Tribunal grants relief under Income Tax Act, overturns denial of exemption for property renting.

The Tribunal allowed the appeal, granting relief under section 11 of the Income Tax Act for the assessment year 2010-11. The denial of exemption under section 11 due to renting property to an excluded person at a lower rate was overturned. The Tribunal found that the rent charged to the company related to the trustee was justified based on various factors, including the area rented and premium paid, which had not been considered by the lower authorities. The assessing officer and CIT(A) were deemed unjustified in denying the exemption, and relief was granted to the assessee.

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Issues:
Challenge to order denying exemption under section 11 of the Income Tax Act for the assessment year 2010-11.

Analysis:
The appeal was filed challenging the order passed by the Commissioner of Income Tax (Appeals) denying exemption under section 11 of the Act. The Tribunal rectified an earlier order to consider the appeal. The main issue raised in ground No. 3 was the denial of exemption under section 11 due to the property being rented to an excluded person at a lower rate. The assessee, a charitable organization, claimed exemption under section 11 for engaging in educational charitable activities. The property was rented to a company in which trustees were interested, leading to the denial of exemption by the Assessing Officer.

In the appeal before the CIT(A), the assessee reiterated its submissions, but the appeal was dismissed based on the lower rent paid by the company related to the trustee. During the hearing, it was argued that the premium paid by the company was not considered, and the rent charged was higher than other tenants. The Departmental Representative argued that the premium and rent were lower than market value, citing examples of rent paid by other entities.

The Tribunal analyzed the facts and background of the case. It noted that the property was under use by statutory tenants, and any comparison should be made with rents charged to other statutory tenants in the building. The rent charged to the company related to the trustee was justified based on the area rented and the premium paid. The Tribunal found that the lower authorities did not consider the premium paid, and factors like access and amenities were not taken into account. It also highlighted that the rent dispute was separate from sale considerations. The Tribunal also noted that in subsequent years, the assessee's returns were accepted, and exemption under section 11 was granted.

Ultimately, the Tribunal allowed the appeal, stating that the assessing officer and CIT(A) were not justified in denying relief under section 11 for the rent received from the company related to the trustee. Ground No. 3 in the assessee's appeal was allowed, and relief was granted under section 11.

The judgment was pronounced on 13/07/2022 by the Tribunal comprising Shri Pramod Kumar, Vice President, and Shri Sandeep Singh Karhail, Judicial Member.

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