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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI KULDIP SINGH & SHRI OM PRAKASH KANT
PER OM PRAKASH KANT, AM
1. This appeal by the assessee is directed against order dated 24.03.2022 passed by the Ld. Commissioner of Income-tax (Exemptions), Mumbai [in short ‘the Ld. CIT(E)’] for assessment year 2017-18, raising following grounds:
Lions Club of Malad Borivali 2 ITA No. 1458/M/2022
The Ld. CIT (Exemptions) erred in pass The Ld. CIT (Exemptions) erred in passing the order us 263, ing the order us 263, holding the assessment order as passed as erroneous and holding the assessment order as passed as erroneous and holding the assessment order as passed as erroneous and prejudicial to the interest of the revenue, without properly prejudicial to the interest of the revenue, without properly prejudicial to the interest of the revenue, without properly considering facts of the case. considering facts of the case. 2.
The Ld. CIT (Exemptions) erred in treating the receipts of 2. The Ld. CIT (Exemptions) erred in treating the receipts of 2. The Ld. CIT (Exemptions) erred in treating the receipts of donations, without considering its nature Rs.12,12,957/ Rs.12,12,957/- as donations, without considering its nature that such receipt from the students as per the fees structure that such receipt from the students as per the fees structure that such receipt from the students as per the fees structure provided by the University of Mumbai is to be spent on provided by the University of Mumbai is to be spent on provided by the University of Mumbai is to be spent on specified purposes and even not considering amounts spent as specified purposes and even not considering amounts spent as specified purposes and even not considering amounts spent as application of income. application of income. 3. 3. The Ld. CI 3. The Ld. CIT (Exemptions) erred in not considering the T (Exemptions) erred in not considering the consistency followed in the method of treatment of such consistency followed in the method of treatment of such consistency followed in the method of treatment of such receipts in past more than 40 years. receipts in past more than 40 years. 4. The appellant prays that order passed w/s 263 be cancelled. The appellant prays that order passed w/s 263 be cancelled. The appellant prays that order passed w/s 263 be cancelled. 2. At the outset, the Ld. Counsel of the assessee submitted that At the outset, the Ld. Counsel of the assessee submitted At the outset, the Ld. Counsel of the assessee submitted the Registry has pointed out a delay of 7 days in filing the appeal. the Registry has pointed out a delay of 7 days in filing the appeal. the Registry has pointed out a delay of 7 days in filing the appeal. The Ld. Counsel submitted that the Trust has e The Ld. Counsel submitted that the Trust has e-filed the appeal on filed the appeal on 19.05.2022 i.e. on time. However, the hard copy of the said appeal 19.05.2022 i.e. on time. However, the hard copy of the said appeal 19.05.2022 i.e. on time. However, the hard copy of the said appeal was filed on 23.03.2022 on 23.03.2022. Accordingly, there was a delay of 7 days in a delay of 7 days in filing the appeal.
We have heard rival submission of the parties on the issue of We have heard rival submission of the parties on the issue of We have heard rival submission of the parties on the issue of delay. We find that the appeal delay. We find that the appeal was already filed electronically already filed electronically on Lions Club of Malad Borivali 3 ITA No. 1458/M/2022 time and therefore we condoned the delay of 7 days in filing the and therefore we condoned the delay of 7 days in filing the and therefore we condoned the delay of 7 days in filing the appeal physically. The appeal is accordingly admitted for . The appeal is accordingly admitted for . The appeal is accordingly admitted for adjudication.
In the grounds raised, the assessee is mainly aggrieved with In the grounds raised, the assessee is mainly In the grounds raised, the assessee is mainly the finding of the Ld. CIT(E) holding the assessment the finding of the Ld. CIT(E) holding the assessment the finding of the Ld. CIT(E) holding the assessment order as erroneous and prejudicial to the interest of the Revenue. erroneous and prejudicial to the interest of the Revenue. erroneous and prejudicial to the interest of the Revenue.
Briefly stated facts of the case are that assessee is a Trust, d facts of the case are that assessee is a Trust, d facts of the case are that assessee is a Trust, registered as a charitable organization with Commissioner of registered as a charitable organization with Commissioner of registered as a charitable organization with Commissioner of Income Tax (Exemption), Mumbai u/s 12A of the Income Tax Act, Income Tax (Exemption), Mumbai u/s 12A of the Income Tax Act, Income Tax (Exemption), Mumbai u/s 12A of the Income Tax Act, 1961 (in short ‘the Act’). The Trust is also registered u/s 80G of the 1961 (in short ‘the Act’). The Trust is also registered u/s 80G of the 1961 (in short ‘the Act’). The Trust is also registered u/s 80G of the Act. The Trust is running and st is running and managing a Commerce Degree College, a Commerce Degree College, affiliated to Mumbai University Mumbai University, in the name of “Prahladrai Dalmia Prahladrai Dalmia Lions” College of Commerce and Economics. The assessee claimed College of Commerce and Economics. The assessee claimed College of Commerce and Economics. The assessee claimed that it collects fees from the students as per fee structure fixed by that it collects fees from the students as per fee structure fixed by that it collects fees from the students as per fee structure fixed by the University of Mumbai. As per the said fee structure an amount of e University of Mumbai. As per the said fee structure an amount of e University of Mumbai. As per the said fee structure an amount of ₹500/- per student is collected towards per student is collected towards ‘development development’ and ₹50/-
Lions Club of Malad Borivali 4 ITA No. 1458/M/2022
per student is collected towards per student is collected towards ‘student welfare fund student welfare fund’. The assessee e-filed its return of income in the year under consider filed its return of income in the year under consider filed its return of income in the year under consideration on 27.12.2017 declaring total income at 27.12.2017 declaring total income at ₹ Nil. The assessee claimed Nil. The assessee claimed exemption u/s 11 of the Act. The assessment u/s 143(3) of the Act exemption u/s 11 of the Act. The assessment u/s 143(3) of the Act exemption u/s 11 of the Act. The assessment u/s 143(3) of the Act was completed by the was completed by the Assessing Officer on 30.11.2019, Assessing Officer on 30.11.2019, wherein, he accepted the return of income filed by the assessee. accepted the return of income filed by the assessee.
5.1 Subsequently, the Ld. CIT(E) called for the record and after Subsequently, the Ld. CIT(E) called for the record and after Subsequently, the Ld. CIT(E) called for the record and after verification, he was prima facie of the view that assessment order he was prima facie of the view that assessment order he was prima facie of the view that assessment order dated 30.11.2019 was erroneous in dated 30.11.2019 was erroneous in so far as prejudicial to the far as prejudicial to the interest of the Revenue within the meaning of section 263 of the Act terest of the Revenue within the meaning of section 263 of the Act terest of the Revenue within the meaning of section 263 of the Act due to the reason that that assessee had directly credited to balance assessee had directly credited to balance sheet ₹10,75,000/- under sub under sub-head development fund, head development fund, ₹1,12,350/- under sub-head students welfare fund and head students welfare fund and ₹25,607/ 25,607/- under SMAF fund and the said donation income fund and the said donation income (i.e. fee received) was not offered to tax in the return of income. The Ld. CIT(E) further observed that to tax in the return of income. The Ld. CIT(E) further observed that to tax in the return of income. The Ld. CIT(E) further observed that by way of directly credited the said total amount of by way of directly credited the said total amount of by way of directly credited the said total amount of ₹12,12,957/- to Lions Club of Malad Borivali 5 ITA No. 1458/M/2022 balance sheet, the assessee has escaped assess balance sheet, the assessee has escaped assessment whereas this ment whereas this amount should have been disallowed by the Assessing Officer. amount should have been disallowed by the Assessing Officer. amount should have been disallowed by the Assessing Officer. According to him, the Assessing Officer has not verified this issue According to him, the Assessing Officer has not verified this issue According to him, the Assessing Officer has not verified this issue during the course of asses during the course of assessment proceedings. The Ld. CIT(E sment proceedings. The Ld. CIT(E) after considering the submission of the assessee considering the submission of the assessee held that assessee has held that assessee has violated provision of section 11 of the Act because u/s 11 of the Act violated provision of section 11 of the Act because u/s 11 of the Act violated provision of section 11 of the Act because u/s 11 of the Act only corpus donations are excluded for the purpose of application of corpus donations are excluded for the purpose of application of corpus donations are excluded for the purpose of application of the funds as prescribed and all other funds as prescribed and all other receipts to be considered to be considered for application as per the pro as per the provision of section 11 of the Act subject to vision of section 11 of the Act subject to accumulation as per Rules. The Ld. CIT(A) accordingly held the accumulation as per Rules. The Ld. CIT(A) accordingly held the accumulation as per Rules. The Ld. CIT(A) accordingly held the order passed by the Assessing Officer order passed by the Assessing Officer was erroneous in so far as erroneous in so far as prejudicial to the interest of the Revenue and directed the Assessing the interest of the Revenue and directed the Assessing the interest of the Revenue and directed the Assessing Officer to pass a fresh reasoned and speaking assessment order after a fresh reasoned and speaking assessment order after a fresh reasoned and speaking assessment order after proper verification of the issues pointed out by him. The relevant proper verification of the issues pointed out by him. The relevant proper verification of the issues pointed out by him. The relevant para of the impugned order is reproduced as under: para of the impugned order is reproduced as under:
“5. The matter is considered. The core issue on Doth the Development The matter is considered. The core issue on Doth the Development The matter is considered. The core issue on Doth the Development Fund and Studen Fund and Student Fund is the same. Assessee has collected the amounts t Fund is the same. Assessee has collected the amounts
Lions Club of Malad Borivali 6 ITA No. 1458/M/2022 at the time of admission from the students as per the norms of at the time of admission from the students as per the norms of at the time of admission from the students as per the norms of University of Mumbai. These amounts are directly being credited to the University of Mumbai. These amounts are directly being credited to the University of Mumbai. These amounts are directly being credited to the Balance Sheet Balance Sheet without passing through the Income & Expenditure ithout passing through the Income & Expenditure Account. As per the submission of the assesses reproduced abov As per the submission of the assesses reproduced abov As per the submission of the assesses reproduced above, the amount is spent for different purposes as required for the development amount is spent for different purposes as required for the development amount is spent for different purposes as required for the development of infrastructure and the welfare of the student community. As such it of infrastructure and the welfare of the student community. As such of infrastructure and the welfare of the student community. As such is the understan is the understanding, of, the assessee that the amounts collected are amounts collected are not required to pass through the not required to pass through the Income &. Expenditure Account the Income &. Expenditure Account the AO has accepted this has accepted this reporting of the impugned items, directly items, directly into the balance sheet without any verification balance sheet without any verification. After having applied my mind having applied my mind on, the issue in questi ssue in question, am of the considered view that in accepting on, am of the considered view that in accepting assessee's position without any verification. the AO has passed an assessee's position without any verification. the AO has passed an assessee's position without any verification. the AO has passed an order which is erroneous in so far as it is prejudicial to the interests of order which is erroneous in so far as it is prejudicial to the interests of order which is erroneous in so far as it is prejudicial to the interests of revenue within the meaning of Section 263 of the Act. The reasons revenue within the meaning of Section 263 of the Act. The reasons revenue within the meaning of Section 263 of the Act. The reasons for the same are stated in the following paragraphs. the same are stated in the following paragraphs.
6. As per the Schedule A to the Balance Sheet, the depiction of As per the Schedule A to the Balance Sheet, the depiction of As per the Schedule A to the Balance Sheet, the depiction of Development Fund, is as Development Fund, is as under: A. Development Development a) Sr. College Sr. College As per last balance sheet As per last balance sheet ₹71,35,926.01 71,35,926.01 Add: Received during the Add: Received during the ₹10,75,000 10,75,000 year Less : Utilized during the Less : Utilized during the (₹20,54,453.62) ₹20,54,453.62) year Closing Balance Closing Balance ₹ 61,56,472,.39 61,56,472,.39 As per the provisions of Section 11 of the Act, income from property As per the provisions of Section 11 of the Act, income from property As per the provisions of Section 11 of the Act, income from property held under the trust as well as from property held under the trust as held under the trust as well as from property held under the trust as held under the trust as well as from property held under the trust as well as voluntary donations are Income of the trust, though exempt voluntary donations are Income of the trust, though exempt voluntary donations are Income of the trust, though exempt from tax but are subjected to rules of application under Section from tax but are subjected to rules of application under Section from tax but are subjected to rules of application under Section 11(1)(a) as well as accumulation under S 11(1)(a) as well as accumulation under Section 11(2) of the Act. The ction 11(2) of the Act. The only exception to the rules or application of income is the exception ption to the rules or application of income is the exception ption to the rules or application of income is the exception
Lions Club of Malad Borivali 7 ITA No. 1458/M/2022 available for corpus donations as per the provisions of Section available for corpus donations as per the provisions of Section available for corpus donations as per the provisions of Section 11(1)(d) of the Act. It is evident from the nature of amounts collected 11(1)(d) of the Act. It is evident from the nature of amounts collected 11(1)(d) of the Act. It is evident from the nature of amounts collected towards Development Fund or the Welfare Fund that they are towards Development Fund or the Welfare Fund that they are towards Development Fund or the Welfare Fund that they are not in the nature of corpus donations. the nature of corpus donations.
It is also a matter of record that the assessee trust is reporting It is also a matter of record that the assessee trust is reporting It is also a matter of record that the assessee trust is reporting Education Receipts and various Fees etc. collected in its Return. The Education Receipts and various Fees etc. collected in its Return. The Education Receipts and various Fees etc. collected in its Return. The relevant Educational Income reported by the assessee include relevant Educational Income reported by the assessee include relevant Educational Income reported by the assessee include Admission Processing Processing Processing Fees, Fees, Fees, Eligibility Eligibility Eligibility _ _ _ Fees, Fees, Fees, Computer Computer Computer Practicles/Laboratory Fees, Examination Fees, Gymkhana Fees, Practicles/Laboratory Fees, Examination Fees, Gymkhana Fees, Practicles/Laboratory Fees, Examination Fees, Gymkhana Fees, Library Fees, Tuition Fees, Utility Fees, Group Insurance and so on. The Library Fees, Tuition Fees, Utility Fees, Group Insurance and so on. The Library Fees, Tuition Fees, Utility Fees, Group Insurance and so on. The non reporting of Development Fund and Student Welfare Fund, in the non reporting of Development Fund and Student Welfare Fund, in the non reporting of Development Fund and Student Welfare Fund, in the light of the provisions of Section 11 of the Act, is conceptually flawed. It the provisions of Section 11 of the Act, is conceptually flawed. It the provisions of Section 11 of the Act, is conceptually flawed. It begs the question as to how the receipts or collections on account of begs the question as to how the receipts or collections on account of begs the question as to how the receipts or collections on account of these funds are any different from other receipts/collections for these funds are any different from other receipts/collections for these funds are any different from other receipts/collections for educational purposes? It was incumbent on the part o educational purposes? It was incumbent on the part of the AO to have f the AO to have examined the same, conducted necessary verifications on whether the examined the same, conducted necessary verifications on whether the examined the same, conducted necessary verifications on whether the collections during the year in these funds, as well as earnings of collections during the year in these funds, as well as earnings of collections during the year in these funds, as well as earnings of interest income etc. were reported as part and parcel of gross receipts interest income etc. were reported as part and parcel of gross receipts interest income etc. were reported as part and parcel of gross receipts to which the rules of applicatio to which the rules of application of income as well as accumulation n of income as well as accumulation apply. The AO needed to verify whether the amount collected in the apply. The AO needed to verify whether the amount collected in the apply. The AO needed to verify whether the amount collected in the funds during the year have been applied jewards charitable purposes funds during the year have been applied jewards charitable purposes funds during the year have been applied jewards charitable purposes to the extent of 85 per cent as per, law? The A needed to further to the extent of 85 per cent as per, law? The A needed to further to the extent of 85 per cent as per, law? The A needed to further examine whether non examine whether non application of income less than 85 per cent; out application of income less than 85 per cent; out of these funds have been part of accumulation claimed in Form 10 as of these funds have been part of accumulation claimed in Form 10 as of these funds have been part of accumulation claimed in Form 10 as per the provisions of Section 11(2) of the Act. It also remained to be per the provisions of Section 11(2) of the Act. It also remained to be per the provisions of Section 11(2) of the Act. It also remained to be verified whether the balance in these tunds have been invested in verified whether the balance in these tunds have been invested in verified whether the balance in these tunds have been invested in modes specified under the provisions of Section 11(5) of the Act? Non odes specified under the provisions of Section 11(5) of the Act? Non odes specified under the provisions of Section 11(5) of the Act? Non verification of all these issues, and all verification of all these issues, and allowance of an apparent incorrect owance of an apparent incorrect
Lions Club of Malad Borivali 8 ITA No. 1458/M/2022 claim of non reporting of collections to these funds during the year by claim of non reporting of collections to these funds during the year by claim of non reporting of collections to these funds during the year by taking it directly to the Balance t directly to the Balance sheet, renders the assessment order enders the assessment order framed by the AQ, erroneous in so far by the AQ, erroneous in so far as it is prejudicial to the inter prejudicial to the interest of revenue, with specific reference to Explanation 2 to Section 263 of revenue, with specific reference to Explanation 2 to Section 263 of revenue, with specific reference to Explanation 2 to Section 263-of the Act. The relevant Explanation 2 is reproduced as under: the Act. The relevant Explanation 2 is reproduced as under: the Act. The relevant Explanation 2 is reproduced as under:
'Explanation 2 'Explanation 2- For the purposes of this section, it is hereby declared e purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be that an order passed by the Assessing Officer shall be deemed to be that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, erroneous in so far as it is prejudicial to the interests of the revenue, if, erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner in the opinion of the Principal Commissioner or Commissioner in the opinion of the Principal Commissioner or Commissioner, - (a) the order is passed without making inquiries or verification which (a) the order is passed without making inquiries or verification which (a) the order is passed without making inquiries or verification which should have been made; should have been made; (b) the order is passed allowing any relief without inquiring into the (b) the order is passed allowing any relief without inquiring into the (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, (c) the order has not been made in accordance with any order, (c) the order has not been made in accordance with any order, direction or inst direction or instruction issued by the Board under section 119; or ction 119; or (d) the order has not been passed in accordance with any decision (d) the order has not been passed in accordance with any decision (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High which is prejudicial to the assessee, rendered by the jurisdictional High which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the Court or Supreme Court in the case of the assessee or any other assessee or any other person.]
7. As mentioned above, a plain reading of the Explanation 2 makes it 7. As mentioned above, a plain reading of the Explanation 2 makes it 7. As mentioned above, a plain reading of the Explanation 2 makes it abundantly clear that in the instant case there are critical gaps and abundantly clear that in the instant case there are critical gaps and abundantly clear that in the instant case there are critical gaps and errors committed by the AO in errors committed by the AO in non verification of the impugned issues. verification of the impugned issues. Accordingly, I am satisfied that the ass Accordingly, I am satisfied that the assessment order dated essment order dated 30/11/2019 is erroneous in so far as it is prejudicial to the interests of 30/11/2019 is erroneous in so far as it is prejudicial to the interests of 30/11/2019 is erroneous in so far as it is prejudicial to the interests of revenue within the meaning of Section 263 of the Act. Hence, by virtue revenue within the meaning of Section 263 of the Act. Hence, by virtue revenue within the meaning of Section 263 of the Act. Hence, by virtue of powers vested in the undersigned vide t of powers vested in the undersigned vide the provisions of Section 263 he provisions of Section 263
Lions Club of Malad Borivali 9 ITA No. 1458/M/2022 of the Act, I deem the Act, I deem it appropriate to set aside the assessment order it appropriate to set aside the assessment order dated 30/11/2019 with a direction to the AO to reframe the dated 30/11/2019 with a direction to the AO to reframe the dated 30/11/2019 with a direction to the AO to reframe the assessment order as under: assessment order as under:
(i) The collections in the impugned funds made during the year is to be The collections in the impugned funds made during the year is to be The collections in the impugned funds made during the year is to be taken as income under the provisions of Section 1 taken as income under the provisions of Section 11 of the Act. 1 of the Act.
(ii)Necessary verification of the spends out of the collections during the )Necessary verification of the spends out of the collections during the )Necessary verification of the spends out of the collections during the year may be made, and allowance to the extent applied for charitable year may be made, and allowance to the extent applied for charitable year may be made, and allowance to the extent applied for charitable purpose may be given purpose may be given (iii) The AO may verify whether the investment of balance in the funds The AO may verify whether the investment of balance in the funds The AO may verify whether the investment of balance in the funds have been made in the modes specified in Section 11(5) of een made in the modes specified in Section 11(5) of een made in the modes specified in Section 11(5) of the Act, and take necessary action in terms of the Law in case of default. take necessary action in terms of the Law in case of default. take necessary action in terms of the Law in case of default.
(iv) The AO may AO may verify whether the interest income arising or accruing income arising or accruing on the balance in the impugned funds have been reported on the balance in the impugned funds have been reported on the balance in the impugned funds have been reported as income, or directly taken to the Balance Sheet? or directly taken to the Balance Sheet? Necessary action in this regard Necessary action in this regard may be taken to include the interest income in the gross receipts if may be taken to include the interest income in the gross receipts if may be taken to include the interest income in the gross receipts if directly taken to the balance sheet. directly taken to the balance sheet.
(v) The AO may not allow application of income out of the balance The AO may not allow application of income out of the balance The AO may not allow application of income out of the balance brought forward from the earlier years as no accumulation of these ought forward from the earlier years as no accumulation of these ought forward from the earlier years as no accumulation of these funds have been sought in Form 10 read with section 11(2) of the Act. funds have been sought in Form 10 read with section 11(2) of the Act. funds have been sought in Form 10 read with section 11(2) of the Act.
8. The AO is directed to pass a reasoned and Speaking order after The AO is directed to pass a reasoned and Speaking order after The AO is directed to pass a reasoned and Speaking order after proper verification of the above issues. Needless to m proper verification of the above issues. Needless to mention, the AO ention, the AO shall give the ass shall give the assessee adequate opportunity of being heard. The AO ing heard. The AO may further note that his/her intervention in the consequential may further note that his/her intervention in the consequential may further note that his/her intervention in the consequential proceedings is limited to the above issue only, and the AO is directed proceedings is limited to the above issue only, and the AO is directed proceedings is limited to the above issue only, and the AO is directed not to travel beyond this limited scop not to travel beyond this limited scope.”
Lions Club of Malad Borivali 10 ITA No. 1458/M/2022
Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that assessee is following this practice of directly crediting the fees assessee is following this practice of directly crediting the fees assessee is following this practice of directly crediting the fees received against the development against the development, welfare fund and other fund to welfare fund and other fund to the balance sheet and therefore in view of the balance sheet and therefore in view of rule of consiste consistency, the Assessing Officer accepted the contention of the assessee in the Assessing Officer accepted the contention of the assessee in the Assessing Officer accepted the contention of the assessee in the assessment order. Further, he referred to page 4 of the Paper Book assessment order. Further, he referred to page 4 of the Paper Book assessment order. Further, he referred to page 4 of the Paper Book filed which contains details of the Schedule A to balance sheet of the filed which contains details of the Schedule A to balance sheet of the filed which contains details of the Schedule A to balance sheet of the assessee filed for year under consideration. assessee filed for year under consideration. The Ld. Counsel The Ld. Counsel submitted that assessee during the year has incurred amount of submitted that assessee during the year has incurred amount of submitted that assessee during the year has incurred amount of ₹20,54,453/- as compared as compared to amount of ₹10,75,000/ 10,75,000/- received against the development fund and therefore, assessee has already against the development fund and therefore, assessee has already against the development fund and therefore, assessee has already incurred expenditure in excess of amount received against the incurred expenditure in excess of amount received against the incurred expenditure in excess of amount received against the development fund. The said expenditure has not been claimed by development fund. The said expenditure has not been claimed by development fund. The said expenditure has not been claimed by the assessee and therefore, the assessee fulf the assessee and therefore, the assessee fulfils requirement of ils requirement of section 11 of the Act. section 11 of the Act.
Lions Club of Malad Borivali 11 ITA No. 1458/M/2022
We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused the relevant material on record. The main ground of the assessee is the relevant material on record. The main ground of the assessee is the relevant material on record. The main ground of the assessee is that in view of rule of rule of consistency, the assessee is entitled for consistency, the assessee is entitled for deduction u/s 11 deduction u/s 11 of the Act without satisfying provision of of the Act without satisfying provision of accumulation of funds as provided u/s 11 of the Act. The Ld. Counsel accumulation of funds as provided u/s 11 of the Act. The Ld. Counsel accumulation of funds as provided u/s 11 of the Act. The Ld. Counsel referred the decision of the Tribunal Rajkot Bench in the case of the decision of the Tribunal Rajkot Bench in the case of the decision of the Tribunal Rajkot Bench in the case of Gujarat State Lion Conservation Society v. Commissioner of Income Gujarat State Lion Conservation Society v. Commissioner of Income Gujarat State Lion Conservation Society v. Commissioner of Income- tax (Exemption) [2022] 141 taxmann.com 269 (Rajkot on) [2022] 141 taxmann.com 269 (Rajkot on) [2022] 141 taxmann.com 269 (Rajkot-Trib.) and submitted that in such case practice followed by the assessee of that in such case practice followed by the assessee of that in such case practice followed by the assessee of crediting Government grant directly to balance sheet was accepted crediting Government grant directly to balance sheet was accepted crediting Government grant directly to balance sheet was accepted in earlier years and therefore, in view of doctrine of consistency, the in earlier years and therefore, in view of doctrine of consistency, the in earlier years and therefore, in view of doctrine of consistency, the Tribunal directed to accept the same in subsequent years. The bunal directed to accept the same in subsequent years. The bunal directed to accept the same in subsequent years. The relevant para of the decision of the Tribunal (supra) relevant para of the decision of the Tribunal (supra) relevant para of the decision of the Tribunal (supra) is reproduced as under :
“9. Without prejudice to the above, further, we note that even for the 9. Without prejudice to the above, further, we note that even for the 9. Without prejudice to the above, further, we note that even for the earlier and subsequent years, the assessee was earlier and subsequent years, the assessee was in receipt of in receipt of government grant, however, no addition on this aspect has been made government grant, however, no addition on this aspect has been made government grant, however, no addition on this aspect has been made by the Revenue. The assessee has appended copies of the order by by the Revenue. The assessee has appended copies of the order by by the Revenue. The assessee has appended copies of the order by Lions Club of Malad Borivali 12 ITA No. 1458/M/2022 Income Tax Appellate Tribunal in his own case for assessment year Income Tax Appellate Tribunal in his own case for assessment year Income Tax Appellate Tribunal in his own case for assessment year 2012-13 and also copy of the assessment ord 13 and also copy of the assessment order under section 143(3) section 143(3) of the Act for assessment year 2013 the Act for assessment year 2013- 14, wherein no addition on the 14, wherein no addition on the assessee has been made by the Revenue in any of the earlier years. The assessee has been made by the Revenue in any of the earlier years. The assessee has been made by the Revenue in any of the earlier years. The assessee utilises the above grants for the assessee utilises the above grants for the purpose of carrying out the purpose of carrying out the fencing of the railway line to the forest. Though strictly speaking, fencing of the railway line to the forest. Though strictly speaking, fencing of the railway line to the forest. Though strictly speaking, principle of res judicata does not apply to income tax proceedings, but principle of res judicata does not apply to income tax proceedings, but principle of res judicata does not apply to income tax proceedings, but it is also well-settled principle of law that if there is no change in the settled principle of law that if there is no change in the settled principle of law that if there is no change in the facts of the assessee from the previous years, principle of consistency e assessee from the previous years, principle of consistency e assessee from the previous years, principle of consistency demands that settled issue should not be re demands that settled issue should not be re-agitated. The counsel for agitated. The counsel for the assessee has submitted that the assessee Trust is in receipt of the assessee has submitted that the assessee Trust is in receipt of the assessee has submitted that the assessee Trust is in receipt of government grant in the earlier years as well. However, i government grant in the earlier years as well. However, i government grant in the earlier years as well. However, it is for the first time that this issue has been raised by the Revenue with no first time that this issue has been raised by the Revenue with no first time that this issue has been raised by the Revenue with no change in facts from the earlier years. In the earlier years, the Revenue change in facts from the earlier years. In the earlier years, the Revenue change in facts from the earlier years. In the earlier years, the Revenue had accepted the same as income of the assessee as being eligible for had accepted the same as income of the assessee as being eligible for had accepted the same as income of the assessee as being eligible for accumulation under accumulation under section 11 of the Act. The Gujarat High Court in of the Act. The Gujarat High Court in the case of CIT v. SBJ VON Compounders (P CIT v. SBJ VON Compounders (P.) Ltd[2013] 37 .) Ltd[2013] 37 taxmann.com 353 (Gujarat) has held that claim of assessee in taxmann.com 353 (Gujarat) has held that claim of assessee in taxmann.com 353 (Gujarat) has held that claim of assessee in respect of valuation of stock which was accepted in preceding assessment year of valuation of stock which was accepted in preceding assessment year of valuation of stock which was accepted in preceding assessment year was to be accepted in current year also following doctrine of was to be accepted in current year also following doctrine of was to be accepted in current year also following doctrine of consistency.
9.1 In view of the above, we are of the considered view that Principal 9.1 In view of the above, we are of the considered view that Principal 9.1 In view of the above, we are of the considered view that Principal CIT has erred in facts and in l CIT has erred in facts and in law in holding that the order passed by aw in holding that the order passed by the AO is erroneous and prejudicial to the interest of revenue.” the AO is erroneous and prejudicial to the interest of revenue. the AO is erroneous and prejudicial to the interest of revenue.
7.1 We find that in in the Tribunal (supra), income of the assessee income of the assessee was eligible for accumulation u/s 11 of the Act i ccumulation u/s 11 of the Act in earlier year earlier year(s) and therefore, following ru therefore, following rule of consistency, was allowed to eligible for le of consistency, was allowed to eligible for Lions Club of Malad Borivali 13 ITA No. 1458/M/2022 accumulation. In the case, it is otherwise. The fee receipts (income) accumulation. In the case, it is otherwise. The fee receipts (income) accumulation. In the case, it is otherwise. The fee receipts (income) which was credited directly to Balance Sheet was never considered which was credited directly to Balance Sheet was never considered which was credited directly to Balance Sheet was never considered for accumulation or appli for accumulation or application of fund by the assessee in earlier cation of fund by the assessee in earlier years. Even if same was allowed as income in earlier due to mistake, Even if same was allowed as income in earlier due to mistake, Even if same was allowed as income in earlier due to mistake, same may be rectified as held by the Hon’ble Supreme Court in the same may be rectified as held by the Hon’ble Supreme Court in the same may be rectified as held by the Hon’ble Supreme Court in the case of Distributors (Baroda) Pvt. Ltd. v. UOI in (1985) AIR 1585 Distributors (Baroda) Pvt. Ltd. v. UOI in (1985) AIR 1585 Distributors (Baroda) Pvt. Ltd. v. UOI in (1985) AIR 1585 SCR Supl. CO 778 that to perpetuate an error is no heroism and that to perpetuate an error is no heroism and that to perpetuate an error is no heroism and rectify is the compulsion of judicial conscience. rectify is the compulsion of judicial conscience. In the instant case, In the instant case, we find that the receipt of development welfare fund are admittedly we find that the receipt of development welfare fund are admittedly we find that the receipt of development welfare fund are admittedly not part of the corpus fund and therefore, under the provisions of not part of the corpus fund and therefore, under the provisions of not part of the corpus fund and therefore, under the provisions of section 11 of the Act, tion 11 of the Act, the assessee was required to consider th see was required to consider those receipts for the purpose of application of 85 per cent of the income receipts for the purpose of application of 85 per cent of the income receipts for the purpose of application of 85 per cent of the income as prescribed in section 11(1) of the Act as prescribed in section 11(1) of the Act and if not applied applied then such accumulated income is to accumulated income is to invested in terms of section in terms of section 11(2) of the Act.
Lions Club of Malad Borivali 14 ITA No. 1458/M/2022 7.2 The relevant provision of section 11(1) & 11(2) are The relevant provision of section 11(1) & 11(2) are The relevant provision of section 11(1) & 11(2) are reproduced as under: reproduced as under:
Section 11(1) Section 11(1)
(1) Subject to the provisions of sections 60 to 63, the 11. (1) Subject to the provisions of sections 60 to 63, the 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the following income shall not be included in the total income of the following income shall not be included in the total income of the previous year of the previous year of the person in receipt of the income_ "(a) income derived from property' held under trust wholly for "(a) income derived from property' held under trust wholly for "(a) income derived from property' held under trust wholly for charitable or religious purposes, to the extent to which such charitable or religious purposes, to the extent to which such charitable or religious purposes, to the extent to which such income is applied' to such purposes in India; and, where any such income is applied' to such purposes in India; and, where any such income is applied' to such purposes in India; and, where any such income is 'accumulated or set a 'accumulated or set apart for application to such part for application to such purposes in India, to the extent to which the income so purposes in India, to the extent to which the income so purposes in India, to the extent to which the income so accumulated or set apart" is not in excess of [fifteen] per cent of accumulated or set apart" is not in excess of [fifteen] per cent of accumulated or set apart" is not in excess of [fifteen] per cent of the income from such property; the income from such property; (b) income derived from property held under trust in part" only (b) income derived from property held under trust in part" only (b) income derived from property held under trust in part" only for such purposes, the trust having been created before the purposes, the trust having been created before the purposes, the trust having been created before the commencement of this Act, to the extent to which such income" is commencement of this Act, to the extent to which such income" is commencement of this Act, to the extent to which such income" is applied to such purposes in India; and, where any such income is applied to such purposes in India; and, where any such income is applied to such purposes in India; and, where any such income is finally set apart for finally set apart for application to such purposes in India, to the application to such purposes in India, to the extent to which the income so set apart is not in excess of to which the income so set apart is not in excess of to which the income so set apart is not in excess of "(fifteen]per cent of the income from such property; "(fifteen]per cent of the income from such property; (c) income "(derived] from property held under trust (c) income "(derived] from property held under trust- (1) created on or after the (1) created on or after the 1st day of April, 1952, for a charitable st day of April, 1952, for a charitable purpose which tends to pro purpose which tends to promote international welfare in which mote international welfare in which India is interested, to the extent to which such income is applied India is interested, to the extent to which such income is applied India is interested, to the extent to which such income is applied to such purposes outside India., and to such purposes outside India., and Lions Club of Malad Borivali 15 ITA No. 1458/M/2022 (4) for charitable or religious purposes, created before the Ist (4) for charitable or religious purposes, created before the Ist (4) for charitable or religious purposes, created before the Ist day of April, 1952, to the extent to which such inc day of April, 1952, to the extent to which such income is applied ome is applied to such purposes outside India: to such purposes outside India:
Provided that the Board, by general or special order, has directed Provided that the Board, by general or special order, has directed Provided that the Board, by general or special order, has directed in either case that it shall not be included in the total income of in either case that it shall not be included in the total income of in either case that it shall not be included in the total income of the person in receipt of such income; the person in receipt of such income; "[(d) income in the form of volunta "[(d) income in the form of voluntary contributions made with a ry contributions made with a specific direction that they shall form part of the corpus of the specific direction that they shall form part of the corpus of the specific direction that they shall form part of the corpus of the trust or institution 17 trust or institution 17-L, subject to the condition that such L, subject to the condition that such voluntary contributions are invested or deposited in one or more voluntary contributions are invested or deposited in one or more voluntary contributions are invested or deposited in one or more section (5) maintained of the forms or modes specified in of the forms or modes specified in sub-section (5) maintained specifically for such corpus].] specifically for such corpus].] Section 11(2) Section 11(2)
Where "eighty Where "eighty-five) per cent of the income referred to in clause five) per cent of the income referred to in clause (a) or clause (b) of sub (a) or clause (b) of sub-section (1) read with the Explanation to section (1) read with the Explanation to that sub-section is not applied, or is not deemed section is not applied, or is not deemed to have been to have been applied, tocharitable or religious purposes in India during the applied, tocharitable or religious purposes in India during the applied, tocharitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or previous year but is accumulated or set apart, either in whole or previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so in part, for application to such purposes in India, such income so in part, for application to such purposes in India, such income so accumulated Or ser apart shall not be included accumulated Or ser apart shall not be included in the total in the total income of the previous year of the person in receipt of the income of the previous year of the person in receipt of the income of the previous year of the person in receipt of the income, provided the following conditions are complied with, income, provided the following conditions are complied with, income, provided the following conditions are complied with, namely:] '[(a) such person furnishes a statement in the prescribed form '[(a) such person furnishes a statement in the prescribed form '[(a) such person furnishes a statement in the prescribed form and in the prescribed" manner% to the Assessing O and in the prescribed" manner% to the Assessing Officer, stating fficer, stating the purpose for which the income is being accumulated or set the purpose for which the income is being accumulated or set the purpose for which the income is being accumulated or set
Lions Club of Malad Borivali 16 ITA No. 1458/M/2022 apart and the period for which the income is to be accumulated apart and the period for which the income is to be accumulated apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years; or set apart, which shall in no case exceed five years; (b) the money so accumulated or set apart is invested or (b) the money so accumulated or set apart is invested or (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub osited in the forms or modes specified in sub-section (5); section (5); (c) the statement referred to in clause (a) is furnished on or (c) the statement referred to in clause (a) is furnished on or (c) the statement referred to in clause (a) is furnished on or before the due date specified under sub before the due date specified under sub-section (1) of section 139 section (1) of section 139 for furnishing the return of income for the previous year: for furnishing the return of income for the previous year:” ” 7.3 The assessee has not complied those provisions of the Act. assessee has not complied those provisions of the Act. assessee has not complied those provisions of the Act. The claim of the assessee that claim of the assessee that as per rules of University of Mumbai, the rules of University of Mumbai, the assessee was allowed to incur the amount received for development assessee was allowed to incur the amount received for development assessee was allowed to incur the amount received for development fund against creating creating infrastructure facility and therefore, infrastructure facility and therefore, it was separately transferred to said fund and separately transferred to said fund and expenditure expenditure has been incurred out of that. In our opinion, there is no conflict between the incurred out of that. In our opinion, there is no conflict between the incurred out of that. In our opinion, there is no conflict between the rules laid down by the Mumbai University directing the assessee to rules laid down by the Mumbai University directing the assessee to rules laid down by the Mumbai University directing the assessee to dispose the amount received from the students agai dispose the amount received from the students against development nst development fee/fund. It was the onus of the assessee to make entries and apply onus of the assessee to make entries and apply onus of the assessee to make entries and apply the funds in consonance with the provisions of Income the funds in consonance with the provisions of Income the funds in consonance with the provisions of Income-tax Act and Rules. The assessee cannot choose its own option of assessee cannot choose its own option of assessee cannot choose its own option of interpretation of provisions of the law provisions of the law. The claim of the assessee is that it was is that it was only
Lions Club of Malad Borivali 17 ITA No. 1458/M/2022 a technical default and not escapement of income a technical default and not escapement of income, but but we find that claim is not in accordance with law, therefore, not eligible for claim is not in accordance with law, therefore, not eligible for claim is not in accordance with law, therefore, not eligible for exemption u/s 11 of the Act exemption u/s 11 of the Act. We find that before us, the assessee has . We find that before us, the assessee has also failed to substantiate that any in also failed to substantiate that any inquiry was carried out by the quiry was carried out by the Assessing Officer on the issue of application of development fund Assessing Officer on the issue of application of development fund Assessing Officer on the issue of application of development fund u/s 11 of the Act. In the circumstances, we do not find any error in u/s 11 of the Act. In the circumstances, we do not find any error in u/s 11 of the Act. In the circumstances, we do not find any error in the finding of the Ld. CIT(E) in invoking the provision of section 263 the finding of the Ld. CIT(E) in invoking the provision of section 263 the finding of the Ld. CIT(E) in invoking the provision of section 263 of the Act and hold hold that the order of the Assessing Officer of the Assessing Officer is erroneous in so far as prejudicial to the interest of the Revenue. erroneous in so far as prejudicial to the interest of the Revenue. erroneous in so far as prejudicial to the interest of the Revenue. Accordingly, we reject the contenti Accordingly, we reject the contention of the assessee and dismiss on of the assessee and dismiss the grounds raised by the assessee in this regard. the grounds raised by the assessee in this regard.
In the result, the appeal filed by the assessee is dismissed. In the result, the appeal filed by the assessee is dismissed. In the result, the appeal filed by the assessee is dismissed.
Order pronounced in th unced in the open Court in 27/09 /09/2022.