INCOME TAX OFFICER (EXEMPTION), DEHRADUN V. M/S CIVIL SERVICES INSTITUTE, OLD MUSSOORIE ROAD

ITA 158/DDN/2025

AI Insights

The case involves the Income Tax Department (Revenue) appealing against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, which allowed exemptions to M/s. Civil Services Institute under section 12A of the Income Tax Act for the assessment year 2014-15. The primary issues were the treatment of corpus funds received and the taxability of interest income on the grounds of mutuality. The Tribunal referenced a previous decision for the assessee for AY 2015-16, which had set a precedent on these issues, leading to the dismissal of the Revenue's appeal.

• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Dehradun
• Assessment Year: 2014-2015
• Appeal Filed On: 27-08-2025
• Other Referred Cases: ITA No.4485/Del/2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMAR PAL SINGH
• Assessee Lawyers: MOHD. FAIZ; MAKING FOLLOWING
• Keywords: Capital receipt; Capital expenditure; Earning of tax free income
• Section: 12AA; 12A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DEHRADUN “DB” BENCH: DEHRADUN BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER [THROUGH VIRTUAL MODE] ITA No.158/DDN/2025 (ASSESSMENT YEAR 2014-15) ITO, 130A, Subhash Road, Dehradun Vs. M/s. Civil Services Institute, Old Mussoorie Road, Near Moravian Institute, Post Rajpur, Dehradun 248001 PAN-AABTC6000B (Appellant) (Respondent) Department by Shri Amar pal Singh, Sr.DR Assessee by Shri Mohd. Faiz, CA Date of Hearing 13.01.2026 Date of Pronouncement 25.03.2026 O R D E R PER MANISH AGARWAL, AM: This appeal is filed by the Revenue against the order dated 29.06.2025 by Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [‘Ld. CIT(A)’ in short], in Appeal No. CIT(A), Dehradun/10545/2019-20 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’ in short) arising out of assessment order dated 30.11.2019 passed u/s 143(3)/148 of the Act for A.Y. 2014- 15. Printed from counselvise.com 2 ITA No.158 /Ddn/2025 2. Ground of appeal No.1 raised by the Revenue is against the order of Ld. CIT(A) in allowing the exemption u/s 12A of the Act on the corpus funds received by the appellant society. 3. Having considered the arguments of both the parties and perused the material available on record. At the outset, from the perusal of order of Ld. CIT(A), it is observed that identical issue was came up for consideration in the case of assessee for AY 2015-16 wherein the corpus funds received from Government of INR 5.00 crores was treated as the capital receipt and eligible for exemption. The Co-ordinate Bench of Tribunal vide its order dated 24.09.2018 in ITA No.4485/Del/2018 had decided this issue in favour of the assessee and held that the said amount has a corpus funds. The relevant observations of the co-ordinate Bench as contained in para 5 & 6 of the said order are reproduced as under:- 5. “We have perused submissions advanced by both sides in light of records placed before us. 6. It is observed from communication between assessee and Government of Uttarakhand Department of Culture, Tourism and Games, Dehradun, dated 01/12/14, that funds were released, as ‘corpus fund’ for operation of Civil Services Institute construction at Dehradun. It is also observed that only reason for disallowance of claim of assessee is because, phrase “Corpus Fund” has not been mentioned in letter dated 23/03/11, issued by Principal Secretary, Government of Uttarakhand to Director of Sports, Uttarakhand Culture, Tourism and Games. However it is observed that in Minutes of meeting by Government of Uttarakhand Department of Culture, Tourism and Games, dated 31/05/13 presided over by Chief Secretary, there is a specific reference regarding budget allocation of Rs. 5 crore as “corpus fund” from Sports Department to assessee, for its daily functioning in clause (vii). For sake of convenience said clause(vii) is reproduced herein: Printed from counselvise.com 3 ITA No.158 /Ddn/2025 “(vii) but detailed discussion was made in respect of daily functioning of the institution. This year one-time budget allocation of Rs. 5 crores as corpus funds from sports Department has been made. During the discussion it was also felt that there is a need for further of additional fund, so that there is no hindrance in the functioning. It was directed that for sanction of additional corpus fund the file to be submitted to Hon’ble Chief Minister through proper channel.” 6.1. We therefore do not have any doubt on nature of funds to be towards ‘corpus’. Further assessee has been able to prove that corpus fund was received for meeting out capital expenditure which according to explanation of assessee have been used actually to meet the capital expenditure. Thus, in our considered opinion, corpus fund which is meant for specific purpose to meet out capital expenditure could not be part of annual receipts of the Society, even if no registration u/s 12AA has been granted. 6.2. Accordingly ground nos. 1 to 3 raised by assessee stand allowed.” 4. Ld. CIT(A) had also followed the aforesaid order of Tribunal while allowing the appeal of the assessee on this issue and the Revenue has not controverted the findings given therefore, by respectfully following the order of tribunal in the case of assessee itself for Ay 2015-16, Ground of appeal No.1 raised by the Revenue is dismissed. 5. Ground of appeal No.2 raised by the Revenue is with respect to treating the interest income as exempt income on the principal of mutuality. 6. Heard the parties and perused the material available on record. This issue is also covered by the decision of the Co-ordinate Bench Printed from counselvise.com 4 ITA No.158 /Ddn/2025 in AY 2015-16 wherein in ITA No.4485/Del/2018, Bench has decided this issue in favour of the assessee by making following observations:- 10. “We have perused submissions advanced by both the sides in the light of records placed before us. 10.1. In our considered opinion, amount on which interest has been earned by assessee, itself is exempt from tax under ‘doctrine of mutuality’. Further it has been observed from objects of the society that treatment of excess funds must be in furtherance of objects of society. In the instant case, surplus funds were to be used for any specific service, infrastructure, maintenance or for any other direct benefit for members. Further from submissions of assessee before Ld. CIT (A) it is observed that bank with whom fixed deposits are maintained are not its members and assessee did not claim for any exemption of interest income on the basis of ‘doctrine of mutuality’, instead has considered for taxability under head ‘Income from Business’. We therefore do not find any reason to change the head of interest income to “income from other sources”. 7. Before us, Revenue has merely stated that the said order is challenged before the Hon’ble Jurisdictional High Court. It is observed that hon’ble high court has admitted the appeal of the revenue but has not stayed the order of Tribunal thus mere admission of appeal has not barred the Tribunal to follow its order in the case of assessee for other assessment year. Therefore, by respectfully following the aforesaid order of Tribunal, we hold that the interest income earned as exempted on the basis of principal of mutuality and accordingly, order of Ld. CIT(A) is hereby, upheld. Printed from counselvise.com 5 ITA No.158 /Ddn/2025 8. In the result, appeal of the Revenue is dismissed. Order pronounced in the open Court on 25.03.2026. Sd/- Sd/- Sd/- Sd/- (SATBEER SINGH GODARA) (MANISH AGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 25.03.2026 *Amit Kr. Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Printed from counselvise.com "