DIRECTOR OF INCOME TAX vs. SOCIETY FOR DEVELOPMENT ALTERNATIVES


\$~3 & 4

IN THE HIGH COURT OF DELHI AT NEW DELHI

+ ITA Nos. 12/2012 & 18/2012

DIRECTOR OF INCOME TAX

..... Appellant gh Mr. Abhishek Maratha, Sr.

Through Mr. Abhishek Maratha, Sr. Standing Counsel with Ms.

Anshul Sharma, Adv.

versus

SOCIETY FOR DEVELOPMENT ALTERNATIVES ..... Respondent Through

CORAM:

HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE R.V.EASWAR

> ORDER 13.01.2012

Grounds of appeal read as under:-

a) Because impugned order passed by ITAT is perverse in law, as has been passed without the proper application of mind.

- b) Because ITAT has grossly erred in the eyes of law, in confirming the order of CIT (A), when there is clear infringement of the provisions provided u/s 13 (1) (c) of the act by the assessee i.e. the income and assets of the assessee society were used for the benefit of the individual/person specified u/s 13(3) of the Act. - c) Because ITAT has grossly erred in law in passing the impugned order ignoring that the assessee has not maintained the separate books of accounts for each donor agency during the assessment year under consideration. - d) Because the ITAT has grossly erred in passing the impugned order in view of the fact that the



"Section 13. Section 11 not to apply in certain cases

- (3) The persons referred to in clause (c) of subsection (1) and sub-section (2) are the following namely:— - (a) the author of the trust or the founder of the institution; - (b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds 6[fifty thousand] rupees; - (c) where such author, founder or person is a Hindu undivided family, a member of the family; - (cc) any trustee of the trust or manager (by whatever name called) of the institution; - (d) any relative of any such author, founder, person, member, trustee or manager as aforesaid; - (e) any concern in which any of the persons referred to in clauses (a), (b), (c), (cc) and (d) has a substantial interest.

Explanation 3.—For the purposes of this section, a person shall be deemed to have a substantial interest in a concern,—

- (ii) in the case of any other concern, if such person is entitled, or such person and one or more of the other persons referred to in sub-section (3) are entitled in the aggregate, at any time during the previous year, to not less than twenty per cent of the profits of such concern." - 6. Learned counsel for the appellant-Revenue was asked to point out whether the Assessing Officer has recorded any finding that the


the cases. All the terms and conditions are simultaneously complied with otherwise the grants are withdrawn. The appellant has to utilize the funds as per the terms and conditions of the grant. If the appellant fails to utilize the grants for the purpose for which grant is sanctioned, the amount is recovered by the funding agency. On the basis of the evidences placed on record, it is seen that the appellant is not free to use the funds voluntarily as per its sweet will and, thus, these are not voluntary contribution as per Section 12 of the Act. These are tied up grants where the appellant acts as a custodian of the funds given by the funding agency to channelize the same in a particular direction.

In case of voluntary contribution, the appellant is free to use the money as per its will and neither have to render the account of the same to the donor nor the same is monitored by the donor. The said amount becomes income of the appellant and has to be used for charitable purposes as per its objects. However, in case of specific tied up grants, money is received for specific purposes and is to be utilized for the same."

- 8. The Commissioner of Income Tax (Appeals) has also referred to the judgment of the Rajasthan High Court in Sukhdeo Charity EstateVs. CIT (1984) 149 ITR 470 (Raj.). - 9. In view of the aforesaid factual position, the tribunal has upheld the order passed by the Commissioner of Income Tax (Appeals) and has not accepted the appeal filed by the Revenue. - 10. In view of the aforesaid factual position, we are not inclined to entertain the present appeals on the second aspect.


SANJIV KHANNA, J.

R.V.EASWAR, J.

JANUARY 13, 2012 NA /