TMI Blog2016 (5) TMI 811X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Addition of unvouched expenses and expenses of personal nature - Held that:- C IT(A) has correctly observed that the expenses incurred on account of business promotion, Misc. expenses, repair and maintenance office expenses, D.G. set and Printing and stationery expenses are required for smooth running of the educational institution. By any stretch of imagination, these expenses cannot be held unreasonable or excessive. We also agree with the CIT(A) that 1/10 t h of vehicle running and maintenance expenses is to be treated as personal in nature because the element of personal use of vehicle cannot be ruled out in this case. There is no evidence on record to show that the assessee had maintained the log book of the vehicle. Thus, considering the entire facts and circumstances of the case, we uphold the order of CIT(A) Withdrawal of registration u/s 12AA - Held that:- CIT(A) has deleted various additions made by the Assessing officer and after re-computation condition of application of 85% of income stands satisfied and, therefore, there remains no ground for withdrawal of the registration granted u/s 12AA of the Act. According to Ld. Counsel for the assessee, this ground h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, he disallowed 50% of the salary debited by the assessee i.e. ₹ 35,35,126/- and added back the same to the total income of the assessee. 3. On appeal, the CIT(A) restricted the disallowance to ₹ 5 lakhs as against ₹ 35,35,126/- disallowed by the Assessing officer. The relevant observations of the CIT(A) are as under:- 6. I have gone through the facts of the case, written submission filed by the appellant, remand report of the AO and rejoinder filed by the appellant. It is noted that the assessee is a registered society running an educational institute and has claimed its income as exempt income under the provisions of section 11 of the Act. The assessee has submitted audited account as per section 44AB and shown gross receipts of ₹ 1,57,94,400/-. It has claimed expenditure on account of salary to staff of ₹ 70,70,252/-. As per income and expenditure account, the assessee had shown a sum of ₹ 22,15,359/- as excess of income over expenditure. The AO disallowed 50% of salary expenses i.e. ₹ 35,35,126/- as bogus payment due to non submission of complete address, PAN details of employees and non deduction of TDS on the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted during appellate proceeding were admitted and considered for decision. Here, reliance is also placed on the decision in the case of Smt. Mahinder Kaur Vs. Central Govt (1976) 104 ITR 120 (AIL), CIT Vs. Subhash Chander Aggarwal [1988] 172 ITR 166 (All.). 6.3 On perusal of salary details, it is noted that the salary expenses has been claimed on monthly basis for about 60 to 66 persons who have given services as lecturers, clerk, lab technicians, sweeper, gate keeper, peon, attendant etc. The total monthly salary' expense varies from about Rs,5.1 lacs to ₹ 6.1 lacs. The individual monthly payments varies between ₹ 2,500/- to ₹ 15,000/- with one/two exceptions of higher salary. The payments have been shown to be given after taking their signatures on stamps on the salary sheets. Since, the college is a running college and has shown gross receipts of about ₹ 1.58 Crores during the year, it cannot be said that college will run without any proper support of staff performing various kinds of duties. The AO has simply made disallowance of 50% of salary expense on estimation without bringing any defect or any conduct of inquiry for finding that the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred on account of salary is only for the purpose of running of College and no part of it had been spent for any other purposes. In this case, the CIT(A) has observed that the salary expenses has been claimed on monthl y basis for about 60 to 66 persons who had given services as lecturers, clerks, lab technicians, sweeper, gate keepers, peons, attendants etc. According to Ld. Counsel for the assessee, the total monthly salary expense varies from ₹ 5.1 lakh to ₹ 6.1 lakhs. He has also stated in clear terms that the payments on account of salary were being given after taking the signatures of the employees on stamps on the salary sheets. The Ld. C IT(A) has also observed that the college is a running college and the gross receipts for the year under consideration were about ₹ 1.58 crores. He therefore, categorically stated that it cannot be said that college will run without an y proper supporting staff performing various kinds of duties. We may observe here that during the appellate proceedings before the CIT(A), the assessee submitted documents of salary expenses as additional evidence. The C IT(A) has forwarded the assessee's written submissions and the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions by not deducting TDS. Accordingly, the Assessing officer disallowed the claim made by the assessee on account of advertisement expenses at ₹ 5,84,071/- us/ 40(a)(ia) of the Act. 7. On appeal, the C IT(A) deleted the disallowance for the reasons stated in para 10 of the impugned order. According to Ld. C IT(A), disallowance u/s 40(a) (ia) is not applicable to the computation of income of trust for charitable purposes as per the provisions of section 11 of the Act. He Accordingly deleted the disallowance of ₹ 5,84,071/- made u/s 40(a) (ia) of the Act. 8. After hearing the Ld. representatives of both the parties, we find that the issue is squarely covered in favour of the assessee by the decision of ITAT Mumbai Bench in the case of Mahatma Gandhi Seva Mandir v Deputy Director of Income Tax (Exemptions), Mumbai (2012) 52 SOT 26 (Mumbai)(URO) wherein the Tribunal held as under;- It is an admitted fact that the assessee is a charitable trust, which is duly registered under Section 12A and accordingly its income and expenditure is computed in terms of section 11. The issue is whether the disallowance under Section 40(a)(ia) can be made for the non-ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 28 and not otherwise. Hence, provisions of section 40(a) are not applicable in case of charitable trust or institution where income and expenditure is computed in terms of section 11. Accordingly, we do not find any merit in the orders passed by the Assessing Officer as well as by the CIT(A) and delete the disallowance made under Section 40(a)(ia) on account of non-deduction of TDS has to be deleted. Respectfull y following the judgement of the ITAT Mumbai Bench referred to above, we don't find any infirmit y in the order of CIT(A) on this issue and Accordingly we uphold the same. 9. Ground No.2 of the appeal stands rejected. 10. Ground Nos. 3 of the appeal reads as under:- 3. On the facts and in the circumstances of the case the Ld. CIT(A} has erred in law by the A.O. on the account of unvouched expenses and expenses of personal nature, disregarding the finding given by the A.O. 11. The Assessing officer noticed that assessee claimed expenses totaling to ₹ 9,01,124/- under various heads of account in income and expenditure account. The details are as under;- S. No. Head of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. By any stretch of imagination, these expenses cannot be held unreasonable or excessive. We also agree with the C IT(A) that 1/10 t h of vehicle running and maintenance expenses is to be treated as personal in nature because the element of personal use of vehicle cannot be ruled out in this case. There is no evidence on record to show that the assessee had maintained the log book of the vehicle. Thus, considering the entire facts and circumstances of the case, we uphold the order of C IT(A) and reject ground No3 of the appeal. 14. Ground No.4 of the appeal reads as under;- 4. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in law in ignoring the fact that the AO has recommended for withdrawal of registration u/s 12AA as the application of income of the assessee trust comes to mere 62.32%, which is much below the limit of 85% and the trust failed to comply with the requisite provisions of Income Tax Act, 1961. 15. While deciding the above issue, the C IT(A) has held as under:- 11.2 After considering the submissions of the appellant and the facts of the case, I am of the view that re-computation of application of money has been done on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
