Sanatan Dharam Mandir Sabha vs ITO Ward – 41(2), New Delhi: Expenses Disallowance and Tax Rate

Sanatan Dharam Mandir Sabha vs ITO Ward – 41(2), New Delhi: Expenses Disallowance and Tax Rate

Case Number: ITA 5791/DEL/2019
Appellant: Sanatan Dharam Mandir Sabha, New Delhi
Respondent: ITO Ward – 41(2), New Delhi
Assessment Year: 2013-14
Result: Appeal allowed
Case Filed on: 2019-07-03
Order Type: Final Tribunal Order
Date of Order: 2022-04-13
Pronounced on: 2022-04-13

Introduction

This appeal by Sanatan Dharam Mandir Sabha (the appellant) pertains to the assessment year 2013-14 and is directed against the order dated 30/04/2019, passed by the learned Commissioner of Income-tax (Appeals) [CIT(A)]-14, New Delhi. The case was heard together with other appeals for the assessment years 2014-15 to 2016-17 due to common issues.

Background

The appellant is a registered society titled as Sanatan Dharam Mandir Sabha, duly registered with the Registrar of Societies, Delhi. The society runs a Sanatan Dharam Mandir at Ambica Vihar, Delhi, and is considered a religious society. However, it neither applied for nor received registration under section 12A of the Income-tax Act, 1961 (the Act) for the assessment years 2013-14 to 2016-17.

Grounds of Appeal

The appellant raised the following grounds:

1. The CIT(A) erred in confirming the disallowance of the entire expenditure incurred by the appellant amounting to Rs. 4,85,564.
2. The CIT(A) erred in confirming the disallowance of the entire expenditure incurred since it is beyond the scope of section 143(1) of the Act.

Hearing and Proceedings

The hearing was held on 31.01.2022, with the tribunal presided by Shri R. K. Panda, Accountant Member. The appellant was represented by Sh. Ashok Kumar Jain, CA, and the respondent was represented by Sh. Om Prakash, Sr. DR.

Findings of the CIT(A)

The CIT(A) noted that the appellant filed its income tax return in ITR-7 on 26.07.2021, showing taxable income at Rs. 2,18,060 after reducing the application of income of Rs. 4,85,564 from the gross receipt of Rs. 7,03,624. The income was shown under the head “Income from Other Sources.” The Centralized Processing Centre (CPC), Bangalore, processed the return under section 143(1) of the Act and disallowed the expenses of Rs. 4,85,564 claimed in the return. Additionally, the CPC denied the benefit of the threshold limit and charged income tax at the maximum marginal rate on the gross receipt.

Appellant’s Arguments

The appellant contended that:

• The AO erred in rejecting the rectification application by holding that the appellant is an AOP (Trust), whereas the appellant is a registered society.
• The disallowance of the entire expenditure of Rs. 4,85,564 is beyond the scope of section 143(1) of the Act.
• The CPC, Bangalore, incorrectly denied the benefit of the threshold limit and charged income tax at the maximum marginal rate.
• The adjustment made by the CPC does not fall under any of the limbs prescribed under section 143(1) of the Act.
• In case of charitable societies, even if the benefit under sections 11 and 12 of the Act is denied and income is brought to tax as “Income from Other Sources,” all relevant expenditures should be allowed under section 57(iii) of the Act.

Respondent’s Arguments

The respondent supported the order of the CIT(A) and argued that the AO correctly applied the maximum marginal rate due to the appellant’s status as an AOP (Trust) and properly disallowed the claimed expenses.

Tribunal’s Decision

The tribunal, after considering the arguments and reviewing the material on record, found that:

1. The appellant is a registered society running a temple, not an AOP (Trust).
2. The disallowance of the entire expenditure of Rs. 4,85,564 by the CPC, Bangalore, and confirmed by the CIT(A) is not warranted as it does not fall under the provisions of section 143(1) of the Act.
3. In the case of charitable societies, even if benefits under sections 11 and 12 are denied, relevant expenditures should be allowed under section 57(iii).

The tribunal referenced the Hon’ble Delhi High Court decision in the case of Deputy Director of Income Tax (E) Inv. vs Petroleum Sports Promotion Board, which supports the allowance of relevant expenditures even if income is taxed under “Income from Other Sources.”

Conclusion

The tribunal set aside the order of the CIT(A) and directed the AO to allow the claim of expenditure of Rs. 4,85,564 from the gross receipt. The appeal for the assessment year 2013-14 was allowed.

Order Pronounced in the Open Court on 13th April, 2022.

Signed:
R. K. Panda, Accountant Member

Dated: 13th April, 2022
f{x~{tÜ? P.S

Copy Forwarded to:

1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR

Assistant Registrar, ITAT, New Delhi

Sanatan Dharam Mandir Sabha vs ITO Ward – 41(2), New Delhi: Expenses Disallowance and Tax Rate