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Income Tax Appellate Tribunal, DELHI ‘C’ BENCH,
Before: SHRI SUCHITRA KAMBLE, & SHRI PRASHANT MAHARISHI,
PER SUCHITRA KAMBLE, JUDICIAL MEMBER
This appeal is filed by the Revenue against the order of the Ld. CIT(A)- 40(Exemption), New Delhi, dated 27/08/2015 for Assessment Year 2011-12.
Grounds of appeal are as under:-
1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that in the absence of written direction from the donor, the donation will not be treated as corpus donation and consequently, from part of the income of the organisation.
2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that assessee being a separate entity can be earmarked to pay for education and for the specific expenses.
3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the claim of carry forward of losses disregarding the fact that the provisions of Section 72 to 74 are applicable to cases whose income are taxable as per provisions of the Act and not applicable in the cases who are claiming exemption u/s. 11 & 12 of the Income Tax Act, 1961.
4. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to allow benefit of carry forward of deficit loss of Rs. 25,66,47,941/- in view of the decision of Delhi Tribunal in the case of Pushpawati Singhania Research Institute for Liver, Renal & Digestive Disease vs DDIT(E) (2009) 29 SOT 316 (Del.).
The assessee is registered under the Societies Registration Act, 1860 on 18.08.2004 and is also registered under Section 12AA(1) of the Income Tax Act, 1961 on 28.04.2005 and also enjoys the benefit of Section 80G vide order dated 01.07.2010. The main object of the assessee trust is to conduct various activities, programs including social welfare, sanitation and healthcare, health community programs, primary education and vocational training, infrastructure support to schools and non-formal education, life skill and employment general program, youth and sports development and governance reforms etc. During the assessment proceedings the Assessing Officer had treated the society as an AOP not a charitable society and computed all the taxes as normal AOP vide the order of the Assessing Officer.
Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee.
The Ld. DR submitted that the CIT(A) ignored the fact that in the absence of written direction from the donor, the donation will not be treated as corpus donation and consequently, from part of the income of the organization. The CIT(A) ignored the fact that assessee being a separate entity can be earmarked to pay for education and for the specific expenses. The Ld. DR further submitted that the CIT(A) erred in allowing the claim of carry forward losses disregarding the fact that the provisions of Section 72 to 74 are applicable to cases whose income are taxable as per provisions of the Act and not applicable in the cases who are claiming exemption u/s 11 & 12 of the Income Tax Act, 1961. The Ld. DR further submitted that the CIT(A) erred in directing the Assessing Officer to allow benefit of carry forward of deficit loss of Rs.25,66,47,941/- in view of the decision of Delhi Tribunal in the case of Pushpawati Singhania Research Institute for Liver, Renal & Digestive Diseases Vs. DDIT (E) (2009) 29 SOT 316 (Del.).
The Ld. AR relied upon the order of the CIT(A).
We have heard both the parties and perused all the relevant material available on record. The CIT(A) held as under :
“4.5 The AO has added the sum of Rs. 19 crore in the income of the Appellant on the premises that the transfer from the corpus Fund to General Reserve tantamount income of the assessee and the same was not offered for taxation. I have gone through and found no substance on the action of the AO because the Corpus Fund was utilized for purchase of land i.e. Capital Assets. The Income tax Act permits that the Corpus Fund may be utilized for acquiring Capital Assets pursuing activities in accordance with the objective of the Charitable institution. The transfer to general fund is only an accounting entry. There is no transfer of fund by this entry, it is well settled that substance prevail over form. Merely making an accounting entry does not change the substance of the transaction that the Corpus Fund has been utilized for Purchase of Capital Asset.
4.6 The appellant relies upon the case laws which have been perused and found that if an amount received as voluntary contribution towards the advancement of Charitable activities with the specific direction it will form part of the Corpus Fund and it will not lose exemption even if it is spent by the trust for meeting its expenses. The addition made by the AO without judicious appreciation of the facts and the position of law and therefore it is deleted.”
Thus, the CIT(A) has rightly observed that merely making an accounting entry does not change the substance of the transaction that the Corpus Fund has been utilized for the purchase of capital assets. Thus, there is no need to interfere with the findings of the CIT(A). The appeal of the revenue is dismissed.
In result, appeal of the revenue is dismissed.
Order pronounced in the open court on 03/09/2019.