Deputy Commissioner of Income Tax, (Exemptions), Circle-1, Bengaluru V. M/s. Christ Educational Society, Bengaluru

ITA 2892/BANG/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2964 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-03-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 28-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUZAFFAR HUSSAIN
• Assessee Lawyers: SUDHEENDRA B R
• Keywords: Charitable institution; Tax effect; Condonation of delay
• Section: 12A; 119(2)(b); 13

Judgement Text

ITA 2892/BANG/2017 M/S. CHRIST EDUCATIONAL SOCIETY, BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO. 2892/BANG/2017 ASSESSMENT YEAR: 2011-12 DEPUTY COMMISSIONER OF INCOME-TAX (E) CIRCLE-1, BANGALORE PAN NO : AAATC1122D VS. M/S. CHRIST EDUCATIONAL SOCIETY DHARAMARAM COLLEGE BANGALORE-500029. APPELLANT RESPONDENT APPELLANT BY : SHRI MUZAFFAR HUSSAIN, D.R. RESPONDENT BY : SHRI SUDHEENDRA B.R., A.R. DATE OF HEARING : 04.03.2020 DATE OF PRONOUNCEMENT : 13.03.2020 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST ORDER DATED 20.10.2017 PASSED BY LD. CIT(A)-14, BENGALURU AND IT RELATES TO ASSESSMENT YEAR 2011-12 . THE REVENUE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN HOLDING THAT THE DONATION GIVEN BY THE ASSESSEE TO ANOTHER TRUST IS NOT TO BE CONSIDERED AS APPLICATION OF INCOME, SINC E IT HAS BEEN PAID OUT OF ACCUMULATED INCOME. ITA 2892/BANG/2017 M/S. CHRIST EDUCATIONAL SOCIETY, BANGALORE PAGE 2 OF 6 2. THE FACTS RELATING TO THE ABOVE SAID ISSUE ARE S TATED IN BRIEF. THE ASSESSEE IS A CHARITABLE INSTITUTION RE GISTERED U/S 12A OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR S HORT] AND IS RUNNING EDUCATIONAL INSTITUTIONS. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE A SSESSEE HAS DONATED SUM OF RS.21 CRORES TO ANOTHER TRUST NA MED M/S. CHRIST UNIVERSITY TRUST. THE A.O. EXAMINED TH E SOURCES OF MAKING DONATIONS AND NOTICED THAT THE AS SESSEE HAS PAID A SUM OF RS.14.14 CRORES OUT OF THE MATURI TY PROCEEDS OF FIXED DEPOSITS KEPT WITH BANK. THE SAI D DEPOSITS WERE FOUND TO HAVE BEEN MADE BY THE ASSESS EE ON 5.4.2010. ACCORDINGLY, THE A.O. DREW THE INFERENCE THAT THE ASSESSEE HAS USED ITS ACCUMULATED FUNDS TO THE TUNE OF RS.14.14 CRORES, IN ORDER TO MAKE DONATIONS OF RS.2 1 CRORES TO M/S. CHRIST UNIVERSITY TRUST. ACCORDINGL Y, THE A.O. TOOK THE VIEW THAT THE ASSESSEE HAS VIOLATED T HE PROVISIONS OF EXPLANATION GIVEN U/S 11(1) OF THE AC T, WHICH STATES THAT THE DONATION GIVEN TO ANOTHER CHARITABL E TRUST OUT OF ACCUMULATED INCOME IS NOT CONSIDERED AS APPL ICATION OF INCOME. ACCORDINGLY, HE ADDED RS.14.14 CRORES T O THE TOTAL INCOME OF THE ASSESSEE. 3. THE LD. CIT(A), HOWEVER, TOOK THE VIEW THAT TH E CONCLUSION DRAWN BY THE A.O. THAT DONATIONS WERE MA DE OUT OF OPENING CASH BALANCE IS NOT CORRECT. ACCORD INGLY, HE ITA 2892/BANG/2017 M/S. CHRIST EDUCATIONAL SOCIETY, BANGALORE PAGE 3 OF 6 DELETED THE DISALLOWANCE AND HENCE, THE REVENUE IS IN APPEAL. AGGRIEVED, THE REVENUE HAS FILED THIS APPE AL. 4. AT THE TIME OF HEARING, THE LD A.R SUBMITTED THAT THE ASSESSEE HAD INITIALLY FILED FORM NO.10 U/S 11(2) O PTING TO ACCUMULATE UNUTILIZED INCOME OF RS.7,85,73,537/-. IN VIEW OF THE DECISION OF THE AO TO ASSESS RS.14,14,35,325 /- AS INCOME OF THE ASSESSEE ON ACCOUNT OF DISALLOWANCE O F INTER- TRUST DONATION AS APPLICATION OF INCOME, THE ASSESS EE HAS OPTED TO ENHANCE THE ACCUMULATION OF INCOME IN TERM S OF THE CBDT CIRCULAR NO.273 DATED 03-06-1980. ACCORDI NGLY, THE ASSESSEE HAS FILED AN APPLICATION U/S 119(2)(B) FOR CONDONATION OF DELAY IN FILING REVISED FORM NO.10 B EFORE DIT (EXEMPTION), BANGALORE AND THE SAME WAS CONSIDE RED AND CONDONED BY DIT, VIDE HIS LETTER IN F NO.18(44)/DIT(E)/FORM 10/2013-14 DATED 20-03-2014. ACCORDINGLY, THE ASSESSEE HAS FILED REVISED FORM NO .10 IN ORDER TO ACCUMULATE A SUM OF RS.26,86,00,000/- U/S 11(2) OF THE ACT AND THE SAME HAS ALSO BEEN ACCEPTED BY T HE AO. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE ISSUE AS TO WHETHER THE DONATIONS WERE GIVEN OUT OF CURRENT INC OME OR ACCUMULATED INCOME SHALL BECOME ACADEMIC IN NATURE. 5. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT THE ASSESSING OFFICE WAS ABLE TO ESTABLISH NEXUS BETWEE N THE DONATION AND SOURCES THEREOF, WHICH WAS THE MATURIT Y ITA 2892/BANG/2017 M/S. CHRIST EDUCATIONAL SOCIETY, BANGALORE PAGE 4 OF 6 PROCEEDS OF DEPOSITS MADE DURING THE FIRST WEEK OF BEGINNING OF THE PREVIOUS YEAR. THE DONATIONS GIVE N TO ANOTHER CHARITABLE TRUST OUT OF ACCUMULATED INCOME IS NOT TREATED AS APPLICATION OF INCOME. HENCE THE LD CIT( A) WAS NOT JUSTIFIED IN HOLDING THAT THE DONATION WAS PAID OUT OF CURRENT YEARS INCOME. 6. WE HEARD RIVAL CONTENTIONS. FROM THE SUBMIS SIONS MADE BY THE LD A.R, WE NOTICE THAT THE ASSESSEE HAS OPTED TO ACCUMULATE THE ABOVE SAID INCOME U/S 11(2) OF TH E ACT AND ACCORDINGLY, AFTER GETTING THE DELAY IN FILING FORM NO.10 BY LD. DIT (E), THE ASSESSEE HAS ALSO FILED REVISED FORM NO.10 ENHANCING THE AMOUNT ACCUMULATED BY IT. THUS , THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF RS.14.4 0 CRORES AS MATTER OF PRINCIPLE BEFORE LD CIT(A) AND HENCE IT WAS ONLY AN ACADEMIC EXERCISE. HENCE THE DECISION RENDERED BY LD CIT(A) DOES NOT HAVE ANY TAX EFFECT FOR THE YEAR UNDER CONSIDERATION. THERE SHOULD NOT BE ANY DISPUTE THAT THE AMOUNT THAT COULD BE ACCUMULATED U/S 11(2) OF THE ACT CANNOT EXCEED THE UNUTILIZED SURPLUS OF THE YEAR UNDER CONSIDERATION. IN THE INSTANT CASE, THE ASSE SSEE HAS ALREADY ACCUMULATED A SUM OF RS.26.86 CRORES, WHICH INCLUDED THE AMOUNT OF RS.14.40 CRORES DISALLOWED B Y THE AO. HENCE, AFTER GIVING EFFECT TO THE ORDER OF LD CIT(A), THE UNUTILIZED SURPLUS SHALL COME DOWN AND HENCE THE AM OUNT OF RS.26.86 CRORES WOULD RESULT IN ACCUMULATION OF AMOUNT ITA 2892/BANG/2017 M/S. CHRIST EDUCATIONAL SOCIETY, BANGALORE PAGE 5 OF 6 OVER AND ABOVE THE UNUTILIZED SURPLUS OF THE YEAR U NDER CONSIDERATION. HENCE THE REVENUES INTEREST IS NOT AFFECTED BY THE ORDER PASSED BY LD CIT(A). 7. IN THIS VIEW OF THE MATTER, THE ISSUE URGED BY THE REVENUE BEFORE WOULD BE ACADEMIC IN NATURE AND FURT HER THE DECISION RENDERED BY LD CIT(A) ON THE ABOVE SAI D ISSUE DOES NOT HAVE ANY REVENUE EFFECT. ACCORDINGLY, WE ARE OF THE VIEW THE ISSUE URGED BY THE REVENUE DOES NOT RE QUIRE ADJUDICATION. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS T REATED AS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH MARCH, 2020. SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 13 TH MARCH, 2020. /VG/ ITA 2892/BANG/2017 M/S. CHRIST EDUCATIONAL SOCIETY, BANGALORE PAGE 6 OF 6 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.