Commissioner of Income Tax vs Simla Chandigarh Diocese Society

Adarsh Kumar Goel, J.—The Revenue has preferred this appeal u/s 260A of the income tax Act, 1961 (for short, "the Act") against the order of the income tax Appellate Tribunal, Chandigarh Bench "B'' dated January 29, 2008, passed in I.T.A. No. 888/Chandi/2006 for the assessment year 2003-04, proposing to raise the following substantial questions of law:

(i) Whether, in the facts and circumstances of the case, the hon''ble income tax Appellate Tribunal is right in law in holding that the assessee is entitled for exemption u/s 11(1)(a) of the income tax Act, 1961?

(ii) Whether, in view of the above observations, the hon''ble income tax Appellate Tribunal is justified in deleting the following additions and disallowances":

(a) Addition of Rs. 50,39,288 made on account of interest earned from deposits/investments out of unutilized foreign contributions relating to the current assessment year as well as earlier assessment year(s).

(b) Addition of Rs. 23,76,417 made on account of interest earned from funds earmarked for specific projects, interest earned on savings bank accounts and interest earned from FDRs.

(c) Addition of Rs. 27,30,000 made on account of rental income under the head ''Income from house property''.

(d) Addition of Rs. 25,12,438 made on account of foreign contributions received.

(e) Addition of Rs. 18,99,300 made on account of registration charges and buildings funds.

(f) Disallowance of Rs. 67,42,583 being expenditure out of ear marked funds/current liabilities?

(iii) Whether, in the facts and in the circumstances of the case, the hon''ble income tax Appellate Tribunal is right in holding that ''trust'' means faith and not the status in the context of the assessee?

(iv) Whether, in the facts and circumstances of the case, the hon''ble income tax Appellate Tribunal''s order is perverse in accepting the decision of the learned Commissioner of income tax (Appeals) on the issue of considering ''revised Form No. 10'' furnished by the assessee when there is no provision for filing a revised Form No. 10 under the income tax Act, 1961?

(v) Whether the hon''ble income tax Appellate Tribunal was correct in law in coming to the conclusion that ''interest income'' is not ''income from other sources'' and, therefore, part and parcel of accumulated funds, especially when the ''interest income'' is ''income from other sources'' and the same is not applied for fund purpose but for profit on funds till the same are utilized.

The assessee is a charitable society and is engaged in various activities including running of church and schools. It claimed exemption u/s 11(1)(a) and section 12(1) of the Act. The same was declined by the Assessing Officer on the ground that the assessee was a society and not a trust. The Assessing Officer also made additions in respect of rental income, foreign contributions, registration charges, building funds and expenditure out of earmarked funds. The Assessing Officer also raised objection that revised Form No. 10 was not furnished with the return. The Commissioner of income tax (Appeals) upheld the claim of the assessee, which view has been affirmed by the Tribunal.

We have heard learned counsel for the appellant.

As regards question of assessee being eligible for exemption u/s 11(1)(a), irrespective of its constitution, we have dealt with the matter in our separate order passed today in I.T.A No. 939 of 2008 (CIT v. Sarvhitkari Education Society see page 93 supra). The question raised, thus, cannot be held to be substantial question of law.

As regards filing of Form No. 10 after the return but before the assessment, the Commissioner of income tax (Appeals) observed as under:

It was pointed out that the appellant has accordingly modified Form No. 10 in the course of assessment proceedings. The modified Form No. 10 has also been rejected by the Assessing Officer on the ground that there is no provision in the Act for revising Form No. 10. It was submitted that there is no specific bar prohibiting the appellant from modifying the figure of accumulation. In the light of the ratio laid down by the Supreme Court in the case of The Commissioner of Income Tax, Vidarbha, Nagpur Vs. The Nagpur Hotel Owners'' Association Nagpur, , Form 10 may be furnished before the assessing authority completes the concerned assessment.

The matter being fully covered by the judgment of the hon''ble Supreme Court in Nagpur Hotel Owners'' Association [2001] 247 ITR 201, the question cannot be held to be substantial question of law.

As regards the question of additions made on account of interest earned on deposit out of unutilized foreign contributions, Form No. 10 having been held to be valid, the additions were not called for. The claim for exemption falls u/s 11(1) (a); as income has been derived from property. This reason also applies to other additions rightly, as held by the Commissioner of income tax (Appeals) as well as the Tribunal.

In view of the above, we are of the view that no substantial question of law arises. The appeal is dismissed.