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II. Direct Taxes Case Laws:
1. Seth Walchand Hirachand Memorial Trust Vs. ITO, I.T.A. No. 4852/Mum/2016, Date of Order: 29.03.2017, ITAT - MUMBAI
Issue: Whether exemption available u/s 11(1)(a) of the Income Tax Act, 1961 of 15% of Income can be claimed even in case of deficit?
Held: Yes
Brief Facts
The assessee is a charitable trust and has challenged the
confirmation of the order of the AO where he disallowed the accumulation
of the 15% even when the income was allowed u/s.11(1)(a) of the Act.
The AO observed that if the trust is not left with surplus and there is
deficit, then there can be no accumulation made. He further stated that
accumulation or setting apart of 15% of income has been allowed by
virtue of provision of section 11(1)(a) of the Act, when assessee is
unable to spend the entire amount and where the entire amount has been
spent, there is no surplus left that can be accumulated.
The
assessee contended that as per section 11(1)(a), the expenditure
incurred by a trust or institute on the objects of the trust by way of
application of income derived from the property held for religious or
charitable purposes is deductible from the income. It was submitted that
there is no bar in law and there are no specific provisions in the Act
which says that such deduction of 15% for accumulation will not be
allowed in case of deficit. Such 15% accumulation is allowable
irrespective of whether 85% of the income have been applied to
charitable purposes or not. However, the AO rejected the assessee’s
contention and disallowed the claim. The CIT (A) has also confirmed the
order of AO. Being aggrieved by that, the assessee preferred appeal
before the Hon’ble ITAT.
Held
The Tribunal held that it is clear from section 11(1)(a) that income
derived from property held under trust wholly for charitable purposes or
religious purposes shall not be included in the total income to the
extent of 15% is unqualified. It was held that exemption available
u/s.11(1)(a) i.e. 15% of income is unfettered and not subject to any
conditions and thus allowed this issue in favour of the assessee and
deleted the addition confirmed by the CIT(A).
Therefore, the appeal of the assessee is allowed.
(Please click here for judgment)
2. Sh. Adarsh Kumar Swarup Vs. DCIT, I.T.A. No. 1228/Del/2016, Date of Order: 28.03.2017, ITAT - Delhi
Issue: Whether
deduction u/s 54 of the Income Tax Act, 1961 can be claimed where only
land appurtenant to the residential house is sold and not the whole of
the residential house?
Held: Yes
Brief Facts
A residential house and land appurtenant thereto was inherited to
assessee by way of will. During the year under consideration, the
assessee, out of the land appurtenant to the residential house, had sold
land in two parts. In the assessment, the AO has also allowed deduction
for the investment made in a flat is u/s 54 of the Act. However, the
Ld. CIT(A) in the appeal proceedings alleged that the deduction as
allowed by the AO in respect of investment of flat u/s 54 of the Act was
wrong as he was of the view that u/s 54 of the Act the deduction is
available only when the residential house is transferred and not the
land appurtenant thereto and thus, disallowed the deduction u/s 54 of
the Act as allowed by the AO. Therefore, being aggrieved by that, the
assessee has preferred appeal before the Hon’ble ITAT.
Held:
The tribunal remarked that U/s 54 of the Act, the legislature has
used the expression "being buildings or lands appurtenant thereto and
being a residential house". Following this statement of law and
emphasising on the usage of word “or” it held that the deduction u/s 54
of the Act is also available even if the land, which was appurtenant to
the residential house, is sold and it is not necessary that the whole of
the residential house should be sold because the legislature has used
the words "or" which is distinctive in nature and that in the instant
case, it is not the case of AO and CIT (A) that the land was not
appurtenant to the residential house. The case of the CIT (Appeals) is
that the assessee has sold only the land appurtenant to the house and
not residential house which held is not a requirement under the law.
Further the sale deed itself showed that the land was part of
residential house. Hence, the exemption as claimed was upheld.
Therefore, the appeal of the assessee is allowed.
(Please click here for judgment)
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