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2014 (3) TMI 24 - AT - Income TaxAllowability of Exemption u/s 11 of the Act Violation of provision of section 13(1)(b) of the Act - Held that:- The AO has not appreciated the functioning of the society and the requirement of the law in the right perspective - There is no provision, either under the Societies Registration Act, or under the Income Tax Act prohibiting persons related through blood to be functionaries of the society - this cannot be a ground for denying exemption under Section 11 of the Act - There is no prohibition or condition prescribed under Section 12A or under Section 11 regarding operation of the bank account - so long as its objects come within the meaning of 'charitable purpose' under Section 2 (15), and the income has been applied to such purposes thus, the observation of the CIT(A) is upheld that exemption under Section 11 is available on compliance of the conditions as prescribed in Sections 11 and Section 12 of the Act. The functioning of the institution cannot be considered to be undemocratic, if two relatives are occupying the position in the management - Section 13 itself provides for payment of salary, and allowance to the persons in the management, in case such payment does not exceed what may be reasonably paid for such services - there is no such restriction in Section 13 regarding relatives holding position in the charitable society or institution. Misuse of facilities of society Held that:- The vehicles are being used for the purposes of the society - during the course of the survey nothing adverse on this account has been found - In the absence of any evidence the allegation of the AO cannot be sustained - Floor of the premises of the society being occupied by its Executive President does not violate the provisions of Section 13 Allowing occupation of the premises to Executive President cannot be considered to be unreasonable - The AO has just made the allegation and has not even bothered to examine the same in the context of section 13(2)(c) of the Act - Revenue could not point out any error or defect in the finding given by the CIT(A) the findings of the CIT(A) is upheld that the objects of the assessee Society are educational in nature and hence, they fall within the meaning of 'charitable purpose' under Section 2(15) of the Act - The assessee is a Society registered under Section 12A of the Act thus, the assessee is eligible for exemption under Section 11 of the Act Decided against Revenue. Allowability of depreciation Revenue was of the view that the society has already claimed the same as deduction of income at the time of addition to the fixed assets Held that:- The assessee having purchased the fixed assets and the same having been utilized in carrying out its activities, the income arising from the activities is to be computed by applying the normal principle of computation of income, which will include a charge on account of depreciation in respect of the fixed assets used for carrying out such activities - depreciation is allowed while computing income of the year under consideration - It cannot be said that the fixed assets acquired had already been claimed as deduction - Depreciation is a normal expenditure incurred in the course of the activities and hence, the same need to be deducted while computing the income- This Decision in Director of Income Tax vs. Vishwa Jagriti Mission 2012 (4) TMI 289 - DELHI HIGH COURT] followed the order of the CIT(A) upheld Decided against Revenue. Allowability of expenditure - Purchase of 260 laptops Held that:- The CIT(A) has clearly held that in case it is to be considered as expenditure, it will be an application of income, and if, the same is to be considered as fixed assets, it will still be an application of income and either way, the society is eligible to claim the amount as application of its income - Revenue could not substantiate their allegation the findings of the CIT(A) upheld Decided against Revenue. Allowability of deduction on expenses Held that:- There is no material or evidence that the society has any link directly or indirect with any of these enterprises - the AO is not correct in making an allegation that the appellant- society is not eligible for exemption under section 11 of the Income Tax Act Revenue could not successfully contradict the above findings of the CIT(A) - The assessee has actually purchased these items, or has in fact taken services from these suppliers/service providers - The payments have been made by account payee cheques - nothing adverse was found during the course of the survey- the expenses are routine expenditure for repair and maintenance the assessee had submitted complete details during the course of the assessment proceedings there is no reason to interfere in the findings of the CIT(A) Decided against Revenue.
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