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2019 (1) TMI 1052 - AT - Income TaxCharitable activities - Denial of exemption u/s 11 - micro finance activities are held to be commercial in nature and therefore, the assessee society is not eligible for claiming exemption - Held that:- AO noticed that the assessee society provided services to the SHGs in the name of ‘charity’ by collecting service charges and higher interest from them for managing its own expenses. Though the assessee claims that it was offering services to the poor, AO observed that no services were provided to the poorer on ‘free of cost’. Therefore, by invoking the provisions of section 2(15) r.w.s. 13(8) AO denied the claim of exemption under section 11 of the Act. However, in the appellate order, the CIT(A) has not given any findings as to whether the assessee is eligible to claim exemption under section 11 of the Act since the assessee was carrying out micro finance activity. Under the above facts and circumstances, we remit the issue to the file of the ld. CIT(A) for adjudication and passing detailed speaking order keeping in mind the decisions of the Tribunal as relied on by the ld. DR. Thus, the ground raised by the Revenue is allowed for statistical purposes. Violation committed by the assessee society by spending more than 50% towards administrative expenses - As in the case of Maddi Venataraman & CO. (P.) Ltd. v. CIT [1997 (12) TMI 3 - SUPREME COURT], wherein, as held that it is against the public policy to allow the benefit of deduction under one statute of any expenditure incurred in violation of the provisions of another statute. In view of the above decision of the Hon’ble Supreme Court, we find that the assessee has clearly violated the Foreign Contribution Regulations Rules, 2011 and thus, the ground raised by the Revenue is allowed. Rent paid by the assessee society to its accountant - Held that:- Since the owner of the building insisted the rent in cash, the Financial Controller of the Society drew a cheque in his own favour, encashed the same and paid the same to the building owner. Moreover, it was submitted that the said rent was not paid from the resources of the society. On perusal of the appellate order, we find that without asking any details from the assessee, the ld. CIT(A) has simply sustained the addition. We find that the provision made for rental was duly agreed by the concern agency and accordingly, out of the foreign fund, the said expenditure was met out as contended by the assessee in its written submissions that the said rent was not paid from the assessee’s fund. In view of the above facts, the addition made and sustained by the ld. CIT(A) stands deleted. Disallowance 50% of the salary paid to the Secretary of the assessee society - Held that:- By considering the qualification, experience, etc. and since the Assessing Officer has not allowed any reasonable portion of salary claimed to have paid to the Secretary, the ld. CIT(A) has reasonably allowed 50% of the disallowance of salary paid to the secretary and the balance was rightly sustained. The above allowance of 50% of salary to the Secretary by the ld. CIT(A) was not at all disputed by the Department in its appeal before the Tribunal, we find no reason to interfere with the order passed by the ld. CIT(A) and accordingly, the ground raised by the assessee stands dismissed.
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