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आदेश/Order
PER RAJPAL YADAV, VP
The assessee is in appeal against the order of the ld. CIT(A) dated 15.11.2019 passed for assessment year 2016-17.
Though the assessee has taken four grounds of appeal
, but in brief, its grievance revolves around a single issue namely, ld. CIT(A) was not justified in upholding the shortfall of Rs. 56,947/- in application of income worked out by the AO. A.Y. 2016
17. Page 2 of 5 is a charitable society enjoying registration u/s 12AA of the Income Tax Act since 30.01.1986. It is running a Dharamshala at Palampur. It has filed its return of income on 09.10.2016 for assessment year 2016-17 declaring ‘nil’ income. The case of the assessee was selected for scrutiny assessment and a notice u/s 143(2) was issued and served upon the assessee.
On scrutiny of the accounts, it revealed to the AO that assessee society had surplus over application of income, however, it was contended before the AO that assessee has accumulated a sum of Rs. 5,14,929/- u/s 11(2). The copy of form No. 10B dated 07.07.2016 was placed before the AO. The ld. AO thereafter determined the taxable income of the assessee as under :
During the assessment proceedings it has been noticed that the assessee trust is registered u/s 12A of the Income Tax Act. and claiming exemption u/s 11 & 12 of the Act. The computation of income and expenditure as filed by the assessee society during the year under consideration is as under:- i. Income as per Income & Expenditure Account Rs. 53,09,443/- ii. Revenue Expenditure Rs.31,24,604/- iii. Capital Expenditure Rs. 8,16,547/- iv. Accumulated or set apart u/s 11(2) Rs. 5,14,929/- v. Application of Income during the year (ii+iii+iv) Rs. 44,56,080/-
6. The assessee trust was required to apply its income to the extent of 85% i.e. an amount of Rs. 45,13,027/- in order to claim exemption u/s 11 & 12 of the Act., but the it has applied only an amount f Rs. 44,56,080/- which is less than 85% of its receipts during the year. As such the assessee trust failed to apply its income to the extent of 85%, the shortfall in application by Rs. 56,947/- is charged to taxed accordingly.
A.Y. 2016-17 Page 3 of 5
The ld. AO has worked out a shortfall in application of income of Rs. 56,947/- which has been charged to tax.
Aggrieved with the above action, assessee went in appeal before the ld. CIT(A) but the appeal to the First Appellate Authority did not bring any relief to the assessee.
5. Before us, ld. counsel for the assessee contended that basically ld. AO has erred in computing the alleged shortfall in application of income. He filed a brief Paper Book running into five pages. On page No. 1 he placed on record the details exhibiting the working for accumulation of amount at Rs. 5,14,929/- and on page Nos. 2 and 3, he placed on record copy of receipt and payment for the year ended on 31.03.2016 and copy of Income & Expenditure for the year 31.03.2016. Taking us through these pages, ld. counsel for the assessee apprised that basically the AO took income as pc Income & Expenditure account at Rs. 53,09,443/-. This shortfall in application of income has been worked out by taking the details from Income & Expenditure Account. The right method for the AO was to take the details from ‘receipt and payment’ and not from ‘income and expenditure’. Had he verified the details with that angle, then there would have not any shortfall in application of income for charitable purposes as worked out by the AO. He emphasized that these details were submitted A.Y. 2016-17 Page 4 of 5 before the AO. On the other hand ld. DR submitted that whatever details were submitted before the AO, those were considered while working out the shortfall. Thus, she relied upon the orders of the Revenue authorities.
We have duly considered the rival contentions and gone through the record carefully. The area of dispute between the parties is that according to the assessee, computing for the purpose of verifying 85% of application of its receipts ought be from the ‘receipt and payment’ account, whereas AO has computed the alleged application of 85% of its receipts by taking the figure from “income & expenditure account’. This exercise goad the AO to reach at a conclusion that there is a shortfall in application of income for charitable purpose by Rs. 56,947/-. Taking into consideration all these details, we deem it appropriate that the issue deserves to be set aside to the file of the AO for re-verification. The ld. AO shall take into account the details of receipt and payment and thereafter, verify whether any shortfall is available which was not applied by the assessee for the objects of the society and which deserves to be brought to tax. In other words, the assessee being a charitable institution, requires to apply 85% of its receipts on its objects. In the present case, the assessee has already sought permission for accumulation of the amount A.Y. 2016-17 Page 5 of 5 which was not applied for charitable purposes for application in future and thereafter, it has shown ‘nil’ income. We direct the AO to go into all these details and re-work out, if any shortfall is there which was not applied for the objects of the society. With the above observation, this issue is remitted back to the file of the AO for re-adjudication.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced on 19th November,2020.