Case Law Details
Save A Family Plan (India) Vs DCIT (Exemptions) (Kerala High Court)
The case involves an appeal by a charitable trust registered under Section 12A of the Income Tax Act, 1961, claiming benefits under Section 11 of the Act. During the financial year 2013-14 (Assessment Year 2014-15), the appellant received domestic and foreign donations and distributed donations to 72 other institutions, also registered under Section 12A. The Assessing Officer, upon examining the appellant’s accounts, accepted the return of income in the assessment order dated 30.12.2016. Subsequently, the Commissioner of Income Tax (Exemptions), Kochi, initiated suo motu revisional proceedings under Section 263 and, by order dated 29.03.2019, set aside the assessment order, directing the Assessing Officer to re-examine the matter. The Commissioner reasoned that exemptions under Section 11(1)(a) should only apply if donations were made to institutions with a similar categorization under the Foreign Contribution (Regulation) Act, 2010 (FCRA).
The appellant appealed against this revisional order to the Income Tax Appellate Tribunal, Cochin Bench, which held that the donations constituted application of income for charitable purposes and were not affected by the FCRA provisions. However, the Tribunal further observed that donations should align with the trust’s objects and, since the assessment order did not address this, there was no illegality in the Commissioner’s exercise of Section 263 powers. The appellant contested this reasoning, raising two legal questions: whether the Tribunal correctly upheld the Commissioner’s exercise of revisionary jurisdiction, and whether evidence existed to justify such invocation.
The Kerala High Court analyzed the matter and noted that the Tribunal rightly concluded that donations to other charitable trusts amounted to application of income for charitable purposes, and Section 11 benefits are independent of the FCRA Act. Therefore, the Commissioner’s invocation of suo motu revision under Section 263 was unjustified. The Court emphasized that the Tribunal should not have extended its reasoning to sustain the revision order on grounds not cited by the Commissioner. The Court referenced the Division Bench decision in Commissioner of Income Tax v. Chandrika Educational Trust, establishing that when a Commissioner sets aside an assessment for a specific reason, the Tribunal cannot sustain the order on alternative grounds.
Applying this principle, the Kerala High Court found the appeal in favor of the appellant, holding that the revisional order was not sustainable in law. The questions of law raised by the appellant were answered in their favor, and the appeal was allowed, effectively confirming that the Commissioner overstepped the scope of Section 263 in this case.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The appellant is stated to be a Charitable Trust, having obtained registration under Section 12A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), and therefore entitled for the benefits flowing out of Section 11 of the Act. During the financial year 2013-14, relevant to the assessment year 2014-15, the appellant received various donations, both from India and foreign countries, and made further donations to 72 other institutions, which were also stated to be having registration under Section 12A of the Act. By Annexure-A assessment order dated 30.12.2016, the assessing authority examined the books of accounts and other records and accepted the return of income by the appellant. However, the Commissioner of Income Tax (Exemptions), Kochi, initiated suo motu revisional steps under Section 263 of the Act, leading to Annexure-B order dated 29.03.2019, as per which, the assessment order was set aside, remitting the matter back to the Assessing Officer for fresh disposal as per law. A reading of the afore order would show that, according to the revisional authority, only the donations made to institutions that have a similar nature of categorization under the Foreign Contribution (Regulation) Act, 2010 (hereinafter referred to as ‘the FCRA Act’), as that of the appellant herein were entitled for exemption. In the appeal instituted by the appellant against this order, the Income Tax Appellate Tribunal, Cochin Bench, by Annexure-E order dated 19.05.2025, found that the donations made by the appellant were not hit by the provisions of the Act and hence amounts to an application of income for charitable purposes. However, the Tribunal went on to hold further that the donations should be consistent with the objects of the Trust, and since the assessment order was silent in that regard, there was no illegality in the exercise of the revisional power under Section 263 of the Act. It is in the above circumstances that the appellant has instituted the captioned appeal, raising the following questions of law:-
“1) Whether on the facts and in the circumstances of the case the Appellate Tribunal is right in holding that the Commissioner was justified in invoking the revisionary jurisdiction under Section 263 of the Income Tax Act?
2) Whether on the facts and in the circumstances of the case there was any evidence or material before the Appellate Tribunal to justify its finding that the Assessing Officer has not made any enquiry with respect to the issue in question and therefore the Commissioner was justified in invoking the jurisdiction under Section 263 of the Income Tax Act.”
2. Heard Sri. Joseph Markos, the learned senior counsel for the appellant-assessee, and Sri. Jose Joseph, the learned Standing Counsel for the respondent-Revenue.
3. The order of the revisional authority under Section 263 of the Act, as noticed earlier, was issued for the reason that the benefits under Section 11(1)(a) of the Act could be extended only when the institutions to which donations were made had a similar categorization as that of the appellant under the FCRA Act. The Tribunal, while passing the impugned order, found – quite rightly – that insofar as the donations were made to another charitable trust out of the current year’s income, that amounts to the application of income for charitable purposes. It is to be noticed that the benefits under Section 11 of the Act are not in relation to the provisions of the FCRA Act. Therefore, the Commissioner was not justified in exercising the suo motu revisional power under Section 263 of the Act, as rightly found by the Tribunal.
4. At this juncture, it is to be noticed that the appeal before the Tribunal was instituted against the order at Annexure-B issued by the Commissioner under Section 263 of the Act. The sustainability or otherwise of the exercise of powers under Section 263 of the Act, as borne out of the said order alone, was the subject matter of consideration by the Tribunal. As regards the afore issue, the Tribunal has found in favor of the appellant– assessee. When that be so, there was no requirement for the Tribunal to have proceeded out of the scope of consideration and held that the revision order requires to be sustained for the reason noticed in the latter portion of paragraph No.11 of the impugned order. It is the finding of the Tribunal that the appellant was not able to demonstrate that the donations were made to trusts having the same objects as that of the appellant. Here, we may straight away notice that this was not an issue highlighted by the Commissioner while exercising the revisional power under Section 263 of the Act. When that be so, the Tribunal was not expected to go out of the scope of consideration in the appeal and issue further findings so as to sustain the revision order.
5. The learned senior counsel for the appellant has relied, in our opinion, quite rightly, on the Division Bench judgment of this Court in Commissioner of Income Tax v. Chandrika Educational Trust [(1994) 207 ITR 108]. That was also a case where the revisional power under Section 263 of the Act was invoked by the Commissioner, setting aside the assessment order for a particular ground/reason. Considering this issue, the Division Bench of this Court found as under:-
“In entertaining an appeal from the Commissioner’s order what the Tribunal does is to examine whether the said order is sustainable in law and whether it is within the powers conferred by section 263. Therefore, when the Commissioner has chosen to set aside the order of the Income-tax Officer only on a particular ground, the Tribunal is not entitled to go beyond and sustain the order of the Commissioner on grounds different from that relied on by the Commissioner himself.”
We are in agreement with the principles laid down as above. The dictum laid down by this Court would apply to the facts and circumstances of the case at hand also, insofar as, only one reason was highlighted by the Commissioner for exercising the power under Section 263 of the Act and the Tribunal having found the said reason as not a valid one, the Tribunal should have stopped there rather than making further observations as regards the sustainability or otherwise of the extension of the benefits under Section 11 of the Act through the assessment order.
In the result, we are of the opinion that the appellant is entitled to succeed. Hence, this appeal would stand allowed, with the questions raised being answered in favour of the assessee and against the Revenue.
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