Allahabad H.C : Treating the donations as voluntary whereas the A.O on test check basis found that the donations were not voluntary and made the additions u/s 68 of the I.T Act, 1961 as explained cash credits which was clear violation of Section 11 (1) (d) of the I.T. Act, 1961

High Court Of Allahabad

CIT, Ghaziabad Vs. Uttaranchal Welfare Society

Assessment Year : 2001-02

Section : 11, 68

Sunil Ambwani And Surya Prakash Kesarwani, JJ.

IT Appeal No. 442 Of 2009

August 8, 2013

ORDER

1. We have heard Shri Dhananjai Awasthi, learned counsel appearing for the department. Shri Nikhil Agrawal appears for the respondent-assessee.

2. This Income Tax Appeal under Section 260-A of the Income Tax Act arises out of an order of Income Tax Appellate Tribunal, Amritsar Bench, Camp at Meerut dated 28.11.2008 in respect of assessment year 2001-02.

3. The appeal has been preferred by the revenue on the following substantial questions of law:—

“1. Whether on the facts and circumstances of the case as per law the Hon’ble ITAT was legally justified in deleting the addition made by the A.O of Rs.96,50,000/- on account of treating the donations as voluntary whereas the A.O on test check basis found that the donations were not voluntary and made the additions u/s 68 of the I.T Act, 1961 as explained cash credits which was clear violation of Section 11 (1) (d) of the I.T. Act, 1961.

2. Whether on the facts and circumstances of the case as per law the Hon’ble ITAT was right in giving the exemption u/s 11 of the I.T. Act, 1961 to the assessee society inspite of the fact that the assessee society has failed to comply with the provisions of the Section 11 (1) (d) and violated the provisions of Section 13 of the I.T. Act.

3. Whether on the facts and circumstances of the case as per law the Hon’ble ITAT was right in dismissing the appeal of the revenue on account of interest disallowed by the AO amounting to Rs.11,36,191/- without giving any findings.

4. Whether on the facts and circumstances of the case as per law the Hon’ble ITAT was right in dismissing the appeal of the revenue on account of caution money disallowed by the AO amounting to Rs.9,70,035/- without giving any findings.”

4. In the present case the AO disallowed the exemptions for donations of Rs.96,50,000/- received from 60 persons, who had donated the amounts ranging from Rs.8000/- to 19000/- and others. The AO issued summons to 15 persons, out of these four persons denied the affidavits and signatures on the affidavits and also stated that they have not donated any money to the assessee. In another two cases they denied that they have any connection with the Society. On account of anonymous donations the benefit of Sections 11 and 12 was withdrawn.

5. The CIT (A) allowed the exemptions under Sections 11 and 12 during the continuation of the registration under Section 12-A on the ground that even if the genuineness of the donations were not proved, if the activities of the Trust are genuine and if it has carried out activities in accordance with the object of the Trust and registration granted under Section 12-A, has not been withdrawn, the exemptions cannot be denied.

6. The Tribunal upheld the order with further findings that admittedly more than 75% of the donations were applied for charitable purposes. It was held that Section 68 is not applicable to the facts of the case. Since the assessee has disclosed donations of Rs.96,50,000/- in its income and expenditure account and that it was not disputed that all the receipts, other than corpus donations was declared as income in the hands of the assessee. There was full disclosure of the income by the assessee. It was also not in dispute that the objects and activities of the assessee are charitable.

7. Shri Nikhil Agarwal, appearing for the respondent-assessee has relied on DIT (Exemption) v. Keshav Social & Charitable Foundation [2005] 278 ITR 152/146 Taxman 569 (Delhi) in which following S. RM. M. CT. M. Tiruppani Trust v. CIT [1998] 230 ITR 636/96 Taxman 635 (SC) it was held that under Section 11 (1) every charitable or religious trust is entitled to deduction of certain income from its total income of the previous year. The income so exempt is the income which is applied by the charitable or religious trust to its charitable or religious purposes in India. This is, of course, subject to accumulation up to a specified maximum which was 25 per cent. In that case it was found, as in the present case that the assessee had applied more than 75% of the donations for charitable purposes as per its objects. The Delhi High Court further held that Section 68 of the Act has no application in such case where the assessee had disclosed donations as its income. It was also not disputed that all receipts, other than corpus donations, would be income in the hands of the assessee. If there is full disclosure of the donation for whatever purpose and that the registration under Section 12-A is continuing and valid, exemptions cannot be denied.

8. We find that questions of law as raised are covered by the reasons given in judgments of Supreme Court and Delhi High Court cited above and do not require reconsideration in the present case.

9. The Income Tax Appeal is dismissed.

[Citation : 364 ITR 398]