DCIT Vs Jaymahakali Shikshan Sanstha Bapuchiwadi (ITAT Nagpur)
ITAT Nagpur held that short charging of rent from the trustee cannot be reason for denial of entire claim of exemption under section 11 of the Income Tax Act. Accordingly, order of CIT(A) upheld and appeal of revenue dismissed.
Facts- The assessee respondent is an Educational Trust registered u/s. 12A of the Income Tax Act, 1961. During the course of assessment proceedings, it was observed that the assessee trust has provided an residential accommodation to the trustee of the trust and has recovered an annual rent of Rs. 1,20,000, from the trustee of the trust. AO was of the opinion that fair rent of the residential accommodation was Rs. 3,00,000 per annum and accordingly, the assessee trust has charged rent on reduced rate to the extent of Rs. 1,80,000 per annum. However, AO not only disallowed the difference amount of Rs. 1,80,000, but also denied the assessee trust complete exemption claimed under the provisions of section 11 of the Act.
CIT(A) restricted the disallowance only to the extent of Rs. 1,80,000, and allowed the balance claim of exemption. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that the legislature did not contemplate the denial of the benefit of section 11 of the Act to the entire income of the trust/charitable institution. If the interpretation sought by the Revenue is accepted, it would lead to grave injustice as any mistake minor or contravention of provisions will lead to complete denial of the benefit of exemption which otherwise a trust registered under section 12A is legally allowed to claim. In view of the forgoing discussions, we hold that the maximum marginal rate shall be levied to the extent of relevant income, which has contravened provisions of section 13 and in the present case as contravention is of ` 1,80,000 only. The Assessing Officer erred in denying entire claim of exemption under section 11 and 12 of the Act. Therefore, we uphold the impugned order passed by the learned CIT(A).
