INCOME TAX OFFICER, CHENNAI vs. THE THEOSOPHICAL SOCIETY, CHENNAI

आदेश /O R D E R

PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:

This appeal filed by the revenue is directed against the order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2014-15 dated 12.01.2024.

:-2-: ITA. No: 624/Chny/2024 of the Act when the assessment order passed by the Assessing Officer clearly established the fact that there was violation of provisions of section 13(1)(c) of the Act and two parties, who had contributed to the assessee trust exceeding fifty thousand rupees, upto the end of the relevant financial year, were specified persons u/s. 13(3)(b) of the Act? 2. The ld.CIT(A) erred in deleting the addition made by invoking provisions of section 13(1)(c) when the guest house of the assessee trust was let out to the interested parties at an inadequate rent. 3. Whether the ld.CIT(A) was right in relying on CBDT Circular No. 557 dated 19.03.1990, when the exemption is claimed u/s. 11 and not u/s. 10(23C)(iv) in the ITR.”

:-3-: ITA. No: 624/Chny/2024 4. The case was selected for scrutiny assessment and issued statutory notices to the assessee and concluded the assessment u/s.143(3) of the Act, by the Assessing officer on 29.12.2016, by denying the exemption u/s.11 of the Act on account of violation of sec. 13(1)(c) of the Act and made the following additions / disallowances : Interest transferred to various funds - Rs.99,18,117/- - Funds received & taken to Balance sheet - Rs.1,35,94,395/- Expenses spent for charitable objects- Rs.33,76,431/- - Depreciation claimed -Rs.7,36,669/- -

Aggrieved by the order of the Assessing officer, the assessee preferred an appeal before the Ld.CIT(A).

:-4-: ITA. No: 624/Chny/2024 persons at an inadequate rent and hence exemption u/s 11 was revoked. During appeal proceedings the society uploaded details of interested persons. It is seen that those individuals are providing services to the society without remuneration and their stay in guest house was for theosophical work. It is debatable whether donors to society will be qualified as interested persons. People staying in society lodgings to serve the society are obviously not benefitting from society as such. Even if it was so, then such instance would only affect the case of an assessee within the meaning of sections 11 to 13 and could not be imported to deny exemption under section 10(23C). This position of law is based on CBDT Circular No. 557, dated 19-03-1990 which held that provisions of section 11 will not be applied and provisions of sections 11 and 13 relating to 'interested person' will not be applicable while examining the claim for exemption under section 10(23C)(iv). This was reiterated by IT AT Lucknow in the case of Virendra Singh Memorial Shiksha Samiti [2010, 35 SOT 1]. 4. In the case of Seethakathi Trust [2007] 295 ITR 520 (Madras), the Assessing Officer denied the exemption under section 10(22) of the Act and also denied the benefits of sections 11 and 12 of the Act holding that the assessee violated the provisions of section 11(5) read with section 13(1)(d) of the Act. ITAT dismissed revenue appeal stating that as the assessee is entitled to exemption under sections 10(22), 10(22A) and 10(23C) of the Act and in which case, it is not necessary to pass an order in respect of the alternative plea of the assessee-trust in regard to the deduction under section 11 of the Act. The jurisdictional Madras High Court held in this case that the Central Board of Direct Taxes, themselves, issued a circular bearing No. 712 dated July 25, 1995, (see [1995] 215 ITR (St.) 3), to the effect that the educational institutions are entitled to exemption under section 10(22) of the Act and consequently, the benefit conferred under section 10(22) cannot be denied on the ground of violation of section 11(5) of the Act. On the basis of above discussions, it is held that the assessing officer cannot raise a demand on the basis of disallowance u/s 11 as the appellant was granted exemption u/s 10(23C)(iv). The appellant has also disputed additions made by the AO on commercial principles. It is see that the jurisdictional ITAT in appellant's own case has decided the issue pertaining to depreciation claimed on fixed assets in favour of assessee. Anyway, once exemption is available as per discussion above, other additions will not cause any grievance to the appellant. Disallowances of expenses by AO would only add to the

:-5-: ITA. No: 624/Chny/2024 surplus of the society but could not become basis for denying exemption. As a result, the appeal is fully allowed.”

Aggrieved by the impugned order of the Ld.CIT(A), the revenue is before us.

:-6-: ITA. No: 624/Chny/2024 8. The Ld.AR took us through the Paper book page Nos.31 & 32 for having notified the society u/s. 10(23c)(iv) of the Act and renewed upto date and thereby the income of the society needs to be excluded from the total income as per Section 10(23C)(iv) of the Act. Further, the Ld.AR stated that, the Ld.CIT(A) has considered the entire facts and circumstances of the case and allowed the appeal of the assessee and prayed for dismissal of the appeal filed by the revenue.

:-7-: ITA. No: 624/Chny/2024 are of the view that, there is no infirmity in the order of ld.CIT(A) in allowing the appeal of the assessee and therefore, there is no need for us to interfere and hence, we are inclined to dismiss the appeal of the Revenue.