2023 (4) TMI 1091 - AT - Income Tax

Tribunal affirms CIT(E)'s order on expenditure, income set-off.

Income Tax Officer (E), Ward-1 (4), New Delhi Versus Mehta Charitable Prajanalaya Trust

Income Tax Officer (E), Ward-1 (4), New Delhi Versus Mehta Charitable Prajanalaya Trust - TMI Issues:1. Allowance of expenditure under different heads directed by CIT(A) - High Court's directions.2. Allowance of deduction under section 80G directed by CIT(A) - High Court's directions.3. Appreciation of High Court's direction on allowance of expenditure narrowing its scope by CIT(A).Issue 1: Allowance of Expenditure under Different HeadsThe Revenue filed an appeal against the order of the ld. CIT(A)-40, New Delhi, questioning the direction to assess and allow expenditure under different heads. The Revenue argued that the High Court did not specify details about different heads of income and expenditure in its decision regarding the denial of benefits under sections 11 & 12. The High Court had simply instructed the AO to examine the allowability of expenditure and depreciation in accordance with the law. The case history revealed that exemption under section 11 was previously denied for certain assessment years based on the decisions of the Delhi High Court. The ld. CIT(E) directed the AO to assess the income from charitable activities under the head 'Income from other sources' and disallowed certain expenditures not related to income generation. The Revenue authorities had allowed depreciation and other expenses as per the High Court's directions, leading to the dismissal of the Revenue's appeal.Issue 2: Allowance of Deduction under Section 80GAnother ground raised by the Revenue was the direction of the ld. CIT(A) to allow deduction under section 80G after verification, even though the High Court did not specifically address this issue. The ld. CIT(E) instructed the AO to allow deductions under section 80G for donations paid, provided they were made to entities approved under section 80G. The Revenue's appeal was dismissed as the expenditure unrelated to income generation was disallowed, and the Revenue authorities had correctly allowed the set off of business income with losses computed under the head 'Income from other sources.'Issue 3: Appreciation of High Court's DirectionThe ld. CIT(A) was criticized for not fully appreciating the High Court's direction, especially regarding the allowance of all expenditures, as the ld. CIT(E) narrowed the scope to only a few heads. However, the Tribunal found that the Revenue authorities had appropriately followed the High Court's directions by disallowing expenditures unrelated to income generation and allowing set off of business income with losses under the Income Tax Act. The Tribunal declined to interfere with the ld. CIT(E)'s order, leading to the dismissal of the Revenue's appeal. Additionally, the Tribunal allowed the assessee's application to treat the income earned as business income and set off expenses and depreciation accordingly.In conclusion, the Tribunal upheld the ld. CIT(E)'s order, emphasizing the correct application of the law in disallowing expenditures not related to income generation and allowing set off of business income with losses. The Tribunal dismissed the Revenue's appeal and allowed the assessee's application regarding the treatment of income as business income.