2014 (4) TMI 978 - AT - Income Tax

Tribunal directs AO to recompute income under Income Tax Act, clarifies eligibility for deductions.

The Ajay G. Piramal Foundation Versus Assistant Director of Income Tax

The Tribunal allowed the appeal in part, directing the Assessing Officer to recompute the income under normal provisions of the Income Tax Act. They ... Disallowance of deduction of interest expenses – Held that:- The Assessing Officer has recorded the finding that the assessee is not entitled to exemption under Section 11 & 12 - The assessee has not disputed such finding in appeal either before the CIT(A) or before this authority - assessee’s income is to be computed under the general provisions of the Income-tax Act which are applicable in the case of persons who are not entitled to exemption under Section 11 & 12 – there is merit in the contention of the assesse that the income of the assessee needs to be computed under the various provisions of the Income-tax Act, viz., income from other sources or income from capital gains - thus, the AO is directed to recomputed the income – Decided in favour of Assessee. Disallowance of deduction u/s 80G of the Act – Held that:- The findings of the CIT(A) cannot be upheld that if the assessee is not eligible for exemption under Section 11 & 12, he is not eligible for deduction under Section 80G - The assessees who are not eligible for exemption under Section 11 & 12 are very well eligible for deduction under Section 80G – thus, the order of the CIT(A) set aside and the matter is remitted back to the AO for re-consideration – Decided in favour of Assessee. Withdrawal of exemption/registration u/s 12A/12AA of the Act – Held that:- If there is some correspondence between the AO and other departmental authorities, though the AO has mentioned the same in the assessment order, it will not become an appealable issue - if the DIT(Exemptions) would like to take any action on the proposal of the Assessing Officer, he will give opportunity of being heard to the assessee in accordance with law - even if the DIT(Exemptions) passed any order withdrawing the exemption granted to the assessee u/s 12A/12AA, the assessee would be at liberty to take appropriate action against such order in accordance with law – the ground is premature and needs no adjudication – Decided against Assessee. Issues involved:1. Deduction of interest expenses under Section 11(5) r.w.s. 13(1)(d) of the Income Tax Act, 1961.2. Deduction under Section 80G of the Act.3. Proposal for withdrawal of exemption/registration under Section 12A/12AA of the Act.Detailed Analysis:1. The appeal addressed the issue of deduction of interest expenses under Section 11(5) r.w.s. 13(1)(d) of the Income Tax Act, 1961. The Assessing Officer had denied the exemption under Section 11 & 12 to the assessee due to the violation of Section 13(1)(d) read with Section 11(5) of the Act. The appellant argued that since they did not claim exemption under Section 11 and the Assessing Officer also denied the exemption, their income should be assessed under the general provisions of the Income-tax Act. The Tribunal agreed, setting aside the previous orders and directing the Assessing Officer to recompute the income under the normal provisions of the Income-tax Act, providing the assessee with a fair opportunity to be heard.2. The second issue revolved around the deduction under Section 80G of the Act. The appellant had not claimed the deduction as their gross total income was a loss. However, if upon recomputation the gross total income turned positive, the Tribunal directed the Assessing Officer to consider the claim for deduction under Section 80G. The Tribunal disagreed with the CIT(A)'s finding that ineligibility for exemption under Section 11 & 12 would disqualify the assessee from claiming deduction under Section 80G. They clarified that those not eligible for exemption under Section 11 & 12 could still claim deduction under Section 80G, instructing the Assessing Officer to reconsider the issue accordingly.3. The final issue pertained to the proposal for withdrawal of exemption/registration under Section 12A/12AA of the Act. The Tribunal noted that the correspondence between the Assessing Officer and other departmental authorities did not constitute an appealable issue. They stated that if the DIT(Exemptions) took any action based on the proposal, the assessee would have the opportunity to be heard as per the law. The Tribunal deemed this issue premature and unnecessary for adjudication at that stage, emphasizing that the assessee could challenge any adverse decision in accordance with the law.In conclusion, the Tribunal partially allowed the appeal for statistical purposes, providing detailed reasoning and directions for each issue raised by the appellant, ensuring a fair and lawful assessment of the assessee's income and deductions under the Income Tax Act, 1961.