DAKSHINA KANNADA SANATHANA DHARMA SANGHA vs. INCOME TAX OFFICER(EXEMPTION),

The assessee is in appeal challenging the order passed by the Income Tax Appellate Tribunal “SMC” “B” Bench, Bengaluru (for short, ‘the Tribunal’) in ITA.No.110/Bang/2023 dated 19.04.2023 for the assessment year 2017-18 by raising the following substantial questions of law: “1. Whether in law and facts of the case the learned tribunal erred in not following the

Whether in law and facts of the case the tribunal was right in remitting the matter back to the AO/NFAC with the direction to prove that the amount had been donated voluntarily by the donors towards the corpus fund, when the same was already proved by the Appellant Assessee?”

The substantial questions of law are admitted on 08.08.2023. The assessee-Trust filed return of income for the assessment year 2017-18. The Assessing Officer issued notice under Section 143(2) of the Income Tax Act, 1961 (for short, ‘1961 Act’). The Assessing Officer noticed that the assessee has received donations and claimed it as corpus. As there was no specific instructions by the donor to treat the donation as corpus, the Assessing Officer rejected the claim.

The assessee further aggrieved, preferred appeal before the Commissioner of Income Tax (Appeals) (for short, ‘CIT(A)’. The CIT(A) by order dated 24.01.2023 held the issue of corpus against the assessee. Thereafter, the assessee preferred appeal before the Tribunal. The Tribunal under impugned order remanded the matter to the Assessing Officer with a direction to the assessee to prove that the amount has been donated voluntarily by the donors towards the corpus by furnishing requisite evidence.

Sri.Balram R. Rao, learned counsel appearing for the appellant/assessee submits that there is no requirement under the statute for the instructions by the donor to treat the donation as corpus. It is submitted that the direction to prove the voluntary donations towards corpus at this length of time is difficult. Learned counsel further submits that the finding recorded by the Tribunal is contrary to the judgment of this Court in the case of

Learned senior standing counsel Sri.Y.V.Raviraj appearing for respondent/Revenue submits that if the donation is to be treated as corpus, it is mandate of Section 11(1)(d) of the Act, that the donor should issue specific direction to treat a donation as corpus. It is submitted that in the absence of such specific direction, every donation cannot be treated as corpus on the same being recognized as corpus by the assessee. It is submitted that the order of the Tribunal has not given raise to any substantial questions of law to entertain this appeal.

We have considered the submissions of learned counsel appearing for the parties and perused the appeal papers.

The assessee is a Trust, registered under Section 12A of the Act. The assessee has claimed benefit of the exemption under Section 11 of the Act. Insofar as few donations, assessee claimed that donations are towards corpus and it is accounted as such and the same is to be treated as corpus fund under Section 11(1)(d) of the Act. The treatment of donation as corpus fund is rejected by the Assessing Officer on the ground that the assessee has not adduced any proof in writing from the donor to treat the donation as corpus fund. However, this Court in the case of SRI RAMAKRISHNA SEVA ASHRAMA (supra) held that instructions to treat donation as corpus need not be in writing. It is further held that in the absence of directions in writing, one can find out whether there was specific direction and to find out how the money so paid is utilized. In view of the law laid down by the Co-ordinate Bench of this Court in SRI RAMAKRISHNA SEVA ASHRAMA (supra) insistence of the Assessing Officer to produce the written instructions of

The order of remand has not given raise to substantial questions of law. However, we clarify that the Assessing Officer while concluding the remand proceedings shall take note and apply the principles/test held in paragraph 17 of the decision of this Court in SRI RAMAKRISHNA SEVA ASHRAMA (supra).

With the above limited observations, the present appeal is not entertained. As the order of remand is confirmed and Assessing Officer is directed to examine the issue in the light of SRI RAMAKRISHNA SEVA ASHRAMA (supra), the questions of law raised in the appeal are not answered and kept open.

With the above observations, appeal stands disposed of.