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2021 (2) TMI 469 - AT - Income TaxExemption u/s 11 - charitable activity u/s 2(15) - cancellation of registration u/s 12AA - CIT-E doubted genuineness of the activity of the society, because, he had observed certain defects with regard to profit for the F.Y. 2015-16, 2016-17 and 2017-18 - HELD THAT:- Assessee has furnished financial statement and as seen from the financial statements, the same refers to the construction account undertaken by the assessee which was not reflected in the income and expenditure statement, but recorded in the balance sheet. Thus, there was an error in the finding of the Ld.CIT(E) with regard to profit making activity of the assessee society. Violation of provisions of section 13(1) - Unreasonable payment of rent - no basis for suspecting the source of income of the daughters for purchase of land. It is observed that the assessee society is paying the rent of ₹ 50,000/- per year for 1355 sq.yds of land which is leased to the society for 15 years for the purpose of construction of old age home which works out ₹ 3.00 per square yard for month. The rent of ₹ 50,000/- per year on 1355 sq.yds of land in the vicinity of Visakhapatnam district appears to be reasonable and there is no reason to suspect the reasonableness of payment of rent. Payment of salary to Sri P.Prabhakar, who is working in the orphanage home for 24 x 7 cannot be said to be unreasonable by any stretch of imagination - CIT(E) ought to have considered the minimum wages as per the act in the area as decided by the District Collector, working hours and compared the salary paid to Sri P.Prabhakar with the minimum wages to arrive at the reasonableness. Defects of donations, ‘Loyola Sweet Home’ is stated to be the name of orphanage home and on the receipt, registered number of the society was also duly printed and no defects were brought on record with regard to accounting of the receipts in the society’s books, thus, there is no reason to suspect the genuineness of the activity of the society. Donations deposited in the bank account on 15.11.2016 and 25.11.2016, the sums of ₹ 1.00 lakh and ₹ 10,000/- respectively, the assessee submitted that the same were directly deposited in the in the bank account and duly accounted in the books of accounts. If the Ld.CIT(E) suspects the donations, the CIT(E) ought to have taken action for assessing the same as income u/s 68 r.w.s. 115BBE as per law, but there is no case for suspecting the genuineness of the activity of the society. Purchase of Maruti van, it is observed that Maruti van was purchased by the society prior to registration and the same was not brought into books of accounts. Van was used exclusively for ambulance of the society. The invoices was also available for purchase of Maruti van and no depreciation was claimed. The Ld.CIT(E) ought to have taken the appropriate action for the A.Y.2010-11( relevant to the Previous year 2009- 10) if necessary as per law. Loans, genuineness cannot be doubted. The assessee has accepted the interest free loans, the creditors are identifiable and the no individual benefit was given by accepting interest free loans thus there is no reason for the CIT(E) to reject the registration u/s 80G of the Act. Bills for construction activity, the assessee stated that it would produce the bills given the opportunity. In the instant case, we find that though the assessee has filed application on 29.03.2019, the case was taken up by the Ld.CIT(E) at the fag end of the period i.e. 13.09.2019, thus there was no time for the Ld.CIT(E) to examine the issue properly. Though all the issues prima facie appears to be not a reason for rejection of application of the assessee society, all the above issues needs to be verified in detail to take further action. Therefore, in our considered opinion, the issue needs to be remitted back to the file of the CIT(E). Accordingly, we remit the matter back to the file of the Ld.CIT(E) with a direction to examine the issues with regard to genuineness of the society and take appropriate action as per law. Appeal filed by the assessee is allowed for statistical purpose.
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