PR COMMISSIONER OF INCOME TAX-(E) vs. M/S VISHWA BHARATI EDUCATION TRUST

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ITA/233/2017HC KarnatakaKAHC02016040201719 July 2019Bench: ARAVIND KUMAR,P.G.M.PATIL6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises for consideration in the present appeal. The Court noted that the issue of whether voluntary contributions received for a specific purpose can be regarded as income under Section 2(24)(iia) had been resolved by the First Appellate Authority and the Tribunal in favour of the assessee. Both authorities concluded that such contributions are capital receipts and tied-up grants for specific purposes, not income. The Tribunal's finding that these amounts could not be subjected to tax was based on the principle that they were capital receipts, irrespective of whether the assessee treated them as loans and refunded them. The Court further observed that the issue was squarely covered by the ITAT's order in ITO vs. Vokkaligara Sangha, which had not been pursued by the department, and that this finding had attained finality. Therefore, the appeal filed by the Revenue was dismissed.

What were the facts?

The assessee, M/s. Vishwa Bharati Education Trust, filed its return for AY 2010-11 declaring nil income, claiming exemption under Section 11 of the Income Tax Act, 1961, on donations and fees. Its application for registration under Section 12-AA was rejected on 28.09.2011 due to non-production of documents. Subsequently, reassessment proceedings under Section 143(3) read with Section 147 were initiated, and an addition of Rs. 2,53,80,309/- was made by the assessing officer for not applying the principle of mutuality. The CIT(A) allowed the assessee's appeal, finding that the amount calculated had been returned on different dates. The Revenue appealed to the ITAT, which dismissed the appeal, relying on its earlier order in Basanthi Devi and Shri Chakan Lal Garg Education Trust, holding that corpus donations are not income under Section 2(24)(iia). The High Court is hearing an appeal by the Revenue against the ITAT's order.

What were the issues?

1. Whether a substantial question of law arises for consideration in the appeal filed by the Revenue against the order of the ITAT, which upheld the CIT(A)'s decision allowing the assessee's appeal? Assessee's Contention: The assessee argued that voluntary contributions received for a specific purpose are capital receipts and not income under Section 2(24)(iia) of the Act, citing the ITAT's order in ITO vs. M/s. Vokkaligara Sangha, which followed the Delhi High Court's judgment in Basanthi Devi's case. The assessee also contended that the issue was a question of fact resolved in its favour by the lower authorities and that the ITAT's finding had attained finality. Revenue's Contention: The Revenue's specific contentions are not explicitly detailed in the judgment, but their appeal to the High Court indicates disagreement with the ITAT's decision that corpus donations are not income and that the issue did not involve a substantial question of law.

Which sections of the Income-tax Act were involved?

Section 11,Section 12-AA,Section 143(3),Section 147,Section 2(24)(iia),Section 260-A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH

DATED THIS THE 19TH DAY OF JULY, 2019

PRESENT

THE HON’BLE MR.JUSTICE ARAVIND KUMAR AND THE HON’BLE MR.JUSTICE P.G.M.PATIL

ITA No.233 OF 2017

BETWEEN:

1.

PR. COMMISSIONER OF INCOME TAX-(E) MISSION ROAD,

BANGALORE.

2.

DEPUTY COMMISSIONER, OF INCOME TAX, CIRCLE-1(1),

BANGALORE. ... APPELLANTS

(BY SRI Y. V. RAVIRAJ, ADV.)

AND:

M/S. VISHWA BHARATI EDUCATION TRUST, VIDYANAGAR, HUBLI-580009. ... RESPONDENT

(BY SRI A.SHANKAR ADV. FOR SRI. V. CHANDRASHEKHAR, ADV.)

THIS ITA IS FILED UNDER SEC.260-A OF IT ACT 1961, PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY HON'BLE COURT AS DEEMED FIT

: 2 :

AND SET ASIDE THE APPELLATE ORDER DATED 18.11.2016 PASSED BY INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH ‘C’ BENGALURU, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEE'S CASE, IN APPEAL PROCEEDINGS IN ITA NO.624/BANG/2014 FOR A.Y.2010-11 VIDE ANNEXURE-A.

THIS ITA COMING ON FOR ORDERS, THIS DAY, ARAVIND KUMAR J., DELIVERED THE FOLLOWING:

JUDGMENT

Though matter is listed for hearing on interlocutory application, by consent of learned advocates, it is taken up for final hearing.

2.

Assessee claiming to be a trust has filed its return of income for the assessment year 2010-2011 declaring nil income. Source of income claimed by assessee is donations and corpus and entrance/membership fees, but claiming exemption under Section 11 of Income Tax Act, 1961. Assessee had filed application for registration under Section 12-AA which came-up for consideration on 31.03.2011 and due to failure in producing requisite documents, by order dated 28.09.2011 application for registration filed under Section 12-AA of the Act came to be rejected. Pursuant to same,

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re-assessment proceedings under Section 143(3) read with Section 147 of the Income Tax Act, 1961 was taken up and order under Section 143(3) read with Section 147 of the Income Tax Act, 1961 came to be passed on 28.09.2011, whereunder assessing authority made addition of net gross receipts to the tune of Rs.2,53,80,309/- by not applying principle of mutuality to the assessee, who is considered as AOP (Charitable Trust). Being aggrieved by said addition of net gross receipts, assessee filed an appeal before Commissioner of Income Tax (Appeals) in I.T.A. No.CIT(A)191 / HBL - 2012 – 13 / AY 2010-11, which came to be allowed on the ground that amount which had been calculated had been returned on different dates namely amount of Rs.2,52,59,808/-. Thus, relief sought for by assessee came to be granted by the Commissioner of Income Tax (Appeals). Being aggrieved by the same, appeal was preferred by Revenue before the Commissioner of Income Tax Appellate Tribunal (ITAT), which has dismissed the same by relying upon its earlier order passed in I.T.A. No.927/2009, on 23.09.2009 in the case of Basanthi Devi and Shri Chakan Lal Garg Education Trust

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holding that corpus donations cannot be regarded as income under Section 2(24)(iia) of the Act.

3.

In fact, assessee had also placed reliance on the order of the Tribunal dated 14.08.2015 passed in the matter of ITO vs. M/s. Vokkaligara Sangha in I.T.A. Nos.281-285(B)/2014, whereunder Tribunal had followed the judgment of Delhi High Court rendered in Basanthi Devi’s case referred to herein supra. In that view of the matter, we are of considered view that substantial question of law which is sought to be raised by revenue would not arise for consideration, as it is a question of fact which has been resolved by First Appellate Authority as well as Tribunal in favour of assessee, by arriving at a conclusion that voluntary contribution received for a specific purpose cannot be regarded as income under Section 2(24)(iia) since they are capital receipt and tied up grants for specific purpose. In fact, Tribunal noticed that assessee has considered the said voluntary contribution as a loan and had refunded the same to the donors though would not have any relevancy to the facts on hand, since it

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is held that this is a capital receipt and cannot be regarded as income under Section 2(24)(iia) of the Act and it would be immaterial as to whether same amount was converted by the assessee as loan and refunded to the donors.

4.

In this background, Tribunal has held, and rightly so, that said amount cannot be subjected to tax on the ground that assessee was not granted registration under Section 12-AA of the Act, inasmuch as, assessee did not claim eligible for exemption under Section 11 of the I.T. Act, but on the other hand, claim of the assessee was to the affect that it was a voluntary contribution and not liable to tax and it is not an income.

5.

In the light of facts discussed hereinabove and also the fact that issue involved in the present appeal being squarely covered by order dated 14.08.2015 passed by ITAT in ITO vs. Vokkaligara Sangha in I.T.A. Nos.281- 285(B)/2015 and same having not been pursued by the department or in other words, issue involved in said appeal being squarely applicable to the facts on hand and said finding having attained finality, we are of considered view,

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there is no substantial question of law involved in this appeal for being formulated, adjudicated and answered. Hence, we proceed to pass the following: ORDER (i) I.T.A. No.233/2017 is dismissed. (ii) Order passed by Income Tax Appellate Tribunal, Bangalore Bench ‘C’, Bangalore in I.T.A. No.624 (BANG) 2014 for the assessment year 2010-11 stands confirmed. (iii) No costs.

Sd/- JUDGE

Sd/- JUDGE

VB-para 1 & 2 Rsh-para 3 to end

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