Commissioner of Income Tax vs Uttaranchal Welfare Society

We have heard Shri Dhananjai Awasthi, learned counsel appearing for the Department. Shri Nikhil Agrawal appears for the respondent-assessee. This income tax appeal u/s 260A of the income tax Act, 1961, arises out of an order of the income tax Appellate Tribunal, Amritsar Bench, Camp at Meerut, dated November 28, 2008, in respect of the assessment year 2001-02.

The appeal has been preferred by the Revenue on the following substantial questions of law:

Whether, on the facts and in the circumstances of the case as per law, the hon''ble income tax Appellate Tribunal was legally justified in deleting the addition made by the Assessing Officer of Rs. 96,50,000 on account of treating the donations as voluntary whereas the Assessing Officer on test check basis found that the donations were not voluntary and made the additions u/s 68 of the income tax Act, 1961, as explained cash credits which was clear violation of section 11(1)(d) of the income tax Act, 1961?

Whether, on the facts and in the circumstances of the case as per law, the hon''ble income tax Appellate Tribunal was right in giving the exemption u/s 11 of the income tax Act, 1961, to the assessee-society in spite of the fact that the assessee-society has failed to comply with the provisions of section 11(1)(d) and violated the provisions of section 13 of the income tax Act?

Whether, on the facts and in the circumstances of the case as per law, the hon''ble income tax Appellate Tribunal was right in dismissing the appeal of the Revenue on account of interest disallowed by the Assessing Officer amounting to Rs. 11,36,191 without giving any findings?

Whether, on the facts and in the circumstances of the case as per law, the hon''ble income tax Appellate Tribunal was right in dismissing the appeal of the Revenue on account of caution money disallowed by the Assessing Officer amounting to Rs. 9,70,035 without giving any findings?

In the present case, the Assessing Officer disallowed the exemptions for donations of Rs. 96,50,000 received from 60 persons, who had donated the amounts ranging from Rs. 8,000 to Rs. 19,000 and others. The Assessing Officer 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.

The Commissioner of income tax (Appeals) allowed the exemptions under sections 11 and 12 during the continuation of the registration u/s 12A 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 the activities in accordance with the object of the trust and registration granted u/s 12A has not been withdrawn, the exemptions cannot be denied.

The Tribunal upheld the order with further findings that admittedly more than 75 per cent 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 the 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.

Shri Nikhil Agarwal, appearing for the respondent-assessee, has relied on Director of Income Tax (Exemption) Vs. Keshav Social and Charitable Foundation, in which following S.RM.M.CT.M. Tiruppani Trust Vs. The Commissioner of Income Tax, it was held that u/s 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 per cent 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 u/s 12A is continuing and valid, exemptions cannot be denied.

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