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Question Whether van rent received and paid by the educational institute appearing in both side of income of expenditure account will be counted for calculating turnover of the assessee to allow the benefit U/s 10(23C) of the Act. ITAT AMRITSAR BENCH, AMRITSAR passed the order on 10.8.2022 in thc case of Baba Farid Public Welfare Society vs. ITO (Exemptions), Ward, Amritsar
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR.
BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER
I.T.A. No. 216/Asr/2019 Assessment Year: 2015-16
|Baba Farid Public Welfare Society, Village Ubha, Mansa, Bathinda. [PAN:AAAAB5557C]
|Vs.||ITO (Exemptions), Ward, Amritsar.
|Appellant by||Sh.J. K. Gupta, Adv.|
|Respondent by||Sh.Manpreet Singh Duggal, Sr. DR.|
|Date of Hearing||28.06.2022|
|Date of Pronouncement||10.08.2022|
Per:Anikesh Banerjee, JM:
The instant appeal is directed against the order of the ld. Commissioner of Income Tax(Appeals), Bathinda, [in brevity the CIT(A)] bearing appeal no. 153- IT/2018-19, date of order 24.01.2019, the order passed u/s 250(6) of the IT Act 1961, [in brevity the Act] for A.Y.2015-16.
The impugned order was originated from the order of the ld. ITO (Exemption), Ward, Amritsar, (in brevity the AO) order passed u/s 143(3) of the Act date of order 30.11.2017.
- The grounds of the assessee is extracted asfollows:
“1. That on the facts and in the circumstancesof the case andin law, the learnedCIT(A) erred in upholding the disallowance of Rs. 146100/- at the rate of 10% out of total salary of Rs. 1461000/- when EPF was also deducted from salary of the staff.
- That on the facts and in the circumstances of thecase and in law, the learnedCIT(A) erred in making disallowance at Rs. 293100/- at the rate of 10% of the total expense of Rs. 2930997/- on different heads without pointing out the particular expenditure which is of disallowable nature and without confronting the adverse material to the
- That onthe facts and in the circumstancesof the case and in law, the learnedCIT(A) should have allowed the deduction u/s 10(23C)(iiiad) read with Rule 2BC of the Income tax Rules, 1962 on the basis of his finding in para 5.2 as per relief of Rs. 19,73,268/-, the receipt of the assessee would be below Rs. 1 crore. So, the necessary relief may kindly be given in second
- That the appeal of the assessee for grant of registrationu/s 12A is pending beforethe So, the learned
CIT(A) should have waited for the decision of the same and registration would be applicable from previous assessment years.
- That any other relief may kindly be granted to the assessee to whom it is foundentitled at the time of hearing of appeal.”
- The brief facts of the case are that the disallowance was made by the ld. AO @ 10% of the expenses, related to different heads of expenses. Further assessee prayed for allow the relief amount of Rs.19,73,268/- on account of receipt of “van rent” which was debited and credited both the side of the income and expenditure account in same amount. During the assessment year the assessee applied for registration u/s 12A of the Act. Finally the registration was granted w.e.f. the A.Y. 2016-17 related to “Education”. The assessee is an educational institution& also running the school during the year of appeal. The total receipts in income and expenditure account of the assesseefor F.Y. 2014-15 was Rs.1,01,37,729/-. The assessee further argued that the amount of “van rent” Rs.1973628/- be deducted from turnover so the total turnover will come below the one crore. Accordingly, the assessee can able to avail the benefit u/s 10(23C)(iiiad) of the Act. The contra entry of ‘van rent’ would be deducted from both the side of I & E Account. The addition was made by the ld. AO in different heads related expenses including the “van rent”. Aggrieved assessee filed an appeal before the ld. CIT(A). The
CIT(A) granted the relief related to addition of Rs.30,000/- paid to PSPCL and “van rent” Rs.1973268/-. Rest of the grounds are upheld in favour of the revenue. Aggrieved assessee filed an appeal before us.
- During the argument it is mentioned that without finding proper lacuna the addition was made by deducting 10% of salary which was paid to 29 employees total amount of Rs.1461000/-. Further the addition was made @ 10% related to expenses in different heads amounting to Rs.2930997/- which is worked out amount of293100/-.
4.1 The ld. CIT DR vehemently argued and relied on the order of the revenue.
He further relied on the observation of the CIT(A) in point no. 6 which is extracted as follows:
“6. Ground of Appeal no. 4:- The ground of appeal is directed against the addition of Rs. 1,46,100/- made by the AO in the impugned order. During the year the appellant running educational institute and made salary to staff of amount Rs. 14,61,000/- but failed to produce documentary evidence to prove genuineness of these expenses. The AO held that the expenses are at higher side, so expenses to the extent of 10% (Rs. 1,46,100/-) were disallowed.”
- We heard the rival submission and relied on the documents available in the record. The ld. Counsel had filed written submissions with brief synopsis which is keptin the The expenses was disallowed on ad hoc basis @ 10% on total
expenses. Without finding any lacuna the addition was made by the revenue. The salary was paid to 29 employees accordingly. The EPF was deducted and paid. But without verifying the proper documents, the addition was made. The ld. Counsel has relied on the order of Coordinate Bench, ITAT, Amritsar in the case of Vijay Kumar Grover vs. ITO, ITA No. 276/Asr/2018, order dated 16.06.2022 and Ajay Kumar Grover vs. ITO, ITA No.277 & 300/Asr/2018, date of order 16.06.2022. We find that the ld. AO had purely made addition by making ad hoc disallowance out of expenditure @ 10%. The ld. AO had not specified the specific lacuna related disallowance of expenditure. The ld CIT-DR was not able to point out any contrary view in relation to submission of ld Counsel. Hence, the ld.AO is hereby directed to delete this disallowance made amount to Rs.146100/- and 293100/-.
- The ld. Counsel further argued that “van rent” amount to Rs.1973268/- was duly deleted by the ld. CIT(A). This particular “van rent” was taken twice both debit and credit side income of expenditure account for F.Y. 2014-15. Both the entries of “van rent”per contra. So, both the entries are deleted from income and expenditure account. The ld. Counsel has annexed the audit report with income and expenditure account from pages no. 20 to 29 of APB. Accordingly, the assessee is an educational society and the gross receipt is calculated after deduction of “van rent” amount of Rs.81,64,461/- (Rs.10137729/- – Rs 1973268/-). Accordinglythe
assessee is eligible for benefit u/s 10(23C)(iiiad) r.w.s rule 2BC of the I.T. Rule 1962. We consider the submission of ld AO. The fact is that ‘van rent’ is in contra entry in both side of I & E accounts. After deduction of same amount from both the sides, the Turn Over of assessee is coming below 1cr. The ld CIT-DR had not made any strong objection against the ground of the assessee. We direct for considering the turnover amount to Rs. 81,64,461/- in I & E A/c & to allow the benefit U/s 10(23C) of the Act.
In the result, the ground in ITA No.216/Asr/2019 1,2 and 3 are allowed. The Ground 4 & 5 are general in nature.
- In the result, the appeal of the assessee is
Order pronounced in the open court on 10.08.2022
(Dr. M. L. Meena) (ANIKESH BANERJEE)
Accountant Member Judicial Member
Copy of the order forwarded to:
- The Appellant
- The Respondent
- The CIT
- The CIT(Appeals)
- The DR,T.A.T.
True Copy By Order