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Facts
The assessee, National Culture Fund, a national fund registered under section 12A, faced additions by the AO and confirmations by the CIT(A) concerning FDR interest income and non-allowance of accumulation under sections 11(2) and 11(3) of the Income Tax Act for AY 2016-17 and 2017-18. The AO disallowed accumulation, citing belated filing of Form 10B and the Income Tax Return, and treated the unutilized accumulated income as taxable.
Held
The Tribunal set aside the CIT(A)'s order and remanded the matter to the AO for a de-novo assessment. The AO is directed to consider the assessee's new legal submission regarding the non-taxability of interest income amounting to Rs.3,35,31,966/- under section 11(5) read with 11(1)(d) as part of the Corpus Fund. Additionally, the AO must consider the pending decision of the CIT(E) concerning the condonation application for the belated filing of Form 10B.
Key Issues
Whether FDR interest income constitutes part of the Corpus Fund and is exempt under section 11(1)(d) read with 11(5), and whether accumulation benefits under section 11(2) should be allowed despite belated filing of Form 10B when a condonation application is pending.
Sections Cited
11(1), 11(2), 11(3), 11(5), 12A, 13(9), 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH, ‘E’: NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI BRAJESH KUMAR SINGH
Against the above order, the assessee filed an appeal before the Ld.
CIT(A). The Ld. CIT(A) agreed with the findings of the AO and dismissed the appeal of the assessee vide an order dated 13.11.2023. The Ld. CIT(A) in para-4 of his order stated that the assessee complied with only to the notice dated 03.03.2020 and did not comply with the notices of hearing issued on 08.01.2021, 12.07.2023, 27.10.2023 and 03.11.2023.
4.1. Regarding the issue on why accumulation u/s 11(2) of the Act cannot be allowed when Form 10B as well as ITR was filed belatedly, the ld. CIT(A) noted the finding of the AO that during the assessment proceedings, the assessee did not file any cogent reply. The ld. CIT(A) further held that all the three conditions mentioned in clause(a) (b) & (c) of section 11(2) of the Act has to be satisfied for the accumulated income to be excluded from the income of the year and held that the contention of the assessee that there is no mention of all the conditions to be met is not factually correct as the words ‘following conditions are complied with’ and makes no exception to any condition. The Ld. CIT(A), therefore, in view of the fact that the Form 10B as well as ITR was filed belatedly in terms of section 139(1) of the Act did not allow the exemption as claimed by the assessee.
4.2. The Ld. CIT(A) further held that without prejudice and in addition on the issue of non-compliance by the assessee at the appellate stage relying upon the case laws cited in his order and in absence of any new submission, dismissed the appeal of the assessee.
Against the above order, the assessee is in appeal before us.
At the time of hearing, the ld. AR referred to its written submission filed along with the appeal and submitted that the reason for filing late returns was on account of non-appointment of auditors by the assessee as it needed special approval for the appointment of the auditor, which was done on 12.03.2018 and upon approval of the competent authority, the IT-return was filed on 28.03.2018. It was further submitted that circular of CBDT No 7/2017 dated 20.12.2018 issued after the date of the assessment Order 17.12.2018 provided for filing of condonation petition before the CIT(E) in filing Form No.10. He further stated that a condonation of delay in filing of Form No.10 is filed with CIT(E) on 03.01.2019, which is still pending and till the same is decided, the decision of the Ld. CIT(A) in rejecting the same, was not legally tenable.
The written submission of the assessee is reproduced as below:-
The Ld. AR further relied upon the order of the Tribunal in its own AY 2013-14, dated 25.07.2024 and submitted that facts being similar for this year also, this case may also be remanded to the file of the AO for fresh adjudication. The Ld. AR submitted that the key factor in deciding the issue on the taxability of Rs.84,24,460/- and the non-allowance of accumulation u/s 11(2) of the Act amounting to Rs.2,85,12,371/- was whether ‘interest from deposits as specified u/s 11(5) of the Act’ amounting to Rs.3,35,31,966/- was part of the Corpus Fund as per Gazette notification establishing National Culture Fund published by Authority Department of Culture vide Notification dt.
28.11.1996, contributing Rs. 17.5 crore to the asset of Fund (Corpus Fund) out of plan budget of the Department of Culture, Government of India, and that Auditor of National Culture Fund overlooking the said document treated interest on FDR made out of said Fund as income exempt u/s 11 while as per said notification, the said interest of Rs.3,35,31,966/- from FDRs is part of Corpus Fund and is exempt u/s 11(1)(d) of the Act, which is a vital fact and germane to the settling of the controversy out of the facts and evidences.
We have heard both the parties and perused the material available on record. There are two issues in this appeal i.e. the taxability of Rs.84,24,460/- and the non-allowance of accumulation u/s 11(2) of the Act amounting to Rs.2,85,12,371/-. For this, it has to be decided as to whether ‘interest from deposits as specified u/s 11(5) of the Act’ amounting to Rs.3,35,31,966/- was part of the Corpus Fund and therefore non-taxable u/s 11(i)(d) of the Act. It appears that the said plea was not taken by the assessee either before the AO or before the Ld.
CIT(A). Further, no finding has been given by the ld. CIT(A) with respect to the condonation application filed by the assessee before the CIT(E) vide letter dated 03.01.2019. Therefore, considering the facts in totality, the order of the Ld. CIT(A) is set-aside and the matter is restored back to the file of the AO for considering the above legal submission of the assessee regarding the non-taxability of interest amounting to Rs.3,35,31,966/- u/s 11(5) of the Act and the decision of the Ld. CIT(E) in respect of the condonation application in filing Form 10B belatedly i.e. on 28.03.2018.
After considering these aspects, the AO will frame the assessment de-novo as per law after giving due opportunity of being heard to the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes.
The grounds of appeal raised by the assessee in ITA No.2722/Del/2024 are as under:-
“1. That the learned C.I.T(A) has erred both laws and facts for passing an ex parte order and confirming the addition made by Ld.AO without looking to full facts and circumstances of the cases.
That the learned C.I.T(A) has erred both laws and facts for confirming the addition made by Ld.AO as Income of Rs -5,52,48,666 u/s 11(2) without looking to facts that the FDR interest Income which is of exempted nature.
That the learned C.I.T(A) has erred both laws and facts for confirming the addition made by Ld.AO as Income of Rs 2,09,14,812 u/s 11(2) without looking to facts that the FDR interest Income which is of exempted nature.
That the learned C.I.T(A) has erred both laws and facts for confirming the addition made by Ld.AO as Income of Rs 81,27,560 u/s 11(3) without looking to facts that the FDR interest Income which is of exempted nature.”
Ground Nos.1 to 4 are identical to the grounds of appeal of ITA No.2721/Del/2024 except for the difference in the amount. Therefore, the shall apply mutatis mutandis to this appeal also.
In the result, this appeal of the assessee is also allowed for statistical purposes.
Finally, both appeals of the assessee are allowed for statistical purposes.
Order pronounced in the open court on 21st November, 2024.
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