M/S BALALOK EDUCATIONAL SOCIETY OF TUTELAGE , CHENNAI V. ACIT , CHENNAI

ITA 662/CHNY/2022

AI Insights

The case involves M/s. Balalok Educational Society, a registered trust, which received corpus fund donations amounting to Rs.205 Lacs from another trust, M/s. Srinivasa Educational Trust, during the assessment year 2016-17. The Assessing Officer treated these donations as income, alleging that the funds were used for day-to-day operations and not maintained in a separate account for corpus purposes. The Commissioner of Income Tax (Appeals) upheld this decision, suspecting that the trusts were routing funds to avoid taxation. However, the Tribunal found no evidence to support these allegations and accepted the assessee's classification of the donations as corpus funds, directing a re-computation of the assessee's income.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133862 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-03-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 04-08-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 12AA

Judgement Text

आयकर अपीलीय अिधकरण ‘ए’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI माननीय +ी वी. द ु गा1 राव, ाियक सद3 एवं माननीय +ी मनोज कु मार अ7वाल ,लेखा सद3 के सम9। BEFORE HON’BLE SHRI V. DURGA RAO, JUDICIAL MEMBER AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.662/Chny/2022 (िनधा1रण वष1 / Assessment Year: 2016-17) M/s. Balalok Educational Society of Tutelage No.4, Tarachand Nagar, Virugambakkam, Chennai – 600 092. बनाम/ V s. ACIT Central Circle-1(2), Chennai. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AAAT B -3 2 5 2 -F (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Appellant by : Shri Y. Sridhar (C.A)-Ld. AR थ की ओरसे/Respondent by : Shri S. Venkatramani (CIT) – Ld. DR सुनवाई की तारीख/Date of Hearing : 20-03-2023 घोषणा की तारीख /Date of Pronouncement : 24-03-2023 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2016-17 arises out of the order of learned Commissioner of Income Tax (Appeals)-18, Chennai [CIT(A)] dated 27-05-2022 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) of the Act on 13-12-2018. The sole grievance of the assessee is that corpus donation received by it during the year has been treated as its income. Having heard rival submission, the appeal is disposed-off as under. ITA No.662/Chny/2022 - 2 - 2.1 The assessee is a registered trust u/s. 12AA of the Act. During assessment proceedings, it transpired that the assessee received corpus fund donation of Rs.205 Lacs from another Trust i.e., M/s. Srinivasa Educational Trust. The same was claimed by the assessee to be exempt u/s. 11(1)(d) of the Act. The assessee submitted that the funds were received and treated as corpus fund to be utilized for future development of the trust and educational activity of the society. The donation was received in cash on various dates as tabulated in opening para of the assessment order. The assessee submitted that the funds so received were kept in fixed deposit with the bank which is one of the prescribed modes of investment u/s 11(5). The same was evident from the fact that fixed deposits reflected increase of Rs.278 Lacs during the year. In support of receipt of donation, the assessee furnished a letter from donor confirming that the donation was paid and it was towards corpus fund. 2.2 However, Ld. AO alleged that the assessee utilized the same in its day-to-day operations. No separate receipts were issued by the assessee to the donor for the same. The corpus donation was not maintained in a separate account whereas the same had to be utilized towards specific purposes only. The assessee merely reflected the same on liability side of Balance Sheet. Finally, the donations were treated as income of the assessee. 2.3 Upon further appeal, Ld. CIT(A) confirmed the stand of Ld. AO on following reasoning: 7.5 It can be seen from the above that there is no correlation between the donation claimed to have been received towards corpus and the fixed deposits made. Fixed deposit has not been made immediately on receipt of the cash from the donor on the very same day. Assessee has not demonstrated that the cash received from the donor has not been used for day-to-day purposes other than corpus purpose in ITA No.662/Chny/2022 - 3 - between. Assessee has shown to have received Rs.14,00,000 on 29.04.2015, Rs.40,00,000 on 06.05.2015, Rs.30,00,000 on 07.05.2015 and another Rs.30,00,000 on 08.05.2015, totalling Rs.1,14,00,000 from the said donor. But, FD of Rs.1,00,00,000 only was made on 08.05.2015. On 09.05.2015, it claimed to have received Rs.12,00,000 only from the donor, but it made FD of Rs.1,00,00,000 on 11.05.2015. The ledger shows FD of Rs.1,50,00,000 was withdrawn immediately on 13.05.2015. The reasonable inference from the above is that the appellant had used the funds for its other purposes and has not earmarked the same as corpus donations by putting it separately in the corpus fund a/c in bank. The assessee failed to furnish any evidence that separate bank account has been maintained for corpus account. The assessee also has not tendered any evidence on the application of the said donations to the infrastructural development of the trust. The fact that the trustees are common in both the trusts leads to further suspicion as to whether the trust had really received the donations from the other trust for corpus purposes so as to exempt from application during the year u/s 11(1)(d). Further it is seen that the assessee trust has claimed that it had made a donation of Rs.1,46,00,000 to another group trust namely Jaya Educational Trust (JET). It is noticed that Shri.A. Kanagaraj is the Chairman of Jaya Educational Trust and Srinivasa Educational Trust (SET). He is the Secretary of the assessee trust. Further, it is seen that JET and SET function from the same address: No.8, II Main Road, Krishnapuram, CTH Road. Thiruninravur - 602204. The above facts show that whenever there is shortfall of 85% application, the group trusts route the amounts to another group, trust acting in a concerted manner, so as to escape from the clutches of taxation. All things considered in the backdrop of preponderance of probabilities, I am of the view that the appellant had not discharged its onus of proving that the amounts claimed to have been received from Srinivasa Educational Trust represent, corpus donations within the meaning of section 11(1)(d) of the Act. I therefore confirm the addition made by the AO and dismiss the grounds raised. The Ld. CIT(A) thus confirmed the stand of Ld. AO, inter-alia, on the ground that there was no one-to-one correlation between the donations and the FDRs made by the assessee. The Ld. CIT(A) also raised a suspicion about the nature of donations received from another trust by observing that the donations were made merely to avoid the taxation. Aggrieved, the assessee is in further appeal before us. 3. From the facts, it emerges that the assessee has received donations of Rs.205 Lacs from another registered trust. The same has been classified as Corpus Donation in the Balance Sheet and shown separately on the liability side. The assessee has also produced ITA No.662/Chny/2022 - 4 - confirmation from the donor that the donations were paid and the same were corpus donation. The confirmation has already been reproduced in the impugned order. In such a case, the fact of donation could not be denied and the same could not be termed as suspicious donation without dislodging the claim of the assessee. There is nothing on record in favor of revenue to suggest that the donations were not genuine. Therefore, the reasoning of Ld. CIT(A) could not be accepted. Another fact is that the assessee has classified the corpus donation separately in the Balance Sheet and there is increase in FDRs to the extent of Rs.278 Lacs during the year which is much more than impugned corpus donation of Rs.205 Lacs. The FDR is one of the prescribed modes of investment u/s 11(5). In out considered opinion, there need not be immediate one-to-one correlation in such a case. It was sufficient enough that the donations were classified / earmarked separately in the financial statements. The assessee has already done the same. Therefore, the donations could not be treated as income of the assessee. We order so. The Ld. AO is directed to re-compute the income of the assessee. 4. The appeal stand allowed in terms of our above order. Order pronounced on 24 th March, 2023. Sd/- (V. DURGA RAO) ाियक सद3 /JUDICIAL MEMBER Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद3 / ACCOUNTANT MEMBER चे*ई / Chennai; िदनांक / Dated : 24-03-2023 EDN/- आदेश की Uितिलिप अ 7ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु /CIT 4. िवभागीय ितिनिध/DR 5. गाड फाईल/GF