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ITAT remands issue on unutilized amount for charity, directs AO to grant deduction The ITAT set aside the CIT(A)'s order and remanded the issue to the AO to ascertain the actual utilization of the unutilized amount for charitable ...
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ITAT remands issue on unutilized amount for charity, directs AO to grant deduction
The ITAT set aside the CIT(A)'s order and remanded the issue to the AO to ascertain the actual utilization of the unutilized amount for charitable purposes in the next financial year. The AO was directed to grant the deduction if satisfied with the utilization. The ITAT clarified that the delay in filing the intimation for availing benefits under s.11(1) would not be viewed adversely. The appeal of the assessee was allowed for statistical purposes.
Issues: Entitlement of benefits to charitable trust under s.11 of the Income Tax Act, 1961 for unutilized amount received under Corporate Social Responsibility (CSR) initiative from a donor.
Analysis: The appeal was filed by the assessee against the order of the CIT(A) concerning the treatment of an unutilized amount received from a donor under CSR initiative. The controversy revolved around the entitlement of benefits to the charitable trust under s.11 of the Act. The assessee received Rs.2 Crores from a company for specific purposes of welfare, out of which Rs.55,88,997/- was spent, and Rs.1,44,11,003/- remained unutilized in the relevant financial year. The issue was whether the unutilized amount could be treated as applied income under s.11(1) of the Act.
The assessee claimed that the unutilized amount should be deemed as applied during the previous year and treated as application of income under s.11(1) of the Act. The AO contended that there was a deficiency in compliance with the law as no communication was made with the AO or any form filed. The Revenue alleged a change in the assessee's stance regarding the deduction claimed under s.11(1) of the Act.
The ITAT held that the law permits deduction under s.11(1) if income is applied in the immediately subsequent financial year, and inconsistency in claiming deductions under different sections is not fatal. The substantial compliance with the conditions of the provision is crucial. The ITAT observed that the actual application of income in the next financial year is a question of fact that needs examination by the AO to determine the entitlement to tax benefits.
The ITAT set aside the CIT(A)'s order and remanded the issue to the AO to ascertain the actual utilization of the unutilized amount for charitable purposes in the next financial year. The AO was directed to grant the deduction if satisfied with the utilization. The ITAT clarified that the delay in filing the intimation for availing benefits under s.11(1) would not be viewed adversely. The appeal of the assessee was allowed for statistical purposes.
In conclusion, the judgment focused on the proper application of income received under CSR initiative by a charitable trust, emphasizing the importance of substantial compliance with the provisions of the Income Tax Act to determine entitlement to tax benefits for charitable activities.
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