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Facts
The assessee, a public charitable trust, claimed exemption for voluntary contributions received for assessment year 2019-20. The Income Tax Department treated these contributions as income and raised a demand. The CIT(A) allowed the assessee's appeal, leading to the current appeal by the Revenue.
Held
The Tribunal held that the proviso to section 11(2) of the Income Tax Act, 1961, applies because the approval for registration was granted before the assessment proceedings concluded. Voluntary contributions are capital receipts and not chargeable to tax.
Key Issues
Whether voluntary contributions received by a charitable trust are eligible for exemption under sections 11 and 12, considering the proviso to section 12A(2) of the Income Tax Act, 1961, and the timing of registration.
Sections Cited
12A, 12AA, 11, 12, 143(1), 154, 143(3), 144, 139, 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: Ms. Suchitra Kamble & Shri Narendra Prasad Sinha
आदेश/ORDER PER : SUCHITRA KAMBLE, JUDICIAL MEMBER:-
This is an appeal filed against the order dated 20-06- 2024 passed by National Faceless Appeal Centre(NFAC), Delhi for assessment year 2019-20
2. The grounds of appeal
are as under:-
1. Whether on the facts and in circumstances of the case, the Ld CIT(A) has erred in holding that the assessee is eligible for exemption by virtue of first proviso to section 12A(2) of the Income- tax Act, 1961 and thereby allowing the exemption of Rs. 10,45,50,001/- under section 11 and 12 of the Income-tax Act. 1961 despite the fact that the no assessment for the AY 2019-20 in the case of the assessee was pending as on 25.10.2019 (the date of application for registration under section 12AA of the Income-tax Act, 1961) and proceedings under section 143(1) of the Income-tax Act, 1961 cannot be treated as assessment proceedings.”
3. The assessee i.e. Skill Development Society is a public charitable trust registered/approved under the provisions of Section 12A/12AA of the Income Tax Act, 1961. During the relevant assessment year 2019-10, the assessee did not have any income except the amounts received by way of voluntary contribution as stated by the trust. The approval of the Trust was initially granted on 30-01-2020 w.e.f. 25-10-2019 in respect of section 11 and 12. The income of the trust was claimed to be exempt for the relevant assessment year 2019- 20. However, this voluntary contributions treated as income by the Income Tax Department and demand for tax applicable thereon to give with interest was raised by the Income tax Department vide intimation under section 143(1) dated 26-03- 2021. The Income Tax Department did not take assessee’s contention and therefore a rectification application dated 22- 02-2023 u/s. 154 of the Act was filed by the trust in response to the intimation u/s. 143(1) of the Act. The rectification application was rejected by the Deputy Director of Income Tax, CPC, Bangalore vide order dated 27-06-2023. The assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee.
The ld. D.R. submitted that as per that section 12AA of the Act, the provisions of section 11 and 12 would be applicable in respect of income of such trust or institution for any of the preceding assessment year relevant to the financial year during which the application for registration is made but in the present case the assessee has received voluntary contributions which is an income of the assessee and therefore, quashing order passed u/s. 154 should not be correct on part of the CIT(A). The ld. D.R. relied upon the decision of Hon’ble Gujarat High Court in case of Mayur Foundation (2018) 9 SCC 1.
The ld. A.R. submitted that the preceding year is also covered in respect of assessment year which is pending assessment year so as return of income was not filed and the objects remained the same. The Assessing Officer should have allowed the amount received by way of voluntary contribution and should have not been added the same to the income of the assessee trust. Thus, the ld. A.R. relied upon the order of the CIT(A). The ld. A.R. further relied upon various decision which are as follows:- 1. Auto & Metals Engineers v. Union of India [1998] 229 ITR 399 (SC)
Sansthan Shree Eknath Maharaj Vishwastha Mandal vs ITO (Exemption) (2022)
(Pune Tribunal) 3. Leh Nutrition Project v. Deputy Commissioner of Income Tax (223) 101 ITR(T) 9 (Amritsar - Tribunal) 4. Punjab Educational Society v Income Tax Officer - IT. Moga (2017) ITR(T) 622 (Amritsar - Tribunal) 5. Shree Bhanushali Mitra Mandal Trust v. Income Tax Officer Ward-3 Vapi (2016) 68 taxmann.com 250 (Ahmedabad- Tribunal) 6 6. Prem Prakash Mandal Sewa Trust v. Income Tax Officer (Exemption Raipur (CG) (2021) 192 ITD 109 (Raipur-Tribunal) 7. Deputy Commissioner of Income Tax v Shree Saraswati Education Sanstahan [2023] 203 ITD 668 (Ahmedabad- Tribunal) 8. Income Tax Officer (Exemptions) v Smt. Basanti Devi & Shri Chakhan Lal Garg Education Trust [2011]
Income Tax Officer (Exemptions), Guntur v. Hosanna Ministries [2020]185 ITD 144 (Vishakhapatnam Tribunal) 10. ACIT v. Financial Inclusion Trust [2024] 204 ITD 211 (Delhi-Tribunal) 11. Income Tax Officer (Exemptions), Ward-2 Pane v Serum Institute of India Research Foundation (2016) 169 ITD 271 (Pune-Tribunal)
Income Tax Officer v Gaudiva Granth Amaved Trust (2017) 28 161 (Agra-Tribunal) 13. Indian Society of Anaesthesiologists Income Tax Officer, Ward 1(4) (2014) 32 ITR(T) 152 (Chennai-Tribunal) 14. Chandraprabhu Jain Swetamber Mandir v. Assistant Commissioner of Income Tax (2017) 50 ITR(T) 155 (Mumbai Tribunal) 15. Versova Kokni Sunni Jamat Trust vs. Central Processing Centre, Bangalore (2022) (Mumbai - Tribunal)
We have heard both the parties and perused all the relevant materials available on record. The assessee has made application for registration on 25-10-2019 and the approval was granted on 30-01-2020. The proviso to section 11 sub- section 2 will apply on the date of approval of pending proceeding and since the CPC proceeded on the date of 27-06- 2023, the approval was already granted and thus the proviso will apply in the present assessee’s case. These submissions of the ld. A.R. appears to be justifiable as there was no change of any objects and activities of the trust for assessment year 2020-21 and that also of assessment year 2019-20. Thus, the decisions cited by the ld. A.R., when the entire process of assessment starts from the stage of filing of return u/s. 139 or issuance of notice u/s. 142(1) till the making of the assessment order u/s. 143(3) of section 144 will be applicable in assessee’s case vis-à-vis the assessment proceedings when pending before the Assessing Officer on the date of registration u/s. 12A of the Act in terms of section proviso of section 12A(2) of the Act which provides for the grant of registration for preceding assessment year. The corpus of donations i.e. voluntary donations are considered a capital receipts which are not chargeable to the Income Tax Act and therefore the same cannot be considered as income as envisaged by various decisions relied by the ld. A.R.. Decision cited by ld. D.R. that of Hon’ble Gujarat High Court in case of Mayur Foundation (supra) will not be applicable in the present case as the assessee has not changed its objects from the preceding year to the present assessment year and in fact has given the details of the voluntary contributions. Thus, the appeal of the Revenue is dismissed.
In the result, the appeal of the revenue is dismissed.