TaxTMI 
TaxTMI 
2022 (1) TMI 86
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.... Act is available even for the assessment year 2014-15. 3. The learned Commissioner of Income-Tax (Appeals) erred in confirming the addition made by the Assessing officer of Rs. 31,90,180/- made by the Assessing Officer treating the amount received towards Corpus Fund as income assessable for the assessment year 2014-15. 4. The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that the said receipt represents capital receipt and is exempt from tax. 5. Any other ground that may be urged at the time of hearing." 2. Briefly the facts of the case are that the assessee filed its return of income for the impugned AY 2014-15 on 11/12/2014 admitting a total income of Rs. 2,28,290/-, which was processed u/s 143(1) of the Act by the AO at Central Processing Centre (CPC) vide order/information on 16/03/2016 and determined the total income of the assessee at Rs. 44,48,201/- by making the following additions/disallowances to the returned income of the assessee: 1. Addition on account of treating the corpus fund receipts/donations as income - Rs. 31,90,180/- 2. Disallowance of expenditure - Rs. 8,41,028/- 2.1 Against....
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.... income of Rs. 2,28,290/-, and the same is computed under the head income from other sources. While doing so, the assessee has disclosed gross receipts of Rs. 12,58,021/, and, after claiming certain expenses, the net profit is disclosed at Rs. 4,16,993/-. Further, it is observed from the return of income that the assessee has claimed a sum of Rs. 1,88,703/- u/s. 11(l)(a) of the Act towards accumulated or set-apart purportedly for application to charitable or religious purposes. Thus, after excluding Rs. 1,88,703/- from the net profit of Rs. 4,16,993/-, the assessee has finally arrived at the total income of Rs. 2,28,290/-. 7.4 Also, it is observed from the return of income filed that the assessee has disclosed a sum of Rs. 31,90,180/- towards corpus fund receipts and the same was disclosed in the balance sheet under the head capital account. As such, the corpus fund receipts have not been disclosed under profit and loss account. In view of this, while processing the return of income, the AO at CPC had rejected the assessee's claim of exemption u/s. 11 of the Act and considered the gross receipts of Rs. 12,58,021/- and corpus fund receipts of Rs. 31,90,180/-, aggregatin....
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....led, it is observed that the assessee has filed the return of income in Form ITR-7, which is meant for the persons who are eligible to claim exemption u/s 10(23C) and 11 of the Act. Further, as seen from the details furnished in the return, the assessee has not claimed exemption of its income u/s. 10(23C) (iii ad) of the Act. To be precise, as per the return format i.e., OTHER DETAllS-B, itis imperative on the part of the assessee to provide the details of eligibility for exemption u/s. 10(23C) (iii ad) and u/s. 10(23C) (iii ae) of the Act. The relevant portion of the return format is reproduced below for ready reference: This space is left blank intentionally. 7.8 In the instant case, it is clearly evident that the assessee has not chosen either of this columns implying that the assessee did not opt for exemption '" of its income either u/s. 10(23C) (iii ad) or u/s. 10(23C) (iii ae) of the Act, as the case may be. Further, in the same return format, the assessee has categorically stated that it has not been registered u/s.12A/12AA of the Act. Accordingly, it is mentioned that it is not entitled to claim exemption of its income u/s.11 of the Act. However, in the sta....
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....nts stipulated u/s. 10(23C) (iii ad) of the Act. To be precise, as seen from the facts of the case, including the financial statements, the assessee is not a University or other educational institution. Further, it is observed from the profit and loss account that the assessee has not disclosed any transactions relating to educational activities. For example, in the income side, the assessee has disclosed receipts under three heads Le., building rent, SML Town Bank FD interest and SML Town Bank SB interest. On the other hand, under the expenses, the assessee has claimed various expenses which are in the nature of general administrative and ~sta6Hsr.nJ1,ent expenses, apart from depreciation allowance, but there is no expenditure towards imparting education. For the sake of ready reference, a scanned copy of the profit and loss account is given below: 7.14 As seen from the above, it is quite clear that the assessee has not engaged in educational activities during the FY 2013-14 relevant to impugned A Y 2014-15, let alone existing solely for educational purposes and not for purposes of profit. The assessee has actually earned income in the shape of interest on Fixed Deposits ....
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....a) of the Act are squarely applicable inasmuch as, as per the Memorandum of Association of the assessee society, the society has been formed with no profit motive, implying that the assessee society has been created wholly or partly for charitable purposes. Accordingly, I am of the considered opinion that the assessee is liable to pay tax on the entire amount of corpus fund receipts/donations of Rs. 31,90,180/- without any deduction. Thus, the grounds of appeal raised by the assessee are treated as partly allowed." 4. Aggrieved by the order of CIT(A), the assessee is in appeal before the ITAT. 5. Before us, the ld. AR of the assessee reiterated the submissions made before the lower authorities and submitted that the assessee is a society registered under the Societies Registration Act. He submitted that the society received corpus fund which is exempt from the tax and the interest received on the investment of corpus fund is also exempt from tax. He submitted that while processing the return u/s 143(1) of the Act, the AO/CPC has made adjustments, which he could not have done. Referring to the provisions of section 143(1) of the Act, he submitted that only adjustments can be m....
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....additional ground of assessee. 7.1 The assessee is a society registered under AP Registration Act, by M.O.A. dated 07/03/2003, which is available on record. There are 11 objects of the society, which are mentioned at page 21 of the paper book. As regards the objection of the assessee that the addition made u/s 143(1) is not as per the provisions of the Act, in this connection, we refer to section 143(1) of the Act, which is as under: "(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely: (a) the total income or loss shall be computed after making the following adjustments, namely: (i) any arithmetical error in the return; 3 *** (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;4 (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) disallowance of expenditure indicated in the audit report but not taken into account in com....
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....the Principal Commissioner or Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under section 12AA : Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,- (i) from the date of the creation of the trust or the establishment of the institution if the Principal Commissioner or Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons; (ii) from the 1st day of the financial year in which the application is made, if the Principal Commissioner or Commissioner is not so satisfied: Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007; (aa) t....
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....from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year: Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year: Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA. 7.2.1 The submission of the ld. AR is that the application in form No. 10A seeking registration u/s 12AA was pending before the CIT(E) and the same was granted by the CIT(E) on 01/08/2019 and the CIT(A) passed his order dated 09/01/2020, which was instituted by the assessee on 27th October, 2016, it means that assessment was pending before the CIT(A....
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.... the learned counsel for the appellant, we find that the factual position in the case of Shree Shyam Mandir Committee (supra) was entirely different as could be seen from paragraph 6.4 of the said judgment as the issue was whether a reassessment proceedings would also be construed as a pending assessment proceedings and in the background of those facts, the Court took note of the Circular issued by the CBDT and granted relief. The decision of the Hon'ble Supreme Court in the case of Mathew M Thomas (supra) was entirely a different issue pertaining to a case arising under section 269C, read with section 269-1 of the Act, pertaining to acquisition of immovable properties and initiation of proceedings. 9. Therefore, we find both the decisions cannot be applied to the assessee's case. The decision in the case of Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan (supra), in our opinion, would be applicable to the case on hand. The Substantial Questions of Law which fell for consideration in the said case was: (i) Whether the Income-tax Appellate Tribunal was justified in allowing retrospective coverage to the assessee under sections 11 and 12 of the Act, by hold....
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....ment year" proceeding, for which assessment is pending before the Assessing Authority as on the date of registration. The Tribunal has given interpretation to the proviso to hold that irrespective of the date of application, the benefit of sections 11 & 12 of the Act, 1961 would be available to the assessee retrospectively, if the assessment proceedings were pending and pendency of such proceedings may be not only before the Assessing Office, but even before the Tribunal. 15. According to us, the interpretation of the proviso has been given in ignorance of the main provision of section l2A(2) of the Act, 1961. Whenever interpretation of the statutes has to be given it should be after making harmonious construction of the statute. For the purpose of proper interpretation of Section l2A of the Act, 1961, the Tribunal was required to make interpretation after taking into consideration the main provision along with the proviso and not by giving meaning to the proviso in ignorance of substantive provision. 16. The Tribunal has even ignored the basic principle of law in giving interpretation in charging provisions, the benefit is to be given to the assessee but same pri....
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....-2015, the benefit of sections II & 12 would be available for the following financial year in which application was made if the assessment proceedings for the relevant assessment year was pending till the date of registration. It cannot be for the assessment year 2011-12 due to pendency of. the appeal before the Tribunal. If the benefit of sections 11 and 12 is extended for the assessment year 2011-12, despite submission of the application for registration on 15-12-2014, it would be in contravention of sub-section 2 of section 12. By virtue of the interpretation taken by the Tribunal the main provision has been made redundant on the facts of the case, though not permissible. The proviso has to be read along with main proviso and not in isolation and contradiction. 19. The Tribunal even ignored the fact that proviso not only require registration of the Trust or the Institution while the assessment proceedings are pending, but it refers to assessment proceedings before the assessing authority and not elsewhere. In a common parlance, whenever matter is pending before the Tribunal in appeal, considered to be pendency of the assessment proceedings. The aforesaid principle would....
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....ore the Assessing Officer and such cases also subsequent application for registration and acceptance would result to extend benefit of sections 11 and 12 creating anomalous position if not meant for. This was not the object sought to be achieved by the legislature. If for one or the other reason, the proceedings in reference to the assessment years 1998-99 remains pending and the application for registration under section 12AA of the Act, 1961 is filed in the year 2014-15 followed by registration, if the proviso is applied, then benefit of sections 11 and 12 of the Act, 1961 would be given to the Trust or the Institution even for the year 1998-99, though the legislatures have not provided such arrangement or to extend the benefit in such cases. The provision is candid to govern only those cases where the application for registration is submitted followed by registration, to extend the benefit to the assessee from the following financial year of the date of application. Taking aforesaid into mind, we find reasons to allow the appeal preferred by the revenue and the substantial questions of law framed herein above are answered in favour of the Revenue and thereby we set-aside the ord....
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.... Account. If the corpus has been received by the assessee for a designated purpose, the same should have utilized for that purpose only and if depreciation is charged, depreciation should be reduced from the corpus fund as well as from the fixed assets. Whereas the assessee has reduced from the current year's receipts as per the P&L Account submitted at page 4 of paper book. 7.4. Since the society is not registered u/s 12A/12AA of the Act, in our considered view, the AO/CPC has right in making the addition of Rs. 31,90,180/- treating the corpus fund receipts/donations as income and the CIT(A) has confirmed the same by analyzing the issue elaborately. Therefore, we uphold the order of the CIT(A) and dismiss the grounds raised by the assessee on this issue. 8. In the result, appeal of the assessee is dismissed in above terms. Pronounced in the open court on 10th December, 2021. ============= Document 1 10026/2016-17/A3/CIT(A)-Kurnool ITA No. Page 9 of 15 Where, in any of the projects/institutions run by you, one of the charitable purposes is advancement of any of object of general public utility then- OTHER DETAIL A D a whether there is any ac....
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....come under the head Capital Gains a Short term (A5 of schedule CG) b Long term (B3 of schedule CG) (enter nil if loss) 33 За NIL 3b NIL c Total capital gains (3a + 3b) (enter nil if loss) 4 Income from other sources (as per item no. 4 of Schedule OS) 5 Voluntary Contributions (C of schedule VC) 6 Gross income (1+2+3+4+5] 3 + 3c NIL 4 12,58,021 5 31,90,180 6 44,48,201 If registered under section 12A/12AA, fill out items 7 to 13 ' 7 Aggregate of income referred to in section u/s 11 and 12 derived during the previous year to the extent that is included in 6 above 44,48,201 8 Voluntary contribution forming part of corpus as per section 11(1)(d) [(Ai + Bi) of schedule VC] 8 31,90,180- 9 Application of income for charitable or religious purposes i Amount applied to charitable or religious purposes in India during the previous year gi - Revenue Account Amount applied to charitable or religious purposes in India during the previous year 9ii -Capital Account (Excluding application from Borrowed Funds and amount exempt u/s 11(1A)| Amount applied to charitable or religious purpos....