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Facts
The assessee, SEW Foundation, filed its return declaring nil income after claiming exemption u/s 11. The Assessing Officer (AO) noted corpus donations of Rs. 28,73,388/- and made an addition of Rs. 28,74,878/- by denying exemption. The CIT(A) confirmed the addition, stating that the assessee failed to prove utilization or investment of corpus donations as per section 11(5).
Held
The Tribunal held that the amendments to section 11(1)(d) by the Finance Act, 2021, and the insertion of Explanations 3A and 3B by the Finance Act, 2022, are not applicable for the assessment year 2017-18. Therefore, the condition of investing corpus donations as per section 11(5) was not applicable for the year under consideration.
Key Issues
Whether the requirement to invest corpus donations as per section 11(5) was applicable to the assessee for the assessment year 2017-18, considering the amendments to section 11(1)(d) were prospective.
Sections Cited
11, 11(1)(a), 11(1)(d), 11(5), 143(2), 142(1), 144, 80G, 12A
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Income Tax Appellate Tribunal, Hyderabad ‘ DB-A ‘ Bench, Hyderabad
Before: Shri Vijay Pal Rao, Vice-Shri Manjunatha, G.
(िनधा�रण वष�/Assessment Year: 2017-18) SEW Foundation Vs. Income Tax Officer HYDERABAD (Exemptions), Ward 1(4) PAN:AAATS7433H Hyderabad (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Advocate V Siva Kumar राज� व �ारा/Revenue by:: Shri Vinodh Kannan, Sr. AR सुनवाई की तारीख/Date of hearing: 07/08/2025 घोषणा की तारीख/Pronouncement: 13/08/2025 आदेश/ORDER
Per Vijay Pal Rao, Vice President
This appeal by the assessee is directed against the order dated 27/01/2025 of the learned CIT (A)/ADDL/JCIT(A)-1 Coimbatore, for the A.Y.2017-18.
The assessee has raised the following grounds of appeal: “1. The order of the learned CIT (A)/Addl/JCIT(A)-5 Coimbatore, 27-01-2025 is erroneous, contrary to law and facts of the case.
2. The learned CIT (A) is not justified in sustaining the addition of Rs.28,73,338/- made by the Assessing Officer in respect of corpus donations.
3. The learned CIT (A) ought to have seen that details of registration of the organization u/s 12A and approval u/s 80G were available in return of income. The learned CIT (A) further ought to have seen that Appellant’s accounts were audited by C.A whose details are furnished in the return of income. Hence, , denying exemption u/s 11 to the Appellant and restricting corpus donations of Rs.28,73,338/- by the Assessing Officer is not justified on the ground that appellant failed to furnish the required information.
4. For all of the above and such other grounds as may be urged at the time of hearing, it is prayed that the appeal be allowed, and suitable directions be issued to the Assessing Officer to grant exemption u/s 11 and complete the assessment on the basis of return in the interest of justice”.
The learned Counsel for the assessee submitted that the assessee has received corpus donation during the financial year 2016-17 relevant to the A.Y under consideration. He has referred to the donation receipts placed at page Nos. 4 to 18 of the paper book and submitted that all these donations are duly reflected in the bank account of the assessee, details of which are also given in statement of corpus donation at page No.1 & 2 of the paper book. The Assessing Officer has made an addition of the said amount of corpus donation of Rs.28,74,878/- for want of documentary evidence to prove the corpus donation. He has submitted that the Assessing Officer has passed the ex-parte order u/s 144 of the Act. The learned Counsel for the assessee has submitted that before the learned CIT (A) the assessee has produced all the documentary evidence in support of the corpus
Page 2 of 10 donation which is received by the assessee. However, the learned CIT (A) has confirmed the disallowance made by the Assessing Officer of the corpus donation only on the ground that the assessee has failed to prove that corpus donation is utilized or invested in the modes stated in section 11(5) of the I.T. Act. The learned Counsel for the assessee has submitted that the learned CIT (A) has not disputed the genuineness of the corpus donation fund as the assessee produced the relevant documentary evidence comprising of the donation receipts as well as the details of the donation as received through banking channel and duly recorded in the books of account. He has contended that for the year under consideration, there was no such condition of investment to the corpus donation and in the mode prescribed u/s 11(5) of the Act. He has referred to section 11(d) of the I.T. Act and submitted that prior to the amendment by Finance Act, 2021, w.e.f. 01/04/2022, there was no such condition of investment of corpus fund in the mode provided u/s 11(5) of the Act. The learned Counsel for the assessee has submitted that the Explanation 3A and 3B to section 11(1) are inserted by Finance Act, 2021, w.e.f. 01/04/2021 and therefore, the same are not applicable for the year under consideration and therefore, the addition made by the Assessing Officer and confirmed by the learned CIT (A) is not justified and liable to be deleted.
On the other hand, the learned DR has submitted that before the Assessing Officer, the assessee has not produced any Page 3 of 10 details or supporting evidence of the claim of corpus donation and consequently, the Assessing Officer has framed the assessment u/s 144 of the Act. He has further submitted that the learned CIT (A) has also considered this issue and confirmed the addition made by the Assessing Officer when the assessee has failed to show that the corpus donation received by the assessee was either applied for charitable purpose or investment in terms of section 11(5) of the Act. He has relied upon the orders of the authorities below.
We have considered the rival contentions as well as the relevant material available on record. The assessee has filed its return of income for the year under consideration on 03/11/2017 declaring total income at Nil after claiming exemption u/s 11 of the Act. The Assessing Officer noted that during the year, the assessee has declared corpus donation of Rs.28,73,388/- and admitted gross receipts other than corpus donation receipts at Rs.1540/-. The case was selected for complete scrutiny under CASS. However, there was no compliance on behalf of the assessee to the notices issued by the Assessing Officer u/s 143(2) and 142(1) of the Act. Consequently, the Assessing Officer proposed to frame the assessment u/s 144 of the Act and issued a show cause notice dated 25/11/2019. Again, there was no response on behalf of the assessee to the show cause notice for completion of assessment u/s 144 of the Act and accordingly the Assessing Officer has framed the assessment u/s 144 of the Act
Page 4 of 10 whereby an addition of Rs.28,74,878/- on account of corpus donation is made by denying exemption u/s 11 of the Act as the said income was neither applied for charitable purpose nor set apart for future application in terms of section 11(1)(a) of the Act. The assessee challenged the action of the Assessing Officer before the learned CIT (A) and produced the relevant details as well as the donation receipts in support of the claim of the corpus donation to the tune of Rs.28,74,878/-. The learned CIT (A) has observed that as per the balance sheet/statement of affairs filed by the assessee along with the audit report, the assessee has not shown any investment in the mode prescribed u/s 11(5) of the Act. The learned CIT (A) without questioning the genuineness of the claim of corpus donation has confirmed the additions to the extent of Rs.28,73,338/- in para 5.5 to 5.7 as under: “5.5 Now the question is whether Corpus donations are exempt. This is exempt u/s 11(d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution. But the Corpus donations not utilized must be invested in the modes stated in 11(5). (5) The forms and modes of investing or depositing the money referred to in clause (b) of sub-section (2) shall be the following, namely:— (i) investment in savings certificates as defined in clause (c) of section 2 of the Government Savings Certificates Act, 1959 (46 of 1959), and any other securities or certificates issued by the Central Government under the Small Savings Schemes of that Government; (ii) deposit in any account with the Post Office Savings Bank;
(iii) deposit in any account with a scheduled bank or a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank). Explanation.—In this clause, "scheduled bank" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934); (iv) investment in units of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963); (v) investment in any security for money created and issued by the Central Government or a State Government; (vi) investment in debentures issued by, or on behalf of, any company or corporation both the principal whereof and the interest whereon are fully and unconditionally guaranteed by the Central Government or by a State Government; (vii) investment or deposit in any public sector company: Provided that where an investment or deposit in any public sector company has been made and such public sector company ceases to be a public sector company,— (A) such investment made in the shares of such company shall be deemed to be an investment made under this clause for a period of three years from the date on which such public sector company ceases to be a public sector company; (B) such other investment or deposit shall be deemed to be an investment or deposit made under this Page 6 of 10 clause for the period up to the date on which such investment or deposit becomes repayable by such company; (viii) deposits with or investment in any bonds issued by a financial corporation which is engaged in providing long-term finance for industrial development in India and which is eligible for deduction under clause (viii) of sub-section (1) of section 36; (ix) deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes and which is eligible for deduction under clause (viii) of sub-section (1) of section 36;
(ixa) deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for urban infrastructure in India. Explanation.—For the purposes of this clause,— (a) "long-term finance" means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years; (b) "public company" shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956); (c) "urban infrastructure" means a project for providing potable water supply, sanitation and sewerage, drainage, solid waste management, roads, bridges and flyovers or urban transport; (x) investment in immovable property. Explanation.—"Immovable property" does not include any machinery or plant (other than machinery or plant installed in a building for the convenient occupation of the building) even though attached to, or permanently fastened to, anything attached to the earth; (xi) deposits with the Industrial Development Bank of India established under the Industrial Development Bank of India Act,
1964 (18 of 1964); (xii) any other form or mode of investment or deposit as may be prescribed. 5.6 The balance sheet/statement of affairs filed along with the audit report does not have any investment in the modes prescribed u/s 11(5).
5.7 The AO has added the Corpus donation only as income and has allowed section 11 exemption on the revenue received during the year in the Income and expenditure account. The appellant has not filed any evidence to prove that the Corpus donations were used/invested as per the directions/bye law and the finding of the AO that assessee failed to provide documentary evidences in respect of the corpus donations of Rs.28,73,338/- and also why the exemption claimed u/s.11 of the Act cannot be denied is correct to the extent of corpus donations. The additions made by the AO has to be limited to Rs.28,73,338/- and the grounds are partly allowed”.
Thus, the learned CIT (A) has confirmed the addition solely on the ground that the assessee has failed to prove that the corpus donation was used/investment as per section 11(5) of the Act. It is pertinent to note that prior to the amendment to section Page 8 of 10 11(1)(d) vide Finance Act, 2021 w.e.f. 01/04/2022, the income from voluntary contributions made with a specific direction that they shall form part of corpus fund of the Trust or Institution shall not be included in the total income of the previous year of the Trust/Institution. For ready reference, clause (d) of section 11(1) as existed at the relevant point of time is reproduced as under: “11 (1) Subject to the provisions of section 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income: (a)…………… (b)…………… (c)…………… (d) Income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution”.
Therefore, the amendment brought in clause (d) of section 11(1) vide Finance Act, 2021 w.e.f. 01/04/2022 and insertion of Explanation 3A and 3B vide Finance Act, 2022 w.e.f. 01/04/201 are not applicable for the year under consideration and consequently, the conditions as prescribed in the amended provisions of section 11(1)(d) r.w. Explanation 3A and 3B that such voluntary contributions are invested or deposited in the forms or modes specified u/s 11(5) of the Act are not applicable for the year under consideration for allowing the benefit of section 11(1)(d) of the Act. Accordingly, in the facts and circumstances as discussed above, the addition confirmed by the learned CIT (A) is not sustainable and liable to be set aside. Hence, we allow the Page 9 of 10 claim of the assessee u/s 11(1)(d) of the I.T. Act in respect of corpus donation in question.
In the result, appeal filed by the assessee is allowed.