Unregistered Donation Treated as Income: Compliance is Key

The tribunal upheld the decision to treat the donation received by the assessee as income due to the lack of registration under section 12AA of the Act and non-compliance with FCRA requirements. The tribunal emphasized the importance of fulfilling statutory compliances and registration mandates to claim benefits under relevant sections of the Act, ultimately dismissing the appeal of the assessee.

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Issues:
1. Treatment of donation received by the assessee as income due to lack of registration under section 12AA of the Act.

Analysis:
The appeal was filed against the order of the Ld. CIT(A)-9, Hyderabad regarding the treatment of a donation received by the assessee as income since the assessee was not registered under section 12AA of the Act. The assessee, a registered society engaged in religious activities, had admitted NIL income for the AY 2012-13 under section 11 of the Act. The Ld. AO made an addition of Rs. 77,96,563/- by treating the donation received as income during the scrutiny assessment proceedings. The Ld. CIT(A) upheld this decision based on the lack of clarity regarding the utilization of the donations and compliance with FCRA requirements.

During the proceedings, it was revealed that the donations were received for various purposes such as construction of churches, borewells, burial grounds, and two-wheelers. The Ld. AO considered the donations as income since the assessee was not registered under section 12AA of the Act. The Ld. CIT(A) also noted the lack of clarity on whether the donations were utilized as intended and upheld the addition made by the Ld. AO.

The assessee argued that the donations were received from institutions and distributed to parties as per the donors' wishes. The assessee highlighted its FCRA registration and the nature of its activities related to religious purposes. However, the tribunal observed that the FCRA certificate provided was incomplete, and the assessee had not fulfilled all statutory compliances required to enjoy the benefits of the FCRA registration. Additionally, the tribunal emphasized that registration under section 12A is mandatory to claim benefits under section 11 of the Act.

The tribunal referred to the concept of "diversion of income by overriding title" and cited the judgment of the Hon'ble Karnataka High Court in a relevant case. It was noted that the diversion of income must have statutory or court decreed support, and private contractual obligations should be carefully examined to determine if they are for tax avoidance purposes. The tribunal concluded that the actions of the Revenue Authorities were in line with the provisions of the Act and dismissed the appeal.

In conclusion, the tribunal upheld the decision to treat the donation received by the assessee as income due to the lack of registration under section 12AA of the Act and non-compliance with FCRA requirements. The tribunal emphasized the importance of fulfilling statutory compliances and registration mandates to claim benefits under relevant sections of the Act, ultimately dismissing the appeal of the assessee.

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