DCIT Vs Jay Singh Shikshan Sansthan (ITAT Delhi)
ITAT Delhi Restricts Denial of Exemption – Section 11 Cannot be Denied in Full, Only to Extent of Violation u/s 13
ITAT Delhi Restricts Denial of Exemption – Section 11 Cannot be Denied in Full, Only to Extent of Violation u/s 13 Assessee, a charitable society registered u/s 12AA, runs educational institutions & hospital. During assessment, AO noticed outstanding payments of ₹26.30 lakh to Dr. Shailendra Yadav & ₹7.40 lakh to Dr. Sunita Yadav, both specified persons u/s 13(3). AO held that such payments violated s.13(1)(c) & denied exemption u/s 11 altogether, taxing total income at ₹9.86 crore.
On appeal, CIT(A) accepted that there was violation to the extent of payments of ₹33.70 lakh but held that exemption u/s 11 cannot be denied for the entire income. Relying on CBDT Circular No.387 dated 06.07.1984, CIT(A) restricted denial of exemption only to the offending amount, & directed AO to recompute taxable income accordingly.
Before ITAT, Revenue argued that once there is a violation, full exemption stands forfeited. Reliance was placed on CIT Vs Jamnalal Bajaj Sewa Trust (Bom HC). Assessee relied on CIT (Exemption) Vs IILM Foundation (Del HC), CIT(E) Vs Audyogik Shikshan Mandal (Bom HC), & CIT Vs Fr. Mullers Charitable Institutions (SC), all of which support restriction of denial only to the extent of benefit diverted to specified persons.
