TCS FOUNDATION,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX , EXEMPTION CIRCLE 2 , MUMBAI

Briefly stated, the facts emerging from the record are that the assessee is a Section 8 not-for-profit company incorporated for carrying out charitable and CSR-related activities including promotion of education, healthcare, environmental sustainability, preservation of national heritage and other activities falling within Schedule VII of the Companies Act, 2013. The assessee enjoys registration as a charitable institution and is governed by the provisions of sections 11 to 13 of the Act. During the year under

Apart from the current year’s income, the assessee was also required to apply amounts accumulated in earlier years under section 11(2). The record shows that an amount of Rs.284,41,05,466 was available for utilization from accumulations pertaining to Financial Years 2016–17 and 2017–18. Out of the same, the assessee actually applied Rs.109,48,17,881 towards the specified purposes for which the accumulation had originally been made. The balance amount of Rs.174,92,87,585, which could not be applied within the prescribed period, was voluntarily offered to tax under section 115BBI of the Act at the applicable rate. These disclosures were duly reflected both in the return of income as well as in Form No.10B and there is no dispute regarding the filing of either document within the prescribed time.

During the scrutiny proceedings, the Assessing Officer specifically called upon the assessee to furnish complete details regarding its charitable activities, reconciliation between the return of income and Form No.10B, particulars regarding accumulation and application of income, supporting documentary evidence and relevant statutory forms. In response, the assessee furnished detailed explanations together with supporting documents. The material placed before us demonstrates that the issue relating to application of current income, accumulation under section 11(2), application of accumulated funds and disclosure

Significantly, after examining the material on record, the Assessing Officer himself recorded a categorical finding in the assessment order that there was no difference between the taxable income reflected in the return of income and the taxable income reflected in Form No.10B in relation to section 115BBI. The assessment order further records that the disclosures made by the assessee in Form No.10B were duly verified and found to be in order. The Assessing Officer also observed that the relevant amounts stood properly reported in the statutory audit report and consequently no adverse inference was warranted on that aspect. Thus, the factual foundation on which the adjustment under section 143(1) had originally proceeded stood completely demolished during the scrutiny proceedings themselves.

We have carefully considered the rival submissions, perused the assessment order, the impugned appellate order and the material placed before us. The principal issue requiring adjudication is whether, after having undertaken a complete scrutiny of the disclosures made by the assessee in the return of income and Form No.10B and after expressly recording satisfaction regarding the correctness of such

From a careful examination of the record, it emerges that the assessee had disclosed two separate streams of application of income. The first related to application out of the current year’s income amounting to Rs.71,72,96,965. The second related to application of earlier accumulated funds amounting to Rs.109,48,17,881. Both these figures were specifically disclosed in the return of income and in Form No.10B at the appropriate schedules and columns prescribed under the statute. During scrutiny proceedings, the Assessing Officer sought complete details regarding these disclosures and the assessee furnished the same. Thereafter, the Assessing Officer accepted the explanation and recorded an unequivocal finding that there was no mismatch between the return and Form No.10B. Once such a finding had been reached after due verification, there remained no justification whatsoever for continuing with the additions which had originally emanated from the prima facie adjustments made under section 143(1). The assessment proceedings had effectively resolved the alleged mismatch and therefore the additions founded on such mismatch had no surviving basis.

We also find merit in the grievance of the assessee relating to the computation of gross total income at Rs.640,60,27,839. The material placed before us demonstrates that while preparing the computation sheet annexed to the assessment order, the Assessing Officer adopted the income determined pursuant to the earlier section 143(1) adjustment and thereafter once again included the same components while computing gross income. The result was that the amount representing income taxable under section 115BBI and related adjustments came to be considered more than once, leading to an artificial inflation of the taxable base. Such

Another aspect which deserves notice is that the Assessing Officer, while discussing the issues on merits, accepted the assessee’s explanation and recorded findings favourable to the assessee, but while drawing up the final computation failed to align the computation with those very findings. An assessment order must ultimately reflect in its computation the conclusions arrived at in the body of the order. Where the discussion portion records acceptance of the assessee’s explanation and verification of disclosures, but the computation proceeds on assumptions contrary to such findings, the computation cannot be allowed to prevail over the substantive findings recorded after scrutiny. The final determination of income must necessarily be consistent with the conclusions reached during assessment and not with adjustments which stood superseded upon verification.

We further hold that the computation of gross total income at Rs.640,60,27,839 is vitiated by duplication and double inclusion of amounts already considered elsewhere in the computation. The said computation is therefore directed to be corrected by eliminating the duplication and by giving effect to the findings recorded in the assessment order regarding the correctness of the disclosures made by the assessee.

Ground No.3 relating to computation of tax under section 115BBI is consequential to the determination of the correct taxable income. Since we have directed deletion of the additions and correction of the computation mechanism, the Assessing Officer shall recompute the tax liability strictly in

Before parting, we may observe that the entire controversy in the present case does not arise from any failure on the part of the assessee to disclose particulars of its income, accumulation or application. On the contrary, the disclosures were made in the return of income, reflected in Form No.10B, examined during scrutiny proceedings and accepted on merits by the Assessing Officer himself. The additions sustained by the learned CIT(A) ultimately stem from a computation inconsistent with the factual findings recorded in the assessment proceedings. Once the scrutiny assessment itself acknowledges that there is no difference between the return of income and Form No.10B and that the relevant amounts stand duly reported and verified, the resultant additions and computational distortions cannot be sustained.

In the result, all the substantive grounds raised by the assessee are allowed. The Assessing Officer is directed to grant consequential relief and recompute the income and tax liability in conformity with our observations hereinabove.

In the result, the appeal of the assessee is allowed.