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Facts
The Assessee, a trust registered under Section 12A, had its registration revoked and later restored. The Assessing Officer made an addition of INR 42,77,50,000/- treating contribution received from settlors as income and denied exemption under Section 11. The CIT(A) upheld the AO's order.
Held
The Tribunal held that the contribution received from the settlors was towards the corpus of the trust and, with the restoration of the Section 12A registration, the Assessee is eligible for benefits under Section 11. Therefore, the addition made by the AO was deleted and the benefit of deduction under Section 11(1)(a) was directed to be granted.
Key Issues
Whether contribution received from settlors towards corpus fund is to be treated as income of the trust when the trust's registration under Section 12A is validly restored? Whether the Assessee is eligible for exemption under Section 11?
Sections Cited
12A, 143(3), 250, 11, 2(24)(iia), 11(1)(a), 2(15), 263, 18(6), 12AA(3), 11(1)(d)
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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
(Assessment Year: 2013-2014) Credit Guarantee Fund Trust For Micro and Small Enterprises 1st Floor, SIDBI Swavalamban Bhavan, Avenue 3, Lane 2, G-Block Bandra Kurla Complex, Bandra (East), Mumbai-400051, Maharashtra. [PAN:AAATC2613D] …………. Appellant Vs Deputy Commissioner of Income Tax Exemption – 1(1), Exemption, Circle-1 MTNL Telephone Exchange Building, Cumballa Hills, Pedder Road, Mumbai – 400026, Maharashtra. …………. Respondent Appearance For the Appellant /Assessee : Shri Bhupendra Karkhanis Shri Jay Dharod For the Respondent /Department : Shri R.A. Dhyani Date Conclusion of hearing : 30.01.2025 Pronouncement of order : 27.03.2025
O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal has been preferred by the Assessee against the order, dated 30/09/2024, passed by the National Faceless Appeal Centre, Delhi [hereinafter referred to as the ‘NFAC’], under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], whereby the Ld. CIT(A) had dismissed the appeal of the Assessee against the Assessment Order, dated 03/03/2016, passed under Section 143(3) of the Income-tax Act, for the Assessment Year 2013-2014. 1
The relevant facts in brief are that the Assessee is a trust registered as a charitable organization under Section 12A of the Act (vide order dated 18/10/2001). The Registration under Section 12A was revoked by DIT(E) vide order dated 07/12/2011. However, vide order dated 28/05/2014 passed in the Tribunal restored the registration under Section 12A of the Act. The aforesaid order of the Tribunal was upheld by the Hon'ble High Court of Bombay vide order dated 02/08/2017 passed in Income Tax Appeal No. 511 of 2015. For the Assessment Year 2013-14 the Assessee filed return of income on 28/09/2013 which was selected for regular scrutiny vide assessment order dated 03/03/2016 the assessing officer completed the assessment under Section 143(3) of the Act at assessed income of INR 7,73,77,15,499/- after making an addition of INR 42,77,50,000/- holding the contribution received by the Assessee-trust from the settlor in terms of the trust deed as income of the Assessee. The Assessing Officer also rejected Assessee claim for exemption under Section 11 of the Act. being aggrieved the Assessee preferred appeal before the CIT(A) against the aforesaid Assessment Order which was dismissed, vide order dated 30/09/2024. Now, being aggrieved the Assessee-trust has preferred the present appeal before the Tribunal.
When the appeal was taken up for hearing the learned Authorized Representative for the Assessee, at the outset, submitted that issues identical to those raised in the present appeal stand decided in favour of the Assessee in appeals pertaining to the Assessment Years 2010-2011, 2011-2012, 2012-2013, 2014-2015 and 2018- 2018. Reliance in this regard was placed upon the decisions of the Co-ordinate Bench of the Tribunal in the aforesaid appeals placed at pages 117 to 192 of the paper-book filed by the Assessee.
4. Per contra the learned Departmental Representative placed reliance
We have considered rival submission and perused the material on record including the decisions of the Co-ordinate Benches of the Tribunal on which reliance was placed on behalf of the Assessee.
6. We find that the grounds raised by the Assessee in the present appeal are identical to the grounds raised in appeal for the immediately preceding assessment year (i.e., Assessment Year 2012-2013) [ITA No. 2045/Mum/2024] and the same are tabulated hereinbelow: Assessment Year 2013-2014 Assessment Year 2012-2013 2(a) On the facts and circumstances of the 1(a) On the facts and circumstances of case and in law, the Ld. CIT(A) erred in the case and in law, the Learned confirming the action of Learned Assessing Commissioner of Income Tax (Appeals) Officer [Ld. AO] of making addition of Rs. [Ld. CIT(A)] erred in confirming the 42,77,50,000/- u/s 2(24)(iia) of the Act being action of learned Assessing Officer [Id. contribution received from Settlors namely, AO] of making addition of Rs. Government of India (GOI) and Small 2,22,50,000/- u/s 2(24) (iia) of the Industries Development Bank of India Income Tax Act, 1961 being (SIDBI) towards Corpus Fund in terms of the contribution received from Settlors trust deed and the reasons assigned for namely, Government of India (GOI) and doing so are wrong and contrary to facts of Small Industries Development Bank of the case, provisions of the Act and Income India (SIDBI) towards Corpus Fund in Tax Rules, 1962 (hereinafter referred to as terms of the trust deed and the reasons "the Rules") made thereunder. assigned for doing so are wrong and contrary to facts of the case, provisions of Income Tax Act, 1961 (Act) and Income Tax Rules, 1962 (Rules) made thereunder.
(b) On the facts and circumstances of the 1(b) On the facts and circumstances of case and in law, the Ld. CIT(A) erred in the case and in law, the Ld. CIT(A) confirming the action of Ld. AO of making erred in confirming the action of ld. AO addition of Rs. 42,77,50,000/- u/s 2(24)(iia) of making addition of Rs. 2,22,50,000/- of the Act without appreciating the fact that u/s 2(24)(iia) of the Act being voluntary agreed contribution towards corpus fund contribution without appreciating the received by the appellant trust from GOI and fact that agreed contribution towards SIDBI (i.e. the Settlors) is an obligation of corpus fund received by the appellant Settlors as per the trust deed and hence, trust from GOI and SIDBI (i.e. the cannot be treated or added as income u/s Settlors) is an obligation of Settlors as 2(24) (iia) to the total income of appellant per the trust deed and hence, cannot trust. be treated or added as voluntary contribution t/s 2(24) (iia) to the total income of appellant trust. (c) On the facts and circumstances of the 1(c) On the facts and circumstances of 3 Assessment Year 2013-14 case and in law, the Ld. CIT(A) erred in the case and in late, the Ld. CIT(A) confirming the action of Ld. AO of not erred in confirming the action of Ld. AO granting exemption u/s 11(1)(d) of the Act to of not granting exemption as 11(1)(d) of corpus contribution received from settlors on the Act to corpus contribution received the reasoning that DIT(E) has withdrawn the from settlers on the reasoning that registration u/s 12AA(3) without appreciating DIT(E) has withdrawn the registration the fact that order of cancellation of u/s 12AA(3) without appreciating the registration u/s 12A has been set aside by fact that order of cancellation of the Hon'ble Income Tax Appellate Tribunal registration u/s 12A has been set aside (ITAT) and Departmental appeal against the by the Hon'ble Income Tax Appellate said ITAT order has been dismissed by the Tribunal (ITAT) and Departmental Hon'ble Bombay High Court. appeal against the said ITAT order has been dismissed by the Hon'ble Bombay High Court.
(d) On the facts and circumstances of the 1(d) On the facts and circumstances of case and in law, the Ld. CIT(A) and Ld. AO the case and in law, the Ld. CIT(A) and failed to appreciate that Ld. AO failed to appreciate that (i) The contribution received from the (i) The contribution received Settlors in terms of the trust deed from the Settlors in terms of are with a specific direction that the trust deed are with a they shall form part of the Corpus of specific direction that they the Trust and hence, the same shall form part of the Corpus cannot be included in the total of the Trust and hence, the income in view of the provisions of same cannot be included in section 11(1)(d) of the Act; the total income in view of the provisions of section 11(1)(d) of the Act.
(ii) receipt of capital nature cannot be (ii) receipt of capital nature cannot deemed to be income covered u/s be deemed to be income 2(24) of the Act; covered u/s 2(24) of the Act. (iii) the corpus contribution received by (iii) the corpus contribution the appellant trust from settlors in received by the appellant trust terms of trust deed cannot be said from settlors in terms of trust to be covered u/s 2(24)(iia) of the deed cannot be said to be Act which is upheld by Hon'ble voluntary contribution u/s ITAT, Mumbai in appellant trust's 2(24)(iia) of the Act. own case in earlier years. (e) On the facts and circumstances of the 2(b) On the facts and circumstances of case and in law, the Ld. CIT(A) erred in the case and in law, the LA CIT(A) and confirming the action of Ld. AO on wrong Id. AO has failed to appreciate that- assumption of Hon'ble ITAT, Mumbai confirming the appellant trust's activity being (i) the objects of the trust are covered covered u/s 2(15) of the Act in AY 2009-10 within the meaning of charitable which is wrong and contrary to facts of the purpose and the trust was granted case, provisions of the Act and Rules made registration u/s 12A of the Act. The thereunder order of cancellation of registration u/s 12A has been set aside by the Hon'ble ITAT and Departmental appeal against Assessment Year 2013-14 the said ITAT order has been dismissed by the Hon'ble Bombay High Court. (ii) the appellant trust has no profit motive and to fall within proviso to section 2(15) of the Act, rendering of service to trade, commerce or business must be such that it is in the course of carrying on of business and for has a profit motive. (iii) xx xx (iv) xx xx 3. On the facts and circumstances of 2(a) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in the case and in lave, the Ld. CIT(A) confirming the action of Ld. AO of not erred in confirming the action of ld. AO granting deduction u/s 11(1)(a) of the Act of of not granting deduction u/s 11(1)(a) of Rs. 72,29,85,668/-, being 15% of the income the Act of Rs. 75,57,20,895/-, being derived from property held under trust and 15% of the income derived by the trust the reasons assigned for doing so are wrong which is wrong and contrary to facts of and contrary to facts of the case, provisions the case, provisions of the Act and of the Act and Rules made thereunder.” Rules made thereunder.
On perusal of the decision of the Tribunal in appeal preferred by the Assessee for the Assessment Year 2012-2013 [ITA No. 2045/Mum/2024, dated 25/07/2024] we find that the Tribunal had (a) deleted the addition made under Section 2(24)(iia) of the Act holding the contribution received from settlors as income of the Assessee and (b) directed the Assessing Officer to grant benefit in terms of Section 11(1)(a) of the Act holding as under: “3. Representatives were heard at length. Case records carefully perused and relevant documentary evidence duly considered in the light of Rule 18(6) of the ITAT Rules, 1963.
Briefly stated the facts of the case are that the assessee is a trust registered as a charitable organization with DIT(E), Mumbai u/s 12A of the Act vide order dt. 18/10/2001. The Registration u/s 12A was revoked by DIT(E) vide order dt. 07/12/2011. The ITAT vide order dt. 28/05/2014 in has restored the registration u/s 12A. the said order of the Tribunal was upheld by the Hon'ble High Court of Bombay vide order dt. 02/08/2017 in Income Tax Appeal No. 511 of 2015.
Assessment Year 2013-14 5. Now, since the registration u/s 12A has been restored by the order of the Hon'ble High Court of Bombay, the assessee is eligible for the benefits of Section 11 of the Act.
The bone of contention is the contribution from Government of India and SIDBI amounting to Rs.1.25 Crores received as corpus contributions and Rs. 97,50,000/- received from SIDBI received as advance towards corpus fund. The assessee claimed it to be a corpus contribution by the settlers in terms of the trust deed, hence a capital receipt not allowable to tax.
9. From the above it is crystal clear that the contribution received by the assessee was towards corpus of the trust and as mentioned elsewhere, the assessee trust is eligible for exemption u/s 11 of the Act. The impugned addition made by the AO does not hold any water. We accordingly direct the AO to delete the addition of Rs 2,22,50,000/-.
Since we have held that the assessee is eligible for exemption u/s 11 of the Act, the AO is directed to allow the benefit of deduction u/s 11(1)(a) of the Act as per the relevant provision of law.
In the result appeal of the assessee is allowed.” (Emphasis Supplied) 8. Identical view has been taken by the Co-ordinate Bench of the Tribunal in the following appeals preferred by the Assessee: Appeal Number Assessment Year Order Date (ITA No.) - 4048/Mum/2014 2009-2010 11/09/2015 - 6282/Mum/2014 2010-2011 20/01/2017 - 3250/Mum/2016 2011-2012 26/02/2018 - 2214/Mum/2018 2014-2015 30/07/2019 - 2684/Mum/2022 2018-2019 24/11/2023
Further, we find that the Assessing Officer has proceeded on incorrect understanding that the Co-ordinate Bench of the Tribunal has, while adjudicating appeal preferred by the Assessee against the order, dated 11/09/2015, passed under Section 263 of the Act for the Assessment Year 2009-2010, concluded that the Assessee is not Assessment Year 2013-14 a charitable institution. We note that the Co-ordinate Bench of the Tribunal had in paragraph 5 of the order, dated 11/09/2015, passed in the aforesaid appeal [ITA No. 4048/Mum/2014] recorded as under:
“5. After hearing both the parties and in view of the aforesaid admitted facts that the registration granted u/s 12A, which was cancelled by DIT(E) u/s 12AA(3) has been restored by the Tribunal. The entire substratum of the impugned order u/s 263, that the assessee is no longer charitable trust and registration u/s 12A have been cancelled, no longer stands. Because now by virtue of the order of the Tribunal dated 28.05.2014, the registration u/s 12A has been restored and the assessee is now again eligible for deduction u/s 11. Thus, taxing of voluntary contribution and accumulation set-apart for the AY 2007-08 & AY 2008-09 cannot be brought to tax as held by DIT. Here in this case, the Assessing Officer has not given any benefit of section 11 albeit has denied the entire benefit claimed by the assessee in the revised computation. The said assessment order had even attained finality as the assessee has not challenged the same. Therefore, the order u/s 143(3) of the Assessing Officer dated 28.12.2011 stands. The impugned order u/s 263 is hereby cancelled, because same is based on the premise that registration u/s 12AA has been cancelled and assessee consequently is liable for tax on the items as discussed by him and is no longer entitled to derive benefit u/s 11. Thus, the grounds raised by the assessee are treated as allowed, solely on the aforesaid ground.
6. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 11th September, 2015.” (Emphasis Supplied)
10. We note that while adjudicating appeal for the Assessment Year 2012-2013, the Co-ordinate Bench of the Tribunal had, vide order, dated 11/09/2015, passed in observed that the Tribunal had vide order, dated 28/05/2014, passed in pertaining to Assessment Year 2009-2010, restored the Registration under Section 12A of the Act. The aforesaid order of the Tribunal was upheld by the Hon'ble High Court of Bombay vide order, dated 02/08/2017 passed in Income Tax Assessment Year 2013-14 Appeal No. 511 of 2015. Now, the registration under Section 12A/12AA has of the Act been restored, the Assessee is eligible for the benefits of Section 11 of the Act.
11. Thus, respectfully following the above decisions of the Co-ordinate Benches of the Tribunal, we delete the addition of INR.42,77,50,000/- made u/s 2(24)(iia) of the Act and direct the Assessing Officer to grant the benefit of deduction under Section 11(1)(a) of the Act as per the relevant provision of law. In terms of aforesaid, Ground No. 2(a) to 3 [reproduced in paragraph 6 above] are allowed while Ground No. 1 raised by the Assessee is dismissed as having been rendered infructuous.
In result the present appeal preferred by the Assessee is allowed.
Order pronounced on 27.03.2025.