National Culture Fund Vs ITO (ITAT Delhi)
Conclusion: The matter was remanded back to AO to review the non-taxability of interest from Fixed Deposit Receipts (FDRs) as part of the Corpus Fund under Section 11(1)(d) and and the decision of CIT(E) in respect of the condonation application in filing Form 10B belatedly.
Held: Assessee was a national fund created, by a notification of Ministry of Human Resources Development (Department of Culture) registered under section 12A. The return of income was filed declaring total income of Rs.84,24,460/-. During assessment proceedings, AO informed assessee that from the data available from system, it was seen that assessee had filed form 10 after due date and had set apart a large amount u/s 11(2). Assessee was asked to explain why the set apart amount should be allowed as the condition regarding filing of Form-10 as per Rule-17(2) was not fulfilled. Assessee submitted that the amount of 84,24,458/- was the balance amount of the amount accumulated in AY 2010-11 amounting to Rs.1,78,29,249/- minus amount utilized during AY 2016-17- Rs.94,04,791/-. It was further submitted that the nature of income as earned during AY 2010-11 consisted of fixed deposit interest of Rs.2,05,90,582/- and Rs.3,85,005/- being savings bank interest totaling Rs.2,09,75,587/-. Assessee relying upon the decision of the jurisdictional Delhi High Court in the case of CIT vs Divine Light Mission (2005) 278 ITR 659(Del.) submitted that the fixed deposit income was on account of provision of the Income Tax Act, which stated that the funds were to be accumulated in the particular form as prescribed within the Income Tax Act. According to the assessee, these were mandatory provisions which assessee had to follow in respect of the funds of assessee and not within the discretion of assessee. Accordingly, it was submitted that the Hon’ble Delhi High Court in this case had considered such fixed deposit interest income as not part of income, which was liable for income tax. AO took note of the fact that the audit report in Form-10B filed by the auditor had itself reported that the amount of Rs.84,24,458/- was deemed to be income within the meaning sub-section 3 of section 11. CIT(A) further held that all the three conditions mentioned in clause(a) (b) & (c) of section 11(2) had to be satisfied for the accumulated income to be excluded from the income of the year and held that the contention of the assessee that there was no mention of all the conditions to be met was not factually correct as the words ‘following conditions were complied with’ and made no exception to any condition. CIT(A), therefore, in view of the fact that the Form 10B as well as ITR was filed belatedly in terms of section 139(1) did not allow the exemption as claimed by assessee. It was held that there were two issues in this appeal i.e. the taxability of Rs.84,24,460/- and the non-allowance of accumulation u/s 11(2) amounting to Rs.2,85,12,371/-. For this, it had to be decided as to whether ‘interest from deposits as specified u/s 11(5) amounting to Rs.3,35,31,966/- was part of the Corpus Fund and therefore non-taxable u/s 11(i)(d). It appeared that the said plea was not taken by assessee either before the AO or before CIT(A). Further, no finding had been given by CIT(A) with respect to the condonation application filed by assessee before the CIT(E) vide letter dated 03.01.2019. Therefore, considering the facts in totality, the order of CIT(A) was set-aside and the matter was restored back to the file of AO for considering the above legal submission of the assessee regarding the non-taxability of interest amounting to Rs.3,35,31,966/- u/s 11(5) and the decision of CIT(E) in respect of the condonation application in filing Form 10B belatedly i.e. on 28.03.2018. After considering these aspects, AO would frame the assessment de-novo as per law after giving due opportunity of being heard to the assessee.
