ODIA SAMAJ,ARADHNA ENCLAVE vs. INCOME-TAX OFFICER (CIRCLE EXEMP 2(1), DELHI),, NEW DELHI

Having regard to the ground raised by the assessee before us as already narrated hereinbefore a prima facie case has been found in favour of the assessee for admitting such additional ground. The issue is found to be legal and no fresh investigation is required on facts. We note that the Ld. DR has also not been able to controvert the submissions made by the Ld. AR in regard to the admissibility of the additional ground as raised. Furthermore, considering the judgments relied upon by the Ld. AR the additional ground of appeal is admitted.

The brief facts leading to the case are that the assessee trust, filed its return of income for A.Y. 2018-19 on 4.10.2018 declaring total income at Rs. Nil upon claiming exemption under Section 11 of the Act. The nature of activity and classification of the activity is clarified as “others”. The Trust is registered on 13.04.2017 under Section 12AA read with Section 12A of the Act by and under the signatures issued by the Ld. CIT(Exemption), Delhi, copy whereof has already been annexed at page 24 of the paper book filed before us. The assessee has also been granted approval under Section 80G(5)(vi) of the Act on the same day by and at page 35 of the paper book.

The case of the assessee was selected for complete scrutiny under CASS and notice under Section 143(2) of the Act dated 22.09.2019 was issued followed by notices under Section 142(1) dated 28.11.2019 and 4.12.2020. The assessee duly filed the trust deed, copy of the certificate for registration under Section 12AA of the Act. The activities of the trust and the list of donors who had made corpus donation and the list of persons who had voluntarily contributed were also provided to the Ld. AO along with the income and expenditure statement, balance- sheet, bank account, bank pass book, details of expenses, TDS made and TDS not made. The assessee by and under a letter dated 23.03.2021 was directed to file details of the seminars; three days annual mega event etc. conducted by the assessee which were claimed to be one of the objects of the Trust. The assessee was further directed to file the copy of the letter/mail/communication of the donors incorporating the specific direction that they shall form part of the corpus of the trust as stipulated under Section 11(1)(d) of the Act. It is relevant to mention that this is in regard to receipt of Rs. 3,00,00,000/- towards corpus of the trust during the year under consideration.

On 18.01.2021 following details of corpus fund received by the assessee was provided to the Ld. AO:

It was the case of the assessee that the assessee’s receipt of corpus donation to the tune of Rs. 3,00,00,000/- from the public sector undertakings (PSU) was of voluntary contribution with specific directions to consider as corpus donation and due to continued lock down period under Covid-19 office of the assessee was closed and therefore, it could not get the required letters containing the specific directions in regard to the corpus donations made by the different donors.

On the other hand, Ld. AO was of the opinion that the donation should contain a specific direction that it should form part of corpus. The donations were received during F.Y. 1.4.2017 to 31.03.2018 i.e. admittedly during the Assessment Year 2018-19. As no Covid-19 period was there, the letters of the Public Sector Units making specific directions for consideration of the donated funds as corpus fund should have been handed over to the assessee trust during that period. form part of corpus donations, the said donation of Rs. 3,00,00,000/- was considered as receipt non-corpus fund and the minimum application of income/set apart of income is recomputed as under by the Ld. AO:

Before the First Appellate Authority the assessee furnished details of the donations particularly the letters written by the PUC namely Indian Oil Corporation, Oil India Limited, Thiruveni Earth Mover P Limited and Cairn upon by Oil India Limited and Thiruveni Earth Mover P Limited to the tune of Rs. 50,00,000/- each the nature of corpus donation was mentioned by the donors whereas the letters of donation written by the Indian Oil Corporation and Cairn to the tune of Rs. 1,00,00,000/- each, did not mention the nature of corpus donation by the said donors. In that view of the matter the addition of donation of Rs. 2,00,00,000/- as non corpus donation stood confirmed by the First Appellate Authority which is under appeal before us.

Under these facts and circumstances of the matter the alternative argument of the Ld. Counsel appearing for the assessee is that the assessee cannot be subjected to tax for failure to apply or accumulate the income which was not actually available meaning thereby that the assessee has not received the sum of Rs. 3.25 crores during the impugned year; there was no real income available with it which could have been applied or accumulated. The assessee for disclosure purposes had accounted future receivable income as income for the year which was not actually available in support of which the Ld. Counsel referred the balance- sheet for the year under consideration available at page 2 of the paper book filed before us evidencing the fact of donation receivable of Rs. 3,23,40,000/- for the such submissions made by the Ld. AR.

Having regard to the financials of the assessee trust the case made out by the assessee that the donation amounting to Rs.3,23,40,000/- since not received by the assessee during the assessment year under consideration, question of application thereof cannot arise as argued by the Ld. Counsel appearing for the assessee is found to be acceptable. The assessee has further recorded the total current liabilities of Rs.191,99,479/- which cannot be treated as application of funds for the purpose of charitable objectives. Under this facts and circumstances of the matter when the gross receipt of the assessee is Rs.16,01,59,424/- and the corpus donation as admittedly is of Rs.1 lakh, the receipt of accrual basis is thus, Rs.15,01,59,424/-. Considering the donation receivable and current liabilities of the assessee of Rs.323,40,000/- and Rs.191,99,479/- as it appearing from the balance sheet at page 2 of the paper book filed before us, the total receipts available for application remains at Rs.13,70,18,903/-. The 85% of the total receipts available for application, thus, become Rs.11,64,66,068/-, whereas the actual application as per the income and expenditure account is only Rs.11,54,61,387/-. Thus, the revised computation of income of the trust could be calculated as follows:

Now admittedly there is a short application of Rs.10,04,681/- which has not been able to be satisfied by the assessee’s counsel neither the records made available before us. Thus, having regard to the entire aspect of the matter the short application to the tune of Rs.10,04,681/- is found to be liable to be taxed in the hands of the assessee. Hence, the addition is restricted to Rs.10,04,681/- in the hands of the assessee.

The appeal preferred by the assessee is partly allowed.