GRENE ROBOTICS INDIA PRIVATE LIMITED,HYDERABAD vs. ITO., WARD-2(2), HYDERABAD

The assessee has raised the following grounds of appeal :

The brief facts of the case are that, the assessee is a society registered under the Societies Registration Act. It filed its return of income on 30.12.2020 for the assessment year 2020–21 declaring total income at Rs.Nil. The case of the assessee was selected for scrutiny under compulsory criteria and notice under Section 143(2)

of the Income Tax Act, 1961 (“the Act”) was issued on 30.06.2021. The Learned Assessing Officer (“Ld. AO”) completed the assessment under Section 143(3) read with Section 144B of the Act on 20.09.2022, making the additions of Rs.21,51,000/- on account of disallowance of corpus donations and Rs.20,90,339/- on account of disallowance of expenses held as provision. Accordingly, the Ld. AO assessed the total income at Rs.42,41,339/-.

Aggrieved with the order of Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). However, the assessee did not comply with the notices issued during the appellate proceedings. Consequently, the Ld. CIT(A) dismissed the appeal ex-parte.

Aggrieved with the order of Ld. CIT(A), the assessee is now in appeal before the Tribunal. The Learned Authorised Representative (Ld. AR) submitted that, the assessee is in appeal on two issues i.e. (i) additions of Rs.21,51,000/- on account of corpus donations and (ii) addition of Rs.20,90,339/- on account of disallowance of expenses held as provision. On the issue of corpus donations, the Ld. AR submitted that the society had organised a medical conference and collected Rs.1,000/- from each participant, out of the participation fee, specifically towards a corpus fund for purchase of neonatal equipment to be installed at the hospital and to be utilised for the treatment of new born babies and neonate. The Ld. AR invited our attention to the extract of minutes of the society held on 04.01.2019, placed at page no.200 of the paper book and demonstrated that in the meeting of the society, it was decided to collect Rs.1000/- from each member attending the conference towards corpus. Our attention was also invited to sample receipts placed at page nos. 110 to 189 of the paper book, on which a separate seal containing the words “Rs.1000/- towards corpus fund” has been affixed. The Ld. AR contended that such affixation itself signifies the intention of the donor towards corpus fund. The Ld. AR also submitted that, these receipts could not be produced before the Ld. AO during the assessment proceedings. In the absence of which the Ld. AO made the said addition. He prayed for one more opportunity to file all relevant documents before the Ld. AO, to substantiate the claim.

On the issue of disallowance of Rs.20,90,339/-, the Ld. AR submitted that the assessee society is under an obligation to contribute 30% of its income to the NNF Central Chapter. Accordingly, for the year under consideration the total amount to be payable to NNF Central Chapter was Rs.31,90,339/-, out of which Rs.11,00,000/- had already been paid, and the balance Rs.20,90,339/- was shown as payable. He further submitted that the Ld. AO wrongly treated the unpaid amount as a mere “provision” and disallowed it. The Ld. AR drew our attention to the Explanation to Section 11, which states that any sum payable shall be considered as application only in the year of actual payment. However, he submitted that this Explanation was inserted by the Finance Act, 2022 with effect from 01.04.2022 and applies from AY 2022–23 onwards and not to AY 2020–21. In the alternative, the Ld. AR argued that if the amount represents 30% income pertaining to the NNF Central Chapter, then the same is not even the income of the assessee society and hence should not be taxed, irrespective of actual payment.

Per contra, as far as the issue of receipt of corpus is concerned, the Learned Departmental Representative (Ld. DR) supported the findings of the Ld. AO and submitted that mere mention of “Rs.1000/- towards corpus fund” on the receipts is not sufficient to establish the donor’s intention. He argued that the assessee failed to produce any confirmations from the donors or proof of actual use of funds for the stated object.

7.1 As regards the disallowance of Rs.20,90,339/-, the Ld. DR submitted that the assessee had not submitted any documentary evidence either during assessment or appellate proceedings to prove the existence of any legal or contractual obligation to transfer 30% of income to the NNF Central Chapter. In absence of such evidence, the Ld. AO rightly treated it as a provision and disallowed the same.

We have considered the rival submissions and perused the material available on record. In respect of the corpus donation, on perusal of the sample receipts placed at page nos. 110 to 189 of the paper book, we find that the receipts bear a specific mention of “Rs.1,000 towards corpus fund”. However, these receipts were not made available to Ld. AO for verification. We have also gone through the extract of minutes of the society held on 04.01.2019, placed at page no.200 of the paper book and found that in the meeting of the society, it was decided to collect Rs.1000/- from each member attending the conference towards corpus. The assessee claims that the corpus fund were collected for the purchase of neonatal equipment to be installed at the hospital and to be utilised for the treatment of new born babies and neonate. However, no evidence has been brought on record either during assessment or before us to demonstrate actual utilisation of the collected corpus fund towards the stated purpose. Hence, in the interest of justice, we are inclined to provide one more opportunity to the assessee to file all necessary documents before the Ld. AO.

In respect of the addition of Rs.20,90,339/-, we note that the assessee contends this amount is an institutional liability payable to its NNF Central Chapter. However, no evidence has been placed before us in support of such a contractual obligation, nor is there any copy of by-laws, resolutions, or correspondence evidencing such arrangement. At the same time, the assessee has also argued that Explanation to Section 11, inserted by Finance Act, 2022, is prospective in nature and not applicable to AY 2020-21. This aspect also needs to be examined in the context of the assessee’s actual accounting treatment, purpose, and source of such liability.

In the above facts and circumstances of the case, we are of the view that both the issues i.e. (i) additions of Rs.21,51,000/- on account of corpus donations and (ii) addition of Rs.20,90,339/- on account of disallowance of expenses held as provision require fresh verification and analysis at the end of the Ld. AO. Accordingly, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the Ld. AO for de novo adjudication as per law. We direct that the assessee shall furnish all supporting documents such as by-laws, resolutions, payment records, etc without taking any unnecessary adjournments. The assessee is also directed to cooperate and file all relevant evidence before the Ld. AO.

In the result, the appeal is allowed for statistical purposes. Order pronounced in the open Court on 18th July, 2025.