THE COMMISSIONER OF INCOME EXEMPTION vs. M/S CANARA BANK

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HC-KAR NC: 2025:KHC:29470-DB ITA No. 34 of 2025

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 28TH DAY OF JULY, 2025 PRESENT THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE AND THE HON'BLE MR. JUSTICE C M JOSHI INCOME TAX APPEAL NO. 34 OF 2025

BETWEEN:

Digitally signed by PRABHAKAR SWETHA KRISHNAN Location: High Court of Karnataka

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112, CANARA BANK BUILDING J.C. ROAD BANGALORE - 560 002 REPRESENTED BY ITS SECRETARY. …RESPONDENT

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO.689/Bang/2024 DATED 30.07.2024 FOR ASSESSMENT YEAR 2016-17 ANNEXURE-A AND THE ORDER OF APPELLANT COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE ASSISTANT THE COMMISSIONER OF INCOME TAX (EXEMPTIONS) BENGALURU & ETC.

THIS APPEAL, COMING ON FOR ORDERS, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

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CORAM: HON'BLE MR. VIBHU BAKHRU ,CHIEF JUSTICE and HON'BLE MR. JUSTICE C M JOSHI

ORAL JUDGMENT (PER: HON'BLE MR. VIBHU BAKHRU,CHIEF JUSTICE)

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ii) disallowance of Rs.8,70,00,000/- made by AO in respect of capital expenditure. 4. The Revenue has projected the following questions for consideration of this Court: "1) Whether on the facts and circumstances of the case, the Hon'ble ITAT is correct in law in deleting the addition of Rs.3,14,00,000/- on account of application of unutilized accumulation made u/s.11(2) of the Income Tax Act, 1961 for the earlier assessment year, despite the fact that respondent/assessee had failed to furnish correct details of the purpose for which the accumulation was utilized? 2) Whether on the facts and circumstances of the case, the Hon'ble ITAT is correct in law in giving a finding as to whether the claim of respondent/assessee on addition to fixed assets i.e., construction of building during the current year, was financed by the funds accumulated u/s.11(2) of the Income Tax Act, 1961 in the preceding financial years? 3) Whether on the facts and circumstances of the case, the Hon'ble ITAT is correct in law in coming to the conclusion that respondent/assessee had applied the funds accumulated in earlier years for construction of the building in the current financial year, in the absence of specific documentary evidence produced by respondent/assessee in support of its claim? 4) Whether on the facts and circumstances of the case, the Hon'ble ITAT is correct in law in deleting the addition of Rs.8,70,00,000/-by ignoring the fact that respondent/assessee had not given any details regarding commissioning of the RO water treatment plant during the current financial year and the list of beneficiaries of the solar lamp project, while in the

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absence of such details, it cannot be proved that respondent/assessee had actually applied funds for the stated objects of the trust?" 5. The respondent [Assessee] is a Charitable Trust run by Canara Bank. The Assessee was registered under Section 12A of the Income Tax Act, 1961 [the Act] since 06.01.1982. 6. The Assessee had filed its return of income for AY 2016-17 claiming exemption under Section 11 of the Act and declared 'NIL Income". The Assessee's return was selected for scrutiny and the assessment proceedings culminated in an Assessment Order dated 25.12.2018 passed under Section 143(3) of the Act. The Assessing Officer [AO] determined the Assessee's taxable income for the relevant [AY] 2016-17 at `8,93,02,628/-. The said determination was on account of the following additions: i) Disallowance of `3,14,00,000/- which was utilized for capital expenditure out of accumulated funds from previous year; and ii) Disallowance of `8,70,00,000/- on account of RO water treatment plant. 7. The Assessee claimed that it had utilized accumulated funds from the previous year to the extent of `3,14,00,000/-. However,

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the AO added the same to the Assessee’s income, inter alia, on the ground that the Assessee has failed to establish the year in which the funds were accumulated. Additionally, the AO held that the Assessee had mixed up the fixed assets, bills and payments towards solar lantern projects and water treatment projects. The AO faulted the Assessee for not furnishing the details for which the funds were accumulated. He also disallowed an amount of `8,70,00,000/- on the ground that the expenditure of `30,00,000/- was incurred towards solar lantern projects and `8,40,00,000/- was incurred towards RO water treatment plant and such expenditure was capital in nature. Additionally, the AO held that the facilities were provided to entire village and that the Assessee had failed to furnish the list of beneficiaries with regard to distribution of solar lanterns. 8. The Assessee being aggrieved, appealed the Assessment Order dated 25.12.2018 before the NFAC. 9. The Assessee explained that it is a Charitable Trust and one of its main object was rural development. The Assessee explained that the accumulated amount of less than 15% of its total receipts were carried forward under Section 11(1)(a) of the Act. It had also

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incurred capital expenditure of `6,03,83,149/- for construction of building and a water treatment plant etc. The sum of `3,14,51,045/-, which had been carried forward from earlier years is reflected in Form No.10 for AY 2015-16 and balance `2,89,32,104/- was incurred from the current year's income. 10. The Assessee explained that it had spent a sum of `8,40,00,000/- for commissioning water treatment plant for rural development in drought hit areas of Kolar and Chikkaballapur districts. Further an amount of `30,00,000/- was spent on solar lanterns distributed in the backward villages of Dandeli and Supha. 11. The NFAC accepted the Assessee's contention that a sum of `3,14,51,045/- was accumulated in the previous year for a specific purpose. Investment made was also shown in the depreciation table as current expenditure for construction of the building. Further an amount of Rs.2,89,32,104/- was used from the income of the current year. 12. The NFAC also accepted that the amount of `8,40,00,000/- was being spent for water treatment plant and `30,00,000/- was

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spent for distribution of solar lanterns, which were part of the charitable activity. 13. The ITAT also accepted the finding of the NFAC. The Revenue in the present appeal has challenged the findings of the ITAT. 14. Plainly, the findings recorded by the NFAC and ITAT are factual findings and the Revenue has not projected any question to assail the findings as perverse. 15. In view of the above, we are not persuaded to accept that the present appeal raises any substantial question of law. 16. The appeal is accordingly dismissed.

Sd/- (VIBHU BAKHRU) CHIEF JUSTICE

Sd/- (C M JOSHI) JUDGE

KPS