a trustee had to be taken along, as she could not be left alone. The Tribunal deemed the amount negligible and not a personal benefit, allowing the expense.5. Charging of Interest under Section 234D:The Tribunal found no merit in the ground regarding interest under Section 234D, considering it consequential. The AO was directed to recompute interest after giving effect to the Tribunal's order as per the Income-tax Act, 1961.Conclusion:The Tribunal allowed the appeal in part, confirming the exemption under Sections 11 & 12, deleting additions on account of interest-free advances, and allowing traveling expenses. The ground regarding interest under Section 234D was deemed consequential.
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