Tribunal denies exemption, directs reassessment for net income only, excludes specific grants. Appeal allowed.

Society For Integrated Development In Urban And Rural Areas(sidur). Versus Deputy Commissioner Of Income-Tax.

Society For Integrated Development In Urban And Rural Areas(sidur). Versus Deputy Commissioner Of Income-Tax. - ITD 090, 493, TTJ 084, 968, Issues Involved:
1. Violation of Section 13(1)(c) and denial of exemption u/s 11.
2. Taxability of entire receipts as income.

Summary:

Issue 1: Violation of Section 13(1)(c) and Denial of Exemption u/s 11

The assessee, a society registered u/s 12A, filed a return declaring 'nil' income after claiming exemption u/s 11. The Assessing Officer (AO) denied this exemption, citing a violation of Section 13(1)(c) due to loans taken by Mr. Vardhan, the Executive Secretary, against the society's fixed deposits (FDs) without adequate security or interest. The Commissioner (Appeals) upheld the AO's decision, noting that the society's funds were misapplied for personal benefits of interested persons, violating Section 13(1)(c) read with Section 13(2)(b). The Tribunal agreed, emphasizing that the society's assets were used without compensation, thus denying the exemption u/s 11.

Issue 2: Taxability of Entire Receipts as Income

The assessee argued that even if exemption u/s 11 is denied, the entire receipts should not be taxed as income. The Commissioner (Appeals) rejected this, stating that u/s 2(24)(iia), income includes voluntary contributions, making the entire receipts taxable. The Tribunal referred to the case of Nirmal Agricultural Society, which held that only the net income, not gross receipts, should be taxed, and specific grants for particular purposes should not be treated as income. The Tribunal directed the AO to re-do the assessment, considering only the net income after deducting expenses related to the society's objectives.

Conclusion:

The Tribunal upheld the denial of exemption u/s 11 due to the violation of Section 13(1)(c) but directed the AO to reassess the income, considering only the net income and excluding specific grants from being taxed as income. The appeal was treated as allowed for statistical purposes.