Chartered flight travel by a charitable society enjoying tax benefit was an unreasonable expenditure. ITAT confirms addition for want of justification
ABCAUS Case Law Citation:
ABCAUS 2965 (2019) (05) ITAT
Important Case Laws Cited/relied upon by the parties:
Chiranjiv Charitable Trust
Indraprastha Cancer Society 229 Taxmann 93 (Del)
Lissie medical institutions vs. CIT 348 ITR 344 (Kerala).
CIT vs. Rajasthan and Gujarati Charitable Foundation, Poona (2018) 402 ITR 441
CIT vs. Karnataka Lingayat education society
The assessee was a society running the educational institutions. The Assessing Officer (AO) assessed the income of the assessee by making certain additions which inter alia included disallowance of depreciation, surplus of hostel receipts by treating it as business income, and disallowance of expenses incurred on a chartered flight travel by the top official and office bearer of the society.
The CIT(A) deleted the addition for depreciation claim. Also he though rejected the contention of the assessee that the running of hostel was an integral to education, reduced the addition. In respect of the travelling expense he confirmed the findings of the learned Assessing Officer to the effect that the travel by chartered flight was definitely unreasonable expenditure particularly by an assessee who enjoyed tax benefit for charitable activities.
Both, the revenue and the assessee had preferred the instant appeals againdt the order of the CIT(A).
The Tribunal observed that the issue of claim of depreciation and hostel receipts were no longer res Integra in view of the decisions of the Hon’ble Supreme Court and Hon’ble High Courts. Accordingly the Tribunal held that there was no illegality are regularity in the findings returned by the CIT(A) while deleting the addition made on account of depreciation. Similarly, the Tribunal held that running of hostel facility did not amount to business activity nor the surplus generated had to be considered as business income.
On the issue of addition relating to the travel expense, the Tribunal observed that admittedly, these expenses were related to the Air travel by the official and office bearer of the society by way of non-scheduled flight (chartered flight).
The Tribunal noted that both the authorities below held that the travel by chartered flight was an unreasonable expenditure particularly by an assessee who enjoys tax benefit for charitable activities and such an expense by the office bearer could not relate to charitable activities/objectives of the society.
The assessee submitted that unless and until the authorities below return a finding that the expenditure was bogus or that it had no nexus with the business of the assessee, it could not be said that such an expense was not allowable. He submitted that the purpose of travel was to join a meeting with Institute of Management, Hyderabad and other institutes to meet with the requirement of smooth/affective running of Institute for better academic and administrative matters, and since this meeting was convened at a short notice, the official was forced to go by a chartered flight.
The Tribunal observed that as recorded in the assessment order, during the course of assessment proceedings, the assessee had not shown how the said chartered flights were made exclusive for business purpose. Neither the impugned order nor the assessment order showed that the assessee had justified the claim with any evidence to show the purpose of travel or the circumstances forcing the official of the assessee to travel by chartered flight.
The Tribunal, for want of evidence confirmed the addition for chartered flight and dismissed the relevant ground of assessee’s appeal.