SACRED HEART EDUCATIONAL RELIGIOUS & CHARITABLE SOCIETY,LUDHIANA vs. INCOME-TAX OFFICER (EXEMPTIONS) WARD, JALANDHAR

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ITA 561/ASR/2019Status: DisposedITAT Amritsar18 March 2022AY 2014-154 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal directed the AO to verify the assessee's total utilization of funds, considering that after deducting the income tax payment, the utilization still exceeds the mandatory 85% limit. The grounds of appeal were allowed for statistical purposes.

What were the facts?

The assessee, a charitable society, debited Rs. 12,46,640/- paid as income tax for AY 2010-11 to its receipt and expenditure account. The AO disallowed this as application of income, leading to an addition. The CIT(A) confirmed this addition.

What were the issues?

Whether income tax paid for a prior assessment year can be considered as application of income for the current year, and whether the 85% utilization rule for charitable purposes was violated.

Which sections of the Income-tax Act were involved?

Section 11,Section 12A,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR

Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE

Hearing: 03.03.2022Pronounced: 25.03.2022

ORDER Per Anikesh Banerjee, JM:

The instant appeal is filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-4, Ludhiana [in brevity the CIT(A)], bearing Appeal No. 02/ROT/IT/CIT(A)-4/LDH/2017-18 dated 04.06.2019 passed u/s 143(3) of the Income Tax Act,1961 in relation to Assessment Year 2014-15.

2.

The assessee has raised the following grounds of appeal:-

“1. That the Ld. Commissioner of Income- Tax (Appeals) has wrongly erred on facts and on law by confirming the addition of a sum of Rs. 12,46,640/ being the amount of Income Tax paid- for Assessment Year 2010-11 which was inadvertently debited to Receipt and Expenditure Account of the assessee, debatable addition as income of the assessee, after

Sacred Heart Educational Religious & Charitable Society v. The ITO ignoring the fact that the utilization of funds even after excluding this amount exceeds the mandatory limit of 85%.

2. That the Ld. Commissioner of Income- Tax (Appeals) has erred in failing to consider various replies and submissions placed on record in the proceedings before her which is arbitrary and unjustified.

3.

That the order of Ld. Commissioner of Income-Tax (Appeals) is erroneous, arbitrary, opposed to the facts of the case and is unsustainable in law.

4.

That the appellant craves for permission to amend or add any other ground of appeal, before the appeal is finally heard and disposed of.

3. The brief fact is that the assessee filed its return u/s 139(1). In the income expenditure account, the assessee claimed expenses amount of Rs. 12,46,640/- for payment of direct tax related to financial year 2009-10 relevant to assessment year 2010-11 as utilization/application of income. Accordingly, the Ld. Assessing Officer [in brevity the AO] disallowed the violation of condition of section 12A r.w.s. 11 of the Act regarding 85% utilization for charitable purpose. In fact, the assessee’s gross receipt was amount of Rs. 3,53,58,892.71/- and total utilization of fund amount to Rs. 4,24,89,568.91/- after reducing the income tax paid amount of Rs. 12,46,640/-. This payment of income tax amount to Rs.12,46,640/- was added if the assessee’s total income by the Ld AO. The assessee filed appeal before the ld. CIT(A). But the Ld. CIT(A) did not consider the same and took the income tax liability payment as addition of income and the addition was sustained accordingly.

4. After the order of the Ld. CIT(A), the assessee filed an appeal before us.

5.

During the hearing the assessee filed a paper book and the following calculation was filed which is reproduced as under:

“Computation of income Gross Receipts 3,53,58,892,.71

Sacred Heart Educational Religious & Charitable Society v. The ITO Less utilization of funds after reducing Rs. 12,46,460/- for income tax paid Revenue Expenditure 2,78,69,956.91 Capital Expenditure 1,46,19,612.00 4,24,89,568.91 ------------------ Total income (-) 71,30,676.2”

6.

The assessee’s total utilization of fund after reducing the payment is amount of Rs. 4,24,89,568.91/-. So the assessee’s utilization fund is more than 85% accordingly no violation of section 11 of the Act. In this moment we are not able to verify the details calculation of assessee. So, the direction is made to the Ld. AO to verify the only the utilization of fund in the context of above mentioned discussion.

7.

It is to be directed to the ld Assessing Officer to consider the total utilization of fund of the assessee which is more than 85% of Gross Receipt and calculate the tax accordingly with due consideration of section 11 of the Act after deducting the payment of income tax amount of Rs. 12,46,460/-. So, the ground of the assessee is allowed for statistical purposes.

8.

In the result, the appeal of the assessee is allowed for statistical purposes.

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