Top Stories Exemption u/s11(1) of Income Tax Act Not available for expense incurred for giving Mementos to Presidents and Secretaries of Milk Producers Association: ITAT [Read Order] By Aparna. M – On March 1, 2024 2:32 pm – 2 mins read Bangalore bench of Income Tax Appellate Tribunal ( ITAT ) ruled that exemption under Section 11(1) of the Income Tax Act, 1961 shall not be available for expenses incurred for giving mementos to presidents and secretaries of Milk Producers Association.

The assessee MYMUL Raitha Kalyana Trust,after filing the return of the income for the assessment year 2016-17 the case was selected for scrutiny. For these assessment years, the assessee claimed exemption us/ 11 of the Act. However, the AO denied the exemption by observing that the assessee is not performing any charitable activity within the meaning of sec. 2(15) of the Act and he considered the contribution received from MYMUL as income of the assessee from ‘other sources’ by denying exemption u/s 11 of the Act.

The assessee carried an appeal before the NFAC. The NFAC observed that the amount incurred by the assessee is of Rs.11,05,950/- towards giving mementos to presidents and secretaries of milk producers association is not in accordance with the objects of the assessee trust and also does not qualify for expenditure for charitable activities and such office bearers are covered under ‘persons’ referred in sec.13(1)(c) r.w.s 13(2) and 13(3) of the Act and it has to be taxed separately for granting exemption u/s 11 of the Act. Therefore the NFAC allowed the appeal filed by the assessee.

Therefore the revenue filed a second appeal before the tribunal. Since there was no response to the said show cause notices issued, the assessment was completed vide order dated 09.03.2023 under section 147 r.w.s. 144 r.w.s. 144B of the Act. In the assessment completed, the entire amount of purchase cost was treated as unexplained and the income was determined at Rs.1,02,47,403/-. Thereafter the Deputy Commissioner of Income Tax passed an order giving effect ( OGE ) dated 08.03.2016 granting the refund of Rs. 30,45,62,594 and the assessee received the said refund on 18.08.2022. But in that order AO has incorrectly adjusted the earlier refunds – Interest short credited Rs 9,93,09,258/- Aggrieved, the assessee filed an appeal before the CIT(A). There was a delay of 75 days in filing the appeal before the CIT(A). Assessee filed a petition for condonation of delay.

The CIT(A), however, rejected the assessee’s application for condonation of delay and dismissed the appeal of the assessee. Accordingly  assessee has filed the present appeal before the Tribunal. Assesee representative, V. Srinivasan argued that  expenditure has not been incurred for the benefit of the President and Secretaries of assessee trust. It has been spent by the assessee out of tide up grants which is evident from the Receipts and Payments account of both the assessment years Dr. Manjunath Karkihalli , the Department representative argued that the amount does not spend any charitable purpose and it has been given for the personal benefits of the President and Secretaries of other Milk Producers Association even though it is out of the tide of grants, the said amount to be taxed separately. After observing the submissions of both parties the two-member bench of Laxmi Prasad Sahu, ( Accountant member ) and  Beena Pillai, ( Judicial Member ) held that exemption under Section 11(1) of the Income Tax Act, 1961 shall not be available for expenses incurred for giving mementos to presidents and secretaries of Milk Producers Association.