INCOME TAX ACT, 1961

Section 13(2)(b)

Charitable trust - Bar to exemption under section 13(2)(b) - Vehicle running expenses and depreciation of car -

Assessee-trust maintained luxury cars. AO noted that trust had no requirement to maintain such luxury cars and the cars were used by the Chairman. Therefore, he made disallowance on account of vehicle running expenses and depreciation of car in terms of section 13(2)(b). Held: AO had not brought any material on record as to how he had given his finding that the cars had been purchased for the benefit of the Chairman. AO was also not justified in holding that the assessee trust has no requirement to maintain luxury car. The expenses should be considered from the point of view of the assessee and not for the point of view of the AO. In the absence of any material brought on record against the assessee, the order of AO could not be sustained. Further, it was not in dispute that Chairman was looking after the activities of the assessee-trust whole time and had to visit various Government Departments in connection with the activities of the assessee trust. No incriminating material was found during the course of search if the Chairman had used the cars for personal purposes. Therefore, it appeared that addition had been made wholly on ad hoc basis which could not be sustained in law.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2004-05, 2006-07, 2007-08 & 2008-09

INCOME TAX ACT, 1961

Section 69

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