2015 (9) TMI 548 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on donation addition, citing compliance with Income-tax Act

Income Tax Officer, II (3), Lucknow Versus M/s. Saraswati Educational Charitable Trust

The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 1,66,30,000/-, confirming that the donations were not anonymous and that Section ... Anonymous donations - addition u/s 68 as unexplained cash credits - assessee trust - invoking provisions of section 115BBC - CIT (A) deleted addition on account of donations, not found explained by the Assessing Officer - Held that:- Though the Revenue has taken a plea that for anonymous donation, provisions of section 115BBC of the Act can be invoked but in the instant case where the assessee has filed various documents to prove the identity of the donors, these donations cannot be called to be anonymous. So far as applicability of provisions of section 68 of the Act is concerned, it has been held by various High Courts including the jurisdictional High Court that once donation received was taken as income of the assessee which was applied for charitable purposes, provisions of section 68 of the Act cannot be invoked. Since we do not find any infirmity in the order of the ld. CIT(A), we confirm the same as he has adjudicated the issue in the light of various judicial pronouncements. Accordingly we confirm his order.- Decided against revenue. Issues Involved:1. Deletion of addition on account of unexplained donations.2. Applicability of Section 68 of the Income-tax Act, 1961.3. Applicability of Section 115BBC regarding anonymous donations.Issue-wise Detailed Analysis:1. Deletion of Addition on Account of Unexplained Donations:The primary issue revolves around the deletion of an addition of Rs. 1,66,30,000/- by the CIT(A), which was initially made by the Assessing Officer (AO) on account of unexplained donations. The AO had questioned the creditworthiness and genuineness of the transactions related to these donations. However, the CIT(A) deleted the addition, observing that the donations were taken as income and applied for charitable purposes, thus no addition was warranted under Section 68 of the Act.2. Applicability of Section 68 of the Income-tax Act, 1961:The AO invoked Section 68, treating the donations as unexplained cash credits. The CIT(A) and the Tribunal, however, relied on judicial precedents, including the judgments in CIT vs. Uttaranchal Welfare Society and Director of Income-tax (Exemption) vs. Keshav Social and Charitable Foundation. These judgments established that once donations are disclosed as income and applied for charitable purposes, Section 68 does not apply. The Tribunal noted that the assessee had provided substantial evidence, including PAN details, ITR copies, bank statements, confirmations, and financial statements to prove the identity and capacity of the donors.3. Applicability of Section 115BBC Regarding Anonymous Donations:The Revenue argued that the donations could be considered anonymous under Section 115BBC, which mandates a 30% tax on anonymous donations exceeding certain thresholds. However, the Tribunal found that the assessee had maintained records of the donors' identities, including names and addresses, thereby fulfilling the requirements to exclude these donations from being categorized as anonymous under Section 115BBC. The Tribunal cited the Board Circular No. 14 and judicial precedents to support this interpretation.Conclusion:The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 1,66,30,000/-, confirming that the donations were not anonymous and that Section 68 was not applicable. The Tribunal emphasized that the assessee had sufficiently proven the identity and capacity of the donors and had applied the donations for charitable purposes, thereby complying with the relevant provisions of the Income-tax Act. Consequently, the appeal by the Revenue was dismissed.