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2015 (7) TMI 521 - AT - Income TaxExemption of income under the provision of Section 11 denied - Computation of income of assessee society - CIT (A) held that the activities of the assessee fall within the purview of the proviso to section 2(15) - whether the appellant society is engaged in the activities which are in the nature of educational or advancement of any other objects of general public utility? - Held that:- .The mere fact that the appellant society had generated surplus, during the course of carrying on the ancillary objects, shall not alter the character of the main objects so long as the predominant object continues to be charitable and not to earn the profit. Please refer to the judgments rendered by the Hon’ble Apex Court in the cases of Addl. CIT vs. Surat Art Silk Cloth Manufacturers’ Association [1979 (11) TMI 1 - SUPREME Court] and CIT v. A.P. State Road Transport Corporation [1986 (3) TMI 1 - SUPREME Court]. As viewed from any angle, we hold that the Appellant society is entitled from exemption of income under the provision of Section 11 of the Act and the proviso to Section 2(15) of the Act cannot be applied to the appellant society as it is not engaged in any activity which are in the nature of trade, commerce and business. Accordingly, we direct the Assessing Officer to allow the exemption under the provisions of Sec. 11 of the Act. - Decided in favour of assessee. Disallowance of prior period expenses, deferred tax liability and provision for income-tax - Held that:- If the commercial principles for determining the income are applied, it is but natural that the adjustment of the expenses incurred by the appellant society for charitable purposes in the earlier year against income earned by the appellant society in the subsequent year will have to be regarded as application of income of the appellant society for charitable purpose in the subsequent year in which such adjustment has been made having regard to the benevolent provisions contained in section 11 and will have to be excluded from the income of the appellant society under section 11(1)(a) Reliance in this regard is placed on the decision in the case of CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal, (1993 (11) TMI 17 - GUJARAT High Court ). Further, we also note that the provisions of section 11(1)(a) of the Act does not prescribe that income of the year should have been applied only in the year in which income has arisen. Therefore, we hold that the pre-operative expense should be allowed as deduction. The Assessing Officer had adopted the excess of income over expenditure for taxation and further addition of provision for income tax was made. For the purpose of computation of income available for application for charitable purposes, it is only the actual receipts and payments which are all alone to be considered. Therefore, we direct the Assessing Officer to allow the provision for taxation only in the year in which actual payment is made. Allowability of depreciation - Held that:- We direct the Assessing Officer to allow the depreciation as an application of income. See case of A.P. Olympic Association [2014 (2) TMI 988 - ITAT HYDERABAD] - Decided in favour of assessee.
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