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2018 (7) TMI 813 - AT - Income TaxEligible for exemption u/s 11 - loans and advances given to two trade unions - violation of section 13(1)(c ) r.w.s 13(3) - Held that:- When the bench pose a specific question about continuation of violation referred to u/s 13(1)(c) for subsequent years, the ld. AR for the assessee fairly accepted that such violation is perpetuated in subsequent years, however tried to argued that violations brought out by the AO shall not be reason for denial of exemption, when the assessee continued to carry out its activities in accordance with its objects. We find that, the assessee failed to negate observation of the lower authorities in the light of provisions of section 13(1)(c) of the Act. Therefore, consistent with the view taken by the Coordinate bench, we are of the considered view that the assessee is not eligible for exemption u/s 11 of the Act, and hence we are inclined to upheld finding of the ld. CIT(A) and reject ground of the assessee for all asst. years. Taxation of corpus donations - Held that:- On perusal of facts, we find that the AO as well as the ld. CIT(A) gave categorical findings that the assessee failed to file any evidences to prove that these donation are corpus donations. Once, these donations are not corpus donations, then, automatically all receipts including corpus donations shall be treated as receipts of the trust and income wherefrom shall be computed in normal commercial practices by deducting all expenses. The CIT(A) after considering relevant facts has rightly treated corpus donation as part of gross receipts to determine income. We do not find any error in the order of the ld. CIT(A). Hence, we are inclined to uphold the CIT(A) order and reject ground taken by the assessee for all years. Addition towards expenditure in the assessment - Held that:- There is no cause of grievance for the assessee insofar this issue is concerned. But, fact remains that, the AO has said in para 2 of his order that the amount of expenditure is taxable. Once, exemption is denied, income shall be computed under normal accounting principles by considering all income and expenses to determine profit/loss, but at no stretch of imagination expenditure shall be treated as income, unless such expenses is unexplained or such expenses has not be substantiated with evidences. In this case, there are no findings from the AO on these aspects. Therefore, we are of the considered view that no addition can be made towards expenditure incurred for objects of the trust. Denial of credit for TDS - Held that:- The assessee claims that the AO did not allowed credit for TDS amounting to ₹ 1,25,032/-. But, on perusal of orders of the ld. AO as well as the Ld. CIT(A), we find that facts with regard to claim of TDS is not emanating from orders of lower authorities. However, if the assessee able to prove the claim with necessary TDS certificates and corresponding income is already considered in books, then the AO is directed to allow credit for TDS. Hence, the matter is set aside to the file of the AO to cause necessary enquiries and allow credit for TDS. Carry forward and set off of loss of earlier years - Held that:- AO denied benefit of exemption u/s 11 and computed income under normal commercial principles. Once, benefit of exemption is denied and income is considered under normal commercial principles, then the benefit of carry forward and set off of losses shall be allowed, provided all other conditions of carry forward and set off of losses as provided under section 72 are satisfied. Therefore, we set aside the issue to the file of the AO to cause necessary enquiries and allow the benefit accordingly. Additions towards loans and advances given to two trade unions, i.e. Engineering Mazdoor Sabha(EMS) and Mumbai Mazdoor Sabha(MMS) - Held that:- As gathered during assessment and violations of section 13(1)(c) brought out by the AO may be a good reason for rejection of exemption, but loans and advances being current assets cannot be treated as income of the assessee. The ld. CIT(A) after considering relevant facts has rightly deleted additions towards loan and advances. We do not find any error in the order of the ld. CIT(A) and hence, we are inclined to upheld findings of the CIT(A) and reject grounds of revenue for all assessment years. Additions towards purchase car in the name of trustee and repairs and also other expenses - Held that:- Once, exemption is denied, income shall be computed under normal accounting principles by considering all income and expenses to determine profit/loss, but at no stretch of imagination expenditure shall be treated as income, unless such expenses is unexplained within the provisions of section 69C or such expenses has not be substantiated with evidences. In this case, there is no finding from the AO on these aspects. Therefore, we are of the considered view that no addition can be made towards expenditure incurred for objects of the trust, purchase of car being capital in nature and treated as such in books and amount paid to Shankar Gadam of M/s Mahalaxmi Enterprises.
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