Income Tax Appellate Tribunal - Delhi
Sunder Deep Educational Society, New ... vs Assessee on 6 December, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'G': NEW DELHI
BEFORE SHRI G. D. AGRAWAL, VICE PRESIDENT AND
SHRI I. C. SUDHIR, JUDICIAL MEMBER
I.T.A.No.4058/Del/2013
Assessment Year : 2006-07
Sunder Deep Educational Society, vs. Addl. CIT,
C/O. M/s. RRA Taxindia, Range-2
D-28,South Extension, Part-1
New Delhi. Ghaziabad.
PAN: AAETS5165J.
(Appellant) (Respondent)
I.T.A.No.4059/Del/2013
Assessment Year : 2008-09
Sunder Deep Educational Society, vs. Addl. CIT,
NH-24 , Range-2
Dasna
Ghaziabad. Ghaziabad.
PAN: AAETS5165J.
(Appellant) (Respondent)
Appellant by : Shri Ashwani Taneja, F.C. A
Respondent by : Smt. Renuka Jain Gupta, Sr. DR.
ORDER
PER I. C. SUDHIR, JUDICIAL MEMBER
In both the appeals preferred by the assessee, the action of the Ld. CIT (A) has been questioned in sustaining the addition made u/s 68 of the Act, by treating the donation as non genuine and thereby in not granting the benefit 2 of exemption under sections 11 & 12 of the Act. Without appreciating that the society is duly registered u/s 12AA of the Act.
2. At the outset of hearing the Ld. AR pointed out that the issue raised in the grounds is fully covered by the decision of the Tribunal in the case of assessee itself for the assessment year 2007-08 in ITA No. 2428/Del/2011, order dated 06.12.2013. A copy of this order has been furnished by the Ld. AR.
3. The Ld. Departmental Representative, on the other hand, tried to justify orders of the authorities below.
4. The relevant facts of the case are that the assessee society was granted registration u/s 12AA of the Act with effect from 10.09.2004 and exemption u/s 80G of the Act for the period from 10.09.2004 to 31.03.2008. As per memorandum of the association the main objectives of the society are to establish, maintain and support schools, colleges, technical school, medical colleges and other educational institution and research centre for carrying out research in various branches of education including technical subject and to associate with educational research institutions. The society is also engaged in the activity providing technical education in the form of engineering, management courses at different places. The assessee was subjected to survey u/s 133A of the I. T. Act, 1961 and during the course of 3 survey a huge investment in purchase of land and construction of college buildings was notices. The receipt of donations towards corpus funds was also noticed during the course of assessment proceedings. Necessary confirmations along with copy of bank statement and PAN Nos. were received from the donors in the assessment year 2006-07. The donor M/s USha (India) Ltd. refused vide its letter dated 24.09.2008 for giving donation of Rs.6,50,000/- to the assessee was asked to explain the said claimed donation.
5. Being not satisfied with the explanation, the assessee made an addition of Rs.6,50,000/- u/s 68 of the Act, treating the donation as non genuine the Ld. CIT (A) has upheld the same.
6. Similarly in the assessment year 2008-09, the Assessing Officer made addition of Rs.63,52,600/- u/s 68 read with section 115 BBC of the Act, holding the income from unexplained sources. During this year also the assessee had taken donations from different parties and tried to establish its genuineness but could not succeed even before the Ld. CIT (A) and addition of Rs.63,52,602/- has been sustained u/s 68 of the Act.
7. Keeping in view the provisions of section 115 BBC, the grievances of the assessee remain that they had furnished sufficient evidence in support of the genuineness of the claimed donation and even if, the addition on this 4 account of non genuineness of the claimed donation is made, the assessee society duly registered u/s 12AA of the Act, will be eligible for exemption under sections 11& 12 of the Act on the said addition. Under almost similar facts and circumstances in the case of assessee itself for the assessment year 2007-08, the addition made u/s 68 read with section 115BBC of the Act at Rs.1,92,35,000/-, on account of non genuineness of the donations has ultimately been deleted by the Tribunal vide its order dated 06.12.2012 (Supra). Relevant para nos. 11 to 15 thereof are being reproduced hereunder:
"11. We have duly considered the rival contentions and gone through the record carefully. There is no dispute between the parties that assessee is a registered society under Society Registration Act. 1862. It is also enjoying registration under sec. 12AA of the Act and it is also enjoying exemption under sec. 80G of the Act. All these registrations are in tact during the accounting year relevant to this assessment year. Assessing Officer has basically distinguished the facts of Hon'ble Delhi High Court's decision in the case of Keshav Charitable Trust, on the ground that sec. 115BBC has been introduced in the Act, it is applicable in this assessment year and if donations are to be treated as anonymous donations then, it would not be construed that such donations are deemed to be income derived from the trust as per sec. 12 of the Act. This fact has been reversed by the Learned CIT(Appeals) in the findings extracted supra. Learned CIT(Appeals) has held that sec. 115BBC is applied to anonymous donations. He did not agree with the Assessing Officer's view of treating these donations as anonymous to that extent he agreed with the assessee's arguments. This finding of fact has not been challenged before us by the revenue. The order of the Learned CIT(Appeals) is dated 31.3.2011. The appeal of the assessee was listed on six occasions, but no steps were shown by the revenue that it is going to challenge the findings of Learned CIT(Appeals) 5 extracted supra. Thus, we have to proceed from the point that assessee has been maintaining complete details of the donors as required under sec. 115BBC. The donations are not by anonymous donors. If these are not anonymous then let us see how the income would be computed. Section 12 of the Act has a direct bearing in the controversy in hand, therefore, it is imperative upon us to take note of this section as under:
"12. Income of trusts or institutions from contributions.- (1) Any voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes (not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of section 11 be deemed to be income derived from property held under trust wholly for charitable or religious purposes and the provisions of that section and section 13 shall apply accordingly.
(2) The value of any services, being medical or educational services, made available by any charitable or religious trust running a hospital or medical institution or an educational institution, to any person referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3) of section 13, shall be deemed to be income of such trust or institution derived from property held under trust wholly for charitable or religious purposes during the previous year in which such services are so provided and shall be chargeable to income-tax notwithstanding the provisions of sub-section (1) of section 11.
Explanation.--For the purposes of this sub-section, the expression "value" shall be the value of any benefit or facility granted or provided free of cost or at concessional rate to any person referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3) of section 13. 6 (3) Notwithstanding anything contained in section 11, any amount of donation received by the trust or institution in terms of clause (d) of sub-section (2) of section 80G in respect of which accounts of income and expenditure have not been rendered to the authority prescribed under clause (v) of sub- section (5C) of that section, in the manner specified in that clause, or which has been utilised for purposes other than providing relief to the victims of earthquake in Gujarat or which remains unutilised in terms of sub-section (5C) of section 80G and not transferred to the Prime Minister's National Relief Fund on or before the 31st day of March, 2004 shall be deemed to be the income of the previous year and shall accordingly be charged to tax".
12. A bare perusal of sub-clause (i) of sec. 12 would indicate that if an assessee had received donations which were not with a specific directions that they shall form part of the corpus donation then, for the purpose of section 11 be deemed to be income derived from property held under the Trust wholly for charitable or religious purpose. It has not been specifically demonstrated before us that these donations were towards the corpus. The learned counsel for the assessee submitted that once the donations are held by the Learned CIT(Appeals) as synonymous and assessee is able to demonstrate the maintenance of the complete record then sec. 115BBC of the Act would not be applicable. The receipts are to be governed by sec. 11 and 12 of the Act. The moment assessee has treated the donations as its income and it is deemed to be an income derived from the property held under the trust as per sec. 12(1) then, the only aspect remained is to verify whether such amounts have been applied for the objects of the society to the extent of 85% or not? According to the assessee, it has applied Rs.533,22,266 as expenditure towards fulfillment of assessee's objections and it has an income of only Rs.90,79,412. This fact was brought to the notice of the Assessing Officer in the reply dated 21.12.2009 which has been reproduced by the Assessing Officer on page 5.
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13. In the judgment referred by the assessee, a similar issue was involved. The ITAT in the case of St. Vivekanand Education & Welfare Society has considered this aspect. The discussion made by the ITAT reads as under:
"7. Having gone through the decisions relied upon by the Ld. A.R., we find that in the case of DIT(E) Vs Keshav Social & Charitable Foundation (supra), before the Hon'ble Delhi High Court, the charitable institution made disclosure of donations along with list of donors. There was no dispute that more than 75% of the donations were applied for charitable purposes. It was held that the facts that complete list of donors was not filed or that the donors were not produced, does not necessarily lead to the inference that the assessee was trying to introduce unaccounted money by way of donation receipts and Section 68 has no application to the facts of the case as the assessee had in fact disclosed the donations as income. The Hon'ble Delhi High Curt approved the decision of the Tribunal that addition u/s 68 was not correct and exemption u/s 11 cannot be denied.
8. Again, in the case of DIT(E) VS Motibagh Mutual Aid Education (supra), before Hon'ble High Court, the assessee received 'guptdaan' which was shown as unsecured loan by mistake. Some other donations were also there. The donations were utilized for construction of school building. It was held that when there is no deviation of funds there are minor contradictions or deviation in the accounts, this by itself cannot substantiate the allegation that the assessee exists for profit motive, therefore, exemption u/s 10(22) of the Act cannot be denied to the assessee. It was held that the amount of 'guptdaan' is a receipt and not an outflow from the corpus of the assessee. Therefore, the question in this regard is whether the amount was received by was of a loan or by way of guptdaan. In either case, it cannot be said that the amount was received with a profit motive, unless it was not meant for utilization for educational purpose for which there is no evidence on record. It was held further that even if donors were not produced, it was not necessarily lead to an inference that the assessee was trying to introduce unaccounted money by way of donation receipts. The donations were utilized for construction of school building, is clearly an educational 8 /charitable purpose. But at no stretch of imagination it can be said that the donations were received with some profit motive as held by Hon'ble Delhi High Court.
9. In the case of DCIT(E) VS New Anand Education Society (supra) before Delhi Bench of the Tribunal, the dispute was raised against the donation receipt of RS.7,65,467/-. The assessee trust duly registered u/s 12A(a) of the Act had furnished details of donations received. The A.O. held that these were only accommodation entries as per the report of the Investigation Wing. He accordingly subjected the said donation receipts for charge of tax at maximum marginal rate.
Ld CIT(A) deleted the same. The Tribunal upheld the first appellate order on the issue with this finding that to obtain benefit of exemption u/s 1`1, the assessee is required to show that the donations were voluntary. It was observed that the assessee had not only disclosed the donations but had also submitted list of donors. It was held further that the fact that complete list of donors were not filed and the donors were not produced, does not necessarily lead to the inference that the assessee was trying to introduce unaccounted money by way of donation receipts. The Tribunal respectfully followed the above ratio laid down by the Hon'ble Delhi High Court in the case of Keshav Social and Charitable Foundation (supra) declined to interfere with the first appellate order on the issue.
10. In view of the ratio laid down in the above cited decisions of Hon'ble Delhi High Court when we examined the orders of authorities below, we do not find justification in the action in sustaining the addition of Rs.140 lacs u/s 68 of the Act, only because members of the donors could not be verified when there is no dispute that the assessee had made disclosure of donations along with list of donors, amounts were paid through banking channels and due to this non-availability / non existence on their given addresses the amounts so received in donations were applied for charitable purposes. It is pertinent to mention over here that during the year, the assessee had received corpus donations of Rs.1,99,86,101/- and it had collected RS.3,51,76,220/- as per income and expenditure account, thus the total amount available with the assessee from 9 these two accounts was Rs.5,51,62,321`/- against which it had spent Rs.4,03,76,796/- on the fixed assets and Rs.3,09,80,493/- on recurring expenses. After depreciation of Rs.63,08,433/-, the total application of funds comes to Rs.6,50,48,856/-. Thus, when there is no dispute that the amount in question was applied for educational purposes, the fact that the donations remained unverifiable due to non availability of donors at the addresses given in their confirmations does not necessarily lead to the inference that the assessee was trying to introduce unaccounted money by way of donation receipts. We, therefore, respectfully following the decision of Hon'ble Delhi High Court in the case of Keshav Social & Charitable Foundation (supra), hold that the provision of Section 68 of the Act has no application to the facts of the present case when list of donors with supporting evidence was filed, amounts were paid through banking channels, there is also no dispute that the objects and activities of the assessee were charitable in nature and it was duly registered under the provisions of Section 12A of the I. T. Act, 1961. We thus direct the A.O. to delete the addition of Rs.140 lacs made u/s 68 of the Act in question. So far applicability of the provisions under section 115BBC are concerned, we do not find substance in the contention of the Ld. DR as the donations in question can not be turned as anonymous since list of the donors was filed and undisputedly payments have been through banking channels. The ground Nos.1-10 invoking the issue are thus allowed in favour of the assessee".
14. The issue in all other judgments referred by the assessee is similar. The orders of the ITAT, Delhi are basically based upon the judgment of Hon'ble Delhi High Court in the case of Keshav Trust. The order in the case of Hansraj Smarak Society has also been upheld by the Hon'ble Delhi High Court. Respectfully following the judgment of the Hon'ble Delhi High Court and orders of the Co-ordinate Bench, we are of the view that benefit of sections 11 & 12 in computing the income received on account of donations from identified donors cannot be denied. Consequently, we allow the appeal of assessee and direct the Assessing Officer to verify the facts that 10 assessee has applied 85% of its income during the year including these donations on its objects. If the claim of the assessee that it has incurred an expenditure of Rs.533,22,266 towards fulfillment of its object during the year then its income would be assessable at nil because the incurrence of this expenditure would take care the additions of Rs.192,35,000, Rs. 30,00,000 and Rs.11,00,000. Charging of interest under sec. 234B and 167B of the Income-tax Act, 1961 would be consequential. "
15. In the result, the appeal of the e is allowed for statistical purposes.
8. Keeping in mind the above decision of the Tribunal in the case of assessee itself on an identical issue for the assessment year 2007-08 (Supra), we find that in the assessment years 2006-07 and 2008-09 under consideration almost similar are the facts. In the assessment year 2006-07, in support of the claimed donation of Rs.6,50,000/- received from Usha (India) Ltd., the assessee had submitted confirmation of donation from Usha (India) Ltd. dated 22.03.2006 along with bank statement during period 01.04.2005 to 13.10.2008 showing donation of Rs.6.50 lac on 31.03.2006 by demand draft, which was made from the bank account of the donor with Axis Bank Ltd. vide cheque nos. 446046 & 446045. The Assessing Officer had denied the genuineness of the claimed donation mainly on the basis that the donor Usha (India) Ltd. had refused vide its letter dated 24.09.2008 for giving donation to Sunder Deep Education Society that is the assessee. Likewise in the assessment year 2008-09 the assessee had declared donation receipts of 11 Rs.73,52,603/- towards corpus fund, out of which addition of Rs.63,52,600/- has been made u/s 68 read with section 115BBC of the Act, holding it as income from unexplained sources. During this year also the assessee had filed details of donations along with confirmations, copies of income tax returns and cheques. The addition in question has been made by the Assessing Officer, on the basis that confirmations were in a stereotyped format, copies of income tax returns in some cases were of two years old and were not related with current year and that in most of the cases notice issued u/s 133(6) of the Act were returned back with postal remark that no such person exist at the given address. The Assessing Officer also noted that no donors were produced and there were mis-match of signatures in the confirmation letter and income tax returns. Likewise in the assessment year 2007-08 decided by the Tribunal, during the assessment years under consideration the assessee had also furnished list of donors with supporting evidence, amount were paid through banking channels and there is no dispute that the objects and activities of the assessee were charitable in nature and it was duly registered under the provisions of section 12AA of the Act.
9. We thus find that in the assessment year 2007-08, the Tribunal has deleted the addition of Rs.140 lacs received on account of donations on the 12 basis of cited decisions before it that provisions of section 68 of the Act has no application when list of donors with supporting evidence was filed, amounts were paid through banking channel and there is no dispute that the objects and activities of the assessee were charitable in nature and it was duly registered under the provisions of section 12A of the Act.
11. Regarding the applicability of the provisions u/s 115BBC of the Act, the Tribunal feels that the donations in question cannot be termed as anonymous since list of the donors were filed and payments have been made through banking channel. The Tribunal has held that the benefit of sections 11 & 12 in computing the income received on account of donations from identified donors cannot be denied. The appeal has thus been allowed by the Tribunal in the assessment year 2007-08, subject to verification by the Assessing Officer to the facts that assessee has applied 85% of its income during the year including the donations on its objects. It has been directed that if the claim of the assessee that it has incurred an expenditure of Rs.5,03,22,266/- towards fulfillment of its object during the year then its income would be assessable at nil because the incurrence of this expenditure would take care of addition of Rs.1,92,35,000/-, Rs. 30,00,000/- & Rs.11,00,000/-.
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12. We thus following the above cited decision of the Tribunal on an identical issue in the assessment year 2007-08 set aside the matter to the file of the Assessing Officer to this extent to verify the correctness of the facts that the assessee has applied 85% of its income during the years including the donations in question on fulfillment of its objects, if the Assessing Officer finds it correct, then its income would be assessable at 'nil' because the said incurrence of expenditure will take care of the additions in question.
In result, appeals are allowed for statistical purposes. The order pronounced in the open court on 01.04.2014.
Sd/- Sd/-
(G. D. Agrawal) (I. C. Sudhir)
VICE PRESIDENT JUDICIAL MEMBER
Dated: 01April, 2014.
*S. Sinha*
Copy of the order forwarded to:-
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
By Order
Deputy Registrar, ITAT.