2014 (2) TMI 175 - AT - Income Tax

Deletion made u/s 10(23C)(vi) of the Act Deletion made on vehicle expenses Held that - The Assessing Officer disallowed the claim of the assessee for the reason that the order passed by the ITAT, Jaipur Bench for restoring the registration u/s 12AA of the Act had been challenged before the Hon ble High Court but nothing is brought on record to substantiate that the said order has been set aside or reversed - the Assessing Officer while calculating the application of income had not considered the application towards capital expenditure, however, admitted in his remand report that if the capital expenditure was to be considered the application of income was at 96.29% of the income/receipts, therefore, the assessee fulfilled the conditions - the AO failed to bring any material on record that the notification dated 23/3/2007 of the CBDT for granting exemption u/s 10(23C)(vi) of the Act had been rescinded - CIT(A) was fully justified in deleting the addition made by the Assessing Officer Decided against Revenue.

Summary

Issues:
1. Deletion of addition under Section 10(23C)(vi) of the Income Tax Act, 1961.
2. Deletion of addition related to vehicle expenses.
3. Direction to compute the income of the assessee at Nil.

Analysis:

Issue 1: Deletion of addition under Section 10(23C)(vi) of the Income Tax Act, 1961:
The case involved an appeal by the department against the deletion of an addition made by the Assessing Officer under Section 10(23C)(vi) of the Income Tax Act. The assessee, a registered society running a school, had faced cancellation of registration which was later restored. The Assessing Officer calculated surplus income and made additions based on the accumulation of funds. However, the Ld. CIT(A) observed that the surplus was utilized for the society's objectives, indicating a non-profit motive. The Ld. CIT(A) also highlighted that the CBDT had not rescinded the exemption granted under Section 10(23C)(vi) and that the assessee had previously received such exemptions. The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing the lack of grounds to interfere with the findings.

Issue 2: Deletion of addition related to vehicle expenses:
Another ground of appeal was the deletion of an addition concerning vehicle expenses. The Assessing Officer disallowed a portion of these expenses, alleging a profit motive. However, the Ld. CIT(A) found the expenses to be related to the society's operations and not for profit. The Tribunal agreed with the Ld. CIT(A)'s reasoning, noting the absence of evidence that the vehicles were used for non-societal purposes. The Tribunal emphasized that the Assessing Officer failed to show any basis for disallowing these expenses.

Issue 3: Direction to compute the income of the assessee at Nil:
The third issue pertained to the direction given by the Ld. CIT(A) to compute the assessee's income at Nil. This direction was based on the findings related to the first two issues, where the Tribunal upheld the deletions of the additions made by the Assessing Officer. The Tribunal found no valid grounds to interfere with the Ld. CIT(A)'s decision, leading to the dismissal of the department's appeal.

In conclusion, the Tribunal upheld the Ld. CIT(A)'s decisions to delete the additions under Section 10(23C)(vi) and related to vehicle expenses, resulting in the direction to compute the assessee's income at Nil. The department's appeal was dismissed, and the Tribunal found no justification to overturn the Ld. CIT(A)'s findings.