ITO (E), GHAZIABAD vs. M/S CHAUDHARY BISHAMBHAR SINGH EDUCATION SOCIETY, NOIDA

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ITA 718/DEL/2015Status: DisposedITAT Delhi23 August 2018AY 2010-116 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed both grounds of appeal filed by the Revenue. Regarding Ground No. 1, the Tribunal observed that the 12AA Registration Certificate, valid w.e.f. 01.04.2007, was applicable for the assessment year under consideration. Since the AO treated corpus donations as revenue receipts due to the non-availability of the 12AA certificate at that time, and the CIT(A) considered the subsequent grant of registration, the Tribunal found no infirmity in the CIT(A)'s decision. Regarding Ground No. 2, the Tribunal noted that the amendment to section 11(6) of the Act by the Finance Act (No. 2) Act, 2014, is effective from 01.04.2015. As the present assessment year is 2010-11, the Tribunal found no infirmity in the CIT(A)'s decision to allow depreciation on assets acquired from accumulated funds or income set apart for the trust's application. The ratio decidendi is that post-facto registration under section 12AA validates claims made during the period of such registration, and amendments to section 11(6) have prospective effect.

What were the facts?

The assessee, Chaudhary Bishambhar Singh Ward Education Society, Ghaziabad, filed its return of income for Assessment Year 2010-11 declaring 'nil' income. The return was selected for scrutiny. The Assessing Officer (AO) treated the assessee as an AOP and made additions of Rs. 98,10,000/- on account of corpus donation and Rs. 16,92,423/- for disallowance of depreciation. The assessee appealed to the Commissioner of Income-Tax (Appeals) (CIT(A)). During the appeal, the assessee submitted that it had been granted registration under section 12AA by an ITAT order dated 13.06.2014. The CIT(A), considering this, granted relief to the assessee. The Revenue is now in appeal before the Income Tax Appellate Tribunal (ITAT) against the order of the CIT(A).

What were the issues?

1. Whether the deletion of addition of Rs. 98,10,000/- on account of corpus donation by the CIT(A) is legally sustainable, considering the assessee claimed exemption under section 10(23C)(vi) and failed to file copies of such certificates, and the AO treated the donations as anonymous. - Assessee's contention: The disallowance of corpus donations was due to the non-availability of registration under section 12AA at the assessment stage. The ITAT order granting registration under section 12AA is applicable. - Revenue's contention: The assessee received large amounts of donations, and the receipts did not establish the identity or address of the donors, justifying the AO's treatment of donations as anonymous and taxing them at 30% under section 115BBC. 2. Whether the deletion of addition of Rs. 16,92,423/- on account of disallowance of depreciation by the CIT(A) is legally sustainable, considering that assets created or acquired out of exempt income shall have 'nil' WDV. - Assessee's contention: The amendment to Section 11(6) takes effect from 01.04.2015 and will apply from Assessment Year 2015-16 onwards. The assets were acquired from accumulated funds or income set apart for application of the trust. - Revenue's contention: Placing reliance on ITO vs. Charanjiv Charitable Trust (2014) 43 Taxmann.com 300, the Revenue argued that section 32 cannot be made applicable in the case of a society and trust.

Which sections of the Income-tax Act were involved?

Section 10(23C)(vi),Section 12AA,Section 143(1),Section 143(3),Section 32,Section 11(6),Section 115BBC

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI

Before: SHRI R.K.PANDA & SMT. BEENA A PILLAI

Hearing: 30.07.2018Pronounced: 23.08.2018

PER BEENA A PILLAI, JUDICIAL MEMBER

1.

The present appeal has been filed by Revenue against order dated 28.11.2014 passed by Ld. Commissioner of Income-Tax (Appeals), Noida for Assessment Year 2010-11 on the following grounds.

./2015 “1. The Ld.CIT(A) has erred in law and on facts and circumstances of the case, in deleting addition of Rs.98,10,000/- on account of corpus donation as the assessee has claimed exemption u/s 10(23C)(vi) in its return of income and failed to file copy of such certificates.

2. The Ld.CIT(A) has erred in law and on facts and circumstances of the case, in deleting addition of Rs.16,92,423/- on account of disallowance of depreciation as the assets has created/acquired out of exempt income shall have ‘nil’ WDV.

3.

The order of ld.CIT(A) be cancelled and order of AO be restored.”

2.

Brief facts of the case are as under: Assessee is a society registered with the Registrar of Society, Uttar Pradesh. Assessee filed its return of income on 12/10/10 declaring ‘nil’ income. The return was processed under section 143 (1) of the Income Tax Act, 1961 (the Act) and was selected for scrutiny. During the course of assessment proceedings assessee was asked to file certificate regarding 10(23)(vi) of the Act. Assessee submitted that society has applied for registration under section 12 AA with income tax Department but has not received any communication in respect of the same. Ld. AO on perusal observed that assessee simply filed form 10 A for registration under section 12 AA, and it was not registered under section 10 (23) (c ) of the Act. Ld. AO thus completed Assessment under section 143 (3) of the Act by treating status of assessee as AOP. Ld.A.O. made addition on account of corpus donation of Rs.98,10,000/- and addition on account of denial of claim of depreciation amounting to Rs.16,92,423/-. ./2015 2.1. Aggrieved by the addition made by Ld. AO assessee preferred appeal before Ld. CIT (A). 2.2. During the appellate proceedings it was submitted by assessee that it has been granted registration under section 12 AA as per order dated 13.06.2014 passed by this Tribunal in assessee’s own case in ITA No. 236/Del/2014. It was submitted that Assessing Officer while giving appeal effect, granted registration under section 12 AA to the society. Assessee also furnished copy of order of Assessing Officer before Ld.CIT(A). Ld.CIT (A) accordingly granted relief to the assessee in respect of the disallowances made by Ld. AO.

3. Aggrieved by the order of Ld.CIT (A), revenue is in appeal before us now. 4. Ld. DR submitted that receipts of society is about Rs.1.34 crores, which is more than monetary limit of 1 crore prescribed under section 10 (23C) (iiiad) of the Act. It was submitted that assessee received large amount of donations from many parties, for which assessee filed receipts. It has been submitted that through these receipts identity, address of donors has not been established and therefore Ld. AO has correctly treated donations as anonymous and taxed it at 30% as prescribed under section 115BBC of the Act. 4.1. Regarding depreciation claimed by assessee, Ld.DR placing reliance upon decision of Hon’ble Delhi High Court in case of ITO vs Charanjiv Charitable Trust reported in (2014) 43 Taxmann.com 300, submitted that section 32 cannot be made applicable in case of society and trust. ./2015 5. On the contrary Ld.AR submitted that disallowances of corpus donations received by assessee have been denied to assessee at assessment stage because of non availability of registration under section 12AA of the Act. 5.1. Ld.AR submitted regarding claim of depreciation that assets were acquired, on which application of income has also been claimed. He submitted that amendment to Sec.11(6) will take effect from 01/04/15 and accordingly will apply in relation to Assessment Year 2015-16 onwards. 5.2. He thus supported the order of Ld. CIT (A). 6. We have perused the submissions advanced by both the sides in the light of the records placed before us. 7. Ground No.1:It is observed that 12 AA Registration Certificate dated 11/08/14 issued by revenue authorities, is valid w.e.f. 01/04/07. It is observed that certificate will be applicable for the purposes of Assessment Year under consideration before us. It is also observed that Assessing Officer treated corpus donation as revenue receipt in the hands of assessee, due to non-availability of 12AA Certificate. Ld.CIT(A), considering these factual changes allowed claim of assessee and therefore we do not find any infirmity with the same. 7.1. Accordingly ground No. 1 of revenue stands dismissed. 8. Ground No. 2 has been raised in respect of the depreciation allowed by Ld.CIT(A) to the tune of Rs.16,92,423/-. As has been rightly observed by Ld. CIT (A), applicability of amendment to section 11 (6) of the Act by Finance Act (No. 2) Act,2014 will be effective w.e.f. 01/04/15. As, present assessment year is 2010- 11, we do not find any infirmity in the decision of Ld. CIT (A) in ./2015 allowing the claim of depreciation on the assets which has been acquired from the accumulated funds or income set apart for application of trust. 8.1. Accordingly this ground raised

by revenue stands dismissed.

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