THE COMMISSIONER OF INCOME-TAX(EXEMPTIONS) vs. M/S CHOICE FOUNDATION

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI THURSDAY, THE 11TH DAY OF NOVEMBER 2021 / 20TH KARTHIKA, 1943 ITA NO. 180 OF 2019 AGAINST THE ORDER/JUDGMENT IN ITA 20/2017 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/S: THE COMMISSIONER OF INCOME-TAX(EXEMPTIONS) KOCHI BY ADVS. SRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENT SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT RESPONDENT/S: M/S CHOICE FOUNDATION C/O. M/S KURUVILLA AND JOSE, CHARTERED ACCOUNTANTS, 41/695, CHITTOOR ROAD, KOCHI - 682018. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 11.11.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA NO. 180 OF 2019 -2- JUDGMENT S.V.Bhatti,J. Heard Mr.Christopher Abraham, the learned Standing Counsel for appellant. 2. The Commissioner of Income Tax (Exemptions), Kochi/Revenue is the appellant. M/s. Choice Foundation, C/o.M/s.Kuruvilla & Jose/assessee is the appellant. The Revenue being aggrieved by the order dated 29.01.2018 in I.T.A No.20/Coch/2017 has filed the instant appeal under Sec.260A of the Income Tax Act, 1961 (for short, 'the Act'). The subject matter of the appeal relates to the issues arising out of the return filed by the assessee for the assessment year 2010-11. 3. The circumstances surrounding the controversy in the appeal are summarily stated thus:

ITA NO. 180 OF 2019 -3- 3.1 On 18.10.2010 the assessee filed the return of income for the assessment year 2010-11. On 21.01.2014 notice under Sec.148 was issued to the assessee on the ground that the assessee violated the provisions of Section 11(5) of the Act and in substance, the nature of activity undertaken by the assessee is in the nature of business. 4. The Assessing Officer made the assessment order through Annexure-A dated 10.03.2015 rejecting the explanation offered by the assessee. By order dated 06.08.2015 made under Sec.154 of the Act the total income of the assessee has been reduced to Rs.1,60,56,579/-. The Commissioner of the Income Tax (Exemptions) had taken up proceedings under Sec.263 of the Act. In the proceedings initiated under Sec.263, the Commissioner noted the details concerning Rs.2,08,91,000/- which was reduced from the total income of the assessee vide order dated 06.08.2015 and which constituted building fund stated to have been collected by the assessee from the donors. The consideration before the Commissioner was whether the receipt of the amount shown as building fund

ITA NO. 180 OF 2019 -4- represents income and/or a donation given for establishment of the capital asset by the assessee. Through order in Annexure-B order 22.12.2016, the Commissioner held as follows: “4. I have gone through the submissions made by the assessee during the course of the proceedings u/s 263 of the Income Tax Act and I find that the assessee has not adduced any convincing reply to the proposed revision under section 263 of the Income Tax Act. As already mentioned, It is a voluntary contribution and, therefore, income of the assessee within the meaning of section 2(24)(iia) of the Income Tax Act, 1961. If it is to be treated as a corpus donation, the same can only be excluded in computing the total income under the provisions of section 11 & 12 of the Income Tax Act, 1961. By virtue of section 13(8) of the Income Tax Act, the Assessing Officer had held that nothing contained in section 11 or section 12 shall operate so as to exclude any income from the total income of the assessee for the assessment year 2010-11. Accordingly, I am of the opinion that the income assessed for the assessment year 2010-11 is short by Rs.2,08,91,000/-. 5. In the light of the above discussion, I find that the assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act dated 10/03/2015 for the assessment year 2010-11 is erroneous in so far as it is prejudicial to the interests of revenue. Accordingly, invoking the provisions of section 263 of the Income Tax Act, 1961, the assessment order dated 10/03/2015 is set aside with a direction to the Assessing Officer to redo the same afresh after considering all issues raised herein above and after affording an opportunity of being heard to the assessee.” 5. The assessee filed I.T.A No.20/Coch/2017 before the Tribunal

ITA NO. 180 OF 2019 -5- questioning the directions issued by the Commissioner of Income Tax (Exemptions) under Sec.263 of the Act, directing reopening of assessment and redoing the assessment for the assessment year 2010-11 afresh. The Tribunal through the order in Annexure-C allowed the appeal filed by the assessee. The Tribunal on the consideration of building fund by the assessee whether constitutes corpus donation, has recorded the following findings: “5.5 In view of the judgment of the Hon'ble Apex Court in the case of Alagendian Finance Limited (supra), since the revisional jurisdiction to reopen the order of assessment was exercised in respect of corpus donation received, which was not subject matter of reassessment proceedings u/s 147 r.w.s. 148 of the I.T.Act, the period of limitation provided u/s 263(2) of the I.T.Act would begin to run from the date of intimation u/s 143(1) of the I.T.Act and not from the date of order of reassessment. As mentioned earlier, if the period of limitation is to be reckoned from the date of intimation u/s 143(1) of the I.T.Act, the Commissioner ought to have initiated revisionary proceedings on or before 31.03.2014. In the instant case the notice u/s 263 of the I.T.Act was issued much subsequently, i.e., on 02.05.2016 and order u/s 263 of the I.T.Act was completed on 22.12.2016. Hence the revisional jurisdiction is beyond the period of limitation u/s 263 of the I.T.Act and is a nullity. 5.6 The learned Departmental Representative had submitted that the issue of limitation was not raised before the CIT, hence cannot be raised before the Tribunal. This contention of the

ITA NO. 180 OF 2019 -6- learned DR cannot be entertained since the issue of limitation is a pure legal issue going into the root of the case and does not require examination of fresh fact. Therefore, going by the dictum laid down by the judgment of the Hon'ble Apex Court in the case of National Thermal Power Company Ltd. Vs. CIT [(1998) 229 ITR 383 (SC)], the Tribunal is duty bound to consider the legal issue though raised before it for the first time. 5.7 Even on merits, we find that the amount received by the assessee was voluntary in nature and the donors had specifically mentioned that their donations are towards infrastructure development. A copy of the specimen letters from the donors confirming their voluntary contribution and partaking the nature of corpus of the trust, is enclosed at page 65 of the paper book filed by the assessee. A copy of the receipt issued by the assessee is also enclosed at page 66 of the paper book filed by the assessee. The building fund is capital in nature and forming part of corpus of the trust. The words "Corpus Fund" are not defined in the Income-tax Act. Normally, "Corpus Fund" denotes a permanent fund separately accounted and capital in nature. Therefore, the receipt of voluntary contributions towards "infrastructure fund" is a voluntary contribution towards the corpus fund and is therefore exempted u/s 11(1)(d) of the I.T.Act. The Mumbai Bench of the Tribunal in Chandraprabhu Jain v. ACIT [(2016) 50 ITR (Trib.) 355 (Mum-Tri.)] had held that the building fund is forming part of the corpus fund eligible for deduction u/s 11(1)(d) of the I.T.Act. Therefore, the initiation of the proceedings u/s 263 of the I.T.Act for disallowing the claim u/s 11(1)(d) of the corpus donation on the ground that it is not voluntary and not capital in nature is not in accordance with law and hence void. It is ordered accordingly.” 6. The above findings are under challenge in this appeal. The substantial questions of law framed by the Revenue reads thus:

ITA NO. 180 OF 2019 -7- “1. Whether on the facts and circumstances of the case and particularly in the context of the Supreme Court decision in the case of ACIT VS.M/s Rajesh Jhaveri Stock Brokers Pvt.Limited holding that the intimation under section 143(1)(a) is not an order of assessment ,is the ITAT right in holding that the order passed by the Commissioner of Income Tax(Exemptions)under section 263 of the IT Act is barred by limitation? 2. Whether on the facts and circumstances of the case and in law, the ITAT is right in treating the order of the Commissioner of Income Tax (Exemptions) passed under section 263 of the IT Act as not in accordance with law and hence invalid by holding that contributions to the building fund amounting to Rs.20891000 are in the nature of corpus donations especially when there are no specific directions from the donors regarding the quantum of contributions to be part of the corpus of the trust or institution as required u/s 11(1)(d) of the IT Act ?” 7. Mr. Christopher Abraham argued substantially on the very lines which found favour with the Commissioner of Income Tax (Exemptions) for setting aside the assessment order dated 10.03.2015 and directing reassessment by the Assessing Officer. 8. We are of the view that the grounds canvassed in support of the substantial questions are not touching upon the reasons weighed with the Tribunal for interdicting the order in Anneuxre-B dated 22.12.2016. In other words, this Court examines the order of the Tribunal and

ITA NO. 180 OF 2019 -8- whether a ground is made out warranting interference under Sec.260A of the Act. Briefly stated, the Tribunal found that the order in Annexure-B is barred by limitation, secondly, the nature of receipt amounting to Rs.2,08,91,000/- is found as building donation fund/corpus fund received by the assessee for the purpose of building fund. 9. The findings recorded by the Tribunal firstly are findings of fact, the Tribunal being final authority on an issue of fact, a few grounds are available to challenge even the findings of fact recorded by the Tribunal. The question that falls thereafter for our consideration is whether any of the exceptional grounds available in this behalf are put forward to assail the findings of the Tribunal. For convenience, we have excerpted the findings recorded by the Tribunal. This Court since is in agreement with the findings recorded both in law and fact of the Tribunal, is also not pursuaded to restate the same conclusion in a different way. We accept the findings recorded by the Tribunal and further hold that the no substantial question of law arises for

ITA NO. 180 OF 2019 -9- consideration. The questions are answered against the Revenue and in favour of the assessee. The appeal fails, dismissed accordingly. No order as to costs. Sd/- S.V.BHATTI JUDGE Sd/- BASANT BALAJI JUDGE JS

ITA NO. 180 OF 2019 -10- APPENDIX OF ITA 180/2019 PETITIONER ANNEXURE ANNEXURE A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S 143(3) R.W.S.147 OF THE INCOME TAX ACT DATED 10.03.2015 ANNEXURE B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (EXEMPTIONS) U/S 263 OF THE IT.ACT. DATED 22.12.2016 ANNEXURE C COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH IN ITA 20/COCH/2017 DATED 29.01.2018.