M/S NANDANA EDUCATION TRUST,SHIMOGA vs. CIT, DAVANGERE

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ITA 1404/BANG/2013Status: DisposedITAT Bangalore13 January 2016AY 2010-114 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the CIT was justified in assuming jurisdiction under Section 263 because the AO failed to examine the taxability of donations under Section 11(1)(d). The AO's assessment order was considered erroneous and prejudicial to the revenue due to non-application of mind on this crucial aspect.

What were the facts?

The appellant-trust claimed exemption under Section 10(23C)(iiiad) for AY 2010-11. The Assessing Officer (AO) completed the assessment allowing this exemption. The CIT initiated revision proceedings under Section 263, stating the donations received were not examined for taxability under Section 11(1)(d) as the trust was not registered under Section 12A.

What were the issues?

Whether the CIT was justified in revising the assessment order under Section 263 when the AO had not examined the taxability of donations under Section 11(1)(d)?

Which sections of the Income-tax Act were involved?

Section 263,Section 11(1)(d),Section 12A,Section 115BBC(3)

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Income Tax Appellate Tribunal, ‘A’ BENCH, BANGALORE

For Appellant: Shri A.R.Vivek, Advocate
For Respondent: Shri Muzaffar Hussain, CIT(DR)
Hearing: 08/12/2015Pronounced: 13/01/2016

O R D E R

PER INTURI RAMA RAO, AM :

1.

This appeal is filed by the appellant-trust directed against the order of CIT, Davangere dated 30-07-2013 passed u/s 263 of the IT Act, 1961 for the assessment year 2010-11.

2.

Briefly, the facts of the case are that the appellant-trust was duly registered under the Trust Act, with the object of imparting education. The return of income for the assessment year 2010-11 was filed on 21/9/2011 claiming exemption u/s 10(23C)(iiiad) of the IT Act, 1961. Against the said return of income, the assessment was completed by the Addl.CIT, Shimoga at a total income of Rs.24,36,670/-, u/s 143(3) after allowing exemption u/s10(23C)(iiiad) of the IT Act, 1961 [hereinafter referred to as ‘the Act’] vide order dated 28-03-2012.

Page 2 of 4 3. While the matter stood thus, the CIT, Davangere, issued a show cause notice dated 16/04/2013 u/s 263 of the Act proposing to revise the assessment u/s 263 of the Act on the ground that the donations received of Rs.23,73,039/- and Rs.15,00,000/- are not exempt from the tax, as the appellant– trust was not granted registration u/s 12A of the IT Act, 1961. In response to the show cause notice, appellant-trust submitted that the donation are forming part of corpus funds and therefore, exempt u/s 11(1)(d) of the IT Act, 1961 and therefore, cannot be brought to tax and submitted that the power of revision cannot be assumed. The CIT, after considering the explanation filed by the appellant-trust held that since the issue of exemption u/s 11(1)(d) of the Act was not examined by the AO, he set aside the assessment order for re-doing the same in the light of the observations made by him in his order passed u/s 263 of the IT Act.

4.

Being aggrieved, the appellant-trust is before us with the present appeal.

5.

The learned counsel for the appellant-trust argued that the donations were received as corpus fund and therefore, exempt u/s 11(1)(d) of the Act. He further submitted that the CIT was not justified to set aside the assessment order. He placed reliance on the decision of the Hon’ble Supreme Court in the case of Malabar Industrial. Co. Ltd., Vs CIT (243 ITR 83).

Page 3 of 4 6. On the other hand, learned Senior DR placed reliance on the order of revision passed by the CIT and submitted that the CIT was justified in assuming jurisdiction u/s 263 of the Act, as the AO failed to examine the issue of exemption of donations under the provisions of sec.11(1)(d) of the Act.

7.

We have heard rival submissions and perused the material on record. The only issue in this appeal to be adjudicated upon is whether the ld.CIT was justified in assuming jurisdiction under the provisions of sec.263 of the IT Act, 1961. Mere perusal of the order passed u/s 263 of the IT Act by the learned CIT, it is clear that the CIT was of the opinion that the receipt of donation of Rs.23,73,039/- and Rs.15.00 lakhs was not examined from the point of taxability under the provisions of Sec.11(1)(d) of the IT Act, 1961. Neither is it discernable from the assessment order that the AO had examined the donation from the point of their taxability u/s 11(1)(d) of the Act. The AO merely examined the issue in the light of the provisions of sec.115BBC(3) of the Act. It is needless to mention that the provision of sec.15BBC(3) of the IT Act and 11(1)(d) of the Act operate in different fields. The provisions of sec.11(1)(d) were amended by direct laws Amendment Act, 1989 with effect from 01-04-1989 to the effect that the voluntary contribution with specific direction forming part of corpus of the trust would constitute income within the meaning of sec.2(24)(iia) of the IT Act. Only after treating the corpus

Page 4 of 4 donation as income, the the exemption can be claimed under the provisions of sec.11(1)(d) by showing the necessary evidence to the effect that the donations are made with the specific direction to form part of the corpus of the trust. The AO never examined this aspect during the course of assessment proceedings. It is trite law, as held by the Hon’ble Apex Court in the case of Malabar Ind. Co.Ltd Vs CIT 243 ITR 83 non-application of mind by the AO on the issue, and absence of material on record to support the claim renders the assessment order erroneous and prejudicial to the interest of revenue. Respectfully following the ratio laid down by the Hon’ble Apex Court in the case cited supra, we uphold the action of the CIT in assuming jurisdiction u/s 263 of the IT Act.

8.

In the result, the appeal filed by the appellant-trust is dismissed.

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