ADIT(E), New Delhi V. VLCC Foundation, New Delhi

ITA 608/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3813 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 25-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 08-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Keywords: Charitable institution
• Section: 143(3); 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H : NEW DELHI BEFORE SHRI C.L.SETHI, JM AND SHRI R.C.SHARMA, AM ITA NO.608/DEL/2010 ASSESSMENT YEAR : 2006-07 ADIT(E), TRUST CIRCLE-IV, NEW DELHI. VS. M/S VLCC FOUNDATION, C-42, ANAND NIKETAN, NEW DELHI. PAN NO.AAATV2636D. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K.CHAND, SR.DR. RESPONDENT BY : MS.SWEETY KOTHARI, CA. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 30.11.2009 FOR THE AY 2006-07, IN THE MATTER OF ORD ER PASSED BY THE AO U/S 143(3) OF THE IT ACT. 2. THE REVENUE IS AGGRIEVED FOR ALLOWING EXEMPTION TO THE ASSESSEE TRUST U/S 11 OF THE IT ACT AND FOR CIT(A)S ACTION IN ACCEPTI NG DONATION GIVEN BY THE ASSESSEE TRUST TO THE OTHER INSTITUTION NOT HAVING SIMILAR MAIN OBJECT AS THE ASSESSEE TRUST WAS HAVING. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FROM THE RECORD, WE FOUND THAT THE AO ASSESSED THE INCOME OF ASSESSE E TRUST AT RS.12,67,020/- BY WITHDRAWING EXEMPTION U/S 11 OF THE IT ACT FOR TWO REASONS, (A) BY HOLDING THAT THE ASSESSEE IS NOT REGISTERED U/S 12A AS THE ASSES SEE COULD NOT PRODUCE ANY REGISTRATION CERTIFICATE U/S 12A AND, (B) THE ASSES SEE HAS FAILED TO SUBSTANTIATE THAT DONATION HAS BEEN PAID TO ANOTHER CHARITABLE TRUST FOR THE UTILIZATION BY THE DONEE TRUST TOWARDS THEIR CHARITABLE OBJECTS RELYING ON I NSTRUCTION NO.1132 OF THE CBDT. SINCE THE EXEMPTION WAS WITHDRAWN U/S 11 OF THE ACT , THE ENTIRE INCOME OF THE TRUST WAS BROUGHT TO TAX AS INCOME FROM OTHER SOURC ES WITHOUT ALLOWING DONATION PAID AS APPLICATION OF INCOME AND THE ASSESSEE WAS ASSESSED AS AOP. ITA-608/DEL/2010 2 4. IN AN APPEAL FILED BEFORE THE CIT(A), THE CIT(A) CALLED FOR A REMAND REPORT FROM THE AO WHEREIN FOLLOWING WAS THE NOTING OF AO WITH REGARD TO ASSESSEES REGISTRATION U/S 12A OF THE ACT:- I PERSONALLY CHECKED THE RECORDS OF ITO(HQRS), O/O THE DIT(E), DELHI AND COULD NOT BE FOUND WHETHER THE ASSESSEE H AS BEEN GRANTED REGISTRATION UNDER SECTION 12A, EVEN, I COULD NOT F OUND COPY OF REGISTRATION ORDER UNDER SECTION 12A IN THAT RECORD S. IT IS, THEREFORE, REQUESTED THAT CASE OF THE SAID ASSESSEE MAY BE DEC IDED ON MERITS ON THE BASIS OF ASSESSMENT ORDER COMPLETED BY MY PREDE CESSOR. 5. THE CIT(A) ALLOWED EXEMPTION TO THE ASSESSEE TRU ST U/S 11 AND ALSO DELETED THE ADDITION OF RS.12,67,015/- AFTER HAVING THE FOL LOWING OBSERVATION:- 5.1 ON PERUSAL OF THE INSTRUCTION 1132 DATED 05/01 /1978 ISSUED BY THE CBDT, IT IS SEEN THAT IT CLEARLY MENTIONS THAT THE PAYMENT OF A SUM BY ONE CHARITABLE TRUST TO ANOTHER FOR UTILIZAT ION BY THE DONEE TRUST TOWARDS ITS CHARITABLE OBJECTS IS PROPER APPL ICATION OF INCOME FOR CHARITABLE PURPOSE IN THE HANDS OF THE DONEE TR UST. IT HAS ALSO BEEN MENTIONED THAT THE DONOR TRUST WILL NOT LOSE E XEMPTION U/S 11 OF THE ACT MERELY BECAUSE THE DONEE DID NOT SPEND THE DONATION DURING THE YEAR OF RECEIPT ITSELF. THE INSTRUCTION DID NO T STATE THAT THE DONOR HAS TO SUBSTANTIATE THAT THE FUNDS WERE UTILIZED BY THE DONEE FOR THEIR CHARITABLE OBJECTS. RATHER, IT SUPPORTS THE CONTEN TION OF THE APPELLANT. IF THE DONEE TRUST DOES NOT USE THE FUN DS FOR CHARITABLE OBJECTS, IT IS THE DUTY OF THEIR ASSESSING OFFICER TO BRING THE SAID RECEIPT INTO TAX NET IN THE HANDS BUT THE SAME CANN OT BE TAXED IN THE HANDS OF THE DONOR IN ANY MANNER. 5.2 IN THIS CASE, THE APPELLANT HAS PLACED ON RECOR D ALL THE EVIDENCES TO SHOW THAT DONATIONS HAVE BEEN GIVEN TO CHARITABLE TRUST, INSTITUTIONS AND POOR AND NEEDY PEOPLE. THE ASSESS ING OFFICER DID NOT POINT OUT ANY DISCREPANCY IN THE DONATION GIVEN AND DID NOT PLACE ANY EVIDENCE ON RECORD TO SHOW THAT DONATIONS WERE NOT GIVEN FOR CHARITABLE PURPOSE. IN THE ABSENCE OF THE SAME, FO LLOWING THE ABOVE INSTRUCTION, THE AMOUNT GIVEN AS DONATION WILL BE D EEMED AS APPLICATION OF THE FUNDS FOR CHARITABLE PURPOSE. I N VIEW OF THE EVIDENCES PLACED ON RECORD AND NO ADVERSE FINDING O F THE ASSESSING OFFICER REGARDING UTILIZATION OF FUNDS, THE EXEMPTI ON OF THE APPELLANT CANNOT BE WITHDRAWN. THUS, THE ACTION OF THE ASSES SING OFFICER IS HEREBY REVERSED. THE APPELLANT IS ELIGIBLE TO EXEM PTION U/S 11 OF THE ACT AND THUS, THE ADDITION OF RS.12,67,015/- IS HER EBY DELETED AND THE EXEMPTION U/S 11 IS ALLOWED TO THE APPELLANT. ITA-608/DEL/2010 3 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAR EFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPU TE TO THE WELL-SETTLED LEGAL PROPOSITION THAT EXEMPTION U/S 11 CAN BE ALLOWED TO AN ASSESSEE WHO IS REGISTERED U/S 12A OF THE IT ACT. SECTION 12A PRESCRIBES COND ITION FOR APPLICABILITY OF SECTION 11 & 12 AND CLEARLY STATED THAT PROVISIONS OF SECTION 11 AND 12 SHALL NOT APPLY IN RELATION TO AN INCOME OF ANY TRUST OR INST ITUTION UNLESS IT IS REGISTERED U/S 12AA OF THE IT ACT. AS PER FINDING RECORDED BY THE AO WHILE FRAMING THE ASSESSMENT AS WELL AS IN THE REMAND REPORT, IT IS C LEAR THAT ASSESSEE WAS NOT ABLE TO PRODUCE 12A REGISTRATION FOR THE YEAR UNDER CONSIDE RATION NOR ANY REGISTRATION CERTIFICATE WAS FOUND BY US ON RECORD TO SUBSTANTIA TE THE ASSESSEES CLAIM OF REGISTRATION U/S 12AA DURING THE YEAR UNDER CONSIDE RATION. THEREFORE, BEFORE EMBARKING UPON ALLOWABILITY OF DONATIONS GIVEN BY T HE ASSESSEE TRUST BY FOLLOWING THE INSTRUCTION NO.1132 DATED 5.1.1978 ISSUED BY TH E CBDT, THE CIT(A) SHOULD HAVE CONTROVERT THE FINDING RECORDED BY THE AO AND SHOULD HAVE GIVEN A CLEAR FINDING TO THE EFFECT THAT ASSESSEE WAS REGISTERED U/S 12A OF THE IT ACT WHICH HE HAS FAILED TO DO AND ALLOWED EXEMPTED TO ASSESSEE T RUST U/S 11 OF IT ACT, AND ACCEPTED ASSESSEES VERSION REGARDING UTILIZATION O F DONATION RECEIVED BY IT DURING THE YEAR AS PROPER UTILIZATION. IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER BACK TO HIM FOR DECIDING THE ISSUE AFRESH FOR ALLOWABILITY OF THE DONATIONS GIVEN BY T HE ASSESSEE TRUST AND CONSIDERING ITS CLAIM OF EXEMPTION U/S 11 AFTER RECORDING A CLE AR FINDING THAT REGISTRATION U/S 12AA EVEN IF GRANTED IN THE EARLIER YEAR HAS NOT BE EN WITHDRAWN DURING THE YEAR UNDER CONSIDERATION AND WAS IN FORCE DURING THE YEA R UNDER CONSIDERATION. THE CIT(A) IS TO DECIDE THE ISSUE AFRESH AS PER LAW. W E DIRECT ACCORDINGLY. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 11 TH JUNE, 2010. SD/- SD/- (C.L.SETHI) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11.06.2010. VK. ITA-608/DEL/2010 4 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR