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2022 (12) TMI 1088 - AT - Income TaxExemption u/s 11 - Application of provisions of "Accumulation of income" for Notional Income (Rent) - annual value of any property is to be determined - two properties leased out by assessee are not the fair market value of rental income and it is only nominal value and he compared the prevailing market rent in the area - As per AO assessee charitable trust owns land leased out the same and the two tenants are specified persons u/s.13(3 hence, provisions of section 13(1)(c) of the Act are applicable to the case of the assessee - HELD THAT:- As going through the CBDT Circular No.005P (LXX-6) dt. 19th June, 1968 cited above, which has been considered in the case of Rao Bahadur Calavala Cunnan Chetty Charities [1979 (8) TMI 17 - MADRAS HIGH COURT] and Ganga Charity Trust Fund [1985 (10) TMI 67 - GUJARAT HIGH COURT] we are of the view that the ‘accumulation’ or ‘application’ in section 11(1)(a) of the Act must be of real income and as per the CBDT circular No.005P(LXX-6) cited above, makes it clear that the word ‘income’ in section 11(1)(a) must be understood in commercial sense. The entire income of the trust in the commercial sense has been spent for the purpose and not the notional income. But in the present case before us, the assessee has violated the provisions of section 13(1)(c) r.w.s. 13(1)(b) of the Act, as the assessee has received rent from two tenants who are specified persons u/s.13(3) of the Act and hence, clear violation of provisions of section 13(1)(c) r.w.s. 13(1)(b) of the Act. Therefore, the assessee is not entitled for claim of deduction. Accordingly assessee trust cannot be assessed on notional rental income in term of CBDT Circular No.005P(LXX-6) dt. 19th June 1968 AO will deny exemption u/s.11 of the Act, in regard to the income declared by assessee and will assess the same to tax in term of section 164(1) of the Act.
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