The Income Tax Appellate Tribunal (ITAT),Vishakhapatnam has held that the activity of agricultural products for feeding children in the orphanage is charitable in nature and therefore, income tax exemption is allowable to a charitable society.
The assessee is carrying out medical and educational activities and conducting pastoral activities in the name and style of M/s. Roman Catholic Diocese of Eluru Bishop House.For the relevant year, the CIT (E) observed that an amount of Rs. 11,56,800/- in respect of FCRA receipts was claimed as expenses under the head ‘agricultural activity’. The CIT (E) verified the objects of the society and observed that activity of agriculture is nowhere mentioned as the objects of the assessee-society. The CIT(E), therefore concluded that the expenditure is not eligible for exemption under section 11 of the Act.
The assessee contended that the FCRA expenses are verified by the Home Ministry based on the submissions made to the Home Ministry every year. It was also argued that the agricultural produce from 44 Acres of land owned by the assessee in Utasamudram and Seethanagaram villages in West Godavari District was being used for feeding the boys and girls in the orphanages run by the assessee-society.
The Tribunal bench comprising Shri Duvvuru R L Reddy, Judicial Member & Shri S. Balakrishnan, Accountant Member observed that the agricultural income belongs to the Indian transactions and does not belong to the foreign transactions of the assessee.
“The observation of the Ld. CIT (E) is that no income is shown under the foreign transaction receipts and payments accounts furnished by the assessee. Based on the submissions of the Ld. AR, we find that the agricultural produce of the Utasamudram and Seethanagaram villages are being used for the feeding of boys and girls in the orphanages. This being a social and charitable activity where the assessee is exploiting his own natural resources, we set aside the order of the Ld. CIT (E) and allow the appeal of the assessee,” the Tribunal said.
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