Donation out of accumulated funds u/s. 11(2) are not allowable as application of income

Sahachari Foundation Vs ITO (ITAT Delhi)

ITAT Delhi held that provisions of section 11(3) states that donations given out of accumulated funds u/s 11(2) of the Income Tax Act of earlier previous years are not allowable as application of income for charitable or religious purposes and the same shall be deemed to be income of the assessee.

Facts- The assessee-society is registered u/s 12AA of the Act. Return was selected for scrutiny assessment and assessment was completed accepting the returned income of the assessee vide order dated 27.12.2019. Assuming jurisdiction u/s 263 of the Act, the CIT(E) issued a show cause notice to the assessee.

Conclusion- Held that provisions of section 11(3) are very clear wherein it has been mentioned that donations given out of accumulated funds u/s 11(2) of the Act of earlier previous years are not allowable as application of income for charitable or religious purposes and the same shall be deemed to be income of the assessee. Therefore, in our considered opinion, an error has crept in the assessment order dated 27.12.2019, framed u/s 143(3) of the Act which has made the assessment order erroneous in law. Since there is a revenue leakage in so far as utilization of corpus fund of Rs. 41 lakhs, the assessment order is also prejudicial to the interest of the revenue.

FULL TEXT OF THE ORDER OF ITAT DELHI

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