Baba Farid Public Welfare Society Vs ITO (Exemptions) (ITAT Amritsar)
The appeal arose from the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2015-16 affirming, in part, the assessment order passed under Section 143(3) of the Income Tax Act, 1961. The assessee challenged the ad hoc disallowance of 10% of salary expenses, 10% of other expenses, denial of deduction under Section 10(23C)(iiiad) read with Rule 2BC, and the non-consideration of its pending registration under Section 12A. The assessee also contended that relief should be granted after excluding the amount of “van rent” from its receipts.
The Assessing Officer had made ad hoc disallowances of 10% of salary expenses amounting to ₹1,46,100 and 10% of various other expenses amounting to ₹2,93,100. The assessee also claimed that an amount of ₹19,73,268 representing “van rent” had been credited and debited in the income and expenditure account as a contra entry and should therefore be excluded while computing total receipts. During the assessment proceedings, the assessee had applied for registration under Section 12A, which was subsequently granted with effect from Assessment Year 2016-17 in relation to education. The assessee, an educational institution running a school, had total receipts of ₹1,01,37,729 for Financial Year 2014-15 and contended that exclusion of the contra “van rent” entry would reduce its receipts below ₹1 crore, making it eligible for exemption under Section 10(23C)(iiiad). The CIT(A) granted relief in respect of ₹30,000 paid to PSPCL and deleted the addition relating to “van rent” of ₹19,73,268 but upheld the remaining additions.
